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In March 1998 Mr Brian Pitchers owned two buildings, at 23 and 25 Moss Street, Paisley.
The tenants of the ground floor shop at number 23 were Morrison Sports Ltd (Morrison Sports).
On 6 March 1998 the building at number 23 was destroyed by fire.
The neighbouring building at number 25 was also damaged and had to be demolished.
This left the gable wall between numbers 25 and 27 exposed.
As a result, the owners of flats at 27 Moss Street had to carry out weatherproofing work to the gable wall.
Investigations identified the seat of the fire as an electricity meter cupboard in number 23.
Mr Pitchers, Morrison Sports Ltd and the flat owners at 27 Moss Street (the pursuers) raised three separate actions for damages against Scottish Power UK plc (Scottish Power) in Glasgow Sheriff Court.
The actions were remitted to the Court of Session.
All three actions are framed in the same way.
The pursuers aver that, in order to improve the fit between the prongs and the fuse holder, a metal shim had been wrapped around the end of the prongs of the cut out fuse before it was inserted into the fuse holder in the ground floor premises at number 23.
The pursuers further aver that the presence of the shim caused heating and that this led to arcing which in turn caused the fire.
The pursuers allege that the shim was fitted by employees of Scottish Power.
Scottish Power largely admit the pursuers averments as to the cause of the fire, but deny that the shim was fitted by their employees.
They believe and aver, rather, that the cut out fuse had been tampered with by someone acting on behalf of Morrison Sports.
On the basis of their factual averments the pursuers seek to hold Scottish Power liable on two bases.
First, they allege that Scottish Power are vicariously liable for the negligence of their employees in fitting the shim.
Secondly, and separately, in article 6 of condescendence they aver that the fire was caused by Scottish Powers breach of their statutory duty under regulations 17, 24 and 25 of the Electricity Supply Regulations 1988 (SI 1988 no 1057) (the 1988 Regulations).
The defenders deny the averments of fault and aver that the fire was caused by the sole fault of Morrison Sports.
Scottish Power accept that a proof before answer must be allowed in respect of the pursuers common law case of negligence.
But they plead that the pursuers averments in article 6 of condescendence, relating to the alleged breach of statutory duty, are irrelevant and should not be admitted to probation.
In short, Scottish Power submit that a breach of the relevant provisions of the 1988 Regulations does not give rise to any liability in damages to those who may suffer loss as a result of the breach.
The Lord Ordinary (Lord Wheatley) rejected Scottish Powers argument and allowed a proof before answer on the whole case: 2007 CSOH 131; 2007 SLT 1103.
Scottish Power reclaimed, but, varying the Lord Ordinarys interlocutor, an Extra Division (Lady Paton, Lady Dorrian and Lord McEwan) repelled Scottish Powers plea to the relevancy insofar as it extends to the pursuers averments in article 6 of condescendence: 2009 CSIH 92; 2010 SLT 243.
In effect, therefore, they allowed a proof of those averments.
Before this Court the Dean of Faculty explained that, in pronouncing this particular interlocutor, the Extra Division proceeded on the basis of a concession that, if they rejected Scottish Powers argument that a breach of the regulations did not give rise to civil liability, the averments in article 6 should be treated as being otherwise relevant.
The 1988 Regulations were made by the Secretary of State by virtue of his powers under section 16 of the Energy Act 1983 (the 1983 Act).
So far as relevant, section 16 provided: The Secretary of State may make such regulations as he thinks fit for the purpose of (a) securing that supplies of electricity by Electricity Boards or other persons are regular and efficient; and (b) eliminating or reducing the risk of personal injury, or damage to property or interference with its use, arising from the supply of electricity by an Electricity Board or any other person, from the use of electricity so supplied or from the installation, maintenance or use of any electrical plant. (3) Regulations under this section may provide that any person who contravenes any specified provision of the regulations, or any person who does so in specified circumstances, shall be guilty of an offence under this section. (4) A person guilty of an offence under this section shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.
In 1988 section 16 was the latest embodiment of a power to make regulations, for securing the supply of electricity and for preserving the safety of life and property, which has existed in different incarnations since the earliest days of the public supply of electricity in this country.
See, for instance, section 6 of the Electric Lighting Act 1882 and section 60(1) of the Electricity Act 1947.
Part I of the 1983 Act, including section 16, was repealed by the Electricity Act 1989 (the 1989 Act), but the power to make regulations was maintained in section 29 of the new Act which, so far as relevant, provides: (1) The Secretary of State may make such regulations as he thinks fit for the purpose of (a) securing that supplies of electricity are regular and efficient; (b) protecting the public from dangers arising from the generation, transmission, distribution or supply of electricity, from the use of electricity interconnectors, from the use of electricity supplied or from the installation, maintenance or use of any electric line or electrical plant; and (c) without prejudice to the generality of paragraph (b) above, eliminating or reducing the risks of personal injury, or damage to property or interference with its use, arising as mentioned in that paragraph. (2) Without prejudice to the generality of subsection (1) above, regulations under this section may (e) make provision requiring compliance with notices given by the Secretary of State specifying action to be taken in relation to any electric line or electrical plant, or any electrical appliance under the control of a consumer, for the purpose of (i) preventing or ending a breach of regulations under this section; or (ii) eliminating or reducing a risk of personal injury or damage to property or interference with its use. (3) Regulations under this section may provide that any person (a) who contravenes any specified provisions of the regulation; or (b) who does so in specified circumstances, shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale; but nothing in the subsection shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
In the Court of Session Scottish Power argued that, even though the 1983 Act had been repealed by the 1989 Act, the court should proceed on the basis that the 1988 Regulations still have effect on the basis that they were made under the 1983 Act.
Under reference to para 3(a) of Schedule 17 to the Electricity Act 1989 (the 1989 Act), however, the Extra Division rejected that argument and held that the 1988 Regulations have effect as if they were made under section 29 of the 1989 Act.
Scottish Power now accept this and so there is no need to examine that particular argument: the 1988 Regulations are to be treated as having effect as if they had been made under section 29(1) of the 1989 Act.
The difference between section 16 of the 1983 Act and section 29 of the 1989 Act and, hence, the point of the dispute in the Court of Session lies in the concluding words of section 29(3).
While both section 16(3) and (4) of the 1983 Act and section 29(3) of the 1989 Act envisage that regulations may provide for a person who contravenes the regulations, or who does so in specified circumstances, being guilty of a criminal offence and liable to a fine not exceeding level 5 on the standard scale, section 29(3) goes on to provide that nothing in subsection (3) shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
Regulation 39 of the 1988 Regulations does indeed provide that any supplier who fails to comply with any provision of the Regulations shall be guilty of an offence under section 16 of the 1983 Act, now section 29(3) of the 1989 Act.
It follows that, if, as the pursuers aver, Scottish Power failed to comply with regulations 17, 24 and 25 of the 1988 Regulations, they would be liable to a fine under section 29(3).
In these circumstances the Extra Division attributed critical importance, for present purposes, to the concluding words of section 29(3).
They noted that section 27(5) of the 1989 Act provides for a licence holder to be liable in damages to those suffering loss as a result of a breach of a final or provisional order; similarly, section 39 provides for a public electricity supplier to make compensation to any person affected by a failure to meet a prescribed standard of performance.
The Extra Division then said, 2010 SLT 243, 252, paras 43 46: This is not therefore a regulatory scheme conferring no private rights of action for damages.
On the contrary, it is a regulatory scheme conferring certain private rights of action for damages.
Thus it is a different type of statutory scheme from those being considered by Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 when he noted at page 731G H: Although the question is one of statutory construction and therefore each case turns on the provisions in the relevant statute, it is significant that your Lordships were not referred to any case where it had been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large had been held to give rise to a private right of action for damages for breach of statutory duty. 44.
Against that background, while criticisms might be levelled at the style of drafting (in particular the apparent introduction of an important private right of action for damages by reservation in section 29(3) of the 1989 Act), we consider that the plain meaning of section 29(3) is that Parliament intended any member of the public who suffers any damage or injury which may have been caused by the contravention of the 1988 Regulations to be entitled to raise an action for damages against the person who contravened the regulations, founding the action upon that breach of statutory duty. 45.
We accept that a similar reservation provision relating to compensation did not appear in the 1983 Act.
Thus the wording of section 29(3) represents an important innovation.
However as was made clear in Stevens v General Steam Navigation Co Ltd [1903] 1 KB 890, the proper approach to the construction of statutory provisions may change if Parliament directs that the provisions are to be construed in terms of a later, modified, enactment. 46.
In the result therefore, when construing the Electricity Supply Regulations 1988 as if they had been made under section 29 of the Electricity Act 1989, Parliament's intention is in our view clear, and it is unnecessary to define a protected class.
The Extra Division were, of course, right to point out that the scheme of the 1989 Act makes provision in section 27(5) for individuals to recover damages and in section 39 for the payment of compensation to individuals.
But, where Parliament has made specific provision of this kind in two sections, the natural inference is that it does not intend there to be a right to damages or compensation for loss or injury caused by other breaches of the statute or of subordinate legislation for which no such specific provision is made.
As emerges from para 44 of their judgment, however, the Extra Division thought that, by enacting section 29(3), Parliament had indeed made specific provision for a private right of action of damages for loss caused by breaches of the regulations.
They considered that in section 29(3) Parliament had introduced an important private right of action for damages by reservation.
In other words, although the Division appear to have accepted that, on its face, the relevant words in section 29(3) merely make a reservation, they nevertheless held that, by using these words, Parliament actually intended to introduce, and did introduce, a new right of action.
The Division indicate that the drafting of this provision might be open to criticism for the style of the legislative language used to create the right.
Nevertheless, in their view, the plain meaning of section 29(3) of the 1989 Act is that Parliament intended any member of the public who suffers any damage or injury due to a contravention of the 1988 Regulations to be entitled to raise an action of damages for loss caused by the contravention.
In the hearing before this Court, Mr Ivey QC, who appeared for the pursuers, adopted the reasoning of the Extra Division.
Indeed, he expressly conceded that section 29(3) was the only indication in either the 1989 Act or in the 1988 Regulations that a person who contravened a provision of the Regulations would, ipso facto, be liable in damages to anyone who suffered loss as a result.
The Extra Divisions construction of section 29(3) is untenable.
There is no basis whatever for thinking that the drafter of the provision intended to introduce a civil right of action but somehow botched that comparatively straightforward task and came up with the words in the subsection which are so singularly ill suited to the supposed purpose.
On the contrary, the main thrust of the subsection is to provide that, where the regulations so stipulate, a person who contravenes a provision is to be guilty of a criminal offence carrying a maximum penalty of a fine not exceeding level 5 on the standard scale.
The subsection then goes on, in unmistakable terms, to provide that this criminal liability is not to affect any liability of that person to pay compensation in respect of any damage or injury caused by the contravention.
So far from itself providing that such a person should be liable to pay compensation, the subsection merely confirms that liability to the criminal penalty is not to affect any liability of the offender to pay compensation.
By any liability Parliament means the offenders liability, if any, to pay compensation.
Since section 29(3) cannot be construed as introducing a private right of action, it is, strictly speaking, unnecessary for present purposes to determine its precise scope.
One feature which stands out, however, is the reference to liability to pay compensation.
As the Extra Division held, this cannot be a reference to the compensation which may be payable under section 27(5) or section 39(3) of the 1989 Act, since section 29(3) is dealing with contraventions of regulations made under section 29(1).
The industry of junior counsel for Scottish Power has, however, cast some light on the language of the subsection, which can be seen to reflect language used in earlier regulations.
As already noted, section 6 of the Electric Light Act 1882 gave the Board of Trade power to make such regulations as they might think expedient for securing the safety of the public from personal injury or from fire or otherwise.
Section 2 of the Electricity (Supply) Act 1919 made provision for Electricity Commissioners to exercise that power.
The Commissioners proceeded to do so.
Regulation 35 of the (A) Regulations for Securing the Safety of the Public made by the Electricity Commissioners under the Electricity (Supply) Acts 1882 to 1922 provided for undertakers who failed to comply with any of the regulations to be liable to a criminal penalty.
Regulation 35 added: The recovery of a penalty under these regulations shall not affect the liability of the undertakers to make compensation of any damage or injury which may be caused by reason of the default.
In Stevens v Aldershot Gas, Water and District Lighting Co (1932) LJKB 12 the plaintiff alleged that she had suffered damage to electrical apparatus and loss of profits because the defendants had failed to supply electric current at the voltage at which they had said that they would.
Macnaghten J explained that the question was whether, if they have failed in that obligation, the plaintiff has a remedy at common law or is she limited to penalties in a court of summary jurisdiction? His Lordship held that the plaintiff was limited to the penalties.
In the course of what appears to have been an extempore judgment, Macnaghten J noted that the (B) Regulations which he had to apply, and which related to ensuring a proper supply, did not contain an equivalent of regulation 35.
This may suggest that he took the inclusion of regulation 35 in the regulations for securing the safety of the public to be some kind of an indication that an undertaker would be civilly liable for a breach of those regulations.
But the remark was obiter and he did not explore the point.
In December 1936 the Commissioners made a new set of Regulations, the Electricity Supply Regulations 1937.
Regulation 39 again made provision for a criminal penalty to be imposed for non compliance with the Regulations, but provided that The recovery of a penalty under these Regulations shall not affect the liability (if any) of the Undertakers to make compensation in respect of any damage or injury which may have been caused by reason of the default.
Note that the liability (if any) of the Undertakers replaces the reference to the liability of the undertakers in the old regulation 35.
Regulation 39 of the 1937 Regulations was considered by the Court of Appeal (Morton, Tucker and Somervell LJJ) in Heard v Brymbo Steel Company Ltd [1947] KB 692.
The plaintiff was injured in an explosion at the factory in which he worked.
It was held that the explosion had been due to a short circuit which had occurred because of breaches by the second defendants, the North Wales Power Co Ltd, of regulations 24 and 25 of the Electricity Supply Regulations 1937.
It was accepted that the Electric Lighting (Clauses) Act 1899 applied to the power company.
Paragraph 77 of the schedule to that Act provided for undertakers to be answerable for all accidents, damages and injuries happening through their act or default default being a word that was to be found in regulation 39.
In these circumstances the Court of Appeal held the power company liable in damages for the plaintiffs injuries.
Somervell LJ explained, at p 699, that the default, which was a breach of regulations 24 and 25, and which might cause damage or injury under regulation 39, was a default for which undertakers were answerable under para 77 of the schedule to the 1899 Act.
In other words, the power company were held liable to pay damages, not because the breaches of regulations 24 and 25 of the 1937 Regulations per se gave rise to civil liability, but because the default which constituted the breach of those regulations was also a default which made the company liable to pay damages under para 77 of the schedule to the 1899 Act.
The 1899 Act was repealed by the 1989 Act.
It is unnecessary to trace the subsequent course of the legislation governing the supply of electricity before the 1983 Act.
Enough has been said to suggest that, when Parliamentary counsel came to draft section 29(3) of the 1989 Act, the choice of language was influenced by the language which had been used in the old regulations.
Hence, in particular, the use of the term compensation.
On the other hand there is nothing to show why the tailpiece was omitted from section 16(4) of the 1983 Act but inserted in section 29(3) of the 1989 Act.
The fact that the language of section 29(3) can be traced back at least as far as the earlier of the two sets of regulations made by the Electricity Commissioners does, however, undermine part of the reasoning of Mr Peregrine Simon QC, Deputy High Court Judge, in A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506.
The claimants alleged that they had suffered loss as a result of the defendants breach of regulation 25(1) of the 1988 Regulations.
Having referred to the indicators of liability for breach of a statutory provision in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, the Deputy High Court Judge continued at para 31: It is arguable that the claimants fell within a class which was intended to be protected by regulations introduced under the powers conferred by section 29(1)(c): namely, those affected by the risks of damage to property.
However, in my judgment, the claimants fail at the second stage of the analysis in that it is clear that Parliament did not intend to confer a private right to claim damages for a breach of the statutory duty.
First, the sanction of the criminal law for breach of the Regulations provides a clear method of securing the protection that the statute was intended to confer and militates against the intention to create private rights of action.
Secondly, by section 29(4), the power to bring criminal proceedings is confined to the Secretary of State and the DPP.
This suggests that Parliament did not intend a breach of the regulations to be widely invoked.
Thirdly, the claimants rely on the reference to compensation in section 29(3) as showing that the Act contemplated a civil action for breach of the [regulations].
However, the reference to compensation in section 29(3) is, in its context, clearly a reference to a claim for compensation under section 35 of the Powers of Criminal Courts Act 1973 and not to a civil action.
Although the decision was reversed on appeal, [2001] 1 WLR 281, this part of the reasoning was not affected.
The equivalent of section 35 of the Powers of Criminal Courts Act 1973 in Scots Law is to be found in section 249 of the Criminal Procedure (Scotland) Act 1980, which derives from section 58 of the Criminal Justice (Scotland) Act 1980.
Since, as has been seen, the term compensation was being used in the present context long before Parliament made provision for criminal courts to make compensation orders, it is implausible to confine the reference in section 29(3) to that kind of compensation.
We would therefore reject the construction adopted in A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc.
It is apparent that, in Heard v Brymbo Steel Company Ltd [1947] KB 692, the Court of Appeal considered that the reference to compensation in regulation 35 of the then current regulations was apt to cover a liability to pay damages for a default in complying with regulations which also constituted a default for purposes of para 77 of the schedule to the 1899 Act.
Be that as it may, section 29(3) obviously envisages a situation where a person may contravene a provision of regulations made under the section and be liable to pay compensation for damage or injury which he has thereby caused.
But it does not follow that Parliament is saying that someone who contravenes any provision of any regulations made under the section is automatically liable to pay compensation for any resulting damage or injury.
Rather, it will all depend on the terms of the regulations which the Secretary of State decides to make.
And, of course, the drafter of section 29(3) did not know what regulations the Secretary of State might choose to make in the years to come.
So section 29(3) simply provides that, if in terms of any regulations made under the section a person is to be liable to pay compensation for damage or injury caused by a contravention of some provision of the regulations, then the persons liability to pay that compensation is not affected by his liability to pay a fine for the selfsame contravention.
So it all depends on what the regulations made by the Secretary of State provide.
There is, of course, nothing in the 1988 Regulations which makes express provision for a person who contravenes them to be liable to pay compensation for damage or injury.
In that situation, it is common ground that the well known authorities, as to whether a breach of a statute or subordinate legislation gives rise to a private law statutory right of action, are conveniently summarised in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
Having separated out a number of different types of case, he dealt with breaches of statutory duty simpliciter, at pp 731 732: This category comprises those cases where the statement of claim alleges simply (a) the statutory duty, (b) a breach of that duty, causing (c) damage to the plaintiff.
The cause of action depends neither on proof of any breach of the plaintiffs' common law rights nor on any allegation of carelessness by the defendant.
The principles applicable in determining whether such statutory cause of action exists are now well established, although the application of those principles in any particular case remains difficult.
The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action.
However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.
There is no general rule by reference to which it can be decided whether a statute does create such a right of action but there are a number of indicators.
If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer.
If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action: Cutler v Wandsworth Stadium Ltd [1949] AC 398; Lonrho Ltd v Shell Petroleum Co. Ltd. (No 2) [1982] A.C. 173.
However, the mere existence of some other statutory remedy is not necessarily decisive.
It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy.
Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach: see Groves v Wimborne (Lord) [1898] 2 QB 402.
Although the question is one of statutory construction and therefore each case turns on the provisions in the relevant statute, it is significant that your Lordships were not referred to any case where it had been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large had been held to give rise to a private right of action for damages for breach of statutory duty.
Although regulatory or welfare legislation affecting a particular area of activity does in fact provide protection to those individuals particularly affected by that activity, the legislation is not to be treated as being passed for the benefit of those individuals but for the benefit of society in general.
Thus legislation regulating the conduct of betting or prisons did not give rise to a statutory right of action vested in those adversely affected by the breach of the statutory provisions, i e bookmakers and prisoners: see Cutler's case [1949] AC 398; Reg v Deputy Governor of Parkhurst Prison Ex parte Hague [1992] 1 AC 58.
The cases where a private right of action for breach of statutory duty have been held to arise are all cases in which the statutory duty has been very limited and specific as opposed to general administrative functions imposed on public bodies and involving the exercise of administrative discretions.
As Lord Browne Wilkinson explains, if a statute provides some means, other than a private law action for damages, of enforcing any duty which it imposes, that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action.
In Cutler v Wandsworth Stadium Ltd [1949] AC 398, 408, Lord Simonds observed that, where the statutory remedy was by way of criminal proceedings for a penalty, it could be argued that the criminal sanction emphasises that the statutory obligation is imposed for the public benefit and, hence, that the breach of it is a public rather than a private wrong.
This is indeed one of the arguments advanced against private law liability for breach of the 1988 Regulations in Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506.
But, in the case of regulations made under section 29 of the 1989 Act, that argument is really neutralised by the terms of section 29(3): the mere fact that there was criminal liability for a contravention would plainly not be inconsistent with there being civil liability to pay compensation for the same contravention.
On the other hand, section 29(2)(e) of the 1989 Act envisages regulations being made to give the Secretary of State power to take enforcement action in relation to any electric line or electrical plant, or any electrical appliance under the control of a consumer for the purpose of preventing or ending a breach of the regulations or eliminating or reducing a risk of personal injury or damage to property or interference with its use.
And regulation 38 of the 1988 Regulations does indeed contain a regulation with precisely that effect.
Section 30 of the 1989 Act provides for the Secretary of State to appoint inspectors to carry out various checks of electric lines and electrical plant, including lines and plant on consumers premises, with a view to determining, inter alia, whether any requirement imposed by or under Part I of the Act has been complied with.
Regulation 33 of the 1988 Regulations provides for inspections by people authorised by the Secretary of State to ascertain whether a breach of the Regulations has occurred.
These provisions point strongly to the conclusion that the regulations are to be enforced by the Secretary of State and those appointed to act on his behalf, rather than by individuals raising private actions.
Indeed, a private right of action to require, say, a supplier to comply with a regulation would be basically inconsistent with this scheme for enforcement by the Secretary of State and his representatives.
Presumably for that reason, Mr Ivey felt obliged to argue that the only right of action arising out of the 1989 Act and the 1988 Regulations was a right to damages, not, say, to interdict or to an action to require compliance with a duty.
Of course, in theory, Parliament could provide for a limited right of this kind.
But, if it had been its intention to do so, it would surely have said so in express terms.
There are further indications that the 1989 Act, as it applied in 1998, envisaged that the legislation would be enforced by means other than private action.
Section 1 provided for the appointment of a Director General of Electricity Supply.
By section 45 it was his duty to investigate any matter which appeared to him to be an enforcement matter.
While the range of such matters was prescribed by section 25 of the Act, section 46 also provided for consumers committees to investigate certain other relevant matters.
The Dean of Faculty drew attention to two other factors which tend to point against a private right of action for contraventions of the 1988 Regulations.
First, regulation 27(1) envisages that a consumer may use his electrical installation in a way that may give rise to danger or cause undue interference with the suppliers system or with the supply to others.
Regulation 28 then contains an elaborate scheme under which the supplier can discontinue supply to the consumers installation.
In addition, where the Secretary of State is satisfied that the suppliers works are being used otherwise than in accordance with the Regulations, he may serve notice on the consumer requiring him to take various steps to deal with the situation.
These regulations therefore envisage situations where a consumer may be in breach of a requirement of the Regulations and where that breach may give rise to a risk of danger to others.
While some consumers of electricity will, of course, be large businesses, others will be individuals.
If the pursuers argument were correct, the Regulations would confer a right of action against them for any failure to comply with a requirement made under these provisions.
Again, it seems unlikely that Parliament intended the legislation to operate in that way and more likely that it intended any such failures to be dealt with in accordance with the specific mechanisms in the legislation.
Secondly, the Dean referred to section 21(b) of the 1989 Act under which a supplier of electricity under section 16(1) of the Act may require any person who requires a supply of electricity to accept any terms restricting any liability of the supplier for economic loss resulting from negligence which it is reasonable in all the circumstances for that person to be required to accept.
If it really were the case that a supplier could be held liable in damages for a contravention of any regulations made under section 29, then the protection afforded by section 21(b) would be ineffective in the not uncommon situation where the suppliers negligence constituted a contravention of the regulations.
Looked at as a whole, therefore, the scheme of the legislation, with its carefully worked out provisions for various forms of enforcement on behalf of the public, points against individuals having a private right of action for damages for contraventions of regulations made under it.
That argument is reinforced by the fact that it is difficult to identify any limited class of the public for whose protection the 1988 Regulations were enacted and on whom Parliament intended to confer a private right of action for breach of the provisions of the Regulations.
In A E Beckett & Sons (Lyndons) Ltd v Midland Electricity Plc 2000 WL 664506 Mr Simon QC thought that it was arguable that regulations introduced under the powers conferred by section 29(1)(c) were intended to protect a class comprising those affected by the risks of damage to property.
The Extra Division were much bolder: assuming that a class required to be identified, they considered that Parliament intended to confer rights upon all members of the public within the United Kingdom: 2010 SLT 252, para 46.
In so holding, the Division relied on a dictum of Atkin LJ in Phillips v Britannia Hygienic Laundry [1923] 2 KB 832, 841.
But, as Neuberger J, speaking for the Court of Appeal, recognised in Todd v Adams and Chope (The Margaretha Maria) [2002] 2 Lloyds LR 293, 298, para 20, that dictum is inconsistent with the approach which was authoritatively laid down by the House of Lords in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 and three other cases.
The Division also referred to Roe v Sheffield City Council [2004] QB 653, 672 673.
But in that case Pill LJ did actually identify a limited class, albeit one as broad as road users.
The potentially far reaching effects of the Extra Divisions approach are well illustrated by the claim of the owners of the flats at number 27 for the costs of weatherproofing their gable wall.
After all, their property suffered no damage in the explosion: their claim arose out of the effects of the demolition of the intervening property at number 25.
On one view, they can simply be regarded as members of the public who are averred to have suffered loss as a result of Scottish Powers breach of the 1988 Regulations.
It seems extremely unlikely, however, that Parliament would ever have intended persons in that position to have a right of action for damages for breach of the 1988 Regulations.
These are the kinds of considerations which have led the courts to hold that one of the necessary preconditions of the existence of a private law cause of action is that the statutory duty in question was imposed for the protection of a limited class of the public.
As support for their view that the Regulations gave rise to a private right of action, the Extra Division attached some weight to the fact that the aim of some of the 1988 Regulations is to reduce the risk of personal injury or damage to property: 2010 SLT 243, 252, para 47.
Even if that is a consideration which can, in an appropriate case, point to an intention on the part of the legislator to create a private right of action, the mixed aims of the 1988 Regulations weaken any argument of that kind in respect of them.
In any event, the fact that legislation is designed to reduce the risk of personal injury or damage to property is by no means an infallible indication that Parliament intended to give individuals a private right of action for breach of its provisions.
It is simply one factor to be taken into account.
See, for example, Weir v East of Scotland Water Authority 2001 SLT 1205, 1210, para 10, where Lord McCluskey considered that, although the water authority was under a statutory duty to supply wholesome water, it was not a duty that was owed to a defined limited class of the public.
The duty was accordingly enforceable in various ways, but not by a private right of action.
For these reasons we are satisfied that contraventions of regulations 17, 24 and 25 of the 1988 Regulations do not give rise to a private right of action.
The appeal must accordingly be allowed, and the interlocutors of the Extra Division and the Lord Ordinary recalled.
The Court will sustain the first plea in law for the defenders in each of the actions to the extent of excluding article 6 of condescendence from probation.
Quoad ultra the Court will allow the parties a proof before answer.
| UK-Abs | At the heart of this appeal is whether a breach of certain provisions of the Electricity Supply Regulations 1988 can give rise to a private right of action.
In March 1998 Mr Brian Pritchers owned two buildings, at 23 and 25 Moss Street, Paisley.
The tenants of the ground floor shop at number 23 were Morrison Sports Ltd. On 6 March 1998 the building at number 23 was destroyed by fire.
Two other buildings were also damaged.
Investigations identified the seat of the fire as an electricity meter cupboard in number 23.
Those affected by the fire, who are now the respondents, raised three separate actions for damages against Scottish Power UK plc.
All three actions are framed in the same way.
The respondents aver that it was the presence of a shim fitted by employees of Scottish Power that was the cause of the fire.
Scottish Power deny that the shim was fitted by their employees.
One of the bases on which the respondents seek to hold Scottish Power liable is that the fire was caused by Scottish Powers breach of their statutory duty under regulations 17, 24 and 25 relating to a suppliers works of the 1988 Regulations.
The 1988 Regulations were made by the Secretary of State by virtue of his powers under section 16 of the Energy Act 1983.
Part I of the 1983 Act, including section 16, was repealed by the Electricity Act 1989, but the power to make regulations was maintained in section 29 of the new Act.
Scottish Power now accept that the 1988 Regulations have effect as if they were made under section 29 of the 1989 Act.
The difference between section 16 of the 1983 Act and section 29 of the 1989 Act and, hence, the point in dispute in the Court of Session lies in the concluding words of section 29(3).
Section 29(3) of the 1989 Act, but not section 16(3) and (4) of the 1983 Act, provides that nothing in subsection (3) shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
The Extra Division thought that, by enacting section 29(3), Parliament had indeed made specific provision for a private right of action for damages for loss caused by breaches of the regulations.
They therefore considered that in section 29(3) Parliament had introduced an important private right of action for damages by reservation.
Scottish Power appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It holds that contraventions of regulations 17, 24 and 25 of the 1988 Regulations do not give rise to a private right of action.
The judgment of the Court is delivered by Lord Rodger.
There is no basis whatever for thinking that the drafter of section 29(3) of the 1989 Act intended to introduce a civil right of action but somehow botched that comparatively straightforward task and came up with the words in the subsection which are so singularly ill suited to the supposed purpose.
Far from itself providing that a person who contravenes a provision should be liable to pay compensation, the subsection merely confirms that the liability to the criminal penalty is not to affect any liability of the offender to pay compensation.
By any liability Parliament means the offenders liability, if any, to pay compensation, for which regulations made under section 29 may provide [paras 16 and 27].
The language used in the subsection reflects language used in earlier regulations.
On the other hand there is nothing to show why the tailpiece was omitted from section 16(4) of the 1983 Act [paras 18 22].
There are indications in the overall legislative scheme that a breach of the relevant provisions of the 1988 Regulations would not give rise to a private law statutory right of action.
First, there are provisions in the 1989 Act and the 1988 Regulations that point strongly to the conclusion that the regulations are to be enforced by the Secretary of State and those appointed to act on his behalf, rather than by individuals raising private actions [paras 30 32].
In addition, there are provisions in the 1988 Regulations which envisage situations where a consumer may be in breach of a requirement of the 1988 Regulations and where that breach may give rise to a risk of danger to others.
If the respondents argument were correct, the 1988 Regulations would confer a right of action against individual consumers of electricity for any failure to comply with a requirement under these provisions.
It seems unlikely that Parliament intended the legislation to operate in that way [para 35].
If it really were the case that a supplier could be held liable in damages for a contravention of any regulations made under section 29 of the 1989 Act, then the protection afforded by section 21(b) of the Act (under which a supplier of electricity under section 16(1) of the Act may require any person who requires a supply of electricity to accept any terms restricting any liability of the supplier for economic loss resulting from negligence which it is reasonable in all the circumstances for that person to be required to accept) would be ineffective in the situation where the suppliers negligence constituted a contravention of the regulations [para 36].
That no private right of action is available is reinforced by the fact that it is difficult to identify any limited class of the public for whose protection the 1988 Regulations were enacted and on whom Parliament intended to confer a private right of action for breach of the provisions of the Regulations.
One of the necessary preconditions of the existence of a private law cause of action is that the statutory duty was imposed for the protection of a limited class of the public [paras 38 40].
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The three appellants in these two appeals were each convicted of murder.
Each had his conviction quashed pursuant to a reference to the Court of Appeal by the Criminal Cases Review Commission (CCRC) in the exercise of its powers under Part II of the Criminal Appeal Act 1995 (the 1995 Act).
In each case no order was made for a retrial.
Each claimed compensation from the Secretary of State pursuant to section 133 of the Criminal Justice Act 1988 (section 133).
That section applies to England and Wales, to Northern Ireland and to Scotland.
I shall not refer to provisions which cater for differences of procedure in Scotland.
The most material part of that section provides: (1)when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction In each case the claim for compensation was refused by the Secretary of State, whose decisions were upheld on judicial review both at first instance and on appeal.
The common issue that arises in relation to each appeal is the meaning of miscarriage of justice in section 133.
In the case of Adams there is a second issue, which is the meaning of a new or newly discovered fact.
Lord Hope has set out the background to the statutory right to compensation provided by section 133 and I need not repeat his summary.
Lord Kerr has set out in detail the relevant facts in the appeals of Mr MacDermott and Mr McCartney and I gratefully adopt his account of these.
It remains for me to summarise the facts relevant to the appeal of Mr Adams.
They can be shortly stated.
A more detailed summary can be found in the extract of the judgment of Simon J at first instance, annexed to the judgment of the Court of Appeal [2009] EWCA Civ 1291; [2010] QB 460.
The facts in Mr Adams appeal
On 18 May 1993 Mr Adams was convicted in the Crown Court at Newcastle of the murder of a man called Jack Royal and sentenced to life imprisonment.
He appealed to the Court of Appeal and on 16 January 1998 his appeal was dismissed.
Some nine years later his case was referred to the Court of Appeal by the CCRC on three grounds.
The first, and only material ground, was that incompetent defence representation had deprived him of a fair trial.
On 12 January 2007 the Court of Appeal allowed his appeal on this ground.
The relevant shortcomings in the conduct of Mr Adams defence were, in large measure, the result of a late change of his counsel.
This was made when those originally instructed to represent him had to withdraw from the case because of a conflict of interest.
Those instructed to replace them were hard pressed to prepare for the trial and failed to consider relevant unused material.
Some of this had been disclosed by the prosecution.
Some was available on a computer database known as the Holmes database.
The case against Mr Adams was essentially based on the evidence of a single witness, Mr Kevin Thompson.
His evidence was supported by that of two police officers.
It was the defence case that Mr Thompson was lying, that he had entered into a deal with the police to give evidence against Mr Adams, and that he had been fed with information about Mr Royals murder by the police.
The evidence which had been overlooked by defence counsel would have provided valuable assistance in cross examining Mr Thompson and the two police officers.
The Court of Appeal concluded that, had it been available and deployed, the jury might not have been satisfied of Mr Adams guilt.
Accordingly the court quashed the conviction, but in doing so stated expressly that they were not to be taken as finding that, if the failings on the part of the defence lawyers had not occurred, Mr Adams would inevitably have been acquitted: [2007] 1 Cr App R 449 at para 157.
Miscarriage of Justice
Section 133(1) reproduces, in almost identical wording, the following provision in article 14(6) of the International Covenant on Civil and Political Rights 1966, which this country ratified in May 1976 (article 14(6) of the ICCPR).
I shall emphasise the material differences: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such
conviction shall be compensated according to law
The reference to a final decision is accommodated by a provision in section 133(5) which defines reversed as referring to a conviction which has been quashed on an appeal out of time or on a reference under the 1995 Act.
The possible meanings of miscarriage of justice
The meaning of miscarriage of justice in section 133 received consideration by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18; [2005] 1 AC 1, when rejecting a claim for compensation by Mr Mullen.
He had been convicted of terrorist offences.
His conviction had been quashed by an appeal out of time.
This was not because there was any doubt that he had committed the offences of which he was convicted.
His conviction was quashed because he had been seized and brought to this country from Zimbabwe in circumstances that had involved a flagrant abuse of power.
It was not suggested that there was any defect in the trial process itself.
The House held that in these circumstances Mr Mullens conviction had not been quashed on the ground of a miscarriage of justice within the meaning of section 133.
Lord Steyn expressed the view that this phrase only extended to the conviction of someone subsequently shown to be innocent.
Lord Bingham of Cornhill expressed doubt as to whether this was correct.
Both were agreed that section 133 was enacted to give effect to article 14(6) and that the meaning of the latter should govern the interpretation of the section.
They were not, however, agreed as to the meaning of article 14(6).
Lord Rodger of Earlsferry accepted the interpretation reached by Lord Steyn.
Lord Walker of Gestingthorpe considered that Lord Steyn had given powerful reasons for his conclusion, but preferred not to go beyond the limited common ground for allowing the appeal.
Lord Scott expressed no view on the difference between Lord Bingham and Lord Steyn.
Miscarriage of justice is a phrase that is capable of having a number of different meanings.
In giving the judgment of the Court of Appeal in relation to Adams case Dyson LJ divided the circumstances in which convictions may be quashed on the basis of the discovery of fresh evidence into four categories, which I shall summarise in my own words. (1) Where the fresh evidence shows clearly that the defendant is innocent of the crime of which he has been convicted. (2) Where the fresh evidence is such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant. (3) Where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant. (4) Where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
These four categories have provided a useful framework for discussion.
There are relatively few domestic authorities that bear on the meaning of miscarriage of justice in section 133 and none which provides a definitive answer.
In these circumstances, before considering those authorities, I propose to consider extrinsic sources that might be expected to assist with the interpretation of this phrase.
Parliamentary material
Mr Bailin QC, appearing for JUSTICE as intervener, submits that a statement made by Earl Ferrers, the Minister of State at the Home Office, throws light on the meaning of miscarriage of justice.
The statement was made in the course of debate on the clause that was to become section 133: see Hansard (HL Debates), 22 July 1988, cols 1630 1632.
At the outset Earl Ferrers explained that the object of the clause was to give statutory effect to the United Kingdoms obligations under article 14.
Lord Hutchinson of Lullington then asked the very question that lies at the heart of these appeals.
He contrasted a new fact which resulted in the quashing of a conviction because it raised a lurking doubt in the mind of the Court of Appeal about the safety of the conviction and a new fact which caused the Secretary of State to advise that a defendant should be pardoned because he had been shown to be innocent.
Which, he asked, amounted to a miscarriage of justice under the clause? This, he stated, was a crucial point.
If it is not contempt of Parliament to observe that Lord Bingham, in his judicial capacity, was uncertain of the answer to this question, after giving it detailed consideration in Mullen, it is not, I hope, contempt of Parliament to suggest that Earl Ferrers, when faced with the question ex improviso in the course of debate, may have had to seek assistance from an official before giving the answer.
At all events the answer that he gave was: The normal course is to refer cases to the Court of Appeal and to regard its view as binding.
Mr Bailin submits that, in accordance with Lord Hopes observations on the use that can be made of parliamentary material in R v A (No 2) [2002] 1 AC 45 at para 81, this statement binds the Secretary of State to accept that the question of whether there has been a miscarriage of justice must be determined from the judgment of the Court of Appeal in the particular case and that, as the Court of Appeal does not and cannot rule on whether the defendant is innocent, that cannot be the test of whether there has been a miscarriage of justice.
I do not accept this submission.
The reply given by Earl Ferrers did not answer the question posed by Lord Hutchinson.
To be blunt it made no sense.
It affords no guidance on the meaning in section 133 of miscarriage of justice.
The relevant part of the debate clearly indicates that the intention of Parliament in enacting section 133 was to give effect to the obligation imposed by article 14(6).
It does not suggest that Parliament intended that the meaning of section 133 should differ in any way from the meaning of article 14(6).
This reinforces the rule of statutory interpretation that raises a presumption that, where a statute is passed in order to give effect to the obligations of the United Kingdom under an international convention, the statute should be given a meaning that conforms to that of the convention: see Salomon v Customs and Excise Commissioners [1967] 2 QB 116, 141 and Bennion on Statutory Interpretation, 5th ed (2008), section 221.6.
What then is the meaning of miscarriage of justice in article 14(6)? In answering this question the provisions of the Vienna Convention on the Law of Treaties should be applied: see Fothergill v Monarch Airlines Ltd [1981] AC 251, 283, per Lord Diplock.
The interpretation of Article 14(6)
As the wording of the English text of article 14(6) is virtually identical to that of section 133, the former throws no light on the meaning of the latter.
Article 33 of the Vienna Convention permits reference to the text of a convention in an alternative authenticated language.
In Mullen Lord Steyn at para 47 derived assistance from the French text of article 14(6).
This uses the phrase une erreur judiciare for miscarriage of justice.
Lord Steyn stated that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of someone who was innocent.
He did not explain the basis for this assertion and Lord Bingham did not agree with it.
He expressed the view at para 9 that erreur judiciare could be understood as equivalent to miscarriage of justice in its broad sense.
Lord Binghams interpretation of the French text is to be preferred to that of Lord Steyn.
The difference between them received detailed consideration by Girvan LJ in In re Boyles Application [2008] NICA 35 at paras 11 13.
He concluded that the French term was as elastic as the English miscarriage of justice.
In his written case at para 4.32 Mr Tam QC for the Secretary of State invited the Court to reject Girvan LJs analysis of the French law.
In these circumstances the Court allowed Mr Owen to adduce a witness statement from Dr Cristina Mauro, who teaches Criminal Procedure as an Assistant Professor at Universit Panthon Assas at Paris.
She confirmed that Girvan LJs interpretation of erreur judiciare was correct, and Mr Tam accepted this to be the case.
Had the French text given a more precise meaning to article 14(6) than the English this would have been a legitimate aid to the interpretation of the latter.
As it is the French text leaves us no further forward.
Article 31(3)(b) of the Vienna Convention also permits one to take into account any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation.
Lord Steyn, Girvan LJ and Dr Mauro, in progressively greater detail, have examined articles 622 to 626 of the French Code de Procdure Pnale, which give effect to article 14(6).
Once again the analysis of the latter two is to be preferred to that of Lord Steyn.
This indicates that in France a conviction will be reviewed where a new element gives rise to serious doubts about guilt and that the reviewing court can then either quash the conviction on the ground that the new element proves that the defendant is not guilty or direct a retrial.
Compensation will be recoverable in the former event or, if there is a retrial, if this results in an acquittal.
This practice on the part of only one of the many signatories to the ICCPR does not provide a guide to the meaning of article 14(6) but it does demonstrate that proof of innocence has not been universally adopted as the test of entitlement to compensation.
It has not been suggested that there is any consistency of practice on the part of the signatories that assists in determining the meaning of article 14(6).
If it is not possible to deduce the meaning of article 14(6) from subsequent practice in its application, what of the travaux prparatoires? Article 32 of the Vienna Convention permits recourse to these where necessary to determine the meaning to be attributed to the term of a treaty in the light of its object and purpose see article 31.
The Court has been provided with relevant comments on the travaux in The Right to a Fair Trial under the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights by D Weissbrodt (2001) and Guide to the Travaux Prparatoires of the International Covenant on Civil and Political Rights by M Bossuyt (1987).
So far as the precise meaning of miscarriage of justice is concerned the travaux are inconclusive.
They disclose that Mrs Roosevelt was opposed to the inclusion of article 14(6) on the ground that its implementation would cause significant technical difficulties because of the diversity of national legislation.
They show concern by some, including the British delegate, that the provision should not create an obligation to pay compensation when a conviction was reversed on appeal.
Of most significance is the rejection by 22 votes to 11 with 40 abstentions of an amended provision initially proposed by Israel, with input from France and Afghanistan.
This reads: The judicial recognition of the innocence of a convicted person shall confer on him the right to request the award of compensation in accordance with the law in respect of any damage caused him by the conviction.
While this provides no positive indication of precisely what the state parties intended miscarriage of justice to mean, it makes it difficult to argue that they intended it to mean conviction of the innocent.
Lord Bingham suggested at para 9 in Mullen that the phrase miscarriage of justice may have commended itself to the parties because of the latitude of interpretation that it offered and it seems to me that this may well be the case.
It is, I believe, possible to make some more positive conclusions about what it was that the states who were involved in the drafting of article 14(6) were trying to achieve.
They were concerned with the emergence of a new fact after the completion of the trial process, including review on appeal.
Article 14(5) provides that everyone convicted of a crime shall have the right to have his conviction and sentence reviewed by a higher tribunal according to law.
Article 14(6) applies to the discovery of a new fact after that final decision.
Compensation was only payable where the new fact demonstrated conclusively that there had been a miscarriage of justice.
Thus miscarriage of justice had to be the kind of event that one could sensibly require to be proved conclusively.
Article 14 is, in general, concerned with the right to a fair trial.
Most of its provisions relate to procedure.
One might have expected article 14(6) similarly to have been concerned with the consequences of shortcomings in procedure.
The travaux do not suggest that this was the primary concern of the delegates.
It is perhaps significant that Mrs Roosevelt and Ms Bowie did not consider that the provision belonged in the Covenant and suggested deleting it.
What the delegates appear to have been primarily concerned about was not errors of procedure, but the emergence of fresh facts that were inconsistent with the conviction of the defendant.
Thus, at the outset, the Philippines suggested that the circumstances in which the provision should apply should be spelt out and that these should be where the true offender had confessed and there were no reasonable grounds to doubt his confession or where the fact or event which was the basis of the conviction was shown beyond reasonable doubt never to have taken place.
A comment by Mrs Roosevelt that compensation should be denied to someone who deliberately concealed facts which would have exonerated him if discovered (my emphasis) is a further example of this approach, as is the proposed amendment to which I have referred at para 19 above.
The fact remains, however, that this amendment was not carried and that the travaux show concern on the part of some delegates that the provision under discussion would allow compensation to persons who were clearly guilty but whose conviction had been annulled for reasons of form or procedure while others appear to have considered that the provision should provide a guarantee for lawful process.
The travaux clearly demonstrate that the parties intended article 14(6) to cover the situation where a newly discovered fact demonstrated conclusively that the defendant was innocent of the crime of which he had been convicted.
They were not, however, prepared to agree an interpretation which restricted the ambit of article 14(6) to this situation.
In the 14th and final session it is recorded that most of the Committee agreed that only adequate legislation could solve the technical difficulties involved in the problem of compensation for a miscarriage of justice.
Thus, while the principle was agreed that there should be compensation for the consequences of a conviction reversed on the ground of conclusive proof of a miscarriage of justice as a result of the discovery of new evidence after the conclusion of the criminal process, and that this would cover the case of a convicted man who was shown to be innocent, it seems to have been left to the individual parties by domestic legislation to identify the precise parameters of the miscarriage of justice that would give rise to a right to compensation.
The words according to law were added to the article by a late amendment.
It would have been possible for the contracting parties to have agreed that any person whose conviction was reversed by reason of a newly discovered fact should be given compensation for the consequences of the conviction.
This could have been justified on the basis that the reversal of the conviction raised a presumption of innocence and that compensation should be paid on the basis of that presumption.
The parties did not take that course.
The fact that they did not do so, and the requirement that the miscarriage of justice should be established conclusively, indicates so it seems to me, an anxiety not to agree to an entitlement to compensation that would result in compensation being paid to those who had in fact committed the crimes of which they were convicted, at least on a substantial scale.
In these circumstances the fact that section 133 is intended to give effect to the obligation imposed by article 14(6) is of limited assistance in interpreting that section.
It would not be right, however, when interpreting section 133 to lose sight of the fact that it is giving effect to a convention agreed by parties with varying systems of criminal justice.
Article 14(6) is applicable to criminal trials in jurisdictions that have jury trials and jurisdictions that do not, to civil and to common law jurisdictions.
The meaning given to miscarriage of justice should be one that is capable of application to the systems of criminal justice of the other parties to the covenant.
I have not found any other extrinsic material to be of assistance.
In Mullen Lord Bingham at para 9(3) considered the jurisprudence of the United Nations Human Rights Committee and concluded that this did not assist.
He reached the same conclusion in relation to the explanatory report of the Steering Committee for Human Rights in relation to article 3 of the Seventh Protocol to the European Convention on Human Rights.
I agree with Lord Bingham for the reasons which he gave.
Mullen
I now turn to consider the decision of the House of Lords in Mullen.
This task has been undertaken in a little detail by Lord Hope, which shortens the comments that I wish to make on this decision.
The reason why the appeal in Mullen did not succeed was that the House of Lords were unanimous in holding that the abuse of power that had led to the quashing of Mr Mullens conviction did not fall within the definition of miscarriage of justice, whatever the meaning of that phrase.
At para 8 Lord Bingham said: It is for failures of the trial process that the Secretary of State is bound, by section 133 and article 14(6), to pay compensation.
On that limited ground I would hold that he is not bound to pay compensation under section 133.
It was this statement that led Mr Owen to advance, initially, an argument that section 133 was directed at some failure in the trial process.
This led him to submit that if, after an impeccably conducted trial, the discovery of DNA evidence demonstrated conclusively that the convicted defendant was innocent, no claim for compensation would lie under section 133.
He was right subsequently to acknowledge that this could not be correct, but that acknowledgement raised a question as to the validity of Lord Binghams observation that section 133 applied to failures of the trial process.
I also question that statement.
It is not the failure of the trial process that constitutes a miscarriage of justice, but the wrongful conviction that may be caused by it.
A wrongful conviction is capable of amounting to a miscarriage of justice whether or not it has been caused by a failure of the trial process.
I do not believe that Lord Bingham can have intended to exclude from the ambit of section 133 convictions quashed as the result of the discovery of new facts in circumstances where there has been no failure of the trial process.
That, I believe, is the situation with which section 133 is, at least primarily, concerned.
There is a question as to the assistance that is to be derived from the following earlier comments in para 4 of Lord Binghams judgment: The expression wrongful convictions is not a legal term of art and it has no settled meaning.
Plainly the expression includes the conviction of those who are innocent of the crime of which they have been convicted.
But in ordinary parlance the expression would, I think, be extended to those who, whether guilty or not, should clearly not have been convicted at their trials.
It is impossible and unnecessary to identify the manifold reasons why a defendant may be convicted when he should not have been.
It may be because the evidence against him was fabricated or perjured.
It may be because flawed expert evidence was relied on to secure conviction.
It may be because evidence helpful to the defence was concealed or withheld.
It may be because the jury was the subject of malicious interference.
It may be because of judicial unfairness or misdirection.
In cases of this kind, it may, or more often may not, be possible to say that a defendant is innocent, but it is possible to say that he has been wrongly convicted.
The common factor in such cases is that something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin) at para 25 I stated that in this passage Lord Bingham was identifying the types of miscarriage of justice that would fall within section 133.
On reflection I believe that I was wrong.
As Lord Hope has pointed out in para 90 Lord Bingham was discussing the meaning of wrongful conviction in the context of the previous ex gratia scheme.
There is a further point to be made in relation to para 4 of Lord Binghams speech.
He has included in the catalogue of cases resulting in the conviction of someone who should not have been convicted the case of a judicial misdirection.
A judicial misdirection could not be a new or newly discovered fact, but if it were it would fall into Dyson LJs third category.
So might a conviction based on flawed expert evidence: see R (Allen) (formerly Harris)) v Secretary of State for Justice [2008] EWCA Civ 808; [2009] 2 All ER 1.
Thus para 4 would appear to embrace all four of Dyson LJs categories.
In para 9 Lord Bingham observed, when considering section 133, that, while miscarriage of justice can be used to describe the conviction of the demonstrably innocent, it can be and has been used to describe cases in which defendants, guilty or not, certainly should not have been convicted.
This also has been treated by some as expressing Lord Binghams view of the scope of section 133, but I do not think that it is clear that this was so.
In these circumstances, I agree with Lord Hope that Lord Binghams speech does not provide significant positive assistance in interpreting miscarriage of justice in section 133.
It is of assistance in respect of his comments on Lord Steyns answer to that question.
Lord Steyns conclusion in Mullen that miscarriage of justice was restricted to the conviction of an innocent person was largely founded on his misreading of the French text of article 14(6) and of the position in France.
Shorn of that support, his speech does not provide compelling justification for his conclusion.
For all these reasons I do not believe that Mullen helps very much in determining the meaning of miscarriage of justice in section 133.
The cases that have followed Mullen, including those before this Court, have proceeded on the basis that Lord Bingham had laid down an alternative test to that of Lord Steyn, and concluded, in each case, that neither test was satisfied.
In the circumstances there is nothing to be gained by considering those decisions.
I agree with Lord Hope that a fresh approach is required.
I propose to adopt the four categories identified by Dyson LJ as the framework for discussion.
The nature of the exercise
The wording of section 133, following that of article 14(6), might suggest that the terms of the judgment of the court that reverses the conviction will establish whether the entitlement to compensation has been made out.
It speaks of a conviction being reversed on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice (emphasis added).
That is not, however, the test for quashing a conviction in this jurisdiction.
The words on the ground that must, if they are to make sense, be read as in circumstances where.
Section 133(1) provides that the compensation will be paid by the Secretary of State, and section 133(2) provides for a two year time limit for application for compensation to the Secretary of State.
Thus it is for the Secretary of State to decide whether the requirements of section 133 are satisfied, an exercise which is, of course, subject to judicial review.
The Secretary of State first has to consider whether a new or newly discovered fact has led to the quashing of a conviction.
If it has, he then has to consider whether that fact shows beyond reasonable doubt that there has been a miscarriage of justice, applying the true meaning of that phrase.
The Secretary of State will plainly have regard to the terms of the judgment that quashes the conviction, but ultimately he has to form his own conclusion on whether section 133 is satisfied.
The object of the exercise
I think that the primary object of section 133, as of article 14(6), is clear.
It is to provide entitlement to compensation to a person who has been convicted and punished for a crime that he did not commit.
But there is a subsidiary object of the section.
This is that compensation should not be paid to a person who has been convicted and punished for a crime that he did commit.
The problem with achieving both objects is that the quashing of a conviction does not of itself prove that the person whose conviction has been quashed did not commit the crime of which he was convicted.
Thus it is not satisfactory to make the mere quashing of a conviction the trigger for the payment of compensation.
It was this problem which led to the adoption of the imprecise language of article 14(6), which has been reproduced in section 133.
In interpreting section 133 it is right to have in mind the two conflicting objectives.
It is necessary to consider whether the wording of the section permits a balance to be struck between these two objectives and, if so, how and where that balance should be struck.
I turn to consider Dyson LJs four categories having in mind these considerations.
I shall deviate from the order in which he set them out.
Category 4: where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who
should not have been convicted
This category is derived from Lord Binghams speech in Mullen.
As I have explained, I do not believe that he put it forward as falling within the scope of section 133.
As I understand it, the category embraces an abuse of process so egregious that it calls for the quashing of a conviction, even if it does not put in doubt the guilt of the convicted person.
I would not interpret miscarriage of justice in section 133 as embracing such a situation.
It has no bearing on what I have identified as the primary purpose of the section, which is the compensation of those who have been convicted of a crime which they did not commit.
If it were treated as falling within section 133 this would also be likely to defeat the subsidiary object of section 133, for it would result in the payment of compensation to criminals whose guilt was not in doubt.
Category 3: Fresh evidence rendering the conviction unsafe
Dyson LJ propounded this test as requiring consideration of whether a fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
This raises the question, which I shall consider further when I come to category 2, of whether section 133 requires the Secretary of State to consider the reaction to fresh evidence of a fair minded jury.
Put another way, the situation under consideration is one where the fresh evidence reduces the strength of the case that led to the claimants conviction, but does not diminish it to the point where there is no longer a significant case against him.
I would not place this category within the scope of section 133 for two reasons.
The first is that it gives no sensible meaning to the requirement that the miscarriage of justice must be shown beyond reasonable doubt, or conclusively in the wording of article 14(6).
It makes no sense to require that the new evidence must show conclusively that the case against the claimant is less compelling.
It is tantamount to requiring the Secretary of State to be certain that he is uncertain of the claimants guilt.
My second reason is that, if category 3 were adopted as the right definition of miscarriage of justice, it would not strike a fair balance between the two objectives of section 133.
The category of those who are convicted on evidence which appears to establish guilt beyond reasonable doubt, but who have their convictions quashed because of fresh evidence that throws into question the safety of their convictions, will include a significant number who in fact committed the offences of which they were convicted.
This is the inevitable consequence of a system which requires guilt to be proved beyond reasonable doubt.
When these two factors are considered together they lead to the conclusion that section 133 does not, on its true interpretation, apply to category 3.
Category 1: Fresh evidence that shows clearly that the defendant is innocent of the
crime of which he was convicted
Having considered the categories which were at one extremity of Dyson LJs list, I now turn to the category at the other.
Plainly section 133 will embrace this category, but does it provide the exclusive definition of miscarriage of justice in that section? There are a number of points to be made in favour of this suggestion.
The first is that it gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133.
More particularly, if miscarriage of justice is read as meaning the conviction of someone who is innocent, it makes perfect sense of the requirement that the new fact should prove this beyond reasonable doubt.
Next it gives section 133 a meaning which is eminently practicable.
Objection has been made to category 1 on the ground that it is not the role of the Court of Appeal, when reviewing a conviction, to rule whether the defendant is innocent of the crime of which he was convicted.
In R v McIlkenny (1991) 93 Cr App R 287, 311 Lloyd LJ observed that the Court of Appeal was neither obliged nor entitled to state that an appellant was innocent.
Its task was simply to decide whether the verdict of the jury could stand.
He described this as a point of great constitutional importance.
I think that he was right.
The point was well put by the Court of Appeal for Ontario in R v Mullins Johnson 2007 ONCA 720; 87 OR (3d) 425.
The appellant had been convicted of murder of his 4 year old niece and served 12 years in prison.
His conviction was based on expert evidence that the autopsy indicated that the young girl had been sexually abused and suffocated.
Subsequent medical evidence totally discredited the evidence given at the trial, so that it became clear that there was no reliable pathological evidence either of sexual abuse or of homicidal asphyxia of the child.
The case was referred to the Court of Appeal on terms that it should treat it as an appeal on fresh evidence.
In a passage which merits citation in full, the Court explained why it would not be proper for it in these circumstances to make a declaration that the appellant was in fact innocent: 22 The fresh evidence shows that the appellants conviction was the result of a rush to judgment based on flawed scientific opinion.
With the entering of an acquittal, the appellants legal innocence has been re established.
The fresh evidence is compelling in demonstrating that no crime was committed against Valin Johnson and that the appellant did not commit any crime.
For that reason an acquittal is the proper result. 23 There are not in Canadian law two kinds of acquittals: those based on the Crown having failed to prove its case beyond a reasonable doubt and those where the accused has been shown to be factually innocent.
We adopt the comments of the former Chief Justice of Canada in The Lamer Commission of Inquiry Pertaining to the Cases of: Ronald Dalton, Gregory Parsons, Randy Druken, Annex 3, pp. 342: [A] criminal trial does not address factual innocence.
The criminal trial is to determine whether the Crown has proven its case beyond a reasonable doubt.
If so, the accused is guilty.
If not, the accused is found not guilty.
There is no finding of factual innocence since it would not fall within the ambit or purpose of criminal law. 24 Just as the criminal trial is not a vehicle for declarations of factual innocence, so an appeal court, which obtains its jurisdiction from statute, has no jurisdiction to make a formal legal declaration of factual innocence.
The fact that we are hearing this case as a Reference under section 696.3(3)(a)(ii) of the Criminal Code does not expand that jurisdiction.
The terms of the Reference to this court are clear: we are hearing this case as if it were an appeal.
While we are entitled to express our reasons for the result in clear and strong terms, as we have done, we cannot make a formal legal declaration of the appellants factual innocence. 25 In addition to the jurisdictional issue, there are important policy reasons for not, in effect, recognizing a third verdict, other than guilty or not guilty, of factually innocent.
The most compelling, and, in our view, conclusive reason is the impact it would have on other persons found not guilty by criminal courts.
As Professor Kent Roach observed in a report he prepared for the Commission of Inquiry into Certain Aspects of the Trial and Conviction of James Driskell, there is a genuine concern that determinations and declarations of wrongful convictions could degrade the meaning of the not guilty verdict (p 39).
To recognize a third verdict in the criminal trial process would, in effect, create two classes of people: those found to be factually innocent and those who benefited from the presumption of innocence and the high standard of proof beyond a reasonable doubt.
But the decision whether there has been a miscarriage of justice within section 133 is not for the court but for the Secretary of State.
He should have no difficulty in deciding whether new evidence that has led to the quashing of a conviction shows beyond reasonable doubt that the defendant was innocent of the crime of which he was convicted.
Where the prosecution has satisfied the jury beyond reasonable doubt that a defendant is guilty, evidence that demonstrates beyond reasonable doubt that he was in fact innocent will not be equivocal.
Even though it is not for the Court of Appeal, when quashing the conviction, to express its opinion that the defendant is innocent, the reasons given for quashing the conviction are unlikely to leave any doubt of this, just as was the position in Mullins Johnson.
The other obvious point in favour of category 1 is that it precludes all possibility of a defendant who in fact committed the crime of which he was convicted receiving compensation for the consequences of his conviction.
If this is to be treated as being of paramount importance, then category 1 is the only satisfactory interpretation of section 133.
The Law Commission of New Zealand in its 1998 Report No 49 on Compensating the Wrongly Convicted advised at para 127 A requirement to prove innocence is, however, necessary to prevent the guilty claimant, acquitted on a technicality, from profiting from the crime.
It recognises that it is a persons innocence which provides the justification for compensation in the first place.
This brings me to the last point that is advanced in favour of category 1.
It is argued that it is not in practice possible to draw a line between category 2 and category 3.
Unless category 1 is adopted as the correct interpretation of section 133, defendants whose convictions are quashed on technicalities will profit from compensation.
I shall consider this argument when I deal with category 2.
The first argument against restricting the ambit of section 133 to category 1 is that the parties to article 14(6) voted against an amendment which would have done this.
The second is that this will deprive some defendants who are in fact innocent and who succeed in having their convictions quashed on the grounds of fresh evidence from obtaining compensation.
It will exclude from entitlement to compensation those who no longer seem likely to be guilty, but whose innocence is not established beyond reasonable doubt.
This is a heavy price to pay for ensuring that no guilty person is ever the recipient of compensation.
Does category 2, or some similar formulation of miscarriage of justice, provide a more satisfactory approach to the desire to provide compensation to the innocent without rewarding the guilty that both accords with the language of the section and is workable in practice? Category 2: Fresh evidence such that, had it been available at the trial no
reasonable jury could convict the defendant
This category applies to the evidence, including the fresh evidence, the test that a judge has to apply when considering an application at the end of the prosecution case for dismissal of a charge on the ground that the defendant has no case to answer.
It focuses on the evidence before the jury.
If the fresh evidence were always evidence of primary fact, or new expert evidence, the test might be satisfactory.
The position is not, however, as simple as that.
The new evidence that leads to the quashing of a conviction is very often not primary evidence that bears directly on whether the defendant committed the crime of which he was convicted, but evidence that bears on the credibility of those who provided the primary evidence on which he was convicted.
Both of the appeals before the Court fall into this category.
So does the example of category 2 given by Dyson LJ: fresh evidence which undermines the creditworthiness of the sole witness for the prosecution.
Here one can run into a problem that is peculiar to the criminal procedures that apply in common law jurisdictions.
Under common law procedures the evidence that is permitted to be placed before the jury is screened by a number of rules that are designed to avoid the risk that the jury will be unfairly prejudiced and to ensure that the trial is fair.
Thus section 78 of the Police and Criminal Evidence Act 1984 gives the judge a general jurisdiction to exclude evidence on the grounds of fairness and section 76A of the same Act contains a little code governing the admissibility of a confession.
So does section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978, which was applicable to the critical evidence adduced against the defendants in the second appeal.
Often it will be appropriate for the judge to hold a voir dire in order to decide whether or not evidence can be admitted.
The question of whether there is evidence upon which a jury can properly convict is taken after the judge has screened from the jury evidence which, under the relevant procedural code, he has ruled to be inadmissible.
That is often a difficult judicial task.
I do not believe that section 133 should be so interpreted as to impose on the Secretary of Sate the task of deciding whether the fresh evidence would have rendered inadmissible the primary evidence to which it related, in order to answer the question whether there would have been a case upon which a reasonable jury could convict.
There is a further difficulty with category 2.
The question of whether a reasonable jury could properly convict falls to be answered having regard to the fact that a jury must be satisfied of guilt beyond reasonable doubt.
Section 133 requires the Secretary of State to be satisfied beyond reasonable doubt that a miscarriage of justice has occurred.
Category 2 thus operates as follows: compensation will be payable where the Secretary of State is satisfied beyond reasonable doubt that no reasonable jury could have been satisfied beyond reasonable doubt that the defendant was guilty.
This does not seem a very sensible test.
The final point to make about category 2 is that it applies a test the result of which depends critically on common law procedural rules.
As the test is derived from article 14(6), it would be preferable if it were one more readily applicable in other jurisdictions.
For these reasons I do not consider the second category, as formulated by Dyson LJ, provides a satisfactory definition of miscarriage of justice.
I would replace it with a more robust test of miscarriage of justice.
A new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This is a matter to which the test of satisfaction beyond reasonable doubt can readily be applied.
This test will not guarantee that all those who are entitled to compensation are in fact innocent.
It will, however, ensure that when innocent defendants are convicted on evidence which is subsequently discredited, they are not precluded from obtaining compensation because they cannot prove their innocence beyond reasonable doubt.
I find this a more satisfactory outcome than that produced by category 1.
I believe that it is a test that is workable in practice and which will readily distinguish those to whom it applies from those in category 3.
It is also an interpretation of miscarriage of justice which is capable of universal application.
Retrial
The provisions in relation to retrial introduced into section 133 in the circumstances described by Lord Hope at paras 103 and 104 of his judgment raise a problem.
A retrial will only be ordered where, although it quashes the defendants conviction on the grounds of fresh evidence, the Court of Appeal considers that there remains a case against him that is fit for trial.
Assuming that they are correct in that view, the fresh evidence could never fall within the scope of section 133 if it is right to interpret that section as being limited to either category 1 or category 2, as formulated by Dyson LJ or as I have reformulated it.
The introduction into the section of the provisions in relation to retrial would make more sense if section 133 embraced category 3.
In that case, however, one might have expected compensation to be payable automatically if the retrial ended in an acquittal, but the amended section 133 does not so provide.
It does not follow, however, that category 1 or category 2 cannot stand with section 133, as amended.
Entitlement to compensation does not turn on the view that the Court of Appeal takes of the new evidence.
The defendant may contend, even where a retrial is ordered, that the fresh evidence proves his innocence.
Although the Court of Appeal is not persuaded of this, it may become apparent in the course of the retrial that the defendant is correct.
Thus the provisions in relation to retrial make sense, even if category 1 or category 2 represents the correct interpretation of miscarriage of justice.
Article 6(2) of the European Convention on Human Rights
The Strasbourg Court has stated that one of the functions of article 6(2) is to protect an acquitted persons reputation from statements or acts that follow an acquittal which would seem to undermine it see Taliadorou and Stylianou v Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008, at para 26.
The Courts expansion of what would seem to be a rule intended to be part of the guarantee of a fair trial into something coming close to a principle of the law of defamation is one of the more remarkable examples of the fact that the Convention is a living instrument.
Mr Owen QC for Mr Adams referred the Court to a series of decisions of the Strasbourg Court in which it was held to be a violation of article 6(2) for a state to refuse compensation to which an applicant who had been held in preventative detention was normally entitled on acquittal at the end of a criminal trial on the ground that his acquittal did not establish his innocence.
Lord Hope has summarised the details and effect of those authorities.
Mr Owen argued that their effect was that, once Mr Adams conviction had been quashed, he was entitled to be treated as innocent in the context of his claim for compensation.
A rather different argument based on article 6(2) was rejected by Lord Steyn in Mullen at para 44.
Mr Owen first advanced the present argument when appearing for the claimant in R(Allen) (formerly Harris)) v Secretary of State for Justice [2009] 2 All ER 1.
In that case the claimants claim for compensation under section 133 was rejected on the grounds that his case satisfied neither Lord Steyns test in Mullen nor the test that Lord Bingham had been thought to advance in that case.
Giving the only reasoned judgment, Hughes LJ comprehensively rejected Mr Owens argument based on article 6(2) for a series of ten reasons.
On the present appeals Lord Hope has held that reliance on article 6(2) is misplaced for reasons that have much in common with those of Hughes LJ.
I agree with both of them.
I would add this.
The appellants claims are for compensation pursuant to the provisions of section 133.
On no view does that section make the right to compensation conditional on proof of innocence by a claimant.
The right to compensation depends upon a new or newly discovered fact showing beyond reasonable doubt that a miscarriage of justice has occurred.
Whatever the precise meaning of miscarriage of justice the issue in the individual case will be whether it was conclusively demonstrated by the new fact.
The issue will not be whether or not the claimant was in fact innocent.
The presumption of innocence will not be infringed.
Newly discovered fact
Mr Adams appeal raises a second issue.
Were the facts that led to the quashing of his conviction newly discovered despite the fact that they were contained in documents disclosed to his legal representatives before his trial or available on the Holmes database? The phrase newly discovered raises a further difficult problem of interpretation, for it does not indicate to whom the discovery must be new.
Procedure Act 1993.
Section 9(6) of that Act provides: Ireland has given effect to article 14(6) by section 9 of the Criminal newly discovered fact means ( a ) where a conviction was quashed by the Court on an application under section 2 or a convicted person was pardoned as a result of a petition under section 7, or has been acquitted in any re trial, a fact which was discovered by him or came to his notice after the relevant appeal proceedings had been finally determined or a fact the significance of which was not appreciated by the convicted person or his advisers during the trial or appeal proceedings.
I would adopt this generous interpretation of newly discovered fact.
Section 133(1), following the almost identical wording of article 14(6), ends with the proviso : unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso is significant in more than one way.
First, the use of the word non disclosure would seem to equate the new discovery with disclosure.
The latter word has a broad ambit and, in context, suggests to me the bringing of a fact into the public domain and, in particular, the disclosure of that fact to the court.
Secondly, I read the provision as excluding a right to compensation where the person convicted has deliberately prevented the disclosure of the relevant fact, or where the non discovery of that fact is otherwise attributable to his own fault.
We are envisaging a situation where a claimant has been convicted, and may well have served a lengthy term of imprisonment, in circumstances where it has now been discovered that a fact existed which either demonstrates that he was innocent or, at least, undermines the case that the prosecution brought against him.
If he was aware of this fact but did not draw it to the attention of his lawyers, and he did not deliberately conceal it (which would bring the fact within the proviso), this will either be because the significance of the fact was not reasonably apparent or because it was not apparent to him.
Many who are brought before the criminal courts are illiterate, ill educated, suffering from one or another form of mental illness or of limited intellectual ability.
A person who has been wrongly convicted should not be penalised should this be attributable to any of these matters.
It is for those reasons that I would adopt the same interpretation of newly discovered fact as the Irish legislature.
Conclusions
It has always been common ground that Mr Adams case falls into category 3.
The newly discovered facts (as I would hold them to be) in his case do not show that a miscarriage of justice has occurred within the meaning that I would give to that phrase in section 133.
Accordingly, I would dismiss his appeal.
The newly discovered facts in the case of Mr McCartney and Mr MacDermott, as described by Lord Kerr, so undermine the evidence against them that no conviction could possibly be based upon it.
There can be no reasonable doubt of this.
Accordingly I would allow their appeal and hold that they are entitled to compensation pursuant to the provisions of section 133.
LORD HOPE
I accept with gratitude Lord Phillips description of the facts in the case of Andrew Adams and Lord Kerrs description of the facts in the cases of Eamonn MacDermott and Raymond McCartney.
With that advantage I can go straight to the issues of principle that these cases have raised.
Mention should also be made of Barry George, who was granted permission to intervene in this appeal.
On 2 July 2001 he was convicted of the murder on 26 April 1999 of the television presenter Jill Dando, who was killed by a single shot to the head as she was about to enter her home in Fulham.
His appeal against conviction was dismissed on 29 July 2002: [2002] EWCA Crim 1923.
A major part of the Crowns case against him was that a single particle of firearms discharge, which matched particles found in the cartridge case of the bullet which killed Miss Dando, in her coat and in samples of her hair, had been found nearly 12 months later in the pocket of a coat owned and worn by Mr George.
Following a review of his case, the Criminal Cases Review Commission decided to refer his conviction to the Court of Appeal under section 9 of the Criminal Appeal Act 1995 on the ground that new evidence called into question the evidence at the trial about the firearms discharge and the significance that had apparently been attached to that evidence.
New reports obtained from the Forensic Science Service had shown that it had no evidential value in the case against Mr George.
On 15 November 2007 the Court of Appeal quashed the conviction and ordered a retrial: [2007] EWCA Crim 2722.
The evidence of the firearms discharge was not admitted at the trial.
On 1 August 2008 the jury by a unanimous verdict found Mr George not guilty.
On the day of the acquittal the Crown Prosecution Service issued a press statement in which it was stated that Mr George now had the right to be regarded as an innocent man.
On 7 October 2009 Mr George applied for compensation under section 133 of the Criminal Justice Act 1988.
By letter dated 15 January 2010 the Secretary of State for Justice told Mr George that he was not prepared to authorise an award of compensation as the new forensic evidence did not prove beyond reasonable doubt that he was innocent.
He referred to the fact that in its judgment of 15 November 2007 the Court of Appeal stated that in the absence of the evidence of the firearms discharge there was circumstantial evidence capable of implicating Mr George, and that it had ordered a retrial which defence counsel conceded should take place.
Mr George applied for judicial review of that decision on 14 April 2010.
On 25 August 2010 Collins J granted permission.
But he stayed the proceedings pending the decision of this Court as to the meaning of miscarriage of justice in section 133 of the 1988 Act.
Mr Glen QC for Mr George submitted that it was sufficient to entitle a person to an award of compensation under that section that his conviction had been reversed on the ground of a new or newly discovered fact and that, in the event of his being subjected to a retrial, he had been acquitted of the offence.
As that was what had happened in his case it should be made clear by this Court in its judgment that, where a person had suffered punishment in such circumstances, compensation should be paid to him under the scheme that had been set up by the statute.
With that introduction I can go straight to the issues of principle that these cases have raised.
Background
The background to the introduction of a statutory right to compensation for miscarriages of justice by section 133 of the Criminal Justice Act 1988 was described in In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289, paras 6 9 by Lord Bingham of Cornhill and R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, paras 25 28 by Lord Steyn.
Lord Bingham drew attention in McFarland, para 6, to the underlying principles.
In any liberal democratic state there will be those who are accused of crime and are acquitted at trial, or whose convictions are reversed following an appeal.
Those affected will have suffered the stigma of being accused and the trauma of standing trial and of imprisonment before the process is brought to an end.
In principle it might seem that the state, which initiated the unsuccessful prosecution, should compensate those who have been acquitted, or at least some of them.
How this was to be done and in what circumstances was much debated before the current system was adopted: see David Harris, The Right to a Fair Trial in Criminal Proceedings as a Human Right (1967) 16 ICLQ 352, 372 375.
It was, as Lord Steyn said in Mullen, para 52, a process of evolution.
First, there was the adoption on 16 December 1966 of the International Covenant on Civil and Political Rights (the ICCPR), article 14(6) of which made provision for what it described as compensation according to law to a person whose conviction had been reversed or had been pardoned in the circumstances to which it referred and who had suffered punishment as a result of such a conviction.
The ICCPR was ratified by the United Kingdom on 20 May 1976.
On 29 July 1976 the Home Secretary (Mr Roy Jenkins) set out in a written answer the procedure which was being adopted for the making of ex gratia payments in recognition of the hardship caused by what he referred to as a wrongful conviction: Hansard (HC Debates), WA cols 328 330.
Three weeks later, on 20 August 1976, the ICCPR entered into force.
Thereafter the United Kingdom continued to fulfil its international obligations under article 14(6) under the ex gratia scheme.
The scheme was put onto a more formal basis on 29 November 1985: see Hansard (HC Debates), WA cols 689 690.
The then Home Secretary (Mr Douglas Hurd) said that he would be prepared to pay compensation where this was required by the international obligations, and that he remained prepared to pay compensation to people who did not fall within the terms of article 14(6) but who had spent a period in custody following a wrongful conviction or charge, where he was satisfied that it had resulted from serious default on the part of a member of a police force or of some other public authority.
He said that the Secretary of State for Northern Ireland intended to follow a similar practice.
A similar scheme was already in operation in Scotland.
There was however international pressure on the United Kingdom to put its obligations under article 14(6) on a statutory footing: see R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, para 28 by Lord Steyn.
The response to it was section 133 of the Criminal Justice Act 1988.
The new statutory right superseded in part the existing scheme for ex gratia payments, which remained in being until April 2006, when it was terminated both in England and Wales and Northern Ireland.
This has had the inevitable, but unfortunate, consequence that claimants in those jurisdictions are now dependent solely upon the scheme provided by the statute.
The ex gratia scheme which has been operated in Scotland by the Scottish Ministers still remains in force there, alongside the system for the payment of compensation in respect of all reversals of convictions that fall within section 133 of the 1988 Act.
This enables those against whom criminal proceedings were taken which can properly be regarded with hindsight as wrongful to be compensated even though their cases cannot be brought within the terms of the statute.
The way the scheme is currently operated in England and Wales was set out by the Minister of State (Lord McNally) in a written answer which was published on 1 March 2011 (Hansard (HL Debates), WA col 318), in which he said: Compensation is paid under [section 133] where a conviction is quashed following an out of time appeal or following a reference by the Criminal Cases Review Commission to the relevant appeal court on the basis that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Section 133 fully meets our international obligations.
The Government do not operate a compensation scheme for those who have convictions quashed at in time appeals or those who are acquitted at trial.
Figures disclosed by the Ministry of Justice about the number of applications received and the number of applications approved in England and Wales show that there has been a very substantial drop in the number of applications approved since the abolition of the ex gratia scheme in 2006.
The system prior to that date was that all applications were considered first under section 133 and then, if not approved, were considered under the ex gratia scheme.
The following table shows all applications for compensation received since May 2004 and those which were approved under section 133 : Year 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
The statutory scheme
Article 14(6) of the ICCPR provides: Total Applications Received 88 74 39 40 38 37 Applications Approved Under s 133 39 21 23 7 7 1 When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
The wording of section 133(1) of the 1988 Act follows that of article 14(6).
It provides: (1) Subject to subsection (2) below, when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Subsection (2) provides that no payment of compensation is to be made unless an application for compensation is made to the Secretary of State, for which a time limit of two years beginning with the date when the persons conviction is reversed or he is pardoned was introduced in relation to England and Wales and Northern Ireland by section 61(3) of the Criminal Justice and Immigration Act 2008.
Section 133(5) of the 1988 Act, as amended by paragraph 16(4) of Schedule 2 to the Criminal Appeal Act 1995, provides: In this section reversed shall be construed as referring to a conviction having been quashed or set aside (a) on an appeal out of time; or (b) on a reference (i) (ii) under section 194B of the Criminal Procedure (Scotland) Act under the Criminal Appeal Act 1995; or 1995.
Subsection (5A), which was inserted in relation to England and Wales and Northern Ireland by section 61(5) of the Criminal Justice and Immigration Act 2008, provides: (5A) But in a case where (a) a persons conviction for an offence is quashed on an appeal out of time, and (b) the person is to be subject to a retrial, the conviction is not to be treated for the purposes of this section as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
To be entitled to compensation under section 133(1) the claimant must show that he has been convicted of a criminal offence and that subsequently his conviction has been reversed on an appeal out of time or on a reference by the CCRC, or he has been pardoned: on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The words that I have quoted from the subsection differ from the equivalent part of article 14(6) of the ICCPR in one respect only.
The statute uses the phrase beyond reasonable doubt where article 14(6) uses the word conclusively.
One might have thought at first sight that, when applications for compensation were made to the Secretary of State, such simple wording could be applied to each case without much difficulty.
But that has proved not to be the case, as can be seen from the speeches in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, where the meaning of the words miscarriage of justice was under scrutiny.
Lord Bingham said that he would hesitate to accept the submission of the Secretary of State that section 133 obliged him to pay compensation only when a defendant, finally acquitted in the circumstances satisfying the statutory conditions, is shown beyond reasonable doubt to be innocent of the crime of which he had been convicted: para 9.
Lord Steyn, on the other hand, said that the words miscarriage of justice extend only to cases where the person concerned is acknowledged to be clearly innocent: para 56.
Then there are the words new or newly discovered fact.
What is a fact for this purpose? And to whom does it have to be new or by whom does it have to be newly discovered? The meaning of those words is in issue in the appeal by Adams, whose conviction was reversed because of a failure by his representatives to make themselves aware of and make use of three pieces of important material at his trial which had been made available to them by the prosecution but of which Adams himself was not aware.
The issue as to what is meant by the words miscarriage of justice is common to his appeal and the appeals of MacDermott and McCartney.
It will be convenient to examine this issue first.
Miscarriage of justice
Attempts have been made in subsequent cases to reconcile the differing views as to the meaning of miscarriage of justice that were expressed in Mullen: see R (Murphy) v Secretary of State for the Home Department [2005] EWHC 140 (Admin), [2005] 1 WLR 3516; R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin); In re Boyles Application [2008] NICA 35; R (Allen) (formerly Harris) v Secretary of State for Justice [2008] EWCA Civ 808, [2009] 2 All ER 1; R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin).
In the Court of Appeal in Adamss case Dyson LJ said that, like Lord Phillips of Worth Matravers CJ in Cliberys case and Richards J in Murphy, he did not propose to express a view as to whether Lord Binghams interpretation was to be preferred to that of Lord Steyn: R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, para 42.
The assumption has been that Lord Binghams reference in para 4 of his speech in Mullen to something having gone seriously wrong in the investigation of the offence or the conduct of the trial could be taken as a test of whether the right to compensation under section 133 was available that could sit alongside that preferred by Lord Steyn.
In Allen, para 26 Hughes LJ said that this was made the plainer by Lord Binghams references to a defendant who should clearly not have been convicted in para 4 and who certainly should not have been convicted in para 9(1).
Dyson LJ set the scene for a discussion of this issue in these appeals in para 19 of his judgment in R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, when he said: The question what is meant by miscarriage of justice has not been resolved by the courts.
As Toulson LJ said when giving permission to appeal in the present case, there are at least three classes of case where the Court of Appeal allows an appeal against conviction on the basis of fresh evidence.
I shall call them category 1, category 2 and category 3 cases.
A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the trial, shows beyond reasonable doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
This list of the different types of case where appeals are allowed according to the practice of the Court of Appeal (Criminal Division) was used in argument to focus the positions adopted by either side in these appeals.
It was assisted later in the judgment by an acknowledgment that there were two limbs to Lord Binghams interpretation as set out in his speech in Mullen, para 4: [2010] QB 460, para 43.
The first limb was where the person was innocent of the crime of which he had been convicted: category 1 according to Toulson LJs analysis.
The second limb was where something had gone seriously wrong in the investigation or the conduct of the trial and the person should clearly not have been convicted.
For the Secretaries of State it was submitted that only cases falling within category 1 would satisfy the requirements of section 133(1).
For Adams Mr Owen QC submitted that it was not possible to draw a clear line between categories 2 and 3, so it was sufficient for him to bring his case within category 3.
In any event, he submitted that Lord Binghams interpretation of the phrase in his second limb in Mullen was to be preferred, that proof of innocence was not required and that his case came within category 4.
Counsel for the appellants McCartney and MacDermott submitted that Lord Binghams interpretation was to be preferred, and that their cases too fell within his second limb and category 4.
It would be wrong to regard the way these categories were identified and described by the Court of Appeal as a substitute for looking at the language of section 133(1) itself and reaching our own view as to its effect.
Lord Bingham said in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, para 2 that he would allow the Secretary of States appeal on a narrow ground which made it unnecessary for him to reach a concluded view as to whether the right to compensation under the statute was available only to those who were innocent of the crime of which they had been convicted.
We do not have that luxury in the cases that are before us in these appeals.
A choice has to be made.
It is time to take a fresh look at the arguments.
Our task is made less onerous, although no less difficult, by the fact that the materials that were said to be relevant were discussed so fully by Lord Bingham and Lord Steyn in Mullen.
It is striking how little assistance they were able to derive from the materials that were before the House.
On many points both Lord Steyn and Lord Bingham were in agreement.
They were agreed that the wording of section 133(1) was intended, as Lord Bingham put it in para 9, to reflect article 14(6).
In para 5 he said that the parties were rightly agreed that the key to interpretation of section 133 was a correct understanding of article 14(6).
They were also agreed that, as Lord Bingham said in para 9(1), the expression miscarriage of justice is not a legal term of article Taken on its own and out of context, it has no settled meaning.
Lord Steyn said that the expression had to be looked at in the relevant international context, and that the only relevant context here was the international meaning of the words in article 14(6) on which section 133 is based: para 36.
The question then was, what did the materials reveal as to its international meaning?
The travaux prparatoires disclosed no consensus of opinion on the meaning to be given to it.
Lord Steyn said that they were neutral and did not assist in any way on the proper construction of article 14(6): para 54.
Lord Bingham seems to have seen this as a possible pointer towards a more generous interpretation.
He said that the expression miscarriage of justice may have commended itself because of the latitude of interpretation that it offered: para 9(2).
But this was no more than a straw in the wind.
The jurisprudence of the United Nations Human Rights Committee was of little assistance either indeed, Lord Steyn does not mention it at all.
And there was no consensus of academic opinion on the issue.
In this situation Lord Steyn resorted first to an examination of article 14(6) on its own terms: para 45.
Lord Bingham did not undertake this exercise.
Instead he took as his starting point the statements that Mr Jenkins and Mr Hurd made when they were explaining the ex gratia scheme to Parliament: para 4.
As he said at the outset of this paragraph, they were addressing the subject of wrongful convictions and charges.
He observed that, like the expression miscarriage of justice, the expression wrongful convictions is not a legal term of art and it has no settled meaning.
He then set out to describe in some detail the situations to which in ordinary parlance, as he put it, the expression would be taken to extend.
Here we find the first and second limbs, as Dyson LJ in the Court of Appeal described them at [2010] QB 460, para 43, set out.
The first is the conviction of those who are innocent of the crime of which they were convicted.
The second embraces cases where those who, whether guilty or not, should not have been convicted.
The manifold reasons where this might happen were impossible and unnecessary to identify.
The common factor however was that something had gone seriously wrong in the investigation of the offence or the conduct of the trial.
It is important not to lose sight of the fact that Lord Bingham was not seeking in para 4 to describe what, in the context of article 14(6), was meant by the expression miscarriage of justice.
He was concentrating here on the expression wrongful conviction in the statements about the ex gratia scheme.
He did not refer to the fact that it is a precondition of the right to compensation under article 14(6), and in its turn section 133, that the conviction was reversed because of a new or newly discovered fact.
The descriptions of the ex gratia scheme did not mention this as a prerequisite.
Quite what part this discussion had to play in the interpretation of article 14(6), to which he turned in para 5, is unclear.
He took account of the fact that in the course of his statement Mr Hurd recited the terms of, and undertook to observe, article 14(6): para 5.
There is an indication in that paragraph that he saw the only difference between that part of Mr Hurds statement and the enactment of section 133 as being that the right to be compensated should more obviously be, as article 14(6) requires, according to law.
But, as he said at the end of that paragraph, the task of the House was to interpret section 133.
He did not say and it would have been surprising if he had done that the key to this was to be found in Mr Hurds description of the cases where he was willing to pay compensation for a wrongful conviction under the ex gratia scheme.
When he said at the end of para 8 that it is for failures of the trial process that the Secretary of State is bound by section 133 and article 14(6) to pay compensation, he was not offering a considered view as to what those provisions actually mean.
He was explaining why, because there was no failure in the trial process, he could decide the case against Mullen on that limited ground without forming a concluded view as to what the convicted person had to show to be entitled to compensation.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin), para 25, Lord Phillips of Worth Matravers CJ said that in para 4 of his speech in Mullen Lord Bingham considered two different situations, each of which he (that is, Lord Bingham) considered fell within the description of miscarriage of justice in section 133 of the 1988 Act.
It is true, as Lord Phillips went on to point out, that in para 6 of his speech Lord Bingham referred to the core right with which article 14(6) is concerned as the right to a fair trial.
But I think, with respect, that Lord Phillips was wrong to say that in para 4 of his speech Lord Bingham was considering what was meant by miscarriage of justice in section 133, as he himself has accepted: see para 30, above.
Hughes LJ drew attention to this point in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 25.
He said that it must be remembered that in Mullen both the statutory and the ex gratia schemes were under consideration.
In my opinion the value of Lord Binghams speech in Mullen lies not in any attempt on his part to subject section 133 to textual analysis, for he did not do this.
It is to be found in the reasons he gave for hesitating to accept the argument for the Secretary of State that section 133 was satisfied only when the defendant was shown beyond reasonable doubt to have been innocent of the crime of which he had been convicted, and in particular in the three points on which he disagreed with Lord Steyn.
Lord Steyns textual analysis of article 14(6) begins with a warning that there was no overarching purpose of compensating all who are wrongly convicted.
For the reasons he gives in para 45, the fundamental right under article 14(6) is narrowly circumscribed.
There was no intention to compensate all those whose convictions were quashed within the ordinary time limits, only those whose convictions were quashed on appeal out of time.
And this was only where a new or newly discovered fact showed conclusively that there had been a miscarriage of justice.
Having made this point, he then concentrated in para 46 on the requirement that the new or newly discovered fact must show conclusively (or beyond reasonable doubt in the language of section 133) that there has been a miscarriage of justice.
He said that this filtered out cases of two kinds, (1) where there may have been a wrongful conviction and (2) where it is only probable that there may have been a wrongful conviction.
He concluded that the only relevant context pointed to a narrow interpretation, that is to say the case where innocence is demonstrated.
This approach leans very heavily on the use of the word conclusively.
That word certainly points towards a narrow interpretation.
But it does not point inevitably to the demonstration of innocence as the only case that could qualify for compensation under the article.
The fact that a person who has been pardoned is brought within the scheme does not have that effect either.
It would plainly have been wrong to exclude those who are pardoned from the scheme when those whose convictions have been reversed are given the benefit of it.
But the reversal of a conviction and a pardon are processes which are distinct from each other.
It does not follow from the mere fact that they are both covered by the same scheme that the only reversals of convictions that can be contemplated are those which would otherwise have deserved a pardon.
Lord Steyn might have examined these points more fully, had he not been persuaded by two considerations to which he then turned that he had found the right answer.
The first was the use of the words une erreur judiciaire in the French text of the ICCPR.
In para 47 of his speech in Mullen Lord Steyn said that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of the innocent.
In para 9(4) of his speech Lord Bingham expressed some unease about this, as he contrasted these words with the reference to un condamn reconnu innocent in article 626 of the French Code de Procdure Pnale.
He said that the expression une erreur judiciaire could be understood as equivalent to miscarriage of justice in its broad sense, and that it was not obviously apt to denote proof of innocence.
In In re Boyles Application [2008] NICA 35, para 11 Girvan LJ said that he considered that Lord Binghams hesitation in not accepting Lord Steyns stringent requirement of proof of innocence was justified.
In para 12 he pointed out that the term erreur judiciaire is defined by Grard Cornu in his Vocabulaire Juridique, 7th ed (1998), as une erreur de fait commise par une juridiction de jugement dans son appreciation de la culpabilit dune personne poursuivie.
In para 13 he enlarged on Lord Binghams reference to article 626 of the Code de Procdure Pnale, pointing out that it did not require proof of innocence but rather that, where a defendants conviction is quashed and he is subsequently acquitted, he is reconnu innocent in consequence in other words, the annulment of the conviction itself leads to the establishment of his innocence.
Although Mr Tam QC for the Secretary of State sought to defend Lord Steyns interpretation in his written case, he accepted in the course of Mr Owens oral argument that it was probably incorrect.
For my part, I think that Girvan LJs researches have shown that Lord Steyns understanding of the words une erreur judiciaire in the French text of article 14(6), for which he gave no authority, was mistaken.
The second consideration on which Lord Steyn relied was an observation in para 25 of an explanatory report by the Steering Committee for Human Rights appointed by the Council of Europe which accompanied the Seventh Protocol of the European Convention when it was published in November 1984: Mullen, para 48.
It said of article 3, which follows the wording of article 14(6) of the ICCPR, that the intention was that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be an acknowledgment that the person concerned was clearly innocent.
Having noted that in the introduction to the report it was stated that participation in the Protocol would not affect the application of provisions containing obligations under any other international instrument, Lord Steyn said that the explanatory report nevertheless had great persuasive value in the process of interpretation.
In para 9(4), on the other hand, Lord Bingham set out five reasons for thinking that this passage does not bear the weight that Lord Steyn attached to it.
Among those reasons are two which seem to me to be particularly significant.
First, many more states are parties to the ICCPR than to the European Convention or the Seventh Protocol, which the United Kingdom has not signed or ratified.
Second, para 25 does not appear to be altogether consistent with para 23, which suggests that a miscarriage of justice occurs where there is a serious failure in the judicial process involving grave prejudice to the convicted person.
Furthermore, as Lord Bingham noted in para 9(5), van Dijk and van Hoof, Theory and Practice of the European Convention on Human Rights, 3rd ed (1998), p 689 take a different view, suggesting that the explanatory reports interpretation is too strict and that reversal of the conviction on the ground that new facts have been discovered which introduce a reasonable doubt as to the guilt of the accused is enough.
Lord Steyn said in para 48 that the explanatory report had great persuasive value.
I think that, for the reasons Lord Bingham gives, this overstates the position.
The better view is that it lends some support the Secretary of States argument, but that it must be for the court to work out for itself what the words mean.
There was one further difficulty about Lord Steyns interpretation to which Lord Bingham drew attention in para 9(6).
This is that courts of appeal, although well used to deciding whether convictions are safe or whether reasonable doubts exist about their safety, are not called upon to decide whether a defendant is innocent and in practice rarely do so.
In R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact will be identifiable in that court and the judgment will, in virtually every case, make this plain.
I do not think that this entirely meets Lord Binghams point.
I have no doubt that there will be cases of the kind that Hughes LJ describes.
But it remains true that courts of appeal are not called upon to say whether or not a defendant was innocent, and it is at least questionable whether restricting the right to compensation to cases where the establishment of innocence is apparent from the courts judgment imposes too severe a test for the entitlement to compensation.
A fresh analysis
If one accepts, as I would do, Lord Binghams reasons for doubting whether Lord Steyn was right to find support for his reading of article 14(6) in the French text and in para 25 of the explanatory committees report on article 3 of the Seventh Protocol, one is driven back to the language of the article itself as to what the words miscarriage of justice mean.
Taken by itself this phrase can have a wide meaning.
It is the sole ground on which convictions can be brought under review of the High Court of Justiciary in Scotland: Criminal Procedure (Scotland) Act 1995, section 106(3).
But the fact that these words are linked to what is shown conclusively by a new or newly discovered fact clearly excludes cases where there may have been a wrongful conviction and the court is persuaded on this ground only that it is unsafe.
It clearly includes cases where the innocence of the defendant is clearly demonstrated.
But the article does not state in terms that the only criterion is innocence.
Indeed, the test of innocence had appeared in previous drafts but it was not adopted.
I would hold, in agreement with Lord Phillips (see para 55 above) that it includes also cases where the new or newly discovered fact shows that the evidence against the defendant has been so undermined that no conviction could possibly be based upon it.
In that situation it will have been shown conclusively that the defendant had no case to answer, so the prosecution should not have been brought in the first place.
There is an important difference between these two categories.
It is one thing to be able to assert that the defendant is clearly innocent.
Cases of that kind have become more common and much more easily recognised since the introduction into the criminal courts, long after article 14(6) of the ICCPR was ratified in 1976, of DNA evidence.
It seems unlikely that the possibility of demonstrating innocence in this way was contemplated when the test in article 14(6) was being formulated.
Watson and Crick published their discovery of the double helix in 1951, but DNA profiling was not developed until 1984 and it was not until 1988 that it was used to convict Colin Pitchfork and to clear the prime suspect in the Enderby Murders case.
The state should not, of course, subject those who are clearly innocent to punishment and it is clearly right that they should be compensated if it does so.
But it is just as clear that it should not subject to the criminal process those against whom a prosecution would be bound to fail because the evidence was so undermined that no conviction could possibly be based upon it.
If the new or newly discovered fact shows conclusively that the case was of that kind, it would seem right in principle that compensation should be payable even though it is not possible to say that the defendant was clearly innocent.
I do not think that the wording of article 14(6) excludes this, and it seems to me that its narrowly circumscribed language permits it.
The range of cases that will fall into the category that I have just described is limited by the requirement that directs attention only to the evidence which was the basis for the conviction and asks whether the new or newly discovered fact has completely undermined that evidence.
It is limited also by the fact that the new or newly discovered fact must be the reason for reversing the conviction.
This suggests that it must be the sole reason, but I do not see the fact that the appellate court may have given several reasons for reversing the conviction as presenting a difficulty.
All the other reasons that it has given will have to be disregarded.
The question will be whether the new or newly discovered fact, taken by itself, was enough to show conclusively that there was a miscarriage of justice because no conviction could possibly have been based on the evidence which was used to obtain it.
For these reasons it is plain that category 1 in Dyson LJs list (see para 83, above) falls within the scope of section 133.
I think that it is equally plain that category 4 (Lord Binghams second limb) does not, as it is taken from para 4 of Lord Binghams speech in Mullen where he was discussing what was included within the phrase wrongful convictions, not what was meant by section 133.
This leaves category 2, where the fresh evidence shows that the defendant was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted; and category 3, where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
Bearing in mind that we must form our own view as to what section 133 means, can the wording of that section on a correct understanding of article 14(6) include either or both of these categories?
I have put the words fresh evidence, which of course echo the wording of section 23 of the Criminal Appeal Act 1968 (see also section 106(3) of the Criminal Procedure (Scotland) Act 1995), into inverted commas because they depart from the words of section 133.
The statute, like article 14(6), refers to a new, or newly discovered fact, not to fresh evidence.
And it must be a fact which shows beyond reasonable doubt, or conclusively, that there was a miscarriage of justice.
Fresh evidence does not attain that status until the matter to which it relates has been proved or has been admitted to be true.
Fresh evidence that justifies the conclusion referred to in category 3 will usually not be, and certainly need not be, of that character.
If it shows that the conviction is merely unsafe, the court may order a retrial.
Under our system of trial by jury there will be no way of knowing, beyond reasonable doubt, whether it was a new or newly discovered fact that led to the acquittal.
For these reasons I would exclude category 3 from the scope of section 133.
This leaves category 2.
As Hughes LJ indicates in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii), we are dealing here with a new or newly discovered fact that is identifiable as such by the Court of Appeal.
Category 2, as described in Dyson LJs list, is of course accurate as a description of what happens according to the Court of Appeals practice.
But it is too broadly framed for use as a reliable guide to what falls within the scope of section 133 read with article 14(6).
It lacks the limiting factors indicated by the words new or newly discovered fact and shows conclusively.
It may not be easy in practice to distinguish cases that fall within it from those that fall within category 3.
So in my opinion a more precise, and more exacting, formula must be found.
I am uneasy too about requiring the Secretary of State, whose function it is to administer the scheme under the statute, to apply a test which refers to what a reasonable jury would do.
This is a judgment that is best left to the courts.
While he will be guided by what the appellate court said when it reversed the conviction, he is entitled to look at the new or newly discovered fact for himself and draw his own conclusions as to its consequences so long as they are not in conflict with what the court has said in its judgment.
This brings me back to what I said in para 94 above.
For the reasons I give there I would rephrase category 2, so that it fits with the narrowly circumscribed language of article 14(6) and section 133.
I would limit it to cases where the new or newly discovered fact shows conclusively that there was a miscarriage of justice because the evidence that was used to obtain the conviction was so undermined by the new or newly discovered fact that no conviction could possibly be based upon it.
This would include cases where the prosecution depended on a confession statement which was later shown by a new or newly discovered fact to have been inadmissible because, as the defendant had maintained all along, it was extracted from him by improper means.
It may be quite impossible to say in such a case that he was, beyond reasonable doubt, innocent.
But, as the evidence against him has been completely undermined, it can be said that it has been shown beyond reasonable doubt, or conclusively, that there has been a miscarriage of justice in his case which was as great as it would have been if he had in fact been innocent, because in neither case should he have been prosecuted at all.
Retrial
Section 133(5A), which was inserted by section 61 of the Criminal Justice and Immigration Act 2008, changed the timetable as to when a persons conviction was to be taken to have been reversed in a case where a retrial is ordered.
This amendment has to be read with the amendment which was made at the same time to section 133(2) by inserting a time limit for making an application for compensation under section 133.
This is a period of two years beginning with the date when the conviction is reversed.
Section 133(5A) provides that where the person is to be subject to a new trial the conviction is not to be treated as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
This provision introduces a feature of the statutory scheme which was not before the House in Mullen.
But I do not think that it affects Lord Steyns interpretation of section 133, or the qualification which I would make to it to include cases where the prosecution should never have been brought.
It is not to be taken as suggesting that compensation is payable in every case where the appellate court has ordered a new trial because it is satisfied that the conviction was unsafe in the light of fresh evidence.
What it does, as it seems to me, is to allow for the possibility that something may emerge either before or during the retrial which would require compensation to be paid.
Nor is it to be taken as suggesting that compensation is payable in every case, such as that of Mr George, where the person was acquitted at his retrial.
The tests laid down in section 133(1) must still be applied.
It is only where a new fact or a newly discovered fact shows conclusively that the person was innocent or that the prosecution should never have been brought that there will be a right to compensation.
This will not be the case where a retrial has been ordered, and it may not be apparent from the jurys verdict at the retrial.
The fact that it returned a verdict of not guilty will not be enough.
But if new facts emerge during the retrial process that have the effect of showing conclusively that the person was innocent or that the prosecution should never have been brought they can be taken into account, even though they emerged after the date when the conviction was reversed by the Court of Appeal.
New or newly discovered fact
A question that is raised in Adamss case is to whom these words are addressed.
His appeal was allowed by the Court of Appeal on the basis that, owing to inadequacies in the conduct of his case by his then legal team, there had been a failure by them to discover and make use at the trial of three pieces of important material which had been made available to them by the prosecution but of which Adams himself was not aware: [2007] 1 Cr App R 449, para 155.
In other words, this was material that was available at the trial but not used.
Could it be said that these were new or newly discovered facts? His case is that all he needed to show was that he himself was unaware of them.
They were new to him because they were not revealed to him by his legal team.
They did not have to be new, as the Secretary of State maintains, to everyone involved in the trial.
The Divisional Court (Maurice Kay LJ and Simon J) held that the Secretary of State was right to reject Adamss claim for compensation on the ground that his conviction was not quashed because of a new or newly discovered fact: [2009] EWHC 156 (Admin).
The Court of Appeal (Waller, Dyson and Lloyd LJJ) disagreed, for three reasons: [2010] QB 460, paras 14 16.
First, it was difficult to accept that those who drafted the article intended to deny compensation to a person whose conviction was reversed on the basis of material which was available to his legal team and would have shown that he was innocent.
Second, there was no need to interpret the phrase in a way that yielded such an extreme result.
Third, the focus of the language was on the convicted person.
There was no mention of his legal representatives in the article.
So compensation was not to be denied to him if facts emerged that were new to him, although they were known to his legal representatives.
I do not think that the language of article 14(6) bears this interpretation.
It seems to me that the focus of attention is on what was known or not known to the trial court, not to the convicted person.
The assumption is that the trial court did not take the fact into account because it was not known or had not been discovered at the time of the trial.
If this was attributable wholly or in part to the convicted person because he deliberately chose not to reveal what he knew to his defence team compensation must be denied to him, as the coda to article 14(6) makes clear.
But, leaving that point out of account, the only relevant questions are whether it was not available to the trial court because it was not known then at all or whether, although knowable, it had not been discovered by the time of the trial.
Material that has been disclosed to the defence by the time of the trial cannot be said to be new or to have been newly discovered when it is taken into account at the stage of the out of time appeal.
To focus on the state of mind of the convicted person goes too far.
It ignores the fact that in practice the defendants legal representatives are unlikely to have discussed with him every piece of information that they come across in the course of their preparation for and conduct of the trial.
I agree with Lord Judge that a fact is not new or newly discovered for the purposes of section 133 just because the defendant himself, who was previously unaware of that fact, ceases to be ignorant of it.
Does denial of compensation infringe the presumption of innocence?
Mr Owen submitted that a narrow interpretation of article 14(6) would conflict with the presumption of innocence in article 6(2) of the European Convention.
He relied on a series of decisions by the European Court of Human Rights which show that the presumption of innocence may be violated in particular circumstances where, following an acquittal, a court or other authority expresses an opinion of continuing suspicion which amounts in substance to a determination of guilt of the person concerned: Sekanina v Austria (1993) 17 EHRR 221; Leutscher v The Netherlands (1996) 24 EHRR 181; Rushiti v Austria (2000) 33 EHRR 1331; Weixelbraun v Austria (2001) 36 EHRR 799; Orr v Norway (Application No 31283/04) (unreported) 15 May 2008; and Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
These cases, other than Orr v Norway, were examined in Mullen by Lord Bingham in para 10 and by Lord Steyn in paras 41 44.
Mr Owen said that the reasons that Lord Steyn gave for finding these cases of no assistance on the question as to whether article 6(2) requires an expansive interpretation of article 3 of the Seventh Protocol or of article 14(6) of the ICCPR were correct but irrelevant.
Lord Bingham on the other hand said in para 10 that they were of no assistance, since Mullens acquittal was based on matters entirely unrelated to the merits of the accusation against him.
So it was open to this court to take a fresh look at the issue.
As Mr Tam for the Secretary of State pointed out, article 6(2) applies according to its own terms to the criminal process.
The Strasbourg cases show that its jurisprudence is designed to protect the criminal acquittal in proceedings that are closely linked to the criminal process itself.
In Sekanina v Austria (1993) 17 EHRR 221, para 30, for example, the court said that the voicing of suspicions regarding a persons innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits but that it was no longer admissible to rely on such suspicions once an acquittal has become final.
That was a case where the applicant had been charged with murder and remanded in custody but was subsequently acquitted at his trial.
His claim for compensation was dismissed on the ground that there were still strong suspicions regarding his guilt.
The problem was that Austrian legislation and practice linked the two questions the criminal responsibility of the accused and the right to compensation to such a degree that the decision on the latter issue could be seen to be regarded as a consequence and, to some extent, the concomitant of the decision on the former: para 22.
The court was careful to point out in para 25, however, that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol.
This distinction shows that a person might properly be refused compensation under that article, and thus under article 14(6) of the ICCPR which marches together with article 3 of the Seventh Protocol, without violating the presumption of innocence under article 6(2).
The same approach was taken in Hammern v Norway (Application No 30287/96) 11 February 2003 where the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner, by the same court sitting largely in the same formation, so as to bring the proceedings within the scope of article 6(2): para 46.
A further example of this line of reasoning is provided by Y v Norway (2003) 41 EHRR 87, where the applicant was acquitted by the High Court which then went on to refuse his claim for compensation the next day on the ground that it was clearly probable that he had committed the offences with which he had been charged.
So too in Orr v Norway (Application No 31283/04) 15 May 2008, where the High Court dealt with the acquittal and the payment of compensation to the complainant in two clearly distinct parts of its judgment, but in several places highlighted that the standard of proof for civil liability to pay compensation was less strict than for criminal liability: para 52.
This was held in para 53 to cast doubt on the correctness of the acquittal.
The principle that is applied is that it is not open to the state to undermine the effect of the acquittal.
What article 14(6) does not do is forbid comments on the underlying facts of the case in subsequent proceedings of a different kind, such as a civil claim of damages, when it is necessary to find out what happened.
The system that article 14(6) of the ICCPR provides does not cross the forbidden boundary.
The procedure laid down in section 133 provides for a decision to be taken by the executive on the question of entitlement to compensation which is entirely separate from the proceedings in the criminal courts.
As Lord Steyn pointed out in Mullen, paras 41 43, in none of the cases from Austria or Norway, nor in Leutscher v The Netherlands 24 EHRR 181, was the court called upon to consider the interaction between article 6(2) and article 3 of the Seventh Protocol.
On the contrary, the fact that the court was careful to emphasise in Sekanina v Austria, para 25 that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol is an important pointer to the conclusion that, as Lord Steyn put it in Mullen, para 44, article 14(6) and section 133 of the 1988 Act are in the category of lex specialis and that the general provision for a presumption of innocence does not have any impact on them.
A refusal of compensation under section 133 on the basis that the innocence of the convicted person has not been clearly demonstrated, or that it has not been shown that the proceedings should not have been brought at all, does not have the effect of undermining the acquittal.
Conclusions
I would dismiss the appeal by Adams on the ground that the phrase new or newly discovered fact does not encompass the material that was available to but not used at the trial by the convicted persons legal representatives.
But I would add that the second limb of the test that has been attributed to Lord Bingham because of what he said in para 4 of his speech in Mullen, on which Mr Owen relied, does not meet the requirements of article 14(6).
So, even if the material in question could be said to have been newly discovered, his case would not have entitled him to compensation under the statute.
I would allow the appeals by McCartney and MacDermott, for the reasons given by Lord Kerr.
It is not possible to say in their cases that the newly discovered facts show conclusively that they were innocent of the crimes of which they were convicted.
But it is possible to say, in the light of the newly discovered facts, that these were proceedings that ought not to have been brought because the evidence against them has been so completely undermined that no conviction could possibly be based upon it.
I would hold that their cases fall within the narrowly circumscribed language of article 14(6) and section 133 of the 1988 Act, and they are entitled to be compensated.
LADY HALE
I agree that a miscarriage of justice in section 133 of the Criminal Justice Act 1988 (see para 1 above) should be interpreted as proposed by Lord Phillips in para 55 of his judgment.
The phrase is clearly capable of bearing a wider meaning than conclusive proof of innocence.
Both the inspiration for section 133, in article 14(6) of the ICCPR (see para 6 above) and the meaning of miscarriage of justice in domestic law in 1988 support a wider meaning.
The drafters of article 14(6) rejected all attempts to confine it to proof of innocence.
In 1988, the Criminal Appeal Act 1968 permitted the Court of Appeal to dismiss an appeal if they considered that no miscarriage of justice has actually occurred (section 2(1) before its amendment by the Criminal Appeal Act 1995).
This points strongly to the meaning of miscarriage of justice as the conviction of someone who ought not to have been convicted.
The addition in section 133 of the requirement that this be shown beyond reasonable doubt (in substitution for conclusively in article 14(6)) indicates that this refers to someone who definitely should not have been convicted rather than to someone who might or might not have been convicted had we known then what we know now.
As I understand it, Lord Phillips formulation, with which both Lord Hope and Lord Kerr agree, would limit the concept to a person who should not have been convicted because the evidence against him has been completely undermined.
Unlike Lord Clarke, therefore, he would not include a person who should not have been convicted because the prosecution was an abuse of process.
I agree with Lord Phillips that the object of this particular exercise is to compensate people who cannot be shown to be guilty rather than to provide some wider redress for shortcomings in the system.
I do sympathise with Lord Browns palpable sense of outrage that Lord Phillips test may result in a few people who are in fact guilty receiving compensation.
His approach would of course result in a few people who are in fact innocent receiving no compensation.
I say a few because the numbers seeking compensation are in any event very small.
But Lord Phillips approach is the more consistent with the fundamental principles upon which our criminal law has been based for centuries.
Innocence as such is not a concept known to our criminal justice system.
We distinguish between the guilty and the not guilty.
A person is only guilty if the state can prove his guilt beyond reasonable doubt.
This is, as Viscount Sankey LC so famously put it in Woolmington v Director of Public Prosecutions [1935] AC 462, at p 481, the golden thread which is always to be seen throughout the web of the English criminal law.
Only then is the state entitled to punish him.
Otherwise he is not guilty, irrespective of whether he is in fact innocent.
If it can be conclusively shown that the state was not entitled to punish a person, it seems to me that he should be entitled to compensation for having been punished.
He does not have to prove his innocence at his trial and it seems wrong in principle that he should be required to prove his innocence now.
Of course, it is not enough that the evidence supporting his conviction has been fatally undermined.
This has to be because of a new or newly discovered fact.
On this point, I also agree with Lord Phillips, who adopts the definition contained in section 9(6) of the Criminal Procedure Act 1993 in Ireland (see para 60).
This means that the person convicted either did not know or did not appreciate the significance of the information in question.
It seems difficult to make sense of the proviso to section 133(1) unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted in any other way.
For these reasons, in agreement with Lord Phillips, I would dismiss Mr Adams appeal but allow the appeals of Mr MacDermott and Mr McCartney.
The evidence against Mr Adams has not been so undermined that no conviction could possibly be based upon it, whereas Lord Kerr has demonstrated that this is indeed the case with Mr MacDermott and Mr McCartney.
LORD KERR The appeals of Eamonn MacDermott and Raymond McCartney
Introduction
On 12 January 1979, after a trial by a judge, sitting without a jury at Belfast City Commission, Raymond Pius McCartney was convicted of two offences of murder and one of membership of the Irish Republican Army.
The two murder victims were Geoffrey Agate and Detective Constable Liam Patrick McNulty.
Mr McCartney was sentenced to life imprisonment on each of the murder counts and to five years imprisonment for the offence of membership of a proscribed organisation.
On the same date and at the same court Eamonn MacDermott was convicted of various offences including the murder of Detective Constable McNulty.
He was sentenced to life imprisonment for that offence and to various terms of imprisonment for the other offences.
The sole evidence on which Mr McCartney and Mr MacDermott were convicted consisted of written and verbal admissions that they were said to have made during interviews by police.
Both contested the admissibility of the statements, alleging that they had either been the product of ill treatment by interviewing police officers or that they had been concocted.
The admissibility of the statements was considered by the trial judge after a long voire dire hearing.
He rejected the allegations of the appellants and stated that he was satisfied that neither had been ill treated.
The judge also considered whether to exercise his residual discretion to exclude the statements from evidence if he considered it proper to do so.
He concluded that it would not be proper to do so and the statements were duly admitted.
An appeal by Mr MacDermott and Mr McCartney against their convictions was dismissed by the Court of Appeal in Northern Ireland (Jones LJ, Gibson LJ and Kelly J) on 29 September 1982.
Both spent several years in prison.
On 18 January 2006 the Criminal Cases Review Commission referred the convictions of Mr MacDermott and Mr McCartney to the Court of Appeal.
On 15 February 2007 their convictions were quashed, the Court of Appeal declaring that they had a distinct feeling of unease about their safety.
Following the quashing of their convictions by the Court of Appeal, Mr McCartney and Mr MacDermott applied to the Secretary of State for Northern Ireland for compensation under section 133 of the Criminal Justice Act 1988 on the basis that they had been victims of a miscarriage of justice.
The applications were refused.
They then sought judicial review of that decision.
The application for judicial review was rejected by Weatherup J on 25 June 2009.
An appeal against that decision was dismissed by the Court of Appeal in Northern Ireland (Morgan LCJ, Girvan LJ and Coghlin LJ) on 8 February 2010.
The appellants trials
Mr McCartney
Mr McCartneys case on trial had been that he did not make any verbal admissions and that the two written statements attributed to him had been fabricated by police officers.
He claimed that he had been ill treated before each statement had been written out.
He had refused to sign them but he had initialled the caution that appeared at the head of the first statement and had drawn a line and had written the words "end of statement" at the concluding part of the second statement.
Mr McCartney claimed that his ill treatment began during the second of a series of interviews that took place in Castlereagh Police Office between 3 and 7 February 1977.
The ill treatment continued during a number (although not all) of the succeeding interviews.
Two police officers in particular were identified by him as having been the most persistent and determined perpetrators.
He gave evidence that he had been told that they had been specially chosen in order to extract confessions from him.
The suggestion was made by Mr McCartneys counsel that proper supervision of interviews had broken down and that a concerted campaign of abuse had been conducted in order to obtain confessions that would lead to convictions.
The interviewing police officers denied that they had been guilty of any form of ill treatment.
Superior officers rejected the suggestion that there had been any lack of supervision or that particular officers were chosen in order to extract confessions.
It was accepted, however, that a new team of detectives had been selected to continue interviews with Mr McCartney on the second day of interviewing.
This new team was chosen, according to one of the senior officers in charge of interviews, because Mr McCartney, despite having shown signs of co operation on the first evening of interviews, had evinced a less co operative attitude the following day.
The detectives thus selected were those identified by Mr McCartney as his principal abusers.
During the course of Mr McCartneys trial, an application was made on his behalf for leave to call three witnesses who had been arrested at the same time as he and who had been interviewed at Castlereagh Police Office during the same period.
In the event, two of the witnesses gave evidence.
One of these was a man called John Thomas Pius Donnelly.
He had been arrested at the same time as Mr McCartney.
He was interviewed about and subsequently charged with one of the murders of which Mr McCartney was later convicted.
He was also charged with having caused an explosion.
For reasons that will appear presently, the charges against Mr Donnelly were not proceeded with and he did not stand trial.
During the trial of Mr McCartney and Mr MacDermott, Mr Donnelly gave evidence that he had been subjected to serious assaults during his interviews and had sustained significant injuries in consequence.
Although the detectives who, according to Mr Donnelly, had assaulted him, Detective Constable French and Detective Constable Newell, were not those who were alleged to have ill treated Mr McCartney, they were members of the group of officers who had been conducting interviews into the murders of Mr Agate and Detective Constable McNulty.
Detective Constable French had interviewed Mr MacDermott and had recorded the most significant statement of admission from him.
Mr MacDermott alleged that he had been assaulted by Detective Constable French and by the officer who accompanied him, Detective Constable Dalton.
This second detective had also interviewed Mr McCartney and Mr McCartney claimed to have been assaulted by him also.
On 6 February 1977, after he had been interviewed for several days, two doctors carried out a joint examination of Mr Donnelly.
One of them was a forensic medical officer, retained by the police.
No fewer than ten areas of injury on Mr Donnellys body were recorded.
Substantial bruising, particularly in the abdominal area was found.
The trial judge observed that both doctors were shocked and horrified by what they found on examination.
How Mr Donnellys injuries had been caused was the subject of acute controversy on trial.
It was trenchantly put to him by counsel for the prosecution that some had been sustained during a series of struggles while he was being taken to and from interview rooms and that the remaining injuries were self inflicted.
This was a highly significant cross examination when seen in the light of the subsequently discovered reasons that the charges against Mr Donnelly had not been proceeded with.
The decision not to proceed with the prosecution of Mr Donnelly was itself highly significant for he was alleged to have made verbal and written admissions of murder and causing an explosion.
The second witness, Hugh Brady, also gave evidence of having been assaulted during interviews which took place during the same period as those of Mr McCartney and Mr Donnelly.
One of the detectives identified by Mr Brady as having assaulted him (Detective Constable Dalton) had also interviewed Mr McCartney and, as noted at para 126 above, Mr McCartney claimed that he too had been assaulted by this officer.
Mr Brady was also found on medical examination to have multiple injuries, most notably bruising of the abdomen and a burn to his hand which he claimed had been caused by the hand being forcibly held against a hot radiator.
One of the doctors who examined him, Dr Hendron, who had been retained by Mr Bradys solicitors, concluded his medical report by saying that he had no doubt that Mr Brady had been assaulted, although he conceded during cross examination at the trial of Mr McCartney and Mr MacDermott that Mr Brady may have exaggerated.
Other doctors who examined Mr Brady believed that he had exaggerated and gave evidence to that effect.
Mr Brady did not make admissions and was not charged with any offences.
Under cross examination at the trial of Mr McCartney and Mr MacDermott it was also suggested to him that his injuries had been self inflicted.
The trial judge, MacDermott J, did not find him an impressive witness for reasons that I will turn to presently.
Mr McCartney was examined by two doctors, Dr Henderson, the Force medical officer and Dr Hendron, who attended at the request of Mr McCartneys solicitors.
The medical examination took place shortly after the tenth interview which had ended at 5.20 pm on 6 February 1977.
A linear abrasion, 1 1/4 inches long was observed in the centre of McCartney's forehead, with two further small abrasions above and below it.
Dr Hendron noted that Mr McCartneys right cheek was red and puffy.
Dr Henderson had no note of this but on the form used to record the findings on examination he wrote "claimed struck on face no evidence of any bruises".
The mark on Mr McCartney's forehead was superficial; it was considered to have been present for a couple of days and was of a type that could be caused by a finger nail.
When asked for his conclusions on the evidence, Dr Hendron stated that he had no doubt that Mr McCartney had been assaulted.
Mr MacDermott
Mr MacDermott had been arrested on 31 January 1977 and his interviews took place in Strand Road Police Station in Derry between the date of his arrest and 2 February.
He claimed that he had been beaten before making admissions and had been abused and threatened on his way to the interview room.
He also gave evidence that the principal statement of admission had been prepared by a detective officer while he, MacDermott, lay on a bed.
It was claimed that his mental resolve had been so eroded by the assaults and threats that by the time the statement was being recorded, he did not care what it contained.
Mr MacDermott was examined by a number of doctors, including his own father who was a general medical practitioner.
No significant signs of physical injury were found.
He was observed to have tenderness of the jaw and ears which, he claimed, had been areas of assault.
He also exhibited signs of anxiety tension.
Towards the end of the trial, the judge asked counsel for the prosecution about the charges against Donnelly.
He said, Am I right in saying that the position is that he was charged and then what happened? The court was informed that no evidence was being offered? Counsel for the prosecution replied, He was never returned for trial.
The charges were not proceeded with.
In a lengthy judgment the trial judge found that neither Mr McCartney nor Mr MacDermott had been ill treated as they had alleged.
Indeed, in relation to Mr McCartney, the judge declared that his certain conclusion [was] that the Crown has satisfied me beyond reasonable doubt that McCartney was not ill treated and in relation to Mr MacDermott that he was absolutely satisfied that he had not been ill treated in any way or threatened.
The judge fully accepted the evidence of the police officers denying ill treatment at all times.
In relation to Mr Donnelly, the judge said that he was satisfied that the police had not assaulted or ill treated him.
Mr Brady was condemned as a dishonest and unreliable witness whose evidence the judge found did not assist in deciding whether Mr McCartney had been ill treated.
Dr Hendron had expressed the strong opinion that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted by police officers.
MacDermott J said this about the doctors evidence: There is no doubt in my mind that Dr. Hendron believes, I am sure genuinely, that McCartney, Brady, Donnelly and others have been ill treated at Castlereagh, and such a conclusion could be reached by anyone who is prepared to form a conclusion after hearing only what might be described as one side of the case.
To my mind, Dr. Hendron's evidence throughout was coloured by this belief and lacked the professional objectivity displayed later by other doctors
Robert Barclay
On 2 January 1977 Robert Barclay was arrested and taken to Omagh Police Station where he was interviewed over a number of days by Detective Constables French and Newell (the same officers who had interviewed Mr Donnelly approximately one month later).
Mr Barclay was said to have made admissions during these interviews.
He also complained of ill treatment at the hands of both detective officers.
He alleged that they assaulted him by slapping him and punching him and that they had threatened him.
On 2 December 1977, after a trial in which he gave evidence that he had been assaulted by the officers, Mr Barclay was convicted on foot of the admissions that he had made during interview.
He appealed his convictions.
A solicitor had given evidence on his trial that when he saw Mr Barclay in court on 4 January he had a black eye.
Two doctors who had examined him while he was at Omagh Police Station found signs of injury.
On 12 April 1978, the then Lord Chief Justice of Northern Ireland, Lord Lowry, delivering the judgment of the Court of Appeal, quashed the convictions.
Although no written judgment appears to have been given, Lord Lowry was recorded as having said: It is not possible to exclude the conclusion that the injuries found on the accused were inflicted at Omagh Police Station and this renders inadmissible any statement made by him.
Subsequently, Mr Barclay brought a private prosecution against Detective Constable French and Detective Constable Newell.
In his judgment, which was delivered on 25 April 1979, the trial judge in that case accepted that there was a strong prima facie case that Mr Barclay had been assaulted.
He said that Mr Barclay had undoubtedly sustained injuries in Omagh Police Station.
He referred, however, to Mr Barclays admission that, on other occasions quite unconnected with the proceedings against the police officers, he had been dishonest.
Also, on certain matters relating to his interviews by the detectives (such as, for instance, which of them had taken the notes of the interview) Mr Barclay was found by the judge to have been inaccurate.
But the medical evidence that was called on the prosecution of the police officers was found to be consistent with Mr Barclays allegations.
The judge said, however, that he could not be certain that the injuries had occurred at the time that Mr Barclay alleged they had been inflicted.
The effect of the evidence made it unlikely that they were self inflicted but this was a possibility in the estimation of the judge.
Therefore, on the basis that there was a reasonable doubt as to their guilt, he considered that he was left with no alternative but to acquit the officers.
Although the private prosecution of Detective Constables French and Newell took place after the trial of Mr McCartney and Mr MacDermott, Mr Barclays appeal against his convictions had succeeded before their trial began.
Their trial commenced on 18 September 1978.
Of course, no reference to Mr Barclays successful appeal was made during the trial of Mr McCartney and Mr MacDermott.
There is no reason to believe that anything was known of that by those involved in their trial.
On the contrary, the fact that such a relevant circumstance was not referred to is a clear indication that nothing was known about it.
The reasons that the prosecution of John Donnelly did not proceed
In a memorandum of 29 June 1977, Mr Roy Junkin, then an assistant director in the Department of the Director of Public Prosecutions, considered the prospects of success for the prosecution of Mr Donnelly.
He concluded that a court would not accept that the statement of admission made by Mr Donnelly was voluntary.
He therefore recommended that the prosecution should not proceed.
That recommendation was accepted by Mr Junkins superior, Mr George McLaughlin, to whom the memorandum had been addressed and a direction of no prosecution was duly issued.
Mr Donnelly was interviewed about his complaint of ill treatment after being informed that the prosecution against him was not to proceed.
Following the interview, Mr Junkin considered the papers again.
In a further memorandum to Mr McLaughlin dated 6 October 1977, Mr Junkin reviewed all the evidence including that obtained from Mr Donnelly during the interview about his complaint.
He stated that he had no doubt that Donnelly was assaulted whilst in police custody at Castlereagh.
The only detective identified by Mr Donnelly was Detective Constable Newell.
He had claimed that this was the only police officer who had disclosed his name.
Since this police officer had interviewed Mr Donnelly with Detective Constable French and since Mr Donnelly had said that both Detective Constable Newell and the other officer present had assaulted him, Mr Junkin recommended that both be prosecuted for assault.
In his response to Mr Junkins recommendation, Mr McLaughlin, in a memorandum dated 10 March 1978 (6 months before the trial of Mr McCartney and Mr MacDermott began), agreed that there was no doubt that Mr Donnelly had been assaulted while in custody at Castlereagh.
But Mr McLaughlin concluded that not all of Mr Donnellys complaints were supported by findings on medical examination.
He also considered that because 8 or 9 other police officers had interviewed Mr Donnelly the prosecution would not be able to establish that any particular injury had been inflicted by Detective Constables Newell and French.
He therefore declined to accept Mr Junkins recommendation that the officers be prosecuted.
The quashing of the appellants convictions
On the hearing before the Court of Appeal of the reference by CCRC, Ms McDermott QC, appearing on behalf of Mr McCartney, submitted that if counsel for the prosecution had known the reason that the prosecution of Donnelly had been discontinued, he would not have put to him in cross examination that his injuries were self inflicted.
This submission does not appear to have been countered by counsel who appeared for the Crown on the hearing of the reference and it does not feature in the conclusions expressed by the Court of Appeal in its judgment on the reference.
At the same hearing, counsel for the appellant Mr MacDermott drew attention to what he suggested was a striking similarity between the manner in which, on Mr Donnellys account, a statement was taken from him by Detective Constable French and the way in which, according to Mr MacDermott, the most important statement of admission had been recorded from him by the same police officer.
Generally, it was submitted that if the trial judge had been aware of the reasons that Mr Donnelly had not been prosecuted (viz that an assistant director in the office of the DPP and a senior assistant director considered that he had certainly been assaulted by police officers) he would not have admitted the confession statements.
It was suggested that the judge would have formed a more favourable view of the evidence of Mr Donnelly and Mr Brady and would have considered that the police officers credibility was wholly undermined.
The Court of Appeal gave its decision on these arguments in the final paragraph of its judgment as follows: We cannot rule out the possibility that the evidence of the police officers may have been discredited by evidence that is now available.
The admission in evidence of MacDermott's confessions depended upon the acceptance by the judge of the evidence of DC French.
If the judge had known of the finding of a prima facie case in the prosecution brought by Mr Barclay against DC French he may well have reached a different conclusion.
To this is to be added the striking similarity between the description given by Donnelly and MacDermott as to the manner in which their admissions were recorded.
If the allegations by Donnelly had been supported and strengthened by the new evidence this could have served also to discredit the evidence given by the police officers in McCartney's case.
In both cases we are left with a distinct feeling of unease about the safety of their convictions based as they were on admissions and the convictions must therefore be quashed.
The challenge to the refusal of compensation
On 7 November 2007 a letter in the following terms was sent to Mr McCartneys solicitors in response to the application that they had made on his behalf for compensation under section 133 of the 1988 Act: The Secretary of State has not yet reached a decision about the application; before he does so I would like to give you the opportunity to comment in writing on the views set out below.
Under section 133 compensation is payable to an applicant where his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Mr McCartneys convictions were, we believe, reversed within the meaning of section 133, by the decision of the Court of Appeal on 15 February 2007.
We also tend to the view that this reversal was based on a new or newly discovered fact.
However, in light of the available case law on these matters, we believe that your client has so far failed to establish that a new or newly discovered fact has shown beyond reasonable doubt that there has been a miscarriage of justice either on the basis that your client is demonstrably innocent or on the basis of a failure of the trial process.
Further representations were made on behalf of Mr McCartney.
Rejecting these, a letter dated 16 May 2008 sent on behalf of the Secretary of State, communicated his decision that Mr McCartney was not eligible under section 133.
It contained the following passage: The reasons for that decision are those as previously set out in my letter of 7 November.
In your further representations you made two main points.
Firstly, you suggest that there was a comprehensive failure to disclose material critical to Mr McCartney's defence.
The Secretary of State does not consider that anything went wrong with the investigation of the offence or in the conduct of the trial so as to result in a failure of the trial process.
Secondly, you suggest that the tape of the appeal should be listened to.
It is the written judgment of the CoA that sets out the basis for the decision that a conviction was unsafe and therefore the basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
Similar letters were sent to solicitors acting for Mr MacDermott.
These solicitors also made further representations and on 17 November 2008 a final responding letter was sent in which the following appeared: We have now considered the other points you put to us on 1 August in relation to the Boyle case [In re Boyles Application [2008] NICA 35].
The majority of the Court of Appeal in that case posed the test of whether the claimant should not have been convicted.
We do not believe that the terms of the Court of Appeal's judgment in your client's appeal mean that he should not have been convicted.
Therefore, the Boyle case does not alter the Secretary of State's decision that your client is not entitled to compensation.
Both appellants sought judicial review of the Secretary of States decision.
These applications were dismissed by Weatherup J, although it is clear that he felt that they might have succeeded if he had felt able to apply the test which, he considered, had been propounded by Lord Bingham in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1.
Weatherup J considered that there were two types of new or newly discovered fact (necessary as a prerequisite for eligibility under section 133, as explained by Lord Hope in paras 79 and 81 of his judgment).
The first was the evidence that it had been accepted by the assistant director and the senior assistant director in the DPPs office that Mr Donnelly had been assaulted and that this would have tended to throw doubt on the credibility of the police witnesses.
The second type was described by the judge in paras 23 and 24 of his judgment: 23another part of the new evidence relating to the prosecution of Donnelly concerned the manner in which his evidence was dealt with at the trial.
When Donnelly was called as a defence witness, counsel for the DPP, rather than proceeding on the position of the DPP officials dealing with the prosecution of Donnelly, adopted and put to Donnelly in cross examination the police approach rejected by those officials, namely that Donnelly had received injuries after an attack on police officers and that some injuries were also self inflicted.
Further, when the trial judge was considering the evidence of Donnelly, he asked counsel for the DPP about the absence of a prosecution of Donnelly and a complete reply was not furnished.
It is important to note that this was a non jury Diplock trial.
It is apparent that the tria1 Judge was inviting counsel to disclose, as delicately as the situation demanded, whether there was a reason for the decision not to prosecute that related to matters other than the alleged ill treatment of Donnelly, in respect of which the answer of counsel implied that there was.
The trial judge was not told that the DPP had concluded that Donnelly had been ill treated, that his confession was not to be considered as being voluntary and there was no other evidence against him.
There is no suggestion that counsel in the applicants trial had been made aware of the DPP position relating to the prosecution of Donnelly.
Had counsel for the DPP been aware of the DPPs approach to the prosecution of Donnelly two aspects of the trial would have been different.
First of all, the cross examination of Donnelly would have taken a different course and counsel would not have put to Donnelly that his injuries had been occasioned by defensive action by the police and by his own hand.
Secondly, the submission of counsel for the DPP in relation to the prosecution of Donnelly would not have rested on the bald assertion that the prosecution was not proceeded with but should have indicated the basis of the DPP decision. 24 Thus the issue of the treatment of the Donnelly evidence is not directly a matter about the credibility of the evidence given by the police officers, nor is it directly a matter about withholding disclosure from the defence.
Rather it is a matter about the conduct of the prosecution in relation to the evidence of a witness who was central to the defence challenge to the voluntariness of the admissions on which the applicants were convicted.
In light of the above discussion of the Donnelly evidence there is a basis for concluding that something had gone seriously wrong with the conduct of the trial.
This is a matter that is capable of satisfying the wider interpretation of miscarriage of justice expounded by Lord Bingham.
It is evident from these passages that Weatherup J considered that it would have been quite wrong for prosecuting counsel, had he known of the reasons that Mr Donnelly had not been prosecuted, to pursue the line of questioning that he did.
On the hearing of the appeal before this court Mr Maguire QC, who appeared on behalf of the Secretary of State for Northern Ireland, was unable to confirm that Crown counsel was unaware of the reasons that the prosecution of Mr Donnelly was not pursued but I share Weatherup Js view that this is the only possible explanation for his having cross examined Mr Donnelly as he did.
Mr Junkin and Mr McLaughlin had concluded that Mr Donnelly had been assaulted by police officers.
If that view (which was the product of extensive consideration of all the relevant material) had been communicated to prosecuting counsel, it would have been improper for him to advance a case which was quite at odds with the conclusion that had been reached by two experienced officers in the department of the Director of Public Prosecutions.
At a more fundamental level, however, it was not open to the prosecuting authority to adopt a different stance in relation to Mr Donnellys evidence according to the context in which it was being considered or, as Lord Rodger so pertinently put it during argument, to face both ways.
The decision not to prosecute Mr Donnelly on a charge of murder and one of causing an explosion when, according to police evidence, he had voluntarily admitted to both was a momentous one.
It is unsurprising that Mr Junkin and Mr McLaughlin only felt able to take that course because they were convinced that he had been assaulted by police officers.
It is simply incompatible with the prosecutions duty of fairness for a different position to be taken thereafter as to the manner in which Mr Donnellys injuries were caused unless there was fresh evidence that warranted a different view.
In this instance there was no such evidence.
Weatherup J was therefore perfectly right when he said that something had gone seriously wrong with the conduct of the trial.
Crown counsel ought to have been aware of the DPPs position on this and, if he had been, cross examination of Mr Donnelly challenging his account of how he sustained his injuries would not have taken place.
Although Weatherup J concluded that the circumstances of the reversal of the appellants convictions were capable of satisfying the test that Lord Bingham had propounded for eligibility for compensation under section 133, he felt bound to follow more recent authority in England and Wales, particularly R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36 which had expressed a clear preference for the test advocated by Lord Steyn in Mullen.
The appellants appeal against the decision of Weatherup J was dismissed by the Court of Appeal.
That court did not share Weatherup Js view that the circumstances revealed by the judgment which had quashed the appellants convictions were sufficient to satisfy Lord Binghams formulation of the correct test.
The conclusions of the court are contained in para 15 of the judgment of the Lord Chief Justice: In the second category of cases it is necessary to demonstrate that something has gone seriously wrong in the conduct of the trial resulting in the conviction of someone who should not have been convicted.
In this case the new facts upon which the appellants rely raise issues about the credibility of one police officer and one other witness.
It is not possible to come to any conclusion as to whether the new facts would have led to a different outcome in respect of the assessment of either witness.
The new evidence was sufficient to give rise to unease about the safety of the conviction but this is a case in which at its height it can only be said that the appellants might not have been convicted.
Such a case lies outside either of the categories identified by Lord Bingham.
That is also the reasoning of the decision in Boyles Application [2008] NICA 35 by which we are bound.
Should the appellants have been acquitted?
In re Boyles Application [2008] NICA 35 was an appeal in which the appellant claimed entitlement to compensation under section 133 and the ex gratia scheme which was then still extant.
Some years after the appellants conviction a note taken of one of a series of interviews had been shown by electrostatic detection apparatus (ESDA) testing techniques to have been made at a time other than that claimed by police officers.
Another version of the note for that single interview existed, contrary to the denials of the interviewing police officers.
The differences were not substantial and nothing which was inculpatory of the appellant had been written in to the version of the notes that had been presented to the court and which the police officers claimed was the only note of the interview.
Nevertheless, because the police officers had firmly denied that a different version had been prepared and because that had been shown to be incorrect, it was considered that doubt had been thrown on their credibility and the appellants conviction could not be regarded as safe.
In dismissing Mr Boyles appeal against the finding that he was not eligible to apply for compensation under section 133, the Court of Appeal said at para 22: it is impossible for the appellant to assert that he should not have been convicted.
One can certainly say that the police officers should not have given the evidence that they did.
One may even say with confidence that the trial judge is bound to have taken an entirely different view of their credibility from the extremely favourable impression that he appears to have formed.
But it is impossible to conclude that the appellant would not have been found guilty (much less that he should have been acquitted) if evidence of the other version of the interview notes had been given.
The circumstances in the Boyle case were obviously and markedly different from those that arise in the present appeals of Mr McCartney and Mr MacDermott.
The most that could be said in Boyle was that the newly discovered fact (that there was a different version of the notes of a single interview) cast doubt on the credibility of the police officers who asserted to the contrary.
By contrast, although the Court of Appeal which quashed Mr McCartneys and Mr MacDermotts convictions expressed itself in a restrained fashion, there is simply no doubt that these appellants ought not to have been convicted.
For the reasons that I have given, it was not open to prosecuting counsel to challenge Mr Donnellys account that he had been assaulted by police officers.
I am satisfied that he would not have done so if he had been aware of the true circumstances in which the decision not to continue with the prosecution of Mr Donnelly had been taken.
Mr Donnellys evidence that he had been assaulted would therefore have been received without challenge.
That evidence, if uncontradicted, is bound to have changed the entire course of the trial.
It could not have done less than establish the reasonable possibility that Detective Constable French had assaulted Mr Donnelly and that he had recorded a statement purporting to come from him but which was not given at Mr Donnellys dictation.
When those inevitable findings were brought to bear on Mr MacDermotts case they could not have done other than create a doubt as to the voluntariness of his admissions.
Section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978 was in force at the date of the trial.
It provided: If, in any such proceedings [ie criminal proceedings for a scheduled offence] where the prosecution proposes to give in evidence a statement made by the accused, prima facie evidence is adduced that the accused was subjected to torture or to inhuman or degrading treatment in order to induce him to make the statement, the court shall, unless the prosecution satisfies it that the statement was not so obtained (a) exclude the statement, or (b) if the statement has been received in evidence, either (i) continue the trial disregarding the statement; or (ii) direct that the trial shall be restarted before a differently constituted court (before which the statement in question shall be inadmissible).
The trial judge had reminded himself of this provision at the beginning of his judgment.
He said that the appellants had raised a prima facie case as required by the section and that, in those circumstances, the burden passes to the Crown to satisfy me beyond reasonable doubt that the statement, whose admissibility is challenged, was not obtained by ill treatment.
In other words, a prima facie case of ill treatment having been established the burden rests squarely on the Crown of satisfying me (and by that I mean satisfying me beyond reasonable doubt) that the accused was not ill treated.
In making these observations the trial judge was reflecting the well known statement of the law in this area provided by Lowry LCJ in R v Hetherington [1975] NI 164, 168 where he said: It is not for the defence to prove but for the prosecution to disprove beyond reasonable doubt in relation to each accused that he was not subject even to any degrading treatment in order to induce him to make a statement on which the Crown rely, the decision under section 6(2) [the precursor of section 8(2) of the 1978 Act] must be based solely on how the statement is proved to have been obtained and not on whether it was true.
The prosecution would therefore have had to prove beyond reasonable doubt that the statements made by Mr McCartney and Mr MacDermott had not been obtained by any degrading treatment whatever.
It can now be seen that this would have been an impossible task had the full facts and circumstances come to light.
A person detained at the same time as Mr McCartney had been assaulted while in Castlereagh Police Office during the same period; the police officers who carried out the assaults on Mr Donnelly were part of the group of officers who were investigating the murders with which Mr McCartney was charged; one of the officers who had assaulted Mr Donnelly had been accused by Mr MacDermott of assaulting him; and the other officer who, according to Mr MacDermott, had assaulted him, had also interviewed Mr McCartney and had been accused of assault by him.
Quite apart from these considerations, two further factors of substantial importance must be taken into account.
Firstly, by the time that Mr McCartney and Mr MacDermott stood trial, Mr Barclays conviction, based on statements of admission allegedly obtained by Detective Constable French and Detective Constable Newell on interview, had been quashed.
If the trial judge had been aware that this conviction had been quashed because the possibility that Mr Barclay had been assaulted by these two officers could not be excluded (which was the necessary implication from the finding of the Court of Appeal) he could not have concluded with the same firmness that he did that Detective Constable French had not engaged in ill treatment of Mr MacDermott.
Secondly, once it was established, even as a reasonable possibility, that Mr Donnelly had been assaulted, the judges view of Dr Hendrons evidence could not have remained as he had expressed it in his judgment.
Dr Hendron had stated unequivocally that he was convinced that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted.
The judge found that this opinion was sincerely held but that Dr Hendrons evidence was coloured by his conviction that the men had been attacked and on that account his testimony lacked professional objectivity.
If it had become known that the doctors view about Mr Donnelly was shared by an assistant director and a senior assistant director in the department of the Director of Public Prosecutions, it is not likely that his opinion would have been dismissed in the manner that it was by the trial judge.
The combined effect of all these factors makes it inevitable, in my opinion, that, had the judge been fully acquainted with all the material information about the reasons for the decision not to continue the prosecution of Mr Donnelly and the circumstances of the quashing of Mr Barclays convictions, he would not have convicted the appellants.
Should the appellants have been prosecuted?
Not only should the appellants have been acquitted, in my opinion they should not have been put to their trial.
If prosecuting counsel had become aware of the shadow that necessarily fell on Detective Constable Frenchs evidence by the decision not to proceed with the prosecution of Mr Donnelly and by the quashing of Mr Barclays conviction, it is, in my view, inevitable that he could not have proffered this officer as a witness of truth on the issue of whether Mr MacDermott had been ill treated.
Moreover, the conclusion of Mr Junkin and Mr McLaughlin that Mr Donnelly had been assaulted cast significant doubt on the evidence of the entire interviewing team.
Although Mr McLaughlin considered that there was insufficient evidence to charge Detective Constables French and Newell, he was of the clear view that Mr Donnelly had been physically attacked by some police officers.
It was therefore the case that the office of the Director of Public Prosecutions had determined that some officers within the team that conducted interviews of Mr Donnelly, Mr Brady and Mr McCartney had been guilty of assault on Mr Donnelly.
Mr Brady alleged that he had been assaulted in much the same manner as Mr Donnelly had been.
Despite this, he had not made admissions.
He had no personal advantage to gain by fabricating his account of the attacks on him.
The trial judge found, however, that he was prepared to do so in order to help a friend (Mr McCartney) and because of his animus towards the police.
I cannot believe that the judge would have reached that view if he had known that the DPP had concluded that Mr Donnelly had been assaulted and that Mr Barclays conviction had been quashed because of the reasonable possibility that two members of the same interviewing team had also assaulted him.
Likewise, I cannot believe that if experienced Crown counsel had been aware of these matters he would have done other than advise that the prosecution of Mr McCartney and Mr MacDermott should not proceed.
That prosecution was only viable if there was a realistic prospect of the Crown establishing beyond reasonable doubt that Mr McCartney and Mr MacDermott had not been ill treated.
Any objective assessment of all the circumstances as they are now known was bound to have resulted in the conclusion that there was no such prospect.
In reaching this view I intend no criticism whatever of counsel who, for the reasons that I have given, must have been wholly unaware of why it had been decided not to prosecute Mr Donnelly.
He must also have been ignorant of the fact that Mr Barclays conviction had been quashed and of the circumstances in which that had occurred.
A fortiori, no criticism of the trial judge is warranted.
On the contrary, he made what in retrospect was an astute and pertinent inquiry as to why Mr Donnelly had not been prosecuted and was not given the information which, if it had been provided, would certainly have led to a completely different outcome.
While it might be said that the assistant director and the senior assistant director in the department of the Director of Public Prosecutions ought to have been alive to the impact that their conclusion about the assaults on Mr Donnelly was bound to have on the propriety of proceeding with the prosecution of Mr McCartney and Mr MacDermott, there is no reason to suppose that they were aware of the quashing of Mr Barclays convictions or of the evidence of Mr Brady.
Neither is discussed in the exchange of memoranda between Mr Junkin and Mr McLaughlin.
These are matters which have played a significant part in leading me to the conclusion that the prosecution of Mr McCartney and Mr MacDermott ought not to have taken place.
In deciding that the appellants ought not to have been convicted and, indeed, ought not to have been required to stand trial, I have gone beyond the findings of the Court of Appeal which quashed their convictions.
On one reading, the letter of 16 May 2008 sent on behalf of the Secretary of State suggests that the judgment of the Court of Appeal provides the exclusive basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
And much was made in the course of argument of an answer given by Earl Ferrers in the course of the passage through the House of Lords of the Bill which ultimately became the 1988 Act.
Earl Ferrers answer was to the effect that the Secretary of State would regard the Court of Appeals view as to whether there had been a miscarriage of justice as binding.
In my opinion, the decision as to whether the statutory conditions have been fulfilled is one for the Secretary of State to make and he may not relinquish that decision to the Court of Appeal.
True, of course, it is that the material on which the decision is taken will derive in most cases from the judgment of the Court of Appeal.
True it also is that it would not be appropriate for the Secretary of State to depart from the reasoning that underlies that judgment unless for good reason it is shown to be erroneous but the Secretary of State must make his own decision based on all relevant information touching on the question whether there has been a miscarriage of justice.
In the present appeals, Weatherup J considered that it was open to him to examine the question whether there had been a miscarriage of justice not merely by reference to what the Court of Appeal had said but by taking into account the circumstances revealed by its judgment.
At para 20 of his judgment he said: Counsel for the respondent contends that there is nothing in the judgment of the Court of Appeal indicating that the applicants should not have been convicted.
It should not be expected that a Court of Appeal will state in terms that an appellant should not have been convicted.
The approach of the Court of Appeal on an appeal against conviction is concerned with whether that conviction is unsafe.
In taking the cue from the Court of Appeal in determining a successful appellants entitlement to compensation it is necessary to have regard to the circumstances set out in the judgment of the Court of Appeal as well as the wording adopted in the judgment in relation to the position of the appellant.
I agree with these observations and they appear, implicitly at least, to have been approved by the Court of Appeal.
As Weatherup J stated, the task of the Court of Appeal is not to decide whether the appellant should have been convicted, much less to determine whether the appellant is innocent.
It is to decide whether the conviction is safe.
The decision whether there has been a miscarriage of justice (whatever meaning is to be given to that phrase) of necessity takes place on a different basis and on foot of consideration of issues beyond those which sound only on whether the conviction is safe.
Section 133
As Lord Hope has said, it has been possible until now for courts to avoid a final resolution of the question of what is required in order to establish entitlement to compensation under section 133 of the 1988 Act.
Must a person whose conviction has been reversed as the result of a new or newly discovered fact show that he was innocent (Lord Steyns view in Mullen) or can eligibility arise in somewhat wider circumstances (Lord Binghams provisional opinion)? These appeals require this court to confront that debate and to resolve that conflict.
For the reasons given by Lord Hope and Lord Clarke, with which I agree, the analysis of Lord Bingham in Mullen as to the possible scope of section 133 is to be preferred to that of Lord Steyn.
I cannot accept that the section imposes a requirement to prove innocence.
In the first place, not only does such a requirement involve an exercise that is alien to our system of criminal justice, that system of justice does not provide a forum in which assertion of innocence may be advanced.
An appeal against conviction heard by the Court of Appeal Criminal Division is statutorily required to focus on the question whether the conviction under challenge is safe.
In a number of cases, evidence may emerge which conclusively demonstrates that the appellant was wholly innocent of the crime of which he or she was convicted but that will inevitably be incidental to the primary purpose of the appeal.
The Court of Appeal has no function or power to make a pronouncement of innocence.
It may observe that the effect of the material considered in the course of the appeal is demonstrative of innocence but it has no statutory function to make a finding to that effect: R v McIlkenny (1991) 93 Cr App R 287.
It is therefore not surprising that in New Zealand when the Law Commission proposed that a prerequisite of establishing entitlement to compensation for a wrongful conviction was proof of innocence, it was careful to recommend that a tribunal be set up in which that issue could be frankly addressed and confidently determined: see New Zealand Law Commission Report No 49 (1988) Compensating the Wrongly Convicted paras 124 127 and 136 137.
In Canada in 1988 Federal/Provincial Guidelines on Compensation for Wrongly Convicted and Imprisoned Persons likewise required that there be proof of innocence in order to qualify under the ex gratia scheme operated there.
In the case of Dumont v Canada (Communication 1467/2006, 21 May 2010) the UN Human Rights Committee held that the failure of the state authorities to establish a procedure for conducting an investigation to examine whether the applicant was innocent and to possibly identify the real perpetrator constituted a breach of article 2(3) of ICCPR read in conjunction with article 14(6).
Article 2(3)(a) requires that state authorities provide an effective remedy in the form of access to a procedure in which adequate compensation can be claimed.
The respondents in this case rely on the experience in New Zealand and Canada in support of their argument that a miscarriage of justice within the meaning of article 14(6) of the Covenant occurs only when the convicted person is in fact innocent of the offence with which he is charged.
The Human Rights Committee in Dumont, while recording the states submission to that effect, reached its decision without adjudicating on it.
The New Zealand Law Commissions report does not suggest that article 14(6) must be given that meaning.
On the contrary para 71 of the report states that article 14(6) while an important normative statement by the international community and a reference point for domestic compensation schemes was not relied on as a model for the Commissions recommended scheme.
There was no unanimity as to the meaning to be given to miscarriage of justice among the delegates who were involved in the negotiations which led to the adoption of ICCPR: see para 9(2) of Lord Binghams speech in Mullen.
As he observed, it is possible that the expression commended itself because of the latitude in interpretation which it offered.
Or, as the New Zealand Law Commission put it, it is a normative statement which provides a general template for domestic provisions in the subscribing states which can vary as to content.
Certainly, while the travaux prparatoires may be regarded as neutral on the meaning of the expression, it is unquestionably clear from these that every proposal that its ambit should be confined to compensating those whose innocence was established was roundly defeated.
Against that background, it would be a surprising conclusion that article 14(6) had the very effect that a majority of delegates clearly did not intend.
The twin theses on which Lord Steyn relied to support his conclusion that proof of innocence was required in order to establish entitlement to compensation under section 133 have been subject to scrupulous examination in paras 93 and 94 of Lord Hopes judgment.
For the reasons that appear there, with which I fully agree, these arguments can no longer be regarded as sound.
I also agree with Lord Clarkes reasons for rejecting Lord Steyns formulation of the test.
As Lord Clarke has pointed out, if Parliament had intended that a proof of innocence test was to be preferred, that could surely have been easily prescribed.
The debate as to whether such a test was appropriate had been extensively referred to in the travaux prparatoires and it is to be presumed that Parliament was aware of this when it came to enact section 133.
Confining the application of the section to those who could show that they were innocent was, in any event, a perfectly obvious option.
The failure to articulate that test in the legislation can only be explained on the basis that Parliament decided not to choose that option.
This conclusion is fortified by the consideration that the expression miscarriage of justice, although its meaning may vary according to context, is a very familiar one in our system of law.
In no other context has it been used to connote proof of innocence.
I am therefore satisfied that proof of innocence cannot be the criterion on which entitlement to compensation under section 133 is to be determined.
Rejection of this hypothesis brings with it the need to determine how miscarriage of justice is to be interpreted.
As Lord Hope has said, a fresh analysis is required and for the reasons that he gives the answer is not necessarily provided by the speech of Lord Bingham in Mullen.
The use of the word conclusively in article 14(6) of ICCPR and the expression beyond reasonable doubt lends support to the view that the section does not contemplate that all whose convictions have been quashed and who satisfy the other requirements of the section will be entitled to compensation.
On this there is no dispute between the parties to these appeals.
Lord Hope has proposed that the section should be interpreted as targeting those cases where, as a consequence of the state of affairs revealed by the new or newly discovered fact, it can be concluded that no prosecution ought to have taken place.
Lord Clarke prefers to define the category of eligibility as extending to those cases where the new or newly discovered fact leads inexorably to the conclusion that no jury, properly directed, would have convicted.
As a matter of practical experience, there may be little difference as to which of these tests should be applied.
But it is important that, if possible, clear guidance be given by this court as to the circumstances in which the section should be held to apply.
Lord Hope has pointed out that requiring the Secretary of State to apply a test which refers to what a reasonable jury would do is not appropriate since this is a matter best left to the courts.
Lord Clarke, on the other hand, suggests that a test which requires the Secretary of State to focus on whether the claimant should never have been prosecuted runs the risk of the inquiry wrongly focusing on the propriety of the decision to prosecute by reference to the circumstances that obtained when the decision was taken.
There is substance in both concerns.
I believe that a simple test can cater for these concerns and will also faithfully reflect the intention of article 14 (6) and section 133 that only truly deserving applicants should be included in the compensatory scheme.
The test which I would have proposed was: whether, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that the applicant should not have been convicted.
Lord Phillips has suggested that the test should be worded in the following way: the new fact shows that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This appears to me to achieve the same result as the test which I would have proposed and I am therefore quite content to subscribe to his formulation.
The proper application of either test ties entitlement to compensation firmly to the true factual situation.
Procedural deficiencies that led to irregularities in the trial or errors in the investigation of offences will not suffice to establish entitlement to compensation.
A claimant for compensation will not need to prove that he was innocent of the crime but he will have to show that, on the basis of the facts as they are now known, he should not have been convicted or that conviction could not possibly be based on those facts.
Of course, if innocence can be proved, the test, on either formulation, will be amply satisfied.
The adoption of a single, simple test dispenses with the need to consider possible categories of entitlement which, I believe, tends more to confuse than to enlighten.
As it happens, although it is possible to construct from Lord Binghams observations a fourth category of case beyond the three that were identified by Toulson LJ in giving permission to appeal in the Adams case, I do not believe that Lord Bingham intended that this be considered a freestanding category.
New or newly discovered fact
I find myself in complete agreement with the reasoning of Dyson LJ on this issue in the judgment of the Court of Appeal in Adams [2010] QB 460, paras 14 16 and with what Lord Phillips has had to say on the matter in paras 59 63 of his judgment.
The newly discovered limb of the requirement clearly, to my mind, connotes discovery by the party who prays it in aid to demonstrate that he should not have been convicted.
It would be wholly anomalous, as Dyson LJ has pointed out, that a person whose innocence can be conclusively proved, should be deprived of compensation simply because his lawyers failed to communicate the vital information or failed to grasp its significance.
Does denial of compensation infringe the presumption of innocence?
Lord Hope has dealt comprehensively with the arguments made by the appellants on this issue in paras 108 to 111 of his judgment.
I agree with his reasons for rejecting the arguments.
There is nothing further that I could usefully say on the topic.
Conclusions
I would allow the appeals of Mr McCartney and Mr MacDermott.
For the reasons that I have given, I am satisfied that, on the facts as they are now known, they should not have been convicted.
As it happens, I am also satisfied that they ought not to have been prosecuted and their cases therefore fulfil the requirement that Lord Hope has formulated.
Clearly they also satisfy the test preferred by Lord Clarke of being cases in which no reasonable jury, properly directed, could convict.
Like Lord Phillips and Lord Hope I consider that both are entitled to be compensated under section 133.
Although I would hold that the material on which Mr Adams relied constituted a newly discovered fact, I do not consider that he has demonstrated that, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that he should not have been convicted.
I would dismiss his appeal.
LORD CLARKE
Introduction
I gratefully adopt Lord Hopes description of the background to the introduction of the statutory right to compensation for miscarriages for justice in section 133 of the Criminal Justice Act 1988 in the light of article 14(6) of the ICCPR.
He has set out the relevant provisions of section 133 and article 14(6).
I shall not therefore repeat them.
The principal issues for decision in this appeal are the meaning of the expressions miscarriage of justice and new or newly discovered fact in those provisions.
Miscarriage of justice
The meaning of this expression has been considered in a number of cases as described by Lord Hope.
I agree with him that it is helpful to consider its meaning in the present context by reference to the categories identified by Toulson LJ when giving permission to appeal to the Court of Appeal in the Adams appeal which are described by Dyson LJ [2010] QB 460, at para 19 of his judgment which is quoted in full by Lord Hope.
Dyson LJ described the categories of case thus: A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the time of trial, shows beyond doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available at the trial, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
The respondents say that there is only a miscarriage of justice within the meaning of article 14(6) and section 133 in a category 1 case.
They say that the provision that the new or newly discovered fact must show conclusively (in article 14(6)) or beyond reasonable doubt (in section 133(1)) that there has been a miscarriage of justice points to the conclusion that it is only where the claimant can prove his innocence that there has been a miscarriage of justice.
The appellants say, by contrast, that the words conclusively and beyond reasonable doubt do not inform the meaning of miscarriage of justice but only indicate the standard of proving the miscarriage of justice, once its meaning has been established.
They say that if the Court of Appeal allows an appeal in any of the three categories of case there will have been a miscarriage of justice, unless the claimant is convicted at a retrial.
Another possibility is, of course, that section 133 applies in a category 1 and a category 2 case, but not to a category 3 case.
Category 1 proof of innocence
I turn first to the question whether the expression miscarriage of justice is confined to the case where the claimant can prove beyond reasonable doubt that he was innocent.
This was of course the view espoused by Lord Steyn in Mullen.
Lord Bingham expressed a different view in that case, albeit without reaching a firm conclusion, and Lord Hope has taken a different view in this case.
I agree with him.
To my mind there is nothing in either the language or the context to limit the meaning of miscarriage of justice to the case where the claimant can prove that he was innocent.
If that is so, it is not for the court to limit the meaning because its own view is that it would be desirable to do so as a matter of policy.
Such matters of policy are for Parliament and not for the courts.
It is common ground that the expression is capable of a broader meaning than that espoused by Lord Steyn.
For reasons which I explain below, to my mind the natural meaning is broader, but I will begin with the context because I appreciate that, as has famously been said, context is everything.
The context of section 133 is of course article 14(6).
Both Lord Steyn and Lord Bingham considered the travaux prparatoires in Mullen.
In para 9(2) of his speech Lord Bingham said this: The House was referred to the travaux prparatoires of the negotiations which culminated in adoption of the ICCPR.
It is plain that some delegates contended that compensation should not be paid save to those who were shown to be innocent, and such delegates found no difficulty in expressing this very simple principle.
But it is equally plain, as Mr Pleming submitted, that every proposal to that effect was voted down.
The travaux disclose no consensus of opinion on the meaning to be given to this expression.
It may be that the expression commended itself because of the latitude in interpretation which it offered.
It is common ground that the expression miscarriage of justice in article 14(6) and therefore section 133(1) should if possible be given an autonomous meaning.
Although the travaux are far from conclusive, they do seem to me to point the way because, as Lord Bingham put it, every proposal that innocence should be the test was turned down.
So, if the expression is to be given an autonomous meaning, it cannot be limited to cases where innocence can be shown.
It follows that I do not agree with Lord Steyns view that the travaux do not assist in any way.
On the contrary, they assist on the first question in this appeal, namely whether proof of innocence should be the test.
I agree with Lord Steyn (at para 35) that there is no foundation in the language of article 14(6) and section 133, or by reference to any relevant external aids to construction, for the suggestion that Parliament intended to use the words miscarriage of justice in any wider sense than it bears in article 14(6) and that Parliament intended to give effect to the United Kingdoms international obligations in article 14(6) and no more.
I would add and no less.
Parliament used the same or almost the same language, so that there is to my mind no warrant for holding that it intended to confer narrower rights to compensation than those afforded by article 14(6).
As Lord Hope observes at para 91, Lord Steyn correctly said at para 45 that both article 14(6) and section 133 show that there was no overarching purpose of compensating all who are wrongly convicted.
This is demonstrated by the fact that compensation only arises at all in the case of appeals out of time and by the indispensable pre condition that a new or newly discovered fact shows conclusively (or beyond reasonable doubt) that there has been a miscarriage of justice.
So, for example, in the case of a recognition that an earlier dismissal of an appeal was wrong, the case falls outside article 14(6).
That is so, however palpable the error in the first appellate decision may have been, and however severe the punishment that the victim suffered unjustly.
As Lord Steyn put it, those considerations demonstrate that the fundamental right under article 14(6) was unquestionably narrowly circumscribed.
Para 46 is the only paragraph in which Lord Steyn focuses on the relevant language.
In it, as Lord Hope explains at paras 91 and 92, Lord Steyn focused on the language of article 14(6) and section 133, and in particular on the use of conclusively and beyond reasonable doubt respectively.
He said that that language filters out cases where it is only established that there may have been a wrongful conviction and cases where it is only probable that there has been a wrongful conviction.
He observed that those two categories would include the vast majority of cases where an appeal is allowed out of time.
He concluded that those considerations militated against an expansive interpretation of miscarriage of justice and ultimately held that: While accepting that in other contexts a miscarriage of justice is capable of bearing a narrower or wider meaning, the only relevant context points to a narrow interpretation, viz, the case where innocence is demonstrated.
I accept that the language points to a narrow construction but not that it is restricted to the case where innocence is demonstrated.
Indeed, to my mind Lord Steyn did not point to any reason why the right to compensation should be so confined.
There is nothing in the language or the context to lead to the conclusion that cases in category 2 should be excluded.
Yet the expression miscarriage of justice naturally includes such a case.
Indeed it seems to me to be the paradigm case.
A criminal trial is concerned (and concerned only) with the question whether the prosecution has proved beyond reasonable doubt to the satisfaction of the jury that the defendant is guilty of the offence charged.
If the new or newly discovered fact shows that, in the light of it, no reasonable jury, properly directed, could have convicted the accused, to my mind his conviction would, in ordinary language, be a miscarriage of justice.
I see no reason why such a case should not be a miscarriage of justice within the meaning of article 14(6) or section 133(1).
None of Lord Steyns reasoning leads to the conclusion that it is not.
He himself did not address this possibility.
In paras 91 to 95 Lord Hope has given his reasons for disagreeing with Lord Steyn that innocence must be proved.
I agree with them.
I would very briefly summarise my own reasons (in addition to those already given) in this way. (a) (b) If Parliament had intended to limit miscarriages of justice to cases where the claimant could prove innocence, it would have been easy to say so.
As Lord Bingham put it in Mullen at para 9(2) quoted above, those delegates who wished to limit compensation in that way found no difficulty in expressing this very simple principle.
In para 9(1) Lord Bingham noted that when what was to become section 133 was debated in the House of Lords, the minister, Earl Ferrers, was pressed by Lord Hutchinson QC to say whether a miscarriage of justice connoted the innocence of a defendant or the raising of a doubt about his guilt, but the minister said nothing to suggest that compensation would be payable only to the innocent: Hansard (HL Debates), 22 July 1988, cols 1631 1634. (c) Lord Steyns reliance upon the words une erreur judiciaire in the French text of article 14(6) was unsound for the reasons given by Lord Hope at para 93. (d) The five reasons given by Lord Bingham in para 9(4) of Mullen for thinking that reliance upon para 25 of the explanatory report prepared by a committee of experts on human rights with reference to article 3 of the Seventh Protocol was not of the persuasive value which Lord Steyn identified are convincing: see Lord Hope at para 94. (e) Little assistance is to be gained from either the jurisprudence of the United Nations Human Rights Committee or academic opinion. (f) Courts of appeal are not called upon to decide whether defendants are innocent: see Lord Bingham at para 9(6) and Lord Hope at para 95.
If, as I believe is the case, Lord Steyns test is too narrow, the question arises what is the correct construction of the expression miscarriage of justice in this context.
I will consider the possibilities in turn.
Category 2 no reasonable jury properly directed could convict
Category 2 would of course include category 1, but not vice versa.
Mr Owen QC submitted that cases in this category would involve a miscarriage of justice, although he also sought to include category 3, to which I will return.
I have already expressed my view that there is nothing in the language or context of article 14(6) or section 133 to exclude category 2 and that the expression naturally includes it.
Absent any clear indication in the language or context, it is to my mind permissible to have regard to the approach to it within the United Kingdom.
In 1988 the Court of Appeal in England and Wales determined criminal appeals by reference to the unamended section 2(1) of the Criminal Appeal Act 1968.
The proviso to that subsection provided that, notwithstanding that the Court of Appeal were of the opinion that the point raised in the appeal might be decided in favour of the appellant, they may dismiss the appeal if they consider that no miscarriage of justice has actually occurred.
In R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 the Court of Appeal (Sir Thomas Bingham MR, Farquharson and Simon Brown LJJ) dismissed an appeal from an order of the Divisional Court refusing judicial review of a decision refusing the appellant compensation under section 133.
He had been convicted of several counts of receiving stolen goods and sentenced to six years imprisonment.
He had appealed to the Court of Appeal on the ground that he had been convicted on the basis of evidence in statement form given by witnesses from New Zealand.
His appeal failed.
Some time later his case was referred back to the Court of Appeal under section 17 of the Criminal Appeal Act 1968.
This time his appeal succeeded on what was essentially the same ground as that which had failed before and his convictions were quashed.
In the Court of Appeal he argued inter alia that the second Court of Appeal must have regarded his conviction as a miscarriage of justice because they would otherwise have applied the proviso.
Sir Thomas Bingham (with whom the other members of the court agreed) said this: Therefore, it follows, he says, that he is a victim of a miscarriage of justice and from that it follows that he is entitled to compensation.
To deny him compensation is, he argues, to undermine his acquittal and the presumption of innocence which flows from the fact that his convictions have been quashed.
I am, for my part, unable to accept that argument, although I hasten to assure Mr Bateman that in doing so I have no intention whatever to undermine the effect of the quashing of his convictions.
He is entitled to be treated, for all purposes, as if he had never been convicted.
Nor do I wish to suggest that Mr Bateman is not the victim of what the man in the street would regard as a miscarriage of justice.
He has been imprisoned for three and a half years when he should not have been convicted or imprisoned at all on the second decision of the Court of Appeal (Criminal Division).
The man in the street would regard that as a miscarriage of justice and so would I.
But that is not, in my judgment, the question.
The question is whether the miscarriage of justice from which Mr Bateman has suffered is one that has the characteristics which the Act lays down as a pre condition of the statutory right to demand compensation.
That, therefore, is the question to which I now turn.
The Master of the Rolls then held that there was no new or newly discovered fact, so that Mr Bateman could not satisfy the relevant criteria under section 133.
The relevance of the statement quoted above is that it supports the conclusion that the Master of the Rolls accepted that there had been a miscarriage of justice within the meaning of section 133, which in turn supports the conclusion that that expression is not limited to cases in which the claimant can prove his innocence.
It is perhaps the forerunner of Lord Binghams approach in Mullen.
A similar conclusion can be drawn from the terms of section 106, of the Criminal Procedure (Scotland) Act 1995, which sets out the test for criminal appeals in Scotland.
By subsection (3) it provides: By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice, which may include such a miscarriage based on (a) subject to subsections 3A to 3D below, the existence and significance of evidence which was not heard at the original proceedings; and (b) the jurys having returned a verdict which no reasonable jury, properly directed, could have returned.
It can thus be seen that a miscarriage of justice for the purposes of a fresh evidence appeal in Scotland includes the case where the jurys verdict is one which no reasonable jury, properly directed, could have returned.
That is of course a category 2 case.
Section 106(3) is thus an example of the expression miscarriage of justice being used in a very similar context to that with which we are concerned.
It has been suggested that to include category 2 within the test of miscarriage of justice in section 133 would cause difficulties of application.
For my part, I would not accept that suggestion.
It is a test used at the end of the prosecution case in countless criminal trials in England and Wales.
Moreover, it is used in the Court of Appeal in England and Wales.
While it is not the question for decision in an English appeal because the question is now simply whether the conviction is safe, it is plainly relevant when a retrial is sought.
The Court of Appeal would not make an order for a retrial if it formed the view that the effect of the new or newly discovered evidence led to the conclusion that no reasonable jury, properly directed, could convict.
Moreover, so far as I am aware, this test has caused no difficulty in criminal appeals in Scotland.
It is a test which is familiar to the criminal trial and appeal process, which the proposed test of innocence is not.
As Lord Hope has observed at para 95, in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1 at para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact the Court of Appeal will, in virtually every case, make that plain.
However, that may not be the case and, as Lord Hope says, the Court of Appeal is not bound to say whether or not a defendant is innocent.
In this regard there is authority for the proposition that the Court of Appeal is neither obliged nor entitled to say whether an appellant is innocent: see R v McIlkenny (1991) 93 Cr App R 287 at 310 311.
Whether that is correct or not, I agree with Lord Hope that, to put it no higher, it is at least questionable whether it can be right to restrict the entitlement to compensation to cases where the establishment of innocence is apparent from the Court of Appeals judgment.
It is of interest in the context of this debate to note that it is common ground that it was only after the decision in Mullen that Secretaries of State have applied an innocence test and that they do not do so in Scotland even now.
It was suggested in argument that it is not appropriate for the Secretary of State, and not a court, to make judgments of this kind.
However, section 133(3) expressly provides that the question whether there is a right to compensation shall be determined by the Secretary of State.
Nobody has suggested that it is not appropriate for the Secretary of State to decide whether the claimant has proved that the new or newly discovered fact shows that he is innocent.
It does not seem to me to be any less appropriate for the Secretary of State to decide whether he has proved that it shows that no reasonable jury could have convicted him.
In reaching his or her conclusion the Secretary of State is of course bound to have regard to what the Court of Appeal which reverses the conviction has said.
In In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289 Lord Bingham said at para 16, albeit in the context of a claim under the ex gratia scheme, that the Secretary of State must properly be guided by the judgment of the Court of Appeal.
However, it seems to me that it is for the Secretary of State to have regard to all relevant material when deciding whether the claimant has established beyond reasonable doubt that, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted him.
I see no reason why the Secretary of State could not decide that question, whether on the grounds of innocence or otherwise.
As I see it, the matter has to be tested as at the date of the reversal, having regard both to the evidence that was available at the trial and to the new or newly discovered facts.
I would include in the evidence available at the trial, all such evidence, not just that adduced on behalf of the prosecution, but also that adduced during the defence case.
I would therefore include admissions made by the defendant in cross examination in a case in which the new evidence showed that the case should have been stopped.
The question is whether, on that material, he had a case to answer or, put another way, whether a reasonable jury properly directed could have convicted him.
If he proves beyond reasonable doubt that the answer to those questions is no, he is in my opinion entitled to compensation under section 133 on the basis that there has been a miscarriage of justice.
I entirely accept that the cases in which compensation can be claimed are limited by the necessity to satisfy the criteria in the section and by the need to show beyond reasonable doubt that the new or newly discovered fact demonstrates, in the light of the other material before the court that no reasonable jury, properly directed, could have convicted him.
The Secretary of State would of course have to be satisfied that the alleged fact was indeed a fact.
I should add by way of postscript that, as I see it, category 2 potentially includes a case where the new or newly discovered fact is such that, if it had been known at the trial, the trial judge would have stopped the trial on the ground of abuse of process.
If the Court of Appeal concluded that a new trial could not properly be ordered on the basis that it was not possible to cure the abuse, so that no reasonable jury, properly directed, could convict, there would, in my opinion have been a miscarriage of justice within section 133.
It seems to me that this must be within the kind of miscarriage of justice which Lord Bingham had in mind in Mullen, namely where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
Since Mullen, some doubt has been expressed as to whether the basis upon which it was decided is correct.
See, for example, R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin) per Leveson LJ at paras 47 48.
The basis on which it was decided by the majority, comprising Lord Bingham, Lord Scott, Lord Rodger and Lord Walker was that Mr Mullens conviction had been reversed by the Court of Appeal on the ground that there had been an abuse of executive power and not any failure in the trial process: see per Lord Bingham at para 8, Lord Scott at para 65, Lord Rodger at para 69 and Lord Walker at para 70.
In particular, Lord Bingham said that it was for failures in the trial process that the Secretary of State is bound by article 14(6) and section 133 to pay compensation.
He distinguished those from abuse of executive power.
He did so by reference to R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 per Lord Griffiths at pp 61 62 and R v Looseley [2001] 1 WLR 2060 at para 40.
Lord Scott said that the Court of Appeal had not reversed the conviction because there had been any failure in the trial process but because, prior to the commencement of the trial process, there had been serious abuse of executive power which had led to the removal of the claimant from Zimbabwe to this country and thus enabled the trial to take place.
Although Leveson LJ observed that this distinction has its difficulties and noted that Lord Steyn said at para 57 that, if that abuse had been disclosed the trial would have been stopped, and in its written submissions Justice suggested that Mullen might now be decided differently on its facts.
There is I think scope for argument in the future as to whether there is a class of cases in which the section would not apply, of which Mullen is an example.
They are cases in which it has been held that the trial should not be permitted to proceed, not because of anything related to the case against the defendant, but because to permit it would offend against the rule of law or would seriously affect the integrity of the administration of justice.
In quashing Mullens conviction Rose LJ, giving the judgment of the Court of Appeal, said at [2000] QB 520, 535 536: This court recognises the immense degree of public revulsion which has, quite properly, attached to the activities of those who have assisted and furthered the violent operations of the IRA and other terrorist organisations.
In the discretionary exercise, great weight must therefore be attached to the nature of the offence involved in this case.
Against that, however, the conduct of the security services and police in procuring the unlawful deportation of the defendant in the manner which has been described represents, in the view of this court, a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts.
The need to discourage such conduct on the part of those who are responsible for criminal prosecutions is a matter of public policy to which, as appears from R v Horseferry Road Magistrates' Court, Ex p Bennett [1994] 1 AC 42 and R v Latif [1996] 1 WLR 104, very considerable weight must be attached.
It appears to me to be at least arguable that such a case would not fall within section 133.
None of the cases before the Court in these appeals is such a case.
I recognise that Lord Phillips rejects category 2 as a test and that he has suggested an alternative test.
However, section 133 inevitably requires the Secretary of State to consider the effect of the new or newly discovered fact upon the other evidence before the court and thus on the validity of the conviction.
This involves the evaluation of the evidence in its legal context.
It also expressly requires the Secretary of State to decide whether in the light of all the evidence the claimant has shown beyond reasonable doubt that there has been a miscarriage of justice.
In considering all these questions, the Secretary of State can of course always take such advice as is appropriate.
I remain of the view that category 2 is an appropriate formulation of the test and that the position is or should be as stated above.
Compensation is only payable where, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted or, subject perhaps to the point made in para 215 above, where the new or newly discovered fact would have led the judge to stop the case on the ground of abuse in the trial process.
However, I recognise that Lord Phillips suggests replacing the category 2 test with a more robust test.
It is that a new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
I have assumed that the second it means the evidence against the defendant.
To my mind that test is consistent with the category 2 test identified above because, in such a case, no reasonable jury properly directed, could convict the defendant.
For that reason and on that basis, I would accept the proposed test, with which Lord Hope, Baroness Hale and Lord Kerr agree.
Category 3 unsafe conviction
Section 2(1) of the Criminal Appeal Act 1968, as substituted by section 2(1) of the Criminal Appeal Act 1995, provides that the Court of Appeal shall allow an appeal if they think the conviction is unsafe.
The proviso in the previous section 2(1) was repealed.
Mr Owen submitted that where a qualifying appeal is allowed on the basis that the claimant has shown beyond reasonable doubt that the conviction was unsafe because of a new or newly discovered fact, it follows that there was a miscarriage of justice within the meaning of section 133.
It is certainly possible to construe the expression miscarriage of justice as wide enough to include such a case.
I do not however think that Parliament can have intended the expression to have such a wide meaning in section 133(1) because it would have been easy for the section to have been drafted in such a way as to include every case where the relevant appeal was allowed on the basis of a new or newly discovered fact.
Moreover none of the courts which have considered section 133 have suggested that it might have such a wide meaning: see the cases referred to by Lord Hope at para 82.
In particular, the formulation of the test by Lord Bingham in Mullen does not encompass every case where the conviction was held to be unsafe on the basis of new evidence.
His formulation was that there is a miscarriage of justice where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
It is not possible to say that, merely because a conviction has been quashed because it was unsafe, the appellant should not have been convicted.
A conviction may be unsafe because the Court of Appeal concludes that, but for the successful ground of appeal, the jury might not have convicted.
Indeed, this is by far the most common case in which an appeal is allowed.
It is a category 3 case in which, as Dyson LJ put it in the passage quoted above, a fair minded jury might convict or might acquit.
In such a case I do not think that one can say as a matter of course that the defendant should not have been convicted.
It seems to me that it is only in a category 2 case (which of course includes a category 1 case) that it can be said that a person should not have been convicted.
It can be so held in such a case because it follows from the conclusion that no reasonable jury, properly directed, could have convicted the defendant that he should not have been convicted.
Any lesser test is to my mind too uncertain and would not satisfy the statutory test that, in order to be entitled to compensation, the claimant must prove beyond reasonable doubt that there has been a miscarriage of justice.
If he might have been convicted by a jury on all the evidence including the new or newly discovered fact, he cannot show for sure that there has been a miscarriage of justice within section 133(1).
Retrial
Section 133(5A) was not part of section 133 when Mullen was decided.
It makes it clear that, where the claimant succeeds on appeal but is convicted at a retrial, he is not entitled to compensation because his conviction has not been reversed.
If his appeal succeeds and the Court of Appeal orders a retrial, but the prosecution decides not to proceed with the retrial, the conviction is treated a reversed when it so indicates.
In these circumstances, the position is as described above.
If a retrial takes place and the claimant is acquitted of all offences at a retrial, there is scope for debate as to the position.
By subsection (5A) the conviction is treated as reversed when he is so acquitted.
It is not necessary to decide this question in this appeal but it is my provisional view that the same approach as described above would apply.
Thus, in order to be entitled to compensation, he would have to prove beyond reasonable doubt that on the basis of the new or newly discovered fact no reasonable jury would have convicted him.
New or newly discovered fact
The question is what is meant by a new or newly discovered fact.
In particular the question is what is meant by a newly discovered fact.
Mr Tam QC submitted that a fact which was known to the prosecution and knowable to the defence because it was available to them, but which they did not know because they did not take the steps they should have taken to examine the evidence was not a newly discovered fact.
I would not accept that submission.
If the fact was not in fact discovered at or before the trial or at an in time appeal but was discovered thereafter, it follows that it was a newly discovered fact.
The question is whether it was discovered earlier, not whether it was discoverable earlier.
In my opinion the fact that it was discovered by the prosecution before the appeal is irrelevant.
In neither of the appeals before the Supreme Court were the relevant facts discovered by the defendants or their lawyers at or before the trial or the in time appeal.
It follows that they were newly discovered facts.
The fact that in the Adams case they were discoverable by the defendants lawyers is irrelevant.
As I see it, therefore, on the facts of these appeals this part of the test is satisfied.
However, there was much debate as to whether it is possible for a fact to be a newly discovered fact if it was known to the defendants lawyers.
In my opinion it is.
Section 133(1) is subject to the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
The proviso does not apply if the non disclosure of the fact was attributable to his lawyers.
It could have done so.
As Dyson LJ explained at paras 14 16 of his judgment, there is no mention of the convicted persons legal advisers in article 14(6) or section 133, whereas article 14(3) does refer to legal advisers.
Moreover, there is no suggestion that the person convicted in section 133(1) includes his lawyers.
In my opinion the Court of Appeal correctly held that knowledge of the fact by the defendants lawyers would not prevent it being a newly discovered fact.
I note in this regard that in a case where the fact was known to the defendants lawyers and not used at the trial, the failure to use it would be very relevant to the question whether the evidence of the fact would be admissible under section 23 of the Criminal Appeal Act 1968.
It might well be held that in the light of the fact that the lawyers failed to deploy it, it was not necessary or expedient in the interests of justice to admit it on an appeal.
In that event the appeal would not be allowed or the conviction reversed on the basis of it.
The remaining question is whether it is possible for a fact to be a newly discovered fact if it was known to the defendant himself at trial or at an in time appeal.
The Court of Appeal held that it was, for the reasons given by Dyson LJ at paras 14 to 18.
I agree.
Section 133(1) contains the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso would not be necessary if the question whether evidence was new or newly discovered were tested by reference to the knowledge of the convicted person himself.
The proviso seems to me to assume that a fact may be newly discovered even though it is known to the defendant at the relevant time.
Otherwise it would have very little effect because it would only apply where the defendant did not know the fact but its non disclosure was attributable to him.
Such a situation is perhaps theoretically possible but the natural meaning of the proviso is that it covers the case where the defendant is aware of the fact at the relevant time but does not deploy it either personally or through his lawyers.
So understood, the proviso seems to me to point to the conclusion that a fact may be a newly discovered fact even if it was known to the defendant himself at trial or at an in time appeal.
For these reasons I agree with Lord Hopes conclusion at para 107 and Lord Phillips conclusion at para 62 that the relevant knowledge is that of the trial court, but do not agree with Lord Hopes conclusion, also at para 107, that material disclosed to the defence by the time of the trial cannot be said to have been newly discovered when it is taken into account at the stage of the out of time appeal.
For the reasons given earlier, it is my view that material that was not discovered either by the defendant or his lawyers but was discovered only after the in time appeal was newly discovered on the simple basis that, whether or not it ought to have been discovered, it was not in fact discovered.
That was the position in both the Adams appeal and the Northern Irish appeals.
Article 6(2) of the European Convention of Human Rights
Other members of the Court have considered the issues under this head in some detail.
The European Court of Human Rights (ECtHR) has applied article 6(2) in cases which are not covered by its language.
For my part, I do not think that this is a case in which it is necessary or would be appropriate to analyse that jurisprudence in detail.
I will only say that I am not at present persuaded that article 14(6) and section 133 are a form of lex specialis to which article 6(2) can never be relevant.
For present purposes I shall simply assume that it is in principle possible for article 6(2) to apply to proceedings under section 133.
I can see that it is inappropriate, to put it no higher, to impute criminal liability to a person who has been acquitted.
In each of the cases in which a claim for compensation arises under section 133(1) the claimants conviction has been reversed by the Court of Appeal in an out of time appeal.
Section 2(3) of the Criminal Appeal Act 1968 (as substituted in 1995) provides: (3) An order of the Court of Appeal quashing a conviction shall, except when under section 7 below the appellant is ordered to be retried, operate as a direction to the court of trial to enter, instead of the record of conviction, a judgment and verdict of acquittal.
Thus the effect of the reversal of the conviction by the order of the Court of Appeal quashing it, is that the person concerned is formally acquitted.
In these circumstances the court hearing and determining a claim for compensation under section 133(1) must not say or do anything inconsistent with the claimants acquittal.
If the analysis set out above is adopted, there is no risk of its doing so.
The question in each case is whether the claimant has proved beyond reasonable doubt that the new or newly discovered fact has demonstrated that there was a miscarriage of justice on the basis that no reasonable jury, properly directed, could convict him.
The trial of that question does not in any way affect or impugn the acquittal of the claimant as provided by section 2(3) of the Criminal Appeal Act 1968 quoted above.
The question at such a trial is different and so is the burden of proof.
The position is not unlike a civil process where a claimant seeks damages from a defendant who has been acquitted of, say, causing grievous bodily harm to A at a criminal trial.
Under English law it is permissible for A to seek damages from the defendant on the ground that he was unlawfully injured by him, alleging all the same facts as had been relied upon at the criminal trial.
The critical difference between the two processes is that at the criminal trial the prosecution has to prove guilt beyond reasonable doubt, whereas at the civil trial A only has to prove liability on the balance of probabilities.
The ECtHR has expressly recognised that civil proceedings of that kind do not infringe article 6(2) of the Convention: see eg Y v Norway (2003) 41 EHRR 87, where the court expressly said at para 41 that, while the acquittal from criminal liability ought to be maintained in compensation proceedings, it should not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof.
It did add in para 42 that, if the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention.
See also Bok v The Netherlands, (Application No 45482/06), 18 January 2011.
Similarly, here, where, at any rate on the analysis set out above, there is no question of anything said or done in the section 133 proceedings impugning the acquittal in the criminal proceedings, I see nothing in article 6(2) which is in any way inconsistent with the conclusions I have reached.
Disposal
I agree with Lord Phillips, Lord Hope, Baroness Hale and Lord Kerr that the appeal in the Adams case must be dismissed.
Lord Phillips has set out the relevant facts.
As Dyson LJ observed at para 59, the Court of Appeal allowed the appeal because the undeployed material was important and might have led the jury to acquit.
The decision to quash the conviction was founded on the potential that the undeployed material had for affecting the jurys verdict.
It was thus a category 3 case and, for the reasons given earlier, section 133(1) does not cover such a case.
I also agree that the appeals in the Northern Irish cases should be allowed.
Lord Kerr has set out the facts in some detail.
They show, at any rate to my mind, that, in the light of the newly discovered facts, no reasonable jury, properly directed, could have convicted them.
DISSENTING JUDGMENTS LORD JUDGE
The legislation
Section 133(1) of the Criminal Justice Act 1988 (section 133) provides: when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Reversed refers to a conviction which is quashed on an appeal out of time or following a reference by the Criminal Cases Review Commission (section 133(5)).
By section 133(2) compensation is not payable unless the application for compensation has been made: Before the end of the period of 2 years beginning with the date on which the convictionis reversed or he is pardoned.
This limitation was inserted by sections 61(1) (3) and (9) of the Criminal Justice and Immigration Act 2008 and came into force on 1 December 2008.
Simultaneously, in accordance with section 61(1), (2), (5) and (9) of the 2008 Act, provision was made for the cases where the conviction is quashed on an appeal out of time, and a retrial ordered, so that: The conviction is not to be treatedas reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial. (Section 133(5A))
The determination whether there is an entitlement to compensation is vested exclusively in the Secretary of State, (section 133(3)) who in exceptional circumstances may extend the time for making an application. (section 133(2A))
When section 133 was enacted an ex gratia system operated in tandem with it.
In England and Wales and Northern Ireland, but not in Scotland, the ex gratia scheme was abolished in 2006.
In his article Compensation for Wrongful Imprisonment [2010] Crim LR 805, Professor John Spencer QC convincingly criticised the narrowness of and consequent anomalies which arise from the limitations of the statutory scheme.
No alternative remedy is provided unless, perhaps, and subject to limitation periods, where malpractice in the investigative process is established, the victim may pursue a remedy in tort, or when the individual suffered a wrongful conviction as a consequence of negligence by his legal advisors, a claim in damages may be available.
In short, the statutory scheme does not preclude any relevant action which may, in theory, be available in tort, but it is in any event unsupported by the ex gratia scheme.
Nevertheless we must analyse section 133 and the ambit of the scheme for the payment of compensation without reference to its anomalies and disadvantages.
When it was examined by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1 the meaning and effect of section 133 produced contradictory opinions with no authoritative decision.
Lord Steyn concluded that the statutory scheme was confined to cases where the person concerned was clearly innocent.
Lord Bingham of Cornhill, while agreeing with the result, for carefully explained reasons, hesitated to accept this restriction on the ambit of the statutory scheme.
The differences between their respective approaches to the problem have been considered and examined in a number of subsequent decisions, of which the most recent is R (Allen (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36.
They must finally be resolved now.
As we are not agreed, without embarking on what would be a repetitious discourse of much of the voluminous material drawn to our attention, I shall briefly explain the reasons why I agree with Lord Steyn.
In Mullen the parties were agreed that the interpretation of section 133 required what was described as a correct understanding of article 14(6) of the International Covenant on Civil and Political Rights, dated 16 December 1966. (ICCPR) That view was adopted by the House of Lords and it is unchallenged in the present proceedings.
Article 14(6) provides: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the grounds that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
In short, the enactment of section 133 in virtually identical terms represented the response of the United Kingdom to a Treaty obligation.
One further Treaty provision needs immediate attention.
In November 1984 article 3 of Protocol 7 to the Convention of Human Rights also made what was effectively an identical provision to article 14(6) of the ICCPR.
When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed, or he has been pardoned, on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to the law or the practice of the State concerned, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
Article 3, Protocol 7 will become relevant when the jurisprudence of the European Court of Human Rights falls to be considered.
In the context of a statutory provision reflecting the international obligations undertaken by the United Kingdom, it would be productive of confusion for the phrase miscarriage of justice to be analysed by reference to the many different ways in which, looking at our own statutes which enable convictions to be quashed, and the language used, sometimes loosely, in the course of numerous judgments bearing on these questions.
The phrase reflects an autonomous concept, in which the words miscarriage of justice reflect the international obligations of the United Kingdom under article 14(6).
Like article 14(6), section 133 distinguishes the reversal of the conviction (or a pardon) and a miscarriage of justice.
Within the section itself, as with article 14(6), these concepts are distinct.
Even if the remaining pre conditions to the payment of compensation are established, the reversal of the conviction is an essential prerequisite to but is not conclusive of the entitlement to compensation.
In short, for the purposes of section 133 the reversal of the conviction and the consequent revival of the legal presumption of innocence is not synonymous with a miscarriage of justice.
Therefore before compensation is payable under the statutory scheme more than the reversal of the conviction is required.
The requirement is that a miscarriage of justice must be demonstrated beyond reasonable doubt.
In my view the use of this phrase was deliberate and significant.
The phrase is not relevant to the evidential question whether the conviction has been reversed and it is not directed to any individual feature or aspect of the investigation or trial processes.
If the reversal of the conviction alone were sufficient, that fact would be proved beyond reasonable doubt by the court record, and if any specific feature of the investigation or trial processes were relevant, appropriate provision could readily have been made in section 133 itself.
Instead the phrase describes the characteristics or attributes of the miscarriage of justice which must be established.
The word conclusively in article 14(6) was not repeated.
Rather the familiar description of the standard of proof in criminal cases and, significantly in the context of a claim for the payment of compensation (normally a civil claim), the standard normally applied to the prosecution in the criminal justice process was imposed on the defendant.
For this purpose the balance of probabilities was expressly ignored.
Accordingly, for section 133 to apply, following a conviction of an offence which was proved beyond reasonable doubt, the emergence of a new or newly discovered fact should demonstrate not only that the conviction was unsafe, or that the investigative or trial processes were defective, but that justice had surely miscarried.
In the present context, the ultimate and sure miscarriage of justice is the conviction and incarceration of the truly innocent.
This leads me to the conclusion that as a matter of construction the operation of the compensation scheme under section 133 is confined to miscarriages of justice in which the defendant was convicted of an offence of which he was truly innocent.
In my judgment nothing less will do, and no alternative or half way house or compromise solution consistent with this clear statutory provision is available.
I must therefore address some of the contentions which suggest that this construction is over restrictive.
The unsafe conviction
Mr Tim Owen QC highlighted the absence of word innocent from section 133.
The omission reflects not only the autonomous concept of miscarriage of justice, but more significantly, the absence of an innocent verdict in the criminal justice process.
The defendant is either proved to be guilty of the crime alleged, or he is entitled to a not guilty verdict and acquittal.
A verdict of innocent is unknown.
On acquittal, or the reversal of a conviction, the presumption of innocence revives.
It applies when the jury considers that there is a high probability that the defendant is guilty, and indeed to cases like Mullen, whose conviction was quashed notwithstanding the assessment of the court that he was undoubtedly guilty.
Just because it is a concept to which the criminal justice process is not directed, the word innocent could have no place in section 133.
The only ground for quashing a conviction in the Court of Appeal Criminal Division (the Court) is that it is unsafe.
There are however occasions when a new or newly discovered fact may well demonstrate the factual innocence of the appellant.
And if it does, the judgment of the court may say so.
I respectfully disagree with the observation in R v McIlkenny (1991) 93 Cr App R 287 that the court is not entitled to state that an appellant is innocent.
The processes of the Court of Appeal do not allow for a formal declaration of factual innocence, any more than the trial process recognises a verdict of innocent.
However there can surely be no stronger case for doubting the safety of a conviction than evidence which unmistakenably demonstrates that the appellant is in truth an innocent man or woman. (See R v Fergus (1994) 98 Cr App R 313: R v Hodgson [2009] EWCA Crim 490.) Although the conviction is quashed not on the ground that the defendant is innocent, but because his conviction is unsafe, the terms of the judgment should conscientiously reflect the true reasons for its decision that the conviction should indeed be quashed as unsafe.
At the risk of stating the obvious, the decision whether to quash a conviction is for the Court: so are all features of the trial process, and indeed any order for retrial.
If the end of the judicial process is that the conviction is quashed, or if following a retrial, the defendant is acquitted, the administrative decision whether compensation is payable for a miscarriage of justice is vested exclusively in the Secretary of State.
The determination is not limited to some kind of administrative assessment of the circumstances in which the judicial process has come to an end.
Therefore while the Secretary of State should pay the closest possible attention to the terms of the judgment of the Court, whatever the terms in which the judgment is expressed, when making the decision whether a miscarriage of justice has occurred, he is not confined to the judgment of the Court.
Retrial
The circumstances in which a retrial will be ordered following the quashing of a conviction vary enormously.
The single question is whether in a fact specific context the interests of justice should lead to such an order.
Dealing with it generally it is most unusual for an order for retrial to be made many years after conviction, or when the sentence imposed at the original trial has been or is close to being completed.
On the other hand, again dealing with it generally, where a conviction is recent, and the sentence substantial, and the evidence relied on the prosecution is likely to be available at the retrial, then a retrial may well be ordered.
Exceptions can be found both ways.
At the risk of repetition, the decision is fact specific.
It can however be confidently stated that it would be inconceivable for the Crown to seek or the Court to order a new trial if it were made clear in the terms of the judgment that the conviction was being quashed on the basis that the fresh evidence demonstrated that the defendant was innocent.
This reinforces my view that if that conclusion is justified, the court is entitled to say so in its judgment.
These considerations bring me to section 133(5A).
This subsection addresses the newly introduced statutory time limit in which an application for compensation may be made in the context of an order for retrial.
If for any reason (including the conclusion of the Court that the defendant is truly innocent) no order for retrial is made, time runs from the date when the conviction is quashed.
If however (again, for whatever reason) the order quashing the conviction is accompanied by an order for retrial, notwithstanding the presumption of innocence, for the purposes of the scheme for the payment of compensation the conviction is not reversed or quashed and the time for making an application is accordingly postponed until the retrial process is completed.
This enables first, the defendant to concentrate his attention on the forthcoming retrial.
Second, it is conclusive of the question (adversely to the defendant) if he is convicted, when his position is exactly the same as it would have been if the original conviction had not been quashed.
Third, if he is acquitted, the process may provide the Secretary of State with further material on which to base his determination.
In my judgment section 133(5A) has no bearing on the proper construction of the words beyond reasonable doubt that there has been a miscarriage of justice, and the entitlement to compensation under the statutory scheme was not expanded with effect from 1 December 2008 when section 133(5A) came into force.
That was not the purpose of this new inserted provision which was directed to the consequences of the introduction of the new timetable within which applications should be made.
It was procedural only.
European Court of Human Rights
In my judgment the jurisprudence of the European Court of Human Rights drawn to our attention by Mr Owen does not bear on the issues which arise in this litigation.
As already indicated once a conviction has been reversed the presumption of innocence applies.
Subject only to the provisions of sections 76 83 of the Criminal Justice Act 2003 the rule against double jeopardy applies and the defendant cannot be prosecuted a second time for an offence of which he has been acquitted, or when his conviction has been reversed and for the purposes of the administration of criminal justice the prosecution process is at an end.
Nevertheless the acquittal, or the successful appeal against conviction, does not operate as an absolute bar to litigation.
It remains open to any individual to assert that notwithstanding the acquittal or quashing of the conviction, the defendant was guilty.
That is what Lord Steyn said about Mullen in his judgment in that case.
A defendant who has been acquitted of rape may face proceedings for damages by the complainant and she may successfully establish on the balance of probabilities that he did indeed rape her and is liable in damages.
In proceedings for defamation on the basis that the defendants innocence is questioned, the acquittal does not create an irrebuttable presumption that the assertion cannot be justified and must be unjustifiable.
Article 3, Protocol 7 forms part of the Convention.
It must be read together with the Convention.
The jurisprudence of the European Court of Human Rights relied on by Mr Owen was not directed to and did not address the provisions of article 3, Protocol 7.
If the decisions he relied on apply in the present case it will in effect mean that the reversal of the conviction carries with it an obligation to pay compensation in accordance with section 133, although such a conclusion would be inconsistent with the wording of article 3, Protocol 7 itself.
Bok v The Netherlands (Application No 45482/06) (unreported) 18 January 2011 confirms that it does not.
Section 133 therefore provides an individual whose conviction has been reversed with the opportunity (but no obligation) to make a claim for compensation based on a statutory test which is effectively identical to the provisions of the European Convention.
The Secretary of State must allow or reject the application in accordance with that test.
Conviction Impossible
This heading is used to encompass some of the alternative ways of approaching the concept of miscarriage of justice adopted in the majority judgments which have reached the conclusion that the phrase has a rather broader ambit than I do.
A newly discovered fact which demonstrates that the prosecution against the defendant is shredded to the extent that no conviction could have been based on it, or that no evidence would properly have been offered or, if there had been a trial, there would have been no case to answer at the close of the prosecution case, is likely to provide powerful material which may lead the Secretary of State to conclude that the defendant is indeed innocent.
However that conclusion does not automatically follow, and unless it does, section 133 does not apply.
In short, these considerations are of evidential significance, maybe of crucial evidential significance, but not determinative.
There are a variety of different circumstances in which the Court may make a decision on appeal in relation to decisions at trial that what appeared to be powerful evidence for the Crown should have been excluded.
For example, in the light of some newly discovered fact the Court may conclude that the decision of the trial judge to allow crucial prosecution eye witnesses to give their evidence anonymously was wrong, or no longer tenable: without that evidence there would be no case against the defendant.
The Court may order a retrial, but without the protection of an anonymity order, the crucial witnesses may then refuse to give evidence at all.
Accordingly no further evidence would be offered against the defendant.
In my judgment it should not, and it would not, follow that the defendant would be entitled to compensation.
Similar considerations would arise if, on the basis of fresh evidence, the Court concluded that the judge had wrongly admitted crucial hearsay evidence without which there would have been no prosecution.
Taking the matter further, R v Smith [1999] 2 Cr App R 238 illustrates the difficulty of equating the no case to answer situation with the concept of miscarriage of justice within section 133.
The judge rejected a submission that there was no case to answer.
The Court concluded that he was wrong and went on to examine the question, what if a submission is wrongly rejected but the defendant is cross examined into admitting his guilt? It concluded that the conviction would still be unsafe because the defendant was entitled to be acquitted at the close of the prosecution case.
It would be surprising if notwithstanding his own sworn admission of guilt, the discovery of a new fact which demonstrated that the decision that there was a case to answer was wrong, should be followed by the payment of compensation.
Again, where fresh evidence is advanced on behalf of the appellant which undermines the safety of the conviction, and indeed puts into question a substantial part of the prosecutions case, the prosecution may seek to adduce fresh evidence demonstrative of guilt.
The jurisdiction to permit the Crown to do so is available (for example, see R v Hanratty [2002] EWCA Crim 1141; [2002] 3 All ER 534).
In the interests of justice the Court may order a new trial to enable all the issues to be resolved by a jury notwithstanding that, standing on its own, the original evidence advanced by the Crown was no longer sufficient to found a case for the appellant to answer.
Finally, I must return to Mullen itself, which at [1999] 2 Cr App R 143 sets out the reasons why the conviction was quashed.
The matters which constituted the abuse of process occurred before Mullen was returned from Zimbabwe to this jurisdiction.
The British authorities procured his deportation by unlawful means, in breach of public international law.
The prosecution itself was held to be unlawful.
Mullen therefore should not have been charged, let alone prosecuted to trial.
Yet the House of Lords was agreed that he was not entitled to compensation, and I wholeheartedly agree.
Considerations like these underline some of the practical difficulties with any approach to the construction of section 133 which goes beyond the limits suggested by Lord Steyn in his judgment in Mullen, that compensation within the statutory scheme is payable only when the defendant was convicted of an offence of which he was truly innocent, and therefore beyond reasonable doubt the victim of a miscarriage of justice.
In my judgment the principle is that section 133 is concerned with the fact rather than the presumption of innocence in the context of the administrative decision to be made by the Secretary of State.
It is not related to different (and if so which?) aspects of the trial processes, or the likely or possible impact which the new or newly discovered fact would have had on the decision to prosecute or on the forensic processes which culminated in conviction.
Their practical effect is demonstrated in the case of MacDermott and McCartney.
The confessions on which the prosecution relied would have been inadmissible if they had been made not as a result of violence, but rather of inducements.
Assuming for present purposes that the newly discovered material demonstrated that Donnelly had been offered identical inducements to those which MacDermott and McCartney had asserted at their trials, their convictions would have been no less liable to be quashed than they were in the light of the fresh evidence relating to police violence.
As there was no evidence beyond their inadmissible confession there would have been no basis for any prosecution.
And there would, if they were prosecuted, have been no case for either to answer.
Yet, in the context of an inducement or inducements, there might, if the confessions were sufficiently detailed, be no reason to doubt that the confessions were true, even if inadmissible.
In my judgment their cases would not qualify for compensation.
We are here dealing not with inducements which cast doubt on the voluntariliness of the confessions, but with violence.
The newly discovered material would have borne on the decision of the trial judge whether the defendants confessions were voluntary or not.
The fresh evidence led the Court of Appeal in Northern Ireland to conclude that if it had been available at trial there was a realistic possibility that the evidence of the police officers (who asserted that there had been no intimidation of the defendants, and no grounds for doubting that the confession statements were voluntary) may have been discredited.
If so the statements would have been excluded from consideration, and there would then have been no prosecution and no case for either of them to answer.
In principle, however, the impact on the admissibility of their confessions would have been the same, whether they responded to inducements to confess or succumbed to violence.
Although I share the distinct unease of the Court of Appeal in Northern Ireland about the circumstances in which the confessions were made by the appellants, it does not follow that the Secretary of State was obliged to conclude that they were innocent for the purposes and within the ambit of section 133.
New or newly discovered fact
In the discussion about the meaning of new or newly discovered fact the rival contentions went too far.
It would be unrealistic, and removed from the realities of the conduct of the defence at trial that his legal advisers should inform the defendant personally of each and every fact and matter to which their attention is drawn by the prosecution.
When all is said and done, the defence advocate is not a mouthpiece or echo chamber for his client.
The responsibility for giving advice and assisting the defendant to make whatever decisions which he must make for himself is one aspect of the responsibilities: the deployment of evidence and argument on his behalf is another.
Sometimes the lines overlap, but often they do not.
It therefore follows that merely because the defendant himself is personally ignorant of a particular fact, it is not new or newly discovered when the defendant personally ceases to be ignorant of it.
On the other hand, when the prosecution has complied with all its obligations in relation to disclosure of material to the defence lawyers, and they, for whatever reason, do not then deploy material which appears to be adverse to the prosecution or which would assist the defendant, that material should not automatically be excluded from the ambit of the section on the basis of prosecutorial compliance with its disclosure obligations.
Rather the approach should coincide with the circumstances in which fresh evidence is sought to be deployed before the Court in accordance with section 23 of the Criminal Appeal Act 1968.
This normally predicates that there should be a reasonable explanation for the earlier failure to adduce the evidence at the trial.
In the present case, it is clear from the judgment of the Court in Adams that the conviction was quashed on the basis of fresh evidence in circumstances in which, notwithstanding that the prosecution had fully performed its responsibilities in relation to disclosure, Adamss legal team had failed adequately to respond and fulfil theirs.
In my judgment that failure or omission was a new or newly discovered fact within the ambit of section 133.
Conclusion
In my judgment the appeal of Adams should be dismissed: as to the appeals of MacDermott and McCartney, I should have agreed with Lord Browns proposal that they should be remitted to the Secretary of State for further consideration.
LORD BROWN (with whom Lord Rodger agrees)
I have had the advantage of reading in draft the judgment of Lord Judge, the Lord Chief Justice, and, agreeing with it as I do, I shall try not to repeat the bulk of its reasoning.
So troubled am I, however, that apparently ours is the minority view on these appeals that I wish to add some additional thoughts of my own.
That section 133 of the Criminal Justice Act 1988 was intended to give effect to the United Kingdoms international obligation under article 14(6) of the International Covenant on Civil and Political Rights 1966 is, of course, plain and obvious.
Section 133(1) omits the phrase in article 14(6) by a final decision reflecting it instead in the definition of reversal in section 133(5) by referring there to an appeal out of time or on a reference and substitutes for the word conclusively in article 14(6) the hallowed expression beyond reasonable doubt.
Otherwise the language of the two provisions is virtually identical.
It is clear, therefore, that the right to compensation arises only when each of four conditions is satisfied: (i) the conviction is quashed on an appeal out of time or a reference (not, therefore, when a timeous appeal succeeds, nor, of course, on an acquittal at trial); (ii) the appeal succeeds on the ground of a new or newly discovered fact; (iii) the appellant was in no way responsible for the previous non disclosure of that fact; and (iv) that fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The critical question for decision here, of course, is what precisely is meant in this context by a miscarriage of justice.
As to this, whilst recognising that the expression has an autonomous meaning, I share the view expressed in several of the judgments that there is no real assistance to be derived here from any of the extrinsic material, for example, the travaux or other states practices.
Rather, as Lord Bingham suggested in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, 27, para 9(2): It may be that the expression [miscarriage of justice] commended itself because of the latitude in interpretation which it offered.
That being so, it was perfectly open to the UK to introduce legislation intended to compensate only those shown to be clearly innocent of the crime of which they had been convicted and in this connection I see no reason to ignore the explanatory report relating to article 3 of Protocol 7 to the European Convention on Human Rights (an article almost precisely reproducing the language of article 14(6)) which, at para 25, states: The intention is that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be acknowledgment that the person concerned was clearly innocent.
True, the UK never ratified Protocol 7 and I am far from suggesting that the explanatory report shows plainly that section 133(1) is to be construed in the way para 25 suggests.
But it does surely show that this is both a permissible view to take of the extent of the article 14(6) obligation undertaken by the UK and a perfectly possible construction of section 133(1) itself.
Before turning more particularly to whether it is the right construction, it is I think worth pointing out too that the provision whereby those benefiting from article 14(6) are entitled to be compensated according to law similarly accords to individual states a wide discretion as to how such compensation is to be assessed.
As to this the UKs approach seems to me notably generous.
In reaching his assessment, the Secretary of States assessor is directed to apply principles analogous to those governing the assessment of damages for civil wrongs including, therefore, claims for wrongful imprisonment although a deduction may be made on account of the claimants criminal record.
An illustration of the size of the awards liable to be made in these cases is provided by R (OBrien) v Independent Assessor [2007] UKHL 10; [2007] 2 AC 312 concerning compensation claims arising out of the wrongful conviction of the Hickey brothers and others for the murder of Carl Bridgewater at Yew Tree Farm.
The first instance decision in that case [2003] EWHC 855 (Admin) shows net final compensation assessments there of 990,000 for Michael Hickey and 506,220 for Vincent Hickey (wrongfully detained in prison respectively for just under thirteen years and something under fourteen years see para 8 of Lord Binghams judgment in the House of Lords).
What, then, is the correct interpretation of a miscarriage of justice in section 133(1)? More particularly, is it: (i) the conviction of an innocent defendant, or (ii) the conviction of a defendant who, by a new fact, so undermines the evidence against him as to show that, on the undermined evidence, he could not possibly have been convicted essentially Lord Phillips (category 2) formulation (at para 55), apparently now subscribed to by the majority of the court.
I mention only those two possible constructions since no member of the court appears to favour any yet wider construction of section 133 so as to embrace also cases where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant (Lord Phillips category 3 at para 9).
Strikingly, and to my mind significantly, it was this wider construction that not just the appellants but also Mr Alex Bailin QC for the Intervener, JUSTICE, were urging upon the court; indeed, both Mr Owen QC for Mr Adams and Mr Bailin expressly submitted that there was no logical or principled dividing line between categories 2 and 3.
And to my mind they were right to do so.
Of course, innocence as such (factual as opposed to presumptive) is not a concept known to the criminal law.
But nor too, in the context of criminal appeals, is the notion of a prosecution case so undermined that no jury could possibly convict.
The criminal court deals only in the safety of convictions.
On a fresh evidence appeal the sole question the court asks itself is whether the conviction is unsafe (essentially the lurking doubt test).
If the case is a difficult one it sometimes finds it helpful to test its view by asking whether the evidence, if given at the trial, might reasonably have affected the decision of the trial jury to convict R v Pendleton [2001] UKHL 66; [2002] 1 WLR 72, 83, para 19.
The ultimate and only question, however, is for the court: is the verdict unsafe? The question raised by section 133, by contrast, is not one for the criminal court but rather one entirely for the Secretary of State.
Similarly, no member of the court appears to suggest that Mullen itself was wrongly decided.
Lord Steyn, of course, reached his decision there (to allow the Secretary of States appeal and reinstate the decision of the Divisional Court) on the ground that section 133 compensates only those who are clearly innocent whereas Lord Bingham reached his on the altogether narrower ground that: It is for failures of the trial process that the Secretary of State is bound . to pay compensation (para 8).
Mr Mullens conviction was, of course, quashed not because of anything that had gone wrong in the trial process but because he would not have been on trial at all but for having been unlawfully returned to this country.
Certainly Lord Bingham disagreed with Lord Steyns approach.
But it cannot be pretended that Lord Binghams own approach supports the particular formulation suggested by the majority in the present case.
My own reasoning in the Divisional Court in Mullen [2002] 1 WLR 1857, 1864 was essentially that later to be adopted by Lord Steyn: 25 What was shown beyond reasonable doubt here was that there had been an abuse of process in bringing the claimant to trial.
That was the newly discovered fact.
But that fact did not itself show beyond reasonable doubt that there had been a miscarriage of justice.
All that it showed was that the court needed to conduct a discretionary exercise to decide in effect which of two important public interests should prevail: the public interest in trying, convicting and punishing the guilty or that in discouraging breaches of the rule of law and preserving the integrity of the criminal justice system.
It preferred the latter.
True, it had no doubt that the balance came down decisively in the defendants favour.
But that was by no means to find that he was innocent, still less that he was plainly so.
Rather it was a judgment that the lawful administration of justice would be affronted by his remaining convicted and imprisoned. 26 In short, a miscarriage of justice in the context of section 133 means, in my judgment, the wrongful conviction of an innocent accused.
Compensation goes only to those ultimately proved innocent, not to all those whose convictions are adjudged unsafe.
The quashing of the claimants conviction in this case was a vindication of the rule of law, not the righting of a mistaken verdict.
As I shall come to suggest, the quashing of the conviction in many cases which would fall within the majoritys formulation for compensation here is more properly to be characterised as a vindication of the rule of law than as the righting of a mistaken verdict.
Par excellence, indeed, this seems to me to be so in cases where confession statements, even though perhaps demonstrably true (by referring, say, to facts known only to the perpetrator of the crime) are excluded because of intimidation or inducement see particularly in this regard paras 264 and 265 of Lord Judges judgment.
My reasons for remaining precisely of the view I expressed in the Divisional Court in Mullen are essentially a combination of the considerations in favour of the category 1 test (that of innocence) and the considerations weighing against the category 2 test (that of critical evidence undermined).
As for the factors favouring the test of innocence, it is difficult to improve upon those listed by Lord Phillips at paras 43 48 of his judgment.
As Lord Phillips there points out, this construction gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133 (para 43); it makes perfect sense of the requirement that the new facts should prove this beyond reasonable doubt (para 44); and it gives section 133 a meaning which is eminently practicable (para 45).
It seems to me unnecessary to decide whether Lloyd LJ was right to say in R v McIlkenny (1991) 93 Cr App R 287, 311 that the Court of Appeal is not entitled to state that an appellant is innocent a point on which Lord Phillips (at para 45) and Lord Judge (at para 251) disagree.
The all important consideration in this respect is, as Lord Phillips says, that it is for the Secretary of State, not the Court of Appeal, to decide whether there has in fact been a miscarriage of justice (and, therefore, on the innocence test, whether the fresh evidence shows beyond reasonable doubt that the defendant was innocent) and the reasons given for quashing the conviction are unlikely to leave any doubt of this (para 46).
As, moreover, Lord Phillips observes (at para 47) the innocence test will ensure that a guilty defendant is not compensated for the consequences of his conviction.
If I may revert to the man in the street, he would, I think, be appalled at a construction which, on the contrary, would not infrequently result in the compensation of the guilty, sometimes, as already indicated, to the extent of hundreds of thousands of pounds.
As for the factors weighing against the category 2 test, prominent amongst these is undoubtedly the converse of the point just made, the fact that it would result in very substantial compensation for many defendants who are in truth guilty.
I have already instanced (para 275 above and paras 264 and 265 of Lord Judges judgment) those whose confession statements (even if true) come to be undermined.
Equally this is so in cases where it comes to be seen that anonymous or hearsay evidence should not have been allowed (see particularly in this regard para 260 of Lord Judges judgment).
This point, indeed, can be illustrated by the facts of R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 (where, as Lord Clarke notes at para 199, I was sitting in the Court of Appeal with Sir Thomas Bingham MR and Farquharson LJ).
Mr Batemans appeal for compensation failed in the event because the success of his second criminal appeal owed nothing to a new or newly discovered fact.
Obiter, however, the Master of the Rolls suggested that he had suffered a miscarriage of justice.
On an appeal out of time his conviction had been quashed because certain statements had been wrongly admitted in evidence at trial.
These were statements from important New Zealand witnesses whom he had wanted called and cross examined.
But why, I am now inclined to ask, should a successful appellant be compensated in those circumstances? The case against him might well have become more, rather than less, damning had the witnesses indeed been called and given their evidence orally (as was held should have happened).
One other case I want to mention which to my mind strikingly illustrates the dangers of adopting the category 2 construction is a recent decision of this court.
The case concerned the conviction of each of two brothers (A and B) for murder and two robberies following, as later investigations and a reference by the Criminal Cases Review Commission were to show, police misconduct of the gravest kind (most notably by colluding with the main prosecution witness).
On a second appeal some twelve years after conviction there was accordingly no dispute but that As and Bs convictions had to be quashed.
The only issue for the Court of Appeal had been whether A should be retried, this time not on the basis of the irredeemably tainted evidence given at his original trial but rather based on a series of admissions of guilt he had made following his conviction and the failure of his first appeal.
Because the decision upheld by the majority in this court was to order a retrial, the reporting of the detailed judgments both of the Court of Appeal and of this court has had to be delayed.
As, however, these judgments make plain, although B could not be retried (he having made no confession of guilt), the guilt of both was in reality plain.
True, the most critical evidence in the case against them had been that of a supergrass (without whose evidence, indeed, it was agreed that there could have been no prosecution at all), upon whose evidence the Crown could no longer rely because of the polices misconduct in conferring upon him a whole host of benefits to secure his continuing cooperation in the brothers prosecution at trial.
But his evidence had been supported by a jigsaw of other pieces of evidence.
That said, however, in the language of the majoritys category 2 test, no conviction could possibly be based upon it.
Is it then to be said that B must be compensated for the twelve years or so he spent in prison before being released at his second appeal? And, indeed, that A too would have had to be compensated had the Court of Appeal not decided to order his retrial? Will the Court of Appeal in future, when deciding at the conclusion of an out of time appeal whether the interests of justice require a retrial, have to factor in the consideration that, unless a retrial is ordered, the successful appellant will or may be found entitled to compensation under the majoritys approach to section 133?
The other centrally important consideration militating against a category 2 construction of section 133 is the difficulty indeed, to my mind, impossibility of reconciling this with the language of the section as a whole, and most especially with its requirement that the new facts establish a miscarriage of justice beyond reasonable doubt.
It seems to me nonsensical to suggest that the category 2 test is one that can sensibly be satisfied (or not) beyond reasonable doubt.
For good measure although, I accept, less conclusively the alternative basis of entitlement to compensation provided for by the section, namely a pardon, naturally connotes innocence rather than some less exacting test.
Even the language of a new or newly discovered fact (rather than fresh evidence) to my mind tends to suggest the revelation of something clear and certain namely innocence, rather than merely the undermining of the prosecutions overall case.
I entirely accept, of course, that a new fact which does so undermine this case as to show that the appellant could not properly have been convicted on the evidence in fact adduced against him may well in many cases suggest actual innocence and duly persuade the Secretary of State of this.
Lord Judge expressly recognises this at para 259 of his judgment.
But what if, say, as a result of inadmissible intercept evidence or other reliable intelligence the Secretary of State reasonably believes (perhaps, indeed, is convinced) that the appellant is in fact guilty.
Must he nevertheless compensate him? I would hope and respectfully maintain not.
Naturally I recognise that the application of the innocence test will exclude from compensation a few who are in fact innocent.
Even on the majoritys test, of course, some who are innocent will be excluded.
That, however, seems to me preferable to compensating a considerable number (although mercifully not so many as would be compensated on the category 3 approach) who are guilty.
After all, this whole compensation scheme operates by creating only a narrow and exceptional class who qualify.
The claimant qualifies only by producing a new or newly discovered fact.
And only if his conviction is quashed on a reference or an appeal out of time. (It will, indeed, often be a matter of chance whether an appeal is out of time the lawyers may simply have missed the time limit.) Why should the state not have a scheme which compensates only the comparatively few who plainly can demonstrate their innocence and, as I have shown, compensate them generously rather than a larger number who may or may not be innocent? That, at all events, is the scheme which in my opinion Parliament enacted here.
On certain of the questions raised there is nothing I wish to add to what Lord Judge has said.
I agree with him (at para 252) about the material to be considered by the Secretary of State (indeed, as to this, I agree too with what Lord Phillips says at para 36 of his judgment, subject only to applying the correct test).
I agree with all that Lord Judge says (at para 254) as to the relevance here of section 133(5A).
I agree with him too (at paras 255 and 256) about the relevance of the Strasbourg jurisprudence in this context. (It hardly needs pointing out that, were the Strasbourg cases to present a problem, they would do so no less for the majority than for the minority view.) And I agree with Lord Judges approach (at paras 266 and 267) to a new or newly discovered fact.
In common, as I understand it, with every other member of the Court, I too would dismiss Mr Adamss appeal.
Had Lord Judges and my view as to the meaning of section 133 prevailed, I would have been inclined to remit Mr MacDermotts and Mr McCartneys compensation claims to the Secretary of State for his further consideration in the light of our judgments and more particularly of Lord Kerrs masterly analysis of the facts of those two cases.
LORD WALKER
I agree with the judgments of Lord Judge and Lord Brown.
| UK-Abs | Section 133 of the Criminal Justice Act 1988 (s 133) provides that the Secretary of State for Justice shall pay compensation when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
It was enacted to give effect to Article 14(6) of the International Covenant on Civil and Political Rights 1966 (Article 14(6)), which the United Kingdom ratified in May 1976.
Article 14(6) also refers to a miscarriage of justice.
The principal issue in these appeals was the meaning of this phrase in this context; in particular whether compensation should only be given if someone was subsequently shown conclusively to have been innocent of the offence.
The three appellants each claimed compensation following the quashing of their convictions for murder by the Court of Appeal.
In each case the claim was refused on the ground that the appellant had not shown that a miscarriage of justice had occurred.
In Mr Adams case, it was also refused on the ground that he had not shown that his conviction had been reversed by reason of a new or newly discovered fact.
Mr Adams was convicted on 18 May 1993 of the murder of Jack Royal.
His conviction was referred to the Court of Appeal in 2007 on the ground that incompetent defence representation had deprived him of a fair trial.
His representatives had failed to consider unused material provided by the police which would have assisted in undermining the evidence given by the sole prosecution witness.
The Court of Appeal found that if this had been done the jury might not have been satisfied of Mr Adams guilt, although he would not inevitably have been acquitted.
Mr McCartney was convicted of the murders of Geoffrey Agate and DC Liam McNulty, and Mr MacDermott that of DC McNulty, on 12 January 1979.
The sole evidence was their admissions during interviews with the police.
They alleged that these had been made after ill treatment and called other witnesses who claimed to have suffered similar treatment from the same group of police officers.
The judge rejected their evidence.
He had been told that a prosecution brought against one of these witnesses had not been proceeded with.
But he was not told that this was because senior officers in the Department of the Director of Public Prosecutions considered that he had been assaulted by police officers to obtain his confession and that a conviction in another case, based on a confession obtained in similar circumstances and involving one of the same officers, had been quashed.
The Court of Appeal in Northern Ireland quashed the convictions of Mr McCartney and Mr MacDermott on 15 February 2007 on the ground that this new evidence left it with a distinct feeling of unease about the safety of their convictions.
The Supreme Court unanimously dismisses the appeal of Mr Adams and by a majority (Lord Rodger, Lord Walker, Lord Brown and Lord Judge dissenting) allows the appeals of Mr MacDermott and Mr McCartney.
The majority hold that a miscarriage of justice has occurred for the purposes of s 133 when a new or newly discovered fact shows conclusively that the evidence against a defendant has been so undermined that no conviction could possibly be based upon it.
Miscarriage of justice Miscarriage of justice was a phrase capable of a number of different meanings.
It was useful to consider four categories of cases in which the Court of Appeal would quash a conviction on the basis of fresh evidence: Where it showed a defendant was innocent of the crime (category 1) Where it was such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant (category 2) Where it rendered the conviction unsafe in that, had it been available at the trial, a reasonable jury might or might not have convicted the defendant (category 3) Where something had gone seriously wrong in the investigation of the offence or the conduct of the trial resulting in the conviction of someone who should not have been convicted (category 4) [9] The primary object of s133, and of Article 14(6), was clearly to compensate a person who had been convicted and punished for a crime which he did not commit.
A subsidiary objective was not to compensate someone who had in fact committed the crime [37].
Category 4 fell outside this purpose as it dealt with abuses of process so shocking that the conviction should be quashed even if it did not put in doubt the guilt of the convicted person [38].
Category 3 was also outside s 133 because the miscarriage of justice had to be shown beyond reasonable doubt.
Category 3 would include a significant number who had in fact committed the offences, as an inevitable consequence of a system which required guilt to be proved beyond reasonable doubt [42].
Category 1 cases were clearly covered by s 133.
However, the majority (Lord Phillips, Lord Hope, Lady Hale, Lord Kerr and Lord Clarke) held that the ambit of s 133 was not restricted to category 1 as it would deprive of compensation some defendants who were in fact innocent but could not establish this beyond reasonable doubt.
A wider scope was plainly intended at the time of the drafting of Article 14(6).
Even though it would not guarantee that all those entitled to compensation were in fact innocent, the test for miscarriage of justice in s 133 (in more robust terms than category 2) was as follows: A new or newly discovered fact will show conclusively that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it [55].
A miscarriage of justice in a case of that kind would be as great as it would have been if he had in fact been innocent, because in neither case would he have been prosecuted at all [102].
Four justices dissented on this issue.
Lord Judge considered that the words beyond reasonable doubt in s 133 meant that the miscarriage of justice was the conviction and incarceration of the truly innocent [248].
Lord Brown considered that there was no logical or principled dividing line between categories 2 and 3 [274] and the arguments in favour of an interpretation limited to category 1 were compelling [277].
Lord Rodger agreed with Lord Brown, and Lord Walker agreed with Lord Brown and Lord Judge.
Application of s 133 to cases involving a retrial An amendment to s 133 (subsection 5A) which referred to a retrial changed the timetable for a claim for compensation.
It did not mean that compensation was payable in every case in which a retrial had been ordered and the defendant then acquitted, as was argued by counsel for the intervener Barry George.
The same test was to be applied.
The amendment allowed for the possibility that something might emerge in the retrial which would require compensation [104].
New or newly discovered fact Lord Phillips (with whom Lady Hale, Lord Kerr and Lord Clarke agreed) held that the phrase new or newly discovered fact should be interpreted generously in accordance with the effect given to Article 14(6) by legislation in Ireland as including facts the significance of which was not appreciated by the convicted person or his advisers during the trial [60].
Lord Hope disagreed, considering that material disclosed to the defence by the time of the trial could not be said to be new and the focus on the state of mind of the convicted person went too far [107].
Lord Judge (with whom Lords Brown, Rodger and Walker agreed) preferred an approach which coincided with the test for admission of fresh evidence before the Court of Appeal, which required a reasonable explanation for the failure to adduce the evidence at the trial.
This had been satisfied by Mr Adams in his case [281].
Disposal of the appeals Mr Adams appeal was unanimously dismissed on the ground that his was a category 3 case and did not fall within s 133.
The majority allowed the appeals of Mr McCartney and Mr MacDermott as it had been shown conclusively that the evidence against them had been so undermined that no conviction could possibly be based upon it.
The minority would have remitted their cases to the Secretary of State for further consideration in the light of the judgment.
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In this case, Virgin Atlantic Airways Ltd wishes to recover damages exceeding 49,000,000 for the infringement of a European Patent which does not exist in the form said to have been infringed.
The Technical Board of Appeal (TBA) of the European Patent Office (EPO) has retrospectively amended it so as to remove with effect from the date of grant all the claims said to have been infringed.
The TBA found that in the form in which the patent was originally granted the relevant claims were invalid because they had been anticipated by prior article Virgin says that it is nevertheless entitled to recover damages for infringement because before the TBA had issued its decision, the English courts had held the patent to be valid and specifically rejected the objection based on prior article Their case is that this conclusion and the finding of validity on which it is based are res judicata notwithstanding the later but retrospective decision of the TBA.
A similar argument had succeeded before the Court of Appeal in very similar circumstances in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin Beheer BV v Berry Floor NV [2007] FSR 635.
The Court of Appeal, conceiving itself to be bound by these decisions and regarding them as correct in principle, arrived at the same conclusion.
The statutory framework
The appeal perfectly illustrates the problems arising from the system of parallel jurisdiction for determining the validity of European patents.
Part II of the Patents Act 1977 gives effect to the principal provisions of the European Patent Convention.
Section 77(1) of the Act provides that a European Patent (UK), i.e. one which is granted for the United Kingdom or for states including the United Kingdom, is to be treated as if it were a patent granted under the Act, and that the proprietor of a European Patent (UK) shall accordingly as respects the United Kingdom have the same rights and remedies, subject to the same conditions, as the proprietor of a patent under this Act.
Section 77(2) (4A) deal with the revocation or amendment of a European Patent by the EPO (EPO): 77 Effect of European Patent (UK) . (2) Subsection (1) above shall not affect the operation in relation to a European patent (UK) of any provisions of the European Patent Convention relating to the amendment or revocation of such a patent in proceedings before the EPO. (3) Where in the case of a European patent (UK) (a) proceedings for infringement, or proceedings under section 58 above, have been commenced before the court or the comptroller and have not been finally disposed of, and (b) that the patent is only partially valid, it is established in proceedings before the EPO the provisions of section 63. apply as they apply to proceedings in which the validity of a patent is put in issue and in which it is found that the patent is only partially valid. (4) Where a European patent (UK) is amended in accordance with the European Patent Convention, the amendment shall have effect for the purposes of Parts I and III of this Act as if the specification of the patent had been amended under this Act; but subject to subsection (6)(b) below. (4A) Where a European patent (UK) is revoked in accordance with the European Patent Convention, the patent shall be treated for the purposes of Parts I and III of this Act as having been revoked under this Act.
The provisions of section 63 to which section 77(3) refers deal with the power of the Comptroller in a case where a patent is found to be only partially valid to grant relief in respect of that part which is found to be valid and infringed.
Section 77(2) of the Act refers to the provisions of the European Patent Convention relating to the amendment or revocation.
This is a reference to article 68 of the Convention, and indirectly to article 64.
They provide: Article 64 Rights conferred by a European patent (1) A European patent shall, subject to the provisions of paragraph 2, confer on its proprietor from the date [of publication of the mention of its grant], in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State. (2) If the subject matter of the European patent is a process, the protection conferred by the patent shall extend to the products directly obtained by such process. (3) Any infringement of a European patent shall be dealt with by national law.
Article 68 Effect of revocation or limitation of the European patent The European patent application and the resulting European patent shall be deemed not to have had, from the outset, the effects specified in articles 64 and 67, to the extent that the patent has been revoked or limited in opposition, limitation or revocation proceedings.
Part V of the Convention provides for opposition procedure before the
Opposition Division of the EPO and on appeal from them to the TBA.
A European patent may be opposed on the ground (among others) that the invention is not patentable by reason of lack of novelty.
The procedure is available to any one affected, provided that it is initiated within nine months of the grant.
Under articles 101 and 111 of the Convention, the Opposition Division and the TBA are empowered to revoke a patent found to be invalid or to accept an amendment proposed by the patentee which will cause the patent to satisfy the requirements of the Convention.
The effect of these provisions is that the English courts have the same jurisdiction to determine questions of validity and infringement in the case of a European patent as they have for domestic patents, but that concurrent jurisdiction over questions of validity is exercisable by the EPO.
There is, however, an important difference between the legal effect of a decision in the two jurisdictions.
Both are decisions in rem.
They determine the validity of the patent not only as between the parties to the proceedings, but generally.
But the English courts jurisdiction over the question of validity is purely national.
A decision of an English court declaring a patent invalid, or (which will normally follow) revoking it, will have effect in the United Kingdom only, whereas a corresponding decision of the EPO, which was the authority by which the patent was granted, will have effect in all the states for which the patent was granted.
These considerations make it highly desirable to avoid inconsistent decisions if it can be done.
National procedures for achieving this differ from one contracting state to another.
In England, there are established procedures for staying English proceedings in which the validity of a European patent is in issue, if there are concurrent opposition procedures in the EPO.
However the value of these procedures is somewhat diminished by the current practice of the High Court, which is based on dicta of Jacob LJ in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, at para 25 and on the subsequent decision of the Court of Appeal in Glaxo Group Ltd v Genentech Inc (Practice Note) [2008] Bus LR 888.
Their effect is that the primary consideration on an application for a stay is the probable duration of the proceedings before the two tribunals.
If the question of validity would be likely to be resolved quicker in the English court than in the EPO, it would normally be appropriate not to stay the English proceedings.
The consequences of this practice are particularly serious in a case where the English courts win the race to judgment if, as the Court of Appeal decided in Unilin, the effect is to bind the parties to a decision of the English court that the patent is valid notwithstanding that the EPO which granted it subsequently decides that it should be revoked or amended ab initio.
In Glaxo Group Ltd v Genentech Inc, at para 83 Mummery LJ, delivering the judgment of the court thought that this consequence was inherent in the existence of concurrent systems of adjudication: . the possibility of the duplication of proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the Convention.
In practice national courts exercise exclusive jurisdiction on infringement issues and they have concurrent jurisdiction with the EPO on validity issues.
As Mr Daniel Alexander appearing for the claimant said, the contracting states and the UK Parliament contemplated that the national patents courts should be able to determine the same issues of patentability as the EPO.
The resultant legislation allowed the determination by the national court and the EPO at the same time.
Indeed, there is nothing in the Convention or the 1977 Act to prevent the commencement of revocation proceedings in the Patents Court on the very date of the grant of the patent by the EPO.
It is undoubtedly right that the draftsmen of both the Convention and the Patents Act 1977 envisaged concurrent jurisdiction over questions of validity, but it may be doubted whether they envisaged anything like the consequence which has come about in this case.
The facts
The patent in suit is a European patent for a seating system and passenger accommodation unit for a vehicle, granted to Virgin and published on 30 May 2007.
The seat, which was designed in about 2005, reclines to provide a flat bed.
It is commonly used in long haul aircraft.
Zodiac Seats UK Ltd (as it is now called) manufactures a seating unit called the Solar Eclipse in the United Kingdom.
It has been supplied to a number of international airlines.
On 30 July 2007, two months after the grant of the patent, Virgin began proceedings against Zodiac in the High Court claiming an injunction and damages on the footing that its seats infringed the patent.
Zodiac defended the action on the ground that its seats did not fall within the claims of the patent.
But, they said, if the claims were wide enough to cover their seats, then the patent was invalid on account of prior art and for added matter.
They also, on 29 February 2008, opposed the validity of the patent in the EPO, along with a number of airlines who had bought their seats and were at risk of infringement proceedings if the patent was valid.
Initially, no application was made for a stay of the English proceedings.
There was a certain amount of argument before us about the significance of this fact, if any.
For present purposes, however, it is enough to say that under the Glaxo v Genentech guidelines, an application for a stay would not necessarily have succeeded.
The English action was heard by Lewison J. He gave judgment in January 2009, holding that Zodiacs Solar Eclipse seats did not infringe the patent.
He recorded that if the claims of the patent had been wide enough to cover Zodiacs seating system, he would have held it to be invalid for added matter.
But he rejected every other ground of invalidity advanced.
Virgin appealed against the decision on infringement, and Zodiac cross appealed on validity.
On 31 March 2009, some two months after Lewison Js judgment, the Opposition Division of the EPO upheld the patent subject to minor amendments which are agreed to be immaterial to the present dispute.
Zodiac and other opponents of the patent immediately indicated their intention to appeal to the TBA.
This gave rise to a brief correspondence between the parties solicitors about what would happen if the English Court of Appeal held the patent to be valid but the TBA later held it to be invalid in some relevant respect.
Zodiacs solicitors proposed that if the appeal on validity succeeded in England, the making of any final order by the Court of Appeal should be stayed until the final determination of the opposition proceedings in the EPO.
Virgins solicitors refused, on their clients behalf, to agree.
They then wrote on the same day to the Court of Appeal informing them of the progress and likely course of the opposition proceedings, and summarising their correspondence with Zodiacs solicitors.
On 12 May 2009, the Civil Appeals Office replied that Lord Justice Jacob has directed that he will not grant a stay of proceedings at present, however, parties can apply for a stay following judgment in the Court of Appeal if it is still possibly relevant.
That direction was given without prior notice to either party and without inviting any observations from those acting for Zodiac.
The Appeal was heard in October 2009 by Jacob and Patten LJJ and Kitchin J.
On 22 October, they gave judgment reversing Lewison Js decision on validity and holding the patent to have been valid and infringed.
They specifically rejected the argument based on prior article Zodiac then made the application for a stay of the order apparently envisaged in Jacob LJs direction of 12 May 2009, pending an application for permission to appeal to the Supreme Court and the conclusion of the opposition proceedings in the EPO.
In a further judgment handed down on 21 December 2009 the Court of Appeal refused the application.
The main ground on which they refused it was that it was pointless to stay the order on the appeal, because the effect of the decision in Unilin was that any later decision of the TBA revoking the patent would make no difference.
This was because the decision of the Court of Appeal would bind the parties per rem judicatam.
On 12 January 2010 the Court of Appeal sealed an order making a declaration that the patent was valid and infringed, together with an injunction and an enquiry as to damages.
The injunction was qualified so as to allow the delivery of seats to Delta under an existing contract, upon Zodiac undertaking to pay 10,000 to Virgin for each seat delivered, but otherwise covered all future infringements.
At this stage, the decision of the TBA on the opposition proceedings was due to be given on 20 April 2010.
In the event, however, this was postponed to 9 September 2010 as a result of the disruption of flights following the eruption of the Eyjafjalajkull volcano in Iceland.
When the adjourned date came, the TBA varied the decision of the Opposition Division.
They held that all the claims found in England to have been infringed were invalid by reason of prior art, and accepted amendments proposed by Virgin removing them from the patent.
By that time, however, the appeal proceedings had been completed and permission to appeal on the merits of the Court of Appeals findings had been refused by the Supreme Court.
As a result of this decision, further applications were made by Zodiac to the Court of Appeal to vary the Court of Appeals order and to discharge the injunction.
The injunction was discharged by consent on 1 December 2010.
The application to vary the courts order was heard by the Court of Appeal (Smith, Jacob and Patten LJJ) in February 2011.
So far as relevant to this appeal, the variations actually sought were (i) the replacement of the declarations made by new declarations making it clear that the patent held to be valid was the unamended patent; (ii) the discharge of the order for delivery up of the allegedly infringing articles; (iii) the discharge of the order for an enquiry as to damages; and (iv) the release of Zodiac from its undertaking to pay 10,000 per seat delivered to Delta and the repayment of the 3,600,000 already paid under it.
Judgment was given on 23 February 2011.
The Court of Appeal held
(following the same numbering) (i) that the declaration would not be varied; (ii) that the order for delivery up would be discharged because it was redundant in the light of the amendment of the patent; (iii) that the order for an enquiry as to damages would stand, because it was no more than the mechanism for working out the effect of the Court of Appeals decision that the patent was valid, and that decision was res judicata; and (iv) that the 3,600,000 was not repayable because it was an advance referable to (among other things) the damages to be assessed in the enquiry.
To complete the story, on 27 July 2012 Floyd J gave judgment in three actions against customers who had bought and were using Zodiacs seating units; actions to which Zodiac were also joined.
They had been sued by Virgin on the footing that the Solar Eclipse seating units infringed the amended patent.
Floyd J held that they did not.
His judgment confirms that Zodiacs seating units do not infringe the patent in the form which it is now deemed to have taken from the moment it was granted.
The issue
The order of the Court of Appeal of 12 January 2010 upholding the validity of the patent and directing an enquiry as to damages can now be varied only by way of appeal, and no further avenues of appeal are open.
It is therefore right to start by pointing out that this is not an appeal against that order.
The fundamental question is whether Zodiac is entitled to contend upon the enquiry as to damages that there have been no damages because the patent has been retrospectively amended so as to remove the claims held to have been infringed.
This depends on whether the Court of Appeal was right to say that its order declaring the patent to be valid continued to bind the parties per rem judicatam notwithstanding that the patent was later amended on the footing that it was not valid in the relevant respects.
Res judicata: general principles
Res judicata is a portmanteau term which is used to describe a number of different legal principles with different juridical origins.
As with other such expressions, the label tends to distract attention from the contents of the bottle.
The first principle is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings.
This is cause of action estoppel.
It is properly described as a form of estoppel precluding a party from challenging the same cause of action in subsequent proceedings.
Secondly, there is the principle, which is not easily described as a species of estoppel, that where the claimant succeeded in the first action and does not challenge the outcome, he may not bring a second action on the same cause of action, for example to recover further damages: see Conquer v Boot [1928] 2 KB 336.
Third, there is the doctrine of merger, which treats a cause of action as extinguished once judgment has been given upon it, and the claimants sole right as being a right upon the judgment.
Although this produces the same effect as the second principle, it is in reality a substantive rule about the legal effect of an English judgment, which is regarded as of a higher nature and therefore as superseding the underlying cause of action: see King v Hoare (1844) 13 M & W 494, 504 (Parke B).
At common law, it did not apply to foreign judgments, although every other principle of res judicata does.
However, a corresponding rule has applied by statute to foreign judgments since 1982: see Civil Jurisdiction and Judgments Act 1982, section 34.
Fourth, there is the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties: Duchess of Kingstons Case (1776) 20 St Tr 355.
Issue estoppel was the expression devised to describe this principle by Higgins J in Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537, 561 and adopted by Diplock LJ in Thoday v Thoday [1964] P 181, 197 198.
Fifth, there is the principle first formulated by Wigram V C in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones.
Finally, there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles with the possible exception of the doctrine of merger.
It is only in relatively recent times that the courts have endeavoured to
impose some coherent scheme on these disparate areas of law.
The starting point is the statement of principle of Wigram V C in Henderson v Henderson (1843) 3 Hare 100, 115.
This was an action by the former business partner of a deceased for an account of sums due to him by the estate.
There had previously been similar proceedings between the same parties in Newfoundland in which an account had been ordered and taken, and judgment given for sums found due to the estate.
The personal representative and the next of kin applied for an injunction to restrain the proceedings, raising what would now be called cause of action estoppel.
The issue was whether the partner could reopen the matter in England by proving transactions not before the Newfoundland court when it took its own account.
The Vice Chancellor said: In trying this question I believe I state the rule of the Court correctly when I say that, where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.
The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.
Now, undoubtedly the whole of the case made by this bill might have been adjudicated upon in the suit in Newfoundland, for it was of the very substance of the case there, and prima facie, therefore, the whole is settled.
The question then is whether the special circumstances appearing upon the face of this bill are sufficient to take the case out of the operation of the general rule.
Wigram V Cs statement of the law is now justly celebrated.
The principle which he articulated is probably the commonest form of res judicata to come before the English courts.
For many years, however, it was rarely invoked.
The modern law on the subject really begins with the adoption of Wigram V Cs statement of principle by the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581.
Yat Tung was an appeal from Hong Kong, in which the appellant sought to unsuccessfully avoid the exercise by a mortgagee of a power of sale in two successive actions, contending on the first occasion that the sale was a sham and that there was no real sale, and on the second that the sale was fraudulent.
Lord Kilbrandon, giving the advice of the Board, distinguished at 589 590 between res judicata and abuse of process: The second question depends on the application of a doctrine of estoppel, namely res judicata.
Their Lordships agree with the view expressed by McMullin J that the true doctrine in its narrower sense cannot be discerned in the present series of actions, since there has not been, in the decision in no. 969, any formal repudiation of the pleas raised by the appellant in no. 534.
Nor was Choi Kee, a party to no. 534, a party to no. 969.
But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.
Lord Kilbrandon referred to the statement of Wigram V C in Henderson v Henderson as the authority for the wider sense of res judicata, classifying it as part of the law relating to abuse of process.
The implications of the principle stated in Henderson v Henderson were more fully examined by the House of Lords in Arnold v National Westminster Bank plc [1991] 2 AC 93.
The question at issue in that case was whether in operating a rent review clause under a lease, the tenants were bound by the construction given to the very same clause by Walton J in earlier litigation between the same parties over the previous rent review.
The Court of Appeal had subsequently, in other cases, cast doubt on Walton Js construction, and the House approached the matter on the footing that the law (or perhaps, strictly speaking, the perception of the law) had changed since the earlier litigation.
Lord Keith of Kinkel began his analysis by restating the classic distinction between cause of action estoppel and issue estoppel: Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter.
In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment.
The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re opened. (104D E) Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re open that issue. (105E) The case before the committee was treated as one of issue estoppel, because the cause of action was concerned with a different rent review from the one considered by Walton J.
But it is important to appreciate that the critical distinction in Arnold was not between issue estoppel and cause of action estoppel, but between a case where the relevant point had been considered and decided in the earlier occasion and a case where it had not been considered and decided but arguably should have been.
The tenant in Arnold had not failed to bring his whole case forward before Walton J.
On the contrary, he had argued the very point which he now wished to reopen and had lost.
It was not therefore a Henderson v Henderson case.
The real issue was whether the flexibility in the doctrine of res judicata which was implicit in Wigram V Cs statement extended to an attempt to reopen the very same point in materially altered circumstances.
Lord Keith of Kinkel, with whom the rest of the Committee agreed, held that it did.
Lord Keith first considered the principle stated by Wigram V C that res judicata extended to every point which properly belonged to the subject of litigation and which the parties exercising reasonable diligence might have brought forward at the time.
He regarded this principle as applying to both cause of action estoppel and issue estoppel.
Cause of action estoppel, as he had pointed out, was absolute in relation to all points decided unless fraud or collusion is alleged.
But in relation to points not decided in the earlier litigation, Henderson v Henderson opened up the possibility that cause of action estoppel may not apply in its full rigour where the earlier decision did not in terms decide, because they were not raised, points which might have been vital to the existence or non existence of a cause of action (105B).
He considered that in a case where the earlier decision had decided the relevant point, the result differed as between cause of action estoppel and issue estoppel: There is room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different. (108G H) The relevant difference between the two was that in the case of cause of action estoppel it was in principle possible to challenge the previous decision as to the existence or non existence of the cause of action by taking a new point which could not reasonably have been taken on the earlier occasion; whereas in the case of issue estoppel it was in principle possible to challenge the previous decision on the relevant issue not just by taking a new point which could not reasonably have been taken on the earlier occasion but to reargue in materially altered circumstances an old point which had previously been rejected.
He formulated the latter exception at 109B as follows: In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings.
One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result.
This enabled the House to conclude that the rejection of Walton Js construction of the rent review clause in the subsequent case law was a materially altered circumstance which warranted rearguing the very point that he had rejected.
Arnold is accordingly authority for the following propositions: (1) Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non existence of a cause of action. (2) Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or non existence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised. (3) Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which (i) were not raised in the earlier proceedings or (ii) were raised but unsuccessfully.
If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised.
It was submitted to us on behalf of Virgin that recent case law has re categorised the principle in Henderson v Henderson so as to treat it as being concerned with abuse of process and to take it out of the domain of res judicata altogether.
In these circumstances, it is said, the basis on which Lord Keith qualified the absolute character of res judicata in Arnold v National Westminster Bank by reference to that principle is no longer available, and his conclusions can no longer be said to represent the law.
I do not accept this.
The principle in Henderson v Henderson has always been thought to be directed against the abuse of process involved in seeking to raise in subsequent litigation points which could and should have been raised before.
There was nothing controversial or new about this notion when it was expressed by Lord Kilbrandon in Yat Tung.
The point has been taken up in a large number of subsequent decisions, but for present purposes it is enough to refer to the most important of them, Johnson v Gore Wood & Co [2002] 2 AC 1, in which the House of Lords considered their effect.
This appeal arose out of an application to strike out proceedings on the ground that the plaintiffs claim should have been made in an earlier action on the same subject matter brought by a company under his control.
Lord Bingham took up the earlier suggestion of Lord Hailsham of St. Marylebone LC in Vervaeke v Smith [1983] 1 AC 145, 157 that that the principle in Henderson v Henderson was both a rule of public policy and an application of the law of res judicata.
He expressed his own view of the relationship between the two at p 31 as follows: Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them.
The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.
This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.
The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.
I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.
It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.
That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.
The rest of the Committee, apart from Lord Millett, agreed in terms with Lord Binghams speech on this issue.
Lord Millett agreed in substance in a concurring speech.
He dealt with the relationship between res judicata and the Henderson v Henderson principle at pp 58H 59B as follows: Later decisions have doubted the correctness of treating the principle as an application of the doctrine of res judicata, while describing it as an extension of the doctrine or analogous to it.
In Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257, Sir Thomas Bingham MR explained that it is not based on the doctrine in a narrow sense, nor on the strict doctrines of issue or cause of action estoppel.
As May LJ observed in Manson v Vooght [1999] BPIR 376, 387, it is not concerned with cases where a court has decided the matter, but rather cases where the court has not decided the matter.
But these various defences are all designed to serve the same purpose: to bring finality to litigation and avoid the oppression of subjecting a defendant unnecessarily to successive actions.
While the exact relationship between the principle expounded by Sir James Wigram V C and the defences of res judicata and cause of action and issue estoppel may be obscure, I am inclined to regard it as primarily an ancillary and salutary principle necessary to protect the integrity of those defences and prevent them from being deliberately or inadvertently circumvented.
It was clearly not the view of Lord Millett in Johnson v Gore Wood that because the principle in Henderson v Henderson was concerned with abuse of process it could not also be part of the law of res judicata.
Nor is there anything to support that idea in the speech of Lord Bingham.
The focus in Johnson v Gore Wood was inevitably on abuse of process because the parties to the two actions were different, and neither issue estoppel nor cause of action estoppel could therefore run (Mr Johnsons counsel conceded that he and his company were privies, but Lord Millett seems to have doubted the correctness of the concession at p 60D E, and so do I).
Res judicata and abuse of process are juridically very different.
Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the courts procedural powers.
In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation.
That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where the conduct is not abusive.
As Lord Keith put it in Arnold v National Westminster Bank at p 110G, estoppel per rem judicatam, whether cause of action estoppel, or issue estoppel is essentially concerned with preventing abuse of process.
It may be said that if this is the principle it should apply equally to the one area hitherto regarded as absolute, namely cases of cause of action estoppel where it is sought to reargue a point which was raised and rejected on the earlier occasion.
But this point was addressed in Arnold, and to my mind the distinction made by Lord Keith remains a compelling one.
Where the existence or non existence of a cause of action has been decided in earlier proceedings, to allow a direct challenge to the outcome, even in changed circumstances and with material not available before, offends the core policy against the re litigation of identical claims.
Application to the present case
If this case is to be determined according to these general principles of the modern law, there can, I think, be little doubt about the answer.
The Court of Appeal decided, before the result of the opposition proceedings in the EPO, that in its unamended form the patent was valid and infringed.
It follows that Zodiac are estopped from asserting on the enquiry as to damages that in its unamended form the patent was invalid or was not infringed.
This estoppel is a true cause of action estoppel.
The Court of Appeal has determined in favour of Virgin issues essential to the existence of the cause of action for infringement of the unamended patent, which are the basis of the claim for damages.
However, the point which Zodiac seek to make on the enquiry is that the unamended patent has been retrospectively amended.
It no longer exists, and is deemed never to have existed, in the form on which these issues were adjudicated by the Court of Appeal.
Zodiacs reliance on the retrospective amendment is a new point which was not raised before.
It could not have been raised before, because the decision of the TBA retrospectively amending the patent was made after the order giving effect to the judgment of the Court of Appeal.
There are two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages.
One is that they are relying on the more limited terms of a different patent which, by virtue of the decision of the TBA, must at the time of the enquiry be treated as the only one that has ever existed.
The other is that Zodiac are not seeking to reopen the question of validity determined by the Court of Appeal.
The invalidity of the patent may be the reason why the TBA amended the patent, but the defendant is relying on the mere fact of amendment, not on the reasons why it happened.
The patent cases
How then did the Court of Appeal come to a different conclusion? The answer is that they followed a line of cases culminating in the decision of the Court of Appeal in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, which had held that a patentee whose patent has been held to be valid is entitled to claim damages for its infringement without regard to a subsequent revocation of the patent.
This has been held to be so, even though it has always been the law in England (as it is under the European Patent Convention) that the revocation of a patent for invalidity relates back to the date of grant: see, currently, section 75(3) of the Patents Act 1977.
The decisions which support the Court of Appeals conclusion are Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin itself.
The facts in Poulton were that the court had held the patent to be valid and infringed and had ordered an enquiry as to damages.
An attempt to have the patent declared invalid for prior use had been rejected.
After the judgment, the defendant found a further and better instance of prior use on the basis of which he successfully petitioned for the revocation of the patent.
He then sought to rely on the revocation on the enquiry as to damages.
The question presently before this court was not argued.
The defendants case was that the revocation of the patent was a decision in rem which itself gave rise to an estoppel against the world.
There was therefore, it was said, an estoppel against an estoppel.
Parker J rejected this argument.
The Court of Appeal (Vaughan Williams, Fletcher Moulton and Buckley LJJ) also rejected it in an extempore judgment delivered on a Friday afternoon after an argument in which no authority was cited on the ambit of the law of res judicata other than the Duchess of Kingstons Case (1776) 20 St Tr 355.
Vaughan Williams LJ appears to have thought that the revocation of the patent operated only from the date it occurred, but he held that it did not matter whether the patent was valid or not, nor whether the revocation was retrospective.
This was because the Court having declared it to be valid, it must be treated as valid as between the same parties notwithstanding its subsequent revocation.
Fletcher Moulton LJ considered that it was enough that the patent had been declared to be a valid patent at the time of the judgment.
That was determinative on an enquiry as to damages in the same proceedings.
Buckley LJ did not feel so clear on this point as my learned brothers, but considered that their view could be justified on the footing that the enquiry as to damages was no more than the working out of the effect of the judgment on liability.
The decision may have been in accord with the law of res judicata as it was then thought to be, before the implications of Henderson v Henderson were appreciated or the doctrine had acquired its modern flexibility.
What is clear is that without special facts the grounds on which Poulton was decided cannot be reconciled with the modern law on the subject.
The real origin of the principle applied by the Court of Appeal in the present case was a much more recent case, namely the decision of the Court of Appeal in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708.
The patent in this case related to a system for laying flexible flowlines in the seabed in subsea oil installations.
The facts were substantially the same as in Poulton.
The court had rejected a challenge to the validity of the patent based on prior art, and had held that the only infringement alleged in the pleadings (relating to the performance of a contract for the Magnus Swift field) was made out.
The court gave judgment for the patentee, ordering an enquiry as to damages.
In accordance with the ordinary practice, the enquiry as to damages extended not just to the Magnus Swift field infringement but to fourteen other similar infringements.
While it was in progress a third party, relying upon different prior art in parallel proceedings, succeeded in having the patent revoked.
The majority of the Court of Appeal (Peter Gibson LJ and Sir Martin Nourse) held that they were bound by Poulton and that the defendant was estopped.
They rejected the submission that it was no longer good law, for two reasons.
The first was based on Lord Keiths distinction in Arnold between cause of action estoppel and issue estoppel.
The second was that unless the defendant was estopped, the patentee would be harassed by two successive proceedings in which he would be required to defend the validity of the patent.
Neuberger LJ dissented.
He distinguished between strict cause of action estoppel (i.e. where the same issue had been decided in the earlier proceedings) and abuse of process cause of action estoppel (where the unsuccessful party wishes to reargue the point by reference to new material or a new argument not put before the court before).
Neuberger LJ assigned the Magnus Swift field infringement to the second category of cause of action estoppel, because the defendant was seeking to rely not on the prior art which had led to the revocation of the patent in the parallel proceedings, but on the mere fact of revocation, which was a decision in rem, and decisive irrespective of the ground for it.
He regarded the fourteen other alleged infringements raised only on the enquiry as being governed by the principles relating to issue estoppel.
He considered that the estoppel was not absolute in either case.
In my opinion the majority in Coflexip were mistaken on both of the points which they made, for substantially the reasons given by Neuberger LJ in his dissenting judgment.
The point can best be tested by reference to the Magnus Swift field infringement, which unquestionably turned on cause of action estoppel.
I would for my part leave open the question whether the same applied to the other fourteen infringements, which has given rise to a certain amount of controversy since: see Hormel Foods Corp v Antilles Landscape Investments NV [2005] RPC 657, Unilin Beheer BV v Berry Floor NV [2007] FSR 635 at paras 47 48.
The essential fallacy in the majoritys reasoning in Coflexip lay in their view that Lord Keith in Arnold had held that cause of action estoppel was always absolute.
He did not.
He held that it was absolute only in relation to points actually decided on the earlier occasion.
Because of this mistake, the majority had no regard to the fact that the consequences of the patents revocation had not been decided on the earlier occasion, and could not have been because it had not happened.
As for the policy considerations, they were also wrong, as it seems to me, to suppose that the court would be rehearing on the enquiry the question of validity decided by the judgment on liability.
The revocation of the patent was an act in rem which determined the status of the patent as against the world.
It had been revoked by the authority which had granted it and must be treated as never having existed.
Although the patent had been revoked on the ground of invalidity, the issue which the defendant wished to raise on the enquiry was not invalidity but revocation.
The revocation would be decisive regardless of the ground on which it was ordered.
In Unilin Beheer BV v Berry Floor NV [2007] FSR 635 the Court of Appeal
reached the same conclusion.
The facts were in some ways an even more exacting test of the principle, because the policy considerations invoked in Coflexip could not possibly have justified the outcome in Unilin.
This was because, as in the present case, the patent was retrospectively amended by the EPO to limit its scope to valid claims, after the English court had given judgment in favour of the patentee.
The vexation associated with the pursuit of two proceedings challenging the validity of the patent was an inescapable feature of the statutory scheme which conferred concurrent jurisdiction on questions of validity on both the English court and the EPO.
It can hardly be said that the vexation inherent in there being two perfectly proper proceedings concurrently is made more tolerable by ignoring the outcome of one of them.
It was common ground in Unilin that the court was bound by Coflexip, and there was therefore only limited consideration of the merits of the principle decided in that case.
The argument was directed to a different issue, namely whether the law stated in Coflexip was inconsistent with the scheme of the legislation relating to European patents, and therefore impliedly excluded where such a patent was revoked or amended by the EPO.
In his judgment in Unilin, Jacob LJ said that he was not sorry to reach the conclusion that he did: (i) it was conducive to certainty because it enabled the parties to get a final decision on validity from an English court without waiting to find out who has won until the slowest horse in the race gets there; and (ii) any injunction against future infringements will be discharged if the EPO subsequently revokes or amends the patent.
I have to say that I do not find either of these considerations convincing.
Jacob LJ plainly assumed that the slowest horse would usually be the EPO.
That assumption was not necessarily correct, especially in the light of the availability of at least one and potentially two tiers of appeal in England.
The truth is that the effect of the decision in Coflexip is not to introduce certainty in this field but to make the outcome dependent on the wholly adventitious question which of two concurrently competent jurisdictions completes its procedures first.
In the present case, the Court of Appeal may have reached a different conclusion if the Opposition Division of the EPO had reached the conclusion subsequently reached by the TBA.
Permission to appeal the decision on validity to this court might well have been granted if the eruption of the Icelandic volcano had not deferred the decision of the TBA to a date after the application for permission had been resolved.
The fate of 49m must surely depend on more substantial and predictable considerations than these.
As for the discharge of any injunction restraining future infringements, this was a point also made by the majority in Coflexip (see para 137), but to my mind it simply underlines the irrationality of their conclusion.
Logically, if the defendant is bound by the courts declaration that the patent is valid although it has been revoked or amended, he should be equally bound whether the remedy sought is damages or an injunction.
The distinction between past and future infringements makes no sense in a case where a single cause of action embraces both and the revocation or amendment is by statute effective ab initio.
In my opinion Poulton is no longer good law, and Coflexip was wrongly decided.
It follows that Unilin was also wrongly decided because it proceeded on the premise of the law stated in Coflexip.
The point with which Unilin was actually concerned, namely whether there is a different rule for European patents arising from the scheme of the relevant legislation, has been argued before us but it does not arise, because the anomaly in English law to which that point is directed does not exist.
Accordingly, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and the patent is subsequently retrospectively revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages.
Once the enquiry is concluded, different considerations will arise.
There will then be a final judgment for a liquidated sum.
At common law, that judgment could be challenged on the ground that the patent had later been revoked or amended only by way of appeal, and then only if an appeal is still open.
I doubt whether an implied statutory right to reopen it could be derived from the scheme of the Patents Act 1977, but that is a question which will have to await a case in which it arises.
Disposal
I would allow the appeal and declare that Zodiac are entitled to rely on the amendment of Virgins patent in answer to their claim for damages on the enquiry.
The Glaxo v Genentech guidelines
I add a brief observation on the procedural implications.
If I had concluded that the defendant was estopped from relying on the revocation or amendment of the patent once the court had adjudged it to be valid, that would have had important implications for the question whether English proceedings should be stayed pending a decision in concurrent opposition proceedings in the EPO.
On that footing, it would in my opinion have been essential to stay the English proceedings so that the decision of the EPO would not be rendered nugatory by the operation of the law of res judicata.
On that hypothesis, it would have been difficult to defend the guidance given by the Court of Appeal in Glaxo Group Ltd v Genentech Inc [2008] Bus LR 888 to the effect that the English court should normally refuse a stay of its own proceedings if it would be likely to resolve the question of validity significantly earlier.
The effect of that guidance is to put more litigants in the impossible situation in which successive decisions of the Court of Appeal placed the parties in this case.
As it is, the problem has not gone away, even on the footing that those decisions are overruled.
In the first place, a similar problem may well arise if the patent is revoked by the EPO after a judgment has been given for a liquidated sum.
Second, that problem is aggravated by the fact that a decision of the English court on validity is directly effective only in the United Kingdom, whereas the EPOs decision, being the decision of the authority which granted the patent, is directly effective in every country for which the patent was granted.
Third, even if the EPO opposition proceedings are concluded in time to affect the English proceedings, the uncertainty and waste of costs involved do little credit to our procedures.
This is not a suitable occasion, nor is the Supreme Court the appropriate tribunal to review the guidelines, but I think that they should be re examined by the Patents Court and the Court of Appeal.
LORD NEUBERGER (with whom Lady Hale, Lord Clarke and Lord Carnwath agree)
The factual background
The facts of this case are fully set out by Lord Sumption in paras 8 15 of his judgment, but it is worth summarising them.
Virgin was the registered proprietor of a European patent (UK) (the Patent) granted out of the European Patent Office (EPO).
They began infringement proceedings (the English proceedings) in the High Court against Zodiac, who were manufacturing and selling an allegedly infringing product.
Zodiac denied infringement, and counterclaimed for revocation of the Patent on the grounds, inter alia, that it was invalid in the light of prior article Those proceedings resulted in a hearing in front of the Court of Appeal, which (i) decided that the Patent was valid, (ii) declared that Zodiacs product infringed it, and (iii) ordered an assessment of damages (the assessment) [2009] EWCA Civ 1062 and 1513.
Meanwhile, opposition proceedings in the EPO had been initiated by Zodiac in respect of the Patent.
Following the decision of the Court of Appeal in the English proceedings, the opposition proceedings came before the Technical Board of Appeal (TBA).
During the course of the hearing before the TBA, Virgin abandoned the claims which Zodiac had been held to infringe, and the Patent was amended accordingly.
Virgin then contended that Zodiacs product infringed one or more of the surviving claims of the Patent, as amended, but Floyd J concluded that the amendment limited the scope of the Patent so as to render Zodiacs product no longer infringing [2012] EWHC 2153 (Pat).
It is common ground that the consequence of this is that the Patent is to be treated as limited in its scope pursuant to the amendment, with retrospective effect from its priority date.
Virgin contend that, because the English proceedings have been finally determined in their favour on validity and infringement, it is not now open to Zodiac to rely in the assessment on the subsequent amendment of the Patent, by virtue of res judicata.
In other words, Virgins contention is that the assessment should proceed on the basis that Zodiac are precluded from contending that they are not liable for any damages for infringement in the light of the amendment of the Patent.
If that contention is right, then it seems likely that Virgin will recover damages probably running to tens of millions of pounds, whereas if it is wrong, they will presumably recover nothing.
Res judicata and the authorities on the point in this appeal
relation to res judicata, and I agree with his exposition.
Virgins contention is that res judicata compels the conclusion that, where a patent has been held by a court to be valid and infringed as between the patentee and an alleged infringer, but it is subsequently revoked (or amended so that the alleged infringer would no longer be held to infringe), the patentee is nonetheless entitled to damages from the alleged infringer as if the patent had not been revoked (or relevantly amended).
This contention receives support from three previous decisions of the Court of Appeal, which were followed by the Court of Appeal in this case.
Those decisions are Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708, and Unilin Beheer BV v Berry Floor NV [2007] FSR 635.
Poulton and Coflexip both involved an assessment of damages following a hearing at which the alleged infringer had unsuccessfully challenged the patentee on the validity and infringement of a purely British patent, in the English courts, but, before the assessment of damages had taken place, the patent had been revoked in other proceedings which were also in the English courts.
The present case, like Unilin, is concerned with a European patent, in respect of which issues of validity and infringement have been determined by the English courts, but, before the assessment of damages has taken place, validity is being, or has been, considered by the EPO in opposition proceedings.
In paras 17 26 of his judgment, Lord Sumption summarises the law in
In Poulton [1908] 2 Ch 430, 437, Vaughan Williams LJ explained that the judgment obtained by the patentee made the question whether there had been an infringement of a patent then valid res judicata as between the parties to the action, and operated as a complete estoppel between them.
On the following page, he said that the subsequent order of revocation could not affect the already existing estoppel, by virtue of which the defendants were prevented from denying that which had been finally determined to be the truth of the matter as between [the] parties involved in [the] action, and he therefore concluded that the alleged infringer could not rely on the subsequent revocation of the patent on the assessment of damages.
At first sight, one can see the force of that reasoning.
It is well established that the fact that an identical issue is determined differently in two different sets of proceedings is irrelevant to the rights of the parties to each set of proceedings inter se.
Thus, in the normal run of things, where A has lost against B on an issue in one case, it is simply irrelevant to As legal obligations and rights as against B if C subsequently defeats B on the very same issue (except it may help A to obtain permission to appeal out of time see Arnold v National Westminster Bank plc [1991] 2 AC 93, 109F 110C but that is rather a different matter).
That is because the determination of most issues in litigation can only bind the parties to the litigation (and their privies).
The point is starkly illustrated by In re Waring, Westminster Bank v Burton Butler [1948] Ch 221.
In that case, Jenkins J held that (i) an annuitant under a will was bound by a decision of the Court of Appeal in earlier litigation, where the will trustees and he were parties, as to the effect of tax legislation on his rights, but (ii) another annuitant was entitled to rely on a subsequent, more favourable, decision of the House of Lords on the point in a different case, because he had not been a party to the earlier litigation.
Whilst Jenkins J acknowledged that the result may appear to be anomalous, in reality it was a clear and principled application of the fundamental rule.
Discussion
In my view, however, the same cannot be said of the reasoning of the Court of Appeal in Poulton [1908] 2 Ch 430, and in the three cases which followed it (including this case).
It seems to me that the mistake of the courts in those four decisions was attributable to the fact that they did not have appropriate regard to the statutory provisions relating to patents, which reflect the nature of a patent and the effect of its revocation.
They therefore treated the subsequent decision to revoke the patent as no more than a later determination by another court in other proceedings between different parties.
The essential point is that, although the decision to revoke the patent was indeed made in proceedings involving different parties, the effect of the Patents Act 1977 (and its statutory predecessors) (the Patents Act) and the European Patent Convention (the EPC) whose relevant provisions are set out in paras 3 7 of Lord Sumptions judgment, was that the revocation did not just have effect between those parties.
The revocation of the patent deprived the patentee of the rights which the patent had bestowed on him as against the world; furthermore, it did so retrospectively.
In other words, the effect of the revocation was that everyone was entitled to conduct their affairs as if the patent had never existed.
The failure to consider the nature of a patent and the effect of its revocation led the Court of Appeal into error, as it failed to take into account the fact that the issue of res judicata was being raised by the (former) patentee in connection with a particular statutory right.
In this connection, it is worth referring to an observation of Lord Bridge in Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273, 289C D: In relation to adjudications subject to a comprehensive self contained statutory code, the presumption must be that where the statute has created a specific jurisdiction for the determination of any issue which establishes the existence of a legal right, the principle of res judicata applies to give finality to that determination unless an intention to exclude the principle can properly be inferred as a matter of construction of the relevant statutory provisions.
I do not suggest that the Patents Act or the EPC created a specific jurisdiction, but the observation emphasises that an issue of res judicata in connection with a patent case cannot be considered correctly without proper regard to the effect of that Act and the EPC.
In Poulton [1908] 2 Ch 430 and the cases which followed it, the Court of Appeal failed to focus on the point that the effect of the Patents Act was that the revocation meant that, as against the world, the patentee had never had a valid patent.
They wrongly concluded that cause of action estoppel applied so as to preclude the alleged infringer from relying on the revocation of the patent in the assessment, because they failed correctly to formulate the point which the alleged infringer wished to take on the assessment.
The alleged infringer was bound by strict cause of action estoppel from running any argument that it had run on validity or infringement, but there was no such strict rule to prevent it from contending that the patent had, as a matter of fact, been revoked.
Not merely was that an argument which had not been run in the earlier proceedings: it was an argument which, ex hypothesi, could not have been run in the earlier proceedings.
Accordingly, following the reasoning in Arnold, it was a fact which the court could at least have contemplated permitting the alleged infringer to rely on in the assessment.
In my view, however, it goes further than that.
Absent special factors, principle, fairness and commercial sense support the view that the fact that the patent in issue had been revoked was a point which the alleged infringer should have been entitled to rely on in the assessment.
It was a new, centrally important, uncontroversial fact, and to deny the alleged infringer the ability to raise it would be to give effect to a monopoly right which the patentee never should have had.
Further, while not enough of a point on its own, it can fairly be said that, far from increasing litigation, permitting Zodiac to rely on the amendment of the Patent, would serve to put an end to the assessment.
On the facts of this case, Zodiac are not seeking to challenge any of the conclusions reached by the Court of Appeal in the English proceedings.
They accept that they cannot say that the Patent, in its unamended form, is susceptible to attack on the grounds raised in the English proceedings, or that Zodiacs product did not infringe the Patent in that form, or that Virgin is not entitled to an assessment of damages.
All that Zodiac are seeking to do is to contend that the damages on the assessment should be assessed at nil (or, perhaps, a nominal figure), because, as the Patent has been amended in the course of the EPO proceedings, it is now retrospectively to be treated as amended, so that Zodiacs product does not infringe, and so Virgin have suffered no damage.
Further, Zodiac are not seeking to relitigate or raise a point which was determined by the Court of Appeal in the English proceedings.
Indeed, they could not have raised the point that the Patent had been amended during those proceedings, for the very good reason that it had not been revoked.
Zodiac are simply seeking to rely on a highly relevant event which occurred after the determination of those proceedings, and which self evidently would have a very significant effect on the assessment.
It is true that the grounds upon which the TBA concluded that the Patent in
its original form had to be amended were grounds on which Zodiac had unsuccessfully relied before the Court of Appeal, namely invalidity over the prior article However, Zodiac are not seeking to rely on those grounds in the assessment: they are simply seeking to rely on the fact that the Patent has been amended.
The position would be the same if validity had not been in issue in the English proceedings.
The purpose of res judicata is not to punish a party for failing to take a point, or for failing to take a point properly, any more than to punish a party because the court which tried its case may have gone wrong.
It is, as explained above, to support the good administration of justice, in the public interest in general and in the parties interest in particular.
Assessed from either perspective, it seems to me wrong to prevent a person who has been held to infringe a patent from invoking in proceedings thereafter a subsequent revocation or amendment of the patent, in order to avoid liability for infringement (at least in the absence of exceptional facts).
The inappropriateness of relying, as the Court of Appeal did, on the approach in the normal run of cases is highlighted by the fact that the decision between the will trustees and one annuitant in Waring [1948] Ch 221 was not binding as between the will trustees and another annuitant.
On the other hand, the decision to revoke the patent in a case such as this and Poulton [1908] 2 Ch 430 can be relied on by everyone, even though the decision may have been reached in proceedings in which only one person and the patentee (or its privy) was involved.
The point may also be made by considering a hypothetical case, instanced in argument by Lord Sumption, where, after the Court of Appeal found for Virgin on validity and infringement, another court decided that Xs product, which was identical to that of Zodiac, did not infringe the Patent.
That would not have been a decision which would have assisted Zodiac in any way, as the position of Zodiac and X would have been analogous to that of the two annuitants in Waring.
A decision on infringement is in personam, so it only binds the parties to the action (and their privies), whereas a decision that a patent is invalid (or must be amended) is in rem, so it binds the world, just as the patent, so long as it is in force, can be enforced against the world.
The policy of the Patents Act is that valid patents are enforceable against the world, even if an infringer is honestly and reasonably unaware of the existence of the patent.
Equally, if a patent is revoked (or amended), the policy is that the revocation (or amendment) takes effect retrospectively, and that this can be relied on by the world.
I find it hard to see why someone who has failed in an attack on the patent should not be entitled, like anyone else, to rely on the points that the patent has been revoked (or amended), and that the revocation (or amendment) is retrospective in its effect, whether in legal proceedings or in another context.
This conclusion is supported by another point.
As Virgin accept, any injunction restraining Zodiac from infringing the Patent granted at the end of the English proceedings either became ineffective or would have to be discharged, following the amendment of the Patent in the EPO proceedings.
In my view, there is a logical difficulty with the notion that Zodiac cannot rely on the fact that the Patent was retrospectively amended when it comes to the assessment, if they can rely on the amendment in order to discharge or to ignore the injunction.
It is true that the injunction is prospective and the assessment retrospective, but the amendment is both prospective and retrospective in its effect.
Fletcher Moulton LJ rightly said in Poulton [1908] 2 Ch 430, 439, that [t]he order of revocation is in the nature of a judgment in rem which terminates the res, and he was also right when he added that [i]t has no further effect so far as estoppel is concerned.
However, where he went wrong was to conclude that this meant that the fact and consequences of the revocation could not be relied on by a person who had previously been held to be an infringer, for instance when damages come to be assessed.
He acknowledged that [a]s regards the world at large, every one is bound by the fact that the patent ceased to exist, and, as a matter of legal principle and consistency, as well as a matter of common sense and fairness, I consider that every one includes a party who has previously been held to infringe it.
So far as the interests of patentees are concerned, it is inherent in the grant of a patent under the Patents Act that, however often its validity may be unsuccessfully challenged in earlier litigation, it may none the less be revoked (or amended), and with retrospective effect, at some point by a court or by the EPO.
A patentee therefore must appreciate that it can never be sure that a decision of a court that the patent is valid will settle the question for good.
It is true that an unsuccessful challenge to the validity of a patent by a particular person will normally give rise to a res judicata to prevent that person raising another challenge, but, as is common ground, it would not enable the patentee to rely on the patent against that person once the patent had been revoked, at least in respect of what would be infringements after its revocation.
Other matters
When seeking to justify a conclusion that, though it applies, res judicata does not preclude a point being taken, it can be dangerous to invoke the observation of Lord Keith in Arnold [1991] 2 AC 93, 109B, that estoppel is intended to work justice between the parties, because it is only too easy to fall back on it as an excuse for an unprincipled departure from, or an unprincipled exception to, the rule.
However, in a case where the rule has been relied on, I consider that it is helpful for a court which is inclined to accept the argument that it does not prevent a point being taken, to consider whether that outcome would work justice between the parties.
In this case, as in cases such as Poulton, it seems to me that it would be positively unjust, as between the parties, for a (former) patentee to recover damages for infringement of a patent after the patent has been irrevocably and retrospectively revoked (or, as in this case, relevantly amended).
And I can see no public interest in such an outcome.
There is no question of extra further litigation, as it is undeniable that the Patent has been revoked (or amended); indeed, further litigation will be avoided as the assessment need not proceed.
In the course of his submissions on behalf of Virgin, Mr Crow QC relied on the doctrine of merger, viz the principle whereby whatever rights a claimant has against a defendant are treated as merged into the order made in the proceedings.
I do not think that that aspect takes the point at issue on this appeal any further.
Mr Crow realistically did not suggest that it would cause any problems if we were to overturn a decision which had stood for over a hundred years and had been followed and applied in the last ten years.
We therefore do not have to address the problem which was faced by the House of Lords in Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70, when they decided to overturn an early twentieth century decision of the Court of Appeal which had stood for around a century.
We were taken to some articles on the attitude of the courts of Germany, France and the Netherlands to the point raised in these proceedings.
I am not confident that we have a full and accurate picture of the position in those three jurisdictions, but it seems clear that, to put it at its very lowest, there is not a consistent approach which could be said to reflect Virgins contention in this case.
Indeed, my strong impression is that Zodiacs contention is closer to the practice in those three countries.
However, as Mr Crow submits, that is of little weight, as this is the sort of issue which has to be resolved by reference to domestic law, and is not the subject of any attempt to harmonise practices across the EPC territories.
As to the temporal limit of Zodiacs right to rely on the amendment of the Patent in the assessment of damages, I have no doubt that they could raise the amendment until judgment for the assessed damages had been drawn up, or passed and entered to use the time honoured legal expression.
While the court would, I think, have power to refuse to do so, I would expect it normally to agree to reopen such a judgment if any revocation or amendment was raised before the assessed damages had been paid.
If the Patent had been amended after the order had been formally passed and entered, but before the damages had been paid, I suspect that the only course open to Zodiac would have been to seek to appeal against the award of damages, relying on the amendment as new evidence, as strict cause of action estoppel (indeed merger) would apply.
Once the damages had been paid, it seems to me that an alleged infringer would have to try and raise a restitutionary claim if it wished to recover the damages on the ground that the patent had been revoked or varied.
I express no view on the strength of such a claim, which may well be highly dependent on the facts of the particular case.
This conclusion renders it unnecessary to consider whether, if Poulton was rightly decided, it would none the less be open to Zodiac to rely on the amendment of the Patent in the assessment, because the amendment was effected in the EPO rather than in a domestic court.
I find it slightly difficult to consider that hypothetical question, not merely because I would be proceeding on an artificial hypothesis, but also because my reasons for concluding that Poulton was wrongly decided in relation to a UK patent apply a fortiori to a European patent.
Conclusion
Genentech Inc (Practice Note) [2008] Bus LR 888.
Accordingly, for these reasons, which follow those of Lord Sumption, and with whose reasoning I agree, I would allow Zodiacs appeal, and overrule the decisions in Poulton and Coflexip.
It also follows that I disagree with the reasoning of the Court of Appeal in Unilin.
I also agree with what Lord Sumption says in para 38 about the guidance given by the Court of Appeal in Glaxo Group Ltd v
| UK-Abs | Virgin obtained judgment from the English Court of Appeal (the CA) against Zodiac for damages to be assessed for the infringement of certain claims (the relevant claims) in a European Patent.
The CA found their patent to have been valid and infringed by Zodiac.
Subsequently, the Technical Board of Appeal (the TBA) of the European Patent Office (the EPO) ruled that that the relevant claims were invalid because they had been anticipated in prior art, and retrospectively amended the patent so as to remove, with effect from the date of grant, all the relevant claims.
Virgin submitted that it was nevertheless entitled to recover damages for infringement because the CAs conclusions that the patent (including the relevant claims) was valid and that the relevant claims were infringed by Zodiac were res judicata as between it and Zodiac on the subsequent assessment of damages, and that it was not open to Zodiac to reply on the TBAs amendment to the patent, as this would be inconsistent with the orders made by the CA.
That argument had succeeded before the CA in similar circumstances in previous cases, and the CA had followed those decisions in the present case.
Zodiacs case is that the unamended patent has been retrospectively amended, and that the relevant claims therefore no longer exist, and are deemed never to have existed.
It submits that no issue of res judicata arises because that was not the situation considered by the CA.
The Supreme Court unanimously allows the appeal and declares that Zodiac are entitled to rely on the amendment of patent in answer to Virgins claim for damages on the enquiry.
Lord Sumption gives the lead judgment, Lord Neuberger gives a concurring judgment, and the other members of the Court agree with both judgments.
After a review of the law of res judicata [17 26], the Court gives two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages.
One is that it is relying on the more limited terms of a different patent which, by virtue of the TBAs decision, must at the time of the enquiry be treated as the one that existed at the relevant time, whereas the unamended patent, relied on by Virgin, must be treated as if it had never existed.
The second reason is that Zodiac is not seeking to reopen the validity of the relevant claims, which was one of the questions determined by the CA.
The invalidity of those claims may be the reason the TBA amended the patent, but Zodiac is relying on the mere fact of amendment, not the reasons why it happened [27, 53, 54].
The CA reached a different conclusion because it followed a line of cases holding that a patentee, whose patent (in proceedings against a particular defendant) is found to be valid and infringed, is entitled to claim damages from the defendant for the infringement without regard to a subsequent revocation of the patent, even though as a matter of English law the revocation of a patent for invalidity relates back to the date of grant [28, 48].
The Court holds that this line of cases was wrongly decided.
Their major fallacy is the assumption that cause of action estoppel was absolute generally rather than absolute only as regards points actually determined by the earlier decision.
Accordingly, the decisions in those cases had no regard to the fact that the consequences of the patents subsequent revocation had not been, and could not have been, determined, or even taken into account, in the earlier decision, because it had not happened by the time of that decision.
They were also wrong to suppose that, by taking into account the subsequent revocation, a court would be rehearing the question of validity decided by the judgment on liability.
The revocation was a decision in rem determining the status of the patent as against the world [32, 48].
It had been revoked by the authority which had granted it and it must be treated as never having existed.
The issue raised on the enquiry was not invalidity but revocation [32].
Accordingly, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and that patent is subsequently revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages [35].
The Supreme Court also proposed that the current procedural guidelines laid down by the CA, which propose that the English court should normally refuse to stay its own proceedings if it would be likely to resolve the question of validity significantly earlier than the EPO, should be re examined [38, 69].
|
The first Star Wars film (later renamed Star Wars Episode IV A New Hope in order to provide for prequels as well as sequels) was released in the United States in 1977.
It was an enormous commercial success.
It won an Oscar for best costume design.
This appeal is concerned with intellectual property rights in various artefacts made for use in the film.
The most important of these was the Imperial Stormtrooper helmet to which the trial judge (Mann J) referred in his judgment ([2008] EWHC 1878 (Ch), [2009] FSR 103, paras [2] and [121]): One of the most abiding images in the film was that of the Imperial Stormtroopers.
These were soldiers clad in white armour, including a white helmet which left no part of the face uncovered.
The purpose of the helmet was that it was to be worn as an item of costume in a film, to identify a character, but in addition to portray something about that character its allegiance, force, menace, purpose and, to some extent, probably its anonymity.
It was a mixture of costume and prop.
The parties are agreed that for the purposes of this final appeal the helmet can be taken as the paradigm case that will be decisive of the outcome.
The facts are set out in the judges clear and thorough judgment.
For present purposes a brief summary will suffice.
The films story line and characters were conceived by Mr George Lucas.
Between 1974 and 1976 Mr Lucass concept of the Imperial Stormtroopers as threatening characters in fascist white armoured suits was given visual expression in drawings and paintings by an artist, Mr Ralph McQuarrie, and three dimensional form by Mr Nick Pemberton (a freelance scenic artist and prop maker) and Mr Andrew Ainsworth (who is skilled in vacuum moulding in plastic).
Mr Pemberton made a clay model of the helmet, which was adapted several times until Mr Lucas was happy with it.
Mr Ainsworth produced several prototype vacuum moulded helmets.
Once Mr Lucas had approved the final version Mr Ainsworth made 50 helmets for use in the film.
These events all took place in England.
Although Mr Lucas and his companies are based in California he had come to live in England while the film was made at Elstree (there was also filming on location in Tunisia).
The first appellant is a Californian corporation owned by Mr Lucas.
The second appellant is an English company owned by Mr Lucas.
The third appellant is a Californian corporation responsible for the groups licensing activities; it is wholly owned by the first appellant.
Between them these three companies own copyrights in the artistic works created for the Star Wars films, and they can be referred to generally as Lucasfilm.
Apart from the huge commercial success of the Star Wars films, Lucasfilm has built up a successful licensing business which includes licensing models of Imperial Stormtroopers and their equipment.
This litigation has come about because in 2004 Mr Ainsworth, the principal respondent in this appeal, used his original tools to make versions of the Imperial Stormtrooper helmet and armour, and other artefacts that it is not necessary to detail, for sale to the public.
The second respondent is a private company owned by Mr Ainsworth but for practical purposes Mr Ainsworth can be treated as the only respondent.
Mr Ainsworth sold some of the goods that he produced (to the value of at least $8,000 but not more than $30,000) in the United States.
In 2005 Lucasfilm sued Mr Ainsworth in the United States District Court, Central District of California, and in 2006 it obtained a default judgment for $20m, $10m of which represented triple damages under the Lanham Act.
The whole judgment remains unsatisfied.
Lucasfilm also commenced proceedings in the Chancery Division of the English High Court.
The re amended particulars of claim put forward a variety of claims under English law, including infringement of copyright (paras (1) to (10) of the prayer for relief); a claim for enforcement of the United States judgment to the extent of $10m (para (11)); and claims under United States copyright law (paras (12) to (17)).
The trial occupied 17 days during April and May 2008.
In his judgment delivered on 31 July 2008 Mann J dismissed all Lucasfilms claims based on English copyright law (together with some other claims that are no longer pursued).
He held that the helmet made by Mr Ainsworth was a substantial reproduction of original work carried out by Mr McQuarrie and other persons working for Lucasfilm.
But the English copyright claims failed because the helmet was not a work of sculpture and Mr Ainsworth had defences (to a claim that he was reproducing Mr McQuarries work) under sections 51 and 52 of the Copyright Designs and Patents Act 1988 (the 1988 Act).
The judge also dismissed Mr Ainsworths counterclaim based on his own claim to copyright in the helmet.
The judge held that the United States judgment was unenforceable for want of personal jurisdiction over Mr Ainsworth and his company.
But he held that Lucasfilms United States copyright claims were justiciable in England and that Mr Ainsworth and his company had infringed those rights.
The Court of Appeal ([2009] EWCA Civ 1328, [2010] Ch 503) agreed with the judge that the United States judgment is unenforceable, and there is no further appeal on that point.
The Court of Appeal also agreed with the judge that any intellectual property rights in the helmet belong to Lucasfilm, and this Court has refused Mr Ainsworth permission to cross appeal on that point.
The issues that are open in this Court are whether the helmet was a sculpture and the defences under sections 51 and 52 of the 1988 Act (on all of which the Court of Appeal agreed with the judge) and justiciability in England of the United States copyright claims (on which the Court of Appeal disagreed with the judge).
The issues on sections 51 and 52 arise only if the helmet was a sculpture (and so an artistic work) within the meaning of the 1988 Act.
In the Court of Appeal Lucasfilm abandoned its alternative contention that the helmet qualified as an artistic work because it was a work of artistic craftsmanship.
Part I: English copyright law issues
Current statutory provisions
The Court has been taken to the full legislative history but it is better to start with the current legislation, that is the 1988 Act.
Under section 1(1)(a) copyright is a property right which subsists in original literary, dramatic, musical or artistic works.
Other works, including films, come in under section 1(1)(b) and (c).
By section 4(1) artistic work means, for copyright purposes, (a) a graphic work, photograph, sculpture or collage, irrespective of artistic quality, (b) a work of architecture being a building or a model for a building, or (c) a work of artistic craftsmanship.
By section 4(2) sculpture includes a cast or model made for purposes of sculpture.
Sections 51 and 52 are in Part I, Chapter III of the 1988 Act (acts permitted in relation to copyright works).
Chapter III contains a variety of exemptions from liability on general grounds, including fair dealing (sections 29 31) and educational, archival and other public purposes (sections 32 50).
Section 62 contains a general exemption for buildings, sculpture and works of artistic craftsmanship on permanent public display.
Section 51 (design documents and models) as amended provides as follows: (1) It is not an infringement of any copyright in a design document or model recording or embodying a design for anything other than an artistic work or a typeface to make an article to the design or to copy an article made to the design. (2) Nor is it an infringement of the copyright to issue to the public, or include in a film or communicate to the public, anything the making of which was, by virtue of subsection (1), not an infringement of that copyright. (3) In this section design means the design of any aspect of the shape or configuration (whether internal or external) of the whole or part of an article, other than surface decoration; and design document means any record of a design, whether in the form of a drawing, a written description, a photograph, data stored in a computer or otherwise.
Section 52 (effect of exploitation of design derived from artistic work) provides as follows: (1) This section applies where an artistic work has been exploited, by or with the licence of the copyright owner, by (a) making by an industrial process articles falling to be treated for the purposes of this Part as copies of the work, and (b) marketing such articles, in the United Kingdom or elsewhere. (2) After the end of the period of 25 years from the end of the calendar year in which such articles are first marketed, the work may be copied by making articles of any description, or doing anything for the purpose of making articles of any description, and anything may be done in relation to articles so made, without infringing copyright in the work. (3) Where only part of an artistic work is exploited as mentioned in subsection (1), subsection (2) applies only in relation to that part. (4) The Secretary of State may by order make provision (a) as to the circumstances in which an article, or any description of article, is to be regarded for the purposes of this section as made by an industrial process; (b) excluding from the operation of this section such articles of a primarily literary or artistic character as he thinks fit. (5) An order shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (6) In this section (a) references to articles do not include films; and (b) references to the marketing of an article are to its being sold or let for hire or offered or exposed for sale or hire.
These two sections operate so as to limit (in different ways) the influence of literary or artistic copyright on other persons freedom to make and market three dimensional objects.
Section 51 applies where the end product of a design document or model is not an artistic work.
It provides a more principled answer to the problem to which the House of Lords gave a radical and controversial solution in British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 while the Bill which became the 1988 Act was before Parliament.
Section 52 applies (subject to exceptions specified by the Secretary of State) where there is an artistic work, but that work has been exploited (with the consent of the copyright owner) by industrial production of copies to be marketed.
The Copyright (Industrial Process and Excluded Articles) (No 2) Order 1989 (SI 1989/1070) (the 1989 Order), made under section 52(4) of the 1988 Act, provides (para 2) for an article to be regarded as made by an industrial process if it is one of more than 50 articles which are to be treated as copies of a particular artistic work (and are not together a set).
The Order also provides (para 3(1)(a)) for the exclusion from section 52 of works of sculpture, other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process.
Legislative history: before the 1911 Act
These provisions (and especially sections 51 and 52) are difficult to understand without reference to their legislative history.
Unfortunately the history is itself quite complicated.
The Copyright Act 1911 (the 1911 Act) was (as Lord Bridge observed in British Leyland [1986] AC 577, 619) the first attempt to provide a comprehensive code of copyright protection.
Section 1(1) of the 1911 Act was in terms similar to those of section 1(1)(a) of the 1988 Act, (except that the words irrespective of artistic quality did not appear in the 1911 Act), and it may give the impression of embodying a well proportioned symmetrical principle providing equal protection to every form of human creativity.
Any such impression would be misleading.
When the 1911 Act was passed there had already been two centuries of legislative history, starting with the Copyright Act 1709 (the 1709 Act), and for most of that time it was the protection of printed words published literary works that was the laws principal concern.
Moreover the original legislative purpose of laws on literary copyright was the protection of the commercial interests of stationers (the early publishers) and booksellers, and the control of unlicensed (and possibly subversive) publications, rather than the vindication of the legal and moral rights of authors.
There are useful summaries of the history of English copyright law in Copinger and Skone James on Copyright, 16th ed (2010), paras 2 08 to 2 42, and Cornish, Llewelyn and Aplin, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 7th ed (2010), paras 10 01 to 10 41.
The 1709 Act protected literary works, books and other writings.
During the 18th century protection was extended (by statute) to engravings and (by a liberal interpretation of the 1709 Act) to musical and dramatic compositions.
Three dimensional works of art were brought within the scope of copyright by a statute enacted in 1798, 38 Geo III c 71, but it was very badly drafted and offered little practical protection (Lord Ellenborough said in Gahagan v Cooper (1811) 3 Camp 111, 113 that The statute seems to have been framed with a view to defeat its own object).
This Act was replaced by the Sculpture Copyright Act 1814 (the 1814 Act).
The class of protected works was described in discursive terms, starting with any new and original sculpture, or model, or copy, or cast of the human figure or human figures, or of any bust or busts, or of any part or parts of the human figure, clothed in drapery or otherwise, and continuing in broader terms, referring to any matter being subject of invention in sculpture.
The sculpture was required to bear the makers name and the date when it was made.
Paintings, drawings and photographs were not protected until the Fine Arts Copyright Act 1862 (the 1862 Act).
The 1862 Act required registration as a condition of protection.
Architectural works were not protected until the 1911 Act (which also introduced works of artistic craftsmanship into the definition of artistic work in section 35 of that Act).
The 1814 Act remained in force until the coming into force of the 1911 Act, and was until then the only statute that gave long term copyright protection to any three dimensional works.
During the 19th century the rapid expansion of mechanical mass production produced an obvious need for industrial designers and manufacturers to be protected against unfair competition by copying of their designs.
Parliament decided that protection should be provided by a new right which was (rather confusingly, as the Court of Appeal said in para [24] of its judgment) called copyright, but which differed in two respects from literary and artistic copyright.
First, the proprietor was required to register his design.
Second, the period of protection was much shorter.
Those were the essential features of the scheme introduced by the Copyright of Designs Act 1839, repealed and replaced by the Designs Act 1842.
Earlier legislation granting copyright to the design of a range of printed textiles was repealed and replaced by the new system of registration, but copyright in sculpture under the 1814 Act was preserved.
The law as to registered designs was amended by the Copyright of Designs Act 1850, was further amended and consolidated by Part III of the Patents, Designs and Trade Marks Act 1883 (the 1883 Act) and finally (as regards legislation before the 1911 Act) was further amended by the Patents and Designs Act 1907 (the 1907 Act).
Most of the detail of this history is irrelevant for present purposes.
But it is to be noted that although the periods of protection for registered designs were progressively extended, they were always much shorter than the period for literary or artistic copyright.
It is also to be noted that after an uncertain start in the early statutes, a design for a work of sculpture was excluded from the statutory definition of design (section 60 of the 1883 Act and section 93 of the 1907 Act).
Only one judicial decision on the 1814 Act calls for mention, that is Britain v Hanks Bros & Co (1902) 86 LT 765.
Wright J held that copyright protection as sculpture was available to what the report refers to as toy metal models of soldiers on horseback, or mounted yeomen.
The models were designed and made by William Britain, a partner in the plaintiff firm.
The report does not say how large the models were, but they were evidently large enough for each to have stamped on it the makers name and the date of its manufacture.
There was expert evidence, which the judge accepted, that the models were artistic productions, in that the anatomy is good, and that the modelling shows both technical knowledge and skill.
The judge seems to have regarded the case as near the borderline, but was prepared to hold that the models were entitled to protection.
The Court of Appeal observed (para [59]) that it is difficult . to take too much from this case.
A minor point in the appellants case is that that is just what the Court did (para [82]) in describing the Britain models as highly crafted models designed to appeal to the collector but which might be played with by his children.
Legislative history: the 1911 Act and afterwards
The introduction by the 1911 Act of full copyright protection for a work of artistic craftsmanship was ascribed by Lord Simon, in George Hensher Ltd v Restawile Upholstery (Lancs) Ltd [1976] AC 64, 89 91, to the influence of the Arts and Crafts movement inspired by William Morris and John Ruskin.
Lord Simons view (at p 91) was that the expression is a composite phrase which must be construed as a whole, and that view has had recent support from the High Court of Australia (Swarbrick v Burge (2007) 232 CLR 336).
Section 22 of the 1911 Act provided as follows: (1) This Act shall not apply to designs capable of being registered under the Patents and Designs Act 1907, except designs which, though capable of being so registered, are not used or intended to be used as models or patterns to be multiplied by any industrial process. (2) General rules under section 86 of the Patents and Designs Act 1907 may be made for determining the conditions under which a design shall be deemed to be used for such purposes as aforesaid.
The test for production by an industrial process was (by rule 89 of the Designs Rules 1920, and so far as now material) the same as that in the 1989 Order (mentioned in para [13] above).
The effect of the double negative in section 22(1) can be more easily understood, as Viscount Maugham observed in King Features Syndicate Inc v O & M Kleeman Ltd [1941] AC 417, 427, if it is rewritten: This Act shall apply to designs capable of being registered under [the 1907 Act], which are not used or intended to be used as models or patterns to be multiplied by any industrial process.
With that exception this Act shall not apply to designs capable of being registered under [the 1907 Act].
The main issue in that case (which was concerned with Popeye dolls derived from published comic strips enjoying artistic copyright) was the time at which the intention of use for industrial production had to be formed.
The Lords decided that the intention must have been there from the start.
The Patents and Designs Act 1919 amended the 1907 Act by substituting for the definition in section 93 of the 1907 Act a new definition of design which referred to features applied by any industrial process and did not make an express exception for a design for a sculpture.
Because of the way that section 22 of the 1911 Act was framed, this had the effect of withdrawing from works of sculpture their specially privileged position in relation to mass production of copies.
Its effect was illustrated by Pytram Ltd v Models (Leicester) Ltd [1930] 1 Ch 639.
The Boy Scouts Association commissioned a model of a wolf cubs head which was to be used to produce a permanent mould for the production of large numbers of papier mach models to be attached to the top of wooden poles.
Clauson J dismissed the plaintiffs claim to copyright in the original model.
He accepted that the model was a work of sculpture, but it was not automatically exempt from registration under the 1907 Act as amended, and it did not come within the exception in section 22(1) because (p 647) The whole point in the preparation of this model was to enable the plaintiffs to supply totem poles in large quantities.
After the second world war there was a legislative shift back again.
In 1947 the Swan Committee recommended that works of sculpture should again be excluded from registrable designs.
The Registered Designs Act 1949 provided (section 1(3) and (4)) for exclusions from registration of articles which were primarily literary or artistic in character.
Rule 26(1) of the Designs Rules 1949 (SI 1949/2368) excluded works of sculpture other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process.
This wording (now reproduced in the 1989 Order) followed section 22(1) of the 1911 Act and must be construed in line with the House of Lords decision on that section in King Features.
The 1911 Act was repealed by the Copyright Act 1956 (the 1956 Act).
Section 10 of the 1956 Act (special exception in respect of industrial designs) restated the boundaries between copyright and design right.
As amended by the Design Copyright Act 1968, section 10(3) set a 15 year limit on copyright protection for any work in respect of which a corresponding design could have been registered under the 1949 Act.
But section 10(4) made an exception for designs excluded from registration by rules made under the 1949 Act; and rule 26 of the Designs Rules 1949 has now been replicated by rule 26 of the Registered Designs Rules 1989.
The 1956 Act introduced the words irrespective of artistic quality into para (a) of its definition of artistic work in section 3(1).
This was, it seems, as a result of maps, charts and plans being reclassified by the 1956 Act as artistic rather than literary works.
The new wording sits rather uneasily with works of artistic craftsmanship in para (c) of the same definition.
In Hensher [1976] AC 64, 94, Lord Simon suggested an explanation which some may not find wholly convincing.
But it is common ground that in copyright cases the court is not concerned with passing judgment on the merits of either literary or artistic works.
The Court of Appeal drew two general conclusions from its own survey of the legislative history (which occupies paras [21] to [39] of the judgment).
The first ([40] and [41]) was that there is little or no assistance as to the meaning of sculpture in the 1988 Act to be derived from the relationship between copyright and registered design rights.
The second ([42] and [43]) is that design and artistic work are different concepts.
Apart from unregistered design right (introduced by Part III of the 1988 Act), design right statutes are concerned with features that have visual appeal.
Copyright protection depends on a work falling within a particular category specified in the 1988 Act: It does not depend upon a further analysis or identification of its design features.
The meaning of sculpture
Both the judge and the Court of Appeal undertook a full review of English and Commonwealth authority as to the meaning of sculpture.
They rightly concluded that some first instance decisions gave them no real assistance, and it is unnecessary to go into them again.
The judgments that call for discussion are (in chronological order) those of the Court of Appeal of New Zealand in Wham O Manufacturing Co v Lincoln Industries Ltd [1985] RPC 127, [1984] 1 NZLR 641; of Falconer J in Breville Europe Plc v Thorn EMI Domestic Appliances Ltd [1995] FSR 77; of Laddie J in Metix (UK) Ltd v G H Maughan (Plastics) Ltd [1997] FSR 718; and of Angel J (sitting in the Supreme Court of the Northern Territory) in Wildash v Klein (2004) 61 IPR 324.
Before discussing these four cases it is appropriate to make a further brief reference to the decision of the House of Lords in Hensher [1976] AC 64.
Since Lucasfilm is no longer contending that the helmet is a work of artistic craftsmanship it is unnecessary to make much further reference to Hensher, which Mann J discussed at some length, drawing attention to the difficulty of identifying the true principle of the decision.
The reason why that contention has been abandoned is stated (para 22(2) of the appellants printed case) to be that section 4(1)(c) of the 1988 Act is intended to comprise articles whose purpose is primarily functional, and which cannot therefore qualify as sculpture.
The relative significance of the functional and the artistic is central to this appeal.
The speeches in Hensher, difficult though they are, show a general inclination to start with the ordinary meaning of the words of the statute (see Lord Reid at p 78, Lord Morris at p 81, Viscount Dilhorne at pp 86 87, Lord Simon at p 91 and Lord Kilbrandon at p 97), however much they differed as to the application of that principle.
The same approach is called for in relation to the meaning of sculpture.
In Wham O the Court of Appeal of New Zealand was concerned with frisbees (light plastic discs used in outdoor games because of their aerodynamic qualities).
Lincoln made and marketed in New Zealand frisbees which were alleged to infringe Wham Os copyright in design drawings, wooden models, moulds and the final plastic moulded products.
The relevant parts of the Copyright Act 1962 of New Zealand were similar but not identical to those of the 1988 Act.
At first instance Moller J held that the wooden models were copyright as sculptures and that the moulds and final products were engravings.
The Court of Appeal upheld this result, while holding that the final products were not sculptures (a point left open by the judge).
Much of the judgment is taken up with reasoning leading to the rather surprising conclusion that the moulds and final products were engravings.
The finding that the wooden model of a frisbee and that alone was a sculpture seems to have been based mainly on the fact that only the model had been made by hand, and the moulds and final products had been made industrially.
Davison CJ stated ([1985] RPC 127, 157): It seems to us inappropriate to regard utilitarian objects such as plastic flying discs, manufactured as toys, by an injection moulding process, as items of sculpture for the purposes of the Copyright Act.
The Breville case was concerned with sandwich toasters.
Copyright was claimed for plaster shapes made for the production of die cast moulds of the heating plates (which were required to have the same scalloped shape as was to be impressed on the toasted sandwiches).
Falconer J held that there had been no infringement, but went on to express the view that the plaster shapes were protected by copyright.
He stated (at p 94): I do not see why the word sculpture in section 3 of the Copyright Act 1956 should not receive its ordinary dictionary meaning except in so far as the scope of the word is extended by section 48(1) which provides that sculpture includes any cast or model made for purposes of sculpture.
In reaching this conclusion he relied on the part of the Wham O decision which recognised copyright in the wooden model of a frisbee.
He also relied on the Concise Oxford Dictionarys definition of sculpture: Art of forming representations of objects etc or abstract designs in the round or in relief by chiselling stone, carving wood, modelling clay, casting metal, or similar processes; a work of sculpture.
Falconer J was a very experienced intellectual property judge but in Breville he seems to have overlooked the significance of the words for purposes of sculpture in the statute and the significance of the first word, Art, in the dictionary definition.
That was the view of the Court of Appeal (para [66]): The same [far removed from the creation of expressive form] goes for the plastic shapes considered by Falconer J in the Breville case [1995] FSR 77.
No ordinary citizen indeed no ordinary lawyer would regard a sandwich toaster or any part of it as a work of sculpture even if it did produce scalloped sandwiches.
So why should a copyright lawyer take a different view? A total or almost total emphasis on the manner of creation, as in the Breville case and Wham O case [1985] RPC 127 produces a result which offends common sense and in our view is wrong.
There must, as Mann J said, be some element of artistic expression however unsuccessful.
The point about for purposes of sculpture is underlined by some observations earlier in the judgment of the Court of Appeal (paras [49] and [50], and again at para [70]) as to the word sculpture being applicable both to a process and to a product (terms familiar to intellectual property lawyers).
Over the centuries statues and other works of art cast in metal have been produced by what is basically a three stage process: first by making a model in clay or some other malleable material; then by taking a mould from the model; and then by casting, that is, pouring molten metal into the mould to produce the work of art (followed no doubt by appropriate finishing).
Copyright protection is therefore extended (currently by section 4(2) of the 1988 Act) to a cast or model made for purposes of sculpture.
But not every product of industrial casting or moulding is sculpture.
As the Court of Appeal observed (para [50]): Casting or moulding is an industrial process commonly used where the end product is made of plastic or metal of some kind.
It is used in the production of millions of ordinary household objects, none of which would usually be described as sculptures.
A motor car is but one obvious example.
Some would have qualified for protection as registered designs so as to be excluded under section 22(1) of the 1911 Act.
But would they have qualified as sculpture?.
Metix can be taken more shortly.
It was a case in which Laddie J rightly rejected a claim to artistic copyright in moulds used for making cartridges used in conjunction with flow mixers (the judge described them as looking like double barrelled hyperdermic syringes).
Laddie J, another very experienced intellectual property judge made some general observations (at pp 721 722): The law has been bedevilled by attempts to widen out the field covered by the Copyright Acts.
It is not possible to say with precision what is and what is not sculpture, but I think Mr Meade was close to the heart of the issue.
He suggested that a sculpture is a three dimensional work made by an artists hand.
It appears to me that there is no reason why the word sculpture in the 1988 Act, should be extended far beyond the meaning which that word has to ordinary members of the public.
Mr Meades formulation as recorded by Laddie J seems to be the only suggested definition or near definition that has not attracted adverse comment from any quarter.
Wildash v Klein (2004) 61 IPR 324, like Metix, is of interest not so much for what it decides as for its discussion of general issues (including the notion of copying of part, which is not an issue here).
The case was an unfortunate dispute between two women, each of whom made craftwork depicting local wildlife for sale at markets.
Initially they cooperated but later each accused the other of copyright infringement.
The craftworks were made of wire but also (and here the summaries in the judgments below are rather sparse) glass rods, glass nuggets, copper foil and other materials.
The judge held that they were sculptures or, alternatively, works of artistic craftsmanship.
The judge cited the Court of Appeal of New Zealand in Wham O (sculpture should in some way express in three dimensional form an idea of the sculptor) and also Laddie J in Metix.
In connection with copying the judge also cited Lord Hoffmanns cryptic observation about foxes and hedgehogs in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416, 2423, describing it as an allusion to an essay written in 1953 by Sir Isaiah Berlin; in fact Sir Isaiah was alluding, as has Professor Ronald Dworkin in his latest book, Justice for Hedgehogs (2011), to a saying attributed to Archilochus in the 7th century BC , (the fox knows many things, but the hedgehog one big thing.)
The judgments of Mann J and the Court of Appeal
It was primarily from these authorities that Mann J derived what he called guidelines, not rigid requirements as to the meaning of sculpture in the 1988 Act.
These are set out in nine numbered sub paragraphs in para 118 of his judgment.
The Court of Appeal quoted this paragraph in full, [2010] Ch 503, para [54], and was generally in agreement with it.
As the guidelines are readily accessible we will not quote them again.
The first three note (as did the House of Lords in Henscher [1976] AC 64) that normal English usage is important, though not determinative.
The fourth guideline (no judgment is to be made about artistic worth) is in the text of section 4(1)(a) of the 1988 Act, and is common ground.
The Court is not to set itself up as an arbiter of artistic merit.
But it is concerned with artistic purpose (the artists hand).
The fifth guideline (not every three dimensional representation of a concept can be regarded as a sculpture) is also uncontroversial, at any rate if concept is understood as covering any idea, functional as well as artistic (Mr Bloch QC challenged it in the Court of Appeal, but it is consistent with the appellants printed case in this Court, especially paras 7 and 14).
In the courts below as in the parties written and oral submissions in this Court, the argument has centred on the right approach to three dimensional objects that have both an artistic purpose (of some sort) and a utilitarian function (of some sort).
These issues are addressed in the rest of the judges guidelines.
The appellants printed case gives some world famous examples: the caryatids which form part of the Erectheion at Athens; the Medici tombs in the sacristy of San Lorenzo in Florence; the Trevi fountain in Rome.
These seem to be rather special cases, not because of their outstanding merit but because they all have a strong architectural element, and the fact that a work of architecture is functional does not disqualify it from copyright protection.
Other artefacts mentioned in the case, such as the Ribchester helmet in the British Museum or a decorated medieval suit of armour, would come more naturally under the head of works of artistic craftsmanship, together with fine furniture, musical instruments, silverware and ceramics.
But the appellants have made clear that it is no longer part of their case that the Imperial Stormtrooper helmet was a work of artistic craftsmanship.
Instead, the appellants contend that the helmet had no practical function at all.
Their case is that it is sculpture because its purpose is wholly artistic.
Para 7 of their printed case puts it in these terms: In the present case, the question of functionality does not arise, because the articles in question have no functional purpose whatever.
The Stormtroopers helmets and armour did not exist in order to keep their wearers warm or decent or to protect them from injury in an inter planetary war.
Their sole purpose was to make a visual impression on the filmgoer.
They are therefore artistic works.
Mann J saw it differently.
He stated (para [121], and here we are picking up the quotation in the first paragraph in this judgment): It was a mixture of costume and prop.
But its primary function is utilitarian.
While it was intended to express something, that was for utilitarian purposes.
While it has an interest as an object, and while it was intended to express an idea, it was not conceived, or created, with the intention that it should do so other than as part of character portrayal in the film.
That, in my view, does not give it the necessary quality of artistic creation inherent in the test suggested by Laddie J.
The Court of Appeal took the same view (paras [79] and [80]): Mr Bloch seeks to avoid our example of a real soldiers helmet being used as a prop in a film by stressing the fictional and imaginary nature of the stormtroopers and what they were .
But that argument confuses the fictional nature of the stormtrooper with his physical depiction in the film.
Although invented, the helmet and armour are still recognisable as such and have a function within the confines of the film as the equipment of the stormtrooper.
Discussion
In this Court the appellants have challenged the reasoning of the judge and the Court of Appeal.
Mr Sumption QC said that it was eccentric of the judge to describe the helmets purpose as utilitarian, and that the Court of Appeal could find it to have a functional purpose only by treating it as having the same functional purpose as a real helmet within the confines of a film.
This is quite a puzzling point.
The Star Wars films are set in an imaginary, science fiction world of the future.
War films set in the past (Paths of Glory, for instance, depicting the French army in the first world war, or Atonement depicting the British Expeditionary Force at Dunkirk) are at least based on historical realities.
The actors and extras in the trenches or on the beaches may be wearing real steel helmets, or (because real steel helmets of the correct style are unobtainable in sufficient numbers) they may be wearing plastic helmets painted khaki.
In either case the helmets are there as (in the judges words) a mixture of costume and prop in order to contribute to the artistic effect of the film as a film.
They are part of a production process, as Laddie J said in Metix at p 721, citing Whitford J in Davis (J & S)(Holdings) Ltd v Wright Health Group Ltd [1988] RPC 403, 410 412.
In this case the production process was the making of a full length feature film.
It would not accord with the normal use of language to apply the term sculpture to a 20th century military helmet used in the making of a film, whether it was the real thing or a replica made in different material, however great its contribution to the artistic effect of the finished film.
The argument for applying the term to an Imperial Stormtrooper helmet is stronger, because of the imagination that went into the concept of the sinister cloned soldiers dressed in uniform white armour.
But it was the Star Wars film that was the work of art that Mr Lucas and his companies created.
The helmet was utilitarian in the sense that it was an element in the process of production of the film.
Those were the concurrent findings of both the judge and the Court of Appeal, in paras [121] and [80] of their respective judgments.
The type of judgmental conclusion that often has to be reached in intellectual property cases on issues such as obviousness, inventiveness, and copying are matters on which appellate courts should be slow to interfere with the judgment of the trial judge.
In Designers Guild [2000] 1 WLR 2416, 2423 2424, Lord Hoffmann observed that there were two reasons for this.
The first is that the judge has, and the appellate court has not, seen and heard the witnesses.
Lord Hoffmann continued, Secondly, because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judges decision unless he has erred in principle: see Pro Sieben Media AG v Carlton UK Television Ltd [1991] 1 WLR 605, 612 613.
I agree with Buxton LJ in Norowzian v Arks Ltd (No 2) [2000] FSR 363, 370 when he said: where it is not suggested that the judge has made any error of principle a party should not come to the Court of Appeal simply in the hope that the impression formed by the judges in this court, or at least two of them, will be different from that of the trial judge.
That applies with extra force in the case of a second appeal.
To the same effect are Lord Hoffmanns observations in Biogen Inc v Medeva plc [1997] RPC 1, 45, which are too well known to need repetition.
The Court of Appeal (para [78]) relied on Lord Hoffmanns observations in Designers Guild, and in our view it was right to do so.
During the 17 days of the trial Mann J heard evidence about the helmet and the other artefacts from numerous different witnesses.
Long and thorough as his judgment is, he may not have recorded every nuance that contributed to his conclusion.
He did not err in law or reach an obviously untenable conclusion, and the Court of Appeal was right to uphold his decision on this point.
We would uphold the judgments below very largely for the reasons that they give.
But (at the risk of appearing humourless) we are not enthusiastic about the elephant test in para [77] of the Court of Appeals judgment (knowing one when you see it).
Any zoologist has no difficulty in recognising an elephant on sight, and most could no doubt also give a clear and accurate description of its essential identifying features.
By contrast a judge, even one very experienced in intellectual property matters, does not have some special power of divination which leads instantly to an infallible conclusion, and no judge would claim to have such a power.
The judge reads and hears the evidence (often including expert evidence), reads and listens to the advocates submissions, and takes what the Court of Appeal rightly called a multi factorial approach.
Moreover the judge has to give reasons to explain his or her conclusions.
There is one other matter to which the Court of Appeal attached no weight, but which seems to us to support the judges conclusion.
It is a general point as to the policy considerations underlying Parliaments development of the law in order to protect the designers and makers of three dimensional artefacts from unfair competition.
After reviewing the legislative history the Court of Appeal took the view (para [40]) that there was no assistance to be obtained from the relationship between copyright and registered design right.
We respectfully disagree, especially if the relatively new unregistered design right is also taken into account.
It is possible to recognise an emerging legislative purpose (though the process has been slow and laborious) of protecting three dimensional objects in a graduated way, quite unlike the protection afforded by the indiscriminate protection of literary copyright.
Different periods of protection are accorded to different classes of work.
Artistic works of art (sculpture and works of artistic craftsmanship) have the fullest protection; then come works with eye appeal (AMP Inc v Utilux Pty Ltd [1971] FSR 572); and under Part III of the 1988 Act a modest level of protection has been extended to purely functional objects (the exhaust system of a motor car being the familiar example).
Although the periods of protection accorded to the less privileged types have been progressively extended, copyright protection has always been much more generous.
There are good policy reasons for the differences in the periods of protection, and the Court should not, in our view, encourage the boundaries of full copyright protection to creep outwards.
Sections 51 and 52
The appellants accept that if the helmet did not qualify as a sculpture within the meaning of the 1988 Act, then Mr Ainsworth had a defence under section 51 to any infringement claim based on Mr McQuarries graphics, and section 52 does not arise.
The Court of Appeal dealt with these sections, for completeness, in paras 83 to 98 of its judgment.
It is unnecessary to cover the same ground again.
We would dismiss the appeal so far as it is based on the English law of copyright.
Part II: Whether a claim against a defendant domiciled in England for infringement of a foreign copyright is justiciable
The decision of the Court of Appeal and the issue on the appeal
The issue on this aspect of the appeal is a narrow one, whether the English court may exercise jurisdiction in a claim against persons domiciled in England for infringement of copyright committed outside the European Union in breach of the copyright law of that country.
That issue has raised two questions.
The first question is whether a claim for infringement of a foreign copyright is non justiciable.
The second question only arises if the answer to the first question is in the affirmative: the question would then arise whether the English court is in any event required to accept jurisdiction by virtue of Council Regulation (EC) No 44/2001 on jurisdiction and the enforcement of judgments in civil and commercial matters (the Brussels I Regulation), article 2, which provides that, subject to the terms of the Regulation, persons domiciled in a Member State shall be sued in the courts of that Member State.
The Court of Appeal decided that the claim for breach of the United States copyright was non justiciable.
It held that the rule in British South Africa Co v Companhia de Moambique [1893] AC 602 that the English court has no jurisdiction to entertain an action for the determination of the title to, or the right to possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied not only to foreign land, but also to claims for infringement of foreign intellectual property rights, including copyright, irrespective of whether issues of title or validity were involved; and irrespective of whether the rights required registration (such as trade marks or registered designs) or not.
It also held that article 2 of the Brussels I Regulation did not require the English court to exercise jurisdiction.
The substantial question on this aspect of the appeal is whether, as Lucasfilm contends, the Court of Appeal was wrong, as a matter of law and policy, to extend to foreign copyrights the common law rule in the Moambique case that actions for damages for infringement or invasion of property rights in foreign land are not justiciable.
The foreign land rule and its application to intellectual property: British South
Africa Co v Companhia de Moambique and Potter v Broken Hill Pty Co Ltd
Some legal archaeology is necessary for an understanding of how the law developed to the point where the English courts, at first instance and in the Court of Appeal, decided that claims for infringement of foreign copyright were not justiciable in England.
British South Africa Co v Companhia de Moambique
The decision in the Moambique case is the authoritative foundation for the rule that the English court has no jurisdiction to entertain an action for (1) the determination of the title to, or the right to the possession of, any immovable situate out of England or (2) the recovery of damages for trespass to such immovable (Dicey, Conflict of Laws, 1st ed (1896), pp 214 215, Rule 39).
The rule has for long been subject to an exception where there is a contract, or an equity, between the parties, which the courts of equity will enforce: ibid, p 216; Penn v Lord Baltimore (1750) 1 Ves Sen 444.
As the House of Lords noted, in the United States there is a similar local action rule (based on Livingston v Jefferson, 15 Fed Cas 660 (CCD Va, 1811), Marshall CJ on circuit) for actions to determine title: see Hay, Borchers & Symeonides, Conflict of Laws, 5th ed (2010), para 7.7.
But the current prevailing view in the United States is that the local action rule does not apply to actions for trespass to foreign land: Restatement Second, Conflict of Laws, section 87 (1971).
It seems also that that part of the rule which denies jurisdiction for trespass to foreign land had no counterpart outside common law countries (Rabel, Conflict of Laws: A Comparative Study, 2nd ed, (1960) vol 2, p 47; Wolff, Private International Law, 2nd ed (1950), p 92; and for the position in France see Audit, Droit International Priv, 6th ed (2010), para 346), and, as will be seen, although the House of Lords refused to reconsider the trespass rule, it no longer applies at least as regards land in other Member States of the European Union.
The speeches of Lord Herschell LC and Lord Halsbury (and, in the Court of Appeal, of Lord Esher MR, whose dissenting judgment was upheld in the House of Lords) are substantially based on Storys Conflict of Laws.
The essence of the decision is that jurisdiction in relation to land is local (that is, the claim has a necessary connection with a particular locality) as opposed to transitory (where such a connection is not necessary) and that it is contrary to international law, or comity, for one state to exercise jurisdiction in relation to land in another state.
Lord Esher MR said ([1892] 2 QB 358, 398): an action quare clausum fregit cannot be entertained by an English Court in respect of an alleged wrongful entry on land situated abroad; and the ground of the inability is no consent of other nations by way of comity to the exercise of such jurisdiction can be inferred.
Lord Herschell LC and Lord Halsbury relied in particular on Storys quotation (Story, Conflict of Laws, section 553, from the 1st edition in 1834 to the 8th edition in 1883) of a translation of a passage in Vattels Droit des Gens, which concluded that, in the case of an action relating to an estate in land, or to a right annexed to such an estate: [1893] AC at 622, 631: in such a case, inasmuch as property of the kind is to be held according to the laws of the country where it is situated, and as the right of granting it is vested in the ruler of the country, controversies relating to such property can only be decided in the state in which it depends.
In Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508 Lord Wilberforce said (at p 537) that the foreign land rule involved possible conflict with foreign jurisdictions, and the possible entry into and involvement with political questions of some delicacy; and Viscount Dilhorne said (at p 541) that: Questions of comity of nations may well be involved.
The leading cases all involved unusual factual situations in which the claim had major political ramifications, and in which, therefore, issues of international law and comity were engaged.
The Moambique company was a Portuguese company (with substantial British ownership) effectively in control of Mozambique and Cecil Rhodes British South Africa Co was effectively in control of Southern Rhodesia.
The Moambique case was a battle between them over mines in territories which were claimed by Portugal.
In Hesperides Hotels the plaintiffs were Greek Cypriot hotel owners who were seeking to establish that their hotels in Northern Cyprus had been illegally requisitioned by the authorities of the unrecognised Turkish Federated State of North Cyprus.
Similarly, in the leading case on the related, and more general, principle that the courts will not adjudicate upon the transactions of foreign sovereign states, Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, Occidental Petroleum was endeavouring to establish that Buttes and the Ruler of Sharjah had fraudulently deprived Occidental of the benefit of its oil concession in the neighbouring emirate of Umm al Qaywayn.
Potter v Broken Hill Pty Co Ltd
It is inevitable that any discussion of the justiciability of claims for infringement of foreign intellectual property rights must begin with the influential decision in Potter v Broken Hill Pty Co Ltd [1905] VLR 612, affd (1906) 3 CLR 479, which is generally (but not entirely accurately) regarded as based on an extension of the Moambique rule to actions for infringement of patents.
At a time when patents were granted by the several States in Australia, Potter obtained a patent in Victoria for the separation of metals from sulphide ores and a patent for the same process in New South Wales.
Potter claimed that (as well as a threatened infringement of the Victorian patent in Victoria) the defendant company (now BHP Billiton) had infringed the New South Wales patent at its mine in New South Wales.
Broken Hill denied novelty and utility, but also said that an action for the infringement in New South Wales of a New South Wales patent was not justiciable in the Victorian courts.
The question of justiciability was argued as a preliminary matter before the Full Court of the Supreme Court of Victoria, which decided by a majority that the claim was not justiciable, and an appeal to the High Court of Australia was dismissed.
As already mentioned, the decision is generally regarded as based on the Moambique rule.
Although the Moambique rule is one of the elements in the conclusion of the High Court, an examination of the way in which the case was argued, and of the reasoning of the High Court, shows that it is a decision extending the act of state doctrine to foreign patents.
There are four strands to the conclusions reached by the Full Court and the High Court of Australia.
The first strand is in the judgment of Hodges J (with whom Hood J concurred) in the Full Court.
That strand is based on that aspect of the Moambique rule which turns on the distinction between local and transitory actions.
He considered that the patent had a definite locality: Potter claimed in effect that in no building and on no land in New South Wales could the company use his invention.
It was a claim made in respect of a defined area, the whole of which was outside the jurisdiction of the court in Victoria.
The second strand is found only in the judgment of Hood J in the Full Court, but it finds an echo in later English decisions, and that is that the action was precluded by what became known as the first branch of the rule in Phillips v Eyre (1870) LR 6 QB 1, namely that an act done abroad was only actionable in England if it was actionable as a tort according to English law, that is, was an act, which if done in England, would be a tort.
The rule as then understood showed what became the first limb of the rule as the second limb in these terms: An act done in a foreign country is a tort if it is both (1) wrongful according to the law of the country where it was done, and, (2) wrongful according to English law, ie, is an act which, if done in England, would be a tort (Dicey, Conflict of Laws, 1st ed (1896), Rule 175, p 659).
Hood J considered that the rule was not satisfied because Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria: the act of Broken Hill, using and working certain alleged inventions in New South Wales even though it be wrong by the law of that State, would not be actionable if committed here (at p 631).
The third strand is found in the reliance on the Moambique case by the High Court of Australia.
Both Griffiths CJ and Barton J said that the question did not depend on the distinction between local and transitory actions.
They (and the third member of the court, OConnor J) took their inspiration from those parts of the speeches in the House of Lords, and of the dissenting judgment of Lord Esher MR in the Court of Appeal, which emphasised that rights in immovables were created by the exercise of the sovereign power of the State, and that controversies relating to such property could only be decided in that State.
So also, they reasoned, the comity of nations required a similar rule for patents: especially (1906) 3 CLR 479, 495, 502.
The appeal was first argued in November 1905, but the report shows (at p 486) that on 27 February 1906: The matter was, at the desire of the Court, further argued on the point whether the Courts of one State can enquire into the propriety or validity of an attempted exercise of the sovereign power of another State.
As a result there is a fourth, and decisive, strand in the decision, namely the act of state doctrine.
The classic statement of the act of state doctrine was enunciated by Fuller CJ in the United States Supreme Court in Underhill v Hernandez, 168 US 250, 252 (1897): 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.
This principle had its origin, as appears clearly from the decision of the lower court in that case, in the decision of the House of Lords in Duke of Brunswick v Duke of Hanover (1848) 2 HLC I, 17, in which it was said: the courts of this country cannot sit in judgment upon an act of a sovereign, effected by virtue of his sovereign authority abroad . : see Underhill v Hernandez, 65 F 577 (2d Cir 1895).
As re stated by the United States Supreme Court, the act of state doctrine was re imported into English law in Luther v Sagor [1921] 3 KB 532 (CA).
All three members of the High Court of Australia quoted and applied Underhill v Hernandez and it is the act of state doctrine, rather than the Moambique rule, which is the essential foundation of the judgments in the High Court.
Thus Griffith CJ said that if a government had granted a monopoly in respect of an alleged invention which was not new, the government must have been misled: at pp 498 499.
Barton J thought that the whole subject matter of the action was excluded from the cognizance or competence of Victoria, and its courts could not sit in judgment to determine whether such rights were validly granted: at p 503.
O'Connor J said that a court could not enquire into the validity of a patent, any more than it could enquire into the validity of a concession granted by the Czar: at p 513.
Consequently the effect of the decision in Potter v Broken Hill Pty Co Ltd was to apply the Moambique rule and, especially, the act of state doctrine to actions for patent infringement.
It received no attention in the English case law until it was mentioned by Lord Wilberforce in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508, 536 as authority for the proposition that the Moambique rule applied in Australia.
It was only from the 1980s that it came to be regarded as a significant authority in the field of transnational intellectual property litigation: Def Lepp Music v Stuart Brown [1986] RPC 273; Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 (both copyright cases).
Subsequent developments
There have been major developments since the decisions in the Moambique case and Potter v Broken Hill Pty Co Ltd, which have to a significant extent undermined them, and to which it is now necessary to turn.
The questions to which these developments are relevant are these: (1) whether there is a distinction between actions to determine title and/or validity and actions for infringement of rights; (2) whether there is a distinction between actions for infringement which raise issues of title and/or validity and actions for infringement which do not; (3) whether there is a distinction between intellectual property rights which require registration or prior examination and those which do not, and in particular whether there is a relevant distinction between copyright and other intellectual property rights, especially patents; (4) whether the conflict of laws rules relating to tortious conduct abroad have undermined the older decisions; and (5) whether the act of state doctrine has any relevance to actions for infringement of intellectual property rights.
The Moambique rule
To the extent that the principles in Potter v Broken Hill Pty Co Ltd were based on that part of the rule in the Moambique case which precluded actions for damages for infringement of property rights (in that case damages for trespass), they have been fatally undermined so far as English law is concerned.
That part of the rule was confirmed by the House of Lords in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508.
The House of Lords not only refused an invitation to depart from that part of the rule, but also extended it by holding that it applied when no question of title was involved.
Lord Wilberforce said (at p 541) that questions of comity might well be involved, and it had to be for Parliament to change the law.
That invitation was taken up, and that part of the Moambique rule was abolished by section 30(1) of the Civil Jurisdiction and Judgments Act 1982, which came into force in 1982, and provides: The jurisdiction of any court in England . to entertain proceedings for trespass to, or any other tort affecting, immovable property shall extend to cases in which the property in question is situated outside that part of the United Kingdom unless the proceedings are principally concerned with a question of the title to, or the right to possession of, that property.
There was a parallel development in European law which also confirms, broadly, that the foreign land principle in the European Union is concerned only with actions to establish title.
That development began with the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, which was signed in 1968 and came into force for the six original EEC Member States in 1973.
The Brussels Convention was enacted into United Kingdom law by the 1982 Act and the relevant provisions came into force in 1987, and are now contained in the Brussels I Regulation (Council Regulation (EC) No 44/2001).
The effect is that the Moambique rule has been superseded, as regards land in other Member States, by what is now Article 22(1) of the Brussels I Regulation.
Article 22(1) (formerly article 16(1)(a) of the Brussels Convention) provides that the courts of the Member State in which the property is situated have exclusive jurisdiction, regardless of domicile, in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property.
The European Court has confirmed that what is now article 22(1) must not be given an interpretation broader than is required by its objective: and that actions for damages based on infringement of rights in rem or on damage to property in which rights in rem exist do not fall within its scope: Case C 343/04 Land Obersterreich v EZ as [2006] ECR I 4557, para [26] et seq.
The consequence is that in the United Kingdom the trespass aspect of the Moambique rule has no application as regards land in other Member States, and (subject to the controversial question of the applicability of article 2) can only apply to land outside the Member States where a question of title is involved: see Dicey, Morris & Collins, Conflict of Laws, 14th ed (2006), vol 2 paras 23 02523 027.
The rule in Phillips v Eyre
As has been seen, in Potter v Broken Hill Pty Co Ltd, in the Full Court of the Supreme Court of Victoria, Hood J considered that the action was precluded by the first branch of the rule in Phillips v Eyre, ie that Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria.
The effect of the first limb of the rule in intellectual property cases was expressed in Dicey & Morris, Conflict of Laws, 12th ed (1993) (the last edition before the law was changed), vol 2, at p 1516: Nor can the holder of a French patent, trade mark or copyright sue in England for its infringement in France.
Since the French patent, trade mark or copyright is territorial in its operation and the act complained of would not be a tort if committed in England, it cannot be brought within [the first limb of the rule in Phillips v Eyre].
In consequence it was held in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 that it was not possible to bring an action in England for infringement (or, as in that case, an action for a declaration of non infringement) of United States copyright.
The first limb of the rule in Phillips v Eyre was also employed by Sir Nicolas Browne Wilkinson V C in Def Lepp Music v Stuart Brown [1986] RPC 273 to deny a claim in England for breach of a United Kingdom copyright in the Netherlands, but a shorter answer to the claim would have been that United Kingdom copyrights are purely territorial and do not, by United Kingdom law, confer any rights abroad: see, eg Norbert Steinhardt & Son Ltd v Meth (1960) 105 CLR 440.
But the rule in Phillips v Eyre was first eroded by case law and then abolished by statute.
Following the lead of Lord Wilberforce and Lord Hodson in Boys v Chaplin [1971] AC 356, in Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 the Privy Council decided that the first limb of the rule in Phillips v Eyre could be displaced so that an issue might be governed by the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties.
That exception was applied in Pearce v Ove Arup Partnership Ltd [2000] Ch 403, in which the Court of Appeal held that a claim in England for infringement of a Dutch copyright was not defeated by the first limb of the rule in Phillips v Eyre, because the issues had the most significant relationship with the Netherlands.
Accordingly, the court held that Dutch law was the applicable law and not the combination of English law and Dutch law required by Phillips v Eyre.
In KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 (High Court of New Zealand), MacKenzie J held (in reasoning which is not entirely clear) that, in a claim for infringement of United Kingdom and Hong Kong copyrights, the first limb of the rule in Phillips v Eyre was satisfied.
The rule in Phillips v Eyre was abolished by the Private International Law (Miscellaneous Provisions) Act 1995.
In principle the law of the place of infringement applies: 1995 Act, section 11(1).
Consequently, so far as English proceedings are concerned, that basis for the decisions in Potter v Broken Hill Pty Co Ltd and Tyburn Productions Ltd v Conan Doyle has disappeared, and the rule in Phillips v Eyre is no impediment to actions in England for infringement of foreign intellectual property rights.
The act of state doctrine
In the United States the act of state doctrine has been used as a basis for non justiciability of foreign trade mark and patent rights.
The Court of Appeals for the Second Circuit held in Vanity Fair Mills Inc v T Eaton Co Ltd, 234 F 2d 633, 646 (2d Cir 1956), cert den, 352 US 871 (1956) that a United States federal court should not rule on the validity of a Canadian trade mark because (among other reasons) the act of state doctrine precluded determination of the acts of a foreign sovereign done within its own territory, and to rule on validity would create conflicts with Canadian administrative and judicial officers.
The act of state doctrine was also invoked more recently in the United States as a ground for refusing to allow the addition of claims for infringement of parallel foreign patents to claims for infringement of United States patents, in litigation in which validity was in issue: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007).
The majority of the court (Gajarsa CJ, Prost CJ concurring) said (at p 904): the act of state doctrine may make the exercise of supplemental jurisdiction over foreign patent infringement claims fundamentally unfair.
As a principle of decision binding on federal and state courts alike, the act of state doctrine requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid.
W S Kirkpatrick & Co, Inc v Envtl Tectonics Corp, Intl, 493 U.S. 400, 406, 409 (1990) In this case, none of the parties or amicus curiae have persuaded us that the grant of a patent by a sovereign is not an act of state.
Therefore, assuming arguendo that the act of state doctrine applies, the doctrine would prevent our courts from inquiring into the validity of a foreign patent grant and require our courts to adjudicate patent claims regardless of validity or enforceability.
The act of state doctrine was held not to apply where, in a dispute arising out of a patent licence, the issue was one of interpretation of the patent, and not of validity: Fairchild Semiconductor Corpn v Third Dimension (3D) Semiconductor Inc, 589 F Supp 2d 84, 98 (D Me 2008).
So also, in the case of copyright infringement, it has been held that the act of state doctrine has no application because there is no need to pass on the validity of acts of foreign government officials.
In London Film Productions, Ltd v Intercontinental Communications, Inc, 580 F Supp 47, 49 (SDNY 1984) the District Court held that the plaintiff could sue for infringement of its foreign copyright in films.
The court accepted Professor Nimmers view that the act of state doctrine was not engaged: in adjudicating an infringement action under a foreign copyright law there was no need to pass upon the validity of acts of foreign governmental officials, since foreign copyright laws did not generally incorporate administrative formalities which had to be satisfied to create or perfect a copyright.
In Frink America, Inc v Champion Road Machinery Ltd, 961 F Supp 398 (NDNY 1997) it was held that dismissal of a claim for infringement of Canadian copyright was not warranted because US and Canada were signatories to the Berne Convention, which bars administrative formalities, and therefore there was no question of passing on acts of foreign government.
Contrast ITSI TV Productions, Inc v California Authority of Racing Fairs, Inc, 785 F Supp 854, 866 (ED Cal 1992).
But in the Commonwealth Potter v Broken Hill Pty Co Ltd appears to stand alone in using the act of state doctrine as an impediment to actions for infringement of foreign intellectual property rights.
In Voda v Cordis Corpn, above, Circuit Judge Newman, dissenting, rightly pointed out (at p 914) that not every governmental action and not every ministerial activity is an act of state.
In Mannington Mills, Inc v Congoleum Corpn, 595 F 2d 1287, 129394 (3d Cir 1979) the Court of Appeals for the Third Circuit was unable to accept the proposition that the mere issuance of patents by a foreign power constitutes an act of state.
It has been said that the grant of a national patent is an exercise of national sovereignty (Jenard Report on the Brussels Convention (OJ 1979 C59 pp 1, 36), and the European Court has emphasised that the issue of patents necessitates the involvement of the national administrative authorities (Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [23]).
But 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 it should not today be regarded as an impediment to an action for infringement of foreign intellectual property rights, even if validity of a grant is in issue, simply because the action calls into question the decision of a foreign official.
European law and intellectual property rights
Two important developments in European law have undermined any argument that there is a substantial policy reason for the view that actions for infringement of intellectual property rights cannot be brought outside the State in which they are granted or subsist.
First, article 22(4) of the Brussels I Regulation (formerly article 16(4) of the Brussels Convention) provides that, in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is deemed to have taken place, have exclusive jurisdiction irrespective of the domicile of the defendant.
This is an exception to the general domicile rule of jurisdiction, and has to be construed strictly.
It applies only to intellectual property rights which are required to be deposited or registered, and does not apply to infringement actions in which there is no issue as to validity.
The European Court has emphasised that article 22(4) is only concerned with cases in which a question of validity arises.
It has made the following points: the basis for article 22(4) is that the courts of the Contracting State in which the deposit or registration has been applied for or made are best placed to adjudicate upon cases in which the dispute itself concerns the validity of the patent or the existence of the deposit or registration; but it does not apply in proceedings which do not concern the validity of the intellectual property right or the existence of the deposit or registration and these matters are not disputed by the parties, for example, a patent infringement action, in which the question of the validity of the patent allegedly infringed is not called into question; it would apply if the question of validity were raised by way of defence in infringement proceedings; the concern for the sound administration of justice is all the more important in the field of patents since, given the specialised nature of this area, a number of Contracting States have set up a system of specific judicial protection, to ensure that these types of cases are dealt with by specialised courts; the exclusive jurisdiction is also justified by the fact that the issue of patents necessitates the involvement of the national administrative authorities: Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [16] et seq.
Article 22(4) does not in terms apply to intellectual property rights outside the Member States.
It is not necessary for present purposes to delve into the question whether it may be applied by analogy (or reflexively) to non Member States.
What it shows is that there is a fundamental distinction between intellectual property claims which involve the registration or validity of intellectual property rights which are required to be deposited or registered, and those which are not.
The second relevant piece of European legislation does not apply to the present proceedings because it came into force only on 11 January 2009, but it also shows clearly that there is no European public policy against the litigation of foreign intellectual property rights.
Regulation (EC) No 864/2007 of the European Parliament and of the Council on the law applicable to non contractual obligations (Rome II) applies wherever in the world a tort was committed.
It plainly envisages that actions may be brought in Member States for infringement of foreign intellectual property rights, including copyright.
Recital (26) states: Regarding infringements of intellectual property rights, the universally acknowledged principle of the lex loci protectionis should be preserved.
For the purposes of this Regulation, the term intellectual property rights should be interpreted as meaning, for instance, copyright, related rights, the sui generis right for the protection of databases and industrial property rights.
As regards choice of law, article 8 provides: Infringement of intellectual property rights 1.
The law applicable to a non contractual obligation arising from an infringement of an intellectual property right shall be the law of the country for which protection is claimed. 2.
In the case of a non contractual obligation arising from an infringement of a unitary Community intellectual property right, the law applicable shall, for any question that is not governed by the relevant Community instrument, be the law of the country in which the act of infringement was committed.
Other proposals
These developments in European law are mirrored in proposals within the American Law Institute, which favour adjudication of foreign intellectual property rights, at least where issues of validity are not in issue.
The American Law Institutes Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes (2008) apply to transnational civil disputes which involve (inter alia) copyrights, patents, trademarks, and other intellectual property rights (section 102) and note the controversy over the question of the justiciability of intellectual property rights (Reporters Notes 4 and 5).
Section 211 provides that the court must have subject matter and personal jurisdiction.
Comment b states: There is substantial sentiment that issues regarding the validity of a registered right, particularly a patent right, should be adjudicated in the courts of the State in which the right is registered.
Only this State is competent to cancel the registration.
Nonetheless, the Principles do not include a blanket prohibition on the adjudication of matters involving a foreign States registered rights, because separating adjudication of validity from infringement can have substantive ramifications.
Separate resolutions can prevent a court from hearing all of the evidence relevant to the action and from using its understanding of how a technology is utilized to inform its decision on the scope of the right.
Bifurcating validity and infringement can also increase the parties costs.
The draft Principles for Conflict of Laws in Intellectual Property, 2011, prepared by the European Union Max Planck Group on Conflict of Laws in Intellectual Property contain no specific provision for actions for infringement of foreign rights abroad, but it is implicit in the Principles that they envisage such actions: (a) the primary rule of jurisdiction in the Principles is habitual residence (Part 2, section 1), and (b) the primary law applicable to infringement is the law of the State for which protection is sought (Part 3, section 6).
The English and foreign authorities on justiciability of intellectual property
claims
A number of distinguished judges have expressed the view that the English court cannot, or should not, exercise jurisdiction in claims for infringement of foreign intellectual property rights, such as patents (Mlnlycke AB v Procter & Gamble Ltd [1992] 1 WLR 1112, 1118, per Dillon LJ; Plastus Kreativ AB v Minnesota Mining and Manufacturing Co [1995] RPC 438, 447, per Aldous J) or trade marks (LA Gear Inc Ltd v Gerald Whelan & Sons Ltd [1991] FSR 670, 674, per Mummery J).
But prior to the decision of the Court of Appeal in the present proceedings the only directly relevant decisions were the decisions of Vinelott J in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75, of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, and of the Court of Appeal in Pearce v Ove Arup Partnership Ltd [2000] Ch 403.
In Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 Vinelott J applied the Moambique rule in the light of Potter v Broken Hill Pty Co Ltd to what was in effect a prospective negative declaration relating to potential copyright infringement in the United States.
The action was by a television company for a declaration that the daughter of Sir Arthur Conan Doyle had no rights under the copyright, unfair competition, or trademark laws of the United States to prevent the company from distributing a Sherlock Holmes television film.
It was conceded on behalf of the television company that no distinction could be drawn for the purpose of the case law between patents and other intellectual property rights including copyright.
Vinelott J also supported his conclusion by reliance on the first limb of the rule in Philips v Eyre: infringement of an American copyright was not a tort in English law and the first limb could not be satisfied.
In R Griggs Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153, Vinelott Js decision was criticised by Mr Peter Prescott QC, sitting as a Deputy High Court judge, who distinguished it by applying the exception to the Moambique rule whereby jurisdiction could be exercised if there were a contract or an equity between the parties: the judge allowed an amendment to a pleading on the basis that the court in the exercise of its equitable in personam jurisdiction could order a person who had acquired property situate abroad with sufficient notice of an earlier obligation to transfer the property to another to assign that property to its equitable owner, and that it would not be a breach of comity to adjudicate in personam on rights to foreign intellectual property (copyright) arising out of a contract.
Patents were the subject of the decision of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, in which he held that the court had no jurisdiction to try claims for infringement of German and Spanish patents for two reasons: the first was that the claims were not justiciable under the Moambique/Potter v Broken Hill Pty Co Ltd principles.
The second was that the claims were concerned with validity and within what is now article 22(4) of the Brussels I Regulation.
In Pearce v Ove Arup Partnership Ltd [2000] Ch 403 Mr Pearce claimed that the defendants had infringed his English and Dutch copyrights in his drawings and plans for a town hall by copying them in designing the Kunsthal in Rotterdam.
There was no issue about existence or validity of the copyrights.
The sole factual question was whether his drawings and plans had been copied.
On the question of the justiciability of the claim for infringement of the Dutch copyright, the court had personal jurisdiction over the defendants by virtue of their domicile in England (because they were additional parties for the purposes of what is now article 6(1) of the Brussels I Regulation).
It was not suggested that what is now article 22(4) applied, since the proceedings were for infringement of copyright and no question of deposit or registration arose.
The effect of what is now article 22(1)) was that the Moambique rule no longer applied within the Member States, and that where proceedings in relation to intellectual property fell outside what is now article 22(1), the general rules of jurisdiction applied, and there was no room for an objection of non justiciability.
The common law rule of choice of law applied because the relevant events occurred before section 11 of the Private International law (Miscellaneous Provisions) Act 1995 came into force in 1996, but (as mentioned above) the court disapplied the first limb of the rule in Phillips v Eyre in favour of the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties, which was Dutch law.
Foreign authorities
In the United States the local action rule has been used as a ground for refusal to add claims for infringement of foreign patents to a United States patent infringement action: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007), discussed above in connection with the act of state doctrine.
The majority said (at pp 901 902): the local action doctrine informs us that exercising supplemental jurisdiction in this case appears to violate our own norms of what sovereigns ordinarily expect.
Courts derived the local action doctrine from the distinction between local and transitory actions beginning with Livingston v Jefferson, written by Justice John Marshall riding Circuit. 15 F. Cas. 660 (C.C.D.Va. 1811). [T]he local action doctrine served to prevent courts from adjudicating claims for trespass or title to real property.
The territorial limits of the rights granted by patents are similar to those conferred by land grants.
A patent right is limited by the metes and bounds of the jurisdictional territory that granted the right to exclude.
Therefore, a patent right to exclude only arises from the legal right granted and recognized by the sovereign within whose territory the right is located.
It would be incongruent to allow the sovereign power of one to be infringed or limited by another sovereign's extension of its jurisdiction.
Claims for infringement of foreign copyright have been held in New Zealand and South Africa to be non justiciable.
In Atkinson Footwear Ltd v Hodgskin International Services Ltd, (1994) 31 IPR 186 (High Court of New Zealand) Tipping J followed the Tyburn Productions Ltd decision and in Gallo Africa Ltd v Sting Music (Pty) Ltd [2010] ZASCA 96, 2010 (6) SA 329 the Supreme Court of Appeal of South Africa applied the decision of the Court of Appeal in the present case.
But in KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 MacKenzie J in the High Court of New Zealand declined to follow Atkinson Footwear and held that a claim for infringement of foreign intellectual property rights (in that case breach of United Kingdom and Hong Kong copyright in PlayStation 2) was justiciable if no question of the existence or validity of those rights was in issue.
Conclusions on the justiciability question
The issue on this appeal is a very narrow one because the appellants do not take issue with the application of the Moambique rule to intellectual property so far as it is limited to patents and other intellectual property rights dependent on the grant or authority of a foreign State, and to cases where what is in issue is the validity of the patent, as opposed to its infringement.
As recorded by Mann J, the trial judge ([2008] EWHC 1878 (Ch), [2009] FSR 103, at [272]), the dispute relating to the United States copyright was as follows.
The subsistence of copyright and ownership of all drawings was accepted by Mr Ainsworth, although the existence of some drawings was disputed.
Infringement was denied so far as some drawings are concerned, on the footing that they were not copied, or not copied closely enough.
Because three dimensional items were produced, it was argued that under United States law there was no infringement because copyright in the drawings would not be infringed by the production of a utilitarian or functional device.
Lucasfilm claimed copyright in physical helmets and armour, which was disputed by Mr Ainsworth because they were said to be functional or utilitarian.
According to the judge, at one stage it had also been suggested that if there was copyright it was vested in Mr Ainsworth and not in Lucasfilm, but this point was not ultimately persisted in.
Although at trial the infringement arguments sometimes merged into a subsistence argument, the substantial dispute has always been about the ownership of the relevant copyrights and their infringement rather than about their subsistence.
Were these claims justiciable? Mr Ainsworth argued that the principle behind the Moambique rule (as extended in Hesperides to include actions in which no issue of title arises) still subsists and applies to claims for infringement of all foreign intellectual property rights, including copyright, because such claims are essentially local and must be brought in the place where the rights have been created, irrespective as to whether there is any claim to title.
But to describe the claims as local is simply to beg the question whether as a matter of law they must be brought in the place where the rights originate and are effective.
We have come to the firm conclusion that, in the case of a claim for infringement of copyright of the present kind, the claim is one over which the English court has jurisdiction, provided that there is a basis for in personam jurisdiction over the defendant, or, to put it differently, the claim is justiciable.
It is clear that much of the underpinning of the Moambique rule and the decision in Potter v Broken Hill Pty Co Ltd has been eroded.
All that is left of the Moambique rule (except to the extent that it is modified by the Brussels I Regulation) is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are principally concerned with a question of the title, or the right to possession, of that property.
So also article 22(1) of the Brussels I Regulation does not apply to actions for damages for infringement of rights in land.
The basis for what remains of the rule was said by the House of Lords in the Moambique case to be that controversies should be decided in the country of the situs of the property because the right of granting it was vested in the ruler of the country and in the Hesperides case to be the maintenance of comity and the avoidance of conflict with foreign jurisdictions.
It is possible to see how the rationale of the Moambique rule can be applied to patents, at any rate where questions of validity are involved.
For example the claims might touch on the validity of patents in sensitive areas, such as armaments, and that no doubt is part of the rationale for article 22(4) of the Brussels I Regulation.
But it is very difficult to see how it could apply to copyright.
It is true that copyright can involve delicate political issues.
Thus in a very different context Brightman J had to deal with the international consequences for copyright protection of the samizdat circulation in the Soviet Union of Solzhenitsyns August 1914 without having been passed by the Soviet censor: Bodley Head Ltd v Flegon [1972] 1 WLR 680.
But such cases can be dealt with by an application of the principles of public policy in appropriate cases.
Nor do the additional matters relied on in Potter v Broken Hill Pty Co Ltd lead to any different conclusion.
The rule in Phillips v Eyre has gone.
There is no room for the application of the act of state doctrine in relation to copyright in this case, even if (contrary to the view expressed above) actions of officials involved with registration and grant of intellectual property rights were acts of state.
The requirement to apply for copyright registration in the United States is limited to the copyright in any United States work which in practice means that published works first published outside the United States are exempted from compliance with US registration provisions.
In the present case the copyrights were treated as United States works and were registered.
Registration is a pre requisite to proceedings in the United States: United States Copyright Act, section 411.
But the unchallenged evidence before the judge in this case was that registration was not a prerequisite to subsistence but only to suit, and it was possible to register at the time of suit.
Consequently the provision is purely procedural.
That has been confirmed recently by the United States Supreme Court, which has held that federal courts have subject matter jurisdiction to approve a class action settlement where some of the authors are not registered, because section 411 is not a jurisdictional rule: Reed Elsevier Inc v Muchnick, 130 S Ct 1237 (2010).
There is no doubt that the modern trend is in favour of the enforcement of foreign intellectual property rights.
First, article 22(4) of the Brussels I Regulation only assigns exclusive jurisdiction to the country where the right originates in cases which are concerned with registration or validity of rights which are required to be deposited or registered and does not apply to infringement actions in which there is no issue as to validity.
This can rarely, if ever, apply to copyright.
Second, the Rome II Regulation also plainly envisages the litigation of foreign intellectual property rights and, third, the professional and academic bodies which have considered the issue, the American Law Institute and the Max Planck Institute, clearly favour them, at any rate where issues of validity are not engaged.
There are no issues of policy which militate against the enforcement of foreign copyright.
States have an interest in the international recognition and enforcement of their copyrights, as the Berne Convention on the International Union for the Protection of Literary and Artistic Works shows.
Many of the points relied on by the Court of Appeal to justify the application of the Moambique rule in this case as a matter of policy would apply to many international cases over which the English court would have jurisdiction and would in principle exercise it, especially the suggestion that questions of foreign law would have to be decided.
It was also said by the Court of Appeal that enforcement of foreign intellectual property law might involve a clash of policies such that a defendant may be restrained by injunction from doing acts in this country which are lawful in this country.
But such an injunction will be granted only if the acts are anticipated to achieve fruition in another country, and there is no objection in principle to such an injunction.
Nor is there any objection in principle, as the Court of Appeal thought, to a restraint on acts in another country.
Extra territorial injunctions are commonly granted here against defendants subject to the in personam jurisdiction.
The Court of Appeal also thought that it was relevant that there was no international regime for the mutual recognition of copyright jurisdiction and of copyright judgments, but this is no reason for the English court refusing to take jurisdiction over an English defendant in a claim for breach of foreign copyright.
It follows that Tyburn Productions Ltd v Conan Doyle was wrongly decided and that on this aspect the decision of the Court of Appeal in these proceedings cannot stand.
The Owusu v Jackson point
If the Court of Appeal was right to hold that the claim was in principle non justiciable, a further question would arise whether nevertheless, in the light of the decision of the European Court in Case C 281/02 Owusu v Jackson [2005] ECR I 1383, the English court must grant a remedy against Mr Ainsworth, who is domiciled in England for the purposes of what is now Article 2 of the Brussels I Regulation.
In Owusu v Jackson the European Court decided that an action in England arising out of events in Jamaica could not be stayed as against an English defendant in favour the Jamaican courts on the ground of forum non conveniens.
That was because the English defendant was domiciled in a Member State for the purposes of article 2, and the assignment of jurisdiction to that State applied also as between Contracting and non Contracting States (now Member and non Member States).
In this case the Court of Appeal distinguished Owusu v Jackson on the basis that it did not apply to cases where the English court held that it had no subject matter jurisdiction.
Lucasfilm argues that it would be inconsistent with the Owusu principle for the English court to decline to decide a particular issue on the ground that it is not justiciable under English law, because (in particular) the Brussels I Regulation is concerned with subject matter jurisdiction as well as personal jurisdiction; it is concerned with achieving the uniform application of common principles regarding jurisdiction across the European Community, and it would not be consistent with that object if national courts were able to decline jurisdiction on principles of non justiciability.
Although in argument it was stressed that the argument was one of lack of jurisdiction rather than non justiciability, in substance the real point of the argument is that if Lucasfilm were right, then the Brussels I Regulation would require the English court to adjudicate on other matters which have hitherto been regarded as non justiciable, such as the transactions of foreign sovereign states which were held to be non justiciable in Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 931; and that to require the English court to so adjudicate would be contrary to international law (or, perhaps more accurately, put the United Kingdom in breach of international law).
In view of the conclusion on the main point, this issue (on which a reference to the European Court might be required) does not arise and there is no need to express a view on it.
We would therefore allow the appeal on the justiciability issue.
LORD MANCE
For the reasons given by Lord Walker and Lord Collins in their combined judgment, I agree that the appeal fails on the first issue (sculpture) and succeeds on the second (justiciability of a claim for infringement of a foreign copyright).
I express no view about the application or scope of the doctrine of act of state in relation to issues of validity of foreign intellectual property rights which (unlike copyright) may be said to depend upon state grant.
| UK-Abs | The appeal raises two distinct legal issues: (1) The definition of sculpture in the Copyright, Designs and Patents Act 1988, and, in particular, the correct approach to three dimensional objects that have both an artistic purpose and a utilitarian function; (2) Whether an English court may exercise jurisdiction in a claim against persons domiciled in England for infringement of copyright committed outside the European Union in breach of the copyright law of that country? This appeal is concerned with intellectual property rights in various artefacts made for use in the first Star Wars film, Star Wars Episode IV A New Hope.
The most important was the Imperial Stormtrooper helmet.
It has been treated as decisive for the outcome of the case.
As the trial judge put it, one of the most abiding images in the film was that of the Imperial Stormtroopers.
The films story line and characters were conceived by George Lucas.
Between 1974 and 1976 his concept of the Imperial Stormtroopers as threatening characters in fascist white armoured suits was given visual expression in drawings and paintings by an artist, Mr Ralph McQuarrie, and eventually three dimensional form by Mr Andrew Ainsworth.
He produced several prototype vacuum moulded helmets.
Once Mr Lucas had approved the final version, Mr Ainsworth made 50 helmets for use in the film.
The Appellants (here referred to collectively as Lucasfilm) own copyrights in the artistic works created for the Star Wars films.
They have built up a successful licensing business, including licensing models of Imperial Stormtroopers.
In 2004 Mr Ainsworth used his original tools to make versions of the Imperial Stormstrooper helmet and armour for sale to the public. (The second respondent is a company owned by Mr Ainsworth; for practical purposes, he can be treated as the sole respondent).
He sold between $8,000 and $30,000 of the goods in the United States.
Lucasfilm obtained judgment against him in the United States.
It also commenced proceedings in the English High Court, including claims for infringement of English copyright and claims under US copyright law.
By the time of the Supreme Court hearing, Lucasfilm claimed only that the helmets qualified for copyright protection under English law as sculptures and not as works of artistic craftsmanship.
In terms of section 4 of the Copyright Designs and Patents Act 1988, copyright subsists in, amongst other things, original artistic works, which includes a sculpture, irrespective of artistic quality.
Whether a helmet was a sculpture is significant for two reasons.
If it is, any copying of the helmets which Mr Ainsworth had originally produced would infringe Lucasfilms copyright.
It is also relevant for the defences which are available.
To produce a helmet by working from a drawing of it infringes copyright in the drawing.
However, it is not an infringement of any copyright in a design document which records a design for anything other than an artistic work to make an article to the design or to copy an article made to the design: section 51 1988 Act.
If the helmet did not qualify as sculpture, and was therefore not an artistic work, Mr Ainsworth had a defence to an English copyright action based on infringement of Mr McQuarries graphics.
The High Court dismissed the claims for infringement of English copyright: the helmet was not a work of sculpture and therefore Mr Ainsworth had a defence under section 51.
It held, however, that the United States copyright claims were justiciable and that US copyright had been infringed.
The Court of Appeal allowed Mr Ainsworths appeal.
It agreed that the helmet was not a work of sculpture but held that the US copyright claims were not justiciable.
Lucasfilm appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It holds that the helmets were not sculptures but that the US copyright claims were justiciable in English proceedings.
Lord Walker and Lord Collins give a joint opinion, with which the other members of the Court agree.
Sculpture issue The court reviews the legislative history of the current statutory provisions and previous authorities as to the meaning of sculpture: [14] [35].
In the High Court, the judge had formulated various guidelines as to the meaning of sculpture.
For example, some regard must be had to the normal use of the word sculpture.
The concept can apply to things going beyond what one would normally expect to be art, but it is inappropriate to stray too far from what would normally be regarded as sculpture.
Not every three dimensional representation of a concept qualifies: [36] [37].
Lucasfilm contended that the helmet was sculpture as it had no practical function at all.
Its purpose was wholly artistic, to make a visual impression on the filmgoer.
That was not, however, how the trial judge and the Court of Appeal had viewed matters.
Mann J found the helmets to be a mixture of costume and prop and that their primary function was utilitarian, namely to express an idea as part of character portrayal in the film.
He held that this lacked the necessary quality of artistic creation required of a sculpture.
This type of judgmental conclusion was one with which appellate courts should be slow to interfere, as Lord Hoffmann observed in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416: [40] [45].
The judge did not err in law or reach an obviously untenable conclusion: [46].
It would not accord with the normal use of language to apply the term sculpture to, for example, a 20th century military helmet used in the making of a film, however great its contribution to the artistic effect of the finished film.
The argument for applying the term to an Imperial Stormtrooper helmet was stronger, because of the imagination that went into the concept of the Stormtroopers.
But it remained the Star Wars film itself that was the work of article The helmet was utilitarian in the sense that it was an element in the process of production of the film: [44].
The Court noted that the law did not apply an elephant test, but instead a multi factoral approach: [47].
Justiciability of foreign copyright claim The Court of Appeal had held that the common law rule in British South Africa Co v Companhia de Moambique [1893] AC 602 that an English court had no jurisdiction to entertain an action for the determination of title to, or the right of possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied to claims for infringement of foreign intellectual property rights.
The Supreme Court concludes that, provided there is a basis for in personam jurisdiction over the defendant, an English court does have jurisdiction to try a claim for infringement of copyright of the kind involved in the present action: [105].
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This appeal is concerned with the long standing principle of insolvency law known as the rule against double proof.
It originated in the law of individual bankruptcy but has since the Companies Act 1862 applied to the winding up of companies.
It now extends to distributions made by administrators under para 65 of Schedule B1 to the Insolvency Act 1986 as substituted by the Enterprise Act 2002.
Like the anti deprivation rule recently considered by the Supreme Court in Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2011] UKSC 38, [2011] 3 WLR 521, the rule against double proof is implicit in the Insolvency Act 1986.
In the words of Neuberger J in In re Glen Express Ltd [2000] BPIR 456, 461, it remains good law.
It is an overarching principle which still applies to insolvency, and nothing in Stein v Blake [1996] AC 243 calls it into question.
The facts
The appeal is concerned with distributions made and to be made by the administrators of Kaupthing Singer & Friedlander Ltd (KSF), a bank which went into administration during the financial crisis in October 2008.
The disputed issues as to the rule against double proof arise, as is generally the case, in the context of suretyship.
KSF has a wholly owned subsidiary named Singer & Friedlander Funding plc (Funding), which is also in administration.
Fundings sole function was to raise funds for use by KSF and other group companies.
In 2005 Funding issued 250m floating rate notes repayable in 2010.
They were constituted under a trust deed dated 9 February 2005 made between Funding, KSF (then named Singer & Friedlander Ltd) and HSBC Trustee (CI) Ltd (the Trustee).
By clause 7 of the trust deed KSF guaranteed payment of principal and interest on the notes and performance of Fundings other obligations under the trust deed.
The correct construction of clause 7 (and in particular the non competition provisions in clause 7.7) is one of the issues in the appeal.
The net proceeds of the notes (approximately 249.5m) were advanced by Funding to KSF by way of unsecured loan.
When KSF went into administration on 8 October 2008 it owed Funding approximately 242.6m.
When Funding went into administration on 15 October 2008 the amount of principal prospectively due on the notes was (following the buyback and cancellation of some of the notes during 2008) approximately 240.3m.
On 23 March 2009 the Trustee gave notice that an event of default had occurred in respect of the notes.
The effect of this was that the notes became immediately due and payable, and the obligations of Funding (as principal debtor) and KSF (as guarantor) came into immediate effect.
On 28 April 2009 the Trustee submitted to Fundings administrators, and also to KSFs administrators, proofs of debt for principal and interest in respect of the loan notes in the sum of approximately 248.1m in each case.
Those proofs have been admitted.
On 8 May 2009 Funding submitted a proof in respect of its loan to KSF in the sum of approximately 242.6m.
KSFs administrators have indicated that, subject to the issues raised in this appeal, they intend to admit Fundings proof.
On 20 May 2009 KSFs administrators gave notice of their intention to make distributions in the administration, including distributions to ordinary unsecured creditors.
This notice was given under rule 2.95 of the Insolvency Rules 1986 (SI 1986/1925) as amended, and with the permission of the court granted by an order of Henderson J made on 24 April 2009.
KSF has numerous creditors who have already received dividends amounting to 58p in the pound (or in the case of Funding, had provision made for payment, subject to this appeal).
By contrast Funding has only one creditor other than the Trustee, that is HM Revenue and Customs, which has proved for the relatively trivial sum of 2,654.10.
Funding has no assets other than its loan to KSF.
It has an issued capital, fully paid up, of only 12,500.
The administrators of Funding have not given notice of an intention to make distributions in their administration.
Mr Dicker QC, for the administrators of KSF, drew attention to this fact but did not take any point on it.
The proceedings
This is a leapfrog appeal to the Supreme Court under section 12 of the Administration of Justice Act 1969 as amended.
The administrators of KSF applied to the Chancery Division for directions.
The matter came before Sir Andrew Morritt C.
At the hearing the Trustee recognised that the Chancellor was bound by the decision of the Court of Appeal in In re SSSL Realisations (2002) Ltd [2006] EWCA Civ 7, [2006] Ch 610 (SSSL), in which the Court of Appeal had in comparable circumstances applied the equitable principle known as the rule in Cherry v Boultbee (1839) 4 My & Cr 442.
The only issue argued before the Chancellor was whether clause 7.7 of the trust deed excluded that rule.
But the Trustee made clear its intention to argue in the Supreme Court, if granted permission to appeal, that SSSL was wrongly decided.
Fundings administrators were joined in the proceedings but were not represented.
The Chancellors order dated 18 December 2009 declared that the rule in Cherry v Boultbee was not excluded and directed that the administrators of KSF might rely on it unless and until KSFs right to indemnity (as a surety) had been satisfied in full.
He granted a certificate under section 12 of the 1969 Act that there was a point of law of general public importance on which he was bound by a fully considered judgment of the Court of Appeal.
The Supreme Court gave the Trustee permission to appeal.
Both sets of administrators are respondents to the appeal but, again, Fundings administrators have not been represented.
The rule against double proof
The expression the rule in Cherry v Boultbee suggests a technical rule of some complexity.
Any such impression would be misleading.
It is basically a simple technique of netting off reciprocal monetary obligations, even where there is no room for legal set off, developed and used by masters in the Court of Chancery in giving directions for the administration of the estates of deceased persons.
Complication arises only in a situation of insolvency, where the equitable rule produces a different outcome from that produced by statutory set off (see para 43 below).
This appeal ultimately turns on what function, if any, the equitable rule has to perform in the operation of the rule against double proof as it applies in suretyship situations.
The appellant Trustee, on behalf of the noteholders, submits that it would be irrational and unfair to apply it in circumstances in which there is clear House of Lords authority (Secretary of State for Trade and Industry v Frid [2004] UKHL 24, [2004] 2 AC 506) that statutory set off does not apply.
The active respondents, the administrators of KSF, submit that its application is required by two decisions of the Court of Appeal, In re Melton [1918] 1 Ch 37 and SSSL [2006] Ch 610, and that they were rightly decided.
The starting point in understanding and resolving this issue must be, not Cherry v Boultbee, but the rule against double proof as it applies to suretyship.
One of the earliest judicial expositions of that rule was by Mellish LJ in In re Oriental Commercial Bank (1871) LR 7 Ch App 99, 103 104: But the principle itself that an insolvent estate, whether wound up in Chancery or in Bankruptcy, ought not to pay two dividends in respect of the same debt appears to me to be a perfectly sound principle.
If it were not so, a creditor could always manage, by getting his debtor to enter into several distinct contracts with different people for the same debt, to obtain higher dividends than the other creditors, and perhaps get his debt paid in full.
I apprehend that is what the law does not allow; the true principle is, that there is only to be one dividend in respect of what is in substance the same debt, although there may be two separate contracts.
The function of the rule is not to prevent a double proof of the same debt against two separate estates (that is what insolvency practitioners call double dip).
The rule prevents a double proof of what is in substance the same debt being made against the same estate, leading to the payment of a double dividend out of one estate.
It is for that reason sometimes called the rule against double dividend.
In the simplest case of suretyship (where the surety has neither given nor been provided with security, and has an unlimited liability) there is a triangle of rights and liabilities between the principal debtor (PD), the surety (S) and the creditor (C).
PD has the primary obligation to C and a secondary obligation to indemnify S if and so far as S discharges PDs liability, but if PD is insolvent S may not enforce that right in competition with C. S has an obligation to C to answer for PDs liability, and the secondary right of obtaining an indemnity from PD.
C can (after due notice) proceed against either or both of PD and section If both PD and S are in insolvent liquidation, C can prove against each for 100p in the pound but may not recover more than 100p in the pound in all.
The primary purpose of the rule has been described as the protection of other creditors of PD against unfair treatment by an arrangement under which there are multiple creditors in respect of the same debt: Swinfen Eady LJ in In re Melton [1918] 1 Ch 37, 48 citing Mellish LJ in In re Oriental Commercial Bank.
There is a full discussion of the purpose and scope of the rule in the judgment of Oliver LJ in Barclays Bank Ltd v TOSG Trust Fund Ltd [1984] AC 626, 636 644.
The much quoted example given by Mellish LJ may seem surprising, since in a suretyship situation there are on the face of it two debtors and one creditor.
But the surety is also potentially a creditor of the principal debtor, because of his right to an indemnity.
The effect of the rule is that so long as C has not been paid in full, S may not compete with C either directly by proving against PD for an indemnity, or indirectly by setting off his right to an indemnity against any separate debt owed by S to PD.
The position was summarised by Lord Hoffmann, with whom the rest of the appellate committee agreed, in Secretary of State for Trade and Industry v Frid [2004] 2 AC 506, para 13, commenting on In re Fenton (No 1) [1931] 1 Ch 85: In re Fenton, Ex p Fenton Textile Association Ltd [1931] 1 Ch 85 was another case of a surety under a pre insolvency guarantee, but this time he had not actually paid.
Nor could he pay, because he was bankrupt and his assets had vested in his trustee.
The creditor was still owed the money and entitled to prove in the liquidation.
The Court of Appeal held, first, that one could not have more than one proof in respect of the same debt (the rule against double proof); otherwise, if there had been, say, four guarantors, there could have been five people receiving dividends on the same debt.
Secondly, the Court of Appeal said that until the creditor had been paid, he had the superior right of proof and a proof by a surety was excluded.
Thirdly, the court said that a debt which could not be proved could not be relied upon for set off.
There is no longer doubt about any of these propositions.
But the judgments of Lawrence and Romer LJJ make it clear (that of Lord Hanworth MR is a little obscure) that if the guarantor had paid off the debt after the insolvency date, he would have been entitled to set it off against a debt which he owed to the company.
The rule in Cherry v Boultbee
After that brief introduction to double proof (it will be necessary to return to it in more detail) it is appropriate to go back in time to the origins and development of the equitable rule.
The rule was described as follows by Kekewich J in In re Akerman [1891] 3 Ch 212, 219: A person who owes an estate money, that is to say, who is bound to increase the general mass of the estate by a contribution of his own, cannot claim an aliquot share given to him out of that mass without first making the contribution which completes it.
Nothing is in truth retained by the representative of the estate; nothing is in strict language set off; but the contributor is paid by holding in his own hand a part of the mass, which, if the mass were completed, he would receive back.
That is expanding what the Lord Chancellor calls in Cherry v Boultbee a right to pay out of the fund in hand, rather than a set off.
In re Akerman was not an insolvency case.
The issue was whether in the division of the testators residuary estate three of the testators seven children had to bring into account statute barred debts due to the estate.
It was held that they were bound to bring them into account.
The early cases on the rule were mostly concerned with testamentary gifts in favour of relatives who were debtors of the testator (or testatrix).
Some of them became bankrupt.
Three points should be noted.
First, it was only later, and by analogy, that the rule was extended to cases not concerned with the administration of deceased persons estates.
Second, the beneficiarys bankruptcy sometimes occurred before, and sometimes after, the death on which the testamentary disposition took effect, and the sequence of events may make a difference.
Third, very few of the early cases involved suretyship.
The earliest case that calls for mention is Jeffs v Wood (1723) 2 P Wms 128.
Jeffs senior made a will appointing his son Jeffs junior as his executor and leaving a legacy of 500 to his nephew Wood, who was indebted to the testator in a smaller sum.
Wood was made bankrupt after the testators death, but before the legacy had been paid.
Sir Joseph Jekyll MR directed the executor to pay Wood the balance of the legacy after retention by the executor of the full amount of Woods debt to the testator.
If Jeffs v Wood is (as some authorities have suggested) the first clear application of the equitable rule, then Cherry v Boultbee (1839) 4 My & Cr 442, which has given its name to the rule, is an illustration of how it operates differently where the beneficiary became bankrupt before the will took effect.
The facts are more fully stated in the first instance report, 2 Keen 319.
Thomas Boultbee owed 1,878 to his sister Catherine, who left him legacies totalling 2,500.
He became bankrupt in 1821.
She died in 1823, and Thomass assignee in bankruptcy claimed the legacy from Catherines executors.
Lord Cottenham LC held that the executor could deduct from the legacies (which had in any event abated) only so much of the debt as would have been paid as a dividend in Thomass bankruptcy (in which Catherine had not proved).
The reasoning behind the different outcome in the later case appears at p 447: the bankruptcy of the debtor having taken place in the lifetime of the testatrix, her executors were never entitled to receive from the assignee more than the dividends upon the debt.
The underlying principle appears even more clearly in later cases.
In Willes v Greenhill (No 1) (1860) 29 Beav 376 the testator had in 1830 backed a bill for his son Henry.
It was dishonoured, and after the testators death in 1832 his executors met the liability.
Henry had a one sixth interest, subject to his mothers life interest, in the residuary trust fund.
Henry mortgaged this interest and the mortgage was transferred to Willes.
The issue of priority in the distribution of Henrys share arose on the widows death in 1849.
Sir John Romilly MR held that the executors right to make an adjustment to indemnify themselves took priority to the rights of the mortgagee.
It was not a bankruptcy case, but it brings out the proprietary character of the rights of those who participate (whether as creditors, legatees or shareholders) in the distribution of a fund held or administered by fiduciaries.
The inception of the administration (or bankruptcy, or liquidation) crystallises the position, and persons who were previously unsecured creditors obtain proprietary interests of a sort (though they may ultimately prove worthless because others take priority).
The rule was applied in the compulsory liquidation of a company in In re Rhodesia Goldfields Ltd [1910] 1 Ch 239.
Partridge, a director of the company who held some of its debenture stock, was facing a serious misfeasance claim which had not yet been resolved.
Set off was therefore not available.
But Swinfen Eady J said (at p 247) that it would be a strange travesty of equity to hold that in distributing the fund Partridge was entitled to be paid at once all that was due to him out of the companys money, and subsequently to find, after it had been established that he owed money to the fund, that the amount could not be recovered from him.
Payment of what was due to Partridge and his assignees was therefore deferred until the claim against him was resolved.
The rule was applied again by Sargant J in In re Peruvian Railway Construction Co Ltd [1915] 2 Ch 144 (upheld by the Court of Appeal in brief judgments [1915] 2 Ch 442).
William Alt died insolvent in 1908.
His estate included shares in the company, which went into voluntary liquidation in 1914.
Alt was indebted to the company in the sum of 2,633 (as certified by the master in the administration of the insolvent estate).
It was held that in the distribution of the companys surplus assets the liquidator could retain out of the fund, on account of Alts debt, only the amount of the dividend on the debt.
Sargant J distinguished other cited authorities (at p 153) as having an entire absence of the special feature present in Cherry v Boultbee and in the case before me, namely, the insolvency of the original debtor before the right of retainer or quasi set off had first arisen.
Sargant Js judgment contains a full review of the authorities.
These included In re Auriferous Properties Ltd (No 2) [1898] 2 Ch 428 and In re West Coast Gold Fields Ltd [1905] 1 Ch 597.
These cases concerned claims made in liquidations by creditors who were also holders of shares which were not fully paid up.
In each case it was held, following the seminal decision of Lord Chelmsford LC and the Lord Justices in In re Overend Gurney & Co (Grissells case) (1866) LR 1 Ch App 528, that the claimant could recover nothing as a creditor until all his liability as a contributory had been discharged.
Buckley J said in In re West Coast Gold Fields Ltd [1905] 1 Ch 597, 602 (where the shareholder was bankrupt but the company solvent and in voluntary liquidation): The right view is that the person liable as contributory must discharge himself in that character before he can set up that, as a creditor, he is entitled to receive anything, and a fortiori, as it seems to me, before he can set up that, as a contributory, he is entitled to receive anything.
That decision was upheld by the Court of Appeal in a brief judgment of the court [1906] 1 Ch 1.
The payment up of the shares in full was a condition precedent to any participation in the distribution of surplus assets.
In this appeal the appellants case is that payment off in full of the Trustee as creditor is a condition precedent to the admission of any proof against Funding by KSF as surety.
In re Melton, In re Fenton (No 1) and In re Fenton (No 2)
In re Melton [1918] 1 Ch 37 and the two cases of In re Fenton (No 1) [1931] 1 Ch 85 and (No 2) [1932] 1 Ch 178 are discussed at length in the judgment of Chadwick LJ in SSSL (paras 69 91) and In re Melton was the principal authority relied on in the Court of Appeals reasoning in SSSL.
It is therefore necessary to look at these cases, and especially In re Melton, in some detail.
The facts of In re Melton were quite complicated and it is important to note the sequence of events.
Richard Melton was married, with one son Arthur, and three daughters.
In 1901 Richard and another surety gave a joint and several guarantee in respect of Arthurs bank overdraft, limited to 500.
Richard died in 1907.
By his will he settled his real estate on his wife for life and then on trust for sale for his four children in equal shares.
His personal estate was very small.
In 1910 Arthur mortgaged his one quarter interest in expectancy to the bank.
In 1911 Arthur absconded and later in that year he was adjudicated bankrupt.
He then owed the bank 1,057.
The bank valued its security at 158 and proved for the balance.
It received a dividend of 494 in Arthurs bankruptcy.
By then both sureties were dead and the bank called on their respective executors to pay 500, with interest from the date of demand.
The other set of executors paid 250 and their share of the interest.
Richards executors had no funds available and had to go to court for power to raise money on the settled real estate.
They obtained authority, raised 420, and paid 313 to the bank, representing 250 together with interest.
In 1916 the widow died and the trust for sale arose.
The land was sold for about 1,600 net of the mortgage and costs.
Three quarters of the fund was distributable to the daughters.
Arthurs mortgaged quarter share had been sold by the bank and purchased by Frances, the deserted wife of the absconding Arthur.
The question was whether Frances, as assignee of Arthurs original interest, must bring into account the 313 paid by the executors to the bank.
Astbury J held that she must.
Frances appealed.
The daughters opposed her appeal.
The executors were neutral, and neither Arthurs trustee in bankruptcy nor the bank was a party.
In the Court of Appeal all three members of the Court (Swinfen Eady, Warrington and Scrutton LJJ) delivered full judgments.
All of them attached great weight to the sequence of events.
The testator had before his death incurred a potential liability as surety to the bank, with a concomitant potential right to indemnity if the surety was called on to pay, and the bank was (by one means or another) paid off in full.
The law report does not state in terms that the bank was paid off in full, but both the statement of facts, and the judgments, seem to proceed on the basis that the bank had no further claim against either the surety or the estate of the principal debtor.
The testators potential liability was a liability which affected the administration of his estate prior to Arthurs bankruptcy, and it matured into an immediate liability when the bank called on the executors to pay, and 313 was eventually paid.
Similarly the potential right to an indemnity was a contingent asset of the estate prior to Arthurs bankruptcy, and it matured into an immediate claim when the 313 was paid, apparently in full and final satisfaction of the banks claims against anyone.
The proprietary character of the rights (or equities) arising from this sequence of events was reflected (though expressed in rather different terms) in all three judgments in the Court of Appeal in In re Melton [1918] 1 Ch 37.
Swinfen Eady LJ stated at p 52 (speaking of In re Binns [1896] 2 Ch 584, a comparable case where there were two sons made bankrupt after the death of their father, the surety): The fallacy is that at the date of the bankruptcy what was claimed was not part of the debtors estate.
An equity that the testators estate should be indemnified in respect of his liability under the guarantee arose at his death; and when the sons became bankrupt there was already an equity subject to which the trustees in bankruptcy took the sons interests; and the trustees in bankruptcy took nothing more than the debtors had, and the debtors interests under the will were subject to this equity.
In this passage the word equity is used three times.
It is not fully explained but it emphasises that an unsecured right of indemnity had, on the testators death, acquired some sort of proprietary character.
Similarly Warrington LJ stated, at p 57: What the trustees are here claiming never was distributable amongst the creditors of the bankrupt at all.
I think, therefore, in the present case, on the simple ground that the right of the trustees to retain is in respect of something which at the date of the bankruptcy did not form part of the estate distributable amongst the creditors of the bankrupt, the trustees are still entitled to the right they then had.
If it were necessary for the purposes of this decision I do not think it is I should, as at present advised, be prepared to say that the trustees in respect of their claim are in the position of secured creditors; for their right, as expressed by the Lord Chancellor in Cherry v Boultbee, seems to me to have all the characteristics of a depository lien.
Scrutton LJ reached the same conclusion, though he saw it in less definitely proprietary terms (at p 60): Speaking for myself, I am not prepared to say that this right of the executor is a mortgage, charge or lien.
I do not wish finally to decide that, because the question may directly arise in other cases, but, as at present advised, I do not see how that can be called a lien.
Equally, however, I see nothing in section 7(1) of the Bankruptcy Act 1914, to prevent the exercise of this right; it is not the use of a remedy against the property or person of the debtor, which the creditor is forbidden to make use of, unless he is a secured creditor.
It appears to me to be simply a right to see that the person who claims a share of the testators estate claims only the proper share .
So the appeal was dismissed.
In In re Melton all three members of the court considered that the case of In re Binns [1896] 2 Ch 584 had been wrongly decided, and was based on a fallacy which had already been exposed in Midland Banking Co v Chambers (1869) LR 4 Ch App 398.
This point played an important part in the reasoning of Swinfen Eady LJ (at pp 51 52) and Warrington LJ (at pp 56 57).
Midland Banking Co v Chambers and In re Binns were both cases concerned with insolvency and suretyship, but with the further element of security being provided in the earlier case by PD to S, and in the later case by S to C.
In the earlier case Thorpe gave the bank a guarantee, limited to 300, of Mercers overdraft.
The guarantee was given in 1865.
In 1866 Mercer made an assignment to trustees for his creditors, which was equivalent to bankruptcy.
At some time before then Mercer granted Thorpe a mortgage to indemnify him.
Mercers overdraft stood at 410.
The trustees sold the mortgaged property and paid Thorpe 300, which he paid to the bank.
The issue between the bank and the trustees was whether the bank could prove for 410 or only 110.
It was not argued that the security was a fraudulent preference.
Malins V C held that the bank could prove for the full sum, and the trustees appealed.
The Lord Justices dismissed the appeal.
The trustees argued that the 300 had been paid out of PDs estate, but that was dismissed as a fallacy because S had the benefit of a valid security granted prior to the bankruptcy.
Giffard LJ said (at p 402) that the 300 was paid out of something which, having before the execution of the creditors deed been dedicated to the purpose of indemnifying the surety, was not, at the time of the execution of that deed, part of the debtors estate.
There was also a question of construction of the guarantee which both courts resolved in favour of the bank.
In In re Binns the security was the other way round.
In 1894 William Binns deposited 2,400 in his own name with the bank where two of his sons, who traded as J & F Binns, had an overdraft.
William signed a letter in these terms: I hereby declare that my deposit of 2,400 is lodged with you as a continuing security for any amount that may from time to time be owing to you by J & F Binns.
In 1895 William died leaving each son a legacy and a one sixth share of his residuary estate.
The overdraft then stood at 8,858.
A few months later the sons were made bankrupt.
The bank proved for the whole overdraft debt but was unlikely to receive more than about 3,300 by way of dividend.
It had not yet appropriated the 2,400 deposit but it was accepted that it would do so.
The issue was between the sons trustees in bankruptcy, who contended that the sons beneficial interests under the will were assets available for their creditors, and the trustees of the fathers will, who contended that they could retain the sons beneficial interests in order to indemnify the fathers estate against the 2,400 which he had deposited.
The trustees in bankruptcy were represented by Mr Swinfen Eady QC, who argued that the trustees of the will had no right to prove in the bankruptcy, because the bank had proved for the whole overdraft debt and it was gone (in the sense, it seems, of being incapable of proof again, because of the rule against double proof).
This argument was accepted by North J.
He said (at p 588, but using PD, S and C): But the difficulty in [Ss] way is this that there is no debt in respect of which [S] can at present claim to retain anything as against [PD].
The claim against [PD] is made by [C]; and [S] cannot as against [C] set up an adverse claim of any kind.
No doubt when [C] have been paid in full the position of matters would be different .
North J went on to explain that, on the facts, there was no real prospect of the bank ever being paid in full.
Warrington LJ criticised North J in In re Melton (at p 57) but he was mistaken in his premise (at p 56) that the facts of In re Binns were undoubtedly, for all substantial purposes, identical with those of In re Melton.
In In re Melton the bank had been paid in full; in In re Binns the bank had not been paid in full, and was never going to be paid in full.
Moreover in In re Melton there was no question of anything in the testators estate going to the bankrupt sons trustee: his interest had been mortgaged and then sold and Frances (the deserted wife) was a purchaser for value (but only of an equitable interest, and with notice of the equity of indemnification).
In In re Binns, by contrast, the sons interests under their fathers will were available to their trustees in bankruptcy, and the diversion of those interests to other members of the family would have meant that S was in competition with C while Cs claims had not been fully satisfied.
There is also the question why Swinfen Eady LJ, having won In re Binns as leading counsel about 20 years before, said in his judgment in In re Melton that it was fallacious and wrongly decided.
The relevant passage is at pp 51 52 and it is not at all easy to follow.
Swinfen Eady LJ said twice that North J fell into the same fallacy as was exposed by Giffard LJ in Midland Banking Co v Chambers, but the facts and the issues in that case were quite different.
In the later case S had provided security to C; in the earlier case PD had provided security to S, and the security had been dealt with in an unusual way (by a mortgagors sale, not a mortgagees) which left room for argument about where the 300 should be treated as coming from.
The reasoning in In re Melton does not satisfy me that In re Binns was wrongly decided.
That does not however cast any doubt on the correctness of the decision in In re Melton, the facts of which were quite unusual.
I come next to the two Fenton cases.
Fenton had a large holding of shares in a company (referred to as the Association) which owned woollen mills.
He was also heavily indebted to the Association.
In 1921 he made an arrangement with his creditors and the Association submitted a proof for over 550,000, subsequently reduced to about 423,000.
Fenton had entered into four limited guarantees of bank loans in respect of which the Association was the principal debtor.
The total liabilities under these guarantees amounted to 166,795, which his trustee sought to set off against the debt proved by the Association.
The Association itself went into compulsory liquidation in 1923.
The banks were unsecured creditors of the Association and only one of them proved in the liquidation, because there was going to be nothing left for unsecured creditors (this was established in the Court of Appeal; at first instance the judge was told that none of the banks had proved).
The banks proved against Fenton for the total sum of 166,795.
Luxmoore J at first instance permitted the set off in full.
The Court of Appeal unanimously allowed an appeal by the Associations liquidator.
The judgment of Lord Hanworth MR is a little obscure (as Lord Hoffmann put it in Secretary of State for Trade and Industry v Frid [2004] 2 AC 506, para 13).
Much of it was concerned with a discussion of the need for mutuality in set off; but in the final passage (at pp 109 110) he referred to In re Oriental Commercial Bank (1871) LR 7 Ch App 99, 103 and relied on the rule against double proof.
So did Lawrence LJ at p 114, addressing the situation where both principal debtor and surety are bankrupt: The reason why, in my opinion, such a claim . cannot be set off is because so long as the estate of the principal debtor remains liable to the principal creditor the surety will not be permitted to prove against the estate of the principal debtor, as such a proof would be a double proof for the same debt, and would therefore be inadmissible as being contrary to the established rule in bankruptcy.
Romer LJ agreed.
He said at pp 119 120: In the present case, if Fenton, not having paid the banks anything under his guarantee, were entitled to prove in the winding up of the Association, or if, having paid them less than the amount due to them, he were to prove for the amount so paid, and the banks were also to prove in the winding up of the Association for the full sum due to them, as they would be entitled to do, the estate of the Association would be subjected to more than one proof in respect of the same debt, and this is not permissible.
A further issue in the liquidation of the Association came before Luxmoore J a year later: In re Fenton (No 2) [1932] 1 Ch 178.
Fentons trustee in bankruptcy had declared a dividend of one shilling (5p) in the pound and the question was whether the trustee could withhold the Associations dividend because of Fentons liability on his guarantees to the banks, and his potential right to an indemnity.
The judge held (rather surprisingly, in view of the passage from Romer LJs judgment quoted above) that this point had not been decided by the Court of Appeal.
The argument for Fentons trustee was that so long as the Association was indebted, either immediately or contingently, to Fentons estate, the Association should receive no dividend, despite the fact that it had proved for a separate liability of 423,000.
Luxmoore J rejected this for essentially the same reason as the Court of Appeal had rejected set off in the earlier proceedings (at pp 187 188): But the position is further complicated by the fact that the banks have already proved or are entitled to prove against the assets of the Association in respect of the whole of the sum guaranteed, and consequently if the trustee of the deeds of arrangement should retain out of the dividend payable to the Association a sum equal to the dividend on the total amount due to the banks under the guarantee, there would in effect be an allowance against the Association of two dividends in respect of what is for all practical purposes the same debt, and so the rule against double proof would be infringed.
In other words S (Fentons estate) would be competing with C (the banks, which had not been, and never were going to be, paid in full) in claiming (whether directly or by set off or retention) against PD (the Association).
The Court of Appeal in SSSL held that In re Fenton (No 2) was wrongly decided.
SSSL: introduction
Both the facts and the issues in SSSL were complicated.
Remarkably, the point now at issue was not raised at all at first instance, and so the Supreme Court has not been referred, except in passing, to the judgment of Lloyd J [2004] EWHC 1760 (Ch), [2005] 1 BCLC 1.
The numerous issues that Lloyd J did have to resolve turned largely on the correct construction and legal effect of a subordination (or non competition) clause in a deed of indemnity entered into by six companies in the group headed by Save Group plc (Group) in favour of AIG Europe (UK) Ltd (AIG).
The group traded as petrol retailers and AIG provided a bond for payment of excise duty to HMRC, so enabling liability for duty to be deferred.
The deed of indemnity related to the bond and the companies that gave the indemnity included Group and its subsidiary, then called Save Service Stations Ltd, later renamed SSSL Realisations (2002) Ltd (Stations).
Stations owned most of the fixed assets of the petrol retailing business.
There were substantial inter company debts.
Group had a treasury function and Stations owed large sums to Group both for loans and for petrol products bought by Group and sold on to Stations.
In 2001 Group and all its subsidiaries went into administration.
Later Group went into compulsory liquidation and Stations into creditors voluntary liquidation.
In early 2004 both sets of liquidators made separate applications to the court for directions.
Issues were agreed and heard by Lloyd J in June 2004.
On 27 July 2004 he held that Group was not entitled to prove for the debt due to it from Stations.
That is a very brief summary of the practical result of a long judgment which covered numerous issues, not including the rule in Cherry v Boultbee.
The rule was raised in a respondents notice served by Stations in response to Groups notice of appeal.
The point was raised contingently, against the event that the Court of Appeal were to hold that Groups liquidators could disclaim its contract with AIG.
In the event the Court of Appeal upheld Lloyd J on the disclaimer point, and every other point, and dealt with Cherry v Boultbee only because the issue had been fully argued, and Chadwick LJ (para 68) thought it sensible to address it.
When the present case came before the Chancellor it was not disputed that SSSL should be treated as a binding precedent.
In SSSL Chadwick LJ gave the only judgment in the Court of Appeal [2006] Ch 610, with which Jonathan Parker LJ and Etherton J agreed.
In his judgment he introduced the rule in Cherry v Boultbee in paras 11 17, 20 25 and 31, but his main reasoning about the rule is in paras 68117.
Before coming to those paragraphs I would note parenthetically that in SSSL the Court of Appeal had detailed evidence as to the assets and liabilities of the various group companies, and Chadwick LJ was at pains to explain the financial implications of the issues.
That was no doubt appropriate in a case in which the court was being asked to grant an injunction.
In this appeal, by contrast, the Supreme Court has no relevant documentary evidence (the only exhibit to the sixth witness statement of Mr Brazzill, one of the administrators of KSF, included in our papers is the offering circular published by Funding, which is now ancient history), and Mr Moss QC, for the Trustee, was not eager to go into the figures.
I make no complaint about that, as the court has to decide the point as a matter of principle.
Mr Moss did tell us that the Trustee will recover about 84% of its claim if it loses the appeal completely, and 100% if it wins either on Cherry v Boultbee or on the point of construction which the Chancellor decided against the Trustee.
Apart from that we know that Funding has no assets other than the debt owed to it by KSF, and no significant creditors other than the Trustee; and that KSF has numerous creditors and has so far paid (or reserved) dividends totalling 58p in the pound.
Above all it is essential to bear in mind, in order to avoid confusion, that although this appeal raises the same legal issue as was raised in SSSL the factual context is different.
In SSSL PD was the parent company, Group, and S was (among other subsidiaries) Stations; and (apart from any question of indemnification of S) S owed PD about 70m.
In the present appeal PD is the subsidiary, Funding; S is the parent company, KSF; and (apart from any question of indemnification) S owes PD about 242m.
In his judgment Chadwick LJ was also at pains to explain the operation of the rule in Cherry v Boultbee in mathematical notation which, if I may respectfully say so, tends to suggest that the rule is a branch of rocket science.
The disparity between the results of the examples in para 13 of his judgment is simply the difference between netting off at 100p in the pound and netting off at the appropriate dividend rate.
In the example set off means that the debtor beneficiary gets 1,818, that is 100p in the pound worth of set off, and 90.9p in the pound for the balance of 2,000 due from the bankrupts estate.
The equitable rule means that he gets 1,750, that is 91.7p in the pound for the whole 3,000 due to him, with 1,000 treated as already in his hands.
Where the equitable rule applies the rate of dividend is marginally higher for everyone, because the differential (in the example, 91 out of the set off of 1,000) is made available for distribution across the board.
The lower the expected rate of dividend, the greater will be the disparity between the two computations.
SSSL: the Court of Appeals reasoning
The scheme of paras 68 to 117 of Chadwick LJs judgment is as follows: (1) Para 68 sets out the financial implications of the point. (2) Paras 69 to 78 contain a full discussion of In re Melton, concluding with the extraction of three principles stated in para 79. (3) Paras 80 to 82 identify three questions left unanswered by In re Melton. (4) Paras 83 to 92 discuss the two cases of In re Fenton, concluding that In re Fenton (No 2) was wrongly decided. (5) Paras 93 to 97 discuss the purpose of the rule against double proof (which has been briefly introduced in paras 14 to 15). (6) Paras 98 to 117 discuss and answer the three questions left unanswered by In re Melton, the first being whether the equitable rule applies in a situation where statutory set off is (as noted by Lord Hoffmann in Secretary of State for Trade and Industry v Frid [2004] 2 AC 506, para 13) excluded by the rule against double proof.
The first principle that Chadwick LJ extracted from In re Melton is the equitable rule itself, which he set out as a mathematical formula.
The second principle is that the rule extends to cases where the fund has a right to be indemnified by the claimant against a liability which the fund may be required to meet in the future.
That proposition seems to be too widely stated.
In the passage quoted from the judgment of Warrington LJ in In re Melton (at p 55) that time refers to the death of Richard Melton in 1907.
His settled estate did not become distributable until his widows death in 1916, and by then there was an immediate right to an indemnity for the 313 paid by the estate.
The judgment of Warrington J in In re Abrahams [1908] 2 Ch 69, 73, states the correct rule: the debt due to the testator is one which is not immediately payable, whereas the right of the debtor to receive the residuary share is an immediate right.
I think, therefore, that the debtor is entitled to receive that share.
Chadwick LJ also relied on Warrington LJs comments on In re Binns [1896] 2 Ch 584.
But (as already noted) the facts of In re Binns were not identical, or even similar, to those of In re Melton.
The third principle, set out in para 79 (3), is also too widely stated, as Chadwick LJ himself recognised in the following paragraph.
After referring to section 323 of the Insolvency Act 1986 and rule 4.90 of the Insolvency Rules he observed: But the question remains whether the [equitable] rule is applicable in a case where by reason of the rule against double proof there is no set off between Xs claim against the fund, on the one hand, and the funds right to be indemnified by X on the other hand.
That is the heart of the matter, but having posed that question the judgment embarks on a lengthy discussion of the two Fenton cases, concluding that In re Fenton (No 2) was wrongly decided because it was inconsistent with the judgments in In re Melton.
I respectfully disagree.
In In re Fenton (No 2) Luxmoore J was faithfully following the reasoning of the Court of Appeal in In re Fenton (No 1).
The banks (C) were never going to recover in full either from the Association (PD) or from Fenton (S), and Fentons trustee could not seek to recover from the Association in competition with the banks, either by direct proof or by set off, merely because he had paid a dividend of 5p in the pound.
The equitable rule is a technique of netting off similar to statutory set off.
It is true that in a situation of double insolvency (that is where both PD and S are bankrupt or in insolvent liquidation) the equitable rule may produce a different result from set off if PDs insolvency occurred before that of S (that is the difference between Jeffs v Wood and In re Rhodesia Goldfields Ltd, on the one hand, and Cherry v Boultbee and In re Peruvian Railway Construction Co Ltd, on the other hand).
But in this appeal that is of little importance as there is a larger and more basic question to be asked first.
If the policy of the law underlying the rule against double proof is powerful enough to oust statutory set off, is there any good reason why it should not have the same effect on the equitable rule?
Chadwick LJ considered that there are good reasons, and (para 92) that the contrary view involved three misunderstandings: of the principle underlying the equitable rule, of the reasoning in In re Melton, and of the object of the rule against double proof.
I have to say that I find much of his reasoning difficult to follow.
The distinction drawn in para 94 between swelling assets and limiting claims seems to be, in this context, a distinction without a difference: netting off matches assets against claims, and the rule against double proof is (as has often been said) a matter of substance, not form.
Para 96 of the judgment suggests that in a double insolvency the equitable rule and the rule against double proof can and should both apply, and that this would strike a fair balance between the competing interests of creditors.
In my view this approach would lead to many doubts and difficulties, and whether the end result would strike a fair balance would depend very much on the facts of the particular case (that point is made forcefully in a case note by Look Chan Ho, Understanding Debt Subordination and the Rule in Cherry v Boultbee: Re SSSL Realisations [2006] JIBLR 266, 271 272; see also a learned article from an Australian viewpoint, Dean, Luckett and Houghton, Notional Calculations in Liquidations Revisited: the case of ASC Class Order Cross Guarantees (1993) 11 Company and Securities Law Journal 204).
The facts of this case would be regarded as unusual in normal commercial dealings (though they may be more usual in the world of investment banking) in that Funding, a subsidiary with a relatively tiny paid up capital, borrowed almost 250m, and as it has no other significant creditors the Trustee will, if it wins this appeal, make a full recovery on behalf of the noteholders.
In that respect the case has some similarity to In re Polly Peck International plc [1996] 2 All ER 433, in which it was argued, unsuccessfully, that the special purpose vehicle incorporated in the Cayman Islands should be regarded as a single economic unit with the holding company, so as to eliminate double dip as well as double dividend.
Para 98 of the judgment refers to the line of authority dealing with the special case of shareholders liable for calls on shares which are not fully paid up.
Some of these cases are mentioned in para 20 above.
Chadwick LJ sets out a fuller citation of the cases but I have to say, with respect, that he seems to have missed their point.
The situation in this line of authority is that a shareholder is a creditor of an insolvent company, but his shares are not fully paid up, so that he is liable as a contributory.
Suppose he has 10,000 1 shares, 10p paid, and is owed 15,000, but the dividend prospectively payable is only 30p in the pound.
If the liquidator calls on him for 9,000 to make his shares fully paid up, he has no right of set off, and to that extent he is disadvantaged (that is In re Auriferous Properties Ltd (No 1) [1898] 1 Ch 691).
If he seeks to prove in the liquidation, the liquidator can rely on the equitable rule as it applies in a case of this sort that is, that he can receive nothing until he has paid everything that he owes as a contributory.
That is In re Auriferous Properties Ltd (No 2) [1898] 2 Ch 428.
The rule is also very clearly stated by Buckley J in In re West Coast Gold Fields Ltd [1905] 1 Ch 597, 602 (affirmed [1906] 1 Ch 1, and cited in para 20 above).
Payment of the call is a condition precedent to the shareholders participation in any distribution, and again the shareholder is to that extent disadvantaged.
So the equitable rule may be said to fill the gap left by disapplication of set off, but it does not work in opposition to set off.
It produces a similar netting off effect except where some cogent principle of law requires one claim to be given strict priority to another.
The principle that a companys contributories must stand in the queue behind its creditors is one such principle.
The rule against double proof is another.
I would accept Mr Mosss submission that it would be technical, artificial and wrong to treat the rule against double proof as trumping set off (as it undoubtedly does) but as not trumping the equitable rule.
Conclusion
I would therefore allow this appeal on that ground, and set aside the Chancellors direction.
Once the Trustee has received 100p in the pound the rule against double proof will cease to apply, and any assets then remaining in the hands of Fundings administrators will be administered without further regard to it.
It is not necessary to address the issue of the correct construction of clause 7.7 of the trust deed, and it seems better not to comment on an issue which the Chancellor approached (as he was bound to) on legal premises now shown to be mistaken.
LORD HOPE
I would allow this appeal.
For the reasons given by Lord Walker with which I am in full agreement, I too would hold that the equitable rule in Cherry v Boultbee is excluded by the rule against double proof.
So the Trustee must be paid in full before there can be any proof against Funding as the principal debtor by KSF as guarantor.
| UK-Abs | This appeal is concerned with distributions made and to be made by the administrators of Kaupthing Singer & Friedlander Ltd (KSF), a bank.
In particular, the appeal turns on what function, if any, the equitable rule in Cherry v Boultbee has to perform in the operation of the rule against double proof as it applies in situations involving guarantees and other sureties [9].
Singer & Friedlander Funding plc (Funding) is a wholly owned subsidiary of KSF and its sole function was to raise funds for use by KSF and other group companies.
In 2005 Funding issued 250m floating rate notes constituted under a trust between KSF, Funding and HSBC Trustee (CI) Ltd (the Trustee).
Under the trust KSF guaranteed payment of the principal and interest on the notes [2].
The net proceeds of the notes were advanced by Funding to KSF by way of an unsecured loan [3].
Both KSF and Funding went into administration in October 2008.
When KSF went into administration on 8 October 2008 it owed Funding approximately 242.6m pursuant to the loan.
When Funding went into administration on 15 October 2008 approximately 240.3m was prospectively owing on the notes and on 23 March 2009 the Trustee gave notice of an event of default upon which the notes became immediately due and payable and the obligations of Funding (as principal debtor) and KSF (as guarantor) came into immediate effect [3].
On 28 April 2009, the Trustee submitted to each of Fundings and KSFs administrators proofs of debt in respect of the loan notes in the sum of approximately 248.1m.
On 8 May 2009, Funding submitted a proof in respect of its loan to KSF in the sum of approximately 242.6m [4].
On 20 May 2009, KSFs administrators gave notice of their intention to make distributions in the administration, including to ordinary unsecured creditors.
KSF has numerous creditors who have already received dividends amounting to 58p in the pound [5].
KSFs administrators applied to the Chancery Division for directions.
At the hearing the Trustee recognised that the Chancellor was bound by the Court of Appeal decision in In re SSSL Realisations (2002) Ltd [2006] Ch 610 (SSSL) but the Trustee made clear its intention to argue that SSSL was wrongly decided if granted permission to appeal.
Accordingly, the Chancellor declared that the rule in Cherry v Boultbee was not excluded and directed that the administrators of KSF might rely on it unless and until KSFs right of indemnity (as a surety) had been satisfied in full.
This is a leapfrog appeal direct from the Chancellor, who certified that there was a point of law of general public importance on which he was bound by a fully considered judgment of the Court of Appeal [6] [7].
The Supreme Court unanimously allows the appeal.
The rule in Cherry v Boultbee is excluded in this case by the rule against double proof.
Accordingly the Trustee must be paid in full before there can be any proof against Funding as the principle debtor by KSF as guarantor.
Lord Walker gives the leading judgment with which Lady Hale, Lord Clarke and Lord Collins agree.
Lord Hope delivers a short judgment agreeing with Lord Walkers reasons and the result.
The rule against double proof is a rule to prevent the double proof of what is in substance the same debt being made against the same estate, leading to the payment of a double dividend out of one estate.
In the simplest case of suretyship there is a triangle of rights and liabilities between the principal debtor (PD), the surety (S) and the creditor (C).
PD has the primary obligation to C and a secondary obligation to indemnify S if and so far as S discharges PDs liability.
But if PD is insolvent S may not enforce that right in competition with C. S has an obligation to C to answer for PDs liability and the secondary right of obtaining an indemnity from PD.
C can proceed against either or both of PD and section If both PD and S are in insolvent liquidation, C can prove against each for 100p in the pound but may not recover more than 100p in the pound in all [11].
The rule protects other creditors of PD against unfair treatment by an arrangement under which there are multiple creditors in respect of the same debt.
The effect is that so long as C has not been paid in full, S may not compete with C either directly by proving against PD for an indemnity, or indirectly by setting off his right to an indemnity against any separate debt owed by S to PD.
The rule in Cherry v Boultbee is a technique of netting off reciprocal monetary obligations, even where there is no room for legal set off [9].
A person who owes an estate money, that is, who is bound to increase the general mass of the estate by a contribution of his own, cannot claim a share given to him out of that mass estate without first making the contribution that completes it [13].
In SSSL, the Court of Appeal considered that there are good reasons why the rule against double proof should not have the same effect on the equitable rule in Cherry v Boultbee as it does on statutory set off.
The Court of Appeal considered that the contrary view involved three misunderstandings.
Lord Walker finds much of the reasoning of the Court of Appeal in SSSL difficult to follow [49].
For example, the Court of Appeals suggestion that in a double insolvency the rule in Cherry v Boultbee and the rule against double proof can and should both apply, as this would strike a fair balance between the competing interests of creditors, would lead to many doubts and difficulties [51] [52].
The equitable rule in Cherry v Boultbee may be said to fill the gap left by disapplication of set off, but it does not work in opposition to it.
It produces a similar netting off effect except where some cogent principle of law requires one claim to be given strict priority to another.
The rule against double proof is one such principle.
It would be technical, artificial and wrong to treat the rule against double proof as trumping set off but as not trumping the rule in Cherry v Boultbee [53].
|
This is, in effect, an appeal against the decision of the High Court of Justiciary in HM Advocate v McLean [2009] HCJAC 97, 2010 SLT 73, which was heard by a bench of seven judges.
The link between that case and the appeal is that the minuter in that case and the appellant, Peter Cadder, in this were both detained under section 14 of the Criminal Procedure (Scotland) Act 1995, as amended (the 1995 Act).
This has given rise, in both cases, to the question whether the Crowns reliance on admissions made by a detainee during his detention while being interviewed by the police without access to legal advice before the interview begins is incompatible with his right to a fair trial.
The minuter and the appellant were both interviewed by the police while they were being detained under section 14.
They made admissions on which, in McLean, the Crown intended to rely at trial and which, in Peter Cadders case, it did rely in obtaining a conviction.
In neither case did they have access to legal advice while they were in detention.
Nor was a solicitor present while they were being interviewed.
McLean had requested that intimation of the fact and place of his detention should be made to a solicitor.
But he was not offered an opportunity to have legal advice before he was interviewed, nor did he request this.
Cadder was asked whether he wished a solicitor to be contacted, and he replied that he did not.
At no time while he was being questioned did he request access to a solicitor.
In Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber of the European Court of Human Rights held unanimously that there had been a violation of article 6(3)(c) of the European Convention on Human Rights, in conjunction with article 6(1), because the applicant did not have the benefit of legal assistance while he was in police custody.
In McLean the Appeal Court held, notwithstanding the decision in Salduz, that the fact that legal representation was not available to the minuter did not of itself constitute a violation of articles 6(1) and 6(3)(c) read in conjunction.
In its opinion the guarantees otherwise available under the Scottish system were sufficient to avoid the risk of any unfairness.
It approved its decisions in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203 (by a court of five judges) that the Crowns reliance on admissions made by a detainee while being interviewed in the absence of a solicitor was not incompatible with the right to a fair trial.
The appellant seeks to challenge the decision in McLean.
He submits that the decision in Salduz requires this court to hold that there has been a violation of those articles.
It is remarkable that, until quite recently, nobody thought that there was anything wrong with this procedure.
Ever since the statutory power to question a suspect prior to charge was introduced by sections 1 to 3 of the Criminal Justice (Scotland) Act 1980, the system of criminal justice in Scotland has proceeded on the basis that admissions made by a detainee without access to legal advice during his detention are admissible.
Countless cases have gone through the courts, and decades have passed, without any challenge having been made to that assumption.
Many more are ongoing or awaiting trial figures were provided to the court which indicate there are about 76,000 such cases or are being held in the system pending the hearing of an appeal although not all of them may be affected by the decision in this case.
There is no doubt that a ruling that the assumption was erroneous will have profound consequences.
But there is no room, in the situation which confronts this court, for a decision that favours the status quo simply on grounds of expediency.
The issue is one of law, as the court appreciated in McLean.
It must be faced up to, whatever the consequences.
The facts of this case
At around 14.30 hours on 13 May 2007 the appellant was detained by the police at his home in Glasgow under section 14(1) of the 1995 Act following an incident in which Liam Tracey and his father John Tracey had been attacked by a group of youths.
In accordance with section 14(6) he was informed that he was being detained on suspicion of serious assault, and he was cautioned in accordance with section 14(9).
He made no comment, and was conveyed to London Road Police Office.
He arrived there at about 14.45 hours.
On arrival he was again cautioned in accordance with section 14(9).
At about 14.49 he was informed in accordance with section 15 of the 1995 Act that he was entitled to have intimation of his detention sent to a solicitor, but he declined to have a solicitor contacted on his behalf.
Thereafter, for a period of approximately 27 minutes commencing at about 15.03 hours, he was interviewed under caution by two police officers.
During this interview he made a number of admissions with regard to the offences with which he was later charged.
At 15.30 he was informed that he was no longer a detained person under section 14, and he was placed under arrest.
At 15.35 hours he was cautioned and charged with various offences in regard to the incident.
He made no reply to any of these charges.
On 27 August 2008 an identification parade was held at London Road Police Office.
A DVD compilation showing an image of the appellant and images of other individuals was shown to potential witnesses.
The complainer Liam Tracey identified the image of the appellant as that of his assailant.
The complainer John Tracey failed to identify anyone.
On 24 December 2008 an indictment was served on the appellant and two co accused charging them with assaulting Liam Tracey to his severe injury and permanent disfigurement, assaulting John Tracey to his injury and breach of the peace.
The appellant went to trial in the Sheriff Court at Glasgow on 26 May 2009.
On 27 May 2009 the procurator fiscal depute intimated that the Crown did not seek a conviction against the co accused and the trial proceeded against the appellant alone.
During the course of the trial the procurator fiscal depute led evidence from Liam Tracey, who identified the appellant as one of those involved in assaulting both him and his father John Tracey.
He also led evidence from John Tracey who identified the appellant in court as one of those involved in the assaults.
Evidence was led of the content of the interview of the appellant while he was in detention.
An audio tape recording of it was played in full to the jury, and the jury were given copies of the transcript.
In his charge to the jury the sheriff made reference both to the contents of the interview and to the dock identification of the appellant by John Tracey.
On 29 May 2009 the appellant was convicted on all charges and on 26 June 2009 he was sentenced to 250 hours Community Service.
The sheriff also imposed a compensation order for 500.
On 9 July 2009 the appellant lodged intimation of his intention to appeal against his conviction.
On 12 October 2009 he lodged a note of appeal in which he sought leave to challenge his conviction on four grounds.
Grounds 1 and 2 referred to the reliance by the procurator fiscal depute on the contents of his interview.
Ground 3 was concerned with the sheriffs directions in relation to the crime of breach of the peace.
Ground 4 was concerned with the reliance by the procurator fiscal depute on dock identification evidence.
In relation to grounds 1, 2 and 4 the appellant relied on article 6 of the Convention and section 57(2) of the Scotland Act 1998, and he gave notice that he intended to raise a devolution issue with respect to the issues raised in each of them.
By letter dated 10 November 2009 the Depute Clerk of Justiciary informed the appellant that the judge who was conducting the first sift had considered his application for leave to appeal and that it had been refused.
On 19 November 2009 the appellant appealed against this refusal, supported by an opinion provided by his counsel, Mr Shead.
By letter dated 27 November 2009 the Depute Clerk of Justiciary informed the appellant that his appeal had been considered by three judges at the second sift stage, and that it also had been refused.
The following reasons were given: Although we have had regard to counsels opinion, grounds 1 and 2 are not arguable, standing the 7 judge decision in McLean.
As to ground 3 it is not arguable, having regard to the particular circumstances of the alleged offence and the judges charge as a whole, that his directions were apt to confuse or that any miscarriage of justice could be said to have resulted.
As to ground 4, it is not arguable, having regard inter alia to Holland v HM Advocate 2005 1 SC (PC) 3, that it would have been incompatible with the appellants Article 6 rights for the Crown to seek to rely on dock identification in the circumstances of the case.
On 15 December 2009 the appellants solicitors wrote to the Depute Clerk of Justiciary asking for the case to be put out for a procedural hearing so that an application could be made for leave to appeal to the Supreme Court.
By letter dated 23 December 2009 the Appeals Manager replied that this request had been considered by the Criminal Appeals Administration Judge and had been refused on the basis that, as the refusal of leave to appeal at the second sift did not amount to a determination of a devolution issue from which an appeal might lie to the Supreme Court, no further procedure was competent.
The appellant then submitted an application for special leave to appeal to the Supreme Court under para 13 of Schedule 6 to the Scotland Act 1998.
The issues
The first three issues relate to the question whether it is open to this court to give permission to appeal.
In the statement of facts and issues they are set out in these terms: 1.
Whether the decision dated 25 November 2009 by three judges of the High Court of Justiciary to refuse the appeal against the refusal to grant leave to appeal was the determination of a devolution issue. 2.
Whether the Court below has refused to grant permission to appeal to the Supreme Court of the United Kingdom. 3.
Whether, in all the circumstances, permission to appeal should be granted by the Supreme Court in whole or in part.
The remaining issues are the substantive issues in the appeal.
They can be stated, in simplified terms, as follows: 4.
Whether the Crowns reliance on the content of the appellants interview was incompatible with his rights under articles 6(1) and 6(3)(c), having regard to the decision in Salduz. 5.
Whether the act of the Lord Advocate in leading and relying on that evidence was ultra vires, having regard to sections 57(2) and (3) of the Scotland Act 1998 and section 6(2) of the Human Rights Act 1998. 6.
Whether the act of the Lord Advocate in leading and relying on evidence of the dock identification of the appellant was incompatible with his rights under article 6(1) and thereby ultra vires in terms of section 57(2) of the Scotland Act 1998. 7.
Whether the acts of the Lord Advocate referred to in issues 5 and 6, taken together, were incompatible with the appellants rights under article 6(1) and thereby ultra vires in terms of section 57(2) of the Scotland Act 1998. 8.
Whether, if issue 5 is answered in the affirmative, the decisions in Paton v Ritchie and HM Advocate v McLean should be overruled with prospective effect only or with any other limit on the temporal effect of the decision.
Permission to appeal: issues 1 3
As the history which I have narrated in para 9 shows, the appellants appeal to the High Court of Justiciary never reached the stage of a full hearing by the appeal court.
It was dealt with on paper by means of the sift procedure under section 107(5) and (6) of the 1995 Act.
But there is no doubt that this resulted in the refusal of the appeal and that, for the reasons that were explained in McDonald v HM Advocate [2008] UKPC 46, 2008 SLT 993, it amounted to the determination of a devolution issue for the purposes of para 13 of Schedule 6 to the Scotland Act 1998; see also Allison v HM Advocate [2010] UKSC 6, 2010 SLT 261, para 6, per Lord Rodger of Earlsferry.
As I said in para 16 of McDonald, the word determination in para 13 of Schedule 6 to the Scotland Act 1998 can include any decision which disposes of the issue in the lower court, including a refusal to consider the issue.
I do not think that it would be right to say that the judges who conducted the second sift refused to consider the devolution issues which the appellant was seeking to raise.
But they certainly did dispose of them when, for the reasons given, they refused his application for leave to appeal.
Nor does the fact that the appellants application for leave to appeal was dealt with on paper by the Criminal Appeals Administration Judge create a procedural obstacle to his application to this court for special leave to appeal.
His decision that the application for leave to appeal was incompetent, as communicated by the Appeals Manager to the appellants solicitors, was based on the view that the refusal of leave by the sifting judges did not amount to a determination of the devolution issues.
This, for the reasons I have given, was a misconception of the effect of what the sifting judges had done.
It falls to be treated for the purposes of para 13 of the Schedule as amounting to a refusal of leave by the lower court.
That being so, it is open to this court to decide whether it has jurisdiction to entertain the application for special leave.
Dock identification: issues 6 and 7
At the outset of the hearing the parties were informed that the court was satisfied that special leave to appeal should be given with regard to the devolution issues identified as issues 4, 5 and 8 in the statement of facts and issues.
They are directed to the question as to the effect of the decision of the Grand Chamber in Salduz and whether the view of that case which was taken in HM Advocate v McLean can be sustained.
Issue 6, on the other hand, is directed to the appellants complaint about the Crowns reliance at his trial on the dock identification of him by John Tracey, who failed to identify him at the identification parade.
In Holland v HM Advocate 2005 SC 1 (PC) 3 the Board rejected the argument that the use of dock identification evidence in solemn proceedings must always be regarded as incompatible with the accuseds right under article 6(1) of the Convention to a fair trial.
Lord Rodger said in para 57 that, except perhaps in an extreme case, there was no basis either in domestic law or in the Convention for regarding evidence of dock identification as inadmissible per se.
There is nothing more to be said on that question.
But the appellants complaint, as presented in his written case, is not that the evidence of the dock identification as such was inadmissible.
His complaint is that the sheriffs directions to the jury were inadequate, as he did not tell the jury that, standing John Traceys failure to identify the appellant at the identification parade, they had to consider whether they accepted his dock identification as reliable.
In other words, his complaint is directed to the way this issue was dealt with by the sheriff when he was delivering his charge to the jury, not to the act of the Lord Advocate in leading and relying upon this evidence.
The question as to the adequacy or otherwise of the sheriffs charge is a matter that lies exclusively within the jurisdiction of the High Court of Justiciary.
It does not raise a devolution issue which is open to consideration by this court.
The application for special leave to appeal on issues 6 and 7 is refused.
This leaves for more detailed consideration issues 4, 5 and 8.
Salduz: issue 4
As already mentioned, the question whether reliance on admissions made by an accused without access to legal advice when detained under section 14 of the 1995 Act gives rise to a breach of his article 6 Convention right to a fair trial was considered by a bench of seven judges in the High Court of Justiciary in HM Advocate v McLean 2010 SLT 73.
Its decision that the fact that legal representation was not available at the time of the interview did not of itself constitute a violation of the appellants rights under article 6(3)(c) read in conjunction with article 6(1) was based on the view that in Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber recognised a certain flexibility in the requirement that access to a lawyer should be provided (see the last sentence of para 24), and on the proposition that the guarantees otherwise available under the Scottish system are sufficient to secure a fair trial for a person who, while detained, is interviewed by police officers without access to a lawyer (see the first sentence of para 26).
In this court Mr Shead for the appellant submitted that in both respects the decision in McLean was unsound and that, together with the decisions in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203, it should be disapproved.
This argument can, perhaps, most helpfully be approached in three stages: first, by examining the decision of the Grand Chamber in Salduz; second, by considering whether this court should follow Salduz, having regard to subsequent decisions in Strasbourg; and third, by considering whether the guarantees otherwise available under the Scottish system provide a sound basis for holding that, whatever the Grand Chamber may have said in Salduz, for the Crown to rely on admissions made by an accused person while being interviewed in detention without access to a solicitor does not constitute a violation of his rights under article 6(3)(c) read with article 6(1).
Article 6(1) provides: (1) In the determination of any criminal charge against him, everyone is entitled to a fair and public hearing by an independent and impartial tribunal established by law Article 6(3) provides: (3) Everyone charged with a criminal offence has the following minimum rights: (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require.
The effect of these provisions, taken in conjunction, was the subject of the decision in Salduz.
But first it is necessary to say something about the procedure that has been laid down for Scots law by the statute.
The statutory procedure
The practice of removing persons to and detaining them at police stations for the purpose of questioning them in relation to allegations of criminal conduct is regulated by sections 14 and 15 of the 1995 Act, into which the provisions of the 1980 Act were consolidated.
Section 14(1) provides that, where a constable has reasonable grounds for suspecting that a person has committed or is committing an offence punishable by imprisonment, he may for the purpose of facilitating the carrying out of investigations into the offence and as to whether criminal proceedings should be instigated against the person, detain him and take him as quickly as is reasonably practicable to a police station or other premises.
Section 14(2) provides that detention under subsection (1) must be terminated not more than six hours after it begins or, if earlier, when the person is arrested or is detained in pursuance of any other enactment or where there are no longer grounds for his detention.
Among the subsections that then follow are the following: (7) Where a person is detained under subsection (1) above, a constable may (a) without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence; (b) exercise the same powers of search as are available following an arrest (9) A person detained under subsection (1) above shall be under no obligation to answer any question other than to give the information mentioned in subsection (10) below, and a constable shall so inform him both on so detaining him and on arrival at the police station or other premises.
The information mentioned in section 14(10) comprises the persons name, his address, his date and place of birth and his nationality.
Section 15(1) provides, so far as relevant, as follows: (1) Without prejudice to section 17 of this Act [right of accused to have access to a solicitor immediately upon arrest], a person who (a) has been arrested and is in custody in a police station or other premises, shall be entitled to have intimation of his custody and of the place where he is being held sent to a person reasonably named by him; (b) is being detained under section 14 of this Act and has been taken to a police station or other premises or place, shall be entitled to have intimation of his detention and of the police station or other premises or place sent to a solicitor and to one other person reasonably named by him, without delay or, where some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is so necessary. (2) A person shall be informed of his entitlement under subsection (1) above (a) on arrival at the police station or other premises; or (b) where he is not arrested, or as the case may be detained, until after such arrival, on such arrest or detention.
Subsection (3) provides that where the person requests such information to be sent a record must be made of the time at which such request was made and complied with.
Special arrangements are made under subsection (4) for intimation to a parent where the person detained appears to be under the age of 16 years.
The procedure that these provisions regulate was based on the recommendations of the Thomson Committee: Criminal Procedure in Scotland (Second Report) (Cmnd 6218) (October 1975).
Among the problems with which it was confronted were the absence of any clear statement of the law of arrest, the rule of law that had been laid down in Chalmers v HM Advocate 1954 JC 66 that it was not competent for the police to detain a person on suspicion without formally charging him and uncertainties about the extent to which statements made by a suspect in answer to police questioning were admissible: see Hartley v HM Advocate 1979 SLT 26.
Lord Cameron described this as an extremely difficult and delicate topic on which the police lacked adequate guidance: Scottish practice in relation to admissions and confessions by persons suspected or accused of crime, 1975 SLT (News) 265, 266.
In para 2.01 the Committee noted that in these and certain other areas of law there was a conflict between the public interest in the detection and suppression of crime on the one hand and the interest of the individual in freedom from interference by the police on the other.
In para 2.03, recognising that any solution to the problems under consideration must necessarily be a compromise between these two interests, it said that such a solution: must safeguard the individuals right to go about his lawful business free from unreasonable police interference, and his right to have his personality and human dignity respected when he is in the hands of the police, without creating a situation in which criminals can render the investigation of their crimes difficult or even impossible merely by standing on their rights.
It must recognise the realities of the situation, and take account of those police practices which are accepted as fair by the public including criminals although they may be technically illegal or at least of doubtful legality.
In paras 2.04 it said that the protection afforded to accused persons must not be so strong as to restrict the collection and presentation to the court of such evidence against an accused person as was, in accordance with the then current ideas of fairness and propriety, considered admissible.
In Chapter 7 the Committee dealt with the law of interrogation by police officers and the admissibility of statements made to them by the accused.
Having noted the lack of clarity in the law as to the questioning of suspects, it recommended in para 7.13 that it should be competent for the Crown to lead evidence of statements made by a suspect before arrest in answer to police questioning.
As regards the presence of a solicitor, it said in para 7.16: Although a person who has been charged with an offence is entitled to an interview with a solicitor, we recommend that a solicitor should not be permitted to intervene in police investigations before charge.
The purpose of the interrogation is to obtain from the suspect such information as he may possess regarding the offence, and this purpose might be defeated by the participation of his solicitor.
It is for this reason that we recommend in chapter 5.08 that it will be a matter of police discretion whether to allow the detainee an interview with his solicitor.
There was a clear signal here that in the Committees view the public interest in the detection and suppression of crime outweighed any disadvantage to the detainee in being subjected to police questioning in the absence of his solicitor.
It did not rule out the possibility of his being given legal advice before he was questioned.
But this was to be at the discretion of the police.
The rights of the detainee were to take second place to the public interest in allowing the police to question him without being deflected from their task by the presence of a solicitor.
The statutory procedure was framed on this basis.
There is a right to have intimation of his detention sent to a solicitor.
But there is no right of access to legal advice before he is interviewed.
In Paton v Ritchie 2000 JC 271, 276 Lord Justice Clerk Cullen, delivering the opinion of the appeal court, said that neither the common law nor the Convention requires that in all cases the person who is detained should be afforded the opportunity to have his solicitor present, and that the question whether a fair trial can be achieved depends not simply on what happened during the preliminary investigation but on the whole proceedings.
In Dickson v HM Advocate 2001 JC 203, which was heard by a court of five judges, the appellant was detained under sections 24 and 25 of the Criminal Law (Consolidation) (Scotland) Act 1995, which conferred on customs officers the same powers as those given to the police by sections 2 and 3 of the Criminal Justice (Scotland) Act 1980.
She made repeated requests during her interview to have a solicitor present, but this was refused.
It was submitted that the right to have a solicitor present was implicit in the right to a fair trial under article 6(1) of the Convention where such a request was made.
Reference was made to Murray v United Kingdom (1996) 22 EHRR 29 and Averill v United Kingdom (2000) 31 EHRR 839.
The court held, affirming Paton v Ritchie, that the question whether a fair trial can be achieved depends on the whole proceedings: p 218, per Lord Cameron of Lochbroom.
At p 225 Lord Macfadyen said that the cases of Murray and Averill were clearly distinguishable, as the appellant had been cautioned, clearly understood the caution and declined, for the most part, to answer the questions that were put to her.
He rejected the submission that the evidence of the interview was inadmissible simply because it was conducted in the face of her requests for a solicitor to be present.
In an affidavit that was prepared for the appeal to this court D Sgt Paul Carruthers said that in his experience requests for a solicitor to be contacted are made by detained persons fairly frequently.
The response will depend on the circumstances of the case, in particular the time constraints imposed by section 14 which limits the period of detention to six hours.
If it is feasible within the time limit for a solicitor to attend and give advice then, in the vast majority of cases, the solicitor is allowed to confer with his client before the interview commences.
He would also be allowed to sit in during the interview, but he would not be allowed to take an active role.
For that he gave this explanation: By this I mean that the solicitor would not normally interrupt the interview, unless he had a concern over its fairness.
Any advice he had to give would be given prior to the interview commencing.
It is the suspect who is there to be interviewed, not the solicitor.
The situation in this appeal however, as it was in HM Advocate v McLean 2010 SLT 73, is that no solicitor was present at any stage either before or during the interview.
In McLean, having examined the decision of the Grand Chamber in Salduz, the appeal court took the view that it permitted a certain flexibility in the application of the requirement: para 24, last sentence.
It saw no reason to depart from the approach that had been laid down in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203.
In para 31 the Lord Justice General (Hamilton), delivering the opinion of the court, said: Even if, contrary to our view, the decision of the Grand Chamber in Salduz amounts to the expounding of a principle that article 6 requires that access to a lawyer should be provided as from the first interrogation of a suspect by the police, we are satisfied that that principle cannot and should not be applied without qualification in this jurisdiction.
In particular, if other safeguards to secure a fair trial of the kind which we have described are in place, there is, notwithstanding that a lawyer is not so provided, no violation, in our view, of article 6.
The decisions and reasoning in Paton v Ritchie and Dickson v HM Advocate are approved.
The other safeguards to secure a fair trial to which the Lord Justice General referred in para 31 are described in para 27 of his opinion in McLean.
Detention is a form of limited or temporary apprehension on suspicion.
The safeguards against its abuse include the detainees right to be cautioned on his detention and on arrival at the police station; the right, if arrested, to have a solicitor informed of what has happened and to a subsequent interview with him before his appearance in court; the fact that he may not, after caution and charge, be further questioned by the police; the fact that in all serious cases the interview is tape recorded and in some cases recorded on video; the fact that police are not entitled to coerce the detainee or otherwise to treat him unfairly, and that if they do any incriminating answers will be rendered inadmissible; the fact that the accused has an absolute right to silence, and that the jury is expressly directed that it may not draw any inference adverse to the accused from the fact that he declined to answer police questions; the fact that an accused cannot be convicted on the basis of his own admission alone, as Scots law requires that there be corroboration by independent evidence; and the fact that a person may not be detained for more than six hours from the moment of his detention.
In para 28 of his opinion in McLean the Lord Justice General referred to my observations in Brown v Stott 2001 SC (PC) 43 at 73, where I said that the statutory rules to be found in sections 14 and 15 of the 1995 Act had been framed in such a way as to provide appropriate checks and balances in the interests of fairness to the accused.
He referred also to a comment to the same effect by Lord Rodger of Earlsferry in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 39, [2003] 1 WLR 1763, para 87, where he said, with reference to the different rights of detainees in Northern Ireland and England and Wales on the one hand and in Scotland on the other: This difference may well be explicable by reference to the much more restricted powers that are given to the police in Scotland to detain people for questioning.
As it is entitled to do, Parliament has thus struck the balance differently and established two distinct systems of powers and rights within the same overall constitutional framework of the United Kingdom.
In para 88 Lord Rodger went on to say that, since detainees have no right to consult a solicitor in Scotland, it followed that at trial the Crown regularly leads evidence of incriminating statements made by the accused while he was detained and before he consulted a solicitor.
The Lord Justice General said that by his remarks in that paragraph Lord Rodger implicitly approved of the decisions of the High Court of Justiciary in Paton v Ritchie and Dickson v HM Advocate.
There is no doubt that the appeal courts decision in McLean was entirely in line with, and fully supported by, previous authority.
The question, however, is whether it can survive scrutiny in the light of what the Grand Chamber said in Salduz v Turkey (2008) 49 EHRR 421.
The Grand Chamber's decision in Salduz
The applicant, who was a Turkish national and was then 17 years old, was taken into custody at about 10.15 pm by police officers of the anti terrorism branch of the Izmir Security Directorate on suspicion of having taken part in an unlawful demonstration in support of an illegal organisation and of hanging an illegal banner from a bridge.
At 1 am the next day he was reminded of his right to remain silent and was then interrogated by the anti terrorism branch.
No lawyer was present during his interrogation.
He made various admissions in the course of which he confessed to the suspected offences, and samples were taken of his handwriting.
Later that day he was brought before the public prosecutor and subsequently the investigating judge.
Before the public prosecutor he denied involvement in the offences.
He told the investigating judge, retracting the statement that he made to the police, that it had been extracted under duress.
It was only after all this questioning was over that he was allowed access to a lawyer.
At 11.45 pm the same day he was examined by a doctor, who stated that there was no sign of ill treatment on his body.
He was subsequently tried on indictment before the state security court.
Although he again sought to retract his police statement, alleging that it had been extracted from him under duress, he was convicted as charged.
He was sentenced to four years and six months imprisonment, reduced to two and a half years as he was a minor at the time of the offence.
It appears from the circumstances as described in the report that there are some significant differences between the way the applicants case was handled and that of the appellant.
The applicant was not told that he had a right to have intimation of his detention sent to a lawyer.
The time that had elapsed between his being taken into custody and his being interviewed is not recorded.
His suggestion that he confessed under duress is not matched by anything in this case, there being no suggestion that the appellant was coerced while he was being interviewed.
The questioning of the applicant does not appear to have been tape recorded.
On the other hand, the applicant was not convicted on his own admissions.
The court had before it evidence from his co accused before the public prosecutor that the applicant had urged them to participate in the demonstration and that he had been in charge of organising it.
His handwriting was also compared with that on the banner.
There is, of course, common ground between the two cases in that both interviews were carried out without the assistance of a lawyer either before they began or during the process of questioning.
Like the applicant in Salduz, the appellant was a minor when he was taken into detention.
He was born on 4 June 1990 and was 16 years old.
The Grand Chamber began its assessment of the applicable principles by making some general observations which appear to be in line with the view that was taken in Paton v Ritchie and Dickson v HM Advocate of the effect of the Convention right.
Having noted in para 50 that the right set out in article 6(3)(c) of the Convention is one element, among others, of the concept of a fair trial in criminal proceedings in article 6(1) (see Imbrioscia v Switzerland (1993) 17 EHRR 441 and Brennan v United Kingdom (2001) 34 EHRR 18), it stated in para 51: The Court further reiterates that although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of fair trial.
Nevertheless, article 6(3)(c) does not specify the manner of exercising this right.
It thus leaves to the contracting states the choice of the means of ensuring that it is secured in their judicial systems, the Courts task being only to ascertain whether the method they have chosen is consistent with the requirements of a fair trial.
In para 52, having stated that article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at the initial stages of police interrogation, it said: However, this right has so far been considered capable of being subject to restrictions for good cause.
The question, in each case, has therefore been whether the restriction was justified and, if so, whether, in the light of the entirety of the proceedings, it has not deprived the accused of a fair hearing, for even a justified restriction is capable of doing so in certain circumstances. [emphasis added]
The more one reads on through the judgment, however, the clearer it becomes that the Grand Chamber was determined to tighten up the approach that must be taken to protect a detainee against duress or pressure of any kind that might lead him to incriminate himself.
As Peter W Ferguson QC has observed, it marks an apparent change in approach: The right of access to a lawyer, 2009 SLT (News) 107, 108.
In para 53 the Grand Chamber asserts that the principles which it outlined in para 52 are consistent with generally recognised international standards which are at the heart of the concept of a fair trial, whose rationale relates in particular to the need to protect the accused against abusive coercion on the part of the authorities.
Reference is made to aims pursued by article 6, notably equality of arms between the investigating or prosecuting authorities and the accused.
In para 54 reference is made to the particularly vulnerable position that the accused finds himself in at the investigation stage of the proceedings.
The point is made that in the majority of cases this vulnerability can only be adequately compensated for by the presence of a lawyer whose task it is, among other things, to help to ensure that the right of an accused not to incriminate himself is respected.
Early access to a lawyer is said to be part of the procedural safeguards to which the Court will have particular regard when examining whether a procedure has or has not extinguished the very essence of the law against self incrimination.
Reference is made to the numerous recommendations by the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment which underline the point that the right of any detainee to have access to legal advice is a fundamental safeguard against ill treatment.
There is perhaps an indication here that the primary concern of the Grand Chamber was to eliminate the risk of ill treatment or other forms of physical or psychological pressure as a means of coercing the detainee to incriminate himself.
If that was the aim, it might have been thought that the use of techniques such as tape recording would meet the need to monitor the need for fairness and that, as cases where there are real grounds for suspecting that abusive methods were used can be dealt with appropriately by the trial judge under Scots procedure, there would be no reason to doubt the essential fairness of the Scottish system.
But the way the Grand Chamber then went on to express itself removes the possibility of resorting to such an analysis.
what it had said in the previous paragraphs as follows: In para 55 the Grand Chamber expressed the conclusion which it drew from Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Even where compelling reasons may exceptionally justify denial of access to a lawyer, such restriction whatever its justification must not unduly prejudice the rights of the accused under article 6.
The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction.
The emphasis throughout is on the presence of a lawyer as necessary to ensure respect for the right of the detainee not to incriminate himself.
The last sentence of paragraph 55 could hardly be more clearly expressed.
In a concurring opinion the President of the Grand Chamber, Judge Bratza, was at pains to emphasise the importance that was to be attached to the need for a lawyer to be present during the course of police interrogation.
Like Judge Zagrebelsky, who was joined by two other judges, he thought that the Grand Chamber had not gone far enough.
Referring to the general principle stated in paragraph 55 of the Courts judgment, he said in para O I2: This principle is consistent with the Courts earlier case law and is clearly sufficient to enable the Court to reach a finding of a violation of article 6 on the facts of the present case.
However, I share the doubts of Judge Zagrebelsky as to whether in appearing to hold that the right of access to a lawyer only arises at the moment of first interrogation, the statement of principle goes far enough.
Like Judge Zagrebelsky, I consider that the Court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 requires that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention.
It would be regrettable if the impression were to be left by the judgment that no issue could arise under article 6 as long as a suspect was given access to a lawyer at the point when his interrogation began or that article 6 was engaged only where the denial of access affected the fairness of the interrogation of the suspect.
The denial of access to a lawyer from the outset of the detention of a suspect which, in a particular case, results in prejudice to the rights of the defence may violate article 6 of the Convention whether or not such prejudice stems from the interrogation of the suspect.
I have the greatest respect for Judge Bratza, who has made an outstanding contribution during his time as the United Kingdoms judge on the Strasbourg court.
But I cannot help thinking that there is an air of unreality about his insistence that a detainee should have access to legal advice from the moment that he is taken into police custody, otherwise there will be a violation of article 6.
Peter W Ferguson QC has described it, not entirely unreasonably, as a staggering proposition because of its absolutist nature: 2009 SLT (News) 107, 109.
Under the Scottish system, a person is taken into police custody as soon as he is detained under section 14(1) of the 1995 Act.
This could happen anywhere, and at any time of the day or night.
Inevitably there will be an interval of time between the taking of this step and the arrival of a solicitor in response to intimation that the person has been detained.
The best that is likely to be achievable is the presence of a solicitor within a short time of the detainees arrival at the police station.
Despite the present rigorous time limit of six hours that is imposed by section 14(2), the police will have to defer any questioning of the detainee until an enrolled solicitor is actually present in the police station.
To go further and require the solicitor to be present from the very moment when the person is detained would in most cases make use of the power of detention under section 14 practically impossible.
It may be that Judge Bratza had in mind the arrival at the place where the person was to be held as marking the point at which his being taken into police custody began.
Even then, practical considerations such as other demands on solicitors time and the time of day or night of the arrival would be likely to make it difficult to adhere to the rule that he was advocating in all cases.
The public interest in the detection and suppression of crime would not be well served if the police had in all cases to delay resort to the detention of a suspect until the person concerned had contacted a solicitor and to ensure that he had his solicitor with him from the moment when he was detained.
A more generous interpretation, as Lord Rodger suggests, is that Judge Bratza was assuming that legal assistance was actually available when the suspect was detained in which case it could not be denied to him, and that he was not intending to assert that there was a positive duty to ensure its availability whatever the circumstances.
That all having been said, there is no doubt that the effect of Judge Bratzas remarks is to underline the importance of the rule that was expressed in para 55 of the Courts judgment.
In para 24 of his judgment in HM Advocate v McLean the Lord Justice General said that the first sentence of what the Grand Chamber said in that paragraph was open to interpretation.
He said that the requirement for a solicitor to be present was subject to exception and applied only as a rule.
He said that it was open to two alternative interpretations.
One was that the court was laying down that every jurisdiction must, to be compliant with the Convention, have in place a system under which access to a solicitor was ordinarily provided as from the first interrogation, whatever safeguards there may otherwise be for a fair trial.
The other was that, while this is what the court would generally expect, it was recognising that the issue as to whether or not there has been a fair trial will depend on the circumstances of the case, including what arrangements the jurisdiction in question has made for access to legal advice, seen against the guarantees which are otherwise in play in that jurisdiction to secure a fair trial.
On this approach there would be room for, as he put it, a certain flexibility in its application.
In para 25 he said that the court was inclined to favour the alternative interpretation.
Were that not what the court intended, it would be departing from its previous case law, contrary to Judge Bratzas statement that the principle being enunciated was entirely consistent with it.
I do not think, with respect, that the alternative interpretation is tenable.
It has, of course, often been said by the Strasbourg court that it leaves to the contracting states the choice as to the means by which the manner of exercising the right to a fair trial is secured in their judicial systems.
Indeed the Grand Chamber said as much in para 51 of Salduz.
The admissibility of evidence, for example, is primarily a matter for the domestic legal systems of the contracting states.
But there is no hint anywhere in its judgment that it had in mind that the question whether or not a detainee who was interrogated without access to a lawyer has had a fair trial will depend on the arrangements the particular jurisdiction has made, including any guarantees otherwise in place there.
Distinctions of that kind would be entirely out of keeping with the Strasbourg courts approach to problems posed by the Convention, which is to provide principled solutions that are universally applicable in all the contracting states.
It aims to achieve a harmonious application of standards of protection throughout the Council of Europe area, not one dictated by national choices and preferences.
There is no room in its jurisprudence for, as it were, one rule for the countries in Eastern Europe such as Turkey on the one hand and those on its Western fringes such as Scotland on the other.
The statement in para 55 that article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect must be understood as a statement of principle applicable everywhere in the Council of Europe area.
The statement that the rights of the defence will in principle otherwise be irretrievably prejudiced must be understood in the same way.
It is true that the use of such expressions indicates that there is room for a certain flexibility in the application of the requirement, as the Lord Justice General said in HM Advocate v McLean, para 24.
But they do not permit a systematic departure from it, which is what has occurred in this case under the regime provided for by the statute.
The area within which there is room for flexibility is much narrower.
It permits a departure from the requirement only if the facts of the case make it impracticable to adhere to it.
The reference in that paragraph to its being demonstrated in the light of the particular circumstances of the case that there are compelling reasons to restrict the right reinforces this interpretation.
It is the particular circumstances of the case, not other guarantees that are available in the jurisdiction generally, that will justify such a restriction.
The appeal courts view that if that interpretation were not what the court intended it would be departing from its previous case law might seem, at first sight, to have more to commend it.
In Windsor v United Kingdom, application no 13081/87, 14 December 1988, the Commission observed that the applicant had not established that the initial period of six hours of his detention was of crucial relevance to the preparation of his defence or to the fairness of his trial or that he was prejudiced in any material way by the refusal of access to his solicitor during this period.
The court has indicated in cases such as Imbrioscia v Switzerland (1993) 17 EHRR 441 and Brennan v United Kingdom (2001) 34 EHRR 18 that the absence of a lawyer during the preliminary investigation is not necessarily incompatible with the accuseds right to a fair trial.
In Imbrioscia, para 38, the court said that the manner in which article 6(3)(c) was to be applied during the preliminary investigation depends on the special features of the proceedings involved and on the circumstances of the case.
In Brennan the fact that a lawyer was not present during police questioning was not treated as creating irretrievable prejudice to the right to a fair trial.
In Murray v United Kingdom (1996) 22 EHRR 29, para 63, it said that, while article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at the initial stages of police interrogation, that right might be subject to restrictions for good cause and that the question in each case is whether, in the light of the entirety of the proceedings, it has deprived the accused of a fair hearing.
There are, however, passages in the courts judgment in Murray v United Kingdom which come very close to saying what the Grand Chamber said in Salduz, and it cannot be overlooked that there is no indication anywhere in its judgment that it was intended to be a departure from previous case law.
As Lord Rodger points out in para 67, recognition of the implied right of the accused not to incriminate himself can be traced back to the decision of the Grand Chamber in Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
In Murray, para 66, the court said the scheme contained in the Criminal Evidence (Northern Ireland) Order 1988 was such that it was of paramount importance for the rights of the defence that an accused had access to a lawyer at the initial stages of police interrogation as at that stage the accused was confronted with a fundamental dilemma relating to his defence.
Similar observations are to be found in paras 52 and 54 of Salduz.
Later in the same paragraph in Murray the court said that to deny access to a lawyer for the first 48 hours of police questioning, in a situation where the rights of the defence might be irretrievably prejudiced, was whatever the justification for such denial incompatible with the rights of the accused under article 6.
The last sentence of para 55 in Salduz is a reiteration of the same point.
It may well be, as the appeal court suggested in HM Advocate v McLean, para 25, that the Grand Chamber was particularly influenced by what was said in Jalloh v Germany (2006) 44 EHRR 32, para 101, to which reference is made in a footnote to para 54 of its judgment in Salduz.
In Jalloh where the applicant had been forced to regurgitate a bag of cocaine, there was a complaint that article 3 had been violated as well as article 6.
In para 101 the court said that in examining whether a procedure has extinguished the very essence of the privilege against self incrimination, it will have regard, in particular, to the following elements: the nature and degree of compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained will be put.
This passage was referred to by the Grand Chamber in support of its observation in para 54 of Salduz that early access to a lawyer is part of the procedural safeguards to which the court will have particular regard when examining whether a procedure has extinguished the very essence of the privilege against self incrimination.
It plainly had in mind that there was a consensus across Europe that the presence of a lawyer was a safeguard against ill treatment, as can be seen from its reference in para 54 to the recommendations of the European Committee for the Prevention of Torture.
But it is just as plain that the risk of irretrievable prejudice to the accused because of a lack of respect of his right to remain silent was at the forefront of its mind too: see para 110 of Jalloh, where the court observed that the privilege against self incrimination is commonly understood in the contracting states and elsewhere to be primarily concerned with respecting the will of the defendant to remain silent in the face of questioning and not to be compelled to provide a statement.
Its reasoning cannot be confined to cases where a violation of article 3 is in issue.
Should this court follow Salduz?
The starting point is section 2(1) of the Human Rights Act 1998, which provides that a court which is determining a question which has arisen in connection with a Convention right must take into account any decision of the Strasbourg court.
The United Kingdom was not a party to the decision in Salduz nor did it seek to intervene in the proceedings.
As the Lord Justice General observed in McLean, para 29, the implications for the Scottish system cannot be said to have been carefully considered.
But in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 26, Lord Slynn of Hadley said that the court should follow any clear and constant jurisprudence of the Strasbourg court.
And in R (Anderson) v Secretary of State for the Home Department [2002] UKHL 46, [2003] 1 AC 837, para 18, Lord Bingham of Cornhill said the court will not without good reason depart from the principles laid down in a carefully considered judgment of the court sitting as a Grand Chamber.
In R v Spear [2002] UKHL 31, [2003] 1 AC 734, on the other hand, the House refused to apply a decision of the Third Section because, as Lord Bingham explained in para 12, they concluded that the Strasbourg court had materially misunderstood the domestic legal context in which courts martial were held under United Kingdom law.
And in R v Horncastle [2009] UKSC 14, [2010] 2 WLR 47 this court declined to follow a line of cases in the Strasbourg court culminating in a decision of the Fourth Section because, as Lord Phillips explained in para 107, its case law appeared to have been developed largely in cases relating to the civil law without full consideration of the safeguards against an unfair trial that exist under the common law procedure.
In this case the court is faced with a unanimous decision of the Grand Chamber.
This, in itself, is a formidable reason for thinking that we should follow it.
In its judgment in Panovits v Cyprus, application no 4268/04, 11 December 2008, the Strasbourg court considered the question whether an applicant, aged 17 at the time, who confessed his guilt when he was subjected to police questioning for about 30 40 minutes without legal advice was deprived of his right to a fair trial.
His confession was decisive for the prospects of his defence and constituted a significant element on which his conviction was based.
Having reviewed its previous jurisprudence on the right not to incriminate oneself, albeit without the benefit of the Grand Chambers observations in Salduz which came too late for them to be take into account, it held in para 77 that there had been a violation of article 6(3)(c) in conjunction with article 6(1) on account of the lack of legal assistance to the applicant during the initial stages of police questioning.
This decision is entirely consistent with Salduz.
As for the question whether Salduz has given rise to a clear and constant jurisprudence, the case law shows that it has been followed repeatedly in subsequent cases.
A full list was provided in its helpful written intervention by JUSTICE.
There are far too many for them all to be mentioned in this judgment.
The following selection is sufficient to show that the court has consistently applied the ruling in Salduz, holding that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction: kran Yildiz v Turkey, application no 4661/02, 3 February 2009; Amutgan v Turkey, application no 5138/04, 3 February 2009, paras 17 18; Plonka v Poland, application no 20310/02, 31 March 2009, para 35; Pishchalnikov v Russia, application no 7025/04, 24 September 2009, para 70; Dayanan v Turkey, application no 7377/03, 13 October 2009, paras 32 33; Fatma Tun v Turkey, application no 18532/05, 13 October 2009, paras 14 15.
It was applied in Amutgan v Turkey although the applicant had confirmed to the trial judge the accuracy of his confession and admitted that he had carried out a number of armed activities: para 7; and in Dayanan v Turkey notwithstanding the fact that the applicant made use of his right to remain silent whilst in custody: para 29.
It was not applied in Zaichenko v Russia, application no 39660/02, but in that case the applicant was not formally arrested or interrogated in police custody but stopped for a road check: para 47.
Nor was it applied in Yolda v Turkey, application no 27503/04, 23 February 2010, but in that case the applicant had the right to legal assistance during his custody but he refused it and his decision to waive assistance was considered to have been freely and voluntarily made: para 52.
In my opinion the Strasbourg court has shown by its consistent line of case law since Salduz that the Grand Chambers finding in para 55 is now firmly established in its jurisprudence.
There are two other recent judgments which should be noted.
In Gfgen v Germany, application no 22978/05, 1 June 2010, the applicant was subjected while being interrogated to threats of deliberate and imminent ill treatment within the scope of article 3 and he complained that his right to a fair trial had been violated.
The court said that it was not its function to lay down any rules on the admissibility of evidence as such, which was primarily a matter for regulation under national law: para 162.
Having regard to the particular circumstances of the case it held that the failure to exclude evidence secured as a result of the interrogation did not have a bearing on his conviction and sentence, and that there had been no violation of articles 6(1) and 6(3): paras 187 188.
In para 5 of their partly dissenting opinion Judge Rozakis and five others indicated that in their opinion this approach was very difficult to reconcile with the absolutist position that the Grand Chamber adopted in Salduz that events that occurred subsequently could not cure the defects which had occurred during the time spent in police custody.
This was a pragmatic decision which proceeded on the basis that the evidence obtained in breach of article 3 was, on the facts, irrelevant to the applicants conviction.
I do not think that it can be regarded as raising any doubt as to the decision in Salduz, which was mentioned with approval in para 177.
But it serves as a warning that the Salduz principle cannot be confined to admissions made during police questioning.
It extends to incriminating evidence obtained from elsewhere as a result of lines of inquiry that the detainees answers have given rise to.
In Brusco v France, application no 1466/07, 14 October 2010, the reasoning in Salduz was applied by the court in finding that there had been a violation of article 6(1) in circumstances where the applicant had been subjected to a police interrogation without access to a lawyer.
The conclusion that I would draw as to the effect of Salduz is that the contracting states are under a duty to organise their systems in such a way as to ensure that, unless in the particular circumstances of the case there are compelling reasons for restricting the right, a person who is detained has access to advice from a lawyer before he is subjected to police questioning.
As JUSTICE has shown by the materials referred to in its written intervention, the majority of those member states which prior to Salduz did not afford a right to legal representation at interview (Belgium, France, the Netherlands and Ireland) are now recognising that their legal systems are, in this respect, inadequate.
In the Netherlands the Supreme Court has held that a suspect arrested by the police must be offered the opportunity to consult a lawyer before being interviewed and that an arrested minor was entitled to have the assistance of a lawyer while being interviewed: LJN BH3079, 30 June 2009.
In France the Conseil Constitutionnel has held that articles 62 and 63 of the Code of Criminal Procedure, which authorise the questioning of a person remanded in police custody (the process known as la garde vue) but do not allow the person held against his will to have the benefit of legal assistance while undergoing questioning, are unconstitutional because they could not be reconciled with articles 9 and 16 of the Dclaration of 1789 des droits de lhomme et du citoyen: Dcision No 2010 14/22 QPC, 30 July 2010.
It postponed the effect of its decision until 1 July 2011 to allow the legislature to remedy the unconstitutionality.
The Criminal Chamber of the Cour de Cassation has applied the law as declared by the Conseil Constitutionnel but postponing the effect of its decision, and has set aside two rulings of lower courts which pre empted the postponement: arrt no 5699 and arrts nos 5700 and 5701, 19 October 2010.
The Conseil dEtat in its turn has drawn the governments attention to the fragility, in the light of article 6 of the Convention, of article 706 88 of the code de procdure pnale, which prevents access to legal assistance at this stage: Section de lintrieur, Projet de loi relatif la garde vue, 7 October 2010 (No 384.505).
There has, as yet, been no decision as to the effect of Salduz in Ireland.
But if Scotland were not to follow the example of the others it would be almost alone among all the member states in not doing so.
It would not be able to find support for that position from England and Wales or Northern Ireland.
Access to legal advice was described in R v Samuel [1988] QB 615 as a fundamental right, and section 58(1) of the Police and Criminal Evidence Act 1984 provides that a person arrested and held in custody in a police station or other premises shall be entitled, if he so requires, to consult a solicitor privately at any time: see also section 59(1) of the Police and Criminal Evidence (Northern Ireland) Order 1989 (SI 1989/1341 (NI 12)).
I should add for completeness that I see no room for any escape from the Salduz ruling on the ground that the guarantees otherwise available under the Scottish system are sufficient to secure a fair trial.
The appeal court made much of this point in HM Advocate v McLean, para 27, as did the Lord Advocate in her address to this court.
As I have already said, the ruling in para 55 of Salduz must be read as applicable equally in all the contracting states.
There is room for a restriction of the right of access to a solicitor during the police interrogation, but only if there are compelling reasons in the light of the particular circumstances of the case which make the presence of a solicitor impracticable.
The guarantees otherwise available are entirely commendable.
But they are, in truth, incapable of removing the disadvantage that a detainee will suffer if, not having had access to a solicitor for advice before he is questioned by the police, he makes incriminating admissions or says something which enables the police to obtain incriminating evidence from other sources which is then used against him at his trial.
Much was made, of course, of the rule of Scots law that there must be corroboration of a confession by independent evidence.
But there was independent evidence in Salduz.
The reasoning in that case offers no prospect of its ruling being held not to apply because any confession must under Scots law be corroborated.
The fact is that the system of detention under sections 14 and 15 of the 1995 Act was devised, on the advice of the Thomson Committee, on a view of where the balance is to be struck between the public interest and the rights of the accused which is irreconcilable with the Convention rights.
It was also out of keeping with current thinking in the rest of the United Kingdom.
There is no sign in its report of any attempt at comparative jurisprudence on this issue.
The Royal Commission on Criminal Procedure (the Philips Commission), on the other hand, concluded that all suspects other than those suspected of grave offences should have an unrestricted right to consult and communicate privately with a solicitor at any stage of the investigation, and even for the restricted group the circumstances in which that right might be withheld should be limited and the subject of record and review: Report of the Commission, Cmnd 8092 (January 1981), para 4.93.
Subsequent research showed that the presence of a solicitor or other legal adviser had relatively little effect on the behaviour of detainees when they were being questioned by the police: David Dixon, Common sense, legal advice and the right of silence (1991) Public Law 233, 252.
Of course, Parliament was entitled to establish two different systems within the same overall constitutional framework of the United Kingdom, as Lord Rodger observed in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, para 87.
But, by preferring to go their own way, those who were promoting the legislation that gave effect to the Thomson Committees recommendations were shutting their eyes to the way thinking elsewhere was developing.
Now, sadly, 30 years on the Scottish criminal justice system must reap the consequences.
Section 6(2) of the Human Rights Act 1998: issue 5
The Lord Advocate submitted that her reliance on the evidence of the police interview was protected by section 57(3) of the Scotland Act 1998, even if that act was incompatible with the appellants article 6 Convention rights.
This was because she was giving effect to provisions in sections 14 and 15 of the 1995 Act which could not be read or given effect in a way that was compatible with them.
I can dispose of this issue quite shortly.
Section 57(2) of the Scotland Act provides that a member of the Scottish Executive has no power to make any subordinate legislation or to do any other act so far as the legislation or act is incompatible with the Convention rights.
Section 57(3) provides: (3) Subsection (2) does not apply to an act of the Lord Advocate (a) (b) in prosecuting any offence, or in his capacity as head of the systems of criminal prosecution and investigation of deaths in Scotland, which, because of subsection (2) of section 6 of the Human Rights Act 1998, is not unlawful under subsection (1) of that section.
Subsections (1) and (2) of section 6 of the Human Rights Act are in these terms: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
The Lord Advocate did not seek to rely on the exception provided by subsection (2)(a) of section 6.
She could not, of course, do so as there is nothing in sections 14 or 15 of the 1995 Act which prohibits access by the detainee to legal advice prior to or during a police interview or directs that the answers given must be led in evidence.
Everything therefore depends on whether she can bring herself within the exception provided by subsection (2)(b).
It seems to me however that, as Lord Rodger pointed out during the argument, she faces an insuperable obstacle, having regard to what section 14(7) of the 1995 provides.
So far as relevant, it states: (7) Where a person is detained under subsection (1) above, a constable may (a) without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence. [emphasis added] The question is whether the phrase which I have identified can or cannot be read or given effect in a way which is compatible with the detainees article 6 Convention rights.
There can, I think, be only one answer to this question.
It is plain that the phrase which I have emphasised can be read and given effect so as to preclude the admission in evidence of any incriminating answers obtained by the police from a detainee who is subjected to questioning without access to legal advice.
The consequence of Salduz is that, as a general rule, such evidence is inadmissible.
Allowance must be made, as the Grand Chamber acknowledged in para 55, for the possibility that in the light of the particular circumstances of the case there are compelling reasons to restrict the right of access.
But nothing of that kind has been suggested in this case.
As section 14(7) can be read and given effect in a way that would preclude leading and relying on the evidence of the police interview, the act of the Lord Advocate in leading and relying on that evidence is not exempted from challenge by section 57(3) of the Scotland Act.
The conclusion must be that, in terms of section 57(2), she had no power to lead and rely on that evidence.
Prospective overruling: issue 8
This is, perhaps, the most difficult and anxious of all the issues that the court faces in this case.
As is well known, the decision in Salduz caused a considerable disruption to criminal business in Scotland.
It led to preliminary objections being taken in many cases, and associated devolution issue minutes being lodged, on the basis that the Crowns proposed reliance on incriminating statements made by suspects while detained would render the trial unfair.
This has disrupted and delayed the progress of criminal trials throughout Scotland.
Numerous appeals by persons wishing to take that point are awaiting hearing in the High Court of Justiciary.
That disruption, which is likely to impose a severe burden on an already overburdened appeal court, is continuing and is likely to continue.
If it were open to the court to provide a solution to this problem, there would be compelling reasons why it should do so.
The court has power under section 102(2) of the Scotland Act 1998 to make an order removing or limiting any retrospective effect of a decision that an Act of the Scottish Parliament is not within the legislative competence of the Scottish Parliament.
But we are not dealing in this case with the effect of legislation which is incompatible with a Convention right.
The issue is directed to the powers of the Lord Advocate as one of the Scottish Ministers.
Section 102 does not give the court power to remove or limit the effect of a decision that an act of the Lord Advocate was one that, in terms of section 57(2) she had no power to make.
The absence of such a power in the statute, at the very least, is a considerable obstacle, on the inclusio unius est exclusio alterius principle.
The legislation could have included such a power, but it did not do so.
In its absence, the statutory declaration that the Lord Advocate had no power to do what she did must be given effect.
Her act, whenever it occurred, must simply be held to have been invalid.
It is hard to see how, under this statutory regime, there can be any room for limiting the effect of that decision by holding that it is not to have retrospective effect.
There are now a considerable number of dicta to the effect that the court has a general inherent power to limit the retrospective effect of its decisions: see, for example, In re Spectrum Plus Ltd [2005] UKHL 41, [2005] 2 AC 680; Ahmed v HM Treasury (no 2) [2010] UKSC 5, [2010] 2 WLR 378, para 17.
The principle of legal certainty, which the Strasbourg court in Marckx v Belgium (1979) 2 EHRR 330, para 58, said was inherent in the Convention as in Community law, suggests that there would be no objection to this on Convention grounds.
In that case the court dispensed the Belgian state from re opening legal acts or situations that antedated the delivery of its judgment.
It followed the same approach in Walden v Liechtenstein, application no 33916/96, 16 March 2000.
The court said that it had also been accepted that, in view of the principle of legal certainty, a constitutional court may set a time limit for the legislator to enact new legislation with the effect that an unconstitutional provision remains applicable for a transitional period.
Section 102 of the Scotland Act gives effect to that principle.
Had it been open to us to do so, I would have wished to exercise the inherent power in this case.
But I have come to the conclusion that the statutory regime that applies to this case precludes our doing so.
Furthermore, it would not be right to deny the appellant, and other appellants like him who have taken the point timeously, an appropriate remedy for breach of the Convention right.
I would have felt less inhibited if the Grand Chamber had made it clear in Salduz that it was departing from its previous case law and that it was laying down a new principle.
But, as I have already observed, there is no indication anywhere in its judgment that it was its intention to do so.
Far from making a ruling that was not applicable to acts or situations that pre dated its judgment, it ruled that the applicants Convention rights were violated in 2001 when the relevant events took place.
That is not to say that the principle of legal certainty has no application.
On the contrary, I think that there are strong grounds for ruling today, on the basis of this principle and bearing in mind the fact that the Salduz objection could have been raised at any time after the right of challenge on Convention grounds became available, that the decision in this case does not permit the re opening of closed cases.
Cases which have not yet gone to trial, cases where the trial is still in progress and appeals that have been brought timeously (see section 100(3B) of the Scotland Act 1998, as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009 to which Lord Rodger refers in paras 105 and 106) but have not yet been concluded will have to be dealt with on the basis that a person who is detained must have had access to an enrolled solicitor before being questioned by the police, unless in the particular circumstances of the case there were compelling reasons for restricting this right.
As for the rest, I would apply Murray CJs dictum that the retrospective effect of a judicial decision is excluded from cases that have been finally determined: A v The Governor of Arbour Hill Prison [2006] IESC 45, [2006] 4 IR 88, para 36.
That was a case where the statutory provision under which the applicant was convicted was later declared by the Irish Supreme Court to be unconstitutional.
In paras 125 126 the Chief Justice set out the general principle in these terms: 125 In a criminal prosecution where the State relies in good faith on a statute in force at the time and the accused does not seek to impugn the bringing or conduct of the prosecution, on any grounds that may in law be open to him or her, including the constitutionality of the statute, before the case reaches finality, on appeal or otherwise, then the final decision in the case must be deemed to be and to remain lawful notwithstanding any subsequent ruling that the statute, or a provision of it, is unconstitutional.
That is the general principle. 126 I do not exclude, by way of exception to the foregoing general principle, that the grounds upon which a court declares a statute to be unconstitutional, or some extreme feature of an individual case, might require, for wholly exceptional reasons related to some fundamental unfairness amounting to a denial of justice, that verdicts in particular cases or a particular class of cases be not allowed to stand.
In para 127 he observed that the applicant, like all persons in his position, could have sought to prohibit prosecution on several grounds including that the section was inconsistent with the Constitution and that, not having done so, they were tried and either convicted or acquitted under due process of law.
Once finality is reached in these circumstances, he said, the general principle should apply.
The same approach was recently adopted by the Court of Appeal in England in a case where the statute under which the appellants were convicted had not been notified as required by EU law: R v Budimir [2010] EWCA Crim 1486.
Reference was made in that case to Marckx v Belgium and Walden v Liechtenstein, as well as to Murray CJs observations in A v Governor of Arbour Hill Prison.
In the light of these authorities I would hold that convictions that have become final because they were not appealed timeously, and appeals that have been finally disposed of by the High Court of Justiciary, must be treated as incapable of being brought under review on the ground that there was a miscarriage of justice because the accused did not have access to a solicitor while he was detained prior to the police interview.
The Scottish Criminal Cases Review Commission must make up its own mind, if it is asked to do so, as to whether it would be in the public interest for those cases to be referred to the High Court.
It will be for the appeal court to decide what course it ought to take if a reference were to be made to it on those grounds by the Commission.
Conclusion
I agree with Lord Rodgers judgment.
For the reasons he gives, and these reasons of my own, I would hold that the decisions of the High Court of Justiciary in Paton v Ritchie 2000 JC 271, Dickson v HM Advocate 2001 JC 203 and HM Advocate v McLean 2010 SLT 73 are no longer good law in the light of the Grand Chambers ruling in Salduz and that they should be overruled.
I would allow the appeal on the ground that leading and relying on the evidence of the appellants interview by the police was a violation of his rights under article 6(3)(c) read in conjunction with article 6(1) of the Convention.
Mr Shead invited the court simply to allow the appeal and quash the conviction.
But that would only be appropriate if it was clear that there was insufficient evidence for a conviction without the evidence of the police interview or that, taking all the circumstances of the trial into account, there was a real possibility that the jury would have arrived at a different verdict had they not had that evidence before them: McInnes v HM Advocate [2010] UKSC 7, 2010 SLT 266.
This court is not in a position to make that assessment.
It is a matter that must be for determination by the High Court of Justiciary.
So I would remit the case to that court for further procedure.
LORD RODGER
I have had the advantage of considering Lord Hopes judgment in draft.
I agree with it and, for the reasons which he gives, I too would allow the appeal.
In doing so, the Court will be overruling the unanimous decision of the seven member appeal court in HM Advocate v McLean 2010 SLT 73, the written judgment in which was issued on 15 December 2009.
Because of this, and because of the obvious importance of the appeal, I add some observations of my own.
In doing so, I gratefully adopt Lord Hopes account of the facts and issues.
Understandably, both the appeal court and the Lord Advocate in her submissions to this Court were at pains to describe the many safeguards that the criminal law of Scotland provides for accused persons.
They pointed out that sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act) were to be seen in that overall context.
I agree with that general approach which I indeed adopted when briefly referring to the Scottish position in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, 1790 1791, para 87.
But, in a very real sense, for present purposes these safeguards are beside the point.
The European Courts reasoning in Salduz v Turkey (2008) 49 EHRR 421 starts from the implied right of an accused person under article 6(1) and (3)(c) of the European Convention not to incriminate himself.
The recognition of this right under the Convention can be traced back to the decision of the Grand Chamber in Saunders v United Kingdom (1996) 23 EHRR 313, 337, para 68: The Court recalls that, although not specifically mentioned in article 6 of the Convention, the right to silence and the right not to incriminate oneself, are generally recognised international standards which lie at the heart of the notion of a fair procedure under article 6.
Their rationale lies, inter alia, in the protection of the accused against improper compulsion by the authorities thereby contributing to the avoidance of miscarriages of justice and to the fulfilment of the aims of article 6.
The right not to incriminate oneself, in particular, presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused.
In this sense the right is closely linked to the presumption of innocence contained in article 6(2) of the Convention (internal citations omitted).
This reasoning is reflected in Salduz, 49 EHRR 421, 436, para 54.
To avoid the risk that the police may use coercion or oppression to obtain evidence from a suspect, the Grand Chamber goes on to derive a further implied right, viz the right to early access to a lawyer.
Again, the court is building on its existing case law.
It cites, inter alia, Murray v United Kingdom (1996) 22 EHRR 29, 66, para 63: National laws may attach consequences to the attitude of an accused at the initial stages of police interrogation which are decisive for the prospects of the defence in any subsequent criminal proceedings.
In such circumstances article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer already at the initial stages of police interrogation.
However, this right, which is not explicitly set out in the Convention, may be subject to restrictions for good cause.
The question, in each case, is whether the restriction, in the light of the entirety of the proceedings, has deprived the accused of a fair hearing.
When referring to Murray and two other cases, the English text of para 52 of the judgment in Salduz, 49 EHRR 421, 436, says that the right to legal assistance at the initial stages of police interrogation has so far been considered capable of being subject to restrictions for good cause (emphasis added) and that the question in each case has therefore been whether the restriction was justified.
The language might seem to suggest that in Salduz the Grand Chamber was innovating and laying down a rule under which restrictions for good cause would now be treated differently.
The language of the French text of para 52 is different and gives no support for any such inference, however.
Referring to the right to legal assistance at the initial stage of police questioning, the court says: Ce droit, que la Convention nnonce pas expressment, peut toutefois tre soumis des restrictions pour des raisons valables.
Il sagit donc, dans chaque cas, de savoir si la restriction litigieuse est justifie et, dans laffirmative, si, considre la lumire de la procdure dans son ensemble, elle a ou non priv laccus dun procs quitable, car mme une restriction justifie peut avoir pareil effet dans certaines circonstances.
Moreover, the court finds, 49 EHRR 421, 437, para 55, that, for the right to a fair trial to remain sufficiently practical and effective, article 6(1) requires that, as a rule (en rgle gnrale), access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Even then, any restriction must not unduly prejudice the rights of the accused under article 6.
The law remains the same in this respect.
The narrow base the need to protect the right against self incrimination from which the Grand Chamber in Salduz derives this right of access to a lawyer explains why, in its view, access is to be provided from the first interrogation of the suspect, rather than from the time when he is taken into police custody.
As his concurring opinion shows, 49 EHRR 421, 441, para OI1, like Judge Zagrebelsky, the President, Judge Bratza, would have preferred to go further and to affirm that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention.
A right to legal advice from that earlier stage could not, of course, be derived from the implied right against self incrimination, but would have to be derived from the need for legal assistance for other purposes for example, to support the accused in distress, to check his conditions of detention etc.
See p 446, para O III5.
It is unnecessary to express any view on the merits of that argument since the point does not arise in this case.
But, as I see it, if a suspect had the right to access to legal assistance from the time of his detention, as envisaged by Judge Bratza, it would mean that he could not be refused such assistance if it were available.
But the State would not be under a positive obligation to ensure the availability of legal assistance in all circumstances.
So there would be no violation of the right simply because, due, say, to the time of night or the remoteness of the police station, no legal assistance was actually available when the suspect was detained.
Cf Brennan v United Kingdom (2001) 34 EHRR 507, 521, para 47.
I would read Judge Bratzas opinion in that sense.
The fact that the European Court derives the suspects right to legal assistance at the initial stages of police questioning from his right not to incriminate himself has two significant consequences for present purposes.
First, in HM Advocate v McLean 2010 SLT 73, 84, para 29, the appeal court noted that the European Commission of Human Rights had made no adverse comment on the Scottish system of police questioning in Windsor v United Kingdom (Application No 13081/87), 14 December 1988 (unreported), and Robson v United Kingdom (Application No 25648/94), 15 May 1996 (unreported).
These decisions cannot be regarded as authoritative today, however, since they antedate the Grand Chamber decision in Saunders on the right not to incriminate oneself.
Secondly, the derivation of the right to legal advice before questioning explains why many of the established safeguards for accused persons in Scots law are really beside the point in the present context.
Since this implied right is based on the need to protect the right of the person concerned not to incriminate himself, the only safeguards in Scots domestic law which could be relevant would be those which were designed to protect that right.
Those safeguards have evolved over time.
So, while the precise issue in the present case is relatively new, it is important to notice that the issue of whether legal advice should be available to suspects being questioned about an offence is by no means new: on the contrary, it has a long pedigree in Scottish criminal law.
In sketching the twists and turns, I acknowledge the assistance which I have derived from Sir Gerald Gordons article, The Admissibility of Answers to Police Questioning in Scotland, in P R Glazebrook (ed), Reshaping the Criminal Law: Essays in honour of Glanville Williams (1978), pp 317 343.
Originally, the official charged with investigating crime was usually the sheriff substitute (the sheriff) of the district, who would appoint a procurator fiscal to assist him. (The link between sheriffs and procurators fiscal was not broken until section 2 of the Sheriff Courts and Legal Officers (Scotland) Act 1927 transferred the right to appoint procurators fiscal to the Lord Advocate.) If presented with information about an apparently serious crime, the sheriff would grant warrant to officers of law to search for and apprehend the suspect and to bring him to court for examination. (The wording of the warrant remains essentially the same today.) It was then the duty of the sheriff to examine the suspect about the crime.
It appears that, originally at least, that examination could be fairly vigorous.
While practice seems to have varied from district to district, by the middle of the nineteenth century, except in the gravest cases, many sheriffs left the questioning to the procurator fiscal.
Again, the practice of procurators fiscal varied, but by the 1860s the predominant view appears to have been that, if the suspect did not wish to say anything, he should not be pressed to do so.
Eventually, section 77 of the Summary Jurisdiction (Scotland) Act 1908 provided that, if the accused or his agent intimated that he did not desire to emit a declaration, it was to be unnecessary to take one.
By that time, the system of judicial declarations had largely fallen into desuetude, however.
While the judicial examination system was still active, the position was that, once the suspect had made his declaration or had declined to do so, he would be committed for further examination.
The procurator fiscal would then either continue, or begin, precognoscing the witnesses to the alleged crime.
When that had been done, the suspect could be further examined in the light of the additional evidence.
It was then the sheriffs duty to decide, in the light of all the available material, whether the suspect should be released or committed until liberated in course of law.
If he was committed, the papers would be sent to Crown Office for Crown counsel to decide whether proceedings should be taken.
If Crown counsel decided against prosecution, the proceedings would come to an end and, if still in custody, the suspect would be released.
Otherwise, he would be indicted for trial or, if Crown counsel thought that the offence was relatively minor, he would be tried summarily.
Under this system it was essential for the sheriff to be present during the examination of the suspect, as it is his duty to protect him from any unfair or oppressive examination (the prisoner not being permitted to have legal advice): Macdonald, A Practical Treatise on the Criminal Law of Scotland (first edition, 1867), p 290.
In particular, since anything said by the suspect was evidence against him only if it was emitted of his own free will, it was the duty of the sheriff to inform the prisoner of this, because he may not always know, or may sometimes be afraid to assert his privilege: Hume, Commentaries on the Law of Scotland respecting Crimes (third edition by B R B Bell, 1844) vol 2, pp 80 81; Alison, Practice of the Criminal Law of Scotland (1833), p 131.
The lack of legal advice, in a procedure which was apparently designed to obtain admissions to be used against the suspect, struck a distinguished German observer, Carl Mittermaier, when he visited Scotland in 1850: C J A Mittermaier, Das englische, schottische und nordamerikanische Strafverfahren (1851), pp 193 194.
Plainly, the theory was that the presiding sheriff would ensure that the prisoners rights, including his right against self incrimination, were protected.
To be effective, this system depended on the sheriff and the procurator fiscal acting conscientiously.
Since the whole procedure took place in private, however, it was hard to be sure that they always actually did so.
See, for instance, R C, On the Investigation of Crime in Scotland (1864) 8 Journal of Jurisprudence 473 484, at p 480; F Russell, On the Procedure in Criminal Prosecutions in Scotland Preliminary to Trial (1870) 14 Journal of Jurisprudence 259 268.
The system was examined by the Royal Commission on the Courts of Law in Scotland chaired by Lord Colonsay.
A number of witnesses thought that suspects should have a right to legal advice before being examined.
For instance, Mr Macdonald, advocate, the author of the recently published book on criminal law, had never been able to reconcile himself to the practice of taking a declaration from a prisoner before he was allowed to have any legal advice: the Commissions Third Report (C 36, 1870), p 679, Q 16,895.
The majority of the Commission recommended against the introduction of a right to legal advice before the declaration: Fifth Report (C 260, 1871), p 6.
They may have been influenced by Macdonalds evidence that persons in the better rank who were legally advised usually then declined to answer questions at their examination: Third Report, p 680, Q 16,906.
Notable among the minority who favoured introducing a right for the suspect to consult a lawyer were Lord Advocate Young and the future Lord Shand.
No legislation on this matter followed the Commissions report.
But Mr Macdonald bided his time and eventually, as Lord Advocate, he promoted the Bill which became the Criminal Procedure (Scotland) Act 1887 (the 1887 Act).
Section 17 provided that any person who was arrested on a criminal charge was to be entitled immediately upon such arrest to have intimation sent to a lawyer that his assistance was needed.
The lawyer was to be told the place to which the person was to be taken for examination and the lawyer was to be entitled to have a private interview with the person accused before he is examined on declaration, and to be present at such examination, which shall be conducted according to the existing practice.
The sheriff could delay the examination for up to 48 hours from the time of arrest, in order to allow the lawyer to attend.
It was soon held that, at least in serious cases, it was the duty of the sheriff, before taking the declaration, to inform the accused that he had the right to confer with a lawyer: HM Advocate v Goodall (1888) 2 White 1.
Therefore, once the 1887 Act was in force, an accuseds right not to incriminate himself at his judicial examination was protected by the right to a private interview with his lawyer before the examination.
At first sight, the Scottish system would have gone at least some way towards meeting the relevant requirement of article 6(1) and (3)(c) of the Convention.
In practice, things were rather different.
In the course of the nineteenth century police forces were set up in burghs under the Burghs Police (Scotland) Act 1833 and in counties under the Police (Scotland) Act 1857.
Therefore, by the time the 1887 Act was passed, the reality was that police officers, rather than the sheriff and his procurator fiscal, had come to shoulder the main burden of investigating offences, though they worked under the supervision of the local procurator fiscal.
So, instead of simply applying for, and executing, warrants to take those suspected of committing crimes to be examined before the sheriff, police officers would conduct enquiries of their own.
In particular, they would look for witnesses and take statements from them.
In itself, that was not problematic.
But, when suspicion came to focus on an individual, a significant problem did emerge.
Could the police question that individual or should they take him to the sheriff so that he could be examined in court where he would enjoy the protections afforded by the right to consult a lawyer beforehand, by the presence of the lawyer at his examination and by the supervision of a judicial figure?
In practice, it was accepted that, once the police had arrested and charged a suspect, they could not question him further: he had a right to legal advice and any further questioning had to take place in the context of his subsequent judicial examination.
But, as noted already, by 1909, the system of judicial examination was in decline.
The changes made by the Summary Procedure (Scotland) Act 1908 completed that decline.
See Renton and Brown, Criminal Procedure according to the Law of Scotland (second edition, 1928), p 33.
So the position came to be simply that the police could not question someone whom they had arrested.
The prevailing view was, however, that police officers could take any voluntary statement that he chose to make even though he had not enjoyed the protections of a judicial examination.
Obviously, the police could not avoid the bar on questioning after arrest by choosing to postpone arresting and charging someone against whom they already had sufficient evidence (the chargeable suspect).
But, short of that, could police officers question someone whom they already suspected of committing the offence, in the hope of obtaining enough evidence to charge him? There were two very real difficulties.
In practice, the police would question suspects at a police station.
But it was hard to find any legal basis for the police detaining such a person whom they had not arrested.
Since someone in that position had no right to legal advice (Thompson v HM Advocate 1968 JC 61, 65, per Lord Justice General Clyde), in practice, most people acquiesced in the questioning.
See, for instance, the remarks of Lord Justice General Cooper in Chalmers v HM Advocate 1954 JC 66, 75.
In this connexion, in their second report on Criminal Procedure in Scotland (Cmnd 6218, 1975), para 2.03, the Thomson Committee elegantly referred to police practices which were accepted by the public, including criminals, as fair although they may be technically illegal or at least of doubtful legality.
But, assuming that the suspect stayed to be questioned, were his answers admissible in evidence against him? The views of the judges fluctuated considerably over a long period.
Eventually, however, a consensus emerged that questioning of a person in that position was permissible and the answers were admissible in evidence against him, provided only that the questioning was fair.
See, for instance, Hartley v HM Advocate 1979 SLT 26.
The very real difficulty for police officers and for courts was to determine at what point someone passed, from being a suspect who could be questioned, to being a suspect who could no longer be questioned since there was enough evidence to charge him.
In Chalmers v HM Advocate 1954 JC 66, 81 82, Lord Justice Clerk Thomson referred to the ordinary routine investigation by the police of a crime and continued: In the course of such an investigation the man ultimately accused may be interviewed.
It would unduly hamper the investigation of crime if the threat of inadmissibility were to tie the hands of the police in asking questions.
It would help to defeat the ends of justice if what the person so questioned said in answer to ordinary and legitimate questions were not admissible in evidence against him.
I am assuming throughout that the questioning is not tainted by bullying, pressure, third degree methods and so forth.
Evidence obtained by such methods can never be admissible in our courts, whatever stage the investigation has reached.
But there comes a point of time in ordinary police investigation when the law intervenes to render inadmissible as evidence answers even to questions which are not tainted by such methods.
After the point is reached, further interrogation is incompatible with the answers being regarded as a voluntary statement, and the law intervenes to safeguard the party questioned from possible self incrimination.
Just when that point of time is reached is in any particular case extremely difficult to define or even for an experienced police official to realise its arrival.
There does come a time, however, when a police officer, carrying out his duty honestly and conscientiously, ought to be in a position to appreciate that the man whom he is in process of questioning is under serious consideration as the perpetrator of the crime.
Once that stage of suspicion is reached, the suspect is in the position that thereafter the only evidence admissible against him is his own voluntary statement.
In summary, at the stage of routine investigation, the right to protection against self incrimination was not in play because the individuals were being questioned as potential witnesses rather than as suspects.
But, once the police officer realised, or should have realised, that a particular individual was under serious consideration as the perpetrator of the crime, the common law intervened to safeguard him from possible self incrimination and the only admissible evidence was his own voluntary statement.
Admittedly, the intervention of the common law did not go so far as to secure him the right to consult a lawyer.
This was the background against which the Thomson Committee made their recommendations in 1975.
One aim was to put an end to the doubts about the legal basis for holding suspects for questioning when they had not been arrested.
Another was to clarify the law as to the power of the police to question suspects and as to the admissibility of any answers that the suspects gave to such questions.
The upshot, in relation to the legal basis for holding a suspect, was section 2 of the Criminal Justice (Scotland) Act 1980 (the 1980 Act), which was consolidated as section 14 of the 1995 Act.
The section gives a constable a right to detain a person for questioning where he has reasonable grounds for suspecting that the person has committed or is committing an offence punishable by imprisonment.
In other words, anyone who is detained under the section is, by definition, already reasonably suspected of committing the offence about which he is being questioned.
The authorised period of detention under the section is six hours, after which the police must arrest and charge him or else release him.
In this way the legislation successfully resolved the doubts about the legal basis for detaining suspects for questioning.
Section 3 of the 1980 Act, now section 15 of the 1995 Act, deals with legal assistance for those detained under the legislation.
It is noticeably weaker than section 17 of the 1887 Act: it does not confer any right for the suspect to consult a lawyer before being questioned or, a fortiori, to have the questioning delayed until a lawyer can be consulted.
The suspect is simply entitled to have intimation of his detention, and of the place of his detention, sent to a solicitor without delay or, where some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is so necessary.
Section 6 of the 1980 Act tried to breathe new life into the procedure for judicial examination.
The reformed system is now to be found in sections 35 39 of the 1995 Act.
Notably, section 36(6) gives the accused a right to consult his solicitor before answering any of the procurator fiscals questions.
Although judicial examination forms a recognised step in solemn cases, the truth is that only rarely does the accused make use of it to give an account of his position.
Having usually said all that he wished to say when questioned by the police before his arrest, the accused tends to decline to say more on the advice of his solicitor.
The re introduction of the procedure cannot therefore be accounted a real success from the point of view of either the Crown or accused persons.
Since the maximum period of detention under section 14 of the 1995 Act is six hours, it is obvious that, in the absence of any power to postpone the running of the six hour period, a right to consult a lawyer before the questioning began would, in many cases, be unworkable.
So the denial of a right for a suspect to consult a lawyer before being questioned might, in theory, have been devised merely as a necessary trade off for restricting the permissible period of detention to six hours.
That is indeed how I tended to see the position in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, 1790 1791, para 87.
But the investigations of counsel in the present case show beyond doubt that the thinking behind section 15 was very different.
The reasoning behind the section is to be found in para 7.16 of the second report of the Thomson Committee: Although a person who has been charged with an offence is entitled to an interview with a solicitor, we recommend that a solicitor should not be permitted to intervene in police investigations before charge.
The purpose of the interrogation is to obtain from the suspect such information as he may possess regarding the offence, and this purpose might be defeated by the participation of his solicitor.
It is for this reason that we recommend in chapter 5.08 that it will be a matter of police discretion whether to allow the detainee an interview with his solicitor.
Following this recommendation, section 3 of the 1980 Act (now section 15 of the 1995 Act) was designed to deny an individual, who was already reasonably suspected of committing the crime, a right to obtain legal advice when he was to be questioned.
This was done because of a fear that allowing him to take legal advice beforehand would tend to frustrate the police in their efforts to obtain information from him about the crime.
In short, section 15 of the 1995 Act deliberately deprives the suspect of any right to take legal advice before being questioned by the police, in the hope that, without it, he will be more likely to incriminate himself during questioning.
As already mentioned, in HM Advocate v McLean 2010 SLT 73, 83, para 27, the appeal court listed many features of Scots criminal law that provide protection to an accused person.
They are indeed admirable and, in certain respects, go further than the protections offered by some other systems.
But these protections cannot, and do not, make up for the lack of any right for the suspect to take legal advice before being questioned.
For example, a modern recording of a police interview shows how it was conducted, what answers the suspect gave and what his attitude was.
It therefore eliminates many of the doubts that used to surround police questioning but it does nothing to diminish the fact that the questioning takes place without the suspect having any right to legal advice as to whether he should say anything at all and, if so, how far he should go.
It is significant that, in the 1887 Act, Parliament introduced a right to take legal advice before a suspect was judicially examined, even though the questioning was to be overseen by a sheriff and the administration of a form of caution and the doctrine of corroboration were recognised elements of Scottish criminal law at the time.
By withholding the right to take legal advice, section 15 of the 1995 Act is intended to give the police and therefore the prosecution an enhanced possibility of obtaining incriminating admissions from the suspect which can then be deployed in evidence at his trial.
The Lord Advocate did not suggest that whether due to the existence of the various protections or for any other reason the legislation had failed to fulfil this intention.
The only possible conclusion is that section 15 creates a procedure under which, as a rule, access to a lawyer is denied at the stage when a suspect is questioned by the police even though the aim of the questioning is to obtain admissions from him which may later be used against him at trial.
The present case, where the Crown suggested to the jury that the appellants answers to the police were a very significant part of the evidence, is fairly typical.
The procedure under sections 14 and 15 of the 1995 Act is therefore, in this respect, the very converse of what the Grand Chamber holds is required by article 6(1) and (3)(c) of the Convention: Salduz v Turkey (2008) 49 EHRR 421, 437, para 55.
Moreover, the Grand Chamber long since declared that the right to silence and the right not to incriminate oneself, are generally recognised international standards which lie at the heart of the notion of a fair procedure under article 6: Saunders v United Kingdom (1996) 23 EHRR 313, 337, para 68.
Cf Murray v United Kingdom (1996) 22 EHRR 29, 60, para 45.
A right of access to a lawyer, which is implied in order to protect a right at the heart of the notion of a fair procedure under article 6, must itself lie near that heart.
For this reason, in my view there is not the remotest chance that the European Court would find that, because of the other protections that Scots law provides for accused persons, it is compatible with article 6(1) and (3)(c) for the Scottish system to omit this safeguard which the Committee for the Prevention of Torture regards as fundamental and for suspects to be routinely questioned without having the right to consult a lawyer first.
On this matter Strasbourg has spoken: the courts in this country have no real option but to apply the law which it has laid down.
Two points are perhaps worth adding.
First, as the European Court recognises, 49 EHRR 421, 437, para 55, since the right to legal assistance at the stage when a suspect is to be questioned is an implied right, it is not absolute and must be subject to exceptions when, in the particular circumstances, there are compelling reasons to restrict it.
It is not suggested that there would have been any such reasons in this case.
But the circumstances in which section 15 of the 1995 Act envisages delaying intimation to a solicitor (the interest of the investigation or the prevention of crime or the apprehension of offenders) could perhaps constitute compelling reasons to restrict the right of access in an appropriate case.
It has to be remembered, however, that even a justified restriction may deprive an accused of a fair hearing and so lead to a violation of article 6: 49 EHRR 421, 436, para 52.
Secondly, although the Court has deliberately refrained from entering into the circumstances of this particular case, which is still to be considered by the appeal court, it is common ground that the appellant actually declined to have intimation of his detention sent to any solicitor.
It might therefore be that, had he had a right to consult a solicitor, he would have waived that right.
It is, indeed, quite common for those who have been arrested to decide to make a voluntary statement to the police and not to exercise their right to obtain legal advice before doing so.
See, for instance, the famous example in Manuel v HM Advocate 1958 JC 41, 49.
Similarly, if a suspect had a right to legal advice before being questioned, but declined to exercise it, a court might have to consider whether, having regard to all the circumstances, he had effectively waived his relevant article 6 Convention right so that no violation would arise.
To return to the main point.
Assume that, up to now, the system for questioning suspects under the 1995 Act has assisted the police in obtaining incriminating information from suspects.
It must follow that the recognition of a right for the suspect to consult a solicitor before being questioned will tilt the balance, to some degree, against the police and prosecution.
Although inescapable, that consequence is one that many of those who are familiar with the way the present system operates may well find unpalatable.
The change will, however, have the effect of putting the police and prosecution in Scotland in the same position in this respect as the police and prosecution in the rest of the United Kingdom and, indeed, in other countries which are members of the Council of Europe.
Lord Hope has mentioned that a number of States have taken steps to alter their law to bring it into line with the approach laid down by the European Court in Salduz.
In particular, as he explains, since the hearing there has been a series of developments in France.
These culminated in the decision of the European Court in Brusco v France (Application no 1466/07), 14 October 2010, paras 45 and 54, confirming the law as laid down in Salduz, followed by the three decisions of the Chambre Criminelle of the Cour de Cassation of 19 October 2010 applying that law, but postponing the effect of doing so.
The need for legislation to deal with the new situation has been recognised in France.
Equally, there will need to be changes in both legislation and police and prosecution practice to bring the Scottish system of police questioning into line with the requirements of Strasbourg and to ensure that, overall, any revised scheme is properly balanced and makes for a workable criminal justice system.
At the hearing before this Court the Lord Advocate indicated that, despite the judgment in HM Advocate v McLean 2010 SLT 73, steps had already been taken to allow for the possibility that, at some point, section 15 of the 1995 Act might be found to be incompatible with article 6.
Reports in the media since the hearing indicate that further steps are being taken by various groups in anticipation of a change.
The necessary reforms are, however, matters for the Scottish Executive and Parliament, not for this Court.
The interval between the hearing of the appeal and the announcement of the Courts decision should, however, have given the responsible authorities time to prepare appropriate legislation for the consideration of the Parliament.
Any changes in the relevant legislation or practices will, of course, apply only to future cases.
At the hearing of the appeal the Lord Advocate submitted that, if the Court were to decide against the Crown, it should make a ruling with only prospective effect.
As she pointed out, since 1999 the Scottish courts have dealt with many thousands of cases in which the Crown obtained convictions by relying, to a greater or lesser extent, on answers to questioning under section 14 of the 1995 Act.
The Court should not make a ruling that would throw these convictions into doubt.
The Lord Advocates submission appeared to be based on an apprehension that, unless the Court took some exceptional step, a decision to allow this appeal would operate retroactively to undermine any convictions which had been obtained in reliance on evidence from police questioning in cases completed since May 1999.
That would, however, be to adopt an extreme version of the accepted doctrine that courts declare not only what the law is, but what it has always been.
And it would be to adopt a theory which has never been applied to other well known appellate decisions that were perceived to alter the law as it had previously been understood.
The effect of a decision which develops the law was examined by the Supreme Court of Ireland in A v The Governor of Arbour Hill Prison [2006] 4 IR 88.
In June 2004 A pleaded guilty to, and was convicted of, unlawful carnal knowledge, contrary to section 1(1) of the Irish Criminal Law (Amendment) Act 1935.
Then, on 23 May 2006, in CC v Ireland [2006] 4 IR 66, the Supreme Court declared that section 1(1) was inconsistent with the Irish Constitution.
Three days later, A applied for an order for his release on the ground that his detention, by virtue of a sentence of imprisonment following his conviction in 2004 under section 1(1), was unlawful because that provision had now been declared to be unconstitutional.
The Supreme Court rejected that argument and held that the declaration of inconsistency in CC v Ireland applied to the parties in that case, or in related litigation, and prospectively, but that it did not apply retrospectively, unless there were wholly exceptional circumstances.
The very full judgments in A v The Governor of Arbour Hill Prison repay study.
But for present purposes guidance can be derived from the judgment of Murray CJ, [2006] 4 IR 88, 117, paras 36 38: 36.
Judicial decisions which set a precedent in law do have retrospective effect.
First of all the case which decides the point applies it retrospectively in the case being decided because obviously the wrong being remedied occurred before the case was brought.
A decision in principle applies retrospectively to all persons who, prior to the decision, suffered the same or similar wrong, whether as a result of the application of an invalid statute or otherwise, provided of course they are entitled to bring proceedings seeking the remedy in accordance with the ordinary rules of law, such as a statute of limitations.
It will also apply to cases pending before the courts.
That is to say that a judicial decision may be relied upon in matters or cases not yet finally determined.
But the retrospective effect of a judicial decision is excluded from cases already finally determined.
This is the common law position. 37.
Only a narrow approach based on absolute and abstract formalism could suggest that all previous cases should be capable of being reopened or relitigated (even if subject to a statute of limitations).
If that absolute formalism was applied to the criminal law it would in principle suggest that every final verdict of a trial or decision of a court of appeal should be set aside or, where possible, retried in the light of subsequent decisions where such subsequent decision could be claimed to provide a potential advantage to a party in such a retrial.
In principle both acquittals and convictions could be open to retrial.
But one has only to pose the question to see the answer.
No one has ever suggested that every time there is a judicial adjudication clarifying or interpreting the law in a particular manner which could have had some bearing on previous and finally decided cases, civil or criminal, that such cases be reopened or the decisions set aside. 38.
It has not been suggested because no legal system comprehends such an absolute or complete retroactive effect of judicial decisions.
To do so would render a legal system uncertain, incoherent and dysfunctional.
Such consequences would cause widespread injustices.
Murray CJs description of the effect of a decision which alters the law as previously understood can be applied to Scots law.
For instance, in Smith v Lees 1997 JC 73 the Court of Five Judges overruled Stobo v HM Advocate 1994 JC 28 and thereby laid down a more restrictive test for corroboration in cases of sexual assault.
The new test applied to the appellants case and to other cases that were still live.
But it could never have been suggested that the decision meant that convictions in completed cases, which had been obtained on the basis of the law as laid down in Stobo, were ipso facto undermined or invalidated.
Similarly, in Thompson v Crowe 2000 JC 173, the Full Bench overruled Balloch v HM Advocate 1977 JC 23 and re established the need to use the procedure of a trial within a trial when the admissibility of statements by the accused is in issue.
But, again, this had no effect on the countless completed cases where convictions had been obtained on the basis of evidence of such statements by the accused which judges had admitted in evidence without going through that procedure.
So, here, the Courts decision as to the implications of article 6(1) and (3)(c) of the Convention for the use of evidence of answers to police questioning has no direct effect on convictions in proceedings that have been completed.
To hold otherwise would be to create uncertainty and, as Murray CJ rightly observes, cause widespread injustices.
And the Strasbourg court has pointed out that the principle of legal certainty is necessarily inherent in the law of the European Convention: Marckx v Belgium (1979) 2 EHRR 330, 353, para 58.
In the Irish case Geoghegan J said, [2006] 4 IR 88, 200, para 286, that he was satisfied that it would be wholly against good order if convictions and sentences which were deemed to be lawful at the time they were decided had to be reopened.
I emphatically agree.
And that policy is, of course, embodied in section 124 of the 1995 Act which makes interlocutors and sentences pronounced by the appeal court final and conclusive and not subject to review by any court whatsoever, except in proceedings on a reference by the Scottish Criminal Cases Review Commission.
The only way, therefore, in which the Courts decision in this case could have any effect on completed cases would be, indirectly, through the mechanism of such a reference by the Review Commission.
It is, however, no part of this Courts function, in an appeal to which the Commission is not a party, to comment on the approach that it should adopt in handling any application for such a reference.
It is for the Commission to consider where the public interest lies if an application is made to it for a reference to the High Court in a case that was properly conducted according to the law as understood at the time.
A fortiori, it is no part of this Courts function on this occasion to comment on the approach to be adopted by the appeal court if the Commission should make a reference in such a case.
That would be a matter for the appeal court to determine in the light of the arguments presented to it.
I would not wish, however, to part with this case without drawing attention to a matter which was not mentioned by any of the counsel who appeared.
In Somerville v Scottish Ministers 2008 SC (HL) 45 the House of Lords held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998.
It followed that, subject to any common law limitations or any specific statutory time limit, such proceedings could be brought at any time.
The Scottish Parliament eventually responded to that decision by passing the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, which amended section 100 of the Scotland Act so as to introduce a one year time limit like the one in section 7(5) of the Human Rights Act.
In its present (amended) form section 100 provides: (1) This Act does not enable a person (a) to bring any proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights, or (b) to rely on any of the Convention rights in any such proceedings, unless he would be a victim for the purposes of Article 34 of the Convention (within the meaning of the Human Rights Act 1998) if proceedings in respect of the act were brought in the European Court of Human Rights. (2) Subsection (1) does not apply to the Lord Advocate, the Advocate General, the Attorney General, the Advocate General for Northern Ireland or the Attorney General for Northern Ireland. (3) This Act does not enable a court or tribunal to award any damages in respect of an act which is incompatible with any of the Convention rights which it could not award if section 8(3) and (4) of the Human Rights Act 1998 applied. (3A) Subsection (3B) applies to any proceedings brought on or after 2 November 2009 by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive in a court or tribunal on the ground that an act of the Scottish Ministers or a member of the Scottish Executive is incompatible with the Convention rights. (3B) Proceedings to which this subsection applies must be brought before the end of (a) the period of one year beginning with the date on which the act complained of took place, or (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances, but that is subject to any rule imposing a stricter time limit in relation to the procedure in question. (3C) Subsection (3B) does not apply to proceedings brought by the Lord Advocate, the Advocate General, the Attorney General, the Attorney General for Northern Ireland or the Advocate General for Northern Ireland. (3D) In subsections (3A) and (3B) act does not include the making of any legislation but it does include any other act or failure to act (including a failure to make legislation). (3E) The reference in subsection (3A) to proceedings brought on or after 2 November 2009 includes proceedings relating to an act done before that date. (4) Subject to subsection (3D), in this section act means (a) making any legislation, (b) any other act or failure to act, if it is the act or failure of a member of the Scottish Executive.
The present proceedings are proceedings brought on the ground that it is incompatible with article 6(1) and (3)(c) for the Lord Advocate to lead evidence of answers to questions elicited by the police under section 14 of the 1995 Act when the accused had no right to legal advice and had not had legal advice.
The leading of such evidence is an act for the purposes of the section: subsections (3D) and (4).
Any fresh proceedings which sought to raise the same point in other cases would be brought on the same ground.
If those proceedings were brought on or after 2 November 2009, they would fall within section 100(3A) of the Scotland Act as amended.
Subsection (3E) makes it clear that subsection (3A) applies to proceedings relating to an act done before 2 November 2009.
It follows that, by reason of subsection (3B), to be competent, any such proceedings would need to have been commenced before the end of a year beginning with the date on which the Crown led the evidence, or within such longer period as the court considered equitable having regard to all the circumstances.
LORD WALKER
I agree with the judgments of Lord Hope and Lord Rodger (between which I can discern no significant difference on any point of principle).
LORD BROWN
I have had the advantage of reading in draft the judgments of Lord Hope and Lord Rodger.
I agree with both of them and for the reasons they give I too would allow this appeal.
The critical point can, I think, be comparatively shortly made.
The Strasbourg jurisprudence makes plain that it is not sufficient for a legal system to ensure that a suspect knows of his right to silence and is safeguarded (perhaps most obviously by the video recording of any interviews) against any possibility that by threats or promises of one sort or another he may nonetheless be induced against his will to speak and thereby incriminate himself.
It is imperative too that before being questioned he has the opportunity to consult a solicitor so that he may be advised not merely of his right to silence (the police will already have informed him of that) but also whether in fact it is in his own best interests to exercise it: by saying nothing at all or by making some limited statement.
He must in short have the opportunity to be advised by a solicitor not to make incriminating statements despite whatever inclination he might otherwise have to do so.
It is clearly Strasbourgs judgment that whatever in the result may be lost in the way of convicting the guilty as a result (wholly or partly) of their voluntary admissions is more than compensated for by the reinforcement thereby given to the principle against self incrimination and the guarantees this principle provides against any inadequacies of police investigation or any exploitation of vulnerable suspects.
LORD KERR
For the reasons given by Lord Hope and Lord Rodger, with which I am in full agreement, I too would allow the appeal.
SIR JOHN DYSON SCJ
For the reasons given by Lord Hope and Lord Rodger, with which I am in full agreement, I too would allow the appeal.
| UK-Abs | The question in this appeal is whether a person who has been detained by the police in Scotland on suspicion of having committed an offence has the right of access to a lawyer prior to being interviewed.
Sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995 allow a police constable to detain a person whom he has reasonable grounds for suspecting has committed or is committing an offence punishable by imprisonment.
Detention may last for up to six hours.
During detention, the police may put questions to the detainee, although the detainee is under no obligation to answer them and is to be informed at the outset of the detention that he is under no such obligation.
The detainee is entitled to have a solicitor informed of his detention.
However, in terms of the statute, the detainee has no right of access to a solicitor.
The question is whether that is a breach of the right to a fair trial, recognised in Article 6(1) and 6(3)(c) of the European Convention of Human Rights (the ECHR).
The Appellant was detained by the police on suspicion of serious assault and cautioned, in line with the statute, that he did not have to answer any question, beyond giving his name, address, date and place of birth and nationality.
He was told that he was entitled to have a solicitor informed of his detention but he did not exercise that right.
He was interviewed without a lawyer being present.
During interview, the Appellant made a number of admissions.
At trial the Crown led evidence of the police interview with the Appellant and relied on the admissions.
The Appellant was convicted.
In Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber of the European Court of Human Rights unanimously held that there had been a violation of Articles 6(1) and 6(3)(c) ECHR because Salduz had not had the benefit of legal advice when he was in police custody.
In Her Majestys Advocate v McLean [2009] HCJAC 97, the High Court of Justiciary (sitting with seven judges) held that, notwithstanding the decision in Salduz, it was not a violation of Articles 6(1) & 6(3)(c) ECHR for the Crown to rely at trial on admissions made by a detainee while being interviewed without having had access to a solicitor.
This was because the guarantees otherwise available in the Scottish legal system (and, in particular, the requirement that there be corroborated evidence in order to convict) were sufficient to provide for a fair trial.
In the present case, relying on the decision in McLean, the appeal court refused the Appellant leave to appeal against his conviction.
In effect, therefore, the present case is an appeal against the decision in McLean.
The Supreme Court unanimously grants leave to appeal and then goes on to allow the appeal.
The ECHR requires that a person who has been detained by the police has the right to have access to a lawyer prior to being interviewed, unless in the particular circumstances of the case there are
compelling reasons to restrict that right.
The Supreme Court remits the case to the High Court of Justiciary for further procedure.
Lord Hope (Deputy President) delivers the leading judgment, with which Lord Mance agrees.
Lord Rodger delivers a separate judgment, agreeing with Lord Hope but adding observations of his own.
Lord Walker, Lord Brown, Lord Kerr and Sir John Dyson SCJ agree with the reasons given by both Lord Hope and Lord Rodger.
The High Court of Justiciarys decision in McLean was entirely in line with previous domestic authority: [29] That authority cannot, however, survive in light of the European Court of Human Rights decision in Salduz and in subsequent cases.
Properly interpreted, Salduz requires a detainee to have had access to a lawyer from the time of the first interview unless there are compelling reasons, in light of the particular circumstances of the case, to restrict that right: [35], [36], [38] & [70].
The exception applies only if there are particular circumstances in the individual case and does not allow a systematic departure from the rule such as that set up by the 1995 Act: [41].
The rule in Salduz is based on the right not to incriminate oneself: [33] & [67].
This court should follow Salduz.
Indeed, it has no real option but to do so: [93].
Previous cases have established that the court should follow any clear and consistent jurisprudence of the Strasbourg court: [45].
Salduz is a decision of the Grand Chamber, now firmly established in the European Court of Human Rights case law: [48].
The majority of those member states which prior to Salduz did not afford a right to legal representation at interview (Belgium, France, the Netherlands and Ireland) are reforming their laws to bring them into line with the Conventions requirements: [49].
The guarantees otherwise offered by the Scottish legal system (in particular corroboration) are commendable but are beside the point.
They do not address the European Courts concern, which is with self incrimination: [50], [66] & [92].
The system of detention under section 14 and 15 of the 1995 Act was expressly designed to deny an individual, reasonably suspected of committing a crime, a right to obtain legal advice when questioned in the hope that, without legal advice, the individual would be more likely to incriminate himself during questioning: [91].
That view of where the balance is to be struck between the public interest and the rights of the accused is irreconcilable with Convention rights: [51].
There is not the remotest chance that the European Court would hold that, because of the other protections that Scots law provides for accused persons, the Scottish system could omit the safeguard of allowing legal advice prior to interview: [93].
The Lord Advocate could not rely upon section 57(3) of the Scotland Act 1998 to prevent her act of leading the evidence of the interview from being unlawful.
Section 57(3) would apply where, because of another provision of legislation, the Lord Advocate could not have acted any differently or where she acted to give effect to another provision which could not be read in a way which complies with Convention rights.
Neither applied here because of the drafting of section 14(7) of the 1995 Act: [54] & [55].
This decision does not permit closed cases to be re opened.
Although a judicial decision has retrospective effect, it does not affect cases which have been finally determined (namely, where an accused was convicted and did not appeal within the relevant time limits, or did appeal and the appeal has been finally disposed of).
The decision will, however, affect cases which have not yet gone to trial, where the trial is still in progress or where an appeal has been brought in time and is not yet concluded.
The Scottish Criminal Cases Review Commission, if it is asked to do so, will have to determine whether it is in the public interest for cases which have already been finally determined to be referred to the High Court, which will in turn have to decide how to deal with such cases, if a reference is made: [60] [62]; [99] [103].
|
We are concerned with the employment, by the Secretary of State for Children, Schools and Families, of teachers to work in the European Schools.
These are schools set up to provide a distinctively European education principally for the children of officials and employees of the European Communities.
The Staff Regulations, made by the Board of Governors pursuant to the Convention defining the Statute of the European Schools, limit the period for which teachers may be seconded to work in those schools to a total of nine years (or exceptionally ten).
This is made up of an initial probationary period of two years, and a further period of three years, which is renewable for a further four years.
The principal question before us is whether these arrangements can be objectively justified as required by the Fixed term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) (the Fixed term Regulations).
This was the measure chosen by the United Kingdom to implement Council Directive 1999/70/EC concerning the framework agreement on fixed term work concluded by ETUC, UNICE and CEEP (the Fixed term Directive).
The effect of regulation 8 is that a successive fixed term contract is turned into a permanent employment unless the use of such a contract can be objectively justified.
Should the answer to the principal question be no, two subsidiary issues arise in the case of teachers who are employed to work in schools outside the United Kingdom.
The first is whether the Fixed term Regulations apply to them.
In other words, do they form part of the contractual arrangements between the parties? This may raise questions of European law which might have to be referred to the European Court of Justice.
The second is whether the statutory protection against unfair dismissal, given to people employed in Great Britain, applies to them.
Without such protection, the teachers would be limited to their contractual rights.
If the answer to the principal question is yes, however, these questions do not arise.
The Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal have all held that the use of successive fixed term contracts for these teachers is not objectively justified.
In the case of teachers employed to work in schools outside the United Kingdom, the Employment Appeal Tribunal and the Court of Appeal have held that the Fixed term Regulations do apply.
However, this might have been something of a pyrrhic victory, because the Employment Tribunal and the Employment Appeal Tribunal held, applying the test in Lawson v Serco Ltd [2006] UKHL 3, [2006] ICR 250, that the teachers were not entitled to make claims for unfair dismissal.
This would have meant that they were limited to their contractual notice rights.
The Court of Appeal held, applying the principle in Bleuse v MBT Transport Ltd [2008] ICR 488 that, nevertheless, it was necessary to extend the remedy of unfair dismissal to them in order to give them an effective remedy for breach of their rights in Community law.
The Secretary of State appeals against the decision of the Court of Appeal, reported at [2010] ICR 815, on all save the Lawson v Serco issue and the teachers cross appeal on that issue.
The background
The first European School was established in 1954 for the children of officials of the European Coal and Steel Community, by agreement between the original six Member States.
This later became the Statute of the European Schools and Protocol on the Setting Up of the European Schools of 1957.
In 1994, the Member States and the European Communities adopted the Convention defining the Statute of the European Schools (the Schools Convention), which consolidated, updated and amended the original Statute.
The Board of Governors, established under the Convention, is made up of a representative of the European Commission, a representative of each Member State, a staff representative, a parent representative and a representative of the EU Patent Office.
The Regulations for Members of the Seconded Staff of the European Schools 1996 (the Staff Regulations) were made by the Board pursuant to Article 12 of the Schools Convention.
Articles 28 and 29 of those Regulations define the terms for which teachers may be seconded: an initial probationary period of two years (article 28(1)); a further period of three years (article 29(a)(i)); renewable for a further period of four years (article 29(a)(i)); subject to a maximum period of nine years, although a further one year extension may be granted in special cases (article 29(a)(ii)).
This is what has come to be referred to as the nine year rule.
The nine year rule is an attempt to strike a balance between the need for expertise and continuity in the European Schools and the desire for cross fertilisation between those schools and the national schools of the Member States; to put it another way, to prevent the European Schools becoming an educational ghetto, isolated from the mainstream of ordinary education.
Whether the supposed benefits of the rule outweigh the disruption caused to the lives of the teachers and to the education of their pupils is controversial.
The staff committee has for a long time been trying to persuade the Governors to think again but so far without success.
The United Kingdom government has also supported a review of the rule, which presents a particular difficulty for the United Kingdom because of the way in which teachers are employed in this country.
Most of the teachers in the European Schools are not employed by the schools themselves, but are employed as teachers by the Member States and seconded to work in the European Schools.
In most of the Member States, school teachers are permanent employees of the state.
At the end of their secondment they return to work in their home countries.
In the United Kingdom, however, school teachers are employed either by the local education authority or by the governing body of the school where they work.
They are not employed by central government.
Hence the Secretary of State employs teachers specifically to work in the European Schools and on fixed term contracts which correspond to the secondment periods laid down in the Staff Regulations.
This of course presents problems for the teachers, who will have to look for new employment when their terms of employment end.
It also presents a problem for the Secretary of State, who has no other work for these teachers once their secondment to the European Schools is over.
The Directive and the Regulations
It is important to understand that the Fixed term Directive is not directed against fixed term contracts as such.
It has two more specific aims, set out in recital (14): The signatory parties . have demonstrated their desire to improve the quality of fixed term work by ensuring the application of the principle of non discrimination, and to establish a framework to prevent abuse arising from the use of successive fixed term employment contracts or relationships.
Those two purposes are spelled out in clause 1 of the annexed Framework Agreement.
Clause 4 goes on to deal with the principle of non discrimination and clause 5 deals with measures to prevent abuse: 1.
To prevent abuse arising from the use of successive fixed term employment contracts or relationships, Member States, after consultation with social partners in accordance with national law, collective agreements or practice, and/or the social partners, shall, where there are no equivalent legal measures to prevent abuse, introduce in a manner which takes account of the needs of specific sectors and/or categories of workers, one or more of the following measures: (a) objective reasons justifying the renewal of such contracts or relationships; (b) the maximum total duration of successive fixed term employment contracts or relationships; (c) the number of renewals of such contracts or relationships.
The preamble and general considerations in the Framework Agreement recognise that contracts of an indefinite duration are, and will continue to be, the general form of employment relationship between employers and workers and also that they contribute to the quality of life of the workers concerned and improve performance.
But they also recognise that fixed term employment contracts respond, in certain circumstances, to the needs of both employers and workers and that they are a feature of employment in certain sectors, occupations and activities which can suit both employers and workers.
But the substantive provisions of the Framework Agreement do not attempt to define the circumstances in which fixed term employment is acceptable.
Instead they concentrate on preventing or limiting the abuse of successive fixed term contracts, the abuse being to disguise what is effectively an indefinite employment as a series of fixed term contracts, thus potentially avoiding the benefits and protections available in indefinite employment.
When implementing clause 5 of the Framework Agreement, the United Kingdom chose a mixture of options (a) and (b).
Regulation 8 of the Fixed term Regulations deals with Successive fixed term contracts: (1) This regulation applies where (a) an employee is employed under a contract purporting to be a fixed term contract, and (b) the contract mentioned in sub paragraph (a) has previously been renewed, or the employee has previously been employed on a fixed term contract before the start of the contract mentioned in sub paragraph (a).
Thus the regulation only applies to a fixed term contract where there has been at least one previous fixed term contract or to a fixed term contract which has been renewed.
It continues: (2) Where this regulation applies then, with effect from the date specified in paragraph (3), the provision of the contract mentioned in paragraph (1)(a) that restricts the duration of the contract shall be of no effect, and the employee shall be a permanent employee, if (a) the employee has been continuously employed under the contract mentioned in paragraph (1)(a), or under that contract taken with a previous fixed term contract, for a period of four years or more, and (b) the employment of the employee under a fixed term contract was not justified on objective grounds (i) where the contract mentioned in paragraph (1)(a) has been renewed, at the time when it was last renewed; (ii) where that contract has not been renewed, at the time when it was entered into. (3) The date referred to in paragraph (2) is whichever is the later of (a) the date on which the contract mentioned in paragraph (1)(a) was entered into or last renewed, and (b) the date on which the employee acquired four years continuous employment.
Thus there is no need for objective justification for the current (that is, renewed or successive) contract unless and until the employee has been continuously employed for four years.
But once he has, the latest renewal or successive contract has to be justified on objective grounds.
Otherwise the contract will automatically be transformed into a contract of indefinite duration.
As such it will still, of course, be terminable by whatever is the contractual notice period on either side.
The individual cases
Mr Fletcher was employed by the Secretary of State and seconded to work in the European School in Culham, Oxfordshire, from 1 September 1998 until 31 August 2008.
After his two year probationary period, therefore, he was employed for a further three year period, extended for a further four years, and then an additional one year, making the maximum total of ten years in all.
His initial offer letter referred to the nine year rule, and stated that the contract was governed by English law and that the English courts had exclusive jurisdiction over it.
In 2007, Mr Fletcher claimed that he was a permanent employee by virtue of regulation 8 of the Fixed term Regulations.
The Employment Tribunal made a declaration to that effect on 16 November 2007.
The Tribunal went through the documents showing the history of and debates about the nine year rule in some detail.
They examined the three reasons for the rule recorded in the Minutes of the Board of Governors in 2002, summarised as: turnover of staff, new staff bringing new ideas, and enrichment of the national systems when teachers returned.
They noted that they did not have the benefit of evidence from the Troika of Governors who had last considered the rule and found no evidence to support its supposed benefits: quite the reverse.
They therefore rejected the factual justification for the rule.
They also rejected the argument that the fact that Staff Regulations laid down the rule was justification in itself.
They cited the rulings of the European Court of Justice in Adeneler v Ellinikos Organismos Galaktos (ELOG) (Case C 212/04) [2006] ECR I 6057 and Del Cerro Alonso v Osakidetza (Servicio Vasco de Salud) (Case C 307/05) [2008] ICR 145 that a difference in treatment could not be justified on the basis that it was provided for by a general, abstract national norm but had to be justified by the existence of precise and concrete factors, characterising the employment condition to which it relates, in the specific context in which it occurs and on the basis of objective and transparent criteria in order to ensure that the unequal treatment in fact responds to a genuine need, is appropriate for achieving the objective pursued and is necessary for the purpose.
They regarded the Staff Regulations in the same light as the Greek national law in Adeneler (which simply provided that fixed term contracts were justified where national law provided for them).
The Secretary of State could not therefore rely upon the Staff Regulations unless these prevailed over the Fixed term Directive.
They held that the Directive prevailed.
It followed that Mr Fletcher was entitled to his declaration.
Both the Employment Appeal Tribunal and the Court of Appeal dismissed the Secretary of States appeal.
The Court of Appeal heard the case of Mr Fletcher together with that of Mr Duncombe.
Mr Duncombe was a teacher at the European School in Karlsruhe, Germany, from January 1996 until 31 August 2006.
He too was employed under a series of fixed term contracts to reflect the nine year rule.
He brought claims in the Employment Tribunal for wrongful dismissal or pay in lieu of notice, unfair dismissal and a declaration that he was a permanent employee.
He failed on the preliminary point that he did not have the right to bring the claims because he was employed outside the United Kingdom.
In both the Employment Appeal Tribunal and the Court of Appeal, he succeeded in respect of his claim for wrongful dismissal or pay in lieu of notice, and in the Court of Appeal he also succeeded in respect of his claim for unfair dismissal.
The arguments on the principal question
Before the Employment Tribunal the Secretary of State made what, with hindsight, was the fatal mistake of trying to justify the nine year rule on its merits.
In other words, he tried to persuade the Tribunal that it was a good thing.
This he conspicuously failed to do.
The Tribunal was unconvinced by the argument that encouraging a turnover of staff in the European Schools was a way of bringing in staff with up to date experience of teaching in the national systems, thus with new ideas and a fresh outlook, as well as returning teachers to their national systems enriched with a European outlook.
Despite the unreality of the Tribunal expecting the Governors of the European Schools to appear before them to explain themselves, it was not suggested until now that this was an exercise upon which the Tribunal should never have embarked.
Before this Court, Mr Crow QC on behalf of the Secretary of State contends that it is not for a court or tribunal in one of the Member States to inquire into the factual merits of the nine year rule.
The plain fact of the matter is that the Secretary of State has no choice.
The United Kingdom has only one vote on the Board of Governors and has so far failed to persuade them that the rule should be changed.
It has to employ teachers for the purpose of seconding them to the European Schools and the Schools will only take them on the basis of the nine year rule.
All of this is made perfectly plain to the teachers when they are recruited.
This in itself is objective justification for employing the teachers on successive or renewable contracts which mirror the periods in the rule.
Mr Crow further argues that this is not a question of whether the Staff Regulations trump the Fixed term Directive, as the Employment Tribunal held that they had to do if the Secretary of State was to get home on this ground.
There is no inconsistency between the two.
The Staff Regulations do not dictate the terms of employment of seconded teachers, merely the duration of the period(s) for which they can be seconded to the schools.
Furthermore, the reliance in both the Employment Tribunals and the Court of Appeal on the case of Adeneler was misplaced.
There it was held that a Greek employer could not rely upon a general rule of Greek law as justification.
That was in effect allowing a Member State to provide for a general opt out from the Directive.
But that is not this case.
It is not argued that the United Kingdom has failed to transpose the Directive properly.
The rule in question is specific to the work in question and is made by an international body responsible for determining the terms of that work in circumstances over which the United Kingdom has no control.
The respondent teachers are understandably aggrieved that the Secretary of State should now be putting his case rather differently from the way in which it was put in the Tribunals and Court below.
But they have to grapple with the argument.
Mr Giffin QC argues that the Staff Regulations are incompatible with the Directive.
The Directive is there to give effect to the proposition that the norm is indefinite employment.
If therefore there is an indefinite need for the work which the employee is doing, then prima facie the worker should be kept on an indefinite contract.
It defeats the object to keep changing the workers doing the same job.
The exceptions, where fixed term contracts may be justified, relate to the specific short term or seasonal nature of the work being done. (Thus, for example, it was justified for the European Parliament to employ people on short term contracts to coincide with the Parliamentary sessions: see the judgment of the European Union Civil Service Tribunal in Aahyan v European Parliament (Case F 65/07) (unreported), 30 April 2009.) There is therefore no escape from a factual inquiry into the evidence to see whether the practice is really justified.
A practice can be justified because it is complying with a rule, but only if the rule itself is justified.
The Employment Tribunal has found that this one is not and there is no right of appeal from that factual finding.
Furthermore, he argues, all the Member States are bound by the Directive and by a general duty to co operate with one another in furthering its purposes.
Their representatives on the Board of Governors cannot therefore use the power to make Staff Regulations in a way which means that Member State employers will be using fixed term contracts in contravention of the Directive.
In short, the United Kingdom should be taking a tougher line with the Board, and invoke the dispute resolution mechanism, as the teachers have argued, rather than complain that it is between a rock and a hard place.
Discussion of the principal question
The teachers complaint is not against the three or four periods comprised in the nine year rule but against the nine year rule itself.
In other words, they are complaining about the fixed term nature of their employment rather than about the use of the successive fixed term contracts which make it up.
But that is not the target against which either the Fixed term Directive or the Regulations is aimed.
Had the Secretary of State chosen to offer them all nine year terms and take the risk that the schools would not have kept them for so long, they would have had no complaint.
Employing people on single fixed term contracts does not offend against either the Directive or the Regulations.
This is therefore the answer to Mr Giffins attractive argument: that fixed term contracts must be limited to work which is only needed for a limited term; and that where the need for the work is unlimited, it should be done on contracts of indefinite duration.
This may well be a desirable policy in social and labour relations terms.
It may even be the expectation against which the Directive and Framework Agreement were drafted.
But it is not the target against which they were aimed, which was discrimination against workers on fixed term contracts and abuse of successive fixed term contracts in what was in reality an indefinite employment.
It is not suggested that the terms and conditions on which the teachers were employed during their nine year terms were less favourable than those of comparable teachers on indefinite contracts.
It follows that the comprehensive demolition by the Employment Tribunal of the arguments for the nine year rule is nothing to the point.
It is not that which requires to be justified, but the use of the latest fixed term contract bringing the total period up to nine years.
And that can readily be justified by the existence of the nine year rule.
The teachers were employed to do a particular job which could only last for nine years.
The Secretary of State could not foist those teachers on the schools for a longer period, no matter how unjustifiable either he or the employment tribunals of this country thought the rule to be.
The teachers were not employed to do any alternative work because there was none available for them to do.
The Adeneler case is not in point.
That concerned a national rule which provided a general get out from the requirements of the Directive.
It is not a question of whether the Staff Regulations trump the Directive.
There is no inconsistency between them.
The Staff Regulations are dealing with the duration of secondment, not with the duration of employment.
In those circumstances it is questionable whether there is any duty of co operation between the Member States.
It appears that the Board of Governors did not see any conflict between the Staff Regulations and the Directive.
This is scarcely surprising.
The United Kingdom could have chosen to implement the Directive by setting a maximum number of renewals or successive fixed term contracts, for example by limiting them to three.
It could equally have chosen to implement the Directive by setting a maximum duration to the employment, for example by limiting it to nine or ten years in total.
It is readily understandable why the alternative route of requiring objective justification after four years was taken: this is more flexible and capable of catering for the wide variety of circumstances in which a succession of fixed term contracts may be used.
Unless a very short maximum total had been chosen, it is more favourable to employees than the alternatives.
But the fact that the alternatives would have been equally acceptable ways of implementing the Directive is yet another indication that the target is not fixed term employment as such.
For these reasons I would allow the appeal of the Secretary of State on the principal issue.
In those circumstances, there is no need to consider the other issues which arise in the case of Mr Duncombe and the other teachers who were employed to work in schools outside the United Kingdom.
But they are both important points to which a large proportion of the argument before us was directed.
The remedies issue
There is now a great deal of European Union law addressing employment rights.
This is not surprising as the free movement of workers is one of the fundamental rights in the Union.
Mr Crow argues that these are rules designed for the protection of employees and should thus be subject to the same jurisdictional rule which applies to the protection given in our domestic law against unfair dismissal.
That protection only applies to employment in Great Britain and the principles governing when an employment should be held to be in Great Britain and when it should not were laid down by the House of Lords in Lawson v Serco.
It is not enough, however, simply to characterise the rules of European law relating to employment as employment protection.
They are designed in part for that purpose, of course, but they are different from the law of unfair dismissal in at least three ways.
First, of course, they have their source in the law of the European Union and not simply in the domestic law of the United Kingdom.
Secondly, that law is designed to offer workers the same or similar protection wherever they are working in the area covered by European Union law.
They must not lose the rights that they have accrued in one of the Member States because they choose to work in another Member State; nor should they have lesser rights than other workers in the country where they go to work.
Thirdly, therefore, the rights which workers have are enforceable as part of the contractual arrangements between them and their employers.
The question then becomes one of incorporation into those contracts.
In what circumstances does a contract of employment between a United Kingdom employer and a worker who is employed to work outside the United Kingdom incorporate the protection given by European Union law? It may be that it is not enough simply to provide that the contract is governed by English law (or by the law of some other jurisdiction within the United Kingdom).
Would a person employed to work in China, for example, be able to claim the benefit of all the domestic law which emanates from the European Union?
It is not necessary to attempt to answer that question, because we are concerned with a person employed by an employer in the United Kingdom to work in another country within the European Union.
Is it to be expected that there should be gaps in the protection offered to such workers? In other words, that they would be protected if employed by an employer in the country where they work, but not if employed by an employer in their home country? Two people doing exactly the same work would enjoy very different protection.
This seems, on the face of it, an unlikely conclusion.
On the other hand, there would still be differences between the two employees.
One would be covered by the European Union law as implemented in the country where they both worked; the other would be covered by the law as implemented in the country where his employer was based.
These would not always be identical, as the example of the Fixed term Directive shows.
But the context of the European Schools shows that there may be European workers from different European countries who are subject to different contractual arrangements.
At least, on this view, they would all have the benefit of the minimum requirements imposed by European Union law.
I would therefore be inclined to agree with the Tribunals and the Court of Appeal that Mr Duncombe and other teachers employed by the Secretary of State in European schools abroad are covered by the Fixed term Regulations.
But the intended scope of the protection given by the Directive, and others like it, is a question of European Union law to which a uniform answer should be given throughout the Union.
We have not been shown any authority which indicates that the answer is acte clair, however obvious we might think the answer to be.
Had it been necessary to answer the question, therefore, it would probably be necessary to refer it to the European Court of Justice.
Were the answer to that simple question to be yes it would then be necessary to give further consideration to the mechanisms appropriate to achieve that end.
There was much discussion before us of whether the Fixed term Directive had direct effect and whether the principle put forward by the Employment Appeal Tribunal in Bleuse v MBT Transport Ltd [2008] ICR 488 applied.
There is no need to enter into that debate at present, but it would seem unlikely that, if the protection of European employment law is to be extended to workers wherever they are working in the area covered by European law, that protection should depend upon whether or not it gives rise to directly effective rights against organs of the state.
A way would have to be found of extending it to private as well as public employment.
The cross appeal
As already indicated, the scope of protection against unfair dismissal is a different question.
This does not originate in European Union law.
It is a remedy devised by Parliament to fill a well known gap in the protection offered to employees by the domestic law of contract.
It does not form part of the contractual terms and conditions of employment.
The Employment Rights Act 1996 no longer specifies the employments to which the right not to be unfairly dismissed in section 94(1) applies whether to employees actually doing their work wholly or mainly within Great Britain or to employees who are based here or to some other employments as well.
In Lawson v Serco the House of Lords held that it applied to employment in Great Britain but that there were some exceptional circumstances in which people who performed their work wholly or mainly outside Great Britain were nevertheless protected.
However, it was not enough that the employer was based here.
Something more was needed.
This might be provided by the fact that an employee was posted abroad for the purpose of a business conducted, not in the foreign country, but here at home: for example, a foreign correspondent of a British newspaper (para 38).
It might also be provided by the fact that an employee was working within what amounts for practical purposes to an extra territorial British enclave in a foreign country (para 39): for example, a civilian employee working on a British military base in Germany or an RAF base on Ascension Island.
Lord Hoffmann, with whom all the other members of the committee agreed, was not able to think of any other examples: they would have to have equally strong connections with Great Britain and British employment law (para 40).
Mr Giffin makes a strong case that this is another example: a British worker working for the British government within an international enclave who has no one else to whom he can turn for protection.
But this last cannot be enough on its own: otherwise every person employed abroad by a British employer would be able to claim.
They too have no where else to go.
A British national locally engaged to work in the British Embassy in Rome would be protected: yet Lord Hoffmann had no doubt that Bryant v Foreign and Commonwealth Office (unreported) 10 March 2003 was rightly decided (para 39).
The question is whether Parliament intended that they should have the extra protection afforded to employees who are based in this country.
It is not necessary for us to decide the point for the purpose of the questions of European Union law which were put before us in this appeal.
However, we have been told that the point is still relevant for the purpose of unfair dismissal claims based upon other grounds.
Accordingly we intend to reserve our decision upon the cross appeal to a later date.
Conclusion
I would therefore allow the Secretary of States appeal and hold that it was objectively justified to employ these teachers on the current fixed term contracts and accordingly that these were not converted into permanent contracts by the operation of regulation 8 of the Fixed term Regulations.
LORD MANCE
I agree with Lady Hale that this appeal should be allowed on the principal issue for the reasons she gives.
I also agree with her view on the remedies issue and that our decision on the cross appeal should be reserved.
LORD COLLINS
I also agree with Lady Hale that this appeal should be allowed on the main issue for the reasons she gives.
I would prefer to express no view on the very interesting and difficult questions which arise on the remedies issue and reserve our decision on the cross appeal.
I agree with Lady Hale that the appeal should be allowed on the principal issue
LORD CLARKE
Hilary Term [2011] UKSC 36 On appeal from: [2009] EWCA Civ 1355 JUDGMENT Duncombe and others (Respondents) v Secretary of State for Children, Schools and Families (Appellant) (no. 2) before Lord Rodger Lady Hale Lord Mance Lord Collins Lord Clarke JUDGMENT GIVEN ON 15 July 2011 Heard on 17 and 18 January 2011 Appellant Jonathan Crow QC Maya Lester (Instructed by Treasury Solicitors) Respondents Nigel Giffin QC Katherine Eddy Simon Henthorn (Instructed by Reynolds Porter Chamberlain LLP) LADY HALE, DELIVERING THE JUDGMENT OF THE COURT 1.
This is the judgment of the court, composed of Lady Hale, Lord Mance, Lord Clarke and Lord Collins.
Lord Rodger of Earlsferry presided over the panel which heard this case on 17 and 18 January 2011 and took part in our deliberations and decision upon the appeal: [2011] UKSC 14.
His sudden illness and untimely death have sadly prevented him from taking any part in our deliberations and decision upon the cross appeal. 2.
The case relates to the unusual employment status of teachers employed by the Secretary of State for Children, Schools and Families to work in the European Schools.
The main issue in the appeal was whether the terms of that employment fell foul of the Fixed term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) which implemented Council Directive 1999/70/EC concerning the framework agreement on fixed term work concluded by ETUC, UNICE and CEEP.
This Court handed down judgment on 30 March 2011 allowing the appeal of the Secretary of State on that issue: [2011] UKSC 14.
We reserved judgment in the cross appeal of the teachers.
The issue in the cross appeal is whether their employment is covered by the protection against unfair dismissal conferred by section 94(1) of the Employment Rights Act 1996. 3.
It is fair to say that had this issue stood alone it is unlikely that permission would have been given to bring an appeal to this Court.
It is common ground that the basic principle was laid down by the House of Lords in Lawson v Serco Ltd [2006] UKHL 3, [2006] ICR 250.
It is also common ground that these teachers employment does not fall within either of the specific examples given in Lawson of people employed by British employers to work outside Great Britain who would be protected from unfair dismissal.
The question is whether there are other examples of the principle, of which this is one. 4.
There were three cases heard together in Lawson v Serco.
Mr Lawson was employed by Serco as a security supervisor at the British RAF base on Ascension Island, which is a dependency of the British Overseas Territory of St Helena.
Mr Botham was employed as a youth worker at various Ministry of Defence establishments in Germany; under the NATO Status of Forces Agreement of 1951 he was part of the civil component of British Forces in Germany and treated as resident in the UK for various purposes.
Mr Crofts was a pilot employed by a company which was a wholly owned subsidiary of, and provided aircrew for, Cathay Pacific Airways Ltd, the Hong Kong airline; but he was based at Heathrow under the airlines permanent basings policy. 5.
Section 94(1) of the Employment Rights Act 1996, which grants employees the right not to be unfairly dismissed, no longer contains any geographical limitation.
Parliament had repealed the previous exclusion of employees (mariners working on British ships apart) who ordinarily worked outside Great Britain in 1999 and put nothing in its place.
But it was agreed that section 94(1) could not apply to all employment anywhere in the world.
But to what did it apply? Lord Hoffmann, with whom all the other members of the appellate committee agreed, emphasised that this was a question of law (para 34), and that it was a matter of applying a principle rather than inventing a rule (para 23).
The standard, normal or paradigm case was an employee working in Great Britain at the time of the dismissal (paras 25, 27).
Also covered were peripatetic employees who might spend much of their time outside Great Britain but were nevertheless based here (para 30). 6.
The problem of expatriate employees, who worked or were based abroad, was more difficult (para 35).
Lord Hoffmann agreed with counsel for the Ministry of Defence that it might well be correct to describe the cases in which section 94(1) could exceptionally apply to employees working outside Great Britain as those where despite the workplace being abroad, there are other relevant factors so powerful that the employment relationship has a closer connection with Great Britain than with the foreign country where the employee works.
But like many accurate statements, it is framed in terms too general to be of practical help.
So he tried to identify the characteristics which such an exceptional case would ordinarily have (para 36).
First, it would be very unlikely that the right would apply unless the employee was working for an employer who was based here; but many British companies carry on businesses in other countries, so something more would be needed (para 37).
The something more might be that the employee was posted abroad for the purpose of a business carried on in Great Britain, such as the foreign correspondent of a British newspaper (para 38).
Another example was an employee working within what amounts for practical purposes to an extra territorial British enclave in a foreign country (para 39).
There might be other examples, but he could not think of any, and they would have to have equally strong connections with Great Britain and British employment law (para 40). 7.
According to these principles, all three employees in Lawson v Serco were covered by the legislation: Mr Crofts because he was based in Great Britain, and both Mr Botham and Mr Lawson because they were working for British employers in what amounted to a British enclave.
In the latter two cases, although there was a local system of law the connection between the employment relationship and the United Kingdom was overwhelmingly stronger (para 39).
On the other hand, he had no doubt that Bryant v Foreign and Commonwealth Office, unreported, 10 March 2003, was correctly decided: there the Employment Appeal Tribunal held that section 94(1) did not apply to a person (who happened to be a British national) locally engaged to work in the British embassy in Rome (para 39). 8.
It is therefore clear that the right will only exceptionally cover employees who are working or based abroad.
The principle appears to be that the employment must have much stronger connections both with Great Britain and with British employment law than with any other system of law.
There is no hard and fast rule and it is a mistake to try and torture the circumstances of one employment to make it fit one of the examples given, for they are merely examples of the application of the general principle. 9.
The Employment Tribunal rightly held that neither of Lord Hoffmanns specific examples applied to teachers employed by the British Government to work in European Schools abroad.
The Tribunal thought that their employment was much more firmly rooted in the European Schools than in Great Britain.
However, the teachers argument is that, although their actual work might have strong connections with the particular school in which they were employed, their employment relationship had virtually no connection with the system of law in the country in which that particular school happened to be.
They were not employed in a British enclave but they were employed in an international enclave.
There is no applicable international system of employment law to which they can turn.
In this respect they are very similar to Mr Lawson and Mr Botham, where there was a local system of law, but the connection between the employment relationship and the United Kingdom was overwhelmingly stronger. 10.
The teachers also draw attention to the similarities between their case and that of Mrs Wallis and Mrs Grocott: see Ministry of Defence v Wallis and Grocott [2011] EWCA Civ 231.
This case is of interest, first, because of the agreed statement of facts between the Ministry of Defence and the claimants, which was relied upon by the employment judge; and second, because on facts very similar to the present case, the Employment Tribunal, Employment Appeal Tribunal and Court of Appeal reached a different conclusion. 11.
Mrs Wallis was employed by the Ministry of Defence as a library assistant at the international school attached to the Supreme Headquarters Allied Powers Europe (SHAPE) in Belgium.
Mrs Grocott was employed by the Ministry of Defence as a school secretary in the British section of the Armed Forces North International School attached to the Joint Forces Command (JFC) in the Netherlands.
Both SHAPE and JFC are entities within the structure of NATO.
The claimants were recruited to these jobs because they were the wives of armed forces personnel working at SHAPE and JFC.
Both were dismissed from their jobs when their husbands left the British armed forces (although they continued to work for NATO at SHAPE and JFC respectively in a civilian capacity).
According to the agreed statement of facts in the case, the Ministry of Defence regards it as desirable for the harmony of the family life of those engaged in the forces, or the civilian component accompanying them, that there are employment opportunities open to their spouses and other dependants and so actively tries to recruit them.
Their contracts of employment are governed by English law and the Ministry of Defence goes to considerable lengths to reassure such employees that their terms and conditions are essentially English.
They pay neither British nor local taxes, but do pay British national insurance contributions.
These employees are in a different category from directly employed labour.
The latter are employees engaged locally with the help of the host state, who are engaged on local (host state) labour terms, regardless of their nationality, and pay local taxes. 12.
The employment judge rightly rejected the argument that the women were working within a British enclave.
Rather, they were working within an international enclave.
But their employment was so closely connected to England as to be within section 94(1) of the Employment Rights Act 1996.
They were piggy backed by their husbands into the same terms and conditions as employees of the British armed forces posted to serve abroad, who undoubtedly fall within the Botham exception.
They were thus in a quite different position from the locally engaged directly employed labour such as Mrs Bryant: Mrs Bryants connection with England was just the fortuitous one of nationality in what would otherwise be a standard case of directly employed labour. 13.
That reasoning was described as unimpeachable by Underhill J in the Employment Appeal Tribunal and accepted by the Court of Appeal.
Elias LJ said this: They were the spouses of persons who formed part of a British contingent working in an international enclave, and they obtained their employment only because of that relationship.
In my judgment they have equally strong connections with Great Britain and British employment law as those employed in British enclaves abroad (para 46).
Mummery LJ also rejected the Ministry of Defence submission that this would be to export British unfair dismissal law to a foreign country and contrary to the principles of sovereignty and equality of states in international law: Considerations of international comity could not possibly affect the claimants husbands access to an employment tribunal for unfair dismissal from the armed forces and I do not see how they could affect claims by the claimants if there is a sufficiently strong connection of their employment to Great Britain and its unfair dismissal law (para 35). 14.
The teachers in this case point out that they too have been recruited to work in an international enclave and have even stronger links with Britain and British employment law.
They have not been recruited simply because they are the dependants of British personnel posted abroad, but as British public servants to be posted abroad.
Furthermore, although they were not being employed abroad for the purpose of a British undertaking conducted here, nor were they being employed for the purpose of a foreign branch of a British undertaking, they were being employed to fulfil the obligations which the United Kingdom government had undertaken to other European Union states under the Statute of the European Schools. 15.
In this case, the Secretary of State was content simply to argue that it fell within neither of the cases identified as exceptional in Lawson v Serco: the teachers worked entirely overseas in a sui generis international establishment and this was not a strong enough connection with Great Britain and its employment law.
The Court of Appeal had been right to defer to the judgment of the specialist Employment Tribunal.
In applying for permission to appeal in the case of Wallis and Grocott, the Ministry of Defence argues that aspects of the employees personal lives have been wrongly labelled employment factors, so as to supply the necessary connection between the employment and British employment law, and that the decision fails to respect the employment laws of the countries in which the women were employed.
The Ministry also makes some in terrorem arguments about the potential consequences of adding these further examples to those in Lawson v Serco. 16.
In our view, these cases do form another example of an exceptional case where the employment has such an overwhelmingly closer connection with Britain and with British employment law than with any other system of law that it is right to conclude that Parliament must have intended that the employees should enjoy protection from unfair dismissal.
This depends upon a combination of factors.
First, as a sine qua non, their employer was based in Britain; and not just based here but the Government of the United Kingdom.
This is the closest connection with Great Britain that any employer can have, for it cannot be based anywhere else.
Second, they were employed under contracts governed by English law; the terms and conditions were either entirely those of English law or a combination of those of English law and the international institutions for which they worked.
Although this factor is not mentioned in Lawson v Serco, it must be relevant to the expectation of each party as to the protection which the employees would enjoy.
The law of unfair dismissal does not form part of the contractual terms and conditions of employment, but it was devised by Parliament in order to fill a well known gap in the protection offered by the common law to those whose contracts of employment were ended.
Third, they were employed in international enclaves, having no particular connection with the countries in which they happened to be situated and governed by international agreements between the participating states.
They did not pay local taxes.
The teachers were there because of commitments undertaken by the British government; the husbands, in Wallis and Grocott, were there because of commitments undertaken by the British government; and the wives were there because the British government thought it beneficial to its own undertaking to maximise the employment opportunities of their husbands dependants.
Fourth, it would be anomalous if a teacher who happened to be employed by the British government to work in the European School in England were to enjoy different protection from the teachers who happened to be employed to work in the same sort of school in other countries; just as it would be anomalous if wives employed to work for the British government precisely because their husbands were so employed, and sacked because their husbands ceased to be so employed, would be denied the protection which their husbands would have enjoyed. 17.
This very special combination of factors, and in particular the second and third, distinguishes these employees from the directly employed labour of which Mrs Bryant was an example.
There, the closer analogy was with a British, or indeed any other company, operating a business in a foreign country and employing local people to work there.
These people are employed under local labour laws and pay local taxes.
They do not expect to enjoy the same protection as an employee working in Great Britain, although they do expect to enjoy the same protection as an employee working in the country where they work.
They do, in fact, have somewhere else to go. (It would indeed be contrary to the comity of nations for us to assume that our protection is better than any others.) To admit the cases before us as another example of the principle laid down in Lawson v Serco is scarcely to extend those exceptional cases very far or to offend against the sovereignty and equality of nations. 18.
For those reasons, the cross appeal is allowed and the case will return to the Employment Tribunal.
It follows that the application of the Ministry of Defence for permission to appeal on this point in the cases of Wallis and Grocott will be dismissed. for the reasons she has given.
| UK-Abs | This appeal is concerned with the employment, by the Secretary of State for Children, Schools and Families, of teachers to work in the European Schools.
These are schools set up to provide a distinctively European education principally for the children of officials and employees of the European Communities.
The Staff Regulations, made by the Board of Governors pursuant to the Convention defining the Statute of the European Schools, limit the period for which teachers may be seconded to work in those schools to a total of nine years (or exceptionally ten).
This is made up of an initial probationary period of two years, and a further period of three years, which is renewable for a further four years (the nine year rule).
The principal question in the appeal is whether these arrangements can be objectively justified, as required by the Fixed term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) (the Fixed term Regulations).
This was the measure chosen by the United Kingdom to implement Council Directive 1999/70/EC concerning the framework agreement on fixed term work (the Fixed term Directive).
The effect of regulation 8 is that a successive fixed term contract is turned into a permanent employment unless the use of such a contract can be objectively justified.
Mr Fletcher was employed by the Secretary of State and seconded to work in the European School in Culham, Oxfordshire, from 1 September 1998 until 31 August 2008.
After his two year probationary period, he was employed for a further three year period, extended for a further four years, and then an additional one year.
In 2007, he claimed that he was a permanent employee by virtue of regulation 8.
Mr Duncombe was a teacher at the European School in Karlsruhe, Germany, from January 1996 until 31 August 2006.
He too was employed under a series of fixed term contracts to reflect the nine year rule.
He brought claims in the Employment Tribunal for wrongful dismissal or pay in lieu of notice, unfair dismissal and a declaration that he was a permanent employee.
The Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal all held that the use of the successive fixed term contracts is not objectively justified.
The Supreme Court unanimously allows the appeal, holding that it was objectively justified to employ these teachers on the current fixed term contracts and accordingly that these were not converted into permanent contracts by the operation of regulation 8 of the Fixed term Regulations.
Lady Hale gives the leading judgment.
The teachers complaint is not against the three or four periods comprised in the nine year rule but against the nine year rule itself.
In other words, they are complaining about the fixed term nature of their employment rather than about the use of the successive fixed term contracts which make it up.
But that is not the target against which either the Fixed term Directive or the Regulations are aimed.
Employing people on single fixed term contracts does not offend against either the Directive or the Regulations. [23] The targets against which the Directive and Framework Agreement were directed were discrimination against workers on fixed term contracts and abuse of successive fixed term contracts in what was in reality an indefinite employment.
It is not suggested that the terms and conditions on which the teachers were employed during their nine year terms were less favourable than those of comparable teachers on indefinite contracts. [24] It is not the nine year rule which requires to be justified, but the use of the latest fixed term contract bringing the total period up to nine years.
And that can readily be justified by the existence of the nine year rule.
The teachers were employed to do a particular job which could only last for nine years.
The Secretary of State could not foist those teachers on the schools for a longer period, no matter how unjustifiable either he or the employment tribunals of this country thought the rule to be.
The teachers were not employed to do any alternative work because there was none available for them to do. [25] It is not a question of whether the Staff Regulations trump the Directive.
There is no inconsistency between them.
The Staff Regulations are dealing with the duration of secondment, not with the duration of employment. [26]
|
The issue in this appeal is about the proper construction of an option clause in a lease of land at Cumbernauld.
The lease was entered into between the appellants, Multi Link Leisure Developments Limited, (the tenants) and the respondents, North Lanarkshire Council, (the landlords).
It granted to the tenants an option to purchase the leased subjects.
This was to be at a price to be determined by the landlords according to an agreed formula if the option to purchase was exercised subsequent to the first year of let.
The tenants have exercised the option, but they disagree with the landlords as to the price that must be paid for its exercise according to that formula.
They contend that the effect of the option clause is that the price is to be determined without reference to any increase in value that may be attributed to the subjects on the ground that it is likely that planning permission will be granted for housing development.
The landlords, on the other hand, contend that the option clause, properly construed, does not envisage that there should be any discount of any element attributable to the potential of the subjects for development.
The difference between these two approaches as to the meaning of the option clause is very substantial.
The tenants say that the full market value of the subjects, for the purposes of the option clause, is 500,000.
They seek declarator that this is the price that is payable for the purchase of the subjects by the tenants to the landlords.
The landlords say that the full market value of the subjects, taking account of their potential for development, is 5.3 million and that, as the tenants have exercised the option, this is the price that must be paid.
The tenants have refused to pay any more than 500,000, so the answer to the question which approach is right will determine whether the option contract remains in force.
The parties are agreed that, if the tenants are right, the contract remains in force and the landlords will require to value the subjects anew on the basis of the construction of the clause contended for by the tenants.
They are also agreed that, if the landlords are right, the option is spent and can no longer be exercised during the remaining term of the lease.
The factual background
The case was argued in the Court of Session on the basis of the parties pleadings and various documents which had been lodged in process.
No oral evidence was led as to the surrounding circumstances.
The only facts that were before the Lord Ordinary were those that could be ascertained from the parties averments.
The argument concentrated for the most part on the wording of the option clause itself.
Reference was also made to some other provisions in the lease which might assist as to the meaning of the option clause.
The lease is dated 18 January and 11 February 2000.
It was varied by a minute of variation of lease dated 13, 24 and 29 November 2001, by which an error in the extent of the ground leased was corrected and a new plan relative to the lease was substituted.
The subjects comprise an area of ground extending to about 34.32 hectares located at East Waterhead Farm about a mile east of the town centre of the Cumbernauld.
It had previously been in use for agricultural purposes.
In terms of clause 2 of the lease the date of entry was 1 June 1999.
The lease was to endure for 50 years until 31 May 2049.
Clause 5 of the lease provided for rent reviews every five years.
In the event of the parties failing to agree, the amount of the revised rent was to be referred to arbitration.
The arbiter was to be instructed to assess the rent on the basis of the open market rent, no account being taken of works effected by the tenants or on their behalf.
By clause 9 it was provided that the tenants were to occupy and use the subjects for the development of a pay and play golf course and ancillary activities incidental to that use, and for no other purpose whatever without the prior express written consent of the landlords.
It was also provided that if the golf course was not developed within five years of the date of entry, or if the subjects of lease were to cease to be used for that purpose, the lease was to terminate with immediate effect.
By clause 12 it was provided that the tenants were bound at their own expense to provide an efficient drainage system for the subjects and to bear the whole expense of maintaining it in efficient working order.
It is agreed that a golf course was duly developed within five years of the date of entry, and that the land is still being used as a pay and play golf course.
By clause 18.1 the tenants were given an option to purchase the subjects during the currency of the lease.
No period of notice was required if the tenants decided to exercise the option to purchase during the first year of the period of let.
In that event the option price was to be the sum of 130,000.
Thereafter the tenants had to give the landlords not less than twelve months notice in writing prior to the proposed date of entry for the purchase if they wished to exercise it.
The dispute between the parties is as to the effect of clause 18.2, which is in these terms: The price to be paid by Multi Link in terms of this clause (the option price) shall, if the option to purchase is exercised within the first year of the period of let, be the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING.
The option price, if the option to purchase is exercised subsequent to the first year of let, shall be equal to the full market value of the subjects hereby let as at the date of entry for the proposed purchase (as determined by the landlords) of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt, shall be not less than the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING.
In determining the full market value (i) the landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the landlords and the tenants under this lease have been complied with, and (b) that the subjects hereby let are ready for occupation, and (ii) the landlords shall disregard (a) any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation [to] the landlords, and (b) any damage to or destruction of the subjects hereby let.
By clause 18.6 it was provided, for the avoidance of doubt, that the option to purchase was personal to Multi Link and that it was to be exercisable only so long as they were tenants under the lease.
The tenants first expressed an interest in exercising the option to purchase in 2005.
On 14 March 2005 their solicitors wrote to the landlords seeking to know the price that they would seek for the subjects.
By letter dated 29 June 2005 the landlords proposed a price of 500,000, subject to the tenants entering into a minute of agreement, fortified by a standard security, to the effect that an additional sum, to be agreed, would be payable in the event of a change of use generating a higher value for the land.
The tenants were not willing to agree to this proposal.
In 2006 the prospect of a change of use generating a higher value was confirmed by the publication in 2006 of the Glasgow and Clyde Valley Joint Structure Plan which identified as one of three priorities for development in the South Cumbernauld Community Growth area, within which the subjects of the lease are situated.
In 2008 the North Lanarkshire Finalised Draft Local Plan identified the area as a potential area for housing led urban expansion.
The landlords position, as explained in their averments, is that it would be unreasonable for them to fail to have regard to this planning background when determining the price payable under clause 18.2.
By letter dated 8 October 2007 the tenants solicitors served on the landlords notice of their decision to exercise the option, with entry one year later on 8 October 2008.
They invited the landlords to provide them with their views as to the full market value of the subjects as defined by clause 18.2.
By letter dated 4 November 2008 the landlords solicitors intimated that they fixed the price at 5.3 million.
The tenants made further proposals as to the option price, but they were rejected by the landlords.
By a letter dated 22 January 2009 the landlords served formal notice on the tenants requiring them within 28 days to pay 5.3 million in exchange for a valid marketable title, failing which the landlords would be entitled to rescind the contract resulting from the exercise of the option in clause 18.
The tenants did not comply with these conditions.
So by letter dated 25 February 2009 the landlords served on the tenants a formal notice of rescission of the option contract and the purchase and sale of the subjects resulting from the notice of 8 October 2007.
The tenants then raised the present action in which they seek declarator that their option to purchase has not validly been rescinded and that on a proper construction of clause 18.2 the landlords are bound to determine the full market value of the subjects as agricultural land or open space suitable for a golf course, without reference to any increase in value which may be attributable to the fact that is likely that planning permission will be granted for housing development there.
The Lord Ordinary, Lord Glennie, held on 31 July 2009 that the obvious meaning of the words used in clause 18.2 was that the full market value was to be assessed by reference only to the use of the subjects as a golf course, and he made the declarations that the tenants had asked for: [2009] CSOH 114, 2009 SLT 1170.
The landlords reclaimed, and on 30 December 2009 an Extra Division (Lords Carloway and Hardie and Sir David Edward QC) allowed the reclaiming motion: [2009] CSIH 96, 2010 SC 302.
It held that the words full market value were to be construed as meaning what they said and that considerations that might be relevant to market value were not to be ignored unless there were express words to that effect: para 28.
Decree was pronounced in terms of the conclusion to the landlords counterclaim.
This was to the effect that the contract resulting from the exercise of the option clause had been rescinded, the option was spent and it could not be exercised during the remaining term of the lease.
The option clause
The courts task is to ascertain the intention of the parties by examining the words they used and giving them their ordinary meaning in their contractual context.
It must start with what it is given by the parties themselves when it is conducting this exercise.
Effect is to be given to every word, so far as possible, in the order in which they appear in the clause in question.
Words should not be added which are not there, and words which are there should not be changed, taken out or moved from the place in the clause where they have been put by the parties.
It may be necessary to do some of these things at a later stage to make sense of the language.
But this should not be done until it has become clear that the language the parties actually used creates an ambiguity which cannot be solved otherwise.
The option clause can, for the purposes of analysis, be broken down into the following parts: (1) the opening words, which state that the option price shall be equal to the full market value of the subjects hereby let; (2) the direction that the option price is to be determined as at the date of entry for the proposed purchase; (3) the words as determined the landlords which then follow in parenthesis, indicating by whom the option price as at the date of entry is to be determined; (4) the direction that the full open market value is to be of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt shall be not less than the sum of one hundred and thirty thousand pounds (130,000) sterling. (5) the direction that in determining the full market value the landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the landlords and the tenants under this lease have been complied with, and (b) that the subjects hereby let are ready for occupation; and (6) the direction that in determining the full market value the landlords shall disregard (a) any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation [to] the landlords, and (b) any damage to or destruction of the subjects hereby let. [The word to is inserted to make good an obvious omission from this part of the clause as printed in the lease.]
The problem
The Lord Ordinary said that there were certain parts of the clause that could safely be disregarded: para 5.
He omitted the provision that the option price should be not less than 130,000.
He also omitted the reference to the date of entry.
It was agreed before him that the words as determined by the landlords were misplaced as that they should be in close proximity to the words full market value.
So he decided to omit those words too.
This left him with the words in parts (1) and (4) to (6) of the foregoing analysis, less the reference to the figure of 130,000.
He then said, in his summary of counsel for the pursuers argument in para 8, that the valuer was being asked to assume that the purchase was for development as a golf course [the emphasis is mine].
In para 9 he said that he accepted that the option price was to be equal to the full market value, but that when one asked oneself of what the answer was the full market value of the subjects for the proposed purchase of land suitable for development as a golf course.
He said that this was a clear pointer to the sole use to which the valuer must have regard when assessing the full market value of the subjects.
The purpose in inserting in clause 18(2) that the proposed purchase was for development as a golf course, as he saw it, was to restrict the assumed use by reference to which the subjects were to be valued [again, the emphasis is mine].
He found support for this approach in the assumptions set out in part (5) of the foregoing analysis.
I have italicised the words for development in my quotations from the Lord Ordinarys opinion in the previous paragraph to draw attention to the fact that when he was construing the option clause he departed from the words that the parties themselves had used.
The words in the relevant part of the clause, which is part (4) of the foregoing analysis, are of agricultural land or open space suitable for development as a golf course [again, my emphasis].
Taking the words that the parties themselves used, this is a description of the state of the subjects as they are to be taken to be in as at the date of entry.
It is not a direction about the purpose for which they are being purchased.
If it had been, it would have been an easy step to conclude that the full market value must be taken to be restricted by the assumed use.
That is how one would construe the words open market rent for the purposes of the rent reviews referred to in clause 5, as the open market rent must be determined by reference to the use of the subjects that is permitted by the lease.
In Arthur Bell & Sons v Assessor for Fife [1965] RA 535, 540 541 Lord Avonside said, with reference to the estimation of the annual value of subjects under the Valuation and Rating (Scotland) Act 1956, that it was notorious that one must take a building according to its use at the time of the valuation.
But the insertion of a description as to the assumed state of the subjects as at the date of entry for the proposed purchase under the option clause does not have that effect.
It permits account to be taken of the way land in that state might be expected to be used in the future, including its being used for development.
The Lord Ordinarys omission of the words as at the date of entry for the proposed purchase (as determined by the landlords) made it easier for him to conclude, wrongly in my opinion, that this was a direction about the purpose for which the subjects were being purchased.
These departures from the words the parties themselves used were crucial to the Lord Ordinarys reasoning, and I do not think that his interpretation of the option clause can be accepted.
The Extra Division, for its part, based its conclusion as to the meaning of the option clause on the weight which is said should be given to the words full market value: paras 27, 28.
The problem with this approach, however, is that it pays no regard to the words which follow, especially to the assumptions and disregards in parts (5) and (6) of the foregoing analysis.
Had the words full market value stood alone, it would have been plain that the value was to be determined by reference to the uses to which the land was reasonably capable of being put in the future: Raja Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302, 313; see also Griffiths v WE & DT Cave Ltd (1998) 78 P&CR 8, 14.
It is the words which follow that give rise to difficulty, when an attempt is made to construe the clause as a whole.
Parts (1) to (4), taken by themselves and read according to the words used, tell the valuer what the subjects are to be assumed to be and how they are to be valued.
The subjects are assumed to be agricultural land or open space suitable for use as a golf course, and they are to be valued at their full market value.
This approach to the option price makes commercial sense.
The assumption describes the land as it was at the date of entry to the lease.
But once the option is exercised all restrictions on the use of the land fly off.
The tenants will become the owners of the land.
They will be free to sell it on to a third party at its full market value or to use it themselves for any use whatever that will get planning permission.
Both parties to the lease, if they had applied business commonsense, would have been aware of the advantages that ownership would confer on the tenant in the event of the option clause being exercised.
This suggests that, if it had been their intention to restrict the option price to the value of the subjects as a golf course and to exclude any value attributable to their potential for development, they would have said so.
The problem, however, is that they then added the assumptions and disregards set out in parts (5) and (6).
Their function is not hard to understand if the full market value is to be determined simply on the basis that the subjects are to be assumed to be agricultural land or open space suitable for development as a golf course.
What they require the valuer to do is to make further assumptions which tend to indicate that he is to value the subjects strictly according to their actual state and existing use as at the date of entry for the proposed purchase, disregarding tenants improvements and any damage to or destruction of the subjects.
Yet these assumptions and disregards are introduced by the words in determining the full market value, which in themselves contain no hint of any restriction on the nature of the market to which the valuer may look when he is conducting this exercise.
This part of the clause looks as if it has been borrowed from a different lease without regard to the context.
But the words are there as part of the option clause.
So it is not possible simply to ignore them.
Lord Rodger says that it is helpful to start with the assumptions and disregards that the landlords are to apply when determining the full market value: para 28.
I do not disagree with this approach, which is both logical and helpful.
Of course, it all depends on what the question is that one is trying to answer.
If this was a case where there was no question of any development value, the assumptions and disregards would indeed be central to a proper understanding of the approach to value.
Contrary to what the landlords valuer in this case thought, and the parties accepted in the Inner House, they do not indicate that all capital expenditure by the tenants is to be disregarded.
The disregard extends only to improvements carried out by the tenants otherwise than in pursuance of an obligation to the landlords.
But the inquiry cannot end there.
As the valuer himself said at the end of para 3.0 of his report, use as a golf course might not represent the full market value in view of the planning assumptions that he addressed in para 4.0.
Development value was likely to completely eclipse any value that might be attributed to the subjects in their existing use.
The question whether the planning assumptions can be taken into account too is the crucial question in this case.
The assumptions and disregards do not mention this point, so one has to look at the whole clause to see what it means.
The solution
I do not think that it is possible to reconcile the assumptions and disregards with the earlier parts of the option clause.
They seem to me to be approaching the question of value on different bases.
The assumptions and disregards are designed to settle the basis for a purchase of subjects in their existing use.
The earlier parts of the clause are designed to settle the price for the purchase of subjects that will have a value in the open market that takes account of their potential for development.
In this situation the solution must be found by recognising the poor quality of the drafting and trying to give a sensible meaning to the clause as a whole which takes account of the factual background known to the parties at the time when the lease was entered into.
Support for this approach is to be found in the following passage from the judgment of Lord Bridge of Harwich in Mitsui Construction Co v Attorney General of Hong Kong (1986) 33 BLR 1, 14, where he said: The poorer the quality of the drafting, the less willing any court should be to be driven by semantic niceties to attribute to the parties an improbable and un businesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis.
In Ravennavi SpA v New Century Shipbuilding Co Ltd [2007] 2 Lloyds Rep 24, para 12 Moore Bick LJ said: Unless the dispute concerns a detailed document of a complex nature that can properly be assumed to have been carefully drafted to ensure that its provisions dovetail neatly, detailed linguistic analysis is unlikely to yield a reliable answer.
It is far preferable, in my view, to read the words in question fairly as a whole in the context of the document as a whole and in the light of the commercial and factual background known to both parties in order to ascertain what they were intending to achieve.
It has, of course, long been recognised that the commercial or business object of the provision in question may be relevant: Prenn v Simmonds [1971] 1 WLR 1381, 1385 per Lord Wilberforce; see also Aberdeen City Council v Stewart Milne Group Ltd [2010] CSIH 81, para 11, although I think that the way this issue should be approached is less clearly explained in the 19th century Scottish cases referred to by the Extra Division in that paragraph (Mackenzie v Liddell 1883 10 R 705, Bank of Scotland v Stewart 1891 18 R 957, Jacobs v Scott & Co 1899 2 F (HL) 70).
In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201, Lord Diplock said that if detailed and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must yield to business commonsense; see also Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913 where Lord Hoffmann included this as the fifth of his common sense principles.
In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771 Lord Steyn, making the same point, said that words are to be interpreted in the way in which a reasonable commercial person would construe them, and that the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language; see also Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657, 661 per Lord President Rodger.
In Deutsche Genossenschaftsbank v Burnhope [1995] 1 WLR 1580, 1587, however, Lord Steyn reminded us that our law of construction is based on an objective theory, and he emphasised the objective nature of the exercise of searching for meaning of language in its contractual setting: The court must not try to [divine] the purpose of the contract by speculating about the real intention of the parties.
It may only be inferred from the language used by the parties, judged against the objective contextual background.
What then of the objective commercial background in this case? The landlords are a local authority.
They were under a statutory duty not to dispose of land for a consideration less than the best that could reasonably be obtained: Local Government (Scotland) Act 1973, section 74(2).
The tenants are a commercial organisation.
They are in business to make money.
They undertook to use the subjects during the period of the lease for the development of a pay and play golf course and for no other purpose without the prior express written consent of the landlords.
But a successful exercise of the option would transfer to them all the rights of ownership, which they could be expected to turn to their financial advantage if the opportunity of doing so were to present itself.
The land itself was in use as grazing land when the lease was entered into.
It was situated about a mile from the town centre and the lease was entered into for a period of fifty years.
It can be inferred from the price that was agreed for the exercise of the option within the first twelve months that at that stage there was no evidence that it had any hope value and that it was thought to be suitable only for recreational activities.
But much can change within a period of fifty years, and there has been no indication that there were any planning constraints such as a designation of the land as part of a green belt that would inhibit its potential for development.
The land has now been identified as lying within a potential area for housing led urban expansion.
If the tenants are right, acquiring the land at a price which ignores its potential for development will provide them with a very substantial windfall at the expense of the landlords.
This was something that the wording of the option clause might have been expected to guard against.
The tenants, on the other hand, did not ensure that the opportunity to obtain a windfall in circumstances such as have now arisen was expressly provided for.
I do not think that the assumptions and disregards at the end of the option clause, which sit uneasily with the clause when read as a whole, carry sufficient weight to overcome the message conveyed by its opening words by attributing to them the meaning that the tenants contend for.
They indicate that the parties were agreed that the option price was to be determined by the full market value of the land as described, taking full account of its potential, if any, for development.
That is what reasonable commercial men would have agreed to when the lease was entered into, if they had applied their minds to the benefits that would accrue to the tenants if they were to exercise the option to purchase.
I would hold that it must be taken to be what the parties agreed to in this case.
Conclusion
Although I prefer not to endorse the Extra Divisions reasoning, I consider that it arrived at the right result.
I would dismiss the appeal and affirm the Extra Divisions interlocutor.
LORD RODGER
Lord Hope has set out the background and the wording of the clause which the Court has to interpret.
I can accordingly explain my approach very briefly.
As their name suggests, Multi Link Leisure Developments (Multi Link) are a commercial company operating in the leisure field.
They leased land near Cumbernauld from the North Lanarkshire Council to construct a golf course.
This was a commercial venture: the course was to be a pay and play course.
In these circumstances it is appropriate to treat the lease as a commercial agreement which is to be construed accordingly.
It is therefore noteworthy that Multi Links interpretation of the disputed clause of the lease produces a result whether or not appropriately described as a windfall which it seems unlikely that the parties to a commercial agreement would ever have intended: that Multi Link should be able to buy the land for a sum that takes no account of its (substantial) hope value.
That result is even more surprising when the clause provides that, in the circumstances which have occurred, the price is to be the full market value of the subjects.
Nevertheless, something has gone wrong with the drafting of the relevant clause, Clause 18.2.
So no construction is ever going to produce perfect harmony among all its elements.
The Lord Ordinary proceeded by stripping out various pieces of the text, including the reference to the date of entry.
As a result he produced a version which included the phrase for the proposed purchase of agricultural land or open space suitable for development as a golf course: Multi Link Leisure Developments Ltd v North Lanarkshire Council 2009 SLT 1170, 1172, para 5.
But, as Sir John Dyson pointed out in the course of argument, words in Clause 18.1 (prior to the proposed date of entry for the purchase) show that the words for the proposed purchase in Clause 18.2 are actually part of the description of the date of entry, which the Lord Ordinary had omitted.
It is therefore not easy to use them to construct the phrase to which the Lord Ordinary attached so much importance.
When translating a document written in a foreign language, it often makes sense to start with the parts whose meaning is clear and then to use those parts to unravel the meaning of the parts which are more difficult to understand.
The same applies to interpreting contracts or statutes.
Here, since their meaning is not really in doubt, I find it helpful to start with the assumptions and disregards that the landlords are to apply when determining the full market value.
First, the landlords are to assume that the subjects are in good and substantial order and repair and that all the obligations of the landlords and tenants under the lease have been complied with.
Since more than five years have passed, this means, in particular, that the landlords are to proceed on the basis that the golf course, which the tenants were obliged to construct in terms of Clause 9, has indeed been constructed and is in good order and repair.
In fact, the golf course has been duly created.
So Multi Link are to pay for the golf course on the assumption that it is in good condition.
The Extra Division, who did not refer to this part of Clause 18.2, proceeded on the basis that, in assessing the full market value, the landlords were to ignore anything done by the tenants to develop the golf course: Multi Link Leisure Developments Ltd v North Lanarkshire Council 2010 SC 302, para 26.
This was understandable, since, curiously enough, it was the basis upon which both parties proceeded in the Inner House and in the face of some resistance in this Court.
Nevertheless, I am quite unable to approach the interpretation of the clause on that basis since it is inconsistent with the specific direction in the later part of the clause.
The suggestion seemed to be that the words of agricultural land or open space suitable for development as a golf course meant that the landlords were to value the subjects as if the golf course had not been developed and that this was justified because, otherwise, Multi Link would be paying twice over for the development of the course.
But that approach is utterly inconsistent with the assumption that is spelled out in the later part of the clause.
And that assumption itself is entirely consistent with Clause 21, which provides that, at the expiry or termination of the lease, the tenants are to yield up the subjects with any buildings and others thereon well and substantially maintained in accordance with the obligations hereinbefore specified and that without any compensation being paid therefor.
Since, on its expiry or termination, Multi Link are not to be paid for the buildings etc which they may have constructed in accordance with their obligations under the lease, it would make no sense whatever if they could buy the subjects under the option without paying for the same buildings etc.
In effect, the cost of constructing the golf course in terms of Clause 9 is treated as part of the consideration which Multi Link provide in return for the lease of the land.
Therefore, as the assumption makes clear, if Multi Link want to buy a completed golf course, they have to pay for it.
On the other hand, the landlords are to disregard any improvements which the tenants may have carried out otherwise than in pursuance of an obligation [to] the landlords.
Again, this makes sense, since those improvements form no part of the consideration for the lease.
So, having paid to make these improvements which they were not obliged to make, the tenants should not have to pay again if they buy the land.
In my view the problematical words of agricultural land or open space suitable for development as a golf course cannot be construed in a manner that is inconsistent with the clear directions as to the assumptions which the landlords are to adopt in assessing the full market value.
In the circumstances of this case they have to value the golf course which has been laid out and they have to do so on the basis that it is in good and substantial order and repair.
If Multi Link have carried out other improvements which they were not obliged to carry out, these are to be ignored.
If the landlords proceed in this way, they will comply with the instructions in the clause.
And, if there were no other elements in the picture, no doubt they would be able to assess what someone wanting to buy a golf course would pay for this course in this area.
But the instructions in the clause do not tell the landlords to ignore any other factor which might be relevant to the value of the golf course.
And there is indeed a further, very significant, factor: in 2006 the Glasgow and Clyde Valley Joint Structure Plan identified the area where the land lies as a community growth area for an indicative capacity of 2,000 houses.
In addition, in 2008 the final draft of the relevant Local Plan identified that community growth area as a suitable location for medium term housing development.
Obviously, these changes mean that the possible purchasers of the golf course would now include developers who were interested in acquiring the land, not as a golf course, but as a site for a possible housing development.
So the potential value of the golf course on the open market will have increased accordingly.
Multi Link contend, however, that the words of agricultural land or open space suitable for development as a golf course show that this factor and this increase in value are to be ignored.
The valuation is to proceed on the basis that the land is to be used as a golf course and nothing else.
Given that apart from planning considerations there is no limit on the use to which the land could be put if Multi Link successfully exercised their option to purchase it, that would be a highly unusual and artificial approach to valuation far less to determining the full market value of the land.
Construing Clause 18.2 as a whole and as part of a commercial agreement, I am satisfied that the words in question are not to be interpreted as requiring the landlords to adopt this unusual approach and to ignore the hope value.
Had the parties intended the landlords to assume that the land was to be used only as a golf course, I would have expected to find that assumption included among the others at the end of the clause.
For these reasons the landlords are entitled to have regard to the hope value of the golf course when assessing its full market value.
Although my reasoning is different, I agree with the result reached by the Extra Division.
I would accordingly dismiss the appeal.
It will be up to the parties to work out how, if at all, they are to arrange for the lease to be terminated and the hope value to be unlocked.
LADY HALE
We are required to construe the following words: The Option price, if the Option to purchase is exercised subsequent to the first year of let, shall be equal to the full market value of the subjects hereby let as at the date of entry for the proposed purchase (as determined by the Landlords) of agricultural land or open space suitable for development as a golf course but, for the avoidance of doubt, shall be not less than the sum of ONE HUNDRED AND THIRTY THOUSAND POUNDS (130,000) STERLING.
In determining the full market value (i) the Landlords shall assume (a) that the subjects hereby let are in good and substantial order and repair and that all obligations of the Landlords and the Tenants under this Lease have been complied with, and (b) that the subjects hereby let are ready for occupation, and (ii) the Landlords shall disregard (a) any improvements carried out by the Tenants during the period of this Lease otherwise than in pursuance of an obligation the Landlords, and (b) any damage to or destruction of the subjects hereby let. (emphasis supplied)
The puzzle is what those italicised words are meant to mean.
There are at least four possible meanings of the term taken as a whole: (i) the value of the land as agricultural land or open space suitable for development as a golf course, without any hope value; (ii) the same but with any hope value; (iii) the value of the land with the golf course which has now been constructed on it, without any hope value; and (iv) the same but with any hope value.
The appellant tenants argued primarily for (i) but would accept (iii) as second best.
Their point was that it is otherwise difficult to ascribe any meaning at all to the italicised words and that (iii) would mean that they had to pay twice for the golf course.
But their main aim was to avoid having to pay any hope value.
The Lord Ordinary opted for (iii) on the basis that the assumptions required the valuer to assume that the golf course had indeed been constructed but the italicised words restricted the possible uses to which the valuer had to have regard.
The respondent landlords argued for (ii) before the Inner House and the Inner House agreed with them.
The reality is that it made no difference whether the right answer was (ii) or (iv) because in either case the contract to purchase had been validly rescinded and the option was now spent.
I do not regard the tenants position as quite as fanciful as others might.
Local authorities are not commercial organisations.
They are there to serve the local population, not to make money.
In 1999, it appears that no one was thinking about the potential for residential development.
The Council, no doubt conscious of their responsibility to provide facilities for healthy recreation for the inhabitants of Cumbernauld, wanted a pay and play golf course which all could enjoy.
The tenants were prepared to take the commercial risk of developing the land as a golf course.
The Council were happy to tie up the land for that purpose for fifty years.
On the Lord Ordinarys view of the matter, if the option were exercised they would not only have had the course built but would also have been paid for it.
Had it not been for the possibilities opened up by the regional development plan, that might have seemed a good deal to them.
As things now stand, unless the parties can come to some sensible agreement to unlock both the land and its development value, the Council are going to be no better off than they were at the outset.
All of that is by the by.
We have to try and make sense of the words the parties used.
The problem with the italicised words is that they begin with of with no clear indication of what they belong to.
It would be ungrammatical to link them to full market value as that is already followed by another genitive.
It appears, therefore, that they must be linked to the proposed purchase but there is no need for them there and indeed they are now inaccurate as a statement of fact.
Faced with that conundrum, I have found comfort in Lord Rodgers approach: construe the words you can understand and see where that takes you.
Even here we have to insert the word to between obligation and Landlords in disregard (ii)(a).
But after that the assumptions clearly take us at least as far as solution (iii).
The valuer is to assume that the Tenant has complied with the obligation to build the golf course: assumption (i)(a).
That improvement is not to be disregarded: cf disregard (ii)(a).
By itself, that does not tell us whether the answer is (iii) or (iv).
But it does tell us that the italicised words do not mean that the land is to be valued as if the golf course had never been built.
This also suggests that they are not meant to limit the ordinary meaning of full market value.
This is reinforced by their grammatical ineptitude: if they were meant to limit it, they would have come immediately after full market value and been preceded by as rather than of.
Finally, if the parties had meant anything other than the ordinary sense of full market value they could so easily have used a different phrase.
Thus, by a route mapped out by Lord Rodger, I too arrive at the conclusion that this appeal should be dismissed.
LORD CLARKE
I agree that this appeal should be dismissed.
I detect no difference between the principles applicable to the construction of a lease in Scotland and in England.
The true construction of clause 18.2 of the lease depends upon the language of the clause construed in the context of the lease as a whole, which must in turn be considered having regard to its surrounding circumstances or factual matrix.
I do not think that the parties can have given express consideration to the question that has arisen in this case.
If they had, they would surely have expressly provided that, if the tenants exercised the option to purchase in clause 18 of the lease, they must pay the full market value of the land as described, taking full account of its potential, if any, for development.
Any other conclusion would flout business commonsense because it would give the tenants an unwarranted windfall.
Applying the principles stated by Lord Hope in his para 20, I would construe the reference to full market value in clause 18.2 of the lease as meaning the full market value of the land, including its potential development value.
SIR JOHN DYSON SCJ
I agree that this appeal should be dismissed.
To the extent that there is any difference between the reasoning of Lord Hope and Lord Rodger, I prefer that of Lord Rodger.
| UK-Abs | This appeal concerns the proper construction of a term of a lease which gives the Appellant (the tenant) the option to purchase the leased property from the Respondent (the landlord).
The question was whether, given the particular drafting, the Respondent was entitled to take into account hope value attributable to the potential for residential development when it determined the option price.
The lease in question was a fifty year lease of land near Cumbernauld, commencing on 1 June 1999.
The Appellant was to develop a golf course on the land.
The Appellant was given an option to purchase the land.
The lease set out how the option price was to be calculated.
The relevant part of the clause provided that it was to be equal to the full market value of the subjects as at the date of entry for the proposed purchase (as determined by the landlords) of agricultural land or open space suitable for development as a golf course.
But, in determining the full market value, the landlords were to assume that the subjects were in good and substantial order and repair, that all obligations of the landlords and the tenants under the lease had been complied with and that they were ready for occupation.
They were to disregard any improvements carried out by the tenants during the period of this lease otherwise than in pursuance of an obligation to the landlords, and any damage to or destruction of the subjects of the lease.
Neither party seems to have contemplated, when they entered into this lease, that the site might be used for residential development.
However, it has now been identified as being in an area which has the potential for housing led urban expansion.
This gives it a hope value which was not in prospect when the lease was entered into.
The Appellant exercised the option to purchase on 8 October 2007.
The Respondent fixed the price at 5.3 million.
This figure included value attributable to the development potential of the land.
The Appellant took issue with this valuation on the ground that it was far in excess of the value of the land as a golf course.
Eventually, the Respondent served notice on the Appellant requiring payment of 5.3 million.
When the Appellant did not pay, the Respondent terminated the option contract.
The parties are agreed that, if the termination was valid, the option was spent and could not be exercised again.
The Appellant sought a declaration that the option contract has not been validly rescinded and that the Respondent is to determine the full market value of the land without reference to any increase in value attributable to its potential for residential development.
They relied, in particular, on the inclusion in the lease of the words of agricultural land or open space suitable for development as a golf course.
The Lord Ordinary found for the Appellant.
His decision was reversed by the Inner House, which held that full market value meant what it said; that express wording would have been needed in order for considerations relevant to market value to be ignored, and that there was no such wording here.
The Appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
It holds that the Respondent was entitled, when determining the option price, to take full account of the lands potential for development.
Lord Hope holds that the problem arises because of the conflict between the words of the first part of the clause (full market value of the subjects of agricultural land or open space suitable for development as a golf course) and the assumptions and disregards in the second part.
These two parts of the clause approach the question of value on different bases.
The earlier parts were designed to settle the price for the purchase of land that will have a value in the open market that takes account of the potential for development.
The assumptions and disregards were designed to settle the basis for a purchase of the land in its existing use.
The court has to recognise the poor quality of the drafting and try to give a sensible meaning to the clause as a whole, which takes account of the factual background known to the parties at the time they entered into the lease: [16] [19].
The commercial or business object of the provision has to be taken into account: [21] The Appellants construction would provide them with a substantial windfall at the expense of the Respondent: [23].
Had reasonable commercial parties directed their mind to the benefits which would accrue to the Appellant if the option was exercised, they would have agreed that the option price was to be the full market value of the land, taking account of any development potential.
That is what the parties must be taken to have agreed in this case: [23].
Lord Rodger also holds that the lease should be construed as a commercial agreement.
It seems unlikely that parties to such an agreement would have intended the Appellants construction: [26].
Something had gone wrong with the drafting: [27].
In those circumstances, it is useful to start with those parts of the clause whose meaning was clear and then to consider those parts which are more difficult to understand: [28].
The meaning of the assumptions and disregards is clear: [28].
They provide that, contrary to the approach taken by the parties, the valuation is to be on the basis that the golf course has been constructed and is in good order and repair: [29] [32].
The words of agricultural land or open space suitable for development as a golf course cannot be construed inconsistently with the clear directions in the assumptions and disregards so as to require the valuer to assume that the golf course had not been developed: [33].
The clause contains no instructions to ignore any other factor which might be relevant to the value of the golf course: [34].
The approach contended for by the Appellant would be an unusual and artificial approach to valuation, given that there was no limit on the use to which the land could be put after the option was exercised: [36].
Lady Hale agrees with Lord Rodgers approach and also concludes that the appeal should be dismissed: [44].
Lord Clarke agrees that the appeal be dismissed, emphasising that any other conclusion would flout business common sense: [45].
Sir John Dyson agrees that the appeal should be dismissed, preferring Lord Rodgers reasoning to Lord Hopes to the extent that there is any difference between them: [46].
|
The Aarhus Convention (more fully, the Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters) requires that the procedures to which it refers should be fair, equitable, timely and not prohibitively expensive (article 9.4).
Although the United Kingdom is a party to the Convention, it is not directly applicable in domestic law.
However, the same requirements have been incorporated by amendments made in 2003 into directives, relating in particular to environmental impact assessment (EIA Directive 85/337/EEC) and integrated pollution prevention and control (IPPC Directive 96/61/EC); compliance was required by 25 June 2005 (Council Directive 2003/35/EC article 6) (The EIA Directive is now consolidated at 2011/92/EC).
It has not been disputed that the present proceedings, though begun before that date, are at least at this level subject to what I will call the Aarhus tests under directly applicable European law.
For reasons explained in its judgment of December 2010 ([2010] UKSC 57; [2011] 1 WLR 79), the Supreme Court referred to the Court of Justice of the European Union (CJEU) certain questions relating to the expression not prohibitively expensive.
The reference followed the dismissal of the substantive appeal, and the making of an order for costs against the effective appellant, Mrs Pallikaropoulos (Edwards v Environment Agency [2008] 1 WLR 1587; [2008] UKHL 22).
The answers of the CJEU were given in a judgment dated 11 April 2013: Edwards v Environment Agency (No 2) (Case C 260/11) [2013] 1 WLR 2914 (following an opinion of Advocate General Kokott dated 18 October 2012).
We heard oral submissions from the parties on 22 July 2013.
Following that hearing it was agreed that our decision would be deferred pending receipt of the same Advocate Generals opinion in infraction proceedings against the United Kingdom relating to alleged non implementation of the directives.
That opinion was delivered on 12 September 2013 (Commission of the European Union v United Kingdom (Case C 530/11)).
We have received further submissions of the parties on that opinion.
We have also been informed that a request by the UK government to reopen the oral procedure in that case has been refused by the court.
Judicial review proceedings
Before turning to those issues, it is necessary to recall briefly the subject matter, and somewhat unusual course, of the substantive judicial review proceedings, including the circumstances in which Mrs Pallikaropoulos became a party.
The proceedings concerned a cement works in Rugby.
On 12 August 2003 the Environment Agency issued a permit to continue operations with an alteration in its fuel from coal and petroleum coke to shredded tyres.
This proposal gave rise to a public campaign on environmental grounds, one opponent being a local pressure group called Rugby in Plume.
Judicial review proceedings were begun on 28 October 2003 challenging the Agencys decision.
The proceedings were begun in the name of a local resident, Mr David Edwards.
The background to his involvement was described by Keith J, when permitting the claim to proceed ([2004] EWHC 736 (Admin)), paras 12 13).
He noted the public campaign led by Rugby in Plume, its leading light being Mrs Pallikaropoulos, who claimed to speak for between 50,000 and 90,000 local residents affected by the proposals, and to have committed substantial funds of her own to the campaign.
Following the decision of the Rugby Borough Council, on advice from leading counsel, not to pursue its own claim for judicial review, she was reported as pledging to carry on the battle using legal aid, and was also reported as saying: I'm too rich [to get legal aid], because I own my own house, so someone in Rugby has to come forward who feels strongly enough to take the case forward under the legal aid scheme.
Although there was no direct evidence from Mr Edwards that he had responded to this request for assistance, the judge found it difficult to resist the inference that he had been put up as a claimant in order to secure public funding of the claim by the Legal Services Commission when those who are the moving force behind the claim believe that public funding for the claim would not otherwise have been available.
Keith J held that this somewhat unconventional background neither deprived Mr Edwards of a sufficient interest to bring judicial review proceedings, nor constituted an abuse of process.
There was no appeal from that conclusion.
It had the consequence that the proceedings in the High Court continued at public expense and without significant risk to the applicant, or to his supporters, of an adverse costs order if they lost.
The substantive application was heard by Lindsay J and dismissed on 19 April 2005: [2005] EWHC 657 (Admin), [2006] Env L R 56.
He observed that the public opposition was not unnatural: I say that that was not unnatural as burning rubber is notorious for the noxious smell given off and the dense smoke created and many, unaware of the way in which the chipped tyres would be burned in a modern state of the art kiln at temperatures of up to 1400 degrees, would expect and fear the worst. (para 5) However, as he found in the course of his judgment, these fears, natural or not, were contradicted by the evidence.
He dismissed an argument that the proposal was a change which may have significant adverse effects on the environment (EIA Directive Annex II para 13), saying: it is plain that tyre burning in itself as a fuel has no significant adverse effects on the environment and, indeed, overall may even have beneficial effects on the environment. (para 31).
Lord Hoffmann, giving the leading judgment in the House of Lords on the substantive appeal, described this as an unchallenged finding of fact that the only change in operation proposed by the application, namely the use of tyres, would not have significant negative effects on human beings or the environment ([2008] 1 WLR 1587, para 30) Lindsay J rejected grounds alleging non compliance with the two directives.
He upheld a complaint of procedural unfairness by the Agency arising from failure to disclose an internal assessment report AQMAU 1 relating to emissions of particulate matter (PM10), but exercised his discretion to refuse relief.
He also declined to make a reference to the CJEU.
Mr Edwards appealed to the Court of Appeal with permission granted by Keene LJ.
The appeal was heard over three days beginning on 6 February 2006, and was dismissed on similar grounds, including the exercise of discretion ([2006] EWCA Civ 877; [2007] Env LR 126).
The court held that the change was not a project within the meaning of the EIA directive, but that if that were wrong there had been substantial compliance.
On the procedural issues, Auld LJ observed: given the Judge's finding on the evidence before him of no environmental harm from the plant and the continuous and dynamic nature of the PPC regulatory system enabling assessments to be made on what is known rather than predicted by AQMAU over three years ago, it would be pointless to quash the permit simply to enable the public to be consulted on out of date data. (para 126) The court again declined to make a reference to the CJEU.
There had been an unexpected development on the third and final day of the hearing.
Mr Edwards, while wishing to continue with his appeal, withdrew his instructions from both solicitors and counsel (Mr Wolfe QC).
Mrs Pallikaropoulos, described by Auld LJ as a prime mover, who had been in court throughout the appeal, applied without objection to be joined as an additional appellant.
This course was described by Auld LJ as plainly in the public interest to enable the appeal to be concluded.
He agreed to Mr Wolfes proposal that her potential liability to costs in the Court of Appeal should be capped at 2,000.
Following dismissal of the appeal, the respondents costs capped at this level were awarded against her.
She was given leave to appeal by the House of Lords.
She applied to the House of Lords for an order varying or dispensing with the ordinary requirement, under the applicable practice direction of the House (not replicated in the new Supreme Court rules), to give security for costs in the sum of 25,000, and for a protective costs order, under the principles set out in R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192, [2005] 1 WLR 2600.
On 22 March 2007 the Judicial Office wrote to the parties informing them that the applications had been rejected for the following reasons: Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that [existence] of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the applicant's means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial; further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be 'prohibitively expensive' or that Directive 2003/35/EC would be breached without a special order.
Mrs Pallikaropoulos was evidently not deterred by that ruling.
The security was duly paid and the appeal proceeded.
In the substantive hearing before the House of Lords, the main issues came down to two, one of interpretation of the EIA Directive, the other procedural.
The first was whether the proposed use of tyres and the related adaptations constituted a waste disposal installation within paragraph 10 of Annex I to the Directive, rather than a change or extension of an Annex I project, within paragraph 13 of Annex II.
The main practical difference was that paragraph 13 was limited to changes which may have significant adverse effects on the environment, and therefore (on the findings of Lindsay J) would have had no application to this case.
The second issue was one of fairness, relating to failure to disclose the AQMAU report.
The House split on the issue of interpretation: the majority held that that the proposal was not within paragraph 10, but accepted that, if this point had been determinative, a reference to the European Court would have been necessary.
However, all were agreed that it was not determinative, because, if the EIA directive applied, its requirements had been complied with (para 58, per Lord Hoffmann; para 82, per Lord Mance).
On the procedural issue, Lord Hoffmann doubted whether a common law duty arose as claimed (para 44), but held in agreement with the courts below that relief should in any event be refused since the relevance of the reports had been completely overtaken by events, in the shape of more recent reports showing no exceedances as a result of the Cemex plant (para 64 65).
The dispute over costs
The present dispute arises out of the order for costs of the appeal in the House of Lords made on 18 July 2008 in favour of both respondents, the Environment Agency and the Secretary of State.
They submitted bills totalling respectively 55,810 and 32,290.
In the course of the assessment, following transfer of jurisdiction to the Supreme Court, the costs officers determined, as a preliminary issue, that in accordance with the directives they should disallow any costs which they considered prohibitively expensive ([2011] 1 WLR 79, 92 et seq).
On the defendants application to the full court for a review, it was decided that the costs officers had had no jurisdiction to consider this issue, but that it was a matter that could be considered by the court under its jurisdiction to correct a possible injustice arising from the original costs order ([2011] 1 WLR 79 para 35, per Lord Hope).
As to the application of the Aarhus test, the court referred to the judgment of Sullivan LJ in R (Garner) v Elmbridge Borough Council [2011] 3 All ER 418; [2010] EWCA Civ 1006, in which he had identified an important point of principle, as to whether the question should be approached objectively or subjectively: Should the question whether the procedure is or is not prohibitively expensive be decided on an 'objective' basis by reference to the ability of an 'ordinary' member of the public to meet the potential liability for costs, or should it be decided on a 'subjective' basis by reference to the means of the particular claimant, or upon some combination of the two bases? (para 42) Sullivan LJ had taken the view that a purely subjective approach would not be consistent with the objectives underlying the Directive.
On the facts of the Garner case, which was concerned only with the position at first instance, he held that an order should have been made capping the claimants potential costs liability to the defendant at 5,000.
Lord Hope thought it plain that the difficult issues highlighted by Sullivan LJ had not been previously addressed by the House of Lords in the present case, either when declining to make a protective costs order or in its final order for costs, both decisions apparently being based on a purely subjective approach (para 33).
He concluded that there was no clear and simple answer, and that accordingly a reference should be made to the CJEU for guidance, the order for costs being stayed in the meantime (para 36).
Government consultation
While the reference was pending, the government issued a consultation paper on the issue of cost capping, and the scope for providing clearer guidance in the procedural rules: Costs Protection for Litigants in Environmental Judicial Review Claims (CP16/11 October 2011).
This consultation ran in parallel with the consultation on the proposals for reform of costs rules generally, following the report of Jackson LJ.
The paper noted the developing practice of the courts: 18 A number of domestic cases dating from R (Corner House Research) v Secretary of State for Trade and Industry [2005] 1 WLR 2600 including R (Garner) v Elmbridge Borough Council [2011] 1 Costs LR 48 (8 September 2010), have set out the basic principles underpinning the use of PCOs in judicial review proceedings. 19 The cases did not provide detailed guidance on the level at which a PCO should be set, but Garner made it clear that a level of twice the national average income would be too high.
In Garner itself the court awarded a PCO at 5,000.
One question raised was whether any figure laid down by the rules should be absolute, or merely presumptive: 27 An absolute cap would have the advantage for users of providing the most certainty, but it would also provide the same protection for wealthy organisations and individuals as for those of more limited means.
A presumptive limit would be more capable of being targeted at those most in need, but if too flexible could give rise to unnecessary and time consuming arguments about costs.
As to the level of cap a figure of 5,000 was proposed: 35 Taking account of the levels which are currently being used by the courts as well as the importance of setting a level which could not be further reduced, it is proposed that the cap should be set at a level of 5,000.
This is on the basis that any claimant who is so impecunious that the possibility of being liable for 5,000 would present an insuperable barrier to proceeding would in most cases be eligible for legal aid, with its attendant cost protection in any event.
The conclusions on these issues were given in a Report on Response to Consultation (CP(R) 16/11 August 2012).
As to the level of the cap, it was noted that while there was only minority support for the proposed cap of 5,000 there was no strong consensus for any alternative: 3 On the basis of the results of this consultation and the evidence of current practice in the courts, the Government takes the view that a cap of 5,000 is a proportionate amount to ask individual claimants to pay.
On the same basis it believes that it is reasonable to make a distinction between the position of individuals and organisations and therefore proposes to set a cap of 10,000 for organisations.
Consideration was also given to the position on appeal: 8 The similarity of the proposals to a fixed costs regime indicates in the Governments view, and as one respondent strongly argued, that it will be appropriate for appeals to be dealt with in accordance with the rule proposed by Lord Justice Jackson for appeals in cases to which a fixed or restricted costs regime applied at first instance.
Under that rule, when it is implemented as part of the wider Jackson reforms, the judge considering whether to give permission to appeal in a case which was subject at first instance to a fixed or restricted costs regime will at the outset determine the appropriate costs limit or limits having had regard to the decisions in the lower court.
These proposals were given effect by amendment to the Civil Procedure Rules.
It is enough for present purposes to refer to a summary of the changes in an update to the rules dated 1 April 2013: Amendments are made to comply with the Aarhus Convention so that any system for challenging decisions in environmental matters is open to members of the public and is not prohibitively expensive.
Two limits are set: on the costs recoverable by a defendant from a claimant (5,000 where the claimant is an individual and 10,000 in any other circumstances) and; on the costs recoverable by a claimant from a defendant (35,000).
Consequential amendments are made to PD 25A, Part 54 and the Pre Action Protocol Judicial Review.
The amendments do not apply to a claim commenced before 1 April 2013.
For appeals a new rule was added in CPR 52: Orders to limit the recoverable costs of an appeal 52.9A.(1) In any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies. (2) In making such an order the court will have regard to (a) the means of both parties; (b) all the circumstances of the case; and (c) the need to facilitate access to justice. (3) If the appeal raises an issue of principle or practice upon which substantial sums may turn, it may not be appropriate to make an order under paragraph (1). (4) An application for such an order must be made as soon as practicable and will be determined without a hearing unless the court orders otherwise.
In the Supreme Court, the Costs Practice Direction No 13 (as amended with effect from November 2013) now includes specific provision for an order limiting the recoverable costs of an appeal in an Aarhus Convention claim (para 2.2.c).
The CJEUs decision
The court reaffirmed the principles established in its judgment in Commission of the European Communities v Ireland (Case C 427/07) [2010] Env LR 123; [2009] ECR I 6277, noting in particular that Aarhus Convention does not affect the powers of national courts to award reasonable costs, and that the costs in question are all the costs arising from participation in the judicial proceedings (paras 25 27).
In response to the questions raised by the Supreme Court, it began by affirming the duty of member states to ensure that the directive is fully effective, while retaining a broad discretion as to the choice of methods (para 37).
The national court, in turn, when ruling on issues of costs, must satisfy itself that that requirement has been complied with, taking into account both the interest of the person wishing to defend his rights and the public interest in the protection of the environment (para 35).
The following paragraphs of the judgment, which contain the substantive guidance, must be set out in full: 40 That assessment cannot, therefore, be carried out solely on the basis of the financial situation of the person concerned but must also be based on an objective analysis of the amount of the costs, particularly since, as has been stated in para 32 of the present judgment, members of the public and associations are naturally required to play an active role in defending the environment.
To that extent, the cost of proceedings must not appear, in certain cases, to be objectively unreasonable.
Thus, the cost of proceedings must neither exceed the financial resources of the person concerned nor appear, in any event, to be objectively unreasonable. 41 As regards the analysis of the financial situation of the person concerned, the assessment which must be carried out by the national court cannot be based exclusively on the estimated financial resources of an average applicant, since such information may have little connection with the situation of the person concerned. 42 The court may also take into account the situation of the parties concerned, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure and the potentially frivolous nature of the claim at its various stages: see, by analogy, DEB Deutsche Energiehandels und Beratungsgesellschaft mbH v Bundesrepublik Deutschland (Case C 279/09) [2010] ECR I 13849, para 61. 43 It must also be stated that the fact, put forward by the Supreme Court of the United Kingdom, that the claimant has not been deterred, in practice, from asserting his or her claim is not in itself sufficient to establish that the proceedings are not, as far as that claimant is concerned, prohibitively expensive for the purpose (as set out above) of Directives 85/337 and 96/61. 44 Lastly, as regards the question whether the assessment as to whether or not the costs are prohibitively expensive ought to differ according to whether the national court is deciding on costs at the conclusion of first instance proceedings, an appeal or a second appeal, an issue which was also raised by the referring court, no such distinction is envisaged in Directives 85/337 and 96/61, nor, moreover, would such an interpretation be likely to comply fully with the objective of the European Union legislature, which is to ensure wide access to justice and to contribute to the improvement of environmental protection. 45 The requirement that judicial proceedings should not be prohibitively expensive cannot, therefore, be assessed differently by a national court depending on whether it is adjudicating at the conclusion of first instance proceedings, an appeal or a second appeal.
A number of significant points can be extracted from the Edwards judgment: First, the test is not purely subjective.
The cost of proceedings must not exceed the financial resources of the person concerned nor appear to be objectively unreasonable, at least in certain cases. (The meaning of i) the latter qualification is not immediately obvious, but it may be better expressed in the German version in Einzelfllen, meaning simply in individual cases.) The justification is related to the objective of the relevant European legislation (referred to in para 32 of the judgment), which is to ensure that the public plays an active role in protecting and improving the quality of the environment. ii) The court did not give definitive guidance as to how to assess what is objectively unreasonable.
In particular it did not in terms adopt Sullivan LJs suggested alternative of an objective assessment based on the ability of an ordinary member of the public to meet the potential liability for costs.
While the court did not apparently reject that as a possible factor in the overall assessment, exclusive reliance on the resources of an average applicant was not appropriate, because it might have little connection with the situation of the person concerned. iii) The court could also take into account what might be called the merits of the case: that is, in the words of the court, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages. (para 42) iv) That the claimant has not in fact been deterred for carrying on the proceedings is not in itself determinative. v) The same criteria are to be applied on appeal as at first instance.
I do not understand the last point as intended to imply that the same order must be made at each stage of the proceedings, or that there should be a single global figure covering all potential stages, but rather that the same principles should be applied to the assessment at each stage, taking account of costs previously incurred.
In her 2013 opinion in Commission of the European Union v United Kingdom (Case C 530/11), the Advocate General said of the courts reasoning on this point: that finding cannot be interpreted as meaning that in assessing the permissible cost burden in appeal proceedings the costs already incurred in courts below may be ignored.
Instead, each court must ensure that the costs at all levels of jurisdiction taken together are not prohibitive or excessive. (para 23)
However, as she had recognised in her earlier opinion (2012 opinion in Edwards v Environment Agency (No 2) (Case C 260/11) [2013] 1 WLR 2914, paras 58 61), while prohibitive costs must be prevented at all levels of jurisdiction, the considerations may differ at each level.
Thus, on the one hand, as she notes, the decision of the House of Lords as the final court was potentially of special significance, because it alone had a duty to make a reference to the CJEU in case of doubt as to EU law.
On the other hand, it is possible that after the decision by the lower court, public interest in the further continuation of the proceedings would be reduced.
Accordingly, she said, it was compatible with Aarhus tests to re examine at each level of jurisdiction the extent to which prohibitive costs must be prevented.
More generally, in her 2012 opinion, in support of the need for account to be taken of both objective and subjective considerations, she had emphasised the importance of the public interest in the protection of the environment: 42.
Recognition of the public interest in environmental protection is especially important since there may be many cases where the legally protected interests of particular individuals are not affected or are affected only peripherally.
However, the environment cannot defend itself before a court, but needs to be represented, for example by active citizens or non governmental organisations.
Conversely A person who combines extensive individual economic interests with proceedings to enforce environmental law can, as a rule, be expected to bear higher risks in terms of costs than a person who cannot anticipate any economic benefit.
The threshold for accepting the existence of prohibitive costs may thus be higher where there are individual economic interests. (para 45) It is less clear how the court saw the merits of the case (para 23(iii) above)
being brought into account.
There is in the judgment no indication as to how the identified factors might affect the ultimate level of recovery, one way or the other. (The comparison there drawn with DEB Deutsche Energiehandels und Beratungsgesellschaft mbH v Bundesrepublik Deutschland (Case C 279/09) [2010] ECR I 13849 provides little direct assistance.
That case was not related to environmental law, and it concerned the circumstances in which legal aid should be granted to a claimant, rather than the extent of his potential liability to the other party.)
Taking the points in turn I would suggest the following: i) A reasonable prospect of success Lack of a reasonable prospect of success in the claim may, it seems, be a reason for allowing the respondents to recover a higher proportion of their costs.
The fact that frivolity is mentioned separately (see below), suggests that something more demanding is envisaged than, for example, the threshold test of reasonable arguability. ii) The importance of what is at stake for the claimant As indicated by Advocate General Kokott, this is likely to be a factor increasing the proportion of costs fairly recoverable.
As she said, a person with extensive individual economic interests at stake in the proceedings may reasonably be expected to bear higher risks in terms of costs. iii) The importance of what is at stake for the protection of the environment Conversely, and again following the Advocate Generals approach, this is likely to be a factor reducing the proportion of costs recoverable, or eliminating recovery altogether.
As she said, the environment cannot defend itself, but needs to be represented by concerned citizens or organisations acting in the public interest. iv) The complexity of the relevant law and procedure This factor is not further explained.
Its relevance seems to be that a complex case is likely to require higher expenditure by the respondents, and thus, objectively, to justify a higher award of costs.
Although mention is only made of complexity of law or procedure, the same presumably should apply to technical or factual complexity. v) The potentially frivolous nature of the claim at its various stages The respondents should not have to bear the costs of meeting a frivolous claim.
In domestic judicial review procedures, whether at first instance or on appeal, this issue is likely to be resolved in favour of the claimant by the grant of permission,
The present case
The present case is unusual in that the Aarhus issue did not arise in the same form at a lower level.
Full protection at first instance was given by legal aid.
In the Court of Appeal the costs cap provided for Mrs Pallikaropoulos reflected the unusual circumstances in which she became a party, and the courts view that it was in the public interest that the case could be completed with the same representation.
It therefore provides no guide to the appropriate order on the further appeal.
On the other hand, as Lord Hope recognised, the initial decision of the House itself not to provide any costs protection was made without full consideration of all the factors now known to be relevant.
The respondents are not now seeking recovery of their full costs.
They have agreed to limit their joint claim to 25,000, which is the amount of the security already paid by the appellant as the condition for bringing the appeal.
There is limited evidence as to the resources of the appellant herself, and none that an order for payment of the sum of 25,000 already in court would be beyond her means or cause her hardship.
Furthermore, it must be assumed that following the refusal of a protective costs order in March 2007, her decision to proceed was made with full knowledge of the risks involved.
It is impossible in my view on the material before us to hold that the order sought would be subjectively unreasonable.
The more difficult question is whether there should be some objectively determined lower limit, and if so how it should be assessed.
Although this was one of the main issues raised by the reference, the European court has not offered a simple or straightforward answer.
Mr Wolfe relies on the last sentence of para 40 of the judgment in Edwards v Environment Agency (No 2 ) (Case C 260/11) [2013] 1 WLR 2914, supported as he says by the Advocate Generals 2013 opinion in Commission of the European Union v United Kingdom (Case C 530/11), para 55: the correct position is that litigation costs may not exceed the personal financial resources of the person concerned and that, in objective terms, that is to say, regardless of the persons own financial capacity, they must not be unreasonable.
In other words, even applicants with the capacity to pay may not be exposed to the risk of excessive or prohibitive costs and, in the case of applicants with limited financial means, objectively reasonable risks in terms of costs must in certain circumstances be reduced further. (emphasis added) Thus, he says, it is necessary to start from an objectively defined standard, the circumstances of the particular individual being relevant only to the extent that they may reduce that figure.
Furthermore, in his submission, the question of what is objectively reasonable was answered definitively by the government itself, when following extensive consultation it adopted the figure of 5,000 (as now embodied in the High Court rules).
As he submits, the respondents cannot properly go behind that figure, at least without evidence to support any alternative suggestion.
I am doubtful whether so prescriptive an approach can be extracted from the
European courts decision.
If it were, it is difficult to see how the merits factors would play a significant part.
In any event, I cannot agree that the respondents are bound by the figure of 5,000 adopted for the purpose of the new rules.
The new rules only apply to proceedings commenced after June 2013.
More importantly, they recognise (as did the Advocate General: para 25 above) that, while the same general principles apply in the Court of Appeal, the factors affecting the judgment of what is subjectively or objectively reasonable may have changed.
This applies with even more force at the highest level, where the case for a second appeal needs special justification.
Furthermore, the factors which justify a relatively low standard figure for an advance cap, including the desirability of avoiding satellite litigation in advance of a hearing on the merits, will not apply with the same force to consideration after the event.
At that stage the court will be in a much better position to take a view on both the merits of the case (in the sense discussed above) and on the costs incurred and their consequences for the parties.
The test in principle remains the same but the court is considering it in a different context.
Of the five merits factors mentioned by the court, I would discount the second and fifth immediately.
There is no evidence that the appellant had any economic interest of her own in the proceedings, and, given the grant of permission at each stage, including the appeal to the House of Lords, they could not be said to be frivolous.
The relative complexity of the case (factor (iv)) is evidenced by the fact that it took three days before the House.
It has not been suggested that the costs incurred by the respondents were excessive in respect of the issues involved in the case.
They are not out of line with those incurred by the appellant.
The 25,000 now claimed represents a very significant reduction from that figure.
The other two factors (i) the prospects of success and (iii) the importance of the case for the protection of the environment are at best neutral from the applicants point of view.
The issue of construction of the EIA Directive was one of some difficulty, as is clear from the division of views within the House.
However, by the time it reached the House it seems to have become a point of limited practical significance for the protection of the environment in the area, given the judges unchallenged finding on that aspect.
Nor was there any clear evidence of more general public support for her appeal at this level.
Furthermore the prospects of a final order in her favour in the appeal were highly questionable.
Whatever the answer to the bare legal issue, there was a serious risk of the courts discretion being exercised against her, in the same way as had happened in the lower courts.
Accordingly, the potential significance of the legal issue in my view carries relatively little weight in the overall balance.
The alternative disclosure issue had been overtaken by events, as the Court of Appeal had held, and the House confirmed.
Taking all these factors into account, I find it impossible to say that the figure of 25,000, viewed objectively, is unreasonably high, either on its own or in conjunction with the 2,000 awarded in the Court of Appeal.
Mr Wolfe submits that if this court has any doubt as to his interpretation of the European courts decision and the Advocate Generals opinions, we should delay matters until the final judgment in the infraction proceedings.
I do not think that is necessary or desirable.
Resolution of this case has already been long delayed.
The European court has given such specific answers as it thought appropriate to the questions referred in the present case.
Although they leave some scope for judgment in their application, there is nothing in the Advocate Generals later opinion, in my view, which suggests that more definitive guidance for the purposes of the present case is to be expected from the forthcoming judgment.
objectively excessive.
Accordingly, I would make an order for costs in that amount in favour of the respondents jointly.
Michaelmas Term [2010] UKSC 57 JUDGMENT R (on the application of Edwards and another (Appellant)) v Environment Agency and others (Respondents) Lord Hope, Deputy President before Lord Walker Lord Brown Lord Mance Lord Dyson JUDGMENT GIVEN ON 15 December 2010 Heard on 11 November 2010 Appellant David Wolfe (Instructed by Richard Buxton Environmental and Public Law) Respondents James Eadie QC James Maurici Charles Banner (Instructed by Treasury Solicitor) LORD HOPE, delivering the judgment of the Panel 1.
This is an appeal against a decision by two costs officers appointed by the President of the Supreme Court under rule 49(1) of the Supreme Court Rules 2009, Mrs Registrar di Mambro and Master OHare, a copy of which is annexed to this judgment.
From the issues they were asked to decide they selected two preliminary issues which arose in the detailed assessment of bills of costs lodged by the respondents in an appeal to the House of Lords in which they were successful.
The appellant, Mrs Pallikaropoulos, had been ordered to pay the costs of the appeal.
The first respondent, the Environment Agency, had lodged a bill totalling 55,810.
The second respondent, the Secretary of State for the Environment, Food and Rural Affairs, had lodged a bill totalling 32,290. 2.
The preliminary issues were about the proper application of article 10a of Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (the EIA Directive) and article 15a of Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (the IPPC Directive).
Those articles had been inserted by articles 3(7) and 4(4) of Council Directive 2003/35/EC of 26 May 2003 to implement provisions which first appeared in the Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters of 25 June 1998 (the Aarhus Convention).
Among the provisions as to access to justice in article 9 of the Aarhus Convention is a requirement that the procedures to which it refers should be fair, equitable and timely and not prohibitively expensive: article 9(4).
In proceedings to which the EIA Directive applies, article 10a requires 3.
Member States to ensure that members of the public have access to a review procedure before a court of law or another independent and impartial body established by law to challenge the substantive or procedural legality of decisions, acts or omissions subject to the public participation provisions of the directive.
It also provides that Any such procedure shall be fair, equitable, timely and not prohibitively expensive.
Article 15a of the IPPC Directive makes identical provision with respect to proceedings to which that directive applies. 4.
The costs officers were asked to consider the proper application of those articles to this case.
The issues which were identified from the skeleton arguments provided by the parties were as follows: (i) where an order for costs has been made, whether as a general rule the court assessing those costs has any jurisdiction to implement the directives; (ii) if so, whether in the particular circumstances of this case the costs officers should seek to do so; and (iii) if so, whether on the evidence presented the amount of costs payable by the appellant should be moderated or even excluded altogether.
The costs officers decided the first two issues in favour of the appellant.
They reserved their opinion on the third issue until they had given written reasons for their decision on the first two issues and the parties had had an opportunity to consider whether to appeal against it. 5.
The respondents appealed against the costs officers decision under rule 53 of the Supreme Court Rules.
They asked the single Justice to refer the following questions to a panel of Justices under rule 53(2): (1) whether it was open to the costs officers, in the circumstances of this case in which applications to the court to reduce or cap a partys liability had been made to and considered by and rejected by the Court, to achieve that result through the detailed assessment process; and (2) if it was, whether the test indicated by the phrase prohibitively expensive should be focused exclusively on the actual circumstances of the parties to the litigation and not on the question what would be prohibitively expensive for the ordinary member of the public.
The single Justice referred the application to a panel of five Justices and directed that these questions should be decided after an oral hearing.
The panel, having now heard counsel, is grateful for their assistance on these issues of principle.
Background 6.
The issues about costs are in respect of the appellants application for judicial review of the decision of the first respondent to issue a permit on 12 August 2003 for the operation of a cement works in Lawford Road, Rugby.
Permission had been sought and granted to replace the fuel that had previously been used for their operation, which was coal and petroleum coke, with shredded tyres.
The use of tyres for this purpose gave rise to a public campaign against the proposal on environmental grounds.
The application was originally brought in the name of a Mr David Edwards.
His claim for judicial review was dismissed by Lindsay J: [2005] EWHC 657 (Admin), [2006] Env L R 3.
He appealed to the Court of Appeal, but on the third and final day of the hearing he withdrew his instructions from his solicitors, Richard Buxton & Co, and his counsel, David Wolfe.
Mrs Pallikaropoulos, who had been present in court throughout the appeal and had been closely involved in opposition to the permit, was added as an appellant for the remainder of the proceedings.
Her liability in the Court of Appeal was capped at 2,000.
The appeal was dismissed and the respondents costs, capped at 2,000, were awarded against Mrs Pallikaropoulos: [2006] EWCA Civ 1138.
Mrs Pallikaropoulos was given leave to appeal by the House of Lords. 7.
Mrs Pallikaropoulos then applied to the House of Lords for an order varying or dispensing with the requirement to give security for costs in the sum of 25,000 in accordance with House of Lords Practice Direction 10.6.
She also applied for a protective costs order, in which she sought a cap on her liability for costs on her appeal under the principles set out in R (Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192, [2005] 1 WLR 2600.
She relied in support of these applications on the requirement of articles 10a and 15a of the EU Directives and article 9(4) of the Aarhus Convention that access to the courts should not be prohibitively expensive.
She declined to provide details of her means or details of the means of those whom she claimed to represent.
Her applications were opposed by the respondents. 8.
By letter dated 22 March 2007 the Judicial Office of the House of Lords wrote to the parties informing them that Mrs Pallikaropouloss applications had been rejected.
The following reasons were given for this decision: Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that absence of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the applicants means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial; further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be prohibitively expensive or that Directive 2003/35/EC would be breached without a special order.
Notwithstanding the rejection of these applications Mrs Pallikaropoulos proceeded with her appeal. 9.
On 16 April 2008 the House of Lords affirmed the Court of Appeals decision and dismissed the appeal: [2008] UKHL 22, [2008] Env LR 34.
The parties were given time to make written submissions on costs.
It was submitted for Mrs Pallikaropoulos that there should be no order as to costs.
As in the case of her application for a protective costs order, she relied in support of that submission on the requirement of articles 10a and 15a of the EU Directives and article 9(4) of the Aarhus Convention that access to the courts should not be prohibitively expensive.
Some information was given about her means, but it was in general terms and it was not accompanied by detailed evidence.
Her submission was opposed by the respondents, who sought an order for the costs of the appeal.
On 18 July 2008, following consideration of what had been offered on either side, the House of Lords pronounced a costs order in these terms: That the appellant do pay or cause to be paid to the respondents their costs of the appeal to this House, the amount of such costs to be certified by the Clerk of the Parliaments if not agreed between the parties.
No reasons were given for this decision. 10.
On 1 October 2009 the jurisdiction of the House of Lords was transferred to the Supreme Court by section 40 of the Constitutional Reform Act 2005.
Among the transitional provisions in Schedule 10 to the Act relating to proceedings transferred to the Supreme Court from the House of Lords or the Judicial Committee of the Privy Council is para 5, which provides: (1) Any act, judgment or order of the original court in the transferred proceedings is to have the same effect after the transfer day as if it had been an act, judgment or order of the Supreme Court in corresponding proceedings in that court. (2) Accordingly, after the transfer day, further proceedings may be taken in the Supreme Court in respect of such an act, judgment or order. 11.
Rule 49 of the Supreme Court Rules 2009 provides that every detailed assessment of costs shall be carried out by two costs officers appointed by the President.
Rule 50, as to the basis of the assessment, provides: (1) Where the Court is to assess the amount of costs it will assess those costs (a) on the standard basis, or (b) on the indemnity basis, in the manner specified by rule 51 or (where appropriate) on the relevant bases that apply in Scotland or Northern Ireland. (2) Where (a) the Court makes an order about costs without indicating the basis on which the costs are to be assessed, or (b) the Court makes an order for costs to be assessed on a basis other than one specified in paragraph (1), the costs will be assessed on the standard basis. (3) This rule applies subject to any order or direction to the contrary. 12.
Supreme Court Practice Direction 13, para 16.1 provides: The costs officers have discretion as to the amount to allow.
In exercising this discretion they bear in mind the terms unreasonably incurred and unreasonable in amount in CPR 44.4, (or in appeals from Scotland the provisions of rule 42.10 of the Rules of the Court of Session 1994) and in particular consider to what extent an item assisted the Court in determining the appeal.
The costs officers judgment 13.
Having identified the three preliminary issues referred to in para 4 above, the costs officers dealt with them as follows.
They held that compliance with the EU Directives was a relevant factor for them to take into account on the detailed assessment of costs in cases to which the directives apply unless the court awarding costs had already done so: para 13.
In deciding what costs it was reasonable for the respondents to obtain, they said that they would disallow any costs which they considered to be prohibitively expensive: para 17.
As to the meaning of the phrase prohibitively expensive, they said that they were minded to adopt the test which had been propounded by Mr Justice Sullivan, as he then was, in the report of his Working Group, Ensuring access to environmental justice in England and Wales (May 2008), where he said costs, actual or risked, should be regarded as prohibitively expensive if they would reasonably prevent an ordinary member of the public (that is, one who is neither very rich nor very poor, and would not be entitled to legal aid) from embarking on the challenge falling within the terms of Aarhus. 14.
They then addressed the respondents argument that, as the appellant had raised the Aarhus principles on two occasions in the House of Lords and those submissions had been rejected on both occasions, she was estopped from raising those issues again before the costs officers.
They rejected it, for the reasons given in para 23 where they said: We neither have nor assert any right to set aside or vary any decision already made by the Law Lords or by the Justices in this case.
If, in advance of the hearing before us, the Law Lords or the Justices had made any decision on the implementation of the EU Directives in this case we would of course act in compliance with that decision.
However, we take the view that the pronouncements which the Law Lords have made in this case do not prevent us from applying the Aarhus principles in the course of our assessment.
In their view no part of the decision in March 2007 ruled out their discretion to decide that the reasonable costs in the case should be nil or should be no more than a nominal amount: para 25.
While the costs order of 18 July 2008 gave the respondents stronger ground for saying that the appellant had raised the Aarhus principles already and had lost them, they noted that the order did not expressly deal with them.
They said that this was consistent with their finding that those matters were best dealt with at the stage at which costs are assessed rather than at the stage at which costs are awarded.
The order expressly left the amount of costs to be determined.
They decided that they should determine that amount taking into account the Aarhus principles: para 27.
The jurisdiction of the costs officers 15.
The costs officers judgment raises a short but important point about the extent of their jurisdiction when they are carrying out their detailed assessment of costs under rule 49(1) of the Supreme Court Rules 2009. 16.
In Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91, [2007] 1 WLR 998, the Court of Appeal held that, where a costs order was deemed to have been made on the standard basis, the claimant was entitled to 100% of his assessed costs and that the costs judge had no power in advance of the assessment to vary the deemed order so as to reduce the claimants percentage entitlement to costs.
The relevant rules of the CPR were rule 44.3(1), which gives the court a discretion as to (a) whether costs are payable by one party to another, (b) the amount of those costs and (c) when they are to be paid; rule 44.4, which sets out the basis of assessment; and rule 44.5, which sets out the factors to be taken into account in deciding the amount of costs. 17.
The Supreme Court rule which corresponds to CPR rule 44.3 is rule 46(1), which provides: The Court may make such orders as it considers just in respect of the costs of any appeal, application for permission to appeal, or other application to or proceeding before the Court.
The rules about the basis of assessment of costs which correspond to those in CPR rules 44.4 and 44.5 are set out in rule 49 which provides for the detailed assessment of costs to be carried out by the costs officers (see para 11, above), and in rule 51 which provides with regard to the standard basis of assessment: (1) Costs assessed on the standard basis are allowed only if they are proportionate to the matters in issue and are reasonably incurred and reasonable in amount. (2) Any doubt as to whether costs assessed on the standard basis are reasonably incurred and are reasonable and proportionate in amount will be resolved in favour of the paying party. 18.
As Dyson LJ explained in Lahey v Pirelli Tyres Ltd, paras 20 21: 20 There is a real distinction between (a) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage and (b) deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs.
The figure that results from (a) represents 100% of the assessed costs.
In deciding as part of the assessment to reduce the bill by a percentage, the costs judge is giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed.
The figure that results from (b) represents less than 100% of the assessed costs.
In deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs, the costs judge is not giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed. 21 Rule 44.3 gives a judge jurisdiction to make a type (b) order.
There is no doubt that at the end of a hearing the judge may make an order of the kind that the defendant sought from the [costs judge] in the present case.
In such a case, the judge is not purporting to vary an order if he disallows the successful party a proportion of his costs.
He is making the order.
He does not have the advantage accorded to the costs judge of having a detailed bill of costs.
He cannot, therefore, carry out a detailed assessment.
But he usually has the benefit, denied to the costs judge, of knowing a good deal about the case, and is often in a good position to form a view about the reasonableness of the parties conduct.
When carrying out a detailed assessment, the costs judge is not making an order for costs.
His position is quite different from that of a judge exercising the jurisdiction given by rule 44.3. 19.
The distinction in principle between carrying out an assessment and then deciding as part of the assessment to reduce the bill by a percentage on the one hand, and deciding in advance that the receiving party will receive only a percentage of the assessed costs on the other, is fully recognised by the Supreme Court Rules.
The function of the costs officers under rule 49(1), read together with Practice Direction 13, para 16.1 (see para 12, above) is to carry out the detailed assessment.
That is the limit of their jurisdiction.
Decisions as to whether the receiving party is to receive less than 100% of the assessed costs are reserved to the Court, in the exercise of the jurisdiction that is given to it by rule 46(1). 20.
The costs officers recognised the distinction that was drawn between these two functions in Lahey v Pirelli Tyres Ltd. But they were persuaded that the task of giving effect to the EU Directives fell naturally within the assessment of reasonableness.
They drew an analogy with the task that has to be performed where a party was legally aided for some but not all of the proceedings covered by the order for costs.
Section 11(1) of the Access to Justice Act 1999 provides: Except in prescribed circumstances, costs ordered against an individual in relation to any proceedings or part of proceedings funded for him shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including (a) the financial resources of all the parties to the proceedings, and (b) their conduct in connection with the dispute to which the proceedings relate; and for this purpose proceedings, or a part of proceedings, are funded for an individual if services relating to the proceedings or part are funded for him by the Commission as part of the Community Legal Service.
Since in most cases the reasonable sum that results from this exercise is nil, the assessments of reasonableness could vary substantially between periods when a losing litigant was legally aided and when he was not.
In the costs officers view the factors which they would have to take into account in implementing the EU Directives were not wholly dissimilar from the factors that they have to take into account under section 11 of the 1999 Act when it applies: para 16. 21.
This view of the costs officers jurisdiction is, with respect, misconceived.
Where section 11 of the 1999 Act applies the statute itself gives to the costs judge the authority to depart from the ordinary basis of assessment by setting a limit on the amount which it is reasonable for the paying party to pay.
In this case a statutory direction of that kind is absent, and there has been no direction by the Court that any basis of assessment other than the standard basis is to be applied.
So the costs officers must confine the exercise which they carry out to that which they are directed to perform under the rules.
It is not enough for them to refrain from deciding in advance of their assessment that the respondents will receive only a part of the assessed costs, which they have no jurisdiction to do for the reasons explained in Lahey v Pirelli Tyres Ltd. They must refrain from introducing a different basis than that prescribed by the rules when they are carrying out their assessment.
The test of reasonableness which they must apply is directed to their assessment of the costs incurred by the receiving party: see CPR 44.5 as to the factors to be taken into account by the costs judge when exercising his discretion as to costs.
It is not directed to the entirely different question whether the cost to the paying party would be prohibitively expensive, which is what the Aarhus test is concerned with. 22.
Mr Wolfe submitted that the costs officers were obliged to give effect to the EU Directives under the principle explained in Case C 62/00 Marks & Spencer plc v Customs and Excise Comrs [2003] QB 866, 888, para 24 where the European Court said that in applying domestic law the national court called upon to interpret that law is required to do so, as far as possible, in the light of the wording and purpose of a directive, in order to achieve its purpose and thereby comply with the third paragraph of article 189 of the EC Treaty (now the third paragraph of article 288 TFEU): see also Case C 106/89 Marleasing SA v La Commercial Internacional de Alimentacin SA [1990] ECR I 4135, 4159, para 8; Case C 72/95 [1996] ECR I 5403 Aannemersbedrijf P K Kraaijeveld BV v Gedeputeerde Staten van Zuid Holland, para 55, where it was said in the context of an EIA Directive that the obligation of a Member State to take all the measures necessary to achieve the result prescribed by a directive is a binding obligation imposed by the EC treaty and by the directive itself.
He said that this obligation had to be given effect to by the costs officers unless the words of the rules precluded this, which in his submission they did not. 23.
The answer to this submission is to be found in the division of responsibility that the rules themselves recognise between the Court on the one hand and the costs officers on the other.
The question whether the review procedure is prohibitively expensive is a matter that can, and should, be addressed by the Court itself.
Preferably this should be done at the outset of the proceedings.
The Sullivan Working Group recommended in Appendix 4 to its May 2008 Report that, for the proper conduct of the case, a protective costs order should be sought with the application for permission for judicial review and should wherever possible be decided at the same time as permission.
No mention was made in its recommendations of what is to be done at the stage of an appeal.
But the advantages of having the matter resolved at the outset apply just as much at that stage as they do at first instance.
So a protective costs order to meet the requirement that the proceedings should not be prohibitively expensive should be sought when permission to appeal is being asked for, or as soon as possible thereafter.
That is what Mrs Pallikaropoulos did in this case. 24.
But the refusal of a protective costs order does not preclude further consideration of the matter by the Court at the end of the proceedings.
The Aarhus Convention has been authenticated in three languages: English, French and Russian.
The English word prohibitively in the English version of article 9 suggests that the question is for consideration at the outset, as the act of prohibiting must always anticipate what is prohibited.
The French language version uses the word prohibitif.
The Russian text uses the word , indicating that the costs must not be inaccessibly high.
The words prohibitively and prohibitif are carried forward into the English and French language versions of the EU directives and the adjective in the Greek version carries the same meaning.
But the words used in the translations of the directives into German (bermssig teuer), Italian (eccessivamente onerosa) and Spanish (excesivamente onerosos) indicate that, so far as the directives are concerned, the question of expense is not exclusively for consideration at the outset. 25.
The general rule is that EU Directives should be interpreted in a manner that is consistent with international agreements concluded by the EU: Case C 341/95 Bettati v Safety Hi Tech Srl [1998] ECR I 4355, para 20.
The emphasis of the Convention, as all three language versions show, is on facilitating access to an effective remedy.
But its object and purpose would not be well served if a narrow view were to be taken of the time when the issue about the expense of the proceedings can be considered.
The essential question seems to be whether the bill of costs will be, or is, excessive bearing in mind the overriding requirement of access to justice.
This is best dealt with by making a protective costs order, but the Court can deal with the matter at the end of the case by setting a limit on the paying partys liability which meets the objective of the directives.
It does not need to carry out a detailed assessment of the costs in order to do this, any more than it does when it is making a protective costs order.
The costs officers, for their part, must confine their attention to the basis of assessment prescribed by rule 50, subject to any directions that may be given to them by the Court. 26.
For these reasons the answer to the first question which the respondents referred to the single Justice under rule 53 (see para 5, above) must be in the negative.
The ruling by the costs officers that they have jurisdiction to implement the EU Directives must be set aside.
The Courts obligation under the Directives 27.
As there is a division of responsibility, the question that must now be addressed is whether the House of Lords fulfilled its obligation to take the measures that were necessary to achieve the objects of the Directives.
That is an obligation which, in its turn, rests on this Court. 28.
Mr Eadie QC for the respondents submitted that the issue was fully and properly addressed in March 2007 when the appellant applied for a protective costs order.
He said that the House of Lords was right to rely on the fact that Mrs Pallikaropoulos had not provided the information that was needed for her to show that the proceedings would be prohibitively expensive.
As the House made clear in the reasons that it gave for not considering it appropriate to make the order, she had not made out a case for saying that the proposed appeal would be prohibitively expensive.
Furthermore she proceeded with the appeal notwithstanding that decision.
So there were no grounds for taking a different view at the stage when the order for costs was made on 18 July 2008.
That was a final decision, and the issue was not open to be considered again. 29.
The question however is whether, when it made these decisions, the House was proceeding upon a correct understanding of the test that is to be applied in order to determine whether the proceedings in question are prohibitively expensive.
There are various possible approaches to this issue.
In R (Garner) v Elmbridge Borough Council [2010] EWCA Civ 1006 the judge had refused to grant a protective costs order because he was of the view that it was impossible to tell whether the proceedings would be prohibitively expensive unless there was detailed information about the appellants resources to fund the proceedings.
In the Court of Appeal Sullivan LJ said of his decision in para 42: This raises an important issue of principle.
Should the question whether the procedure is or is not prohibitively expensive be decided on an objective basis by reference to the ability of an ordinary member of the public to meet the potential liability for costs, or should it be decided on a subjective basis by reference to the means of the particular claimant, or upon some combination of the two bases? 30.
Sullivan LJ observed that in an ideal world he would have preferred to defer taking a decision on such an important issue of principle until after the findings of the Aarhus Convention Compliance Committee as to whether our domestic costs rules are Aarhus compliant, and until after it was known whether the European Commission will accept or reject the United Kingdoms response to the Commissions reasoned opinion, announced in a press release dated 18 March 2010, in which the Commission was contending that the United Kingdom is failing to comply with the EIA Directive because challenges to the legality of environmental decisions are prohibitively expensive: para 43.
But as the court had to reach a decision as to whether the judge was wrong to refuse to grant a protective costs order, he went on to say this in para 46: Whether or not the proper approach to the not prohibitively expensive requirement under article 10a should be a wholly objective one, I am satisfied that a purely subjective approach, as was applied by Nicol J, is not consistent with the objectives underlying the directive.
Even if it is either permissible or necessary to have some regard to the financial circumstances of the individual claimant, the underlying purpose of the directive to ensure that members of the public concerned having a sufficient interest should have access to a review procedure which is not prohibitively expensive would be frustrated if the court was entitled to consider the matter solely by reference to the means of the claimant who happened to come forward, without having to consider whether the potential costs would be prohibitively expensive for an ordinary member of the public concerned.
There was evidence that without a protective costs order the liability and costs of an unsuccessful appellant was likely to be prohibitively expensive to anyone of ordinary means.
So the judges decision was set aside. 31.
The importance that is to be attached to Sullivan LJs observations in R (Garner) v Elmbridge Borough Council gathers strength when they are viewed in the light of the proposal in para 4.5 of Chapter 30 of the Jackson Review of Civil Litigation Costs (December 2009) as to environmental judicial review cases that the costs ordered against the claimant should not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, and the entirely different proposal in para 30 of the Update Report of the Sullivan Working Group (August 2010) that an unsuccessful claimant in a claim for judicial review should not be ordered to pay the costs of any other party other than where the claimant has acted unreasonably in bringing or conducting the proceedings.
They have to be viewed too in the light of the conclusion of the Aarhus Convention Compliance Committee which was communicated by letter dated 18 October 2010 that, in legal proceedings in the UK within the scope of article 9 of the Convention, the public interest nature of the environmental claims under consideration does not seem to have been given sufficient consideration in the apportioning of costs by the courts and that despite the various measures available to address prohibitive costs, taken together they do not ensure that the costs remain at a level which meets the requirements of the Convention: see paras 134 135.
It is clear that the test which the court must apply to ensure that the proceedings are not prohibitively expensive remains in a state of uncertainty.
The balance seems to lie in favour of the objective approach, but this has yet to be finally determined. 32.
It is unclear too whether a different approach is permissible at the stage of a second appeal from that which requires to be taken at first instance.
The question in R (Garner) v Elmbridge Borough Council was about the approach that was required to be taken at first instance.
In this case Mrs Pallikaropoulos did not appear at first instance.
She was given a protective costs order in the Court of Appeal, where her appeal was unsuccessful, because her liability in costs was capped at 2,000.
By the stage when her appeal reached the House of Lords the question which she wished to raise had already been considered twice in the courts below without the claimant having been deterred from seeking judicial review on grounds of expense.
It is questionable whether the public interest is best served if a limit must be set on the amount of the costs payable to the successful party in the event of a second appeal as this will inevitably mean that, if the public authority wins, some of the costs reasonably incurred by it will not be recoverable. 33.
It is plain from the reasons that were given by the House of Lords for its decision to refuse a protective costs order on 22 March 2007 that these difficult issues were not addressed at that stage.
It took a purely subjective approach to the question whether a case for such an order had been made.
No reasons were given for the costs order of 18 July 2008.
But it is to be inferred from its terms that the House was not satisfied that a case had been made out for any modification of its approach.
It must be concluded that here too the House took an approach to this issue which was a purely subjective one.
It is to say the least questionable whether in taking this approach, which has now been disapproved by the Court of Appeal in Garner v Elmbridge Borough Council, it fulfilled its obligations under the directives.
Conclusion 34.
In R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, 132 Lord Browne Wilkinson observed that the respondents concession that their Lordships had jurisdiction in appropriate cases to rescind or vary an earlier order of the House of Lords was rightly made both in principle and on authority: In principle it must be that your Lordships, as the ultimate court of appeal, have power to correct any injustice caused by an earlier order of this House.
There is no relevant statutory limitation on the jurisdiction of the House in this regard and therefore its inherent jurisdiction remains unfettered.
In Broome v Cassell & Co Ltd (No 2) [1972] AC 1136 your Lordships varied an order for costs already made by the House in circumstances where the parties had not had a fair opportunity to address argument on the point.
He went on to say that it should be made clear that the House would not reopen any appeal save in circumstances where, through no fault of a party, he or she had been subjected to an unfair procedure. 35.
The Supreme Court is a creature of statute.
But it has inherited all the powers that were vested in the House of Lords as the ultimate court of appeal.
So it has the same powers as the House had to correct any injustice caused by an earlier order of the House or this Court.
It would however be more consistent with the principle which Lord Browne Wilkinson described to say that the power is available to correct any injustice, however it may have arisen.
In this case it seems that, through no fault of the appellant, an injustice may have been caused by the failure of the House to address itself to the correct test in order to comply with the requirements of the directives. 36.
The appellant has submitted that, taken overall, no clear and simple answer is available to the question as to what is the right test.
That indeed does seem to be the position.
In any event it cannot be said to be so obvious as to leave no reasonable scope for doubt as to the manner in which the question would be resolved: CILFIT (Srl) v Ministry of Health (Case C 283/81) [1983] 1 CMLR 472.
In these circumstances the Court will refer the issue to the Court of Justice of the European Union for a preliminary ruling under article 267 TFEU (ex article 234 EC).
The order for costs of 18 July 2008 will be stayed pending the reference.
The parties are invited to make submissions in writing within 28 days on the questions to be referred to the Court of Justice.
ANNEX IN THE SUPREME COURT OF THE UNITED KINGDOM Parliament Square London, Date: 15 January 2010 MRS REGISTRAR DI MAMBRO AND MASTER OHARE Before : Between : THE QUEEN ON THE APPLICATION OF [DAVID EDWARDS] LILIAN PALLIKAROPOULOS THE ENVIRONMENT AGENCY THE FIRST SECRETARY OF STATE FOOD AND RURAL AFFAIRS CEMEX UK CEMENT LIMITED and and SECRETARY OF STATE FOR THE ENVIRONMENT Appellant Respondents Intervener Mr Wolfe (instructed by Richard Buxton) for the Appellant Mr Maurici (instructed by Environment Agency Legal Services and the Treasury Solicitors) for the Respondents Hearing date: 4 December 2009 Approved Judgment . . . . . .
Mrs Registrar di Mambro and Master OHare: 1.
This is our decision on two preliminary issues which arose in the detailed assessment of the bills of costs lodged by the Respondents in respect of the appeal to the House of Lords in this case.
The appeal arose out of a Judicial Review, which was initially brought by a Mr David Edwards.
He instructed Mr Richard Buxton, whose fees were funded by the Legal Services Commission.
The claim was dismissed by Lindsay J ([2005] EWHC 657) and Mr Edwards brought an appeal to the Court of Appeal.
On the third and final day of that appeal Mr Edwards withdrew his instructions from Messrs Richard Buxton, and, at that stage, Mrs Pallikaropoulos was added as an additional party in order to continue the appeal.
Mrs Pallikaropoulos was not eligible for legal aid, but the Court of Appeal made a costs capping order limiting her exposure to the Respondents costs to the sum of 2,000. 2.
The appeal to the Court of Appeal was dismissed ([2006] EWCA Civ 1138) and Mrs Pallikaropoulos successfully petitioned the House of Lords for leave to appeal to that court.
Having obtained leave she then applied for a waiver of the security sum payable on such an appeal, and also applied for a protective costs order.
By letter dated 22 January 2007 the Judicial Office indicated to her that, on the basis of the information then before them, the members of the Appeal Committee were not then minded to grant either application. 3.
The appeal was heard in January 2008 and lasted three days.
On 16 April 2008 the House of Lords dismissed the appeal, thereby affirming the Court of Appeals decision.
The matter was then adjourned for the parties to make written representations on costs.
On 18 July 2008, despite her Counsels written submissions to the contrary, Mrs Pallikaropoulos was ordered to pay the Respondents costs of the appeal.
The First Respondent has now lodged a bill totalling 55,810, and the Second Respondent has lodged a bill totalling 32,290. 4.
The preliminary issues which arose in this case concern the proper application of certain articles under the Environment Impact Assessment (EIA) Directive (85/337/EEC), and the Integrated Pollution Prevention and Control (IPPC) Directive (96/61/EC) both of which implement provisions which first appeared in the Treaty known as the Aarhus Convention (UNECE Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters: 25 June 1998).
In proceedings to which the EIA Directive applies, Article 10a requires Member States to ensure that members of the public as there defined: have access to a review procedure before a court of law or another independent and impartial body established by law to 5. challenge the substantive or procedural legality of decisions, acts or omissions subject to the participation provisions of this directive. and it also provides that: Any such procedure shall be fair, equitable, timely and not prohibitively expensive. 6.
In proceedings to which the IPPC Directive applies, Article 15a makes provision identical to that set out above in respect of Article 10a of the EIA Directive. 7.
These EU Directives were considered by the Court of Appeal in Morgan v Hinton Organics (Wessex) Ltd [2009] EWCA Civ 107 from which judgment we would like to set out two quotations.
The first concerns points made in a document called the 2008 Sullivan Report, which has influenced our decision in this case.
The second quotation summarised the argument heard by the Court of Appeal on these directives.
The Court of Appeal did not give a ruling on these arguments since, as paragraph 47(ii) indicates, the directives were not applicable in that case. 32.
The 2008 Sullivan report, to which Carnwath LJ referred in granting permission in the present case, was a report of another informal working group representing a range of interested groups, this time under Sullivan J (Ensuring Access to Environmental Justice in England and Wales Report of the Working Group on Access to Environmental Justice May 2008).
The report expressed views on the application of the Aarhus principles, in the context of domestic procedures relevant to environmental proceedings, including protective costs orders.
The present case was mentioned, without further discussion, as apparently the first which has reached this court raising issues under the Convention in relation to a costs order in private law proceedings.
The following points from the report are possibly relevant in the present context: i) That the "not prohibitively expensive" obligation arising under the Convention extends to the full costs of the proceedings, not merely the court fees involved (in this respect differing from the Irish High Court in Sweetman v An Bord [2007] including Pleanala and the Attorney General IEHC 153); ii) That the requirement for procedures not to be to all prohibitively expensive applies for proceedings, applications injunctive relief, and not merely the overall application for final relief in the proceedings; iii) That costs, actual or risked, should be regarded as "prohibitively expensive" if they would reasonably prevent an "ordinary" member of the public (that is, "one who is neither very rich nor very poor, and would not be entitled to legal aid") from embarking on the challenge falling within the terms of Aarhus (para 20). iv) That there should be no general departure from the present "loser pays" principle, provided that the loser's potential liability does not make litigation prohibitively expensive in the way described above (para 38).
It may be helpful at this point to draw together some of the threads of the discussion, without attempting definitive conclusions: i) The requirement of the Convention that costs should not be "prohibitively expensive" should be taken as applying to the total potential liability of claimants, including the threat of adverse costs orders. ii) Certain EU Directives (not applicable in this case) have incorporated Aarhus principles, and thus given them direct effect in domestic law.
In those cases, in the light of the Advocate General's opinion in the Irish cases, the court's discretion may not be regarded as adequate implementation of the rule against prohibitive 47. costs.
Some more specific modification of the rules may need to be considered. iii) With that possible exception, the rules of the CPR relating to the award of costs remain effective, including the ordinary "loser pays" rule and the principles governing the court's discretion to depart from it.
The principles of the Convention are at most a matter to which the court may have regard in exercising its discretion. iv) This court has not encouraged the development of separate principles for "environmental" cases (whether defined by reference to the Convention or otherwise).
In particular the principles governing the grant of Protective Costs Orders apply alike to environmental and other public interest cases.
The Corner House statement of those principles must now be regarded as settled as far as this court is concerned, but to be applied "flexibly".
Further development or refinement is a matter for legislation or the Rules Committee. v) The Jackson review provides an opportunity for considering the Aarhus principles in the context of the system for costs as a whole.
Modifications of the present rules in the light of that report are likely to be matters for Parliament or the Civil Procedure Rules Committee.
Even if we were otherwise attracted by Mr Wolfe's invitation (on behalf of CAJE) to provide guidelines on the operation of the Aarhus convention, this would not be the right time to do so. vi) Apart from the issues of costs, the Convention requires remedies to be "adequate and effective" and "fair, equitable, timely".
The variety and lack of coherence of jurisdictional routes currently available to potential litigants may arguably be seen as additional obstacles in the way of achieving these objectives. 8.
Although the EIA Directive and the IPPC Directive were not applicable in Morgan, both of them are applicable in the case now before us.
That was accepted by Counsel for the Respondents, who also accepted that the directives were therefore directly binding upon the courts.
The skeleton argument for the Appellant set out the following quotation from the judgment of the ECJ in Marks & Spencer v Commissioners for Customs & Excise [2002] ECR I 06325: 24.
In that regard it should be remembered, first that the member states obligation under a directive is to achieve the result envisaged by the directive and their duty to take all appropriate measures whether general or particular, to ensure fulfilment of that obligation, are binding on all the authorities of the member state including, for matters within their jurisdiction, the courts 25. whenever the provisions of a directive appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the state where the latter has failed to implement the directive in domestic law 26. implementation of a directive must be such as to ensure its application in full 9.
In preparation for the hearing before us both parties supplied skeleton arguments which were extremely helpful and explicit.
From these we were able to identify three preliminary issues, which are as follows: i) Where an order for costs has been made, whether, as a general rule, the court assessing those costs has any jurisdiction to implement the EU Directives.
If so, whether, in the particular circumstances of this case, we should seek to implement the EU Directives.
If so, whether, on the evidence presented to the court, the amount of costs payable by the Appellant should be moderated or even excluded. 10.
At the hearing we decided the first two issues in favour of the Appellant, but thought it right not to hear argument as to the third issue until we had given written reasons for our decision, sight of which by the parties might enable them to agree the third issue subject of course to any appeal against ii) iii) our ruling on the first two issues.
We also ruled that the time for appealing our decision on the first two issues should not expire until 28 days after the delivery of our written decision.
Issue 1 : Jurisdiction of Costs Officers Generally 11.
On this point Mr Maurici, Counsel for the Respondents, argued that application of EU Directives falls wholly outside the jurisdiction of Costs Officers.
He placed reliance upon the Supreme Court Practice Direction 13 para 16.1, which states as follows: The Costs Officers have discretion as to the amount to allow.
In exercising this discretion they bear in mind the terms unreasonably incurred and unreasonable in amount in CPR 44.4 and in particular consider to what extent an item assisted the court in determining the appeal 12.
From this he argued that Costs Officers are limited to assessing the reasonableness of the costs awarded by another court.
It is for the court awarding costs to decide how and in what way to implement the European Directives.
It is not a proper function of the assessing court.
Counsel also placed reliance upon the Court of Appeal decision in Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91 which held that, where a court awards costs, the Costs Judges duty is to assess 100% of the reasonableness of the costs awarded.
The Costs Judge has no power to vary the award of costs made so as to allow less than 100% of the reasonable costs.
Counsel drew our attention to paragraphs 20 and 21 of the judgment in that case, which we now set out: 20.
There is a real distinction between (a) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage and (b) deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs.
The figure that results from (a) represents 100% of the assessed costs.
In deciding as part of the assessment to reduce the bill by a percentage, the costs judge is giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed.
The figure that results from (b) represents less than 100% of the assessed costs.
In deciding in advance of the assessment that the receiving party will only receive a percentage of the assessed costs, the costs judge is not giving effect to an order that the successful party is entitled to his costs, to be assessed if not agreed. 21.
Rule 44.3 gives a judge jurisdiction to make a type (b) order.
There is no doubt that at the end of a hearing, the judge may make an order of the kind that the defendant sought from the district judge in the present case.
In such a case, the judge is not purporting to vary an order if he disallows the successful party a proportion of his costs.
He is making the order.
He does not have the advantage accorded to the costs judge of having a detailed bill of costs.
He cannot, therefore, carry out a detailed assessment.
But he usually has the benefit, denied to the costs judge, of knowing a good deal about the case, and is often in a good position to form a view about the reasonableness of the parties' conduct.
When carrying out a detailed assessment, the costs judge is not making an order for costs.
His position is quite different from that of a judge exercising the jurisdiction given by rule 44.3. 13.
We take the view that compliance with the EU Directives is a relevant factor for us to take into account on the detailed assessment of costs in cases to which the Directives apply unless, of course, the court awarding costs has already taken them into account. 14.
We accept the submission of Mr Wolfe, Counsel for the Appellant, that the reasonableness. falls within task naturally Reasonableness can mean different things in different contexts.
We draw an analogy here with what happens when costs are awarded against a party who was legally aided for some but not all of the proceedings covered by the order for costs.
Section 11 of the Access to Justice Act 1999 provides that costs ordered against a legally aided party: the definition of shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including (a) the financial resources of all the parties to the proceedings, and their conduct in connection with the dispute to which the proceedings relate (b) 15.
The Legal Aid Regulations now leave the task of making that assessment to the Costs Officers of the courts in which those costs were awarded.
In this court paragraph 4 of Practice Direction 13 requires the Costs Officers to 16. assess the sum reasonable for a legally aided party to pay as part of the detailed assessment proceedings.
Since, in most cases, the reasonable sum is nil, the assessments of reasonableness vary substantially between periods when a losing litigant was legally aided and when he was not.
In our judgment the factors we ought to take into account in implementing the EU Directives are not wholly dissimilar from the factors we have to take into account in applying section 11 of the Access to Justice Act when it applies.
It seems to us that the implementation of any relevant EU Directive is more naturally and conveniently dealt with at the detailed assessment stage rather than at the stage of awarding costs, unless of course, the court awarding costs had already made a decision on these questions. 17.
We take the view that in deciding what costs it is reasonable for the Respondents to obtain we will disallow any costs which we consider to be prohibitively expensive.
Therefore, in making any such disallowance, we will be acting in compliance with, and not defiance of, the principles stated in Lahey. 18.
The passages from Morgan which we have quoted indicate that the EU Directives here in question have not yet been implemented by Parliament or by the Civil Procedure Rule Committee.
In Morgan the Court of Appeal expressed the hope that the current Jackson Review may consider the Aarhus principles and stated that it was not appropriate to give guidance in the context of Morgan.
In the absence of authority we are presently minded to adopt the test of prohibitively expensive which was propounded in the 2008 Sullivan Report: costs, actual or risked, should be regarded as prohibitively expensive if they would reasonably prevent an ordinary member of the public (that is, one who is neither very rich nor very poor, and would not be entitled to legal aid) from embarking on the challenge falling within the terms of Aarhus. 19.
That seems to us to require us to start by making an objective assessment of what costs are reasonable costs.
However, any allowance or disallowance of costs we make must be made in the light of all the circumstances.
We presently take the view that we should also have regard to the following: i) The financial resources of both parties. ii) Their conduct in connection with the appeal. iii) The fact that the threat of an adverse costs order did not in fact prohibit the appeal. security was in fact provided. iv) The fact that a request to waive security money was refused and v) The amount raised and paid for the Appellants own costs.
Issue 2 : Issue Estoppel 20.
For the Respondents, Mr Maurici submitted that the Appellants have raised Aarhus principles on two occasions in the House of Lords and those submissions were rejected on both occasions.
The first occasion was in respect of the Appellants applications for waiver of security monies and for a protective costs order.
On 22 March 2007 the Appeal Committee made the following decision: Their Lordships do not consider it appropriate to make any order on the application made to them for a dispensation in respect of the requirement to put up security and for a protective costs order.
Their Lordships have considered the criteria in R (Cornerhouse Research) v Secretary of State for Trade & Industry [2005] EWCA Civ 192 and the submissions made with regard to their application and potential relaxation.
Their Lordships proceed on the basis that the appeal raises an issue or issues of general importance and they are prepared to assume that absence of private interest may not always preclude the making of a special costs order in such a case.
But their Lordships do not accept that information about the Applicants means, about the identity and means of any who she represents and about the position generally in the absence of any special order, are or should be regarded as immaterial: further, they do not consider that the suggested protective orders regarding costs appear proportionate on the information which is before them and in the light of the nature of the issues involved; and they do not consider that any case has been made for saying that the proposed appeal would be prohibitively expensive or that Directive 2003/35/EC would be breached without a special order. 21.
The second occasion upon which the Aarhus principles were considered in this case preceded the making of the costs order dated 18 July 2008.
In the written submissions on costs lodged on behalf of the Appellant, much greater information about the Appellants financial resources was given than had been given on the previous occasion.
In the light of that information it was submitted that there should be no order for costs.
In the alternative, the following submissions were made: In the event of their Lordships, notwithstanding the above, deciding to award costs in favour of the Respondents, they are requested to consider: Limiting them to the costs of one Respondent Limiting the costs to 70% of the Respondents costs.
At the High Court and Court of Appeal stages only 70% of costs were awarded Reducing the burden on the Appellant by ordering any costs in excess of the 25,000 security monies already lodged with the House of Lords to be payable by instalments of at most 5,000 per annum and without interest (other than in the event of late payment).
In any event staying the effect of the order until the issues relating to prohibitive expense and Directive 2003/35/EC are resolved between the Commission and the UK Authorities. 22.
In response to those submissions the House made a standard order for costs: That the Appellant do pay or cause to be paid to the Respondents their costs of the appeal to this House, the amount of such costs to be certified by the Clerk of the Parliaments if not agreed between the parties. 23.
We neither have nor assert any right to set aside or vary any decision already made by the Law Lords or by the Justices in this case.
If, in advance of the hearing before us, the Law Lords or the Justices had made any decision on the implementation of the EU Directives in this case we would of course act in compliance with that decision.
However, we take the view that the pronouncements which the Law Lords have made in this case do not prevent us from applying the Aarhus principles in the course of our assessment. 24.
The decision made in March 2007 was made without a hearing and was made on the basis of the information about the Appellants means, about the identity and means of any who she represents and about the position generally.
This being so the order states that their Lordships did not consider that any case had been made for saying that the proposed appeal would be prohibitively expensive.
In the circumstances, we do not think that that was a final ruling upon these principles in this case.
On the 25. contrary, we think the wording their Lordships there adopted invited the Appellant to provide the court with the information it would need to decide such principles.
In our view no part of the decision made in March 2007 rules out our discretion to decide that the reasonable costs in this case should be nil or should be no more than a nominal amount.
Whilst it is difficult to imagine circumstances in which it would be appropriate for us to allow less than 25,000 if the Respondents costs would otherwise reasonably exceed that sum, it is not in theory impossible that we should do so.
In requiring the Appellant to raise such a sum as security monies their Lordships could not know, for example, what terms and conditions the Appellant might be required to agree to in order to borrow such a sum.
It may be appropriate for us to take any such terms and conditions into account when assessing whether the costs of this appeal would have been prohibitively expensive. 26.
At the hearing before us we made reference to a Court of Appeal decision on security for costs raised for an appeal: R v The Common Professional Examination Board, ex p.
Mealing McLeod [2000] EWCA Civ 138.
In that case the Court of Appeal overturned an earlier order which permitted monies paid as security for an appeal to be used in part satisfaction of costs orders made in earlier proceedings.
The Court of Appeal made its decision on the basis of the terms of the loan agreement by which the security monies had been raised: they had been raised solely for the purpose of providing security and not for any other purpose.
In fact, on examination of the decision in that case, we now appreciate that it is not directly relevant to the issues which arise in this case.
In our view, the costs order dated 18 July 2008 gives the Respondents stronger ground for saying that the Appellant has raised the Aarhus principles already in this case and has lost them.
However, on this point also, we find in favour of the Appellant.
The order dated 18 July 2008 does not expressly deal with the Aarhus principles.
As such, it is consistent with our finding that these matters are better dealt with at the stage at which costs are assessed rather than at the stage at which costs are awarded.
The order expressly leaves the amount of costs to be determined.
In our view we should determine that amount taking into account the Aarhus principles. 27.
NEXT STEPS 28.
In a draft of this judgment which was sent to the parties some time ago we foresaw the possibility that the parties may agree what sums should reasonably be allowed as costs in this case and may make such agreement subject to the decision upon any appeal the Respondents may bring against our rulings on Issues 1 and 2.
Alternatively, the parties may agree to defer any decision as to the amount of reasonable costs pending a decision on such an appeal.
The draft stated that the parties are neither required nor expected to attend the hearing at which we shall formally deliver this judgment, although they may do so if they wish. 29.
Accordingly, we will now consider any submissions any party wishes to make.
If appropriate, we will adjourn this matter to a further hearing and, perhaps, fix a date for that hearing.
In conclusion, I am satisfied that in the special circumstances of this case the figure of 25,000 now claimed by the respondents is neither subjectively nor
| UK-Abs | This appeal concerns the meaning of prohibitively expensive under the Aarhus Convention.
The proceedings concerned a cement works in Rugby.
On 12 August 2003, the Environment Agency issued a permit to continue operations with an alteration in its fuel from coal and petroleum coke to shredded tyres.
This proposal gave rise to a public campaign on environmental grounds.
The public campaign was being led by Mrs Pallikaropolous who had committed substantial funds of her own to the campaign.
Following the decision of the Rugby Borough Council not to pursue its own claim for judicial review, Mrs Pallikaropolous was reported as pledging to carry on the battle using legal aid and, because she was too rich to get legal aid, asked for someone to come forward to take the case under legal aid.
A local resident, Mr David Edwards, began judicial review proceedings on 28 October 2003 challenging the Agencys decision.
The judge inferred that Mr David Edwards had been put up as a claimant in order to secure public funding of the claim.
The substantive application for judicial review was dismissed on 8 February 2006.
Mr Edwards appealed to the Court of Appeal.
On the final day of the Court of Appeal hearing, Mr Edwards withdrew his instructions from both solicitors and counsel.
Mrs Pallikaropolous applied without objection to be joined as an additional appellant in the public interest to enable the appeal to be concluded.
Her potential liability to costs in the Court of Appeal was capped at 2,000.
Following dismissal of the appeal, the respondents costs capped at this level were awarded against her.
Mrs Pallikaropolous was given leave to appeal by the House of Lords.
She provided security for costs in the sum of 25,000 and the appeal proceeded.
Her appeal was dismissed by the House of Lords.
The present dispute arises out of the order for costs of the appeal in the House of Lords made in favour of the respondents.
The Environment Agency and the Secretary of State submitted bills totally respectively 55,810 and 32,290.
The Supreme Court made a reference to the Court of Justice of the European Union (CJEU) for guidance relating to the expression not prohibitively expensive.
While the reference was pending, the government issued a consultation paper on the issue of cost capping and the scope for providing clearer guidance in the procedural rules.
The proposals were given effect to by amendment to the Civil Procedure Rules.
The Supreme Court makes an order for costs in the amount of 25,000 in favour of the respondents jointly.
Lord Carnwath gives the lead judgment with which Lord Neuberger, Lord Hope, Lord Mance and Lord Clarke agree.
The following points could be extracted from the CJEUs Edwards judgment: (i) The test is not purely subjective.
The cost of proceedings must not exceed the financial resources of the person concerned nor appear to be objectively unreasonable, at least in certain cases. (ii) The court did not give definitive guidance as to how to assess what is objectively unreasonable. (iii) The court could take into account the merits of the case: that is whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages. (4)That the claimant has not in fact been deterred for carrying on the proceedings is not itself determinative. (5) The same criteria are to be applied on appeal as at first instance [28].
The respondents are not now seeking recovery of their full costs.
They have agreed to limit their joint claim to 25,000 which is the amount of security already paid by the appellant as the condition for bringing the appeal.
It is impossible on the material available to hold that the order was subjectively unreasonable.
The more difficult question is whether there should be some objectively determined lower limit, and if so how it should be assessed.
Although this was one of the main issues raised by the reference, the European court has not offered a simple or straightforward answer [30 31].
Of the five factors mentioned by the court, the second and fifth can be discounted immediately.
There is no evidence that the appellant had any economic interest of her own in the proceedings and, given the grant of permission at each stage, they could not be said to be frivolous [34].
The relative complexity of the case is evidenced by the fact that it took three days before the House [35].
The other two factors (i) the prospects of success and (iii) the importance of the case for the protection of the environment are at best neutral from the applicants point of view [36].
Taking factors mentioned by the court into account, it is impossible to say that the figure of 25,000, viewed objectively, is unreasonably high, either on its own or in conjunction with the 2,000 awarded in the Court of Appeal [37].
|
At issue in this case are the principles which should guide the exercise of the courts discretion in deciding whether to order a child to attend to give evidence in family proceedings.
The current approach was stated by Smith LJ in LM v Medway Council, RM and YM [2007] EWCA Civ 9, [2007] 1 FLR 1698, at para 44: The correct starting point . is that it is undesirable that a child should have to give evidence in care proceedings and that particular justification will be required before that course is taken.
There will be some cases in which it will be right to make an order.
In my view they will be rare.
She went on to explain the factors which should guide the judge in considering whether to make the order, at para 45: . the judge will have to balance the need for the evidence in the circumstances of the case against what he assesses to be the potential for harm to the child.
In assessing the need for oral evidence . the judge should, in my view, take account of the importance of the evidence to the process of his decision about the childs future.
It may be that the childs future cannot satisfactorily be determined without that evidence.
In assessing the risk of harm or oppression, the judge should take heed of current research into the effect on children of giving evidence and should not rely only upon his impression of the child, although that will of course be relevant.
That approach was based upon the earlier authority of Butler Sloss LJ in R v B County Council, ex parte P [1991] 1 WLR 221 and Wilson J in Re P (Witness Summons) [1997] 2 FLR 447.
It was endorsed by Wilson LJ in the Medway case and by Wall and Thorpe LJJ in SW v Portsmouth City Council; Re W (children: concurrent care and criminal proceedings) [2009] EWCA 644, [2009] 3 FCR 1.
And it was followed by Wall and Wilson LJJ in their joint judgment in the present case: [2010] EWCA Civ 57.
Each had previously stated that in all their years of experience in the Family Division of the High Court he had never heard oral evidence from a child in care proceedings.
That is also my own experience.
The complaint, very moderately advanced by Mr Geekie QC, is that a starting point of undesirability, placing the burden upon the person wishing to cross examine a child to show some particular justification for doing so, gives insufficient weight to the Convention rights of all concerned.
All the parties in care proceedings are entitled to a fair hearing in the determination of their civil rights and obligations the parents who stand to lose their children if allegations of abuse are made out, the children who stand to lose their parents if allegations of abuse are made out, but also stand to suffer abuse or further abuse if they are left at home because those allegations cannot be proved.
And it is not only their article 6 rights which are in play.
The civil rights in issue are also Convention rights in themselves the right to respect for the family lives of the parents and their children but also the right to respect for the private lives of the children, which include their rights to be protected from attacks upon their physical and psychological integrity: X and Y v The Netherlands (1985) 8 EHRR 235.
Even a stranger child, whose future is not in issue in the proceedings but whose statements are relevant, has privacy interests which deserve respect.
Hence, argues Mr Geekie, there should be no starting point or presumption that such cases will be rare.
Instead, the court should adopt the approach explained by Lord Steyn in In re S (Identification: Restrictions on Publication) [2004] UKHL 47, [2005] 1 AC 593, at para 17, when balancing of the right to respect for private and family life in article 8 and the right to freedom of expression in article 10: First, neither article has as such precedence over the other.
Secondly, where the values of the two articles are in conflict, an intense focus on the comparative importance of the specific rights being claimed in the individual case is necessary.
Thirdly, the justifications for interfering with or restricting each right must be taken into account.
Finally, the proportionality test must be applied to each.
Mr Geekie understands that article 6 is not a qualified right in the same way that article 8 is a qualified right, but he accepts that what is entailed in a fair hearing in Childen Act proceedings will have to take account of the article 8 rights of all concerned.
All he asks for is an intense focus upon their comparative importance rather than an assumption that the one will almost always trump the other.
The background
The starting point of English criminal and civil procedure has historically been that facts must be proved by oral evidence given on oath before the court which can then be tested by cross examination.
Hearsay evidence was mostly inadmissible.
But wardship proceedings in the High Court were an exception.
The High Court was exercising a protective parental jurisdiction over its wards in which their welfare and not the rights of the parties was the paramount consideration: see In re K (Infants) [1965] AC 201; Re W (Minors) (Wardship: Evidence) [1990] 1 FLR 203.
It was assumed that hearsay was also admissible in proceedings about the future of children in other courts.
But the Court of Appeal held otherwise in H v H (Minor)(Child Abuse: Evidence) [1990] Fam 86 in relation to matrimonial and guardianship proceedings and Otton J held otherwise in Bradford City Metropolitan Council v K (Minors) [1990] Fam 140 in relation to care proceedings in juvenile courts.
The result was an addition to the Children Bill then going through Parliament, which became section 96 of the Children Act 1989.
Subsections (1) and (2) allow a child to give unsworn evidence in any civil proceedings, even if he does not understand the nature of an oath, provided that he understands that it is his duty to tell the truth and has sufficient understanding to justify his evidence being heard.
Subsections (3) to (5) provide for the Lord Chancellor (with the concurrence of the Lord Chief Justice) to make provision by order for the admissibility in civil proceedings of hearsay evidence relating to the upbringing, maintenance or welfare of a child.
The Children (Admissibility of Hearsay Evidence) Order 1993, SI 1993/621, simply provides that such evidence shall be admissible notwithstanding any rule of law relating to hearsay.
It does not make the more detailed provision allowed for by section 96(5).
Meanwhile, there had also been developments in the criminal courts, not in relation to the admissibility of hearsay, but in relation to the way in which a childs evidence might be given.
In 1989, the Report of the Advisory Group on Video Evidence (the Pigot Report) recommended that both the evidence in chief and cross examination of child witnesses should be video recorded and the recording stand as their evidence at the trial.
The Group received evidence that most children are disturbed to a greater or lesser extent by giving evidence in court which was a harmful, oppressive and often traumatic experience (para 2.10).
They attached particular importance to the psychiatric opinion we received which suggests that not only do abused children who testify in court exhibit more signs of disturbed behaviour than those who do not, but that the effects of a court appearance are most severe and prolonged in those who have suffered the worst abuse and those without family support (para 2.12).
The Criminal Justice Act 1991 implemented the Pigot Reports proposals for video recorded evidence in chief but not for cross examination.
A Memorandum of Good Practice on Video Recorded Interviews with Child Witnesses for Criminal Proceedings, drawing on expert psychological advice, was published in 1992; replaced in 2002 by Achieving Best Evidence in Criminal Proceedings: Guidance for Vulnerable or Intimidated Witnesses, including Children; and again in 2007 by Achieving Best Evidence in Criminal Proceedings: Guidance on Interviewing Victims and Witnesses, and Using Special Measures.
As its name implies, the aim is to enable witnesses who would not otherwise be able to give of their best in a criminal trial to do so.
The Youth Justice and Criminal Evidence Act 1999 now provides for a variety of special measures to assist children (and other vulnerable witnesses) to give evidence in criminal cases.
These include screens, live television links, using video recordings as evidence in chief, providing aids to communication and examining the witness through an approved intermediary. (There is also provision for cross examination and re examination to be video recorded but there are no plans to bring this into force.) The 1999 Act also allows witnesses of any age to give unsworn evidence in criminal proceedings unless it appears to the court that they are unable to understand the questions put or to give intelligible answers.
On top of these measures designed to improve the ways in which the evidence of these witnesses is put before the court, the Criminal Justice Act 2003 now allows for hearsay evidence to be given in criminal trials in a much wider set of circumstances than used to be the case.
Family proceedings are typically very different from criminal proceedings.
There is often a mass of documentary evidence, much of it hearsay, from which a picture can be built up or inferences drawn.
A child may reveal what has happened to her in many different ways.
The dangers of over enthusiasm and leaping to conclusions were well illustrated in the Report of the Inquiry into Child Abuse in Cleveland 1987 (1988, Cm 412).
One consequence has been that video recordings of Achieving Best Evidence (ABE) interviews are routinely used in care proceedings if they are available.
The near contemporaneous account, given in response to open ended questioning, in relaxed and comfortable surroundings, is considered inherently more likely to be reliable than an account elicited by formal questioning in the stressful surroundings of a court room months if not years after the event.
Unlike criminal proceedings, however, it is rare for the child to be called for cross examination in family proceedings.
The facts of this case
These are care proceedings relating to five children: a 14 year old girl whom we shall call Charlotte and her four half siblings, aged 8, 7, 3 and 18 months.
The mother is expecting another child later this month.
The appellant is father to the younger children but not to Charlotte and her 17 year old sister Nancy.
The mother and father are not married to one another, but the appellant is de facto the step father of both Charlotte and Nancy and has been referred to as the father throughout the case.
These proceedings began in June 2009 because Charlotte made allegations at school that the father had seriously sexually abused her, specifically on the previous day but also on a number of occasions before that.
This was not the first time that she had made allegations against him to friends and other adults; the police have disclosed statements and interviews from these people.
There were two previous investigations which came to nothing: in 2006 when she had failed to confirm what she was said to have told others and in 2008 when she retracted a serious allegation made in a text message to a friend.
This time, however, she was immediately ABE interviewed and medically examined and there is also some relevant forensic evidence.
The father has been charged with 13 criminal offences against her and is currently on bail awaiting trial.
Charlotte has been in foster care since making her allegations.
Her four younger half siblings were at first taken into foster care, then returned to their mother following an order excluding the father from the home, then taken back into foster care after the mother allowed them unauthorised contact with the father.
They are having supervised contact with both their parents.
Charlotte is having contact with the younger children, but the local authority do not think that contact with her mother is beneficial for her.
At a case management hearing in September 2009, the parties had agreed that there should be a fact finding hearing in relation to the allegations of sexual abuse made by Charlotte, at which she would give live evidence over a video link.
The judge, however, asked for further argument on the matter.
The local authority, having by then had time to consider the material received from the police, decided that they no longer wished to call Charlotte as a witness but to rely upon her ABE interview.
The father however applied for her to be called.
On 30 November 2009 the judge refused this application.
The fact finding hearing is currently listed to begin next Monday, 8 March 2010.
On 9 February 2010, the Court of Appeal gave their reasons for dismissing the fathers appeal.
In their joint judgment, Wall and Wilson LJJ adhered to the practice as laid down in the previous decisions of that court.
They did, however, point out that the evidence upon which the Pigot Report had relied related to the criminal law as it stood in 1989.
They wondered whether the time had now come for a wider consideration of the issue in relation to family proceedings than is possible in \the light of the doctrine of precedent (para 27).
They therefore proposed to send the judgments to the President of the Family Division so that he could consider whether to take the issue further, perhaps by referring it to the Family Justice Council for a multi disciplinary committee to look into it (para 30).
Rimer LJ drew back from the brink of dissent: he concluded that the judges decision was for all practical purposes, imposed on her by a mixture of jurisprudence and practice, being however a mixture whose underlying soundness I would respectfully question (para 69).
He endorsed the proposal for reconsideration and we have since been told that the President of the Family Division has referred the question to a multi disciplinary committee chaired by Thorpe LJ.
Wall and Wilson LJJ appeared to accept (at para 30) the observation of Wall LJ in Re W, above, at para 57, that this was not a matter for the judiciary to resolve.
While this must be true of the criminal justice process, with the greatest of respect to them, it cannot be true of the family justice process.
There is no problem with the admissibility of hearsay evidence.
The problem is whether the current practice of rarely calling children to give live evidence even when they could be called can be reconciled with the Convention rights or even with the elementary principles of justice.
That is a question of law for this Court, even if it is one on which we should very much prefer to have the up to date advice of an expert multi disciplinary committee.
Preserving the status quo
There are a great many reasons for not departing from the present practice.
The principal reason, urged upon us by Ms Lucinda Davis for the local authority, is that the whole purpose of care proceedings is to protect the interests of children.
It does not make sense to set up a process to protect them and then for the process itself to traumatise them by making them give evidence.
This does, of course, depend upon the view that giving evidence is indeed harmful to children.
But, she argues, the evidence we have is that which was before the Pigot committee in 1989 and it would be wrong to change the practice until there is fresh evidence which casts doubt upon that.
As to whether such evidence might be forthcoming, we note the experience of Wall LJ, as related in Re W at para 55, which does not suggest that it would: throughout his time in the Family Division, he attended numerous conferences at which every child and adolescent psychiatrist to whom he spoke, or whom he heard speak, condemned as abusive the process in criminal law whereby a child was required to attend court to be cross examined, often many months and sometimes years after the event in order to have his or her credibility impugned over abuse allegations.
He had never been persuaded that it was impracticable to implement the Pigot proposals in full.
Recent research (Joyce Plotnikoff and Richard Woolfson, Measuring up? Evaluating implementation of Government commitments to young witnesses in criminal proceedings, 2009, Nuffield Foundation and NSPCC) has shown that, although special measures have made the experience better for children, many still find it difficult and stressful.
There are other problems with changing the present practice.
It might well be possible to do far more in family proceedings to make the process of giving evidence less traumatic for children.
There is no reason in principle why the family courts should not adopt the Pigot proposals in full.
Care proceedings are said to be inquisitorial.
The parties are not permitted to keep their powder dry as they are for the full scale battle before the jury in criminal cases.
They have to disclose what their answers are to any allegations made.
They are compellable witnesses.
If the child is ABE interviewed and they wish to put questions to her, the facilities could in theory be made available for them to do this in a further video recorded session soon afterwards.
But what if those facilities are not made available? What if for some reason the ideal cannot happen? Is the judge to say that, because the best trial cannot happen, the proceedings must be abandoned? The childrens need for protection is just as strong and the childrens right to be given that protection is just as powerful.
Say, for example, in a case like this, an older child went missing or died after having made her allegations.
Is the evidence of those allegations to be ignored in deciding whether or not the younger children require to be protected against something similar happening to them in future? It is one thing for the State to abandon the prospect of punishing a person for his misdeeds.
It is another for the State to abandon the children who may need its protection to their fate.
There is a further fear.
It is, of course, not unknown for children to make false allegations of abuse.
But it is also not unknown, indeed it is believed to be more common, for children to conceal or deny the abuse which is happening to them.
They may have been groomed to believe it normal and natural.
They may have been threatened with dire consequences if they tell the secret.
They may be perfectly capable of working out for themselves that making a complaint will lead to pain and distress for all concerned and probably to the break up of the whole family.
These are powerful deterrents to coming forward or persisting in complaints.
It is as much for this reason as for any other that the family justice system has sought to minimise the deterrent effect of its own processes.
Were requests for children to give evidence to become routine, the uncertainties which this would generate would add to the deterrent effect both in individual cases and in general.
These are all, it can be said, very real risks to the welfare of individual children, and to children as yet unknown, which this court must be careful to take into account in any reformulation of the present approach.
Conclusions in principle
However tempting it may be to leave the issue until it has received the expert scrutiny of a multi disciplinary committee, we are satisfied that we cannot do so.
The existing law erects a presumption against a child giving evidence which requires to be rebutted by anyone seeking to put questions to the child.
That cannot be reconciled with the approach of the European Court of Human Rights, which always aims to strike a fair balance between competing Convention rights.
Article 6 requires that the proceedings overall be fair and this normally entails an opportunity to challenge the evidence presented by the other side.
But even in criminal proceedings account must be taken of the article 8 rights of the perceived victim: see SN v Sweden, App no 34209/96, 2 July 2002.
Striking that balance in care proceedings may well mean that the child should not be called to give evidence in the great majority of cases, but that is a result and not a presumption or even a starting point.
The object of the proceedings is to achieve a fair trial in the determination of the rights of all the people involved.
Children are harmed if they are taken away from their families for no good reason.
Children are harmed if they are left in abusive families.
This means that the court must admit all the evidence which bears upon the relevant questions: whether the threshold criteria justifying state intervention have been proved; if they have, what action if any will be in the best interests of the child? The court cannot ignore relevant evidence just because other evidence might have been better.
It will have to do the best it can on what it has.
When the court is considering whether a particular child should be called as a witness, the court will have to weigh two considerations: the advantages that that will bring to the determination of the truth and the damage it may do to the welfare of this or any other child.
A fair trial is a trial which is fair in the light of the issues which have to be decided.
Mr Geekie accepts that the welfare of the child is also a relevant consideration, albeit not the paramount consideration in this respect.
He is right to do so, because the object of the proceedings is to promote the welfare of this and other children.
The hearing cannot be fair to them unless their interests are given great weight.
In weighing the advantages that calling the child to give evidence may bring to the fair and accurate determination of the case, the court will have to look at several factors.
One will be the issues it has to decide in order properly to determine the case.
Sometimes it may be possible to decide the case without making findings on particular allegations.
Another will be the quality of the evidence it already has.
Sometimes there may be enough evidence to make the findings needed whether or not the child is cross examined.
Sometimes there will be nothing useful to be gained from the childs oral evidence.
The case is built upon a web of behaviour, drawings, stray remarks, injuries and the like, and not upon concrete allegations voiced by the child.
The quality of any ABE interview will also be an important factor, as will be the nature of any challenge which the party may wish to make.
The court is unlikely to be helped by generalised accusations of lying, or by a fishing expedition in which the child is taken slowly through the story yet again in the hope that something will turn up, or by a cross examination which is designed to intimidate the child and pave the way for accusations of inconsistency in a future criminal trial.
On the other hand, focussed questions which put forward a different explanation for certain events may help the court to do justice between the parties.
Also relevant will be the age and maturity of the child and the length of time since the events in question, for these will have a bearing on whether an account now can be as reliable as a near contemporaneous account, especially if given in a well conducted ABE interview.
The age and maturity of the child, along with the length of time since the events in question, will also be relevant to the second part of the inquiry, which is the risk of harm to the child.
Further specific factors may be the support which the child has from family or other sources, or the lack of it, the childs own wishes and feelings about giving evidence, and the views of the childs guardian and, where appropriate, those with parental responsibility.
We endorse the view that an unwilling child should rarely, if ever, be obliged to give evidence.
The risk of further delay to the proceedings is also a factor: there is a general principle that delay in determining any question about a childs upbringing is likely to prejudice his welfare: see Children Act 1989, s 1(2).
There may also be specific risks of harm to this particular child.
Where there are parallel criminal proceedings, the likelihood of the child having to give evidence twice may increase the risk of harm.
The parent may be seeking to put his child through this ordeal in order to strengthen his hand in the criminal proceedings rather than to enable the family court to get at the truth.
On the other hand, as the family court has to give less weight to the evidence of a child because she has not been called, then that may be damaging too.
However, the court is entitled to have regard to the general evidence of the harm which giving evidence may do to children, as well as to any features which are particular to this child and this case.
That risk of harm is an ever present feature to which, on the present evidence, the court must give great weight.
The risk, and therefore the weight, may vary from case to case, but the court must always take it into account and does not need expert evidence in order to do so.
But on both sides of the equation, the court must factor in what steps can be taken to improve the quality of the childs evidence and at the same time to decrease the risk of harm to the child.
These two aims are not in opposition to one another.
The whole premise of Achieving Best Evidence and the special measures in criminal cases is that this will improve rather than diminish the quality of the evidence to the court.
It does not assume that the most reliable account of any incident is one made from recollection months or years later in the stressful conditions of a courtroom.
Nor does it assume that an Old Bailey style cross examination is the best way of testing that evidence.
It may be the best way of casting doubt upon it in the eyes of a jury but that is another matter.
A family court would have to be astute both to protect the child from the harmful and destructive effects of questioning and also to evaluate the answers in the light of the childs stage of development.
The family court will have to be realistic in evaluating how effective it can be in maximising the advantage while minimising the harm.
There are things that the court can do but they are not things that it is used to doing at present.
It is not limited by the usual courtroom procedures or to applying the special measures by analogy.
The important thing is that the questions which challenge the childs account are fairly put to the child so that she can answer them, not that counsel should be able to question her directly.
One possibility is an early videod cross examination as proposed by Pigot.
Another is cross examination via video link.
But another is putting the required questions to her through an intermediary.
This could be the court itself, as would be common in continental Europe and used to be much more common than it is now in the courts of this country.
In principle, the approach in private family proceedings between parents should be the same as the approach in care proceedings.
However, there are specific risks to which the court must be alive.
Allegations of abuse are not being made by a neutral and expert local authority which has nothing to gain by making them, but by a parent who is seeking to gain an advantage in the battle against the other parent.
This does not mean that they are false but it does increase the risk of misinterpretation, exaggeration or downright fabrication.
On the other hand, the child will not routinely have the protection and support of a Cafcass guardian.
There are also many more litigants in person in private proceedings.
So if the court does reach the conclusion that justice cannot be done unless the child gives evidence, it will have to take very careful precautions to ensure that the child is not harmed by this.
It will be seen that these considerations are simply an amplification of those outlined by Smith LJ in the Medway case, at para 45, but without the starting point, at para 44.
The essential test is whether justice can be done to all the parties without further questioning of the child.
Our prediction is that, if the court is called upon to do it, the consequence of the balancing exercise will usually be that the additional benefits to the courts task in calling the child do not outweigh the additional harm that it will do to the child.
A wise parent with his childs interests truly at heart will understand that too.
But rarity should be a consequence of the exercise rather than a threshold test (as in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, para 20).
Finally, we would endorse the suggestion made by Miss Branigan QC for the childs guardian, that the issue should be addressed at the case management conference in care proceedings or the earliest directions hearing in private law proceedings.
It should not be left to the party to raise.
This is not, however, an invitation to elaborate consideration of what will usually be a non issue.
The Outcome in this Case
We commend the care with which the judge approached the issue in this case.
She considered the factors which we have outlined above most conscientiously.
But she approached them, as she was required to do on the authorities as they stood, from the starting point that it is only in exceptional circumstances that a child should be required to give evidence.
We cannot be confident that she would have reached the same conclusion had she approached them without that starting point, although she might well have done so.
We have considered whether it would be appropriate for us to exercise the discretion afresh but have concluded that we should not do so.
It would have the advantage of a speedy decision, one way or the other, in advance of the hearing which is due to start on Monday.
But we are not confident that we have all the relevant material before us.
In particular, although we have seen the transcripts, we have not seen the video of the first ABE interview.
Nor have we seen the video of a second interview, conducted after the Court of Appeal decision, in which Charlotte made allegations of physical abuse of all the children and domestic violence between the adults.
In the circumstances we see no alternative to remitting the question to be determined by the judge in the light of the judgment of this court.
However, there must be no question of adjourning the hearing fixed for next week.
That would undoubtedly be detrimental to all the children concerned.
It has already been adjourned twice.
Charlotte is understandably anxious that matters be resolved as soon as possible for the sake of the younger children.
They have been away from their home since June last year.
Even more important is the fate of the baby who is expected later this month.
The courts findings will be crucial in deciding what steps, if any, are required to protect the baby.
This means that the parties will have to consider their positions and make written submissions to the judge in time for her to decide the question on Monday morning.
There is, of course, still time for the father to change his stance.
For these reasons, the appeal will be allowed and the question of whether the child should give evidence at the hearing which is to begin on Monday 8 March is remitted to the judge for her to determine in the light of this judgment.
| UK-Abs | In this judgment the Supreme Court reformulates the approach a family court should take when exercising its discretion to decide whether to order a child to give live evidence in family proceedings.
In so doing it removes the presumption or starting point of the current test, which is rarely if ever rebutted, that it is only in the exceptional case that a child should be so called.
At issue in this case is the care of five children.
The mother and father at the relevant time were in a relationship and the father is the biological parent of the four youngest children.
A sixth child is due to be born to the couple this month.
The proceedings began in June 2009 when the eldest child, a 14 year old girl, alleged that her de facto stepfather had seriously sexually abused her.
All the children were taken into foster care and the four younger children are having supervised contact with both parents.
The father has since been charged with 13 criminal offences and is currently on bail awaiting trial.
In the family proceedings the parties originally agreed that there would be a fact finding hearing in which the 14 year old girl would give evidence via a video link.
The judge however asked for further argument on whether she should do so.
The Local Authority, having had time to consider the material received from the police, decided that they no longer wished to call the girl as a witness.
In November 2009 the judge decided to refuse the fathers application for her to be called.
Instead, she would rely on the other evidence, including a video recorded interview with the child.
The Court of Appeal dismissed the fathers appeal.
They did, however, express some concern about the test laid down in previous decisions of that court and suggested that the matter might be considered by the Family Justice Council.
The father appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal and remits the question of whether the child should give evidence, and if so in what way, to Her Honour Judge Marshall to be determined at the fact finding hearing scheduled for 8 March 2010 in light of the principles set down in this judgment.
Lady Hale gave the judgment of the court.
The court agreed with counsel for the Local Authority that there were very real risks to the welfare of children which the court must take into account in any reformulation of the approach. [17 to 21] However the current law, which erects a presumption against a child giving live evidence in family proceedings, cannot be reconciled with the approach of the European Court of Human Rights, which aims to strike a fair balance between competing Convention rights.
In care proceedings there must be a balance struck between the article 6 requirement of fairness,
normally entails the opportunity to challenge evidence, and the article 8 right to respect for private and family life of all the people directly and indirectly involved.
No one right should have precedence over the other.
Striking the balance may well mean that a child should not be called to give evidence in a great majority of cases, but this is a result and not a presumption nor even a starting point. [22, 23] Accordingly, when considering whether a particular child should be called as a witness in family proceedings, the court must weigh two considerations: the advantages that that will bring to the determination of the truth and the damage it may do to the welfare of this or any other child. [24] The court sets out a number of factors that a family court should consider when conducting this balancing exercise.
An unwilling child should rarely, if ever, be obliged to give evidence.
The risk of harm to the child if he or she is called to give evidence remains an ever present factor to which the court must give great weight.
The risk, and therefore the weight, will vary from case to case, but it must always be taken into account. [25, 26] At both stages of the test the court must also factor in any steps which can be taken to improve the quality of the childs evidence, and at the same time decrease the risk of harm to the child. [27, 28] The essential test is whether justice can be done to all the parties without further questioning of the child.
The relevant factors are simply an amplification of the existing approach.
What the court has done however is remove the presumption or starting point; that a child is rarely called to give evidence will now be a consequence of conducting a balancing exercise and not the threshold test. [30] In this case the trial judge had approached her decision from that starting point.
The Supreme Court could not be confident that the judge would have reached the same result had she approached the issue without this starting point, although she might well have done so.
Nor did the court consider it appropriate to exercise its own discretion, given that all of the relevant material was not before the court.
The question is remitted to the trial judge to decide at the fact finding hearing scheduled for next week.
Taking account of the detriment which delay would undoubtedly cause to all of the children concerned, including the unborn baby, there should be no question of adjourning that hearing. [31 to 35]
|
In about December 2005, the claimant commenced employment as a sessional music assistant at X school (the school).
On 4 October 2007, the parents of M, a 15 year old boy, who was undergoing a short period of work experience at the School, went to see the head teacher.
They complained that the claimant, who was 22 years of age at the time, had kissed M. They also showed the head teacher two text messages which they said the claimant had sent to M and an entry in Ms diary which appeared to indicate that some form of sexual relationship had developed between the two of them.
On the same day, the head teacher summoned the claimant and informed him that he was being suspended because of an incident involving a young man.
The schools child protection co ordinator later provided a statement to the school in which she said that, after he had been suspended, the claimant admitted to her that he had kissed M and that he had sent a text inviting him to his house, but was concerned that this could be misinterpreted, so he added that they could go for a drive instead.
On 1 November, the head teacher wrote to the claimant formally confirming his suspension on the grounds that the allegations, if proved, could constitute gross misconduct of having formed an inappropriate relationship with a child.
By a further letter of the same date, she informed the claimant that he was required to attend an investigatory interview on 15 November and that he was entitled to be represented by a trade union representative or work colleague.
In fact, he was not a member of a trade union.
The interview was postponed several times because the claimants solicitor had advised him that it was not in his interests to attend an interview until the police had completed their investigations.
By letter dated 12 December 2007, the head teacher notified the claimant that a disciplinary hearing would be convened in the new year, that the school was required to continue with its investigations and that a report would be submitted to the governing body for its consideration.
She added that since the claimant continued to refuse to attend any investigatory meetings, she would be willing to include in her report any written submissions that he wished to make about the allegations.
On 18 December, the claimant repeated the legal advice that he had been given that he should not become involved in the disciplinary proceedings until the police investigation was completed.
By 1 February, it was known that the Crown Prosecution Service intended to take no further action.
On that date, the claimants solicitors wrote to the head teacher stating that the claimant was unable to attend a meeting on 5 February.
The letter included a number of written representations to be placed before that meeting denying the allegations and stating that no improper conduct had taken place.
By letter dated 6 February, the head teacher informed the claimant that the investigation was complete and an investigation report had been written.
A disciplinary hearing was to take place on 21 February before a panel of governors to consider the allegations and the management case would be presented by the head teacher.
A copy of the investigation report would be sent within a few days and this would be the evidence presented at the hearing.
The claimant was told that he was entitled to be represented at the hearing by a trade union representative or a work colleague.
The investigation report was duly provided to the claimant.
Attached to it was a report from the local authoritys safeguarding officer, which stated that consideration should be given to referring the matter to the Secretary of State.
The head teachers report concluded: there is strong evidence that the allegations against [the claimant] are proven.
The panel should therefore fully consider his future employment . and whether a referral to the DFES is required.
By letter dated 14 February, the claimants solicitors wrote to the school seeking permission for them to represent him at the hearing.
They said that in view of the potential repercussions of an adverse finding, the potential impact on our client is such that it would be a breach of his human rights not to be represented.
This request was refused by the school by letter dated 20 February.
Prior to the hearing on 21 February, the claimant produced a document entitled Statement regarding M which disputed the allegations in some detail.
The panel consisted of three of the schools governors (including the Chair).
They were assisted by an HR adviser from the Schools Education Advisory Team (SEAT).
The head teacher presented the management case and she was assisted by a SEAT HR adviser.
The claimant, who was accompanied by his father, represented himself.
Oral evidence was given by the schools child protection co ordinator and one other witness.
The claimant refused to answer questions, stating that he believed the proceedings to be unfair for the reasons given in his solicitors letters.
Neither the claimant nor his father asked questions of any of the witnesses.
By letter dated 27 February, the chair of the governors informed the claimant of the outcome of the hearing.
After reciting the evidence, he concluded: The panel gave full and careful consideration to the evidence that was made available to them.
The panel are satisfied that inappropriate contact was made with the child whilst the two of you were alone in the church.
Further, that you sent a text message to the child inviting him to meet with you alone, during your own time and in doing so had instigated an inappropriate relationshipIn conclusion, the panel believe that, on the balance of probabilities, it was your intention to cultivate a sexual relationship with the child.
The panel are satisfied that these actions constitute an abuse of trust implicit in your position at the school and as such constitute gross misconduct.
As a result, you are summarily dismissed in accordance with the schools disciplinary procedurethe panel are also concerned that you have behaved in a way which indicates you may be unsuitable for work with children and as such will be reporting your dismissal to the appropriate agencies.
On 4 March 2008, the claimants solicitors gave notice of his intention to appeal against the dismissal decision.
The head teacher responded that the appeal would be heard by the staff appeal committee and that the claimant had the right to be represented at the appeal by his trade union representative or work colleague.
The hearing of the appeal was adjourned and it has never taken place.
In the light of the decision to dismiss the claimant, the school were obliged by regulation 4 of the Education (Prohibition from Teaching or Working with Children) Regulations 2003 (SI 2003/1184) (the 2003 Regulations) to report the circumstances of the dismissal to the Secretary of State so that he could consider whether to make a direction under section 142 of the Education Act 2002 (the 2002 Act) prohibiting the claimant from carrying out certain types of work with children (including teaching).
A person subject to such a direction was, at the relevant time, placed on a list known as List 99.
Accordingly, by letter dated 7 May 2008, the chair of the governors notified the Childrens Safeguarding Operations Unit (POCA) of the claimants dismissal for gross misconduct.
The statutory regime applicable to cases referred to the Secretary of State under regulation 4 of the 2003 Regulations ceased to apply to cases where the Secretary of State had not invited representations by 20 January 2009.
The claimants case was one such case.
A new regime (to which the claimants case applies) was established under the Safeguarding Vulnerable Groups Act 2006 (the 2006 Act) as subsequently amended.
On 19 May 2008, the claimant issued judicial review proceedings seeking a declaration that, by reason of the denial of his right to legal representation, the disciplinary hearing before the school governors was in breach of his rights under article 6 of the European Convention on Human Rights (ECHR).
He succeeded before Stephen Morris QC (sitting as a deputy High Court judge) who ordered the allegations of misconduct to be heard by a differently constituted disciplinary committee at which the claimant was to be given the right to legal representation.
The schools appeal was dismissed by the Court of Appeal (Laws, Wilson, Goldring LJJ) [2010] 1 WLR 2218.
The statutory scheme
Section 1(1) of the 2006 Act established the Independent Barring Board.
The board was renamed the Independent Safeguarding Authority (ISA) by section 81(1) of the Policing and Crime Act 2009 and I shall so refer to it.
The ISA is required to establish and maintain the childrens barred list (section 2(1)(a) of the 2006 Act).
As from 12 October 2009, a person is barred from a regulated activity relating to children if he is included in the childrens barred list (section 3(2)(a)).
Regulated activities relating to children are defined in Schedule 4 to the 2006 Act.
They include any form of teaching, training or instruction of children, unless the teaching, training or instruction is merely incidental to teaching, training or instruction of persons who are not children (para 2(1)(a)) and any form of care for or supervision of children, unless the care or supervision is merely incidental to care for or supervision of person who are not children (para 2(1)(b)).
Part 1 of Schedule 3 applies for the purpose of determining whether an individual is included in the childrens barred list.
It provides: 3(1) This paragraph applies to a person if (a) it appears to [ISA] that the person has (at any time) engaged in relevant conduct, and (b) [ISA] proposes to include him in the childrens barred list. (2) [ISA] must give the person the opportunity to make representations as to why he should not be included in the childrens barred list. (3) [ISA] must include the person in the childrens barred list if (a) it is satisfied that the person has engaged in relevant conduct, and (b) it appears to [ISA] that it is appropriate to include the person in the list. 4(1) For the purposes of paragraph 3 relevant conduct is conduct which endangers a child or is likely to endanger a (a) child; (b) conduct which, if repeated against or in relation to a child, would endanger that child or would be likely to endanger him; (c) (including possession of such material); (d) (e) [ISA] that the conduct is inappropriate. conduct involving sexual material relating to children
conduct of a sexual nature involving a child, if it appears to
Para 16 of Schedule 3 deals with representations to ISA.
A person who is, by virtue of any provision of the 2006 Act, given an opportunity to make representations must have the opportunity to make representations in relation to all of the information on which ISA intends to rely in taking a decision under the Schedule (para 16(1)).
The opportunity to make representations does not include the opportunity to make representations that findings of fact made by a competent body were wrongly made (para 16(3)).
Findings of fact made by a competent body are findings made in proceedings before one or more of the bodies specified in para 16(4) or any of its committees.
Para 19 of Schedule 3 gives ISA the power to require various specified persons to provide relevant information to it.
It may require the chief officer of a relevant police force to provide any such relevant information (para 19(1)(c)).
Para 19(3) provides that, for the purposes of sub paragraph (c), relevant information relating to a person is information which the chief officer thinks might be relevant in relation to the regulated activity concerned.
Section 37 provides that the ISA may require various specified persons to provide any prescribed information that he or it holds in relation to a person ISA is considering whether to include in, or remove from, a barred list.
Prescribed information is defined in the Schedule to The Safeguarding Vulnerable Groups Act 2006 (Prescribed Information) Regulations 2008 (SI 2008/3265).
It includes information relating to the persons employment and the reasons why permission was withdrawn for him to engage in the regulated or controlled activity in question (para 4(h)); and information relating to the persons conduct and any information other than that relating to [the persons] conduct which is likely to, or may, be relevant in considering whether [the person] should be included in or removed from a barred list including information relating to any previous offences, allegations, incidents, behaviour or other acts or omissions (para 5(f)).
Regulated activity providers who hold any prescribed information in relation to a person engaged in regulated activity provided by him must provide the information to the ISA in the circumstances specified in section 35 of the 2006 Act.
If the person is included in the list, he has a right of appeal to the Upper Tribunal if the Tribunal gives permission (section 4(1) and (4) of the 2006 Act).
An appeal may be made only on the grounds that the ISA has made a mistake (a) on any point of law or (b) in any finding of fact which it has made and on which the decision was based (section 4(2)).
For the purpose of subsection (2), the decision whether or not it was appropriate for an individual to be included in a barred list is not a question of law or fact (section 4(3)).
The ISA referral guidance
The ISA has published referral guidance for use in connection with referrals to it.
Annexed to the guidance are extensive Guidance Notes for the Barring Decision Making Process (the barring process).
These are public documents.
The guidance notes that were in force at the time of the Court of Appeals decision were issued in February 2009.
These were superseded in August 2010 by guidance notes which made minor (and immaterial) amendments.
I shall refer to the current version.
It is necessary to consider these in some detail, because, for reasons that will become clear, they are central to the issues that arise on this appeal.
The referral guidance has no statutory force.
As is stated in the introduction to the guidance notes, they are intended to be used by case workers in the determination of decisions with regard to whether referred individuals should be barred from working with vulnerable groups.
Para 2.1 states that the purpose of the barring process is to ensure that all barring decisions follow a process which affords a fair, rigorous, consistent, transparent and legitimate assessment of whether an individual should be prevented from working with children. based on the information available to the [ISA].
The guidance notes identify five stages of the barring process.
The first is the Initial assessment.
The ISA can consider information from any source (para 4.1.1).
The second stage is Evidence evaluation.
This provides: 5.1 The next stage in the process is deciding, on the balance of probabilities, whether the event (or events) happened, and whether or not relevant conduct or risk of harm occurred.
It can be taken as a matter of fact that, in some circumstances such as the notification of convictions, cautions and decisions by competent bodies (Appendix C), the event happened.
However, in all other circumstances, including allegations, it is the assessment of all the available evidence that will assist in the determination of whether or not, on the balance of probabilities, the event happened 5.2 Referral information 5.2.1 Referral information is received from employers who have dealt with individuals through their internal disciplinary procedures.
The conclusions reached by employers are reviewed to establish, on the balance of probabilities, the facts.
It is the facts of the case that determine whether the case requires further consideration and not necessarily the conclusions the employer reached. 5.3 Sources of information 5.3.3 Referrals may be received relating to allegations that, if proven, would have amounted to auto bar offences or auto bar with reps offences.
Here you must still fully examine the evidence for yourself on the basis of the balance of probabilities despite the lack of a criminal conviction (see also 5.7). 5.3.5 While the ISA does not have an investigatory function, relevant information held by other organisations, agencies and bodies may be sought. 5.5 Further information 5.5.1 The acquisition of as much relevant information as is necessary and reasonably sufficient to make a fair and defensible barring decision is all that is required 5.9 General principles in relation to the assessment of evidence 5.9.1 When case workers have completed the process of receiving and gathering all the information, evidence must be assessed in terms of what reliance may be placed on it for the purposes of making a barring decision. 5.9.2 As mentioned already, in cases of cautions, convictions and findings of fact by competent bodies, case workers will be able to treat the facts as proved. [Lord Brown explains who competent bodies are at para 98 of his judgment]. 5.9.3 In relation to other evidence, case workers will first need to assess each piece of evidence and judge how reliable it is.
The judgment as to how reliable a piece of evidence is will determine how much weight can be placed on it.
Less reliable evidence will carry less weight in a barring decision than highly reliable evidence.
Some evidence will be so unreliable, for example because it is contradicted or called into question by other reliable evidence, that no lawful reliance can be placed on it at all.
Such evidence must be disregarded altogether; a failure to do this could give rise to an appeal on the grounds that the ISA had made an error in its findings of fact. 5.9.7 Case workers must always be mindful of the principles that the findings of fact that can or cannot be made in the light of the evidence may mean that case workers must re assess which powers can be relied on to bar.
Stage 3 (Case assessment) contains detailed guidance as to the assessment of the gravity of the case and the level of risk of future harm presented by the individual.
Para 6.11 states that there may be referral of particularly difficult cases to a specialist for an opinion.
Such cases may include those where advice is required about issues of mental health or where the motivation of the applicant or referred person is unclear, for example, in the case of alleged grooming.
Stage 4 is entitled Representations.
Para 7.1 states that, if the ISA has decided that the evidence supports a bar for the childrens list (that is the minded to bar stage has been reached), the person must be given the opportunity to make representations as to why he or she should not be included in the list.
Para 7.3 states that the request for representations that is sent to the person draws attention to findings of fact that are material to the barring decision and the areas of risk identified so that any representation made by the applicant/referred individual can address specific areas to be explored in the case assessment.
Para 7.4 is important.
It provides: Representations could alter a case workers original conclusions in two areas.
Firstly, in relation to the evidence, findings of facts or the value or significance of other evidence being relied on may be genuinely called into question; secondly, the conclusions reached in the structured judgment procedure [ie stage 3] may need to be reviewed in the light of further evidence or things presented in the representations.
Para 7.5 provides that the representations are ordinarily expected to be in writing by the individual under consideration.
But they may be made by others on behalf of the individual, provided that they are authorised.
The final stage of the Process is entitled Final decision.
It includes: 8.1 The decision after receiving representations relates to the level of potential future risk of harm to children and/or vulnerable adults taking into consideration, where applicable, any representations that have been made and all pertinent facts and any specialist opinions.
The guiding principle is that the assessment of the case is based on a structured judgment regarding an individuals risk of harm to vulnerable groups whether, based on that process, it is appropriate to include any such individual in the list(s). 8.2 The appropriateness test is based on the requirement to ensure children and vulnerable adults are safeguarded and that any barring decision is not tarnished by any desire to act as a sanction or punishment.
A key issue is that decisions to include or not on the barred list(s) are only taken after the merits of each case have been fully considered following an assessment of all available, relevant facts and evidence, any specialist opinions and, where appropriate, any representations made.
In addition to the published guidance notes, case workers have the benefit of Case Worker Guidance to assist them in making balanced, factually sound and defensible decisions from stages 2 to 5 of the barring process.
This guidance is not published.
It is intended to supplement the guidance contained in the guidance notes.
The version that was provided to the court (which is redacted) is dated April 2011.
There is a section headed Assessing the reliability of the evidence.
It includes: 2.12 The judgment as to how reliable a piece of evidence is will determine how much weight can be placed on it.
Less reliable evidence will carry less weight in a barring decision than highly reliable evidence.
Some evidence will be so unreliable, for example, because it is contradicted or called into question by other reliable evidence, that no lawful reliance can be placed on it at all.
Such information must be disregarded altogether and the reason for such a decision documented; as failure to disregard such information could give rise to an appeal. 2.13 Consider the credibility of the witnesses and the referred individual and in your assessment take account of any issues that relate to their motivation and their previous conduct.
Is there anything in the background to the matter which affects anyones credibility? Is there history of similar problems or issues relating to their honesty? 2.14 The underlying motivation of the person giving the information or the referred individual may be very important in your assessment and the weight you allot to it; especially where you consider that it involves prejudice, financial gain or malice. 2.15 You should be careful in the way you deal with the opinions of those giving information.
While it is sometimes helpful to receive an interpretation of a set of circumstances or facts from, for example, a care worker or police officer, it is also important to remember that an opinion is essentially a persons belief; it is a subjective observation of statement which may or may not be supported by evidence.
Then at para 2.30, there is a section headed Professional opinions and previous findings.
It includes: Can we take at face value the findings of a referring organisations disciplinary process? For the most part, such findings, if supporting evidence is on the file, will be fairly straightforward to confirm as reliable.
However, there are plenty of examples where the referring organisations have either made decisions without the full facts available, or come to partial findings that have led to a dismissal We are in a unique position in that we are able to pull together relevant information from a range of agencies and it is therefore essential we make our own findings about the evidence available to us.
More fundamentally, in the above example, a headmasters investigatory report to a disciplinary panel may conclude that an allegation is proven; this is not a finding of fact, so we should evaluate the evidence too.
Obviously they will have a good contextual knowledge of the case (better in many cases than ourselves) but there could be any number of reasons why that finding is not defensible (they were not privy to all the information; a witness has since retracted/revisited a statement; they simply did not come to a reasoned conclusion, etc) so we should evaluate the evidence ourselves and come to our own conclusions.
The only cases in which this is not relevant is when there is a finding of fact made by a competent body.
The issue
The issue is whether the governors decision not to allow the claimant to have legal representation at the disciplinary hearing violated his rights under article 6 of the ECHR which, so far as material, provides: 1.
In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
It is common ground that the civil right with which we are concerned is the claimants right to practise his profession as a teaching assistant and to work with children generally.
There is no doubt that this right would be directly determined by a decision of the ISA to include him in the childrens barred list.
He does not, however, contend that the proceedings before the ISA would violate his article 6(1) rights.
His case is that (i) the disciplinary proceedings would have such a powerful influence on the ISA proceedings as to engage article 6(1) in both of them and (ii) the consequences of being placed on the childrens barred list by the ISA would be so grave for him that the right to a fair hearing vouchsafed by article 6(1) meant that he was entitled to legal representation in both proceedings.
If there is no connection at all between the disciplinary proceedings and the proceedings before the ISA, it is obvious that article 6 has no role to play in the disciplinary proceedings.
Ex hypothesi, they have nothing to do with the civil right in question.
The principal question raised on this appeal is what kind of connection is required between proceedings A (in which an individuals civil rights or obligations are not being explicitly determined) and proceedings B (in which his civil rights or obligations are being explicitly determined) for article 6 to apply in proceedings A as well as proceedings B. Does the connection have to be so strong that the decision in proceedings A in effect determines the outcome of proceedings B (as Mr Bowers QC submits).
Or is it sufficient that the decision in proceedings A has an effect on proceedings B which is more than merely tenuous or remote (as Mr Drabble QC submits)? Or does the connection lie somewhere between these two positions? Having considered the Strasbourg jurisprudence, Laws LJ (with whom Wilson and Goldring LJJ agreed) adopted a test somewhere along the spectrum between the two extremes.
He said [2010] 1 WLR 2218, para 32 that the ECtHR approach was likely to be met where the decision in the relevant proceedings has a substantial influence or effect on the later vindication or denial of the claimants Convention right.
He amplified this at para 37 in these terms: In my view the effect of the learning (and I have already foreshadowed this) is that where an individual is subject to two or more sets of proceedings (or two or more phases of a single proceeding), and a civil right [or] obligation enjoyed or owed by him will be determined in one of them, he may (not necessarily will) by force of Article 6 enjoy appropriate procedural rights in relation to any of the others if the outcome of that other will have a substantial influence or effect on the determination of the civil right or obligation.
I do not mean any influence or effect which is more than de minimis: it must play a major part in the civil rights determination.
I do not intend a hard and fast rule.
Principles developed by the Strasbourg court for the interpretation and application of the Convention tend not to have sharp edges; as I have said, the jurisprudence is generally pragmatic and fact sensitive.
The nature of the right in question may make a difference.
So may the relative authority of courts, tribunals or other bodies playing their respective parts in a case, such as the present, where connected processes touch a Convention right.
The Strasbourg jurisprudence
Mr Bowers (supported by Miss Lieven QC) submits that there is no support in the Strasbourg jurisprudence for the test propounded by Laws LJ and that we should reject it.
It is, therefore, necessary to examine some of the decisions of the ECtHR.
In Ringeisen v Austria (No 1) (1971) 1 EHRR 455, the Austrian District and Regional Real Property Transactions Commission refused to approve the sale of a number of plots of land.
The applicant challenged the refusal alleging bias and contending that his article 6 rights were violated for that reason.
The Austrian statute provided that the refusal of approval rendered the sale null and void.
The ECtHR said at para 94 that the French expression contestations sur (des) droits et obligations de caractre civil covers all proceedings the result of which is decisive for private rights and obligations.
The English text determination of . civil rights and obligations confirms this interpretation.
A little later in the same paragraph, the court said: In the present case, when Ringeisen purchased property from the Roth couple, he had a right to have the contract for sale which they had made with him approved if he fulfilled, as he claimed to do, the conditions laid down in the Act.
Although it was applying rules of administrative law, the Regional Commissions decision was to be decisive for the relations in civil law (de caractre civil) between Ringeisen and the Roth couple.
This is enough to make it necessary for the court to decide whether or not the proceedings in this case complied with the requirements of article 6(1) of the Convention.
It is clear that the refusal of approval by the Commission (a matter of administrative law) was, as a matter of fact in that case, determinative of the private contractual rights of the parties.
It did not merely influence the relations in civil law between the parties.
It was dispositive of them.
But it is not at all clear that the court was saying that this was the test for all cases.
The words covers all proceedings the result of which is decisive for private rights and obligations (emphasis added) could mean that the circumstances in which article 6(1) is engaged include, but are not limited to, such cases.
It will be seen, however, that the language of para 94 of Ringeisen (proceedings the result of which is decisive for private rights and obligations) has been repeated as a mantra in other cases where the facts were materially different.
The next case is Le Compte, Van Leuven and De Meyere v Belgium (1981) 4 EHRR 1.
The applicants were suspended from practising medicine for three months by the Provincial Council of the Ordre des mdecins.
They appealed unsuccessfully to the Appeal Council and from there (again unsuccessfully) to the Court de Cassation.
Dr. Le Compte complained to the ECtHR that his article 6 rights had been violated because the proceedings before the Appeals Council had not been conducted in public.
An issue arose as to whether article 6 was engaged at all.
The applicants argued that what was in issue before the Provincial and Appeals Councils was their right to continue to practise in their profession (a civil right).
The Government argued that the decisions of those bodies had no more than an indirect effect on that right, since they did not review the lawfulness of the earlier suspension from practice, but merely had to decide whether breaches of the rules of professional conduct of a kind justifying disciplinary sanctions had actually occurred (para 46).
Following Ringeisen, the court said that it must be shown that the dispute (before the Appeals Council) related to civil rights and obligations, in other words that the result of the proceedings was decisive for such right (para 46).
At para 47, the court said: As regards the question whether the dispute related to the above mentioned right, the court considers that a tenuous connection or remote consequences do not suffice for article 6(1), in either of its official versions (contestation sur, determination of): civil rights and obligations must be the objector one of the objectsof the contestation (dispute); the result of the proceedings must be directly decisive for such a right.
Whilst the court agrees with the Government on this point, it does not agree that in the present case there was not this kind of direct relationship between the proceedings in question and the right to continue to exercise the medical profession.
This seems to be the first case in which the ECtHR contrasted the notion that the result of the proceedings must be directly decisive with the notion of a tenuous connection or remote consequences.
On the facts of Le Compte, the issue for the Appeals Council was whether the breaches of the rules of professional conduct on which the decision to suspend was based had actually occurred.
But the link between the findings of breach and the decision to suspend could not have been closer.
If the appeal failed, the decision to suspend would remain unimpaired.
The decision of the Appeals Council was determinative of the applicants civil right to practise their profession during the period of suspension.
In my view, the court was not introducing a gloss on the Ringeisen test that any connection more than tenuous or remote would suffice.
On the facts of this case (as in Ringeisen itself), the result of the proceedings in question was determinative of the civil rights in issue.
The next case is Fayed v United Kingdom (1994) 18 EHRR 393.
This is heavily relied on by Mr Bowers as showing that decisive means determinative in the sense of dispositive.
The applicants had acquired the House of Fraser (HOF).
The takeover had been opposed by Lonrho Plc which pursued a hostile campaign against the applicants through the media, including The Observer, a newspaper that it owned.
This led to the issue of libel proceedings by the applicants.
Some time later, the Government appointed two inspectors to investigate inter alia the circumstances surrounding the acquisition of HOF.
The inspectors provisional conclusions included a finding that the applicants had made material dishonest misrepresentations at the time of the takeover.
The Government published the report.
Following the publication of the report, the applicants abandoned their libel claims against The Observer newspaper on the grounds that, in the light of the report, it had become impossible to prosecute the claims with any prospects of success.
The applicants complained that, in violation of article 6(1), the inspectors had in their report determined their civil rights to honour and reputation (protected as part of their right to respect for private life under article 8) and had denied them effective access to a court to have those rights determined.
The first question that the ECtHR had to decide was whether article 6(1) was applicable to the investigation by the inspectors.
It was contended by the applicants that the result of the investigation was decisive of their article 8 rights and that the inspectors report effectively determined them without respecting any of the procedural guarantees of article 6(1).
The court accepted that the published findings of the inspectors undoubtedly damaged the applicants reputations, but that was not sufficient to lead to the conclusion that the inspectors had determined their civil rights.
The court said: 61.
However, the court is satisfied that the functions performed by the inspectors were, in practice as well as in theory, essentially investigative.
The inspectors did not adjudicate, either in form or in substance.
They themselves said in their report that their findings would not be dispositive of anything.
They did not make a legal determination as to criminal or civil liability concerning the Fayed brothers, and in particular concerning the latters civil right to honour and reputation.
The purpose of their inquiry was to ascertain and record facts which might subsequently be used as the basis for action by other competent authoritiesprosecuting, regulatory, disciplinary or even legislative.
Nevertheless, whilst there was a close connection between Lonrhos grievance against the Fayed brothers and the matters investigated by the inspectors, the object of the proceedings before the inspectors was not to resolve any dispute (contestation) between Lonrho and the applicants In short, it cannot be said that the inspectors inquiry determined the applicants civil right to a good reputation, for the purposes of article 6(1), or that its result was directly decisive for that right. 62.
Acceptance of the applicants argument [as to the] interpretation of article 6(1) would in practice unduly hamper the effective regulation in the public interest of complex financial and commercial activities.
In the courts view, investigative proceedings of the kind in issue in the present case fall outside the ambit and intendment of article 6(1).
Thus it can be seen that the court accepted that there was a close connection between the findings of the inspectors and the determination of the civil right which was to be the subject of the libel proceedings, but that was not enough.
Fayed shows that in the ECtHR lexicon, decisive is not the antonym of a tenuous connection or remote consequence.
The court emphasised the fact that (i) the inspectors themselves said that their findings would not be dispositive of anything, (ii) the object of the proceedings before the inspectors was not to resolve any dispute and (iii) there was an important policy reason for not applying article 6 in investigative proceedings conducted at the instance of regulatory or other authorities.
In Balmer Schafroth v Switzerland (1998) 25 EHRR 598 the applicants lodged an objection with the Federal Council requesting that it refuse to extend a licence to operate a power station.
The council (which was the authority of first and last instance to deal with the matter) rejected the objection and extended the licence.
The applicants invoked articles 6(1) and 13, arguing that they had not had access to a tribunal and that the procedure followed by the council had not been fair.
They said that there had been a violation of their civil right to the protection of their physical integrity under articles 2 and 8.
The court found that article 6(1) was not engaged.
At para 32, it set out the familiar test: the outcome of the proceedings must be directly decisive for the right in question.
As the court has consistently held, mere tenuous connections or remote consequences are not sufficient to bring article 6(1) into play.
At para 39, it said that the question in particular was whether the link between the councils decision and the applicants article 2 and 8 rights was sufficiently close to bring article 6(1) into play, and was not too tenuous or remote.
At para 40, it answered this question saying that the applicants were unable to establish that the operation of the power station exposed them personally to a danger that was not only serious but also specific and, above all, imminent.
Consequently neither the dangers nor the remedies were established with a degree of probability that made the outcome of the proceedings directly decisive within the meaning of the courts case law.
In the result, the connection between the councils decision and the right invoked by the applicants was too tenuous and remote.
This is an example of a case where there is only one set of proceedings in issue (ie the first and last instance authority adjudicating on the same right).
In such a case, the question is whether the proceedings are decisive in the ordinary sense of being dispositive of the effective exercise of the applicants rights.
Another example of such a case is Slovenske Telekomunikacie (Application No 47097/99) (unreported) given 28 September 2010.
There is also a line of Strasbourg decisions on the question whether article 6 is engaged where an issue arising in civil proceedings is referred to a constitutional court.
This question arose in particular in relation to the question whether proceedings before the constitutional court were to be taken into account in determining whether the length of the civil proceedings was reasonable within the meaning of article 6(1).
Initially, the ECtHR decided that the ECHR did not apply to rights determined by a constitutional court because of their constitutional nature: see Buchholz v Germany (1981) 3 EHRR 597.
This approach was, however, rejected in Deumeland v Germany (1986) 8 EHRR 448 where at para 77 the ECtHR held that, although the Constitutional Court had no jurisdiction to rule on the merits of the dispute, its decision was capable of affecting the outcome of the claim.
Since then, the Deumeland approach has been followed repeatedly by the ECtHR in cases where questions are referred to a constitutional court.
Thus in Poiss v Austria (1987) 10 EHRR 231, in relation to the applicability of article 6(1), the court said: Any decisionwhether favourable or unfavourableby the authorities dealing with the matter subsequently affected, affects or will in future affect their property rights.
The outcome of the proceedings complained of is accordingly decisive for private rights and obligations (see Ringeisen), so that article 6(1) applies in the instant case.
that Deumeland should not be followed and at para 37 said that: In Bock v Germany (1989) 12 EHRR 247, the ECtHR rejected an argument there are circumstances in which proceedings before the constitutional court must be taken into the reckoning in determining the relevant period.
It has to be considered whether the constitutional courts decision was capable of affecting the outcome of the case which has been litigated before the ordinary courts.
The question whether article 6(1) is applicable to constitutional complaint proceedings must accordingly be treated on the merits of each case, in the light of all the circumstances (emphasis added).
Another case involving constitutional proceedings is Ruiz Mateos v Spain (1993) 16 EHRR 505.
This is one of the decisions relied on by Laws LJ in support of his test of substantial influence or effect.
The applicants brought a claim for the restitution of shares which had been expropriated by legislative decree of the Spanish Government.
An issue arose as to the constitutionality of the decree and this was referred to the Spanish Constitutional Court.
The applicants complained of breaches of article 6(1) by reason of (i) the delays occasioned by the proceedings in the Constitutional Court and (ii) the alleged failure to accord them a fair hearing before the Constitutional Court.
The Government argued inter alia that article 6(1) was not applicable in the proceedings before the Constitutional Court.
The ECtHR rejected this argument.
The court said, in relation to the length of the proceedings, that the relevant period included the time taken in the proceedings before the Constitutional Court and was not limited to the duration of the civil proceedings.
At para 35, the court said that, according to its well established case law, proceedings in a Constitutional Court are to be taken into account for calculating the relevant period where the result of such proceedings is capable of affecting the outcome of the dispute before the ordinary courts (emphasis added).
The Commission explained at para 52 of its Opinion that although the purpose of these constitutional proceedings was not the same as that of the civil proceedings, the length of the constitutional proceedings inevitably contributed to the prolongation of the civil proceedings.
As regards the allegation that the applicants had been denied a fair hearing before the Constitutional Court, the court observed that there was a close link between the subject matter of the proceedings before that court and the civil proceedings (para 59).
The annulment of the decree by the Constitutional Court would have led the civil courts to allow the applicants claim.
For this reason, the ECtHR held that article 6(1) applied to the proceedings before the Constitutional Court.
The Commission put the point very clearly at para 87 of its opinion: In effect, therefore, it is as if the applicants case was dealt with in a single set of proceedings before the Spanish courts.
Although these proceedings involved a civil stage, in the strict sense, and a constitutional stage, these stages were so closely bound up with each other that to dissociate them would be tantamount to crediting a legal fiction.
In the specific circumstances of the case, [to interpret article 6(1) as excluding the constitutional stage of the proceedings] would be excessively formalist and likely to undermine to a considerable extent the guarantees afforded to the applicants by the Convention, whereas, according to case law, the Convention must be interpreted in such a way as to ensure its efficacy and to safeguard the individual in a real and practical way, rather than a fictitious and illusory way, as regards those areas with which it deals.
In relation to the question of reasonable period, unsurprisingly the ECtHR has consistently held that, where a constitutional issue arises in civil proceedings and this can only be determined by a Constitutional Court, the time taken before that court must be taken into account in calculating the length of the civil proceedings.
The position should be no different from what it would be if the civil court had jurisdiction to decide the constitutional issue for itself.
It is as if the proceedings before the Constitutional Court and the civil court were all part of the same proceedings.
For the same reason, the guarantee of a fair hearing afforded by article 6(1) should apply to proceedings before the Constitutional Court as it does to proceedings before the civil court.
The next case referred to by Laws LJ was Lizarraga v Spain (2004) 45 EHRR 1031.
This was a case similar to Ruiz Mateos.
At para 47, the ECtHR said that, although the proceedings before the Constitutional Court bore the hallmarks of public law proceedings, they were decisive of the applicants proceedings in the ordinary courts to have a dam project set aside.
The court found that the proceedings as a whole may be considered to concern the civil rights of the applicants.
The third ECtHR case relied on by Laws LJ was the Grand Chamber decision in Ocalan v Turkey (2005) 41 EHRR 985.
This is a criminal case.
The applicant was detained and held in police custody where he was questioned by the security forces.
He received no legal assistance during this period.
Thereafter, he was remanded in custody pending trial and during this period he was allowed restricted access to his lawyers.
He made several self incriminating statements which were a major contributing factor to his conviction at trial.
It was held by the ECtHR that there had been a violation of article 6(1) in conjunction with article 6(3)(b) and (c).
At para 131 the Grand Chamber endorsed the following statement: . in these circumstances, the court is of the view that to deny access to a lawyer for such a long period and in a situation where the rights of the defence might well be irretrievably prejudiced is detrimental to the rights of the defence to which the accused is entitled by virtue of article 6.
I agree that in such a case, the requirements of article 6(1) (criminal) and 6(3) are necessarily engaged sooner than in civil cases because of the specific article 6 right to the presumption of innocence and legal representation after charge with which it is inextricably linked.
That is why I do not consider that this decision sheds light on the issue that arises in the present appeal.
The concept of irretrievable prejudice has, however, been used by the ECtHR in the civil context of claims for interim measures.
In Markass Car Hire Ltd v Cyprus (Application No 51591/99) (unreported) given 23 October 2001, the domestic court had made an interim order without notice to the applicant for the delivery up of a fleet of vehicles.
An issue arose as to whether article 6 applied to the interim order proceedings.
The ECtHR (Third Section) noted that, unless the interim decision was reversed by the appeal court within a short time, it would affect the legal rights of the parties.
The court could not overlook the drastic effect of the interim decision.
The combined effect of the measure and its duration caused irreversible prejudice to the applicants interests and drained to a substantial extent the final outcome of the proceedings of its significance.
In these circumstances, the court considered that the interim decision in effect partially determined the rights of the parties in relation to the final claim against the applicant in [the] civil action.
This approach to interim measures was endorsed by the Grand Chamber in Micallef v Malta (2010) 50 EHRR 920.
At para 74, the court said that the result of the interim proceedings must be directly decisive for the right in question, mere tenuous connections or remote consequences not being sufficient to bring article 6(1) into play.
At para 79, they noted that a judges decision on an injunction will often be tantamount to a decision on the merits of the claim for a substantial period of time, even permanently in exceptional cases.
At para 85, they said that the nature of the interim measure, its object and purpose as well as its effects on the rights in question should be scrutinised.
Whenever an interim measure can be considered effectively to determine the civil right or obligation at stake, notwithstanding the length of time it is in force, article 6 will apply.
Before I attempt to distil the principles that can be derived from these cases which are relevant to this appeal, I need to refer to some recent English cases.
The English cases
Laws LJ derived support for his test from Kulkarni v Milton Keynes Hospital NHS Trust [2009] EWCA Civ 789, [2010] ICR 101.
A doctor claimed that he was entitled to legal representation in disciplinary proceedings brought by his employer.
Smith LJ (with whom Wilson LJ and Sir Mark Potter P agreed) said obiter at para 67 that she would have held that article 6 is engaged where an NHS doctor faces charges which are of such gravity that, in the event they are found proved, he will be effectively barred from employment in the NHS.
She explained at para 66 why article 6 was engaged on the facts of that case.
The NHS is, to all intents and purposes, a single employer of doctors for the whole country.
If Dr Kulkarni was found guilty of the charge, he would be unemployable as a doctor and would never complete his training.
Thus, the internal disciplinary procedure was, as a matter of fact, dispositive of his right to work in his chosen field.
R (Wright) v Secretary of State for Health [2009] 1 AC 739 was concerned with the procedure for provisionally listing a worker on the Protection of Vulnerable Adults (POVA) list under the 2006 Act.
The House of Lords held that some interim measures have such a clear and decisive impact upon the exercise of a civil right that article 6(1) does apply (per Baroness Hale of Richmond, at para 21).
Provisional listing in the POVA list was a determination of the civil right to work because it had detrimental and often irreversible and incurable effects (para 25).
Thus, the procedure was, as a matter of fact, dispositive of the claimants right to work in his chosen field.
Neither Kulkarni nor Wright sheds light on the meaning and boundaries of the Ringeisen test.
They contain no analysis or discussion of the meaning of what I have called the mantra.
They are merely examples of cases where, as a matter of fact, the proceedings determined the civil right in question.
We were also shown other domestic decisions where the test has been applied such as Runa Begum v Tower Hamlets London Borough Council (First Secretary of State intervening) [2003] 2 AC 430 (paras 30 and 78); R (A) v Croydon London Borough Council (Secretary of State for the Home Department intervening) [2009] 1 WLR 2557 (paras 37, 59 and 63) and Ali v Birmingham City Council (Secretary of State for Communities and Local Government intervening) [2010] 2 AC 39 (paras 36 and 43).
In each of these passages, the mantra of directly decisive is stated, but there is no analysis of precisely what it means.
Conclusions on the test for the application of article 6
I have found it necessary to examine the facts of the ECtHR decisions to which I have referred in some detail because, in my view, the jurisprudence contains no clear explanation of what directly decisive means.
It is, therefore, necessary to see how the court has applied the Ringeisen test in order to see what light the cases shed on its meaning.
I think that the following principles can be derived from the cases.
First, it is clear that it is a sufficient condition for the application of article 6(1) in proceedings A that a decision in those proceedings will be truly dispositive of a civil right which is the subject of determination in proceedings B.
In Ringeisen 1 EHRR 455 and Le Compte 4 EHRR 1, proceedings A were, on the facts of those cases, dispositive of the outcome of proceedings B. The constitutional cases such as Ruiz Mateos 16 EHRR 505 and Lizarraga 45 EHRR 1031 are further examples of the application of this principle.
So too in the interim measures cases of Markass 23 October 2001 and Micallef 50 EHRR 37, the decision to grant interim measures was, on the facts, directly decisive in the sense that they caused irreversible prejudice to the applicants and, in effect, were wholly or at least partly determinative of the civil right in question.
Article 6(1) therefore applied in all of these cases.
But none of them states in terms that it is a necessary condition for the application of article 6(1) in proceedings A that they are dispositive of proceedings B.
Secondly, although the word decisive is contrasted with tenuous connection or remote consequences, no decision was shown to us which states that article 6(1) applies in any case where the connection between the two proceedings is merely more than tenuous or where the consequences of a decision in proceedings A for proceedings B is merely more than remote.
There is a spectrum of effect ranging from (i) merely more than tenuous and remote to (ii) dispositive.
The fact that the ECtHR contrasted the two ends of the spectrum, for example, in Le Compte does not indicate that the court was saying that article 6(1) applies in any case where the link is merely more than tenuous or the consequences are merely more than remote.
Thirdly, in a number of cases the court made it clear that a link that was merely more than tenuous or consequences that were merely more than remote is not sufficient.
How close does the link have to be for article 6(1) to apply? In Balmer Schafroth 25 EHRR 598, the court said that there had to be a sufficiently close link.
That begs the question: does the link have to be sufficient to be dispositive of the decision or is it enough that it is likely to have some influence on it? In Ruiz Mateos 16 EHRR 505, the court said that the test was whether the decision of the constitutional court was capable of affecting the outcome of the proceedings in which the civil rights were to be determined.
In most cases where a constitutional question which arises in the course of a civil dispute is referred to a constitutional court, the decision of that court is likely to be capable of being determinative of the dispute.
Ruiz Mateos was one such case.
Fayed 18 EHRR 393 shows that, in some cases at least, the link must be very close.
That was a strong case on the facts as the findings set out in the inspectors report had a potent impact on the applicants attempt to vindicate his article 8 right to honour and reputation.
Nevertheless, the court held that the proceedings before the inspectors were not decisive of his civil rights.
Fourthly, the cases show that, despite the apparent simplicity of the mantra, the ECtHR adopts a pragmatic context sensitive approach to the problem.
It is not possible to classify all the cases into neat hermetically sealed categories.
This may be considered to be unfortunate, since it is desirable to know in advance whether article 6(1) applies to a procedure or not.
Anything less gives rise to uncertainty and potential litigation.
But the ECtHR has propounded an approach which is not sharp edged and I do not think it is for us to introduce a rigidity which Strasbourg has eschewed.
It is pertinent to note that in Ruiz Mateos, the Commission referred at para 87 of its Opinion to the specific circumstances of the case (see para 52 above) and in Bock 12 EHRR 247, para 37, the court said that the question whether article 6(1) was applicable must be treated on the merits of each case, in the light of all the circumstances (see para 49 above).
Thus, in deciding whether article 6(1) applies, the ECtHR takes into account a number of factors including (i) whether the decision in proceedings A is capable of being dispositive of the determination of civil rights in proceedings B or at least causing irreversible prejudice, in effect, by partially determining the outcome of proceedings B; (ii) how close the link is between the two sets of proceedings; (iii) whether the object of the two proceedings is the same; and (iv) whether there are any policy reasons for holding that article 6(1) should not apply in proceedings A.
This last factor was taken into account by the ECtHR in Fayed 18 EHRR 393 (see para 43 above).
So where does this leave the test of substantial influence or effect proposed by Laws LJ? He was careful to say that an applicant may (not necessarily will) by force of article 6 enjoy appropriate procedural rights in relation to any of the others [set of proceedings] if the outcome of that other will have a substantial influence or effect on the determination of the civil right or obligation: [2010] 1 WLR 2218, para 37 (emphasis added).
In my view, this is a useful formulation.
It captures the idea of the outcome of proceedings A being capable of playing a major part in the civil rights determination in proceedings B.
That is what fairness requires.
Anything less would be excessively formalist (see para 87 of the Commissions Opinion in Ruiz Mateos 16 EHRR 505) and would give too much weight to the fact that the two sets of proceedings are, as a matter of form, separate.
The focus should be on the substance of the matter.
The court should always keep in mind the importance of ensuring that the guarantees afforded by article 6(1) are not illusory.
It is clearly established that, where a decision in proceedings A is dispositive of proceedings B, article 6(1) applies in proceedings A as well as in proceedings B.
That is what the right to a fair hearing in proceedings B requires.
Why does fairness not require the same where the decision in proceedings A, although it is not strictly determinative, is likely to have a major influence on the outcome in proceedings B? As a matter of substance, there is not much difference between (i) an outcome of proceedings A which has a major influence on the result in proceedings B and (ii) an outcome of proceedings A which is dispositive of the result in proceedings B.
In each case, the civil right of the person concerned is greatly affected by what occurs in proceedings A.
If there is to be a difference in the application of article 6(1) between the two cases, it needs to be justified.
There may be policy reasons (such as those referred to in Fayed 18 EHRR 393) based on the nature of the body charged with proceedings A which justify a different approach.
But absent such policy reasons, it is difficult to see why article 6(1) should not apply in both cases.
No such policy reasons have been identified in the present case.
I propose, therefore, to consider whether article 6(1) applies in the present case on the basis of the test propounded by Laws LJ.
Did article 6(1) apply in the disciplinary proceedings in the present case?
At para 47 of his judgment, Laws LJ said: It seems to me that there is every likelihood that the outcome of the disciplinary process in a case like this, where there has been a finding of abuse of trust by virtue of sexual misconduct, will have a profound influence on the decision making procedures relating to the barred list.
The governors conclusion comprised both a finding of fact and a judgment as to where the facts lay on the scale of severity that in the particular case fell to be applied.
While the ISA may bring an independent mind to bear, it is not I think suggested that it operates a procedure for oral hearings with cross examination.
The force of the disciplinary decision lies not only in the governors view of the primary facts, but especially in their judgment as to how those facts should be viewed.
Without a de novo hearing and the possibility of oral evidence before the ISA, at the very least the flavour and the emphasis of those conclusions will remain important and influential.
I accept at once the gravity of the consequences for the claimant of being placed on the childrens barred list.
For that reason, I would agree with the courts below that, if article 6 did apply in the disciplinary proceedings, then the claimant was entitled to the enhanced procedural protection (normally associated with criminal proceedings) of the right to have legal representation at the disciplinary hearing.
The more serious the allegation and the graver the consequences if the allegation is proved, the greater the need for enhanced protection: see Albert and Le Compte v Belgium (1983) 5 EHRR 533, para 30, R v Securities and Futures Authority Ltd, Ex p Fleurose [2002] IRLR 297, para 14 (per Schiemann LJ) and International Transport Roth GmbH v Secretary of State for the Home Department [2003] QB 728, para 38 (per Simon Brown LJ) and para 148 (per Jonathan Parker LJ).
I agree with Mr Drabble that at the heart of the schools decision to dismiss the claimant were two issues of credibility: (i) whether the claimant should be believed when he denied that he massaged and kissed M when the two of them were alone in the church (the claimants case was that he moved away when M tried to kiss him); and (ii) whether, as alleged by the schools child protection officer (but denied by the claimant), the claimant made detailed damaging admissions including that he had kissed M and massaged his back.
As Mr Drabble points out, the school determined both of these issues against the claimant following his disciplinary hearing at which the child protection officer was questioned by the disciplinary panel and their head teachers advisor from the SEAT.
The letter of dismissal stated: the panel also heard evidence from the schools child protection officer. who recalled information relayed to her by you about the incident in the church. the information [the officer] recalls corresponds with a diary entry made by the child.
In these circumstances, Mr Drabble submits that, even if the ISA had the capacity to make a decision for itself on the balance of probabilities on the papers, it is inevitable that they would adopt the schools credibility findings which had been arrived at after the disciplinary panel had been afforded the opportunity of seeing the claimant and the child protection officer giving oral evidence.
The ISA would have had no opportunity to make a similar assessment of their credibility.
Laws LJ essentially accepted these submissions at para 47 of his judgment.
Central to his reasoning is the conclusion that the findings of the disciplinary panel would be likely to have a profound influence on the decision reached by the ISA without a de novo hearing and the possibility of oral evidence before the ISA.
I have already set out in full the principal material statutory provisions and parts of the ISA guidance notes and the case worker guidance.
It is necessary to emphasise certain aspects of them.
They show that the ISA is required to exercise its own independent judgment both in relation to finding facts and making an assessment of their gravity and significance.
So far as findings of fact are concerned, apart from the automatic barring provisions contained in paragraphs 1 and 2 of Schedule 3, the 2006 Act requires the ISA itself to be satisfied that the person has engaged in relevant conduct.
The latest version of the guidance notes (August 2010) also makes it clear that the ISA is expected to make its own findings.
It can consider information from any source (para 4.1.1).
Para 5.1 states that, in all cases except where there has been notification of convictions, cautions and decisions by competent bodies, it is the assessment of all the available evidence that will assist in the determination of whether or not, on the balance of probabilities, the event happened (emphasis added).
Para 5.2.1 states that the conclusions reached by employers are reviewed to establish, on the balance of probability, the facts.
It is the facts of the case that determine whether the case requires further consideration and not necessarily the conclusions that the employer reached.
Mr Drabble emphasised the use of the word reviewed and submits that this shows that the exercise which the ISA performs in relation to the facts is akin to a judicial review, rather than a de novo consideration of the facts.
I cannot accept this submission.
It is clear that the ISA is expected to form its own assessment of the facts on the basis of all the available evidence: the word review means no more than assess or reconsider.
This is supported by the terms of paras 5.9.3 and 5.9.7 which I have set out at para 24 above.
No judge would embark on such an exercise when undertaking a judicial review of a decision.
Other important provisions in the guidance notes are to be found in paras 5.3.3, 5.3.5, 5.5.1, 7.3, 8.1 and 8.2.
It is worth repeating part of para 8.2: A key issue is that decisions to include or not on the barred list(s) are only taken after the merits of each case have been fully considered following an assessment of all available, relevant facts and evidence, any specialist opinions and, where appropriate, any representations made (emphasis added).
Mr Drabble draws attention to the fact that para 5.3.5 states that the ISA does not have an investigatory function.
But it is clear that it can obtain information held by other organisations and bodies: see the powers referred to at paras 19 and 20 above.
Moreover, the referred person is entitled to legal representation before the ISA.
It is to be assumed that the legal representative will seek and obtain all relevant information which might advance the referred persons cause and present it to the ISA.
Also of importance is para 2.30 of the case worker guidance (see para 31 above).
I would emphasise We are in a unique position in that we are able to pull together relevant information from a range of agencies and it is therefore essential we make our own findings about the evidence available to usso we should evaluate the evidence ourselves and come to our own conclusions.
The only cases in which this is not relevant is when there is a finding of fact made by a competent body (emphasis added).
It is clear from this material that the ISA is required to make its own findings of fact and bring its own independent judgment to bear as to their seriousness and significance before deciding whether it is appropriate to place the person on the barred list.
Why did the Court of Appeal conclude that, despite these procedures and, as Miss Lieven QC says, without any evidence to show that they had not been and would not be applied properly, the employers findings and decision would still exert a profound influence on the decision making process?
There are two aspects to consider.
First, the ISA does not operate a procedure for oral hearings with cross examination.
There is nothing in either the statute or the guidance notes to prevent the ISA from operating such a procedure, but there is nothing which sanctions it either.
I do not find it necessary to decide whether the ISA could operate such a procedure.
There must be very few cases where the lack of an oral hearing (with examination and cross examination of witnesses) would make it unduly difficult for the ISA to make findings of fact applying its own judgment to the material.
It is only in very few cases that a decision making body is faced with a conflict of evidence which it resolves solely or even primarily on the basis of the demeanour shown by the witnesses.
There is usually something else.
It may be that the account given by one person is self contradictory or inconsistent with the account that he or she gave on a different occasion; or doubt may be cast on its accuracy by a document; or one account is supported by the evidence of other apparently credible and reliable witnesses, whereas the other stands on its own; or one account is incredible or at least improbable.
In any event, as Lord Bingham said in The Business of Judging (2000) at p 9, the current tendency is (I think) on the whole to distrust the demeanour of a witness as a reliable pointer to his honesty.
At pp 9 13, he developed this view and supported it with references to a number of statements by judges and advocates.
I accept, however, that there may occasionally be a case where the critical factor which leads an employer to find that there has been gross misconduct by an employee is the demeanour shown by the employee when giving his or her account to the disciplinary panel.
But Mr Drabble does not submit that article 6(1) is engaged at the disciplinary proceedings stage only in order to accommodate such cases.
His submission is that the Court of Appeal was correct to hold that findings of fact made by an employers disciplinary panel are generally and in most cases likely to exercise a profound influence on the decision making process before the ISA.
I do not agree.
The guidance notes and case worker guidance have been drafted in meticulous detail.
They repeatedly make the point that it is for the ISA to make its own findings of fact on the basis of all the available material.
Any case worker who follows the guidance notes and the case worker guidance knows that he or she should not defer to the findings of the referring body.
The case worker guidance contains worked examples of evidence evaluation, including examples of both good and bad practice.
I see no reason to doubt that case workers do as they are instructed.
The lack of an oral hearing does not prevent the ISA from making its own findings of fact.
In the present case, it would have to look at all the evidence, including the investigation report and appendices, the notes of the disciplinary hearing, the notes of any appeal hearing before the governors and the representations of the claimant himself.
It would also consider any other information which was made available to it.
There is no reason to believe that, contrary to its statutory duty and guidance, the ISA would be unable to form its own view of the facts independently of the view formed by the school authorities and governors.
The second feature identified by Laws LJ is that the ISA would be influenced especially [by the governors] judgment as to how [the primary] facts should be viewed: [2010] 1 WLR 2218, para 47.
In other words, the panels decision that it is appropriate that the employee should be placed on the barred list would profoundly influence the view taken by the ISA as to the appropriateness of that course.
But as Miss Lieven points out, it is difficult to see why this should be so.
Save where there is a conviction for a specified offence, a person can be included in a barred list only if the ISA is satisfied that he has engaged in the relevant conduct and it appears to the ISA that it is appropriate to include the person in the list (paragraph 3(3) of Schedule 3 to the 2006 Act).
Stage 3 of the barring process (the case assessment) requires case workers to apply the ISA structured judgment procedure which contains a list of detailed questions that they must ask.
To assist them in the process, they can obtain specialist advice: see para 6.11 of the guidance notes.
The schools disciplinary panel reaches its conclusions as part of an inquiry into a question which is different from that which is addressed by the ISA.
More fundamentally, the case workers know that they are required to form their own opinion on the gravity and significance of the facts and on whether it is appropriate to include the referred person in the barred list.
There is no reason to suppose that the ISA will be influenced profoundly (or at all) by the schools opinion of how the primary facts should be viewed.
Conclusion
For all these reasons, I would hold that article 6(1) does not apply in the disciplinary proceedings and would allow the appeal.
I do not, therefore, find it necessary to decide whether, if there is a breach of article 6(1) at the disciplinary proceedings stage, it is cured by the decision making processes of ISA itself and the right of appeal to the Upper Tribunal.
The curative or full jurisdiction principle is well established by authorities such as Bryan v United Kingdom (1995) 21 EHRR 342 and R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295.
At paras 40 to 42 of his judgment, Laws LJ held that this line of authority does not apply here.
He said that this line of authority is concerned with cases where there is an administrative or executive decision which is not article 6 compliant (because the decision maker is not independent), but it is subject to judicial review, which is article 6 compliant; and the question is whether the judicial review jurisdiction is full enough to satisfy article 6.
Laws LJ said that the Bryan/Alconbury line of reasoning has no application here since the barred list procedure before the ISA does not control or correct errors of the disciplinary process and, as Laws LJ put it, it is the claimants case that the latter will drive the former.
Mr Bowers submits that this is an artificially narrow view of the full jurisdiction principle.
He contends that the principle extends beyond mere administrative or executive decisions by officials and recognises that procedural deficiencies may be cured by a process when viewed as a whole.
These are difficult issues on which I prefer to express no opinion.
I would allow this appeal for the reasons given by Lord Dyson with which I
LORD HOPE
am in full agreement, and for the further reasons given by Lord Brown.
It is quite clear, as Lord Dysons analysis of the facts shows, that the internal proceedings before the employer and the barring proceedings before the ISA are separate and distinct from each other.
Their decisions and procedures are directed to different issues.
On the one hand there is the persons right to remain in employment with that employer.
If the proceedings result in dismissal, as they did in this case, the decision to dismiss may be challenged in the Employment Tribunal.
On the other there is a persons right to engage in activities relating to children more generally.
This is the issue which must be determined by the Independent Safeguarding Authority (the ISA).
The barring process that the ISA conducts under the Safeguarding Vulnerable Groups Act 2006 may be the result of a decision by the employer to dismiss.
But there is no limit to the sources from which information may come that require the ISA to consider whether an individual should be included in the childrens barred list.
If the ISA decides that the individual should be included in the list, he has a right of appeal to the Upper Tribunal on the grounds set out in section 4(2).
Then there are the factors which may lead to an employers decision to dismiss or not to dismiss.
They may range widely.
They are not limited to the matters to which the ISA is required to have regard by the statute.
We are therefore dealing here with a case where an individual is subject to two distinct sets of proceedings which are not inextricably linked to each other.
That is not, of course, an end to the question whether the claimants article 6(1) Convention rights were engaged at the disciplinary hearing that was conducted by his employer.
Taken by themselves, those proceedings did not engage the protections afforded by that article.
It was not their function to determine the civil right that was in issue at that stage, which was the claimants contractual right to remain in his current employment at the school.
Nor did any decision taken in those proceedings determine his civil right to practice his profession as a teaching assistant.
It has not been suggested that, if the right to remain in his current employment were the only issue, article 6(1) required that the claimant be allowed the opportunity of legal representation in those proceedings.
For that to be the case it would have to be shown, as Laws LJ observed in the Court of Appeal, that there was in some sense at least a close nexus between the disciplinary process and the barred list procedures to be conducted by the ISA: [2010] EWCA Civ 1; [2010] 1 WLR 2218, para 28.
The decisions of the Strasbourg court have repeatedly emphasised that a remote or tenuous connection will not do.
If its effect is decisive, the nexus will have been established.
But clear guidance is lacking as to how a case is to be determined that lies between these extremes.
This is such a case, because the connection between the disciplinary proceedings and the proceedings before the ISA cannot be dismissed as remote.
Nor can it be said that the disciplinary proceedings are decisive.
The ISA must make its own assessment and its own evaluation of the evidence.
Like Lord Dyson, I would adopt Laws LJs test, which is that the claimant may enjoy article 6 procedural rights if the decision in the disciplinary proceedings will have a substantial influence or effect on the determination by the ISA of his civil right to practice his profession: [2010] 1 WLR 2218, paras 32, 37.
For the school, Mr Bowers QC said that there was no support for that test in the Strasbourg authorities.
That is, of course, true in so far as the Strasbourg court has not set it out in so many words.
But I think that it is possible to detect the underlying principle to which its decisions give effect.
I think that Laws LJs test captures the essence of the principle.
The question, then, is whether the test is satisfied in this case.
Laws LJ said that his test was satisfied because, as he saw it, there was every likelihood that the outcome of the disciplinary process would have a profound influence on the decision making processes by the ISA: para 47.
As he put it, without a de novo hearing and the possibility of an oral hearing before the ISA, at the very least the flavour and the emphasis of the governors view of the facts would remain important and influential.
He also said that that result could not be dislodged by the existence of the appellate jurisdiction of the Upper Tribunal, as the critical question was whether on the proved facts the quality of the persons act should be judged severe enough to put him on the barred list: para 49.
I am unable to agree with that assessment.
As the ISA has not yet considered the claimants case, we do not have before us a concrete set of facts on which to judge whether or not its procedures are fair.
But the Guidance Notes and the Case Worker Guidance are there for us to read, and I agree with Lord Dyson that there is no reason to doubt that case workers do as they are instructed.
The issues which they must consider under Part 1 of Schedule 3 to the 2006 Act extend well beyond those that were required to be considered by the governors.
The guidance that case workers have been given makes it very clear that they must form their own view of the facts independently of the view formed by the governors.
They must make their own assessment of the reliability of the evidence.
They are not judging the case at second hand.
Their concern is with the primary facts of the case, not with any conclusions that the governors may have formed about them.
They must give an opportunity to the person to make representations as to why he or she should not be included in the list, which may be made by a lawyer on the persons behalf, and difficult cases may be referred to a specialist for an opinion.
I think that we can be confident that the governors view of the facts will have receded far into the background when the time comes for a decision as to whether the person should be included in the childrens barred list.
As for the right of appeal to the Upper Tribunal, this is available on the grounds that the ISA has made a mistake on any point of law and in any finding of fact which it has made and on which the decision was based: section 4(2) of the 2006 Act.
The final decision whether or not it is appropriate for an individual to be included in a barred list is not a question of law or fact: section 4(3).
But I do not see this as a reason for doubting whether, taken as a whole, the procedures that the 2006 Act sets out are compatible with article 6(1).
As Miss Lieven QC for the Secretary of State pointed out, the Upper Tribunal would be in no better position to form a judgment on that issue than the expert body which is the ISA.
It would be open to the Upper Tribunal to remit that matter for reconsideration if it were to hold after an oral hearing with the benefit of legal representation that the ISA had made a mistake on any finding of fact on which the decision to list was based.
The principle, when the question of compliance with article 6(1) of the procedure before professional bodies is being considered, is to see whether they are subject to control by a judicial body that has full jurisdiction and does provide the guarantees of article 6(1): Albert and Le Compte v Belgium (1983) 5 EHRR 533, para 29; Tehrani v United Kingdom Central Council for Nursing, Midwifery and Health Visiting [2001] IRLR 208; R (Thompson) v Law Society [2004] 1 WLR 2522.
The Upper Tribunal is such a body, and had it been necessary to do so I would have been inclined to hold that any breach of article 6(1) at the initial stage was cured by the opportunity for an oral hearing that an appeal to the Upper Tribunal provides.
Working backwards, as it were, I would also have been inclined to hold that the better way to cure any breach of article 6(1) at the initial stage would have been to require the ISA to adopt procedures which complied with article 6(1) rather to require the employer to adopt these procedures to make good gaps in the regime that is operated by the ISA.
Laws LJs conclusion was that article 6(1) required that the claimant should be afforded the opportunity to arrange for legal representation in the disciplinary proceedings should he so choose: [2010] 1 WLR 2218, para 53.
But there is a serious risk that, if that course were to be adopted, disciplinary proceedings in the public sector would be turned into a process of litigation, with all the consequences as to expense and delay that that would involve.
The burden that this would impose on employers, and its chilling effect on resort to the procedure for fear of its consequences, is not hard to imagine.
A good indication that it was Parliaments wish to avoid this is to be found in section 10 of the Employment Relations Act 1999 that the employee has a right to be accompanied by an official of a trade union, not by a lawyer.
To require the person to be provided with legal representation before the governors would go against that intention, and it would have been the wrong remedy.
Our decision that the necessary nexus has not been established avoids these very unattractive consequences.
LORD BROWN
Was G entitled to be legally represented before the disciplinary committee of X School which in February 2008 was investigating an allegation of gross misconduct against him? The Court of Appeal (Laws, Wilson, Goldring LJJ) [2010] 1 WLR 2218 held that he was on the basis that the disciplinary proceedings engaged the civil limb of article 6 of the European Convention on Human Rights.
In common with the majority of this court I take a contrary view and would allow the governors appeal.
In the light of Lord Dysons very full judgment in the case, with which I fully agree, I can state what I want to add really quite shortly.
I understand Lord Dysons essential conclusion to be (see paras 74, 82 and 83 of his judgment) that the findings of the disciplinary panel in Gs case are unlikely to have a profound influence on the decision yet to be reached by the Independent Safeguarding Authority (ISA) and it is for this reason that article 6 is not engaged.
As Lord Dyson makes plain, once the disciplinary proceedings (including Gs proposed appeal which is presently stayed) have been concluded, the ISAs task will be to decide, by the process described by Lord Dyson at paras 16 31 (and further elaborated at paras 76 78), whether G should be placed on the barred list that being the decision which (subject to any appeal to the Upper Tribunal) will determine Gs relevant right here the right to work with children, not the right to continue employment with X School.
As Lord Dysons judgment also makes plain, in reaching that decision initially as to whether the ISA propose to include G in the list and, if so, following whatever representations he or his advisors may then make as to why he should not be included, as to whether or not to include him the ISA are required both to make their own independent findings of fact and to decide whether in the light of those facts he should appropriately be included in the barred list.
The only exceptions to such an independent approach (neither exception being applicable here) are, first, where there has been a conviction for a specified offence and, secondly, where findings of fact have been made by a competent body or one of its committees: see paragraph 16(4) of Schedule 3 to the Safeguarding Vulnerable Groups Act 2006 (the 2006 Act).
It seems to me instructive to note who these bodies are: (a) the General Teaching Council for England; (b) the General Teaching Council for Wales; (c) the Council of the Pharmaceutical Society of Great Britain; (d) the General Medical Council; (e) the General Dental Council; (f) the General Optical Council; (g) the General Osteopathic Council; (h) the General Chiropractic Council; (i) the Nursing and Midwifery Council; (j) the Health Professions Council (k) the General Social Care Council; (l) the Care Council for Wales.
As I need hardly observe, each of them is an independent and impartial tribunal established by law within the meaning of article 6(1) of the Convention and indisputably their proceedings engage that article.
One of the more puzzling and to my mind less satisfactory features of the Court of Appeals decision in the present case is that, whereas it requires school disciplinary panels to allow legal representation, it does not require them to be (as, of course, they are not) independent and impartial, notwithstanding that ordinarily this is regarded as an altogether more fundamental requirement (part of the irreducible minimum guaranteed by article 6) than any requirement for legal representation.
Why, one wonders, is it not permissible for the ISA to be influenced by findings of fact made without the person concerned having legal representation and yet permissible for them to be influenced by findings of fact made by a partial body such as the school governors?
More troubling still, however, is the stark anomaly created by the decision below as between public sector and private sector authorities.
X School happens to be a (small) voluntary aided school and thus a public authority.
Were a similar situation to arise, however, in a private school which would require a precisely similar report to the ISA pursuant to section 35 of the 2006 Act there could be no question of article 6 applying to the initial disciplinary process.
What, then, would be the consequence of a private school acting as X School have acted here ie not allowing legal representation of their disciplinary proceedings? As I see it, G must be saying either that in those circumstances the identical overall process would be fair and involve no breach of article 6 (which would surely be absurd) or that the operation of the ISA scheme must itself in those circumstances necessarily involve a breach of article 6.
But this would be effectively to stigmatise and condemn the whole ISA scheme carefully devised as this has been to avoid the fatal defects in the previous scheme revealed in R (Wright) v Secretary of State for Health [2009] AC 739 without any experience whatever of its workings in practice, making assumptions as to how the ISA would treat the findings of an employers disciplinary panel which run counter to its own guidance (both published and internal), without argument being directed specifically to the compatibility of the ISA scheme with article 6 in such cases as are referred to it other than by public authority employers, and without even the Secretary of State being a party at first instance (albeit represented as an intervener before the Court of Appeal and, most helpfully, before us).
To my mind it is unthinkable that the ISA scheme should be implicitly condemned in this way.
Rather it seems to me that for the purposes of the present challenge we should assume that the scheme is compatible with article 6 with regard to those cases referred to the ISA by non public authority employers and, indeed, by persons acting independently of employers.
If, of course, a challenge comes in due course to be made to the operation or legality of the scheme in such a case a challenge necessarily directed against the ISA (in so far as it is said that the scheme is not, but could be, operated lawfully) and/or the Secretary of State (in so far as it is said, as in Wright, that the scheme is inherently incompatible with article 6) the court will have to decide it.
In doing so, it will have to consider, amongst other issues, the curative or full jurisdiction principle to which Lord Dyson refers at paras 84 and 85 of his judgment.
That challenge, however, I repeat, is not presently before us.
If, then, we assume, as for present purposes I suggest we should, that the overall ISA scheme is article 6 compatible in respect of references from the private sector, I fail to see how the initial disciplinary process can be incompatible in the present case.
For these reasons, in addition to those given by Lord Dyson, I too would allow this appeal.
LORD KERR
For the reasons given by Lord Dyson, I agree that the Court of Appeal correctly identified the test to be applied on the nature of the connection that is required between various stages of a process in order to determine whether article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) is engaged at a point in the process other than that at which the final decision is taken.
The premise of the appellants argument was that the decisive influence that the disciplinary hearing in this case had to have on the decision of the Independent Safeguarding Authority (ISA) must be determinative if article 6 was to apply to that disciplinary hearing.
In other words, for article 6 of ECHR to be in play, the decision on whether Gs name was placed on the barred list must, the appellants suggested, be dictated by the outcome of the disciplinary proceedings.
Lord Dysons authoritative survey of the Strasbourg jurisprudence has effectively demonstrated the fallacy of that argument.
The centrepiece of the case made on behalf of both the appellant and the Secretary of State has therefore failed.
What the majority of this court has decided, however, is that although the Court of Appeal correctly identified the test, it failed to apply it properly.
In the main, this involves forming a different view on the facts (and the inferences to be drawn from them) from that reached by the Court of Appeal.
As Lord Dyson has said (at para 76) ISA is expected to form its own assessment of the facts on the basis of all the available evidence and (at para 79) ISA is required to make its own findings of fact and bring its own independent judgment to bear as to their seriousness and significance before deciding whether it is appropriate to place the person on the barred list.
The question that these statements raise is whether, because ISA must reach its own view as to whether the facts, as they have found them to be, are sufficient to support the conclusion that an individual should be placed on the barred list, insulates that process from substantial influence by the earlier disciplinary hearing.
Supplying an answer to that question does not involve the application of principle.
It is an exercise in deduction as to what is likely to happen when the case officers of ISA consider all the available information, including the report on the disciplinary proceedings.
On that account alone, I have grave misgivings about the propriety of this court finding that the Court of Appeal was wrong to conclude that it was inevitable that the views of the disciplinary panel and the report of the evidence given to it were likely to have a substantial influence on the decision of ISA.
It appears to be implicit in the view of the majority that it would be improper for ISA to allow itself to be heavily influenced by the findings that emerged from the disciplinary proceedings.
Regretfully, I cannot subscribe to that view.
It seems to me to be entirely open to ISA to pay close attention to the findings of the disciplinary tribunal and indeed to be substantially influenced by them, so long as it keeps faith with the requirement that it reach its own independent view of the facts.
There is nothing in the least inconsistent with ISA arriving at its own conclusions while acknowledging, expressly or otherwise, that those conclusions have been heavily influenced by the findings of the disciplinary hearing and by what took place at that hearing.
After all, details of the proceedings before the disciplinary panel will be before ISA.
Indeed, of all the material considered by ISA, the notes of the hearing are likely to be of the most pivotal importance.
Why should the findings of the panel and the account of the evidence given not have a substantial influence on ISAs conclusions? It seems to me to border on the perverse to suggest that they would not have such an influence.
The conclusion that they would not hold substantial sway appears to be based on the requirement that ISA must reach its own independent judgment.
But a judgment is not robbed of its independent quality simply because it has been heavily influenced by a particular item of evidence or by findings made by another body that considered that evidence.
Lord Hope has said that the two sets of proceedings (the internal disciplinary proceedings and what he describes as the barring proceedings) are not inextricably linked and that they are directed to different issues (para 87).
This is of course true in the sense that they have a different objective the first to decide what sanction, including dismissal, it is appropriate to impose and the second whether to include the respondents name on the barred list.
But both are most certainly concerned with the same factual matrix and the conclusions reached on the factual dispute between the principal protagonists are surely central to the outcome of both sets of proceedings.
In those circumstances it seems to me that the conclusions reached by the disciplinary panel and the evidence given to the panel not only could but should have a substantial influence on the decision of ISA.
Could it seriously be suggested that ISA would be entitled, for instance, to leave the findings of the disciplinary panel out of account? Of course not.
By the same token, it is open to ISA to decide what weight it should give to those findings.
In the absence of any other remotely adversarial proceeding in the entire process, it seems to me inevitable that the disciplinary hearing is bound to have a substantial influence or, at least, that the Court of Appeal was perfectly entitled to come to the view that it did and that this court should not interfere with that conclusion.
Lord Hope has expressed confidence that the governors view of the facts will have receded far into the background by the time that a decision is taken as to whether the respondent should be included in the barred list (para 92).
I am afraid that I do not share that confidence.
Of course, as Lord Hope has said, ISA is not limited in the sources of information to which it may have recourse in reaching its decision.
But can it realistically be said that the record of the proceedings before the disciplinary panel will be of peripheral importance only? In this connection, it is, I think, important to understand that it is not simply the conclusions of the governors that are in issue on the question of the potential of the disciplinary hearing to have a substantial influence on the findings of ISA.
All of the material from that hearing which touches on the truth of the allegations made against the respondent is relevant and, for my part, I would find it surprising, indeed reprehensible, if the case workers of ISA did not pay the closest attention to that material in reaching their conclusions on the facts.
I have said that the hearing before the disciplinary panel is the only remotely adversarial stage of the entire process.
Whether ISA has power to hold an oral hearing remains imponderable see para 80 of Lord Dysons judgment.
What is clear is that it has not in the past held one and it may safely be assumed that it will not convene such a hearing in the present case.
One must proceed on the basis, therefore, that the only occasion on which oral evidence was or will be given about the extremely serious allegations which form the case against the respondent both on the disciplinary proceedings and the barring proceedings is during the hearing before the panel.
In fact, of course, this was not an adversarial proceeding in any real sense for the respondent did not put any questions to the witnesses who gave evidence against him and refused to answer any questions put to him (because he considered that the proceedings were unfair).
Lord Dyson has said that there must be very few cases where the lack of an oral hearing would make it unduly difficult for ISA to make findings of fact and that only in very few cases will the resolution of a conflict of evidence depend on the demeanour of witnesses (para 80).
It would be wrong, in my opinion, to assume that the value of an oral hearing in a case such as the present is confined to the opportunity to observe the demeanour of witnesses.
Just as legal representation at an early stage is critical to the safeguarding of an accused persons interests, so legal representation for someone such as G is vital at the early stage.
Ex post facto contributions from a legal adviser necessarily suffer from the handicap that they must seek to displace adverse findings rather than have the chance to pre emptively nullify them.
Legal representation, if it is required in order to achieve an article 6 compliant process, is surely required where it can be deployed not only to best effect but also to achieve a real and effective contribution to the fairness of the proceedings.
This is not confined to providing an effective challenge made to the case presented against the person who is the subject of the disciplinary proceedings.
It includes advising that person on how to participate in the proceedings, as well as introducing relevant further evidence that may have a crucial impact on the forming of the first views on the factual issues.
The present case exemplifies the point.
The passive, not to say hostile, attitude of the respondent to the proceedings may well have played a crucial part in their outcome.
The lack of an oral hearing before ISA may not, as Lord Dyson has suggested, make it unduly difficult for them to reach findings of fact but the result of the only oral hearing that has taken place in this case may well lead ISA to a different conclusion on the factual dispute from that which would have been the product of a properly conducted disciplinary hearing in which the respondent, with the benefit of legal advice, had fully and meaningfully participated.
It has not been disputed that the decision of ISA involves the determination of Gs civil right.
The particular species of conduct alleged against him is at least capable of amounting to criminal activity.
It is therefore beyond argument that article 6 of ECHR requires that he must at some stage of the process be entitled to legal representation if he wishes to have it.
A fair determination of his civil right cannot take place without that vital ingredient, given the gravity of the allegations made against him and the seriousness of the consequences for him.
It is important not to concentrate unduly on the various stages of the process in isolation from each other.
And it is certainly mistaken to focus exclusively on an individual stage in order to determine whether it by itself meets the requirements of article 6.
The process overall must be fair.
Although the actual determination takes places at the point when ISA decides whether to include the respondent on the list, the anterior stage of disciplinary proceedings cannot be left out of account in deciding whether the overall process is fair.
That does not mean that one must import all the constituent rights of article 6(3)(c) into the disciplinary hearing part of the process.
It does not even mean that article 6(1) requirements must be fulfilled for that part of the process considered in isolation from the rest.
What it does mean is that the conduct of the disciplinary proceedings part of the process must be examined in order to assess what impact this has had, if any, on the overarching question whether the determination of the civil right, the product of the entire process, has fulfilled the requirement of fairness.
It is precisely because the disciplinary proceedings provide the only occasion when the competing cases can be presented in direct opposition to each other that legal advice at that point is so crucial.
That is the critical time for the testing of the evidence not merely by observing the demeanour of the witnesses (although that may play its part in the assessment of the reliability of the respective accounts) but by the probing of the allegations against the respondent and the evaluation of the plausibility of his defence to them.
It is to be remembered that this young man faced extremely grave accusations.
If those were found proved, quite apart from what I consider to be the virtually certain impact that they will have on the barring proceedings, they will place an irretrievable stain on his character and reputation.
To recognise his right to be legally represented at that stage, although it may give rise to administrative difficulties for the conduct of disciplinary proceedings, seems to me to be entirely consonant with the proper safeguarding of his article 6 rights.
Lord Brown has said that a less than satisfactory feature of the Court of Appeals decision is that while requiring school disciplinary panels to allow legal representation, it does not require them to be independent and impartial.
But this is to assume that all the requirements of article 6 must be supplied at the disciplinary proceedings stage of the process.
That is not so.
The need for an impartial and independent tribunal can be met at the later stage of ISAs decision.
At that point a wholly objective view can be formed not only of the panels conclusions but also of the evidence that the panel has heard.
Of even greater concern to Lord Brown was what he perceived to be the anomaly that a public authority such as the school in the present case would be subject to the requirement to allow legal representation under article 6 whereas a private school would not be.
In the latter case the appellant would have to argue (Lord Brown suggests) either that, despite its shortcomings, the overall process was fair (which, he says, would be absurd and I agree) or that the ISA scheme as a whole must stand condemned as necessarily involving a breach of article 6.
Again with much regret, I find myself unable to agree with this analysis.
Article 6 applies to the barring process, irrespective of whether the school is public or private.
The critical question is whether, at the time the allegations against an individual are heard, he is entitled to legal representation.
If he is entitled to that representation then, he must have it.
Simply because a private school may assert that it is not subject to the Human Rights Act 1998 (HRA) and that it is therefore not bound to comply with a teachers article 6 rights, it cannot be right to relieve a public authority such as a publicly funded school of the obligations which it owes to a teacher under HRA and ECHR.
Quite apart from that, the requirement that a teaching assistant such as the respondent is legally represented at the time that allegations are presented in evidence against him does not necessitate the condemnation of the ISA scheme for inevitable breach of article 6.
That scheme does not contemplate the holding of oral hearings.
But it does not forbid them.
An option available to ISA is to convene an oral hearing at which the person who is the subject of the barring proceedings may be legally represented.
This may require a modification of the scheme as it is currently operated but better that than its wholesale condemnation.
Moreover, if it is the position that, to comply with article 6, a person subject to barring proceedings should be legally represented when allegations against him are heard, it would be open to, indeed required of, ISA to disregard evidence given and findings made at proceedings where that prerequisite had not been fulfilled.
I consider, therefore, that this appeal should be dismissed and that it should be held that if evidence given and findings made at a disciplinary hearing are to be taken into account by ISA in deciding whether a person such as G should be placed on a barred list, he should be legally represented at that disciplinary hearing.
For the reasons given by Laws LJ at paras 40 42 of his judgment, I do not consider that this is a case where deficiencies in compliance with article 6 at the disciplinary proceedings can be cured by the availability of a right to appeal to the Upper Tribunal.
As Laws LJ said, the reasoning in the Bryan (Bryan v United Kingdom (1995) 21 EHRR 342) and Alconbury (R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295) line of cases, is concerned with the review by a judicial review court of an earlier administrative or executive decision: [2010] 1 WLR 2218, para 40.
A lack of impartiality at that stage may be corrected when subject to later review by an impartial tribunal in the form of a court.
Here the situation is quite different.
The absence of legal representation at a critical time when vital evidence is given and crucial findings are made cannot be rescued by the type of appeal that is available to the Upper Tribunal.
| UK-Abs | The issue in this case is whether the claimants rights under article 6(1) of the European Convention on Human Rights (ECHR) were engaged in a disciplinary hearing that was conducted by X School (the School).
The claimant contends that the Schools refusal to allow him legal representation violated his article 6 rights.
The Safeguarding Vulnerable Groups Act 2006 (the 2006 Act) and its predecessor legislation requires, inter alia, a school to report the circumstances of dismissals involving findings of sexual misconduct to the Independent Safeguarding Authority (ISA) which maintains a childrens barred list.
Those included on the childrens barred list are prohibited from undertaking certain work with children, including teaching.
Part 1 of Schedule 3 of the 2006 Act applies to ISAs determinations of whether to include an individual on the childrens barred list.
It provides that ISA must include an individual on the childrens barred list if a) ISA is satisfied that the person has engaged in relevant conduct and b) it is appropriate to include the person on the list (para 3(3)).
Relevant conduct includes conduct of a sexual nature involving a child (para 4(1)).
It also provides that ISA must give an individual facing being placed on the childrens barred list the opportunity to make representations (para 2) and it empowers ISA to require various persons, such as the police, to provide it with information (para 19).
In coming to its determination, ISA must make an independent evaluation of the facts.
It is not bound by the findings of any prior disciplinary hearing.
This is also set out in guidance provided to case workers.
If ISA determines to place an individual on the childrens barred list, that individual has a right of appeal to the Upper Tribunal (section 4(1) & (4)).
The claimant was a sessional music assistant at the School.
On 4 October 2007 he was suspended from his post on the basis of allegations that he had formed an inappropriate relationship with M, a 15 year old boy doing work experience at the School.
Disciplinary proceedings were launched by the School.
The claimant was advised by his solicitor not to participate in them until the police had completed their investigations.
In early February 2008 the Crown Prosecution Service indicated that they did not intend to take any further action.
By this time the School had also completed its investigation.
The investigation report concluded that there was strong evidence that the allegations were proven.
A disciplinary hearing was scheduled to take place on 21 February 2008.
In advance of the hearing, the claimant was told that he was entitled to be represented by a trade union representative or work colleague.
The claimant was not a member of a trade union and sought to be represented by his solicitors.
The School refused.
The claimant attended the disciplinary hearing accompanied by his father.
He refused to answer questions on the basis that he believed the proceedings to be unfair.
The disciplinary panel found that the claimant had formed an inappropriate relationship with M. They held that this constituted gross misconduct which warranted his summary dismissal.
In May 2008, the School reported this to the Secretary of State in accordance with the legislation preceding the 2006 Act.
The question of whether or not the claimant should be added to the childrens barred list remains pending before ISA.
The claimant issued judicial review proceedings on 19 May 2008 seeking a declaration that by reason of the denial of his right to legal representation before the Schools disciplinary hearing, it was in breach of his rights under article 6 ECHR.
He succeeded before Mr
Stephen Morris QC sitting as a Deputy High Court Judge at first instance ([2009] EWHC 504 (Admin)) whose decision was upheld by the Court of Appeal (Laws, Wilson and Goldring LJJ) ([2010] EWCA Civ 1).
The Supreme Court, by a majority, allows the appeal.
Article 6(1) does not apply to the disciplinary proceedings in issue.
The lead judgment is given by Lord Dyson, with whom Lord Walker agrees.
Lords Hope and Brown give separate, but concurring, opinions.
Lord Kerr gives a dissenting judgment.
Article 6 ECHR applies where there is a determination of . civil rights and obligations.
The meaning of determination was considered by the European Court of Human Rights (ECtHR) in Ringeisen v Austria (No 1) (1971) 1 EHRR 455.
In that case the ECtHR held that it meant proceedings the result of which is decisive for private rights and obligations.
In Le Compte, Van Leuven and De Meyere v Belgium (1981) 4 EHRR 1, the ECtHR contrasted proceedings which are directly decisive of the right in question, to which article 6 applies, with those which have a tenuous or remote consequence.
The ECtHR has repeated this mantra in a series of further cases: [36] [59].
The mantra has been applied to circumstances in which initial proceedings do not themselves determine a civil right but are closely linked to subsequent proceedings which do.
The ECtHR takes a pragmatic, context sensitive approach to the question of when such a link is established.
The case law demonstrates that the factors it takes into account include: whether the first proceedings are in fact dispositive of the later proceedings; how close the link is between the two proceedings; whether the object of the two proceedings is the same; and whether there are policy reasons for holding that article 6(1) should not apply in the first proceedings.
In light of this, the test of substantial influence formulated by Laws LJ in the Court of Appeal below is a useful formulation and is endorsed: [64] [69].
In application to the present facts, it is not disputed that the civil right in question is the claimants right to practise his profession as a teaching assistant and to work with children more generally.
This civil right would be directly determined by a decision of ISA to include him on the childrens barred list.
Accordingly, article 6(1) ECHR applies to proceedings before ISA.
However, it was not the function of the Schools disciplinary proceedings to determine the civil right in issue.
Rather, they were only concerned with the claimants employment at the School.
Therefore, in and of themselves, the Schools disciplinary proceedings do not engage article 6(1) ECHR.
As regards the establishment of a link such that article 6(1) ECHR applies to the disciplinary proceedings, they do not directly determine or exert a substantial influence over the ISA proceedings.
Therefore, in combination with the ISA proceedings, the Schools disciplinary proceedings do not engage article 6(1).
In particular this is because ISA is required to exercise its own independent judgment both in relation to finding facts and assessing their gravity and significance.
The decision by ISA whether to include an individual on the childrens barred list is only taken following an assessment of the full merits of each case.
The absence of an oral hearing does not prevent the ISA from making its own findings of fact and forming its own view independent of the view formed by the School [70] [83]; [87] [92]; [97] [101].
Lord Kerr would have dismissed the appeal.
In his view, ISA could and indeed should be substantially influenced by the findings of the disciplinary tribunal.
The requirement that it reach its own independent view of the facts is not inconsistent with this.
The overall process involving the determination of the claimants civil right must be fair.
In light of this, it is mistaken to concentrate substantially or exclusively on an individual stage in that process.
In this case, the disciplinary proceedings were critical in testing the evidence against the claimant.
To recognise his right to be legally represented at that stage is consonant with the proper safeguarding of his article 6 rights: [103] [119].
|
A feature of the trial is that in the public interest all those directly taking part are given civil immunity for their participationThus the court, judge and jury, and the witnesses including expert witnesses are granted civil immunity.
This is not just privilege for the purposes of the law of defamation but is a true immunity Arthur JS Hall & Co v Simons [2002] 1 AC 615, 740, per Lord Hobhouse of Woodborough.
In Stanton v Callaghan [1998] QB 75 the Court of Appeal held that the immunity of an expert witness extended to protect him from liability for negligence in preparing a joint statement for use in legal proceedings pursuant to RSC, Ord 38, r 38.
The claim in this case relates precisely to such negligence and was, for that reason, struck out by Blake J on 22 January 2010.
He certified, however, that the case involved a point of law of general public importance and granted a leapfrog certificate under section 12 of the Administration of Justice Act 1969, so that this appeal is brought directly from his decision.
The narrow issue raised by this appeal is whether the act of preparing a joint witness statement is one in respect of which an expert witness enjoys immunity from suit.
Mr Ter Haar QC for the appellant was careful to emphasise at the outset of his submissions that he was not concerned to do more than establish that an expert witness enjoyed no immunity in relation to this activity.
Inevitably, however, his submissions have raised the broader issue of whether public policy justifies conferring on an expert witness any immunity from liability in negligence in relation to the performance of his duties in that capacity.
Surprisingly, this immunity has never been challenged in the past.
It has simply been accepted that an immunity which protects witnesses of fact applies equally to prevent a client from suing in negligence the expert that he has retained.
The facts
In so far as this statement of the facts describes conduct on the part of the respondent, the facts are not proved but asserted in the particulars of claim.
They are to be treated as true for the purpose of resolving the question of whether this claim was properly struck out.
Understandably, the respondent has not suggested that the facts asserted do not disclose a good cause of action if she is susceptible to liability in negligence.
The action has its origin in a road traffic accident that occurred in Liverpool on 14 March 2001.
The appellant was stationary on his motorcycle, waiting to turn at a road junction, when he was knocked down by a car driven by a Mr Bennett.
Mr Bennett was drunk, he was uninsured and he was driving while disqualified.
The appellant suffered significant physical injuries, but these were not of such severity as to dwarf the significance of the psychiatric consequences of his accident.
These were post traumatic stress disorder (PTSD), depression, an adjustment disorder and associated illness behaviour which manifested itself in chronic pain syndrome.
On 20 March 2001 the appellant instructed solicitors (Kirwans) to act for him in personal injury proceedings.
Kirwans instructed a consultant orthopaedic surgeon who advised that an opinion from a clinical psychologist would be of help.
The respondent is a consultant clinical psychologist.
In May 2003 Kirwans instructed her to examine the appellant and prepare a report for the purposes of litigation.
She prepared a report dated 29 July 2003 in which she expressed the view, inter alia, that the appellant was at that time suffering from PTSD.
Kirwans issued proceedings on 26 September 2003 against Mr Bennett and the Motor Insurance Bureau.
The latter was replaced by the relevant insurer (Fortis).
Fortis admitted liability on 17 February 2004, so that only quantum remained in issue.
Pursuant to instructions from Kirwans, the respondent carried out a further examination of the appellant and issued a second report dated 10 December 2004.
This stated that the appellant did not have all the symptoms to warrant a diagnosis of PTSD, but was still suffering from depression and some of the symptoms of PTSD.
A subsequent report prepared by Dr El Assra, a consultant psychiatrist instructed by Fortis, expressed the view that the appellant was exaggerating his physical symptoms.
The district judge ordered the two experts to hold discussions and to prepare a joint statement.
The discussion took place on the telephone and Mr El Assra prepared a draft joint statement, which the respondent signed without amendment or comment.
The joint statement was damaging to the appellants claim.
It recorded agreement that his psychological reaction to the accident was no more than an adjustment reaction that did not reach the level of a depressive disorder of PTSD.
It further stated that the respondent had found the appellant to be deceptive and deceitful in his reporting, and that the experts agreed that his behaviour was suggestive of conscious mechanisms that raised doubts as to whether his subjective reporting was genuine.
When taxed by Kirwans with the discrepancy between the joint report that she had signed and her earlier assessments the respondent gave what Blake J rightly described as an unhappy picture of how the joint statement came to be signed, summarised as follows: She had not seen the reports of the opposing expert at the time i) of the telephone conference; ii) The joint statement, as drafted by the opposing expert, did not reflect what she had agreed in the telephone conversation, but she had felt under some pressure in agreeing it; iii) Her true view was that the claimant had been evasive rather than deceptive; iv) now resolved; v) She was happy for the claimants then solicitors to amend the joint statement.
It was her view that the claimant did suffer PTSD which was
Kirwans sought permission to change their psychiatric expert, but the district judge would not permit this.
It is the appellants case that Kirwans were then constrained to settle his claim for significantly less than the settlement that would have been achieved had not the respondent signed the joint statement in the terms in which she did.
The current state of the law
The immunity of expert witnesses, as propounded by the Court of Appeal in Stanton v Callaghan, has a long history.
This dates back over 400 years see Cutler v Dixon (1585) 4 Co Rep 14b; 76 ER 886.
Thus the immunity was established long before the development of the modern law of negligence and, in particular, the recognition of the possibility of liability for negligent misstatement.
It also dates back to an era long before it became common for forensic experts to offer their services under contracts for reward.
The immunity has its origin in a reaction to an actual or perceived tendency on the part of disgruntled litigants, or defendants in criminal proceedings, to bring proceedings for libel or slander against those who had given evidence against them.
Thus the immunity originally took the form of absolute privilege against a claim for defamation and it extended to all who took part in legal proceedings.
In Dawkins v Lord Rokeby (1873) LR 8 QB 255, 263 Kelly CB stated: The authorities are clear, uniform and conclusive, that no action of libel or slander lies, whether against judges, counsel, witnesses or parties, for words written or spoken in the ordinary course of any proceeding before any court or tribunal recognized by law.
This privilege was extended, in the form of immunity from suit, to other forms of action in tort.
In Hargreaves v Bretherton [1959] 1 QB 45 a man who had been convicted of fraud sought to bring a civil suit for perjury.
In striking out the claim as disclosing no cause of action Lord Goddard CJ cited the statement of Lord Mansfield in R v Skinner (1772) Lofft 55 that neither party, witness, counsel, jury, or judge, can be put to answer, civilly or criminally, for words spoken in office.
He commented: That is a perfectly clear statement by one of the greatest common lawyers that ever lived, that for words spoken by a witness in office, which means, of course, for this purpose in giving evidence, he cannot be put to answer either civilly or criminally.
In Marrinan v Vibart [1963] 1 QB 528 an attempt to circumvent the immunity by framing a claim in conspiracy to defame was roundly rejected by the Court of Appeal.
The typical situation where the immunity was invoked was where a witness or party had given evidence hostile to the plaintiff.
A similar protection was afforded to counsel in relation to defamatory allegations made against a party, or indeed anyone else, in the course of his conduct of legal proceedings.
This immunity overlapped with a wider immunity enjoyed by a barrister from a claim by his own client for failure to exercise reasonable skill and care in the conduct of litigation on behalf of the client.
That immunity was unsuccessfully challenged in Rondel v Worsley [1969] 1 AC 191.
In Hall v Simons [2001] 1 AC 615 the House of Lords abolished it on the ground that it could no longer be justified.
The barrister is, however, still protected by absolute privilege from a claim in defamation in relation to statements made in the course of the conduct of legal proceedings see Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120, 142, per Lord Hobhouse.
I now propose to consider the authorities in greater detail.
My particular objects in doing so are first to identify the reasons for the immunity from suit, secondly to examine the circumstances in which it was accepted that this immunity extended to expert witnesses and thirdly to identify the reasoning that was applied first in holding that this immunity extended to barristers and then in holding that it did not protect them from actions for breach of duty of care.
In the light of the authorities I shall then turn to consider whether the immunity can be justified.
The authorities
The reasons for the immunity
In Cutler v Dixon the reason given for rejecting the claim was that if actions should be permitted in such cases, those who have just cause for complaint, would not dare to complain for fear of infinite vexation.
The continuous theme that runs through the cases is, in modern parlance, the chilling effect that the risk of claims arising out of conduct in relation to legal proceedings would have.
It would make claimants reluctant to resort to litigation.
It would make witnesses reluctant to testify.
If they did testify, it would make them reluctant to do so freely and frankly.
The cases emphasise that the object of the immunity is not to protect those whose conduct is open to criticism, but those who would be subject to unjustified and vexatious claims by disgruntled litigants.
There is no need to cite the many early authorities that support these propositions, for the reasons for the immunity were considered relatively recently by the House of Lords in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
The issue in that case was whether witness immunity extended to protect police officers who were alleged to have fabricated evidence, as opposed to having given false evidence, from claims of conspiracy to injure and misfeasance in public office.
The plaintiffs had been indicted for serious offences, but their trial had been permanently stayed on the grounds of abuse of process on the part of the police.
Their Lordships identified the following justifications for witness immunity: i) To protect witnesses who have given evidence in good faith from being harassed and vexed by unjustified claims: per Lord Hope of Craighead at p 446 and Lord Hutton at p 464; ii) To encourage honest and well meaning persons to assist justice; in the interest of establishing the truth and to secure that justice may be done: per Lord Hope at p 447 and Lord Clyde at p 460; iii) To secure that the witness will speak freely and fearlessly: per Lord Clyde at p 461.
A further justification was identified by Lord Hope at p 446, namely to avoid a multiplicity of actions in which the value or truth of the evidence of a witness would be tried all over again.
This justification had been identified by Lord Wilberforce in Roy v Prior [1971] AC 470, 480.
In Darker Lord Hope observed that this justification only applied to evidence given in court, so that it was not relevant to that appeal.
He might have added that it only applied where the proceedings had culminated in a decision.
In his judgment in this case, Lord Hope suggests that this justification is one that was relevant to barrister immunity, but which is not relevant to witness immunity.
I do not wholly agree.
A claim against a witness might well involve an assertion that, but for the false evidence, the trial would have had a different outcome, a matter with obvious implications for the measure of damages.
I agree, however, that this was not one of the original justifications, nor the most cogent justification, for the general immunity.
The extension of the immunity to expert witnesses
A significant distinction between an expert witness and a witness of fact is that the former will have chosen to provide his services and will voluntarily have undertaken duties to his client for reward under contract whereas the latter will have no such motive for giving evidence.
The question was raised, but not explored in depth, of whether an expert is normally in direct contractual relationship with his client, or whether his contract is with the solicitor who engages him on behalf of the client.
I do not think that this is significant.
In either event there is a marked difference between holding the expert witness immune from liability for breach of the duty that he has undertaken to the claimant and granting immunity to a witness of fact from liability against a claim for defamation, or some other tortious claim, where the witness may not have volunteered to give evidence and where he owes no duty to the claimant.
It is notable that, before the present case, no one appears to have suggested that this difference called into question whether witness immunity should extend to protect the expert witness against a claim by his own client.
The Scottish case of Watson v MEwan [1905] AC 480 was a case where a claim was brought against a medical witness in respect of statements made in preparation of a witness statement and similar statements subsequently made in court.
It is a case of unusual facts.
The appellant was a doctor of medicine who had been retained by the respondent (the wife) in respect of proposed proceedings against her husband for separation and aliment.
He was subsequently retained by the husband in the same proceedings.
In preparing his witness statement he included some very damaging allegations based on matters that he had learned when acting for the wife, which included allegations of taking morphine and planning to procure an abortion.
He subsequently gave oral evidence of these matters in the court proceedings.
The wife brought an action against him for breach of confidence and for slander, relying on both what was said to the husbands lawyers and what was said in court.
The head note to the report of the decision in the House of Lords suggests that the claim for breach of confidence did not proceed, and that the relevant issues that came before the House of Lords were whether the appellant was immune from a claim for slander in respect of what he said in court and, more pertinently, whether this immunity extended to what he had said when giving his witness statement (the precognition).
I am however grateful to Lord Hope for his clarification of the nature of this rather confusing litigation.
The House of Lords held that the appellant was immune.
Giving the leading speech the Earl of Halsbury LC said, at pp 488 489: I do not care whether he is what is called a volunteer or not; if he is a person engaged in the administration of justice, on whichever side he is called his duty is to tell the truth and the whole truth.
If he tells the truth and the whole truth, it matters not on whose behalf he is called as a witness; in respect of what he swears as a witness he is protected that cannot be denied and when he is being examined for the purpose of being a witness he is bound to tell the whole truth according to his views, otherwise the precognition, the examination to ascertain what he will prove in the witness box, would be worth nothing.
This decision lends some support for extending witness immunity to experts, but it is right to observe that the focus of the House of Lords appears to have been the claim for slander and the case was not concerned with the duty of care that, under the modern law, is owed by an expert to his client, as to which see para 49 below.
Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184 involved a claim against forensic scientists in negligence.
The scientists had provided post mortem reports to the police that had led to the plaintiff being prosecuted for the murder of her small son.
At trial the prosecution offered no evidence so that she was acquitted.
She alleged that the defendants had been negligent in the conduct of the post mortem.
Drake J held that the defendants were protected by witness immunity.
He held that immunity given to a witness extended to cover statements he made prior to the issue of a writ or the commencement of a prosecution, provided that the statement was made for the purpose of a possible action or prosecution and at a time when the possible action or prosecution was being considered.
There is no reported case where immunity was invoked against a claim for breach of a duty of care brought against a professional expert witness by his client before Palmer v Durnford Ford [1992] QB 483.
In that case the plaintiffs had pursued a disastrous claim against both the supplier and a repairer of a lorry tractor unit.
They subsequently sued an engineering expert on the ground that his incompetent report had led them to advance claims on a basis that was invalid, and their solicitors for negligence in engaging an incompetent expert.
The expert persuaded the district judge to strike out the claim against him on the ground that he was immune from suit.
On appeal the plaintiff did not challenge the proposition that the immunity that was enjoyed by witnesses in general protected a paid expert against a claim by his own client.
The issue was the extent of that immunity.
Mr Simon Tuckey QC, sitting as a deputy High Court judge, applied by analogy the decision of the House of Lords in relation to the advocates immunity from suit in Saif Ali v Sydney Mitchell & Co [1980] AC 198 a decision that I shall consider in due course.
He held, at p 488, that immunity would only extend to what could fairly be said to be work which was preliminary to giving evidence in court, judged perhaps by the principal purpose for which the work was done.
Work done principally for the purpose of advising the client was not covered.
Until the present case I am not aware that the decision in Palmer v Durnford Ford has been questioned.
It was referred to, with approval, in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
One of the issues raised in that case was whether witness immunity protected a psychiatrist from liability in negligence to a child in respect of advice as to whether the likelihood of child abuse rendered it desirable for a child to be removed from her home.
The argument was that if the psychiatrists views were to lead to child care proceedings, the psychiatrist would have to present those views in court.
In the Court of Appeal at p 661 Sir Thomas Bingham MR dismissed this argument.
He observed that witness immunity had been treated as analogous to immunity accorded to those in the conduct of proceedings.
If the immunity were as wide as that claimed, a barrister or solicitor advising a client on a factual question with a view to proceedings would be immune from an action for negligence.
Such a result was inconsistent with authority.
Mr Simon Tuckey had reached a correct conclusion in Palmer v Durnford Ford.
In the House of Lords Lord Browne Wilkinson disagreed at p 755, inasmuch as he held that the views expressed by the psychiatrist were protected by witness immunity.
He found the reasoning of Drake J in Evans v London Hospital compelling, at least in relation to criminal proceedings.
He expressed no view in relation to ordinary civil proceedings and said that he intended to cast no doubt on Mr Simon Tuckeys decision in Palmer v Durnford Ford.
Stanton v Callaghan [2000] QB 75 is the leading case on immunity conferred in respect of a claim brought by a litigant against his own expert witness.
The case has features in common with those of the present case.
The defendant was a structural engineer, retained by the plaintiffs to assist in a claim against insurers in relation to the costs of dealing with subsidence of the plaintiffs house.
He initially advised that total underpinning was required at a cost of some 77,000.
Subsequently, in the course of preparing a joint report with the insurers expert witness, the latter persuaded him to agree that infilling with polystyrene, at a cost of only some 21,000, would be a satisfactory remedy.
The case was settled on that basis, but the plaintiffs then brought an action claiming that their experts change of advice had been negligent.
The master refused an application to strike out the claim and the judge upheld him, but the Court of Appeal reversed the decision.
After a review of authority, including lengthy citation from Palmer v Durnford Ford, Chadwick LJ summarised their effect as follows, at p 100: (i) an expert witness who gives evidence at a trial is immune from suit in respect of anything which he says in court, and that immunity will extend to the contents of the report which he adopts as, or incorporates in, his evidence; (ii) where an expert witness gives evidence at a trial the immunity which he would enjoy in respect of that evidence is not to be circumvented by a suit based on the report itself; and (iii) the immunity does not extend to protect an expert who has been retained to advise as to the merits of a partys claim in litigation from a suit by the party by whom he has been retained in respect of that advice, notwithstanding that it was in contemplation at the time when the advice was given that the expert would be a witness at the trial if that litigation were to proceed.
What, as it seems to me, has not been decided by any authority binding in this court is whether an expert is immune from suit by the party who has retained him in respect of the contents of a report which he prepares for the purpose of exchange prior to trial say, to comply with directions given under RSC, Ord 38, r 37 in circumstances where he does not, in the event, give evidence at the trial; either because the trial does not take place or because he is not called as a witness.
Chadwick LJs conclusion appears at pp 101 102: In my view, the public interest in facilitating full and frank discussion between experts before trial does require that each should be free to make proper concessions without fear that any departure from advice previously given to the party who has retained him will be seen as evidence of negligence.
That, as it seems to me, is an area in which public policy justifies immunity.
The immunity is needed in order to avoid the tension between a desire to assist the court and fear of the consequences of a departure from previous advice.
Otton LJ agreed.
He drew an analogy between the position of an expert witness and the position of an advocate, and applied the reasoning of the House of Lords in relation to the position of barristers in Rondel v Worsley [1969] 1 AC 191, to which I shall shortly refer.
Each had to be given full opportunity to discharge their duties to the court.
Otton LJs conclusion on the facts of the case before him were as follows: On any basis the defendant when attending the meeting with his opposite number enjoyed the immunity.
It is true that he did not do so pursuant to RSC, Ord 38, r 38 but the purpose of the meeting was to identify those parts of the evidence and the others opinion which they could agree and those which they could not.
It was in the public interest to do so.
The duty to the court must override the fear of suit arising out of a departure from a previously held position.
The expert must be able to resile fearlessly and with dignity.
In the instant case both experts resiled from more extreme positions.
In theory, at least, the defendants could have sued their expert for placing them in a more adverse position.
This is the extent of the relatively sparse authority in this jurisdiction which deals directly with the immunity of an expert witness to suit by his own client.
Before considering whether this Court should allow the law to stand where it is I turn to consider what lessons are to be learned from the position of advocates, for the courts have both compared and contrasted the position of advocates with the position of expert witnesses.
The position of barristers
It had long been thought by many that barristers were immune from liability in negligence because they did not enter into contracts with their clients.
They could not sue for their fees and thus they owed their clients no duty of care.
This reasoning was thrown into question by the decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.
The immunity of barristers was challenged in Rondel v Worsley [1969] 1 AC 191.
No case could have been better designed to illustrate the dangers of being exposed to vexatious litigation.
The defendant had accepted a dock brief for a man who was rightly convicted and sentenced to 18 months imprisonment.
His application for permission to appeal included complaints against his counsel.
It was refused.
He then commenced proceedings for negligence.
It was at all stages found that his claim was hopeless.
But the issue of principle of whether an action for negligence could be brought against a barrister was pursued to the House of Lords.
Their Lordships unanimously held that it could not.
Barristers were immune from liability in negligence.
This immunity did not stem from a barristers inability to sue for his fees.
It was to protect him from the risk of being sued for doing no more than his duty to the court.
This would sometimes conflict with what appeared to be the personal interests of the client: as an officer of the court concerned in the administration of justice, he has an overriding duty to the court, to the standards of his profession, and to the public, which may and often does lead to a conflict with his clients wishes or with what the client thinks are his personal interests. per Lord Reid at p 227.
This rendered counsel particularly susceptible to vexatious suits and immunity was necessary to protect against this.
Without this immunity there would be a pressure on the advocate to subordinate his duty to the court to his duty to the client.
This would lead him into undesirable prolixity per Lord Reid at p 229, Lord Morris of Borth y Gest at p 251, Lord Pearce at pp 256 and 272, and Lord Upjohn at p 284.
Some of their Lordships were also concerned with the prospect of repeated litigation raising the same issues having failed to prove by appeal that he was wrongly convicted, the defendant would seek to establish this by a claim against his counsel.
This would lead to a trial upon a trial, speculation upon speculation, an unseemly excrescence upon the legal system per Lord Morris at pp 249 250.
Lord Reid, Lord Morris and Lord Upjohn expressed the view that public policy did not require that a barrister should be immune from negligence in relation to matters unconnected with cases in court.
Lord Reid observed at p 229 that immunity was not the only way that the law protected counsel.
They also shared with the judge and witnesses the absolute privilege with regard to what was said by them in court.
At p 252 Lord Morris compared the immunity of the barrister with that accorded to witnesses in respect of the evidence given by them in court, an immunity which also attached to the parties and to the judge, albeit that the relationship between an advocate and the client differed from the relationship between the client and an adverse witness p 253.
Lord Pearce at pp 268 269 also drew an analogy between the position of advocates and the position of witnesses.
He remarked that the reasons underlying the immunity of witnesses were first that there might be a series of retrials and secondly that an honest witness might be deflected by fear of the consequences.
He asked at p 270 whether counsel alone of the five ingredients of a trial parties, witnesses, judge, jurors and advocate should be the only one to be liable to his client in damages.
Lord Upjohn at p 283 remarked that it was because of counsels duty to the court in the public interest that immunity from defamation was granted, as it was to the judge and to witnesses.
This immunity was just as necessary in respect of his general conduct of the case.
It is noteworthy that, in justifying the immunity from suit enjoyed by counsel, their Lordships compared the position of counsel with that of the others who took part in the trial process, including witnesses.
In Saif Ali v Sydney Mitchell & Co [1980] AC 198 the issue was not whether barristers should have immunity from suit, but the scope of that immunity.
The plaintiff brought an action against his solicitors for failure to sue the correct defendant in relation to a road traffic accident.
The solicitors joined the barrister who had advised them.
The issue was whether the barristers immunity extended to his advice on whom to sue.
The House of Lords, Lord Keith of Kinkel dissenting, held that it did not.
Lord Wilberforce at p 214 distinguished this immunity from the privilege that attached to court proceedings, which protected equally judge, counsel, witnesses, jurors and parties, observing that this had nothing to do with a barristers immunity from suit.
The following test of immunity, laid down by McCarthy P in the New Zealand Court of Appeal in Rees v Sinclair [1974] 1 NZLR 180, 187 was approved: the protection exists only where the particular work is so intimately connected with the conduct of the cause in court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing.
Lord Diplock commented at p 218 that the barristers immunity from liability for negligence in the conduct of his professional work granted the Bar a privileged status which the common law did not accord to any other profession or skilled craft.
He held that this immunity was justified by two considerations.
The first was that the barristers immunity for what he said and did in court was part of the general immunity from civil liability which attached to all persons in respect of their participation in proceedings before a court of justice; judges, court officials, witnesses, parties, counsel and solicitors alike p 222.
The second was the undesirability of re trials of the same issues.
Lord Salmon at p 230 remarked that public policy required the barrister to have the same immunity as the judge, juryman or witness for anything he said or did in court, but not for failing to join the right party.
Lord Russell of Killowen, who also dissented, at p 233, on the other hand, said that the barristers immunity was so that he could perform his public duty in relation to the conduct of litigation without worrying about the possibility of a claim for negligence.
He did not consider that this immunity was connected with a quite different immunity of judges, witnesses and jurors.
It is not easy to trace a common thread in these judgments.
The majority, however, come close to equating the position of the barrister with that of the others who take part in proceedings in court.
The majority also held that, when a solicitor was acting as an advocate, he enjoyed the same immunity as a barrister.
In Hall v Simons the House of Lords swept away the advocates immunity from liability in negligence, in court and out, albeit not their absolute privilege from claims for defamation.
Counsel for the plaintiffs accepted that expert witnesses enjoyed immunity and did not seek to challenge this.
Rather they sought to distinguish expert witnesses from advocates on the ground that the former owed no duties to their clients once they were in the witness box.
Their sole duty was then to the court p 671.
Lord Steyn does not seem to have accepted this argument.
At p 679 he referred to the analogy of the immunity of those involved in court proceedings.
He then referred to an argument in Cane, Tort Law and Economic Interests, 2nd ed (1996), p 237 that urged the case for removing immunity from paid expert witnesses.
He was, however, persuaded by an argument that there was little connection between immunity from liability for things said in court and immunity from liability for negligent acts.
Lord Hoffmann accepted counsels argument.
He said at p 698: Mr Scott invited your Lordships to apply by analogy the decision of the Court of Appeal in Stanton v Callaghan [2000] QB 75, in which it was held that an expert witness could not be sued for agreeing to a joint experts statement in terms which the client thought detrimental to his interests.
He said that this was an example of a general immunity for acts done in the course of litigation.
But that seems to me to fall squarely within the traditional witness immunity.
The alleged cause of action was a statement of the evidence which the witness proposed to give to the court.
A witness owes no duty of care to anyone in respect of the evidence he gives to the court.
His only duty is to tell the truth.
There seems to me no analogy with the position of a lawyer who owes a duty of care to his client.
Nor is there in my opinion any analogy with the position of the judge.
The judge owes no duty of care to either of the parties.
He has only a public duty to administer justice in accordance with his oath.
The fact that the advocate is the only person involved in the trial process who is liable to be sued for negligence is because he is the only person who has undertaken a duty of care to his client.
I shall shortly consider the extent to which there is a valid distinction between advocates and expert witnesses in the present context.
It suffices to note that in Hall v Simons the House of Lords abolished immunity from liability in negligence in the case of the former without questioning the immunity of the latter.
Discussion
I propose to consider the following issues in relation to expert witnesses: i) What are the purposes of the immunity? ii) What is the scope of the immunity? iii) Has the immunity been eroded? iv) What are the effects of the immunity? v) Can expert witnesses be compared to advocates? vi) Is the immunity justified? vii) Should the immunity be abolished? What are the purposes of the immunity?
Mr Lawrence QC for the respondent did not seek to advance the danger of a multiplicity of proceedings in support of witness immunity.
He accepted that that argument had been more cogent as a justification for the immunity from suit that had been accorded to advocates, and yet that argument had not prevailed in Hall v Simons.
Rather, Mr Lawrence invoked the chilling factor that potential liability in negligence would introduce in respect of expert evidence.
This, he submitted, would operate in two ways.
First it would make expert witnesses more reluctant to provide their services at all.
He drew attention to concerns expressed by Thorpe LJ in Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462, paras 225 249, that, in relation to family justice, the demand for experts exceeded supply and that this was a field which was very sensitive to increasing or newly emerging disincentives.
This was a theme that Wall LJ had underlined extra judicially when delivering a paper on the use of experts in family cases at the annual Bond Solon expert witness conference on 6 November 2009.
Mr Lawrence placed more emphasis on the other aspect of the chilling factor.
This was the reluctance that an expert witness would have to give evidence that was contrary to his clients interest if there was a risk that this might lead his client to sue him.
This risk, he submitted, had become more significant since Lord Woolf, and the provisions of the CPR which gave effect to his recommendations, had emphasised the paramount importance of the duty of an expert to give frank and objective advice to the court.
It was important that experts should have the reassurance that, if they complied with this obligation to the possible disadvantage of their clients, they would not be at risk of being sued for failing to have regard to their clients best interests.
I believe that Mr Lawrence has accurately identified the primary case for conferring immunity from liability in negligence on expert witnesses.
As I explained in para 17 above, however, I would not wholly discount the argument that it is undesirable that one court, other than an appellate court, should be required to pass judgment on the correctness of the decision of another court, which is a possible consequence of permitting claims for negligence against expert witnesses.
What is the scope of the immunity?
The Court suggested to Mr Lawrence that the requirement identified by Otton LJ in Stanton v Callaghan that an expert must be able to resile fearlessly and with dignity from a more extreme position taken in an earlier advice could present a paradox.
The expert might be reluctant to do this through fear of conceding that his earlier advice had been erroneous.
In that event he needed protection, not in respect of his revised view, but in respect of his earlier advice.
Yet, on the approach in Palmer v Durnford Ford, the earlier advice might not be covered by the immunity.
Mr Lawrences response to this was that any advice given in possible anticipation of litigation should be covered by the immunity.
This would bring within the scope of the immunity a wider class of expert advice than those embraced by the test in Palmer v Durnford Ford, indeed any expert advice where there was a possibility of litigation.
Mr Lawrences submissions lend support to a point made in opposition to the immunity by Mr Ter Haar.
This is that it is difficult to draw the line that confines the immunity.
The border is fuzzy.
It is clear, however, that if the immunity is to be effective in removing inhibitions on what the expert witness is prepared to say at the trial it must protect him in relation to his expression of views before the trial.
Has the immunity been eroded?
Mr Ter Haar submitted that the case for conferring immunity on expert witnesses has weakened because, in two respects, the immunity of expert witnesses has been eroded.
In Meadow v General Medical Council [2007] QB 462 the Court of Appeal held that expert witnesses had no immunity against disciplinary proceedings before professional tribunals where fitness to practice was in issue.
In Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 Peter Smith J held that expert witnesses were not immune from being held liable to wasted costs orders.
Mr Lawrence accepted the validity of this argument to the extent of submitting that Phillips v Symes (No 2) had been wrongly decided.
I do not consider that the susceptibility of expert witnesses to disciplinary proceedings or to wasted cost orders weakens the case for immunity from civil suit, in so far as this case exists.
The principal argument advanced for immunity from civil suit is that the risk of being sued will deter the expert witness from giving full and frank evidence in accordance with his duty to the court when this conflicts with the interests of his client.
In so far as a witness may be tempted to trim his sails to suit his client, I would expect the risk of disciplinary proceedings or of a wasted costs order to be a deterrent.
The argument advanced in support of immunity from suit by the client does not extend to immunity from disciplinary proceedings or wasted costs orders.
What are the effects of the immunity?
It is common ground that if the immunity is to be effective it must apply to views expressed not only in court, but in contemplation of, or at least preparation for, possible court proceedings.
The vast proportion of civil claims settle before they get to court.
For this reason alone it will be in only a small minority of cases that views expressed by an expert will affect the client because of their impact on a hearing in court.
In the vast majority of cases those views will impact, not on a judgment of the court, but on the clients decision whether or not to proceed with an action or on the terms on which he agrees to settle the dispute.
It is no coincidence that both in the present case and in Palmer v Durnford Ford the claim has related to the effect of the experts opinion on the terms of a settlement.
Thus the effect of the immunity is to preclude the client from suing for breach of duty where the experts negligence is alleged to have adversely affected such a decision.
The question is whether this is necessary in order to ensure that his objectivity is not affected in the minority of cases that do result in court proceedings.
Can expert witnesses be compared to advocates?
In Hall v Simons at p 698 Lord Hoffmann, when comparing the position of an expert witness to that of an advocate, said that a witness owes no duty of care in respect of the evidence that he gives to the court.
His only duty is to tell the truth.
That statement may be true of a witness of fact, but it is not true of an expert witness.
Lord Hoffmann was wrong to distinguish between the expert witness and the advocate on the basis that the latter is the only person who has undertaken a duty of care to the client.
In some circumstances the difference between an immunity from suit and an absence of legal duty can be readily appreciated.
Diplomatic immunity, which can be waived, is an example.
In this case the distinction is more elusive.
There was a time when it might have been possible to argue that there was a difference between the duty owed by an expert witness to the client who retained him and a conflicting, and overriding, public duty owed by the expert when giving evidence in court; that the former obliged the expert to put forward the best case for his client whereas the latter involved a duty to be candid, even at the expense of his client.
The existence of such a difference is implicit in the provision of CPR 35.3 which states that it is the duty of experts to help the court with matters within their expertise and that this duty overrides any obligation to the person from whom the experts have received their instructions or by whom they are paid.
Such a distinction lends force to the argument that, once the expert is providing evidence to the court, or preparing to do so, he is no longer bound by a duty to his client and thus cannot be held liable for breach of such duty.
In Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd [1995] FSR 818 Laddie J, at p 841, quoted from an article, The Expert Witness: Partisan with a Conscience, in the August 1990 Journal of the Chartered Institute of Arbitrators by a distinguished expert who suggested that it was appropriate for an expert to act as a hired gun unless and until he found himself in court where the earlier pragmatic flexibility is brought under a sharp curb, whether of conscience, or fear of perjury, or fear of losing professional credibility.
It is no longer enough for the expert like the virtuous youth in the Mikado to tell the truth whenever he finds it pays: shades of moral and other constraints begin to close up on him.
Laddie J was rightly critical of the approach of this expert.
There is no longer any scope, if indeed there ever was, for contrasting the duty owed by an expert to his client with a different duty to the court, which replaces the former, once the witness gets into court.
In response to Lord Woolfs recommendations on access to justice the CPR now spell out in detail the duties to which expert witnesses are subject including, where so directed, a duty to meet and, where possible, reach agreement with the expert on the other side.
At the end of every experts report the writer has to state that he understands and has complied with his duty to the court.
Where an expert witness is retained, it is likely to be, as it was in the present case, on terms that the expert will perform the functions specified in the CPR.
The expert agrees with his client that he will perform the duties that he owes to the court.
Thus there is no conflict between the duty that the expert owes to his client and the duty that he owes to the court.
Furthermore, a term is implied into the contract under section 13 of the Supply of Goods and Services Act 1982, that the expert will exercise reasonable skill and care in carrying out the contractual services.
Thus the expert witness has this in common with the advocate.
Each undertakes a duty to provide services to the client.
In each case those services include a paramount duty to the court and the public, which may require the advocate or the witness to act in a way which does not advance the clients case.
The advocate must disclose to the court authorities that are unfavourable to his client.
The expert witness must give his evidence honestly, even if this involves concessions that are contrary to his clients interests.
The expert witness has far more in common with the advocate than he does with the witness of fact.
Is the immunity justified?
In Darker Lord Clyde remarked, at pp 456 457: since the immunity may cut across the rights of others to a legal remedy and so runs counter to the policy that no wrong should be without a remedy, it should be only allowed with reluctance, and should not readily be extended.
It should only be allowed where it is necessary to do so.
With this principle in mind, I would adopt the approach advocated by Lord Reid in Rondel v Worsley at p 228, when considering the immunity from suit enjoyed by advocates: the issue appears to me to be whether the abolition of the rule would probably be attended by such disadvantage to the public interest as to make its retention clearly justifiable.
It would not be right to start with a presumption that because the immunity exists it should be maintained unless it is shown to be unjustified.
The onus lies fairly and squarely on the respondent to justify the immunity behind which she seeks to shelter.
I turn to consider whether she can do so.
I shall consider the various justifications advanced for the immunity that I have identified earlier in this judgment.
Reluctance to testify
Is Mr Lawrence right to submit that, if expert witnesses are liable to be sued for breach of duty, they will be discouraged from providing their services at all? I can see no justification for this assumption.
All who provide professional services which involve a duty of care are at risk of being sued for breach of that duty.
They customarily insure against that risk.
In some circumstances the risk of suit and the cost of insurance may be so high that this is a discouragement to provision of those services.
I understand that, in some parts of the world, this is true of the services of obstetricians.
In Meadow Thorpe LJ drew attention to the shortage of medical experts who were prepared to provide forensic services in child care cases.
He said, at para 227, of the family justice system: Here most of the required experts are either medically qualified or otherwise qualified in the mental health professions.
The majority will be employed under NHS consultant contracts.
By contrast to the other justice systems this is a market in which demand exceeds supply.
It is thus very sensitive to increasing or newly emerging disincentives.
This factor is compounded by a paucity of incentives.
The fee for the work will often be paid to the trust employer.
The employer may be reluctant to release the consultant from other duties.
Keeping up with the demands of the courts timetable may involve evening or weekend work.
Thorpe LJ was describing the position as it then was, notwithstanding that expert witnesses were immune from suit in relation to their evidence.
It does not follow that removing this immunity would constitute a further significant disincentive to their provision of forensic services.
Why should the risk of being sued in relation to forensic services constitute a greater disincentive to the provision of such services than does the risk of being sued in relation to any other form of professional service? Furthermore, as Thorpe LJ remarked, the supply of expert witnesses in other fields exceeds demand.
Mr Ter Haar referred the Court to a survey carried out at the Bond Solon Annual Expert Witness Conference in November 2010. 106 experts were asked whether they would continue to act as expert witnesses if expert immunity from suit were substantially reduced. 92 answered yes and 14 no. I do not consider that much weight can be attached to a survey of this type, but it does not suggest that immunity from suit for negligence is essential to secure an adequate supply of forensic experts.
The case that immunity is necessary to prevent a chilling effect on the supply of expert witnesses is not made out.
Is immunity necessary to ensure that expert witnesses give full and frank evidence to the court?
The principal justification for immunity that Mr Lawrence urged was that this was necessary to ensure that the expert performed his duty to the court.
This duty required him, whether when attempting to reach agreement with the expert on the other side, or when giving evidence to the court, to give his honest opinion, even if this proved adverse to the case of his own client.
Mr Lawrence submitted that the expert would have some apprehension about taking such a course and that immunity from suit was necessary to allay this apprehension.
Mr Lawrence could produce no empirical evidence to support this thesis, nor could Mr Ter Haar produce any empirical evidence to disprove it.
Research into the position in other common law jurisdictions was inconclusive.
As expert witnesses have, to date, had the benefit of immunity, how they will behave if that immunity is removed must be a matter of conjecture or, more accurately, reasoning.
But if reasoning is applied, I do not find that it supports Mr Lawrences thesis.
An experts initial advice is likely to be for the benefit of his client alone.
It is on the basis of that advice that the client is likely to decide whether to proceed with his claim, or the terms on which to settle it.
The question then arises of the experts attitude if he subsequently forms the view, or is persuaded by the witness on the other side, that his initial advice was over optimistic, or that there is some weakness in his clients case which he had not appreciated.
His duty to the court is frankly to concede his change of view.
The witness of integrity will do so.
I can readily appreciate the possibility that some experts may not have that integrity.
They will be reluctant to admit to the weakness in their clients case.
They may be reluctant because of loyalty to the client and his team, or because of a disinclination to admit to having erred in the initial opinion.
I question, however, whether their reluctance will be because of a fear of being sued at least a fear of being sued for the opinion given to the court.
An expert will be well aware of his duty to the court and that if he frankly accepts that he has changed his view it will be apparent that he is performing that duty.
I do not see why he should be concerned that this will result in his being sued for breach of duty.
It is paradoxical to postulate that in order to persuade an expert to perform the duty that he has undertaken to his client it is necessary to give him immunity from liability for breach of that duty.
There is here, I believe, a lesson to be learnt from the position of barristers.
It was always believed that it was necessary that barristers should be immune from suit in order to ensure that they were not inhibited from performing their duty to the court.
Yet removal of their immunity has not in my experience resulted in any diminution of the advocates readiness to perform that duty.
It would be quite wrong to perpetuate the immunity of expert witnesses out of mere conjecture that they will be reluctant to perform their duty to the court if they are not immune from suit for breach of duty.
Will the diligent expert witness be harassed by vexatious claims for breach of duty?
There is an overlap between this question and the last.
The rational expert witness who has performed his duty is unlikely to fear being sued by the rational client.
But unsuccessful litigants do not always behave rationally.
I can appreciate the apprehension that, if expert witnesses are not immune, they may find themselves the subject of vexatious claims.
But again I question the extent to which this apprehension is realistic.
It is easy enough for the unsuccessful litigant to allege, if permitted, that a witness of fact who has given evidence against him was guilty of defamatory mendacity.
It is far less easy for a lay litigant to mount a credible case that his expert witness has been negligent.
The present case is unusual in that, on the agreed facts, the respondent has admitted to putting her signature to a joint report that did not express her views.
There is nothing vexatious about the present claim.
Where, however, a litigant is disaffected because a diligent expert has made concessions that have damaged his case, how is he to get a claim against that expert off the ground? It will not be viable without the support of another expert.
Is the rare litigant who has the resources to fund such a claim going to throw money away on proceedings that he will be advised are without merit? The litigant without resources will be unlikely to succeed in persuading lawyers to act on a conditional fee basis.
A litigant in person who seeks to bring such a claim without professional support will be unable to plead a coherent case and will be susceptible to a strike out application.
For these reasons I doubt whether removal of expert witness immunity will lead to a proliferation of vexatious claims.
I am not aware that since Hall v Simons barristers have experienced a flood of such claims from disappointed litigants.
Will there be a risk of a multiplicity of suits?
For the reasons that I have already given I do not believe that there will.
I have, however, been considering thus far the position of expert witnesses in civil cases.
I believe that my conclusions hold good in the case of the duty owed by an expert witness to the client who retains him in a criminal trial.
I concede, however, that the risk of vexatious claims from those convicted of criminal offences may be greater.
Such claims will, however, be struck out as an abuse of process unless the convicted client first succeeds in getting his conviction overturned on appeal see Hunter v Chief Constable of the West Midlands Police [1982] AC 529.
For these reason I conclude that no justification has been shown for continuing to hold expert witnesses immune from suit in relation to the evidence they give in court or for the views they express in anticipation of court proceedings.
Should the immunity be abolished?
It follows that I consider that the immunity from suit for breach of duty that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished.
I emphasise that this conclusion does not extend to the absolute privilege that they enjoy in respect of claims in defamation.
Accordingly, I would allow this appeal.
LORD BROWN
Being far from sure that I have anything of value to add to the judgments of the majority in favour of allowing this appeal, I shall state my central views on the matter very briefly indeed.
Expert witnesses are to be regarded as sui generis in the present context.
There are profound differences between them and, on the one hand, witnesses of fact; on the other hand, advocates. (For the purposes of this brief judgment I mean by an expert witness a witness selected, instructed and paid by a party to litigation for his expertise and permitted on that account to give opinion evidence in the dispute.
I am not referring, for example, to a treating doctor or forensic pathologist, either of whom may be called to give factual evidence in the case as well as being asked for their professional opinions upon it without their having been initially retained by either party to the dispute.)
It has long been established that witnesses of fact enjoy complete immunity immunity, that is, from any form of civil action in respect of evidence given (or foreshadowed in a statement made) in the course of proceedings.
It is no less clearly established, following Arthur J S Hall & Co v Simons [2002] 1 AC 615 that advocates have no immunity from suit in respect of any aspect of their conduct of proceedings (save, of course, from defamation claims and the like pursuant to the absolute privilege attaching to court proceedings).
The absolute immunity rule which applies to witnesses of fact, as noted by Lord Hoffmann in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, 208: is designed to encourage freedom of speech and communication in judicial proceedings by relieving persons who take part in the judicial process from the fear of being sued for something they say.
That aside, witnesses of fact are unlikely to owe the party calling them any duty of care whether in contract or in tort.
In stark contrast, not only do expert witnesses clearly owe the party retaining them a contractual duty to exercise reasonable skill and care but, I am persuaded, the gains to be derived from denying them immunity from suit for breach of that duty substantially exceed whatever loss might be thought likely to result from this.
These pros and cons have been fully explored in the judgments of other members of the court.
Suffice to say that in my opinion the most likely broad consequence of denying expert witnesses the immunity accorded to them (only comparatively recently) by the decisions in Palmer v Durnford Ford [1992] QB 483 and Stanton v Callaghan [2000] QB 75 will be a sharpened awareness of the risks of pitching their initial views of the merits of their clients case too high or too inflexibly lest these views come to expose and embarrass them at a later date.
I for one would welcome this as a healthy development in the approach of expert witnesses to their ultimate task (their sole rationale) of assisting the court to a fair outcome of the dispute (or, indeed, assisting the parties to a reasonable pre trial settlement).
The other signal advantage of denying immunity to expert witnesses is, of course, that in the no doubt rare case where the witness behaves in an egregious manner such as is alleged in the instant case or, indeed, otherwise causes his client loss by adopting or adhering to an opinion outside the permissible range of reasonable expert opinions, the wronged client will enjoy, rather than have denied to him by rule of law, his proper remedy.
Such cases are to my mind likely to be highly exceptional and for my part I would urge the courts to be alert to protect expert witnesses against specious claims by disappointed litigants not to mention to stamp vigorously upon any sort of attempt to pressurise experts to adopt or alter opinions other than those genuinely held.
Overall, I am satisfied that the balance of advantage here lies clearly in favour of allowing this appeal.
LORD COLLINS
I agree that the appeal should be allowed.
This appeal is concerned only with the liability of the so called friendly expert to be sued by the client on whose behalf the expert was retained.
The facts raise directly only liability to be sued for out of court statements, but any immunity in relation to such statements is a necessary concomitant of the immunity for things said in court, and the same principles must apply equally to each.
The early history of witness immunity is largely concerned with immunity from suit for defamation: see, e.g. Dawkins v Lord Rokeby (1873) LR 8 QB 255.
It was of course extended to other causes of action, but absolute privilege of witnesses and other persons in the judicial process from defamation is at its core.
The basis of the present decision is that where a person has suffered a wrong that person should have a remedy unless there is a sufficiently strong public policy in maintaining an immunity.
The policy behind immunity from suit for defamation is that to allow the possibility of such an action would create a chilling effect, inhibit frankness and bring the trial process into disrepute.
Thus there is nothing in the present decision which would enable a client to sue his handwriting expert for slander because in the witness box he changed his mind and expressed the view that the clients document was a forgery.
Nor of course is there anything in the present decision which affects the position of the adverse expert.
It is not sufficient to say that the adverse expert presents no problem because the expert owes no duty to the client on the other side.
There are wider considerations of policy which ought to prevent adverse experts from being the target of disappointed litigants, even if the scope of duty in tort were to be extended in the future.
It is true, as McHugh J said in DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 223 CLR 1, para 100, that except for the purpose of classification it may not matter whether the lack of legal liability stems from characterising it as an immunity or as an absence of duty of care.
But it would be preferable to treat it as an immunity to emphasise the strong element of policy involved.
Lord Phillips has referred in detail to the developments in the case law in England.
Because this appeal raises questions of policy it is more than usually helpful to look at developments in other countries, and in particular at the rich jurisprudence which has developed in the United States in the last 20 years or so.
The tendency in the Commonwealth in recent years has been to uphold witness immunity for experts, although it has not been the subject of full discussion at higher appellate levels.
General witness immunity has been re affirmed by the High Court of Australia in DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 223 CLR 1, para 39; by the Supreme Court of New Zealand in Lai v Chamberlains [2007] 2 NZLR 7; and by the Ontario Court of Appeal in Reynolds v Kingston (Police Services Board) [2007] ONCA 166.
The immunity has been re affirmed in relation to expert witnesses in Australia in Sovereign Motor Inns Pty Ltd v Howarth Asia Pacific Pty Ltd [2003] NSWSC 1120; James v Medical Board of South Australia (2006) 95 SASR 445 (South Australia); Commonwealth v Griffiths (2007) 245 ALR 172 (NSW C.A) and in Canada in Carnahan v Coates (1990) 71 DLR (4th) 464; Varghese v Landau [2004] Can LII 5084 (Ont SC) and Deep v College of Physicians and Surgeons of Ontario [2010] ONSC 5248 (Ont SC).
But all of these other than Sovereign Motor Inns v Howarth Asia Pacific were cases of actions against adverse experts or independent experts.
It is highly desirable that at this appellate level, in cases where issues of legal policy are concerned, the Court should be informed about the position in other common law countries.
This Court is often helped by being referred to authorities from other common law systems, including the United States.
It is only in the United States that there has been extensive discussion in the case law of the policy implications of removal of immunity for actions by disappointed clients against their experts.
On this appeal the appellant did not rely on the United States material, although it is helpful to his case.
The respondents counsel drew attention to some of the United States cases on the basis of research which (it was said) was slightly hampered by the renovation of the Middle Temples American room.
But there is an outstanding collection of United States material in the Institute of Advanced Legal Studies in London University, and (provided the barristers or solicitors concerned are prepared to make the expenditure) all of the material is readily available on line.
Lord Wilberforce said in Buttes Gas & Oil Co v Hammer (Nos 2 & 3) [1982] AC 888, 936 937: 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 is not, of course, as that case was, litigation between the same parties in the two countries, but the principle is the same.
In the present context the American State courts have considered and dealt with precisely the same arguments of policy which have been argued before this court.
In the last 20 years several State courts have considered the immunity of retained or so called friendly experts, sued by the party which retained them.
The respondents counsel suggested that the Court would not derive much assistance from these cases, because (it is said) the culture relating to expert evidence is different in the United States.
There are, it is true, many references to the expert (who, of course, will be giving evidence in jury trials) as a hired gun (e.g. Blackwell v Wyeth, 971 A 2d 235, 245 (Ct App Md 2009), quoting Judge Weinstein an expert can be found to testify to the truth of almost any factual theory, no matter how frivolous) and there have been well known concerns about the practice of shopping around for experts and the venality of some of them, and the lack of specific procedural guides to the conduct of experts by contrast with England, where the Woolf reforms have sought to entrench and give teeth to the principle.
But the underlying principle is the same: the expert owes a duty to the client, but also owes a duty to the court, as a servant of the court, to present truthful and competent evidence: Marrogi v Howard, 805 So 2d 1118, 1132 (La 2002); and cf Federal Rules of Evidence, rules 102, 702.
In 1983 the United States Supreme Court re affirmed the general principle of witness immunity in Briscoe v LaHue, 460 US 325 (1983).
That was an action in which police officers were held to be absolutely immune from action arising out of their evidence in a criminal trial.
Apart from a passing reference in a footnote (at p 341, n 27) the Supreme Court did not touch on the subject of expert witnesses.
In the United States witness immunity has generally been applied to adverse and court appointed experts: e.g. Provencher v Buzzell Plourde Associates, 711 A 2d 251 (NH 1998); Dalton v Miller, 984 P 2d 666 (Colo Ct App 1999); McNall v Frus, 784 NE 2d 238 (Ill App Ct. 2002).
The question was first considered in the State of Washington, but its courts stand alone in recent years in upholding the immunity: Bruce v Byrne Stevens & Associates Engineers Inc, 776 P 2d 666 (Wash.1989).
The rationale of the decisions upholding immunity included these: that absence of immunity would lead to a loss of objectivity, and the threat of civil liability would encourage experts to assert extreme positions favourable to the client; it would run counter to the fundamental reason for expert evidence, which was to assist the court in a matter which was beyond its fact finding capabilities; there is a need to promote finality of judgments by discouraging endless collateral litigation; and fewer experts would be willing to become involved in litigation if they could later be sued by the party who retained them.
Other States which have considered the matter have come to a different view: California, Missouri, Pennsylvania, Connecticut, Massachusetts, and Louisiana: Mattco Forge Inc v Arthur Young & Co, 6 Cal Reptr 2d 781 (Ct.App.1992) and Lambert v Carneghi, 70 Cal Reptr 3d 626 (2008); Murphy v AA Matthews, 841 SW 2d 671 (Mo.1992); LLMD of Michigan Inc v Jackson Cross Co, 740 A 2d 186 (Pa. 1999); Pollock v Panjabi, 781 A 2d 518 (Conn.Super.
Ct.2000); Boyes Bogie v Horvitz & Associates, 14 Mass L Reptr 208 (Mass Sup Ct 2001); Marrogi v Howard, 805 So 2d 1118 (La.2002).
The policy reasons in these decisions included these: The reality is that an expert retained by one party is not an unbiased witness, and the threat of liability for negligence may encourage more careful and reliable evaluation of the case by the expert.
Consequently, the threat of liability will not encourage experts to take extreme views.
The client who retains a professional expert for court related work should not be in a worse position than other clients.
The practical tools of litigation, including the oath, cross examination, and the threat of perjury limit any concern about an expert altering his or her opinion because of potential liability.
The risk of collateral litigation is exaggerated.
There is no basis for suggesting that experts will be discouraged from testifying if immunity were removed most are professional people who are insured or can obtain insurance readily, and those who are not insured can limit their liability by contract.
See, for a critical analysis, Jurs, The Rationale for Expert Immunity or Liability Exposure and Case Law since Briscoe: Reasserting Immunity Protection for Friendly Expert Witnesses (2007 2008) 38 U Mem LR 49.
In England there has never been complete immunity for expert witness evidence, any more than there has been complete immunity for other witnesses.
The general principle does not preclude prosecutions for perjury, or for perverting the course of justice, or for contempt of court, or liability for malicious prosecution, or misfeasance in public office: see, e.g. Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
Any suggestion of a potentially unsatisfactory chilling effect on expert witnesses is inconsistent with the liability to a prosecution for perjury for untruthful evidence and with liability to disciplinary proceedings for unprofessional conduct in the preparation or presentation of expert evidence.
The immunity has never prevented the possibility of prosecution for perjury of an expert witness who deliberately misleads the court although it would of course be very difficult to prove its elements.
As Sir George Jessel MR said in Lord Abinger v Ashton (1873) 17 LR Eq 358, 373 374: in matters of opinion I very much distrust expert evidence, for several reasons. [A]lthough the evidence is given on oath, in point of fact the person knows he cannot be indicted for perjury, because it is only evidence as to a matter of opinion.
So that you have not the authority of legal sanction.
A dishonest man, knowing that he could not be punished, might be inclined to indulge in extravagant assertions on an occasion that required it.
The potential effects of a sanction by a professional body are more serious than the effects of civil proceedings by a dissatisfied client (where the expert will usually, although not invariably, be insured).
An expert may lose his livelihood and entire reputation as a result of an adverse ruling by a professional disciplinary body, but no suggestion has been made on this appeal that the Court of Appeal was wrong to decide that witness immunity does not protect an expert witness from disciplinary proceedings for unprofessional conduct in the preparation of, or giving of, expert evidence: Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462.
There are no longer any policy reasons for retaining immunity from suit for professional negligence by expert witnesses.
The danger of undesirable multiplicity of proceedings has been belied by the practical experience of the removal of immunity for barristers.
A conscientious expert will not be deterred by the danger of civil action by a disappointed client, any more than the same expert will be deterred from providing services to any other client.
It is no more (or less) credible that an expert will be deterred from giving evidence unfavourable to the clients interest by the threat of legal proceedings than the expert will be influenced by the hope of instructions in future cases.
The practical reality is that, if the removal of immunity would have any effect at all on the process of preparation and presentation of expert evidence (which is not in any event likely), it would tend to ensure a greater degree of care in the preparation of the initial report or the joint report.
It is almost certain to be one of those reports, rather than evidence in the witness box, which will be the focus of any attack, since it is very hard to envisage circumstances in which performance in the witness box could be the subject of even an arguable case.
For these reasons and those given by Lord Phillips and Lord Dyson, I would allow the appeal.
I agree that this appeal should be allowed for the reasons given by Lord
LORD KERR
Phillips.
It has not been disputed that an expert witness owes a duty to the client by whom he has been retained.
Breach of that duty should, in the normal course, give rise to a remedy.
This is the unalterable back drop against which the claim to immunity must be made.
Whether or not witness immunity has had a long history (and, as to that, I agree with Lord Dyson that this is far from clear) this court should not be deflected from conducting a clear sighted, contemporary examination of the justification for its preservation.
This is particularly required because the immunity has its roots in a time when, as Lord Phillips has pointed out, it was not customary for experts to offer their services under contract for reward.
Although the circumstances of modern litigation are substantially different from those which obtained when immunity from suit was extended to all who participated in litigation, many of the reasons that it is said to be necessary are strikingly similar to those which underlay its original recognition.
These are given something of a modern twist by the suggestion that not only would witnesses be deterred from giving evidence but that those who testified would be inclined to tailor their evidence to guard against the risk of being sued.
Both these consequences are claimed to be the product of fear that would descend on potential witnesses faced with the daunting prospect of adverse litigation.
This line of reasoning can be traced back to the decision of Mr Tuckey QC, sitting as a deputy High Court judge, in Palmer v Durnford Ford [1992] QB 483 and the way that this decision influenced the outcome of the appeal in Stanton v Callaghan [2000] QB 75.
It is to be noted that in Palmer it was not in dispute that witnesses enjoyed immunity from suit in respect of evidence given whether in civil or criminal proceedings.
What was in issue in the case was whether that immunity should extend to work undertaken by the expert in advising the client whether he had a good case worthy of pursuit.
At p 488H Mr Tuckey said this: the immunity would only extend to what could fairly be said to be preliminary to his giving evidence in court judged perhaps by the principal purpose for which the work was done.
So the production or approval of a report for the purposes of disclosure to the other side would be immune but work done for the principal purpose of advising the client would not.
It is important to recognise that this approach was modelled on what Mr Tuckey described as the analogous but not identical situation of the advocate's immunity from suit for what he does in court considered by the House of Lords in Saif Ali v Sydney Mitchell & Co [1980] AC 198.
Of course, the decision in that case to the effect that an advocate was immune from suit for advocacy has been overtaken by the later decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615 where that immunity was swept away.
In the meantime, however, the Court of Appeal in Stanton had to confront the question of whether an expert was immune from suit in respect of the contents of a joint statement to which he had contributed following a site meeting between the defendant and the insurers' expert witness.
In deciding that immunity should attach to the contents of the report and relying on the decision in Palmer, Chadwick LJ said this at pp 100H 101A: the only ground of public policy that can be relied upon as a foundation for immunity in respect of the contents of an expert's report, in circumstances where no trial takes place and the expert does not give evidence, is that identified by Lord Morris of Borth y Gest in Rondel v Worsley [1969] 1 AC 191, 251G and referred to by Lord Diplock in Saif Ali v Sydney Mitchell & Co [1980] AC 198, 222B: It has always been the policy of the law to ensure that trials are conducted without avoidable strains and tensions of alarm and fear.
The rather incongruous outcome of this process of reasoning is that although initially an expert could be expected to be sanguine about the prospect of suit when giving preliminary advice, he would be overcome by fear and apprehension as the date for trial approached.
It would also lead to the paradox articulated by Lord Phillips in para 42 of his judgment to the effect that a more convincing case for an immunity could be made, not at the stage of giving evidence, but at the earlier stage when advice that may subsequently prove inconvenient may have been given.
When confronted with this, Mr Lawrence QC was prompted to suggest that the zone of protection should be extended backwards so as to comprehend advice given at the early stage.
I would have no hesitation in rejecting that suggestion firstly because it would be a wholly retrograde step and would involve reversing well established authority to contrary effect.
More importantly, however, there is no evidence that witnesses would react in this way in anticipation of possible proceedings by disappointed clients.
In particular, there is nothing to support the assumption that conscientious witnesses (which, if assumptions are to be made at all, professional witnesses must be presumed to be) would behave discreditably by modifying their opinions from those they truly held because they feared that an aggrieved client might unwarrantably seek redress against them.
If an expert expresses an honestly held view, even if it differs from that which he may have originally expressed, provided it is an opinion which is tenable, he has nothing to fear from a disgruntled party.
Pitched against the arguments that witnesses might be influenced to distort their evidence is the fundamental consideration that breach of a duty owed by a witness to his client should, in the normal course, give rise to a remedy.
Properly examined, the claimed chilling factors that would descend on expert witnesses if there was removal of the immunity are highly unlikely to materialise.
In the final analysis, the only possible reason for preservation of the rule is its supposed longevity.
Even if that could be established, it is in no sense an adequate justification for maintaining an immunity whose effect is to deny deserving claimants of an otherwise due remedy.
LORD DYSON
The duty owed by an expert witness
It is not in dispute that an expert who acts in civil litigation owes his client a duty to act with reasonable skill and care.
He owes this duty in contract (section 13 of the Supply of Goods and Services Act 1982) and in tort (on the basis of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465).
He holds himself out as a skilled and competent person.
The client relies on his advice in determining whether to bring or defend proceedings, in considering settlement values and in appraising the risks at trial.
The client also relies on him to give the court skilled and competent expert opinion evidence.
This was rightly acknowledged by Chadwick LJ in the leading case of Stanton v Callaghan [2000] QB 75, 88E: Mr Callaghan was a professional man who undertook, for reward, to provide advice within his expertise.
The expectation of those who engaged him must have been that he would exercise the care and attention appropriate to what he was engaged to do.
I would find it difficult to accept that Mr Callaghan did not share that expectation.
But an expert witness who is retained to act for a client in relation to litigation also owes a duty to the court.
CPR 35.3 provides: (1) It is the duty of experts to help the court on matters within their expertise. (2) This duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.
The existence of this duty is affirmed by para 4.1 of the Protocol for the Instruction of Experts to give Evidence in Civil Claims 2005 which provides: Experts always owe a duty to exercise reasonable skill and care to those instructing them, and to comply with any relevant professional code of ethics.
However when they are instructed to give or prepare evidence for the purpose of civil proceedings in England and Wales they have an overriding duty to help the court on matters within their expertise (CPR 35.3).
This duty overrides any obligation to the person instructing or paying them.
This Protocol was drafted by the Civil Justice Council with the assistance of work done by the Expert Witness Institute and the Academy of Experts.
It was cited with approval by Sir Anthony Clarke MR in Meadow v General Medical Council [2007] QB 462, para 22.
The overriding duty of an expert to the court in relation to criminal proceedings is reflected in Part 33.2(1) of the Criminal Procedure Rules and in relation to family proceedings in para 3 of Practice Direction (Family Proceedings: Experts) [2008] 1 WLR 1027.
There is no conflict between the duty owed by an expert to his client and his overriding duty to the court.
His duty to the client is to perform his function as an expert with the reasonable skill and care of an expert drawn from the relevant discipline.
This includes a duty to perform the overriding duty of assisting the court.
Thus the discharge of the duty to the court cannot be a breach of duty to the client.
If the expert gives an independent and unbiased opinion which is within the range of reasonable expert opinions, he will have discharged his duty both to the court and his client.
If, however, he gives an independent and unbiased opinion which is outside the range of reasonable expert opinions, he will not be in breach of his duty to the court, because he will have provided independent and unbiased assistance to the court.
But he will be in breach of the duty owed to his client.
In saying that an expert who is engaged for reward by his client owes the client a duty of care both in contract and tort, I do not, of course, seek to prejudge the question raised on this appeal whether such an expert is immune from suit.
The present state of the law
The immunity of witnesses as a general class is long established.
But the particular question of whether expert witnesses retained for reward by their clients enjoy immunity from liability does not seem to have been considered until it arose in Palmer v Durnford Ford [1992] QB 483.
In that case it was not in issue that it was well settled that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings (emphasis added).
The issue in Palmer was to what extent that immunity extended to the activities of the expert at the pre trial stage.
Mr Simon Tuckey QC held that the immunity extended to work which was preliminary to his giving evidence (such as the production or approval of a report for the purposes of disclosure), but not to work done for the principal purpose of advising the client.
In drawing the line in this way, he avowedly followed the approach that had been adopted by the House of Lords in Saif Ali v Sydney Mitchell & Co [1980] AC 198 in relation to the immunity of advocates.
The correctness of Palmer has not since been challenged.
In Stanton, the Court of Appeal drew heavily on Mr Tuckeys judgment in Palmer (as well as the decisions of the House of Lords in Rondel v Worsley [1969] 1 AC 191 and Saif Ali).
It is important to note that the decision in Stanton pre dated the decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615.
There are several features of the current state of the law to which I would draw attention.
First, the rationale given for the decision in Palmer was that there is a close analogy between the position of experts and that of advocates, so that the immunity/liability line in relation to experts should be drawn at a point which is analogous to the point at which it was drawn in Saif Ali in relation to advocates.
As Mr Tuckey said at p 488F, the problem of where to draw the line was considered in Saif Ali in the analogous but not identical situation of the advocates immunity from suit for what he does in court.
If the analogy is good, it should follow that since (following Arthur Hall) advocates no longer have the immunity, experts should not have it either.
In other words, the reasoning in the case of Palmer leads to the inevitable conclusion that it would have been decided differently today.
Secondly, Mr Tuckey recognised that it might be difficult to decide in any given case whether the experts work can fairly be said to be (i) preliminary to his giving evidence in court judged perhaps by the principal purpose for which the work was done or (ii) work done for the principal purpose of advising the client.
He said at p 489A: Each case would depend upon its own facts with the court concerned to protect the expert from liability for the evidence which he gave in court and the work principally and proximately leading thereto.
I do not think that difficulty in drawing the line precisely should result in a plaintiff in a case such as this being denied all remedy against his expert.
But this uncertainty, generated by the difficulty of knowing where to draw the line in any given case, is inherently unsatisfactory, since the difficulty itself contains the seeds of potential litigation.
Moreover, there should be a degree of certainty as to the existence of an immunity if it is to be fair and effective.
The expert should know in advance whether what he or she says will or will not be protected.
This point has been made on a number of occasions.
Thus, for example, see per Lord Clyde in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, 457C.
In Arthur Hall, Lord Hope said at p 724F that a further reason for regarding the core immunity in the civil field as no longer justifiable was the difficulty of finding a satisfactory way of defining the limits of the immunity.
Lord Hutton said at p 729D that the Saif Ali test had proved difficult to apply in practice and had given rise to considerable uncertainty.
He agreed with the observation of Kirby J in Boland v Yates Property Corpn plc Ltd (1999) 74 ALJR 209, 238, para 137 that it was obviously desirable that a clear line establishing the limits of an advocates immunity should be drawn.
Thirdly, as Lord Phillips points out, the Palmer approach gives rise to the paradox which he explains at para 42 above.
I cannot agree with Lord Hope that there is a formidable body of authority in support of the Palmer approach.
More important, however, is the fact that, as I have said, the very foundation that was identified by Mr Tuckey as the basis for that approach, namely the analogy with the position of advocates, now suggests that the immunity for experts should be removed as it has been for advocates.
The correct starting point
There are two possible views as to the correct starting point for a consideration of the question whether experts should have immunity.
The first is that there is a general rule that every wrong should have a remedy and that any exception to this rule must be justified as being necessary in the public interest.
The second is that there is a different general rule, which is long established and founded on grounds of public policy, that witnesses may not be sued for anything said in court and that, if there is to be an exception to that rule, it too must be justified in the public interest.
This is Lord Hopes approach.
He acknowledges that the general rule that where there is a wrong there should be a remedy is a valuable guide in the right context.
But he says that this rule cannot prevail in the present context because it runs contrary to long established authority.
In other words, the existence of a long established exclusionary rule is itself a sufficient reason for holding that it is necessary to deny a remedy to those who have suffered a wrong.
I respectfully disagree with this approach for two reasons.
First, upon close examination the rule that an expert witness retained for reward is immune from liability is not long established.
As Lord Wilberforce explained at p 214E in Saif Ali, it is necessary to disentangle three separate strands in relation to the immunity of barristers.
The first is the privilege which attaches to proceedings in court and protects equally the judge, counsel, witnesses, jurors and parties.
It has nothing to do with a barristers duty to his client.
The second is that in the nature of things an action against a barrister who acts honestly and carefully is very unlikely to succeed.
The third is that the barrister enjoys immunity from an action, which depends upon public policy.
In fixing its boundary, account must be taken of the counter policy that a wrong ought not to be without a remedy.
Thus, the fact that there was a long standing rule that all who participated in a trial enjoyed absolute privilege was not because they did not owe a duty of care to those who might be adversely affected by what they said at the trial.
As Lord Phillips points out, this rule was established long before the modern law of negligence and, in particular, long before liability for negligent misstatement was first recognised.
There is no long established rule that witnesses are immune from liability to their clients in respect of what they say at trial and in connection with litigation.
As I have said, the distinct position of such witnesses does not seem to have received the attention of the courts until Palmer.
It is true that Palmer has been approved on a few occasions, but in so far as the rule has been applied in relation to the liability of expert witnesses to their clients, it has shallow roots.
But secondly, even if there is such a long established rule, it is based on policy grounds and cannot survive if the policy grounds on which it is based no longer justify the rule.
The mere fact that the immunity is long established is not a sufficient reason for blessing it with eternal life.
Circumstances change as do attitudes to the policy reasons which underpin the immunity.
The common law develops in response to these changes.
The history of the rise and fall of the immunity of advocates provides a vivid illustration of the point.
As Lord Reid observed in Rondel v Worsley at p 227C, public policy is not immutable and any rule of immunity requires to be considered in the light of present day conditions.
The general rule that where there is a wrong there should be a remedy is a cornerstone of any system of justice.
To deny a remedy to the victim of a wrong should always be regarded as exceptional.
As has been frequently stated, any justification must be necessary and requires strict and cogent justification: see, for example, per Lord Hoffmann in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, 214D; Darker v Chief Constable of the West Midlands Police per Lord Hope at p 446D, per Lord Clyde at p 456H and per Lord Hutton at p 468F.
If the position were otherwise, the law would be irrational and unfair and public confidence in it would be undermined.
Furthermore, the justification for any exception to this general rule should be kept under review.
That is what happened in relation to the immunity of barristers.
Their immunity for all that they did was recognised by the House of Lords in Rondel v Worsley.
It was based on the public policy grounds that the administration of justice required that a barrister should be able to carry out his duty to the court fearlessly and independently, and that actions for negligence against barristers would make the retrying of the original actions inevitable and so prolong litigation contrary to the public interest.
In Saif Ali the immunity was limited (again on grounds of public policy) to what barristers did in court and to work that could fairly be said to affect the way that the case would be conducted if it came to a hearing.
Finally, the immunity was swept away altogether in Arthur Hall, when it was decided that the public policy grounds previously relied on were no longer sufficient to justify a departure from the general rule that where there was a wrong there should be a remedy.
It follows that the issue that arises on this appeal is whether there is a compelling need to continue the immunity enjoyed by expert witnesses from liability to their clients.
Is the immunity justified?
Two reasons have been advanced in support of the continued immunity.
The first is that it is necessary to ensure that expert witnesses will be prepared to give evidence at all.
Like Lord Phillips and Lord Hope, I am not impressed with this argument.
From time to time, the court is called upon to make decisions on whether to grant or withhold immunity from suit in certain classes of case.
It does not expect to be able to make decisions of this kind on the basis of empirical evidence.
In my view, surveys such as that carried out at the Bond Solon Annual Expert Witness Conference in November 2010 are of very limited value.
It is unrealistic to look for hard evidence in this area.
It is easy to assert that professional persons will refuse to act as expert witnesses if they cease to enjoy immunity.
The court has to exercise its judgment in assessing the validity of such an assertion.
Whether professional persons are willing to give expert evidence depends on many factors.
I am not persuaded that the possibility of being sued if they are negligent is likely to be a significant factor in many cases in determining whether a person will be willing to act as an expert.
Negligence is not easy to prove against an expert witness, especially in relation to what he or she says in the heat of battle in court.
This is the second of the three strands identified by Lord Wilberforce at p 214E in Saif Ali.
Professional indemnity insurance is available.
Professional persons engage in many activities where the possibility of being sued is more realistic than it is in relation to undertaking the role of an expert in litigation.
Thus, for example, it is a sad fact of life that births sometimes go wrong and when that happens, parents sometimes look for someone to blame.
But that does not stop people from practising as obstetricians.
The second reason advanced in support of maintaining the immunity is that expert witnesses would be reluctant to give evidence against their clients interests if there was a risk that they would be sued.
This is the divided loyalty argument that was considered in relation to advocates in Rondel v Worsley, Saif Ali and Arthur Hall.
The argument in those cases was that the advocate owes an overriding duty to the court and unless there was immunity from liability to the client, there was a danger that they would disregard their duty to the court.
Lord Hope suggests in the present case that the duties owed by the advocate to the court are not as far reaching as those owed to the court by the expert.
But it is significant that in Rondel v Worsley and Saif Ali the House of Lords described the advocates duty to the court as overriding and regarded that fact as one of the reasons for not withdrawing the immunity.
In Arthur Hall, Lord Hoffmann recognised that the duty of the advocate to the court is extremely important in the English system of justice.
He described the divided loyalty argument as being that the possibility of being sued for negligence would actually inhibit the lawyer, consciously or unconsciously, from giving his duty to the court priority to his duty to his client.
That is precisely the argument advanced by Mr Lawrence in the present case.
It is therefore relevant to examine the way in which the divided loyalty argument was dealt with in Arthur Hall.
The fullest treatment of it is in the speech of Lord Hoffmann at p 692F: To assess the likelihood [of the removal of the immunity having a significant adverse effect], I think that one should start by considering the incentives which advocates presently have to comply with their duty and those which might tempt them to ignore it.
The first consideration is that most advocates are honest conscientious people who need no other incentive to comply with the ethics of their profession.
Then there is the wish to enjoy a good reputation among ones peers and the judiciary.
There can be few professions which operate in so bright a glare of publicity as that of the advocate.
Everything is done in public before a discerning audience.
Serious lapses seldom pass unnoticed.
And in the background lie the disciplinary powers of the judges and the professional bodies.
Looking at the other side of the coin, what pressures might induce the advocate to disregard his duty to the court in favour of pleasing the client? Perhaps the wish not to cause dissatisfaction which might make the client reluctant to pay. Or the wish to obtain more instructions from the same client.
But among these pressures, I would not put high on the list the prospect of an action for negligence.
It cannot possibly be negligent to act in accordance with ones duty to the court and it is hard to imagine anyone who would plead such conduct as a cause of action.
Although the analogy between the advocate and the expert witness is not precise, it is sufficiently close for much of what Lord Hoffmann said in this passage to be equally applicable to expert witnesses.
In particular, like advocates, they are professional people who can be expected to want to comply with the rules and ethics of their profession.
Experts can be in no doubt that their overriding duty is to the court.
That is spelt out in the rules and they are reminded of the duty every time they write a report: rule 35.10(2) states that at the end of the experts report there must be a statement that the expert understands and has complied with their duty to the court.
There is no reason to doubt that most experts are honest conscientious people who need no other incentive to comply with their duty and the rules and ethics of their profession.
There may be a few experts (as there may be a few advocates) who behave dishonourably.
But that is no more compelling a reason for retaining the immunity for experts than it was for retaining it for advocates.
As Lord Hoffmann said in relation to advocates, the prospect of an action for negligence is unlikely to tempt an expert to disregard his duty to the court.
Experts can and almost always do obtain professional indemnity insurance to cover the risk of negligence.
Most of them act honestly and conscientiously because that is what professional men and women do.
It follows from what I have said that I cannot agree with what Lord Hoffmann said at p 698D G about expert witnesses.
He said of Stanton that it was an example of a general immunity for acts done in the course of litigation which fell squarely within the traditional witness immunity; and that a witness owes no duty of care to anyone in respect of the evidence he gives to the court.
For the reasons that I have given, an expert engaged for reward does owe a duty of care to his client.
The only question is whether there are sufficiently compelling policy reasons for according the expert immunity from suit.
It is in any event difficult to see how immunity would promote the discharge by experts of their duty to the court.
The lesson of history suggests that it would not do so.
Even before the Woolf reforms, it was well established that an expert witness owed a duty to be independent and assist the court: see The Ikarian Reefer [1993] 2 Lloyds Rep 68, 81, and the cases cited there.
But that did not dissuade the hired gun, who all too often walked the stage before the Woolf reforms, from acting in a partisan way, even though at that time he enjoyed immunity from suit.
It follows that I am not convinced by either of the reasons advanced in justification of the immunity.
I am even less persuaded that the immunity is necessary in the public interest or that there is a sufficiently compelling reason to justify continuing to deny a remedy to a person who has suffered loss as a result of his experts breach of the duty of care owed in contract and tort.
Should the immunity of expert witnesses survive for any purpose?
Nothing that I have said is intended to undermine the long standing absolute privilege enjoyed by other witnesses in respect of litigation.
Although it is unnecessary to decide the point, as presently advised I can see no reason to treat expert witnesses who are engaged in criminal and family litigation any differently from those engaged in civil litigation.
Conclusion
For these reasons as well as those given by Lord Phillips, I would hold that the immunity of expert witnesses from liability to their clients for breach of duty (whether in contract or negligence) can no longer be justified.
I would, therefore, allow this appeal.
LORD HOPE
The question in this case is whether an exception should be made to the rule that witnesses may not be sued in respect of evidence given in court, or things said or done in contemplation of giving evidence in court, where the witness is an expert who accepts instructions from the litigant to give evidence for reward.
The respondent is said to have negligently signed an inaccurate joint statement which had been prepared as directed by the judge under CPR 35.12(3).
She did not give evidence in court, as the case was subsequently settled.
So it is her conduct when she agreed to the way the joint statement had been worded by the other sides expert that is the focus of attention.
It is common ground that the immunity rule applies to things said or done, or omitted to be said or done, by an expert witness at that stage of the proceedings unless it is subject to the exception for which the appellant contends: see Watson v MEwan [1905] AC 480.
In that case it was held that the privilege of a witness extends to statements made in a preliminary statement with a view to giving evidence.
I have not found this an easy question to answer, for a variety of reasons.
The first is to be found in the nature and purpose of the rule itself, which must be the starting point for an inquiry as to whether an exception should be made to it.
The second is to be found when an attempt is made to define the limits of the exception.
The third is the lack of firm evidence, pointing either one way or the other, as to the need for the exception or as to the consequences if it were to be introduced.
The question whether the rule continues to perform a useful function has been raised from time to time.
Andrew Edis, Privilege and immunity: problems of expert evidence (2007) CJQ 40, suggested that compliance with the experts duty to the court would be enhanced by its removal.
But it is a very different thing for it to be removed retrospectively, as I assume it will have to be if the appellants claim is be given effect, by a decision of seven Justices in this Court, from which there would be no way back except by legislation enacted by Parliament.
I doubt whether it is right that we should proceed in this way only on the basis of assumptions, which is really all we have to go on in this case.
I regret too the absence of any intervention in these proceedings by a body with experience across the whole range of this area of practice, such as the Academy of Experts, which could have provided us with evidence to inform our judgment.
In Arthur J S Hall & Co v Simons [2002] 1 AC 615, in which the opportunity was taken to challenge the decision of the House of Lords in Rondel v Worsley [1969] 1 AC 191 on the question of the immunity given to advocates, the House had the benefit of argument from the Bar Council which was given leave to intervene.
As Lord Steyn said at p 676, it played a particularly helpful part in the appeal.
The House was, of course, dealing in that case with an issue which was within the personal experience of all members of the Appellate Committee, and it was known that advocates were already under a professional obligation to carry insurance: see Lord Steyn, p 682; Lord Hoffmann, p 691.
In this case we are dealing with an area of practice with whose precise limits I suspect I am not alone in being less familiar.
I am unwilling to assume that every witness who gives evidence as an expert belongs to a professional organisation or engages regularly in court work.
Some may be academics, and some may come forward to give expert evidence only once in a lifetime.
It seems to me that it would be unwise to assume that they all have insurance cover against claims for negligence.
I am also unimpressed by the line of argument that the rule should not be allowed to provide a shelter for the negligent expert who is in breach of the duty that he owes to the client from whom he has accepted instructions or by whom he is being paid.
Of course, if the point is put that way round the immunity that the rule currently provides may seem objectionable.
But, as I shall mention later, it was recognised long ago that it is not the purpose of the rule to protect those who are guilty of such transgressions.
Its purpose is to ensure that witnesses are not deterred from coming forward to give evidence in court and from feeling completely free to speak the truth when they do so, without facing the risk of being harassed afterwards by actions in which allegations are made against them in an attempt to make them liable in damages.
It is important not to lose sight of this fundamental principle.
To do so risks devaluing the rule.
It diverts attention from the consequences for those who are wholly innocent of any transgression for which damages could properly be awarded, but are nevertheless exposed to harassment by the disgruntled or the unscrupulous.
There has been no challenge to the policy justification as it applies to witnesses generally.
So the question in this case is whether the reasons which justify an immunity for witnesses generally do not apply to expert witnesses.
The grounds for making that exception by judicial decision need to be examined and explained very carefully.
This is because they may have implications for the immunity which is at present given to other kinds of witness against whom a breach of duty may be alleged.
An incautious removal of the immunity from one class of witness risks destabilising the protection that is given to witnesses generally.
The rule
The rule that affords immunity to witnesses when giving evidence in court, or with a view to giving evidence, is not itself in doubt.
But I think that it is important, before deciding whether an exception should be made to it in the case of expert witnesses, to examine the origins of the rule and the grounds of policy on which it is based.
The rule is of very long standing, perhaps as early as the 16th century: see DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 214 ALR 92, para 39.
It was recognised in the 17th century that judges, with whose immunity that which is given to witnesses there is an affinity, should not be exposed to action, at least in dubious cases where just and rational men might be of different judgments: otherwise no man but a beggar, or a fool, would be a judge: Stair, Institutions of the Law of Scotland (2nd ed, 1693), IV, 1, 5.
Two centuries later, in Dawkins v Lord Rokeby (1873) LR 8 QB 255, 264, Kelly CB declared: no action lies against parties or witnesses for anything said or done, although falsely and maliciously and without any reasonable or probable cause, in the ordinary course of any proceeding in a court of justice.
That this principle had long been recognised in English law can be seen from Lord Mansfields statement in R v Skinner (1772) Lofft 55 that: neither party, witness, counsel, jury, or judge, can be put to answer, civilly or criminally, for words spoken in office.
As Lord President Inglis observed in Williamson v Umphray and Robertson (1890) 17 R 905, 910 911 where the claim was one of libel, the rule that gives that privilege to judges, jurors, counsel and witnesses is founded on obvious grounds of public policy: It is essential to the ends of justice that persons in such positions should enjoy freedom of speech without fear of consequences, in discharging their public duties in the course of a judicial inquiry.
But the motive of the law is not to protect corrupt or malevolent judges, malicious advocates, or malignant and lying witnesses, but to prevent persons acting honestly in discharging a public function from being harassed afterwards by actions imputing to them dishonesty and malice, and seeking to make them liable in damages.
The Lord President referred in support of this explanation of the purpose of the rule to the following passage in the speech of Lord Penzance in the House of Lords in Dawkins v Lord Rokeby (1875) LR 7 HL 744, 755 756: If by any process of demonstration, free from the defects of human judgment, the untruth and malice could be set above and beyond all question or doubt, there might be ground for contending that the law of the land should give damages to the injured man.
But this is not the state of things under which this question of law has to be determined.
Whether the statements were, in fact, untrue, and whether they were dictated by malice, are, and always will be, open questions, upon which opinions may differ, and which can only be resolved by the exercise of human judgment.
And the real question is, whether it is proper on grounds of public policy to remit such questions to the judgment of a jury.
The reasons against doing so are simple and obvious.
A witness may be utterly free from malice, and may yet in the eyes of a jury be open to that imputation; or, again, the witness may be cleared by the jury of the imputation, and may yet have to encounter the expenses and distress of a harassing litigation.
With such possibilities hanging over his head, a witness cannot be expected to speak with that free and open mind which the administration of justice demands.
Commenting on that passage in Primrose v Waterston (1902) 4 F 783, in which an action for slander was brought against a magistrate, Lord Moncreiff said at pp 793 794 that the reason for the wideness of the protection was that experience showed that, although the judge might after trial succeed in clearing himself of the imputation, he would be exposed to being called on to answer what ex facie of the summons was apparently a relevant charge: Now, if that were once permitted the protection of absolute privilege would disappear; and therefore the only sound rule is to grant that protection unless it can be demonstrated that is, shewn so clearly that no man of ordinary intelligence and judgment could honestly dispute it that the words used had no connection with the case in hand.
The result of this, no doubt, is that in an exceptional case like that which we have before us, of a judge who is unable to restrain himself, hardship is inflicted on the person to whom the remarks are addressed.
But on the other hand it is to be remembered that, thanks to the protection afforded by the privilege, ninety nine out of a hundred judges are enabled to discharge their duties without fear or favour and without the dread of an impending action.
Although Lord Moncreiff was there speaking of the rule in its application to judges, his point applies with equal force to the position of witnesses.
There will, of course, be some who may abuse the privilege and against whom allegations might reasonably be made that what they said in the witness box was malicious and defamatory.
But the privilege exists for the protection of all witnesses, not just the few against whom successful actions might otherwise be brought for an award of damages: see also Munster v Lamb (1883) 11 QBD 588, 607 where Fry LJ said that the purpose of the rule was to protect persons acting bona fide who under a different rule would be liable, not perhaps to verdicts and judgments against them, but to the vexation of defending actions.
In Watson v MEwan [1905] AC 480 the Lord Chancellor, the Earl of Halsbury, said that the privilege of a witness, the immunity from responsibility in an action in which evidence has been given by him in a court of justice, was too well established then to be shaken.
He described it as one of the necessities of the administration of justice.
In that case a medical practitioner, whom the pursuer had employed as her professional adviser with a view to an action she proposed to bring against her husband for separation and aliment, then gave evidence for the husband in that same action.
This was said to have come about because he expressed views to the husbands solicitors that made it evident that his opinion was adverse to the position that the wife wished him to adopt.
This led to his being requested by those acting for the husband to give evidence on his behalf.
He agreed to do so, and in the course of his evidence referred to matters which he had learned on the occasion of his professional visit to the wife relevant to her state of health which, so it was alleged, impressed the judge unfavourably to the wifes case and without which, it was said, she would have been successful.
An action of damages was then raised by the wife against him for slander and breach of confidentiality.
The wifes father raised an action of damages against him on similar grounds.
In both cases the question whether the medical practitioner was entitled to witness immunity was raised as a preliminary issue.
Reversing the judgment of the Court of Session (see AB v CD (1904) 7 F 72; reported also in the Scots Law Times as MEwan v Watson (1905) 12 SLT 599), the House of Lords held that the protection that the medical practitioner undoubtedly had as to what he had said in the witness box should be given also to his preliminary examination by those acting for the husband to find out what he could prove if called to give evidence on his behalf.
As to that, the Lord Chancellor made this observation: It may be that to some extent it seems to impose a hardship, but after all the hardship is not to be compared with that which would arise if it were impossible to administer justice, because people would be afraid to give their testimony.
The facts of that case are of particular interest, especially because this appears to have been the first case that the immunity was invoked in response to a claim other than one for slander.
They are best explained in the report of the judgment of the Court of Session at (1904) 7 F 72, in which the averments for both sides are set out.
Sir Patrick Watson was a hospital surgeon and clinical teacher with an unrivalled reputation for his operative skill and teaching powers.
He accepted instructions from Mrs McEwan with a view to his giving evidence as an expert witness on her behalf.
In the event the evidence which he was said to have given, when he appeared as a witness for her husband, was unfavourable to her and in support of the case that was being made against her.
He was said in the course of his evidence to have read out notes which he had made during a professional visit when he examined her.
They contained entries to the effect that it seemed to him that both the wife and her father were bent on inducing her premature labour (in other words, an abortion) with a view to freeing her from any permanent reminder of the marriage and, if possible, to obtain a separation.
This is an early example of the protection being given to an expert witness against an allegation that his evidence to the court was contrary to the interests of the person by whom he had originally been instructed for reward.
It was also alleged that what he said was defamatory of her and her father.
There was no suggestion that the fact that he may have owed duties to them, such as the duty of confidentiality, made any difference.
He was entitled to the protection in the same way as any other witness.
The reports of the case in the House of Lords, which describe the case in the head note as one of slander, give the impression that the claim for breach of confidence did not proceed and that the relevant issues before the House were concerned only with the claim for slander.
But the report of the case in the Court of Session in the Session Cases shows that the pursuer had proposed four issues for trial: AB v CD (1904) 7 F 72, 76 77.
Issue (1) was whether giving the precognition amounted to breach of confidence; issue (2) was whether giving the evidence in court amounted to breach of confidence; issue (3) was whether giving the precognition amounted to slander; and issue (4) was whether giving the evidence in court amounted to slander.
The Lord Ordinary disallowed issues (2) and (4), as they related to evidence given in court which attracted the immunity.
But he allowed issues (1) and (3), on the view that witness immunity did not extend to giving a precognition.
In the Inner House it was argued that the fact that an expert gave evidence by choice and was not compelled to do so meant that he did not require the protection of the immunity.
This argument was rejected, and the Inner House agreed with the Lord Ordinary that issues (2) and (4) should be disallowed.
But it also disallowed issue (1).
Watson then appealed to the House of Lords against the decision of the Inner House that issue (3) should go to trial.
This was the issue as to slander in the precognition.
The Session Cases report of the case in the House of Lords states that Mrs McEwan cross appealed against the disallowance of the first issue: Watson v MEwan (1905) 7 F (HL) 109, 110.
This was issue (1), the issue as to breach of confidentiality in the precognition.
The appeal was heard together with an appeal in the action raised by Mrs McEwans father, in which the issues were almost the same.
The fathers case has not been separately reported, but the names of both cases appear in the Scots Law Times report at (1905) 13 SLT 340.
The Lord Chancellor said that it was impossible to say that any different question arose in the one appeal from that which arose in the other: [1905] AC 480, 485.
Both claims as to what was said in the precognition were before the House and, as the outcome of the appeal was that Mrs McEwans case was remitted to the Court of Session to dismiss her action, its ruling that Watson was entitled to the immunity at the precognition stage must be taken to have extended to her claim against him for breach of confidence as well as her claim for slander.
That this is how the Lord Chancellor saw the matter appears from the second paragraph of his speech, at p 486, where he said that he was not disposed to express an opinion either way as to the confidential nature of the relationship, which might raise very serious and difficult questions, because he had no difficulty at all in their solution on other grounds: The broad proposition I entertain no doubt about, and it seems to me to be the only question that properly arises here; as to the immunity of a witness for evidence given in a Court of Justice, it is too late to argue that as if it were doubtful.
I think that this passage makes it clear that, in his opinion, there were no grounds for distinguishing between the claims that were being made in the action.
The immunity extended as much to a claim of damages for breach of a duty of confidence as it did to a claim for slander, or indeed any other claim.
The question whether an expert witness was in a different position from an ordinary witness had been raised and dealt with in the Inner House.
The decision in Watson v MEwan [1905] AC 480 that the protection extended to the preparation of evidence was applied in Marrinan v Vibart [1963] 1 QB 528.
The plaintiff in that case was a barrister who brought an action in damages for conspiracy to make false statements defamatory of him as a barrister against two police officers.
They had given evidence against him at a criminal trial and in disciplinary proceedings at an inquiry before the Benchers of Lincolns Inn.
His action was held to be barred by the rule of public policy.
Sellers LJ, with whom the other members of the Court of Appeal agreed, said at p 535: Whatever form of action is sought to be derived from what was said or done in the course of judicial proceedings must suffer the same fate of being barred by the rule which protects witnesses in their evidence before the court and in the preparation of the evidence which is to be so given. [Emphasis added] Salmon J said of the immunity in the same case at first instance, at [1963] 1 QB 234, 237: This immunity exists for the benefit of the public, since the administration of justice would be greatly impeded if witnesses were to be in fear that any disgruntled and possibly impecunious persons against whom they gave evidence might subsequently involve them in costly litigation.
In Roy v Prior [1971] AC 470, 480 Lord Wilberforce said that the reasons why immunity is conferred upon witnesses in respect of evidence given in court are in order that they may give their evidence fearlessly and to avoid a multiplicity of actions in which the value or truth of their evidence would be tried over again.
This appears to have been the first mention of the second of these two reasons in the context of witness immunity.
Lord Wilberforces formulation was adopted by Mr Simon Tuckey QC in Palmer v Durnford Ford [1992] QB 483, 487 and by Simon Brown LJ in Silcott v Commissioner of Police of the Metropolis (1996) 8 Admin LR 633, 637.
It was referred to also by Drake J in Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184, 189 when he was discussing the reasons for the immunity in the context of criminal proceedings.
He accepted that one of the reasons was to prevent disgruntled prisoners from seeking to have their cases retried in civil suit.
But he said that the reason was in fact more broadly based than that.
In Stanton v Callaghan [2000] QB 75, 93 94, Chadwick LJ pointed out that Lord Wilberforces second reason, which he appears to have derived from the reasons for the immunity given to barristers in Rondel v Worsley [1969] 1 AC 191, was said by Lord Diplock in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 223 to have overlooked the possibility that the action had been dismissed or judgment entered without a contested hearing so that there was no possibility of restoring the action and proceeding to trial.
We are left then with the first reason, which has been the only true basis for the rule from the very beginning.
In Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 Lord Hoffmann said that the policy of the immunity is to enable people to speak freely without fear of being sued, whether successfully or not.
Once again there is a recognition of the fact that the rule exists for the protection of all witnesses, not just the few against whom successful actions might otherwise be brought.
Lord Hoffmann added these words at p 214: If this object is to be achieved, the person in question must know at the time he speaks whether or not the immunity will attach.
If it depends upon the contingencies of whether he will be called as a witness, the value of the immunity is destroyed.
It is the need for certainty that also makes it necessary to extend the protection of the rule to all witnesses and to all causes of action that may be brought against them.
The rough is taken with the smooth.
There will be some cases where a genuine cause of action is excluded by it.
But in the vast majority of cases it is the assurance of the protection that enables people against whom no action could reasonably be brought to speak freely without facing the prospect of being harassed by those against whose interests they have spoken.
It is an important part of the protection that, as Sellers LJ said in Marrinan v Vibart [1963] 1 QB 528, 535, it extends to whatever form of action is sought to be derived from what was said or done in the proceedings.
That had been settled law since the decision of the House of Lords in Watson v MEwan [1905] AC 480, where it was held that the witness was protected by the immunity against a claim for breach of confidence: see para 141, above.
In Arthur J S Hall & Co v Simons [2002] 1 AC 615 it was argued for the Bar Council that witness immunity provided a useful analogy to that given to advocates: p 669.
For the clients, on the other hand, it was argued that no relevant parallel could be drawn, as the duties that a paid witness owed to his client were subject to the overriding duty to the court to tell the truth: p 671.
Lord Hobhouse of Woodborough said at p 741 that the expert witness was in a special position similar to that of the advocate.
But Lord Hoffmann at pp 697 698 rejected the expert witness analogy.
He said that it was not enough to explain the immunity relating to court proceedings by saying, as Lord Diplock did in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 222, that people involved in litigation should be free from avoidable stress and tensions of alarm and fear.
It was necessary to go further and explain why the public interest requires that a particular participant should be free from the stress created by the possibility that he might be sued.
The witness rule, he said, depends on the proposition that without it, witnesses would be more reluctant to assist the court.
Referring to Stanton v Callaghan [2000] QB 75, in which it was held that an expert could not be sued for agreeing to a joint experts statement in terms which the client thought detrimental to his interests, he said: that seems to me to fall squarely within the traditional witness immunity.
The alleged cause of action was a statement of the evidence which the witness proposed to give to the court.
A witness owes no duty of care to anyone in respect of the evidence he gives to the court.
His only duty is to tell the truth.
The question which this case raises is whether Lord Hoffmann was right to declare that the case of the expert witness fell within the traditional witness immunity.
The expert witness
The observations of Lord Hoffmann and Lord Hobhouse in Arthur J S Hall & Co v Simons [2002] 1 AC 615 indicate that they did not think that the fact that expert witnesses owed a duty of care to their clients was a reason for excluding them from the immunity that is available to witnesses generally.
In Watson v MEwan [1905] AC 480 the fact that Sir Patrick Watson may have owed a duty in confidence to his former client made no difference to the result: see paras 139 141, above.
Lord Browne Wilkinson made it clear in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 755 that nothing that he had said in that case about the investigation and preparation of evidence by the psychiatrist in proceedings for the protection of a child from abuse was intended to cast doubt on the ruling by Mr Simon Tuckey QC in Palmer v Durnford Ford [1992] QB 483, 488 489 that the protection should be extended to the production or approval of an experts report for the purposes of disclosure to the other side, but not to work done for the principal purpose of advising the client.
In the Court of Appeal in X (Minors) v Bedfordshire County Council Sir Thomas Bingham MR too said that in his opinion Mr Simon Tuckey QC reached a correct conclusion in Palmer: [1995] 2 AC 633, 661.
There was a difference of view between the Court of Appeal and the House of Lords in that case as to whether there was a sufficiently immediate link between the investigations carried out by the psychiatrist to attract the immunity.
But it was common ground that the psychiatrist was in the same position in regard to the immunity as any other witness.
This is a formidable body of authority which should not be lightly disregarded.
The decision of Drake J in Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184 lends further support to it.
In Hughes v Lloyds Bank Plc [1998] PIQR P98 the Court of Appeal assumed that expert witnesses were immune from suit for negligence.
In Raiss v Palmano [2001] PNLR 21 a claim for negligence against a surveyor was struck out at first instance but allowed so far as it alleged deceit because he conceded in cross examination that he did not have the qualification claimed in his expert report.
On appeal the entire claim against him was struck out.
Lord Phillips says that the immunity of expert witnesses from liability in negligence has never been challenged but has simply been accepted.
It is true that none of the earlier cases addressed the question of immunity from liability for negligence, and it was accepted in Palmer v Durnford Ford [1992] QB 483 and Hughes v Lloyds Bank Plc [1998] PIQR P98 that in general the paid expert witness is protected by the immunity.
But I think, with respect both to him and Lord Dyson, that this view does not do justice to what the authorities, properly understood, reveal to us.
The immunity was challenged in Watson v MEwan [1905] AC 480 but held to apply to a claim by a client for breach of the experts duty of confidence.
The universality of the rule was declared in that case, and it has been asserted and applied repeatedly since then.
Its application to claims for breach of duty by their clients against expert witnesses was expressly recognised by both Lord Hoffmann and Lord Hobhouse in Arthur J S Hall & Co v Simons [2002] 1 AC 615.
The fact must be faced that what we are being asked to do in this case is to remove an immunity which until now has been accepted as falling within the universal principle.
This is not just a fringe decision of the kind to which Lord Wilberforce referred in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 211 where, as he saw it, the extent of the immunity then given to advocates was in need of being clarified.
The leading modern authority on the position of expert witnesses is Stanton v Callaghan [2000] QB 75.
In that case too, after reviewing the authorities, the Court of Appeal saw no reason to disturb the ruling in Palmer.
Chadwick LJ said at p 101 that he was not persuaded that experts who, as part of their professional practice and for reward, offer their services as potential witnesses on matters within their expertise are prone to strains and tensions of alarm and fear at the stage at which they are preparing their reports for exchange.
But the basis in fact for this observation is unclear, and the other members of the Court did not agree with him on this point.
Otton LJ said at p 104 in Stanton that there was clear authority that, provided the test of principal and proximate connection is satisfied, the pre hearing work of an expert will be within the protective circle of the witness immunity principle.
What remained to be considered was whether it was appropriate to draw the circle narrower so that some experts are admitted and some are not.
His conclusion was that, while the need to grant immunity may be more obvious in some cases than others, the courts ought not to rush to draw a rigid boundary between situations where immunity is automatically granted to some and not to others.
He reminded himself at p 107 that the immunity is not granted primarily for the benefit of the individuals who seek it.
They are the beneficiaries of the public interest to ensure that the administration of justice is not impeded, which is the consideration that should be paramount.
Although Nourse LJ was prepared to acknowledge that the rule could not be quite the same for experts as for other witnesses as the expert usually has the dual capacity of advising the client as well as giving evidence in support of his case, he saw no justification for distinguishing between an expert and a lay witness either on the ground that the expert is usually remunerated for his services or on the ground that he may be less likely than a lay witness to be deterred from giving evidence.
The proper administration of justice depends frequently on evidence given by expert witnesses.
As Otton LJ observed in Stanton at p104, witnesses who claim to be and are treated as experts come from many disciplines and appear in ever widening areas of litigation, ranging from accident reconstruction experts to veterinary surgeons and it might also be said to zoologists.
The proceedings in which they are engaged range across the board, from criminal trials at one extreme to professional disciplinary hearings at the other, with a wide variety of civil proceedings in between.
And they range from those whose profession is to give expert evidence and who are very familiar with the court process to those who appear once only in a particular case and who are least likely to have protected themselves against the risk of a claim for negligence.
Mr Ter Haar QC for the appellant was careful to confine his argument to the facts of this case.
His proposition was that an expert in civil cases should no longer have immunity from suit in relation to negligent work performed for the substantial purpose of giving evidence in court.
He said that it was no part of his argument that his proposition should be applied to expert witnesses in criminal cases or in family law cases either.
Nor was it part of his argument that it should be applied to what the expert witness said when giving evidence in court.
But I do not think that, if there are good grounds for removing the immunity from that stage of the proceedings, it would be possible to retain it for the stage when the expert gives evidence in court.
And it would be difficult to defend its retention where the expert witness gives evidence, or prepares for the giving of evidence, for his client in other tribunals.
The underlying duty of care is the same in all cases.
In his report, Access to Justice (1996), Lord Woolf referred in chapter 13, para 3 to the recommendation in chapter 23 of his interim report that the calling of expert evidence in civil cases should be under the complete control of the court.
His concern was that a more economical use should be made of this type of evidence by narrowing the issues between opposing experts as early as possible.
Among the points that he made about the way expert evidence was being used was a concern that experts sometimes took on the role of partisan advocates instead of neutral fact finders or opinion givers.
In chapter 13, para 25 of his report he said that there was wide agreement that the experts role should be that of an independent adviser to the court, and that lack of objectivity could be a serious problem.
In para 27 he said that it was important that each opposing experts overriding duty to the court was clearly understood.
In para 30 he said that there was widespread agreement that an experts report intended for use as evidence in court proceedings should be addressed to the court.
These observations formed the basis for the rules that are now set out in CPR Part 35 and for Practice Direction 35 which supplements them.
CPR Part 35 and the Practice Direction are designed for use in civil cases only.
They do not apply to criminal cases, and they do not apply in Scotland either.
But it seems to me that the principles which they express are of universal application in criminal cases arguably even more so, in view of the overriding public interest in securing the ends of justice in proceedings of that kind.
CPR 35.2(1) states that a reference to an expert in the Part is a reference to a person who has been instructed to give or prepare expert evidence for the purpose of proceedings.
CPR 35.3 states: (1) It is the duty of experts to help the court on matters within their expertise. (2) This duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.
In National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) [1993] 2 Lloyds Rep 68, 81 Cresswell J said, of the duties and responsibilities of experts in relation to the party and to the court, that expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to the form or content by the exigencies of litigation, and that an expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise.
He referred, in support of these propositions, to Lord Wilberforces observations in Whitehouse v Jordan [1981] 1 WLR 246, 256 and those of Garland J in Pollivitte Ltd v Commercial Union Assurance Company Plc [1987] I Lloyds Rep 379, 386 and Cazalet J in In re J (Child Abuse: Expert Evidence) [1991] FCR 193.
There is, then, an obvious conflict between the duties that the expert owes to his client and those that, in the public interest, he owes to the court.
Lord Hoffmann was perhaps overstating the position when he said in Arthur J S Hall & Co v Simons [2002] 1 AC 615, 698, in the context of a discussion about expert witnesses, that a witness owes no duty of care to anyone in respect of the evidence he gives to the court, as his only duty is to speak the truth.
This may be true of witnesses generally, but it is plain that the paid expert owes duties to the client by whom he is being paid.
If he agrees for a reward to prepare a report and to present himself in court to give evidence, he is obliged to do those things and to take reasonable care when he is doing so.
He must make the necessary investigations and preparations for the giving of that evidence.
Nevertheless when it comes to the content of that evidence his overriding duty is to the court, not to the party for whom he appears.
His duty is to give his own unbiased opinion on matters within his expertise.
It is on that basis that he must be assumed to have agreed to act for his client.
It would be contrary to the public interest for him to undertake to confine himself to making points that were in the clients interest only and to refrain from saying anything to the court to which his client might take objection.
Do these considerations reduce, or remove, the need in the case of the expert witness for the protection of the immunity? As Justice Stevens observed in Briscoe v LaHue (1983) 460 US 325, 335 336, when a police officer appears as a witness he may reasonably be viewed as acting like any other witness sworn to tell the truth.
He may be regarded as an official performing a critical role in the judicial process, in which event he may seek the benefit afforded to other participants in the same proceeding.
At p 345 he recognised that the absolute witness immunity bars a path to recovery by defendants who have been convicted on the basis of false testimony: But we have recognised, again and again, that in some situations, the alternative of limiting the officials immunity would disserve the broader public interest.
There would seem then, as a starting point, to be a strong case for treating an expert in the same way as any other witness when it comes to the giving of sworn evidence in court.
If that is so, the case would seem to be just as strong for treating him in the same way when, on the directions of the court, he is agreeing a joint statement with the opposing expert and for treating him in the same way when he is preparing his own report with a view to giving his evidence.
Lord Phillips does not see why an expert should be concerned that performance of his duty to the court will result in his being sued for breach of duty to his client: para 56.
But this assumption contradicts the justification for the immunity that is extended to witnesses generally, which is that there are grounds from time to time for believing that the fear of suit exists.
If he is right, there are seeds here for challenging the whole concept of witness immunity.
Pros and cons
Various arguments have been advanced in favour of removing the immunity from expert witnesses and for not doing so.
I shall deal first with those that have been advanced for removing it.
Where there is a wrong there must be a remedy.
This may be a valuable guide in the right context.
Lord Wilberforce said in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 214 that account had to be taken of this principle in fixing the boundary of the advocates immunity, which until then was unclear.
But we are not dealing with fringe issues in this case, and in the present context it seems to me that little weight can be attached to it.
Removal of the immunity runs counter to long established authority.
The question whether it was more important to right wrongs was considered and rejected by Lord Penzance in the House of Lords in Dawkins v Lord Rokeby (1875) LR 7 HL 744: see para 133, above.
It was considered again and rejected by Lord President Inglis in Williamson v Umphray and Robertson (1890) 17 R 905, by Fry LJ in Munster v Lamb (1883) 11 QBD 588 and by the Lord Chancellor in Watson v MEwan [1905] AC 480.
Nothing that has been said in any of the later authorities casts doubt on the policy choice that was made in these early cases.
Lord Hoffmanns declaration in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 that the policy of the immunity is to enable people to speak freely without fear of being sued, whether successfully or not, is a restatement of exactly the same point.
Lord Wilberforces view in Saif Ali was that this consideration showed that the area of the immunity must be cautiously defined.
By that I think he meant that the immunity should not be extended any further than necessary.
That test can be applied without too much difficulty when one is setting limits to the context in which things said or done will attract the immunity.
It will then follow that the protection will extend to all claims of whatever nature that fall within that context.
Those which fall outside it of whatever nature will not have that protection.
It is more difficult to apply the idea that where there is a wrong there must be a remedy to include some wrongs within the scope of the immunity and exclude others that fall within the same context.
If it is necessary to give the protection against some claims to enable witnesses to speak freely, why should it not be given to them all? Why should a claim for a breach of duty be treated differently from a claim for defamation? If the claim is well founded, a wrong was done in either case which ought to be remedied.
Any immunity has to be justified.
This too is a sound argument in the right context.
But in this case we are dealing with a long established principle which extends the immunity to everyone who gives evidence to the court.
Any extension of that principle would, of course, have to be justified.
That was the problem that was faced up to and answered in Watson v MEwan [1905] AC 480 and more recently in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
But in this case we are being asked to make an exception to it.
We are being asked to remove the immunity for a category of witness which until now has been given the benefit of it.
Watson v MEwan [1905] AC 480 is a case in point as, of course, is Stanton v Callaghan [2000] QB 75.
It seems to me to be that it is the proposed exception to the rule, not the rule itself, that needs to be justified.
Analogy with the removal of the immunity from advocates.
It was said that, as the decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615 that the advocates immunity from liability for a breach of duty to his client had not given rise to any problems, the assumption could be made that the same could be said for the removal of the immunity from experts.
I am not convinced that this is so.
The witness and the advocate perform different functions.
The duties that the advocate owes to the court are not as far reaching as the overriding duty to the court that rests on the expert.
His principal duty is to his client, not to the court.
Lord Phillips makes another point: see paras 46 50.
He says that the expert witness can be compared with the advocate, as both undertake a duty to their client.
In that respect he has much more in common with the advocate than he does with the witness of fact.
Lord Dyson addresses the same issue when he is discussing the problem of divided loyalties: para 120.
His conclusion is that the fact that the experts overriding duty is to the court is no more compelling for retaining the immunity for experts than it was for retaining it for advocates.
These observations use the fact that the immunity has been withdrawn from the one as an argument for withdrawing it from the other.
I find this disturbing.
I do not think that anyone who sat in Arthur J S Hall & Co v Simons foresaw that removing the immunity from advocates would be taken as an indication that it should be removed from expert witnesses too.
Lord Hoffmanns remarks indicate that, rightly or wrongly, he saw no such analogy.
Only Lord Hobhouse disagreed with him.
Yet here we are a decade later contemplating taking just that step.
There is a warning here, to repeat the old adage, that one thing leads to another.
Removing just one brick from the wall that sustains the witness immunity may have unforeseen consequences.
Wasted costs orders and disciplinary proceedings against experts.
It was also said that, as it was now clear that an expert witness was not immune from the sanction of compensating by a wasted costs order those who had suffered by evidence given recklessly in flagrant disregard of his duties to the court, and that he was not immune from disciplinary proceedings for professional misconduct at the instance of the professional body to which he belongs, a sufficient inroad had been made into his immunity for it to be but a short step for it to be removed as regards his duties to his client too.
The suggestion was that the protection of the immunity had been significantly eroded by these developments.
I am not convinced by this argument either.
The decisions in Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 and Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462 are not inconsistent with the continued existence of the general immunity.
But there is a more fundamental point.
It is one thing to be liable to a wasted costs order at the instance of the court itself or to proceedings by a professional body for professional misconduct.
It is quite another to be at risk of worthless but possibly embarrassing and time consuming proceedings by a disgruntled and disaffected litigant in person.
Insurance cover, if available, is not a universal remedy.
And here again one must be careful not to lose sight of the policy choice that was made long ago that, to be effective, the immunity must be for the protection of all, not just those who might otherwise be liable.
Experts can look after themselves.
Some experts may be robust enough to withstand the risks and in most cases, no doubt, the risks they face will be minimal.
But one cannot assume that this will be so for everyone.
And it is not the robustness of the witness that is the problem.
It is the risk of the expense and distress of a harassing litigation at the instance of an aggressive client which in some cases, given the vagaries of human nature, may be quite obvious.
Lord Penzance thought in Dawkins v Lord Rokeby (1875) LR 7 HL 744 that, with such possibilities hanging over his head, a witness could not be expected to speak with that free and open mind which the administration of justice demands.
I would find it hard to say that he misdirected himself on this point or that what he said then does not still hold true today, even in the case of experts who regularly give evidence but certainly in respect of those who do not.
As against those points, there are various arguments that have been put forward in support of retaining the immunity for expert witnesses.
Chilling effect on the availability of witnesses.
Mr Lawrence QC for the respondent said that it was a relevant consideration whether abolition of the immunity would deter a significant number of potential experts from giving evidence.
Otton LJ made this point in Stanton v Callaghan [2000] QB 75, 106 and Thorpe LJ raised the same concern in Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462, para 227.
I would not, on present information, attach much importance to this argument.
In any event, without hard information, it is not possible to assess how much weight should be given to it.
Experts can usually expect to be paid for their work, and there are no doubt other considerations that will incline them to continue to make themselves available.
I would not, however, discard this point as entirely irrelevant.
There may be some situations some kind of case, some kinds of client where the expert would be reluctant to become involved at all.
If that were to happen it would raise questions as to whether access to justice for the disadvantaged was being inhibited.
This is a reason for wishing to be cautious before taking a step which, for all practical purposes, would be irretrievable.
Fuzzy edges: where to draw the dividing line.
This is a much more important point.
Although Mr Ter Haar was careful to confine his submissions to civil cases and to the relationship between the expert and his own client only, it is hard to see how one could justify removing the immunity in that respect but keeping it for all the other tribunals which hear evidence for experts.
This would be a matter of particular concern in the criminal jurisdiction.
The expert for the prosecution would continue to enjoy the immunity from proceedings at the instance of the defendant.
The expert for the defence would have it removed from him.
One cannot discount the fact that exposure to the risk of incurring the expense and distress of a harassing litigation at the clients instance should the defence fail, however unlikely, will colour his evidence.
The public interest surely demands that experts who give evidence on either side in criminal proceedings are free from pressures of that kind.
The same point could be made where proceedings are brought for the protection of children, where the interests of the child must be the paramount consideration and it is undesirable that anything should be done that might discourage the expert from giving full and frank evidence.
What is the basis in principle that would justify the removal in civil cases but retaining it in all the others? And what if the removal is to be extended to family proceedings and public law proceedings where children are involved? Lady Hales compelling treatment of this subject in paras 182 and 183 of her judgment illustrates the problems.
It would be unwise to leave the position outside the civil jurisdiction in a state of uncertainty.
Other duties giving rise to the risk of liability.
The argument in favour of removing the immunity concentrated on the duties of care that arise from the contractual relationship and, in tort, from the relationship of reliance on the services of the professional.
There are however other circumstances that need to be considered that might give rise to liability from which, as matters stand, experts enjoy immunity.
There is the duty of confidentiality which was the subject of the proceedings against the expert in Watson v MEwan [1905] AC 480.
Is the immunity to be removed in cases of that kind too, where the expert agrees to give evidence for the other side or feels himself bound when giving evidence for his own side to reveal information which the court needs if it is to be told the truth but which his client maintains was confidential?
What about the joint or the court appointed expert? And what about witnesses who, although not experts, can be said to owe duties to a party to the litigation or those who may be affected by what they say? Is the immunity to be removed from the company director who owes a duty to the company to promote its interests but is said to have made an inexcusable error when giving evidence on its behalf? What about the employee with specialist skills who gives evidence on his employers behalf and is said to have caused loss to his employer because of the negligent way he presented his evidence? How does one determine who, for the purposes of the removal of the immunity, is an expert and who is not? And how is one to identify those to whom the duty is owed? In Carnahan v Coates (1990) 71 DLR (4th) 464, 471 472 Huddart J drew attention to the fact that prima facie a professional person who gives evidence owes a duty of care towards all who might be contemplated to be harmed by his failure to conduct himself with the minimum standard of care dictated by his profession.
In E OK v DK [2001] 3 IR 568 the unsuccessful party to an action of nullity of marriage sought damages against a witness whom the court had appointed to carry out a psychiatric examination of her, alleging that he had been negligent.
The different ways in which Lord Phillips, Lord Brown and Lord Dyson describe the extent to which the immunity is to be removed suggest that the boundaries are, and are likely to remain, unclear.
Conclusion
The lack of a secure principled basis for removing the immunity from expert witnesses, the lack of a clear dividing line between what is to be affected by the removal and what is not, the uncertainties that this would cause and the lack of reliable evidence to indicate what the effects might be suggest that the wiser course would be to leave matters as they stand.
The Law Commission has recently completed a project in which it addressed the admissibility of expert evidence in criminal proceedings in England and Wales: see Law Com No 325 (HC 829, 21 March 2011).
The question of immunity was not raised at any stage during its consideration of this issue.
If there is a need to reform the law in this area, it would be better to leave it to be dealt with by Parliament following a further report by the Law Commission.
As Watson v MEwan [1905] AC 480 remains binding in Scotland and witness immunity in Scotland is a devolved matter, the question whether it is in need of reform deserves attention by the Scottish Law Commission as soon as practicable.
In this way all the various problems could be addressed after proper consultation and debate.
For these reasons, and for those given by Lady Hale, I would dismiss the appeal.
LADY HALE
On 26 July 1966, the Lord Chancellor made the following statement, Practice Statement (Judicial Precedent) [1966] 1 WLR 1234, on behalf of himself and the Lords of Appeal in Ordinary: Their Lordships regard the use of precedent as an indispensable foundation upon which to decide what is the law and its application to individual cases.
It provides at least some degree of certainty upon which individuals can rely in the conduct of their affairs, as well as a basis for orderly development of legal rules.
Their Lordships nevertheless recognise that too rigid adherence to precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law.
They propose therefore to modify their present practice and, while treating former decisions of this House as normally binding, to depart from a previous decision when it appears right to do so.
In Austin v Southwark London Borough Council [2010] UKSC 28, [2010] 3 WLR 144, at para 25, Lord Hope (with whom all other members of the court agreed) stated that this has as much effect in this court as it did before.
However, this case illustrates how hard it is to apply that wise guidance in practice.
Lord Hope has demonstrated, to my mind convincingly, that there is House of Lords authority, in the shape of Watson v MEwan [1905] AC 480, for the general proposition that no cause of action of any kind lies against any witness in respect of the evidence he gives to a court.
The rule was first developed as a protection against suits in defamation, but there is no reason in principle to limit it to these.
If the purpose is to ensure that witnesses can prepare and give their evidence freely to the court, irrespective of whether it might otherwise constitute a tort or a breach of contract against someone else, then it should not matter what the source of that liability might be: whether saying or writing something which is defamatory of someone else; or saying or writing something in breach of a duty of confidence owed to someone else; or saying or writing something in breach of a contractual duty owed to someone else; or saying or writing something in breach of what would otherwise be a tortious duty owed to someone else.
The rule has been taken for granted by courts at all levels for a very long time.
I therefore agree with Lord Hope that we are here concerned with whether we should carve out an exception to that long established rule.
There are, of course, existing exceptions.
The most important is perjury, but among the others are contempt of court, professional misconduct (assuming Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462 to be correctly decided), and liability for the wasted costs of the other side (assuming Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 to be correctly decided).
It has been suggested that these exceptions, and in particular the last two, make such inroads into the rule that they call its whole purpose into question.
In my view they do no such thing.
These exceptions are all, in their different ways, in support of the courts interest in witnesses behaving properly: telling the truth, obeying court orders or respecting the undertakings given to the court, behaving professionally so as to justify the courts confidence in their expertise and not wasting the time of the court or the other parties.
In short, they are there to encourage, indeed to oblige, the witness to perform her duty to the court.
They are not there to protect the interests of the witnesss client.
The exception which we are being asked to make is to protect the interests of the client.
That is a significant departure from existing principles.
The rule may have been established before certain developments in law and practice in particular the modern evolution of the law of negligence and the practice of paying expert witnesses to give their opinions in civil or criminal cases.
But these are not new developments in the way that, for example, email and the internet are new developments which the existing law must find ways of accommodating.
A professional person has always owed her client a contractual duty to exercise reasonable care and skill: its statutory recognition in the Supply of Goods and Services Act 1982 was not intended to change the law.
It has never, so far as I am aware, been contrary to public policy for a party to litigation to pay an expert for her advice in connection with the litigation.
The development is one of quantity not quality.
If an exception is to be made, the boundaries of that exception must be logical and clear.
As I understand it, there is no question of removing the absolute privilege which all witnesses enjoy against defamation, whether or not the person defamed is their client.
As I also understand it, there is no question of erecting a duty of care where none would otherwise exist, and thus of rendering an expert witness liable to the other side or to anyone else involved in the litigation apart from her own client.
The rationale for the proposed exception is that, without the rule, an expert witness would owe a duty of care to her own client and there is no reason why she should not be liable if she has caused her client loss through the breach of that duty.
I am unclear whether the exception would apply only in a case where there was a contractual duty or whether it would apply in a case where there was no contractual duty but there might be a duty owed in tort.
Or is it to be assumed that the two are co terminous? I doubt that because there may be situations where there is no contractual duty, for example because the contract was made with the partys legal advisers, but where there could be a duty in tort were it not for witness immunity.
I ask these questions because, as it seems to me, it would be impossible to confine any exception to run of the mill cases like the present.
The present case is a classic personal injury action.
The claimant was injured in a road traffic accident.
There is a variety of medical evidence available.
Some of it comes from the doctors who have been treating him for his injuries.
Some of it comes from doctors, and in this case a clinical psychologist, who have been instructed by one side or the other to give their expert opinion purely for the purpose of the litigation.
These last are the paradigm case on which the rationale for the proposed exception is based.
They have been called in to give their opinion for the purpose of the litigation.
They are paid a fee for doing so.
They would ordinarily owe a contractual duty to exercise reasonable care and skill, either directly to the client or through the clients legal advisers.
Why should they not be held liable to the client if they fail to exercise that care and skill? After all, as professionals, they will only fail in their duty if they fail the Bolam test (Bolam v Friern Hospital Management Committee [1957] 1 WLR 582); and as witnesses, they will be excused much in the hurly burly of the trial.
These are powerful arguments indeed in the context in which they are deployed.
Mr Ter Haar QC, for the appellant claimant, was at pains to exclude consideration of the liability of expert witnesses in other contexts.
But I do not think that we can exclude it.
If we are to change the law, we must do so in a principled way.
If the exception is made, it will clearly have to apply between expert witnesses and their clients in all kinds of civil proceedings, before all kinds of courts and tribunals: the surveyor who gives valuation evidence in a leasehold enfranchisement case; the plasterer who gives quantum meruit evidence in a building dispute; the engineer who explains how a machine works in a factory accident; or the scientist who explains how DNA works in a patent case.
All of this may sound straightforward.
But even in ordinary civil cases, it is not completely so.
A doctor who has treated the patient after an accident or for an industrial disease may be called upon, not only to give evidence of what happened at the time, but also to give an opinion as to the future.
Sometimes there may be a fee involved and sometimes not.
Is the proposed exception to cover all or only some of her evidence? In many civil cases, there are commonly now jointly instructed experts on some issues.
A jointly instructed expert owes contractual duties to each of the parties who instruct her.
A party who is disappointed by her evidence will often find it difficult to persuade the court to allow a further expert to be instructed to enable her evidence to be properly tested.
But the disappointed party does not have to ask the courts permission to find an expert who will enable him to launch proceedings against the jointly instructed expert.
Because such an expert is extremely likely to disappoint one of those instructing her, she may be more vulnerable to such actions than is the expert instructed by one party alone.
How far beyond ordinary civil proceedings is this exception to go? I have already suggested that it would have to apply to essentially private law proceedings in tribunals as well as in courts thus to proceedings between landlord and tenant in leasehold valuation, service charge, rent assessment and other such disputes; or between employer and employee in unfair dismissal, redundancy, discrimination and breach of contract cases.
But what about cases which are essentially public law proceedings? Should the independent psychiatrist who is instructed on behalf of the patient in tribunal proceedings under the Mental Health Act 1983 be covered by the proposed exception? Should the educational psychologist or child psychiatrist instructed by the parents of a child with special educational needs to give evidence in tribunal proceedings under Part 4 of the Education Act 1996? These are sensitive and often highly fraught cases in which performing the experts duty to the tribunal may well be perceived by the client patient or parent as a breach of her duty towards him.
This brings me to family proceedings, in which all of these various situations can arise.
The most obvious analogy with an ordinary civil case is ancillary relief proceedings between husband and wife.
Expert valuation or forensic accountancy evidence is common.
If such experts may be held liable to their clients in other civil proceedings, it is hard to see why they should not be so liable in ancillary relief proceedings.
The next example is proceedings between mother and father (or other relatives) about the future of their children.
Often, the court will be assisted by a welfare report from a Cafcass officer.
That officer is not instructed by either party and so will presumably run no risk of liability to either of them.
But sometimes the parties will jointly instruct a child psychiatrist or psychologist to assist the court.
Is such an expert to be potentially liable to the disappointed parent even though it is generally accepted that her principal duty is owed, not to the parents, but to the child? And sometimes, even in these private law disputes, the child will be separately represented.
Such cases are so difficult and sensitive that it is quite likely that an expert will be instructed on behalf of the child.
Is such an expert to be potentially liable to the child?
Then there are public law proceedings between a local authority, the child and the parents.
There will often be a great deal of expert evidence.
Some of the evidence will come from social workers employed or instructed by the local authority.
Some of these will be simple witnesses of fact.
Some will have carried out expert risk assessments.
Many will do both.
Are they to be potentially liable to the local authority in respect of all or only some of their evidence? Some of the evidence will come from doctors, nurses and other health care professionals who have treated or looked after the child at critical times.
They may be called as witnesses by any party to the proceedings but are usually called by the local authority.
I do not know, but it may be that they are sometimes paid a fee for giving an expert opinion to the court.
Are they to be potentially liable to whoever called them as witnesses in respect of all or only some of their evidence? Some of the evidence will come from health care professionals who have not treated the child, but have been called in to make an assessment for the purpose of potential or actual care proceedings.
They may be instructed by the local authority, the parents or the childs guardian.
Are they to be potentially liable to whoever instructed them? Should any of this depend upon whether the expert is paid a fee specifically for her appearance in court, or provides her assessment as part of her ordinary duties to the health or social care services, who may not be party to the proceedings, or provides it as part of a special arrangement between the agencies?
In M (A Minor) v Newham London Borough Council [1995] 2 AC 633, 661, Sir Thomas Bingham MR (with whom Staughton LJ agreed) held that a psychiatrist who interviewed a child in the course of investigating suspected child sexual abuse was not covered by witness immunity: she must have known that if she concluded that the child had been abused by someone living in the household, proceedings to remove the child were likely, but she had never in fact become involved in proceedings about the child.
When the case went to the House of Lords, as one of those reported as X v Bedfordshire County Council [1995] 2 AC 633, at pp 754 755, Lord Browne Wilkinson pointed out that this was factually incorrect: the psychiatrist had made a report which was relied upon in the proceedings.
He also concluded that there should be no liability for investigations which had such an immediate link with possible proceedings.
But this was in the context of the case as a whole, where it was held that there was no duty of care owed to a child by the professionals involved in deciding whether or not to institute proceedings to protect him from abuse.
In D v East Berkshire Community NHS Trust [2003] EWCA Civ 1151, [2004] QB 558, the Court of Appeal held that both doctors and social workers did owe a duty of care to the child when conducting child protection investigations.
Discussing the impact of witness immunity, at paras 113 117, Lord Phillips of Worth Matravers MR compared the approach of Lord Browne Wilkinson in X v Bedfordshire with the more detailed consideration of witness immunity in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
There Lord Hope had said, at p 448: The actions which the police take as law enforcers or as investigators may, of course, become the subject of evidence.
But there is no good reason on grounds of public policy to extend the immunity which attaches to things said or done by [police officers] when they are describing these matters to things done by them which cannot fairly be said to form part of their participation in the judicial process as witnesses.
The purpose of the immunity is to protect witnesses against claims made against them for something said or done in the course of giving or preparing to give evidence.
It is not to be used to shield the police from action for things done while they are acting as law enforcers or investigators.
Lord Phillips went on to say that it may not be easy to draw the line between investigation and preparation of evidence in cases of suspected child abuse but the Court clearly held that that was where the line should be drawn.
To that extent, therefore, the view taken in X v Bedfordshire has been superseded by later authority.
There was no appeal to the House of Lords against that aspect of the decision of the Court of Appeal in D v East Berkshire NHS Trust.
There may, therefore, be a relatively clear dividing line between conducting the examinations and investigations, on the one hand, and preparing for and giving evidence, on the other.
But what these examples also make clear is that in many family cases, if the law is to be changed, there will be some professional witnesses who enjoy immunity in respect of their evidence and some who do not.
Some of those distinctions will appear arbitrary.
Whereas in the past, all enjoyed the same immunity, in the future only some will do so.
This will introduce a dimension to the interactions between the experts, and between the experts and the courts, which was not there before.
To what extent will the court, in evaluating an experts evidence, take account of that experts potential liability to a client or the lack of it?
These demarcation problems might have to be suffered if it were clear that the benefits of making the exception outweighed the risks.
But it is impossible to say what effect the removal of immunity will have, either on the care with which the experts give their evidence, or upon their willingness to do so.
It is certainly possible that it will reduce any tendency to act as a hired gun and that would be a very good thing; but it is also possible that it will increase the pressure on an expert to stick to her previous opinion for fear of being sued if she retracts or modifies it.
It is possible that it will have no effect at all upon the willingness of experts to give evidence; it is also possible that, in certain fields at least, it will reduce their willingness to do so, or even to become involved in the particular field of practice at all.
It is possible that professional indemnity insurance premiums will rise and that fees for giving expert evidence will also rise to take account of this; it is possible that exclusion clauses may be introduced into contracts to give expert evidence, in which case we shall be back where we started.
The major concern, however, is not about the effect of making the exception upon expert witnesses.
If they are truly expert professionals, they should not allow any of this to affect their behaviour.
The major concern is about the effect upon disappointed litigants.
I agree with Lord Hope that the object of the rule is to protect all witnesses, the great majority of whom are trying to do a professional job and are well aware of their duties to the court, against the understandable but usually unjustifiable desire of a disappointed litigant to blame someone else for his lack of success in court.
For these reasons, it does not seem to me self evident that the policy considerations in favour of making this exception to the rule are so strong that this Court should depart from previous authority in order to make it.
To my mind, it is irresponsible to make such a change on an experimental basis.
This seems to me self evidently a topic more suitable for consideration by the Law Commission and reform, if thought appropriate, by Parliament rather than by this Court.
| UK-Abs | The appellant in this case challenged the rule that an expert witness enjoyed immunity from any form of civil action arising from the evidence he or she gave in the course of proceedings.
The appellant had been hit by a car in March 2001 and suffered physical and psychiatric consequences.
He consulted solicitors with a view to bringing a claim for personal injury, and they instructed the respondent, a clinical psychologist, to prepare a report on his psychiatric injuries for the purposes of the litigation.
She reported that the appellant was suffering from post traumatic stress disorder (PTSD).
Proceedings were issued and liability was admitted, so that the only remaining issue was the amount of damages.
The appellant was examined by a consultant psychiatrist instructed by the defendant driver, who expressed the view that the appellant was exaggerating his symptoms.
The district judge ordered the two experts to hold discussions and to prepare a joint statement to assist the court at the trial.
It is the appellants case that the respondent carried out this task negligently, and thereby signed a joint statement which wrongly recorded that she agreed that the appellant had not suffered PTSD and that she had found the appellant to be deceitful in his reporting.
This was so damaging to his claim for damages that he felt constrained to settle it for a significantly lower sum than he might otherwise have been able to achieve.
The appellant accordingly issued proceedings for negligence against the respondent.
She applied for the claim to be struck out.
The judge in the High Court was bound by the Court of Appeals decision in Stanton v Callaghan [2000] QB 75 to hold that the respondent, as an expert witness, was entitled to immunity from such a claim in respect of her preparation of a joint statement for trial, and granted the application.
The appellants appeal against this order came direct to the Supreme Court as a point of general public importance.
The Supreme Court by a majority (Lord Hope and Lady Hale dissenting) allows the appeal.
Lord Phillips gives the lead judgment.
The majority hold that the immunity from suit for breach of duty (whether in contract or in negligence) that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished.
Witness immunity dates back over 400 years, long before the development of the modern law of negligence and the practice of forensic experts to offer services to litigants for reward [11].
It originally took the form of absolute privilege against defamation claims but was extended to all forms of suit [12].
It overlapped with the wider immunity formerly enjoyed by an advocate from negligence claims by his own client, before that immunity was abolished by the House of Lords in 2001 on the ground that it could no longer be justified [13].
The general rule was that every wrong should have a remedy and that any exception to this rule must be justified as being necessary in the public interest and kept under review [51][88][113].
The primary rationale for the immunity was a concern that an expert witness might be reluctant to give evidence contrary to his clients interest, in breach of his duty to the court, if there was a risk that this might lead his client to sue him [41].
In common with advocates, however, there was no conflict between the duty that the expert had to provide services to his client with reasonable skill and care, and the duty he owed to the court.
The evidence did not suggest that the immunity was necessary to secure an adequate supply of expert witnesses [54] [117].
The removal of immunity for advocates had not diminished their readiness to perform their duty, nor had there been a proliferation of vexatious claims or multiplicity of actions [57 60][85].
For these reasons the majority concluded that no justification had been shown for continuing to hold expert witnesses immune from suit for breach of duty in relation to the evidence they give in court or for the views they express in anticipation of court proceedings [61].
This decision did not affect the continued enjoyment by expert witnesses of absolute privilege from claims in defamation [62], nor did it undermine the longstanding immunity of other witnesses in respect of litigation [125].
Lord Hope and Lady Hale, dissenting, disagreed with the majoritys approach of reviewing the justification for the immunity.
The rule was longstanding and its application to claims beyond defamation in respect of evidence given by any witness was confirmed by the House of Lords in Watson v MEwen [1905] AC 480 [141].
The question therefore was whether an exception to this rule could be justified [161][176].
The main concern arising from the decision of the majority was the effect on disappointed litigants liable to commence worthless but time consuming claims against their experts [165][188].
The lack of a secure principled basis for removing the immunity, of a clear dividing line between what was to be affected by the removal and what was not, and of reliable evidence to indicate what the effects might be, suggested that the wiser course was to leave any reform, if needed, to Parliament [173][189].
|
The appellants are former employees of the London Borough of Lewisham (the council).
They worked in the councils leisure department until 2002.
Their part of the councils undertaking was then contracted out to a private sector employer named CCL Ltd and they were transferred into its employment.
In May 2004 CCLs undertaking was taken over by another private sector employer named Parkwood Leisure Ltd (Parkwood), which is the respondent to this appeal.
As a result of that transfer the appellants became employees of Parkwood.
The Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) (TUPE) applied to each of these transfers.
TUPE safeguards the rights of employees when the business in which they worked changes hands between employers.
It preserves their contractual rights so that they are enforceable against the transferee after the transfer.
Regulations 5(1) and 5(2) of TUPE provided that their contracts of employment were to have effect after the transfer as if originally made between the persons so employed and the transferee.
TUPE was replaced by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) which came into force on 5 April 2006.
But the transfers with which this case is concerned took place before that date.
So the position that applies to them is governed by the 1981 Regulations, which I shall continue to refer to as TUPE.
The council subscribed to the National Joint Council for Local Government Services (the NJC).
The NJC comprises within its membership representatives of local authority employers and trades unions.
As the appellants were employees of a local authority, their contracts of employment with the council included a term which entitled them to the benefit of the terms and conditions set by the NJC.
They were in a standard form which, under the heading Terms and Conditions of Employment, contained the following express term: During your employment with the council your terms and conditions of employment will be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services, set out in the scheme of conditions of service (commonly known as the Green Book) supplemented by agreements reached locally through the councils negotiating committees.
Among the terms and conditions collectively agreed by the NJC were rates of pay for employees of local authorities.
At the date of the appellants transfer to CCL there were in place collectively agreed terms setting out the pay rates for the period from 1 April 2002 to 31 March 2004.
Those terms were honoured by CCL throughout the period of the appellants employment with that company.
In March 2004 NJC negotiations began for the period from 1 April 2004 to 31 March 2007.
There were twelve representations of the local government associations on the NJC and various unions, including UNISON of which the appellants were members.
But Parkwood does not recognise UNISON and, as it is a private sector employer, it cannot belong to the NJC or be represented on it.
So it was not a party to these negotiations.
The negotiations concluded on 4 June 2004, after the date of Parkwoods takeover of CCL.
On 14 July 2004 the NJC issued a circular summarising the three year settlement.
It included pay increases for the periods from 1 April 2004 and 1 April 2005.
Parkwood initially refused to award the appellants pay increases in accordance with the collective agreement for the periods from 1 April 2004 and 1 April 2005.
The appellants brought claims against it for unauthorised deductions from their wages contrary to section 13 of the Employment Rights Act 1996.
These claims were settled without admission of liability and the increases for these years were paid.
But Parkwood declined to award the appellants increased rates of pay in accordance with the collective agreements with effect from 1 April 2006 and 1 April 2007.
So the appellants brought further claims against Parkwood for unauthorised deductions in the London (South) Employment Tribunal (the ET).
The ET dismissed their claims, for reasons that were given in a judgment sent to the parties on 16 July 2008.
On 12 January 2009 the Employment Appeal Tribunal (the EAT), allowed the appellants appeal against that decision and remitted the claims to the ET for a hearing as to remedy: [2009] ICR 703.
Parkwood was given permission to appeal.
On 29 January 2010 the Court of Appeal (Ward, Smith and Rimer LJJ) allowed the appeal, set aside the order of the EAT and restored the decision of the ET to dismiss the appellants claims: [2010] EWCA Civ 24, [2010] ICR 793.
The issues
The issue which lies at the heart of this appeal is whether the effect of regulations 5(1) and 5(2) of TUPE is that the appellants are entitled to the benefit of increases in pay negotiated by the NJC after they were transferred into the employment of Parkwood.
It is common ground that, had this issue been solely one of domestic law, the question would have been open only to one answer.
In BET Catering Services Ltd v Ball (unreported) 28 November 1996, Lindsay J, delivering the judgment of the appeal tribunal in Mrs Balls favour, said that he could see no conceptual difficulty in a private sector employer binding itself to public sector pay rates.
In Whent v T Cartledge Ltd [1997] IRLR 153, in a judgment delivered by Judge Hicks QC, the appeal tribunal said that, once it was accepted that regulation 5 of TUPE applied and that there had been no relevant subsequent variation in the contract of employment, the issue became simply one of the true meaning of the clause that provided that the employees pay would be in accordance with the agreement made by the NJC as amended from time to time, and that there was no apparent reason why the transfer should cause any change in the meaning of these words: para 9.
The employment tribunals view that it could not be right that an employer is bound ad infinitum by the terms of a succession of collective agreements negotiated by bodies other than themselves was rejected.
In para 16 Judge Hicks said: there is simply no reason why parties should not, if they choose, agree that matters such as remuneration be fixed by processes in which they do not themselves participate.
In Glendale Grounds Management v Bradley, (unreported) 19 February 1998, and Glendale Managed Services v Graham [2003] EWCA Civ 773, [2003] IRLR 465 issues were raised as to whether a different result followed because of particular words used in the employees contract.
In Bradley it was held that the particular terms of the contract required the approval of the employer for the time being to any new negotiated terms, whereas Glendale had given none.
In Graham the clause provided that the rate of remuneration would normally be in accordance with the NJC.
The Court of Appeal held that it was an implied term of that contract that the employer must inform the employee if and when there was to be a departure from the normal situation.
BET Catering Services Ltd v Ball and Whent v T Cartledge Ltd were not referred to.
But I agree with Rimer LJs observation in the Court of Appeal in this case that the decision in Graham was impliedly consistent with the approach that was reflected in those cases: [2010] ICR 793, para 21.
The view that was taken in those decisions about the effect of conditions of the kind that the appellants rely on in this case was, in my opinion, entirely consistent with the common law principle of freedom of contract.
There can be no objection in principle to parties including a term in their contract that the employees pay is to be determined from time to time by a third party such as the NJC of which the employer is not a member or on which it is not represented.
It all depends on what the parties have agreed to, as revealed by the words they have used in their contract.
The fact that the employer has no part to play in the negotiations by which the rates of pay are determined makes no difference.
Unless the contract itself provides otherwise, the employee is entitled to be paid according to the rates of pay as determined by the third party.
This is simply what the parties have agreed to in their contract.
The same is true of the transferee in the event of the transfer of an undertaking regulated by TUPE.
Domestic law tells us that the term in the contract is enforceable against the transferee in just the same way as it was against the original employer.
As Rimer LJ said in the Court of Appeal, decisions such as Whent amount to no more than a conventional application of ordinary principles of contract law to the statutory consequences apparently created by regulation 5 of TUPE: [2010] ICR 793, para 46.
But the issue is not solely one of domestic law.
Regulation 5 of TUPE must be read together with article 3(1) of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L61, p 26) (the Directive), to which it gave effect.
The question that has brought the appeal before this court is whether the approach that has hitherto been taken as to the effect of TUPE can still stand, in the light of the decision of the European Court of Justice in Werhof v Freeway Traffic Systems GmbH & Co KG (Case C 499/04) [2006] ECR I 2397 (Werhof).
The ECJ was concerned in that case with the meaning and effect of article 3(1) of the Directive.
The Court of Appeal held that the decision of the ECJ in Werhof was to be understood as meaning that the transferee was not committed by article 3(1) to any collective agreement made after the expiry of an agreement that was in force at the date of the transfer, and that there was nothing in the language of regulation 5 of TUPE to indicate that it was intended to enlarge employees rights beyond those provided for by article 3(1).
Its conclusion was that, in the light of Werhof, the domestic decisions in cases such as Whent were wrong and should not be followed.
The appellants contend for what has been described as a dynamic interpretation of the effect of their contract on transferees.
That is to say, that their contracts should be given effect according to their terms, binding the transferee to give effect to collective agreements negotiated by the NJC from time to time in the same way as if they had still been employed by the council.
The respondents submit that the effect of Werhof is that static rights only are protected, with the result that the transferee is not bound by any collective agreements that were not already binding on the original employer on the date of the transfer.
The questions that must be examined, therefore, are these: (i) what is the effect of the judgment of the Court of Justice in Werhof as to the interpretation of article 3(1) of the Directive? (ii) to what extent, if at all, is there room for giving a different meaning to regulation 5 of TUPE in domestic law from that indicated by Werhof as to the meaning of article 3(1)?
The legislation
As Rimer LJ observed in para 9 of his judgment, the law in the United Kingdom prior to the bringing into force of legislation to comply with the Directive was that, if an employer transferred his business to another, the employees contracts of employment were terminated.
It was a matter entirely for the transferee to decide whether it should continue to employ the employees of the transferor in the business which it had acquired and, if so, on what terms.
That position was reversed by the implementation of the Directive in 1981 by TUPE.
The position now is that the rights of employees when the business in which they worked changes hands between employers are safeguarded.
The extent to which their contractual rights are protected so that they are enforceable against the transferee after the transfer has not hitherto been in question.
The 1977 Directive was amended by Council Directive 98/50/EC (OJ 1998 L201, p 88).
Article 3 of the amended version reproduced in substance the provisions of article 3 of the 1977 Directive, as the ECJ noted in Werhof, para 4.
Council Directive 2001/23/EC of 12 March 2001 (OJ 2001 L82, p 16) has replaced the 1977 Directive, but the tenor of the wording used in the article 3 of the 1998 Directive has been retained: Werhof, in the opinion of Advocate General Ruiz Jarabo Colomer, para 9.
As both the Advocate General and the Court of Justice directed their attention to the wording of the 1977 Directive in Werhof, and as that was the Directive that TUPE was intended to implement, I shall do the same for the purposes of this judgment.
The preamble to the Directive included the following recitals : Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded; Whereas differences still remain in the Member States as regards the extent of the protection of employees in this respect and these difference should be reduced; Whereas these differences can have a direct effect on the functioning of the common market; Whereas it is therefore necessary to promote the approximation of laws in this field .
No mention was made in the recitals of any need to protect employers in the event of a change in employer as against the rights that were to be safeguarded for the protection of the employees.
In article 1(1) of the Directive it was declared that the Directive was to apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.
Article 3 of the Directive included these provisions: 1.The transferors rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of article 1(1) shall, by reason of such transfer, be transferred to the transferee.
Member States may provide that, after the date of the transfer within the meaning of article 1(1) and in addition to the transferee, the transferor shall continue to be liable in respect of obligations which arose from a contract of employment or an employment relationship. 2.
Following the transfer within the meaning of article 1(1), the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.
Member States may limit the period for observing such terms and conditions, with the proviso that it shall not be less than one year.
As the aim of the Directive was the approximation of the laws of the Member States, not their harmonisation, article 7 of the Directive provided: This Directive shall not affect the right of member states to apply or introduce laws, regulations or administrative provisions which are more favourable to employees.
In that connection it should be noted that the Directive did not apply to sea going vessels: article 1(3).
Nor, according to consistent decisions of the Court of Justice, did it apply to transfers of undertakings in the context of insolvency proceedings unless the undertaking had continued to trade or was expected to continue to trade: see Transport and General Workers Union v Swissport (UK) Ltd (in administration) and another [2007] ICR 1593, paras 56 58.
TUPE was made under the authority of section 2 of the European Communities Act 1972, subsection (2) of which, as amended by section 27(1) of the Legislative and Regulatory Reform Act 2006, provides inter alia that at any time after the passing of that Act any designated Minister or department may by order, rules, regulations or scheme make provision for the purpose of implementing any EU obligation of the United Kingdom or enabling any such obligation to be implemented.
Paragraphs (1) and (2) of Regulation 5 of TUPE, as amended by section 33(4)(a) and (b) of the Trade Union Reform and Employment Rights Act 1993, provided: (1) Except where objection is made under paragraph (4A) below, a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee. (2) Without prejudice to paragraph (1) above, but subject to paragraph (4A) below, on the completion of a relevant transfer (a) all the transferors rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and (b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee.
A relevant transfer is a transfer to which TUPE applies, that is to say a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom: regulation 3, read with regulation 2(1).
Regulation 5(4A), which was inserted by section 33(4)(c) of the 1993 Act, provided that paragraphs (1) and (2) were not to operate to transfer the employees contract of employment and the rights, powers, duties and liabilities under or in connection with it if he informs the transferor or the transferee that he objects to becoming employed by the transferee.
Regulation 6 of TUPE was in these terms: Where at the time of a relevant transfer there exists a collective agreement made by or on behalf of the transferor with a trade union recognised by the transferor in respect of any employee whose contract of employment is preserved by regulation 5(1) above, then (a) without prejudice to section 18 of the 1974 Act or article 63 of the 1976 Order (collective agreements presumed to be unenforceable in specified circumstances) that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application as aforesaid, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee; and (b) any order made in respect of that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if the transferee were a party to the agreement.
Section 18 of the 1974 Act is now to be found in section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992.
The interpretative obligation in domestic law
I shall deal with this question first so that the decision of the Court of Justice in Werhof [2006] ECR I 2397, which is the most troublesome aspect of this case, can be examined in the right context.
The appellants submit that, even if the ruling in Werhof is inconsistent with the interpretation of regulation 5 of TUPE for which they contend, it does not warrant any reading down of regulation 5 given that article 7 of the Directive expressly authorises more generous protection for employees.
The respondents, on the other hand, say that regulation 5 of TUPE was introduced to implement, and to do no more than implement, article 3 of the Directive and that, in that situation, the courts of the United Kingdom are obliged to construe the domestic legislation consistently with the Directive and rulings of the Court of Justice as to the meaning and scope of the Directive.
As to the latter point, it is well established that it is the duty of the court to construe domestic legislation which has been enacted to give effect to the United Kingdoms obligations under the EU Treaty so as to conform to those obligations, so far as it is possible to do so.
In Pickstone v Freemans plc [1989] AC 66 it was held that words were to be implied into a regulation which was designed to give effect to Council Directive 75/117/EEC dealing with equal pay for women doing work of equal value.
This was because, if the House had not been able to make that implication, the United Kingdom would have been in breach of its treaty obligations to give effect to Directives.
In Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546, where the employees had been dismissed a short time before the transfer became operative, the issue was as to the meaning of the words immediately before the transfer in regulation 5(3) of TUPE.
Lord Keith of Kinkel said at p 554: it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect.
The precedent established by Pickstone v Freemans plc indicates that this is to be done by implying the words necessary to achieve that result.
Lord Oliver of Aylmerton said at p 559: If the legislation can reasonably be construed so as to conform with those obligations obligations which are to be ascertained not only from the wording of the relevant Directive but from the interpretation placed upon it by the European Court of Justice at Luxembourg such a purposive construction will be applied even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use.
This approach is consistent with what the Court of Justice itself said in von Colson and Kamann v Land Nordrhein Westfalen (Case 14/83) [1984] ECR 1891 with regard to Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment (OJ 1976 L39, p 40).
In para 26 the court said that: the member states obligation arising from a Directive to achieve the result envisaged by the Directive and their duty under article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of member states including, for matters within their jurisdiction, the courts.
It follows that, in applying the national law and in particular the provisions of a national law specifically introduced in order to implement Directive 76/207, national courts are required to interpret their national law in the light of the wording and the purpose of the Directive in order to achieve the result referred to in the third paragraph of article 189.
All of this is, of course, now very well known and it is common ground between the parties.
Mr Linden QC for the appellants submitted, however, that there was no decision of the Court of Justice which prohibits the domestic court from doing other than applying its domestic law approach to interpretation in a case where there was no reason to be concerned that the domestic provisions fell short of what Community law requires.
In R (Hurst) v London Northern District Coroner [2007] UKHL 13, [2007] 2 AC 189, para 52 Lord Brown of Eaton under Heywood said that the interpretative effect that Community law required was strictly confined to those case where, on their particular facts, the application of the domestic legislation in its ordinary meaning would produce a result incompatible with the relevant European Community legislation.
In cases where no European Community rights would be infringed, the domestic legislation is to be construed and applied in the ordinary way.
Mr Linden referred to two decisions of the Court of Justice that he said supported this approach to the construction of domestic legislation by national courts.
They showed, he said, that it was open to national courts to adopt an interpretation of domestic legislation that had been designed to give effect to the result sought to be achieved by a Directive that was more favourable than that indicated by the Directive itself.
In Katsikas v Konstantinidis (Joined Cases C 132/91, C 138/91 and C 139/91) [1992] ECR I 6577 the court was asked to consider a provision in article 613a(1) of the German Domestic Code which had been held by the German Labour Court to have the effect of preventing a transfer of the employment relationship where one of the employees had objected to the transfer of his employment by the business in which he was employed.
Provisions to the same effect are now to be found in regulations 5(4A) and 5(4B) of TUPE.
The question was whether the words laws, regulations or administrative provisions in article 7 of the Directive, which enable Member States to introduce laws which were more favourable to employees than the Directive, covered more favourable interpretations of measures of that kind given by national courts.
The court said in paras 39 and 40 that it had been consistently held that the scope of national laws, regulations and administrative provisions had to be assessed having regard to the interpretation given to them by the national courts and that the expression used in article 7 must be understood as referring to those measures as they are interpreted by the courts of that state.
In Criminal Proceedings against Lindqvist (Case C 101/01) [2004] QB 1014 questions had been referred to the Court of Justice as to whether Council Directive 95/46/EC on the protection of individuals with regard to the processing of personal data was compatible with the general principles of freedom of expression and whether national rules might be introduced that were more restrictive than the Community provisions.
As to the first point, the court said in para 85 that it was at the stage of the application at national level of the legislation implementing the Directive in individual cases that a balance must be found between the rights and interests involved.
The courts of the member states had to make sure, however, that they did not rely on an interpretation which would be in conflict with the fundamental principles protected by the Community legal order: para 87.
In paras 97 98 it said: 97 It is true that Directive 95/46 allows the member states a margin for manoeuvre in certain areas and authorises them to maintain or introduce particular rules for specific situations, as a large number of its provisions demonstrate.
However, such possibilities must be made use of in the manner provided for by Directive 95/46 and in accordance with its objective of maintaining a balance between the free movement of personal data and the protection of private life. 98 On the other hand, nothing prevents a member state from extending the scope of the national legislation implementing the provisions of Directive 95/46 to areas not included within the scope thereof, provided that no other provision of Community law precludes it.
The question that these decisions give rise to are (1) whether regulations 5(1) and 5(2) of TUPE were designed to be more generous than article 3(1) of the Directive as interpreted by the Court of Justice in Werhof [2006] ECR I 2397, according to the respondents reading of that decision; and (2) if not, whether it is open to the national court to construe regulation 5 of TUPE more generously because to do so is not precluded by article 3(1).
Was regulation 5 of TUPE designed to be more generous?
There is no doubt that in some respects TUPE was more generous to employees than the Directive.
As already noted (see para 16, above), the Directive did not apply to sea going vessels.
In Castle View Services Ltd v Howes 2000 SLT 696, however, the First Division of the Court of Session held that the crews of such vessels were not excluded from the benefit of the regulations: see also NUMAST v P&O Scottish Ferries Ltd [2005] ICR 1270.
In Transport and General Workers Union v Swissport (UK) Ltd (in administration) [2007] 1CR 1593 it was held that TUPE applied to transfers of undertakings in insolvency cases, whereas the Directive did not.
TUPE did not adopt the one year maximum on the period for observing collective agreements after a transfer in regulation 6, as member states were authorised to do by the second paragraph of article 3(2).
And regulations 5(4A) and 5(4B) introduced by section 33 of the Trade Union Reform and Employment Rights Act 1993, which enable employees to object to being transferred, are also more generous: Katsikas v Konstantinidis v Stauereibetreib Paetz [1992] ECR I 6577.
It is not possible, however, to detect anything in regulations 5(1) and 5(2) of TUPE that is so obviously more generous than what is to be found in article 3(1) of the Directive.
Regulation 5(1) does say something that article 3(1) does not say in so many words.
This is that a relevant transfer shall not operate so as to terminate the contract of employment, which shall have effect after the transfer as if originally made between the employee and the transferee.
Article 3(1) leaves this to implication, concentrating as it does on the fundamental point that the transferors rights and obligations arising from the contract shall, by reason of the transfer, be transferred to the transferee.
This is the point that is picked up, admittedly in more elaborate language, in regulation 5(2)(a) and (b).
The words rights and obligations are expanded to rights, powers, duties and liabilities.
But the expanded phrase does not encompass anything more than was caught by the words used in article 3(1).
So there is in substance no difference.
Regulation 5(2)(b) goes on to refer to things done in relation to the transferor before the transfer, which are deemed to have been done by or in relation to the transferee.
But here too we find an expanded description of what is already captured by the words rights and obligations in article 3(1).
Mr Linden sought to find support for his argument as to the intention of Parliament from the fact that regulations 4(1) and (2) of the 2006 Regulations which came into force on 6 April 2006 were in almost the same terms as regulations 5(1) and (2) of TUPE.
He submitted that, by re enacting the equivalent provisions of TUPE, Parliament must be taken to have endorsed the interpretation that had been given to those provisions in BET Catering Services Ltd v Ball and Whent v T Cartledge Ltd (see para 7, above).
I do not think that it is open to us to make that assumption.
No reference to these authorities was made in the Public Consultation Document issued by the Employment Relations Directorate of the Department of Trade and Industry in March 2005 and none of the questions that were asked were addressed to this point.
Furthermore, by the time the 2006 Regulations were laid before Parliament on 7 February 2006 the Advocate Generals opinion in Werhof [2006] ECR I 2397 was in the public domain.
It was delivered on 15 November 2005, so anyone who was keeping an eye on what was being said about the effect of article 3(1) of the Directive would have been aware of the raising of the issue as to its limits by that time.
The judgment in Werhof was promulgated on 9 March 2006, and the 2006 Regulations came into force on 6 April 2006.
This timetable indicates that it would not be safe to infer that Parliaments intention was to do anything more than simply to give continuing effect to the Directive.
I think therefore that Rimer LJ summarised the situation correctly when he said that it seemed to him that the language of regulations 5(1) and (2) of TUPE sat harmoniously with that of article 3(1) and gave effect to it: [2010] ICR 793, para 56.
In my opinion Parliament must be taken to have intended to do no more, when it was enacting regulations 5(1) and (2), than implement article 3(1) of the Directive.
The same must be said of its intention when it was enacting the 2006 Regulations.
Is it open to the national court to interpret regulation 5 more generously?
I address this question on the assumption, whose soundness I will examine later, that the effect of the decision of the Court of Justice in Werhof [2006] ECR I 2397 is that the transfer of dynamic contractual rights was inconsistent with article 3(1) of the Directive.
It seems to me that Mr Lindens argument that it is open to the domestic courts to give regulations 5(1) and 5(2) of TUPE their ordinary meaning derives some support from what the Court of Justice said in the cases of Katsikas v Konstantinidis [1992] ECR I 6577 and Criminal Proceedings against Lindqvist [2004] QB 1014: see paras 24 and 25, above.
Lord Keiths statement in Litster v Forth Dry Dock & Engineering Co Ltd (In Receivership) [1990] 1 AC 546, 554 that it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect must be read subject to this qualification.
It is open to the national court, as the Court of Justice said in para 98 of Lindqvist, to extend the scope of the national legislation implementing the provisions of the Directive to areas not included within its scope, provided that no other provisions of Community law preclude it.
In the present context this means that it would be open to the national court to give regulations 5(1) and 5(2) their ordinary and natural meaning so long as there was nothing in Werhof that indicates that it is not open to it to do so.
Mr Lynch QC for Parkwood submits however that this is exactly what, in the light of the ruling in Werhof, the national court cannot do.
Werhof
Mr Linden submits that there are two main reasons why Werhof v Freeway Traffic Systems GmbH & Co KG [2006] ECR I 2397 is not to be read as having the effect of overruling the case law of the EAT as indicated by Whent [1997] IRLR 153.
The first depends on the facts in Werhof.
He submits that it was concerned with a different question from that which arises in this case, as it did not concern a term in the employment contract which incorporated terms and conditions as agreed from time to time by a collective bargaining body such as the NJC.
The second is that in any event Werhof merely decided that the Directive did not require the transferred employees to be entitled to the benefit of subsequent collective agreements.
It did not prohibit national law from being more generous to the employees, in accordance with our own domestic case law as to the effect of regulation 5 of TUPE.
Mr Werhofs terms of employment with his original employer were governed by a framework collective agreement and wages agreement in force at the material time for workers in the North Rhine Westphalia metal and electrical industry negotiated between the trade union for the metal industry, of which he was not a member, and the metal and electrical Industry for North Rhine Westphalia, of which the undertaking was a member: Advocate General, para 17; ECJ, paras 7 and 8.
The Advocate General acknowledged that, under German employment law, a contract of employment may refer to other instruments such as collective agreements which have not necessarily been concluded by the contracting parties: para 30.
These clauses act statically or dynamically, depending on whether they refer to a specific agreement which is in force or to the agreement applicable at any time to the undertaking or economic sector in which the business is conducted: para 32.
Mr Werhofs agreement was of the dynamic kind.
This was what gave rise to the problem with which his case was concerned.
As the Advocate General explained in para 33, the problem arose as to the legal effects of an agreement of that kind when the undertaking has been transferred, where the transferor was a member of the employers federation with whom the union negotiated but the transferee was not and the collective agreement was replaced by another one after the transfer.
The referring court, the Landesarbeitsgericht at Dsseldorf, was in doubt as to whether the right to participate in amendments made to agreements following the transfer was one of the rights that passed to the transferee under article 3(1) of the Directive.
This was because, as the Advocate General explained in para 35, in Germany, the Bundesarbeitsgericht (Federal Labour Court) has interpreted paragraph 613a of the BGB stating that, under the second sentence, the collectively agreed rules become a constituent part of the contract of employment with the content that they possess at the time when the business is transferred and subsequent amendments are not relevant, because a right to benefit from the advantages of further dynamic development in negotiation cannot be inferred, since the protection granted to the rights of workers is static; the Bundesarbeitsgericht, combining the first sentence of the provision with paragraphs 3 and 4 of the TVG [Law on Collective Agreements: Advocate General, para 10], also considers that subjection of workers to subsequent collective agreements cannot do without the subjection of the employer; otherwise, if the company were transferred, the position of the employees would depend on the concluding of an arrangement for parity of treatment.
The point that the Advocate General was making in the concluding part of this paragraph was that the system of collective bargaining that was in issue in that case was enforceable by statute, which required the employer to be a member of the employers federation that was a party to the collective agreement.
The only way the collective agreement could be rendered enforceable, if the statute did not apply to it, would be by entering into a contract which gave parity of treatment to the employee.
Mr Werhofs contract of employment was not of that kind.
The first sentence of paragraph 613a(1) of the BGB provides that, where a business is transferred to another owner, the rights and obligations arising from the employment relationship existing on the date of the transfer shall pass to the owner.
The second sentence provides that, where the rights and obligations are governed by the provisions of a collective or works agreement, they shall be incorporated into the employment relationship with the new owner and the employee.
This was the provision that the Federal Labour Court had interpreted as having the effect that such agreements had the content that they possessed at the time when the business was transferred and that subsequent amendments were not relevant.
The question that the case raised was whether this interpretation was precluded by article 3(1) of the Directive.
The Advocate General drew attention to the distinction between articles 3(1) and 3(2) of the Directive in paras 38 43.
Article 3(1) refers to clauses applying to individuals and article 3(2) to those stipulated in a collective agreement.
Where the document concluded by the worker and the employer refers to a collective agreement on a matter such as wages it is governed by article 3(1) because it is included in an individual contract.
But the collective provision to which the parties refer is governed by article 3(2).
He drew attention too to the fact that the right to freedom of association under article 11 of the European Convention on Human Rights includes the right not to join or to withdraw from an association: Young, James and Webster v United Kingdom (1981) 4 EHRR 38; Gustafsson v Sweden (1996) 22 EHRR 409, para 45.
In para 49 he observed that if the new owner wished to participate in agreements with the unions he would have to join the negotiating employers federation which would curtail his freedom of association.
In paras 51 52 the Advocate General said that the right of a person acquiring an undertaking must prevail over any other of lesser importance, such as the right of the employee to the financial advantages arising from the development of the collective agreements signed by the transferor, otherwise the consequences would be similar to contracts imposing obligations on third parties in breach of the general principle pacta tertiis nec nocent.
In para 53 he concluded that a dynamic interpretation of the clause in Mr Werhofs contract was inappropriate.
He suggested that the Court of Justice should rule that it was not contrary to article 3(1) of the Directive if a transferee, who was not a member of an employers federation which negotiates such agreements, did not apply collective agreements which had replaced the one which was in force at the time of change of ownership.
The Court of Justice was more guarded in its approach to the question whether the principle that contracts cannot impose obligations on third parties would be infringed.
In paras 24 and 25 it noted that the Community legislature has sought to ensure that, on the transfer of an undertaking, employees enjoyed special protection designed to prevent the erosion which could result from the application of that principle.
According to the case law of the court, the Directive was intended to safeguard the rights of employees by allowing them to continue to work for the new employer on the same conditions as those agreed with the transferor.
The rights and obligations arising from a collective agreement to which the contract of employment refers were automatically transferred to the new owner even if the new owner was not a party to any collective agreement.
That having been said, however, the court found two reasons for holding that Mr Werhof could not maintain that his clause referring to collective agreements must necessarily be dynamic, so that by the application of article 3(1) of the Directive it referred to collective agreements concluded after the date of the transfer.
The first was that account had to be taken of article 3(2), which contained limitations to the principle that the collective agreement to which the contract of employment referred was applicable.
It showed that the object of the Directive was merely to safeguard the rights and obligations of employees in force on the date of the transfer, and was not intended to protect hypothetical advantages flowing from future changes to collective agreements: paras 28 29.
The second was that, although the interests of the employees must be protected, those of the transferee could not be disregarded.
If the dynamic interpretation were to be applied it would mean that the transferees fundamental right not to join an association could be affected, whereas that right would be fully safeguarded if the static interpretation were to be adopted: paras 31 35.
The Court concluded its judgment with a ruling in these terms, at para 37: .
Article 3(1) of the Directive must be interpreted as not precluding, in a situation where the contract of employment refers to a collective agreement binding the transferor, that the transferee, who is not a party to such an agreement, is not bound by collective agreements subsequent to the one which was in force at the time of the transfer of the business. [emphasis added] Is a dynamic interpretation precluded by article 3(1)?
The Advocate Generals summary of the facts indicates that the system under national law which applied in Werhof was different from that which formed the context for the appellants contracts of employment with the council.
Among other things, the German employment law with reference to which Mr Werhofs employment contract was framed assumes that the employer is a member of the employers federation which is a party to the collective agreement and, in consequence, is bound by statute to comply with it: Advocate General, para 12; see also Employment Law In Europe 2nd ed (2009), paras 11.197 11.200.
There is no such statutory obligation in our domestic law, nor is membership of the negotiating body a prerequisite for the enforceability of any agreement that has been reached collectively.
It all depends upon what the parties have provided for in their individual contracts.
There is therefore something to be said for Mr Lindens submission that the decision in Werhof is distinguishable on its facts, especially as to the point that the Court of Justice made in paras 31 35 of its judgment about the transferees fundamental right not to be required to join an employers federation.
The more important point of distinction for present purposes, however, is the second point on which Mr Linden relies: see para 34, above.
The question which the Court of Justice addressed by its ruling in Werhof is not the same as that which requires to be answered in this case.
It was sufficient to resolve the issue that had been raised by the referring court for it to say that the ruling of the Federal Labour Court summarised by the Advocate General in para 35 of his opinion was not precluded by article 3(1) of the Directive.
In our case the question has to be looked at the other way round.
This is because, as the Court of Justice recognised in Criminal Proceedings against Lindqvist [2004] QB 1014, para 98, there is nothing to prevent a member state from extending the scope of the national legislation implementing the provisions of the Directive to areas not included within it, so long as no other provisions of Community law preclude this.
It would, of course, not be open to the national court to adopt that approach if the effect of the Directive was that it was precluded by it.
That is why the way in which the Court of Justice framed its ruling in Werhof does not answer directly the question that needs to be resolved in this case.
The absence of a direct answer to it would not have given rise to difficulty if it had been possible to infer from the judgment how the question would have been answered.
Mr Lynch invited us to draw that inference, as his case is that the principle enunciated in the judgment is that the transfer of dynamic contractual rights is inconsistent with the Directive so regulation 5 of TUPE must be confined to static contractual rights.
But it is not obvious, if it is open to the national courts to interpret legislation that was intended to give effect to the Directive more generously in favour of employees than the Directive itself envisaged, why this should be so.
The first of the two reasons for the courts decision, that the object of the Directive was merely to safeguard the rights and obligations of employees in force on the date of the transfer, would not seem to preclude a more generous interpretation if the national court thought that this was appropriate to give effect to the ordinary meaning of TUPE.
There are various reasons for thinking that, when TUPE was originally being framed, it was thought that employment contracts such as those which the appellants entered into which provided for a dynamic approach to be taken to collective agreements were permitted by the Directive.
The aim of the Directive was to promote approximation of laws among the member states, not their harmonisation.
None of the recitals in the preamble refer to a need to balance protection for employers against the protection given to employees in the event of a change of employer.
And it was stated in article 7 of the Directive that it was not to affect the right of member states to introduce laws which are more favourable to employees.
It hardly needs to be said that the question whether Werhof precludes the dynamic approach, if this is indeed what the employment contract interpreted according to the principles of domestic law provides for, is of fundamental importance to the many employees who work in sectors where their terms and conditions of employment are commonly determined through collective bargaining.
The second reason for the courts decision was its finding that, when interpreting the Directive, account had to be taken of the principle of the coherence of the Community legal order which required secondary Community legislation to be interpreted in accordance with the general principles of Community law among which was that the right not to join an association or a union was protected in the Community legal order: paras 32 33.
As I have already mentioned, this point was directly relevant in Mr Werhofs case because of the way German employment law deals with collective agreements.
Our domestic law is entirely different.
There is no equivalent statutory framework.
The matter depends entirely on the domestic law of contract, under which parties are at liberty to agree to abide by agreements arrived at by a process in which they do not, and are not required to, participate.
Parkwood has not sought to argue that regulation 5 of TUPE is objectionable because it breached its article 11 Convention right of freedom not to join an association.
There is no question of its being forced to become a member of one of the participants in the NJC.
The appellants contracts do not require this, and in any event it would not be eligible to do so.
In these circumstances, as I consider the answer to the question not to be acte clair, I would refer the issue as to whether article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to regulation 5 of TUPE in the circumstances of this case to the Court of Justice of the European Union for a preliminary ruling under article 267 TFEU (ex article 234 EC).
I would invite the parties to make submissions in writing within 28 days on the questions to be referred to the Court of Justice.
| UK-Abs | The issue in this appeal is whether, where there has been a transfer of employees to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) apply, the new employer is bound by a term of an employees contract of employment which provides that terms and conditions of employment will be in accordance with collective agreements negotiated from time to time.
UK courts have previously held that Regulation 5 TUPE renders such a dynamic clause enforceable against the new employer.
This appeal considers whether that approach requires to be modified in light of a decision of the European Court of Justice in Werhof v Freeway Traffic Systems GmbH & Co KG (Case C 499/04) [2006] ECR I 2397 (Werhof).
Werhof interpreted Article 3(1) of the Directive which TUPE implements in domestic law (Directive 77/187/EEC on the approximation of the laws in the Member States relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of businesses, as amended (the Directive).
The Appellants are former employees of the London Borough of Lewisham (the council) who worked in the councils leisure department until 2002.
The council subscribed to the National Joint Council for Local Government Services (the NJC).
The Appellants contracts of employment provided that their terms and conditions of employment will be in accordance with the collective agreements negotiated from time to time by the NJC supplemented by agreements reached locally through the councils negotiating committees.
In 2002 the part of the councils undertaking in which the Appellants worked was contracted out to CCL Ltd.
In 2004, CCL Ltds undertaking was taken over by the Respondent, another private sector employer.
TUPE applied to each of these transfers.
The employees therefore first became employees of CCL Ltd and then of the Respondent.
At the date of the transfer to CCL Ltd, there were collectively agreed terms setting out pay rates from 1 April 2002 to 31 March 2004.
Subsequent NJC settlements provided for further pay increases.
The Respondent refused to increase the Appellants pay in line with the NJC settlement with effect from 1 April 2006 and 1 April 2007.
The Appellants brought claims for unauthorised deduction from wages.
These were dismissed by the Employment Tribunal.
The Appellants appeal to the Employment Appeal Tribunal was successful, but the Court of Appeal restored the Tribunals decision.
It held that Werhof meant that Article 3(1) of the Directive did not bind the transferee to any collective agreement made after the transfer and that Regulation 5 TUPE did not indicate any intention to provide employees with greater protection.
The Appellants appealed to the Supreme Court.
The Supreme Court unanimously holds that there should be a reference to the Court of Justice of the European Union for a preliminary ruling to establish whether Article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to Regulation 5 of TUPE in the circumstances of this case.
Lord Hope gives the judgment, with which the other members of the court agree.
Domestic legislation enacted so as to give effect to the UKs EU obligations must be construed so as to conform to those obligations, so far as possible to do so.
Two questions arise: (i) whether Regulations 5(1) and 5(2) TUPE were designed to be more generous than Article 3(1) of the Directive, as interpreted in Werhof; (ii) if not, whether it is open to the national court to construe those Regulations more generously because that is not precluded by Article 3(1) of the Directive: [19] [26].
As to the first question, Parliament must be taken to have intended to do no more in enacting Regulations 5(1) and (2) TUPE than implement Article 3(1) of the Directive.
Regulations 5(1) & (2) TUPE provided that contracts of employment to which it applied were to have effect after the TUPE transfer as if originally made between the employee and the transferee.
Although in some respects TUPE was more generous to employees that the Directive, there was nothing indicating such an intention in Regulations 5(1) & (2).
Although it is the 1981 TUPE Regulations which apply to this case, they were replaced by new regulations in 2006, which contained equivalent provisions to Regulations 5(1) & (2).
It was not possible to infer from this that Parliament had intended to endorse the interpretation which had been given to Regulation 5 in the existing domestic case law: [28] [30].
As to the second question, it is open to a national court to extend the scope of national legislation implementing a Directive to areas not included within the scope of the Directive, provided that no other provisions of EU law preclude that: [32].
The scope of Article 3 has now been interpreted by the ECJ in Werhof, which was a preliminary reference from Germany.
German law provides that collectively agreed rules become part of the employment contract with the content that they possess at the time when the business is transferred and are not updated after the transfer.
It therefore adopts a static approach.
The ECJ held such an approach was not precluded by Article 3(1) of the Directive: [37] [42] The question in this case is a different one: whether a member state is precluded from extending the protection afforded to employees on transfer, so as to provide dynamic protection, where that would be the consequence of an application of domestic contract law: [44].
It was not possible to infer from Werhof how the ECJ might have answered that question: [45].
First, the Directives aim was to promote approximation, not harmonisation, of law.
It was not to affect the right of member states to introduce laws more favourable to employees: [46].
Secondly, in Werhof the ECJ had taken into account the new employers right not to join an association or union, protected by Article 11 of the European Convention on Human Rights.
That had been of relevance there because of the way German employment law deals with collective agreements.
It was not a concern in this case, because the matter depended entirely on the domestic law of contract: [47].
The question whether Article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to regulation 5 of TUPE in the circumstances of this case should therefore be referred for a preliminary reference to the Court of Justice: [48].
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In July 1999 Mr Beesley, the second respondent, bought 22 acres of open land in the Green Belt on the outskirts of Northaw, Potters Bar.
In October 1999 he applied for and in March 2000 obtained planning permission to construct a hay barn for grazing and haymaking.
Upon a further application made in January 2001, this was in October 2001 revoked and in December 2001 replaced by a second planning permission for the same barn, re sited differently.
Each planning permission was subject to the condition that The building hereby permitted shall be used only for the storage of hay, straw or other agricultural products and shall not be used for any commercial or non agricultural storage purposes.
Between January and July 2002, with the assistance of his builder father in law, Mr Beesley constructed a building which was to all external appearances the permitted barn, with walls in profiled metal sheeting, a roller shutter door, two smaller doors and eight roof lights.
Internally it was a dwelling house with full facilities, including garage, entrance hall, study, lounge, living room, toilet, storeroom, gym and three bedrooms, two of them with en suite bathrooms, and connected to mains electricity, water and drainage and a telephone line.
On 9 August 2002 Mr Beesley and his wife moved in and there they lived continuously for four years.
Welwyn Hatfield Borough Council, the appellant, in whose area the property lies, remained unaware throughout that the building was or was being used as a dwelling house.
Mr Beesley was, on the other hand, well aware of the scheme of the Town and Country Planning Act 1990, section 171B of which provides: (1) Where there has been a breach of planning control consisting in the carrying out without planning permission of building, engineering, mining or other operations in, on, over or under land, no enforcement action may be taken after the end of the period of four years beginning with the date on which the operations were substantially completed. (2) Where there has been a breach of planning control consisting in the change of use of any building to use as a single dwellinghouse, no enforcement action may be taken after the end of the period of four years beginning with the date of the breach. (3) In the case of any other breach of planning control, no enforcement action may be taken after the end of the period of ten years beginning with the date of the breach.
Section 171A defines a breach of planning control as (a) carrying out development without the required planning permission, or (b) failing to comply with any condition or limitation subject to which planning permission is granted.
The significance of the expiry of the periods mentioned in section 171B appears from section 191(3), which provides that for the purposes of the Act: any matter constituting a failure to comply with any condition or limitation subject to which planning permission has been granted is lawful at any time if (a) has then expired; and it does not constitute a contravention of any of the (b) requirements of any enforcement notice or breach of condition notice then in force.
Section 191(1) provides: the time for taking enforcement action in respect of the failure any existing use of buildings or other land is lawful; any operations which have been carried out in, on, over or If any person wishes to ascertain whether (a) (b) under land are lawful; or any other matter constituting a failure to comply with any (c) condition or limitation subject to which planning permission has been granted is lawful, he may make an application for the purpose to the local planning authority specifying the land and describing the use, operations or other matter. (2) For the purposes of this Act uses and operations are lawful at any time if (a) no enforcement action may then be taken in respect of them (whether because they did not involve development or require planning permission or because the time for enforcement action has expired or for any other reason); and (b) requirements of any enforcement notice then in force.
they do not constitute a contravention of any of the
On 15 August 2006, Mr Beesley submitted an application under section 191(1)(a) for a certificate of lawfulness for use of the building as a dwelling house, attaching three statutory declarations and thirteen items of documentation to establish his completion of four years of continuous occupation.
The application led to a dispute notable for the turns taken by each sides case.
The council denied that the building constructed was a dwelling house, maintained that a ten year period for enforcement applied under section 171B(3) and on 30 August 2007 refused a certificate.
Mr Beesley appealed and the matter came before Mr K L Williams, a planning inspector appointed by the second respondent, the Secretary of State.
The council, in addition to relying on section 171B(3), challenged Mr Beesleys credibility regarding the length and continuity of his occupation.
In so doing, it relied on the fact that, on his own account, he had from the outset, and specifically when he applied for planning permission for a barn, deliberately deceived the council.
The inspector noted this, but found nevertheless that use as a dwelling house probably did commence more than four years before the date of the application for a certificate.
He observed that, since the intention from the outset was to establish immunity from enforcement under section 171, Mr Beesley would have been unlikely to apply for a certificate until four years had expired.
He held that, however the building was classified, it had been in use as a single dwelling house, and he treated this as sufficient to bring section 171B(2) into operation.
Under section 195(2) of the Act, he therefore granted a certificate.
The council appealed to the High Court, where Collins J on 7 April 2009 over turned the inspectors decision: [2009] EWHC 966 (Admin).
He viewed the building as the permitted barn (paras 34 35), but went on to hold that there had never been any intention to use the building other than as a dwelling house, and that this meant that there had not been a change of use within section 171B(2).
On further appeal by the Secretary of State and Mr Beesley, the Court of Appeal (Pill, Mummery and Richards LJJ) on 29 January 2010 reversed Collins J: [2010] EWCA Civ 26; [2010] PTSR 1296.
It held section 171B(2) to apply on the basis that use as a dwelling house as from 9 August 2002 was a change of use either from the use permitted by the planning permission or from a period of no use which the court identified as occurring between completion of the building and its residential occupation: para 29 per Richards LJ, with whose reasoning the other two members of the court agreed.
However, Mummery LJ expressed puzzlement at the total absence of argument from the council, or the Secretary of State, about the effect of Mr Beesleys reprehensible conduct in obtaining planning permission by deception and in failing to implement it (para 43).
He added (para 45) that it is very difficult to believe that Parliament could have intended that the certificate procedure in section 191 should be available to someone who has dishonestly undermined the legislation by obtaining a planning permission which would never have been granted if the council had been told the truth.
The council now appeals to the Supreme Court.
It challenges the Court of Appeals decision that there was a change of use, but it also seeks to raise a new point, picking up Mummery LJs remarks in terms of a principle of public policy.
Neither Mr Beesley nor the Secretary of State has objected to this new second point being argued.
However, both dispute that public policy can have any role in the relevant statutory scheme, and Mr Beesley seeks to adduce fresh evidence which would, if accepted, qualify the inspectors finding that his intention was from the outset to establish immunity from enforcement.
This could, he submits, affect the application of any principle of public policy which may be relevant.
The fresh evidence would be to the effect that his intention to construct the barn to live in as a dwelling house was only formed in June 2001, and so after he had submitted both the original and the revised planning application, although before the former was revoked and the latter actually obtained.
The first issue section 171B(2)
The first issue depends upon an analysis of the scheme of section 171B.
The only directly relevant part is subsection (2), because, for whatever reason, Mr Beesley only applied for (and was only given by the inspector) a certificate of lawfulness of existing use under section 191(1)(a).
He has not sought to address the possibility that the operation of constructing the building might itself also (and independently) be regarded as having been in breach of planning control within section 171B(1) and section 191(1)(b).
This is perhaps not as surprising as might appear, since the council itself treated the building as a barn when refusing a certificate in August 2007, and argued forcefully before the inspector to this effect with a view to establishing a ten year period for enforcement under section 171B(3)).
If it was the permitted barn (as Collins J thought), then section 171B(1) would not apply and the only breach was in its use as a dwelling house, contrary to its stated purpose as well as contrary to the planning permission condition (para 1 above).
Before the Court of Appeal, the Secretary of State and Mr Beesley challenged the proposition that the building constructed was the permitted barn, relying on the House of Lords reasoning in Sage v Secretary of State for the Environment, Transport and the Regions [2003] UKHL 22; [2003] 1 WLR 983.
The Court of Appeal upheld the challenge, concluding that the physical and design features, and the character, purpose and proper classification for planning purposes of the building built were those of a dwelling house, not a barn.
Looking at the matter overall, this part of the Court of Appeals analysis appears incontestable.
It rests on the approach established as correct by Lord Hobhouses opinion in Sage, para 14, with which all other members of the House agreed.
It is unusual to find a house which looks externally like a barn, but appearances can be and were here intended to be deceptive.
Tromp loeil can of course also have legitimate purposes, as for example in an eco house constructed with permission to look like a fold in the ground.
Aside from its appearance, the present building was in every respect designed and built as a house.
This is a case where it would, taking Lord Hopes words in Sage, para 7, be wrong to treat it as having a character which the person who erected it never intended it to have.
In another of the many turns in each sides arguments, Mr Booth for Mr Beesley now submits that there is another way in which the first basis of the Court of Appeals decision under section 171B(2) can be upheld.
He notes that under section 56 of the 1990 Act: (1) . for the purposes of this Act development of land shall be taken to be initiated (a) if the development consists of the carrying out of operations, at the time when those operations are begun; (b) if the development consists of a change in use, at the time when the new use is instituted; . (2) For the purposes of the provisions of this Part mentioned in subsection (3) development shall be taken to be begun on the earliest date on which any material operation comprised in the development begins to be carried out. (3)The provisions referred to in subsection (2) are sections 85(2), 86(6), 87(4), 89, 91, 92 and 94. (4)In subsection (2) material operation means (a)any work of construction in the course of the erection of a building; (aa)any work of demolition of a building; (b)the digging of a trench which is to contain the foundations, or part of the foundations, of a building; (c)the laying of any underground main or pipe to the foundations, or part of the foundations, of a building or to any such trench as is mentioned in paragraph (b); .
Here, he says, the planning permission for a hay barn was initiated as soon as the first trench was dug; and this was as capable of being referable to the permitted hay barn as it was to the intended dwelling house; so he submits that the first basis upon which Richards LJ held that there can be a change of use (see para 7 above) can be supported by this route.
Although Mr Booth put his submission in terms of initiation under subsection (1), that subsection, once relevant to compensation, appears to have been long obsolete (Encyclopaedia of Planning Law and Practice, Sweet & Maxwell, para P56.04).
But a parallel submission may be made under subsection (2), which defines when development is to be taken to have begun, for the purpose of deciding whether it has been begun within the time required by statute or the permission itself.
It is impossible to accept this submission, on whichever subsection it is based.
As a preliminary observation, it must be open to doubt whether even the first material operations related to the permitted hay barn.
The dwelling house which Mr Beesley was intent on building must from the outset have required construction works for sewage and drainage.
But I can leave that aspect aside (which would if relevant have required further factual investigation), as well as any potential issue of law as to whether Mr Beesleys admitted intention from the outset to build a dwelling house is relevant to the question whether he could, in any event, be said to have begun to build the permitted hay barn (compare the authorities discussed in the Encyclopaedia of Planning Law, para P56.10, on which the Supreme Court heard no submissions).
Even assuming that it could be shown that the development of a hay barn was begun within section 56(2), this cannot assist on the essential question whether the building as constructed and completed was a barn, so that the only breach was in its use as a dwelling house contrary to its stated purpose and contrary to the planning permission condition (para 1 above).
Even if the planning permission were to be treated as having been initiated or begun, it was not implemented in any further or substantial respect; so the building constructed was not a building which could be regarded as having any permitted use.
Accordingly, the first basis on which the Court of Appeal held that there may have been a change of use within section 171B(2) is unsustainable.
This makes it unnecessary at this point to decide whether change of use under section 171B(2) can consist in a simple departure from permitted use, without any actual prior use.
I doubt this, since the word use, in each place where it appears in that subsection is on its face used in a real or material sense, rather than in the legal sense of permitted use.
This is also supported by authorities on the concept of development by the making of any material change in the use of any buildings or other land which has appeared in successive Town and Country Planning Acts (section 12 of the 1962 Act, section 22 of the 1971 Act and now section 55 of the 1990 Act).
Under these sections it is clear that this form of development focuses on actual use: Hills Town and Country Planning Acts (5th ed) (1967), p. 55; Hartley v Minister of Housing and Local Government [1970] 1 QB 413, discussed in Lord Scarmans leading speech in Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] AC 132, 143B E and White v Secretary of State for the Environment (1989) 58 P & CR 281.
In Hills work, it is also expressly stated that a use permitted by a planning permission but never implemented is irrelevant.
It was only in section 15(3)(c) of the Town and Country Planning Act 1968 that the predecessor to section 171B(2) first appeared, adopting change of use . to use as a single dwelling house as a specific trigger to the start of a four year period. (Under the Town and Country Planning Act 1947, all development without planning permission attracted a four year period, within which any enforcement notice had to be served.) The natural assumption is that the concept introduced into section 15(3)(a) in 1968 was borrowed in the same sense as that in which it was used in section 12.
The express qualification material was probably omitted because of the existence of what is now section 171A(1)(b).
I turn to the alternative basis on which the Court of Appeal concluded and the sole basis on which the Secretary of State now argues that there was a change of use.
This is that in the short period between completion of the building in July 2002 and its residential occupation on 9 August 2002 the building had no use, so that there was a change of use from no use to use as a dwelling house on and after 9 August 2002.
The Court of Appeal did not base this analysis on any authority, and none appears to have been cited to it on this aspect, but cases have been produced before the Supreme Court which are said to assist it.
The scheme of section 171B is on its face straightforward.
Subsection (1) deals with unauthorised building operations.
For reasons already given, subsection (1) applied to the present building.
Subsection (2) deals with change of use of a building to use as a single dwelling house.
Both subsections involve four year periods, from the date of substantial completion of the operations under subsection (1) and the date of the breach (meaning clearly the date when the change of use first occurred and the four year period began to run) under subsection (2).
There is a basic distinction between the types of development dealt with under these two subsections, and it is buttressed by section 336(1) where use in relation to land is defined as not including the use of land for the carrying out of any building or other operations on it.
Subsection (2) does not however on its face cover all breaches relating to the use of a building, but only one important category: change of use to use as a dwelling house.
Subsection (3), applying in the case of any other breach of planning control, involves, in contrast, a ten year period from the date of breach.
Protection from enforcement in respect of a building and its use are thus potentially very different matters.
Mr Beesley could have applied for a certificate under subsection (1) in respect of the building as soon as July 2006 was over, but he has not done so.
He has focused on the use of the building for four years, in respect of which, he submits, he must now be entitled to protection by reference to roughly, though not precisely, the same four year period.
If the right analysis were that there has been no change of use within subsection (2), the only alternative analysis must, he points out, be that use of the building as a dwelling house, which is either impermissible or positively prohibited under the relevant planning permission, can be the subject of an enforcement notice at any time within a ten year period under subsection (3).
I agree that that would, on its face, seem surprising.
However, it becomes less so, once one appreciates that an exactly parallel situation involving different time periods applies to the construction without permission and the use of a factory or any building other than a single dwelling house.
The building attracts a four year period for enforcement under subsection (1), while its use attracts, at any rate in theory, a ten year period for enforcement under subsection (3).
I say in theory because there is a potential answer to this apparent anomaly, one which would apply as much to a dwelling house as to any other building.
It is that, once a planning authority has allowed the four year period for enforcement against the building to pass, principles of fairness and good governance could, in appropriate circumstances, preclude it from subsequently taking enforcement steps to render the building useless.
The Secretary of State and Mr Beesley rely heavily upon what they submit is the purpose behind subsection (2).
The Supreme Court was not provided with material shedding direct light on the mischief to which the subsection was directed.
However, the normal expectation would be that unauthorised building operations within subsection (1) would be easy to spot and quite often onerous to undo.
A shorter period for enforcement steps is understandable.
As to subsection (2), single dwelling houses were clearly seen as falling into a category meriting a degree of special treatment.
They are after all peoples homes, and a longer period than four years might well cause serious loss and/or hardship in the event of enforcement proceedings long after the event: Arun District Council v First Secretary of State [2006] EWCA Civ 1172; [2007] 1 WLR 523, para 5, per Auld LJ.
It is also not difficult to view change of use of an existing building to a single dwelling house as less likely to be harmful to the public interest than other development.
In considering the predecessor provisions of the 1968 Act (section 15), Robert Carnwath QC suggested in his February 1989 report Enforcing Planning Control that the logic behind them was not entirely clear, but that special protection was no doubt thought desirable for peoples homes.
He went on to say that in the case of operations, now dealt with in subsection (1), the governing considerations presumably were the relative ease of detection, the potential costs involved in reinstating the land, and the need to provide certainty for potential purchasers (Chap 7, para 3.2).
The periods of four years retained in respect of both building operations and change of use to use as a dwelling house clearly reflect the legislators view that this would give adequate opportunity for enforcement steps, after the expiry of which the infringer would be entitled to repose and to arrange his affairs on the basis of the status quo.
The speculation that a need to provide certainty for purchasers can have motivated the legislator is less obviously sure.
At any rate in a case like the present, no purchaser would presumably look at Mr Beesleys house unless and until he is able to produce a certificate of lawfulness.
Not surprisingly, subsection (2) has received a generous interpretation.
In Arun District Council v First Secretary of State, the Court of Appeal held that, bearing in mind that a breach of planning control covers under section 171A(1) both (a) carrying out development without the required planning permission and (b) failing to comply with any condition or limitation subject to which planning permission is granted, section 171B(2) should be read as providing for a four year period in respect of both types of breach of planning control, for example both unauthorised development in the form of material change of use contrary to section 55(1) and any consequent breach of an express condition in a planning permission.
However, as Carnwath LJ noted at para 49, although the type of breach does not in this respect matter, the protection under subsection (2) depends upon there having been a change of use.
In Van Dyck v Secretary of State for the Environment [1993] 1 PLR 124, the Court of Appeal concluded that subsection (2) covered the case of a single dwelling house the use of which was changed by its conversion into two separate units or dwelling houses.
It is unnecessary to express any view on the decision, but it is relied upon for the Courts general statements to the effect that the broad policy underlying the then equivalent of section 171B(2) (section 172(4)(c) of the Town and Country Planning Act 1990) meant that it was capable of being construed and applied so as to benefit all new separate residences after four years (p.137).
But in that case the change of use was undeniable.
The Secretary of State and Mr Beesley invite a broad approach to change of use.
They submit that there is no real reason why the legislator should have wanted subsection (2) to apply to a case like Van Dyck, but not have wanted to apply it in the present case.
The words change of use cannot however be ignored.
If the legislator had wanted subsection (2) to cover all situations of unauthorised use, these words could and presumably would have been omitted, and the subsection would have read: Where there has been a breach of planning control consisting in the use of any building as a single dwellinghouse, no enforcement action may be taken after the end of the period of four years beginning with the date of the breach.
A likely explanation of the general scheme of section 171B is in these circumstances that, in the legislators mind, new building developments like the present would be dealt with under subsection (1), while changes of use of an existing building to use as a single dwelling house would be dealt with under subsection (2).
All other breaches of planning control, including on any view unauthorised use of an authorised new building other than as a dwelling house, would fall within subsection (3).
The Court of Appeal, rightly and inevitably, accepted that a change of use to use as a single dwelling house was required before subsection (2) could apply, but found this, on its alternative analysis, in the existence of a period of no use between the end of July 2002 and 9 August 2002, followed by a change to use as a single dwelling house on that date.
This analysis is to my mind counter intuitive.
It is not, I think, natural to talk of a house built to live in as undergoing, especially in so short a period, two different uses or non use and then use.
Second, it raises the question what would be the position if Mr Beesley had moved in as substantial completion of the building occurred.
Third, should a dwelling house into which its builder owner intends to move almost immediately be regarded as having or being of no use as a dwelling house?
On the second point, no satisfactory answer was to my mind given by the Secretary of State or Mr Beesley.
It was suggested that there might during the building operations still be a period of no use, which changed to residential use as and when the building was completed.
But subsection (2) is only concerned with change of use of any building, not with the change of use of land and of something which is not yet a building which may occur when the building is completed.
It follows that subsection (2) cannot on any view cover all cases of new building.
There will be cases where completion of the building and commencement of occupation are simultaneous.
House owners sometimes even start to move in before building works are complete.
Turning to the third point, it is necessary at the outset to distinguish cases concerned with the different question whether existing use rights have been extinguished.
As explained by Lord Scarman in Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] 1 AC 132, 143F 144D, a new development sanctioned by a planning permission may extinguish the existing use rights which the land or a previous building on the land possessed: see e.g. Prosser v Minister of Housing and Local Government (1968) 67 LGR 109; Petticoat Lane Rentals Ltd v Secretary of State for the Environment [1971] 1 WLR 1112, discussed in Newbury District Council v Secretary of State for the Environment [1981] AC 578, pp 598 599 per Viscount Dilhorne, pp 606E H per Lord Fraser, pp 616 617 per Lord Scarman and pp 625A 626F per Lord Lane.
The straightforward explanation is that the planning permission, once taken up and implemented, gives rise to a new situation in which the building owner has the advantage of, but is also bound by the limitations of, the rights of use permitted by the planning permission, and no longer has the benefit of any other rights of use which may have existed prior to the new development.
This is highlighted in an instructive article, New Planning Units, New Chapters in Planning History and Inconsistent Permissions [2009] 2 JPL 161 by Satnam Choongh and Jeremy Cahill QC.
It is true that at one point in the Petticoat Lane case (p 1117D), Widgery LJ said of the new building that it started with a nil use, that is to say, immediately after it was completed it was used for nothing, and thereafter any use to which it is put is a change of use, and if that use is not authorised by the planning permission, it is a use which can be restrained by planning control.
But the opinions of Lords Fraser, Scarman and Lane in Newbury and the analysis of Lord Scarman in Pioneer Aggregates show that reasoning based on change of use was not necessary even in the context which Widgery LJ was addressing.
It was sufficient that the owner was bound by the terms of the planning permission which he had chosen to implement.
By parallel reasoning the implementation of one of two co existent planning permissions can supersede the other inconsistent planning permission: see Pioneer Aggregates, pp 144B 145C per Lord Scarman.
Thus, in the present case, the council, while understandably prudent to do so, may not have had to insist on revoking the first planning permission obtained by Mr Beesley before granting the second.
Whether existing use rights had been lost was also in issue in Jennings Motors Ltd v Secretary of State for the Environment [1982] QB 541, but there the argument was that the replacement of one building by another new building without planning permission gave rise to a new situation paralleling that which arose in Prosser, Petticoat Lane and Newbury as a result of the implementation of a planning permission.
The Court of Appeal proceeded on the basis that the parallel was generally sound, and cited Widgery LJs judgment, including the passage referring to a new building starting with a nil use (see p 553F per Parker LJ, with whom Watkins LJ agreed at p 557H), but it held that the erection of the replacement building had no impact on existing rights of user.
The enforcement steps were based on development in the form of an alleged material change in the use of buildings, and the decision itself appears readily explicable on the basis that there had been no such change of use, merely an unauthorised re building which the planning authority was not as such challenging.
These cases, although prominent in counsels submissions, concern a very different problem, and in my view offer no real assistance in the present context.
In each case the essential question was whether prior rights of user had been lost, not whether the land or building could still be said to be in or of use for any purpose.
More to the point are cases on abandonment, which is possible in relation to prior use (Hartley v Minister of Housing and Local Government [1970] 1 WLR 413; Secretary of State for the Environment v Hughes (2000) 80 P & CR 397), though not in relation to rights acquired under a planning permission still capable of being implemented according to its terms (Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] 1 AC 132, 143B E).
Even in this context caution is necessary in considering the terminology used in the cases, because references to non use may mean, as in Hartley, no more than non use as a site for selling cars (the token sales of five cars being held de minimis), and not that the site had no use in Hartley it continued throughout to be used as a petrol station.
But, as was accepted by the site owner in argument in Hartley (p 417G H), a single use may, if abandoned, mean that a site has nil or no use.
In Hughes it was held that residential use of a cottage which had been uninhabited for nearly 30 years and had fallen into a ruinous state had in all the circumstances been abandoned (despite the owners subjective intention to resume residential user).
It is difficult to think in such a case of any other use which the cottage could be said to have continued to have.
But caution could be necessary even before describing a ruinous cottage or waste land as having or being of no use at all.
One might have to consider whether it could be regarded as having a use to the owner as a place to walk or walk to or for its aspect or its value to flora and fauna.
The cases on abandonment show that use as a dwelling house should not be judged on a day by day basis, but on a broader and longer term basis.
Dwelling houses are frequently left empty for long periods without any question of abandonment or of their not being in or of use.
A holiday home visited only yearly remains of and in residential use.
Of course, such cases usually fall to be viewed against the background of previous active use.
In the present case, the question is whether it is right to describe a dwelling house as having or being of no use as a dwelling house, when it has just been completed and its owner intends to occupy it within days.
This too is not a question which can sensibly be answered on a day by day basis.
It calls for a broader and longer term view.
Support for this is found in Impey v Secretary of State for the Environment (1984) 47 P & CR 157.
The question before the Divisional Court there was whether development had occurred in the form of a material change of use of a building from the breeding of dogs to residential use.
Donaldson LJ said at pp 160 161: Change of use to residential development can take place before the premises are used in the ordinary and accepted sense of the word, and [counsel] gives by way of example cases where operations are undertaken to convert premises for residential use and they are then put on the market as being available for letting.
Nobody is using those premises in the ordinary connotation of the term, because they are empty, but there has plainly, on those facts, been a change of use.
The question arises as to how much earlier there can be a change of use.
Before the operations have been begun to convert to residential accommodation plainly there has been no change of use, assuming that the premises are not in the ordinary sense of the word being used for residential purposes.
It may well be that during the course of the operations the premises will be wholly unusable for residential purposes.
It may be that the test is whether they are usable, but it is a question of fact and degree.
In a later case, Backer v Secretary of State for the Environment (1984) 47 P & CR 149, Mr David Widdicombe QC, sitting as a deputy judge, expressed doubt about the decision in Impey.
He said (p 154) that, but for it, he would have had no hesitation in accepting an argument that physical works of conversion, that is, say building operations, cannot by themselves give rise to a material change of use: some actual use is required.
Backer is on any view an odd case, and the deputy judges doubt as to whether any change of use had occurred is understandable, even on the approach in Impey indeed, although he remitted the matter for further consideration, his expressed view was that there had been none.
The issue was whether development had taken place before 7 July 1976, in circumstances where all that appears is that the works of conversion were completed, or substantially completed, by July 1976 (p 151).
The owners brother was sleeping in the building at nights on a mattress which he moved to and from his van every day, since workmen were working during the day (p 15l).
Yet the argument was that it was not necessary to consider his activity, and that the result of the physical works of conversion to a residential unit alone sufficed to constitute a material change of use.
On any view, the present case involves an altogether simpler and (apart from the deceit underlying it) more conventional scenario.
As a matter of law, I consider that the approach taken by Donaldson LJ was correct and is to be preferred to the doubt expressed in Backer.
Too much stress has, I think, been placed on the need for actual use, with its connotations of familiar domestic activities carried on daily.
In dealing with a subsection which speaks of change of use of any building to use as a single dwelling house, it is more appropriate to look at the matter in the round and to ask what use the building has or of what use it is.
As I have said, I consider it artificial to say that a building has or is of no use at all, or that its use is as anything other than a dwelling house, when its owner has just built it to live in and is about to move in within a few days time (having, one might speculate, probably also spent a good deal of that time planning the move).
So far as the impetus to adopt so artificial an analysis derives from the thought that otherwise section 171B(2) will not apply, I consider that result to be, on the contrary, consistent with a proper understanding of the scheme of the section.
In summary: unauthorised building operations, like the present, are likely to have been seen as falling to be addressed under subsection (1), rather than subsection (2); the suggested anomaly that enforcement action based on use might then be taken under subsection (3) within as long as ten years is one which the draftsmen failed in any event to address in relation to the use of all buildings other than single dwelling houses, so there is no reason to think that he thought of subsection (2) as covering it in respect of single dwelling houses; any unfairness in either case may, in an appropriate case, be covered by more general public law controls on administrative action by way of planning enforcement; the focus on the established concept of change of use, rather than simply on use, can only have been deliberate; and the Secretary of States and Mr Beesleys analysis either ignores this or, by artificial extension of the concept of change of use to cover the present case, opens an anomalous distinction between cases where an owner moves in before or as his unauthorised dwelling house is completed and cases like the present where a period of days elapses before he actually moves in.
The second issue the facts as found by the inspector
I would therefore allow the councils appeal on the first issue.
This makes it strictly unnecessary to address the second issue, but it is one of general importance and I shall do so.
It is necessary to set out in greater detail the factual background as it can be derived from the inspectors findings.
First, Mr Beesley intended to deceive the council from the outset, that is (at least) when he made each of his successive planning applications in March 2000 and January 2001; in each application he described the proposed building as a hay barn, said that the application involved no change of use of land, and, in relation to sewage disposal, answered not applicable.
Secondly, when building his house, he deliberately refrained from giving the notice under the building regulations, applicable to a house but not an agricultural barn, so committing an offence triable summarily and punishable by a fine.
Thirdly, he did not register for council tax or on the electoral register at the building.
Fourthly, he gave the council as his address his office, whereas all other correspondence was to and from the house.
Fifthly, he lived a low key existence, the house being at the end of a lane or track apparently accessible from the road only by a locked gate.
The aim of this conduct was, firstly, to obtain a planning permission which would not have been granted had the application been for a dwelling house, secondly, to conceal the fact that what was being built was and was to be a dwelling house and, thirdly to live in the house without being detected or therefore having enforcement steps taken for the four year periods stated in section 171B(1) and (2), after which a certificate would be sought under section 191.
The council now submits that Mr Beesleys deceit should preclude Mr Beesley from obtaining a certificate under section 171B(2), even if (contrary to my view) that subsection were otherwise applicable.
Mr Beesleys application to adduce fresh evidence on the new point
It is in response to this new submission that Mr Beesley applies to adduce fresh evidence, with a view to showing that he intended to build a genuine hay barn up until June 2001.
That is, until after both planning applications and after the Council had written to him on 15 March 2001 informing him that its planning control board had resolved to grant the second planning permission subject to revocation of the first planning permission, and asked for his written consent to that effect.
It is unclear when such consent was granted and why there was further delay, since it was only on 16 October 2001 that the first permission was revoked and only on 7 December 2001 that the second permission was granted.
Be that as it may, Mr Beesley submits that any argument based on his conduct would look different if both planning permissions were honestly sought.
The inspectors report states the factual position as follows: 7 The appellant, Mr Beesley, says that he deliberately deceived the council when he applied for planning permission for a barn.
He always intended that the building should be a dwelling. 22. he admits that he has carried out a planned and deliberate deceit over an extended period.
I consider this to reduce his credibility as a witness.
These passages were solidly based.
The pre inquiry statement lodged on Mr Beesleys behalf had stated unequivocally: The appellant has confirmed that the building was never intended or designed for any other use than a dwellinghouse.
The appellant and his wife may also give evidence at the inquiry.
Mr Beesleys proof of evidence had been to like effect: 2.2 On 7 December 2001 I obtained planning permission for the erection of a hay barn. 2.3 Between January and July 2002, the building was erected.
The building was never intended for any use other than as a dwelling house.
These statements were in support of Mr Beesleys case that what he had built was a dwelling house, within section 171B(2).
Mr Beesley came up to proof.
In opposition to his present application, the Council has produced notes of his evidence taken at the inquiry by the Councils principal development control officer (Lisa Hughes) and by a planning consultant called by the Council (Alison Hutchinson).
They show that in cross examination Mr Beesley accepted that he knew (a) that, if he had applied for planning permission for a house, he would not have got it, (b) that his applications for a barn were a ruse to mislead [the] local planning authority and, later, (c) that his sole purpose in seeking the planning permissions for a barn and in not paying council tax was to obtain after four years a certificate of lawfulness for his house.
The application filed on Mr Beesleys behalf for permission to adduce fresh evidence states: 20. [Mr Beesley] acknowledges that in the course of the planning enquiry he must have intimated to the inspector that, when seeking planning permission from the council, he had already determined to erect a dwelling.
So much is evident from the statement of the planning inspector at paragraph 7 of his report. 21.
However, it is contended that such indication was given by [him] in error and that when providing his answer to the inspectors question [he] misunderstood what it was that was being asked of him.
In a witness statement supporting the present application Mr Beesley states that the land was bought in August 1999 because his future wife was a keen equestrian, and because the horses were our priority we decided that we should build stables, a mange and a barn to which purpose he applied for planning permission on 7 October 1999 for all three and an access track.
The application for a barn being agricultural, it had to be re submitted separately on 26 October 1999.
The stables and access track were completed by 29 November 2000.
Thefts then occurred of a generator and other items on 16 December 2000 and of horse rugs in March 2001.
The application for re siting of the barn was made because the original site chosen for the mange was prone to flooding.
Mr and Mrs Beesley married in June 2001, and, on their honeymoon, were very concerned about the spate of thefts which left them feeling very vulnerable: 12.
It was approximately at this point that we made a decision to build the Barn as a dwelling and to move into it.
We spent so much time there as it was and we felt protective of our smallholding (even more so in view of the thefts) and so moving in to it seemed the most sensible thing to do. 13.
I knew that, if I asked the council for permission to build a house on the land in lieu of the barn, my application would be refused, and so I said nothing about our decision to build a dwelling and move into it.
Planning permission for the (re situated) Barn was granted on 7th December 2001 I was aware that in planning law there is as a catch all rule that provides that, where the local authority does not commence enforcement proceedings within 4 years . , immunity from such enforcement action arises.
I freely admit that I knew what I was doing and that I kept deliberately silent about the true use of the premises.
In a second witness statement Mr Beesley says that, since the inspector granted him a certificate of lawfulness, there was no need for me, at that time, to correct the assumption that I had deceived the council, that, when the matter came to the High Court, the council: did not there raise any legal argument concerning my alleged deceit.
Accordingly, it did not appear to me to be necessary to seek to correct the inaccurate impression I must have given to the Planning Inspector regarding my intention when submitting the planning applications in respect of the Barn.
It was simply not an issue that was relevant to the issues at the time, and I took a decision, principally with a view to saving costs, that I would not seek to address the issue of the supposed deceit by way of witness statement and would not participate in the proceedings.
That was not a position that I was altogether happy with at the time, but I took a pragmatic approach having regard to the way in which the [councils] case was put.
He says that, in the course of preparing for the Court of Appeal proceedings, he specifically raised with his legal team the question whether to put in a statement to correct the inaccurate impression I must have given the Planning Inspector, but I was advised that the question of my intention when submitting the applications were [sic] not relevant to the point at issue.
Now, however, that the case against him in the Supreme Court does directly put in issue his conduct, he says, he has no choice but to take steps to correct the inaccurate impression, and is in a sense, relieved to now have the opportunity to explain my side of the story in effect forced upon me.
The admission of new evidence on appeal normally depends upon satisfying three conditions identified in the well known case of Ladd v Marshall [1954] 1 WLR 1489, viz: (1) it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.
In the present case, Mr Booth submits that the first condition is either inapplicable or needs to be relaxed, bearing in mind that we are concerned with a finding regarding Mr Beesleys state of mind which went only to credibility before the inspector, and did not influence the outcome before him or in either of the courts below.
There is force in this submission, although I note that it is not quite correct to say that Mr Beesleys state of mind can have been regarded as entirely irrelevant by him or his legal team below, since the skeleton argument submitted on his behalf to the Court of Appeal records that Collins J had been concerned in argument about a certificate having been granted in circumstances where he [Mr Beesley] had misled the [council] (in its capacity as a local planning authority and went on to submit that important principles and statutory provisions . should not be stretched in their application simply to ensure a particular outcome in a case where a claimant/appellant is deemed to be less than sympathetic.
If Mr Beesley did not mislead the council from the outset in making the planning applications, and there was some unexplained misapprehension to that effect in the inspectors report, this was one occasion on which at least to put that on the record.
However, I will proceed on the basis that the first condition is either satisfied or, in this case, inapplicable.
I turn to the second condition.
At the core of the councils case on public policy is the obtaining of the planning permissions as a result of the deceptive planning applications.
If the applications when made were genuine, that could well put a different complexion on Mr Beesleys conduct.
Mr Beesleys conduct, though still disgraceful, could then be said to consist predominantly of sins of omission and concealment, rather than of positive deception.
This of course could depend upon what if any communications there were between Mr Beesley and the council between June 2001 and 7 December 2001.
Further, even if there were none, Mr Beesleys current account could well support a conclusion that he knew full well both that after June 2001 the council would still be relying on his continuing but now inaccurate statements in his second application about the nature and purpose of the proposed building, and that he owed a duty to correct this, but deliberately determined not to do this.
Whether and how far Mr Beesleys current account could, therefore, significantly influence a courts evaluation of any issue of public policy is therefore best left open.
Unless the third condition is satisfied, it is unnecessary to consider it further.
The third condition is that the proposed evidence is apparently credible.
To this, I consider that the only answer is a categorical no.
First, there is no basis or credibility at all in Mr Beesleys suggestion that he (not the inspector) made some unexplained misunderstanding in his answers in cross examination.
The notes show clear and repeated answers, directly in point on the issue of his state of mind and intentions when making the planning applications.
Second, precisely the same account was given in the pre inquiry statement put in on Mr Beesleys behalf and in his own witness statement.
Mr Beesley has not volunteered any explanation as to how these statements could also be mistaken.
Third, it is difficult to believe that, if the inspectors report had, due to some unexplained mistake by Mr Beesley, given a factual account which Mr Beesley (as he says) knew and thought was less favourable to him than the reality, Mr Beesley would have said nothing at any point to record this, even if it was not directly in issue.
Fourth, the account now advanced regarding Mr Beesleys state of mind has the ring of implausibility.
The land was bought in August 1999.
Applications were made in October 1999 to build stables, which were clearly required and in due course built for the horses, but also for a large hay barn.
If a large hay barn was intended, there must have been some need or use for such a barn, and, since the application was actively pursued over the next 21 months, this need or use must have continued to exist.
The present application was not accompanied by any explanation as to how or why it disappeared in and after June 2002, and none was given after the point arose during oral submissions.
I would therefore refuse Mr Beesleys application to adduce the proposed evidence.
The second issue merits
It follows from the above that the issue whether Mr Beesleys conduct disentitles him on public policy grounds from relying on section 171B or 191(1), assuming it would otherwise apply, falls to be determined on the facts as stated by the inspector.
The real gravamen of the councils case is to be found in the deception involved in the obtaining of false planning permissions which Mr Beesley never intended to implement, but which were designed to and did mislead the council into thinking that the building was a genuine hay barn and so into taking no enforcement step for over four years.
This was deception in the planning process and directly intended to undermine its regular operation.
The other aspects of Mr Beesleys conduct identified in paragraph 31 above were ancillary to the plan of deception.
By themselves, these are, I suppose, aspects of conduct not uncommon among those who build or extend houses or convert buildings into houses without planning permission; they do not bear directly on the planning process and I am prepared to assume, for the purposes of this case at all events, that they would not, at least without more, disentitle reliance upon section 171B(1) or (2) or section 191(1)(a) or (b).
The council relies upon a principle stated in Halsburys Laws of Englands title Statutes (vol 44(1)), para 1450 in these terms: 1450.
Law should serve the public interest.
It is the basic principle of legal policy that the law should serve the public interest .
Where a literal construction would seriously damage the public interest, and no deserving person would be prejudiced by a strained construction to avoid this, the court will apply such a construction.
In pursuance of the principle that the law should serve the public interest, the courts have evolved the important technique known as construction in bonam partem (in good faith).
If a statutory benefit is given only if a specified condition is satisfied, it is presumed that Parliament intended the benefit to operate only where the required act is performed in a lawful manner. 1453. Illegality.
Unless the contrary intention appears, an enactment by implication . imports the principle of legal policy embodied in the maxim nullus commodum capere potest de injuria sua propria (no one should be allowed to profit from his own wrong).
The most obvious application of this principle against wrongful self benefit relates to murder and other unlawful homicide.
Bennion on Statutory Interpretation (5th ed) (2007) section 264, also discusses the principle that law should serve the public interest.
It comments that all enactments are presumed to be for the public benefit and that [t]his means that the court must always assume that it is in the public interest to give effect to the intention of the legislator, once this is ascertained; and, later, that Construction in bonam partem is related to three specific legal principles.
The first is that a person should not benefit from his own wrong.
The second principle precludes a person from succeeding if he has to prove an unlawful act to claim the statutory benefit, and the third is that where a grant is in general terms there is always an implied provision that it shall not include anything which is unlawful or immoral.
In R v Chief National Insurance Commissioner, Ex p Connor [1981] QB 758, a widows claim for a widows allowance failed, despite her apparently absolute statutory entitlement, because her widowhood derived from the manslaughter of her husband of which she had been convicted.
Another famous older example of the obvious application of the same principles is Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147.
After her conviction still controversial for poisoning her husband, Florence Maybrick assigned to Mr Cleaver as her administrator an insurance policy taken out by her husband in her favour on his life.
Cleavers claim on the policy failed, Fry LJ saying (p 156) that: The principle of public policy invoked is in my opinion rightly asserted.
If no action can arise from fraud, it seems impossible to suppose that it can arise from felony or misdemeanour.
This principle of public policy, like all such principles, must be applied to all cases to which it can be applied without reference to the particular character of the right asserted or the form of its assertion.
In R v South Ribble Borough Council, Ex p Hamilton [2000] EWCA Civ 518; (2001) 33 HLR 9, a statutory provision entitled a person to housing benefit if he had no income above a specified amount, and it had been previously decided that receipt of income support under the separate social security scheme, with its inbuilt rights of adjudication and appeal, bound those administering the housing benefit scheme to treat a person as having income below the specified amount.
Mr Hamilton had however obtained income support by false statements.
The Court of Appeal held that income support obtained by fraud did not count for the purposes of entitlement to housing benefit.
One reason was an express provision in the relevant regulations defining a person on income support as a person lawfully in receipt of income support, but another was the principle that legislation should not be so construed as to enable a man to profit from his own wrong: paras 8 and 26.
The cases cited included Lazarus Estates Ltd v Beesley [1956] 1 QB 702, where Lord Denning MR delivered his dictum that Fraud unravels all and R v Barnet London Borough Council, Ex p Shah [1983] 2 AC 309, where Lord Scarman said at p 344A that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully.
This was said in the context of the entitlement to a student award of anyone ordinarily resident for three years in this country, to support Lord Scarmans view that ordinary residence would not include unlawful residence.
The Court of Appeal in the South Ribble case also cited R v Secretary of State for the Home Department, Ex p Puttick [1981] QB 767.
Astrid Proll, a member of the Baader Meinhof gang and unmarried, absconded while awaiting trial in Germany.
She then entered the United Kingdom using a passport which she had bought in the name of Senta Sauerbier, and married Robin Puttick under that name.
The German authorities discovered her true identity and location, and applied to extradite her.
She responded by an application under section 6 of the British Nationality Act 1948.
Section 6 gave an apparently unqualified right to any woman married to a United Kingdom citizen to be registered as a citizen of the United Kingdom.
The Divisional Court refused her application.
Donaldson LJ said that statutory duties which are in terms absolute may nevertheless be subject to implied limitations based upon principles of public policy accepted by the courts at the time when the Act is passed (p 773G H).
Ms Prolls marriage was valid and in itself legal, but the commission of the crime of perjury and forgery formed the foundation of her marriage and disentitled her to rely upon the right which she would otherwise have had to claim registration . (pp 775H 776A, per Donaldson LJ).
Forbes J said that the registrar who performed the ceremony was fraudulently misled into believing that he was marrying someone called Sauerbier, a divorced person of whose capacity to contract a second marriage he had satisfied himself, and whose father was called Eric Schulz, a machine engineer (p 777E), and, further, that, when applying to the Home Secretary to be registered as a citizen, Ms Proll (or Mrs Puttick as she was in law) produced, as she had to, the marriage certificate, with its fraudulent entries and forged signature, and had to explain in a covering letter the extent of her criminal activities.
Forbes J said that he had therefore no doubt that it was her fraud and forgery which directly obtained for her the entitlement she now seeks to enforce and that she cannot claim that entitlement without relying on her own criminality (p 777F G).
In considering whether the above principles and cases can have any present application, the Secretary of State and Mr Booth for Mr Beesley point to Lord Scarmans warning to courts in the Pioneer Aggregates case at pp 140H 141A C that planning control, though based on land law, is the creature of statute, and that planning law is a comprehensive code imposed in the public interest, into which the courts should not import principles or rules derived from private law unless expressly authorised by Parliament or necessary in order to give effect to the legislative purpose.
That is a salutary reminder, and it links to Bennions first message quoted in para 46 above.
But since the principles discussed in Halsbury and Bennion and in cases already discussed (notably South Ribble and Puttick) involve statutory interpretation, I do not think that the planning legislation can be treated as axiomatically immune from their application.
The decision in Puttick was that, although Ms Proll was Mrs Puttick, and satisfied the literal language of section 6, her criminal conduct in the course of the marriage ceremony alone (Donaldson LJs judgment), or at all events that conduct coupled with her inevitable reliance on it when seeking registration (Forbes Js judgment), disentitled her from such registration.
In the present case, if (as I am assuming, for the purposes of considering the second issue) Mr Beesley satisfies the literal language of the relevant statutory provisions, sections 171B(2) and 191(1)(a), he only does so because he successfully deceived the council into giving him planning permission to build a hay barn, into thinking that he intended to build and was building such a barn, and into thinking for more than four years that he had done so.
When he applied for a certificate of lawfulness under section 191(1)(a), he attached carefully accumulated documentation to substantiate his four year occupation, including a plan showing the location and shape of his house (still marked barn).
He thus necessarily disclosed and indeed expressly asserted that the hay barn for which he had obtained planning permission and in which he had been living for over four years was in reality a dwelling house.
He did not expressly disclose or have to disclose that he had intended from the outset, when seeking planning permission, to build a dwelling house.
In that respect the present case may be said to differ from Puttick, although the over whelming probability that the planning permissions had been deceptive from the outset could not have failed to be apparent.
The other respect in which the present case differs from Puttick is that Mr Beesleys conduct in obtaining the planning permissions by deception, perhaps surprisingly, did not involve any identifiable and provable criminal offence under the law as it then stood.
It could now do under section 2 of the Fraud Act 2006.
One may speculate that Mr Beesley cannot have acted alone in relation to the planning applications, but must have had at least a co conspirator in forming and executing the plan to deceive the council, but the factual basis for a conclusion in this area is certainly outside the scope of the present proceedings.
Since the ultimate question is whether it can have been the intention of the legislator that a person conducting himself like Mr Beesley can invoke the benefits of sections 171B and 191(1), I do not consider that there can be any absolute principle that public policy can only bear on the legislators intention in a context where there has been the commission of a crime.
The principle described in the passages cited from Halsbury and Bennion is one of public policy.
The principle is capable of extending more widely, subject to the caution that is always necessary in dealing with public policy.
Some confirmation that the need for an actual crime is not absolute can also be found in another case, R v Registrar General, Ex p Smith [1991] 2 QB 393, where the Court of Appeal held it sufficient to disentitle a prisoner from exercising his on its face absolute right to inspect his birth certificate that there was a current and justified apprehension of a significant risk that he might in the future use the information thereby obtained to commit a serious crime.
Whether conduct will on public policy grounds disentitle a person from relying upon an apparently unqualified statutory provision must be considered in context and with regard to any nexus existing between the conduct and the statutory provision.
Here, the four year statutory periods must have been conceived as periods during which a planning authority would normally be expected to discover an unlawful building operation or use and after which the general interest in proper planning control should yield and the status quo prevail.
Positive and deliberately misleading false statements by an owner successfully preventing discovery take the case outside that rationale.
Although the principle was not mentioned in counsels submissions and my conclusions have been reached independently of it, it is not uninteresting also to recall the way in which, before the enactment of section 26 of the Limitation Act 1939 (the predecessor of section 32 of the Limitation Act 1980), the courts held that the apparently general wording of the limitation statutes could not be relied upon in cases where the cause of action had been fraudulently concealed or, later also, was itself based on fraud: Booth v Warrington (1714) 2 ER 111, Gibbs v Gould (1881 82) LR 9 QBD 59, Bulli Coal Mining Co v Osborne [1899] AC 351 and Lynn v Bamber [1930] 2 KB 72.
If the owner of an unauthorised house were to bribe or by menaces coerce a planning authority officer into turning a blind eye to unlawful development for four years, it is inconceivable that the building owner could then rely on the four year period, even though the owner would not have to (and surely would not) mention anything but his four year period of occupation in his attempt to bring himself within the literal language of the sections.
It is true that the council would then be able to show that a criminal offence had been committed (in the case of a bribe under the Public Bodies Corrupt Practices Act 1889, section 1 and in the case of menaces probably under the Theft Act 1968, section 21, since the purpose of gain includes under section 34(2)(a) keeping what one has).
However, if a planning authority were to discover an unauthorised development or use, and the property owner were, in order to avoid enforcement action within the four years, falsely to assure the planning authority that the four years had not expired, and that he intended to remove or cease the development or use before they did, and so succeed in avoiding enforcement action during the four years, I very much doubt whether the owner could thereafter rely upon sections 171B and 191(A), merely because no criminal offence had been committed.
Here, Mr Beesleys conduct, although not identifiably criminal, consisted of positive deception in matters integral to the planning process (applying for and obtaining planning permission) and was directly intended to and did undermine the regular operation of that process.
Mr Beesley would be profiting directly from this deception if the passing of the normal four year period for enforcement which he brought about by the deception were to entitle him to resist enforcement.
The apparently unqualified statutory language cannot in my opinion contemplate or extend to such a case.
In seeking to counter such a conclusion, the Secretary of State and Mr Beesley draw attention to Epping Forest District Council v Philcox [2002] Env LR 2, where the grant of a certificate under section 191 was challenged on the grounds that the relevant user (the breaking of motorised road vehicles and storage of parts) had taken place during the relevant period without a waste management licence required under the Environmental Protection Act 1990 and so involved a criminal offence.
The Court of Appeal cited inter alia Connor and Puttick, but held that there was no principle that the plain words of a statute which define what is lawful were to be read subject to a proviso that what is criminal cannot be lawful (para 15, per Pill LJ).
However, both Chadwick LJ and Buxton LJ stressed that enforcement under the planning legislation and under the legislation regulating waste management were different matters: paras 35 and 46.
No benefit would accrue to the operator by granting planning permission, which might be granted or refused for reasons which had nothing to do with waste management; those responsible for regulating waste management would remain free to take whatever enforcement action they decided: para 46.
The case did not involve any fraudulent conduct in the planning process, and the failures to procure an environmental licence and obtain planning permission were independent, rather than one causing the other.
I do not regard the case as assisting the Secretary of State or Mr Beesleys case.
Conclusion
For the reasons I have given, I do not consider that sections 171B(2) and 191(1)(a) are applicable to the facts of this case.
Had I considered otherwise, I would have concluded that their language could not have been intended to cover the exceptional facts of this case, where there was positive deception in the making and obtaining of fraudulent planning applications, which was directly designed to avoid enforcement action within any relevant four year period and succeeded in doing so.
This is a conclusion which would still be relevant, were any application to be made for a certificate under section 191(1)(b) or any reliance sought to be placed upon section 171B(1) to preclude enforcement action in respect of the building itself.
In the present case, I would allow the Councils appeal, and set aside the grant of the certificate under section 191(1)(a).
LORD RODGER
I agree with Lord Mance and Lord Brown that the appeal should be
allowed.
I agree with what Lord Mance says on the first point.
But, even assuming that section 171B (2) of the Town and Country Planning Act 1990 (the 1990 Act) did apply and that more than four years have elapsed since the structure was first used as a single dwellinghouse, in agreement with Lord Brown and Lord Mance, I am satisfied that the council would still be entitled to take enforcement action.
Section 171B (2) of the 1990 Act allows respite from enforcement action four years after the time when a breach of planning control consisting in the change of use of a structure to a single dwellinghouse occurred.
This provision must be based on the general idea that the change of use has been there for all to see for four years.
If in that period the breach has not come to the notice of the council or the council has not seen fit to take enforcement action, then the better policy is to allow the change of use to stand and, so, to exclude enforcement action.
In this case, however, Mr Beesley took effective steps to conceal the true nature of the development over the four year period since the change of use occurred.
In particular, he deliberately concealed the fact that the structure was being used, and was intended to be used, as a single dwellinghouse on greenbelt land.
The concealment worked and the true position came to light only when Mr Beesley triumphantly revealed his dwellinghouse immediately after the four years had expired.
He does not suggest and it would not lie in his mouth to suggest that, despite his efforts, the council should have spotted the true position before the four years expired.
In that situation, where Mr Beesley deliberately set out to conceal the true nature of the development during the whole four year period, with the aim that the council would be prevented (as happened) from taking enforcement action within the four year period, there is no justification for cutting off the councils right to take enforcement action.
To hold otherwise would be to frustrate the policy, indeed the raison dtre, of section 171B (2) of the 1990 Act: in short, it is unthinkable that Parliament would have intended the time limit for taking enforcement action to apply in such circumstances.
In my view, therefore, in this situation section 171B (2) does not prevent the council from initiating enforcement action.
It follows that, having regard to section 191(2)(a) of the 1990 Act, the use of the subjects as a dwellinghouse is not lawful for the purposes of section 191(1)(a).
I would therefore allow the appeal and set aside the grant of the certificate of lawful use under section 191(1)(a) of the 1990 Act.
LORD BROWN
Is Mr Beesley entitled to continue living in the three bedroomed house, masquerading as a modern barn, which in 2002 he built on metropolitan green belt land in Hertfordshire? The Secretary of States Planning Inspector held that he is.
Collins J decided the contrary.
The Court of Appeal restored the inspectors decision.
One of the more surprising features of the litigation has seemed to me the Secretary of States strong support throughout for Mr Beesleys case.
Reluctantly allowing the Secretary of States and Mr Beesleys joint appeal to the court below, Mummery LJ observed [2010] PTSR 1296, para 38: It is a surprising outcome which decent law abiding citizens will find incomprehensible: a public authority deceived into granting planning permission by a dishonest planning application can be required by law to issue an official certificate to the culprit consolidating the fruits of the fraud.
The Lord Justice went on to note with regret that no public policy argument had been addressed to the court to the effect that statutory provisions should where possible be construed so as to prevent their use as an engine of fraud.
Prompted by that judgment, the public policy argument is now for the first time in these proceedings before the Court in addition to the argument that, on the proper construction of section 171B(2) of the Town and Country Planning Act 1990 (as amended) (the 1990 Act), the particular breach of planning control committed here did not fall within its scope.
Before us the Secretary of State resisted both arguments with equal vigour and whilst, of course, I recognise his general interest in supporting his inspectors decisions, I confess to some difficulty in understanding the damage he suggests the acceptance of either would occasion to the overall operation of the 1990 Act.
On the contrary, what to my mind would be damaging, at least to the publics confidence in our planning law, would be a conclusion that the Court has no option but to permit Mr Beesley to profit from his dishonest scheme.
With regard to the first issue the true construction and application of section 171B(2) there is nothing of substance I want to add to Lord Mances detailed judgment on the point.
I find his reasoning entirely convincing.
Parliament appears to have contemplated that a dwelling house built by way of unpermitted operational development would be enforced against, if at all, within the requisite four year period provided for by section 171B(1) failing which the authority probably would not seek ordinarily to enforce against its continued use as a house.
That no doubt explains why the protection of a four year (as opposed to a ten year) limitation period for enforcement in respect of single dwelling houses was not extended to use as such but only to a change of use of any building [inferentially, some building other than a newly built house] as a single dwelling house.
Either way, as Lord Mance demonstrates, section 171B(2) is simply not apt to encompass the use of a newly built house as a dwelling house and the nil use concept provides no coherent escape from this conclusion.
It is upon the second issue in the case the issue of public policy to which Mr Beesleys deceitfulness gives rise that I wish to add a few thoughts of my own.
Is it, one must ask, appropriate to import into this apparently self contained legislative planning scheme the principle of public policy that no one should be allowed to profit from his own wrong? That, critically, is the question arising on this part of the appeal and, it is important to note, it is a question that affects enforcement time limits no less under section 171B(1) (and, indeed, section 171B(3)) than under section 171B(2).
At first blush, there might be thought two difficulties in the path of this public policy argument.
The first is this.
Although Mr Beesleys appeal to the inspector was ostensibly against the councils refusal of a section 191 application for a certificate of lawful existing use, in law his entitlement to such a certificate depended in turn (see section 191(2)(a)) upon whether the existing use could be enforced against i.e. whether the time for enforcement action had expired.
Assuming as for the purposes of this part of the appeal one should that Mr Beesleys use of the dwelling house would otherwise fall within the terms of section 171B(2), the 1990 Act appears on its face to preclude the taking of enforcement action.
It might be thought one thing to construe the Act in the light of the public policy principle so as to deny Mr Beesley the certificate that he was seeking (the grant of which would no doubt enhance his houses value and saleability) a certificate, as we have seen Mummery LJ describe it, consolidating the fruits of the fraud; quite another thing to construe it as enabling the council, section 171B(2) notwithstanding, to enforce against the use (by now apparently protected and thus lawful) beyond the expiry of the four year limitation period.
On true analysis, however, there is nothing in this point.
If, as was held in R v Chief National Insurance Commissioner, Ex p Connor [1981] QB 758, monetary payments, or, as decided in R v Secretary of State for the Home Department Ex p Puttick [1981] QB 767, registration as a United Kingdom citizen, could lawfully be withheld on public policy grounds respectively from a widow who had manslaughtered her husband, and from a German woman whose qualifying marriage to a United Kingdom citizen she had procured by fraud despite in each case their having acquired an ostensibly absolute statutory right to these respective benefits, so too a statutory bar on enforcement action can in my judgment be disapplied on similar public policy grounds.
Logically a statutory prohibition on enforcement action is simply the other side of the coin from a statutory requirement to make a payment or to register citizenship: the one prevents a public authority from terminating a benefit; the other requires a public authority to confer a benefit.
Public policy may operate to negate both.
The second problem said to confront the importation into the 1990 Act of the public policy principle (the Connor principle as I shall now call it) is that it would run counter to the plain intention of a legislative scheme as a whole.
The very premise of section 171 (and, in turn, of section 191) is that unlawful development development in breach of planning control has taken place and, having been persisted in for more than four years (or, as the case may be, ten years) has become expressly legitimised by Parliament.
The whole object of the scheme, essentially in the interests of clarity and certainty, is to recognise and declare that after a certain time unpermitted development, if not already enforced against, has become immune from enforcement and thus lawful.
To import the Connor principle into this scheme, submits the Secretary of State, would be inconsistent with that intention and would compromise the very public interest which the scheme is designed to serve.
The argument is a serious one and I confess initially to have been troubled by it.
Clearly it would be impossible to superimpose upon the statutory scheme any sort of broad principle to the effect that no one guilty of wrongdoing can be allowed to benefit from the limitation provisions of the 1990 Act.
That, indeed, would be inconsistent with the plain intention of this legislation.
Inevitably the breaches of planning control statutorily said to become immune from enforcement under section 171B involve a spectrum of wrongdoing.
These range from cases at one end where the developer is simply unaware of the need for development permission to, at the other extreme, those intent on unpermitted development who plot a whole course of deception designed to circumvent planning control and escape enforcement.
The point is illustrated by two cases in particular, Epping Forest District Council v Philcox [2002] Env LR 2 (Philcox) and Arun District Council v First Secretary of State [2007] 1 WLR 523 (Arun), both touched on in Lord Mances judgment.
The applicant in Philcox, presumably a disaffected neighbour, was challenging the local authoritys grant of a section 191 certificate in respect of a companys unpermitted use of land for the breaking of motorised road vehicles and storage of parts.
Basing his challenge upon the companys failure to obtain a waste management licence as required by the Environmental Protection Act 1990, Mr Philcox sought to invoke the Connor principle to deny the company the benefit of immunity from enforcement action pursuant to section 171B.
In considering the Court of Appeals judgments rejecting the challenge, it is important to have in mind three points in particular.
First, section 191(7) of the 1990 Act provides in terms that a certificate under the section has effect as if it were a grant of planning permission for the purpose of section 36(2)(a) of the Environmental Protection Act 1990.
Secondly, section 171B of the 1990 Act confers no immunity against prosecution by the regulatory authority under the Environmental Protection Act (ie the company could still be prosecuted for their past failure to obtain a waste management licence).
Thirdly, the company still required a licence and this could be refused unless the regulatory authority was satisfied both that the applicant was a fit and proper person and that it was not necessary to refuse the licence on environmental grounds.
It is in this context that the following passages in the judgments fall to be understood: The court is entitled to construe a statute . in the light of its ability to promote its notions of public policy. The cases do not, however, in my judgment, establish a principle that the plain words of a statute which define what is lawful must be read subject to a proviso that what is criminal cannot be lawful.
Section 191, in a systematic way, defines what uses and operations are lawful for the purposes of the Act and states the consequences of achieving that status with specific reference to section 36(2)(a) of the Environmental Protection Act 1990.
There is no principle of public policy which requires that the intent of Parliament as expressed in section 191 should be defeated in the manner claimed. (Pill LJ at para 15) Whatever might be the position in other contexts, it is to my mind clear beyond argument that activity which is illegal by reason of contravention of one or other of the regulatory statutes referred to in section 191(7) is not activity which, (for that reason alone) prevents an application being made under section 191(1); or which prevents a local authority from fulfilling the duty imposed upon it by section 191(4).
To hold otherwise would be contrary to the plain intention of Parliament when enacting section 191(7) of the Town and Country Planning Act 1990. (Chadwick LJ at para 39) The broad principle of not benefiting from a persons own illegal acts simply does not fit into the reality of what is being done when planning permission is granted or when a certificate of lawful existing use is granted on the basis of failure to take enforcement action over a period of 10 years; and, in particular, it does not fit, for the reasons that my Lords have given, into the particular case here, which is a case specifically addressed in section 191(7). (Buxton LJ at para 47).
Not only, therefore, was there no relationship whatever in Philcox between the companys offending under the Environmental Protection Act and its breach of planning control in making unpermitted use of the land, but Parliament in section 191(7) of the 1990 Act expressly contemplated the issue of a certificate notwithstanding the requirement under different legislation for a waste management licence.
Arun was a very different case decided, indeed, with no reference at all to the Connor principle.
The point directly at issue there was whether the particular breach of planning control in question attracted a four year or a ten year limitation period a point of no materiality to the present appeal.
The cases present relevance, however, lies in a short passage in Sedley LJs judgment (at para 36): I can entirely understand the local planning authoritys sense of frustration about this.
Their planning department is not a police station, and the discovery that a person such as Mrs Brown has not to put too fine a point on it cheated on a conditional grant of planning permission, to detriment of her neighbours and of planning control, may well be a matter of time and of chance.
The ordinary ten year period might well have been thought reasonable for such cases, but . it is not what Parliament decided to provide.
What had happened there was that a Mrs K Brown of Bognor Regis had obtained planning permission for an extension (presumably something akin to a granny flat) subject to a number of conditions.
One of these was that the extension should be occupied only by Mrs Browns dependent relative, Mrs J Brown; another was that, upon vacation of the extension by Mrs J Brown, its use should become merely ancillary to that of the original single dwelling house and should not be occupied or disposed of as separate residential accommodation.
The extension was built shortly after planning permission was granted in 1988 but was not, in the event, occupied by Mrs J Brown.
Until 1996 it was used by Mrs K Brown as part of her house and it was then let to students who occupied it independently as separate living accommodation.
If one starts introducing the Connor principle into this area of the law, asks the Secretary of State, where will it all end? Given that Mrs Brown, in Arun, cheated on her neighbours and planning authority, should she too have lost the benefit (after whatever was the relevant limitation period) of immunity from enforcement action?
In responding with a resounding no to that forensic question (posed, I should at once make clear, in my language rather than Mr Mauricis), it is necessary to identify what seem to me the stark differences between the facts of Arun and those of the present case, and so finally come to indicate just what part the Connor principle should to my mind play in the construction and application of this legislation.
In my opinion, the only respect in which Mrs K Brown in Arun can be said to have cheated was in 1996 when she came to let her extension to students as independent living accommodation instead of continuing to occupy it, as for the past eight years she had, as part of her own house.
There was no suggestion of any deceit by her either in the obtaining or in the initial implementation of the planning permission, no suggestion that she had always intended to use the extension for independent letting, no suggestion of any positive steps taken by her to disguise her eventual breach of planning control.
It is difficult to suppose that there are not many people in the same sort of position as Mrs Brown who let out part of their houses as separate accommodation.
Criticise them as one may, they can hardly be thought to have forfeited the statutory protection afforded by the limitation provisions of the 1990 Act.
Contrast Mr Beesleys position.
His was a deliberate, elaborate and sustained plan to deceive the council from first to last, initially into granting him a planning permission and then into supposing that he had lawfully implemented it and was using the building for its permitted purpose.
His conduct throughout was calculated to mislead the council and to conceal his wrongdoing.
As necessary features of his deceit he omitted to register any member of the household for the payment of council tax for the period 2002 2006, contrary to section 6 of the Local Government Finance Act 1992, and he failed to comply with a number of the requirements of the Building Regulations (SI 2000/2531) with regard to the construction of the dwelling.
Whether this conduct (and that of his father in law with whom he secretly constructed the house) was or was not susceptible to prosecution under the general criminal law cannot be the determining question here.
On any possible view the whole scheme was in the highest degree dishonest and any law abiding citizen would be not merely shocked by it but astonished to suppose that, once discovered, instead of being enforced against, it would be crowned with success, with Mr Beesley entitled to a certificate of lawful use to prove it.
Frankly the dishonesty involved in this case is so far removed from almost anything else that I have ever encountered in this area of the law that it appears to constitute a category all its own.
I say almost, because we all now know of the no less astonishing case of Fidler v Secretary of State for Communities and Local Government and Reigate and Banstead Borough Council [2010] EWHC 143 (Admin), a case concerning the construction without planning permission of a mock tudor castle behind a 40 ft high shield of straw bales and tarpaulin.
Mr Fidler, just like Mr Beesley, successfully concealed his dwelling house from the local planning authority for four years.
His claim to be immune from enforcement action (taken by the council there with a view to having the building demolished) was, however, defeated, initially before the inspector and then before Sir Thayne Forbes sitting on a section 289 appeal to the High Court.
This was on the basis that the overall building operations relating to the construction of the new dwelling included the erection and removal of the straw bales and tarpaulin that had been deliberately put in place to conceal the construction and existence of the new dwelling in order to take advantage of the four year rule [and] were not substantially completed until the removal of the straw bales in July 2006 (para 7).
In other words, enforcement action was found to have been taken before the necessary four years had elapsed for the purposes of section 171B(1) of the 1990 Act.
Mr Fidlers further appeal to the Court of Appeal is, we are told, currently stayed pending the outcome of this appeal.
Although, of course, we are not here deciding Mr Fidlers further appeal, it seems to me plain that, consistent with our judgment in the present case, it will be open to the council there to advance, as an alternative argument to that on which they have hitherto succeeded as to whether for the purposes of section 171B(1) the operational development had been substantially completed four years before the enforcement action was taken the argument based on the Connor principle.
It also follows from our decision here that, in this very case, the council can, if it thinks it expedient, seek to enforce not merely against the continued use of this building as a dwelling house but additionally against its construction.
One other matter should be mentioned at this stage.
Recognising the unattractiveness of Mr Beesleys position and the persuasive public policy arguments against his succeeding in his application for a lawful development certificate, the Secretary of State in December 2010 published the Localism Bill which, if enacted, will by section 104 amend the 1990 Act by inserting three new subsections (171BA, 171BB, and 171BC) expressly to deal with issues of concealment.
Without wishing to comment on the details of these provisions, I would observe only, first, that their proposed inclusion in the legislation surely indicates that the legislative scheme as a whole can hardly be thought incompatible with some application of the Connor principle; secondly that, pending the proposed statutory amendments, only truly egregious cases such as this very one (and perhaps Fidler too) should be regarded as subject to the Connor principle.
I simply do not accept that amending legislation is required before this salutary principle of public policy can ever be invoked.
I do recognise, however, that, as matters presently stand, it should only be invoked in highly exceptional circumstances.
For these reasons, together with those given by Lord Mance, I too would allow the councils appeal on both grounds and would set aside the grant of the certificate under section 191(1)(a).
| UK-Abs | This appeal concerns the application of planning law to a dwelling house disguised as a hay barn.
The first issue is whether the building is within the provisions of the Town and Country Planning Act 1990 which impose a time limit for taking enforcement action against breaches of planning control.
The second issue is whether the owners dishonest scheme disentitles him from benefitting from those provisions.
In 2001 Mr Beesley, the Second Respondent, applied for and obtained planning permission to construct a hay barn for grazing and haymaking on open land which he owned in the Green Belt.
In 2002 he constructed a building which was to all external appearances the permitted barn, but internally was a fully fitted out dwelling house with garage, living room, study, bedrooms, bathrooms and gym.
In August 2002 he moved in with his wife and lived there continuously for four years.
Welywn Hatfield Borough Council, the Appellant, in whose area the property lies, remained unaware that the building was constructed as, or was being used as, a dwelling house.
In August 2006 Mr Beesley made an application for a certificate of lawfulness for use of the building as a dwelling house.
He contended that the four year time limit for taking enforcement action in section 171B(2) of the Town and Country Planning Act 1990 (the 1990 Act) was applicable and had elapsed.
The section provides that where there has been a breach of planning control consisting in the change of use of any building to use as a single dwelling house, no enforcement action may be taken after the end of four years beginning with the date of the breach.
The certificate was granted and subsequently upheld by the Court of Appeal, which decided that there had been a change of use within section 171B(2) such that immunity from enforcement was established.
The Council appealed to the Supreme Court on two grounds.
First, it challenged the Court of Appeals decision that there had been a relevant change of use.
Secondly, it argued that even if there had been such a change, the principle of public policy that no one should be allowed to profit from his own wrong precluded Mr Beesley from relying on section 171B(2).
The Supreme Court unanimously allows the appeal.
It holds that: (i) there had been no change of use within section 171B(2); (ii) in any event, Mr Beesleys dishonest conduct meant that he could not rely on the section.
Lord Mance gives the lead judgment.
Lords Rodger and Brown deliver additional concurring judgments.
On the first issue, the question was whether there had been any relevant change of use such as to bring the building within section 171B(2).
The Supreme Court held first that the building which Mr Beesley constructed was not the permitted barn: it was a dwelling house.
Therefore there could not have been a change of use within section 171B(2) from the use permitted by the planning permission.
In any event, it was doubtful whether change of use under section 171B(2) could consist of a simple departure from permitted use.
The word use in the section is directed to real or material use, not permitted use. [13] [14] Nor was there a relevant change of use on the basis that in the short period between completion of the building in July 2002 and its residential occupation on 9 August 2002 the building had no use, such that there was a change of use from no use to use as a dwelling house on and after 9 August.
It is artificial to say that a building has no use when its owner has just built it to live in and is about to move in a few days time.
The question of whether it is right to describe a building as having no use is not one which can sensibly be answered on a day by day basis, but rather calls for a broader and longer term view.
For all these reasons, section 171B(2) is simply not apt to encompass the use of a newly built house as a dwelling house. [27] [30]; [68] In light of this conclusion on the first issue, it was not strictly necessary to address the second issue, but given its importance the Court went on to do so.
The issue involved consideration of the scope and application of the principle that, unless the contrary intention appears, statutes are to be construed to the effect that no one should be allowed to profit from his own wrong.
The Court noted that Mr Beesley intended to deceive the Council from the outset by his statements in the planning application.
This was positive deception in matters integral to the planning process and directly intended to undermine that process.
His conduct was not identifiably criminal but the principle is not only relevant where there has been the commission of a crime.
The Court further considered the rationale of the statutory provision: the four year period in section 171B(2) must have been conceived as a period during which a planning authority would normally be expected to discover an unlawful use and after which the general interest in proper planning control should yield and the status quo prevail.
Positive and deliberately misleading false statements by an owner which prevent discovery take a case outside that rationale.
It would in fact frustrate the policy of the section if the time limit for enforcement was to apply on the facts of the present case.
It would also damage the publics confidence in planning law: any law abiding citizen would be astonished to suppose that Mr Beesleys dishonest scheme, once being discovered, would not be enforced against but rather crowned with success.
It is unthinkable that Parliament intended such an outcome.
Even if, therefore, Mr Beesley had come within the literal wording of section 171B(2), his conduct took him outside its scope. [31]; [53] [58]; [67]; [80]
|
The appellant (NML) is a Cayman Island Company.
It is an affiliate of a New York based hedge fund of a type sometimes described as a vulture fund.
Vulture funds feed on the debts of sovereign states that are in acute financial difficulty by purchasing sovereign debt at a discount to face value and then seeking to enforce it.
This appeal relates to bonds issued by the Republic of Argentina in respect of which, together with all its other debt, Argentina declared a moratorium in December 2001.
Between June 2001 and September 2003 affiliates of NML purchased, at a little over half their face value, bonds with a principal value of US$ 172,153,000 (the bonds).
On 11 May 2006, NML, as beneficial owner, obtained summary judgment on the bonds for a total, including interest, of US$ 284,184,632.30, in a Federal Court in New York.
NML brought a common law action on that judgment in this jurisdiction, and succeeded before Blair J in the Commercial Court.
That judgment was reversed by the Court of Appeal, which held that Argentina is protected by state immunity.
The question raised by this appeal is whether that finding was correct.
The bonds and the New York Judgment
The bonds were issued by Argentina in February and July 2000 pursuant to a Fiscal Agency Agreement between Argentina and Bankers Trust Company.
The terms applicable to the bonds were contained in the Agreement and the bonds themselves, both of which were expressly governed by the law of New York.
In November 2003, having declared events of default under the Fiscal Agency Agreement, relying on the moratorium and Argentinas subsequent failure to pay interest on the bonds, NML commenced proceedings against Argentina in the United States District Court, Southern District of New York, to recover principal and interest due under the bonds.
Jurisdiction was founded on an express submission to New York jurisdiction in the Fiscal Agency Agreement.
Argentina appeared and defended the proceedings.
Judge Thomas P Griesa granted NMLs motion for summary judgment.
Argentina does not, in these proceedings, challenge that judgment.
The proceedings in this jurisdiction
In order to serve a foreign sovereign state it is necessary to obtain the permission of the court to serve the claim form out of the jurisdiction.
On 14 March 2008 NML applied ex parte for this permission.
The witness statement supporting this application, and the draft particulars of claim exhibited to it, alleged two reasons why Argentina was not entitled to state immunity.
The first was that under clause 22 of the Fiscal Agency Agreement Argentina had waived, and agreed not to plead, any claim that it might have to state immunity.
The second was that NMLs claim was founded on the Fiscal Agency Agreement and the bonds, and consequently constituted proceedings relating to a commercial transaction for the purposes of the State Immunity Act 1978 (the 1978 Act).
On 2 April 2008, David Steel J granted NML permission to serve Argentina out of the jurisdiction, and service was duly effected.
On 5 September 2008 Argentina applied under CPR 11(1) to set the order for service aside on the ground that Argentina enjoyed state immunity from the jurisdiction of the English courts.
At the hearing of this application before Blair J NML conceded that it could rely, at first instance, on neither of the grounds for alleging that Argentina did not enjoy immunity that had been advanced in support of the application to serve out.
Instead NML sought to rely first on the provisions of section 31 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) and secondly on alternative provisions as to waiver and jurisdiction in the bonds themselves.
I shall follow the example of Aikens LJ in annexing in Appendix 1 the relevant provisions of section 31, in Appendix 2 Article 20 of the European Convention on State Immunity (ECSI), to which I shall refer in due course, and in Appendix 3 the relevant terms of the bonds.
Argentina contended that it was not open to NML to invoke alternative grounds for contending that immunity did not apply when these had not been relied on in the original ex parte application.
NMLs proper course was to make a fresh application for permission to serve Argentina out of the jurisdiction.
Blair J rejected this procedural objection and found in favour of NML on both the new substantive points [2009] EWHC 110 (Comm); [2009] QB 579.
The Court of Appeal reversed Blair J on all three issues [2010] EWCA Civ 41; [2011] 1 QB 8.
Aikens LJ gave the only reasoned judgment, with which Mummery and Elias LJJ agreed.
The issues
The following issues are raised by this appeal: (1) Whether the present proceedings for the recognition and enforcement of the New York courts judgment are proceedings relating to a commercial transaction within the meaning of section 3 of the State Immunity Act 1978. (As I shall explain, this issue was not open to NML in the courts below). (2) Whether Argentina is prevented from claiming state immunity in respect of the present proceedings by Section 31 of the Civil Jurisdiction and Judgments Act 1982. (3) Whether the bonds contain a submission to the jurisdiction of the English court in respect of these proceedings within the meaning of section 2 of the State Immunity Act 1978. (4) Whether NML was entitled to raise at the inter partes hearing the two new points not previously relied on in the ex parte application for permission to serve Argentina out of the jurisdiction. (5) Whether, having regard to the answers to the above questions, Argentina is entitled to claim state immunity in respect of these proceedings.
The resolution of the first two issues turns on statutory interpretation.
This must be carried out in the context of simultaneous developments in the law of sovereign immunity and of the recognition of foreign judgments.
State immunity
At the beginning of the 20th century state immunity was a doctrine of customary international law, applied in England as part of the common law.
Under this doctrine a state enjoyed absolute immunity from suit in the court of another state.
The property of the state was also immune from execution.
Because a state could not be sued, there was no procedural provision in this jurisdiction for service of process on a foreign state.
The Court of Appeal had, however, occasion to consider the law of state immunity when proceedings in rem were served on a mail packet owned by Belgium which had been involved in a collision in the case of The Parlement Belge (1880) LR 5 PD 197.
The Court held that the vessel, being the property of a foreign sovereign state, was immune from legal process.
Giving the judgment of the court Brett LJ explained the reason for this immunity, at pp 207 208 and 220: From all these authorities it seems to us, although other reasons have sometimes been suggested, that the real principle on which the exemption of every sovereign from the jurisdiction of every court has been deduced is that the exercise of such jurisdiction would be incompatible with his regal dignity that is to say, with his absolute independence of every superior authority.
By a similar examination of authorities we come to the conclusion, although other grounds have sometimes been suggested, that the immunity of an ambassador from the jurisdiction of the courts of the country to which he is accredited is based upon his being the representative of the independent sovereign or state which sends him, and which sends him upon the faith of his being admitted to be clothed with the same independence of and superiority to all adverse jurisdiction as the sovereign authority whom he represents would be.
It has been held that an ambassador cannot be personally sued, although he has traded; and in both cases because such a suit would be inconsistent with the independence and equality of the state which he represents.
If the remedy sought by an action in rem against public property is, as we think it is, an indirect mode of exercising the authority of the court against the owner of the property, then the attempt to exercise such an authority is an attempt inconsistent with the independence and equality of the state which is represented by such an owner.
The property cannot upon the hypothesis be denied to be public property; the case is within the terms of the rule; it is within the spirit of the rule; therefore, we are of opinion that the mere fact of the ship being used subordinately and partially for trading purposes does not take away the general immunity.
In Mighell v Sultan of Johore [1894] 1 QB 149 leave to effect substituted service on the Sultan of Johore in an action in personam was set aside on the ground that he enjoyed sovereign immunity.
To an argument that he had waived this immunity, the court held that the only way that a sovereign could waive immunity was by submitting to jurisdiction in the face of the court as, for example, by appearance to a writ.
If the sovereign ignored the issue of the writ, the court was under a duty of its own motion to recognise his immunity from suit.
In Compania Naviera Vascongado v Steamship Cristina [1938] AC 485 the House of Lords confirmed that a state owned ship that was used for public purposes could not be made the subject of proceedings in rem.
Lord Atkin started his judgment with the following definition of state immunity, at p 490: The foundation for the application to set aside the writ and arrest of the ship is to be found in two propositions of international law engrafted into our domestic law which seem to me to be well established and to be beyond dispute.
The first is that the courts of a country will not implead a foreign sovereign, that is, they will not by their process make him against his will a party to legal proceedings whether the proceedings involve process against his person or seek to recover from him specific property or damages.
The second is that they will not by their process, whether the sovereign is a party to the proceedings or not, seize or detain property which is his or of which he is in possession or control.
There has been some difference in the practice of nations as to possible limitations of this second principle as to whether it extends to property only used for the commercial purposes of the sovereign or to personal private property.
In this country it is in my opinion well settled that it applies to both.
Three members of the House questioned, however, whether state immunity would protect a vessel that was used for the purposes of commercial trade.
This reflected a growing recognition around the world of the restrictive doctrine of state immunity under which immunity related to governmental acts in the exercise of sovereign authority (acta jure imperii) but not to commercial activities carried on by the state (acta jure gestionis).
The absolute doctrine of state immunity could pose a disincentive to contracting with a state and some states attempted to avoid this disadvantage by including in contracts an agreement not to assert state immunity.
The English courts held, however, that such a purported waiver was ineffective.
Immunity could only be lost by a submission to the jurisdiction when it was invoked, and not earlier see Duff Development Co v Kelantan Government [1924] AC 797 and Kahan v Pakistan Federation [1951] 2 KB 1003.
In Rahimtoola v Nizam of Hyderabad [1958] AC 379, 422 Lord Denning expressed, obiter, the view that judicial immunity should not apply to commercial transactions, but the other members of the House expressly dissociated themselves from this view, because the point had not been argued.
It was not until nearly I shall deal with the intervention of Parliament in the form of the 1978 and twenty years later that Lord Denning MR was able to carry the rest of the Court of Appeal with him in applying the restrictive doctrine of state immunity in Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529.
This decision was approved by the House of Lords in I Congreso del Partido [1983] 1 AC 244.
1982 Acts when I deal specifically with the first two issues.
Enforcement of foreign judgments
Prior to the 1982 Act the common law provided two alternative remedies to a plaintiff who had obtained a judgment against a debtor in a foreign jurisdiction.
He could bring a claim on the judgment or he could bring a claim on the cause of action in respect of which he had obtained the judgment.
The former did not merge in the latter.
In order to establish jurisdiction to sue on the judgment the plaintiff had to serve a writ in personam in accordance with the normal procedure.
The existence of a foreign judgment was not a ground upon which permission could be obtained to serve a writ out of the jurisdiction.
The plaintiff had to establish that a number of conditions were satisfied in order to claim successfully on the foreign judgment.
In particular, he had to establish that the foreign court had had jurisdiction over the defendant in accordance with the English rules of private international law and the judgment had to be final and conclusive on the merits.
Part II of the Administration of Justice Act 1920 (the 1920 Act) provides an alternative means of enforcing, in the United Kingdom, the judgment of a superior court in another part of His Majestys dominions.
Section 9 of that Act provides that, subject to the conditions there specified, the High Court may, if in all the circumstances of the case they think it is just and convenient that the judgment should be enforced in the United Kingdom order the judgment to be registered.
The conditions include a requirement that the foreign court should have had jurisdiction and preclude registration where the judgment is in respect of a cause of action which for reasons of public policy or for some other similar reason could not have been entertained by the registering court.
These conditions plainly preclude the registration of a judgment against a defendant who, under English law, is subject to state immunity.
Prior to 1978 there is no record, so far as I am aware, of any plaintiff having attempted to register such a judgment.
The Foreign Judgments (Reciprocal Enforcement) Act 1933 was passed to make provision for the enforcement in the United Kingdom of judgments given in foreign countries that accord reciprocal treatment to judgments given in the United Kingdom.
Section 2 of this Act provides for registration of such judgments on specified conditions, subject to the right of the judgment debtor to apply to have the judgment set aside.
The section provides that for the purposes of execution a registered judgment is to be treated as if it were a judgment of the registering court.
Section 4 makes provision for an application to set aside a registered judgment.
The section includes a provision that the judgment shall be set aside if the registering court is satisfied that the foreign court had no jurisdiction in the circumstances of the case.
The section further provides by subsection (3)(c) that the foreign court shall not be deemed to have had jurisdiction if the judgment debtor, being a defendant in the original proceedings, was a person who under the rules of public international law was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court.
This last provision is significant in the present context in that it implicitly provides for the registration of a judgment against a state, a state entity or an individual who was subject to state immunity in the foreign country if there has been a submission to the foreign jurisdiction.
The 1933 Act contains no provision, however, that permits enforcement of such a judgment against property owned by a state.
Furthermore section 2(1)(b) of the Act precludes recognition of a judgment that cannot be enforced by execution in the country of the original court, and section 4(1)(a)(v) requires the registration of a judgment to be set aside if enforcement would be contrary to the public policy of the registering court.
So long as the absolute doctrine of state immunity prevailed in the United Kingdom it is hard to envisage registration of a foreign judgment against a judgment debtor who had been entitled to state immunity, but who had submitted to the foreign jurisdiction, except perhaps a diplomat in respect of whom his state had waived diplomatic immunity.
There does not seem to be any recorded instance of such a case.
Issue 1: are the present proceedings proceedings relating to a commercial transaction within the meaning of the State Immunity Act 1978?
The 1978 Act had its origin in the need to give effect to the ECSI, but as the Bill passed through Parliament the scope of the legislation was widened so as to make provisions in relation to state immunity having effect on all states, and not just those party to the Convention.
Fox on The Law of State Immunity 2nd ed (2008), at p 241 and following, describes the genesis of the Act.
Section 3(1) of the 1978 Act provides: A State is not immune as respects proceedings relating to (a) a commercial transaction entered into by the state.
Section 3(3)(b) defines commercial transaction as including any loan or other transaction for the provision of finance.
In view of this definition it is not surprising that it is common ground that the action in respect of which NML obtained judgment in New York was a proceeding relating to a commercial transaction within the meaning of section 3(1)(a).
Permission to effect service on Argentina out of the jurisdiction was obtained from David Steel J on the basis of an averment that the common law action that was to be brought in England on the New York judgment was also a proceeding relating to a commercial transaction.
However before Blair J and the Court of Appeal NML conceded that this averment was not open to them short of the Supreme Court.
This was because of two reasoned decisions, one in the High Court and one in the Court of Appeal which, albeit that the latter was obiter, constrained NML to accept that, for the purposes of section 3(1)(a), the action that NML was seeking to bring was a proceeding relating to the New York judgment and not to the transaction to which that judgment related.
Before this Court Mr Sumption QC has challenged these authorities.
Issue 1 turns on the question of whether they were rightly decided.
The first of these cases is AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB).
AIC registered under the 1920 Act a judgment that they had obtained in Nigeria against the Nigerian Government in relation to what AIC alleged to be a commercial transaction.
The Nigerian Government applied to have the registration set aside on the ground that registration was an adjudicative act and that Nigeria was protected by state immunity by reason of section 1 of the 1978 Act.
AIC argued that their application to register the judgment was a proceeding relating to a commercial transaction within section 3(1)(a).
Stanley Burnton J rejected this submission.
His reasoning appears in the following short passage in para 24 of his judgment In my judgment, the proceedings resulting from an application to register a judgment under the 1920 Act relate not to the transaction or transactions underlying the original judgment but to that judgment.
The issues in such proceedings are concerned essentially with the question whether the original judgment was regular or not.
Stanley Burnton J held that this conclusion was supported by two matters.
The first was that section 9 of the 1978 Act excludes immunity as respects proceedings which relate to [an] arbitration where the state has entered into a written arbitration agreement.
As most arbitrations relate to commercial transactions, section 9 would be unnecessary if a claim in respect of an arbitration constituted a proceeding relating to the commercial transaction to which the arbitration related, for that would fall within 3(1)(a).
The second matter was that it would be illogical to exempt from immunity the enforcement of a judgment in relation to a commercial transaction, but not the enforcement of a judgment in relation to any of the other matters in respect of which the 1978 Act provided exceptions to immunity under sections 3 to 11 of the Act.
Stanley Burnton J remarked at para 30 that it was unsurprising that the defendants were immune from proceedings for the registration of the Nigerian judgment: the underlying principle of the State Immunity Act is that a state is not immune from the jurisdiction of the courts of the United Kingdom if it enters into commercial transactions or undertakes certain activities having some connection with this jurisdiction.
Purely domestic activities of a foreign state are not the subject of any exception to immunity.
Sections 3(1)(b), 4, 5, 6, 7, 8 and 11 all contain territorial qualifications to the exceptions to immunity to which they relate.
Section 3(1)(a) does not include any such qualification, but even there the claimant wishing to bring proceedings must establish a basis for jurisdiction under CPR Part 6.20, normally under paragraphs (5) or (6), relating to contractual claims.
Stanley Burnton J went on to observe that Lord Denning MR when advancing the restrictive doctrine of state immunity in Rahimtoola v Nizam of Hyderabad [1958] AC 379, 422, in Thai Europe Tapioca Service Ltd v Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 WLR 1485, 1491 and in Trendtex Trading v Bank of Nigeria [1977] 1 QB 529, 558 had emphasised the significance not merely of the fact that the proceedings related to a commercial transaction, but that the transaction was connected with the United Kingdom.
A similar issue to that considered by Stanley Burnton J arose in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2005] EWHC 2437 (Comm); [2006] 1 Lloyds Rep 181.
There the relevant issue was whether a claim to enforce an arbitration award constituted proceedings relating to the transaction that gave rise to the award for the purposes of section 3(1)(a).
Gloster J followed Stanley Burnton Js reasoning in holding that it did not.
Her decision on the point was obiter, but it received reasoned approval, also obiter, when the case reached the Court of Appeal [2006] EWCA Civ 1529; [2007] QB 886.
The court held at para 137: In our view the expression relating to is capable of bearing a broader or narrower meaning as the context requires.
Section 3 is one of a group of sections dealing with the courts' adjudicative jurisdiction and it is natural, therefore, to interpret the phrase in that context as being directed to the subject matter of the proceedings themselves rather than the source of the legal relationship which has given rise to them.
To construe section 3 in this way does not give rise to any conflict with section 9, which is concerned with arbitration as the parties' chosen means of resolving disputes rather than with the underlying transaction.
In our view AIC Ltd v Federal Government of Nigeria was correctly decided and Gloster J was right to follow it in the present case.
I agree with the Court of Appeal that the expression relating to is capable of bearing a broader or narrower meaning as the context requires.
I disagree, however, with their conclusion as to the relevant context.
Sections 1 to 11 of the 1978 Act are a comprehensive statement of the scope of state immunity under the law of the United Kingdom.
Section 3(1)(a) makes it plain that the United Kingdom applies the restrictive doctrine of state immunity.
The context in which the question of the meaning of relating to has arisen in this case is the issue of whether Argentina is or is not protected by state immunity against the proceedings that NML seek to bring.
The object of bringing these proceedings is to enforce the New York judgment.
Argentina has not suggested that (subject to the issue of immunity) these proceedings did not fall within CPR 6.20(9), which provides for service out of the jurisdiction if a claim is made to enforce any judgment or arbitral award.
The only issue is whether Argentina is immune from the claim.
Whether a state is immune from such a claim should, under the restrictive doctrine of state immunity, depend upon the nature of the underlying transaction that has given rise to the claim, not upon the nature of the process by which the claimant is seeking to enforce the claim.
When considering whether a state is entitled to immunity in respect of a claim to enforce a foreign judgment the question does the claim constitute proceedings relating to a commercial transaction? can only be given a meaning that is sensible if relating to is given a broad, rather than a narrow, meaning.
The proceedings relate both to the foreign judgment and to the transaction underlying that judgment, but in the context of restrictive state immunity it only makes sense to focus on the latter.
The argument to the contrary accepted by Stanley Burnton J in AIC proceeds as follows.
There is a distinction between the adjudicative and the executionary stages of these proceedings.
First NML has to establish liability in this jurisdiction and then proceed to attempt to levy execution.
The question is whether Argentina enjoys immunity from the adjudicative stage.
That stage involves the conversion of the New York judgment into an English judgment.
The proceedings to effect this conversion do not turn on the nature of the underlying transaction, but on whether the judgment in respect of that transaction was regularly obtained.
Thus those proceedings do not relate to the underlying transaction.
The fallacy in this argument is that the issue raised in the present proceedings is not the regularity of the New York judgment but whether Argentina is immune to an action on that judgment.
Mr Howard QC put the matter more accurately at para 15 of his written case: It is important to bear in mind that the issue in these proceedings is not whether the English court had jurisdiction to entertain proceedings on the bonds.
It is common ground that it did not.
Rather, the issue is whether the present proceedings for the recognition and enforcement of the New York judgment are proceedings relating to that judgment, or are, instead, proceedings relating to a commercial transaction entered into by Argentina within the meaning of section 3(1)(a) on the grounds that the New York proceedings on which the New York judgment was based were proceedings relating to a commercial transaction entered into by Argentina (ie relating to the bonds).
The issue that Mr Howard identifies has to be answered in order to determine whether, under English law, Argentina enjoys state immunity in relation to these proceedings.
That question ought to be answered in the light of the restrictive doctrine of state immunity under international law.
There is no principle of international law under which state A is immune from proceedings brought in state B in order to enforce a judgment given against it by the courts of state C, where state A did not enjoy immunity in respect of the proceedings that gave rise to that judgment.
Under international law the question of whether Argentina enjoys immunity in these proceedings depends upon whether Argentinas liability arises out of acta jure imperii or acta jure gestionis.
This involves consideration of the nature of the underlying transaction that gave rise to the New York judgment.
The fact that NML is seeking to enforce that judgment in this jurisdiction by means of an action on the judgment does not bear on the question of immunity.
This leads to the conclusion that the context in which the issue of the meaning of the words relating to arises in this case requires one to look behind the New York judgment at the underlying transaction.
I must deal with the matters that Stanley Burnton J considered supported the narrower interpretation of relating to in AIC Ltd v Federal Government of Nigeria.
The first is that section 9 would not be needed if section 3(1)(a) applies to proceedings to enforce an arbitration award.
It is true, if relating to is given the wider meaning, that the circumstances covered by section 9 of the 1978 Act will often overlap with the circumstances covered by section 3(1)(a), but this will not In order to deal with the second matter to which Stanley Burnton J referred, always be the case.
Not all arbitrations relate to commercial transactions.
Furthermore, as Mr Sumption pointed out, section 9 relates not only to proceedings to enforce an award, but to all proceedings relating to an arbitration to which a state is party, and establishes jurisdiction of the English court in relation to all such proceedings.
it is necessary to quote the point that he made in his own words at para 26: Furthermore, if Parliament had intended the State Immunity Act to include an exception from immunity relating to the registration of foreign judgments, it would have been illogical to limit it to commercial transactions entered into by the state (which is the consequence of AICs contentions), with no provision for the registration of foreign judgments where the exception to immunity before the original court was the equivalent of one of the other exceptions to immunity in that Act.
In argument this point was, I believe, misunderstood.
It was assumed that Stanley Burnton J was suggesting that if a foreign judgment relating to a commercial transaction were enforceable here, so logically should a foreign judgment dealing with one of the other matters specifically exempted from immunity under the 1978 Act.
Thus, for instance, if in New York a judgment were given against Argentina in respect of personal injury caused to the claimant in the United Kingdom, one would expect that judgment to be enforceable here see section 5 of the 1978 Act.
Mr Sumptions answer was that the judgment would in fact be enforceable here.
An action on the New York judgment would be an action in respect of the personal injury caused in the United Kingdom.
I believe that we all misunderstood Stanley Burnton Js point.
It was not that it would be logical to be able to enforce here a New York judgment dealing with a personal injury caused in the United Kingdom, but a New York judgment where there was an exemption from immunity equivalent to that provided by section 5 ie a New York judgment in respect of a personal injury caused in New York.
As to that point, I agree with Stanley Burnton J.
It was illogical that the 1978 Act did not make provision for the enforcement in this country of such a judgment.
This was because the draftsman of the 1978 Act did not deal generally with foreign judgments.
That omission was made good by section 31 of the 1982 Act, as I shall show.
The other matter that impressed Stanley Burnton J was the desirability of giving section 3(1)(a) an interpretation which would have the effect of requiring a link between the defendant states commercial transaction and the United Kingdom jurisdiction.
He drew attention to the existence of such a link in the other exemptions to state immunity in the 1978 Act and to dicta of Lord Denning.
It is true that the need for such a link receives support from dicta of Lord Denning in the judgments prior to 1978 in which he sought to introduce the restrictive doctrine of state immunity into English law.
Thus in Thai Europe Tapioca Service v Government of Pakistan he said, [1975] 1 WLR 1485, 1491 1492: a foreign sovereign has no immunity when it enters into a commercial transaction with a trader here and a dispute arises which is properly within the territorial jurisdiction of our courtsBy this I do not mean merely that it can be brought within the rule for service out of the jurisdiction under RSC Ord, 11, r 1.
I mean that the dispute should be concerned with property actually situate within the jurisdiction of our courts or with commercial transactions having a most close connection with England, such that, by the presence of parties or the nature of the dispute, it is more properly cognisable here than elsewhere.
Fox on The Law of State Immunity at p 269 describes the academic criticism of what was alleged to be confusion by Lord Denning of the doctrine of state immunity with principles of extra territorial jurisdiction.
When Parliament enacted the 1978 Act the exemption from immunity under section 3(1)(a) in respect of proceedings relating to a commercial transaction entered into by the state was not qualified by any requirement for a link between the transaction and the United Kingdom.
This was not accidental.
The United Kingdom ratified the ECSI on the same day that the 1978 Act came into force, and the Act was designed to give effect to the Convention.
The original Bill followed closely the structure of the ECSI.
Its scope was, however, significantly enlarged by amendment.
The ECSI only applies as between contracting states.
The 1978 Act was expanded so as to apply to all states.
The ECSI does not give effect to the restrictive doctrine of sovereign immunity.
Article 24 provides, however, that any state may declare that its courts shall be entitled to entertain proceedings against another Contracting State to the extent that its courts are entitled to entertain proceedings against States not party to the present Convention.
Such declaration shall be without prejudice to the immunity from jurisdiction which foreign States enjoy in respect of acts performed in the exercise of sovereign authority (acta jure imperii).
The United Kingdom made such a declaration at the time of ratification of the Convention.
In Kuwait Airways Corporation v Iraqi Airways Corporation [1995] 1 WLR 1147, 1158 Lord Goff, with whom the rest of the Committee agreed, observed that the declaration: must have been intended to recognise the inapplicability in English law of the principle of sovereign immunity in cases in which the sovereign was not acting jure imperii, as had by then been recognised both in The Philippine Admiral [1977] AC 373 and in the Trendtex case [1977] QB 529, though the authoritative statement of the law by Lord Wilberforce in I Congreso del Partido [1983] 1 AC 244, 262, was not then available.
At all events, the consequential exception included in section 3 of the Act of 1978 related to commercial transactions, though in section 3(3) the expression commercial transactions is very broadly defined.
I can see no justification for giving section 3(1)(a) a narrow interpretation on the basis that it is desirable to restrict the circumstances in which it operates to those where the commercial transaction has a link with the United Kingdom.
The restrictive doctrine of sovereign immunity does not restrict the exemption from immunity to commercial transactions that are in some way linked to the jurisdiction of the forum.
For these reasons I have concluded that Stanley Burnton Js decision on this point in AIC and the Court of Appeals approval of it in Svenska was erroneous.
By reason of section 3(1)(a) of the 1978 Act Argentina is not immune from the proceedings that NML have commenced in this jurisdiction.
My conclusion accords with the decisions on the identical points of the Quebec Court of Appeal and the Supreme Court of Canada in Kuwait Airways Corporation v Republic of Iraq [2009] QCCA 728; [2010] SCC 40, [2010] 2 SCR 571.
Mr Howard relied upon the approaches taken in Holland v Lampen Wolfe [2001] 1 WLR 1573, 1587, per Lord Millett, in Australian Competition and Consumer Commission v P T Garuda Indonesia Ltd (2010) 269 ALR 98, paras 105 137 and Bouzari et al v Attorney General of Canada et al (Bouzari v Iran (Islamic Republic)) [2004] 243 DLR (4th) 406, para 51.
None of these cases concerned, however, the meaning of relating to in the context of an action on a foreign judgment.
Such an action is sui generis and I did not find the authorities in question of assistance.
For these reasons I differ from the Court of Appeal on the answer to the first issue.
My conclusion is that the present proceedings are proceedings relating to a commercial transaction within the meaning of section 3 of the 1978 Act.
The conclusion that I have reached resolves an issue that may not have occurred to the draftsman of the 1978 Act or to Parliament when enacting it.
While section 9 of the Act makes express provision for arbitration awards, the Act makes no mention of proceedings in relation to foreign judgments against states, other than Part II, which deals with judgments against the United Kingdom in the courts of other states party to the ECSI; there have been, in fact, only 8 ratifications of that Convention.
Prior to 1978 there had been no attempts to enforce in the United Kingdom foreign judgments against states.
As I have explained the 1920 and the 1933 Acts gave little scope for registering foreign judgments against states and there is no recorded instance of an attempt to do this before 1978.
In 1978 the Rules of Court made no provision for impleading a foreign sovereign, no doubt reflecting the previous absolute doctrine of state immunity.
Section 12(1) of the 1978 Act made provision for service on a state and section 12(7) made it plain that such service required permission, which could only be granted in accordance with the rules of court governing service out of the jurisdiction.
There was no provision in 1978 for service out of the jurisdiction of a claim to enforce a judgment.
In these circumstances it is perhaps not surprising that the Act made no express provision in relation to proceedings to enforce foreign judgments, other than judgments against the United Kingdom covered by the ECSI.
My decision on the first issue may make the other three issues academic, but they were fully argued and I propose to deal with them, not least because other members of the Court may not agree with me on the first issue.
Issue 2: Is Argentina prevented from claiming state immunity in respect of the present proceedings by section 31 of the Civil Jurisdiction and Judgments Act 1982?
The primary object of the 1982 Act was to give effect to the Brussels Convention of 1968.
This Convention made provision for the reciprocal recognition and enforcement of judgments.
The application of section 31 was not, however, restricted to the states who were parties to that Convention.
The following are the most significant provisions of that section: (1) A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if and only if (a) it would be so recognised and enforced if it had not been given against a state; and (b) that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the State Immunity Act 1978. (4) Sections 12, 13 and 14(3) and (4) of the State Immunity Act 1978 (service of process and procedural privileges) shall apply to proceedings for the recognition or enforcement in the United Kingdom of a judgment given by the court of an overseas country (whether or not that judgment is within subsection (1) of this section) as they apply to other proceedings.
It is NMLs case that section 31 provides comprehensively for the recognition and enforcement of the foreign judgments to which it applies.
If this is correct the first issue ceases to be of relevance but for the possible impact of the fourth issue.
My conclusion in relation to the first issue is, however, entirely in harmony with NMLs case on the second issue.
Blair J found in favour of NML on this issue, but his decision was reversed by the Court of Appeal.
If NMLs interpretation of section 31 is correct, it effected an addition to the categories of exemption from state immunity set out in the 1978 Act.
Aikens LJ could not accept that an extension would have been effected in this way, without any express amendment to the 1978 Act.
He interpreted section 31 as imposing an additional requirement to exemption from immunity where an action was brought to enforce a foreign judgment.
The claimant would first have to show that section 31 of the 1982 Act was satisfied and then that the proceedings fell within one of the exemptions from immunity set out in sections 2 to 11 of the 1978 Act.
I do not believe that Aikens LJs analysis is correct.
Section 31 provides for recognition of a foreign judgment against a state where there exists a connection between the subject matter of that judgment and the forum state that is equivalent to one that would give rise to an exception to immunity in this jurisdiction.
Thus, so far as foreign judgments are concerned, section 31 both reflects and, in part, replaces the exemptions from immunity contained in the 1978 Act.
The words if, and only if in section 31 are important.
Let me revert to the example that I gave in para 32 above.
Section 31 provides for the recognition and enforcement of a New York judgment against a state in respect of a personal injury caused in New York.
Conversely it would not permit recognition of a New York judgment against a state in respect of a personal injury caused by the state in the United Kingdom unless, as in reality would be likely to be the case, there was an alternative basis for recognition that satisfied section 31, such as submission to New York jurisdiction by the foreign state.
In short, far from providing an additional hurdle that the claimant has to cross before enforcing a foreign judgment against a state, section 31 provides an alternative scheme for restricting state immunity in the case of foreign judgments.
If Aikens LJ were correct, section 31 would be largely nugatory.
Even though, according to the British view of state immunity, the state against which the foreign judgment was given would have had no entitlement to immunity, this country would be prevented from recognising or enforcing the foreign judgment unless the case also fell within one of the exceptions in the 1978 Act.
If I am right on the first issue, one exception which would in practice be capable of application would be section 3(1)(a).
None of the other exceptions would be likely to be capable of application, with the exception of section 2.
Both the wording of section 31(1) and the scheme to which it gives effect appear to me to be clear.
State immunity cannot be raised as a bar to the recognition and enforcement of a foreign judgment if, under the principles of international law recognised in this jurisdiction, the state against whom the judgment was given was not entitled to immunity in respect of the claim.
There is, however, one complication.
The complication is as to the effect of section 31(4) of the 1982 Act.
The first problem that I have is reconciling the words in parenthesis in the subsection whether or not that judgment is within section 31(1) with the provision in section 31(1) that a foreign judgment shall be enforced if, and only if the requirements of the subsection are satisfied.
The second is as to how to make sense of the provisions of section 14(3) in the context of proceedings to enforce a foreign judgment.
Mr Howard QC for Argentina submitted that, with the aid of the application of a wet towel to the head, it was possible to determine that the provisions of section 14(3) were only consistent with Argentinas case on the construction of section 31(1).
This argument was considered by Aikens LJ at paras 80 to 86 of his judgment.
He concluded that the reference in section 31(4) of the 1982 Act to section 14(3), and so to 14(2) of the 1978 Act tends to support Argentinas case on the construction of section 31.
I agree with this conclusion.
It is not easy to reconcile the reference in section 14(3) to the submission by a separate entity to the jurisdiction in respect of proceedings in the case of which it is entitled to immunity with a scheme where any relevant submission to jurisdiction will be in a foreign forum.
Sections 14(2) and 14(3) are part of a particularly complex part of the 1978 Act.
It is not easy to make sense of all their provisions in the context of the 1978 Act itself, let alone section 31 of the 1982 Act.
Their general object is, however, clear, which is to provide the same protection for a separate entity acting in the exercise of sovereign authority as is accorded to a state, including the protection against enforcement in section 13.
I do not consider that it would be right to abandon an interpretation of section 31 which I find clear and compelling in order to attempt to give a coherent role to section 14(3) of the 1978 Act, as applied by section 31(4) of the later Act.
Section 31(4) made section 12 of the 1978 Act applicable to proceedings for the recognition or enforcement of a foreign judgment and thereby made such proceedings subject to the rules of court governing service out of the jurisdiction.
These rules were significantly amended in consequence of the passing of the 1982 Act by Rules of the Supreme Court (Amendment No 2) 1983 (SI 1983/1181).
In particular the following new provision was introduced into RSC, Ord 11, r (1)(1): service of a writ out of the jurisdiction is permissible with the leave of the court if in the action begun by the writ (m) the claim is brought to enforce any judgment or arbitral award.
It thus became possible to obtain leave to serve out of the jurisdiction proceedings in respect of an action on a foreign judgment in circumstances where this was not governed by any Convention.
No question appears to have been raised as to the fact that this opened the door to enforcement proceedings in this country of overseas judgments given against states.
For these reasons, in agreement with Blair J at para 26 of his judgment, and disagreement with Aikens LJ, I conclude that the effect of section 31 of the 1982 Act, together with the addition to RSC, Order 11 was accurately summarised by Dicey, Morris & Collins, The Conflict of Laws, 14th ed (2006), vol 1, para 14 095, as follows: The effect of [section 31] is that a foreign judgment against a state, other than the United Kingdom or the state to which the court which pronounced the judgment belongs, is to be recognised and enforced in the United Kingdom if [the judgment] would be so recognised and enforced if it had not been given against a state and the foreign court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the [1978 Act].
A foreign judgment against a state will be capable of enforcement in England if both of the following conditions are fulfilled: first, that the foreign court would have had jurisdiction if it had applied the United Kingdom rules on sovereign immunity set out in sections 2 to 11 of the [1978 Act], the effect of which is that a state is not immune (inter alia) where it submits to the jurisdiction or where the proceedings relate to a commercial transaction; second, that under United Kingdom law the state is not immune from the processes of execution.
Section 31(4) of the 1982 Act gives to judgments against foreign states the benefit of (inter alia) the immunities from execution contained in sections 13 and 14(3), (4) of the 1978 Act; their effect is that there can be no execution against sovereign property without the written consent of the foreign state unless the property is in use or intended for use for commercial purposes.
Issue 3: Do the Bonds contain a submission to the jurisdiction of the English court in respect of these proceedings within the meaning of section 2 of the 1978 Act?
Section 2(2) of the 1978 Act varied the law of what was capable of amounting to a submission by a state to the jurisdiction of the English court, as I have described it at paras 9 and 11 above, in that it provided that a state could submit to the jurisdiction by a written agreement prior to any dispute arising.
The issue on this appeal is simply whether, on the true construction of the relevant provisions of the bonds, Argentina submitted to the jurisdiction of the English court.
The bonds were governed by New York law and that law applies a narrow construction in favour of the state to the construction of a term which is alleged to waive state immunity.
The relevant provisions of the bonds are set out in appendix 3 in two paragraphs.
Blair J at paras 32 to 38 of his judgment concluded that the first paragraph contained a submission to the jurisdiction of the English court.
Before Aikens LJ, NML relied on the second paragraph as supporting the conclusion that Blair J had drawn from the first.
They were, however, unsuccessful, for Aikens LJ ruled that, even when the two paragraphs were read together, they did not constitute a submission to the jurisdiction of the English court.
There was and is a degree of common ground.
It is accepted that the judgment of the New York court is a related judgment, that is a judgment in related proceedings.
The issue in relation to the provisions of the first paragraph is whether the following provision constitutes a submission to the jurisdiction of the English court: the related judgment shall be conclusive and binding upon [Argentina] and may be enforced in any specified court or in any other courts to the jurisdiction of which the republic is or may be
subject (the other courts) by a suit upon such judgment
Blair J considered at para 38 that this provision constituted a submission to the jurisdiction of the English court inasmuch as Argentina unambiguously agreed that a final judgment on the bonds in New York should be enforceable against Argentina in other courts in which it might be amenable to a suit on the judgment.
Aikens LJ did not agree.
He held at para 101 that the agreement that the New York judgment could be enforced in any courts to the jurisdiction of which Argentina is or may be subject by a suit upon such judgment was neither a waiver of jurisdiction nor a submission to the jurisdiction of the English court.
I do not follow this reasoning.
It seems to rob the provision of all effect.
Blair J held that this agreement was more than a mere waiver, and I agree.
If a state waives immunity it does no more than place itself on the same footing as any other person.
A waiver of immunity does not confer jurisdiction where, in the case of another defendant, it would not exist.
If, however, state immunity is the only bar to jurisdiction, an agreement to waive immunity is tantamount to a submission to the jurisdiction.
In this case Argentina agreed that the New York judgment could be enforced by a suit upon the judgment in any court to the jurisdiction of which, absent immunity, Argentina would be subject.
It was both an agreement to waive immunity and an express agreement that the New York judgment could be sued on in any country that, state immunity apart, would have jurisdiction.
England is such a country, by reason of what, at the material time, was CPR 6.20(9).
The provision in the first paragraph constituted a submission to the jurisdiction of the English courts.
If consideration of the first paragraph alone left any doubt that the terms of the bonds included a submission to this jurisdiction, this would be dispelled by the second paragraph.
Omitting immaterial words, this reads: To the extent that the republic shall be entitled, in any jurisdiction in which any other court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any related judgment, to any immunity from suit, from the jurisdiction of any such court from execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the republic has irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction solely for the purpose of enabling a holder of securities of this series to enforce or execute a related judgment.
The words may at any time be brought which I have emphasised once again constitute Argentinas agreement that the waiver of immunity applies in respect of any country where, immunity apart, there is jurisdiction to bring a suit for the purposes of enforcing a judgment on the bonds.
England is such a jurisdiction.
Thus the second paragraph constitutes an independent submission to English jurisdiction.
Both jointly and severally the two paragraphs amount to an agreement on the part of Argentina to submit to the jurisdiction of the English (no doubt among other) courts.
This conclusion does not involve a departure from the narrow approach to construction required by the law of New York.
It gives the provisions as to immunity in the bonds the only meaning that they can sensibly bear.
Neither Aikens LJ nor Mr Howard suggested any alternative meaning for the words.
The reality is that Argentina agreed that the bonds should bear words that provided for the widest possible submission to jurisdiction for the purposes of enforcement, short of conferring jurisdiction on any country whose domestic laws would not, absent any question of immunity, permit an action to enforce a New York judgment.
No doubt those responsible were anxious to make the bonds as attractive as possible.
Aikens LJ held at para 103 that because, in the present proceedings, NML had to bring an action in this jurisdiction to obtain recognition of the New York judgment, the proceedings here were not brought solely for the purpose of enforcing or executing any related judgment.
This was to confuse the means with the ends.
Obtaining recognition of the New York judgment is no more than an essential stepping stone to attempting to enforce it.
No suggestion has been made that there is any other purpose in bringing these proceedings.
For this reason I would reverse the decision of the Court of Appeal on the third issue also.
Issue 4: Were NML entitled to raise at the inter partes hearing the two new points not relied on in the ex parte application to serve Argentina out of the jurisdiction?
This issue has been described as the gateway issue.
It involves consideration of the effect of what I shall describe as the rule in Parker v Schuller (1901) 17 TLR 299.
A claimant has always been required by rules of court to include in the application for permission to serve proceedings out of the jurisdiction a statement of the ground for doing so.
This requirement is currently to be found in CPR 6.37 (1)(a), which expressly requires an application for permission to serve a claim form out of the jurisdiction to set out which of the grounds for service out (now contained in paragraph 3.1 of Practice Direction B) is relied on.
CPR 6.37 (3) provides: The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.
In Parker v Schuller the plaintiffs obtained leave to serve a writ out of the jurisdiction under Order 11, r 1(e) of the RSC on the ground that the claim was for breach of a contract within the jurisdiction.
The breach alleged was of a CIF contract, and the allegation was that the contract was broken by reason of a failure to deliver in Liverpool the goods that were the subject of the contract.
Leave was given ex parte and upheld inter partes.
In the Court of Appeal the plaintiffs conceded that the way that their claim had been advanced had been misconceived in that a CIF contract involves an obligation to deliver documents, not the goods to which the documents relate.
The plaintiffs sought to persuade the Court of Appeal to uphold the leave given to serve out on the basis of substituting for the original claim a claim for failure to deliver the relevant documents in Liverpool.
The Court of Appeal refused to permit this.
At p 300 A L Smith MR is reported as saying: It was not until the case came into this Court that the plaintiff set up another cause of action.
That could not be allowed.
Romer LJ added: an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care and looked at strictly.
If a material representation upon which the leave was obtained in the first instance turned out to be unfounded, the plaintiff ought not to be allowed, when an application was made by the defendant to discharge the order for the issue of the writ and the service, to set up another and a distinct cause of action which was not before the judge upon the original application.
It should be noted that in this case the plaintiffs sought to rely upon different facts and not merely upon a different cause of action.
Parker v Schuller was soon lost from sight until it was applied with obvious reluctance by Sir Nicolas Browne Wilkinson V C in Re Jogia (A Bankrupt) [1988] 1 WLR 484.
Since then it has been referred to or applied in a significant number of decisions at first instance or in the Court of Appeal.
The most significant of these, for it expanded the scope of the original decision, was Metall und Rohstoff A G v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391.
The facts of that case are complex, but it suffices to record the response, at p 436, of Slade LJ, giving the judgment of the court, to one of the submissions of counsel for the plaintiffs: One of Mr Wallers responses to this contention has been to refer us to the general observations made by Lord Denning MR in In re Vandervells Trusts (No 2) [1974] Ch 269, 231, as to the modern practice concerning pleadings: It is sufficient for the pleader to state the material facts.
He need not state the legal result.
If, for convenience, he does so, he is not bound by, or limited to, what he has stated.
We respectfully agree with this statement as a general proposition.
However, it was not made in the context of a pleading intended to be served out of the jurisdiction, to which we think rather different considerations apply.
In our judgment, if the draftsman of a pleading intended to be served out of the jurisdiction under Ord 11, r 1(1)(f) (or indeed under any other sub paragraph) can be reasonably understood as presenting a particular head of claim on one specific legal basis only, the plaintiff cannot thereafter, for the purpose of justifying his application under Ord 11, r 1(1)(f), be permitted to contend that that head of claim can also be justified on another legal basis (unless, perhaps, the alternative basis has been specifically referred to in his affidavit evidence, which it was not in the present case).
With this possible exception, if he specifically states in his pleading the legal result of what he has pleaded, he is in our judgment limited to what he had pleaded, for the purpose of an Order 11 application.
To permit him to take a different course would be to encourage circumvention of the Order 11 procedure, which is designed to ensure that both the court is fully and clearly apprised as to the nature of the legal claim with which it is invited to deal on the ex parte application, and the defendant is likewise apprised as to the nature of the claim which he has to meet, if and when he seeks to discharge an order for service out of the jurisdiction.
No rule of court requires a claimant, when seeking to serve a state out of the jurisdiction, to make clear, in the application for permission, the basis upon which it is alleged that the state does not enjoy immunity from suit.
The Practice Note at CPR para 6.37.24, repeating what at the material time was 6.21.24, states that the claimant must show distinctly (a) why the prospective defendant is not absolutely immune from suit.
It is Argentinas case that if the grounds relied upon in the application for permission for contending that the defendant state is not immune from suit prove to be unfounded, the rule in Parker v Schuller precludes the subsequent grant of permission to the claimant to rely on alternative valid grounds.
Blair J did not accept this submission.
He held that it involved an extension of the rule in Parker v Schuller, which he declined to make.
He held at para 48 that where permission to serve out is given on the basis of a mistaken legal analysis of the absence of state immunity, but on a correct legal analysis the state is not in fact immune from the jurisdiction, the court has a discretion whether or not to set aside the order giving permission to serve out.
He exercised that discretion in favour of NML because this involved no prejudice to Argentina, and to require NML to start proceedings afresh would be pointless and involve a waste of costs para 49.
Aikens LJ reversed this decision.
He held at para 61: the order of Steel J was made upon an incorrect basis of the court having jurisdiction in respect of the proposed claim against Argentina.
Logically therefore, that order has to be set aside for want of jurisdiction, just as it must when a claimant has relied on an incorrect cause of action or an incorrect ground for permission to serve out of the jurisdiction.
There can be no question of exercising a discretion to correct the error (in the absence of a new application on a different basis) because the lack of jurisdiction is fatal.
He added at para 66 if NML incorrectly identified the basis on which it asserted that Argentina was subject to the adjudicative jurisdiction of the English court, then the basis for the exercise of the jurisdiction was incorrect.
It is not a mere procedural error, because it goes to the very basis for invoking the jurisdiction against a sovereign state.
It is, qualitatively speaking, in the same position as a failure to identify the correct cause of action or the correct ground for obtaining permission to serve out of the jurisdiction.
Strictly, Aikens LJs decision involves an extension of the rule in Parker v Schuller, inasmuch as the requirement to identify the reason why a state is not immune when seeking permission to serve out is not found in the rules, but only in a Practice Note.
But I think that Aikens LJ was correct to find that there was no difference in principle between the two situations.
Mr Sumption sought to persuade the Court to distinguish Parker v Schuller, but at the same time he invited this Court to hold that there is no longer any justification for following that decision, if indeed there ever was.
I believe that Mr Sumption is correct.
Procedural rules should be the servant not the master of the rule of law.
Lord Woolf, by his Reports on Access to Justice, brought about a sea change in the attitude of the court to such rules.
This included the adoption of the overriding objective with which the new CPR begins.
CPR 1.1 states that the overriding objective of the Rules is to enable the court to deal with cases justly, and that this involves saving expense and ensuring that cases are dealt with expeditiously.
Where an application is made to amend a pleading the normal approach is to grant permission where to do so will cause no prejudice to the other party that cannot be dealt with by an appropriate order for costs.
This accords with the overriding objective.
Where all that a refusal of permission will achieve is additional cost and delay, the case for permitting the amendment is even stronger.
I can see no reason in principle why similar considerations should not apply where an application is made for permission to serve process out of the jurisdiction.
It is, of course, highly desirable that care should be taken before serving process on a person who is not within the jurisdiction.
But if this is done on a false basis in circumstances where there is a valid basis for subjecting him to the jurisdiction, it is not obvious why it should be mandatory for the claimant to be required to start all over again rather than that the court should have a discretion as to the order that will best serve the overriding objective.
Before Parker v Schuller there had been a relevant decision of a powerful Court of Appeal, of which A L Smith LJ was a member, which was not referred to and does not seem to have been cited in the later case.
In Holland v Leslie [1894] 2 QB 450 leave to serve out of the jurisdiction had been granted in relation to a bill of exchange which had been erroneously described in the statement of claim indorsed on the writ.
The Court of Appeal upheld an order giving leave to amend the writ.
In doing so Lord Esher MR said this at p 451: Leave was given for the issue of the writ so indorsed, and service of notice of it out of the jurisdiction; such notice was duly served upon the defendant abroad; and the defendant has in due course appeared in this country.
It is argued that, under these circumstances, the writ cannot be amended.
Why not? The rules with regard to amendments appear in terms to apply to such a case.
It is contended, nevertheless that there cannot be an amendment, because the writ was for service, and has been served, out of the jurisdiction.
But the defendant has now appeared in this country; and I can see no reason why an amendment such as this should not be made, just as in the case of a writ served within the jurisdiction.
We were pressed with the possibility that, if such a writ could be amended, it might be amended so as to introduce a cause of action in respect of which leave could not have been originally given for service out of the jurisdiction.
That is not the present case.
When that case arises, there may be good reason for refusing to allow the amendment.
The other two members of the Court agreed.
It is not easy to reconcile the approach in this decision with Parker v Schuller.
Certainly it is good reason to confine the latter decision to its particular facts.
There are a number of authorities which follow the approach of Lord Esher in suggesting that there is, in principle, no objection to amending a pleading which has been served out of the jurisdiction unless the effect will be to add a claim in respect of which leave could not, or would not, have been given to serve out: Waterhouse v Reid [1938] 1 KB 743, 747, 749; Beck v Value Capital Ltd (No 2) [1975] 1 WLR 6,15; Bastone & Firminger Ltd v Nasima Enterprises (Nigeria) Ltd [1996] CLC 1902, 1907; Donohue v Armco Inc [2001] UKHL 64; [2002] 1 All ER 749.
Masri v Consolidated Contractors International (UK) Ltd (No 3) [2008] EWCA Civ 625; [2009] QB 503, para 74.
While most of these cases involved proceedings which had progressed beyond the initial leave stage, I can see no reason for adopting a less generous approach to amendment at the earlier stage.
While amending to add a cause of action is not the same as amending to substitute one, in either case the amendment involves subjecting the overseas party to a claim other than the one that he entered an appearance to meet, and similar principles should apply in each case.
For all these reasons I would hold that the rule in Parker v Schuller should no longer be applied.
The same approach should be taken to an application to amend a pleading that has been served out of the jurisdiction as is adopted to any other application to amend a pleading.
If this conclusion is not shared by the majority, I would confine the rule in Parker v Schuller and not extend it to cover the different facts of the present case.
There is no question here of relying on a different cause of action to that in respect of which leave was obtained to serve out.
Nor is there any question of relying on facts that were not before David Steel J when he gave permission to serve Argentina out of the jurisdiction.
Nor is there any failure to comply with a rule of court.
It follows that I consider that the application to rely on alternative reasons why Argentina has no immunity was one to be determined by Blair J in the exercise of his discretion.
There are no valid grounds for challenging his decision.
It has not been suggested that Argentina will be any better off if NML is required to start proceedings afresh.
To require them to do so would be a waste of time and money.
Argentina agreed when the bonds were issued to a wide ranging waiver of immunity and submission to jurisdiction.
The court had an independent obligation to satisfy itself that Argentina is not entitled to immunity.
It had before it all the relevant material.
Any initial mistake on the part of NML in identifying the correct reason why Argentina enjoys no immunity should not preclude NML from proceeding with its action.
For these reasons, I would reverse the Court of Appeal on the fourth issue also.
Issue 5: Is Argentina entitled to claim state immunity in respect of these proceedings?
My answer is no.
I would allow this appeal.
LORD MANCE
Lord Phillips has set out the facts and, in para 7 identified the five issues to which they give rise.
I agree with his judgment on the second and third issues; that is, the effect of section 31 of the Civil Jurisdiction and Judgments Act 1978 and whether the bonds contain a submission to the English jurisdiction.
I also agree that NML was entitled to raise these two new issues, not having relied upon them on the ex parte application for permission to serve the Republic of Argentina out of the jurisdiction.
For reasons which Lord Collins has given, I do not think that the rule in Parker v Schuller (1901) 17 TLR 299 should be treated as extending to the present case, but I also agree that it should, in any event, no longer be followed.
In the result, I also agree with Lord Phillips answer to the fifth issue, namely that the Republic is not entitled to claim state immunity in the present proceedings to enforce against it the judgment obtained in New York proceedings.
But I do so by a different route to his primary route.
This is because I am unable to agree with Lord Phillips on the first issue: the scope of section 3 of the State Immunity Act 1978.
This represents his preferred basis for his answer to the fifth issue.
I do not consider that the drafters of that Act or Parliament contemplated that section 3(1)(a) of the 1978 Act had in mind that it would or should apply to a foreign judgment against a foreign state.
I understand Lord Phillips effectively to accept that (para 42), but, nonetheless, he and Lord Clarke treat the words as wide enough to cover such a judgment.
I do not consider this to be justified.
The pursuit of a cause of action without the benefit of a foreign judgment is one thing; a suit based on a foreign judgment given in respect of a cause of action is another.
In the present case, the only issue arising happens to be the issue of state immunity with which the Supreme Court is concerned.
But a claim on a cause of action commonly gives rise to quite different issues from those which arise from a claim based on a judgment given in respect of a cause of action.
A claim on a cause of action normally involves establishing the facts constituting the cause of action.
A suit based on a foreign judgment normally precludes re investigation of the facts and law thereby decided.
But it not infrequently directs attention to quite different matters, such as the foreign courts competence in English eyes to give the judgment, public policy, fraud or the observance of natural justice in the obtaining of the judgment.
These are matters discussed in rules 42 to 45 of Dicey, Morris & Collins, The Conflict of Laws 14th ed (2009) vol 1.
A recent example of their potential relevance is, in a Privy Council context, AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, paras 48 and 109 to 121.
The exceptions from immunity provided by sections 2 to 11 of the 1978 Act focus on specific conduct (submission) in the domestic UK proceedings or on specific transactions, contexts or interests in relation to which causes of action may arise.
The recognition and enforcement of foreign judgments has long been recognised as a special area of private international law.
Careful statutory attention was given to it in the Administration of Judgments Act 1920 (judgments of courts from other parts of Her Majestys dominions) and the Foreign Judgments (Reciprocal Enforcement) Act 1933 (judgments from certain other countries) in terms which (as Lord Phillips points out in paras 16 to 18) respect the existence of state immunity, as well as in Part II of the 1978 Act itself (judgments against the United Kingdom in other states party to the European Convention on State Immunity, now Regulation EC44/2001) in terms specifically addressing state immunity.
In this context, it stretches language beyond the admissible to read proceedings relating to a commercial transaction as covering proceedings relating to a judgment which itself relates to a commercial transaction.
The improbability of so extended a construction is underlined by the extreme care that the drafters of the Act took to define in s.3, in the widest terms, the concept of commercial transactions.
I do not however agree with the view (expressed by Stanley Burnton J in AIC Ltd v The Federal Government of Nigeria [2003] EWHC 1357 (QB), paras 30 32) that the improbability can be supported on the basis of an implied limitation of section 3(1)(a) of the 1978 Act to commercial transactions with a domestic nexus.
That view ignores the clear contrast between the wording of section 3(1)(a) and (b).
If there were any doubt about the point (which there is not), it would be dispelled by the Parliamentary history.
In the original bill, clause 3(1), the precursor to section 3(1)(a), was territorially limited to commercial activity by a State through an office, agency or establishment maintained by it for that purpose in the United Kingdom.
Following strong criticism of this limitation by Lords Wilberforce and Denning (Hansard HL Deb 17 January 1978 vol 388 cc51 78), the Lord Chancellor moved an amendment inserting a clause in the form which became section 3(1), making expressly clear that this was to ensure that No qualifications, no jurisdictional links with the United Kingdom are to be required under sub clause (a) as distinct from sub clause (b): Hansard HL Deb 16 March 1978 vol 389 cc1491 540.
Even before the enactment of section 34 of the Civil Jurisdiction and Judgments Act 1982, it is extremely doubtful whether the principle that a cause of action did not merge in a foreign judgment survived in English law: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853, 966 per Lord Wilberforce.
This, to my mind, also makes unconvincing a reading of proceedings relating to (a) a commercial transaction which covers proceedings to enforce a judgment based on a cause of action arising from a commercial transaction.
Where a state has agreed in writing to submit a dispute to arbitration, section 9 of the 1978 Act provides that the state is not immune as respects proceedings in United Kingdom courts which relate to the arbitration.
This subsection addresses the consequences of submission, and leaves it to the court to determine whether such has occurred.
The subsection also covers ancillary or interlocutory applications relating to arbitration, and is not limited to arbitration relating to commercial transactions.
But very many arbitrations are commercial; and a major purpose of section 9 must on any view have been to lift state immunity in respect of the enforcement of arbitration awards against states, including foreign arbitration awards since the subsection is in general terms (see further on this last point para 90 below).
Section 9 thus reversed the effect of the House of Lords reasoning in Duff Development Co Ltd v Government of Kelantan [1924] AC 797 on the concept of submission as understood in Kahan v Federation of Pakistan [1951] 2 KB 1003, although section 13(2) to (4) restricts the issue of process against state property (principally, to property for the time being in or intended for use for commercial purposes).
I would endorse on these aspects what is said in paragraphs 117 to 122 of the judgment of the Court of Appeal handed down by Moore Bick LJ in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2007] QB 886.
In case there were any room for doubt, paras 119 and 120 set out extracts from Hansard (HL Debs16 March 1978 vol 389 cc1516 1517 and 28 June 1978 c316), where the Lord Chancellor confirmed expressly the intention to remove state immunity in respect of the enforcement of arbitration awards.
On NMLs case, there is, as a result, an unlikely dichotomy between the express treatment of arbitration in Part I of the 1978 Act and the suggested tacit, but nonetheless (if achieved) very important, removal of state immunity in respect of judgments relating to commercial transactions.
At the time of the 1978 Act, the rules of court provided no basis for obtaining leave to serve out of the jurisdiction in respect of a claim to enforce any judgment or arbitral award.
Such a basis was only introduced, as what was then RSC O.11 r.1(1)(m), from 1 January 1984.
Section 12(7) of the 1978 Act maintained the need for leave to serve out of the jurisdiction where required by the rules of court.
The lifting by section 9 of the 1978 Act of state immunity in respect of arbitration awards had obvious relevance in a case, like Duff Development Co Ltd v Government of Kelantan itself, where a foreign state had by an English arbitration agreement undertaken to submit to the English jurisdiction in respect of an application to enforce any award as a judgment.
Indeed, as appears from the original bill and from the passages in Hansard quoted in the Svenska Petroleum Exploration case at paras 119 and 120, the clause in the original bill which became section 9 in the 1978 Act was confined to arbitration in or according to the law of the United Kingdom, and this phrase was only deleted in the House of Commons.
In relation to foreign judgments there was, however, no equivalent problem to that raised by the Duff Development and Kahan cases, and the absence when the 1978 Act was passed of any basis for obtaining leave to serve out in respect of a foreign judgment or award also points, I think, against a construction stretching the wording of section 3(1) to cover suits to enforce such judgments.
It is true that the 1978 Act adopted the restrictive theory of state immunity, but the question before the Supreme Court now is: how far and in respect of what transactions.
It is true that it is now well recognised that no principle of international law renders state A immune from proceedings brought in state B to enforce a judgment given against it in state C.
But the question is how far the drafters of the 1978 Act appreciated or covered the full possibilities allowed by international law, or, putting the same point in a different way, how far these were only covered a little later by section 31 of the 1982 Act.
As Lord Phillips records at para 12, English common law was at the time itself in development and not finally settled, on the point that states were not immune in respect of commercial transactions, until the House of Lords decision in I Congreso del Partido [1983] AC 244, some years after the 1978 Act.
The question whether a claim to enforce a judgment constitute[s] proceedings relating to a commercial transaction simply does not arise, unless one assumes that the wording of section 3(1)(a) of the 1978 Act covers proceedings on judgments.
But that is the very issue which is before the Supreme Court.
On NMLs case, which Lord Phillips favours, Parliament by section 3(1) of the 1978 Act achieved a partial and oddly imbalanced lifting of state immunity in respect of foreign judgments against foreign states.
First, it omitted to introduce any analogue of a most obvious situation in which a foreign judgment might be rendered against a state.
Under section 2, a state is not immune as respects proceedings in respect of which it has submitted to United Kingdom courts; but nothing in the 1978 Act lifts state immunity in the United Kingdom in respect of a foreign judgment on the basis of its submission in proceedings abroad.
Secondly, the Act either fails to lift immunity or, if it lifts immunity at all, does so in a partial and illogical way, in situations paralleling those covered by sections 4 to 11 of the Act.
To this, Mr Sumption QC responds on behalf of NML that, if relating to a commercial transaction can be read widely enough to cover relating to a foreign judgment relating to a commercial transaction, then phrases in other sub sections such as in respect of death or personal injury (section 5(a)) can be read widely enough to mean in respect of a foreign judgment in respect of death or personal injury caused by an act or omission in the United Kingdom.
However, as Mr Mark Howard QC points out on behalf of the Republic, even if this persistent stretching of words were to be accepted, it does not remove the anomalies which flow from NMLs case.
It does not, in particular, address the cases of a foreign judgment against a state where the contract of employment was not made in the United Kingdom or the work was not wholly or to be performed here (cf section 4); or in respect of death or personal injury or damage or loss of tangible property caused by an act or omission not occurring in the United Kingdom (cf section 5); or relating to immovable property not in the United Kingdom (cf section 6); or relating to any patent not registered in the United Kingdom (cf section 7); or relating to membership of any body corporate not incorporated or constituted under United Kingdom law (cf section 8).
Lord Phillips acknowledges the illogicality (para 34).
The territorial limits involved in these sections are understandable in proceedings actually relating to such contexts or interests.
But they make no real sense as a basis for distinguishing between foreign judgments in respect of which state immunity is and is not said to exist.
On NMLs analysis, section 3 of the 1978 Act therefore gave a very partial and haphazard mandate for enforcement of foreign judgments, while section 31 of the 1982 Act was necessary, though only necessary, to restore the comprehensive harmony which in that respect the 1978 Act had singularly failed to achieve.
There is however no trace of that in the 1982 Act itself.
On the contrary, section 31(1)(b) refers to sections 2 to 11 of the 1978 Act without discrimination and evidently without recognising that (on NMLs analysis) the legislator must, by reason of the words if and only if, have been replacing a partial scheme of enforcement of foreign judgments under the 1978 Act with a new scheme provided by section 31(1) of the 1982 Act.
Further, section 31(1) makes clear that the scheme it introduces is to apply to judgments by a foreign court against a state other than the United Kingdom or the state to which that court belongs.
Mr Sumption submits that this would, in consequence of the words if and only if, supersede section 3(1) as regards judgments against the state to which that court belongs.
If that were so, then the 1982 Act would for some unexplained reason be cutting down what is, on Mr Sumptions case, the width of section 3(1).
But I do not think that Mr Sumptions submission is correct.
All that the words if and only if achieve is the exclusion of judgments against the state to which that court belongs from the scheme of section 31.
They do not overrule or affect any provision of section 3(1) which, on NMLs case, already covered such judgments.
The patchwork provision of the two statutes, which arises on NMLs case, and which Lord Phillips and Lord Clarke are minded to accept, becomes even less probable as a matter of imputed Parliamentary intention.
I see no basis for giving the phrase relating to in section 3(1)(a) what is described as an updated meaning.
What constitutes a family or cruel or inhuman treatment or a true and fair view (to take three well known examples) may vary, and has varied, with social or professional attitudes from time to time.
But a connecting factor like relating to is most unlikely to have this elasticity, and it is implausible to suggest that Parliament intended that its meaning or application in or under section 3(1)(a) could, over time, expand to remove immunity in respect of judgments.
This would amount to altering the scope of the Act in a way not falling within the principles originally envisaged, contrary to the rule stated in Bennion on Statutory Interpretation (5th ed) section 288, para (6).
Further, even if (contrary to my view) any expansion were theoretically possible, no legal, social or other developments have been identified justifying it in this case.
On the contrary: the enactment of section 31(1) of the 1982 Act argues strongly against any such expansion of the ambit of relating to in section 3(1)(a) of the 1978 Act; and the only effect of expanding the scope of section 3(1)(a) would be partially to create an overlap with that section and/or the illogical patch work effect referred to in preceding paragraphs.
It is for these reasons that I am unable to follow Lord Phillips and Lord Clarkes answer to the first issue.
In my view, section 31 is the means by which the United Kingdom legislator achieved, for the first time, a comprehensive and coherent treatment of the issue of state immunity in respect of foreign judgments, and it enables the enforcement of the New York judgment in this case.
But the bonds also contain a comprehensive submission to the English jurisdiction in respect of the enforcement of the New York judgment, and this leads to the same result.
I would, on this basis, therefore allow the appeal.
LORD COLLINS (with whom Lord Walker agrees)
I agree with Lord Phillips that the appeal should be allowed, but, in agreement with Lord Mance, I would rest my conclusion on section 31 of the 1982 Act and on Argentinas submission and waiver of immunity, and not on section 3 of the 1978 Act.
Although I agree with Lord Phillips observations on the so called rule in Parker v Schuller (1901) 17 TLR 299, in my judgment the point does not, and did not, arise in these proceedings because there has never been a rule (as distinct from good practice) that the grounds for absence of immunity must be set out once and for all at the stage when an application for permission to serve the foreign State is made; and there is no analogy between the rules for applications for service out of the jurisdiction in general and good practice in relation to service on foreign States.
Introduction
The first widespread defaults on sovereign debt occurred in the early 19th century.
The newly independent former Spanish American colonies besieged London for loans in the years 1822 1825 and the proceeds were quickly expended on armaments, or otherwise wastefully dissipated, with little regard to the quite different purposes for which, in many instances, the loan had been ostensibly raised: see Borchard, State Insolvency and Foreign Bondholders, Vol 1 (1951), pp xx xxi, quoting Wynne (1935) 42 J Can.
Bankers Assn 472.
The Province of Buenos Aires defaulted in 1827 on loans raised for it by Baring Brothers: see Ferns, Britain and Argentina in the Nineteenth Century (1960), pp 141 et seq; Marichal, A Century of Debt Crises in Latin America (1989), p 59.
National courts of the debtor state and of the creditors were unable to secure the rights of unpaid bondholders.
In Twycross v Dreyfus (1877) LR 5 Ch D 605, a case concerning Peruvian bonds, Sir George Jessel MR said (at 616): [T]he municipal law of this country does not enable the tribunals of this country to exercise any jurisdiction over foreign governments as such.
Nor, so far as I am aware, is there any international tribunal which exercises any such jurisdiction.
The result, therefore, is that these so called bonds amount to nothing more than engagements of honour, binding, so far as engagements of honour can bind, the government which issues them, but are not contracts enforceable before the ordinary tribunals of any foreign government without the consent of the government of that country.
By the beginning of the 20th century only a few countries (including Belgium and Italy) had adopted a restrictive theory of sovereign immunity, but only with regard to jurisdiction, and not to execution: see Borchard, Diplomatic Protection of Citizens Abroad (1915), p 307.
The only remedy for countries whose citizens were affected by sovereign default was force, and in response to the blockade of Venezuelan ports by the United States, Italy, Germany and Britain, the Minister of Foreign Affairs of Argentina, Dr Drago, enunciated in 1902 what became known as the Drago doctrine, namely that the public debt [of an American nation] cannot occasion armed intervention by a European power: Hackworth, Digest of International Law, vol 5 (1927), p 625.
Venezuelan bond claims were subsequently submitted to mixed claims commissions: Borchard, op cit, pp 322 325.
But law and practice was revolutionised in the second half of the 20th century by the widespread (but by no means uniform) adoption of the restrictive theory of sovereign immunity, and the modern law now depends on the application of the restrictive theory of immunity and on the almost invariable use in international loan agreements and bond issues since the 1970s of clauses providing for submission to national jurisdiction and waivers of immunity.
NML is one of several bondholders who have obtained judgments in the New York Federal District Court against Argentina on the bonds: see also Lightwater Corp v Republic of Argentina, 2003 WL 1878420 (SDNY 2003); NW Global Strategy v Republic of Argentina, 2011 WL 1237538 (SDNY 2011).
The idea behind vulture funds is not new.
Borchard State Insolvency and Foreign Bondholders, Vol 1 (1951), pp.xx xxi, quotes Wynne, op cit, in relation to the early South American defaults: Meanwhile, however, the bonds had largely passed out of the hands of the original purchasers into the possession of speculators who bought them up at next to nothing and, in due time, reaped a handsome profit.
So also in the famous Greek bond cases in England in the 1960s and 1970s, the bondholders were speculators who had bought cheaply bonds issued by the Greek Government in the 1920s and unpaid since 1941: see eg National Bank of Greece SA v Westminster Bank Executor and Trustee Co (Channel Islands) Ltd [1971] AC 945; UGS Finance Ltd v National Mortgage Bank of Greece [1964] 1 Lloyds Rep 446.
So called vulture funds have given rise to at least two problems.
First, the ability of investors to acquire defaulted debt can be abused: see, eg, the Barcelona Traction case (Belgium v Spain), 1970 ICJ Rep 3; Highberry Ltd v Colt Telecom Group plc (No 1) [2002] EWHC 2503 (Ch), [2003] 1 BCLC 290; (No 2) [2002] EWHC 2815 (Ch), [2003] BPIR 324.
Second, particular attention has focussed on the ability of vulture funds to thwart loan re structuring by highly indebted poor countries: see Lumina, Report to the UN Human Rights Council on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social, and cultural rights, April 29, 2010 (A/HRC/14/21); Donegal International Ltd v Republic of Zambia [2007] EWHC 197 (Comm), [2007] 1 Lloyds Rep 397; and the Debt Relief (Developing Countries) Act 2010.
Argentina declared a sovereign debt moratorium in December 2001 and has restructured much of its debt through debt exchange, but that has no effect on these proceedings because (a) there is no international insolvency regime for States; and (b) the bonds are governed by New York law and are unaffected by any Argentine moratorium.
Issue 1: proceedings relating to a commercial transaction and the State
Immunity Act 1978, section 3
The proceedings in the present appeal are proceedings at common law for the enforcement of the New York judgment.
None of the statutory methods of enforcement is available for judgments rendered in the United States.
On this part of the appeal the only relevant question is whether the proceedings in England at common law on the New York judgment are proceedings relating to a commercial transaction entered into by the State, where commercial transaction includes any loan or other transaction for the provision of finance: section 3(1)(a); section 3(3)(b).
Whether the New York proceedings were themselves proceedings relating to a commercial transaction is not the relevant question.
The question on this issue is whether the expression relating to is to be given the meaning ascribed to it (in proceedings different from the present ones) by Stanley Burnton J in AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB) (registration of a Nigerian judgment under the Administration of Justice Act 1920) and by Gloster J and the Court of Appeal in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2005] EWHC 2437 (Comm), [2006] 1 Lloyds Rep 181, [2006] EWCA Civ 1529; [2007] QB 886 (enforcement of Danish arbitral award under Arbitration Act 1996, section 101).
The question, to what do the proceedings for enforcement of the New York judgment relate, can be given a narrow or a wide answer.
The narrow meaning would result in a conclusion that they relate to the enforceability of the New York judgment, which would involve such matters (not likely to be the subject of dispute in a case such as the present one) as whether the New York court had in personam jurisdiction (here there was a clear submission to the jurisdiction of the New York courts) or whether enforcement could be resisted on any of the traditional grounds (such as want of natural justice, fraud, or public policy), none of which has any arguable application.
The wider meaning would give effect to the practical reality that the proceedings relate to liability under the bonds, the issue of which was plainly a commercial transaction for the purposes of section 3.
My conclusion that the narrower meaning is the one which must be ascribed to Parliament rests on considerations somewhat different from the reasons articulated by Stanley Burnton J in AIC.
I do not consider that a potential overlap with the arbitration provision in section 9 supports a narrow interpretation of section 3.
The overlap would not be complete, and it would be artificial and over technical to use the potential overlap to cut down the scope of section 3.
Nor do I consider that the narrow construction is supported by an argument that section 3(1)(a) should be interpreted so as to require a link with the territorial jurisdiction of the United Kingdom.
No such link is required in the 1978 Act in relation to the head of commercial transactions covered by section 3(3)(b).
Both the Quebec Court of Appeal and the Supreme Court of Canada in Kuwait Airways Corporation v Republic of Iraq [2009] QCCA 728; revd [2010] SCC 40, [2010] 2 SCR 571, although reaching different conclusions on the facts, decided that, in an action to enforce an English judgment, the question whether the proceedings in Canada relate[d] to any commercial activity of the foreign state (State Immunity Act RSC 1985, c 18, section 5) depended on the nature of the underlying proceedings in England.
But neither judgment articulates the reasons for that conclusion, and they are therefore unhelpful on this appeal.
What is not likely to be in doubt is that at the time the 1978 Act was enacted it would not have been envisaged that section 3 would have applied to the enforcement at common law of a foreign judgment against a foreign State based on a commercial transaction.
That was because until RSC Order 11, r 1(1)(m) (now CPR PD6B, para 3.1(10)) was enacted in 1982 (and came into force on January 1, 1984) a defendant outside the jurisdiction could not be served in an action on a foreign judgment even if there were assets within the jurisdiction to satisfy the judgment (and consequently no freezing injunction could be made in relation to those assets: Perry v Zissis [1977] 1 Lloyds Rep 607).
Nor is it likely that section 31 of the Civil Jurisdiction and Judgments Act 1982 would have been enacted in the form that it was enacted if Parliament had thought that the 1978 Act already applied to a class of foreign judgments.
I accept that neither of those points is conclusive as to the meaning of section 3.
There is no impediment in public international law to the institution of proceedings to enforce a foreign judgment based on commercial transactions.
It is now possible to serve a foreign sovereign out of the jurisdiction in such proceedings, and the 1978 Act could be construed in the light of present circumstances: Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, 49; Yemshaw v Hounslow London Borough Council (Secretary of State for Communities and Local Government intervening) [2011] UKSC 3, [2011] 1 WLR 433, paras 5 27.
But for section 31 of the 1982 Act, and the almost invariable employment of wide express waivers of immunity, it might have been desirable as a matter of policy to give section 3 the wider meaning.
There would, however, be no principled basis on which to found such a conclusion.
The proceedings in England relate to the New York judgment and not to the debt obligations on which the New York proceedings were based.
Issue 2: section 31 of the Civil Jurisdiction and Judgments Act 1982
This is a very short point.
If the Court of Appeal was right to accept Argentinas argument, the section has such limited effect that it would not have been worth enacting, and certainly would not have justified the attention that it was given in the Parliamentary process: see Fox (2009) 125 LQR 544, at 547 548 for some of the history.
The natural meaning of section 31(1) is that it requires recognition and enforcement of a foreign judgment against a foreign State (other than the United Kingdom or the State in which the foreign proceedings were brought) if (a) the normal conditions for recognition and enforcement of judgments are fulfilled, and (b) mutatis mutandis the foreign State would not have been immune if the foreign proceedings had been brought in the United Kingdom.
That meaning is the one which text writers have propounded since the section was enacted: Collins, Civil Jurisdiction and Judgments Act 1982 (1983), p 140; Dicey & Morris, Conflict of Laws 11th ed (1987), pp 454 455 (now Dicey, Morris & Collins, 14th ed (2006), para 14 095); Cheshire, North & Fawcett, Private International Law, 14th ed (2008), pp 588 589.
It is true that there are some drafting infelicities, including the reference to such matters in section 31(1)(b), and the words in parentheses in section 31(4), but they give no support to the Court of Appeals surprising conclusion that, in the absence of an express amendment to the 1978 Act, section 31 does not affect the law of immunity, and therefore has no discernible purpose.
Issue 3: submission
As late as 1957 Delaume, Jurisdiction of Courts and International Loans (1957) 6 Am J Comp L 189, 203, said there was no consensus of opinion as to whether contractual waivers of immunities are valid and binding upon a foreign sovereign or as to what acts are necessary to constitute such a waiver.
In 1965 the Restatement Second, Foreign Relations Law of the United States, section 70(1) stated that a foreign State might waive its immunity by agreement with a private party, including an agreement made before the institution of proceedings.
The Reporters Note accepted that there had been no judicial decision to this effect, but that it was believed that United States courts would apply a waiver rule.
As indicated above (para 103), it was only in the 1970s that it became almost invariable practice for syndicated bank loans to States and international bonds issued by States to contain wide submissions to the jurisdiction of national courts and express waivers of immunity.
The position in English law prior to the enactment of the 1978 Act was that it was thought that a prior contractual submission to the jurisdiction of the court was ineffective to amount to a waiver of immunity and that nothing less than an appearance in the face of the court would suffice: Duff Development Co v Government of Kelantan [1924] AC 797 and Kahan v Federation of Pakistan [1951] 2 KB 200, relying on Mighell v Sultan of Johore [1894] 1 QB 149, 159, 160.
In Mighell v Sultan of Johore [1894] 1 QB 149 the argument for the unfortunate Miss Mighell was that the Sultan had waived his immunity by coming to England as Albert Baker and making contracts as a private individual.
That argument was rejected.
Submission had to be when the Court is about or is being asked to exercise jurisdiction over him and not any previous time (Lord Esher MR at 159); the only mode in which a sovereign can submit to the jurisdiction is by a submission in the face of the court, as, for example, by appearance to a writ (Lopes LJ at 161); or unless upon being sued he actively elects to waive his privilege and to submit to the jurisdiction (Kay LJ at 164).
In Duff Development Co Ltd v Government of Kelantan [1924] AC 797 the question was whether the Government had waived immunity in relation to an application to the court to enforce an arbitration award by agreeing to the arbitration clause in the deed of concession and by applying to the court to set aside the award.
The effect of the decision was that a submission to arbitration was not a submission to enforcement.
Only Viscount Cave and Lord Sumner relied on the approach in Mighell.
Cf Lord Dunedin at 821.
In Kahan v Federation of Pakistan [1951] 2 KB 1003, in a contract for the supply of Sherman tanks Pakistan agreed to submit for the purposes of this agreement to the jurisdiction of the English courts and agreed a method of service within the jurisdiction.
Relying on three of the speeches in Duff Development and the decision in Mighell, the Court of Appeal held that there was no submission in the absence of an undertaking given to the court at the time when the other party asked the court to exercise jurisdiction over it.
As Dr F A Mann said, the proposition that a waiver or submission had to be declared in the face of the court was a peculiar (and unjustifiable) rule of English law: (1991) 107 LQR 362, at 364.
In a classic article (Cohn, Waiver of Immunity (1958) 34 BYIL 260) Dr E J Cohn showed that from the 19th century civil law countries had accepted that sovereign immunity could be waived by a contractual provision, and that the speeches in Duff Development on the point were obiter (and did not constitute a majority) and that both Duff Development and Kahan v Federation of Pakistan had overlooked the fact that submission in the face of the court was not the only form of valid submission since the introduction in 1920 in RSC Ord 11, r 2A (reversing the effect of British Wagon Co Ltd v Gray [1896] 1 QB 35) of a rule that the English court would have jurisdiction to entertain an action where there was a contractual submission.
In particular, in Duff Development Lord Sumner had overlooked the fact that British Wagon Co v Gray was no longer good law.
The principle enunciated in Kahan v Federation of Pakistan was reversed by section 2(2) of the 1978 Act, which provided that a State could submit to the jurisdiction by a prior written agreement.
This is consistent with international practice: United States Foreign Sovereign Immunities Act 1976, section 1605(a)(1) (State not immune if it has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver . ); European Convention on State Immunity 1972, Art 2(b) (no immunity if it has undertaken to submit to the jurisdiction of [the] court by an express term contained in a contract in writing); UN Convention on Jurisdictional Immunities of States and their Property 2004, Art 7(1)(b) (no immunity if the State has expressly consented to the exercise of jurisdiction by the court with regard to the matter or case in a written contract).
The Waiver and Jurisdiction Clause in the bonds provided that a related judgment: shall be conclusive and binding upon [Argentina] and may be enforced in any Specified Court or in any other courts to the jurisdiction of which the Republic is or may be subject (the Other Courts) by a suit upon such judgment.
The New York judgment was on any view a related judgment.
Argentina agreed that it could be enforced in any other courts to the jurisdiction of which the Republic is or may be subject.
This was the clearest possible waiver of immunity because Argentina was or might be subject to the jurisdiction of the English court since the English court had a discretion to exercise jurisdiction in an action on the New York judgment by virtue of CPR 6.20(9) (now CPR PD6B, para 3.1(10)).
The waiver is confirmed by the second paragraph of the clause, which provides: To the extent that the Republic shall be entitled, in any jurisdictionin which anyOther Court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any Related Judgment, to any immunity from suit, from the jurisdiction of any such courtfrom execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the Republic has hereby irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction solely for the purpose of enabling the Fiscal Agent or a holder of Securities of this Series to enforce or execute a Related Judgment.
Again England is a jurisdiction in which an action may be brought to enforce the New York judgment and Argentina agreed not to claim any immunity in that jurisdiction.
The contrary conclusion of the Court of Appeal is not readily explicable.
Issue 4: The Parker v Schuller point
As I have said, in my judgment the point in Parker v Schuller (1901) 17 TLR 299 does not arise.
As Lord Walker said in Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 240, at [94], the law of procedure and practice has traditionally been regarded as the province of the Court of Appeal rather than the House of Lords (or, now, the Supreme Court), and this court should be especially hesitant to decide points of procedure in appeals in which they do not even arise.
The reason why the point does not arise is as follows.
The current CPR 6.37(1)(a) provides that an application for permission to serve a claim form out of the jurisdiction must set out which ground in paragraph 3.1 of Practice Direction 6B is relied on.
There was substantially the same rule under the RSC, where Order 11, r 4(1) provided that an application for the grant of leave to serve a writ out of the jurisdiction had to be supported by an affidavit stating the grounds on which the application is made.
If there is such a rule as the so called rule in Parker v Schuller (1901) 17 TLR 299 it is a rule that the court must decide an application for permission to serve out of the jurisdiction on the basis of the cause or causes of action expressly mentioned in the pleadings and the claimant will not be allowed to rely on an alternative cause of action which he seeks to spell out of the facts pleaded if it has not been mentioned: see now Civil Procedure 2011, vol 1, para 6.37.15.1 (or under the RSC, Supreme Court Practice 1999, para 11/1/10).
But there is no analogous rule relating to the exceptions to State immunity.
There is simply a note in Civil Procedure, vol 1 (now para 6.37.24, and formerly, eg at Supreme Court Practice 1999, Vol 1, para 11/1/17) indicating that the practitioner should note that an application for permission to serve the foreign State should show distinctly why the prospective defendant is not absolutely immune from suit.
This is neither a rule nor a Practice Direction nor has it ever been.
There is no analogy between the specific rule for service out of the jurisdiction and the good practice note and therefore no basis for the conclusion of the Court of Appeal that because the basis for absence of immunity was incorrectly identified the English court had no jurisdiction.
That is why the point simply does not arise.
If it had arisen, I would have agreed with the general approach of Lord Phillips.
It is to be noted in particular that in Parker v Schuller itself Romer LJ (at 300) based his decision on the ground very close to that of non disclosure.
He said an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care and looked at strictly.
If a material representation upon which the leave was obtained in the first instance turned out to be unfounded, the plaintiff ought not to be allowed, when an application was made by the defendant to discharge the order for the issue of the writ and the service, to set up another and a distinct cause of action which was not before the judge on the original application.
It was on the representation that the defendants were bound to deliver the goods in England that leave had originally been granted.
In cases of non disclosure, the court has a discretion (a) to set aside the order for service and require a fresh application; or (b) to treat the claim form as validly served, and deal with the non disclosure if necessary by a costs order: Macaulay (Tweeds) Ltd v Independent Harris Tweed Producers Ltd [1961] RPC 184; Kuwait Oil Co (KSC) v Idemitsu Tankers KK, The Hida Maru [1981] 2 Lloyds Rep 510.
By analogy, where the so called rule in Parker v Schuller (1901) 17 TLR 299 might apply in a case where the ground for service out has been incorrectly identified, the court would also have power to grant permission to serve out on a fresh basis and dispense with re service.
LORD CLARKE
I agree that the appeal should be allowed for the reasons given by Lord Phillips.
I add a short judgment of my own because of the difference of opinion between Lord Phillips and Lord Mance, Lord Collins and Lord Walker on the first issue.
As to the fourth issue, I agree with Lord Collins that the point does not arise but, if it does, like him I agree with Lord Phillips observations on the so called rule in Parker v Schuller (1901) 17 TLR 299.
The question raised by the first issue is whether these proceedings are proceedings relating to a commercial transaction entered into by the state of Argentina within the meaning of section 3(1)(a) of the State Immunity Act 1978 (the 1978 Act).
The Court of Appeal held that they are not.
As Lord Phillips observes at para 20, it is common ground that the New York proceedings in which NML obtained judgment against Argentina were such proceedings.
The contrary would have been unarguable because they were brought in order to establish Argentinas liability under the bonds described by Lord Phillips.
NMLs argument is that, if the New York proceedings related to a commercial transaction, it is but a short step to hold that these proceedings, which were brought in order to enforce a judgment in respect of a liability under the bonds, are also proceedings relating to a commercial transaction.
I agree.
As ever, all depends upon the context, but it seems to me to follow naturally from the conclusion that the New York proceedings were such proceedings that the same is true of these.
Both have the same purpose, namely to enforce Argentinas liabilities under commercial bonds.
There is nothing in the language of section 3(1) to lead to any other conclusion.
The Court of Appeal reached its conclusion in the light of the decision of Stanley Burnton J in AIC Ltd v Federal Government of Nigeria [2003] EWHC 1357 (QB) and in the light of dicta in the Court of Appeal in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2006] EWCA Civ 1529, [2007] QB 886.
Lord Phillips has set out the relevant parts of the judgments in those cases at paras 21 and 23 and para 25 respectively.
In Svenska the judgment of the court was given by Moore Bick LJ.
Scott Baker LJ and I were the other two members of the court.
I have now reached the conclusion that the decision in AIC and the dicta in para 137 of Svenska (to which I was a party) were wrong, essentially for the reasons given by Lord Phillips at paras 26 to 41 which I adopt without repeating.
Lord Mance has reached a different view.
He notes in para 84 that in para 42 Lord Phillips recognises that the conclusion that he has reached may not have occurred to the draftsman of the 1978 Act or to Parliament.
Lord Mance concludes that Lord Phillips approach and conclusions are not justified.
He does so principally by looking at circumstances as they existed at the time the 1978 Act was enacted.
However, in my opinion, that is to approach the construction of section 3(1)(a) of the Act too narrowly.
It is stated in Bennion on Statutory Interpretation, 5th ed (2008) at section 288 that, unless a contrary intention appears, an enactment is intended to develop in meaning with developing circumstances and should be given what Bennion calls an updating construction to allow for changes since the Act was initially framed.
Bennion distinguishes that case, which he calls the usual case, from the comparatively rare case of the Act which is intended to be of unchanging effect.
The commentary to section 288 states that the court must, in interpreting an Act, make allowances for the fact that the surrounding legal conditions prevailing on the date of its passing have changed.
That approach seems to me to be entirely consistent with that of Lady Hale in Yemshaw v Hounslow London Borough Council (Secretary of State for Communiteis and Local Government intervening) [2011] UKSC 3, [2011] 1 WLR 433, paras 25 to 28, where she was considering whether words such as violence in a statute could be given an updated meaning.
She concluded that the question was whether an updated meaning was consistent with the statutory purpose.
See also Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, per Lord Clyde at 49 50, where he said in the context of the meaning of family in the Rent Acts: The judges in Helby vs Rafferty [1979] 1 WLR 13 had difficulty in accepting that a word which had been repeated throughout the successive Rent Acts could change its meaning from time to time.
But as a matter of construction I see no grounds for treating the provisions with which we are concerned as being in the relatively rare category of cases where Parliament intended the language to be fixed at the time when the original Act was passed.
The rule of contemporary exposition should be applied only in relation to very old statutes (Governors of Campbell College, Belfast v Commissioner Northern Ireland Valuation [1964] 2 All ER 705).
The general presumption is that an updating construction is to be applied (Bennion on Statutory Interpretation, 3rd ed p 686).
Such an approach was recently adopted by this House in Reg v Ireland [1988] AC 147.
In my opinion it is appropriate and consistent with the statutory purpose of the 1978 Act to give it an updated meaning.
The question is whether, viewed at the time the question arises, particular proceedings for the enforcement of a particular foreign judgment are proceedings relating to a commercial transaction.
At the time the 1978 Act was enacted there was no machinery for seeking permission to serve proceedings out of the jurisdiction in respect of a claim to enforce either an arbitration award or a foreign judgment.
It could thus be said with force that at that time it was not contemplated that proceedings could be brought in England on a foreign judgment, at any rate unless the defendant accepted service of them.
I note that section 12(6) of the 1978 Act permits a state to accept service of proceedings against it in a particular manner, including no doubt proceedings to enforce a foreign judgment.
As Lord Phillips says at para 42, prior to 1978 there had been no attempts to enforce in the United Kingdom judgments against states.
However, he adds that section 12(7) makes it plain that service on a sovereign state requires permission, which could only be granted in accordance with the rules of court governing service out of the jurisdiction.
In my opinion, Parliament must have recognised that those rules, then RSC Order 11, would be likely to be amended from time to time and, indeed, may well have contemplated that at some future date a rule would be introduced permitting permission to be given allowing service out of the jurisdiction.
As Lord Collins explains at para 114, such a rule was introduced with effect from January 1 1984 in RSC Order 11 r 1(1)(m).
It subsequently became CPR 6.20(9) and is now CPR 6BPD para 3.1(10), which provides for service of proceedings out of the jurisdiction where a claim is made to enforce any judgment or arbitral award.
As I see it, the question is whether such proceedings are proceedings relating to a commercial transaction within section 3(1)(a) in circumstances where such proceedings are contemplated by the present rules of court.
I would answer that question in the affirmative.
As Lord Phillips has explained, there was during the 20th century a growing recognition round the world of the restrictive doctrine of state immunity under which immunity related to government acts in the exercise of sovereign authority (acta jure imperii) but not to commercial activities carried on by the state (acta jure gestionis).
As I see it, the conclusion that these proceedings are proceedings relating to a commercial transaction is no more than a further example of that growing recognition.
The question arises in the context of the particular proceedings in this case.
As Lord Phillips observes at para 29, the question in these proceedings is whether Argentina enjoys state immunity.
I agree with him that, there being no principle of international law under which state A is immune from proceedings brought in state B in order to enforce a judgment given against it by the courts of state C where state A did not enjoy immunity in respect of the proceedings that gave rise to that judgment, under international law the question whether Argentina enjoys immunity in these proceedings depends upon whether its liability arises out of acta jure imperii or acta jure gestionis.
That involves a consideration of the nature of the underlying transaction and demonstrates that the proceedings, at any rate on the facts of this case, relate to a commercial transaction.
I agree with Lord Collins that the expression relating to in section 3(1)(a) can be given a narrow or wide meaning.
I also agree with him that these are proceedings relating to the foreign judgment.
The question is whether they are also proceedings relating to a commercial transaction entered into by Argentina.
I agree with Lord Collins in para 111 that the wider meaning would give effect to the practical reality that the proceedings relate to liability under the bonds, the issue of which was plainly a commercial transaction for the purposes of section 3.
For my part, I see no reason why, in construing the meaning of relating to, the court should not reflect that practical reality.
I agree with Lord Collins in para 112 that a potential overlap with the arbitration provision in section 9 does not support a narrow interpretation and that there is no warrant for holding that section 3(1)(a) should be interpreted as requiring a link with the territorial jurisdiction of the United Kingdom.
I also agree with him that the absence of reasoning in the Canadian case to which he refers in para 113 makes it of little assistance.
In para 114 Lord Collins notes that it was decided in Perry v Zissis [1977] 1 Lloyds Rep 607 that, since a defendant could not be served out of the jurisdiction in an action on a foreign judgment, no freezing injunction could be granted in respect of assets within the jurisdiction.
I agree that that was indeed the position at that time.
The position would surely be different now that the rules have been changed.
Finally I agree with Lord Collins that it is not likely that section 31 of the Civil Jurisdiction and Judgments Act 1982 would have been enacted in the form in which it was if Parliament had thought that the 1978 Act already applied to a class of foreign judgments.
However, Lord Collins accepts at para 115 that neither of those points is conclusive as to the meaning of section 3.
That is because there is no impediment in international law to the institution of proceedings to enforce a foreign judgment.
Lord Collins adds that it is now possible to serve a foreign sovereign out of the jurisdiction and that the 1978 Act could be construed in the light of present circumstances.
He cites Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, 49 and Yemshaw [2011] 1 WLR 433, paras 5 to 27 for that proposition.
As stated in para 144 above, I would go further and hold that it should be given an updated meaning.
As Lord Clyde said in Fitzpatrick in the passage quoted above, the general presumption is that an updating construction is to be applied.
As I see it, once it is concluded that an updating construction should be applied, the wider meaning would give effect to the practical reality that the sole purpose of the proceedings is to enforce Argentinas liability under a commercial transaction and that there is no impediment to such a construction in international law, both policy and principle lead to the conclusion that the wider interpretation is to be preferred.
APPENDIX 1 State Immunity Act 1978 Immunity from jurisdiction "1.(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.
Exceptions from immunity 2.(1)A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom. (2)A State may submit after the dispute giving rise to the proceedings has arisen or by a prior written agreement; but a provision in any agreement that it is to be governed by the law of the United Kingdom is not to be regarded as a submission. (3)A State is deemed to have submitted (a) if it has instituted the proceedings; or (b) subject to subsections (4) and (5) below, if it has intervened or taken any step in the proceedings. (4)Subsection (3)(b) above does not apply to intervention or any step taken for the purpose only of (a) claiming immunity; or (b) asserting an interest in property in circumstances such that the State would have been entitled to immunity if the proceedings had been brought against it. (5)Subsection (3)(b) above does not apply to any step taken by the State in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained and immunity is claimed as soon as reasonably practicable. (6)A submission in respect of any proceedings extends to any appeal but not to any counter claim unless it arises out of the same legal relationship or facts as the claim. (7)The head of a State's diplomatic mission in the United Kingdom, or the person for the time being performing his functions, shall be deemed to have authority to submit on behalf of the State in respect of any proceedings; and any person who has entered into a contract on behalf of and with the authority of a State shall be deemed to have authority to submit on its behalf in respect of proceedings arising out of the contract. 3.(1)A State is not immune as respects proceedings relating to (a) a commercial transaction entered into by the State; or (b)an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom. (2)This section does not apply if the parties to the dispute are States or have otherwise agreed in writing; and subsection (1)(b) above does not apply if the contract (not being a commercial transaction) was made in the territory of the State concerned and the obligation in question is governed by its administrative law. (3)In this section "commercial transaction" means (a)any contract for the supply of goods or services; (b)any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation; and (c)any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority; but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual. 4.( 1) A State is not immune as respects proceedings relating to a contract of employment between the State and an individual where the contract was made in the United Kingdom or the work to be wholly or partly performed there. (2) Subject to subsections (3) and (4) below, this section does not apply if (a) at the time when the proceedings are brought the individual is a national of the State concerned; or (b) at the time when the contract was made the individual was neither a national of the United Kingdom nor habitually resident there; or (c) the parties to the contract have otherwise agreed in writing. (3) Where the work is for an office, agency or establishment maintained by the State in the United Kingdom for commercial purposes, subsection (2)(a) and (b) above do not exclude the application of this section unless the individual was, at the time when the contract was made, habitually resident in that State. (4) Subsection (2)(c) above does not exclude the application of this section where the law of the United Kingdom requires the proceedings to be brought before a court of the United Kingdom. (5) In subsection (2)(b) above "national of the United Kingdom " means a citizen of the United Kingdom and Colonies, a person who is a British subject by virtue of section 2, 13 or 16 of the British Nationality Act 1948 or by virtue of the British Nationality Act 1965, a British protected person within the meaning of the said Act of 1948 or a citizen of Southern Rhodesia. (6) In this section "proceedings relating to a contract of employment" includes proceedings between the parties to such a contract in respect of any statutory rights or duties to which they are entitled or subject as employer or employee. 5.
A State is not immune as respects proceedings in respect (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. (1) A State is not immune as respects proceedings relating to (a) any interest of the State in, or its possession or use of, immovable property in the United Kingdom; or (b) any obligation of the State arising out of its interest in, or its possession or use of, any such property. (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 paragraph (b) above, if the claim is neither admitted nor supported by prima facie evidence. 7.
A State is not immune as respects proceedings relating to (a) any patent, trade mark, design or plant breeders rights belonging to the State and registered or protected in the United Kingdom or for which the State has applied in the United Kingdom; (b) an alleged infringement by the State in the United Kingdom of any patent, trade mark, design, plant breeders' rights or copyright; or (c) the right to use a trade or business name in the United Kingdom. 8.( 1) A State is not immune as respects proceedings relating to its membership of a body corporate, an unincorporated body Membership or a partnership which (a) has members other than States; and (b) is incorporated or constituted under the law of the United Kingdom or is controlled from or has its principal place of business in the United Kingdom, being proceedings arising between the State and the body or its other members or, as the case may be, between the State and the other partners. (2) This section does not apply if provision to the contrary has been made by an agreement in writing between the parties to the dispute or by the constitution or other instrument establishing or regulating the body or partnership in question. 9. (1)Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration. (2)This section has effect subject to any contrary provision in the arbitration agreement and does not apply to any arbitration agreement between States. 10(l) This section applies to (a) Admiralty proceedings ; (b) proceedings on any claim which could be made the subject of Admiralty proceedings. (2) A State is not immune as respects (a) an action in rem against a ship belonging to that State; or (b) an action in personam for enforcing a claim in connection with such a ship, if, at the time when the cause of action arose, the ship was in use or intended for use for commercial purposes. (3) Where an action in rem is brought against a ship belonging to a State for enforcing a claim in connection with another ship belonging to that State, subsection (2)(a) above does not apply as respects the first mentioned ship unless, at the time when the cause of action relating to the other ship arose, both ships were in use or intended for use for commercial purposes. (4) A State is not immune as respects (a) an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes ; or (b) an action in personam for enforcing a claim in connection with such a cargo if the ship carrying it was then in use or intended for use as aforesaid. (5) In the foregoing provisions references to a ship or cargo belonging to a State include references to a ship or cargo in its possession or control or in which it claims an interest; and, subject to subsection (4) above, subsection (2) above applies to property other than a ship as it applies to a ship. (6) Sections 3 to 5 above do not apply to proceedings of the kind described in subsection (1) above if the State in question is a party to the Brussels Convention and the claim relates to the operation of a ship owned operated by that State, the carriage of cargo or passengers on any such ship or the carriage of cargo owned by that State on any other ship. 11.
A State is not immune as respects proceedings relating to its liability for (a) value added tax, any duty of customs or excise or any agricultural levy; or (b) rates in respect of premises occupied by it for commercial purposes. 12. (1)Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and service shall be deemed to have been effected when the writ or document is received at the Ministry. (2)Any time for entering an appearance (whether prescribed by rules of court or otherwise) shall begin to run two months after the date on which the writ or document is received as aforesaid. (3)A State which appears in proceedings cannot thereafter object that subsection (1) above has not been complied with in the case of those proceedings. (4)No judgment in default of appearance shall be given against a State except on proof that subsection (1) above has been complied with and that the time for entering an appearance as extended by subsection (2) above has expired. (5)A copy of any judgment given against a State in default of appearance shall be transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of that State and any time for applying to have the judgment set aside (whether prescribed by rules of court or otherwise) shall begin to run two months after the date on which the copy of the judgment is received at the Ministry. (6)Subsection (1) above does not prevent the service of a writ or other document in any manner to which the State has agreed and subsections (2) and (4) above do not apply where service is effected in any such manner. (7)This section shall not be construed as applying to proceedings against a State by way of counter claim or to an action in rem; and subsection (1) above shall not be construed as affecting any rules of court whereby leave is required for the service of process outside the jurisdiction. 13. (1)No penalty by way of committal or fine shall be imposed in respect of any failure or refusal by or on behalf of a State to disclose or produce any document or other information for the purposes of proceedings to which it is a party. (2)Subject to subsections (3) and (4) below (a)relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and (b)the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale. (3)Subsection (2) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection. (4)Subsection (2)(b) above does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes; but, in a case not falling within section 10 above, this subsection applies to property of a State party to the European Convention on State Immunity only if (a)the process is for enforcing a judgment which is final within the meaning of section 18(1)(b) below and the State has made a declaration under Article 24 of the Convention; or (b)the process is for enforcing an arbitration award. (5)The head of a State's diplomatic mission in the United Kingdom, or the person for the time being performing his functions, shall be deemed to have authority to give on behalf of the State any such consent as is mentioned in subsection (3) above and, for the purposes of subsection (4) above, his certificate to the effect that any property is not in use or intended for use by or on behalf of the State for commercial purposes shall be accepted as sufficient evidence of that fact unless the contrary is proved. (6)In the application of this section to Scotland (a)the reference to "injunction" shall be construed as a reference to "interdict"; (b)for paragraph (b) of subsection (2) above there shall be substituted the following paragraph "(b) the property of a State shall not be subject to any diligence for enforcing a judgment or order of a court or a decree arbitral or, in an action in rem, to arrestment or sale."; and (c)any reference to "process" shall be construed as a reference to "diligence", any reference to "the issue of any process" as a reference to "the doing of diligence" and the reference in subsection (4)(b) above to "an arbitration award" as a reference to "a decree arbitral".
Supplementary provisions 14. (1)The immunities and privileges conferred by this Part of this Act apply to any foreign or commonwealth State other than the United Kingdom; and references to a State include references to (a)the sovereign or other head of that State in his public capacity; (b)the government of that State; and (c)any department of that government, but not to any entity (hereafter referred to as a "separate entity") which is distinct from the executive organs of the government of the State and capable of suing or being sued. (2)A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if (a)the proceedings relate to anything done by it in the exercise of sovereign authority; and (b)the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune. (3)If a separate entity (not being a State's central bank or other monetary authority) submits to the jurisdiction in respect of proceedings in the case of which it is entitled to immunity by virtue of subsection (2) above, subsections (1) to (4) of section 13 above shall apply to it in respect of those proceedings as if references to a State were references to that entity. (4)Property of a State's central bank or other monetary authority shall not be regarded for the purposes of subsection (4) of section 13 above as in use or intended for use for commercial purposes; and where any such bank or authority is a separate entity subsections (1) to (3) of that section shall apply to it as if references to a State were references to the bank or authority. (5)Section 12 above applies to proceedings against the constituent territories of a federal State; and Her Majesty may by Order in Council provide for the other provisions of this Part of this Act to apply to any such constituent territory specified in the Order as they apply to a State. (6)Where the provisions of this Part of this Act do not apply to a constituent territory by virtue of any such Order subsections (2) and (3) above shall apply to it as if it were a separate entity.
PART II JUDGMENTS AGAINST UNITED KINGDOM IN CONVENTION STATES . 18.( 1) This section applies to any judgment given against the United Kingdom by a court in another State party to the European Convention on State Immunity, being a judgment (a) given in proceedings in which the United Kingdom was not entitled to immunity by virtue of provisions corresponding to those of sections 2 to 11 above; and (b) which is final, that is to say, which is not or is no longer subject to appeal or, if given in default of appearance, liable to be set aside. (2) Subject to section 19 below, a judgment to which this PAn ill section applies shall be recognised in any court in the United Kingdom as conclusive between the parties thereto in all proceedings founded on the same cause of action and may be relied on by way of defence or counter claim in such proceedings. (3) Subsection (2) above (but not section 19 below) shall have effect also in relation to any settlement entered into by the United Kingdom before a court in another State party to the Convention which under the law of that State is treated as equivalent to a judgment. (4) In this section references to a court in a State party to the Convention include references to a court in any territory in respect of which it is a party. 19.( 1) A court need not give effect to section 18 above in the case of a judgment (a) if to do so would be manifestly contrary to public policy or if any party to the proceedings in which the judgment was given had no adequate opportunity to present his case; or (b) if the judgment was given without provisions corresponding to those of section 12 above having been complied with and the United Kingdom has not entered an appearance or applied to have the judgment set aside. (2) A court need not give effect to section 18 above in the case of a judgment (a) if proceedings between the same parties, based on the same facts and having the same purpose (i) are pending before a court in the United Kingdom and were the first to be instituted; or (ii) are pending before a court in another State party to the Convention, were the first to be instituted and may result in a judgment to which that section will apply; or (b) if the result of the judgment is inconsistent with the result of another judgment given in proceedings between the same parties and (i) the other judgment is by a court in the United Kingdom and either those proceedings were the first to be instituted or the judgment of that court was given before the first mentioned judgment became final within the meaning of subsection (1)(b) of section 18 above; or (ii) the other judgment is by a court in another State party to the Convention and that section has already become applicable to it. (3) Where the judgment was given against the United Kingdom in proceedings in respect of which the United Kingdom was not entitled to immunity by virtue of a provision corresponding to section 6(2) above, a court need not give effect to section 18 above in respect of the judgment if the court that gave the judgment (a) would not have had jurisdiction in the matter if it had applied rules of jurisdiction corresponding to those applicable to such matters in the United Kingdom; or (b) applied a law other than that indicated by the United Kingdom rules of private international law and would have reached a different conclusion if it had applied the law so indicated. (4) In subsection (2) above references to a court in the United Kingdom include references to a court in any dependent territory in respect of which the United Kingdom is a party to the Convention, and references to a court in another State party to the Convention include references to a court in any territory in respect of which it is a party. " Civil Jurisdiction and Judgments Act 1982 ".
Provisions relating to recognition and enforcement of judgments 31 Overseas judgments given against states, etc (1)A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if, and only if (a)it would be so recognised and enforced if it had not been given against a state; and (b)that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the State Immunity Act 1978. (2)References in subsection (1) to a judgment given against a state include references to judgments of any of the following descriptions given in relation to a state (a)judgments against the government, or a department of the government, of the state but not (except as mentioned in paragraph (c)) judgments against an entity which is distinct from the executive organs of government; (b)judgments against the sovereign or head of state in his public capacity; (c)judgments against any such separate entity as is mentioned in paragraph (a) given in proceedings relating to anything done by it in the exercise of the sovereign authority of the state. (3)Nothing in subsection (1) shall affect the recognition or enforcement in the United Kingdom of a judgment to which Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 applies by virtue of section 4 of the Carriage of Goods by Road Act 1965, section 17(4) of the Nuclear Installations Act 1965, section [166(4) of the Merchant Shipping Act 1995], [regulation 8 of the Railways (Convention of International Carriage by Rail) Regulations 2005] (4)Sections 12, 13 and 14(3) and (4) of the State Immunity Act 1978 (service of process and procedural privileges) shall apply to proceedings for the recognition or enforcement in the United Kingdom of a judgment given by a court of an overseas country (whether or not that judgment is within subsection (1) of this section) as they apply to other proceedings. (5)In this section "state", in the case of a federal state, includes any of its constituent territories. 50.
In this Act, unless the context otherwise requires . " Contracting State " has the meaning given by section 1(3) ; " the 1968 Convention " has the meaning given by section 1(1), and references to that Convention and to provisions of it are to be construed in accordance with section 1(2) (a) ; " the Conventions " has the meaning given by section 1(1) ; . " overseas country " means any country or territory outside the United Kingdom ; .
Civil Procedure Rules 2008 . 6.20(9) In any proceedings to which rule 6.19 does not apply, a claim form may be served out of the jurisdiction with the permission of the court if a claim is made to enforce any judgment or arbitral award. " APPENDIX 2 EUROPEAN CONVENTION on STATE IMMUNITY Chapter III Effect of Judgment "Article 20 1.
A Contracting State shall give effect to a judgment given against it by a court of another Contracting State: a. if, in accordance with the provisions of Articles 1 to 13, the State could not claim immunity from jurisdiction; and b. if the judgment cannot or can no longer be set aside if obtained by default, or if it is not or is no longer subject to appeal or any other form of ordinary review or to annulment. 2.
Nevertheless, a Contracting State is not obliged to give effect to such a judgment in any case: a. where it would be manifestly contrary to public policy in that State to do so, or where, in the circumstances, either party had no adequate opportunity fairly to present his case; b. where proceedings between the same parties, based on the same facts and having the same purpose: i. are pending before a court of that State and were the first to be instituted; ii. are pending before a court of another Contracting State, were the first to be instituted and may result in a judgment to which the State party to the proceedings must give effect under the terms of this Convention; c. where the result of the judgment is inconsistent with the result of another judgment given between the same parties: i. by a court of the Contracting State, if the proceedings before that court were the first to be instituted or if the other judgment has been given before the judgment satisfied the conditions specified in paragraph 1.b; or ii. by a court of another Contracting State where the other judgment is the first to satisfy the requirements laid down in the present Convention; d. where the provisions of Article 16 have not been observed and the State has not entered an appearance or has not appealed against a judgment by default. 3.
In addition, in the cases provided for in Article 10, a Contracting State is not obliged to give effect to the judgment: a. if the courts of the State of the forum would not have been entitled to assume jurisdiction had they applied, mutatis mutandis, the rules of jurisdiction (other than those mentioned in the annex to the present Convention) which operate in the State against which judgment is given; or b. if the court, by applying a law other than that which would have been applied in accordance with the rules of private international law of that State, has reached a result different from that which would have been reached by applying the law determined by those rules.
However, a Contracting State may not rely upon the grounds of refusal specified in sub paragraphs a and b above if it is bound by an agreement with the State of the forum on the recognition and enforcement of judgments and the judgment fulfils the requirement of that agreement as regards jurisdiction and, where appropriate, the law applied. " APPENDIX 3 The terms of the bonds " The republic has in the fiscal agency agreement irrevocably submitted to the jurisdiction of any New York state or federal court sitting in the Borough of Manhattan and the courts of the republic of Argentina ('the specified courts') over any suit, action or proceeding against it or its properties, assets or revenues with respect to the securities of this series or the fiscal agency agreement (a 'related proceeding') The republic has in the fiscal agency agreement waived any objection to related proceedings in such courts whether on grounds of venue, residence or domicile or on the ground that the related proceedings have been brought in an inconvenient forum.
The republic agrees that a final non appealable judgment in any such related proceeding ('the related judgment') shall be conclusive and binding upon it and may be enforced in any specified court or in any other courts to the jurisdiction of which the republic is or may be subject (the 'other courts') by a suit upon such judgment." "To the extent that the republic or any of its revenues, assets or properties shall be entitled, in any jurisdiction in which any specified court is located, in which any related proceeding may at any time be brought against it or any of its revenues, assets or properties, or in any jurisdiction in which any specified court or other court is located in which any suit, action or proceeding may at any time be brought solely for the purpose of enforcing or executing any related judgment, to any immunity from suit, from the jurisdiction of any such court, from set off, from attachment prior to judgment, from attachment in aid of execution of judgment, from execution of a judgment or from any other legal or judicial process or remedy, and to the extent that in any such jurisdiction there shall be attributed such an immunity, the republic has hereby irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction provided further that such agreement and waiver, in so far as it relates to any jurisdiction other than a jurisdiction in which a specified court is located, is given solely for the purpose of enabling the fiscal agent or a holder of securities of this series to enforce or execute a related judgment." . " Lord Collins suggests at para 116 that, but for section 31 and the almost invariable employment of wide express waivers of immunity, it might have been desirable as a matter of policy to give section 3 the wider meaning.
He adds that there would, however, be no principled basis for doing so.
I respectfully disagree.
I do not think that either the enactment of section 31 or the fact that some parties use wide submission and waiver clauses points to a narrow meaning of relating to, whether as a matter of policy or as a matter of principle.
In my opinion, viewed as at the time the question has to be decided these proceedings relate both to the New York judgment and to the underlying commercial transaction. ".
| UK-Abs | This appeal relates to bonds issued by the respondent, the Republic of Argentina (Argentina), in respect of which, together with all its other debt, Argentina declared a moratorium in December 2001.
The appellant NML Capital Limited (NML) is an affiliate of a New York based hedge fund, which purchased the bonds at little over half their face value between June 2001 and September 2003 and then pursued the respondent for the return of their full principal value and interest in the New York courts.
On 11 May 2006 NML obtained summary judgment on the bonds from a Federal Court in New York for over $284m.
It then sought to enforce the judgment against assets held by Argentina in England by bringing a common law action on the judgment in London.
NML applied for permission to serve the claim form out of the jurisdiction on Argentina, initially alleging two reasons why Argentina was not entitled to state immunity.
The first was that Argentina had waived immunity as a term of its agreement with Bankers Trust to issue the bonds, and the second that the claim constituted proceedings relating to a commercial transaction and so fell within the exception in section 3(1)(a) of the State Immunity Act 1978 (the 1978 Act).
Permission was granted and the proceedings were served.
Argentina then applied to have the order for service set aside.
NML resisted this application by reliance on two different grounds: the provisions of section 31 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) and terms as to waiver and jurisdiction in the bonds themselves.
The High Court dismissed Argentinas application but this decision was reversed by the Court of Appeal, which held that Argentina was protected by state immunity from the claim.
The Supreme Court unanimously allows the appeal.
Lord Phillips and Lord Clarke find that the claim falls within the scope of section 3(1)(a) of the 1978 Act.
Lord Mance, Lord Collins and Lord Walker disagree on this point but all agree that the appeal should in any event succeed by reason of the provisions of s 31 of the 1982 Act and by Argentinas submission and waiver of immunity in the bonds.
The scope of s 3(1)(a) of the 1978 Act Sections 1 11 of the 1978 Act are a comprehensive statement of the scope of state immunity under the law of the United Kingdom.
During the twentieth century there was a growing recognition around the world of the restrictive doctrine of state immunity, under which immunity was given to governmental acts in the exercise of sovereign authority but not to commercial activities carried on by the state [10].
S 3(1)(a) made it clear that the UK was adopting the restrictive doctrine.
The context for interpreting the phrase proceedings relating to a commercial transaction in this case was the enforcement of a judgment which absent state immunity would be permitted by Civil Procedure Rule 6.20(9).
Lord Phillips and Lord Clarke considered that the words relating to should be given a broad rather than a narrow meaning.
The proceedings related both to the foreign judgment and to the transaction underlying that judgment [26].
Although Parliament was unlikely to have thought the 1978 Act to apply to a class of foreign judgments at a time when there was no procedural machinery to serve a defendant out of the jurisdiction, s 3(1)(a) should be given an updated meaning consistent with the statutory purpose of the act [152].
Lord Mance did not think it was justified to treat the wording of s 3(1)(a) as applying to a foreign judgment against a foreign state, which had long been recognised as a special area of private international law [80].
S 31 of the 1982 Act was the means by which Parliament had achieved for the first time a comprehensive treatment of the issue of state immunity in respect of foreign judgments [98][118].
Lord Collins (with whom Lord Walker agreed) pointed to the almost invariable use in international loan agreements and bond issues since the 1970s of clauses providing for submission to national jurisdiction and waivers of immunity [103].
He preferred a narrow interpretation of s 3(1)(a).
There was no policy reason to give it a wider meaning in the light of s 31 of the 1982 Act and the widespread use of express waivers [116].
Effect of s 31 of the 1982 Act S 31 of the 1982 Act reflected and in part replaced the categories of exemption from state immunity set out in the 1978 Act as far as foreign judgments were concerned.
It was an alternative scheme rather than an additional hurdle [47].
State immunity could not be raised as a bar to the recognition and enforcement of a foreign judgment if, under the principles of international law recognised in this jurisdiction, the state against whom the judgment was given was not entitled to immunity in respect of the claim [49].
Did the bonds contain a submission to the jurisdiction of the English court? The High Court had correctly held that the agreement in the bond was more than a mere waiver and amounted to a submission to jurisdiction [59].
It was the only meaning the provision could sensibly bear [62] [128].
Could NML rely on new issues at the High Court hearing? Lord Phillips considered that the rule in Parker v Schuller (1901) should no longer be applied.
Allowing a party to amend a pleading where no prejudice was caused to the other party that could not be dealt with by an appropriate order for costs accorded with the overriding objective [75].
The other justices did not think that the rule applied on the facts of this case, but agreed with his observations.
|
This appeal is concerned with claims for first year allowances (FYAs) under the Capital Allowances Act 2001 (CAA 2001) in respect of expenditure on software rights.
The claims were made by two limited liability partnerships, the respondents Tower MCashback 1 LLP (LLP1) and Tower MCashback 2 LLP (LLP2).
The two claims were not identical, because there was an issue as to whether LLP 1 had started trading during the 2003 4 tax year for which it claimed FYAs (LLP2s claim was for the 2004 5 tax year).
This point of distinction led to different outcomes in the Court of Appeal, as explained below.
Throughout the litigation there have been two main issues, one procedural and one substantive, each of which is of some general importance.
There were also other issues below which have now disappeared.
The procedural issue concerns the effect of two closure notices dated 20 June 2006 signed by Mr Peter Frost, an officer in the Anti Avoidance Group (Investigation) of the appellants, the Commissioners for Her Majestys Revenue and Customs (HMRC).
The respondents contend that the terms of each closure notice restricted HMRC, on the taxpayers appeal against it, to a single issue (which HMRC have now abandoned).
HMRC contend that the notice did not have that restrictive effect.
The substantive issue (referred to below as the expenditure issue to distinguish it from the trading issue and the conditional contract issue, neither of which is live in this Court) goes to the efficacy of the tax saving scheme embarked on by LLP1 and LLP2.
In this judgment I shall try to use LLPs as referring to limited liability partnerships generally, and the LLPs to refer to LLP1 and LLP2 (with or without LLP3 and LLP4, which are of peripheral interest).
The litigation has followed a tortuous course.
The Special Commissioner (Mr Howard Nowlan) decided the procedural point in favour of HMRC and disallowed 75% of LLP2s claim for FYAs.
He disallowed the whole of LLP1s claim on the separate ground that it had not been trading during the 2003 4 tax year: [2008] STC 3366, 3369 3411.
On appeal ([2008] EWHC 2387 (Ch), [2008] STC 3366, 3411) Henderson J allowed the LLPs appeals on the procedural issue.
That made the expenditure issue academic, but Henderson J considered it fully and set out the reasons why he would have allowed the LLPs appeals on that ground also (but for the trading issue affecting LLP1, on which he dismissed LLP1s appeal).
He also dismissed HMRCs cross appeal on the conditional contract issue.
By then it was common ground that if LLP2 was ultimately successful in its claim for FYAs for the 2004 5 tax year, then LLP1 would also be entitled to FYAs for that year.
So on further appeal to the Court of Appeal ([2010] EWCA Civ 32, [2010] STC 809), on LLP1 abandoning its appeal on the trading issue, HMRC was for all practical purposes the appellant on both remaining issues.
The majority (Scott Baker and Moses LJJ) reversed Henderson J on the procedural issue but agreed with him on the expenditure issue.
Arden LJ agreed with the judge on both issues.
Because of its abandonment of the trading issue, LLP1s appeal was formally dismissed by the Court of Appeal.
But before this Court the argument has in substance been an appeal by HMRC on the expenditure issue and a cross appeal by the LLPs on the procedural issue.
Counsel sensibly agreed that both issues should be opened by Mr Kevin Prosser QC (who appeared with Miss Rebecca Murray for HMRC) and responded to by Mr Giles Goodfellow QC (who appeared with Mr Richard Vallat and Mr Thomas Chacko for the LLPs).
The procedural issue: statutory provisions
Matters of procedure in charging income tax, capital gains tax and corporation tax are regulated largely by the Taxes Management Act 1970 (TMA 1970) and regulations made under TMA 1970.
Major amendments were made to TMA 1970 in order to provide for the introduction of self assessment (described by HMRC, as Moses LJ noted, at para 1, as the most fundamental reform of personal tax administration for 50 years).
The changes were introduced by the Finance Act 1994 (FA 1994) and took effect, for income tax and capital gains tax purposes, in 1996 97.
Further amendments were made by the Finance Act 2001 (FA 2001) intended to simplify and clarify the process of self assessment.
A limited liability partnership established under the Limited Liability Partnership Act 2000 has a legal personality separate from those of its members.
But if it carries on a trade it is, under section 118ZA of the Income and Corporation Taxes Act 1988 (ICTA 1988), taxed as if it were an ordinary, non incorporated partnership.
Section 118ZA(1) (as substituted by FA 2001) provides: For the purposes of the Tax Acts, where a limited liability partnership carries on a trade, profession or other business with a view to profit (a) all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such), (b) anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and (c) members as partnership property.
the property of the partnership is treated as held by the
The most important provisions of the self assessment regime, as it applies to LLPs, are to be found in sections 12AA, 12AB, 12AC, 28B, 31 and 31A of TMA 1970 (the first two introduced by FA 1994, the last four substituted by FA 2001).
The familiar provisions of section 50 of TMA 1970, relating to procedure before the Commissioners (now the First tier Tribunal) were also amended by those Acts.
Together the provisions require a partnership to submit a partnership return, which is to contain a partnership statement with the particulars required by section 12AB(1).
That section, as further amended by the Finance Acts 1995, 1996 and FA 2001, (and in contrast to section 9 of TMA 1970, which applies to a personal return or a trustees return) does not actually include the expression self assessment, but that is its effect.
By section 12AC an officer of HMRC may give notice of enquiry into a partnership return.
The time limit for a notice of enquiry is generally a year from the due date for submission of the return.
Section 28B provides as follows: (1) An enquiry under section 12AC(1) of this Act is completed when an officer of the Board by notice (a closure notice) informs the taxpayer that he has completed his enquiries and states his conclusions.
In this section the taxpayer means the person to whom notice of enquiry was given or his successor. (2) A closure notice must either (a) state that in the officers opinion no amendment of the return is required, or (b) make the amendments of the return required to give effect to his conclusions. (3) A closure notice takes effect when it is issued. (4) Where a partnership return is amended under subsection (2) above, the officer shall by notice to each of the partners amend (a) the partners return under section 8 or 8A of this Act, or (b) the partners company tax return, so as to give effect to the amendments of the partnership return. (5) The taxpayer may apply to the Commissioners for a direction requiring an officer of the Board to issue a closure notice within a specified period. (6) Any such application shall be heard and determined in the same way as an appeal. (7) The Commissioners hearing the application shall give the direction applied for unless they are satisfied that there are reasonable grounds for not issuing a closure notice within a specified period.
Section 31(1)(b) gives the taxpayer a right of appeal against any conclusion stated or amendment made by a closure notice.
By section 31A(5) and (6) the notice of appeal must specify the grounds of appeal, but the Commissioners (or now the First tier Tribunal) may allow other grounds to be put forward.
Section 50 (as amended) regulates the disposal of the appeal: (6) If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other . evidence (a) that . the appellant is overcharged by a self assessment; (b) that . any amounts contained in a partnership assessment are excessive; or (c) that the appellant is overcharged by an assessment other than a self assessment, the assessment or amounts shall be reduced accordingly but otherwise the assessment or statement shall stand good. (7) If, on an appeal, it appears to the Commissioners (a) that the appellant is undercharged to tax by a self assessment . ; (b) that any amounts contained in a partnership statement . are insufficient; or (c) that the appellant is undercharged by an assessment other than a self assessment, the assessment or amounts shall be increased accordingly. (9) Where any amounts contained in a partnership statement are reduced under subsection (6) above or increased under subsection (7) above, an officer of the Board shall by notice to each of the relevant partners amend (a) the partners return under section 8 or 8A of this Act, or (b) the partners company tax return, so as to give effect to the reductions or increases of those amounts.
The procedural issue: the facts
This summary follows the agreed statement of facts and issues, which give details in relation to LLP2 only.
The facts are not materially different in relation to LLP1.
On 30 June 2005 HMRC issued a notice of enquiry in relation to LLP2s partnership return.
Meetings and correspondence ensued between HMRC and KPMG, acting for the LLPs.
HMRC concentrated its enquiries on section 45(4) of CAA 2001 (as inserted by the Finance Act 2003), which withholds FYAs for expenditure on software rights if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question.
HMRC asked for quite a lot of information, not all of which was supplied promptly.
On 24 May 2006 Mr Peter Honeywell, a director of KPMG, sent a six page letter to Mr Frost, the officer in charge of the enquiry, supplying a good deal more information.
The penultimate paragraph of the letter stated: The repayments claimed by a number of partners are currently being withheld and in these circumstances the partnerships generally are anxious to ensure that your enquiries are settled without delay.
In these circumstances I have to inform you that if we do not receive either confirmation that you can now agree the amounts claimed in the partners returns or a detailed explanation of your reasons for not doing so by 20 June 2006, we will apply to the Commissioners for a directive under section 28A(4) TMA 1970.
Mr Frost replied on 2 June 2006: In helping you to managing your clients expectations I can tell you that I very much hope to reply fully before 31 July, although if I have to defend an application for closure notice before then that date will obviously slip back.
In the event Mr Frost, after one more letter from Mr Honeywell, did issue a closure notice on 20 June 2006.
A great deal of expensive legal argument might have been avoided if Mr Frost had stood his ground and insisted that he needed more time to consider the matter.
The closure notice referred in its heading to LLP2 and section 28B of TMA 1970.
It read as follows (emphasis applied): I have now concluded my enquiries into the Partnership Tax Return for the year ended 5 April 2005.
As previously indicated, my conclusion is: The claim for relief under section 45 CAA 2001 is excessive.
The partnership return for the year ended 5 April 2005 is amended as follows.
Capital Allowances Nil Allowable Loss Nil.
There was a further paragraph dealing with the practical consequences of this conclusion.
The words As previously indicated in the closure notice call for emphasis because Henderson J regarded them as providing a context which the Special Commissioner had ignored.
The context was that Mr Frost had on 19 June 2006 written Mr Honeywell a letter concerned solely with the section 45(4) issue, and stating that there seems to be no further point in us debating [that] issue.
The closure notice was sent with a covering letter dated 20 June 2006 which stated: Given the content of my last letter to you I am satisfied that the MCashback scheme fails on the section 45(4) CAA 2001 point alone.
I would prefer to have had longer to examine the full records, as they have only been completely made available to me with your letter of 24 May.
This would enable me to provide your clients with a full list of additional points for their consideration.
In the circumstances I have to accept that any additional points that may arise will make no difference to the bottom line that no loss relief is due because of section 45(4).
Therefore as your clients are so very anxious to receive closure notices I now enclose copies of those that I have issued today.
Henderson J read this as Mr Frost making a conscious decision to pin his colours to the mast of section 45(4).
The alternative view is that Mr Frost saw section 45(4) as a sufficient reason for a decision to disallow the claims completely, but not necessarily the only relevant reason for doing so.
The procedural issue: discussion
Henderson J reached his conclusion despite his having correctly observed, at para 113: There is no express requirement that the officer must set out or state the reasons which have led him to his conclusions, and in the absence of an express requirement I can see no basis for implying any obligation to give reasons in the closure notice.
What matters at this stage is the conclusion which the officer has reached upon completion of his investigation of the matters in dispute, not the process of reasoning by which he has reached those conclusions.
He also observed (again, in my view, entirely correctly), at paras 115 116: There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the Commissioners in exercise of their statutory functions to have regard to that public interest. [The judge then considered changes in the tax system and continued] For present purposes, however, it is enough to say that the principle still has at least some residual vitality in the context of section 50, and if the Commissioners are to fulfil their statutory duty under that section they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice.
Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the Commissioners on their own initiative.
That is not to say, however, that an appeal against a closure notice opens the door to a general roving inquiry into the relevant tax return.
The scope and subject matter of the appeal will be defined by the conclusions stated in the closure notice and by the amendments (if any) made to the return.
Arden LJ reached the same conclusion as Henderson J but the majority of the Court of Appeal took a different view.
Moses LJ (with whom Scott Baker LJ agreed) observed, at para 32, that an appeal under section 31(1)(b) of TMA 1970 is confined to the subject matter of the conclusion.
On this point he approved and followed the decision of Dr John Avery Jones CBE in DArcy v Revenue and Customs Commissioners [2006] STC (SCD) 543.
Moses LJ (at para 41) took the view that it was for the Special Commissioner (or now the First tier Tribunal) to identify what section 28ZA describes as the subject matter of the enquiry.
The closure notice completes that enquiry and states the inspectors conclusions as to the subject matter of the enquiry.
The appeal against the conclusions is confined to the subject matter of the enquiry and of the conclusions.
But I emphasise that the jurisdiction of the special commissioners is not limited to the issue whether the reason for the conclusion is correct.
Accordingly, any evidence or any legal argument relevant to the subject matter may be entertained by the special commissioner subject only to his obligation to ensure a fair hearing.
There was little if any difference between the majority of the Court of Appeal and Henderson J as to the principles to be applied (Arden LJ did take a rather different approach).
The difference between the majority and the judge was as to the application of those principles.
I prefer the approach of Moses LJ, who set out his conclusions on this point at paras 50 51: I agree with Henderson J that the fact that the taxpayers had pressed the inspector to issue the closure notice had no relevance to the identification of the subject matter of the appeal.
It was, as he remarked, open to the inspector to delay until he had considered, for example, the business plan.
He chose not to do so.
But the fact that the inspector had indicated that there might have been other issues which arose, was relevant to the exercise of the special commissioners case management powers.
The taxpayer was not deprived of an opportunity fairly to marshal evidence as to the other grounds subsequently advanced by the Revenue on the appeal.
There is a second basis on which I differ from Henderson J. Apart from the importance of leaving it to the fact finding tribunal to determine the subject matter of the closure notice, in my view the closure notice itself does not allow of so restricted a view of the subject matter of the appeal.
Whilst it did refer to previous correspondence which clearly focussed on section 45(4), the closure notice itself was, in plain terms, a refusal of the claim for relief under section 45 CAA 2001.
That was the conclusion stated pursuant to section 28B(1).
There is neither statutory warrant nor any need to look further.
This should not be taken as an encouragement to officers of HMRC to draft every closure notice that they issue in wide and uninformative terms.
In issuing a closure notice an officer is performing an important public function in which fairness to the taxpayer must be matched by a proper regard for the public interest in the recovery of the full amount of tax payable.
In a case in which it is clear that only a single, specific point is in issue, that point should be identified in the closure notice.
But if, as in the present case, the facts are complicated and have not been fully investigated, and if their analysis is controversial, the public interest may require the notice to be expressed in more general terms.
As both Henderson J and the Court of Appeal observed, unfairness to the taxpayer can be avoided by proper case management during the course of the appeal.
Similarly Dr Avery Jones observed in DArcy, para 13: It seems to me inherent in the appeal system that the tribunal must form its own view on the law without being restricted to what the Revenue state in their conclusion or the taxpayer states in the notice of appeal.
It follows that either party can (and in practice frequently does) change their legal arguments.
Clearly any such change of argument must not ambush the taxpayer and it is the job of the Commissioners hearing the appeal to prevent this by case management.
CAA 2001
In Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51, [2005] 1 AC 684 (BMBF) Lord Nicholls of Birkenhead (delivering the opinion of the whole appellate committee) explained the general nature of capital allowances (para 3): A trader computing his profits or losses will ordinarily make some deduction for depreciation in the value of the machinery or plant which he uses.
Otherwise the computation will take no account of the need for the eventual replacement of wasting assets and the true profits will be overstated.
But the computation required by Schedule D (whether for the purpose of income or corporation tax) has always excluded such a deduction.
Parliament therefore makes separate provision for depreciation by means of capital allowances against what would otherwise be taxable income.
In addition, generous initial or first year allowances, exceeding actual depreciation, are sometimes provided as a positive incentive to investment in new plant.
In practice, generous FYAs have also provided a positive incentive to artificial tax avoidance schemes.
The relevant statutory provisions as to capital allowances are mostly in Parts 1 and 2 of CAA 2001.
They are set out quite fully in paras 15 to 27 of the judgment of Henderson J. Because there is now only a single substantive issue in dispute I can summarise them rather more briefly.
Allowances are available for capital expenditure on plant and machinery (section 1(1) and (2)(a)) which includes computer software (section 71, which makes appropriate modifications to the notions of providing and owning plant where it consists of computer software).
Allowances must be claimed (section 3).
There are fairly complex provisions as to when capital expenditure is incurred (section 5).
Section 5 is less directly in point than it was below, but it may be helpful to set out the relevant subsections: (1) For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it. (2) The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date. (3) There are the following exceptions to the general rule. (4) If under an agreement (a) the capital expenditure is expenditure on the provision of an asset, (b) an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event, (c) the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and (d) at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay, the expenditure is to be treated as incurred immediately before the end of that chargeable period. (5) If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date.
The claimant must carry on a qualifying activity, which includes a trade (sections 11(1) and 15(1)(a)).
The claimant must also incur qualifying expenditure (section 11(1) and (4)).
The last mentioned subsection provides: The general rule is that expenditure is qualifying expenditure if (a) it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and (b) the person incurring the expenditure owns the plant or machinery as a result of incurring it.
It is not suggested that the general rule is not applicable in this case.
The most important types of capital allowances are FYAs and writing down allowances.
FYAs are generally more attractive to the taxpayer, especially if they are granted at the rate of 100% of the whole expenditure. 100% FYAs were available under section 45 (ICT expenditure incurred by small enterprises).
That section (as amended by the Finance Act 2003) provided as follows: (1) Expenditure is first year qualifying expenditure if (a) it is incurred on or before 31 March 2004, (b) it is incurred by a small enterprise, (c) it is expenditure on information and communications technology, and (d) it is not excluded by section 46 (general exclusions) or subsection (4) below. (2) Expenditure on information and communications technology means expenditure on items within any of the following classes: Class A. Computers and Associated Equipment .
Class B. Other Qualifying Equipment .
Class C. Software This class covers the right to use or otherwise deal with software for the purposes of any equipment within Class A or B . (4) Expenditure on an item within Class C is not first year qualifying expenditure under this section if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question.
The various statutory conditions are brought together by section 52, which specifies the percentages for FYAs.
It is common ground that LLP2 was a small enterprise.
Originally HMRC relied on section 45(4) as excluding relief, but that contention was abandoned, rightly or wrongly, on the third day of the hearing before the Special Commissioner, and no attempt has been made to reintroduce it.
The purpose of section 45(4) was evidently to ensure that the full relief was available only to small enterprises which acquired software rights for use in their own business activities, and not simply as a source of income from licences.
The expenditure issue
As explained below, the investor members of the LLPs were individuals with large incomes who themselves put up only 25% of the consideration said to have been paid for acquiring rights in software.
The remaining 75% was provided by interest free loans on non recourse terms, made to the investor members by special purpose vehicles set up for the purpose.
HMRC rely strongly on the circularity of these transactions as more fully described below.
The essential issue (simply stated but not simply resolved) is whether the LLPs incurred capital expenditure, to the extent of the whole stated consideration, in acquiring software rights for the purposes of their trades.
The LLPs case is that they have plainly satisfied the statutory test, and that they have concurrent conclusions of the Chancery Division and the Court of Appeal in their favour (indeed Henderson J observed, at para 30, that in view of the Special Commissioners findings one might have thought that the answer to this question was obvious).
HMRCs case is that in relation to each of the LLPs there was a single composite transaction (that much, at least, is common ground, as the LLPs printed case refers to the wider transaction) and that by that transaction, realistically assessed, much less than the full claimed amount of the expenditure was incurred on the acquisition of software rights.
HMRCs printed case (para 66) puts its position as follows: The overall effect of the single composite transaction from LLP2s point of view is that the highly uncommercial loan reduced the cost to LLP2 of the software with the result that LLP2 did not incur expenditure of 27.5m for the purposes of CA 2001.
It did incur expenditure of at least 5m, but . it was for LLP2 to prove how much more than this it incurred, by giving evidence as to the value of its members liability under the Member Loans.
But LLP2 chose to give no evidence of this before the Special Commissioner.
In those circumstances the correct conclusion is that LLP2 incurred expenditure of only 5m.
Out of context, the value of its members liability under the Member Loans is a rather opaque expression, but I take it to mean the value of the benefit conferred by the highly uncommercial loan just referred to.
Those familiar with the leading cases in this troublesome area of the law will not be surprised to hear that the LLPs rely strongly on the decision of the House of Lords in BMBF [2005] 1 AC 684 and seek to distinguish the decision of the House of Lords in Ensign Tankers (Leasing) Ltd v Stokes [1992] 1 AC 655 (Ensign).
HMRCs position is not precisely the converse of that: they seek to distinguish BMBF but do not rely particularly strongly on Ensign, while repudiating any suggestion that Ensign has been impliedly overruled by BMBF.
The wider transaction: the participants
The arrangements in which the LLPs took part involved three main participants: MCashback Limited (MCashback) which developed and originally owned the software; Tower Group plc (Tower), a financial services company; and the LLP in question (I shall follow the courts below in concentrating on LLP2).
MCashback had a board of directors with what the Special Commissioner described as impressive credentials in the retailing world.
Its CEO was Mr Bob Cooper, who had been a main board director at Sainsbury.
MCashbacks board also included Dr Adrian Rowe (or Roe there are variant spellings in the papers), an IT expert who developed the software, and Mr Ahmed Zghari, its Chief Operating Officer.
Dr Rowe and Mr Zghari gave evidence to the Special Commissioner but Mr Cooper (who was principally responsible for income forecasts) did not.
The software was for a system described in the agreed statement of facts and issues (paras 27 28) as follows: MCashback had devised a complex software package, called the M Rewards system, to enable manufacturers to promote their products to retail customers by offering them free airtime on their mobile phones.
The manufacturers would pay MCashback a fixed fee, called a clearing fee, per transaction.
MCashback required additional funding to roll out the M Rewards system.
This potentially involved negotiations with manufacturers, supermarket groups and mobile phone companies around the world.
MCashback approached Tower Group plc (Tower), which had experience of arranging finance for similar software companies.
The funding arrangement proposed by Tower was for MCashback to sell part of its software (by means of SLAs) to four newly created Tower LLPs, the members of which would include Tower personnel and individual outside investors, for a total of 143 million; the LLPs would thereby acquire a right to receive part of the clearing fees derived from the exploitation of the M Rewards system.
In the event these ambitious plans were not realised.
Only LLP1 and LLP2 (which raised about 7.33m and 27.5m respectively after fees and expenses) completed their transactions in full; LLP3s completion was very much scaled down and LLP4 never completed its transaction at all.
Tower was involved in advising and making arrangements for the transactions between MCashback and the LLPs.
It had a subsidiary relevant to LLP2, Tower MCashback Finance UK 2 Limited (Tower Finance 2).
There was also an entity called Tower Project Finance LLP which acted in an advisory capacity.
Some of Towers personnel (Mr Paul Feetum, Mr Stephen Marsden and Mr Simon Smith) became founder members of the LLPs.
In the case of LLP1 they also became investor members, as mentioned below.
Mr Feetum and Mr Marsden gave evidence to the Special Commissioner.
The LLPs were to have founder members (who set them up and entered into contracts with MCashback before relief under section 45 ran out on 1 April 2004) and investor members.
The latter were to provide the funds and obtain the tax advantages of the FYAs.
LLP1 was very short of investor members, since a number of potential investors dropped out at a late stage, which was why the three founder members became investor members also.
LLP2, by contrast, had more than 50 investor members.
Its partnership return for 2004 5 shows that the partnership claimed an allowable loss of just under 30m, 27.5m of which was for capital allowances.
The largest claim for any individual member was 2,497,439, and the average claim was for a little over 500,000.
Most of the investors became partners during June or July 2004.
Apart from the three main groups of participants two banks, both based in Guernsey, were involved in the arrangements.
These were R & D Investments Ltd (R&D) and Janus Holdings Ltd (Janus).
As explained in more detail below, R&D held security deposits placed with it by MCashback, which R&D in turn deposited with Janus as security for a loan by Janus to a Tower Finance company (described in the schemes explanatory material as the Lending SPV).
The Tower Finance company made interest free non recourse loans to individual investor members of the LLPs.
The Special Commissioner concluded (para 127) that the function of the banks was window dressing, and was actually counter productive, since When I can discern no real change or implication or benefit that results from the insertion of the two banks, the fact that that interposition has increased costs, complexity, documentation and legal fees just serves to underline how vital it was thought to try to disguise the reality of what was happening.
The wider transaction: the documents
As already noted, it is not disputed that the sequence of events amounted to a prearranged, composite transaction of the type to which Lord Wilberforce referred 30 years ago in a famous passage in W T Ramsay v IRC [1982] AC 300, 326: To force the courts to adopt, in relation to closely integrated situations, a step by step, dissecting, approach which the parties themselves may have negated, would be a denial rather than an affirmation of the true judicial process.
In each case the facts must be established, and a legal analysis made: legislation cannot be required or even be desirable to enable the courts to arrive at a conclusion which corresponds with the parties own intentions.
In contrast to the timing of events in some other closely integrated situations which have been investigated in some of the well known authorities, the sequence of events in relation to LLP2 was quite protracted.
The completion of the transaction entered into on 31 March 2004, which was under the contract required to take place within four months (in order to satisfy section 5(5) of CAA 2001) was in the event delayed until mid January 2005, and in the meantime there seems to have been real doubt as to whether sufficient investor members would come forward to provide the cash sum of 7.5m (25% of 30m, which was the total sum required to meet the whole stated consideration of 27.5m together with 2.5m for fees and expenses).
There was also real doubt as to whether the M Rewards scheme would be as big a commercial success as the directors of MCashback hoped.
The smooth operation of the scheme was therefore by no means fully pre ordained.
But from 31 March 2004 it could be predicted with confidence that if the investors did come up with the necessary funds, their destination would follow a pre ordained pattern.
In order to bring the LLP1 and LLP2 transactions to completion ten significant documents (as well as many other more routine items) were executed or issued between 31 March 2004 and early 2005.
Those in the appeal papers are as follows (not all the specimen documents in the appeal papers relate to the same LLP): date (1) 31 March 2004 (2) 6 July 2004 Description Software licence agreement (SLA) Limited liability partnership agreement (the partnership agreement) Operations agreement (the operations agreement) Valuation report Information Memorandum Application form (specimen) Loan agreement (members loan agreement) Loan agreement Parties MCashback (1) LLP2 (then Tower Taxi Technology 34 LLP)(2) Original founder members (1) LLP2 (2) MCashback (1)LLP1 (2) LLP2 (3) LLP3 (4) LLP4 (5) Valuation Consulting Ltd (Mr Ian Brewer) Issued by Tower Project Finance LLP (relates to LLP3) PJ Donaldson (an adhering investor member of LLP2) Tower MCashback Finance (1) P J Donaldson (2) Tower MCashback (3) 6 July 2004 (4) 7 July 2004 (5) 12 July 2004 (6) 29 July (7) 30 July 2004 (8) 1 December 2004 Finance (1) Janus (2) (9) 12 January 2005 Guarantee and deposit R & D (1) Janus (2) agreement (10) 12 January 2005 Collateral agreement MCashback (1)R&D(2)
It is simplest to comment on these documents in chronological order, after a preliminary word about the position immediately before 31 March 2004.
The four LLPs were in existence, having been registered in the names of Tower Taxi Technology 34, 35, 36 and 38 LLP respectively.
It is apparent from the recitals and definitions in the specimen SLA that these four corporate limited partnerships were intended to be renamed as LLP1, LLP2, LLP3 and LLP4 respectively.
But in the event they changed their names on 14 April 2004 (after signature of the SLAs but before signature of the partnership agreements) so that 34, 35, 36 and 38 became 2, 3, 4 and 1 respectively.
In consequence the specimen SLA (describing itself as the LLP1 agreement) was entered into by LLP2 and the agreement defined as the LLP4 agreement was entered into by LLP1.
This produced some apparent inconsistencies in other documents.
Regrettably these facts were not explained to the Court (though counsel may have had the well meaning intention of avoiding unnecessary complication).
So what we are concentrating on is the LLP1 agreement, actually entered into by LLP2.
LLP1 and LLP2 each had three founder members who were part of the Tower team, and few if any investor members had committed themselves to investing.
The negotiations that were taking place were between MCashback and Tower and their respective advisers.
Within the last two or three days before the deadline on 1 April new advice seems to have raised doubt about the wisdom of software rights being acquired by different LLPs in undivided shares, leading to a last minute decision to bundle software into bits (as it was put in an email sent by Mr Feetum at 7.33am on 30 March 2004).
In addition there were still vigorous negotiations being conducted on other points (an email sent by Mr Feetum to his team at 7.45 am on 31 March 2004, describing his discussions with Dr Rowe, is vivid evidence of this).
Henderson J (at para 31) referred to the emails and was in no doubt that the SLAs were negotiated at arms length between wholly unconnected parties.
The Special Commissioner made these findings (para 44) about the decision to bundle the software rights into bits: An email from Towers lawyers on 29 March indicated however that there would be some problem in the LLPs simply purchasing percentage slices of the software, and therefore the solution was adopted that LLP1 would buy the Code Generation Software for 7.334m, carrying an entitlement to 0.66% of clearing fees and to 5.128% of the clearing fees allocable to all four LLPs; LLP2 would buy the Customer Support Software for 27.501m; LLP3 would buy the Call Centre Software for 45.835m and LLP4 would buy the fourth element of software for 62.33m.
Notwithstanding the allocations of specific software to each of the LLPs, the price payable by, and the percentage entitlement to clearing fees acquired by, each LLP retained their earlier matched relationship.
These details appear to be correct, despite the confusion resulting from the way in which the LLPs were renamed.
But it must be borne in mind that the SLA entered into by LLP2 had been drafted for LLP1 (that may be the explanation of a comment by Henderson J in the fifth sentence of para 36 of his judgment).
The heart of LLP2s SLA was an obligation on MCashback to grant an exclusive world wide royalty free licence to LLP2 to use the Licensed Software, defined as the Customer Support Interface.
The consideration was to be 27.501m payable on completion against an undertaking by MCashbacks solicitors to apply it in obtaining a release of an existing charge on the software and in the procurement of a new security.
LLP2 was to be entitled indefinitely to 2.5% of the (gross) clearance fees received from exploitation of the M Rewards system.
There is a full summary in the judgment of Henderson J which is readily available ([2002] STC 3366, 3411, paras 36 to 47) and I cannot hope to improve on it.
I gratefully adopt the description in para 42 of how the SLA looked forward to matters which had not yet been finally decided: It was always intended that each LLP would raise 75% of the finance which it needed by way of bank borrowing, and that MCashback would be obliged to deposit approximately 82% of the consideration which it received for the grant of the licence as an indirect security for that borrowing.
The details had not yet been worked out on 31 March 2004, and the identity of the two participating banks was still undecided.
However, the basic framework of the arrangements had been agreed, and this was reflected in the definitions in clause 1.1 of the SLA of the Bank Loan, Bank One, Bank One Security, Bank Two and Bank Two Security.
Clause 4.2(d) provided that on completion MCashback should deliver to Bank Two the Bank Two Security, and procure that Bank Two provide to Bank One the Bank One Security.
He then summarised Clause 4.2 and Clause 4.3, dealing with security.
Bank One was to have been Lloyds TSB, but turned out to be Janus.
Bank Two was to have been Halifax Bank of Scotland, but turned out to be R & D.
Had all four LLPs proceeded as Tower hoped, they would have produced a total cash investment (from investor members of the LLPs) of 39m, supplemented by bank loans from Janus (through the medium of a SPV, Tower Finance 2 in the case at LLP2) of 117m.
A total sum of 156m would have been paid out by the LLPs in three directions: (i) payment of fees and expenses of about 13m; (ii) payment to R & D of a security deposit of 117m; and (iii) payment of the balance of 26m to MCashback for its roll out expenses.
These figures are taken from paras 30 and 31 of the agreed statement of facts and issues.
As between the different LLPs the plan was as follows: % of clearing fees 0.66 consideration licensed software (m) LLP1 7.334 Code Generation system LLP2 27.501 2.50 Customer Support Interface LLP3 45.835 4.16 Call Centre system LLP4 62.330 5.68 Reporting Module ______ _____ 143.000 13.00 But as already mentioned, only LLP1 and LLP2 got far off the ground.
The authorities
In BMBF [2005] 1 AC 684, paras 26 to 38, the House of Lords (in an opinion of the appellate committee delivered by Lord Nicholls) gave a brief summary, under the heading The Ramsay Principle, of the laws development, during the past thirty years, in its attitude to artificial tax avoidance.
There is another, more detailed discussion of the same topic (starting with the heading Ramsay: A principle of construction? and going on with several other headings) in the opinion of Lord Hoffmann in MacNiven v Westmoreland Investments Ltd [2001] UKHL 6, [2003] 1 AC 311, paras 28 to 62.
Those passages are by now well known and I shall not try to summarise them.
But I wish to add a few footnotes.
The Ramsay case (Ramsay (WT) Limited v Inland Revenue Commissioners [1982] AC 300) was the fountain head, as Lord Hoffmann put it in MacNiven at para 30.
Nothing in Lord Wilberforces magisterial opinion in Ramsay was revolutionary, as he was careful to point out (p323).
It did not introduce a new, judge made principle (p326).
But the clarity of Lord Wilberforces insights was rather obscured by some subsequent decisions, especially (if I may respectfully say so) the opinion of Lord Brightman in Furniss v Dawson [1984] AC 474, 527.
There, Lord Brightman, in another very well known passage, following Lord Diplock in Inland Revenue Commissioners v Burmah Oil Co Ltd [1982] STC 30, 33, appeared to lay down a detailed and fairly inflexible prescription of how the Ramsay principle works.
Lord Hoffmann commented on this in MacNiven at para 49: In the first flush of victory after the Ramsay, Burmah and Furniss cases, there was a tendency on the part of the Inland Revenue to treat Lord Brightmans words as if they were a broad spectrum antibiotic which killed off all tax avoidance schemes, whatever the tax and whatever the relevant statutory provisions.
The need to recognise Ramsay as a principle of statutory construction, the application of which must always depend on the text of the taxing statute in question, was clearly recognised in Craven v White [1989] AC 398: see especially, in the House of Lords, Lord Keith of Kinkel at p 479 and Lord Oliver of Aylmerton at pp 502 503.
The House was split three two, the dissenters being Lord Templeman and Lord Goff of Chieveley, who gave the only two full opinions in the House of Lords unanimous decision in Ensign four years later.
The drawing back from the rigidity of Furniss v Dawson was continued by the important decisions in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991 (discussed by Lord Hoffmann in MacNiven at paras 51 to 57) and MacNiven itself.
There are also many helpful insights in the judgments in the Court of Final Appeal of Hong Kong in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46.
That is, in brief summary, the historical context of the decision of the House of Lords in Ensign.
Although the composite transaction considered in that case had to be gathered from no fewer than seventeen legal documents, and although the hearing before the Special Commissioners took 18 days, for present purposes the essential facts can be summarised quite briefly (the fullest statement of facts is to be found in the decision of the Special Commissioners [1989] STC 705: details of the setting up and operation of the scheme bank account can be found at pp 719 and 725).
Victory Partnership (VP) was a limited partnership formed under the Limited Partnerships Act 1907.
Ensign Tankers (Leasing) Ltd (Tankers) was one of the limited partners, with much the largest capital contribution.
VP agreed with Lorimar Productions Inc (LPI), a film production company, to acquire the right to make and exploit a film which was then in production (and which LPI agreed to continue to produce on behalf of VP). $4.780m had already been spent out of a budget of $13m.
VP agreed to pay $3.25m towards the cost of the film and LPI agreed to lend VP the balance of the budgeted sum (the production loan) and any further sum (the completion loan) needed if (as happened) the film went over budget.
To implement these arrangements a bank account (the scheme account) was opened by Guinness Mahon, a merchant bank specialising in such schemes.
The account was in the name of VP but could not be operated without the approval of a representative of LPI.
VP paid $3.25m into the scheme account, from which it was transferred to LPIs bank, Chemical Bank, to reduce LPIs indebtedness.
Lord Templeman described the subsequent operation of the account as follows ([1992] 1 AC 655, 664): Thereafter, when LPI required to spend or spent money in making the film, the amount involved was credited by LPI to the scheme current account (which was controlled by LPI) and returned to LPI on the same day for credit to its account at Chemical Bank.
The scheme current account was thus never in credit or debit at the close of any day and [VP] was never in debt as a result of the scheme.
In substance the film was funded by LPI borrowing from Chemical Bank.
VPs liability to repay the so called loans from LPI was limited both by the Limited Partnerships Act 1907 and by express terms in the scheme documents.
VP claimed capital allowances for the whole cost of producing the film.
Its claim turned on how much capital expenditure VP had incurred.
Lord Templeman differed from Millett J (the first instance judge) as to the significance of the non recourse nature of the loans (p 667): But the non recourse nature of the borrowing ensured that LPI paid the whole cost of the film exceeding $3m and conversely that [VP] would not be liable for the cost of the film in excess of $3m.
By the operation of the scheme current account in accordance with the provisions of the scheme, the money of LPI, at all times under the control of LPI, was electronically transferred from Hollywood to the City of London and back again without serving any useful purpose and leaving no trace except entries on computer prints.
After a wide ranging survey of authorities on tax avoidance Lord Templeman restated his conclusion at p 676: In the present case if LPI had been a British company, the fact that LPI borrowed $10m from Chemical Bank to enable LPI to make the film would not have denied to LPI a first year allowance equal to the sums borrowed and expended.
But [VP] neither borrowed nor spent $10m.
Lord Goff took the same view.
He observed at p 682: I accept, too, that money was indeed paid by LPI to VP on the various occasions when the relevant account was credited; although that too was deprived of any practical effect by the immediate repayment, on the same day, of exactly the same sum from that account.
What I have to do, however, is to stand back from the composite transaction; to look at it as a whole; and to decide, first, what is the true nature and effect of the transaction and, second, whether, on a true construction of section 41(1) of the Finance Act 1971, VP is entitled to an allowance in respect of the whole of the cost of the film, viz $14m.
When I embark upon this process, I find it impossible to characterise the money paid by LPI into the bank account to the credit of VP as, in any meaningful sense, a loan.
It was not in my opinion money lent to VP to enable VP to finance the production of the film.
It was money paid by LPI into the bank account opened in VPs name to enable VP to indulge in a tax avoidance scheme, and for no other purpose.
Here Lord Goff emphasised that the Ramsay principle is indeed a principle of construction.
He focused on the text of section 41(1) of the Finance Act 1971 (in terms not materially different from those of CAA 2001), and answered the ultimate question . whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically (Ribeiro PJ in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46, para 35, quoted by Lord Nicholls in BMBF at para 36).
In the result the House of Lords concluded that VP had spent $3.25m, not $14m, on production of the film, and that was the extent of VPs entitlement to capital allowances.
This Court has not been invited, formally or informally, to overrule or depart from Ensign.
HMRC suggest in their printed case that Henderson J treated it as impliedly overruled by BMBF, but I do not read his judgment in that way.
He did state (para 62) that BMBF is now the leading case in this area.
But in BMBF the House of Lords did not mention Ensign, though it was cited, and in the Court of Appeal ([2002] EWCA Civ 1853, [2003] STC 66) only Peter Gibson LJ (paras 40 41) referred to it, without in any way questioning it.
He impliedly distinguished it (as I understand those paragraphs) on the basis that Ensign was not a case in which the money went round in a circle; more simply, nothing happened to the money.
At first instance in this case Henderson J referred to Ensign once only, at para 48, in a passage dealing with the opinion of tax counsel which had been provided to prospective investor members of the LLPs.
The decision of the Court of Appeal in BMBF is of interest for another reason.
Both Peter Gibson LJ (with whom Rix LJ agreed) and Carnwath LJ (at paras 44 and 69 to 73 respectively) courteously expressed difficulty with the distinction between legal and commercial concepts drawn by Lord Hoffmann in MacNiven in relation to the construction of tax legislation.
Para 38 of Lord Nicholls opinion in BMBF may perhaps be regarded as something of a strategic withdrawal by the House of Lords from a position which, if not untenable (indeed perhaps something of a truism), was likely to give rise to misunderstandings.
I must now come to what BMBF itself decided.
It was a leasing finance scheme entered into by the taxpayer (which I shall call Barclays Finance to distinguish the body corporate from the decided case).
Barclays Finance was described by Lord Nicholls as the UK market leader in this field.
Under the scheme Barclays Finance paid about 91m to acquire a newly constructed gas pipeline under the Irish Sea from its owner, Bord Gais Eireann (BGE), an Irish statutory corporation.
The pipeline was then leased by Barclays Finance to BGE for an initial term of about 30 years, at an escalating rent, and subleased by BGE to a subsidiary, with which BGE also entered into a transportation agreement and other arrangements under which the subsidiary operated the pipeline.
Barclays Finance borrowed the whole of the 91m from Barclays Bank at a fixed commercial rate (10.95%).
The sum received by BGE was deposited with a Jersey company called Deepstream, which undertook complicated obligations to make a range of periodical payments to BGE.
The deposit with Deepstream returned, via an Isle of Man Barclays subsidiary, to Barclays Banks Treasury.
So it was a case in which the money could be said to have gone round in a circle.
These transactions were entered into at the end of 1993, that is fairly soon after the decision of the House of Lords in Ensign.
The schemes tax implications did not however come before the Special Commissioners until 2001.
The Special Commissioners concluded that the scheme had no commercial reality, a conclusion that the Court of Appeal (paras 32 36 and 52 59) found insupportable.
The first instance judge, Park J ([2002] STC 1068), had upheld the Special Commissioners but on the different and narrower ground (as Peter Gibson LJ put it [2003] STC 66, para 18) that this was not a case where the finance enabled the lessee to have the use of an asset which, absent the lease finance, it would not have, nor was it a case where the lessee uses the proceeds of sale to repay borrowings or for other purposes of the lessees business. [Park J] described all those cases as being where the finance lessor provided up front finance to the lessee and the finance so provided is used in the lessees business.
He contrasted that with the present case where BGE already owned the Pipeline, and after the transaction it was still able to use it as before, though by virtue of the Headlease, the Sublease and the Transportation Agreement, and it still owed the banks the money which it had borrowed, nor was the 91,292,000 available for BGE to use in any other way to finance transactions or activities of its business.
Peter Gibson LJ disagreed (para 37): Section 24 focuses on the incurring of expenditure by the trader on the provision of plant or machinery wholly and exclusively for the purposes of his trade.
It therefore requires one to look only at what the taxpayer did.
To the test posed in section 24 it is immaterial how the trader acquires the funds to incur the expenditure or what the vendor of the provided plant or machinery does with the consideration received.
So did Carnwath LJ (para 54): However, there is nothing in the statute to suggest that up front finance for the lessee is an essential feature of the right to allowances.
The test is based on the purpose of the lessors expenditure not the benefit of the finance to the lessee.
Nor, as the judge recognised, should it make any difference whether the arrangements by which the tax advantage was achieved were simple or, as the Commissioners thought in this case, complicated [and] convoluted.
Carnwath LJ also stated, in a passage at para 58 to which Moses LJ attached great importance (he quoted it twice, at paras 69 and 86 of his judgment in the Court of Appeal, supplying emphasis as below): There might be more room for argument as to whether there was expenditure, given the apparent circularity of the payments.
However, once one accepts the transfer of ownership, it is difficult to question the reality of the expenditure by which the purchase price was discharged.
I have discussed the decision of the Court of Appeal in BMBF at some length because it was the latest relevant authority when MCashback and Tower were planning and negotiating their arrangements; HMRCs appeal to the House of Lords was pending (Henderson J referred to this in para 48 of his judgment).
Moreover the single opinion of the House of Lords amounted to a general endorsement of the decision of the Court of Appeal (I have already referred to the matter of the legal commercial concept dichotomy).
The House of Lords summarised their conclusion in para 42: If the lessee chooses to make arrangements, even as a pre ordained part of the transaction for the sale and leaseback, which result in the bulk of the purchase price being irrevocably committed to paying the rent, that is no concern of the lessor.
From his point of view, the transaction is exactly the same.
No one disputes that [Barclays Finance] had acquired ownership of the pipeline or that it generated income for [Barclays Finance] in the course of its trade in the form of rent chargeable to corporation tax.
In return it paid 91m.
The circularity of the payments which so impressed Park J and the Special Commissioners arose because [Barclays Finance], in the ordinary course [of] its business, borrowed the money to buy the pipeline from Barclays Bank and Barclays happened to be the bank which provided the cash collateralised guarantee to [Barclays Finance] for the payment of the rent.
But these were happenstances.
None of these transactions, whether circular or not, were necessary elements in creating the entitlement to the capital allowances.
The decision of the Special Commissioner
The Special Commissioner had an unenviable task and it is clear that he must have devoted a lot of time and thought to the preparation of his written decision, which runs to 176 paragraphs.
The decision attracted a good deal of criticism from Henderson J (in particular paras 60, 61 and 74 to 84 of his judgment), and some of the judges criticisms have force.
The Special Commissioner reached a conclusion which had not been contended for by either side, which is an adventurous course to take in a complex tax case (see Billingham v Cooper [2001] EWCA Civ 1041, [2001] STC 1177, para 31).
Nevertheless the Special Commissioner was the fact finding tribunal, and his findings of fact can be departed from by appellate courts only on the principles laid down in Edwards v Bairstow [1956] AC 14.
The most important findings made by the Special Commissioner include the following: (1) the scheme was not a sham, but it was pre ordained and designed as a composite whole (paras 128 132); (2) the market value of the software rights disposed of was very materially below the price ostensibly paid for those rights (para 99, elaborated at paras 100 to 111); (3) the last minute decision to sell the software in bits added to the artificiality of the valuations (para 103); (4) there was little chance that the members loan would be repaid in full within ten years; as much as 60% of the loans might be unpaid, and waived, at the end of that period (para 57); (5) there was no commercial justification for the insertion into the scheme of the two banks, R & D and Janus (paras 66, 127); and (6) the consideration paid by the LLPs was not paid partly for soft finance, which was the Special Commissioners own third approach (paras 113 121).
The Special Commissioners conclusion on the expenditure point, so far as it is to be found in any single paragraph, is probably to be found in para 138: The question that I have to address, therefore, is whether it is appropriate to say that capital expenditure of the gross figures has been incurred when the seller has filtered back 75% of the price to the investor members of the LLPs via the cosmetic banking chain, when the reality is that there is a great likelihood that a substantial proportion of the wholly uncommercial loans will eventually be waived, and when, in the meantime, any partial repayments of the loans will be liable to be made on an entirely contingent basis.
And when I address that question by looking at the legal reality of what has occurred, and at the money movements, rather than looking fixedly at discredited labels attached to the transactions by the parties, I conclude that the gross capital expenditure has not been incurred.
On a purposive basis it seems to me that the investor members and the LLPs have so far incurred the 25% element of the total price, and that the LLPs will incur further capital expenditure if and to the extent that the LLPs discharge members loans on their behalf by the envisaged application of 50% of clearing fees.
The judgment of Henderson J
Henderson J dealt with the expenditure issue at paras 30 to 86 of his judgment.
Paras 30 to 61 are concerned with the facts and I have already summarised the judges careful exposition of the scheme documents.
Paras 62 to 71 are concerned with the law, especially the decisions of the Court of Appeal and the House of Lords in BMBF which (as already noted) the judge described as the leading case.
The judges discussion of the issue and his conclusions are to be found in fifteen closely reasoned paragraphs, 72 86.
sentence of para 72: In fact the judge began the discussion by stating his conclusion in the first In the light of the principles laid down in BMBF and MacNivens case, there cannot in my judgment be any real doubt about the answer to the Expenditure Issue.
The whole of the purchase price of 27.501m was expended by LLP2 on the acquisition of the software, and it was not expended on anything else.
The rest of the paragraph provides the principal reasons for this conclusion: (1) the purchase price was negotiated at arms length between wholly unconnected parties; (2) title to the software rights passed on completion in January 2005; (3) what happened to the purchase price of 27.501m after it had been paid by LLP2 to MCashback is immaterial, because section 11 of CAA 2001 requires one to look only at what the taxpayer did (BMBF in the Court of Appeal, per Peter Gibson LJ [2003] STC 66, para 37).
Henderson J treated the circularity of the movement of the 22.5m as irrelevant, as it had been in BMBF (para 73 of his judgment).
He thought that the Special Commissioner had been distracted from the true question by a combination of errors into an unsound approach of his own devising (para 74).
In particular: (1) the Special Commissioner had considered the authorities only after reaching his own provisional view, and treated BMBF as irrelevant (para 75); (2) he had been greatly over influenced by his views on the question of valuation, which he had discussed at great length, expressing his conclusions in colourful and sometimes contradictory terms (para 76); (3) market value was, Henderson J stated, completely irrelevant to the expenditure issue, as HMRC were not relying on any of the anti avoidance provisions in section 214 216 of CAA 2001 (para 77); and (4) in any event the criticisms of the evidence of Mr Brewer (who made the valuation report dated 7 July 2004) were largely unfounded, showing a fundamental confusion between the prediction of future income and the valuation of predicted income (para 78).
Henderson J then turned (paras 79 83) to the Special Commissioners four possible approaches.
The judge considered that the approach that was correct in law was the second approach, that is that the market value of the acquired software might be materially lower than the price paid for it in this case, but that nevertheless the LLPs should still be entitled to claim capital allowances by reference to the full price paid because, whilst the LLPs might only have paid that price because of the non recourse loans provided to the members to contribute their capital, the LLPs have nevertheless paid the full price for the software and nothing can adjust that analysis for tax purposes.
The judge agreed with the Special Commissioner as to the difficulties in the third (soft finance) approach, while commenting that on his own findings the Special Commissioner should logically have accepted it.
The Special Commissioner had been entitled to conclude that the insertion of the two banks had no commercial justification (para 84 of the judges judgment) but nevertheless the only real transaction was the transaction which the parties actually carried out, involving the banks.
The judge rejected the argument that BMBF was distinguishable because in that case the circularity was happenstance.
His conclusions can be found in paras 85 and 86: I accept that there are distinctions between the facts of the present case and those of BMBF, and I would agree that in the absence of evidence from the banks the Special Commissioner was entitled to be sceptical about the commerciality of the arrangements into which they entered.
It seems to me, however, that none of this advances the Revenues case, because it does not impinge on the narrow question whether LLP 2 incurred the relevant expenditure on the acquisition of the software.
The judge referred to MacNivens case, and continued: I hope I have now said enough to explain why in my judgment the Special Commissioners conclusion on the Expenditure Issue cannot stand, and in the absence of a finding of sham the only conclusion open to him was that the whole of the consideration for the software, when it was paid on completion of the SLA in January 2005, was expenditure incurred on the provision of plant within the meaning of section 11 of CAA 2001.
The Court of Appeal
In the Court of Appeal the only full judgment on the expenditure issue is that of Moses LJ.
His judgment covers this issue at paras 56 to 87.
He referred at some length to BMBF in the Court of Appeal and the House of Lords (paras 61 to 72), and to Ensign in the House of Lords (paras 73 78).
He did not accept the submission (made on behalf of the LLPs) that BMBF shows that the terms of borrowing are simply irrelevant (paras 78 79): The terms of the borrowing, in the context of all the facts, may be relevant in order to cast light on whether LLP2 had really incurred expenditure, as Carnwath LJ foresaw ([2003] STC 66, para 58).
The source of the money was irrelevant in BMBF because the borrowing was on regular, commercial terms.
Rather than regarding the terms on which LLP2 borrowed 75% of the consideration as simply irrelevant, the Court should consider them in relation to the fundamental question whether the taxpayer suffered the economic burden of paying the full amount.
By doing so, it is possible to decide whether there was real expenditure.
Moses LJ put aside (paras 80 to 81) the issue of whether incurring expenditure was a legal or commercial concept.
The rest of the judgment of Moses LJ (paras 82 to 87) concentrated on the question whether there was real expenditure by the LLPs (without any emphasis on the question for what the expenditure was incurred).
Moses LJ distinguished Ensign on two principal grounds.
The first was (para 84): Whilst there was an expectation, on the basis of conservative predictions, that the whole of the loan agreement would not be paid off in full over the period of ten years, it cannot be shown that the terms were such that the loan was never likely to be repaid.
It all depended on success in marketing the software.
In Ensign, the loan never had to be repaid whatever success the film achieved.
The last sentence was challenged by Mr Prosser as factually incorrect.
The second point of distinction perceived by Moses LJ was (para 85): LLP and its members owned free of any liability software which could generate a substantial proportion of an annual income which the projections showed to be approximately 38m.
In Ensign Tankers, the partnership never acquired a right to more than 25% of the returns.
In my view this is a seriously oversimplified version of the facts in each case.
The LLPs did not own the software; they owned rights in bits of the software which together (if the whole plan had gone through) would have brought them 13% of the clearing fees (one component in computing in MCashbacks trading profit).
VP did own the whole of the master negative of the film, but that ownership did not entitle VP to the whole net profits from the film, because there were also heavy distribution and exploitation costs to be incurred by other companies connected with LPI before the film earned what it had cost to make.
Moses LJ set out his conclusion in para 86 (referring back to para 85): It is this feature which to my mind is the most important ground for distinguishing Ensign Tankers and this appeal.
The ownership of the software agreement was transferred to LLP 2.
The question of transfer of ownership casts a clear light on the reality of the expenditure, just as it did in Ensign Tankers.
It was unacceptable to contemplate that [VP] had incurred 100% of the expenditure on the film in acquiring a mere 25% of the rights.
But the fact that LLP2 acquired the right to the full economic benefit of the agreement is a powerful, and, to my mind, a determinative feature of this appeal.
It is worth repeating part of Carnwath LJs judgment (at para 85) which I cited earlier: However, once one accepts the transfer of ownership, it is difficult to question the reality of the expenditure by which the purchase price was discharged.
Discussion and conclusions
I start from the Special Commissioners findings of fact summarised in para 55 above.
Henderson J accepted (1) (not sham, but pre ordained) and (5) (no commercial purpose for insertion of banks, but with the qualification that it was nevertheless the only real transaction).
He did not disagree with (6) (the Special Commissioners rejection of his third approach) while commenting that logically he would have expected the Special Commissioner to accept it.
As to (4) (prospect of repayment of members loans) the judge set the bar (to my mind) surprisingly low in commenting (para 81) that the Special Commissioner recognised that there was (at the lowest) a real possibility that the clearing fees derived from the software would be sufficient to ensure that at least some of the 75% loan finance would be repaid.
The judge strongly disagreed on (2) (valuation) and did not mention (3) (disposition and valuation of rights to software in bits).
Before disagreeing strongly with the Special Commissioners views on valuation, Henderson J stated (para 77) that the market value of the software was completely irrelevant.
That is, in my view, putting it a good deal too high.
It is true that HMRC (for reasons that I do not understand) made no attempt to invoke any of the anti avoidance provisions in CAA 2001.
But I cannot accept that the question of valuation was totally irrelevant in the context of a complex pre ordained transaction where the court is concerned to test the facts, realistically viewed, against the statutory text, purposively construed.
Henderson J went on to say that the Special Commissioner betrayed a fundamental confusion between the prediction of future income and the valuation of predicted income (Mr Brewers task being limited to the second function).
That comment preserves Mr Brewers professional reputation he was acting in accordance with his instructions but to my mind (as to the Special Commissioners mind) it leaves the valuation of the software, on the basis of predicted income derived solely from Mr Coopers revised business plan, as lacking any sort of independent professional approval.
I see great force in the Special Commissioners comment (para 104) that in rightly following the instructions that he was given, Mr Brewer naturally produced a fairly useless conclusion.
Mr Brewer himself said that a far more extensive exercise would have been required by a private equity firm investing, and that the present valuation was only good enough for Inland Revenue purposes.
Moreover the LLPs were not buying the software, either as a whole or even in bits.
They were acquiring a licence to use it which was far short of absolute ownership (clause 7.4 of the SLA restricted their right of access to the source code, and there seems to have been no evidence certainly there was no finding about any separate escrow agreement made under that sub clause).
In practice, even if all four of the LLPs had completed as planned, they would together have received no more than 13% of the clearance fees in respect of their rights in the software.
Cooperation between MCashback and the LLPs was to take place under the opaque terms of the operating agreement.
That, on the LLPs case, was the consideration for which they would have been paying 156m (had all the schemes gone through).
All those points would arise even in the absence of the last minute change when it was decided to sell the software rights in bits.
The Special Commissioner speculated as to which bits, if any, remained unsold (see para 103: his reference to a retained interest in 87% of the clearance fees seems to have overlooked that the LLPs 13% was a gross figure).
A confidential report dated 5 July 2004 made by Mr John Heap, an IT expert, suggests that the four systems allocated to the four LLPs (Code Generation, Reporting Module, Customer Support Interface and Call Centre Interface) were the essential parts of the system.
But the report (though written more than three months after the SLAs were entered into) reports a different allocation (LLP1 Customer Support Interface; LLP2 Call Centre Interface; LLP3 Reporting Module; LLP4 Code Generation).
Both sides accept that that is wrong, and that Mr Heap must have been misled by his instructions.
Mr Brewers valuation does not specify the categories of software to which it apportions the total valuation of 145m to 150m, nor does it explain the basis on which the apportionment has been made.
The fact that these errors and omissions were made and apparently caused no concern emphasises the extreme unreality of selling the software rights in bits, when they were parts of a closely integrated system designed for a specialised task.
To my mind it is only a little less unreal than for a syndicate which owns a racehorse in undivided shares to decide, 48 hours before the big race, to partition the animal so that one member takes the head and neck, and another the off hind leg, and so on.
A further indication of how little practical importance seems to have been attached to the division of the software rights, and what they were to earn, is that the reader of the information memorandum relating to LLP3 has to get to p 42, if he gets that far, before learning that the rights in the Call Centre Interface (itself mentioned on p 12) are to earn 4.16% of the clearing fees.
For these reasons I respectfully consider that the judge, although correct in his view that market value was not determinative, and also correct in thinking that the Special Commissioner had used unnecessarily colourful and contradictory language, was wrong to dismiss, as sweepingly as he did, the Special Commissioners scepticism about the valuation of the software rights, and the commercial soundness of the transactions.
The judge also downplayed the Special Commissioners doubts about the prospects of the members loans being repaid within ten years.
He treated the case as essentially similar to BMBF, while conceding that there were factual points of difference.
The essential point that he took from BMBF (in para 84 of his judgment) was that CAA 2001 is resistant to an approach on Ramsay lines, because it focuses attention solely on the position of the purchaser.
In conclusion on this issue he stated (para 86, which I have already quoted): In the absence of a finding of sham the only conclusion open to him was that the whole of the consideration for the software . was expenditure incurred on the provision of plant within the meaning of section 11 of CAA 2001.
I respectfully think that that was wrong in law, and overlooked the continuing validity of the decision of the House of Lords in Ensign.
It is not clear to me how far the judge, in these conclusions, was relying on the Special Commissioners rejection of his own third approach, the soft finance analysis (to which the judge had referred in para 30 of his judgment, at the very start of his discussion of the expenditure issue).
The grounds on which the Special Commissioner rejected the soft finance analysis (paras 113 121 of his decision) are to my mind rather confused.
He recognised that it does not involve any re analysis of the transactions.
Ultimately he seems to have rejected it mainly on the practical grounds of difficulty of valuation (though he had, both at a directions hearing and on the first morning of the main hearing, refused HMRCs application for an adjournment in order to obtain expert evidence on valuation matters).
He was also apparently influenced by the thought that it would be unrealistically harsh to deprive the investor members of possible future claims for capital allowances in later years.
I find those reasons unconvincing.
HMRC has now abandoned the soft finance argument as such.
But it has not vanished completely, as appears from para 66 of HMRCs printed case, quoted at para 25 above.
Before this Court Mr Prosser argued (though this is probably an oversimplification of his more subtle arguments) that even if an investor member did spend the money which he borrowed (say 225,000) as well as his own money (say 75,000) he did not incur expenditure of 300,000 on acquiring software rights, because only 50,000 of the money reached MCashback, and 225,000 went into a loop from which MCashback received no immediate benefit at all.
If in the future money were to flow back to MCashback out of the loop it would be because of its own commercial success in generating clearing fees.
Whatever the 225,000 was spent on, it was not spent in acquiring software rights from MCashback, because the 225,000 never reached MCashback (I leave open for the present the expenditure, in this example, of the odd 25,000 on fees and expenses).
The judge was right to emphasise that the transaction was the subject of tough negotiation between MCashback and Tower (whose founder members stood to make a large gain, when the investor members rights had been fully satisfied, if the M Rewards scheme was as successful as both sides hoped it would be).
The negotiations were tough because MCashback (unlike BGE in BMBF) really did need up front finance in order to roll out its software and give effect to its business plan.
It saw itself as parting with potentially very valuable rights indefinitely (the investor members dropped out after ten years, but the founder members did not) for only a modest part (just over 18% before fees and expenses, or just under 17% after fees and expenses) of the total capital apparently being raised.
That was because 75% of the capital raised, although not simply a sham, was really being used in an attempt to quadruple the investor members capital allowances.
That is what the tough bargain which Tower struck with MCashback enabled Tower to offer to its investor members.
I have already (para 47 above) quoted Lord Goff in Ensign [1992] 1 AC 655, 682.
The facts of that case were different, since in that case there was not in any meaningful sense a loan at all.
In this case there was a loan but there was not, in any meaningful sense, an incurring of expenditure of the borrowed money in the acquisition of software rights.
It went into a loop in order to enable the LLPs to indulge in a tax avoidance scheme.
Despite the shortcomings in his decision, the Special Commissioner was essentially right in his conclusion in para 138 (quoted in para 56 above).
I respectfully consider that Moses LJ was right in deriving assistance from Ensign (paras 78 and 79 of his judgment, quoted in para 62 above) as to the relevance of the terms of the borrowing (here interest free and non recourse).
But I respectfully think that he was wrong to concentrate on the terms as an indication of whether there was real expenditure.
That was the issue in Ensign (no real loan, no real expenditure).
Here the issue was whether there was real expenditure on the acquisition of software rights.
I think that Moses LJ gave the right answer to the wrong question.
The transfer of ownership (or at least of rights) indicated the reality of some expenditure on acquiring those rights, but was not conclusive as to the whole of the expenditure having been for that purpose.
Moses LJ was also wrong (on the point of fact raised by Mr Prosser) in saying that in Ensign the loan never had to be paid, whatever success the film achieved: see [1992] 1 AC 655, 663 (Lord Templeman) and 683 (Lord Goff); also the detailed case stated at [1989] STC 705, 721 722, summarising clause 11 of the distribution agreement.
One of the lessons of BMBF is that it is not enough for HMRC, in attacking a scheme of this sort, to point to the money going round in a circle.
Closer analysis is required.
In BMBF the whole 91m was borrowed by Barclays Finance from Barclays Bank on fully commercial terms (though they were companies in the same group) and Barclays Finances acquisition of the pipeline was on fully commercial terms.
BGE had the whole 91m at its disposal, and though it was disposed of at once under further pre arranged transactions, those transactions were entirely for the benefit of BGE.
BGE had no pressing need for upfront finance (which is not, contrary to what Park J supposed, an essential feature of a leasing scheme capable of generating capital allowances).
In the present case, by contrast, the borrowed money did not go to MCashback, even temporarily; it passed, in accordance with a solicitors undertaking, straight to R & D where it produced no economic activity (except a minimal spread for the two Guernsey banks) until clearing fees began to flow from MCashback to the LLPs (in an arrangement comparable, though not closely similar, to the arrangements between LPI and VP in Ensign).
The LLPs relied on the decision of the House of Lords in Corporation of Birmingham v Barnes [1935] AC 292.
The Corporation was held to be entitled to wear and tear allowances in respect of the whole cost of building and renewing tramways although it had received contributions to the cost from two sources (a factory owner benefited by the tramway and a government grant to encourage public works as a means of reducing unemployment).
The statutory words to be construed were the actual cost to the Corporation.
Lord Atkin (with whom the rest of the House agreed) understood the words as directed (p 298) to the amount which the Corporation paid for the tramway works, regardless of the source of its funds.
That does not assist the LLPs, which did not pay the borrowed money to MCashback to acquire software rights.
Instead they put it into a loop as part of a tax avoidance scheme.
For these reasons I would allow HMRCs appeal, dismiss the LLPs cross appeal, and set aside the orders of the Court of Appeal and Henderson J.
I have considered whether it would be right (especially in view of the factual confusion and absence of any valuation evidence about the allocation of software rights) to remit the matter to another Special Commissioner for further findings.
But I do not think it would be right to do so.
Neither side asked for a remission, and the Special Commissioner himself twice refused an adjournment for further valuation evidence to be adduced.
No one has suggested that that case management decision should now be revisited.
I would direct the conclusions and amendments in the closure notices to be amended to allow 25% only of the FYAs claimed.
That is in one way generous to the LLPs, since in fact about one third of their contribution (the 25,000 in the example given above) was devoted to fees and expenses.
But I think it would, in all the circumstances, be the fair outcome in a confusing case.
If a majority of the Court agrees with my conclusion, it is to be expected that commentators will complain that this Court has abandoned the clarity of BMBF and returned to the uncertainty of Ensign.
I would disagree.
Both are decisions of the House of Lords and both are good law.
The composite transactions in this case, like that in Ensign (and unlike that in BMBF) did not, on a realistic appraisal of the facts, meet the test laid down by the CAA, which requires real expenditure for the real purpose of acquiring plant for use in a trade.
Any uncertainty that there may be will arise from the unremitting ingenuity of tax consultants and investment bankers determined to test the limits of the capital allowances legislation.
LORD HOPE
I accept with gratitude Lord Walkers careful description of the facts of this case, his discussion of the authorities and the conclusions that he has reached.
Like him, I would dismiss the cross appeal by the LLPs on the procedural issue, allow HMRCs appeal on the expenditure issue and make the order that he proposes.
I would however like to add one or two footnotes to what he has said.
The procedural issue
The stage at which an enquiry under section 12AC(1) of TMA 1970 is completed is identified by a notice given under section 28B by the officer in charge of the enquiry to the taxpayer.
Section 28B(1) describes this as a notice which informs the taxpayer that the officer has completed his enquiries and states his conclusions.
If an amendment to the return is required to give effect to his conclusions, section 28B(2) requires him to make those amendments.
The taxpayer has a right of appeal under section 31(1)(b) of TMA 1970 against any conclusion stated in or amendment made by a closure notice.
So it is desirable that the statement by the officer of his conclusions should be as informative as possible.
This is because of the function that the terms of the notice will serve in identifying the subject matter of any appeal.
In this case the closure notice that Mr Frost issued was in very bald terms.
All he said was that the claim for relief under section 45 CAA was excessive, and that the amount in the return for capital allowances was amended to nil.
No details were given of the reasons why he had reached the conclusion to which his amendment gave effect.
The statute does not spell out exactly what it means by the words his conclusions.
But taxpayers are entitled to expect a closure notice to be more informative.
Notices of this kind, however, are seldom, if ever, sent without some previous indication during the enquiry of the points that have attracted the officers attention.
They must be read in their context.
In this case Mr Frost drew attention to this when he prefaced his conclusion with the words as previously indicated.
He also sent a covering letter which cast further light on the approach which he had taken to the various issues that had been under examination.
In these circumstances it does not seem unfair to the LLPs to hold that the issue as to their entitlement to the allowances claimed should be examined as widely as may be necessary in order to determine whether they are indeed entitled to what they have claimed.
Furthermore, while the scope and subject matter of the appeal will be defined by the conclusions and the amendments made to the return, section 50 of TMA does not tie the hands of the Commissioners (now the Tax Chamber) to the precise wording of the closure notice when hearing the appeal.
I would therefore respectfully endorse the points that Lord Walker makes in para 18.
Our decision to dismiss the cross appeal should not be taken as indicating that uninformative closure notices of the kind that Mr Frost, no doubt under pressure, issued in this case should be the norm.
The aim should be to be helpful, both to the taxpayer and to the Tax Tribunal which will have to case manage any appeal.
The officer should wherever possible set out the conclusions that he has reached on each point that was the subject of enquiry which has resulted in his making an amendment to the return.
The expenditure issue
The issue, reduced to its simplest terms, is whether the whole of the 27.5m paid by LLP2 to MCashback under the terms of the software licence agreement was expenditure incurred by LLP2 on the provision of software within the meaning of the Capital Allowances Act 2001.
The general rule itself is not in doubt.
Expenditure is qualifying expenditure if it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure: CAA, section 11(4).
The problem that the facts of this case give rise to is the extent to which surrounding circumstances, such as the source and destination of the funds expended and the commercial soundness of the transaction when looked at as a whole, may be taken into account in an assessment of the question whether the taxpayer was involved in expenditure that entitled it to the allowance claimed.
The case for the LLPs was that transfer of ownership was itself enough to show that real expenditure was incurred.
They also maintained that the source of the funds was irrelevant, as also was what the purchaser did with the funds received by it.
Moses LJ too adopted a similar approach in the Court of Appeal when he concluded that there was nothing in the terms of the loans which showed that they were never likely to be repaid, as it all depended on success in marketing the software: [2010] STC 809, para 84; and that it was sufficient that the LLPs acquired the right to the full economic benefit of the software: para 86.
The reality, however, was that much of the consideration paid by the LLPs for the software was derived from funds borrowed by members of the LLPs on non recourse terms which was immediately passed back by way of a chain of banks to the lender.
This was, as Lord Walker says in para 67, a complex pre ordained transaction which requires the facts, realistically viewed, to be tested against the wording of the statute.
In Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684, para 32 Lord Nicholls of Birkenhead said that the question is always whether the relevant provisions of the statute, upon its true construction, applies to the facts as found.
In para 39 he stressed the need for a close analysis of what, on a purposive construction, the statute actually requires.
CAA, section 11(4) sets out the general rule that expenditure must satisfy if it is to be qualifying expenditure.
Purposively construed, it requires it to be demonstrated in this case that the whole of the claimed expenditure of 27.5m was actually incurred on acquiring rights in the software.
This is a factual inquiry, the extent and depth of which will always depend on the circumstances of each case.
The Special Commissioner held that the scheme in this case was not a sham, but that the market value of the software rights was very materially below the price that had ostensibly been paid for them.
A significant proportion of the consideration for their acquisition was provided from loans which were immediately returned to the lender in a way that had been pre ordained.
Whatever purpose the loans were designed to serve, it is not obvious that it was to secure the acquisition of rights in the software.
The LLPs maintained that the source of this part of the consideration, and what was done with it, was irrelevant.
They referred, in support of that proposition, to Birmingham Corporation v Barnes [1935] AC 292, where the Corporation incurred expenditure on building and operating a tramway.
Part of the funding for the tramway came from the owner of a factory near to whose premises the tramway ran.
Another part came from an Unemployed Grants Committee because the Corporation had used direct labour which included workers who had previously been unemployed.
It was held that, when determining the actual cost of the tramway, the source of the funding was irrelevant.
I do not think that the decision in that case, on relatively simple facts, offers any guidance as to the view that should be taken of this case.
In that case there was no doubt that the whole of the money which the Corporation received, from whatever source, was actually expended on the tramway.
A significant part of the money that was passing from one party to another in this case was returned to its source immediately.
As Lord Walker points out in para 76, it did not go to MCashback as payment for the rights in the software, even temporarily.
This suggests that it is, to say the least, questionable whether it was expended in their acquisition at all.
I think that the LLPs were perhaps on stronger grounds in relying on Peterson v Commissioner of Inland Revenue [2005] UKPC 5, [2005] STC 448.
In that case the taxpayer was a member of a syndicate of investors formed to finance a feature film in New Zealand.
The investors were induced to invest in it by the prospect of obtaining a depreciation allowance to set off against their taxable income, but they were led to believe that the film would cost more than it was actually expected to cost.
They signed a contract in which they accepted a liability to pay the artificially inflated amount to the production company.
That sum was to be paid in cash at the outset, funded in part by the investors out of their own resources, and in part by the proceeds of a non recourse loan from a third party connected to the production company.
Unknown to the investors, the production company did not use the portion of the consideration funded by the loan to make the film but recycled the money back to the lender immediately it was received.
The investors claimed to be allowed to set off the full amount against their taxable income.
The Commissioner allowed that part which had been funded out of their own resources.
But he disallowed the loan element, on the ground that it did not represent expenditure by them at all.
The question was whether the investors had obtained a tax advantage which could be held to be void under the tax avoidance legislation in force in New Zealand.
The Board held by a majority (Lord Millett, Baroness Hale of Richmond and Lord Brown of Eaton under Heywood) that the investors were entitled to depreciate their full acquisition costs for the film, whatever the means by which they had obtained funds to finance its acquisition.
The fact that the cost of the acquisition was funded wholly or in part by a non recourse loan was irrelevant, as was the fact that the costs of the films production had been falsely inflated.
The focus was on the party who acquired the asset and his having incurred the cost of doing so.
It did not matter where the money came from, nor did it matter what the party who disposed of the asset did with the money when he received it.
He was not required to apply the proceeds of disposing of the film to the investors in making the film.
So the Commissioner had not succeeded in showing that the investors had not incurred the economic burden of paying the inflated amount for its acquisition.
It should be noted, however, that the majority were careful to say that they reached their conclusion on the facts agreed or found by the Taxation Review Authority, the way in which the Commissioner put his case from time to time and the allegations and concessions he had made: para 47.
They said that they were not to be understood as deciding that, had the necessary facts been found, the Commissioner might not have successfully challenged the investors case that the obligation which they incurred to pay the inflated amount was exclusively incurred as consideration for the acquisition of the film.
There was also a powerful dissent by the minority (Lord Bingham of Cornhill and Lord Scott of Foscote), who thought that it was plain that the non recourse loan was no more than a device to produce a higher capital sum to be depreciated and, thereby, a higher tax deduction: para 91.
While the mechanism that was used there was broadly the same as that which was used in this case, I would confine the decision to its own facts.
In Barclays Mercantile Business Finance Ltd v Mawson the House of Lords adopted a practical, commercial approach to the reality of the expenditure.
Although the facts of this case lead to a different result, I would adopt the same approach here.
As Lord Walkers exacting analysis has shown, they do not support LLPs case that the whole of the claimed expenditure was actually used to acquire the rights in the software.
I agree that, in the circumstances of this case, we can and should reach our own conclusion as to the amount that should be allowed in respect of the claimed expenditure.
LORD RODGER, LORD COLLINS, LORD KERR, LORD CLARKE
LORD DYSON
For the reasons given by Lord Walker and Lord Hope, with which we entirely agree, we too would dismiss the cross appeal by the LLPs on the procedural issue, allow HMRCs appeal on the expenditure issue and make the order that Lord Walker proposes.
| UK-Abs | This appeal raises two issues of tax law.
The first (the procedural issue), of general importance to the self assessment regime, concerns the scope of arguments which may be advanced by HMRC in a taxpayers appeal against a closure notice which the HMRC issues to conclude its enquiry into a tax return.
The second issue (the expenditure issue) concerns the proper approach to determining whether expenditure has been incurred for the purposes of the Capital Allowances Act 2001.
The case concerns the tax consequences of the scheme used by MCashback Limited (MCashback) to raise finance to enable it to roll out M Rewards, a software package which it had developed and which enabled manufacturers to promote products to customers by offering free mobile phone airtime.
On the advice of Tower Group plc (Tower), it was decided to raise funds by selling rights to the software, via software licence agreements (SLAs), to four Limited Liability Partnerships to be set up as part of the financing scheme.
Tower personnel were founder members of the LLPs and negotiated the SLAs with MCashback.
The SLAs provided for each LLP to receive a proportion of the clearing fees which manufacturers would pay in respect of each transaction via the M Rewards system.
For the purposes of this litigation, the situation of Tower MCashback 2 LLP (LLP2) has been taken as representative of the other LLPs.
LLP 2 entered an SLA with MCashback, under which it was to pay 27.5m for a licence of part of the M Rewards system.
LLP2 was entitled to 2.5% of the gross clearance fees received from exploitation of M Rewards.
LLP2 obtained the funds required to pay the consideration under the SLA (and the associated professional fees) from investors, who became investor members of LLP2.
They contributed 25% from their own funds and obtained the remaining 75% from bank borrowing, on uncommercial terms.
Janus Holdings Ltd (Janus) lent the required sum to a special purpose vehicle set up by Tower, which made interest free, non recourse loans to the investor members.
MCashback was obliged to deposit approximately 82% of the consideration due to it in terms of the SLA as indirect security for the investor members borrowing from Janus.
These sums were placed on security deposit with R&D Investments Ltd (R&D), which R&D in turn deposited with Janus as security for Januss loan to the SPV.
LLP2 claimed 27.5m first year capital allowances for the 2004/05 tax year, the amount of consideration set out in the SLA.
Because of the way LLPs are taxed, the investor members would take the benefit of these allowances if the claim is successful.
One of the conditions for entitlement to capital allowances is that a person incurs qualifying expenditure: section 11 Capital Allowances Act 2001.
Expenditure is qualifying expenditure if, amongst other things, it is capital expenditure on the provision of plant or machinery, which includes software or rights to software.
On 30 June 2005 HMRC issued a notice of enquiry into LLP 2s partnership return.
Attention initially focused on section 45(4) CAA 2001, which withholds first year allowances for expenditure on software rights in certain circumstances.
After a lengthy period of enquiry, during which correspondence was exchanged about the application of section 45(4), HMRC issued closure notices (under s28B Taxes Management Act 1970) which stated that, as previously indicated the claim for relief under section 45 CAA
2001 is excessive and amended the partnership return so that the capital allowances claimed, and allowable loss, were nil.
The LLPs appealed against the closure notices.
Before the Special Commissioner, HMRC abandoned the argument that the claims were disallowed by section 45(4) CAA and sought instead to argue that the full extent of the consideration under the SLAs was not expenditure incurred on software.
The Special Commissioner decided the procedural point in favour of the HMRC, allowing them to advance this argument, and, on the expenditure issue, disallowed 75% of LLP2s claims.
On appeal, the High Court allowed the LLPs appeals on the procedural issue.
It would also have allowed the LLPs appeals on the expenditure issue, had the point arisen for decision.
The Court of Appeal, by majority, reversed the High Court on the procedural issue (Arden LJ dissenting), but agreed with the High Court on the expenditure issue.
HMRC appeals against the determination of the expenditure issue and the LLPs cross appeal against the determination of the procedural issue.
The Supreme Court unanimously allows the HMRCs appeal and dismisses the LLPs cross appeal.
Lord Walker issues the leading judgment and Lord Hope a short, concurring judgment.
The other members of the Court agree with both.
It therefore holds that the HMRC could advance alternative arguments on the expenditure issue, and that all of the consideration provided for in the SLA was not expenditure incurred on the provision of software.
The Court directs that the closure notices be amended to allow only 25% of the first year allowances claimed.
Procedural issue The Special Commissioners are free to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice.
The scope and subject matter of the appeal will, however, be defined by the conclusions stated in the closure notice and any amendments made to the return.
The Court emphasises that this is not to be taken as encouragement to HMRC to draft every closure notice in wide and uninformative terms.
There is, however, a public interest in taxpayers paying the correct amount of tax and it is one of the duties of the Commissioners to have regard to that public interest.
Any potential unfairness to the taxpayer can be avoided by proper exercise of case management powers during the appeal: [15] [18]; [83] [85].
Expenditure issue The court considers two previous decisions of the House of Lords: Ensign Tankers (Leasing) Ltd v Stokes [1992] 1 AC 655 and Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51.
Both remain good law: [72] It is not enough for HMRC, in attacking a scheme of this sort, simply to point to money going round in a circle: [77] Nor, however, is it the law as the judge had held that unless one finds the transaction in this case to be a sham, the only possible conclusion is that the whole of the consideration in the SLA was expenditure incurred on the provision of software.
In the context of a complex pre ordained transaction, the courts task is to test the facts, realistically viewed, against the statutory test, purposively construed: [67] Entitlement to capital allowances requires there to have been real expenditure for the real purpose of acquiring plant or machinery for use in a trade: [80].
Concerns about the valuation of what is being acquired and the commercial soundness of the transactions are relevant.
The fact that rights in the software had been transferred by MCashback to LLP2 demonstrated the reality of some expenditure on acquiring those rights, but did not conclusively show that the whole of consideration in the SLA was expenditure for that purpose.
The Special Commissioner found that the market value of the software was very materially below 27.5m.
He had also held that there was little chance that the members loan would be repaid in full within ten years as much as 60% might be unpaid, and waived, at the end of that period.
These findings justified the conclusion that the money which the investor members borrowed was not used, in any meaningful sense, as expenditure in the acquisition of software rights.
Instead, it went in a loop back to the lender in order to enable the LLPs to indulge in a tax avoidance scheme: [75]
|
The three appellants in these two appeals were each convicted of murder.
Each had his conviction quashed pursuant to a reference to the Court of Appeal by the Criminal Cases Review Commission (CCRC) in the exercise of its powers under Part II of the Criminal Appeal Act 1995 (the 1995 Act).
In each case no order was made for a retrial.
Each claimed compensation from the Secretary of State pursuant to section 133 of the Criminal Justice Act 1988 (section 133).
That section applies to England and Wales, to Northern Ireland and to Scotland.
I shall not refer to provisions which cater for differences of procedure in Scotland.
The most material part of that section provides: (1)when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction In each case the claim for compensation was refused by the Secretary of State, whose decisions were upheld on judicial review both at first instance and on appeal.
The common issue that arises in relation to each appeal is the meaning of miscarriage of justice in section 133.
In the case of Adams there is a second issue, which is the meaning of a new or newly discovered fact.
Lord Hope has set out the background to the statutory right to compensation provided by section 133 and I need not repeat his summary.
Lord Kerr has set out in detail the relevant facts in the appeals of Mr MacDermott and Mr McCartney and I gratefully adopt his account of these.
It remains for me to summarise the facts relevant to the appeal of Mr Adams.
They can be shortly stated.
A more detailed summary can be found in the extract of the judgment of Simon J at first instance, annexed to the judgment of the Court of Appeal [2009] EWCA Civ 1291; [2010] QB 460.
The facts in Mr Adams appeal
On 18 May 1993 Mr Adams was convicted in the Crown Court at Newcastle of the murder of a man called Jack Royal and sentenced to life imprisonment.
He appealed to the Court of Appeal and on 16 January 1998 his appeal was dismissed.
Some nine years later his case was referred to the Court of Appeal by the CCRC on three grounds.
The first, and only material ground, was that incompetent defence representation had deprived him of a fair trial.
On 12 January 2007 the Court of Appeal allowed his appeal on this ground.
The relevant shortcomings in the conduct of Mr Adams defence were, in large measure, the result of a late change of his counsel.
This was made when those originally instructed to represent him had to withdraw from the case because of a conflict of interest.
Those instructed to replace them were hard pressed to prepare for the trial and failed to consider relevant unused material.
Some of this had been disclosed by the prosecution.
Some was available on a computer database known as the Holmes database.
The case against Mr Adams was essentially based on the evidence of a single witness, Mr Kevin Thompson.
His evidence was supported by that of two police officers.
It was the defence case that Mr Thompson was lying, that he had entered into a deal with the police to give evidence against Mr Adams, and that he had been fed with information about Mr Royals murder by the police.
The evidence which had been overlooked by defence counsel would have provided valuable assistance in cross examining Mr Thompson and the two police officers.
The Court of Appeal concluded that, had it been available and deployed, the jury might not have been satisfied of Mr Adams guilt.
Accordingly the court quashed the conviction, but in doing so stated expressly that they were not to be taken as finding that, if the failings on the part of the defence lawyers had not occurred, Mr Adams would inevitably have been acquitted: [2007] 1 Cr App R 449 at para 157.
Miscarriage of Justice
Section 133(1) reproduces, in almost identical wording, the following provision in article 14(6) of the International Covenant on Civil and Political Rights 1966, which this country ratified in May 1976 (article 14(6) of the ICCPR).
I shall emphasise the material differences: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such
conviction shall be compensated according to law
The reference to a final decision is accommodated by a provision in section 133(5) which defines reversed as referring to a conviction which has been quashed on an appeal out of time or on a reference under the 1995 Act.
The possible meanings of miscarriage of justice
The meaning of miscarriage of justice in section 133 received consideration by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18; [2005] 1 AC 1, when rejecting a claim for compensation by Mr Mullen.
He had been convicted of terrorist offences.
His conviction had been quashed by an appeal out of time.
This was not because there was any doubt that he had committed the offences of which he was convicted.
His conviction was quashed because he had been seized and brought to this country from Zimbabwe in circumstances that had involved a flagrant abuse of power.
It was not suggested that there was any defect in the trial process itself.
The House held that in these circumstances Mr Mullens conviction had not been quashed on the ground of a miscarriage of justice within the meaning of section 133.
Lord Steyn expressed the view that this phrase only extended to the conviction of someone subsequently shown to be innocent.
Lord Bingham of Cornhill expressed doubt as to whether this was correct.
Both were agreed that section 133 was enacted to give effect to article 14(6) and that the meaning of the latter should govern the interpretation of the section.
They were not, however, agreed as to the meaning of article 14(6).
Lord Rodger of Earlsferry accepted the interpretation reached by Lord Steyn.
Lord Walker of Gestingthorpe considered that Lord Steyn had given powerful reasons for his conclusion, but preferred not to go beyond the limited common ground for allowing the appeal.
Lord Scott expressed no view on the difference between Lord Bingham and Lord Steyn.
Miscarriage of justice is a phrase that is capable of having a number of different meanings.
In giving the judgment of the Court of Appeal in relation to Adams case Dyson LJ divided the circumstances in which convictions may be quashed on the basis of the discovery of fresh evidence into four categories, which I shall summarise in my own words. (1) Where the fresh evidence shows clearly that the defendant is innocent of the crime of which he has been convicted. (2) Where the fresh evidence is such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant. (3) Where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant. (4) Where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
These four categories have provided a useful framework for discussion.
There are relatively few domestic authorities that bear on the meaning of miscarriage of justice in section 133 and none which provides a definitive answer.
In these circumstances, before considering those authorities, I propose to consider extrinsic sources that might be expected to assist with the interpretation of this phrase.
Parliamentary material
Mr Bailin QC, appearing for JUSTICE as intervener, submits that a statement made by Earl Ferrers, the Minister of State at the Home Office, throws light on the meaning of miscarriage of justice.
The statement was made in the course of debate on the clause that was to become section 133: see Hansard (HL Debates), 22 July 1988, cols 1630 1632.
At the outset Earl Ferrers explained that the object of the clause was to give statutory effect to the United Kingdoms obligations under article 14.
Lord Hutchinson of Lullington then asked the very question that lies at the heart of these appeals.
He contrasted a new fact which resulted in the quashing of a conviction because it raised a lurking doubt in the mind of the Court of Appeal about the safety of the conviction and a new fact which caused the Secretary of State to advise that a defendant should be pardoned because he had been shown to be innocent.
Which, he asked, amounted to a miscarriage of justice under the clause? This, he stated, was a crucial point.
If it is not contempt of Parliament to observe that Lord Bingham, in his judicial capacity, was uncertain of the answer to this question, after giving it detailed consideration in Mullen, it is not, I hope, contempt of Parliament to suggest that Earl Ferrers, when faced with the question ex improviso in the course of debate, may have had to seek assistance from an official before giving the answer.
At all events the answer that he gave was: The normal course is to refer cases to the Court of Appeal and to regard its view as binding.
Mr Bailin submits that, in accordance with Lord Hopes observations on the use that can be made of parliamentary material in R v A (No 2) [2002] 1 AC 45 at para 81, this statement binds the Secretary of State to accept that the question of whether there has been a miscarriage of justice must be determined from the judgment of the Court of Appeal in the particular case and that, as the Court of Appeal does not and cannot rule on whether the defendant is innocent, that cannot be the test of whether there has been a miscarriage of justice.
I do not accept this submission.
The reply given by Earl Ferrers did not answer the question posed by Lord Hutchinson.
To be blunt it made no sense.
It affords no guidance on the meaning in section 133 of miscarriage of justice.
The relevant part of the debate clearly indicates that the intention of Parliament in enacting section 133 was to give effect to the obligation imposed by article 14(6).
It does not suggest that Parliament intended that the meaning of section 133 should differ in any way from the meaning of article 14(6).
This reinforces the rule of statutory interpretation that raises a presumption that, where a statute is passed in order to give effect to the obligations of the United Kingdom under an international convention, the statute should be given a meaning that conforms to that of the convention: see Salomon v Customs and Excise Commissioners [1967] 2 QB 116, 141 and Bennion on Statutory Interpretation, 5th ed (2008), section 221.6.
What then is the meaning of miscarriage of justice in article 14(6)? In answering this question the provisions of the Vienna Convention on the Law of Treaties should be applied: see Fothergill v Monarch Airlines Ltd [1981] AC 251, 283, per Lord Diplock.
The interpretation of Article 14(6)
As the wording of the English text of article 14(6) is virtually identical to that of section 133, the former throws no light on the meaning of the latter.
Article 33 of the Vienna Convention permits reference to the text of a convention in an alternative authenticated language.
In Mullen Lord Steyn at para 47 derived assistance from the French text of article 14(6).
This uses the phrase une erreur judiciare for miscarriage of justice.
Lord Steyn stated that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of someone who was innocent.
He did not explain the basis for this assertion and Lord Bingham did not agree with it.
He expressed the view at para 9 that erreur judiciare could be understood as equivalent to miscarriage of justice in its broad sense.
Lord Binghams interpretation of the French text is to be preferred to that of Lord Steyn.
The difference between them received detailed consideration by Girvan LJ in In re Boyles Application [2008] NICA 35 at paras 11 13.
He concluded that the French term was as elastic as the English miscarriage of justice.
In his written case at para 4.32 Mr Tam QC for the Secretary of State invited the Court to reject Girvan LJs analysis of the French law.
In these circumstances the Court allowed Mr Owen to adduce a witness statement from Dr Cristina Mauro, who teaches Criminal Procedure as an Assistant Professor at Universit Panthon Assas at Paris.
She confirmed that Girvan LJs interpretation of erreur judiciare was correct, and Mr Tam accepted this to be the case.
Had the French text given a more precise meaning to article 14(6) than the English this would have been a legitimate aid to the interpretation of the latter.
As it is the French text leaves us no further forward.
Article 31(3)(b) of the Vienna Convention also permits one to take into account any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation.
Lord Steyn, Girvan LJ and Dr Mauro, in progressively greater detail, have examined articles 622 to 626 of the French Code de Procdure Pnale, which give effect to article 14(6).
Once again the analysis of the latter two is to be preferred to that of Lord Steyn.
This indicates that in France a conviction will be reviewed where a new element gives rise to serious doubts about guilt and that the reviewing court can then either quash the conviction on the ground that the new element proves that the defendant is not guilty or direct a retrial.
Compensation will be recoverable in the former event or, if there is a retrial, if this results in an acquittal.
This practice on the part of only one of the many signatories to the ICCPR does not provide a guide to the meaning of article 14(6) but it does demonstrate that proof of innocence has not been universally adopted as the test of entitlement to compensation.
It has not been suggested that there is any consistency of practice on the part of the signatories that assists in determining the meaning of article 14(6).
If it is not possible to deduce the meaning of article 14(6) from subsequent practice in its application, what of the travaux prparatoires? Article 32 of the Vienna Convention permits recourse to these where necessary to determine the meaning to be attributed to the term of a treaty in the light of its object and purpose see article 31.
The Court has been provided with relevant comments on the travaux in The Right to a Fair Trial under the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights by D Weissbrodt (2001) and Guide to the Travaux Prparatoires of the International Covenant on Civil and Political Rights by M Bossuyt (1987).
So far as the precise meaning of miscarriage of justice is concerned the travaux are inconclusive.
They disclose that Mrs Roosevelt was opposed to the inclusion of article 14(6) on the ground that its implementation would cause significant technical difficulties because of the diversity of national legislation.
They show concern by some, including the British delegate, that the provision should not create an obligation to pay compensation when a conviction was reversed on appeal.
Of most significance is the rejection by 22 votes to 11 with 40 abstentions of an amended provision initially proposed by Israel, with input from France and Afghanistan.
This reads: The judicial recognition of the innocence of a convicted person shall confer on him the right to request the award of compensation in accordance with the law in respect of any damage caused him by the conviction.
While this provides no positive indication of precisely what the state parties intended miscarriage of justice to mean, it makes it difficult to argue that they intended it to mean conviction of the innocent.
Lord Bingham suggested at para 9 in Mullen that the phrase miscarriage of justice may have commended itself to the parties because of the latitude of interpretation that it offered and it seems to me that this may well be the case.
It is, I believe, possible to make some more positive conclusions about what it was that the states who were involved in the drafting of article 14(6) were trying to achieve.
They were concerned with the emergence of a new fact after the completion of the trial process, including review on appeal.
Article 14(5) provides that everyone convicted of a crime shall have the right to have his conviction and sentence reviewed by a higher tribunal according to law.
Article 14(6) applies to the discovery of a new fact after that final decision.
Compensation was only payable where the new fact demonstrated conclusively that there had been a miscarriage of justice.
Thus miscarriage of justice had to be the kind of event that one could sensibly require to be proved conclusively.
Article 14 is, in general, concerned with the right to a fair trial.
Most of its provisions relate to procedure.
One might have expected article 14(6) similarly to have been concerned with the consequences of shortcomings in procedure.
The travaux do not suggest that this was the primary concern of the delegates.
It is perhaps significant that Mrs Roosevelt and Ms Bowie did not consider that the provision belonged in the Covenant and suggested deleting it.
What the delegates appear to have been primarily concerned about was not errors of procedure, but the emergence of fresh facts that were inconsistent with the conviction of the defendant.
Thus, at the outset, the Philippines suggested that the circumstances in which the provision should apply should be spelt out and that these should be where the true offender had confessed and there were no reasonable grounds to doubt his confession or where the fact or event which was the basis of the conviction was shown beyond reasonable doubt never to have taken place.
A comment by Mrs Roosevelt that compensation should be denied to someone who deliberately concealed facts which would have exonerated him if discovered (my emphasis) is a further example of this approach, as is the proposed amendment to which I have referred at para 19 above.
The fact remains, however, that this amendment was not carried and that the travaux show concern on the part of some delegates that the provision under discussion would allow compensation to persons who were clearly guilty but whose conviction had been annulled for reasons of form or procedure while others appear to have considered that the provision should provide a guarantee for lawful process.
The travaux clearly demonstrate that the parties intended article 14(6) to cover the situation where a newly discovered fact demonstrated conclusively that the defendant was innocent of the crime of which he had been convicted.
They were not, however, prepared to agree an interpretation which restricted the ambit of article 14(6) to this situation.
In the 14th and final session it is recorded that most of the Committee agreed that only adequate legislation could solve the technical difficulties involved in the problem of compensation for a miscarriage of justice.
Thus, while the principle was agreed that there should be compensation for the consequences of a conviction reversed on the ground of conclusive proof of a miscarriage of justice as a result of the discovery of new evidence after the conclusion of the criminal process, and that this would cover the case of a convicted man who was shown to be innocent, it seems to have been left to the individual parties by domestic legislation to identify the precise parameters of the miscarriage of justice that would give rise to a right to compensation.
The words according to law were added to the article by a late amendment.
It would have been possible for the contracting parties to have agreed that any person whose conviction was reversed by reason of a newly discovered fact should be given compensation for the consequences of the conviction.
This could have been justified on the basis that the reversal of the conviction raised a presumption of innocence and that compensation should be paid on the basis of that presumption.
The parties did not take that course.
The fact that they did not do so, and the requirement that the miscarriage of justice should be established conclusively, indicates so it seems to me, an anxiety not to agree to an entitlement to compensation that would result in compensation being paid to those who had in fact committed the crimes of which they were convicted, at least on a substantial scale.
In these circumstances the fact that section 133 is intended to give effect to the obligation imposed by article 14(6) is of limited assistance in interpreting that section.
It would not be right, however, when interpreting section 133 to lose sight of the fact that it is giving effect to a convention agreed by parties with varying systems of criminal justice.
Article 14(6) is applicable to criminal trials in jurisdictions that have jury trials and jurisdictions that do not, to civil and to common law jurisdictions.
The meaning given to miscarriage of justice should be one that is capable of application to the systems of criminal justice of the other parties to the covenant.
I have not found any other extrinsic material to be of assistance.
In Mullen Lord Bingham at para 9(3) considered the jurisprudence of the United Nations Human Rights Committee and concluded that this did not assist.
He reached the same conclusion in relation to the explanatory report of the Steering Committee for Human Rights in relation to article 3 of the Seventh Protocol to the European Convention on Human Rights.
I agree with Lord Bingham for the reasons which he gave.
Mullen
I now turn to consider the decision of the House of Lords in Mullen.
This task has been undertaken in a little detail by Lord Hope, which shortens the comments that I wish to make on this decision.
The reason why the appeal in Mullen did not succeed was that the House of Lords were unanimous in holding that the abuse of power that had led to the quashing of Mr Mullens conviction did not fall within the definition of miscarriage of justice, whatever the meaning of that phrase.
At para 8 Lord Bingham said: It is for failures of the trial process that the Secretary of State is bound, by section 133 and article 14(6), to pay compensation.
On that limited ground I would hold that he is not bound to pay compensation under section 133.
It was this statement that led Mr Owen to advance, initially, an argument that section 133 was directed at some failure in the trial process.
This led him to submit that if, after an impeccably conducted trial, the discovery of DNA evidence demonstrated conclusively that the convicted defendant was innocent, no claim for compensation would lie under section 133.
He was right subsequently to acknowledge that this could not be correct, but that acknowledgement raised a question as to the validity of Lord Binghams observation that section 133 applied to failures of the trial process.
I also question that statement.
It is not the failure of the trial process that constitutes a miscarriage of justice, but the wrongful conviction that may be caused by it.
A wrongful conviction is capable of amounting to a miscarriage of justice whether or not it has been caused by a failure of the trial process.
I do not believe that Lord Bingham can have intended to exclude from the ambit of section 133 convictions quashed as the result of the discovery of new facts in circumstances where there has been no failure of the trial process.
That, I believe, is the situation with which section 133 is, at least primarily, concerned.
There is a question as to the assistance that is to be derived from the following earlier comments in para 4 of Lord Binghams judgment: The expression wrongful convictions is not a legal term of art and it has no settled meaning.
Plainly the expression includes the conviction of those who are innocent of the crime of which they have been convicted.
But in ordinary parlance the expression would, I think, be extended to those who, whether guilty or not, should clearly not have been convicted at their trials.
It is impossible and unnecessary to identify the manifold reasons why a defendant may be convicted when he should not have been.
It may be because the evidence against him was fabricated or perjured.
It may be because flawed expert evidence was relied on to secure conviction.
It may be because evidence helpful to the defence was concealed or withheld.
It may be because the jury was the subject of malicious interference.
It may be because of judicial unfairness or misdirection.
In cases of this kind, it may, or more often may not, be possible to say that a defendant is innocent, but it is possible to say that he has been wrongly convicted.
The common factor in such cases is that something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin) at para 25 I stated that in this passage Lord Bingham was identifying the types of miscarriage of justice that would fall within section 133.
On reflection I believe that I was wrong.
As Lord Hope has pointed out in para 90 Lord Bingham was discussing the meaning of wrongful conviction in the context of the previous ex gratia scheme.
There is a further point to be made in relation to para 4 of Lord Binghams speech.
He has included in the catalogue of cases resulting in the conviction of someone who should not have been convicted the case of a judicial misdirection.
A judicial misdirection could not be a new or newly discovered fact, but if it were it would fall into Dyson LJs third category.
So might a conviction based on flawed expert evidence: see R (Allen) (formerly Harris)) v Secretary of State for Justice [2008] EWCA Civ 808; [2009] 2 All ER 1.
Thus para 4 would appear to embrace all four of Dyson LJs categories.
In para 9 Lord Bingham observed, when considering section 133, that, while miscarriage of justice can be used to describe the conviction of the demonstrably innocent, it can be and has been used to describe cases in which defendants, guilty or not, certainly should not have been convicted.
This also has been treated by some as expressing Lord Binghams view of the scope of section 133, but I do not think that it is clear that this was so.
In these circumstances, I agree with Lord Hope that Lord Binghams speech does not provide significant positive assistance in interpreting miscarriage of justice in section 133.
It is of assistance in respect of his comments on Lord Steyns answer to that question.
Lord Steyns conclusion in Mullen that miscarriage of justice was restricted to the conviction of an innocent person was largely founded on his misreading of the French text of article 14(6) and of the position in France.
Shorn of that support, his speech does not provide compelling justification for his conclusion.
For all these reasons I do not believe that Mullen helps very much in determining the meaning of miscarriage of justice in section 133.
The cases that have followed Mullen, including those before this Court, have proceeded on the basis that Lord Bingham had laid down an alternative test to that of Lord Steyn, and concluded, in each case, that neither test was satisfied.
In the circumstances there is nothing to be gained by considering those decisions.
I agree with Lord Hope that a fresh approach is required.
I propose to adopt the four categories identified by Dyson LJ as the framework for discussion.
The nature of the exercise
The wording of section 133, following that of article 14(6), might suggest that the terms of the judgment of the court that reverses the conviction will establish whether the entitlement to compensation has been made out.
It speaks of a conviction being reversed on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice (emphasis added).
That is not, however, the test for quashing a conviction in this jurisdiction.
The words on the ground that must, if they are to make sense, be read as in circumstances where.
Section 133(1) provides that the compensation will be paid by the Secretary of State, and section 133(2) provides for a two year time limit for application for compensation to the Secretary of State.
Thus it is for the Secretary of State to decide whether the requirements of section 133 are satisfied, an exercise which is, of course, subject to judicial review.
The Secretary of State first has to consider whether a new or newly discovered fact has led to the quashing of a conviction.
If it has, he then has to consider whether that fact shows beyond reasonable doubt that there has been a miscarriage of justice, applying the true meaning of that phrase.
The Secretary of State will plainly have regard to the terms of the judgment that quashes the conviction, but ultimately he has to form his own conclusion on whether section 133 is satisfied.
The object of the exercise
I think that the primary object of section 133, as of article 14(6), is clear.
It is to provide entitlement to compensation to a person who has been convicted and punished for a crime that he did not commit.
But there is a subsidiary object of the section.
This is that compensation should not be paid to a person who has been convicted and punished for a crime that he did commit.
The problem with achieving both objects is that the quashing of a conviction does not of itself prove that the person whose conviction has been quashed did not commit the crime of which he was convicted.
Thus it is not satisfactory to make the mere quashing of a conviction the trigger for the payment of compensation.
It was this problem which led to the adoption of the imprecise language of article 14(6), which has been reproduced in section 133.
In interpreting section 133 it is right to have in mind the two conflicting objectives.
It is necessary to consider whether the wording of the section permits a balance to be struck between these two objectives and, if so, how and where that balance should be struck.
I turn to consider Dyson LJs four categories having in mind these considerations.
I shall deviate from the order in which he set them out.
Category 4: where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who
should not have been convicted
This category is derived from Lord Binghams speech in Mullen.
As I have explained, I do not believe that he put it forward as falling within the scope of section 133.
As I understand it, the category embraces an abuse of process so egregious that it calls for the quashing of a conviction, even if it does not put in doubt the guilt of the convicted person.
I would not interpret miscarriage of justice in section 133 as embracing such a situation.
It has no bearing on what I have identified as the primary purpose of the section, which is the compensation of those who have been convicted of a crime which they did not commit.
If it were treated as falling within section 133 this would also be likely to defeat the subsidiary object of section 133, for it would result in the payment of compensation to criminals whose guilt was not in doubt.
Category 3: Fresh evidence rendering the conviction unsafe
Dyson LJ propounded this test as requiring consideration of whether a fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
This raises the question, which I shall consider further when I come to category 2, of whether section 133 requires the Secretary of State to consider the reaction to fresh evidence of a fair minded jury.
Put another way, the situation under consideration is one where the fresh evidence reduces the strength of the case that led to the claimants conviction, but does not diminish it to the point where there is no longer a significant case against him.
I would not place this category within the scope of section 133 for two reasons.
The first is that it gives no sensible meaning to the requirement that the miscarriage of justice must be shown beyond reasonable doubt, or conclusively in the wording of article 14(6).
It makes no sense to require that the new evidence must show conclusively that the case against the claimant is less compelling.
It is tantamount to requiring the Secretary of State to be certain that he is uncertain of the claimants guilt.
My second reason is that, if category 3 were adopted as the right definition of miscarriage of justice, it would not strike a fair balance between the two objectives of section 133.
The category of those who are convicted on evidence which appears to establish guilt beyond reasonable doubt, but who have their convictions quashed because of fresh evidence that throws into question the safety of their convictions, will include a significant number who in fact committed the offences of which they were convicted.
This is the inevitable consequence of a system which requires guilt to be proved beyond reasonable doubt.
When these two factors are considered together they lead to the conclusion that section 133 does not, on its true interpretation, apply to category 3.
Category 1: Fresh evidence that shows clearly that the defendant is innocent of the
crime of which he was convicted
Having considered the categories which were at one extremity of Dyson LJs list, I now turn to the category at the other.
Plainly section 133 will embrace this category, but does it provide the exclusive definition of miscarriage of justice in that section? There are a number of points to be made in favour of this suggestion.
The first is that it gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133.
More particularly, if miscarriage of justice is read as meaning the conviction of someone who is innocent, it makes perfect sense of the requirement that the new fact should prove this beyond reasonable doubt.
Next it gives section 133 a meaning which is eminently practicable.
Objection has been made to category 1 on the ground that it is not the role of the Court of Appeal, when reviewing a conviction, to rule whether the defendant is innocent of the crime of which he was convicted.
In R v McIlkenny (1991) 93 Cr App R 287, 311 Lloyd LJ observed that the Court of Appeal was neither obliged nor entitled to state that an appellant was innocent.
Its task was simply to decide whether the verdict of the jury could stand.
He described this as a point of great constitutional importance.
I think that he was right.
The point was well put by the Court of Appeal for Ontario in R v Mullins Johnson 2007 ONCA 720; 87 OR (3d) 425.
The appellant had been convicted of murder of his 4 year old niece and served 12 years in prison.
His conviction was based on expert evidence that the autopsy indicated that the young girl had been sexually abused and suffocated.
Subsequent medical evidence totally discredited the evidence given at the trial, so that it became clear that there was no reliable pathological evidence either of sexual abuse or of homicidal asphyxia of the child.
The case was referred to the Court of Appeal on terms that it should treat it as an appeal on fresh evidence.
In a passage which merits citation in full, the Court explained why it would not be proper for it in these circumstances to make a declaration that the appellant was in fact innocent: 22 The fresh evidence shows that the appellants conviction was the result of a rush to judgment based on flawed scientific opinion.
With the entering of an acquittal, the appellants legal innocence has been re established.
The fresh evidence is compelling in demonstrating that no crime was committed against Valin Johnson and that the appellant did not commit any crime.
For that reason an acquittal is the proper result. 23 There are not in Canadian law two kinds of acquittals: those based on the Crown having failed to prove its case beyond a reasonable doubt and those where the accused has been shown to be factually innocent.
We adopt the comments of the former Chief Justice of Canada in The Lamer Commission of Inquiry Pertaining to the Cases of: Ronald Dalton, Gregory Parsons, Randy Druken, Annex 3, pp. 342: [A] criminal trial does not address factual innocence.
The criminal trial is to determine whether the Crown has proven its case beyond a reasonable doubt.
If so, the accused is guilty.
If not, the accused is found not guilty.
There is no finding of factual innocence since it would not fall within the ambit or purpose of criminal law. 24 Just as the criminal trial is not a vehicle for declarations of factual innocence, so an appeal court, which obtains its jurisdiction from statute, has no jurisdiction to make a formal legal declaration of factual innocence.
The fact that we are hearing this case as a Reference under section 696.3(3)(a)(ii) of the Criminal Code does not expand that jurisdiction.
The terms of the Reference to this court are clear: we are hearing this case as if it were an appeal.
While we are entitled to express our reasons for the result in clear and strong terms, as we have done, we cannot make a formal legal declaration of the appellants factual innocence. 25 In addition to the jurisdictional issue, there are important policy reasons for not, in effect, recognizing a third verdict, other than guilty or not guilty, of factually innocent.
The most compelling, and, in our view, conclusive reason is the impact it would have on other persons found not guilty by criminal courts.
As Professor Kent Roach observed in a report he prepared for the Commission of Inquiry into Certain Aspects of the Trial and Conviction of James Driskell, there is a genuine concern that determinations and declarations of wrongful convictions could degrade the meaning of the not guilty verdict (p 39).
To recognize a third verdict in the criminal trial process would, in effect, create two classes of people: those found to be factually innocent and those who benefited from the presumption of innocence and the high standard of proof beyond a reasonable doubt.
But the decision whether there has been a miscarriage of justice within section 133 is not for the court but for the Secretary of State.
He should have no difficulty in deciding whether new evidence that has led to the quashing of a conviction shows beyond reasonable doubt that the defendant was innocent of the crime of which he was convicted.
Where the prosecution has satisfied the jury beyond reasonable doubt that a defendant is guilty, evidence that demonstrates beyond reasonable doubt that he was in fact innocent will not be equivocal.
Even though it is not for the Court of Appeal, when quashing the conviction, to express its opinion that the defendant is innocent, the reasons given for quashing the conviction are unlikely to leave any doubt of this, just as was the position in Mullins Johnson.
The other obvious point in favour of category 1 is that it precludes all possibility of a defendant who in fact committed the crime of which he was convicted receiving compensation for the consequences of his conviction.
If this is to be treated as being of paramount importance, then category 1 is the only satisfactory interpretation of section 133.
The Law Commission of New Zealand in its 1998 Report No 49 on Compensating the Wrongly Convicted advised at para 127 A requirement to prove innocence is, however, necessary to prevent the guilty claimant, acquitted on a technicality, from profiting from the crime.
It recognises that it is a persons innocence which provides the justification for compensation in the first place.
This brings me to the last point that is advanced in favour of category 1.
It is argued that it is not in practice possible to draw a line between category 2 and category 3.
Unless category 1 is adopted as the correct interpretation of section 133, defendants whose convictions are quashed on technicalities will profit from compensation.
I shall consider this argument when I deal with category 2.
The first argument against restricting the ambit of section 133 to category 1 is that the parties to article 14(6) voted against an amendment which would have done this.
The second is that this will deprive some defendants who are in fact innocent and who succeed in having their convictions quashed on the grounds of fresh evidence from obtaining compensation.
It will exclude from entitlement to compensation those who no longer seem likely to be guilty, but whose innocence is not established beyond reasonable doubt.
This is a heavy price to pay for ensuring that no guilty person is ever the recipient of compensation.
Does category 2, or some similar formulation of miscarriage of justice, provide a more satisfactory approach to the desire to provide compensation to the innocent without rewarding the guilty that both accords with the language of the section and is workable in practice? Category 2: Fresh evidence such that, had it been available at the trial no
reasonable jury could convict the defendant
This category applies to the evidence, including the fresh evidence, the test that a judge has to apply when considering an application at the end of the prosecution case for dismissal of a charge on the ground that the defendant has no case to answer.
It focuses on the evidence before the jury.
If the fresh evidence were always evidence of primary fact, or new expert evidence, the test might be satisfactory.
The position is not, however, as simple as that.
The new evidence that leads to the quashing of a conviction is very often not primary evidence that bears directly on whether the defendant committed the crime of which he was convicted, but evidence that bears on the credibility of those who provided the primary evidence on which he was convicted.
Both of the appeals before the Court fall into this category.
So does the example of category 2 given by Dyson LJ: fresh evidence which undermines the creditworthiness of the sole witness for the prosecution.
Here one can run into a problem that is peculiar to the criminal procedures that apply in common law jurisdictions.
Under common law procedures the evidence that is permitted to be placed before the jury is screened by a number of rules that are designed to avoid the risk that the jury will be unfairly prejudiced and to ensure that the trial is fair.
Thus section 78 of the Police and Criminal Evidence Act 1984 gives the judge a general jurisdiction to exclude evidence on the grounds of fairness and section 76A of the same Act contains a little code governing the admissibility of a confession.
So does section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978, which was applicable to the critical evidence adduced against the defendants in the second appeal.
Often it will be appropriate for the judge to hold a voir dire in order to decide whether or not evidence can be admitted.
The question of whether there is evidence upon which a jury can properly convict is taken after the judge has screened from the jury evidence which, under the relevant procedural code, he has ruled to be inadmissible.
That is often a difficult judicial task.
I do not believe that section 133 should be so interpreted as to impose on the Secretary of Sate the task of deciding whether the fresh evidence would have rendered inadmissible the primary evidence to which it related, in order to answer the question whether there would have been a case upon which a reasonable jury could convict.
There is a further difficulty with category 2.
The question of whether a reasonable jury could properly convict falls to be answered having regard to the fact that a jury must be satisfied of guilt beyond reasonable doubt.
Section 133 requires the Secretary of State to be satisfied beyond reasonable doubt that a miscarriage of justice has occurred.
Category 2 thus operates as follows: compensation will be payable where the Secretary of State is satisfied beyond reasonable doubt that no reasonable jury could have been satisfied beyond reasonable doubt that the defendant was guilty.
This does not seem a very sensible test.
The final point to make about category 2 is that it applies a test the result of which depends critically on common law procedural rules.
As the test is derived from article 14(6), it would be preferable if it were one more readily applicable in other jurisdictions.
For these reasons I do not consider the second category, as formulated by Dyson LJ, provides a satisfactory definition of miscarriage of justice.
I would replace it with a more robust test of miscarriage of justice.
A new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This is a matter to which the test of satisfaction beyond reasonable doubt can readily be applied.
This test will not guarantee that all those who are entitled to compensation are in fact innocent.
It will, however, ensure that when innocent defendants are convicted on evidence which is subsequently discredited, they are not precluded from obtaining compensation because they cannot prove their innocence beyond reasonable doubt.
I find this a more satisfactory outcome than that produced by category 1.
I believe that it is a test that is workable in practice and which will readily distinguish those to whom it applies from those in category 3.
It is also an interpretation of miscarriage of justice which is capable of universal application.
Retrial
The provisions in relation to retrial introduced into section 133 in the circumstances described by Lord Hope at paras 103 and 104 of his judgment raise a problem.
A retrial will only be ordered where, although it quashes the defendants conviction on the grounds of fresh evidence, the Court of Appeal considers that there remains a case against him that is fit for trial.
Assuming that they are correct in that view, the fresh evidence could never fall within the scope of section 133 if it is right to interpret that section as being limited to either category 1 or category 2, as formulated by Dyson LJ or as I have reformulated it.
The introduction into the section of the provisions in relation to retrial would make more sense if section 133 embraced category 3.
In that case, however, one might have expected compensation to be payable automatically if the retrial ended in an acquittal, but the amended section 133 does not so provide.
It does not follow, however, that category 1 or category 2 cannot stand with section 133, as amended.
Entitlement to compensation does not turn on the view that the Court of Appeal takes of the new evidence.
The defendant may contend, even where a retrial is ordered, that the fresh evidence proves his innocence.
Although the Court of Appeal is not persuaded of this, it may become apparent in the course of the retrial that the defendant is correct.
Thus the provisions in relation to retrial make sense, even if category 1 or category 2 represents the correct interpretation of miscarriage of justice.
Article 6(2) of the European Convention on Human Rights
The Strasbourg Court has stated that one of the functions of article 6(2) is to protect an acquitted persons reputation from statements or acts that follow an acquittal which would seem to undermine it see Taliadorou and Stylianou v Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008, at para 26.
The Courts expansion of what would seem to be a rule intended to be part of the guarantee of a fair trial into something coming close to a principle of the law of defamation is one of the more remarkable examples of the fact that the Convention is a living instrument.
Mr Owen QC for Mr Adams referred the Court to a series of decisions of the Strasbourg Court in which it was held to be a violation of article 6(2) for a state to refuse compensation to which an applicant who had been held in preventative detention was normally entitled on acquittal at the end of a criminal trial on the ground that his acquittal did not establish his innocence.
Lord Hope has summarised the details and effect of those authorities.
Mr Owen argued that their effect was that, once Mr Adams conviction had been quashed, he was entitled to be treated as innocent in the context of his claim for compensation.
A rather different argument based on article 6(2) was rejected by Lord Steyn in Mullen at para 44.
Mr Owen first advanced the present argument when appearing for the claimant in R(Allen) (formerly Harris)) v Secretary of State for Justice [2009] 2 All ER 1.
In that case the claimants claim for compensation under section 133 was rejected on the grounds that his case satisfied neither Lord Steyns test in Mullen nor the test that Lord Bingham had been thought to advance in that case.
Giving the only reasoned judgment, Hughes LJ comprehensively rejected Mr Owens argument based on article 6(2) for a series of ten reasons.
On the present appeals Lord Hope has held that reliance on article 6(2) is misplaced for reasons that have much in common with those of Hughes LJ.
I agree with both of them.
I would add this.
The appellants claims are for compensation pursuant to the provisions of section 133.
On no view does that section make the right to compensation conditional on proof of innocence by a claimant.
The right to compensation depends upon a new or newly discovered fact showing beyond reasonable doubt that a miscarriage of justice has occurred.
Whatever the precise meaning of miscarriage of justice the issue in the individual case will be whether it was conclusively demonstrated by the new fact.
The issue will not be whether or not the claimant was in fact innocent.
The presumption of innocence will not be infringed.
Newly discovered fact
Mr Adams appeal raises a second issue.
Were the facts that led to the quashing of his conviction newly discovered despite the fact that they were contained in documents disclosed to his legal representatives before his trial or available on the Holmes database? The phrase newly discovered raises a further difficult problem of interpretation, for it does not indicate to whom the discovery must be new.
Procedure Act 1993.
Section 9(6) of that Act provides: Ireland has given effect to article 14(6) by section 9 of the Criminal newly discovered fact means ( a ) where a conviction was quashed by the Court on an application under section 2 or a convicted person was pardoned as a result of a petition under section 7, or has been acquitted in any re trial, a fact which was discovered by him or came to his notice after the relevant appeal proceedings had been finally determined or a fact the significance of which was not appreciated by the convicted person or his advisers during the trial or appeal proceedings.
I would adopt this generous interpretation of newly discovered fact.
Section 133(1), following the almost identical wording of article 14(6), ends with the proviso : unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso is significant in more than one way.
First, the use of the word non disclosure would seem to equate the new discovery with disclosure.
The latter word has a broad ambit and, in context, suggests to me the bringing of a fact into the public domain and, in particular, the disclosure of that fact to the court.
Secondly, I read the provision as excluding a right to compensation where the person convicted has deliberately prevented the disclosure of the relevant fact, or where the non discovery of that fact is otherwise attributable to his own fault.
We are envisaging a situation where a claimant has been convicted, and may well have served a lengthy term of imprisonment, in circumstances where it has now been discovered that a fact existed which either demonstrates that he was innocent or, at least, undermines the case that the prosecution brought against him.
If he was aware of this fact but did not draw it to the attention of his lawyers, and he did not deliberately conceal it (which would bring the fact within the proviso), this will either be because the significance of the fact was not reasonably apparent or because it was not apparent to him.
Many who are brought before the criminal courts are illiterate, ill educated, suffering from one or another form of mental illness or of limited intellectual ability.
A person who has been wrongly convicted should not be penalised should this be attributable to any of these matters.
It is for those reasons that I would adopt the same interpretation of newly discovered fact as the Irish legislature.
Conclusions
It has always been common ground that Mr Adams case falls into category 3.
The newly discovered facts (as I would hold them to be) in his case do not show that a miscarriage of justice has occurred within the meaning that I would give to that phrase in section 133.
Accordingly, I would dismiss his appeal.
The newly discovered facts in the case of Mr McCartney and Mr MacDermott, as described by Lord Kerr, so undermine the evidence against them that no conviction could possibly be based upon it.
There can be no reasonable doubt of this.
Accordingly I would allow their appeal and hold that they are entitled to compensation pursuant to the provisions of section 133.
LORD HOPE
I accept with gratitude Lord Phillips description of the facts in the case of Andrew Adams and Lord Kerrs description of the facts in the cases of Eamonn MacDermott and Raymond McCartney.
With that advantage I can go straight to the issues of principle that these cases have raised.
Mention should also be made of Barry George, who was granted permission to intervene in this appeal.
On 2 July 2001 he was convicted of the murder on 26 April 1999 of the television presenter Jill Dando, who was killed by a single shot to the head as she was about to enter her home in Fulham.
His appeal against conviction was dismissed on 29 July 2002: [2002] EWCA Crim 1923.
A major part of the Crowns case against him was that a single particle of firearms discharge, which matched particles found in the cartridge case of the bullet which killed Miss Dando, in her coat and in samples of her hair, had been found nearly 12 months later in the pocket of a coat owned and worn by Mr George.
Following a review of his case, the Criminal Cases Review Commission decided to refer his conviction to the Court of Appeal under section 9 of the Criminal Appeal Act 1995 on the ground that new evidence called into question the evidence at the trial about the firearms discharge and the significance that had apparently been attached to that evidence.
New reports obtained from the Forensic Science Service had shown that it had no evidential value in the case against Mr George.
On 15 November 2007 the Court of Appeal quashed the conviction and ordered a retrial: [2007] EWCA Crim 2722.
The evidence of the firearms discharge was not admitted at the trial.
On 1 August 2008 the jury by a unanimous verdict found Mr George not guilty.
On the day of the acquittal the Crown Prosecution Service issued a press statement in which it was stated that Mr George now had the right to be regarded as an innocent man.
On 7 October 2009 Mr George applied for compensation under section 133 of the Criminal Justice Act 1988.
By letter dated 15 January 2010 the Secretary of State for Justice told Mr George that he was not prepared to authorise an award of compensation as the new forensic evidence did not prove beyond reasonable doubt that he was innocent.
He referred to the fact that in its judgment of 15 November 2007 the Court of Appeal stated that in the absence of the evidence of the firearms discharge there was circumstantial evidence capable of implicating Mr George, and that it had ordered a retrial which defence counsel conceded should take place.
Mr George applied for judicial review of that decision on 14 April 2010.
On 25 August 2010 Collins J granted permission.
But he stayed the proceedings pending the decision of this Court as to the meaning of miscarriage of justice in section 133 of the 1988 Act.
Mr Glen QC for Mr George submitted that it was sufficient to entitle a person to an award of compensation under that section that his conviction had been reversed on the ground of a new or newly discovered fact and that, in the event of his being subjected to a retrial, he had been acquitted of the offence.
As that was what had happened in his case it should be made clear by this Court in its judgment that, where a person had suffered punishment in such circumstances, compensation should be paid to him under the scheme that had been set up by the statute.
With that introduction I can go straight to the issues of principle that these cases have raised.
Background
The background to the introduction of a statutory right to compensation for miscarriages of justice by section 133 of the Criminal Justice Act 1988 was described in In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289, paras 6 9 by Lord Bingham of Cornhill and R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, paras 25 28 by Lord Steyn.
Lord Bingham drew attention in McFarland, para 6, to the underlying principles.
In any liberal democratic state there will be those who are accused of crime and are acquitted at trial, or whose convictions are reversed following an appeal.
Those affected will have suffered the stigma of being accused and the trauma of standing trial and of imprisonment before the process is brought to an end.
In principle it might seem that the state, which initiated the unsuccessful prosecution, should compensate those who have been acquitted, or at least some of them.
How this was to be done and in what circumstances was much debated before the current system was adopted: see David Harris, The Right to a Fair Trial in Criminal Proceedings as a Human Right (1967) 16 ICLQ 352, 372 375.
It was, as Lord Steyn said in Mullen, para 52, a process of evolution.
First, there was the adoption on 16 December 1966 of the International Covenant on Civil and Political Rights (the ICCPR), article 14(6) of which made provision for what it described as compensation according to law to a person whose conviction had been reversed or had been pardoned in the circumstances to which it referred and who had suffered punishment as a result of such a conviction.
The ICCPR was ratified by the United Kingdom on 20 May 1976.
On 29 July 1976 the Home Secretary (Mr Roy Jenkins) set out in a written answer the procedure which was being adopted for the making of ex gratia payments in recognition of the hardship caused by what he referred to as a wrongful conviction: Hansard (HC Debates), WA cols 328 330.
Three weeks later, on 20 August 1976, the ICCPR entered into force.
Thereafter the United Kingdom continued to fulfil its international obligations under article 14(6) under the ex gratia scheme.
The scheme was put onto a more formal basis on 29 November 1985: see Hansard (HC Debates), WA cols 689 690.
The then Home Secretary (Mr Douglas Hurd) said that he would be prepared to pay compensation where this was required by the international obligations, and that he remained prepared to pay compensation to people who did not fall within the terms of article 14(6) but who had spent a period in custody following a wrongful conviction or charge, where he was satisfied that it had resulted from serious default on the part of a member of a police force or of some other public authority.
He said that the Secretary of State for Northern Ireland intended to follow a similar practice.
A similar scheme was already in operation in Scotland.
There was however international pressure on the United Kingdom to put its obligations under article 14(6) on a statutory footing: see R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, para 28 by Lord Steyn.
The response to it was section 133 of the Criminal Justice Act 1988.
The new statutory right superseded in part the existing scheme for ex gratia payments, which remained in being until April 2006, when it was terminated both in England and Wales and Northern Ireland.
This has had the inevitable, but unfortunate, consequence that claimants in those jurisdictions are now dependent solely upon the scheme provided by the statute.
The ex gratia scheme which has been operated in Scotland by the Scottish Ministers still remains in force there, alongside the system for the payment of compensation in respect of all reversals of convictions that fall within section 133 of the 1988 Act.
This enables those against whom criminal proceedings were taken which can properly be regarded with hindsight as wrongful to be compensated even though their cases cannot be brought within the terms of the statute.
The way the scheme is currently operated in England and Wales was set out by the Minister of State (Lord McNally) in a written answer which was published on 1 March 2011 (Hansard (HL Debates), WA col 318), in which he said: Compensation is paid under [section 133] where a conviction is quashed following an out of time appeal or following a reference by the Criminal Cases Review Commission to the relevant appeal court on the basis that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Section 133 fully meets our international obligations.
The Government do not operate a compensation scheme for those who have convictions quashed at in time appeals or those who are acquitted at trial.
Figures disclosed by the Ministry of Justice about the number of applications received and the number of applications approved in England and Wales show that there has been a very substantial drop in the number of applications approved since the abolition of the ex gratia scheme in 2006.
The system prior to that date was that all applications were considered first under section 133 and then, if not approved, were considered under the ex gratia scheme.
The following table shows all applications for compensation received since May 2004 and those which were approved under section 133 : Year 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
The statutory scheme
Article 14(6) of the ICCPR provides: Total Applications Received 88 74 39 40 38 37 Applications Approved Under s 133 39 21 23 7 7 1 When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
The wording of section 133(1) of the 1988 Act follows that of article 14(6).
It provides: (1) Subject to subsection (2) below, when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Subsection (2) provides that no payment of compensation is to be made unless an application for compensation is made to the Secretary of State, for which a time limit of two years beginning with the date when the persons conviction is reversed or he is pardoned was introduced in relation to England and Wales and Northern Ireland by section 61(3) of the Criminal Justice and Immigration Act 2008.
Section 133(5) of the 1988 Act, as amended by paragraph 16(4) of Schedule 2 to the Criminal Appeal Act 1995, provides: In this section reversed shall be construed as referring to a conviction having been quashed or set aside (a) on an appeal out of time; or (b) on a reference (i) (ii) under section 194B of the Criminal Procedure (Scotland) Act under the Criminal Appeal Act 1995; or 1995.
Subsection (5A), which was inserted in relation to England and Wales and Northern Ireland by section 61(5) of the Criminal Justice and Immigration Act 2008, provides: (5A) But in a case where (a) a persons conviction for an offence is quashed on an appeal out of time, and (b) the person is to be subject to a retrial, the conviction is not to be treated for the purposes of this section as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
To be entitled to compensation under section 133(1) the claimant must show that he has been convicted of a criminal offence and that subsequently his conviction has been reversed on an appeal out of time or on a reference by the CCRC, or he has been pardoned: on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The words that I have quoted from the subsection differ from the equivalent part of article 14(6) of the ICCPR in one respect only.
The statute uses the phrase beyond reasonable doubt where article 14(6) uses the word conclusively.
One might have thought at first sight that, when applications for compensation were made to the Secretary of State, such simple wording could be applied to each case without much difficulty.
But that has proved not to be the case, as can be seen from the speeches in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, where the meaning of the words miscarriage of justice was under scrutiny.
Lord Bingham said that he would hesitate to accept the submission of the Secretary of State that section 133 obliged him to pay compensation only when a defendant, finally acquitted in the circumstances satisfying the statutory conditions, is shown beyond reasonable doubt to be innocent of the crime of which he had been convicted: para 9.
Lord Steyn, on the other hand, said that the words miscarriage of justice extend only to cases where the person concerned is acknowledged to be clearly innocent: para 56.
Then there are the words new or newly discovered fact.
What is a fact for this purpose? And to whom does it have to be new or by whom does it have to be newly discovered? The meaning of those words is in issue in the appeal by Adams, whose conviction was reversed because of a failure by his representatives to make themselves aware of and make use of three pieces of important material at his trial which had been made available to them by the prosecution but of which Adams himself was not aware.
The issue as to what is meant by the words miscarriage of justice is common to his appeal and the appeals of MacDermott and McCartney.
It will be convenient to examine this issue first.
Miscarriage of justice
Attempts have been made in subsequent cases to reconcile the differing views as to the meaning of miscarriage of justice that were expressed in Mullen: see R (Murphy) v Secretary of State for the Home Department [2005] EWHC 140 (Admin), [2005] 1 WLR 3516; R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin); In re Boyles Application [2008] NICA 35; R (Allen) (formerly Harris) v Secretary of State for Justice [2008] EWCA Civ 808, [2009] 2 All ER 1; R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin).
In the Court of Appeal in Adamss case Dyson LJ said that, like Lord Phillips of Worth Matravers CJ in Cliberys case and Richards J in Murphy, he did not propose to express a view as to whether Lord Binghams interpretation was to be preferred to that of Lord Steyn: R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, para 42.
The assumption has been that Lord Binghams reference in para 4 of his speech in Mullen to something having gone seriously wrong in the investigation of the offence or the conduct of the trial could be taken as a test of whether the right to compensation under section 133 was available that could sit alongside that preferred by Lord Steyn.
In Allen, para 26 Hughes LJ said that this was made the plainer by Lord Binghams references to a defendant who should clearly not have been convicted in para 4 and who certainly should not have been convicted in para 9(1).
Dyson LJ set the scene for a discussion of this issue in these appeals in para 19 of his judgment in R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, when he said: The question what is meant by miscarriage of justice has not been resolved by the courts.
As Toulson LJ said when giving permission to appeal in the present case, there are at least three classes of case where the Court of Appeal allows an appeal against conviction on the basis of fresh evidence.
I shall call them category 1, category 2 and category 3 cases.
A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the trial, shows beyond reasonable doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
This list of the different types of case where appeals are allowed according to the practice of the Court of Appeal (Criminal Division) was used in argument to focus the positions adopted by either side in these appeals.
It was assisted later in the judgment by an acknowledgment that there were two limbs to Lord Binghams interpretation as set out in his speech in Mullen, para 4: [2010] QB 460, para 43.
The first limb was where the person was innocent of the crime of which he had been convicted: category 1 according to Toulson LJs analysis.
The second limb was where something had gone seriously wrong in the investigation or the conduct of the trial and the person should clearly not have been convicted.
For the Secretaries of State it was submitted that only cases falling within category 1 would satisfy the requirements of section 133(1).
For Adams Mr Owen QC submitted that it was not possible to draw a clear line between categories 2 and 3, so it was sufficient for him to bring his case within category 3.
In any event, he submitted that Lord Binghams interpretation of the phrase in his second limb in Mullen was to be preferred, that proof of innocence was not required and that his case came within category 4.
Counsel for the appellants McCartney and MacDermott submitted that Lord Binghams interpretation was to be preferred, and that their cases too fell within his second limb and category 4.
It would be wrong to regard the way these categories were identified and described by the Court of Appeal as a substitute for looking at the language of section 133(1) itself and reaching our own view as to its effect.
Lord Bingham said in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, para 2 that he would allow the Secretary of States appeal on a narrow ground which made it unnecessary for him to reach a concluded view as to whether the right to compensation under the statute was available only to those who were innocent of the crime of which they had been convicted.
We do not have that luxury in the cases that are before us in these appeals.
A choice has to be made.
It is time to take a fresh look at the arguments.
Our task is made less onerous, although no less difficult, by the fact that the materials that were said to be relevant were discussed so fully by Lord Bingham and Lord Steyn in Mullen.
It is striking how little assistance they were able to derive from the materials that were before the House.
On many points both Lord Steyn and Lord Bingham were in agreement.
They were agreed that the wording of section 133(1) was intended, as Lord Bingham put it in para 9, to reflect article 14(6).
In para 5 he said that the parties were rightly agreed that the key to interpretation of section 133 was a correct understanding of article 14(6).
They were also agreed that, as Lord Bingham said in para 9(1), the expression miscarriage of justice is not a legal term of article Taken on its own and out of context, it has no settled meaning.
Lord Steyn said that the expression had to be looked at in the relevant international context, and that the only relevant context here was the international meaning of the words in article 14(6) on which section 133 is based: para 36.
The question then was, what did the materials reveal as to its international meaning?
The travaux prparatoires disclosed no consensus of opinion on the meaning to be given to it.
Lord Steyn said that they were neutral and did not assist in any way on the proper construction of article 14(6): para 54.
Lord Bingham seems to have seen this as a possible pointer towards a more generous interpretation.
He said that the expression miscarriage of justice may have commended itself because of the latitude of interpretation that it offered: para 9(2).
But this was no more than a straw in the wind.
The jurisprudence of the United Nations Human Rights Committee was of little assistance either indeed, Lord Steyn does not mention it at all.
And there was no consensus of academic opinion on the issue.
In this situation Lord Steyn resorted first to an examination of article 14(6) on its own terms: para 45.
Lord Bingham did not undertake this exercise.
Instead he took as his starting point the statements that Mr Jenkins and Mr Hurd made when they were explaining the ex gratia scheme to Parliament: para 4.
As he said at the outset of this paragraph, they were addressing the subject of wrongful convictions and charges.
He observed that, like the expression miscarriage of justice, the expression wrongful convictions is not a legal term of art and it has no settled meaning.
He then set out to describe in some detail the situations to which in ordinary parlance, as he put it, the expression would be taken to extend.
Here we find the first and second limbs, as Dyson LJ in the Court of Appeal described them at [2010] QB 460, para 43, set out.
The first is the conviction of those who are innocent of the crime of which they were convicted.
The second embraces cases where those who, whether guilty or not, should not have been convicted.
The manifold reasons where this might happen were impossible and unnecessary to identify.
The common factor however was that something had gone seriously wrong in the investigation of the offence or the conduct of the trial.
It is important not to lose sight of the fact that Lord Bingham was not seeking in para 4 to describe what, in the context of article 14(6), was meant by the expression miscarriage of justice.
He was concentrating here on the expression wrongful conviction in the statements about the ex gratia scheme.
He did not refer to the fact that it is a precondition of the right to compensation under article 14(6), and in its turn section 133, that the conviction was reversed because of a new or newly discovered fact.
The descriptions of the ex gratia scheme did not mention this as a prerequisite.
Quite what part this discussion had to play in the interpretation of article 14(6), to which he turned in para 5, is unclear.
He took account of the fact that in the course of his statement Mr Hurd recited the terms of, and undertook to observe, article 14(6): para 5.
There is an indication in that paragraph that he saw the only difference between that part of Mr Hurds statement and the enactment of section 133 as being that the right to be compensated should more obviously be, as article 14(6) requires, according to law.
But, as he said at the end of that paragraph, the task of the House was to interpret section 133.
He did not say and it would have been surprising if he had done that the key to this was to be found in Mr Hurds description of the cases where he was willing to pay compensation for a wrongful conviction under the ex gratia scheme.
When he said at the end of para 8 that it is for failures of the trial process that the Secretary of State is bound by section 133 and article 14(6) to pay compensation, he was not offering a considered view as to what those provisions actually mean.
He was explaining why, because there was no failure in the trial process, he could decide the case against Mullen on that limited ground without forming a concluded view as to what the convicted person had to show to be entitled to compensation.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin), para 25, Lord Phillips of Worth Matravers CJ said that in para 4 of his speech in Mullen Lord Bingham considered two different situations, each of which he (that is, Lord Bingham) considered fell within the description of miscarriage of justice in section 133 of the 1988 Act.
It is true, as Lord Phillips went on to point out, that in para 6 of his speech Lord Bingham referred to the core right with which article 14(6) is concerned as the right to a fair trial.
But I think, with respect, that Lord Phillips was wrong to say that in para 4 of his speech Lord Bingham was considering what was meant by miscarriage of justice in section 133, as he himself has accepted: see para 30, above.
Hughes LJ drew attention to this point in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 25.
He said that it must be remembered that in Mullen both the statutory and the ex gratia schemes were under consideration.
In my opinion the value of Lord Binghams speech in Mullen lies not in any attempt on his part to subject section 133 to textual analysis, for he did not do this.
It is to be found in the reasons he gave for hesitating to accept the argument for the Secretary of State that section 133 was satisfied only when the defendant was shown beyond reasonable doubt to have been innocent of the crime of which he had been convicted, and in particular in the three points on which he disagreed with Lord Steyn.
Lord Steyns textual analysis of article 14(6) begins with a warning that there was no overarching purpose of compensating all who are wrongly convicted.
For the reasons he gives in para 45, the fundamental right under article 14(6) is narrowly circumscribed.
There was no intention to compensate all those whose convictions were quashed within the ordinary time limits, only those whose convictions were quashed on appeal out of time.
And this was only where a new or newly discovered fact showed conclusively that there had been a miscarriage of justice.
Having made this point, he then concentrated in para 46 on the requirement that the new or newly discovered fact must show conclusively (or beyond reasonable doubt in the language of section 133) that there has been a miscarriage of justice.
He said that this filtered out cases of two kinds, (1) where there may have been a wrongful conviction and (2) where it is only probable that there may have been a wrongful conviction.
He concluded that the only relevant context pointed to a narrow interpretation, that is to say the case where innocence is demonstrated.
This approach leans very heavily on the use of the word conclusively.
That word certainly points towards a narrow interpretation.
But it does not point inevitably to the demonstration of innocence as the only case that could qualify for compensation under the article.
The fact that a person who has been pardoned is brought within the scheme does not have that effect either.
It would plainly have been wrong to exclude those who are pardoned from the scheme when those whose convictions have been reversed are given the benefit of it.
But the reversal of a conviction and a pardon are processes which are distinct from each other.
It does not follow from the mere fact that they are both covered by the same scheme that the only reversals of convictions that can be contemplated are those which would otherwise have deserved a pardon.
Lord Steyn might have examined these points more fully, had he not been persuaded by two considerations to which he then turned that he had found the right answer.
The first was the use of the words une erreur judiciaire in the French text of the ICCPR.
In para 47 of his speech in Mullen Lord Steyn said that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of the innocent.
In para 9(4) of his speech Lord Bingham expressed some unease about this, as he contrasted these words with the reference to un condamn reconnu innocent in article 626 of the French Code de Procdure Pnale.
He said that the expression une erreur judiciaire could be understood as equivalent to miscarriage of justice in its broad sense, and that it was not obviously apt to denote proof of innocence.
In In re Boyles Application [2008] NICA 35, para 11 Girvan LJ said that he considered that Lord Binghams hesitation in not accepting Lord Steyns stringent requirement of proof of innocence was justified.
In para 12 he pointed out that the term erreur judiciaire is defined by Grard Cornu in his Vocabulaire Juridique, 7th ed (1998), as une erreur de fait commise par une juridiction de jugement dans son appreciation de la culpabilit dune personne poursuivie.
In para 13 he enlarged on Lord Binghams reference to article 626 of the Code de Procdure Pnale, pointing out that it did not require proof of innocence but rather that, where a defendants conviction is quashed and he is subsequently acquitted, he is reconnu innocent in consequence in other words, the annulment of the conviction itself leads to the establishment of his innocence.
Although Mr Tam QC for the Secretary of State sought to defend Lord Steyns interpretation in his written case, he accepted in the course of Mr Owens oral argument that it was probably incorrect.
For my part, I think that Girvan LJs researches have shown that Lord Steyns understanding of the words une erreur judiciaire in the French text of article 14(6), for which he gave no authority, was mistaken.
The second consideration on which Lord Steyn relied was an observation in para 25 of an explanatory report by the Steering Committee for Human Rights appointed by the Council of Europe which accompanied the Seventh Protocol of the European Convention when it was published in November 1984: Mullen, para 48.
It said of article 3, which follows the wording of article 14(6) of the ICCPR, that the intention was that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be an acknowledgment that the person concerned was clearly innocent.
Having noted that in the introduction to the report it was stated that participation in the Protocol would not affect the application of provisions containing obligations under any other international instrument, Lord Steyn said that the explanatory report nevertheless had great persuasive value in the process of interpretation.
In para 9(4), on the other hand, Lord Bingham set out five reasons for thinking that this passage does not bear the weight that Lord Steyn attached to it.
Among those reasons are two which seem to me to be particularly significant.
First, many more states are parties to the ICCPR than to the European Convention or the Seventh Protocol, which the United Kingdom has not signed or ratified.
Second, para 25 does not appear to be altogether consistent with para 23, which suggests that a miscarriage of justice occurs where there is a serious failure in the judicial process involving grave prejudice to the convicted person.
Furthermore, as Lord Bingham noted in para 9(5), van Dijk and van Hoof, Theory and Practice of the European Convention on Human Rights, 3rd ed (1998), p 689 take a different view, suggesting that the explanatory reports interpretation is too strict and that reversal of the conviction on the ground that new facts have been discovered which introduce a reasonable doubt as to the guilt of the accused is enough.
Lord Steyn said in para 48 that the explanatory report had great persuasive value.
I think that, for the reasons Lord Bingham gives, this overstates the position.
The better view is that it lends some support the Secretary of States argument, but that it must be for the court to work out for itself what the words mean.
There was one further difficulty about Lord Steyns interpretation to which Lord Bingham drew attention in para 9(6).
This is that courts of appeal, although well used to deciding whether convictions are safe or whether reasonable doubts exist about their safety, are not called upon to decide whether a defendant is innocent and in practice rarely do so.
In R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact will be identifiable in that court and the judgment will, in virtually every case, make this plain.
I do not think that this entirely meets Lord Binghams point.
I have no doubt that there will be cases of the kind that Hughes LJ describes.
But it remains true that courts of appeal are not called upon to say whether or not a defendant was innocent, and it is at least questionable whether restricting the right to compensation to cases where the establishment of innocence is apparent from the courts judgment imposes too severe a test for the entitlement to compensation.
A fresh analysis
If one accepts, as I would do, Lord Binghams reasons for doubting whether Lord Steyn was right to find support for his reading of article 14(6) in the French text and in para 25 of the explanatory committees report on article 3 of the Seventh Protocol, one is driven back to the language of the article itself as to what the words miscarriage of justice mean.
Taken by itself this phrase can have a wide meaning.
It is the sole ground on which convictions can be brought under review of the High Court of Justiciary in Scotland: Criminal Procedure (Scotland) Act 1995, section 106(3).
But the fact that these words are linked to what is shown conclusively by a new or newly discovered fact clearly excludes cases where there may have been a wrongful conviction and the court is persuaded on this ground only that it is unsafe.
It clearly includes cases where the innocence of the defendant is clearly demonstrated.
But the article does not state in terms that the only criterion is innocence.
Indeed, the test of innocence had appeared in previous drafts but it was not adopted.
I would hold, in agreement with Lord Phillips (see para 55 above) that it includes also cases where the new or newly discovered fact shows that the evidence against the defendant has been so undermined that no conviction could possibly be based upon it.
In that situation it will have been shown conclusively that the defendant had no case to answer, so the prosecution should not have been brought in the first place.
There is an important difference between these two categories.
It is one thing to be able to assert that the defendant is clearly innocent.
Cases of that kind have become more common and much more easily recognised since the introduction into the criminal courts, long after article 14(6) of the ICCPR was ratified in 1976, of DNA evidence.
It seems unlikely that the possibility of demonstrating innocence in this way was contemplated when the test in article 14(6) was being formulated.
Watson and Crick published their discovery of the double helix in 1951, but DNA profiling was not developed until 1984 and it was not until 1988 that it was used to convict Colin Pitchfork and to clear the prime suspect in the Enderby Murders case.
The state should not, of course, subject those who are clearly innocent to punishment and it is clearly right that they should be compensated if it does so.
But it is just as clear that it should not subject to the criminal process those against whom a prosecution would be bound to fail because the evidence was so undermined that no conviction could possibly be based upon it.
If the new or newly discovered fact shows conclusively that the case was of that kind, it would seem right in principle that compensation should be payable even though it is not possible to say that the defendant was clearly innocent.
I do not think that the wording of article 14(6) excludes this, and it seems to me that its narrowly circumscribed language permits it.
The range of cases that will fall into the category that I have just described is limited by the requirement that directs attention only to the evidence which was the basis for the conviction and asks whether the new or newly discovered fact has completely undermined that evidence.
It is limited also by the fact that the new or newly discovered fact must be the reason for reversing the conviction.
This suggests that it must be the sole reason, but I do not see the fact that the appellate court may have given several reasons for reversing the conviction as presenting a difficulty.
All the other reasons that it has given will have to be disregarded.
The question will be whether the new or newly discovered fact, taken by itself, was enough to show conclusively that there was a miscarriage of justice because no conviction could possibly have been based on the evidence which was used to obtain it.
For these reasons it is plain that category 1 in Dyson LJs list (see para 83, above) falls within the scope of section 133.
I think that it is equally plain that category 4 (Lord Binghams second limb) does not, as it is taken from para 4 of Lord Binghams speech in Mullen where he was discussing what was included within the phrase wrongful convictions, not what was meant by section 133.
This leaves category 2, where the fresh evidence shows that the defendant was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted; and category 3, where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
Bearing in mind that we must form our own view as to what section 133 means, can the wording of that section on a correct understanding of article 14(6) include either or both of these categories?
I have put the words fresh evidence, which of course echo the wording of section 23 of the Criminal Appeal Act 1968 (see also section 106(3) of the Criminal Procedure (Scotland) Act 1995), into inverted commas because they depart from the words of section 133.
The statute, like article 14(6), refers to a new, or newly discovered fact, not to fresh evidence.
And it must be a fact which shows beyond reasonable doubt, or conclusively, that there was a miscarriage of justice.
Fresh evidence does not attain that status until the matter to which it relates has been proved or has been admitted to be true.
Fresh evidence that justifies the conclusion referred to in category 3 will usually not be, and certainly need not be, of that character.
If it shows that the conviction is merely unsafe, the court may order a retrial.
Under our system of trial by jury there will be no way of knowing, beyond reasonable doubt, whether it was a new or newly discovered fact that led to the acquittal.
For these reasons I would exclude category 3 from the scope of section 133.
This leaves category 2.
As Hughes LJ indicates in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii), we are dealing here with a new or newly discovered fact that is identifiable as such by the Court of Appeal.
Category 2, as described in Dyson LJs list, is of course accurate as a description of what happens according to the Court of Appeals practice.
But it is too broadly framed for use as a reliable guide to what falls within the scope of section 133 read with article 14(6).
It lacks the limiting factors indicated by the words new or newly discovered fact and shows conclusively.
It may not be easy in practice to distinguish cases that fall within it from those that fall within category 3.
So in my opinion a more precise, and more exacting, formula must be found.
I am uneasy too about requiring the Secretary of State, whose function it is to administer the scheme under the statute, to apply a test which refers to what a reasonable jury would do.
This is a judgment that is best left to the courts.
While he will be guided by what the appellate court said when it reversed the conviction, he is entitled to look at the new or newly discovered fact for himself and draw his own conclusions as to its consequences so long as they are not in conflict with what the court has said in its judgment.
This brings me back to what I said in para 94 above.
For the reasons I give there I would rephrase category 2, so that it fits with the narrowly circumscribed language of article 14(6) and section 133.
I would limit it to cases where the new or newly discovered fact shows conclusively that there was a miscarriage of justice because the evidence that was used to obtain the conviction was so undermined by the new or newly discovered fact that no conviction could possibly be based upon it.
This would include cases where the prosecution depended on a confession statement which was later shown by a new or newly discovered fact to have been inadmissible because, as the defendant had maintained all along, it was extracted from him by improper means.
It may be quite impossible to say in such a case that he was, beyond reasonable doubt, innocent.
But, as the evidence against him has been completely undermined, it can be said that it has been shown beyond reasonable doubt, or conclusively, that there has been a miscarriage of justice in his case which was as great as it would have been if he had in fact been innocent, because in neither case should he have been prosecuted at all.
Retrial
Section 133(5A), which was inserted by section 61 of the Criminal Justice and Immigration Act 2008, changed the timetable as to when a persons conviction was to be taken to have been reversed in a case where a retrial is ordered.
This amendment has to be read with the amendment which was made at the same time to section 133(2) by inserting a time limit for making an application for compensation under section 133.
This is a period of two years beginning with the date when the conviction is reversed.
Section 133(5A) provides that where the person is to be subject to a new trial the conviction is not to be treated as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
This provision introduces a feature of the statutory scheme which was not before the House in Mullen.
But I do not think that it affects Lord Steyns interpretation of section 133, or the qualification which I would make to it to include cases where the prosecution should never have been brought.
It is not to be taken as suggesting that compensation is payable in every case where the appellate court has ordered a new trial because it is satisfied that the conviction was unsafe in the light of fresh evidence.
What it does, as it seems to me, is to allow for the possibility that something may emerge either before or during the retrial which would require compensation to be paid.
Nor is it to be taken as suggesting that compensation is payable in every case, such as that of Mr George, where the person was acquitted at his retrial.
The tests laid down in section 133(1) must still be applied.
It is only where a new fact or a newly discovered fact shows conclusively that the person was innocent or that the prosecution should never have been brought that there will be a right to compensation.
This will not be the case where a retrial has been ordered, and it may not be apparent from the jurys verdict at the retrial.
The fact that it returned a verdict of not guilty will not be enough.
But if new facts emerge during the retrial process that have the effect of showing conclusively that the person was innocent or that the prosecution should never have been brought they can be taken into account, even though they emerged after the date when the conviction was reversed by the Court of Appeal.
New or newly discovered fact
A question that is raised in Adamss case is to whom these words are addressed.
His appeal was allowed by the Court of Appeal on the basis that, owing to inadequacies in the conduct of his case by his then legal team, there had been a failure by them to discover and make use at the trial of three pieces of important material which had been made available to them by the prosecution but of which Adams himself was not aware: [2007] 1 Cr App R 449, para 155.
In other words, this was material that was available at the trial but not used.
Could it be said that these were new or newly discovered facts? His case is that all he needed to show was that he himself was unaware of them.
They were new to him because they were not revealed to him by his legal team.
They did not have to be new, as the Secretary of State maintains, to everyone involved in the trial.
The Divisional Court (Maurice Kay LJ and Simon J) held that the Secretary of State was right to reject Adamss claim for compensation on the ground that his conviction was not quashed because of a new or newly discovered fact: [2009] EWHC 156 (Admin).
The Court of Appeal (Waller, Dyson and Lloyd LJJ) disagreed, for three reasons: [2010] QB 460, paras 14 16.
First, it was difficult to accept that those who drafted the article intended to deny compensation to a person whose conviction was reversed on the basis of material which was available to his legal team and would have shown that he was innocent.
Second, there was no need to interpret the phrase in a way that yielded such an extreme result.
Third, the focus of the language was on the convicted person.
There was no mention of his legal representatives in the article.
So compensation was not to be denied to him if facts emerged that were new to him, although they were known to his legal representatives.
I do not think that the language of article 14(6) bears this interpretation.
It seems to me that the focus of attention is on what was known or not known to the trial court, not to the convicted person.
The assumption is that the trial court did not take the fact into account because it was not known or had not been discovered at the time of the trial.
If this was attributable wholly or in part to the convicted person because he deliberately chose not to reveal what he knew to his defence team compensation must be denied to him, as the coda to article 14(6) makes clear.
But, leaving that point out of account, the only relevant questions are whether it was not available to the trial court because it was not known then at all or whether, although knowable, it had not been discovered by the time of the trial.
Material that has been disclosed to the defence by the time of the trial cannot be said to be new or to have been newly discovered when it is taken into account at the stage of the out of time appeal.
To focus on the state of mind of the convicted person goes too far.
It ignores the fact that in practice the defendants legal representatives are unlikely to have discussed with him every piece of information that they come across in the course of their preparation for and conduct of the trial.
I agree with Lord Judge that a fact is not new or newly discovered for the purposes of section 133 just because the defendant himself, who was previously unaware of that fact, ceases to be ignorant of it.
Does denial of compensation infringe the presumption of innocence?
Mr Owen submitted that a narrow interpretation of article 14(6) would conflict with the presumption of innocence in article 6(2) of the European Convention.
He relied on a series of decisions by the European Court of Human Rights which show that the presumption of innocence may be violated in particular circumstances where, following an acquittal, a court or other authority expresses an opinion of continuing suspicion which amounts in substance to a determination of guilt of the person concerned: Sekanina v Austria (1993) 17 EHRR 221; Leutscher v The Netherlands (1996) 24 EHRR 181; Rushiti v Austria (2000) 33 EHRR 1331; Weixelbraun v Austria (2001) 36 EHRR 799; Orr v Norway (Application No 31283/04) (unreported) 15 May 2008; and Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
These cases, other than Orr v Norway, were examined in Mullen by Lord Bingham in para 10 and by Lord Steyn in paras 41 44.
Mr Owen said that the reasons that Lord Steyn gave for finding these cases of no assistance on the question as to whether article 6(2) requires an expansive interpretation of article 3 of the Seventh Protocol or of article 14(6) of the ICCPR were correct but irrelevant.
Lord Bingham on the other hand said in para 10 that they were of no assistance, since Mullens acquittal was based on matters entirely unrelated to the merits of the accusation against him.
So it was open to this court to take a fresh look at the issue.
As Mr Tam for the Secretary of State pointed out, article 6(2) applies according to its own terms to the criminal process.
The Strasbourg cases show that its jurisprudence is designed to protect the criminal acquittal in proceedings that are closely linked to the criminal process itself.
In Sekanina v Austria (1993) 17 EHRR 221, para 30, for example, the court said that the voicing of suspicions regarding a persons innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits but that it was no longer admissible to rely on such suspicions once an acquittal has become final.
That was a case where the applicant had been charged with murder and remanded in custody but was subsequently acquitted at his trial.
His claim for compensation was dismissed on the ground that there were still strong suspicions regarding his guilt.
The problem was that Austrian legislation and practice linked the two questions the criminal responsibility of the accused and the right to compensation to such a degree that the decision on the latter issue could be seen to be regarded as a consequence and, to some extent, the concomitant of the decision on the former: para 22.
The court was careful to point out in para 25, however, that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol.
This distinction shows that a person might properly be refused compensation under that article, and thus under article 14(6) of the ICCPR which marches together with article 3 of the Seventh Protocol, without violating the presumption of innocence under article 6(2).
The same approach was taken in Hammern v Norway (Application No 30287/96) 11 February 2003 where the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner, by the same court sitting largely in the same formation, so as to bring the proceedings within the scope of article 6(2): para 46.
A further example of this line of reasoning is provided by Y v Norway (2003) 41 EHRR 87, where the applicant was acquitted by the High Court which then went on to refuse his claim for compensation the next day on the ground that it was clearly probable that he had committed the offences with which he had been charged.
So too in Orr v Norway (Application No 31283/04) 15 May 2008, where the High Court dealt with the acquittal and the payment of compensation to the complainant in two clearly distinct parts of its judgment, but in several places highlighted that the standard of proof for civil liability to pay compensation was less strict than for criminal liability: para 52.
This was held in para 53 to cast doubt on the correctness of the acquittal.
The principle that is applied is that it is not open to the state to undermine the effect of the acquittal.
What article 14(6) does not do is forbid comments on the underlying facts of the case in subsequent proceedings of a different kind, such as a civil claim of damages, when it is necessary to find out what happened.
The system that article 14(6) of the ICCPR provides does not cross the forbidden boundary.
The procedure laid down in section 133 provides for a decision to be taken by the executive on the question of entitlement to compensation which is entirely separate from the proceedings in the criminal courts.
As Lord Steyn pointed out in Mullen, paras 41 43, in none of the cases from Austria or Norway, nor in Leutscher v The Netherlands 24 EHRR 181, was the court called upon to consider the interaction between article 6(2) and article 3 of the Seventh Protocol.
On the contrary, the fact that the court was careful to emphasise in Sekanina v Austria, para 25 that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol is an important pointer to the conclusion that, as Lord Steyn put it in Mullen, para 44, article 14(6) and section 133 of the 1988 Act are in the category of lex specialis and that the general provision for a presumption of innocence does not have any impact on them.
A refusal of compensation under section 133 on the basis that the innocence of the convicted person has not been clearly demonstrated, or that it has not been shown that the proceedings should not have been brought at all, does not have the effect of undermining the acquittal.
Conclusions
I would dismiss the appeal by Adams on the ground that the phrase new or newly discovered fact does not encompass the material that was available to but not used at the trial by the convicted persons legal representatives.
But I would add that the second limb of the test that has been attributed to Lord Bingham because of what he said in para 4 of his speech in Mullen, on which Mr Owen relied, does not meet the requirements of article 14(6).
So, even if the material in question could be said to have been newly discovered, his case would not have entitled him to compensation under the statute.
I would allow the appeals by McCartney and MacDermott, for the reasons given by Lord Kerr.
It is not possible to say in their cases that the newly discovered facts show conclusively that they were innocent of the crimes of which they were convicted.
But it is possible to say, in the light of the newly discovered facts, that these were proceedings that ought not to have been brought because the evidence against them has been so completely undermined that no conviction could possibly be based upon it.
I would hold that their cases fall within the narrowly circumscribed language of article 14(6) and section 133 of the 1988 Act, and they are entitled to be compensated.
LADY HALE
I agree that a miscarriage of justice in section 133 of the Criminal Justice Act 1988 (see para 1 above) should be interpreted as proposed by Lord Phillips in para 55 of his judgment.
The phrase is clearly capable of bearing a wider meaning than conclusive proof of innocence.
Both the inspiration for section 133, in article 14(6) of the ICCPR (see para 6 above) and the meaning of miscarriage of justice in domestic law in 1988 support a wider meaning.
The drafters of article 14(6) rejected all attempts to confine it to proof of innocence.
In 1988, the Criminal Appeal Act 1968 permitted the Court of Appeal to dismiss an appeal if they considered that no miscarriage of justice has actually occurred (section 2(1) before its amendment by the Criminal Appeal Act 1995).
This points strongly to the meaning of miscarriage of justice as the conviction of someone who ought not to have been convicted.
The addition in section 133 of the requirement that this be shown beyond reasonable doubt (in substitution for conclusively in article 14(6)) indicates that this refers to someone who definitely should not have been convicted rather than to someone who might or might not have been convicted had we known then what we know now.
As I understand it, Lord Phillips formulation, with which both Lord Hope and Lord Kerr agree, would limit the concept to a person who should not have been convicted because the evidence against him has been completely undermined.
Unlike Lord Clarke, therefore, he would not include a person who should not have been convicted because the prosecution was an abuse of process.
I agree with Lord Phillips that the object of this particular exercise is to compensate people who cannot be shown to be guilty rather than to provide some wider redress for shortcomings in the system.
I do sympathise with Lord Browns palpable sense of outrage that Lord Phillips test may result in a few people who are in fact guilty receiving compensation.
His approach would of course result in a few people who are in fact innocent receiving no compensation.
I say a few because the numbers seeking compensation are in any event very small.
But Lord Phillips approach is the more consistent with the fundamental principles upon which our criminal law has been based for centuries.
Innocence as such is not a concept known to our criminal justice system.
We distinguish between the guilty and the not guilty.
A person is only guilty if the state can prove his guilt beyond reasonable doubt.
This is, as Viscount Sankey LC so famously put it in Woolmington v Director of Public Prosecutions [1935] AC 462, at p 481, the golden thread which is always to be seen throughout the web of the English criminal law.
Only then is the state entitled to punish him.
Otherwise he is not guilty, irrespective of whether he is in fact innocent.
If it can be conclusively shown that the state was not entitled to punish a person, it seems to me that he should be entitled to compensation for having been punished.
He does not have to prove his innocence at his trial and it seems wrong in principle that he should be required to prove his innocence now.
Of course, it is not enough that the evidence supporting his conviction has been fatally undermined.
This has to be because of a new or newly discovered fact.
On this point, I also agree with Lord Phillips, who adopts the definition contained in section 9(6) of the Criminal Procedure Act 1993 in Ireland (see para 60).
This means that the person convicted either did not know or did not appreciate the significance of the information in question.
It seems difficult to make sense of the proviso to section 133(1) unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted in any other way.
For these reasons, in agreement with Lord Phillips, I would dismiss Mr Adams appeal but allow the appeals of Mr MacDermott and Mr McCartney.
The evidence against Mr Adams has not been so undermined that no conviction could possibly be based upon it, whereas Lord Kerr has demonstrated that this is indeed the case with Mr MacDermott and Mr McCartney.
LORD KERR The appeals of Eamonn MacDermott and Raymond McCartney
Introduction
On 12 January 1979, after a trial by a judge, sitting without a jury at Belfast City Commission, Raymond Pius McCartney was convicted of two offences of murder and one of membership of the Irish Republican Army.
The two murder victims were Geoffrey Agate and Detective Constable Liam Patrick McNulty.
Mr McCartney was sentenced to life imprisonment on each of the murder counts and to five years imprisonment for the offence of membership of a proscribed organisation.
On the same date and at the same court Eamonn MacDermott was convicted of various offences including the murder of Detective Constable McNulty.
He was sentenced to life imprisonment for that offence and to various terms of imprisonment for the other offences.
The sole evidence on which Mr McCartney and Mr MacDermott were convicted consisted of written and verbal admissions that they were said to have made during interviews by police.
Both contested the admissibility of the statements, alleging that they had either been the product of ill treatment by interviewing police officers or that they had been concocted.
The admissibility of the statements was considered by the trial judge after a long voire dire hearing.
He rejected the allegations of the appellants and stated that he was satisfied that neither had been ill treated.
The judge also considered whether to exercise his residual discretion to exclude the statements from evidence if he considered it proper to do so.
He concluded that it would not be proper to do so and the statements were duly admitted.
An appeal by Mr MacDermott and Mr McCartney against their convictions was dismissed by the Court of Appeal in Northern Ireland (Jones LJ, Gibson LJ and Kelly J) on 29 September 1982.
Both spent several years in prison.
On 18 January 2006 the Criminal Cases Review Commission referred the convictions of Mr MacDermott and Mr McCartney to the Court of Appeal.
On 15 February 2007 their convictions were quashed, the Court of Appeal declaring that they had a distinct feeling of unease about their safety.
Following the quashing of their convictions by the Court of Appeal, Mr McCartney and Mr MacDermott applied to the Secretary of State for Northern Ireland for compensation under section 133 of the Criminal Justice Act 1988 on the basis that they had been victims of a miscarriage of justice.
The applications were refused.
They then sought judicial review of that decision.
The application for judicial review was rejected by Weatherup J on 25 June 2009.
An appeal against that decision was dismissed by the Court of Appeal in Northern Ireland (Morgan LCJ, Girvan LJ and Coghlin LJ) on 8 February 2010.
The appellants trials
Mr McCartney
Mr McCartneys case on trial had been that he did not make any verbal admissions and that the two written statements attributed to him had been fabricated by police officers.
He claimed that he had been ill treated before each statement had been written out.
He had refused to sign them but he had initialled the caution that appeared at the head of the first statement and had drawn a line and had written the words "end of statement" at the concluding part of the second statement.
Mr McCartney claimed that his ill treatment began during the second of a series of interviews that took place in Castlereagh Police Office between 3 and 7 February 1977.
The ill treatment continued during a number (although not all) of the succeeding interviews.
Two police officers in particular were identified by him as having been the most persistent and determined perpetrators.
He gave evidence that he had been told that they had been specially chosen in order to extract confessions from him.
The suggestion was made by Mr McCartneys counsel that proper supervision of interviews had broken down and that a concerted campaign of abuse had been conducted in order to obtain confessions that would lead to convictions.
The interviewing police officers denied that they had been guilty of any form of ill treatment.
Superior officers rejected the suggestion that there had been any lack of supervision or that particular officers were chosen in order to extract confessions.
It was accepted, however, that a new team of detectives had been selected to continue interviews with Mr McCartney on the second day of interviewing.
This new team was chosen, according to one of the senior officers in charge of interviews, because Mr McCartney, despite having shown signs of co operation on the first evening of interviews, had evinced a less co operative attitude the following day.
The detectives thus selected were those identified by Mr McCartney as his principal abusers.
During the course of Mr McCartneys trial, an application was made on his behalf for leave to call three witnesses who had been arrested at the same time as he and who had been interviewed at Castlereagh Police Office during the same period.
In the event, two of the witnesses gave evidence.
One of these was a man called John Thomas Pius Donnelly.
He had been arrested at the same time as Mr McCartney.
He was interviewed about and subsequently charged with one of the murders of which Mr McCartney was later convicted.
He was also charged with having caused an explosion.
For reasons that will appear presently, the charges against Mr Donnelly were not proceeded with and he did not stand trial.
During the trial of Mr McCartney and Mr MacDermott, Mr Donnelly gave evidence that he had been subjected to serious assaults during his interviews and had sustained significant injuries in consequence.
Although the detectives who, according to Mr Donnelly, had assaulted him, Detective Constable French and Detective Constable Newell, were not those who were alleged to have ill treated Mr McCartney, they were members of the group of officers who had been conducting interviews into the murders of Mr Agate and Detective Constable McNulty.
Detective Constable French had interviewed Mr MacDermott and had recorded the most significant statement of admission from him.
Mr MacDermott alleged that he had been assaulted by Detective Constable French and by the officer who accompanied him, Detective Constable Dalton.
This second detective had also interviewed Mr McCartney and Mr McCartney claimed to have been assaulted by him also.
On 6 February 1977, after he had been interviewed for several days, two doctors carried out a joint examination of Mr Donnelly.
One of them was a forensic medical officer, retained by the police.
No fewer than ten areas of injury on Mr Donnellys body were recorded.
Substantial bruising, particularly in the abdominal area was found.
The trial judge observed that both doctors were shocked and horrified by what they found on examination.
How Mr Donnellys injuries had been caused was the subject of acute controversy on trial.
It was trenchantly put to him by counsel for the prosecution that some had been sustained during a series of struggles while he was being taken to and from interview rooms and that the remaining injuries were self inflicted.
This was a highly significant cross examination when seen in the light of the subsequently discovered reasons that the charges against Mr Donnelly had not been proceeded with.
The decision not to proceed with the prosecution of Mr Donnelly was itself highly significant for he was alleged to have made verbal and written admissions of murder and causing an explosion.
The second witness, Hugh Brady, also gave evidence of having been assaulted during interviews which took place during the same period as those of Mr McCartney and Mr Donnelly.
One of the detectives identified by Mr Brady as having assaulted him (Detective Constable Dalton) had also interviewed Mr McCartney and, as noted at para 126 above, Mr McCartney claimed that he too had been assaulted by this officer.
Mr Brady was also found on medical examination to have multiple injuries, most notably bruising of the abdomen and a burn to his hand which he claimed had been caused by the hand being forcibly held against a hot radiator.
One of the doctors who examined him, Dr Hendron, who had been retained by Mr Bradys solicitors, concluded his medical report by saying that he had no doubt that Mr Brady had been assaulted, although he conceded during cross examination at the trial of Mr McCartney and Mr MacDermott that Mr Brady may have exaggerated.
Other doctors who examined Mr Brady believed that he had exaggerated and gave evidence to that effect.
Mr Brady did not make admissions and was not charged with any offences.
Under cross examination at the trial of Mr McCartney and Mr MacDermott it was also suggested to him that his injuries had been self inflicted.
The trial judge, MacDermott J, did not find him an impressive witness for reasons that I will turn to presently.
Mr McCartney was examined by two doctors, Dr Henderson, the Force medical officer and Dr Hendron, who attended at the request of Mr McCartneys solicitors.
The medical examination took place shortly after the tenth interview which had ended at 5.20 pm on 6 February 1977.
A linear abrasion, 1 1/4 inches long was observed in the centre of McCartney's forehead, with two further small abrasions above and below it.
Dr Hendron noted that Mr McCartneys right cheek was red and puffy.
Dr Henderson had no note of this but on the form used to record the findings on examination he wrote "claimed struck on face no evidence of any bruises".
The mark on Mr McCartney's forehead was superficial; it was considered to have been present for a couple of days and was of a type that could be caused by a finger nail.
When asked for his conclusions on the evidence, Dr Hendron stated that he had no doubt that Mr McCartney had been assaulted.
Mr MacDermott
Mr MacDermott had been arrested on 31 January 1977 and his interviews took place in Strand Road Police Station in Derry between the date of his arrest and 2 February.
He claimed that he had been beaten before making admissions and had been abused and threatened on his way to the interview room.
He also gave evidence that the principal statement of admission had been prepared by a detective officer while he, MacDermott, lay on a bed.
It was claimed that his mental resolve had been so eroded by the assaults and threats that by the time the statement was being recorded, he did not care what it contained.
Mr MacDermott was examined by a number of doctors, including his own father who was a general medical practitioner.
No significant signs of physical injury were found.
He was observed to have tenderness of the jaw and ears which, he claimed, had been areas of assault.
He also exhibited signs of anxiety tension.
Towards the end of the trial, the judge asked counsel for the prosecution about the charges against Donnelly.
He said, Am I right in saying that the position is that he was charged and then what happened? The court was informed that no evidence was being offered? Counsel for the prosecution replied, He was never returned for trial.
The charges were not proceeded with.
In a lengthy judgment the trial judge found that neither Mr McCartney nor Mr MacDermott had been ill treated as they had alleged.
Indeed, in relation to Mr McCartney, the judge declared that his certain conclusion [was] that the Crown has satisfied me beyond reasonable doubt that McCartney was not ill treated and in relation to Mr MacDermott that he was absolutely satisfied that he had not been ill treated in any way or threatened.
The judge fully accepted the evidence of the police officers denying ill treatment at all times.
In relation to Mr Donnelly, the judge said that he was satisfied that the police had not assaulted or ill treated him.
Mr Brady was condemned as a dishonest and unreliable witness whose evidence the judge found did not assist in deciding whether Mr McCartney had been ill treated.
Dr Hendron had expressed the strong opinion that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted by police officers.
MacDermott J said this about the doctors evidence: There is no doubt in my mind that Dr. Hendron believes, I am sure genuinely, that McCartney, Brady, Donnelly and others have been ill treated at Castlereagh, and such a conclusion could be reached by anyone who is prepared to form a conclusion after hearing only what might be described as one side of the case.
To my mind, Dr. Hendron's evidence throughout was coloured by this belief and lacked the professional objectivity displayed later by other doctors
Robert Barclay
On 2 January 1977 Robert Barclay was arrested and taken to Omagh Police Station where he was interviewed over a number of days by Detective Constables French and Newell (the same officers who had interviewed Mr Donnelly approximately one month later).
Mr Barclay was said to have made admissions during these interviews.
He also complained of ill treatment at the hands of both detective officers.
He alleged that they assaulted him by slapping him and punching him and that they had threatened him.
On 2 December 1977, after a trial in which he gave evidence that he had been assaulted by the officers, Mr Barclay was convicted on foot of the admissions that he had made during interview.
He appealed his convictions.
A solicitor had given evidence on his trial that when he saw Mr Barclay in court on 4 January he had a black eye.
Two doctors who had examined him while he was at Omagh Police Station found signs of injury.
On 12 April 1978, the then Lord Chief Justice of Northern Ireland, Lord Lowry, delivering the judgment of the Court of Appeal, quashed the convictions.
Although no written judgment appears to have been given, Lord Lowry was recorded as having said: It is not possible to exclude the conclusion that the injuries found on the accused were inflicted at Omagh Police Station and this renders inadmissible any statement made by him.
Subsequently, Mr Barclay brought a private prosecution against Detective Constable French and Detective Constable Newell.
In his judgment, which was delivered on 25 April 1979, the trial judge in that case accepted that there was a strong prima facie case that Mr Barclay had been assaulted.
He said that Mr Barclay had undoubtedly sustained injuries in Omagh Police Station.
He referred, however, to Mr Barclays admission that, on other occasions quite unconnected with the proceedings against the police officers, he had been dishonest.
Also, on certain matters relating to his interviews by the detectives (such as, for instance, which of them had taken the notes of the interview) Mr Barclay was found by the judge to have been inaccurate.
But the medical evidence that was called on the prosecution of the police officers was found to be consistent with Mr Barclays allegations.
The judge said, however, that he could not be certain that the injuries had occurred at the time that Mr Barclay alleged they had been inflicted.
The effect of the evidence made it unlikely that they were self inflicted but this was a possibility in the estimation of the judge.
Therefore, on the basis that there was a reasonable doubt as to their guilt, he considered that he was left with no alternative but to acquit the officers.
Although the private prosecution of Detective Constables French and Newell took place after the trial of Mr McCartney and Mr MacDermott, Mr Barclays appeal against his convictions had succeeded before their trial began.
Their trial commenced on 18 September 1978.
Of course, no reference to Mr Barclays successful appeal was made during the trial of Mr McCartney and Mr MacDermott.
There is no reason to believe that anything was known of that by those involved in their trial.
On the contrary, the fact that such a relevant circumstance was not referred to is a clear indication that nothing was known about it.
The reasons that the prosecution of John Donnelly did not proceed
In a memorandum of 29 June 1977, Mr Roy Junkin, then an assistant director in the Department of the Director of Public Prosecutions, considered the prospects of success for the prosecution of Mr Donnelly.
He concluded that a court would not accept that the statement of admission made by Mr Donnelly was voluntary.
He therefore recommended that the prosecution should not proceed.
That recommendation was accepted by Mr Junkins superior, Mr George McLaughlin, to whom the memorandum had been addressed and a direction of no prosecution was duly issued.
Mr Donnelly was interviewed about his complaint of ill treatment after being informed that the prosecution against him was not to proceed.
Following the interview, Mr Junkin considered the papers again.
In a further memorandum to Mr McLaughlin dated 6 October 1977, Mr Junkin reviewed all the evidence including that obtained from Mr Donnelly during the interview about his complaint.
He stated that he had no doubt that Donnelly was assaulted whilst in police custody at Castlereagh.
The only detective identified by Mr Donnelly was Detective Constable Newell.
He had claimed that this was the only police officer who had disclosed his name.
Since this police officer had interviewed Mr Donnelly with Detective Constable French and since Mr Donnelly had said that both Detective Constable Newell and the other officer present had assaulted him, Mr Junkin recommended that both be prosecuted for assault.
In his response to Mr Junkins recommendation, Mr McLaughlin, in a memorandum dated 10 March 1978 (6 months before the trial of Mr McCartney and Mr MacDermott began), agreed that there was no doubt that Mr Donnelly had been assaulted while in custody at Castlereagh.
But Mr McLaughlin concluded that not all of Mr Donnellys complaints were supported by findings on medical examination.
He also considered that because 8 or 9 other police officers had interviewed Mr Donnelly the prosecution would not be able to establish that any particular injury had been inflicted by Detective Constables Newell and French.
He therefore declined to accept Mr Junkins recommendation that the officers be prosecuted.
The quashing of the appellants convictions
On the hearing before the Court of Appeal of the reference by CCRC, Ms McDermott QC, appearing on behalf of Mr McCartney, submitted that if counsel for the prosecution had known the reason that the prosecution of Donnelly had been discontinued, he would not have put to him in cross examination that his injuries were self inflicted.
This submission does not appear to have been countered by counsel who appeared for the Crown on the hearing of the reference and it does not feature in the conclusions expressed by the Court of Appeal in its judgment on the reference.
At the same hearing, counsel for the appellant Mr MacDermott drew attention to what he suggested was a striking similarity between the manner in which, on Mr Donnellys account, a statement was taken from him by Detective Constable French and the way in which, according to Mr MacDermott, the most important statement of admission had been recorded from him by the same police officer.
Generally, it was submitted that if the trial judge had been aware of the reasons that Mr Donnelly had not been prosecuted (viz that an assistant director in the office of the DPP and a senior assistant director considered that he had certainly been assaulted by police officers) he would not have admitted the confession statements.
It was suggested that the judge would have formed a more favourable view of the evidence of Mr Donnelly and Mr Brady and would have considered that the police officers credibility was wholly undermined.
The Court of Appeal gave its decision on these arguments in the final paragraph of its judgment as follows: We cannot rule out the possibility that the evidence of the police officers may have been discredited by evidence that is now available.
The admission in evidence of MacDermott's confessions depended upon the acceptance by the judge of the evidence of DC French.
If the judge had known of the finding of a prima facie case in the prosecution brought by Mr Barclay against DC French he may well have reached a different conclusion.
To this is to be added the striking similarity between the description given by Donnelly and MacDermott as to the manner in which their admissions were recorded.
If the allegations by Donnelly had been supported and strengthened by the new evidence this could have served also to discredit the evidence given by the police officers in McCartney's case.
In both cases we are left with a distinct feeling of unease about the safety of their convictions based as they were on admissions and the convictions must therefore be quashed.
The challenge to the refusal of compensation
On 7 November 2007 a letter in the following terms was sent to Mr McCartneys solicitors in response to the application that they had made on his behalf for compensation under section 133 of the 1988 Act: The Secretary of State has not yet reached a decision about the application; before he does so I would like to give you the opportunity to comment in writing on the views set out below.
Under section 133 compensation is payable to an applicant where his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Mr McCartneys convictions were, we believe, reversed within the meaning of section 133, by the decision of the Court of Appeal on 15 February 2007.
We also tend to the view that this reversal was based on a new or newly discovered fact.
However, in light of the available case law on these matters, we believe that your client has so far failed to establish that a new or newly discovered fact has shown beyond reasonable doubt that there has been a miscarriage of justice either on the basis that your client is demonstrably innocent or on the basis of a failure of the trial process.
Further representations were made on behalf of Mr McCartney.
Rejecting these, a letter dated 16 May 2008 sent on behalf of the Secretary of State, communicated his decision that Mr McCartney was not eligible under section 133.
It contained the following passage: The reasons for that decision are those as previously set out in my letter of 7 November.
In your further representations you made two main points.
Firstly, you suggest that there was a comprehensive failure to disclose material critical to Mr McCartney's defence.
The Secretary of State does not consider that anything went wrong with the investigation of the offence or in the conduct of the trial so as to result in a failure of the trial process.
Secondly, you suggest that the tape of the appeal should be listened to.
It is the written judgment of the CoA that sets out the basis for the decision that a conviction was unsafe and therefore the basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
Similar letters were sent to solicitors acting for Mr MacDermott.
These solicitors also made further representations and on 17 November 2008 a final responding letter was sent in which the following appeared: We have now considered the other points you put to us on 1 August in relation to the Boyle case [In re Boyles Application [2008] NICA 35].
The majority of the Court of Appeal in that case posed the test of whether the claimant should not have been convicted.
We do not believe that the terms of the Court of Appeal's judgment in your client's appeal mean that he should not have been convicted.
Therefore, the Boyle case does not alter the Secretary of State's decision that your client is not entitled to compensation.
Both appellants sought judicial review of the Secretary of States decision.
These applications were dismissed by Weatherup J, although it is clear that he felt that they might have succeeded if he had felt able to apply the test which, he considered, had been propounded by Lord Bingham in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1.
Weatherup J considered that there were two types of new or newly discovered fact (necessary as a prerequisite for eligibility under section 133, as explained by Lord Hope in paras 79 and 81 of his judgment).
The first was the evidence that it had been accepted by the assistant director and the senior assistant director in the DPPs office that Mr Donnelly had been assaulted and that this would have tended to throw doubt on the credibility of the police witnesses.
The second type was described by the judge in paras 23 and 24 of his judgment: 23another part of the new evidence relating to the prosecution of Donnelly concerned the manner in which his evidence was dealt with at the trial.
When Donnelly was called as a defence witness, counsel for the DPP, rather than proceeding on the position of the DPP officials dealing with the prosecution of Donnelly, adopted and put to Donnelly in cross examination the police approach rejected by those officials, namely that Donnelly had received injuries after an attack on police officers and that some injuries were also self inflicted.
Further, when the trial judge was considering the evidence of Donnelly, he asked counsel for the DPP about the absence of a prosecution of Donnelly and a complete reply was not furnished.
It is important to note that this was a non jury Diplock trial.
It is apparent that the tria1 Judge was inviting counsel to disclose, as delicately as the situation demanded, whether there was a reason for the decision not to prosecute that related to matters other than the alleged ill treatment of Donnelly, in respect of which the answer of counsel implied that there was.
The trial judge was not told that the DPP had concluded that Donnelly had been ill treated, that his confession was not to be considered as being voluntary and there was no other evidence against him.
There is no suggestion that counsel in the applicants trial had been made aware of the DPP position relating to the prosecution of Donnelly.
Had counsel for the DPP been aware of the DPPs approach to the prosecution of Donnelly two aspects of the trial would have been different.
First of all, the cross examination of Donnelly would have taken a different course and counsel would not have put to Donnelly that his injuries had been occasioned by defensive action by the police and by his own hand.
Secondly, the submission of counsel for the DPP in relation to the prosecution of Donnelly would not have rested on the bald assertion that the prosecution was not proceeded with but should have indicated the basis of the DPP decision. 24 Thus the issue of the treatment of the Donnelly evidence is not directly a matter about the credibility of the evidence given by the police officers, nor is it directly a matter about withholding disclosure from the defence.
Rather it is a matter about the conduct of the prosecution in relation to the evidence of a witness who was central to the defence challenge to the voluntariness of the admissions on which the applicants were convicted.
In light of the above discussion of the Donnelly evidence there is a basis for concluding that something had gone seriously wrong with the conduct of the trial.
This is a matter that is capable of satisfying the wider interpretation of miscarriage of justice expounded by Lord Bingham.
It is evident from these passages that Weatherup J considered that it would have been quite wrong for prosecuting counsel, had he known of the reasons that Mr Donnelly had not been prosecuted, to pursue the line of questioning that he did.
On the hearing of the appeal before this court Mr Maguire QC, who appeared on behalf of the Secretary of State for Northern Ireland, was unable to confirm that Crown counsel was unaware of the reasons that the prosecution of Mr Donnelly was not pursued but I share Weatherup Js view that this is the only possible explanation for his having cross examined Mr Donnelly as he did.
Mr Junkin and Mr McLaughlin had concluded that Mr Donnelly had been assaulted by police officers.
If that view (which was the product of extensive consideration of all the relevant material) had been communicated to prosecuting counsel, it would have been improper for him to advance a case which was quite at odds with the conclusion that had been reached by two experienced officers in the department of the Director of Public Prosecutions.
At a more fundamental level, however, it was not open to the prosecuting authority to adopt a different stance in relation to Mr Donnellys evidence according to the context in which it was being considered or, as Lord Rodger so pertinently put it during argument, to face both ways.
The decision not to prosecute Mr Donnelly on a charge of murder and one of causing an explosion when, according to police evidence, he had voluntarily admitted to both was a momentous one.
It is unsurprising that Mr Junkin and Mr McLaughlin only felt able to take that course because they were convinced that he had been assaulted by police officers.
It is simply incompatible with the prosecutions duty of fairness for a different position to be taken thereafter as to the manner in which Mr Donnellys injuries were caused unless there was fresh evidence that warranted a different view.
In this instance there was no such evidence.
Weatherup J was therefore perfectly right when he said that something had gone seriously wrong with the conduct of the trial.
Crown counsel ought to have been aware of the DPPs position on this and, if he had been, cross examination of Mr Donnelly challenging his account of how he sustained his injuries would not have taken place.
Although Weatherup J concluded that the circumstances of the reversal of the appellants convictions were capable of satisfying the test that Lord Bingham had propounded for eligibility for compensation under section 133, he felt bound to follow more recent authority in England and Wales, particularly R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36 which had expressed a clear preference for the test advocated by Lord Steyn in Mullen.
The appellants appeal against the decision of Weatherup J was dismissed by the Court of Appeal.
That court did not share Weatherup Js view that the circumstances revealed by the judgment which had quashed the appellants convictions were sufficient to satisfy Lord Binghams formulation of the correct test.
The conclusions of the court are contained in para 15 of the judgment of the Lord Chief Justice: In the second category of cases it is necessary to demonstrate that something has gone seriously wrong in the conduct of the trial resulting in the conviction of someone who should not have been convicted.
In this case the new facts upon which the appellants rely raise issues about the credibility of one police officer and one other witness.
It is not possible to come to any conclusion as to whether the new facts would have led to a different outcome in respect of the assessment of either witness.
The new evidence was sufficient to give rise to unease about the safety of the conviction but this is a case in which at its height it can only be said that the appellants might not have been convicted.
Such a case lies outside either of the categories identified by Lord Bingham.
That is also the reasoning of the decision in Boyles Application [2008] NICA 35 by which we are bound.
Should the appellants have been acquitted?
In re Boyles Application [2008] NICA 35 was an appeal in which the appellant claimed entitlement to compensation under section 133 and the ex gratia scheme which was then still extant.
Some years after the appellants conviction a note taken of one of a series of interviews had been shown by electrostatic detection apparatus (ESDA) testing techniques to have been made at a time other than that claimed by police officers.
Another version of the note for that single interview existed, contrary to the denials of the interviewing police officers.
The differences were not substantial and nothing which was inculpatory of the appellant had been written in to the version of the notes that had been presented to the court and which the police officers claimed was the only note of the interview.
Nevertheless, because the police officers had firmly denied that a different version had been prepared and because that had been shown to be incorrect, it was considered that doubt had been thrown on their credibility and the appellants conviction could not be regarded as safe.
In dismissing Mr Boyles appeal against the finding that he was not eligible to apply for compensation under section 133, the Court of Appeal said at para 22: it is impossible for the appellant to assert that he should not have been convicted.
One can certainly say that the police officers should not have given the evidence that they did.
One may even say with confidence that the trial judge is bound to have taken an entirely different view of their credibility from the extremely favourable impression that he appears to have formed.
But it is impossible to conclude that the appellant would not have been found guilty (much less that he should have been acquitted) if evidence of the other version of the interview notes had been given.
The circumstances in the Boyle case were obviously and markedly different from those that arise in the present appeals of Mr McCartney and Mr MacDermott.
The most that could be said in Boyle was that the newly discovered fact (that there was a different version of the notes of a single interview) cast doubt on the credibility of the police officers who asserted to the contrary.
By contrast, although the Court of Appeal which quashed Mr McCartneys and Mr MacDermotts convictions expressed itself in a restrained fashion, there is simply no doubt that these appellants ought not to have been convicted.
For the reasons that I have given, it was not open to prosecuting counsel to challenge Mr Donnellys account that he had been assaulted by police officers.
I am satisfied that he would not have done so if he had been aware of the true circumstances in which the decision not to continue with the prosecution of Mr Donnelly had been taken.
Mr Donnellys evidence that he had been assaulted would therefore have been received without challenge.
That evidence, if uncontradicted, is bound to have changed the entire course of the trial.
It could not have done less than establish the reasonable possibility that Detective Constable French had assaulted Mr Donnelly and that he had recorded a statement purporting to come from him but which was not given at Mr Donnellys dictation.
When those inevitable findings were brought to bear on Mr MacDermotts case they could not have done other than create a doubt as to the voluntariness of his admissions.
Section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978 was in force at the date of the trial.
It provided: If, in any such proceedings [ie criminal proceedings for a scheduled offence] where the prosecution proposes to give in evidence a statement made by the accused, prima facie evidence is adduced that the accused was subjected to torture or to inhuman or degrading treatment in order to induce him to make the statement, the court shall, unless the prosecution satisfies it that the statement was not so obtained (a) exclude the statement, or (b) if the statement has been received in evidence, either (i) continue the trial disregarding the statement; or (ii) direct that the trial shall be restarted before a differently constituted court (before which the statement in question shall be inadmissible).
The trial judge had reminded himself of this provision at the beginning of his judgment.
He said that the appellants had raised a prima facie case as required by the section and that, in those circumstances, the burden passes to the Crown to satisfy me beyond reasonable doubt that the statement, whose admissibility is challenged, was not obtained by ill treatment.
In other words, a prima facie case of ill treatment having been established the burden rests squarely on the Crown of satisfying me (and by that I mean satisfying me beyond reasonable doubt) that the accused was not ill treated.
In making these observations the trial judge was reflecting the well known statement of the law in this area provided by Lowry LCJ in R v Hetherington [1975] NI 164, 168 where he said: It is not for the defence to prove but for the prosecution to disprove beyond reasonable doubt in relation to each accused that he was not subject even to any degrading treatment in order to induce him to make a statement on which the Crown rely, the decision under section 6(2) [the precursor of section 8(2) of the 1978 Act] must be based solely on how the statement is proved to have been obtained and not on whether it was true.
The prosecution would therefore have had to prove beyond reasonable doubt that the statements made by Mr McCartney and Mr MacDermott had not been obtained by any degrading treatment whatever.
It can now be seen that this would have been an impossible task had the full facts and circumstances come to light.
A person detained at the same time as Mr McCartney had been assaulted while in Castlereagh Police Office during the same period; the police officers who carried out the assaults on Mr Donnelly were part of the group of officers who were investigating the murders with which Mr McCartney was charged; one of the officers who had assaulted Mr Donnelly had been accused by Mr MacDermott of assaulting him; and the other officer who, according to Mr MacDermott, had assaulted him, had also interviewed Mr McCartney and had been accused of assault by him.
Quite apart from these considerations, two further factors of substantial importance must be taken into account.
Firstly, by the time that Mr McCartney and Mr MacDermott stood trial, Mr Barclays conviction, based on statements of admission allegedly obtained by Detective Constable French and Detective Constable Newell on interview, had been quashed.
If the trial judge had been aware that this conviction had been quashed because the possibility that Mr Barclay had been assaulted by these two officers could not be excluded (which was the necessary implication from the finding of the Court of Appeal) he could not have concluded with the same firmness that he did that Detective Constable French had not engaged in ill treatment of Mr MacDermott.
Secondly, once it was established, even as a reasonable possibility, that Mr Donnelly had been assaulted, the judges view of Dr Hendrons evidence could not have remained as he had expressed it in his judgment.
Dr Hendron had stated unequivocally that he was convinced that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted.
The judge found that this opinion was sincerely held but that Dr Hendrons evidence was coloured by his conviction that the men had been attacked and on that account his testimony lacked professional objectivity.
If it had become known that the doctors view about Mr Donnelly was shared by an assistant director and a senior assistant director in the department of the Director of Public Prosecutions, it is not likely that his opinion would have been dismissed in the manner that it was by the trial judge.
The combined effect of all these factors makes it inevitable, in my opinion, that, had the judge been fully acquainted with all the material information about the reasons for the decision not to continue the prosecution of Mr Donnelly and the circumstances of the quashing of Mr Barclays convictions, he would not have convicted the appellants.
Should the appellants have been prosecuted?
Not only should the appellants have been acquitted, in my opinion they should not have been put to their trial.
If prosecuting counsel had become aware of the shadow that necessarily fell on Detective Constable Frenchs evidence by the decision not to proceed with the prosecution of Mr Donnelly and by the quashing of Mr Barclays conviction, it is, in my view, inevitable that he could not have proffered this officer as a witness of truth on the issue of whether Mr MacDermott had been ill treated.
Moreover, the conclusion of Mr Junkin and Mr McLaughlin that Mr Donnelly had been assaulted cast significant doubt on the evidence of the entire interviewing team.
Although Mr McLaughlin considered that there was insufficient evidence to charge Detective Constables French and Newell, he was of the clear view that Mr Donnelly had been physically attacked by some police officers.
It was therefore the case that the office of the Director of Public Prosecutions had determined that some officers within the team that conducted interviews of Mr Donnelly, Mr Brady and Mr McCartney had been guilty of assault on Mr Donnelly.
Mr Brady alleged that he had been assaulted in much the same manner as Mr Donnelly had been.
Despite this, he had not made admissions.
He had no personal advantage to gain by fabricating his account of the attacks on him.
The trial judge found, however, that he was prepared to do so in order to help a friend (Mr McCartney) and because of his animus towards the police.
I cannot believe that the judge would have reached that view if he had known that the DPP had concluded that Mr Donnelly had been assaulted and that Mr Barclays conviction had been quashed because of the reasonable possibility that two members of the same interviewing team had also assaulted him.
Likewise, I cannot believe that if experienced Crown counsel had been aware of these matters he would have done other than advise that the prosecution of Mr McCartney and Mr MacDermott should not proceed.
That prosecution was only viable if there was a realistic prospect of the Crown establishing beyond reasonable doubt that Mr McCartney and Mr MacDermott had not been ill treated.
Any objective assessment of all the circumstances as they are now known was bound to have resulted in the conclusion that there was no such prospect.
In reaching this view I intend no criticism whatever of counsel who, for the reasons that I have given, must have been wholly unaware of why it had been decided not to prosecute Mr Donnelly.
He must also have been ignorant of the fact that Mr Barclays conviction had been quashed and of the circumstances in which that had occurred.
A fortiori, no criticism of the trial judge is warranted.
On the contrary, he made what in retrospect was an astute and pertinent inquiry as to why Mr Donnelly had not been prosecuted and was not given the information which, if it had been provided, would certainly have led to a completely different outcome.
While it might be said that the assistant director and the senior assistant director in the department of the Director of Public Prosecutions ought to have been alive to the impact that their conclusion about the assaults on Mr Donnelly was bound to have on the propriety of proceeding with the prosecution of Mr McCartney and Mr MacDermott, there is no reason to suppose that they were aware of the quashing of Mr Barclays convictions or of the evidence of Mr Brady.
Neither is discussed in the exchange of memoranda between Mr Junkin and Mr McLaughlin.
These are matters which have played a significant part in leading me to the conclusion that the prosecution of Mr McCartney and Mr MacDermott ought not to have taken place.
In deciding that the appellants ought not to have been convicted and, indeed, ought not to have been required to stand trial, I have gone beyond the findings of the Court of Appeal which quashed their convictions.
On one reading, the letter of 16 May 2008 sent on behalf of the Secretary of State suggests that the judgment of the Court of Appeal provides the exclusive basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
And much was made in the course of argument of an answer given by Earl Ferrers in the course of the passage through the House of Lords of the Bill which ultimately became the 1988 Act.
Earl Ferrers answer was to the effect that the Secretary of State would regard the Court of Appeals view as to whether there had been a miscarriage of justice as binding.
In my opinion, the decision as to whether the statutory conditions have been fulfilled is one for the Secretary of State to make and he may not relinquish that decision to the Court of Appeal.
True, of course, it is that the material on which the decision is taken will derive in most cases from the judgment of the Court of Appeal.
True it also is that it would not be appropriate for the Secretary of State to depart from the reasoning that underlies that judgment unless for good reason it is shown to be erroneous but the Secretary of State must make his own decision based on all relevant information touching on the question whether there has been a miscarriage of justice.
In the present appeals, Weatherup J considered that it was open to him to examine the question whether there had been a miscarriage of justice not merely by reference to what the Court of Appeal had said but by taking into account the circumstances revealed by its judgment.
At para 20 of his judgment he said: Counsel for the respondent contends that there is nothing in the judgment of the Court of Appeal indicating that the applicants should not have been convicted.
It should not be expected that a Court of Appeal will state in terms that an appellant should not have been convicted.
The approach of the Court of Appeal on an appeal against conviction is concerned with whether that conviction is unsafe.
In taking the cue from the Court of Appeal in determining a successful appellants entitlement to compensation it is necessary to have regard to the circumstances set out in the judgment of the Court of Appeal as well as the wording adopted in the judgment in relation to the position of the appellant.
I agree with these observations and they appear, implicitly at least, to have been approved by the Court of Appeal.
As Weatherup J stated, the task of the Court of Appeal is not to decide whether the appellant should have been convicted, much less to determine whether the appellant is innocent.
It is to decide whether the conviction is safe.
The decision whether there has been a miscarriage of justice (whatever meaning is to be given to that phrase) of necessity takes place on a different basis and on foot of consideration of issues beyond those which sound only on whether the conviction is safe.
Section 133
As Lord Hope has said, it has been possible until now for courts to avoid a final resolution of the question of what is required in order to establish entitlement to compensation under section 133 of the 1988 Act.
Must a person whose conviction has been reversed as the result of a new or newly discovered fact show that he was innocent (Lord Steyns view in Mullen) or can eligibility arise in somewhat wider circumstances (Lord Binghams provisional opinion)? These appeals require this court to confront that debate and to resolve that conflict.
For the reasons given by Lord Hope and Lord Clarke, with which I agree, the analysis of Lord Bingham in Mullen as to the possible scope of section 133 is to be preferred to that of Lord Steyn.
I cannot accept that the section imposes a requirement to prove innocence.
In the first place, not only does such a requirement involve an exercise that is alien to our system of criminal justice, that system of justice does not provide a forum in which assertion of innocence may be advanced.
An appeal against conviction heard by the Court of Appeal Criminal Division is statutorily required to focus on the question whether the conviction under challenge is safe.
In a number of cases, evidence may emerge which conclusively demonstrates that the appellant was wholly innocent of the crime of which he or she was convicted but that will inevitably be incidental to the primary purpose of the appeal.
The Court of Appeal has no function or power to make a pronouncement of innocence.
It may observe that the effect of the material considered in the course of the appeal is demonstrative of innocence but it has no statutory function to make a finding to that effect: R v McIlkenny (1991) 93 Cr App R 287.
It is therefore not surprising that in New Zealand when the Law Commission proposed that a prerequisite of establishing entitlement to compensation for a wrongful conviction was proof of innocence, it was careful to recommend that a tribunal be set up in which that issue could be frankly addressed and confidently determined: see New Zealand Law Commission Report No 49 (1988) Compensating the Wrongly Convicted paras 124 127 and 136 137.
In Canada in 1988 Federal/Provincial Guidelines on Compensation for Wrongly Convicted and Imprisoned Persons likewise required that there be proof of innocence in order to qualify under the ex gratia scheme operated there.
In the case of Dumont v Canada (Communication 1467/2006, 21 May 2010) the UN Human Rights Committee held that the failure of the state authorities to establish a procedure for conducting an investigation to examine whether the applicant was innocent and to possibly identify the real perpetrator constituted a breach of article 2(3) of ICCPR read in conjunction with article 14(6).
Article 2(3)(a) requires that state authorities provide an effective remedy in the form of access to a procedure in which adequate compensation can be claimed.
The respondents in this case rely on the experience in New Zealand and Canada in support of their argument that a miscarriage of justice within the meaning of article 14(6) of the Covenant occurs only when the convicted person is in fact innocent of the offence with which he is charged.
The Human Rights Committee in Dumont, while recording the states submission to that effect, reached its decision without adjudicating on it.
The New Zealand Law Commissions report does not suggest that article 14(6) must be given that meaning.
On the contrary para 71 of the report states that article 14(6) while an important normative statement by the international community and a reference point for domestic compensation schemes was not relied on as a model for the Commissions recommended scheme.
There was no unanimity as to the meaning to be given to miscarriage of justice among the delegates who were involved in the negotiations which led to the adoption of ICCPR: see para 9(2) of Lord Binghams speech in Mullen.
As he observed, it is possible that the expression commended itself because of the latitude in interpretation which it offered.
Or, as the New Zealand Law Commission put it, it is a normative statement which provides a general template for domestic provisions in the subscribing states which can vary as to content.
Certainly, while the travaux prparatoires may be regarded as neutral on the meaning of the expression, it is unquestionably clear from these that every proposal that its ambit should be confined to compensating those whose innocence was established was roundly defeated.
Against that background, it would be a surprising conclusion that article 14(6) had the very effect that a majority of delegates clearly did not intend.
The twin theses on which Lord Steyn relied to support his conclusion that proof of innocence was required in order to establish entitlement to compensation under section 133 have been subject to scrupulous examination in paras 93 and 94 of Lord Hopes judgment.
For the reasons that appear there, with which I fully agree, these arguments can no longer be regarded as sound.
I also agree with Lord Clarkes reasons for rejecting Lord Steyns formulation of the test.
As Lord Clarke has pointed out, if Parliament had intended that a proof of innocence test was to be preferred, that could surely have been easily prescribed.
The debate as to whether such a test was appropriate had been extensively referred to in the travaux prparatoires and it is to be presumed that Parliament was aware of this when it came to enact section 133.
Confining the application of the section to those who could show that they were innocent was, in any event, a perfectly obvious option.
The failure to articulate that test in the legislation can only be explained on the basis that Parliament decided not to choose that option.
This conclusion is fortified by the consideration that the expression miscarriage of justice, although its meaning may vary according to context, is a very familiar one in our system of law.
In no other context has it been used to connote proof of innocence.
I am therefore satisfied that proof of innocence cannot be the criterion on which entitlement to compensation under section 133 is to be determined.
Rejection of this hypothesis brings with it the need to determine how miscarriage of justice is to be interpreted.
As Lord Hope has said, a fresh analysis is required and for the reasons that he gives the answer is not necessarily provided by the speech of Lord Bingham in Mullen.
The use of the word conclusively in article 14(6) of ICCPR and the expression beyond reasonable doubt lends support to the view that the section does not contemplate that all whose convictions have been quashed and who satisfy the other requirements of the section will be entitled to compensation.
On this there is no dispute between the parties to these appeals.
Lord Hope has proposed that the section should be interpreted as targeting those cases where, as a consequence of the state of affairs revealed by the new or newly discovered fact, it can be concluded that no prosecution ought to have taken place.
Lord Clarke prefers to define the category of eligibility as extending to those cases where the new or newly discovered fact leads inexorably to the conclusion that no jury, properly directed, would have convicted.
As a matter of practical experience, there may be little difference as to which of these tests should be applied.
But it is important that, if possible, clear guidance be given by this court as to the circumstances in which the section should be held to apply.
Lord Hope has pointed out that requiring the Secretary of State to apply a test which refers to what a reasonable jury would do is not appropriate since this is a matter best left to the courts.
Lord Clarke, on the other hand, suggests that a test which requires the Secretary of State to focus on whether the claimant should never have been prosecuted runs the risk of the inquiry wrongly focusing on the propriety of the decision to prosecute by reference to the circumstances that obtained when the decision was taken.
There is substance in both concerns.
I believe that a simple test can cater for these concerns and will also faithfully reflect the intention of article 14 (6) and section 133 that only truly deserving applicants should be included in the compensatory scheme.
The test which I would have proposed was: whether, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that the applicant should not have been convicted.
Lord Phillips has suggested that the test should be worded in the following way: the new fact shows that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This appears to me to achieve the same result as the test which I would have proposed and I am therefore quite content to subscribe to his formulation.
The proper application of either test ties entitlement to compensation firmly to the true factual situation.
Procedural deficiencies that led to irregularities in the trial or errors in the investigation of offences will not suffice to establish entitlement to compensation.
A claimant for compensation will not need to prove that he was innocent of the crime but he will have to show that, on the basis of the facts as they are now known, he should not have been convicted or that conviction could not possibly be based on those facts.
Of course, if innocence can be proved, the test, on either formulation, will be amply satisfied.
The adoption of a single, simple test dispenses with the need to consider possible categories of entitlement which, I believe, tends more to confuse than to enlighten.
As it happens, although it is possible to construct from Lord Binghams observations a fourth category of case beyond the three that were identified by Toulson LJ in giving permission to appeal in the Adams case, I do not believe that Lord Bingham intended that this be considered a freestanding category.
New or newly discovered fact
I find myself in complete agreement with the reasoning of Dyson LJ on this issue in the judgment of the Court of Appeal in Adams [2010] QB 460, paras 14 16 and with what Lord Phillips has had to say on the matter in paras 59 63 of his judgment.
The newly discovered limb of the requirement clearly, to my mind, connotes discovery by the party who prays it in aid to demonstrate that he should not have been convicted.
It would be wholly anomalous, as Dyson LJ has pointed out, that a person whose innocence can be conclusively proved, should be deprived of compensation simply because his lawyers failed to communicate the vital information or failed to grasp its significance.
Does denial of compensation infringe the presumption of innocence?
Lord Hope has dealt comprehensively with the arguments made by the appellants on this issue in paras 108 to 111 of his judgment.
I agree with his reasons for rejecting the arguments.
There is nothing further that I could usefully say on the topic.
Conclusions
I would allow the appeals of Mr McCartney and Mr MacDermott.
For the reasons that I have given, I am satisfied that, on the facts as they are now known, they should not have been convicted.
As it happens, I am also satisfied that they ought not to have been prosecuted and their cases therefore fulfil the requirement that Lord Hope has formulated.
Clearly they also satisfy the test preferred by Lord Clarke of being cases in which no reasonable jury, properly directed, could convict.
Like Lord Phillips and Lord Hope I consider that both are entitled to be compensated under section 133.
Although I would hold that the material on which Mr Adams relied constituted a newly discovered fact, I do not consider that he has demonstrated that, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that he should not have been convicted.
I would dismiss his appeal.
LORD CLARKE
Introduction
I gratefully adopt Lord Hopes description of the background to the introduction of the statutory right to compensation for miscarriages for justice in section 133 of the Criminal Justice Act 1988 in the light of article 14(6) of the ICCPR.
He has set out the relevant provisions of section 133 and article 14(6).
I shall not therefore repeat them.
The principal issues for decision in this appeal are the meaning of the expressions miscarriage of justice and new or newly discovered fact in those provisions.
Miscarriage of justice
The meaning of this expression has been considered in a number of cases as described by Lord Hope.
I agree with him that it is helpful to consider its meaning in the present context by reference to the categories identified by Toulson LJ when giving permission to appeal to the Court of Appeal in the Adams appeal which are described by Dyson LJ [2010] QB 460, at para 19 of his judgment which is quoted in full by Lord Hope.
Dyson LJ described the categories of case thus: A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the time of trial, shows beyond doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available at the trial, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
The respondents say that there is only a miscarriage of justice within the meaning of article 14(6) and section 133 in a category 1 case.
They say that the provision that the new or newly discovered fact must show conclusively (in article 14(6)) or beyond reasonable doubt (in section 133(1)) that there has been a miscarriage of justice points to the conclusion that it is only where the claimant can prove his innocence that there has been a miscarriage of justice.
The appellants say, by contrast, that the words conclusively and beyond reasonable doubt do not inform the meaning of miscarriage of justice but only indicate the standard of proving the miscarriage of justice, once its meaning has been established.
They say that if the Court of Appeal allows an appeal in any of the three categories of case there will have been a miscarriage of justice, unless the claimant is convicted at a retrial.
Another possibility is, of course, that section 133 applies in a category 1 and a category 2 case, but not to a category 3 case.
Category 1 proof of innocence
I turn first to the question whether the expression miscarriage of justice is confined to the case where the claimant can prove beyond reasonable doubt that he was innocent.
This was of course the view espoused by Lord Steyn in Mullen.
Lord Bingham expressed a different view in that case, albeit without reaching a firm conclusion, and Lord Hope has taken a different view in this case.
I agree with him.
To my mind there is nothing in either the language or the context to limit the meaning of miscarriage of justice to the case where the claimant can prove that he was innocent.
If that is so, it is not for the court to limit the meaning because its own view is that it would be desirable to do so as a matter of policy.
Such matters of policy are for Parliament and not for the courts.
It is common ground that the expression is capable of a broader meaning than that espoused by Lord Steyn.
For reasons which I explain below, to my mind the natural meaning is broader, but I will begin with the context because I appreciate that, as has famously been said, context is everything.
The context of section 133 is of course article 14(6).
Both Lord Steyn and Lord Bingham considered the travaux prparatoires in Mullen.
In para 9(2) of his speech Lord Bingham said this: The House was referred to the travaux prparatoires of the negotiations which culminated in adoption of the ICCPR.
It is plain that some delegates contended that compensation should not be paid save to those who were shown to be innocent, and such delegates found no difficulty in expressing this very simple principle.
But it is equally plain, as Mr Pleming submitted, that every proposal to that effect was voted down.
The travaux disclose no consensus of opinion on the meaning to be given to this expression.
It may be that the expression commended itself because of the latitude in interpretation which it offered.
It is common ground that the expression miscarriage of justice in article 14(6) and therefore section 133(1) should if possible be given an autonomous meaning.
Although the travaux are far from conclusive, they do seem to me to point the way because, as Lord Bingham put it, every proposal that innocence should be the test was turned down.
So, if the expression is to be given an autonomous meaning, it cannot be limited to cases where innocence can be shown.
It follows that I do not agree with Lord Steyns view that the travaux do not assist in any way.
On the contrary, they assist on the first question in this appeal, namely whether proof of innocence should be the test.
I agree with Lord Steyn (at para 35) that there is no foundation in the language of article 14(6) and section 133, or by reference to any relevant external aids to construction, for the suggestion that Parliament intended to use the words miscarriage of justice in any wider sense than it bears in article 14(6) and that Parliament intended to give effect to the United Kingdoms international obligations in article 14(6) and no more.
I would add and no less.
Parliament used the same or almost the same language, so that there is to my mind no warrant for holding that it intended to confer narrower rights to compensation than those afforded by article 14(6).
As Lord Hope observes at para 91, Lord Steyn correctly said at para 45 that both article 14(6) and section 133 show that there was no overarching purpose of compensating all who are wrongly convicted.
This is demonstrated by the fact that compensation only arises at all in the case of appeals out of time and by the indispensable pre condition that a new or newly discovered fact shows conclusively (or beyond reasonable doubt) that there has been a miscarriage of justice.
So, for example, in the case of a recognition that an earlier dismissal of an appeal was wrong, the case falls outside article 14(6).
That is so, however palpable the error in the first appellate decision may have been, and however severe the punishment that the victim suffered unjustly.
As Lord Steyn put it, those considerations demonstrate that the fundamental right under article 14(6) was unquestionably narrowly circumscribed.
Para 46 is the only paragraph in which Lord Steyn focuses on the relevant language.
In it, as Lord Hope explains at paras 91 and 92, Lord Steyn focused on the language of article 14(6) and section 133, and in particular on the use of conclusively and beyond reasonable doubt respectively.
He said that that language filters out cases where it is only established that there may have been a wrongful conviction and cases where it is only probable that there has been a wrongful conviction.
He observed that those two categories would include the vast majority of cases where an appeal is allowed out of time.
He concluded that those considerations militated against an expansive interpretation of miscarriage of justice and ultimately held that: While accepting that in other contexts a miscarriage of justice is capable of bearing a narrower or wider meaning, the only relevant context points to a narrow interpretation, viz, the case where innocence is demonstrated.
I accept that the language points to a narrow construction but not that it is restricted to the case where innocence is demonstrated.
Indeed, to my mind Lord Steyn did not point to any reason why the right to compensation should be so confined.
There is nothing in the language or the context to lead to the conclusion that cases in category 2 should be excluded.
Yet the expression miscarriage of justice naturally includes such a case.
Indeed it seems to me to be the paradigm case.
A criminal trial is concerned (and concerned only) with the question whether the prosecution has proved beyond reasonable doubt to the satisfaction of the jury that the defendant is guilty of the offence charged.
If the new or newly discovered fact shows that, in the light of it, no reasonable jury, properly directed, could have convicted the accused, to my mind his conviction would, in ordinary language, be a miscarriage of justice.
I see no reason why such a case should not be a miscarriage of justice within the meaning of article 14(6) or section 133(1).
None of Lord Steyns reasoning leads to the conclusion that it is not.
He himself did not address this possibility.
In paras 91 to 95 Lord Hope has given his reasons for disagreeing with Lord Steyn that innocence must be proved.
I agree with them.
I would very briefly summarise my own reasons (in addition to those already given) in this way. (a) (b) If Parliament had intended to limit miscarriages of justice to cases where the claimant could prove innocence, it would have been easy to say so.
As Lord Bingham put it in Mullen at para 9(2) quoted above, those delegates who wished to limit compensation in that way found no difficulty in expressing this very simple principle.
In para 9(1) Lord Bingham noted that when what was to become section 133 was debated in the House of Lords, the minister, Earl Ferrers, was pressed by Lord Hutchinson QC to say whether a miscarriage of justice connoted the innocence of a defendant or the raising of a doubt about his guilt, but the minister said nothing to suggest that compensation would be payable only to the innocent: Hansard (HL Debates), 22 July 1988, cols 1631 1634. (c) Lord Steyns reliance upon the words une erreur judiciaire in the French text of article 14(6) was unsound for the reasons given by Lord Hope at para 93. (d) The five reasons given by Lord Bingham in para 9(4) of Mullen for thinking that reliance upon para 25 of the explanatory report prepared by a committee of experts on human rights with reference to article 3 of the Seventh Protocol was not of the persuasive value which Lord Steyn identified are convincing: see Lord Hope at para 94. (e) Little assistance is to be gained from either the jurisprudence of the United Nations Human Rights Committee or academic opinion. (f) Courts of appeal are not called upon to decide whether defendants are innocent: see Lord Bingham at para 9(6) and Lord Hope at para 95.
If, as I believe is the case, Lord Steyns test is too narrow, the question arises what is the correct construction of the expression miscarriage of justice in this context.
I will consider the possibilities in turn.
Category 2 no reasonable jury properly directed could convict
Category 2 would of course include category 1, but not vice versa.
Mr Owen QC submitted that cases in this category would involve a miscarriage of justice, although he also sought to include category 3, to which I will return.
I have already expressed my view that there is nothing in the language or context of article 14(6) or section 133 to exclude category 2 and that the expression naturally includes it.
Absent any clear indication in the language or context, it is to my mind permissible to have regard to the approach to it within the United Kingdom.
In 1988 the Court of Appeal in England and Wales determined criminal appeals by reference to the unamended section 2(1) of the Criminal Appeal Act 1968.
The proviso to that subsection provided that, notwithstanding that the Court of Appeal were of the opinion that the point raised in the appeal might be decided in favour of the appellant, they may dismiss the appeal if they consider that no miscarriage of justice has actually occurred.
In R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 the Court of Appeal (Sir Thomas Bingham MR, Farquharson and Simon Brown LJJ) dismissed an appeal from an order of the Divisional Court refusing judicial review of a decision refusing the appellant compensation under section 133.
He had been convicted of several counts of receiving stolen goods and sentenced to six years imprisonment.
He had appealed to the Court of Appeal on the ground that he had been convicted on the basis of evidence in statement form given by witnesses from New Zealand.
His appeal failed.
Some time later his case was referred back to the Court of Appeal under section 17 of the Criminal Appeal Act 1968.
This time his appeal succeeded on what was essentially the same ground as that which had failed before and his convictions were quashed.
In the Court of Appeal he argued inter alia that the second Court of Appeal must have regarded his conviction as a miscarriage of justice because they would otherwise have applied the proviso.
Sir Thomas Bingham (with whom the other members of the court agreed) said this: Therefore, it follows, he says, that he is a victim of a miscarriage of justice and from that it follows that he is entitled to compensation.
To deny him compensation is, he argues, to undermine his acquittal and the presumption of innocence which flows from the fact that his convictions have been quashed.
I am, for my part, unable to accept that argument, although I hasten to assure Mr Bateman that in doing so I have no intention whatever to undermine the effect of the quashing of his convictions.
He is entitled to be treated, for all purposes, as if he had never been convicted.
Nor do I wish to suggest that Mr Bateman is not the victim of what the man in the street would regard as a miscarriage of justice.
He has been imprisoned for three and a half years when he should not have been convicted or imprisoned at all on the second decision of the Court of Appeal (Criminal Division).
The man in the street would regard that as a miscarriage of justice and so would I.
But that is not, in my judgment, the question.
The question is whether the miscarriage of justice from which Mr Bateman has suffered is one that has the characteristics which the Act lays down as a pre condition of the statutory right to demand compensation.
That, therefore, is the question to which I now turn.
The Master of the Rolls then held that there was no new or newly discovered fact, so that Mr Bateman could not satisfy the relevant criteria under section 133.
The relevance of the statement quoted above is that it supports the conclusion that the Master of the Rolls accepted that there had been a miscarriage of justice within the meaning of section 133, which in turn supports the conclusion that that expression is not limited to cases in which the claimant can prove his innocence.
It is perhaps the forerunner of Lord Binghams approach in Mullen.
A similar conclusion can be drawn from the terms of section 106, of the Criminal Procedure (Scotland) Act 1995, which sets out the test for criminal appeals in Scotland.
By subsection (3) it provides: By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice, which may include such a miscarriage based on (a) subject to subsections 3A to 3D below, the existence and significance of evidence which was not heard at the original proceedings; and (b) the jurys having returned a verdict which no reasonable jury, properly directed, could have returned.
It can thus be seen that a miscarriage of justice for the purposes of a fresh evidence appeal in Scotland includes the case where the jurys verdict is one which no reasonable jury, properly directed, could have returned.
That is of course a category 2 case.
Section 106(3) is thus an example of the expression miscarriage of justice being used in a very similar context to that with which we are concerned.
It has been suggested that to include category 2 within the test of miscarriage of justice in section 133 would cause difficulties of application.
For my part, I would not accept that suggestion.
It is a test used at the end of the prosecution case in countless criminal trials in England and Wales.
Moreover, it is used in the Court of Appeal in England and Wales.
While it is not the question for decision in an English appeal because the question is now simply whether the conviction is safe, it is plainly relevant when a retrial is sought.
The Court of Appeal would not make an order for a retrial if it formed the view that the effect of the new or newly discovered evidence led to the conclusion that no reasonable jury, properly directed, could convict.
Moreover, so far as I am aware, this test has caused no difficulty in criminal appeals in Scotland.
It is a test which is familiar to the criminal trial and appeal process, which the proposed test of innocence is not.
As Lord Hope has observed at para 95, in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1 at para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact the Court of Appeal will, in virtually every case, make that plain.
However, that may not be the case and, as Lord Hope says, the Court of Appeal is not bound to say whether or not a defendant is innocent.
In this regard there is authority for the proposition that the Court of Appeal is neither obliged nor entitled to say whether an appellant is innocent: see R v McIlkenny (1991) 93 Cr App R 287 at 310 311.
Whether that is correct or not, I agree with Lord Hope that, to put it no higher, it is at least questionable whether it can be right to restrict the entitlement to compensation to cases where the establishment of innocence is apparent from the Court of Appeals judgment.
It is of interest in the context of this debate to note that it is common ground that it was only after the decision in Mullen that Secretaries of State have applied an innocence test and that they do not do so in Scotland even now.
It was suggested in argument that it is not appropriate for the Secretary of State, and not a court, to make judgments of this kind.
However, section 133(3) expressly provides that the question whether there is a right to compensation shall be determined by the Secretary of State.
Nobody has suggested that it is not appropriate for the Secretary of State to decide whether the claimant has proved that the new or newly discovered fact shows that he is innocent.
It does not seem to me to be any less appropriate for the Secretary of State to decide whether he has proved that it shows that no reasonable jury could have convicted him.
In reaching his or her conclusion the Secretary of State is of course bound to have regard to what the Court of Appeal which reverses the conviction has said.
In In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289 Lord Bingham said at para 16, albeit in the context of a claim under the ex gratia scheme, that the Secretary of State must properly be guided by the judgment of the Court of Appeal.
However, it seems to me that it is for the Secretary of State to have regard to all relevant material when deciding whether the claimant has established beyond reasonable doubt that, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted him.
I see no reason why the Secretary of State could not decide that question, whether on the grounds of innocence or otherwise.
As I see it, the matter has to be tested as at the date of the reversal, having regard both to the evidence that was available at the trial and to the new or newly discovered facts.
I would include in the evidence available at the trial, all such evidence, not just that adduced on behalf of the prosecution, but also that adduced during the defence case.
I would therefore include admissions made by the defendant in cross examination in a case in which the new evidence showed that the case should have been stopped.
The question is whether, on that material, he had a case to answer or, put another way, whether a reasonable jury properly directed could have convicted him.
If he proves beyond reasonable doubt that the answer to those questions is no, he is in my opinion entitled to compensation under section 133 on the basis that there has been a miscarriage of justice.
I entirely accept that the cases in which compensation can be claimed are limited by the necessity to satisfy the criteria in the section and by the need to show beyond reasonable doubt that the new or newly discovered fact demonstrates, in the light of the other material before the court that no reasonable jury, properly directed, could have convicted him.
The Secretary of State would of course have to be satisfied that the alleged fact was indeed a fact.
I should add by way of postscript that, as I see it, category 2 potentially includes a case where the new or newly discovered fact is such that, if it had been known at the trial, the trial judge would have stopped the trial on the ground of abuse of process.
If the Court of Appeal concluded that a new trial could not properly be ordered on the basis that it was not possible to cure the abuse, so that no reasonable jury, properly directed, could convict, there would, in my opinion have been a miscarriage of justice within section 133.
It seems to me that this must be within the kind of miscarriage of justice which Lord Bingham had in mind in Mullen, namely where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
Since Mullen, some doubt has been expressed as to whether the basis upon which it was decided is correct.
See, for example, R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin) per Leveson LJ at paras 47 48.
The basis on which it was decided by the majority, comprising Lord Bingham, Lord Scott, Lord Rodger and Lord Walker was that Mr Mullens conviction had been reversed by the Court of Appeal on the ground that there had been an abuse of executive power and not any failure in the trial process: see per Lord Bingham at para 8, Lord Scott at para 65, Lord Rodger at para 69 and Lord Walker at para 70.
In particular, Lord Bingham said that it was for failures in the trial process that the Secretary of State is bound by article 14(6) and section 133 to pay compensation.
He distinguished those from abuse of executive power.
He did so by reference to R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 per Lord Griffiths at pp 61 62 and R v Looseley [2001] 1 WLR 2060 at para 40.
Lord Scott said that the Court of Appeal had not reversed the conviction because there had been any failure in the trial process but because, prior to the commencement of the trial process, there had been serious abuse of executive power which had led to the removal of the claimant from Zimbabwe to this country and thus enabled the trial to take place.
Although Leveson LJ observed that this distinction has its difficulties and noted that Lord Steyn said at para 57 that, if that abuse had been disclosed the trial would have been stopped, and in its written submissions Justice suggested that Mullen might now be decided differently on its facts.
There is I think scope for argument in the future as to whether there is a class of cases in which the section would not apply, of which Mullen is an example.
They are cases in which it has been held that the trial should not be permitted to proceed, not because of anything related to the case against the defendant, but because to permit it would offend against the rule of law or would seriously affect the integrity of the administration of justice.
In quashing Mullens conviction Rose LJ, giving the judgment of the Court of Appeal, said at [2000] QB 520, 535 536: This court recognises the immense degree of public revulsion which has, quite properly, attached to the activities of those who have assisted and furthered the violent operations of the IRA and other terrorist organisations.
In the discretionary exercise, great weight must therefore be attached to the nature of the offence involved in this case.
Against that, however, the conduct of the security services and police in procuring the unlawful deportation of the defendant in the manner which has been described represents, in the view of this court, a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts.
The need to discourage such conduct on the part of those who are responsible for criminal prosecutions is a matter of public policy to which, as appears from R v Horseferry Road Magistrates' Court, Ex p Bennett [1994] 1 AC 42 and R v Latif [1996] 1 WLR 104, very considerable weight must be attached.
It appears to me to be at least arguable that such a case would not fall within section 133.
None of the cases before the Court in these appeals is such a case.
I recognise that Lord Phillips rejects category 2 as a test and that he has suggested an alternative test.
However, section 133 inevitably requires the Secretary of State to consider the effect of the new or newly discovered fact upon the other evidence before the court and thus on the validity of the conviction.
This involves the evaluation of the evidence in its legal context.
It also expressly requires the Secretary of State to decide whether in the light of all the evidence the claimant has shown beyond reasonable doubt that there has been a miscarriage of justice.
In considering all these questions, the Secretary of State can of course always take such advice as is appropriate.
I remain of the view that category 2 is an appropriate formulation of the test and that the position is or should be as stated above.
Compensation is only payable where, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted or, subject perhaps to the point made in para 215 above, where the new or newly discovered fact would have led the judge to stop the case on the ground of abuse in the trial process.
However, I recognise that Lord Phillips suggests replacing the category 2 test with a more robust test.
It is that a new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
I have assumed that the second it means the evidence against the defendant.
To my mind that test is consistent with the category 2 test identified above because, in such a case, no reasonable jury properly directed, could convict the defendant.
For that reason and on that basis, I would accept the proposed test, with which Lord Hope, Baroness Hale and Lord Kerr agree.
Category 3 unsafe conviction
Section 2(1) of the Criminal Appeal Act 1968, as substituted by section 2(1) of the Criminal Appeal Act 1995, provides that the Court of Appeal shall allow an appeal if they think the conviction is unsafe.
The proviso in the previous section 2(1) was repealed.
Mr Owen submitted that where a qualifying appeal is allowed on the basis that the claimant has shown beyond reasonable doubt that the conviction was unsafe because of a new or newly discovered fact, it follows that there was a miscarriage of justice within the meaning of section 133.
It is certainly possible to construe the expression miscarriage of justice as wide enough to include such a case.
I do not however think that Parliament can have intended the expression to have such a wide meaning in section 133(1) because it would have been easy for the section to have been drafted in such a way as to include every case where the relevant appeal was allowed on the basis of a new or newly discovered fact.
Moreover none of the courts which have considered section 133 have suggested that it might have such a wide meaning: see the cases referred to by Lord Hope at para 82.
In particular, the formulation of the test by Lord Bingham in Mullen does not encompass every case where the conviction was held to be unsafe on the basis of new evidence.
His formulation was that there is a miscarriage of justice where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
It is not possible to say that, merely because a conviction has been quashed because it was unsafe, the appellant should not have been convicted.
A conviction may be unsafe because the Court of Appeal concludes that, but for the successful ground of appeal, the jury might not have convicted.
Indeed, this is by far the most common case in which an appeal is allowed.
It is a category 3 case in which, as Dyson LJ put it in the passage quoted above, a fair minded jury might convict or might acquit.
In such a case I do not think that one can say as a matter of course that the defendant should not have been convicted.
It seems to me that it is only in a category 2 case (which of course includes a category 1 case) that it can be said that a person should not have been convicted.
It can be so held in such a case because it follows from the conclusion that no reasonable jury, properly directed, could have convicted the defendant that he should not have been convicted.
Any lesser test is to my mind too uncertain and would not satisfy the statutory test that, in order to be entitled to compensation, the claimant must prove beyond reasonable doubt that there has been a miscarriage of justice.
If he might have been convicted by a jury on all the evidence including the new or newly discovered fact, he cannot show for sure that there has been a miscarriage of justice within section 133(1).
Retrial
Section 133(5A) was not part of section 133 when Mullen was decided.
It makes it clear that, where the claimant succeeds on appeal but is convicted at a retrial, he is not entitled to compensation because his conviction has not been reversed.
If his appeal succeeds and the Court of Appeal orders a retrial, but the prosecution decides not to proceed with the retrial, the conviction is treated a reversed when it so indicates.
In these circumstances, the position is as described above.
If a retrial takes place and the claimant is acquitted of all offences at a retrial, there is scope for debate as to the position.
By subsection (5A) the conviction is treated as reversed when he is so acquitted.
It is not necessary to decide this question in this appeal but it is my provisional view that the same approach as described above would apply.
Thus, in order to be entitled to compensation, he would have to prove beyond reasonable doubt that on the basis of the new or newly discovered fact no reasonable jury would have convicted him.
New or newly discovered fact
The question is what is meant by a new or newly discovered fact.
In particular the question is what is meant by a newly discovered fact.
Mr Tam QC submitted that a fact which was known to the prosecution and knowable to the defence because it was available to them, but which they did not know because they did not take the steps they should have taken to examine the evidence was not a newly discovered fact.
I would not accept that submission.
If the fact was not in fact discovered at or before the trial or at an in time appeal but was discovered thereafter, it follows that it was a newly discovered fact.
The question is whether it was discovered earlier, not whether it was discoverable earlier.
In my opinion the fact that it was discovered by the prosecution before the appeal is irrelevant.
In neither of the appeals before the Supreme Court were the relevant facts discovered by the defendants or their lawyers at or before the trial or the in time appeal.
It follows that they were newly discovered facts.
The fact that in the Adams case they were discoverable by the defendants lawyers is irrelevant.
As I see it, therefore, on the facts of these appeals this part of the test is satisfied.
However, there was much debate as to whether it is possible for a fact to be a newly discovered fact if it was known to the defendants lawyers.
In my opinion it is.
Section 133(1) is subject to the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
The proviso does not apply if the non disclosure of the fact was attributable to his lawyers.
It could have done so.
As Dyson LJ explained at paras 14 16 of his judgment, there is no mention of the convicted persons legal advisers in article 14(6) or section 133, whereas article 14(3) does refer to legal advisers.
Moreover, there is no suggestion that the person convicted in section 133(1) includes his lawyers.
In my opinion the Court of Appeal correctly held that knowledge of the fact by the defendants lawyers would not prevent it being a newly discovered fact.
I note in this regard that in a case where the fact was known to the defendants lawyers and not used at the trial, the failure to use it would be very relevant to the question whether the evidence of the fact would be admissible under section 23 of the Criminal Appeal Act 1968.
It might well be held that in the light of the fact that the lawyers failed to deploy it, it was not necessary or expedient in the interests of justice to admit it on an appeal.
In that event the appeal would not be allowed or the conviction reversed on the basis of it.
The remaining question is whether it is possible for a fact to be a newly discovered fact if it was known to the defendant himself at trial or at an in time appeal.
The Court of Appeal held that it was, for the reasons given by Dyson LJ at paras 14 to 18.
I agree.
Section 133(1) contains the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso would not be necessary if the question whether evidence was new or newly discovered were tested by reference to the knowledge of the convicted person himself.
The proviso seems to me to assume that a fact may be newly discovered even though it is known to the defendant at the relevant time.
Otherwise it would have very little effect because it would only apply where the defendant did not know the fact but its non disclosure was attributable to him.
Such a situation is perhaps theoretically possible but the natural meaning of the proviso is that it covers the case where the defendant is aware of the fact at the relevant time but does not deploy it either personally or through his lawyers.
So understood, the proviso seems to me to point to the conclusion that a fact may be a newly discovered fact even if it was known to the defendant himself at trial or at an in time appeal.
For these reasons I agree with Lord Hopes conclusion at para 107 and Lord Phillips conclusion at para 62 that the relevant knowledge is that of the trial court, but do not agree with Lord Hopes conclusion, also at para 107, that material disclosed to the defence by the time of the trial cannot be said to have been newly discovered when it is taken into account at the stage of the out of time appeal.
For the reasons given earlier, it is my view that material that was not discovered either by the defendant or his lawyers but was discovered only after the in time appeal was newly discovered on the simple basis that, whether or not it ought to have been discovered, it was not in fact discovered.
That was the position in both the Adams appeal and the Northern Irish appeals.
Article 6(2) of the European Convention of Human Rights
Other members of the Court have considered the issues under this head in some detail.
The European Court of Human Rights (ECtHR) has applied article 6(2) in cases which are not covered by its language.
For my part, I do not think that this is a case in which it is necessary or would be appropriate to analyse that jurisprudence in detail.
I will only say that I am not at present persuaded that article 14(6) and section 133 are a form of lex specialis to which article 6(2) can never be relevant.
For present purposes I shall simply assume that it is in principle possible for article 6(2) to apply to proceedings under section 133.
I can see that it is inappropriate, to put it no higher, to impute criminal liability to a person who has been acquitted.
In each of the cases in which a claim for compensation arises under section 133(1) the claimants conviction has been reversed by the Court of Appeal in an out of time appeal.
Section 2(3) of the Criminal Appeal Act 1968 (as substituted in 1995) provides: (3) An order of the Court of Appeal quashing a conviction shall, except when under section 7 below the appellant is ordered to be retried, operate as a direction to the court of trial to enter, instead of the record of conviction, a judgment and verdict of acquittal.
Thus the effect of the reversal of the conviction by the order of the Court of Appeal quashing it, is that the person concerned is formally acquitted.
In these circumstances the court hearing and determining a claim for compensation under section 133(1) must not say or do anything inconsistent with the claimants acquittal.
If the analysis set out above is adopted, there is no risk of its doing so.
The question in each case is whether the claimant has proved beyond reasonable doubt that the new or newly discovered fact has demonstrated that there was a miscarriage of justice on the basis that no reasonable jury, properly directed, could convict him.
The trial of that question does not in any way affect or impugn the acquittal of the claimant as provided by section 2(3) of the Criminal Appeal Act 1968 quoted above.
The question at such a trial is different and so is the burden of proof.
The position is not unlike a civil process where a claimant seeks damages from a defendant who has been acquitted of, say, causing grievous bodily harm to A at a criminal trial.
Under English law it is permissible for A to seek damages from the defendant on the ground that he was unlawfully injured by him, alleging all the same facts as had been relied upon at the criminal trial.
The critical difference between the two processes is that at the criminal trial the prosecution has to prove guilt beyond reasonable doubt, whereas at the civil trial A only has to prove liability on the balance of probabilities.
The ECtHR has expressly recognised that civil proceedings of that kind do not infringe article 6(2) of the Convention: see eg Y v Norway (2003) 41 EHRR 87, where the court expressly said at para 41 that, while the acquittal from criminal liability ought to be maintained in compensation proceedings, it should not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof.
It did add in para 42 that, if the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention.
See also Bok v The Netherlands, (Application No 45482/06), 18 January 2011.
Similarly, here, where, at any rate on the analysis set out above, there is no question of anything said or done in the section 133 proceedings impugning the acquittal in the criminal proceedings, I see nothing in article 6(2) which is in any way inconsistent with the conclusions I have reached.
Disposal
I agree with Lord Phillips, Lord Hope, Baroness Hale and Lord Kerr that the appeal in the Adams case must be dismissed.
Lord Phillips has set out the relevant facts.
As Dyson LJ observed at para 59, the Court of Appeal allowed the appeal because the undeployed material was important and might have led the jury to acquit.
The decision to quash the conviction was founded on the potential that the undeployed material had for affecting the jurys verdict.
It was thus a category 3 case and, for the reasons given earlier, section 133(1) does not cover such a case.
I also agree that the appeals in the Northern Irish cases should be allowed.
Lord Kerr has set out the facts in some detail.
They show, at any rate to my mind, that, in the light of the newly discovered facts, no reasonable jury, properly directed, could have convicted them.
DISSENTING JUDGMENTS LORD JUDGE
The legislation
Section 133(1) of the Criminal Justice Act 1988 (section 133) provides: when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Reversed refers to a conviction which is quashed on an appeal out of time or following a reference by the Criminal Cases Review Commission (section 133(5)).
By section 133(2) compensation is not payable unless the application for compensation has been made: Before the end of the period of 2 years beginning with the date on which the convictionis reversed or he is pardoned.
This limitation was inserted by sections 61(1) (3) and (9) of the Criminal Justice and Immigration Act 2008 and came into force on 1 December 2008.
Simultaneously, in accordance with section 61(1), (2), (5) and (9) of the 2008 Act, provision was made for the cases where the conviction is quashed on an appeal out of time, and a retrial ordered, so that: The conviction is not to be treatedas reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial. (Section 133(5A))
The determination whether there is an entitlement to compensation is vested exclusively in the Secretary of State, (section 133(3)) who in exceptional circumstances may extend the time for making an application. (section 133(2A))
When section 133 was enacted an ex gratia system operated in tandem with it.
In England and Wales and Northern Ireland, but not in Scotland, the ex gratia scheme was abolished in 2006.
In his article Compensation for Wrongful Imprisonment [2010] Crim LR 805, Professor John Spencer QC convincingly criticised the narrowness of and consequent anomalies which arise from the limitations of the statutory scheme.
No alternative remedy is provided unless, perhaps, and subject to limitation periods, where malpractice in the investigative process is established, the victim may pursue a remedy in tort, or when the individual suffered a wrongful conviction as a consequence of negligence by his legal advisors, a claim in damages may be available.
In short, the statutory scheme does not preclude any relevant action which may, in theory, be available in tort, but it is in any event unsupported by the ex gratia scheme.
Nevertheless we must analyse section 133 and the ambit of the scheme for the payment of compensation without reference to its anomalies and disadvantages.
When it was examined by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1 the meaning and effect of section 133 produced contradictory opinions with no authoritative decision.
Lord Steyn concluded that the statutory scheme was confined to cases where the person concerned was clearly innocent.
Lord Bingham of Cornhill, while agreeing with the result, for carefully explained reasons, hesitated to accept this restriction on the ambit of the statutory scheme.
The differences between their respective approaches to the problem have been considered and examined in a number of subsequent decisions, of which the most recent is R (Allen (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36.
They must finally be resolved now.
As we are not agreed, without embarking on what would be a repetitious discourse of much of the voluminous material drawn to our attention, I shall briefly explain the reasons why I agree with Lord Steyn.
In Mullen the parties were agreed that the interpretation of section 133 required what was described as a correct understanding of article 14(6) of the International Covenant on Civil and Political Rights, dated 16 December 1966. (ICCPR) That view was adopted by the House of Lords and it is unchallenged in the present proceedings.
Article 14(6) provides: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the grounds that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
In short, the enactment of section 133 in virtually identical terms represented the response of the United Kingdom to a Treaty obligation.
One further Treaty provision needs immediate attention.
In November 1984 article 3 of Protocol 7 to the Convention of Human Rights also made what was effectively an identical provision to article 14(6) of the ICCPR.
When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed, or he has been pardoned, on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to the law or the practice of the State concerned, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
Article 3, Protocol 7 will become relevant when the jurisprudence of the European Court of Human Rights falls to be considered.
In the context of a statutory provision reflecting the international obligations undertaken by the United Kingdom, it would be productive of confusion for the phrase miscarriage of justice to be analysed by reference to the many different ways in which, looking at our own statutes which enable convictions to be quashed, and the language used, sometimes loosely, in the course of numerous judgments bearing on these questions.
The phrase reflects an autonomous concept, in which the words miscarriage of justice reflect the international obligations of the United Kingdom under article 14(6).
Like article 14(6), section 133 distinguishes the reversal of the conviction (or a pardon) and a miscarriage of justice.
Within the section itself, as with article 14(6), these concepts are distinct.
Even if the remaining pre conditions to the payment of compensation are established, the reversal of the conviction is an essential prerequisite to but is not conclusive of the entitlement to compensation.
In short, for the purposes of section 133 the reversal of the conviction and the consequent revival of the legal presumption of innocence is not synonymous with a miscarriage of justice.
Therefore before compensation is payable under the statutory scheme more than the reversal of the conviction is required.
The requirement is that a miscarriage of justice must be demonstrated beyond reasonable doubt.
In my view the use of this phrase was deliberate and significant.
The phrase is not relevant to the evidential question whether the conviction has been reversed and it is not directed to any individual feature or aspect of the investigation or trial processes.
If the reversal of the conviction alone were sufficient, that fact would be proved beyond reasonable doubt by the court record, and if any specific feature of the investigation or trial processes were relevant, appropriate provision could readily have been made in section 133 itself.
Instead the phrase describes the characteristics or attributes of the miscarriage of justice which must be established.
The word conclusively in article 14(6) was not repeated.
Rather the familiar description of the standard of proof in criminal cases and, significantly in the context of a claim for the payment of compensation (normally a civil claim), the standard normally applied to the prosecution in the criminal justice process was imposed on the defendant.
For this purpose the balance of probabilities was expressly ignored.
Accordingly, for section 133 to apply, following a conviction of an offence which was proved beyond reasonable doubt, the emergence of a new or newly discovered fact should demonstrate not only that the conviction was unsafe, or that the investigative or trial processes were defective, but that justice had surely miscarried.
In the present context, the ultimate and sure miscarriage of justice is the conviction and incarceration of the truly innocent.
This leads me to the conclusion that as a matter of construction the operation of the compensation scheme under section 133 is confined to miscarriages of justice in which the defendant was convicted of an offence of which he was truly innocent.
In my judgment nothing less will do, and no alternative or half way house or compromise solution consistent with this clear statutory provision is available.
I must therefore address some of the contentions which suggest that this construction is over restrictive.
The unsafe conviction
Mr Tim Owen QC highlighted the absence of word innocent from section 133.
The omission reflects not only the autonomous concept of miscarriage of justice, but more significantly, the absence of an innocent verdict in the criminal justice process.
The defendant is either proved to be guilty of the crime alleged, or he is entitled to a not guilty verdict and acquittal.
A verdict of innocent is unknown.
On acquittal, or the reversal of a conviction, the presumption of innocence revives.
It applies when the jury considers that there is a high probability that the defendant is guilty, and indeed to cases like Mullen, whose conviction was quashed notwithstanding the assessment of the court that he was undoubtedly guilty.
Just because it is a concept to which the criminal justice process is not directed, the word innocent could have no place in section 133.
The only ground for quashing a conviction in the Court of Appeal Criminal Division (the Court) is that it is unsafe.
There are however occasions when a new or newly discovered fact may well demonstrate the factual innocence of the appellant.
And if it does, the judgment of the court may say so.
I respectfully disagree with the observation in R v McIlkenny (1991) 93 Cr App R 287 that the court is not entitled to state that an appellant is innocent.
The processes of the Court of Appeal do not allow for a formal declaration of factual innocence, any more than the trial process recognises a verdict of innocent.
However there can surely be no stronger case for doubting the safety of a conviction than evidence which unmistakenably demonstrates that the appellant is in truth an innocent man or woman. (See R v Fergus (1994) 98 Cr App R 313: R v Hodgson [2009] EWCA Crim 490.) Although the conviction is quashed not on the ground that the defendant is innocent, but because his conviction is unsafe, the terms of the judgment should conscientiously reflect the true reasons for its decision that the conviction should indeed be quashed as unsafe.
At the risk of stating the obvious, the decision whether to quash a conviction is for the Court: so are all features of the trial process, and indeed any order for retrial.
If the end of the judicial process is that the conviction is quashed, or if following a retrial, the defendant is acquitted, the administrative decision whether compensation is payable for a miscarriage of justice is vested exclusively in the Secretary of State.
The determination is not limited to some kind of administrative assessment of the circumstances in which the judicial process has come to an end.
Therefore while the Secretary of State should pay the closest possible attention to the terms of the judgment of the Court, whatever the terms in which the judgment is expressed, when making the decision whether a miscarriage of justice has occurred, he is not confined to the judgment of the Court.
Retrial
The circumstances in which a retrial will be ordered following the quashing of a conviction vary enormously.
The single question is whether in a fact specific context the interests of justice should lead to such an order.
Dealing with it generally it is most unusual for an order for retrial to be made many years after conviction, or when the sentence imposed at the original trial has been or is close to being completed.
On the other hand, again dealing with it generally, where a conviction is recent, and the sentence substantial, and the evidence relied on the prosecution is likely to be available at the retrial, then a retrial may well be ordered.
Exceptions can be found both ways.
At the risk of repetition, the decision is fact specific.
It can however be confidently stated that it would be inconceivable for the Crown to seek or the Court to order a new trial if it were made clear in the terms of the judgment that the conviction was being quashed on the basis that the fresh evidence demonstrated that the defendant was innocent.
This reinforces my view that if that conclusion is justified, the court is entitled to say so in its judgment.
These considerations bring me to section 133(5A).
This subsection addresses the newly introduced statutory time limit in which an application for compensation may be made in the context of an order for retrial.
If for any reason (including the conclusion of the Court that the defendant is truly innocent) no order for retrial is made, time runs from the date when the conviction is quashed.
If however (again, for whatever reason) the order quashing the conviction is accompanied by an order for retrial, notwithstanding the presumption of innocence, for the purposes of the scheme for the payment of compensation the conviction is not reversed or quashed and the time for making an application is accordingly postponed until the retrial process is completed.
This enables first, the defendant to concentrate his attention on the forthcoming retrial.
Second, it is conclusive of the question (adversely to the defendant) if he is convicted, when his position is exactly the same as it would have been if the original conviction had not been quashed.
Third, if he is acquitted, the process may provide the Secretary of State with further material on which to base his determination.
In my judgment section 133(5A) has no bearing on the proper construction of the words beyond reasonable doubt that there has been a miscarriage of justice, and the entitlement to compensation under the statutory scheme was not expanded with effect from 1 December 2008 when section 133(5A) came into force.
That was not the purpose of this new inserted provision which was directed to the consequences of the introduction of the new timetable within which applications should be made.
It was procedural only.
European Court of Human Rights
In my judgment the jurisprudence of the European Court of Human Rights drawn to our attention by Mr Owen does not bear on the issues which arise in this litigation.
As already indicated once a conviction has been reversed the presumption of innocence applies.
Subject only to the provisions of sections 76 83 of the Criminal Justice Act 2003 the rule against double jeopardy applies and the defendant cannot be prosecuted a second time for an offence of which he has been acquitted, or when his conviction has been reversed and for the purposes of the administration of criminal justice the prosecution process is at an end.
Nevertheless the acquittal, or the successful appeal against conviction, does not operate as an absolute bar to litigation.
It remains open to any individual to assert that notwithstanding the acquittal or quashing of the conviction, the defendant was guilty.
That is what Lord Steyn said about Mullen in his judgment in that case.
A defendant who has been acquitted of rape may face proceedings for damages by the complainant and she may successfully establish on the balance of probabilities that he did indeed rape her and is liable in damages.
In proceedings for defamation on the basis that the defendants innocence is questioned, the acquittal does not create an irrebuttable presumption that the assertion cannot be justified and must be unjustifiable.
Article 3, Protocol 7 forms part of the Convention.
It must be read together with the Convention.
The jurisprudence of the European Court of Human Rights relied on by Mr Owen was not directed to and did not address the provisions of article 3, Protocol 7.
If the decisions he relied on apply in the present case it will in effect mean that the reversal of the conviction carries with it an obligation to pay compensation in accordance with section 133, although such a conclusion would be inconsistent with the wording of article 3, Protocol 7 itself.
Bok v The Netherlands (Application No 45482/06) (unreported) 18 January 2011 confirms that it does not.
Section 133 therefore provides an individual whose conviction has been reversed with the opportunity (but no obligation) to make a claim for compensation based on a statutory test which is effectively identical to the provisions of the European Convention.
The Secretary of State must allow or reject the application in accordance with that test.
Conviction Impossible
This heading is used to encompass some of the alternative ways of approaching the concept of miscarriage of justice adopted in the majority judgments which have reached the conclusion that the phrase has a rather broader ambit than I do.
A newly discovered fact which demonstrates that the prosecution against the defendant is shredded to the extent that no conviction could have been based on it, or that no evidence would properly have been offered or, if there had been a trial, there would have been no case to answer at the close of the prosecution case, is likely to provide powerful material which may lead the Secretary of State to conclude that the defendant is indeed innocent.
However that conclusion does not automatically follow, and unless it does, section 133 does not apply.
In short, these considerations are of evidential significance, maybe of crucial evidential significance, but not determinative.
There are a variety of different circumstances in which the Court may make a decision on appeal in relation to decisions at trial that what appeared to be powerful evidence for the Crown should have been excluded.
For example, in the light of some newly discovered fact the Court may conclude that the decision of the trial judge to allow crucial prosecution eye witnesses to give their evidence anonymously was wrong, or no longer tenable: without that evidence there would be no case against the defendant.
The Court may order a retrial, but without the protection of an anonymity order, the crucial witnesses may then refuse to give evidence at all.
Accordingly no further evidence would be offered against the defendant.
In my judgment it should not, and it would not, follow that the defendant would be entitled to compensation.
Similar considerations would arise if, on the basis of fresh evidence, the Court concluded that the judge had wrongly admitted crucial hearsay evidence without which there would have been no prosecution.
Taking the matter further, R v Smith [1999] 2 Cr App R 238 illustrates the difficulty of equating the no case to answer situation with the concept of miscarriage of justice within section 133.
The judge rejected a submission that there was no case to answer.
The Court concluded that he was wrong and went on to examine the question, what if a submission is wrongly rejected but the defendant is cross examined into admitting his guilt? It concluded that the conviction would still be unsafe because the defendant was entitled to be acquitted at the close of the prosecution case.
It would be surprising if notwithstanding his own sworn admission of guilt, the discovery of a new fact which demonstrated that the decision that there was a case to answer was wrong, should be followed by the payment of compensation.
Again, where fresh evidence is advanced on behalf of the appellant which undermines the safety of the conviction, and indeed puts into question a substantial part of the prosecutions case, the prosecution may seek to adduce fresh evidence demonstrative of guilt.
The jurisdiction to permit the Crown to do so is available (for example, see R v Hanratty [2002] EWCA Crim 1141; [2002] 3 All ER 534).
In the interests of justice the Court may order a new trial to enable all the issues to be resolved by a jury notwithstanding that, standing on its own, the original evidence advanced by the Crown was no longer sufficient to found a case for the appellant to answer.
Finally, I must return to Mullen itself, which at [1999] 2 Cr App R 143 sets out the reasons why the conviction was quashed.
The matters which constituted the abuse of process occurred before Mullen was returned from Zimbabwe to this jurisdiction.
The British authorities procured his deportation by unlawful means, in breach of public international law.
The prosecution itself was held to be unlawful.
Mullen therefore should not have been charged, let alone prosecuted to trial.
Yet the House of Lords was agreed that he was not entitled to compensation, and I wholeheartedly agree.
Considerations like these underline some of the practical difficulties with any approach to the construction of section 133 which goes beyond the limits suggested by Lord Steyn in his judgment in Mullen, that compensation within the statutory scheme is payable only when the defendant was convicted of an offence of which he was truly innocent, and therefore beyond reasonable doubt the victim of a miscarriage of justice.
In my judgment the principle is that section 133 is concerned with the fact rather than the presumption of innocence in the context of the administrative decision to be made by the Secretary of State.
It is not related to different (and if so which?) aspects of the trial processes, or the likely or possible impact which the new or newly discovered fact would have had on the decision to prosecute or on the forensic processes which culminated in conviction.
Their practical effect is demonstrated in the case of MacDermott and McCartney.
The confessions on which the prosecution relied would have been inadmissible if they had been made not as a result of violence, but rather of inducements.
Assuming for present purposes that the newly discovered material demonstrated that Donnelly had been offered identical inducements to those which MacDermott and McCartney had asserted at their trials, their convictions would have been no less liable to be quashed than they were in the light of the fresh evidence relating to police violence.
As there was no evidence beyond their inadmissible confession there would have been no basis for any prosecution.
And there would, if they were prosecuted, have been no case for either to answer.
Yet, in the context of an inducement or inducements, there might, if the confessions were sufficiently detailed, be no reason to doubt that the confessions were true, even if inadmissible.
In my judgment their cases would not qualify for compensation.
We are here dealing not with inducements which cast doubt on the voluntariliness of the confessions, but with violence.
The newly discovered material would have borne on the decision of the trial judge whether the defendants confessions were voluntary or not.
The fresh evidence led the Court of Appeal in Northern Ireland to conclude that if it had been available at trial there was a realistic possibility that the evidence of the police officers (who asserted that there had been no intimidation of the defendants, and no grounds for doubting that the confession statements were voluntary) may have been discredited.
If so the statements would have been excluded from consideration, and there would then have been no prosecution and no case for either of them to answer.
In principle, however, the impact on the admissibility of their confessions would have been the same, whether they responded to inducements to confess or succumbed to violence.
Although I share the distinct unease of the Court of Appeal in Northern Ireland about the circumstances in which the confessions were made by the appellants, it does not follow that the Secretary of State was obliged to conclude that they were innocent for the purposes and within the ambit of section 133.
New or newly discovered fact
In the discussion about the meaning of new or newly discovered fact the rival contentions went too far.
It would be unrealistic, and removed from the realities of the conduct of the defence at trial that his legal advisers should inform the defendant personally of each and every fact and matter to which their attention is drawn by the prosecution.
When all is said and done, the defence advocate is not a mouthpiece or echo chamber for his client.
The responsibility for giving advice and assisting the defendant to make whatever decisions which he must make for himself is one aspect of the responsibilities: the deployment of evidence and argument on his behalf is another.
Sometimes the lines overlap, but often they do not.
It therefore follows that merely because the defendant himself is personally ignorant of a particular fact, it is not new or newly discovered when the defendant personally ceases to be ignorant of it.
On the other hand, when the prosecution has complied with all its obligations in relation to disclosure of material to the defence lawyers, and they, for whatever reason, do not then deploy material which appears to be adverse to the prosecution or which would assist the defendant, that material should not automatically be excluded from the ambit of the section on the basis of prosecutorial compliance with its disclosure obligations.
Rather the approach should coincide with the circumstances in which fresh evidence is sought to be deployed before the Court in accordance with section 23 of the Criminal Appeal Act 1968.
This normally predicates that there should be a reasonable explanation for the earlier failure to adduce the evidence at the trial.
In the present case, it is clear from the judgment of the Court in Adams that the conviction was quashed on the basis of fresh evidence in circumstances in which, notwithstanding that the prosecution had fully performed its responsibilities in relation to disclosure, Adamss legal team had failed adequately to respond and fulfil theirs.
In my judgment that failure or omission was a new or newly discovered fact within the ambit of section 133.
Conclusion
In my judgment the appeal of Adams should be dismissed: as to the appeals of MacDermott and McCartney, I should have agreed with Lord Browns proposal that they should be remitted to the Secretary of State for further consideration.
LORD BROWN (with whom Lord Rodger agrees)
I have had the advantage of reading in draft the judgment of Lord Judge, the Lord Chief Justice, and, agreeing with it as I do, I shall try not to repeat the bulk of its reasoning.
So troubled am I, however, that apparently ours is the minority view on these appeals that I wish to add some additional thoughts of my own.
That section 133 of the Criminal Justice Act 1988 was intended to give effect to the United Kingdoms international obligation under article 14(6) of the International Covenant on Civil and Political Rights 1966 is, of course, plain and obvious.
Section 133(1) omits the phrase in article 14(6) by a final decision reflecting it instead in the definition of reversal in section 133(5) by referring there to an appeal out of time or on a reference and substitutes for the word conclusively in article 14(6) the hallowed expression beyond reasonable doubt.
Otherwise the language of the two provisions is virtually identical.
It is clear, therefore, that the right to compensation arises only when each of four conditions is satisfied: (i) the conviction is quashed on an appeal out of time or a reference (not, therefore, when a timeous appeal succeeds, nor, of course, on an acquittal at trial); (ii) the appeal succeeds on the ground of a new or newly discovered fact; (iii) the appellant was in no way responsible for the previous non disclosure of that fact; and (iv) that fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The critical question for decision here, of course, is what precisely is meant in this context by a miscarriage of justice.
As to this, whilst recognising that the expression has an autonomous meaning, I share the view expressed in several of the judgments that there is no real assistance to be derived here from any of the extrinsic material, for example, the travaux or other states practices.
Rather, as Lord Bingham suggested in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, 27, para 9(2): It may be that the expression [miscarriage of justice] commended itself because of the latitude in interpretation which it offered.
That being so, it was perfectly open to the UK to introduce legislation intended to compensate only those shown to be clearly innocent of the crime of which they had been convicted and in this connection I see no reason to ignore the explanatory report relating to article 3 of Protocol 7 to the European Convention on Human Rights (an article almost precisely reproducing the language of article 14(6)) which, at para 25, states: The intention is that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be acknowledgment that the person concerned was clearly innocent.
True, the UK never ratified Protocol 7 and I am far from suggesting that the explanatory report shows plainly that section 133(1) is to be construed in the way para 25 suggests.
But it does surely show that this is both a permissible view to take of the extent of the article 14(6) obligation undertaken by the UK and a perfectly possible construction of section 133(1) itself.
Before turning more particularly to whether it is the right construction, it is I think worth pointing out too that the provision whereby those benefiting from article 14(6) are entitled to be compensated according to law similarly accords to individual states a wide discretion as to how such compensation is to be assessed.
As to this the UKs approach seems to me notably generous.
In reaching his assessment, the Secretary of States assessor is directed to apply principles analogous to those governing the assessment of damages for civil wrongs including, therefore, claims for wrongful imprisonment although a deduction may be made on account of the claimants criminal record.
An illustration of the size of the awards liable to be made in these cases is provided by R (OBrien) v Independent Assessor [2007] UKHL 10; [2007] 2 AC 312 concerning compensation claims arising out of the wrongful conviction of the Hickey brothers and others for the murder of Carl Bridgewater at Yew Tree Farm.
The first instance decision in that case [2003] EWHC 855 (Admin) shows net final compensation assessments there of 990,000 for Michael Hickey and 506,220 for Vincent Hickey (wrongfully detained in prison respectively for just under thirteen years and something under fourteen years see para 8 of Lord Binghams judgment in the House of Lords).
What, then, is the correct interpretation of a miscarriage of justice in section 133(1)? More particularly, is it: (i) the conviction of an innocent defendant, or (ii) the conviction of a defendant who, by a new fact, so undermines the evidence against him as to show that, on the undermined evidence, he could not possibly have been convicted essentially Lord Phillips (category 2) formulation (at para 55), apparently now subscribed to by the majority of the court.
I mention only those two possible constructions since no member of the court appears to favour any yet wider construction of section 133 so as to embrace also cases where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant (Lord Phillips category 3 at para 9).
Strikingly, and to my mind significantly, it was this wider construction that not just the appellants but also Mr Alex Bailin QC for the Intervener, JUSTICE, were urging upon the court; indeed, both Mr Owen QC for Mr Adams and Mr Bailin expressly submitted that there was no logical or principled dividing line between categories 2 and 3.
And to my mind they were right to do so.
Of course, innocence as such (factual as opposed to presumptive) is not a concept known to the criminal law.
But nor too, in the context of criminal appeals, is the notion of a prosecution case so undermined that no jury could possibly convict.
The criminal court deals only in the safety of convictions.
On a fresh evidence appeal the sole question the court asks itself is whether the conviction is unsafe (essentially the lurking doubt test).
If the case is a difficult one it sometimes finds it helpful to test its view by asking whether the evidence, if given at the trial, might reasonably have affected the decision of the trial jury to convict R v Pendleton [2001] UKHL 66; [2002] 1 WLR 72, 83, para 19.
The ultimate and only question, however, is for the court: is the verdict unsafe? The question raised by section 133, by contrast, is not one for the criminal court but rather one entirely for the Secretary of State.
Similarly, no member of the court appears to suggest that Mullen itself was wrongly decided.
Lord Steyn, of course, reached his decision there (to allow the Secretary of States appeal and reinstate the decision of the Divisional Court) on the ground that section 133 compensates only those who are clearly innocent whereas Lord Bingham reached his on the altogether narrower ground that: It is for failures of the trial process that the Secretary of State is bound . to pay compensation (para 8).
Mr Mullens conviction was, of course, quashed not because of anything that had gone wrong in the trial process but because he would not have been on trial at all but for having been unlawfully returned to this country.
Certainly Lord Bingham disagreed with Lord Steyns approach.
But it cannot be pretended that Lord Binghams own approach supports the particular formulation suggested by the majority in the present case.
My own reasoning in the Divisional Court in Mullen [2002] 1 WLR 1857, 1864 was essentially that later to be adopted by Lord Steyn: 25 What was shown beyond reasonable doubt here was that there had been an abuse of process in bringing the claimant to trial.
That was the newly discovered fact.
But that fact did not itself show beyond reasonable doubt that there had been a miscarriage of justice.
All that it showed was that the court needed to conduct a discretionary exercise to decide in effect which of two important public interests should prevail: the public interest in trying, convicting and punishing the guilty or that in discouraging breaches of the rule of law and preserving the integrity of the criminal justice system.
It preferred the latter.
True, it had no doubt that the balance came down decisively in the defendants favour.
But that was by no means to find that he was innocent, still less that he was plainly so.
Rather it was a judgment that the lawful administration of justice would be affronted by his remaining convicted and imprisoned. 26 In short, a miscarriage of justice in the context of section 133 means, in my judgment, the wrongful conviction of an innocent accused.
Compensation goes only to those ultimately proved innocent, not to all those whose convictions are adjudged unsafe.
The quashing of the claimants conviction in this case was a vindication of the rule of law, not the righting of a mistaken verdict.
As I shall come to suggest, the quashing of the conviction in many cases which would fall within the majoritys formulation for compensation here is more properly to be characterised as a vindication of the rule of law than as the righting of a mistaken verdict.
Par excellence, indeed, this seems to me to be so in cases where confession statements, even though perhaps demonstrably true (by referring, say, to facts known only to the perpetrator of the crime) are excluded because of intimidation or inducement see particularly in this regard paras 264 and 265 of Lord Judges judgment.
My reasons for remaining precisely of the view I expressed in the Divisional Court in Mullen are essentially a combination of the considerations in favour of the category 1 test (that of innocence) and the considerations weighing against the category 2 test (that of critical evidence undermined).
As for the factors favouring the test of innocence, it is difficult to improve upon those listed by Lord Phillips at paras 43 48 of his judgment.
As Lord Phillips there points out, this construction gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133 (para 43); it makes perfect sense of the requirement that the new facts should prove this beyond reasonable doubt (para 44); and it gives section 133 a meaning which is eminently practicable (para 45).
It seems to me unnecessary to decide whether Lloyd LJ was right to say in R v McIlkenny (1991) 93 Cr App R 287, 311 that the Court of Appeal is not entitled to state that an appellant is innocent a point on which Lord Phillips (at para 45) and Lord Judge (at para 251) disagree.
The all important consideration in this respect is, as Lord Phillips says, that it is for the Secretary of State, not the Court of Appeal, to decide whether there has in fact been a miscarriage of justice (and, therefore, on the innocence test, whether the fresh evidence shows beyond reasonable doubt that the defendant was innocent) and the reasons given for quashing the conviction are unlikely to leave any doubt of this (para 46).
As, moreover, Lord Phillips observes (at para 47) the innocence test will ensure that a guilty defendant is not compensated for the consequences of his conviction.
If I may revert to the man in the street, he would, I think, be appalled at a construction which, on the contrary, would not infrequently result in the compensation of the guilty, sometimes, as already indicated, to the extent of hundreds of thousands of pounds.
As for the factors weighing against the category 2 test, prominent amongst these is undoubtedly the converse of the point just made, the fact that it would result in very substantial compensation for many defendants who are in truth guilty.
I have already instanced (para 275 above and paras 264 and 265 of Lord Judges judgment) those whose confession statements (even if true) come to be undermined.
Equally this is so in cases where it comes to be seen that anonymous or hearsay evidence should not have been allowed (see particularly in this regard para 260 of Lord Judges judgment).
This point, indeed, can be illustrated by the facts of R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 (where, as Lord Clarke notes at para 199, I was sitting in the Court of Appeal with Sir Thomas Bingham MR and Farquharson LJ).
Mr Batemans appeal for compensation failed in the event because the success of his second criminal appeal owed nothing to a new or newly discovered fact.
Obiter, however, the Master of the Rolls suggested that he had suffered a miscarriage of justice.
On an appeal out of time his conviction had been quashed because certain statements had been wrongly admitted in evidence at trial.
These were statements from important New Zealand witnesses whom he had wanted called and cross examined.
But why, I am now inclined to ask, should a successful appellant be compensated in those circumstances? The case against him might well have become more, rather than less, damning had the witnesses indeed been called and given their evidence orally (as was held should have happened).
One other case I want to mention which to my mind strikingly illustrates the dangers of adopting the category 2 construction is a recent decision of this court.
The case concerned the conviction of each of two brothers (A and B) for murder and two robberies following, as later investigations and a reference by the Criminal Cases Review Commission were to show, police misconduct of the gravest kind (most notably by colluding with the main prosecution witness).
On a second appeal some twelve years after conviction there was accordingly no dispute but that As and Bs convictions had to be quashed.
The only issue for the Court of Appeal had been whether A should be retried, this time not on the basis of the irredeemably tainted evidence given at his original trial but rather based on a series of admissions of guilt he had made following his conviction and the failure of his first appeal.
Because the decision upheld by the majority in this court was to order a retrial, the reporting of the detailed judgments both of the Court of Appeal and of this court has had to be delayed.
As, however, these judgments make plain, although B could not be retried (he having made no confession of guilt), the guilt of both was in reality plain.
True, the most critical evidence in the case against them had been that of a supergrass (without whose evidence, indeed, it was agreed that there could have been no prosecution at all), upon whose evidence the Crown could no longer rely because of the polices misconduct in conferring upon him a whole host of benefits to secure his continuing cooperation in the brothers prosecution at trial.
But his evidence had been supported by a jigsaw of other pieces of evidence.
That said, however, in the language of the majoritys category 2 test, no conviction could possibly be based upon it.
Is it then to be said that B must be compensated for the twelve years or so he spent in prison before being released at his second appeal? And, indeed, that A too would have had to be compensated had the Court of Appeal not decided to order his retrial? Will the Court of Appeal in future, when deciding at the conclusion of an out of time appeal whether the interests of justice require a retrial, have to factor in the consideration that, unless a retrial is ordered, the successful appellant will or may be found entitled to compensation under the majoritys approach to section 133?
The other centrally important consideration militating against a category 2 construction of section 133 is the difficulty indeed, to my mind, impossibility of reconciling this with the language of the section as a whole, and most especially with its requirement that the new facts establish a miscarriage of justice beyond reasonable doubt.
It seems to me nonsensical to suggest that the category 2 test is one that can sensibly be satisfied (or not) beyond reasonable doubt.
For good measure although, I accept, less conclusively the alternative basis of entitlement to compensation provided for by the section, namely a pardon, naturally connotes innocence rather than some less exacting test.
Even the language of a new or newly discovered fact (rather than fresh evidence) to my mind tends to suggest the revelation of something clear and certain namely innocence, rather than merely the undermining of the prosecutions overall case.
I entirely accept, of course, that a new fact which does so undermine this case as to show that the appellant could not properly have been convicted on the evidence in fact adduced against him may well in many cases suggest actual innocence and duly persuade the Secretary of State of this.
Lord Judge expressly recognises this at para 259 of his judgment.
But what if, say, as a result of inadmissible intercept evidence or other reliable intelligence the Secretary of State reasonably believes (perhaps, indeed, is convinced) that the appellant is in fact guilty.
Must he nevertheless compensate him? I would hope and respectfully maintain not.
Naturally I recognise that the application of the innocence test will exclude from compensation a few who are in fact innocent.
Even on the majoritys test, of course, some who are innocent will be excluded.
That, however, seems to me preferable to compensating a considerable number (although mercifully not so many as would be compensated on the category 3 approach) who are guilty.
After all, this whole compensation scheme operates by creating only a narrow and exceptional class who qualify.
The claimant qualifies only by producing a new or newly discovered fact.
And only if his conviction is quashed on a reference or an appeal out of time. (It will, indeed, often be a matter of chance whether an appeal is out of time the lawyers may simply have missed the time limit.) Why should the state not have a scheme which compensates only the comparatively few who plainly can demonstrate their innocence and, as I have shown, compensate them generously rather than a larger number who may or may not be innocent? That, at all events, is the scheme which in my opinion Parliament enacted here.
On certain of the questions raised there is nothing I wish to add to what Lord Judge has said.
I agree with him (at para 252) about the material to be considered by the Secretary of State (indeed, as to this, I agree too with what Lord Phillips says at para 36 of his judgment, subject only to applying the correct test).
I agree with all that Lord Judge says (at para 254) as to the relevance here of section 133(5A).
I agree with him too (at paras 255 and 256) about the relevance of the Strasbourg jurisprudence in this context. (It hardly needs pointing out that, were the Strasbourg cases to present a problem, they would do so no less for the majority than for the minority view.) And I agree with Lord Judges approach (at paras 266 and 267) to a new or newly discovered fact.
In common, as I understand it, with every other member of the Court, I too would dismiss Mr Adamss appeal.
Had Lord Judges and my view as to the meaning of section 133 prevailed, I would have been inclined to remit Mr MacDermotts and Mr McCartneys compensation claims to the Secretary of State for his further consideration in the light of our judgments and more particularly of Lord Kerrs masterly analysis of the facts of those two cases.
LORD WALKER
I agree with the judgments of Lord Judge and Lord Brown.
| UK-Abs | Section 133 of the Criminal Justice Act 1988 (s 133) provides that the Secretary of State for Justice shall pay compensation when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
It was enacted to give effect to Article 14(6) of the International Covenant on Civil and Political Rights 1966 (Article 14(6)), which the United Kingdom ratified in May 1976.
Article 14(6) also refers to a miscarriage of justice.
The principal issue in these appeals was the meaning of this phrase in this context; in particular whether compensation should only be given if someone was subsequently shown conclusively to have been innocent of the offence.
The three appellants each claimed compensation following the quashing of their convictions for murder by the Court of Appeal.
In each case the claim was refused on the ground that the appellant had not shown that a miscarriage of justice had occurred.
In Mr Adams case, it was also refused on the ground that he had not shown that his conviction had been reversed by reason of a new or newly discovered fact.
Mr Adams was convicted on 18 May 1993 of the murder of Jack Royal.
His conviction was referred to the Court of Appeal in 2007 on the ground that incompetent defence representation had deprived him of a fair trial.
His representatives had failed to consider unused material provided by the police which would have assisted in undermining the evidence given by the sole prosecution witness.
The Court of Appeal found that if this had been done the jury might not have been satisfied of Mr Adams guilt, although he would not inevitably have been acquitted.
Mr McCartney was convicted of the murders of Geoffrey Agate and DC Liam McNulty, and Mr MacDermott that of DC McNulty, on 12 January 1979.
The sole evidence was their admissions during interviews with the police.
They alleged that these had been made after ill treatment and called other witnesses who claimed to have suffered similar treatment from the same group of police officers.
The judge rejected their evidence.
He had been told that a prosecution brought against one of these witnesses had not been proceeded with.
But he was not told that this was because senior officers in the Department of the Director of Public Prosecutions considered that he had been assaulted by police officers to obtain his confession and that a conviction in another case, based on a confession obtained in similar circumstances and involving one of the same officers, had been quashed.
The Court of Appeal in Northern Ireland quashed the convictions of Mr McCartney and Mr MacDermott on 15 February 2007 on the ground that this new evidence left it with a distinct feeling of unease about the safety of their convictions.
The Supreme Court unanimously dismisses the appeal of Mr Adams and by a majority (Lord Rodger, Lord Walker, Lord Brown and Lord Judge dissenting) allows the appeals of Mr MacDermott and Mr McCartney.
The majority hold that a miscarriage of justice has occurred for the purposes of s 133 when a new or newly discovered fact shows conclusively that the evidence against a defendant has been so undermined that no conviction could possibly be based upon it.
Miscarriage of justice Miscarriage of justice was a phrase capable of a number of different meanings.
It was useful to consider four categories of cases in which the Court of Appeal would quash a conviction on the basis of fresh evidence: Where it showed a defendant was innocent of the crime (category 1) Where it was such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant (category 2) Where it rendered the conviction unsafe in that, had it been available at the trial, a reasonable jury might or might not have convicted the defendant (category 3) Where something had gone seriously wrong in the investigation of the offence or the conduct of the trial resulting in the conviction of someone who should not have been convicted (category 4) [9] The primary object of s133, and of Article 14(6), was clearly to compensate a person who had been convicted and punished for a crime which he did not commit.
A subsidiary objective was not to compensate someone who had in fact committed the crime [37].
Category 4 fell outside this purpose as it dealt with abuses of process so shocking that the conviction should be quashed even if it did not put in doubt the guilt of the convicted person [38].
Category 3 was also outside s 133 because the miscarriage of justice had to be shown beyond reasonable doubt.
Category 3 would include a significant number who had in fact committed the offences, as an inevitable consequence of a system which required guilt to be proved beyond reasonable doubt [42].
Category 1 cases were clearly covered by s 133.
However, the majority (Lord Phillips, Lord Hope, Lady Hale, Lord Kerr and Lord Clarke) held that the ambit of s 133 was not restricted to category 1 as it would deprive of compensation some defendants who were in fact innocent but could not establish this beyond reasonable doubt.
A wider scope was plainly intended at the time of the drafting of Article 14(6).
Even though it would not guarantee that all those entitled to compensation were in fact innocent, the test for miscarriage of justice in s 133 (in more robust terms than category 2) was as follows: A new or newly discovered fact will show conclusively that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it [55].
A miscarriage of justice in a case of that kind would be as great as it would have been if he had in fact been innocent, because in neither case would he have been prosecuted at all [102].
Four justices dissented on this issue.
Lord Judge considered that the words beyond reasonable doubt in s 133 meant that the miscarriage of justice was the conviction and incarceration of the truly innocent [248].
Lord Brown considered that there was no logical or principled dividing line between categories 2 and 3 [274] and the arguments in favour of an interpretation limited to category 1 were compelling [277].
Lord Rodger agreed with Lord Brown, and Lord Walker agreed with Lord Brown and Lord Judge.
Application of s 133 to cases involving a retrial An amendment to s 133 (subsection 5A) which referred to a retrial changed the timetable for a claim for compensation.
It did not mean that compensation was payable in every case in which a retrial had been ordered and the defendant then acquitted, as was argued by counsel for the intervener Barry George.
The same test was to be applied.
The amendment allowed for the possibility that something might emerge in the retrial which would require compensation [104].
New or newly discovered fact Lord Phillips (with whom Lady Hale, Lord Kerr and Lord Clarke agreed) held that the phrase new or newly discovered fact should be interpreted generously in accordance with the effect given to Article 14(6) by legislation in Ireland as including facts the significance of which was not appreciated by the convicted person or his advisers during the trial [60].
Lord Hope disagreed, considering that material disclosed to the defence by the time of the trial could not be said to be new and the focus on the state of mind of the convicted person went too far [107].
Lord Judge (with whom Lords Brown, Rodger and Walker agreed) preferred an approach which coincided with the test for admission of fresh evidence before the Court of Appeal, which required a reasonable explanation for the failure to adduce the evidence at the trial.
This had been satisfied by Mr Adams in his case [281].
Disposal of the appeals Mr Adams appeal was unanimously dismissed on the ground that his was a category 3 case and did not fall within s 133.
The majority allowed the appeals of Mr McCartney and Mr MacDermott as it had been shown conclusively that the evidence against them had been so undermined that no conviction could possibly be based upon it.
The minority would have remitted their cases to the Secretary of State for further consideration in the light of the judgment.
|
The three appellants in these two appeals were each convicted of murder.
Each had his conviction quashed pursuant to a reference to the Court of Appeal by the Criminal Cases Review Commission (CCRC) in the exercise of its powers under Part II of the Criminal Appeal Act 1995 (the 1995 Act).
In each case no order was made for a retrial.
Each claimed compensation from the Secretary of State pursuant to section 133 of the Criminal Justice Act 1988 (section 133).
That section applies to England and Wales, to Northern Ireland and to Scotland.
I shall not refer to provisions which cater for differences of procedure in Scotland.
The most material part of that section provides: (1)when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction In each case the claim for compensation was refused by the Secretary of State, whose decisions were upheld on judicial review both at first instance and on appeal.
The common issue that arises in relation to each appeal is the meaning of miscarriage of justice in section 133.
In the case of Adams there is a second issue, which is the meaning of a new or newly discovered fact.
Lord Hope has set out the background to the statutory right to compensation provided by section 133 and I need not repeat his summary.
Lord Kerr has set out in detail the relevant facts in the appeals of Mr MacDermott and Mr McCartney and I gratefully adopt his account of these.
It remains for me to summarise the facts relevant to the appeal of Mr Adams.
They can be shortly stated.
A more detailed summary can be found in the extract of the judgment of Simon J at first instance, annexed to the judgment of the Court of Appeal [2009] EWCA Civ 1291; [2010] QB 460.
The facts in Mr Adams appeal
On 18 May 1993 Mr Adams was convicted in the Crown Court at Newcastle of the murder of a man called Jack Royal and sentenced to life imprisonment.
He appealed to the Court of Appeal and on 16 January 1998 his appeal was dismissed.
Some nine years later his case was referred to the Court of Appeal by the CCRC on three grounds.
The first, and only material ground, was that incompetent defence representation had deprived him of a fair trial.
On 12 January 2007 the Court of Appeal allowed his appeal on this ground.
The relevant shortcomings in the conduct of Mr Adams defence were, in large measure, the result of a late change of his counsel.
This was made when those originally instructed to represent him had to withdraw from the case because of a conflict of interest.
Those instructed to replace them were hard pressed to prepare for the trial and failed to consider relevant unused material.
Some of this had been disclosed by the prosecution.
Some was available on a computer database known as the Holmes database.
The case against Mr Adams was essentially based on the evidence of a single witness, Mr Kevin Thompson.
His evidence was supported by that of two police officers.
It was the defence case that Mr Thompson was lying, that he had entered into a deal with the police to give evidence against Mr Adams, and that he had been fed with information about Mr Royals murder by the police.
The evidence which had been overlooked by defence counsel would have provided valuable assistance in cross examining Mr Thompson and the two police officers.
The Court of Appeal concluded that, had it been available and deployed, the jury might not have been satisfied of Mr Adams guilt.
Accordingly the court quashed the conviction, but in doing so stated expressly that they were not to be taken as finding that, if the failings on the part of the defence lawyers had not occurred, Mr Adams would inevitably have been acquitted: [2007] 1 Cr App R 449 at para 157.
Miscarriage of Justice
Section 133(1) reproduces, in almost identical wording, the following provision in article 14(6) of the International Covenant on Civil and Political Rights 1966, which this country ratified in May 1976 (article 14(6) of the ICCPR).
I shall emphasise the material differences: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such
conviction shall be compensated according to law
The reference to a final decision is accommodated by a provision in section 133(5) which defines reversed as referring to a conviction which has been quashed on an appeal out of time or on a reference under the 1995 Act.
The possible meanings of miscarriage of justice
The meaning of miscarriage of justice in section 133 received consideration by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18; [2005] 1 AC 1, when rejecting a claim for compensation by Mr Mullen.
He had been convicted of terrorist offences.
His conviction had been quashed by an appeal out of time.
This was not because there was any doubt that he had committed the offences of which he was convicted.
His conviction was quashed because he had been seized and brought to this country from Zimbabwe in circumstances that had involved a flagrant abuse of power.
It was not suggested that there was any defect in the trial process itself.
The House held that in these circumstances Mr Mullens conviction had not been quashed on the ground of a miscarriage of justice within the meaning of section 133.
Lord Steyn expressed the view that this phrase only extended to the conviction of someone subsequently shown to be innocent.
Lord Bingham of Cornhill expressed doubt as to whether this was correct.
Both were agreed that section 133 was enacted to give effect to article 14(6) and that the meaning of the latter should govern the interpretation of the section.
They were not, however, agreed as to the meaning of article 14(6).
Lord Rodger of Earlsferry accepted the interpretation reached by Lord Steyn.
Lord Walker of Gestingthorpe considered that Lord Steyn had given powerful reasons for his conclusion, but preferred not to go beyond the limited common ground for allowing the appeal.
Lord Scott expressed no view on the difference between Lord Bingham and Lord Steyn.
Miscarriage of justice is a phrase that is capable of having a number of different meanings.
In giving the judgment of the Court of Appeal in relation to Adams case Dyson LJ divided the circumstances in which convictions may be quashed on the basis of the discovery of fresh evidence into four categories, which I shall summarise in my own words. (1) Where the fresh evidence shows clearly that the defendant is innocent of the crime of which he has been convicted. (2) Where the fresh evidence is such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant. (3) Where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant. (4) Where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
These four categories have provided a useful framework for discussion.
There are relatively few domestic authorities that bear on the meaning of miscarriage of justice in section 133 and none which provides a definitive answer.
In these circumstances, before considering those authorities, I propose to consider extrinsic sources that might be expected to assist with the interpretation of this phrase.
Parliamentary material
Mr Bailin QC, appearing for JUSTICE as intervener, submits that a statement made by Earl Ferrers, the Minister of State at the Home Office, throws light on the meaning of miscarriage of justice.
The statement was made in the course of debate on the clause that was to become section 133: see Hansard (HL Debates), 22 July 1988, cols 1630 1632.
At the outset Earl Ferrers explained that the object of the clause was to give statutory effect to the United Kingdoms obligations under article 14.
Lord Hutchinson of Lullington then asked the very question that lies at the heart of these appeals.
He contrasted a new fact which resulted in the quashing of a conviction because it raised a lurking doubt in the mind of the Court of Appeal about the safety of the conviction and a new fact which caused the Secretary of State to advise that a defendant should be pardoned because he had been shown to be innocent.
Which, he asked, amounted to a miscarriage of justice under the clause? This, he stated, was a crucial point.
If it is not contempt of Parliament to observe that Lord Bingham, in his judicial capacity, was uncertain of the answer to this question, after giving it detailed consideration in Mullen, it is not, I hope, contempt of Parliament to suggest that Earl Ferrers, when faced with the question ex improviso in the course of debate, may have had to seek assistance from an official before giving the answer.
At all events the answer that he gave was: The normal course is to refer cases to the Court of Appeal and to regard its view as binding.
Mr Bailin submits that, in accordance with Lord Hopes observations on the use that can be made of parliamentary material in R v A (No 2) [2002] 1 AC 45 at para 81, this statement binds the Secretary of State to accept that the question of whether there has been a miscarriage of justice must be determined from the judgment of the Court of Appeal in the particular case and that, as the Court of Appeal does not and cannot rule on whether the defendant is innocent, that cannot be the test of whether there has been a miscarriage of justice.
I do not accept this submission.
The reply given by Earl Ferrers did not answer the question posed by Lord Hutchinson.
To be blunt it made no sense.
It affords no guidance on the meaning in section 133 of miscarriage of justice.
The relevant part of the debate clearly indicates that the intention of Parliament in enacting section 133 was to give effect to the obligation imposed by article 14(6).
It does not suggest that Parliament intended that the meaning of section 133 should differ in any way from the meaning of article 14(6).
This reinforces the rule of statutory interpretation that raises a presumption that, where a statute is passed in order to give effect to the obligations of the United Kingdom under an international convention, the statute should be given a meaning that conforms to that of the convention: see Salomon v Customs and Excise Commissioners [1967] 2 QB 116, 141 and Bennion on Statutory Interpretation, 5th ed (2008), section 221.6.
What then is the meaning of miscarriage of justice in article 14(6)? In answering this question the provisions of the Vienna Convention on the Law of Treaties should be applied: see Fothergill v Monarch Airlines Ltd [1981] AC 251, 283, per Lord Diplock.
The interpretation of Article 14(6)
As the wording of the English text of article 14(6) is virtually identical to that of section 133, the former throws no light on the meaning of the latter.
Article 33 of the Vienna Convention permits reference to the text of a convention in an alternative authenticated language.
In Mullen Lord Steyn at para 47 derived assistance from the French text of article 14(6).
This uses the phrase une erreur judiciare for miscarriage of justice.
Lord Steyn stated that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of someone who was innocent.
He did not explain the basis for this assertion and Lord Bingham did not agree with it.
He expressed the view at para 9 that erreur judiciare could be understood as equivalent to miscarriage of justice in its broad sense.
Lord Binghams interpretation of the French text is to be preferred to that of Lord Steyn.
The difference between them received detailed consideration by Girvan LJ in In re Boyles Application [2008] NICA 35 at paras 11 13.
He concluded that the French term was as elastic as the English miscarriage of justice.
In his written case at para 4.32 Mr Tam QC for the Secretary of State invited the Court to reject Girvan LJs analysis of the French law.
In these circumstances the Court allowed Mr Owen to adduce a witness statement from Dr Cristina Mauro, who teaches Criminal Procedure as an Assistant Professor at Universit Panthon Assas at Paris.
She confirmed that Girvan LJs interpretation of erreur judiciare was correct, and Mr Tam accepted this to be the case.
Had the French text given a more precise meaning to article 14(6) than the English this would have been a legitimate aid to the interpretation of the latter.
As it is the French text leaves us no further forward.
Article 31(3)(b) of the Vienna Convention also permits one to take into account any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation.
Lord Steyn, Girvan LJ and Dr Mauro, in progressively greater detail, have examined articles 622 to 626 of the French Code de Procdure Pnale, which give effect to article 14(6).
Once again the analysis of the latter two is to be preferred to that of Lord Steyn.
This indicates that in France a conviction will be reviewed where a new element gives rise to serious doubts about guilt and that the reviewing court can then either quash the conviction on the ground that the new element proves that the defendant is not guilty or direct a retrial.
Compensation will be recoverable in the former event or, if there is a retrial, if this results in an acquittal.
This practice on the part of only one of the many signatories to the ICCPR does not provide a guide to the meaning of article 14(6) but it does demonstrate that proof of innocence has not been universally adopted as the test of entitlement to compensation.
It has not been suggested that there is any consistency of practice on the part of the signatories that assists in determining the meaning of article 14(6).
If it is not possible to deduce the meaning of article 14(6) from subsequent practice in its application, what of the travaux prparatoires? Article 32 of the Vienna Convention permits recourse to these where necessary to determine the meaning to be attributed to the term of a treaty in the light of its object and purpose see article 31.
The Court has been provided with relevant comments on the travaux in The Right to a Fair Trial under the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights by D Weissbrodt (2001) and Guide to the Travaux Prparatoires of the International Covenant on Civil and Political Rights by M Bossuyt (1987).
So far as the precise meaning of miscarriage of justice is concerned the travaux are inconclusive.
They disclose that Mrs Roosevelt was opposed to the inclusion of article 14(6) on the ground that its implementation would cause significant technical difficulties because of the diversity of national legislation.
They show concern by some, including the British delegate, that the provision should not create an obligation to pay compensation when a conviction was reversed on appeal.
Of most significance is the rejection by 22 votes to 11 with 40 abstentions of an amended provision initially proposed by Israel, with input from France and Afghanistan.
This reads: The judicial recognition of the innocence of a convicted person shall confer on him the right to request the award of compensation in accordance with the law in respect of any damage caused him by the conviction.
While this provides no positive indication of precisely what the state parties intended miscarriage of justice to mean, it makes it difficult to argue that they intended it to mean conviction of the innocent.
Lord Bingham suggested at para 9 in Mullen that the phrase miscarriage of justice may have commended itself to the parties because of the latitude of interpretation that it offered and it seems to me that this may well be the case.
It is, I believe, possible to make some more positive conclusions about what it was that the states who were involved in the drafting of article 14(6) were trying to achieve.
They were concerned with the emergence of a new fact after the completion of the trial process, including review on appeal.
Article 14(5) provides that everyone convicted of a crime shall have the right to have his conviction and sentence reviewed by a higher tribunal according to law.
Article 14(6) applies to the discovery of a new fact after that final decision.
Compensation was only payable where the new fact demonstrated conclusively that there had been a miscarriage of justice.
Thus miscarriage of justice had to be the kind of event that one could sensibly require to be proved conclusively.
Article 14 is, in general, concerned with the right to a fair trial.
Most of its provisions relate to procedure.
One might have expected article 14(6) similarly to have been concerned with the consequences of shortcomings in procedure.
The travaux do not suggest that this was the primary concern of the delegates.
It is perhaps significant that Mrs Roosevelt and Ms Bowie did not consider that the provision belonged in the Covenant and suggested deleting it.
What the delegates appear to have been primarily concerned about was not errors of procedure, but the emergence of fresh facts that were inconsistent with the conviction of the defendant.
Thus, at the outset, the Philippines suggested that the circumstances in which the provision should apply should be spelt out and that these should be where the true offender had confessed and there were no reasonable grounds to doubt his confession or where the fact or event which was the basis of the conviction was shown beyond reasonable doubt never to have taken place.
A comment by Mrs Roosevelt that compensation should be denied to someone who deliberately concealed facts which would have exonerated him if discovered (my emphasis) is a further example of this approach, as is the proposed amendment to which I have referred at para 19 above.
The fact remains, however, that this amendment was not carried and that the travaux show concern on the part of some delegates that the provision under discussion would allow compensation to persons who were clearly guilty but whose conviction had been annulled for reasons of form or procedure while others appear to have considered that the provision should provide a guarantee for lawful process.
The travaux clearly demonstrate that the parties intended article 14(6) to cover the situation where a newly discovered fact demonstrated conclusively that the defendant was innocent of the crime of which he had been convicted.
They were not, however, prepared to agree an interpretation which restricted the ambit of article 14(6) to this situation.
In the 14th and final session it is recorded that most of the Committee agreed that only adequate legislation could solve the technical difficulties involved in the problem of compensation for a miscarriage of justice.
Thus, while the principle was agreed that there should be compensation for the consequences of a conviction reversed on the ground of conclusive proof of a miscarriage of justice as a result of the discovery of new evidence after the conclusion of the criminal process, and that this would cover the case of a convicted man who was shown to be innocent, it seems to have been left to the individual parties by domestic legislation to identify the precise parameters of the miscarriage of justice that would give rise to a right to compensation.
The words according to law were added to the article by a late amendment.
It would have been possible for the contracting parties to have agreed that any person whose conviction was reversed by reason of a newly discovered fact should be given compensation for the consequences of the conviction.
This could have been justified on the basis that the reversal of the conviction raised a presumption of innocence and that compensation should be paid on the basis of that presumption.
The parties did not take that course.
The fact that they did not do so, and the requirement that the miscarriage of justice should be established conclusively, indicates so it seems to me, an anxiety not to agree to an entitlement to compensation that would result in compensation being paid to those who had in fact committed the crimes of which they were convicted, at least on a substantial scale.
In these circumstances the fact that section 133 is intended to give effect to the obligation imposed by article 14(6) is of limited assistance in interpreting that section.
It would not be right, however, when interpreting section 133 to lose sight of the fact that it is giving effect to a convention agreed by parties with varying systems of criminal justice.
Article 14(6) is applicable to criminal trials in jurisdictions that have jury trials and jurisdictions that do not, to civil and to common law jurisdictions.
The meaning given to miscarriage of justice should be one that is capable of application to the systems of criminal justice of the other parties to the covenant.
I have not found any other extrinsic material to be of assistance.
In Mullen Lord Bingham at para 9(3) considered the jurisprudence of the United Nations Human Rights Committee and concluded that this did not assist.
He reached the same conclusion in relation to the explanatory report of the Steering Committee for Human Rights in relation to article 3 of the Seventh Protocol to the European Convention on Human Rights.
I agree with Lord Bingham for the reasons which he gave.
Mullen
I now turn to consider the decision of the House of Lords in Mullen.
This task has been undertaken in a little detail by Lord Hope, which shortens the comments that I wish to make on this decision.
The reason why the appeal in Mullen did not succeed was that the House of Lords were unanimous in holding that the abuse of power that had led to the quashing of Mr Mullens conviction did not fall within the definition of miscarriage of justice, whatever the meaning of that phrase.
At para 8 Lord Bingham said: It is for failures of the trial process that the Secretary of State is bound, by section 133 and article 14(6), to pay compensation.
On that limited ground I would hold that he is not bound to pay compensation under section 133.
It was this statement that led Mr Owen to advance, initially, an argument that section 133 was directed at some failure in the trial process.
This led him to submit that if, after an impeccably conducted trial, the discovery of DNA evidence demonstrated conclusively that the convicted defendant was innocent, no claim for compensation would lie under section 133.
He was right subsequently to acknowledge that this could not be correct, but that acknowledgement raised a question as to the validity of Lord Binghams observation that section 133 applied to failures of the trial process.
I also question that statement.
It is not the failure of the trial process that constitutes a miscarriage of justice, but the wrongful conviction that may be caused by it.
A wrongful conviction is capable of amounting to a miscarriage of justice whether or not it has been caused by a failure of the trial process.
I do not believe that Lord Bingham can have intended to exclude from the ambit of section 133 convictions quashed as the result of the discovery of new facts in circumstances where there has been no failure of the trial process.
That, I believe, is the situation with which section 133 is, at least primarily, concerned.
There is a question as to the assistance that is to be derived from the following earlier comments in para 4 of Lord Binghams judgment: The expression wrongful convictions is not a legal term of art and it has no settled meaning.
Plainly the expression includes the conviction of those who are innocent of the crime of which they have been convicted.
But in ordinary parlance the expression would, I think, be extended to those who, whether guilty or not, should clearly not have been convicted at their trials.
It is impossible and unnecessary to identify the manifold reasons why a defendant may be convicted when he should not have been.
It may be because the evidence against him was fabricated or perjured.
It may be because flawed expert evidence was relied on to secure conviction.
It may be because evidence helpful to the defence was concealed or withheld.
It may be because the jury was the subject of malicious interference.
It may be because of judicial unfairness or misdirection.
In cases of this kind, it may, or more often may not, be possible to say that a defendant is innocent, but it is possible to say that he has been wrongly convicted.
The common factor in such cases is that something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin) at para 25 I stated that in this passage Lord Bingham was identifying the types of miscarriage of justice that would fall within section 133.
On reflection I believe that I was wrong.
As Lord Hope has pointed out in para 90 Lord Bingham was discussing the meaning of wrongful conviction in the context of the previous ex gratia scheme.
There is a further point to be made in relation to para 4 of Lord Binghams speech.
He has included in the catalogue of cases resulting in the conviction of someone who should not have been convicted the case of a judicial misdirection.
A judicial misdirection could not be a new or newly discovered fact, but if it were it would fall into Dyson LJs third category.
So might a conviction based on flawed expert evidence: see R (Allen) (formerly Harris)) v Secretary of State for Justice [2008] EWCA Civ 808; [2009] 2 All ER 1.
Thus para 4 would appear to embrace all four of Dyson LJs categories.
In para 9 Lord Bingham observed, when considering section 133, that, while miscarriage of justice can be used to describe the conviction of the demonstrably innocent, it can be and has been used to describe cases in which defendants, guilty or not, certainly should not have been convicted.
This also has been treated by some as expressing Lord Binghams view of the scope of section 133, but I do not think that it is clear that this was so.
In these circumstances, I agree with Lord Hope that Lord Binghams speech does not provide significant positive assistance in interpreting miscarriage of justice in section 133.
It is of assistance in respect of his comments on Lord Steyns answer to that question.
Lord Steyns conclusion in Mullen that miscarriage of justice was restricted to the conviction of an innocent person was largely founded on his misreading of the French text of article 14(6) and of the position in France.
Shorn of that support, his speech does not provide compelling justification for his conclusion.
For all these reasons I do not believe that Mullen helps very much in determining the meaning of miscarriage of justice in section 133.
The cases that have followed Mullen, including those before this Court, have proceeded on the basis that Lord Bingham had laid down an alternative test to that of Lord Steyn, and concluded, in each case, that neither test was satisfied.
In the circumstances there is nothing to be gained by considering those decisions.
I agree with Lord Hope that a fresh approach is required.
I propose to adopt the four categories identified by Dyson LJ as the framework for discussion.
The nature of the exercise
The wording of section 133, following that of article 14(6), might suggest that the terms of the judgment of the court that reverses the conviction will establish whether the entitlement to compensation has been made out.
It speaks of a conviction being reversed on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice (emphasis added).
That is not, however, the test for quashing a conviction in this jurisdiction.
The words on the ground that must, if they are to make sense, be read as in circumstances where.
Section 133(1) provides that the compensation will be paid by the Secretary of State, and section 133(2) provides for a two year time limit for application for compensation to the Secretary of State.
Thus it is for the Secretary of State to decide whether the requirements of section 133 are satisfied, an exercise which is, of course, subject to judicial review.
The Secretary of State first has to consider whether a new or newly discovered fact has led to the quashing of a conviction.
If it has, he then has to consider whether that fact shows beyond reasonable doubt that there has been a miscarriage of justice, applying the true meaning of that phrase.
The Secretary of State will plainly have regard to the terms of the judgment that quashes the conviction, but ultimately he has to form his own conclusion on whether section 133 is satisfied.
The object of the exercise
I think that the primary object of section 133, as of article 14(6), is clear.
It is to provide entitlement to compensation to a person who has been convicted and punished for a crime that he did not commit.
But there is a subsidiary object of the section.
This is that compensation should not be paid to a person who has been convicted and punished for a crime that he did commit.
The problem with achieving both objects is that the quashing of a conviction does not of itself prove that the person whose conviction has been quashed did not commit the crime of which he was convicted.
Thus it is not satisfactory to make the mere quashing of a conviction the trigger for the payment of compensation.
It was this problem which led to the adoption of the imprecise language of article 14(6), which has been reproduced in section 133.
In interpreting section 133 it is right to have in mind the two conflicting objectives.
It is necessary to consider whether the wording of the section permits a balance to be struck between these two objectives and, if so, how and where that balance should be struck.
I turn to consider Dyson LJs four categories having in mind these considerations.
I shall deviate from the order in which he set them out.
Category 4: where something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who
should not have been convicted
This category is derived from Lord Binghams speech in Mullen.
As I have explained, I do not believe that he put it forward as falling within the scope of section 133.
As I understand it, the category embraces an abuse of process so egregious that it calls for the quashing of a conviction, even if it does not put in doubt the guilt of the convicted person.
I would not interpret miscarriage of justice in section 133 as embracing such a situation.
It has no bearing on what I have identified as the primary purpose of the section, which is the compensation of those who have been convicted of a crime which they did not commit.
If it were treated as falling within section 133 this would also be likely to defeat the subsidiary object of section 133, for it would result in the payment of compensation to criminals whose guilt was not in doubt.
Category 3: Fresh evidence rendering the conviction unsafe
Dyson LJ propounded this test as requiring consideration of whether a fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
This raises the question, which I shall consider further when I come to category 2, of whether section 133 requires the Secretary of State to consider the reaction to fresh evidence of a fair minded jury.
Put another way, the situation under consideration is one where the fresh evidence reduces the strength of the case that led to the claimants conviction, but does not diminish it to the point where there is no longer a significant case against him.
I would not place this category within the scope of section 133 for two reasons.
The first is that it gives no sensible meaning to the requirement that the miscarriage of justice must be shown beyond reasonable doubt, or conclusively in the wording of article 14(6).
It makes no sense to require that the new evidence must show conclusively that the case against the claimant is less compelling.
It is tantamount to requiring the Secretary of State to be certain that he is uncertain of the claimants guilt.
My second reason is that, if category 3 were adopted as the right definition of miscarriage of justice, it would not strike a fair balance between the two objectives of section 133.
The category of those who are convicted on evidence which appears to establish guilt beyond reasonable doubt, but who have their convictions quashed because of fresh evidence that throws into question the safety of their convictions, will include a significant number who in fact committed the offences of which they were convicted.
This is the inevitable consequence of a system which requires guilt to be proved beyond reasonable doubt.
When these two factors are considered together they lead to the conclusion that section 133 does not, on its true interpretation, apply to category 3.
Category 1: Fresh evidence that shows clearly that the defendant is innocent of the
crime of which he was convicted
Having considered the categories which were at one extremity of Dyson LJs list, I now turn to the category at the other.
Plainly section 133 will embrace this category, but does it provide the exclusive definition of miscarriage of justice in that section? There are a number of points to be made in favour of this suggestion.
The first is that it gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133.
More particularly, if miscarriage of justice is read as meaning the conviction of someone who is innocent, it makes perfect sense of the requirement that the new fact should prove this beyond reasonable doubt.
Next it gives section 133 a meaning which is eminently practicable.
Objection has been made to category 1 on the ground that it is not the role of the Court of Appeal, when reviewing a conviction, to rule whether the defendant is innocent of the crime of which he was convicted.
In R v McIlkenny (1991) 93 Cr App R 287, 311 Lloyd LJ observed that the Court of Appeal was neither obliged nor entitled to state that an appellant was innocent.
Its task was simply to decide whether the verdict of the jury could stand.
He described this as a point of great constitutional importance.
I think that he was right.
The point was well put by the Court of Appeal for Ontario in R v Mullins Johnson 2007 ONCA 720; 87 OR (3d) 425.
The appellant had been convicted of murder of his 4 year old niece and served 12 years in prison.
His conviction was based on expert evidence that the autopsy indicated that the young girl had been sexually abused and suffocated.
Subsequent medical evidence totally discredited the evidence given at the trial, so that it became clear that there was no reliable pathological evidence either of sexual abuse or of homicidal asphyxia of the child.
The case was referred to the Court of Appeal on terms that it should treat it as an appeal on fresh evidence.
In a passage which merits citation in full, the Court explained why it would not be proper for it in these circumstances to make a declaration that the appellant was in fact innocent: 22 The fresh evidence shows that the appellants conviction was the result of a rush to judgment based on flawed scientific opinion.
With the entering of an acquittal, the appellants legal innocence has been re established.
The fresh evidence is compelling in demonstrating that no crime was committed against Valin Johnson and that the appellant did not commit any crime.
For that reason an acquittal is the proper result. 23 There are not in Canadian law two kinds of acquittals: those based on the Crown having failed to prove its case beyond a reasonable doubt and those where the accused has been shown to be factually innocent.
We adopt the comments of the former Chief Justice of Canada in The Lamer Commission of Inquiry Pertaining to the Cases of: Ronald Dalton, Gregory Parsons, Randy Druken, Annex 3, pp. 342: [A] criminal trial does not address factual innocence.
The criminal trial is to determine whether the Crown has proven its case beyond a reasonable doubt.
If so, the accused is guilty.
If not, the accused is found not guilty.
There is no finding of factual innocence since it would not fall within the ambit or purpose of criminal law. 24 Just as the criminal trial is not a vehicle for declarations of factual innocence, so an appeal court, which obtains its jurisdiction from statute, has no jurisdiction to make a formal legal declaration of factual innocence.
The fact that we are hearing this case as a Reference under section 696.3(3)(a)(ii) of the Criminal Code does not expand that jurisdiction.
The terms of the Reference to this court are clear: we are hearing this case as if it were an appeal.
While we are entitled to express our reasons for the result in clear and strong terms, as we have done, we cannot make a formal legal declaration of the appellants factual innocence. 25 In addition to the jurisdictional issue, there are important policy reasons for not, in effect, recognizing a third verdict, other than guilty or not guilty, of factually innocent.
The most compelling, and, in our view, conclusive reason is the impact it would have on other persons found not guilty by criminal courts.
As Professor Kent Roach observed in a report he prepared for the Commission of Inquiry into Certain Aspects of the Trial and Conviction of James Driskell, there is a genuine concern that determinations and declarations of wrongful convictions could degrade the meaning of the not guilty verdict (p 39).
To recognize a third verdict in the criminal trial process would, in effect, create two classes of people: those found to be factually innocent and those who benefited from the presumption of innocence and the high standard of proof beyond a reasonable doubt.
But the decision whether there has been a miscarriage of justice within section 133 is not for the court but for the Secretary of State.
He should have no difficulty in deciding whether new evidence that has led to the quashing of a conviction shows beyond reasonable doubt that the defendant was innocent of the crime of which he was convicted.
Where the prosecution has satisfied the jury beyond reasonable doubt that a defendant is guilty, evidence that demonstrates beyond reasonable doubt that he was in fact innocent will not be equivocal.
Even though it is not for the Court of Appeal, when quashing the conviction, to express its opinion that the defendant is innocent, the reasons given for quashing the conviction are unlikely to leave any doubt of this, just as was the position in Mullins Johnson.
The other obvious point in favour of category 1 is that it precludes all possibility of a defendant who in fact committed the crime of which he was convicted receiving compensation for the consequences of his conviction.
If this is to be treated as being of paramount importance, then category 1 is the only satisfactory interpretation of section 133.
The Law Commission of New Zealand in its 1998 Report No 49 on Compensating the Wrongly Convicted advised at para 127 A requirement to prove innocence is, however, necessary to prevent the guilty claimant, acquitted on a technicality, from profiting from the crime.
It recognises that it is a persons innocence which provides the justification for compensation in the first place.
This brings me to the last point that is advanced in favour of category 1.
It is argued that it is not in practice possible to draw a line between category 2 and category 3.
Unless category 1 is adopted as the correct interpretation of section 133, defendants whose convictions are quashed on technicalities will profit from compensation.
I shall consider this argument when I deal with category 2.
The first argument against restricting the ambit of section 133 to category 1 is that the parties to article 14(6) voted against an amendment which would have done this.
The second is that this will deprive some defendants who are in fact innocent and who succeed in having their convictions quashed on the grounds of fresh evidence from obtaining compensation.
It will exclude from entitlement to compensation those who no longer seem likely to be guilty, but whose innocence is not established beyond reasonable doubt.
This is a heavy price to pay for ensuring that no guilty person is ever the recipient of compensation.
Does category 2, or some similar formulation of miscarriage of justice, provide a more satisfactory approach to the desire to provide compensation to the innocent without rewarding the guilty that both accords with the language of the section and is workable in practice? Category 2: Fresh evidence such that, had it been available at the trial no
reasonable jury could convict the defendant
This category applies to the evidence, including the fresh evidence, the test that a judge has to apply when considering an application at the end of the prosecution case for dismissal of a charge on the ground that the defendant has no case to answer.
It focuses on the evidence before the jury.
If the fresh evidence were always evidence of primary fact, or new expert evidence, the test might be satisfactory.
The position is not, however, as simple as that.
The new evidence that leads to the quashing of a conviction is very often not primary evidence that bears directly on whether the defendant committed the crime of which he was convicted, but evidence that bears on the credibility of those who provided the primary evidence on which he was convicted.
Both of the appeals before the Court fall into this category.
So does the example of category 2 given by Dyson LJ: fresh evidence which undermines the creditworthiness of the sole witness for the prosecution.
Here one can run into a problem that is peculiar to the criminal procedures that apply in common law jurisdictions.
Under common law procedures the evidence that is permitted to be placed before the jury is screened by a number of rules that are designed to avoid the risk that the jury will be unfairly prejudiced and to ensure that the trial is fair.
Thus section 78 of the Police and Criminal Evidence Act 1984 gives the judge a general jurisdiction to exclude evidence on the grounds of fairness and section 76A of the same Act contains a little code governing the admissibility of a confession.
So does section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978, which was applicable to the critical evidence adduced against the defendants in the second appeal.
Often it will be appropriate for the judge to hold a voir dire in order to decide whether or not evidence can be admitted.
The question of whether there is evidence upon which a jury can properly convict is taken after the judge has screened from the jury evidence which, under the relevant procedural code, he has ruled to be inadmissible.
That is often a difficult judicial task.
I do not believe that section 133 should be so interpreted as to impose on the Secretary of Sate the task of deciding whether the fresh evidence would have rendered inadmissible the primary evidence to which it related, in order to answer the question whether there would have been a case upon which a reasonable jury could convict.
There is a further difficulty with category 2.
The question of whether a reasonable jury could properly convict falls to be answered having regard to the fact that a jury must be satisfied of guilt beyond reasonable doubt.
Section 133 requires the Secretary of State to be satisfied beyond reasonable doubt that a miscarriage of justice has occurred.
Category 2 thus operates as follows: compensation will be payable where the Secretary of State is satisfied beyond reasonable doubt that no reasonable jury could have been satisfied beyond reasonable doubt that the defendant was guilty.
This does not seem a very sensible test.
The final point to make about category 2 is that it applies a test the result of which depends critically on common law procedural rules.
As the test is derived from article 14(6), it would be preferable if it were one more readily applicable in other jurisdictions.
For these reasons I do not consider the second category, as formulated by Dyson LJ, provides a satisfactory definition of miscarriage of justice.
I would replace it with a more robust test of miscarriage of justice.
A new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This is a matter to which the test of satisfaction beyond reasonable doubt can readily be applied.
This test will not guarantee that all those who are entitled to compensation are in fact innocent.
It will, however, ensure that when innocent defendants are convicted on evidence which is subsequently discredited, they are not precluded from obtaining compensation because they cannot prove their innocence beyond reasonable doubt.
I find this a more satisfactory outcome than that produced by category 1.
I believe that it is a test that is workable in practice and which will readily distinguish those to whom it applies from those in category 3.
It is also an interpretation of miscarriage of justice which is capable of universal application.
Retrial
The provisions in relation to retrial introduced into section 133 in the circumstances described by Lord Hope at paras 103 and 104 of his judgment raise a problem.
A retrial will only be ordered where, although it quashes the defendants conviction on the grounds of fresh evidence, the Court of Appeal considers that there remains a case against him that is fit for trial.
Assuming that they are correct in that view, the fresh evidence could never fall within the scope of section 133 if it is right to interpret that section as being limited to either category 1 or category 2, as formulated by Dyson LJ or as I have reformulated it.
The introduction into the section of the provisions in relation to retrial would make more sense if section 133 embraced category 3.
In that case, however, one might have expected compensation to be payable automatically if the retrial ended in an acquittal, but the amended section 133 does not so provide.
It does not follow, however, that category 1 or category 2 cannot stand with section 133, as amended.
Entitlement to compensation does not turn on the view that the Court of Appeal takes of the new evidence.
The defendant may contend, even where a retrial is ordered, that the fresh evidence proves his innocence.
Although the Court of Appeal is not persuaded of this, it may become apparent in the course of the retrial that the defendant is correct.
Thus the provisions in relation to retrial make sense, even if category 1 or category 2 represents the correct interpretation of miscarriage of justice.
Article 6(2) of the European Convention on Human Rights
The Strasbourg Court has stated that one of the functions of article 6(2) is to protect an acquitted persons reputation from statements or acts that follow an acquittal which would seem to undermine it see Taliadorou and Stylianou v Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008, at para 26.
The Courts expansion of what would seem to be a rule intended to be part of the guarantee of a fair trial into something coming close to a principle of the law of defamation is one of the more remarkable examples of the fact that the Convention is a living instrument.
Mr Owen QC for Mr Adams referred the Court to a series of decisions of the Strasbourg Court in which it was held to be a violation of article 6(2) for a state to refuse compensation to which an applicant who had been held in preventative detention was normally entitled on acquittal at the end of a criminal trial on the ground that his acquittal did not establish his innocence.
Lord Hope has summarised the details and effect of those authorities.
Mr Owen argued that their effect was that, once Mr Adams conviction had been quashed, he was entitled to be treated as innocent in the context of his claim for compensation.
A rather different argument based on article 6(2) was rejected by Lord Steyn in Mullen at para 44.
Mr Owen first advanced the present argument when appearing for the claimant in R(Allen) (formerly Harris)) v Secretary of State for Justice [2009] 2 All ER 1.
In that case the claimants claim for compensation under section 133 was rejected on the grounds that his case satisfied neither Lord Steyns test in Mullen nor the test that Lord Bingham had been thought to advance in that case.
Giving the only reasoned judgment, Hughes LJ comprehensively rejected Mr Owens argument based on article 6(2) for a series of ten reasons.
On the present appeals Lord Hope has held that reliance on article 6(2) is misplaced for reasons that have much in common with those of Hughes LJ.
I agree with both of them.
I would add this.
The appellants claims are for compensation pursuant to the provisions of section 133.
On no view does that section make the right to compensation conditional on proof of innocence by a claimant.
The right to compensation depends upon a new or newly discovered fact showing beyond reasonable doubt that a miscarriage of justice has occurred.
Whatever the precise meaning of miscarriage of justice the issue in the individual case will be whether it was conclusively demonstrated by the new fact.
The issue will not be whether or not the claimant was in fact innocent.
The presumption of innocence will not be infringed.
Newly discovered fact
Mr Adams appeal raises a second issue.
Were the facts that led to the quashing of his conviction newly discovered despite the fact that they were contained in documents disclosed to his legal representatives before his trial or available on the Holmes database? The phrase newly discovered raises a further difficult problem of interpretation, for it does not indicate to whom the discovery must be new.
Procedure Act 1993.
Section 9(6) of that Act provides: Ireland has given effect to article 14(6) by section 9 of the Criminal newly discovered fact means ( a ) where a conviction was quashed by the Court on an application under section 2 or a convicted person was pardoned as a result of a petition under section 7, or has been acquitted in any re trial, a fact which was discovered by him or came to his notice after the relevant appeal proceedings had been finally determined or a fact the significance of which was not appreciated by the convicted person or his advisers during the trial or appeal proceedings.
I would adopt this generous interpretation of newly discovered fact.
Section 133(1), following the almost identical wording of article 14(6), ends with the proviso : unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso is significant in more than one way.
First, the use of the word non disclosure would seem to equate the new discovery with disclosure.
The latter word has a broad ambit and, in context, suggests to me the bringing of a fact into the public domain and, in particular, the disclosure of that fact to the court.
Secondly, I read the provision as excluding a right to compensation where the person convicted has deliberately prevented the disclosure of the relevant fact, or where the non discovery of that fact is otherwise attributable to his own fault.
We are envisaging a situation where a claimant has been convicted, and may well have served a lengthy term of imprisonment, in circumstances where it has now been discovered that a fact existed which either demonstrates that he was innocent or, at least, undermines the case that the prosecution brought against him.
If he was aware of this fact but did not draw it to the attention of his lawyers, and he did not deliberately conceal it (which would bring the fact within the proviso), this will either be because the significance of the fact was not reasonably apparent or because it was not apparent to him.
Many who are brought before the criminal courts are illiterate, ill educated, suffering from one or another form of mental illness or of limited intellectual ability.
A person who has been wrongly convicted should not be penalised should this be attributable to any of these matters.
It is for those reasons that I would adopt the same interpretation of newly discovered fact as the Irish legislature.
Conclusions
It has always been common ground that Mr Adams case falls into category 3.
The newly discovered facts (as I would hold them to be) in his case do not show that a miscarriage of justice has occurred within the meaning that I would give to that phrase in section 133.
Accordingly, I would dismiss his appeal.
The newly discovered facts in the case of Mr McCartney and Mr MacDermott, as described by Lord Kerr, so undermine the evidence against them that no conviction could possibly be based upon it.
There can be no reasonable doubt of this.
Accordingly I would allow their appeal and hold that they are entitled to compensation pursuant to the provisions of section 133.
LORD HOPE
I accept with gratitude Lord Phillips description of the facts in the case of Andrew Adams and Lord Kerrs description of the facts in the cases of Eamonn MacDermott and Raymond McCartney.
With that advantage I can go straight to the issues of principle that these cases have raised.
Mention should also be made of Barry George, who was granted permission to intervene in this appeal.
On 2 July 2001 he was convicted of the murder on 26 April 1999 of the television presenter Jill Dando, who was killed by a single shot to the head as she was about to enter her home in Fulham.
His appeal against conviction was dismissed on 29 July 2002: [2002] EWCA Crim 1923.
A major part of the Crowns case against him was that a single particle of firearms discharge, which matched particles found in the cartridge case of the bullet which killed Miss Dando, in her coat and in samples of her hair, had been found nearly 12 months later in the pocket of a coat owned and worn by Mr George.
Following a review of his case, the Criminal Cases Review Commission decided to refer his conviction to the Court of Appeal under section 9 of the Criminal Appeal Act 1995 on the ground that new evidence called into question the evidence at the trial about the firearms discharge and the significance that had apparently been attached to that evidence.
New reports obtained from the Forensic Science Service had shown that it had no evidential value in the case against Mr George.
On 15 November 2007 the Court of Appeal quashed the conviction and ordered a retrial: [2007] EWCA Crim 2722.
The evidence of the firearms discharge was not admitted at the trial.
On 1 August 2008 the jury by a unanimous verdict found Mr George not guilty.
On the day of the acquittal the Crown Prosecution Service issued a press statement in which it was stated that Mr George now had the right to be regarded as an innocent man.
On 7 October 2009 Mr George applied for compensation under section 133 of the Criminal Justice Act 1988.
By letter dated 15 January 2010 the Secretary of State for Justice told Mr George that he was not prepared to authorise an award of compensation as the new forensic evidence did not prove beyond reasonable doubt that he was innocent.
He referred to the fact that in its judgment of 15 November 2007 the Court of Appeal stated that in the absence of the evidence of the firearms discharge there was circumstantial evidence capable of implicating Mr George, and that it had ordered a retrial which defence counsel conceded should take place.
Mr George applied for judicial review of that decision on 14 April 2010.
On 25 August 2010 Collins J granted permission.
But he stayed the proceedings pending the decision of this Court as to the meaning of miscarriage of justice in section 133 of the 1988 Act.
Mr Glen QC for Mr George submitted that it was sufficient to entitle a person to an award of compensation under that section that his conviction had been reversed on the ground of a new or newly discovered fact and that, in the event of his being subjected to a retrial, he had been acquitted of the offence.
As that was what had happened in his case it should be made clear by this Court in its judgment that, where a person had suffered punishment in such circumstances, compensation should be paid to him under the scheme that had been set up by the statute.
With that introduction I can go straight to the issues of principle that these cases have raised.
Background
The background to the introduction of a statutory right to compensation for miscarriages of justice by section 133 of the Criminal Justice Act 1988 was described in In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289, paras 6 9 by Lord Bingham of Cornhill and R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, paras 25 28 by Lord Steyn.
Lord Bingham drew attention in McFarland, para 6, to the underlying principles.
In any liberal democratic state there will be those who are accused of crime and are acquitted at trial, or whose convictions are reversed following an appeal.
Those affected will have suffered the stigma of being accused and the trauma of standing trial and of imprisonment before the process is brought to an end.
In principle it might seem that the state, which initiated the unsuccessful prosecution, should compensate those who have been acquitted, or at least some of them.
How this was to be done and in what circumstances was much debated before the current system was adopted: see David Harris, The Right to a Fair Trial in Criminal Proceedings as a Human Right (1967) 16 ICLQ 352, 372 375.
It was, as Lord Steyn said in Mullen, para 52, a process of evolution.
First, there was the adoption on 16 December 1966 of the International Covenant on Civil and Political Rights (the ICCPR), article 14(6) of which made provision for what it described as compensation according to law to a person whose conviction had been reversed or had been pardoned in the circumstances to which it referred and who had suffered punishment as a result of such a conviction.
The ICCPR was ratified by the United Kingdom on 20 May 1976.
On 29 July 1976 the Home Secretary (Mr Roy Jenkins) set out in a written answer the procedure which was being adopted for the making of ex gratia payments in recognition of the hardship caused by what he referred to as a wrongful conviction: Hansard (HC Debates), WA cols 328 330.
Three weeks later, on 20 August 1976, the ICCPR entered into force.
Thereafter the United Kingdom continued to fulfil its international obligations under article 14(6) under the ex gratia scheme.
The scheme was put onto a more formal basis on 29 November 1985: see Hansard (HC Debates), WA cols 689 690.
The then Home Secretary (Mr Douglas Hurd) said that he would be prepared to pay compensation where this was required by the international obligations, and that he remained prepared to pay compensation to people who did not fall within the terms of article 14(6) but who had spent a period in custody following a wrongful conviction or charge, where he was satisfied that it had resulted from serious default on the part of a member of a police force or of some other public authority.
He said that the Secretary of State for Northern Ireland intended to follow a similar practice.
A similar scheme was already in operation in Scotland.
There was however international pressure on the United Kingdom to put its obligations under article 14(6) on a statutory footing: see R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1, para 28 by Lord Steyn.
The response to it was section 133 of the Criminal Justice Act 1988.
The new statutory right superseded in part the existing scheme for ex gratia payments, which remained in being until April 2006, when it was terminated both in England and Wales and Northern Ireland.
This has had the inevitable, but unfortunate, consequence that claimants in those jurisdictions are now dependent solely upon the scheme provided by the statute.
The ex gratia scheme which has been operated in Scotland by the Scottish Ministers still remains in force there, alongside the system for the payment of compensation in respect of all reversals of convictions that fall within section 133 of the 1988 Act.
This enables those against whom criminal proceedings were taken which can properly be regarded with hindsight as wrongful to be compensated even though their cases cannot be brought within the terms of the statute.
The way the scheme is currently operated in England and Wales was set out by the Minister of State (Lord McNally) in a written answer which was published on 1 March 2011 (Hansard (HL Debates), WA col 318), in which he said: Compensation is paid under [section 133] where a conviction is quashed following an out of time appeal or following a reference by the Criminal Cases Review Commission to the relevant appeal court on the basis that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Section 133 fully meets our international obligations.
The Government do not operate a compensation scheme for those who have convictions quashed at in time appeals or those who are acquitted at trial.
Figures disclosed by the Ministry of Justice about the number of applications received and the number of applications approved in England and Wales show that there has been a very substantial drop in the number of applications approved since the abolition of the ex gratia scheme in 2006.
The system prior to that date was that all applications were considered first under section 133 and then, if not approved, were considered under the ex gratia scheme.
The following table shows all applications for compensation received since May 2004 and those which were approved under section 133 : Year 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
The statutory scheme
Article 14(6) of the ICCPR provides: Total Applications Received 88 74 39 40 38 37 Applications Approved Under s 133 39 21 23 7 7 1 When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
The wording of section 133(1) of the 1988 Act follows that of article 14(6).
It provides: (1) Subject to subsection (2) below, when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Subsection (2) provides that no payment of compensation is to be made unless an application for compensation is made to the Secretary of State, for which a time limit of two years beginning with the date when the persons conviction is reversed or he is pardoned was introduced in relation to England and Wales and Northern Ireland by section 61(3) of the Criminal Justice and Immigration Act 2008.
Section 133(5) of the 1988 Act, as amended by paragraph 16(4) of Schedule 2 to the Criminal Appeal Act 1995, provides: In this section reversed shall be construed as referring to a conviction having been quashed or set aside (a) on an appeal out of time; or (b) on a reference (i) (ii) under section 194B of the Criminal Procedure (Scotland) Act under the Criminal Appeal Act 1995; or 1995.
Subsection (5A), which was inserted in relation to England and Wales and Northern Ireland by section 61(5) of the Criminal Justice and Immigration Act 2008, provides: (5A) But in a case where (a) a persons conviction for an offence is quashed on an appeal out of time, and (b) the person is to be subject to a retrial, the conviction is not to be treated for the purposes of this section as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
To be entitled to compensation under section 133(1) the claimant must show that he has been convicted of a criminal offence and that subsequently his conviction has been reversed on an appeal out of time or on a reference by the CCRC, or he has been pardoned: on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The words that I have quoted from the subsection differ from the equivalent part of article 14(6) of the ICCPR in one respect only.
The statute uses the phrase beyond reasonable doubt where article 14(6) uses the word conclusively.
One might have thought at first sight that, when applications for compensation were made to the Secretary of State, such simple wording could be applied to each case without much difficulty.
But that has proved not to be the case, as can be seen from the speeches in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, where the meaning of the words miscarriage of justice was under scrutiny.
Lord Bingham said that he would hesitate to accept the submission of the Secretary of State that section 133 obliged him to pay compensation only when a defendant, finally acquitted in the circumstances satisfying the statutory conditions, is shown beyond reasonable doubt to be innocent of the crime of which he had been convicted: para 9.
Lord Steyn, on the other hand, said that the words miscarriage of justice extend only to cases where the person concerned is acknowledged to be clearly innocent: para 56.
Then there are the words new or newly discovered fact.
What is a fact for this purpose? And to whom does it have to be new or by whom does it have to be newly discovered? The meaning of those words is in issue in the appeal by Adams, whose conviction was reversed because of a failure by his representatives to make themselves aware of and make use of three pieces of important material at his trial which had been made available to them by the prosecution but of which Adams himself was not aware.
The issue as to what is meant by the words miscarriage of justice is common to his appeal and the appeals of MacDermott and McCartney.
It will be convenient to examine this issue first.
Miscarriage of justice
Attempts have been made in subsequent cases to reconcile the differing views as to the meaning of miscarriage of justice that were expressed in Mullen: see R (Murphy) v Secretary of State for the Home Department [2005] EWHC 140 (Admin), [2005] 1 WLR 3516; R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin); In re Boyles Application [2008] NICA 35; R (Allen) (formerly Harris) v Secretary of State for Justice [2008] EWCA Civ 808, [2009] 2 All ER 1; R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin).
In the Court of Appeal in Adamss case Dyson LJ said that, like Lord Phillips of Worth Matravers CJ in Cliberys case and Richards J in Murphy, he did not propose to express a view as to whether Lord Binghams interpretation was to be preferred to that of Lord Steyn: R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, para 42.
The assumption has been that Lord Binghams reference in para 4 of his speech in Mullen to something having gone seriously wrong in the investigation of the offence or the conduct of the trial could be taken as a test of whether the right to compensation under section 133 was available that could sit alongside that preferred by Lord Steyn.
In Allen, para 26 Hughes LJ said that this was made the plainer by Lord Binghams references to a defendant who should clearly not have been convicted in para 4 and who certainly should not have been convicted in para 9(1).
Dyson LJ set the scene for a discussion of this issue in these appeals in para 19 of his judgment in R (Adams) v Secretary of State for the Home Department [2009] EWCA Civ 1291, [2010] QB 460, when he said: The question what is meant by miscarriage of justice has not been resolved by the courts.
As Toulson LJ said when giving permission to appeal in the present case, there are at least three classes of case where the Court of Appeal allows an appeal against conviction on the basis of fresh evidence.
I shall call them category 1, category 2 and category 3 cases.
A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the trial, shows beyond reasonable doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
This list of the different types of case where appeals are allowed according to the practice of the Court of Appeal (Criminal Division) was used in argument to focus the positions adopted by either side in these appeals.
It was assisted later in the judgment by an acknowledgment that there were two limbs to Lord Binghams interpretation as set out in his speech in Mullen, para 4: [2010] QB 460, para 43.
The first limb was where the person was innocent of the crime of which he had been convicted: category 1 according to Toulson LJs analysis.
The second limb was where something had gone seriously wrong in the investigation or the conduct of the trial and the person should clearly not have been convicted.
For the Secretaries of State it was submitted that only cases falling within category 1 would satisfy the requirements of section 133(1).
For Adams Mr Owen QC submitted that it was not possible to draw a clear line between categories 2 and 3, so it was sufficient for him to bring his case within category 3.
In any event, he submitted that Lord Binghams interpretation of the phrase in his second limb in Mullen was to be preferred, that proof of innocence was not required and that his case came within category 4.
Counsel for the appellants McCartney and MacDermott submitted that Lord Binghams interpretation was to be preferred, and that their cases too fell within his second limb and category 4.
It would be wrong to regard the way these categories were identified and described by the Court of Appeal as a substitute for looking at the language of section 133(1) itself and reaching our own view as to its effect.
Lord Bingham said in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, para 2 that he would allow the Secretary of States appeal on a narrow ground which made it unnecessary for him to reach a concluded view as to whether the right to compensation under the statute was available only to those who were innocent of the crime of which they had been convicted.
We do not have that luxury in the cases that are before us in these appeals.
A choice has to be made.
It is time to take a fresh look at the arguments.
Our task is made less onerous, although no less difficult, by the fact that the materials that were said to be relevant were discussed so fully by Lord Bingham and Lord Steyn in Mullen.
It is striking how little assistance they were able to derive from the materials that were before the House.
On many points both Lord Steyn and Lord Bingham were in agreement.
They were agreed that the wording of section 133(1) was intended, as Lord Bingham put it in para 9, to reflect article 14(6).
In para 5 he said that the parties were rightly agreed that the key to interpretation of section 133 was a correct understanding of article 14(6).
They were also agreed that, as Lord Bingham said in para 9(1), the expression miscarriage of justice is not a legal term of article Taken on its own and out of context, it has no settled meaning.
Lord Steyn said that the expression had to be looked at in the relevant international context, and that the only relevant context here was the international meaning of the words in article 14(6) on which section 133 is based: para 36.
The question then was, what did the materials reveal as to its international meaning?
The travaux prparatoires disclosed no consensus of opinion on the meaning to be given to it.
Lord Steyn said that they were neutral and did not assist in any way on the proper construction of article 14(6): para 54.
Lord Bingham seems to have seen this as a possible pointer towards a more generous interpretation.
He said that the expression miscarriage of justice may have commended itself because of the latitude of interpretation that it offered: para 9(2).
But this was no more than a straw in the wind.
The jurisprudence of the United Nations Human Rights Committee was of little assistance either indeed, Lord Steyn does not mention it at all.
And there was no consensus of academic opinion on the issue.
In this situation Lord Steyn resorted first to an examination of article 14(6) on its own terms: para 45.
Lord Bingham did not undertake this exercise.
Instead he took as his starting point the statements that Mr Jenkins and Mr Hurd made when they were explaining the ex gratia scheme to Parliament: para 4.
As he said at the outset of this paragraph, they were addressing the subject of wrongful convictions and charges.
He observed that, like the expression miscarriage of justice, the expression wrongful convictions is not a legal term of art and it has no settled meaning.
He then set out to describe in some detail the situations to which in ordinary parlance, as he put it, the expression would be taken to extend.
Here we find the first and second limbs, as Dyson LJ in the Court of Appeal described them at [2010] QB 460, para 43, set out.
The first is the conviction of those who are innocent of the crime of which they were convicted.
The second embraces cases where those who, whether guilty or not, should not have been convicted.
The manifold reasons where this might happen were impossible and unnecessary to identify.
The common factor however was that something had gone seriously wrong in the investigation of the offence or the conduct of the trial.
It is important not to lose sight of the fact that Lord Bingham was not seeking in para 4 to describe what, in the context of article 14(6), was meant by the expression miscarriage of justice.
He was concentrating here on the expression wrongful conviction in the statements about the ex gratia scheme.
He did not refer to the fact that it is a precondition of the right to compensation under article 14(6), and in its turn section 133, that the conviction was reversed because of a new or newly discovered fact.
The descriptions of the ex gratia scheme did not mention this as a prerequisite.
Quite what part this discussion had to play in the interpretation of article 14(6), to which he turned in para 5, is unclear.
He took account of the fact that in the course of his statement Mr Hurd recited the terms of, and undertook to observe, article 14(6): para 5.
There is an indication in that paragraph that he saw the only difference between that part of Mr Hurds statement and the enactment of section 133 as being that the right to be compensated should more obviously be, as article 14(6) requires, according to law.
But, as he said at the end of that paragraph, the task of the House was to interpret section 133.
He did not say and it would have been surprising if he had done that the key to this was to be found in Mr Hurds description of the cases where he was willing to pay compensation for a wrongful conviction under the ex gratia scheme.
When he said at the end of para 8 that it is for failures of the trial process that the Secretary of State is bound by section 133 and article 14(6) to pay compensation, he was not offering a considered view as to what those provisions actually mean.
He was explaining why, because there was no failure in the trial process, he could decide the case against Mullen on that limited ground without forming a concluded view as to what the convicted person had to show to be entitled to compensation.
In R (Clibery) v Secretary of State for the Home Department [2007] EWHC 1855 (Admin), para 25, Lord Phillips of Worth Matravers CJ said that in para 4 of his speech in Mullen Lord Bingham considered two different situations, each of which he (that is, Lord Bingham) considered fell within the description of miscarriage of justice in section 133 of the 1988 Act.
It is true, as Lord Phillips went on to point out, that in para 6 of his speech Lord Bingham referred to the core right with which article 14(6) is concerned as the right to a fair trial.
But I think, with respect, that Lord Phillips was wrong to say that in para 4 of his speech Lord Bingham was considering what was meant by miscarriage of justice in section 133, as he himself has accepted: see para 30, above.
Hughes LJ drew attention to this point in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 25.
He said that it must be remembered that in Mullen both the statutory and the ex gratia schemes were under consideration.
In my opinion the value of Lord Binghams speech in Mullen lies not in any attempt on his part to subject section 133 to textual analysis, for he did not do this.
It is to be found in the reasons he gave for hesitating to accept the argument for the Secretary of State that section 133 was satisfied only when the defendant was shown beyond reasonable doubt to have been innocent of the crime of which he had been convicted, and in particular in the three points on which he disagreed with Lord Steyn.
Lord Steyns textual analysis of article 14(6) begins with a warning that there was no overarching purpose of compensating all who are wrongly convicted.
For the reasons he gives in para 45, the fundamental right under article 14(6) is narrowly circumscribed.
There was no intention to compensate all those whose convictions were quashed within the ordinary time limits, only those whose convictions were quashed on appeal out of time.
And this was only where a new or newly discovered fact showed conclusively that there had been a miscarriage of justice.
Having made this point, he then concentrated in para 46 on the requirement that the new or newly discovered fact must show conclusively (or beyond reasonable doubt in the language of section 133) that there has been a miscarriage of justice.
He said that this filtered out cases of two kinds, (1) where there may have been a wrongful conviction and (2) where it is only probable that there may have been a wrongful conviction.
He concluded that the only relevant context pointed to a narrow interpretation, that is to say the case where innocence is demonstrated.
This approach leans very heavily on the use of the word conclusively.
That word certainly points towards a narrow interpretation.
But it does not point inevitably to the demonstration of innocence as the only case that could qualify for compensation under the article.
The fact that a person who has been pardoned is brought within the scheme does not have that effect either.
It would plainly have been wrong to exclude those who are pardoned from the scheme when those whose convictions have been reversed are given the benefit of it.
But the reversal of a conviction and a pardon are processes which are distinct from each other.
It does not follow from the mere fact that they are both covered by the same scheme that the only reversals of convictions that can be contemplated are those which would otherwise have deserved a pardon.
Lord Steyn might have examined these points more fully, had he not been persuaded by two considerations to which he then turned that he had found the right answer.
The first was the use of the words une erreur judiciaire in the French text of the ICCPR.
In para 47 of his speech in Mullen Lord Steyn said that this was a technical expression indicating a miscarriage of justice in the sense of the conviction of the innocent.
In para 9(4) of his speech Lord Bingham expressed some unease about this, as he contrasted these words with the reference to un condamn reconnu innocent in article 626 of the French Code de Procdure Pnale.
He said that the expression une erreur judiciaire could be understood as equivalent to miscarriage of justice in its broad sense, and that it was not obviously apt to denote proof of innocence.
In In re Boyles Application [2008] NICA 35, para 11 Girvan LJ said that he considered that Lord Binghams hesitation in not accepting Lord Steyns stringent requirement of proof of innocence was justified.
In para 12 he pointed out that the term erreur judiciaire is defined by Grard Cornu in his Vocabulaire Juridique, 7th ed (1998), as une erreur de fait commise par une juridiction de jugement dans son appreciation de la culpabilit dune personne poursuivie.
In para 13 he enlarged on Lord Binghams reference to article 626 of the Code de Procdure Pnale, pointing out that it did not require proof of innocence but rather that, where a defendants conviction is quashed and he is subsequently acquitted, he is reconnu innocent in consequence in other words, the annulment of the conviction itself leads to the establishment of his innocence.
Although Mr Tam QC for the Secretary of State sought to defend Lord Steyns interpretation in his written case, he accepted in the course of Mr Owens oral argument that it was probably incorrect.
For my part, I think that Girvan LJs researches have shown that Lord Steyns understanding of the words une erreur judiciaire in the French text of article 14(6), for which he gave no authority, was mistaken.
The second consideration on which Lord Steyn relied was an observation in para 25 of an explanatory report by the Steering Committee for Human Rights appointed by the Council of Europe which accompanied the Seventh Protocol of the European Convention when it was published in November 1984: Mullen, para 48.
It said of article 3, which follows the wording of article 14(6) of the ICCPR, that the intention was that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be an acknowledgment that the person concerned was clearly innocent.
Having noted that in the introduction to the report it was stated that participation in the Protocol would not affect the application of provisions containing obligations under any other international instrument, Lord Steyn said that the explanatory report nevertheless had great persuasive value in the process of interpretation.
In para 9(4), on the other hand, Lord Bingham set out five reasons for thinking that this passage does not bear the weight that Lord Steyn attached to it.
Among those reasons are two which seem to me to be particularly significant.
First, many more states are parties to the ICCPR than to the European Convention or the Seventh Protocol, which the United Kingdom has not signed or ratified.
Second, para 25 does not appear to be altogether consistent with para 23, which suggests that a miscarriage of justice occurs where there is a serious failure in the judicial process involving grave prejudice to the convicted person.
Furthermore, as Lord Bingham noted in para 9(5), van Dijk and van Hoof, Theory and Practice of the European Convention on Human Rights, 3rd ed (1998), p 689 take a different view, suggesting that the explanatory reports interpretation is too strict and that reversal of the conviction on the ground that new facts have been discovered which introduce a reasonable doubt as to the guilt of the accused is enough.
Lord Steyn said in para 48 that the explanatory report had great persuasive value.
I think that, for the reasons Lord Bingham gives, this overstates the position.
The better view is that it lends some support the Secretary of States argument, but that it must be for the court to work out for itself what the words mean.
There was one further difficulty about Lord Steyns interpretation to which Lord Bingham drew attention in para 9(6).
This is that courts of appeal, although well used to deciding whether convictions are safe or whether reasonable doubts exist about their safety, are not called upon to decide whether a defendant is innocent and in practice rarely do so.
In R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact will be identifiable in that court and the judgment will, in virtually every case, make this plain.
I do not think that this entirely meets Lord Binghams point.
I have no doubt that there will be cases of the kind that Hughes LJ describes.
But it remains true that courts of appeal are not called upon to say whether or not a defendant was innocent, and it is at least questionable whether restricting the right to compensation to cases where the establishment of innocence is apparent from the courts judgment imposes too severe a test for the entitlement to compensation.
A fresh analysis
If one accepts, as I would do, Lord Binghams reasons for doubting whether Lord Steyn was right to find support for his reading of article 14(6) in the French text and in para 25 of the explanatory committees report on article 3 of the Seventh Protocol, one is driven back to the language of the article itself as to what the words miscarriage of justice mean.
Taken by itself this phrase can have a wide meaning.
It is the sole ground on which convictions can be brought under review of the High Court of Justiciary in Scotland: Criminal Procedure (Scotland) Act 1995, section 106(3).
But the fact that these words are linked to what is shown conclusively by a new or newly discovered fact clearly excludes cases where there may have been a wrongful conviction and the court is persuaded on this ground only that it is unsafe.
It clearly includes cases where the innocence of the defendant is clearly demonstrated.
But the article does not state in terms that the only criterion is innocence.
Indeed, the test of innocence had appeared in previous drafts but it was not adopted.
I would hold, in agreement with Lord Phillips (see para 55 above) that it includes also cases where the new or newly discovered fact shows that the evidence against the defendant has been so undermined that no conviction could possibly be based upon it.
In that situation it will have been shown conclusively that the defendant had no case to answer, so the prosecution should not have been brought in the first place.
There is an important difference between these two categories.
It is one thing to be able to assert that the defendant is clearly innocent.
Cases of that kind have become more common and much more easily recognised since the introduction into the criminal courts, long after article 14(6) of the ICCPR was ratified in 1976, of DNA evidence.
It seems unlikely that the possibility of demonstrating innocence in this way was contemplated when the test in article 14(6) was being formulated.
Watson and Crick published their discovery of the double helix in 1951, but DNA profiling was not developed until 1984 and it was not until 1988 that it was used to convict Colin Pitchfork and to clear the prime suspect in the Enderby Murders case.
The state should not, of course, subject those who are clearly innocent to punishment and it is clearly right that they should be compensated if it does so.
But it is just as clear that it should not subject to the criminal process those against whom a prosecution would be bound to fail because the evidence was so undermined that no conviction could possibly be based upon it.
If the new or newly discovered fact shows conclusively that the case was of that kind, it would seem right in principle that compensation should be payable even though it is not possible to say that the defendant was clearly innocent.
I do not think that the wording of article 14(6) excludes this, and it seems to me that its narrowly circumscribed language permits it.
The range of cases that will fall into the category that I have just described is limited by the requirement that directs attention only to the evidence which was the basis for the conviction and asks whether the new or newly discovered fact has completely undermined that evidence.
It is limited also by the fact that the new or newly discovered fact must be the reason for reversing the conviction.
This suggests that it must be the sole reason, but I do not see the fact that the appellate court may have given several reasons for reversing the conviction as presenting a difficulty.
All the other reasons that it has given will have to be disregarded.
The question will be whether the new or newly discovered fact, taken by itself, was enough to show conclusively that there was a miscarriage of justice because no conviction could possibly have been based on the evidence which was used to obtain it.
For these reasons it is plain that category 1 in Dyson LJs list (see para 83, above) falls within the scope of section 133.
I think that it is equally plain that category 4 (Lord Binghams second limb) does not, as it is taken from para 4 of Lord Binghams speech in Mullen where he was discussing what was included within the phrase wrongful convictions, not what was meant by section 133.
This leaves category 2, where the fresh evidence shows that the defendant was wrongly convicted in the sense that, had the fresh evidence been available, no reasonable jury could properly have convicted; and category 3, where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
Bearing in mind that we must form our own view as to what section 133 means, can the wording of that section on a correct understanding of article 14(6) include either or both of these categories?
I have put the words fresh evidence, which of course echo the wording of section 23 of the Criminal Appeal Act 1968 (see also section 106(3) of the Criminal Procedure (Scotland) Act 1995), into inverted commas because they depart from the words of section 133.
The statute, like article 14(6), refers to a new, or newly discovered fact, not to fresh evidence.
And it must be a fact which shows beyond reasonable doubt, or conclusively, that there was a miscarriage of justice.
Fresh evidence does not attain that status until the matter to which it relates has been proved or has been admitted to be true.
Fresh evidence that justifies the conclusion referred to in category 3 will usually not be, and certainly need not be, of that character.
If it shows that the conviction is merely unsafe, the court may order a retrial.
Under our system of trial by jury there will be no way of knowing, beyond reasonable doubt, whether it was a new or newly discovered fact that led to the acquittal.
For these reasons I would exclude category 3 from the scope of section 133.
This leaves category 2.
As Hughes LJ indicates in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1, para 40(iii), we are dealing here with a new or newly discovered fact that is identifiable as such by the Court of Appeal.
Category 2, as described in Dyson LJs list, is of course accurate as a description of what happens according to the Court of Appeals practice.
But it is too broadly framed for use as a reliable guide to what falls within the scope of section 133 read with article 14(6).
It lacks the limiting factors indicated by the words new or newly discovered fact and shows conclusively.
It may not be easy in practice to distinguish cases that fall within it from those that fall within category 3.
So in my opinion a more precise, and more exacting, formula must be found.
I am uneasy too about requiring the Secretary of State, whose function it is to administer the scheme under the statute, to apply a test which refers to what a reasonable jury would do.
This is a judgment that is best left to the courts.
While he will be guided by what the appellate court said when it reversed the conviction, he is entitled to look at the new or newly discovered fact for himself and draw his own conclusions as to its consequences so long as they are not in conflict with what the court has said in its judgment.
This brings me back to what I said in para 94 above.
For the reasons I give there I would rephrase category 2, so that it fits with the narrowly circumscribed language of article 14(6) and section 133.
I would limit it to cases where the new or newly discovered fact shows conclusively that there was a miscarriage of justice because the evidence that was used to obtain the conviction was so undermined by the new or newly discovered fact that no conviction could possibly be based upon it.
This would include cases where the prosecution depended on a confession statement which was later shown by a new or newly discovered fact to have been inadmissible because, as the defendant had maintained all along, it was extracted from him by improper means.
It may be quite impossible to say in such a case that he was, beyond reasonable doubt, innocent.
But, as the evidence against him has been completely undermined, it can be said that it has been shown beyond reasonable doubt, or conclusively, that there has been a miscarriage of justice in his case which was as great as it would have been if he had in fact been innocent, because in neither case should he have been prosecuted at all.
Retrial
Section 133(5A), which was inserted by section 61 of the Criminal Justice and Immigration Act 2008, changed the timetable as to when a persons conviction was to be taken to have been reversed in a case where a retrial is ordered.
This amendment has to be read with the amendment which was made at the same time to section 133(2) by inserting a time limit for making an application for compensation under section 133.
This is a period of two years beginning with the date when the conviction is reversed.
Section 133(5A) provides that where the person is to be subject to a new trial the conviction is not to be treated as reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial.
This provision introduces a feature of the statutory scheme which was not before the House in Mullen.
But I do not think that it affects Lord Steyns interpretation of section 133, or the qualification which I would make to it to include cases where the prosecution should never have been brought.
It is not to be taken as suggesting that compensation is payable in every case where the appellate court has ordered a new trial because it is satisfied that the conviction was unsafe in the light of fresh evidence.
What it does, as it seems to me, is to allow for the possibility that something may emerge either before or during the retrial which would require compensation to be paid.
Nor is it to be taken as suggesting that compensation is payable in every case, such as that of Mr George, where the person was acquitted at his retrial.
The tests laid down in section 133(1) must still be applied.
It is only where a new fact or a newly discovered fact shows conclusively that the person was innocent or that the prosecution should never have been brought that there will be a right to compensation.
This will not be the case where a retrial has been ordered, and it may not be apparent from the jurys verdict at the retrial.
The fact that it returned a verdict of not guilty will not be enough.
But if new facts emerge during the retrial process that have the effect of showing conclusively that the person was innocent or that the prosecution should never have been brought they can be taken into account, even though they emerged after the date when the conviction was reversed by the Court of Appeal.
New or newly discovered fact
A question that is raised in Adamss case is to whom these words are addressed.
His appeal was allowed by the Court of Appeal on the basis that, owing to inadequacies in the conduct of his case by his then legal team, there had been a failure by them to discover and make use at the trial of three pieces of important material which had been made available to them by the prosecution but of which Adams himself was not aware: [2007] 1 Cr App R 449, para 155.
In other words, this was material that was available at the trial but not used.
Could it be said that these were new or newly discovered facts? His case is that all he needed to show was that he himself was unaware of them.
They were new to him because they were not revealed to him by his legal team.
They did not have to be new, as the Secretary of State maintains, to everyone involved in the trial.
The Divisional Court (Maurice Kay LJ and Simon J) held that the Secretary of State was right to reject Adamss claim for compensation on the ground that his conviction was not quashed because of a new or newly discovered fact: [2009] EWHC 156 (Admin).
The Court of Appeal (Waller, Dyson and Lloyd LJJ) disagreed, for three reasons: [2010] QB 460, paras 14 16.
First, it was difficult to accept that those who drafted the article intended to deny compensation to a person whose conviction was reversed on the basis of material which was available to his legal team and would have shown that he was innocent.
Second, there was no need to interpret the phrase in a way that yielded such an extreme result.
Third, the focus of the language was on the convicted person.
There was no mention of his legal representatives in the article.
So compensation was not to be denied to him if facts emerged that were new to him, although they were known to his legal representatives.
I do not think that the language of article 14(6) bears this interpretation.
It seems to me that the focus of attention is on what was known or not known to the trial court, not to the convicted person.
The assumption is that the trial court did not take the fact into account because it was not known or had not been discovered at the time of the trial.
If this was attributable wholly or in part to the convicted person because he deliberately chose not to reveal what he knew to his defence team compensation must be denied to him, as the coda to article 14(6) makes clear.
But, leaving that point out of account, the only relevant questions are whether it was not available to the trial court because it was not known then at all or whether, although knowable, it had not been discovered by the time of the trial.
Material that has been disclosed to the defence by the time of the trial cannot be said to be new or to have been newly discovered when it is taken into account at the stage of the out of time appeal.
To focus on the state of mind of the convicted person goes too far.
It ignores the fact that in practice the defendants legal representatives are unlikely to have discussed with him every piece of information that they come across in the course of their preparation for and conduct of the trial.
I agree with Lord Judge that a fact is not new or newly discovered for the purposes of section 133 just because the defendant himself, who was previously unaware of that fact, ceases to be ignorant of it.
Does denial of compensation infringe the presumption of innocence?
Mr Owen submitted that a narrow interpretation of article 14(6) would conflict with the presumption of innocence in article 6(2) of the European Convention.
He relied on a series of decisions by the European Court of Human Rights which show that the presumption of innocence may be violated in particular circumstances where, following an acquittal, a court or other authority expresses an opinion of continuing suspicion which amounts in substance to a determination of guilt of the person concerned: Sekanina v Austria (1993) 17 EHRR 221; Leutscher v The Netherlands (1996) 24 EHRR 181; Rushiti v Austria (2000) 33 EHRR 1331; Weixelbraun v Austria (2001) 36 EHRR 799; Orr v Norway (Application No 31283/04) (unreported) 15 May 2008; and Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
These cases, other than Orr v Norway, were examined in Mullen by Lord Bingham in para 10 and by Lord Steyn in paras 41 44.
Mr Owen said that the reasons that Lord Steyn gave for finding these cases of no assistance on the question as to whether article 6(2) requires an expansive interpretation of article 3 of the Seventh Protocol or of article 14(6) of the ICCPR were correct but irrelevant.
Lord Bingham on the other hand said in para 10 that they were of no assistance, since Mullens acquittal was based on matters entirely unrelated to the merits of the accusation against him.
So it was open to this court to take a fresh look at the issue.
As Mr Tam for the Secretary of State pointed out, article 6(2) applies according to its own terms to the criminal process.
The Strasbourg cases show that its jurisprudence is designed to protect the criminal acquittal in proceedings that are closely linked to the criminal process itself.
In Sekanina v Austria (1993) 17 EHRR 221, para 30, for example, the court said that the voicing of suspicions regarding a persons innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits but that it was no longer admissible to rely on such suspicions once an acquittal has become final.
That was a case where the applicant had been charged with murder and remanded in custody but was subsequently acquitted at his trial.
His claim for compensation was dismissed on the ground that there were still strong suspicions regarding his guilt.
The problem was that Austrian legislation and practice linked the two questions the criminal responsibility of the accused and the right to compensation to such a degree that the decision on the latter issue could be seen to be regarded as a consequence and, to some extent, the concomitant of the decision on the former: para 22.
The court was careful to point out in para 25, however, that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol.
This distinction shows that a person might properly be refused compensation under that article, and thus under article 14(6) of the ICCPR which marches together with article 3 of the Seventh Protocol, without violating the presumption of innocence under article 6(2).
The same approach was taken in Hammern v Norway (Application No 30287/96) 11 February 2003 where the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner, by the same court sitting largely in the same formation, so as to bring the proceedings within the scope of article 6(2): para 46.
A further example of this line of reasoning is provided by Y v Norway (2003) 41 EHRR 87, where the applicant was acquitted by the High Court which then went on to refuse his claim for compensation the next day on the ground that it was clearly probable that he had committed the offences with which he had been charged.
So too in Orr v Norway (Application No 31283/04) 15 May 2008, where the High Court dealt with the acquittal and the payment of compensation to the complainant in two clearly distinct parts of its judgment, but in several places highlighted that the standard of proof for civil liability to pay compensation was less strict than for criminal liability: para 52.
This was held in para 53 to cast doubt on the correctness of the acquittal.
The principle that is applied is that it is not open to the state to undermine the effect of the acquittal.
What article 14(6) does not do is forbid comments on the underlying facts of the case in subsequent proceedings of a different kind, such as a civil claim of damages, when it is necessary to find out what happened.
The system that article 14(6) of the ICCPR provides does not cross the forbidden boundary.
The procedure laid down in section 133 provides for a decision to be taken by the executive on the question of entitlement to compensation which is entirely separate from the proceedings in the criminal courts.
As Lord Steyn pointed out in Mullen, paras 41 43, in none of the cases from Austria or Norway, nor in Leutscher v The Netherlands 24 EHRR 181, was the court called upon to consider the interaction between article 6(2) and article 3 of the Seventh Protocol.
On the contrary, the fact that the court was careful to emphasise in Sekanina v Austria, para 25 that the situation in that case was not comparable to that governed by article 3 of the Seventh Protocol is an important pointer to the conclusion that, as Lord Steyn put it in Mullen, para 44, article 14(6) and section 133 of the 1988 Act are in the category of lex specialis and that the general provision for a presumption of innocence does not have any impact on them.
A refusal of compensation under section 133 on the basis that the innocence of the convicted person has not been clearly demonstrated, or that it has not been shown that the proceedings should not have been brought at all, does not have the effect of undermining the acquittal.
Conclusions
I would dismiss the appeal by Adams on the ground that the phrase new or newly discovered fact does not encompass the material that was available to but not used at the trial by the convicted persons legal representatives.
But I would add that the second limb of the test that has been attributed to Lord Bingham because of what he said in para 4 of his speech in Mullen, on which Mr Owen relied, does not meet the requirements of article 14(6).
So, even if the material in question could be said to have been newly discovered, his case would not have entitled him to compensation under the statute.
I would allow the appeals by McCartney and MacDermott, for the reasons given by Lord Kerr.
It is not possible to say in their cases that the newly discovered facts show conclusively that they were innocent of the crimes of which they were convicted.
But it is possible to say, in the light of the newly discovered facts, that these were proceedings that ought not to have been brought because the evidence against them has been so completely undermined that no conviction could possibly be based upon it.
I would hold that their cases fall within the narrowly circumscribed language of article 14(6) and section 133 of the 1988 Act, and they are entitled to be compensated.
LADY HALE
I agree that a miscarriage of justice in section 133 of the Criminal Justice Act 1988 (see para 1 above) should be interpreted as proposed by Lord Phillips in para 55 of his judgment.
The phrase is clearly capable of bearing a wider meaning than conclusive proof of innocence.
Both the inspiration for section 133, in article 14(6) of the ICCPR (see para 6 above) and the meaning of miscarriage of justice in domestic law in 1988 support a wider meaning.
The drafters of article 14(6) rejected all attempts to confine it to proof of innocence.
In 1988, the Criminal Appeal Act 1968 permitted the Court of Appeal to dismiss an appeal if they considered that no miscarriage of justice has actually occurred (section 2(1) before its amendment by the Criminal Appeal Act 1995).
This points strongly to the meaning of miscarriage of justice as the conviction of someone who ought not to have been convicted.
The addition in section 133 of the requirement that this be shown beyond reasonable doubt (in substitution for conclusively in article 14(6)) indicates that this refers to someone who definitely should not have been convicted rather than to someone who might or might not have been convicted had we known then what we know now.
As I understand it, Lord Phillips formulation, with which both Lord Hope and Lord Kerr agree, would limit the concept to a person who should not have been convicted because the evidence against him has been completely undermined.
Unlike Lord Clarke, therefore, he would not include a person who should not have been convicted because the prosecution was an abuse of process.
I agree with Lord Phillips that the object of this particular exercise is to compensate people who cannot be shown to be guilty rather than to provide some wider redress for shortcomings in the system.
I do sympathise with Lord Browns palpable sense of outrage that Lord Phillips test may result in a few people who are in fact guilty receiving compensation.
His approach would of course result in a few people who are in fact innocent receiving no compensation.
I say a few because the numbers seeking compensation are in any event very small.
But Lord Phillips approach is the more consistent with the fundamental principles upon which our criminal law has been based for centuries.
Innocence as such is not a concept known to our criminal justice system.
We distinguish between the guilty and the not guilty.
A person is only guilty if the state can prove his guilt beyond reasonable doubt.
This is, as Viscount Sankey LC so famously put it in Woolmington v Director of Public Prosecutions [1935] AC 462, at p 481, the golden thread which is always to be seen throughout the web of the English criminal law.
Only then is the state entitled to punish him.
Otherwise he is not guilty, irrespective of whether he is in fact innocent.
If it can be conclusively shown that the state was not entitled to punish a person, it seems to me that he should be entitled to compensation for having been punished.
He does not have to prove his innocence at his trial and it seems wrong in principle that he should be required to prove his innocence now.
Of course, it is not enough that the evidence supporting his conviction has been fatally undermined.
This has to be because of a new or newly discovered fact.
On this point, I also agree with Lord Phillips, who adopts the definition contained in section 9(6) of the Criminal Procedure Act 1993 in Ireland (see para 60).
This means that the person convicted either did not know or did not appreciate the significance of the information in question.
It seems difficult to make sense of the proviso to section 133(1) unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted in any other way.
For these reasons, in agreement with Lord Phillips, I would dismiss Mr Adams appeal but allow the appeals of Mr MacDermott and Mr McCartney.
The evidence against Mr Adams has not been so undermined that no conviction could possibly be based upon it, whereas Lord Kerr has demonstrated that this is indeed the case with Mr MacDermott and Mr McCartney.
LORD KERR The appeals of Eamonn MacDermott and Raymond McCartney
Introduction
On 12 January 1979, after a trial by a judge, sitting without a jury at Belfast City Commission, Raymond Pius McCartney was convicted of two offences of murder and one of membership of the Irish Republican Army.
The two murder victims were Geoffrey Agate and Detective Constable Liam Patrick McNulty.
Mr McCartney was sentenced to life imprisonment on each of the murder counts and to five years imprisonment for the offence of membership of a proscribed organisation.
On the same date and at the same court Eamonn MacDermott was convicted of various offences including the murder of Detective Constable McNulty.
He was sentenced to life imprisonment for that offence and to various terms of imprisonment for the other offences.
The sole evidence on which Mr McCartney and Mr MacDermott were convicted consisted of written and verbal admissions that they were said to have made during interviews by police.
Both contested the admissibility of the statements, alleging that they had either been the product of ill treatment by interviewing police officers or that they had been concocted.
The admissibility of the statements was considered by the trial judge after a long voire dire hearing.
He rejected the allegations of the appellants and stated that he was satisfied that neither had been ill treated.
The judge also considered whether to exercise his residual discretion to exclude the statements from evidence if he considered it proper to do so.
He concluded that it would not be proper to do so and the statements were duly admitted.
An appeal by Mr MacDermott and Mr McCartney against their convictions was dismissed by the Court of Appeal in Northern Ireland (Jones LJ, Gibson LJ and Kelly J) on 29 September 1982.
Both spent several years in prison.
On 18 January 2006 the Criminal Cases Review Commission referred the convictions of Mr MacDermott and Mr McCartney to the Court of Appeal.
On 15 February 2007 their convictions were quashed, the Court of Appeal declaring that they had a distinct feeling of unease about their safety.
Following the quashing of their convictions by the Court of Appeal, Mr McCartney and Mr MacDermott applied to the Secretary of State for Northern Ireland for compensation under section 133 of the Criminal Justice Act 1988 on the basis that they had been victims of a miscarriage of justice.
The applications were refused.
They then sought judicial review of that decision.
The application for judicial review was rejected by Weatherup J on 25 June 2009.
An appeal against that decision was dismissed by the Court of Appeal in Northern Ireland (Morgan LCJ, Girvan LJ and Coghlin LJ) on 8 February 2010.
The appellants trials
Mr McCartney
Mr McCartneys case on trial had been that he did not make any verbal admissions and that the two written statements attributed to him had been fabricated by police officers.
He claimed that he had been ill treated before each statement had been written out.
He had refused to sign them but he had initialled the caution that appeared at the head of the first statement and had drawn a line and had written the words "end of statement" at the concluding part of the second statement.
Mr McCartney claimed that his ill treatment began during the second of a series of interviews that took place in Castlereagh Police Office between 3 and 7 February 1977.
The ill treatment continued during a number (although not all) of the succeeding interviews.
Two police officers in particular were identified by him as having been the most persistent and determined perpetrators.
He gave evidence that he had been told that they had been specially chosen in order to extract confessions from him.
The suggestion was made by Mr McCartneys counsel that proper supervision of interviews had broken down and that a concerted campaign of abuse had been conducted in order to obtain confessions that would lead to convictions.
The interviewing police officers denied that they had been guilty of any form of ill treatment.
Superior officers rejected the suggestion that there had been any lack of supervision or that particular officers were chosen in order to extract confessions.
It was accepted, however, that a new team of detectives had been selected to continue interviews with Mr McCartney on the second day of interviewing.
This new team was chosen, according to one of the senior officers in charge of interviews, because Mr McCartney, despite having shown signs of co operation on the first evening of interviews, had evinced a less co operative attitude the following day.
The detectives thus selected were those identified by Mr McCartney as his principal abusers.
During the course of Mr McCartneys trial, an application was made on his behalf for leave to call three witnesses who had been arrested at the same time as he and who had been interviewed at Castlereagh Police Office during the same period.
In the event, two of the witnesses gave evidence.
One of these was a man called John Thomas Pius Donnelly.
He had been arrested at the same time as Mr McCartney.
He was interviewed about and subsequently charged with one of the murders of which Mr McCartney was later convicted.
He was also charged with having caused an explosion.
For reasons that will appear presently, the charges against Mr Donnelly were not proceeded with and he did not stand trial.
During the trial of Mr McCartney and Mr MacDermott, Mr Donnelly gave evidence that he had been subjected to serious assaults during his interviews and had sustained significant injuries in consequence.
Although the detectives who, according to Mr Donnelly, had assaulted him, Detective Constable French and Detective Constable Newell, were not those who were alleged to have ill treated Mr McCartney, they were members of the group of officers who had been conducting interviews into the murders of Mr Agate and Detective Constable McNulty.
Detective Constable French had interviewed Mr MacDermott and had recorded the most significant statement of admission from him.
Mr MacDermott alleged that he had been assaulted by Detective Constable French and by the officer who accompanied him, Detective Constable Dalton.
This second detective had also interviewed Mr McCartney and Mr McCartney claimed to have been assaulted by him also.
On 6 February 1977, after he had been interviewed for several days, two doctors carried out a joint examination of Mr Donnelly.
One of them was a forensic medical officer, retained by the police.
No fewer than ten areas of injury on Mr Donnellys body were recorded.
Substantial bruising, particularly in the abdominal area was found.
The trial judge observed that both doctors were shocked and horrified by what they found on examination.
How Mr Donnellys injuries had been caused was the subject of acute controversy on trial.
It was trenchantly put to him by counsel for the prosecution that some had been sustained during a series of struggles while he was being taken to and from interview rooms and that the remaining injuries were self inflicted.
This was a highly significant cross examination when seen in the light of the subsequently discovered reasons that the charges against Mr Donnelly had not been proceeded with.
The decision not to proceed with the prosecution of Mr Donnelly was itself highly significant for he was alleged to have made verbal and written admissions of murder and causing an explosion.
The second witness, Hugh Brady, also gave evidence of having been assaulted during interviews which took place during the same period as those of Mr McCartney and Mr Donnelly.
One of the detectives identified by Mr Brady as having assaulted him (Detective Constable Dalton) had also interviewed Mr McCartney and, as noted at para 126 above, Mr McCartney claimed that he too had been assaulted by this officer.
Mr Brady was also found on medical examination to have multiple injuries, most notably bruising of the abdomen and a burn to his hand which he claimed had been caused by the hand being forcibly held against a hot radiator.
One of the doctors who examined him, Dr Hendron, who had been retained by Mr Bradys solicitors, concluded his medical report by saying that he had no doubt that Mr Brady had been assaulted, although he conceded during cross examination at the trial of Mr McCartney and Mr MacDermott that Mr Brady may have exaggerated.
Other doctors who examined Mr Brady believed that he had exaggerated and gave evidence to that effect.
Mr Brady did not make admissions and was not charged with any offences.
Under cross examination at the trial of Mr McCartney and Mr MacDermott it was also suggested to him that his injuries had been self inflicted.
The trial judge, MacDermott J, did not find him an impressive witness for reasons that I will turn to presently.
Mr McCartney was examined by two doctors, Dr Henderson, the Force medical officer and Dr Hendron, who attended at the request of Mr McCartneys solicitors.
The medical examination took place shortly after the tenth interview which had ended at 5.20 pm on 6 February 1977.
A linear abrasion, 1 1/4 inches long was observed in the centre of McCartney's forehead, with two further small abrasions above and below it.
Dr Hendron noted that Mr McCartneys right cheek was red and puffy.
Dr Henderson had no note of this but on the form used to record the findings on examination he wrote "claimed struck on face no evidence of any bruises".
The mark on Mr McCartney's forehead was superficial; it was considered to have been present for a couple of days and was of a type that could be caused by a finger nail.
When asked for his conclusions on the evidence, Dr Hendron stated that he had no doubt that Mr McCartney had been assaulted.
Mr MacDermott
Mr MacDermott had been arrested on 31 January 1977 and his interviews took place in Strand Road Police Station in Derry between the date of his arrest and 2 February.
He claimed that he had been beaten before making admissions and had been abused and threatened on his way to the interview room.
He also gave evidence that the principal statement of admission had been prepared by a detective officer while he, MacDermott, lay on a bed.
It was claimed that his mental resolve had been so eroded by the assaults and threats that by the time the statement was being recorded, he did not care what it contained.
Mr MacDermott was examined by a number of doctors, including his own father who was a general medical practitioner.
No significant signs of physical injury were found.
He was observed to have tenderness of the jaw and ears which, he claimed, had been areas of assault.
He also exhibited signs of anxiety tension.
Towards the end of the trial, the judge asked counsel for the prosecution about the charges against Donnelly.
He said, Am I right in saying that the position is that he was charged and then what happened? The court was informed that no evidence was being offered? Counsel for the prosecution replied, He was never returned for trial.
The charges were not proceeded with.
In a lengthy judgment the trial judge found that neither Mr McCartney nor Mr MacDermott had been ill treated as they had alleged.
Indeed, in relation to Mr McCartney, the judge declared that his certain conclusion [was] that the Crown has satisfied me beyond reasonable doubt that McCartney was not ill treated and in relation to Mr MacDermott that he was absolutely satisfied that he had not been ill treated in any way or threatened.
The judge fully accepted the evidence of the police officers denying ill treatment at all times.
In relation to Mr Donnelly, the judge said that he was satisfied that the police had not assaulted or ill treated him.
Mr Brady was condemned as a dishonest and unreliable witness whose evidence the judge found did not assist in deciding whether Mr McCartney had been ill treated.
Dr Hendron had expressed the strong opinion that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted by police officers.
MacDermott J said this about the doctors evidence: There is no doubt in my mind that Dr. Hendron believes, I am sure genuinely, that McCartney, Brady, Donnelly and others have been ill treated at Castlereagh, and such a conclusion could be reached by anyone who is prepared to form a conclusion after hearing only what might be described as one side of the case.
To my mind, Dr. Hendron's evidence throughout was coloured by this belief and lacked the professional objectivity displayed later by other doctors
Robert Barclay
On 2 January 1977 Robert Barclay was arrested and taken to Omagh Police Station where he was interviewed over a number of days by Detective Constables French and Newell (the same officers who had interviewed Mr Donnelly approximately one month later).
Mr Barclay was said to have made admissions during these interviews.
He also complained of ill treatment at the hands of both detective officers.
He alleged that they assaulted him by slapping him and punching him and that they had threatened him.
On 2 December 1977, after a trial in which he gave evidence that he had been assaulted by the officers, Mr Barclay was convicted on foot of the admissions that he had made during interview.
He appealed his convictions.
A solicitor had given evidence on his trial that when he saw Mr Barclay in court on 4 January he had a black eye.
Two doctors who had examined him while he was at Omagh Police Station found signs of injury.
On 12 April 1978, the then Lord Chief Justice of Northern Ireland, Lord Lowry, delivering the judgment of the Court of Appeal, quashed the convictions.
Although no written judgment appears to have been given, Lord Lowry was recorded as having said: It is not possible to exclude the conclusion that the injuries found on the accused were inflicted at Omagh Police Station and this renders inadmissible any statement made by him.
Subsequently, Mr Barclay brought a private prosecution against Detective Constable French and Detective Constable Newell.
In his judgment, which was delivered on 25 April 1979, the trial judge in that case accepted that there was a strong prima facie case that Mr Barclay had been assaulted.
He said that Mr Barclay had undoubtedly sustained injuries in Omagh Police Station.
He referred, however, to Mr Barclays admission that, on other occasions quite unconnected with the proceedings against the police officers, he had been dishonest.
Also, on certain matters relating to his interviews by the detectives (such as, for instance, which of them had taken the notes of the interview) Mr Barclay was found by the judge to have been inaccurate.
But the medical evidence that was called on the prosecution of the police officers was found to be consistent with Mr Barclays allegations.
The judge said, however, that he could not be certain that the injuries had occurred at the time that Mr Barclay alleged they had been inflicted.
The effect of the evidence made it unlikely that they were self inflicted but this was a possibility in the estimation of the judge.
Therefore, on the basis that there was a reasonable doubt as to their guilt, he considered that he was left with no alternative but to acquit the officers.
Although the private prosecution of Detective Constables French and Newell took place after the trial of Mr McCartney and Mr MacDermott, Mr Barclays appeal against his convictions had succeeded before their trial began.
Their trial commenced on 18 September 1978.
Of course, no reference to Mr Barclays successful appeal was made during the trial of Mr McCartney and Mr MacDermott.
There is no reason to believe that anything was known of that by those involved in their trial.
On the contrary, the fact that such a relevant circumstance was not referred to is a clear indication that nothing was known about it.
The reasons that the prosecution of John Donnelly did not proceed
In a memorandum of 29 June 1977, Mr Roy Junkin, then an assistant director in the Department of the Director of Public Prosecutions, considered the prospects of success for the prosecution of Mr Donnelly.
He concluded that a court would not accept that the statement of admission made by Mr Donnelly was voluntary.
He therefore recommended that the prosecution should not proceed.
That recommendation was accepted by Mr Junkins superior, Mr George McLaughlin, to whom the memorandum had been addressed and a direction of no prosecution was duly issued.
Mr Donnelly was interviewed about his complaint of ill treatment after being informed that the prosecution against him was not to proceed.
Following the interview, Mr Junkin considered the papers again.
In a further memorandum to Mr McLaughlin dated 6 October 1977, Mr Junkin reviewed all the evidence including that obtained from Mr Donnelly during the interview about his complaint.
He stated that he had no doubt that Donnelly was assaulted whilst in police custody at Castlereagh.
The only detective identified by Mr Donnelly was Detective Constable Newell.
He had claimed that this was the only police officer who had disclosed his name.
Since this police officer had interviewed Mr Donnelly with Detective Constable French and since Mr Donnelly had said that both Detective Constable Newell and the other officer present had assaulted him, Mr Junkin recommended that both be prosecuted for assault.
In his response to Mr Junkins recommendation, Mr McLaughlin, in a memorandum dated 10 March 1978 (6 months before the trial of Mr McCartney and Mr MacDermott began), agreed that there was no doubt that Mr Donnelly had been assaulted while in custody at Castlereagh.
But Mr McLaughlin concluded that not all of Mr Donnellys complaints were supported by findings on medical examination.
He also considered that because 8 or 9 other police officers had interviewed Mr Donnelly the prosecution would not be able to establish that any particular injury had been inflicted by Detective Constables Newell and French.
He therefore declined to accept Mr Junkins recommendation that the officers be prosecuted.
The quashing of the appellants convictions
On the hearing before the Court of Appeal of the reference by CCRC, Ms McDermott QC, appearing on behalf of Mr McCartney, submitted that if counsel for the prosecution had known the reason that the prosecution of Donnelly had been discontinued, he would not have put to him in cross examination that his injuries were self inflicted.
This submission does not appear to have been countered by counsel who appeared for the Crown on the hearing of the reference and it does not feature in the conclusions expressed by the Court of Appeal in its judgment on the reference.
At the same hearing, counsel for the appellant Mr MacDermott drew attention to what he suggested was a striking similarity between the manner in which, on Mr Donnellys account, a statement was taken from him by Detective Constable French and the way in which, according to Mr MacDermott, the most important statement of admission had been recorded from him by the same police officer.
Generally, it was submitted that if the trial judge had been aware of the reasons that Mr Donnelly had not been prosecuted (viz that an assistant director in the office of the DPP and a senior assistant director considered that he had certainly been assaulted by police officers) he would not have admitted the confession statements.
It was suggested that the judge would have formed a more favourable view of the evidence of Mr Donnelly and Mr Brady and would have considered that the police officers credibility was wholly undermined.
The Court of Appeal gave its decision on these arguments in the final paragraph of its judgment as follows: We cannot rule out the possibility that the evidence of the police officers may have been discredited by evidence that is now available.
The admission in evidence of MacDermott's confessions depended upon the acceptance by the judge of the evidence of DC French.
If the judge had known of the finding of a prima facie case in the prosecution brought by Mr Barclay against DC French he may well have reached a different conclusion.
To this is to be added the striking similarity between the description given by Donnelly and MacDermott as to the manner in which their admissions were recorded.
If the allegations by Donnelly had been supported and strengthened by the new evidence this could have served also to discredit the evidence given by the police officers in McCartney's case.
In both cases we are left with a distinct feeling of unease about the safety of their convictions based as they were on admissions and the convictions must therefore be quashed.
The challenge to the refusal of compensation
On 7 November 2007 a letter in the following terms was sent to Mr McCartneys solicitors in response to the application that they had made on his behalf for compensation under section 133 of the 1988 Act: The Secretary of State has not yet reached a decision about the application; before he does so I would like to give you the opportunity to comment in writing on the views set out below.
Under section 133 compensation is payable to an applicant where his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
Mr McCartneys convictions were, we believe, reversed within the meaning of section 133, by the decision of the Court of Appeal on 15 February 2007.
We also tend to the view that this reversal was based on a new or newly discovered fact.
However, in light of the available case law on these matters, we believe that your client has so far failed to establish that a new or newly discovered fact has shown beyond reasonable doubt that there has been a miscarriage of justice either on the basis that your client is demonstrably innocent or on the basis of a failure of the trial process.
Further representations were made on behalf of Mr McCartney.
Rejecting these, a letter dated 16 May 2008 sent on behalf of the Secretary of State, communicated his decision that Mr McCartney was not eligible under section 133.
It contained the following passage: The reasons for that decision are those as previously set out in my letter of 7 November.
In your further representations you made two main points.
Firstly, you suggest that there was a comprehensive failure to disclose material critical to Mr McCartney's defence.
The Secretary of State does not consider that anything went wrong with the investigation of the offence or in the conduct of the trial so as to result in a failure of the trial process.
Secondly, you suggest that the tape of the appeal should be listened to.
It is the written judgment of the CoA that sets out the basis for the decision that a conviction was unsafe and therefore the basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
Similar letters were sent to solicitors acting for Mr MacDermott.
These solicitors also made further representations and on 17 November 2008 a final responding letter was sent in which the following appeared: We have now considered the other points you put to us on 1 August in relation to the Boyle case [In re Boyles Application [2008] NICA 35].
The majority of the Court of Appeal in that case posed the test of whether the claimant should not have been convicted.
We do not believe that the terms of the Court of Appeal's judgment in your client's appeal mean that he should not have been convicted.
Therefore, the Boyle case does not alter the Secretary of State's decision that your client is not entitled to compensation.
Both appellants sought judicial review of the Secretary of States decision.
These applications were dismissed by Weatherup J, although it is clear that he felt that they might have succeeded if he had felt able to apply the test which, he considered, had been propounded by Lord Bingham in R (Mullen) v Secretary of State for the Home Department [2004] UKHL 18, [2005] 1 AC 1.
Weatherup J considered that there were two types of new or newly discovered fact (necessary as a prerequisite for eligibility under section 133, as explained by Lord Hope in paras 79 and 81 of his judgment).
The first was the evidence that it had been accepted by the assistant director and the senior assistant director in the DPPs office that Mr Donnelly had been assaulted and that this would have tended to throw doubt on the credibility of the police witnesses.
The second type was described by the judge in paras 23 and 24 of his judgment: 23another part of the new evidence relating to the prosecution of Donnelly concerned the manner in which his evidence was dealt with at the trial.
When Donnelly was called as a defence witness, counsel for the DPP, rather than proceeding on the position of the DPP officials dealing with the prosecution of Donnelly, adopted and put to Donnelly in cross examination the police approach rejected by those officials, namely that Donnelly had received injuries after an attack on police officers and that some injuries were also self inflicted.
Further, when the trial judge was considering the evidence of Donnelly, he asked counsel for the DPP about the absence of a prosecution of Donnelly and a complete reply was not furnished.
It is important to note that this was a non jury Diplock trial.
It is apparent that the tria1 Judge was inviting counsel to disclose, as delicately as the situation demanded, whether there was a reason for the decision not to prosecute that related to matters other than the alleged ill treatment of Donnelly, in respect of which the answer of counsel implied that there was.
The trial judge was not told that the DPP had concluded that Donnelly had been ill treated, that his confession was not to be considered as being voluntary and there was no other evidence against him.
There is no suggestion that counsel in the applicants trial had been made aware of the DPP position relating to the prosecution of Donnelly.
Had counsel for the DPP been aware of the DPPs approach to the prosecution of Donnelly two aspects of the trial would have been different.
First of all, the cross examination of Donnelly would have taken a different course and counsel would not have put to Donnelly that his injuries had been occasioned by defensive action by the police and by his own hand.
Secondly, the submission of counsel for the DPP in relation to the prosecution of Donnelly would not have rested on the bald assertion that the prosecution was not proceeded with but should have indicated the basis of the DPP decision. 24 Thus the issue of the treatment of the Donnelly evidence is not directly a matter about the credibility of the evidence given by the police officers, nor is it directly a matter about withholding disclosure from the defence.
Rather it is a matter about the conduct of the prosecution in relation to the evidence of a witness who was central to the defence challenge to the voluntariness of the admissions on which the applicants were convicted.
In light of the above discussion of the Donnelly evidence there is a basis for concluding that something had gone seriously wrong with the conduct of the trial.
This is a matter that is capable of satisfying the wider interpretation of miscarriage of justice expounded by Lord Bingham.
It is evident from these passages that Weatherup J considered that it would have been quite wrong for prosecuting counsel, had he known of the reasons that Mr Donnelly had not been prosecuted, to pursue the line of questioning that he did.
On the hearing of the appeal before this court Mr Maguire QC, who appeared on behalf of the Secretary of State for Northern Ireland, was unable to confirm that Crown counsel was unaware of the reasons that the prosecution of Mr Donnelly was not pursued but I share Weatherup Js view that this is the only possible explanation for his having cross examined Mr Donnelly as he did.
Mr Junkin and Mr McLaughlin had concluded that Mr Donnelly had been assaulted by police officers.
If that view (which was the product of extensive consideration of all the relevant material) had been communicated to prosecuting counsel, it would have been improper for him to advance a case which was quite at odds with the conclusion that had been reached by two experienced officers in the department of the Director of Public Prosecutions.
At a more fundamental level, however, it was not open to the prosecuting authority to adopt a different stance in relation to Mr Donnellys evidence according to the context in which it was being considered or, as Lord Rodger so pertinently put it during argument, to face both ways.
The decision not to prosecute Mr Donnelly on a charge of murder and one of causing an explosion when, according to police evidence, he had voluntarily admitted to both was a momentous one.
It is unsurprising that Mr Junkin and Mr McLaughlin only felt able to take that course because they were convinced that he had been assaulted by police officers.
It is simply incompatible with the prosecutions duty of fairness for a different position to be taken thereafter as to the manner in which Mr Donnellys injuries were caused unless there was fresh evidence that warranted a different view.
In this instance there was no such evidence.
Weatherup J was therefore perfectly right when he said that something had gone seriously wrong with the conduct of the trial.
Crown counsel ought to have been aware of the DPPs position on this and, if he had been, cross examination of Mr Donnelly challenging his account of how he sustained his injuries would not have taken place.
Although Weatherup J concluded that the circumstances of the reversal of the appellants convictions were capable of satisfying the test that Lord Bingham had propounded for eligibility for compensation under section 133, he felt bound to follow more recent authority in England and Wales, particularly R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36 which had expressed a clear preference for the test advocated by Lord Steyn in Mullen.
The appellants appeal against the decision of Weatherup J was dismissed by the Court of Appeal.
That court did not share Weatherup Js view that the circumstances revealed by the judgment which had quashed the appellants convictions were sufficient to satisfy Lord Binghams formulation of the correct test.
The conclusions of the court are contained in para 15 of the judgment of the Lord Chief Justice: In the second category of cases it is necessary to demonstrate that something has gone seriously wrong in the conduct of the trial resulting in the conviction of someone who should not have been convicted.
In this case the new facts upon which the appellants rely raise issues about the credibility of one police officer and one other witness.
It is not possible to come to any conclusion as to whether the new facts would have led to a different outcome in respect of the assessment of either witness.
The new evidence was sufficient to give rise to unease about the safety of the conviction but this is a case in which at its height it can only be said that the appellants might not have been convicted.
Such a case lies outside either of the categories identified by Lord Bingham.
That is also the reasoning of the decision in Boyles Application [2008] NICA 35 by which we are bound.
Should the appellants have been acquitted?
In re Boyles Application [2008] NICA 35 was an appeal in which the appellant claimed entitlement to compensation under section 133 and the ex gratia scheme which was then still extant.
Some years after the appellants conviction a note taken of one of a series of interviews had been shown by electrostatic detection apparatus (ESDA) testing techniques to have been made at a time other than that claimed by police officers.
Another version of the note for that single interview existed, contrary to the denials of the interviewing police officers.
The differences were not substantial and nothing which was inculpatory of the appellant had been written in to the version of the notes that had been presented to the court and which the police officers claimed was the only note of the interview.
Nevertheless, because the police officers had firmly denied that a different version had been prepared and because that had been shown to be incorrect, it was considered that doubt had been thrown on their credibility and the appellants conviction could not be regarded as safe.
In dismissing Mr Boyles appeal against the finding that he was not eligible to apply for compensation under section 133, the Court of Appeal said at para 22: it is impossible for the appellant to assert that he should not have been convicted.
One can certainly say that the police officers should not have given the evidence that they did.
One may even say with confidence that the trial judge is bound to have taken an entirely different view of their credibility from the extremely favourable impression that he appears to have formed.
But it is impossible to conclude that the appellant would not have been found guilty (much less that he should have been acquitted) if evidence of the other version of the interview notes had been given.
The circumstances in the Boyle case were obviously and markedly different from those that arise in the present appeals of Mr McCartney and Mr MacDermott.
The most that could be said in Boyle was that the newly discovered fact (that there was a different version of the notes of a single interview) cast doubt on the credibility of the police officers who asserted to the contrary.
By contrast, although the Court of Appeal which quashed Mr McCartneys and Mr MacDermotts convictions expressed itself in a restrained fashion, there is simply no doubt that these appellants ought not to have been convicted.
For the reasons that I have given, it was not open to prosecuting counsel to challenge Mr Donnellys account that he had been assaulted by police officers.
I am satisfied that he would not have done so if he had been aware of the true circumstances in which the decision not to continue with the prosecution of Mr Donnelly had been taken.
Mr Donnellys evidence that he had been assaulted would therefore have been received without challenge.
That evidence, if uncontradicted, is bound to have changed the entire course of the trial.
It could not have done less than establish the reasonable possibility that Detective Constable French had assaulted Mr Donnelly and that he had recorded a statement purporting to come from him but which was not given at Mr Donnellys dictation.
When those inevitable findings were brought to bear on Mr MacDermotts case they could not have done other than create a doubt as to the voluntariness of his admissions.
Section 8(2) of the Northern Ireland (Emergency Provisions) Act 1978 was in force at the date of the trial.
It provided: If, in any such proceedings [ie criminal proceedings for a scheduled offence] where the prosecution proposes to give in evidence a statement made by the accused, prima facie evidence is adduced that the accused was subjected to torture or to inhuman or degrading treatment in order to induce him to make the statement, the court shall, unless the prosecution satisfies it that the statement was not so obtained (a) exclude the statement, or (b) if the statement has been received in evidence, either (i) continue the trial disregarding the statement; or (ii) direct that the trial shall be restarted before a differently constituted court (before which the statement in question shall be inadmissible).
The trial judge had reminded himself of this provision at the beginning of his judgment.
He said that the appellants had raised a prima facie case as required by the section and that, in those circumstances, the burden passes to the Crown to satisfy me beyond reasonable doubt that the statement, whose admissibility is challenged, was not obtained by ill treatment.
In other words, a prima facie case of ill treatment having been established the burden rests squarely on the Crown of satisfying me (and by that I mean satisfying me beyond reasonable doubt) that the accused was not ill treated.
In making these observations the trial judge was reflecting the well known statement of the law in this area provided by Lowry LCJ in R v Hetherington [1975] NI 164, 168 where he said: It is not for the defence to prove but for the prosecution to disprove beyond reasonable doubt in relation to each accused that he was not subject even to any degrading treatment in order to induce him to make a statement on which the Crown rely, the decision under section 6(2) [the precursor of section 8(2) of the 1978 Act] must be based solely on how the statement is proved to have been obtained and not on whether it was true.
The prosecution would therefore have had to prove beyond reasonable doubt that the statements made by Mr McCartney and Mr MacDermott had not been obtained by any degrading treatment whatever.
It can now be seen that this would have been an impossible task had the full facts and circumstances come to light.
A person detained at the same time as Mr McCartney had been assaulted while in Castlereagh Police Office during the same period; the police officers who carried out the assaults on Mr Donnelly were part of the group of officers who were investigating the murders with which Mr McCartney was charged; one of the officers who had assaulted Mr Donnelly had been accused by Mr MacDermott of assaulting him; and the other officer who, according to Mr MacDermott, had assaulted him, had also interviewed Mr McCartney and had been accused of assault by him.
Quite apart from these considerations, two further factors of substantial importance must be taken into account.
Firstly, by the time that Mr McCartney and Mr MacDermott stood trial, Mr Barclays conviction, based on statements of admission allegedly obtained by Detective Constable French and Detective Constable Newell on interview, had been quashed.
If the trial judge had been aware that this conviction had been quashed because the possibility that Mr Barclay had been assaulted by these two officers could not be excluded (which was the necessary implication from the finding of the Court of Appeal) he could not have concluded with the same firmness that he did that Detective Constable French had not engaged in ill treatment of Mr MacDermott.
Secondly, once it was established, even as a reasonable possibility, that Mr Donnelly had been assaulted, the judges view of Dr Hendrons evidence could not have remained as he had expressed it in his judgment.
Dr Hendron had stated unequivocally that he was convinced that Mr McCartney, Mr Donnelly and Mr Brady had been assaulted.
The judge found that this opinion was sincerely held but that Dr Hendrons evidence was coloured by his conviction that the men had been attacked and on that account his testimony lacked professional objectivity.
If it had become known that the doctors view about Mr Donnelly was shared by an assistant director and a senior assistant director in the department of the Director of Public Prosecutions, it is not likely that his opinion would have been dismissed in the manner that it was by the trial judge.
The combined effect of all these factors makes it inevitable, in my opinion, that, had the judge been fully acquainted with all the material information about the reasons for the decision not to continue the prosecution of Mr Donnelly and the circumstances of the quashing of Mr Barclays convictions, he would not have convicted the appellants.
Should the appellants have been prosecuted?
Not only should the appellants have been acquitted, in my opinion they should not have been put to their trial.
If prosecuting counsel had become aware of the shadow that necessarily fell on Detective Constable Frenchs evidence by the decision not to proceed with the prosecution of Mr Donnelly and by the quashing of Mr Barclays conviction, it is, in my view, inevitable that he could not have proffered this officer as a witness of truth on the issue of whether Mr MacDermott had been ill treated.
Moreover, the conclusion of Mr Junkin and Mr McLaughlin that Mr Donnelly had been assaulted cast significant doubt on the evidence of the entire interviewing team.
Although Mr McLaughlin considered that there was insufficient evidence to charge Detective Constables French and Newell, he was of the clear view that Mr Donnelly had been physically attacked by some police officers.
It was therefore the case that the office of the Director of Public Prosecutions had determined that some officers within the team that conducted interviews of Mr Donnelly, Mr Brady and Mr McCartney had been guilty of assault on Mr Donnelly.
Mr Brady alleged that he had been assaulted in much the same manner as Mr Donnelly had been.
Despite this, he had not made admissions.
He had no personal advantage to gain by fabricating his account of the attacks on him.
The trial judge found, however, that he was prepared to do so in order to help a friend (Mr McCartney) and because of his animus towards the police.
I cannot believe that the judge would have reached that view if he had known that the DPP had concluded that Mr Donnelly had been assaulted and that Mr Barclays conviction had been quashed because of the reasonable possibility that two members of the same interviewing team had also assaulted him.
Likewise, I cannot believe that if experienced Crown counsel had been aware of these matters he would have done other than advise that the prosecution of Mr McCartney and Mr MacDermott should not proceed.
That prosecution was only viable if there was a realistic prospect of the Crown establishing beyond reasonable doubt that Mr McCartney and Mr MacDermott had not been ill treated.
Any objective assessment of all the circumstances as they are now known was bound to have resulted in the conclusion that there was no such prospect.
In reaching this view I intend no criticism whatever of counsel who, for the reasons that I have given, must have been wholly unaware of why it had been decided not to prosecute Mr Donnelly.
He must also have been ignorant of the fact that Mr Barclays conviction had been quashed and of the circumstances in which that had occurred.
A fortiori, no criticism of the trial judge is warranted.
On the contrary, he made what in retrospect was an astute and pertinent inquiry as to why Mr Donnelly had not been prosecuted and was not given the information which, if it had been provided, would certainly have led to a completely different outcome.
While it might be said that the assistant director and the senior assistant director in the department of the Director of Public Prosecutions ought to have been alive to the impact that their conclusion about the assaults on Mr Donnelly was bound to have on the propriety of proceeding with the prosecution of Mr McCartney and Mr MacDermott, there is no reason to suppose that they were aware of the quashing of Mr Barclays convictions or of the evidence of Mr Brady.
Neither is discussed in the exchange of memoranda between Mr Junkin and Mr McLaughlin.
These are matters which have played a significant part in leading me to the conclusion that the prosecution of Mr McCartney and Mr MacDermott ought not to have taken place.
In deciding that the appellants ought not to have been convicted and, indeed, ought not to have been required to stand trial, I have gone beyond the findings of the Court of Appeal which quashed their convictions.
On one reading, the letter of 16 May 2008 sent on behalf of the Secretary of State suggests that the judgment of the Court of Appeal provides the exclusive basis on which the Secretary of State decides if the conditions for statutory compensation are fulfilled.
And much was made in the course of argument of an answer given by Earl Ferrers in the course of the passage through the House of Lords of the Bill which ultimately became the 1988 Act.
Earl Ferrers answer was to the effect that the Secretary of State would regard the Court of Appeals view as to whether there had been a miscarriage of justice as binding.
In my opinion, the decision as to whether the statutory conditions have been fulfilled is one for the Secretary of State to make and he may not relinquish that decision to the Court of Appeal.
True, of course, it is that the material on which the decision is taken will derive in most cases from the judgment of the Court of Appeal.
True it also is that it would not be appropriate for the Secretary of State to depart from the reasoning that underlies that judgment unless for good reason it is shown to be erroneous but the Secretary of State must make his own decision based on all relevant information touching on the question whether there has been a miscarriage of justice.
In the present appeals, Weatherup J considered that it was open to him to examine the question whether there had been a miscarriage of justice not merely by reference to what the Court of Appeal had said but by taking into account the circumstances revealed by its judgment.
At para 20 of his judgment he said: Counsel for the respondent contends that there is nothing in the judgment of the Court of Appeal indicating that the applicants should not have been convicted.
It should not be expected that a Court of Appeal will state in terms that an appellant should not have been convicted.
The approach of the Court of Appeal on an appeal against conviction is concerned with whether that conviction is unsafe.
In taking the cue from the Court of Appeal in determining a successful appellants entitlement to compensation it is necessary to have regard to the circumstances set out in the judgment of the Court of Appeal as well as the wording adopted in the judgment in relation to the position of the appellant.
I agree with these observations and they appear, implicitly at least, to have been approved by the Court of Appeal.
As Weatherup J stated, the task of the Court of Appeal is not to decide whether the appellant should have been convicted, much less to determine whether the appellant is innocent.
It is to decide whether the conviction is safe.
The decision whether there has been a miscarriage of justice (whatever meaning is to be given to that phrase) of necessity takes place on a different basis and on foot of consideration of issues beyond those which sound only on whether the conviction is safe.
Section 133
As Lord Hope has said, it has been possible until now for courts to avoid a final resolution of the question of what is required in order to establish entitlement to compensation under section 133 of the 1988 Act.
Must a person whose conviction has been reversed as the result of a new or newly discovered fact show that he was innocent (Lord Steyns view in Mullen) or can eligibility arise in somewhat wider circumstances (Lord Binghams provisional opinion)? These appeals require this court to confront that debate and to resolve that conflict.
For the reasons given by Lord Hope and Lord Clarke, with which I agree, the analysis of Lord Bingham in Mullen as to the possible scope of section 133 is to be preferred to that of Lord Steyn.
I cannot accept that the section imposes a requirement to prove innocence.
In the first place, not only does such a requirement involve an exercise that is alien to our system of criminal justice, that system of justice does not provide a forum in which assertion of innocence may be advanced.
An appeal against conviction heard by the Court of Appeal Criminal Division is statutorily required to focus on the question whether the conviction under challenge is safe.
In a number of cases, evidence may emerge which conclusively demonstrates that the appellant was wholly innocent of the crime of which he or she was convicted but that will inevitably be incidental to the primary purpose of the appeal.
The Court of Appeal has no function or power to make a pronouncement of innocence.
It may observe that the effect of the material considered in the course of the appeal is demonstrative of innocence but it has no statutory function to make a finding to that effect: R v McIlkenny (1991) 93 Cr App R 287.
It is therefore not surprising that in New Zealand when the Law Commission proposed that a prerequisite of establishing entitlement to compensation for a wrongful conviction was proof of innocence, it was careful to recommend that a tribunal be set up in which that issue could be frankly addressed and confidently determined: see New Zealand Law Commission Report No 49 (1988) Compensating the Wrongly Convicted paras 124 127 and 136 137.
In Canada in 1988 Federal/Provincial Guidelines on Compensation for Wrongly Convicted and Imprisoned Persons likewise required that there be proof of innocence in order to qualify under the ex gratia scheme operated there.
In the case of Dumont v Canada (Communication 1467/2006, 21 May 2010) the UN Human Rights Committee held that the failure of the state authorities to establish a procedure for conducting an investigation to examine whether the applicant was innocent and to possibly identify the real perpetrator constituted a breach of article 2(3) of ICCPR read in conjunction with article 14(6).
Article 2(3)(a) requires that state authorities provide an effective remedy in the form of access to a procedure in which adequate compensation can be claimed.
The respondents in this case rely on the experience in New Zealand and Canada in support of their argument that a miscarriage of justice within the meaning of article 14(6) of the Covenant occurs only when the convicted person is in fact innocent of the offence with which he is charged.
The Human Rights Committee in Dumont, while recording the states submission to that effect, reached its decision without adjudicating on it.
The New Zealand Law Commissions report does not suggest that article 14(6) must be given that meaning.
On the contrary para 71 of the report states that article 14(6) while an important normative statement by the international community and a reference point for domestic compensation schemes was not relied on as a model for the Commissions recommended scheme.
There was no unanimity as to the meaning to be given to miscarriage of justice among the delegates who were involved in the negotiations which led to the adoption of ICCPR: see para 9(2) of Lord Binghams speech in Mullen.
As he observed, it is possible that the expression commended itself because of the latitude in interpretation which it offered.
Or, as the New Zealand Law Commission put it, it is a normative statement which provides a general template for domestic provisions in the subscribing states which can vary as to content.
Certainly, while the travaux prparatoires may be regarded as neutral on the meaning of the expression, it is unquestionably clear from these that every proposal that its ambit should be confined to compensating those whose innocence was established was roundly defeated.
Against that background, it would be a surprising conclusion that article 14(6) had the very effect that a majority of delegates clearly did not intend.
The twin theses on which Lord Steyn relied to support his conclusion that proof of innocence was required in order to establish entitlement to compensation under section 133 have been subject to scrupulous examination in paras 93 and 94 of Lord Hopes judgment.
For the reasons that appear there, with which I fully agree, these arguments can no longer be regarded as sound.
I also agree with Lord Clarkes reasons for rejecting Lord Steyns formulation of the test.
As Lord Clarke has pointed out, if Parliament had intended that a proof of innocence test was to be preferred, that could surely have been easily prescribed.
The debate as to whether such a test was appropriate had been extensively referred to in the travaux prparatoires and it is to be presumed that Parliament was aware of this when it came to enact section 133.
Confining the application of the section to those who could show that they were innocent was, in any event, a perfectly obvious option.
The failure to articulate that test in the legislation can only be explained on the basis that Parliament decided not to choose that option.
This conclusion is fortified by the consideration that the expression miscarriage of justice, although its meaning may vary according to context, is a very familiar one in our system of law.
In no other context has it been used to connote proof of innocence.
I am therefore satisfied that proof of innocence cannot be the criterion on which entitlement to compensation under section 133 is to be determined.
Rejection of this hypothesis brings with it the need to determine how miscarriage of justice is to be interpreted.
As Lord Hope has said, a fresh analysis is required and for the reasons that he gives the answer is not necessarily provided by the speech of Lord Bingham in Mullen.
The use of the word conclusively in article 14(6) of ICCPR and the expression beyond reasonable doubt lends support to the view that the section does not contemplate that all whose convictions have been quashed and who satisfy the other requirements of the section will be entitled to compensation.
On this there is no dispute between the parties to these appeals.
Lord Hope has proposed that the section should be interpreted as targeting those cases where, as a consequence of the state of affairs revealed by the new or newly discovered fact, it can be concluded that no prosecution ought to have taken place.
Lord Clarke prefers to define the category of eligibility as extending to those cases where the new or newly discovered fact leads inexorably to the conclusion that no jury, properly directed, would have convicted.
As a matter of practical experience, there may be little difference as to which of these tests should be applied.
But it is important that, if possible, clear guidance be given by this court as to the circumstances in which the section should be held to apply.
Lord Hope has pointed out that requiring the Secretary of State to apply a test which refers to what a reasonable jury would do is not appropriate since this is a matter best left to the courts.
Lord Clarke, on the other hand, suggests that a test which requires the Secretary of State to focus on whether the claimant should never have been prosecuted runs the risk of the inquiry wrongly focusing on the propriety of the decision to prosecute by reference to the circumstances that obtained when the decision was taken.
There is substance in both concerns.
I believe that a simple test can cater for these concerns and will also faithfully reflect the intention of article 14 (6) and section 133 that only truly deserving applicants should be included in the compensatory scheme.
The test which I would have proposed was: whether, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that the applicant should not have been convicted.
Lord Phillips has suggested that the test should be worded in the following way: the new fact shows that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
This appears to me to achieve the same result as the test which I would have proposed and I am therefore quite content to subscribe to his formulation.
The proper application of either test ties entitlement to compensation firmly to the true factual situation.
Procedural deficiencies that led to irregularities in the trial or errors in the investigation of offences will not suffice to establish entitlement to compensation.
A claimant for compensation will not need to prove that he was innocent of the crime but he will have to show that, on the basis of the facts as they are now known, he should not have been convicted or that conviction could not possibly be based on those facts.
Of course, if innocence can be proved, the test, on either formulation, will be amply satisfied.
The adoption of a single, simple test dispenses with the need to consider possible categories of entitlement which, I believe, tends more to confuse than to enlighten.
As it happens, although it is possible to construct from Lord Binghams observations a fourth category of case beyond the three that were identified by Toulson LJ in giving permission to appeal in the Adams case, I do not believe that Lord Bingham intended that this be considered a freestanding category.
New or newly discovered fact
I find myself in complete agreement with the reasoning of Dyson LJ on this issue in the judgment of the Court of Appeal in Adams [2010] QB 460, paras 14 16 and with what Lord Phillips has had to say on the matter in paras 59 63 of his judgment.
The newly discovered limb of the requirement clearly, to my mind, connotes discovery by the party who prays it in aid to demonstrate that he should not have been convicted.
It would be wholly anomalous, as Dyson LJ has pointed out, that a person whose innocence can be conclusively proved, should be deprived of compensation simply because his lawyers failed to communicate the vital information or failed to grasp its significance.
Does denial of compensation infringe the presumption of innocence?
Lord Hope has dealt comprehensively with the arguments made by the appellants on this issue in paras 108 to 111 of his judgment.
I agree with his reasons for rejecting the arguments.
There is nothing further that I could usefully say on the topic.
Conclusions
I would allow the appeals of Mr McCartney and Mr MacDermott.
For the reasons that I have given, I am satisfied that, on the facts as they are now known, they should not have been convicted.
As it happens, I am also satisfied that they ought not to have been prosecuted and their cases therefore fulfil the requirement that Lord Hope has formulated.
Clearly they also satisfy the test preferred by Lord Clarke of being cases in which no reasonable jury, properly directed, could convict.
Like Lord Phillips and Lord Hope I consider that both are entitled to be compensated under section 133.
Although I would hold that the material on which Mr Adams relied constituted a newly discovered fact, I do not consider that he has demonstrated that, on the facts as they now stand revealed, it can be concluded beyond reasonable doubt that he should not have been convicted.
I would dismiss his appeal.
LORD CLARKE
Introduction
I gratefully adopt Lord Hopes description of the background to the introduction of the statutory right to compensation for miscarriages for justice in section 133 of the Criminal Justice Act 1988 in the light of article 14(6) of the ICCPR.
He has set out the relevant provisions of section 133 and article 14(6).
I shall not therefore repeat them.
The principal issues for decision in this appeal are the meaning of the expressions miscarriage of justice and new or newly discovered fact in those provisions.
Miscarriage of justice
The meaning of this expression has been considered in a number of cases as described by Lord Hope.
I agree with him that it is helpful to consider its meaning in the present context by reference to the categories identified by Toulson LJ when giving permission to appeal to the Court of Appeal in the Adams appeal which are described by Dyson LJ [2010] QB 460, at para 19 of his judgment which is quoted in full by Lord Hope.
Dyson LJ described the categories of case thus: A category 1 case is where the court is sure that the defendant is innocent of the crime of which he has been convicted.
An obvious example is where DNA evidence, not obtainable at the time of trial, shows beyond doubt that the defendant was not guilty of the offence.
A category 2 case is where the fresh evidence shows that he was wrongly convicted in the sense that, had the fresh evidence been available at the trial, no reasonable jury could properly have convicted.
An example is where the prosecution case rested entirely on the evidence of a witness who was put forward as a witness of truth and fresh evidence undermines the creditworthiness of that witness, so that no fair minded jury could properly have convicted on the evidence of that witness.
It does not follow in a category 2 case that the defendant was innocent.
A category 3 case is where the fresh evidence is such that the conviction cannot be regarded as safe, but the court cannot say that no fair minded jury could properly convict if there were to be a trial which included the fresh evidence.
The court concludes that a fair minded jury might convict or it might acquit.
There is a fourth category of case to which Lord Bingham referred in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1.
This is where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who should not have been convicted.
The respondents say that there is only a miscarriage of justice within the meaning of article 14(6) and section 133 in a category 1 case.
They say that the provision that the new or newly discovered fact must show conclusively (in article 14(6)) or beyond reasonable doubt (in section 133(1)) that there has been a miscarriage of justice points to the conclusion that it is only where the claimant can prove his innocence that there has been a miscarriage of justice.
The appellants say, by contrast, that the words conclusively and beyond reasonable doubt do not inform the meaning of miscarriage of justice but only indicate the standard of proving the miscarriage of justice, once its meaning has been established.
They say that if the Court of Appeal allows an appeal in any of the three categories of case there will have been a miscarriage of justice, unless the claimant is convicted at a retrial.
Another possibility is, of course, that section 133 applies in a category 1 and a category 2 case, but not to a category 3 case.
Category 1 proof of innocence
I turn first to the question whether the expression miscarriage of justice is confined to the case where the claimant can prove beyond reasonable doubt that he was innocent.
This was of course the view espoused by Lord Steyn in Mullen.
Lord Bingham expressed a different view in that case, albeit without reaching a firm conclusion, and Lord Hope has taken a different view in this case.
I agree with him.
To my mind there is nothing in either the language or the context to limit the meaning of miscarriage of justice to the case where the claimant can prove that he was innocent.
If that is so, it is not for the court to limit the meaning because its own view is that it would be desirable to do so as a matter of policy.
Such matters of policy are for Parliament and not for the courts.
It is common ground that the expression is capable of a broader meaning than that espoused by Lord Steyn.
For reasons which I explain below, to my mind the natural meaning is broader, but I will begin with the context because I appreciate that, as has famously been said, context is everything.
The context of section 133 is of course article 14(6).
Both Lord Steyn and Lord Bingham considered the travaux prparatoires in Mullen.
In para 9(2) of his speech Lord Bingham said this: The House was referred to the travaux prparatoires of the negotiations which culminated in adoption of the ICCPR.
It is plain that some delegates contended that compensation should not be paid save to those who were shown to be innocent, and such delegates found no difficulty in expressing this very simple principle.
But it is equally plain, as Mr Pleming submitted, that every proposal to that effect was voted down.
The travaux disclose no consensus of opinion on the meaning to be given to this expression.
It may be that the expression commended itself because of the latitude in interpretation which it offered.
It is common ground that the expression miscarriage of justice in article 14(6) and therefore section 133(1) should if possible be given an autonomous meaning.
Although the travaux are far from conclusive, they do seem to me to point the way because, as Lord Bingham put it, every proposal that innocence should be the test was turned down.
So, if the expression is to be given an autonomous meaning, it cannot be limited to cases where innocence can be shown.
It follows that I do not agree with Lord Steyns view that the travaux do not assist in any way.
On the contrary, they assist on the first question in this appeal, namely whether proof of innocence should be the test.
I agree with Lord Steyn (at para 35) that there is no foundation in the language of article 14(6) and section 133, or by reference to any relevant external aids to construction, for the suggestion that Parliament intended to use the words miscarriage of justice in any wider sense than it bears in article 14(6) and that Parliament intended to give effect to the United Kingdoms international obligations in article 14(6) and no more.
I would add and no less.
Parliament used the same or almost the same language, so that there is to my mind no warrant for holding that it intended to confer narrower rights to compensation than those afforded by article 14(6).
As Lord Hope observes at para 91, Lord Steyn correctly said at para 45 that both article 14(6) and section 133 show that there was no overarching purpose of compensating all who are wrongly convicted.
This is demonstrated by the fact that compensation only arises at all in the case of appeals out of time and by the indispensable pre condition that a new or newly discovered fact shows conclusively (or beyond reasonable doubt) that there has been a miscarriage of justice.
So, for example, in the case of a recognition that an earlier dismissal of an appeal was wrong, the case falls outside article 14(6).
That is so, however palpable the error in the first appellate decision may have been, and however severe the punishment that the victim suffered unjustly.
As Lord Steyn put it, those considerations demonstrate that the fundamental right under article 14(6) was unquestionably narrowly circumscribed.
Para 46 is the only paragraph in which Lord Steyn focuses on the relevant language.
In it, as Lord Hope explains at paras 91 and 92, Lord Steyn focused on the language of article 14(6) and section 133, and in particular on the use of conclusively and beyond reasonable doubt respectively.
He said that that language filters out cases where it is only established that there may have been a wrongful conviction and cases where it is only probable that there has been a wrongful conviction.
He observed that those two categories would include the vast majority of cases where an appeal is allowed out of time.
He concluded that those considerations militated against an expansive interpretation of miscarriage of justice and ultimately held that: While accepting that in other contexts a miscarriage of justice is capable of bearing a narrower or wider meaning, the only relevant context points to a narrow interpretation, viz, the case where innocence is demonstrated.
I accept that the language points to a narrow construction but not that it is restricted to the case where innocence is demonstrated.
Indeed, to my mind Lord Steyn did not point to any reason why the right to compensation should be so confined.
There is nothing in the language or the context to lead to the conclusion that cases in category 2 should be excluded.
Yet the expression miscarriage of justice naturally includes such a case.
Indeed it seems to me to be the paradigm case.
A criminal trial is concerned (and concerned only) with the question whether the prosecution has proved beyond reasonable doubt to the satisfaction of the jury that the defendant is guilty of the offence charged.
If the new or newly discovered fact shows that, in the light of it, no reasonable jury, properly directed, could have convicted the accused, to my mind his conviction would, in ordinary language, be a miscarriage of justice.
I see no reason why such a case should not be a miscarriage of justice within the meaning of article 14(6) or section 133(1).
None of Lord Steyns reasoning leads to the conclusion that it is not.
He himself did not address this possibility.
In paras 91 to 95 Lord Hope has given his reasons for disagreeing with Lord Steyn that innocence must be proved.
I agree with them.
I would very briefly summarise my own reasons (in addition to those already given) in this way. (a) (b) If Parliament had intended to limit miscarriages of justice to cases where the claimant could prove innocence, it would have been easy to say so.
As Lord Bingham put it in Mullen at para 9(2) quoted above, those delegates who wished to limit compensation in that way found no difficulty in expressing this very simple principle.
In para 9(1) Lord Bingham noted that when what was to become section 133 was debated in the House of Lords, the minister, Earl Ferrers, was pressed by Lord Hutchinson QC to say whether a miscarriage of justice connoted the innocence of a defendant or the raising of a doubt about his guilt, but the minister said nothing to suggest that compensation would be payable only to the innocent: Hansard (HL Debates), 22 July 1988, cols 1631 1634. (c) Lord Steyns reliance upon the words une erreur judiciaire in the French text of article 14(6) was unsound for the reasons given by Lord Hope at para 93. (d) The five reasons given by Lord Bingham in para 9(4) of Mullen for thinking that reliance upon para 25 of the explanatory report prepared by a committee of experts on human rights with reference to article 3 of the Seventh Protocol was not of the persuasive value which Lord Steyn identified are convincing: see Lord Hope at para 94. (e) Little assistance is to be gained from either the jurisprudence of the United Nations Human Rights Committee or academic opinion. (f) Courts of appeal are not called upon to decide whether defendants are innocent: see Lord Bingham at para 9(6) and Lord Hope at para 95.
If, as I believe is the case, Lord Steyns test is too narrow, the question arises what is the correct construction of the expression miscarriage of justice in this context.
I will consider the possibilities in turn.
Category 2 no reasonable jury properly directed could convict
Category 2 would of course include category 1, but not vice versa.
Mr Owen QC submitted that cases in this category would involve a miscarriage of justice, although he also sought to include category 3, to which I will return.
I have already expressed my view that there is nothing in the language or context of article 14(6) or section 133 to exclude category 2 and that the expression naturally includes it.
Absent any clear indication in the language or context, it is to my mind permissible to have regard to the approach to it within the United Kingdom.
In 1988 the Court of Appeal in England and Wales determined criminal appeals by reference to the unamended section 2(1) of the Criminal Appeal Act 1968.
The proviso to that subsection provided that, notwithstanding that the Court of Appeal were of the opinion that the point raised in the appeal might be decided in favour of the appellant, they may dismiss the appeal if they consider that no miscarriage of justice has actually occurred.
In R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 the Court of Appeal (Sir Thomas Bingham MR, Farquharson and Simon Brown LJJ) dismissed an appeal from an order of the Divisional Court refusing judicial review of a decision refusing the appellant compensation under section 133.
He had been convicted of several counts of receiving stolen goods and sentenced to six years imprisonment.
He had appealed to the Court of Appeal on the ground that he had been convicted on the basis of evidence in statement form given by witnesses from New Zealand.
His appeal failed.
Some time later his case was referred back to the Court of Appeal under section 17 of the Criminal Appeal Act 1968.
This time his appeal succeeded on what was essentially the same ground as that which had failed before and his convictions were quashed.
In the Court of Appeal he argued inter alia that the second Court of Appeal must have regarded his conviction as a miscarriage of justice because they would otherwise have applied the proviso.
Sir Thomas Bingham (with whom the other members of the court agreed) said this: Therefore, it follows, he says, that he is a victim of a miscarriage of justice and from that it follows that he is entitled to compensation.
To deny him compensation is, he argues, to undermine his acquittal and the presumption of innocence which flows from the fact that his convictions have been quashed.
I am, for my part, unable to accept that argument, although I hasten to assure Mr Bateman that in doing so I have no intention whatever to undermine the effect of the quashing of his convictions.
He is entitled to be treated, for all purposes, as if he had never been convicted.
Nor do I wish to suggest that Mr Bateman is not the victim of what the man in the street would regard as a miscarriage of justice.
He has been imprisoned for three and a half years when he should not have been convicted or imprisoned at all on the second decision of the Court of Appeal (Criminal Division).
The man in the street would regard that as a miscarriage of justice and so would I.
But that is not, in my judgment, the question.
The question is whether the miscarriage of justice from which Mr Bateman has suffered is one that has the characteristics which the Act lays down as a pre condition of the statutory right to demand compensation.
That, therefore, is the question to which I now turn.
The Master of the Rolls then held that there was no new or newly discovered fact, so that Mr Bateman could not satisfy the relevant criteria under section 133.
The relevance of the statement quoted above is that it supports the conclusion that the Master of the Rolls accepted that there had been a miscarriage of justice within the meaning of section 133, which in turn supports the conclusion that that expression is not limited to cases in which the claimant can prove his innocence.
It is perhaps the forerunner of Lord Binghams approach in Mullen.
A similar conclusion can be drawn from the terms of section 106, of the Criminal Procedure (Scotland) Act 1995, which sets out the test for criminal appeals in Scotland.
By subsection (3) it provides: By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice, which may include such a miscarriage based on (a) subject to subsections 3A to 3D below, the existence and significance of evidence which was not heard at the original proceedings; and (b) the jurys having returned a verdict which no reasonable jury, properly directed, could have returned.
It can thus be seen that a miscarriage of justice for the purposes of a fresh evidence appeal in Scotland includes the case where the jurys verdict is one which no reasonable jury, properly directed, could have returned.
That is of course a category 2 case.
Section 106(3) is thus an example of the expression miscarriage of justice being used in a very similar context to that with which we are concerned.
It has been suggested that to include category 2 within the test of miscarriage of justice in section 133 would cause difficulties of application.
For my part, I would not accept that suggestion.
It is a test used at the end of the prosecution case in countless criminal trials in England and Wales.
Moreover, it is used in the Court of Appeal in England and Wales.
While it is not the question for decision in an English appeal because the question is now simply whether the conviction is safe, it is plainly relevant when a retrial is sought.
The Court of Appeal would not make an order for a retrial if it formed the view that the effect of the new or newly discovered evidence led to the conclusion that no reasonable jury, properly directed, could convict.
Moreover, so far as I am aware, this test has caused no difficulty in criminal appeals in Scotland.
It is a test which is familiar to the criminal trial and appeal process, which the proposed test of innocence is not.
As Lord Hope has observed at para 95, in R (Allen) (formerly Harris) v Secretary of State for Justice [2009] 2 All ER 1 at para 40(iii) Hughes LJ said that cases where the innocence of the convicted defendant is genuinely demonstrated beyond reasonable doubt by the new or newly discovered fact the Court of Appeal will, in virtually every case, make that plain.
However, that may not be the case and, as Lord Hope says, the Court of Appeal is not bound to say whether or not a defendant is innocent.
In this regard there is authority for the proposition that the Court of Appeal is neither obliged nor entitled to say whether an appellant is innocent: see R v McIlkenny (1991) 93 Cr App R 287 at 310 311.
Whether that is correct or not, I agree with Lord Hope that, to put it no higher, it is at least questionable whether it can be right to restrict the entitlement to compensation to cases where the establishment of innocence is apparent from the Court of Appeals judgment.
It is of interest in the context of this debate to note that it is common ground that it was only after the decision in Mullen that Secretaries of State have applied an innocence test and that they do not do so in Scotland even now.
It was suggested in argument that it is not appropriate for the Secretary of State, and not a court, to make judgments of this kind.
However, section 133(3) expressly provides that the question whether there is a right to compensation shall be determined by the Secretary of State.
Nobody has suggested that it is not appropriate for the Secretary of State to decide whether the claimant has proved that the new or newly discovered fact shows that he is innocent.
It does not seem to me to be any less appropriate for the Secretary of State to decide whether he has proved that it shows that no reasonable jury could have convicted him.
In reaching his or her conclusion the Secretary of State is of course bound to have regard to what the Court of Appeal which reverses the conviction has said.
In In re McFarland [2004] UKHL 17, [2004] 1 WLR 1289 Lord Bingham said at para 16, albeit in the context of a claim under the ex gratia scheme, that the Secretary of State must properly be guided by the judgment of the Court of Appeal.
However, it seems to me that it is for the Secretary of State to have regard to all relevant material when deciding whether the claimant has established beyond reasonable doubt that, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted him.
I see no reason why the Secretary of State could not decide that question, whether on the grounds of innocence or otherwise.
As I see it, the matter has to be tested as at the date of the reversal, having regard both to the evidence that was available at the trial and to the new or newly discovered facts.
I would include in the evidence available at the trial, all such evidence, not just that adduced on behalf of the prosecution, but also that adduced during the defence case.
I would therefore include admissions made by the defendant in cross examination in a case in which the new evidence showed that the case should have been stopped.
The question is whether, on that material, he had a case to answer or, put another way, whether a reasonable jury properly directed could have convicted him.
If he proves beyond reasonable doubt that the answer to those questions is no, he is in my opinion entitled to compensation under section 133 on the basis that there has been a miscarriage of justice.
I entirely accept that the cases in which compensation can be claimed are limited by the necessity to satisfy the criteria in the section and by the need to show beyond reasonable doubt that the new or newly discovered fact demonstrates, in the light of the other material before the court that no reasonable jury, properly directed, could have convicted him.
The Secretary of State would of course have to be satisfied that the alleged fact was indeed a fact.
I should add by way of postscript that, as I see it, category 2 potentially includes a case where the new or newly discovered fact is such that, if it had been known at the trial, the trial judge would have stopped the trial on the ground of abuse of process.
If the Court of Appeal concluded that a new trial could not properly be ordered on the basis that it was not possible to cure the abuse, so that no reasonable jury, properly directed, could convict, there would, in my opinion have been a miscarriage of justice within section 133.
It seems to me that this must be within the kind of miscarriage of justice which Lord Bingham had in mind in Mullen, namely where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
Since Mullen, some doubt has been expressed as to whether the basis upon which it was decided is correct.
See, for example, R (Siddall) v Secretary of State for Justice [2009] EWHC 482 (Admin) per Leveson LJ at paras 47 48.
The basis on which it was decided by the majority, comprising Lord Bingham, Lord Scott, Lord Rodger and Lord Walker was that Mr Mullens conviction had been reversed by the Court of Appeal on the ground that there had been an abuse of executive power and not any failure in the trial process: see per Lord Bingham at para 8, Lord Scott at para 65, Lord Rodger at para 69 and Lord Walker at para 70.
In particular, Lord Bingham said that it was for failures in the trial process that the Secretary of State is bound by article 14(6) and section 133 to pay compensation.
He distinguished those from abuse of executive power.
He did so by reference to R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42 per Lord Griffiths at pp 61 62 and R v Looseley [2001] 1 WLR 2060 at para 40.
Lord Scott said that the Court of Appeal had not reversed the conviction because there had been any failure in the trial process but because, prior to the commencement of the trial process, there had been serious abuse of executive power which had led to the removal of the claimant from Zimbabwe to this country and thus enabled the trial to take place.
Although Leveson LJ observed that this distinction has its difficulties and noted that Lord Steyn said at para 57 that, if that abuse had been disclosed the trial would have been stopped, and in its written submissions Justice suggested that Mullen might now be decided differently on its facts.
There is I think scope for argument in the future as to whether there is a class of cases in which the section would not apply, of which Mullen is an example.
They are cases in which it has been held that the trial should not be permitted to proceed, not because of anything related to the case against the defendant, but because to permit it would offend against the rule of law or would seriously affect the integrity of the administration of justice.
In quashing Mullens conviction Rose LJ, giving the judgment of the Court of Appeal, said at [2000] QB 520, 535 536: This court recognises the immense degree of public revulsion which has, quite properly, attached to the activities of those who have assisted and furthered the violent operations of the IRA and other terrorist organisations.
In the discretionary exercise, great weight must therefore be attached to the nature of the offence involved in this case.
Against that, however, the conduct of the security services and police in procuring the unlawful deportation of the defendant in the manner which has been described represents, in the view of this court, a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts.
The need to discourage such conduct on the part of those who are responsible for criminal prosecutions is a matter of public policy to which, as appears from R v Horseferry Road Magistrates' Court, Ex p Bennett [1994] 1 AC 42 and R v Latif [1996] 1 WLR 104, very considerable weight must be attached.
It appears to me to be at least arguable that such a case would not fall within section 133.
None of the cases before the Court in these appeals is such a case.
I recognise that Lord Phillips rejects category 2 as a test and that he has suggested an alternative test.
However, section 133 inevitably requires the Secretary of State to consider the effect of the new or newly discovered fact upon the other evidence before the court and thus on the validity of the conviction.
This involves the evaluation of the evidence in its legal context.
It also expressly requires the Secretary of State to decide whether in the light of all the evidence the claimant has shown beyond reasonable doubt that there has been a miscarriage of justice.
In considering all these questions, the Secretary of State can of course always take such advice as is appropriate.
I remain of the view that category 2 is an appropriate formulation of the test and that the position is or should be as stated above.
Compensation is only payable where, in the light of the new or newly discovered fact, no reasonable jury, properly directed, could have convicted or, subject perhaps to the point made in para 215 above, where the new or newly discovered fact would have led the judge to stop the case on the ground of abuse in the trial process.
However, I recognise that Lord Phillips suggests replacing the category 2 test with a more robust test.
It is that a new fact will show that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it.
I have assumed that the second it means the evidence against the defendant.
To my mind that test is consistent with the category 2 test identified above because, in such a case, no reasonable jury properly directed, could convict the defendant.
For that reason and on that basis, I would accept the proposed test, with which Lord Hope, Baroness Hale and Lord Kerr agree.
Category 3 unsafe conviction
Section 2(1) of the Criminal Appeal Act 1968, as substituted by section 2(1) of the Criminal Appeal Act 1995, provides that the Court of Appeal shall allow an appeal if they think the conviction is unsafe.
The proviso in the previous section 2(1) was repealed.
Mr Owen submitted that where a qualifying appeal is allowed on the basis that the claimant has shown beyond reasonable doubt that the conviction was unsafe because of a new or newly discovered fact, it follows that there was a miscarriage of justice within the meaning of section 133.
It is certainly possible to construe the expression miscarriage of justice as wide enough to include such a case.
I do not however think that Parliament can have intended the expression to have such a wide meaning in section 133(1) because it would have been easy for the section to have been drafted in such a way as to include every case where the relevant appeal was allowed on the basis of a new or newly discovered fact.
Moreover none of the courts which have considered section 133 have suggested that it might have such a wide meaning: see the cases referred to by Lord Hope at para 82.
In particular, the formulation of the test by Lord Bingham in Mullen does not encompass every case where the conviction was held to be unsafe on the basis of new evidence.
His formulation was that there is a miscarriage of justice where a conviction is quashed because something has gone seriously wrong in the investigation of the offence or the conduct of the trial, resulting in the conviction of someone who certainly should not have been convicted.
It is not possible to say that, merely because a conviction has been quashed because it was unsafe, the appellant should not have been convicted.
A conviction may be unsafe because the Court of Appeal concludes that, but for the successful ground of appeal, the jury might not have convicted.
Indeed, this is by far the most common case in which an appeal is allowed.
It is a category 3 case in which, as Dyson LJ put it in the passage quoted above, a fair minded jury might convict or might acquit.
In such a case I do not think that one can say as a matter of course that the defendant should not have been convicted.
It seems to me that it is only in a category 2 case (which of course includes a category 1 case) that it can be said that a person should not have been convicted.
It can be so held in such a case because it follows from the conclusion that no reasonable jury, properly directed, could have convicted the defendant that he should not have been convicted.
Any lesser test is to my mind too uncertain and would not satisfy the statutory test that, in order to be entitled to compensation, the claimant must prove beyond reasonable doubt that there has been a miscarriage of justice.
If he might have been convicted by a jury on all the evidence including the new or newly discovered fact, he cannot show for sure that there has been a miscarriage of justice within section 133(1).
Retrial
Section 133(5A) was not part of section 133 when Mullen was decided.
It makes it clear that, where the claimant succeeds on appeal but is convicted at a retrial, he is not entitled to compensation because his conviction has not been reversed.
If his appeal succeeds and the Court of Appeal orders a retrial, but the prosecution decides not to proceed with the retrial, the conviction is treated a reversed when it so indicates.
In these circumstances, the position is as described above.
If a retrial takes place and the claimant is acquitted of all offences at a retrial, there is scope for debate as to the position.
By subsection (5A) the conviction is treated as reversed when he is so acquitted.
It is not necessary to decide this question in this appeal but it is my provisional view that the same approach as described above would apply.
Thus, in order to be entitled to compensation, he would have to prove beyond reasonable doubt that on the basis of the new or newly discovered fact no reasonable jury would have convicted him.
New or newly discovered fact
The question is what is meant by a new or newly discovered fact.
In particular the question is what is meant by a newly discovered fact.
Mr Tam QC submitted that a fact which was known to the prosecution and knowable to the defence because it was available to them, but which they did not know because they did not take the steps they should have taken to examine the evidence was not a newly discovered fact.
I would not accept that submission.
If the fact was not in fact discovered at or before the trial or at an in time appeal but was discovered thereafter, it follows that it was a newly discovered fact.
The question is whether it was discovered earlier, not whether it was discoverable earlier.
In my opinion the fact that it was discovered by the prosecution before the appeal is irrelevant.
In neither of the appeals before the Supreme Court were the relevant facts discovered by the defendants or their lawyers at or before the trial or the in time appeal.
It follows that they were newly discovered facts.
The fact that in the Adams case they were discoverable by the defendants lawyers is irrelevant.
As I see it, therefore, on the facts of these appeals this part of the test is satisfied.
However, there was much debate as to whether it is possible for a fact to be a newly discovered fact if it was known to the defendants lawyers.
In my opinion it is.
Section 133(1) is subject to the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
The proviso does not apply if the non disclosure of the fact was attributable to his lawyers.
It could have done so.
As Dyson LJ explained at paras 14 16 of his judgment, there is no mention of the convicted persons legal advisers in article 14(6) or section 133, whereas article 14(3) does refer to legal advisers.
Moreover, there is no suggestion that the person convicted in section 133(1) includes his lawyers.
In my opinion the Court of Appeal correctly held that knowledge of the fact by the defendants lawyers would not prevent it being a newly discovered fact.
I note in this regard that in a case where the fact was known to the defendants lawyers and not used at the trial, the failure to use it would be very relevant to the question whether the evidence of the fact would be admissible under section 23 of the Criminal Appeal Act 1968.
It might well be held that in the light of the fact that the lawyers failed to deploy it, it was not necessary or expedient in the interests of justice to admit it on an appeal.
In that event the appeal would not be allowed or the conviction reversed on the basis of it.
The remaining question is whether it is possible for a fact to be a newly discovered fact if it was known to the defendant himself at trial or at an in time appeal.
The Court of Appeal held that it was, for the reasons given by Dyson LJ at paras 14 to 18.
I agree.
Section 133(1) contains the proviso unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
This proviso would not be necessary if the question whether evidence was new or newly discovered were tested by reference to the knowledge of the convicted person himself.
The proviso seems to me to assume that a fact may be newly discovered even though it is known to the defendant at the relevant time.
Otherwise it would have very little effect because it would only apply where the defendant did not know the fact but its non disclosure was attributable to him.
Such a situation is perhaps theoretically possible but the natural meaning of the proviso is that it covers the case where the defendant is aware of the fact at the relevant time but does not deploy it either personally or through his lawyers.
So understood, the proviso seems to me to point to the conclusion that a fact may be a newly discovered fact even if it was known to the defendant himself at trial or at an in time appeal.
For these reasons I agree with Lord Hopes conclusion at para 107 and Lord Phillips conclusion at para 62 that the relevant knowledge is that of the trial court, but do not agree with Lord Hopes conclusion, also at para 107, that material disclosed to the defence by the time of the trial cannot be said to have been newly discovered when it is taken into account at the stage of the out of time appeal.
For the reasons given earlier, it is my view that material that was not discovered either by the defendant or his lawyers but was discovered only after the in time appeal was newly discovered on the simple basis that, whether or not it ought to have been discovered, it was not in fact discovered.
That was the position in both the Adams appeal and the Northern Irish appeals.
Article 6(2) of the European Convention of Human Rights
Other members of the Court have considered the issues under this head in some detail.
The European Court of Human Rights (ECtHR) has applied article 6(2) in cases which are not covered by its language.
For my part, I do not think that this is a case in which it is necessary or would be appropriate to analyse that jurisprudence in detail.
I will only say that I am not at present persuaded that article 14(6) and section 133 are a form of lex specialis to which article 6(2) can never be relevant.
For present purposes I shall simply assume that it is in principle possible for article 6(2) to apply to proceedings under section 133.
I can see that it is inappropriate, to put it no higher, to impute criminal liability to a person who has been acquitted.
In each of the cases in which a claim for compensation arises under section 133(1) the claimants conviction has been reversed by the Court of Appeal in an out of time appeal.
Section 2(3) of the Criminal Appeal Act 1968 (as substituted in 1995) provides: (3) An order of the Court of Appeal quashing a conviction shall, except when under section 7 below the appellant is ordered to be retried, operate as a direction to the court of trial to enter, instead of the record of conviction, a judgment and verdict of acquittal.
Thus the effect of the reversal of the conviction by the order of the Court of Appeal quashing it, is that the person concerned is formally acquitted.
In these circumstances the court hearing and determining a claim for compensation under section 133(1) must not say or do anything inconsistent with the claimants acquittal.
If the analysis set out above is adopted, there is no risk of its doing so.
The question in each case is whether the claimant has proved beyond reasonable doubt that the new or newly discovered fact has demonstrated that there was a miscarriage of justice on the basis that no reasonable jury, properly directed, could convict him.
The trial of that question does not in any way affect or impugn the acquittal of the claimant as provided by section 2(3) of the Criminal Appeal Act 1968 quoted above.
The question at such a trial is different and so is the burden of proof.
The position is not unlike a civil process where a claimant seeks damages from a defendant who has been acquitted of, say, causing grievous bodily harm to A at a criminal trial.
Under English law it is permissible for A to seek damages from the defendant on the ground that he was unlawfully injured by him, alleging all the same facts as had been relied upon at the criminal trial.
The critical difference between the two processes is that at the criminal trial the prosecution has to prove guilt beyond reasonable doubt, whereas at the civil trial A only has to prove liability on the balance of probabilities.
The ECtHR has expressly recognised that civil proceedings of that kind do not infringe article 6(2) of the Convention: see eg Y v Norway (2003) 41 EHRR 87, where the court expressly said at para 41 that, while the acquittal from criminal liability ought to be maintained in compensation proceedings, it should not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof.
It did add in para 42 that, if the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention.
See also Bok v The Netherlands, (Application No 45482/06), 18 January 2011.
Similarly, here, where, at any rate on the analysis set out above, there is no question of anything said or done in the section 133 proceedings impugning the acquittal in the criminal proceedings, I see nothing in article 6(2) which is in any way inconsistent with the conclusions I have reached.
Disposal
I agree with Lord Phillips, Lord Hope, Baroness Hale and Lord Kerr that the appeal in the Adams case must be dismissed.
Lord Phillips has set out the relevant facts.
As Dyson LJ observed at para 59, the Court of Appeal allowed the appeal because the undeployed material was important and might have led the jury to acquit.
The decision to quash the conviction was founded on the potential that the undeployed material had for affecting the jurys verdict.
It was thus a category 3 case and, for the reasons given earlier, section 133(1) does not cover such a case.
I also agree that the appeals in the Northern Irish cases should be allowed.
Lord Kerr has set out the facts in some detail.
They show, at any rate to my mind, that, in the light of the newly discovered facts, no reasonable jury, properly directed, could have convicted them.
DISSENTING JUDGMENTS LORD JUDGE
The legislation
Section 133(1) of the Criminal Justice Act 1988 (section 133) provides: when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice, the Secretary of State shall pay compensation for the miscarriage of justice to the person who has suffered punishment as a result of such conviction or, if he is dead, to his personal representatives, unless the non disclosure of the unknown fact was wholly or partly attributable to the person convicted.
Reversed refers to a conviction which is quashed on an appeal out of time or following a reference by the Criminal Cases Review Commission (section 133(5)).
By section 133(2) compensation is not payable unless the application for compensation has been made: Before the end of the period of 2 years beginning with the date on which the convictionis reversed or he is pardoned.
This limitation was inserted by sections 61(1) (3) and (9) of the Criminal Justice and Immigration Act 2008 and came into force on 1 December 2008.
Simultaneously, in accordance with section 61(1), (2), (5) and (9) of the 2008 Act, provision was made for the cases where the conviction is quashed on an appeal out of time, and a retrial ordered, so that: The conviction is not to be treatedas reversed unless and until the person is acquitted of all offences at the retrial or the prosecution indicates that it has decided not to proceed with the retrial. (Section 133(5A))
The determination whether there is an entitlement to compensation is vested exclusively in the Secretary of State, (section 133(3)) who in exceptional circumstances may extend the time for making an application. (section 133(2A))
When section 133 was enacted an ex gratia system operated in tandem with it.
In England and Wales and Northern Ireland, but not in Scotland, the ex gratia scheme was abolished in 2006.
In his article Compensation for Wrongful Imprisonment [2010] Crim LR 805, Professor John Spencer QC convincingly criticised the narrowness of and consequent anomalies which arise from the limitations of the statutory scheme.
No alternative remedy is provided unless, perhaps, and subject to limitation periods, where malpractice in the investigative process is established, the victim may pursue a remedy in tort, or when the individual suffered a wrongful conviction as a consequence of negligence by his legal advisors, a claim in damages may be available.
In short, the statutory scheme does not preclude any relevant action which may, in theory, be available in tort, but it is in any event unsupported by the ex gratia scheme.
Nevertheless we must analyse section 133 and the ambit of the scheme for the payment of compensation without reference to its anomalies and disadvantages.
When it was examined by the House of Lords in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1 the meaning and effect of section 133 produced contradictory opinions with no authoritative decision.
Lord Steyn concluded that the statutory scheme was confined to cases where the person concerned was clearly innocent.
Lord Bingham of Cornhill, while agreeing with the result, for carefully explained reasons, hesitated to accept this restriction on the ambit of the statutory scheme.
The differences between their respective approaches to the problem have been considered and examined in a number of subsequent decisions, of which the most recent is R (Allen (formerly Harris) v Secretary of State for Justice [2009] 1 Cr App R 36.
They must finally be resolved now.
As we are not agreed, without embarking on what would be a repetitious discourse of much of the voluminous material drawn to our attention, I shall briefly explain the reasons why I agree with Lord Steyn.
In Mullen the parties were agreed that the interpretation of section 133 required what was described as a correct understanding of article 14(6) of the International Covenant on Civil and Political Rights, dated 16 December 1966. (ICCPR) That view was adopted by the House of Lords and it is unchallenged in the present proceedings.
Article 14(6) provides: When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the grounds that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to law, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
In short, the enactment of section 133 in virtually identical terms represented the response of the United Kingdom to a Treaty obligation.
One further Treaty provision needs immediate attention.
In November 1984 article 3 of Protocol 7 to the Convention of Human Rights also made what was effectively an identical provision to article 14(6) of the ICCPR.
When a person has by a final decision been convicted of a criminal offence and when subsequently his conviction has been reversed, or he has been pardoned, on the ground that a new or newly discovered fact shows conclusively that there has been a miscarriage of justice, the person who has suffered punishment as a result of such conviction shall be compensated according to the law or the practice of the State concerned, unless it is proved that the non disclosure of the unknown fact in time is wholly or partly attributable to him.
Article 3, Protocol 7 will become relevant when the jurisprudence of the European Court of Human Rights falls to be considered.
In the context of a statutory provision reflecting the international obligations undertaken by the United Kingdom, it would be productive of confusion for the phrase miscarriage of justice to be analysed by reference to the many different ways in which, looking at our own statutes which enable convictions to be quashed, and the language used, sometimes loosely, in the course of numerous judgments bearing on these questions.
The phrase reflects an autonomous concept, in which the words miscarriage of justice reflect the international obligations of the United Kingdom under article 14(6).
Like article 14(6), section 133 distinguishes the reversal of the conviction (or a pardon) and a miscarriage of justice.
Within the section itself, as with article 14(6), these concepts are distinct.
Even if the remaining pre conditions to the payment of compensation are established, the reversal of the conviction is an essential prerequisite to but is not conclusive of the entitlement to compensation.
In short, for the purposes of section 133 the reversal of the conviction and the consequent revival of the legal presumption of innocence is not synonymous with a miscarriage of justice.
Therefore before compensation is payable under the statutory scheme more than the reversal of the conviction is required.
The requirement is that a miscarriage of justice must be demonstrated beyond reasonable doubt.
In my view the use of this phrase was deliberate and significant.
The phrase is not relevant to the evidential question whether the conviction has been reversed and it is not directed to any individual feature or aspect of the investigation or trial processes.
If the reversal of the conviction alone were sufficient, that fact would be proved beyond reasonable doubt by the court record, and if any specific feature of the investigation or trial processes were relevant, appropriate provision could readily have been made in section 133 itself.
Instead the phrase describes the characteristics or attributes of the miscarriage of justice which must be established.
The word conclusively in article 14(6) was not repeated.
Rather the familiar description of the standard of proof in criminal cases and, significantly in the context of a claim for the payment of compensation (normally a civil claim), the standard normally applied to the prosecution in the criminal justice process was imposed on the defendant.
For this purpose the balance of probabilities was expressly ignored.
Accordingly, for section 133 to apply, following a conviction of an offence which was proved beyond reasonable doubt, the emergence of a new or newly discovered fact should demonstrate not only that the conviction was unsafe, or that the investigative or trial processes were defective, but that justice had surely miscarried.
In the present context, the ultimate and sure miscarriage of justice is the conviction and incarceration of the truly innocent.
This leads me to the conclusion that as a matter of construction the operation of the compensation scheme under section 133 is confined to miscarriages of justice in which the defendant was convicted of an offence of which he was truly innocent.
In my judgment nothing less will do, and no alternative or half way house or compromise solution consistent with this clear statutory provision is available.
I must therefore address some of the contentions which suggest that this construction is over restrictive.
The unsafe conviction
Mr Tim Owen QC highlighted the absence of word innocent from section 133.
The omission reflects not only the autonomous concept of miscarriage of justice, but more significantly, the absence of an innocent verdict in the criminal justice process.
The defendant is either proved to be guilty of the crime alleged, or he is entitled to a not guilty verdict and acquittal.
A verdict of innocent is unknown.
On acquittal, or the reversal of a conviction, the presumption of innocence revives.
It applies when the jury considers that there is a high probability that the defendant is guilty, and indeed to cases like Mullen, whose conviction was quashed notwithstanding the assessment of the court that he was undoubtedly guilty.
Just because it is a concept to which the criminal justice process is not directed, the word innocent could have no place in section 133.
The only ground for quashing a conviction in the Court of Appeal Criminal Division (the Court) is that it is unsafe.
There are however occasions when a new or newly discovered fact may well demonstrate the factual innocence of the appellant.
And if it does, the judgment of the court may say so.
I respectfully disagree with the observation in R v McIlkenny (1991) 93 Cr App R 287 that the court is not entitled to state that an appellant is innocent.
The processes of the Court of Appeal do not allow for a formal declaration of factual innocence, any more than the trial process recognises a verdict of innocent.
However there can surely be no stronger case for doubting the safety of a conviction than evidence which unmistakenably demonstrates that the appellant is in truth an innocent man or woman. (See R v Fergus (1994) 98 Cr App R 313: R v Hodgson [2009] EWCA Crim 490.) Although the conviction is quashed not on the ground that the defendant is innocent, but because his conviction is unsafe, the terms of the judgment should conscientiously reflect the true reasons for its decision that the conviction should indeed be quashed as unsafe.
At the risk of stating the obvious, the decision whether to quash a conviction is for the Court: so are all features of the trial process, and indeed any order for retrial.
If the end of the judicial process is that the conviction is quashed, or if following a retrial, the defendant is acquitted, the administrative decision whether compensation is payable for a miscarriage of justice is vested exclusively in the Secretary of State.
The determination is not limited to some kind of administrative assessment of the circumstances in which the judicial process has come to an end.
Therefore while the Secretary of State should pay the closest possible attention to the terms of the judgment of the Court, whatever the terms in which the judgment is expressed, when making the decision whether a miscarriage of justice has occurred, he is not confined to the judgment of the Court.
Retrial
The circumstances in which a retrial will be ordered following the quashing of a conviction vary enormously.
The single question is whether in a fact specific context the interests of justice should lead to such an order.
Dealing with it generally it is most unusual for an order for retrial to be made many years after conviction, or when the sentence imposed at the original trial has been or is close to being completed.
On the other hand, again dealing with it generally, where a conviction is recent, and the sentence substantial, and the evidence relied on the prosecution is likely to be available at the retrial, then a retrial may well be ordered.
Exceptions can be found both ways.
At the risk of repetition, the decision is fact specific.
It can however be confidently stated that it would be inconceivable for the Crown to seek or the Court to order a new trial if it were made clear in the terms of the judgment that the conviction was being quashed on the basis that the fresh evidence demonstrated that the defendant was innocent.
This reinforces my view that if that conclusion is justified, the court is entitled to say so in its judgment.
These considerations bring me to section 133(5A).
This subsection addresses the newly introduced statutory time limit in which an application for compensation may be made in the context of an order for retrial.
If for any reason (including the conclusion of the Court that the defendant is truly innocent) no order for retrial is made, time runs from the date when the conviction is quashed.
If however (again, for whatever reason) the order quashing the conviction is accompanied by an order for retrial, notwithstanding the presumption of innocence, for the purposes of the scheme for the payment of compensation the conviction is not reversed or quashed and the time for making an application is accordingly postponed until the retrial process is completed.
This enables first, the defendant to concentrate his attention on the forthcoming retrial.
Second, it is conclusive of the question (adversely to the defendant) if he is convicted, when his position is exactly the same as it would have been if the original conviction had not been quashed.
Third, if he is acquitted, the process may provide the Secretary of State with further material on which to base his determination.
In my judgment section 133(5A) has no bearing on the proper construction of the words beyond reasonable doubt that there has been a miscarriage of justice, and the entitlement to compensation under the statutory scheme was not expanded with effect from 1 December 2008 when section 133(5A) came into force.
That was not the purpose of this new inserted provision which was directed to the consequences of the introduction of the new timetable within which applications should be made.
It was procedural only.
European Court of Human Rights
In my judgment the jurisprudence of the European Court of Human Rights drawn to our attention by Mr Owen does not bear on the issues which arise in this litigation.
As already indicated once a conviction has been reversed the presumption of innocence applies.
Subject only to the provisions of sections 76 83 of the Criminal Justice Act 2003 the rule against double jeopardy applies and the defendant cannot be prosecuted a second time for an offence of which he has been acquitted, or when his conviction has been reversed and for the purposes of the administration of criminal justice the prosecution process is at an end.
Nevertheless the acquittal, or the successful appeal against conviction, does not operate as an absolute bar to litigation.
It remains open to any individual to assert that notwithstanding the acquittal or quashing of the conviction, the defendant was guilty.
That is what Lord Steyn said about Mullen in his judgment in that case.
A defendant who has been acquitted of rape may face proceedings for damages by the complainant and she may successfully establish on the balance of probabilities that he did indeed rape her and is liable in damages.
In proceedings for defamation on the basis that the defendants innocence is questioned, the acquittal does not create an irrebuttable presumption that the assertion cannot be justified and must be unjustifiable.
Article 3, Protocol 7 forms part of the Convention.
It must be read together with the Convention.
The jurisprudence of the European Court of Human Rights relied on by Mr Owen was not directed to and did not address the provisions of article 3, Protocol 7.
If the decisions he relied on apply in the present case it will in effect mean that the reversal of the conviction carries with it an obligation to pay compensation in accordance with section 133, although such a conclusion would be inconsistent with the wording of article 3, Protocol 7 itself.
Bok v The Netherlands (Application No 45482/06) (unreported) 18 January 2011 confirms that it does not.
Section 133 therefore provides an individual whose conviction has been reversed with the opportunity (but no obligation) to make a claim for compensation based on a statutory test which is effectively identical to the provisions of the European Convention.
The Secretary of State must allow or reject the application in accordance with that test.
Conviction Impossible
This heading is used to encompass some of the alternative ways of approaching the concept of miscarriage of justice adopted in the majority judgments which have reached the conclusion that the phrase has a rather broader ambit than I do.
A newly discovered fact which demonstrates that the prosecution against the defendant is shredded to the extent that no conviction could have been based on it, or that no evidence would properly have been offered or, if there had been a trial, there would have been no case to answer at the close of the prosecution case, is likely to provide powerful material which may lead the Secretary of State to conclude that the defendant is indeed innocent.
However that conclusion does not automatically follow, and unless it does, section 133 does not apply.
In short, these considerations are of evidential significance, maybe of crucial evidential significance, but not determinative.
There are a variety of different circumstances in which the Court may make a decision on appeal in relation to decisions at trial that what appeared to be powerful evidence for the Crown should have been excluded.
For example, in the light of some newly discovered fact the Court may conclude that the decision of the trial judge to allow crucial prosecution eye witnesses to give their evidence anonymously was wrong, or no longer tenable: without that evidence there would be no case against the defendant.
The Court may order a retrial, but without the protection of an anonymity order, the crucial witnesses may then refuse to give evidence at all.
Accordingly no further evidence would be offered against the defendant.
In my judgment it should not, and it would not, follow that the defendant would be entitled to compensation.
Similar considerations would arise if, on the basis of fresh evidence, the Court concluded that the judge had wrongly admitted crucial hearsay evidence without which there would have been no prosecution.
Taking the matter further, R v Smith [1999] 2 Cr App R 238 illustrates the difficulty of equating the no case to answer situation with the concept of miscarriage of justice within section 133.
The judge rejected a submission that there was no case to answer.
The Court concluded that he was wrong and went on to examine the question, what if a submission is wrongly rejected but the defendant is cross examined into admitting his guilt? It concluded that the conviction would still be unsafe because the defendant was entitled to be acquitted at the close of the prosecution case.
It would be surprising if notwithstanding his own sworn admission of guilt, the discovery of a new fact which demonstrated that the decision that there was a case to answer was wrong, should be followed by the payment of compensation.
Again, where fresh evidence is advanced on behalf of the appellant which undermines the safety of the conviction, and indeed puts into question a substantial part of the prosecutions case, the prosecution may seek to adduce fresh evidence demonstrative of guilt.
The jurisdiction to permit the Crown to do so is available (for example, see R v Hanratty [2002] EWCA Crim 1141; [2002] 3 All ER 534).
In the interests of justice the Court may order a new trial to enable all the issues to be resolved by a jury notwithstanding that, standing on its own, the original evidence advanced by the Crown was no longer sufficient to found a case for the appellant to answer.
Finally, I must return to Mullen itself, which at [1999] 2 Cr App R 143 sets out the reasons why the conviction was quashed.
The matters which constituted the abuse of process occurred before Mullen was returned from Zimbabwe to this jurisdiction.
The British authorities procured his deportation by unlawful means, in breach of public international law.
The prosecution itself was held to be unlawful.
Mullen therefore should not have been charged, let alone prosecuted to trial.
Yet the House of Lords was agreed that he was not entitled to compensation, and I wholeheartedly agree.
Considerations like these underline some of the practical difficulties with any approach to the construction of section 133 which goes beyond the limits suggested by Lord Steyn in his judgment in Mullen, that compensation within the statutory scheme is payable only when the defendant was convicted of an offence of which he was truly innocent, and therefore beyond reasonable doubt the victim of a miscarriage of justice.
In my judgment the principle is that section 133 is concerned with the fact rather than the presumption of innocence in the context of the administrative decision to be made by the Secretary of State.
It is not related to different (and if so which?) aspects of the trial processes, or the likely or possible impact which the new or newly discovered fact would have had on the decision to prosecute or on the forensic processes which culminated in conviction.
Their practical effect is demonstrated in the case of MacDermott and McCartney.
The confessions on which the prosecution relied would have been inadmissible if they had been made not as a result of violence, but rather of inducements.
Assuming for present purposes that the newly discovered material demonstrated that Donnelly had been offered identical inducements to those which MacDermott and McCartney had asserted at their trials, their convictions would have been no less liable to be quashed than they were in the light of the fresh evidence relating to police violence.
As there was no evidence beyond their inadmissible confession there would have been no basis for any prosecution.
And there would, if they were prosecuted, have been no case for either to answer.
Yet, in the context of an inducement or inducements, there might, if the confessions were sufficiently detailed, be no reason to doubt that the confessions were true, even if inadmissible.
In my judgment their cases would not qualify for compensation.
We are here dealing not with inducements which cast doubt on the voluntariliness of the confessions, but with violence.
The newly discovered material would have borne on the decision of the trial judge whether the defendants confessions were voluntary or not.
The fresh evidence led the Court of Appeal in Northern Ireland to conclude that if it had been available at trial there was a realistic possibility that the evidence of the police officers (who asserted that there had been no intimidation of the defendants, and no grounds for doubting that the confession statements were voluntary) may have been discredited.
If so the statements would have been excluded from consideration, and there would then have been no prosecution and no case for either of them to answer.
In principle, however, the impact on the admissibility of their confessions would have been the same, whether they responded to inducements to confess or succumbed to violence.
Although I share the distinct unease of the Court of Appeal in Northern Ireland about the circumstances in which the confessions were made by the appellants, it does not follow that the Secretary of State was obliged to conclude that they were innocent for the purposes and within the ambit of section 133.
New or newly discovered fact
In the discussion about the meaning of new or newly discovered fact the rival contentions went too far.
It would be unrealistic, and removed from the realities of the conduct of the defence at trial that his legal advisers should inform the defendant personally of each and every fact and matter to which their attention is drawn by the prosecution.
When all is said and done, the defence advocate is not a mouthpiece or echo chamber for his client.
The responsibility for giving advice and assisting the defendant to make whatever decisions which he must make for himself is one aspect of the responsibilities: the deployment of evidence and argument on his behalf is another.
Sometimes the lines overlap, but often they do not.
It therefore follows that merely because the defendant himself is personally ignorant of a particular fact, it is not new or newly discovered when the defendant personally ceases to be ignorant of it.
On the other hand, when the prosecution has complied with all its obligations in relation to disclosure of material to the defence lawyers, and they, for whatever reason, do not then deploy material which appears to be adverse to the prosecution or which would assist the defendant, that material should not automatically be excluded from the ambit of the section on the basis of prosecutorial compliance with its disclosure obligations.
Rather the approach should coincide with the circumstances in which fresh evidence is sought to be deployed before the Court in accordance with section 23 of the Criminal Appeal Act 1968.
This normally predicates that there should be a reasonable explanation for the earlier failure to adduce the evidence at the trial.
In the present case, it is clear from the judgment of the Court in Adams that the conviction was quashed on the basis of fresh evidence in circumstances in which, notwithstanding that the prosecution had fully performed its responsibilities in relation to disclosure, Adamss legal team had failed adequately to respond and fulfil theirs.
In my judgment that failure or omission was a new or newly discovered fact within the ambit of section 133.
Conclusion
In my judgment the appeal of Adams should be dismissed: as to the appeals of MacDermott and McCartney, I should have agreed with Lord Browns proposal that they should be remitted to the Secretary of State for further consideration.
LORD BROWN (with whom Lord Rodger agrees)
I have had the advantage of reading in draft the judgment of Lord Judge, the Lord Chief Justice, and, agreeing with it as I do, I shall try not to repeat the bulk of its reasoning.
So troubled am I, however, that apparently ours is the minority view on these appeals that I wish to add some additional thoughts of my own.
That section 133 of the Criminal Justice Act 1988 was intended to give effect to the United Kingdoms international obligation under article 14(6) of the International Covenant on Civil and Political Rights 1966 is, of course, plain and obvious.
Section 133(1) omits the phrase in article 14(6) by a final decision reflecting it instead in the definition of reversal in section 133(5) by referring there to an appeal out of time or on a reference and substitutes for the word conclusively in article 14(6) the hallowed expression beyond reasonable doubt.
Otherwise the language of the two provisions is virtually identical.
It is clear, therefore, that the right to compensation arises only when each of four conditions is satisfied: (i) the conviction is quashed on an appeal out of time or a reference (not, therefore, when a timeous appeal succeeds, nor, of course, on an acquittal at trial); (ii) the appeal succeeds on the ground of a new or newly discovered fact; (iii) the appellant was in no way responsible for the previous non disclosure of that fact; and (iv) that fact shows beyond reasonable doubt that there has been a miscarriage of justice.
The critical question for decision here, of course, is what precisely is meant in this context by a miscarriage of justice.
As to this, whilst recognising that the expression has an autonomous meaning, I share the view expressed in several of the judgments that there is no real assistance to be derived here from any of the extrinsic material, for example, the travaux or other states practices.
Rather, as Lord Bingham suggested in R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1, 27, para 9(2): It may be that the expression [miscarriage of justice] commended itself because of the latitude in interpretation which it offered.
That being so, it was perfectly open to the UK to introduce legislation intended to compensate only those shown to be clearly innocent of the crime of which they had been convicted and in this connection I see no reason to ignore the explanatory report relating to article 3 of Protocol 7 to the European Convention on Human Rights (an article almost precisely reproducing the language of article 14(6)) which, at para 25, states: The intention is that states would be obliged to compensate persons only in clear cases of miscarriage of justice, in the sense that there would be acknowledgment that the person concerned was clearly innocent.
True, the UK never ratified Protocol 7 and I am far from suggesting that the explanatory report shows plainly that section 133(1) is to be construed in the way para 25 suggests.
But it does surely show that this is both a permissible view to take of the extent of the article 14(6) obligation undertaken by the UK and a perfectly possible construction of section 133(1) itself.
Before turning more particularly to whether it is the right construction, it is I think worth pointing out too that the provision whereby those benefiting from article 14(6) are entitled to be compensated according to law similarly accords to individual states a wide discretion as to how such compensation is to be assessed.
As to this the UKs approach seems to me notably generous.
In reaching his assessment, the Secretary of States assessor is directed to apply principles analogous to those governing the assessment of damages for civil wrongs including, therefore, claims for wrongful imprisonment although a deduction may be made on account of the claimants criminal record.
An illustration of the size of the awards liable to be made in these cases is provided by R (OBrien) v Independent Assessor [2007] UKHL 10; [2007] 2 AC 312 concerning compensation claims arising out of the wrongful conviction of the Hickey brothers and others for the murder of Carl Bridgewater at Yew Tree Farm.
The first instance decision in that case [2003] EWHC 855 (Admin) shows net final compensation assessments there of 990,000 for Michael Hickey and 506,220 for Vincent Hickey (wrongfully detained in prison respectively for just under thirteen years and something under fourteen years see para 8 of Lord Binghams judgment in the House of Lords).
What, then, is the correct interpretation of a miscarriage of justice in section 133(1)? More particularly, is it: (i) the conviction of an innocent defendant, or (ii) the conviction of a defendant who, by a new fact, so undermines the evidence against him as to show that, on the undermined evidence, he could not possibly have been convicted essentially Lord Phillips (category 2) formulation (at para 55), apparently now subscribed to by the majority of the court.
I mention only those two possible constructions since no member of the court appears to favour any yet wider construction of section 133 so as to embrace also cases where the fresh evidence renders the conviction unsafe in that, had it been available at the time of the trial, a reasonable jury might or might not have convicted the defendant (Lord Phillips category 3 at para 9).
Strikingly, and to my mind significantly, it was this wider construction that not just the appellants but also Mr Alex Bailin QC for the Intervener, JUSTICE, were urging upon the court; indeed, both Mr Owen QC for Mr Adams and Mr Bailin expressly submitted that there was no logical or principled dividing line between categories 2 and 3.
And to my mind they were right to do so.
Of course, innocence as such (factual as opposed to presumptive) is not a concept known to the criminal law.
But nor too, in the context of criminal appeals, is the notion of a prosecution case so undermined that no jury could possibly convict.
The criminal court deals only in the safety of convictions.
On a fresh evidence appeal the sole question the court asks itself is whether the conviction is unsafe (essentially the lurking doubt test).
If the case is a difficult one it sometimes finds it helpful to test its view by asking whether the evidence, if given at the trial, might reasonably have affected the decision of the trial jury to convict R v Pendleton [2001] UKHL 66; [2002] 1 WLR 72, 83, para 19.
The ultimate and only question, however, is for the court: is the verdict unsafe? The question raised by section 133, by contrast, is not one for the criminal court but rather one entirely for the Secretary of State.
Similarly, no member of the court appears to suggest that Mullen itself was wrongly decided.
Lord Steyn, of course, reached his decision there (to allow the Secretary of States appeal and reinstate the decision of the Divisional Court) on the ground that section 133 compensates only those who are clearly innocent whereas Lord Bingham reached his on the altogether narrower ground that: It is for failures of the trial process that the Secretary of State is bound . to pay compensation (para 8).
Mr Mullens conviction was, of course, quashed not because of anything that had gone wrong in the trial process but because he would not have been on trial at all but for having been unlawfully returned to this country.
Certainly Lord Bingham disagreed with Lord Steyns approach.
But it cannot be pretended that Lord Binghams own approach supports the particular formulation suggested by the majority in the present case.
My own reasoning in the Divisional Court in Mullen [2002] 1 WLR 1857, 1864 was essentially that later to be adopted by Lord Steyn: 25 What was shown beyond reasonable doubt here was that there had been an abuse of process in bringing the claimant to trial.
That was the newly discovered fact.
But that fact did not itself show beyond reasonable doubt that there had been a miscarriage of justice.
All that it showed was that the court needed to conduct a discretionary exercise to decide in effect which of two important public interests should prevail: the public interest in trying, convicting and punishing the guilty or that in discouraging breaches of the rule of law and preserving the integrity of the criminal justice system.
It preferred the latter.
True, it had no doubt that the balance came down decisively in the defendants favour.
But that was by no means to find that he was innocent, still less that he was plainly so.
Rather it was a judgment that the lawful administration of justice would be affronted by his remaining convicted and imprisoned. 26 In short, a miscarriage of justice in the context of section 133 means, in my judgment, the wrongful conviction of an innocent accused.
Compensation goes only to those ultimately proved innocent, not to all those whose convictions are adjudged unsafe.
The quashing of the claimants conviction in this case was a vindication of the rule of law, not the righting of a mistaken verdict.
As I shall come to suggest, the quashing of the conviction in many cases which would fall within the majoritys formulation for compensation here is more properly to be characterised as a vindication of the rule of law than as the righting of a mistaken verdict.
Par excellence, indeed, this seems to me to be so in cases where confession statements, even though perhaps demonstrably true (by referring, say, to facts known only to the perpetrator of the crime) are excluded because of intimidation or inducement see particularly in this regard paras 264 and 265 of Lord Judges judgment.
My reasons for remaining precisely of the view I expressed in the Divisional Court in Mullen are essentially a combination of the considerations in favour of the category 1 test (that of innocence) and the considerations weighing against the category 2 test (that of critical evidence undermined).
As for the factors favouring the test of innocence, it is difficult to improve upon those listed by Lord Phillips at paras 43 48 of his judgment.
As Lord Phillips there points out, this construction gives section 133 a perfectly natural and logical meaning, indeed it is the meaning that the man in the street would be likely to accord to the wording of section 133 (para 43); it makes perfect sense of the requirement that the new facts should prove this beyond reasonable doubt (para 44); and it gives section 133 a meaning which is eminently practicable (para 45).
It seems to me unnecessary to decide whether Lloyd LJ was right to say in R v McIlkenny (1991) 93 Cr App R 287, 311 that the Court of Appeal is not entitled to state that an appellant is innocent a point on which Lord Phillips (at para 45) and Lord Judge (at para 251) disagree.
The all important consideration in this respect is, as Lord Phillips says, that it is for the Secretary of State, not the Court of Appeal, to decide whether there has in fact been a miscarriage of justice (and, therefore, on the innocence test, whether the fresh evidence shows beyond reasonable doubt that the defendant was innocent) and the reasons given for quashing the conviction are unlikely to leave any doubt of this (para 46).
As, moreover, Lord Phillips observes (at para 47) the innocence test will ensure that a guilty defendant is not compensated for the consequences of his conviction.
If I may revert to the man in the street, he would, I think, be appalled at a construction which, on the contrary, would not infrequently result in the compensation of the guilty, sometimes, as already indicated, to the extent of hundreds of thousands of pounds.
As for the factors weighing against the category 2 test, prominent amongst these is undoubtedly the converse of the point just made, the fact that it would result in very substantial compensation for many defendants who are in truth guilty.
I have already instanced (para 275 above and paras 264 and 265 of Lord Judges judgment) those whose confession statements (even if true) come to be undermined.
Equally this is so in cases where it comes to be seen that anonymous or hearsay evidence should not have been allowed (see particularly in this regard para 260 of Lord Judges judgment).
This point, indeed, can be illustrated by the facts of R v Secretary of State for the Home Department, Ex p Bateman (1994) 7 Admin LR 175 (where, as Lord Clarke notes at para 199, I was sitting in the Court of Appeal with Sir Thomas Bingham MR and Farquharson LJ).
Mr Batemans appeal for compensation failed in the event because the success of his second criminal appeal owed nothing to a new or newly discovered fact.
Obiter, however, the Master of the Rolls suggested that he had suffered a miscarriage of justice.
On an appeal out of time his conviction had been quashed because certain statements had been wrongly admitted in evidence at trial.
These were statements from important New Zealand witnesses whom he had wanted called and cross examined.
But why, I am now inclined to ask, should a successful appellant be compensated in those circumstances? The case against him might well have become more, rather than less, damning had the witnesses indeed been called and given their evidence orally (as was held should have happened).
One other case I want to mention which to my mind strikingly illustrates the dangers of adopting the category 2 construction is a recent decision of this court.
The case concerned the conviction of each of two brothers (A and B) for murder and two robberies following, as later investigations and a reference by the Criminal Cases Review Commission were to show, police misconduct of the gravest kind (most notably by colluding with the main prosecution witness).
On a second appeal some twelve years after conviction there was accordingly no dispute but that As and Bs convictions had to be quashed.
The only issue for the Court of Appeal had been whether A should be retried, this time not on the basis of the irredeemably tainted evidence given at his original trial but rather based on a series of admissions of guilt he had made following his conviction and the failure of his first appeal.
Because the decision upheld by the majority in this court was to order a retrial, the reporting of the detailed judgments both of the Court of Appeal and of this court has had to be delayed.
As, however, these judgments make plain, although B could not be retried (he having made no confession of guilt), the guilt of both was in reality plain.
True, the most critical evidence in the case against them had been that of a supergrass (without whose evidence, indeed, it was agreed that there could have been no prosecution at all), upon whose evidence the Crown could no longer rely because of the polices misconduct in conferring upon him a whole host of benefits to secure his continuing cooperation in the brothers prosecution at trial.
But his evidence had been supported by a jigsaw of other pieces of evidence.
That said, however, in the language of the majoritys category 2 test, no conviction could possibly be based upon it.
Is it then to be said that B must be compensated for the twelve years or so he spent in prison before being released at his second appeal? And, indeed, that A too would have had to be compensated had the Court of Appeal not decided to order his retrial? Will the Court of Appeal in future, when deciding at the conclusion of an out of time appeal whether the interests of justice require a retrial, have to factor in the consideration that, unless a retrial is ordered, the successful appellant will or may be found entitled to compensation under the majoritys approach to section 133?
The other centrally important consideration militating against a category 2 construction of section 133 is the difficulty indeed, to my mind, impossibility of reconciling this with the language of the section as a whole, and most especially with its requirement that the new facts establish a miscarriage of justice beyond reasonable doubt.
It seems to me nonsensical to suggest that the category 2 test is one that can sensibly be satisfied (or not) beyond reasonable doubt.
For good measure although, I accept, less conclusively the alternative basis of entitlement to compensation provided for by the section, namely a pardon, naturally connotes innocence rather than some less exacting test.
Even the language of a new or newly discovered fact (rather than fresh evidence) to my mind tends to suggest the revelation of something clear and certain namely innocence, rather than merely the undermining of the prosecutions overall case.
I entirely accept, of course, that a new fact which does so undermine this case as to show that the appellant could not properly have been convicted on the evidence in fact adduced against him may well in many cases suggest actual innocence and duly persuade the Secretary of State of this.
Lord Judge expressly recognises this at para 259 of his judgment.
But what if, say, as a result of inadmissible intercept evidence or other reliable intelligence the Secretary of State reasonably believes (perhaps, indeed, is convinced) that the appellant is in fact guilty.
Must he nevertheless compensate him? I would hope and respectfully maintain not.
Naturally I recognise that the application of the innocence test will exclude from compensation a few who are in fact innocent.
Even on the majoritys test, of course, some who are innocent will be excluded.
That, however, seems to me preferable to compensating a considerable number (although mercifully not so many as would be compensated on the category 3 approach) who are guilty.
After all, this whole compensation scheme operates by creating only a narrow and exceptional class who qualify.
The claimant qualifies only by producing a new or newly discovered fact.
And only if his conviction is quashed on a reference or an appeal out of time. (It will, indeed, often be a matter of chance whether an appeal is out of time the lawyers may simply have missed the time limit.) Why should the state not have a scheme which compensates only the comparatively few who plainly can demonstrate their innocence and, as I have shown, compensate them generously rather than a larger number who may or may not be innocent? That, at all events, is the scheme which in my opinion Parliament enacted here.
On certain of the questions raised there is nothing I wish to add to what Lord Judge has said.
I agree with him (at para 252) about the material to be considered by the Secretary of State (indeed, as to this, I agree too with what Lord Phillips says at para 36 of his judgment, subject only to applying the correct test).
I agree with all that Lord Judge says (at para 254) as to the relevance here of section 133(5A).
I agree with him too (at paras 255 and 256) about the relevance of the Strasbourg jurisprudence in this context. (It hardly needs pointing out that, were the Strasbourg cases to present a problem, they would do so no less for the majority than for the minority view.) And I agree with Lord Judges approach (at paras 266 and 267) to a new or newly discovered fact.
In common, as I understand it, with every other member of the Court, I too would dismiss Mr Adamss appeal.
Had Lord Judges and my view as to the meaning of section 133 prevailed, I would have been inclined to remit Mr MacDermotts and Mr McCartneys compensation claims to the Secretary of State for his further consideration in the light of our judgments and more particularly of Lord Kerrs masterly analysis of the facts of those two cases.
LORD WALKER
I agree with the judgments of Lord Judge and Lord Brown.
| UK-Abs | Section 133 of the Criminal Justice Act 1988 (s 133) provides that the Secretary of State for Justice shall pay compensation when a person has been convicted of a criminal offence and when subsequently his conviction has been reversed or he has been pardoned on the ground that a new or newly discovered fact shows beyond reasonable doubt that there has been a miscarriage of justice.
It was enacted to give effect to Article 14(6) of the International Covenant on Civil and Political Rights 1966 (Article 14(6)), which the United Kingdom ratified in May 1976.
Article 14(6) also refers to a miscarriage of justice.
The principal issue in these appeals was the meaning of this phrase in this context; in particular whether compensation should only be given if someone was subsequently shown conclusively to have been innocent of the offence.
The three appellants each claimed compensation following the quashing of their convictions for murder by the Court of Appeal.
In each case the claim was refused on the ground that the appellant had not shown that a miscarriage of justice had occurred.
In Mr Adams case, it was also refused on the ground that he had not shown that his conviction had been reversed by reason of a new or newly discovered fact.
Mr Adams was convicted on 18 May 1993 of the murder of Jack Royal.
His conviction was referred to the Court of Appeal in 2007 on the ground that incompetent defence representation had deprived him of a fair trial.
His representatives had failed to consider unused material provided by the police which would have assisted in undermining the evidence given by the sole prosecution witness.
The Court of Appeal found that if this had been done the jury might not have been satisfied of Mr Adams guilt, although he would not inevitably have been acquitted.
Mr McCartney was convicted of the murders of Geoffrey Agate and DC Liam McNulty, and Mr MacDermott that of DC McNulty, on 12 January 1979.
The sole evidence was their admissions during interviews with the police.
They alleged that these had been made after ill treatment and called other witnesses who claimed to have suffered similar treatment from the same group of police officers.
The judge rejected their evidence.
He had been told that a prosecution brought against one of these witnesses had not been proceeded with.
But he was not told that this was because senior officers in the Department of the Director of Public Prosecutions considered that he had been assaulted by police officers to obtain his confession and that a conviction in another case, based on a confession obtained in similar circumstances and involving one of the same officers, had been quashed.
The Court of Appeal in Northern Ireland quashed the convictions of Mr McCartney and Mr MacDermott on 15 February 2007 on the ground that this new evidence left it with a distinct feeling of unease about the safety of their convictions.
The Supreme Court unanimously dismisses the appeal of Mr Adams and by a majority (Lord Rodger, Lord Walker, Lord Brown and Lord Judge dissenting) allows the appeals of Mr MacDermott and Mr McCartney.
The majority hold that a miscarriage of justice has occurred for the purposes of s 133 when a new or newly discovered fact shows conclusively that the evidence against a defendant has been so undermined that no conviction could possibly be based upon it.
Miscarriage of justice Miscarriage of justice was a phrase capable of a number of different meanings.
It was useful to consider four categories of cases in which the Court of Appeal would quash a conviction on the basis of fresh evidence: Where it showed a defendant was innocent of the crime (category 1) Where it was such that, had it been available at the time of the trial, no reasonable jury could properly have convicted the defendant (category 2) Where it rendered the conviction unsafe in that, had it been available at the trial, a reasonable jury might or might not have convicted the defendant (category 3) Where something had gone seriously wrong in the investigation of the offence or the conduct of the trial resulting in the conviction of someone who should not have been convicted (category 4) [9] The primary object of s133, and of Article 14(6), was clearly to compensate a person who had been convicted and punished for a crime which he did not commit.
A subsidiary objective was not to compensate someone who had in fact committed the crime [37].
Category 4 fell outside this purpose as it dealt with abuses of process so shocking that the conviction should be quashed even if it did not put in doubt the guilt of the convicted person [38].
Category 3 was also outside s 133 because the miscarriage of justice had to be shown beyond reasonable doubt.
Category 3 would include a significant number who had in fact committed the offences, as an inevitable consequence of a system which required guilt to be proved beyond reasonable doubt [42].
Category 1 cases were clearly covered by s 133.
However, the majority (Lord Phillips, Lord Hope, Lady Hale, Lord Kerr and Lord Clarke) held that the ambit of s 133 was not restricted to category 1 as it would deprive of compensation some defendants who were in fact innocent but could not establish this beyond reasonable doubt.
A wider scope was plainly intended at the time of the drafting of Article 14(6).
Even though it would not guarantee that all those entitled to compensation were in fact innocent, the test for miscarriage of justice in s 133 (in more robust terms than category 2) was as follows: A new or newly discovered fact will show conclusively that a miscarriage of justice has occurred when it so undermines the evidence against the defendant that no conviction could possibly be based upon it [55].
A miscarriage of justice in a case of that kind would be as great as it would have been if he had in fact been innocent, because in neither case would he have been prosecuted at all [102].
Four justices dissented on this issue.
Lord Judge considered that the words beyond reasonable doubt in s 133 meant that the miscarriage of justice was the conviction and incarceration of the truly innocent [248].
Lord Brown considered that there was no logical or principled dividing line between categories 2 and 3 [274] and the arguments in favour of an interpretation limited to category 1 were compelling [277].
Lord Rodger agreed with Lord Brown, and Lord Walker agreed with Lord Brown and Lord Judge.
Application of s 133 to cases involving a retrial An amendment to s 133 (subsection 5A) which referred to a retrial changed the timetable for a claim for compensation.
It did not mean that compensation was payable in every case in which a retrial had been ordered and the defendant then acquitted, as was argued by counsel for the intervener Barry George.
The same test was to be applied.
The amendment allowed for the possibility that something might emerge in the retrial which would require compensation [104].
New or newly discovered fact Lord Phillips (with whom Lady Hale, Lord Kerr and Lord Clarke agreed) held that the phrase new or newly discovered fact should be interpreted generously in accordance with the effect given to Article 14(6) by legislation in Ireland as including facts the significance of which was not appreciated by the convicted person or his advisers during the trial [60].
Lord Hope disagreed, considering that material disclosed to the defence by the time of the trial could not be said to be new and the focus on the state of mind of the convicted person went too far [107].
Lord Judge (with whom Lords Brown, Rodger and Walker agreed) preferred an approach which coincided with the test for admission of fresh evidence before the Court of Appeal, which required a reasonable explanation for the failure to adduce the evidence at the trial.
This had been satisfied by Mr Adams in his case [281].
Disposal of the appeals Mr Adams appeal was unanimously dismissed on the ground that his was a category 3 case and did not fall within s 133.
The majority allowed the appeals of Mr McCartney and Mr MacDermott as it had been shown conclusively that the evidence against them had been so undermined that no conviction could possibly be based upon it.
The minority would have remitted their cases to the Secretary of State for further consideration in the light of the judgment.
|
This appeal is concerned with the validity of a patent which claims the nucleotide sequence of the gene which encodes for a novel protein (and which has further associated claims).
Although there is an insufficiency issue, which I will consider at the end of this judgment, the primary issue on this appeal raises a difficult question, namely the way in which the requirement of industrial applicability in Articles 52 and 57 of the European Patent Convention (the EPC) extends to a patent for biological material.
While this issue can be said to raise an important question of principle, its resolution is inevitably fact sensitive, and therefore any answer may be of limited value in other cases.
Further, the issue arises in the context of a fast developing field, which requires a court to approach it with caution.
The need for caution is reinforced by the fact that the answer may give rise to potentially far reaching consequences for scientific research, the biotech industry, and human health.
On the other hand, for those very reasons, it is particularly important that the law in this area is as clear, consistent and certain as possible.
The patent in suit
The patent in suit (the Patent) is European Patent (UK) 0,939,804.
It describes the encoding nucleotide, the amino acid sequence, and certain antibodies, of a novel human protein, which it calls Neutrokine , and includes contentions as to its biological properties and therapeutic activities, as well as those of its antibodies.
These contentions are predictions, which are substantially based on the proposition that Neutrokine is a member of the TNF ligand superfamily.
The application for the Patent was filed by Human Genome Sciences Ltd (HGS) on 25 October 1996, and it was granted by the Examining Division of the European Patent Office (the EPO) to HGS on 17 August 2005.
Accordingly, the Patents validity is to be judged as at October 1996.
For present purposes, it is unnecessary to go into the claims or the description of the Patent in much detail.
The claims, although not in their final form as allowed by the Technical Board of Appeal of the European Patent Office, are set out in an appendix to the judgment of Kitchin J at first instance, [2008] EWHC 1903 (Pat), [2008] RPC 29.
The centrally important claim for present purposes is Claim 1, which essentially extends to the encoding nucleotides of the gene of Neutrokine .
The specification, or description, of the Patent is well summarised by Kitchin J at [2008] RPC 29, paras 100 133.
It is confusingly long, diffuse, and widely expressed, running to over 25 closely typed pages, and nearly 200 paragraphs of descriptive text, and a further twelve pages of sequences of polypeptide amino acids and DNA nucleotides.
Also, as Kitchin J said, the specification contains extravagant and sometimes contradictory claims [2008] RPC 29, para 134.
Perhaps rather more tolerantly, the Technical Board of Appeal of the European Patent Office (the Board) referred to the Patent as having been drafted on a boiler plate basis, which it described as a practice used by patentees T 0018/09 Neutrokine/Human Genome Sciences, para 27.
The specification begins by explaining that Neutrokine is a new protein, and a member of the TNF ligand superfamily of cytokines, which are proteins which act as inter cellular mediators in inflammation and other immune responses.
It states that all the known members of that superfamily are involved in regulation of cell proliferation, activation and differentiation, including control of cell survival or death by apoptosis or cytotoxicity.
The specification also explains that the first identified member of the superfamily is known as TNF , which was isolated in 1975 and whose encoding gene was sequenced in 1985.
By 1996, it was clear that TNF had a variety of effects on different cell types, which the specification describes as including immunoregulatory actions including activation of T cells, B cells, monocytes, [and] thymocytes .
Accordingly, it is claimed, there is a need to provide cytokines similar to [TNF ] that are involved in pathological conditions.
The specification goes on to reveal the existence and structure of Neutrokine , to claim it as a member of the superfamily, and to explain that it is expressed in neutrophils in kidney, lung, peripheral leukocyte, bone marrow, T cell lymphoma, B cell lymphoma, activated T cells, stomach cancer, smooth muscle, macrophages and cord blood tissue.
The specification then describes the claimed invention as potentially useful for the diagnosis, prevention, or treatment of an extraordinarily large and disparate number of, sometimes widely expressed, categories of disorders of the immune system, and other conditions and actions, either through Neutrokine itself or through its antagonists.
However, nowhere in the Patent is there any data or any suggestion of in vitro or in vivo studies, so there is no experimental evidence to support any of those suggestions.
Among its many contentions, the specification states that, [l]ike other members of TNF family, Neutrokine exhibits activity on leukocytes including for example monocytes, lymphocytes and neutrophils, and so is active in directing the proliferation, differentiation and migration of these cell types.
These activities are said to be useful for immune enhancement or suppression, myeloprotection, stem cell mobilization and treatment of leukemia.
The specification also discusses the tissues in which Neutrokine is expressed, and goes on to state that, because Neutrokine belongs to the TNF superfamily, it will have a wide range of anti inflammatory activities and may be suitable to be employed as an anti neovascularizing agent to treat solid tumors by stimulating the invasion and activation of host defense cells, e.g., cytotoxic T cells .
It is also said that Neutrokine may be suitable to be employed to enhance host defenses against resistant chronic and acute infections and also to inhibit T cell proliferation or for the treatment of T cell mediated auto immune diseases and lymphocytic leukemias.
In very summary terms, the disclosure of the Patent thus includes the following features: (i) the existence and amino acid sequence of Neutrokine , (ii) the nucleotide sequence of the gene encoding for Neutrokine , (iii) the tissue distribution of Neutrokine , (iv) the expression of Neutrokine by its mRNA (the encoding gene) in T cell and B cell lymphomas, and (v) the information that Neutrokine is a member of the TNF ligand superfamily.
Technical background to the Patent
The teaching in the specification must, of course, be read through the eyes of the notional addressee (or the person skilled in the art), an appropriately skilled person or group of persons, as at October 1996.
In that connection, the Judge said this at [2008] RPC 29, paras 30 and 32: 30.
The Patent is directed to a team of people with about two years of post doctoral experience.
It would include a molecular biologist familiar with routine techniques of cloning, expression and sequencing of genes and proteins; a biochemist to make and purify recombinant proteins; and a biologist or immunologist with experience of the TNF superfamily and with the skills necessary to generate and test antibodies.
I am also satisfied that any team interested in identifying a new member of the TNF superfamily would carry out a literature search to gather as much knowledge as possible about the existing members. 32. [T]he skilled team looking for a new member of the TNF superfamily would have been aware that the science of bioinformatics could provide assistance in the search and, if a bioinformaticist was not already a member of the team, would have considered it worthwhile to consult such a person.
Accordingly, particularly in the light of the last sentence of the first of those two paragraphs, recourse must be had not only to the common general knowledge as at October 1996, but also to the results of any research into the literature which such notional addressees could be expected to carry out as at that time.
While a fuller explanation of the background and technique of bioinformatics, referred to in the passage quoted in para 11 above, was provided by the Judge at [2008] RPC 29, paras 78 99, I shall attempt a very brief explanation in the ensuing five paragraphs.
DNA molecules are found in virtually every human and mammalian cell.
They consist of a long chain of units called nucleotides, many of which encode, via a related molecule called RNA, for proteins through specific regions known as genes.
A gene is a stretch of DNA, which normally includes non coding regions as well as protein encoding regions.
RNA is made from DNA, and the non coding regions are removed as the RNA is processed into mature messenger RNA (mRNA). mRNA thus contains the protein encoding regions of a gene. mRNA is unstable outside the cell so it is copied in the laboratory to produce the more stable cDNA.
Proteins consist of a chain (or sometimes linked chains) of amino acids, and, in mammals, they perform many essential functions in the body; they include, for instance, insulin and erythropoietin.
There are four different nucleotides, and contiguous groups of three specific nucleotides in DNA encode either for a specific amino acid or to indicate the end of a particular encoding exercise (known as protein translation).
The result of the translation process is often a linear strand of amino acids, which is called a polypeptide, and which folds up to form a functional protein.
The sequence of nucleotides in DNA which encodes the amino acid sequence of a particular protein is the encoding gene of that protein.
Part of the relevant art is to identify the gene of a particular protein, and to discover in which body tissues that gene is switched on so as to express the protein.
Traditional wet lab experiments as at 1996 included the use of Expressed Sequence Tags (ESTs), which are usually relatively small pieces of cDNA, in attempts to identify novel protein encoding genes.
However, EST cDNAs normally do not encompass the entire sequence of the original mRNA, and consequently do not give complete DNA sequence information.
Therefore, it was often very difficult to derive the correct or complete protein amino acid sequence (and hence to the identity of the protein) from such experimental strategies.
In the early 1990s, a new technique, known as bioinformatics, was developed.
It relies upon what Kitchin J described as the considerable increase in the amount of DNA and amino acid sequence data created and stored in publicly accessible databases and a parallel increase in the power of computers [2008] RPC 29, para 6.
Bioinformatics enables researchers to identify genes (and the proteins for which they encode) by comparing their sequences with previously identified and characterised genes.
However, it is not possible to determine, at least conclusively, the actual activity of any gene or protein identified by this technique until after the gene has been cloned and the resultant protein has been subjected to in vitro and in vivo assays.
As the Judge explained at [2008] RPC 29, para 75, Assays are essential to determine the activities and functions of a cytokine.
They are also necessary to determine whether any putative therapeutic is effective.
The immune system is the bodys defence mechanism against infection, which, in technical terms, involves the body being attacked by foreign bodies known as pathogens (bacteria, viruses, fungi, parasites).
The system is based on white blood cells (or leukocytes), of which there are various types, including lymphocytes.
Lymphocytes recognise and interact with structures on, or derived from, pathogens known as antigens.
Two types of lymphocyte based mechanism are relevant for present purposes; they are: (i) The development (in the bone marrow, in the case of adults) of type B lymphocytes (B cells), which produce antibodies, which are molecules which bind to specific antigen sites (or epitopes) on the surface of specific pathogens, in order to clear those pathogens from the body, and (ii) The development (in the thymus) of type T lymphocytes (T cells), which directly react with epitopes derived from specific pathogens, again in order to clear those pathogens from the body.
Once a new protein is found and identified, it is relatively easy for those skilled in the art to generate antibodies (or antagonists, which for present purposes can be treated as being the same thing), but it can be much more difficult to produce useful pharmaceuticals as a result.
The production of a useful pharmaceutical from an antibody can be seen as initially involving three steps, namely (i) finding a murine antibody which is derived from a single B cell and which neutralises a particular antigen, (ii) ensuring that that antibody does not bind to other antigens, (iii) conversion of the murine antibody so that it can be effective in humans.
This often involves engineering it so that it is not recognised and eliminated by the human immune system.
Further to this, extensive clinical trials are required to confirm its efficacy in human disease.
A more detailed explanation of the immunology may be found in Kitchin Js judgment, [2008] RPC 29, paras 34 50.
A family or superfamily of proteins is a group of proteins, all of which enjoy a significant degree of homology, i.e. they all have certain specified structural characteristics.
Although the distinction is not always observed, members of a particular family will normally have close structural similarity and similar functions, whereas members of a particular superfamily, while retaining related structural characteristics, will often be more distantly related and will include members which have similar functions but also may include members with different functions.
However, even that is an over simplification, as, in some cases, proteins will have pleiotropic functions, that is to say a multitude of different effects on different cell types, driving multiple biological processes per Kitchin J at [2008] RPC 29, para 71.
Accordingly, there will be cases where members of a family or superfamily have some functions which are common to all (or a majority) of the members, and other characteristics which are unique to one member (or a few members).
The TNF superfamily is sufficiently described for present purposes as consisting of certain cytokines with common structural molecular characteristics.
The nature of those characteristics need not be particularised for present purposes (they are described by Kitchin J at [2008] RPC 29, paras 53 56).
As the Patent records, the founding member of the superfamily was TNF , which, by 1996, had long been known as a cytokine with a significant role in regulating immune cells; at least eight other members of the family had been found, including one called TNF .
At [2008] RPC 29, para 71, Kitchin J stated that the following features would have been appreciated by the notional addressee of the Patent about members of the TNF ligand superfamily as at October 1996: i) They were all expressed by activated T cells and some by other [types of cell]. ii) Their activities were mediated by binding to receptors, of which a number had been identified. iii) They were known to have pleiotropic actions .
Some of those activities were understood to be unique to particular TNF ligands and others were understood to be shared by some or all the other TNF ligands. iv) They all played a role in the regulation of T cell proliferation and T cell mediated immune responses [and they all co stimulated T cell proliferation [2008] RPC 29, para 65]. v) Some of the ligands played a role in the regulation of B cell proliferation and antibody secretion and some took part in T cell dependent regulation of B cells. vi) Some of the ligands had an ability to induce cell death by necrosis or apoptosis. vii) TNF and TNF were functionally linked as primary mediators of immune regulation and inflammatory response. viii) It had been suggested that various ligands were associated with a very wide range of particular disease states .
But no disease had been identified in which all the ligands were involved. ix) TNF was the only ligand shown to have a therapeutic application; that being for the treatment of rheumatoid arthritis through the use of a specific monoclonal antibody.
Earlier in his judgment, at [2008] RPC 29, paras 62 68, the Judge had described what a person skilled in the art would have been expected of a new member of the TNF ligand superfamily as at October 1996.
Such a person would have anticipated that one of the activities of any new member [of the TNF ligand family] would relate to T cells.
Such a new member would also have been expected to have the same roles, to some degree, as existing members, roles which included involve[ment] during lymphoid or thymic development, T cell mediated immune responses, T cell dependent help for B cells or humoral B cell activity, and being a co stimul[ant] of T cell proliferation.
It was also clear that an effect on B cell proliferation and involve[ment] with distinct human diseases would also have been anticipated as a possible property of a new member of the TNF ligand superfamily.
The Judge also said this: 72. [I]t was appreciated that further studies were both needed and desirable to identify further ligands in the TNF superfamily and, in relation to each ligand, to seek to identify its unique and redundant biological functions.
There was undoubtedly an incentive to do so, because of their apparent roles in the regulation of the immune system and inflammatory response, their possible involvement in various different diseases and so also, in due course, their potential as therapeutic agents.
The rewards were potentially very great. 74 [T]he reality [was] that pharmaceutical companies and academic institutions were indeed looking for further members of the TNF ligand and receptor superfamilies and seeking to elucidate their various biological functions and roles in disease states, ultimately with a view to developing a therapeutic or diagnostic product, if possible.
The proceedings in the EPO and in the English courts
The central issue both in the High Court proceedings before Kitchin J and in the opposition proceedings before the EPO was whether, in the light of the common general knowledge at October 1996, by disclosing the facts summarised in para 10 above (namely the existence and structure of Neutrokine , the sequence of its encoding DNA, its tissue distribution, its expression, and its membership of the TNF ligand superfamily), the Patent satisfied Articles 52 and 57 of the EPC so as to enable HGS to claim the encoding gene for Neutrokine .
Article 52 of the EPC provides that an invention cannot be patented unless it is susceptible of industrial application.
Article 57 of the EPC (Article 57) goes on to state that an invention is susceptible of industrial application if it can be made or used in any kind of industry, including agriculture.
In its various decisions discussed below, the Board always refers to Article 57 alone, and I will adopt the same approach.
After the grant of the Patent to HGS, it was the subject of opposition proceedings brought in the EPO by Eli Lilly and Company (Eli Lilly).
Following an oral hearing before the Opposition Division of the EPO (the OD) in June 2008, the Patent was revoked on the basis that the claimed invention constituted, as the Judge put it, a claim to an arbitrary member of the TNF ligand superfamily without a known function.
HGS appealed against the ODs decision to the Board, which, after a hearing lasting around a day and a half, in a decision given on 21 October 2009, allowed the appeal.
The Boards decision was, in very summary terms, based on the ground that the notional addressee of the Patent would have appreciated that, in the light of the common general knowledge of the TNF ligand superfamily and its properties, Neutrokine would, as the Patent states, be active in directing the proliferation, differentiation, and migration of [T cells], and that was a sufficient function to vindicate the Patent under Article 57 see T 0018/09, paras 23 24.
Accordingly, the Board referred the case back to the OD with a direction that the Patent be maintained.
Meanwhile, Eli Lilly brought parallel proceedings in the High Court for revocation of the Patent in this jurisdiction.
The proceedings came before Kitchin J, who, after a hearing held over some thirteen days, decided to revoke the Patent.
His decision was, again in very summary terms, based on the conclusion that, in the light of the common general knowledge, the notional addressee of the Patent would have concluded that the functions of Neutrokine were, at best, a matter of expectation and then at far too high a level of generality to constitute a sound or concrete basis for anything except a research project see [2008] RPC 29, para 234.
Kitchin Js decision was given on 31 July 2008, after the decision of the OD, but before HGS had appealed to the Board.
HGS appealed against Kitchin Js decision to the Court of Appeal, who, on 9 February 2010, dismissed the appeal [2010] EWCA Civ 33, [2010] RPC 14.
The Court of Appeals reasoning effectively followed and approved that of Kitchin J, although it was given after the ruling of the Board.
In his judgment, with which Hallett LJ and Lewison J agreed, Jacob LJ discussed the reasoning of the Board in T0018/09.
It is, of course, against the decision of the Court of Appeal which HGS now appeal.
HGSs case on this appeal is that, notwithstanding Kitchin Js impressively full and careful analysis of the law, the relevant technology, the Patent and the expert evidence, and its affirmation by the Court of Appeal, his decision that the Patent failed to satisfy Article 57 was wrong.
That case effectively mirrors the reasoning of the Board in T0018/09.
In summary, HGS contends that the reasoning of the Board was correct, and that it shows that Kitchin J and the Court of Appeal set too high a standard for industrial applicability in the context of a patent for biological material.
HGS and Eli Lilly each rely on the jurisprudence of the Board prior to the decision in T 0018/09 as to the way in which the requirement of industrial applicability extends to biological material patents, as did both Kitchin J, and the Board itself in T 0018/09.
Kitchin J also referred to some domestic jurisprudence and to decisions of courts in the United States.
It was also suggested below that the Biotech Directive (99/44EC) (the Directive) was of some assistance.
The Directive, and domestic and US jurisprudence
Article 5 of the Directive confirms that a naturally occurring gene is patentable, but states that [its] industrial application must be disclosed in the patent application.
As Jacob LJ put it, However clever and inventive you may have been in discovering a gene sequence, you cannot have a patent for it or for the protein for which it encodes if you do not disclose how it can be used [2010] RPC 14, para 57.
It was common ground that the Directive cannot alter the meaning of Article 57 (both because it came into force after 1996, and because the EPC extends to countries outside the EU).
While that may not prevent the Directive being of some assistance in a case where Article 57 is in play in relation to a patent for biological material, it seems to me that it is not helpful in the present case, as it begs the central question, namely how far an applicant for a patent for biological material has to go in disclosing industrial application.
Jacob LJs pithy formulation at [2010] RPC 14, para 57, cited in para 35 above, applies equally to Article 57 before the Directive came into force as it does afterwards.
So far as the cases in this jurisdiction are concerned, as Kitchin J said at [2008] RPC 29, para 186 [t]here is very little authority on the topic of industrial applicability: only a brief and very general comment from the Court of Appeal in Chiron Corp v Murex Diagnostics Ltd [1996] RPC 535, 607 608, and a decision in 2005 of a Divisional Director acting for the Comptroller of UK Patents, Aeomicas Application BL O/286/05, which analysed the issue more fully.
In my view, neither case provides any assistance to the problem raised on this appeal.
The conclusions in both Chiron [1996] RPC 535 and Aeomica BL O/286/05 appear equally consistent with HGSs and Eli Lillys contentions, the observations in the former case are at a high level of generality, and the reasoning in the latter case rests on the US jurisprudence.
As for the US courts, their approach to the question of what constitutes any new and useful composition of matter under section 101 of 35 USC was considered by the US Supreme Court in Brenner v Manson 383 US 519 (1966) 534 536, and by the US Court of Appeals for the Federal Circuit in Fisher v Lalgudi 421 F 3d 1365 (2005) (and both decisions are discussed and quoted from by the Judge at [2008] RPC 29, paras 218 224).
The analyses in the US cases deserve great respect, and it is interesting to note that, in Fisher 421 F 3d 1365, the US Court of Appeals referred to a requirement that an invention is useful to the public as disclosed in its current form as opposed to prov[ing] useful at some future date after further research, and that the invention can be used to provide a well defined and particular benefit to the public.
However, there are obvious risks in relying on US jurisprudence when considering the precise nature of the requirements of Article 57 in relation to a claim for a patent for biological material under the EPC.
There have been moves over the past fifty years (and more) to harmonise patent law across jurisdictions (the EPC and TRIPS the Trade Related Aspects of Intellectual Property Protection being two important examples), and it is a laudable aim to seek to ensure that all aspects of the law of patents are identical throughout the world.
However, the achievement of such an aim is plainly not currently practicable, and, although they have a great deal in common, there are significant and fairly fundamental differences (over and above the different words used in Articles 52 and 57 of the EPC and section 101 of 35 USC) between US patent law and the EPC (two notorious examples being the first to file rule in Europe, and file wrapper estoppel in the US).
Accordingly, particularly when it comes to a nice question such as the precise delineation of boundaries between patentability and unpatentability on the ground of industrial application, it would be unsurprising if the law was not identical under the two jurisdictions.
In the event, as both parties to this appeal acknowledge, it is in the jurisprudence of the EPO, and in particular that of the Board, that the applicable principles are really to be found.
So I now turn to that jurisprudence.
The Boards jurisprudence on Article 57 and biological material
There are a number of decisions of the Board prior to its decision in relation to the Patent, which are of importance to the present appeal.
In their oral arguments, the parties concentrated on two of them, T 0870/04 BDP1 Phosphatase/ Max Planck, on which Eli Lilly placed reliance, and T 0898/05 Hematopoietic receptor/ZymoGenetics, from which HGS sought to derive assistance.
However, because it is important to establish the nature and ambit of the approach which the Board has adopted to the application of Article 57 to patents for proteins and their encoding genes, it is, in my view, necessary to consider all the decisions to which we were referred.
I also consider that it is necessary to quote a number of passages from the decisions.
As both parties accept, the reasoning of the Board in those decisions contains the principles applicable to this appeal, but they disagree as to the precise nature of those principles.
In T 0870/04, decided on 11 May 2005, the Board upheld the rejection by the Examining Division of the EPO (the ED) of an application which disclosed BDP 1, a new polypeptide, said to be a member of the so called PTP PEST family.
The application suggested that PTP PESTs played an important role in certain specified cellular functions, and were possible candidate anti cancer proteins.
It also disclosed that BDP 1 was expressed in most tissues and cell lines, particularly in epithelium origin cell lines and in cancer cell lines.
The Board began its reasoning by giving some general guidance.
At T0870/04, para 3, it said that the concept of industry in Article 57 was very broad, extending to all activities carried out for for financial (commercial) gains.
In the following paragraph, it explained that a practical application of the invention has to be disclosed so that there is some profitable use for which the [claimed] substance can be employed.
Turning to the disclosure in the particular application, the Board pointed out at T 0870/04, paras 11 12 (and in the light of the subsequent jurisprudence, I draw particular attention to para 12): 11. [T]he application does not explicitly disclose the specific nature and the possible significance of [the] suggested roles for BDP1. [T]he application stops short of suggesting, let alone identifying, an anti cancer activity for BDP1 or a therapeutic use of BDP1 as a tumour suppressor agent.
There is no evidence as to whether BDP1 plays a passive role or an active role in cancer. 12.
Nor can the identification of BDP1 as a PTP PEST be taken as any clear indication of its function or use, as the prior art does not attribute clear functions to PTP PESTS as a class.
At T 0870/04, paras 21 22, the Board concluded: 21. [A]lthough the present application describes a product (a polypeptide), means and methods for making it, and its prospective use thereof for basic science activities, it identifies no practical way of exploiting it in at least one field of industrial activity.
In this respect, it is considered that a vague and speculative indication of possible objectives that might or might not be achievable by carrying out further research with the tool as described is not sufficient for fulfilment of the requirement of industrial applicability.
The purpose of granting a patent is not to reserve an unexplored field of research for an applicant. 22.
The present case is already on the [wrong] side of the borderline. [T]he only practicable use suggested is to use what is claimed to find out more about the natural functions of what is claimed itself.
This is not in itself an industrial application, but rather research undertaken either for its own sake or with the mere hope that some useful application will be identified.
Shortly after this, on 28 June 2005, the Board decided T 1329/04 Factor 9/John Hopkins, in which it again upheld the EDs refusal of a patent application.
At T 1329/04, para 4, the Board embarked on its familiar problem/solution approach, and described the problem to be solved as isolating a further member of the TGF superfamily, whose established members it described as [having] influence on a wide variety of differentiation processes such as adipogenesis, myogenesis etc.
The Board went on to say that the patents claimed solution was the nucleotide sequence encoding for the claimed polypeptide, and described the issue as being [w]hether or not the problem has been plausibly solved.
The Board concluded on this issue at T 1329/04, para 11, in a passage which illuminatingly indicates what was lacking in the application: [A]s a significant structural feature fails to be identical in TGF 9 and the members of the TGF superfamily, and no functional characterisation of TGF 9 is forthcoming in the application, it is concluded that the application does not sufficiently identify this factor as a member of this family i.e. that there is not enough evidence in the application to make at least plausible that a solution was found to the problem which was purportedly solved.
The Board added at T 1329/04, para 12, that even if supplementary post published evidence may in the proper circumstances also be taken into consideration, it may not serve as the sole basis to establish that the application solves indeed the problem it purports to solve.
In T 0604/04 PF4A receptors/Genentech, decided on 16 March 2006, the Board allowed an appeal from the OD where the claim was to certain polypeptides on the ground that they were members of the PF4AR family of chemokine receptors.
At T 0604/04, para 6, dealing with the issue of inventive step, and having accepted that there is no absolute certainty that the [claimed] polypeptides are receptors for members of the PF4A family of cytokines to which IL 8 belongs, the Board said that [certain] structural features make it plausible that this is indeed the case.
In the following paragraph, the Board expressly distinguished T 1329/04, where it was not accepted that the polypeptide then claimed was a member of the TGF superfamily.
Dealing with Article 57, the Board said this at T 0604/04, para 13: In summary, the patent in suit identifies applications for the claimed polypeptides which may ultimately lead to some profitable use.
It provides a structural characterisation which enables their assignment to the category of receptors which bind members of the PF4A family of chemokines and, insofar, indicates what their function might be.
Yet, in the absence of any characterisation of their ligands, this function remains at best incompletely understood.
After referring to T 0870/04, the Board said at T 0604/04, para 15: [T]he technical data provided in respect of the [claimed] polypeptides . fall somewhat short of fulfilling them insofar as, as already above mentioned, there is no evidence available as to which ligands these polypeptides bind to.
Yet, of course, each case has to be considered on its own merit and it is important here to take into account the common general knowledge at the priority date as well as the then prevalent attitude of the person skilled in the art as it may be inferred from the documents illustrating this common general knowledge.
At T 0604/04, para 16, the Board said that, as at the priority date: chemokines were already known as mediators of the inflammatory response, a role which most of them were thought to play, in particular, through a biological interaction of the chemokines with the cells which they attract which involves binding to the receptors present on the cell surface.
Thus, the skilled person would understand that any role of a given chemokine was reflected in its receptor.
At T 0604/04, para 18, the Board concluded that: It is clear that chemokines as a family were considered not only to be interesting in fundamental research but also as important for the pharmaceutical industry irrespective of whether or not their role had been clearly defined.
It follows that their receptors must have been considered equally important since the mode of action of chemokines is through their receptors.
It is, thus, reasonable to conclude that the [claimed polypeptides] which exhibit the characteristics of receptors of members of the PF4A family of cytokines would have been regarded as important to the pharmaceutical industry, i.e. that industrial applicability may be acknowledged.
The Board also said at T 0604/04, para 22 that in its judgment, and in the absence of any evidence to the contrary, the patent specification provides adequate experimental instructions for the skilled person to be able to reproduce without undue burden the [claimed] polypeptides .
I turn now to the Boards decision on 7 July 2006 in T 0898/05.
This was an appeal against the EDs refusal of a patent application, which disclosed the nucleotide sequence and the encoded amino acid sequence of a polypeptide and receptor, Zcytor1, and claimed inter alia the encoding nucleotide and the polypeptide.
As in T 0870/04, the Board made some general observations at the outset.
Thus, at T 0898/05, para 4, after referring to the reasoning in T 0870/04, the Board said that a patent application [must describe] its subject invention in sufficiently meaningful technical terms that it can be expected that the exclusive rights resulting from the grant of a patent will lead to some financial or other commercial benefit.
And in the next paragraph, the Board said that the invention claimed must have such a sound and concrete technical basis that the skilled person can recognise that its contribution to the art could lead to practical exploitation in industry.
The Board then elaborated its approach in these terms: 6. [T]he expression profitable use should be understood more in the sense of immediate concrete benefit.
This conveys, in the words concrete benefit, the need to disclose in definite technical terms the purpose of the invention and how it can be used in industrial practice to solve a given technical problem, this being the actual benefit or advantage of exploiting the invention.
The essence of the requirement is that there must be at least a prospect of a real as opposed to a purely theoretical possibility of exploitation.
Further, the use of the word immediate conveys the need for this to be derivable directly from the description, if it is not already obvious from the nature of the invention or from the background article It should not be left to the skilled reader to find out how to exploit the invention by carrying out a research programme. 7.
Accordingly, a product whose structure is given (e.g. a nucleic acid sequence) but whose function is undetermined or obscure or only vaguely indicated might not fulfil the above criteria, in spite of the fact that the structure of the product per se can be reproduced.
If a patent is granted therefor, it might prevent further research in that area, and/or give the patentee unjustified control over others who are actively investigating in that area and who might eventually find actual ways to exploit it. 8.
On the other hand, a product which is definitely described and plausibly shown to be usable, e.g. to cure a rare or orphan disease, might be considered to have a profitable use or concrete benefit, irrespective of whether it is actually intended for the pursuit of any trade at all.
Thus, although no particular economic profit might be expected in the development of such products, nevertheless there is no doubt that it might be considered to display immediate concrete benefits.
The claimed disclosure is described at T 0898/05, paras 13 16.
In summary terms, it disclosed the nucleotide sequence and the encoded amino acid sequence of the cytokine, Zcytor1, its tissue distribution, including in both B and T cells, and claims that Zcytor1 accordingly had various roles such as in proliferation, differentiation, and/or activation of immune cells and that it could therefore be useful in different therapeutic conditions, of which a fair number of different possibilities were given.
No experimental evidence was provided to support these claimed roles or uses.
At T 0898/05, para 19, the Board identified the two reasons the ED had refused the patent application.
They were (i) the use of a computer assisted alignment did not allow any concrete conclusions to be made as to the actual specific function of the protein, because such studies provided only speculation of a vague nature and no specific therapeutic or diagnostic use could be ascertained therefrom; and (ii) Zcytor1 was only a research tool whose disclosure was only the first step in the quest for industrially applicable matter.
The Board then started its consideration of the EDs two reasons for refusing ZymoGenetics application in these terms: 21.
In the present case, based on computer assisted sequence homology studies and on tissue distribution studies, the Zcytor1 receptor was identified in the application as a putative member of the hematopoietin receptor family and it was assigned a role in proliferation, differentiation and/or activation of immune cells and thus a possible role for its ligands in therapeutic conditions associated with the functioning of the immune system.
Admittedly, no experimental evidence for the suggested role of the receptor and/or its ligands is made available in the application.
Later evidence, however, confirmed this sort of educated guess, which the examining division considered to be in its own words reasonably credible. 22.
The fact that the putative function of the Zcytor1 receptor was assigned in the examples based on computer assisted methods, rather than on the basis of traditional wet lab techniques, does not mean that it has to be automatically disregarded or excluded from a careful and critical examination. [The] probative value [of such examples] has to be examined on a case by case basis regarding the nature of the invention and the prior art relating thereto.
Such methods of analysis are increasingly becoming an integral part of scientific investigations and can often allow plausible conclusions to be made regarding the function of a product before it is actually tested.
The Board then explained at T 0898/05, para 24, that the identification of the Zcytor1 receptor as a putative member of [the] hematopoietin receptor family of cytokines was based on [its] general structure, and was not called into question by anything in the Patent or by any other evidence.
The Board also said that post published evidence, which confirms the preliminary finding and actually supports the conclusion, cannot be ignored.
After quoting the EDs view that the suggested role of the Zcytor1 receptor was too vaguely defined, not least because the members of the family all obviously have different functions, the Board said this at T 0898/05, para 27: It might well be possible that members of a structurally related family have, notwithstanding their related structure, a different activity and function.
However, there is no reference to the prior art in the decision under appeal which supports such a case in the hematopoietin receptor family.
In fact, from the prior art cited in the application and concerned with this family of receptors , it may be derived that, although none of these members are precisely interchangeable in terms of their biological action, there is considerable redundancy of action as well as an ability to elicit, under certain conditions, similar biological responses.
Even more important is the fact that this prior art does not cast significant or serious doubts on the suggested role of the Zcytor1 receptor.
Thus, the assumption (or educated guess) made in the patent application is plausible.
At T 0898/05, paras 29 31, the Board concluded as follows: 29.
The function of a protein (and thus of the nucleic acid encoding it) can be seen at different levels.
These include: (i) the biochemical activity of the protein , i.e. its molecular function; (ii) the function of the protein in cellular processes , i.e. its cellular function; and (iii) the influence of those cellular processes within a multicellular organism, . this being its biological function in a broad sense. 30.
The elucidation of one of these particular levels of function might result, under certain conditions, in a straightforward industrial application, even though the other levels of activity remain completely unknown or only partially characterized.
For the purpose of Article 57 , none of these levels is more fundamental than the other ones . 31.
In the present case, the suggested role of [Zcytor1] corresponds to the level of the biological function and the practical applications or the concrete technical benefits derived therefrom are clearly disclosed in the present application, namely the stimulation of cell mediated immunity and of lymphocyte proliferation by agonist ligands of Zcytor1 and the suppression of the immune system by antagonists of the Zcytor1 receptor .
Although the details of the biochemical activity and the cellular function of the Zcytor1 receptor have not been elucidated in the application, the (therapeutic) treatments directly derivable from the biological function identified by the computer assisted method cannot be considered to be so vaguely defined that they do not suggest any therapeutic or diagnostic use.
On the contrary, the treatments referred to in the application are specifically in relation to the function plausibly attributed to the molecule, and are in the areas of rheumatoid arthritis, multiple sclerosis, diabetes mellitus, etc.
In T 1452/06 Serine protease/Bayer (10 May 2007) the Board considered and applied its reasoning in T 0870/04 and T 0898/05, when upholding a decision of the ED refusing an application claiming a patent for a polypeptide and its encoding gene.
Having said that there was no experimental evidence whatsoever in support of [the claimed] serine protease activity of the claimed polypeptide, the Board then said at T 1452/06, para 4, that such support might be provided by a (computer assisted) comparison of [the disclosed] sequence with sequences of known serine proteases and, more particularly, with the allegedly closely related sequence of [the already known] epithin.
The Board accepted, at para 6, that such support might be obtained by a straight (computer assisted) comparison of the [disclosed] sequence with the sequence of [epithin].
However, the Board pointed out that epithin is defined as a putative serine protease (original emphasis) and there was no experimental evidence in support of [its] serine protease activity nor of any other activity at all. (para 7)
In T 1165/06 IL 17 related polypeptide/Schering, decided 19 July 2007, the main issue was obviousness, but the Board also addressed the question whether the requirements of Article 57 had been satisfied, and concluded that they had.
At T 1165/06, para 14, the Board, adopting its problem/solution approach, said the technical problem to be solved can be defined as the isolation of a further polypeptide of the IL 17 cytokine family, and a nucleotide sequence encoding the polypeptide.
The appellants case was that the claimed polypeptide exhibited significant sequence similarity to the [IL 17 cytokine family which had four established members, all of] which functioned in controlling physiology,
development and differentiation of mammalian cells
At T 1165/06, para 25, the Board concluded: The sequence information provided in the application with respect to the presence in IL 174 of the characteristic cysteine spacing of the IL 17 cytokine family makes it plausible that [the claimed] polypeptide may belong to this family and have biological activities similar to those of the other family members known at the filing date, in particular CTLA 8.
This is confirmed by post published evidence filed by the appellant.
The reasoning and conclusions of Kitchin J and of the Board
As I have mentioned, in their respective decisions, both Kitchin J and the Board referred to and relied on the Boards jurisprudence, but they came to different conclusions.
It is therefore appropriate to turn to the reasoning in the two decisions in a little more detail, and in particular the identification of what the notional addressee would get from the Patent, and why the Patent did or did not satisfy Article 57.
As to the overall effect of the teaching of the Patent, it is convenient to refer to what Kitchin J said at [2008] RPC 29, paras 231 233, as the view which he expressed was very similar to that of the Board, and was not challenged in this court by HGS.
In those paragraphs, he summarised his view as to what the Patent disclosed thus: 231.
In this case I am quite satisfied that the skilled person would consider the Patent does not of itself identify any industrial application other than by way of speculation. [I]t contains an astonishing range of diseases and conditions which Neutrokine and antibodies to Neutrokine may be used to diagnose and treat and there is no data of any kind to support the claims made.
The skilled person would consider it totally far fetched that Neutrokine could be used in relation to them all and would be driven to the conclusion that the authors had no clear idea what the activities of the protein were and so included every possibility.
To have included such a range of applications was no better than to have included none at all. 232.
But that is not the end of the matter because the disclosure must be considered in the light of the common general knowledge .
The skilled person would have known that TNF was involved as a primary mediator in immune regulation and the inflammatory response and had an involvement in a wide range of diseases as septic shock, rheumatoid arthritis, inflammatory bowel disease, tissue rejection, HIV infection, and some adverse drug reactions.
He would have known that all the members of the TNF ligand superfamily identified hitherto were expressed by T cells and played a role in the regulation of T cell proliferation and T cell mediated responses.
Further, the skilled person would anticipate that the activities of Neutrokine might relate to T cells and, in particular, be expressed on T cells and be a co stimulant of B cell production; that it might play a role in the immune response and in the control of tumours and malignant disease; that it might have an effect on B cell proliferation . 233.
On the other hand, the skilled person would have also known that the members of the family had pleiotropic actions; that some of those activities were unique to particular TNF ligands and others were shared by some or all the other TNF ligands and that no disease had been identified in which they were all involved.
Moreover, the therapeutic application of TNF monoclonal antibody for the treatment of rheumatoid arthritis was believed to operate by interrupting the cytokine cascade and by controlling the recruitment and trafficking of blood cells to the joint a rather specific activity.
Eli Lillys case to the effect that the teaching of the Patent fell short of the requirements of Article 57 was accepted by Kitchin J at [2008] RPC 29, paras 230 and 234 5 (which were effectively approved by the Court of Appeal).
But before quoting them, it is appropriate to refer to three earlier passages in his judgment.
At [2008] RPC 29, para 118, the Judge accepted that the claims of the Patent in relation to Neutrokine were significant because: [T]hey reveal the importance of the identification of the tissues where [it] is expressed, the tissues where it acts, the nature of its biological activity and how that profile varies in any particular disease state.
However, no data is provided to support these claims.
Further, the variety of conditions for which the described method is said to be useful [is] puzzlingly wide and the method itself impossible to operate in the absence of any information as to the standard level of Neutrokine expressed in each of these tissues in normal conditions.
Having considered the description of the Patent, the Judge concluded at [2008] RPC 29, para 134, that there was nothing by way of experimental evidence to support the claims made and the idea that Neutrokine and [its antagonists] could be used to treat the extraordinary range of diseases identified was fanciful.
He then said that, in his view, the skilled person would come to the conclusion that the inventors had no idea as to the activity of Neutrokine when drafting the Patent and that it taught the skilled person nothing useful about its activity other than that Neutrokine is another member of the TNF ligand superfamily.
The Judge also considered in some detail the work carried out since October 1996, and concluded at [2008] RPC 29, para 176, that this work established Neutrokine s functions more clearly, and in particular that it plays a significant and particular role in the proliferation and differentiation of B cells [and] in the regulation of T cell proliferation and activation.
He went on: Neutrokine has now been shown to have an important role in the development of autoimmune disease and B cell cancers; but, at the same time, much of its biology remains unclear and is the subject of continuing study by many different research centres.
In my judgment the nature and extent of all this research work, the limited conclusions ultimately drawn and the amount of work that remains to be done point strongly to the conclusion that the therapeutic and diagnostic applications suggested in the Patent were indeed speculative.
Turning then to the passage in which he expressed his conclusions, [2008] RPC 29, paras 230 and 234 5, Kitchin J said this: 230.
I accept that the contribution made by HGS was to find Neutrokine and to identify it as a member of the TNF ligand superfamily.
However it is clear from the cases to which I have referred that simply identifying a protein is not necessarily sufficient to confer industrial utility upon it.
It may be sufficient if the identification of the protein will immediately suggest a practical application, such as was the case with insulin, human growth hormone and erythropoietin.
But if the function of the protein is not known or is incompletely understood and if no disease has been attributed to a deficiency or excess of it, then the position may well be different.
In these cases the industrial utility must be identified in some other way. 234.
Does [the] common general knowledge, taken as a whole, disclose a practical way of exploiting Neutrokine ? Or does it provide a sound and concrete basis for recognising that Neutrokine could lead to practical application in industry? In my judgment it does not.
The fact that Neutrokine might be expected to play a role in regulating the activities of B cells and T cells and play an unspecified role in regulating the immune and inflammatory response did not reveal how it could be used to solve any particular problem.
Neither the Patent nor the common general knowledge identified any disease or condition which Neutrokine could be used to diagnose or treat.
Its functions were, at best, a matter of expectation and then at far too high a level of generality to constitute a sound or concrete basis for anything except a research project. 235.
I believe this conclusion is confirmed by the activities of those in the pharmaceutical industry in the years following the filing of the application.
HGS, Lilly and Biogen (and possibly others too) carried out research programmes to try and find out where Neutrokine was expressed, where its receptors were expressed and what its activities appeared to be.
They carried out in vitro assays and animal studies and determined that it appeared to have an activity in relation to B lymphocytes with a particular biological profile.
On the basis of this work they recognised that it was an important therapeutic target some two to three years after the application for the Patent had been filed.
It is significant that in so doing they considered that its utility might lie in the treatment of B cell disorders of particular kinds.
The passage I have just quoted from Kitchin Js judgment encapsulates Eli Lillys case, and HGSs case is well summarised in the Boards reasoning at T0018/09, paras 22 26.
The first of those paragraphs sets the scene in terms of the general approach: 22.
As pointed out in T 870/04, [paras 5 and 6], in many cases the allocation of a newly found protein to a known protein family with known activities suffices to assign a specific function to the protein because normally the members of the family share a specific function.
This may be a well characterized and perfectly understood function which provides in a straightforward manner enough support for industrial applicability.
In such cases, the immediate concrete benefit is manifest.
In other cases, where the members of a protein family have different, pleiotropic effects which may even be opposite and neither completely characterized nor understood, no effect can be assigned to a new member without relying on some experimental data.
Between these two extreme situations, a variety of other situations may arise for which a detailed examination of all the facts may be required.
Indeed, this is the case for the TNF ligand superfamily.
In the next two paragraphs, the Board sought to follow that approach in
relation to the instant Patent: 23.
As known in the art and acknowledged in the [Patent], all members of the TNF ligand superfamily are known to participate in the regulation of (immune) cell proliferation, activation, and differentiation, and are involved in various medical conditions.
They are pleiotropic cytokines which display a wide range of activities and have distinctive, but also overlapping biological functions.
As acknowledged in the art, a feature common to all members (without exception) of the TNF ligand superfamily is the expression on activated T cells and the ability to co stimulate T cell proliferation In view of the assignment of Neutrokine to the family, the skilled person expects it to display this common feature, the relevant question here being whether anything in the Patent specification contradicts this expectation. 24.
The Patent specification, besides providing the undisputed structural identification of Neutrokine as a member of the TNF ligand superfamily, also provides some further relevant technical data which are fully in line with the expected properties of a member of that superfamily.
In particular, it discloses the tissue distribution of Neutrokine mRNA expression using the nucleic acid sequence encoding the Neutrokine protein, as a cDNA probe and, as expected, reports although without concrete experimental data the expression of Neutrokine in activated T cells .
It further states that (l)ike other members of TNF family, Neutrokine exhibits activity on leukocytes including for example monocytes, lymphocytes and neutrophils.
For this reason Neutrokine is active in directing the proliferation, differentiation and migration of these cell types .
This broad statement, far from contradicting the ability of Neutrokine to co stimulate T cell proliferation, actually supports it.
In the light of the common general knowledge of the TNF ligand superfamily and its properties, no serious doubts can be cast on this explicit additional information.
Nor can this information be taken as a mere theoretical or purely hypothetical assumption.
First of all, it is plausible and, secondly, there is ample post published evidence on file confirming both the presence of Neutrokine on activated T cells and its ability to co stimulate T cell proliferation.
The Board then turned to Eli Lillys contention that in view of the numerous contradictory statements and of the broad range of conditions and diseases referred to in the patent in suit, the skilled person would have disregarded such information as constituting only hypothetical assumptions or speculations, and said this at T 0018/09, para 26: When reading the patent specification, a skilled person would distinguish the positive technical information such as that mentioned above from other allegedly contradictory and broad statements found in the patent in suit, such as the wide range of activities and conditions for which Neutrokine could be useful.
This is because the skilled person realises that the description of the structure of Neutrokine , its structural assignment to the family of TNF ligands, and the reports about its tissue distribution and activity on leucocytes, are the first essential steps at the onset of research work on the newly found TNF ligand superfamily member.
In view of the known broad range of possible activities of such a molecule, the skilled person is aware of the fact that the full elucidation of all properties requires further investigations which will gradually reveal them.
In this context, the skilled person regards the long listing of possible actions of Neutrokine and of medical conditions in which it might take part as the enumeration or generalisation of the properties of the TNF ligand superfamily.
This is seen as the frame in which the newly found molecule has to be placed as one could prima facie have a reasonable expectation that most of them could in fact be present.
The Board accordingly concluded at T 0018/09, para 27 that the description of the patent delivers sufficient technical information, namely the effect of Neutrokine on T cells and the tissue distribution of Neutrokine mRNA, to satisfy the requirement of disclosing the nature and purpose of the invention and how it can be used in industrial practice.
At T 0018/09, paras 28 30, the Board then considered the arguments that in view of the technical difficulties involved in measuring the co stimulation of T cells by Neutrokine , the implementation of the teaching of the Patent would involve an undue burden, and that, in any event, no industrial application can be directly derived from a mere co stimulation of T cells.
Those arguments were also rejected.
Although the Board acknowledged that such assays had produced a few contradictory results, there was post published evidence which showed that Neutrokine activity could be reasonably easily measured in relation to both T cells and B cells.
Further, the Board said that the activities of Neutrokine , as taught by the Patent (in particular, the inhibition of co stimulation and/or proliferation of lymphocytes) may represent a valid basis for a possible industrial application.
The Board went on to say at T 0018/09, para 30, that the Patents teaching as to the expression of Neutrokine mRNA in B cell and T cell lymphomas provides in itself in the context of the disclosure a valid basis for an industrial application, adding that the presence of Neutrokine in these lymphomas, which is also confirmed by post published evidence may be used to develop appropriate means and methods for their diagnosis and treatment based on the disclosure of the [Patent].
In the next four paragraphs, the Board also rejected the contention that alleged technical problems meant that no industrial application could be derived from [the] information [in the Patent]; this was because Eli Lilly was unable to establish serious doubts, substantiated by verifiable facts, so that it was relying on mere unsupported assumptions.
Following the Boards jurisprudence
Where the EPO decides that a patent, or a claim in a patent, is invalid, then that is the end of the issue (subject, of course, to the patentee or applicant appealing to the Board) in relation to all countries which are signatories to the EPC.
Where, however, the EPO decides that a patent, or a particular claim, is valid, then, as this case shows, it is still open to a national court to decide that the patent, or claim, is invalid within its territorial jurisdiction.
In all cases, however, the EPO and each national court are, of course, applying the principles contained in the EPC.
It is plainly appropriate in principle, and highly desirable in practice, that all these tribunals interpret the provisions of the EPC in the same way.
In a number of recent decisions of the House of Lords, attention has been drawn to the importance of UK patent law aligning itself, so far as possible, with the jurisprudence of the EPO (and especially decisions of its Enlarged Boards of Appeal), to quote Lord Walker in Generics (UK) Ltd v H Lundbeck A/S [2009] UKHL 12; [2009] RPC 13, para 35.
It is encouraging that the same approach is being adopted in Germany by the Bundesgerictshof see Case Xa ZR 130/07 (10 September 2009), para 33.
However, as Lord Walker went on to explain in Generics [2009] RPC 13, para 35, National courts may reach different conclusions as to the evaluation of the evidence in the light of the relevant principles even though the principles themselves should be the same, stemming as they do from the EPC.
Thus, the EPO (or another national court) and a national court may come to different conclusions because they have different evidence or arguments, or because they assess the same competing arguments and factual or expert evidence differently, or, particularly in a borderline case, because they form different judgments on the same view of the expert and factual evidence.
As Lord Hoffmann said in Conor Medsystems Inc v Angiotech Pharmaceuticals Inc [2008] UKHL 49, [2008] RPC 28, para 3: A European patent takes effect as a bundle of national patents over which the national courts have jurisdiction.
It is therefore inevitable that they will occasionally give inconsistent decisions about the same patent.
Sometimes this is because the evidence is different.
In most continental jurisdictions, including the [EPO], cross examination is limited or unknown.
Sometimes one is dealing with questions of degree over which judges may legitimately differ.
Obviousness is often in this category.
But when the question is one of principle, it is desirable that so far as possible there should be uniformity in the way the national courts and the EPO interpret the [EPC].
Further, while national courts should normally follow the established jurisprudence of the EPO, that does not mean that we should regard the reasoning in each decision of the Board as effectively binding on us.
There will no doubt sometimes be a Board decision which a national court considers may take the law in an inappropriate direction, misapplies previous EPO jurisprudence, or fails to take a relevant argument into account.
In such cases, the national court may well think it right not to apply the reasoning in the particular decision.
While consistency of approach is important, there has to be room for dialogue between a national court and the EPO (as well as between national courts themselves).
Nonetheless, where the Board has adopted a consistent approach to an issue in a number of decisions, it would require very unusual facts to justify a national court not following that approach.
In the present instance, as discussed above, there has been little helpful domestic guidance as to the application of Article 57 to patents for biological material, but there have been a number of decisions of the Board which have addressed the topic and which at least purport to adopt a consistent approach to the issue.
It is true that there is no decision of the Enlarged Board on the instant point, but there was no such decision on the point at issue in Generics [2009] RPC 13.
But, again as in that case, there is what may be described, at its lowest, as an intended consistent approach to the issue in a number of carefully considered decisions of the Board.
Further, it is not irrelevant to mention that there is unlikely to be a decision of the Enlarged Board on the instant point in the near future, as the Board refused to make a reference in T 0898/05, para 33.
Further, while there has been some attack on the reasoning of the Board in its decision on the instant Patent, T 0018/09, both in the judgment of Jacob LJ in the Court of Appeal ([2010] RPC 14, paras 146, 155 and 156) and in the submissions on behalf of Eli Lilly in this court, there has been no attempt either here or below to suggest that the reasoning in the earlier decisions of the Board was wrong, save that Mr Waugh QC, on behalf of Eli Lilly, did make the point that decisions on appeal from the ED, perhaps particularly T 0898/05, should carry less weight as they were unopposed, or ex parte.
In relation to the Boards assessment of the factual and expert evidence in a particular ex parte appeal, I can see the force of the point.
But I am unimpressed with the point in so far as it is invoked in relation to the applicable principles.
In particular, I would reject the implicit suggestion that the Board has been too favourable to patentees in some of the decisions discussed above, as a result of the hearing being ex parte.
First, all the decisions discussed above appear to me to demonstrate a consistent approach to the issue raised on this appeal.
Secondly, those decisions include an appeal from the OD, namely T 0604/04.
Thirdly, the decision of the Board in relation to the instant Patent was from the OD, after strong opposition from Eli Lilly, and, far from resulting in the Board modifying its position, it is Eli Lillys case in this court that the Board went further in this case in favour of the patentee than in any appeal from the ED.
In these circumstances, it seems to me to be right to take the law as being that laid down in the Boards jurisprudence I have discussed.
But, of course, as explained by Lord Hoffmann and Lord Walker in the passages quoted above, this does not necessarily mandate the same outcome as the Board arrived at in T 0018/09.
It is unlikely that the Board and Kitchin J received very different arguments in the present case, in the light of the reasoning in the two decisions, and the fact that the parties in the two sets of proceedings were the same.
It is less clear how similar the evidence before each tribunal was: the witnesses were different, and there was at least one further expert witness statement (on behalf of HGS) before the Board which post dated Kitchin Js judgment.
Further, unlike before Kitchin J, there was no cross examination of witnesses before the Board.
As Jacob LJ said at [2010] RPC 14, paras 25 26, citing the well known observations of Lord Hoffmann in Biogen Inc v Medeva plc [1997] RPC 1, 45, appeals are conducted on the evidence and materials before the court of first instance and the Court of Appeal gives very considerable deference to the findings of fact of the first instance court.
So also to its value judgments.
That is all the more true of appeals to this court from the Court of Appeal, especially where, as here, there are concomitant findings (i.e. where the Court of Appeal has upheld the trial judges findings of fact and value judgments).
In these circumstances, the question which needs to be decided is whether, as the Court of Appeal held, Kitchin J followed the principles laid down by the Boards jurisprudence.
If he did, then it seems to me that it would be inappropriate to interfere with his conclusion that the Patent did not satisfy the requirements of Article 57, unless the conclusion was one which he could not reasonably have reached.
If he did not, then things would stand on a very different footing.
Before turning to that question, however, it is appropriate to mention another, and rather wider, reason for consistency of approach to patents in the biological field.
Consistency and policy: the wider picture
The BioIndustry Association (the BIA), which has intervened in these proceedings, describes itself as a trade association for innovative enterprises in the UKs bioscience sector and its membership extends to hundreds of companies with an aggregate turnover in 2010 of about 5.5bn, and around 36,000 employees.
The requirements of clarity and certainty in this area of law are emphasised by the BIA.
As its submissions also explain, after the discovery of a naturally occurring molecule, particularly a protein and its encoding gene, a large amount of research and development is required before there can be any therapeutic benefit.
It is therefore important for bioscience companies to be able to decide at what stage to file for patent protection.
Thus, If the application is filed early, [t]he company will be left with no patent protection, but would have disclosed its invention in the published patent application to competitors.
If the application is filed late, there is a risk in such a competitive environment where several companies may be working on the same type of research projects, that a third party will already have filed a patent application covering the same or a similar invention, in which case the company may not be able to gain any patent protection for its work and by continuing their programme they may risk infringing that third partys patents.
In both cases, the company will have lost much of the benefit of its costly research and development.
Similarly, funding for research and development on the potential therapeutic value of a newly discovered and characterised protein or its antibodies is dependent on the funders being reasonably confident that the patent (or patent application) concerned will be reasonably safe from attack (or likely to be granted).
It is also relevant that bioscience companies attract investment by reference to their patent portfolios, which gives rise to the same need for certainty.
As the BIA suggests, it is worth remembering the purpose of the patent system, namely to provide a temporary monopoly as an incentive to innovation, while at the same time facilitating the early dissemination of any such innovation through an early application for a patent, and its subsequent publication.
Although this is true in any sector, it has particular force in the pharmaceutical field, where even many of those who are sceptical about the value of intellectual property rights accept that there is a public interest in, and a commercial need for, patent protection.
For obvious reasons, the BIA has not set out to support either of the two parties to this appeal in its trenchant written submissions in these proceedings.
However, it does suggest that if we agree with the reasoning of the Court of Appeal there is at least a risk that it will make it appreciably harder for patentees to satisfy the requirement of industrial applicability in future cases.
If that were so, it is suggested that this would cause UK bioscience companies great difficulty in attracting investment at an early stage in the research and development process.
This consequence is said to arise from the reasoning of the Court of Appeal (and hence of Kitchin J), on the basis that there will normally be a need to conduct tests to provide experimental data to establish to the standard they require that a protein (or its antagonists) have therapeutic use.
This in turn is said to lead to two problems.
First, such tests will or may involve clinical work, which, as I understand it, would be hard to keep confidential, especially in the age of the internet.
Secondly, such tests would often be expensive to run, and, as already mentioned, funding would be hard to obtain for a project of this sort which had no protection in the form of a patent application.
Having said this, the BIA accepts that it would be wrong in principle to enable applications for patents to be made when the applicant can reveal no more than a vague indication of possible objectives that might or might not be achievable by carrying out further research.
After all, as the BIA also states, the purpose of the patents system is not to reserve an unexplored field of research for the applicant nor to give the patentee unjustified control over others who are actively investigating in that area and who might eventually find ways actually to exploit it.
Did the courts below follow the Boards jurisprudence?
As already mentioned, despite its very wide ranging and generalised suggestions as to the uses to which Neutrokine and its antibodies might be put, over and above revealing the existence and structure of the new protein and its encoding gene, the only relevant teaching of the Patent ultimately arises from its teaching as to the tissue distribution of Neutrokine , its expression in T cell and B cell lymphomas, and the fact that it is a member of the TNF ligand superfamily.
Accordingly, the question is whether the Judge was right, or at least entitled, to conclude that the inferences which would have been drawn from this in 1996 would not have been enough to satisfy Article 57.
The determination of that issue, as I see it, ultimately involves focussing on the Judges conclusion at [2008] RPC 29, para 234, quoted at para 75 above.
In that passage, he concluded that the fact that the description in the Patent, even taken together with knowledge which should be attributed to its addressee, neither reveal[ed] how [Neutrokine ] could be used to solve any particular problem nor identified any disease or condition which [it] could be used to diagnose or treat was fatal to the patents validity.
He considered that the functions of Neutrokine were, at best, a matter of expectation and then at far too high a level of generality to constitute a sound or concrete basis for anything except a research project.
My initial reaction, like that of the Court of Appeal, was that this was a conclusion to which Kitchin J, as the trial judge, who had heard a great deal of evidence, which he had impressively and cogently analysed, was entitled to come, and with which it would be inappropriate to interfere.
Standing back, it also seemed to be a conclusion which could be said to accord with good sense.
As he held in the next paragraph of his judgment (also quoted in para 75 above), it required what may fairly be characterised as a research project to enable the therapeutic qualities of Neutrokine to be identified, or, as HGS would put it, to be confirmed.
However, on further reflection, like Lord Hope, I have come to the conclusion that the basis upon which the Judge decided the issue was not consistent with the approach adopted by the Board in the decisions which are discussed above.
The essence of the Boards approach in relation to the requirements of Article 57 in relation to biological material may, I think, be summarised in the following points: The general principles are: (i) The patent must disclose a practical application and some profitable use for the claimed substance, so that the ensuing monopoly can be expected [to lead to] some commercial benefit (T 0870/04, para 4, T 0898/05, paras 2 and 4); (ii) A concrete benefit, namely the inventions use in industrial practice must be derivable directly from the description, coupled with common general knowledge (T 0898/05, para 6, T 0604/04, para 15); (iii) A merely speculative use will not suffice, so a vague and speculative indication of possible objectives that might or might not be achievable will not do (T 0870/04, para 21 and T 0898/05, paras 6 and 21); (iv) The patent and common general knowledge must enable the skilled person to reproduce or exploit the claimed invention without undue burden, or having to carry out a research programme (T 0604/04, para 22, T 0898/05, para 6); Where a patent discloses a new protein and its encoding gene: (v) The patent, when taken with common general knowledge, must demonstrate a real as opposed to a purely theoretical possibility of exploitation (T 0604/04, para 15, T 0898/05, paras 6, 22 and 31) ; (vi) Merely identifying the structure of a protein, without attributing to it a clear role, or suggest[ing] any practical use for it, or suggesting a vague and speculative indication of possible objectives that might be achieved, is not enough (T 0870/04, paras 6 7, 11, and 21; T 0898/05, paras 7, 10 and 31); (vii) The absence of any experimental or wet lab evidence of activity of the claimed protein is not fatal (T 0898/05, paras 21 and 31, T 1452/06, para 5); (viii) A plausible or reasonably credible claimed use, or an educated guess, can suffice (T 1329/04, paras 6 and 11, T 0640/04, para 6, T 0898/05, paras 8, 21, 27 and 31, T 1452/06, para 6, T 1165/06 para 25); (ix) Such plausibility can be assisted by being confirmed by later evidence, although later evidence on its own will not do (T 1329/04, para 12, T 0898/05, para 24, T 1452/06, para 6, T 1165/06, para 25); (x) The requirements of a plausible and specific possibility of exploitation can be at the biochemical, the cellular or the biological level (T 0898/05, paras 29 30); Where the protein is said to be a family or superfamily member: (xi) If all known members have a role in the proliferation, differentiation and/or activation of immune cells or function in controlling physiology, development and differentiation of mammalian cells, assigning a similar role to the protein may suffice (T 1329/04, para 13, T 0898/05, para 21, T 1165/06, paras 14 and 16, and T 0870/04, para 12); (xii) So the problem to be solved in such a case can be isolating a further member of the [family] (T 1329/04, para 4, T 0604/04, para 22, T 1165/06, paras 14 and 16); (xiii) If the disclosure is important to the pharmaceutical industry, the disclosure of the sequences of the protein and its gene may suffice, even though its role has not been clearly defined (T 0604/04, para 18); (xiv) The position may be different if there is evidence, either in the patent or elsewhere, which calls the claimed role or membership of the family into question (T 0898/05 para 24, T 1452/06, para 5); (xv) The position may also be different if the known members have different activities, although they need not always be precisely interchangeable in terms of their biological action, and it may be acceptable if most of them have a common role (T 0870/04, para 12, T 0604/04, para 16, T 0898/05, para 27).
As already explained, Kitchin J concluded that (a) the Patent discloses Neutrokine as a new member of the TNF ligand superfamily; (b) all known members of the superfamily had pleiotropic effects, (c) there were some features which all those known members shared, such as expression by T cells and a role in the regulation of T cell proliferation and T cell mediated responses; (d) however, there were other features which some family members had, but others did not; (e) it would be anticipated that the activities of Neutrokine might relate to T cells and, in particular, be expressed on T cells and be a co stimulant of B cell production; that it might play a role in the immune response and in the control of tumours and malignant disease; that it might have an effect on B cell proliferation; (f) subsequent research has confirmed that was indeed the case; (g) there was a search for new members of the family as they were of interest to the pharmaceutical industry.
In those circumstances, it seems to me that, subject to dealing with a number of specific arguments to the contrary, the disclosure of the existence and structure of Neutrokine and its gene sequence, and its membership of the TNF ligand superfamily should have been sufficient, taking into account the common general knowledge, to satisfy the requirements of Article 57, in the light of the principles which I have attempted to summarise in para 107 above.
Points (viii), (ix) and (x) appear to apply so far as the plausibility of at least some of the claims are concerned, and points (xi), (xii) and (xiii) all appear to be satisfied, given the evidence in relation to the TNF ligand superfamily (and point (xiv) cannot be invoked by Eli Lilly).
Like Lord Hope, I derive considerable assistance from the approach set out at T 0018/09, para 22, which appears to me to be entirely consistent with the Boards earlier jurisprudence (as summarised in para 107 above), and the application in the ensuing four paragraphs, of that approach to the Boards view of what constituted the centrally relevant facts, which (subject to the arguments considered in the next section of this judgment) do not appear to me to be inconsistent with the findings made by Kitchin J.
As Lord Hope says at para 152 below, the Boards conclusion was effectively this, that the disclosure of what was accepted to be a new member of the TNF ligand superfamily (coupled with details of its tissue distribution) satisfied Article 57, because all known members were expressed on T cells and were able to co stimulate T cell proliferation, and therefore Neutrokine would be expected to have a similar function.
This conclusion was supported, or reinforced, by the statement that Neutrokine was expressed in B cell and T cell lymphomas (referred to in T 0018/09, para 30), and indeed by the interest and effort in the pharmaceutical industry in finding a new member of the superfamily (as explained by Kitchin J at [2008] RPC 29, paras 72 74).
The arguments in support of the conclusion reached below
The first argument to the contrary is based on the fact that the members of the TNF ligand superfamily were known to have pleiotropic effects.
On behalf of Eli Lilly, Mr Waugh QC therefore relies on point (xv) i.e. that the claim to a new member of a superfamily is not good enough because the known members of the family have different activities.
In my opinion, that point does not apply in a case where all known members of the superfamily also manifest to a significant degree common activities which are, of themselves, enough to bring the patent within the ambit of points (xi), (xii) and (xiii).
Given that the fact that all known family members have sufficient common features to satisfy those points can justify a patent for a new member, it would seem somewhat bizarre if the fact that they had additional, but differing, qualities, should preclude the grant of such a patent.
The disclosure of a new member would not only be of greater potential value than if the additional qualities did not exist, but the reason for the grant of the patent is the perceived value of a new member because of the common features of all known members, a feature which is unaffected by the additional qualities.
I believe that this conclusion is supported not only by the Boards decision in this case, but also by the Boards conclusion in T 0898/05 that the disclosure of Zcytor1 satisfied Article 57, in circumstances where its predicted activity was based on its membership of a family.
As already explained, the Board stated that although none of these members are precisely interchangeable in terms of their biological action, there is considerable redundancy of action as well as an ability to elicit, under certain conditions, similar biological responses T 0898/05, para 27.
I also derive support from the fact that the Board in T 0604/04 was prepared to uphold a patent granted in respect of a novel molecule on the basis that it was a member of a family, only most of whose known members were thought to play [a role as] mediators of the inflammatory response; nonetheless, it was held that the evidence established that it was reasonable to conclude that the [claimed] polypeptides which exhibit the characteristics of receptors of members of the PF4A family of cytokines would have been regarded as important to the pharmaceutical industry, ie that industrial applicability may be acknowledged (see T 0604/04, paras 16 18).
A second argument raised against validity is the unsatisfactory drafting of the Patent (mentioned by the Court of Appeal at [2010] RPC 14, para 148).
If the Judge had found that the drafting of the specification of the Patent was so confusing and potentially misleading that the skilled reader would have been put off the scent in relation to what would otherwise have been appreciated from common general knowledge and reading the literature as to the potential and plausible uses to which the disclosure could be put, that may well have been a problem for HGSs case.
However, although the Judge was (in my view, rightly) critical about the drafting of the specification, he did not anywhere in his full and careful judgment say, or even suggest, that its wide ranging prolix contents would have actually diverted the notional addressees, the appropriately skilled persons, from what they would otherwise have understood the Patent to be revealing, in the light of what was appreciated about the properties of the known members of the TNF ligand superfamily.
Indeed, Mr Thorley QC, for HGS, identified passages in the evidence of Professor Saklatvala, which would have made such a finding difficult to justify.
Mr Waughs submission that the extravagant and wordy claims of the specification should count against HGS as a matter of policy has some attraction.
However, I refer again to the Boards comments at T 0018/09, para 27, cited in para 6 above.
The drafting of a patent is a ticklish business, no doubt particularly in some types of case, of which biological patents may well be an example, not least because it is a fast developing field, with substantial commercial and scientific pressures.
In the end, the question is whether the drafting of the Patent would actually have diverted the notional addressees from what their search of the literature, coupled with common general knowledge, would otherwise have led them to understand represented the teaching of the Patent.
The Board held that it would not have done so see at T 0018/09, para 26.
Given (a) the fact that the Judge made no express finding that there would have been such a diversion, (b) the evidence of Professor Saklatvala suggested that there would have been no such diversion, and (c) the way in which the Judge expressed himself at [2008] RPC 29, paras 232 and 234 (quoted respectively at paras 70 and 75 above), I would infer that Kitchin J did not think differently.
That is unsurprising, given the fact that there was fairly intense interest in the TNF ligand superfamily as the Judge held at [2008] RPC 29, paras 72 and 74 (quoted at para 26 above), and the fact that there is nothing in the description which positively points away from what was known about the family.
A third argument is based on the Judges remarks at [2008] RPC 29, paras 176 and 234, that the disclosure in the Patent as to the uses of Neutrokine , even when taken together with common general knowledge, was no more than speculative and did not give rise to an immediate concrete benefit i.e. invoking on points (ii) and (iii).
This argument (which was also relied on by the Court of Appeal see at [2010] RPC 14, para 132) proceeds on the implicit assumption that the disclosure of the Patent as summarised in para 108 above is not sufficient in itself to satisfy the requirements of Article 57.
However, if, as I consider, the effect of the Boards jurisprudence is that the sort of disclosure summarised in para 108 above does justify patentability, then the fact that the plausible predictions for the use of the invention could also be said to involve speculation takes matters no further.
If the known activities of the TNF ligand superfamily were enough to justify patentability for the disclosure of a novel molecule (and its encoding gene) which was plausibly identified as a member of that family, the fact that further work was required to see whether the disclosure actually had therapeutic benefits does not, at least without more, undermine the validity of a patent.
In other words, in agreement with Lord Hope, I think that the approach of the Board in this case, in particular at T 0018/09, paras 22 30, appears more in line with the previous EPO jurisprudence than the approach of Kitchin J and the Court of Appeal.
The Court of Appeal made much of the Boards statement that a patent should yield an immediate concrete benefit (see at [2010] RPC 14, paras 146, 149, 155 and 156).
I certainly accept that, in some cases, different tribunals can and will legitimately come to different views as to whether a particular claimed invention can satisfy the requirement of providing an immediate concrete benefit.
However, I am not persuaded that such an argument is open to Eli Lilly in this case.
In my view, the Court of Appeals approach, like that of the Judge, was implicitly predicated on the mistaken basis that it was not enough for the Patent to satisfy the requirements of points (xi) to (xiii).
Further, at least in the context of the present case, I do not consider that the Courts below gave proper weight to points (viii), (ix) and (x).
In particular, in my judgment, the Court of Appeal did not approach the concept of plausibility consistently with the jurisprudence of the Board.
That is well demonstrated by Jacob LJs observation at [2010] RPC 14, para 112, that [i]t is not good enough to say this protein or any antibody to it probably has a pharmaceutical use.
Such a statement is indeed plausible, but is of no real practical use.
You are left to find out what that use is.
If the statement is indeed plausible, then, in the absence of any reason to the contrary, it at least prima facie satisfies the requirements of Article 57 according to the Board.
I appreciate that the dividing line between plausibility and educated guess, as against speculation, just like the contrast between a real as opposed to a purely theoretical possibility of exploitation, can be difficult to discern in terms of language and application, and is a point on which tribunals could often differ. (I might add that the notion that the dividing line is not very satisfactory is illustrated by the fact that, at one point in his evidence, Professor Saklatvala effectively equiparated speculation with an educated guess.) However, as a result of the decisions discussed above, the Boards approach to patents such as that in this case is, I believe, tolerably clear.
I also consider that the Judge did not give sufficient weight to point (x), in that he concentrated on the absence of firm evidence of specific therapeutic roles, as opposed to the other roles of Neutrokine .
This is well demonstrated by his reliance in what is perhaps the crucial paragraph of his judgment, [2008] RPC 29, para 234, on the fact that [n]either the Patent nor the common general knowledge identified any disease or condition which Neutrokine could be used to diagnose or treat.
He did not, in this context, take into account the roles at other levels which could be attributed to Neutrokine as a result of its membership of the TNF ligand superfamily and their known activities. (The same point may be made about Jacob LJs judgment at [2010] RPC 14, paras 112 and 119, quoted by Lord Hope at para 150 below).
Eli Lilly also relied on the Judges finding at [2008] RPC 29, para 234 that the precise uses to which Neutrokine could be put would, on the basis of the disclosure in the Patent, involve a research project, effectively raising point (iv).
Although the Court of Appeal also relied on this point (see at [2010] RPC 14, para 149), it does not appear to me to be maintainable, essentially for the reason given in the immediately preceding paragraphs of this judgment.
I draw support for this conclusion from the Boards third reason for rejecting a similar argument raised by Eli Lilly in the EPO, namely that the skilled person would not have been able to reproduce [the activities of Neutrokine as described in the Patent] without the undue burden of undertaking a research programme.
The Board said that the disclosure of the Patent may represent a valid basis for a possible industrial application.
In particular, the inhibition of co stimulation and/or proliferation of lymphocytes might be prima facie of relevance for certain immune diseases in T 0018/09, para 29.
If a patent advances an appropriately plausible function for the claimed protein, then the question of undue burden has to be considered in relation to the making of the protein, as the Boards observation at T 0604/04, para 22 that the patent specification provides adequate experimental instructions for the skilled person to be able to reproduce without undue burden the [claimed] polypeptides shows.
A further argument, which is really another formulation of the same point, is that, as was emphasised by the Court of Appeal at [2010] RPC 14, para 152, one important reason why Kitchin J reached a different conclusion from the Board was because he concluded that the necessary assays to determine the precise role and potential of the patents disclosure would be a complex task, whereas the Board thought it would simply involve standard assays compare [2008] RPC 29, para 77, and T 0018/09, para 29 respectively.
As the Court of Appeal rightly observed, such a conflict is entirely legitimate and understandable, in view of the different evidence, the benefit of cross examination, and/or the room for difference of opinion between two tribunals.
In another case, such a difference in assessment of the evidence could well justify a difference in outcome.
But not in this case.
Once one concludes that the effect of the Boards jurisprudence is that, in the light of the common general knowledge, the disclosure of Neutrokine as a member of the TNF ligand superfamily (coupled with its amino acid and encoding gene sequences and the tissues in which it is expressed), the claims in relation to the inventions potential satisfy Article 57.
As a result, the relevance of the degree of effort needed in relation to any subsequent work falls away. (The same point undermines Eli Lillys reliance on a number of other small differences between the findings of the Judge and the Board on the expert evidence).
Conclusion on the main issue, Article 57
Accordingly, I would allow HGSs appeal on the issue as to whether the Patent satisfied the requirements of Article 57, and hold that it does.
As explained, I have reached this conclusion by applying my understanding of the jurisprudence of the Board to the facts found by Kitchin J.
However, particularly as I have stated in para 105 above that there is good sense in the contrary conclusion reached by the Judge and the Court of Appeal, it is right to emphasise that there is also good sense in the result which, at least in my view, is mandated by the Boards approach to the law in this field.
Just as it would be undesirable to let someone have a monopoly over a particular biological molecule too early, because it risks closing down competition, so it would be wrong to set the hurdle for patentability too high, essentially for the reasons advanced by the BIA and discussed in paras 97 100 above.
Quite where the line should be drawn in the light of commercial reality and the public interest can no doubt be a matter of different opinions and debate.
However, in this case, apart from the fairly general submissions of the parties and of the BIA, we have not had any submissions on such wider policy considerations.
That is not the end of this appeal, for two reasons.
First, there is an argument based on insufficiency: Eli Lilly contends that, even if the Patent satisfies Article 57, it is invalid on the ground of insufficiency, an argument which largely turns on an issue of interpretation, on which the Judge found against Eli Lilly.
Secondly, if Eli Lillys insufficiency argument fails, there remain some points decided by Kitchin J and not determined by the Court of Appeal, which it is agreed should be remitted to the Court of Appeal.
The contention that claim 1 of the Patent is insufficient
The Judge held that, in addition to failing to comply with Article 57, the Patent was invalid on the ground of insufficiency, namely that the specification does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the art [2008] RPC 29, para 238.
The basis for this conclusion was explained in these terms by the Judge at [2008] RPC 29, para 259: it would have required a research programme and been far from routine for the skilled person to produce a candidate pharmaceutical or diagnostic composition comprising an antibody to Neutrokine a, that is to say the pharmaceutical or diagnostic equivalent of a workable prototype.
Although the Court of Appeal did not consider this point, Jacob LJ did say at the end of his judgment, that he rather suspect[ed] that the insufficiency argument would go hand in hand with Article 57 [2010] RPC 29, para 159.
Subject to one point, which turns on the meaning of Claim 1 (as well as some of the other claims), it seems to me that that must be correct.
If Claim 1 is simply to the encoding gene of Neutrokine , then, subject to any other points which have yet to be decided by the Court of Appeal, the reason why I consider the Judge and the Court of Appeal were wrong to hold that Article 57 is not satisfied is the same reason for holding the claim to be sufficient.
In T 0898/05, para 6, the Board explained the close connection, indeed overlap, between Article 57 and sufficiency in a passage, of which the first sentence has already been quoted: It should not be left to the skilled reader to find out how to exploit the invention by carrying out a research programme. [This] corresponds to the requirements of Articles 57 (the need to indicate how to exploit the invention), and 83 EPC (the need to provide a sufficient disclosure of the claimed invention).
All those provisions reflect the basic principle of the patent system that exclusive rights can only be granted in exchange for a full disclosure of the invention.
However, Eli Lilly contend that the Judge was wrong to hold, as he did at [2008] RPC 29, para 137, that claim 1 is now limited to an isolated nucleic acid molecule comprising one of two sequences which are specifically disclosed and are not defined by reference to their activity.
They contend that, on its true construction, the claim requires the claimed protein, or polypeptide to demonstrate what is referred to in the specification as Neutrokine activity, and that such activity is too imprecisely defined and too difficult to establish, following the teaching of the Patent and any prior art, to be sufficient.
Claim 1, which I have not so far set out, is in the following terms: An isolated nucleic acid molecule comprising a polynucleotide sequence encoding a Neutrokine polypeptide wherein said polynucleotide sequence is selected from the group consisting of: (a) a polynucleotide sequence encoding the full length Neutrokine polypeptide having the amino acid sequence of residues [as defined]; and the (b) a polynucleotide sequence encoding extracellular domain of the Neutrokine polypeptide having the amino acid sequence of residues [as defined].
In my view, the Judge was right to conclude that the reference to a Neutrokine polypeptide was simply a reference to the polypeptide, and did not incorporate a provision that the polypeptide had certain activities.
There is no express reference in the claim to the polypeptide having any specific activities, and I see no grounds for implying into claim 1 such a provision.
There is no commercial or technical reason for implying such a provision, and, of course, it is well established that a term is only to be implied into a written document if there are strong reasons in support.
It is true that the phrase Neutrokine before the word polypeptide is strictly redundant on this basis, but that is no reason for giving the phrase an unnatural meaning.
The fact that the phrase is strictly redundant does not alter the fact that its natural meaning is to describe the polypeptide by the name which the specification has given to it.
It is also true that the specification refers to the claimed invention involving Neutrokine activity in more than one place.
However, the very fact that this expression is not included in claim 1, when it is (to some extent) defined and, in more than one place used, in the specification suggests that it is not intended to apply to the claim.
Accordingly, I would dismiss Eli Lillys cross appeal on the insufficiency issue.
Conclusion
It follows from this that, at least in my opinion, HGSs appeal on the Article 57 issue should be allowed, Eli Lillys cross appeal on the insufficiency issue should be dismissed, and the case should be remitted to the Court of Appeal to deal with the outstanding issues.
LORD HOPE
This is a difficult and troublesome case.
It is well known that modern techniques in the field of biomedical science offer immense benefits in the promotion of human health, particularly in the combating of a wide range of degenerative diseases previously thought to be incurable and in the provision of techniques for the effective treatment of cancers.
As the BioIndustry Association has pointed out in its written intervention, patent portfolios are often the most valuable asset of companies in the bioscience industry.
So assessments of the value of a bioscience companys patent portfolio are likely to be a key consideration in deciding whether to acquire or invest in such a company.
This in turn affects the funding that is made available for research and development, without which effective progress in putting a patented invention to practical use is likely to be very limited.
The evaluation of a patent specification for this purpose will depend on whether it discloses an invention that is reasonably capable of industrial application.
There is thus much common ground between the aims of those whose funding is essential for the sustained programme of research and development that will almost always have to be carried out before a product can be placed on the market and the tests that the law lays down for patentability.
Article 52(1) of the European Patent Convention provides: European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.
Article 57 provides: An invention shall be considered as susceptible of industrial application if it can be made or used in any kind of industry, including agriculture.
These articles were implemented in domestic law in sections 1(1)(c) and 4 of the Patents Act 1977.
As the tests in both articles are the same, it is convenient to refer to the issue which they raise as the article 57 issue.
It is plain that the standard to be applied for determining whether this test has been satisfied must in principle be the same for patents in the bioscience industry as for those in other fields.
The bioscience industry is particularly dependent, however, on funding for long term research and development.
It is commonplace for those who need money for these activities to have to look to other organisations to provide it.
The tests that must be applied are necessarily very rigorous, and it may require many years of investment before a product can be declared safe for use in the promotion of health in humans.
The gap between the point of initial research and the point where the discovery is ready to be developed by the pharmaceutical industry can be very wide.
Various steps along this uncertain road can be identified in the present case.
First, there is the inventive step itself.
In this case it revealed the existence of Neutrokine , a previously unknown member of the TNF ligand superfamily.
The characteristics of the newly discovered protein had then to be examined and analysed.
In this case the task was to determine whether the Neutrokine molecule had characteristics that offered the prospect of influencing biological mechanisms in the same way as other members of the superfamily.
If that could be achieved, there would then have to follow a large amount of research and development before the molecule could be deployed therapeutically.
The question that this case raises is how far along that road the process must go before the invention can be held to be susceptible of industrial application and patented.
The core of HGSs argument for the industrial application of Neutrokine was identified by their expert witness Professor Noelle in his first witness statement.
In para 72 he said: In my opinion, the inventive concept of the Patent is the identification of a new member of the TNF ligand superfamily, which the inventors named Neutrokine , and elucidation of its nucleic acid and amino acid sequences.
Once the nucleic acid sequence of a novel member of the TNF ligand superfamily became available, it opened up the field such that it was possible to use well known techniques to express the protein, analyze the protein, develop antibodies and make therapeutics and diagnostics for diseases associated with under or over expression of the protein.
In para 75 he said that disclosure of this novel gene and its encoded protein, and the provision of information about its structure and activities enabled the making of products which could be used in studying its role in disease and for the development of potential diagnostic and therapeutic applications.
In para 79 he said that, since the activities ascribed to Neutrokine in the Patent were consistent with those activities possessed by other TNF superfamily members, the skilled addressee would consider the activities of Neutrokine described in the Patent as specific and also credible.
His point, in short, was the description of the protein, when taken with common knowledge as to the techniques that could be applied to it, was sufficient to show that it was possible to use it in the respects that he identified.
For him the fact that it opened up the field indicated that it was susceptible of industrial application.
The significance of his observations can be seen by comparing what Jacob LJ said in the Court of Appeal with the judgment of the Technical Board of Appeal (TBA) of the European Patent Office (the EPO) in the present case, which was published on 1 December 2009: Neutrokine /Human Gennome Sciences Inc T 0018/09.
The Board reached a different conclusion from that which the trial judge, Kitchin J, had reached on 31 July 2008 when he held that the claimed invention was not susceptible of industrial application at the date of the Patent: [2008] RPC 29, para 237.
In the Court of Appeal Jacob LJ attributed this to the fact that the Board was working on different evidence and was using a different procedure: [2010] RPC 14, para 157; see also para 154, where he noted that the judges findings were arrived at following an extensive examination of the evidence.
I think that, while both of these things are true, the conclusion ought to have been that tests that the Board applied were materially different from those applied by the judge and by the Court of Appeal.
In para 22 of the reasons for its decision that the Patent provided a concrete technical basis for the skilled person to recognise a practical exploitation of the claimed invention in industry, the TBA said: 22.
As pointed out in T 870/04 of 11 May 2005 [Max Planck] (cf in particular points 5 and 6 of the Reasons), in many cases the allocation of a newly found protein to a known protein family with known activities suffices to assign a specific function to the protein because normally the members of the family share a specific function.
This may be a well characterized and perfectly understood function which provides in a straightforward manner enough support for industrial applicability.
In such cases, the immediate concrete benefit is manifest.
In other cases, where the members of a protein family have different, pleiotropic effects which may even be opposite and neither completely characterized nor understood, no effect can be assigned to a new member without relying on some experimental data.
Between these two extreme situations, a variety of other situations may arise for which a detailed examination of all the facts may be required.
Indeed, this is the case for the TNF ligand superfamily.
The expression superfamily does not appear to have a precise meaning, as Jacob LJ observed in the Court of Appeal: [2010] RPC, para 73.
As he explained, the general idea is that it includes not only very closely homologous compounds but also those with rather less homology.
The contrast is between a closely knit family with known activities, and a wider family with a variety of different, pleiotropic effects: cousins, second cousins, distant uncles and so on.
The same contrast between two extremes is to be found in para 22 of the TBAs judgment.
But the important point that emerges from its comment that it was dealing with a superfamily is to be found in the last two sentences.
This case is not one where the different, pleiotropic effects are so poorly understood that it is plain that no effect can be assigned to a new member without relying on some experimental data.
That is not true of the TNF ligand superfamily as it lies between the two extremes.
So a detailed examination of all the facts is needed before it can be determined whether or not an effect can be assigned to this particular new member.
As the TBA said in T 0898/05 (7 July 2006) Hematopoietic cytokine receptor/ZymoGenetics, para 22, the probative value of the claimed invention must be examined on a case by case basis regarding the nature of the invention and the prior art relating thereto: Such methods of analysis are increasingly becoming an integral part of scientific investigations and can often allow plausible conclusions to be made regarding the function of a product before it is actually tested.
In other words, that examination may be enough in itself to show, without further experiments, that what the TBA refers to as a specific function can be assigned to the new member of the family.
This is because that well characterized and perfectly understood function is shared by other members of the family which it has been shown to belong to.
In paras 6 8 of its judgment in ZymoGenetics the TBA contrasted a product whose structure was given but whose function was undetermined or obscure or only vaguely indicated with one which was definitely described and plausibly shown to be usable.
In the former case, the granting of a patent might give the patentee unjustified control over others who were actively investigating in that area and who might eventually find ways to exploit it.
In the latter, because it was plausibly shown to be usable, it might be considered to display concrete benefits.
As these benefits are assumed not yet to have been confirmed by research, the exercise that these passages indicate is necessarily one of prediction.
That is why the Board used the word plausibly.
I would not quarrel with Jacob LJs comment, after consulting the Shorter Oxford English Dictionary, that the sense that word conveys is that there must be some real reason for supposing that the statement is true: para 111.
The important point, however, is that the standard is not any higher than that.
Further experiments are not needed if sufficient information is provided in the description, when common general knowledge is taken into account, to show that a positive answer can be given to the question whether a profitable use can readily be identified: ZymoGenetics, para 20.
In para 102 of his judgment in the Court of Appeal, however, having reviewed the EPO case law, Jacob LJ said: It is clear from these authorities that discovering a nucleotide sequence encoding for a human protein and being able to show that the protein concerned has some common homology with known proteins (ie is a member of a family) may satisfy article 57.
But whether it does or not is case dependent and in particular depends upon how well established the functions of the other members of the family are.
To say, my new protein is similar to a known family of proteins is not all that helpful in indicating a possible use if the function of that family is itself poorly understood at best.
In para 112, having said that to be plausible a statement must be sufficiently precise, he added: It is not good enough to say this protein or any antibody to it probably has a pharmaceutical use.
Such a statement is indeed plausible, but is of no real practical use.
You are left to find out what that use is.
In para 119, having summarised the findings and conclusions of Kitchin J, he said: So the Judge addressed the crucial question: is it enough to make the invention susceptible of industrial application to tell the skilled reader that Neutrokine is structurally similar to TNF and related cytokines and is believed to have similar biological effects and activities? That depends on what was known about the biological effects and activities of the known members of the superfamily.
Each of the postulated uses of Neutrokine or its antagonists was possible in the sense that one could not rule that out as a matter of science based on what was known about other superfamily members.
So in one sense each was plausible, even though all of them collectively were not and indeed some contradicted others so both could not be true.
But that is miles away from being able to say that any particular use was plausible in the sense of being taken, by the reader, to be reasonably so.
In reality one was faced with a research programme to see which, if any, of the possible uses of the Neutrokine or its antagonists was real.
I think that there are indications in these passages that the standard which Jacob LJ was setting for susceptibility to industrial application was a more exacting one than that used by the TBA.
He appears to have been looking for a description that showed that a particular use for the product had actually been demonstrated rather than that the product had plausibly been shown to be usable.
In para 23 of the reasons for its decision in the present case the TBA noted that, as known in the art and acknowledged in the Patent, a feature common to all members of this particular superfamily without exception was the expression on activated T cells and the ability to co stimulate T cell proliferation.
It followed, in view of the assignment of Neutrokine to the family, that the skilled person would expect it to display that common feature.
Asking itself whether there was anything in the patent specification which contradicted that expectation, the Board found that the technical data in the patent specification, far from contradicting the ability of Neutrokine to co stimulate T cell proliferation, actually supported it.
That information could not be taken as a mere theoretical or purely hypothetical assumption.
In para 26 the TBA said that a skilled person, when reading the patent specification, would distinguish the positive technical information from the contradictory and broad statements to which Eli Lilly had drawn its attention: This is because the skilled person realises that the description of the structure of Neutrokine , its structural assignment of the family of TNF ligands, and the reports about its tissue distribution and activity on leucocytes, are the first essential steps at the onset of research work on the newly found TNF ligand superfamily member.
In view of the known broad range of possible activities of such a molecule, the skilled person is aware of the fact that the full elucidation of all properties requires further investigations which will gradually reveal them.
In this context, the skilled person regards the long listing of possible actions of Neutrokine and of medical conditions in which it might take part as the enumeration or generalisation of the properties of the members of the TNF ligand superfamily.
This is seen as the frame in which the newly found molecule has to be placed as one could prima facie have a reasonable expectation that most of them could in fact be present.
This is in sharp contrast to Jacob LJs comment in [2010] RPC 14, para 145 that the Patent, even in relation to T cell activity, was just too speculative to provide anything of practical value other than information upon which a research programme could be based.
Referring to the first sentence of the passage which I have just quoted, he then said that a first step at the onset of research work was hardly enough to provide an immediate and concrete benefit: para 149.
The phrase immediate concrete benefit the and which Jacob LJ inserted into this phrase is his own word comes from para 6 of the TBAs reasons for its decision in ZymoGenetics; see also para 21 of its reasons in the present case.
Here again there is an indication that Jacob LJ was applying a different test from that applied by the TBA.
The immediate concrete benefit that he was looking for was something more than that there was a reasonable expectation that the molecule would be usable for the purposes of research work.
In para 27 the TBA said that, despite its long list of conditions and activities, the description of the Patent delivered sufficient technical information (namely the effect of Neutrokine on T cells and the tissue distribution of Neutrokine mRNA) to satisfy the requirement of disclosing the nature and purpose of the invention and how it could be used in industrial practice.
In para 29 it rejected Eli Lillys arguments that, in view of the technical difficulties involved in measuring the co stimulation of T cells by Neutrokine and the absence of any detailed experimental information on the activities of Neutrokine listed in the Patent, the skilled person would not have been able to reproduce them without the undue burden of undertaking a research programme and that no industrial application could be directly derived from a mere co stimulation of T cells.
It pointed out that there was a convincing body of post published evidence showing that, using standard assays, Neutrokine activity was indeed present on T cells, that the reference in the Patent to the presence of Neutrokine activity in lymphocytes would prompt the skilled person to look for that activity in all types of lymphocytes, including B lymphocytes as well as T lymphocytes.
Contrary to Eli Lillys view, it held that these activities might represent a valid basis for a possible industrial application.
The industrial application that it had in mind was the use of the molecule for research, which it must be taken to have regarded in itself as an industrial activity.
Developing this point further, the TBA said in para 30: In the boards judgment, the tissue distribution of Neutrokine mRNA disclosed in the patent in suit, in particular the expression of Neutrokine mRNA in B cell and T cell lymphomas (cf paragraph [0032]), provides in itself in the context of the disclosure a valid basis for an industrial application.
The presence of Neutrokine in these lymphomas, which is also confirmed by post published evidence on file (cf inter alia document D126), may be used to develop appropriate means and methods for their diagnosis and treatment based on the disclosure of the patent in suit.
These passages are important not so much for the assessment of the evidence that was before the TBA, with which the national court may properly disagree if presented with evidence which it accepts to the contrary, as for the clear indication that they give as to the point in the development of an invention in the biosciences field where it may be said that the requirement that the invention shall be considered as susceptible of industrial application can be taken to have been satisfied.
The concluding words of the last sentence of para 30 indicate that the test which the Board was applying, as in ZymoGenetics, para 8, was whether Neutrokine was plausibly shown to be usable.
I read this as indicating that it was satisfied that the protein was a research tool which could be used to develop appropriate means and methods for the diagnosis and treatment of B cell and T cell lymphomas.
In the Boards judgment that was enough for it to be susceptible of industrial application within the meaning of article 57 of the Convention.
Kitchin J did not have the benefit of seeing the judgment of the TBA in this case, as it was published more than a year after he handed down his judgment on 31 July 2008.
He identified the principles that had emerged from the decisions of the EPO in his judgment at [2008] RPC 29, para 226.
Among them were the following (case references omitted): (vi)the purpose of granting a patent is not to reserve an unexplored field of research for the applicant nor to give the patentee unjustified control over others who are actively investigating in that area and who might eventually find ways actually to exploit it. (vii) If a substance is disclosed and its function is essential for human health then the identification of the substance having that function will immediately suggest a practical application.
If, on the other hand, the function of that substance is not known or is incompletely understood, and no disease has been identified which is attributable to an excess or a deficiency of it, and no other practical use is suggested for it, then the requirement of industrial applicability is not satisfied.
This will be so even though the disclosure may be a scientific achievement of considerable merit. (viii) Using the claimed invention to find out more about its activities is not in itself an industrial application.
He derived these principles from the reasons that the TBA gave for its decisions in BDP1 Phosphatase/Max Planck T 0870/04 (11 May 2005) and, in the case of the second part of the principle in para (vi), from para 8 of ZymoGenetics.
But he did not pick up the point made in para 8 of ZymoGenetics that a product which is definitely described and plausibly shown to be usable might be considered to have a profitable use or concrete benefit, or the point made in para 22 that computerised methods of analysis are increasingly becoming an integral part of scientific investigations and that they can often allow plausible conclusions to be made regarding the function of a product before it is actually tested.
Careful though his analysis was, I think that it tended to divert attention away from points that were likely to produce an appropriately balanced decision in this case.
In para 230 the judge said: I accept that the contribution made by HGS was to find Neutrokine and to identify it as a member of the TNF ligand superfamily.
However it is clear from the cases to which I have referred that simply identifying a protein is not necessarily sufficient to confer industrial utility upon it.
Multimeric Receptors/Salk Institute is just one example.
It may be sufficient if the identification of the protein will immediately suggest a practical application, such as was the case with insulin, human growth hormone and erythropoietin.
But if the function of the protein is not known or is incompletely understood and if no disease has been attributed to a deficiency or excess of it, then the position may well be different.
In these cases the industrial utility must be identified in some other way.
In paras 231 232 he said that he was quite satisfied that the skilled person would consider that the Patent did not by itself identify any industrial application other than by way of speculation.
The range of diseases and conditions which Neutrokine and antibodies to Neutrokine might be used to diagnose and treat were astonishing and there was no data of any kind to support the claims made.
But he recognised that the disclosure had to be considered in the light of the common general knowledge.
Thus the skilled person would have known that TNF was involved as a primary mediator in immune regulation and the inflammatory response and had an involvement in a wide range of diseases, that all the members of the TNF ligand superfamily identified hitherto were expressed by T cells and played a role in the regulation of T cell proliferation and T cell mediated responses.
Further, as Eli Lillys expert witness Professor Saklatvala accepted, the skilled person would anticipate that the activities of Neutrokine might relate to T cells, be expressed in T cells and be a co stimulant of B cell production and that it might play a role in the immune response and in the control of tumours and malignant disease and have an effect of B cell proliferation.
Thus far, his analysis of the evidence matches that in paras 27 30 of the reasons which the TBA gave for its decision in this case: see paras 155 156, above.
But he then went on to say in para 233 that the skilled person would also have known that the members of the family had pleiotropic actions, that some of those activities were unique to particular TNF ligands and others were shared by some or all the other TNF ligands, that no disease had been identified in which they were all involved and that the known therapeutic application of the TNF monoclonal antibody was a rather specific activity.
In para 234, drawing these conclusions together, he said: Does that common general knowledge, taken as a whole, disclose a practical way of exploiting Neutrokine ? Or does it provide a sound and concrete basis for recognising that Neutrokine could lead to practical application in industry? In my judgment it does not.
The fact that Neutrokine might be expected to play a role in regulating the activities of B cells and T cells and play an unspecified role in regulating the immune and inflammatory response did not reveal how it could be used to solve any particular problem.
Neither the Patent nor the common general knowledge identified any disease or condition which Neutrokine could be used to diagnose or treat.
Its functions were, at best, a matter of expectation and then at far too high a level of generality to constitute a sound or concrete basis for anything except a research project.
In para 237 he said that he was satisfied that this was a case where the claimed inventions were not susceptible of industrial application at the date of the Patent.
It was no answer to say that subsequent research had shown that they might be useful to treat diseases associated with particular B cell disorders.
I think that there is here a significant drift away from the approach indicated by the TBAs reasons in ZymoGenetics as subsequently confirmed by the reasons for its decision in the present case.
This is not just because the Board was working on different evidence and was using a different procedure, as Jacob LJ seems to have thought.
There is a very obvious difference of view as to the test that the invention had to satisfy to be susceptible of industrial application.
For the TBA, the question was whether, taking the common general knowledge into account, it had been plausibly shown that the molecule was usable.
It was not necessary for a skilled person to undertake a research programme to conclude that the presence of Neutrokine in B cell and T cell lymphomas might be used to develop appropriate means and methods for their diagnosis and treatment: para 30.
For the judge, this did not go far enough.
For him the critical point was that neither the Patent nor the common general knowledge identified any disease or condition which Neutrokine could be used to diagnose or treat: [2008] RPC 29, para 234.
In para 29 of its reasons in ZymoGenetics the TBA said that the function of a protein, and thus of the nucleic acid encoding it, could be seen at different levels: (i) its molecular function, revealed by the biochemical activity of the protein; (ii) its cellular function, in regard to cellular processes; and (iii) the influence of those cellular processes in a general and more complex network within a multicellular organism, this being its biological function in a broad sense.
In para 30 it said that the elucidation of one of those particular levels of function might result in a straightforward industrial application, even though the other levels of activity remained completely unknown or only partially characterised.
In ZymoGenetics the suggested role for the receptor corresponded to the biological function, and the therapeutical treatments directly derivable from it were not considered to be so vaguely defined that they did not suggest any therapeutic or diagnostic use: para 31.
In the present case the role that the TBA saw for Neutrokine was in connection with activities at the level of the cellular function, and this in itself was seen to provide a valid basis for an industrial application: paras 29 30.
Jacob LJ observed, I think correctly, that the Board thought that standard assays, of the kind revealed by common general knowledge, would do the job of providing an immediate concrete benefit: [2010] RPC 14, para 152.
He then said that the judges finding on the facts was to the opposite effect.
He quoted the following passage from para 77 of Kitchin Js judgment: In my judgment the skilled person would indeed have been able to identify or develop from his common general knowledge some assays with which to begin the study of the new ligand and start to asses at least some of its possible activities.
But I am not satisfied that such studies would have produced informative results and I have no doubt that to carry out a comprehensive screening programme so as to identify the role of the ligand in the biology of any particular cell type would be an altogether more complex task, and one properly characterised as a research programme.
In other words, it was necessary for the skilled person to be able to identify the role of the ligand in the biology of a particular cell type before the newly discovered molecule could be said to be susceptible of industrial application.
The test which both he and the judge were applying was not that indicated by the TBA.
The same approach is to be found in early parts of his judgment.
In para 119 he said that the reader was faced with a research programme to see which, if any, of the possible uses of Neutrokine or its antagonists was real.
In para 130, in his discussion of Gruss and Dowers assessment of the practical usefulness of the TNF ligand superfamily as a whole he said that their observations were far from saying that any member of the superfamily or its agonists had real or indeed any potential as a therapeutic or diagnostic agent.
In para 142 he referred to the fact that the judge had preferred Professor Saklatvalas evidence that by 1996 only TNF had been shown to be biomedically useful to Professor Noelles comment that he would expect Neutrokine to be useful in the same way as other members of the TNF ligand superfamily.
In para 145 he said that the Patent was just too speculative to provide anything of practical value other than information upon which a research programme can be based.
It is clear from these passages that for him the fact that the skilled addressee would see that the molecule was usable for a programme of research work, which the TBA thought he would, was not sufficient.
For these reasons I cannot agree with Jacob LJ that the differences between the conclusions reached by the judge and the TBA are attributable to the fact the Board was working on different evidence and was using a different procedure.
It seems to me that they are attributable to differences of principle about the amount of information that was needed to show that the invention was susceptible of industrial application.
The test to be applied to determine this issue is a question of law, not one of fact.
As Jacob LJ observed, our practice is to follow any principle of law clearly laid down by the TBA: [2010] RPC 14, para 39.
It is a strong thing to disagree with the concurrent findings of judges with such experience in this field.
But our decision in this appeal does not depend on a re evaluation of the evidence.
It turns on the principle of law which I find clearly set out by the TBA in the passages to which I have referred.
In my opinion that principle leads inevitably to the conclusion that HGSs appeal on the article 57 issue must be allowed and the decision of Kitchin J that the claimed inventions were not susceptible of industrial application at the date of the Patent set aside.
I would dismiss Eli Lillys cross appeal on the issue of insufficiency for the reasons given by Lord Neuberger.
I too would remit the case to the Court of Appeal to deal with the outstanding issues.
LORD WALKER
As Lord Hope observes, this is a difficult and troublesome case.
It is also an important case: not only for the parties, but also for the bioscience industry generally (as the intervention of the BioIndustry Association makes clear) and, in some measure, for the future course of patent law in the United Kingdom.
I have to say that all my instincts, as an appellate judge, are for dismissing this appeal.
The issue is one of multi factorial evaluation of evidence, a task which has already been carried out twice, with the same result, by a very experienced patent judge, and a division of the Court of Appeal presided over by a Lord Justice with even more experience in the field of patents.
Their task was to evaluate the evidence against a statutory test expressed in simple terms, whose meaning is not necessarily made much clearer by elaborate judicial exposition (see the quotation in para 170 below).
This Court has recently, in Lucasfilm Limited v Ainsworth [2001] UKSC 39, [2011] 3 WLR 487, para 45, reinforced Lord Hoffmanns much cited statement of the importance, in cases of this sort, of deference to the conclusions of the trial judge.
What Lord Hoffmann said in Biogen Inc v Medeva Plc [1997] RPC 1, 45 is too well known to need repetition.
It applies even more strongly in the case of concurrent findings.
The same thought was expressed (in a dissenting judgment) by Justice Kirby in the High Court of Australia in Aktiebolaget Hassle v Alphapharm Pty Ltd [2002] 212 CLR 411, para 95 (references omitted): The conclusions on obviousness in the proceedings below represented the outcome of a judicial evaluation of a mass of evidence.
In the assessment of that evidence, and in the conclusion to be derived from it, the primary judge and the Full Court were better placed to perform the function of fact finding than this Court is.
Unless some error is shown in the application of the relevant law, it would be a rare step for this Court to condescend to re evaluate such a factual conclusion, reached by concurrent decisions at two levels of the judicial hierarchy.
Kirby J also quoted from Biogen, observing (para 97): Any exposition of judicial reasons explaining such factual findings is inherently an incomplete statement of the impression which was made upon [the judge] by the primary evidence.
Judges having replaced juries in such matters in Australia, and having entangled themselves in a web of horrible verbal formulae, must do their best to explain their conclusions where, in the past, juries simply announced their verdicts.
Nevertheless the powerful and sustained analysis and reasoning in the judgments of Lord Hope and Lord Neuberger has persuaded me, against my inclination, that this appeal must be allowed.
There is nothing that I can usefully add to their reasoning, except to repeat that there are two strong policy arguments for allowing the appeal.
The first is to reduce the risk of a chilling effect on investment in bioscience (though here the arguments are certainly not all one way).
The other is to align this countrys interpretation of the European Patent Convention more closely with that of other contracting states.
To my mind these considerations justify this Court in taking what would otherwise be a questionable course.
LORD CLARKE
Like Lord Neuberger, I was initially attracted by the submission that, as the Court of Appeal held, Kitchin J was entitled to reach the conclusion he did.
Moreover, Lord Walker has expressed with clarity the correct approach of an appellate court in a case such as this.
In short, where the judge, especially a judge of great experience in his field has carried out what Lord Walker calls a multi factorial evaluation of the evidence and the Court of Appeal has refused to interfere with that evaluation, it will be the rare case indeed in which this Court will be entitled to interfere.
However, like Lord Walker, I have been persuaded by the detailed analysis by Lord Neuberger of the decisions in this and other cases of the Technical Board of Appeal of the European Patent Office that the appeal should be allowed.
In all the circumstances I would allow the appeal for the reasons given by Lord Neuberger and Lord Hope.
LORD COLLINS
For the reasons given by Lord Neuberger and Lord Hope, I would allow the appeal.
| UK-Abs | Article 52(1) of the European Patent Convention (the EPC) provides that, in order to obtain a European patent, an invention must be susceptible of industrial application.
Article 57 states that an invention is susceptible of industrial application if it can be made or used in any kind of industry.
The primary issue in this case is the way in which the requirement of industrial applicability extends to a patent for biological material.
The Appellant is the proprietor of European Patent (UK) 0,939,804 (the Patent).
It describes the encoding nucleotide, the amino acid sequence, and certain antibodies of a new human protein called Neutrokine , and includes contentions as to its biological properties and therapeutic activities, as well as those of its antibodies.
These contentions are predictions substantially based on the proposition that Neutrokine is a member of the THF ligand superfamily.
The Patent was filed on 25 October 1996 and granted on 17 August 2005.
The Respondent brought opposition proceedings in the Opposition Division of the European Patent Office (the EPO), following which the Patent was revoked.
The Appellant appealed to the Technical Board of Appeal (the Board) of the EPO, which allowed the appeal and ordered that the Patent be maintained.
Meanwhile, the Respondent brought parallel proceedings in the High Court for revocation of the Patent in the UK.
The High Court revoked the Patent, on the basis that, in the light of the common general knowledge, the notional addressee of the Patent (a person skilled in the art) would have concluded that the functions of Neutrokine were, at best, a matter of expectation and then at far too high a level of generality to constitute a sound or concrete basis for anything except a research project.
This decision was upheld by the Court of Appeal.
The Supreme Court unanimously allows the appeal, dismisses the cross appeal, and remits the case to the Court of Appeal to deal with the outstanding issues.
The leading judgments are given by Lord Neuberger and Lord Hope, with whom the other justices agreed.
There is very little UK authority on the topic of industrial applicability, particularly as regards biological material [37] and [88], and the applicable principles are really to be found in the jurisprudence of the EPO and the Board [42].
While the reasoning in each decision of the Board is not binding upon national courts, the courts should normally follow the jurisprudence of the EPO,
particularly where the Board has adopted a consistent approach to an issue in a number of decisions [84] and [87], as is the case with regard to the application of Article 57 to patents for biological material [88].
Further, there are strong policy reasons for seeking consistency of approach to patents in the biological field, as it is import for bioscience companies to be able to decide at what stage to file for patent protection, and to be able to obtain funding based on patent protection [96 102] and [141 143].
Despite the very wide ranging and generalised suggestions in the Patent as to the uses to which Neutrokine and its antibodies might be put, over and above revealing the existence and structure of the new protein and its encoding gene, the only relevant guidance in the Patent ultimately arises from its teaching as to the tissue distribution of Neutrokine , its expression in T cell and B cell lymphomas, and the fact that it is a member of the TNF ligant superfamily.
The question is whether the Judge in the High Court was right, or at least entitled, to conclude that the inferences which would have been drawn from the Patent specification in 1996 would not have been enough to satisfy Article 57 [103].
That conclusion was based on the fact that the Patent neither revealed how Neutrokine could be used to solve any particular problem nor identified any disease or condition which it could be used to diagnose or treat [104] and [161].
That reasoning was not consistent with the approach adopted by the Board, from which a number of general and specific principles may be drawn [106 107].
In light of those principles, the disclosure of the existence and structure of Neutrokine and its gene, and its membership of the TNF ligand superfamily should have been sufficient, taking into account the common general knowledge, to satisfy the requirements of Article 57 [109].
This is because all known members of the TNF ligand family were expressed on T cells and were able to co stimulate T cell proliferation, and therefore Neutrokine would be expected to have a similar function [111].
The fact that the members of that superfamily were known to have pleiotropic effects is irrelevant where the value of the new member relates to the common features manifested by all known members [112 115].
Neither the Judge nor the Board considered that the unsatisfactory drafting of the Patent would actually have diverted the person skilled in the art from what their search of the literature, coupled with common general knowledge, would otherwise have led them to understand represented the teaching of the Patent [116 118].
The lower courts were wrong to focus on the speculative nature of some of the therapeutic uses of Neutrokine as disclosed in the Patent, and the degree of extra effort required to determine those uses, when the known activities of the superfamily were enough in themselves to justify patentability for the disclosure of a novel molecule (and its encoding gene) [119 121], [124 128] and [161].
For the same reason, the Respondents argument that the specification of the Patent is insufficient must fail [132 139].
The standard set by the Judge for susceptibility to industrial application was a more exacting one than that used by the Board.
He was looking for a description that showed that a particular use for the product had actually been demonstrated, rather than that the product had plausibly been shown to be usable for the purposes of research work [151] and [154], which the Board must be taken to have regarded as an industrial activity in itself [155 156].
Notwithstanding the importance of deference to the findings of fact and value judgments of a court of first instance, especially where that decision is confirmed on appeal [94 95], [166], [168 170 and 172], in this case it is evident that the Judge and Court of Appeal failed to follow the principles of law clearly set out by the Board in this and previous cases.
The appeal must therefore be allowed.
|
In 1999 the Inland Revenue, as it was then known and to which I will refer as the Revenue, published a revised version of a booklet known as IR20 and entitled Residents and non residents Liability to tax in the United Kingdom.
The 1999 version of the booklet, which remained operative until 2009 and which I will call the booklet, offered general guidance upon the meaning of the word residence and of the phrase ordinary residence in the context of an individuals liability for UK income tax and capital gains tax.
The present appeals require the court mainly to construe the guidance in the booklet.
For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes.
Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status.
The latter limb of each of the appellants alternative contentions is not in dispute.
The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK.
The issues arise within applications for judicial review.
Mr Davies and Mr James (the first appellants) issued their application in February 2007.
They sought judicial review of determinations by the Revenue dated 28 November 2006 that they had each been resident and ordinarily resident in the UK for the tax year 2001 02.
Mr Gaines Cooper (the second appellant) issued his application in April 2007.
He sought judicial review of a determination by the Revenue dated 25 January 2007 that he had been resident and ordinarily resident in the UK for the tax years from 1993 94 to 2003 04.
In each application the appellants contended that, by reference to the allegedly more benevolent interpretation contained in the guidance or adopted by the Revenue in accordance with its settled practice, the determinations were erroneous.
In addition to the issue of their application for judicial review the first appellants filed a notice of appeal to the special commissioners which would now be heard by the Tax Chamber of the First tier Tribunal against the determinations of the Revenue dated 28 November 2006.
There was a dispute as to whether their application or their appeal should first be determined.
On 10 July 2008 the Court of Appeal, in my view correctly and irrespective of its reasoning, ruled that the application should first be determined and it therefore remitted to the Administrative Court the question whether permission to apply for judicial review should be granted.
The appeal of the first appellants to the commissioners has been stayed pending determination of the present proceedings.
But the course taken in the case of the second appellant was different.
The Revenues determination dated 25 January 2007 accorded with assessments for the years from 1992 93 to 2003 04 which it had raised against him in 2005 and against which he had appealed to the commissioners.
In June/July 2006, at a hearing which proceeded for ten days, the commissioners conducted a trial of preliminary issues whether he had been: (a) domiciled in the UK from 1992 93 to 2003 04; (b) resident in the UK from 1993 94 to 2003 04; and (c) ordinarily resident in the UK from 1992 93 to 2003 04.
I will explain in para 24 below why he did not dispute that he had been resident in the UK in 1992 93.
In the event, by Decision dated 31 October 2006, the commissioners held that he had been domiciled, resident and ordinarily resident in the UK during all those years respectively.
Against their conclusion in respect of domicile the second appellant appealed, on point of law, to the High Court; on 13 November 2007 Lewison J dismissed his appeal.
The result is that the second appellant, can no longer dispute that he was domiciled in the UK from 1992 93 to 2003 04; but his UK domicile is irrelevant to the present proceedings.
Nor can he continue to dispute that, according to the ordinary law, he was resident in the UK from 1993 94 to 2003 04 and ordinarily resident in the UK from 1992 93 to 2003 04.
His case is, however, that, by reference to either of the contentions set out above, the ordinary law does not govern determination of the issue surrounding his UK residence and ordinary residence during those years.
It is unfortunate that, for whatever reason, the course taken in the case of the first appellants was not taken in the case of the second appellant.
Were either of his contentions in the present proceedings to prevail, it would follow that the commissioners invested a large amount of time as well as a conspicuous degree of care in application to the issues of his residence and ordinary residence of principles inapplicable to them.
In their Decision they expressly noted that their function was to apply the law rather than the guidance in the booklet.
But, whereas issues of fact between the Revenue and the first appellants in relation to their circumstances in 2001 02 remain unresolved, the now conclusive resolution by the commissioners of the issues of fact between the Revenue and the second appellant in relation to his circumstances from 1992 93 to 2003 04 at any rate throws the effect of these proceedings into sharp relief.
For, although it remains an open question whether, upon application of the ordinary law, the first appellants were resident and ordinarily resident in the UK during the year relevant to them, we know that, upon application of the ordinary law, the second appellant was resident and ordinarily resident in the UK during the years relevant to him.
As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law.
A complication, to which I will turn in para 30 and para 31 below, is that, while they all contend for what I have described as a more benevolent interpretation of the circumstances in which a taxpayer becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law, the benevolent interpretation for which the first appellants contend is not identical to that for which the second appellant contends.
I infer that it is the unchallengeable findings of fact made by the commissioners against the second appellant which drive him to contend for a more ambitious interpretation than that for which the first appellants now contend.
In the Administrative Court permission to apply for judicial review was refused in both cases by Wilkie J on 10 October 2008 in the case of the first appellants and by Lloyd Jones J on 3 November 2008 in the case of the second appellant.
All the appellants appealed against the refusals and, when granting permission to appeal, the Court of Appeal listed the appeals to be heard together.
On 10 July 2009 the court allowed their appeals against the refusals and, pursuant to CPR 52.15(4), directed that it should itself, on a later date, hear their applications for judicial review.
The hearing took place on 4, 5 and 6 November 2009 and judgments were handed down on 16 February 2010.
The court (Ward, Dyson and Moses LJJ) thereby dismissed the applications for judicial review and it is against the dismissals that the present appeals are brought.
The appellants
The first appellants are successful property developers.
By March 2001, then based in Swansea, they each held 50% of the preference shares in Liberty Property Holdings Ltd (Liberty).
They were also prominent in the administration of Swansea Rugby Football Club and were respected members of the local community.
They decided to extend their property development business to Brussels.
Whether their decision was related to a possible disposal of their shares in Liberty appears to be in dispute.
At all events, in March 2001, they caused a company, in which each of them had a one third shareholding, to be incorporated in Belgium.
Furthermore they began to rent furnished apartments in the same block in Brussels and began to reside in them, at any rate in part, prior to 6 April 2001.
They contend that, prior to 6 April 2001, they had begun to work full time for the Belgian company in the field of property development; that, alternatively, during the weeks after 5 April 2001, they had begun to work full time for it; that, from the date whatever it was when their full time work for it began, they have worked for it full time throughout a number of years; and that it has become extremely successful.
On the other hand they accept that neither of them sold their homes in Swansea; that their wives, and in the case of Mr. Davies his daughters, remained resident, or partly resident, in Swansea; and that they returned very frequently, albeit not for lengthy periods, to their homes in Swansea in order to be with their families or in connection with Liberty (of which they remained non executive directors) or with rugby in Swansea or with other matters of local importance.
In December 2001 Liberty acquired the first appellants shares in itself for a consideration of 4.5m each.
Although the capital gain within the consideration remains unidentified, it is clearly important for the first appellants that they should be recognised at law to have been neither resident nor ordinarily resident in the UK in 2001 02.
The second appellant is a successful entrepreneur.
His domicile of origin was in England (and Wales) and he remains a British citizen.
His case before the commissioners was that in 1976, when aged 39, he acquired a domicile of choice in the Seychelles.
But, by their Decision, we know that he remained domiciled in England until, at any rate, 2003 04.
Between 1976 and 2004 he led an international existence, assiduously charted in their Decision.
But, by reference inter alia to two substantial homes successively maintained and to a significant extent occupied by him in Berkshire and in Oxfordshire throughout those years and to the presence in England, following 1977, of the wife whom he was ultimately to marry in 1993 and also, from his birth in 1998 until after 2004, of their son, the commissioners concluded that from 1992 to 2004 the second appellant dwelt permanently in the later home in England and that thus, notwithstanding his residence in the Seychelles throughout those years, he was resident and ordinarily resident in the UK during the years under review.
C. Residence as a matter of law
The status of being resident in the UK creates liability to UK tax under provisions of the Income Tax (Earning and Pensions) Act 2003 and the Income Tax (Trading and Other Income) Act 2005.
But the word itself is not currently defined in statute.
In 1936 the Income Tax Codification Committee appointed by the Chancellor of the Exchequer issued a Report (Cmd 5131) in which, in para 59 of Volume I, it concluded that the lack of clarity surrounding the word residence was intolerable and in which, in Volume II, it set out a proposed Bill including, in clause six, a definition of the circumstances in which an individual would be resident in the UK.
But the Bill was never enacted.
Under active consideration today, however, is the governments proposal to introduce a full statutory definition of tax residence for individuals; and the time for response to its initial consultation paper, issued in June 2011 by HM Treasury and HMRC and entitled Statutory definition of tax residence: a consultation, has recently expired.
In the absence to date of any statutory definition of residence taxpayers and their advisers have had to turn to the guidance given by the courts and, importantly, also by the Revenue in relation to its meaning.
But the courts have not nor, as we shall see, has the Revenue found it easy to formulate the guidance.
For more than 80 years the leading authority has been Levene v Inland Revenue Comrs [1928] AC 217.
Until 1919 Mr. Levene was resident and ordinarily resident in the UK.
During the next five years he spent about five months (mainly in the summer) each year, staying in hotels in the UK and receiving medical attention or pursuing religious and social activities.
He spent the remaining months staying in hotels abroad.
The appellate committee declined to disturb the conclusion of the commissioners that Mr Levene had remained resident and ordinarily resident in the UK during those years.
Viscount Cave, the Lord Chancellor, adopted, at p 222, the definition of reside given in the Oxford English Dictionary, namely to dwell permanently or for a considerable time, to have ones settled or usual abode, to live in or at a particular place; and, of these three descriptions, the Lord Chancellor chose, no doubt as being the most helpful, that of a settled or usual abode.
Since 1928, if not before, it has therefore been clear that an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK.
Although, as I will explain in para 19 below, the phrase a distinct break first entered the case law in a subtly different context, the phrase, now much deployed including in the present appeals, is not an inapt description of the degree of change in the pattern of an individuals life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.
To the legal analysis of a taxpayers residence must be added a provision which can be traced back to section 10 of an Act of 1799 (39 Geo III, c 13) which introduced income tax in order to raise an ample Contribution for the Prosecution of the War against Napoleon.
Parliament has recently placed the provision, in modified form and in clearer terms than those of its several predecessors, in section 829 of the Income Tax Act 2007; but it is convenient to cite the section in which it was to be found when the booklet was operative and indeed during the years for which assessments have been raised against the appellants.
The section was section 334 of the Income and Corporation Taxes Act 1988 and it provided as follows: Commonwealth citizens and others temporarily abroad Every Commonwealth citizen or citizen of the Republic of Ireland (a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and (b) Kingdom upon the whole amount of his profits or gains
shall be charged as a person actually residing in the United
The effect of this provision is or should be now clear.
If an individual (restricted under the 1988 Act to Commonwealth and Irish citizens) who has been resident and ordinarily resident in the UK ceases to be resident in the UK, he will nevertheless be deemed to have remained resident in the UK if he has left the UK for the purpose only of occasional residence abroad.
So the provision puts a second hurdle in his way in that, in order to escape liability as a resident, he needs to establish not only that he has become non resident but also that his change to non residence was not for the purpose only of occasional residence abroad.
That such is the effect of the statutory provision can be discerned in the opinions in Levene itself.
For the Lord Chancellor (with whose opinion Lord Atkinson agreed) and Lord Warrington of Clyffe both held that the appellant could not overturn the conclusion that he had remained resident and ordinarily resident in the UK and, at pp 224 and 232, they each made clear that, while they considered that alternatively he may well have fallen foul of the provision (which was then in General Rule 3 in the First Schedule to the Income Tax Act 1918), they did not rest their decision upon it.
Viscount Sumner, on the other hand, at p 227, expressly rested his decision upon it.
In Reed v Clark [1986] Ch 1, however, Nicholls J made it expressly clear that such was the effect of the statutory provision.
Mr Dave Clark, who had been resident and ordinarily resident in the UK, moved to Los Angeles on 3 April 1978 and made his home and place of business there until 2 May 1979, when, not having set foot in the UK in the interim, he returned to reside here.
Nicholls J dismissed the Revenues appeal against the ruling of the commissioners that he had not been resident nor ordinarily resident in the UK in 1978 79.
He rejected each of the Revenues alternative arguments that (a) on the primary facts found by the commissioners Mr Clark had been so resident and ordinarily resident and (b) for the purposes of the provision (which was then in section 49 of the Income and Corporation Taxes Act 1970) he had left the UK for the purpose only of occasional residence abroad.
Nicholls J, at p 15C, accepted the Revenues submission that the provision brought into the tax net those who were not resident in the UK at all in the year of assessment.
He held, at p 16H, that occasional residence was the converse of ordinary residence and he cited, at p 17D, the statement of Lord Scarman in R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, 343 that ordinary residence referred to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life or the time being, whether of short or of long duration.
By that route Nicholls J came to contrast occasional residence with residence for a settled purpose.
In observing, at p 18A, that his construction might give little scope in practice for the operation of the statute as an independent charging provision, Nicholls J perhaps had in mind that, were the persons residence abroad not to have been for a settled purpose, his settled or usual abode might have remained in the UK with the result that, in the light of the definition adopted in Levene, he would not have ceased to be a UK resident and so would already have fallen at the first hurdle.
Nevertheless the concepts of settled purpose and settled abode are clearly different.
Nicholls J proceeded to hold, at p 18G, that there had been a distinct break in the pattern of Mr Clarks life in the UK such that his becoming non resident had not been for the purpose only of occasional residence abroad.
In referring to a distinct break Nicholls J, as he acknowledged at 14F, was adopting a phrase first used in this context in the decision of the Court of Session in Inland Revenue Comrs v Combe (1932) 17 TC 405.
Until 1926 Captain Combe was resident and ordinarily resident in the UK.
Then he went to New York to work as a broker for a firm on Wall Street.
The objective was that he should become its European representative and, in furtherance of it, he returned to the UK, staying in hotels, for 52 days, 175 days and 181 days during each of the following three years.
In upholding the conclusion that he was not liable to tax as a UK resident for those years the court proceeded straight to the statutory provision (which then remained in General Rule 3) and concluded that the captain had not left the UK for the purpose only of occasional residence abroad.
It was implicit in its conclusion that he had left the UK in the sense of becoming non resident in it.
When, therefore, Lord Sands observed, at p 411, that there was a distinct break in what he described as the captains residence in the UK, it was with a view to explaining his conclusion that the captains residence abroad had been more than occasional.
In Reed v Clark Nicholls J applied the phrase in precisely the same context and helpfully added that what was required distinctly to be broken was the pattern of the taxpayers life [1986] Ch 1, 18.
It is therefore clear that, whether in order to become non resident in the UK or whether at any rate to avoid being deemed by the statutory provision still to be resident in the UK, the ordinary law requires the UK resident to effect a distinct break in the pattern of his life in the UK.
The requirement of a distinct break mandates a multifactorial inquiry.
In my view however the controversial references in the judgment of Moses LJ in the decision under appeal to the need in law for severance of social and family ties pitch the requirement, at any rate by implication, at too high a level.
The distinct break relates to the pattern of the taxpayers life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance, to which I will refer, of limited visits to the UK on the part of the taxpayer who has become non resident, clearly foreshadows their continued existence in a loosened form.
Severance of such ties is too strong a word in this context.
It became clear from decisions like Combe that, if a taxpayer left the UK in order to pursue employment abroad which was full time, it was likely not only that he would cease to be a UK resident but also that he would escape being deemed still to be a UK resident under the statutory provision.
For, from the fact that the employment was full time, it was likely to follow that he had made a distinct break in the pattern of his life in the UK.
By section 11 of the Finance Act 1956 the position of the full time employee or other worker abroad was strengthened by a provision (now in effect contained in section 830 of the 2007 Act) that, in determining whether he remained resident in the UK, regard should not be had to any place of abode in the UK which he maintained for his use.
As I will demonstrate in para 36 below, the Revenue also sought to eliminate any remaining element of doubt about the proper treatment of the full time employee abroad by providing in the booklet that, subject to specified conditions of ostensibly simple application, he would definitely be treated as not resident, nor ordinarily resident, in the UK.
In his case, therefore, the Revenue was dispensing with the need for the multifactorial inquiry.
In its piecemeal contribution to the law relating to UK residence for tax purposes, Parliament has also made provision in respect of the individual who has been non resident in the UK and challenges a contention that he has become resident here for tax purposes.
He is, as Nicholls J pointed out in Reed v Clark above, at p 16G, the converse of the UK resident who contends that he has become non resident in the UK and who, as I have explained, is required by statute also to address the purpose of his change to non residence.
Until 1993 Parliaments provision in respect of the former individual, now in effect to be found in sections 831 and 832 of the 2007 Act, was that, subject to one bright line rule, he did not become resident in the UK for income tax purposes if, in the words of subsections (1)(a) and (2) of section 336 of the 1988 Act (entitled Temporary Residents in the United Kingdom), he was in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there.
The bright line rule, set out in subsection (1)(b) and, albeit in slightly different terms, in subsection (2), was that he had not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment; and both subsections concluded by making clear that, if he had so resided for such a period in any year, he was chargeable to UK income tax for that year.
Until 1993, however, the available accommodation rule, abrogated in 1956 in respect of the full time employee abroad, continued to apply to the person who claimed to be only a temporary resident within the meaning of section 336: its effect was that, were living accommodation in the UK to have been available for his use during any year of assessment, any presence on his part within the UK during that year would be taken to have been otherwise than for some temporary purpose only and not with any view or intent of establishing his residence there.
The application to him of the available accommodation rule was abrogated, with effect from 1993 94, by the insertion into section 336 of subsection (3).
It will now be clear why the second appellant did not dispute that he had been resident in the UK in 1992 93, namely the first of the 12 years of assessment.
Before the commissioners he unsuccessfully contended that the relevant inquiry was not whether he had become non resident in the UK in 1976 but whether, having then become non resident, he had again become resident in the UK in any of the years of assessment.
In other words he unsuccessfully contended that the parameters of the inquiry were set by section 336, rather than by section 334, of the 1988 Act.
But, in that in 1992 93 living accommodation in the UK had been available for his use and in that during that year he had been present in the UK albeit not for a total of six months, he was constrained to concede that, even on his approach, he was in principle liable to tax as a UK resident for that first year.
D. Revenue guidance
There can be no better introduction to this section than in the words of Moses LJ in his judgment in the decision under appeal: 12.
The importance of the extent to which thousands of taxpayers may rely upon guidance, of great significance as to how they will manage their lives, cannot be doubted.
It goes to the heart of the relationship between the Revenue and taxpayer.
It is trite to recall that it is for the Revenue to determine the best way of facilitating collection of the tax it is under a statutory obligation to collect.
But it should not be forgotten that the Revenue itself has long acknowledged that the best way is by encouraging co operation between the Revenue and the public Co operation requires fair dealing by the Revenue, and frank and open dealing by the public.
Of course the Revenue may refuse to give guidance and re create a situation in which the taxpayers and their advisers are left to trawl through the authorities to find a case analogous to their own, or, if they are fortunate, a statement of principle applicable to their circumstances.
But since 1973, in a field fraught with borderline cases relating to an enormous variety of circumstances, the Revenue has chosen to confer what presumably it regarded as a benefit on taxpayers who wished to know whether they were likely to be treated as resident or not.
The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: section 1 of the Taxes Management Act 1970.
Inherent in the duty of management is a wide discretion.
Although the discretion is bounded by the primary duty (R(Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718, para 21 per Lord Hoffmann), it is lawful for the Revenue to make concessions in relation to individual cases or types of case which will, or may, result in the non collection of tax lawfully due provided that they are made with a view to obtaining overall for the national exchequer the highest net practicable return: Inland Revenue Comrs v National Federation of Self employed and Small Businesses Ltd [1982] AC 617, 636 per Lord Diplock.
In particular the Revenue is entitled to apply a cost benefit analysis to its duty of management and in particular, against the return thereby likely to be foregone, to weigh the costs which it would be likely to save as a result of a concession which cuts away an area of complexity or likely dispute.
The Revenue accepts first that, were it in the booklet to have made the representations about the circumstances necessary for the achievement of non residence for which either the first appellants or the second appellant contend, such would have been within its powers; and second that, for so long as the representations remained operative, an individual would have had, and therefore have been able to enforce, a legitimate expectation that it would appraise his case by reference to them notwithstanding that they failed to reflect the ordinary law.
In this connection, however, the Revenue refers to the decision of the Divisional Court of the Queens Bench Division in R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545.
It was advantageous to members of syndicates at Lloyds that funds required to be held for them by their underwriters should be so invested as to yield what the Revenue would accept to be capital gain rather than as income.
Prior to their investment in American and Canadian index linked bonds underwriters had, by their agents, inquired of the Revenue whether the uplift for indexation to be achieved on sale or redemption of the bonds would be treated as capital gain rather than as income.
They unsuccessfully contended that the Revenues responses constituted an affirmative to which it should be held irrespective of whether such treatment of the uplift was correct as a matter of law.
Having rejected the Revenues argument that any such affirmative response would have been outside its powers, Bingham LJ proceeded, at p 1569, as follows: I am, however, of the opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all important.
Every ordinarily sophisticated taxpayer knows that the revenue is a tax collecting agency, not a tax imposing authority.
The taxpayers only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of One should be taxed by law, and not be untaxed by concession: Vestey v Inland Revenue Comrs [1979] Ch 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them.
But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary First, it is necessary that the taxpayer should have put all his cards face upwards on the table Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.
The court held that the Revenues statements about the treatment of the uplift had not been clear enough to give rise to any legitimate expectation.
In that the representations in the booklet are formally published by the Revenue to the world rather than being its response to approaches of a less formal nature, a literal reading of Bingham LJs judgment suggests that, although they are binding in relation only to cases falling clearly within them, the requirement that they should be clear, unambiguous and devoid of relevant qualification does not apply to them.
But in my view a case would fall clearly within them only if they were clear, unambiguous etc; and in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453, Lord Hoffmann, at para 60, applied the quoted words of Bingham LJ to a formal publication, namely a press announcement, on the part of the Foreign Secretary.
It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgement about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the ordinarily sophisticated taxpayer irrespective of whether he is in receipt of professional advice.
The alleged representations
The first appellants contend that, in the booklet, the Revenue represented that an individual would be accepted as not resident and not ordinarily resident in the UK if he: (a) (paragraph 2.2 of the booklet); or (b) 2.8); or (c) went abroad for a settled purpose and remained abroad for at least a whole tax year (paragraph 2.9) left the UK to take up full time employment abroad left the UK permanently or for at least three years (paragraph provided, in each case, that his visits to the UK during the years following departure totalled less than six months in any tax year and averaged less than 91 days in each such year (the day count proviso).
The first appellants accept that, if he is to become non resident in the UK, the law requires an individual to effect a distinct break in the pattern of his life in the UK such as to demonstrate that, when subsequently present in the UK, he is here only as a visitor; and they contend that, by (a), (b) and (c) above, the Revenue reflected in a simplified form the requirement of a distinct break.
Their primary contention is that, irrespective of whether they fell within (a) or (b), they fell within (c).
They therefore contend that, if (as appears to be the case) they went abroad for a settled purpose for at least one tax year and satisfied the day count proviso, the Revenue is bound to acknowledge their status as having been neither resident nor ordinarily resident in the UK in 2001 02 notwithstanding that, were their cases to be appraised on a wider basis, they might not have effected a distinct break in the pattern of their life in the UK.
The second appellant, by contrast, contends that, in the booklet, the Revenue represented that a taxpayer would be accepted as not resident and not ordinarily resident in the UK if he went to live abroad for at least three years and satisfied the day count proviso.
His contention is that, in the interests of simplicity, the Revenue thereby cut away its need or entitlement to afford any independent consideration to whether he had effected a distinct break in the pattern of his life in the UK.
The proper construction of the booklet
The preface to the booklet stated: The notes in this booklet reflect the law and practice at October 1999.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office The first paragraph quoted does not advance the Revenues case: no doubt it intended the booklet to reflect the law but it accepts that, were the booklet to have failed to do so, it would be bound by its terms irrespective of the discrepancy.
The second paragraph is however of greater significance: it stressed that the guidance was general; that its application to a particular case depended upon its facts; and that, in the event of any difficulties in its application to his case, the individual should consult a Revenue tax office.
Neither in 1976 nor at any time thereafter did the second appellant seek advice from a tax office, still less a ruling on residence such as was available until the introduction of self assessment on 6 April 1996.
Nor did the first appellants (who were at all material times advised by PricewaterhouseCoopers LLP) seek such advice in advance of their going to Brussels in March 2001.
Paragraph 1.1 of the booklet stated: The terms residence and ordinary residence are not defined in the Taxes Acts.
The guidelines to their meaning in this Chapter and in Chapters 2 (residence status of those leaving the UK) and 3 (those coming to the UK) are largely based on rulings of the Courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your particular case.
The paragraph therefore told the taxpayer that the booklet set out only the main factors to be taken into account and repeated that the decision in relation to residence could be made only upon an evaluation of the facts of the case.
Paragraph 1.4 of the booklet stated: It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
So here the taxpayer learned that it would be insufficient for him to become resident abroad: if he was to become non resident in the UK, more was needed.
Crucial to the appeals is the second chapter of the booklet, entitled Leaving the UK.
Paragraph 2.1, headed Short absences, stated: You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
The appellants stress the reference to short periods and they reasonably submit that the day count proviso was the other side of the same coin.
The Revenue, by contrast, stresses the word usually.
I accept its submission that the word conveyed to the reasonably sophisticated taxpayer that the inquiry would encompass consideration of various aspects of his life with a view to the identification of its usual location.
Paragraph 2.2, headed Working abroad, stated: If you leave the UK to work full time abroad under a contract of employment, you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for a least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) The second bullet point, which has two parts, represented the day count proviso.
Although the first part of it was statutory (now section 830 of the 2007 Act), the second part of it reflected long established Revenue practice: thus, if the individual visited the UK for six months or more in any year of assessment, he was treated as resident here for that year but, if he did not do so and his visits to the UK averaged less than 91 days each year during up to four tax years, he was treated as not resident here for those years.
Reluctant though I am to be distracted from consideration of the substantive issues in the appeals, it is convenient here to append a footnote about an alternative ground of appeal on the part of the first appellants, which their leading counsel described as peripheral and which he did not address in oral argument save to decline formally to abandon.
The argument is based on their alternative, fall back assertion that it was only after 5 April 2001, namely during the weeks which followed it, that they began the full time work in Belgium which has since proceeded for a number of years and at least throughout the year 2002 03.
On that basis the argument is that the Revenue is required to treat the first appellants as not resident and not ordinarily resident in the UK even in the crucial year 2001 02 because they had left the UK prior to the start of that year and because they had left to work full time abroad even though the work did not begin until after the start of that year.
But no rational taxpayer could imagine that the route to non residence by his pursuit of full time employment abroad throughout a tax year could be successfully traversed even in relation to a preceding year.
It is only the individuals full time employment abroad which yields the distinct break in the pattern of his life in the UK (see para 21 above) and the terms of paragraph 2.2 adequately convey its status as a pre requisite to non residence.
Paragraphs 2.7 to 2.9, which lie at the centre of the appeals, were headed Leaving the UK permanently or indefinitely so their content was entirely governed by that rubric, in which the two adverbs provided important colour to the type of leaving which the Revenue was proposing to address.
I also agree, however, with the observation of Moses LJ that: It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence. (para 44)
The paragraphs stated: 2.7 2.8 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits.
If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing[viz the day count proviso]. 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving [satisfy the day count proviso].
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing [viz the day count proviso].
On any view the three paragraphs were very poorly drafted.
But does it follow that, when read in conjunction with the other parts of the booklet to which I have drawn attention, they amounted to a clear representation of the types for which the appellants respectively contend? Regrettable though it would be, a confusing presentation would be likely to have lacked the clarity required by the doctrine of legitimate expectation.
There is now a preliminary dispute between the appellants about the nexus between paragraph 2.9 and paragraphs 2.7 and 2.8.
For in this court the first appellants for the first time contend that paragraph 2.9 charts a free standing route to non residence; to be specific, that the subject of paragraph 2.7 is leaving the UK permanently, that that of paragraph 2.8 is leaving it permanently or indefinitely and that that of paragraph 2.9 is leaving it for a settled purpose; and that they themselves travelled by the route charted in paragraph 2.9.
The second appellant, by contrast, accepts the Revenues contention as did the first appellants in the Court of Appeal that paragraph 2.9 was linked to paragraph 2.8 and charted only a different way in which an individual might establish that he had left the UK indefinitely.
In one sense it comes as no surprise that the Revenue should explain that paragraph 2.9 (which first appeared in the 1996 version of the booklet, as paragraph 2.10) was introduced as a result of the decision in 1985 of Nicholls J in Reed v Clark [1986] Ch 1.
For, by referring to the need for a settled purpose, the paragraph introduces a phrase adopted by Nicholls J: see para 18 above.
But the paragraph is a garbled reference to the decision: for Nicholls J was describing the settled purpose not as a route to becoming non resident but as the means by which the taxpayer who had become non resident escaped being treated otherwise under what is now section 829 of the 2007 Act.
Nevertheless, as all parties agree, the exercise required by these appeals is not to compare the booklet with the law but to construe it by reference to its own terms; and, as a matter of construction, the contention of the first appellants that paragraph 2.9 was independent of paragraph 2.8 is in my view patently incorrect.
It was grouped with paragraphs 2.7 and 2.8 under the heading Leaving the UK permanently or indefinitely; and, following paragraph 2.8 in which the Revenue offered one example of evidence which might satisfy it that the individual had left either permanently or indefinitely, paragraph 2.9, which, by its opening hypothesis if you do not have this evidence, made an express link with paragraph 2.8, purported to identify another situation in which the Revenue would accept that he had left indefinitely, namely that in which he had gone abroad for a settled purpose (including for a project in which he was to be engaged for an extended period of time) and satisfied the other specified conditions.
So the three paragraphs must be read compendiously.
They shared one important feature: they all referred to visits on the part of the individual to the UK.
If he usually resides in the UK, he will go abroad as a visitor but, if he has left the UK and has adopted a usual residence abroad, he will come to the UK as a visitor: we are not visitors in the country of our usual residence.
The reference to visits to the UK therefore underlined the need for a change in the individuals usual residence and therefore, by ready inference, for a distinct break in the pattern of his life in the UK.
Another important feature lay in paragraph 2.8.
The evidence there suggested was that the individual had taken steps to create a permanent home abroad.
He was then warned however that, if he continued to have property in the UK for his use, his reason for doing so must have been consistent with his stated aim of living abroad permanently or for at least three years.
The suggestion was therefore that it might be permissible for him to maintain in the UK not a home but property for [his] use but that, if he did so, he would fail to secure non resident status unless his reason for doing so survived the test of consistency with his stated aim.
In the course of his submissions leading counsel for the first appellants invited the court to consider a document not placed before the Court of Appeal.
It is entitled Notes on NON RESIDENCE, ETC and, when an individual asks the Revenue to supply him with the supplementary pages of a tax return referable to his claim to non residence, it will supply not only the extra pages but also the Notes in order to assist him in completing them.
The Notes put before the court were referable to the tax year 2001 02, being the crucial year for the first appellants.
By question 2A, first inserted into the Notes supplied for the year 2000 01, the individual was invited to ask himself Have you left the UK? In order to help him answer the question, the Notes said: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain there.
The premise of the question which followed was that prior to the relevant tax year the individual had left in the above sense and, on that basis, he was invited to consider whether he had lived or had intended to live outside the UK for at least three years (reflective of paragraph 2.8 of the booklet) or had worked abroad full time throughout the relevant tax year (reflective of paragraph 2.2, when properly construed) or had been abroad for a settled purpose (reflective of paragraph 2.9).
The proposition in the Notes quoted above was a clear (and, as it happens, also a reasonably accurate) definition of leaving the UK for the purposes of attaining non residence; and, inasmuch as the Notes had apparently been furnished in that form to everyone who submitted a claim to the Revenue that he had become non resident for any year after 1999 2000, it would, in the event of any significant doubt about the meaning of the booklet, have been legitimate to construe it in the light also of the quoted proposition.
On any view it is inconsistent with the contention of the first appellants, accepted by Lord Mance, that the Revenue was treating as non resident an individual who had done no more than to go abroad for a settled purpose (and to remain there for at least a year and to satisfy the day count proviso) irrespective of whether he had continued usually to live in the UK and to make his home and settled domestic life here.
At last comes the moment in which to stand back from the detailed textual analysis of the booklet and to survey the wood instead of the trees.
Unlike so it seems its successor, namely HMRC6, the exposition in the booklet of how to achieve non resident status should have been much clearer.
My view however, is that, when all the passages in it to which I have referred were considered together, it informed the ordinarily sophisticated taxpayer of matters which indeed were unlikely to come as a surprise to him, namely that: (a) he was required to leave the UK in a more profound sense than that of travel, namely permanently or indefinitely or for full time employment; (b) he was required to do more than to take up residence abroad; (c) he was required to relinquish his usual residence in the UK; (d) any subsequent returns on his part to the UK were required to be no more than visits; and (e) any property retained by him in the UK for his use was required to be used for the purpose only of visits rather than as a place of residence.
He will surely have concluded that these general requirements in principle demanded and might well in practice generate a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal.
If invited to summarise what the booklet required, he might reasonably have done so in three words: a distinct break.
The evaluative nature of the inquiry described in the booklet was fairly recognised by the first appellants accountant himself when he stated as follows: [W]hat IR20 does (according to the understanding which I have always had as a practitioner) is to set out certain factors which will be taken into account.
Some of these factors relate to the quality of the links which the taxpayer has with another country (eg fulltime employment for at least a whole tax year, settled purpose, acquiring accommodation abroad, living outside the UK for three years or more), and some of the factors relate to the extent of the links retained by the taxpayer with the UK (eg the number of days spent here, retaining a property in the UK).
It follows from this that HMRC have set out their view of the quality of the links with another country and the extent of the remaining links with the UK which should together be taken into account in determining whether someone has ceased to be UK resident.
The quality of the links with the other country are relevant insofar as they help to determine the extent to which the taxpayer has removed himself from the UK.
Were I wrong, however, to have concluded that the booklet succeeded in conveying to the taxpayer the information to which I have referred in para 45 above, it would in no way follow that, on this, the main, basis upon which they are advanced, the appeals should succeed.
Were I wrong, I would feel driven to conclude only that the treatment in the booklet of the means of becoming non resident was so unclear as to communicate to its readers nothing to which legal effect might be given.
Such a conclusion would leave the appeals far short of their necessary foundation, namely of clearly specified criteria by reference to which they legitimately expected their claims to non residence to be determined.
The alleged change of practice
I summarise the subsidiary and alternative contention of the appellants as follows: that, even if, on a proper construction of the booklet, the Revenue did not thereby make the representations for which they have respectively contended, its settled practice over many years was nevertheless to determine claims to non residence on the footing that, in the booklet, it had made such representations; that its settled practice continued until a date shortly after all the years of assessment (ie until a date in 2004 05); that its practice thereupon changed in that it began to conduct, including in relation to the appellants, a general inquiry into whether the taxpayer had effected a distinct break in the pattern of his life in the UK; and that the Revenue had thus raised in the appellants a legitimate expectation that it would determine their claims in respect of the years of assessment by reference to its earlier settled practice.
It is an arresting proposition that, having published and regularly revised a booklet in which it purported to explain how it would determine claims by individuals to have become non resident and of which it encouraged widespread use, the Revenue departed from it as a matter of settled practice.
Clear evidence would be necessary in order to make the proposition good.
But there is another reason for the need for clear evidence in this connection.
For, whereas, in the booklet the Revenue gave unqualified assurances about its treatment of claims to non residence which, if dishonoured, would readily have fallen for enforcement under the doctrine of legitimate expectation, it is more difficult for the appellants to elevate a practice into an assurance to taxpayers from which it would be abusive for the Revenue to resile and to which under the doctrine it should therefore be held. [T]he promise or practicemust constitute a specific undertaking, directed at a particular individual or group, by which the relevant policys continuance is assured: R (Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755, per Laws LJ at [43].
The result is that the appellants need evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to carry within it a commitment to a group of taxpayers including themselves of treatment in accordance with it.
The appellants place before the court statements by their tax advisers and others that in their experience the Revenue did not prior to 2004 05 conduct any general inquiry into whether a person who claimed to have become non resident pursuant to paragraphs 2.7 to 2.9 of the booklet had effected a distinct break in the pattern of his life in the UK; and they add that, so far as they know, it was the settled practice of the Revenue not to do so and thus that the general inquiries in that regard which were directed at the appellants from 2004 05 onwards represented an unheralded departure from it.
By its witness statements the Revenue disputes the existence of any such alleged practice and, in an argument which found favour in the Court of Appeal, suggests that the appellants witnesses may have mistakenly deduced the existence of the alleged earlier practice from what was on any view a later increase in the level of Revenue scrutiny of claims to have become non resident.
In any event, however, the appellants accept that, in order to make good their case, they need evidence beyond the generalised, anecdotal understanding of their witnesses, however highly regarded; and in this regard they primarily rely on a letter, entirely unrelated to the cases before the court, from a Revenue Inspector, Mr Wilks, to an accountant, Mr Sawyer, dated 7 July 1999, which was never published and of which the appellants learnt only following the Revenues disclosure of it in the course of these proceedings.
I should add that, in this court albeit not in the Court of Appeal, the appellants have also relied on a document published by the Institute of Chartered Accountants in England and Wales, dated 30 November 1994, in which, no doubt accurately, it recorded the Revenue as confirming that, were a UK resident to retire overseas to a house which he owned but to retain ownership of another house in the UK to which he were to make regular holiday visits of 50 days each year, he would have become non resident and not ordinarily resident in the UK; but in my view the quoted words sufficiently betoken a distinct break.
In his letter to Mr Sawyer, Mr Wilks wrote: As promised Im writing to confirm the way we approach the residence status of individuals who leave the UK for purported permanent residence but who cannot produce the sort of evidence mentioned in paragraph 2.9 of IR20.
Subject only to the caveat that the following guidance is general and particular cases will always need to be decided on their own specific facts, I can say that provided such an individual lives outside the UK for 3 years or more from the date of departure, and after departure has not visited the UK for as much as 183 complete days in any one tax year or 91 or more days a year on average then we will, after the 3 years has elapsed, accept the claim to have become not resident and not ordinarily resident.
Specifically, circumstances such as the spouse and/or children having continued to live in the UK a residence having been maintained here duties having continued to be performed in the UK will not prejudice the claim to non residence.
The reference by Mr Wilks to IR20 was to the 1996 version and, in the 1999 version, paragraph 2.9, which he cited, became paragraph 2.8.
There is no doubt that Mr Wilks letter accords well with the assertions of the appellants professional witnesses.
If and insofar as, by his reference to individuals who leave the UK, Mr Wilks was attempting to refer to individuals who effect a distinct break in the pattern of their lives in the UK, the attempted reference was too elliptical; and the fact that, in another context, he wrote a further letter to Mr Sawyer dated 8 March 2000, in which he referred to a person who continues to be resident in the UK on the basis that he hasnt in reality left the UK, cannot alter the natural construction of the earlier letter.
But did it reflect a settled practice to depart from the law and indeed from the then current version of the booklet?
Until 1998 some UK residents had been able to take advantage of what was known as the foreign earnings deduction.
To the extent that they earned income from employment carried out wholly or partly abroad for at least a year, they had been able to deduct it in full from their income for UK tax purposes.
But, by section 63 of the Finance Act 1998, the right to make the deduction was abolished.
The abolition precipitated an increase in claims to non residence on the part of mobile workers, ie persons, such as lorry drivers and airline pilots, who made frequent and regular trips abroad in the course of their work but who remained based in the UK.
In the present proceedings the Revenue disclosed its statements made in 2000 and 2001 to a variety of professionals about its treatment of such claims.
The statements are unhelpful to the appellants case.
For example the gist of a tax bulletin, published by the Revenue in April 2001, was that, unless he was working full time abroad for at least a whole tax year and so could satisfy the requirements of paragraph 2.2 of the booklet, it was probable that the mobile worker usually lived in the UK, thus also failed to fall within paragraphs 2.7 to 2.9 and so was resident in the UK.
The bulletin explained that individuals usually live in the UK if their home continues to be in the UK and their settled domestic life remains here.
Although the bulletin related to mobile workers, tax advisers sought clarity as to how it affected the Revenues treatment of business executives who were seconded to work abroad but who regularly returned to the UK.
For example, one of the expert witnesses of the first appellants, Mr Hilton Gee, who was a senior manager at PricewaterhouseCoopers LLP until 2006 but who never handled their case, spoke to a Revenue manager on 8 May 2001 and made the following note: I asked whether the Tax Bulletin article reflects a change of Practice by the Revenue or a change in policing standards. [He] confirmed that the article does not reflect any change in the Revenues practice, but it does reflect their view that whereas in the past they might have taken a claim to non residence at face value, they now feel that they should be asking for more facts.
The article was directed at a specific category of individual and [he] can see that, if you try to apply its literal wording to other categories of businessmen, one might get the wrong impression.
The Revenue are attempting to describe the difference between a businessman who is based in the UK but travels abroad for most of the time, and a businessman who is based abroad but manages to visit the UK from time to time, and are saying that in a case which may not be clear cut you need to look at all relevant factors.
In June 2001 accountants at Arthur Andersen raised analogous questions at a meeting with senior Revenue officers.
According to the Revenues note, its officers explained that paragraph 2.2 of the booklet still applied; that mobile workers who worked partly within the UK did not fall within it; but that business executives seconded to work abroad might well do so; and that they could fall within the paragraph without severing every link with the UK.
Arthur Andersen acknowledged in the words of the note that: If an individual had full time employment abroad, it was not necessary to look at the wider factors in paragraph 2.7 about personal circumstances such as accommodation, family life etc.
Arthur Andersen, at any rate, were under no illusion about the nature of the inquiry into a claim for non residence which was required by the booklet when it did not fall within paragraph 2.2.
The Revenues dialogue with the accountants culminated in its letter, dated July 2001, sent to the Institute of Chartered Accountants, the Chartered Association of Certified Accountants, the Chartered Institute of Taxation, the Confederation of British Industry, and the big five firms of accountants.
It made clear that most mobile workers failed to become non resident because they did not fall within paragraph 2.2 and because they had not genuinely left the UK in the residence sense.
In the light of the wide circulation of the letter, it is hard to imagine that tax practitioners did not realise that the Revenue required that an individual who claimed to have become non resident but who failed to fall within paragraph 2.2 should genuinely have left the UK, being a requirement reflective only of the ordinary law.
Had there been a facility for cross examination of the appellants professional witnesses in the proceedings, no doubt their precise understanding of what was or was not required both in law and in practice and their grounds for having it would have been laid bare.
In my view the Court of Appeal was right to hold that the appellants failed to establish that, by its inquiries and determinations in respect of them, the Revenue was departing from a settled practice such as to found a legitimate expectation.
In about 2001, probably triggered by the mobile workers, scrutiny of claims to non residence became more frequent.
But when, previously, claims had been scrutinised, had the Revenue adopted a settled practice of applying criteria different from those identified not only by the ordinary law but also in its own booklet read as a whole? The appellants evidence to this effect was far too thin and equivocal.
H. Conclusion
I would dismiss the appeals.
LORD HOPE
I am grateful to both Lord Wilson and Lord Mance for their description of the background to these appeals and for the way in which they have identified the points that are in issue.
I have reached the conclusion that, for the reasons that are set out in Lord Wilsons judgment, the appeals should be dismissed.
I have nothing to add to what Lord Wilson has said about the appellants secondary and alternative contention.
Their case that the Revenue had raised a legitimate expectation that their claim would be determined more favourably than the law and a proper construction of IR 20 would indicate was simply not made out by the evidence.
The difference between Lord Wilson and Lord Mance as to the primary issue turns on the meaning that paragraphs 2.7 to 2.9 of IR 20 would convey to the ordinarily sophisticated taxpayer.
Is the question whether the taxpayer has become non resident and not ordinarily resident in the United Kingdom to be determined simply by reference to the taxpayers intention when going abroad regarding the overall duration of his absence and counting up the days of any return visits? Or is it to be determined by evaluating the quality or nature of the absence and of any return visits that he has made?
There is an obvious attraction in keeping the test as simple as possible, especially as taxpayers are now responsible for self assessment when making their returns.
But the underlying principle that the law has established is that it must be shown that there has been a distinct break in the pattern of the taxpayers life in the UK.
The inquiry that this principle indicates is essentially one of evaluation.
It depends on the facts.
It looks to what the taxpayer actually does or does not do to alter his lifes pattern.
His intention is, of course, relevant to the inquiry.
But it is not determinative.
All the circumstances have to be considered to see what light they can throw on the quality of the taxpayers absence from the UK.
The question then is whether on its proper construction the booklet sets out tests which are so clear that they eliminate the need for an inquiry into whether there was in fact a distinct break.
As Lord Mance points out, the requirement for a distinct break is not clearly expressed in the relevant paragraphs of the booklet.
But I cannot agree with him that chapter 2 is to be read as substituting for that test a series of specifically delineated cases which clearly and unambiguously eliminated the need for such an inquiry: see para 100, below.
The booklet must be read as a whole, including its introductory paragraphs.
As the preface to the booklet made clear, it offered general guidance.
Its application to a particular case was to depend on its own facts.
So paragraphs 2.7 2.9 do not stand alone.
Taken as a whole, the message that the booklet conveyed was that all the circumstances were open to evaluation in order to see whether the rules for non residence were satisfied.
I am in full agreement with Lord Wilsons careful analysis.
LORD WALKER
I agree that these appeals should be dismissed for the reasons given in the judgment of Lord Wilson.
The stronger appeal is that of Mr Davies and Mr James, but it is by no means as strong as is claimed by the exaggerated opening of their printed case.
The preface to the relevant edition of IR 20 made clear that it gave general guidance only, and that whether the guidance was appropriate in a particular case would depend on all the facts of the case.
In the event of difficulty taxpayers were invited to consult an Inland Revenue tax office.
The appellants had expert professional advisers, and it was well known to them that a large amount of tax was at stake.
The guidance in IR 20 is far from clear, as Lord Wilson explains.
Yet there is no suggestion that any attempt was made to seek clarification from an office of the Inland Revenue, still less that any specific guidance or assurance was given on the particular course of action proposed by the appellants.
It seems possible that the preferred strategy was to let sleeping dogs lie, despite the obscurity of parts of IR 20.
But whether that is right or not, the appeals must be dismissed for the reasons given by Lord Wilson, which are essentially the same as those given by Moses LJ in the Court of Appeal.
LORD CLARKE
I agree that these appeals should be dismissed for the reasons given by Lord Wilson.
I have reached the conclusion that his reasoning is to be preferred to that of Lord Mance for the reasons given by Lord Hope.
LORD MANCE
Introduction
In these appeals, the issue is whether Her Majestys Revenue and Customs (HMRC) is entitled to treat the appellants as resident and ordinarily resident in the United Kingdom, in the case of Mr Davies and Mr James in the tax year 2001 02 and in the case of Mr Gaines Cooper in respect of the tax years 1993 94 to 2003 04.
The issue turns primarily upon the interpretation and effect of Revenue guidance on the liability to tax in the United Kingdom of residents and non residents, known as IR20.
IR20 was first issued in 1973, and existed in various versions developed from time to time until April 2009, when IR20 was entirely replaced by materially different guidance called HMRC 6.
A secondary issue in each appeal is whether HMRC, in seeking to treat the appellants as ordinarily resident, resiled illegitimately from a practice followed prior to 2005 with respect to the interpretation and application of IR20.
HMRC has confirmed in each appeal (HMRC Case para 2) that it accepts that a taxpayer has a legitimate expectation that HMRC will apply the guidance of IR20 to the facts of his particular case and, if satisfied that the facts and evidence fall within one of the circumstances in chapter 2 of IR20 indicating a certain residence treatment, will treat him accordingly.
This accepts that the guidance of IR20 gives rise to a legitimate expectation, but the nature of that legitimate expectation depends upon the terms of the guidance.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453, para 60, cited recently in Paponette v Attorney General of Trinidad and Tobago [2010] UKPC 32, [2011] 3 WLR 219, para 28, Lord Hoffmann said that: a legitimate expectation can be based only upon a promise which is clear, unambiguous and devoid of relevant qualification It is not essential that the applicant should have relied upon the promise to his detriment, although this is a relevant consideration in deciding whether the adoption of a policy in conflict with the promise would be an abuse of power .
As to the need for a representation to be clear, unambiguous and devoid of qualification, the Board in Paponette endorsed Dyson LJs statement in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, para 56, that the question is how on a fair reading of the promise it would have been reasonably understood by those to whom it was made ([2011] 3 WLR 219, para 30).
The primary issue in each appeal is thus how, on a fair reading, IR20 would have been reasonably understood by those to whom it was directed.
It is for the courts to resolve this as a matter of law.
If any of the appellants succeeds on either issue, it may also be necessary to consider what precise relief would be appropriate.
Mr Eadie QC for HMRC suggested in his oral submissions that a requirement to treat the taxpayer as not resident and ordinarily resident should not follow axiomatically.
However, the unequivocal nature of the above confirmation makes it difficult to see how this could be so if and in so far as any of the appellants succeeds on the primary issue.
More specifically the issues are whether, upon the true interpretation of IR20 or under Revenue practice prior to 2005, taxpayers seeking to show that they are neither resident nor ordinarily resident in the United Kingdom are required to show that they have made a distinct break from or severed family and social ties in the United Kingdom.
HMRC maintains and the Court of Appeal (paras 50, 53 55) has held that this is not required where a taxpayer can show that he or she is in full time employment abroad, but is required in all other circumstances.
This is said to reflect the test which would, having regard to past case law, apply in strict law.
The present judicial review proceedings are brought on the basis that, whatever the legal position might otherwise be, HMRC must as a matter of public law honour the terms of IR20.
This, as I have explained in para 70, follows from the HMRCs assurance, that if satisfied that the facts and evidence fall within chapter 2 of IR20, it will treat the relevant taxpayer accordingly.
While accepting this assurance, I confess to some residual unease about a concession so apparently general and independent of any consideration of particular circumstances, including any knowledge and advice possessed by or available to the particular taxpayer.
Nevertheless, that is the agreed basis upon which this appeal falls to be considered as a matter of public law.
Statutory background
Although this case concerns the effect of IR20 and/or Revenue practice, I refer at points to the limited statutory provisions relating to residence to be found in the Income and Corporation Taxes Act 1988 (ICTA 1988), which it will therefore be helpful to set out: 335 Residence of persons working abroad (1) Where (a) a person works full time in one or more of the following, that is to say, a trade, profession, vocation, office or employment; and (b) no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom; the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use. (2) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom. 336 Temporary residents in the United Kingdom (1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if (a) he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and (b) he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment, but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year. (2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has. (3) The question whether (a) a person falls within subsection (1)(a) above, or (b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there, shall be decided without regard to any living accommodation available in the United Kingdom for his use.
Section 336(3) was only introduced for and with effect from the tax year 1993 94 by section 208 of the Finance Act 1993.
IR20 has, as stated, developed over the years.
The version which matters in the case of Mr Davies and Mr James was issued in December 1999.
Mr Gaines Coopers case may require consideration also of earlier versions issued in October 1992, November 1993 and October 1996.
However, Mr Gaines Coopers case is that he left the United Kingdom permanently long ago and has lived abroad for many years, and the changes in provisions governing his situation are relatively limited.
The 1992 version read as follows: Leaving the UK permanently 2.5 If you go abroad permanently but have accommodation in the UK available for your use, you will be treated as resident for any tax year during which you visit the UK (see Chapter 4 for details of when accommodation is regarded as available).
The length of the visit does not matter.
If you come to the UK in most tax years, you remain ordinarily resident. 2.6 If you go abroad permanently and do not have available accommodation in the UK, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year. 2.7 If you claim that you are no longer resident and ordinarily resident you will normally be asked to give some evidence that you have left the UK permanently for example, that you have sold your UK home (or you have left it empty and on the market for sale) and set up a permanent home abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
In the event, the guidance regarding accommodation in paragraphs 2.5 and 2.6 was superseded as a matter of law by the introduction (for and from the tax year 1993 94) of section 336(3) of ICTA 1988 (para 72 above), providing that whether a person is in the United Kingdom with the intention of establishing his residence there should be decided without regard to any living accommodation available in the United Kingdom for his use.
This change was reflected in the 1993 version of IR20 which read: Leaving the UK permanently 2.6 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year.
For tax years before 1993 94, if you went abroad permanently but had accommodation in the UK available for your use, you were treated as resident for any tax year during which you visited the UK (see Chapter 4 for details of when accommodation was regarded as available).
The length of the visit did not matter.
If you came to the UK in most tax years, you remained ordinarily resident. 2.7 If you claim that you are no longer resident and ordinarily resident, you will normally be asked to give some evidence that you have left the UK permanently for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to own property in the UK, the reason is consistent with your stated aim of permanent residence abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
The Revenue in its submissions before the Supreme Court suggested that section 336(3) has no bearing on the present appellants situations, being relevant to persons who have established residence and ordinary residence abroad and come back here temporarily, rather than to the question whether persons have established ordinary residence abroad (an analysis encapsulated in the title to a contribution to issue 435 of CCH Taxes The Weekly Tax News after the Special Commissioners decision in relation to Mr Gaines Copper: Tis better to have left and returned than never to have left at all: p 37).
Whatever the accuracy of the Revenues submission on this point in strict law, it is clear, from the change in treatment of the significance of available accommodation in the 1993 and subsequent versions of IR20, that for the purposes of IR20 the Revenue treated the thinking behind section 336 as directly relevant to the question whether a taxpayer had established residence and ordinary residence abroad.
The 1996 version of IR20 was amended by the addition in the light of the decision, some ten years before, of Nicholls J in Reed v Clark [1986] Ch 1 of a new paragraph 2.10, which became paragraph 2.9 of the 1999 version and is of particular relevance to the cases of Mr Davies and Mr James.
The 1999 version read: 1 Residence and ordinary residence Residence in both the UK and another country 1.4 It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
Where, however, you are resident both in the UK and a country with which the UK has a double taxation agreement, there may be special provisions in the agreement for treating you as a resident of only one of the countries for the purposes of the agreement (paragraph 9.2). 2 Leaving the UK .
Short absences 2.1 You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Working abroad 2.2 If you leave the UK to work full time abroad under a contract of employment you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for at least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.3 If you meet all the conditions in paragraph 2.2, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK to the day before you return to the UK at the end of your employment abroad.
You are treated as coming to the UK permanently on the day you return from your employment abroad and as resident and ordinarily resident from that date.
If there is a break in full time employment, or some other change in your circumstances during the period you are overseas, we would have to review the position to decide whether you still meet the conditions in paragraph 2.2.
If at the end of one employment you returned temporarily to the UK, planning to go abroad again after a very short stay in this country, we may review your residence status in the light of all the circumstances of your employment abroad and your return to the UK.
If you do not meet all the conditions in paragraph 2.2, you remain resident and ordinarily resident unless paragraphs 2.8 2.9 apply to you.
Special rules apply to employees of the European Community (see paragraph 2.14). 2.4 The treatment in paragraph 2.3 will also apply if you leave the UK to work fulltime in a trade, profession or vocation and you meet conditions similar to those in paragraph 2.2.
Meaning of full time 2.5 There is no precise definition of when employment overseas is full time, and a decision in a particular case will depend on all the facts.
Where your employment involves a standard pattern of hours, we will regard it as full time if the hours you work each week clearly compare with those in a typical UK working week.
If your job has no formal structure or no fixed number of working days, we will look at the nature of the job, local conditions and practices in the particular occupation to decide if the job is full time.
If you have several part time jobs overseas at the same time, we may be able to treat this as full time employment.
That might be so if, for example, you have several appointments with the same employer or group of companies, and perhaps also where you have simultaneous employment and self employment overseas.
But if you have a main employment abroad and some unconnected occupation in the UK at the same time, we will consider whether the extent of the UK activities was consistent with the overseas employment being full time.
Accompanying spouse 2.6 If you are the husband or wife of someone who leaves the UK within the terms of paragraph 2.2 or 2.4 and you accompany or later join your spouse abroad, you may also by concession (extra statutory concession A78) be treated as not resident and not ordinarily resident from the day after your departure to the day before your return, even if you are not yourself in full time employment abroad.
This applies where you are abroad for a complete tax year, and during your absence any visits you make to the UK total less than 183 days in the tax year average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) Where the tax years of your departure or return are spilt in this way, your tax liabilities which are affected by residence status are calculated on the basis of the period you are treated as resident in the UK.
Leaving the UK permanently or indefinitely 2.7 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits. 2.8 If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving have totalled less than 183 days in any tax year, and have averaged less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year; and your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing in either case your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
Calculating annual average visits 2.10 If it is necessary to calculate your annual average visits to the UK, the method is as follows: Total visits to the UK in days x 365 Total period since leaving (in days) = annual average visits .
After the third review the year of departure is dropped from the calculation.
At each subsequent review the oldest year is dropped, so that there is a rolling period of four years being reviewed.
However, if during your absence the pattern of your visits varied substantially year by year, it might be appropriate to look at the absence as being made up of separate periods for the purpose of calculating average visits.
This might be necessary if, for example, a shift in the pattern of your visits suggested a change of circumstances, which altered how we viewed your residence status.
Contacting the Inland Revenue 2.11 You should let us know when you leave the UK (other than for short trips as in paragraph 2.1).
You will normally be asked to complete form P85,which will help to determine your residence status.
Paragraphs 2.1 to 2.6 repeated similar provisions in previous editions, all including a 183 day limit.
Such a limit appears for the first time in the 1996 edition in paragraphs dealing with Leaving the UK permanently .
Again, it is clear that, even if the scope of section 336 of ICTA 1988 may in strict law be regarded as confined to persons who have already established residence and ordinary residence abroad, the Revenue was inspired to take a more generalised view of the relevance of a 183 day limit in IR20, treating it as part of the test whether someone has established residence and ordinary residence abroad.
Davies and James
Mr Davies and Mr James are British citizens, who were born in the United Kingdom and lived and worked in Wales until 2001, when they took decisions, with the benefit of undisclosed professional tax advice, aimed at bringing about a cessation of ordinary residence here.
In pursuit of those decisions, in March 2001, they moved from the United Kingdom to apartments in Brussels, and incorporated and became directors of a Belgian company, Beaufort House SA, in which each held one third of the shares.
They also entered into employment contracts for full time work with that company for three years from 1 April 2001.
They say that, in planning for and making this move, they and their tax advisers, PriceWaterhouseCoopers, relied upon the guidance in IR20 in believing that it would mean that they would cease to be ordinarily resident in the United Kingdom.
The importance of this is that, in the tax year 2001 02, as they probably already envisaged, they realised chargeable gains in respect of which they became liable to capital gains tax unless they were not resident and ordinarily resident in the United Kingdom in that tax year.
In May 2002 they submitted to HMRC forms P85 (Leaving the United Kingdom) declaring that their intention had been to live outside the United Kingdom for a full tax year after their departure (though not permanently), that they would be working full time under a contract for their employment abroad for three years and that they expected to be in the United Kingdom for less than 90 days a year.
HMRC maintains and the Court of Appeal has held that Mr Davies and Mr James are unable to take advantage of paragraph 2.2 of IR20, because their employment by Beaufort House SA did not in fact commence from 5 April 2001, but only later, since on 5 April 2001 they were in fact on holiday in Italy.
That is accepted factually, but Mr Goldberg QC does not abandon his clients submission that it is sufficient under paragraph 2.2 that their employment should last for at least a whole tax year including a later tax year, such as 2002 03.
Rightly, however, he did not elaborate on the submission, which is without merit.
It is plainly implicit that the whole tax year to which paragraph 2.2 refers is that in relation to which absence of ordinary residence in the United Kingdom is asserted.
Mr Goldberg QC for Mr Davies and Mr James has thus to fall back on paragraph 2.8 or 2.9.
In relation to these paragraphs, Mr Daviess and Mr Jamess case is that they went abroad either to live outside the United Kingdom for three years or more within paragraph 2.8 or, at least, for a settled purpose within paragraph 2.9, and that they were in fact absent from the United Kingdom for the whole tax year 2001 02, indeed for three tax years, from such departure, and that their visits to the United Kingdom totalled less than 183 days in any such tax year and averaged less than 91 days a tax year.
HMRC asserts in response that Mr Davies and Mr James failed to establish the necessary distinct break with family and social ties in the United Kingdom.
In particular, they continued to each to have a substantial house here, in which their spouses lived when not visiting them in Belgium and where they lived when in the United Kingdom; and they retained employment and business links in the United Kingdom, as well as other links such as with Swansea Football Club and the Area Health Authority.
The Court of Appeal held that the issue whether such a break was necessary under IR20 should be determined in the present judicial review proceedings prior to any proceedings before the Special Commissioners ([2008] EWCA Civ 933, paras 18 19 and 24).
Gaines Cooper
Mr Gaines Coopers case involves very different and more complex facts, which have already been established in proceedings before the Special Commissioners, who, in a full and very clearly reasoned decision, concluded that Mr Gaines Cooper was in law resident and ordinarily resident during the relevant tax years in the United Kingdom.
In doing so they said that in this appeal we must apply the law rather than the provisions of IR20: para 99.
A brief summary will suffice, since it is of the essence of the present appeal that most of the facts so established are irrelevant under IR20 and/or under Revenue practice.
Mr Gaines Cooper is also a British citizen, who was born and educated and for many years lived here.
But by 1974 he had formed the view that the tax regime in the United Kingdom was unfavourable to businessmen and entrepreneurs, and on that basis he began to establish overseas interests.
He did so first in Canada and then in the Seychelles, where he purchased a house (Bois Noir) in late 1975 and was granted a residency permit in February 1976 and with which he has had close links ever since, and later elsewhere worldwide.
In February 1980, HMRC wrote to him asking for details of his travel to the United Kingdom between 1976 and 1979.
The figures provided for days spent, which there is no reason to doubt, were 49, 45 and 56, not counting days of arrival and departure.
HMRC raised no further queries thereafter and did not suggest that he might be taxable as resident or ordinarily resident in the United Kingdom until 2000, when the inquiries began which led eventually to these proceedings.
After marrying Mrs Dilona Lantang in 1979, Mr Gaines Cooper also purchased a house in California, where they lived for a time, but the marriage was dissolved in 1986.
In 1993 he married a Seychellois citizen, Miss Jane Laye Sion, whom he had met in the Seychelles, but who had moved with her family to the United Kingdom, and their son James was born in 1998.
Through off shore companies, Mr Gaines Cooper has retained property in the United Kingdom which was, apart from occasional periods of letting, available for his use.
Since early 1989 that has consisted of Old Place, near Henley, where his wife, Mrs Jane Gaines Cooper lives during term time, as does Mr Gaines Cooper when here.
By reason of the availability of such property, Mr Gaines Cooper accepts that, in the tax years immediately prior to 1993 94 and under the language then of IR20, the availability of such property meant that he was, even though he might satisfy all other conditions of IR20, to be treated as ordinarily resident in the United Kingdom.
In school holidays, Mrs Gaines Cooper and James also join Mr Gaines Cooper abroad in the Seychelles or wherever he may be.
In October 1987 Mr Gaines Cooper acquired an Italian company, Orthofix, administered from Cyprus and from about 1988 serviced by a company of which he was director based in Henley.
He developed it by 2003 into a worldwide company with subsidiaries registered in twenty four countries.
From 1992 to 1995 he was employed half time to perform duties in the United Kingdom for Orthofix.
After about 1987 he also became involved in manufacturing Laryngeal masks, first through a Seychelles company and then from 1988 by mass production in Indiana, USA.
So far as he had earnings here, he paid tax on them here.
During the relevant tax years, Mr Gaines Cooper spent about 150 days each year on airplanes, travelling between his interests in different countries, and spending each year in total about three or four months in the United Kingdom, three or four months in Jersey, six to eight weeks in the United States, two weeks in Cyprus and two weeks in Italy.
He also made visits to the Seychelles, which involved in the years 1991 92 to 1995 96 weeks in total rather than months according to the Special Commissioners (para 108).
It is now common ground that the total days spent by Mr Gaines Cooper in the United Kingdom, calculated by ignoring days of arrival and departure (in accordance with IR20) were, in the tax years 1992 93 to 2002 03, as follows (the square bracketed figures being those arrived at by the Commissioners who concluded that when examining the position in strict law they should add back days of arrival and departure, including single day trips to the United Kingdom): 1992 93: 107 (including 60 for a heart bypass) [147]; 1993 94: 78 [121]; 1994 95: 110 [158]; 1995 96: 66 [110]; 1996 97: 109 [146]; 1997 98: 92 (including 8 for Jamess birth) [141]; 1998 99: 110 (including 8 for Jamess birth) [151]; 1999 2000: 81 [127]; 2000 01: 50 [94]; 2001 02: 0 [27]; and 2002 03: 68 [105].
The Commissioners concluded, looking at the position overall, that England remained the centre of gravity of [Mr Gaines Coopers] life and interests, because he lived in Henley more than anywhere else and because of his many other ties to Berkshire and Oxfordshire.
On the basis of figures calculated according to IR20 (and all the more so if one excludes as exceptional circumstances the time spent here for a heart bypass and Jamess birth), Mr Gaines Cooper satisfied in the relevant tax years the conditions both that his visits should in no tax year total 183 days and that they should have averaged over any four year period less than 91 days a year.
Mr Gaines Cooper clearly intended to maintain that position permanently or for three years or more, and has maintained it over a period of many years.
The essential question is whether that is sufficient to attract the benefit of paragraph 2.7, read with paragraph 2.8, or paragraph 2.9 of IR20.
The status and interpretation of IR20
Giving the leading judgment in the Court of Appeal Moses LJ, with whose reasoning Dyson LJ agreed, addressed the question of the status and interpretation of IR20 (1999 version) in relation to questions of residence for the purpose of taxation as follows (para 4): It is notorious that the principles to be applied [on such questions] are to be found, not in the few statutory provisions (sections 334 336 ICTA 1988, now sections 829 832 ITA 2007), which do not purport to be a statutory code but in case law, mainly from the late 19th and early 20th Century.
As the Codification Committee recognised, only study of that jurisprudence would enable intelligent prediction of the outcome of an assertion as to residence or non residence.
All the more important, then, that guidance should be given on which taxpayers could rely.
The Income Tax Codification Committee, chaired by Lord Macmillan and reporting in 1936 (Cmd 5131), put the matter strongly, saying: We are, however, of opinion that the present state of affairs, under which an enquirer can only be told that the question whether he is resident or not is a question of fact for the Commissioners, but that by the study of the effect of a large body of case law he may be able to make an intelligent forecast of their decision, is intolerable and should not be allowed to continue. (paragraph 59) The Codification Committees prescription to resolve this situation was a draft set of statutory rules, which was not however enacted.
Nearly 20 years later in 1955, the Royal Commission on The Taxation of Profits and Income (Cmd 9474) set out what it believed to be the practice which the Revenue followed and claimed to derive from the few statutory rules existing and from decided cases.
This included a principle that: A man who has been regularly resident in the United Kingdom and has then gone abroad may or may not be treated as a visitor if he comes back again at any time.
That depends primarily on the question whether the circumstances in which he went abroad indicate a clear break with the United Kingdom as his place of ordinary residence. (paragraph 290) The Commission, quoting the 1936 reports words set out above, agreed that the state of affairs was unsatisfactory.
It suggested as the remedy a printed leaflet which sets out at any rate the main lines of the Revenue Departments established practice, and went on to say that: . fixed rules would simplify the work of administration even if they worked unreasonably in some instances.
But it is one of the arguments against the existing system that it does lead to the devotion of a great deal of time and skill to considering and adjudicating upon individual cases, whereas the establishment of certain fixed rules would make this unnecessary without giving any individual a serious cause of complaint.
Indeed we think that the visitor or potential visitor would normally prefer certainty to the assurance that there will be the fullest consideration of his personal circumstances. (paragraph 292) By 1961 separate visitors and permanent residence leaflets were in existence, and steps were begun to bring into existence the single guidance which became the first edition of IR20 in 1973.
The Preface to IR20 has since 1992 started with the statement that: The notes in this booklet reflect the law and practice at the time of writing.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
Until 1996 it went on: From 1996, it read: You should therefore always consult an Inland Revenue Tax Office on how the rules apply in your own case .
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office .
This change followed from the introduction in April 1996 of self assessment, representing a major shift in the responsibilities of taxpayers, who from then on had to determine for themselves in the first instance whether or not they were ordinarily resident for tax purposes.
However, it is not, I understand, suggested that the change is critical to the outcome of the present appeals in any year.
Paragraph 1.1 of IR20 notes that the terms residence and ordinary residence are not defined in the Taxes Acts, but states that: The guidelines to their meaning in this Chapter and in Chapters 2 . and 3 . are largely based on rulings of the courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your
particular case
As Moses LJ underlined in paras 17 to 25 of his judgment, HMRC has given, both by the language of paragraphs 2.2 to 2.9 and expressly in the present proceedings (para 70 above), a binding and lawful assurance that it will treat a taxpayer, whose case falls within the circumstances described, as not resident and not ordinarily resident.
The significance of the words quoted above from the Preface and paragraph 1.1 is to show that the guidance is meant to reflect the law and practice, and to set out the main factors and that, although it is not binding in law and does not affect a taxpayers right of appeal, it was and is intended to obviate any need for a taxpayer to look further.
As HMRC itself put the matter, in writing to PriceWaterhouseCoopers about Mr Daviess and Mr Jamess positions on 14 March 2005: it is generally accepted that some of the practices outlined in IR20 are relaxations from the strict position.
Not all these relaxations are covered in Extra Statutory Concessions (ESCs).
Parliamentary Draftsmen did not draw up the IR20 notes, as they are simply general guidance.
Therefore it is not appropriate to seek to construe this general guidance as if it were statute law.
On the other hand we do consider ourselves bound to follow the practices outlined in IR20.
Therefore if your clients circumstances place them within IR20 2.2, or 2.7 etc we will accept the non resident (NR) claim.
This conclusion would apply even if a strict interpretation of the law suggested otherwise.
Moses LJ correctly identified each of paragraphs 2.2 to 2.9 in the 1999 version as requiring at the outset not merely a departure from the United Kingdom, but satisfaction of a further qualification (in addition to the later provisos relating to the duration of absence from and of visits to the United Kingdom).
In the case of paragraph 2.2, the further qualification was that he must have left to work full time; no more, and in particular no severance of any family and social ties within the United Kingdom, was required (para 43).
But, in the case of paragraphs 2.7 to 2.9, he held that severance of ties had to be demonstrated, because (para 44) The adverbs permanently or indefinitely make, as a matter of construction, all the difference.
The extent to which a taxpayer retains social and family ties within the United Kingdom must have a significant and often dispositive impact on the question whether a taxpayer has left permanently or indefinitely (for at least three years).
It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence and contrast with 2.1 .
Moses LJ considered that this interpretation was supported both by the contrast with paragraph 2.1 (short absences) and by the reference in paragraph 2.8 to the need, if you continue to have property in the UK for your use, for evidence that the reason is consistent with your stated aim of living abroad permanently or for three years or more.
To my mind, however, the references in paragraphs 2.7 and 2.8 to going abroad permanently or to live outside the UK for three years or more and to a stated aim of living abroad permanently or indefinitely are directed most obviously to the taxpayers intention regarding the overall duration of his or her absence, rather than to the quality of absence or the nature of any return visits or continuing British connections.
Further, it is clear that the words Leaving the UK permanently or indefinitely cannot and do not precisely or accurately reflect all the paragraphs above which they appear.
Thus, the only requirements under the first part of paragraph 2.9 are (i) going abroad (ii) for a settled purpose, which is expressly defined to include a fixed object or intention in which you are going to be engaged for an extended period of time.
That paragraph, reflecting Reed v Clark [1986] Ch 1, is again focused on the taxpayers intention when going abroad; and a settled purpose to engage in an overseas activity for an extended period of time may clearly exist without any intention to stay overseas either permanently or indefinitely.
As in Reed v Clark, therefore, a taxpayer may have a settled purpose simply to remain outside the United Kingdom for one tax year.
When paragraph 2.9 starts with the phrase If you do not have this evidence, this cannot mean that paragraph 2.9 only applies as a sort of long stop, when a taxpayer is asserting that his intention was to go abroad permanently or indefinitely, but when he cannot prove this but can prove some more limited settled purpose.
To that extent, I disagree with Moses LJs description of paragraph 2.9 as designed to assist taxpayers who lack evidence (para 50), a description which may have been based on a partial concession below (para 51) which cannot however be sustained.
In my opinion, paragraph 2.9 is designed to assist taxpayers who never intended to leave permanently or indefinitely, but can show a settled purpose of lesser duration.
The second part of paragraph 2.9 deals likewise with situations where there was neither an intention to go abroad permanently or indefinitely nor, additionally, any settled purpose.
It covers two possibilities: one that the taxpayer can subsequently say and show that he has now acquired an intention to leave the United Kingdom permanently (or, one would presume though this is not expressed, for three years or more); the other that his actual absence covers three years from departure.
This second possibility looks on its face at the period for which he is abroad, again without focusing on the quality of absence.
Paragraph 2.1 in my view also lends no real support to HMRCs case.
It focuses on persons who usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Not only does this leave open what is meant under IR20 by usually living here, but the reference to only going abroad for short periods cannot be regarded as matching either Mr Gaines Coopers or Mr Daviess and Mr Jamess lifestyles during the relevant periods, and is consistent with an analysis whereby persons spending less than 91 days here within the terms of paragraphs 2.2 onwards are not treated as ordinarily resident.
What is also worth note is the use throughout chapter 2 of words such as go abroad, leave and departure interchangeably in relation to short and long term absence.
It is impossible to derive from any of them any message as to the quality of the absence required for cessation of United Kingdom residency.
Reference was made to a short check sheet (Notes on Non residence) issued by HMRC to persons making tax returns, which included from the tax year 2000 01 a question 2A, asking Have you left the UK? with a note: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain here, If NO, you are resident in the UK .
This was introduced after a number of long distance lorry drivers based in, but driving overseas for substantial periods from, the United Kingdom made claims to be not ordinarily resident here.
One would have thought that such claims were self evidently not admissible, on the basis that part of such drivers work must have taken place in the United Kingdom, eg when they collected and returned vehicles or tractors.
Question 2A recognises this by its reference to making frequent trips abroad in the course of your employment.
It does not address persons who worked basically abroad, although sometimes coming here on business.
In any event, it does not form part of IR20, and it has not been relied upon by HMRC as qualifying whatever IR20 may mean.
It follows from what I have already said that I do not find in the express terms of paragraph 2 of IR20, or in particular in the words permanently or indefinitely, direct support for any requirement for a distinct break.
Looking at the matter more broadly, it would seem to me remarkable that, if any such requirement were intended, it was not clearly expressed.
The guidance is intended to be useful as well as reliable.
A requirement for a distinct break from family and social ties in the United Kingdom would certainly be a main factor (see paragraph 1.1).
It and its uncertainty would also be matters of obvious concern to many taxpayers.
How (for example) does one demonstrate a distinct break from family ties, in a world where spouses or partners may live and work in different countries, but meet regularly in one or the other? This is highlighted by a point made by Moses LJ after he had referred to section 334 of ICTA 1988 and to case law including Levene v Inland Revenue Comrs [1928] AC 217, The Comrs of Inland Revenue v Combe (1932) 17 TC 405, Revenue and Customs Comrs v Grace [2009] STC 2707 and Reed v Clark.
He said (para 53): While IR20 is designed to guide and simplify, I cannot accept that it provides a warrant for ignoring so obvious a factor [as the need for a distinct break] for determining whether a taxpayer hitherto resident and ordinarily resident in the UK has ceased to be so and has left permanently or indefinitely.
Yet HMRC now suggests that the existence of so obvious a factor was left to inference from what appear, at best, very opaque clues.
Moses LJ regarded the statutory and case law position as confirming his view that a distinct break was required.
He said (para 52): I am confirmed in that view by the objective of IR20 stated in the opening words of the preface, that it is designed to reflect the law.
It would, therefore, be surprising if IR20 had the effect of contradicting established jurisprudence.
In my opinion, it is wrong to start with the premise that IR20 was designed to reflect the law as a court would interpret it apart from IR20 and Revenue practice; and also wrong to assume a knowledge of the case law as background to the construction of IR20.
The purpose of IR20 was to reflect the law and practice.
It was addressed to individual taxpayers, and, even if they might often have professional advisers, those advisers would be very likely to be, as Mr Daviess and Mr Jamess were, accountants rather than lawyers, and correspondingly interested in HMRCs understanding and practice rather than prepared to attempt exhaustive analysis of legal authority.
These points are underlined, rather than undermined, by Miss Simler QCs submission that there is nothing in IR20 to suggest that there is likely to be any divergence from the law.
To the extent that that is so, it confirms that, even if he were interested in the legal position apart from Revenue understanding and practice, a taxpayer or professional adviser need look no further than IR20.
It follows that the terms of IR20 should be read as independent of any conclusion to which a strict interpretation of the law might lead: see HMRCs letter dated 14 March 2005 (para 87 above).
A degree of simplification brought about by fixed rules, in place of a difficult judgment as to whether the circumstances indicated a clear break with the United Kingdom as his place of ordinary residence, is indeed precisely what the Royal Commission on The Taxation of Profits and Income encouraged in 1955 (para 84 above).
The aim and function of IR20 in this respect is demonstrated by consideration of the further conditions of chapter 2.
In addition to the requirements already discussed, a taxpayer seeking to take advantage of paragraphs 2.7 to 2.9 must satisfy two conditions relating to duration of absence from and visits to the United Kingdom.
As I have already stated (para 75 above), the first (absence totalling less than 183 days in a tax year) was clearly inspired by the provisions of section 336(1)(b), delimiting what counts as temporary residence in the United Kingdom.
The second (an average of less than 91 days a tax year in the United Kingdom) has no statutory basis.
It is a condition introduced by HMRC to enable a taxpayer to know where he stands in HMRCs eyes.
It is there, on its face, as a measure of the degree of separation from the United Kingdom which HMRC will in practice accept as sufficient to avoid ordinary residence here.
The further references in paragraph 2.8 to the exclusion from this 91 day average period of days spent here due to exceptional circumstances such as the illness of yourself or a member of your immediate family do not fit with an expectation of a distinct break of social or family ties with the United Kingdom.
The reference in all versions of IR20 from November 1993 on to a person being able to have property available for use in the United Kingdom during his visits here also militates against a requirement of a distinct break.
IR20 should in this connection be read on its own terms, independently of the statutory or common law background to that reference.
There is here, however, a minor paradox, since the October 1992 version contains a contrary reference, reflecting the law as it was prior to the Finance Act 1993 which introduced section 336(3) into ICTA 1988 for the tax year 1993 94 (para 74 above).
Mr Gaines Cooper had property available for his use in the United Kingdom at all material times.
In relation to the tax year 1993 94 he cannot simply rely on IR20, he must rely upon it as (notionally) supplemented by section 336(3).
However, HMRC did not in its submissions identify this as a specific problem for Mr Gaines Cooper in relation to the tax year 1993 94, and I will put it on one side for the moment.
Moses LJ found support in paragraph 1.4 for his view that a value judgment was necessary as to whether there had been a direct break (para 53).
That the guidance in paragraph 1.4 is correct is clear.
But it says, to my mind, nothing about whether such a value judgment is necessary under paragraphs 2.7 to 2.9.
In particular, it is obvious that, if a person falls automatically to be treated as ordinarily resident here if he or she spends 91 days or more here, he or she may well be ordinarily resident in one or two other countries in the same tax year, whether on the basis of an equivalent 91 day rule there or for more general reasons.
It does not follow that compliance with the express requirement and conditions of paragraphs 2.7 to 2.9 may not be sufficient to ensure that a person is not ordinarily resident here.
Ward LJ appears to have concluded (paras 118 119) that the appellants each had an unarguably strong case for claiming to be ordinarily resident abroad under IR20.
But he went on to say that the principle of case law recognised in Viscount Cave LCs dictum in Levene v Inland Revenue Comrs [1928] AC 218, 233, that a man may reside in more than one place, entitled HMRC to look for a clear or clean break with this country.
That is once again to make the error of applying the case law, rather than the terms of IR20.
In so far as paragraph 1.4 reflects a similar principle, it must be read not as watering down the categorical guidance as to situations of non residence given in chapter 2, but consistently with that guidance in the way which I have indicated in the previous paragraph.
It is submitted on behalf of HMRC that all that the specific 91 day rule does is identify a limit which HMRC applies to persons who would or might otherwise be able to show that they are not ordinarily resident (ie by having made a distinct break with United Kingdom ties).
It is an upper limit above which HMRC will not accept absence of ordinary residence, but keeping below that limit does not indicate or point to an absence of ordinary residence.
The word providing used in paragraphs 2.8 and 2.9 of the 1999 version is particularly relied upon.
The language used in IR20 is however variable.
In previous versions of paragraph 2.8 (see the versions of paragraph 2.7 quoted in paras 73 and 74 above) and in paragraph 2.7, words such as as long as and if were and are used, and the limit is clearly expressed as a condition of entitlement in paragraphs 2.2 and 2.6 dealing with persons with full time employment outside the United Kingdom and their accompanying spouses.
It is of course HMRCs case that a distinction is to be drawn between paragraphs 2.2 to 2.6 and later paragraphs, but to my mind the distinction rests on weak foundations in so far as it is based on such terminological differences.
The natural meaning to a potential taxpayer of all relevant paragraphs of the guidance is, as I see it, that, as long as he confines his presence within the United Kingdom to less than 183 days in any one tax year and less than 91 days average per tax year, and satisfies the other requirements relating to intention and/or years spent abroad, he will qualify as not ordinarily resident.
In my opinion, the natural meaning of chapter 2 in all its versions since at least 1993 is that, rather than imply the case law test of a distinct break, they introduced (and for public law purposes substitute) a series of specifically delineated cases, into which, if a taxpayer falls, he or she will be treated without more as not resident or ordinarily resident in the United Kingdom.
I repeat that the suggestion that the distinct break test is implicit in the language of paragraphs 2.5 to 2.9 (though not in that of paragraph 2.2) appears to me remarkable in the light of the obvious importance of such a factor if it were envisaged.
Paragraphs 2.5 to 2.9 of IR20 are essentially futile, indeed positively misleading, if they are read as incorporating or reiterating the difficult case law test of a distinct break, and moreover imposing a further specific restriction (a 91 day average limit) to the taxpayers disadvantage.
I appreciate that, in all the appellants cases, the view may be taken that it is desirable and appropriate that HMRC should be able to tax as ordinarily resident persons with the life style and connections with the United Kingdom of these appellants.
That is a moral or fiscal judgment, which may well reflect the strict law (and evidently does so in the case of Mr Gaines Cooper).
But it does not follow that it is the conclusion to be drawn from the guidance in IR20 which HMRC issued, in the interests of good governance, clarity and transparency for the benefit of individuals, to explain the combination of the law and practice by reference to which such individuals could direct their affairs.
I would therefore allow these appeals, so far as they concern the correct interpretation of IR20.
It seems to me to follow from the assurance given by HMRC in these proceedings (para 70 above) that there should be a declaration that HMRC should treat the appellants in respect of the relevant tax years (save perhaps 1992 93, on which I would be prepared to hear any further specific submissions) in accordance with that interpretation of IR20.
I did not find in Mr Eadies submissions any good reason to the contrary.
Since writing this judgment, I have had the benefit of reading Lord Wilsons judgment.
My own view, as will be apparent from what I have already written, is that to treat IR20 as pregnant with the detailed implications listed in para 45 (or, in summary, as informing an ordinarily sophisticated taxpayer of a need for a multifactorial evaluation of his or her circumstances and for a distinct break) runs contrary not only to the wording and sense of the document itself but also to its genesis and purpose: paras 83 87 above; so also, to treat IR20 as so unclear as to communicate nothing to which legal effect can be given on the means by which non resident status might be acquired.
Practice
It is in these circumstances unnecessary to go into the secondary issue regarding HMRCs practice prior to 2005, when the issues relating to the appellants first crystallised.
Whether the appellants can show a clear and unequivocal practice is in issue, as are potentially how far it would be necessary to establish any general or particular knowledge of or reliance on such a practice and how far they could hold HMRC to such a practice as a matter of legitimate expectation.
These are all matters into which I prefer not to go.
Conclusion
I would allow these appeals, on the primary issue of interpretation of IR20 and make the declaration to which I have referred in para 101.
| UK-Abs | In 1999 the Inland Revenue [now known as Her Majestys Revenue and Customs, HMRC] published a booklet known as IR20 and entitled Residents and Non Residents Liability to tax in the United Kingdom, which offered general guidance on the word residence and the phrase ordinary residence for the purposes of an individuals liability for UK income and capital gains tax.
IR20 remained operative until 2009.
The Appellants contend that, on its proper construction, IR20 contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than did the ordinary law; alternatively that prior to 2005 it was the settled practice of HMRC to adopt such a benevolent interpretation of IR20.
Either the construction or the practice gave rise (so they say) to a legitimate expectation that the benevolent interpretation would be applied to determinations of their status for tax purposes and consequently HMRC should not have determined that, during the years relevant to them, they were resident or ordinarily resident in the UK.
The First Appellants, Mr Davies and Mr James, contend that prior to 6 April 2001 they left the UK for the settled purpose of establishing and working full time for a Belgian company.
Although their wives and Mr Davies daughters remained resident in the UK and although they returned frequently to the UK, albeit for short periods, they contend that they are entitled to be treated as non resident and not ordinarily resident in 2001 2002 by reference to paragraph 2.9 of IR20 since they had gone abroad for a settled purpose and had remained abroad for at least a whole tax year.
The situation of the Second Appellant, Mr Gaines Cooper, is different from that of the First Appellants in that it has already been conclusively determined, by reference to the ordinary law, that he was resident and ordinary resident in the UK in the years relevant to him.
He contends, however, that his status should instead be determined by reference to paragraphs 2.8 and 2.9 of IR20 or to the alleged settled practice and that, on either basis, he was not resident in the UK from 1993 to 2004 nor ordinarily resident here from 1992 to 2004.
The High Court refused the Appellants permission to apply for judicial review of the determinations by HMRC that they were resident and ordinarily resident in the UK in the relevant years.
The Court of Appeal granted them permission but dismissed their substantive applications.
The Appellants appeal to the Supreme Court.
The Supreme Court, by a 4 1 majority, dismisses the two appeals on the grounds that the proper construction of IR20 does not support the Appellants contentions and that there is insufficient evidence of any settled practice on the part of the HMRC by way of departure from the IR20 guidance.
Lord Wilson gives the leading judgment; Lords Hope, Walker and Clarke give short concurring judgments.
Lord Mance gives a dissenting judgment.
An individuals status as being resident and ordinarily resident in the UK largely determines his liability for UK income tax and capital gains tax.
In law an individual who has been resident in the UK ceases to be so resident only if he ceases to have a settled or usual abode in the UK per Levene v Inland Revenue Comrs [1928] AC 217 [13
Section 334 of the Income and Corporation Taxes Act 1988 (now replaced) also provided that an individual would nevertheless be deemed to have remained resident in the UK if he had left the UK for the purpose only of occasional residence abroad [15 17].
At law, an individual needs to effect a distinct break in the pattern of his life in the UK in order to become non resident per Reed v Clark [1986] Ch 1 [18 19]; this mandates a multifactorial evaluation of his circumstances [20].
But an individuals pursuit of full time employment abroad is likely to be sufficient to cause him to cease to be a UK resident and not to be deemed under the statute still to be a UK resident [21].
HMRC issued guidance on residence and ordinary residence in IR20.
HMRC accepts that it is bound by whatever might be the proper construction of the guidance and that the guidance gave rise to a legitimate expectation that it would appraise any individuals case by reference to such guidance even if it failed to reflect the ordinary law [27].
The First Appellants contend that HMRC represented in IR20 that non residence was achieved if an individual left the UK to take up full time employment abroad, or left the UK permanently or for at least three years, or went abroad for a settled purpose and remained abroad for at least a whole tax year, provided in each case that any visits to the UK totalled less than six months in any one year and averaged less than 91 days each year [the day count proviso] [30].
The Second Appellant contends that HMRC thereby represented that it was sufficient for an individual to live abroad for at least three years and to satisfy the day count proviso, thus eliminating any need for consideration of whether he had effected a distinct break in the pattern of his life in the UK [31].
The majority holds that the proper construction of IR20, when read as a whole, does not support the Appellants contentions [45, 64].
Paragraph 2.1 indicated that an individuals claim to non residence would generate consideration of various aspects of his life with a view to the identification of its usual location [35].
The heading to paragraphs 2.7 to 2.9 namely Leaving the UK permanently or indefinitely required consideration of the quality of his absence from the UK [37].
Paragraph 2.9, which stated that if an individual had gone abroad for a settled purpose, he would be treated as not resident and not ordinarily resident if his absence from the UK had covered at least a whole tax year and he had met the day count proviso, could not be construed as a freestanding route to non residence since there was an express link to paragraph 2.8, which required an individual to leave indefinitely [41].
Although its exposition of how to achieve non residence should have been much clearer, IR20, taken as a whole, informed the ordinarily sophisticated taxpayer that he had to leave the UK permanently, indefinitely or for full time employment; had to do more than to take up residence abroad; and had to relinquish his usual residence in the UK.
It also informed him that any subsequent returns to the UK had to be no more than visits and that any property retained in the UK by him for his use had to be used for the purpose only of such visits rather than as a place of residence [45].
He will have concluded that such requirements in principle demanded, and might well in practice generate, a multifactorial evaluation of his circumstances [45, 64] and, in summary, that he had to make a distinct break [45].
Alternatively, IR20 was so unclear as to communicate nothing to which legal effect might be given [47].
The majority holds that there was insufficient evidence that HMRC had departed from IR20 as a matter of settled practice [58].
Such a contention requires evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to amount to a specific commitment of treatment in accordance with it [49] but the Appellants evidence to this effect was far too thin and equivocal [58].
Lord Mance, dissenting, holds that the references to going abroad permanently or living outside the UK for three years or more in paragraphs 2.7 2.8 referred to the taxpayers intention regarding the duration of his absence rather than the quality of any absence or the nature of any return visits or continuing UK connections [89].
Paragraph 2.9 was designed to assist taxpayers who never intended to leave permanently or indefinitely, but went abroad for a settled purpose to engage in an overseas activity for an extended period of time of lesser duration [89]; or where the taxpayer could subsequently show he had acquired an intention to leave the UK permanently or that his actual absence covered three years from departure [90].
It would be remarkable if there were a requirement for a distinct break from life in the UK when no such requirement was clearly expressed [93] and other factors, including the day count proviso, militated against such a requirement [95; 96].
|
In 1999 the Inland Revenue, as it was then known and to which I will refer as the Revenue, published a revised version of a booklet known as IR20 and entitled Residents and non residents Liability to tax in the United Kingdom.
The 1999 version of the booklet, which remained operative until 2009 and which I will call the booklet, offered general guidance upon the meaning of the word residence and of the phrase ordinary residence in the context of an individuals liability for UK income tax and capital gains tax.
The present appeals require the court mainly to construe the guidance in the booklet.
For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes.
Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status.
The latter limb of each of the appellants alternative contentions is not in dispute.
The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK.
The issues arise within applications for judicial review.
Mr Davies and Mr James (the first appellants) issued their application in February 2007.
They sought judicial review of determinations by the Revenue dated 28 November 2006 that they had each been resident and ordinarily resident in the UK for the tax year 2001 02.
Mr Gaines Cooper (the second appellant) issued his application in April 2007.
He sought judicial review of a determination by the Revenue dated 25 January 2007 that he had been resident and ordinarily resident in the UK for the tax years from 1993 94 to 2003 04.
In each application the appellants contended that, by reference to the allegedly more benevolent interpretation contained in the guidance or adopted by the Revenue in accordance with its settled practice, the determinations were erroneous.
In addition to the issue of their application for judicial review the first appellants filed a notice of appeal to the special commissioners which would now be heard by the Tax Chamber of the First tier Tribunal against the determinations of the Revenue dated 28 November 2006.
There was a dispute as to whether their application or their appeal should first be determined.
On 10 July 2008 the Court of Appeal, in my view correctly and irrespective of its reasoning, ruled that the application should first be determined and it therefore remitted to the Administrative Court the question whether permission to apply for judicial review should be granted.
The appeal of the first appellants to the commissioners has been stayed pending determination of the present proceedings.
But the course taken in the case of the second appellant was different.
The Revenues determination dated 25 January 2007 accorded with assessments for the years from 1992 93 to 2003 04 which it had raised against him in 2005 and against which he had appealed to the commissioners.
In June/July 2006, at a hearing which proceeded for ten days, the commissioners conducted a trial of preliminary issues whether he had been: (a) domiciled in the UK from 1992 93 to 2003 04; (b) resident in the UK from 1993 94 to 2003 04; and (c) ordinarily resident in the UK from 1992 93 to 2003 04.
I will explain in para 24 below why he did not dispute that he had been resident in the UK in 1992 93.
In the event, by Decision dated 31 October 2006, the commissioners held that he had been domiciled, resident and ordinarily resident in the UK during all those years respectively.
Against their conclusion in respect of domicile the second appellant appealed, on point of law, to the High Court; on 13 November 2007 Lewison J dismissed his appeal.
The result is that the second appellant, can no longer dispute that he was domiciled in the UK from 1992 93 to 2003 04; but his UK domicile is irrelevant to the present proceedings.
Nor can he continue to dispute that, according to the ordinary law, he was resident in the UK from 1993 94 to 2003 04 and ordinarily resident in the UK from 1992 93 to 2003 04.
His case is, however, that, by reference to either of the contentions set out above, the ordinary law does not govern determination of the issue surrounding his UK residence and ordinary residence during those years.
It is unfortunate that, for whatever reason, the course taken in the case of the first appellants was not taken in the case of the second appellant.
Were either of his contentions in the present proceedings to prevail, it would follow that the commissioners invested a large amount of time as well as a conspicuous degree of care in application to the issues of his residence and ordinary residence of principles inapplicable to them.
In their Decision they expressly noted that their function was to apply the law rather than the guidance in the booklet.
But, whereas issues of fact between the Revenue and the first appellants in relation to their circumstances in 2001 02 remain unresolved, the now conclusive resolution by the commissioners of the issues of fact between the Revenue and the second appellant in relation to his circumstances from 1992 93 to 2003 04 at any rate throws the effect of these proceedings into sharp relief.
For, although it remains an open question whether, upon application of the ordinary law, the first appellants were resident and ordinarily resident in the UK during the year relevant to them, we know that, upon application of the ordinary law, the second appellant was resident and ordinarily resident in the UK during the years relevant to him.
As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law.
A complication, to which I will turn in para 30 and para 31 below, is that, while they all contend for what I have described as a more benevolent interpretation of the circumstances in which a taxpayer becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law, the benevolent interpretation for which the first appellants contend is not identical to that for which the second appellant contends.
I infer that it is the unchallengeable findings of fact made by the commissioners against the second appellant which drive him to contend for a more ambitious interpretation than that for which the first appellants now contend.
In the Administrative Court permission to apply for judicial review was refused in both cases by Wilkie J on 10 October 2008 in the case of the first appellants and by Lloyd Jones J on 3 November 2008 in the case of the second appellant.
All the appellants appealed against the refusals and, when granting permission to appeal, the Court of Appeal listed the appeals to be heard together.
On 10 July 2009 the court allowed their appeals against the refusals and, pursuant to CPR 52.15(4), directed that it should itself, on a later date, hear their applications for judicial review.
The hearing took place on 4, 5 and 6 November 2009 and judgments were handed down on 16 February 2010.
The court (Ward, Dyson and Moses LJJ) thereby dismissed the applications for judicial review and it is against the dismissals that the present appeals are brought.
The appellants
The first appellants are successful property developers.
By March 2001, then based in Swansea, they each held 50% of the preference shares in Liberty Property Holdings Ltd (Liberty).
They were also prominent in the administration of Swansea Rugby Football Club and were respected members of the local community.
They decided to extend their property development business to Brussels.
Whether their decision was related to a possible disposal of their shares in Liberty appears to be in dispute.
At all events, in March 2001, they caused a company, in which each of them had a one third shareholding, to be incorporated in Belgium.
Furthermore they began to rent furnished apartments in the same block in Brussels and began to reside in them, at any rate in part, prior to 6 April 2001.
They contend that, prior to 6 April 2001, they had begun to work full time for the Belgian company in the field of property development; that, alternatively, during the weeks after 5 April 2001, they had begun to work full time for it; that, from the date whatever it was when their full time work for it began, they have worked for it full time throughout a number of years; and that it has become extremely successful.
On the other hand they accept that neither of them sold their homes in Swansea; that their wives, and in the case of Mr. Davies his daughters, remained resident, or partly resident, in Swansea; and that they returned very frequently, albeit not for lengthy periods, to their homes in Swansea in order to be with their families or in connection with Liberty (of which they remained non executive directors) or with rugby in Swansea or with other matters of local importance.
In December 2001 Liberty acquired the first appellants shares in itself for a consideration of 4.5m each.
Although the capital gain within the consideration remains unidentified, it is clearly important for the first appellants that they should be recognised at law to have been neither resident nor ordinarily resident in the UK in 2001 02.
The second appellant is a successful entrepreneur.
His domicile of origin was in England (and Wales) and he remains a British citizen.
His case before the commissioners was that in 1976, when aged 39, he acquired a domicile of choice in the Seychelles.
But, by their Decision, we know that he remained domiciled in England until, at any rate, 2003 04.
Between 1976 and 2004 he led an international existence, assiduously charted in their Decision.
But, by reference inter alia to two substantial homes successively maintained and to a significant extent occupied by him in Berkshire and in Oxfordshire throughout those years and to the presence in England, following 1977, of the wife whom he was ultimately to marry in 1993 and also, from his birth in 1998 until after 2004, of their son, the commissioners concluded that from 1992 to 2004 the second appellant dwelt permanently in the later home in England and that thus, notwithstanding his residence in the Seychelles throughout those years, he was resident and ordinarily resident in the UK during the years under review.
C. Residence as a matter of law
The status of being resident in the UK creates liability to UK tax under provisions of the Income Tax (Earning and Pensions) Act 2003 and the Income Tax (Trading and Other Income) Act 2005.
But the word itself is not currently defined in statute.
In 1936 the Income Tax Codification Committee appointed by the Chancellor of the Exchequer issued a Report (Cmd 5131) in which, in para 59 of Volume I, it concluded that the lack of clarity surrounding the word residence was intolerable and in which, in Volume II, it set out a proposed Bill including, in clause six, a definition of the circumstances in which an individual would be resident in the UK.
But the Bill was never enacted.
Under active consideration today, however, is the governments proposal to introduce a full statutory definition of tax residence for individuals; and the time for response to its initial consultation paper, issued in June 2011 by HM Treasury and HMRC and entitled Statutory definition of tax residence: a consultation, has recently expired.
In the absence to date of any statutory definition of residence taxpayers and their advisers have had to turn to the guidance given by the courts and, importantly, also by the Revenue in relation to its meaning.
But the courts have not nor, as we shall see, has the Revenue found it easy to formulate the guidance.
For more than 80 years the leading authority has been Levene v Inland Revenue Comrs [1928] AC 217.
Until 1919 Mr. Levene was resident and ordinarily resident in the UK.
During the next five years he spent about five months (mainly in the summer) each year, staying in hotels in the UK and receiving medical attention or pursuing religious and social activities.
He spent the remaining months staying in hotels abroad.
The appellate committee declined to disturb the conclusion of the commissioners that Mr Levene had remained resident and ordinarily resident in the UK during those years.
Viscount Cave, the Lord Chancellor, adopted, at p 222, the definition of reside given in the Oxford English Dictionary, namely to dwell permanently or for a considerable time, to have ones settled or usual abode, to live in or at a particular place; and, of these three descriptions, the Lord Chancellor chose, no doubt as being the most helpful, that of a settled or usual abode.
Since 1928, if not before, it has therefore been clear that an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK.
Although, as I will explain in para 19 below, the phrase a distinct break first entered the case law in a subtly different context, the phrase, now much deployed including in the present appeals, is not an inapt description of the degree of change in the pattern of an individuals life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.
To the legal analysis of a taxpayers residence must be added a provision which can be traced back to section 10 of an Act of 1799 (39 Geo III, c 13) which introduced income tax in order to raise an ample Contribution for the Prosecution of the War against Napoleon.
Parliament has recently placed the provision, in modified form and in clearer terms than those of its several predecessors, in section 829 of the Income Tax Act 2007; but it is convenient to cite the section in which it was to be found when the booklet was operative and indeed during the years for which assessments have been raised against the appellants.
The section was section 334 of the Income and Corporation Taxes Act 1988 and it provided as follows: Commonwealth citizens and others temporarily abroad Every Commonwealth citizen or citizen of the Republic of Ireland (a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and (b) Kingdom upon the whole amount of his profits or gains
shall be charged as a person actually residing in the United
The effect of this provision is or should be now clear.
If an individual (restricted under the 1988 Act to Commonwealth and Irish citizens) who has been resident and ordinarily resident in the UK ceases to be resident in the UK, he will nevertheless be deemed to have remained resident in the UK if he has left the UK for the purpose only of occasional residence abroad.
So the provision puts a second hurdle in his way in that, in order to escape liability as a resident, he needs to establish not only that he has become non resident but also that his change to non residence was not for the purpose only of occasional residence abroad.
That such is the effect of the statutory provision can be discerned in the opinions in Levene itself.
For the Lord Chancellor (with whose opinion Lord Atkinson agreed) and Lord Warrington of Clyffe both held that the appellant could not overturn the conclusion that he had remained resident and ordinarily resident in the UK and, at pp 224 and 232, they each made clear that, while they considered that alternatively he may well have fallen foul of the provision (which was then in General Rule 3 in the First Schedule to the Income Tax Act 1918), they did not rest their decision upon it.
Viscount Sumner, on the other hand, at p 227, expressly rested his decision upon it.
In Reed v Clark [1986] Ch 1, however, Nicholls J made it expressly clear that such was the effect of the statutory provision.
Mr Dave Clark, who had been resident and ordinarily resident in the UK, moved to Los Angeles on 3 April 1978 and made his home and place of business there until 2 May 1979, when, not having set foot in the UK in the interim, he returned to reside here.
Nicholls J dismissed the Revenues appeal against the ruling of the commissioners that he had not been resident nor ordinarily resident in the UK in 1978 79.
He rejected each of the Revenues alternative arguments that (a) on the primary facts found by the commissioners Mr Clark had been so resident and ordinarily resident and (b) for the purposes of the provision (which was then in section 49 of the Income and Corporation Taxes Act 1970) he had left the UK for the purpose only of occasional residence abroad.
Nicholls J, at p 15C, accepted the Revenues submission that the provision brought into the tax net those who were not resident in the UK at all in the year of assessment.
He held, at p 16H, that occasional residence was the converse of ordinary residence and he cited, at p 17D, the statement of Lord Scarman in R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, 343 that ordinary residence referred to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life or the time being, whether of short or of long duration.
By that route Nicholls J came to contrast occasional residence with residence for a settled purpose.
In observing, at p 18A, that his construction might give little scope in practice for the operation of the statute as an independent charging provision, Nicholls J perhaps had in mind that, were the persons residence abroad not to have been for a settled purpose, his settled or usual abode might have remained in the UK with the result that, in the light of the definition adopted in Levene, he would not have ceased to be a UK resident and so would already have fallen at the first hurdle.
Nevertheless the concepts of settled purpose and settled abode are clearly different.
Nicholls J proceeded to hold, at p 18G, that there had been a distinct break in the pattern of Mr Clarks life in the UK such that his becoming non resident had not been for the purpose only of occasional residence abroad.
In referring to a distinct break Nicholls J, as he acknowledged at 14F, was adopting a phrase first used in this context in the decision of the Court of Session in Inland Revenue Comrs v Combe (1932) 17 TC 405.
Until 1926 Captain Combe was resident and ordinarily resident in the UK.
Then he went to New York to work as a broker for a firm on Wall Street.
The objective was that he should become its European representative and, in furtherance of it, he returned to the UK, staying in hotels, for 52 days, 175 days and 181 days during each of the following three years.
In upholding the conclusion that he was not liable to tax as a UK resident for those years the court proceeded straight to the statutory provision (which then remained in General Rule 3) and concluded that the captain had not left the UK for the purpose only of occasional residence abroad.
It was implicit in its conclusion that he had left the UK in the sense of becoming non resident in it.
When, therefore, Lord Sands observed, at p 411, that there was a distinct break in what he described as the captains residence in the UK, it was with a view to explaining his conclusion that the captains residence abroad had been more than occasional.
In Reed v Clark Nicholls J applied the phrase in precisely the same context and helpfully added that what was required distinctly to be broken was the pattern of the taxpayers life [1986] Ch 1, 18.
It is therefore clear that, whether in order to become non resident in the UK or whether at any rate to avoid being deemed by the statutory provision still to be resident in the UK, the ordinary law requires the UK resident to effect a distinct break in the pattern of his life in the UK.
The requirement of a distinct break mandates a multifactorial inquiry.
In my view however the controversial references in the judgment of Moses LJ in the decision under appeal to the need in law for severance of social and family ties pitch the requirement, at any rate by implication, at too high a level.
The distinct break relates to the pattern of the taxpayers life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance, to which I will refer, of limited visits to the UK on the part of the taxpayer who has become non resident, clearly foreshadows their continued existence in a loosened form.
Severance of such ties is too strong a word in this context.
It became clear from decisions like Combe that, if a taxpayer left the UK in order to pursue employment abroad which was full time, it was likely not only that he would cease to be a UK resident but also that he would escape being deemed still to be a UK resident under the statutory provision.
For, from the fact that the employment was full time, it was likely to follow that he had made a distinct break in the pattern of his life in the UK.
By section 11 of the Finance Act 1956 the position of the full time employee or other worker abroad was strengthened by a provision (now in effect contained in section 830 of the 2007 Act) that, in determining whether he remained resident in the UK, regard should not be had to any place of abode in the UK which he maintained for his use.
As I will demonstrate in para 36 below, the Revenue also sought to eliminate any remaining element of doubt about the proper treatment of the full time employee abroad by providing in the booklet that, subject to specified conditions of ostensibly simple application, he would definitely be treated as not resident, nor ordinarily resident, in the UK.
In his case, therefore, the Revenue was dispensing with the need for the multifactorial inquiry.
In its piecemeal contribution to the law relating to UK residence for tax purposes, Parliament has also made provision in respect of the individual who has been non resident in the UK and challenges a contention that he has become resident here for tax purposes.
He is, as Nicholls J pointed out in Reed v Clark above, at p 16G, the converse of the UK resident who contends that he has become non resident in the UK and who, as I have explained, is required by statute also to address the purpose of his change to non residence.
Until 1993 Parliaments provision in respect of the former individual, now in effect to be found in sections 831 and 832 of the 2007 Act, was that, subject to one bright line rule, he did not become resident in the UK for income tax purposes if, in the words of subsections (1)(a) and (2) of section 336 of the 1988 Act (entitled Temporary Residents in the United Kingdom), he was in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there.
The bright line rule, set out in subsection (1)(b) and, albeit in slightly different terms, in subsection (2), was that he had not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment; and both subsections concluded by making clear that, if he had so resided for such a period in any year, he was chargeable to UK income tax for that year.
Until 1993, however, the available accommodation rule, abrogated in 1956 in respect of the full time employee abroad, continued to apply to the person who claimed to be only a temporary resident within the meaning of section 336: its effect was that, were living accommodation in the UK to have been available for his use during any year of assessment, any presence on his part within the UK during that year would be taken to have been otherwise than for some temporary purpose only and not with any view or intent of establishing his residence there.
The application to him of the available accommodation rule was abrogated, with effect from 1993 94, by the insertion into section 336 of subsection (3).
It will now be clear why the second appellant did not dispute that he had been resident in the UK in 1992 93, namely the first of the 12 years of assessment.
Before the commissioners he unsuccessfully contended that the relevant inquiry was not whether he had become non resident in the UK in 1976 but whether, having then become non resident, he had again become resident in the UK in any of the years of assessment.
In other words he unsuccessfully contended that the parameters of the inquiry were set by section 336, rather than by section 334, of the 1988 Act.
But, in that in 1992 93 living accommodation in the UK had been available for his use and in that during that year he had been present in the UK albeit not for a total of six months, he was constrained to concede that, even on his approach, he was in principle liable to tax as a UK resident for that first year.
D. Revenue guidance
There can be no better introduction to this section than in the words of Moses LJ in his judgment in the decision under appeal: 12.
The importance of the extent to which thousands of taxpayers may rely upon guidance, of great significance as to how they will manage their lives, cannot be doubted.
It goes to the heart of the relationship between the Revenue and taxpayer.
It is trite to recall that it is for the Revenue to determine the best way of facilitating collection of the tax it is under a statutory obligation to collect.
But it should not be forgotten that the Revenue itself has long acknowledged that the best way is by encouraging co operation between the Revenue and the public Co operation requires fair dealing by the Revenue, and frank and open dealing by the public.
Of course the Revenue may refuse to give guidance and re create a situation in which the taxpayers and their advisers are left to trawl through the authorities to find a case analogous to their own, or, if they are fortunate, a statement of principle applicable to their circumstances.
But since 1973, in a field fraught with borderline cases relating to an enormous variety of circumstances, the Revenue has chosen to confer what presumably it regarded as a benefit on taxpayers who wished to know whether they were likely to be treated as resident or not.
The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: section 1 of the Taxes Management Act 1970.
Inherent in the duty of management is a wide discretion.
Although the discretion is bounded by the primary duty (R(Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718, para 21 per Lord Hoffmann), it is lawful for the Revenue to make concessions in relation to individual cases or types of case which will, or may, result in the non collection of tax lawfully due provided that they are made with a view to obtaining overall for the national exchequer the highest net practicable return: Inland Revenue Comrs v National Federation of Self employed and Small Businesses Ltd [1982] AC 617, 636 per Lord Diplock.
In particular the Revenue is entitled to apply a cost benefit analysis to its duty of management and in particular, against the return thereby likely to be foregone, to weigh the costs which it would be likely to save as a result of a concession which cuts away an area of complexity or likely dispute.
The Revenue accepts first that, were it in the booklet to have made the representations about the circumstances necessary for the achievement of non residence for which either the first appellants or the second appellant contend, such would have been within its powers; and second that, for so long as the representations remained operative, an individual would have had, and therefore have been able to enforce, a legitimate expectation that it would appraise his case by reference to them notwithstanding that they failed to reflect the ordinary law.
In this connection, however, the Revenue refers to the decision of the Divisional Court of the Queens Bench Division in R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545.
It was advantageous to members of syndicates at Lloyds that funds required to be held for them by their underwriters should be so invested as to yield what the Revenue would accept to be capital gain rather than as income.
Prior to their investment in American and Canadian index linked bonds underwriters had, by their agents, inquired of the Revenue whether the uplift for indexation to be achieved on sale or redemption of the bonds would be treated as capital gain rather than as income.
They unsuccessfully contended that the Revenues responses constituted an affirmative to which it should be held irrespective of whether such treatment of the uplift was correct as a matter of law.
Having rejected the Revenues argument that any such affirmative response would have been outside its powers, Bingham LJ proceeded, at p 1569, as follows: I am, however, of the opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all important.
Every ordinarily sophisticated taxpayer knows that the revenue is a tax collecting agency, not a tax imposing authority.
The taxpayers only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of One should be taxed by law, and not be untaxed by concession: Vestey v Inland Revenue Comrs [1979] Ch 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them.
But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary First, it is necessary that the taxpayer should have put all his cards face upwards on the table Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.
The court held that the Revenues statements about the treatment of the uplift had not been clear enough to give rise to any legitimate expectation.
In that the representations in the booklet are formally published by the Revenue to the world rather than being its response to approaches of a less formal nature, a literal reading of Bingham LJs judgment suggests that, although they are binding in relation only to cases falling clearly within them, the requirement that they should be clear, unambiguous and devoid of relevant qualification does not apply to them.
But in my view a case would fall clearly within them only if they were clear, unambiguous etc; and in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453, Lord Hoffmann, at para 60, applied the quoted words of Bingham LJ to a formal publication, namely a press announcement, on the part of the Foreign Secretary.
It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgement about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the ordinarily sophisticated taxpayer irrespective of whether he is in receipt of professional advice.
The alleged representations
The first appellants contend that, in the booklet, the Revenue represented that an individual would be accepted as not resident and not ordinarily resident in the UK if he: (a) (paragraph 2.2 of the booklet); or (b) 2.8); or (c) went abroad for a settled purpose and remained abroad for at least a whole tax year (paragraph 2.9) left the UK to take up full time employment abroad left the UK permanently or for at least three years (paragraph provided, in each case, that his visits to the UK during the years following departure totalled less than six months in any tax year and averaged less than 91 days in each such year (the day count proviso).
The first appellants accept that, if he is to become non resident in the UK, the law requires an individual to effect a distinct break in the pattern of his life in the UK such as to demonstrate that, when subsequently present in the UK, he is here only as a visitor; and they contend that, by (a), (b) and (c) above, the Revenue reflected in a simplified form the requirement of a distinct break.
Their primary contention is that, irrespective of whether they fell within (a) or (b), they fell within (c).
They therefore contend that, if (as appears to be the case) they went abroad for a settled purpose for at least one tax year and satisfied the day count proviso, the Revenue is bound to acknowledge their status as having been neither resident nor ordinarily resident in the UK in 2001 02 notwithstanding that, were their cases to be appraised on a wider basis, they might not have effected a distinct break in the pattern of their life in the UK.
The second appellant, by contrast, contends that, in the booklet, the Revenue represented that a taxpayer would be accepted as not resident and not ordinarily resident in the UK if he went to live abroad for at least three years and satisfied the day count proviso.
His contention is that, in the interests of simplicity, the Revenue thereby cut away its need or entitlement to afford any independent consideration to whether he had effected a distinct break in the pattern of his life in the UK.
The proper construction of the booklet
The preface to the booklet stated: The notes in this booklet reflect the law and practice at October 1999.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office The first paragraph quoted does not advance the Revenues case: no doubt it intended the booklet to reflect the law but it accepts that, were the booklet to have failed to do so, it would be bound by its terms irrespective of the discrepancy.
The second paragraph is however of greater significance: it stressed that the guidance was general; that its application to a particular case depended upon its facts; and that, in the event of any difficulties in its application to his case, the individual should consult a Revenue tax office.
Neither in 1976 nor at any time thereafter did the second appellant seek advice from a tax office, still less a ruling on residence such as was available until the introduction of self assessment on 6 April 1996.
Nor did the first appellants (who were at all material times advised by PricewaterhouseCoopers LLP) seek such advice in advance of their going to Brussels in March 2001.
Paragraph 1.1 of the booklet stated: The terms residence and ordinary residence are not defined in the Taxes Acts.
The guidelines to their meaning in this Chapter and in Chapters 2 (residence status of those leaving the UK) and 3 (those coming to the UK) are largely based on rulings of the Courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your particular case.
The paragraph therefore told the taxpayer that the booklet set out only the main factors to be taken into account and repeated that the decision in relation to residence could be made only upon an evaluation of the facts of the case.
Paragraph 1.4 of the booklet stated: It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
So here the taxpayer learned that it would be insufficient for him to become resident abroad: if he was to become non resident in the UK, more was needed.
Crucial to the appeals is the second chapter of the booklet, entitled Leaving the UK.
Paragraph 2.1, headed Short absences, stated: You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
The appellants stress the reference to short periods and they reasonably submit that the day count proviso was the other side of the same coin.
The Revenue, by contrast, stresses the word usually.
I accept its submission that the word conveyed to the reasonably sophisticated taxpayer that the inquiry would encompass consideration of various aspects of his life with a view to the identification of its usual location.
Paragraph 2.2, headed Working abroad, stated: If you leave the UK to work full time abroad under a contract of employment, you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for a least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) The second bullet point, which has two parts, represented the day count proviso.
Although the first part of it was statutory (now section 830 of the 2007 Act), the second part of it reflected long established Revenue practice: thus, if the individual visited the UK for six months or more in any year of assessment, he was treated as resident here for that year but, if he did not do so and his visits to the UK averaged less than 91 days each year during up to four tax years, he was treated as not resident here for those years.
Reluctant though I am to be distracted from consideration of the substantive issues in the appeals, it is convenient here to append a footnote about an alternative ground of appeal on the part of the first appellants, which their leading counsel described as peripheral and which he did not address in oral argument save to decline formally to abandon.
The argument is based on their alternative, fall back assertion that it was only after 5 April 2001, namely during the weeks which followed it, that they began the full time work in Belgium which has since proceeded for a number of years and at least throughout the year 2002 03.
On that basis the argument is that the Revenue is required to treat the first appellants as not resident and not ordinarily resident in the UK even in the crucial year 2001 02 because they had left the UK prior to the start of that year and because they had left to work full time abroad even though the work did not begin until after the start of that year.
But no rational taxpayer could imagine that the route to non residence by his pursuit of full time employment abroad throughout a tax year could be successfully traversed even in relation to a preceding year.
It is only the individuals full time employment abroad which yields the distinct break in the pattern of his life in the UK (see para 21 above) and the terms of paragraph 2.2 adequately convey its status as a pre requisite to non residence.
Paragraphs 2.7 to 2.9, which lie at the centre of the appeals, were headed Leaving the UK permanently or indefinitely so their content was entirely governed by that rubric, in which the two adverbs provided important colour to the type of leaving which the Revenue was proposing to address.
I also agree, however, with the observation of Moses LJ that: It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence. (para 44)
The paragraphs stated: 2.7 2.8 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits.
If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing[viz the day count proviso]. 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving [satisfy the day count proviso].
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing [viz the day count proviso].
On any view the three paragraphs were very poorly drafted.
But does it follow that, when read in conjunction with the other parts of the booklet to which I have drawn attention, they amounted to a clear representation of the types for which the appellants respectively contend? Regrettable though it would be, a confusing presentation would be likely to have lacked the clarity required by the doctrine of legitimate expectation.
There is now a preliminary dispute between the appellants about the nexus between paragraph 2.9 and paragraphs 2.7 and 2.8.
For in this court the first appellants for the first time contend that paragraph 2.9 charts a free standing route to non residence; to be specific, that the subject of paragraph 2.7 is leaving the UK permanently, that that of paragraph 2.8 is leaving it permanently or indefinitely and that that of paragraph 2.9 is leaving it for a settled purpose; and that they themselves travelled by the route charted in paragraph 2.9.
The second appellant, by contrast, accepts the Revenues contention as did the first appellants in the Court of Appeal that paragraph 2.9 was linked to paragraph 2.8 and charted only a different way in which an individual might establish that he had left the UK indefinitely.
In one sense it comes as no surprise that the Revenue should explain that paragraph 2.9 (which first appeared in the 1996 version of the booklet, as paragraph 2.10) was introduced as a result of the decision in 1985 of Nicholls J in Reed v Clark [1986] Ch 1.
For, by referring to the need for a settled purpose, the paragraph introduces a phrase adopted by Nicholls J: see para 18 above.
But the paragraph is a garbled reference to the decision: for Nicholls J was describing the settled purpose not as a route to becoming non resident but as the means by which the taxpayer who had become non resident escaped being treated otherwise under what is now section 829 of the 2007 Act.
Nevertheless, as all parties agree, the exercise required by these appeals is not to compare the booklet with the law but to construe it by reference to its own terms; and, as a matter of construction, the contention of the first appellants that paragraph 2.9 was independent of paragraph 2.8 is in my view patently incorrect.
It was grouped with paragraphs 2.7 and 2.8 under the heading Leaving the UK permanently or indefinitely; and, following paragraph 2.8 in which the Revenue offered one example of evidence which might satisfy it that the individual had left either permanently or indefinitely, paragraph 2.9, which, by its opening hypothesis if you do not have this evidence, made an express link with paragraph 2.8, purported to identify another situation in which the Revenue would accept that he had left indefinitely, namely that in which he had gone abroad for a settled purpose (including for a project in which he was to be engaged for an extended period of time) and satisfied the other specified conditions.
So the three paragraphs must be read compendiously.
They shared one important feature: they all referred to visits on the part of the individual to the UK.
If he usually resides in the UK, he will go abroad as a visitor but, if he has left the UK and has adopted a usual residence abroad, he will come to the UK as a visitor: we are not visitors in the country of our usual residence.
The reference to visits to the UK therefore underlined the need for a change in the individuals usual residence and therefore, by ready inference, for a distinct break in the pattern of his life in the UK.
Another important feature lay in paragraph 2.8.
The evidence there suggested was that the individual had taken steps to create a permanent home abroad.
He was then warned however that, if he continued to have property in the UK for his use, his reason for doing so must have been consistent with his stated aim of living abroad permanently or for at least three years.
The suggestion was therefore that it might be permissible for him to maintain in the UK not a home but property for [his] use but that, if he did so, he would fail to secure non resident status unless his reason for doing so survived the test of consistency with his stated aim.
In the course of his submissions leading counsel for the first appellants invited the court to consider a document not placed before the Court of Appeal.
It is entitled Notes on NON RESIDENCE, ETC and, when an individual asks the Revenue to supply him with the supplementary pages of a tax return referable to his claim to non residence, it will supply not only the extra pages but also the Notes in order to assist him in completing them.
The Notes put before the court were referable to the tax year 2001 02, being the crucial year for the first appellants.
By question 2A, first inserted into the Notes supplied for the year 2000 01, the individual was invited to ask himself Have you left the UK? In order to help him answer the question, the Notes said: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain there.
The premise of the question which followed was that prior to the relevant tax year the individual had left in the above sense and, on that basis, he was invited to consider whether he had lived or had intended to live outside the UK for at least three years (reflective of paragraph 2.8 of the booklet) or had worked abroad full time throughout the relevant tax year (reflective of paragraph 2.2, when properly construed) or had been abroad for a settled purpose (reflective of paragraph 2.9).
The proposition in the Notes quoted above was a clear (and, as it happens, also a reasonably accurate) definition of leaving the UK for the purposes of attaining non residence; and, inasmuch as the Notes had apparently been furnished in that form to everyone who submitted a claim to the Revenue that he had become non resident for any year after 1999 2000, it would, in the event of any significant doubt about the meaning of the booklet, have been legitimate to construe it in the light also of the quoted proposition.
On any view it is inconsistent with the contention of the first appellants, accepted by Lord Mance, that the Revenue was treating as non resident an individual who had done no more than to go abroad for a settled purpose (and to remain there for at least a year and to satisfy the day count proviso) irrespective of whether he had continued usually to live in the UK and to make his home and settled domestic life here.
At last comes the moment in which to stand back from the detailed textual analysis of the booklet and to survey the wood instead of the trees.
Unlike so it seems its successor, namely HMRC6, the exposition in the booklet of how to achieve non resident status should have been much clearer.
My view however, is that, when all the passages in it to which I have referred were considered together, it informed the ordinarily sophisticated taxpayer of matters which indeed were unlikely to come as a surprise to him, namely that: (a) he was required to leave the UK in a more profound sense than that of travel, namely permanently or indefinitely or for full time employment; (b) he was required to do more than to take up residence abroad; (c) he was required to relinquish his usual residence in the UK; (d) any subsequent returns on his part to the UK were required to be no more than visits; and (e) any property retained by him in the UK for his use was required to be used for the purpose only of visits rather than as a place of residence.
He will surely have concluded that these general requirements in principle demanded and might well in practice generate a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal.
If invited to summarise what the booklet required, he might reasonably have done so in three words: a distinct break.
The evaluative nature of the inquiry described in the booklet was fairly recognised by the first appellants accountant himself when he stated as follows: [W]hat IR20 does (according to the understanding which I have always had as a practitioner) is to set out certain factors which will be taken into account.
Some of these factors relate to the quality of the links which the taxpayer has with another country (eg fulltime employment for at least a whole tax year, settled purpose, acquiring accommodation abroad, living outside the UK for three years or more), and some of the factors relate to the extent of the links retained by the taxpayer with the UK (eg the number of days spent here, retaining a property in the UK).
It follows from this that HMRC have set out their view of the quality of the links with another country and the extent of the remaining links with the UK which should together be taken into account in determining whether someone has ceased to be UK resident.
The quality of the links with the other country are relevant insofar as they help to determine the extent to which the taxpayer has removed himself from the UK.
Were I wrong, however, to have concluded that the booklet succeeded in conveying to the taxpayer the information to which I have referred in para 45 above, it would in no way follow that, on this, the main, basis upon which they are advanced, the appeals should succeed.
Were I wrong, I would feel driven to conclude only that the treatment in the booklet of the means of becoming non resident was so unclear as to communicate to its readers nothing to which legal effect might be given.
Such a conclusion would leave the appeals far short of their necessary foundation, namely of clearly specified criteria by reference to which they legitimately expected their claims to non residence to be determined.
The alleged change of practice
I summarise the subsidiary and alternative contention of the appellants as follows: that, even if, on a proper construction of the booklet, the Revenue did not thereby make the representations for which they have respectively contended, its settled practice over many years was nevertheless to determine claims to non residence on the footing that, in the booklet, it had made such representations; that its settled practice continued until a date shortly after all the years of assessment (ie until a date in 2004 05); that its practice thereupon changed in that it began to conduct, including in relation to the appellants, a general inquiry into whether the taxpayer had effected a distinct break in the pattern of his life in the UK; and that the Revenue had thus raised in the appellants a legitimate expectation that it would determine their claims in respect of the years of assessment by reference to its earlier settled practice.
It is an arresting proposition that, having published and regularly revised a booklet in which it purported to explain how it would determine claims by individuals to have become non resident and of which it encouraged widespread use, the Revenue departed from it as a matter of settled practice.
Clear evidence would be necessary in order to make the proposition good.
But there is another reason for the need for clear evidence in this connection.
For, whereas, in the booklet the Revenue gave unqualified assurances about its treatment of claims to non residence which, if dishonoured, would readily have fallen for enforcement under the doctrine of legitimate expectation, it is more difficult for the appellants to elevate a practice into an assurance to taxpayers from which it would be abusive for the Revenue to resile and to which under the doctrine it should therefore be held. [T]he promise or practicemust constitute a specific undertaking, directed at a particular individual or group, by which the relevant policys continuance is assured: R (Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755, per Laws LJ at [43].
The result is that the appellants need evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to carry within it a commitment to a group of taxpayers including themselves of treatment in accordance with it.
The appellants place before the court statements by their tax advisers and others that in their experience the Revenue did not prior to 2004 05 conduct any general inquiry into whether a person who claimed to have become non resident pursuant to paragraphs 2.7 to 2.9 of the booklet had effected a distinct break in the pattern of his life in the UK; and they add that, so far as they know, it was the settled practice of the Revenue not to do so and thus that the general inquiries in that regard which were directed at the appellants from 2004 05 onwards represented an unheralded departure from it.
By its witness statements the Revenue disputes the existence of any such alleged practice and, in an argument which found favour in the Court of Appeal, suggests that the appellants witnesses may have mistakenly deduced the existence of the alleged earlier practice from what was on any view a later increase in the level of Revenue scrutiny of claims to have become non resident.
In any event, however, the appellants accept that, in order to make good their case, they need evidence beyond the generalised, anecdotal understanding of their witnesses, however highly regarded; and in this regard they primarily rely on a letter, entirely unrelated to the cases before the court, from a Revenue Inspector, Mr Wilks, to an accountant, Mr Sawyer, dated 7 July 1999, which was never published and of which the appellants learnt only following the Revenues disclosure of it in the course of these proceedings.
I should add that, in this court albeit not in the Court of Appeal, the appellants have also relied on a document published by the Institute of Chartered Accountants in England and Wales, dated 30 November 1994, in which, no doubt accurately, it recorded the Revenue as confirming that, were a UK resident to retire overseas to a house which he owned but to retain ownership of another house in the UK to which he were to make regular holiday visits of 50 days each year, he would have become non resident and not ordinarily resident in the UK; but in my view the quoted words sufficiently betoken a distinct break.
In his letter to Mr Sawyer, Mr Wilks wrote: As promised Im writing to confirm the way we approach the residence status of individuals who leave the UK for purported permanent residence but who cannot produce the sort of evidence mentioned in paragraph 2.9 of IR20.
Subject only to the caveat that the following guidance is general and particular cases will always need to be decided on their own specific facts, I can say that provided such an individual lives outside the UK for 3 years or more from the date of departure, and after departure has not visited the UK for as much as 183 complete days in any one tax year or 91 or more days a year on average then we will, after the 3 years has elapsed, accept the claim to have become not resident and not ordinarily resident.
Specifically, circumstances such as the spouse and/or children having continued to live in the UK a residence having been maintained here duties having continued to be performed in the UK will not prejudice the claim to non residence.
The reference by Mr Wilks to IR20 was to the 1996 version and, in the 1999 version, paragraph 2.9, which he cited, became paragraph 2.8.
There is no doubt that Mr Wilks letter accords well with the assertions of the appellants professional witnesses.
If and insofar as, by his reference to individuals who leave the UK, Mr Wilks was attempting to refer to individuals who effect a distinct break in the pattern of their lives in the UK, the attempted reference was too elliptical; and the fact that, in another context, he wrote a further letter to Mr Sawyer dated 8 March 2000, in which he referred to a person who continues to be resident in the UK on the basis that he hasnt in reality left the UK, cannot alter the natural construction of the earlier letter.
But did it reflect a settled practice to depart from the law and indeed from the then current version of the booklet?
Until 1998 some UK residents had been able to take advantage of what was known as the foreign earnings deduction.
To the extent that they earned income from employment carried out wholly or partly abroad for at least a year, they had been able to deduct it in full from their income for UK tax purposes.
But, by section 63 of the Finance Act 1998, the right to make the deduction was abolished.
The abolition precipitated an increase in claims to non residence on the part of mobile workers, ie persons, such as lorry drivers and airline pilots, who made frequent and regular trips abroad in the course of their work but who remained based in the UK.
In the present proceedings the Revenue disclosed its statements made in 2000 and 2001 to a variety of professionals about its treatment of such claims.
The statements are unhelpful to the appellants case.
For example the gist of a tax bulletin, published by the Revenue in April 2001, was that, unless he was working full time abroad for at least a whole tax year and so could satisfy the requirements of paragraph 2.2 of the booklet, it was probable that the mobile worker usually lived in the UK, thus also failed to fall within paragraphs 2.7 to 2.9 and so was resident in the UK.
The bulletin explained that individuals usually live in the UK if their home continues to be in the UK and their settled domestic life remains here.
Although the bulletin related to mobile workers, tax advisers sought clarity as to how it affected the Revenues treatment of business executives who were seconded to work abroad but who regularly returned to the UK.
For example, one of the expert witnesses of the first appellants, Mr Hilton Gee, who was a senior manager at PricewaterhouseCoopers LLP until 2006 but who never handled their case, spoke to a Revenue manager on 8 May 2001 and made the following note: I asked whether the Tax Bulletin article reflects a change of Practice by the Revenue or a change in policing standards. [He] confirmed that the article does not reflect any change in the Revenues practice, but it does reflect their view that whereas in the past they might have taken a claim to non residence at face value, they now feel that they should be asking for more facts.
The article was directed at a specific category of individual and [he] can see that, if you try to apply its literal wording to other categories of businessmen, one might get the wrong impression.
The Revenue are attempting to describe the difference between a businessman who is based in the UK but travels abroad for most of the time, and a businessman who is based abroad but manages to visit the UK from time to time, and are saying that in a case which may not be clear cut you need to look at all relevant factors.
In June 2001 accountants at Arthur Andersen raised analogous questions at a meeting with senior Revenue officers.
According to the Revenues note, its officers explained that paragraph 2.2 of the booklet still applied; that mobile workers who worked partly within the UK did not fall within it; but that business executives seconded to work abroad might well do so; and that they could fall within the paragraph without severing every link with the UK.
Arthur Andersen acknowledged in the words of the note that: If an individual had full time employment abroad, it was not necessary to look at the wider factors in paragraph 2.7 about personal circumstances such as accommodation, family life etc.
Arthur Andersen, at any rate, were under no illusion about the nature of the inquiry into a claim for non residence which was required by the booklet when it did not fall within paragraph 2.2.
The Revenues dialogue with the accountants culminated in its letter, dated July 2001, sent to the Institute of Chartered Accountants, the Chartered Association of Certified Accountants, the Chartered Institute of Taxation, the Confederation of British Industry, and the big five firms of accountants.
It made clear that most mobile workers failed to become non resident because they did not fall within paragraph 2.2 and because they had not genuinely left the UK in the residence sense.
In the light of the wide circulation of the letter, it is hard to imagine that tax practitioners did not realise that the Revenue required that an individual who claimed to have become non resident but who failed to fall within paragraph 2.2 should genuinely have left the UK, being a requirement reflective only of the ordinary law.
Had there been a facility for cross examination of the appellants professional witnesses in the proceedings, no doubt their precise understanding of what was or was not required both in law and in practice and their grounds for having it would have been laid bare.
In my view the Court of Appeal was right to hold that the appellants failed to establish that, by its inquiries and determinations in respect of them, the Revenue was departing from a settled practice such as to found a legitimate expectation.
In about 2001, probably triggered by the mobile workers, scrutiny of claims to non residence became more frequent.
But when, previously, claims had been scrutinised, had the Revenue adopted a settled practice of applying criteria different from those identified not only by the ordinary law but also in its own booklet read as a whole? The appellants evidence to this effect was far too thin and equivocal.
H. Conclusion
I would dismiss the appeals.
LORD HOPE
I am grateful to both Lord Wilson and Lord Mance for their description of the background to these appeals and for the way in which they have identified the points that are in issue.
I have reached the conclusion that, for the reasons that are set out in Lord Wilsons judgment, the appeals should be dismissed.
I have nothing to add to what Lord Wilson has said about the appellants secondary and alternative contention.
Their case that the Revenue had raised a legitimate expectation that their claim would be determined more favourably than the law and a proper construction of IR 20 would indicate was simply not made out by the evidence.
The difference between Lord Wilson and Lord Mance as to the primary issue turns on the meaning that paragraphs 2.7 to 2.9 of IR 20 would convey to the ordinarily sophisticated taxpayer.
Is the question whether the taxpayer has become non resident and not ordinarily resident in the United Kingdom to be determined simply by reference to the taxpayers intention when going abroad regarding the overall duration of his absence and counting up the days of any return visits? Or is it to be determined by evaluating the quality or nature of the absence and of any return visits that he has made?
There is an obvious attraction in keeping the test as simple as possible, especially as taxpayers are now responsible for self assessment when making their returns.
But the underlying principle that the law has established is that it must be shown that there has been a distinct break in the pattern of the taxpayers life in the UK.
The inquiry that this principle indicates is essentially one of evaluation.
It depends on the facts.
It looks to what the taxpayer actually does or does not do to alter his lifes pattern.
His intention is, of course, relevant to the inquiry.
But it is not determinative.
All the circumstances have to be considered to see what light they can throw on the quality of the taxpayers absence from the UK.
The question then is whether on its proper construction the booklet sets out tests which are so clear that they eliminate the need for an inquiry into whether there was in fact a distinct break.
As Lord Mance points out, the requirement for a distinct break is not clearly expressed in the relevant paragraphs of the booklet.
But I cannot agree with him that chapter 2 is to be read as substituting for that test a series of specifically delineated cases which clearly and unambiguously eliminated the need for such an inquiry: see para 100, below.
The booklet must be read as a whole, including its introductory paragraphs.
As the preface to the booklet made clear, it offered general guidance.
Its application to a particular case was to depend on its own facts.
So paragraphs 2.7 2.9 do not stand alone.
Taken as a whole, the message that the booklet conveyed was that all the circumstances were open to evaluation in order to see whether the rules for non residence were satisfied.
I am in full agreement with Lord Wilsons careful analysis.
LORD WALKER
I agree that these appeals should be dismissed for the reasons given in the judgment of Lord Wilson.
The stronger appeal is that of Mr Davies and Mr James, but it is by no means as strong as is claimed by the exaggerated opening of their printed case.
The preface to the relevant edition of IR 20 made clear that it gave general guidance only, and that whether the guidance was appropriate in a particular case would depend on all the facts of the case.
In the event of difficulty taxpayers were invited to consult an Inland Revenue tax office.
The appellants had expert professional advisers, and it was well known to them that a large amount of tax was at stake.
The guidance in IR 20 is far from clear, as Lord Wilson explains.
Yet there is no suggestion that any attempt was made to seek clarification from an office of the Inland Revenue, still less that any specific guidance or assurance was given on the particular course of action proposed by the appellants.
It seems possible that the preferred strategy was to let sleeping dogs lie, despite the obscurity of parts of IR 20.
But whether that is right or not, the appeals must be dismissed for the reasons given by Lord Wilson, which are essentially the same as those given by Moses LJ in the Court of Appeal.
LORD CLARKE
I agree that these appeals should be dismissed for the reasons given by Lord Wilson.
I have reached the conclusion that his reasoning is to be preferred to that of Lord Mance for the reasons given by Lord Hope.
LORD MANCE
Introduction
In these appeals, the issue is whether Her Majestys Revenue and Customs (HMRC) is entitled to treat the appellants as resident and ordinarily resident in the United Kingdom, in the case of Mr Davies and Mr James in the tax year 2001 02 and in the case of Mr Gaines Cooper in respect of the tax years 1993 94 to 2003 04.
The issue turns primarily upon the interpretation and effect of Revenue guidance on the liability to tax in the United Kingdom of residents and non residents, known as IR20.
IR20 was first issued in 1973, and existed in various versions developed from time to time until April 2009, when IR20 was entirely replaced by materially different guidance called HMRC 6.
A secondary issue in each appeal is whether HMRC, in seeking to treat the appellants as ordinarily resident, resiled illegitimately from a practice followed prior to 2005 with respect to the interpretation and application of IR20.
HMRC has confirmed in each appeal (HMRC Case para 2) that it accepts that a taxpayer has a legitimate expectation that HMRC will apply the guidance of IR20 to the facts of his particular case and, if satisfied that the facts and evidence fall within one of the circumstances in chapter 2 of IR20 indicating a certain residence treatment, will treat him accordingly.
This accepts that the guidance of IR20 gives rise to a legitimate expectation, but the nature of that legitimate expectation depends upon the terms of the guidance.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453, para 60, cited recently in Paponette v Attorney General of Trinidad and Tobago [2010] UKPC 32, [2011] 3 WLR 219, para 28, Lord Hoffmann said that: a legitimate expectation can be based only upon a promise which is clear, unambiguous and devoid of relevant qualification It is not essential that the applicant should have relied upon the promise to his detriment, although this is a relevant consideration in deciding whether the adoption of a policy in conflict with the promise would be an abuse of power .
As to the need for a representation to be clear, unambiguous and devoid of qualification, the Board in Paponette endorsed Dyson LJs statement in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, para 56, that the question is how on a fair reading of the promise it would have been reasonably understood by those to whom it was made ([2011] 3 WLR 219, para 30).
The primary issue in each appeal is thus how, on a fair reading, IR20 would have been reasonably understood by those to whom it was directed.
It is for the courts to resolve this as a matter of law.
If any of the appellants succeeds on either issue, it may also be necessary to consider what precise relief would be appropriate.
Mr Eadie QC for HMRC suggested in his oral submissions that a requirement to treat the taxpayer as not resident and ordinarily resident should not follow axiomatically.
However, the unequivocal nature of the above confirmation makes it difficult to see how this could be so if and in so far as any of the appellants succeeds on the primary issue.
More specifically the issues are whether, upon the true interpretation of IR20 or under Revenue practice prior to 2005, taxpayers seeking to show that they are neither resident nor ordinarily resident in the United Kingdom are required to show that they have made a distinct break from or severed family and social ties in the United Kingdom.
HMRC maintains and the Court of Appeal (paras 50, 53 55) has held that this is not required where a taxpayer can show that he or she is in full time employment abroad, but is required in all other circumstances.
This is said to reflect the test which would, having regard to past case law, apply in strict law.
The present judicial review proceedings are brought on the basis that, whatever the legal position might otherwise be, HMRC must as a matter of public law honour the terms of IR20.
This, as I have explained in para 70, follows from the HMRCs assurance, that if satisfied that the facts and evidence fall within chapter 2 of IR20, it will treat the relevant taxpayer accordingly.
While accepting this assurance, I confess to some residual unease about a concession so apparently general and independent of any consideration of particular circumstances, including any knowledge and advice possessed by or available to the particular taxpayer.
Nevertheless, that is the agreed basis upon which this appeal falls to be considered as a matter of public law.
Statutory background
Although this case concerns the effect of IR20 and/or Revenue practice, I refer at points to the limited statutory provisions relating to residence to be found in the Income and Corporation Taxes Act 1988 (ICTA 1988), which it will therefore be helpful to set out: 335 Residence of persons working abroad (1) Where (a) a person works full time in one or more of the following, that is to say, a trade, profession, vocation, office or employment; and (b) no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom; the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use. (2) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom. 336 Temporary residents in the United Kingdom (1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if (a) he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and (b) he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment, but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year. (2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has. (3) The question whether (a) a person falls within subsection (1)(a) above, or (b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there, shall be decided without regard to any living accommodation available in the United Kingdom for his use.
Section 336(3) was only introduced for and with effect from the tax year 1993 94 by section 208 of the Finance Act 1993.
IR20 has, as stated, developed over the years.
The version which matters in the case of Mr Davies and Mr James was issued in December 1999.
Mr Gaines Coopers case may require consideration also of earlier versions issued in October 1992, November 1993 and October 1996.
However, Mr Gaines Coopers case is that he left the United Kingdom permanently long ago and has lived abroad for many years, and the changes in provisions governing his situation are relatively limited.
The 1992 version read as follows: Leaving the UK permanently 2.5 If you go abroad permanently but have accommodation in the UK available for your use, you will be treated as resident for any tax year during which you visit the UK (see Chapter 4 for details of when accommodation is regarded as available).
The length of the visit does not matter.
If you come to the UK in most tax years, you remain ordinarily resident. 2.6 If you go abroad permanently and do not have available accommodation in the UK, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year. 2.7 If you claim that you are no longer resident and ordinarily resident you will normally be asked to give some evidence that you have left the UK permanently for example, that you have sold your UK home (or you have left it empty and on the market for sale) and set up a permanent home abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
In the event, the guidance regarding accommodation in paragraphs 2.5 and 2.6 was superseded as a matter of law by the introduction (for and from the tax year 1993 94) of section 336(3) of ICTA 1988 (para 72 above), providing that whether a person is in the United Kingdom with the intention of establishing his residence there should be decided without regard to any living accommodation available in the United Kingdom for his use.
This change was reflected in the 1993 version of IR20 which read: Leaving the UK permanently 2.6 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year.
For tax years before 1993 94, if you went abroad permanently but had accommodation in the UK available for your use, you were treated as resident for any tax year during which you visited the UK (see Chapter 4 for details of when accommodation was regarded as available).
The length of the visit did not matter.
If you came to the UK in most tax years, you remained ordinarily resident. 2.7 If you claim that you are no longer resident and ordinarily resident, you will normally be asked to give some evidence that you have left the UK permanently for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to own property in the UK, the reason is consistent with your stated aim of permanent residence abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
The Revenue in its submissions before the Supreme Court suggested that section 336(3) has no bearing on the present appellants situations, being relevant to persons who have established residence and ordinary residence abroad and come back here temporarily, rather than to the question whether persons have established ordinary residence abroad (an analysis encapsulated in the title to a contribution to issue 435 of CCH Taxes The Weekly Tax News after the Special Commissioners decision in relation to Mr Gaines Copper: Tis better to have left and returned than never to have left at all: p 37).
Whatever the accuracy of the Revenues submission on this point in strict law, it is clear, from the change in treatment of the significance of available accommodation in the 1993 and subsequent versions of IR20, that for the purposes of IR20 the Revenue treated the thinking behind section 336 as directly relevant to the question whether a taxpayer had established residence and ordinary residence abroad.
The 1996 version of IR20 was amended by the addition in the light of the decision, some ten years before, of Nicholls J in Reed v Clark [1986] Ch 1 of a new paragraph 2.10, which became paragraph 2.9 of the 1999 version and is of particular relevance to the cases of Mr Davies and Mr James.
The 1999 version read: 1 Residence and ordinary residence Residence in both the UK and another country 1.4 It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
Where, however, you are resident both in the UK and a country with which the UK has a double taxation agreement, there may be special provisions in the agreement for treating you as a resident of only one of the countries for the purposes of the agreement (paragraph 9.2). 2 Leaving the UK .
Short absences 2.1 You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Working abroad 2.2 If you leave the UK to work full time abroad under a contract of employment you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for at least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.3 If you meet all the conditions in paragraph 2.2, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK to the day before you return to the UK at the end of your employment abroad.
You are treated as coming to the UK permanently on the day you return from your employment abroad and as resident and ordinarily resident from that date.
If there is a break in full time employment, or some other change in your circumstances during the period you are overseas, we would have to review the position to decide whether you still meet the conditions in paragraph 2.2.
If at the end of one employment you returned temporarily to the UK, planning to go abroad again after a very short stay in this country, we may review your residence status in the light of all the circumstances of your employment abroad and your return to the UK.
If you do not meet all the conditions in paragraph 2.2, you remain resident and ordinarily resident unless paragraphs 2.8 2.9 apply to you.
Special rules apply to employees of the European Community (see paragraph 2.14). 2.4 The treatment in paragraph 2.3 will also apply if you leave the UK to work fulltime in a trade, profession or vocation and you meet conditions similar to those in paragraph 2.2.
Meaning of full time 2.5 There is no precise definition of when employment overseas is full time, and a decision in a particular case will depend on all the facts.
Where your employment involves a standard pattern of hours, we will regard it as full time if the hours you work each week clearly compare with those in a typical UK working week.
If your job has no formal structure or no fixed number of working days, we will look at the nature of the job, local conditions and practices in the particular occupation to decide if the job is full time.
If you have several part time jobs overseas at the same time, we may be able to treat this as full time employment.
That might be so if, for example, you have several appointments with the same employer or group of companies, and perhaps also where you have simultaneous employment and self employment overseas.
But if you have a main employment abroad and some unconnected occupation in the UK at the same time, we will consider whether the extent of the UK activities was consistent with the overseas employment being full time.
Accompanying spouse 2.6 If you are the husband or wife of someone who leaves the UK within the terms of paragraph 2.2 or 2.4 and you accompany or later join your spouse abroad, you may also by concession (extra statutory concession A78) be treated as not resident and not ordinarily resident from the day after your departure to the day before your return, even if you are not yourself in full time employment abroad.
This applies where you are abroad for a complete tax year, and during your absence any visits you make to the UK total less than 183 days in the tax year average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) Where the tax years of your departure or return are spilt in this way, your tax liabilities which are affected by residence status are calculated on the basis of the period you are treated as resident in the UK.
Leaving the UK permanently or indefinitely 2.7 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits. 2.8 If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving have totalled less than 183 days in any tax year, and have averaged less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year; and your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing in either case your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
Calculating annual average visits 2.10 If it is necessary to calculate your annual average visits to the UK, the method is as follows: Total visits to the UK in days x 365 Total period since leaving (in days) = annual average visits .
After the third review the year of departure is dropped from the calculation.
At each subsequent review the oldest year is dropped, so that there is a rolling period of four years being reviewed.
However, if during your absence the pattern of your visits varied substantially year by year, it might be appropriate to look at the absence as being made up of separate periods for the purpose of calculating average visits.
This might be necessary if, for example, a shift in the pattern of your visits suggested a change of circumstances, which altered how we viewed your residence status.
Contacting the Inland Revenue 2.11 You should let us know when you leave the UK (other than for short trips as in paragraph 2.1).
You will normally be asked to complete form P85,which will help to determine your residence status.
Paragraphs 2.1 to 2.6 repeated similar provisions in previous editions, all including a 183 day limit.
Such a limit appears for the first time in the 1996 edition in paragraphs dealing with Leaving the UK permanently .
Again, it is clear that, even if the scope of section 336 of ICTA 1988 may in strict law be regarded as confined to persons who have already established residence and ordinary residence abroad, the Revenue was inspired to take a more generalised view of the relevance of a 183 day limit in IR20, treating it as part of the test whether someone has established residence and ordinary residence abroad.
Davies and James
Mr Davies and Mr James are British citizens, who were born in the United Kingdom and lived and worked in Wales until 2001, when they took decisions, with the benefit of undisclosed professional tax advice, aimed at bringing about a cessation of ordinary residence here.
In pursuit of those decisions, in March 2001, they moved from the United Kingdom to apartments in Brussels, and incorporated and became directors of a Belgian company, Beaufort House SA, in which each held one third of the shares.
They also entered into employment contracts for full time work with that company for three years from 1 April 2001.
They say that, in planning for and making this move, they and their tax advisers, PriceWaterhouseCoopers, relied upon the guidance in IR20 in believing that it would mean that they would cease to be ordinarily resident in the United Kingdom.
The importance of this is that, in the tax year 2001 02, as they probably already envisaged, they realised chargeable gains in respect of which they became liable to capital gains tax unless they were not resident and ordinarily resident in the United Kingdom in that tax year.
In May 2002 they submitted to HMRC forms P85 (Leaving the United Kingdom) declaring that their intention had been to live outside the United Kingdom for a full tax year after their departure (though not permanently), that they would be working full time under a contract for their employment abroad for three years and that they expected to be in the United Kingdom for less than 90 days a year.
HMRC maintains and the Court of Appeal has held that Mr Davies and Mr James are unable to take advantage of paragraph 2.2 of IR20, because their employment by Beaufort House SA did not in fact commence from 5 April 2001, but only later, since on 5 April 2001 they were in fact on holiday in Italy.
That is accepted factually, but Mr Goldberg QC does not abandon his clients submission that it is sufficient under paragraph 2.2 that their employment should last for at least a whole tax year including a later tax year, such as 2002 03.
Rightly, however, he did not elaborate on the submission, which is without merit.
It is plainly implicit that the whole tax year to which paragraph 2.2 refers is that in relation to which absence of ordinary residence in the United Kingdom is asserted.
Mr Goldberg QC for Mr Davies and Mr James has thus to fall back on paragraph 2.8 or 2.9.
In relation to these paragraphs, Mr Daviess and Mr Jamess case is that they went abroad either to live outside the United Kingdom for three years or more within paragraph 2.8 or, at least, for a settled purpose within paragraph 2.9, and that they were in fact absent from the United Kingdom for the whole tax year 2001 02, indeed for three tax years, from such departure, and that their visits to the United Kingdom totalled less than 183 days in any such tax year and averaged less than 91 days a tax year.
HMRC asserts in response that Mr Davies and Mr James failed to establish the necessary distinct break with family and social ties in the United Kingdom.
In particular, they continued to each to have a substantial house here, in which their spouses lived when not visiting them in Belgium and where they lived when in the United Kingdom; and they retained employment and business links in the United Kingdom, as well as other links such as with Swansea Football Club and the Area Health Authority.
The Court of Appeal held that the issue whether such a break was necessary under IR20 should be determined in the present judicial review proceedings prior to any proceedings before the Special Commissioners ([2008] EWCA Civ 933, paras 18 19 and 24).
Gaines Cooper
Mr Gaines Coopers case involves very different and more complex facts, which have already been established in proceedings before the Special Commissioners, who, in a full and very clearly reasoned decision, concluded that Mr Gaines Cooper was in law resident and ordinarily resident during the relevant tax years in the United Kingdom.
In doing so they said that in this appeal we must apply the law rather than the provisions of IR20: para 99.
A brief summary will suffice, since it is of the essence of the present appeal that most of the facts so established are irrelevant under IR20 and/or under Revenue practice.
Mr Gaines Cooper is also a British citizen, who was born and educated and for many years lived here.
But by 1974 he had formed the view that the tax regime in the United Kingdom was unfavourable to businessmen and entrepreneurs, and on that basis he began to establish overseas interests.
He did so first in Canada and then in the Seychelles, where he purchased a house (Bois Noir) in late 1975 and was granted a residency permit in February 1976 and with which he has had close links ever since, and later elsewhere worldwide.
In February 1980, HMRC wrote to him asking for details of his travel to the United Kingdom between 1976 and 1979.
The figures provided for days spent, which there is no reason to doubt, were 49, 45 and 56, not counting days of arrival and departure.
HMRC raised no further queries thereafter and did not suggest that he might be taxable as resident or ordinarily resident in the United Kingdom until 2000, when the inquiries began which led eventually to these proceedings.
After marrying Mrs Dilona Lantang in 1979, Mr Gaines Cooper also purchased a house in California, where they lived for a time, but the marriage was dissolved in 1986.
In 1993 he married a Seychellois citizen, Miss Jane Laye Sion, whom he had met in the Seychelles, but who had moved with her family to the United Kingdom, and their son James was born in 1998.
Through off shore companies, Mr Gaines Cooper has retained property in the United Kingdom which was, apart from occasional periods of letting, available for his use.
Since early 1989 that has consisted of Old Place, near Henley, where his wife, Mrs Jane Gaines Cooper lives during term time, as does Mr Gaines Cooper when here.
By reason of the availability of such property, Mr Gaines Cooper accepts that, in the tax years immediately prior to 1993 94 and under the language then of IR20, the availability of such property meant that he was, even though he might satisfy all other conditions of IR20, to be treated as ordinarily resident in the United Kingdom.
In school holidays, Mrs Gaines Cooper and James also join Mr Gaines Cooper abroad in the Seychelles or wherever he may be.
In October 1987 Mr Gaines Cooper acquired an Italian company, Orthofix, administered from Cyprus and from about 1988 serviced by a company of which he was director based in Henley.
He developed it by 2003 into a worldwide company with subsidiaries registered in twenty four countries.
From 1992 to 1995 he was employed half time to perform duties in the United Kingdom for Orthofix.
After about 1987 he also became involved in manufacturing Laryngeal masks, first through a Seychelles company and then from 1988 by mass production in Indiana, USA.
So far as he had earnings here, he paid tax on them here.
During the relevant tax years, Mr Gaines Cooper spent about 150 days each year on airplanes, travelling between his interests in different countries, and spending each year in total about three or four months in the United Kingdom, three or four months in Jersey, six to eight weeks in the United States, two weeks in Cyprus and two weeks in Italy.
He also made visits to the Seychelles, which involved in the years 1991 92 to 1995 96 weeks in total rather than months according to the Special Commissioners (para 108).
It is now common ground that the total days spent by Mr Gaines Cooper in the United Kingdom, calculated by ignoring days of arrival and departure (in accordance with IR20) were, in the tax years 1992 93 to 2002 03, as follows (the square bracketed figures being those arrived at by the Commissioners who concluded that when examining the position in strict law they should add back days of arrival and departure, including single day trips to the United Kingdom): 1992 93: 107 (including 60 for a heart bypass) [147]; 1993 94: 78 [121]; 1994 95: 110 [158]; 1995 96: 66 [110]; 1996 97: 109 [146]; 1997 98: 92 (including 8 for Jamess birth) [141]; 1998 99: 110 (including 8 for Jamess birth) [151]; 1999 2000: 81 [127]; 2000 01: 50 [94]; 2001 02: 0 [27]; and 2002 03: 68 [105].
The Commissioners concluded, looking at the position overall, that England remained the centre of gravity of [Mr Gaines Coopers] life and interests, because he lived in Henley more than anywhere else and because of his many other ties to Berkshire and Oxfordshire.
On the basis of figures calculated according to IR20 (and all the more so if one excludes as exceptional circumstances the time spent here for a heart bypass and Jamess birth), Mr Gaines Cooper satisfied in the relevant tax years the conditions both that his visits should in no tax year total 183 days and that they should have averaged over any four year period less than 91 days a year.
Mr Gaines Cooper clearly intended to maintain that position permanently or for three years or more, and has maintained it over a period of many years.
The essential question is whether that is sufficient to attract the benefit of paragraph 2.7, read with paragraph 2.8, or paragraph 2.9 of IR20.
The status and interpretation of IR20
Giving the leading judgment in the Court of Appeal Moses LJ, with whose reasoning Dyson LJ agreed, addressed the question of the status and interpretation of IR20 (1999 version) in relation to questions of residence for the purpose of taxation as follows (para 4): It is notorious that the principles to be applied [on such questions] are to be found, not in the few statutory provisions (sections 334 336 ICTA 1988, now sections 829 832 ITA 2007), which do not purport to be a statutory code but in case law, mainly from the late 19th and early 20th Century.
As the Codification Committee recognised, only study of that jurisprudence would enable intelligent prediction of the outcome of an assertion as to residence or non residence.
All the more important, then, that guidance should be given on which taxpayers could rely.
The Income Tax Codification Committee, chaired by Lord Macmillan and reporting in 1936 (Cmd 5131), put the matter strongly, saying: We are, however, of opinion that the present state of affairs, under which an enquirer can only be told that the question whether he is resident or not is a question of fact for the Commissioners, but that by the study of the effect of a large body of case law he may be able to make an intelligent forecast of their decision, is intolerable and should not be allowed to continue. (paragraph 59) The Codification Committees prescription to resolve this situation was a draft set of statutory rules, which was not however enacted.
Nearly 20 years later in 1955, the Royal Commission on The Taxation of Profits and Income (Cmd 9474) set out what it believed to be the practice which the Revenue followed and claimed to derive from the few statutory rules existing and from decided cases.
This included a principle that: A man who has been regularly resident in the United Kingdom and has then gone abroad may or may not be treated as a visitor if he comes back again at any time.
That depends primarily on the question whether the circumstances in which he went abroad indicate a clear break with the United Kingdom as his place of ordinary residence. (paragraph 290) The Commission, quoting the 1936 reports words set out above, agreed that the state of affairs was unsatisfactory.
It suggested as the remedy a printed leaflet which sets out at any rate the main lines of the Revenue Departments established practice, and went on to say that: . fixed rules would simplify the work of administration even if they worked unreasonably in some instances.
But it is one of the arguments against the existing system that it does lead to the devotion of a great deal of time and skill to considering and adjudicating upon individual cases, whereas the establishment of certain fixed rules would make this unnecessary without giving any individual a serious cause of complaint.
Indeed we think that the visitor or potential visitor would normally prefer certainty to the assurance that there will be the fullest consideration of his personal circumstances. (paragraph 292) By 1961 separate visitors and permanent residence leaflets were in existence, and steps were begun to bring into existence the single guidance which became the first edition of IR20 in 1973.
The Preface to IR20 has since 1992 started with the statement that: The notes in this booklet reflect the law and practice at the time of writing.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
Until 1996 it went on: From 1996, it read: You should therefore always consult an Inland Revenue Tax Office on how the rules apply in your own case .
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office .
This change followed from the introduction in April 1996 of self assessment, representing a major shift in the responsibilities of taxpayers, who from then on had to determine for themselves in the first instance whether or not they were ordinarily resident for tax purposes.
However, it is not, I understand, suggested that the change is critical to the outcome of the present appeals in any year.
Paragraph 1.1 of IR20 notes that the terms residence and ordinary residence are not defined in the Taxes Acts, but states that: The guidelines to their meaning in this Chapter and in Chapters 2 . and 3 . are largely based on rulings of the courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your
particular case
As Moses LJ underlined in paras 17 to 25 of his judgment, HMRC has given, both by the language of paragraphs 2.2 to 2.9 and expressly in the present proceedings (para 70 above), a binding and lawful assurance that it will treat a taxpayer, whose case falls within the circumstances described, as not resident and not ordinarily resident.
The significance of the words quoted above from the Preface and paragraph 1.1 is to show that the guidance is meant to reflect the law and practice, and to set out the main factors and that, although it is not binding in law and does not affect a taxpayers right of appeal, it was and is intended to obviate any need for a taxpayer to look further.
As HMRC itself put the matter, in writing to PriceWaterhouseCoopers about Mr Daviess and Mr Jamess positions on 14 March 2005: it is generally accepted that some of the practices outlined in IR20 are relaxations from the strict position.
Not all these relaxations are covered in Extra Statutory Concessions (ESCs).
Parliamentary Draftsmen did not draw up the IR20 notes, as they are simply general guidance.
Therefore it is not appropriate to seek to construe this general guidance as if it were statute law.
On the other hand we do consider ourselves bound to follow the practices outlined in IR20.
Therefore if your clients circumstances place them within IR20 2.2, or 2.7 etc we will accept the non resident (NR) claim.
This conclusion would apply even if a strict interpretation of the law suggested otherwise.
Moses LJ correctly identified each of paragraphs 2.2 to 2.9 in the 1999 version as requiring at the outset not merely a departure from the United Kingdom, but satisfaction of a further qualification (in addition to the later provisos relating to the duration of absence from and of visits to the United Kingdom).
In the case of paragraph 2.2, the further qualification was that he must have left to work full time; no more, and in particular no severance of any family and social ties within the United Kingdom, was required (para 43).
But, in the case of paragraphs 2.7 to 2.9, he held that severance of ties had to be demonstrated, because (para 44) The adverbs permanently or indefinitely make, as a matter of construction, all the difference.
The extent to which a taxpayer retains social and family ties within the United Kingdom must have a significant and often dispositive impact on the question whether a taxpayer has left permanently or indefinitely (for at least three years).
It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence and contrast with 2.1 .
Moses LJ considered that this interpretation was supported both by the contrast with paragraph 2.1 (short absences) and by the reference in paragraph 2.8 to the need, if you continue to have property in the UK for your use, for evidence that the reason is consistent with your stated aim of living abroad permanently or for three years or more.
To my mind, however, the references in paragraphs 2.7 and 2.8 to going abroad permanently or to live outside the UK for three years or more and to a stated aim of living abroad permanently or indefinitely are directed most obviously to the taxpayers intention regarding the overall duration of his or her absence, rather than to the quality of absence or the nature of any return visits or continuing British connections.
Further, it is clear that the words Leaving the UK permanently or indefinitely cannot and do not precisely or accurately reflect all the paragraphs above which they appear.
Thus, the only requirements under the first part of paragraph 2.9 are (i) going abroad (ii) for a settled purpose, which is expressly defined to include a fixed object or intention in which you are going to be engaged for an extended period of time.
That paragraph, reflecting Reed v Clark [1986] Ch 1, is again focused on the taxpayers intention when going abroad; and a settled purpose to engage in an overseas activity for an extended period of time may clearly exist without any intention to stay overseas either permanently or indefinitely.
As in Reed v Clark, therefore, a taxpayer may have a settled purpose simply to remain outside the United Kingdom for one tax year.
When paragraph 2.9 starts with the phrase If you do not have this evidence, this cannot mean that paragraph 2.9 only applies as a sort of long stop, when a taxpayer is asserting that his intention was to go abroad permanently or indefinitely, but when he cannot prove this but can prove some more limited settled purpose.
To that extent, I disagree with Moses LJs description of paragraph 2.9 as designed to assist taxpayers who lack evidence (para 50), a description which may have been based on a partial concession below (para 51) which cannot however be sustained.
In my opinion, paragraph 2.9 is designed to assist taxpayers who never intended to leave permanently or indefinitely, but can show a settled purpose of lesser duration.
The second part of paragraph 2.9 deals likewise with situations where there was neither an intention to go abroad permanently or indefinitely nor, additionally, any settled purpose.
It covers two possibilities: one that the taxpayer can subsequently say and show that he has now acquired an intention to leave the United Kingdom permanently (or, one would presume though this is not expressed, for three years or more); the other that his actual absence covers three years from departure.
This second possibility looks on its face at the period for which he is abroad, again without focusing on the quality of absence.
Paragraph 2.1 in my view also lends no real support to HMRCs case.
It focuses on persons who usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Not only does this leave open what is meant under IR20 by usually living here, but the reference to only going abroad for short periods cannot be regarded as matching either Mr Gaines Coopers or Mr Daviess and Mr Jamess lifestyles during the relevant periods, and is consistent with an analysis whereby persons spending less than 91 days here within the terms of paragraphs 2.2 onwards are not treated as ordinarily resident.
What is also worth note is the use throughout chapter 2 of words such as go abroad, leave and departure interchangeably in relation to short and long term absence.
It is impossible to derive from any of them any message as to the quality of the absence required for cessation of United Kingdom residency.
Reference was made to a short check sheet (Notes on Non residence) issued by HMRC to persons making tax returns, which included from the tax year 2000 01 a question 2A, asking Have you left the UK? with a note: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain here, If NO, you are resident in the UK .
This was introduced after a number of long distance lorry drivers based in, but driving overseas for substantial periods from, the United Kingdom made claims to be not ordinarily resident here.
One would have thought that such claims were self evidently not admissible, on the basis that part of such drivers work must have taken place in the United Kingdom, eg when they collected and returned vehicles or tractors.
Question 2A recognises this by its reference to making frequent trips abroad in the course of your employment.
It does not address persons who worked basically abroad, although sometimes coming here on business.
In any event, it does not form part of IR20, and it has not been relied upon by HMRC as qualifying whatever IR20 may mean.
It follows from what I have already said that I do not find in the express terms of paragraph 2 of IR20, or in particular in the words permanently or indefinitely, direct support for any requirement for a distinct break.
Looking at the matter more broadly, it would seem to me remarkable that, if any such requirement were intended, it was not clearly expressed.
The guidance is intended to be useful as well as reliable.
A requirement for a distinct break from family and social ties in the United Kingdom would certainly be a main factor (see paragraph 1.1).
It and its uncertainty would also be matters of obvious concern to many taxpayers.
How (for example) does one demonstrate a distinct break from family ties, in a world where spouses or partners may live and work in different countries, but meet regularly in one or the other? This is highlighted by a point made by Moses LJ after he had referred to section 334 of ICTA 1988 and to case law including Levene v Inland Revenue Comrs [1928] AC 217, The Comrs of Inland Revenue v Combe (1932) 17 TC 405, Revenue and Customs Comrs v Grace [2009] STC 2707 and Reed v Clark.
He said (para 53): While IR20 is designed to guide and simplify, I cannot accept that it provides a warrant for ignoring so obvious a factor [as the need for a distinct break] for determining whether a taxpayer hitherto resident and ordinarily resident in the UK has ceased to be so and has left permanently or indefinitely.
Yet HMRC now suggests that the existence of so obvious a factor was left to inference from what appear, at best, very opaque clues.
Moses LJ regarded the statutory and case law position as confirming his view that a distinct break was required.
He said (para 52): I am confirmed in that view by the objective of IR20 stated in the opening words of the preface, that it is designed to reflect the law.
It would, therefore, be surprising if IR20 had the effect of contradicting established jurisprudence.
In my opinion, it is wrong to start with the premise that IR20 was designed to reflect the law as a court would interpret it apart from IR20 and Revenue practice; and also wrong to assume a knowledge of the case law as background to the construction of IR20.
The purpose of IR20 was to reflect the law and practice.
It was addressed to individual taxpayers, and, even if they might often have professional advisers, those advisers would be very likely to be, as Mr Daviess and Mr Jamess were, accountants rather than lawyers, and correspondingly interested in HMRCs understanding and practice rather than prepared to attempt exhaustive analysis of legal authority.
These points are underlined, rather than undermined, by Miss Simler QCs submission that there is nothing in IR20 to suggest that there is likely to be any divergence from the law.
To the extent that that is so, it confirms that, even if he were interested in the legal position apart from Revenue understanding and practice, a taxpayer or professional adviser need look no further than IR20.
It follows that the terms of IR20 should be read as independent of any conclusion to which a strict interpretation of the law might lead: see HMRCs letter dated 14 March 2005 (para 87 above).
A degree of simplification brought about by fixed rules, in place of a difficult judgment as to whether the circumstances indicated a clear break with the United Kingdom as his place of ordinary residence, is indeed precisely what the Royal Commission on The Taxation of Profits and Income encouraged in 1955 (para 84 above).
The aim and function of IR20 in this respect is demonstrated by consideration of the further conditions of chapter 2.
In addition to the requirements already discussed, a taxpayer seeking to take advantage of paragraphs 2.7 to 2.9 must satisfy two conditions relating to duration of absence from and visits to the United Kingdom.
As I have already stated (para 75 above), the first (absence totalling less than 183 days in a tax year) was clearly inspired by the provisions of section 336(1)(b), delimiting what counts as temporary residence in the United Kingdom.
The second (an average of less than 91 days a tax year in the United Kingdom) has no statutory basis.
It is a condition introduced by HMRC to enable a taxpayer to know where he stands in HMRCs eyes.
It is there, on its face, as a measure of the degree of separation from the United Kingdom which HMRC will in practice accept as sufficient to avoid ordinary residence here.
The further references in paragraph 2.8 to the exclusion from this 91 day average period of days spent here due to exceptional circumstances such as the illness of yourself or a member of your immediate family do not fit with an expectation of a distinct break of social or family ties with the United Kingdom.
The reference in all versions of IR20 from November 1993 on to a person being able to have property available for use in the United Kingdom during his visits here also militates against a requirement of a distinct break.
IR20 should in this connection be read on its own terms, independently of the statutory or common law background to that reference.
There is here, however, a minor paradox, since the October 1992 version contains a contrary reference, reflecting the law as it was prior to the Finance Act 1993 which introduced section 336(3) into ICTA 1988 for the tax year 1993 94 (para 74 above).
Mr Gaines Cooper had property available for his use in the United Kingdom at all material times.
In relation to the tax year 1993 94 he cannot simply rely on IR20, he must rely upon it as (notionally) supplemented by section 336(3).
However, HMRC did not in its submissions identify this as a specific problem for Mr Gaines Cooper in relation to the tax year 1993 94, and I will put it on one side for the moment.
Moses LJ found support in paragraph 1.4 for his view that a value judgment was necessary as to whether there had been a direct break (para 53).
That the guidance in paragraph 1.4 is correct is clear.
But it says, to my mind, nothing about whether such a value judgment is necessary under paragraphs 2.7 to 2.9.
In particular, it is obvious that, if a person falls automatically to be treated as ordinarily resident here if he or she spends 91 days or more here, he or she may well be ordinarily resident in one or two other countries in the same tax year, whether on the basis of an equivalent 91 day rule there or for more general reasons.
It does not follow that compliance with the express requirement and conditions of paragraphs 2.7 to 2.9 may not be sufficient to ensure that a person is not ordinarily resident here.
Ward LJ appears to have concluded (paras 118 119) that the appellants each had an unarguably strong case for claiming to be ordinarily resident abroad under IR20.
But he went on to say that the principle of case law recognised in Viscount Cave LCs dictum in Levene v Inland Revenue Comrs [1928] AC 218, 233, that a man may reside in more than one place, entitled HMRC to look for a clear or clean break with this country.
That is once again to make the error of applying the case law, rather than the terms of IR20.
In so far as paragraph 1.4 reflects a similar principle, it must be read not as watering down the categorical guidance as to situations of non residence given in chapter 2, but consistently with that guidance in the way which I have indicated in the previous paragraph.
It is submitted on behalf of HMRC that all that the specific 91 day rule does is identify a limit which HMRC applies to persons who would or might otherwise be able to show that they are not ordinarily resident (ie by having made a distinct break with United Kingdom ties).
It is an upper limit above which HMRC will not accept absence of ordinary residence, but keeping below that limit does not indicate or point to an absence of ordinary residence.
The word providing used in paragraphs 2.8 and 2.9 of the 1999 version is particularly relied upon.
The language used in IR20 is however variable.
In previous versions of paragraph 2.8 (see the versions of paragraph 2.7 quoted in paras 73 and 74 above) and in paragraph 2.7, words such as as long as and if were and are used, and the limit is clearly expressed as a condition of entitlement in paragraphs 2.2 and 2.6 dealing with persons with full time employment outside the United Kingdom and their accompanying spouses.
It is of course HMRCs case that a distinction is to be drawn between paragraphs 2.2 to 2.6 and later paragraphs, but to my mind the distinction rests on weak foundations in so far as it is based on such terminological differences.
The natural meaning to a potential taxpayer of all relevant paragraphs of the guidance is, as I see it, that, as long as he confines his presence within the United Kingdom to less than 183 days in any one tax year and less than 91 days average per tax year, and satisfies the other requirements relating to intention and/or years spent abroad, he will qualify as not ordinarily resident.
In my opinion, the natural meaning of chapter 2 in all its versions since at least 1993 is that, rather than imply the case law test of a distinct break, they introduced (and for public law purposes substitute) a series of specifically delineated cases, into which, if a taxpayer falls, he or she will be treated without more as not resident or ordinarily resident in the United Kingdom.
I repeat that the suggestion that the distinct break test is implicit in the language of paragraphs 2.5 to 2.9 (though not in that of paragraph 2.2) appears to me remarkable in the light of the obvious importance of such a factor if it were envisaged.
Paragraphs 2.5 to 2.9 of IR20 are essentially futile, indeed positively misleading, if they are read as incorporating or reiterating the difficult case law test of a distinct break, and moreover imposing a further specific restriction (a 91 day average limit) to the taxpayers disadvantage.
I appreciate that, in all the appellants cases, the view may be taken that it is desirable and appropriate that HMRC should be able to tax as ordinarily resident persons with the life style and connections with the United Kingdom of these appellants.
That is a moral or fiscal judgment, which may well reflect the strict law (and evidently does so in the case of Mr Gaines Cooper).
But it does not follow that it is the conclusion to be drawn from the guidance in IR20 which HMRC issued, in the interests of good governance, clarity and transparency for the benefit of individuals, to explain the combination of the law and practice by reference to which such individuals could direct their affairs.
I would therefore allow these appeals, so far as they concern the correct interpretation of IR20.
It seems to me to follow from the assurance given by HMRC in these proceedings (para 70 above) that there should be a declaration that HMRC should treat the appellants in respect of the relevant tax years (save perhaps 1992 93, on which I would be prepared to hear any further specific submissions) in accordance with that interpretation of IR20.
I did not find in Mr Eadies submissions any good reason to the contrary.
Since writing this judgment, I have had the benefit of reading Lord Wilsons judgment.
My own view, as will be apparent from what I have already written, is that to treat IR20 as pregnant with the detailed implications listed in para 45 (or, in summary, as informing an ordinarily sophisticated taxpayer of a need for a multifactorial evaluation of his or her circumstances and for a distinct break) runs contrary not only to the wording and sense of the document itself but also to its genesis and purpose: paras 83 87 above; so also, to treat IR20 as so unclear as to communicate nothing to which legal effect can be given on the means by which non resident status might be acquired.
Practice
It is in these circumstances unnecessary to go into the secondary issue regarding HMRCs practice prior to 2005, when the issues relating to the appellants first crystallised.
Whether the appellants can show a clear and unequivocal practice is in issue, as are potentially how far it would be necessary to establish any general or particular knowledge of or reliance on such a practice and how far they could hold HMRC to such a practice as a matter of legitimate expectation.
These are all matters into which I prefer not to go.
Conclusion
I would allow these appeals, on the primary issue of interpretation of IR20 and make the declaration to which I have referred in para 101.
| UK-Abs | In 1999 the Inland Revenue [now known as Her Majestys Revenue and Customs, HMRC] published a booklet known as IR20 and entitled Residents and Non Residents Liability to tax in the United Kingdom, which offered general guidance on the word residence and the phrase ordinary residence for the purposes of an individuals liability for UK income and capital gains tax.
IR20 remained operative until 2009.
The Appellants contend that, on its proper construction, IR20 contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than did the ordinary law; alternatively that prior to 2005 it was the settled practice of HMRC to adopt such a benevolent interpretation of IR20.
Either the construction or the practice gave rise (so they say) to a legitimate expectation that the benevolent interpretation would be applied to determinations of their status for tax purposes and consequently HMRC should not have determined that, during the years relevant to them, they were resident or ordinarily resident in the UK.
The First Appellants, Mr Davies and Mr James, contend that prior to 6 April 2001 they left the UK for the settled purpose of establishing and working full time for a Belgian company.
Although their wives and Mr Davies daughters remained resident in the UK and although they returned frequently to the UK, albeit for short periods, they contend that they are entitled to be treated as non resident and not ordinarily resident in 2001 2002 by reference to paragraph 2.9 of IR20 since they had gone abroad for a settled purpose and had remained abroad for at least a whole tax year.
The situation of the Second Appellant, Mr Gaines Cooper, is different from that of the First Appellants in that it has already been conclusively determined, by reference to the ordinary law, that he was resident and ordinary resident in the UK in the years relevant to him.
He contends, however, that his status should instead be determined by reference to paragraphs 2.8 and 2.9 of IR20 or to the alleged settled practice and that, on either basis, he was not resident in the UK from 1993 to 2004 nor ordinarily resident here from 1992 to 2004.
The High Court refused the Appellants permission to apply for judicial review of the determinations by HMRC that they were resident and ordinarily resident in the UK in the relevant years.
The Court of Appeal granted them permission but dismissed their substantive applications.
The Appellants appeal to the Supreme Court.
The Supreme Court, by a 4 1 majority, dismisses the two appeals on the grounds that the proper construction of IR20 does not support the Appellants contentions and that there is insufficient evidence of any settled practice on the part of the HMRC by way of departure from the IR20 guidance.
Lord Wilson gives the leading judgment; Lords Hope, Walker and Clarke give short concurring judgments.
Lord Mance gives a dissenting judgment.
An individuals status as being resident and ordinarily resident in the UK largely determines his liability for UK income tax and capital gains tax.
In law an individual who has been resident in the UK ceases to be so resident only if he ceases to have a settled or usual abode in the UK per Levene v Inland Revenue Comrs [1928] AC 217 [13
Section 334 of the Income and Corporation Taxes Act 1988 (now replaced) also provided that an individual would nevertheless be deemed to have remained resident in the UK if he had left the UK for the purpose only of occasional residence abroad [15 17].
At law, an individual needs to effect a distinct break in the pattern of his life in the UK in order to become non resident per Reed v Clark [1986] Ch 1 [18 19]; this mandates a multifactorial evaluation of his circumstances [20].
But an individuals pursuit of full time employment abroad is likely to be sufficient to cause him to cease to be a UK resident and not to be deemed under the statute still to be a UK resident [21].
HMRC issued guidance on residence and ordinary residence in IR20.
HMRC accepts that it is bound by whatever might be the proper construction of the guidance and that the guidance gave rise to a legitimate expectation that it would appraise any individuals case by reference to such guidance even if it failed to reflect the ordinary law [27].
The First Appellants contend that HMRC represented in IR20 that non residence was achieved if an individual left the UK to take up full time employment abroad, or left the UK permanently or for at least three years, or went abroad for a settled purpose and remained abroad for at least a whole tax year, provided in each case that any visits to the UK totalled less than six months in any one year and averaged less than 91 days each year [the day count proviso] [30].
The Second Appellant contends that HMRC thereby represented that it was sufficient for an individual to live abroad for at least three years and to satisfy the day count proviso, thus eliminating any need for consideration of whether he had effected a distinct break in the pattern of his life in the UK [31].
The majority holds that the proper construction of IR20, when read as a whole, does not support the Appellants contentions [45, 64].
Paragraph 2.1 indicated that an individuals claim to non residence would generate consideration of various aspects of his life with a view to the identification of its usual location [35].
The heading to paragraphs 2.7 to 2.9 namely Leaving the UK permanently or indefinitely required consideration of the quality of his absence from the UK [37].
Paragraph 2.9, which stated that if an individual had gone abroad for a settled purpose, he would be treated as not resident and not ordinarily resident if his absence from the UK had covered at least a whole tax year and he had met the day count proviso, could not be construed as a freestanding route to non residence since there was an express link to paragraph 2.8, which required an individual to leave indefinitely [41].
Although its exposition of how to achieve non residence should have been much clearer, IR20, taken as a whole, informed the ordinarily sophisticated taxpayer that he had to leave the UK permanently, indefinitely or for full time employment; had to do more than to take up residence abroad; and had to relinquish his usual residence in the UK.
It also informed him that any subsequent returns to the UK had to be no more than visits and that any property retained in the UK by him for his use had to be used for the purpose only of such visits rather than as a place of residence [45].
He will have concluded that such requirements in principle demanded, and might well in practice generate, a multifactorial evaluation of his circumstances [45, 64] and, in summary, that he had to make a distinct break [45].
Alternatively, IR20 was so unclear as to communicate nothing to which legal effect might be given [47].
The majority holds that there was insufficient evidence that HMRC had departed from IR20 as a matter of settled practice [58].
Such a contention requires evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to amount to a specific commitment of treatment in accordance with it [49] but the Appellants evidence to this effect was far too thin and equivocal [58].
Lord Mance, dissenting, holds that the references to going abroad permanently or living outside the UK for three years or more in paragraphs 2.7 2.8 referred to the taxpayers intention regarding the duration of his absence rather than the quality of any absence or the nature of any return visits or continuing UK connections [89].
Paragraph 2.9 was designed to assist taxpayers who never intended to leave permanently or indefinitely, but went abroad for a settled purpose to engage in an overseas activity for an extended period of time of lesser duration [89]; or where the taxpayer could subsequently show he had acquired an intention to leave the UK permanently or that his actual absence covered three years from departure [90].
It would be remarkable if there were a requirement for a distinct break from life in the UK when no such requirement was clearly expressed [93] and other factors, including the day count proviso, militated against such a requirement [95; 96].
|
The issue in this case is what is meant by the word violence in section 177(1) of the Housing Act 1996.
Is it limited to physical contact or does it include other forms of violent conduct?
The Court of Appeal, as it was bound to do by the earlier case of Danesh v Kensington and Chelsea Royal London Borough Council [2006] EWCA Civ 1404, [2007] 1 WLR 69, held that it was limited to physical contact: [2009] EWCA Civ 1543.
The appellant contends that it is not.
As the appellant is a woman, and the majority of victims of all forms of domestic violence are women, I shall refer to the victim as she throughout.
But of course I realise that men can be victims too.
The evolution of the statutory scheme
The modern scheme of local housing authorities powers and duties towards homeless people dates back to the Housing (Homeless Persons) Act 1977.
That Act provided that a person was homeless if there was no accommodation which she (together with other members of her family) was entitled to occupy.
Even if there was such accommodation, a person was also homeless if it is probable that occupation of it will lead to violence from some other person residing in it or to threats of violence from some other person residing in it and likely to carry out the threats: 1977 Act, section 1(2)(b).
That provision was repeated when the 1977 Act was consolidated with other housing legislation in the Housing Act 1985: see section 58(3)(b).
Then came the case of R v Hillingdon London Borough Council, Ex p Puhlhofer [1986] AC 484, where the House of Lords held that a person was not homeless even if it was not reasonable for her to have to continue to occupy the accommodation to which she was entitled.
In response to this, the Housing and Planning Act 1986 inserted two new subsections into section 58 of the 1985 Act.
Subsection (2A) 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; but subsection (2B) permitted the local housing authority, when deciding whether it would be reasonable to continue to occupy, to have regard to the general circumstances prevailing in relation to housing in the district.
No change was made to the basic definition in section 58(3), under which a person was automatically homeless if there was a risk of violence from another person living in the accommodation which she was entitled to occupy.
Neither in 1977 nor in 1985 did the subsection specify who had to be the victim of such violence: it may have been assumed that it had to be the person claiming to be homeless or it may have been assumed that it would also cover the people living with her, in particular her children.
The scheme was recast in Part VII of the Housing Act 1996, although retaining its basic shape.
The definition of homelessness, now contained in section 175 of the 1996 Act, remained the same as it had been in the 1985 Act as amended in 1986, but section 58(3)(b) dealing with violence and section 58(2B) dealing with local housing conditions were removed into section 177 (see para 5).
The former reasonable to continue to occupy requirement in section 58(2A) is now contained in section 175(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.
The former section 58(3)(b) and (2B) have been translated into the new section 177, which is headed Whether it is reasonable to continue to occupy accommodation.
The former section 58(2B), dealing with local housing conditions, is now contained in section 177(2), which reads as follows: In determining whether it would be, or would have been, reasonable for a person to continue to occupy accommodation, regard may be had to the general circumstances prevailing in relation to housing in the district of the local housing authority to whom he has applied for accommodation or for assistance in obtaining accommodation.
Although there was some debate about it before us, the phrase used is the general circumstances in relation to housing and not the general condition of the housing stock in the area.
This strongly suggests that regard may be had, not only to the quality of housing available locally, but also to the quantity.
The former section 58(3)(b), dealing with the risk of violence, was recast as section 177(1) of the 1996 Act.
In its original form, it read as follows: It is not reasonable for a person to continue to occupy accommodation if it is probable that this will lead to domestic violence against him, or against (a) a person who normally resides with him as a member of his family, or (b) any other person who might reasonably be expected to reside with him.
For this purpose domestic violence , in relation to a person, means violence from a person with whom he is associated, or threats of violence from such a person which are likely to be carried out.
This made two changes of substance from the old law.
First, it expressly encompassed violence against other members of the homeless persons household: a mother for example, could not reasonably be expected to occupy accommodation where her children were at risk of domestic violence.
Second, it was no longer limited to violence from someone living in the same accommodation but covered violence from an associated person, whether or not living in the same household.
Section 178 spells out the Meaning of associated person in detail, but of course it includes spouses and former spouses, cohabitants and former cohabitants, and (since 2005) civil partners and former civil partners.
But these changes did not change the underlying purpose of section 177(1).
It has variously been called a deeming or a pass-porting provision.
The effect is, as it has been since 1977, that a person who is at risk of the violence to which it applies is automatically homeless, even though she has every right to remain in the accommodation concerned and however reasonable it might in other respects be for her to do so.
Questions of local housing conditions or shortages do not come into it.
There was, however, another important consequence of the particular drafting technique employed in section 177.
This was new to the 1996 Act and was not referred to in the argument before us.
As it is automatically not reasonable for a person to continue to occupy accommodation where she is at risk of violence, she cannot be treated as intentionally homeless if she leaves.
Section 191 defines when a person becomes homeless intentionally as follows: (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.
This result follows a recommendation of the Home Affairs Committee in their 1993 Report on Domestic Violence, to which I shall return in paragraph 21.
Section 177(1) was amended, and a new section 177(1A) introduced, by the Homelessness Act 2002.
These now read as follows: (1) It is not reasonable for a person to continue to occupy accommodation if it is probable that this will lead to domestic violence or other violence against him, or against (a) a person who normally resides with him as a member of his family, or (b) any other person who might reasonably be expected to reside with him.
(1A) For this purpose violence means (a) violence from another person; or (b) threats of violence from another person which are likely to be carried out; and violence is domestic violence if it is from a person who is associated with the victim.
Once the prospect of other violence was introduced into this pass-porting provision, it is not easy to see why the specific reference to domestic violence (together with the complex definition of associated persons in section 178) was retained, unless perhaps it was thought that domestic violence had a special meaning.
But this is quite hard to reconcile with the phrase violence is domestic violence.
I return to this question in paragraph 31.
One reason may be that the phrase domestic violence has been in the scheme throughout, even though it was not originally used in the definition of homelessness in section 1 of the 1977 Act (see para 2 above).
Section 5 of the 1977 Act dealt with responsibility for housing homeless people as between different local housing authorities.
The authority first approached could in effect transfer responsibility to another housing authority if the applicant, or other members of her household, had no local connection with their area, but did have a local connection with another area, and neither the person who so applied nor any person who might reasonably be expected to reside with him will run the risk of domestic violence in that housing authoritys area: see section 5(1)(iii).
The risk of domestic violence or threats of domestic violence was defined in terms of a risk from any person with whom, but for the risk of violence, he might reasonably be expected to reside or from any person with whom he formerly resided: see section 5(11).
These provisions were consolidated in the 1985 Act as section 67(2)(c) and (3).
The same principles were carried through into section 198(2)(c) and (3) of the Housing Act 1996 in virtually identical form, save that the risk had now to come from a person with whom he is associated.
With the introduction of other violence into section 177(1) by the 2002 Act, changes were also made to section 198.
Section 198(2) remains in its original form, but a new section 198(2A) has been introduced and section 198(3) replaced.
These now read as follows: (2A) But the conditions for referral mentioned in subsection (2) are not met if (a) the applicant or any person who might reasonably be expected to reside with him has suffered violence (other than domestic violence) in the district of the other authority; and (b) it is probable that the return to that district of the victim will lead to further violence of a similar kind against him.
(3) For the purposes of subsections (2) and (2A) violence means - (a) violence from another person; or (b) threats of violence from another person which are likely to be carried out; and violence is domestic violence if it is from a person who is associated with the victim.
As with section 177, it is not easy to see why the distinction between domestic and other violence was retained, as the consequence is the same, unless there was thought to be some difference between them.
There is one further provision in the homelessness scheme to which I must refer.
The 1996 Act introduced a new provision in section 177(3): (3) The Secretary of State may by order specify (a) other circumstances in which it is to be regarded as reasonable or not reasonable for a person to continue to occupy accommodation.
There is no equivalent power in section 198.
Thus, in theory, the Secretary of State could expand the categories of people who are automatically homeless by reference to some other risk, but they could then be sent back to a district where they would face exactly that same risk.
Danesh v Kensington and Chelsea Royal London Borough Council [2006] EWCA Civ 1404, [2007] 1 WLR 69, concerned the meaning of non-domestic violence in section 198.
The applicant and his family were asylum seekers who had been living for just over a year in Swansea when they were granted indefinite leave to remain and thus became eligible under Part VII of the 1996 Act.
They applied to Kensington which referred them to Swansea.
They complained of trouble from local youths in Swansea, shouting abuse and making insulting gestures, racist abuse on a bus, and two specific incidents of assault outside a community centre and in the city centre.
The local authority took the view that the two assaults were random incidents of crime which might happen anywhere to anyone and were not part of a course of harassment against the applicant or his family.
The verbal abuse did not amount to a threat of violence and accordingly there was no reason to believe that it was more likely than not that violence would result if they returned to Swansea.
The Court of Appeal held that in this context, violence involved some sort of physical contact: Neuberger LJ accepted the councils contention that In section 198 violence means physical violence, and the word violence on its own does not include threats of violence or acts or gestures, which lead someone to fear physical violence: see para 14.
He went on to give five reasons for this, to which I shall return.
Finally, it is worth noting another innovation made by the 1996 Act.
Sections 145 and 149 amended the 1985 Act and the Housing Act 1988 by introducing for secure and assured tenancies a new ground for obtaining possession of a dwelling let to a married or cohabiting couple by, respectively, a local authority on a secure tenancy and a registered social landlord or charitable housing trust on an assured tenancy, where one partner has left because of violence or threats of violence towards that partner or a member of the family living with her and is unlikely to return.
This was in response to a recommendation of a Department of the Environment Homelessness Policy Division Working Party Report on Relationship Breakdown and Secure Local Authority Tenants (December 1993).
The facts of this case
The appellant is a married woman with two young children, a girl who is now aged eight and a boy who is now aged two.
They were aged respectively six and eight months in August 2008 when she left the matrimonial home in which she lived with her husband, taking the children with her, and (having nowhere else to go) sought the help of the local housing authority.
The matrimonial home was rented in her husbands sole name.
In her two interviews with the housing officers, she complained that her husband hates her and [she] suspects that he is seeing another woman.
[She] is scared that if she confronts him he may hit her.
[However her] husband has never actually threatened to hit her.
She went on to complain of his shouting in front of the children, so that she retreated to her bedroom with them, not treating her like a human, not giving her any money for housekeeping, being scared that he would take the children away from her and say that she was not able to cope with them, and that he would hit her if she returned home.
The officers decided that she was not homeless as her husband had never actually hit her or threatened to do so.
She consulted solicitors who applied for a review which was unsuccessful.
The panel noted that your root cause of homelessness is not that you fled after a domestic incident, but it was your decision to leave the matrimonial home because you felt that your husband did not love you any more and was not close to you, in addition to suspecting that he was seeing another woman.
They believed that the probability of domestic violence is low and found her fear that her husband would take the children away from her to be contradictory, as she had also said that he took no interest in the children.
Hence they concluded that it was reasonable for her to continue to occupy the matrimonial home while taking action to secure a transfer under the Family Law Act 1996 or alternatively seeking accommodation in the private sector.
Mr Richard Drabble QC, who appears for the local authority, accepts that the housing officers and review panel applied the Danesh meaning when they decided that the appellant was not homeless within the meaning of the Housing Act 1996.
If this Court decides that there is a wider meaning, the case will have to be considered afresh.
There is no need, therefore, to make any further comment on the facts or upon the reasoning in the decision and review letters.
The meaning of violence
In Danesh the first, and principal, reason given was that physical violence is the natural meaning of the word violence: para 15.
I can readily accept that this is a natural meaning of the word.
It is, for example, the first of the meanings given in the Shorter Oxford English Dictionary.
But I do not accept that it is the only natural meaning of the word.
It is common place to speak of the violence of a persons language or of a persons feelings.
Thus the revised 3rd Edition, published in 1973, also included vehemence of personal feeling or action; great, excessive, or extreme ardour or fervour; . . .
passion, fury; and the 4th (1993), 5th (2002) and 6th (2006) Editions all include strength or intensity of emotion; fervour, passion.
When used as an adjective it can refer to a range of behaviours falling short of physical contact with the person: see, for example, section 8 of the Public Order Act 1986.
The question is what it means in the 1996 Act.
The 1996 Act was originally concerned only with domestic violence, that is violence between people who are or were connected with one another in an intimate or familial way.
By that date, it is clear that both international and national governmental understanding of the term had developed beyond physical contact.
The Court is grateful to the diligence of both interveners, the Secretary of State for Communities and Local Government and the Womens Aid Federation of England, for gathering so many of the references together.
Internationally, in 1992 the United Nations Committee, which monitors the Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), adopted General Recommendation 19, which included in its definition of discrimination in relation to gender based violence acts that inflict physical, mental or sexual harm or suffering, threats of such acts, coercion and other deprivations of liberty.
In 1993, the General Assembly adopted the Declaration on the Elimination of Violence against Women, defined for this purpose as any act of gender-based violence that results in, or is likely to result in, physical, sexual or psychological harm or suffering to women . . .
Nationally, in 1993 the House of Commons Home Affairs Committee in its Report on Domestic Violence adopted the definition any form of physical, sexual or emotional abuse which takes place within the context of a close relationship (Session 1992-93, Third Report, HC 245-I, para 5).
The Home Affairs Committee report used two reports as the basis for its inquiry: the Report on Domestic Violence of a national inter-agency working party convened by Victim Support (1992) and the Report of the Law Commission on Domestic Violence and Occupation of the Family Home (1992, Law Com No 207).
The Law Commission gave this explanation of domestic violence, at para 2.3: The term violence itself is often used in two senses.
In its narrower meaning it describes the use or threat of physical force against a victim in the form of an assault or battery.
But in the context of the family, there is also a wider meaning which extends to abuse beyond the more typical instances of physical assaults to include any form of physical, sexual or psychological molestation or harassment which has a serious detrimental effect upon the health and well-being of the victim.
The recommendations made in the Law Commissions Report were embodied in the Domestic Violence and Occupation of the Family Home Bill which passed through most of its Parliamentary stages in the session 1994 1995 before falling at the last hurdle.
The same clauses were reintroduced, with immaterial amendments, in the Family Law Bill 1995 1996 and became Part IV of the Family Law Act 1996.
It cannot be a coincidence that the definition of an associated person in section 178 of the Housing Act 1996 bears a very close resemblance to the definition of an associated person for the purpose of occupation and non- molestation orders under the Family Law Act 1996, in section 62(3) to (6) of that Act.
It will be recalled that the Housing Act 1996 had shifted the focus, away from the presence of the perpetrator in the same accommodation as the victim, to the nature of the relationship between them.
These are strong indications of joined up thinking on the part of the legislators.
The Home Affairs Committee had also made the link between the criminal and family law remedies, with which it was concerned, and the housing law remedies, which were then the concern of the Department of the Environment; thus, it recommended that local authorities put an end to the nonsense where a victim fleeing domestic violence is deemed to have made herself intentionally homeless and that appropriate priority be given to rehousing victims of domestic violence (para 131).
In fact, the Department of the Environment had already gone some way towards meeting the first point, as the 1991 version of the Code of Guidance for Local Authorities on Homelessness had stated (para 7.11) that authorities should not automatically treat an applicant as intentionally homeless because she had failed to use legal remedies to protect herself from domestic violence.
The Department of the Environments Relationship Breakdown Working Party (see para 15 above) was well aware of the Law Commissions Report: not only was the Law Commission represented upon it but the Working Party recommended implementation of the Commissions two most relevant recommendations.
All of this indicates a consciousness in 1996 of the need to align housing, homelessness and family law remedies for victims of domestic violence, so that they could have a genuine choice between whether to stay and whether to go and the local authority or social landlord would not be obliged to continue to provide family sized accommodation to the perpetrator.
There was also an explicit acknowledgement in the report which led to the Family Law Act 1996 and by the Home Affairs Committee that violence could have a wider meaning than physical contact.
In my view, therefore, whatever may have been the original meaning in 1977 (and, for that matter, in the Domestic Proceedings and Magistrates Courts Act 1978), by the time of the 1996 Act the understanding of domestic violence had moved on from a narrow focus upon battered wives and physical contact.
But if I am wrong about that, there is no doubt that it has moved on now.
In March 2005, the Home Office published Domestic Violence: A National Report, in which it was stated at para 10: To support delivery across government and its agencies through a common understanding of domestic violence, we now have a common definition.
This follows the definition already used by the Association of Chief Police Officers, and is: Any incident of threatening behaviour, violence or abuse (psychological, physical, sexual, financial or emotional) between adults who are or have been intimate partners or family members, regardless of gender or sexuality.
That definition, or something very close to it, has been adopted by many official and governmental bodies, including the Association of Chief Police Officers: Guidance on Investigating Domestic Abuse (2008); the Crown Prosecution Service Policy for Prosecuting Cases of Domestic Violence (2010); the Ministry of Justice, in Domestic Violence: A Guide to Civil Remedies and Criminal Sanctions (February 2003, updated March 2007); and the UK Border Agency, in Victims of Domestic Violence: Requirements for Settlement Applications.
Indeed, it is cited in Hounslows own leaflet, Domestic Violence: What it is and how you can get help (2009), which goes on to explain: It is rarely a one off incident and it is not only about being physically or sexually abused, you may be subject to more subtle attacks, such as constant breaking of trust, isolation, psychological games and harassment.
Emotional abuse is just as serious and damaging; many survivors will carry the emotional scars long after the physical injuries have healed.
The 2006 version of the Homelessness Code of Guidance for Local Authorities is explicit at para 8.21: The Secretary of State considers that the term violence should not be given a restrictive meaning, and that domestic violence should be understood to include threatening behaviour, violence or abuse (psychological, physical, sexual, financial or emotional) between persons who are, or have been, intimate partners, family members or members of the same household, regardless of gender or sexuality.
This was new to the 2006 Code.
The fourth reason given by the Court of Appeal in Danesh, at para 18, was that various passages in the previous, 2002, Code had given a different impression, for example by comparing severe harassment with actual violence (para 8.32).
However, it is not for government and official bodies to interpret the meaning of the words which Parliament has used.
That role lies with the courts.
And the courts recognise that, where Parliament uses a word such as violence, the factual circumstances to which it applies can develop and change over the years.
There are, as Lord Steyn pointed out in R v Ireland [1998] AC 147, at p 158, statutes where the correct approach is to construe them as if one were interpreting it the day after it was passed.
The House went on in that case to construe bodily harm in the Offences Against the Person Act 1861 in the light of our current understanding of psychological as well as physical harm.
The third reason given by the Court of Appeal in Danesh was that it was impermissible to construe the meaning of one phrase by reference to the meaning of another.
This I accept.
However, as Lord Clyde observed in Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, at p 49, which was concerned with whether same sex partners could be members of one anothers family for the purpose of succession to Rent Act tenancies, it is a relatively rare category of cases where Parliament intended the language to be fixed at the time when the original Act was passed.
In other cases, as Lord Slynn of Hadley explained at p 35: It is not an answer to the problem to assume . . .
that if in 1920 people had been asked whether one person was a member of another same-sex persons family the answer would have been No. That is not the right question.
The first question is what were the characteristics of a family in the 1920 Act and the second whether two same-sex partners can satisfy those characteristics so as today to fall within the word family.
An alternative question is whether the word family in the 1920 Act has to be updated so as to be capable of including persons who today would be regarded as being of each others family, whatever might have been said in 1920: see R v Ireland [1998] AC 147, 158, per Lord Steyn; Bennion, Statutory Interpretation, 3rd ed (1997), p 686 and Halsburys Laws of England, 4th ed reissue, vol 44(1) (1995), p 904, para 1473.
Violence is a word very similar to the word family.
It is not a term of article It is capable of bearing several meanings and applying to many different types of behaviour.
These can change and develop over time.
There is no comprehensive definition of the kind of conduct which it involves in the Housing Act 1996: the definition is directed towards the people involved.
The essential question, as it was in Fitzpatrick, is whether an updated meaning is consistent with the statutory purpose in that case providing a secure home for those who share their lives together.
In this case the purpose is to ensure that a person is not obliged to remain living in a home where she, her children or other members of her household are at risk of harm.
A further purpose is that the victim of domestic violence has a real choice between remaining in her home and seeking protection from the criminal or civil law and leaving to begin a new life elsewhere.
That being the case, it seems clear to me that, whatever may have been the position in 1977, the general understanding of the harm which intimate partners or other family members may do to one another has moved on.
The purpose of the legislation would be achieved if the term domestic violence were interpreted in the same sense in which it is used by the President of the Family Division, in his Practice Direction (Residence and Contact Orders: Domestic Violence) (No 2) [2009] 1 WLR 251, para 2, suitably adapted to the forward-looking context of sections 177(1) and 198(2) of the Housing Act 1996: Domestic violence includes physical violence, threatening or intimidating behaviour and any other form of abuse which, directly or indirectly, may give rise to the risk of harm.
That conclusion is consistent with the decision of the Court of Appeal in AN (Pakistan) v Secretary of State for the Home Department [2010] EWCA Civ 757.
This was concerned with the meaning of domestic violence in para 289A of the Immigration Rules, which stipulates the requirements to be met by a person admitted as the spouse or civil partner of a person present or settled here who is the victim of domestic violence which has caused the relationship permanently to break down and who is seeking indefinite leave to remain in the United Kingdom.
Richards LJ quoted the definitions in the 1993 Home Affairs Committee Report, the 2005 National Report (repeated in a more recent Report of the Home Affairs Committee, Domestic Violence, Forced Marriage and Honour-Based Violence, 2007-08, 6th Report, para 4), the guidance given by the UK Border Agency, and the Presidents Practice Direction.
He pointed out that The general thrust of all those definitions is much the same (para 23) and accepted that the term was not limited to physical violence, although it must reach some minimum level of seriousness, which will depend upon context and particular circumstances (para 24).
It remains to be discussed whether giving the words the meaning given them by the President of the Family Division would be inconsistent with anything in the statutory language or purpose.
The statutory language
The second reason given in Danesh for preferring a narrow construction was that, in both section 177(1) and section 198(3), violence is defined as violence or threats of violence which are likely to be carried out: para 16.
If the concept of violence already included conduct which puts a person in fear of physical violence there would be no need to refer to threats at all.
I am not convinced of this.
For one thing, there are some forms of conduct which undoubtedly put a person in fear of violence but which would not necessarily be described as threats.
Silent phone calls, heavy breathing, the sorts of stalking behaviours which were the subject matter of Bond v Leicester City Council [2001] EWCA Civ 1544, [2002] HLR 158 and R v Ireland [1998] AC 147, can all put the victim in very real (and justified) fear of violence in the narrow sense.
They should be covered by the concept of violence.
More importantly, if the concept of violence includes other sorts of harmful or abusive behaviour, then the reference to threats is not redundant.
Locking a person (including a child) within the home, or depriving a person of food or of the money to buy food, are not uncommon examples of the sort of abusive behaviour which is now recognised as domestic violence.
There is nothing redundant in a provision which refers to threats of such behaviour which are likely to be carried out.
In this Court, Mr Drabble urged an alternative solution upon us: that if there were forms of ill-treatment falling short of physical violence which ought to be included within the pass-porting provision in section 177(1), the Secretary of State could use the power in section 177(3)(a) to include them.
Mr Maurici, on behalf of the Secretary of State, explained that the Secretary of State has not done so because in his view the concept of violence already bears the wider meaning for which the appellant contends.
There is the further objection to this solution, that there is no equivalent power in section 198, so that a person might be accepted as homeless under section 177(1) but could then be referred to a district where she would face exactly the same risks.
There may also be a concern that an expanded definition is setting the threshold too low.
The advantage of the definition adopted by the President of the Family Division is that it deals separately with actual physical violence, putting a person in fear of such violence, and other types of harmful behaviour.
It has been recognised for a long time now that it is dangerous to ignore what may appear to some to be relatively trivial forms of physical violence.
In the domestic context it is common for assaults to escalate from what seems trivial at first.
Once over the hurdle of striking the first blow, apologising and making up, some people find it much easier to strike the second, and the third, and go on and on.
But of course, that is not every case.
Isolated or minor acts of physical violence in the past will not necessarily give rise to a probability of their happening again in the future.
This is the limiting factor.
Sections 177 and 198 are concerned with future risk, not with the past.
The introduction in 2002 of other violence into a statute which was previously concerned only with domestic violence also raises questions.
They are readily answered, if I am right that the concept of domestic violence in 1996 was already wider than physical contact.
As Miss Nathalie Lieven QC for the appellant points out, the introduction of other violence in 2002 cannot possibly have been intended to cut down the meaning which the statute already had.
However, if the understanding of the conduct to which the word applies has moved on, the question of whether this also applies to other violence does not arise on the facts of this case, and so it is unnecessary for us to express a concluded view.
Reading the statute as it now stands, there are arguments on either side.
On the one hand, if violence has the same meaning in both domestic violence and other violence, there was no need to retain the separate concept of domestic violence, together with the complicated definition of associated persons in section 178.
A person who was at risk of any violence if she stayed in or returned to the property or the locality would be protected.
Retaining them as separate concepts suggests that domestic violence is limited by the relationship between the victim and the perpetrator, rather than by the nature of the conduct involved.
Other violence, having no such limitation and lacking the connotations of an intimate or familial relationship, might relate to a narrower set of behaviours.
On the other hand, providing in sections 177(1A) and 198(3) that violence is domestic violence suggests that violence has a constant meaning.
Hence, I would incline towards the view that it does.
Nor would that be surprising.
People who are at risk of intimidating or harmful behaviour from their near neighbours are equally worthy of protection as are those who run the same risk from their relations.
But it may be less likely that they will suffer harm as a result of the abusive behaviour of their neighbours than it is in the domestic context.
In practice, the threshold of seriousness may be higher.
Conclusion
As the housing officers and review panel adopted a narrow view of domestic violence in this case, it is agreed that it must be remitted to the authority to be decided again.
I accept that these are not easy decisions and will involve officers in some difficult judgments.
But these are no more intrinsically difficult than many of the other judgments that they have to make: for example, as to the circumstances in which it is reasonable to continue to occupy the accommodation; as to whether a person has rendered herself intentionally homeless; and as to the suitability of accommodation provided by the local authority.
Was this, in reality, simply a case of marriage breakdown in which the appellant was not genuinely in fear of her husband; or was it a classic case of domestic abuse, in which one spouse puts the other in fear through the constant denial of freedom and of money for essentials, through the denigration of her personality, such that she genuinely fears that he may take her children away from her however unrealistic this may appear to an objective outsider? This is not to apply a subjective test (pace the fifth reason given in Danesh).
The test is always the view of the objective outsider but applied to the particular facts, circumstances and personalities of the people involved.
I would therefore allow this appeal and remit the case to be decided by the local housing authority.
I agree that the appeal should be allowed for the reasons given by Lady Hale.
I add a few comments of my own, since the point is not free from difficulty and we are differing from two decisions of the Court of Appeal.
The term domestic violence rose to prominence in the 1970s in connexion with battered wives women who, whether married or not, suffered violence at the hands of their husband or partner.
One reaction was to set up refuges.
Another was public pressure for the law to be reformed to give such women greater protection.
Of course, it was known that physical violence was not the only form of abuse which women suffered.
For example, in 1974 Dr Elizabeth Wilson referred to a case where the husbands constant abuse in the form of offensive and cruel denigratory remarks had already damaged his wifes psyche possibly in a more irreparable way than if he had broken her nose: Battered wives: why they are the born victims of domestic violence, The Times 4 September 1974, p 13.
But, understandably, the predicament of women who were the victims of physical violence was at the forefront of demands for the law to be reformed.
It is therefore not surprising that the term domestic violence first entered English law in the short title of the Domestic Violence and Matrimonial Proceedings Act 1976 (the 1976 Act) which derived from the Private Members Bill promoted by Miss Josephine Richardson MP.
There can be no doubt that the main aim of Parliament in passing the legislation was to give some additional protection, by way of injunctions in the county court and the possibility of including a power of arrest in certain cases - to women, whether married or cohabiting, who were likely to suffer physical violence at the hands of their husband or partner.
Section 2 did indeed refer to the other party to the relationship using violence.
But the Act was not confined to such cases.
As Lord Scarman noted in Davis v Johnson [1979] AC 264, 348C-E, the mischief at which section 1 of the Act was aimed (molesting) went beyond physical violence and included conduct which makes it impossible or intolerable for the other partner, or the children, to remain at home.
When, the following year, Parliament enacted the Housing (Homeless Persons) Act 1977 (the 1977 Act), it included provisions that were designed to provide additional help to victims of violence in the home.
On this occasion it did not refer to cases where the woman was molested.
Parliament therefore seems to have been concentrating on the paradigm case of battered wives, women who feared physical violence understandably enough, since the new Act was imposing novel obligations on local authorities.
More than 30 years have passed.
The legislation has become a familiar part of the legal landscape and has been re-enacted in the Housing Act 1996 (the 1996 Act).
The question before the Court is whether the word violence in section 177(1) and (1A) of the 1996 Act is confined to physical violence.
At first sight it is curious that Parliament has maintained the special term domestic violence.
Section 177(1) now applies to cases where it is probable that continuing to occupy accommodation will lead to domestic or other violence - other violence being violence from people, such as neighbours, who are not associated with the victim.
Subsection (1A) then says that violence is domestic violence if it is from a person who is associated with the victim.
In my view, there is no doubt that violence means the same, whether it comes from a person associated with the victim or from a third party.
The form of the provision may simply reflect the way that the provision has evolved.
More likely, however, the retention of the term domestic violence is intended to serve a purpose.
The aim, it seems to me, may well be to ensure that the same standard is applied to violence within the home as to other violence and so to counter any suggestion that violence within the home is to be treated as being somehow of less significance than violence outside the home.
Subsection (1A) makes it clear that any conduct that would count as violence outside the home counts as violence if it occurs within the home: the law does not give a discount to the perpetrator because of the domestic setting.
In 1974 Dr Wilson saw that the husbands constant denigration of his wife had damaged her psyche possibly irreparably.
The Court has not been referred to any case where a court had to consider whether such conduct would have counted as violence for the purposes of section 1(2)(b) of the 1977 Act.
I have already made the point that cases of that kind were not the focus of Parliaments attention in enacting that provision.
But it is common place for courts to have to consider whether circumstances, beyond those at the forefront of Parliaments consideration, may properly be held to be within the scope of a provision, having regard to its purpose.
Similarly, cases of physical violence surely remain the main focus of section 177(1) of the 1996 Act.
And, similarly, the question remains: does deliberate non-physical abuse which harms the other party fall within the scope of violence in that subsection, having regard to its purpose? Parliament has provided that it is not reasonable for someone to continue to occupy accommodation if it is probable that this will lead to her being subjected to violence in the form of deliberate conduct, or threats of deliberate conduct, that may cause her physical harm.
So the person at risk is automatically homeless for the purposes of the 1996 Act.
I can see no reason why Parliament would have intended the position to be any different where someone will be subjected to deliberate conduct, or threats of such conduct, that may cause her psychological harm.
I would therefore interpret violence as including such conduct and the subsection as applying in such cases.
To conclude otherwise would be to play down the serious nature of psychological harm.
A necessary precondition of a right to be rehoused under the homelessness legislation is that the applicant is without accommodation.
Section 175(3) of the Housing Act 1996 as amended (the 1996 Act) provides: 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 177(1) of the Act provides: It is not reasonable for a person to continue to occupy accommodation if it is probable that this will lead to domestic violence or other violence against him . . .
The issue identified by the parties for the Courts determination on this appeal is: Is the concept of domestic violence in section 177(1) of the Act limited to actual physical violence or is it capable of extending to abusive psychological behaviour which could reasonably be described as violence?
It has long been known that psychological abuse within a domestic context can cause at least as much long-term harm to the victim (most commonly the woman) as physical abuse.
Certainly no one who has read the extensive material put before us by the Womens Aid Federation of England could fail to appreciate that fact.
But I have nonetheless found this a much more difficult case than other members of the Court appear to have done and I cannot hide my profound doubt as to whether at any stage of their legislative history the domestic violence provisions with which we are here concerned now enacted as sections 177 and 198 of the 1996 Act - were intended to extend beyond the limits of physical violence.
A number of indicators to my mind point to this being Parliaments limited intention.
One of these is the primary meaning ordinarily given to the word violence as connoting physical violence (in contrast, in the present context, to other forms of domestic abuse).
A second pointer is the very definition of violence and domestic violence contained in both section 177 (1A) and section 198 (3) of the 1996 Act: (1A) For this purpose violence means (a) violence from another person; or (b) threats of violence from another person which are likely to be carried out; and violence is domestic violence if it is from a person who is associated with the victim.
Psychological abuse would plainly encompass threats whether or not they are likely to be carried out: it is the threats themselves which are intrinsically abusive and harmful.
It is not generally apt to speak of a threat to carry out psychological abuse.
Even if one postulates a threat, say, to lock someone up in their room or deprive them of all funds, the statutory definition stipulates that it is only if the threat is likely to be carried out that it constitutes violence: the threat itself, however hurtful and humiliating, unless likely to be carried out, is excluded from the definition.
Another pointer to Parliaments intention is the fact that violence falls to be construed in the same way irrespective of whether the perpetrator is a person associated with the victim (sections 177(1A) and 178) or some other person.
If, of course, the perpetrator is associated with the applicant, the question arising under section 177(1) is whether the applicants continued occupation of the accommodation would probably lead to domestic violence; the question arising under section 198(2)(c) being whether, if referred to another local housing authority for re-housing in their district, the applicant would then run the risk of domestic violence in that district.
If, however, the perpetrator is not associated with the applicant, the question under 177(1) is whether continued occupation of the accommodation would probably lead to violence by that person; the question under 198(2A) being whether the applicant (whom the housing authority contemplates referring to another authority) has in the past suffered (non-domestic) violence in that other authoritys district and would probably suffer violence of a similar kind if returned there.
I do not say that psychological abuse (as opposed to actual or threatened physical violence) at the hands of a non-associated perpetrator is literally incapable of being described as violence and of justifying respectively (a) deemed homelessness leading to a section 193 duty to re-house or (b) non- referral back to the district whence the applicant came.
I do say, however, that Parliament is unlikely to have contemplated or intended these consequences.
Fourthly, it must be recognised that when the homelessness legislation was first introduced (by the Housing (Homeless Persons) Act 1977 - homelessness by section 1(2)(b) of the Act being deemed to exist in the case of those whose occupation of accommodation would probably lead to violence from some other person residing in it or to threats of violence from some other person residing in it and likely to carry out the threats, described as the risk of domestic violence in sections 5(1)(iii) and 5(11) of the Act, the equivalent provisions to those now in section 198 of the 1996 Act) the publics concern as to domestic violence was essentially about battered women (for whom, one recollects, Ms Erin Pizzey was starting to provide refuges).
This view, moreover, that in the homelessness context domestic violence meant physical violence, was reflected in successive statutory Codes of Guidance issued by the Secretary of State (under provisions similar to what is now section 182(1) of the 1996 Act), certainly up until the 2006 Code.
The 1978 Code, for example, referred to fear of violence and to battered women . . .
at risk of violent pursuit or, if they return home, at risk of further violence (paras 2.10(b) and 2.12(c)(iii)).
The 2002 Code (issued following the 2002 amendments to the 1996 Act) refers (at para 6.18) to the required assessment of the likelihood of a threat of violence being carried out not being based solely on whether there has been actual violence in the past (emphasis added) and (at para 8.26) to the safety of the applicant . . .
[being] of paramount concern (emphasis added).
A little later, not in the context of deemed homelessness but rather of priority need for accommodation because of vulnerability for some other special reason (section 189(1)(c) of the 1996 Act), the 2002 Code (at para 8.32) says: People fleeing harassment.
In some cases severe harassment may fall short of actual violence or threats of violence likely to be carried out.
Housing authorities should consider carefully whether applicants who have fled their home because of non-violent forms of harassment, for example verbal or psychological abuse or damage to property, are vulnerable as a result.
There, it can readily be seen, verbal or psychological abuse is mentioned as an example of non-violent forms of harassment and contrasted with actual violence.
True it is that from 1991 onwards the successive codes from time to time refer to violence or threats of violence including, for example, racial harassment or attacks, sexual abuse or harassment, and harassment on the grounds of religious creed.
Invariably, however, until 2006, this was in the context not of deemed homelessness under section 177(1), but rather of whether it was reasonable for the applicant to continue to occupy his (or more generally her) accommodation, the question now arising under section 175(3) of the 1996 Act.
This is the basic question which has arisen ever since 1986 (when the Housing Act 1985 was amended to overturn the effect of R v Hillingdon London Borough Council, Ex p Puhlhofer [1986] AC 484) in every case save when section 177(1) deems continued occupation not reasonable.
Only in the 2006 Code (at para 8.21) did the Secretary of State first indicate his support for a wider interpretation of section 177(1): The Secretary of State considers that the term violence should not be given a restrictive meaning, and that domestic violence should be understood to include threatening behaviour, violence or abuse (psychological, physical, sexual, financial or emotional) between persons who are, or have been, intimate partners, family members or members of the same household, regardless of gender or sexuality.
It is not, of course, suggested that this notable change in the Secretary of States Code of Guidance could directly affect the true construction of the statute: such guidance can be at most persuasive of the meaning to be given to legislative provisions.
It is, after all, for the courts not the executive to interpret legislation.
But it is suggested that, consistently with the living instrument, always speaking approach to statutory construction, and following the decision of the House of Lords in Fitzpatrick v Sterling Housing Association Ltd [2001] 1 AC 27, the developing perception and understanding of domestic violence now enables, indeed requires, the interpretation of the relevant sections in line with the Secretary of States present views, reflecting as these do modern thinking on the question.
By the same token that the majority of the Court in Fitzpatrick had regard to changes in social habits and opinions to interpret the phrase tenants family as being capable of encompassing a same-sex partner, so too, the appellant argues, nowadays it would be wrong to continue construing domestic violence (or, indeed, this being a necessary part of the appellants case, violence outside the domestic context) as meaning physical violence only.
Tempting though it is to accept this argument one does not, after all, like to appear old-fashioned I confess to doubts and hesitation here too.
If one considers just why it is that domestic violence (indeed, violence generally), in contradistinction to all other circumstances, has been thought to justify a deeming provision a provision, that is, which deems it unreasonable that a probable victim of future such violence should continue to occupy his or her present accommodation, the explanation would seem to me to lie partly in the obvious need for the speedy re-housing of those identified as being at risk of violence in order to safeguard their physical safety, and partly in the comparative ease with which this particular class of prospective victims can be identified.
With the best will in the world I find it difficult to accept that there is quite the same obvious urgency in re-housing those subject to psychological abuse, let alone that it will be possible to identify this substantially wider class of prospective victims, however precisely they may be defined, with anything like the same ease.
Confining the deeming provision to the victims and potential victims of physical abuse does not, of course, remove all other victims from protection.
Rather it leaves their cases to be assessed under section 175(3).
If, then, an applicant does come to be assessed as a victim of sufficiently severe psychological abuse to satisfy the section 175(3) test for homelessness (a process which I accept would be likely to take rather longer than a section 177(1) judgment in respect of physical abuse), then obviously he or she would have to be re-housed just as if they had been deemed homeless under section 177(1).
It is, of course, true that, in section 175(3) cases generally but not in deemed cases, the housing officer is empowered by section 177(2) to have regard to the general circumstances prevailing in relation to housing in the district, so that theoretically, on the present understanding and application of the statute, a victim of psychological abuse, in contradistinction to a victim of physical abuse, could be subject to an adverse decision on homelessness by reference to the limited stock of housing available to an authority for re-housing purposes.
Realistically, however, I see this as only a theoretical possibility since it seems to me that section 177(2) exists essentially to deal with complaints about the quality of an applicants existing housing: the housing officer may on occasion have to decide that an applicants present accommodation, however un-ideal, must suffice given the quality and quantity of the authoritys stock generally.
I had at one time thought that the solution to the problem raised by this case if problem there is lay in the Secretary of States order-making power under section 177(3)(a) of the 1996 Act.
I recognise, however, that there are difficulties in the use of this power: first, that, given the Secretary of States view that the victims of psychological abuse are already covered by section 177(1), he cannot properly specify their needs as arising in other circumstances; secondly, that the use of this power could not in any event affect the proper approach to section 198 so that the problem would not be entirely solved.
There would remain the possibility of someone being returned for re-housing to an area where, although not cohabiting with an abuser, he or she might be at risk of future psychological abuse from a non-cohabiting family member (essentially the position in Bond v Leicester City Council [2002] HLR 158, although that case was in fact concerned with intentional homelessness and appears to have been argued and decided on the assumption that section 177(1) dealt with physical violence only) or, indeed, a neighbour.
Certainly, I no longer see section 177(3) as the solution to this case.
Rather the Court has no alternative but to decide whether it is indeed now right, pursuant to the Fitzpatrick principle, to give to the terms domestic violence and violence the wider meaning contended for by the appellant and both interveners.
In taking this course we would, of course, be overturning two clear and unanimous decisions of the Court of Appeal: respectively of Mummery, Jacob and Neuberger LJJ in Danesh v Kensington and Chelsea Royal London Borough Council [2007] 1 WLR 69 and of Waller, Laws and Etherton LJJ in the present case.
I have already indicated my very real doubts about doing so.
At the end of the day, however, I do not feel sufficiently strongly as to the proper outcome of the appeal to carry these doubts to the point of dissent.
I am content that the views of the majority should prevail and that the appeal should be allowed.
| UK-Abs | The issue in this case is what is meant by the word violence in section 177(1) of the Housing Act 1996.
Is it limited to physical contact or does it include other forms of violent conduct? Under section 193 of the 1996 Act, where a local housing authority are satisfied that an applicant is homeless and did not become homeless intentionally, they must make accommodation available for the applicant, unless they refer the application to another local housing authority.
Section 175(1) provides that a person is homeless if he has no accommodation available for his occupation.
Section 175(3) provides 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 177(2) states that in determining whether it is reasonable for a person to continue to occupy accommodation, regard may be had to the general circumstances prevailing in relation to housing in the local housing authority district.
Section 177(1) states that it is not reasonable for a person to continue to occupy accommodation if it is probable that this will lead to domestic violence or other violence against him or other members of his household.
The effect of section 177(1), which has been called a pass porting provision, is that a person who is at risk of the violence to which it applies is automatically homeless, however reasonable it might in other respects be for her to remain in the accommodation.
Questions of local housing conditions or shortages do not come into it.
Another important consequence of section 177(1) is that the person cannot be treated as intentionally homeless.
Section 198 provides that one of the conditions for referral to another local housing authority is that neither the applicant nor other members of his household will run the risk of domestic violence in the other district.
In the case of Danesh v Kensington and Chelsea Royal London Borough Council [2006] EWCA Civ 1404, [2007] 1 WLR 69, the Court of Appeal held that violence in the context of section 198 involved some sort of physical contact, and the word violence on its own did not include threats of violence or acts or gestures, which lead someone to fear physical violence.
In August 2008, the Appellant left the matrimonial home in which she lived with her husband, taking her two young children with her, and sought the help of the local housing authority.
In interviews with housing officers, she complained of her husbands behaviour, which included shouting in front of the children, and stated that she was scared that if she confronted him he might hit her.
The officers decided that she was not homeless as her husband had never actually hit her or threatened to do so.
On a review, the panel noted that the root cause of her homelessness was not that she had fled after a domestic incident.
The panel believed the probability of domestic violence to be low.
They concluded that it was reasonable for her to continue to occupy the matrimonial home.
The Respondent local
authority accepted that the housing officers and review panel had applied the Danesh meaning when deciding that the appellant was not homeless within the meaning of the 1996 Act.
The Supreme Court unanimously allows the appeal and sends the case back to be decided again by the local housing authority.
Lady Hale gives the leading judgment.
The Court holds that domestic violence in section 177(1) of the 1996 Act includes physical violence, threatening or intimidating behaviour and any other form of abuse which, directly or indirectly, may give rise to the risk of harm.
Physical violence is not the only natural meaning of the word violence.
Another natural meaning is strength or intensity of emotion; fervour, passion. [19] By the time of the 1996 Act, both international and national governmental understanding of the term domestic violence had developed beyond physical contact.
There is certainly no doubt that the understanding of domestic violence has moved on now, as demonstrated by the definitions used in a 2005 Home Office publication Domestic Violence: A National Report and in the 2006 Homelessness Code of Guidance for Local Authorities. [20] [24] Violence is not a term of article It is capable of bearing several meanings and applying to many different types of behaviour.
These can change and develop over time.
The essential question is whether an updated meaning is consistent with the statutory purpose.
The purpose is to ensure that a person is not obliged to remain living in a home where she, her children or other members of her household are at risk of harm.
A further purpose is that the victim of domestic violence has a real choice between remaining in her home and seeking protection from the criminal or civil law and leaving to begin a new life elsewhere. [27] The purpose of the legislation would be achieved if the term domestic violence were interpreted in the same sense in which it is used by the President of the Family Division, in his Practice Direction (Residence and Contact Orders: Domestic Violence) (No 2) [2009] 1 WLR 251, para 2, suitably adapted to the forward looking context of sections 177(1) and 198(2) of the Housing Act 1996: Domestic violence includes physical violence, threatening or intimidating behaviour and any other form of abuse which, directly or indirectly, may give rise to the risk of harm. [28] Lord Rodger could see no reason why Parliament would have intended the position to be any different where someone will be subjected to deliberate conduct, or threats of deliberate conduct, that may cause her psychological, as opposed to physical, harm.
To conclude otherwise would be to play down the serious nature of psychological harm. [46] Lord Brown indicated his very real doubts that Parliament intended domestic violence to extend beyond the limits of physical violence but did not feel sufficiently strongly as to the proper outcome of the appeal to carry these doubts to the point of dissent. [48], [60].
|
These two cases raise a number of important issues in relation to the detention pending deportation of foreign national prisoners (FNPs) following the completion of their sentences of imprisonment.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) provides that a person who is not a British citizen is liable to deportation from the United Kingdom if the Secretary of State deems his deportation to be conducive to the public good.
Schedule 3 to the 1971 Act provides in certain specified circumstances for the detention of such a person pending his deportation.
Walumba Lumba is a citizen of the Democratic Republic of Congo (DRC) who entered the UK on 10 April 1994.
He was convicted of a number of offences culminating in an offence of wounding with intent for which he was sentenced to 4 years imprisonment on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of his intention to deport him under section 3(5)(a) of the 1971 Act.
He was due to be released from prison on 23 June 2006, but by letter dated 22 June 2006 was notified that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He arrived in the United Kingdom on 4 December 1992 and was given 6 months leave to enter as a visitor.
Thereafter, he made various unsuccessful applications for leave to remain.
On 10 February 2003, however, he was granted indefinite leave to remain.
He had been convicted of a number of offences, including possession of a Class A drug with intent to supply, for which on 27 June 2003, he was sentenced to 42 months imprisonment.
Following his release on licence, he committed a driving offence and was recalled to prison.
He was finally released on 31 March 2006.
On 10 May 2006, the Secretary of State informed Mr Mighty of his intention to deport him under section 3(5)(a) of the 1971 Act.
On 19 May 2006, he was detained pending deportation because he was likely to abscond and his release was not conducive to the public good.
He was released on bail on 28 July 2008.
Schedule 3 of the 1971 Act provides, so far as material: 2. (1) Where a recommendation for deportation made by a court is in force in respect of any person, and that person is not detained in pursuance of the sentence or order of any court, he shall, unless the court by which the recommendation is made otherwise directs, or a direction is given under sub paragraph (1A) below, be detained pending the making of a deportation order in pursuance of the recommendation, unless the Secretary of State directs him to be released pending further consideration of his case or he is released on bail. (1A) Where (a) a recommendation for deportation made by a court on conviction of a person is in force in respect of him; and (b) he appeals against his conviction or against that recommendation, the powers that the court determining the appeal may exercise include power to direct him to be released without setting aside the recommendation. (2) Where notice has been given to a person in accordance with regulations under section 105 of the Nationality, Immigration and Asylum Act 2002 (notice of decision) of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained under the authority of the Secretary of State pending the making of the deportation order. (3) Where a deportation order is in force against any person, he may be detained under the authority of the Secretary of State pending his removal or departure from the United Kingdom (and if already detained by virtue of sub paragraph (1) or (2) above when the order is made, shall continue to be detained unless he is released on bail or the Secretary of State directs otherwise).
Between April 2006 and 9 September 2008, the Secretary of States published policy on detention of FNPs under her immigration powers was that there was a presumption in favour of release, although detention could be justified in some circumstances.
In fact, during this period the Secretary of State applied a quite different unpublished policy which was described as a near blanket ban by the Secretary of State, Ms Jacqui Smith, to the Prime Minister, Gordon Brown, on 19 September 2007 in a document entitled Bail Proposal for Foreign National Prisoners in which she said: Since April 2006, the BIA [(the Border and Immigration Agency)] has been applying a near blanket ban on release, regardless of whether removal can be achieved and the level of risk to the public linked to the nature of the FNPs original offence.
By currently having no discretion to grant bail, the BIA has to regularly transfer FNPs around the Estate.
On 9 September 2008, the Secretary of State published a policy which included a presumption of detention and withdrew all references to a presumption of release.
On 22 January 2009, following the decision of Davis J in the current proceedings, this policy was amended again to omit the reference to a presumption of detention and substitute a policy in favour of release from detention.
It will be necessary to describe the policies and practices adopted from time to time in more detail later in this judgment.
The proceedings
Mr Lumba issued proceedings on 18 October 2007.
He challenged the lawfulness of his detention on the grounds that he was no longer being detained pending deportation and that his continued detention was in breach of the principles stated by Woolf J in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
He also claimed a declaration that his detention was unlawful, a mandatory order that he be released and damages.
On 4 July 2008, Collins J gave an interlocutory judgment on part of the claim: [2008] EWHC 2090 (Admin).
He did not make a decision in relation to Mr Lumbas past detention and reserved for a further hearing inter alia the questions of whether the operation of an unpublished policy had been unlawful and the past detention had been unlawful as a consequence.
On 28 July 2008, Mr Lumbas claim was joined to four other cases in which the same points arose.
One of these was the claim of Mr Mighty which had been issued on 29 May 2008.
The five cases were heard by Davis J on 11 14 November 2008.
In an impressive judgment given on 19 December 2008 [2008] EWHC 3166 (Admin), he granted the claimants declarations that (i) paragraph 2 of Schedule 3 to the 1971 Act prohibits the Secretary of State from operating any policy in relation to the detention of FNPs which contains a presumption in favour of detention and (ii) it was unlawful for the Secretary of State to operate the policy introduced in April 2006 in that it was not sufficiently published or accessible until its publication on 9 September 2008.
He dismissed the other claims, in particular the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed against the first declaration.
In a judgment of the court delivered by Stanley Burnton LJ, the Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) ([2010] 1 WLR 2168) allowed the cross appeal and set aside the first declaration.
They also varied the second declaration.
Otherwise the appeals were dismissed.
The issues
The principal issues are as follows. (i) Were the detention policies that were applied to the appellants after April 2006 unlawful because (a) they were blanket policies (para 21 below) and/or (b) they were inconsistent with the published policies (para 26 below) and/or (c) they were not published policies (paras 27 38 below) and/or (d) they contained a presumption in favour of detention (paras 40 55 below)? (ii) If unlawful policies were applied to the appellants, was their detention unlawful in consequence (paras 56 89)? (iii) If their detention was unlawful, are the appellants entitled to more than nominal damages (paras 90 101 below)? (iv) Is Mr Lumba entitled to damages for unlawful detention on the grounds that, in his case, there has been a breach of the Hardial Singh principles? (paras 102 148 below) (v) Are the appellants entitled to an award of exemplary damages (paras 150 168 below)? The policies in more detail
The published policies
The presumption of release had been entrenched in the Secretary of States published policies since at least 1991.
It appeared in the White Paper Fairer, Faster and Firmer: a Modern Approach to Immigration and Asylum (1998) (Cm 4018), which was published in 1998 and again in 2002 in the White Paper Secure Borders, Safe Haven: Integration Diversity in Modern Britain (2002) (Cm 5387) which stated at para 4.76: Our 1998 White paper set out the criteria by which Immigration Act powers of detention were exercised and confirmed that the starting point in all cases was a presumption in favour of granting temporary admission or release.
The criteria were modified in March 2000 to include detention at Oakington Reception Centre if it appeared that a claimants asylum application could be decided quickly.
The modified criteria and the general presumption remain in place.
Chapter 38 of the Operational Enforcement Manual (OEM), which was a published document in force until April 2008, stated in its introductory section that the 1998 White Paper confirmed that there was a presumption in favour of temporary admission or release and that, whenever possible, we would use alternatives to detention.
Para 38.3 stated: 1.
There is a presumption in favour of temporary admission or temporary release. 2.
There must be strong grounds for believing that a person will not comply with conditions of temporary admission or temporary release for detention to be justified. 3.
All reasonable alternatives to detention must be considered before detention is authorised.
Identical wording was contained in Chapter 55 of the Enforcement Instructions and Guidance (EIG) which replaced Chapter 38 of the OEM and came into force on 19 June 2008.
On 9 September 2008, Chapter 55 of the EIG was amended.
With regard to FNPs, para 55.1.2 stated: Due to the clear imperative to protect the public from harm and the particular risk of absconding in these cases, the presumption in favour of temporary admission or temporary release does not apply where the deportation criteria are met.
Instead the person will normally be detained, provided detention is, and continues to be lawful.
The EIG then gave guidance to caseworkers as to the factors which might make further detention unlawful.
In particular, it stated that the presumption of detention will be displaced where legally the person cannot or can no longer be detained because detention would exceed the period reasonably necessary for the purpose of removal.
Following the decision of Davis J in the current proceedings, on 22 January 2009 this policy was changed again so as to replace a presumption in favour of detention with a presumption in favour of release from detention.
The unpublished policies
The true picture during the period from April 2006 until September 2008 was very different.
Following the public disclosure on 25 April 2006 that 1,013 FNPs had been released from prison before consideration had been given to the question of whether they should have been deported, the Secretary of State adopted a new policy which he did not publish.
I have already referred at para 5 above to the description of it contained in the 19 September 2007 Bail Proposal as a near blanket ban.
The policy of blanket detention admitted of exceptions only on compassionate grounds.
No formal guidance was given to caseworkers to give effect to this policy until on 8 November 2007 they were issued with a document (known as Cullen 1) which set out criteria and guidance for the identification and release of FNPs who were considered to pose the lowest risks to the public and the lowest risks of absconding.
Cullen 1 was not published to the outside world.
It led at most to the release of a handful of FNPs.
In March 2008, an amended guidance document (known as Cullen 2) was issued to the caseworkers.
It too was not published to the outside world.
Attached to Cullen 1 and Cullen 2 was an extensive list of offences entitled List of recorded crimes where release from immigration detention or at the end of custody will not be appropriate.
In practice, almost all FNPs who had been sentenced to imprisonment were likely to have committed one or more of such offences.
Both Mr Lumba and Mr Mighty had done so.
The evidence of David Wood, Strategic Director of the Criminality and Detention Group, was that between December 2006 and July 2008, 15 FNPs were released from detention.
On 22 May 2008, the existence of an unpublished policy or practice was belatedly disclosed by the Secretary of State to Mitting J after he had given judgment in the case of R (Ashori) v Secretary of State for the Home Department [2008] EWHC 1460 (Admin).
More detail as to the circumstances in which the policy came to be disclosed is given by Davis J at paras 21 to 26 of his judgment.
The unpublished policies were applied to Mr Lumba and Mr Mighty
It is now common ground that the unpublished policies were applied to the two appellants throughout their detention.
It is, therefore, unnecessary to consider para 203 of the judgment of Davis J (where the judge stated that there was nothing to show that Mr Lumba was detained by application of the unpublished policy) or para 100 of the judgment of the Court of Appeal which upheld Davis J on this point.
Were these policies unlawful?
Here too, there is little dispute between the parties.
Mr Beloff QC rightly accepts as correct three propositions in relation to a policy.
First, it must not be a blanket policy admitting of no possibility of exceptions.
Secondly, if unpublished, it must not be inconsistent with any published policy.
Thirdly, it should be published if it will inform discretionary decisions in respect of which the potential object of those decisions has a right to make representations.
As regards the first of these propositions, it is a well established principle of public law that a policy should not be so rigid as to amount to a fetter on the discretion of decision makers.
Davis J held that the unpublished policy was not a blanket policy.
The Court of Appeal disagreed.
Basing themselves on the review by David Wood of the failure to publish a revised FNP detention policy following the April 2006 crisis approved on 3 August 2009, the Court of Appeal concluded that the policy, as applied at least from the time of Cullen 1 in November 2007, effectively operated on a blanket basis rather than (as held by the judge) one of presumption.
I agree with this assessment by the Court of Appeal but would go further.
It seems clear to me that a blanket policy was also applied from April 2006 until the introduction of Cullen 1 in November 2007.
During this earlier period, the only exceptions made to the policy of universal detention were on compassionate grounds and these were few and far between.
Importantly, there were no releases on the basis of Hardial Singh principles.
Indeed, Cullen 1 represented a modest relaxation of the previous position.
It is convenient to introduce the Hardial Singh principles at this stage, since they infuse much of the debate on the issues that arise on this appeal.
It is common ground that my statement in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46 correctly encapsulates the principles as follows: (i) The Secretary of State must intend to deport the person and can only use the power to detain for that purpose; (ii) The deportee may only be detained for a period that is reasonable in all the circumstances; (iii) If, before the expiry of the reasonable period, it becomes apparent that the Secretary of State will not be able to effect deportation within a reasonable period, he should not seek to exercise the power of detention; (iv) The Secretary of State should act with reasonable diligence and expedition to effect removal.
Lord Phillips says that the first two of these principles cannot properly be derived from Hardial Singh.
Since their correctness has not been put in issue by the parties to these appeals, I propose to deal with the points shortly.
As regards the first principle, I consider that Woolf J was saying unambiguously that the detention must be for the purpose of facilitating the deportation.
The passage quoted by Lord Phillips includes the following: as the power is given in order to enable the machinery of deportation to be carried out I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose(emphasis added).
The first principle is plainly derived from what Woolf J said.
As for the second principle, in my view this too is properly derived from Hardial Singh.
Woolf J said that (i) the power of detention is limited to a period reasonably necessary for the purpose (as I would say) of facilitating deportation; (ii) what is reasonable depends on the circumstances of the particular case; and (iii) the power to detain ceases where it is apparent that deportation will not be possible within a reasonable period.
It is clear at least from (iii) that Woolf J was not saying that a person can be detained indefinitely provided that the Secretary of State is doing all she reasonably can to effect the deportation.
It seems to me that, in relation to both the first and second principles, Lord Phillips is suggesting a different interpretation of paragraph 2(3) of Schedule 3 to the 1971 Act from that enunciated by Woolf J.
I do not agree with this interpretation.
But what is perhaps of more importance in the context of these appeals is that in my view it is not appropriate to depart from a decision which has been followed repeatedly for almost 30 years unless it is obviously wrong (which I do not believe to be the case), still less to do so without the benefit of adversarial argument.
As regards the second proposition accepted by Mr Beloff, a decision maker must follow his published policy (and not some different unpublished policy) unless there are good reasons for not doing so.
The principle that policy must be consistently applied is not in doubt: see Wade and Forsyth Administrative Law, 10th ed (2009) p 316.
As it is put in De Smiths Judicial Review, 6th ed (2007) at para 12 039: there is an independent duty of consistent application of policies, which is based on the principle of equal implementation of laws, non discrimination and the lack of arbitrariness.
The decision of the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department [2003] EWCA Civ 1768, [2004] INLR 139 is a good illustration of the principle.
At para 68, Lord Phillips MR, giving the judgment of the court, said that the Secretary of State could not rely on an aspect of his unpublished policy to render lawful that which was at odds with his published policy.
As for the third proposition, the Court of Appeal dealt with the issue of whether there is a general rule of law that policies must be published at paras 70 to 79 of their judgment.
Disagreeing with Davis J, they concluded that there is no such general rule and said that the fact that the appellants were detained pursuant to unpublished policies was not in itself a reason for holding that the decisions to detain them were unlawful.
Mr Beloff did not feel able to support this conclusion.
It is unfortunate that the Court of Appeal embarked on this topic at all, since it was not before them and was not, therefore, the subject of argument or citation of authority.
As the point is of general importance, I need to say why in my view the judge was right and the Court of Appeal were wrong on this issue both as a matter of common law and ECHR law.
The Court of Appeal referred to a statement of Sedley LJ in R v Secretary of State for Education and Employment Ex P Begbie [2000] 1 WLR 1115, 1132C that there were cogent objections to the operation of undisclosed policies affecting individuals entitlements or expectations and said at para 72 that they had no difficulty in accepting this as (no more than) a statement of good administrative practice.
They also said that the judge was wrong to rely on Sunday Times v United Kingdom (1979) 2 EHRR 245 and criticised the reasoning in Nadarajah at paras 64 67 which relied on the Sunday Times case in support of the proposition that a relevant policy is part of the law that must be accessible, so as to enable those affected by it reasonably to foresee the consequences of their actions.
At para 73, they said that the relevant passage in the judgment of the ECtHR at para 49 of the judgment in the Sunday Times case is not, as we read it, about policy as such, but is rather directed to the need for accessibility and precision, as requirements of law in the strict sense.
They went on to say that, in the present context, the requirement for an accessible and precise statement of the relevant law is satisfied by paragraph 2 of Schedule 3 to the 1971 Act, taken with the Hardial Singh guidelines.
In short, policy is not the same as law (para 57).
In support for their conclusion, they referred to what Laws LJ said in R (SK Zimbabwe) v Secretary of State for the Home Department [2008] EWCA Civ 1204; [2009] 1 WLR 1527, para 33.
In that case, the Secretary of State had failed to carry out regular reviews following detention, as required by the Detention Centre Rules.
As regards the requirement that any deprivation of liberty be in accordance with a procedure prescribed by law in article 5(1) of the ECHR, Laws LJ said that this was to ensure that any interference is not random and arbitrary, but governed by clear pre existing rules.
He continued: Here the rules are the Hardial Singh principles.
Their fulfilment in any given case saves a detention from the vice of arbitrariness.
A system of regular monitoring is, no doubt, a highly desirable means of seeing that the principles are indeed fulfilled.
But it is not itself one of those principles.
But all that the Hardial Singh principles do is that which article 5(1)(f) does: they require that the power to detain be exercised reasonably and for the prescribed purpose of facilitating deportation.
The requirements of the 1971 Act and the Hardial Singh principles are not the only applicable law.
Indeed, as Mr Fordham QC points out, the Hardial Singh principles reflect the basic public law duties to act consistently with the statutory purpose (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, 1030B D) and reasonably in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223).
But they are not exhaustive.
If they were exhaustive, there could be no room for the public law duty of adherence to published policy, which was rightly acknowledged by the Court of Appeal at paras 51, 52 and 58 of their judgment.
I therefore accept the submission of Mr Husain QC and Mr Fordham that the Court of Appeals criticisms of Nadarajah were misplaced.
I should interpolate that there is in any event an obvious difference between rules which require the review of a detention to be undertaken at prescribed intervals and rules which prescribe the criteria by which a person is to be released or to be subjected to continuing detention.
The fact that a policy states that only persons of a specified category will be considered for release is at least as substantively important as the Hardial Singh principles which determine, for example, that a person may not be detained for an unreasonable period.
There is further support in the ECtHR jurisprudence for the proposition that paragraph 2 of Schedule 3 to the 1971 Act and the Hardial Singh principles are not exhaustive of the law.
In Medvedyev v France (Appln no 3394/03, 29 March 2010), the Grand Chamber said at para 80: where deprivation of liberty is concerned it is particularly important that the general principle of legal certainty be satisfied.
It is therefore essential that the conditions for deprivation of liberty under domestic and/or international law be clearly defined.
The case of Gillan v United Kingdom (2010) 50 EHRR 45 concerned the stop and search powers conferred on the police by the Terrorism Act 2000.
For present purposes, the relevant issue was whether the powers were in accordance with the law within the meaning of article 8(2) of the ECHR.
A Code of Practice was issued by the Secretary of State to guide police officers in the exercise of their powers of stop and search.
The ECtHR said: 77Consequently, the law must indicate with sufficient clarity the scope of any such discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of domestic legislation which cannot in any case provide for every eventuality depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
The ECtHR noted at para 83 that the Code of Practice governs essentially the mode in which the stop and search is carried out, rather than providing any restriction on the officers decision to stop and search.
That decision is, as the House of Lords made clear, one based exclusively on the hunch or professional intuition of the officer concerned.
In the opinion of the court, there was a clear risk of arbitrariness in the grant of such a broad discretion to the police officer.
At para 87, they concluded that, despite the existence of the Code of Practice, the statutory powers were not in accordance with the law because they were neither sufficiently circumscribed nor subject to adequate legal safeguards against abuse.
The rule of law calls for a transparent statement by the executive of the circumstances in which the broad statutory criteria will be exercised.
Just as arrest and surveillance powers need to be transparently identified through codes of practice and immigration powers need to be transparently identified through the immigration rules, so too the immigration detention powers need to be transparently identified through formulated policy statements.
The individual has a basic public law right to have his or her case considered under whatever policy the executive sees fit to adopt provided that the adopted policy is a lawful exercise of the discretion conferred by the statute: see In re Findlay [1985] AC 318, 338E.
There is a correlative right to know what that currently existing policy is, so that the individual can make relevant representations in relation to it.
In R (Anufrijeva) v Secretary of State for the Home Department [2003] UKHL 36, [2004] 1 AC 604, para 26 Lord Steyn said: Notice of a decision is required before it can have the character of a determination with legal effect because the individual concerned must be in a position to challenge the decision in the courts if he or she wishes to do so.
This is not a technical rule.
It is simply an application of the right of access to justice.
Precisely the same is true of a detention policy.
Notice is required so that the individual knows the criteria that are being applied and is able to challenge an adverse decision.
I would endorse the statement made by Stanley Burnton J in R (Salih) v Secretary of State for the Home Department [2003] EWHC 2273 at para 52 that it is in general inconsistent with the constitutional imperative that statute law be made known for the government to withhold information about its policy relating to the exercise of a power conferred by statute.
At para 72 of the judgment of the Court of Appeal in the present case, this statement was distinguished on the basis that it was made in the quite different context of the Secretary of States decision to withhold from the individuals concerned an internal policy relating to a statutory scheme designed for their benefit.
This is not a satisfactory ground of distinction.
The terms of a scheme which imposes penalties or other detriments are at least as important as one which confers benefits.
As Mr Fordham puts it: why should it be impermissible to keep secret a policy of compensating those who have been unlawfully detained, but permissible to keep secret a policy which prescribes the criteria for their detention in the first place?
There was a real need to publish the detention policies in the present context.
As Mr Husain points out, the Cullen policies provided that certain non serious offenders could be considered for release.
The failure to publish these policies meant that individuals who may have been wrongly assessed as having committed a crime that rendered them ineligible for release would remain detained, when in fact, had the policy been published, representations could have been made that they had a case for release.
The precise extent of how much detail of a policy is required to be disclosed was the subject of some debate before us.
It is not practicable to attempt an exhaustive definition.
It is common ground that there is no obligation to publish drafts when a policy is evolving and that there might be compelling reasons not to publish some policies, for example, where national security issues are in play.
Nor is it necessary to publish details which are irrelevant to the substance of decisions made pursuant to the policy.
What must, however, be published is that which a person who is affected by the operation of the policy needs to know in order to make informed and meaningful representations to the decision maker before a decision is made.
For all these reasons, the policies which were applied to Mr Lumba and Mr Mighty were unlawful.
But Mr Husain submits (with the support of Mr Rabinder Singh QC and Mr Fordham) that the policies were also unlawful because they included a presumption of detention.
Presumption of detention
Davis J held at paras 114 to 116 of his judgment that the provisions of paragraph 2 of Schedule 3 to the 1971 Act operate to prevent the Secretary of State from operating a policy of a presumption in favour of detention of FNPs pending deportation.
He applied R (Sedrati) v Secretary of State for the Home Department [2001] EWHC 210 (Admin) in which, by consent, Moses J had granted a declaration that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention upon completion of the sentence.
On the Secretary of States cross appeal against the declaration, the Court of Appeal said at para 65: . . there is no reason in principle why paragraph 2.1 of Schedule 3 to the 1971 Act, which clearly does require continued detention unless the Secretary of State otherwise orders (i.e. a presumption of detention), should not be construed as a presumption of detention pending deportation.
Equally, the Secretary of State may lawfully adopt a policy for the purposes of paragraph 2(2) or (3) that involves a presumption.
A presumption that those who have committed serious crimes (e.g. most of those listed in Cullen 1 and 2) should be detained is unobjectionable.
They went on at para 66 to say that for these reasons the declaration granted by Moses J was wrong and allowed the Secretary of States cross appeal.
Mr Husain, supported by Mr Singh and Mr Fordham, say that the judge was right and the Court of Appeal wrong on this issue.
The primary case advanced by Mr Husain is that the policy that was applied between April 2006 and September 2008 was not properly described as a presumptive policy at all, but rather was a blanket policy.
But whether that is right or not, Mr Lumba continued to be detained between September 2008 (when the Secretary of State published a policy in favour of detention) and 22 January 2009 (when the order of Davis J was implemented).
It follows that even if, as I have accepted, the Court of Appeal was justified in holding that the policy was a blanket policy until September 2008, the presumption of liberty issue is of more than academic interest in this appeal.
It is important at the outset to define clearly what a presumption means in this context.
It is the Secretary of States case that paragraph 2 of Schedule 3 to the 1971 Act permits the operation of a policy in which she states that a FNP will normally be detained in certain prescribed circumstances.
Such a policy serves as a guide to the caseworkers who make the decisions on the ground and as an indication to the FNPs of what they can normally expect in the circumstances specified in the policy.
I shall refer to such a policy as normal practice.
It need not, and usually does not say anything about the burden of proof.
Normal practice is to be distinguished from presumptions in the strict sense.
Phipson on Evidence 17th ed (2009) at 6 16 to 6 31 categorises presumptions in this sense into rebuttable presumptions of law, irrebuttable presumptions of law and rebuttable presumptions of fact.
Such a presumption usually regulates the burden of proof in legal proceedings.
Thus, a presumption that a deprivation of liberty is unlawful regulates the burden of proof in relation to that issue: the burden is on the detainer to show that there was a power to detain.
I shall refer to a presumption in the strict sense as a legal presumption.
The distinction between normal practice and a legal presumption is fundamental to the present issue.
The fact that in legal proceedings the burden of proving a certain issue is allocated to one party rather than the other does not assist in deciding whether the Secretary of State may, in principle, lawfully give guidance that when certain factors are present, the decision should normally be to detain.
This distinction was not articulated in the courts below.
A further preliminary point needs to be made.
The legality of a decision may be considered at two stages: first at the administrative stage when the decision is taken and secondly, if the decision is challenged, at the stage of legal proceedings.
At the administrative stage, the individual against whom the decision is taken often plays no part.
It is not appropriate to talk of a burden of proof at this stage: see, for example, R v Lichniak [2003] 1 AC 903 at para 16 per Lord Bingham.
At the stage of legal proceedings, the Secretary of State rightly accepts that the burden of proof is on her to justify the detention.
This has long been established: Allen v Wright (1838) 8 C & P 522 and Lord Atkins dissenting speech in Liversidge v Anderson [1942] AC 206, 245 every detention is prima facie unlawful and that it is for a person directing imprisonment to justify his act.
Mr Husain submits that there is a presumption of liberty both under the jurisprudence of the ECtHR or at common law.
I shall start with the jurisprudence on article 5 of the ECHR which Mr Husain submits establishes that there is such a presumption.
He refers to Ilijkov v Bulgaria (Application No 33977/96) (unreported) 26 July 2001 where the ECtHR said: 84.
The court reiterates that continued detention can be justified in a given case only if there are specific indications of a genuine requirement of public interest which, notwithstanding the presumption of innocence, outweighs the rule of respect for individual liberty.
Any system of mandatory detention on remand is per se incompatible with article 5(3) of the Convention.
Where the law provides for a presumption in respect of factors relevant to the grounds for continued detention. the existence of the concrete facts outweighing the rule of respect for individual liberty must be nevertheless convincingly demonstrated. 85.
Moreover, the court considers that it was incumbent on the authorities to establish those relevant facts.
Shifting the burden of proof to the detained person in such matters is tantamount to overturning the rule of article 5 of the Convention, a provision which makes detention an exceptional departure from the right to liberty and one that is only permissible in exhaustively enumerated and strictly defined cases.
This was a decision in relation to an alleged violation of article 5(3) which provides: Everyone arrested or detained in accordance with the provisions of paragraph 1(c) of this article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial.
Mr Husain submits that, although these principles were articulated in the context of detention pending trial, they are more widely applicable as expressions of the right to liberty protected by article 5: see also Bykov v Russia (Application No 4378/02, 10 March 2009) at para 61 and Bordikov v Russia (Application no 921/03, 9 October 2009) at para 88.
However, these cases only concern legal presumptions that regulate burdens of proof in legal proceedings.
They are not concerned with normal practice contained in a policy of the kind with which these appeals are concerned.
In Ilijkov, the national courts rejected a series of applications for bail pending trial.
They did so relying on the Bulgarian Code of Criminal Procedure, which provided that, for certain crimes, detention on remand was mandatory in the absence of exceptional circumstances.
The ECtHR held that the initial decision to detain was lawful, but that the continuing application of the presumption of detention by the national judicial authorities was unlawful (paras 78 9 and 87).
The case was not concerned with the lawfulness of any decision to detain taken at an administrative stage.
It is clear from para 84 of the judgment that the court held that there was a breach of article 5(3).
There is, however, no provision in article 5(1)(f) corresponding with article 5(3) and there is nothing to indicate that the court intended its ruling in relation to article 5(1)(c) and 5(3) to apply to article 5(1)(f).
The decisions in Bykov and Bordikov do not advance the argument.
Para 61 of the judgment in Bykov merely reiterates what the court has repeatedly said in relation to article 5(3).
The reference to the presumption of release under article 5 is a reference to the second limb of article 5(3).
The case is concerned with the decisions of judicial authorities and not administrative decision makers.
Similarly, para 88 of the judgment in Bordikov makes it clear that the court in that case too was only concerned with the decisions of the courts.
The principal ECtHR authority on article 5(1)(f) is Saadi v UK (2008) 47 EHRR 427.
The applicant sought judicial review of the decision to detain him for a short period while his asylum claim was being subject to fast track processing.
The decision was made pursuant to a policy under which all asylum claimants falling within defined criteria (usually by nationality) were normally detained at Oakington while their claims were determined in an accelerated process.
This was a normal practice case and not a case about legal presumptions.
The ECtHR held inter alia that deprivation of liberty must not be arbitrary.
It must comply with the substantive and procedural rules of national law and the detention must be in good faith.
At para 69, the court said: The condition that there be no arbitrariness further demands that both the order to detain and the execution of the detention must genuinely conform with the purpose of the restrictions permitted by the relevant sub paragraph of article 5(1).
There must in addition be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention.
And at para 72: Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example, to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal (1997) 23 EHRR 413 that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for
an unreasonable length of time
It was this statement which led the Court of Appeal to conclude at para 62 that a national law that authorises detention with a view to deportation may be compatible with article 5 even if it imposes a presumption of detention pending deportation.
It is not clear in what sense the Court of Appeal was using the phrase presumption of detention in this passage.
But if it is construed as a reference to normal practice, I agree with it, provided that it requires the Government to justify the detention with reasons that are closely connected to the statutory purpose of effecting deportation.
I turn to the position at common law.
It is not in dispute that the right to liberty is of fundamental importance and that the courts should strictly and narrowly construe general statutory powers whose exercise restricts fundamental common law rights and/or constitutes the commission of a tort.
The Court of Appeal said at para 63 that there is no rule of our domestic law that precludes the application of a presumption in favour of detention pending deportation, subject, of course, to the limitations in Ex P Hardial Singh [1984] 1 WLR 704, none of which involves consideration of risk of reoffending or absconding.
Such risks, they said, are relevant to the reasonableness of the period during which it is lawful to detain a FNP, but the absence of such a risk does not of itself render detention unlawful.
If by presumption in favour of detention the Court of Appeal meant the normal practice as to the circumstances in which a FNP will be detained, then I would agree with them, provided that it is understood that (i) the Hardial Singh principles are observed and (ii) each case is considered individually.
The Court of Appeal set aside the declaration granted by Davis J. They were right to do so.
For the reasons I have given, it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation provided that the criteria that I have set out at para 53 above are satisfied.
Such a policy is not prohibited by paragraph 2 of Schedule 3 to the 1971 Act.
The Court of Appeal also held at para 66 that the declaration granted by Moses J in Sedrati [2001] EWHC Admin 418 was wrong in law.
I find this somewhat puzzling.
The declaration stated that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention.
Whatever the position may be in relation to paragraph 2(1) and the parenthesis in paragraph 2(3), paragraph 2(2) and the remainder of paragraph 2(3) do not create any presumption at all.
They simply give the Secretary of State a discretion to detain.
In relation to paragraph 2(2) and (3), therefore, so far as it goes, the declaration granted by Moses J is correct.
Were the detentions unlawful?
In summary, the appellants case is that their claims in false imprisonment should have succeeded: the Secretary of States unlawful unpublished policy which operated between April 2006 and September 2008 influenced the initial decisions to detain them and the subsequent decisions to continue to detain them.
Davis J accepted the argument advanced on behalf of the Secretary of State that, where the unlawful policy was of no causative effect because the claimants could and would have been lawfully detained if the published policy had been applied, their detention was not unlawful.
The Court of Appeal agreed.
They distinguished Christie v Leachinsky [1947] AC 573 and Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 on the footing that in those cases there was no lawful authority to detain the plaintiff.
In the present case, however, they said at para 87: there is no doubt that the statutory powers relied on by the Secretary of State were apt for the purpose, and the case is not based on the breach of any specific regulation on which the legality of detention was dependent.
Rather it is about the manner in which the power was exercised.
And at para 89: The mere existence of an internal, unpublished policy or practice at variance with, and more disadvantageous to the FNP than, the published policy will not render a decision to detain unlawful.
It must be shown that the unpublished policy was applied to him.
Even then, it must be shown that the application of the policy was material to the decision.
If the decision to detain him was inevitable, the application of the policy is immaterial, and the decision is not liable to be set aside as unlawful.
In short, since Mr Lumba and Mr Mighty would inevitably have been detained even if the published policy had been applied to them, their detentions were lawful.
The court therefore applied what it is convenient to call the causation test.
Davis J and the Court of Appeal were right to hold that the detention of the appellants would have been inevitable in the light of the risk of absconding and re offending that they both posed.
This appeal therefore raises the important question of whether it was right to apply the causation test and for that reason to hold that the detentions were lawful.
A somewhat similar problem arose in R (SK Zimbabwe) v Secretary of State for the Home Department.
In that case the unlawfulness lay in the failure of the Secretary of State to comply with her policy which prescribed the procedural requirements for reviews of FNPs who are already in detention.
The present case concerns the substantive requirements for the initial detention of FNPs as well as their continued detention.
What follows is to a considerable extent based on the submissions of Mr Husain.
The introduction of a causation test in the tort of false imprisonment is contrary to principle both as a matter of the law of trespass to the person and as a matter of administrative law.
Neither body of law recognises any defence of causation so as to render lawful what is in fact an unlawful authority to detain, by reference to how the executive could and would have acted if it had acted lawfully, as opposed to how it did in fact act.
The causation test entails the surprising proposition that the detention of a person pursuant to a decision which is vitiated by a public law error is nevertheless to be regarded as having been lawfully authorised because a decision to detain could have been made which was not so vitiated.
In my view, the law of false imprisonment does not permit history to be rewritten in this way.
The Court of Appeal were right to say at para 89 that the mere existence of an unlawful policy is not sufficient to establish that any particular exercise of a statutory discretion is unlawful.
The decision to detain and/or continue detention will not be vitiated on the grounds of an unlawful policy unless the policy has been applied or at least taken into account by the decision maker.
But this does not shed any light on the correctness of the causation test.
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
An action lies even if the victim does not know that he was imprisoned: see, for example, Murray v Ministry of Defence [1988] 1 WLR 692, 703A where Lord Griffiths refused to redefine the tort of false imprisonment so as to require knowledge of the confinement or harm because The law attaches supreme importance to the liberty of the individual and if he suffers a wrongful interference with that liberty it should remain actionable even without proof of special damage.
By contrast, an action on the case (of which a claim in negligence is the paradigm example) regards damage as the essence of the wrong.
All this is elementary, but it needs to be articulated since it demonstrates that there is no place for a causation test here.
All that a claimant has to prove in order to establish false imprisonment is that he was directly and intentionally imprisoned by the defendant, whereupon the burden shifts to the defendant to show that there was lawful justification for doing so.
As Lord Bridge said in R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58, 162C D: The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
The causation test shifts the focus of the tort on to the question of how the defendant would have acted on the hypothesis of a lawful self direction, rather than on the claimants right not in fact to be unlawfully detained.
There is no warrant for this.
A purported lawful authority to detain may be impugned either because the defendant acted in excess of jurisdiction (in the narrow sense of jurisdiction) or because such jurisdiction was wrongly exercised.
Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 established that both species of error render an executive act ultra vires, unlawful and a nullity.
In the present context, there is in principle no difference between (i) a detention which is unlawful because there was no statutory power to detain and (ii) a detention which is unlawful because the decision to detain, although authorised by statute, was made in breach of a rule of public law.
For example, if the decision to detain is unreasonable in the Wednesbury sense, it is unlawful and a nullity.
The importance of Anisminic is that it established that there was a single category of errors of law, all of which rendered a decision ultra vires: see Boddington v British Transport Police [1999] 2 AC 143, 158D E.
Mr Beloff submits that there are inherent problems in what I consider to be the correct and principled approach.
First, it fails to take account of the nature or extent of the public law error.
For example, he suggests that it treats for the purposes of liability as equally unlawful a decision to detain made by an official one grade lower than that specified in the detention policy (but which is otherwise unimpeachable) and a decision to detain for which there is no statutory authority at all.
Secondly, it allows what is in essence a public law challenge to be made under the guise of a private law action without any of the procedural safeguards which apply in a judicial review application.
In particular, the normal time limits for judicial review proceedings are circumvented.
Thirdly, judicial review is a discretionary remedy.
A minor public law error may result in no substantive relief being granted at all in judicial review proceedings, whereas a claimant can bring proceedings for false imprisonment as of right.
I do not consider that these arguments undermine what I have referred to as the correct and principled approach.
As regards Mr Beloffs first point, the error must be one which is material in public law terms.
It is not every breach of public law that is sufficient to give rise to a cause of action in false imprisonment.
In the present context, the breach of public law must bear on and be relevant to the decision to detain.
Thus, for example, a decision to detain made by an official of a different grade from that specified in a detention policy would not found a claim in false imprisonment.
Nor too would a decision to detain a person under conditions different from those described in the policy.
Errors of this kind do not bear on the decision to detain.
They are not capable of affecting the decision to detain or not to detain.
Lord Walker and Lord Hope would prefer the more demanding test of the wrongful use of a statutory power amounting to an abuse of power.
It is true that the phrase abuse of power is used in certain contexts in public law.
For example, it has been held that the court will in a proper case decide whether to frustrate the legitimate expectation of a substantial benefit is so unfair that to take a different course will amount to an abuse of power: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213 para 57.
In that context, the phrase abuse of power denotes a degree of unfairness.
It is not clear to me in what sense the phrase abuse of power is being suggested in the present context.
Suppose that a detention policy states that no FNP who has been sentenced to less than 12 months imprisonment is to remain in detention pending deportation for more than 6 months.
Suppose further that, by an administrative oversight, a FNP who has been sentenced to 9 months imprisonment is detained for 12 months.
There can be little doubt that the FNP would have a good claim for substantial damages for false imprisonment in respect of the period of 6 months when he should not have been detained.
It would be odd to say that his detention during that period was the result of an abuse of power.
I would say that the FNP would be the victim of a material public law error.
The error was one which was relevant to the decision to detain him.
It was capable of affecting the decision to continue to detain him and did in fact do so.
As for Mr. Beloffs other points, such force as they have derives from the fact that the detention in these cases is unlawful because it is vitiated by a public law error.
The significance and effect of that error cannot be affected by the fortuity that it is also possible for a victim to challenge the decision by judicial review proceedings (which are subject to tighter time limits than private law causes of action) and that judicial review is a discretionary remedy.
It is well established that a defendant can rely on a public law error as a defence to civil proceedings and that he does not need to obtain judicial review as a condition for defending the proceedings: see, for example, Wandsworth London Borough Council v Winder [1985] AC 461.
The same applies in the context of criminal proceedings: see Boddington v British Transport Police [1999] 2 AC 143.
Mr Beloff submits that the position of a claimant who relies on a public law error to found his cause of action and a defendant can sensibly be differentiated.
But it is difficult to see how or why.
I can see that at first sight it might seem counter intuitive to hold that the tort of false imprisonment is committed by the unlawful exercise of the power to detain in circumstances where it is certain that the claimant could and would have been detained if the power had been exercised lawfully.
But the ingredients of the tort are clear.
There must be a detention and the absence of lawful authority to justify it.
Where the detainer is a public authority, it must have the power to detain and the power must be lawfully exercised.
Where the power has not been lawfully exercised, it is nothing to the point that it could have been lawfully exercised.
If the power could and would have been lawfully exercised, that is a powerful reason for concluding that the detainee has suffered no loss and is entitled to no more than nominal damages.
But that is not a reason for holding that the tort has not been committed.
Both Mr Husain and Mr Beloff have referred to much authority.
I shall refer to some of it.
But there is nothing in the cases which shows that the conclusion which I consider is dictated by principle is questionable, still less that it is wrong.
Mr Husain relies on dicta of Lord Diplock in Holgate Mohamed v Duke [1984] AC 437.
Lord Diplock recognised that a claim for false imprisonment may be made out where police powers of arrest are unlawfully exercised by reference to common law principles.
The statutory power for an arrest without warrant (section 2(4) of the Criminal Law Act 1967)) made it a condition precedent that the constable should have reasonable cause to suspect the person to be guilty of the arrestable offence in respect of which the arrest was being made.
On the facts, the condition precedent was made out.
Lord Diplock said at p 443B that this left the officer with an executive discretion whether to arrest or not.
The lawfulness of the way in which the discretion had been exercised could not be challenged except on Wednesbury grounds.
He then continued: The Wednesbury principlesare applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought. (emphasis added)
Lord Diplock then applied the Wednesbury principles and concluded that the officers action was not unlawful.
It follows that his comments about false imprisonment were obiter dicta.
Nevertheless, it is clear that, if he had concluded that the officer had exercised his statutory discretion unlawfully, Lord Diplock would have held that he was liable in tort for false imprisonment.
I accept, however, that these are no more than dicta, albeit from a source of high authority, and that the issue does not seem to have been the subject of much if any argument in the House of Lords.
Other authorities relied on by Mr Husain as rejecting the causation test include Christie v Leachinsky [1947] AC 573, Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 and Langley v Liverpool City Council [2006] 1 WLR 375.
In addition, Mr Singh relies on Cooper v The Board of Works for the Wandsworth District (1863) 14 C.B. (N.S) 180.
In Christie v Leachinsky, Viscount Simon explained that where an arrest was unlawful because it did not comply with the procedural requirements imposed by the common lawcommunication of the true and good ground of arrest to the detaineethere would be a false imprisonment notwithstanding that the arrest could have been effected in a proper manner.
At p 588H he said: I entertain no doubt that in the present case the appellants are not exonerated from liability for false imprisonment by satisfying the judge that they had a reasonable suspicion that the respondent had been guilty of theft or of receiving stolen goods knowing they had been stolen, when they never told the respondent that this was the ground of his arrest.
Instead of doing so, they gave a different ground which, as Christie admitted, was not a good excuse for arresting him at all.
Mr Beloff submits that this case should be distinguished on the basis that it concerned the giving of reasons for detention which was a condition precedent to a lawful arrest.
He argues that it says nothing about the causation test in cases where the alleged error is not a failure to satisfy a condition precedent.
I do not see why the failure to provide a detainee with the reasons for the arrest should be regarded as a failure to satisfy a condition precedent to lawful arrest rather than an unlawful exercise of the power to arrest.
In any event, it would be remarkable if the question whether a cause of action in false imprisonment exists should depend on such fine distinctions of classification.
More fundamentally, such distinctions have no justification in the light of Anisminic.
In Roberts v Chief Constable of the Cheshire Constabulary, the Court of Appeal held that a failure by the custody officer to conduct a review as required by section 40 of the Police and Criminal Evidence Act 1984 rendered the plaintiffs continued detention unlawful until the next review.
The defence was raised that the plaintiff could only prove false imprisonment if he could show that, if the review had been carried out at the appropriate time, he would have been released.
This causation defence was rejected by Clarke LJ (with whom Stuart Smith and Schiemann LJJ agreed) at p 667B as being nothing to the point.
Mr Beloff emphasises the fact that the plaintiff was not being detained in accordance with the relevant statutory provisions and that the statute stipulated an express condition precedent to the lawful continuation of the detention, namely a review of detention, and that condition was not satisfied.
This argument has no more force than Mr Beloffs corresponding argument in relation to Christie.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned child protection.
The Court of Appeal held that a constable who had wrongfully removed a child under section 46 of the Children Act 1989 was liable in false imprisonment.
He should instead have facilitated the exercise of a different power of removal through the execution of an emergency protection order (EPO) obtained by the local authority under section 44 of the 1989 Act.
I gave the main judgment (with which Thorpe and Lloyd LJJ agreed).
I held (para 32) that the power to remove a child under section 46 can be exercised even where an EPO is in force.
I said (para 36) that where a police officer knows that an EPO is in force, he should not exercise the power of removing a child under section 46 unless there are compelling reasons to do so.
On the facts of the case, there were no compelling reasons for the constable to exercise the section 46 power.
The constable was in error in failing to ask himself whether there were compelling reasons why he should invoke section 46 rather than leave it to the council to execute the EPO.
I held, therefore, that the removal of the child was unlawful.
It was not in issue that, if the removal of the child was unlawful, the Chief Constable was liable to the child in false imprisonment.
Mr Beloff submits that the effect of my reasoning was that the constable had no jurisdiction (in the narrow pre Anisminic sense) to do what he did.
As an EPO was in force, it was in effect mandatory to invoke section 44 rather than section 46.
I do not accept this analysis.
I drew a clear distinction between the existence of the statutory authority to use the section 46 powers (which the constable had) and the exercise of those powers (which was wrongful on the facts of that case).
In Cooper v The Board of Works for the Wandsworth District 14 CB (NS) 180, the defendant board had the statutory power to demolish a house that was in the course of construction.
It was held that this power was subject to the common law qualification that it should not be exercised without giving the builder notice and an opportunity to be heard.
It was held that the board had exercised its statutory power unlawfully and that the builder was entitled to damages for trespass to property.
But I agree with Mr Beloff that this decision does not shed any light on the question whether detention pursuant to an unlawful exercise of a power to detain is itself unlawful.
As Byles J put it at p 195, the board contravened the words of the statute.
In effect, therefore, the court held that the decision to demolish the house was one which the board had no jurisdiction to make in the narrow pre Anisminic sense.
I should deal with the authorities relied on by Mr Beloff.
In R (Saadi) v Secretary of State for the Home Department [2002] 1 WLR 3131 as I have set out at para 50 above, the issue was whether the policy of detaining certain categories of asylum seekers whose claims could be processed quickly at the Oakington detention centre was lawful.
The House of Lords held that it was.
At first instance, Collins J had also considered the fact that when detaining the claimants the Home Office had used standard forms which did not reflect the new policy, and that therefore the true reasons for the detention had not been given.
Collins J said that this did not affect the lawfulness of the detention.
Lord Slynn at para 48 agreed that the failure to give the right reason for detention and the giving of no or wrong reasons did not in the end affect the legality of the detention.
But para 48 is not part of the ratio of the decision of the House.
In any event, in so far as it was argued at all that the giving of untrue reasons for the detention rendered the detention unlawful, the Secretary of State did not advance a causation defence and contend that the giving of untrue reasons was immaterial because the true reasons were lawful.
In Nadarajah v Secretary of State for the Home Department [2004] INLR 139, the Secretary of States published policy was that, if legal proceedings were initiated, removal would not be treated as imminent even if it otherwise was.
The Secretary of State also had an unpublished policy, namely that information that proceedings were about to be initiated would be disregarded, however credible that information might be.
At paras 68 and 69 of the judgment of Lord Phillips MR, the Court of Appeal said that the Secretary of State could not rely on the unpublished policy as rendering lawful that which was, on the face of it, at odds with his policy, as made public and for that reason the detention of N was unlawful.
There is no hint of the causation test here.
But the court went on to say that, if Ns solicitors had been aware of the unpublished policy, they would have instituted proceedings sooner.
N therefore suffered because his solicitor could not foresee the consequences of her conduct and his detention did not satisfy the requirement of lawfulness imposed by article 5(1)(f) of the ECHR.
I accept that this was a causation point.
But it was unnecessary for the court to adopt this additional reason for holding that the detention was unlawful.
Further, it requires a huge leap to argue from this that the causation test must be satisfied as an element of the tort of false imprisonment.
In short, neither Saadi nor Nadarajah bears the weight that Mr Beloff seeks to place on them.
Recognising that the court might reject the causation test, Mr Beloff suggested a number of alternative approaches.
The first is that false imprisonment should be confined to no authority cases ie cases in which there was in fact no authority to detain, without recourse to the legal fiction that, because of a public law error, an authority to detain which was in fact given should be treated as if it had no legal effect because it was ultra vires.
The second is that detention should be vitiated only by pre Anisminic error of law.
The third is that vitiating circumstances should be restricted to bad faith and improper purpose.
The fourth is that authority to detain should be vitiated only by failure to have regard to a material consideration which had an effect on the detention.
The fifth is that it should be a requirement that the claimant shall have successfully applied in judicial review proceedings for the decision to detain to be quashed.
The first two of these suggestions seek to put the clock back to the pre Anisminic era.
For reasons given earlier, this is unwarranted.
As regards the third and fourth suggestions, I have accepted at paras 68 and 69 above that the detention must be vitiated by an error which is material in public law terms and have attempted to explain there what I mean by that.
The fifth seeks unjustifiably to impose a procedural hurdle where none currently exists either at common law or in statute.
To accede to this suggestion would be to engage in an unacceptable exercise of judicial legislation.
To summarise, therefore, in cases such as these, all that the claimant has to do is to prove that he was detained.
The Secretary of State must prove that the detention was justified in law.
She cannot do this by showing that, although the decision to detain was tainted by public law error in the sense that I have described, a decision to detain free from error could and would have been made.
Overall conclusion on liability on the basis that the policies applied were unlawful
I conclude, therefore, that since it is common ground that the unlawful policies in force between April 2006 and September 2008 were applied to Mr Lumba and Mr Mighty, they were unlawfully detained and their claims in false imprisonment must succeed.
I turn to consider the assessment of damages.
Compensatory or nominal damages?
Having found that there was no liability in false imprisonment, the Court of Appeal did not need to decide whether the claimants were entitled to damages.
They did, however, say at para 96: If, on the evidence, it was clear that, even assuming a lawful consideration, there was no realistic possibility of a different decision having been reached, and no realistic possibility of earlier release, then we do not see why that should not be reflected in an award of nominal damages only.
Mr Husain and Mr Westgate submit that, even if it was inevitable that the appellants would have been detained if the statutory power to detain had been lawfully exercised, they are nevertheless entitled to substantial and not merely nominal damages.
They emphasise that false imprisonment is a tort of strict liability which is actionable without proof of special damage.
The focus is on the claimants right rather than the culpability of the defendants conduct.
They rely on two authorities in support of their argument.
The first is Roberts v Chief Constable of the Cheshire Constabulary to which I have already referred at para 75 above.
The plaintiff issued proceedings for false imprisonment arising from his detention by the police between 5.25 a.m. (when his detention should have been reviewed as required by statute) and 7.45 a.m. the same morning when it was reviewed and his continued detention authorised.
It was found by the judge that the detention between 5.25 a.m. and 7.45 a.m. was unlawful, but that, if a review had taken place at 5.25 a.m., his continued detention would have been authorised.
The judge awarded the plaintiff 500.
The defendants appeal on both liability and damages was dismissed by the Court of Appeal.
Clarke LJ gave the leading judgment.
He said at p 668 D that there was an infringement of the plaintiffs legitimate right to have his case reviewed and that, although the outcome may not have been affected by the failure to review in time, this infringement cannot be regarded as a purely nominal matter or a matter compensatable by entirely nominal damages.
There are rules, the police must stick to them.
He added at p 668G: As a matter of general principle such a plaintiff is entitled to be put into the position in which he would have been if the tort had not been committed.
It is therefore important to analyse what the tort is.
The plaintiffs claim was not for damages for breach of duty to carry out a review at 5.25 a.m. but for false imprisonment.
As I tried to explain earlier, the reason why the continued detention was unlawful was that no review was carried out.
The wrong was not, however, the failure to carry out the review but the continued detention.
If the wrong had not been committed the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
I do not consider that this case was correctly decided on the issue of damages.
I agree that the plaintiff was entitled to be put into the position in which he would have been if the tort of false imprisonment had not been committed.
But I do not agree that, if the tort had not been committed, the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
On the judges findings, if the tort had not been committed, he would have been detained during this period.
It seems to me that the fallacy in the analysis in Roberts is that it draws no distinction between a detainee who would have remained in detention if the review had been carried out (and therefore no tort committed) and a detainee who would not have remained in detention if the review had been carried out.
But the position of the two detainees is fundamentally different.
The first has suffered no loss because he would have remained in detention whether the tort was committed or not.
The second has suffered real loss because, if the tort had not been committed, he would not have remained in detention.
The second authority relied on in support of the appellants case is Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883.
It was held there that it is no answer to a claim in conversion of goods for a defendant to say that the goods were or would have been subsequently converted by a third party: see the discussion by Lord Nicholls at paras 81 to 84 of his speech.
But questions of causation in relation to cases of successive conversion by different tortfeasors have no application in the present context.
The question here is simply whether, on the hypothesis under consideration, the victims of the false imprisonment have suffered any loss which should be compensated in more than nominal damages.
Exemplary damages apart, the purpose of damages is to compensate the victims of civil wrongs for the loss and damage that the wrongs have caused.
If the power to detain had been exercised by the application of lawful policies, and on the assumption that the Hardial Singh principles had been properly applied (an issue which I discuss at paras 129 148 below), it is inevitable that the appellants would have been detained.
In short, they suffered no loss or damage as a result of the unlawful exercise of the power to detain.
They should receive no more than nominal damages.
I should add that this approach is consistent with the observation by Lord Griffiths in Murray v Ministry of Defence [1988] 1WLR 692, 703A B: if a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
Vindicatory damages
Mr Westgate submits that, if the appellants are entitled to no more than nominal damages, then they should also be awarded vindicatory damages.
It has been said that the award of compensatory damages can serve a vindicatory purpose: see, for example, Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 per Lord Scott at para 22 and Lord Rodger at para 60.
But vindicatory damages serve a wider purpose than simply to compensate a successful claimant.
The phrase vindicatory damages seems to have been coined by Sharma CJ in the Court of Appeal of Trinidad and Tobago in Attorney General of Trinidad and Tobago v Ramanoop as a head of loss in claims for breach of constitutionally protected rights and freedoms: see address given by the President of the Caribbean Court of Justice to a Symposium entitled Current Developments in Caribbean Community Law in Port of Spain on 9 November 2009.
Lord Collins has traced the history of the use of the phrase in other contexts.
The concept of vindicatory damages was explained and endorsed by the Privy Council in the appeal in the Ramanoop case [2005] UKPC 15, [2006] 1 AC 328.
Lord Nicholls said: 18.
When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of constitutional right will not always be coterminous with the cause of action at law. 19.
An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements had a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
It will be seen, therefore, that the Privy Council endorsed the principle of vindicatory damages for violation of constitutional rights.
Should this principle be extended further? In Ashley at para 22 Lord Scott obiter said that vindicatory damages might be awarded for the tort of battery or trespass to the person by the police resulting in the death of the victim.
But the issue in that case was whether a claimant should be allowed to continue with an action in order to establish whether an assault had been committed, where there could be no award of further compensatory damages because these had already been paid in full as a result of a concession by the police.
Lord Scotts view that vindicatory damages have a role in the compensation for civil wrongs and the breach of ECHR rights was endorsed, at least to some extent, in Mosley v News Group Newspapers Ltd [2008] EWHC 1777 (QB).
In awarding damages for breach of the claimants right to privacy, after recognising the compensatory nature of damages for infringements of privacy, Eady J said at paras 216 7 that there was another factor which probably had to be taken into account, namely vindication to mark the infringement of the right.
It is one thing to say that the award of compensatory damages, whether substantial or nominal, serves a vindicatory purpose: in addition to compensating a claimants loss, it vindicates the right that has been infringed.
It is another to award a claimant an additional award, not in order to punish the wrongdoer, but to reflect the special nature of the wrong.
As Lord Nicholls made clear in Ramanoop, discretionary vindicatory damages may be awarded for breach of the Constitution of Trinidad and Tobago in order to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
It is a big leap to apply this reasoning to any private claim against the executive.
McGregor on Damages 18th ed (2009) states at para 42 009 that It cannot be said to be established that the infringement of a right can in our law lead to an award of vindicatory damages.
After referring in particular to the appeals to the Privy Council from Caribbean countries, the paragraph continues: the cases are therefore far removed from tortious claims at home under the common law.
I agree with these observations.
I should add that the reference by Lord Nicholls to reflecting public outrage shows how closely linked vindicatory damages are to punitive and exemplary damages.
The implications of awarding vindicatory damages in the present case would be far reaching.
Undesirable uncertainty would result.
If they were awarded here, then they could in principle be awarded in any case involving a battery or false imprisonment by an arm of the state.
Indeed, why limit it to such torts? And why limit it to torts committed by the state? I see no justification for letting such an unruly horse loose on our law.
In my view, the purpose of vindicating a claimants common law rights is sufficiently met by (i) an award of compensatory damages, including (in the case of strict liability torts) nominal damages where no substantial loss is proved, (ii) where appropriate, a declaration in suitable terms and (iii) again, where appropriate, an award of exemplary damages.
There is no justification for awarding vindicatory damages for false imprisonment to any of the FNPs.
Application of Hardial Singh principles to the appeal of Mr Lumba
In addition to the issues that are raised which are common to both appeals, it is submitted on behalf of Mr Lumba (but not Mr Mighty) that his detention is unlawful on the grounds that there has been a breach of the Hardial Singh principles.
This part of the appeal raises a number of points about the reach of those principles.
I refer to the encapsulation of the principles set out in my judgment in R (I) [2003] INLR 196 at para 22 above.
A convenient starting point is to determine whether, and if so when, there is a realistic prospect that deportation will take place.
As I said at para 47 of my judgment in R (I), there may be situations where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a period that is reasonable in all the circumstances, having regard in particular to time that the person has already spent in detention.
I deal below with the factors which are relevant to a determination of a reasonable period.
But if there is no realistic prospect that deportation will take place within a reasonable time, then continued detention is unlawful.
How long is a reasonable period? At para 48 of my judgment in R (I), I said: It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view, they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences.
So far as I am aware, subject to the following qualifications, the relevance of these factors has not been questioned.
The qualifications are first that the relevance of the risk of offending on release is challenged on behalf of the appellants in the present case.
Secondly, the nature of the obstacles begs two questions that have been raised on this appeal, namely what is the relevance, if any, of delays attributable to the fact that a detained person (i) is challenging the decision to deport him by appeal or judicial review and will generally not be deported until his challenges have been determined; and (ii) has refused to return voluntarily to his country of origin?
Risk of re offending
Mr Husain accepts that, where there is a risk that the detained person will abscond, the risk of re offending is relevant to the assessment of the duration of detention that is reasonably necessary to effect deportation.
But he submits that, where there is no real risk of absconding, the risk of re offending cannot of itself justify detention.
Where there is no such risk, detention is not necessary to facilitate deportation, because it will be possible to effect the deportation without the need for detention.
The underlying purpose of the power to detain is not to prevent the commission of criminal offences, but to facilitate the implementation of a deportation order.
I have some difficulty in understanding why the risk of re offending is a relevant factor in a case where there is a risk of absconding, but not otherwise.
It seems to me that it is possible to construe the power to detain either (more narrowly) as a power which may only be exercised to further the object of facilitating a deportation, or (more broadly) as a power which may also be exercised to further the object which it is sought to achieve by a deportation, namely, in the present case, that of removing an offender whose presence is not conducive to the public good.
The distinction between these two objects was clearly drawn by the Court of Appeal in R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
Toulson LJ said at para 55: A risk of offending if the person is not detained is an additional relevant factor, the strength of which would depend on the magnitude of the risk, by which I include both the likelihood of it occurring and the potential gravity of the consequences.
Mr Drabble submitted that the purpose of the power of detention was not for the protection of public safety.
In my view, that is over simplistic.
The purpose of the power of deportation is to remove a person who is not entitled to be in the United Kingdom and whose continued presence would not be conducive to the public good.
If the reason why his presence would not be conducive to the public good is because he has a propensity to commit serious offences, protection of the public from that risk is the purpose of the deportation order and must be a relevant consideration when determining the reasonableness of detaining him pending his removal or departure.
Para 78 of Keene LJs judgment is to similar effect.
I acknowledge that the principle that statutory powers should be interpreted in a way which is least restrictive of liberty if that is possible would tend to support the narrower interpretation.
But I think that the Court of Appeal was right in R (A) to adopt the interpretation which gives effect to the purpose underlying the power to deport and which the power to detain is intended to facilitate.
Perhaps a simpler way of reaching the same conclusion is to say, as Simon Brown LJ said in R (I) at para 29, that the period which is reasonable will depend on the circumstances of the particular case and the likelihood or otherwise of the detainee re offending is an obviously relevant circumstance.
But the risk of re offending is a relevant factor even if the appellants are right in saying that it is relevant only when there is also a risk of absconding.
As Lord Rodger pointed out in argument, if a person re offends there is a risk that he will abscond so as to evade arrest or if he is arrested that he will be prosecuted and receive a custodial sentence.
Either way, his re offending will impede his deportation.
The risk of re offending is, therefore, a relevant factor.
Delay attributable to challenges to deportation
Mr Beloff submits that the time taken to resolve legal challenges brought by an individual against deportation should generally be left out of account in considering whether a reasonable period of detention has elapsed.
He concedes that this general rule should be subject to two qualifications: (i) if the Secretary of State has caused delay in the resolution of the legal challenge, then that time may be taken into account; and (ii) the time during which a legal challenge is being resolved should be taken into account if removal is not possible for reasons unrelated to the legal challenge.
I shall call this general rule the exclusionary rule.
In support of this submission, Mr Beloff makes the following points.
First, it is the individuals choice to challenge the removal and, if the time taken to resolve legal challenges were taken into account, the length of detention would be outside the control of the Secretary of State and would be entirely within the control of the detained person.
Secondly, if the position were otherwise, those who (if at large) would be a danger to the public or who would be likely to thwart a deportation order by absconding, would be able to increase their prospects of release by pursuing every conceivable point by way of legal challenges and by doing everything possible to delay the legal process.
Thirdly, if the legality of detention is capable of depending on the merits of a challenge to the decision to deport, it will be necessary for the High Court to decide for itself the merits of the underlying challenge, in advance of consideration of the case by the specialist tribunal appointed by Parliament to undertake that task.
That is undesirable.
At para 102 of their judgment, the Court of Appeal said: In our judgment, the fact that a FNP is refusing to return voluntarily, or is refusing to cooperate in his return (for example, by refusing to apply for an emergency travel document, as initially did WL) is relevant to the assessment of the legality of his continued detention: see R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
So is the fact that the period of his detention had been increased, and his deportation postponed by his pursuit of appeals and judicial review proceedings seeking to challenge his deportation order or his application for asylum or leave to remain, particularly if his applications and appeals are obviously unmeritorious.
In our judgment, as a matter of principle, a FNP cannot complain of the prolongation of his detention if it is caused by his own conduct.
It is not clear whether the Court of Appeal were accepting the exclusionary rule in its entirety.
To say that the fact that the length of the detention is attributable to the pursuit of legal proceedings is relevant to the assessment of the legality of the detention suggests a rejection of the exclusionary rule.
But to say that FNPs cannot complain of the prolongation of their detention caused by their own conduct suggests an acceptance of it.
The question of the relevance of the pursuit of legal proceedings has been considered in a number of authorities.
I do not propose to analyse them.
None is binding on this court.
The discussion of the issue which I have found most helpful is that of Davis J in R (Abdi) v Secretary of State for the Home Department [2009] EWHC 1324 (Admin).
In that case, the exclusionary rule (with the same two exceptions) was urged on the court on behalf of the Secretary of State.
In rejecting it, Davis J pointed out at para 25 of his judgment, that it was undesirable, where the core question is an assessment of what is reasonable in all the circumstances, to be astute to look for mandatory restrictions or rules in what ought to be a fact specific exercise.
I agree.
The Hardial Singh principles should not be applied rigidly or mechanically.
There are several problems with the exclusionary rule.
First, it seems to require the exclusion of consideration of the individual circumstances of an applicant pending what may be a long appellate process.
Suppose two FNPs who both embark on a meritorious appeal process which takes a number of years.
The only difference between them is that A poses a very high risk of absconding and re offending and B poses a very low risk.
If the exclusionary rule is applied, no difference can be drawn between them from the time proceedings are commenced.
In both cases, the several years during which they are detained while the appeal process is continuing are to be disregarded in assessing whether the period of detention is reasonable.
Or suppose that the effect of detention on A is to cause serious damage to his health or that of members of his family, whereas there is no such effect in the case of B. I can see no warrant for such a mechanistic approach to the determination of what is reasonable in all the circumstances.
Secondly, the exclusionary rule seems to involve the exclusion from consideration of any delays occurring within the appeal process which are not the fault of the applicant or (as is conceded by Mr Beloff) the Secretary of State.
I see no reason why such delays, for example, delays on the part of the tribunal or court, should be disregarded in a determination of whether the period of detention is reasonable.
Thirdly, the consequence of the exclusionary rule is that a person can be detained for many years while pursuing a prima facie meritorious appeal but he cannot by judicial review or habeas corpus challenge his detention on Hardial Singh or related article 5(1)(f) of the ECHR principles.
It precludes such judicial scrutiny (i) however long the detention and appeals have lasted and (ii) regardless of the effects of prolonged detention on the detainee, provided that (iii) the appeals are being diligently pursued and there is no concurrent independent reason why deportation cannot be effected.
I accept the submission of Mr Husain that bail is not a sufficient answer to the fundamental objection that the exclusionary rule constitutes an impermissible restriction on judicial oversight of the legality of administrative detention.
Paragraph 29 of Schedule 2 to the 1971 Act gives the First Tier Tribunal power to grant bail pending an appeal, but this is subject to the restrictions stated in paragraph 30.
Paragraph 30(1) provides that an appellant shall not be released under paragraph 29 without the consent of the Secretary of State if removal directions are currently in force.
There is nothing in the schedule which requires the tribunal to apply the Hardial Singh principles in deciding whether or not to grant bail and, in particular, to have regard to the past and likely future length of a detention.
Bail is not a determination of the legality of detention, whether at common law or for article 5(4) purposes.
Fourthly, the exclusionary rule is inconsistent with the decision of the ECtHR in Chahal v United Kingdom (1996) 23 EHRR 413.
In deciding whether the detention complied with the requirements of article 5(1)(f), the court had regard to the length of the detention, including the time taken for the various domestic proceedings to be completed: see paras 114, 115 and 123 of the judgment of the court.
There is a close analogy between the Hardial Singh principles and the article 5 requirement that detention for the purposes of deportation must not be of excessive duration.
I would reject Mr Beloffs in terrorem argument that, unless the exclusionary rule applies, detained FNPs will be able to procure their release from detention by the simple expedient of pursuing hopeless legal challenges.
Time taken in the pursuit of hopeless challenges should be given minimal weight in the computation of a reasonable period of detention.
Nor do I accept that it is undesirable (or indeed unduly difficult) to identify hopeless or abusive challenges.
There exist statutory mechanisms to curb unmeritorious appeals.
If a claim is clearly unfounded, certification under section 94(2) of the Nationality, Immigration and Asylum Act 2002 precludes an in country appeal.
If a claim relies on a matter which could have been raised earlier in response to an earlier immigration decision or in response to a one stop notice, certification under section 96 of the 2002 Act precludes any appeal at all.
In any event, a court considering the legality of a detention will often be able to assess the prima facie merits of an appeal.
Where, as in the case of Mr Lumba, there have been orders for reconsideration, or where there has been a grant of permission to appeal to the Court of Appeal, the court will easily recognise that the challenge has some merit.
Conversely, there may be one or more determinations from immigration judges dismissing claims as wholly lacking in credibility.
To summarise, I would reject the exclusionary rule.
If a detained person is pursuing a hopeless legal challenge and that is the only reason why he is not being deported, his detention during the challenge should be given minimal weight in assessing what is a reasonable period of detention in all the circumstances.
On the other hand, the fact that a meritorious appeal is being pursued does not mean that the period of detention during the appeal should necessarily be taken into account in its entirety for the benefit of the detained person.
Indeed, Mr Husain does not go so far as to submit that there is any automatic rule, regardless of the risks of absconding and/or re offending, which would compel an appellants release if the appeals process lasted a very long time through no fault of the appellant.
He submits that the weight to be given to time spent detained during appeals is fact sensitive.
This accords with the approach of Davis J in Abdi and I agree with it.
The risks of absconding and re offending are always of paramount importance, since if a person absconds, he will frustrate the deportation for which purpose he was detained in the first place.
But it is clearly right that, in determining whether a period of detention has become unreasonable in all the circumstances, much more weight should be given to detention during a period when the detained person is pursuing a meritorious appeal than to detention during a period when he is pursuing a hopeless one.
Non cooperation with return
The most common examples of non cooperation are (i) a refusal by a person who does not have a valid passport to cooperate with the obtaining of travel documents to enable him to return and (ii) a persons refusal to avail himself of one of the Home Office schemes by which he may leave the United Kingdom voluntarily.
Most of the discussion in the cases has centred on (ii).
It is common ground that a refusal to return voluntarily is relevant to an assessment of what is a reasonable period of detention if a risk of absconding can properly be inferred from the refusal.
But I would warn against the danger of drawing an inference of risk of absconding in every case.
It is always necessary to have regard to the history and particular circumstances of the detained person.
What is, however, in issue is whether a failure to return voluntarily can of itself justify a period of detention which would otherwise be unreasonable and therefore unlawful.
In R (I), I said in the Court of Appeal: 50.
As regards the significance of the appellants refusal of voluntary repatriation, there appears to be agreement between Simon Brown LJ and Mummery LJ that this is a relevant circumstance, but Mummery LJ considers that it is decisively adverse to the appellant, whereas Simon Brown LJ considers that it is of relatively limited relevance on the facts of the present case.
I too consider that it is a relevant circumstance, but in my judgment it is of little weight. [Counsel for the Secretary of State] submits that a refusal to leave voluntarily is relevant for two reasons.
First, the detained person has control over the fact of his detention: if he decided to leave voluntarily, he would not be detained.
Secondly, the refusal indicates that he would abscond if released from detention.
It is this second feature which has weighed heavily with Mummery LJ. 51.
I cannot accept that the first of [the Secretary of States] reasons is relevant.
Of course, if the appellant were to leave voluntarily, he would cease to be detained.
But in my judgment, the mere fact (without more) that a detained person refuses the offer of voluntary repatriation cannot make reasonable a period of detention which would otherwise be unreasonable.
If [the Secretary of State] were right, the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation. 52.
I turn to [the Secretary of States] second reason.
I accept that if it is right to infer from the refusal of an offer of voluntary repatriation that a detained person is likely to abscond when released from detention, then the refusal of voluntary repatriation is relevant to the reasonableness of the duration of a detention.
In that event, the refusal of voluntary repatriation is no more than evidence of a relevant circumstance namely the likelihood that the detained person will abscond if released. 53.
But there are two important points to be made.
First, the relevance of the likelihood of absconding, if proved, should not be overstated.
Carried to its logical conclusion, it could become a trump card that carried the day for the Secretary of State in every case where such a risk was made out regardless of all other considerations, not least the length of the period of detention.
That would be a wholly unacceptable outcome where human liberty is at stake. 54.
Secondly, it is for the Secretary of State to satisfy the court that it is right to infer from the refusal by a detained person of an offer of voluntary repatriation that, if released, he will abscond.
There will no doubt be many cases where the court will be persuaded to draw such an inference.
I am not, however, satisfied that this is such a case.
It is not at all surprising that this appellant has refused voluntary repatriation.
He has not yet exhausted the asylum process, which, if successful, would permit him to remain in the United Kingdom.
In these circumstances, why should one infer from the refusal of voluntary repatriation that, if released, he would abscond? In my judgment, the most that can be said is that there is a risk that if he is released the appellant will abscond.
But that can be said of most cases.
I do not consider that the fact that he has refused the offer of voluntary repatriation adds materially to the evidence that such risk is present in the instance case.
Simon Brown LJ adopted a somewhat different approach at para 31.
He said that, since in Hardial Singh Woolf J had regarded it as a factor in the applicants favour that he was quite prepared to go to India, he could not see why the converse should not be relevant.
The court should not ignore entirely the applicants ability to end his detention by returning home voluntarily.
The point was considered again by the Court of Appeal in R (A) Somalia v Secretary of State for the Home Department [2007] EWCA Civ 804 Toulson LJ (with whom Longmore LJ agreed) said: 54.
I accept the submission on behalf of the Home Secretary that where there is a risk of absconding and a refusal to accept voluntary repatriation, those are bound to be very important factors, and likely often to be decisive factors, in determining the reasonableness of a persons detention, provided that deportation is the genuine purpose of the detention.
The risk of absconding is important because it threatens to defeat the purpose for which the deportation order was made.
The refusal of voluntary repatriation is important not only as evidence of the risk of absconding, but also because there is a big difference between administrative detention in circumstances where there is no immediate prospect of the detainee being able to return to his country of origin and detention in circumstances where he could return there at once.
In the latter case the loss of liberty involved in the individuals continued detention is a product of his own making.
Keene LJ said at para 79: I am not persuaded by Mr Giffin that the refusal by this detainee to return to Somalia voluntarily when it was possible to do so is some sort of trump card.
On this I see the force of what was said by Dyson LJ in R (I) at paragraph 52, namely that the main significance of such a refusal may often lie in the evidence it provides of a likelihood of the individual absconding if released.
After all, if there is in a particular case no real risk of his absconding, how could detention be justified in order to achieve deportation, just because he has refused voluntary return? The Home Office in such a case, ex hypothesi, would be able to lay hands on him whenever it wished to put the deportation order into effect.
Detention would not be necessary in order to fulfil the deportation order.
Having said that, I do not regard such a refusal to return as wholly irrelevant in its own right or as having a relevance solely in terms of the risk of absconding.
It is relevant that the individual could avoid detention by his voluntary act.
But I do not accept that such a refusal is of the fundamental
importance contended for by the Secretary of State
It is necessary to distinguish between cases where return to the country of origin is possible and those where it is not.
Where return is not possible for reasons which are extraneous to the person detained, the fact that he is not willing to return voluntarily cannot be held against him since his refusal has no causal effect.
But what if return would be possible, but the detained person is not willing to go? Here it is necessary to consider whether the detained person has issued proceedings challenging his deportation.
If he has done so, then it is entirely reasonable that he should remain in the United Kingdom pending the determination of those proceedings (unless the proceedings are an abuse).
In those circumstances his refusal to accept an offer of voluntary return is irrelevant.
The purpose of voluntary return is not to encourage foreign nationals to return to their countries of origin where, if their legal challenges succeed, it is likely to have been demonstrated that they would face a risk of persecution within the meaning of the Convention and Protocol relating to the Status of Refugees (1951) (Cmd 9171) and (1967) (Cmnd 3906) or treatment contrary to article 3 of the ECHR.
Rather, it is to facilitate removal where that is justified because the FNPs have not proved that they would face the relevant risk on return.
In accepting voluntary return, the individual forfeits all legal rights to remain in the United Kingdom.
He should not be penalised for seeking to vindicate his ECHR or Refugee Convention rights and be faced with the choice of abandoning those rights or facing a longer detention than he would face if he had not been offered voluntary return.
What about those who have no outstanding legal challenges? Here, the fact that the detained person has refused voluntary return should not be regarded as a trump card which enables the Secretary of State to continue to detain until deportation can be effected, whenever that may be.
That is because otherwise, as I said at para 51 of my judgment in R (I), the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation.
If the refusal of voluntary return has any relevance in such cases even if a risk of absconding cannot be inferred from the refusal, it must be limited.
That was the view of Simon Brown LJ in R (I) and Keene LJ in R (A) and I agree with them.
The appeal of Mr Lumba
I can now turn to the particular case of Mr Lumba.
He entered the United Kingdom unlawfully on 10 April 1994 and claimed asylum on the same day.
His claim was refused on 20 February 2000.
He was, however, granted exceptional leave to remain until 20 February 2004.
He has a bad criminal record which includes convictions for assault occasioning actual bodily harm (six months imprisonment); two offences of using threatening and abusive behaviour (twelve months probation); two offences of shoplifting (non custodial sentences); assault occasioning actual bodily harm (six months imprisonment); assaulting a constable (four months imprisonment); and wounding with intent contrary to section 18 of the Offences Against the Person Act 1861 (4 years imprisonment).
He married MP, another national of the Democratic Republic of Congo (DRC).
Their son, PAS, was born on 5 July 2003.
As I have already said, on 3 April 2006, the Secretary of State decided to deport Mr Lumba.
Notwithstanding that his son is a British citizen, the Secretary of State also decided to deport his wife and son, although the orders against them were subsequently revoked.
He was notified of the decision to detain him under the 1971 Act on 22 June 2006, the day before his release date.
His first detention review was in February 2007.
He appealed against the decision to deport him.
On 7 September 2006, while the appeal was still pending, he refused to attend a travel document interview with the immigration authorities to facilitate his return to the DRC.
His appeal against deportation was dismissed by the Asylum and Immigration Tribunal (AIT) on 15 December 2006.
In about January 2007, he was transferred from prison to Dover Immigration Removal Centre, since when he remained in detention.
On 1 March 2007, he attended an interview with an immigration officer at which he explained that his passport was missing.
He was asked to complete an application for an Emergency Travel Document (ETD) but refused to do so, stating that he did not wish to be returned to the DRC because the problem which formed the initial basis of his asylum claim is still true.
By 20 March 2007, the Secretary of States caseworkers had discovered that they had a copy of Mr Lumbas passport on file.
His indefinite leave to remain was terminated only after service on him of the signed deportation order on 21 March 2007.
The discovery of the copy of his passport on file obviated the need for his cooperation in completing a travel document application.
On 29 March, a completed application for an ETD, accompanied by copies of his passport and identity card, was sent to the Embassy of the DRC.
The Embassy claimed to have lost the initial application and the application for an ETD was resubmitted on 26 April 2007.
The application was granted by the DRC Embassy on 25 July 2007 and on the following day directions were set for Mr Lumbas removal from the United Kingdom on 20 August 2007.
On 15 August 2007, his new solicitors submitted fresh representations challenging his deportation.
These noted that a country guidance case (BK (DRC)) concerning the safety of returns to the DRC of failed asylum seekers/ deportees was to be heard by the AIT on 17 September 2007.
On 16 August 2007, the Secretary of State refused to treat those representations as a fresh asylum claim and on the following day, Mr Lumba issued judicial review proceedings challenging that refusal.
On 14 September 2007, these proceedings were stayed by consent until the outcome of the pending country guidance case before the AIT was known.
On 23 October 2007, Mr Lumba issued the claim for judicial review challenging his detention which has given rise to the present appeal.
On 18 December 2007, the AIT promulgated its determination in BK (Democratic Republic of Congo) v Secretary of State for the Home Department and decided that failed asylum seekers were not, as such, at risk in the DRC: [2007] UKAIT 98.
Mr Lumba made applications for bail on 23 January 2008, 4 February 2008 and 4 March 2008.
They were all rejected by the immigration judge principally on the ground that there was a real risk that if he was released he would re offend.
On 23 April 2008, permission was granted to appeal the AITs decision in BK (DRC) to the Court of Appeal.
Mr Lumbas claim for judicial review in respect of his detention was heard by Collins J on 4 July 2008.
His judgment is reported at [2008] EWHC 2090 (Admin).
He concluded that the detention was lawful on Hardial Singh principles and that it would continue to be so until the Court of Appeal gave judgment in BK (DRC), on the assumption that judgment was given by the end of December 2008.
In fact judgment was given by the Court of Appeal on 3 December 2008 after the hearing before Davis J, but before he gave judgment: [2008] EWCA Civ 1322.
Davis J agreed with the reasoning and conclusion of Collins J as to the lawfulness of the detention.
The findings made by Davis J are set out in full by the Court of Appeal at para 99 of their judgment.
There is no need to repeat them in this judgment.
In summary, Davis J said at para 203 that (i) Mr Lumba posed a high risk of absconding and a high risk of serious reoffending; (ii) at all stages there was a prospect of removing him within a reasonable period; and (iii) there had been no lack of due expedition on the part of the Secretary of State.
On 11 February 2009, Mr Lumbas solicitors made fresh representations on his behalf to the Secretary of State, and applied for the revocation of the deportation order.
They said that his marriage had broken down and that he was seeking contact with his son.
He relied on article 8 of the ECHR.
This application was rejected by the Secretary of State on 1 July 2009.
Mr Lumba appealed on 8 July 2009.
The appeal was dismissed by the AIT on 28 September 2009.
A reconsideration was ordered by a senior immigration judge on 26 October 2009.
At the reconsideration, the Secretary of State conceded that the original tribunal had erred in law.
By a judgment given on 19 February 2010, the Court of Appeal dismissed Mr Lumbas appeals against the decisions of Collins J and Davis J. The Court of Appeal said at para 100 that they had seen nothing to justify interfering with Davis Js findings at para 203 of his judgment.
They said in relation to the application of the Hardial Singh principles that the real attack was on the judgment of Collins J.
There had been no material error in the approach or conclusions of Collins J who had taken into account the high risk of absconding and re offending, the fact that Mr Lumba could have returned to the DRC voluntarily, and that his deportation had been delayed by his pursuit of several unsuccessful applications for asylum or leave to remain and appeals against their refusal.
The Court of Appeal had been asked to consider the period which had elapsed since the judgment of Davis J and subsequent evidence, including a psychiatric report, and to determine the legality of Mr Lumbas current detention in the light of it.
They said at para 108 that it would be inappropriate for them to consider as a first instance decision whether Mr Lumbas mental condition rendered his continued detention unlawful.
Apart from that, they said that: having reviewed the history of [Mr Lumbas] detention and the reasons given for continuing it, and for the refusals of bail, and his several hitherto unmeritorious appeals and applications, we are satisfied that his detention for the purposes of his deportation continues to be lawful.
On behalf of Mr Lumba it is submitted that the Court of Appeal should have concluded that his detention was unreasonably long by the time of the hearing before Collins J on 4 July 2008; alternatively by the time of the hearing before Davis J on 11 14 November 2008; alternatively by the time of the hearing before them between 30 November and 2 December 2009.
By the time of the appeal, of particular importance were the facts that (i) Mr Lumba had been in detention for 41 months; (ii) he could not be deported while he was pursuing his appeal against the Secretary of States refusal to revoke the deportation order; and (iii) there was evidence from the Croydon Mental Health Team and consultant psychiatrist Dr Dinakaran which showed that the risk of re offending and psychotic relapse could be managed in the community.
Mr Lumba has now been in detention for 54 months.
At first sight, his detention seems to have been of unreasonable duration.
There must come a time when, however grave the risk of absconding and however the grave the risk of serious offending, it ceases to be lawful to detain a person pending deportation.
Moreover, in certain respects the courts below have not applied the Hardial Singh principles correctly.
In particular, they have wrongly regarded the fact that Mr Lumba has been able to delay his deportation by pursuing applications and appeals which, thus far, have been unsuccessful as being relevant to the assessment of a reasonable period of detention.
It has not been suggested by the Secretary of State that any of these applications or appeals have been hopeless and abusive.
For the reasons given above, the fact that the applications and appeals delayed the deportation should have been regarded as irrelevant.
The courts below also appear to have taken into account Mr Lumbas refusal of voluntary return without making it clear how this is relevant to the assessment of a reasonable period.
As I have said, it is of limited relevance as a free standing reason (see paras 122 128 above).
It would be legitimate to infer from the refusal of voluntary return that there is a risk of absconding.
But it is not clear that Collins J or Davis J drew such an inference in this case.
Mr Husain submits that it was incumbent on the Court of Appeal to consider the legality of the continuing executive detention by reference to the situation current at the time of the appeal and that they erred in failing to do so.
He says that they should have considered what the prospects were of removal within a reasonable period.
I accept that, where the facts are the same as they were before the first instance judge and the only difference is the passage of further time, there is no reason why the Court of Appeal should not decide for themselves whether a continuing detention is unlawful.
I also accept that, where there is fresh evidence, the Court of Appeal are entitled to apply the Hardial Singh principles and consider for themselves on the basis of all the up to date material whether a continuing detention is lawful.
Indeed, that was the course that the Court of Appeal took in R (I).
But there are some circumstances where that course is not appropriate.
In the present case, the Court of Appeal took the view that such a course was inappropriate.
They said at para 108 that they should not embark on a first instance decision on matters, such as whether the deportation order should be revoked on account of [Mr Lumbas] mental condition, that Parliament has entrusted to a specialist tribunal.
That was an entirely proper reason for the Court of Appeal not making a first instance decision in this case.
Mr Husain submits that the Supreme Court should allow Mr Lumbas appeal.
I would allow the appeal of both appellants for the generic reasons that I have stated earlier.
But I would not decide whether the detention of Mr. Lumba for almost 56 months was in breach of the Hardial Singh principles.
The reasons which led the Court of Appeal to refuse to make a first instance decision apply with even greater force in an appeal to the Supreme Court.
It is only in the most exceptional case that this court should embark on a task that is normally to be performed by a court of first instance.
In view of the passage of further time since the decision of the Court of Appeal as well as the fact that the courts below failed to apply the Hardial Singh principles correctly, I would remit Mr Lumbas claim for damages for breach of those principles to the High Court for reconsideration in the light of all the evidence as to the current position.
The case of Mr Mighty
As I have already said, Mr Mighty was detained between 19 May 2006 and 28 July 2008.
He issued proceedings on 29 May 2008 alleging that his detention was for longer than a reasonable period and inter alia that, on a proper application of the Hardial Singh principles, he should have been released.
His Hardial Singh case was rejected by Davis J.
There was no appeal on this aspect of the case to the Court of Appeal and the point has not been raised on behalf of Mr Mighty before this court.
Exemplary damages
The relevant principles are not in doubt.
Exemplary damages may be awarded in three categories of case: see per Lord Devlin in Rookes v Barnard [1964] AC 1129.
The category which is relevant for present purposes is that there has been an arbitrary and outrageous use of executive power (p 1223) and oppressive, arbitrary or unconstitutional action by servants of the government (p 1226).
In this category of case, the purpose of exemplary damages is to restrain the gross misuse of power: see AB v South West Water Services Ltd [1993] QB 507, 529F per Sir Thomas Bingham MR.
It must be shown that the conscious wrongdoing by a defendant is so outrageous, his disregard of the plaintiffs rights so contumelious, that something more [than compensatory damages] is needed to show that the law will not tolerate such behaviour as a remedy of last resort: see per Lord Nicholls Kuddus v Chief Constable of Leicestershire Constabulary [2002] 2 AC 122 at para 63.
Both Davis J and the Court of Appeal addressed the question of exemplary damages, although in view of their findings on the issue of liability, it was not necessary for them to do so.
Davis J said at para 205 of his judgment that: I add, briefly, that, even if I had concluded there was unlawful detention in any of these cases justifying an award of damages, I would not in any event have awarded exemplary damages on the footing of unconstitutional, oppressive or arbitrary conduct, in so far as sought.
While the Home Office has, to put it mildly, not covered itself in glory in this whole matter of the new policy, I think the failings were in essence one of failing, promptly and directly, to confront and address a perceived legal difficulty: whether through concerns at being bearers of unwelcome news to the Ministers or through an instinct for ducking an apparently intractable problem or through institutional inertia or some other reason, I cannot really say.
I am not prepared, however, to conclude on the material before me that there was a conscious decision within the Home Office to operate tacitly an unpublished policy, known to be highly suspect, in the hope it would not be uncovered or, if it was uncovered, against a plan, if the courts intervened, to present that reversal as being due solely to the courts or the Human Rights Act.
In my view what happened here, in any of these five cases, cannot fairly, I think, be described as sufficiently outrageous to justify an award of exemplary damages.
In any event, I emphasise that individual consideration was given to the cases of each of the claimants.
By the time of the appeal, the Secretary of State had disclosed more material than was before the judge.
The Court of Appeal said that, even taking account of the additional material, they agreed with the assessment of the judge.
They said: 122.
We give weight to that assessment by the judge at the end of his very careful and comprehensive judgment.
It also accords with our own view, even taking account of the additional material which has been disclosed.
We consider that there was a failure, which to put it very mildly indeed, was very regrettable, on the part of the department to face up to the basic problem that the published policy had not caught up with the much more restrictive approach implicit in ministerial statements on the subject.
However, we find it difficult to describe such conduct as unconstitutional, oppressive or arbitrary, in circumstances where the Home Secretary had an undoubted power to detain for the purposes in question, and it has been held that on the facts of the case he could lawfully have exercised that power with the same effect; at any rate, if it can be so described, these circumstances mean that the conduct is at the less serious end of unconstitutional, oppressive or arbitrary.
We also bear in mind also that the claimants had the right to apply for bail to an independent tribunal, at which it was possible for the continuing reasonableness of their detention to be challenged.
An award of exemplary damages would be an unwarranted windfall for them, and it would have little punitive effect since it will not be borne by those most directly responsible.
Rather it would be a drain on public resources which in itself is unlikely to add significantly to the remedial effect of a declaration of unlawfulness. 123.
Moreover, it is difficult to see on what basis exemplary damages could be assessed in lead cases such as these.
The conduct of the Home Secretary complained of in the present case was common to a large number of detainees who have brought proceedings against him.
The selection of lead claimants such as [Mr Lumba] and [Mr Mighty] does not depend on the merits of their individual cases, which have not been assessed other than for the purposes of the grant of permission to apply for judicial review or permission to appeal.
Other claimants may have equally or even more meritorious claims to damages, and if appropriate exemplary damages, than the present claimants.
There would be no principled basis, therefore, to restrict an award of exemplary damages to the present lead claimants.
If an award of exemplary damages is made to the present lead claimants, a similar award would have to be made in every case.
Exemplary damages are assessed by reference to the conduct of the tortfeasor.
The court would, we think, have to assess an appropriate sum as exemplary damages and divide it between all successful claimants.
But we do not know how many successful claimants there will ultimately be.
These considerations demonstrate that exemplary damages, in a case such as the present, may be ill suited to be a remedy in judicial review proceedings, and would be in the present cases.
Yet further material has been disclosed by the Secretary of State since the hearing before the Court of Appeal.
Mr Westgate submits that it can now be seen that this is indeed one of those exceptional cases where awards of exemplary damages are merited.
His submissions are detailed and elaborate.
I shall endeavour to concentrate on the essential points.
He submits that the conditions for an award of exemplary damages have been established because (i) from April 2006 until September 2008 the Secretary of State operated a hidden blanket policy which did not give effect to the Hardial Singh principles; (ii) the Secretary of State actively discouraged disclosure of her true detention policy with the consequence that the integrity of written reasons for detention was compromised; (iii) there was a deliberate decision not to publish the hidden policy; and (iv) the Secretary of State and/or her officials knew that, or were reckless as to whether, their actions were unlawful, preferring for political reasons to leave it to the courts to remedy the illegality.
In addition, Mr Westgate submits that the Secretary of State in this litigation has fallen short of the duties of candour owed to the courts in that (v) the courts have been intentionally or recklessly misled by the Secretary of States officials; (vi) elementary safeguards necessary to promote compliance with a public authoritys duty of candour in judicial review proceedings have not been observed: in particular, the Deputy Chief of Staff of the Chief Executive of the UK Border Agency was selected as the person responsible for overseeing disclosure, when the responsibility for disclosure was that of the Treasury Solicitor; and (vii) there remain significant lacunae in the disclosure.
I find it convenient to take (i) to (iv) together.
I have already referred at paras 16 39 above to the hidden blanket policy which did not give effect to the Hardial Singh principles.
There is no doubt that such a policy was operated between April 2006 and November 2007 when a slight relaxation was effected by the introduction of Cullen 1.
To a large extent, the policy that was applied until September 2008 was a blanket policy.
It certainly remained a hidden policy during the whole period.
But that of itself comes nowhere near being sufficient to justify an award of exemplary damages.
It is the reasons why the policy was not published that are the matters of real concern.
There is undoubtedly evidence to support submissions (ii) to (iv).
I shall refer to some of it.
A more detailed description of the internal material relating to the period between April 2006 and September 2008 that was disclosed to Davis J appears at para 43 of his judgment.
At least from 17 May 2006, senior officers within the Home Office, including lawyers of the Home Office Legal Advisers Branch (HOLAB), expressed concern to, among others, Lin Homer (Chief Executive of the Border and Immigration Agency) (BIA) that the policy was unlawful on the grounds that it did not satisfy the Hardial Singh principles and that it differed from the published policy.
Thus, for example, on 20 July 2006, Ms Rogerson (Head of Policy for the BIA) said in an email we are increasingly vulnerable and we should probably publish revised criteria.
She suggested that they should review the criteria and consider being prepared to release FNPs in some cases, with public protection as a priority.
She added that Ministers preferred position may be to continue to detain all FNPs and let immigration judges take any hit which is to be had by releasing on bail.
On 19 January 2007, Joy Munro (Deputy Director, Border Control) wrote to Ms Rogerson asking for written evidence of the lawfulness of detaining FNPs whom they were unable to remove.
She referred to there being unrest in the CCD about the power in law to detain some of those held if they are not removable.
Ms Rogerson replied: We shouldnt be dealing with thisor any such policy discussionson email in this way.
I believe a meeting would be the most profitable way forward.
On 13 March 2007, Stephen Braviner Roman of HOLAB wrote to Ken Sutton (Deputy Director of the Immigration and Nationality Directorate) saying: if the courts were to find we had not been following our policy in these cases we would face criticism, but also claims for compensation.
He also referred to the fact that Simon Harker (from the Treasury Solicitors Department) had pointed out that they have a duty of candour to the court and cannot mislead.
First hand evidence of the attitude of the Secretary of State herself is to be found in an email dated 16 July 2007 sent to Lin Homer in response to a draft bail proposal: Is this an issue primarily about legal vulnerability rather than capacity? If so, what is the reason for worrying about this now? Have we been threatened with legal action?
This prompted a series of internal emails, some of which referred to the test case of R (A) (Somalia) v Secretary of State for the Home Department [2007] EWCA Civ 804.
In an email dated 17 July 2007, Mr Braviner Roman referred to the impending hearing and said that there was an on going legal vulnerability.
If it materialised, we would face a liability in damages as well as severe criticism if it was said that we have maintained a policy of detaining people which was unlawful (as opposed to having a lawful policy but just getting it wrong on the facts from time to time, which is inevitable).
But the unpublished policy was not disclosed in that litigation.
The response to the Secretary of States question was given in an email dated 19 July 2007 which stated that the issue was one of legal vulnerability.
To this the Private Secretary of the Secretary of State replied that there did not seem to be a strong enough or immediate enough reason to be releasing or not detaining people at this point.
A further insight into the thinking of the senior officers can be derived from the draft policy submission that had been circulated in May 2007.
It referred to the legal advice that the Secretary of State was open to legal challenge for the reasons to which I have earlier referred.
It also said: if we were to lose a test case, we could present any change in FNP detention practice as having been forced on us by the courts.
I agree with what Davis J said about this document at para 43.12 of his judgment: That may or may not be good politics: but it is deplorable practice, especially when it is seen that almost from day one the new unpublished policy was perceived in virtually all quarters within the department to be at least legally vulnerable and in some quarters positively to be untenable and legally invalid.
The tone of this draft is further confirmed by the subsequent comments that the longer the delay the more likely it would be that a court judgment would force us to pay out significant sums in compensation to FNPs whose detention was held to be unlawful as well as exposing the department to criticism in the media and to reputational damage.
Mr Westgate is able to point to clear evidence that caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
This material was disclosed seven days before the start of the hearing before the Court of Appeal.
It comprises an exchange of emails in relation to a Liverpool case.
On 21 March 2007, Philip Muirhead of the Criminal Casework Directorate (CCD) in Liverpool said of the FNP under consideration that there was no valid reason to detain him.
Nichola Samuel, a lawyer of HOLAB, said that if detention was appropriate in that case, this suggested that they were applying a different policy, ie that all FNPs should be detained pending deportation.
Gareth Lloyd (Assistant Director of the CCD) responded that he had an email from Mandie Campbell (Director of CCD) telling me that we must detain all FNPs until removal.
In an email dated 22 March 2007, Mr Lloyd said that this was not only a Liverpool issue and in an email sent on the following day, he said: We just detain as instructed and choose the most defendable option in our opinion.
From the above, it seems to me to be clear that there was a deliberate decision not to publish the hidden policy.
The material that has now been disclosed suggests that the assessment made by Davis J at para 205 may have been somewhat generous to the Secretary of State and her senior officials.
It is true that they did not know and could not have known that the policy that was being applied was bound to be struck down as unlawful, but they certainly knew that it was vulnerable to legal challenge and that it did not accord with the published policy.
Nevertheless, the question remains whether, regrettable though the behaviour of the Secretary of State and her senior officials may have been, it was sufficiently outrageous and sufficiently unconstitutional, oppressive or arbitrary to merit awards of exemplary damages.
I approach this question without regard to the allegations of lack of candour in the litigation.
This is because the role of exemplary damages is to punish the commission of the underlying tort and not the subsequent conduct of the litigation.
Any disapproval of the conduct of the litigation can be marked by an appropriate order for costs or by an increased award of (compensatory) aggravated damages: Thompson v Commissioner of Police of the Metropolis [1998] QB 498, 517D per Lord Woolf MR.
Whether the high threshold for the award of exemplary damages has been crossed in any particular case is ultimately a matter of judgment.
Opinions can reasonably differ on whether a defendants conduct has been so outrageous and so unconstitutional, oppressive or arbitrary as to justify the imposition of the penalty of exemplary damages.
An appellate court should not interfere with the judgment of the court below unless that judgment is plainly wrong.
On the material that was before him, Davis J was entitled to reach the conclusion that he reached.
In my view, the Court of Appeal were also entitled to reach the conclusion that they reached on the more extensive material that was before them.
Both the judge and the Court of Appeal applied the correct test.
In particular, the Court of Appeal were right to place some weight on the fact that the Secretary of State had the statutory power to detain the appellants pending deportation and that, although she in fact exercised that power unlawfully, she could have done so lawfully.
They were also right to say that, if her conduct is properly to be described as unconstitutional, oppressive or arbitrary, it was at the less serious end of the scale.
It is material that there is no suggestion that officials acted for ulterior motives or out of malice towards the appellants.
Nevertheless, there was a deliberate decision taken at the highest level to conceal the policy that was being applied and to apply a policy which, to put it at its lowest, the Secretary of State and her senior officials knew was vulnerable to legal challenge.
For political reasons, it was convenient to take a risk as to the lawfulness of the policy that was being applied and blame the courts if the policy was declared to be unlawful.
The Court of Appeal identified at para 123 of their judgment a further point which militated against awards of exemplary damages to the appellants.
Where there is more than one victim of a tortfeasors conduct, one award of damages should be made which should be shared between the victims, rather than separate awards of exemplary damages for each individual: see Riches v News Group Newspapers Ltd [1986] QB 256.
This is because the purpose of the award is to punish conduct rather than compensate the claimants.
In Riches, the victims of the tort were a small class who were all before the court.
But where (as in the present case) there is potentially a large number of claimants and they are not all before the court, it is not appropriate to make an award of exemplary damages: see AB v South West Water Services Ltd [1993] QB 507, 527B D per Stuart Smith LJ and p 531D E per Sir Thomas Bingham MR.
Unless all the claims are quantified by the court at the same time, how is the court to fix and apportion that punitive element of the damages? If the assessments are made separately at different times for different claimants, how is the court to know that the overall punishment is appropriate? The Court of Appeal were right to regard this a further reason why it was not appropriate to award exemplary damages in the present case.
There is yet one further point.
It is unsatisfactory and unfair to award exemplary damages where the basis for the claim is a number of serious allegations against named officials and Government Ministers of arbitrary and outrageous use of executive power and those persons have not been heard and their answers to the allegations have not been tested in evidence.
In a private law action, they would almost certainly have been called to give evidence.
But oral evidence is rarely adduced in judicial review proceedings and, understandably, it was not adduced in the present case.
Overall conclusion
I would, therefore, allow these appeals.
For the reasons that I have given, the Secretary of State is liable to both appellants in the tort of false imprisonment on the narrow ground that she unlawfully exercised the statutory power to detain them pending deportation because she applied an unpublished policy which was inconsistent with her published policy.
The appellants are, however, only entitled to nominal damages because, if the Secretary of State had acted lawfully and applied her published policy, it is inevitable that both appellants would have been detained.
As regards the discrete question whether the detention of Mr Lumba was in any event unlawful on the grounds of a breach of the Hardial Singh principles, I would remit this to a High Court judge.
Finally, neither appellant is entitled to exemplary damages.
LORD HOPE
In agreement with Lord Walker, Lady Hale, Lord Collins, Lord Kerr and Lord Dyson I would hold that the Secretary of State is liable to the appellants in the tort of false imprisonment because she applied to them an unpublished policy which was inconsistent with her published policy, and I too would remit to a High Court judge the question whether Mr Lumbas detention was unlawful as being in breach of the Hardial Singh principles.
As I am anxious to avoid adding to the length of the courts judgment, I shall simply say that I am in full agreement with all the reasons that Lord Dyson has given on these issues except that I do not have the same difficulty as he has with the use of the phrase abuse of power by Lord Walker (see para 69, above).
There are only three points on which I wish to comment.
First, as Lord Phillips has noted (see para 258, below), it was common ground in these appeals that Lord Dyson correctly summarised the effect of Woolf Js judgment in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704.
Nevertheless he has indicated that he does not consider that the first and second principles that Lord Dyson has extracted from it can properly be derived from what Woolf J said in that judgment.
For my part, I think that Lord Dysons summary, which he has taken from his judgment in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46, is accurate and I would endorse it.
We can, of course, read what Woolf J said for ourselves, and there are no doubt various ways of expressing what Lord Dyson has taken from it.
The essential point, as Lady Hale has explained (see para 199, below), is that the detention must be for the statutory purposes of making or implementing a deportation order and for no other purpose.
Lord Phillips says that he can see no justification for reading the terms of the statute in this way, that it places an unjustified restriction on the Secretary of States power of detention and that he does not believe that Woolf J intended to say what Lord Dyson has attributed to him.
He would read Hardial Singh as concerned only with the length of time that was reasonably necessary to effect deportation and not the purpose of the detention.
I am unable, with respect, to agree with this interpretation of Woolf Js judgment.
There are two points that need to be considered.
The first is, what do the words that Woolf J used actually mean? The second is whether, if they have the meaning that Lord Dyson has attributed to them, this limitation on the statutory power can properly be read into the statute.
As to the first point, in the second sentence of the relevant paragraph (see para 262 of Lord Phillipss judgment) Woolf J makes it plain that in his view the statutory power can only authorise detention if the individual is being detained pending the making of a deportation order or pending his removal and for no other purpose.
I think that his judgment could not be clearer on this issue, and that Lord Dyson has captured the essential points that Woolf J made accurately in his summary.
As for the second, it must be recognised that until now Woolf Js statement of the limitations to the statutory power has never been questioned.
I think that there are good reasons for this.
To confine the limitation to the period of the detention only and release the Secretary of State from the limitation as to purpose which Woolf J identified would greatly reduce the protection which, as I read it, his judgment was designed to give to the detainee.
For obvious reasons that, if it were to happen, would be regrettable.
It would, as Lord Phillips indicates in para 269, enable the Secretary of State to exercise the power to detain simply because he believed that the detainee would, if released, pose a threat to national security.
I do not think that article 5(1)(f) of the European Convention on Human Rights permits this interpretation of the statutory power.
If Parliament had intended that the power to detain could be used for a purpose other than the making or effecting of a deportation order, it would have had to have said this expressly and it has not done so.
It is hard also to see how the limitation as to time which Lord Phillips accepts can be read into the statute can be tested without having regard to the purpose for which the detainee is being held.
The limitation as to time and the limitation as to purpose are really two sides of the same coin.
They cannot be separated from each other.
I think that Woolf J was right to recognise this and that there are sound reasons for all that he said about the limitations that must be understood to qualify the statutory power.
Second, I cannot accept Lord Phillipss conclusion that the application of the secret policy did not render the detention of the appellants unlawful.
The basis for that view is that, if the published policy had been applied they would have been detained anyway and that, had they challenged their continued detention, they would have had no legitimate expectation of obtaining an order for their release.
This is the causation argument which, for the reasons Lord Dyson gives in paras 62 68 with which I agree, he rejects.
The key point, as I see it, are that we are dealing in this case with the tort of false imprisonment.
Torts of this kind are actionable per se regardless of whether the individual suffers any harm.
While not every breach of public law will give rise to a cause of action on this ground, the history of this case shows that there was here a serious abuse of power which was relevant to the circumstances of the appellants detention.
If the rule of law is to be sustained, the detention must be held to have been unlawful.
The appellants were being detained without regard to the purpose for which the Secretary of State was authorised to exercise the power by the statute.
The court must insist that powers of detention are exercised according to law.
If they are not, those who have abused their powers must accept the consequences.
It is no answer for them to say that they could, had they put their mind to it, have achieved the same result lawfully by other means.
Third, I agree that this is not a case for exemplary damages.
But, for the reasons given by Lord Walker and Lady Hale, I would hold that the breach of the appellants fundamental rights that has occurred in these cases should not be marked by an award only of nominal damages.
An award on ordinary compensatory principles is, of course, out of the question.
It is plain that the appellants would not have had any prospect of being released from detention if the Secretary of State had acted lawfully.
So they cannot point to any quantifiable loss or damage which requires to be compensated.
But the conduct of the officials in this case amounted, as Lord Walker says (see para 194, below), to a serious abuse of power and it was deplorable.
It is not enough merely to declare that this was so.
Something more is required, and I think that this is best done by making an award of damages that is not merely nominal.
The principles on which damages for breaches of fundamental rights are to be assessed in situations such as this are not greatly developed, as Elias CJ pointed out in the Supreme Court of New Zealand in Taunoa and others v Attorney General and another [2007] 5 LRC 680, para 108.
But some guidance is available from judgments which the Judicial Committee of the Privy Council has given where a constitutional right has been infringed.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 Lord Nicholls of Birkenhead added his own words to those of the Board in Harrikissoon v Attorney General of Trinidad and Tobago [1980] AC 265 as to how an award of damages should be assessed in such a case.
In para 18 he observed that when exercising its constitutional jurisdiction the court is concerned to uphold, or to vindicate, the constitutional right.
In para 19 he said that an award, not necessarily of substantial size, might be needed to reflect the sense of public outrage, emphasise the gravity of the breach and deter further breaches.
The law on this matter is still in the process of being worked out, so I should like to say just a little more about it.
Although such an award is likely in financial terms to cover much the same ground as an award by way of punishment in the sense of retribution, punishment in that sense is not its object.
The expressions punitive damages or exemplary damages are therefore best avoided.
Allowance must be made for the importance of the right and the gravity of the breach in the assessment of any award.
Its purpose is to recognise the importance of the right to the individual, not to punish the executive.
It involves an assertion that the right is a valuable one as to whose enforcement the complainant has an interest.
Any award of damages is bound, to some extent at least, to act as a deterrent against further breaches.
The fact that it may be expected to do so is something to which it is proper to have regard.
As for the amount to be awarded, an award is referred to as a conventional award when it is incapable of being calculated arithmetically as there is no pecuniary guideline which can point the way to a correct assessment: Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174, 189G H, per Lord Scarman.
In most cases the sum to be awarded can be derived from experience and from awards in similar cases: Ward v James [1966] 1 QB 273, 303, per Lord Denning MR.
But that cannot be said of this case.
So I would turn for guidance to what Lord Bingham of Cornhill said in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, para 8.
The conventional award that he had in mind in that case to mark the injury and loss due to the unwanted child was not, and was not intended, to be compensatory.
It was not the product of calculation, nor was it derived from awards in other similar cases.
But it was not a nominal, let alone a derisory, award.
Its purpose was to afford some measure of recognition of the wrong done.
In agreement with Lord Steyn, I regarded the idea of a conventional award under the tort system in that case as contrary to principle: Rees v Darlington Memorial Hospital NHS Trust paras 46, 70 77.
But I do not think that it is open to the same objection in the present context.
In this case the factors referred to by Lord Nicholls in Ramanoop must be the primary consideration.
There must be some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment, and account should be taken of the deterrent effect of an award lest there be the possibility of further breaches.
But account should also be taken of the underlying facts and circumstances which indicate that it should not be more than a modest one.
It should do no more than afford some recognition of the wrong done, without being nominal or derisory.
Lord Walker has suggested that an award of 1,000 to each appellant would be appropriate.
We have no yardstick by which that sum can be measured to test its accuracy.
Given the purpose of the award, I see no reason to disagree with his assessment although I, for my part, would have arrived at a substantially lower figure.
LORD WALKER
The issue on which Lord Brown differs from Lord Dyson is one of high importance and great difficulty.
Its high importance is obvious.
Lord Dyson cites Lord Bridge in R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1AC 58, 162, The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
It is a species of trespass to the person and as such a tort actionable without the need for proof of special damage.
The notion that no more than nominal damages should ever be awarded for false imprisonment by the executive arm of government sits uncomfortably with the pride that English law has taken for centuries in protecting the liberty of the subject against arbitrary executive action.
It would in Lord Browns view seriously devalue the whole concept of false imprisonment.
The difference of opinion between two Justices with so much expert knowledge in the field of public law, on a point of such high importance, demonstrates its difficulty.
I hardly need say that it is with diffidence that I make any contribution to the debate.
Lord Browns approach to the solution to the problem is to distinguish between cases where there is no lawful authority to detain a person (including cases where a precondition to lawful detention has not been satisfied) and cases where there is a power to detain, but in the exercise of that power the decision maker has been in breach of some public law duty.
In cases (or at any rate some cases) of the flawed exercise of a power to detain there is (so the argument goes) no false imprisonment at all, and so the question of awarding damages, whether nominal or otherwise, simply does not arise.
This solution has considerable attractions.
The proposed distinction is based on the difference between the existence (or rather non existence) of a lawful authority to detain, and a defective exercise of an authority which does exist: see the observations of Lord Brown in R (Khadir) v Secretary of State for the Home Department [2006] 1AC 207, para 33.
The difficulty that I feel is whether the distinction, though clear enough in theory, can cope with the variety and complexity of the problems that arise in practice, as illustrated by the numerous decided cases cited to the court.
I also have difficulty (or perhaps this is another way of putting the same point) in reconciling the basic existence/exercise distinction with the four categories which Lord Brown extracts from his analysis of successful claims for false imprisonment by executive action.
His four categories are (1) no power to detain; (2) failure to satisfy a precondition to exercising the power to detain; (3) detention beyond the scope of the power to detain; and (4) power to detain limited by published official policy.
The distinction is clear enough in extreme cases.
R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2AC 19 was a case (in Lord Browns category (1)) in which there was simply no lawful authority for the claimants detention after the date of expiration of her term of imprisonment, when properly adjusted for time spent on remand (the complicated statutory provisions as to allowances for multiple periods spent on remand had been misinterpreted).
At or near the other extreme was the breach of a public law duty to see that an asylum seeker detained at a detention centre received a medical examination within 24 hours.
The omission to provide a medical examination was an administrative failing but it did not render the detention unlawful: R (HK (Turkey)) v Secretary of State for the Home Department [2007] EWCA Civ 1357.
Lord Brown supplements his category (1) by category (2) so as to let in a range of cases in which there is for the time being no lawful authority to detain because some precondition has not been satisfied.
A well known example of this is Christie v Leachinsky [1947] AC 573, where a man arrested without a warrant was not correctly informed of the offence which gave rise to the power of arrest without a warrant.
Moreover categories (1) and (2) must be expanded to cover cases in which detention, although initially lawful, has become unlawful because of a failure to carry out some procedure or satisfy some condition of precedent fact required by statute.
A procedural example is Roberts v Chief Constable of the Cheshire Constabulary [1999] 1WLR 662, where the provisions of the Police and Criminal Evidence Act 1984 required detention in police custody to be reviewed every six hours.
The claimant had been detained at 11.25pm and the police officers failure to review his detention by 5.25 am on the next day made his detention unlawful until it was reviewed (and his detention continued) at 7.45 am, and the Court of Appeal refused to overturn or reduce the award of 500 damages, even though it accepted that his detention would have continued if a review had been carried out at the right time.
By contrast in R (Saadi) v Secretary of State for the Home Department [2002] 1WLR 3131 the statement of incorrect and inappropriate reasons on an official form handed to detained asylum seekers was not treated as a failure to satisfy a condition precedent affecting the legality of their continued detention.
The distinction between these two cases is that the relevant statutes were interpreted in one case as imposing a condition which had to be satisfied if continued detention was to be lawful, and as not imposing such a condition in the other case.
It is, as Laws LJ emphasised in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527, paras 21 and 25, an issue of statutory construction.
In that case the Court of Appeal held that compliance with rule 9 of the Detention Centre Rules 2001 (calling for a monthly review of detention with written reasons given to the detained person) was not a precondition to the continuation of lawful detention. (See Laws LJ at paras 31 35 and Keene LJ agreeing, with some hesitation, at para 47.)
Lord Browns category (3) is detention beyond the scope of the relevant power.
Laws LJ in SK (Zimbabwe), para 21, referred to the reach of the power.
These expressions, as I understand them, approximate to the object or purpose for which Parliament has conferred the power.
The importance of the statutory purpose has been recognised since Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 and (as Lord Dyson notes in para 30 of his judgment) the Hardial Singh principles (see R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704) reflect the application of the wide general principle of not deviating from the statutory purpose to the particular field of the detention of foreign nationals pending deportation.
Woolf J made this clear in Hardial Singh itself at p 706.
The wide general principle of not deviating from the statutory purpose is of such fundamental importance in public law that it can be seen as going to the existence of the power, rather than merely to its exercise.
In law the power exists only for the purposes for which Parliament has conferred it on the executive.
In Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97, 113, the Privy Council put it very simply: If removal is not pending . the director has no power at all.
So I would see Lord Browns category (3) as fitting reasonably comfortably into his basic existence/exercise classification.
Determining the purpose for which Parliament has conferred a power is also a process of statutory construction.
That process should not, in my opinion, be minutely elaborated.
I entirely accept the exposition of the Hardial Singh principles by Dyson LJ (as he then was) in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46.
It goes no further than spelling out clearly what is necessarily implicit in the purpose of detention with a view to deportation, and it has been widely cited and followed.
I have more of a problem in seeing Langley v Liverpool City Council [2006] 1 WLR 375 as a case where the police departed from the statutory purpose in exercising their power of removal under section 46 of the Children Act 1989 when an emergency protection order under section 44 of that Act had already been made.
The purpose of both statutory powers (one conferred on the police, the other on the court) was child protection in an emergency situation.
I regard Langley as a finely balanced decision in which the Court of Appeal held that well intentioned police action, directed to child protection and taken under pressure of circumstances, was nevertheless an unlawful manner of exercising the section 46 power.
Thorpe LJ (at para 79) reached that conclusion with some reluctance.
It is with Lord Browns category (4), however, that I have the greatest difficulty.
Here the issues are concerned with official policies how rigid or flexible they may be, whether and in how much detail they should be published, whether (in these appeals) a policy with a presumption towards detention is permissible.
Official decision makers need policies for obvious reasons.
Although decisions in the field of immigration law are all taken in the name of the Secretary of State, only a tiny handful of cases are actually decided by the Secretary of State personally.
Decisions are taken by a small army of officials at different levels, and they need guidance in order to achieve consistency in decision making.
Members of the public, or those of the public liable to be affected, should know where they stand, and so they are entitled to know, at least in general terms, the content of the official policies.
This is not a matter of being faithful to the purposes of statutory powers, but of seeing that they are exercised consistently and fairly.
There is a helpful discussion of these points in the judgment of the Court of Appeal in these appeals, prepared by Stanley Burnton LJ, at paras 53 58.
It is here that Lord Diplocks dictum in Holgate Mohammed v Duke [1984] AC 437 calls for consideration.
In a passage (at p.444) quoted by both Lord Brown and Lord Dyson, Lord Diplock expressed the view that Wednesbury principles are applicable to determining the lawfulness of the exercise of a statutory power of arrest not only in proceedings for judicial review but also in an action for damages for false imprisonment.
As Lord Dyson says, there seems to have been little argument on this point in the House of Lords.
Nor has there been much discussion of it in later authorities.
It was cited and followed by the Court of Appeal in D v Home Office (Bail for Immigration Detainees intervening) [2006] 1 WLR 1003 (see especially Brooke LJ at para 111).
In SK (Zimbabwe), Holgate Mohammed was cited by counsel but not referred to in the judgments in the Court of Appeal.
Holgate Mohammed and D v Home Office (Bail for Immigration Detainees intervening) were both discussed at some length in the Court of Appeal in these appeals (paras 50 52, and, in relation to causation, paras 82 84).
The Court of Appeal rightly regarded itself as bound by the latter decision.
This court is not bound to follow the Court of Appeals acceptance of Lord Diplocks dictum, and for my part I would refrain from giving it unequivocal approval.
Mr Beloff QC (appearing for the Secretary of State in this court) put forward some persuasive submissions in favour of an alternative approach.
They are noted in paras 76 and 86 of Lord Dysons judgment.
The first two submissions would make a qualification or exception, for the purposes of a private law claim for damages for false imprisonment, to the Anisminic equation of any significant public law error with lack of jurisdiction (see Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147).
Lord Dyson, in para 87, dismisses these in a single sentence as putting the clock back to pre Anisminic days.
With great respect, I think there may be more to be said about it.
Anisminic was one of the seminal cases in the development of modern public law.
But its full implications are still open to debate.
The context in which it equated wrongful exercise of jurisdiction with excess of jurisdiction (the courts response to an ouster clause in the Foreign Compensation Act 1950) was far removed from a private law claim for damages for false imprisonment.
It is a big step to extend the principle to a claim for damages for false imprisonment, where a defendant may have his professional reputation at stake and may not enjoy the procedural protections which attend judicial review (strict time limits, and the discretionary nature of the remedy granted).
I would prefer a more demanding test, that in a case where an extant statutory power to detain has been wrongly used there would be a private law claim only if the misuse amounted to an abuse of power (including but not limited to cases of misfeasance or other conscious misuse of power).
However, it is in my opinion unnecessary to decide the point in these appeals because the conduct of officials, including some senior officials, of the Home Office between April 2006 and September 2008 amounted to a serious abuse of power.
Lord Dyson has in paras 154 165 of his judgment described in restrained language how senior officials were well aware of the risk (indeed the likelihood) of challenge and decided to run the risk, (including the proposal to let immigration judges take any hit), and how further damaging facts were disclosed by stages, some before Davis J, some before the Court of Appeal, and some only in this Court.
Wherever the line is to be drawn (if, as I think, a line does need to be drawn between public law errors in detention policies which do or do not give rise to an action for false imprisonment) these appeals must in my view fall on the wrong side of the line from the Secretary of States point of view.
I agree with Lord Dyson (paras 165 168) that despite the deplorable official conduct this is not a case for exemplary damages.
But in my view it is not a case for nominal damages either.
Apart from cases concerned with constitutional rights in the Caribbean, (the line of authority starts with Attorney General of St Christophers, Nevis and Anguilla v Reynolds [1980] AC 637), the common law has always recognised that an award of more than nominal damages should be made to vindicate an assault on an individuals person or reputation, even if the claimant can prove no special damage. (See Mayne & McGregor on Damages, 18th ed. (2009) paras 42 008 to 009).
In these appeals, each claimant had a very bad criminal record and would undoubtedly have been kept in custody under the Secretary of States published policies.
They cannot therefore establish a claim to special damages.
But the argument on causation does not completely defeat their claims.
I would award each claimant the sum of 1,000 damages.
I would remit the case of Mr Lumba as Lord Dyson proposes.
On every point on which I have not expressed disagreement or doubt I am in respectful agreement with the judgment of Lord Dyson.
LADY HALE
I agree entirely with Lord Brown that far and away the most important issue in this case, as it is in the case of SK (Zimbabwe) [2009] 1 WLR 1527, is whether the breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful.
If it is, the second question is which breaches of public law duties have that consequence; and the third question is whether it makes any difference that the person authorising the detention both could and would have done so lawfully, without breaching the public law duty in question, had the point been drawn to his attention.
If that does not make a difference to liability, a fourth question is whether the fact that the person detained both could and would have been lawfully detained is of any relevance to the assessment of his damages for false imprisonment.
But I differ from Lord Brown in his view that the answer to the last of these questions should govern the answer to the first, second or third question: in other words, that if we take the view that no compensatory damages are payable in a case such as this it should follow that there is no liability in the first place.
Forcefully and attractively though that argument is made, it does put the cart before the horse.
It also fails to acknowledge that false imprisonment is a trespass to the person, actionable per se without proof that the claimant has suffered any harm for which the law would normally grant compensation.
As to the first question, this is a stronger case than is still before the Court in SK (Zimbabwe) because the illegality alleged (and now admitted) went to the criteria for detention rather than to the procedure for authorising it.
The statutory power to detain under paragraph 2(2) and (3) of schedule 3 to the Immigration Act 1971 (quoted by Lord Dyson at paragraph 4 of his judgment) is, on its face, very broad.
Provided that the detainee has been notified of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained pending the actual making of the order (para 2(2)).
Once the deportation order is made, he may be detained pending his removal or departure from the United Kingdom (para 2(3)).
However, since at least the case of R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704, it has been recognised that there are limitations implicit in these powers: the detention must be for the statutory purpose of making or implementing a deportation order and for no other purpose; hence it cannot be continued once it becomes clear that it will not be possible to effect deportation within a reasonable period; the Secretary of State must act with reasonable diligence and expedition to bring this about; and in any event the detention cannot continue for longer than a period which is reasonable in all the circumstances.
These limitations were devised long before the Human Rights Act and have been accepted without question ever since.
They stem from the long established principle of United Kingdom public law that statutory powers must be used for the purpose for which they were conferred and not for some other purpose: Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
They were not inspired by article 5(1)(f) of the European Convention for the Protection of Human Rights and Fundamental Freedoms and it does not follow that, because detention would be permissible under article 5(1)(f), it is also permissible under United Kingdom law.
The last restriction referred to above has not hitherto been questioned but it is the most questionable, for the Secretary of State may genuinely be doing all that she can to effect deportation, and deportation may still be a realistic possibility, but even so the deportee may have been detained for so long that it is no longer lawful to keep him there.
That this has never until now been questioned indicates how strong are the objections to indefinite detention by order of the executive.
But it undoubtedly gives rise to some difficult questions, as is amply shown by Lord Dysons discussion, in paragraphs 102 to 128 of his judgment, of the matters to be taken into account in deciding whether or not the period of detention is reasonable.
In addition to such substantive limitations, the law has also imposed procedural requirements upon apparently open ended statutory powers.
In common with Lord Dyson, I do not think that it matters whether these are characterised as implied conditions precedent or implied procedural requirements.
The effect is the same.
The best known example is Cooper v Wandsworth Board of Works (1863) 14 CB (NS) 180, 143 ER 414.
The Board had power to alter or demolish a house if the builder had not given 7 days notice of his intention to build.
The Court held that the common law imposed upon the Board a requirement to notify the builder before they decided to demolish the house, so that he could present arguments why they should not.
As the Board had not given the builder such an opportunity before demolishing the house, they were liable to him in damages for trespass.
It is true that Byles J founded his opinion partly on the basis that the Board had also failed in their express statutory duty to notify the builder of their demolition order: but the majority based their opinions on the broader principle that he had a right to be heard before the order was made: in other words, there were public law duties inherent in the apparently open ended statutory power.
Another example of the same principle is Christie v Leachinsky [1947] AC 573 where the common law implied a duty, when exercising a power of arrest, to tell the arrested person the power under which he was being arrested, so that he might know whether or not he could resist arrest.
Once again, the police were liable in false imprisonment.
The question is whether the same principles apply where the requirement in question is the duty, imposed by the common law, for the Secretary of State and his officials to comply with a published policy, unless there is good reason not to do so.
As I understand it, Lord Brown accepts that they may indeed do so, for he agrees that if the published policy further narrows and defines the circumstances in which the power will be exercisable, the Secretary of State may not lawfully depart from that.
It is on that basis that he considers R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 to have been correctly decided.
Support for the proposition that the ordinary requirement to observe public law duties may restrict the lawful exercise of a statutory (or common law) power which would otherwise authorise a trespass can be found in the dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437, 443, quoted by Lord Dyson at para 73 of his judgment.
On the face of it, this was a lawful arrest.
The argument was that the police officer had arrested the claimant for the wrong reason: to get her to confess.
There can be little doubt that, had the House of Lords concluded that this was indeed an impermissible consideration, they would have held that the arrest was unlawful and that the claimant was entitled to the damages she sought.
This was, after all, an action for damages for false imprisonment in which the claimant had succeeded in the county court.
If the House had thought that she would not have been entitled to damages in any event, it would surely have said so.
I agree with Lord Walker that it is not necessary to hold that every single departure from policy, or even failure in the decision making process, attracts these consequences in order to hold that they apply in this case.
The discrepancy between what the policy said should happen in these cases and what was actually happening is stark.
The claimants were being dealt with, not under the published, lawful policy, but under an unpublished, unlawful policy or practice.
Yet it is difficult not to have some sympathy for the officials involved.
The Government had been hit by a perfect storm in April 2006 when the popular press discovered that foreign national prisoners were being released after serving their sentences without any consideration being given to whether or not they should be deported.
It had cost the then Home Secretary his job.
The immediate answer was not to let any of them go.
This was at odds with the published policy, which presumed against the use of detention powers.
Officials knew this and they also knew that the policy needed amendment.
But they found it very difficult to devise a policy for publication which would be both lawful and acceptable to ministers.
Ministers wanted a near blanket ban on release, whereas the law requires some flexibility to respond to the circumstances of the particular case.
So the situation dragged on for many, many months.
These are just the sort of circumstances, where both Ministers and their civil servants are under pressure to do what they may know to be wrong, in which the courts must be vigilant to ensure that their decisions are taken in accordance with the law.
To borrow from the civil servants correspondence, the courts must be prepared to take the hit even if they are not.
The law requires that decisions to detain should be made on rational grounds and in an open and transparent way and not in accordance with arbitrary rules laid down by Government and operated in secret.
One of the most disturbing features of this sorry tale is that the case handling officials had to give reasons for their decisions which were not what their real reasons were.
The European Convention on Human Rights and the Strasbourg Court have not imposed the same requirements of proportionality upon detention with a view to deportation under article 5(1)(f) as they have upon detention under other provisions in article 5(1).
But any deprivation of liberty has to be in accordance with a procedure prescribed by law.
Unless the law has certain essential characteristics, there is a risk that detentions may be arbitrary.
That is why the open ended common law power to detain people who lack the capacity to make decisions for themselves on grounds of necessity was found incompatible with article 5(1)(e): see L v United Kingdom (2005) 40 EHRR 32.
There is every reason to think that Strasbourg would find a secret policy which presumed in favour of the detention of every foreign national prisoner open to the same objections.
The common law is just as respectful of the liberty of the person, and just as distrustful of arbitrary and secret decision making by officials acting on behalf of Government, as is the Convention.
I would therefore answer yes to the first question.
I would also answer the second question in the way proposed by Lord Dyson.
In other words, the breach of public law duty must be material to the decision to detain and not to some other aspect of the detention and it must be capable of affecting the result which is not the same as saying that the result would have been different had there been no breach.
The third question is whether it makes any difference that, in these particular cases, if the officials had been operating the published policy they both could and would have authorised the detention of these appellants.
This would not normally make any difference.
In Christie v Leachinsky, the officers could have made a lawful arrest and only chose to make an unlawful arrest for convenience, but they were still liable for false imprisonment.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, the custody officer could have reviewed the case when he should have done and would no doubt have authorised the continued detention then, but there was still liability in false imprisonment.
For all the reasons given by Lord Dyson, there is no basis for drawing a distinction according to the reason why the detention is unlawful, permitting what has been referred to as a causation defence in some cases but not in others.
The most difficult question is whether this should make any difference to the measure of damages awarded.
I quite agree with Lord Brown that the importance of strict adherence to the law when depriving people of their liberty should not be devalued.
Awarding the same measure of damages, irrespective of whether or not the person could and would have been lawfully detained, serves to reinforce the importance of this principle.
Also, if no distinction, according to the reason why the detention is unlawful, is to be drawn in relation to the second question, there should be no such distinction in relation to damages.
If we are to hold that a person who could and inevitably would have been detained lawfully had the correct criteria or procedures been applied is not to be compensated for the loss of liberty, then this must apply irrespective of the reason why depriving him of his liberty was unlawful.
We cannot single out these public law cases for special treatment.
In most cases of false imprisonment, the problem will not arise, because the detainer does not have a choice between acting lawfully and acting unlawfully.
The prison governor in R v Governor of Brockhill Prison, Ex p Evans (No 2) [2001] 2 AC 19 had no power to detain the prisoner beyond the properly calculated term of her imprisonment: the fact that he was acting in compliance with the law as it had previously been thought to be was neither here nor there.
The police officer in Langley v Liverpool City Council [2006] 1 WLR 375 had, as the Court of Appeal found in what I agree with Lord Walker was a finely balanced decision, no power to use his power to take a child into police protection under section 46 of the Children Act 1989 when the child could and should have been protected by social workers implementing an emergency protection order under section 44.
The immigration officers in Kuchenmeister v Home Office [1958] 1 QB 496 had no power to detain the claimant in such a way as to prevent his transiting from one aircraft to another at London airport.
However, where the defendant has failed to comply with a procedural requirement, there is always the possibility that the deed might have been done lawfully.
But the whole point of procedural requirements, such as those in Cooper v Wandsworth Board of Works or Christie v Leachinsky, is that the person whose rights are being infringed should have an opportunity of challenging this.
So it will rarely be possible to be confident that, had the correct procedure been followed, the outcome would have been the same.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 is an example where it was possible.
This case is another, because it would appear that, had the decision makers applied the published, lawful policy rather than the unpublished, unlawful policy, they would inevitably have reached the same conclusion.
Insofar as damages for false imprisonment are meant to compensate for the loss of liberty, it is difficult to see why a claimant should be compensated for the loss of something which he would never have enjoyed.
But, left to myself, I would not regard this as the end of the story.
Trespass, whether to person or property, has always been actionable per se, without proof of anything which the law regards as damage.
The tort is complete when a direct interference with person or property without lawful justification is established.
Usually, there will also be some harm done which the wrongdoer must remedy, either by damages or in some other way.
Take, for example, the case of the neighbour who put a row of ridge tiles on his neighbours roof.
They did no harm to the roof; they did not diminish the value of the house in any way; indeed many might think them an enhancement; but the claimant did not want them there and successfully sued for trespass.
The obvious remedy was to remove the tiles or pay the cost of the claimants doing so.
But suppose there is no such harm.
The claimant has nevertheless been done wrong.
Let us also assume, as is the case here, that the circumstances are not such as to attract punitive or exemplary damages.
Is our law not capable of finding some way of vindicating the claimants rights and the importance of the principles involved? A way which does not purport to compensate him for harm or to punish the defendant for wrongdoing but simply to mark the laws recognition that a wrong has been done?
As Lord Collins explains, the concept of vindicatory damages has been developed in some Commonwealth countries with written constitutions enshrining certain fundamental rights and principles and containing broadly worded powers to afford constitutional redress (and also in New Zealand, which has no written Constitution but does have a Bill of Rights: Taunoa v Attorney General [2008] 1 NZLR 429).
In an early article on the Canadian Charter, Damages as a remedy for infringement of the Canadian Charter of Rights and Freedoms (1984) 62(4) Canadian Bar Review 517, Marilyn Pilkington argued that an award of damages under section 24(1) of the Charter should not be limited by the common law principles of compensation.
In a proper case it might be designed to deter repetition of the breach, or to punish those responsible or to reward those who expose it.
In Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607, the Privy Council upheld a modest award of exemplary damages for breach of a constitutional right.
But there can be a middle course between compensatory and exemplary damages.
In Jorsingh v Attorney General (1997) 52 WIR 501, de la Bastide CJ and Sharma JA in the Court of Appeal of Trinidad and Tobago both said, albeit obiter, that the remedies available under section 14(2) of the Constitution were not limited by common law principles.
Sharma JA said, at p 512, that The court is mandated to do whatever it thinks appropriate for the purpose of enforcing or securing the enforcement of any of the provisions dealing with the fundamental rights.
Not only can the court enlarge old remedies; it can invent new ones as well, if that is what it takes or is necessary in an appropriate case to secure and vindicate the rights breached.
Since then, the concept of vindicatory damages for breach of constitutional rights has been recognised by the Judicial Committee of the Privy Council, in Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38 (Bahamas); applied to breach of constitutional provisions other than the fundamental rights and freedoms, in Fraser v Judicial and Legal Services Commission [2008] UKPC 25 (St Lucia) and Inniss v Attorney General [2008] UKPC 42 (St Kitts), which involved the dismissal of respectively a magistrate and a High Court registrar in breach of the procedures laid down in the Constitution; and applied to the breach of fundamental rights in Takitota v Attorney General [2009] UKPC 11 (Bahamas), where the Board quoted from Lord Nicholls in Ramanoop, at para 19: An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter future breaches.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided .
We are not here concerned with a written constitution with a broadly drawn power to grant constitutional redress.
But neither are we concerned with a statutory provision, such as section 8(3) and (4) of the Human Rights Act 1998, with a narrowly drawn power to award damages.
We are concerned with a decision taken at the highest level of Government to detain certain people irrespective of the statutory purpose of the power to detain.
The common law has shown itself capable of growing and adapting to meet new situations.
It has recently invented the concept of a conventional sum to mark the invasion of important rights even though no compensatory damages are payable.
In the view of the majority of the House of Lords in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, there were sound reasons of public policy why damages should not be recoverable for the cost of bringing up a healthy child born as a result of a negligent sterilisation.
Nevertheless, an award limited to the stress and trauma associated with the pregnancy and birth was insufficient to mark the legal wrong which had been done to the mother.
This should be marked by a fixed, non negligible, conventional sum (in that case 15,000).
Rees was concerned with the rights to bodily integrity and personal autonomy, the right to limit ones family and to live ones life in the way planned: see Lord Bingham of Cornhill at paragraph 8.
These are important rights indeed.
But no one can deny that the right to be free from arbitrary imprisonment by the state is of fundamental constitutional importance in this country.
It is not the less important because we do not have a written constitution.
It is a right which the law should be able to vindicate in some way, irrespective of whether compensatable harm has been suffered or the conduct of the authorities has been so egregious as to merit exemplary damages.
Left to myself, therefore, I would mark the false imprisonment in these cases with a modest conventional sum, perhaps 500 rather than the 1000 suggested by Lord Walker, designed to recognise that the claimants fundamental constitutional rights have been breached by the state and to encourage all concerned to avoid anything like it happening again.
In reality, this may well be what was happening in the older cases of false imprisonment, before the assessment of damages became such a refined science.
I therefore agree, and (subject to the additional points made above) for the reasons given by Lord Dyson, that both these appeals should be allowed.
When considering what was a reasonable period for which to detain Mr Lumba in accordance with the Hardial Singh principles, however, I would stress that his psychiatric condition must be among the factors to be taken into account.
LORD COLLINS
I agree with Lord Dyson that the appeals should be allowed, substantially for the reasons which he gives.
This is a case in which on any view there has been a breach of duty by the executive in the exercise of its power of detention.
Fundamental rights are in play.
Chapter 39 of Magna Carta (1215) said that no free man shall be seized or imprisoned except by the law of the land and the Statute of Westminster (1354) provided that no man of what state or condition he be, shall be imprisoned without being brought in answer by due process of the law.
That the liberty of the subject is a fundamental constitutional principle hardly needs the great authority of Sir Thomas Bingham MR (see In re S C (Mental Patient: Habeas Corpus) [1996] QB 599, 603) to support it, but it is worth recalling what he said in his book The Rule of Law (2010), at p 10, about the fundamental provisions of Magna Carta: These are words which should be inscribed on the stationery of the Home Office.
The evidence shows that concern was expressed in the Home Office from an early stage about the lawfulness of the policy, and that a deliberate decision was taken to continue an unlawful policy.
As Lord Dyson says, caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
Home Office officials recognised that Ministers preferred position may be to continue to detain all FNPs and let the immigration judges take any hit which is to be had by releasing on bail.
The draft policy submission circulated in May 2007 recommended a change in policy, but also set out continued detention as one of the options, recognising that legal advisers considered that the department would lose on any legal challenge.
The draft added: we could present any change in our approach as having been forced on us by the courts.
I am satisfied that the serious breach of public law in this case has the result that the detention of the appellants was unlawful.
Any other result would negate the rule of law.
Christie v Leachinsky [1947] AC 573 shows that where an arrest was unlawful because it did not comply with the requirements imposed by the common law there would be a false imprisonment even if the arrest could have been effected in a proper manner.
Holgate Mohammed v Duke [1984] AC 437, 443, is high authority for the proposition that breach of principles of public law can found an action at common law for damages for false imprisonment.
Are they entitled to more than nominal damages? In particular are they entitled to vindicatory damages? The expression vindicatory damages has been in common use in the context of proceedings for violation of constitutional rights since Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38.
It would seem that the expression had its origin in the United States, where it was sometimes used as a synonym for exemplary or punitive damages (e.g. Cole v Tucker, 6 Tex 266 (1851); Blair Iron & Coal Co v Lloyd, 3 WNC 103 (Pa (1874)), but at other times used to mean damages designed to vindicate a right but which were compensatory in nature (e.g. McBride v McLaughlin, 5 Watts 375 (Pa 1836); Hallmark v Stillings, 648 SW 2d 230 (Mo 1983)).
In England the expression first emerged in a sense somewhat different from, but in a sense related to, that in which it is now used.
In Broome v Cassell & Co Ltd [1972] AC 1027, 1071, Lord Hailsham of Marylebone LC said: In actions of defamation and in any other actions where damages for loss of reputation are involved, the principle of restitutio in integrum has necessarily an even more highly subjective element.
Such actions involve a money award which may put the plaintiff in a purely financial sense in a much stronger position than he was before the wrong.
Not merely can he recover the estimated sum of his past and future losses, but, in case the libel, driven underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by a jury sufficient to convince a bystander of the baselessness of the charge.
As Windeyer J well said in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 115, 150: It seems to me that, properly speaking, a man defamed does not get compensation for his damaged reputation.
He gets damages because he was injured in his reputation, that is simply because he was publicly defamed.
For this reason, compensation by damages operates in two waysas a vindication of the plaintiff to the public and as consolation to him for a wrong done.
Compensation is here a solatium rather than a monetary recompense for harm measurable in money.
See also, e.g. Sutcliffe v Pressdram Ltd [1991] 1 QB 153; Rantzen v Mirror Group Newspapers (1986) Ltd [1994] QB 670; Purnell v Business F1 Magazine Ltd [2007] EWCA Civ 744, [2008] 1 WLR 1.
Any consideration of the Privy Council decisions on vindicatory damages must be prefaced by three points.
First, they were concerned with alleged violations of constitutional rights.
Second, the constitutions contained provision in relation to such violations for redress (Trinidad and Tobago, section 14(1) (without prejudice to any other action which is lawfully available); Bahamas, article 28(1) (but not if adequate means of redress are available under any other law), or relief together with such remedy as the court considers appropriate (Saint Christopher & Nevis, section 96(1), (3); Saint Lucia, section 105(1), (3)).
Third, although the distinction has sometimes been blurred (as perhaps in Takitota v Attorney General [2009] UKPC 11, 13), the decisions are concerned with two heads of damage, compensatory damages and vindicatory damages.
In Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328, at 18 19 Lord Nicholls, speaking for the Board, dealt with both heads of damages in this way: [18] When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of the constitutional right will not always be coterminous with the cause of action at law. [19] An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements have a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
In Merson v Cartright and Attorney General [2005] UKPC 38 the gravity of police misconduct was such as to attract an award of $100,000 for violations of the Constitution in addition to $90,000 in damages for assault, battery and false imprisonment, and $90,000 for malicious prosecution.
It was held by the Privy Council that the awards were not duplicative.
Lord Scott said (at 18): The purpose of a vindicatory award is not a punitive purpose.
It is not to teach the executive not to misbehave.
The purpose is to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression.
The sum appropriate to be awarded to achieve this purpose will depend upon the nature of the particular infringement and the circumstances relating to that infringement.
It will be a sum at the discretion of the trial judge.
In some cases a suitable declaration may suffice to vindicate the right; in other cases an award of damages, including substantial damages, may seem to be necessary.
A vindicatory award of $50,000 was made in Inniss v Attorney General [2008] UKPC 42.
In Subiah v Attorney General of Trinidad and Tobago [2008] UKPC 47, at 11 Lord Bingham noted that when deciding whether to award vindicatory damages, the answer is likely to be influenced by the quantum of the compensatory award, as also by the gravity of the constitutional violation in question to the extent that this is not already reflected in the compensatory award.
See also Durity v Attorney General of Trinidad and Tobago [2008] UKPC 59, 35.
But in Suratt v Attorney General of Trinidad and Tobago (No 2) [2008] UKPC 38 and James v Attorney General of Trinidad and Tobago [2010] UKPC 23 declaratory relief was sufficient.
The availability of damages for constitutional wrongs, and in particular, exemplary or vindicatory damages, is, or has been, controversial in many countries.
In the United States, nominal damages can be awarded for the deprivation of a constitutional right without proof of actual injury, but substantial damages can be awarded only to compensate for actual injury: e.g. Elkins v District of Columbia, 710 F Supp 2d 53, 63 64 (DDC 2010), citing Carey v Piphus, 435 US 247 (1978); Memphis Community School District v Stachura, 477 US 299 (1986).
In Ntandazeli Fose v Minister of Safety and Security in the Constitutional Court of South Africa [1998] 1 LRC 198 Ackermann J considered whether appropriate relief for infringements of the Interim Constitution of South Africa justified, in addition to compensatory damages for assault, an award for vindication of the rights and for punitive damages.
After a full account of the law in other countries he said that he had considerable doubts whether, even where the infringement of the right caused no damage, an award of constitutional damages in order to vindicate the right would be appropriate, and suggested that the court might conclude that a declaratory order combined with a suitable order for costs would be a sufficiently appropriate remedy to vindicate the right even in the absence of an award of damages.
But in any event there was no place for constitutional punitive damages: 68, 69.
In Taunoa v Attorney General [2008] 1 NZLR 429 the Supreme Court of New Zealand was more sympathetic to vindicatory damages.
Elias CJ said (at para 109) that damages in such cases should be limited to what is adequate to mark any additional wrong in the breach and, where appropriate, to deter future breaches.
See also Tipping J at 317 (the interests of the victim require the court to consider what compensation is due, but society is a victim also, and the court must consider also what is necessary by way of vindication to protect fundamental rights and freedoms); also Blanchard J at 258; McGrath J at 370.
The most recent consideration of the question was by the Supreme Court of Canada in Vancouver (City of) v Ward [2010] 2 SCR 28, in relation to damages for breach of the Canadian Charter of Rights and Freedoms.
McLachlin CJ said that Charter damages had the functions of compensation, vindication and deterrence.
By vindication she meant the affirmation of constitutional values, focusing on the harm which breach of the Charter did to society.
The fact that the claimant had not suffered personal loss did not preclude an award of damages where the objectives of vindication or deterrence clearly called for an award, and the view that constitutional damages were only available for pecuniary or physical loss had been widely rejected in other constitutional democracies: 28, 30.
The present claims are not, of course, for constitutional damages.
Exemplary damages are available where the executive has acted in a way which is oppressive, arbitrary or unconstitutional.
In Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122, 63 Lord Nicholls said: The availability of exemplary damages has played a significant role in buttressing civil liberties, in claims for false imprisonment and wrongful arrest.
From time to time cases do arise where awards of compensatory damages are perceived as inadequate.
The nature of the defendants conduct calls for a further response from the courts.
On occasion conscious wrongdoing by a defendant is so outrageous, his disregard for the plaintiffs rights so contumelious, that something more is needed to show that the law will not tolerate such behaviour.
Without an award of exemplary damages, justice will not have been done.
Exemplary damages, as a remedy of last resort, fill what would otherwise be a regrettable lacuna.
But this is not a case for exemplary damages falling within the first head of Rookes v Barnard [1964] AC 1129.
Nor do I consider that the concept of vindicatory damages should be introduced into the law of tort.
In truth, despite the suggestions to the contrary in the Privy Council in Ramanoop and Merson, vindicatory damages are akin to punitive or exemplary damages (as in Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607).
In Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 the question was whether there was an abuse of process to allow a claim against the police for the wrongful death of James Ashley to proceed where the police admitted liability for all damages.
The House of Lords held by a majority that for the claim to proceed was not an abuse.
Lord Scott (obiter) suggested that the claim should proceed in order that vindicatory damages could be available.
He referred to Lord Hopes observation in Chester v Afshar [2004] UKLH 41, [2005] 1 AC 134, 87 that the function of the law is to enable rights to be vindicated and to provide remedies when duties have been breached.
Lord Scott said at para 22: Although the principal aim of an award of compensatory damages is to compensate the claimant for loss suffered, there is no reason in principle why an award of compensatory damages should not also fulfil a vindicatory purpose.
But it is difficult to see how compensatory damages can could ever fulfil a vindicatory purpose in a case of alleged assault where liability for the assault were denied and a trial of that issue never took place.
Damages awarded for the purpose of vindication are essentially rights centred, awarded in order to demonstrate that the right in question should not have been infringed at all.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 the Privy Council upheld an award of vindicatory damages in respect of serious misbehaviour by a police officer towards the claimant.
These were not exemplary damages; they were not awarded for any punitive purpose.
They were awarded, as it was put in Merson v Cartwright [2005] UKPC 38, another case in which the Privy Council upheld an award of vindicatory damages, in order to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression: para 18.
The rights that had been infringed in the Ramanoop case and in Merson v Cartwright were constitutional rights guaranteed by the respective constitutions of the countries in question.
But the right to life, now guaranteed by article 2 of the European Convention [on Human Rights] and incorporated into our domestic law by the Human Rights Act 1998, is at least equivalent to the constitutional rights for infringement of which vindicatory damages were awarded in Ramanoop and Merson v Cartwright.
But what Lord Hope said in Chester v Afshar was not said in the context of damages, and it seems clear that neither Lord Bingham nor Lord Rodger agreed.
In particular Lord Rodger said that the right to bodily integrity was protected by the tort actionable per se of trespass to the person, where the law vindicates that right by awarding nominal damages (para 60).
To make a separate award for vindicatory damages is to confuse the purpose of damages awards with the nature of the award.
A declaration, or an award of nominal damages, may itself have a vindicatory purpose and effect.
So too a conventional award of damages may serve a vindicatory purpose.
That is the basis of Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309.
As a result of a failed sterilisation negligently performed, the claimant gave birth to a child.
The House of Lords held by a majority that although the health authority was not liable to compensate for the childs upbringing, compensation in respect of stress, trauma and the costs associated with pregnancy and birth were recoverable.
In addition the claimant was awarded an additional sum of 15,000 of which Lord Bingham said: [the] award would not be, and would not be intended to be, compensatory.
It would not be the product of calculation.
But it would not be a nominal, let alone a derisory, award.
It would afford some measure of recognition of the wrong done (para 8).
See also Lords Nicholls, Millett, and Scott: at 17, 123, 148, and the critical views expressed in McGregor, Damages 18th ed (2009), paras 35 29735 299.
Neither the minority dicta in Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] 1 AC 962 nor the award in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309 justify a conclusion that there is a separate head of vindicatory damages in English law.
Consequently I do not consider that there is any basis in the present law for such an award.
Nor do I consider that there is a basis in policy for the creation of a head of vindicatory damages at common law, distinct from the existing law of compensatory or exemplary damages.
I would therefore restrict the remedy in this case to nominal damages for the reasons given by Lord Dyson.
LORD KERR
For the reasons given by Lord Dyson, with which I agree, I too would allow this appeal.
A causation test
False imprisonment is established if there has been a detention and an absence of lawful authority justifying it.
The question whether lawful authority exists is to be determined according to an objective standard.
It either exists or it does not.
It is for this elementary but also fundamental reason that a causation test can have no place in the decision whether imprisonment is false or lawful.
By a causation test in this context I mean a test which involves an examination of whether the persons held in custody could have been lawfully detained.
The fact that a person could have been lawfully detained says nothing on the question whether he was lawfully detained.
The Court of Appeal in the present case decided that, since the claimants could have been detained lawfully had the published policy been applied to them, the fact that an unpublished and unlawful policy was in fact applied was immaterial.
With great respect, this cannot be right.
The unpublished policy was employed in the decision to detain the appellants.
It was clearly material to the decision to detain.
Indeed, it was the foundation for that decision.
An ex post facto conclusion that, had the proper policy been applied, the appellants would have been lawfully detained cannot alter that essential fact.
The inevitability of the finding that the detention was unlawful can be illustrated in this way.
If, some hours after making the decision to detain the appellants (based on the application of the unpublished policy), it was recognised that this did not constitute a legal basis on which they could be held, could their detention be said to be lawful before any consideration was given to whether the application of the published policy would have led to the same result? Surely, at the moment that it became clear that there was no lawful authority for the detention and before any alternative basis on which they might be detained was considered, their detention was unlawful.
It is, I believe, important to recognise that lawful detention has two aspects.
First the decision to detain must be lawful in the sense that it has a sound legal basis and, secondly, it must justify the detention.
This second aspect has found expression in a large number of judgments, perhaps most succinctly in the speech of Lord Hope in R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2 AC 19, 32 D where he said it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification.
It seems to me to be self evident that the justification must relate to the basis on which the detainer has purported to act, and not depend on some abstract grounds wholly different from the actual reasons for detaining.
As Mr Husain QC put it, the emphasis here must be on the right of the detained person not to be detained other than on a lawful basis which justifies the detention.
Detention cannot be justified on some putative basis, unrelated to the actual reasons for it, on which the detention might retrospectively be said to be warranted.
Simply because some ground for lawfully detaining may exist but has not been resorted to by the detaining authority, the detention cannot be said, on that account, to be lawful.
This point was clearly made in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662.
In that case the plaintiff had been lawfully arrested and detained in a police cell.
A review of his detention as required by statute was not carried out within the prescribed time.
At p 667 B the submission of counsel for the Chief Constable was recorded as being that if circumstances existed which were or would be sufficient to justify continued detention the plaintiff could not fairly be said to be detained without lawful excuse.
That submission was roundly and, in my view, rightly rejected, Clarke LJ saying, As I see it, it is nothing to the point to say that the detention would have been lawful if a review had been carried out or that there were grounds which would have justified continued detention.
Likewise it is nothing to the point in this case that if the decision had been taken on the basis of the published policy, it would have been immune from challenge.
As Professor Cane put it in The Temporal Element in Law (2001) 117 LQR 5, 7 imprisonment can never be justified unless actually [as opposed to hypothetically] authorised by law. (The emphasis and the words enclosed in square brackets are mine).
The matter might be considered on the following hypothetical basis.
Suppose that there were two policies, one lawful published policy for the detention of foreign national prisoners sentenced to more than 5 years imprisonment, the other an unlawful secret policy for detention of those sentenced to more than 2 years imprisonment.
On the respondents case an individual detained under the second policy, who would have been detained under the first policy if it had been applied, has not been detained unlawfully.
I do not consider that such an argument is viable.
A policy may lawfully be devised for the purpose of dealing generally with a regularly occurring species of case but it must always be possible to depart from the policy if the circumstances of an individual case warrant it.
As the author of Wade & Forsyth on Administrative Law 10th ed (2009) at page 270 states: It is a fundamental rule for the exercise of discretionary power that discretion must be brought to bear on every case: each one must be considered on its own merits and decided as the public interest requires at the time.
In the mooted example, consideration would be given to departing from a policy which is different from that which the individual is entitled to have applied to him.
The possible justification for departing from the policy would be considered on a different basis from that which ought properly to determine the question.
This is, in my view, impermissible in public law terms.
A minister exercising his discretion by applying a published policy is acting lawfully.
But if the policy which is applied is unlawful, the exercise of discretion is unlawful.
The individual has not had applied to his case the proper exercise of discretion to which he is entitled.
The application of an unlawful policy will therefore ipso facto render the decision to detain unlawful.
In this context, I consider that it matters not whether the decision is said to be in violation of a public law principle or ultra vires the power to make the decision.
To draw such a distinction would mark a radical departure from how error of law has long been understood.
Again, a short extract from Wade & Forsyth at p 255 makes the point decisively: Void or voidable was a distinction which could formerly be applied without difficulty to the basic distinction between action which was ultra vires and action which was liable to be quashed for error of law on the face of the record.
That distinction no longer survives since the House of Lords [in Anisminic and subsequent cases] declared all error of law to be ultra vires.
The nature of the public law breach required to invalidate the detention
In R (SK Zimbabwe) v Secretary of State for the Home Department [2009] 1 WLR 1527 it was accepted by the appellant that not every type of public law breach, committed after an initially valid detention, would render continued detention unlawful.
On the present appeal the argument on behalf of the detained persons is put thus: a public law error that bears directly on the decision to detain will mean that the authority for detention is ultra vires and unlawful, and will sound in false imprisonment.
But breaches which have no direct bearing on the decision to detain do not have that effect.
Since, therefore, for instance, statutory obligations to permit a detainee to consult with his legal advisers (Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763) or to be provided with food or clothing, or to be held in certain conditions (R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1 AC 58) did not bear on the legality of detention, breach of those obligations did not render detention unlawful nor did it give rise to a claim for false imprisonment.
Lord Walker has analysed the existence/exercise of power to detain dichotomy in a way that I find compelling.
This has led him to the conclusion that the essential test as to the validity of continued detention which is said to be beyond the scope of the power to detain is whether there has been a departure from the statutory purpose.
Again, I find his reasoning on this wholly convincing.
I do not agree, however, that it is necessary to establish abuse of power in order to show that the decision is beyond the scope of the power to detain, if by abuse of power it is meant that some deliberate misuse of power is required.
If a review of a persons detention was inadvertently overlooked and it subsequently became clear that, had the review taken place, he would certainly have been released, it surely could not be suggested that the detention that had in the meantime occurred did not constitute false imprisonment.
The statutory purpose of the power to detain foreign nationals after the expiry of their sentence is to facilitate their deportation. (In this connection I agree fully with Lord Dyson in his analysis of the Hardial Singh (R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704) principles and with what he had to say about those principles in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46.) Where the statutory purpose no longer exists, the power to detain falls away.
The means of ascertaining whether the statutory purpose remains achievable is the system of review.
Where that system is operated on the basis of a policy, it is of obvious and critical importance that the policy be transparent and that those who may be detained on foot of it have the opportunity to make informed representations on its application.
Breach of a public law duty which has the effect of undermining the achievement of the statutory purpose will therefore, in my opinion, render the continued detention invalid.
A claim of false imprisonment is the natural, indeed inevitable, entitlement of a person whose detention is no longer justified.
Since the appellants in the present case were detained by the operation of a secret, unpublished policy, an effective system of review of the justification for their detention was not possible.
As a consequence their detention could no longer be said to be justified.
As it seems to me, this approach approximates to the way in which the case was put for the appellants but links it more closely to the vital consideration of the statutory purpose of the power to detain.
Does the award of nominal damages devalue the tort of false imprisonment?
As various members of the court have pointed out, the fact that false imprisonment is a species of trespass to the person and is actionable without proof of special damage must be carefully taken into account in deciding whether nominal damages can ever be considered appropriate.
The impact of a finding that the State has been guilty of false imprisonment (whether or not it is also ordered to pay compensation) should not be underestimated, however.
Such a finding has the effect, in the words of Lady Hale, of mark[ing] the laws recognition that a wrong has been done.
And it is in the unambiguous recognition and declaration by the law that an individual has been falsely imprisoned that the essential value of the entitlement to assert that claim lies.
I do not believe, therefore, that the award of nominal damages will, of itself and as a matter of automatic consequence, bring about a devaluation of the tort.
On the question whether the award of nominal damages or some other measure of compensation is required in false imprisonment claims, I believe that a distinction is clearly merited between those cases where it is plain that the detainees would have been released and those where it can be shown that they would have been lawfully detained, had the correct procedures been followed.
Because false imprisonment is a trespassory tort, it is said that the vindicatory dimension to the assessment of compensation is important.
I shall examine that claim presently but, whatever may be said about its correctness, it is surely right that the actual impact on the individual who has been falsely imprisoned (or perhaps more importantly, the impact that could have been avoided) should feature prominently in the assessment of the appropriate amount of compensation.
Traditionally, the primary function of damages has been to compensate the individual for the loss that he or she has suffered (compensatory damages).
More recently the concept of restitutionary damages has been recognised where damages for the tort are measured according to the gain that the defendant has obtained or the value that the right infringed might have had to the claimant where, for instance, unknown to the claimant, the defendant has used the claimants property.
This category of damages is not relevant here.
A third type of damages (vindicatory damages) may be.
In a number of recent decisions the Judicial Committee of the Privy Council has awarded what might be classified as vindicatory damages where there has been a breach of constitutional rights.
Attorney General for Trinidad and Tobago v Ramanoop [2006] 1 AC 328 is perhaps the leading of these cases.
At para 19 Lord Nicholls, delivering the judgment of the Committee, said : An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
All these elements have a place in this additional award.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
Lord Nicholls recognition that this type of award covered much the same ground as that involved in exemplary or punitive damages is reflected in the more recent decision of the Privy Council in Takitota v Attorney General [2009] UKPC 11 where, at para 15, Lord Carswell said : it would not be appropriate to make an award both by way of exemplary damages and for breach of constitutional rights.
When the vindicatory function of the latter head of damages has been discharged, with the element of deterrence that a substantial award carries with it, the purpose of exemplary damages has largely been achieved.
For the reasons given by Lord Dyson an award of exemplary damages is not warranted in these cases.
If there is any scope for the award of vindicatory damages where exemplary damages are not appropriate, it must be, in my opinion, very limited indeed.
Such an award could only be justified where the declaration that a claimants right has been infringed provides insufficiently emphatic recognition of the seriousness of the defendants default.
That situation does not arise here.
The defendants failures have been thoroughly examined and exposed.
A finding that those failures have led to the false imprisonment of the appellants constitutes a fully adequate acknowledgement of the defendants default.
Since the appellants would have been lawfully detained if the published policy had been applied to them, I agree that no more than a nominal award of damages is appropriate in their cases.
DISSENTING JUDGMENTS LORD PHILLIPS
Introduction
The appellants are foreign nationals who have served sentences of imprisonment in this country (FNPs) They were detained pursuant to Schedule 3 of the Immigration Act 1971 (Schedule 3).
They challenge the legality of their detention.
At the times of the decisions to detain them there existed a policy published by the Secretary of State setting out the circumstances in which her power to detain immigrants would be exercised.
Had the decision maker applied this policy he would have detained each of the appellants.
In the event, however, he decided to detain each by the application of a policy which Mr Beloff QC for the Secretary of State has conceded was unlawful.
Whether the lawful or unlawful policy had been applied the decision would have been the same.
The principal common issues raised by these appeals are first whether, in these circumstances, the detention of each of the appellants was unlawful; secondly whether, if it was unlawful, the result was that the detention of each of the appellants constituted the tort of false imprisonment and; if so, thirdly, whether and on what basis the appellants are entitled to damages.
I have placed the words lawful and unlawful in parentheses because these appeals raise the question of whether there is a material difference between a policy, or a decision, or an act which is unlawful because it violates principles of public law and a policy, or a decision, or an act which is unlawful because it is ultra vires.
In the case of Mr Lumba there is a second issue.
This is whether his detention was or became unlawful because it infringed what have become known as the Hardial Singh principles which date back to the decision of Woolf J in the case of that name over a quarter of a century ago.
Lord Dyson at para 22 of his judgment rightly states that it has been common ground in these appeals that he correctly summarised the effect of Hardial Singh in the four principles which he set out in R (I) v the Secretary of State for the Home Department [2003] INLR 196.
As I shall explain I have reservations about the first two principles which, so far as I am aware, have never been the subject of debate.
Lord Dyson has set out the relevant facts and statutory provisions and I can turn immediately to the common issues raised by these appeals.
Lord Dyson has held that the Secretary of State committed the tort of false imprisonment in relation to each appellant because the decision to detain him was reached in violation of public law.
The violation was the failure to apply the Secretary of States published policy and the application of a policy to which there were various objections of public law.
He has concluded that, because the reasoning offended the requirements of public law, the acts that the decision maker decided upon were beyond his powers, or ultra vires.
I have come to a different conclusion.
I propose in this judgment to address the following questions.
First, what restrictions are implicit, as a matter of statutory interpretation, in the power to detain conferred on the Secretary of State by Schedule 3? Second, what were the policies published by the Secretary of State in relation to the detention of immigrants? Third, what were the practical implications of those policies? Fourth, what were the legal implications of those policies? Fifth, was the detention of each of the appellants contrary to those policies? Sixth, what were the defects in the policy applied when deciding whether the appellants should be detained? Seventh, what were the circumstances in which this policy was applied? Eighth, did the application of that policy render the detention of the appellants unlawful? If so, ninth, are the appellants entitled to damages for false imprisonment?
Implied limitations on the power to detain conferred by Schedule 3
I refer to the four principles that Lord Dyson states at para 22 of his judgment are derived from Hardial Singh.
The third and fourth principles were an essential part of the reasoning that led Woolf J to the decision that he reached in that case.
They are not open to question.
This is not true of the first two.
The first is that the Secretary of State must intend to deport the person and can only use the power to detain for that purpose.
Lord Dyson explains that by this he means that the power to detain must be exercised for the prescribed purpose of facilitating deportation.
The second principle is that the deportee may only be detained for a period that is reasonable in all the circumstances.
Neither of these principles was stated in these terms in Hardial Singh, although I accept that they are possible interpretations of the words used by Woolf J. Neither of these principles was essential to the conclusion that he reached.
I do not myself consider that either principle can properly be derived from his judgment.
The applicant in Hardial Singh sought a writ of habeas corpus.
He was an Indian who had entered the United Kingdom lawfully and been granted indefinite leave to remain.
He had been convicted of offences of burglary and been sentenced to a total of two years imprisonment.
Before he was due to be released he was served with a deportation order on behalf of the Secretary of State.
He was due for release on 20 July 1983 but was then detained by the Secretary of State pursuant to paragraph 2(3) of Schedule 3.
The reason given for his detention was the risk that, if released, he would abscond.
Because of delay on the part of the Secretary of State in making arrangements for his return to India he was still detained in December 1983.
In these circumstances Woolf J, at p 706, said this about the power of detention under Schedule 3: Although the power which is given to the Secretary of State in paragraph 2 to detain individuals is not subject to any express limitation of time, I am quite satisfied that it is subject to limitations.
First of all, it can only authorise detention if the individual is being detained in one case pending the making of a deportation order and, in the other case, pending his removal.
It cannot be used for any other purpose.
Second, as the power is given in order to enable the machinery of deportation to be carried out, I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose.
The period which is reasonable will depend on the circumstances of the particular case.
What is more, if there is a situation where it is apparent to the Secretary of State that he is not going to be able to operate the machinery provided in the Act for removing persons who are intended to be deported within a reasonable period, it seems to me that it would be wrong for the Secretary of State to seek to exercise his power of detention.
In addition, I would regard it as implicit that the Secretary of State should exercise all reasonable expedition to ensure that the steps are taken which will be necessary to ensure the removal of the individual within a reasonable time.
There is a degree of ambiguity in the earlier part of this passage.
Pending the making of a deportation order is not a purpose.
Nor is pending his removal.
What then did Woolf J mean when he said that the power to remove cannot be used for any other purpose? He goes on to say that the power is given to enable the machinery of deportation to be carried out and that the power of detention is limited to such period as is reasonably necessary for that purpose.
If one takes these two passages together it is possible to interpret Woolf J as saying that you can only detain a person for the purpose of facilitating deportation, as Lord Dyson has done.
It is, however, also possible to read him as saying that you can only detain a person while you are pursuing the objective of deporting him and that is how I interpret what he said.
I believe that the interpretation given by Lord Dyson places an unjustified restriction on the Secretary of States power of detention.
It is obvious that detention will almost always make the practical task of deporting the detainee easier to arrange.
Most deportees will be in this country through choice and cannot reasonably be expected to do anything to facilitate their deportation even if they do not try actively to prevent this.
It is open to the Secretary of State to detain a person in order to facilitate his deportation and this is often the, or one of the, reasons for doing so.
But, as I shall explain, I do not consider that detention of a deportee will only be lawful if used for this purpose.
The second principle identified by Lord Dyson is that the deportee may only be detained for a period that is reasonable in all the circumstances.
This I understand to be derived from Woolf Js statement The period which is reasonable will depend upon all the circumstances.
But that sentence was immediately preceded by the statement that the power to detain was impliedly limited to a period that was reasonably necessary for the purpose of enabling the machinery of deportation to be carried out.
Thus I believe that the circumstances that Woolf J had in mind were restricted to those that related to the task of effecting deportation.
I am fortified in this belief by the fact that Woolf J went on to cite R v Governor of Richmond Remand Centre, Ex p Asghar [1971] 1 WLR 129.
In that case the Secretary of State had detained two persons who were awaiting removal with the object that they should testify in a pending criminal trial.
Lord Parker CJ rejected the suggestion that the detention could be justified as reasonable in these circumstances, stating at p 132 it does seem to me that while a reasonable time is contemplated between the giving of the directions and the final removal, that is a reasonable time necessary to effect the physical removal.
In Hardial Singh Woolf J was concerned only with the length of time that was reasonably necessary to effect deportation and the relationship that this bore to the power to detain.
He was not concerned with the question of whether there were further implied restrictions on the power to detain during that period.
The extent of the power to detain pending deportation was an important, albeit not the most important, issue in Chahal v United Kingdom where the nature of the domestic proceedings is apparent from the judgment of the European Court of Human Rights when the case reached Strasbourg (1996) 23 EHRR 413.
Mr Chahal was a Sikh separatist leader who had been granted indefinite leave to remain in the United Kingdom.
On 14 August 1990 the Secretary of State decided that he ought to be deported because his continued presence in the United Kingdom was unconducive to the public good for reasons of national security and other reasons of a political nature, namely the international fight against terrorism.
Two days later he was served with a notice of intention to deport.
He was then detained pursuant to Schedule 3 and remained in detention up to the time of the judgment of the Strasbourg Court.
During this time he pursued an unsuccessful attempt to be granted asylum.
He also, by an application for judicial review, challenged his proposed deportation on the ground that this would violate article 3 of the Convention because it would expose him to the risk of torture and persecution if returned to India.
He was unsuccessful in the Divisional Court and the Court of Appeal and was refused leave to appeal to the House of Lords.
He then applied to Strasbourg, alleging breaches of articles 3 and 5 of the Convention.
In November 1995, while he was awaiting a hearing at Strasbourg, he challenged his continued detention by seeking from the Divisional Court a writ of habeas corpus and judicial review.
The Secretary of State opposed his application on the grounds that he could not safely be released because of the substantial threat that he posed to national security.
It does not appear to have been suggested that his lengthy detention was necessary to facilitate his deportation.
His application was refused on the ground that there was no reason to believe that the Secretary of State did not have good reason for his apprehension.
MacPherson J ruled that the detention per se was plainly lawful because the Secretary of State [had] the power to detain an individual who [was] the subject of a decision to make a deportation order ( para 43).
It is relevant to see how the Strasbourg Court addressed this matter, if only because any interpretation of Schedule 3 must, if possible, be compatible with the requirements of the Convention.
Article 5(1) of the Convention provides, in so far as material: Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: (f) the lawful arrest or detentionof a person against whom action is being taken with a view to deportation The court said this as to the effect of that provision: 112.
The court recalls that it is not in dispute that Mr Chahal has been detained with a view to deportation within the meaning of article 5(1)(f).
Article 5(1)(f) does not demand that the detention of a person against whom action is being taken with a view to deportation be reasonably considered necessary, for example to prevent his committing an offence or fleeing; in this respect article 5(1)(f) provides a different level of protection from article 5(1)(c).
Indeed all that is required under this provision is that action is being taken with a view to deportation.
It is therefore immaterial, for the purposes of article 5(1)(f), whether the underlying decision to expel can be justified under national or Convention law. 113.
The court recalls, however, that any deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible under article 5(1)(f).
These observations echo the Hardial Singh principles, as I would interpret them.
The court went on to consider whether the asylum proceedings, which had delayed the stage at which Mr Chahal would have been deported, had taken an excessive length of time, and concluded that they had not.
This indicates that the Strasbourg Court, when considering the time reasonably needed for deportation, accepted that this would be prolonged by delay reasonably attributable to attempts to obtain asylum.
The court then considered the requirement that the detention should be lawful.
It observed at para 119 that there was no doubt that it was lawful under national law but that, because of the extremely long period during which Mr Chahal had been detained it was also necessary to consider whether there existed sufficient guarantees against arbitrariness.
At para 122 the court concluded that the domestic procedure under which Mr Chahals appeal against deportation had been considered by an advisory panel provided an adequate guarantee that there were at least prima facie grounds for believing that if Mr Chahal were at liberty, national security would be put at risk and thus, that the executive had not acted arbitrarily when it ordered him to be kept in detention.
I am not able to accept that under domestic law it had been an implicit requirement of Schedule 3 that Mr Chahals detention was necessary to facilitate his deportation.
Provided that he was being detained with a view to his removal as soon as reasonably possible I consider that the Secretary of State was entitled to detain him pending that removal on the ground that he would pose a terrorist threat if released.
The Hardial Singh principles were applied by analogy by the Judicial Committee of the Privy Council when considering the legitimacy under Hong Kong legislation of the detention of four boat people from Vietnam in Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97.
Tens of thousands of these people had arrived unlawfully in Hong Kong.
They were steadily being repatriated, but this was taking a long time.
Section 2 of the Immigration (Amendment) Ordinance 1991 added to the relevant legislation a provision designed expressly to deal with this situation: The detention of a person under this section shall not be unlawful by reason of the period of the detention if that period is reasonable having regard to all the circumstances affecting that persons detention, including (a) in the case of a person being detained pending a decision under section 13A(1) to grant or refuse him permission to remain in Hong Kong as a refugee (i) the number of persons being detained pending decisions under section 13A(1) whether to grant or refuse them such permission; and (ii) the manpower and financial resources allocated to carry out the work involved in making all such decisions; (b) in the case of a person being detained pending his removal from Hong Kong (i) the extent to which it is possible to make arrangements to effect his removal; and (ii) whether or not the person has declined arrangements made or proposed for his removal. (p 106).
Lord Browne Wilkinson, giving the advice of the Board, said this, at p 111, under the heading The Hardial Singh principles: Section 13D(1) confers a power to detain a Vietnamese migrant pending his removal from Hong Kong.
Their Lordships have no doubt that in conferring such a power to interfere with individual liberty, the legislature intended that such power could only be exercised reasonably and that accordingly it was implicitly so limited.
The principles enunciated by Woolf J in the Hardial Singh case [1984] 1 WLR 704 are statements of the limitations on a statutory power of detention pending removal.
In the absence of contrary indications in the statute which confers the power to detain pending removal their Lordships agree with the principles stated by Woolf J. First, the power can only be exercised during the period necessary, in all the circumstances of the particular case, to effect removal.
Secondly, if it becomes clear that removal is not going to be possible within a reasonable time, further detention is not authorised.
Thirdly, the person seeking to exercise the power of detention must take all reasonable steps within his power to ensure the removal within a reasonable time.
This accords with my reading of Hardial Singh.
His Lordship went on to say, however: Their Lordships are unable to agree with the Court of Appeal of Hong Kong that there is any conflict between the Hardial Singh principles and the provisions of section 13D. Section 13D(1A), which was inserted in 1991, expressly envisages that the exercise of the power of detention conferred by section 13D(1) will be unlawful if the period of detention is unreasonable.
It expressly provides that The detentionshall not be unlawful by reason of the period of the detention if that period is reasonable having regard to (Emphasis added.) What section 13D(1A) does is to provide expressly that, in deciding whether or not the period is reasonable, regard shall be had to all the circumstances including (in the case of a person detained pending his removal from Hong Kong) the extent to which it is possible to make arrangements to effect his removal and whether or not the person has declined arrangements made or proposed for his removal.
Therefore the subsection is expressly based on the requirement that detention must be reasonable in all the circumstances (the Hardial Singh principles) but imposes specific requirements that in judging such reasonableness those two factors are to be taken into account.
The shorthand summary of the Hardial Singh principles as detention must be reasonable in all the circumstances was made in the context of those circumstances that affected the time reasonably necessary to effect removal and, just as in the case of Hardial Singh itself, I would restrict its ambit to those circumstances.
This I believe was, and remained, the understanding of some, at least, of the judges dealing with claims in respect of the detention of immigrants in the Administrative Court.
Thus in R (Konan) v Secretary of State for the Home Department [2004] EWHC 22 (Admin) Collins J, who had appeared as counsel in Hardial Singh, held at para 21: The power to detain pending removal is not dependent on a fear of absconding or of any other misconduct by the person in question.
Provided it is exercised for the purpose of removal, it is lawful.
It must be exercised reasonably, but reasonableness in this context relates to whether removal can be achieved within a reasonable time: see R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 and Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97 as applied in R (Saadi) v Secretary of State for the Home Department [[2002] 1 WLR 356].
R (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512; [2002] 1 WLR 356 raised the question of the legality of the detention at Oakington Reception Centre for up to 10 days of aliens seeking leave to enter whose cases appeared susceptible of speedy processing.
The power to detain that was relied on was that afforded by paragraph 16(1) of Schedule 2 to the 1971 Act.
Paragraph 2 provides that an immigration officer may examine any person arriving in the United Kingdom to determine whether he should be given leave to enter.
Paragraph 16(1) provides: A person who may be required to submit to examination under paragraph 2 above may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter.
The Court of Appeal, in a judgment which I delivered, considered both the scope of the power to detain afforded by this paragraph and the effect of article 5(1)(f) of the Human Rights Convention.
As to the former the court made the following observations: 14.
Collins J concluded that the only limitation on the power to detain pending examination and the decision whether to grant or refuse leave to enter is that the detention must be for a reasonable time.
For the Secretary of State, the Attorney General supported this conclusion.
He argued that the power to detain persisted for so long as was reasonably necessary to conduct the examination and to reach a decision whether or not to grant leave to enter.
As a matter of statutory interpretation we accept this submission.
Were it not correct, the power to grant temporary admission would also be liable to come to an end before an examination could reasonably be completed and a decision whether to grant or refuse leave to enter reasonably be taken. 15.
We are not aware that it has ever been the policy of the Secretary of State that applicants for leave to enter should be detained pending the decision of their applications, however long that might take.
A more liberal policy has been adopted whereby he has approved the exercise of the power to grant temporary admission in place of detention.
If the basis upon which immigration officers are detaining asylum seekers at Oakington is in conflict with this policy, then, under established principles of public law, they are acting unlawfully.
As to the Convention the court held: 66.
We consider that the test of proportionality required by article 5(1)(f) requires the Court simply to consider whether the process of considering an asylum application, or arranging a deportation, has gone on too long to justify the detention of the person concerned having regard to the conditions in which the person is detained and any special circumstances affecting him or her.
Applying that test no disproportionality is demonstrated in this case.
This was not a test of proportionality that the Strasbourg Court had laid down in Chahal and it received no support from that Court when Saadi reached it, as I shall show.
Giving the only reasoned speech in a unanimous decision of the House of Lords [2002] UKHL 41; [2002] 1 WLR 3131 Lord Slynn of Hadley referred at para 18 to a statement by the Oakington Project Manager that he accepted that an important consideration in relation to detention powers was that no detention should be longer than reasonably necessary.
Lord Slynn went on to express the view at para 22: As the judge and the Court of Appeal stressed, paragraph 16 of Schedule 2 gives power to detain pending examination and a decision; that in my view means for the period up to the time when the examination is concluded and a decision taken.
There is no qualification that the Secretary of State must show that it is necessary to detain for the purposes of examination in that the examination could not otherwise be carried out since applicants would run away.
Nor is it limited to those who cannot for whatever reason appropriately be granted temporary admission.
The period of detention in order to arrive at a decision must however be reasonable in all the circumstances.
The last sentence reflected Government policy, as accepted by the Project Manager.
One of the applicants in Saadi took his case to Strasbourg (2008) 47 EHRR 427.
He claimed that his detention at Oakington had infringed article 5(1)(f).
Liberty, and other interveners, contended that a test of necessity and proportionality should be applied to article 5(1)(f), so that an asylum seeker could only be detained if, but for such detention, he would attempt to effect an unauthorised entry into the country.
The Grand Chamber rejected this submission.
Dealing first with the interpretation of the express provisions of article 5(1)(f) it said: 64.
Whilst the general rule set out in article 5(1) is that everyone has the right to liberty, article 5(1)(f) provides an exception to that general rule, permitting states to control the liberty of aliens in an immigration context.
As the court has remarked before, subject to their obligations under the Convention, states enjoy an undeniable sovereign right to control aliens entry into and residence in their territory.
It is a necessary adjunct to this right that states are permitted to detain would be immigrants who have applied for permission to enter, whether by way of asylum or not.
It is evident from the tenor of the judgment in Amuur that the detention of potential immigrants, including asylum seekers, is capable of being compatible with article 5(1)(f). 65.
On this point, the Grand Chamber agrees with the Court of Appeal, the House of Lords and the Chamber, that until a state has authorised entry to the country, any entry is unauthorised and the detention of a person who wishes to effect entry and who needs but does not yet have authorisation to do so, can be, without any distortion of language, to prevent his effecting an unauthorised entry.
It does not accept that, as soon as an asylum seeker has surrendered himself to the immigration authorities, he is seeking to effect an authorised entry, with the result that detention cannot be justified under the first limb of article 5(1)(f).
To interpret the first limb of article 5(1)(f) as permitting detention only of a person who is shown to be trying to evade entry restrictions would be to place too narrow a construction on the terms of the provision and on the power of the state to exercise its undeniable right of control referred to above.
As to the argument that a test of proportionality applied to the detention, the Court, referring to Chahal, held: 72.
Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for an unreasonable length of time; thus, it held that [A]ny deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible. 73.
With regard to the foregoing, the court considers that the principle that detention should not be arbitrary must apply to detention under the first limb of article 5(1)(f) in the same manner as it applies to detention under the second limb.
Since states enjoy the right to control equally an aliens entry into and residence in their country (see the cases cited in para 63 above), it would be artificial to apply a different proportionality test to cases of detention at the point of entry than that which applies to deportation, extradition or expulsion of a person already in the country. 74.
To avoid being branded as arbitrary, therefore, such detention must be carried out in good faith; it must be closely connected to the purpose of preventing unauthorised entry of the person to the country; the place and conditions of detention should be appropriate, bearing in mind that: [T]he measure is applicable not to those who have committed criminal offences but to aliens who, often fearing for their lives, have fled from their own country; and the length of the detention should not exceed that reasonably required for the purpose pursued.
This passage reinforces the conclusions of the court in Chahal.
Where a person is detained pending deportation, the only proportionality requirement that Strasbourg imposes, if indeed it is right so to describe it, is that the detention should not be for longer than is reasonably necessary to effect the deportation.
Added to this, however, is the important requirement that the exercise of the power to detain must not be arbitrary.
Applying this principle the European Commission of Human Rights held manifestly inadmissible an application of infringement of article 5 by a man who had been detained for five years while he used every means to avoid extradition to Hong Kong.
See Osman v United Kingdom (Application No 15933/89) (unreported) 14 January 1991.
The most recent pronouncement of the Grand Chamber on article 5(1)(f) is to be found in A v United Kingdom (2009) 49 EHRR 625, where it was held that article 5(1)(f) did not justify detention of the famous Belmarsh detainees.
At para 164 the Grand Chamber stated: To avoid being branded as arbitrary, detention under article 5(1)(f) must be carried out in good faith; it must be closely connected to the ground of detention relied on by the Government; the place and conditions of detention should be appropriate; and the length of the detention should not exceed that reasonably required for the purpose pursued.
Against this background of Strasbourg jurisprudence, I return to domestic consideration of the Hardial Singh principles.
In R(I) v Secretary of State for the Home Department [2003] INLR 196 the appellant was an Afghani asylum seeker who had been given exceptional leave to remain.
He was then convicted of indecent assaults and sentenced to 3 years imprisonment with a recommendation for deportation.
The Secretary of State made a deportation order and detained him pursuant to paragraph 2(3) of Schedule 3 from February 2001 to May 2002.
The delay occurred because practical difficulties had caused the Secretary of State to cease removing nationals to that country.
He claimed that his further detention was unlawful as there was no reasonable possibility of his being deported within a reasonable period.
This raised the question of how such a reasonable period fell to be calculated.
Simon Brown LJ addressed three issues of principle that had arisen.
The first was the relevance of the fact that he was likely to go to ground and re offend if released.
His counsel contended that this was irrelevant to the question of whether removal would be possible within a reasonable time.
Simon Brown LJ disagreed.
He held at para 29: The likelihood or otherwise of the detainee absconding and/or re offending seems to me to be an obviously relevant circumstance.
If, say, one could predict with a high degree of certainty that, upon release, the detainee would commit murder or mayhem, that to my mind would justify allowing the Secretary of State a substantially longer period of time within which to arrange the detainees removal abroad.
The second issue was whether it was relevant that the appellant refused to accept voluntary repatriation.
Simon Brown LJ held that it was.
The third issue was whether the calculation of the reasonable period should take account of the fact that the appellant had been making asylum applications.
Simon Brown LJ held that it should not, because it would not have been possible to deport him in any event.
The conclusion that he formed at para 37 was that because the Secretary of State could not establish more than a hope of being able to remove him by the summer substantially more in the way of a risk of re offending (and not merely a risk of absconding) than exists here would in my judgment be necessary to have justified continuing his detention for an indeterminate further period.
Mummery LJ gave a short dissent on the facts rather than the applicable principles.
Dyson LJ agreed with Simon Brown LJ.
He set out the four principles that he derived from Hardial Singh in the same form as he has in his judgment in the present case.
He then made the following observations about the application of those principles. 47.
Principles (ii) and (iii) are conceptually distinct.
Principle (ii) is that the Secretary of State may not lawfully detain a person pending removal for longer than a reasonable period.
Once a reasonable period has expired, the detained person must be released.
But there may be circumstances where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a reasonable period.
In that event, principle (iii) applies.
Thus, once it becomes apparent that the Secretary of State will not be able to effect the deportation within a reasonable period, the detention becomes unlawful even if the reasonable period has not yet expired. 48.
It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences. 49.
Simon Brown LJ has identified the three main points of principle which were in issue in the present appeal, namely, the risk of absconding and reoffending, the appellants refusal to accept voluntary repatriation, and the asylum claim and appeal.
As I have already stated, the risk of absconding and offending or reoffending is relevant to the reasonableness of the length of a detention pending deportation.
It is, as Simon Brown LJ says an obviously relevant circumstance (at para 29): see also per Lord Phillips of Worth Matravers MR in R v (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512, [2002] 1 WLR 356, at paras 65 67.
I have accepted that it is possible to derive Lord Dysons first two principles from the language used by Woolf J in Hardial Singh, and explained why I would not do so.
The passage from the judgment of the Court of Appeal in Saadi that he cites was dealing with the effect of article 5(1)(f) of the Convention and, as I have shown, advanced a test of proportionality which Strasbourg did not endorse.
The problems that have been raised by these appeals suggest that Strasbourg may have had very good reason not to do so.
The conceptual difficulty inherent in the first two principles identified by Lord Dyson is apparent in the passage that he has quoted at para 107 from the judgment of Toulson LJ in A.
If the risk of re offending can be the determinant factor in deciding how long it is reasonable to detain a FNP why should it not be the determinant, or even the sole reason for detaining him in the first place? Why should it be a pre condition to the power to detain that its use is to facilitate deportation, even if this is not the real reason for detention, as in the case of Chahal? It is that logical inconsistency that underlies the challenge that is made on behalf of Mr Lumba in the present case to the legitimacy of having regard to the risk of his re offending.
The interpretation that I would give to the power to detain conferred by the 1971 Act is as follows.
The scheme of the Act is simple, and reflects article 5(1)(f) of the Convention.
The Secretary of State is not required to permit an immigrant who has unlawfully entered this country to roam free.
Schedule 3 permits her to detain the immigrant for as long as she reasonably requires in order to decide whether he should have leave to enter.
If he is not given leave to enter she may detain him for as long as she reasonably requires to effect his deportation, provided always that deportation is a practical possibility.
If the 1971 Act confers powers as wide as this on the Secretary of State, she has not availed herself of them.
She adopted a policy under which, on her calculation, only 1.5% of those who were liable to detention under her immigration powers were actually detained, see para 285 below.
Having chosen to discriminate between those whom she detains and those whom she does not, she is subject to the established principles of public law in choosing between the two.
It is these principles which constrain the exercise of her power to detain rather than restrictions to be implied into the 1971 Act as a matter of statutory interpretation.
They include the obligation to act rationally, an obligation also imposed by article 5 of the Convention.
It is rational and lawful to detain a FNP pending deportation to prevent his re offending or because he would pose a security risk if at large, just as it is rational and lawful to detain him because of the risk of his absconding.
Public law principles include the restraint that a published policy imposes on executive action, a topic that I am about to consider.
As I shall show, the guidance published by the Secretary of State includes a requirement to comply with Lord Dysons first two principles, so that to that extent their enunciation has been self fulfilling.
The policies published by the Secretary of State in relation to the detention of immigrants.
Lord Dyson has referred to the two White Papers in which in 1998 and 2002 the Secretary of State published her policies in relation to detention.
The first of these, Fairer, Faster, Firmer informed the reader at the beginning of Chapter 12 dealing with Detention that at any one time, only about 1.5% of those liable to detention under immigration powers were actually detained.
The White Paper dealt with the criteria to be adopted in identifying this small minority of immigrants who were to be detained.
FNPs awaiting deportation will have formed only a tiny proportion of those liable to detention under those powers.
It is, perhaps, not surprising that the White Paper predominantly addressed the position of the vast majority of immigrants who were not criminals.
Thus, in the passage quoted by Lord Dyson at para 11 of his judgment the White Paper spoke of a presumption in favour of granting temporary admission or release, terms that were not appropriate to those recommended for deportation.
In dealing with Detention Criteria at 12.3 the White Paper identified three circumstances where detention would normally be justified.
The first was where there was a reasonable belief that the individual would fail to keep to the terms of temporary admission or temporary release.
The second was to clarify a persons identity and the basis of their claim on entry.
The third was where removal was imminent.
12.11 dealt with detention in relation to removals.
It focussed entirely on detention to facilitate removals.
Nothing in that White Paper gave any suggestion that those awaiting deportation might be detained because of concern as to the way they might behave if permitted to be at large.
There was no focus on the provisions of Schedule 3.
These comments are equally true of the second White Paper, Secure Borders, Safe Haven, save that this had the following statement in para 4.80 under the heading Serious Criminals: We will explore what more we can do, as other countries have done, to stop serious criminals abusing our asylum system by seeking to remain in the UK having completed a custodial sentence.
There is there no indication that such criminals would be liable to detention pending deportation.
The two White Papers dealt in broad terms with detention.
They were supplemented by Chapter 38, headed Detention and Temporary Release, of the Operational Enforcement Manual, which was a published document, available to the public on the internet.
The court was provided with the version that was current in April 2006.
This included guidance on the law as it was understood to be.
Para 38.1.1.1 gave the following summary of the effect of article 5 and the domestic case law: (a) The relevant power to detain must only be used for the specific purpose for which it is authorised.
This means that a person may only be detained under immigration powers for the purpose of preventing his unauthorised entry or with a view to his removal (not necessarily deportation).
Detention for other purposes, where detention is not for the purposes of preventing unauthorised entry or effecting removal of the individual concerned, is not compatible with article 5 and would be unlawful in domestic law; (b) The detention may only continue for a period that is reasonable in all the circumstances; (c) If before the expiry of the reasonable period it becomes apparent that the purpose of the power, for example, removal, cannot be effected within that reasonable period, the power to detain should not be exercised ; and (d) The detaining authority (be it the immigration officer or the Secretary of State), should act with reasonable diligence and expedition to effect removal (or whatever the purpose of the power in question is).
This summary of the law reflected aspects of the decision of the Court of Appeal in I with which I have differed.
None the less the principles that it expounded were consonant with the general policy of the Secretary of State that there was a presumption against detention.
Para 38.3 set out the factors that influenced a decision to detain.
Those in favour of detention were all matters that bore on the likelihood that the individual would abscond or go to ground if not detained.
The manual set out the contents of a standard form IS9IR.
This set out 6 possible reasons for detention, with instructions that the Immigration Officer should tick the relevant reasons.
In contrast to the general focus on the likelihood of absconding, one of these stated Your release is not considered conducive to the public good.
Factors forming the basis of the reasons also had to be ticked.
These included You are excluded from the United Kingdom at the personal direction of the Secretary of State.
You are detained for reasons of national security, the reasons are/will be set out in another letter.
Your previously unacceptable character, conduct or associates.
Para 38.5.2 was headed Authority to detain persons subject to deportation action.
It summarised the effect of Schedule 3 and required that decisions whether to detain pursuant to the provisions of the Schedule should be made at senior caseworker level in CCT.
No specific guidance was given, however, as to the criteria that should be applied when making those decisions.
In summary, the general message of these published policies was that detention should be used sparingly and, in the case of detention pending removal or deportation, only where necessary to facilitate this in order to prevent individuals from absconding or otherwise evading the immigration system.
Officials were instructed that the law was as held by the Court of Appeal in I and, in particular, that detention could only continue for a period that was reasonable in all the circumstances.
Form IS9IR raised, however, the possibility that detention could be used for reasons of national security or where the individuals previous character, conduct or associates were unacceptable.
Despite this, there was no specific guidance as to the approach to be adopted to criminals whom the Secretary of State had decided to deport.
Not only was it open to the Secretary of State to decide to deport, and to detain pending deportation, criminals in respect of whom the court had made no recommendation, she also had to decide whether to accept recommendations for deportation made by the courts.
Under paragraph 2(1) of Schedule 3 those subject to a recommendation remained detained pending the Secretary of States decision whether to deport them unless released by the court or granted bail pursuant to section 54 of the Immigration and Asylum Act 1999, which came into force in February 2003.
It may have been thought that paragraph 2(1) created a presumption in favour of detention of FNPs pending deportation but in R (Sedrati) v Secretary of State for the Home Department [2001] EWHC Admin 418, with the agreement of counsel for the Secretary of State, Moses J made a declaration that there was no such presumption.
What then, under the Secretary of States published policies, was the position of FNPs whom the Secretary of State decided to deport? It seems to me that many of these were likely to tick the boxes of those who, exceptionally, could properly be detained in accordance with those policies.
They were in this country because this was where they had chosen to live.
They had committed offences that had led the Secretary of State to conclude that their continued presence was no longer conducive to the public good.
Most would be unlikely willingly to submit to deportation.
There would be a risk both of re offending and of absconding.
As Lord Dyson has explained at paras 14 and 15 of his judgment, on 9 September 2008 the Enforcement Instructions and Guidance, which had replaced the Operational Enforcement Manual, was amended so as to lay down a presumption in favour of detaining immigrants where the deportation criteria were met in order to protect the public from harm and the particular risk of absconding in these cases.
I agree with the Court of Appeal and with Lord Dyson that this amendment to her policy was one that it was open to the Secretary of State to make.
However, Davis J, at first instance, ruled to the contrary and this led the Secretary of State to withdraw this amendment.
The UK Borders Act 2007 has since made provision by section 32 for automatic deportation of foreign criminals in specified circumstances.
Section 36 requires the Secretary of State to exercise a power of detention of those being deported under section 32 unless in the circumstances the Secretary of State considers it inappropriate.
These provisions were not in force at the time of the events that have given rise to these appeals.
There is thus a picture of a series of changes to policy, and of legislation, that has been influenced by decisions of the courts, not all of which have been sound.
The practical implications of the policies
Under this heading I propose to consider the practical implications of complying with the Secretary of States published policies, including her directions as to the effect of article 5 and our domestic case law.
Compliance with the Hardial Singh guidelines, even as I have interpreted them, gives rise to some practical difficulties.
Detention pending deportation is permissible for a lengthy period provided that the Secretary of State is taking reasonable steps to effect deportation and provided that there is a reasonable prospect that deportation will be possible.
It is the latter proviso that raises particular difficulties for the possibility of deportation may vary from time to time.
R (Khadir) v Secretary of State for the Home Department [2005] UKHL 39; [2006] 1 AC 207 illustrates this problem.
In the case of each detainee it is necessary to keep the practicability of deportation under review.
This problem is made more difficult if there is a requirement to detain for no longer than is reasonable in all the circumstances, where those circumstances include the nature of the crimes committed by the FNP and the degree of risk of re offending.
The assessment of what period of detention is reasonable in all the circumstances is not an easy one and there will inevitably be cases where, if subjected to judicial review, it will be held not to have been correctly answered.
Furthermore the material circumstances are likely to be subject to frequent change, so that frequent reviews will be necessary.
This last fact was reflected by the requirements in relation to Detention reviews imposed under para 38.8 of the Operational Enforcement Manual which lie at the heart of the appeal in SK (Zimbabwe).
Where there are concerns about the risk of absconding, it may be possible to meet these by measures which fall short of detention.
The Secretary of State may release a FNP who is subject to deportation under a restriction order setting out terms as to residence, employment or occupation and reporting to the police pursuant to paragraph 2(5) of Schedule 3.
The court has the same power in respect of those recommended for deportation under paragraphs 4 to 6 of Schedule 3.
Detainees also have the right to apply for bail.
In para 12.8 of Fairer, Faster, Firmer the Government explained that it believed that there should be a more extensive judicial element in the detention process and proposed that this should be by way of bail hearings, commenting on the resource implications that this would have.
Para 4.83 of Secure Borders, Safe Haven stated that Part III of the Immigration and Asylum Act 1999 had created a complex system of automatic bail hearings at specific points in a persons detention, that this had never been brought into force and that most of it was to be repealed.
There is now a comprehensive statutory scheme for release on bail produced through a series of amendments to Schedule 2 to the 1971 Act.
All of this illustrates the practical problems implicit in the implementation of a regime that attempts to give effect to the policy of using the power to detain only as a last resort.
Despite efforts to implement this policy there will inevitably be cases where individuals are detained when, under the policy, they should not be.
The question arises of whether those who find themselves in this position are entitled to claim damages for false imprisonment.
What are the legal implications of the Secretary of States published policies?
The appellants in this case should have been detained had the Secretary of States published policy been applied.
They claim to be entitled to damages for false imprisonment because those considering their cases reached the right conclusions by applying the wrong policy.
Their complaint is as to the manner in which the decisions to detain them were taken, not as to the substance of those decisions.
Thus, the question of the legal effect of the Secretary of States published policies is not directly in issue.
Nonetheless, underlying the appellants case is the premise that it would not have been lawful for the Secretary of State to reach a decision that was in conflict with her published policy.
For this reason she was required to reach her decision by applying her published policy, not some other policy.
It follows that it is material to consider the effect of the Secretary of States published policies.
I agree with Lord Dyson that, under principles of public law, it was necessary for the Secretary of State to have policies in relation to the exercise of her powers of detention of immigrants and that those policies had to be published.
This necessity springs from the standards of administration that public law requires and by the requirement of article 5 that detention should be lawful and not arbitrary.
Decisions as to the detention of immigrants had to be taken by a very large number of officials in relation to tens of thousands of immigrants.
Unless there were uniformly applied practices, decisions would be inconsistent and arbitrary.
Established principles of public law also required that the Secretary of States policies should be published.
Immigrants needed to be able to ascertain her policies in order to know whether or not the decisions that affected them were open to challenge.
What is the effect of a decision to take action that falls within a power conferred by statute but which conflicts with a published policy as to the manner in which that power will be exercised? This is no easy question.
It overlaps with the question of the nature and effect of a legitimate expectation.
Is a decision that is contrary to policy unlawful, so that action taken pursuant to it is ultra vires? If so a published policy has the same effect as delegated legislation.
Is this result dictated by the jurisprudence that has its origin in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147? Mr Husain QC for the appellants submitted that it is.
He relied on the oft cited catalogue of matters rendering the decision of a tribunal void propounded by Lord Reid in Anisminic at p 171.
This included: It may have refused to take into account something which it was required to take into account.
Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account.
The words that I have emphasised are significant.
Lord Reids proposition cannot necessarily be extended to the situation where the decision maker fails to have regard to his own policy.
Anisminic is, however, only the start of the story.
The effect of Anisminic was the subject of observations by Lord Diplock, which have been treated as authoritative.
In In re Racal Communications Ltd [1981] AC 374, at pp 382 383 he described Anisminic as a legal landmark.
It established that when Parliament conferred on an administrative authority the power to decide particular questions defined by the Act conferring the power, and the authority asked itself and answered the wrong question, it did something that the Act did not empower and its decision was a nullity.
In OReilly v Mackman [1983] 2 AC 237, at p 278 he observed that if a tribunal mistook the law it must have asked itself the wrong question and one that it had no jurisdiction to determine, so that its decision was a nullity.
In R v Hull University Visitor, Ex p Page [1993] AC 682, at pp 701 702 Lord Browne Wilkinson endorsed his comment, adding that any error of law made by an administrative tribunal or inferior court in reaching its decision could be quashed for error of law.
Earlier at p 701 he had observed that it was to be taken that Parliament had only conferred the decision making power on the basis that it was to be exercised on the correct legal basis with the effect that an error of law rendered the decision ultra vires.
This reasoning cannot readily be extended to a decision which departs from executive policy.
It would be totally unrealistic to postulate that when Parliament passes an Act conferring a discretionary power it does so with the intention that if the decision maker publishes a policy in relation to the exercise of that power he will abide by that policy unless he has good reason not to do so.
In Boddington v British Transport Police [1999] 2 AC 143 the House of Lords took Anisminic a significant step further.
The issue was whether the appellant could raise by way of defence to a criminal charge a contention that the bye law, or an administrative decision taken under it, pursuant to which he was prosecuted, was ultra vires.
Lord Irvine of Lairg LC, giving the leading speech, said at p 155 that an order made by the Secretary of State in the purported exercise of a statutory power would be regarded as void ab initio if it had been made in bad faith, or as a result of taking into account an irrelevant, or ignoring a relevant, consideration.
At p 158 he said: The Anisminic decision established, contrary to previous thinking that there might be error of law within jurisdiction, that there was a single category of errors of law, all of which rendered a decision ultra vires.
No distinction is to be drawn between a patent (or substantive) error of law or a latent (or procedural) error of law.
Lord Irvine added, at p 159: Also, in my judgment the distinction between orders which are substantively invalid and orders which are procedurally invalid is not a practical distinction which is capable of being maintained in a principled way across the broad range of administrative action.
Other members of the House were not prepared to reject the possibility that an ultra vires act might have legal consequences before its invalidity was recognised by the court: see Lord Browne Wilkinson, at p 164 and Lord Slynn, at p 165.
Boddington no longer judged the vires of the exercise of a discretionary power by the assumed intention of Parliament.
It held that if a decision was vitiated by procedural impropriety it was ultra vires and a nullity.
In the light of Boddington these appeals raise two issues: (i) is a decision of the Secretary of State that, without good reason, conflicts with her published policy outside her powers, so that it is a nullity? (ii) is a decision reached by the Secretary of State by the application of a policy that conflicts with her published policy a nullity, even if the decision itself accords with her published policy? I am currently concerned with the first question.
The proposition underlying the appellants case is that if a minister, without good reason, acts in a way that is contrary to her published policy she acts outside her powers.
Her action is unlawful and can found a claim for damages if it infringes a private law right.
It is time to look at the law relating to policy and legitimate expectation.
Where a public authority gives an undertaking to an individual that a discretionary power will be used in a particular way, this creates a legitimate expectation in the individual that the authority will comply with that undertaking.
The courts will require the authority to give due consideration to that legitimate expectation when exercising its power: see R (Bibi) v Newham London Borough Council [2001] EWCA Civ 607; [2002] 1 WLR 237.
In an extreme case the courts can require the authority to comply with its undertaking: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213.
The same principle applies where a minister publishes a policy that sets out the way in which he intends to exercise a discretionary power.
This also creates a legitimate expectation in those affected by the power as to the manner in which it will be exercised.
In either case the court can intervene in performance of its duty to ensure that the executive acts fairly and does not abuse the powers conferred on it by Parliament.
These principles have quite often been applied in relation to immigration decisions.
I have already quoted my invocation of them in Saadi: see para 271 above.
Lord Dyson at para 85 has referred to my judgment in Nadarajah v Secretary of State for the Home Department [2003] EWCA Civ 1768.
In that case the Court of Appeal held that Ns detention was unlawful because it was in conflict with the Secretary of States policy.
The court further held that as the detention was contrary to law, it infringed article 5(1)(f) of the Convention.
The Court had earlier stated at para 15 that the consequence of these findings would be that N would be entitled to damages for unlawful detention.
The Secretary of State had sought to show that Ns detention was not contrary to his policy.
He had not challenged the proposition that if the detention was contrary to his policy it would be unlawful, nor that this would lead to liability in damages.
There was no discussion of the nature and effect of the doctrine of legitimate expectation in the context of detention under the 1971 Act.
There was, however, a sequel to the case in which the nature of the doctrine of legitimate expectation received detailed consideration.
The development of the law of legitimate expectation was pellucidly set out at some length by Laws LJ, giving the only reasoned judgment in the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department, [2005] EWCA Civ 1363, a decision which, amazingly, does not seem to have found its way into the law reports.
At the end of his judgment, in paras 68 and 69, Laws LJ set out his conclusions on the principles to be derived from these authorities.
This merits citation at length: The search for principle surely starts with the theme that is current through the legitimate expectation cases.
It may be expressed thus.
Where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so.
What is the principle behind this proposition? It is not far to seek.
It is said to be grounded in fairness, and no doubt in general terms that is so.
I would prefer to express it rather more broadly as a requirement of good administration, by which public bodies ought to deal straightforwardly and consistently with the public.
In my judgment this is a legal standard which, although not found in terms in the European Convention on Human Rights, takes its place alongside such rights as fair trial, and no punishment without law.
That being so there is every reason to articulate the limits of this requirement to describe what may count as good reason to depart from it as we have come to articulate the limits of other constitutional principles overtly found in the European Convention.
Accordingly a public bodys promise or practice as to future conduct may only be denied, and thus the standard I have expressed may only be departed from, in circumstances where to do so is the public bodys legal duty, or is otherwise, to use a now familiar vocabulary, a proportionate response (of which the court is the judge, or the last judge) having regard to a legitimate aim pursued by the public body in the public interest.
The principle that good administration requires public authorities to be held to their promises would be undermined if the law did not insist that any failure or refusal to comply is objectively justified as a proportionate measure in the circumstances.
This approach makes no distinction between procedural and substantive expectations.
Nor should it.
The dichotomy between procedure and substance has nothing to say about the reach of the duty of good administration.
Of course there will be cases where the public body in question justifiably concludes that its statutory duty (it will be statutory in nearly every case) requires it to override an expectation of substantive benefit which it has itself generated.
So also there will be cases where a procedural benefit may justifiably be overridden.
The difference between the two is not a difference of to a principle.
Statutory duty may perhaps more often dictate the frustration of a substantive expectation.
Otherwise the question in either case will be whether denial of the expectation is in the circumstances proportionate legitimate aim pursued.
Proportionality will be judged, as it is generally to be judged, by the respective force of the competing interests arising in the case.
Thus where the representation relied on amounts to an unambiguous promise; where there is detrimental reliance; where the promise is made to an individual or specific group; these are instances where denial of the expectation is likely to be harder to justify as a proportionate measure.
On the other hand where the government decision maker is concerned to raise wide ranging or macro political issues of policy, the expectations enforcement in the courts will encounter a steeper climb.
All these considerations, whatever their direction, are pointers not rules.
The balance between an individual's fair treatment in particular circumstances, and the vindication of other ends having a proper claim on the public interest (which is the essential dilemma posed by the law of legitimate expectation) is not precisely calculable, its measurement not exact.
This passage in Laws LJs judgment was obiter, as is my approval of it as setting out a compelling analysis of the law.
I have, however, some concerns as to the consequences of this extension of the principles of judicial review if a ministers unjustified failure to comply with his policy is to be treated as an unlawful act that subjects him to potential liabilities in private law independently of the discretionary remedies of judicial review.
The facts of this case illustrate my concern.
Assume that I am correct in concluding that Schedule 3 gives the Secretary of State wide ranging powers to detain those who are illegally in this country, whether pending the processing of their applications for permission to enter or pending their removal when such applications have been refused.
The Secretary of State did not choose to exercise those powers to their full extent.
The policy of only detaining immigrants as a last resort is a benevolent policy.
That policy carries with it, however, as I have explained, the risk that, as a result of erroneous decisions in the application of a difficult test, some immigrants may be detained in breach of that policy.
Not all would agree that it is fair that they should be entitled to compensation, in the form of damages for false imprisonment, on the same scale as those whose detention falls outside any statutory power.
Notwithstanding these concerns, I have concluded that the detention of a person in circumstances where, under the Secretary of States published policies he should not have been detained, was both a violation of principles of public law and unlawful so as to exclude any justification for the detention under article 5(1)(f) of the Convention and to give rise to liability for false imprisonment.
Was the detention of each of the appellants contrary to the Secretary of States published policies?
On this question all members of the court are agreed.
Each of the appellants, by reason of the risk of re offending and of absconding, fell into the exceptional category of those who were liable to detention under the Secretary of States published policies.
Had the decision maker applied those policies each of the appellants would have been detained.
On this topic I have nothing to add to the judgment of Lord Dyson.
What were the defects in the policy applied when deciding whether the appellants should be detained?
Mr Beloff conceded that the policy, which I shall call the secret policy, applied by the decision maker when deciding to detain the appellants was unlawful on three counts.
The meaning of the word unlawful in this context needs clarification.
It is not having a policy but implementing a policy that may infringe the law.
A policy can be described as unlawful if action taken pursuant to it will, or may, be unlawful under private or public law.
The first reason why the policy that was applied was unlawful was that it was a blanket policy.
It brooked of no exceptions save rare ones that might be made for compassionate reasons.
It was a blanket policy in that it was applied to any FNP recommended for deportation.
Thus it paid no regard to the severity of the offence for which the FNP had been convicted nor to the likelihood and consequence of his re offending.
In this I do not consider that it was open to objection on public law grounds.
On my interpretation of Schedule 3 it was open to the Secretary of State to decide her own criteria for determining those she wished to detain pending deportation.
Secondly the policy was a blanket policy in that it gave no scope for the application of discretion, save on compassionate grounds.
I do not consider that this was objectionable on public law grounds.
There is a principle of public law that a minister who is granted a discretionary power must not improperly fetter the exercise of his discretion.
In a case such as this, however, a minister has to lay down a firm policy in order to ensure consistency of decision making.
The Secretary of State was laying down an exception to the general rule that there was a presumption against detention.
I can see no reason why she should not lay down a policy under which all those whom she chose to deport should be detained pending their deportation save in circumstances where there were compassionate reasons for departing from the policy.
Where the secret policy was objectionable was that it was to be applied without consideration of whether detention would violate the Hardial Singh principles.
Under the secret policy FNPs were liable to be detained even if they were nationals of a country to which deportation was not a practical possibility.
Thus application of the secret policy would, in some cases, result in detention that was outside the power conferred by the 1971 Act.
The second reason why Mr Beloff conceded that the secret policy was unlawful was that it was inconsistent with the Secretary of States published policy.
Inasmuch as the application of the secret policy would result in the detention of some who would not have been detained on the application of the published policy it was plainly open to objection on this ground.
The third reason why Mr Beloff conceded that the secret policy was unlawful was that it was secret.
This concession was also properly made, for the reasons given by Lord Dyson.
What were the circumstances in which the secret policy was applied?
Lord Dyson has summarised the circumstances in which the secret policy was applied.
Lord Walker and Lord Collins have described these as a serious abuse of power.
Lady Hale has expressed some sympathy for the predicament in which the civil servants found themselves.
Having considered the voluminous discovery, some of it very belated, I share both the concern expressed by Lord Walker and Lord Collins and the sympathy expressed by Lady Hale.
It was clear to officials that the Secretary of State wished all FNPs to be deported, and to be detained pending deportation.
They were concerned at the legality of such a policy, particularly because it conflicted with the published policy.
There was a protracted period preparing and circulating draft advices to ministers in which each of a lengthy circulation list was given the chance to comment.
Many did, whereupon the draft would be re circulated.
There seems to have been a reluctance to grasp the nettle of presenting advice that would be unpalatable.
There were considerable delays caused by the perceived need to obtain counsels opinion.
The picture is of bureaucracy at its worst with the best proving constantly the enemy of the good.
The lamentable fact is that approximately two years elapsed between the identification of the need to publish a revised policy on detention and the publication of such a policy in the new Enforcement Instructions and Guidance in September 2008.
Although it was suggested that ministers might favour a policy that would appear to make the courts responsible for the release from detention of FNPs, this course was neither advocated nor adopted.
There was muddle galore, but I am not persuaded having considered the considerable discovery that there was a deliberate attempt to deceive the courts as to the policy that was being applied.
Did the application of the secret policy render the detention of the appellants unlawful?
It is now accepted by the Secretary of State that the decision maker in the case of each of the appellants decided that he should be detained by applying to him the secret policy.
The power to detain that he purported to apply was that conferred by Schedule 3.
Had the appellants been persons whose deportation would not be possible within a reasonable period, so that they fell outside the lawful application of Schedule 3, the application of the secret policy would have resulted in their detention none the less.
Had the appellants been persons whose detention would have conflicted with the Secretary of States published policy, so that their detention would be unlawful under the principles of public law discussed above, the application of the secret policy would have resulted in their detention none the less.
In the event each appellant fell within the group of FNPs for whom detention was appropriate, indeed inevitable, if the Secretary of States published policy was applied to them.
Was their detention none the less unlawful because of the process of reasoning that had brought it about? Mr Husain submits that it was.
The Court of Appeal held that it was not, because the application of the secret policy was not material; it produced the result that would have been produced had the right policy been applied.
This is I believe a novel question, not to be answered by the simple answer that the detention was unlawful because the decision that produced it was unlawful.
It is also a complex question because of the novel feature of the existence of a published policy that would have predetermined the decisions in relation to the two appellants had it been applied.
It is helpful to unpick the secret policy and consider its effect if each objection to it had been the only objection.
I take first the objection that it was a blanket policy.
Imagine the Secretary of State had publicly announced that all FNPs who were given deportation orders would henceforth be detained pending deportation, subject to exceptions on compassionate grounds.
The application of this policy would have been objectionable in that it would have resulted in the detention of those FNPs whose deportation would not be possible within a reasonable period.
Would this fact have rendered unlawful the detention of the majority of FNPs whose deportation was possible? I see no reason of principle why it should.
Next I take the objection that the policy was in conflict with the published policy.
Had the secret policy not been secret, this objection would have melted away.
The public policy would simply have been publicly altered.
This would not have been objectionable.
What of the objection that the policy was secret? Had this been the only objection to it I do not see how this could have availed the appellants.
They were already subject to a policy that would result in their detention.
They had no legitimate expectation of being permitted to remain at large.
If the secret policy had extended the category of those FNPs who would be detained, those who, without knowing it, were brought within the category of detainees might have had cause to object to their detention, but I do not see how those who were going to be detained under the previous published policy could legitimately complain.
If none of the individual objections to the secret policy would have afforded the appellants legitimate grounds for challenging their detention, does the position change when the objections are considered cumulatively? I can see no reason why it should.
Both logically and intuitively my conclusion is that the introduction of the secret policy gave those whose detention resulted from it cause to challenge the legality of their detention, but not those whose legitimate expectation was that they would be detained under the application of the published policy.
This was also the reaction of those officials who questioned the application of the secret policy.
Their concern was that those whose detention infringed the Hardial Singh guidelines or the published policy would have claims for illegal detention, not that every detainee would have such a claim.
I now turn to some of the authorities relied upon by the appellants to see how they bear on the unusual problem raised by these appeals.
In Christie v Leachinsky [1947] AC 573 the plaintiff, who claimed damages for false imprisonment, had been arrested by police officers on a charge of unlawful possession under the Liverpool Corporation Act 1921.
That Act did not give a power to arrest for this offence.
The defendants raised by way of defence a plea that, at the time of the arrest they reasonably suspected him of receiving stolen goods, which provided a valid ground for his arrest.
The House of Lords held that this was no defence as at the time of his arrest he had been given a different ground of arrest.
This decision is normally cited for the proposition that an arrest will be unlawful if the person arrested is not told the reason for his arrest at the time that he is arrested.
It is also authority for the proposition that if a person is arrested for a reason which is not a valid statutory ground of arrest it is no defence to an action for false imprisonment that he could have been validly arrested on alternative grounds.
I do not see that this decision bears on the very different facts of the present case.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 the Court of Appeal held that detention by the police without the review required by section 40(1)(b) of the Police and Criminal Evidence Act 1984 was unlawful and the fact that, if the review had taken place authorised detention would have continued was no answer to a claim for substantial damages for false imprisonment.
That decision has no bearing on the issue that I am considering, which is whether the detention of the appellants was unlawful.
In Langley v Liverpool District Council [2005] EWCA Civ 1173; [2006] 1 WLR 375 a constable had purported to exercise a discretionary power under the Children Act 1989 in removing a child from its family.
The Court of Appeal held that his exercise of discretion had been wrongful in that, in the circumstances prevailing, it ran counter to the statutory scheme.
It followed that the removal of the child was unlawful and the constable had committed the tort of false imprisonment.
I have found this decision of no assistance in deciding whether, on the unusual facts of this case, the detention of the appellants was unlawful.
One of the cornerstones of the appellants case was the speech of Lord Diplock, with which all other members of the House agreed, in Holgate Mohammed v Duke [1984] AC 437.
A police officer had arrested the plaintiff on suspicion of the theft of jewellery.
He did so pursuant to section 2(4) of the Criminal Law Act 1967, which gave him a discretionary power to arrest her.
She alleged, however, that the exercise of this power had been unlawful because, when deciding whether to exercise his discretion the officer had been influenced by a consideration which was irrelevant, namely the likelihood that the fact that she had been arrested would be more likely to induce her to confess to her crime when interviewed.
Lord Diplock held that this consideration was not irrelevant to the proper exercise of the officers discretion.
It was a matter to which he could legitimately have regard having regard to the objectives of the statutory power to arrest.
Thus the comments upon which the appellants have relied were obiter.
Those comments, at p 443 of Lord Diplocks speech, were as follows: The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
The first of the Wednesbury principles is that the discretion must be exercised in good faith.
The judge in the county court expressly found that Detective Constable Offin in effecting the initial arrest acted in good faith.
He thought that he was making a proper use of his power of arrest.
So his exercise of that power by arresting Mrs Holgate Mohammed was lawful, unless it can be shown to have been unreasonable under Wednesbury principles, of which the principle that is germane to the instant case is: He [sc the exerciser of the discretion] must exclude from his consideration matters which are irrelevant to what he has to consider.
The way in which the appellants argue that this passage impacts on the facts of the present case is, as I understand it, as follows.
The decision to detain the appellants was taken by application of the secret policy.
This infringed the Wednesbury principles because it failed to have regard to relevant considerations, namely whether the Hardial Singh principles precluded detention and whether the appellants detention complied with the published policy.
The answer given by the Court of Appeal to this point is that, so far as the appellants were concerned, the failure to consider these matters was not material because, had they been considered, the conclusion would have been that neither matter posed an impediment to the appellants detention and had they been considered the decision would inevitably have been the same.
The approach of the Court of Appeal involves a refinement of the Wednesbury principles.
It is an application of the following reasoning of May LJ in R v Broadcasting Complaints Commissioner, Ex p Owen [1985] QB 1153, 1177: Where the reasons given by a statutory body for taking or not taking a particular course of action are not mixed and can clearly be disentangled, but where the court is quite satisfied that even though one reason may be bad in law, nevertheless the statutory body would have reached precisely the same decision on the other valid reasons, then this court will not interfere by way of judicial review.
I believe that at least in this new area of the effect of public policy, the approach of the Court of Appeal is a sound one.
Where a minister publishes a policy as to the circumstances in which he will exercise a statutory power and then he or his officials apply a different policy which results in the exercise of that power in circumstances which range wider than those published, I do not consider that those whose cases fell within the published policy can automatically contend that the application of the power to them has been unlawful.
If the facts are that no reasonable decision maker applying the published policy could have done other than reach the decision which the decision maker arrived at, the fact that he applied a more expansive, but unpublished, policy when reaching his decision will not invalidate that decision.
For these reasons, which accord I believe with the reasoning of both the Court of Appeal and Lord Brown, I have concluded that the application of the secret policy did not render the detention of the appellants unlawful.
Damages
In view of my conclusions on liability, the issue of damages does not arise.
Had I agreed with Lord Dyson on liability, I would have shared his approach to damages.
I also endorse Lord Collins conclusions in relation to vindicatory damages.
Reviews
A word about reviews.
If the majority are correct in concluding that the application of the secret policy rendered all decisions taken pursuant to it unlawful, then it seems to me that the moment that the secret policy was applied to reviews of the lawfulness of those detained, their continued detention would have been rendered unlawful, even if they were lawfully detained under the published policy before the secret policy was introduced and even if they remained subject to detention within the terms of the published policy.
This would be an extraordinary result.
MR LUMBAS HARDIAL SINGH APPEAL
Mr Lumba has now voluntarily left the country, but the question remains of whether his detention became unlawful in the period before he left.
Because of the view that I take of the scope of the Hardial Singh principles, I find the issues in relation to this part of Mr Lumbas appeal easier to resolve than has Lord Dyson.
The lengthy period during which Mr Lumba was detained largely resulted from his own efforts to avoid deportation.
For most of the period his deportation had been a practical possibility.
The Secretary of State had not been dragging her feet in her effort to deport Mr Lumba.
I agree with the Court of Appeal that Mr Lumba could not be heard to say that it was impossible to deport him within a reasonable time when the difficulty in doing so resulted from his own attempts to avoid deportation and not from extrinsic problems in effecting his deportation.
On my view of the interpretation of Schedule 3, whether Mr Lumba posed a risk of re offending was not relevant to the period for which he could lawfully be detained.
It seems to me that para 107 of Lord Dysons judgment lends support to my belief that the power to detain is not dependent upon an object of the detention being to facilitate deportation.
The question remains, however, in Mr Lumbas case of whether his continued detention, having particular regard to his mental condition, remained consistent with the Secretary of States published policy.
He has now voluntarily left the country, but if the issue of the lawfulness of his detention is to be pursued I agree with Lord Dyson that this is a matter to be considered by the Administrative Court on remission.
Subject to this, for the reasons that I have given I would dismiss these appeals.
LORD BROWN (with whom Lord Rodger agrees)
Amongst the many issues to be decided on these appeals far and away the most important concerns the true nature of the tort of false imprisonment.
Lord Dyson having set out all the relevant facts and the detailed legal context in which the many issues here arise for determination, I shall proceed without more to what I recognise is to be a dissenting judgment on this crucial question.
Freedom from executive detention is arguably the most fundamental right of all.
Thus Lord Bingham of Cornhill in his 2002 Romanes lecture.
The tort of false imprisonment is, of course, the remedy provided by law for the violation of this freedom, for the unlawful deprivation of a persons liberty.
The outcome of the appeals proposed by the majority of the court is to hold the appellants and, indeed, a large number of others similarly placed to have been unlawfully detained, in many instances for a period of years, and yet to compensate them by no more than a nominal award of damages.
They are to be held unlawfully detained because, in his (or her) exercise of the undoubted power to detain them, the Secretary of State breached certain public law duties.
But they are to be awarded only nominal damages because, whatever approach had been taken to the exercise of the detaining power, the appellants must inevitably have been detained in any event.
Whilst I share to the full the majoritys conclusion that it would be quite wrong in the circumstances of these cases to award the appellants any substantial compensation in respect of their detention, for my part I would reach that conclusion by a very different route.
I would hold that a public law breach of duty in the course of exercising an executive power of detention does not invariably, and did not here, result in the subsequent detention itself being unlawful in short, that these appellants were not the victims of false imprisonment.
Naturally I recognise the beguiling simplicity and apparent purity of the majoritys approach.
Ever since the House of Lords decision in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, decisions made within the decision makers jurisdiction but containing a public law error have generally been regarded as precisely equivalent to decisions made entirely without jurisdiction.
Thus, it is said, a decision to detain which is flawed by a public law error is ultra vires and the detention which follows is necessarily unauthorised and therefore unlawful.
Logically, indeed, this must be so however minor the public law error involved in the making of the decision and however inevitable it is that the decision to detain would have been made in any event. (At one stage in the argument Mr Husain QC for the appellants accepted that some public law failures might be too inconsequential to require this conclusion but unsurprisingly he was unable to formulate any test by which to determine such cases and, indeed, he had argued before this court on behalf of the appellant in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527 that false imprisonment must follow inexorably even from periodic failures to comply with the Secretary of States self imposed monthly review process.) Given, moreover, that the tort of false imprisonment is actionable per se that it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification (Lord Hope in R v Governor of Brockhill Prison ex parte Evans [2001] 2 AC 19, 32) logic also suggests that the notion of nominal damages should have no part to play in determining the compensation payable.
Why should someone imprisoned without lawful justification be paid nominal damages only? If the answer is that they would have been imprisoned anyway, under the same power and in just the same way, then in reality the Court is saying that the tort may be committed merely in a technical way.
I have to say that such an approach would to my mind seriously devalue the whole concept of false imprisonment.
It is true that in Murray v Ministry of Defence [1988] 1 WLR 692, whilst confirming that an action for false imprisonment lies even if the detainee does not know that he has been imprisoned, Lord Griffiths added (p703 A B): If a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
In my opinion, however, there is a very real difference between a detainee who is in fact unaware of being under physical restraint (perhaps because he is asleep or because he simply does not know that the door has been locked) and a detainee who is fully aware of his loss of freedom.
To award the latter nominal damages only, on the basis that, even had he been dealt with lawfully he would still have been deprived of his freedom anyway, is really to say that he was in truth rightly in detention.
That seems to me very different from saying that he was wrongly imprisoned but happily unaware of it.
I have difficulty, therefore, with Lord Dysons criticism (at paras 92 and 93) of the passage on damages in Clarke LJs judgment in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, 668.
To compensate (or rather to deny compensation) on the basis that the detainee has suffered no loss because he would have remained in detention whether the tort was committed or not is in my opinion the very negation of the tort: it is to hold that the detainee was at one and the same time both rightly and wrongly imprisoned.
Search as one may in the judgments both of the Court of Appeal and of the House of Lords in Christie v Leachinsky (respectively [1946] KB 124 and [1947] AC 573), there is no hint of a suggestion that the false imprisonment which followed upon the unlawful arrest in that case might properly attract only a nominal award of damages.
I do not say that those falsely imprisoned should be compensated identically irrespective of how deserving they were of liberty rather than restraint during the relevant period of detention; I do say, however, that rather than hold a detainee simultaneously both rightly detained and falsely imprisoned, the law should instead recognise that, notwithstanding a flaw in the decision making process such as to involve the breach of a public law duty, the decision maker has not in those circumstances committed the tort of false imprisonment.
A court which speaks with two voices risks bringing the law into disrepute.
Is this court then bound by established law to reach so unsatisfactory a conclusion as the majority of the court suggest: tortious liability but for nominal damages only? To my mind it is not.
Assuming that a power to detain exists, that any preconditions to its exercise have been satisfied and any limitations upon its scope observed, I know of no case which holds the detainee to have been falsely imprisoned merely because, in the course of exercising the power, the decision maker committed some public law breach of duty.
On the contrary, and to my mind hardly surprisingly, the courts have consistently shied away from such a conclusion as is amply and consistently demonstrated by the series of Court of Appeal judgments in this very line of cases.
Such was the decision of the Court of Appeal (Laws, Keene and Longmore LJJ) in SK (Zimbabwe), the Court of Appeal (Lord Neuberger of Abbotsbury MR, Carnwath and Stanley Burnton LJJ) in the cases from which the present appeals are brought, and the Court of Appeal (Maurice Kay, Longmore and Black LJJ) more recently still in Anam v Secretary of State for the Home Department [2010] EWCA Civ 1140.
In Anam, indeed, Black LJ in giving the leading judgment characterised the appellants argument thus at para 17: At its most radical, the submission advanced by [counsel] is that a failure by the Secretary of State to apply his published policy in making a decision to detain necessarily renders that decision a nullity and the resulting detention unlawful.
Have all these Lords Justices, many of them distinguished public law jurists, lost sight of the clear and basic principles of public law which, it is said, necessarily compel such a radical conclusion?
So far from the authorities supporting such a surprising conclusion they can and should, I suggest, be analysed rather to the following effect. (1) False imprisonment is the inescapable result of detention absent any power to detain R v Governor of Brockhill Prison (No 2) Ex p Evans [2001] 2 AC 19 is itself a good illustration of this basic proposition: the appellant having been kept in prison beyond the date when her custodial sentence, properly calculated, expired, there could hardly have been a clearer case of false imprisonment.
Such would also be the position were someone arrested for a non arrestable offence.
Analysed in the way I analysed the power of detention under Schedule 2 to the Immigration Act 1971 (directly analogous to the Schedule 3 power under consideration in these appeals) in R (Khadir) v Secretary of State for the Home Department [2006] 1 AC 207, these are cases not about the exercise of the power, but rather about its existence. (2) The tort of false imprisonment is committed too if someone is detained in breach of a condition precedent to the existence of the detention power.
Christie v Leachinsky [1947] AC 573 illustrates the common laws imposition of such a condition precedent: a right of arrest only arises when the citizen is told why he is being arrested.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 illustrates the imposition of such a precondition by statute (in that case the requirement for review as a precondition of continued detention beyond six hours).
R v Secretary of State for the Home Department Ex p Khawaja [1984] AC 74 provides another such illustration, the House of Lords there deciding that the power to detain and remove an immigrant as an illegal entrant under Schedule 2 to the 1971 Act was dependent upon establishing such illegality as a precedent fact. (3) Detention beyond the scope of a detaining power similarly constitutes false imprisonment.
For example, the limitations imposed by the courts following Woolf Js decision in R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles) undoubtedly operate to constrain the power of detention under paragraph 2 of Schedule 3 and it has long been recognised that detention in breach of the Hardial Singh principles gives rise to tortious liability. (Categories 2 and 3, I recognise, may not always be easily distinguishable.
It could, for example, be said that the first Hardial Singh principle constitutes a precondition for the exercise of the detention power.
It has seemed to me nonetheless worth attempting the distinction.) I would accept too that in certain circumstances a power of detention may (4) be narrowed by a published policy as to how it will be exercised.
The Court of Appeals decision in R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 is, I think, an illustration of that in the present context.
The Secretary of State had in that case adopted a published policy which in substance narrowed the grounds on which the detaining power (in that case under schedule 2 to the 1971 Act) would be exercisable (the stated policy there being to release anyone whose removal was not imminent).
Certainly it is on that basis alone that I would regard Nadarajah as correctly decided.
And it must, of course, be recognised that, as with any other statement of policy (a policy being, by definition, no more than an advance indication of how it is proposed to exercise the particular discretionary power in question) it is always open to the holder of the power to change that policy see, for example, in relation to the Immigration Rules themselves, MO (Nigeria) v Secretary of State for the Home Department [2009] 1 WLR 1230.
Every false imprisonment case on which the appellant relies can, in my opinion, be seen to fall within one or other of the above four categories.
Besides those already mentioned, two cases in particular call for brief special mention.
Kuchenmeister v Home Office [1958] 1 QB 496 concerned a German national who landed at Heathrow en route to Dublin.
The immigration officers, instead of refusing him leave to land (as they had been instructed to do), detained him at the airport until it was too late for him to catch the Dublin flight.
Holding him to have been wrongfully imprisoned, Barry J said this (p 512): His liberty was restricted to a greater degree than the immigration authorities were entitled to restrict it under [the particular power they sought to rely upon].
The fact that they might have restricted his mobility by employing the powers conferred upon them by other articles of the Order seems to me to be immaterial.
It is no answer, when a man says I have been unlawfully arrested without a warrant, to say Well, had I (the person making the arrest) taken the trouble to go and ask for a warrant, I would undoubtedly have got it.
That would be no answer to a claim for unlawful arrest.
Similarly here, although the [immigration officers] could have detained the plaintiff by refusing him leave to land, that does not entitle them to detain him on the grounds on which they did.
The case was to my mind correctly decided and can be seen to fall squarely under the first of the above four categories: the immigration officers simply had no power to restrict the plaintiffs movements in the way they did.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned a child in obvious need of protection.
Two relevant powers existed, respectively under sections 44 and 46 of the Children Act 1989.
Section 44 provides for the grant of an emergency protection order (EPO) authorising the council to remove a child into the care of foster carers; section 46 gives the police power to take a child into police protection.
The police officer there having removed the child in purported exercise of his power under section 46, the Court of Appeal held that he had been wrong to do so and accordingly that the child had been falsely imprisoned.
Dyson LJ in giving the leading judgment said that the statutory scheme clearly accords primacy to section 44 [which] is sanctioned by the court and . involves a more elaborate, sophisticated and complete process than removal under section 46 (para 38); that section 46 should be invoked only where it is not practicable to execute an EPO (para 40); and that in the result, albeit the officer had jurisdiction to remove [the child] pursuant to section 46, he could not lawfully invoke that power unless there were compelling reasons for exercising this power when, to his knowledge, an EPO was in force which authorised the council to remove [the child] into the care of foster carers (paras 44 and 46).
Again, I have no difficulty in accepting the correctness of this decision: just as the Hardial Singh line of cases imposed restrictions upon the power of detention under the 1971 Act, so the court in Langley thought it right to place a limitation upon the scope of the section 46 power.
The case falls neatly into category 3 (or perhaps into category 2, on the basis that the impracticality of executing a concurrent EPO was held to be a precondition to the lawful exercise of the section 46 power).
In what circumstances, then, does the breach of a public law duty in the exercise of a power to detain result in the detainee being falsely imprisoned? I have already indicated, at paragraph 347(4) above, one such circumstance, namely when the Secretary of State by his published policy indicates that he will not exercise his power to its fullest extent but rather will confine its exercise within certain limits (for example, as in Nadarajah, by releasing anyone whose removal is not imminent).
Such a published policy, unless and until it is changed, as a matter of public law requires the decision maker to decide cases (subject always to reasoned exceptions) in accordance with it.
It is my clear present view (subject to any further argument on the point) that SK (Zimbabwe) provides a good illustration of circumstances where, the breach of a public law duty notwithstanding, the detainee should not be regarded as falsely imprisoned.
The Secretary of State there breached what was his undoubted public law duty to review all detention cases monthly in accordance with his published policy on procedure.
As it seems to me, however, it is one thing to breach a policy under which a detainee is entitled to be released; quite another to breach a policy under which he is entitled merely to be reviewed for release.
Whereas the former will result in false imprisonment, the latter will not.
Obviously, if the detainee on review would have been entitled to be released under the Hardial Singh principles (or, if more favourable, the published policy statements) then he has a claim for false imprisonment.
But the claim in those circumstances arises from his continued detention beyond the date of such entitlement, not from the failure to review his case.
What, however, is the position in a case like the present when the Secretary of States breach of public law duty consists of applying, in place of his published policy, an unpublished policy less favourable to those subject to the detaining power? On the appellants case, of course, that automatically results in the false imprisonment of every single detainee whose continued detention has been considered under the wrong policy, irrespective of whether or not they would have had the least prospect of release whatever policy had been applied.
Applying the wrong policy, the argument runs, means that the Secretary of State failed to have regard to a material consideration, instead had regard to an immaterial consideration, and therefore reached his decision in an unlawful manner.
This renders it a nullity with the result that there was no lawful authority for the ensuing detention.
The closest this thesis comes to finding high level support in the authorities is in a much quoted dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437.
Following Mrs Holgate Mohammeds arrest on suspicion of theft and her detention for six hours at a police station for questioning, she was found at first instance to have been wrongfully arrested and was awarded 1,000.
This was on the basis that the arresting officer, in deciding that there would be a better prospect of her confessing if she were arrested and detained rather than merely interviewed under caution, wrongfully exercised his power of arrest.
Upholding the Court of Appeals decision to allow the Chief Constables appeal, the House of Lords held that the better prospect of the plaintiff confessing her guilt if arrested and questioned at a police station was in fact a relevant matter so that the arrest was not after all unlawful.
In the course of the only reasoned speech, Lord Diplock (at p443) observed that, the condition precedent to the officers powers of arrest and detention having been fulfilled by his having reasonable cause to suspect the plaintiff to be guilty of an arrestable offence, this left him with an executive discretion whether to arrest her or not.
It is the next passage in the speech that is so strongly relied upon by the appellants: Since this is an executive discretion expressly conferred by statute upon a public officer, the constable making the arrest, the lawfulness of the way in which he has exercised it in a particular case cannot be questioned in any court of law except upon those principles laid down by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, that have become too familiar to call for repetitious citation.
The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
Lord Diplock then noted that amongst the Wednesbury principles was that whoever exercises the discretion must (in Lord Greenes words) exclude from his consideration matters which are irrelevant to what he has to consider.
It is, to my mind, critical to a proper understanding of Lord Diplocks speech to recognise that the relevant matter in question there, the matter which the judge at first instance held the officer to have wrongly taken into consideration, was a consideration clearly decisive of the way he had exercised his discretion.
The whole reason for the officer exercising his power to arrest and detain the plaintiff was so that she would then be more likely to confess.
If that had been an unlawful consideration, nothing could be clearer than that without it the officer would not have exercised the power at all.
In short, on the facts of the case, the power would have been exercised for an improper reason and the resultant detention necessarily unlawful.
Certainly it would in my opinion be quite wrong to regard the case as authority for any wider proposition, least of all a thesis so absolute and unsatisfactory as that contended for here.
There had been no argument on the point: the Chief Constable was not even called upon.
Small wonder that in the quarter century following, despite the hugely increased scope of public law challenges, not a single case appears to have held an arrested detainee falsely imprisoned on Wednesbury grounds save where the arresting officer acted either in bad faith or for an improper purpose.
Perhaps the way to put the point is this.
Classically most public law challenges go to the decision making process rather than to the substance of the decision taken.
The substantive decision is for the public body and not for the court to take and generally a successful challenge requires that the impugned decision be taken afresh.
Obviously, if the substantive decision reached is outside the powers conferred upon the public body purporting to make it (ultra vires in the traditional, literal sense), then it must be nullified.
So too if it is irrational in the public law (Wednesbury) sense i.e. outside the range of permissible decisions which the public body is empowered to make.
But if, as here, the challenge is to the process whereby decisions to continue a detainees detention were taken or, indeed, as in SK (Zimbabwe), if what is challenged is a failure to take decisions (as often as promised by the policy) as to whether a detainees detention should continue then the appropriate remedy is to require the decision maker to act lawfully: to re decide decisions that resulted from a flawed decision making process or, as in SK (Zimbabwe), to take decisions that earlier the decision maker had omitted to take.
It simply does not follow from a flawed decision making process that the detainees continued detention immediately thereupon becomes unlawful so as to make him a victim of false imprisonment until a fresh decision comes later to be lawfully taken so that, for example, a detainee whose detention is reviewed every second month instead of monthly as the published policy dictates, alternates yo yo like between lawful detention and false imprisonment.
Nor does it seem to me that the absolutist approach to the consequences of public law error espoused here by the majority of the Court has received universal endorsement over recent years.
The decision of the House of Lords in Boddington v British Transport Police [1999] 2 AC 143 is often cited as a modern example of the Anisminic principle being applied in the ordinary course of proceedings (there in the context of a criminal trial).
But there are important dicta in the judgments which expressly leave open the question whether legal consequences may nonetheless follow from unlawful action.
Consider this passage from the speech of Lord Slynn of Hadley, an acknowledged master in the field of public law: In our jurisdiction the effect of invalidity may not be relied on if limitation periods have expired or if the court in its discretion refuses relief, albeit considering that the Act is invalid.
These situations are of course different from those where a court has pronounced subordinate legislation or an administrative act to be unlawful or where the presumption in favour of their legality has been overruled by a court of competent jurisdiction.
But even in these cases I consider that the question whether the acts or byelaws are to be treated as having at no time had any effect in law is not one which has been fully explored and is not one on which it is necessary to rule in this appeal and I prefer to express no view upon it.
The cases referred to in Wade & Forsyth, Administrative Law, 7th ed. (1997), pp.323 324, 342 344 lead the authors to the view that nullity is relative rather than an absolute concept (p.343) and that void is meaningless in any absolute sense.
Its meaning is relative.
This may all be rather imprecise but the law in this area has developed in a pragmatic way on a case by case basis. (p.165 C F) (Wade & Forsyth, now in its tenth edition (2010), continues to recognise the relativity of the concept of nullity in this context.) All I am saying is that if the law is to continue to develop in this area in a pragmatic way on a case by case basis, then in this particular case it should expressly recognise that not every decision to detain affected by a public law breach necessarily carries in its wake an unanswerable claim for false imprisonment.
That said, I readily acknowledge that the power of executive detention is one to be exercised with the greatest care and sensitivity and that it is of the first importance that those who exercise it should be ever mindful not merely of the legal limits of the power but also of such public law duties as surround its proper exercise.
Where, as here, a wrong and less favourable policy has been applied in deciding whether a person should be, or continue to be, detained, I accept that it must be for the Secretary of State as decision maker to establish that this breach of his or her public law duty did not in fact prejudice the detainee.
In short, it is for the Secretary of State in these circumstances, in order to avoid liability for the tort of false imprisonment, to establish that the detainee would have been detained in any event even, that is, had the lawful published policy been followed.
Assuming, however, that the inevitability of detention in any event can be established, it seems to me nothing short of absurd to hold the tort of false imprisonment nevertheless made out.
After all, had a detainee in such circumstances sought to challenge his continued detention by judicial review (or habeas corpus), the court would have been likely to grant declaratory relief only, declining in its discretion to order the detainees release.
Assuming, indeed, that the Secretary of States lawful policy in effect dictates the detainees detention, why, one wonders, would a decision to release him not itself be in breach of the Secretary of States public law duty?
Given, as the Court of Appeal held, and as I understand each member of this court to accept, that there was no realistic prospect whatever of these appellants having been released even had the Secretary of State applied his more favourable published policy, it follows that for my part, whilst, of course, deeply regretting the public law breaches of which the Secretary of State was here guilty, I would dismiss the appeals.
The bulk of this judgment was written upon my understanding that the essential choice facing the court was between (a) no false imprisonment and (b) false imprisonment but nominal damages only.
It now appears that some members of the court favour a third outcome: (c) false imprisonment with damages of perhaps 500 1,000 by way of a vindicatory or conventional award.
Describe such an award how one will, to my mind it cannot sensibly be justified here.
Is the court really to award substantial damages to those conceded to have been rightly detained? I have made clear my difficulties with a nominal award of damages.
A substantial award would appear to me more objectionable still.
Lord Hope (at para 177 of his judgment) refers to Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 a constitutional challenge based upon some quite appalling misbehaviour by a police officer (Lord Nicholls at para 2) and calls here for some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment.
Properly critical though our judgments may be of the conduct of Home Office officials in these and similar cases, I find it quite impossible to recognise in them any breach (grave or otherwise) of the detainees fundamental rights.
The detainees, I can only repeat, were rightly detained and it would have been wrong to release them.
Save insofar as this judgment indicates the area of my disagreement with Lord Dysons judgment, I wish to say that I am in respectful agreement with it and feel unable to add anything of value on the various other issues arising for decision.
| UK-Abs | The main issue in this appeal is whether, and if so which and in what circumstances, breaches of public law are capable of rendering unlawful the detention of foreign national prisoners (FNPs) pending their deportation.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) confers on the Secretary of State for the Home Department a power to deport foreign nationals.
Schedule 3 of the 1971 Act empowers the Secretary of State, in certain specified circumstances, to detain foreign nationals pending deportation.
From at least 1991, the Secretary of State had maintained a published policy on the application of the power to detain.
This policy presumed in favour of release whilst justifying detention in some circumstances.
However, following adverse publicity in April 2006, the Secretary of State adopted a new policy which was not published.
Between April 2006 and September 2008, the Secretary of State applied this unpublished policy which imposed a near blanket ban on release of FNPs.
On 9 September 2008, the Secretary of State amended the published policy to replace all references to a presumption of release with a presumption of detention.
However, on 22 January 2009, following the decision of Davis J in the current proceedings, the published policy was amended again to omit references to a presumption of detention.
Walumba Lumba is a citizen of the Democratic Republic of Congo.
He entered the UK unlawfully in April 1994.
He was later convicted of a number of offences and was sentenced to 4 years imprisonment for wounding with intent on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of the intention to deport him.
He was due to be released from prison in June 2006, but was informed that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He was granted indefinite leave to remain in the UK in February 2003.
On 27 June 2003 he was sentenced to 42 months imprisonment for possession of a Class A drug with intent to supply.
On 10 May 2006, the Secretary of State informed Mr Mighty of the intention to deport him.
On 19 May 2006, he was detained pending deportation.
However, he was released on bail on 28 July 2008.
Mr Lumba issued proceedings on 18 October 2007 claiming a declaration that his detention was unlawful and damages.
His case was joined with that of Mr Mighty who had issued proceedings on 29 May 2008.
In addition, Mr Lumba, who remained in detention until his departure from the United Kingdom, challenged the reasonableness of the duration of his detention and sought a mandatory order that he be released.
At first instance ([2008] EWHC 3166 (Admin)), Davis J granted declarations to the effect that it was unlawful for the Secretary of State to operate an unpublished policy which presumed in favour of detention.
He dismissed the other claims, including the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed on the issue of the presumption of detention.
The Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) allowed the cross appeal but otherwise dismissed the appeals ([2010] 1 WLR 2168).
The Supreme Court, by a majority, allows the appeals.
Lord Dyson gives the lead judgment.
The majority hold that the Secretary of State is liable to both appellants in the tort of false imprisonment as the statutory power to detain them was exercised in breach of public law duties (Lords Phillips, Brown and Rodger dissenting).
The appellants are, however, only entitled to nominal damages assessed at 1 (Lords Hope, Walker and Lady Hale
dissenting).
They are not entitled to exemplary damages.
The court remits to the High Court the question whether Mr Lumba was detained for longer than a reasonable period in breach of the principles in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
The court considers five issues: (1) whether the unpublished policy maintained by the Secretary of State between April 2006 and September 2008 is unlawful on grounds of public law error; (2) if so, whether detention on the basis of such a policy is unlawful in circumstances where the appellants would have been lawfully detained in any event; (3) if so, whether the appellants are entitled to recover more than nominal damages; (4) whether the appellants are entitled to an award of exemplary damages; and (5) in the case of Walumba Lumba, whether there has been a breach of the Hardial Singh principles.
The requirements of public law The court holds unanimously that it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation, provided that the requirements of public law, Hardial Singh and Article 5(1)(f) of the ECHR are respected: [40] [55].
However, as regards the application of the statutory power to detain, it is unlawful in public law for the Secretary of State to maintain an unpublished policy which is inconsistent with her published policy and which applies a near blanket ban on the release of FNPs: [26] [38].
Such a policy was applied to the appellants between April 2006 and September 2008: [21].
Liability in false imprisonment Breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful and did render it unlawful in this case: [62] [88], [198] [207], [221].
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
Accordingly, by a majority, the court holds that the fact that the appellants would have lawfully been detained in any event does not affect the Secretary of States liability in false imprisonment: [62], [64] [88], [197], [208] [211], [221], [239] [247].
Lords Phillips and Brown (with whom Lord Rodger agrees) dissent and hold that because the appellants would have been lawfully detained the Secretary of State is not liable to them in false imprisonment: [319] [334], [343] [360].
Damages By a majority, the court holds that the fact that the appellants would have been lawfully detained is relevant to damages rather than to liability.
Since the appellants have suffered no loss they should recover no more than nominal damages of 1: [90] [96].
They are not additionally entitled to damages to vindicate the importance of the right and the seriousness of the infringement: [97] [101], [222] [237], [253] [256] (Lords Hope, Walker and Lady Hale dissenting: [176] [180], [195], [212] [217]).
Further, the court holds unanimously that the appellants are not entitled to exemplary damages: [150] [169].
Reasonableness of the length of detention under the Hardial Singh principles As regards the assessment of whether a reasonable period of detention has elapsed, the court unanimously holds that the risk of reoffending and the legal challenges pursued by the detainee are relevant.
The relevance of a refusal to voluntarily return is limited: [106] [128].
It is for a court of first instance to decide whether Mr Lumbas detention for almost 56 months was in breach of the Hardial Singh principles.
Accordingly, his claim is remitted to the High Court: [129] [148].
|
These two cases raise a number of important issues in relation to the detention pending deportation of foreign national prisoners (FNPs) following the completion of their sentences of imprisonment.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) provides that a person who is not a British citizen is liable to deportation from the United Kingdom if the Secretary of State deems his deportation to be conducive to the public good.
Schedule 3 to the 1971 Act provides in certain specified circumstances for the detention of such a person pending his deportation.
Walumba Lumba is a citizen of the Democratic Republic of Congo (DRC) who entered the UK on 10 April 1994.
He was convicted of a number of offences culminating in an offence of wounding with intent for which he was sentenced to 4 years imprisonment on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of his intention to deport him under section 3(5)(a) of the 1971 Act.
He was due to be released from prison on 23 June 2006, but by letter dated 22 June 2006 was notified that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He arrived in the United Kingdom on 4 December 1992 and was given 6 months leave to enter as a visitor.
Thereafter, he made various unsuccessful applications for leave to remain.
On 10 February 2003, however, he was granted indefinite leave to remain.
He had been convicted of a number of offences, including possession of a Class A drug with intent to supply, for which on 27 June 2003, he was sentenced to 42 months imprisonment.
Following his release on licence, he committed a driving offence and was recalled to prison.
He was finally released on 31 March 2006.
On 10 May 2006, the Secretary of State informed Mr Mighty of his intention to deport him under section 3(5)(a) of the 1971 Act.
On 19 May 2006, he was detained pending deportation because he was likely to abscond and his release was not conducive to the public good.
He was released on bail on 28 July 2008.
Schedule 3 of the 1971 Act provides, so far as material: 2. (1) Where a recommendation for deportation made by a court is in force in respect of any person, and that person is not detained in pursuance of the sentence or order of any court, he shall, unless the court by which the recommendation is made otherwise directs, or a direction is given under sub paragraph (1A) below, be detained pending the making of a deportation order in pursuance of the recommendation, unless the Secretary of State directs him to be released pending further consideration of his case or he is released on bail. (1A) Where (a) a recommendation for deportation made by a court on conviction of a person is in force in respect of him; and (b) he appeals against his conviction or against that recommendation, the powers that the court determining the appeal may exercise include power to direct him to be released without setting aside the recommendation. (2) Where notice has been given to a person in accordance with regulations under section 105 of the Nationality, Immigration and Asylum Act 2002 (notice of decision) of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained under the authority of the Secretary of State pending the making of the deportation order. (3) Where a deportation order is in force against any person, he may be detained under the authority of the Secretary of State pending his removal or departure from the United Kingdom (and if already detained by virtue of sub paragraph (1) or (2) above when the order is made, shall continue to be detained unless he is released on bail or the Secretary of State directs otherwise).
Between April 2006 and 9 September 2008, the Secretary of States published policy on detention of FNPs under her immigration powers was that there was a presumption in favour of release, although detention could be justified in some circumstances.
In fact, during this period the Secretary of State applied a quite different unpublished policy which was described as a near blanket ban by the Secretary of State, Ms Jacqui Smith, to the Prime Minister, Gordon Brown, on 19 September 2007 in a document entitled Bail Proposal for Foreign National Prisoners in which she said: Since April 2006, the BIA [(the Border and Immigration Agency)] has been applying a near blanket ban on release, regardless of whether removal can be achieved and the level of risk to the public linked to the nature of the FNPs original offence.
By currently having no discretion to grant bail, the BIA has to regularly transfer FNPs around the Estate.
On 9 September 2008, the Secretary of State published a policy which included a presumption of detention and withdrew all references to a presumption of release.
On 22 January 2009, following the decision of Davis J in the current proceedings, this policy was amended again to omit the reference to a presumption of detention and substitute a policy in favour of release from detention.
It will be necessary to describe the policies and practices adopted from time to time in more detail later in this judgment.
The proceedings
Mr Lumba issued proceedings on 18 October 2007.
He challenged the lawfulness of his detention on the grounds that he was no longer being detained pending deportation and that his continued detention was in breach of the principles stated by Woolf J in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
He also claimed a declaration that his detention was unlawful, a mandatory order that he be released and damages.
On 4 July 2008, Collins J gave an interlocutory judgment on part of the claim: [2008] EWHC 2090 (Admin).
He did not make a decision in relation to Mr Lumbas past detention and reserved for a further hearing inter alia the questions of whether the operation of an unpublished policy had been unlawful and the past detention had been unlawful as a consequence.
On 28 July 2008, Mr Lumbas claim was joined to four other cases in which the same points arose.
One of these was the claim of Mr Mighty which had been issued on 29 May 2008.
The five cases were heard by Davis J on 11 14 November 2008.
In an impressive judgment given on 19 December 2008 [2008] EWHC 3166 (Admin), he granted the claimants declarations that (i) paragraph 2 of Schedule 3 to the 1971 Act prohibits the Secretary of State from operating any policy in relation to the detention of FNPs which contains a presumption in favour of detention and (ii) it was unlawful for the Secretary of State to operate the policy introduced in April 2006 in that it was not sufficiently published or accessible until its publication on 9 September 2008.
He dismissed the other claims, in particular the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed against the first declaration.
In a judgment of the court delivered by Stanley Burnton LJ, the Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) ([2010] 1 WLR 2168) allowed the cross appeal and set aside the first declaration.
They also varied the second declaration.
Otherwise the appeals were dismissed.
The issues
The principal issues are as follows. (i) Were the detention policies that were applied to the appellants after April 2006 unlawful because (a) they were blanket policies (para 21 below) and/or (b) they were inconsistent with the published policies (para 26 below) and/or (c) they were not published policies (paras 27 38 below) and/or (d) they contained a presumption in favour of detention (paras 40 55 below)? (ii) If unlawful policies were applied to the appellants, was their detention unlawful in consequence (paras 56 89)? (iii) If their detention was unlawful, are the appellants entitled to more than nominal damages (paras 90 101 below)? (iv) Is Mr Lumba entitled to damages for unlawful detention on the grounds that, in his case, there has been a breach of the Hardial Singh principles? (paras 102 148 below) (v) Are the appellants entitled to an award of exemplary damages (paras 150 168 below)? The policies in more detail
The published policies
The presumption of release had been entrenched in the Secretary of States published policies since at least 1991.
It appeared in the White Paper Fairer, Faster and Firmer: a Modern Approach to Immigration and Asylum (1998) (Cm 4018), which was published in 1998 and again in 2002 in the White Paper Secure Borders, Safe Haven: Integration Diversity in Modern Britain (2002) (Cm 5387) which stated at para 4.76: Our 1998 White paper set out the criteria by which Immigration Act powers of detention were exercised and confirmed that the starting point in all cases was a presumption in favour of granting temporary admission or release.
The criteria were modified in March 2000 to include detention at Oakington Reception Centre if it appeared that a claimants asylum application could be decided quickly.
The modified criteria and the general presumption remain in place.
Chapter 38 of the Operational Enforcement Manual (OEM), which was a published document in force until April 2008, stated in its introductory section that the 1998 White Paper confirmed that there was a presumption in favour of temporary admission or release and that, whenever possible, we would use alternatives to detention.
Para 38.3 stated: 1.
There is a presumption in favour of temporary admission or temporary release. 2.
There must be strong grounds for believing that a person will not comply with conditions of temporary admission or temporary release for detention to be justified. 3.
All reasonable alternatives to detention must be considered before detention is authorised.
Identical wording was contained in Chapter 55 of the Enforcement Instructions and Guidance (EIG) which replaced Chapter 38 of the OEM and came into force on 19 June 2008.
On 9 September 2008, Chapter 55 of the EIG was amended.
With regard to FNPs, para 55.1.2 stated: Due to the clear imperative to protect the public from harm and the particular risk of absconding in these cases, the presumption in favour of temporary admission or temporary release does not apply where the deportation criteria are met.
Instead the person will normally be detained, provided detention is, and continues to be lawful.
The EIG then gave guidance to caseworkers as to the factors which might make further detention unlawful.
In particular, it stated that the presumption of detention will be displaced where legally the person cannot or can no longer be detained because detention would exceed the period reasonably necessary for the purpose of removal.
Following the decision of Davis J in the current proceedings, on 22 January 2009 this policy was changed again so as to replace a presumption in favour of detention with a presumption in favour of release from detention.
The unpublished policies
The true picture during the period from April 2006 until September 2008 was very different.
Following the public disclosure on 25 April 2006 that 1,013 FNPs had been released from prison before consideration had been given to the question of whether they should have been deported, the Secretary of State adopted a new policy which he did not publish.
I have already referred at para 5 above to the description of it contained in the 19 September 2007 Bail Proposal as a near blanket ban.
The policy of blanket detention admitted of exceptions only on compassionate grounds.
No formal guidance was given to caseworkers to give effect to this policy until on 8 November 2007 they were issued with a document (known as Cullen 1) which set out criteria and guidance for the identification and release of FNPs who were considered to pose the lowest risks to the public and the lowest risks of absconding.
Cullen 1 was not published to the outside world.
It led at most to the release of a handful of FNPs.
In March 2008, an amended guidance document (known as Cullen 2) was issued to the caseworkers.
It too was not published to the outside world.
Attached to Cullen 1 and Cullen 2 was an extensive list of offences entitled List of recorded crimes where release from immigration detention or at the end of custody will not be appropriate.
In practice, almost all FNPs who had been sentenced to imprisonment were likely to have committed one or more of such offences.
Both Mr Lumba and Mr Mighty had done so.
The evidence of David Wood, Strategic Director of the Criminality and Detention Group, was that between December 2006 and July 2008, 15 FNPs were released from detention.
On 22 May 2008, the existence of an unpublished policy or practice was belatedly disclosed by the Secretary of State to Mitting J after he had given judgment in the case of R (Ashori) v Secretary of State for the Home Department [2008] EWHC 1460 (Admin).
More detail as to the circumstances in which the policy came to be disclosed is given by Davis J at paras 21 to 26 of his judgment.
The unpublished policies were applied to Mr Lumba and Mr Mighty
It is now common ground that the unpublished policies were applied to the two appellants throughout their detention.
It is, therefore, unnecessary to consider para 203 of the judgment of Davis J (where the judge stated that there was nothing to show that Mr Lumba was detained by application of the unpublished policy) or para 100 of the judgment of the Court of Appeal which upheld Davis J on this point.
Were these policies unlawful?
Here too, there is little dispute between the parties.
Mr Beloff QC rightly accepts as correct three propositions in relation to a policy.
First, it must not be a blanket policy admitting of no possibility of exceptions.
Secondly, if unpublished, it must not be inconsistent with any published policy.
Thirdly, it should be published if it will inform discretionary decisions in respect of which the potential object of those decisions has a right to make representations.
As regards the first of these propositions, it is a well established principle of public law that a policy should not be so rigid as to amount to a fetter on the discretion of decision makers.
Davis J held that the unpublished policy was not a blanket policy.
The Court of Appeal disagreed.
Basing themselves on the review by David Wood of the failure to publish a revised FNP detention policy following the April 2006 crisis approved on 3 August 2009, the Court of Appeal concluded that the policy, as applied at least from the time of Cullen 1 in November 2007, effectively operated on a blanket basis rather than (as held by the judge) one of presumption.
I agree with this assessment by the Court of Appeal but would go further.
It seems clear to me that a blanket policy was also applied from April 2006 until the introduction of Cullen 1 in November 2007.
During this earlier period, the only exceptions made to the policy of universal detention were on compassionate grounds and these were few and far between.
Importantly, there were no releases on the basis of Hardial Singh principles.
Indeed, Cullen 1 represented a modest relaxation of the previous position.
It is convenient to introduce the Hardial Singh principles at this stage, since they infuse much of the debate on the issues that arise on this appeal.
It is common ground that my statement in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46 correctly encapsulates the principles as follows: (i) The Secretary of State must intend to deport the person and can only use the power to detain for that purpose; (ii) The deportee may only be detained for a period that is reasonable in all the circumstances; (iii) If, before the expiry of the reasonable period, it becomes apparent that the Secretary of State will not be able to effect deportation within a reasonable period, he should not seek to exercise the power of detention; (iv) The Secretary of State should act with reasonable diligence and expedition to effect removal.
Lord Phillips says that the first two of these principles cannot properly be derived from Hardial Singh.
Since their correctness has not been put in issue by the parties to these appeals, I propose to deal with the points shortly.
As regards the first principle, I consider that Woolf J was saying unambiguously that the detention must be for the purpose of facilitating the deportation.
The passage quoted by Lord Phillips includes the following: as the power is given in order to enable the machinery of deportation to be carried out I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose(emphasis added).
The first principle is plainly derived from what Woolf J said.
As for the second principle, in my view this too is properly derived from Hardial Singh.
Woolf J said that (i) the power of detention is limited to a period reasonably necessary for the purpose (as I would say) of facilitating deportation; (ii) what is reasonable depends on the circumstances of the particular case; and (iii) the power to detain ceases where it is apparent that deportation will not be possible within a reasonable period.
It is clear at least from (iii) that Woolf J was not saying that a person can be detained indefinitely provided that the Secretary of State is doing all she reasonably can to effect the deportation.
It seems to me that, in relation to both the first and second principles, Lord Phillips is suggesting a different interpretation of paragraph 2(3) of Schedule 3 to the 1971 Act from that enunciated by Woolf J.
I do not agree with this interpretation.
But what is perhaps of more importance in the context of these appeals is that in my view it is not appropriate to depart from a decision which has been followed repeatedly for almost 30 years unless it is obviously wrong (which I do not believe to be the case), still less to do so without the benefit of adversarial argument.
As regards the second proposition accepted by Mr Beloff, a decision maker must follow his published policy (and not some different unpublished policy) unless there are good reasons for not doing so.
The principle that policy must be consistently applied is not in doubt: see Wade and Forsyth Administrative Law, 10th ed (2009) p 316.
As it is put in De Smiths Judicial Review, 6th ed (2007) at para 12 039: there is an independent duty of consistent application of policies, which is based on the principle of equal implementation of laws, non discrimination and the lack of arbitrariness.
The decision of the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department [2003] EWCA Civ 1768, [2004] INLR 139 is a good illustration of the principle.
At para 68, Lord Phillips MR, giving the judgment of the court, said that the Secretary of State could not rely on an aspect of his unpublished policy to render lawful that which was at odds with his published policy.
As for the third proposition, the Court of Appeal dealt with the issue of whether there is a general rule of law that policies must be published at paras 70 to 79 of their judgment.
Disagreeing with Davis J, they concluded that there is no such general rule and said that the fact that the appellants were detained pursuant to unpublished policies was not in itself a reason for holding that the decisions to detain them were unlawful.
Mr Beloff did not feel able to support this conclusion.
It is unfortunate that the Court of Appeal embarked on this topic at all, since it was not before them and was not, therefore, the subject of argument or citation of authority.
As the point is of general importance, I need to say why in my view the judge was right and the Court of Appeal were wrong on this issue both as a matter of common law and ECHR law.
The Court of Appeal referred to a statement of Sedley LJ in R v Secretary of State for Education and Employment Ex P Begbie [2000] 1 WLR 1115, 1132C that there were cogent objections to the operation of undisclosed policies affecting individuals entitlements or expectations and said at para 72 that they had no difficulty in accepting this as (no more than) a statement of good administrative practice.
They also said that the judge was wrong to rely on Sunday Times v United Kingdom (1979) 2 EHRR 245 and criticised the reasoning in Nadarajah at paras 64 67 which relied on the Sunday Times case in support of the proposition that a relevant policy is part of the law that must be accessible, so as to enable those affected by it reasonably to foresee the consequences of their actions.
At para 73, they said that the relevant passage in the judgment of the ECtHR at para 49 of the judgment in the Sunday Times case is not, as we read it, about policy as such, but is rather directed to the need for accessibility and precision, as requirements of law in the strict sense.
They went on to say that, in the present context, the requirement for an accessible and precise statement of the relevant law is satisfied by paragraph 2 of Schedule 3 to the 1971 Act, taken with the Hardial Singh guidelines.
In short, policy is not the same as law (para 57).
In support for their conclusion, they referred to what Laws LJ said in R (SK Zimbabwe) v Secretary of State for the Home Department [2008] EWCA Civ 1204; [2009] 1 WLR 1527, para 33.
In that case, the Secretary of State had failed to carry out regular reviews following detention, as required by the Detention Centre Rules.
As regards the requirement that any deprivation of liberty be in accordance with a procedure prescribed by law in article 5(1) of the ECHR, Laws LJ said that this was to ensure that any interference is not random and arbitrary, but governed by clear pre existing rules.
He continued: Here the rules are the Hardial Singh principles.
Their fulfilment in any given case saves a detention from the vice of arbitrariness.
A system of regular monitoring is, no doubt, a highly desirable means of seeing that the principles are indeed fulfilled.
But it is not itself one of those principles.
But all that the Hardial Singh principles do is that which article 5(1)(f) does: they require that the power to detain be exercised reasonably and for the prescribed purpose of facilitating deportation.
The requirements of the 1971 Act and the Hardial Singh principles are not the only applicable law.
Indeed, as Mr Fordham QC points out, the Hardial Singh principles reflect the basic public law duties to act consistently with the statutory purpose (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, 1030B D) and reasonably in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223).
But they are not exhaustive.
If they were exhaustive, there could be no room for the public law duty of adherence to published policy, which was rightly acknowledged by the Court of Appeal at paras 51, 52 and 58 of their judgment.
I therefore accept the submission of Mr Husain QC and Mr Fordham that the Court of Appeals criticisms of Nadarajah were misplaced.
I should interpolate that there is in any event an obvious difference between rules which require the review of a detention to be undertaken at prescribed intervals and rules which prescribe the criteria by which a person is to be released or to be subjected to continuing detention.
The fact that a policy states that only persons of a specified category will be considered for release is at least as substantively important as the Hardial Singh principles which determine, for example, that a person may not be detained for an unreasonable period.
There is further support in the ECtHR jurisprudence for the proposition that paragraph 2 of Schedule 3 to the 1971 Act and the Hardial Singh principles are not exhaustive of the law.
In Medvedyev v France (Appln no 3394/03, 29 March 2010), the Grand Chamber said at para 80: where deprivation of liberty is concerned it is particularly important that the general principle of legal certainty be satisfied.
It is therefore essential that the conditions for deprivation of liberty under domestic and/or international law be clearly defined.
The case of Gillan v United Kingdom (2010) 50 EHRR 45 concerned the stop and search powers conferred on the police by the Terrorism Act 2000.
For present purposes, the relevant issue was whether the powers were in accordance with the law within the meaning of article 8(2) of the ECHR.
A Code of Practice was issued by the Secretary of State to guide police officers in the exercise of their powers of stop and search.
The ECtHR said: 77Consequently, the law must indicate with sufficient clarity the scope of any such discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of domestic legislation which cannot in any case provide for every eventuality depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
The ECtHR noted at para 83 that the Code of Practice governs essentially the mode in which the stop and search is carried out, rather than providing any restriction on the officers decision to stop and search.
That decision is, as the House of Lords made clear, one based exclusively on the hunch or professional intuition of the officer concerned.
In the opinion of the court, there was a clear risk of arbitrariness in the grant of such a broad discretion to the police officer.
At para 87, they concluded that, despite the existence of the Code of Practice, the statutory powers were not in accordance with the law because they were neither sufficiently circumscribed nor subject to adequate legal safeguards against abuse.
The rule of law calls for a transparent statement by the executive of the circumstances in which the broad statutory criteria will be exercised.
Just as arrest and surveillance powers need to be transparently identified through codes of practice and immigration powers need to be transparently identified through the immigration rules, so too the immigration detention powers need to be transparently identified through formulated policy statements.
The individual has a basic public law right to have his or her case considered under whatever policy the executive sees fit to adopt provided that the adopted policy is a lawful exercise of the discretion conferred by the statute: see In re Findlay [1985] AC 318, 338E.
There is a correlative right to know what that currently existing policy is, so that the individual can make relevant representations in relation to it.
In R (Anufrijeva) v Secretary of State for the Home Department [2003] UKHL 36, [2004] 1 AC 604, para 26 Lord Steyn said: Notice of a decision is required before it can have the character of a determination with legal effect because the individual concerned must be in a position to challenge the decision in the courts if he or she wishes to do so.
This is not a technical rule.
It is simply an application of the right of access to justice.
Precisely the same is true of a detention policy.
Notice is required so that the individual knows the criteria that are being applied and is able to challenge an adverse decision.
I would endorse the statement made by Stanley Burnton J in R (Salih) v Secretary of State for the Home Department [2003] EWHC 2273 at para 52 that it is in general inconsistent with the constitutional imperative that statute law be made known for the government to withhold information about its policy relating to the exercise of a power conferred by statute.
At para 72 of the judgment of the Court of Appeal in the present case, this statement was distinguished on the basis that it was made in the quite different context of the Secretary of States decision to withhold from the individuals concerned an internal policy relating to a statutory scheme designed for their benefit.
This is not a satisfactory ground of distinction.
The terms of a scheme which imposes penalties or other detriments are at least as important as one which confers benefits.
As Mr Fordham puts it: why should it be impermissible to keep secret a policy of compensating those who have been unlawfully detained, but permissible to keep secret a policy which prescribes the criteria for their detention in the first place?
There was a real need to publish the detention policies in the present context.
As Mr Husain points out, the Cullen policies provided that certain non serious offenders could be considered for release.
The failure to publish these policies meant that individuals who may have been wrongly assessed as having committed a crime that rendered them ineligible for release would remain detained, when in fact, had the policy been published, representations could have been made that they had a case for release.
The precise extent of how much detail of a policy is required to be disclosed was the subject of some debate before us.
It is not practicable to attempt an exhaustive definition.
It is common ground that there is no obligation to publish drafts when a policy is evolving and that there might be compelling reasons not to publish some policies, for example, where national security issues are in play.
Nor is it necessary to publish details which are irrelevant to the substance of decisions made pursuant to the policy.
What must, however, be published is that which a person who is affected by the operation of the policy needs to know in order to make informed and meaningful representations to the decision maker before a decision is made.
For all these reasons, the policies which were applied to Mr Lumba and Mr Mighty were unlawful.
But Mr Husain submits (with the support of Mr Rabinder Singh QC and Mr Fordham) that the policies were also unlawful because they included a presumption of detention.
Presumption of detention
Davis J held at paras 114 to 116 of his judgment that the provisions of paragraph 2 of Schedule 3 to the 1971 Act operate to prevent the Secretary of State from operating a policy of a presumption in favour of detention of FNPs pending deportation.
He applied R (Sedrati) v Secretary of State for the Home Department [2001] EWHC 210 (Admin) in which, by consent, Moses J had granted a declaration that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention upon completion of the sentence.
On the Secretary of States cross appeal against the declaration, the Court of Appeal said at para 65: . . there is no reason in principle why paragraph 2.1 of Schedule 3 to the 1971 Act, which clearly does require continued detention unless the Secretary of State otherwise orders (i.e. a presumption of detention), should not be construed as a presumption of detention pending deportation.
Equally, the Secretary of State may lawfully adopt a policy for the purposes of paragraph 2(2) or (3) that involves a presumption.
A presumption that those who have committed serious crimes (e.g. most of those listed in Cullen 1 and 2) should be detained is unobjectionable.
They went on at para 66 to say that for these reasons the declaration granted by Moses J was wrong and allowed the Secretary of States cross appeal.
Mr Husain, supported by Mr Singh and Mr Fordham, say that the judge was right and the Court of Appeal wrong on this issue.
The primary case advanced by Mr Husain is that the policy that was applied between April 2006 and September 2008 was not properly described as a presumptive policy at all, but rather was a blanket policy.
But whether that is right or not, Mr Lumba continued to be detained between September 2008 (when the Secretary of State published a policy in favour of detention) and 22 January 2009 (when the order of Davis J was implemented).
It follows that even if, as I have accepted, the Court of Appeal was justified in holding that the policy was a blanket policy until September 2008, the presumption of liberty issue is of more than academic interest in this appeal.
It is important at the outset to define clearly what a presumption means in this context.
It is the Secretary of States case that paragraph 2 of Schedule 3 to the 1971 Act permits the operation of a policy in which she states that a FNP will normally be detained in certain prescribed circumstances.
Such a policy serves as a guide to the caseworkers who make the decisions on the ground and as an indication to the FNPs of what they can normally expect in the circumstances specified in the policy.
I shall refer to such a policy as normal practice.
It need not, and usually does not say anything about the burden of proof.
Normal practice is to be distinguished from presumptions in the strict sense.
Phipson on Evidence 17th ed (2009) at 6 16 to 6 31 categorises presumptions in this sense into rebuttable presumptions of law, irrebuttable presumptions of law and rebuttable presumptions of fact.
Such a presumption usually regulates the burden of proof in legal proceedings.
Thus, a presumption that a deprivation of liberty is unlawful regulates the burden of proof in relation to that issue: the burden is on the detainer to show that there was a power to detain.
I shall refer to a presumption in the strict sense as a legal presumption.
The distinction between normal practice and a legal presumption is fundamental to the present issue.
The fact that in legal proceedings the burden of proving a certain issue is allocated to one party rather than the other does not assist in deciding whether the Secretary of State may, in principle, lawfully give guidance that when certain factors are present, the decision should normally be to detain.
This distinction was not articulated in the courts below.
A further preliminary point needs to be made.
The legality of a decision may be considered at two stages: first at the administrative stage when the decision is taken and secondly, if the decision is challenged, at the stage of legal proceedings.
At the administrative stage, the individual against whom the decision is taken often plays no part.
It is not appropriate to talk of a burden of proof at this stage: see, for example, R v Lichniak [2003] 1 AC 903 at para 16 per Lord Bingham.
At the stage of legal proceedings, the Secretary of State rightly accepts that the burden of proof is on her to justify the detention.
This has long been established: Allen v Wright (1838) 8 C & P 522 and Lord Atkins dissenting speech in Liversidge v Anderson [1942] AC 206, 245 every detention is prima facie unlawful and that it is for a person directing imprisonment to justify his act.
Mr Husain submits that there is a presumption of liberty both under the jurisprudence of the ECtHR or at common law.
I shall start with the jurisprudence on article 5 of the ECHR which Mr Husain submits establishes that there is such a presumption.
He refers to Ilijkov v Bulgaria (Application No 33977/96) (unreported) 26 July 2001 where the ECtHR said: 84.
The court reiterates that continued detention can be justified in a given case only if there are specific indications of a genuine requirement of public interest which, notwithstanding the presumption of innocence, outweighs the rule of respect for individual liberty.
Any system of mandatory detention on remand is per se incompatible with article 5(3) of the Convention.
Where the law provides for a presumption in respect of factors relevant to the grounds for continued detention. the existence of the concrete facts outweighing the rule of respect for individual liberty must be nevertheless convincingly demonstrated. 85.
Moreover, the court considers that it was incumbent on the authorities to establish those relevant facts.
Shifting the burden of proof to the detained person in such matters is tantamount to overturning the rule of article 5 of the Convention, a provision which makes detention an exceptional departure from the right to liberty and one that is only permissible in exhaustively enumerated and strictly defined cases.
This was a decision in relation to an alleged violation of article 5(3) which provides: Everyone arrested or detained in accordance with the provisions of paragraph 1(c) of this article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial.
Mr Husain submits that, although these principles were articulated in the context of detention pending trial, they are more widely applicable as expressions of the right to liberty protected by article 5: see also Bykov v Russia (Application No 4378/02, 10 March 2009) at para 61 and Bordikov v Russia (Application no 921/03, 9 October 2009) at para 88.
However, these cases only concern legal presumptions that regulate burdens of proof in legal proceedings.
They are not concerned with normal practice contained in a policy of the kind with which these appeals are concerned.
In Ilijkov, the national courts rejected a series of applications for bail pending trial.
They did so relying on the Bulgarian Code of Criminal Procedure, which provided that, for certain crimes, detention on remand was mandatory in the absence of exceptional circumstances.
The ECtHR held that the initial decision to detain was lawful, but that the continuing application of the presumption of detention by the national judicial authorities was unlawful (paras 78 9 and 87).
The case was not concerned with the lawfulness of any decision to detain taken at an administrative stage.
It is clear from para 84 of the judgment that the court held that there was a breach of article 5(3).
There is, however, no provision in article 5(1)(f) corresponding with article 5(3) and there is nothing to indicate that the court intended its ruling in relation to article 5(1)(c) and 5(3) to apply to article 5(1)(f).
The decisions in Bykov and Bordikov do not advance the argument.
Para 61 of the judgment in Bykov merely reiterates what the court has repeatedly said in relation to article 5(3).
The reference to the presumption of release under article 5 is a reference to the second limb of article 5(3).
The case is concerned with the decisions of judicial authorities and not administrative decision makers.
Similarly, para 88 of the judgment in Bordikov makes it clear that the court in that case too was only concerned with the decisions of the courts.
The principal ECtHR authority on article 5(1)(f) is Saadi v UK (2008) 47 EHRR 427.
The applicant sought judicial review of the decision to detain him for a short period while his asylum claim was being subject to fast track processing.
The decision was made pursuant to a policy under which all asylum claimants falling within defined criteria (usually by nationality) were normally detained at Oakington while their claims were determined in an accelerated process.
This was a normal practice case and not a case about legal presumptions.
The ECtHR held inter alia that deprivation of liberty must not be arbitrary.
It must comply with the substantive and procedural rules of national law and the detention must be in good faith.
At para 69, the court said: The condition that there be no arbitrariness further demands that both the order to detain and the execution of the detention must genuinely conform with the purpose of the restrictions permitted by the relevant sub paragraph of article 5(1).
There must in addition be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention.
And at para 72: Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example, to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal (1997) 23 EHRR 413 that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for
an unreasonable length of time
It was this statement which led the Court of Appeal to conclude at para 62 that a national law that authorises detention with a view to deportation may be compatible with article 5 even if it imposes a presumption of detention pending deportation.
It is not clear in what sense the Court of Appeal was using the phrase presumption of detention in this passage.
But if it is construed as a reference to normal practice, I agree with it, provided that it requires the Government to justify the detention with reasons that are closely connected to the statutory purpose of effecting deportation.
I turn to the position at common law.
It is not in dispute that the right to liberty is of fundamental importance and that the courts should strictly and narrowly construe general statutory powers whose exercise restricts fundamental common law rights and/or constitutes the commission of a tort.
The Court of Appeal said at para 63 that there is no rule of our domestic law that precludes the application of a presumption in favour of detention pending deportation, subject, of course, to the limitations in Ex P Hardial Singh [1984] 1 WLR 704, none of which involves consideration of risk of reoffending or absconding.
Such risks, they said, are relevant to the reasonableness of the period during which it is lawful to detain a FNP, but the absence of such a risk does not of itself render detention unlawful.
If by presumption in favour of detention the Court of Appeal meant the normal practice as to the circumstances in which a FNP will be detained, then I would agree with them, provided that it is understood that (i) the Hardial Singh principles are observed and (ii) each case is considered individually.
The Court of Appeal set aside the declaration granted by Davis J. They were right to do so.
For the reasons I have given, it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation provided that the criteria that I have set out at para 53 above are satisfied.
Such a policy is not prohibited by paragraph 2 of Schedule 3 to the 1971 Act.
The Court of Appeal also held at para 66 that the declaration granted by Moses J in Sedrati [2001] EWHC Admin 418 was wrong in law.
I find this somewhat puzzling.
The declaration stated that the terms of paragraph 2 of Schedule 3 do not create a presumption in favour of detention.
Whatever the position may be in relation to paragraph 2(1) and the parenthesis in paragraph 2(3), paragraph 2(2) and the remainder of paragraph 2(3) do not create any presumption at all.
They simply give the Secretary of State a discretion to detain.
In relation to paragraph 2(2) and (3), therefore, so far as it goes, the declaration granted by Moses J is correct.
Were the detentions unlawful?
In summary, the appellants case is that their claims in false imprisonment should have succeeded: the Secretary of States unlawful unpublished policy which operated between April 2006 and September 2008 influenced the initial decisions to detain them and the subsequent decisions to continue to detain them.
Davis J accepted the argument advanced on behalf of the Secretary of State that, where the unlawful policy was of no causative effect because the claimants could and would have been lawfully detained if the published policy had been applied, their detention was not unlawful.
The Court of Appeal agreed.
They distinguished Christie v Leachinsky [1947] AC 573 and Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 on the footing that in those cases there was no lawful authority to detain the plaintiff.
In the present case, however, they said at para 87: there is no doubt that the statutory powers relied on by the Secretary of State were apt for the purpose, and the case is not based on the breach of any specific regulation on which the legality of detention was dependent.
Rather it is about the manner in which the power was exercised.
And at para 89: The mere existence of an internal, unpublished policy or practice at variance with, and more disadvantageous to the FNP than, the published policy will not render a decision to detain unlawful.
It must be shown that the unpublished policy was applied to him.
Even then, it must be shown that the application of the policy was material to the decision.
If the decision to detain him was inevitable, the application of the policy is immaterial, and the decision is not liable to be set aside as unlawful.
In short, since Mr Lumba and Mr Mighty would inevitably have been detained even if the published policy had been applied to them, their detentions were lawful.
The court therefore applied what it is convenient to call the causation test.
Davis J and the Court of Appeal were right to hold that the detention of the appellants would have been inevitable in the light of the risk of absconding and re offending that they both posed.
This appeal therefore raises the important question of whether it was right to apply the causation test and for that reason to hold that the detentions were lawful.
A somewhat similar problem arose in R (SK Zimbabwe) v Secretary of State for the Home Department.
In that case the unlawfulness lay in the failure of the Secretary of State to comply with her policy which prescribed the procedural requirements for reviews of FNPs who are already in detention.
The present case concerns the substantive requirements for the initial detention of FNPs as well as their continued detention.
What follows is to a considerable extent based on the submissions of Mr Husain.
The introduction of a causation test in the tort of false imprisonment is contrary to principle both as a matter of the law of trespass to the person and as a matter of administrative law.
Neither body of law recognises any defence of causation so as to render lawful what is in fact an unlawful authority to detain, by reference to how the executive could and would have acted if it had acted lawfully, as opposed to how it did in fact act.
The causation test entails the surprising proposition that the detention of a person pursuant to a decision which is vitiated by a public law error is nevertheless to be regarded as having been lawfully authorised because a decision to detain could have been made which was not so vitiated.
In my view, the law of false imprisonment does not permit history to be rewritten in this way.
The Court of Appeal were right to say at para 89 that the mere existence of an unlawful policy is not sufficient to establish that any particular exercise of a statutory discretion is unlawful.
The decision to detain and/or continue detention will not be vitiated on the grounds of an unlawful policy unless the policy has been applied or at least taken into account by the decision maker.
But this does not shed any light on the correctness of the causation test.
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
An action lies even if the victim does not know that he was imprisoned: see, for example, Murray v Ministry of Defence [1988] 1 WLR 692, 703A where Lord Griffiths refused to redefine the tort of false imprisonment so as to require knowledge of the confinement or harm because The law attaches supreme importance to the liberty of the individual and if he suffers a wrongful interference with that liberty it should remain actionable even without proof of special damage.
By contrast, an action on the case (of which a claim in negligence is the paradigm example) regards damage as the essence of the wrong.
All this is elementary, but it needs to be articulated since it demonstrates that there is no place for a causation test here.
All that a claimant has to prove in order to establish false imprisonment is that he was directly and intentionally imprisoned by the defendant, whereupon the burden shifts to the defendant to show that there was lawful justification for doing so.
As Lord Bridge said in R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58, 162C D: The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
The causation test shifts the focus of the tort on to the question of how the defendant would have acted on the hypothesis of a lawful self direction, rather than on the claimants right not in fact to be unlawfully detained.
There is no warrant for this.
A purported lawful authority to detain may be impugned either because the defendant acted in excess of jurisdiction (in the narrow sense of jurisdiction) or because such jurisdiction was wrongly exercised.
Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 established that both species of error render an executive act ultra vires, unlawful and a nullity.
In the present context, there is in principle no difference between (i) a detention which is unlawful because there was no statutory power to detain and (ii) a detention which is unlawful because the decision to detain, although authorised by statute, was made in breach of a rule of public law.
For example, if the decision to detain is unreasonable in the Wednesbury sense, it is unlawful and a nullity.
The importance of Anisminic is that it established that there was a single category of errors of law, all of which rendered a decision ultra vires: see Boddington v British Transport Police [1999] 2 AC 143, 158D E.
Mr Beloff submits that there are inherent problems in what I consider to be the correct and principled approach.
First, it fails to take account of the nature or extent of the public law error.
For example, he suggests that it treats for the purposes of liability as equally unlawful a decision to detain made by an official one grade lower than that specified in the detention policy (but which is otherwise unimpeachable) and a decision to detain for which there is no statutory authority at all.
Secondly, it allows what is in essence a public law challenge to be made under the guise of a private law action without any of the procedural safeguards which apply in a judicial review application.
In particular, the normal time limits for judicial review proceedings are circumvented.
Thirdly, judicial review is a discretionary remedy.
A minor public law error may result in no substantive relief being granted at all in judicial review proceedings, whereas a claimant can bring proceedings for false imprisonment as of right.
I do not consider that these arguments undermine what I have referred to as the correct and principled approach.
As regards Mr Beloffs first point, the error must be one which is material in public law terms.
It is not every breach of public law that is sufficient to give rise to a cause of action in false imprisonment.
In the present context, the breach of public law must bear on and be relevant to the decision to detain.
Thus, for example, a decision to detain made by an official of a different grade from that specified in a detention policy would not found a claim in false imprisonment.
Nor too would a decision to detain a person under conditions different from those described in the policy.
Errors of this kind do not bear on the decision to detain.
They are not capable of affecting the decision to detain or not to detain.
Lord Walker and Lord Hope would prefer the more demanding test of the wrongful use of a statutory power amounting to an abuse of power.
It is true that the phrase abuse of power is used in certain contexts in public law.
For example, it has been held that the court will in a proper case decide whether to frustrate the legitimate expectation of a substantial benefit is so unfair that to take a different course will amount to an abuse of power: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213 para 57.
In that context, the phrase abuse of power denotes a degree of unfairness.
It is not clear to me in what sense the phrase abuse of power is being suggested in the present context.
Suppose that a detention policy states that no FNP who has been sentenced to less than 12 months imprisonment is to remain in detention pending deportation for more than 6 months.
Suppose further that, by an administrative oversight, a FNP who has been sentenced to 9 months imprisonment is detained for 12 months.
There can be little doubt that the FNP would have a good claim for substantial damages for false imprisonment in respect of the period of 6 months when he should not have been detained.
It would be odd to say that his detention during that period was the result of an abuse of power.
I would say that the FNP would be the victim of a material public law error.
The error was one which was relevant to the decision to detain him.
It was capable of affecting the decision to continue to detain him and did in fact do so.
As for Mr. Beloffs other points, such force as they have derives from the fact that the detention in these cases is unlawful because it is vitiated by a public law error.
The significance and effect of that error cannot be affected by the fortuity that it is also possible for a victim to challenge the decision by judicial review proceedings (which are subject to tighter time limits than private law causes of action) and that judicial review is a discretionary remedy.
It is well established that a defendant can rely on a public law error as a defence to civil proceedings and that he does not need to obtain judicial review as a condition for defending the proceedings: see, for example, Wandsworth London Borough Council v Winder [1985] AC 461.
The same applies in the context of criminal proceedings: see Boddington v British Transport Police [1999] 2 AC 143.
Mr Beloff submits that the position of a claimant who relies on a public law error to found his cause of action and a defendant can sensibly be differentiated.
But it is difficult to see how or why.
I can see that at first sight it might seem counter intuitive to hold that the tort of false imprisonment is committed by the unlawful exercise of the power to detain in circumstances where it is certain that the claimant could and would have been detained if the power had been exercised lawfully.
But the ingredients of the tort are clear.
There must be a detention and the absence of lawful authority to justify it.
Where the detainer is a public authority, it must have the power to detain and the power must be lawfully exercised.
Where the power has not been lawfully exercised, it is nothing to the point that it could have been lawfully exercised.
If the power could and would have been lawfully exercised, that is a powerful reason for concluding that the detainee has suffered no loss and is entitled to no more than nominal damages.
But that is not a reason for holding that the tort has not been committed.
Both Mr Husain and Mr Beloff have referred to much authority.
I shall refer to some of it.
But there is nothing in the cases which shows that the conclusion which I consider is dictated by principle is questionable, still less that it is wrong.
Mr Husain relies on dicta of Lord Diplock in Holgate Mohamed v Duke [1984] AC 437.
Lord Diplock recognised that a claim for false imprisonment may be made out where police powers of arrest are unlawfully exercised by reference to common law principles.
The statutory power for an arrest without warrant (section 2(4) of the Criminal Law Act 1967)) made it a condition precedent that the constable should have reasonable cause to suspect the person to be guilty of the arrestable offence in respect of which the arrest was being made.
On the facts, the condition precedent was made out.
Lord Diplock said at p 443B that this left the officer with an executive discretion whether to arrest or not.
The lawfulness of the way in which the discretion had been exercised could not be challenged except on Wednesbury grounds.
He then continued: The Wednesbury principlesare applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought. (emphasis added)
Lord Diplock then applied the Wednesbury principles and concluded that the officers action was not unlawful.
It follows that his comments about false imprisonment were obiter dicta.
Nevertheless, it is clear that, if he had concluded that the officer had exercised his statutory discretion unlawfully, Lord Diplock would have held that he was liable in tort for false imprisonment.
I accept, however, that these are no more than dicta, albeit from a source of high authority, and that the issue does not seem to have been the subject of much if any argument in the House of Lords.
Other authorities relied on by Mr Husain as rejecting the causation test include Christie v Leachinsky [1947] AC 573, Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 and Langley v Liverpool City Council [2006] 1 WLR 375.
In addition, Mr Singh relies on Cooper v The Board of Works for the Wandsworth District (1863) 14 C.B. (N.S) 180.
In Christie v Leachinsky, Viscount Simon explained that where an arrest was unlawful because it did not comply with the procedural requirements imposed by the common lawcommunication of the true and good ground of arrest to the detaineethere would be a false imprisonment notwithstanding that the arrest could have been effected in a proper manner.
At p 588H he said: I entertain no doubt that in the present case the appellants are not exonerated from liability for false imprisonment by satisfying the judge that they had a reasonable suspicion that the respondent had been guilty of theft or of receiving stolen goods knowing they had been stolen, when they never told the respondent that this was the ground of his arrest.
Instead of doing so, they gave a different ground which, as Christie admitted, was not a good excuse for arresting him at all.
Mr Beloff submits that this case should be distinguished on the basis that it concerned the giving of reasons for detention which was a condition precedent to a lawful arrest.
He argues that it says nothing about the causation test in cases where the alleged error is not a failure to satisfy a condition precedent.
I do not see why the failure to provide a detainee with the reasons for the arrest should be regarded as a failure to satisfy a condition precedent to lawful arrest rather than an unlawful exercise of the power to arrest.
In any event, it would be remarkable if the question whether a cause of action in false imprisonment exists should depend on such fine distinctions of classification.
More fundamentally, such distinctions have no justification in the light of Anisminic.
In Roberts v Chief Constable of the Cheshire Constabulary, the Court of Appeal held that a failure by the custody officer to conduct a review as required by section 40 of the Police and Criminal Evidence Act 1984 rendered the plaintiffs continued detention unlawful until the next review.
The defence was raised that the plaintiff could only prove false imprisonment if he could show that, if the review had been carried out at the appropriate time, he would have been released.
This causation defence was rejected by Clarke LJ (with whom Stuart Smith and Schiemann LJJ agreed) at p 667B as being nothing to the point.
Mr Beloff emphasises the fact that the plaintiff was not being detained in accordance with the relevant statutory provisions and that the statute stipulated an express condition precedent to the lawful continuation of the detention, namely a review of detention, and that condition was not satisfied.
This argument has no more force than Mr Beloffs corresponding argument in relation to Christie.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned child protection.
The Court of Appeal held that a constable who had wrongfully removed a child under section 46 of the Children Act 1989 was liable in false imprisonment.
He should instead have facilitated the exercise of a different power of removal through the execution of an emergency protection order (EPO) obtained by the local authority under section 44 of the 1989 Act.
I gave the main judgment (with which Thorpe and Lloyd LJJ agreed).
I held (para 32) that the power to remove a child under section 46 can be exercised even where an EPO is in force.
I said (para 36) that where a police officer knows that an EPO is in force, he should not exercise the power of removing a child under section 46 unless there are compelling reasons to do so.
On the facts of the case, there were no compelling reasons for the constable to exercise the section 46 power.
The constable was in error in failing to ask himself whether there were compelling reasons why he should invoke section 46 rather than leave it to the council to execute the EPO.
I held, therefore, that the removal of the child was unlawful.
It was not in issue that, if the removal of the child was unlawful, the Chief Constable was liable to the child in false imprisonment.
Mr Beloff submits that the effect of my reasoning was that the constable had no jurisdiction (in the narrow pre Anisminic sense) to do what he did.
As an EPO was in force, it was in effect mandatory to invoke section 44 rather than section 46.
I do not accept this analysis.
I drew a clear distinction between the existence of the statutory authority to use the section 46 powers (which the constable had) and the exercise of those powers (which was wrongful on the facts of that case).
In Cooper v The Board of Works for the Wandsworth District 14 CB (NS) 180, the defendant board had the statutory power to demolish a house that was in the course of construction.
It was held that this power was subject to the common law qualification that it should not be exercised without giving the builder notice and an opportunity to be heard.
It was held that the board had exercised its statutory power unlawfully and that the builder was entitled to damages for trespass to property.
But I agree with Mr Beloff that this decision does not shed any light on the question whether detention pursuant to an unlawful exercise of a power to detain is itself unlawful.
As Byles J put it at p 195, the board contravened the words of the statute.
In effect, therefore, the court held that the decision to demolish the house was one which the board had no jurisdiction to make in the narrow pre Anisminic sense.
I should deal with the authorities relied on by Mr Beloff.
In R (Saadi) v Secretary of State for the Home Department [2002] 1 WLR 3131 as I have set out at para 50 above, the issue was whether the policy of detaining certain categories of asylum seekers whose claims could be processed quickly at the Oakington detention centre was lawful.
The House of Lords held that it was.
At first instance, Collins J had also considered the fact that when detaining the claimants the Home Office had used standard forms which did not reflect the new policy, and that therefore the true reasons for the detention had not been given.
Collins J said that this did not affect the lawfulness of the detention.
Lord Slynn at para 48 agreed that the failure to give the right reason for detention and the giving of no or wrong reasons did not in the end affect the legality of the detention.
But para 48 is not part of the ratio of the decision of the House.
In any event, in so far as it was argued at all that the giving of untrue reasons for the detention rendered the detention unlawful, the Secretary of State did not advance a causation defence and contend that the giving of untrue reasons was immaterial because the true reasons were lawful.
In Nadarajah v Secretary of State for the Home Department [2004] INLR 139, the Secretary of States published policy was that, if legal proceedings were initiated, removal would not be treated as imminent even if it otherwise was.
The Secretary of State also had an unpublished policy, namely that information that proceedings were about to be initiated would be disregarded, however credible that information might be.
At paras 68 and 69 of the judgment of Lord Phillips MR, the Court of Appeal said that the Secretary of State could not rely on the unpublished policy as rendering lawful that which was, on the face of it, at odds with his policy, as made public and for that reason the detention of N was unlawful.
There is no hint of the causation test here.
But the court went on to say that, if Ns solicitors had been aware of the unpublished policy, they would have instituted proceedings sooner.
N therefore suffered because his solicitor could not foresee the consequences of her conduct and his detention did not satisfy the requirement of lawfulness imposed by article 5(1)(f) of the ECHR.
I accept that this was a causation point.
But it was unnecessary for the court to adopt this additional reason for holding that the detention was unlawful.
Further, it requires a huge leap to argue from this that the causation test must be satisfied as an element of the tort of false imprisonment.
In short, neither Saadi nor Nadarajah bears the weight that Mr Beloff seeks to place on them.
Recognising that the court might reject the causation test, Mr Beloff suggested a number of alternative approaches.
The first is that false imprisonment should be confined to no authority cases ie cases in which there was in fact no authority to detain, without recourse to the legal fiction that, because of a public law error, an authority to detain which was in fact given should be treated as if it had no legal effect because it was ultra vires.
The second is that detention should be vitiated only by pre Anisminic error of law.
The third is that vitiating circumstances should be restricted to bad faith and improper purpose.
The fourth is that authority to detain should be vitiated only by failure to have regard to a material consideration which had an effect on the detention.
The fifth is that it should be a requirement that the claimant shall have successfully applied in judicial review proceedings for the decision to detain to be quashed.
The first two of these suggestions seek to put the clock back to the pre Anisminic era.
For reasons given earlier, this is unwarranted.
As regards the third and fourth suggestions, I have accepted at paras 68 and 69 above that the detention must be vitiated by an error which is material in public law terms and have attempted to explain there what I mean by that.
The fifth seeks unjustifiably to impose a procedural hurdle where none currently exists either at common law or in statute.
To accede to this suggestion would be to engage in an unacceptable exercise of judicial legislation.
To summarise, therefore, in cases such as these, all that the claimant has to do is to prove that he was detained.
The Secretary of State must prove that the detention was justified in law.
She cannot do this by showing that, although the decision to detain was tainted by public law error in the sense that I have described, a decision to detain free from error could and would have been made.
Overall conclusion on liability on the basis that the policies applied were unlawful
I conclude, therefore, that since it is common ground that the unlawful policies in force between April 2006 and September 2008 were applied to Mr Lumba and Mr Mighty, they were unlawfully detained and their claims in false imprisonment must succeed.
I turn to consider the assessment of damages.
Compensatory or nominal damages?
Having found that there was no liability in false imprisonment, the Court of Appeal did not need to decide whether the claimants were entitled to damages.
They did, however, say at para 96: If, on the evidence, it was clear that, even assuming a lawful consideration, there was no realistic possibility of a different decision having been reached, and no realistic possibility of earlier release, then we do not see why that should not be reflected in an award of nominal damages only.
Mr Husain and Mr Westgate submit that, even if it was inevitable that the appellants would have been detained if the statutory power to detain had been lawfully exercised, they are nevertheless entitled to substantial and not merely nominal damages.
They emphasise that false imprisonment is a tort of strict liability which is actionable without proof of special damage.
The focus is on the claimants right rather than the culpability of the defendants conduct.
They rely on two authorities in support of their argument.
The first is Roberts v Chief Constable of the Cheshire Constabulary to which I have already referred at para 75 above.
The plaintiff issued proceedings for false imprisonment arising from his detention by the police between 5.25 a.m. (when his detention should have been reviewed as required by statute) and 7.45 a.m. the same morning when it was reviewed and his continued detention authorised.
It was found by the judge that the detention between 5.25 a.m. and 7.45 a.m. was unlawful, but that, if a review had taken place at 5.25 a.m., his continued detention would have been authorised.
The judge awarded the plaintiff 500.
The defendants appeal on both liability and damages was dismissed by the Court of Appeal.
Clarke LJ gave the leading judgment.
He said at p 668 D that there was an infringement of the plaintiffs legitimate right to have his case reviewed and that, although the outcome may not have been affected by the failure to review in time, this infringement cannot be regarded as a purely nominal matter or a matter compensatable by entirely nominal damages.
There are rules, the police must stick to them.
He added at p 668G: As a matter of general principle such a plaintiff is entitled to be put into the position in which he would have been if the tort had not been committed.
It is therefore important to analyse what the tort is.
The plaintiffs claim was not for damages for breach of duty to carry out a review at 5.25 a.m. but for false imprisonment.
As I tried to explain earlier, the reason why the continued detention was unlawful was that no review was carried out.
The wrong was not, however, the failure to carry out the review but the continued detention.
If the wrong had not been committed the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
I do not consider that this case was correctly decided on the issue of damages.
I agree that the plaintiff was entitled to be put into the position in which he would have been if the tort of false imprisonment had not been committed.
But I do not agree that, if the tort had not been committed, the plaintiff would not have been detained between 5.25 a.m. and 7.45 a.m.
On the judges findings, if the tort had not been committed, he would have been detained during this period.
It seems to me that the fallacy in the analysis in Roberts is that it draws no distinction between a detainee who would have remained in detention if the review had been carried out (and therefore no tort committed) and a detainee who would not have remained in detention if the review had been carried out.
But the position of the two detainees is fundamentally different.
The first has suffered no loss because he would have remained in detention whether the tort was committed or not.
The second has suffered real loss because, if the tort had not been committed, he would not have remained in detention.
The second authority relied on in support of the appellants case is Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883.
It was held there that it is no answer to a claim in conversion of goods for a defendant to say that the goods were or would have been subsequently converted by a third party: see the discussion by Lord Nicholls at paras 81 to 84 of his speech.
But questions of causation in relation to cases of successive conversion by different tortfeasors have no application in the present context.
The question here is simply whether, on the hypothesis under consideration, the victims of the false imprisonment have suffered any loss which should be compensated in more than nominal damages.
Exemplary damages apart, the purpose of damages is to compensate the victims of civil wrongs for the loss and damage that the wrongs have caused.
If the power to detain had been exercised by the application of lawful policies, and on the assumption that the Hardial Singh principles had been properly applied (an issue which I discuss at paras 129 148 below), it is inevitable that the appellants would have been detained.
In short, they suffered no loss or damage as a result of the unlawful exercise of the power to detain.
They should receive no more than nominal damages.
I should add that this approach is consistent with the observation by Lord Griffiths in Murray v Ministry of Defence [1988] 1WLR 692, 703A B: if a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
Vindicatory damages
Mr Westgate submits that, if the appellants are entitled to no more than nominal damages, then they should also be awarded vindicatory damages.
It has been said that the award of compensatory damages can serve a vindicatory purpose: see, for example, Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 per Lord Scott at para 22 and Lord Rodger at para 60.
But vindicatory damages serve a wider purpose than simply to compensate a successful claimant.
The phrase vindicatory damages seems to have been coined by Sharma CJ in the Court of Appeal of Trinidad and Tobago in Attorney General of Trinidad and Tobago v Ramanoop as a head of loss in claims for breach of constitutionally protected rights and freedoms: see address given by the President of the Caribbean Court of Justice to a Symposium entitled Current Developments in Caribbean Community Law in Port of Spain on 9 November 2009.
Lord Collins has traced the history of the use of the phrase in other contexts.
The concept of vindicatory damages was explained and endorsed by the Privy Council in the appeal in the Ramanoop case [2005] UKPC 15, [2006] 1 AC 328.
Lord Nicholls said: 18.
When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of constitutional right will not always be coterminous with the cause of action at law. 19.
An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements had a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
It will be seen, therefore, that the Privy Council endorsed the principle of vindicatory damages for violation of constitutional rights.
Should this principle be extended further? In Ashley at para 22 Lord Scott obiter said that vindicatory damages might be awarded for the tort of battery or trespass to the person by the police resulting in the death of the victim.
But the issue in that case was whether a claimant should be allowed to continue with an action in order to establish whether an assault had been committed, where there could be no award of further compensatory damages because these had already been paid in full as a result of a concession by the police.
Lord Scotts view that vindicatory damages have a role in the compensation for civil wrongs and the breach of ECHR rights was endorsed, at least to some extent, in Mosley v News Group Newspapers Ltd [2008] EWHC 1777 (QB).
In awarding damages for breach of the claimants right to privacy, after recognising the compensatory nature of damages for infringements of privacy, Eady J said at paras 216 7 that there was another factor which probably had to be taken into account, namely vindication to mark the infringement of the right.
It is one thing to say that the award of compensatory damages, whether substantial or nominal, serves a vindicatory purpose: in addition to compensating a claimants loss, it vindicates the right that has been infringed.
It is another to award a claimant an additional award, not in order to punish the wrongdoer, but to reflect the special nature of the wrong.
As Lord Nicholls made clear in Ramanoop, discretionary vindicatory damages may be awarded for breach of the Constitution of Trinidad and Tobago in order to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
It is a big leap to apply this reasoning to any private claim against the executive.
McGregor on Damages 18th ed (2009) states at para 42 009 that It cannot be said to be established that the infringement of a right can in our law lead to an award of vindicatory damages.
After referring in particular to the appeals to the Privy Council from Caribbean countries, the paragraph continues: the cases are therefore far removed from tortious claims at home under the common law.
I agree with these observations.
I should add that the reference by Lord Nicholls to reflecting public outrage shows how closely linked vindicatory damages are to punitive and exemplary damages.
The implications of awarding vindicatory damages in the present case would be far reaching.
Undesirable uncertainty would result.
If they were awarded here, then they could in principle be awarded in any case involving a battery or false imprisonment by an arm of the state.
Indeed, why limit it to such torts? And why limit it to torts committed by the state? I see no justification for letting such an unruly horse loose on our law.
In my view, the purpose of vindicating a claimants common law rights is sufficiently met by (i) an award of compensatory damages, including (in the case of strict liability torts) nominal damages where no substantial loss is proved, (ii) where appropriate, a declaration in suitable terms and (iii) again, where appropriate, an award of exemplary damages.
There is no justification for awarding vindicatory damages for false imprisonment to any of the FNPs.
Application of Hardial Singh principles to the appeal of Mr Lumba
In addition to the issues that are raised which are common to both appeals, it is submitted on behalf of Mr Lumba (but not Mr Mighty) that his detention is unlawful on the grounds that there has been a breach of the Hardial Singh principles.
This part of the appeal raises a number of points about the reach of those principles.
I refer to the encapsulation of the principles set out in my judgment in R (I) [2003] INLR 196 at para 22 above.
A convenient starting point is to determine whether, and if so when, there is a realistic prospect that deportation will take place.
As I said at para 47 of my judgment in R (I), there may be situations where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a period that is reasonable in all the circumstances, having regard in particular to time that the person has already spent in detention.
I deal below with the factors which are relevant to a determination of a reasonable period.
But if there is no realistic prospect that deportation will take place within a reasonable time, then continued detention is unlawful.
How long is a reasonable period? At para 48 of my judgment in R (I), I said: It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view, they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences.
So far as I am aware, subject to the following qualifications, the relevance of these factors has not been questioned.
The qualifications are first that the relevance of the risk of offending on release is challenged on behalf of the appellants in the present case.
Secondly, the nature of the obstacles begs two questions that have been raised on this appeal, namely what is the relevance, if any, of delays attributable to the fact that a detained person (i) is challenging the decision to deport him by appeal or judicial review and will generally not be deported until his challenges have been determined; and (ii) has refused to return voluntarily to his country of origin?
Risk of re offending
Mr Husain accepts that, where there is a risk that the detained person will abscond, the risk of re offending is relevant to the assessment of the duration of detention that is reasonably necessary to effect deportation.
But he submits that, where there is no real risk of absconding, the risk of re offending cannot of itself justify detention.
Where there is no such risk, detention is not necessary to facilitate deportation, because it will be possible to effect the deportation without the need for detention.
The underlying purpose of the power to detain is not to prevent the commission of criminal offences, but to facilitate the implementation of a deportation order.
I have some difficulty in understanding why the risk of re offending is a relevant factor in a case where there is a risk of absconding, but not otherwise.
It seems to me that it is possible to construe the power to detain either (more narrowly) as a power which may only be exercised to further the object of facilitating a deportation, or (more broadly) as a power which may also be exercised to further the object which it is sought to achieve by a deportation, namely, in the present case, that of removing an offender whose presence is not conducive to the public good.
The distinction between these two objects was clearly drawn by the Court of Appeal in R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
Toulson LJ said at para 55: A risk of offending if the person is not detained is an additional relevant factor, the strength of which would depend on the magnitude of the risk, by which I include both the likelihood of it occurring and the potential gravity of the consequences.
Mr Drabble submitted that the purpose of the power of detention was not for the protection of public safety.
In my view, that is over simplistic.
The purpose of the power of deportation is to remove a person who is not entitled to be in the United Kingdom and whose continued presence would not be conducive to the public good.
If the reason why his presence would not be conducive to the public good is because he has a propensity to commit serious offences, protection of the public from that risk is the purpose of the deportation order and must be a relevant consideration when determining the reasonableness of detaining him pending his removal or departure.
Para 78 of Keene LJs judgment is to similar effect.
I acknowledge that the principle that statutory powers should be interpreted in a way which is least restrictive of liberty if that is possible would tend to support the narrower interpretation.
But I think that the Court of Appeal was right in R (A) to adopt the interpretation which gives effect to the purpose underlying the power to deport and which the power to detain is intended to facilitate.
Perhaps a simpler way of reaching the same conclusion is to say, as Simon Brown LJ said in R (I) at para 29, that the period which is reasonable will depend on the circumstances of the particular case and the likelihood or otherwise of the detainee re offending is an obviously relevant circumstance.
But the risk of re offending is a relevant factor even if the appellants are right in saying that it is relevant only when there is also a risk of absconding.
As Lord Rodger pointed out in argument, if a person re offends there is a risk that he will abscond so as to evade arrest or if he is arrested that he will be prosecuted and receive a custodial sentence.
Either way, his re offending will impede his deportation.
The risk of re offending is, therefore, a relevant factor.
Delay attributable to challenges to deportation
Mr Beloff submits that the time taken to resolve legal challenges brought by an individual against deportation should generally be left out of account in considering whether a reasonable period of detention has elapsed.
He concedes that this general rule should be subject to two qualifications: (i) if the Secretary of State has caused delay in the resolution of the legal challenge, then that time may be taken into account; and (ii) the time during which a legal challenge is being resolved should be taken into account if removal is not possible for reasons unrelated to the legal challenge.
I shall call this general rule the exclusionary rule.
In support of this submission, Mr Beloff makes the following points.
First, it is the individuals choice to challenge the removal and, if the time taken to resolve legal challenges were taken into account, the length of detention would be outside the control of the Secretary of State and would be entirely within the control of the detained person.
Secondly, if the position were otherwise, those who (if at large) would be a danger to the public or who would be likely to thwart a deportation order by absconding, would be able to increase their prospects of release by pursuing every conceivable point by way of legal challenges and by doing everything possible to delay the legal process.
Thirdly, if the legality of detention is capable of depending on the merits of a challenge to the decision to deport, it will be necessary for the High Court to decide for itself the merits of the underlying challenge, in advance of consideration of the case by the specialist tribunal appointed by Parliament to undertake that task.
That is undesirable.
At para 102 of their judgment, the Court of Appeal said: In our judgment, the fact that a FNP is refusing to return voluntarily, or is refusing to cooperate in his return (for example, by refusing to apply for an emergency travel document, as initially did WL) is relevant to the assessment of the legality of his continued detention: see R (A) v Secretary of State for the Home Department [2007] EWCA Civ 804.
So is the fact that the period of his detention had been increased, and his deportation postponed by his pursuit of appeals and judicial review proceedings seeking to challenge his deportation order or his application for asylum or leave to remain, particularly if his applications and appeals are obviously unmeritorious.
In our judgment, as a matter of principle, a FNP cannot complain of the prolongation of his detention if it is caused by his own conduct.
It is not clear whether the Court of Appeal were accepting the exclusionary rule in its entirety.
To say that the fact that the length of the detention is attributable to the pursuit of legal proceedings is relevant to the assessment of the legality of the detention suggests a rejection of the exclusionary rule.
But to say that FNPs cannot complain of the prolongation of their detention caused by their own conduct suggests an acceptance of it.
The question of the relevance of the pursuit of legal proceedings has been considered in a number of authorities.
I do not propose to analyse them.
None is binding on this court.
The discussion of the issue which I have found most helpful is that of Davis J in R (Abdi) v Secretary of State for the Home Department [2009] EWHC 1324 (Admin).
In that case, the exclusionary rule (with the same two exceptions) was urged on the court on behalf of the Secretary of State.
In rejecting it, Davis J pointed out at para 25 of his judgment, that it was undesirable, where the core question is an assessment of what is reasonable in all the circumstances, to be astute to look for mandatory restrictions or rules in what ought to be a fact specific exercise.
I agree.
The Hardial Singh principles should not be applied rigidly or mechanically.
There are several problems with the exclusionary rule.
First, it seems to require the exclusion of consideration of the individual circumstances of an applicant pending what may be a long appellate process.
Suppose two FNPs who both embark on a meritorious appeal process which takes a number of years.
The only difference between them is that A poses a very high risk of absconding and re offending and B poses a very low risk.
If the exclusionary rule is applied, no difference can be drawn between them from the time proceedings are commenced.
In both cases, the several years during which they are detained while the appeal process is continuing are to be disregarded in assessing whether the period of detention is reasonable.
Or suppose that the effect of detention on A is to cause serious damage to his health or that of members of his family, whereas there is no such effect in the case of B. I can see no warrant for such a mechanistic approach to the determination of what is reasonable in all the circumstances.
Secondly, the exclusionary rule seems to involve the exclusion from consideration of any delays occurring within the appeal process which are not the fault of the applicant or (as is conceded by Mr Beloff) the Secretary of State.
I see no reason why such delays, for example, delays on the part of the tribunal or court, should be disregarded in a determination of whether the period of detention is reasonable.
Thirdly, the consequence of the exclusionary rule is that a person can be detained for many years while pursuing a prima facie meritorious appeal but he cannot by judicial review or habeas corpus challenge his detention on Hardial Singh or related article 5(1)(f) of the ECHR principles.
It precludes such judicial scrutiny (i) however long the detention and appeals have lasted and (ii) regardless of the effects of prolonged detention on the detainee, provided that (iii) the appeals are being diligently pursued and there is no concurrent independent reason why deportation cannot be effected.
I accept the submission of Mr Husain that bail is not a sufficient answer to the fundamental objection that the exclusionary rule constitutes an impermissible restriction on judicial oversight of the legality of administrative detention.
Paragraph 29 of Schedule 2 to the 1971 Act gives the First Tier Tribunal power to grant bail pending an appeal, but this is subject to the restrictions stated in paragraph 30.
Paragraph 30(1) provides that an appellant shall not be released under paragraph 29 without the consent of the Secretary of State if removal directions are currently in force.
There is nothing in the schedule which requires the tribunal to apply the Hardial Singh principles in deciding whether or not to grant bail and, in particular, to have regard to the past and likely future length of a detention.
Bail is not a determination of the legality of detention, whether at common law or for article 5(4) purposes.
Fourthly, the exclusionary rule is inconsistent with the decision of the ECtHR in Chahal v United Kingdom (1996) 23 EHRR 413.
In deciding whether the detention complied with the requirements of article 5(1)(f), the court had regard to the length of the detention, including the time taken for the various domestic proceedings to be completed: see paras 114, 115 and 123 of the judgment of the court.
There is a close analogy between the Hardial Singh principles and the article 5 requirement that detention for the purposes of deportation must not be of excessive duration.
I would reject Mr Beloffs in terrorem argument that, unless the exclusionary rule applies, detained FNPs will be able to procure their release from detention by the simple expedient of pursuing hopeless legal challenges.
Time taken in the pursuit of hopeless challenges should be given minimal weight in the computation of a reasonable period of detention.
Nor do I accept that it is undesirable (or indeed unduly difficult) to identify hopeless or abusive challenges.
There exist statutory mechanisms to curb unmeritorious appeals.
If a claim is clearly unfounded, certification under section 94(2) of the Nationality, Immigration and Asylum Act 2002 precludes an in country appeal.
If a claim relies on a matter which could have been raised earlier in response to an earlier immigration decision or in response to a one stop notice, certification under section 96 of the 2002 Act precludes any appeal at all.
In any event, a court considering the legality of a detention will often be able to assess the prima facie merits of an appeal.
Where, as in the case of Mr Lumba, there have been orders for reconsideration, or where there has been a grant of permission to appeal to the Court of Appeal, the court will easily recognise that the challenge has some merit.
Conversely, there may be one or more determinations from immigration judges dismissing claims as wholly lacking in credibility.
To summarise, I would reject the exclusionary rule.
If a detained person is pursuing a hopeless legal challenge and that is the only reason why he is not being deported, his detention during the challenge should be given minimal weight in assessing what is a reasonable period of detention in all the circumstances.
On the other hand, the fact that a meritorious appeal is being pursued does not mean that the period of detention during the appeal should necessarily be taken into account in its entirety for the benefit of the detained person.
Indeed, Mr Husain does not go so far as to submit that there is any automatic rule, regardless of the risks of absconding and/or re offending, which would compel an appellants release if the appeals process lasted a very long time through no fault of the appellant.
He submits that the weight to be given to time spent detained during appeals is fact sensitive.
This accords with the approach of Davis J in Abdi and I agree with it.
The risks of absconding and re offending are always of paramount importance, since if a person absconds, he will frustrate the deportation for which purpose he was detained in the first place.
But it is clearly right that, in determining whether a period of detention has become unreasonable in all the circumstances, much more weight should be given to detention during a period when the detained person is pursuing a meritorious appeal than to detention during a period when he is pursuing a hopeless one.
Non cooperation with return
The most common examples of non cooperation are (i) a refusal by a person who does not have a valid passport to cooperate with the obtaining of travel documents to enable him to return and (ii) a persons refusal to avail himself of one of the Home Office schemes by which he may leave the United Kingdom voluntarily.
Most of the discussion in the cases has centred on (ii).
It is common ground that a refusal to return voluntarily is relevant to an assessment of what is a reasonable period of detention if a risk of absconding can properly be inferred from the refusal.
But I would warn against the danger of drawing an inference of risk of absconding in every case.
It is always necessary to have regard to the history and particular circumstances of the detained person.
What is, however, in issue is whether a failure to return voluntarily can of itself justify a period of detention which would otherwise be unreasonable and therefore unlawful.
In R (I), I said in the Court of Appeal: 50.
As regards the significance of the appellants refusal of voluntary repatriation, there appears to be agreement between Simon Brown LJ and Mummery LJ that this is a relevant circumstance, but Mummery LJ considers that it is decisively adverse to the appellant, whereas Simon Brown LJ considers that it is of relatively limited relevance on the facts of the present case.
I too consider that it is a relevant circumstance, but in my judgment it is of little weight. [Counsel for the Secretary of State] submits that a refusal to leave voluntarily is relevant for two reasons.
First, the detained person has control over the fact of his detention: if he decided to leave voluntarily, he would not be detained.
Secondly, the refusal indicates that he would abscond if released from detention.
It is this second feature which has weighed heavily with Mummery LJ. 51.
I cannot accept that the first of [the Secretary of States] reasons is relevant.
Of course, if the appellant were to leave voluntarily, he would cease to be detained.
But in my judgment, the mere fact (without more) that a detained person refuses the offer of voluntary repatriation cannot make reasonable a period of detention which would otherwise be unreasonable.
If [the Secretary of State] were right, the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation. 52.
I turn to [the Secretary of States] second reason.
I accept that if it is right to infer from the refusal of an offer of voluntary repatriation that a detained person is likely to abscond when released from detention, then the refusal of voluntary repatriation is relevant to the reasonableness of the duration of a detention.
In that event, the refusal of voluntary repatriation is no more than evidence of a relevant circumstance namely the likelihood that the detained person will abscond if released. 53.
But there are two important points to be made.
First, the relevance of the likelihood of absconding, if proved, should not be overstated.
Carried to its logical conclusion, it could become a trump card that carried the day for the Secretary of State in every case where such a risk was made out regardless of all other considerations, not least the length of the period of detention.
That would be a wholly unacceptable outcome where human liberty is at stake. 54.
Secondly, it is for the Secretary of State to satisfy the court that it is right to infer from the refusal by a detained person of an offer of voluntary repatriation that, if released, he will abscond.
There will no doubt be many cases where the court will be persuaded to draw such an inference.
I am not, however, satisfied that this is such a case.
It is not at all surprising that this appellant has refused voluntary repatriation.
He has not yet exhausted the asylum process, which, if successful, would permit him to remain in the United Kingdom.
In these circumstances, why should one infer from the refusal of voluntary repatriation that, if released, he would abscond? In my judgment, the most that can be said is that there is a risk that if he is released the appellant will abscond.
But that can be said of most cases.
I do not consider that the fact that he has refused the offer of voluntary repatriation adds materially to the evidence that such risk is present in the instance case.
Simon Brown LJ adopted a somewhat different approach at para 31.
He said that, since in Hardial Singh Woolf J had regarded it as a factor in the applicants favour that he was quite prepared to go to India, he could not see why the converse should not be relevant.
The court should not ignore entirely the applicants ability to end his detention by returning home voluntarily.
The point was considered again by the Court of Appeal in R (A) Somalia v Secretary of State for the Home Department [2007] EWCA Civ 804 Toulson LJ (with whom Longmore LJ agreed) said: 54.
I accept the submission on behalf of the Home Secretary that where there is a risk of absconding and a refusal to accept voluntary repatriation, those are bound to be very important factors, and likely often to be decisive factors, in determining the reasonableness of a persons detention, provided that deportation is the genuine purpose of the detention.
The risk of absconding is important because it threatens to defeat the purpose for which the deportation order was made.
The refusal of voluntary repatriation is important not only as evidence of the risk of absconding, but also because there is a big difference between administrative detention in circumstances where there is no immediate prospect of the detainee being able to return to his country of origin and detention in circumstances where he could return there at once.
In the latter case the loss of liberty involved in the individuals continued detention is a product of his own making.
Keene LJ said at para 79: I am not persuaded by Mr Giffin that the refusal by this detainee to return to Somalia voluntarily when it was possible to do so is some sort of trump card.
On this I see the force of what was said by Dyson LJ in R (I) at paragraph 52, namely that the main significance of such a refusal may often lie in the evidence it provides of a likelihood of the individual absconding if released.
After all, if there is in a particular case no real risk of his absconding, how could detention be justified in order to achieve deportation, just because he has refused voluntary return? The Home Office in such a case, ex hypothesi, would be able to lay hands on him whenever it wished to put the deportation order into effect.
Detention would not be necessary in order to fulfil the deportation order.
Having said that, I do not regard such a refusal to return as wholly irrelevant in its own right or as having a relevance solely in terms of the risk of absconding.
It is relevant that the individual could avoid detention by his voluntary act.
But I do not accept that such a refusal is of the fundamental
importance contended for by the Secretary of State
It is necessary to distinguish between cases where return to the country of origin is possible and those where it is not.
Where return is not possible for reasons which are extraneous to the person detained, the fact that he is not willing to return voluntarily cannot be held against him since his refusal has no causal effect.
But what if return would be possible, but the detained person is not willing to go? Here it is necessary to consider whether the detained person has issued proceedings challenging his deportation.
If he has done so, then it is entirely reasonable that he should remain in the United Kingdom pending the determination of those proceedings (unless the proceedings are an abuse).
In those circumstances his refusal to accept an offer of voluntary return is irrelevant.
The purpose of voluntary return is not to encourage foreign nationals to return to their countries of origin where, if their legal challenges succeed, it is likely to have been demonstrated that they would face a risk of persecution within the meaning of the Convention and Protocol relating to the Status of Refugees (1951) (Cmd 9171) and (1967) (Cmnd 3906) or treatment contrary to article 3 of the ECHR.
Rather, it is to facilitate removal where that is justified because the FNPs have not proved that they would face the relevant risk on return.
In accepting voluntary return, the individual forfeits all legal rights to remain in the United Kingdom.
He should not be penalised for seeking to vindicate his ECHR or Refugee Convention rights and be faced with the choice of abandoning those rights or facing a longer detention than he would face if he had not been offered voluntary return.
What about those who have no outstanding legal challenges? Here, the fact that the detained person has refused voluntary return should not be regarded as a trump card which enables the Secretary of State to continue to detain until deportation can be effected, whenever that may be.
That is because otherwise, as I said at para 51 of my judgment in R (I), the refusal of an offer of voluntary repatriation would justify as reasonable any period of detention, no matter how long, provided that the Secretary of State was doing his best to effect the deportation.
If the refusal of voluntary return has any relevance in such cases even if a risk of absconding cannot be inferred from the refusal, it must be limited.
That was the view of Simon Brown LJ in R (I) and Keene LJ in R (A) and I agree with them.
The appeal of Mr Lumba
I can now turn to the particular case of Mr Lumba.
He entered the United Kingdom unlawfully on 10 April 1994 and claimed asylum on the same day.
His claim was refused on 20 February 2000.
He was, however, granted exceptional leave to remain until 20 February 2004.
He has a bad criminal record which includes convictions for assault occasioning actual bodily harm (six months imprisonment); two offences of using threatening and abusive behaviour (twelve months probation); two offences of shoplifting (non custodial sentences); assault occasioning actual bodily harm (six months imprisonment); assaulting a constable (four months imprisonment); and wounding with intent contrary to section 18 of the Offences Against the Person Act 1861 (4 years imprisonment).
He married MP, another national of the Democratic Republic of Congo (DRC).
Their son, PAS, was born on 5 July 2003.
As I have already said, on 3 April 2006, the Secretary of State decided to deport Mr Lumba.
Notwithstanding that his son is a British citizen, the Secretary of State also decided to deport his wife and son, although the orders against them were subsequently revoked.
He was notified of the decision to detain him under the 1971 Act on 22 June 2006, the day before his release date.
His first detention review was in February 2007.
He appealed against the decision to deport him.
On 7 September 2006, while the appeal was still pending, he refused to attend a travel document interview with the immigration authorities to facilitate his return to the DRC.
His appeal against deportation was dismissed by the Asylum and Immigration Tribunal (AIT) on 15 December 2006.
In about January 2007, he was transferred from prison to Dover Immigration Removal Centre, since when he remained in detention.
On 1 March 2007, he attended an interview with an immigration officer at which he explained that his passport was missing.
He was asked to complete an application for an Emergency Travel Document (ETD) but refused to do so, stating that he did not wish to be returned to the DRC because the problem which formed the initial basis of his asylum claim is still true.
By 20 March 2007, the Secretary of States caseworkers had discovered that they had a copy of Mr Lumbas passport on file.
His indefinite leave to remain was terminated only after service on him of the signed deportation order on 21 March 2007.
The discovery of the copy of his passport on file obviated the need for his cooperation in completing a travel document application.
On 29 March, a completed application for an ETD, accompanied by copies of his passport and identity card, was sent to the Embassy of the DRC.
The Embassy claimed to have lost the initial application and the application for an ETD was resubmitted on 26 April 2007.
The application was granted by the DRC Embassy on 25 July 2007 and on the following day directions were set for Mr Lumbas removal from the United Kingdom on 20 August 2007.
On 15 August 2007, his new solicitors submitted fresh representations challenging his deportation.
These noted that a country guidance case (BK (DRC)) concerning the safety of returns to the DRC of failed asylum seekers/ deportees was to be heard by the AIT on 17 September 2007.
On 16 August 2007, the Secretary of State refused to treat those representations as a fresh asylum claim and on the following day, Mr Lumba issued judicial review proceedings challenging that refusal.
On 14 September 2007, these proceedings were stayed by consent until the outcome of the pending country guidance case before the AIT was known.
On 23 October 2007, Mr Lumba issued the claim for judicial review challenging his detention which has given rise to the present appeal.
On 18 December 2007, the AIT promulgated its determination in BK (Democratic Republic of Congo) v Secretary of State for the Home Department and decided that failed asylum seekers were not, as such, at risk in the DRC: [2007] UKAIT 98.
Mr Lumba made applications for bail on 23 January 2008, 4 February 2008 and 4 March 2008.
They were all rejected by the immigration judge principally on the ground that there was a real risk that if he was released he would re offend.
On 23 April 2008, permission was granted to appeal the AITs decision in BK (DRC) to the Court of Appeal.
Mr Lumbas claim for judicial review in respect of his detention was heard by Collins J on 4 July 2008.
His judgment is reported at [2008] EWHC 2090 (Admin).
He concluded that the detention was lawful on Hardial Singh principles and that it would continue to be so until the Court of Appeal gave judgment in BK (DRC), on the assumption that judgment was given by the end of December 2008.
In fact judgment was given by the Court of Appeal on 3 December 2008 after the hearing before Davis J, but before he gave judgment: [2008] EWCA Civ 1322.
Davis J agreed with the reasoning and conclusion of Collins J as to the lawfulness of the detention.
The findings made by Davis J are set out in full by the Court of Appeal at para 99 of their judgment.
There is no need to repeat them in this judgment.
In summary, Davis J said at para 203 that (i) Mr Lumba posed a high risk of absconding and a high risk of serious reoffending; (ii) at all stages there was a prospect of removing him within a reasonable period; and (iii) there had been no lack of due expedition on the part of the Secretary of State.
On 11 February 2009, Mr Lumbas solicitors made fresh representations on his behalf to the Secretary of State, and applied for the revocation of the deportation order.
They said that his marriage had broken down and that he was seeking contact with his son.
He relied on article 8 of the ECHR.
This application was rejected by the Secretary of State on 1 July 2009.
Mr Lumba appealed on 8 July 2009.
The appeal was dismissed by the AIT on 28 September 2009.
A reconsideration was ordered by a senior immigration judge on 26 October 2009.
At the reconsideration, the Secretary of State conceded that the original tribunal had erred in law.
By a judgment given on 19 February 2010, the Court of Appeal dismissed Mr Lumbas appeals against the decisions of Collins J and Davis J. The Court of Appeal said at para 100 that they had seen nothing to justify interfering with Davis Js findings at para 203 of his judgment.
They said in relation to the application of the Hardial Singh principles that the real attack was on the judgment of Collins J.
There had been no material error in the approach or conclusions of Collins J who had taken into account the high risk of absconding and re offending, the fact that Mr Lumba could have returned to the DRC voluntarily, and that his deportation had been delayed by his pursuit of several unsuccessful applications for asylum or leave to remain and appeals against their refusal.
The Court of Appeal had been asked to consider the period which had elapsed since the judgment of Davis J and subsequent evidence, including a psychiatric report, and to determine the legality of Mr Lumbas current detention in the light of it.
They said at para 108 that it would be inappropriate for them to consider as a first instance decision whether Mr Lumbas mental condition rendered his continued detention unlawful.
Apart from that, they said that: having reviewed the history of [Mr Lumbas] detention and the reasons given for continuing it, and for the refusals of bail, and his several hitherto unmeritorious appeals and applications, we are satisfied that his detention for the purposes of his deportation continues to be lawful.
On behalf of Mr Lumba it is submitted that the Court of Appeal should have concluded that his detention was unreasonably long by the time of the hearing before Collins J on 4 July 2008; alternatively by the time of the hearing before Davis J on 11 14 November 2008; alternatively by the time of the hearing before them between 30 November and 2 December 2009.
By the time of the appeal, of particular importance were the facts that (i) Mr Lumba had been in detention for 41 months; (ii) he could not be deported while he was pursuing his appeal against the Secretary of States refusal to revoke the deportation order; and (iii) there was evidence from the Croydon Mental Health Team and consultant psychiatrist Dr Dinakaran which showed that the risk of re offending and psychotic relapse could be managed in the community.
Mr Lumba has now been in detention for 54 months.
At first sight, his detention seems to have been of unreasonable duration.
There must come a time when, however grave the risk of absconding and however the grave the risk of serious offending, it ceases to be lawful to detain a person pending deportation.
Moreover, in certain respects the courts below have not applied the Hardial Singh principles correctly.
In particular, they have wrongly regarded the fact that Mr Lumba has been able to delay his deportation by pursuing applications and appeals which, thus far, have been unsuccessful as being relevant to the assessment of a reasonable period of detention.
It has not been suggested by the Secretary of State that any of these applications or appeals have been hopeless and abusive.
For the reasons given above, the fact that the applications and appeals delayed the deportation should have been regarded as irrelevant.
The courts below also appear to have taken into account Mr Lumbas refusal of voluntary return without making it clear how this is relevant to the assessment of a reasonable period.
As I have said, it is of limited relevance as a free standing reason (see paras 122 128 above).
It would be legitimate to infer from the refusal of voluntary return that there is a risk of absconding.
But it is not clear that Collins J or Davis J drew such an inference in this case.
Mr Husain submits that it was incumbent on the Court of Appeal to consider the legality of the continuing executive detention by reference to the situation current at the time of the appeal and that they erred in failing to do so.
He says that they should have considered what the prospects were of removal within a reasonable period.
I accept that, where the facts are the same as they were before the first instance judge and the only difference is the passage of further time, there is no reason why the Court of Appeal should not decide for themselves whether a continuing detention is unlawful.
I also accept that, where there is fresh evidence, the Court of Appeal are entitled to apply the Hardial Singh principles and consider for themselves on the basis of all the up to date material whether a continuing detention is lawful.
Indeed, that was the course that the Court of Appeal took in R (I).
But there are some circumstances where that course is not appropriate.
In the present case, the Court of Appeal took the view that such a course was inappropriate.
They said at para 108 that they should not embark on a first instance decision on matters, such as whether the deportation order should be revoked on account of [Mr Lumbas] mental condition, that Parliament has entrusted to a specialist tribunal.
That was an entirely proper reason for the Court of Appeal not making a first instance decision in this case.
Mr Husain submits that the Supreme Court should allow Mr Lumbas appeal.
I would allow the appeal of both appellants for the generic reasons that I have stated earlier.
But I would not decide whether the detention of Mr. Lumba for almost 56 months was in breach of the Hardial Singh principles.
The reasons which led the Court of Appeal to refuse to make a first instance decision apply with even greater force in an appeal to the Supreme Court.
It is only in the most exceptional case that this court should embark on a task that is normally to be performed by a court of first instance.
In view of the passage of further time since the decision of the Court of Appeal as well as the fact that the courts below failed to apply the Hardial Singh principles correctly, I would remit Mr Lumbas claim for damages for breach of those principles to the High Court for reconsideration in the light of all the evidence as to the current position.
The case of Mr Mighty
As I have already said, Mr Mighty was detained between 19 May 2006 and 28 July 2008.
He issued proceedings on 29 May 2008 alleging that his detention was for longer than a reasonable period and inter alia that, on a proper application of the Hardial Singh principles, he should have been released.
His Hardial Singh case was rejected by Davis J.
There was no appeal on this aspect of the case to the Court of Appeal and the point has not been raised on behalf of Mr Mighty before this court.
Exemplary damages
The relevant principles are not in doubt.
Exemplary damages may be awarded in three categories of case: see per Lord Devlin in Rookes v Barnard [1964] AC 1129.
The category which is relevant for present purposes is that there has been an arbitrary and outrageous use of executive power (p 1223) and oppressive, arbitrary or unconstitutional action by servants of the government (p 1226).
In this category of case, the purpose of exemplary damages is to restrain the gross misuse of power: see AB v South West Water Services Ltd [1993] QB 507, 529F per Sir Thomas Bingham MR.
It must be shown that the conscious wrongdoing by a defendant is so outrageous, his disregard of the plaintiffs rights so contumelious, that something more [than compensatory damages] is needed to show that the law will not tolerate such behaviour as a remedy of last resort: see per Lord Nicholls Kuddus v Chief Constable of Leicestershire Constabulary [2002] 2 AC 122 at para 63.
Both Davis J and the Court of Appeal addressed the question of exemplary damages, although in view of their findings on the issue of liability, it was not necessary for them to do so.
Davis J said at para 205 of his judgment that: I add, briefly, that, even if I had concluded there was unlawful detention in any of these cases justifying an award of damages, I would not in any event have awarded exemplary damages on the footing of unconstitutional, oppressive or arbitrary conduct, in so far as sought.
While the Home Office has, to put it mildly, not covered itself in glory in this whole matter of the new policy, I think the failings were in essence one of failing, promptly and directly, to confront and address a perceived legal difficulty: whether through concerns at being bearers of unwelcome news to the Ministers or through an instinct for ducking an apparently intractable problem or through institutional inertia or some other reason, I cannot really say.
I am not prepared, however, to conclude on the material before me that there was a conscious decision within the Home Office to operate tacitly an unpublished policy, known to be highly suspect, in the hope it would not be uncovered or, if it was uncovered, against a plan, if the courts intervened, to present that reversal as being due solely to the courts or the Human Rights Act.
In my view what happened here, in any of these five cases, cannot fairly, I think, be described as sufficiently outrageous to justify an award of exemplary damages.
In any event, I emphasise that individual consideration was given to the cases of each of the claimants.
By the time of the appeal, the Secretary of State had disclosed more material than was before the judge.
The Court of Appeal said that, even taking account of the additional material, they agreed with the assessment of the judge.
They said: 122.
We give weight to that assessment by the judge at the end of his very careful and comprehensive judgment.
It also accords with our own view, even taking account of the additional material which has been disclosed.
We consider that there was a failure, which to put it very mildly indeed, was very regrettable, on the part of the department to face up to the basic problem that the published policy had not caught up with the much more restrictive approach implicit in ministerial statements on the subject.
However, we find it difficult to describe such conduct as unconstitutional, oppressive or arbitrary, in circumstances where the Home Secretary had an undoubted power to detain for the purposes in question, and it has been held that on the facts of the case he could lawfully have exercised that power with the same effect; at any rate, if it can be so described, these circumstances mean that the conduct is at the less serious end of unconstitutional, oppressive or arbitrary.
We also bear in mind also that the claimants had the right to apply for bail to an independent tribunal, at which it was possible for the continuing reasonableness of their detention to be challenged.
An award of exemplary damages would be an unwarranted windfall for them, and it would have little punitive effect since it will not be borne by those most directly responsible.
Rather it would be a drain on public resources which in itself is unlikely to add significantly to the remedial effect of a declaration of unlawfulness. 123.
Moreover, it is difficult to see on what basis exemplary damages could be assessed in lead cases such as these.
The conduct of the Home Secretary complained of in the present case was common to a large number of detainees who have brought proceedings against him.
The selection of lead claimants such as [Mr Lumba] and [Mr Mighty] does not depend on the merits of their individual cases, which have not been assessed other than for the purposes of the grant of permission to apply for judicial review or permission to appeal.
Other claimants may have equally or even more meritorious claims to damages, and if appropriate exemplary damages, than the present claimants.
There would be no principled basis, therefore, to restrict an award of exemplary damages to the present lead claimants.
If an award of exemplary damages is made to the present lead claimants, a similar award would have to be made in every case.
Exemplary damages are assessed by reference to the conduct of the tortfeasor.
The court would, we think, have to assess an appropriate sum as exemplary damages and divide it between all successful claimants.
But we do not know how many successful claimants there will ultimately be.
These considerations demonstrate that exemplary damages, in a case such as the present, may be ill suited to be a remedy in judicial review proceedings, and would be in the present cases.
Yet further material has been disclosed by the Secretary of State since the hearing before the Court of Appeal.
Mr Westgate submits that it can now be seen that this is indeed one of those exceptional cases where awards of exemplary damages are merited.
His submissions are detailed and elaborate.
I shall endeavour to concentrate on the essential points.
He submits that the conditions for an award of exemplary damages have been established because (i) from April 2006 until September 2008 the Secretary of State operated a hidden blanket policy which did not give effect to the Hardial Singh principles; (ii) the Secretary of State actively discouraged disclosure of her true detention policy with the consequence that the integrity of written reasons for detention was compromised; (iii) there was a deliberate decision not to publish the hidden policy; and (iv) the Secretary of State and/or her officials knew that, or were reckless as to whether, their actions were unlawful, preferring for political reasons to leave it to the courts to remedy the illegality.
In addition, Mr Westgate submits that the Secretary of State in this litigation has fallen short of the duties of candour owed to the courts in that (v) the courts have been intentionally or recklessly misled by the Secretary of States officials; (vi) elementary safeguards necessary to promote compliance with a public authoritys duty of candour in judicial review proceedings have not been observed: in particular, the Deputy Chief of Staff of the Chief Executive of the UK Border Agency was selected as the person responsible for overseeing disclosure, when the responsibility for disclosure was that of the Treasury Solicitor; and (vii) there remain significant lacunae in the disclosure.
I find it convenient to take (i) to (iv) together.
I have already referred at paras 16 39 above to the hidden blanket policy which did not give effect to the Hardial Singh principles.
There is no doubt that such a policy was operated between April 2006 and November 2007 when a slight relaxation was effected by the introduction of Cullen 1.
To a large extent, the policy that was applied until September 2008 was a blanket policy.
It certainly remained a hidden policy during the whole period.
But that of itself comes nowhere near being sufficient to justify an award of exemplary damages.
It is the reasons why the policy was not published that are the matters of real concern.
There is undoubtedly evidence to support submissions (ii) to (iv).
I shall refer to some of it.
A more detailed description of the internal material relating to the period between April 2006 and September 2008 that was disclosed to Davis J appears at para 43 of his judgment.
At least from 17 May 2006, senior officers within the Home Office, including lawyers of the Home Office Legal Advisers Branch (HOLAB), expressed concern to, among others, Lin Homer (Chief Executive of the Border and Immigration Agency) (BIA) that the policy was unlawful on the grounds that it did not satisfy the Hardial Singh principles and that it differed from the published policy.
Thus, for example, on 20 July 2006, Ms Rogerson (Head of Policy for the BIA) said in an email we are increasingly vulnerable and we should probably publish revised criteria.
She suggested that they should review the criteria and consider being prepared to release FNPs in some cases, with public protection as a priority.
She added that Ministers preferred position may be to continue to detain all FNPs and let immigration judges take any hit which is to be had by releasing on bail.
On 19 January 2007, Joy Munro (Deputy Director, Border Control) wrote to Ms Rogerson asking for written evidence of the lawfulness of detaining FNPs whom they were unable to remove.
She referred to there being unrest in the CCD about the power in law to detain some of those held if they are not removable.
Ms Rogerson replied: We shouldnt be dealing with thisor any such policy discussionson email in this way.
I believe a meeting would be the most profitable way forward.
On 13 March 2007, Stephen Braviner Roman of HOLAB wrote to Ken Sutton (Deputy Director of the Immigration and Nationality Directorate) saying: if the courts were to find we had not been following our policy in these cases we would face criticism, but also claims for compensation.
He also referred to the fact that Simon Harker (from the Treasury Solicitors Department) had pointed out that they have a duty of candour to the court and cannot mislead.
First hand evidence of the attitude of the Secretary of State herself is to be found in an email dated 16 July 2007 sent to Lin Homer in response to a draft bail proposal: Is this an issue primarily about legal vulnerability rather than capacity? If so, what is the reason for worrying about this now? Have we been threatened with legal action?
This prompted a series of internal emails, some of which referred to the test case of R (A) (Somalia) v Secretary of State for the Home Department [2007] EWCA Civ 804.
In an email dated 17 July 2007, Mr Braviner Roman referred to the impending hearing and said that there was an on going legal vulnerability.
If it materialised, we would face a liability in damages as well as severe criticism if it was said that we have maintained a policy of detaining people which was unlawful (as opposed to having a lawful policy but just getting it wrong on the facts from time to time, which is inevitable).
But the unpublished policy was not disclosed in that litigation.
The response to the Secretary of States question was given in an email dated 19 July 2007 which stated that the issue was one of legal vulnerability.
To this the Private Secretary of the Secretary of State replied that there did not seem to be a strong enough or immediate enough reason to be releasing or not detaining people at this point.
A further insight into the thinking of the senior officers can be derived from the draft policy submission that had been circulated in May 2007.
It referred to the legal advice that the Secretary of State was open to legal challenge for the reasons to which I have earlier referred.
It also said: if we were to lose a test case, we could present any change in FNP detention practice as having been forced on us by the courts.
I agree with what Davis J said about this document at para 43.12 of his judgment: That may or may not be good politics: but it is deplorable practice, especially when it is seen that almost from day one the new unpublished policy was perceived in virtually all quarters within the department to be at least legally vulnerable and in some quarters positively to be untenable and legally invalid.
The tone of this draft is further confirmed by the subsequent comments that the longer the delay the more likely it would be that a court judgment would force us to pay out significant sums in compensation to FNPs whose detention was held to be unlawful as well as exposing the department to criticism in the media and to reputational damage.
Mr Westgate is able to point to clear evidence that caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
This material was disclosed seven days before the start of the hearing before the Court of Appeal.
It comprises an exchange of emails in relation to a Liverpool case.
On 21 March 2007, Philip Muirhead of the Criminal Casework Directorate (CCD) in Liverpool said of the FNP under consideration that there was no valid reason to detain him.
Nichola Samuel, a lawyer of HOLAB, said that if detention was appropriate in that case, this suggested that they were applying a different policy, ie that all FNPs should be detained pending deportation.
Gareth Lloyd (Assistant Director of the CCD) responded that he had an email from Mandie Campbell (Director of CCD) telling me that we must detain all FNPs until removal.
In an email dated 22 March 2007, Mr Lloyd said that this was not only a Liverpool issue and in an email sent on the following day, he said: We just detain as instructed and choose the most defendable option in our opinion.
From the above, it seems to me to be clear that there was a deliberate decision not to publish the hidden policy.
The material that has now been disclosed suggests that the assessment made by Davis J at para 205 may have been somewhat generous to the Secretary of State and her senior officials.
It is true that they did not know and could not have known that the policy that was being applied was bound to be struck down as unlawful, but they certainly knew that it was vulnerable to legal challenge and that it did not accord with the published policy.
Nevertheless, the question remains whether, regrettable though the behaviour of the Secretary of State and her senior officials may have been, it was sufficiently outrageous and sufficiently unconstitutional, oppressive or arbitrary to merit awards of exemplary damages.
I approach this question without regard to the allegations of lack of candour in the litigation.
This is because the role of exemplary damages is to punish the commission of the underlying tort and not the subsequent conduct of the litigation.
Any disapproval of the conduct of the litigation can be marked by an appropriate order for costs or by an increased award of (compensatory) aggravated damages: Thompson v Commissioner of Police of the Metropolis [1998] QB 498, 517D per Lord Woolf MR.
Whether the high threshold for the award of exemplary damages has been crossed in any particular case is ultimately a matter of judgment.
Opinions can reasonably differ on whether a defendants conduct has been so outrageous and so unconstitutional, oppressive or arbitrary as to justify the imposition of the penalty of exemplary damages.
An appellate court should not interfere with the judgment of the court below unless that judgment is plainly wrong.
On the material that was before him, Davis J was entitled to reach the conclusion that he reached.
In my view, the Court of Appeal were also entitled to reach the conclusion that they reached on the more extensive material that was before them.
Both the judge and the Court of Appeal applied the correct test.
In particular, the Court of Appeal were right to place some weight on the fact that the Secretary of State had the statutory power to detain the appellants pending deportation and that, although she in fact exercised that power unlawfully, she could have done so lawfully.
They were also right to say that, if her conduct is properly to be described as unconstitutional, oppressive or arbitrary, it was at the less serious end of the scale.
It is material that there is no suggestion that officials acted for ulterior motives or out of malice towards the appellants.
Nevertheless, there was a deliberate decision taken at the highest level to conceal the policy that was being applied and to apply a policy which, to put it at its lowest, the Secretary of State and her senior officials knew was vulnerable to legal challenge.
For political reasons, it was convenient to take a risk as to the lawfulness of the policy that was being applied and blame the courts if the policy was declared to be unlawful.
The Court of Appeal identified at para 123 of their judgment a further point which militated against awards of exemplary damages to the appellants.
Where there is more than one victim of a tortfeasors conduct, one award of damages should be made which should be shared between the victims, rather than separate awards of exemplary damages for each individual: see Riches v News Group Newspapers Ltd [1986] QB 256.
This is because the purpose of the award is to punish conduct rather than compensate the claimants.
In Riches, the victims of the tort were a small class who were all before the court.
But where (as in the present case) there is potentially a large number of claimants and they are not all before the court, it is not appropriate to make an award of exemplary damages: see AB v South West Water Services Ltd [1993] QB 507, 527B D per Stuart Smith LJ and p 531D E per Sir Thomas Bingham MR.
Unless all the claims are quantified by the court at the same time, how is the court to fix and apportion that punitive element of the damages? If the assessments are made separately at different times for different claimants, how is the court to know that the overall punishment is appropriate? The Court of Appeal were right to regard this a further reason why it was not appropriate to award exemplary damages in the present case.
There is yet one further point.
It is unsatisfactory and unfair to award exemplary damages where the basis for the claim is a number of serious allegations against named officials and Government Ministers of arbitrary and outrageous use of executive power and those persons have not been heard and their answers to the allegations have not been tested in evidence.
In a private law action, they would almost certainly have been called to give evidence.
But oral evidence is rarely adduced in judicial review proceedings and, understandably, it was not adduced in the present case.
Overall conclusion
I would, therefore, allow these appeals.
For the reasons that I have given, the Secretary of State is liable to both appellants in the tort of false imprisonment on the narrow ground that she unlawfully exercised the statutory power to detain them pending deportation because she applied an unpublished policy which was inconsistent with her published policy.
The appellants are, however, only entitled to nominal damages because, if the Secretary of State had acted lawfully and applied her published policy, it is inevitable that both appellants would have been detained.
As regards the discrete question whether the detention of Mr Lumba was in any event unlawful on the grounds of a breach of the Hardial Singh principles, I would remit this to a High Court judge.
Finally, neither appellant is entitled to exemplary damages.
LORD HOPE
In agreement with Lord Walker, Lady Hale, Lord Collins, Lord Kerr and Lord Dyson I would hold that the Secretary of State is liable to the appellants in the tort of false imprisonment because she applied to them an unpublished policy which was inconsistent with her published policy, and I too would remit to a High Court judge the question whether Mr Lumbas detention was unlawful as being in breach of the Hardial Singh principles.
As I am anxious to avoid adding to the length of the courts judgment, I shall simply say that I am in full agreement with all the reasons that Lord Dyson has given on these issues except that I do not have the same difficulty as he has with the use of the phrase abuse of power by Lord Walker (see para 69, above).
There are only three points on which I wish to comment.
First, as Lord Phillips has noted (see para 258, below), it was common ground in these appeals that Lord Dyson correctly summarised the effect of Woolf Js judgment in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704.
Nevertheless he has indicated that he does not consider that the first and second principles that Lord Dyson has extracted from it can properly be derived from what Woolf J said in that judgment.
For my part, I think that Lord Dysons summary, which he has taken from his judgment in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46, is accurate and I would endorse it.
We can, of course, read what Woolf J said for ourselves, and there are no doubt various ways of expressing what Lord Dyson has taken from it.
The essential point, as Lady Hale has explained (see para 199, below), is that the detention must be for the statutory purposes of making or implementing a deportation order and for no other purpose.
Lord Phillips says that he can see no justification for reading the terms of the statute in this way, that it places an unjustified restriction on the Secretary of States power of detention and that he does not believe that Woolf J intended to say what Lord Dyson has attributed to him.
He would read Hardial Singh as concerned only with the length of time that was reasonably necessary to effect deportation and not the purpose of the detention.
I am unable, with respect, to agree with this interpretation of Woolf Js judgment.
There are two points that need to be considered.
The first is, what do the words that Woolf J used actually mean? The second is whether, if they have the meaning that Lord Dyson has attributed to them, this limitation on the statutory power can properly be read into the statute.
As to the first point, in the second sentence of the relevant paragraph (see para 262 of Lord Phillipss judgment) Woolf J makes it plain that in his view the statutory power can only authorise detention if the individual is being detained pending the making of a deportation order or pending his removal and for no other purpose.
I think that his judgment could not be clearer on this issue, and that Lord Dyson has captured the essential points that Woolf J made accurately in his summary.
As for the second, it must be recognised that until now Woolf Js statement of the limitations to the statutory power has never been questioned.
I think that there are good reasons for this.
To confine the limitation to the period of the detention only and release the Secretary of State from the limitation as to purpose which Woolf J identified would greatly reduce the protection which, as I read it, his judgment was designed to give to the detainee.
For obvious reasons that, if it were to happen, would be regrettable.
It would, as Lord Phillips indicates in para 269, enable the Secretary of State to exercise the power to detain simply because he believed that the detainee would, if released, pose a threat to national security.
I do not think that article 5(1)(f) of the European Convention on Human Rights permits this interpretation of the statutory power.
If Parliament had intended that the power to detain could be used for a purpose other than the making or effecting of a deportation order, it would have had to have said this expressly and it has not done so.
It is hard also to see how the limitation as to time which Lord Phillips accepts can be read into the statute can be tested without having regard to the purpose for which the detainee is being held.
The limitation as to time and the limitation as to purpose are really two sides of the same coin.
They cannot be separated from each other.
I think that Woolf J was right to recognise this and that there are sound reasons for all that he said about the limitations that must be understood to qualify the statutory power.
Second, I cannot accept Lord Phillipss conclusion that the application of the secret policy did not render the detention of the appellants unlawful.
The basis for that view is that, if the published policy had been applied they would have been detained anyway and that, had they challenged their continued detention, they would have had no legitimate expectation of obtaining an order for their release.
This is the causation argument which, for the reasons Lord Dyson gives in paras 62 68 with which I agree, he rejects.
The key point, as I see it, are that we are dealing in this case with the tort of false imprisonment.
Torts of this kind are actionable per se regardless of whether the individual suffers any harm.
While not every breach of public law will give rise to a cause of action on this ground, the history of this case shows that there was here a serious abuse of power which was relevant to the circumstances of the appellants detention.
If the rule of law is to be sustained, the detention must be held to have been unlawful.
The appellants were being detained without regard to the purpose for which the Secretary of State was authorised to exercise the power by the statute.
The court must insist that powers of detention are exercised according to law.
If they are not, those who have abused their powers must accept the consequences.
It is no answer for them to say that they could, had they put their mind to it, have achieved the same result lawfully by other means.
Third, I agree that this is not a case for exemplary damages.
But, for the reasons given by Lord Walker and Lady Hale, I would hold that the breach of the appellants fundamental rights that has occurred in these cases should not be marked by an award only of nominal damages.
An award on ordinary compensatory principles is, of course, out of the question.
It is plain that the appellants would not have had any prospect of being released from detention if the Secretary of State had acted lawfully.
So they cannot point to any quantifiable loss or damage which requires to be compensated.
But the conduct of the officials in this case amounted, as Lord Walker says (see para 194, below), to a serious abuse of power and it was deplorable.
It is not enough merely to declare that this was so.
Something more is required, and I think that this is best done by making an award of damages that is not merely nominal.
The principles on which damages for breaches of fundamental rights are to be assessed in situations such as this are not greatly developed, as Elias CJ pointed out in the Supreme Court of New Zealand in Taunoa and others v Attorney General and another [2007] 5 LRC 680, para 108.
But some guidance is available from judgments which the Judicial Committee of the Privy Council has given where a constitutional right has been infringed.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 Lord Nicholls of Birkenhead added his own words to those of the Board in Harrikissoon v Attorney General of Trinidad and Tobago [1980] AC 265 as to how an award of damages should be assessed in such a case.
In para 18 he observed that when exercising its constitutional jurisdiction the court is concerned to uphold, or to vindicate, the constitutional right.
In para 19 he said that an award, not necessarily of substantial size, might be needed to reflect the sense of public outrage, emphasise the gravity of the breach and deter further breaches.
The law on this matter is still in the process of being worked out, so I should like to say just a little more about it.
Although such an award is likely in financial terms to cover much the same ground as an award by way of punishment in the sense of retribution, punishment in that sense is not its object.
The expressions punitive damages or exemplary damages are therefore best avoided.
Allowance must be made for the importance of the right and the gravity of the breach in the assessment of any award.
Its purpose is to recognise the importance of the right to the individual, not to punish the executive.
It involves an assertion that the right is a valuable one as to whose enforcement the complainant has an interest.
Any award of damages is bound, to some extent at least, to act as a deterrent against further breaches.
The fact that it may be expected to do so is something to which it is proper to have regard.
As for the amount to be awarded, an award is referred to as a conventional award when it is incapable of being calculated arithmetically as there is no pecuniary guideline which can point the way to a correct assessment: Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174, 189G H, per Lord Scarman.
In most cases the sum to be awarded can be derived from experience and from awards in similar cases: Ward v James [1966] 1 QB 273, 303, per Lord Denning MR.
But that cannot be said of this case.
So I would turn for guidance to what Lord Bingham of Cornhill said in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, para 8.
The conventional award that he had in mind in that case to mark the injury and loss due to the unwanted child was not, and was not intended, to be compensatory.
It was not the product of calculation, nor was it derived from awards in other similar cases.
But it was not a nominal, let alone a derisory, award.
Its purpose was to afford some measure of recognition of the wrong done.
In agreement with Lord Steyn, I regarded the idea of a conventional award under the tort system in that case as contrary to principle: Rees v Darlington Memorial Hospital NHS Trust paras 46, 70 77.
But I do not think that it is open to the same objection in the present context.
In this case the factors referred to by Lord Nicholls in Ramanoop must be the primary consideration.
There must be some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment, and account should be taken of the deterrent effect of an award lest there be the possibility of further breaches.
But account should also be taken of the underlying facts and circumstances which indicate that it should not be more than a modest one.
It should do no more than afford some recognition of the wrong done, without being nominal or derisory.
Lord Walker has suggested that an award of 1,000 to each appellant would be appropriate.
We have no yardstick by which that sum can be measured to test its accuracy.
Given the purpose of the award, I see no reason to disagree with his assessment although I, for my part, would have arrived at a substantially lower figure.
LORD WALKER
The issue on which Lord Brown differs from Lord Dyson is one of high importance and great difficulty.
Its high importance is obvious.
Lord Dyson cites Lord Bridge in R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1AC 58, 162, The tort of false imprisonment has two ingredients: the fact of imprisonment and the absence of lawful authority to justify it.
It is a species of trespass to the person and as such a tort actionable without the need for proof of special damage.
The notion that no more than nominal damages should ever be awarded for false imprisonment by the executive arm of government sits uncomfortably with the pride that English law has taken for centuries in protecting the liberty of the subject against arbitrary executive action.
It would in Lord Browns view seriously devalue the whole concept of false imprisonment.
The difference of opinion between two Justices with so much expert knowledge in the field of public law, on a point of such high importance, demonstrates its difficulty.
I hardly need say that it is with diffidence that I make any contribution to the debate.
Lord Browns approach to the solution to the problem is to distinguish between cases where there is no lawful authority to detain a person (including cases where a precondition to lawful detention has not been satisfied) and cases where there is a power to detain, but in the exercise of that power the decision maker has been in breach of some public law duty.
In cases (or at any rate some cases) of the flawed exercise of a power to detain there is (so the argument goes) no false imprisonment at all, and so the question of awarding damages, whether nominal or otherwise, simply does not arise.
This solution has considerable attractions.
The proposed distinction is based on the difference between the existence (or rather non existence) of a lawful authority to detain, and a defective exercise of an authority which does exist: see the observations of Lord Brown in R (Khadir) v Secretary of State for the Home Department [2006] 1AC 207, para 33.
The difficulty that I feel is whether the distinction, though clear enough in theory, can cope with the variety and complexity of the problems that arise in practice, as illustrated by the numerous decided cases cited to the court.
I also have difficulty (or perhaps this is another way of putting the same point) in reconciling the basic existence/exercise distinction with the four categories which Lord Brown extracts from his analysis of successful claims for false imprisonment by executive action.
His four categories are (1) no power to detain; (2) failure to satisfy a precondition to exercising the power to detain; (3) detention beyond the scope of the power to detain; and (4) power to detain limited by published official policy.
The distinction is clear enough in extreme cases.
R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2AC 19 was a case (in Lord Browns category (1)) in which there was simply no lawful authority for the claimants detention after the date of expiration of her term of imprisonment, when properly adjusted for time spent on remand (the complicated statutory provisions as to allowances for multiple periods spent on remand had been misinterpreted).
At or near the other extreme was the breach of a public law duty to see that an asylum seeker detained at a detention centre received a medical examination within 24 hours.
The omission to provide a medical examination was an administrative failing but it did not render the detention unlawful: R (HK (Turkey)) v Secretary of State for the Home Department [2007] EWCA Civ 1357.
Lord Brown supplements his category (1) by category (2) so as to let in a range of cases in which there is for the time being no lawful authority to detain because some precondition has not been satisfied.
A well known example of this is Christie v Leachinsky [1947] AC 573, where a man arrested without a warrant was not correctly informed of the offence which gave rise to the power of arrest without a warrant.
Moreover categories (1) and (2) must be expanded to cover cases in which detention, although initially lawful, has become unlawful because of a failure to carry out some procedure or satisfy some condition of precedent fact required by statute.
A procedural example is Roberts v Chief Constable of the Cheshire Constabulary [1999] 1WLR 662, where the provisions of the Police and Criminal Evidence Act 1984 required detention in police custody to be reviewed every six hours.
The claimant had been detained at 11.25pm and the police officers failure to review his detention by 5.25 am on the next day made his detention unlawful until it was reviewed (and his detention continued) at 7.45 am, and the Court of Appeal refused to overturn or reduce the award of 500 damages, even though it accepted that his detention would have continued if a review had been carried out at the right time.
By contrast in R (Saadi) v Secretary of State for the Home Department [2002] 1WLR 3131 the statement of incorrect and inappropriate reasons on an official form handed to detained asylum seekers was not treated as a failure to satisfy a condition precedent affecting the legality of their continued detention.
The distinction between these two cases is that the relevant statutes were interpreted in one case as imposing a condition which had to be satisfied if continued detention was to be lawful, and as not imposing such a condition in the other case.
It is, as Laws LJ emphasised in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527, paras 21 and 25, an issue of statutory construction.
In that case the Court of Appeal held that compliance with rule 9 of the Detention Centre Rules 2001 (calling for a monthly review of detention with written reasons given to the detained person) was not a precondition to the continuation of lawful detention. (See Laws LJ at paras 31 35 and Keene LJ agreeing, with some hesitation, at para 47.)
Lord Browns category (3) is detention beyond the scope of the relevant power.
Laws LJ in SK (Zimbabwe), para 21, referred to the reach of the power.
These expressions, as I understand them, approximate to the object or purpose for which Parliament has conferred the power.
The importance of the statutory purpose has been recognised since Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 and (as Lord Dyson notes in para 30 of his judgment) the Hardial Singh principles (see R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704) reflect the application of the wide general principle of not deviating from the statutory purpose to the particular field of the detention of foreign nationals pending deportation.
Woolf J made this clear in Hardial Singh itself at p 706.
The wide general principle of not deviating from the statutory purpose is of such fundamental importance in public law that it can be seen as going to the existence of the power, rather than merely to its exercise.
In law the power exists only for the purposes for which Parliament has conferred it on the executive.
In Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97, 113, the Privy Council put it very simply: If removal is not pending . the director has no power at all.
So I would see Lord Browns category (3) as fitting reasonably comfortably into his basic existence/exercise classification.
Determining the purpose for which Parliament has conferred a power is also a process of statutory construction.
That process should not, in my opinion, be minutely elaborated.
I entirely accept the exposition of the Hardial Singh principles by Dyson LJ (as he then was) in R (I) v Secretary of State for the Home Department [2003] INLR 196, para 46.
It goes no further than spelling out clearly what is necessarily implicit in the purpose of detention with a view to deportation, and it has been widely cited and followed.
I have more of a problem in seeing Langley v Liverpool City Council [2006] 1 WLR 375 as a case where the police departed from the statutory purpose in exercising their power of removal under section 46 of the Children Act 1989 when an emergency protection order under section 44 of that Act had already been made.
The purpose of both statutory powers (one conferred on the police, the other on the court) was child protection in an emergency situation.
I regard Langley as a finely balanced decision in which the Court of Appeal held that well intentioned police action, directed to child protection and taken under pressure of circumstances, was nevertheless an unlawful manner of exercising the section 46 power.
Thorpe LJ (at para 79) reached that conclusion with some reluctance.
It is with Lord Browns category (4), however, that I have the greatest difficulty.
Here the issues are concerned with official policies how rigid or flexible they may be, whether and in how much detail they should be published, whether (in these appeals) a policy with a presumption towards detention is permissible.
Official decision makers need policies for obvious reasons.
Although decisions in the field of immigration law are all taken in the name of the Secretary of State, only a tiny handful of cases are actually decided by the Secretary of State personally.
Decisions are taken by a small army of officials at different levels, and they need guidance in order to achieve consistency in decision making.
Members of the public, or those of the public liable to be affected, should know where they stand, and so they are entitled to know, at least in general terms, the content of the official policies.
This is not a matter of being faithful to the purposes of statutory powers, but of seeing that they are exercised consistently and fairly.
There is a helpful discussion of these points in the judgment of the Court of Appeal in these appeals, prepared by Stanley Burnton LJ, at paras 53 58.
It is here that Lord Diplocks dictum in Holgate Mohammed v Duke [1984] AC 437 calls for consideration.
In a passage (at p.444) quoted by both Lord Brown and Lord Dyson, Lord Diplock expressed the view that Wednesbury principles are applicable to determining the lawfulness of the exercise of a statutory power of arrest not only in proceedings for judicial review but also in an action for damages for false imprisonment.
As Lord Dyson says, there seems to have been little argument on this point in the House of Lords.
Nor has there been much discussion of it in later authorities.
It was cited and followed by the Court of Appeal in D v Home Office (Bail for Immigration Detainees intervening) [2006] 1 WLR 1003 (see especially Brooke LJ at para 111).
In SK (Zimbabwe), Holgate Mohammed was cited by counsel but not referred to in the judgments in the Court of Appeal.
Holgate Mohammed and D v Home Office (Bail for Immigration Detainees intervening) were both discussed at some length in the Court of Appeal in these appeals (paras 50 52, and, in relation to causation, paras 82 84).
The Court of Appeal rightly regarded itself as bound by the latter decision.
This court is not bound to follow the Court of Appeals acceptance of Lord Diplocks dictum, and for my part I would refrain from giving it unequivocal approval.
Mr Beloff QC (appearing for the Secretary of State in this court) put forward some persuasive submissions in favour of an alternative approach.
They are noted in paras 76 and 86 of Lord Dysons judgment.
The first two submissions would make a qualification or exception, for the purposes of a private law claim for damages for false imprisonment, to the Anisminic equation of any significant public law error with lack of jurisdiction (see Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147).
Lord Dyson, in para 87, dismisses these in a single sentence as putting the clock back to pre Anisminic days.
With great respect, I think there may be more to be said about it.
Anisminic was one of the seminal cases in the development of modern public law.
But its full implications are still open to debate.
The context in which it equated wrongful exercise of jurisdiction with excess of jurisdiction (the courts response to an ouster clause in the Foreign Compensation Act 1950) was far removed from a private law claim for damages for false imprisonment.
It is a big step to extend the principle to a claim for damages for false imprisonment, where a defendant may have his professional reputation at stake and may not enjoy the procedural protections which attend judicial review (strict time limits, and the discretionary nature of the remedy granted).
I would prefer a more demanding test, that in a case where an extant statutory power to detain has been wrongly used there would be a private law claim only if the misuse amounted to an abuse of power (including but not limited to cases of misfeasance or other conscious misuse of power).
However, it is in my opinion unnecessary to decide the point in these appeals because the conduct of officials, including some senior officials, of the Home Office between April 2006 and September 2008 amounted to a serious abuse of power.
Lord Dyson has in paras 154 165 of his judgment described in restrained language how senior officials were well aware of the risk (indeed the likelihood) of challenge and decided to run the risk, (including the proposal to let immigration judges take any hit), and how further damaging facts were disclosed by stages, some before Davis J, some before the Court of Appeal, and some only in this Court.
Wherever the line is to be drawn (if, as I think, a line does need to be drawn between public law errors in detention policies which do or do not give rise to an action for false imprisonment) these appeals must in my view fall on the wrong side of the line from the Secretary of States point of view.
I agree with Lord Dyson (paras 165 168) that despite the deplorable official conduct this is not a case for exemplary damages.
But in my view it is not a case for nominal damages either.
Apart from cases concerned with constitutional rights in the Caribbean, (the line of authority starts with Attorney General of St Christophers, Nevis and Anguilla v Reynolds [1980] AC 637), the common law has always recognised that an award of more than nominal damages should be made to vindicate an assault on an individuals person or reputation, even if the claimant can prove no special damage. (See Mayne & McGregor on Damages, 18th ed. (2009) paras 42 008 to 009).
In these appeals, each claimant had a very bad criminal record and would undoubtedly have been kept in custody under the Secretary of States published policies.
They cannot therefore establish a claim to special damages.
But the argument on causation does not completely defeat their claims.
I would award each claimant the sum of 1,000 damages.
I would remit the case of Mr Lumba as Lord Dyson proposes.
On every point on which I have not expressed disagreement or doubt I am in respectful agreement with the judgment of Lord Dyson.
LADY HALE
I agree entirely with Lord Brown that far and away the most important issue in this case, as it is in the case of SK (Zimbabwe) [2009] 1 WLR 1527, is whether the breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful.
If it is, the second question is which breaches of public law duties have that consequence; and the third question is whether it makes any difference that the person authorising the detention both could and would have done so lawfully, without breaching the public law duty in question, had the point been drawn to his attention.
If that does not make a difference to liability, a fourth question is whether the fact that the person detained both could and would have been lawfully detained is of any relevance to the assessment of his damages for false imprisonment.
But I differ from Lord Brown in his view that the answer to the last of these questions should govern the answer to the first, second or third question: in other words, that if we take the view that no compensatory damages are payable in a case such as this it should follow that there is no liability in the first place.
Forcefully and attractively though that argument is made, it does put the cart before the horse.
It also fails to acknowledge that false imprisonment is a trespass to the person, actionable per se without proof that the claimant has suffered any harm for which the law would normally grant compensation.
As to the first question, this is a stronger case than is still before the Court in SK (Zimbabwe) because the illegality alleged (and now admitted) went to the criteria for detention rather than to the procedure for authorising it.
The statutory power to detain under paragraph 2(2) and (3) of schedule 3 to the Immigration Act 1971 (quoted by Lord Dyson at paragraph 4 of his judgment) is, on its face, very broad.
Provided that the detainee has been notified of a decision to make a deportation order against him, and he is not detained in pursuance of the sentence or order of a court, he may be detained pending the actual making of the order (para 2(2)).
Once the deportation order is made, he may be detained pending his removal or departure from the United Kingdom (para 2(3)).
However, since at least the case of R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704, it has been recognised that there are limitations implicit in these powers: the detention must be for the statutory purpose of making or implementing a deportation order and for no other purpose; hence it cannot be continued once it becomes clear that it will not be possible to effect deportation within a reasonable period; the Secretary of State must act with reasonable diligence and expedition to bring this about; and in any event the detention cannot continue for longer than a period which is reasonable in all the circumstances.
These limitations were devised long before the Human Rights Act and have been accepted without question ever since.
They stem from the long established principle of United Kingdom public law that statutory powers must be used for the purpose for which they were conferred and not for some other purpose: Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
They were not inspired by article 5(1)(f) of the European Convention for the Protection of Human Rights and Fundamental Freedoms and it does not follow that, because detention would be permissible under article 5(1)(f), it is also permissible under United Kingdom law.
The last restriction referred to above has not hitherto been questioned but it is the most questionable, for the Secretary of State may genuinely be doing all that she can to effect deportation, and deportation may still be a realistic possibility, but even so the deportee may have been detained for so long that it is no longer lawful to keep him there.
That this has never until now been questioned indicates how strong are the objections to indefinite detention by order of the executive.
But it undoubtedly gives rise to some difficult questions, as is amply shown by Lord Dysons discussion, in paragraphs 102 to 128 of his judgment, of the matters to be taken into account in deciding whether or not the period of detention is reasonable.
In addition to such substantive limitations, the law has also imposed procedural requirements upon apparently open ended statutory powers.
In common with Lord Dyson, I do not think that it matters whether these are characterised as implied conditions precedent or implied procedural requirements.
The effect is the same.
The best known example is Cooper v Wandsworth Board of Works (1863) 14 CB (NS) 180, 143 ER 414.
The Board had power to alter or demolish a house if the builder had not given 7 days notice of his intention to build.
The Court held that the common law imposed upon the Board a requirement to notify the builder before they decided to demolish the house, so that he could present arguments why they should not.
As the Board had not given the builder such an opportunity before demolishing the house, they were liable to him in damages for trespass.
It is true that Byles J founded his opinion partly on the basis that the Board had also failed in their express statutory duty to notify the builder of their demolition order: but the majority based their opinions on the broader principle that he had a right to be heard before the order was made: in other words, there were public law duties inherent in the apparently open ended statutory power.
Another example of the same principle is Christie v Leachinsky [1947] AC 573 where the common law implied a duty, when exercising a power of arrest, to tell the arrested person the power under which he was being arrested, so that he might know whether or not he could resist arrest.
Once again, the police were liable in false imprisonment.
The question is whether the same principles apply where the requirement in question is the duty, imposed by the common law, for the Secretary of State and his officials to comply with a published policy, unless there is good reason not to do so.
As I understand it, Lord Brown accepts that they may indeed do so, for he agrees that if the published policy further narrows and defines the circumstances in which the power will be exercisable, the Secretary of State may not lawfully depart from that.
It is on that basis that he considers R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 to have been correctly decided.
Support for the proposition that the ordinary requirement to observe public law duties may restrict the lawful exercise of a statutory (or common law) power which would otherwise authorise a trespass can be found in the dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437, 443, quoted by Lord Dyson at para 73 of his judgment.
On the face of it, this was a lawful arrest.
The argument was that the police officer had arrested the claimant for the wrong reason: to get her to confess.
There can be little doubt that, had the House of Lords concluded that this was indeed an impermissible consideration, they would have held that the arrest was unlawful and that the claimant was entitled to the damages she sought.
This was, after all, an action for damages for false imprisonment in which the claimant had succeeded in the county court.
If the House had thought that she would not have been entitled to damages in any event, it would surely have said so.
I agree with Lord Walker that it is not necessary to hold that every single departure from policy, or even failure in the decision making process, attracts these consequences in order to hold that they apply in this case.
The discrepancy between what the policy said should happen in these cases and what was actually happening is stark.
The claimants were being dealt with, not under the published, lawful policy, but under an unpublished, unlawful policy or practice.
Yet it is difficult not to have some sympathy for the officials involved.
The Government had been hit by a perfect storm in April 2006 when the popular press discovered that foreign national prisoners were being released after serving their sentences without any consideration being given to whether or not they should be deported.
It had cost the then Home Secretary his job.
The immediate answer was not to let any of them go.
This was at odds with the published policy, which presumed against the use of detention powers.
Officials knew this and they also knew that the policy needed amendment.
But they found it very difficult to devise a policy for publication which would be both lawful and acceptable to ministers.
Ministers wanted a near blanket ban on release, whereas the law requires some flexibility to respond to the circumstances of the particular case.
So the situation dragged on for many, many months.
These are just the sort of circumstances, where both Ministers and their civil servants are under pressure to do what they may know to be wrong, in which the courts must be vigilant to ensure that their decisions are taken in accordance with the law.
To borrow from the civil servants correspondence, the courts must be prepared to take the hit even if they are not.
The law requires that decisions to detain should be made on rational grounds and in an open and transparent way and not in accordance with arbitrary rules laid down by Government and operated in secret.
One of the most disturbing features of this sorry tale is that the case handling officials had to give reasons for their decisions which were not what their real reasons were.
The European Convention on Human Rights and the Strasbourg Court have not imposed the same requirements of proportionality upon detention with a view to deportation under article 5(1)(f) as they have upon detention under other provisions in article 5(1).
But any deprivation of liberty has to be in accordance with a procedure prescribed by law.
Unless the law has certain essential characteristics, there is a risk that detentions may be arbitrary.
That is why the open ended common law power to detain people who lack the capacity to make decisions for themselves on grounds of necessity was found incompatible with article 5(1)(e): see L v United Kingdom (2005) 40 EHRR 32.
There is every reason to think that Strasbourg would find a secret policy which presumed in favour of the detention of every foreign national prisoner open to the same objections.
The common law is just as respectful of the liberty of the person, and just as distrustful of arbitrary and secret decision making by officials acting on behalf of Government, as is the Convention.
I would therefore answer yes to the first question.
I would also answer the second question in the way proposed by Lord Dyson.
In other words, the breach of public law duty must be material to the decision to detain and not to some other aspect of the detention and it must be capable of affecting the result which is not the same as saying that the result would have been different had there been no breach.
The third question is whether it makes any difference that, in these particular cases, if the officials had been operating the published policy they both could and would have authorised the detention of these appellants.
This would not normally make any difference.
In Christie v Leachinsky, the officers could have made a lawful arrest and only chose to make an unlawful arrest for convenience, but they were still liable for false imprisonment.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, the custody officer could have reviewed the case when he should have done and would no doubt have authorised the continued detention then, but there was still liability in false imprisonment.
For all the reasons given by Lord Dyson, there is no basis for drawing a distinction according to the reason why the detention is unlawful, permitting what has been referred to as a causation defence in some cases but not in others.
The most difficult question is whether this should make any difference to the measure of damages awarded.
I quite agree with Lord Brown that the importance of strict adherence to the law when depriving people of their liberty should not be devalued.
Awarding the same measure of damages, irrespective of whether or not the person could and would have been lawfully detained, serves to reinforce the importance of this principle.
Also, if no distinction, according to the reason why the detention is unlawful, is to be drawn in relation to the second question, there should be no such distinction in relation to damages.
If we are to hold that a person who could and inevitably would have been detained lawfully had the correct criteria or procedures been applied is not to be compensated for the loss of liberty, then this must apply irrespective of the reason why depriving him of his liberty was unlawful.
We cannot single out these public law cases for special treatment.
In most cases of false imprisonment, the problem will not arise, because the detainer does not have a choice between acting lawfully and acting unlawfully.
The prison governor in R v Governor of Brockhill Prison, Ex p Evans (No 2) [2001] 2 AC 19 had no power to detain the prisoner beyond the properly calculated term of her imprisonment: the fact that he was acting in compliance with the law as it had previously been thought to be was neither here nor there.
The police officer in Langley v Liverpool City Council [2006] 1 WLR 375 had, as the Court of Appeal found in what I agree with Lord Walker was a finely balanced decision, no power to use his power to take a child into police protection under section 46 of the Children Act 1989 when the child could and should have been protected by social workers implementing an emergency protection order under section 44.
The immigration officers in Kuchenmeister v Home Office [1958] 1 QB 496 had no power to detain the claimant in such a way as to prevent his transiting from one aircraft to another at London airport.
However, where the defendant has failed to comply with a procedural requirement, there is always the possibility that the deed might have been done lawfully.
But the whole point of procedural requirements, such as those in Cooper v Wandsworth Board of Works or Christie v Leachinsky, is that the person whose rights are being infringed should have an opportunity of challenging this.
So it will rarely be possible to be confident that, had the correct procedure been followed, the outcome would have been the same.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 is an example where it was possible.
This case is another, because it would appear that, had the decision makers applied the published, lawful policy rather than the unpublished, unlawful policy, they would inevitably have reached the same conclusion.
Insofar as damages for false imprisonment are meant to compensate for the loss of liberty, it is difficult to see why a claimant should be compensated for the loss of something which he would never have enjoyed.
But, left to myself, I would not regard this as the end of the story.
Trespass, whether to person or property, has always been actionable per se, without proof of anything which the law regards as damage.
The tort is complete when a direct interference with person or property without lawful justification is established.
Usually, there will also be some harm done which the wrongdoer must remedy, either by damages or in some other way.
Take, for example, the case of the neighbour who put a row of ridge tiles on his neighbours roof.
They did no harm to the roof; they did not diminish the value of the house in any way; indeed many might think them an enhancement; but the claimant did not want them there and successfully sued for trespass.
The obvious remedy was to remove the tiles or pay the cost of the claimants doing so.
But suppose there is no such harm.
The claimant has nevertheless been done wrong.
Let us also assume, as is the case here, that the circumstances are not such as to attract punitive or exemplary damages.
Is our law not capable of finding some way of vindicating the claimants rights and the importance of the principles involved? A way which does not purport to compensate him for harm or to punish the defendant for wrongdoing but simply to mark the laws recognition that a wrong has been done?
As Lord Collins explains, the concept of vindicatory damages has been developed in some Commonwealth countries with written constitutions enshrining certain fundamental rights and principles and containing broadly worded powers to afford constitutional redress (and also in New Zealand, which has no written Constitution but does have a Bill of Rights: Taunoa v Attorney General [2008] 1 NZLR 429).
In an early article on the Canadian Charter, Damages as a remedy for infringement of the Canadian Charter of Rights and Freedoms (1984) 62(4) Canadian Bar Review 517, Marilyn Pilkington argued that an award of damages under section 24(1) of the Charter should not be limited by the common law principles of compensation.
In a proper case it might be designed to deter repetition of the breach, or to punish those responsible or to reward those who expose it.
In Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607, the Privy Council upheld a modest award of exemplary damages for breach of a constitutional right.
But there can be a middle course between compensatory and exemplary damages.
In Jorsingh v Attorney General (1997) 52 WIR 501, de la Bastide CJ and Sharma JA in the Court of Appeal of Trinidad and Tobago both said, albeit obiter, that the remedies available under section 14(2) of the Constitution were not limited by common law principles.
Sharma JA said, at p 512, that The court is mandated to do whatever it thinks appropriate for the purpose of enforcing or securing the enforcement of any of the provisions dealing with the fundamental rights.
Not only can the court enlarge old remedies; it can invent new ones as well, if that is what it takes or is necessary in an appropriate case to secure and vindicate the rights breached.
Since then, the concept of vindicatory damages for breach of constitutional rights has been recognised by the Judicial Committee of the Privy Council, in Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38 (Bahamas); applied to breach of constitutional provisions other than the fundamental rights and freedoms, in Fraser v Judicial and Legal Services Commission [2008] UKPC 25 (St Lucia) and Inniss v Attorney General [2008] UKPC 42 (St Kitts), which involved the dismissal of respectively a magistrate and a High Court registrar in breach of the procedures laid down in the Constitution; and applied to the breach of fundamental rights in Takitota v Attorney General [2009] UKPC 11 (Bahamas), where the Board quoted from Lord Nicholls in Ramanoop, at para 19: An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter future breaches.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided .
We are not here concerned with a written constitution with a broadly drawn power to grant constitutional redress.
But neither are we concerned with a statutory provision, such as section 8(3) and (4) of the Human Rights Act 1998, with a narrowly drawn power to award damages.
We are concerned with a decision taken at the highest level of Government to detain certain people irrespective of the statutory purpose of the power to detain.
The common law has shown itself capable of growing and adapting to meet new situations.
It has recently invented the concept of a conventional sum to mark the invasion of important rights even though no compensatory damages are payable.
In the view of the majority of the House of Lords in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309, there were sound reasons of public policy why damages should not be recoverable for the cost of bringing up a healthy child born as a result of a negligent sterilisation.
Nevertheless, an award limited to the stress and trauma associated with the pregnancy and birth was insufficient to mark the legal wrong which had been done to the mother.
This should be marked by a fixed, non negligible, conventional sum (in that case 15,000).
Rees was concerned with the rights to bodily integrity and personal autonomy, the right to limit ones family and to live ones life in the way planned: see Lord Bingham of Cornhill at paragraph 8.
These are important rights indeed.
But no one can deny that the right to be free from arbitrary imprisonment by the state is of fundamental constitutional importance in this country.
It is not the less important because we do not have a written constitution.
It is a right which the law should be able to vindicate in some way, irrespective of whether compensatable harm has been suffered or the conduct of the authorities has been so egregious as to merit exemplary damages.
Left to myself, therefore, I would mark the false imprisonment in these cases with a modest conventional sum, perhaps 500 rather than the 1000 suggested by Lord Walker, designed to recognise that the claimants fundamental constitutional rights have been breached by the state and to encourage all concerned to avoid anything like it happening again.
In reality, this may well be what was happening in the older cases of false imprisonment, before the assessment of damages became such a refined science.
I therefore agree, and (subject to the additional points made above) for the reasons given by Lord Dyson, that both these appeals should be allowed.
When considering what was a reasonable period for which to detain Mr Lumba in accordance with the Hardial Singh principles, however, I would stress that his psychiatric condition must be among the factors to be taken into account.
LORD COLLINS
I agree with Lord Dyson that the appeals should be allowed, substantially for the reasons which he gives.
This is a case in which on any view there has been a breach of duty by the executive in the exercise of its power of detention.
Fundamental rights are in play.
Chapter 39 of Magna Carta (1215) said that no free man shall be seized or imprisoned except by the law of the land and the Statute of Westminster (1354) provided that no man of what state or condition he be, shall be imprisoned without being brought in answer by due process of the law.
That the liberty of the subject is a fundamental constitutional principle hardly needs the great authority of Sir Thomas Bingham MR (see In re S C (Mental Patient: Habeas Corpus) [1996] QB 599, 603) to support it, but it is worth recalling what he said in his book The Rule of Law (2010), at p 10, about the fundamental provisions of Magna Carta: These are words which should be inscribed on the stationery of the Home Office.
The evidence shows that concern was expressed in the Home Office from an early stage about the lawfulness of the policy, and that a deliberate decision was taken to continue an unlawful policy.
As Lord Dyson says, caseworkers were directed to conceal the true reason for detention, namely the unpublished policy, and to give other reasons which appeared to conform with the published policy.
Home Office officials recognised that Ministers preferred position may be to continue to detain all FNPs and let the immigration judges take any hit which is to be had by releasing on bail.
The draft policy submission circulated in May 2007 recommended a change in policy, but also set out continued detention as one of the options, recognising that legal advisers considered that the department would lose on any legal challenge.
The draft added: we could present any change in our approach as having been forced on us by the courts.
I am satisfied that the serious breach of public law in this case has the result that the detention of the appellants was unlawful.
Any other result would negate the rule of law.
Christie v Leachinsky [1947] AC 573 shows that where an arrest was unlawful because it did not comply with the requirements imposed by the common law there would be a false imprisonment even if the arrest could have been effected in a proper manner.
Holgate Mohammed v Duke [1984] AC 437, 443, is high authority for the proposition that breach of principles of public law can found an action at common law for damages for false imprisonment.
Are they entitled to more than nominal damages? In particular are they entitled to vindicatory damages? The expression vindicatory damages has been in common use in the context of proceedings for violation of constitutional rights since Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328 and Merson v Cartright and Attorney General [2005] UKPC 38.
It would seem that the expression had its origin in the United States, where it was sometimes used as a synonym for exemplary or punitive damages (e.g. Cole v Tucker, 6 Tex 266 (1851); Blair Iron & Coal Co v Lloyd, 3 WNC 103 (Pa (1874)), but at other times used to mean damages designed to vindicate a right but which were compensatory in nature (e.g. McBride v McLaughlin, 5 Watts 375 (Pa 1836); Hallmark v Stillings, 648 SW 2d 230 (Mo 1983)).
In England the expression first emerged in a sense somewhat different from, but in a sense related to, that in which it is now used.
In Broome v Cassell & Co Ltd [1972] AC 1027, 1071, Lord Hailsham of Marylebone LC said: In actions of defamation and in any other actions where damages for loss of reputation are involved, the principle of restitutio in integrum has necessarily an even more highly subjective element.
Such actions involve a money award which may put the plaintiff in a purely financial sense in a much stronger position than he was before the wrong.
Not merely can he recover the estimated sum of his past and future losses, but, in case the libel, driven underground, emerges from its lurking place at some future date, he must be able to point to a sum awarded by a jury sufficient to convince a bystander of the baselessness of the charge.
As Windeyer J well said in Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 115, 150: It seems to me that, properly speaking, a man defamed does not get compensation for his damaged reputation.
He gets damages because he was injured in his reputation, that is simply because he was publicly defamed.
For this reason, compensation by damages operates in two waysas a vindication of the plaintiff to the public and as consolation to him for a wrong done.
Compensation is here a solatium rather than a monetary recompense for harm measurable in money.
See also, e.g. Sutcliffe v Pressdram Ltd [1991] 1 QB 153; Rantzen v Mirror Group Newspapers (1986) Ltd [1994] QB 670; Purnell v Business F1 Magazine Ltd [2007] EWCA Civ 744, [2008] 1 WLR 1.
Any consideration of the Privy Council decisions on vindicatory damages must be prefaced by three points.
First, they were concerned with alleged violations of constitutional rights.
Second, the constitutions contained provision in relation to such violations for redress (Trinidad and Tobago, section 14(1) (without prejudice to any other action which is lawfully available); Bahamas, article 28(1) (but not if adequate means of redress are available under any other law), or relief together with such remedy as the court considers appropriate (Saint Christopher & Nevis, section 96(1), (3); Saint Lucia, section 105(1), (3)).
Third, although the distinction has sometimes been blurred (as perhaps in Takitota v Attorney General [2009] UKPC 11, 13), the decisions are concerned with two heads of damage, compensatory damages and vindicatory damages.
In Attorney General of Trinidad and Tobago v Ramanoop [2005] UKPC 15, [2006] 1 AC 328, at 18 19 Lord Nicholls, speaking for the Board, dealt with both heads of damages in this way: [18] When exercising this constitutional jurisdiction the court is concerned to uphold, or vindicate, the constitutional right which has been contravened.
A declaration by the court will articulate the fact of the violation, but in most cases more will be required than words.
If the person wronged has suffered damage, the court may award him compensation.
The comparable common law measure of damages will often be a useful guide in assessing the amount of this compensation.
But this measure is no more than a guide because the award of compensation under section 14 is discretionary and, moreover, the violation of the constitutional right will not always be coterminous with the cause of action at law. [19] An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach, and deter further breaches.
All these elements have a place in this additional award.
Redress in section 14 is apt to encompass such an award if the court considers it is required having regard to all the circumstances.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
In Merson v Cartright and Attorney General [2005] UKPC 38 the gravity of police misconduct was such as to attract an award of $100,000 for violations of the Constitution in addition to $90,000 in damages for assault, battery and false imprisonment, and $90,000 for malicious prosecution.
It was held by the Privy Council that the awards were not duplicative.
Lord Scott said (at 18): The purpose of a vindicatory award is not a punitive purpose.
It is not to teach the executive not to misbehave.
The purpose is to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression.
The sum appropriate to be awarded to achieve this purpose will depend upon the nature of the particular infringement and the circumstances relating to that infringement.
It will be a sum at the discretion of the trial judge.
In some cases a suitable declaration may suffice to vindicate the right; in other cases an award of damages, including substantial damages, may seem to be necessary.
A vindicatory award of $50,000 was made in Inniss v Attorney General [2008] UKPC 42.
In Subiah v Attorney General of Trinidad and Tobago [2008] UKPC 47, at 11 Lord Bingham noted that when deciding whether to award vindicatory damages, the answer is likely to be influenced by the quantum of the compensatory award, as also by the gravity of the constitutional violation in question to the extent that this is not already reflected in the compensatory award.
See also Durity v Attorney General of Trinidad and Tobago [2008] UKPC 59, 35.
But in Suratt v Attorney General of Trinidad and Tobago (No 2) [2008] UKPC 38 and James v Attorney General of Trinidad and Tobago [2010] UKPC 23 declaratory relief was sufficient.
The availability of damages for constitutional wrongs, and in particular, exemplary or vindicatory damages, is, or has been, controversial in many countries.
In the United States, nominal damages can be awarded for the deprivation of a constitutional right without proof of actual injury, but substantial damages can be awarded only to compensate for actual injury: e.g. Elkins v District of Columbia, 710 F Supp 2d 53, 63 64 (DDC 2010), citing Carey v Piphus, 435 US 247 (1978); Memphis Community School District v Stachura, 477 US 299 (1986).
In Ntandazeli Fose v Minister of Safety and Security in the Constitutional Court of South Africa [1998] 1 LRC 198 Ackermann J considered whether appropriate relief for infringements of the Interim Constitution of South Africa justified, in addition to compensatory damages for assault, an award for vindication of the rights and for punitive damages.
After a full account of the law in other countries he said that he had considerable doubts whether, even where the infringement of the right caused no damage, an award of constitutional damages in order to vindicate the right would be appropriate, and suggested that the court might conclude that a declaratory order combined with a suitable order for costs would be a sufficiently appropriate remedy to vindicate the right even in the absence of an award of damages.
But in any event there was no place for constitutional punitive damages: 68, 69.
In Taunoa v Attorney General [2008] 1 NZLR 429 the Supreme Court of New Zealand was more sympathetic to vindicatory damages.
Elias CJ said (at para 109) that damages in such cases should be limited to what is adequate to mark any additional wrong in the breach and, where appropriate, to deter future breaches.
See also Tipping J at 317 (the interests of the victim require the court to consider what compensation is due, but society is a victim also, and the court must consider also what is necessary by way of vindication to protect fundamental rights and freedoms); also Blanchard J at 258; McGrath J at 370.
The most recent consideration of the question was by the Supreme Court of Canada in Vancouver (City of) v Ward [2010] 2 SCR 28, in relation to damages for breach of the Canadian Charter of Rights and Freedoms.
McLachlin CJ said that Charter damages had the functions of compensation, vindication and deterrence.
By vindication she meant the affirmation of constitutional values, focusing on the harm which breach of the Charter did to society.
The fact that the claimant had not suffered personal loss did not preclude an award of damages where the objectives of vindication or deterrence clearly called for an award, and the view that constitutional damages were only available for pecuniary or physical loss had been widely rejected in other constitutional democracies: 28, 30.
The present claims are not, of course, for constitutional damages.
Exemplary damages are available where the executive has acted in a way which is oppressive, arbitrary or unconstitutional.
In Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122, 63 Lord Nicholls said: The availability of exemplary damages has played a significant role in buttressing civil liberties, in claims for false imprisonment and wrongful arrest.
From time to time cases do arise where awards of compensatory damages are perceived as inadequate.
The nature of the defendants conduct calls for a further response from the courts.
On occasion conscious wrongdoing by a defendant is so outrageous, his disregard for the plaintiffs rights so contumelious, that something more is needed to show that the law will not tolerate such behaviour.
Without an award of exemplary damages, justice will not have been done.
Exemplary damages, as a remedy of last resort, fill what would otherwise be a regrettable lacuna.
But this is not a case for exemplary damages falling within the first head of Rookes v Barnard [1964] AC 1129.
Nor do I consider that the concept of vindicatory damages should be introduced into the law of tort.
In truth, despite the suggestions to the contrary in the Privy Council in Ramanoop and Merson, vindicatory damages are akin to punitive or exemplary damages (as in Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 607).
In Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] AC 962 the question was whether there was an abuse of process to allow a claim against the police for the wrongful death of James Ashley to proceed where the police admitted liability for all damages.
The House of Lords held by a majority that for the claim to proceed was not an abuse.
Lord Scott (obiter) suggested that the claim should proceed in order that vindicatory damages could be available.
He referred to Lord Hopes observation in Chester v Afshar [2004] UKLH 41, [2005] 1 AC 134, 87 that the function of the law is to enable rights to be vindicated and to provide remedies when duties have been breached.
Lord Scott said at para 22: Although the principal aim of an award of compensatory damages is to compensate the claimant for loss suffered, there is no reason in principle why an award of compensatory damages should not also fulfil a vindicatory purpose.
But it is difficult to see how compensatory damages can could ever fulfil a vindicatory purpose in a case of alleged assault where liability for the assault were denied and a trial of that issue never took place.
Damages awarded for the purpose of vindication are essentially rights centred, awarded in order to demonstrate that the right in question should not have been infringed at all.
In Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 the Privy Council upheld an award of vindicatory damages in respect of serious misbehaviour by a police officer towards the claimant.
These were not exemplary damages; they were not awarded for any punitive purpose.
They were awarded, as it was put in Merson v Cartwright [2005] UKPC 38, another case in which the Privy Council upheld an award of vindicatory damages, in order to vindicate the right of the complainant to carry on his or her life in the Bahamas free from unjustified executive interference, mistreatment or oppression: para 18.
The rights that had been infringed in the Ramanoop case and in Merson v Cartwright were constitutional rights guaranteed by the respective constitutions of the countries in question.
But the right to life, now guaranteed by article 2 of the European Convention [on Human Rights] and incorporated into our domestic law by the Human Rights Act 1998, is at least equivalent to the constitutional rights for infringement of which vindicatory damages were awarded in Ramanoop and Merson v Cartwright.
But what Lord Hope said in Chester v Afshar was not said in the context of damages, and it seems clear that neither Lord Bingham nor Lord Rodger agreed.
In particular Lord Rodger said that the right to bodily integrity was protected by the tort actionable per se of trespass to the person, where the law vindicates that right by awarding nominal damages (para 60).
To make a separate award for vindicatory damages is to confuse the purpose of damages awards with the nature of the award.
A declaration, or an award of nominal damages, may itself have a vindicatory purpose and effect.
So too a conventional award of damages may serve a vindicatory purpose.
That is the basis of Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309.
As a result of a failed sterilisation negligently performed, the claimant gave birth to a child.
The House of Lords held by a majority that although the health authority was not liable to compensate for the childs upbringing, compensation in respect of stress, trauma and the costs associated with pregnancy and birth were recoverable.
In addition the claimant was awarded an additional sum of 15,000 of which Lord Bingham said: [the] award would not be, and would not be intended to be, compensatory.
It would not be the product of calculation.
But it would not be a nominal, let alone a derisory, award.
It would afford some measure of recognition of the wrong done (para 8).
See also Lords Nicholls, Millett, and Scott: at 17, 123, 148, and the critical views expressed in McGregor, Damages 18th ed (2009), paras 35 29735 299.
Neither the minority dicta in Ashley v Chief Constable of Sussex Police [2008] UKHL 25, [2008] 1 AC 962 nor the award in Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52, [2004] 1 AC 309 justify a conclusion that there is a separate head of vindicatory damages in English law.
Consequently I do not consider that there is any basis in the present law for such an award.
Nor do I consider that there is a basis in policy for the creation of a head of vindicatory damages at common law, distinct from the existing law of compensatory or exemplary damages.
I would therefore restrict the remedy in this case to nominal damages for the reasons given by Lord Dyson.
LORD KERR
For the reasons given by Lord Dyson, with which I agree, I too would allow this appeal.
A causation test
False imprisonment is established if there has been a detention and an absence of lawful authority justifying it.
The question whether lawful authority exists is to be determined according to an objective standard.
It either exists or it does not.
It is for this elementary but also fundamental reason that a causation test can have no place in the decision whether imprisonment is false or lawful.
By a causation test in this context I mean a test which involves an examination of whether the persons held in custody could have been lawfully detained.
The fact that a person could have been lawfully detained says nothing on the question whether he was lawfully detained.
The Court of Appeal in the present case decided that, since the claimants could have been detained lawfully had the published policy been applied to them, the fact that an unpublished and unlawful policy was in fact applied was immaterial.
With great respect, this cannot be right.
The unpublished policy was employed in the decision to detain the appellants.
It was clearly material to the decision to detain.
Indeed, it was the foundation for that decision.
An ex post facto conclusion that, had the proper policy been applied, the appellants would have been lawfully detained cannot alter that essential fact.
The inevitability of the finding that the detention was unlawful can be illustrated in this way.
If, some hours after making the decision to detain the appellants (based on the application of the unpublished policy), it was recognised that this did not constitute a legal basis on which they could be held, could their detention be said to be lawful before any consideration was given to whether the application of the published policy would have led to the same result? Surely, at the moment that it became clear that there was no lawful authority for the detention and before any alternative basis on which they might be detained was considered, their detention was unlawful.
It is, I believe, important to recognise that lawful detention has two aspects.
First the decision to detain must be lawful in the sense that it has a sound legal basis and, secondly, it must justify the detention.
This second aspect has found expression in a large number of judgments, perhaps most succinctly in the speech of Lord Hope in R v Governor of Brockhill Prison Ex p Evans (No 2) [2001] 2 AC 19, 32 D where he said it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification.
It seems to me to be self evident that the justification must relate to the basis on which the detainer has purported to act, and not depend on some abstract grounds wholly different from the actual reasons for detaining.
As Mr Husain QC put it, the emphasis here must be on the right of the detained person not to be detained other than on a lawful basis which justifies the detention.
Detention cannot be justified on some putative basis, unrelated to the actual reasons for it, on which the detention might retrospectively be said to be warranted.
Simply because some ground for lawfully detaining may exist but has not been resorted to by the detaining authority, the detention cannot be said, on that account, to be lawful.
This point was clearly made in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662.
In that case the plaintiff had been lawfully arrested and detained in a police cell.
A review of his detention as required by statute was not carried out within the prescribed time.
At p 667 B the submission of counsel for the Chief Constable was recorded as being that if circumstances existed which were or would be sufficient to justify continued detention the plaintiff could not fairly be said to be detained without lawful excuse.
That submission was roundly and, in my view, rightly rejected, Clarke LJ saying, As I see it, it is nothing to the point to say that the detention would have been lawful if a review had been carried out or that there were grounds which would have justified continued detention.
Likewise it is nothing to the point in this case that if the decision had been taken on the basis of the published policy, it would have been immune from challenge.
As Professor Cane put it in The Temporal Element in Law (2001) 117 LQR 5, 7 imprisonment can never be justified unless actually [as opposed to hypothetically] authorised by law. (The emphasis and the words enclosed in square brackets are mine).
The matter might be considered on the following hypothetical basis.
Suppose that there were two policies, one lawful published policy for the detention of foreign national prisoners sentenced to more than 5 years imprisonment, the other an unlawful secret policy for detention of those sentenced to more than 2 years imprisonment.
On the respondents case an individual detained under the second policy, who would have been detained under the first policy if it had been applied, has not been detained unlawfully.
I do not consider that such an argument is viable.
A policy may lawfully be devised for the purpose of dealing generally with a regularly occurring species of case but it must always be possible to depart from the policy if the circumstances of an individual case warrant it.
As the author of Wade & Forsyth on Administrative Law 10th ed (2009) at page 270 states: It is a fundamental rule for the exercise of discretionary power that discretion must be brought to bear on every case: each one must be considered on its own merits and decided as the public interest requires at the time.
In the mooted example, consideration would be given to departing from a policy which is different from that which the individual is entitled to have applied to him.
The possible justification for departing from the policy would be considered on a different basis from that which ought properly to determine the question.
This is, in my view, impermissible in public law terms.
A minister exercising his discretion by applying a published policy is acting lawfully.
But if the policy which is applied is unlawful, the exercise of discretion is unlawful.
The individual has not had applied to his case the proper exercise of discretion to which he is entitled.
The application of an unlawful policy will therefore ipso facto render the decision to detain unlawful.
In this context, I consider that it matters not whether the decision is said to be in violation of a public law principle or ultra vires the power to make the decision.
To draw such a distinction would mark a radical departure from how error of law has long been understood.
Again, a short extract from Wade & Forsyth at p 255 makes the point decisively: Void or voidable was a distinction which could formerly be applied without difficulty to the basic distinction between action which was ultra vires and action which was liable to be quashed for error of law on the face of the record.
That distinction no longer survives since the House of Lords [in Anisminic and subsequent cases] declared all error of law to be ultra vires.
The nature of the public law breach required to invalidate the detention
In R (SK Zimbabwe) v Secretary of State for the Home Department [2009] 1 WLR 1527 it was accepted by the appellant that not every type of public law breach, committed after an initially valid detention, would render continued detention unlawful.
On the present appeal the argument on behalf of the detained persons is put thus: a public law error that bears directly on the decision to detain will mean that the authority for detention is ultra vires and unlawful, and will sound in false imprisonment.
But breaches which have no direct bearing on the decision to detain do not have that effect.
Since, therefore, for instance, statutory obligations to permit a detainee to consult with his legal advisers (Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763) or to be provided with food or clothing, or to be held in certain conditions (R v Deputy Governor of Parkhurst Prison Ex p Hague [1992] 1 AC 58) did not bear on the legality of detention, breach of those obligations did not render detention unlawful nor did it give rise to a claim for false imprisonment.
Lord Walker has analysed the existence/exercise of power to detain dichotomy in a way that I find compelling.
This has led him to the conclusion that the essential test as to the validity of continued detention which is said to be beyond the scope of the power to detain is whether there has been a departure from the statutory purpose.
Again, I find his reasoning on this wholly convincing.
I do not agree, however, that it is necessary to establish abuse of power in order to show that the decision is beyond the scope of the power to detain, if by abuse of power it is meant that some deliberate misuse of power is required.
If a review of a persons detention was inadvertently overlooked and it subsequently became clear that, had the review taken place, he would certainly have been released, it surely could not be suggested that the detention that had in the meantime occurred did not constitute false imprisonment.
The statutory purpose of the power to detain foreign nationals after the expiry of their sentence is to facilitate their deportation. (In this connection I agree fully with Lord Dyson in his analysis of the Hardial Singh (R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704) principles and with what he had to say about those principles in R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, [2003] INLR 196 para 46.) Where the statutory purpose no longer exists, the power to detain falls away.
The means of ascertaining whether the statutory purpose remains achievable is the system of review.
Where that system is operated on the basis of a policy, it is of obvious and critical importance that the policy be transparent and that those who may be detained on foot of it have the opportunity to make informed representations on its application.
Breach of a public law duty which has the effect of undermining the achievement of the statutory purpose will therefore, in my opinion, render the continued detention invalid.
A claim of false imprisonment is the natural, indeed inevitable, entitlement of a person whose detention is no longer justified.
Since the appellants in the present case were detained by the operation of a secret, unpublished policy, an effective system of review of the justification for their detention was not possible.
As a consequence their detention could no longer be said to be justified.
As it seems to me, this approach approximates to the way in which the case was put for the appellants but links it more closely to the vital consideration of the statutory purpose of the power to detain.
Does the award of nominal damages devalue the tort of false imprisonment?
As various members of the court have pointed out, the fact that false imprisonment is a species of trespass to the person and is actionable without proof of special damage must be carefully taken into account in deciding whether nominal damages can ever be considered appropriate.
The impact of a finding that the State has been guilty of false imprisonment (whether or not it is also ordered to pay compensation) should not be underestimated, however.
Such a finding has the effect, in the words of Lady Hale, of mark[ing] the laws recognition that a wrong has been done.
And it is in the unambiguous recognition and declaration by the law that an individual has been falsely imprisoned that the essential value of the entitlement to assert that claim lies.
I do not believe, therefore, that the award of nominal damages will, of itself and as a matter of automatic consequence, bring about a devaluation of the tort.
On the question whether the award of nominal damages or some other measure of compensation is required in false imprisonment claims, I believe that a distinction is clearly merited between those cases where it is plain that the detainees would have been released and those where it can be shown that they would have been lawfully detained, had the correct procedures been followed.
Because false imprisonment is a trespassory tort, it is said that the vindicatory dimension to the assessment of compensation is important.
I shall examine that claim presently but, whatever may be said about its correctness, it is surely right that the actual impact on the individual who has been falsely imprisoned (or perhaps more importantly, the impact that could have been avoided) should feature prominently in the assessment of the appropriate amount of compensation.
Traditionally, the primary function of damages has been to compensate the individual for the loss that he or she has suffered (compensatory damages).
More recently the concept of restitutionary damages has been recognised where damages for the tort are measured according to the gain that the defendant has obtained or the value that the right infringed might have had to the claimant where, for instance, unknown to the claimant, the defendant has used the claimants property.
This category of damages is not relevant here.
A third type of damages (vindicatory damages) may be.
In a number of recent decisions the Judicial Committee of the Privy Council has awarded what might be classified as vindicatory damages where there has been a breach of constitutional rights.
Attorney General for Trinidad and Tobago v Ramanoop [2006] 1 AC 328 is perhaps the leading of these cases.
At para 19 Lord Nicholls, delivering the judgment of the Committee, said : An award of compensation will go some distance towards vindicating the infringed constitutional right.
How far it goes will depend on the circumstances, but in principle it may well not suffice.
The fact that the right violated was a constitutional right adds an extra dimension to the wrong.
An additional award, not necessarily of substantial size, may be needed to reflect the sense of public outrage, emphasise the importance of the constitutional right and the gravity of the breach and deter further breaches.
All these elements have a place in this additional award.
Although such an award, where called for, is likely in most cases to cover much the same ground in financial terms as would an award by way of punishment in the strict sense of retribution, punishment in the latter sense is not its object.
Accordingly, the expressions punitive damages or exemplary damages are better avoided as descriptions of this type of additional award.
Lord Nicholls recognition that this type of award covered much the same ground as that involved in exemplary or punitive damages is reflected in the more recent decision of the Privy Council in Takitota v Attorney General [2009] UKPC 11 where, at para 15, Lord Carswell said : it would not be appropriate to make an award both by way of exemplary damages and for breach of constitutional rights.
When the vindicatory function of the latter head of damages has been discharged, with the element of deterrence that a substantial award carries with it, the purpose of exemplary damages has largely been achieved.
For the reasons given by Lord Dyson an award of exemplary damages is not warranted in these cases.
If there is any scope for the award of vindicatory damages where exemplary damages are not appropriate, it must be, in my opinion, very limited indeed.
Such an award could only be justified where the declaration that a claimants right has been infringed provides insufficiently emphatic recognition of the seriousness of the defendants default.
That situation does not arise here.
The defendants failures have been thoroughly examined and exposed.
A finding that those failures have led to the false imprisonment of the appellants constitutes a fully adequate acknowledgement of the defendants default.
Since the appellants would have been lawfully detained if the published policy had been applied to them, I agree that no more than a nominal award of damages is appropriate in their cases.
DISSENTING JUDGMENTS LORD PHILLIPS
Introduction
The appellants are foreign nationals who have served sentences of imprisonment in this country (FNPs) They were detained pursuant to Schedule 3 of the Immigration Act 1971 (Schedule 3).
They challenge the legality of their detention.
At the times of the decisions to detain them there existed a policy published by the Secretary of State setting out the circumstances in which her power to detain immigrants would be exercised.
Had the decision maker applied this policy he would have detained each of the appellants.
In the event, however, he decided to detain each by the application of a policy which Mr Beloff QC for the Secretary of State has conceded was unlawful.
Whether the lawful or unlawful policy had been applied the decision would have been the same.
The principal common issues raised by these appeals are first whether, in these circumstances, the detention of each of the appellants was unlawful; secondly whether, if it was unlawful, the result was that the detention of each of the appellants constituted the tort of false imprisonment and; if so, thirdly, whether and on what basis the appellants are entitled to damages.
I have placed the words lawful and unlawful in parentheses because these appeals raise the question of whether there is a material difference between a policy, or a decision, or an act which is unlawful because it violates principles of public law and a policy, or a decision, or an act which is unlawful because it is ultra vires.
In the case of Mr Lumba there is a second issue.
This is whether his detention was or became unlawful because it infringed what have become known as the Hardial Singh principles which date back to the decision of Woolf J in the case of that name over a quarter of a century ago.
Lord Dyson at para 22 of his judgment rightly states that it has been common ground in these appeals that he correctly summarised the effect of Hardial Singh in the four principles which he set out in R (I) v the Secretary of State for the Home Department [2003] INLR 196.
As I shall explain I have reservations about the first two principles which, so far as I am aware, have never been the subject of debate.
Lord Dyson has set out the relevant facts and statutory provisions and I can turn immediately to the common issues raised by these appeals.
Lord Dyson has held that the Secretary of State committed the tort of false imprisonment in relation to each appellant because the decision to detain him was reached in violation of public law.
The violation was the failure to apply the Secretary of States published policy and the application of a policy to which there were various objections of public law.
He has concluded that, because the reasoning offended the requirements of public law, the acts that the decision maker decided upon were beyond his powers, or ultra vires.
I have come to a different conclusion.
I propose in this judgment to address the following questions.
First, what restrictions are implicit, as a matter of statutory interpretation, in the power to detain conferred on the Secretary of State by Schedule 3? Second, what were the policies published by the Secretary of State in relation to the detention of immigrants? Third, what were the practical implications of those policies? Fourth, what were the legal implications of those policies? Fifth, was the detention of each of the appellants contrary to those policies? Sixth, what were the defects in the policy applied when deciding whether the appellants should be detained? Seventh, what were the circumstances in which this policy was applied? Eighth, did the application of that policy render the detention of the appellants unlawful? If so, ninth, are the appellants entitled to damages for false imprisonment?
Implied limitations on the power to detain conferred by Schedule 3
I refer to the four principles that Lord Dyson states at para 22 of his judgment are derived from Hardial Singh.
The third and fourth principles were an essential part of the reasoning that led Woolf J to the decision that he reached in that case.
They are not open to question.
This is not true of the first two.
The first is that the Secretary of State must intend to deport the person and can only use the power to detain for that purpose.
Lord Dyson explains that by this he means that the power to detain must be exercised for the prescribed purpose of facilitating deportation.
The second principle is that the deportee may only be detained for a period that is reasonable in all the circumstances.
Neither of these principles was stated in these terms in Hardial Singh, although I accept that they are possible interpretations of the words used by Woolf J. Neither of these principles was essential to the conclusion that he reached.
I do not myself consider that either principle can properly be derived from his judgment.
The applicant in Hardial Singh sought a writ of habeas corpus.
He was an Indian who had entered the United Kingdom lawfully and been granted indefinite leave to remain.
He had been convicted of offences of burglary and been sentenced to a total of two years imprisonment.
Before he was due to be released he was served with a deportation order on behalf of the Secretary of State.
He was due for release on 20 July 1983 but was then detained by the Secretary of State pursuant to paragraph 2(3) of Schedule 3.
The reason given for his detention was the risk that, if released, he would abscond.
Because of delay on the part of the Secretary of State in making arrangements for his return to India he was still detained in December 1983.
In these circumstances Woolf J, at p 706, said this about the power of detention under Schedule 3: Although the power which is given to the Secretary of State in paragraph 2 to detain individuals is not subject to any express limitation of time, I am quite satisfied that it is subject to limitations.
First of all, it can only authorise detention if the individual is being detained in one case pending the making of a deportation order and, in the other case, pending his removal.
It cannot be used for any other purpose.
Second, as the power is given in order to enable the machinery of deportation to be carried out, I regard the power of detention as being impliedly limited to a period which is reasonably necessary for that purpose.
The period which is reasonable will depend on the circumstances of the particular case.
What is more, if there is a situation where it is apparent to the Secretary of State that he is not going to be able to operate the machinery provided in the Act for removing persons who are intended to be deported within a reasonable period, it seems to me that it would be wrong for the Secretary of State to seek to exercise his power of detention.
In addition, I would regard it as implicit that the Secretary of State should exercise all reasonable expedition to ensure that the steps are taken which will be necessary to ensure the removal of the individual within a reasonable time.
There is a degree of ambiguity in the earlier part of this passage.
Pending the making of a deportation order is not a purpose.
Nor is pending his removal.
What then did Woolf J mean when he said that the power to remove cannot be used for any other purpose? He goes on to say that the power is given to enable the machinery of deportation to be carried out and that the power of detention is limited to such period as is reasonably necessary for that purpose.
If one takes these two passages together it is possible to interpret Woolf J as saying that you can only detain a person for the purpose of facilitating deportation, as Lord Dyson has done.
It is, however, also possible to read him as saying that you can only detain a person while you are pursuing the objective of deporting him and that is how I interpret what he said.
I believe that the interpretation given by Lord Dyson places an unjustified restriction on the Secretary of States power of detention.
It is obvious that detention will almost always make the practical task of deporting the detainee easier to arrange.
Most deportees will be in this country through choice and cannot reasonably be expected to do anything to facilitate their deportation even if they do not try actively to prevent this.
It is open to the Secretary of State to detain a person in order to facilitate his deportation and this is often the, or one of the, reasons for doing so.
But, as I shall explain, I do not consider that detention of a deportee will only be lawful if used for this purpose.
The second principle identified by Lord Dyson is that the deportee may only be detained for a period that is reasonable in all the circumstances.
This I understand to be derived from Woolf Js statement The period which is reasonable will depend upon all the circumstances.
But that sentence was immediately preceded by the statement that the power to detain was impliedly limited to a period that was reasonably necessary for the purpose of enabling the machinery of deportation to be carried out.
Thus I believe that the circumstances that Woolf J had in mind were restricted to those that related to the task of effecting deportation.
I am fortified in this belief by the fact that Woolf J went on to cite R v Governor of Richmond Remand Centre, Ex p Asghar [1971] 1 WLR 129.
In that case the Secretary of State had detained two persons who were awaiting removal with the object that they should testify in a pending criminal trial.
Lord Parker CJ rejected the suggestion that the detention could be justified as reasonable in these circumstances, stating at p 132 it does seem to me that while a reasonable time is contemplated between the giving of the directions and the final removal, that is a reasonable time necessary to effect the physical removal.
In Hardial Singh Woolf J was concerned only with the length of time that was reasonably necessary to effect deportation and the relationship that this bore to the power to detain.
He was not concerned with the question of whether there were further implied restrictions on the power to detain during that period.
The extent of the power to detain pending deportation was an important, albeit not the most important, issue in Chahal v United Kingdom where the nature of the domestic proceedings is apparent from the judgment of the European Court of Human Rights when the case reached Strasbourg (1996) 23 EHRR 413.
Mr Chahal was a Sikh separatist leader who had been granted indefinite leave to remain in the United Kingdom.
On 14 August 1990 the Secretary of State decided that he ought to be deported because his continued presence in the United Kingdom was unconducive to the public good for reasons of national security and other reasons of a political nature, namely the international fight against terrorism.
Two days later he was served with a notice of intention to deport.
He was then detained pursuant to Schedule 3 and remained in detention up to the time of the judgment of the Strasbourg Court.
During this time he pursued an unsuccessful attempt to be granted asylum.
He also, by an application for judicial review, challenged his proposed deportation on the ground that this would violate article 3 of the Convention because it would expose him to the risk of torture and persecution if returned to India.
He was unsuccessful in the Divisional Court and the Court of Appeal and was refused leave to appeal to the House of Lords.
He then applied to Strasbourg, alleging breaches of articles 3 and 5 of the Convention.
In November 1995, while he was awaiting a hearing at Strasbourg, he challenged his continued detention by seeking from the Divisional Court a writ of habeas corpus and judicial review.
The Secretary of State opposed his application on the grounds that he could not safely be released because of the substantial threat that he posed to national security.
It does not appear to have been suggested that his lengthy detention was necessary to facilitate his deportation.
His application was refused on the ground that there was no reason to believe that the Secretary of State did not have good reason for his apprehension.
MacPherson J ruled that the detention per se was plainly lawful because the Secretary of State [had] the power to detain an individual who [was] the subject of a decision to make a deportation order ( para 43).
It is relevant to see how the Strasbourg Court addressed this matter, if only because any interpretation of Schedule 3 must, if possible, be compatible with the requirements of the Convention.
Article 5(1) of the Convention provides, in so far as material: Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: (f) the lawful arrest or detentionof a person against whom action is being taken with a view to deportation The court said this as to the effect of that provision: 112.
The court recalls that it is not in dispute that Mr Chahal has been detained with a view to deportation within the meaning of article 5(1)(f).
Article 5(1)(f) does not demand that the detention of a person against whom action is being taken with a view to deportation be reasonably considered necessary, for example to prevent his committing an offence or fleeing; in this respect article 5(1)(f) provides a different level of protection from article 5(1)(c).
Indeed all that is required under this provision is that action is being taken with a view to deportation.
It is therefore immaterial, for the purposes of article 5(1)(f), whether the underlying decision to expel can be justified under national or Convention law. 113.
The court recalls, however, that any deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible under article 5(1)(f).
These observations echo the Hardial Singh principles, as I would interpret them.
The court went on to consider whether the asylum proceedings, which had delayed the stage at which Mr Chahal would have been deported, had taken an excessive length of time, and concluded that they had not.
This indicates that the Strasbourg Court, when considering the time reasonably needed for deportation, accepted that this would be prolonged by delay reasonably attributable to attempts to obtain asylum.
The court then considered the requirement that the detention should be lawful.
It observed at para 119 that there was no doubt that it was lawful under national law but that, because of the extremely long period during which Mr Chahal had been detained it was also necessary to consider whether there existed sufficient guarantees against arbitrariness.
At para 122 the court concluded that the domestic procedure under which Mr Chahals appeal against deportation had been considered by an advisory panel provided an adequate guarantee that there were at least prima facie grounds for believing that if Mr Chahal were at liberty, national security would be put at risk and thus, that the executive had not acted arbitrarily when it ordered him to be kept in detention.
I am not able to accept that under domestic law it had been an implicit requirement of Schedule 3 that Mr Chahals detention was necessary to facilitate his deportation.
Provided that he was being detained with a view to his removal as soon as reasonably possible I consider that the Secretary of State was entitled to detain him pending that removal on the ground that he would pose a terrorist threat if released.
The Hardial Singh principles were applied by analogy by the Judicial Committee of the Privy Council when considering the legitimacy under Hong Kong legislation of the detention of four boat people from Vietnam in Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97.
Tens of thousands of these people had arrived unlawfully in Hong Kong.
They were steadily being repatriated, but this was taking a long time.
Section 2 of the Immigration (Amendment) Ordinance 1991 added to the relevant legislation a provision designed expressly to deal with this situation: The detention of a person under this section shall not be unlawful by reason of the period of the detention if that period is reasonable having regard to all the circumstances affecting that persons detention, including (a) in the case of a person being detained pending a decision under section 13A(1) to grant or refuse him permission to remain in Hong Kong as a refugee (i) the number of persons being detained pending decisions under section 13A(1) whether to grant or refuse them such permission; and (ii) the manpower and financial resources allocated to carry out the work involved in making all such decisions; (b) in the case of a person being detained pending his removal from Hong Kong (i) the extent to which it is possible to make arrangements to effect his removal; and (ii) whether or not the person has declined arrangements made or proposed for his removal. (p 106).
Lord Browne Wilkinson, giving the advice of the Board, said this, at p 111, under the heading The Hardial Singh principles: Section 13D(1) confers a power to detain a Vietnamese migrant pending his removal from Hong Kong.
Their Lordships have no doubt that in conferring such a power to interfere with individual liberty, the legislature intended that such power could only be exercised reasonably and that accordingly it was implicitly so limited.
The principles enunciated by Woolf J in the Hardial Singh case [1984] 1 WLR 704 are statements of the limitations on a statutory power of detention pending removal.
In the absence of contrary indications in the statute which confers the power to detain pending removal their Lordships agree with the principles stated by Woolf J. First, the power can only be exercised during the period necessary, in all the circumstances of the particular case, to effect removal.
Secondly, if it becomes clear that removal is not going to be possible within a reasonable time, further detention is not authorised.
Thirdly, the person seeking to exercise the power of detention must take all reasonable steps within his power to ensure the removal within a reasonable time.
This accords with my reading of Hardial Singh.
His Lordship went on to say, however: Their Lordships are unable to agree with the Court of Appeal of Hong Kong that there is any conflict between the Hardial Singh principles and the provisions of section 13D. Section 13D(1A), which was inserted in 1991, expressly envisages that the exercise of the power of detention conferred by section 13D(1) will be unlawful if the period of detention is unreasonable.
It expressly provides that The detentionshall not be unlawful by reason of the period of the detention if that period is reasonable having regard to (Emphasis added.) What section 13D(1A) does is to provide expressly that, in deciding whether or not the period is reasonable, regard shall be had to all the circumstances including (in the case of a person detained pending his removal from Hong Kong) the extent to which it is possible to make arrangements to effect his removal and whether or not the person has declined arrangements made or proposed for his removal.
Therefore the subsection is expressly based on the requirement that detention must be reasonable in all the circumstances (the Hardial Singh principles) but imposes specific requirements that in judging such reasonableness those two factors are to be taken into account.
The shorthand summary of the Hardial Singh principles as detention must be reasonable in all the circumstances was made in the context of those circumstances that affected the time reasonably necessary to effect removal and, just as in the case of Hardial Singh itself, I would restrict its ambit to those circumstances.
This I believe was, and remained, the understanding of some, at least, of the judges dealing with claims in respect of the detention of immigrants in the Administrative Court.
Thus in R (Konan) v Secretary of State for the Home Department [2004] EWHC 22 (Admin) Collins J, who had appeared as counsel in Hardial Singh, held at para 21: The power to detain pending removal is not dependent on a fear of absconding or of any other misconduct by the person in question.
Provided it is exercised for the purpose of removal, it is lawful.
It must be exercised reasonably, but reasonableness in this context relates to whether removal can be achieved within a reasonable time: see R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 and Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97 as applied in R (Saadi) v Secretary of State for the Home Department [[2002] 1 WLR 356].
R (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512; [2002] 1 WLR 356 raised the question of the legality of the detention at Oakington Reception Centre for up to 10 days of aliens seeking leave to enter whose cases appeared susceptible of speedy processing.
The power to detain that was relied on was that afforded by paragraph 16(1) of Schedule 2 to the 1971 Act.
Paragraph 2 provides that an immigration officer may examine any person arriving in the United Kingdom to determine whether he should be given leave to enter.
Paragraph 16(1) provides: A person who may be required to submit to examination under paragraph 2 above may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter.
The Court of Appeal, in a judgment which I delivered, considered both the scope of the power to detain afforded by this paragraph and the effect of article 5(1)(f) of the Human Rights Convention.
As to the former the court made the following observations: 14.
Collins J concluded that the only limitation on the power to detain pending examination and the decision whether to grant or refuse leave to enter is that the detention must be for a reasonable time.
For the Secretary of State, the Attorney General supported this conclusion.
He argued that the power to detain persisted for so long as was reasonably necessary to conduct the examination and to reach a decision whether or not to grant leave to enter.
As a matter of statutory interpretation we accept this submission.
Were it not correct, the power to grant temporary admission would also be liable to come to an end before an examination could reasonably be completed and a decision whether to grant or refuse leave to enter reasonably be taken. 15.
We are not aware that it has ever been the policy of the Secretary of State that applicants for leave to enter should be detained pending the decision of their applications, however long that might take.
A more liberal policy has been adopted whereby he has approved the exercise of the power to grant temporary admission in place of detention.
If the basis upon which immigration officers are detaining asylum seekers at Oakington is in conflict with this policy, then, under established principles of public law, they are acting unlawfully.
As to the Convention the court held: 66.
We consider that the test of proportionality required by article 5(1)(f) requires the Court simply to consider whether the process of considering an asylum application, or arranging a deportation, has gone on too long to justify the detention of the person concerned having regard to the conditions in which the person is detained and any special circumstances affecting him or her.
Applying that test no disproportionality is demonstrated in this case.
This was not a test of proportionality that the Strasbourg Court had laid down in Chahal and it received no support from that Court when Saadi reached it, as I shall show.
Giving the only reasoned speech in a unanimous decision of the House of Lords [2002] UKHL 41; [2002] 1 WLR 3131 Lord Slynn of Hadley referred at para 18 to a statement by the Oakington Project Manager that he accepted that an important consideration in relation to detention powers was that no detention should be longer than reasonably necessary.
Lord Slynn went on to express the view at para 22: As the judge and the Court of Appeal stressed, paragraph 16 of Schedule 2 gives power to detain pending examination and a decision; that in my view means for the period up to the time when the examination is concluded and a decision taken.
There is no qualification that the Secretary of State must show that it is necessary to detain for the purposes of examination in that the examination could not otherwise be carried out since applicants would run away.
Nor is it limited to those who cannot for whatever reason appropriately be granted temporary admission.
The period of detention in order to arrive at a decision must however be reasonable in all the circumstances.
The last sentence reflected Government policy, as accepted by the Project Manager.
One of the applicants in Saadi took his case to Strasbourg (2008) 47 EHRR 427.
He claimed that his detention at Oakington had infringed article 5(1)(f).
Liberty, and other interveners, contended that a test of necessity and proportionality should be applied to article 5(1)(f), so that an asylum seeker could only be detained if, but for such detention, he would attempt to effect an unauthorised entry into the country.
The Grand Chamber rejected this submission.
Dealing first with the interpretation of the express provisions of article 5(1)(f) it said: 64.
Whilst the general rule set out in article 5(1) is that everyone has the right to liberty, article 5(1)(f) provides an exception to that general rule, permitting states to control the liberty of aliens in an immigration context.
As the court has remarked before, subject to their obligations under the Convention, states enjoy an undeniable sovereign right to control aliens entry into and residence in their territory.
It is a necessary adjunct to this right that states are permitted to detain would be immigrants who have applied for permission to enter, whether by way of asylum or not.
It is evident from the tenor of the judgment in Amuur that the detention of potential immigrants, including asylum seekers, is capable of being compatible with article 5(1)(f). 65.
On this point, the Grand Chamber agrees with the Court of Appeal, the House of Lords and the Chamber, that until a state has authorised entry to the country, any entry is unauthorised and the detention of a person who wishes to effect entry and who needs but does not yet have authorisation to do so, can be, without any distortion of language, to prevent his effecting an unauthorised entry.
It does not accept that, as soon as an asylum seeker has surrendered himself to the immigration authorities, he is seeking to effect an authorised entry, with the result that detention cannot be justified under the first limb of article 5(1)(f).
To interpret the first limb of article 5(1)(f) as permitting detention only of a person who is shown to be trying to evade entry restrictions would be to place too narrow a construction on the terms of the provision and on the power of the state to exercise its undeniable right of control referred to above.
As to the argument that a test of proportionality applied to the detention, the Court, referring to Chahal, held: 72.
Similarly, where a person has been detained under article 5(1)(f), the Grand Chamber, interpreting the second limb of this sub paragraph, held that, as long as a person was being detained with a view to deportation, that is, as long as action [was] being taken with a view to deportation, there was no requirement that the detention be reasonably considered necessary, for example to prevent the person concerned from committing an offence or fleeing.
The Grand Chamber further held in Chahal that the principle of proportionality applied to detention under article 5(1)(f) only to the extent that the detention should not continue for an unreasonable length of time; thus, it held that [A]ny deprivation of liberty under article 5(1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with due diligence, the detention will cease to be permissible. 73.
With regard to the foregoing, the court considers that the principle that detention should not be arbitrary must apply to detention under the first limb of article 5(1)(f) in the same manner as it applies to detention under the second limb.
Since states enjoy the right to control equally an aliens entry into and residence in their country (see the cases cited in para 63 above), it would be artificial to apply a different proportionality test to cases of detention at the point of entry than that which applies to deportation, extradition or expulsion of a person already in the country. 74.
To avoid being branded as arbitrary, therefore, such detention must be carried out in good faith; it must be closely connected to the purpose of preventing unauthorised entry of the person to the country; the place and conditions of detention should be appropriate, bearing in mind that: [T]he measure is applicable not to those who have committed criminal offences but to aliens who, often fearing for their lives, have fled from their own country; and the length of the detention should not exceed that reasonably required for the purpose pursued.
This passage reinforces the conclusions of the court in Chahal.
Where a person is detained pending deportation, the only proportionality requirement that Strasbourg imposes, if indeed it is right so to describe it, is that the detention should not be for longer than is reasonably necessary to effect the deportation.
Added to this, however, is the important requirement that the exercise of the power to detain must not be arbitrary.
Applying this principle the European Commission of Human Rights held manifestly inadmissible an application of infringement of article 5 by a man who had been detained for five years while he used every means to avoid extradition to Hong Kong.
See Osman v United Kingdom (Application No 15933/89) (unreported) 14 January 1991.
The most recent pronouncement of the Grand Chamber on article 5(1)(f) is to be found in A v United Kingdom (2009) 49 EHRR 625, where it was held that article 5(1)(f) did not justify detention of the famous Belmarsh detainees.
At para 164 the Grand Chamber stated: To avoid being branded as arbitrary, detention under article 5(1)(f) must be carried out in good faith; it must be closely connected to the ground of detention relied on by the Government; the place and conditions of detention should be appropriate; and the length of the detention should not exceed that reasonably required for the purpose pursued.
Against this background of Strasbourg jurisprudence, I return to domestic consideration of the Hardial Singh principles.
In R(I) v Secretary of State for the Home Department [2003] INLR 196 the appellant was an Afghani asylum seeker who had been given exceptional leave to remain.
He was then convicted of indecent assaults and sentenced to 3 years imprisonment with a recommendation for deportation.
The Secretary of State made a deportation order and detained him pursuant to paragraph 2(3) of Schedule 3 from February 2001 to May 2002.
The delay occurred because practical difficulties had caused the Secretary of State to cease removing nationals to that country.
He claimed that his further detention was unlawful as there was no reasonable possibility of his being deported within a reasonable period.
This raised the question of how such a reasonable period fell to be calculated.
Simon Brown LJ addressed three issues of principle that had arisen.
The first was the relevance of the fact that he was likely to go to ground and re offend if released.
His counsel contended that this was irrelevant to the question of whether removal would be possible within a reasonable time.
Simon Brown LJ disagreed.
He held at para 29: The likelihood or otherwise of the detainee absconding and/or re offending seems to me to be an obviously relevant circumstance.
If, say, one could predict with a high degree of certainty that, upon release, the detainee would commit murder or mayhem, that to my mind would justify allowing the Secretary of State a substantially longer period of time within which to arrange the detainees removal abroad.
The second issue was whether it was relevant that the appellant refused to accept voluntary repatriation.
Simon Brown LJ held that it was.
The third issue was whether the calculation of the reasonable period should take account of the fact that the appellant had been making asylum applications.
Simon Brown LJ held that it should not, because it would not have been possible to deport him in any event.
The conclusion that he formed at para 37 was that because the Secretary of State could not establish more than a hope of being able to remove him by the summer substantially more in the way of a risk of re offending (and not merely a risk of absconding) than exists here would in my judgment be necessary to have justified continuing his detention for an indeterminate further period.
Mummery LJ gave a short dissent on the facts rather than the applicable principles.
Dyson LJ agreed with Simon Brown LJ.
He set out the four principles that he derived from Hardial Singh in the same form as he has in his judgment in the present case.
He then made the following observations about the application of those principles. 47.
Principles (ii) and (iii) are conceptually distinct.
Principle (ii) is that the Secretary of State may not lawfully detain a person pending removal for longer than a reasonable period.
Once a reasonable period has expired, the detained person must be released.
But there may be circumstances where, although a reasonable period has not yet expired, it becomes clear that the Secretary of State will not be able to deport the detained person within a reasonable period.
In that event, principle (iii) applies.
Thus, once it becomes apparent that the Secretary of State will not be able to effect the deportation within a reasonable period, the detention becomes unlawful even if the reasonable period has not yet expired. 48.
It is not possible or desirable to produce an exhaustive list of all the circumstances that are, or may be, relevant to the question of how long it is reasonable for the Secretary of State to detain a person pending deportation pursuant to paragraph 2(3) of Schedule 3 to the Immigration Act 1971.
But in my view they include at least: the length of the period of detention; the nature of the obstacles which stand in the path of the Secretary of State preventing a deportation; the diligence, speed and effectiveness of the steps taken by the Secretary of State to surmount such obstacles; the conditions in which the detained person is being kept; the effect of detention on him and his family; the risk that if he is released from detention he will abscond; and the danger that, if released, he will commit criminal offences. 49.
Simon Brown LJ has identified the three main points of principle which were in issue in the present appeal, namely, the risk of absconding and reoffending, the appellants refusal to accept voluntary repatriation, and the asylum claim and appeal.
As I have already stated, the risk of absconding and offending or reoffending is relevant to the reasonableness of the length of a detention pending deportation.
It is, as Simon Brown LJ says an obviously relevant circumstance (at para 29): see also per Lord Phillips of Worth Matravers MR in R v (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512, [2002] 1 WLR 356, at paras 65 67.
I have accepted that it is possible to derive Lord Dysons first two principles from the language used by Woolf J in Hardial Singh, and explained why I would not do so.
The passage from the judgment of the Court of Appeal in Saadi that he cites was dealing with the effect of article 5(1)(f) of the Convention and, as I have shown, advanced a test of proportionality which Strasbourg did not endorse.
The problems that have been raised by these appeals suggest that Strasbourg may have had very good reason not to do so.
The conceptual difficulty inherent in the first two principles identified by Lord Dyson is apparent in the passage that he has quoted at para 107 from the judgment of Toulson LJ in A.
If the risk of re offending can be the determinant factor in deciding how long it is reasonable to detain a FNP why should it not be the determinant, or even the sole reason for detaining him in the first place? Why should it be a pre condition to the power to detain that its use is to facilitate deportation, even if this is not the real reason for detention, as in the case of Chahal? It is that logical inconsistency that underlies the challenge that is made on behalf of Mr Lumba in the present case to the legitimacy of having regard to the risk of his re offending.
The interpretation that I would give to the power to detain conferred by the 1971 Act is as follows.
The scheme of the Act is simple, and reflects article 5(1)(f) of the Convention.
The Secretary of State is not required to permit an immigrant who has unlawfully entered this country to roam free.
Schedule 3 permits her to detain the immigrant for as long as she reasonably requires in order to decide whether he should have leave to enter.
If he is not given leave to enter she may detain him for as long as she reasonably requires to effect his deportation, provided always that deportation is a practical possibility.
If the 1971 Act confers powers as wide as this on the Secretary of State, she has not availed herself of them.
She adopted a policy under which, on her calculation, only 1.5% of those who were liable to detention under her immigration powers were actually detained, see para 285 below.
Having chosen to discriminate between those whom she detains and those whom she does not, she is subject to the established principles of public law in choosing between the two.
It is these principles which constrain the exercise of her power to detain rather than restrictions to be implied into the 1971 Act as a matter of statutory interpretation.
They include the obligation to act rationally, an obligation also imposed by article 5 of the Convention.
It is rational and lawful to detain a FNP pending deportation to prevent his re offending or because he would pose a security risk if at large, just as it is rational and lawful to detain him because of the risk of his absconding.
Public law principles include the restraint that a published policy imposes on executive action, a topic that I am about to consider.
As I shall show, the guidance published by the Secretary of State includes a requirement to comply with Lord Dysons first two principles, so that to that extent their enunciation has been self fulfilling.
The policies published by the Secretary of State in relation to the detention of immigrants.
Lord Dyson has referred to the two White Papers in which in 1998 and 2002 the Secretary of State published her policies in relation to detention.
The first of these, Fairer, Faster, Firmer informed the reader at the beginning of Chapter 12 dealing with Detention that at any one time, only about 1.5% of those liable to detention under immigration powers were actually detained.
The White Paper dealt with the criteria to be adopted in identifying this small minority of immigrants who were to be detained.
FNPs awaiting deportation will have formed only a tiny proportion of those liable to detention under those powers.
It is, perhaps, not surprising that the White Paper predominantly addressed the position of the vast majority of immigrants who were not criminals.
Thus, in the passage quoted by Lord Dyson at para 11 of his judgment the White Paper spoke of a presumption in favour of granting temporary admission or release, terms that were not appropriate to those recommended for deportation.
In dealing with Detention Criteria at 12.3 the White Paper identified three circumstances where detention would normally be justified.
The first was where there was a reasonable belief that the individual would fail to keep to the terms of temporary admission or temporary release.
The second was to clarify a persons identity and the basis of their claim on entry.
The third was where removal was imminent.
12.11 dealt with detention in relation to removals.
It focussed entirely on detention to facilitate removals.
Nothing in that White Paper gave any suggestion that those awaiting deportation might be detained because of concern as to the way they might behave if permitted to be at large.
There was no focus on the provisions of Schedule 3.
These comments are equally true of the second White Paper, Secure Borders, Safe Haven, save that this had the following statement in para 4.80 under the heading Serious Criminals: We will explore what more we can do, as other countries have done, to stop serious criminals abusing our asylum system by seeking to remain in the UK having completed a custodial sentence.
There is there no indication that such criminals would be liable to detention pending deportation.
The two White Papers dealt in broad terms with detention.
They were supplemented by Chapter 38, headed Detention and Temporary Release, of the Operational Enforcement Manual, which was a published document, available to the public on the internet.
The court was provided with the version that was current in April 2006.
This included guidance on the law as it was understood to be.
Para 38.1.1.1 gave the following summary of the effect of article 5 and the domestic case law: (a) The relevant power to detain must only be used for the specific purpose for which it is authorised.
This means that a person may only be detained under immigration powers for the purpose of preventing his unauthorised entry or with a view to his removal (not necessarily deportation).
Detention for other purposes, where detention is not for the purposes of preventing unauthorised entry or effecting removal of the individual concerned, is not compatible with article 5 and would be unlawful in domestic law; (b) The detention may only continue for a period that is reasonable in all the circumstances; (c) If before the expiry of the reasonable period it becomes apparent that the purpose of the power, for example, removal, cannot be effected within that reasonable period, the power to detain should not be exercised ; and (d) The detaining authority (be it the immigration officer or the Secretary of State), should act with reasonable diligence and expedition to effect removal (or whatever the purpose of the power in question is).
This summary of the law reflected aspects of the decision of the Court of Appeal in I with which I have differed.
None the less the principles that it expounded were consonant with the general policy of the Secretary of State that there was a presumption against detention.
Para 38.3 set out the factors that influenced a decision to detain.
Those in favour of detention were all matters that bore on the likelihood that the individual would abscond or go to ground if not detained.
The manual set out the contents of a standard form IS9IR.
This set out 6 possible reasons for detention, with instructions that the Immigration Officer should tick the relevant reasons.
In contrast to the general focus on the likelihood of absconding, one of these stated Your release is not considered conducive to the public good.
Factors forming the basis of the reasons also had to be ticked.
These included You are excluded from the United Kingdom at the personal direction of the Secretary of State.
You are detained for reasons of national security, the reasons are/will be set out in another letter.
Your previously unacceptable character, conduct or associates.
Para 38.5.2 was headed Authority to detain persons subject to deportation action.
It summarised the effect of Schedule 3 and required that decisions whether to detain pursuant to the provisions of the Schedule should be made at senior caseworker level in CCT.
No specific guidance was given, however, as to the criteria that should be applied when making those decisions.
In summary, the general message of these published policies was that detention should be used sparingly and, in the case of detention pending removal or deportation, only where necessary to facilitate this in order to prevent individuals from absconding or otherwise evading the immigration system.
Officials were instructed that the law was as held by the Court of Appeal in I and, in particular, that detention could only continue for a period that was reasonable in all the circumstances.
Form IS9IR raised, however, the possibility that detention could be used for reasons of national security or where the individuals previous character, conduct or associates were unacceptable.
Despite this, there was no specific guidance as to the approach to be adopted to criminals whom the Secretary of State had decided to deport.
Not only was it open to the Secretary of State to decide to deport, and to detain pending deportation, criminals in respect of whom the court had made no recommendation, she also had to decide whether to accept recommendations for deportation made by the courts.
Under paragraph 2(1) of Schedule 3 those subject to a recommendation remained detained pending the Secretary of States decision whether to deport them unless released by the court or granted bail pursuant to section 54 of the Immigration and Asylum Act 1999, which came into force in February 2003.
It may have been thought that paragraph 2(1) created a presumption in favour of detention of FNPs pending deportation but in R (Sedrati) v Secretary of State for the Home Department [2001] EWHC Admin 418, with the agreement of counsel for the Secretary of State, Moses J made a declaration that there was no such presumption.
What then, under the Secretary of States published policies, was the position of FNPs whom the Secretary of State decided to deport? It seems to me that many of these were likely to tick the boxes of those who, exceptionally, could properly be detained in accordance with those policies.
They were in this country because this was where they had chosen to live.
They had committed offences that had led the Secretary of State to conclude that their continued presence was no longer conducive to the public good.
Most would be unlikely willingly to submit to deportation.
There would be a risk both of re offending and of absconding.
As Lord Dyson has explained at paras 14 and 15 of his judgment, on 9 September 2008 the Enforcement Instructions and Guidance, which had replaced the Operational Enforcement Manual, was amended so as to lay down a presumption in favour of detaining immigrants where the deportation criteria were met in order to protect the public from harm and the particular risk of absconding in these cases.
I agree with the Court of Appeal and with Lord Dyson that this amendment to her policy was one that it was open to the Secretary of State to make.
However, Davis J, at first instance, ruled to the contrary and this led the Secretary of State to withdraw this amendment.
The UK Borders Act 2007 has since made provision by section 32 for automatic deportation of foreign criminals in specified circumstances.
Section 36 requires the Secretary of State to exercise a power of detention of those being deported under section 32 unless in the circumstances the Secretary of State considers it inappropriate.
These provisions were not in force at the time of the events that have given rise to these appeals.
There is thus a picture of a series of changes to policy, and of legislation, that has been influenced by decisions of the courts, not all of which have been sound.
The practical implications of the policies
Under this heading I propose to consider the practical implications of complying with the Secretary of States published policies, including her directions as to the effect of article 5 and our domestic case law.
Compliance with the Hardial Singh guidelines, even as I have interpreted them, gives rise to some practical difficulties.
Detention pending deportation is permissible for a lengthy period provided that the Secretary of State is taking reasonable steps to effect deportation and provided that there is a reasonable prospect that deportation will be possible.
It is the latter proviso that raises particular difficulties for the possibility of deportation may vary from time to time.
R (Khadir) v Secretary of State for the Home Department [2005] UKHL 39; [2006] 1 AC 207 illustrates this problem.
In the case of each detainee it is necessary to keep the practicability of deportation under review.
This problem is made more difficult if there is a requirement to detain for no longer than is reasonable in all the circumstances, where those circumstances include the nature of the crimes committed by the FNP and the degree of risk of re offending.
The assessment of what period of detention is reasonable in all the circumstances is not an easy one and there will inevitably be cases where, if subjected to judicial review, it will be held not to have been correctly answered.
Furthermore the material circumstances are likely to be subject to frequent change, so that frequent reviews will be necessary.
This last fact was reflected by the requirements in relation to Detention reviews imposed under para 38.8 of the Operational Enforcement Manual which lie at the heart of the appeal in SK (Zimbabwe).
Where there are concerns about the risk of absconding, it may be possible to meet these by measures which fall short of detention.
The Secretary of State may release a FNP who is subject to deportation under a restriction order setting out terms as to residence, employment or occupation and reporting to the police pursuant to paragraph 2(5) of Schedule 3.
The court has the same power in respect of those recommended for deportation under paragraphs 4 to 6 of Schedule 3.
Detainees also have the right to apply for bail.
In para 12.8 of Fairer, Faster, Firmer the Government explained that it believed that there should be a more extensive judicial element in the detention process and proposed that this should be by way of bail hearings, commenting on the resource implications that this would have.
Para 4.83 of Secure Borders, Safe Haven stated that Part III of the Immigration and Asylum Act 1999 had created a complex system of automatic bail hearings at specific points in a persons detention, that this had never been brought into force and that most of it was to be repealed.
There is now a comprehensive statutory scheme for release on bail produced through a series of amendments to Schedule 2 to the 1971 Act.
All of this illustrates the practical problems implicit in the implementation of a regime that attempts to give effect to the policy of using the power to detain only as a last resort.
Despite efforts to implement this policy there will inevitably be cases where individuals are detained when, under the policy, they should not be.
The question arises of whether those who find themselves in this position are entitled to claim damages for false imprisonment.
What are the legal implications of the Secretary of States published policies?
The appellants in this case should have been detained had the Secretary of States published policy been applied.
They claim to be entitled to damages for false imprisonment because those considering their cases reached the right conclusions by applying the wrong policy.
Their complaint is as to the manner in which the decisions to detain them were taken, not as to the substance of those decisions.
Thus, the question of the legal effect of the Secretary of States published policies is not directly in issue.
Nonetheless, underlying the appellants case is the premise that it would not have been lawful for the Secretary of State to reach a decision that was in conflict with her published policy.
For this reason she was required to reach her decision by applying her published policy, not some other policy.
It follows that it is material to consider the effect of the Secretary of States published policies.
I agree with Lord Dyson that, under principles of public law, it was necessary for the Secretary of State to have policies in relation to the exercise of her powers of detention of immigrants and that those policies had to be published.
This necessity springs from the standards of administration that public law requires and by the requirement of article 5 that detention should be lawful and not arbitrary.
Decisions as to the detention of immigrants had to be taken by a very large number of officials in relation to tens of thousands of immigrants.
Unless there were uniformly applied practices, decisions would be inconsistent and arbitrary.
Established principles of public law also required that the Secretary of States policies should be published.
Immigrants needed to be able to ascertain her policies in order to know whether or not the decisions that affected them were open to challenge.
What is the effect of a decision to take action that falls within a power conferred by statute but which conflicts with a published policy as to the manner in which that power will be exercised? This is no easy question.
It overlaps with the question of the nature and effect of a legitimate expectation.
Is a decision that is contrary to policy unlawful, so that action taken pursuant to it is ultra vires? If so a published policy has the same effect as delegated legislation.
Is this result dictated by the jurisprudence that has its origin in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147? Mr Husain QC for the appellants submitted that it is.
He relied on the oft cited catalogue of matters rendering the decision of a tribunal void propounded by Lord Reid in Anisminic at p 171.
This included: It may have refused to take into account something which it was required to take into account.
Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account.
The words that I have emphasised are significant.
Lord Reids proposition cannot necessarily be extended to the situation where the decision maker fails to have regard to his own policy.
Anisminic is, however, only the start of the story.
The effect of Anisminic was the subject of observations by Lord Diplock, which have been treated as authoritative.
In In re Racal Communications Ltd [1981] AC 374, at pp 382 383 he described Anisminic as a legal landmark.
It established that when Parliament conferred on an administrative authority the power to decide particular questions defined by the Act conferring the power, and the authority asked itself and answered the wrong question, it did something that the Act did not empower and its decision was a nullity.
In OReilly v Mackman [1983] 2 AC 237, at p 278 he observed that if a tribunal mistook the law it must have asked itself the wrong question and one that it had no jurisdiction to determine, so that its decision was a nullity.
In R v Hull University Visitor, Ex p Page [1993] AC 682, at pp 701 702 Lord Browne Wilkinson endorsed his comment, adding that any error of law made by an administrative tribunal or inferior court in reaching its decision could be quashed for error of law.
Earlier at p 701 he had observed that it was to be taken that Parliament had only conferred the decision making power on the basis that it was to be exercised on the correct legal basis with the effect that an error of law rendered the decision ultra vires.
This reasoning cannot readily be extended to a decision which departs from executive policy.
It would be totally unrealistic to postulate that when Parliament passes an Act conferring a discretionary power it does so with the intention that if the decision maker publishes a policy in relation to the exercise of that power he will abide by that policy unless he has good reason not to do so.
In Boddington v British Transport Police [1999] 2 AC 143 the House of Lords took Anisminic a significant step further.
The issue was whether the appellant could raise by way of defence to a criminal charge a contention that the bye law, or an administrative decision taken under it, pursuant to which he was prosecuted, was ultra vires.
Lord Irvine of Lairg LC, giving the leading speech, said at p 155 that an order made by the Secretary of State in the purported exercise of a statutory power would be regarded as void ab initio if it had been made in bad faith, or as a result of taking into account an irrelevant, or ignoring a relevant, consideration.
At p 158 he said: The Anisminic decision established, contrary to previous thinking that there might be error of law within jurisdiction, that there was a single category of errors of law, all of which rendered a decision ultra vires.
No distinction is to be drawn between a patent (or substantive) error of law or a latent (or procedural) error of law.
Lord Irvine added, at p 159: Also, in my judgment the distinction between orders which are substantively invalid and orders which are procedurally invalid is not a practical distinction which is capable of being maintained in a principled way across the broad range of administrative action.
Other members of the House were not prepared to reject the possibility that an ultra vires act might have legal consequences before its invalidity was recognised by the court: see Lord Browne Wilkinson, at p 164 and Lord Slynn, at p 165.
Boddington no longer judged the vires of the exercise of a discretionary power by the assumed intention of Parliament.
It held that if a decision was vitiated by procedural impropriety it was ultra vires and a nullity.
In the light of Boddington these appeals raise two issues: (i) is a decision of the Secretary of State that, without good reason, conflicts with her published policy outside her powers, so that it is a nullity? (ii) is a decision reached by the Secretary of State by the application of a policy that conflicts with her published policy a nullity, even if the decision itself accords with her published policy? I am currently concerned with the first question.
The proposition underlying the appellants case is that if a minister, without good reason, acts in a way that is contrary to her published policy she acts outside her powers.
Her action is unlawful and can found a claim for damages if it infringes a private law right.
It is time to look at the law relating to policy and legitimate expectation.
Where a public authority gives an undertaking to an individual that a discretionary power will be used in a particular way, this creates a legitimate expectation in the individual that the authority will comply with that undertaking.
The courts will require the authority to give due consideration to that legitimate expectation when exercising its power: see R (Bibi) v Newham London Borough Council [2001] EWCA Civ 607; [2002] 1 WLR 237.
In an extreme case the courts can require the authority to comply with its undertaking: see R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213.
The same principle applies where a minister publishes a policy that sets out the way in which he intends to exercise a discretionary power.
This also creates a legitimate expectation in those affected by the power as to the manner in which it will be exercised.
In either case the court can intervene in performance of its duty to ensure that the executive acts fairly and does not abuse the powers conferred on it by Parliament.
These principles have quite often been applied in relation to immigration decisions.
I have already quoted my invocation of them in Saadi: see para 271 above.
Lord Dyson at para 85 has referred to my judgment in Nadarajah v Secretary of State for the Home Department [2003] EWCA Civ 1768.
In that case the Court of Appeal held that Ns detention was unlawful because it was in conflict with the Secretary of States policy.
The court further held that as the detention was contrary to law, it infringed article 5(1)(f) of the Convention.
The Court had earlier stated at para 15 that the consequence of these findings would be that N would be entitled to damages for unlawful detention.
The Secretary of State had sought to show that Ns detention was not contrary to his policy.
He had not challenged the proposition that if the detention was contrary to his policy it would be unlawful, nor that this would lead to liability in damages.
There was no discussion of the nature and effect of the doctrine of legitimate expectation in the context of detention under the 1971 Act.
There was, however, a sequel to the case in which the nature of the doctrine of legitimate expectation received detailed consideration.
The development of the law of legitimate expectation was pellucidly set out at some length by Laws LJ, giving the only reasoned judgment in the Court of Appeal in R (Nadarajah) v Secretary of State for the Home Department, [2005] EWCA Civ 1363, a decision which, amazingly, does not seem to have found its way into the law reports.
At the end of his judgment, in paras 68 and 69, Laws LJ set out his conclusions on the principles to be derived from these authorities.
This merits citation at length: The search for principle surely starts with the theme that is current through the legitimate expectation cases.
It may be expressed thus.
Where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so.
What is the principle behind this proposition? It is not far to seek.
It is said to be grounded in fairness, and no doubt in general terms that is so.
I would prefer to express it rather more broadly as a requirement of good administration, by which public bodies ought to deal straightforwardly and consistently with the public.
In my judgment this is a legal standard which, although not found in terms in the European Convention on Human Rights, takes its place alongside such rights as fair trial, and no punishment without law.
That being so there is every reason to articulate the limits of this requirement to describe what may count as good reason to depart from it as we have come to articulate the limits of other constitutional principles overtly found in the European Convention.
Accordingly a public bodys promise or practice as to future conduct may only be denied, and thus the standard I have expressed may only be departed from, in circumstances where to do so is the public bodys legal duty, or is otherwise, to use a now familiar vocabulary, a proportionate response (of which the court is the judge, or the last judge) having regard to a legitimate aim pursued by the public body in the public interest.
The principle that good administration requires public authorities to be held to their promises would be undermined if the law did not insist that any failure or refusal to comply is objectively justified as a proportionate measure in the circumstances.
This approach makes no distinction between procedural and substantive expectations.
Nor should it.
The dichotomy between procedure and substance has nothing to say about the reach of the duty of good administration.
Of course there will be cases where the public body in question justifiably concludes that its statutory duty (it will be statutory in nearly every case) requires it to override an expectation of substantive benefit which it has itself generated.
So also there will be cases where a procedural benefit may justifiably be overridden.
The difference between the two is not a difference of to a principle.
Statutory duty may perhaps more often dictate the frustration of a substantive expectation.
Otherwise the question in either case will be whether denial of the expectation is in the circumstances proportionate legitimate aim pursued.
Proportionality will be judged, as it is generally to be judged, by the respective force of the competing interests arising in the case.
Thus where the representation relied on amounts to an unambiguous promise; where there is detrimental reliance; where the promise is made to an individual or specific group; these are instances where denial of the expectation is likely to be harder to justify as a proportionate measure.
On the other hand where the government decision maker is concerned to raise wide ranging or macro political issues of policy, the expectations enforcement in the courts will encounter a steeper climb.
All these considerations, whatever their direction, are pointers not rules.
The balance between an individual's fair treatment in particular circumstances, and the vindication of other ends having a proper claim on the public interest (which is the essential dilemma posed by the law of legitimate expectation) is not precisely calculable, its measurement not exact.
This passage in Laws LJs judgment was obiter, as is my approval of it as setting out a compelling analysis of the law.
I have, however, some concerns as to the consequences of this extension of the principles of judicial review if a ministers unjustified failure to comply with his policy is to be treated as an unlawful act that subjects him to potential liabilities in private law independently of the discretionary remedies of judicial review.
The facts of this case illustrate my concern.
Assume that I am correct in concluding that Schedule 3 gives the Secretary of State wide ranging powers to detain those who are illegally in this country, whether pending the processing of their applications for permission to enter or pending their removal when such applications have been refused.
The Secretary of State did not choose to exercise those powers to their full extent.
The policy of only detaining immigrants as a last resort is a benevolent policy.
That policy carries with it, however, as I have explained, the risk that, as a result of erroneous decisions in the application of a difficult test, some immigrants may be detained in breach of that policy.
Not all would agree that it is fair that they should be entitled to compensation, in the form of damages for false imprisonment, on the same scale as those whose detention falls outside any statutory power.
Notwithstanding these concerns, I have concluded that the detention of a person in circumstances where, under the Secretary of States published policies he should not have been detained, was both a violation of principles of public law and unlawful so as to exclude any justification for the detention under article 5(1)(f) of the Convention and to give rise to liability for false imprisonment.
Was the detention of each of the appellants contrary to the Secretary of States published policies?
On this question all members of the court are agreed.
Each of the appellants, by reason of the risk of re offending and of absconding, fell into the exceptional category of those who were liable to detention under the Secretary of States published policies.
Had the decision maker applied those policies each of the appellants would have been detained.
On this topic I have nothing to add to the judgment of Lord Dyson.
What were the defects in the policy applied when deciding whether the appellants should be detained?
Mr Beloff conceded that the policy, which I shall call the secret policy, applied by the decision maker when deciding to detain the appellants was unlawful on three counts.
The meaning of the word unlawful in this context needs clarification.
It is not having a policy but implementing a policy that may infringe the law.
A policy can be described as unlawful if action taken pursuant to it will, or may, be unlawful under private or public law.
The first reason why the policy that was applied was unlawful was that it was a blanket policy.
It brooked of no exceptions save rare ones that might be made for compassionate reasons.
It was a blanket policy in that it was applied to any FNP recommended for deportation.
Thus it paid no regard to the severity of the offence for which the FNP had been convicted nor to the likelihood and consequence of his re offending.
In this I do not consider that it was open to objection on public law grounds.
On my interpretation of Schedule 3 it was open to the Secretary of State to decide her own criteria for determining those she wished to detain pending deportation.
Secondly the policy was a blanket policy in that it gave no scope for the application of discretion, save on compassionate grounds.
I do not consider that this was objectionable on public law grounds.
There is a principle of public law that a minister who is granted a discretionary power must not improperly fetter the exercise of his discretion.
In a case such as this, however, a minister has to lay down a firm policy in order to ensure consistency of decision making.
The Secretary of State was laying down an exception to the general rule that there was a presumption against detention.
I can see no reason why she should not lay down a policy under which all those whom she chose to deport should be detained pending their deportation save in circumstances where there were compassionate reasons for departing from the policy.
Where the secret policy was objectionable was that it was to be applied without consideration of whether detention would violate the Hardial Singh principles.
Under the secret policy FNPs were liable to be detained even if they were nationals of a country to which deportation was not a practical possibility.
Thus application of the secret policy would, in some cases, result in detention that was outside the power conferred by the 1971 Act.
The second reason why Mr Beloff conceded that the secret policy was unlawful was that it was inconsistent with the Secretary of States published policy.
Inasmuch as the application of the secret policy would result in the detention of some who would not have been detained on the application of the published policy it was plainly open to objection on this ground.
The third reason why Mr Beloff conceded that the secret policy was unlawful was that it was secret.
This concession was also properly made, for the reasons given by Lord Dyson.
What were the circumstances in which the secret policy was applied?
Lord Dyson has summarised the circumstances in which the secret policy was applied.
Lord Walker and Lord Collins have described these as a serious abuse of power.
Lady Hale has expressed some sympathy for the predicament in which the civil servants found themselves.
Having considered the voluminous discovery, some of it very belated, I share both the concern expressed by Lord Walker and Lord Collins and the sympathy expressed by Lady Hale.
It was clear to officials that the Secretary of State wished all FNPs to be deported, and to be detained pending deportation.
They were concerned at the legality of such a policy, particularly because it conflicted with the published policy.
There was a protracted period preparing and circulating draft advices to ministers in which each of a lengthy circulation list was given the chance to comment.
Many did, whereupon the draft would be re circulated.
There seems to have been a reluctance to grasp the nettle of presenting advice that would be unpalatable.
There were considerable delays caused by the perceived need to obtain counsels opinion.
The picture is of bureaucracy at its worst with the best proving constantly the enemy of the good.
The lamentable fact is that approximately two years elapsed between the identification of the need to publish a revised policy on detention and the publication of such a policy in the new Enforcement Instructions and Guidance in September 2008.
Although it was suggested that ministers might favour a policy that would appear to make the courts responsible for the release from detention of FNPs, this course was neither advocated nor adopted.
There was muddle galore, but I am not persuaded having considered the considerable discovery that there was a deliberate attempt to deceive the courts as to the policy that was being applied.
Did the application of the secret policy render the detention of the appellants unlawful?
It is now accepted by the Secretary of State that the decision maker in the case of each of the appellants decided that he should be detained by applying to him the secret policy.
The power to detain that he purported to apply was that conferred by Schedule 3.
Had the appellants been persons whose deportation would not be possible within a reasonable period, so that they fell outside the lawful application of Schedule 3, the application of the secret policy would have resulted in their detention none the less.
Had the appellants been persons whose detention would have conflicted with the Secretary of States published policy, so that their detention would be unlawful under the principles of public law discussed above, the application of the secret policy would have resulted in their detention none the less.
In the event each appellant fell within the group of FNPs for whom detention was appropriate, indeed inevitable, if the Secretary of States published policy was applied to them.
Was their detention none the less unlawful because of the process of reasoning that had brought it about? Mr Husain submits that it was.
The Court of Appeal held that it was not, because the application of the secret policy was not material; it produced the result that would have been produced had the right policy been applied.
This is I believe a novel question, not to be answered by the simple answer that the detention was unlawful because the decision that produced it was unlawful.
It is also a complex question because of the novel feature of the existence of a published policy that would have predetermined the decisions in relation to the two appellants had it been applied.
It is helpful to unpick the secret policy and consider its effect if each objection to it had been the only objection.
I take first the objection that it was a blanket policy.
Imagine the Secretary of State had publicly announced that all FNPs who were given deportation orders would henceforth be detained pending deportation, subject to exceptions on compassionate grounds.
The application of this policy would have been objectionable in that it would have resulted in the detention of those FNPs whose deportation would not be possible within a reasonable period.
Would this fact have rendered unlawful the detention of the majority of FNPs whose deportation was possible? I see no reason of principle why it should.
Next I take the objection that the policy was in conflict with the published policy.
Had the secret policy not been secret, this objection would have melted away.
The public policy would simply have been publicly altered.
This would not have been objectionable.
What of the objection that the policy was secret? Had this been the only objection to it I do not see how this could have availed the appellants.
They were already subject to a policy that would result in their detention.
They had no legitimate expectation of being permitted to remain at large.
If the secret policy had extended the category of those FNPs who would be detained, those who, without knowing it, were brought within the category of detainees might have had cause to object to their detention, but I do not see how those who were going to be detained under the previous published policy could legitimately complain.
If none of the individual objections to the secret policy would have afforded the appellants legitimate grounds for challenging their detention, does the position change when the objections are considered cumulatively? I can see no reason why it should.
Both logically and intuitively my conclusion is that the introduction of the secret policy gave those whose detention resulted from it cause to challenge the legality of their detention, but not those whose legitimate expectation was that they would be detained under the application of the published policy.
This was also the reaction of those officials who questioned the application of the secret policy.
Their concern was that those whose detention infringed the Hardial Singh guidelines or the published policy would have claims for illegal detention, not that every detainee would have such a claim.
I now turn to some of the authorities relied upon by the appellants to see how they bear on the unusual problem raised by these appeals.
In Christie v Leachinsky [1947] AC 573 the plaintiff, who claimed damages for false imprisonment, had been arrested by police officers on a charge of unlawful possession under the Liverpool Corporation Act 1921.
That Act did not give a power to arrest for this offence.
The defendants raised by way of defence a plea that, at the time of the arrest they reasonably suspected him of receiving stolen goods, which provided a valid ground for his arrest.
The House of Lords held that this was no defence as at the time of his arrest he had been given a different ground of arrest.
This decision is normally cited for the proposition that an arrest will be unlawful if the person arrested is not told the reason for his arrest at the time that he is arrested.
It is also authority for the proposition that if a person is arrested for a reason which is not a valid statutory ground of arrest it is no defence to an action for false imprisonment that he could have been validly arrested on alternative grounds.
I do not see that this decision bears on the very different facts of the present case.
In Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 the Court of Appeal held that detention by the police without the review required by section 40(1)(b) of the Police and Criminal Evidence Act 1984 was unlawful and the fact that, if the review had taken place authorised detention would have continued was no answer to a claim for substantial damages for false imprisonment.
That decision has no bearing on the issue that I am considering, which is whether the detention of the appellants was unlawful.
In Langley v Liverpool District Council [2005] EWCA Civ 1173; [2006] 1 WLR 375 a constable had purported to exercise a discretionary power under the Children Act 1989 in removing a child from its family.
The Court of Appeal held that his exercise of discretion had been wrongful in that, in the circumstances prevailing, it ran counter to the statutory scheme.
It followed that the removal of the child was unlawful and the constable had committed the tort of false imprisonment.
I have found this decision of no assistance in deciding whether, on the unusual facts of this case, the detention of the appellants was unlawful.
One of the cornerstones of the appellants case was the speech of Lord Diplock, with which all other members of the House agreed, in Holgate Mohammed v Duke [1984] AC 437.
A police officer had arrested the plaintiff on suspicion of the theft of jewellery.
He did so pursuant to section 2(4) of the Criminal Law Act 1967, which gave him a discretionary power to arrest her.
She alleged, however, that the exercise of this power had been unlawful because, when deciding whether to exercise his discretion the officer had been influenced by a consideration which was irrelevant, namely the likelihood that the fact that she had been arrested would be more likely to induce her to confess to her crime when interviewed.
Lord Diplock held that this consideration was not irrelevant to the proper exercise of the officers discretion.
It was a matter to which he could legitimately have regard having regard to the objectives of the statutory power to arrest.
Thus the comments upon which the appellants have relied were obiter.
Those comments, at p 443 of Lord Diplocks speech, were as follows: The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
The first of the Wednesbury principles is that the discretion must be exercised in good faith.
The judge in the county court expressly found that Detective Constable Offin in effecting the initial arrest acted in good faith.
He thought that he was making a proper use of his power of arrest.
So his exercise of that power by arresting Mrs Holgate Mohammed was lawful, unless it can be shown to have been unreasonable under Wednesbury principles, of which the principle that is germane to the instant case is: He [sc the exerciser of the discretion] must exclude from his consideration matters which are irrelevant to what he has to consider.
The way in which the appellants argue that this passage impacts on the facts of the present case is, as I understand it, as follows.
The decision to detain the appellants was taken by application of the secret policy.
This infringed the Wednesbury principles because it failed to have regard to relevant considerations, namely whether the Hardial Singh principles precluded detention and whether the appellants detention complied with the published policy.
The answer given by the Court of Appeal to this point is that, so far as the appellants were concerned, the failure to consider these matters was not material because, had they been considered, the conclusion would have been that neither matter posed an impediment to the appellants detention and had they been considered the decision would inevitably have been the same.
The approach of the Court of Appeal involves a refinement of the Wednesbury principles.
It is an application of the following reasoning of May LJ in R v Broadcasting Complaints Commissioner, Ex p Owen [1985] QB 1153, 1177: Where the reasons given by a statutory body for taking or not taking a particular course of action are not mixed and can clearly be disentangled, but where the court is quite satisfied that even though one reason may be bad in law, nevertheless the statutory body would have reached precisely the same decision on the other valid reasons, then this court will not interfere by way of judicial review.
I believe that at least in this new area of the effect of public policy, the approach of the Court of Appeal is a sound one.
Where a minister publishes a policy as to the circumstances in which he will exercise a statutory power and then he or his officials apply a different policy which results in the exercise of that power in circumstances which range wider than those published, I do not consider that those whose cases fell within the published policy can automatically contend that the application of the power to them has been unlawful.
If the facts are that no reasonable decision maker applying the published policy could have done other than reach the decision which the decision maker arrived at, the fact that he applied a more expansive, but unpublished, policy when reaching his decision will not invalidate that decision.
For these reasons, which accord I believe with the reasoning of both the Court of Appeal and Lord Brown, I have concluded that the application of the secret policy did not render the detention of the appellants unlawful.
Damages
In view of my conclusions on liability, the issue of damages does not arise.
Had I agreed with Lord Dyson on liability, I would have shared his approach to damages.
I also endorse Lord Collins conclusions in relation to vindicatory damages.
Reviews
A word about reviews.
If the majority are correct in concluding that the application of the secret policy rendered all decisions taken pursuant to it unlawful, then it seems to me that the moment that the secret policy was applied to reviews of the lawfulness of those detained, their continued detention would have been rendered unlawful, even if they were lawfully detained under the published policy before the secret policy was introduced and even if they remained subject to detention within the terms of the published policy.
This would be an extraordinary result.
MR LUMBAS HARDIAL SINGH APPEAL
Mr Lumba has now voluntarily left the country, but the question remains of whether his detention became unlawful in the period before he left.
Because of the view that I take of the scope of the Hardial Singh principles, I find the issues in relation to this part of Mr Lumbas appeal easier to resolve than has Lord Dyson.
The lengthy period during which Mr Lumba was detained largely resulted from his own efforts to avoid deportation.
For most of the period his deportation had been a practical possibility.
The Secretary of State had not been dragging her feet in her effort to deport Mr Lumba.
I agree with the Court of Appeal that Mr Lumba could not be heard to say that it was impossible to deport him within a reasonable time when the difficulty in doing so resulted from his own attempts to avoid deportation and not from extrinsic problems in effecting his deportation.
On my view of the interpretation of Schedule 3, whether Mr Lumba posed a risk of re offending was not relevant to the period for which he could lawfully be detained.
It seems to me that para 107 of Lord Dysons judgment lends support to my belief that the power to detain is not dependent upon an object of the detention being to facilitate deportation.
The question remains, however, in Mr Lumbas case of whether his continued detention, having particular regard to his mental condition, remained consistent with the Secretary of States published policy.
He has now voluntarily left the country, but if the issue of the lawfulness of his detention is to be pursued I agree with Lord Dyson that this is a matter to be considered by the Administrative Court on remission.
Subject to this, for the reasons that I have given I would dismiss these appeals.
LORD BROWN (with whom Lord Rodger agrees)
Amongst the many issues to be decided on these appeals far and away the most important concerns the true nature of the tort of false imprisonment.
Lord Dyson having set out all the relevant facts and the detailed legal context in which the many issues here arise for determination, I shall proceed without more to what I recognise is to be a dissenting judgment on this crucial question.
Freedom from executive detention is arguably the most fundamental right of all.
Thus Lord Bingham of Cornhill in his 2002 Romanes lecture.
The tort of false imprisonment is, of course, the remedy provided by law for the violation of this freedom, for the unlawful deprivation of a persons liberty.
The outcome of the appeals proposed by the majority of the court is to hold the appellants and, indeed, a large number of others similarly placed to have been unlawfully detained, in many instances for a period of years, and yet to compensate them by no more than a nominal award of damages.
They are to be held unlawfully detained because, in his (or her) exercise of the undoubted power to detain them, the Secretary of State breached certain public law duties.
But they are to be awarded only nominal damages because, whatever approach had been taken to the exercise of the detaining power, the appellants must inevitably have been detained in any event.
Whilst I share to the full the majoritys conclusion that it would be quite wrong in the circumstances of these cases to award the appellants any substantial compensation in respect of their detention, for my part I would reach that conclusion by a very different route.
I would hold that a public law breach of duty in the course of exercising an executive power of detention does not invariably, and did not here, result in the subsequent detention itself being unlawful in short, that these appellants were not the victims of false imprisonment.
Naturally I recognise the beguiling simplicity and apparent purity of the majoritys approach.
Ever since the House of Lords decision in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, decisions made within the decision makers jurisdiction but containing a public law error have generally been regarded as precisely equivalent to decisions made entirely without jurisdiction.
Thus, it is said, a decision to detain which is flawed by a public law error is ultra vires and the detention which follows is necessarily unauthorised and therefore unlawful.
Logically, indeed, this must be so however minor the public law error involved in the making of the decision and however inevitable it is that the decision to detain would have been made in any event. (At one stage in the argument Mr Husain QC for the appellants accepted that some public law failures might be too inconsequential to require this conclusion but unsurprisingly he was unable to formulate any test by which to determine such cases and, indeed, he had argued before this court on behalf of the appellant in R (SK (Zimbabwe)) v Secretary of State for the Home Department [2009] 1WLR 1527 that false imprisonment must follow inexorably even from periodic failures to comply with the Secretary of States self imposed monthly review process.) Given, moreover, that the tort of false imprisonment is actionable per se that it is of the essence of the tort of false imprisonment that the imprisonment is without lawful justification (Lord Hope in R v Governor of Brockhill Prison ex parte Evans [2001] 2 AC 19, 32) logic also suggests that the notion of nominal damages should have no part to play in determining the compensation payable.
Why should someone imprisoned without lawful justification be paid nominal damages only? If the answer is that they would have been imprisoned anyway, under the same power and in just the same way, then in reality the Court is saying that the tort may be committed merely in a technical way.
I have to say that such an approach would to my mind seriously devalue the whole concept of false imprisonment.
It is true that in Murray v Ministry of Defence [1988] 1 WLR 692, whilst confirming that an action for false imprisonment lies even if the detainee does not know that he has been imprisoned, Lord Griffiths added (p703 A B): If a person is unaware that he has been falsely imprisoned and has suffered no harm, he can normally expect to recover no more than nominal damages.
In my opinion, however, there is a very real difference between a detainee who is in fact unaware of being under physical restraint (perhaps because he is asleep or because he simply does not know that the door has been locked) and a detainee who is fully aware of his loss of freedom.
To award the latter nominal damages only, on the basis that, even had he been dealt with lawfully he would still have been deprived of his freedom anyway, is really to say that he was in truth rightly in detention.
That seems to me very different from saying that he was wrongly imprisoned but happily unaware of it.
I have difficulty, therefore, with Lord Dysons criticism (at paras 92 and 93) of the passage on damages in Clarke LJs judgment in Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662, 668.
To compensate (or rather to deny compensation) on the basis that the detainee has suffered no loss because he would have remained in detention whether the tort was committed or not is in my opinion the very negation of the tort: it is to hold that the detainee was at one and the same time both rightly and wrongly imprisoned.
Search as one may in the judgments both of the Court of Appeal and of the House of Lords in Christie v Leachinsky (respectively [1946] KB 124 and [1947] AC 573), there is no hint of a suggestion that the false imprisonment which followed upon the unlawful arrest in that case might properly attract only a nominal award of damages.
I do not say that those falsely imprisoned should be compensated identically irrespective of how deserving they were of liberty rather than restraint during the relevant period of detention; I do say, however, that rather than hold a detainee simultaneously both rightly detained and falsely imprisoned, the law should instead recognise that, notwithstanding a flaw in the decision making process such as to involve the breach of a public law duty, the decision maker has not in those circumstances committed the tort of false imprisonment.
A court which speaks with two voices risks bringing the law into disrepute.
Is this court then bound by established law to reach so unsatisfactory a conclusion as the majority of the court suggest: tortious liability but for nominal damages only? To my mind it is not.
Assuming that a power to detain exists, that any preconditions to its exercise have been satisfied and any limitations upon its scope observed, I know of no case which holds the detainee to have been falsely imprisoned merely because, in the course of exercising the power, the decision maker committed some public law breach of duty.
On the contrary, and to my mind hardly surprisingly, the courts have consistently shied away from such a conclusion as is amply and consistently demonstrated by the series of Court of Appeal judgments in this very line of cases.
Such was the decision of the Court of Appeal (Laws, Keene and Longmore LJJ) in SK (Zimbabwe), the Court of Appeal (Lord Neuberger of Abbotsbury MR, Carnwath and Stanley Burnton LJJ) in the cases from which the present appeals are brought, and the Court of Appeal (Maurice Kay, Longmore and Black LJJ) more recently still in Anam v Secretary of State for the Home Department [2010] EWCA Civ 1140.
In Anam, indeed, Black LJ in giving the leading judgment characterised the appellants argument thus at para 17: At its most radical, the submission advanced by [counsel] is that a failure by the Secretary of State to apply his published policy in making a decision to detain necessarily renders that decision a nullity and the resulting detention unlawful.
Have all these Lords Justices, many of them distinguished public law jurists, lost sight of the clear and basic principles of public law which, it is said, necessarily compel such a radical conclusion?
So far from the authorities supporting such a surprising conclusion they can and should, I suggest, be analysed rather to the following effect. (1) False imprisonment is the inescapable result of detention absent any power to detain R v Governor of Brockhill Prison (No 2) Ex p Evans [2001] 2 AC 19 is itself a good illustration of this basic proposition: the appellant having been kept in prison beyond the date when her custodial sentence, properly calculated, expired, there could hardly have been a clearer case of false imprisonment.
Such would also be the position were someone arrested for a non arrestable offence.
Analysed in the way I analysed the power of detention under Schedule 2 to the Immigration Act 1971 (directly analogous to the Schedule 3 power under consideration in these appeals) in R (Khadir) v Secretary of State for the Home Department [2006] 1 AC 207, these are cases not about the exercise of the power, but rather about its existence. (2) The tort of false imprisonment is committed too if someone is detained in breach of a condition precedent to the existence of the detention power.
Christie v Leachinsky [1947] AC 573 illustrates the common laws imposition of such a condition precedent: a right of arrest only arises when the citizen is told why he is being arrested.
Roberts v Chief Constable of the Cheshire Constabulary [1999] 1 WLR 662 illustrates the imposition of such a precondition by statute (in that case the requirement for review as a precondition of continued detention beyond six hours).
R v Secretary of State for the Home Department Ex p Khawaja [1984] AC 74 provides another such illustration, the House of Lords there deciding that the power to detain and remove an immigrant as an illegal entrant under Schedule 2 to the 1971 Act was dependent upon establishing such illegality as a precedent fact. (3) Detention beyond the scope of a detaining power similarly constitutes false imprisonment.
For example, the limitations imposed by the courts following Woolf Js decision in R v Governor of Durham Prison Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles) undoubtedly operate to constrain the power of detention under paragraph 2 of Schedule 3 and it has long been recognised that detention in breach of the Hardial Singh principles gives rise to tortious liability. (Categories 2 and 3, I recognise, may not always be easily distinguishable.
It could, for example, be said that the first Hardial Singh principle constitutes a precondition for the exercise of the detention power.
It has seemed to me nonetheless worth attempting the distinction.) I would accept too that in certain circumstances a power of detention may (4) be narrowed by a published policy as to how it will be exercised.
The Court of Appeals decision in R (Nadarajah) v Secretary of State for the Home Department [2004] INLR 139 is, I think, an illustration of that in the present context.
The Secretary of State had in that case adopted a published policy which in substance narrowed the grounds on which the detaining power (in that case under schedule 2 to the 1971 Act) would be exercisable (the stated policy there being to release anyone whose removal was not imminent).
Certainly it is on that basis alone that I would regard Nadarajah as correctly decided.
And it must, of course, be recognised that, as with any other statement of policy (a policy being, by definition, no more than an advance indication of how it is proposed to exercise the particular discretionary power in question) it is always open to the holder of the power to change that policy see, for example, in relation to the Immigration Rules themselves, MO (Nigeria) v Secretary of State for the Home Department [2009] 1 WLR 1230.
Every false imprisonment case on which the appellant relies can, in my opinion, be seen to fall within one or other of the above four categories.
Besides those already mentioned, two cases in particular call for brief special mention.
Kuchenmeister v Home Office [1958] 1 QB 496 concerned a German national who landed at Heathrow en route to Dublin.
The immigration officers, instead of refusing him leave to land (as they had been instructed to do), detained him at the airport until it was too late for him to catch the Dublin flight.
Holding him to have been wrongfully imprisoned, Barry J said this (p 512): His liberty was restricted to a greater degree than the immigration authorities were entitled to restrict it under [the particular power they sought to rely upon].
The fact that they might have restricted his mobility by employing the powers conferred upon them by other articles of the Order seems to me to be immaterial.
It is no answer, when a man says I have been unlawfully arrested without a warrant, to say Well, had I (the person making the arrest) taken the trouble to go and ask for a warrant, I would undoubtedly have got it.
That would be no answer to a claim for unlawful arrest.
Similarly here, although the [immigration officers] could have detained the plaintiff by refusing him leave to land, that does not entitle them to detain him on the grounds on which they did.
The case was to my mind correctly decided and can be seen to fall squarely under the first of the above four categories: the immigration officers simply had no power to restrict the plaintiffs movements in the way they did.
Langley v Liverpool City Council [2006] 1 WLR 375 concerned a child in obvious need of protection.
Two relevant powers existed, respectively under sections 44 and 46 of the Children Act 1989.
Section 44 provides for the grant of an emergency protection order (EPO) authorising the council to remove a child into the care of foster carers; section 46 gives the police power to take a child into police protection.
The police officer there having removed the child in purported exercise of his power under section 46, the Court of Appeal held that he had been wrong to do so and accordingly that the child had been falsely imprisoned.
Dyson LJ in giving the leading judgment said that the statutory scheme clearly accords primacy to section 44 [which] is sanctioned by the court and . involves a more elaborate, sophisticated and complete process than removal under section 46 (para 38); that section 46 should be invoked only where it is not practicable to execute an EPO (para 40); and that in the result, albeit the officer had jurisdiction to remove [the child] pursuant to section 46, he could not lawfully invoke that power unless there were compelling reasons for exercising this power when, to his knowledge, an EPO was in force which authorised the council to remove [the child] into the care of foster carers (paras 44 and 46).
Again, I have no difficulty in accepting the correctness of this decision: just as the Hardial Singh line of cases imposed restrictions upon the power of detention under the 1971 Act, so the court in Langley thought it right to place a limitation upon the scope of the section 46 power.
The case falls neatly into category 3 (or perhaps into category 2, on the basis that the impracticality of executing a concurrent EPO was held to be a precondition to the lawful exercise of the section 46 power).
In what circumstances, then, does the breach of a public law duty in the exercise of a power to detain result in the detainee being falsely imprisoned? I have already indicated, at paragraph 347(4) above, one such circumstance, namely when the Secretary of State by his published policy indicates that he will not exercise his power to its fullest extent but rather will confine its exercise within certain limits (for example, as in Nadarajah, by releasing anyone whose removal is not imminent).
Such a published policy, unless and until it is changed, as a matter of public law requires the decision maker to decide cases (subject always to reasoned exceptions) in accordance with it.
It is my clear present view (subject to any further argument on the point) that SK (Zimbabwe) provides a good illustration of circumstances where, the breach of a public law duty notwithstanding, the detainee should not be regarded as falsely imprisoned.
The Secretary of State there breached what was his undoubted public law duty to review all detention cases monthly in accordance with his published policy on procedure.
As it seems to me, however, it is one thing to breach a policy under which a detainee is entitled to be released; quite another to breach a policy under which he is entitled merely to be reviewed for release.
Whereas the former will result in false imprisonment, the latter will not.
Obviously, if the detainee on review would have been entitled to be released under the Hardial Singh principles (or, if more favourable, the published policy statements) then he has a claim for false imprisonment.
But the claim in those circumstances arises from his continued detention beyond the date of such entitlement, not from the failure to review his case.
What, however, is the position in a case like the present when the Secretary of States breach of public law duty consists of applying, in place of his published policy, an unpublished policy less favourable to those subject to the detaining power? On the appellants case, of course, that automatically results in the false imprisonment of every single detainee whose continued detention has been considered under the wrong policy, irrespective of whether or not they would have had the least prospect of release whatever policy had been applied.
Applying the wrong policy, the argument runs, means that the Secretary of State failed to have regard to a material consideration, instead had regard to an immaterial consideration, and therefore reached his decision in an unlawful manner.
This renders it a nullity with the result that there was no lawful authority for the ensuing detention.
The closest this thesis comes to finding high level support in the authorities is in a much quoted dictum of Lord Diplock in Holgate Mohammed v Duke [1984] 1 AC 437.
Following Mrs Holgate Mohammeds arrest on suspicion of theft and her detention for six hours at a police station for questioning, she was found at first instance to have been wrongfully arrested and was awarded 1,000.
This was on the basis that the arresting officer, in deciding that there would be a better prospect of her confessing if she were arrested and detained rather than merely interviewed under caution, wrongfully exercised his power of arrest.
Upholding the Court of Appeals decision to allow the Chief Constables appeal, the House of Lords held that the better prospect of the plaintiff confessing her guilt if arrested and questioned at a police station was in fact a relevant matter so that the arrest was not after all unlawful.
In the course of the only reasoned speech, Lord Diplock (at p443) observed that, the condition precedent to the officers powers of arrest and detention having been fulfilled by his having reasonable cause to suspect the plaintiff to be guilty of an arrestable offence, this left him with an executive discretion whether to arrest her or not.
It is the next passage in the speech that is so strongly relied upon by the appellants: Since this is an executive discretion expressly conferred by statute upon a public officer, the constable making the arrest, the lawfulness of the way in which he has exercised it in a particular case cannot be questioned in any court of law except upon those principles laid down by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, that have become too familiar to call for repetitious citation.
The Wednesbury principles, as they are usually referred to, are applicable to determining the lawfulness of the exercise of the statutory discretion of a constable under section 2(4) of the Criminal Law Act 1967, not only in proceedings for judicial review but also for the purpose of founding a cause of action at common law for damages for that species of trespass to the person known as false imprisonment, for which the action in the instant case is brought.
Lord Diplock then noted that amongst the Wednesbury principles was that whoever exercises the discretion must (in Lord Greenes words) exclude from his consideration matters which are irrelevant to what he has to consider.
It is, to my mind, critical to a proper understanding of Lord Diplocks speech to recognise that the relevant matter in question there, the matter which the judge at first instance held the officer to have wrongly taken into consideration, was a consideration clearly decisive of the way he had exercised his discretion.
The whole reason for the officer exercising his power to arrest and detain the plaintiff was so that she would then be more likely to confess.
If that had been an unlawful consideration, nothing could be clearer than that without it the officer would not have exercised the power at all.
In short, on the facts of the case, the power would have been exercised for an improper reason and the resultant detention necessarily unlawful.
Certainly it would in my opinion be quite wrong to regard the case as authority for any wider proposition, least of all a thesis so absolute and unsatisfactory as that contended for here.
There had been no argument on the point: the Chief Constable was not even called upon.
Small wonder that in the quarter century following, despite the hugely increased scope of public law challenges, not a single case appears to have held an arrested detainee falsely imprisoned on Wednesbury grounds save where the arresting officer acted either in bad faith or for an improper purpose.
Perhaps the way to put the point is this.
Classically most public law challenges go to the decision making process rather than to the substance of the decision taken.
The substantive decision is for the public body and not for the court to take and generally a successful challenge requires that the impugned decision be taken afresh.
Obviously, if the substantive decision reached is outside the powers conferred upon the public body purporting to make it (ultra vires in the traditional, literal sense), then it must be nullified.
So too if it is irrational in the public law (Wednesbury) sense i.e. outside the range of permissible decisions which the public body is empowered to make.
But if, as here, the challenge is to the process whereby decisions to continue a detainees detention were taken or, indeed, as in SK (Zimbabwe), if what is challenged is a failure to take decisions (as often as promised by the policy) as to whether a detainees detention should continue then the appropriate remedy is to require the decision maker to act lawfully: to re decide decisions that resulted from a flawed decision making process or, as in SK (Zimbabwe), to take decisions that earlier the decision maker had omitted to take.
It simply does not follow from a flawed decision making process that the detainees continued detention immediately thereupon becomes unlawful so as to make him a victim of false imprisonment until a fresh decision comes later to be lawfully taken so that, for example, a detainee whose detention is reviewed every second month instead of monthly as the published policy dictates, alternates yo yo like between lawful detention and false imprisonment.
Nor does it seem to me that the absolutist approach to the consequences of public law error espoused here by the majority of the Court has received universal endorsement over recent years.
The decision of the House of Lords in Boddington v British Transport Police [1999] 2 AC 143 is often cited as a modern example of the Anisminic principle being applied in the ordinary course of proceedings (there in the context of a criminal trial).
But there are important dicta in the judgments which expressly leave open the question whether legal consequences may nonetheless follow from unlawful action.
Consider this passage from the speech of Lord Slynn of Hadley, an acknowledged master in the field of public law: In our jurisdiction the effect of invalidity may not be relied on if limitation periods have expired or if the court in its discretion refuses relief, albeit considering that the Act is invalid.
These situations are of course different from those where a court has pronounced subordinate legislation or an administrative act to be unlawful or where the presumption in favour of their legality has been overruled by a court of competent jurisdiction.
But even in these cases I consider that the question whether the acts or byelaws are to be treated as having at no time had any effect in law is not one which has been fully explored and is not one on which it is necessary to rule in this appeal and I prefer to express no view upon it.
The cases referred to in Wade & Forsyth, Administrative Law, 7th ed. (1997), pp.323 324, 342 344 lead the authors to the view that nullity is relative rather than an absolute concept (p.343) and that void is meaningless in any absolute sense.
Its meaning is relative.
This may all be rather imprecise but the law in this area has developed in a pragmatic way on a case by case basis. (p.165 C F) (Wade & Forsyth, now in its tenth edition (2010), continues to recognise the relativity of the concept of nullity in this context.) All I am saying is that if the law is to continue to develop in this area in a pragmatic way on a case by case basis, then in this particular case it should expressly recognise that not every decision to detain affected by a public law breach necessarily carries in its wake an unanswerable claim for false imprisonment.
That said, I readily acknowledge that the power of executive detention is one to be exercised with the greatest care and sensitivity and that it is of the first importance that those who exercise it should be ever mindful not merely of the legal limits of the power but also of such public law duties as surround its proper exercise.
Where, as here, a wrong and less favourable policy has been applied in deciding whether a person should be, or continue to be, detained, I accept that it must be for the Secretary of State as decision maker to establish that this breach of his or her public law duty did not in fact prejudice the detainee.
In short, it is for the Secretary of State in these circumstances, in order to avoid liability for the tort of false imprisonment, to establish that the detainee would have been detained in any event even, that is, had the lawful published policy been followed.
Assuming, however, that the inevitability of detention in any event can be established, it seems to me nothing short of absurd to hold the tort of false imprisonment nevertheless made out.
After all, had a detainee in such circumstances sought to challenge his continued detention by judicial review (or habeas corpus), the court would have been likely to grant declaratory relief only, declining in its discretion to order the detainees release.
Assuming, indeed, that the Secretary of States lawful policy in effect dictates the detainees detention, why, one wonders, would a decision to release him not itself be in breach of the Secretary of States public law duty?
Given, as the Court of Appeal held, and as I understand each member of this court to accept, that there was no realistic prospect whatever of these appellants having been released even had the Secretary of State applied his more favourable published policy, it follows that for my part, whilst, of course, deeply regretting the public law breaches of which the Secretary of State was here guilty, I would dismiss the appeals.
The bulk of this judgment was written upon my understanding that the essential choice facing the court was between (a) no false imprisonment and (b) false imprisonment but nominal damages only.
It now appears that some members of the court favour a third outcome: (c) false imprisonment with damages of perhaps 500 1,000 by way of a vindicatory or conventional award.
Describe such an award how one will, to my mind it cannot sensibly be justified here.
Is the court really to award substantial damages to those conceded to have been rightly detained? I have made clear my difficulties with a nominal award of damages.
A substantial award would appear to me more objectionable still.
Lord Hope (at para 177 of his judgment) refers to Attorney General of Trinidad and Tobago v Ramanoop [2006] 1 AC 328 a constitutional challenge based upon some quite appalling misbehaviour by a police officer (Lord Nicholls at para 2) and calls here for some recognition of the gravity of the breach of the fundamental right which resulted in false imprisonment.
Properly critical though our judgments may be of the conduct of Home Office officials in these and similar cases, I find it quite impossible to recognise in them any breach (grave or otherwise) of the detainees fundamental rights.
The detainees, I can only repeat, were rightly detained and it would have been wrong to release them.
Save insofar as this judgment indicates the area of my disagreement with Lord Dysons judgment, I wish to say that I am in respectful agreement with it and feel unable to add anything of value on the various other issues arising for decision.
| UK-Abs | The main issue in this appeal is whether, and if so which and in what circumstances, breaches of public law are capable of rendering unlawful the detention of foreign national prisoners (FNPs) pending their deportation.
Section 3(5)(a) of the Immigration Act 1971 (the 1971 Act) confers on the Secretary of State for the Home Department a power to deport foreign nationals.
Schedule 3 of the 1971 Act empowers the Secretary of State, in certain specified circumstances, to detain foreign nationals pending deportation.
From at least 1991, the Secretary of State had maintained a published policy on the application of the power to detain.
This policy presumed in favour of release whilst justifying detention in some circumstances.
However, following adverse publicity in April 2006, the Secretary of State adopted a new policy which was not published.
Between April 2006 and September 2008, the Secretary of State applied this unpublished policy which imposed a near blanket ban on release of FNPs.
On 9 September 2008, the Secretary of State amended the published policy to replace all references to a presumption of release with a presumption of detention.
However, on 22 January 2009, following the decision of Davis J in the current proceedings, the published policy was amended again to omit references to a presumption of detention.
Walumba Lumba is a citizen of the Democratic Republic of Congo.
He entered the UK unlawfully in April 1994.
He was later convicted of a number of offences and was sentenced to 4 years imprisonment for wounding with intent on 12 January 2004.
On 3 April 2006, the Secretary of State informed Mr Lumba of the intention to deport him.
He was due to be released from prison in June 2006, but was informed that he was to be detained pending deportation.
He left the United Kingdom voluntarily on 13 February 2011.
Kadian Mighty is a citizen of Jamaica.
He was granted indefinite leave to remain in the UK in February 2003.
On 27 June 2003 he was sentenced to 42 months imprisonment for possession of a Class A drug with intent to supply.
On 10 May 2006, the Secretary of State informed Mr Mighty of the intention to deport him.
On 19 May 2006, he was detained pending deportation.
However, he was released on bail on 28 July 2008.
Mr Lumba issued proceedings on 18 October 2007 claiming a declaration that his detention was unlawful and damages.
His case was joined with that of Mr Mighty who had issued proceedings on 29 May 2008.
In addition, Mr Lumba, who remained in detention until his departure from the United Kingdom, challenged the reasonableness of the duration of his detention and sought a mandatory order that he be released.
At first instance ([2008] EWHC 3166 (Admin)), Davis J granted declarations to the effect that it was unlawful for the Secretary of State to operate an unpublished policy which presumed in favour of detention.
He dismissed the other claims, including the claims for damages for unlawful detention.
The appellants appealed and the Secretary of State cross appealed on the issue of the presumption of detention.
The Court of Appeal (Lord Neuberger MR, Carnwath and Stanley Burnton LJJ) allowed the cross appeal but otherwise dismissed the appeals ([2010] 1 WLR 2168).
The Supreme Court, by a majority, allows the appeals.
Lord Dyson gives the lead judgment.
The majority hold that the Secretary of State is liable to both appellants in the tort of false imprisonment as the statutory power to detain them was exercised in breach of public law duties (Lords Phillips, Brown and Rodger dissenting).
The appellants are, however, only entitled to nominal damages assessed at 1 (Lords Hope, Walker and Lady Hale
dissenting).
They are not entitled to exemplary damages.
The court remits to the High Court the question whether Mr Lumba was detained for longer than a reasonable period in breach of the principles in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704 (the Hardial Singh principles).
The court considers five issues: (1) whether the unpublished policy maintained by the Secretary of State between April 2006 and September 2008 is unlawful on grounds of public law error; (2) if so, whether detention on the basis of such a policy is unlawful in circumstances where the appellants would have been lawfully detained in any event; (3) if so, whether the appellants are entitled to recover more than nominal damages; (4) whether the appellants are entitled to an award of exemplary damages; and (5) in the case of Walumba Lumba, whether there has been a breach of the Hardial Singh principles.
The requirements of public law The court holds unanimously that it is lawful for the Secretary of State to operate a policy which sets out the practice that she will normally follow in deciding whether or not to detain FNPs pending their deportation, provided that the requirements of public law, Hardial Singh and Article 5(1)(f) of the ECHR are respected: [40] [55].
However, as regards the application of the statutory power to detain, it is unlawful in public law for the Secretary of State to maintain an unpublished policy which is inconsistent with her published policy and which applies a near blanket ban on the release of FNPs: [26] [38].
Such a policy was applied to the appellants between April 2006 and September 2008: [21].
Liability in false imprisonment Breach of a public law duty on the part of the person authorising detention is capable of rendering that detention unlawful and did render it unlawful in this case: [62] [88], [198] [207], [221].
Trespassory torts (such as false imprisonment) are actionable per se regardless of whether the victim suffers any harm.
Accordingly, by a majority, the court holds that the fact that the appellants would have lawfully been detained in any event does not affect the Secretary of States liability in false imprisonment: [62], [64] [88], [197], [208] [211], [221], [239] [247].
Lords Phillips and Brown (with whom Lord Rodger agrees) dissent and hold that because the appellants would have been lawfully detained the Secretary of State is not liable to them in false imprisonment: [319] [334], [343] [360].
Damages By a majority, the court holds that the fact that the appellants would have been lawfully detained is relevant to damages rather than to liability.
Since the appellants have suffered no loss they should recover no more than nominal damages of 1: [90] [96].
They are not additionally entitled to damages to vindicate the importance of the right and the seriousness of the infringement: [97] [101], [222] [237], [253] [256] (Lords Hope, Walker and Lady Hale dissenting: [176] [180], [195], [212] [217]).
Further, the court holds unanimously that the appellants are not entitled to exemplary damages: [150] [169].
Reasonableness of the length of detention under the Hardial Singh principles As regards the assessment of whether a reasonable period of detention has elapsed, the court unanimously holds that the risk of reoffending and the legal challenges pursued by the detainee are relevant.
The relevance of a refusal to voluntarily return is limited: [106] [128].
It is for a court of first instance to decide whether Mr Lumbas detention for almost 56 months was in breach of the Hardial Singh principles.
Accordingly, his claim is remitted to the High Court: [129] [148].
|
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
| UK-Abs | These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
|
This appeal raises a question of some importance on the law relating to occupational pension schemes.
The agreed statement of facts and issues (SFI) sets out three issues, but they are all variations on the same general theme, that is the dividing line, for regulatory purposes, between defined benefit (normally earnings related) schemes and defined contribution (or money purchase) schemes.
The general nature of the distinction between these two types of scheme is familiar, and it may be helpful to start with that (though counsel on both sides properly reminded us that we are concerned with a particular statutory definition, and not with the range of meanings in which imprecise expressions may be used).
Under a defined benefit scheme (the commonest variety of which is a final salary scheme) the primary benefit to which a scheme member is prospectively entitled, on retirement at normal pension age, is a pension for life calculated (in a final salary scheme) by reference to the members pensionable salary at retirement.
A typical formula for calculating the pension was N/60ths, where N is years of pensionable service, but today the formula is more often N/80ths.
The member pays contributions (typically a fraction, such as 5%, of current pensionable salary) and the employer is under a general obligation to pay the balance needed to provide all the benefits under the scheme.
Final salary schemes are therefore also referred to as balance of cost schemes.
What the member pays makes an important contribution to the benefit, but the amount of the benefit is not calculated by reference to the amount of the members contributions, and the risk of a disappointing investment return on the pension fund is assumed by the employer.
Under a defined contribution scheme, by contrast, the members benefit is calculated by reference to the contributions that the member makes, and those that the employer makes in respect of that particular member (for instance the member may pay 4% of his or her current pensionable salary, with the employer matching that with an equal contribution).
These contributions, and the investment return on them, are the measure of the members benefits, and for that reason these schemes are also called money purchase schemes.
The member, and not the employer, takes the risk of the investment return disappointing expectations.
That is one of the main reasons why large numbers of employers have, since the last years of the 20th century, closed their final salary schemes (either completely or to new entrants) and introduced money purchase schemes.
There is a variety of techniques by which, under a money purchase scheme, the amount of the contributions by or for a member, and the investment return on them, are mathematically transposed into quantifying the pension that is the primary benefit that the member expects to receive.
Indeed the appellants case is that some of the techniques (and in particular, those applicable to the voluntary investment planning (VIP) and MoneyMatch benefits under the scheme that are the subject of this appeal) take the scheme outside the statutory definition of money purchase benefits in section 181 of the Pension Schemes Act 1993 (PSA 1993) as applied for the purposes of section 73 of the Pensions Act 1995 (PA 1995).
Section 73 provides a statutory order of priority in the winding up of pension scheme but it does not apply to money purchase schemes, and it applies only in a limited way to hybrid schemes (under which some but not all of the benefits provided are money purchase benefits).
These proceedings have taken an unusual course.
They began as Part 8 proceedings commenced in 2006 by Bridge Trustees Ltd (the Trustee), the independent corporate trustee of the Imperial Home Dcor Pension Scheme (the Scheme).
Three members of the Scheme, that is Mr John Yates (a pensioner in receipt of his pension), Mr Mark Houldsworth and Mr John Hunter (who are entitled to deferred pensions) were joined as representative defendants to represent different classes with different interests.
By then the principal employer, The Imperial Home Dcor Group (UK) Ltd (the Company) was in administrative receivership and the Scheme was in course of being wound up.
The claim form raised a number of questions of construction which were answered either by the deputy judge (Miss Sarah Asplin QC) or by the Court of Appeal (Mummery, Wilson and Rimer LJJ) and are not raised in this appeal.
The issue which is before this Court was raised by a late amendment of the claim form which necessitated a postponement of the first instance hearing.
The appellant, the Secretary of State for Work and Pensions, was not a party to the first instance proceedings, but regarded the decision as having serious policy implications.
The Secretary of State was granted leave to intervene in an appeal (for which the deputy judge had given permission).
The Secretary of State agreed to pay the costs of all parties in the Court of Appeal on the indemnity basis.
Before the Court of Appeal he failed to overturn the deputy judges decision on the money purchase issue, and he now appeals to this Court on that issue as being of general public importance.
It is also of great importance to the current and deferred pensioners interested under the Scheme, since if the Secretary of State is right part of the contributions paid by or in respect of members still in service or entitled to deferred pensions at the date of commencement of the winding up of the Scheme will be used, under the statutory order of priority in section 73 of PA 1995, to satisfy the rights of those already entitled to receipt of pensions at that date.
The history and structure of the Scheme
The Scheme was originally established as an exempt approved scheme by an interim trust deed dated 15 December 1971.
It had three distinct periods in its history, summarised as follows in para 2.2 of the SFI (in which MP benefit means money purchase benefit within the meaning of the statute): (1) From its inception to 5 April 1983 it was a conventional final salary scheme under which the members received a pension based on 1/60 of their final pensionable salary for each year of service.
Members contributed 5% of pensionable salary and the employer contributed the balance of cost.
No question arises as to these final salary benefits: none of them is an MP benefit. (2) The Scheme was restructured with effect from 6 April 1983.
It continued to provide final salary benefits, albeit on a less generous scale, the members contribution rate being reduced to 3% of pensionable salary and the accrual rate to 1/80 per year.
This was known as the Core Plan.
In addition members were able to pay further contributions and thereby accrue extra benefits.
This part of the Scheme was known as Voluntary Investment Planning or VIP.
Again no question arises as to the Core Plan benefits, which are not MP benefits; but whether the VIP benefits are MP benefits where they take the form of internal annuities (ie where a members pension comes into payment it is provided by the Scheme itself rather than by way of an annuity purchased for the member from an external provider, which would also have the effect of terminating the individuals membership of the Scheme) is part of the third issue on this appeal. (3) The Scheme was restructured again with effect from 6 April 1992, when a further benefit structure known as MoneyMatch was introduced.
Some older and longer serving existing members (those whose age plus years of membership equalled at least 64) were given the option of continuing to accrue benefit under the existing benefit structure, namely the Core Plan and VIP.
Those who were either not given the option, or chose to switch, thereafter accrued benefits on the MoneyMatch basis rather than a final salary basis, as did all new joiners.
Those who switched to MoneyMatch benefits for future service could also convert their accrued final salary benefits into MoneyMatch benefits, and were given an incentive to do so.
The questions whether MoneyMatch benefits are MP benefits in whole or in part are the first two issues on this appeal and (where they take the form of internal annuities) the other part of the third issue on this appeal.
In para 12 of her judgment the deputy judge summarised the effect of these
changes on the members of the Scheme: Therefore, after 1992 there were different categories of member: (a) Option 1 members were those who had elected to convert their accrued final salary benefits into MoneyMatch and to accrue future benefits under the MoneyMatch section; (b) Option 2 members were those who retained their accrued benefits in the final salary section but accrued future benefits under MoneyMatch; and (c) Option 3 members were those who both retained their accrued benefits in final salary form and continued to accrue future benefits in final salary form and therefore, did not participate in MoneyMatch at all.
They could accrue VIP benefits, this option being open only to those continuing to accrue final salary benefits.
In addition, new joiners after 22 April 1992 accrued benefits exclusively by reference to the MoneyMatch section of the Scheme.
On 26 June 2003 two partners in Ernst & Young LLP, Mr Garry Wilson and Mr Simon Allport, were appointed as joint administrative receivers of the Company.
This triggered a statutory obligation for the appointment of an independent trustee of the Scheme, and on 18 July 2003 the Trustee was appointed to act with the previous corporate trustee, Imperial Home Dcor Pension Trustees Ltd (which has since been wound up).
The Company ceased to carry on business on 5 September 2003, when its remaining assets and undertaking were sold.
On 22 September 2003 the Trustee resolved to continue the Scheme as a closed Scheme with effect from 5 September 2003.
Having taken further legal advice the Trustee then resolved, on 15 October 2003 (the dissolution date) that the Scheme should be wound up.
During the Schemes varied existence it was governed by a succession of amending and consolidating trust deeds, including a second definitive deed dated 13 September 1984, a third definitive deed dated 21 April 1994 and (following the Schemes amalgamation with the Borden Wallcoverings Pension Scheme) a consolidating trust deed and rules dated 3 October 1995.
These were all in evidence before the deputy judge, but it has not been suggested that they are relevant to this appeal.
The last definitive deed and rules were made on 12 March 1998 in the form of a deed (the 1998 deed) made between the Company (then named Borden Decorative Products Ltd) and the former corporate trustee (then named Borden (UK) Pension Trustees Ltd).
The 1998 deed was amended in minor respects in 2000, 2002 and 2003, but again it is not suggested that any of these amendments is material to this appeal (the effect of the amendments has been noted in manuscript on the copy of the 1998 deed in evidence before us).
The Scheme was contracted out of the State Earnings Related Pension Scheme (SERPS), and from 2002 out of the State Second Pension, on a Guaranteed Minimum Pension (GMP) basis.
As explained in para 2.2 of SFI, no question arises as to the final salary benefits earned during the first and second phases of the Schemes history (except of course how far pensions already in payment at the dissolution date, on a final salary basis, take priority to some other benefits).
The issues that arise are on VIP benefits earned during the second or third phase, and MoneyMatch benefits earned during the third phase.
It is therefore necessary to describe these benefits in some detail.
VIP benefits and methods of providing annuities
Schedule Four to the 1998 deed contains the rules relating to the final salary benefits and (in paras 2.2, 3.2, 3.3 and 8) VIP benefits.
A member could choose what VIP Contribution to pay, within various limits, and in respect of each contributing member the Company undertook to make payments called VIP Match.
These started at 50% of VIP Contributions for a member with less than two years service, rising by stages to 100% (that is, a full match) after nine years service.
The member could make a choice as to the investment of his VIP Contributions and VIP Match (together VIP total contributions).
In practice, the choice was between investment in an account with the Yorkshire Building Society or one of two funds managed by Standard Life.
At 5 April 2003 the total funds held in these two forms of investment was about 20.8m (part held as VIP total contributions, and part as MoneyMatch funds, as explained below).
Para 8 of Schedule Four provided for benefits in respect of VIP total contributions.
This paragraph seems to have been quite extensively amended after 1998 and the manuscript notes of the amendments are far from clear.
But neither side based any submissions on para 8.
It is common ground that the primary benefit to which VIP total contributions were applicable was a pension, which involved the conversion (one way or another) of VIP total contributions (measured by a sum of money) into a life annuity.
Here it is necessary to make an excursus into the part that life assurance companies play in the provision of annuities for pensioners under occupational pension schemes.
Life offices have for many years played a very important part in this field.
Mr William Phillips (one of the first members of the bar to specialise in this field) referred in his Pension Scheme Precedents, published in 1957, to home schemes (what are now called self administered schemes) and office schemes (set up and managed by a life office).
The committee chaired by Professor (now Sir) Roy Goode recorded in its influential report, Pension Law Reform (Cm 2342), published in 1993, that at that time over 97% of contracted out money purchase schemes were insured schemes.
Many of them were quite small in terms of numbers and assets, and the cost of a self administered scheme would have been disproportionate.
Counsel agreed that that 97% figure may well not hold good today, because of the general flight from final salary schemes in recent years, which has probably increased the average size (in membership and assets) of money purchase schemes.
The respondents written case distinguishes between two types of annuity provision, internal and external annuitisation.
Mr Christopher Nugee QC, for the Secretary of State, told the Court that there are in fact four different types, and Mr Simmonds QC (for the deferred pensioners) accepted that refinement.
The four situations are as follows. (1) An annuity is internally provided in the full sense if the trustees of the pension fund, having taken advice from their actuary about current annuity rates, resolve to provide an annuity at a specified rate out of the resources of the pension fund.
This necessarily involves some degree of risk of the resources of the fund proving insufficient to provide all the benefits due, if investment returns are disappointing or annuitants exceed their actuarial life expectations (or both). (2) The next three situations all involve obtaining annuities from life offices.
The trustees may purchase an annuity from a life office and pass on instalments of the annuity, as they become due, to the pensioner.
The trustees remain responsible for the annuity, but are free from any actuarial risk. (3) Alternatively the trustees may arrange with the life office for the purchase of an annuity in the pensioners own name.
This is similar to situation (2) but the trustees are discharged from responsibility as soon as the annuity has been purchased. (4) Under a scheme set up and managed by a life office the trustees of the pension scheme regularly pay premiums to the life office in respect of all the scheme liabilities, which are met by the life office.
Here the annuity is paid for throughout the members pensionable service rather than its amount depending on annuity rates current at his or her retirement.
It will be apparent that in situation (2) there are two theoretical risks: that of misappropriation or miscarriage of pension instalments, and failure of the life office.
In situations (3) and (4) the failure of the life office is the only risk.
The way in which VIP total contributions were used in practice before the dissolution date is recorded in SFI para 2.4 (5): The Trustee had power, with the members consent, to purchase an annuity or insurance contract from an insurance company in order to secure his benefits: Schedule 2 rule 8.1.
In practice however it appears that the Members VIP Interest was converted into pension using tables of factors periodically supplied by the Scheme actuaries and (as allowed for by article 8.1.5) paid direct from the Scheme; this is what is referred to as internal annuitisation and (together with the same feature in relation to MoneyMatch benefits) forms the subject matter of the third issue on this appeal.
Since the Company went into receivership, however, arrangements have been made for the purchase of annuities from a life office.
Mr Giles Orton, a director of the Trustee, has deposed that in December 2004 the Trustee transferred approximately 70m to Prudential Retirement Income Ltd in respect of pensioners in order to lock into the mortality rates and investment yields available at that time.
MoneyMatch benefits
The rules as to MoneyMatch benefits are set out in Schedule Three to the 1998 deed.
Under rule 1 members prospectively entitled to these benefits (that is what the deputy judge called Option 1 and Option 2 members, together with new entrants after the 1992 reorganisation) paid contributions at the rate of 3% of contribution earnings.
They could also opt to pay MoneyMatch Plus contributions and further supplementary contributions, within specified limits.
Under rule 2 the Company made contributions (called MoneyMatch Credits and MoneyMatch Plus Credits) equal to each members MoneyMatch and MoneyMatch Plus (but not supplementary) contributions.
There were some special transitional arrangements which it is unnecessary to go into.
Rule 3 dealt with the investment of total contributions.
The total contributions were to be credited to a Guaranteed Interest Fund (GIF) with the possible exception of (i) a members MoneyMatch Plus contributions (ii) a members supplementary contributions and (iii) the Companys MoneyMatch Plus contributions in excess of 2% of plan earnings (under the definitions in Schedule One plan earnings are defined in similar but not identical terms to contribution earnings; neither side took any point on this).
These three items could be invested, at the Members option, in the investment funds mentioned in para 12 above.
The GIF was defined in Schedule One as the notional investment fund established by the Trustee for the purpose of MoneyMatch.
It was notional in the sense that it was not a separate appropriated fund.
It was a part, ascertainable only as a matter of accounting, of the general fund held by the Trustee for the purposes of both Core (that is, final salary) benefits and MoneyMatch benefits.
The investment funds mentioned in para 12 above were separate appropriated funds, held for the purposes of MoneyMatch Plus and supplementary contributions (together with VIP total contributions as already explained).
Rule 3.1.1(a) and (b) specified which contributions were to be credited to the GIF.
Rule 3.1.1(c) must be set out at length as it is crucial to the appellants case that MoneyMatch benefits were not money purchase benefits, because (it is argued) the investment return on MoneyMatch contributions is not directly related to those contributions.
It provides as follows: (a) At the Commencement of each Plan Year, the Trustee shall declare a rate of interest on the Guaranteed Interest Fund which shall be applicable to the Plan Year stated.
The rate of interest declared shall be 1% less than the rate of interest available from the building society nominated for this purpose by the Trustee on its additional voluntary contribution accounts under company sponsored approved arrangements for which the nominated building society is responsible for the maintenance of individual account balances.
The rate of interest available is that rate at the 31 March immediately preceding the Plan Year to which the said rate is to apply. (b) At each Plan Year end commencing with the Plan Year ending on 5th April 1995 the Trustee shall make (or cause to be made) a comparison of: (i) the average rate of investment return on the Fund (but excluding for the purposes only of the present comparison such parts of the Fund as are attributable to the Investment Funds) applicable to the three preceding calendar years (ii) the average interest rate declared for the Guaranteed Interest Fund during the last of the three calendar years in (i) above calculated as one quarter of the interest rate that applied at the start of that calendar year and three quarters of the interest rate that applied at the end of the calendar year. (c) Where the comparison reveals a rate of return under (b)(i) above which is greater than the return under (b)(ii) above then the Trustee shall declare a bonus percentage.
The bonus percentage shall be 50% of the excess of (i) over (ii) subject to such bonus not exceeding 4%.
Rule 4 set out the benefits to be provided in respect of a members MoneyMatch interest on his or her retirement, early leaving, or death.
Counsel did not make any submissions based on the details of these provisions, but it is worth noting that rule 4.1.3 referred to pension increases in accordance with Rule 5 in the general rules set out in Schedule Two.
Rule 5.2.2 provided that Revaluation Requirements (defined in Schedule One by reference to the statutory code) should apply to deferred pensions in excess of GMP, and stated: In particular, any money purchase benefits (as defined in section 181((1) of [PA 1995]) shall be calculated in accordance with the investment yield and any bonuses arising from the relevant payments during the period [until state pensionable age], subject to the Revaluation Requirements.
The general effect of the provisions in rule 3.1.1(c) is that the amount credited to a member in respect of his or her interest in the notional GIF would not necessarily, and indeed almost certainly would not in practice, precisely mirror the actual investment return on what was a mixed fund of fixed interest government securities, equities, and cash and derivatives.
Instead the member would get an annual return determined year by year by the Trustee by reference to building society rates (in the last accounting period before the dissolution date it was 3.12%) together with the prospect of a bonus equal to half the excess (if any) of the unweighted average annual investment return for the last three calendar years over the weighted average interest rate determined at the beginning and end of the year in question (but not exceeding 4%).
In practice, this formula could be expected to provide a smoother but rather lower rate of return than the actual investment return (which might in some years be negative), comparable to the smoothing effect achieved by life offices on their long term with profits funds.
The statutory provisions
The relevant definition of money purchase benefits is in section 181(1) of PSA 1993, applied for the purposes of section 73 of PA 1995 by section 124(5) of the latter Act: Money purchase benefits, in relation to a member of a personal or occupational pension scheme or the widow or widower of a member of such a scheme, means benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or by any other person in respect of the member and which are not average salary benefits.
Leaving aside the last seven words (to which it will be necessary to return) the reader sees that the essential feature of these benefits is that their rate (typically so much a year) or amount (typically a lump sum) is to be calculated by reference to contributions made by the member or someone else (typically the employer) in respect of that member.
A money purchase scheme is defined (also in section 181(1)) as a pension scheme under which all the benefits that may be provided are money purchase benefits.
The issue between the parties may ultimately turn on whether the statutory words calculated by reference to mean (as the Court of Appeal held in Aon Trust Corporation v KPMG [2005] EWCA Civ 1004, [2006] 1 WLR 97, para 171) calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions.
The appellant contends that the need to refer to current annuity rates as well is fatal in the case of VIP benefits which may be provided by an internal annuity; and that the absence of a direct link with the actual investment return on MoneyMatch contributions is similarly fatal in the case of MoneyMatch benefits.
In their submissions counsel (mainly, it must be said, in response to questions from the Court) made reference to the statutory origins and contexts of the definition which the Court has to construe.
PSA 1993 is a consolidating statute and in Farrell v Alexander [1977] AC 59 the House of Lords gave a firm warning against going behind, or beneath, the text of a consolidating statute.
Lord Wilberforces observations on that point (at p73) are too well known to need repetition.
No doubt mindful of this, Mr Simmonds, in the deferred pensioners written case, went to the consolidating statute itself, the PSA 1993, to identify four contexts in which the definition of money purchase benefits (or that of a money purchase scheme) is relevant.
He referred to the legislative history (in paras 55 to 59 of the case) only as a fallback position.
The first context in PSA 1993 is the revaluation of deferred benefits.
If a member changes jobs at the age of (say) 45, and does not receive a transfer payment to the new employers pension scheme, there is a danger of the real value of the members deferred benefits being severely eroded by inflation.
Sections 83 to 86 of, and Schedule 3 to, PSA 1993 sought to remedy that problem by requiring a minimum level of revaluation of benefits.
The permitted methods of revaluation are referred to in section 84(4) and are defined in Schedule 3 as the average salary method, the final salary method, the flat rate method and the money purchase method.
Flat rate benefit is defined in section 84(4) as any benefit the rate or amount of which is calculated by reference solely to the members length of service.
The definition of money purchase benefits is provided by section 181(1) as already mentioned.
Schedule 3, paragraph 5(1) provides: Subject to sub paragraphs (2) and (3), the money purchase method is to apply the investment yield and any bonuses arising from payments made by or on behalf of a member towards providing any pension or other retirement benefit which is payable under the scheme to him or to any other person in respect of him in the manner in which they would have been applied if his pensionable service had not terminated.
Sub paragraphs (2) and (3) provide for possible deductions of administrative expenses.
It is the provisions of Schedule 3, para 5 that are referred to in rule 5.2.2 of Schedule Two of the 1998 deed.
The second context is in connection with contracting out from SERPS.
This complex topic is dealt with in Part III of PSA 1993.
For present purposes the most material provisions are in section 8(1), under which contracted out employment is defined in terms of employment in a salary related contracted out scheme or a money purchase contracted out scheme.
The statutory conditions include (section 9(3)) requirements as to protected rights.
Section 28(2)(a) contemplates that effect may be given to protected rights by the provision by the scheme of a pension (complying with various requirements).
The appellant accepts that this covers the provision of an internal annuity (in the sense indicated in para 15(1) above).
The third context was provided by sections 102 to 108, under which money purchase benefits were excluded from provisions for revaluation of pensions in payment.
Mr Simmonds did not develop this point, partly no doubt because the effect of sections 102 to 108 was reversed by PA 1995.
But it is another context suggesting that an internal annuity is not incompatible with money purchase benefits.
The fourth context is the employers statutory obligation, under section 144, to make good any deficiency of assets as against liabilities when a pension scheme is wound up, or the employer becomes insolvent (eventualities which frequently coincide).
Mr Simmonds accepts that the context of this provision is unequivocally that of adequacy of funding.
Money purchase schemes were excepted from the scope of section 144.
Section 144 has now been repealed and replaced by section 75 of PA 1995, which also excludes money purchase schemes.
This exclusion is a very important part of Mr Nugees case for the appellant.
He has submitted that it is fundamental to the scheme of the legislation (and confirmed by the EU context, referred to below) that money purchase schemes are (more or less by definition) always fully funded, with no risk of the assets being insufficient to meet the liabilities, and for that reason alone they are excepted from the funding obligation in section 75 and also from the statutory order of priority now found in section 73 of PA 1995.
Hybrid Schemes
As just noted, the exception in section 73 of PA 1995 applied only to money purchase schemes that is schemes providing no benefit except money purchase benefits.
But the Secretary of State had power to modify section 73 by regulations, and exercised this power by making the Occupational Pension Schemes (Winding Up) Regulations 1996 (SI 1996/3126) (the Winding Up Regulations).
Regulation 13 (Hybrid schemes) provides as follows: (1) In relation to any scheme (a) which is not a money purchase scheme, but (b) where some of the benefits that may be provided are relevant money purchase benefits, section 73 applies as if (i) the liabilities of the scheme did not include liabilities in respect of those benefits, and (ii) the assets of the scheme did not include the assets by reference to which the rate or amount of those benefits is calculated. (2) In paragraph (1) relevant money purchase benefits means money purchase benefits other than (a) benefits derived from the payment by any member of voluntary contributions, or (b) underpin benefits. (3) In this regulation, underpin benefits means money purchase benefits which under the provisions of the scheme will only be provided in respect of a member if their value exceeds the value of other benefits in respect of him under the scheme which are not money purchase benefits.
If (as has happened in this case, if Mr Simmonds is correct) both salary related benefits and money purchase benefits are to be provided out of a single global fund of investments, it is not immediately obvious what are the assets by reference to which the rate or amount of those benefits is calculated.
The SFI states (para 4.7), without detailed reference to the facts of this particular case: The effect of the statutory provisions is that if a particular benefit is classified as a relevant MP benefit, regulation 13 takes both the liability and the corresponding assets out of the mandatory priority order in section 73.
If it is not a relevant MP benefit, liability for the benefit has to take its place in the section 73 order, under which priority is given to pensioners over deferreds.
But it is to be noted that under section 73(3)(a) liabilities derived from a members voluntary contributions have the highest priority.
The EU dimension and national lifeboats
There are two relevant EU Directives: Council Directive 80/987/EEC of 20 October 1980 (the Insolvency Directive) and Directive 2003/41/EC of the European Parliament and the Council of 3 June 2003 relating to the Activities and Supervision of Institutions for Occupational Retirement Provision (IORP).
Article 8 of the Insolvency Directive provides as follows: Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employers undertaking or business at the date of the onset of the employers insolvency in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivors benefits, under supplementary company or inter company pension schemes outside the national statutory social security schemes.
This provision was considered and applied by the Court of Justice in Robins v Secretary of State for Work and Pensions (Case C 278/05) [2007] 2 CMLR 269.
That case was concerned with claims by members of an insolvent salary related pension scheme which was wound up in 2003, so that section 73 and 75 of PA 1995 applied.
The Court of Justice held (paras 41 to 45) that Article 8 does not require Member States to provide a full guarantee of pension rights under private sector schemes, but (para 59) that a system such as that established by the UK legislation does not ensure the protection provided for by the Directive and does not constitute proper implementation of Article 8 thereof.
It was for the national court (para 69 et seq) to decide, in accordance with well settled principles, whether a remedy in damages was appropriate.
IORP is concerned, as its recitals indicate, with establishing a genuine internal market for financial services.
Article 15(1) and (2) provide as follows: (1) The home Member State shall ensure that institutions operating occupational pension schemes establish at all times in respect of the total range of their pension schemes an adequate amount of liabilities corresponding to the financial commitments which arise out of their portfolio of existing pension contracts. (2) The home Member State shall ensure that institutions operating occupational pension schemes, where they provide cover against biometric risks and/or guarantee either an investment performance or a given level of benefits, establish sufficient technical provisions in respect of the total range of these schemes.
These requirements are then elaborated in paras (3) to (6).
Article 16(1) provides: The home Member State shall require every institution to have at all times sufficient and appropriate assets to cover the technical provisions in respect of the total range of pension schemes operated.
This requirement is then elaborated in paras (2) and (3).
In Robins the Court of Justice (paras 16 and 17) made a brief (and seemingly incomplete) reference to the statutory provisions for compensating members of insolvent schemes as they stood at that time.
In this appeal the appellant Secretary of State has provided quite a full account of the far reaching changes in compensation and funding requirements made by the Pensions Act 2004 (PA 2004), which radically altered the regulation of pension schemes.
Part 1 of PA 2004 set up the Pensions Regulator in place of the Occupational Pensions Regulatory Authority, and Part 2 set up the Pension Protection Fund (PPF) in place of the Pensions Compensation Board established by PA 1995 (which provided compensation only where there had been a loss caused by dishonesty).
PPF is funded by a statutory levy and it has the function of assuming responsibility for the pension schemes of insolvent employers in cases where the scheme is wound up after 5 April 2005.
It does not therefore apply to the Scheme.
Compensation is not limited to cases of dishonest mismanagement or misappropriation.
But its powers do not extend to money purchase schemes (PA 2004, section 126(1)).
Part 6 of PA 2004 consists of a single section, section 286, which requires the Secretary of State to set up a financial assistance scheme (FAS) for making payments to qualifying members of qualifying pension schemes.
Again, money purchase schemes are excluded from the latter definition (section 286(2)).
The principal regulations are the Financial Assistance Scheme Regulations 2005 (SI 2005/1986) (as amended).
It should also be noted that insured schemes have been comprehensively protected, throughout the whole relevant period, by the Policyholders Protection Act 1975 and regulations made under that statute.
Part 3 of PA 2004 (Scheme funding) is intended to strengthen the regulation of scheme funding.
Like Part 2 these provisions were at least in part intended as a response to the United Kingdoms obligations under the Insolvency Directive and IORP.
The minimum funding requirement regime was replaced by a new statutory funding objective (set out in section 222(1)) which is generally referred to as scheme specific funding (SSF).
These provisions do not apply to money purchase schemes (section 221(1)).
The appellants printed case places some emphasis on the fact that money purchase schemes are excluded from the PPF regime, the FAS regime and the SSF regime.
With the exception mentioned below, the parties written and oral submissions did not explain how those regimes apply to schemes which provide some money purchase benefits without being exclusively money purchase schemes.
The exclusion of money purchase schemes is not, I think, directly relevant to the issues that the Court has to decide, but was mentioned as part of a general submission (which is, as already noted, an important part of Mr Nugees case) that money purchase schemes are by their nature always fully funded, and free from any risk of actuarial insolvency.
It is also part of a more particular submission on the Marleasing principle (Marleasing SA v La Comercial International de Alminentacin SA (Case C 106/89) [1990] ECR I 4135) that this Court should prefer a construction which avoids infringement, or possible infringement, of EU obligations.
This point was not raised before the deputy judge (when the Secretary of State was not an intervener).
It was raised and rejected by the Court of Appeal (paras 95 and 96).
The exception mentioned above is that the diligence of Mr Nugee and his junior, Mr Hilliard, produced on the second day of the hearing a note on the treatment of deferred scheme members setting out the appellants counsels view on the practical outcome of the competing cases on the first issue, in terms of what different classes of pensioners would receive from the combined resources of the Scheme and FAS.
The rules of FAS as they apply to the Scheme do not at present cover all money purchase benefits that fall to be dealt with under section 73 of PA 1995 (though there is a consultation in progress about this).
Although this note was produced in response to a request from the Court I think it better not to refer to it.
This is partly because the note was not (I think) agreed by Mr Simmonds.
But the more important reason is that this Court has to decide the issues of construction as a matter of principle, and without regard to the practical consequences, however much sympathy we may feel for all the pensioners, faced as they are with a long delay in the final determination of how the Schemes inadequate funds should be divided.
The KPMG case: at first instance
The decision of the Court of Appeal in Aon Trust Corpn v KPMG [2006] 1 WLR 97 (KPMG) is the only decision of that court which has any close bearing on the issues in this appeal.
It has therefore received close attention at every stage in this litigation.
The deputy judge, who was of course bound by the decision, distinguished it (primarily at paras 129 to 134 of her judgment).
The Court of Appeal, which was also bound by the decision, also distinguished it, primarily at paras 143 to 145 (as regards MoneyMatch benefits) and paras 150 to 152 (as regards internal annuitisation).
Mr Nugees position is that KPMG was rightly decided and that in this case the Court of Appeal was in error in distinguishing it.
Mr Simmonds accepts that it may have been correctly decided on its facts, but criticises some important parts of its reasoning.
On any view it is necessary to take a close look both at the first instance decision of Sir Andrew Morritt V C (who is very experienced in the pensions field) [2004] EWHC 1844 (Ch) [2005] 1 WLR 995, and at the judgment of the Court of Appeal (delivered by Jonathan Parker LJ, with whom Mummery and Chadwick LJJ agreed).
The case related to a pension scheme which started life in 1949 as the staff pension scheme of Peat Marwick Mitchell & Co.
Until 1999 periodic actuarial valuations showed that the scheme was in surplus, but in that year a small deficit was disclosed.
In consequence the scheme was amended to split the pension fund into two, with effect from 31 March 2000.
There was a pre 2000 fund which became a closed fund (that is, no new entrants were permitted) and a post 2000 fund which was described by the Vice Chancellor, in para 2, as a conventional money purchase scheme.
The proceedings related to the pre 2000 fund (the closed fund).
The principal issue in the Court of Appeal was whether the closed fund also was held in a money purchase scheme for the purposes of PSA 1993 and PA 1995 (it was common ground that if it was, the scheme was a relatively unusual type of money purchase scheme).
This issue arose in Part 8 proceedings in which the corporate trustee (Aon) sought directions on several matters, including whether the employer, KPMG, was liable or potentially liable under PA 1995 to make good a deficit in the closed fund which had grown, by the time of the 2002 triennial actuarial valuation, to about 71m.
The scheme affecting the closed fund was unusual in that it combined one of the salient features of a money purchase scheme defined contributions of equal amount made by both member and employer in respect of that members prospective benefits with actuarially determined formulae under which the amount of pension earned by any member was provisionally ascertainable year by year during a members service.
This process was however provisional only because clauses 8.4 and 8.5 of the trust deed provided as follows: 8.4.
If an actuarial valuation or interim review of the pre 2000 fund shows a surplus the trustees may with the consent of the principal employer and after taking the actuarys advice and after making any such amendments to the trust deed and/or rules as may be necessary, decrease the contributions of any member and/or increase (by declaration of bonuses or interim bonuses or otherwise) the benefits or future benefits of any member or other person entitled to receive any benefit from the pre 2000 fund. 8.5.
If an actuarial valuation of the pre 2000 fund reveals a deficiency in the pre 2000 funds resources the trustees may with the consent of the principal employer make such adjustments and amendments to the benefits secured or thereafter accruing for and in respect of the members as are necessary in the opinion of the trustees after taking the actuarys advice to secure the continued solvency of the pre 2000 fund.
It will be observed that these provisions are not strictly mandatory.
They confer fiduciary powers, to the exercise of which KPMG had to consent.
The alteration in contributions or benefits under clause 8.4 did not have to be carried out in any particular way (though no doubt a general duty of fairness was implicit), and clause 8.5 was similarly unspecific as to how continued solvency was to be maintained.
Moreover (by clause 8.2 and 8.3) only the statutory triennial valuation was mandatory, and it was for the trustees to decide (with KPMGs consent) whether to obtain more frequent actuarial valuations or interim actuarial reviews.
The operations of the provisions of clause 8.4 and 8.5 (the clause 8 powers) was therefore by no means automatic or rigidly linked to changes in investment returns (as opposed to life expectancy).
simplified example: In para 14 of his judgment the Vice Chancellor gave what he called a . take a male aged 25 at his next birthday in the calendar year 1999.
The factor is 0.960 for a pension payable unreduced at age 65.
If in that year he earned 20,000 and the contribution rate for both him and the employer was 4% then the computation of benefit on retirement at age 65 would be 20,000 x 8% (ie 1,600) x 0.960 = 1,536 per annum.
If in the same year there had been a bonus declaration of 5% under clause 8.4 then the pension in respect of that year of service would have increased to 1,612.80 (1,536 + (5% x 1,536)).
On the other hand a deduction of the like percentage under clause 8.5 would give rise to a pension aged 65 of only 1,459.20.
The formula is applied for each year of service to the contributions made in that year and the pension at retirement is the sum of the product of such computations for each year of service.
The last sentence of this passage may be describing how the clause 8 powers were exercised in practice.
I rather doubt whether that was the only permissible way of exercising the powers.
But the general pattern was what was described in argument as building blocks: each years contributions produced a provisional component of the eventual pension, but the cumulative process could be either accelerated or retarded, at least once every three years, by the exercise of the clause 8 powers.
The context in which the KPMG proceedings were brought was that the closed fund had an uncomfortably large deficit and the trustee, Aon, was no doubt considering a fairly drastic exercise of its clause 8.5 power.
Three issues were raised at first instance: (i) whether the power could be used to reduce pensions already in payment; (ii) whether the power was a power of modification within the meaning of section 67 of PA 1995 (and so subject to statutory restrictions); and (iii) whether the scheme was a money purchase scheme, so that KPMG was not subject to statutory obligations to make payments under sections 60 and 75 of PA 1995.
The Vice Chancellor answered questions (i) and (ii) in the affirmative (paras 18 to 33) and question (iii) in the negative (paras 34 to 58).
The Vice Chancellor reached his conclusion on the third question on two alternative grounds, one particular and one general.
The particular ground was the exclusion of average salary benefits from the statutory definition of money purchase benefits.
The Vice Chancellor explained (paras 52 to 55) that average salary benefits, whatever particular mechanism is used to compute them, are likely to have elements of both defined contribution and defined benefit, and that the last seven words of the statutory definition are in the nature of a tie break (para 55): An average earnings related scheme is likely to have resort to both earnings and contributions/payments in the ascertainment or definition of the benefit.
It is necessary to do so in order to take account of both the level of earnings going to make up the average and the time when they arose.
This, in my view, is the explanation for the exclusion of average salary benefits at the conclusion of the definition of money purchase benefit.
That explanation is illuminating but not directly relevant to this appeal.
The more general ground of decision is undoubtedly relevant.
The Vice Chancellor reviewed the contexts in which money purchase benefits and money purchase schemes appear in PSA 1993 and PA 1995 (most of these are noted at paras 25 to 28 above).
He drew from them two general conclusions.
One is in para 46: Nevertheless it appears to me to be obvious that Parliament recognised that in a money purchase scheme in all normal circumstances the benefits are matched by equivalent assets.
This is to be contrasted with a defined benefit scheme, such as a final salary scheme, when assets and liabilities will not match each other unless the actuarial and other assumptions on which the level of contribution was fixed actually occur.
The other general conclusion is set out, in very similar terms, in paras 42, 44 and 47; I quote from para 44: Thus the distinction recognised that a money purchase benefit had no guaranteed or defined benefit for it depended on the investment yield obtained or attributable to the fund derived actually or notionally from the contributions made by the member and his employer.
In each of the three formulations the Vice Chancellor used the expression investment yield.
I think it is clear that he was referring not simply to income yield, but to what is generally referred to in the financial services industry as investment return or total return that is income yield together with capital appreciation (if positive during the relevant period) or the difference between the two (if there is a fall in capital value during the relevant period).
The Vice Chancellor also accepted KPMGs submission (para 54) that the statutory definition must be applied with regard to the substance of the calculation.
He saw that approach as leading both to what I have called the particular ground of decision (para 56) and the more general ground (para 57), on which he considered that the contingent and discretionary effect on benefits of the clause 8 powers was inconsistent with their being money purchase benefits.
The KPMG case: Court of Appeal
All three issues were raised on the appeal, and on the issue of the reduction of pensions in course of payment the appeal was allowed.
Very clear words would have been needed to authorise such a step, and the clause 8.5 power did not go that far.
The appeal as to whether the clause 8 powers came within section 67 of PA 1995 was dismissed.
We are concerned mainly with a decision on the money purchase issue, on which the Court of Appeal reached the same conclusion as the Vice Chancellor, but for reasons that were expressed in rather different terms.
In discussing money purchase schemes in general, Jonathan Parker LJ observed (paras 31 and 32): Alternatively, an employer setting up an occupational pension scheme may decide to define the level of benefits by reference solely to the contributions made in respect of the member concerned, so that the benefit represents no more and no less than the product of the contributions.
Such a scheme is commonly called a money purchase scheme (I will come to the statutory definition of that term later).
Thus in a typical money purchase scheme there can, by definition, be no mismatch between assets and liabilities.
Hence there is no need (indeed, no scope) for a balance of cost obligation on the employer, since the level of contribution dictates the level of benefit and no balance of cost can arise.
Counsels arguments before the Court of Appeal were recorded at some length, the parts relevant to the money purchase issue being paras 106 to 117 (Mr Sumption QC for KPMG), paras 123 to 134 (Mr Green QC for the representative active member) and para 148 (Mr Ham QC largely adopting Mr Greens submissions).
I will not try to analyse these in detail.
There was a good deal of argument about the nature and significance of the clause 8 powers.
The argument for KPMG was that they were an integral part of the process of calculating benefits by reference to contributions, and not a provision for reducing settled entitlements.
Against this the members stressed what the Vice Chancellor had called the contingent and discretionary nature of these powers.
In this appeal the nature and effect of the clause 8 powers have to be compared with the nature and effect of the provisions in rule 3.1.1(c) of Schedule Three of the 1998 deed.
Jonathan Parker LJ discussed the rival arguments and set out his conclusions on this issue at paras 151 to 176.
In summary (which cannot do justice to the detailed development of his reasoning) the steps were on the following lines. (1) The key to the problem is in the relationship between contributions and benefits, as that relationship emerges from a consideration of the scheme as a whole, properly construed (para 151). (2) The clause 8 powers were not automatic, but discretionary, in their operation (para 153). (3) The calculation of benefits was a three stage process, with the clause 8 powers as a distinct stage, involving actuarial factors, which were also involved in the formulae at the first stage (paras 155 to 166). (4) The scheme lacked the basic characteristics of a money purchase scheme: In the first place, the requisite direct relationship between contributions and benefits is broken by the introduction of actuarial factors.
As Mr Ham succinctly put it at the conclusion of his submissions, in the case of a money purchase scheme you do not need an actuary.
Secondly, by including the [clause 8 powers] the scheme not only recognises but positively caters for a continuing mismatch between assets and liabilities (para 167, some references omitted). (5) The inclusion at the first stage of actuarial factors made it impossible for the scheme to qualify as a money purchase scheme: the expression calculated by reference to means, in my judgment, calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions (para 171). (6) The Lord Justice also agreed with the Vice Chancellors alternative ground of decision, the exception for average salary benefit, while commenting that the true reason for it would have to remain a mystery (para 174).
The judgments below
The deputy judge had to decide several issues.
On the money purchase issue she distinguished KPMG as a building block scheme in which actuarial factors were an integral part of the calculation process.
She said in relation to the GIF mechanism (para 137): Despite the fact that the final rate of return to be applied to the Members Interest is arrived at by the addition of a bonus percentage to the initial conservatively declared rate, in my judgment, it is merely a rate of return nevertheless.
The mechanism by which the rate is arrived at is just that.
She considered that to distinguish between the internal and external provision of annuities would produce anomalies.
The Court of Appeal rightly paid generous tribute to her judgment.
The judgment of the Court of Appeal (delivered by Mummery LJ, but recording that all members of the Court had contributed to it) is, if I may respectfully say so, an admirable effort in explaining a very complex topic in language comprehensible to the members of the Scheme.
But the judgment acknowledged the difficulties (paras 38 and 39): The Courts aim has been to produce, as far as possible, a judgment that Scheme members can themselves understand, if not the dense detail, at least the crucial conclusions and the reasons for them.
This is particularly important in a case where the benefits of the members are significantly scaled back .
Attempts to translate the legislation and the Scheme precisely into ordinary English for the benefit of a wider audience of non experts are probably doomed to failure.
The complexity of the subject must be respected.
Over simplification that does not do so could make matters even worse by causing confusion and misunderstanding through error and inaccuracy.
The Court of Appeal identified seven issues as arising in the appeal.
All but one of them were concerned with different aspects of the definition of money purchase benefits and money purchase schemes.
The exception concerned the meaning of voluntary contributions in section 73(3)(a) of PA 1995, which is no longer in issue.
The issues before the Supreme Court are the first two money purchase issues, designated and discussed in the judgment of the Court of Appeal as follows: (1) Are MoneyMatch benefits money purchase benefits despite the presence of the GIF? (paras 139 to 145) (2) Are pensions granted by way of internal annuities money purchase benefits? (paras 146 to 152).
So although the judgment runs to 189 paragraphs the Courts discussion of the crucial issues, and its conclusions on them, can be found in fourteen closely reasoned paragraphs.
This economy of expression was achieved partly because the judgment had already (paras 54 to 98) considered the KPMG case at length.
The discussion of KPMG contains some very pertinent observations (paras 57 to 59) about the role of precedent in statutory construction.
As the report is readily available it is unnecessary to repeat them.
Their general tenor (with which I whole heartedly agree) is that judgments on statutory construction are not to be read as if they were themselves statutes, and that apparently wide propositions may have to be read in the context of the particular facts of the case to which they related.
The Court of Appeal drew four conclusions (paras 85 to 90) as to the significance of KPMG for the present appeal.
First, the scheme in that case was essentially a defined benefit scheme, although that feature was embodied (or concealed) in the actuarial formulae which provided the building blocks of the eventual pension.
Second, KPMG contained no teaching about internal annuities or the presence of guaranteed notional returns provided by the GIF.
Third, the relationship between contributions and benefits must be determined by looking at the scheme as a whole; the impossibility of a mismatch between assets and liabilities was not a necessary condition of a money purchase scheme, although it was a feature of a typical money purchase scheme.
I will set out the fourth point in the Courts own words (para 90): we are also unable to accept that a benefit is precluded from being an MP benefit simply because an actuarial factor is applied at any stage of the calculation, or because the MP benefit pot is increased by reference to a guaranteed or notional return, as with a guaranteed interest fund.
There is force in the comment that there would be no MP benefits at all if the introduction of an annuity rate to convert the capital value of the members MP pot into a pension income for the member prevented that benefit from qualifying as an MP benefit.
In every case an annuity rate has to be applied, either by an insurance company in the case of the external provision of an annuity, or by the Trustee in the case of internal annuitisation.
The important point in such cases is that the pension benefit is related to the size of the members interest or account in the relevant Scheme fund.
The Court of Appeal concluded that the approach taken by counsel for the Secretary of State and the pensioner was over analytical and too literal in its treatment of KPMG.
It considered (para 92): The question in each case is to ask whether, having regard to the combination of all the features of the scheme in question, the rate or amount of the benefit in question can be sensibly and reasonably said to be calculated by reference to the payments by or in respect of the members.
That could not be said in the case of KPMG.
As explained below, it can be said here in relation to the calculation of the Members Interest and the VIP Interest, notwithstanding the particular features on which the Department and the pensioner rely for their objections to the members benefits being MP benefits.
The Court did not accept that the Marleasing principle was of any assistance in construing the statutory definition (paras 95 and 96).
Following that approach, the Court of Appeal thought it wrong to read into the statutory definition a requirement that money purchase benefits (para 144): . must be the direct and actual products of the payments in order to be MP benefits.
Those words are not in the definition.
It is true that they were used in KPMG, but that was in the context of a very different scheme.
In that case the liabilities to members turned on the application of tabulated multipliers to contributions.
That calculation was a break in the link between the benefits and returns on invested contribution payments to that scheme.
By contrast the use (in the GIF mechanism) of notional returns on the invested contributions did not break the link.
The benefits were still calculated by reference to contributions (para 145).
As to internal annuitisation, the Court recognised that it brought actuarial factors into play.
But (para 152) this was only at the final stage of converting a sum of money into a retirement annuity.
The benefits were still calculated by reference to the total contributions.
Discussion: some preliminary points
This Court has had the benefit of excellent written and oral submissions from counsel.
It is unnecessary to summarise them at length.
Mr Nugee has placed particular emphasis on the promise of future benefits as the hallmark of defined benefit schemes; on the equilibrium of assets and liabilities as the hallmark of money purchase schemes, and the reason why they are largely excepted from the operation of sections 73 and 75 of PA 1995; on the Court of Appeals insistence, in KPMG, that a money purchase members benefit should be the direct product of the contributions; and on Marleasing.
Above all, Mr Nugee appealed for clarification and certainty in the law.
Mr Simmonds submitted that Mr Nugee had started with a gloss on KPMG and worked backwards from that.
He explored the four statutory contexts dealing with money purchase benefits (these are covered in paras 25 to 28 above).
He relied on some particular linguistic points on the legislation (including the use of solely in the definition of flat rate benefit in section 84(4) of PSA 1993, and the exclusion from the definition of money purchase benefits of average salary benefits).
He suggested that in considering the meaning of the words calculated by reference to it was helpful to look at the variables and the constants employed in calculations under different types of scheme.
It may be best to start by dealing with three points which can to my mind be disposed of fairly quickly.
First, KPMG was rightly decided.
The use of the actuarial formulae and the width of the clause 8 powers (and the uncertainty as to those powers being exercised either at all, or in any particular way) produced what was on any view too wide a discontinuity between the quantum of a members total contributions (and the return on them), on the one hand, and the benefits to which the member would eventually become entitled, on the other hand.
This conclusion is amply confirmed by (rather than being a consequence of) the deficit of over 70m which had appeared in the closed fund by 2002.
Secondly, however, some of the reasoning in the Court of Appeals decision in KPMG (and in particular, para 171, quoted in para 55(5) above) is open to question: this is considered further below.
I consider that the Vice Chancellor was correct in what he said (para 48 above) about the exception from the statutory definition of average salary benefits.
Thirdly, the Marleasing principle is of no real assistance here.
In relation to the United Kingdoms obligations under article 8 of the Insolvency Directive, Robins v Secretary of State for Work and Pensions (Case C 278/05) [2007] 2 CMLR 269 shows a very broad brush approach, with the outcome determined largely by the statistics quoted in paras 58 and 61 of the judgment of the Court of Justice.
Since the vast majority of money purchase schemes are insured schemes, and since it is agreed that most self administered money purchase schemes have no risk of insolvency, it is hardly conceivable that any drafting error in the legislation could amount to a grave and manifest breach of Community law.
Similarly with IORP; if there is an error in the changes made by Part 3 of PA 2004, it is for Parliament to correct it.
For the Court to attempt correction by stretching or distorting the statutory language would be likely to lead to more anomalies and more confusion.
Calculated by reference to .
payments
In the discussion of whether the critical words of the definition should be construed strictly (Jonathan Parker LJs approach, [2006] 1 WLR 97, para 172) or in terms of what can sensibly and reasonably be regarded as within the words (Mummery LJs approach, para 92) little attention has been paid to the question of the inclusion within the definition of the investment return (in the sense indicated in para 50 above) on a members total contributions.
The only relevant statutory reference that I have found is in the context of revaluation of deferred benefits, where there is a reference to the investment yield and any bonuses arising from payments (PSA 1993, Schedule 3, para 5(1), set out in para 25 above).
Section 87 of PA 1995 and regulations made under it require pension scheme trustees or managers to keep detailed records of contributions to money purchase schemes, but those requirements do not appear to cover the investment return on the contributions.
No one suggests that the investment return on contributions is not properly included in the calculation of money purchase benefits.
In KPMG the Vice Chancellor emphasised that they were included (see paras 49 and 50 above).
Indeed, the statement in the House of Commons in 1986 by Mr John Major MP (quoted by Jonathan Parker LJ in para 112 of his judgment [2006] 1 WLR 97) suggests that the inclusion of investment return is of the essence of money purchase benefits.
The fact is, however, that the statutory definition in section 181(1) of PSA 1993 makes no reference to investment return.
Still less is there anything in the statutory definition requiring meticulous investigation as to the actual investment return earned over the years by every contribution made in respect of a member.
A scheme which provided for a pot (to my mind an unhelpful term, since it suggests an appropriated mini fund) of a members total contributions together with annual interest thereon at (say) 3% compounded annually would be just as much calculated by reference to . payments as one which took account of the exact investment return on investments actually or notionally representing the payments.
Arguably it would fit better with the statutory definition.
It is also worth noting that a scheme which provided for annual interest at the rate of (say) 8% per annum compounded annually would be likely, in the first decade of this century, to have encountered grave solvency problems, although it would seem to fall squarely within the statutory definition.
I do therefore respectfully differ from the key conclusion reached by Jonathan Parker LJ in para 171 of his judgment in KPMG [2006] 1 WLR 97, that calculated by reference to means . calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions.
This interpretation involves reading in the word only, which Parliament did not use (whereas it did use solely in the definition of flat rate benefit set out in para 25 above).
The altered phrase is then explained (in the sense that) by reference to the contributions direct product though the statutory definition makes no express reference to investment return.
It follows that the deputy judge (see para 56 above) and the Court of Appeal (see para 63 above) were right, in my judgment, to conclude that the GIF mechanism did not unhitch a members eventual benefits from that members total contributions.
They provided for a yield of guaranteed interest at a modest rate fixed by an objective test, together with the prospect of further bonuses at a modest rate, fixed, again, by an objective test under which the trustees had no discretion.
All that is in striking contrast to the much looser terms of the clause 8 powers in KPMG.
In the Court of Appeal in KPMG [2006] 1 WLR 97, Jonathan Parker LJ was impressed by the submission of counsel for the representative pensioner (para 148) that with a money purchase scheme there is no need for an actuary.
That proposition is entirely correct in the sense that under Regulation 3(2) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (SI 1996/1715), it is not obligatory to appoint a scheme actuary for a money purchase scheme.
That provision (to which we were not, I think, referred) is consistent with the view that under a money purchase scheme (if not by definition) there should be no mismatch of payments and liabilities.
But a statutory instrument made in 1996 cannot affect the construction of a definition in PSA 1993.
Moreover, as I have just illustrated, the choice of an over optimistic fixed rate of return can lead to solvency problems, as Equitable Life discovered in another context (see Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
There is no evidence before the Supreme Court that the Schemes deficit is the result of the GIF mechanism.
It seems more likely that it has arisen in respect of the final salary part of the Scheme, but the actuarial reports exhibited to Mr Ortons affidavit are not before the Court (with the exception of a report dated 20 March 2008 which is not, without explanation, of much assistance).
This point may be relevant in connection with Regulation 13 of the Winding Up Regulations, discussed further below.
Internal annuities
In my judgment the deputy judge and the Court of Appeal were also correct in their conclusion that the provision of internal annuities (as opposed to the purchase of annuities from a life office) is not incompatible with money purchase benefits.
As the deputy judge put it (para 135) the distinction would produce insupportable anomalies.
As the Court of Appeal put it (para 152), annuity tables based on actuarial calculations are used only at the final stage, when the member retires and the amount earned by his or her defined contributions must be converted from a lump sum into an annuity.
That is inescapable under either method of provision, in that actuarial tables will be used, on the advice of actuaries, either by the trustees or by the life office (with the latter building in a profit element).
Regulation 13
The Court did not hear full submissions as to the effect of Regulation 13 of the Winding Up Regulations, but (as already noted in para 30) the reference in Regulation 13(1)(ii) to the assets by reference to which the rate or amount of those benefits is calculated is not easy to apply when the money purchase benefits are to be provided out of a single unappropriated fund which is insufficient to meet all its liabilities for defined benefits and money purchase benefits.
This point is not expressly raised in the SFI, but it would be most unfortunate if it had to be referred back to a judge of the Chancery Division, with further costs and further delay.
In these circumstances I think it right to say that in my view Regulation 13(1) must be interpreted on the basis that Parliament contemplated (as all sides agree) that money purchase benefits would normally be adequately funded but not over funded, and that the money or assets to be withdrawn from the unappropriated fund for the purposes of section 73 of PA 1995 should be of an amount or value equal to the money purchase benefits calculated by the GIF mechanism (less members MoneyMatch Plus contributions, employers MoneyMatch Plus credits in excess of 2% of Plan earnings and supplementary contributions which under Regulation 13(2)(a) are not relevant money purchase benefits, but take first priority under section 73).
However if counsel for any party feels that this point has been insufficiently argued the Court would entertain further brief written submissions limited to this single point.
Conclusion
In his submissions for the Secretary of State, Mr Nugee (invoking, as it were, the prayer of Ajax: St Aubyn v Attorney General [1952] AC 15, 45) pleaded for clarity above all, even if he were to be unsuccessful in his arguments.
I have considerable sympathy with that, and so will many others who have to grapple with the complexities of the primary and secondary legislation relating to occupational pension schemes.
It is a striking fact that the Trustees report for the year to 5 April 2003 (signed off by the new independent trustee after the dissolution date, and no doubt very carefully considered by the Trustees directors, the auditors and the actuary) stated as a fact that the Scheme had a defined contribution section.
None of these experienced professionals expressed any doubt about the point until the Secretary of States intervention.
That is not to say that the Secretary of States intervention was unnecessary.
Although this Court holds that equilibrium of assets and liabilities is not a requirement of the statutory definition of a money purchase scheme (and similarly for money purchase benefits), it is clear the Parliament has enacted primary legislation, and the Secretary of State has initiated secondary legislation, on that assumption.
Nevertheless in all insured schemes, and in the great majority of self administered schemes, that assumption is in practice justified.
To the special cases on which counsel agreed (insolvency of a life office, or misappropriation of trust funds) there may have to be added the case of an over optimistic guaranteed fixed rate of return on contributions, or the eventuality of unexpectedly high administration costs (the costs of all parties to litigation such as this are normally paid out of the trust fund, especially if the employer is insolvent, and can be a significant burden for a small scheme).
The possibility of exceptional cases of that sort seems unlikely to amount to an infringement of Community obligations, or to necessitate primary legislation as a matter of urgency (although Regulation 13 of the winding up regulations may need clarification).
But those are matters for the Secretary of State and for Parliament.
For these reasons I would dismiss the Secretary of States appeal on the first and third issues.
The second issue (apportionment of MoneyMatch benefits) does not arise.
LORD MANCE
I have found the resolution of this appeal more difficult than the majority.
As Lord Walker points out, the Pensions Schemes Act 1993 (PSA 1993) is a consolidating statute, and we should look at it, rather than undertake historical archaeology.
The critical question is what is comprised within the concept of benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or any other person in respect of the member and which are not average salary benefits (PSA 1993, s.181(1)).
Although the legislative history is not relevant, the factual background at the time of PSA 1993 may be.
While it was only by the Pensions Act 1995 (PA 1995) (amending PSA 1993 and other prior legislation and introducing various new provisions) that Parliament addressed issues raised by the Report of the Pension Law Review Committee chaired by Professor Roy Goode issued in January 1993, that Report must reflect the general understanding of the nature of a money purchase scheme at the time when PSA 1993 was passed.
The Report proceeds on the basis (see e.g. paras 2.2.20, 2.4.24 and 4.4.3) that, since under a money purchase scheme the scheme member bears the investment risk, there cannot in principle be a deficiency of assets, save in the case of loss of assets through fraud or misappropriation.
The Report also confirms (App 4 Table 10, and see paras 2.4.20 to 2.4.31) that in 1993 most money purchase schemes were insured, and in particular (para 2.3.29) that over 97% of the 26,500 such schemes then contracted out (under what became Part III of PSA 1993) were insured.
It is true that insurers can in theory become insolvent, in which case a scheme which had insured itself in respect of a money purchase benefit could suffer a shortfall, but in practice insurance industry solvency is tightly regulated, and there is also extensive statutory protection for beneficiaries in any insolvency.
In the present case, the risk of underfunding due to the promised VIP and MoneyMatch benefits may or may not have been slight.
But, if benefits of this kind do not undermine the essential nature of the scheme as a money purchase scheme, I find it difficult to see where the line is drawn.
This is to my mind confirmed by what I understand to be Lord Walkers view in para 71 that a provision for annual interest on a members total contributions compounded at say 3% or even 8% per annum would still remain a money purchase benefit.
It is true that s.181(1) does not itself expressly delimit what is meant by benefits the rate or amount of which is calculated by reference to a payment or payments.
But the reason appears to me likely to have been that a direct relationship was implicit.
I regard s.84, providing for the revaluation of deferred pensions (accrued at early retirement) to be made using the money purchase method described in Schedule 3, para 5, as pointing strongly in the same direction.
Para 5 states that, with presently immaterial qualifications, the money purchase method is to apply the investment yield and any bonuses arising from payments made by or on behalf of a member towards providing any pension or other retirement benefit which is payable under the scheme to him or to any other person in respect of him in the manner in which they would have been applied if his pensionable service had not been terminated.
The inference is that money purchase benefits are linked directly to an investment yield and/or (e.g. under with profits policies) to bonuses actually declared.
A similar inference appears to me to arise from s.144 (which later became s.75(1) of PA 1995), whereby it is only in the case of an occupational pension scheme which is not a money purchase scheme that an employer is bound to make good to the scheme trustees an amount equal to an excess of the schemes liabilities over the value of its assets.
It cannot therefore have been contemplated that there could be any real risk of liabilities exceeding assets in the case of a money purchase scheme.
Under s.153(1) of PSA 1993 (s.89(2) of PA 1995) the Secretary of State was given power by regulations to make similar provision, subject to such modifications as he might specify, in respect of other cases.
Section 125(2) of PA 1995 conferred a like power expressly in relation to schemes which are not money purchase schemes, but where some of the benefits that may be provided are money purchase benefits.
In the event, however, and consistently with the Goode Report (para 83 above), the only possibility addressed by regulations was that of criminal reduction in the aggregate value of the allocated assets of any money purchase scheme: see regulation 7 of the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1996 (S.I. 1996 no. 3128) requiring the employer to make good any such loss.
Again, this confirms that it was contemplated in 1993 (or one might add subsequently) that there could not be any other real risk of shortfall in respect of a money purchase scheme.
Mr Simmonds QC in his excellent submissions for the scheme member respondents relied upon two other sets of provisions in PSA 1993: the first consists of s.10(1) read with s.28, according to which, in the context of contracting out, protected rights to money purchase benefits may be given effect by the provision by the scheme of a pension which complies with or satisfies certain requirements or conditions; and the second consists of ss.102 108, which require the provision by schemes of annual increases by reference to the RPI of any pension which commences or has commenced under the scheme, but does not include (a) a guaranteed minimum pension or any increase in such a pension under section 109; or (b) any money purchase benefit (section 102(3)).
Both sets of provisions therefore contemplate that a money purchase benefit may be given effect by a pension granted by the scheme itself.
However, as Mr Nugee QC in his equally excellent submissions pointed out, any pension would in practice have been achieved in 1993 by the means of a back to back insurance taken out by the scheme, either when the member entered the scheme or when he or she retired and sought an annuity.
It would not have been achieved by an internal pension exposing the scheme alone.
On that basis, these sections do not contemplate, even on retirement, a situation in which the scheme would or could be exposed to any mismatch of liabilities and assets.
If and in the event that a pension was granted without matched asset backing in the form of an insurance, the appropriate analysis would be that the benefits conferred by the scheme had become defined benefits, rather then money purchase benefits.
Weight was placed by Mr Simmonds on the presence at the end of the definition in s.181(1) of PSA 1993 of the words and which are not average salary benefits.
A definition of average salary benefits appears in s.84, albeit in terms only for the purpose of that section, where it means benefit the rate or amount of which is calculated by reference to the average salary of a member over the period of service on which the benefit is based.
The words and which are not average salary benefits must have been meant to make clear the need for an investment link which is, on any view, the key to a money purchase scheme or benefit.
It does not follow that they were necessary, still less that the link can be partial rather than complete.
There are other instances in the legislation where opposites are expressly excluded, e.g. in ss.73 and 125(1) of PA 1995, where a salary related scheme is expressly defined as a scheme which is not a money purchase scheme.
I cannot attach significant weight to an addition to s.181(1) which can be read as simply making the antithesis clear.
Lord Walker notes (para 79) that the present trustees presented the MoneyMatch section of their scheme as a defined contribution section in the scheme accounts for the year ended 5 April 2003, as they continue to do to this day.
But to my mind a more telling indication of professional understanding is provided by the Actuarial Guidance Note GN27 issued by the Faculty & Institute of Actuaries, paragraphs 3.3 and 3.4 of which have been in the same form since version 1.5 effective from 1 December 2000 (and in almost identical form from the outset in version 1 effective from 6 April 1997).
They read: 3.3 The value of the liabilities must not be limited to the value of the assets, even where the scheme rules may so provide.
In particular, in the valuation of the liabilities in hybrid schemes which give a money purchase benefit subject to a defined benefit promise, the value of the defined benefit promise must not be limited to the value of the assets of the scheme, even if the rules of the scheme restrict the benefit promise where there are not sufficient assets in the scheme. 3.4 The liability in relation to money purchase benefits will, where contributions are accumulated, either in identifiable assets or otherwise, be the accumulated value at the MFR Effective Date, and, where contributions are used to provide minimum benefit rights payable as at a future date, be the value of those rights using the relevant assumptions specified in Appendix 2.
Money purchase benefits which have been converted into defined pension rights on the retirement of the member must be valued in the same way as other benefits for pensioners.
These paragraphs clearly contemplate that, where a money purchase benefit is used to provide a fixed annuity, not backed by a specific asset such as an insurance policy, the annuity constitutes a defined pension benefit.
As Lord Walker also notes (para 80), it is clear that Parliament has enacted primary legislation, and the Secretary of State has initiated secondary legislation, on the assumption that a money purchase scheme (and a money purchase benefit) will not involve any shortfall of assets compared with liabilities.
S.73 of PA 1995 provides for the assets of a salary related occupational scheme (i.e. not a money purchase scheme: see s.125(1)) to be applies towards satisfying the liabilities in respect of pensions and other benefits (including increases in pensions) in the order stated in subss. (2) to (4).
Regulation 13 of the Occupational Pension Schemes (Winding Up) Regulations 1996 (S.I. 1996 no. 3126) provided that, in relation to a hybrid scheme, defined as one which was not a money purchase scheme, but under which some of the benefits which may be provided are money purchase benefits: s.73 applies as if (i) the liabilities of the scheme did not include liabilities in respect of those benefits, and (ii) the assets of the scheme did not include the assets by reference to which the rate or amount of those benefits is calculated.
The assumption in this subsequent legislation is that the rate or amount of benefits can be and is calculated by reference to specific assets, which can be extracted accordingly from the hybrid scheme.
On the case presented by Mr Simmonds and the trustee, it is wholly unclear how this exercise can or should be performed, when and if there is a shortfall in the assets required to meet all liabilities under s.73 and in the assets specifically identifiable to meet liabilities for money purchase benefits.
It is in particular unclear why the latter should be entitled to take out of the former sufficient to ensure that the latter are fully met, and, if that is not the case or is impossible, it is unclear what order of priority should apply to any claims to money purchase benefits against such assets as may be attributed to money purchase benefits.
While later legislators may have misunderstood the effect of earlier legislation, I repeat in relation to the inter relationship of PSA 1993 and PSA 1995 what I said recently in the context of different legislation when giving a judgment with which Lord Walker, Lady Hale and Lord Collins agreed in Bloomsbury International Ltd v Sea Fish Industry Authority [2011] UKSC 25: In the case of a statute which has . been the subject of amendment it is not lightly to be concluded that Parliament, when making the amendment, misunderstood the general scheme of the original legislation, with the effect of creating a palpable anomaly (see eg the principle that provisions in a later Act in pari materia with an earlier may be used to aid the construction of the former, discussed in Bennion on Statutory Interpretation, 5th ed (2008), section 234).
Lord Phillips in his judgment went perhaps even further: see especially para 61.
In the result, I am not persuaded that it is necessary or appropriate to read PSA 1993 (or subsequent legislation) as embracing within the concept of money purchase benefit, to some undefined and unclear extent, liabilities not matched with any specific asset held by the scheme.
This applies as much to internal annuities granted by the scheme as to liabilities by way of guaranteed interest rates undertaken during the accrual of pension rights.
Mr Nugee submitted that a distinction might if necessary, and in particular in the light of the points arising from ss.10(1), 28 and 102 108, be drawn between these two situations.
I would be disinclined to draw such a distinction, when both involve exposure of the scheme to liabilities unmatched with any assets.
My inclination would have been to allow the appeal on both questions identified in para 58 of Lord Walkers judgment.
| UK-Abs | The subject of the appeal is an occupational pension scheme known as the Imperial Home Dcor Pension Scheme (the Scheme), which is winding up and has a significant deficit.
The appeal is concerned with the dividing line, for regulatory purposes, between defined benefit (normally earnings related) schemes and defined contribution (or money purchase) schemes.
The general nature of the distinction is that under a defined benefit scheme (the commonest variety of which is a final salary scheme), the amount of the benefit is not calculated by reference to the amount of the members contributions.
Under a money purchase scheme, by contrast, the members and the employers contributions, and the investment return on them, are the measure of the members benefits.
There is a variety of techniques by which, under a money purchase scheme, the amount of the contributions by or for a member, and the investment return on them, are mathematically transposed into quantifying the pension that is the primary benefit that the member expects to receive.
The Secretary of States case is that some of the techniques (and in particular, those applicable to the voluntary investment planning (VIP) and MoneyMatch benefits under the Scheme) take the benefits outside the definition of money purchase benefits in section 181(1) of the Pension Schemes Act 1993.
The essential feature of the definition is that the rate (typically so much a year) or amount (typically a lump sum) of the benefits is to be calculated by reference to contributions made in respect of that member.
Section 73 of the Pensions Act 1995 provides a statutory order of priority in the winding up of pensions schemes but it does not apply to money purchase schemes, and it applies only in a limited way to hybrid schemes (under which some but not all of the benefits provided are money purchase benefits).
The appeal is of great importance to the current and deferred pensioners interested under the Scheme, since if the Secretary of State is right part of the contributions paid by or in respect of members still in service or entitled to deferred pensions at the date of commencement of the winding up of the Scheme will be used, under the statutory order of priority, to satisfy the rights of those already entitled to receipt of pensions at that date.
The three issues before the Supreme Court were: (1) Are MoneyMatch benefits money purchase benefits despite the presence of the Guaranteed Interest Fund (GIF)? (2) If not, are they money purchase benefits to the extent that they are attributable to contributions and credits not allocated to the GIF? (3) Are pensions granted by way of internal annuities money purchase benefits? As regards the first issue, a Scheme members total MoneyMatch contributions were, with three possible exceptions, credited to the GIF.
As the actual investment returns on contributions might be less than the guaranteed rate of return this could lead to a deficit in the fund.
As regards the third
issue, in practice internal annuities were used in relation to VIP and MoneyMatch benefits, so that the members interest was converted into a pension using tables of factors periodically supplied by the Scheme actuaries and paid direct from the Scheme.
This internal annuitisation necessarily involves some degree of risk of the resources of the fund proving insufficient to provide all the benefits due, if investment returns are disappointing or annuitants exceed their actuarial life expectations (or both).
The proceedings were commenced in 2006 by Bridge Trustees Ltd (the Trustee), the independent corporate trustee of the Scheme.
Three members of the Scheme were joined as representative defendants.
The appellant Secretary of State was not a party to the first instance proceedings, but was granted leave to intervene in an appeal.
The appellants case is that it is fundamental to the scheme of the legislation that money purchase schemes are always fully funded, with no risk of the assets being insufficient to meet the liabilities, and for that reason alone they are excepted from the statutory order of priority.
Both the deputy judge and the Court of Appeal concluded that neither the GIF mechanism nor the provision of internal annuities (as opposed to the purchase of annuities from a life office) is incompatible with money purchase benefits.
The Supreme Court, by a 4 1 majority, dismisses the Secretary of States appeal on the first and third issues, holding that equilibrium of assets and liabilities is not a requirement of the statutory definition of a money purchase scheme (and similarly for money purchase benefits).
The second issue does not arise.
Lord Walker gives the leading judgment.
Lord Mance gives a separate dissenting judgment.
On the first issue, the majority, while accepting that KPMG [2006] 1 WLR 97 was correctly decided on its facts, respectfully differ from the key conclusion reached by Jonathan Parker LJ in para 171 of his judgment in KPMG, that calculated by reference to means calculated only by reference to, in the sense that the benefit in question must be the direct product of the contributions.
This interpretation involves reading in the word only, which Parliament did not use (whereas it did use solely in the definition of flat rate benefit).
The altered phrase is then explained (in the sense that) by reference to the contributions direct product though the statutory definition makes no express reference to investment return.
Still less is there anything in the statutory definition requiring meticulous investigation as to the actual investment return earned over the years by every contribution made in respect of a member.
The GIF mechanism did not unhitch a members eventual benefits from that members total contributions.
It provided for a yield of guaranteed interest at a modest rate fixed by an objective test, together with the prospect of further bonuses at a modest rate, fixed, again, by an objective test under which the trustees had no discretion. [70] [73] On the third issue, the provision of internal annuities (as opposed to the purchase of annuities from a life office) is not incompatible with money purchase benefits.
As the deputy judge put it, the distinction would produce insupportable anomalies.
As the Court of Appeal put it, annuity tables based on actuarial calculations are used only at the final stage, when the member retires and the amount earned by his or her defined contributions must be converted from a lump sum into an annuity.
That is inescapable under either method of provision, in that actuarial tables will be used, on the advice of actuaries, either by the trustees or by the life office (with the latter building in a profit element). [76] Lord Mance is not persuaded that it is necessary or appropriate to read the 1993 Act (or subsequent legislation) as embracing within the concept of money purchase benefit, to some undefined and unclear extent, liabilities not matched with any specific asset held by the scheme. [94]
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Imprisonment for public protection (IPP) is a sentence which condemns a defendant to indeterminate detention.
Section 225(3) of the Criminal Justice Act 2003 (the 2003 Act), as substituted by section 13(1) of the Criminal Justice and Immigration Act 2008, permits a judge to impose a sentence of IPP on a defendant who has been convicted of a serious offence where the judge finds that there is a significant risk that he will commit further offences that will cause serious harm to members of the public.
Can or should a judge impose a sentence of IPP on a defendant who is already serving a sentence of life imprisonment under which he will not be released from prison until he can satisfy the Parole Board that he no longer poses a danger to the public? Although this question has been certified by the Court of Appeal as being a point of general public importance, its significance lies in the issue of law, rather than the practical implications of imposing a sentence of IPP in place of a determinate sentence in such circumstances.
An indeterminate sentence is one designed not merely to imprison a defendant for a minimum period that properly reflects the gravity of his offence, but to ensure that he is not released thereafter unless and until he has ceased to be a danger to the public.
There are two types of indeterminate sentence.
One is a sentence of life imprisonment, for a prisoner sentenced to life imprisonment is entitled to be considered by the Parole Board for release on licence once he has served a fixed term of imprisonment specified by the sentencing judge.
The other indeterminate sentence is the IPP.
Once again the sentencing judge will specify a minimum term to be served after which the prisoner will be entitled to be considered by the Parole Board for release on licence.
The test applied by the Parole Board is the same, whether the defendant has been sentenced to life imprisonment or to IPP.
Release will be ordered if, but only if, the Parole Board is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined see sections 28(6)(b) and 34(2) of the Crime (Sentences) Act 1997, as amended by section 230 of, and Schedule 18 to, the 2003 Act.
The 2003 Act makes the following provisions in relation to the imposition of indeterminate sentences: 225. (1) This section applies where (a) (b) 2) (c) (d) 3) after a person aged 18 or over is convicted of a serious offence the committed commencement of this section, and 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 him of further specified offences.
If the offence is one in respect of which the offender would apart from this section be liable to imprisonment for life, and the court considers that the seriousness of the offence, or of the offence and one or more offences associated with it, is such as to justify the imposition of a sentence of imprisonment for life, the court must impose a sentence of imprisonment for life.
In a case not falling within subsection (2), the court may impose a sentence of imprisonment for public protection if the condition in subsection (3A) or the condition in subsection (3B) is met. (3A) The condition in this subsection is that, at the time the offence was committed, the offender had been convicted of an offence specified in Schedule 15A. (3B) The condition in this subsection is that the notional minimum term is at least two years.
The word may which I have emphasised was substituted for must by the Criminal Justice and Immigration Act 2008.
The Facts
The appellant was born on 25 February 1950.
He has been in and out of prison all his adult life much more in than out, for on each release from prison he has almost immediately returned to crime and been fairly swiftly apprehended and re convicted.
His more recent convictions prior to that which resulted in the sentence which is the subject of the present appeal were as follows: (i) On 21 November 1975, at the Central Criminal Court, he was sentenced to a total of ten years imprisonment for two offences of robbery, contrary to section 8 of the Theft Act 1968, two offences of conspiracy to rob contrary to section 1(1) of the Criminal Law Act 1977 and one offence of wounding with intent to cause grievous bodily harm, contrary to section 18 of the Offences Against the Person Act 1861. (ii) On 29 September 1982, at the Central Criminal Court, he was sentenced to a total of 12 years imprisonment for one offence of conspiracy to rob contrary to section 1(1) of the Criminal Law Act 1977, one offence of having an imitation firearm with intent to commit an indictable offence contrary to section 18 of the Firearms Act 1968, one offence of taking a conveyance without authority contrary to section 12 of the Theft Act 1968 and one offence of criminal damage contrary to section 1(1) of the Criminal Damage Act 1971. (iii) On 28 October 1994, at the Central Criminal Court, he was sentenced to a total of nine years imprisonment for three offences of robbery, contrary to section 8 of the Theft Act 1968 and three associated offences of carrying a firearm with intent to commit an indictable offence contrary to section 18 of the Firearms Act 1968. (iv) On 24 January 2000, in the Crown Court at Kingston, he was sentenced to imprisonment for life for one offence of attempted robbery, contrary to section 1(1) of the Criminal Attempts Act 1981 and one offence of having a firearm with intent, contrary to section 18 of the Firearms Act 1968.
The minimum term to be served prior to consideration of release was fixed at four years.
The life sentence was mandatory by reason of the appellants previous convictions and the provisions of section 2 of the Crime (Sentences) Act 1997.
Having served the minimum term under the sentence passed on 24 January 2000, the appellant persuaded the Parole Board that he qualified for release on licence and was released on 25 September 2004.
On 11 January 2008 he was arrested again on this occasion on suspicion of having committed eight armed robberies of bookmakers premises between 4 March 2006 and 28 May 2007.
In accordance with the provisions of section 32 of the Crime (Sentences) Act 1997 his arrest resulted in his recall under life sentence for breach of the terms of the licence under which he had been released.
On 2 September 2008 in the Crown Court at Harrow he pleaded guilty to eight offences of robbery, contrary to section 8 of the Theft Act 1968 and eight linked offences of possession of a firearm at the time of committing a specified offence, contrary to section 17(2) of the Firearms Act 1968.
The Sentence
The appellant was sentenced on 10 October 2008 by His Honour Judge Greenwood.
In the course of passing sentence the judge made the following remarks: Nicholas Smith, I have to sentence you for a total of eight offences of robbery and eight offences of possessing a firearm at the time of committing robberies.
What you did was to select premises where you expected large sums of money to be kept.
You were armed with an imitation firearm and disguised and you threatened members of staff with that imitation firearm.
I have no doubt at all that on each occasion those threatened were terrified and it was for this reason that you managed to rob the victims of a total of 13,338.74; none of which has been recovered.
As I discussed earlier with your counsel, there are a number of aggravating features in cases such as this.
There is the pre planning; the disguise; the targeting of large sums and, of course, the fact that the victims are vulnerable for that very reason; that they have to look after large sums of money.
You have a dreadful record which includes robberies; an offence of wounding with intent to cause grievous bodily harm, and the use on a previous occasion of a real firearm.
I agree with the conclusion expressed in the pre sentence report that you are a career criminal.
You present without any doubt a significant risk to the public of serious personal injury caused by your committing further specified offences.
I have taken into account everything that I have heard and read about you.
But, in the result, I have no alternative whatsoever but to pass upon you a sentence of imprisonment for public protection.
That is because the offences for which you are now to be sentenced are offences specified in Schedule 15 to the Criminal Justice Act 2003.
Your offences; the offences to which you have pleaded guilty, are punishable by a life sentence, but I do not consider these matters sufficiently serious to justify such a sentence.
On the other hand, in my opinion, there is a significant risk to the public of serious personal injury caused by your committing further offences specified in Schedule 15.
I reach that conclusion, having taken into account the nature and circumstances of your current offences; the pattern of behaviour of which your current offences form a part, and everything else that I know about you from what I have heard and read.
In these circumstances, as I have said already, I will impose a sentence of imprisonment for public protection, which will be concurrent on each of the counts that you face.
The judge went on to specify a minimum term to be served of six years on the basis that, had he not imposed a sentence of IPP, he would have imposed a determinate sentence of 12 years imprisonment, of which the appellant would have had to serve at least half.
Mr Tim Barnes QC for the appellant has submitted that the sentencing remarks suggest that the judge was unaware of the amendment of must to may to which I have referred at para 3 above.
I am not persuaded that this is so.
What does seem clear is that the objections of principle to the sentence imposed which were raised on appeal and which have been pursued before this court were not raised before the judge.
The Appellants Case
Mr Barnes advanced the appellants grounds of appeal with admirable clarity, and they can be shortly summarised.
They were advanced on an alternative basis.
The primary submission was that the imposition of a sentence of IPP was unlawful because the requirement of section 225(1) (b) of the 2003 Act was not satisfied.
Judge Greenwood could not properly have formed the opinion that there was a significant risk to members of the public of serious harm occasioned by the commission by [the appellant] of further specified offences.
This was because the appellant had been recalled to prison under his life sentence.
He would not be released unless and until the Parole Board was satisfied that it was no longer necessary for the protection of the public that he should be confined.
It followed that the significant risk specified in section 225(1)(b) did not exist.
In the alternative, Mr Barnes submitted that Judge Greenwood had erred in principle in imposing a sentence of IPP.
By amending must to may Parliament had conferred a discretion on the sentencing judge, even though the statutory criteria for the imposition of IPP were satisfied.
Where a defendant was already serving a life sentence, nothing was achieved by an additional sentence of IPP, rather than a determinate sentence, and it was wrong to impose one.
The Decision of the Court of Appeal
Counsel who represented the appellant in the Court of Appeal did not submit that it was unlawful to impose a sentence of IPP on a prisoner who was already serving a life sentence.
He simply submitted that it was wrong in principle to do so advancing Mr Barnes alternative case.
Giving the judgment of the Court [2010] EWCA Crim 246 Maurice Kay LJ rejected this submission.
He observed, at paras 8 9: The discretion conferred by the statute was not expressly constrained in a case such as this where there is an existing indeterminate sentence.
It was for the judge to decide upon the punishment for these robberies and associated firearms offences, having regard to the provisions of the 2003 Act.
Moreover, there is nothing anomalous or unusual about two indeterminate sentences being imposed on different occasions, or even in different forms.
Section 34 of the Crime (Sentences) Act 1997 expressly addresses the position of a life prisoner, which expression means, a person serving one or more life sentences.
For this purpose, life sentence is defined in section 34(2) as embracing both a sentence of imprisonment for life and a sentence of imprisonment for public protection.
Section 34(4) then provides: Where a person has been sentenced to one or more life sentences and to one or more terms of imprisonment, nothing in this Chapter shall require the Secretary of State to release the person in respect of any of the life sentence unless and until the Secretary of State is required to release him in respect of each of the terms.
It seems to us that that is a statutory provision designed to ensure that, where more than one indeterminate sentence exists, release is not required until the last of the minimum terms has been completed.
Discussion: The Lawfulness Issue
It is true that section 34 of the Crime (Sentences) Act 1997 expressly contemplates that two indeterminate sentences may be imposed on a defendant, but that is not, of itself, fatal to Mr Barnes primary submission.
Section 34 might simply be addressing the case of a defendant convicted of two murders, each carrying a mandatory life sentence.
Mr Jafferjee QC for the Crown referred the court to a number of cases where the Court of Appeal had considered the problems associated with the imposition of a sentence of IPP together with another determinate or indeterminate sentence.
The most pertinent was R v Delucca [2010] EWCA Crim 710; [2011] 1 WLR 1148, where Thomas LJ, in giving the judgment of the court, referred to the earlier decision of R v OBrien (Practice Note) [2007] 1 WLR 833.
He approved, at para 11, the practice of imposing two concurrent sentences of IPP, one having a longer minimum term than the other.
If Mr Barnes primary submission were sound, this practice would not be lawful, for the imposition of the sentence with the longer minimum term would have the effect that the requirement of section 225(1)(b) could not be satisfied in relation to the other sentence.
Once again, however, the argument relied upon by Mr Barnes in this court does not appear to have been advanced.
Section 225(1)(b) is in the present tense.
The sentencing judge is permitted to impose a sentence of IPP if there is a significant risk that members of the public will suffer serious harm as a result of the commission by the defendant of further offences.
The construction for which Mr Barnes contends requires the sentencing judge to factor in, when considering the question of risk, the fact that the defendant is and will remain detained in prison for a significant period, regardless of the type of sentence imposed.
Plainly the defendant will pose no risk to the public so long as he remains in custody.
Mr Barnes submits that the judge must consider whether he will pose a significant risk when he has served his sentence.
If this is the correct construction of section 225(1)(b) it places an unrealistic burden on the sentencing judge.
Imagine, as in this case, that the defendants conduct calls for a determinate sentence of 12 years.
It is asking a lot of a judge to expect him to form a view as to whether the defendant will pose a significant risk to the public when he has served six years.
We do not consider that section 225(1)(b) requires such an exercise.
Rather it is implicit that the question posed by section 225(1)(b) must be answered on the premise that the defendant is at large.
It is at the moment that he imposes the sentence that the judge must decide whether, on that premise, the defendant poses a significant risk of causing serious harm to members of the public.
For those reasons we reject the primary case advanced by Mr Barnes on behalf of the appellant.
Discretion
It was originally the appellants case that to impose an IPP sentence on a prisoner who was already serving a life sentence would not merely have no benefit, but would have adverse procedural consequences.
These would result from a perceived conflict between, or overlap of, the Parole Boards review requirements in respect of a life sentence and in respect of an IPP.
Mr Barnes now accepts that there will be no such conflict or overlap as a result of the sentence imposed on the appellant.
The procedural position is exactly the same as if the appellant had been given a determinate sentence of 12 years imprisonment.
He will have to serve a minimum term of six years and, thereafter, will have to satisfy the Parole Board that he does not pose a risk to the public in order to secure his release from prison.
In these circumstances Mr Barnes case on discretion is simply that the IPP sentence achieved no benefit.
The result is the same as if a determinate sentence of 12 years had been imposed.
There was thus no point in exercising the power to impose a sentence of IPP and, as a matter of good sentencing practice, a determinate sentence should have been imposed.
We have some sympathy with this submission.
It is not sensible to impose a sentence of IPP in circumstances where it will achieve no benefit.
We would not, however, condemn the sentence imposed in this case.
Maurice Kay LJ remarked at para 11 of his judgment that a determinate sentence would not contain within its terms the finding of the sentencing judge on the most recent occasion, that the appellant does in fact satisfy the dangerousness provisions of the 2003 Act as at 10 October 2008.
The Parole Board had released the appellant on licence having been persuaded that he did not pose a risk of serious harm to the public.
The judge cannot be criticised for imposing a sentence that demonstrated that the contrary was the case.
For these reasons we would dismiss this appeal.
| UK-Abs | This appeal concerns the imposition of two types of indeterminate sentences of imprisonment.
The first is a sentence of life imprisonment, under which a prisoner is entitled to be considered by the Parole Board for release on licence once he has served a fixed term of imprisonment specified by the sentencing judge.
The second is a sentence of imprisonment for public protection (IPP) which a judge can impose on a defendant convicted of a serious offence pursuant to s 225 Criminal Justice Act 2003 (as amended), where he finds that there is a significant risk that the defendant will commit further offences that will cause serious harm to members of the public.
Again, the sentencing judge will specify a minimum term to be served before the prisoner will be entitled to be considered by the Parole Board for release on licence.
The test applied by the Parole Board is the same in the case of both sentences.
It must be satisfied that it is no longer necessary for the protection of the public that the prisoner be confined.
Mr Smith has numerous convictions for robbery related offences.
On 24 January 2000 he received a mandatory sentence of life imprisonment upon further such convictions, with a minimum term of four years.
He satisfied the Parole Board that he should be released on 25 September 2004 but was arrested in 2008 on suspicion of having committed eight armed robberies between 2006 and 2007.
His arrest resulted in his recall to prison under his life sentence for breach of his licence conditions.
He pleaded guilty to the offences and was sentenced on 10 October 2008 to a sentence of IPP with a minimum term to be served of six years.
Mr Smith appealed against the imposition of the sentence of IPP on two alternative grounds.
The first was that it was unlawful because the judge could not have been satisfied for the purposes of s 225 that he represented a significant risk to the public, given that he had been recalled to prison under his life sentence and would have to satisfy the requirements of the Parole Board before he could be released.
The second was that the judge should not have exercised his discretion under s 225 to impose the sentence of IPP when it would achieve no additional benefit.
The Supreme Court unanimously dismisses the appeal.
It holds that the imposition of the sentence of IPP on Mr Smith was both lawful and open to the sentencing judge in the exercise of his discretion.
Lord Phillips gives the judgment of the court.
On the lawfulness issue, the wording of s 225(1)(b) is in the present tense and requires the sentencing judge to impose a sentence of IPP if there is a significant risk of harm to the public.
It would place an unrealistic burden on the judge to require him to form a view of the position at the end of the minimum term of imprisonment.
It is implicit that the risk must be assessed on the premise that the defendant is at large at the moment the sentence is passed [15].
On the exercise of discretion, although it was not sensible to impose a sentence of IPP in circumstances where it will achieve no benefit, in this case it enabled the sentencing court on the most recent occasion to express its finding that Mr Smith did in fact satisfy the dangerousness provisions of the Criminal Justice Act 2003.
Given that the Parole Board had earlier released him on the basis that he did not pose a risk of serious harm to the public, the judge could not be criticised for imposing a sentence that demonstrated that the contrary was the case [19].
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Very substantial judgments have been prepared in this case by Lord Walker, Lord Reed and Lord Sumption, to each of which I pay tribute.
I wish in this short introduction to do two things.
First, I shall say a bit about the background, to assist the reader in understanding at the outset what the issues are and to provide a guide to the passages in those judgments where they are dealt with.
Second, I shall indicate briefly what my opinion is on each of them.
I will however have to say a bit more about the one issue on which the court is divided: the DMG remedy/section 320 issue: see para 11, below.
As it raises a question of EU law and the division of opinion shows that the answer to it is not acte clair, it is plain that it will need to be the subject of a reference to the Court of Justice for a preliminary ruling under article 267 TFEU.
The proceedings
As Henderson J explained at the outset of his judgment [2008] EWHC 2893 (Ch), [2009] STC 254, para 1, the Franked Investment Income (FII) Group Litigation with which these proceedings are concerned was established by a group litigation order on 8 October 2003.
The test claimants are all companies which belong to groups which have UK resident parents and also have foreign subsidiaries, both in the European Union and elsewhere.
In the broadest terms, the purpose of the litigation was to determine various questions of law arising from the tax treatment of dividends received by UK resident companies from non resident subsidiaries, as compared with the treatment of dividends paid and received within wholly UK resident groups of companies.
The provisions giving rise to these questions related to the system of advance corporation tax (ACT) and to the taxation of dividend income from non resident sources under section 18 (Schedule D, Case V) of the Income and Corporation Taxes Act 1988 (the ICTA) (the DV provisions).
The relevant provisions of the ICTA have since been amended, ACT was abolished for distributions made on or after 5 April 1999 and the DV provisions were repealed for dividend income received on or after 1 April 2009.
But the problems created by their existence in the past have not gone away.
The test claimants case is that the differences between their tax treatment and that of wholly UK resident groups of companies breached article 43 (freedom of establishment) and article 56 (free movement of capital) of the EC Treaty (now articles 49 and 63 of the Treaty on the Functioning of the European Union) and their predecessor articles, and that these breaches have caused them loss dating back, at least in some cases, to the accession of the UK to the European Economic Community signed at Brussels on 22 January 1972 and the introduction of ACT in April 1973.
Their arguments are directed in part to issues of domestic law.
But they are also directed to the extensive case law resulting from the application by the Court of Justice of the European Communities and, since the coming into force of the Lisbon Treaty, the Court of Justice of the European Union of principles of Community law to domestic tax systems, including an earlier reference in this case: Test Claimants in the FII Group Litigation v Inland Revenue Comrs (Case C 446/04) [2007] STC 326.
They raise difficult issues, and very large amounts of money are at stake.
Henderson J was told that the maximum amount of the claims advanced in the FII Group Litigation was of the order of 5 billion.
The issues with which Henderson J had to deal were grouped by him under four headings: see [2009] STC 254, para 7.
These were (1) the lawfulness of the UK rules imposing corporation tax on dividends received by UK parent companies from subsidiaries resident in other EU member states and, in some contexts, from subsidiaries in third countries, (2) the lawfulness of UK rules charging ACT on the onward distribution by UK resident companies of dividend income received from such subsidiaries, (3) the lawfulness of rules applicable to dividends payable out of distributable foreign profits which permitted an election to be made to treat such income as foreign income dividends (FIDs) and (4) a number of fundamental questions relating to remedies.
He held that it followed from the judgment of the ECJ under the earlier reference that the UK rules on corporation tax on overseas dividends were not compatible with Community law as regards dividends from subsidiaries resident in other member states, and that the UK legislative scheme as regards FIDs also breached Community law.
A further reference was however required in relation to two of the issues relating to liability: paras 138, 197.
As for the issues relating to remedies, it was common ground that two types of restitutionary remedies are available in domestic law: a claim for restitution of tax unlawfully demanded under the principle established in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70 (Woolwich), and the claim for tax wrongly paid under a mistake which was recognised in Deutsche Morgan Grenfell Group plc v Inland Revenue Comrs [2006] UKHL 49, [2007] 1 AC 558 (DMG).
Henderson J held that, under the principle laid down in Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595 (San Giorgio), EU law required there to be an effective remedy for monies paid in respect of the tax that was unlawfully charged.
The test claims were properly to be classified in English law as claims in restitution based on a mistake of law.
The Woolwich cause of action (which is now time barred), for which mistake was not a necessary ingredient, was likely to play a subsidiary role in such cases: para 260.
It was not open to the Revenue to rely on section 320 of the Finance Act 2004 (Section 320 FA 2004) or section 107 of the Finance Act 2007 (Section 107 FA 2007) to exclude DMG mistake claims, as these provisions purported to curtail the extended limitation period under section 32(1)(c) of the Limitation Act 1980 without notice and without providing any transitional arrangements to protect the right under Community law.
But the test claimants had failed to establish any sufficiently serious breach to entitle them to damages.
The case then proceeded to the Court of Appeal (Arden, Stanley Burnton and Etherton LJJ): [2010] EWCA Civ 103, [2010] STC 1251.
The various issues were made the subject of an agreed list which the court amended and to which it gave numbers.
They were identified in an index at the beginning of the judgment, to which reference may be made.
Issues 1 to 10 related to liability.
Issues 11 to 23 were concerned with remedy.
The Court of Appeal was divided as to the meaning of para 54 of the judgment of the ECJ with respect to one of the test claimants submissions on liability, so it held that a reference should be made on that issue.
On all but one of the other issues relating to liability it agreed with the judge.
On four issues relating to remedy the appeal by the Revenue was allowed.
Differing from the judge, it held that the Woolwich restitution remedy was a sufficient remedy as EU law does not require that there must also be a remedy based on mistake (issue 12); that the Woolwich restitution remedy met the requirements of EU law and was not affected by sections 320 FA 2004 and 107 FA 2007 (issues 20 and 21); and that section 33(2A) of the Taxes Management Act 1970 (TMA) (issue 23), which excludes relief under that section where Case V corporation tax has been paid under a mistake, applied to an assessment based on a provision that infringed Community law as a conforming interpretation could be given to it.
Issue 22, as to whether section 32(1)(c) of the Limitation Act 1980 applied to a Woolwich claim, was not argued before the judge.
But it was argued before the Court of Appeal, which held that it could not be given that wider meaning.
Applications for permission to appeal to the Supreme Court were lodged by both parties.
On 8 November 2010 the panel refused permission on the issue as to which the Court of Appeal decided that there should be a reference, and it remitted another issue relating to liability to the management judge to frame a reference on that point also.
The time limit for making an application for permission on a number of other issues, including issue 22, was extended until the references had been determined by the ECJ and its rulings applied by the Court of Appeal.
But permission to appeal was given on four issues relating to remedy: issues 12, 20, 21 and 23.
Shortly before the hearing of the appeal permission was given to the claimants for issue 22 to be argued also.
The issues
The parties are agreed that the issues in the appeal are best expressed as follows: (1) Could Parliament lawfully curtail without notice the extended limitation period under section 32(1)(c) of the Limitation Act 1980 for the mistake cause of action (section 320 FA 2004) and cancel claims made using that cause of action for the extended period (section 107 FA 2007)? In particular: (a) Would a Woolwich restitution remedy be a sufficient remedy for the repayment claims brought on the basis of EU law (Court of Appeal issue 12)? (b) Whether or not a Woolwich restitution remedy would be a sufficient remedy, does EU law protect the claims which were made in mistake; and, specifically, did the curtailment without notice of the extended limitation period for mistake claims (section 320 FA 2004) and the cancellation of such claims in respect of the extended period (section 107 FA 2007) infringe the EU law principles of effectiveness, legal certainty, legitimate expectations and rule of law (Court of Appeal issues 20 and 21)? (2) Are the restitution and damages remedies sought by the test claimants in respect of corporation tax paid under section 18 (Schedule D, Case V) of the ICTA 1988 excluded by virtue of the statutory provisions for recovery of overpaid tax in section 33 of the Taxes Management Act 1970 (Court of Appeal issue 23)? To that there must be added the following: (3) Does section 32(1)(c) of the Limitation Act 1980 apply to a claim for a Woolwich restitution remedy (Court of Appeal issue 22)? As Lord Walker explains in para 35 below, a further issue became apparent as the parties submissions on issues 12, 20 and 21 have developed which can be expressed as follows: (4) Does the Woolwich restitution remedy apply only to tax that is demanded by the Revenue, and not to tax such as ACT which is payable on a return; and, if so, what amounts to a demand? In the judgments that follow:
a. Issue (4), above, the question whether a Woolwich claim arises only where a demand has been made by the Revenue, is dealt with by Lord Walker in paras 64 83 and by Lord Sumption in paras 171 174. b. Issue (3), above (Court of Appeal issue 22), as to whether section 32(1)(c) of the Limitation Act 1980 should be widely construed so as to give a Woolwich restitution remedy the benefit of the extended limitation period, is dealt with by Lord Walker in paras 42 63 and by Lord Sumption in paras 177 185. c. Issue (2), above (Court of Appeal issue 23), as to whether section 33 of the TMA is incompatible with EU law because it excludes the test claimants right of action at common law, is dealt with by Lord Walker in paras 116 119 and by Lord Sumption in paras 204 205.
I agree, for all the reasons they give, that each of these three distinct issues should be answered in the negative.
I would uphold the judgment of the Court of Appeal on issues (3) and (4) and, because it should not be read as excluding rights of action for the recovery of tax charged contrary to EU law, I would allow the appeal on issue (2) as to the meaning of section 33 of the TMA.
The DMG remedy/section 320 issue
The remaining issue (issue (1), above) is an issue of EU law.
The background is provided by the ruling of the Grand Chamber that it is for the domestic legal systems of each member state to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from Community law, and that the national courts and tribunals before which claims are brought are obliged to ensure that individuals should have an effective legal remedy enabling them to obtain reimbursement of the tax unlawfully levied by a member state or withheld by it directly against that tax: Test Claimants in the FII Group Litigation v Inland Revenue Comrs (Case C 446/04) [2007] STC 326, paras 202 203.
It follows from the answers given to issues (3) and (4) that this issue must be approached on the basis that a Woolwich claim would have been available had it been brought in time.
But it has been excluded by the expiry of the limitation period.
The test claimants are left therefore with their DMG mistake claim.
It has the benefit of the extended limitation period, but the Revenue say that it has been excluded by section 320 FA 2004 and section 107 FA 2007.
As Lord Walker explains in para 38, the question is whether EU law requires only that the member state must make available an adequate remedy which meets the principles of effectiveness and equivalence, or whether it requires every remedy recognised in domestic law to be available so that the taxpayer may obtain the benefit of any special advantages that this may offer on the question of limitation.
The position in domestic law is not now in doubt.
In DMG it was held that the taxpayer was entitled to take advantage of the remedy which was most advantageous to him.
The fact that a Woolwich claim was not available because it was subject to a shorter limitation period did not prevent him from pursuing his mistake claim if his interests were best suited by doing so.
This issue can be broken down into three questions: (1) would Woolwich on its own provide a remedy for the test claimants San Giorgio claims which satisfies the requirements of the EU principles of effectiveness and equivalence? (2) were those principles, and the principle which protects legitimate expectations, infringed by section 320 FA 2004, which curtailed without notice the extended limitation period for mistake claims? (3) were these principles infringed by the retrospective cancellation of such claims by section 107 FA 2007 in respect of the extended period?
Lord Walker and Lord Sumption are agreed that section 107 FA 2007 was contrary to EU law, although they do not reach that conclusion by the same route.
This is because they disagree on the primary issue as to whether Woolwich on its own was sufficient to meet the requirements of effectiveness and equivalence.
Having reached the view that it was not, Lord Walker holds that section 320 FA 2004 was not compatible with EU law as it infringed those principles and maybe that it infringed the principle of legitimate expectations too: para 114 115.
Lord Sumption disagrees.
He holds that the Woolwich remedy on its own with a normal limitation period was an effective way of asserting the test claimants EU right, that there was no obligation on the UK to maintain a concurrent right and that, for this reason and because the test claimants could not have had a legitimate expectation that they would have the benefit of the extended limitation period, section 320 FA 2004 was lawful: paras 198 202.
But, because the circumstances had changed and they had acquired a legitimate expectation by 2006, it was contrary to that principle for that expectation to be defeated by section 107 FA 2007.
Like Lord Walker (see para 115), I agree with Lord Sumptions reasoning in para 203 as to section 107 FA 2007.
On the primary issue however, like Lord Reed, I agree with Lord Walker.
I would take as my starting point the fact that in domestic law two types of restitutionary remedies are available and that the taxpayer is entitled to take advantage of the remedy that is most advantageous to him: a claim for restitution of tax unlawfully demanded under the principle established in Woolwich, and the claim for tax paid under a mistake of law which was recognised in DMG.
It is, of course, true that DMG had not yet reached the House of Lords when section 320 FA 2004 was enacted.
But the common law rule that money which had been paid under a mistake of law was not recoverable had already been rejected.
It was rejected in Scotland in Morgan Guaranty Trust Co of New York v Lothian Regional Council 1995 SC 151, for reasons that were special to Scots law, and in South Africa in Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue 1992 (4) SA 202.
But it had also been rejected by the common law in Canada: see the dissenting opinion of Dickson J, with which Laskin CJ agreed, in Hydro Electric Commission of Township of Nepean v Ontario Hydro [1982] 1 SCR 347, 357 370.
Dickson Js opinion was adopted by La Forest J, with whom Lamer, Wilson and LHeureux Dub agreed on this point, in Air Canada v British Columbia [1989] SCR 1161.
The same result was reached in Australia in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.
Then in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 the House of Lords held that the rule could no longer be maintained, and that it should be recognised that there was a general right to recover money paid under a mistake, whether of fact or law.
It was contended for the Inland Revenue Commissioners in DMG that the general right of recovery did not apply in the case of payments made under a mistake of law to the revenue.
But this topic had already been the subject of comment by one of the most distinguished and influential scholars on the law of restitution, the late Professor Peter Birks.
He declared that, unless displaced by statute, causes of action good against private citizens are no less good against public bodies: see his essay (in the volume Essays on Restitution (1990), edited by Professor P D Finn) entitled Restitution from the Executive: a Tercentenary Footnote to the Bill of Rights, at p 174.
He also made the point that, if in Woolwich the building society had made a mistake of fact, it would undoubtedly have entitled the society to restitution of the money it paid to the revenue in consequence of its mistake, just as it plainly would have been had the transaction been with a private citizen.
The decision of Park J at first instance in DMG [2003] 4 All ER 645, [2003] STC 1017, in which he upheld the taxpayers claim for repayment of tax wrongly paid under a mistake of law with an extended limitation period, should be seen against this background.
As Henderson J observed in para 406 of his judgment, it was not possible to predict with any confidence what the outcome would be of the appeals in DMG that were to follow.
But I think that it would be going too far to say that Park Js judgment was bound ultimately to be set aside.
The fact that on 8 September 2003, less than two months after Park Js judgment was delivered on 18 July 2003, the Paymaster General announced the introduction of what was to become section 320 FA 2004, and said that it was to affect proceedings issued on or after that date, suggests that the revenue had at least some expectation that it would not be successful in achieving that result.
Like Lord Walker (see para 108), I think that the suggestion that the Court of Appeals decision was just a bump in the road understates the strength of the arguments in support of its appeal.
But I cannot agree with Lord Sumption (see paras 200 201) that it was unrealistic for there to have been a reasonable expectation by that date that the right of recovery on the ground of mistake with an extended limitation period would be upheld.
My own view lies between these two extremes.
I share Lord Walkers view that it would have been helpful to have had the view of the judge on this issue: para 112.
But I also think that in para 243 Lord Reed has identified the right way to look at it, which does not require anything more than we already know.
One must ask oneself what the test claimants were entitled to expect when they made their claims based on mistake.
There was no certainty at that time when section 320 FA 2004 was enacted that their claims based on mistake would succeed.
But those claims were undoubtedly arguable, as the subsequent ruling by the House of Lords in DMG [2007] 1 AC 558 made clear.
They were entitled to expect that the question whether their claims based on mistake were well founded would be decided by the courts, as there was a real issue to be tried.
They were also entitled to expect, according to the principle of legal certainty, that this entitlement would not be removed from them by the state by the introduction without notice of a limitation period that was not fixed in advance: see ACF Chemiefarma v Commission of the European Communities (Case 41/69) [1970] ECR 661, para 19; Marks & Spencer plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866, para 39.
The crucial question, however, is whether the retrospective application of that limitation period to claims based on mistake was in conformity with the principles of equivalence and effectiveness, as explained by the Grand Chamber in its judgment in these proceedings: Case C 446/04 [2007] STC 404, para 203.
I accept, of course, that the Woolwich remedy on its own was an effective way of vindicating the San Giorgio right.
But what about the principle of equivalence which, as Lord Reed points out in para 218, is a complementary requirement? The Woolwich remedy was not the only remedy in domestic law, as it was held in DMG that a taxpayer who wrongly paid tax under a mistake of law is entitled to a restitutionary remedy against the revenue.
The theory is that judicial decisions must be taken to declare the law that applies to the case with retrospective effect, whenever the events that gave rise to the claim occurred.
So, in the events that have happened, the DMG remedy must be taken to have been always available.
It is not just a mirror image of the remedy that is afforded under Woolwich.
Both remedies lead to the same result.
But they are different remedies founded upon different principles and they are subject to different limitation periods.
There may be other differences, depending on the facts and circumstances of each case.
There is no obvious way of deciding which of these two remedies must be adopted if only one can be allowed.
Is it to be held the claimant is under an obligation, if both are available, to select the remedy which best suits his opponent? This would be an odd result, as I said in DMG [2007] 1 AC 558, para 51.
For the reasons which I gave in that paragraph, I think that domestic law must reject this idea because it has no basis in principle.
In fairness, the claimant ought to be free to choose the remedy that best suits his case.
The principle of equivalence requires that the rules regulating the right to recover taxes levied in breach of EU law must be no less favourable than those governing similar domestic actions.
So it seems to me that it must follow, if the means of recovering of taxes levied contrary to EU law are to match those in domestic law, that both remedies should be available.
Conclusion
For these reasons, and those given more fully by Lord Reed, I agree with Lord Walkers analysis.
I would hold that Parliament could not lawfully curtail without notice the extended limitation period under section 32(1)(c) of the Limitation Act 1980 for the mistake cause of action by section 320 FA 2004.
I agree with both Lord Walker and Lord Sumption that it could not cancel claims made using that cause of action for the extended period by section 107 FA 2007.
The question whether there was a legitimate expectation of bringing an action of the kind that was excluded by that section does not raise any issue of EU law.
So I do not think that there are grounds for seeking a reference on that point.
I recognise however that, as there is a division of opinion among us as to whether EU law requires that both remedies should be available to the test claimants so that they can choose the remedy that best suits their case for reimbursement, the answer to that question cannot be regarded as acte clair.
I would therefore invite the parties to prepare in draft the question or questions on which they suggest a preliminary ruling should be sought from the CJEU, and a brief note of the submissions that each party would wish to be included in the reference.
I would also invite their views as to whether this reference should be combined with the references that are to be made on the other issues, or whether it should be submitted separately.
LORD WALKER
Introduction
This appeal is a further stage, but by no means the last stage, in complex and protracted group litigation, designated as Test Claimants in the FII [franked investment income] group litigation.
In this group litigation, and other parallel group litigation proceedings, numerous issues have been raised as to whether features of the UK corporation tax regime infringe EU law, and as to the remedies available to companies which claim to have been financially disadvantaged in various ways by such infringements.
These proceedings have already resulted in two references to the Court of Justice.
Since the Court of Justices judgment on the first reference ((Case C 446/04) [2007] STC 326), all the issues as to infringement have been considered by Henderson J [2008] EWHC 2893 (Ch), [2009] STC 254 and by the Court of Appeal [2010] EWCA Civ 103, [2010] STC 1251.
Some have been decided and are no longer in dispute.
In particular, it is now common ground that corporation tax measures relating to advance corporation tax (ACT) and foreign income dividends (FIDs) infringed former article 43 (freedom of establishment) and former article 56 (free movement of capital) of the EC Treaty, now articles 49 and 63 of the Treaty on the Functioning of the European Union.
Other points have been made the subject of a second reference to the Court of Justice.
On yet further points this court has extended time for an application for permission to appeal.
One of these is the concurrent finding of the courts below that the infringements which have been established did not amount to grave and manifest breaches of EU law so as to give rise to a claim for damages on the principles in Brasserie du Pecheur SA v Federal Republic of Germany (Joined Cases C 46/93 and C 48/93) [1996] QB 404.
It is now clear that, apart from any possible claim for damages, the claims to be met by HM Revenue and Customs (HMRC, so as to include its predecessors) are restitutionary in nature.
Some are straightforward claims for recovery of tax which the claimants paid when it was not due.
Other claims are for less direct losses which the claimants say they sustained in consequence of the non compliance of the corporation tax system with EU law.
In relation to restitutionary relief for both the direct and the indirect losses there are important differences between the parties as to the characterisation of the remedies available to the claimants as a matter of English law.
There are also important differences as to how far EU law requires the full range of domestic remedies to be made available for the recovery of unduly paid tax, despite parliamentary intervention (in the form of section 320 of the Finance Act 2004 and section 107 of the Finance Act 2007) to curtail those remedies drastically and with retroactive effect.
Those two provisions (the statutory cut off provisions) are challenged as infringing EU law.
That is a brief sketchy overview of the significance of this appeal in the context of the larger campaign of the FII group litigation.
Except in relation to the statutory cut off provisions the Supreme Court does not on this appeal have to revisit any issue as to infringement of EU law.
But it is appropriate to give a brief explanation of the ACT system, now abolished, that gave rise to the substantive infringements.
A much fuller explanation can be found in the first instance judgment of Henderson J [2009] STC 254, paras 12 to 28.
This draws on the first order for reference to the Court of Justice made by Park J on 13 October 1994.
Since his retirement Sir Andrew Park has himself given an objective account of the progress of several of the associated sets of group litigation in A Judges Tale: Corporation Tax and Community Law [2006] BTR 322.
The ACT system
Corporation tax was introduced in the UK in 1965.
At first the system was a classical system, with full double taxation of company profits and non corporate shareholders dividends.
In 1973 the system changed to one of partial imputation.
When a UK resident company paid a dividend it was required (by way of self assessment) to pay an amount of ACT equal to the mainstream corporation tax (MCT) payable on the part of its profits distributed as dividend.
A non corporate shareholder became entitled to a tax credit equal to the ACT paid in respect of his dividend.
A UK resident corporate shareholder receiving a dividend from another UK resident company received it as franked investment income (FII), and if it both received and paid dividends, ACT was payable only on the excess of its outgoing franked payments over its FII.
The position was different if a UK resident company received a dividend from a non resident company in which it was a shareholder.
That was so whether or not the two companies were part of a group, but this group litigation, and the parallel ACT group litigation, have both been concerned with groups of companies.
Most of the test claimants in this litigation are members of the British American Tobacco (BAT) group.
In para 2 of his judgment Henderson J gave a concise explanation of this group litigation as compared with the ACT group litigation: Whereas the focus of the ACT Group Litigation was on the UK domestic legislation which prevented UK resident subsidiaries of foreign parents from making group income elections, thereby obliging them to pay ACT when paying dividends to their foreign parents, the focus of the FII Group Litigation has been on UK parented groups with foreign subsidiaries, and on the tax treatment of dividends coming into the UK from abroad.
At the simplest level, therefore, the present litigation is concerned with factual situations which are the opposite of those which gave rise to the questions considered in Hoechst [Metallgesellschaft Ltd v Inland Revenue Comrs, (Joined Cases C 397/98 and C 410/98) [2001] Ch 620] and the ACT Group Litigation.
Since 1973 the BAT group has gone through various structural changes (summarised in paras 1.8 to 1.21 of an agreed statement of facts set out in para 29 of the judges judgment) but it has always had as its ultimate holding company a UK resident company whose shares are listed and whose thousands of shareholders expect to receive regular dividends.
After 1973 the BAT group (in common with many large multinational groups) faced a difficulty in that when it received dividends from overseas subsidiaries it did not receive a tax credit that could be used to eliminate or reduce ACT payable in respect of its dividends to its shareholders.
The overseas dividends were not FII.
Although the UK resident company was entitled to double taxation relief against MCT (in the form of a credit against foreign taxes paid by the subsidiary), it still had to pay ACT.
If relatively little MCT was payable (because of double taxation relief) the ACT became surplus and of little or no utility to the holding company.
A UK resident company with overseas subsidiaries (whether resident within or outside the EU) was therefore at a disadvantage, and articles 43 and 56 of the Treaty were infringed.
The other test claimants are members of the Aegis group, another multinational group whose holding company is based in the UK.
These claimants have been included because they are (and claimants in the BAT group are not) affected by section 320 of the Finance Act 2004.
The ACT regime was in force from 1973 to 1999.
Its disadvantages for multinational groups were to some extent mitigated by provisions as to foreign income dividends (FIDs) which were in force from 1994 to 1999.
A UK resident company receiving dividends from non resident companies could elect that dividends paid to its shareholders should be treated as FIDs.
The effect was that ACT was still payable, but would in some circumstances be repaid after an interval, normally of a duration of between eight and a half months and seventeen and a half months.
There is a fuller explanation of the law in paras 23 to 25 of the judges judgment, and of the facts as to FID enhancements in paras 277 to 302.
The principal statutory provision giving a tax credit on qualifying distributions between UK resident companies was section 231 of the Income and Corporation Taxes Act 1988 (TA 1988).
Issue 6 before the Court of Appeal was whether section 231 could be interpreted, under the Marleasing principle (Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C 106/89) [1990] ECR I 4135) so as to be compatible with EU law.
The Court of Appeal held that it could be interpreted in that way.
That is however an issue on which this court has deferred a decision on permitting a further appeal.
The uncertainty as to section 231 is a further complication in clarifying the issues that are before the court on this appeal.
The issues
The Supreme Court gave permission to appeal on four of the 23 issues identified by the Court of Appeal (and set out in the index to its judgment, [2010] STC 1251).
This permission was later extended to cover a fifth issue, numbered 22 in the Court of Appeals judgment, that is the correct construction and scope of section 32(1)(c) of the Limitation Act 1980.
The other four issues covered by the formal order granting permission to appeal are wholly or largely questions of EU law, and the impact of EU law on domestic rights and remedies: that is (issue 12) remedies in English law; (issues 20 and 21) the compatibility with EU law of the statutory cut off provisions; and (issue 23) whether section 33 of the Taxes Management Act 1970 (as amended) provides an exclusive code for recovery of tax mistakenly paid under an assessment, and the impact on that section of EU law.
However, as the parties written and oral submissions have developed it has become apparent that there is another wholly domestic issue of central importance to the appeal.
The Court of Appeal differed from Henderson J as to whether the principle in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70 (Woolwich) applies only to tax that is demanded by revenue authorities (and if so, what amounts to a demand).
For the appellants Mr Aaronson QC took the lead in making submissions on issues of EU law, followed by Mr Rabinowitz QC on issues of English law.
This sequence of argument may have been unavoidable, but it produced the result that the court heard submissions about the attitude of EU law towards national procedures and remedieswhich is an important part of this appealbefore hearing submissions about the English remedies themselves.
It is more helpful to start with the issues of English law, and then assess the impact that EU law has on them.
So this judgment proceeds to consider (i) the scope of section 32(1)(c) of the Limitation Act 1980 and (ii) the scope of the decision in Woolwich, before addressing the effect of EU law.
It may not be immediately apparent why these two domestic issues have assumed such significance, so a brief explanation is called for.
The reason is certainly not the disinterested and scholarly interest of the parties, or either of them, in the development and clarification of English private law.
That is apparent from another of the group litigation proceedings, NEC Semi Conductors Ltd and Other Test Claimants v Inland Revenue Comrs [2006] EWCA Civ 25, [2006] STC 606 (NEC), in which (at paras 140 to 147) the claimant companies and HMRC (through counsel, most of whom have appeared on this appeal) made submissions on the Woolwich issue to the contrary effect, in each case, to those they have made on this appeal.
These tactical shifts have occurred because, naturally enough, each side wants to win, by any proper line of argument, because of the very large sums of money at stake.
The main issue of EU law to be decided can be put, in a very simplified (but not, it is to be hoped, tendentious) form, as follows.
When in any member state tax has been paid which was not due because the national taxing measure infringed the Treaty, must the member state make available to its aggrieved taxpayer (i) an adequate remedy which meets the principles of effectiveness and equivalence; or (ii) every available national remedy, including any that offers the taxpayer special advantages as regards limitation of actions?
At first glance the Woolwich principle provides an adequate remedy, subject to a six year limitation period unaffected by the statutory cut off provisions.
Similarly at first glance mistake of law, following the decision of the House of Lords in Deutsche Morgan Grenfell Group Plc v Inland Revenue Comrs [2007] 1 AC 558 (DMG), provides a specially advantageous basis of claim because of the possibility of an extended limitation period under section 32(1)(c) of the Limitation Act 1980, but subject to the statutory cut off provisions (if and so far as valid under EU law).
But if the test claimants have no Woolwich claim, because as a matter of law such a claim requires an unlawful demand, and there was no such demand, mistake of law would be promoted, as it were, to being the only remedy available under national law, and so to being more surely entitled to protection under EU law.
So it is expedient for the test claimants in this appeal to reverse the stance taken by the test claimants in NEC and argue that the Woolwich principle does not extend to self assessed taxes, for which there is no official demand.
The issue on section 32(1)(c) of the Limitation Act 1980 is part of an alternative line of argument by which the test claimants seek to promote the mistake of law claim and so ensure its protection under EU law.
They submit that section 32(1)(c) should be widely construed, contrary to the authority of Phillips Higgins v Harper [1954] 1 QB 411, a first instance decision which has however stood and been followed for over half a century.
They submit that section 32(1)(c) is applicable, regardless of the cause of action, wherever there is a causally relevant mistake.
In the words of Mr Rabinowitz (day 2, page 80), The mistake element does not have to be a necessary part of the cause of action, so long as the mistake is materially causal or causally material in producing the circumstances from which relief is sought.
So this is an alternative method by which the test claimants seek to saw off the apparent support of the Woolwich branch in order to rely on mistake of law alone.
It seems very doubtful, even if their argument on section 32(1)(c) is sound, whether the claimants aim would be achieved.
In other, more mainstream parts of their argument they rely heavily on the principle (reasserted in this context by the House of Lords in DMG [2007] 1 AC 558) that English law permits litigants to choose, as between concurrent causes of action, the cause or causes of action most advantageous to their interests.
The test claimants have done so.
In the amended particulars of claim of the BAT group, paras 15 and 15A, they have clearly and distinctly relied on two separate causes of action in unjust enrichment, that is (para 15) payment of tax unduly levied and (para 15A) payment under a mistake.
Section 32(1)(c) is relied on in relation to mistake claims only (paras 18, 18A and 18B).
The position is the same on the Aegis groups pleadings.
The statutory cut off provisions (the essential text of which is set out at paras 107 and 109 below) do contain (in section 320(6) and section 107(2)) wide language extending the scope of the sections to actions not expressed to be brought on the grounds of mistake.
So the apparently self inflicted injury which the test claimants invite would seem to require an amendment to the pleadings, and even then (if the section 32(1)(c) argument succeeds) the Woolwich claim would remain with a six year limitation period, which is what it has always been assumed to have.
Nevertheless, the section 32(1)(c) point is an important point of law that has been fully argued, and so it should be addressed.
Section 32(1)(c)
Section 32(1) of the Limitation Act 1980 provides: Subject to [provisions not now material], where in the case of any action for which a period of limitation is prescribed by this Act, either (a) the action is based upon the fraud of the defendant; or (b) any fact relevant to the plaintiffs right of action has been deliberately concealed from him by the defendant; or the action is for relief from the consequences of a mistake; (c) the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
References in this subsection to the defendant include references to the defendants agent and to any person through whom the defendant claims and his agent.
It replaces (with a minor amendment to section 32(1)(b)) provisions first enacted in section 26 of the Limitation Act 1939, in which section 26(c) was in the same terms as section 32(1)(c).
The change in the law made in 1939 was recommended by the Law Review Committee (chaired by Lord Wright MR) in its Fifth Interim Report, (Statutes of Limitation) (1936) (Cmd 5334).
Indeed the expression relief from the consequences of a mistake appears three times in para 23 of the report, dealing with this topic.
The recommendation was that in such cases the equitable rule (that time should run only from when the mistake was, or could with reasonable diligence have been, discovered) should apply to claims which were formerly within the exclusive jurisdiction of common law courts (as opposed to being within equitable or concurrent jurisdiction).
The previous state of the law was established by the decision of Hamilton J (later Lord Sumner) in Baker v Courage & Co [1910] 1 KB 56.
The facts were that the plaintiff was the former owner of a public house who had in 1896 been mistakenly overpaid by 1,000 on the sale of his leasehold public house to the defendants, who were brewers.
The plaintiff then deposited 9,000 at interest with the defendants.
In 1909 he wished to withdraw the last of the deposit (standing, as it happens, at 1,000) but the defendants, on reviewing the position, discovered their mistake and refused to return the money.
When sued they pleaded set off and made a counterclaim, both of which were opposed as statute barred.
Hamilton J referred (at p 62) to the purely equitable claim made in Brooksbank v Smith (1836) 2 Y & C Ex 58, a decision of Alderson B sitting in the equity side of the Court of Exchequer.
Hamilton J said that Brooksbank v Smith was a case to which the Statute of Limitations did not apply; and the rule which was there laid down was one which in my opinion cannot be transferred to cases like the present, to which the statute does directly apply.
In dealing with the latter class of cases, Courts of Equity were just as much bound by the statute as were Courts of Common Law.
In any event, he went on, the brewers had had the means of knowing the truth throughout, if they had chosen to look at the sale contract and examine their books of account.
He also rejected a second contention that time did not start to run until notice of the mistake (that is, the overpayment of 1,000 in 1896) had been given to the plaintiff and a demand had been made.
It is common ground that section 26(c) of the Limitation Act 1939 was intended to reverse the first point of principle (though not, on the facts, the result) in Baker v Courage & Co. The issue is how much further the change in the law was meant to go.
The leading case on that point is the decision of Pearson J in Phillips Higgins v Harper [1954] 1 QB 411.
It was fully argued, and the argument is fully reported.
Professor Andrew Burrows has noted that there was an unsuccessful appeal on the facts by the defendant, briefly reported at p 420, but no cross appeal on the limitation point.
The decision of Pearson J has been followed by the Court of Appeal, apparently with little or no oral argument on the point, in Malkin v Birmingham City Council (unreported) 12 January 2000, a claim for breach of statutory duty.
The judgment of the Court of Appeal in this case recorded [2010] STC 1251, para 242 that Mr Ewart (for HMRC) very generously did not submit that the Court of Appeal was bound by Malkin.
In any event the Court of Appeal, after full argument, accepted Phillips Higgins and Malkin as correct.
It did so after considering the history and language of section 32(1)(c), and the reasoning in the judgment of Pearson J (a long passage from which is set out at para 240).
But for the general importance of the point, it might be sufficient to say that the Court of Appeal was right, and for the right reasons.
Phillips Higgins v Harper was an action by a woman solicitor who had been employed as an assistant by a sole practitioner, Mr Harper, between 1938 and 1950, when she became a salaried partner.
Her employment was, on her case, at a basic salary supplemented by an annual sum to bring her total remuneration up to one third of the net profits of Mr Harpers practice.
Mr Harper contended that (until 1948) the bargain was to supplement her remuneration to one quarter of the net profits as determined by his accountant, and he pleaded the Limitation Act 1939.
The judgment is reported verbatim only on this point, but it is recorded (at p 413) that Pearson J found: (1) that the original fraction of the relevant profit figure to which the plaintiff was entitled was one third, and that that fraction had been reduced to one quarter by the defendant by private instructions to his accountant and that the plaintiff did not know and did not consent to the reduction; (2) that the plaintiffs contention as to the relevant profit figure was correct; and (3) that there had been no intention on the part of the plaintiff to agree the accounts over the material period and that therefore they had not been agreed and settled.
Mr Harpers position was therefore deeply unattractive.
But the plaintiff was not mistaken about the bargain; her mistake was in believing that Mr Harper and his accountant were giving proper effect to it.
As the judge hinted at p 418, the plaintiff might possibly have done better to rely on section 26(b), since although at that time it required fraudulent concealment, that expression was interpreted fairly broadly.
For present purposes the crucial passage is earlier on p 418.
It is part of the passage quoted by the Court of Appeal, but it bears repetition: What, then, is the meaning of provision (c)? The right of action is for relief from the consequences of a mistake.
It seems to me that this wording is carefully chosen to indicate a class of actions where a mistake has been made which has had certain consequences and the plaintiff seeks to be relieved from those consequences.
Familiar examples are, first, money paid in consequence of a mistake: in such a case the mistake is made, in consequence of the mistake the money is paid, and the action is to recover that money back.
Secondly, there may be a contract entered into in consequence of a mistake, and the action is to obtain the rescission or, in some cases, the rectification of such a contract.
Thirdly, there may be an account settled in consequence of mistakes; if the mistakes are sufficiently serious there can be a reopening of the account.
All these are examples of relief which removes or mitigates the adverse consequences to the claimant of the mistake, while respecting the position of the defendant where justice so requires (for instance by the defence of change of position where money has been paid under a mistake, or the requirement for restitutio in integrum where rescission is granted).
It is an important but still relatively narrow category of causes of action, and much narrower than that for which Mr Rabinowitz has contended.
Mr Rabinowitz was critical of the decision of the Court of Appeal as having paid insufficient attention to the statutory language and the traditional equitable rules, and too much attention to the report of the Law Revision Committee.
In his reply (day 5, page 136) he invited the court to read the first sentence of para 23 of the report as if it had contained a parenthesis, saying: Where mistake is not an essential part of the claim because we know thats what the equitable rule is.
In support of this he relied on Brooksbank v Smith (1836) 2 Y & C Ex 58 and Denys v Shuckburgh (1840) 4 Y & C Ex 42, another decision of Alderson B sitting in the equity side of the Court of Exchequer.
As to the statutory language, the criticism is in my view misplaced.
The Court of Appeal cited and agreed with Pearson Js view that the wording is carefully chosen to indicate a category of actions with particular characteristics.
As to the report of the Law Revision Committee, it showed (as would be expected of its distinguished membership) a full awareness of the historical background.
The parenthesis suggested as a gloss by Mr Rabinowitz is not borne out by the example that comes at the end of the first sentence of para 23, that is money or property transferred under a mistake, where the mistake is an essential part of the claim, and would have to be pleaded with some particularity.
The authorities cited by Mr Rabinowitz do not support the wide equitable jurisdiction for which he contended.
Brooksbank v Smith 2 Y & C Ex 58 was about a will trust.
The testatrix died in 1818 leaving a fund in trust, subject to a life interest, for her children in equal shares, with substitutional gifts if any child predeceased her leaving issue.
Her daughter Elizabeth did predecease her by two months, but on the death of the life tenant in 1827 the trustees were given incorrect information about the date of Elizabeths death and her share (1,000 nominal of stock) was transferred to her widower instead of to her children.
When the mistake was discovered in 1833 the trustees claimed 100 stock (which was all that remained unsold) from Elizabeths widower.
The bill was issued within six years of discovery of the mistake.
Alderson B held that the claim was not statute barred.
He treated it as a proprietary claim based on a mistake of fact.
Denys v Shuckburgh 4 Y & C Ex 42 was similar, though the facts were more complicated.
Under a marriage settlement made in 1793 Earl Pomfret settled two quarter shares in some lead mines in Yorkshire on trusts under which he had both an immediate life interest and an ultimate reversion (with intermediate trusts that in due course failed).
In 1813 the Earl (whose marriage was childless and ended in judicial separation) sub settled (but only during his own lifetime) one quarter share on his sister, Lady Caroline, and another on her son William.
Lady Caroline owned another quarter share of the mines in her own right.
In 1826 the Earl assigned the whole of his reversionary interest to William.
On the Earls death in 1830 no one adverted to the fact that the 1813 sub settlement then came to an end, and the right to income from one quarter share of the mines passed from Lady Caroline to her son William.
He went abroad in 1832 and Lady Caroline died in 1835.
The mistake was not discovered until 1839, when William brought a bill against his mothers estate to recover arrears of income.
Alderson B stated the principle at, p 53: The plaintiff contends, that he has established that this receipt has been by mistake of fact, and that this is on the same footing as fraud, and prevents the operation, if made out, of the Statute of Limitations; which in equity is adopted as a guide, but is not at law binding on the court.
I agree in that conclusion, if the circumstances of the case warrant it.
But here, it seems to me, that the plaintiff had the means, with proper diligence, of removing the misapprehension of fact under which I think he did labour.
He had in his power the deed on which the question turns; and, although it is perhaps rather obscurely worded, still I think he has allowed too much time to elapse not to be fairly considered as guilty of some negligence; and a Court of Equity, unless the mistake be clear, and the party be without blame or neglect in not having discovered it earlier, ought, in the exercise of a sound discretion, to adopt the rule given by the statute law as its guide.
He also referred, during counsels argument, to the position at common law.
As it happened part of the misapplied income was represented by identifiable lead ore stored at Richmond.
When counsel for the plaintiff argued that Lady Caroline became liable to an action for money had and received only when she sold the lead, Alderson B commented, at p 48: If she sold the lead and received the produce, you might have waived the tort, and brought an action for money had and received.
But then the Statute of Limitations runs from the conversion, and not from the time of receiving the money.
These authorities were cited to Warrington J in In Re Robinson [1911] 1 Ch 502.
There the mistake was on a fairly arcane point of law, that an entail created by royal grant as a reward for services cannot be barred: Robinson v Giffard [1903] 1 Ch 865.
That decision showed that deeds executed over 40 years before and intended to bar an annuity granted in tail by King Charles II were ineffective.
The claim was to recover arrears of the annuity.
Warrington J identified, at p 513 three types of case where there is no time bar for recovery of mistaken payments by trustees: (1) when an estate is being administered by the court; (2) proprietary claims to recover identifiable trust assets or their traceable proceeds; and (3) claims against third parties in knowing receipt of trust property.
By contrast the claim before him: is in substance a mere money demand to which a Court of Equity, acting by analogy to the statute, would apply the same period of limitation.
I think, therefore, that the plaintiffs claim is barred by the statute, and that the action fails.
The analysis in In Re Robinson was followed by Romer J in In Re Mason [1928] Ch 385 and approved by the Court of Appeal on appeal in that case [1929] 1 Ch 1.
That was a claim, brought after a very long lapse of time, to recover an estate that had been taken by the Crown as bona vacantia.
In the Court of Appeal Lord Hanworth MR distinguished, at p 9, between the discovery of a mistake which was a cause of action and discovery of the evidence needed to prove the cause of action.
He said: It is suggested by Miss Mason that it is only when she found proof of the marriage of Maria LEpines parents that she was entitled to bring this claim.
A confusion seems to have arisen between the power to prove a claim and the right to bring it.
The cause of action on which this claim is founded arose so far back as one of the three dates I have mentioned, 1798, 1801 or 1831, and the last of these dates is nearly 100 years ago.
The fact that the useful evidence did not turn up until 1921 does not affect the date when the cause of action arose.
In re Blake [1932] 1 Ch 54 was another bona vacantia case, though the interest had been assigned by the Crown to third parties.
Maugham J stated, p 60: An action in the Chancery Division brought by the next of kin against a person to whom the administrator had wrongly paid part of the personal estate of the intestate under a mistake of fact (not joining the administrator and seeking administration) would be in the nature of a common law action for money had and received, and the Court acting on the analogy of the Statute of James I (21 Jac 1, c 16) would hold the claim to be barred after the lapse of six years from the date of payment: see In Re Robinson [1911] 1 Ch 502, where the law is elaborately explained by Warrington J, and In Re Mason [1928] Ch 385; [1929] 1 Ch 1.
A common law action of the same character, assuming that such an action would lie, would also be barred by the same statute after the expiration of six years from the date of payment: Baker v Courage & Co [1910] 1 KB 56, 63.
On the other hand there is no doubt that in a proper case the next of kin might bring an action in the Chancery Division to follow the trust property if the defendant to whom the administrator had paid it were still in possession of it.
The last relevant authority is an obiter passage in the monumental judgment of the Court of Appeal in In Re Diplock [1948] Ch 465.
It was concerned with both personal and proprietary claims against numerous charities.
The claims arose in consequence of the executors calamitous distribution of the testators valuable residuary estate in the mistaken belief that it was held on a valid charitable trust.
The executors had by then compromised claims against them personally.
In relation to a point which was not determinative Lord Greene MR, delivering the judgment of the court, observed at pp 515 516: If [the respondent charities] seek to bring the case, for the purposes of the defence of limitation, within section 2 of the [Limitation Act 1939] and to rely upon the reasoning in In Re Blake [1932] 1 Ch 54, they must do so by averring that the cause of action is analogous to the common law action for money had and received.
And if they assert the analogy, they must take it with its attributes and consequences.
Beyond doubt, it would appear that in the case of an action at common law to recover money paid under a mistake of fact, section 26 would now operate to postpone the running of time.
It is true that no such action would lie where the mistake is one of law: but for reasons which we have already given we do not accept the respondents contention that the analogous claim in equity will also lie only where the mistake was one of fact.
In our judgment, therefore, assuming the analogy (as it must be assumed if section 2 is to apply at all) the action is one for the recovery of money paid away by mistake albeit by the mistake of other persons and by a mistake of law and in our judgment, on this assumption, is an action for relief from the consequences of mistake no less than would be an action at common law to recover money paid away under a mistake of fact.
The analogy with the common law action for money paid under a mistake is a recurring feature of these authorities.
Indeed, the analogy goes right back to the great case of Moses v Macferlan (1760) 2 Burr 1005, the fountain head of the English law of unjust enrichment.
This has been explained in a recent article by the Hon Justice W M C Gummow of the High Court of Australia, Moses v Macferlan 250 Years On (2010) 84 Austl LJ 756, (2011) 68 Washington and Lee Law Review 881, 882 888, citing Moses v Macferlan at 97 E R 676, 679 680 and Clark v Shee and Johnson (1774) 1 Cowp 197, 199 200 for the proposition that the action for money had and received was a liberal action in the nature of a bill in equity.
In the old authorities the matter is sometimes treated simply as a case of mistake, without further analysis.
But in the cases where the period was or might have been extended the mistake seems to have been an essential ingredient in the cause of action.
Dr James Edelman, in Limitation Periods and the Theory of Unjust Enrichment (2005) 68 MLR 848, reads Denys v Shuckburgh differently.
In this he follows Franks, whose monograph on Limitation of Actions (1959) suggests, at p 206 that the decision in Phillips Higgins v Harper was too narrow: In particular it seems clear that a beneficiary under a will or trust who claims directly against a person to whom trust property has been wrongfully transferred can rely upon the mistake of the personal representative or trustee to postpone the running of time; although his cause of action rests upon his own title and the defendants lack of title to the property and the action would be just the same if the property had been transferred purposely, ie, with knowledge that the recipient was not entitled.
But Franks goes on to comment that if Pearson Js view is rejected the scope of section 26 might be dangerously expanded.
that mistake is not an essential allegation and adds: In a footnote to the passage about title to trust property Franks comments Indeed it may be doubted whether even in a common law action to recover money paid by mistake (ie money had and received to the use of the plaintiff) the mistake is an essential allegation though it would of course in practice be pleaded: see Bullen & Leake, 3rd ed, 45, 50; 10th ed, 227 228.
This footnote may be thought to anticipate modern controversies about absence of basis in unjust enrichment.
In a case like Denys v Shuckburgh 4 Y & C Ex 42 the claimants cause of action rests both on his antecedent title and on his mistake.
If Lady Carolines son had known the true position throughout, but had expressly or impliedly authorised the mine manager to continue paying income to his mother, he would have had difficulty recovering the payments even within the limitation period.
Doubts about Phillips Higgins v Harper have been expressed not only by Franks and Edelman but also (in a rather more muted way) in Chitty on Contracts, 30th ed (2008) para 28 088; Goff and Jones, The Law of Restitution, 7th ed (2007) paras 43 004 to 43 006, and (renamed The Law of Unjust Enrichment) 8th ed (2011) paras 31 33 to 33 36; H M McLean, Limitation of Actions in Restitution [1989] CLJ 472, 493 495.
Professor Burrows in a note on DMG in the Court of Appeal is generally supportive of Phillips Higgins v Harper: (2005) 121 LQR 540, 544.
In DMG in the House of Lords Lord Hoffmann and I expressed some doubts, but Lord Scott of Foscote supported Phillips Higgins v Harper: [2007] 1 AC 558, paras 22, 91, 147.
Lord Hoffmann observed (para 22): The Kleinwort Benson case [1999] 2 AC 349 is recent authority for the proposition that an action for restitution of money paid under a void contract can fall within this description [for relief from the consequences of a mistake].
That does not seem to me inconsistent with the existence of the mistake not being essential to the cause of action but merely one example of a case which falls within a more general principle, just as one could have (say, for the purposes of limitation) a category called clinical negligence without implying that it is a cause of action different in nature from other kinds of negligence.
That is a reminder (and in view of current debates about absence of basis a timely reminder) that cause of action can bear different meanings, depending on the context.
Having considered the matter with the benefit of much fuller argument than in DMG I have reached the clear conclusion that Phillips Higgins v Harper was rightly decided, and that we should not seek to develop the law by broadening the interpretation of an action for relief from the consequences of a mistake.
My reasons are essentially the same as the Court of Appeals.
In summary, as to the statutory language, I agree with Pearson Js view that the words have been carefully chosen, and are more precise than some formula such as based or founded on a mistake.
That is an imprecise formula, and legal scholars seem to take different views as to whether it would provide a wider or a narrower test than the words of the statute.
As to history, the authorities are rather short on clear exposition of the relevant principles of equity, but on the whole they provide little support for Mr Rabinowitzs thesis.
Their clearest message is the close analogy between the equitable jurisdiction and the common law action to recover money paid under a mistake.
As to policy, departure from Pearson Js relatively narrow interpretation would bring a real risk (as Franks put it, at pp 206 207) that the scope of [section 32(1)(c)] might be expanded dangerously close to the basic rule of common law limitation that ignorance of the existence of a cause of action does not prevent time from running.
It would be difficult to find any principled stopping place for the expansion.
The leading case of Cartledge v E Jopling & Sons Ltd [1963] AC 758 (in which this point was not even faintly argued) would be seen to have missed the point.
The limits (and indeed the rationale) of sections 11 and 14A of the Limitation Act 1980 would have to be revisited.
Further complications would be introduced into claims for pure economic loss for breaches of professional duties of care.
Any such developments are a matter for the Law Commission and for Parliament, not for this court.
Must there be a demand?
At first instance, Henderson J referred to the Woolwich principle in para 245 of his judgment and directed himself in these terms: Conversely, a Woolwich claim must involve, at least in some sense, the making of a demand by the Revenue, whereas there is no need for a demand in cases of [payment under a mistake].
Later in his discussion of the point he referred to the decision of the Court of Appeal in NEC [2006] STC 606, which was decided in the period between the decisions of the Court of Appeal and the House of Lords in DMG.
In NEC the Court of Appeal held that since the companies in question had not made a group income election, ACT was lawfully payable, and there had been no unlawful demand (see especially the judgment of Mummery LJ at paras 152 to 162).
In the present case the Court of Appeal addressed this issue at paras 152 to 174 of the judgment of the court delivered by Arden LJ.
The court differed from Henderson J.
It accorded great respect to the judgment of Mummery LJ in NEC but did not accept that it was a binding precedent.
It also pointed out, at para 169, that Mummery LJs conclusion (in para 162 of his judgment) tended to elide two distinct issues, that is whether ACT was lawfully due and whether it was demanded.
The Court of Appeal went on to reach a different conclusion.
The heart of its reasoning is at paras 157 and 158: In our judgment, the judge was wrong to reject the Revenues submission that Woolwich alone provides a sufficient United Kingdom remedy for the San Giorgio claims of the claimants [Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595 San Giorgio].
He did so because he considered that he was bound by authority to hold that it is an essential ingredient of the Woolwich cause of action that the tax was paid pursuant to a demand.
We consider that authority does not require a demand, and that it is sufficient that the state has exacted tax, which was not lawfully due, by voluntary compliance by the taxpayer with the legislative imposition of the tax. 158.
As a matter of principle, we do not see why a demand should be a requirement of a Woolwich claim.
The underlying principle is that the Revenue should repay tax that has been exacted without legal justification.
We can see no reason why the cause of action should be confined to those taxes that are payable on demand as against those, such as VAT, that are payable without a demand.
Moreover, it is impossible to see why the citizen who duly accounts for and pays, by way of example, VAT, without waiting for a demand, on the assumption that the applicable legislation is valid, should be disadvantaged as against the taxpayer who refuses to account or to pay until a peremptory demand is received.
Mr Rabinowitz criticised the Court of Appeals reasoning and conclusion on the following grounds (in very brief summary): first, that it was contrary to binding authority, that is the decisions of the House of Lords in Woolwich and DMG; second, that it was contrary to what he described as the conventional understanding of Woolwich; third, that it would create uncertainty, both as to the boundaries of any extended Woolwich principle and in the general development of the law of unjust enrichment.
Mr Rabinowitz also had a further, separate argument based on the Court of Appeals conforming interpretation of section 231 of TA 1988 (mentioned in para 33 above).
This summary does not do justice to Mr Rabinowitzs powerful written and oral submissions but it indicates their general scope.
As the matter is now before the Supreme Court, sitting in a constitution of seven, it is unnecessary to embark on a lengthy consideration of the question of precedent.
It is clear from paras 108 to 112 of his judgment in NEC [2006] STC 606 that Mummery LJ carefully considered whether it was appropriate for him to express opinions on issues of law that were not necessary to the decision.
He reached the conclusion that, in the exceptional circumstances of the group litigation, he should take a course which he would not normally have taken, even though it resulted in judgment being reserved for a longer period.
Mummery LJs views (with which Sedley and Lloyd LJJ agreed) do not bind this court, but they are entitled to great respect.
Mr Rabinowitzs strongest point is the frequent and consistent use of the expression demand, not only in the speech of Lord Goff in Woolwich, but in the speeches of the other members of the House of Lords majority in that case, and in the speeches of the House of Lords in DMG.
Occasional variant uses of exaction carry no weight, since the two words have much the same meaning (indeed, arguably exaction sounds rather more coercive).
Mr Rabinowitz is also right in submitting that most legal scholars have understood Woolwich and DMG as laying down that an official demand is an essential prerequisite for the principle to apply.
However legal scholars have also been unanimous, or almost unanimous, in expressing the view that an official demand ought not to be a prerequisite for the application of the principle.
The Law Commission in its report, Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (1994) (Law Com No 227) took the view that a demand was not necessary (paras 6.41 to 6.42): Lord Goffs reasons for the new restitutionary right, described above, also sustain these inferences, as they are based on the special position of the state and other public bodies.
They do not focus on the particular requirements of a demand or a tax; but on the manifest injustice of allowing monies unlawfully extracted from the subject by a public authority to be retained by it. 6.42.
Therefore, we believe that the principle may well be held to apply to all taxes, levies, assessments, tolls or charges, whether for the provision of services or not, collected by any person or body under a statutory provision which is the sole source of the authority to charge.
We do not think that the Woolwich right is limited to payment of tax or to governmental or quasi governmental exactions, or to payments made in accordance with a demand.
We believe the crucial element is that the payment is collected by any person or body which is operating outside its statutory authority, that is, it is acting ultra vires.
The editors of Goff and Jones, The Law of Unjust Enrichment 8th ed [2011], para 22 15 comment, after referring to the Court of Appeals judgment in NEC: However, provided that a claimants money has been paid as tax ie to discharge a supposed tax liability it should make no difference in principle whether HMRC demanded the payment.
After all, the Woolwich case itself was expressly fought and decided on the basis that the building societys payment was not made in response to illegitimate pressure exerted by the Revenue, and as Bastarache J has observed in the Supreme Court of Canada The right of [a claimant] to obtain restitution for taxes paid under ultra vires legislation does not depend on the behaviour of each party but on the objective consideration of whether the tax was exacted without proper legal authority. [Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3, para 53].
Professor Jack Beatson (as he then was) expressed similar views in an article (written after the Law Commissions Consultation Paper No 120 on Restitution of payments Made Under a Mistake of Law (1991), para 3.90 3.91 but before its Report), Restitution of Taxes, Levies and other Imposts: Defining the Extent of the Woolwich Principle (1993) 109 LQR 401, 405: So, the formulation of the principle indicates that only two of the four features present in the Woolwich case the demand and its ultra vires nature may be necessary prerequisites.
In the case of the demand even this is questionable in view of Lord Goff and Lord Slynns view that a payment of tax made under a mistake of law would be recoverable.
The Law Commissions Consultation Paper provisionally recommended that nothing should turn on the existence or otherwise of an actual demand for payment.
Quite apart from the difficulties of distinguishing payments made in response to an implied demand or an expectation of payment generated by the authority (including its literature), which were mentioned, this requirement is wholly inappropriate and may pose difficulties in the context of a system based on self assessment of tax (and other levies) such as that under consideration by the Revenue at present.
Similar views have been expressed by Professor Charles Mitchell (English Private Law, ed Burrows, 2nd ed (2007) para 18 157); Rebecca Williams, Unjust Enrichment in Public Law (2010) pp 40 41; and Professor Burrows, The Law of Restitution 3rd ed (2011) pp 507 508.
This is a formidable volume of distinguished academic opinion.
One of the main themes in the reasoning is the high constitutional importance of the principle that there should be no taxation without Parliament.
As Professor Mitchell put it (English Private Law, 2nd ed para 18.156): One policy justification for the Woolwich entitlement mentioned by Lord Goff is that a general right to recover payments of tax levied without the authority of Parliament is needed to give full effect to the constitutional principle enshrined in article 4 of the Bill of Rights 1689, that the Crown and its ministers may not impose direct or indirect taxes without Parliamentary sanction.
Another, latent in their Lordships speeches, is the related but wider public law principle of legality, that bodies invested with power by the state must respect the rule of law, and adhere to the limits of the jurisdictions conferred upon them.
An earlier footnote refers to two influential articles on the same theme: Professor W R Cornish, Colour of Office: Restitutionary Redress Against Public Authority (1987) 14 J Mal & Comp L 41, and Professor Peter Birks, Restitution from the Executive: a Tercentenary Footnote to the Bill of Rights in Finn (ed), Essays on Restitution (1990) 164.
These were referred to by Lord Goff in Woolwich [1993] AC 70, 166.
These high principles should not depend on the details of the procedure adopted for the levying and payment of any particular tax, especially in an age when (for reasons of economy and efficiency) the trend is towards self assessment of as many taxes as possible.
ACT was self assessed, as already noted, and so was the tax which HMRC sought to charge under the ultra vires Income Tax (Building Societies) Regulations 1986 in Woolwich.
It is helpful to see how the arguments developed as Woolwich proceeded through the courts.
The building society was successful in judicial review proceedings decided by Nolan J on 31 July 1987.
The building society had anticipated that decision by issuing a writ on 15 July 1987.
Nolan J gave judgment in the action on 12 July 1988, [1989] 1 WLR 137.
He felt bound by authority to dismiss the action so far as it claimed interest, holding that there was an implied agreement for repayment of any ultra vires exaction, but without interest.
In his judgment Nolan J made detailed findings of fact (at pp 141 142), concluding that the requirements of the Regulations as amplified in communications from the revenue amounted on their face to lawful demands from the Crown.
The Court of Appeal [1993] AC 70, 76 142 allowed the building societys appeal by a majority.
The majority (Glidewell and Butler Sloss LJJ) based their decision on an ultra vires demand and a payment which was not intended to close the transaction.
Ralph Gibson LJ, dissenting, held that the payment should be classified as voluntary, with an implied agreement for repayment (without interest) if tax was not due.
All three members of the Court of Appeal seem to have accepted, without much discussion, Nolan Js finding that there had been a demand.
The differences between them turned on whether the building societys response to the demand should be regarded as a voluntary payment.
The matter came before the House of Lords, therefore, on the unchallenged factual basis that there had been a demand.
The House was split three two, with Lord Keith of Kinkel and Lord Jauncey of Tullichettle basing their dissents on the absence of any improper pressure or duress: [1993] AC 70, 160 161, 192 194.
There was no difference between the majority and the minority as to the significance of a demand.
In these circumstances it is in my view open to this court (whether or not it was strictly open to the Court of Appeal) to state clearly that where tax is purportedly charged without lawful parliamentary authority, a claim for repayment arises regardless of any official demand (unless the payment was, on the facts, made in order to close the transaction).
The same effect would be produced by saying that the statutory text is itself a sufficient demand, but the simpler and more direct course is to put the matter in terms of a perceived obligation to pay, rather than an implicit demand.
That is how it was put by Wilson J in her well known dissent in Air Canada v British Columbia (1989) 59 DLR (4th) 161, 169: It is, however, my view that payments made under unconstitutional legislation are not voluntary in a sense which should prejudice the taxpayer.
The taxpayer, assuming the validity of the statute as I believe it is entitled to do, considers itself obligated to pay.
Citizens are expected to be law abiding.
They are expected to pay their taxes.
Pay first and object later is the general rule.
The payments are made pursuant to a perceived obligation to pay which results from the combined presumption of constitutional validity of duly enacted legislation and the holding out of such validity by the legislature.
In such circumstances I consider it quite unrealistic to expect the taxpayer to make its payments under protest.
Any taxpayer paying taxes exigible under a statute which it has no reason to believe or suspect is other than valid should be viewed as having paid pursuant to the statutory obligation to do so.
Lord Goff stated in Woolwich that he found this reasoning most attractive.
The Supreme Court of Canada has in recent years, in a judgment of the Court delivered by Bastarache J, unanimously approved this passage from her dissenting speech: Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3, para 55.
In my view English law should follow the same course.
We should restate the Woolwich principle so as to cover all sums paid to a public authority in response to (and sufficiently causally connected with) an apparent statutory requirement to pay tax which (in fact and in law) is not lawfully due.
Mr Rabinowitz argued that to follow that course would introduce uncertainty as to what amounts to a tax.
The expression should in my view be generously construed, but there are bound to be borderline cases (the Foreign and Commonwealth Office is said to be engaged in a constant dialogue with foreign embassies in London as to whether the congestion charge is a tax).
Borderline cases of that sort will arise whether or not a demand is needed.
They would be likely to cause very much less difficulty than deciding, across the whole range of taxes of different sorts, what amounts to an official demand.
Mr Rabinowitz suggested that there would also be uncertainty in the general development of the English law of unjust enrichment.
There is vigorous debate among legal scholars on this topic at present, and uncertainty as to the outcome.
But to decide that an official demand is not a prerequisite to a claim for the recovery of tax paid when not due ought not to add appreciably to the uncertainty.
It would not be a decisive step towards a general absence of basis principle in place of the unjust factors approach that has prevailed in the past.
It would merely be creating, in Mr Rabinowitzs metaphor, a rather larger island of recovery in respect of undue tax.
Finally, under this head, there is the argument based on the Court of Appeals conforming interpretation of section 231 of TA 1998.
This was the Court of Appeals issue 6, addressed at paras 97 to 109 of its judgment.
The test claimants argument is that section 231, on the interpretation adopted by the Court of Appeal, resulted in dividends from non resident subsidiaries of a UK resident company being treated as FII, so that a credit was available in the same way as for dividends received from UK resident subsidiaries.
Therefore, the argument goes, ACT was not unlawfully levied.
The appropriate claim was a mistake claim, not a Woolwich claim.
This is an ingenious variation on the approach described at para 39 above.
The argument looks like another bit of self inflicted harm for the test claimants, but they seek to turn it to their advantage.
The tactical argument is ingenious but (even if the Court of Appeal was right in its conforming interpretation, a point which may still be revisited if permission is given for a further appeal to this court) it is in my view unsound.
It seeks to rewrite history.
HMRC stoutly defended its position before the Court of Justice until the judgment of the Grand Chamber at the end of 2006.
Until then it consistently contended that there was nothing unlawful about the ACT/FII/FIDs regime, and it performed its statutory functions on that basis.
Any suggestion that section 231 of TA 1988 did not mean what it plainly appeared to mean would have been met with incomprehension and disbelief.
In short, it did not administer the taxation of UK resident companies in accordance with any conforming interpretation.
The unlawful levying of tax may depend either on the text of the statute (which was on its face discriminatory and contrary to EU law) or on how the tax is administered in practice.
In this case HMRC were at fault on at least one, and possibly both of these counts.
The central issues revisited
For the reasons given in paras 42 to 82 above I consider that the Court of Appeal was correct in its conclusions (i) on section 32(1)(c) of the Limitation Act 1980 and (ii) on an official demand for tax not being a prerequisite of a Woolwich claim.
The last 40 paragraphs can therefore be seen as no more than a laborious detour which ultimately leads back to the central issues in the appeal, outlined in paras 38 and 39 above: is a Woolwich claim (on its own) an adequate remedy meeting the principles of effectiveness and equivalence? Or are the test claimants also entitled to regard a claim based on mistake as one which EU law will protect against summary removal by national legislation (with the consequence that the statutory cut off provisions infringe EU law)?
The Court of Appeal answered the first of these questions in the affirmative, and the second in the negative.
The relevant part of the judgment is paras 217 to 229.
The courts reasoning is quite compressed, the heart of it being in para 225: We have held, in respect of issues 11 and 12, that a demand is not an essential ingredient of the Woolwich cause of action, and that that cause of action provides an effective remedy for all the Claimants San Giorgio claims.
Thus the cause of action for repayment of monies paid under a mistake is not a cause of action required by Community law.
The cause of action for repayment of monies paid under a mistake is a domestic remedy of wide application, which Community law does not require the member states to provide, attended by a limitation period (ie section 32(1)(c) of the Limitation Act 1980) that goes beyond the requirements of Community law: see Marks & Spencer at paragraph [2003] QB 866, para 35, in which the court considered a three year limitation period to be reasonable.
Community law restricts the effectiveness of domestic legislation curtailing a limitation period applicable to a domestic cause of action that protects the Community right.
That domestic cause of action is the Woolwich claim, and it is unaffected by sections 320 and 107.
Mr Aaronson has criticised this reasoning as seriously flawed.
The test claimants written case sets out an elaborate framework of five reasons, the first and second of which have been the subject of the detour at paras 42 to 82 above.
The third, fourth and fifth reasons are considered in the following sections of this judgment.
Reemtsma
Mr Aaronson relied on the decision of the Court of Justice in Reemtsma Cigarettenfabriken Gmbh v Ministero delle Finanze (Case 35/05) [2007] ECR I 2425 as authority for the general proposition that EU law requires repayment of tax paid under a mistake (and not unlawfully exacted).
In that case an Italian advertising agency had supplied services to a German client and the services were to be treated as supplied in Germany.
The Italian supplier erroneously invoiced the client and paid VAT to the Italian tax authorities.
Having failed to obtain a refund from the supplier, the German company brought proceedings against the Italian tax authorities.
The Court of Justice held that it was not reimbursable under the provisions of the Eighth Directive and should normally be claimed from the supplier.
However, (para 42) where reimbursement of the VAT would become impossible or excessively difficult, the member states must provide for the instruments necessary to enable that recipient [of the relevant services] to recover the unduly invoiced tax in order to respect the principle of effectiveness.
Mr Aaronson submitted that this principle was of general application, and not limited to VAT (as a specifically EU tax).
He submitted that this was a mistaken payment which was within the wide San Giorgio principle but not within the Woolwich principle, however much it might be extended.
In support of his submission that it was not limited to VAT Mr Aaronson referred to Danfoss AS v Skattministeriet (Case C 94/10), 20 October 2011.
Denmark imposed an indirect tax on lubricants and hydraulic oils which failed to give effect to exemptions required by article 8 of Council Directive 92/81 EEC.
Danfoss purchased these products in large quantities and the suppliers passed on to Danfoss the amount of unlawfully exacted tax which they had paid.
Following the judgment of the Court of Justice in Braathens Sverige AB v Riksskatteverket (Case C 346/97) [1999] ECR I 3419 Danfoss claimed reimbursement direct from the Danish authorities.
The Court of Justice referred to the general San Giorgio principle by which a member state is in principle required to pay charges levied in breach of EU law.
This is subject to an exception if the wrongly levied charge has been passed on.
Where the tax has been passed on the ultimate consumer should normally be able to recover from his supplier, but if that is impossible or unduly difficult there must be a remedy in the form of a direct claim against the tax authorities.
Reemtsma was referred to as an authority for this proposition.
Lord Sumption regards this principle as limited to harmonised EU taxes, and I am inclined to agree with that.
But in any event it applies to a different and relatively unusual situation, in which it is a third party, and not the original taxpayer, who is seeking to recover tax from the authorities.
It does not assist the test claimants in this appeal.
EU laws requirements as to national remedies (especially limitation periods)
There is no doubt as to the general principles regulating what EU law requires of national remedies for infringements of EU law.
The principles were stated by the Grand Chamber in its judgment on the first reference in these proceedings, Case C 446/04, paras 201 to 203, in terms identical, or almost identical, to those which have been stated many times before by the Court of Justice: It must be stated that it is not for the court to assign a legal classification to the actions brought before the national court by the claimants in the main proceedings.
In the circumstances, it is for the latter to specify the nature and basis of their actions (whether they are actions for repayment or actions for compensation for damage), subject the national court (see [Metallgesellschaft (Joined Cases C 397/98 and C 410/98) [2001] ECR I 1727], para 18. the supervision of to 202.
However, the fact remains that, according to established case law, the right to a refund of charges levied in a member state in breach of rules of Community law is the consequence and complement of the rights conferred on individuals by Community provisions as interpreted by the court (see, inter alia San Giorgio (Case C 199/82) [1983] ECR 3595, para 12, and Metallgesellschaft, para 84).
The member state is therefore required in principle to repay charges levied in breach of Community law Comateb (Joined Cases C 192/95 to C 218/95) [1997] ECR I 165, para 20, and Metallgesellschaft, para 84). 203.
In the absence of Community rules on the refund of national charges levied though not due, it is for the domestic legal system 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 Community law, provided, first, that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and, secondly, that they do not render virtually impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness) (see, inter alia, Rewe (Case C 33/76) [1976] ECR 1989, para 5, and Comet (Case C 45/76) [1976] ECR 2043, paras 13 and 16; and, more recently, Edis (Case C 231/96) [1998] ECR I 4951, paras 19 and 34; Dilexport (Case C 343/96) [1999] ECR I 579, para 25; and Metallgesellschaft, para 85).
This brings us to the fourth and fifth reasons in the test claimants written case, which go to the heart of this appeal.
They contend that in using the mistake cause of action to vindicate their EU rights they were unquestionably entitled to the protection of EU law.
They criticise the Court of Appeal for having asked the wrong question: that is for having asked which domestic remedies give effect to the San Giorgio principle, rather than considering, as they should have done, all national remedies as available for the purpose.
It is not necessary to multiply references to the general principles, which are not in dispute.
It is however necessary to look more closely at the attitude of EU law towards limitation of actions under the legal systems of different member states, and towards legislative measures taken by member states to curtail limitation periods, so far as they affect national remedies for breaches of EU law.
It is well established that EU law has no general objection to limitation periods being provided for in the legal systems of member states.
On the contrary, limitation periods are one manifestation of the principle of legal certainty.
As long ago as Rewe I (Rewe Zentralfinanz eG v Landwirtschaftskammer fur das Saarland (Case C 33/76) [1976] ECR 1989, para 5, the Court of Justice (after referring to the general principle of national courts acting in accordance with national rules) observed: The position would be different only if the conditions and time limits made it impossible in practice to exercise the rights which the national courts are obliged to protect.
This is not the case where reasonable periods of limitation of actions are fixed.
The laying down of such time limits with regard to actions of a fiscal nature is an application of the fundamental principle of legal certainty protecting both the taxpayer and the administration concerned.
There is a similar statement, again expressly linked to fiscal proceedings, in Comet BV v Produktschap voor Siergewassen (Case C 45/76) [1967] ECR 2043, para 18.
Limitation periods must be reasonable, but the Court of Justice recognises that national systems vary a good deal, and accepts different approaches so long as there is no infringement of the principles of effectiveness and equivalence, and no disappointment of legitimate expectations.
This is made clear in Amministrazione delle Finanze dello Stato v Sas MIRECO (Case C 826/79) [1980] ECR 2559, paras 11 to 13, and other cases of the same vintage involving the Italian tax authorities, including Amministrazione delle Finanze dello Stato v Denkavit Italiana Srl (Case C 61/79) [1980] ECR 1205, paras 23 and 24, and Amministrazione delle Finanze dello Stato v Ariete SpA (Case C 811/79) [1980] ECR 2545, paras 10 and 11.
In line with that approach, in Haahr Petroleum v Abenr Havn (Case C 90/94) [1997] ECR I 4085, a five year period was accepted as reasonable for reimbursement of an unlawful goods duty.
Emmott v Minister for Social Welfare (Case C 208/90) [1993] ICR 8 was distinguished ([1997] ECR I 4085, para 52) because in that case the relevant directive had not been properly transposed, and until its proper transposition time was not to start to run.
In Edilizia Industriale Siderurgica Srl v Ministero delle Finanze (Case C 23/1996) [1998] ECR I 4951 a three year period was accepted for recovery of company registration charges levied in breach of article 10 of Council Directive 69/335/EEC despite the fact that the normal limitation period for restitution, under article 2946 of the Italian Civil Code, was ten years.
The principles of effectiveness, equivalence and legitimate expectation also apply if a national legislature enacts a measure to curtail an existing limitation period, especially if the measure appears to be directed at a particular ruling of the Court of Justice.
The leading authority is the first judgment of the Court of Justice in Marks & Spencer Plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866 (M&S).
That litigation was complicated and protracted, involving as it did two distinct claims for repayment of VAT (one concerning gift vouchers, and the other concerning chocolate covered marshmallow teacakes) which were linked together as a matter of case management.
There were two references to the Court of Justice, the first of which attracted criticism from the court because of its restricted scope.
The final chapter in the saga is reported at [2009] UKHL 8, [2009] STC 452.
For present purposes, however, it is sufficient to note that section 47 of the Finance Act 1997 curtailed the period for a claim for repayment of VAT from six to three years, with retrospective effect, and without any period of grace.
Some of the claimants claims for VAT on teacakes (which were properly treated as zero rated) went back to 1973.
The Advocate General (Geelhoed) referred to a summary ([2003] QB 866, para 54) of the EU jurisprudence in Roquette Frres SA v Direction des Services Fiscaux du Pas de Calais (Case C 88/99) [2000] ECR I 10465, para 20.
He also cited at para 57, Dilexport (Case C 343/96) [1999] ECR I 579, para 43: Community law does not preclude the adoption by a Member State, following judgments of the Court declaring duties or charges to be contrary to Community law, of provisions which render the conditions for repayment applicable to those duties and charges less favourable than those which would otherwise have been applied, provided that the duties and charges in question are not specifically targeted by that amendment and the new provisions do not make it impossible or excessively difficult to exercise the right to repayment.
The Advocate General pointed out (para 58) that the retrospective alterations to the Value Added Tax Act 1994 affected not only taxable persons who expected under the existing rules to have ample time to make their claims but even taxable persons who before the date on which the announcement of a change in the law was made (18 July 1996) or prior to the date on which it was enacted (19 March 1997) had made claims for repayment of unduly levied tax.
The issue of specific targeting was raised at first instance, but in view of the conclusions which he had already reached Henderson J preferred to express no view on it ([2009] STC 254, paras 428 to 431).
His reasons included the difficulty of the constitutional issues which would arise in inquiring into the legislative intention behind the amending legislation.
The point was not raised in the Court of Appeal or in this court.
The Court of Justice reached conclusions similar to those of the Advocate General [2003] QB 866, paras 36 to 38: Moreover, it is clear from Aprile [2001] 1 WLR 126, para 28 and Dilexport [1999] ECR I 579 paras 41 and 42 that national legislation curtailing the period within which recovery may be sought of sums charged in breach of Community law is, subject to certain conditions, compatible with Community law.
First, it must not be intended specifically to limit the consequences of a judgment of the Court to the effect that national legislation concerning a specific tax is incompatible with Community law.
Secondly, the time set for its application must be sufficient to ensure that the right to repayment is effective.
In that connection, the court has held that legislation which is not in fact retrospective in scope complies with that condition. 37.
It is plain, however, that that condition is not satisfied by national legislation such as that at issue in the main proceedings which reduces from six to three years the period within which repayment may be sought of VAT wrongly paid, by providing that the new time limit is to apply immediately to all claims made after the date of enactment of that legislation and to claims made between that date and an earlier date, being that of the entry into force of the legislation, as well as to claims for repayment made before the date of entry into force which are still pending on that date. 38.
Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation.
Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.
The Court of Justice held the amending legislation incompatible with the principle of effectiveness.
It also (paras 45 and 46) held that it was precluded by the principle of the protection of legitimate expectations.
Legitimate expectations
The principle of protection of legitimate expectations is closely linked to the principle of legality.
But in the opinion of the Advocate General (Cosmas) in Duff v Minister for Agriculture and Food, Ireland and Attorney General (Case C 63/93) [1996] ECR I 569, para 23, the two are not interchangeable.
The Advocate Generals opinion contains (at paras 24 and 25) a passage about timing which is of particular interest (his emphasis): 24.
Particularly for the individual the principle of legality would in many ways lose its significance as a guarantee of a sphere of freedom, if the temporal succession of legal provisions concerning him was not governed by an elementary consistency and coherence sufficient to enable him to discern the consequences (legal and financial) of his activities. 25.
Thus the principle of legal certainty calls for clarity and accuracy in framing the rules of law, and the individual provisions giving effect to them, which at a given moment in time constitute the legal framework within which the competences of the institutions are exercised and the activities of individuals are carried on.
The principle of the protection of legitimate expectations requires the Community legislature and the other Community organs (or the national authorities operating under provisions of Community law) to exercise their powers over a period of time in such a way that situations and relationships lawfully created under Community law are not affected in a manner which could not have been foreseen by a diligent person.
This approach was not in terms adopted by the Court of Justice, but para 20 of its judgment appears to be in line with it.
I have quoted this passage at some length because it seems to me to touch on what is, if I may respectfully say so, one of the crucial points in Lord Sumptions judgment.
Lord Sumption ultimately bases his conclusions, on the central issue, on the principle of protection of legitimate expectations (paras 198 to 202).
He observes (para 196) that the right of the test claimants to choose from a range of causes of action is a right derived solely from English procedural law and (echoing the Court of Appeal, para 226) that it exists only to the extent that English law so provides.
I have considerable difficulty in reconciling that with the principles stated by the Advocate General and the Court of Justice in M&S [2003] QB 866.
But before addressing that difficulty I should recapitulate the sequence of events in which the statutory cut off provisions were announced and enacted.
The enactment of the statutory cut off provisions
Mr Aaronson provided a useful summary of the key dates.
The first two are the decisions of the House of Lords in Woolwich (20 July 1992) and Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (29 October 1998).
After 1998 English lawyers knew that the recovery of money paid under a mistake of law (perhaps including a mistake of tax law, subject to arguments on exclusive remedies) had become a real possibility, although it was by no means a firmly established cause of action.
But until the decision of the Court of Justice in Metallgesellschaft (Joined Cases C 397/98 and C 410/98) [2001] Ch 620 on 8 March 2001 there was no general appreciation that the UK corporation tax regime was seriously open to challenge as infringing the Treaty.
Henderson J did not make any detailed findings about this, since the principle of legitimate expectations does not seem to have been argued as a separate issue before him.
But he did (para 267) make a general finding of fact about mistake: The unlawful payments of ACT made from 1973 to 1999, and the unlawful payments of ACT made under the FID regime from 1994 to 1999, were in my view plainly made under a mistake about the lawfulness of the tax regimes under which they were paid.
I am satisfied from the evidence, both written and oral, that this was not obvious to anybody within the BAT group at the time, since everybody proceeded on the footing that the tax in question was lawfully due and payable.
After 8 March 2001 a well advised multinational group based in the UK would have had good grounds for supposing that it had a valid claim to recover ACT levied contrary to EU law, with at least a reasonable prospect that the running of time could be postponed until then (but not subsequently) by the operation of section 32(1)(c) of the Limitation Act 1980.
During 2002 the opinion of the Advocate General and the judgment of the Court of Justice in M&S, while possibly not adding much to the earlier jurisprudence, spelled out very clearly, for UK companies and lawyers, both the capacity and the limits of national legislation in curtailing limitation periods in proceedings for recovery of tax levied in breach of EU law.
The next important date was 18 July 2003, when Park J gave his first instance judgment in DMG.
This was the first judicial decision which positively upheld a claim for repayment of unduly levied tax with an extended limitation period under section 32(1)(c).
But appeals to the Court of Appeal and the House of Lords were to follow and (as Henderson J observed, para 406), the outcome of those appeals was, at the time, impossible to predict with any confidence.
The BAT group started its proceedings on 18 June 2003, a month before Park Js judgment in DMG.
On 8 September 2003 the Paymaster General announced the introduction of retrospective legislation affecting proceedings to recover tax on the ground of mistake if the proceedings were issued on or after that day (the scope of the proposed legislation was later extended to include amendment of existing proceedings).
The Aegis group issued its proceedings on that very day, 8 September 2003, and so was one of the very first claimants to be affected by the legislation.
Section 320 of the Finance Act 2004 was enacted on 24 June 2004.
Its essential provisions were set out by Henderson J (para 408): Exclusion of extended limitation period in England, Wales and Northern Ireland (1) Section 32(1)(c) of the Limitation Act 1980 . (extended period for bringing an action in case of mistake) does not apply in relation to a mistake of law relating to a taxation matter under the care and management of the Commissioners of Inland Revenue.
This subsection has effect in relation to actions brought on or after 8 September 2003. (2) For the purposes of (a) section 35(5)(a) of the Limitation Act 1980 . (circumstances in which time barred claim may be brought in course of existing action), and (b) rules of court . having effect for the purposes of those provisions, as they apply to claims in respect of mistakes of the kind mentioned in subsection (1), a new claim shall not be regarded as arising out of the same facts, or substantially the same facts, if it is brought in respect of a different payment, transaction period or other matter.
This subsection has effect in relation to claims made on or after 20 November 2003. (6) The provisions of this section apply to any action or claim for relief from the consequences of a mistake of law, whether expressed to be brought on the ground of mistake or on some other ground (such as unlawful demand or ultra vires act). (7) This section shall be construed as one with the Limitation Act 1980 .
The Court of Appeal gave judgment in DMG, reversing Park J, on 4 February 2005: [2006] Ch 243.
Mr Aaronson described the Court of Appeals decision as a bump in the road, suggesting that it was unforeseen and soon forgotten, but that seems an inappropriate description, even with hindsight.
Reference to the judgments (running to nearly 300 paragraphs in all) shows that numerous issues were fiercely contested, including the date of the mistakes discovery (which occurred, on HMRCs argument, in 1995).
The Court of Appeals decision was reversed by the House of Lords on 25 October 2006: [2007] 1 AC 558.
Shortly afterwards the UK government applied to the Court of Justice for the reopening of the hearing of the first reference in these proceedings so that the United Kingdom could argue for a temporal restriction to the judgment of the Court of Justice.
That application was rejected on 6 December 2006, and on the same day HMRC announced the introduction of further retrospective legislation.
This was enacted on 19 July 2007 as section 107 of the Finance Act 2007.
The essential terms of the section were set out by Henderson J (para 412): Limitation period in old actions for mistake of law relating to direct tax (1) Section 32(1)(c) of the Limitation Act 1980 . (extended period for bringing action in case of mistake) does not apply in relation to any action brought before 8 September 2003 for relief from the consequences of a mistake of law relating to a taxation matter under the care and management of the Commissioners of Inland Revenue. (2) Subsection (1) has effect regardless of how the grounds on which the action was brought were expressed and of whether it was also brought otherwise than for such relief. (3) But subsection (1) does not have effect in relation to an action, or so much of an action as relates to a cause of action, if (a) the action, or cause of action, has been the subject of a judgment of the House of Lords given before 6 December 2006 as to the application of section 32(1)(c) in relation to such relief, or (b) the parties to the action are, in accordance with a group litigation order, bound in relation to the action, or cause of action, by a judgment of the House of Lords in another action given before that date as to the application of section 32(1)(c) in relation to such relief. (4) If the judgment of any court was given on or after 6 December 2006 but before the day on which this Act is passed the judgment is to be taken to have been what it would have been had subsections (1) to (3) been in force at all times since the action was brought (and any defence of limitation which would have been available had been raised). (6) In this section group litigation order means an order of a court providing for the case management of actions which give rise to common or related issues of fact or law .
On 30 September 2010 the European Commission announced that it had made a formal request to the UK to change section 107 of the Finance Act 2007.
On 26 January 2012 there was a further announcement that the European Commission has referred the UK to the Court of Justice because of the absence of proper transitional rules in section 107.
Discussion of the statutory cut off provisions
These provisions were challenged in the lower courts primarily on the ground that they infringed the principle of effectiveness.
There was little discussion of legitimate expectations.
Lord Sumption holds (para 199) that reasonable persons in the position of the test claimants would not, until Park Js judgment in DMG on 18 July 2003, have counted on being able to recover tax on the ground of mistake of law; and that even after that decision the existence of such a claim was being challenged on serious grounds.
He concludes from that proposition that no one in the position of the test claimants could have had a reasonable and realistic expectation of recovering tax on the ground of mistake.
I cannot disagree with that conclusion.
The issue of legitimate expectations was not raised before the judge, and he made no findings on it.
The issue of reasonable expectations must of course be decided objectively, but it would have been helpful to have had the view of the judge who very carefully considered the whole case.
But in any case I do have great difficulty in applying the same reasoning to upholding the validity of section 320 against attack under the principle of effectiveness, in the light of M&S. The judgment of the Court of Justice in that case lays down a clear requirement for transitional provisions, and that requirement is derived at least as much from the principle of effectiveness and the principle of legality as from the more limited principle of protection of legitimate expectations (as Advocate General Cosmas said in Duff (Case C 63/93) [1996] ECR I 569, para 23, they are not interchangeable).
If one asks what the test claimants were entitled to, and what they could expect to continue to be entitled to, in the way of national remedies to recover tax levied and paid contrary to EU law, the answer is plainly not that they were entitled to the indefinite continuation of a range of alternative remedies.
The passage from Rewe II on which the test claimants rely (Rewe Handelsgellschaft Nord mbH v Haupzollamt Kiel (Case C 158/80) [1981] ECR 1805, para 44) is, as Lord Sumption demonstrates, an example of the operation of the principle of equivalence.
It is not applicable in this case because both of the statutory cut off provisions applied to all claims for repayment of direct tax, whether or not the repayment was claimed because of an infringement of EU law.
Nor were the test claimants entitled to a remedy arrived at by some precise formula furnished by EU law.
That would be contrary to the basic principles laid down in Rewe I (Case C 33/76) [1976] ECR 1989, and repeated in countless cases since then.
What they were entitled to was that national law should provide an effective remedy which met the requirements of EU principles of effectiveness and equivalence; and that any curtailment of any relevant limitation period should comply with those principles, as well as with the principle of legitimate expectations.
The fact that they could not have complained, in another parallel universe in which section 32 (1)(c) had never existed, is not decisive on the issue of effectiveness.
I would therefore hold that section 320 was contrary to EU law as infringing the principle of effectiveness as explained in M&S, and that section 107 was contrary to EU law both on that ground and (in agreement with Lord Sumption) under the principle of protecting legitimate expectations.
Examples can be tendentious, but the drastic way in which section 320 could operate can be illustrated by the example of a UK resident holding company, part of a multinational group, which paid ACT from 1973 to 1996, building up an ever increasing surplus of unused ACT, and then (three years before the repeal of ACT) decided that enough was enough, and disposed of its overseas subsidiaries.
In 2001 it would have learned of the possibility of a claim for repayment of tax, and taken advice as to the wisdom of incurring costs by making a claim, which was still doubtful, at some time during the next six years.
In 2002 M & S (Case C 62/00) [2003] QB 866 seemed to confirm that the law would not be changed retrospectively and without reasonable notice.
But if the company did not act before 8 September 2003 it would have been deprived, retrospectively and without any notice, of the entirety of its claims for over 20 years tax.
Section 33 of the Taxes Management Act 1970
The last substantive point to be considered is section 33 of the Taxes Management Act 1970, which provided a statutory right to repayment of tax paid by mistake, subject to a number of restrictive conditions.
It replaced provisions originally introduced by the Finance Act 1923.
It has since been replaced by two different sets of provisions, one applicable to individuals and the other to companies.
In the form in which it was in force at the relevant time the conditions were (1) it applied only to excessive tax charged by an assessment (which meant, Lord Goff stated in Woolwich [1993] AC 70, 169, a valid assessment) as a result of an error or mistake in a return; (2) there was a six year time limit; (3) there was to be no repayment if the erroneous or mistaken return was in accordance with practice generally prevailing at the time; and (4) the repayment was to be such as the Board of Inland Revenue (subject to a possible appeal to the Special Commissioners) considered reasonable and just.
The flexibility of the last condition was explained by Mr Ewart by the example of a taxpayer who had paid too much tax six years before, but who ought to have paid more tax on the same income seven or more years before.
The issue on section 33 is whether it is an obstacle to the test claimants and if so, whether it can be given a conforming interpretation under the Marleasing principle ((Case C 106/89) [1990] ECR I 4135).
In terms of the amount of tax at stake, this issue is relatively minor in the context of the litigation as a whole, as it extends only to tax charged under Schedule D, Case V, pursuant to section 18 of TA 1988.
But it is still a point of some general importance.
Before Henderson J HMRC argued, but only it seems quite briefly, that the decision of the Court of Appeal in Monro v Revenue and Customs Comrs [2009] Ch 69 established that section 33 was an exclusive remedy which left no room for any common law claim in unjust enrichment.
The judge [2009] STC 254, paras 438 439 rejected that on two grounds: first that section 33 did not extend to tax levied otherwise than by an assessment; secondly that in any event the national legislation must, in a San Giorgio claim, yield to the principle of effectiveness.
It now seems to be common ground that the first of these reasons does not hold good for tax under Schedule D Case V.
The Court of Appeal took a different approach.
It concluded ([2010] STC 1251, paras 261 and 264) that a conforming interpretation was possible, and did sufficiently go with the grain of the legislation (the expression used in relation to section 3(1) of the Human Rights Act 1998 by Lord Rodger of Earlsferry in Ghaidan v Godin Mendoza [2004] 2 AC 557, para 121, also adopted by Lord Nicholls of Birkenhead at para 33).
The conforming interpretation adopted was (para 261) that the restrictive condition about prevailing practice in section 33(2A) is to be read as subject to the limitation that it applies only if and to the extent that the United Kingdom can consistently with its Treaty obligations impose such a restriction.
I have grave doubts as to whether that interpretation does not go against the grain of the legislation, since the practice generally prevailing condition is of long standing and has always been regarded as an important safeguard for the public revenue.
I am inclined to think that Mr Aaronson was right (Day 2, pp 25 26) to call it a cardinal feature of the legislation.
In my view the Marleasing principle can be applied in a simpler and more natural way by not construing section 33 as impliedly setting itself up as an exclusive provision (which it did not do expressly, unlike section 80 of the Value Added Tax Act 1994).
The test claimants submit that the application of Marleasing cannot rework section 33 in a way that serves any relevant purpose.
But to read it as non exclusive does not go against its grain.
It would merely exclude an implication which is itself no more than a process of statutory construction.
In practical terms the effect is the same as that which Henderson J reached by the second limb of his reasoning.
I would therefore allow the appeal on this point (although it may not, in the end, make much practical difference).
In summary, therefore, my provisional view is that we should (1) uphold the Court of Appeal as to (i) the scope of section 32(1)(c) of the Limitation Act 1980 and (ii) the scope of the Woolwich principle; (2) (3) allow the appeal on section 320 and section 107; and allow the appeal on section 33 of the Taxes Management Act 1970.
But in view of the difference of opinion in the court I consider (in common with Lord Hope, Lord Dyson and Lord Reed) that it is necessary for the court to make a further reference to the Court of Justice of the European Union in accordance with directions in para 23 of Lord Hopes judgment.
LORD BROWN
I have had the great advantage of reading in draft the judgments of Lord Walker and Lord Sumption and am in full agreement with them both on the several issues upon which they each agree.
What, then, of the single issue upon which they disagree: was section 320 of the Finance Act 2004 contrary to EU law as infringing the principle of effectiveness as explained by the Court of Justice in Marks & Spencer Plc v Customs & Excise Comrs (Case C 62/00) [2003] QB 866?
During the hearing I confess to having found difficulty in recognising any principled basis for distinguishing between on the one hand section 47(1) of the Finance Act 1997 which (with effect from when government had earlier announced its intention so to legislate: section 47(2)), besides reducing the basic limitation period for tax repayment claims from six to three years, in addition eliminated the special advantage for claims in mistake previously introduced by section 24(5) of the Finance Act 1989, delaying the commencement of the limitation period for such claims until the claimants had actually or constructively discovered the mistake this being the provision held ineffective by the Court of Justice in Marks & Spencer; and, on the other hand, section 320 with which this court is now concerned which (similarly with effect from when government first announced its intention so to legislate) similarly eliminates with regard to tax repayment claims based on a mistake of law the similar special provision enlarging the limitation period to be found in section 32(1)(c) of the Limitation Act 1980.
Now, however, I am inclined to accept Lord Sumptions view that, by the same token that, on the facts of this case, the appellants can establish no legitimate expectation at any time prior to 8 September 2003 (when government announced its intention to introduce section 320) that the limitation period for mistake of law tax repayment claims would not be attenuated by legislation, nor can they make good their argument that section 320 infringes the EU principle of effectiveness.
The self same considerations essentially of fairness and legal certainty which underlie the doctrine of legitimate expectation (both domestically and under EU law) to my mind also inform the principle of effectiveness.
If, as seems to me plainly to be so, the situation even after Park Js first instance decision in Deutsche Morgan Grenfell Group Plc v Inland Revenue Comrs [2003] 4 All ER 645 (DMG) was one of complete uncertainty as to whether tax could be re claimed on the basis of a mistake of law there being at least as much room for a mistake of law as to this as for the mistake of law which the majority of the House of Lords in DMG [2007] 1 AC 558 held the taxpayers to remain under until the Court of Justices final authoritative decision in the Hoechst case (Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C 397/98 and C 410/98) [2001] Ch 620) there was to my mind neither unfairness nor any denial of a legitimate expectation from Parliament stepping in to legislate with immediate effect to clarify the situation (albeit to the taxpayers obvious disadvantage given that the common law was finally to be developed in their favour).
In short, whereas the position as to limitation with regard to tax recovery claims was crystal clear under section 24 of the 1989 Act and could not therefore fairly and legitimately be altered without due notice and appropriate transitional provisions it was entirely unclear under the developing common law when Parliament chose to intervene by the enactment of section 320.
And it is that which provides the principled basis for distinguishing this case from Marks & Spencer.
Section 107, by contrast, is not merely overtly retrospective (eliminating pre existing claims explicitly preserved by section 320), but was introduced after the House of Lords decision in DMG finally resolved the uncertainty in the law and proclaimed (albeit subject always to lawful legislative change) that mistake of law claims with their extended limitation periods were indeed available to those seeking recoupment of overpaid (or prematurely paid) tax.
Small wonder that it is section 107 that the Commission selected for attack.
LORD CLARKE
In para 9 above Lord Hope has conveniently identified four issues for determination in this appeal.
Issues (3) and (4), which raise a question of construction of section 32(1)(c) of the Limitation Act 1980 and the ingredients of the common law Woolwich claim respectively, raise no issue of EC law.
I agree with the other members of the court that, for the reasons they give, the decisions of the Court of Appeal on both questions should be upheld and that both questions should be answered no.
At the end of the argument I was inclined to the view that section 32(1)(c) should be given the wider meaning contended for by the Test Claimants, but I have been persuaded by the reasoning of Lord Walker and Lord Sumption that it should not.
I also agree with the other members of the court that the restitution and damages remedies sought by the Test Claimants are not excluded by section 33 of the Taxes Management Act 1970 and that it follows that question (2) must be answered no and that the Test Claimants appeal on this issue must succeed.
This seems to me to be essentially a matter of construction of section 33.
In so far as it involves an issue of EU law, I would hold that it is acte clair, and would not refer it to the Court of Justice.
By contrast, the questions posed by issue (1) raise difficult questions of EU law.
This is evident from the differences of opinion between members of the court.
A comparison between the judgments in this case shows that the members of the court are divided, not only as to the question whether EU law protects the mistake claims and, in particular, whether section 320 of the Finance Act 2004 infringes the EU law principles of effectiveness, legal certainty and legitimate expectation, but also as to the correct reasoning for the conclusions reached.
I too would refer the section 320 issues to the Court of Justice.
If there is to be a reference, any further analysis of the position by me will be largely, if not entirely, redundant, since all will depend upon the conclusions ultimately reached by the Court of Justice.
I will therefore only add this.
I agree that section 107 infringes EC law for the reasons given by Lord Sumption.
As to section 320, in agreement with Lord Hope, Lord Walker, Lord Dyson, and Lord Reed my provisional view is that the appeal should be allowed.
The problem (or potential problem) facing the Test Claimants is that English law provides two remedies for their claim that tax has been exacted from them contrary to EU law.
If the only available remedy were the mistake claim, the position would be clear.
It would fall within the principle in Marks & Spencer Plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866 (M&S), which is discussed in some detail by Lord Walker at paras 96 to 99.
The principle is summarised both by the Advocate General and by the Court of Justice at paras 36 to 38 (quoted at para 99 above).
It applies in respect of national legislation curtailing the period within which recovery may be sought of sums charged in breach of EU law and may be summarised as follows: (1) such legislation must not be intended specifically to limit the consequences of a judgment of the Court of Justice to the effect that national legislation concerning a specific tax is incompatible with EU law; (2) the time set for its application must be sufficient to ensure that the right to repayment is effective; and (3) where a new limitation period limits the previously permitted period, the new period must be reasonable and the new legislation must include transitional arrangements allowing an adequate period for lodging claims which were available under the previous legislation.
As Lord Walker explains at para 104, after 8 March 2001, when the Court of Justice decided Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C 397/98 and C 410/98) [2001] Ch 620, the Test Claimants would have had good grounds for supposing that they had a good claim to recover ACT levied contrary to EU law, with at least a reasonable prospect that the running of time could be postponed until then by section 32(1)(c) of the Limitation Act 1980.
In so far as proceedings had not been issued, their claims were therefore in time as at 8 September 2003 when HMRC announced the introduction of what became section 320 of the Finance Act 2004.
The effect of section 320, which is set out at para 107 above and was enacted on 24 June 2004, was to deprive those Test Claimants of rights which were available to them by reason of section 32(1)(c) without any transitional provisions to allow them to issue proceedings within a reasonable time.
But for the availability of the Woolwich claim, section 320 would therefore be contrary to the principles clearly set out in M&S. It made it impossible for those Test Claimants to proceed with their mistake claim because of the absence of the introduction of a reasonable period of limitation as from then and because of the complete absence of transitional provisions.
The facts are very similar to those relating to the chocolate covered marshmallow teacakes in M&S.
Does the existence of the Woolwich remedy make all the difference? I agree with Lord Hope, Lord Walker, Lord Reed and Lord Dyson that it does not.
To my mind it would be remarkable if it did.
In this regard, I agree in particular with the reasoning of Lord Hope at paras 16 to 19 above.
As Lord Hope shows, the Test Claimants had every prospect of success.
It is plain from the fact that section 320 was enacted that HMRC shared that view, since (at any rate as it seems to me) the whole point of the section was to ensure that such a claim would not succeed.
In any event, in the period before section 320 came into force the Test Claimants were entitled to have their mistake claim adjudicated upon by the English courts.
In my opinion they had a legitimate expectation that, as Lord Hope puts it at para 19 and Lord Reed puts it at para 243, that entitlement would not be removed from them by the introduction without notice of a limitation period that was not fixed in advance.
Before the decision in Deutsche Morgan Grenfell Group Plc v Inland Revenue Comrs [2007] 1 AC 558 (DMG) the Test Claimants knew that there was a reasonable prospect that they had a good mistake of law claim against the Revenue.
I agree with Lord Sumption (at para 201) that it must be relevant to ask on what basis the Test Claimants must be taken to have made their plans and that the issue is whether there is an assumption reasonably to be attributed to them about how long they had to bring their claims, which was then retrospectively falsified by Parliament.
It seems to me that they can reasonably be taken to have made their plans on the basis of an expectation that the State would not remove their rights without warning or transitional provisions.
That expectation was then retrospectively falsified by section 320.
In all these circumstances, I prefer the reasoning of Lord Hope and Lord Reed to that of Lord Sumption.
It follows that in my opinion section 320 infringes their rights under EC law on the ground that it infringes the principle of legitimate expectation.
In addition I agree with Lord Hope, Lord Walker, Lord Dyson and Lord Reed that an application of the principle of effectiveness also leads to the conclusion that section 320 infringes their rights under EC law.
This part of the case has been analysed in some detail by Lord Hope, Lord Walker and Lord Reed.
In particular, Lord Reeds analysis is considerably more extensive than that of Lord Walker.
As I read Lord Reeds judgment, a critical part of his reasoning is his reliance upon his view of the principles of equivalence, which he then deploys in reaching his conclusion that section 320 infringes the principle of effectiveness.
His reasoning is to my mind convincing and, for the reasons he gives, I too would so hold.
I have a slight concern that so to hold is to determine the issue on a basis which was not advanced in argument on behalf of the Test Claimants, which (to put it no higher) is surprising given the many years they have been considering these issues.
However, if the Court of Justice were to prefer the approach to equivalence adopted by Lord Sumption to that adopted by Lord Reed, I would nevertheless hold that section 320 infringes the principle of effectiveness.
Although there is, so far as I am aware, no decision of the Court of Justice which directly addresses the point, this conclusion seems to me to receive some support from the opinion of Advocate General Sharpston in Unibet (London) Ltd v Justitiekanslern (Case C 432/05) [2008] All ER (EC) 453, where she said this at para 32 of her opinion: The starting point to my mind must be the principle, first laid down in Rewe I [(Case 33/76) [1976] ECR 1989, para 5], that it is for the domestic legal system of each member state to determine the procedural conditions governing actions at law intended to ensure the protection of Community law rights, provided that those conditions are not less favourable than those relating to similar actions of a domestic nature (principle of equivalence) and do not make it impossible in practice to exercise those rights (principle of effectiveness).
That approach was confirmed in Rewe II [(Case 158/80] [1981] ECR 1805, para 44], where the court stated that the Treaty was not intended to create new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law and that the system of legal protection established by the Treaty implies that it must be possible for every type of action provided for by national law to be available for the purpose of ensuring observance of Community provisions having direct effect. (Original emphasis)
I recognise that, as Lord Sumption observes at para 194, Rewe Handelsgellschaft Nord mbH v Haupzollamt Kiel [1981] ECR 1805 was an equivalence case and that the Court of Justice did not expressly comment upon this passage, but it nevertheless seems to me that in her para 32 the Advocate General was putting the point more generally in the context of effectiveness and that, in that context it provides some support for the Test Claimants case.
I appreciate that the views that I (and others) have expressed on the section 320 point can only be provisional and that it will ultimately be resolved in the light of the answers to the questions referred to the Court of Justice.
I nevertheless hope that these views will be of some assistance in the formulation of those questions.
LORD DYSON
I too agree with the judgments of Lord Walker and Lord Sumption on all the issues on which they agree.
Like Lord Hope and Lord Reed, I agree with Lord Walker on the DMG/section 320 issue.
Nevertheless, I acknowledge the force of Lord Sumptions reasoning on this issue.
For that reason I have concluded that the question cannot be regarded as acte clair and that a reference to the European Court of Justice is necessary.
LORD SUMPTION
Introduction
It is not in dispute that under EU Law, the United Kingdom is bound to provide an effective means under its national law of recovering tax charged contrary to the EU Treaty.
It is common ground that it is open to member states to impose reasonable periods of limitation, even on actions to enforce directly effective EU law rights.
It is also common ground that six years is a reasonable period of limitation for an action to recover tax charged contrary to EU law, and that if English law had always provided for the period to run from the date of payment in cases of mistake, then that too would have been reasonable.
Broadly stated, the issue on this appeal is whether the United Kingdom was entitled to change the law relating to the running of the limitation period, without notice or transitional provisions for actions which were pending or in the pipeline.
The commissioners say that the change related only to actions to recover tax paid under a mistake of law and that there are other causes of action unaffected by the change which satisfy the United Kingdoms obligation to provide an effective means of recovering the tax.
The Test Claimants say, in bald summary, (i) that every cause of action available to them for common law restitution is, on analysis, an action for relief against the consequences of a mistake and therefore affected by the change, (ii) that so far as there are other causes of action available to them which are not affected by the change, they are subject to legal limitations which make it impossible to regard them as an effective means of recovery, and (iii) that irrespective of the fate of points (i) and (ii) the United Kingdom was not entitled to curtail, without notice or transitional provisions, the availability of any cause of action which might serve their purpose.
In my judgment, the Test Claimants and other companies in their position have an effective means of recovering the overpaid tax under the principle stated by the House of Lords in the landmark decision in Woolwich Equitable Building Society v Inland Revenue Commrs [1993] AC 70.
The availability of that cause of action entirely satisfies the obligations of the United Kingdom under the EU Treaty, notwithstanding that it is subject to a limitation period which runs from the date of payment.
Neither section 320 of the Finance Act 2004 nor section 107 of the Finance Act 2007 had any impact on a claim made on that basis, because both enactments were concerned only with actions for the recovery of tax paid under a mistake of law.
Mistake of law is a more limited cause of action, which is neither necessary nor sufficient to satisfy the obligations of the United Kingdom under the EU Treaty.
In those circumstances, I consider that the validity of those enactments depends entirely on whether they defeated the legitimate expectations of taxpayers as that concept is understood in EU law.
I do not think that section 320 of the Finance Act 2004 can be criticised on that ground.
Its effect was that the limitation period for an action to recover tax paid under a mistake of law was to run from the date of payment in the same way as the limitation period for an action to recover tax on any other ground.
It was announced almost as soon as the existence of a right to recover tax paid under a mistake of law had been judicially recognised.
It follows that taxpayers in the position of these claimants cannot at the relevant time have had any reasonable expectation that a cause of action to recover tax paid under a mistake of law would be available to them.
For that reason, I think that they would suffer no injustice if section 320 of the 2004 Act were to be given effect according to its terms, whereas a significant injustice would be suffered by the general body of taxpayers if it were not.
Different considerations apply to section 107 of the 2007 Act, which was retrospective in an altogether more radical and objectionable sense.
It does not surprise me that the European Commission has referred the enactment of 2007 to the European Court of Justice, but has taken no comparable step in the case of the enactment of 2004.
I propose in this judgment to deal first with the general principles of EU law which are relevant, and on which I believe that there is substantial agreement among the members of the court.
I shall then address the argument that a claim to recover overpaid corporation tax on the principle in Woolwich Equitable is not enough to satisfy those principles.
I shall then, finally, return to EU law to consider the main question which has divided this court, namely whether, even if English law did not need to make available a right to recover the tax on the footing of mistake, having done so it could lawfully curtail the limitation period for that right retrospectively and without warning or transitional provisions.
EU law
Unlike Value Added Tax and certain other taxes and duties which are required and directly regulated by EU law, corporation tax is a creature of the domestic law of the United Kingdom.
Apart from the limited requirements of Directive 90/435/EEC relating to withholding tax and double taxation relief, it is not subject to any EU scheme of harmonisation.
Like other national tax systems, however, corporation tax is affected by EU law because it must be assessed and collected on a basis consistent with the Treaty.
In particular, it must comply with the requirements of the single market, including the freedom of establishment and the free movement of capital guaranteed by what are now articles 49 and 63 of the Treaty: Commission v France (Case C 270/83) [1986] ECR 273; Staatssecretaris van Financien v Verkooijen (Case C 35/98) [2000] ECR I 7321.
The internal market is a domain in which competence is shared between the institutions of the EU and those of member states under article 4 of the Treaty.
It follows that even in cases where EU law confers direct rights on private parties, it is for national courts applying national law to determine what rights of action are available against member states to vindicate those rights, and subject to what v eG conditions. procedural or other Landwirtschaftskammer fur das Saarland Case 33/76 [1976] ECR 1989 (Rewe I), the principle was stated at para. 5 in terms which have been repeated or paraphrased in many cases decided since: In Rewe Zentralfinanz it is the national courts which are entrusted with ensuring the legal protection which citizens derive from the direct effect of the provisions of Community law.
Accordingly, in the absence of Community rules on this subject, it is for the domestic legal system of each member state to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature.
Where necessary, articles 100 to 102 and 235 of the Treaty enable appropriate measures to be taken to remedy differences between the provisions laid down by law, regulation or administrative action in member states if they are likely to distort or harm the functioning of the Common Market.
In the absence of such measures of harmonization the right conferred by Community law must be exercised before the national courts in accordance with the conditions laid down by national rules.
The position would be different only if the conditions and time limits made it impossible in practice to exercise the rights which the national courts are obliged to protect.
One consequence of this, as the court pointed out in Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C397/98 and C410/98) [2001] Ch 620, para 81, is that the nature, basis and legal classification of rights of action available for this purpose in the national court is a matter for national courts: It must be stressed that it is not for the court to assign a legal classification to the actions brought by the plaintiffs before the national court.
In the circumstances, it is for the claimants [Metallgesellschaft Ltd. and others and Hoechst AG] to specify the nature and basis of their actions (whether they are actions for restitution or actions for compensation for damage), subject to the supervision of the national court.
This is, however, subject to the overriding requirement derived from the Treaty and referred to in the passage which I have quoted from Rewe I, that national legal systems should provide a minimum standard of protection for EU law rights.
In the case law of the Court of Justice, the standard of protection required is embodied in two principles which are restated in almost every decision on the point.
First, the substantive and procedural provisions of national law must be effective to protect EU law rights (the principle of effectiveness).
Their enforcement in national law must not be subject to onerous collateral conditions or disproportionate procedural requirements.
They must not render virtually impossible or excessively difficult the exercise of rights conferred by EU law.
Secondly, the relevant provisions of national law must not discriminate between the rules and procedures applying to the enforcement of EU law rights, and those applying to the enforcement of comparable national law rights (the principle of equivalence).
There is a third principle which features less prominently in the case law on this subject but is of considerable importance because it informs the approach of the Court of Justice to the first two.
This is the principle of legal certainty, which lies at the heart of the EU legal order and entails (among other things) that those subject to EU law should be able clearly to ascertain their rights and obligations.
One aspect of that principle is that within limits EU law will protect within its own domain legitimate expectations adversely affected by a change in the law.
The leading case on the principle of effectiveness is Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595.
This concerned charges levied for frontier health inspections of imported animals or animal products under Italian legislation but contrary to EU law.
Italian law provided for the recovery of the charges on conditions that were in themselves perfectly acceptable, but which were in practice almost impossible to satisfy because of the exacting rules of evidence applicable to such claims.
The court held (para 12): In that connection it must be pointed out in the first place that entitlement to the repayment of charges levied by a member state contrary to the rules of Community law is a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions prohibiting charges having an effect equivalent to customs duties or, as the case may be, the discriminatory application of internal taxes.
Whilst it is true that repayment may be sought only within the framework of the conditions as to both substance and form, laid down by the various national laws applicable thereto, the fact nevertheless remains, as the court has consistently held, that those conditions may not be less favourable than those relating to similar claims regarding national charges and they may not be so framed as to render virtually impossible the exercise of rights conferred by Community law.
These principles were restated in the judgments of the European Court of Justice in Metallgesellschaft [2001] Ch 620, paras 84 86 and in the first reference in this litigation: FII Group Litigation v Inland Revenue Comrs (Case C 446/04) [2007] STC 326, paras 201 208.
It follows that a member state is in principle required to repay charges levied in breach of Community law: Socit Comateb v Directeur Gnral des Douanes et Droits Indirects (Joined Cases C 192/95 to 218/95) [1997] ECR I165, para 20.
Subsequent case law has emphasized the absolute character of this obligation.
The only exception which has been recognized to date is the case where the charge has been passed on by the party who paid it, with the result that he would be unjustly enriched were he to recover it for his own benefit: see Webers Wine World Handels GmbH v Abgabenberufenskommission Wien (Case C 147/01) [2003] ECR I 11365, para 94.
So, although national courts and legislatures are the masters of their own law and procedure, in so far as the legal system of a member state fails to give adequate effect to directly effective EU law rights, it is incumbent on national courts to give effect to those rights by filling the gap between existing causes of action or if necessary to create a new one: see Unibet (London) Ltd v Justitiekanslern (Case C432/05) [2008] All ER (EC) 453, paras 40 1.
The combined effect of (i) the requirement of EU law that there must be an effective right of recovery of tax charged contrary to that law and (ii) the primacy of national law as the source of that right, is that EU law does not, indeed cannot, require that national law should recognise or create any particular cause of action or any particular remedy.
It simply requires that whatever causes of action or remedies exist in national law must, taken as a whole, be effective and non discriminatory.
The implications of these principles for the operation of rules of limitation in national systems of law is the subject of a considerable body of case law in the Court of Justice.
Not only is limitation a feature of every national legal system of the EU, but the recognition of national rules of limitation as both necessary and desirable is treated as part of the principle of legal certainty in EU law.
In Rewe I [1976] ECR 1989, one of the first cases to come before the Court of Justice about the application of limitation periods to claims to enforce directly effective rights in the area of tax, the court observed (para 5) that the laying down of such time limits with regard to actions of a fiscal nature is an application of the fundamental principle of legal certainty protecting both the tax payer and the administration concerned.
This is so, notwithstanding that the effect of that rule is to prevent in whole or in part the repayment of those charges: Haahr Petroleum Ltd v benr Havn (Case C 90/94) [1997] ECR I 4085, para 45.
Subject to the overriding principles of effectiveness and equivalence, EU law recognizes the public interest in orderly national budgeting and equity between generations of taxpayers, which will generally require rules for establishing clear limits beyond which tax accounts may not be reopened.
In the present appeals it has not been argued that section 320 of the Finance Act 2004 or section 107 of the Finance Act 2007 are inconsistent with the principle of equivalence.
I do not find that surprising.
The two enactments with which we are concerned apply in precisely the same way to claims to recover taxes charged contrary to domestic and EU law.
So far as they create practical limitations on a claimants choice of legal route to recovery, they have precisely the same effect whether the charging of the tax was contrary to EU or domestic law.
It is not suggested in these appeals that either enactment offended against the principle in Deville v Administration des Impts (Case 240/87) [1988] ECR 3513 on the ground that they were specifically targeted at the assertion of rights under EU law.
We are therefore concerned on these appeals only with the principle of effectiveness and the principle of the protection of legitimate expectations.
The fundamental requirement of the principle of effectiveness is that limitation periods should be reasonable, ie not so short as to make recovery by action impossible or excessively difficult: see Rewe I, [1976] ECR 1989, and Comet v Produktschap voor Siergewassen (Case 45/76) [1976] ECR 2043, paras 16 18.
But the assessment of what is reasonable allows for considerable variation between different national systems.
There is abundant case law concerning limitation periods much shorter than six years, which have been held to be reasonable.
Moreover, it is not inconsistent with the principle of effectiveness that under national law the limitation period for the recovery of unlawful charges should run from the time of payment: see Edilizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze (Case C 231/96) [1998] ECR I 4951, para 35, Ministero delle Finanze v SPAC (Case C 260/96) [1998] ECR I 4997, para 32.
Nor is there any rule of EU law requiring the running of a limitation period to be deferred until the existence of a right to recover the payment has been judicially established.
It is not uncommon for a claim to repayment to have become time barred in national law while proceedings are still in progress to determine whether the member state was in breach of EU law.
This was, for example, the position in Rewe I.
It was also the position in many of the decisions about the retrospective curtailment of limitation periods, which I shall consider next.
The curtailment of an existing limitation period gives rise to special considerations.
There are two objections that might in principle be taken to it.
First, even if the change applies only to future claims, it is likely to operate retrospectively to some extent.
It will usually extinguish the possibility of enforcing existing rights to recover sums which have already been paid and could in due course have been reclaimed and recovered under the previous law, but are time barred under the new one.
This necessarily engages the principle of effectiveness.
Of course, the legislation may also be retrospective in the more radical sense of abrogating claims that have already been properly made under the old law.
The second potential objection is that to the extent that the change is retrospective, it may offend against the principle of legal certainty.
People must be taken to appreciate that the law may be changed.
But until it is, they are entitled to organise their affairs on the basis of the law as it stands and to assume a sufficient measure of predictability in its future development to enable them to exercise their EU law rights.
This means that if they have already paid money which is in principle recoverable, they are entitled to be guided by the existing law when deciding how long they have left in which to claim.
This objection is commonly analysed as depending on the principle of the protection of legitimate expectations.
But this is not really a distinct principle.
It has been described as the corollary of the principle of legal certainty, which requires that legal rules be clear and precise, and aims to ensure that situations and legal relationships governed by Community law remain foreseeable: Duff v Minister of Agriculture, Ireland (Case C 63/93) [1996] ECR I 569, para 20.
It is one manifestation of the broader principle that those subject to the law should be able to ascertain their rights and obligations at the time that they are called on to decide what to do about them.
EU law might have taken an absolute line on national legislation retrospectively extinguishing the possibility of enforcing existing rights to recover money charged contrary to EU law.
In fact, it has taken a more flexible and nuanced position.
It follows from the liberty given to member states to devise their own domestic law means of giving effect to EU rights, that national legislatures are in principle entitled to change their laws.
Because they are not obliged to provide more than the minimum level of protection for EU rights necessary to make them effective, the changes may adversely affect claims to assert EU rights, provided that the new law still provides an effective means of doing so.
The compromise which EU law has adopted between these conflicting considerations is to allow the retrospective curtailment of limitation periods within limits set by the principle of the protection of legitimate expectations.
Legislation curtailing limitation periods is in principle consistent with the principle of effectiveness provided that a period of grace, which may be quite short, is allowed, either by giving sufficient advance notice of the change or by including transitional provisions in the legislation.
These propositions are derived from the four leading decisions of the Court of Justice on this question, namely Aprile Srl v Amministrazione delle Finanze dello Stato (Case C 228/96) [2000] 1 WLR 126 (Aprile II), Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C 343/96) [1999] ECR I 579, [2000] All ER (EC) 600, Grundig Italiana SpA v Ministero delle Finanze (Case C 255/00) [2003] All ER (EC) 176, and Marks & Spencer v Customs & Excise Comrs (Case C 62/00) [2003] QB 866.
The first two cases had a similar legal background.
Italy had unlawfully levied charges equivalent to customs duties, which the claimant sought to recover under Italian law.
Italian law conferred a general right to recover payments made without legal basis (pagamento non dovuto) under article 2033 of the Civil Code, which was subject to the general limitation period of ten years provided for by the article 2946 of the Code.
In addition, there was a specific right to a refund under the Consolidated Customs Code in cases of calculation errors in the assessment or the application of a duty other than that laid down in the tariff, which was subject to its own limitation period of five years.
The latter right had no application to a claim for a refund of tax charged contrary to Community law.
These provisions were amended by legislation so that the limitation period in the Customs Code applied to actions under article 2033 whenever the claim was for a refund of sums paid in connection with customs operations.
In other words, the limitation period for the only relevant right of recovery, under article 2033, was reduced from ten years to five.
It is clear that the decisive considerations which led the Court of Justice to conclude that the amendment was consistent with the EU law were (i) that the reduced limitation period was still long enough to satisfy the principle of effectiveness and (ii) that the Italian courts had treated the amending legislation as allowing claimants a period of grace of three years from the time the amending legislation came into force, which meant that the legislation cannot be regarded as having retrospective effect; see Aprile II, para 28 and Dilexport, para 42.
This was not enough to help the claimants, for the period of grace had already expired by the time that they succeeded in obtaining a judicial decision that the charges were unlawful.
But it was held to be enough to satisfy the principle of effectiveness.
In Grundig Italiana [2003] All ER (EC) 176, the Court of Justice had to consider the minimum transitional period which would enable a retrospective curtailment of the limitation period to satisfy EU law.
The case concerned the same amending legislation which had featured in Aprile II and Dilexport, but a different aspect of it, namely the reduction of the special limitation period from five years to three, which took effect ninety days after the legislation came into force.
This transitional period was held to be too short.
The court considered that a period of grace must be sufficient to allow taxpayers who initially thought that the old period for bringing proceedings was available to them a reasonable period of time to assert their right of recovery in the event that under the new rules they would already be out of time (para 38).
In the context of an original limitation period of five years, six months was the least that should have been allowed (para 42).
It is accordingly clear that a reasonable period of grace may be considerably shorter than the amount by which the limitation period has been abridged.
It is a period long enough to allow potential claimants to consider their position, not a period long enough to save every existing right of recovery.
In none of the Italian cases was separate consideration given by the Court of Justice to the principle of the protection of legitimate expectations.
But that principle must necessarily have informed the courts analysis of what was required by the principle of effectiveness.
The point was made in terms by Advocate General Ruiz Jarabo in his opinion in Grundig Italiana, where he observed that a retrospective reduction in the limitation period without a period of grace would be contrary to the principle of effectiveness on the grounds that the reduction is unexpected and contrary to the principle of the protection of legitimate expectations and to the principle of legal certainty (para 30).
The court must have agreed with that.
It was critical to its view that legislation retrospectively curtailing an existing limitation period so as to bar some existing rights, would nevertheless be consistent with the principle of effectiveness if it allowed a sufficient period of grace for taxpayers to adjust their plans to the new order of things.
In Marks & Spencer [2003] QB 866, the facts were more complex.
It was a reference from the Court of Appeal in England about a claim to recover VAT unlawfully charged by the Commissioners of Customs and Excise.
By statute, the only right to obtain a refund from the Commissioners was by way of a claim under section 24 of the Finance Act 1989 (subsequently section 80 of the Value Added Tax Act 1994).
Subsections (4) and (5) of section 24 provided for a six year limitation period, which was to run from the date of payment save in cases of mistake, when it was to run from the time when the mistake was or could with reasonable diligence have been discovered.
On 18 July 1996, the government announced its intention of introducing what later became section 47(1) of the Finance Act 1997.
The effect of this enactment was to reduce the limitation period for the statutory claim from six years to three, and to provide that it was to run in all cases from the time of payment.
Section 47(2) provided that subsection (1) should be deemed to have come into effect on 18 July 1996 and should apply to all claims unsatisfied at that date whether made before or afterwards.
There were no relevant transitional provisions.
The reference was concerned with a claim to recover VAT overpaid on sales of gift vouchers.
This claim was affected by the reduction of the limitation period to three years.
It was not affected by the removal of the extended period of limitation in cases of mistake, because the relevant payments had all occurred within six years before the claim was made.
But the facts are complicated by the existence of another claim, to recover VAT paid in respect of sales of teacakes going back to 1973, which was significantly affected by the removal of the extended limitation period.
The teacakes claim was not part of the reference: see the Advocate General at para 27.
But before us a submission was based on it by Mr Aaronson QC (for the Test Claimants) because of the analogy with the removal of the extended period of limitation in the present case.
It is therefore right to point out that it arose only in the context of a preliminary observation of the Advocate General about the way in which the Court of Appeal had framed the reference.
The Court of Appeal had limited it to (i) the gift vouchers claim, (ii) the reduction of the limitation period from six years to three, and (iii) the period before August 1996 when the Sixth VAT Directive 77/388/EEC had been in force but not properly transposed into the law of the United Kingdom.
The Advocate General, while acknowledging that the court was bound by the terms of the reference, pointed out that it had been framed on the assumption that the Directive had no further relevance as a source of rights once it had been properly transposed into English law in August 1996.
This assumption was in his opinion wrong: paras 32 34.
He thought that the Court of Appeals error about the period in which the Directive was relevant had led it to treat the whole of the teacakes claim and the later part of the gift vouchers claim as depending only on national law: see paras 30 and 44, and his citations from the judgments of the High Court and the Court of Appeal at para 32.
None of this had anything to do with the compatibility of section 47 of the Finance Act 1997 with EU law.
The Court of Justice, in its judgment, agreed that the Court of Appeals assumption about the Directive was mistaken (paras 22 28), but dealt only with the application of the 1997 Act to the gift vouchers claim: see para 13.
The Court of Justice had no difficulty in concluding that section 47 was contrary to the principle of effectiveness.
There was only one means allowed by English law of recovering overpaid VAT, and the effect of the amendment was to extinguish without notice any possibility of using that method to recover overpayments between three and six years old.
Indeed, it extinguished it even when there was already a pending claim at the date of the announcement.
The court took the opportunity to restate the effect of previous case law in the following terms: 35.
As regards the latter principle, the court has held that in the interests of legal certainty, which protects both the taxpayer and the administration, it is compatible with Community law to lay down reasonable time limits for bringing proceedings: Aprile, paragraph 19, and the case law cited therein).
Such time limits are not liable to render virtually impossible or excessively difficult the exercise of the rights conferred by Community law.
In that context, a national limitation period of three years which runs from the date of the contested payment appears to be reasonable (see, in particular, Aprile, paragraph 19, and Dilexport, paragraph 26). 36.
Moreover, it is clear from the judgments in Aprile [2000] 1 WLR 126, para 28, and Dilexport [1999] ECR I 579, paras 41 and 42, that national legislation curtailing the period within which recovery may be sought of sums charged in breach of Community law is, subject to certain conditions, compatible with Community law.
First, it must not be intended specifically to limit the consequences of a judgment of the court to the effect that national legislation concerning a specific tax is incompatible with Community law.
Secondly, the time set for its application must be sufficient to ensure that the right to repayment is effective.
In that connection, the court has held that legislation which is not in fact retrospective in scope complies with that condition. 37.
It is plain, however, that that condition is not satisfied by national legislation such as that at issue in the main proceedings which reduces from six to three years the period within which repayment may be sought of VAT wrongly paid, by providing that the new time limit is to apply immediately to all claims made after the date of enactment of that legislation and to claims made between that date and an earlier date, being that of the entry into force of the legislation, as well as to claims for repayment made before the date of entry into force which are still pending on that date. 38.
Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation.
Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.
The decision is also notable as being the one case in this area in which the court has given separate and explicit consideration to the principle of the protection of legitimate expectations.
It did so because it was expressly invited to deal with both effectiveness and legitimate expectations by the terms of the Court of Appeals reference.
But it dealt with the point under both heads.
In dealing with the principle of effectiveness, it observed (para 38) that the principle of effectiveness required that potential claimants should be given time to assert existing rights under the old law.
This was because (para 39) the right of member states to impose reasonable limitation periods was an exception to the rule that member states must repay taxes charged in breach of Community law, and that exception was founded on the principle of legal certainty.
However, in order to serve their purpose in ensuring legal certainty, limitation periods must be fixed in advance.
In other words, the curtailment of limitation periods is consistent with the principle of effectiveness if it is subject to provisions protecting legitimate expectations.
As the Advocate General had pointed out in his opinion (para 68), the principle of protecting legitimate expectations is based on the need for legal certainty.
Addressing the same point, the court held: 44.
In that connection, the court has consistently held that the principle of the protection of legitimate expectations forms part of the Community legal order and must be observed by the member states when they exercise the powers conferred on them by Community directives: see, to that effect, Krcken (Case 316/86) [1988] ECR 2213, para 22, Alois Lageder SpA v Amministrazione delle Finanze dello Stato (Joined Cases C 31 to C 44/91) [1993] ECR I 1761, para 33, Belgocodex v Belgian State (Case C 381/97) [1998] ECR I 8153, para 26, and Grundstckgemeinschaft Schlossstrasse GbR v Finanzamt Paderborn (Case C 396/98) [2000] ECR I 4279, para 44). 45.
The court has held, in particular, that a legislative amendment retroactively depriving a taxable person of a right to deduction he has derived from the Sixth Directive is incompatible with the principle of the protection of legitimate expectations (Schlossstrasse, cited above, paragraph 47). 46.
Likewise, in a situation such as that in the main proceedings, the principle of the protection of legitimate expectations applies so as to preclude a national legislative amendment which retroactively deprives a taxable person of the right enjoyed prior to that amendment to obtain repayment of taxes collected in breach of provisions of the Sixth Directive with direct effect.
Whether it is put on the basis of the principle of effectiveness or the protection of legitimate expectations or on a combination of the two, the rule of EU law which requires a reasonable period of grace before a retrospective curtailment of the limitation period can be lawful, assumes that claimants generally can legitimately count on having the whole of the old limitation period in which to bring whatever claims may be available to them as a matter of domestic law, unless they have a reasonable warning that the position is about to change.
Thus far, I do not think that there is any fundamental difference in principle between my views and those of other members of the court.
The assumption that a claimant can legitimately count on having the whole of the old limitation period in which to bring whatever claims are available to him is one which would normally be made as a matter of course.
But this is not an ordinary case.
The position is complicated by the highly unusual way in which the right to recover unlawfully charged tax has developed in England over the last two decades.
It is a problem which could only have arisen in a common law country such as England, where the law of restitution has been the piecemeal creation of judges while limitation is exclusively the creature of statute.
To these peculiarly English developments, I now turn.
Rights of recovery in English law
Until surprisingly recently, English law afforded only very limited possibilities of recovering overpaid tax.
As Lord Goff of Chieveley observed in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70, 172, English law had not recognised a condictio indebiti allowing an action for the recovery of payments on the simple ground that they were not due.
It has still not done so.
It is necessary, as the law presently stands, to bring the facts within one of the categories of case in which the law recognises that the recipients retention of the money would be unjust.
The relevant categories as they had stood for a considerable time up to 1992 were described by Lord Goff in his speech in Woolwich Equitable at pp 164 166.
Money was recoverable if it was paid under a mistake of fact, but not if it was paid under a mistake of law (as it generally would be if taxes were paid which were not duly authorised by law).
It was recoverable if it was exacted by actual or threatened duress to the person or to the persons goods, but not on a mere threat to assert a claim by a method provided for by law (for example, by legal proceedings).
It was recoverable if it was demanded by a public official or a person charged with a statutory duty as a condition of his performing his duty.
None of these situations was likely to cover the case where a taxpayer paid money which was not in fact due under the relevant legislation, because it had been misconstrued or was contrary to EU law, or because (being secondary legislation) it was ultra vires the enabling Act.
A limited statutory right to claim repayment from the Commissioners had been introduced in 1923 by section 24 of the Finance Act of that year.
Substantially the same provision has remained in force in successive statutory iterations ever since.
It is currently to be found in section 33 of the Taxes Management Act 1970.
In that form, its effect is that overpaid tax may be reclaimed if (i) it was charged by an assessment, (ii) the assessment was excessive because of a mistake in the taxpayers return, (iii) in the case of a mistake about the basis on which the taxpayers liability should be computed, the return was not in the relevant respect made in accordance with the practice generally prevailing at the time, and (iv) having examined all the relevant circumstances of the case, the Board of Inland Revenue or the Special Commissioners on appeal from them considered that repayment would be reasonable and just.
It will be apparent that if tax was paid under invalid or unlawful legislation the claim will almost inevitably fail on the ground that the return having been made in accordance with the statute it accorded with the practice generally prevailing at the time.
Even if the taxpayer can demonstrate that his return was not in accordance with that practice, the fate of his claim will depend on the exercise of a discretion by the Commissioners.
His only right is to have his claim fairly considered in the light of all relevant circumstances.
As Lord Goff pointed out in Woolwich Equitable (at p 170B), historically this provision presupposed that there was no right of recovery at common law.
The first major change in this state of affairs occurred with the judgment of the House of Lords in the Woolwich Equitable case, which was delivered on 20 July 1992.
The Woolwich Equitable Building Society paid the composite rate tax charged on building societies under statutory regulations which it considered to be ultra vires the enabling primary legislation, and which it then successfully challenged in proceedings for judicial review.
It took this course because it was concerned about the reputational damage that it might suffer if it was seen to withhold tax which other building societies were paying, at a time when there had been no definitive decision on the status of the regulations.
The Commissioners, having failed to justify the charge in the judicial review proceedings, repaid the tax, but declined to recognise that they were bound to do so and therefore felt entitled to reject a claim to interest.
The question at issue was whether the Commissioners had been bound to repay the principal and were therefore amenable to an order for the payment of interest as well.
Woolwich was unable to bring itself within any of the established categories of restitution.
In particular, it could not claim repayment on the ground of mistake, because it had not been mistaken.
It had always believed that the regulations were void.
Nor could it claim under section 33 of the Taxes Management Act 1970, because there had been no assessment.
It had pre empted an assessment by paying.
It followed that under the law as it had previously stood, the claim for interest was bound to fail.
The question, as Lord Goff put it at p 171, was whether the House in its judicial capacity should reformulate the law so as to establish that the subject who makes a payment in response to an unlawful demand of tax acquires forthwith a prima facie right in restitution to the repayment of the money.
The claim failed in the High Court, but it succeeded, by a majority, first in the Court of Appeal and then, on somewhat different grounds, in the House of Lords.
In summary, the House of Lords fashioned a cause of action which was (i) acknowledged to be new, (ii) specific to the case of money charged by a public authority in the absence of a valid statutory power to do so, and (iii) available irrespective of whether the payer was mistaken or whether, if he was mistaken, his mistake was one of fact or law.
It was not necessary in Woolwich Equitable to consider the rule that money paid under a mistake of law was irrecoverable.
That question came before the House of Lords in 1998 in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, one of the last cases to be decided in the great tide of litigation arising out of ultra vires interest rate swap agreements with local authorities.
Kleinwort Benson had made net payments to the local authorities under the terms of these agreements, which they claimed had been made under a mistake of law, namely that they were valid.
In the High Court, Langley J dismissed the claims on the ground that the law did not recognise a right to recover in these circumstances.
The case was leapfrogged to the House of Lords on the ground that the Court of Appeal would be bound by authority to reach the same conclusion.
In the House of Lords, the bank acknowledged that the existing law did not allow the recovery of money paid under a mistake of law.
For their part, the local authorities made no attempt to defend that state of the law in principle, in the face of sustained criticism by academic writers and the Law Commission, its total or partial abandonment in many common law jurisdictions, and the recognition of a wider basis of recovery, independent of mistake, in major civil law systems, notably those of Germany, France and Italy.
The fundamental issue before the appellate committee was whether the law should be changed by judicial decision, or the task left to Parliament.
The House allowed the appeal and recognised a right in principle to recover money paid under a mistake of law, while acknowledging that this represented a departure, even a major departure, from what has previously been considered to be established principle: see Lord Goff at p 378.
For a number of years it remained uncertain whether the new cause of action to recover money paid under a mistake of law extended to mistaken payments of tax.
Kleinwort Benson was a case about private law transactions.
In his speech Lord Goff (with whom on this point the rest of the appellate committee agreed) expressed the view at pp 381 382 that there was a distinction between claims to recover payments made in private law transactions and claims to recover payments of taxes and other charges levied by public authorities.
In the latter category, payments were recoverable as of right under the principle laid down in Woolwich Equitable without the need to invoke a mistake of law, or under section 33 of the Taxes Management Act in cases of mistake to which that provision applied.
Lord Goff continued at p. 382: Two observations may be made about the present situation The first observation is that, in our law of restitution, we now find two separate and distinct regimes in respect of the repayment of money paid under a mistake of law.
These are (1) cases concerned with repayment of taxes and other similar charges which, when exacted ultra vires, are recoverable as of right at common law on the principle in Woolwich, and otherwise are the subject of statutory regimes regulating recovery; and (2) other cases, which may broadly be described as concerned with repayment of money paid under private transactions, and which are governed by the common law.
The second observation is that in cases concerned with overpaid taxes, a case can be made in favour of a principle that payments made in accordance with a prevailing practice, or indeed under a settled understanding of the law, should be irrecoverable.
If such a situation should arise with regard to overpayment of tax, it is possible that a large number of taxpayers may be affected; there is an element of public interest which may militate against repayment of tax paid in such circumstances; and, since ex hypothesi all citizens will have been treated alike, exclusion of recovery on public policy grounds may be more readily justifiable.
The Commissioners, relying mainly on this passage, subsequently contended that tax was subject to a special legal regime, and that the only cause of action at common law for the recovery of overpaid tax was a cause of action on the principle stated in Woolwich Equitable.
The recognition of this basis of claim, it was said, impliedly excluded all other bases of claim apart from the statutory procedure under section 33 of the Taxes Management Act 1970.
This proposition was tested in Deutsche Morgan Grenfell Group Plc v Inland Revenue Comrs [2007] 1 AC 558.
The case foreshadowed some of the issues on the present appeals, and was the genesis of section 320 of the Finance Act 2004.
It concerned claims for the recovery of interest on corporation tax which the European Court of Justice had held to have been prematurely charged in Hoechst/Metallgesellschaft.
The taxpayer company wanted to claim interest for the period when it was out of pocket, on the footing that the tax itself had been paid under a mistake of law.
It took this course because a claim on that basis would benefit from the extended limitation period under section 32(1)(c) of the Limitation Act 1980, whereas claims based on Woolwich Equitable or section 33 of the Taxes Management Act ran from the time of payment and would have been time barred.
There were three main issues: (i) whether, in a case covered by the principle in Woolwich Equitable, a common law claim based on mistake was also available to the taxpayer; (ii) if so, what was the mistake, bearing in mind that the tax had been paid in accordance with the correct construction of the taxing Acts, which was only later shown to be inconsistent with EU law by the decision of the Court of Justice in Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C 397/98 and 410/98) [2001] Ch 620; and (iii) at what stage, for the purpose of section 32(1)(c) of the Limitation Act 1980, could it be said that the taxpayer discovered or could with reasonable diligence have discovered that mistake, so as to start the limitation period running.
Park J gave judgment on 18 July 2003.
He decided all three questions in favour of the taxpayer, and held that accordingly a claim on the basis of mistake was available to it.
In February 2005, the Court of Appeal unanimously overruled him and held that it was not.
The House of Lords restored the judgment of Park J on 25 October 2006.
On the first issue, the House held that the claimant could choose between concurrent causes of action on the principle in Woolwich Equitable and on the basis of mistake of law.
On the second issue, there were some differences of reasoning within the majority of the appellate committee, but all of them agreed that by virtue of the theory that judicial decisions are deemed to declare the existing law, the taxpayer company had made a retrospective or deemed mistake.
The mistake consisted in its failing to appreciate that it was entitled to make a group income election and defer the payment of tax, notwithstanding that the statute said that it did not have this right.
On the third issue, the House of Lords held that under section 32(1)(c) of the Limitation Act 1980 the limitation period for a claim in respect of that mistake did not start to run simply because the claimant was aware of a worthwhile claim or of doubts about the lawfulness of the legislation.
It started to run only when the Court of Justice definitively held that the relevant features of the United Kingdom corporation tax regime were contrary to EU law.
The combined effect of the decisions on these three points was in one respect extremely remarkable.
If tax was overpaid under a mistake of law, then provided that a claim to recover it was brought before six years had elapsed from the judgment establishing the correct legal position, there was no limit upon how far back the claim could go.
In the present cases, it goes back to the accession of the United Kingdom to the Common Market in 1973.
If it had arisen from a mistake of purely domestic law, it might have gone back to the inception of corporation tax in 1965.
In other cases where the unlawfulness of the charge depended wholly on English law, it could in principle go back indefinitely.
It has been suggested in argument before us that once the House of Lords in Kleinwort Benson [1999] 2 AC 349 had accepted the right to recover money paid under a mistake of law, the Commissioners case in Deutsche Morgan Grenfell was never likely to be accepted.
Its acceptance by the Court of Appeal was an aberration, a bump in the road to borrow Mr Aaronsons arresting phrase.
Such arguments often sound plausible in hindsight, after the highest court has laid down the law, and ultimately of course the Commissioners argument was not accepted.
But it was nevertheless a formidable argument, to which the observations of Lord Goff appeared to lend substantial support.
In Kingstreet Investments v New Brunswick (Finance) [2007] 1 SCR 3, considerations rather similar to those raised by Lord Goff had led the Supreme Court of Canada to treat claims to recover unlawfully charged tax as governed by a distinct body of constitutional principle relating to tax charged without legislative authority, and not by the general law of unjust enrichment.
At least part of the Canadian courts reasoning was that the concurrent availability of both causes of action was liable to have unacceptable collateral consequences: see paras 32 42 (Bastarache J).
Indeed, the decision of the House of Lords in Deutsche Morgan Grenfell is even now not beyond academic controversy.
The decision on issue (ii) is criticised by the current editors of Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), paras 22.29 22.31 on grounds closely related to the observations which I have quoted from Lord Goff in Kleinwort Benson.
I do not intend by making these points to reopen a debate which has been settled for more than five years.
My point is more straightforward: no reasonable and well advised person could have counted on the decision in Deutsche Morgan Grenfell going the way it did on all three points, until the House of Lords delivered its judgment.
Section 320 of the Finance Act 2004 was a direct response to the decision of Park J in Deutsche Morgan Grenfell.
It altered not the limitation period itself but the statutory rule postponing its commencement in cases of mistake until the taxpayer had discovered or could with reasonable diligence have discovered the mistake.
It had the effect of barring older claims for repayment of tax paid under a mistake which might otherwise have succeeded.
But the mischief to which section 320 was addressed was not the existence of a right to repayment, whether arising from EU or domestic law, but the problem created by Park Js decision that section 32(1)(c) of the Limitation Act 1980 might now enable past tax accounts to be reopened without limit of time.
Is the right to bring a claim based on Woolwich Equitable an effective remedy?
Logically, the first question to be decided is whether a cause of action based on the Woolwich Equitable principle is an effective means of asserting the right to repayment required by EU law.
The Test Claimants say that it is not.
Therefore, the argument runs, their only effective means of recovery was by way of an action to recover on the ground of mistake, and their right to bring such an action has been unlawfully curtailed by section 320 of the Finance Act 2004.
They make three points.
First, they say that a claim based on Woolwich Equitable requires an unlawful demand by a public authority and is not therefore available to recover taxes such as advance corporation tax which are paid with the return, not upon an assessment or other demand by the Commissioners.
Second, the Court of Appeal has held, applying the principle in Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C106/89) [1990] ECR I 4135 that section 231 of the Income and Corporation Taxes Act 1988 (which provides for a tax credit in respect of distributions paid by UK resident companies) can be given a construction which, however strained, applies it to distributions by companies resident anywhere in the EU.
It follows, they say, that there is nothing unlawful about section 231 which can engage the principle in Woolwich Equitable.
If either of these points is right, then a claim based on Woolwich Equitable is not an effective remedy in this case.
Third, the Test Claimants submit that section 320 of the Finance Act 2004 and section 107 of the Finance Act 2007 curtail the limitation period for a claim based on Woolwich Equitable, because although such a claim does not legally depend on mistake, they were in fact mistaken.
Their action is therefore an action for relief from the consequences of a mistake for the purposes of section 32(1)(c) of the Limitation Act 1980.
If this point is right, then Parliament has without warning curtailed the limitation period for all available methods of obtaining restitution, apart from a claim under section 33 of the Taxes Management Act for a small part of the overpayment and a somewhat problematical claim for damages founded on the principle of state liability stated by the European Court of Justice in Francovich v Italian Republic (Joined Cases C 6/90 and 9/90) [1999] ICR 722, [1991] ECR I 5357.
The Test Claimants need only be right on one of these three points, but in my view they are wrong on all of them.
The demand point
In spite of the importance attached to this point in argument, it can I think be dealt with quite shortly.
The speeches of the majority in Woolwich Equitable [1993] AC 70 are full of expressions which, read literally and out of their analytical context, might support the suggestion that the cause of action recognised in that case was dependent on the making of an unlawful demand: see Lord Goff at 171F G, 172B C, 174C D, 177F, Lord Browne Wilkinson at 196G H, 197C H, 198B C, G H, and Lord Slynn of Hadley at 199B D, 200B C, 201D E, 202G 203A, 204F H, 205A B. None of the majority in Woolwich Equitable discusses what they meant by a demand.
But both the facts of the case and the reasoning of the majority show that they cannot have had in mind a formal demand by the Inland Revenue triggering a payment or an apparent obligation to pay.
The facts, which are succinctly set out by Ralph Gibson LJ in the Court of Appeal (pp 104 105) show that Woolwich Equitable did not pay the composite rate tax in response to a formal demand.
The inspector had simply invited it to agree figures and the collector had sent it a return form.
The society sent in a return computed according to the Regulations, under cover of a letter informing them that they proposed to challenge their validity in legal proceedings.
They then paid without prejudice to the outcome.
As Lord Goff pointed out (at p 169) no assessment was ever made, because Woolwich pre empted it by paying.
It is fair to look for the reasoning of the House of Lords mainly in the classic analysis of Lord Goff, although similar points were made by Lord Browne Wilkinson, who agreed with Lord Goff in terms and by Lord Slynn, who agreed with him in substance.
It is apparent that the mischief which justified in Lord Goffs eyes a special rule for unlawful charges by public authorities was (i) that no tax should be collected without Parliamentary authority, and (ii) that citizens did not deal on equal terms with the state, and could not be expected to withhold payment when faced with the coercive powers of the Revenue, whether those powers were actually exercised or merely held in reserve: see pp. 172.
At pp. 175 176, Lord Goff adopted the dissenting judgment of Wilson J in the Supreme Court of Canada in Air Canada v British Columbia (1989) 59 DLR (4th) 161.
In her judgment, Wilson J had expressed the view that there was a general right to recover money paid under unconstitutional legislation, and deprecated any suggestion that it must have been paid under protest.
The reason, as she pointed out at p 169, was that the legislature holds out its legislation as valid and that any loss resulting from payment under it should not fall on the totally innocent taxpayer whose only fault is that it paid what the legislature improperly said was due.
The emphasis in this reasoning was on the unlawful character of the legislation, with which in practice the citizen was bound to comply even if it might subsequently be shown to be void.
This approach has subsequently been adopted by the Supreme Court of Canada in Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3, to which I have already referred in another context.
Lord Goff not only found the reasoning of Wilson J most attractive (p 176D), but expressed his own conclusions in very similar terms.
In the end, he said (p 173), logic appears to demand that the right of recovery should require neither mistake nor compulsion, and that the simple fact that the tax was exacted unlawfully should prima facie be enough to require its repayment.
The exaction of which he is speaking here is not confined to demands by any particular administrative agency of the state.
It includes exaction by the state by enacting void legislation, which taxpayers are likely to pay because they know that the state will act on the footing that it is valid.
It is not a condition of the taxpayers right of recovery that it should have put the matter to the test by waiting until the Inland Revenue insisted.
In a passage at p 177 which strikingly foreshadows some of the issues in the present appeals, Lord Goff assimilated the rule of English law as he had formulated it to the absolute right of recovery recognized by the European Court of Justice in San Giorgio (Case 199/82) [1983] ECR 3595 in cases where tax was charged contrary to EU law.
Although the majority of the appellate committee stopped well short of adopting a concept of absence of legal basis as a general ground of recovery even in cases of taxation without lawful authority, Lord Browne Wilkinsons analysis of the legal basis of recovery in such cases was also very similar to that of the case law of the Court of Justice.
Money unlawfully demanded was recoverable because it was paid for no consideration: see p 198.
The word demand as it was used in the speeches in Woolwich Equitable referred in my view simply to a situation in which payment was being required of the taxpayer without lawful authority.
Nothing in the principle underlying the decision turned on the mechanism by which that requirement was communicated to the taxpayer.
It is therefore a matter of supreme indifference whether it was communicated by assessment, or by some other formal mode of demand, or by proceedings for enforcement, or by the terms of the legislation itself coupled with the knowledge that the Inland Revenue would be likely to enforce it in accordance with those terms.
The Marleasing point
The Court of Appeal [2010] STC 1251, para 107 held that on the principle of conforming construction stated in Marleasing, section 231 of the Income and Corporation Taxes Act 1988 should be construed so as to remove the discriminatory features of the United Kingdoms advance corporation tax regime.
For present purposes we must assume that they were right about this.
An appeal on that issue is not before us.
The right to apply for permission to appeal on it has been deferred pending the outcome of the second reference to the Court of Justice and its application by the courts below.
The argument of the Test Claimants is that on the assumption that the Court of Appeals construction is correct the legislation conformed to EU law.
Therefore, it is said, the principle in Woolwich Equitable is not engaged.
Marleasing (Case C 106/89) [1990] ECR I 4135, at any rate as it has been applied in England, is authority for a highly muscular approach to the construction of national legislation so as to bring it into conformity with the directly effective Treaty obligations of the United Kingdom.
It is no doubt correct that, however strained a conforming construction may be, and however unlikely it is to have occurred to a reasonable person reading the statute at the time, a later judicial decision to adopt a conforming construction will be deemed to declare the law retrospectively in the same way as any other judicial decision.
But it does not follow that there was not, at the time, an unlawful requirement to pay the tax.
It simply means that the unlawfulness consists in the exaction of the tax by the Inland Revenue, in accordance with a non conforming interpretation of what must (on this hypothesis) be deemed to be a conforming statute.
This is so, notwithstanding that the tax may have been paid without anything in the nature of a formal demand by the Inland Revenue.
The rule as the House of Lords formulated it in Woolwich Equitable is in large measure a response to realities of the relationship between the state and the citizen in the area of tax.
The fact that as a matter of strict legal doctrine a statute turns out always to have meant something different from what it appeared to say is irrelevant to the realities of power if it was plain at the relevant time that the tax authorities would enforce the law as it then appeared to be.
Strictly speaking, in Woolwich Equitable itself there were no unlawful regulations, because, being ultra vires the enabling Act, they were and always had been a nullity.
But that did not stop the Woolwich from recovering.
The section 32(1)(c) point
Section 32(1) is (so far as relevant) in the following terms: Postponement of limitation period in case of fraud, concealment or mistake (1) where in the case of any action for which a period of limitation is prescribed by this Act, either (a) the action is based upon the fraud of the defendant; or (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
The argument for the Test Claimants on these appeals is that in section 32(1)(c) actions for relief from the consequences of a mistake are not confined to actions where the mistake is part of the legal foundation of the claim.
They extend to at least some actions where it was merely part of the history.
Mr Rabinowitz QC (who argued this point for the Test Claimants) accepted some limitations of the range of relevant mistakes.
He said that there had to be a sufficient causal nexus between the mistake and the claim, in the sense that the facts constituting the cause of action have come to pass because of the mistake.
It followed that although the Woolwich Equitable cause of action was available to claimants in the position of his clients regardless of whether they were mistaken or not, those who were in fact mistaken in some historically relevant respect would have benefitted from the extended limitation period until the law was changed by section 320 of the Finance Act 2004.
They have been deprived without notice of that right.
Section 320(6) removes any doubt about this by providing that it applies to any action or c1aim for relief from the consequences of a mistake of law, whether expressed to be brought on the ground of mistake or on some other ground (such as unlawful demand or ultra vires act).
Section 32(1) of the Limitation Act 1980 substantially re enacts section 26 of the Limitation Act 1939, with one minor change to paragraph (b) (from concealment by fraud to deliberate concealment).
The Act of 1939 was a notable monument of law reform, replacing an incoherent series of statutes and equitable rules by a coherent statutory scheme.
It was enacted on the recommendation of the Law Revision Committee in its Fifth Interim Report (Cmd 5334), which was prepared in 1936 under the auspices of Lord Wright, then Master of the Rolls.
Section 26 substantially followed the language of the report.
It is clear from paragraphs 22 and 23 of the Committees report that the intention was to replicate certain features of the rules applied by courts of equity in the absence of any statutory limitation period.
The equitable rules on this subject had originally been developed in the context of cases involving fraud.
The doctrine of laches was applied by analogy with statutory limitation at law, save that in cases of fraud time ran from the point when the fraud was discovered or could with reasonable diligence have been discovered, and not from the accrual of the right as it did at law.
It is clear that fraud was relevant in equity in two circumstances, (i) that the right to equitable relief was itself based on fraud, in the sense that fraud was a legally essential element of it, and (ii) that whether or not the right to relief was based on fraud, its existence had been concealed from the plaintiff by the fraud of the defendant.
The Law Revision Committee summarised the position at paragraph 22 of their report as follows: Either the cause of action may spring from the fraud of the defendant or else the existence of a cause of action untainted in its origin by fraud may have been concealed from the plaintiff by the fraudulent conduct of the defendant.
In 1936, when the Committee was considering these matters, there was inconsistent authority on the question whether since the fusion of law and equity the equitable rule about the running of time in cases of fraud applied to causes of action at law.
They recommended that it should.
The result was section 26(a) and (b) of the 1939 Act, corresponding to section 32(1)(a) and (b) of the 1980 Act.
These two paragraphs dealt with the two circumstances in which fraud was relevant to postpone the running of time in equity, as summarised in the Committees report.
As applied to fraud neither paragraph admits of the construction now proposed by the Test Claimants.
Paragraph (a) is concerned with cases where the action is based upon fraud, ie where it is part of the legal foundation of the claim.
Paragraph (b) is concerned with cases where fraud by the defendant is not necessarily part of the legal basis of the claim, but it has concealed the relevant facts from the claimant and thereby delayed his taking action to enforce his right.
The fact that fraud, although no part of the legal basis of the claim, may have brought about the factual situation which is the legal basis of the claim, does not engage either paragraph.
The reason for enacting section 26(c) of the Limitation Act 1939 (now section 32(1)(c) of the Act of 1980) was that courts of equity had previously applied the equitable rule relating to fraud by analogy to cases of mistake.
As Baron Alderson put it in Brooksbank v Smith (1836) 2 Y & C Ex 58, mistake is within the same rule as fraud.
The Law Revision Committee considered that in this respect the rule for mistake should be the same at law, and at paragraph 23 of their report they recommended the statutory reversal of the decision in Baker v Courage [1910] 1 KB 56, which had held that it was not.
Section 26(c) of the 1939 Act was the result.
On the face of it, therefore, the intention behind paragraph (c) was to replicate the rule of equity by providing that mistake should give rise to an extended limitation period in the same circumstances in which fraud had that effect under paragraph (a), namely where it was the legal basis of the claim.
The use of a different phraseology in (a) and (c) (an action for relief from. instead of based upon) simply reflects the phraseology used in the Committees discussion, which was lifted verbatim from the report by the Parliamentary draftsman.
There is no indication in the report itself that the difference was thought to be significant.
It is fair to say that there are cases decided in equity before the Limitation Act 1939 where the court does not seem to have asked itself whether the mistake was the foundation of the cause of action.
Brooksbank v Smith itself was one of them.
Denys v Shuckburgh (1840) 4 Y& CEx 42, also decided by Baron Alderson, was another.
In both cases, the reason for this appears to have been that Baron Alderson was trying to apply the equitable rule about fraudulent concealment (corresponding to section 31(1)(b)) by analogy to cases of mistake, by holding that a mistake on the part of the plaintiff which concealed from him his right was equivalent to the dishonest or deliberate concealment of his right by the defendant.
If so, the idea was still born.
Lord Wrights committee may well have had these cases in mind when it went out of its way in paragraph 23 of its report to say that they desire[d] to make it clear, however, that the mere fact that a plaintiff is ignorant of his rights is not to be a ground for the extension of time.
Our recommendation only extends to cases when there is a right to relief from the consequences, of a mistake.
This reservation was adopted by the draftsman of section 26 of the Limitation Act 1939 and the corresponding provision of the 1980 Act, both of which exclude from the ambit of paragraph (b) cases where the claimant was mistaken about the existence of his right.
There are clearly obscurities about how the old rule in equity operated before statute intervened, attributable at least in part to the absence of analysis in the few reported cases.
But there is, as it seems to me, no difficulty in ascertaining what rule the Law Revision Committee thought that it was proposing to Parliament.
Nor, in my view, is there any real difficulty in understanding what Parliament must have intended by accepting that proposal when it enacted section 26(c) of the 1939 Act.
The point has been directly considered only once, by Pearson J in Phillips Higgins v Harper [1954] 1 QB 411.
That was an action by an assistant solicitor to enforce a term of her contract of employment which entitled her to a share of the profits of the firm for which she worked.
She claimed to have been underpaid under the profits agreement for the whole 13 years of her employment.
In response to a plea of limitation in respect of the early years, she contended that she had been mistaken in failing to realise that she was being underpaid, and relied on section 26(c) of the Limitation Act 1939.
Pearson J rejected her argument.
In his view the wording of the provision was carefully chosen to indicate a class of actions where a mistake has been made which has had certain consequences, and the plaintiff seeks to be relieved from those consequences (p 418).
He gave as examples an action for the restitution of money paid in consequence of a mistake; or for the rescission or rectification of a contract on the grounds of mistake; or an action to reopen accounts settled in consequence of a mistake.
Mrs. Phillips Higginss alleged mistake had no consequences relevant to her cause of action.
Its only consequence was that because she was unaware that she had a cause of action she missed the limitation period.
But that is not sufficient, said Pearson J; Probably provision (c) applies only where the mistake is an essential ingredient of the cause of action, so that the statement of claim sets out, or should set out the mistake and its consequences and pray for relief from those consequences (p 419).
It is fair to say about this reasoning that Mrs. Phillips Higgins would have failed even on Mr Rabinowitzs construction of the Act, because the mistake that she alleged was not the cause of the factual situation which she relied on for her claim.
It only explained why she had allowed so long to pass before bringing her action.
But what matters for present purposes is that her argument failed because her action was an action for relief from a breach of contract, to which the fact that she was mistaken was legally irrelevant.
As Pearson J went on to point out, No doubt it was intended to be a narrow provision, because any wider provision would have opened too wide a door of escape from the general principle of limitation.
I think that it is difficult to fault Pearson Js succinct and principled analysis of the point.
Section 32(1)(c) refers to a type of action and a type of relief.
They are assumed to be organically related to the relevant mistake.
But if the Test Claimants are right, there is no organic connection, but only an adventitious one.
The result would be a state of the law that would operate quite arbitrarily.
Some Woolwich Equitable claims would benefit from the extended limitation period while others would not, depending on whether the underlying facts arose from a mistake.
I can see no principled ground for making such a distinction in a context where the mistake has no bearing on the nature of the action or the relief claimed.
It has been suggested by academic commentators that this result may be anomalous, in that the extended period of limitation applies to a claim to recover a mistaken overpayment of a debt but not to a claim to recover a mistaken underpayment.
Pearson J himself drew attention to this in his judgment in Phillips Higgins at p 419.
But for my part, I do not see the anomaly.
The difference simply arises from the fact that if the claimant is underpaid and sues for the balance, he is enforcing the obligation that gave rise to the debt, whereas if he is overpaid then that obligation will have been discharged, so that he needs some other legal basis for getting it back.
By comparison, there are far graver anomalies associated with the wider construction proposed by the Test Claimants.
Once one departs from a construction of the subsection which requires the cause of action to be founded on the mistake, it is difficult to discern any principled limit to the reach of this provision.
Mr Rabinovitz distinguishes between cases where the mistake, albeit legally irrelevant, was an effective cause of the facts giving rise to the claim and cases where it was merely a background fact.
I find this distinction conceptually difficult to grasp and almost impossible to apply.
Questions of causation are notoriously difficult and highly sensitive to the legal context in which they fall to be answered.
Where parties have fallen out, there is very likely to be mistake on the part of the claimant somewhere in the chain of events that led to his losing money or property.
If at some stage he could have done something to save himself from loss, in what circumstances is that to be a sufficient causal nexus between the legally irrelevant mistake and the legally relevant facts which give rise to the claim? The question will often be incapable of a clear answer.
Moreover, if the test is not to depend on whether the claimant is asserting one of the established grounds of relief from the consequences of his mistake, and depends on the mere fact that a mistake has brought about the situation in which he has a claim, then there is nothing in the language or purpose of the provision which would limit it to his own mistakes.
It could be the defendants mistake against whose consequences the plaintiff is seeking to be relieved, for example by an action for damages.
This would mean that section 26(c) of the Limitation Act 1939 unwittingly covered at least part of the ground which Parliament later covered by providing an extended limitation period for actions for damages for negligence or in respect of personal injuries and certain categories of property damage: see sections 11 to 14B of the Limitation Act 1980.
Mr Rabinowitz disclaimed any suggestion that the extended limitation period would apply to a claim for damages, with the possible exception of damages for misrepresentation or negligent mis statement.
This was no doubt tactically wise.
But it is hard to see how such a restriction can be justified if his basic submission is accepted.
The difficulties associated with the claimants construction of section 32(1)(c) persuade me that Lord Wright is unlikely to have proposed such an indefinite rule without any discussion of these problems, and that Parliament is unlikely to have intended to enact it.
In an ideal world, all rules of law would be clear, but there are few areas where clarity is as important as it is in the law of limitation, whose whole object is to foreclose argument on what ought to be well defined categories of ancient dispute.
Mistake
It follows that the principle in Woolwich Equitable applies generally in all cases where tax has been charged unlawfully, whether by the legislature or by the tax authorities, whether by overt threats or demands or simply by the taxpayers appreciation of the consequences of not paying, and whether the taxpayer was mistaken or not.
By comparison, an action for restitution on the ground of mistake is a more limited remedy, for the obvious reason that it is necessary to prove the mistake.
That will not always be easy, as the facts of Woolwich Equitable itself demonstrate.
On the face of it, the only case where the Woolwich Equitable cause of action is probably not available and where a claimant may therefore need a right of restitution for mistake, is the case where there is no unlawful exaction of tax but the taxpayer has simply paid in error: e.g. he has miscalculated his liability under a self assessed tax or accidentally paid twice.
But that has no bearing on the position of the present claimants.
Does this mean that that the existence of the Woolwich Equitable cause of action in English law is enough to satisfy the obligations of the United Kingdom in EU law? The Test Claimants submit that it does not.
Their case is that notwithstanding the sufficiency of a Woolwich Equitable claim as a means of recovering unlawfully charged tax, at least in the circumstances of the present case, EU law requires that English law should also maintain a fully effective cause of action to recover tax paid by mistake.
Two quite different arguments are advanced in support of this proposition.
The first is that EU law specifically requires that national legal systems should provide for the recovery of overpaid taxes in all cases where they were not due, including the one case where the principle in Woolwich Equitable probably has no application, viz where there is no breach of EU law by the state but the taxpayer has simply overpaid by mistake.
I shall call this the absence of basis point.
The second argument is that even if EU law does not specifically require national law to confer a right to recover taxes overpaid on the ground of mistake, if national law allows a choice between two causes of action to recover the tax, each of them must be independently effective.
I shall call this the choice of remedies point.
The absence of basis point
The Test Claimants argument is that the obligation of a member state to provide an effective means of recovering overpaid taxes is not limited to cases where the state was in breach of EU law.
It also applies in cases where the national law entirely conformed with EU law but the claimant paid more than the law required of him.
This, they submitted, reflected the principle of restitution applied in EU law and in most civil law jurisdictions (but not England) that a payment is recoverable merely on account of the absence of a legal basis for making it: see Masdar (UK) Ltd v Commission of the European Communities (Case C 47/07) [2008] ECR I 9761, paras 44 46, 49.
In Reemtsma Cigarettenfabriken GmbH v Ministero delle Finanze (Case C35/05) [2007] ECR I 2425 a German company purchased services from an Italian advertising agency and paid VAT to them which was not due.
There was nothing wrong with the relevant provisions of Italian law for charging and collecting the tax, which in the relevant respects entirely conformed with the Directives.
The Italian tax authorities had charged no tax unlawfully.
All that happened was that the German purchaser received an invoice from the Italian supplier for the VAT and paid it, not appreciating that the relevant services were by law deemed to have been supplied in Germany.
The supplier then accounted for the tax to the Italian tax administration.
There was no provision of the two relevant VAT Directives requiring a refund to be made in these circumstances, but it was held that the principle of effectiveness required Italy to make available an effective means of recovering sums paid but not due, either from the Italian supplier or from the state.
Mr Aaronson QC argued that the juridical basis for the obligation to repay overpaid tax in these circumstances was the mere absence of a legal basis for the original payment.
I think that he may well be right about that.
But the reason for the decision was that VAT is an EU tax whose incidence and administration is governed by mandatory requirements of EU law.
The purpose of the VAT Directives is to produce a harmonized system operating according to uniform rules across the EU.
The payment of VAT otherwise than in accordance with that scheme distorts its uniform operation.
The point was made in Danfoss AS and Sauer Danfoss ApS v Skatteministeriet (Case C 94/10), 20 October 2011, where a similar result was arrived at in the context of the common EU scheme for taxing mineral oils.
In its judgment in that case, the court observed (para 23) that the purpose of a right of recovery in a harmonized tax scheme is not only compensatory but economic.
The right to the recovery of sums unduly paid helps to offset the consequences of the duty's incompatibility with EU law by neutralising the economic burden which that duty has unduly imposed on the operator who, in the final analysis, has actually borne it.
In those circumstances, a right of action to recover money paid but not due is required so that the economic burden of the duty unduly paid can be neutralised (para 25).
If this issue were to arise in England in the context of an EU tax, the case would be classified in English law as one of mistake and recovery could probably be had on no other basis.
But where the relevant tax is wholly a creature of national law, and no tax has been charged in breach of EU law, EU law is not engaged at all.
The choice of remedies point
This point is at the heart of the division of opinion within this court.
The Test Claimants argue, and the majority agrees, that the principle of effectiveness in EU law requires that all remedies which are available to recover the tax should be independently effective for that purpose.
Therefore, so the argument goes, it was not open to the United Kingdom to compromise the effectiveness of the right to recover on the ground of mistake by curtailing the limitation period for that right without a period of grace.
In argument, this point was founded mainly on the decision of the European Court of Justice in Rewe Handelsgesellschaft Nord mbH v Hauptzollamt Kiel (Case 158/80) [1982] 1 CMLR 449 (Rewe II).
This was another case about VAT and excise duty chargeable under the terms of a Directive.
It concerned not an unlawful charging of tax, but an unlawful exemption from tax.
The claimants were companies operating supermarkets in German coastal towns, who were adversely affected by tax free sales made in international waters during shopping cruises in the Baltic which began and ended in Germany.
Under the terms of the Directives, a limited exemption was allowed for goods coming from member states in the personal luggage of travellers, but German law allowed an exemption of its own which was in some respects wider.
The Court of Justice held that the exemption in the Directive was not available for sales made on shopping cruises beginning and ending in the same member state, that the tax ought to have been charged, that the incidence of VAT and excise duty was an occupied field governed exclusively by Community law, and that Germany had accordingly had no power to grant further exemptions of its own.
The relevant question for present purposes concerned the remedies available to rival traders against the cruise operators.
German law allowed a right of action to those adversely affected by breaches of national laws regulating economic activity.
At para 40 of its judgment, the Court of Justice referred to this German right of action and then summarised the question at issue as follows: Placed in that context, the questions raised by the national court are intended in substance to establish whether that right of action may be exercised in similar conditions within the framework of the Community legal system in particular in the sense that if the economic interests of a person to whom Community law applies are adversely affected by the non application of a Community provision to a third party, either through the action of a member state or of the Community authorities, that person may institute proceedings before the courts of a member state in order to compel the national authorities to apply the provisions in question or to refrain from infringing them.
The courts answer to that question appears at para 44 of the judgment: it must be remarked first of all that, although the Treaty has made it possible in a number of instances for private persons to bring a direct action, where appropriate, before the Court of Justice, it was not intended to create new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law.
On the other hand, the system of legal protection established by the Treaty, as set out in article 177 in particular, implies that it must be possible for every type of action provided for by national law to be available for the purpose of ensuring observance of Community provisions having direct effect, on the same conditions concerning the admissibility and procedure as would apply were it a question of ensuring observance of national law.
In their printed case (paragraph 67) the Test Claimants rely on this statement of principle, and in particular the passage which I have italicised, as authority for the proposition that EU law requires a right to choose from the range of national remedies.
Of course the Test Claimants do have a right to choose either or both of a Woolwich Equitable claim or a claim based on mistake.
Neither of the Acts of 2004 and 2007 took it away from them.
Their real complaint is not that the right to claim on the basis of mistake of law has been withdrawn, but that the law has been changed to make it subject to a period of limitation running from the date of payment in the same way as the limitation period for a Woolwich Equitable claim.
The argument, as it was developed at the hearing, was that even on the footing that a Woolwich Equitable cause of action was enough and that the United Kingdom was not obliged to confer an additional right to recover tax paid by mistake subject to an extended limitation period, since it has chosen to do so, the principle of effectiveness requires that that right with its extended limitation period should remain available for the purpose of recovering tax charged contrary to EU law.
This submission is accepted by the majority on the present appeal.
I regret that I am unable to accept it for three reasons.
First, the argument is not supported by either the decision or the reasoning in Rewe II, nor by the many subsequent cases in which the relevant statement has been cited.
Rewe II was concerned with the principle of equivalence, as the language and the legal context show.
The issue was whether Germany was bound to make a right of action derived from economic regulation under its national law available to litigants who wanted to enforce comparable rights derived from economic regulation under Community law.
What the court was saying was that any cause of action available to enforce a national law right must be equally available to enforce a corresponding Community law right.
Provided that there remains an effective remedy, it does not follow from this that national law is bound to maintain that cause of action subject to unchanged incidents or conditions.
Nothing was said in Rewe II about protecting the choice of litigants between concurrent national law rights or remedies.
The question did not arise because the Court of Justice was considering the only German law remedy which appeared to exist.
Second, the Test Claimants submission is inconsistent with the established case law of the Court of Justice.
In Edilizia Industriale Siderurgica Srl v Ministero delle Finanze (Case C 231/96) [1998] ECR I 4951 and Ministero delle Finanze v SPAC (Case C 260/96) [1998] ECR I 4997, para 32, the facts were that in breach of a Directive which prohibited taxes on the raising of capital, Italy had charged fees for registering companies.
The general limitation period under the Civil Code was ten years, but the decree law authorizing the registration fees provided (and always had provided) for their repayment within three years if they had been wrongly charged.
The Italian courts had held that as a matter of domestic law, the effect of the creation of a specific right to repayment within three years under the decree law was to displace the general right conferred by the Civil Code to claim restitution on the ground of absence of basis within ten years.
One of the questions referred was whether Italy was bound to make available the cause of action with the more generous limitation period for the purpose of giving effect to EU law rights.
The court held that it was not.
Provided that the right of action carrying the more restrictive limitation period was effective and applied without discrimination whether the claim to repayment was based on EU or national law, there was no obligation to provide in addition a right of action under the Civil Code with a more generous limitation period.
In Edilizia Industriale Siderurgica Srl v Ministero delle Finanze, the court said: 36.
Observance of the principle of equivalence implies, for its part, that the procedural rule at issue applies without distinction to actions alleging infringements of Community law and to those alleging infringements of national law, with respect to the same kind of charges or dues (see, to that effect, Amministrazione delle Finanze dello Stato v Salumi (Joined Cases 66/79, 127/79 and 128/79) [1980] ECR 1237, para 21.
That principle cannot, however, be interpreted as obliging a member state to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied in breach of Community law. 37.
Thus, Community law does not preclude the legislation of a member state from laying down, alongside a limitation period applicable under the ordinary law to actions between private individuals for the recovery of sums paid but not due, special detailed rules, which are less favourable, governing claims and legal proceedings to challenge the imposition of charges and other levies.
The position would be different only if those detailed rules applied solely to actions based on Community law for the repayment of such charges or levies.
The same observations were made in Ministero delle Finanze v SPAC SpA, at paras 20 and 21.
They were later repeated and applied in Aprile II and Dilexport, where the facts were very similar (see paras 151 152 above) but the question arose from a change in the law.
Third, the Test Claimants argument is contrary to principle.
The starting point for any analysis of the law in this area is that, subject to the principles of effectiveness and equivalence, it is for national law to determine what remedies are available to enforce a directly effective EU right and on what procedural or other conditions.
I have made this point already: see paragraph 145 above.
The right of the claimants to choose from the range of causes of action recognised by English law is a right derived solely from English procedural law and it exists only to the extent that English law so provides.
So long as the principles of effectiveness and equivalence are respected, a choice between concurrent national law remedies need not exist, and in some member states does not exist, at any rate to the same extent.
Thus English law allows a claimant to choose between concurrent rights of action in contract and tort, a principle which was applied by analogy in Deutsche Morgan Grenfell [2007] 1 AC 558 to allow a choice between concurrent rights to recover under the Woolwich Equitable principle and on the ground of mistake.
French law, by comparison, is more prescriptive.
The principle of non cumul des responsabilits, which excludes delictual claims which fall naturally within the scope of a contract is generally thought to reflect a more general juristic preference for keeping legal categories distinct and allowing claims to be brought in the category to which their subject matter is appropriate.
The same approach appears to lie behind the restriction of claims under the general doctrine of unjust enrichment (enrichissmement sans cause lgitime) to cases where no other action is available: Flour, Aubert et Savaux, Droit civil, Les obligations, 2 Le fait juridique, 11th ed. (2011), 57 64.
I can see no principled reason why EU law should wish to control these divergent features of national legal systems, provided that the choice which the relevant law mandates and the conditions on which it does so are non discriminatory and effective to vindicate EU rights.
The protection of legitimate expectations: Finance Act 2004, section 320
I have already analysed the case law of the Court of Justice on the retrospective curtailment of limitation periods for the exercise of directly effective EU law rights.
It establishes, first, that the retrospective curtailment of a limitation period is not necessarily inconsistent with the principle of effectiveness; and, secondly, that the combined effect of the principle of effectiveness and the principle of the protection of legitimate expectations is to preclude national legislatures from retrospectively curtailing the limitation period applicable to the recovery of overcharged tax, unless there is a sufficient period of grace to enable actual and potential claimants to safeguard their existing rights.
However, it is important to note that in every case in which these principles have been considered by the Court of Justice, the amending legislation curtailed the limitation period for the only right available in national law for recovering the tax.
In none of them was there an effective right of recovery on another legal basis, unaffected by the amendment.
The observations of the Advocate General and the court, especially those made in Marks & Spencer must be read in that light.
The primary case put forward on behalf of the Commissioners is that because (i) English law would be compatible with EU law if the only means of recovering the overpaid tax was a claim on a Woolwich Equitable basis, and (ii) the Finance Act 2004 did not affect a claim on that basis, it follows that the principles of effectiveness and the protection of legitimate expectations are not engaged at all.
In common with every other member of the court, I reject that submission.
The reason is that if, as I have sought to demonstrate (i) a right to claim on the principle in Woolwich Equitable with a normal limitation period is an effective means of asserting the Test Claimants EU law right, and (ii) there is no obligation on the United Kingdom in EU law to maintain a concurrent right to claim on the basis of mistake with an extended limitation period, then logically there still remains one complaint that might arguably be made about section 320 of the Finance Act 2004.
That complaint is that before the intention to legislate was announced potential claimants were entitled to make their plans on the assumption that they could recover the overpaid tax on the ground of mistake with the benefit of an extended limitation period, but their right to do so was then curtailed without notice or transitional provisions.
I think that this complaint depends on the principle of the protection of legitimate expectations, whereas Lord Walker and Lord Reed consider that it can be justified on the basis of the principle of effectiveness alone.
I doubt whether this difference matters.
In either case, the force of the complaint depends entirely on the proposition that reasonable persons in their position could have made their plans on that assumption.
Could they? I think not.
If English law had never recognised a right to recover tax on the ground of mistake of law, but only on the basis of the principle in Woolwich Equitable, it is not disputed that that state of affairs would have satisfied the requirements of EU law.
If Parliament had retrospectively created a concurrent right to recover tax on the ground of mistake of law, but in the same enactment made it subject it to a limitation period of six years to run from the time of payment, it is not disputed that that state of affairs would also have satisfied the requirements of EU law.
The question whether the right to recover money paid under a mistake of law extended to mistaken payments of tax was a difficult question.
There were powerful voices raised in favour, such as that of Professor Birks, but also strong and principled arguments against.
I have dealt with this matter at paragraphs 166 168 above.
Before Park J gave judgment in Deutsche Morgan Grenfell [2003] 4 All ER 645 on 18 July 2003, no one could reasonably have counted on being able to recover tax on the ground of mistake of law.
They might have thought that there were strong arguments to that effect, but I do not believe that they could reasonably have assumed when deciding how long they had in which to bring their claims that those arguments would prevail.
Even after Park Js judgment, the right to recover tax on the ground of mistake of law was being challenged on appeal on serious grounds.
The existence of such a right was rejected by the Court of Appeal [2006] Ch 243 and was not definitively established until the judgment of the House of Lords [2007] 1 AC 558 on 25 October 2006.
In a common law system, it is open to the courts to create new causes of action, but limitation is necessarily a matter for the legislature.
On 8 September 2003, just seven weeks after the decision of Park J, the government announced its intention to introduce what became section 320 of the Finance Act 2004, with its provision that the limitation period for the newly recognised claim to recover tax on the ground of mistake of law should run from the date of payment and not from the date of discovery.
I find it impossible to regard that sequence of events as any different in substance from the situation that would have existed if Parliament had simultaneously created a right to recover tax for mistake of law and subjected it to a limitation period running from the date of payment.
If potential claimants in the position of the present appellants claim to have been entitled to count on being able to recover on the ground of mistake of law with an extended limitation period, then the highest that they can put their case is that they were entitled to do so in the seven week interval between 18 July and 8 September 2003.
Bearing in mind the brevity of the interval, the virtual certainty of an appeal and the uncertainty about its outcome, the argument that they had a legitimate expectation of the kind suggested seems to me to be unrealistic.
In my judgment, section 320 of the Finance Act 2004 was not inconsistent with the protection of legitimate expectations.
All that Parliament did was to provide for the limitation period applicable to a cause of action which English law had only just recognised.
This was a lawful exercise by Parliament of the discretion allowed to member states as to the conditions regarding limitation on which any national law right is be available.
The contrary view of the majority depends on the declaratory theory of judgments.
It proceeds upon the basis that when Park J and then the House of Lords held in Deutsche Morgan Grenfell that there was a right to recover tax on the basis of mistake, they were declaring the law as it had always been.
At a purely formal level, this proposition is undoubtedly correct.
Judgments of the courts about the common law are deemed to be declaratory and not legislative.
But we are, I think, in danger of allowing the form to overlay the substance.
In Deutsche Morgan Grenfell, at p 570, Lord Hoffmann distinguished between two questions raised by the declaratory theory of judgments: One is whether judges change the law or merely declare what it has always been.
The answer to this question is clear enough.
To say that they never change the law is a fiction and to base any practical decision upon such a fiction would indeed be abstract juridical correctitude.
But the other question is whether a judicial decision changes the law retrospectively and here the answer is equally clear.
It does.
It has the immediate practical consequence that the unsuccessful party loses, notwithstanding that, in the nature of things, the relevant events occurred before the court had changed the law: see In re Spectrum Plus Ltd [2005] 2 AC 680.
There is nothing abstract about this rule.
In my judgment, it is the first of Lord Hoffmanns propositions which is relevant for present purposes.
The question is not whether the law must be treated as always having been as Park J and the House of Lords declared it to be.
It is whether before those judgments were delivered a litigant could reasonably count on being able to recover the overpaid tax on the ground of mistake (with an extended period of limitation), as opposed to being limited to the already established remedy under the Woolwich Equitable principle (with a normal period of limitation).
The question must in my judgment be put in this way, because the issue is whether there is an assumption reasonably to be imputed to litigants about how long they had in which to bring their claim, which was then retrospectively falsified by Parliament.
The answer to the question cannot depend on any legal fiction.
It must depend on the position as it appeared to stand, before those judgments were given.
This must in particular be true when one is seeking to apply to the relevant English law principles of EU law which have always depended on substance rather than form.
The reality is that the Test Claimants never were in a position to make their plans on the footing that they had a right of action for mistake until at the very earliest the judgment of Park J, but more realistically until the matter was definitively settled by the House of Lords in 2006.
It is right to point out that this is substantially the same principle as that on which the Test Claimants themselves rely when they say (with the support of the House of Lords in Deutsche Morgan Grenfell) that they cannot be taken to have discovered their mistake about the lawfulness of the United Kingdoms corporation tax regime until the European Court of Justice definitively decided the point.
By the same token, the Test Claimants cannot be taken to have assumed that they had a right to recover the tax on the ground of mistake at a stage when they had arguments and hopes but no definitive decision.
The protection of legitimate expectations: Finance Act 2007, section 107
As I have already indicated, I regard this provision as more problematic.
It was announced on 6 December 2006, more than three years after the announcement which preceded section 320 of the Act of 2004.
It went a great deal further than the earlier enactment, since it applied retrospectively without limit of time to any action brought before the first announcement had been made on 8 September 2003.
It might be said that the announcement of 2006 was a response to the decision of the House of Lords in Deutsche Morgan Grenfell and that the interval between judgment and announcement was no greater than it had been in 2003.
But the circumstances were different.
Companies in the position of the British American Tobacco group who had already brought their actions before the announcement of 8 September 2003 had been expressly excluded from the operation of the legislation proposed on that date.
That exclusion was duly contained in section 320 of the Finance Act 2004.
The British American Tobacco group and other companies in the same position had been pursuing their claims through the English courts and the Court of Justice on that basis since 2003, when their right to the fruits of those proceedings was removed in 2006.
In my view, while they had had no legitimate expectation of being able to bring an action to recover on the ground of mistake of law in 2003, they had acquired such an expectation by 2006, not least as a result of the terms of the announcement of September 2003 and the 2004 Act.
It was therefore contrary to the principle of the protection of legitimate expectations, for that expectation to be defeated without notice of transitional provisions.
Section 33 of the Taxes Management Act 1970
This provision applies only to assessed taxes, and therefore only to a very small part of the present claims.
It confers a right subject to highly restrictive conditions to invoke what is essentially a discretionary power of the Commissioners to grant a refund of overpaid tax.
No one suggests on this appeal that such a limited remedy could possibly be enough in itself to satisfy the virtually unqualified obligation of the United Kingdom to provide an effective means of recovering tax overcharged contrary to EU law.
This does not of course matter if it is an additional remedy as opposed to an exclusive one.
There is certainly nothing in the provision which expressly excludes the availability of other causes of action at common law.
If that is its effect, it must be by implication.
In the ordinary way, such an exclusion might be implied, on the ground that where Parliament confers a restricted right of recovery, that must impliedly displace a corresponding right at common law which would be unrestricted.
However, it is axiomatic that the courts cannot imply an exclusion of unrestricted rights of action at common law where that would be inconsistent with an overriding rule of EU law that an unrestricted right must be available.
Section 33 cannot therefore be an exclusive right to recover tax overcharged contrary to EU law.
Whether it is an exclusive right in other circumstances, is not a point which needs to be considered on this appeal.
The Court of Appeal held that section 33 did impliedly exclude a right of action at common law, even in relation to claims for tax overcharged contrary to EU law.
They then dealt with the resulting inconsistency with EU law by reinterpreting the section so as remove the offending restrictions and the element of discretion.
I think that this was wrong in principle.
I very much doubt whether such radical surgery can be justified even under the extended principles of construction authorised in Marleasing.
Its effect would be fundamentally to alter the scheme of the provision.
But, however that may be, it seems, with respect, eccentric to imply an ambit for section 33 which is inconsistent with EU law and then to torture the express provisions so as to deal with anomalies that but for the implication would never have arisen.
The damages claims
In addition to their claims in restitution, the claimants have claims against the Commissioners in damages on the principle of state liability adopted by the European Court of Justice in Francovich v Italian Republic (Cases C 6 and 9/90) [1995] ICR 722.
This cause of action is subject to a number of conditions, one of which is that the breach should be sufficiently serious, ie should involve a grave and manifest disregard of the limits of the member states discretion: see Brasserie du Pecheur SA v Federal Republic of Germany (Joined Cases C 46/93 and C 48/93) [1996] QB 404.
Both courts below have dismissed the claim for damages on the ground that that condition is not satisfied.
That may explain why, although the issues before us were formulated so as to cover their implications for the damages claim also, the argument focused exclusively on the claim for restitution.
In fact, the damages claims do not call for separate consideration because neither section 320 of the Finance Act 2004 nor section 107 of the Finance Act 2007 applied to those claims unless they fall within section 32(1)(c) of the Limitation Act 1980.
It follows from the construction that I would give to that provision that they do not fall within it.
It is not suggested that section 33 of the Taxes Management Act 1970 has any bearing on a claim for damages on the principle of state liability.
Conclusion
In the result, I would (1) affirm the decision of the Court of Appeal on the requirements of the cause of action based on Woolwich Equitable and the absence of any requirement for an additional remedy in mistake (Issue 12 in their numbering); (2) affirm their decision on the effect of section 32(1)(c) of the Limitation Act 1980) (Issue 22); (3) allow the appeal on section 107 of the Finance Act 2007 (Issues 20 (4) allow the appeal on section 33 of the Taxes Management Act 1970 and 21); and (Issue 23).
The question whether section 320 of the Finance Act 2004 is compatible with EU law cannot be decided without a reference to the Court of Justice.
It is plain from the novelty of the circumstances in which it arises, and from the differences of opinion within the court that it is not acte clair.
I would, however, limit the reference to section 320 of the 2004 Act.
LORD REED
Lord Walker and Lord Sumption have expressed different views about the way in which EU law applies to the grounds of action available to the test claimants for the recovery of taxes which were levied contrary to EU law, and in particular about the way in which EU law applies to legislation which shortened, retroactively and without transitional provisions, the limitation period applicable to one of those grounds of action.
In my opinion, Lord Walkers analysis of the compatibility of section 320 of the Finance Act 2004 and section 107 of the Finance Act 2007 with the principle of effectiveness, and of the compatibility of the latter provision with the principle of the protection of legitimate expectations, is consistent with the relevant case law of the Court of Justice of the European Union.
I agree with his reasoning and conclusions in relation to those issues, as well as in relation to the issues of domestic law before the court.
For my part, in agreement with Lord Hope and Lord Clarke, I am inclined to the view that section 320 of the 2004 Act also infringes the principle of the protection of legitimate expectations.
I add some observations of my own in relation to the issues of EU law only because of the importance of those issues and the division of opinion in the court.
It is perhaps unusual to discuss EU law in such detail when the matter is to be referred to the Court of Justice, but in the present case the issues of EU law and domestic law are closely inter related.
The difficulties in this case arise partly from the fact that the relevant principles of English law have been in the course of development during much of the relevant period of time.
The principal milestones along the road are three decisions of the House of Lords.
First, in 1992 the House of Lords held that a taxpayer was entitled to recover taxes paid in response to an unlawful demand: Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70.
Secondly, in 1998 the House of Lords held that money paid under a mistake of law was recoverable: Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349.
Thirdly, in 2006 the House of Lords held that the latter principle applied to taxes paid under a mistake of law, including taxes paid in ignorance of the fact that the legislation under which they were levied was incompatible with EU law: Deutsche Morgan Grenfell Group plc v Inland Revenue Comrs [2007] 1 AC 558 (DMG).
Two other important matters were also decided in that case.
The first concerned the limitation period applicable to the claim.
In terms of section 32(1)(c) of the Limitation Act 1980, that period would not begin to run until the mistake was discovered, or could with reasonable diligence have been discovered.
The House of Lords held that, in the circumstances of the case, the mistake could not be discovered until the incompatibility of the tax with EU law had been established by a judgment of the Court of Justice.
The second matter was that the fact that the taxpayer might have a concurrent ground of action under the Woolwich principle, which was subject to a limitation period running from the date of the payment, did not prevent it from pursuing its claim on the ground of mistake if the extended limitation period best suited its interests.
Finally, in its present decision this court has held that a taxpayer who pays taxes in compliance with legislation which is incompatible with EU law has a ground of action under the Woolwich principle, in addition to any ground of action which may be available on the basis of mistake.
The legislative provisions with which we are now concerned alter the limitation period applicable to claims for the repayment of taxes on the ground of mistake, so that it runs from the date when the payment was made, rather than the date when the mistake was discovered or could reasonably have been discovered.
The first provision with which we are concerned, section 320 of the Finance Act 2004, applies to claims which were made on or after 8 September 2003.
The second provision, section 107 of the Finance Act 2007, applies to claims made before that date.
The claims with which we are concerned were made on 18 June 2003, in the case of the BAT group claimants, and on 8 September 2003, in the case of the Aegis group claimants.
They were based on both grounds of action.
The principal issue we have to determine is whether the application of the legislation to the claims is compatible with EU law.
In considering that issue, there appear to me to be three central questions, which can at this stage be broadly stated as follows.
The first is whether the ground of action enabling taxes levied in breach of EU law to be recovered on the basis of mistake falls within the ambit of the EU principle of effectiveness.
It is argued that it does not, since the ground of action based on an unlawful demand in itself fully satisfies the requirement of EU law that there should be an effective remedy.
Since no additional remedy is required by the principle of effectiveness, it follows, so the argument runs, that the additional ground of action which English law provides, based on mistake, falls outside the scope of that principle.
I disagree.
As I shall explain, it appears to me that the EU principle of equivalence, which is the complement of the principle of effectiveness, applies to the grounds of action available for the recovery of taxes in domestic law.
Where an action for the recovery of taxes under domestic law can be based either on the ground of mistake or on the ground of unlawful demand (or, as in the present case, on both grounds), it follows from the principle of equivalence that both grounds of action should also be available in similar circumstances to enforce an analogous right under EU law.
So long as they must both be available, they must also both be effective.
The principle of effectiveness therefore applies to both grounds of action.
The second question, which arises only if the first question is answered in the affirmative, is whether the application of section 320 of the 2004 Act to the Aegis claims, and of section 107 of the 2007 Act to the BAT claims, is compatible with the principle of effectiveness.
As I shall explain, I consider that it is not compatible in either case, since the retroactive curtailment of the limitation period and the absence of any transitional provisions rendered impossible in practice the exercise of rights derived from EU law.
If that is correct, it follows that the legislation cannot be relied upon against the claimants, whatever the answer to the third question may be.
The third question is whether the application of the legislation to these claims is compatible with the EU principle of the protection of legitimate expectations.
That is a question which arises even if the first question is answered in the negative, since the procedural rules laid down by domestic law for the enforcement of rights derived from EU law must be in conformity with the general principles of EU law, including the general principle requiring the protection of legitimate expectations.
The answer to the third question is however of no practical significance if the first two questions are answered as I would answer them.
In the event, we are all agreed that the application of section 107 of the 2007 Act to the BAT claims is incompatible with the protection of the BAT claimants legitimate expectations.
In agreement with Lord Hope and Lord Clarke, I have also reached the same provisional conclusion in respect of the application of section 320 of the 2004 Act to the Aegis claims, for reasons which I shall explain.
It might be argued that a fourth question also arises on the facts of these cases: namely, whether the application of the legislation in issue to these claims would be compatible with the rights recognised in the Charter of Fundamental Rights of the European Union (OJ 2000 C 364, p 1) (notably in article 47), to which effect is given by article 6(1) of the Treaty on European Union (TEU), or with the fundamental rights recognised by article 6(3) TEU, including in particular the right of access to a court, guaranteed by article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, and the right to the peaceful enjoyment of possessions, guaranteed by Article 1 of the First Protocol to the Convention.
That question however goes beyond the ambit of the dispute as defined by the parties, and it raises issues on which the court has not been addressed.
In those circumstances it would not be appropriate for the court to consider that question of its own motion.
My answers to the first three questions in any event produce a result which is not incompatible with the fundamental rights just mentioned.
I turn now to consider in greater detail the three questions which I have identified.
The mistake ground of action and the principles of equivalence and effectiveness
Under the principle of cooperation laid down in article 4(3) TEU, it is for the member states to ensure the effective judicial protection of an individuals rights under EU law: see, for example, Unibet (London) Ltd v Justitiekanslern (Case C 432/05) [2008] All ER (EC) 453, paras 37 44.
In particular, in the absence of EU rules governing the matter, it is for the domestic legal system of each member state to lay down the procedural rules governing actions for safeguarding rights which individuals derive from EU law.
In a case such as the present, it may seem idiosyncratic to describe the grounds of action available under domestic law as procedural rules, but that description reflects the distinction drawn in the case law of the Court of Justice between the right derived from EU law and the national law by means of which effect is given to that right, which may govern such matters as the procedure to be followed, the period within which claims must be made, and the proof of such claims.
That general approach applies to the right to recover the taxes in issue in the present case, to the extent that they were levied in breach of EU law: see the judgment of the Grand Chamber on the first reference in these proceedings, Test Claimants in the FII Group Litigation v Inland Revenue Comrs (Case C 446/04) [2006] ECR I 11814, para 203.
As the Grand Chamber stated, the procedural rules laid down by domestic law must comply with two conditions.
First, they must not be less favourable than those governing similar domestic actions.
That is the principle of equivalence.
Secondly, they must not render virtually impossible or excessively difficult the exercise of rights conferred by EU law.
That is the principle of effectiveness.
Equivalence and effectiveness are complementary requirements.
For the purpose of applying the principle of equivalence, a claim for the recovery of taxes levied by a member state in breach of EU law is similar to a claim for the restitution of taxes unlawfully levied under domestic law.
In England and Wales, the rules laid down by domestic law governing such claims are in large part rules of common law.
The procedure laid down by section 33 of the Taxes Management Act 1970 is an exception.
For the reasons given by Lord Walker and Lord Sumption, however, that statutory procedure is not applicable in the circumstances of this case.
The relevant rules of common law include those laid down by the House of Lords in the three cases which I have mentioned Woolwich, Kleinwort Benson and DMG and by this court in the present case.
In particular, as I have explained, it was held in the DMG case that a person who had mistakenly paid taxes which had been levied in breach of EU law had a ground of action based upon the fact that the payment had been made under a mistake: that is to say, the ground of action whose general nature was established in Kleinwort Benson.
The present decision holds that such a person also has a ground of action based upon the fact that the payment was made in compliance with legislation which was incompatible with EU law: that is to say, the ground of action whose general nature was established in Woolwich.
The two grounds of action are in some respects subject to different rules, and in consequence one or the other may be more suitable to a claimant, depending upon the circumstances.
For example, apart from the legislation in issue in the present case, the two grounds of action are subject to different limitation periods.
There may be other differences.
In the present case, as I have explained, the claims are based upon both the mistake ground of action and the unlawful demand ground of action.
Where both these grounds of action are available for the recovery of taxes which have been levied in breach of domestic law, and a person seeking to recover such taxes can choose to base his claim upon whichever ground of action best suits his interests, it follows from the principle of equivalence that the same grounds of action, and the same freedom of choice, must equally be available in analogous circumstances to a person seeking to recover taxes which have been levied in breach of EU law: otherwise, claims based on EU law would be less favourably treated than similar claims based on domestic law.
As the Court of Justice stated in Rewe Handelsgesellschaft Nord mbH v Hauptzollamt Kiel (Case 158/80) [1981] ECR 1805, para 44, the system of legal protection established by the Treaties implies that it must be possible for every type of action provided for by national law to be available for the purpose of ensuring observance of Community provisions having direct effect (emphasis added).
It might however be argued that a complication arises from the fact that it had not been definitively decided at the time when the claims were made, or at the time when the legislation was enacted, that those grounds of action were available for the bringing of claims such as those with which the present proceedings are concerned.
Does that make a difference to the way in which the principle of equivalence applies? In my view it does not.
The decision of the House of Lords in DMG, confirming the soundness of a claim to the repayment of unlawfully levied tax on the basis of a mistake in law, was in no sense prospective only.
The decision of this court in the present case, confirming that claims to the repayment of unlawfully levied tax can be made on the basis of the Woolwich principle even in the absence of a formal demand, has similarly determined what the law was at the time when the claims were made.
Although each of those decisions determined a question of law which was previously contestable, and can therefore be said to have involved a development of the law, they cannot be equiparated to legislation: such decisions actually, and not merely formally, declare the law that is applicable to the case before the court and all other comparable cases.
As Lord Goff of Chieveley explained in Kleinwort Benson at pp 378 379, the declaratory theory of judicial decision is not an aberration of the common law, but reflects the nature of judicial decision making (an aspect which is also reflected in the temporal effects of the judgment of the Grand Chamber on the first reference in these proceedings).
It follows that these claims, although made in proceedings which commenced prior to the decisions of the House of Lords in DMG and of this court in the present case, are based on grounds of action which were available under English law at the time when the claims were made, as a means of recovering taxes which had been unlawfully levied, even if that could not have been known with certainty until the matter had been finally determined by the highest courts.
It accordingly appears to me that the grounds of action based on mistake and on an unlawful demand were both available at all material times, in the circumstances laid down in the relevant case law, for the recovery of taxes which had been levied contrary to domestic law.
It follows from the principle of equivalence that both grounds of action must also have been available in analogous circumstances for the recovery of taxes levied contrary to EU law.
That is not, of course, to say that English law was bound to maintain both grounds of action subject to unchanged incidents or conditions; but any changes would have to comply with the requirements of EU law, including the requirement of effective judicial protection.
That conclusion is challenged on the basis that the mistake ground of action is neither necessary nor sufficient to meet the requirements of EU law, as laid down in such cases as Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595: it is not necessary, since the unlawful demand ground of action is in itself adequate; and it is not sufficient, since it requires the presence of an additional element besides the levying of the taxes in breach of EU law, namely that they must have been paid under a mistake as to the lawfulness of the domestic legislation.
The first of these contentions appears to me to be off the point.
The fact that the ground of action based on an unlawful demand satisfies the San Giorgio principle does not exclude the possibility that the ground of action based on mistake also satisfies that principle.
Indeed, the ground of action based on mistake is of considerable practical importance as a means of enforcing rights to repayment derived from EU law, as the present case demonstrates, since it enables claims relating to taxes levied in breach of EU law to be brought outside the six year limitation period, reckoned from the date of the payment, which applies to claims based upon the Woolwich principle: a period which may have expired before the mistake as to the validity of the tax legislation is discovered.
Admittedly, if English law had evolved differently, and the ground of action based on mistake had not been available, then the ground of action based on an unlawful demand might well have met the requirements of EU law.
The fact of the matter, however, is that English law provides two grounds of action which are capable of satisfying the San Giorgio principle, and the principle of equivalence therefore requires that both grounds of action should be available for the enforcement of rights derived from EU law.
The second contention also appears to me to be mistaken.
The two grounds of action are not identical: in particular, subject to the legislation at issue in the present case, they are subject to different limitation periods.
The mistake ground of action admittedly includes an additional element, namely that the taxes were paid under a mistake; but it is the presence of that additional element which enables the claimant to benefit from an extended limitation period which begins when the mistake is discovered or could with reasonable diligence have been discovered, rather than beginning when the payment was made.
The mistake ground of action is therefore a valuable remedy for the recovery of taxes levied contrary to EU law.
If it were not available for that purpose, then the person who had paid taxes levied contrary to EU law would be in a less favourable position than the person who had a similar claim under domestic law.
The principle of equivalence does not of course oblige a member state to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied contrary to EU law (Edilizia Industriale Siderurgica Srl v Ministero delle Finanze (Case C 231/96) [1998] ECR I 4951, para 36 (Edis)).
It was therefore open to the United Kingdom to curtail the limitation period applicable to the ground of action based on mistake without offending against the principle of equivalence, so long as it did so not only for claims based on a breach of EU law but also for similar claims based on a breach of domestic law.
That had not however been done by the time the present actions were commenced.
Whether the retroactive manner in which the limitation period was subsequently curtailed was compatible with EU law raises issues not in relation to the principle of equivalence but in relation to the principle of effectiveness.
If, then, the principle of equivalence required that the mistake ground of action should be available to the claimants at the time when they made their claims, then it follows under EU law that the principle of effectiveness also applied to that ground of action, and continues to apply until the claims are determined.
The question which arises, and to which I turn next, is whether the application of section 320 of the 2004 Act to the Aegis claims, and of section 107 of the 2007 Act to the BAT claims, would be compatible with that principle.
The application of the principle of effectiveness
The principle of effectiveness requires that the national procedural rules required by the principle of equivalence must provide effective judicial protection in conformity with EU law.
Taken in conjunction with the principle of equivalence, it is a principle which has far reaching implications for domestic law.
The principle of effectiveness may in particular impinge upon domestic laws relating to limitation periods.
There is of course no objection in principle to limitation periods under EU law: on the contrary, it is recognised that reasonable periods of limitation are necessary in the interests of legal certainty (Rewe Zentralfinanz eG v Landwirtschaftskammer fr das Saarland (Case 33/76) [1976] ECR 1989, para 5 and Comet BV v Produktschap voor Siergewassen (Case 45/76) [1976] ECR 2043, paras 17 18).
Equally, there is no requirement that rights derived from EU law should be subject to the most favourable limitation period available under domestic law, provided the principle of equivalence is respected (Edis).
National legislation curtailing the period within which recovery may be sought of sums which have been levied in breach of EU law is not in principle incompatible with EU law.
The Court of Justice has however laid down certain requirements with which such legislation must comply.
It must for example not be intended specifically to limit the consequences of a judgment of the Court of Justice (see eg Deville v Administration des Impts (Case 240/87) [1988] ECR 3513).
In that regard, I note that the Government announced its intention to introduce the provision which became section 107 of the Finance Act 2007 on 6 December 2006, which was the day on which the Court of Justice had rejected the Governments application to re open the hearing in the first reference in this case so as to allow it to seek a temporal restriction to the effect of the judgment.
The effect of section 107 is not however confined to the taxes with which the courts judgment was concerned, and it is not contended that the provision offended against the Deville requirement.
In the circumstances, I proceed on that basis.
A further requirement of legislation curtailing a limitation period is that the arrangements for its entry into force must be consistent with effective judicial protection of the rights derived from EU law.
In particular, such legislation must ensure that it remains possible in practice to enforce the right to repayment derived from EU law.
In order to understand how that principle applies in the present case, it is helpful to consider some of the judgments of the Court of Justice.
First, Aprile v Amministrazione delle Finanze dello Stato (No 2) (Case C 228/96) [2000] 1 WLR 126 concerned a claim for repayment of charges wrongfully levied in 1990, when such claims were subject to the general limitation period of ten years.
On 27 January 1991 legislation was enacted which brought such claims within the scope of a shorter limitation period prescribed by customs legislation, which was then a period of five years, and in addition reduced that limitation period to three years as from 27 April 1991.
The action was begun on 30 March 1994.
It was accepted by the national authorities that the legislation could not be applied to claims which had been lodged prior to 27 April 1991.
In that regard, the Advocate General observed at para 41 of his opinion that the legislation would be clearly incompatible with Community law if it applied to claims which had been lodged before that date: the Community principle of legal certainty did not allow such claims to be affected by a later provision not existing at the time of lodgement which detracted from the legal situation of the claimants.
The issue concerned claims lodged after 27 April 1991 in respect of payments which had been made at a time when the longer limitation period applied.
As the Court of Justice noted, the national courts interpreted the legislation as not having any retroactive effect: it was construed as meaning that persons whose claims had arisen before the date when the legislation came into force had three years from that date within which to commence proceedings: a period which was sufficient to guarantee the effectiveness of the right to reimbursement (para 28).
On that basis, the legislation was compatible with Community law.
The same conclusion was also reached, on similar facts, in Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C 343/96) [2000] All ER (EC) 600.
Secondly, Marks & Spencer plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866 concerned a claim for repayment of VAT unduly paid between May 1991 and August 1996, when the relevant limitation period was six years.
On 19 March 1997 legislation was enacted which reduced the limitation period to three years.
The legislation was deemed to have come into force on 18 July 1996.
The action was begun on 15 April 1997.
The Court of Justice considered the legislation both in relation to the principle of effectiveness and in relation to the principle of the protection of legitimate expectations.
I shall consider the second of those aspects below.
In relation to the principle of effectiveness, the court derived from its judgments in Aprile and Dilexport the proposition that, in order for national legislation curtailing the period within which recovery may be sought of sums charged in breach of Community law to be compatible with Community law, the time set for its application must be sufficient to ensure that the right to repayment is effective (para 36).
The Court continued: 37.
It is plain, however, that that condition is not satisfied by national legislation such as that at issue in the main proceedings which reduces from six to three years the period within which repayment may be sought of VAT wrongly paid, by providing that the new time limit is to apply immediately to all claims made after the date of enactment of that legislation and to claims made between that date and an earlier date, being that of the entry into force of the legislation, as well as to claims for repayment made before the date of entry into force which are still pending on that date. 38.
Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation.
Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right. 39.
In that connection it should be noted that member states are required as a matter of principle to repay taxes collected in breach of Community law (Socit Comateb v Directeur Gnral des Douanes et Droits Indirects (Joined Cases C 192 to 218/95) [1997] ECR I 165, para 20, and Dilexport [1999] ECR I 579, 610 611, para 23), and whilst the court has acknowledged that, by way of exception to that principle, fixing a reasonable period for claiming repayment is compatible with Community law, that is in the interests of legal certainty, as was noted in paragraph 35 hereof.
However, in order to serve their purpose of ensuring legal certainty limitation periods must be fixed in advance (ACF Chemiefarma v Commission of the European Communities (Case 41/69) [1970] ECR 661, para 19).
As the court made clear at para 38, the legislation in issue in Marks & Spencer was objectionable not only because it applied retroactively to persons who had already made claims for repayment which were within the limitation period then in force, but also because it precluded claims by persons who could otherwise have made claims within that period, without any transitional provisions to protect the rights of such persons.
A similar conclusion was also reached in Grundig Italiana SpA v Ministero delle Finanze (Case C 255/00) [2003] All ER (EC) 176, where a limitation period of five years was replaced by one of three years, and a transitional period of 90 days was held to be insufficient to ensure that the right of recovery was not rendered excessively difficult.
It follows from cases such as Aprile, Dilexport, Marks & Spencer and Grundig that a taxpayer who has paid taxes levied contrary to EU law is not vested with a right to repayment in accordance with the domestic provisions which were in force at the time when the payment was made.
It is permissible to alter the applicable rules of domestic law, including rules as to limitation, provided the legislation effecting the alteration does not in practice deprive the persons affected of their right to seek reimbursement.
In order for that proviso to be met, however, the legislation must not apply the new limitation period retroactively so as to bar claims which were made timeously according to the law then in force, and the arrangements for its entry into force must also allow persons who have not yet made claims an adequate period of time to ensure that their right to repayment remains effective.
In the present case, the claims are for the repayment of taxes unduly paid between 1973 and 1999, when the relevant limitation period was six years.
That period generally ran from the date of the payment, but in an action for relief from the consequences of a mistake the period was extended: it did not begin to run until the claimant discovered the mistake or could with reasonable diligence have discovered it (section 32(1)(c) of the Limitation Act 1980, re enacting a provision previously contained in section 12 of the Limitation Act 1939).
As Lord Walker has explained at paras 103 104, it has been established in this case that the payments were made under a mistake about the lawfulness of the tax regimes under which they were paid; and it was only after the Court of Justice issued its judgment in Metallgesellschaft Ltd v Inland Revenue Comrs (Joined Cases C 397/98 and C 410/98) [2001] Ch 620 that it was generally appreciated that the UK corporation tax regime was open to challenge as infringing Community law.
A well advised company in the position of the claimants would then have had grounds for considering that it was entitled to the repayment of tax which had been levied contrary to Community law, and that there was at least a reasonable prospect that it could rely upon the extended limitation period provided by section 32(1)(c) of the 1980 Act in order to recover any taxes paid more than six years before the proceedings were begun.
In order to do so, it would of course have to base its claim upon the mistake ground of action.
The BAT action was begun in June 2003, and the Aegis action on 8 September 2003.
In each action, the claim was based upon the mistake ground of action (as well as the unlawful demand ground of action), and reliance was placed on section 32(1)(c).
Section 320 of the 2004 Act, enacted in July 2004, excluded the application of section 32(1)(c) of the 1980 Act in relation to taxation matters where the action was brought on or after 8 September 2003.
Section 107 of the 2007 Act, enacted in July 2007, excluded the application of section 32(1)(c) where the action was brought prior to 8 September 2003.
It is apparent from that summary that the claims, so far as they relate to payments made more than six years before the proceedings were commenced, have always been dependent on the application of section 32(1)(c) of the 1980 Act.
The effect of the legislation of 2004 and 2007 is thus to deprive the claimants, retrospectively, of the ability to pursue their claims so far as they relate to those payments.
Since the legislation was retroactive in its effect, there was nothing the claimants could do to avoid its operation: that, of course, was the point of making the legislation retroactive.
Since the legislation retroactively restricts the possibility of repayment to claimants who brought an action within six years of the date of the payment, rather than six years of the date when their mistake was discovered or could with reasonable diligence have been discovered, it deprives persons who do not satisfy that condition of any possibility of exercising the right to repayment derived from EU law, which they previously enjoyed.
In the circumstances of this case, it retroactively renders the taxes unduly paid by the BAT group prior to June 1997, and by the Aegis group prior to September 1997, irrecoverable: taxes whose reimbursement had been timeously sought under the law then in force.
It therefore renders impossible in practice the exercise of rights derived from the EU treaties which national courts are bound to protect.
That is the first reason why I have reached the provisional conclusion that it is contrary to EU law and cannot be relied on in these proceedings.
That conclusion does not appear to me to be affected by the argument that the legislation serves the legitimate purpose of avoiding the disruption of public finances which the present claims, and other similar claims, would otherwise cause.
As the Court of Justice observed in its Marks & Spencer judgment at para 39, member states are required as a matter of principle to repay taxes collected in breach of EU law.
Legal certainty, which protects both taxpayers and the administration, can justify fixing reasonable limitation periods for bringing claims for repayment, but it cannot in my view justify applying them in such a way that the rights conferred by EU law are no longer safeguarded.
Nor in my view can the present case be distinguished from such cases as Marks & Spencer on the ground that those cases concerned situations where there was only one basis on which repayment could be sought, whereas the present case concerns a situation where two grounds of action exist, with differently calculated limitation periods, and the effect of the legislation in issue is merely to apply the same method of calculating the limitation period to both grounds of action.
I accept that the present case differs in that respect from the cases which have come before the Court of Justice, but the difference is in my view of no consequence.
Since both grounds of action are available as means of enforcing EU rights in accordance with the principle of equivalence, it follows that the principle of effectiveness must also be respected in relation to both.
The vice of the legislation in issue is not that it seeks to apply a common limitation period to the two grounds of action, but that it does so retroactively and without transitional provisions, and so fails to conform to the principle of effective judicial protection.
The principle of the protection of legitimate expectations
A further reason for my provisional conclusion that the legislation is incompatible with EU law is that it is in my view incompatible with the principle of the protection of legitimate expectations.
As a general principle of EU law, this principle binds member states when implementing EU law at national level.
In particular, it applies to national rules governing the protection of EU rights in national courts.
The point is illustrated by Marks & Spencer (Case C 62/00) [2003] QB 866, where the Court of Justice rejected the Governments contention that the procedural rules governing the recovery of overpayments of VAT were entirely a matter of domestic law, subject only to the Community principles of equivalence and effectiveness.
As the Court held (para 44), the principle of the protection of legitimate expectations forms part of the Community legal order; and, on the facts of that case, legislation retroactively curtailing the period within which repayment might be sought of taxes collected in breach of Community law was incompatible with that principle.
It is in my opinion an even clearer breach of that principle for legislation which has the effect of reducing the limitation period applicable to actions for the enforcement of rights derived from EU law to be applied to actions which were already pending before the courts when the legislation was enacted.
Although persons cannot legitimately expect that the legal rules applicable to them will not be altered, they may legitimately expect that rights which they possess will not be retroactively abridged.
They are therefore entitled to expect that a claim which was not time barred when it was made will not subsequently become time barred as a result of retroactive legislation.
My conclusion on this point does not depend on an assumption that the claimants knew, at the time when they commenced proceedings, that their claims could validly be based upon the mistake ground of action, and could therefore benefit from the extended limitation period provided by section 32(1)(c) of the 1980 Act.
Although the validity of claims to the repayment of unlawfully levied tax on the basis of mistake was strongly arguable at that time, and was of course ultimately established, I accept that it was only some years later that the point was definitively resolved by the decision of the House of Lords in DMG [2007] 1 AC 558.
Although there was therefore an arguable question in 2003 as to whether the claims which they had submitted to the court were time barred, the claimants could legitimately expect that that question would be decided by the court in accordance with a proper understanding of the law in force at the time when the claims were made.
They could legitimately expect that the courts decision of that question would not be pre empted by retroactive legislation subsequently enacted by Parliament.
Nor does it appear to me to be material that the legislation in issue left untouched the limitation period which applied to the ground of action based on an unlawful demand.
The claimants had based their claims upon both grounds of action, as they were entitled to do.
The fact that their claims in respect of payments made during the six years prior to the commencement of the proceedings, so far as based on the unlawful demand ground of action, were not affected by the legislation in issue does not diminish the significance of the fact that their right to pursue claims in respect of earlier periods, on the basis of mistake, was taken away from them after proceedings relying upon that right had been commenced.
The protection of legitimate expectations is not of course an absolute principle, and even retroactive measures interfering with the administration of justice may sometimes be justified by compelling considerations relating to the public interest; and, in any assessment of whether such a justification existed, a lack of certainty as to the law at the material time might be a relevant consideration.
In the present case, however, for the reasons explained in para 239, there appear to me to be no other considerations capable of outweighing the breach of legitimate expectations which resulted from the legislation in issue.
Conclusion
In view of the division of opinion on the court in relation to the compatibility of section 320 of the 2004 Act with EU law, I agree that that issue will require to be the subject of a reference to the Court of Justice in accordance with the directions proposed by Lord Hope.
The other issues should in my view be dealt with as proposed by Lord Walker.
| UK-Abs | The Appellants are all companies which belong to groups which have UK resident parents and also have foreign subsidiaries, both in the European Union and elsewhere.
The purpose of the litigation was to determine various questions of law arising from the tax treatment of dividends received by UK resident companies from non resident subsidiaries, as compared with the treatment of dividends received from subsidiaries within wholly UK resident groups of companies.
The provisions giving rise to these questions related to the system of advance corporation tax (ACT) and to the taxation of dividend income from non resident sources under section 18 (Schedule D, Case V) of the Income and Corporation Taxes Act 1988 (ICTA).
The relevant provisions have since been amended or repealed, but the problems created by their existence in the past have not gone away.
The Appellants case is that the differences between their tax treatment and that of wholly UK resident groups of companies breached article 43 (freedom of establishment) and article 56 (free movement of capital) of the EC Treaty, and that these breaches have caused them considerable loss.
A previous reference to the Court of Justice of the European Union (CJEU) held that those principles had, at least in some respects, been breached.
The issues in this appeal to the Supreme Court relate to the requirements under both EU and domestic law as to the availability of remedies for such breaches of EU law.
It is common ground that two types of restitutionary remedies are available in domestic law in this situation: a claim for restitution of tax unlawfully demanded (under the Woolwich principle), and a claim for tax wrongly paid under a mistake (a DMG claim).
EU law requires there to be an effective remedy for monies paid in respect of tax that has been unlawfully charged.
In the present case, the Woolwich cause of action was now time barred.
The limitation period for DMG mistake claims had been extended by section 32(1)(c) of the Limitation Act 1980 (LA).
However, in June 2004, s320 of the Finance Act 2004 was enacted, retrospectively excluding the application of s32(1)(c) in relation to claims based on a mistake of law relating to a taxation matter, where the action was brought on or after 8 September 2003.
In July 2007, s107 of the Finance Act 2007 came into force.
It excluded the application of s32(1)(c) to any DMG claims brought before 8 September 2003.
The Court of Appeal held: that the Woolwich restitution remedy was a sufficient remedy as EU law does not require that there must always be a remedy based on mistake; that the Woolwich restitution remedy met the requirements of EU law and was not affected by sections 320 and 107; that the restitution and damages remedies sought by the Appellants in respect of one part of the claim were excluded by virtue of the statutory provisions for recovery of overpaid tax in section 33 of the Taxes Management Act 1970; and that section 32(1)(c) of the Limitation Act 1980 could be given a wider meaning so as to apply to a Woolwich claim.
The Appeal raises the following specific issues: (1) Could Parliament lawfully curtail without notice the extended limitation period under section 32(1)(c) of the Limitation Act 1980 for the mistake cause of action (section 320 FA 2004) and cancel claims made using that cause of action for the extended period (section 107 FA 2007)? In particular: (a) Would a Woolwich restitution remedy be a sufficient remedy for the repayment claims brought on the basis of EU law? (b) Whether or not a Woolwich restitution remedy would be a sufficient remedy, does EU law protect the claims which were made in mistake; and, specifically, did the curtailment without notice of the extended limitation period for mistake claims (section 320 FA 2004) and the cancellation of such claims in respect of
the extended period (section 107 FA 2007) infringe the EU law principles of effectiveness, legal certainty, legitimate expectations and rule of law? (2) Are the restitution and damages remedies sought by the Appellants in respect of corporation tax paid under section 18 of the ICTA excluded by virtue of the statutory provisions for recovery of overpaid tax in section 33 of the Taxes Management Act 1970? (3) Does section 32(1)(c) of the Limitation Act 1980 apply to a claim for a Woolwich restitution remedy? (4) Does the Woolwich restitution remedy apply only to tax that is demanded by the Revenue, and not to tax such as ACT which is payable on a return; and, if so, what amounts to a demand?
The Supreme Court unanimously dismisses the appeal on issues (3) and (4), and allows the appeal on issue (2).
On issue (1), a reference is made to the CJEU for a preliminary ruling under article 267 Treaty on the Functioning of the European Union.
Leading judgments are given by Lord Hope, Lord Walker, Lord Sumption and Lord Reed, with shorter judgments by Lord Brown, Lord Clarke and Lord Dyson.
Issue (1) The central question in the appeal is whether EU law requires only that the member state must make available an adequate remedy which meets the principles of effectiveness and equivalence, or whether it requires every remedy recognised in domestic law to be available so that the taxpayer may obtain the benefit of any special advantages that this may offer on the question of limitation [13, 38].
The majority of the Court (Lord Sumption and Lord Brown dissenting [123 & 142]) holds that the Woolwich remedy on its own was not sufficient to meet the requirements of effectiveness and equivalence; an effective remedy was also required in the DMG mistake cause of action.
The principle of equivalence requires that the rules regulating the right to recover taxes levied in breach of EU law must be no less favourable than those governing similar domestic actions.
It must follow, if the means of recovering of taxes levied contrary to EU law are to match those in domestic law, that both remedies should be available [21, 212].
The retrospective application of the section 320 FA 2004 limitation period was therefore not compatible with EU law as it infringed the principles of equivalence and effectiveness, and possibly also the principle of legitimate expectations [15, 22, 115, 135 136, 140, 209, 241].
In relation to s107 FA 2007, the Court unanimously holds that, by 2006, the Appellants had acquired a legitimate expectation that their entitlement to have their DMG claims decided by a court would not be removed from them by the introduction without notice of a limitation period that was not fixed in advance.
So it was not lawful for Parliament to cancel claims made using the mistake cause of action for the extended period [15, 22, 115, 125, 129, 140, 203, 209, LR 34 35, ].
Since the Court is divided on the question as to whether EU law requires that both remedies should be available to the Appellants so that they can choose the remedy that best suits their case for reimbursement, the matter is not acte clair.
A reference to the CJEU is necessary [23].
Issue (2) The question is answered in the negative.
Section 33 can be given an interpretation in conformity with EU law by not construing it as impliedly setting itself up as an exclusive provision.
The common law claim in unjust enrichment remains available [119, 205].
The appeal on this issue is allowed.
Issue (3) The question is answered in the negative.
The extension to the limitation period under section 32(1)(c) should not be read widely so as to apply to Woolwich claims.
The Court should not seek to develop the law by broadening the interpretation of an action for relief from the consequences of a mistake [62, 186].
The appeal on this issue is dismissed.
Issue (4) The question is answered in the negative.
The Woolwich restitution remedy is not limited to tax that is demanded by the Revenue, but is available to cover all sums paid to a public authority in response to (and sufficiently causally connected with) an apparent statutory requirement to pay tax which (in fact and in law) is not lawfully due [79, 174].
The appeal on this issue also is dismissed.
|
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
| UK-Abs | These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
|
This appeal raises important and difficult issues as to the meaning and effect of Part 2 of the Proceeds of Crime Act 2002 (POCA), dealing with post conviction confiscation.
It does not concern civil recovery under Part 5 of POCA, which was considered recently by the court in Serious Organised Crime Agency v Perry [2012] UKSC 35, [2012] 3 WLR 379 nor, although the argument ranged widely, did it address by any means all of the questions which are raised in a post conviction case.
But because of the importance and difficulty of the issues which are raised, the appeal (originally heard by a court of seven Justices in 2011) has been re argued before a court of nine.
These issues relate chiefly to the calculation of benefit and the impact of the Human Rights Act 1998 (HRA).
At the rehearing the Court has had the benefit of argument not only on behalf of the original parties, but also from counsel instructed as advocates to the Court and counsel on behalf of the Secretary of State for the Home Department as an intervener.
POCA is concerned with the confiscation of the proceeds of crime.
Its legislative purpose, like that of earlier enactments in this field, is to ensure that criminals (and especially professional criminals engaged in serious organised crime) do not profit from their crimes, and it sends a strong deterrent message to that effect.
In R v Rezvi [2002] UKHL 1, [2003] 1 AC 1099, para 14, Lord Steyn stated: It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime.
Effective but fair powers of confiscating the proceeds of crime are therefore essential.
The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct.
Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises.
These objectives reflect not only national but also international policy.
These observations have been cited and followed many times, although Lord Steyns reference to punishment needs some qualification.
Despite the use of the term confiscation, which is a misnomer, orders under Part 2 of POCA are made in sums of money (value based) rather than being directed, as are civil recovery orders under Part 5 of POCA, at the divestment of specific assets.
Nevertheless, a confiscation order is not an additional fine.
The legislation under which value based criminal confiscation orders are made has changed significantly during the past thirty years.
The main landmarks can be briefly summarised (there is a more detailed account, which also refers to the international conventions underlying some of the legislation, in the considered opinion of the Appellate Committee of the House of Lords, delivered by Lord Bingham, in R v May [2008] UKHL 28, [2008] AC 1028, para 8).
The first statute, the Drug Trafficking Offences Act 1986 (the 1986 Act) provided for confiscation of sums related to the proceeds of unlawful drug trafficking.
The 1986 Act was repealed and replaced by the Drug Trafficking Act 1994 (the 1994 Act).
In the meantime Part VI of the Criminal Justice Act 1988 (the 1988 Act) had extended the range of offences in respect of which confiscation orders could be made.
The 1988 Act and the 1994 Act were framed in similar but not identical terms and in some of the authorities the Court of Appeal had to consider whether relatively small variations in the scheme and language of the statutes reflected significant differences in legislative policy (see for instance R v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113, para 78).
POCA has put an end to those difficulties, but they must be borne in mind when reading some of the older cases.
The Proceeds of Crime Act 1995 (the 1995 Act) was an amending statute, but its effects were far reaching and, with hindsight after the enactment of HRA a few years later, problematic.
The 1995 Act removed from the Crown Court almost all discretion as to the making or quantum of a confiscation order, if it was applied for by the prosecution and the statutory requirements were satisfied.
That remains the position under POCA.
The Crown Court no longer has any power to use its discretion so as to mould the confiscation order to fit the facts and the justice of the case, even though a confiscation order may arise in every kind of crime from which the defendant has benefited, however briefly.
The Crown Court has encountered many difficulties in applying POCAs strict regime.
Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts.
On the introduction of the Bill that was later enacted as POCA it was certified in the usual way, under section 19 of HRA, as compatible with rights under the European Convention on Human Rights (Convention rights).
The question now raised for this court is whether the application of POCAs rules for the calculation of benefit may, in some circumstances, give rise to a contravention of Convention rights.
This is not a question which has arisen in cases before the Strasbourg court although other challenges to evidential aspects of confiscation legislation have been rejected, for example in Phillips v UK [2001] ECHR 437, (2001) 11 BHRC 280 (statutory assumptions) and Grayson and Barnham v UK [2008] ECHR 871; (2009) 48 EHRR 30 (onus on defendant to demonstrate realisable assets smaller than the benefit figure).
This very important issue is addressed at section III below.
The statutory provisions
Part 2 of POCA has two general features of central importance to its structure.
The first is the distinction between cases in which the defendant is, or is not, to be treated as having a criminal lifestyle (as prescribed by section 75 of POCA).
Mr Wayas is not a criminal lifestyle case, but many of the authorities are concerned with criminal lifestyle cases, and it must be noted that the statutory assumptions made in those cases (under section 10 of POCA) are often determinative of the outcome.
The other structural feature is that the making and quantum of a confiscation order involve three stages.
The first stage is the identification of the benefit obtained by the defendant (sections 6(4), 8 and 76 of POCA).
The second stage is the valuation of that benefit.
It may fall to be valued (sections 79 and 80) either at the time when it is obtained, or at the date of the confiscation order (the confiscation day).
Intermediate events may be relevant, especially for the tracing exercise that may be required under section 80(3), but the valuation date must be either at the beginning or at the end of the process.
The third stage is the valuation as at the confiscation day of all the defendants realisable assets (designated in section 9 as the available assets).
This value sets a cap on the amount (the recoverable amount) of the confiscation order (section 7).
In R v May [2008] AC 1028, para 8, the House of Lords emphasised that the Crown Court must proceed through these three stages in a systematic manner, and not elide them.
Because POCA covers a wide range of offences, Parliament has framed the statute in broad terms with a certain amount of what Lord Wilberforce (in a tax case) called overkill.
Examples of this are the apparently loose causal test in section 76(4) (as a result of or in connection with the conduct) and the rather puzzling definition (property is obtained by a person if he obtains an interest in it) in section 84(2)(b).
Although the statute has often been described as draconian that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness.
But subject to this and to HRA, the task of the Crown Court judge is to give effect to Parliaments intention as expressed in the language of the statute.
The statutory language must be given a fair and purposive construction in order to give effect to its legislative policy.
Much of the argument in the appeal has focussed on sections 76, 79, 80 and 84 of POCA, and they must be set out in full. 76 Conduct and benefit (1) Criminal conduct is conduct which (a) constitutes an offence in England and Wales, or (b) would constitute such an offence if it occurred in England and Wales. (2) General criminal conduct of the defendant is all his criminal conduct, and it is immaterial (a) whether conduct occurred before or after the passing of this Act; (b) whether property constituting a benefit from conduct was obtained before or after the passing of this Act. (3) Particular criminal conduct of the defendant is all his criminal conduct which falls within the following paragraphs (a) conduct which constitutes the offence or offences concerned; (b) conduct which constitutes offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned; (c) conduct which constitutes offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned. (4) A person benefits from conduct if he obtains property as a result of or in connection with the conduct. (5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage. (6) References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other. (7) If a person benefits from conduct his benefit is the value of the property obtained. 79 Value: the basic rule (1) This section applies for the purpose of deciding the value at any time of property then held by a person. (2) Its value is the market value of the property at that time. (3) But if at that time another person holds an interest in the property its value, in relation to the person mentioned in subsection (1), is the market value of his interest at that time, ignoring any charging order under a provision listed in subsection (4). (4) The provisions are (a) section 9 of the Drug Trafficking Offences Act 1986 (c. 32); (b) section 78 of the Criminal Justice Act 1988 (c. 33); (c) Article 14 of the Criminal Justice (Confiscation) (Northern Ireland) Order 1990 (S.I. 1990/2588 (N.I. 17)); (d) section 27 of the Drug Trafficking Act 1994 (c. 37); (e) Article 32 of the Proceeds of Crime (Northern Ireland) Order 1996 (S.I. 1996/1299 (N.I. 9)). (5) This section has effect subject to sections 80 and 81. 80 Value of property obtained from conduct (1) This section applies for the purpose of deciding the value of property obtained by a person as a result of or in connection with his criminal conduct; and the material time is the time the court makes its decision. (2) The value of the property at the material time is the greater of the following (a) the value of the property (at the time the person obtained it) adjusted to take account of later changes in the value of money; (b) the value (at the material time) of the property found under subsection (3). (3) The property found under this subsection is as follows (a) if the person holds the property obtained, the property found under this subsection is that property; (b) if he holds no part of the property obtained, the property found under this subsection is any property which directly or indirectly represents it in his hands; (c) if he holds part of the property obtained, the property found under this subsection is that part and any property which directly or indirectly represents the other part in his hands. (4) The references in subsection (2)(a) and (b) to the value are to the value found in accordance with section 79. 84 Property: general provisions (1) Property is all property wherever situated and includes (a) money; (b) all forms of real or personal property; (c) things in action and other intangible or incorporeal property. (2) The following rules apply in relation to property (a) property is held by a person if he holds an interest in it; (b) property is obtained by a person if he obtains an interest in it; (c) property is transferred by one person to another if the first one transfers or grants an interest in it to the second; (d) references to property held by a person include references to property vested in his trustee in bankruptcy, permanent or interim trustee (within the meaning of the Bankruptcy (Scotland) Act 1985 (c. 66)) or liquidator; (e) references to an interest held by a person beneficially in property include references to an interest which would be held by him beneficially if the property were not so vested; (f) references to an interest, in relation to land in England and Wales or Northern Ireland, are to any legal estate or equitable interest or power; (g) references to an interest, in relation to land in Scotland, are to any estate, interest, servitude or other heritable right in or over land, including a heritable security; (h) references to an interest, in relation to property other than land, include references to a right (including a right to possession).
III The effect of HRA
At the first hearing of this case in 2011 Mr Krolicks arguments on behalf of the defendant included the submission that the operation of the confiscation regime might in some circumstances give rise to an order which infringed Article 1 of the First Protocol to the European Convention on Human Rights.
When adjourning the case to a fresh hearing, this court invited further submissions on this topic, and more generally upon the questions: a. whether POCA is capable of operating in a manner which is oppressive and/or an abuse of process; b. if so, whether the court ought to give any (and if so what) guidance on when that might occur; c. what ought to be the approach to property gained by the defendant but fully restored to the true owner; d. what ought to be the approach to a dishonestly obtained loan which had been fully repaid.
Further submissions on these and related topics were, in consequence, made by all parties at the re hearing of the appeal.
Article 1 of the First Protocol to the European Convention (A1P1) provides: Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to
secure the payment of taxes or other contributions or penalties
It is clear law, and was common ground between the parties, that this imports, via the rule of fair balance, the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation.
That rule has consistently been stated by the European Court of Human Rights: see for example its iteration in Jahn v Germany (2006) 42 EHRR 1084, para 93: 93.
The Court reiterates that an interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights [see, among other authorities, Sporrong and Lnnroth, cited above, p. 26, 69].
The concern to achieve this balance is reflected in the structure of Article 1 of Protocol no. 1 as a whole, including therefore the second sentence, which is to be read in the light of the general principle enunciated in the first sentence.
In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions [see Pressos Compania Naviera SA and Others v Belgium, judgment of 20 November 1995, Series A no. 332, p. 23, 38].
In determining whether this requirement is met, the Court recognises that the State enjoys a wide margin of appreciation with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest for the purpose of achieving the object of the law in question [see Chassagnou v France [GC], nos. 25088/94, 28331/95 and 28443/95, 75, ECHR 1999 III].
Although that case applied this principle to very particular facts, relating to the operation of post reunification German land re organisation, the principle itself is gathered from established Strasbourg jurisprudence in terms often repeated and generally applied.
A1P1 is one of the Convention rights to which the HRA applies: section 1(1)(b).
That means that section 3(1) requires that so far as it is possible to do so, legislation must be: read and given effect in a way which is compatible. [with it].
Mr Perry QC, for the Crown, and Lord Pannick QC for the Home Secretary, both submitted that this means: (a) (b) (c) (d) that POCA must be read and given effect in a manner which avoids a violation of A1P1; that a confiscation order which did not conform to the test of proportionality would constitute such a violation; that it is incumbent upon the domestic court to provide a remedy for any such violation; and that the appropriate remedy lies in the duty of the Crown Court judge not to make an order which involves such a violation.
These submissions are plainly correct.
Any such violation can be avoided by applying to POCA, and in particular to section 6, the rule of construction required by section 3 of HRA.
The extent of the courts obligation under section 3 was summarised by Lord Bingham in Sheldrake v DPP [2004] UKHL 43, [2005] 1 AC 264, para 28: The interpretative obligation of the courts under section 3 of the 1998 Act was the subject of illuminating discussion in Ghaidan v Godin Mendoza [2004] 2 AC 557.
The majority opinions of Lord Nicholls, Lord Steyn and Lord Rodger in that case (with which Lady Hale agreed) do not lend themselves easily to a brief summary.
But they leave no room for doubt on four important points.
First, the interpretative obligation under section 3 is a very strong and far reaching one, and may require the court to depart from the legislative intention of Parliament.
Secondly, a Convention compliant interpretation under section 3 is the primary remedial measure and a declaration of incompatibility under section 4 an exceptional course.
Thirdly, it is to be noted that during the passage of the Bill through Parliament the promoters of the Bill told both Houses that it was envisaged that the need for a declaration of incompatibility would rarely arise.
Fourthly, there is a limit beyond which a Convention compliant interpretation is not possible, such limit being illustrated by R (Anderson) v Secretary of State for the Home Department [2003] 1 AC 837 and Bellinger v Bellinger [2003] 2 AC 467.
In explaining why a Convention compliant interpretation may not be possible, members of the committee used differing expressions: such an interpretation would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation (paras 33, 49, 110 113, 116).
All of these expressions, as I respectfully think, yield valuable insights, but none of them should be allowed to supplant the simple test enacted in the Act: So far as it is possible to do so .
While the House declined to try to formulate precise rules (para 50), it was thought that cases in which section 3 could not be used would in practice be fairly easy to identify.
Section 6(5) of POCA sets out the final stage of the process of assessment of a confiscation order: If the court decides under subsection 4(b) or (c) that the defendant has benefited from the conduct referred to it must (a) decide the recoverable amount, and (b) make an order (a confiscation order) requiring him to pay that amount.
It is plainly possible to read paragraph (b) as subject to the qualification: except insofar as such an order would be disproportionate and thus a breach of Article 1, Protocol 1.
It is necessary to do so in order to ensure that the statute remains Convention compliant, as Parliament must, by section 3 of HRA, be taken to have intended that it should.
Thus read, POCA can be given effect in a manner which is compliant with the Convention right.
The judge should, if confronted by an application for an order which would be disproportionate, refuse to make it but accede only to an application for such sum as would be proportionate.
Both Mr Perry and Lord Pannick accepted the correctness of two cases decided in the Court of Appeal, Criminal Division, in which it was held that a disproportionate confiscation order might in limited circumstances be prevented by the application of the courts jurisdiction to prevent an abuse of process.
Those cases were R v Morgan and R v Bygrave [2008] EWCA Crim 1323; [2009] 1 Cr App R (S) 60 and R v Shabir [2008] EWCA Crim 1809, [2009] 1 Cr App R (S) 84.
The first (where the point was substantially conceded by the Crown) involved consideration of the case of a class of defendant (such as Morgan) whose benefit was limited to loss occasioned to a single victim, who did not have a criminal lifestyle, and who either had repaid, or stood ready to repay, the victim in full.
Such a defendant would not be able to invoke section 6(6) of POCA to ask the court to treat the statutory duty to make a confiscation order as a discretionary power, because the victim would have no occasion to bring or threaten legal proceedings to recover his loss.
The second case involved a defendant whose defalcations were accepted to amount to 464 but from whom the Crown sought a confiscation order of over 400,000 as a result of the manner in which he had obtained the money together with much larger sums to which he was agreed to be entitled and of the form of the charges of which he had been convicted.
The situations described in both cases have (with others) subsequently been recognised in guidance issued by the DPP to prosecutors as ones in which a disproportionate confiscation order ought not to be sought by the Crown.
Whilst the outcomes of those cases were, as is conceded, correct, the better analysis of such situations is that orders such as those there considered ought to be refused by the judge on the grounds that they would be wholly disproportionate and a breach of A1P1.
There is no need to invoke the concept of abuse of process.
That guidance should be issued to prosecutors is perfectly proper.
The Crowns power, under section 6(3)(a) of POCA, to ask the court to make a confiscation order is one with far reaching consequences and care should be taken to exercise it on sound principles.
Section 6 of HRA imposes on prosecutors the duty not to act in a manner incompatible with Convention rights, so that the Crown has an important preliminary function in ensuring that a disproportionate order is not sought.
But the safeguard of the defendants Convention right under A1P1 not to be the object of a disproportionate order does not, and must not, depend on prosecutorial discretion, nor on the very limited jurisdiction of the High Court to review the exercise of such discretion by way of judicial review.
The latter would moreover lead to undesirable satellite litigation.
Mr Perry and Lord Pannick were correct to identify the repository of the control in the person of the Crown Court judge, subject to the reviewing jurisdiction of the Court of Appeal, Criminal Division, on appeal by either party.
There is no occasion for any challenge to a confiscation order to involve an application for judicial review, which would founder on the objection that there is an adequate remedy in the hands of those two courts.
The difficult question is when a confiscation order sought may be disproportionate.
The clear rule as set out in the Strasbourg jurisprudence requires examination of the relationship between the aim of the legislation and the means employed to achieve it.
The first governs the second, but the second must be proportionate to the first.
Likewise, the clear limitation on the domestic courts power to read and give effect to the statute in a manner which keeps it Convention compliant is that the interpretation must recognise and respect the essential purpose, or grain of the statute.
Both Mr Perry and Lord Pannick submitted that it would be very unusual for orders sought under the statute to be disproportionate.
Both drew attention to the severity of the regime and commended its deterrent effect.
The purpose of the legislation is plainly, and has repeatedly been held to be, to impose upon convicted defendants a severe regime for removing from them their proceeds of crime.
It is not to be doubted that this severe regime goes further than the schoolboy concept of confiscation, as Lord Bingham explained in R v May [2008] 1 AC 1028.
Nor is it to be doubted that the severity of the regime will have a deterrent effect on at least some would be criminals.
It does not, however, follow that its deterrent qualities represent the essence (or the grain) of the legislation.
They are, no doubt, an incident of it, but they are not its essence.
Its essence, and its frequently declared purpose, is to remove from criminals the pecuniary proceeds of their crime.
Just one example of such declarations is afforded by the explanatory notes to the statute (para 4): The purpose of confiscation proceedings is to recover the financial benefit that the offender has obtained from his criminal conduct.
A confiscation order must therefore bear a proportionate relationship to this purpose.
Lord Bingham recognised this in his seminal speech in R v May, in adding to his Endnote or overview of the regime, at para 48, two balancing propositions: The legislation does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine.
Some general propositions may be offered in the light of the submissions of Mr Perry and Lord Pannick.
For the reasons given above, it must clearly be understood that the judges responsibility to refuse to make a confiscation order which, because disproportionate, would result in an infringement of the Convention right under A1P1 is not the same as the re creation by another route of the general discretion once available to judges but deliberately removed.
An order which the judge would not have made as a matter of discretion does not thereby ipso facto become disproportionate.
So to treat the jurisdiction would be to ignore the rule that the Parliamentary objective must, so long as proportionately applied, be respected.
A great many of the more serious cases in which confiscation orders are appropriate are criminal lifestyle cases.
The statutory test for a lifestyle case is contained in section 75, read with Schedule 2, of POCA.
In essence, a defendant who has in the past six years committed a number of offences from which he has benefited, or who has committed certain specified offences, will meet the statutory test.
If he does, the calculation of his benefit will normally not depend on the known benefit obtained from identified offences, but will be made after applying the statutory assumptions set out in section 10 as to the criminal source of any assets passing through his hands in the six year period.
Although the starting point is that the assumptions must be made (section 10(1)), this duty is subject to two qualifications contained in section 10(6).
The assumptions should not be made if they are shown to be incorrect: section 10(6)(a).
Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b).
The combination of these provisions, and especially the latter, ought to mean that to the extent that a confiscation order in a lifestyle case is based on assumptions it ought not, except in very unusual circumstances, to court the danger of being disproportionate because those assumptions will only be applied if they can be made without risk of serious injustice.
confiscation order may have one or more of three effects: It is apparent from the decision in May that a legitimate, and proportionate, (a) it may require the defendant to pay the whole of a sum which he has obtained jointly with others; (b) similarly it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property; (c) it may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.
These propositions are not difficult to understand.
To embark upon an accounting exercise in which the defendant is entitled to set off the cost of committing his crime would be to treat his criminal enterprise as if it were a legitimate business and confiscation a form of business taxation.
To treat (for example) a bribe paid to an official to look the other way, whether at home or abroad, as reducing the proceeds of crime would be offensive, as well as frequently impossible of accurate determination.
To attempt to enquire into the financial dealings of criminals as between themselves would usually be equally impracticable and would lay the process of confiscation wide open to simple avoidance.
Although these propositions involve the possibility of removing from the defendant by way of confiscation order a sum larger than may in fact represent his net proceeds of crime, they are consistent with the statutes objective and represent proportionate means of achieving it.
Nor, with great respect to the minority judgment, does the application of A1P1 amount to creating a new governing concept of real benefit.
Similarly, it can be accepted that the scheme of the Act, and of previous confiscation legislation, is to focus on the value of the defendants obtained proceeds of crime, whether retained or not.
It is an important part of the scheme that even if the proceeds have been spent, a confiscation order up to the value of the proceeds will follow against legitimately acquired assets to the extent that they are available for realisation.
The case of a defendant such as was considered in Morgan and Bygrave is, however, a different one.
To make a confiscation order in his case, when he has restored to the loser any proceeds of crime which he had ever had, is disproportionate.
It would not achieve the statutory objective of removing his proceeds of crime but would simply be an additional financial penalty.
That it is consistent with the statutory purpose so to hold is moreover demonstrated by the presence of section 6(6).
This subsection removes the duty to make a confiscation order, and converts it into a discretionary power, wherever the loser whose property represents the defendants proceeds of crime either has brought, or proposes to bring, civil proceedings to recover his loss.
It may be that the presence of section 6(6) is capable of explanation simply as a means of avoiding any obstacle to a civil action brought by the loser, which risk would not arise if repayment has already been made.
But it would be unfair and capricious, and thus disproportionate, to distinguish between a defendant whose victim was about to sue him and a defendant who had already repaid.
If anything, an order that the same sum be paid again by way of confiscation is more disproportionate in the second case than in the first.
Unlike the first defendant, the second has not forced his victim to resort to litigation.
The principle considered above ought to apply equally to other cases where the benefit obtained by the defendant has been wholly restored to the loser.
In such a case a confiscation order which requires him to pay the same sum again does not achieve the object of the legislation of removing from the defendant his proceeds of crime, but amounts simply to a further pecuniary penalty in any ordinary language a fine.
It is for that reason disproportionate.
If he obtained other benefit, then an order confiscating that is a different matter.
The earlier case of Nield [2007] EWCA Crim 993 voiced concern about the effect of a confiscation order in a full restoration case.
That case, however, pre dated Morgan and Bygrave and did not consider A1P1.
To the extent that it, and Forte [2004] EWCA Crim 3188 (a non counsel application with minimal argument), rationalised a confiscation order in such a case on the basis that part of the purpose of the statute was to impose an additional punitive sanction, those observations need now to be read in the light of the observations of Lord Bingham at para 48 in May, cited above.
The principal thrust of Rose [2008] 1 WLR 2113 relates to the question whether the losers interest in stolen property prevents the thief from obtaining it, and to the proper basis for valuation of benefit obtained (see below).
To the extent that Rose held at para 88 that the recovery and restoration intact of the stolen property was always irrelevant to the making of a confiscation order, that part of the decision should not be followed; it too preceded both Morgan and Bygrave and May, and neither A1P1 nor any issue of disproportion was addressed in argument.
Several of these conclusions can conveniently be tested by considering the facts of R v Wilkes [2003] EWCA Crim 848, [2003] 2 Cr App R (S) 105.
The defendant was convicted of burglary.
He had a previous conviction, within the statutory assumption period of six years, for handling.
Both the property stolen in the burglary and the property handled had been recovered intact and restored, undamaged, to the true owners.
The defendant had obtained no other benefit from those two offences.
Under the legislation then prevailing, the 1988 Act (as amended), these two convictions triggered the statutory assumptions, providing that Wilkes had benefited (to any extent) from each of the offences.
The Crown did not assert that the calculation of Wilkes benefit ought to include the value of the goods either stolen in the burglary or handled on the previous occasion.
It confined itself to relying on the statutory assumptions which cast upon him the onus of disproving the proposition that his expenditure on living over the previous six years and some money found buried in the garden were, in each case, attributable to crime.
The Court of Appeal was invited to hold that the statutory assumptions did not apply because Wilkes had not benefited, even briefly, from the two offences under consideration.
That argument was rightly rejected; plainly he had benefited, although the benefit had been for the briefest of time.
The court had no occasion to consider whether the order sought was disproportionate.
If the Crown had sought to recover from him the value of the goods which had been restored intact to their owners, that would have been disproportionate to the aim of the statute to deprive him of his proceeds of crime.
But it did not.
It sensibly abstained from attempting to do so and instead relied upon the contention that except so far as he could prove otherwise his assets and expenditure over the past six years should be treated as the proceeds of crime.
That was no doubt severe, but he had the opportunity to disprove these things, and could do so, to the extent, for example, that he could show that he had received state benefits.
If he had been able to demonstrate that the source of his assets or expenditure was honest earnings from employment, or genuine untainted gifts from others, or a loan honestly obtained from a third party (R v Johnson (Julie) [1991] 2 QB 249 and R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731), the same would have applied.
If any assumption had carried the risk of serious injustice to him, it would not have been made.
Instead, the conclusion on the evidence was that he was a career criminal and all unaccounted for expenditure had been derived from the proceeds of crime.
For the confiscation order to be made, there had to be available assets up to the sum ordered.
The order as made in his case was not disproportionate to the statutory objectives.
Under the POCA rules for lifestyle offences, the trigger for the assumptions would now be four, not two, offences of this kind from which the defendant had benefited, but otherwise the position is unchanged.
If, however, an order were sought independently of the lifestyle provisions and the concomitant assumptions, and to the extent that it were based solely on the momentary benefit of obtaining goods which had been restored intact to the true owners, that order would be disproportionate and ought not to be made: it would not serve the aim, or go with the grain, of the legislation.
Such a defendants proceeds of crime would already have been restored to the loser in their entirety.
An order in the same sum again would simply impose an additional financial penalty upon him.
If such a defendant deserves an additional financial penalty, as in some cases he may, it ought to be imposed openly by way of fine, and whether or not he is also sent to prison, providing he has the means to pay.
A confiscation order in such a case is not compelled by the House of Lords decision in R v Smith (David) [2001] UKHL 68, [2002] 1 WLR 54, although the contrary appears often to be asserted.
In Smith the defendant had evaded the payment of duty on imported cigarettes by smuggling them past the customs post.
The decision in the case was that the pecuniary advantage thus (admittedly) obtained had not retrospectively been undone by the subsequent seizure of the cigarettes.
That was plainly correct.
Lord Rodger held, at para 23, that the subsequent seizure of the cigarettes was in like case to subsequent loss of or damage to goods obtained in the course of crime; such loss or damage would not affect the propriety of a confiscation order consider for example the case of a burglar who hides the householders goods in the open air so that they are ruined by the weather or stolen by someone else.
The House was not, however, considering the case in which the criminal property obtained has been restored to its owner undamaged.
On the contrary, Smith was agreed to have obtained the pecuniary advantage of avoiding payment of the duty, at any rate temporarily.
The true analysis of tax or excise avoidance cases did not arise in this appeal and ought to await full argument when it does.
It is, however, to be observed that in such a case HM Revenue and Customs does not as a matter of practice seek double recovery by way of both the payment of the unpaid duty and a confiscation order in the same sum: see R v Edwards [2004] EWCA Crim 2923, [2005] 2 Cr App R (S) 29, paras 24 to 25, where the existence of this practice was the reason why no breach of A1P1 was argued.
This practice is followed, it appears, because such double recovery is recognised to be disproportionate and wrong.
On the principle explained in para 19 above, the argument may need in the future to be considered that a disproportionate result should not be left to be achieved by way of Executive concession but rather should be the responsibility of the court to which an application for a confiscation order is made.
There may be other cases of disproportion analogous to that of goods or money entirely restored to the loser.
That will have to be resolved case by case as the need arises.
Such a case might include, for example, the defendant who, by deception, induces someone else to trade with him in a manner otherwise lawful, and who gives full value for goods or services obtained.
He ought no doubt to be punished and, depending on the harm done and the culpability demonstrated, maybe severely, but whether a confiscation order is proportionate for any sum beyond profit made may need careful consideration.
Counsels submissions also touched very lightly on cases of employment obtained by deception, where it may well be that difficult questions of causation may arise, quite apart from any argument based upon disproportion.
Those issues were not the subject of argument in this case and must await an appeal in which they directly arise; moreover related issues are understood to be currently before the Strasbourg court.
The present case is one of money lent because of fraud, but subsequently repaid in full and always fully secured.
If, in such a case, the fraud were discovered immediately any confiscation order which included the same sum as had been repaid in full would be disproportionate on the principles set out above.
However, the present case, like many mortgage frauds, is one of substantial benefit gained from the fraud in the form of the large increase in value of the flat which the fraud enabled the offender to buy.
This therefore is not a case in which no confiscation order ought to have been made because any order would be disproportionate.
In general, where the mortgage loan has been repaid or is bound to be repaid because it is amply secured, and absent other property obtained, a proportionate confiscation order is likely to be the benefit that the defendant has derived from his use of the loan, namely the increase in value of the property attributable to the loan.
IV The facts
Mr Waya is a Nigerian businessman resident in London.
In 2003 he wished to buy a flat, 18A Northgate Mansions, Albert Road, London NW8.
He contracted to purchase the flat for 775,000, of which 310,000 came from his own resources.
The balance of 465,000 was provided by a mortgage lender, G E Money Home Lending.
In order to obtain this loan Mr Waya made false statements about his employment record and his earnings.
The sentencing judges remarks (quoted by His Honour Judge Rivlin QC, who made the confiscation order) suggest that Mr Wayas advisers may have encouraged him to make false statements.
The purchase and mortgage were completed in the usual way, with the mortgage lender putting Mr Wayas solicitor in funds shortly before completion.
The solicitor would have held the funds in his client account, in trust for and to the order of the mortgage lender, until they were paid direct to the vendors solicitor on completion. (There is a fuller description of the normal process of completion of a purchase and mortgage in the opinion of Lord Goff of Chieveley in Preddy [1996] AC 815, 828 829.)
In April 2005 the mortgage in favour of G E Money Home Lending was redeemed, on payment of the full sum secured together with a fee of 58,000 for early redemption, and the flat was remortgaged to Birmingham Midshires Building Society to secure the sum of 838,943.
There is no clear evidence as to what happened to the balance (which must have been of the order of 360,000) in excess of the redemption money but it seems probable that Mr Waya spent some of it on improvements to the flat.
The judge accepted that he spent up to 150,000 on the flat during his period of ownership.
Mr Waya was arrested in November 2005 and was charged on two counts of obtaining a money transfer by deception, contrary to section 15A of the Theft Act 1968, one relating to each of the mortgages.
On 10 July 2007 at Southwark Crown Court he was convicted on the first count and acquitted on the second.
He was sentenced to 80 hours community punishment.
The application under POCA was heard on 25 January 2008.
The sum of 1.54m ordered by Judge Rivlin was arrived at by deducting from the then market value of the flat (1.85m) the sum of untainted money (0.31m) paid by Mr Waya out of his own resources on the original purchase.
The judge disregarded the remortgage for reasons that he stated rather briefly.
The Court of Appeal, in a careful reserved judgment delivered by Blake J on 25 March 2010, reduced the amount of the order to 1,110,000: [2010] EWCA Crim 412.
This figure was arrived at as 60% of the market value of the flat.
This represented a rateable split of the value since 465,000 (the loan obtained) is 60%, and 310,000 is 40%, of the original purchase price of 775,000.
The remortgage was again disregarded.
The Court of Appeal certified a point of law of general public importance in these terms: Where a person obtains a money transfer by deception contrary to section 15A Theft Act 1968 as amended, and thereby causes a lending institution to transfer funds to the persons solicitor for the purpose of a mortgage advance to enable purchase by that person of a residential property, does: i) That person obtain a benefit from his conduct in the form of property within the meaning of Part 2 of the Proceeds of Crime Act 2002? ii) If so is the property so obtained the value of the loan advanced to purchase the property or his interest in the property or some other property? iii) meaning of Part 2 of the Proceeds of Crime Act 2002? If not does the person obtain a pecuniary advantage within the The issues in the appeal have since become wider, partly as the result of directions given by this Court when directing a rehearing (see para 10 above).
Mr Wayas sentence of 80 hours community service reflected the judges view of the relatively low level of his culpability.
He was not guilty of a serious mortgage fraud involving dishonest overvaluation of property.
There was no loss to the mortgage lender.
Nevertheless he did, by dishonestly misrepresenting his own financial position, obtain credit on terms which might not otherwise have been available.
It is well known that those with poor credit ratings must expect to pay higher rates of interest if they have to borrow on the secondary or sub prime mortgage markets.
In economic terms, the benefit that Mr Waya obtained from the offence for which he was convicted was obtaining credit, on better terms than those that he could expect to get if he told the truth.
With that credit came the prospect of obtaining a handsome capital gain if the market for high grade residential property in London continued to rise (as it did).
If on the other hand the market had fallen substantially, the mortgage lenders security might have proved inadequate, and the mortgagors personal covenant to repay principal and interest might have been shown to be worthless.
Depriving him of that prospective capital gain, or a proportionate part of it, would therefore be the appropriate way of making the confiscation order fit the crime.
Moreover that is the way in which the provisions of POCA apply in this case, on a fair and purposive construction that takes account of section 3 of HRA and the need for proportionality under A1 P1.
The property obtained V
The first issue, and the only one squarely raised in the certified question, is the identification of the property that Mr Waya obtained (in the language of section 76(4) of POCA) as a result of or in connection with the criminal conduct for which he was convicted of an offence under section 15A of the Theft Act 1968.
This issue of identification is of critical importance since the value of the property obtained, at the time when it was obtained, fixes (subject to adjustment for inflation) one of the two alternative bases of valuation under section 80(2)(a).
If what Mr Waya obtained was 465,000, then that sum (adjusted for inflation) is the minimum sum to be treated as the value of his benefit under section 76(7).
The issue of identification is also important if the alternative (tracing) basis of valuation under section 80(2)(b) and (3)(b) or (c) falls to be considered, because the property originally obtained is no longer in the defendants hands.
If this arises, the first necessary step is to identify the property originally obtained and then to progress by inquiring whether the defendant now holds other property which directly or indirectly represents it.
This aspect is discussed in Part VI below.
All counsel rightly acknowledged that the issue of identification is a difficult one, and some offered alternative analyses.
Mr Krolick (for the appellant) put forward a radical solution, contending that Mr Wayas benefit was nil and criticising as a fallacy what he called the snapshot approach exemplified by the decision of the House of Lords in R v Smith (David) [2001] [2002] 1 WLR 54.
Mr Perry QC (instructed by the Crown Prosecution Service) put forward as his primary submission (paras 86 and 108 of his printed case) that Mr Waya obtained 465,000.
Lord Pannick QC supported this submission (para 39 of his printed case on behalf of the Secretary of State as Intervener).
So did Mr Swift QC (para 17 of the printed case of the Advocates to the Court).
These submissions were broadly in line with the reasoning of the Court of Appeal, although Blake J put it rather more tentatively in para 25 of his judgment ([2010] EWCA Crim 412): In our judgment, at the latest at the time the conditions upon which the money was advanced were satisfied, the appellant had at the least an equitable interest in the money transfer order in his solicitors account, namely a right to ensure that the money was forwarded to the vendor to complete the purchase.
Whether the appellants interest was in property belonging to the lender institution at a time when his interest arose is irrelevant to our inquiry although it was central to the decision in Preddy [R v Preddy [1996] AC 815].
In the words of section 15A Theft Act as amended he obtained the money transfer for himself, if only for the purpose of it being applied to discharge the obligation to pay the purchase price for the property through the solicitors account.
No one contended that the property obtained was the entire flat, although that analysis had been adopted in two early unreported cases on the 1988 Act, Re K (6 July 1990, McCullough J) and R v Layode (12 March 1993, Court of Appeal).
In the latter case the Court relied on the wide language of section 71(4) of the 1988 Act, which (like section 76(4) of POCA) refers to obtaining property as a result of or in connection with the commission of an offence.
Both were, however, cases where the judicial discretion was available to ensure that any eventual order did not exceed what was fair, and more recent cases have declined to stretch the causal link.
In R v May [2008] AC 1028, para 26, a case on the 1988 Act as amended by the 1995 Act, Lord Bingham referred to Re K and R v Layode and observed: It must, however, be appreciated that section 71(4) called for an essentially factual inquiry: what is the value of the property the defendant obtained? If (say) a defendant applies 10,000 of tainted money as a down payment on a 250,000 house, legitimately borrowing the remainder, it cannot plausibly be said that he has obtained the house as a result of or in connection with the commission of his offence.
Similar reasoning can be found in the decision of the Court of Appeal, Civil Division, in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, 22 February 2008 and in R v Ahmad [2012] EWCA Crim 391; [2012] 1 WLR 2335, 2 March 2012.
But it is unnecessary and probably inappropriate to refer to those cases in detail, since an appeal to this court is pending in Ahmad, whilst Olupitan was a civil recovery case on different wording in Part 5 of POCA, where as Toulson LJ observed at para 55, the rival arguments about the mechanics of the transaction by which one house had been acquired did not in the end make any difference, once it had been found that the source of all relevant purchase money was some relevant crime.
It is sufficient to say that the contention that Mr Waya obtained the whole leasehold interest in the flat by his dishonest conduct would completely ignore his down payment, out of untainted funds, of 310,000.
That would not be a fair or purposive application of section 76(4), and it is unnecessary to add that it would also be disproportionate for the purposes of HRA.
The submission that what Mr Waya obtained was 465,000 calls for close examination.
In the case of an ordinary loan induced by fraud, there is no doubt that the defendant does obtain the loan sum advanced.
The facts that he is under an obligation to repay it, and even intends to repay it, do not mean that he does not obtain it.
Indeed the obligation (and intention) to repay both assume an initial obtaining; if there had not been an initial obtaining, there would be nothing to repay.
Nor does the fact that repayment is secured mean that he does not obtain it.
A loan may often be secured on property belonging to the borrower.
The security means that the lender has a much better prospect of being repaid, but once again there can be no doubt that the borrower obtains the sum advanced.
It is paid to him and he can use it either as he wishes, or maybe for the particular purposes for which it is advanced.
In either case, it has come into his possession and control; he has obtained it.
For the reasons set out in Part III above, if a borrower does in fact repay a fraudulently induced loan, secured or unsecured, a confiscation order which requires him to pay the same sum again is (lifestyle considerations apart) likely to be disproportionate and wrong.
But that, likewise, does not mean that he did not obtain the loan sum advanced in the first place.
The difference in the present case lies in the legal machinery by which the loan advance is made, as explained in para 36 above.
The appeal has proceeded on the agreed or assumed factual basis that the same solicitor was acting for Mr Waya and the mortgage lender; that the mortgage advance was paid to the solicitor to be held in the solicitors client account, until completion, in trust for and to the order of the mortgage lender; and that on completion the jointly instructed solicitor transferred the advance to the vendors solicitor, receiving instead an executed transfer of the lease.
Mr Waya would already have executed a charge of the lease in favour of the mortgage lender.
In the eyes of the law all these events occurred simultaneously.
That is established by the decision of the House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56.
There is a full explanation in the speech of Lord Oliver at pp 92 93.
After referring to the proposition that, at least where there is a prior agreement to grant the charge on the legal estate when obtained, the transactions of acquiring the legal estate and granting the charge are, in law as in reality, one indivisible transaction, Lord Oliver analysed the position in detail and concluded: The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise.
The scintilla temporis is no more than a legal artifice.
On this analysis even Blake Js cautious reference to at least an equitable interest seems open to debate.
Mr Waya no doubt had a contractual right as against the mortgage lender, conditional on the vendor performing his contractual obligations to the purchaser, to have the mortgage advance applied towards payment of the purchase price on completion.
Lord Oliver (in a part of his speech between the passages quoted above) referred to the purchaser having a specifically enforceable agreement once the advance was in his solicitors client account, and that might be described as an equitable interest of a sort.
But that cannot detract from the well established principle that in this sort of case the mortgage advance remains in the beneficial ownership of the lender until completion, when it passes direct to the vendor.
That principle was stated in Target Holdings Ltd v Redferns (a firm) [1996] AC 421, 436, reaffirmed in R v Preddy [1996] AC 815, 838, and recently discussed by the Court of Appeal in Lloyds TSB Bank Plc v Markandan & Uddin [2012] EWCA Civ 65, 9 February 2012, a case about a mortgage fraud the facts of which are, even by todays standards, fairly remarkable.
In R v Glatt [2006] EWCA Crim 605, 17 March 2006, a case under the 1988 Act in its original form, in which a solicitor had been convicted of assisting in laundering the proceeds of large scale evasion of excise duty, the Court of Appeal stated in relation to section 71(4) of the 1988 Act (para 141): But obtain does include the cases where a defendant retains control over property received by a third person as a result of steps taken by him, as well as cases where he obtains an interest in property received by a third person.
In R v May [2008] AC 1028, para 16 Lord Bingham stated that the observations on section 71(4) made by Buxton J in R v Gokal (7 May 1997) should not . be understood as excluding . cases where payment is made to a third party at the behest of the defendant.
True it is that in this case the mortgage advance was paid to the vendors solicitor at Mr Wayas behest.
But he had no control over its disposal in the recipients hands; the sole and predetermined purpose of the payment was to form part of the purchase price of the flat, with the mortgage lender having security for its repayment from the moment of completion.
Mr Waya never in fact acquired anything but an equity of redemption (as Lord Oliver put it in Cann), the equity of redemption corresponding in value (at that point) to his untainted down payment of 310,000.
To conclude (as was submitted by Mr Perry, Lord Pannick and Mr Swift) that Mr Waya obtained 465,000 is a legally inaccurate account of the transaction, because the loan sum never became his or came into his possession.
Under the tripartite contractual arrangements between vendor, purchaser and mortgage lender Mr Waya obtained property in the form of a thing in action which was an indivisible bundle of rights and liabilities, and it cannot be correct to fasten onto the rights and ignore the liabilities (the analysis would of course be different if the loan had ever been at the defendants free disposal: see paras 48 and 49 above).
In short, what Mr Waya obtained was the right to have the mortgage advance applied in the acquisition of his flat, subject from the moment of completion to the mortgage lenders security, which ensured the repayment of the advance.
This thing in action had no market value at or immediately after completion, as the equity of redemption (or in everyday speech, the equity) represented Mr Wayas down payment.
There will no doubt be other mortgage fraud cases in which this thing in action does have a value.
One example would be the common case where false representations as to income and status of the borrower are accompanied by a dishonestly inflated valuation of the property which is being purchased.
In such a case the fraud may not only have induced a larger loan than would otherwise have been made, but may well have induced a loan which is not fully secured as the lender believes.
Another example might be the case where the property which the defendant is purporting to purchase does not exist, or is not really being purchased at all.
In both these cases the thing in action has a real value to the defendant.
It is unnecessary to consider the alternative view (canvassed by Mr Perry in para 43 of his printed case) that if the money transfer was not property it was a pecuniary advantage, except to express some doubt as to whether, as Mr Perry suggests, the analysis would be just the same.
It is not clear that the tracing provisions in section 80(3) of POCA could apply to a pecuniary advantage which is not property, but is merely deemed (by section 76(5)) to be a sum of money.
But it is not necessary to decide that point.
VI The operation of section 80(3)
There are four general features of s 80(3) which should be recognised. a) Once property has been obtained as a result of or in connection with crime, it remains the defendants benefit whether or not he retains it.
This is inherent in the value based scheme for post conviction confiscation. b) If however the defendant does not retain all or any of the property originally obtained, but does have other property representing it in his hands, then section 80(3) operates.
This is an important part of the statutory scheme in cases where, for example, the profits of crime such as drug trafficking, are laundered into other assets which are likely to rise in value. c) Even in such a case, s 80(3) only bites if the value of the representing property is larger than the value of the property originally obtained; if it is not, the benefit remains the value of what was originally obtained, subject to index linking under section 80(2)(a). d) Where s 80(3) applies, the value of the representing property is an alternative but not an additional or cumulative benefit; see the helpful explanation offered by Toulson LJ in Pattison, considered below at paras 59 to 61.
Section 80(3) of POCA does not give any guidance (beyond the general interpretative provisions in section 84) as to how the test of direct or indirect representation is to be applied.
This is in contrast to the detailed provisions in Part 5 of POCA, which are to be applied by civil courts in cases where what is being considered is, unlike a post conviction Part 2 case, an order for the surrender of identified property, rather than simply an order for payment of a sum of money.
This suggests that Parliament may have intended section 80(3)(b) and (c) to apply only when the established facts are relatively straightforward.
That is what is likely to happen in practice.
Where bank statements and other documentary evidence are not available the Crown Court may well conclude that any elaborate tracing exercise is impossible.
But the general notion that the court can trace one asset into another is very familiar in English law, not only under formally constituted trusts but also for the purposes of obtaining proprietary or other remedies against a variety of persons in fiduciary positions, such as company directors, and others who have, by dishonestly giving assistance, made themselves accountable as if they were fiduciaries (see generally Lewin on Trusts, 18th ed (2008) pp 1655 1732; Lionel Smith, The Law of Tracing (1997).
This is not to suggest that section 80(3) of POCA is intended to bring in the whole panoply of rules as to tracing in equity.
But the language of the subsection plainly proceeds on the basis that there may be sufficient evidence that one item of property represents another, in the sense that one asset has been exchanged for another asset, or (as is in practice more likely) that money derived from the one asset (whether by sale, mortgage or otherwise) has been used to acquire another asset.
That was recognised (in relation to a similar provision in section 74(8) of the 1988 Act) in the speech of Lord Rodger (with which the rest of the House concurred) in R v Smith (David) [2002] 1 WLR 54, para 23.
It was explored in detail by Toulson LJ giving the judgment of the Court of Appeal in R v Pattison [2007] EWCA Crim 1536, [2008] 1 Cr App R (S) 51.
It is worth setting out one passage of Toulson LJs judgment in full, since it explains the position very clearly.
In Pattison the defendant was an estate agent who had been convicted of money laundering when he bought, at a gross undervalue, a house belonging to an associate who anticipated (correctly) that he would in the near future be the subject of a confiscation order for drug dealing.
The estate agent bought the house for 43,000 in 2004 and it was worth 152,500 at the time of the confiscation order against him.
But he had charged it to secure a loan of 112,500 which he intended to use to meet the drug dealers confiscation order.
However the estate agent was arrested before he could do so, and only 60,000 of the loan was actually drawn down, and remained in his bank account.
In these circumstances Toulson LJ said (para 21): It is the prosecutions argument that where a defendant acquires property through criminal conduct, and subsequently deals with that property, then any proceeds of that dealing must be benefits which result from the offending and are therefore to be added to the original value of the property.
This overlooks the provisions of section 80 (to which the judge was not referred) but before coming to that section it is worth pausing to consider the implications of the argument.
Suppose that after the appellant received the property worth 150,000 he had sold it for that sum and put the money in the bank.
On the prosecutions argument, the benefit that he would then have received and for which he would be amenable to a confiscation order would be 300,000, representing the value of the property (150,000) plus the sum for which he realised it (150,000).
If he then used the 150,000 to buy a yacht worth 150,000, the benefit would rise to 450,000.
If he then tired of sailing and sold the yacht for the same price, the benefit which he would have received and for which he would be liable to a confiscation order would become 600,000.
All the while, his true financial position would have remained identical.
That offends commonsense.
Every school child knows that you cannot have the penny and the sweet.
If your mother gives you a penny and you buy a sweet with it, your benefit is a pennys worth and not two pennys worth.
It is correct that the provisions of the legislation are draconian, but the effect of the prosecutions argument would not [make] any underlying sense.
Fortunately, s.80 addresses the situation where a person subsequently deals with property which has been acquired by him through criminal conduct.
He then set out the terms of section 80, and concluded that quantifying the benefit at 150,000 accorded with the language of the statute as well as with justice and commonsense.
It was represented, on the estate agents confiscation day, by an equity of redemption (presumably worth about 90,000, since the loan had not been drawn down in full) and 60,000 in his bank account.
It is at this point convenient to advert to the discussion before us as to the
Although Toulson LJs example takes complete substitutions, no doubt for the sake of simplicity, the actual decision in the case was on what restitution scholars, following Roman law, call a mixed substitution (see for instance Foskett v McKeown [2001] 1 AC 102, 115F (Lord Hoffmann), 126G (Lord Millett)).
There is no reason to restrict the language of section 80(3) to complete substitutions, since section 80(3)(c) in terms covers the case of partial representation.
To do so would greatly restrict its operation.
Provided that adequate evidence is available, the section is to be given its natural meaning, which is (especially with the interpretative provision in section 84(2)(a)) quite wide.
In this case the established facts are reasonably straightforward.
It is absolutely clear that Mr Waya no longer had the chose in action originally obtained, and equally clear that some interest in the flat now represented that chose in action in his hands.
But there are competing arguments as to (1) what that interest was and (2) how it was to be valued.
import of two sections of POCA, section 84(2)(b) and section 79(3).
Section 84(2)(b) is a general statement concerning property.
It has a bearing on the question of what representing property was held by Mr Waya when confiscation came to be calculated.
One question briefly raised was whether the combination of section 84(2)(b) with section 79(3) carries the meaning that if a person obtains by his crime a limited interest in an item of property, he thereby is to be treated as obtaining the whole item.
It is quite apparent that this is not what section 84(2)(b) means.
Such a construction would ignore well understood concepts of concurrent interests in property, which are recognised by, inter alia, section 79(3).
The potential confusion arises from the sometimes indiscriminate use of the word property to mean both (1) an interest and (2) the item itself, such as a racehorse or 13 Acacia Avenue.
Both the racehorse and the house in Acacia Avenue are very commonly held by several people with concurrent partial interests.
What section 84(2)(b) plainly means is that if a person obtains a limited interest in an item of property, that limited interest is itself property which may fall accordingly to be counted as benefit.
In the same way, section 84(2)(a) means that a person who holds an interest in property holds property for the purposes of POCA.
It follows that the representing property held by Mr Waya can perfectly well be a limited interest in the flat and does not have to be the whole flat.
Section 79(3) contains a general provision for valuation.
If the defendant and another person both hold interests in the same property, then it is the value of the defendants limited interest which is to be taken for the purposes of calculating his benefit.
Contrary to some submissions made to us, it clearly applies both at the benefit calculation and at the assessment of realisable property stages.
That was the conclusion correctly reached in R v Rose [2008] 1 WLR 2113.
Rose was a relatively straightforward case in which the defendant had been found guilty on three counts of possession of criminal property under section 329 of POCA.
Some of the stolen property (principally a lorry trailer and its load of alcoholic drink) had been restored to the owner, a brewery.
But the alcoholic drink was no longer marketable, and some of the stolen property had not been restored at all.
The confiscation order made was for little more than 8,000, although the market value of the stolen goods was over 27,000.
The Crown appealed, challenging the proposition that the property obtained was valueless, since legal title remained in the brewery.
The logic of that proposition, as Richards LJ pointed out at para 38, was that instead of a confiscation order for about 8,000, there should have been no order at all.
The judgment delivered by Richards LJ sets out a careful analysis of the provisions of the earlier legislation in this area, and the authorities on it.
The Court of Appeal rejected the Crowns subsidiary submission that section 79(3) applied only to the valuation of realisable assets (the last stage in the three stage statutory process).
But the Court acceded to one limb of the Crowns primary argument, that is (para 87): . that the market value, within section 79(2), of property obtained by a thief or a handler is the amount it would have cost the defendant to obtain the property legitimately, or the economic value to the loser, rather than what the defendant could get for the property if he sold it (or, therefore, what he could get for his interest in the property if he sold that interest).
That was the approach of the Courts when applying section 74(5) of the [Criminal Justice Act 1988]: see, most obviously, R v Ascroft [2004] 1 Cr App R (S) 326: paras 56 and 60 above.
On that basis there is no need to consider the nature of the defendants interest in the property obtained or the market value of that interest: the focus is on the incoming value of the property, not the value of the property in his hands.
The Court considered that Parliament did not intend to alter the outcome of Ascroft, and that the restoration of stolen property to the owner was irrelevant.
It added that R v Johnson [1991] 2 QB 249 and R v Walls [2003] 1 WLR 731 did not tell against this conclusion.
The argument thus confronted in Rose and also ventilated in this court is that section 79(3) means that in every valuation of property which had been stolen or obtained by deception, the interest of the true owner must be taken into account as reducing the value to the defendant.
The same argument can be presented on the basis that a thief obtains no title to the stolen property, but at most a possessory interest good against third parties, and thus of no significant value.
If the argument is good, the effect will be in most cases to reduce the value to the defendant of property obtained by acquisitive crime to nil, or to next to nothing, since almost every loser has the right to the restoration of such property.
It is quite clear that section 79(3) cannot carry this meaning without wholly emasculating POCA; such a construction is contrary to the whole purpose of the Act and would mean that some of the most obvious examples of the proceeds of crime would be almost entirely removed from the calculation of benefit.
This possible construction of section 79(3) is not necessary.
What that section means is that lawfully co existing interests in property are to be valued individually.
It does not mean that the losers right to recover the property from the thief, which is a claim totally to defeat anything the thief has obtained, is to be treated as a co existing partial interest for the very purpose of valuing what he has obtained.
Rose and Ascroft are correct in holding that the measure of the value of the interest in property stolen to the thief, for the purposes of confiscation, is what it would cost him to acquire it in the open market.
In the present case Mr Perry and Lord Pannick advanced an extension of this Rose proposition.
They contended that because the lender was the loser in the crime, its partial interest in the flat would be irrelevant to any valuation of the flat which had to be performed.
Thus, they contended, any valuation of Mr Waya's interest in the flat ought to ignore the mortgage held by the lender.
That does not follow.
Section 79(3) plainly does apply to co existing legitimate partial interests.
A mortgagee has such an interest.
The fact that he is also the victim of the crime, and so could no doubt claim rescission of the loan, does not affect the fact that if the value of the flat has to be determined, what Mr Waya has is not an unencumbered flat, but a flat subject to the interest of the lender mortgagee.
The victims right to rescission is not within s 79(3), but his quite separately existing mortgage interest is.
What, then, was the property held by Mr Waya, after the completion of the purchase, which represented in his hands the chose in action which he had originally obtained? Mr Perry and Lord Pannick submitted that it was a 60% interest in the flat.
That submission can be accepted so far as it goes, but it does not address the incidence of the mortgage.
The property representing the original chose in action was a fractional part of Mr Wayas total interest in the flat, the fraction corresponding to the part of the original purchase price financed by the dishonestly obtained mortgage (that is, 60%).
But fairness requires that the mortgage liability (deductable under section 79(3)) should be matched to this 60% interest, so that the benefit obtained by Mr Waya was initially nil.
Otherwise 60% of his untainted contribution of 310,000 would, irrationally, be treated as proceeds of crime.
The interest which fairly represented his original chose in action was 60% of the open market value of the flat from time to time, less the whole of the mortgage liability (465,000).
In other words it was 60% of any increase in the flat's market value over its acquisition price.
That represents the reality of what he obtained from his crime and is, moreover, a proportionate order to make by way of confiscation, subject only to the re mortgage, considered below.
So for example, if the confiscation day had occurred before the remortgage and if the flat had then been worth 1.2m, the value of the property obtained by Mr Waya as a result of his dishonesty would have been computed under section 80(2) and (3) as follows: 1,200,000 market value 465,000 mortgage ________ equity 735,000 original equity 310,000 ________ appreciation 425,000 60% thereof
255,000
This analysis may seem, at first sight, to be inconsistent with R v Moulden [2004] EWCA Crim 2715, [2005] 1 Cr App R (S) 121, but it is not.
That was a case under the 1994 Act in which the proceeds of drug trafficking had provided down payments on several properties, otherwise funded by mortgage lenders.
The properties had greatly increased in value.
In the judgment of the Court of Appeal given by Stanley Burnton J the Court rejected the argument that the increase in value should be apportioned between the equity of redemption and the mortgage (para 25): In our judgment it is neither unjust nor surprising that where a property is bought with a relatively low down payment and a high mortgage and it increases in value, the benefit to the defendant is a sum which may be a multiple of the original deposit.
That is because, subject to any interest payments, any mortgage remains unchanged by increases in market values, whereas the defendant has acquired the equity in the property, that is to say he has the property subject only to the mortgage.
That appears to us to be plain on the wording of section 4 and having regard to the draconian purposes of the Act.
So where the down payment was tainted money, and gearing was obtained by the use of a mortgage, the Court of Appeal had no reason to depart from the entirely uncontroversial view that subject to the fixed sum of principal secured by the mortgage, the equity in the property, including the whole of any capital appreciation, belongs to the owner.
The difference between the two cases is a factual one.
A mortgage is a fixed liability which does not rise as the market rises.
What the defendant in Moulden had converted his criminal money into was the whole equity in the house, ie its full value less the fixed sum of the mortgage.
What Mr Waya converted his criminal chose in action into was the proportion of the equity attributable to the mortgage loan, less that loan.
VII The remortgage
By the remortgage Mr Waya realised additional liquid funds of about 360,000 (after payment off of the original mortgage and the fee for early repayment).
Up to 150,000 of the 360,000 is assumed to have been spent on the flat and was no doubt reflected, to some extent, in its market value at the confiscation day.
There is no evidence of what happened to the balance of 210,000.
It cannot therefore be caught by section 80(3), since there are only two possible valuation dates that can be relevant: the date when property is first obtained, and the confiscation day.
That is spelled out in section 80(2), together with the definition of material time in section 80(1).
If this 210,000 were known still to be in the bank, or to have been converted into some other identifiable asset, then section 80(3)(b) would catch it, but there are no findings that either has occurred, rather than the money simply being consumed in living expenses.
The statute does not provide for any assumption adverse to the defendant to be made on that point.
We must assume (in Toulson LJs homely phrase) that Mr Waya decided to consume the sweet.
Mr Perry (para 126) disputes this analysis (again Mr Swift, paras 51 to 59, takes a rather different line).
Mr Perry would apply an extended principle derived from Rose to the remortgage as well as to the original mortgage.
They supplement this submission by pointing out that otherwise ill gotten gains could easily be laundered, and the effectiveness of the confiscation regime undermined.
That cannot however be a good reason for disregarding the reasonably plain terms of the statute.
It is inherent in the scheme of section 80(3)(b) that it can operate only where the defendant still possesses the representing property.
If he previously created it, and then liquidated it and spent the money, section 80(3)(b) cannot apply.
In most cases (though not here) section 80(2)(a) will provide a satisfactory alternative basis for an order, and in some cases (though not here) money raised by a remortgage will be traceable into more valuable assets held at the confiscation day.
VIII Repayment of principal
The last complication to be raised is of little practical importance on the facts of this case, but it calls for mention because it may make more of a difference in other cases.
It arises from the fact that at some time between the remortgage in April 2005 and the confiscation day (25 January 2008) Mr Waya paid off a relatively small part (23,400) of the principal sum secured by the remortgage.
This payment is agreed to have been made out of untainted funds.
Once the repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields.
Thus the effect of repayment of principal out of untainted funds is not to have the paradoxical effect of diminishing the section 79(3) deduction and so increasing the severity of the confiscation order.
In this case, where the repayment was relatively small and seems to have been made at a time when most of the capital appreciation had already taken place, justice can be done by the simple adjustment of adding the amount of the repayment to the amount of the original down payment.
But in the case of a long term instalment mortgage under which principal was repaid throughout the term, it might be more accurate (and fairer) to adjust the percentages of the original down payment and the original mortgage advance so that a smaller proportion of the capital appreciation is treated as benefit.
Elaborate and precise calculations would not be called for; in many cases experienced counsel would be able to agree on the appropriate adjustment and invite the judge to adopt it.
IX The order to be made
Pulling together and summarising the reasoning set out above, we consider that the benefit obtained by Mr Waya from his criminal behaviour was a thing in action with no immediate market value.
It was an item of property but it had a very short life, since on completion it immediately came to be represented by a fractional 60 per cent share of the leasehold interest in the flat, subject to (the whole of) the mortgage, with the remaining 40% representing the untainted contribution.
In economic terms, his benefit was so much of any appreciation in value as was attributable to the mortgage obtained by his dishonesty.
Immediately after completion this value was nil, but as the market value of the flat increased the benefit came to have a significant value, that is 60 per cent of the appreciation in the net value of the flat, subject to the mortgage.
On the facts of this case the amount raised and secured by the remortgage had three elements.
The first, 465,000 plus the early repayment fee of 58,000, had no significant economic effect since it merely substituted one mortgage lender for another (possibly at a different rate of interest).
No new, untainted money of Mr Waya was used to redeem the original mortgage.
The next element, not exceeding 150,000 at most, was recycled into the flat and probably produced some increase, but not a pound for pound increase, in its market value.
The third element, the balance, must be supposed to have been consumed in expenditure of one sort or another so as to fall outside the ambit of section 80(3).
A small adjustment needs to be made for the repayment of the principal sum of 23,400.
A computation in similar format to that at para 71 above produces these figures: 1,850,000 market value mortgage 862,000 ________ equity 987,400 original equity and 333,400 repayment ________ appreciation 654,000 392,400
60% thereof
We would therefore allow the appeal and substitute a confiscation order in the sum of 392,400.
That is a substantial sum, but the order is not disproportionate.
LORD PHILLIPS AND LORD REED
Introduction
By far the most important part of the majority judgment is contained in paragraphs 1 to 34.
These paragraphs recognise that the provisions of POCA are capable of operating in a manner that violates article 1 of the first protocol to the European Convention on Human Rights (A1P1).
They provide a remedy in that they hold that the judge can and must substitute a confiscation order that is proportionate for the confiscation order that would be produced by applying strictly the relevant provisions of POCA, where this is disproportionate.
We shall call this remedy by way of shorthand A1P1.
The identification of A1P1 is novel and imaginative.
It has the important effect of rendering POCA compatible with the European Convention on Human Rights.
We both admire and endorse the careful reasoning and the conclusion of the majority in paragraphs 1 to 34 of their judgment.
There is thus unanimity as to the most important part of the judgment.
The part of the majority judgment from which we dissent is of limited significance, albeit of some complexity.
It relates to the manner in which POCA applies to a mortgage transaction.
A1P1 requires the judge hearing an application for a confiscation order to adopt the following approach.
First he must decide on the amount of the benefit that the defendant is deemed to have obtained from his crime by the application of the express provisions of POCA (the POCA benefit).
Secondly he must decide on the real benefit that the defendant has obtained from his crime (the real benefit).
Thirdly, where the POCA benefit exceeds the real benefit, he must decide whether it is proportionate to base the confiscation order on the POCA benefit.
If it is not, he must make an order that is proportionate in place of the order based on the POCA benefit.
The majority have decided that, on the facts of this case, the POCA benefit obtained by Mr Waya was the same as the real benefit that he obtained by his criminal conduct.
There is, in consequence, no scope for the application of A1P1.
The confiscation order must be made in the amount of the benefit obtained by Mr Waya from his criminal conduct, calculated in accordance with the express provisions of POCA.
We regret that we are fundamentally at odds with the majority in respect of this analysis.
We do not agree with the conclusion of the majority as to the POCA benefit.
Nor do we agree with the conclusion of the majority as to the real benefit that Mr Waya obtained from his crime.
To explain why we differ from the majority requires a more detailed explanation than would normally be appropriate for a dissent from such a powerful majority.
As, however, the Court will have to return to POCA when considering the appeal that is pending in R v Ahmad [2012] EWCA Crim 391, we have decided that we should give a full explanation for our dissent.
The Analysis of the Majority
The analysis of the majority follows the following steps: i) The property initially obtained by Mr Waya was the bundle of contractual rights and liabilities to which Mr Waya was subject prior to completion (see paragraph 53). ii) These constituted a single chose in action (see paragraph 53). iii) The chose in action had no value (see paragraph 53). iv) After completion (and before the remortgage) the property that represented the original chose in action was (a) 60% of the open market value of the flat from time to time, less the mortgagees security interest of 465,000, or (b) 60% of the increase in the flats market value over its acquisition price (see paragraph 70) or (c) 60% of the increase in Mr Wayas equity in the flat (see paragraph 71), these being different ways of describing the same property. v) After the remortgage (and ignoring the repayment of principal) the property that represented the original chose in action was 60% of the increase in Mr Wayas equity in the flat (see paragraphs 74, 75 and 80). vi) On the facts of this case the repayment of principal can be reflected by adding the amount of the repayment to the original down payment (see paragraph 77). vii) The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down payment and the original mortgage advance (see paragraph 77). viii) The POCA benefit arrived at in accordance with the preceding steps was the same as the real benefit that Mr Waya obtained by his criminal behaviour, so that it was proportionate to base the confiscation order on the POCA benefit.
We have problems with each of these steps.
We propose to explain these problems before setting out our own approach to this case.
Step (i): The property that Mr Waya initially obtained was the bundle of rights and
liabilities to which he was subject prior to completion
This starting point is the foundation of all that follows in the reasoning of the majority.
It is a novel starting point.
With one exception, all other decisions applying POCA in the context of a mortgage transaction have treated the property initially obtained as the physical property purchased with, or with the aid of, the mortgage loan, not the contractual rights and obligations prior to the completion of the mortgage transaction.
The exception is the approach of Toulson LJ in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, a Part 5 case, referred to by the majority at paragraph 47.
The majority do not explain why they have chosen this novel starting point.
Their choice raises an important issue as the approach that should be adopted when applying POCA to a contract procured by fraud.
Where a defendant by a fraudulent misrepresentation induces a third party (the victim) to enter into a contract that is subsequently performed, there are two possible ways of identifying the property initially obtained by the defendant as a result of or in connection with his criminal conduct for the purposes of section 76(4) of POCA: (i) the defendants rights under the contract prior to its performance; (ii) the property obtained by the defendant upon performance of the contract. (i) and (ii) are not normally the same, nor can it normally be said that (ii) represents (i).
When valuing the defendants rights under the contract it is necessary to take into account the consideration that he has agreed to provide under the contract whereas the value of the property that he obtains after the contract has been performed will not normally reflect the consideration provided.
Thus if a defendant fraudulently induces a lender to agree to make him a loan, the value of his rights and obligations under that agreement will reflect the consideration that the defendant has agreed to provide for the loan normally the obligation to pay interest and to provide security for that obligation.
On completion the property obtained by the defendant will simply be the sum advanced by the lender.
At paragraph 48 of their judgment the majority consider the position of a loan that is secured on property already owned by the defendant.
In that situation they conclude that the property initially obtained is the sum advanced under the loan, not the bundle of rights and obligations under the antecedent contract.
We understand that they adopt a different approach in this case because, under the bundle of rights and liabilities, the loan made to Mr Waya had to be used to purchase the property that secured it.
We readily appreciate why this affects the analysis of the property obtained by Mr Waya on completion of the transaction.
We do not understand why it makes it appropriate to treat the property initially obtained as the antecedent bundle of rights and liabilities, rather than the property obtained on completion.
The approach adopted by the majority to the property initially obtained by Mr Waya has its attractions.
It produces a result that approximates to the real benefit initially obtained by Mr Waya.
As we shall explain, however, it is not possible after completion to identify property that fairly represented the antecedent bundle of rights and liabilities.
The approach of the majority injects a complication into the application of POCA that is at odds with the simple scheme of the Act.
We shall suggest in due course that, on the natural reading of the provisions of POCA, the property initially obtained by Mr Waya as a result of or in connection with his [criminal] conduct was the flat, subject as it was to the mortgage.
Step (ii): the bundle of rights and liabilities constituted a single chose in action.
Step (iii): the chose in action had no value
It is an over simplification to say that the bundle of rights and liabilities constituted a single chose in action.
The bundle of rights and liabilities arose under two interlinked contracts, the purchase contract and the loan agreement.
Mr Waya had a chose in action in relation to each: (i) the right to purchase the flat for 775,000; (ii) the right to require the lender to pay 60% of the purchase price of the flat.
Assuming that 775,000 was the market value of the flat, the first chose in action had no value.
The same is not true of the second chose in action.
The majority assume that Mr Waya obtained the loan on better terms than he would have obtained had he told the truth about his sources of income (paragraphs 41 and 42 above).
They accept that this was a benefit in economic terms.
A mortgage broker could, no doubt, put a value on this benefit.
As explained below we consider that this was the real benefit that Mr Waya obtained from his criminal conduct.
The majority at paragraph 53 say that the chose in action had no market value.
In doing so they focus on the first chose in action and ignore the second.
They disregard their earlier finding that the loan agreement had an economic benefit for Mr Waya.
Yet in the latter part of paragraph 53 they set out examples of other situations in which a loan agreement, ie the second chose in action, would have a value.
These demonstrate that the real benefit that a defendant obtains from a mortgage transaction will vary, depending upon the particular facts of the case and the nature of the deception that he has perpetrated.
What they do not support is the thesis that it is possible to identify, after completion of the transaction, property that represents the bundle of rights and liabilities that existed before completion, or that represents the real benefit derived by the defendant from the transaction.
We do not believe that it is possible to do so in the present case.
Step (iv): After completion and until the remortgage, the chose in action was represented by (i) 60% of the market value of the flat less the mortgagees security interest of 465.000, or (ii) 60% of the increase in market value of the flat over its acquisition price or (iii) 60% of the increase in Mr Wayas equity in the flat, all
three being the same thing
Paragraph 70 of the majority judgment represents perhaps the most critical step in their reasoning.
We can summarise that reasoning as follows.
Because the loan was fully secured, the benefit that Mr Waya derived from it was not the amount of the advance, but the benefit derived from the use of the advance.
The advance had to be used to purchase 60% of the flat and Mr Wayas benefit from the transaction was 60% of any increase in value of the flat, or of his equity in the flat, the two being the same.
That was what Mr Waya was entitled to under the bundle of rights and liabilities that constituted the property that he initially obtained. 60% of the increase in value of the flat, or of his equity in the flat, was the property that represented the property that he originally obtained.
We have already explained the first problem that we have with this analysis it ignores the economic benefit that Mr Waya obtained by securing the mortgage facility on better terms.
Our second problem, as explained below, is that we do not accept that it is correct to treat 60% of the increase in value of the flat, or of Mr Wayas equity in the flat, as the benefit that Mr Waya obtained from his criminal conduct.
Our fundamental problem with the approach of the majority is, however, that we do not consider that 60% of the open market value of the flat less the mortgage liability of 465,000 or 60% of any increase in the flats market value over its acquisition price, or 60% of the increase of Mr Wayas equity in the flat is, or can properly be said to be property, as defined by section 84 of POCA or at all.
These formulae do not even describe the value of an interest in property.
They describe the increase in the value of an interest in property.
The approach of the majority cannot be reconciled with the provisions of sections 79, 80 and 84 of POCA, which govern the identification and valuation of property obtained by or in connection with criminal conduct.
Step (v): After the remortgage (and ignoring the repayment of principal) the chose
in action was represented by 60% of the increase in Mr Wayas equity in the flat
The majority deal with the effect of the remortgage at paragraphs 74, 75, 79 and 80 of their judgment.
In paragraph 74 they treat the additional funds raised on the remortgage as falling in principle within the scope of section 80(3)(b), as property representing the original chose in action, notwithstanding the fact that they consider that the flat, on the security of which the funds were raised, cannot itself be treated in its entirety as having been obtained from criminal conduct.
Paragraph 75 considers and dismisses an argument advanced by the Crown that the additional funds constituted further property obtained by Mr Waya by or in connection with his criminal conduct so as to increase the amount of the confiscation order, even though the additional funds had been dissipated by confiscation day.
On this point we agree with the majority.
Paragraphs 79 and 80 disregard the use of funds raised by the remortgage to repay the original loan and to meet the early repayment fee, on the basis that no new, untainted money of Mr Waya was used to redeem the original mortgage.
The implicit assumption is again that any funds obtained on the security of the flat are tainted, although only a proportion of the value of the flat represents, in the view of the majority, the property obtained by Mr Waya as a result of or in connection with criminal conduct.
The majority judgment does not expressly provide a formula for arriving at the property representing the original chose in action that takes account of the remortgage.
The formula that we have set out as representing step (v) is derived from the computation at paragraph 80 of the judgment, which the majority describe as a computation in similar format to that at step (iv).
The formula is, however, no longer the same as 60% of the increase in the market value of the flat.
That formula has to be abandoned in face of the requirement imposed by section 79(3) to have regard to the increase in the amount secured by the mortgage when valuing Mr Wayas interest in the flat.
Our principal objection to the formula adopted at step (v) is the same as our objection to the formula adopted at step (iv).
It does not describe property or a proprietary interest.
It describes the increase in value of a proprietary interest.
Step (vi): On the facts of this case the repayment of principal can be reflected by
adding the amount of the repayment to the original down payment
This conclusion of the majority is set out in paragraph 77 of their judgment.
It is tantamount to saying that because the repayment was made late in the day and was of a relatively small amount, 23,400, its effect can be reflected by making a pound for pound reduction from the confiscation order of 60% of the sum repaid.
This robust approach sidesteps the problem of how to apply the formula that immediately precedes it: Once repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less the mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields.
On the face of it this formula would seem to have the result that Mr Waya could have reduced the value of the representing property held by him to nil by repaying the entire loan on the day before confiscation day.
Step (vii): The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down
payment and the original mortgage advance
This proposition is set out in the latter part of paragraph 77 of the majority judgment.
As we understand this, the notional adjustment would have to be made each time a repayment was made.
An ever decreasing proportion of the increase in the value of the flat would be treated as benefit derived from Mr Wayas criminal conduct, to be added to the previous increases in value which qualified as benefit derived from the criminal conduct.
The task of computing on confiscation day the value of the benefit derived by Mr Waya from his criminal conduct would be near impossible, which is no doubt why the majority state, somewhat optimistically, that elaborate and precise calculations would not be called for because experienced counsel would in many cases be able to agree upon an appropriate adjustment.
Whatever the final figure agreed upon in the way suggested, we do not see how it could be described as property held by Mr Waya on confiscation day that represented the chose in action that he initially obtained.
Step (viii): the POCA benefit, calculated in accordance with the preceding steps, was the same as the real benefit obtained by Mr Wayas criminal conduct so that
the confiscation order based upon it was proportionate
We shall explain why we disagree with this proposition when we come to consider the real benefit obtained by Mr Waya as a result of his criminal conduct.
First, however, we propose to set out our conclusions as to how the provisions of POCA apply in the case of Mr Waya.
Our Analysis
Once it is recognised that the judge has A1P1 at his disposal to deal with any disproportionate effect of POCA, it is no longer necessary, or desirable, to depart from the natural meaning and effect of the provisions of POCA in an attempt to avoid an unfair result.
The earlier cases on mortgage transactions cease to provide a foundation upon which to build.
This is as well, for those cases do not provide a consistent approach.
The approach of the majority certainly does not purport to found on the previous cases that deal with mortgage transactions.
The property initially obtained by Mr Waya
We understand it to be the view of the majority that where a contract is induced by the fraud of a defendant the property obtained by the defendant under that contract will normally constitute the property obtained as a result of or in connection with the defendants criminal conduct, within the meaning of section 76(4) of POCA.
We agree with this analysis.
It gives the words of section 76(4) their natural meaning.
We can see no justification in the present case for treating as the property initially obtained the rights and liabilities under the two linked contracts, rather than the property held by Mr Waya after the simultaneous performance of those contracts.
We agree with the majority, for the reasons set out at length in paragraphs 48 to 52 of their judgment, that the property initially obtained by Mr Waya was not the advance of 465,000.
Mr Waya never obtained that sum.
It was paid by the lender to the vendor as part of the simultaneous performance of the two contracts.
There is no doubt as to the property held by Mr Waya after the performance of the two linked contracts.
It was the flat, which was subject to the mortgage.
We consider that on the natural meaning of section 76(4) the entire flat was obtained as a result of or in connection with Mr Wayas criminal conduct, or at least constituted property obtained in that connection and some other section 76(6).
The flat was, of course, also obtained as a result of or in connection with Mr Wayas contribution of 40% of the purchase price, but that does not take the flat outside the wording of section 76(4) and 76(6).
If POCA treats the whole flat as property obtained as a result of or in connection with Mr Wayas criminal conduct, notwithstanding that he contributed 40% to the purchase price, the result is unfair and disproportionate.
The temptation is to disregard the broad reach of the wording of section 76(4) and (6) and hold that only 60% of the flat was property obtained by Mr Waya as a result of or in connection with his criminal conduct.
We were initially tempted to adopt this course.
Unfortunately it only mitigates but does not resolve the unfairness that results from the application of the provisions of POCA, as the majority have identified in paragraph 70 of their judgment.
Attempting to avoid this unfairness has led the majority to adopt the complex series of steps that we believe, for the reasons that we have given, are not compatible with the provisions of POCA.
We have concluded that the better course is to recognise that POCA will often produce a disproportionate result when applied to property obtained under a contract induced by fraud.
The provisions of POCA are simple to apply when accorded their natural meaning, and they should be applied in accordance with that meaning.
Where this produces a disproportionate result, the judge should tailor the confiscation order so as to produce a result which is proportionate.
This is an easier task, and one that has greater flexibility, than the task of following the steps that the majority have held must be taken in order to comply with the requirements of POCA.
Thus we would hold that the property initially obtained by Mr Waya as a result of his criminal conduct was the flat.
As the majority have observed at paragraph 46, this accords with the analysis in the early cases of Re K and R v Layode, where the courts simply applied the natural meaning of property obtained as a result of or in connection with the commission of an offence language preserved in section 76(4) of POCA.
The value of the property initially obtained
The flat was, when obtained by Mr Waya, subject to the mortgage.
This situation is covered by section 79(3).
The value of the flat in relation to Mr Waya was the market value of his interest, which some would describe by way of shorthand as his equity in the flat.
This can be calculated by deducting the amount of the mortgage, 465,000, from the market value of the flat, 775,000, producing a value of 310,000.
That value was wholly attributable to Mr Wayas contribution of 310,000 to the purchase price of the flat.
The provisions of POCA give him no credit for this.
To base a confiscation order upon it would be disproportionate.
A1P1 provides the judge with the necessary power to defeat any attempt by the prosecution to produce such a result.
The effect of the remortage
By the time of the remortgage the flat had increased in market value.
The remortgage increased the amount secured on the flat.
This diminished the value of Mr Wayas interest in the flat, and thus its value in relation to him, by reason of the application of section 79(3).
The fact that this diminution was attributable to Mr Waya, in effect, drawing down part of his interest in the flat did not affect the process of valuing the flat held by him.
It is arguable, however, that the additional funds drawn down represented in Mr Wayas hands part of the original property obtained by Mr Waya so that they fell within the provisions of section 80(3)(c) of POCA.
The additional funds were, however, no longer in the hands of Mr Waya on confiscation day, so they vanish from the picture.
The majority correctly so hold at paragraph 75 of their judgment.
The effect of the repayment of principal
Section 79(3) is of general application.
It provides a simple and rational method of calculating the value to a defendant of property held by him that is subject to a charge.
It pays no regard to the reason for the charge.
The effect of paying off part of the principal secured by a mortgage is to reduce the amount secured by the mortgage and to increase the value of the property held in relation to the defendant.
The more that the defendant repays the greater the confiscation order.
This result is paradoxical, but underlines the fact that the provisions of POCA are capable of producing an unfair result when applied to a mortgage transaction.
A1P1 provides the answer to this.
The confiscation order according to POCA
Calculation of Mr Wayas benefit on confiscation day, and thus the amount of the confiscation order, poses no problem.
The market value of the flat had more than doubled to 1,850,000.
The amount of the mortgage was 862,600.
Applying section 79(3), Mr Wayas benefit was the difference between the two, namely 987,400.
That is the amount of the confiscation order that follows from the application of the express provisions of POCA.
On any view this needs to be adjusted under A1P1 to reflect the fact that part of this benefit was attributable to the 40% contribution to the cost of the flat that was made by Mr Waya out of untainted funds.
We turn to consider the real benefit obtained by Mr Waya from his criminal conduct.
The real benefit obtained by Mr Waya
While on our analysis the determination of the POCA benefit is easily achieved, the more difficult problem for the confiscating judge is to determine the real benefit derived by a defendant from a mortgage fraud.
It may be appropriate to apply a broad brush to this task.
The majority consider that any increase in value of that portion of the property purchased with the mortgage loan will normally constitute benefit obtained by the defendant as a result of his criminal conduct and that it will be proportionate to base the confiscation order on this (see paragraph 35).
We do not agree.
The real benefit obtained by a mortgage fraud will depend on the nature of the fraud and may involve the application of principles of causation for a discussion of these in the context of the assessment of damages for misrepresentation in relation to a mortgage transaction see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191.
In the second part of paragraph 53 the majority consider different types of mortgage fraud.
The facts of the present case are so extreme that there is no need to embark on the task of attempting to define the value of the benefit obtained by the defendant in each of these examples.
We will restrict ourselves to some general observations.
A normal mortgage agreement is one under which the lender provides the borrower with the use of a sum of money to purchase realty.
The primary consideration that the borrower provides for the use of the lenders money is the interest that he agrees to pay.
The lender has decided to use his money to produce income rather than, for example, to speculate on the property market.
A defendant who, by a misrepresentation, induces the lender to make a loan that he would not otherwise have made, or to make a larger loan than he would otherwise have made, is not in the same position, and does not obtain the same benefit, as a defendant who, by a misrepresentation, induces the lender to make a loan on more favourable terms than he would otherwise have demanded.
And a defendant who uses tainted funds to pay the interest due under the mortgage agreement obtains a greater benefit from his criminal conduct than a defendant who pays for the use of the lenders money with clean funds.
It cannot be right to proceed on the basis that in each of these cases the benefit obtained by the defendant is the same, namely the increase in value of the property that he purchases with the money he has borrowed.
We turn to the facts relating to Mr Waya.
The majority have referred to the remarks of the sentencing judge, His Honour Judge Elwin.
These recorded that, in filling out the application form for the mortgage Mr Waya misrepresented the source of his income.
The judge continued: The lender suffered no loss, indeed as the loan was redeemed early it made a profit of 58,000.
By their verdict the jury plainly and surely concluded that you knew that the employment details entered on the form were false; you nevertheless signed it.
Whether you were responsible for the collection and collation of the supporting documentation is far from clear.
There was no false valuation, and the probability is that if you had been open and honest with the lender the loan would have been granted anyway.
It may well also have been the case that you left almost everything to others (our emphasis).
In the light of these remarks it cannot be right to proceed on the basis that if Mr Waya had not made a misrepresentation about his income he would not have obtained the finance that he needed.
The majority are right at paragraph 41 to summarise the benefit he obtained from his dishonesty as obtaining credit on terms which might not otherwise have been available.
Mr Waya provided 40% of the cost of the flat and thus took upon himself the risk that its value might fall to that extent.
Realistically the lenders money was never at risk.
Mr Waya paid the interest due under the mortgage agreement out of clean funds.
He then discharged the first mortgage out of funds raised by remortgaging the flat.
He was guilty of no dishonesty in obtaining the second mortgage he was charged but acquitted of obtaining this by deception.
In circumstances where the remortgage was honestly obtained, and in which the property over which it was secured was not the real benefit obtained by the initial mortgage fraud, we do not think it right to treat the funds raised on the remortgage as tainted monies.
It seems to us that the only benefit that Mr Waya obtained by his dishonesty was that the terms of the loan advanced to him may have been somewhat more generous than they would have been had he told the truth about his income.
A confiscation order in the value of that benefit would plainly be proportionate.
That, in effect, would make him pay the price that he should have paid for the finance that he obtained.
But having achieved this, it would, we suggest, plainly be unjust and disproportionate to deprive him of the benefit that he obtained by the use of the money for which he had paid.
It would be even more unjust to disregard the fact that Mr Waya redeemed the mortgage with funds acquired without dishonesty.
In these circumstances we cannot accept that the real benefit that Mr Waya obtained by his dishonesty was any part of the increase in value of the flat.
The real benefit was no more than the money value of obtaining his financing on better terms than might otherwise have been available.
To base the confiscation order on the increase in value of the flat would be disproportionate.
For this reason we consider that the judge should have applied A1P1 and reduced the confiscation order to reflect the modest benefit that Mr Waya may have enjoyed of obtaining the mortgage on better terms.
In theory the case could be remitted for determination of that benefit.
But after the time that has elapsed and the stress that these proceedings must have involved for Mr Waya, we would not think it just to adopt that course.
We would simply allow this appeal and quash the confiscation order.
| UK-Abs | In 2003 the Appellant purchased a flat in London for 775,000.
To do so, he paid 310,000 from his own resources and was provided with the remaining balance of 465,000 by a mortgage lender, on the basis of false statements he made about his employment record and earnings.
In April 2005, that mortgage was redeemed as the Appellant remortgaged the flat to a different mortgage lender.
On 10th July 2007 at Southwark Crown Court, the Appellant was convicted of obtaining a money transfer by deception in relation to the false statements he made to the initial mortgage lender.
He was sentenced to 80 hours community punishment, and the Crown sought a confiscation order under the Proceeds of Crime Act 2002 (POCA) in respect of the purported economic benefit that the Appellant obtained from his crime.
On 25th January 2008 the judge made a confiscation order for 1.54m, which amounted to the increased market value of the flat at that time less the 310,000 paid by the Appellant at the time of the initial purchase.
On 25th March 2010, the Court of Appeal reduced the order to 1.11m, which amounted to 60% the percentage of the initial value of the property provided by the mortgage lender as a result of his false statements of the flats increased market value.
The Supreme Court, sitting as a bench of seven justices in May 2011, heard argument on whether someone in the position of the Appellant could be said to have gained a benefit from his crime and, if so, how such a benefit should be identified.
But the Court then identified a further issue, that is whether the confiscation provisions of POCA could potentially give rise to a confiscation order which breaches Article 1 of the First Protocol (A1P1) of the European Convention on Human Rights (the Convention), which protects the right to peaceful enjoyment of ones possessions.
In March 2012, the Court reheard the case in relation to that topic and issues related to it.
The Supreme Court unanimously allows Mr Wayas appeal.
Lord Walker and Sir Anthony Hughes, with whom Lady Hale, Lord Judge, Lord Kerr, Lord Clarke and Lord Wilson agree, give the leading judgment in which they substitute a confiscation order of 392,400.
Lord Phillips and Lord Reed, in their partially dissenting judgment, express the view that the confiscation order should be quashed entirely.
The effect of A1P1 jurisprudence is to require that confiscation orders made under POCA must be proportionate to the aims of that Act [11 12, 20]. s.3(1) of the Human Rights Act 1998 requires, so far as it is possible to do so, that legislation must be read and given effect by the courts in a way that is compatible with Convention rights.
The Court therefore holds that the Crown Court should only make confiscation orders which would be proportionate in each case [12 16].
However, this does not amount to giving general discretion to judges to fit confiscation orders to the facts and justice of a case [24].
Such discretion was previously removed from judges by Parliament [4].
To assess whether a particular confiscation order would be disproportionate, it is important to note that the aim of POCA is to remove the proceeds of crime from criminals, rather than to act as a deterrent [2, 21 22].
If to make such an order would effectively constitute an extra punishment, such as in a case
where a defendant has already restored the losses his crime caused to the victim and has therefore gained no benefit, it would be disproportionate for the court to do so [28 29].
However, in the present case the Appellant gained a benefit in the form of an increase in value of the flat that his fraud enabled him to buy.
It is therefore not a case in which any confiscation order would be disproportionate [35].
The Court identifies the property initially obtained by the Appellant as a result of or in connection with his crime, under s.76(4) POCA, as the bundle of rights and liabilities arising from the contractual arrangements made between the Appellant, the vendor and the mortgage lender prior to completion of the purchase, which had no market value.
To say he obtained the 465,000 loan is legally inaccurate, as it was never his or in his possession [53].
To say he obtained the whole flat ignores his 310,000 payment, would be disproportionate, and neither a fair nor a purposive application of s.76(4)[46 47].
In situations where a defendant derives further property for example, by sale or mortgage from the property that he initially obtained by his crime, s.80(3) POCA operates to enable the courts to trace the derived property back to the initially obtained property. [56 58].
This enables the courts to value the benefit of the crime in such cases, and is why the Court required to identify the property initially obtained by the Appellant in this case [43 44]. s.79(3) POCA requires that lawfully co existing interests in property be valued individually.
As such, the Court holds that the Appellants interest in the flat, at the time the confiscation order was made, was a limited interest subject to the mortgage lenders co existing interest in the flat.
However, s.79(3) must not apply with the effect that a defendant who perpetrates an acquisitive crime, such as theft, gains an essentially worthless interest because the right of restoration of the true owner falls to be deducted as a co existing interest.
If that were so, the value of property obtained by a defendant in such cases would invariably be nil, rendering the confiscation provisions of POCA ineffectual [64 69].
The benefit that the Appellant obtained from his crime following completion of the purchase, which could be traced back to the bundle of rights and liabilities he obtained prior to completion, was 60% of any increase in the flats market value over its acquisition price.
This percentage corresponds to that of the initial acquisition price of the flat which, in the form of the loan of 465,000, he obtained dishonestly [70].
There was no evidence before the court as to other assets which at the confiscation date represented the sum that the Appellant realised from the remortgage, so this cannot be considered as part of his benefit [74].
Noting a minor adjustment to account for the Appellants repayment of part of the principal sum secured by the remortgage, the Court therefore substitutes a confiscation order of 392,400 [76 81].
Lord Phillips and Lord Reed agree with the most important aspect of the majority judgment, namely their analysis and resolution of the A1P1 issues arising from POCA.
Their dissent pertains to the way POCA should apply to mortgage transactions in view of that analysis [82 83].
Applying the language of s.76(4) POCA, Lord Phillips and Lord Reed identify the property initially obtained as the flat itself [104 109].
Accounting for the co existing interest of the lender under s.79(3), the value of that property to the Appellant was 310,000, which was the amount he himself paid upon purchase [110].
Paradoxically, the more principal a defendant has repaid, the greater the value the property will be to him under POCA and therefore the greater the confiscation order [113].
To avoid each of these POCA effects leading to a disproportionate confiscation order where they arise, the judge should tailor that order under A1P1 [108, 111, 113].
Further, Lord Phillips and Lord Reed do not agree with the majority that the Appellants benefit under POCA was 60% of the flats increase in value over the acquisition price [95 96].
Applying the express provisions of POCA, his benefit was 987,400, which is the difference between the flats value and the mortgage at the time the confiscation order was made.
However, to confiscate this sum would be disproportionate [114].
In reality, the benefit he obtained was the extent to which the terms of his mortgage loan were more generous due to his misrepresentations.
That figure could be calculated by the Crown Court if the case was remitted to it, but it would be just to quash the order in the circumstances of this case [115 125].
This summary is provided to assist in understanding the Courts decision.
It does not form part of the reasons for the decision.
The full judgment of the Court is the only authoritative document.
Judgments are public documents and are available at: www.supremecourt.gov.uk/decided cases/index.html
|
The issue is simply stated.
Child tax credit (CTC) is payable to one person only in respect of each child, even where the care of the child is shared between separated parents.
It is (now) accepted that entitlement to CTC falls within the ambit of article 1 of the First Protocol to the European Convention on Human Rights (Protection of property): see R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311.
It is (now) accepted that the rule discriminates indirectly against fathers, because experience shows that they are far more likely than mothers to be looking after the child for the smaller number of days in the week.
The question, therefore, is whether this discrimination is justified or whether the refusal of CTC to a father who looks after his children for three days a week is incompatible with his convention rights.
If it is incompatible there is a further question as to how this incompatibility can be remedied.
The facts
The appellant father has two children, a son born on 7 June 1998, and a daughter born on 6 May 1999.
We are concerned with the period from 12 January 2004 until December 2005.
During that time, they lived with their mother but had very extensive contact with their father, who looked after them for at least three days a week.
A court order dated 8 November 2004 sets out the precise arrangements determined after a contested hearing between the parents.
In effect, this provided for the father to have the children for three full weekends in every four and on Thursdays in the fourth week and for half of all school holidays.
In other cases, such a level of shared care might well be reflected in a shared residence order rather than in an order for residence and contact.
But the labels attached to the arrangements are immaterial for the purpose of the present issue.
Throughout the relevant period, the father was in receipt of income support, contributory incapacity benefit and non-contributory disability living allowance.
Income support was, of course, a means-tested benefit equivalent to income-based jobseekers allowance and set at the officially prescribed subsistence level.
Following the introduction of CTC, the childrens needs were not taken into account in assessing the fathers entitlement to income support.
He claimed CTC in respect of both children but his claim was refused on the ground that the mother had the main responsibility for them.
He challenged this decision on the ground that the rule restricting entitlement to one household discriminated in favour of women.
He succeeded in the Appeal Tribunal (Ref: 201/07/453 and 08/337, 16 June 2008) but failed before Upper Tribunal Judge Jacobs in the Upper Tribunal (CTC/2608/2008, 4 February 2009) and before the Court of Appeal where the judgment of the court was delivered by Richards LJ: [2010] EWCA Civ 56; [2010] 1 FCR 630.
Child Tax Credit
CTC and Working Tax Credit were introduced by the Tax Credits Act 2002 (TCA).
CTC replaced the separate systems for taking account of childrens needs in the tax and benefits systems.
Previously, people in work (or otherwise liable to pay income tax) might claim the childrens tax credit to set off against their income.
This was administered by the tax authorities.
People out of work (or otherwise claiming means-tested benefits) might claim additions to their income support or income-based jobseekers allowance to meet their childrens needs.
This was administered by the benefits authorities.
Under the new system, a single tax credit is payable in respect of each child, irrespective of whether the claimant is in or out of work, and is administered by Her Majestys Revenue and Customs (HMRC).
CTC is like income support and jobseekers allowance, in that it is a benefit rather than a disregard and it is means-tested, so that the higher ones income the less the benefit, until eventually it tapers out altogether.
But in several other respects, including the light touch and non-stigmatising way of measuring income, calculated for the year ahead based on the previous years income, with a balancing exercise at the end of the year, it is like a tax allowance.
As the Government explained, in The Child and Working Tax Credits: The Modernisation of Britains Tax and Benefits System, April 2002, para 2.3: The Child Tax Credit will create a single, seamless system of support for families with children, payable irrespective of the work status of the adults in the household.
This means that the Child Tax Credit will form a stable and secure income bridge as families move off welfare and into work.
It will also provide a common framework of assessment, so that all families are part of the same inclusive system and poorer families do not feel stigmatised.
CTC is, of course, separate from and additional to child benefit, which (at that time) was a universal flat rate benefit available to everyone with children, and also administered by HMRC.
Like CTC, child benefit cannot be split between two claimants (Social Security Contributions and Benefits Act 1992, section 144).
This single payment rule has been challenged but so far unsuccessfully: see R (Barber) v Secretary of State for Work and Pensions [2002] EWHC 1915 (Admin); [2002] 2 FLR 1181.
Where separated parents share the care of their children, they may elect who is to receive the benefit.
Failing that, HMRC has a discretion to decide who should have it, without any statutory test (Sched 10, para 5 of the 1992 Act).
They may, therefore, allocate the benefit for one child to one household and for another child to the other: see R (Ford) v Board of Inland Revenue [2005] EWHC 1109 (Admin).
Entitlement to CTC depends upon making a claim: TCA, section 3(1).
A claim may be made either jointly by a couple or by a single person who is not entitled to make a joint claim: section 3(3).
Opposite or same sex partners who are married or in a civil partnership or living together as if they were married or civil partners are a couple unless they are separated by court order or in circumstances in which the separation is likely to be permanent (section 3(5A) as substituted by paragraph 144(3) of Part 14 of Schedule 24 to the Civil Partnership Act 2004).
Joint claims are assessed on the couples aggregate income (section 7(4)(a)).
Entitlement to CTC depends upon the claimant or either or both claimants in a couple being responsible for one or more children (section 8(1)).
The circumstances in which a person is or is not responsible for a child may be prescribed by regulations (section 8(2)).
If more than one person may be entitled to CTC in respect of the same child, the regulations may provide for the amount of the CTC for any of them to be less than it would be if only one claimant were entitled (section 9(7)).
In other words, the regulations could provide for the CTC to be shared, for example between separated parents, but in fact they do not.
Regulation 3(1) of the Child Tax Credit Regulations 2002 (SI 2002/2007), (as amended by article 4(3) of the Civil Partnership Act 2004 (Tax Credits, etc) (Consequential Amendments) Order 2005 (SI 2005/2919)), provides, so far as relevant: For the purposes of child tax credit the circumstances in which a person is or is not responsible for a child . . .
shall be determined in accordance with the following Rules.
Rule 1 1.1 A person shall be treated as responsible for a child who is normally living with him (the normally living with test).
1.2 This Rule is subject to Rules 2 to 4.
Rule 2 2.1 This Rule applies where (a) a child . . .
normally lives with two or more persons in (i) different households, or (ii) the same household, where those persons are not limited to members of a couple, or (iii) a combination of (i) and (ii), and (b) two or more of those persons make separate claims (that is, not a single joint claim made by a couple) for Child Tax Credit in respect of the child . . .
2.2 The child . . .
shall be treated as the responsibility of (a) only one of those persons making such claims, and (b) whichever of them has (comparing between them) the main responsibility for him (the main responsibility test), subject to Rules 3 and 4.
Rule 3 3.1 The persons mentioned in Rule 2.2 (other than the child . . .) may jointly elect as to which of them satisfies the main responsibility test for the child . . ., and in default of agreement the Board may determine that question on the information available to them at the time of their determination.
As with child benefit, therefore, the parents are free to elect between themselves who is to have the CTC.
Unlike child benefit, however, HMRC is constrained by the main responsibility test if the parents fail to agree.
Although the Act allows for sharing, the decision not to provide for it in the regulations was deliberate.
The Paymaster General, Mrs Dawn Primarolo, explained to Parliament (Hansard House of Commons Debates, 26 June 2002, vol 387, col 926-927): Together [the Act and the regulations] create a system that ensures that the family with main responsibility for a child will be provided with a suitable level of support, depending on their needs.
That is similar to many current systems of support for children, and we believe that currently - it provides the most suitable means to ensure that we can focus support on raising children out of poverty.
Our present aim is to enable one family to claim support for any particular child at any one time.
That is the principle on which the Bill, the draft regulations and the business systems being developed are based.
There are several sound reasons for that approach.
Usually, the person or couple who have the main responsibility for care of a child bear more of the everyday responsibilities for the child, and meet the everyday expenditure for him or her.
It is vital, especially for families on lower incomes, that enough support is directed to that family to lift the child from poverty, or to keep him or her out of poverty.
The Government recognised that patterns of care may be changing, that many more families now share responsibility for children than was previously the case, and so, in future, directing support to one family might not be the right approach.
But they had no intention . .
.
of making hasty or ill-considered changes.
The question of shared responsibility for children goes wider than tax credits and affects other systems of support that recognise the needs of families with children, such as housing benefit.
Consultation and contact with lobby groups had shown that payment of support to the family with the main responsibility for the child is seen as the most appropriate way to deal with the vast majority of families with children.
Any change would also entail extensive and expensive IT and business systems changes.
This no-splitting approach is in line with the approach generally adopted across the benefit system, including housing and council tax benefits, although splitting had earlier been provided for in the child tax allowances which were abolished as from 1982, in the short-lived childrens tax credits which preceded CTC, and in the rules for supplementary benefit which was replaced by income support in 1988.
So the Government adopted a no-splitting policy having had some experience of operating the alternative.
Under the Welfare Reform Act 2012, CTC and many other benefits will be replaced by a new benefit, Universal Credit.
Initially this will apply only to new claims, so that existing claimants will remain on CTC until they are transferred to Universal Credit.
The Government has announced that its current intention is to retain the no-splitting rule (Universal Credit: welfare that works, Chapter 2, para 40).
After the decision not to provide for CTC to be split, there came the decision of the Court of Appeal in Hockenjos v Secretary of State for Social Security [2004] EWCA Civ 1749, [2005] EuLR 385.
This concerned claims for child supplements to jobseekers allowance which had been made in 1997, long before the introduction of CTC.
Father and mother were sharing the care of their two children roughly equally, but the mother was receiving the child benefit in respect of them.
The father was claiming jobseekers allowance, but was denied the supplements applicable to children for whom the claimant was responsible because he was not in receipt of the child benefit.
The regulations provided that the person in receipt of child benefit was to be treated as responsible for the child in question.
Unlike CTC, jobseekers allowance was covered by Council Directive 79/7/EEC, article 4 of which prohibited discrimination on grounds of sex.
The Court of Appeal held that the rule was indirectly discriminatory against fathers; that the link with child benefit could not be justified; and that treating only one parent as responsible in a shared care situation could not be justified.
Following Hockenjos, officials in HMRC and HM Treasury conducted a review of the no splitting rule in CTC.
They produced a Table of Policy Issues, assessing the options of Single Payment, Split Payment and Extra Payment against the criteria of Precedent, Rationale, Impact on the benefits system, Public expenditure, Support for Shared parenting, Administration and Other factors.
The full table is annexed to Upper Tribunal Judge Jacobs decision and the columns relating to the Single payment and Split payment options are reproduced by the Court of Appeal at para 33 of their judgment (the Extra payment option no doubt being regarded by all as a complete non-starter).
The full table is also annexed to this judgment.
Unsurprisingly, officials concluded that there had been no material change in the balance of policies which had led to the original CTC scheme and so no further work was done.
Upper Tribunal Judge Jacobs in the present case distinguished Hockenjos on the basis: first, that discrimination under EU law is different from discrimination under the ECHR; that cost is no excuse in EU law, but it may be a justification under the ECHR; that there were no competing claims in that case, because the mother was not claiming jobseekers allowance; that there was a fundamental principle of equality in EU law; and finally, and most importantly, that the structure of jobseekers allowance and CTC were different.
The Court of Appeal did not think that the differences between EU and ECHR law were likely to lead to materially different outcomes (para 53); but they were impressed that the Government had thought about the issue when introducing CTC and had reviewed the policy in the light of the Hockenjos case (para 55); that there was no equivalent to the linkage with child benefit, which was the primary objectionable feature of the JSA scheme (para 59); and that CTC is a benefit of a different kind from JSA (para 60).
They therefore reached their own conclusion on justification rather than following Hockenjos: [2010] EWCA Civ 56.
The test for justification?
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 (REA).
But on reaching the state pension age, they either continued to receive REA at a frozen rate or received instead a retirement allowance (RA) 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.
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 (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.
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 Stec, 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 REA 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.
The same test was applied by Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) in R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311, which concerned the denial of income support disability premium to rough sleepers.
Having quoted para 52 of Stec 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 (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.
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 [2005] UKHL 37, [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 Stec.
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 Stec and Runkee, they must, as the Court of Appeal observed (para 50), apply a fortiori to the indirect sex discrimination with which we are concerned.
The reality is that, although the rule does happen to be indirectly discriminatory against fathers, the complaint would be exactly the same if it did not discriminate between the sexes.
Mothers who share the care of their children for a shorter period each week while living on subsistence level benefits have exactly the same problem.
The real object of the complaint is the discrimination between majority and minority shared carers.
It is quite likely that the Strasbourg Court would regard this as another status for the purpose of article 14, because they have taken a broad view of what that entails.
But this reinforces the view that they would apply the manifestly without reasonable foundation test of justification.
In fact, the appellant did not argue for anything other than the test established in Stec and RJM.
It is unnecessary for us to consider to what extent the test under the ECHR is different from the test in EU law.
EU law requires that, in order to justify indirect sex discrimination, the state has to show that the rule in question is a suitable and necessary means of achieving a legitimate social policy aim which is unrelated to discrimination on the prohibited ground.
In choosing the measures capable of achieving the aims of its social and economic policy, the state has a broad margin of discretion, although it cannot frustrate the implementation of a fundamental principle such as equal pay for men and women: see R v Secretary of State for Employment, Ex p Seymour-Smith (Case C-167/97) [1999] ECR I-623 and [1999] 2 AC 554.
The Court of Appeal in this case thought that the two tests would not lead to materially different outcomes and in particular that the Court of Appeal in Hockenjos would have reached the same conclusion under the ECHR as they did under EU law (para 53).
Is the rule justified?
But the fact that the test is less stringent than the weighty reasons normally required to justify sex discrimination does not mean that the justifications put forward for the rule should escape careful scrutiny.
On analysis, it may indeed lack a reasonable basis.
This case is different from Stec and Runkee in two important respects.
First, they were concerned with non-means-tested benefits; CTC is of course means-tested, though not at subsistence level, and the other benefits to which the appellant was entitled were at subsistence level.
And secondly, the justification advanced in each case was the historic need to cater for the disadvantage suffered by women in the workplace, in the first place by allowing them to retire with a state pension earlier than men, and in the second place by giving them a pension to compensate for the loss of their deceased husbands income on which they had usually been dependent.
The margin lay in deciding when and how to remove the discrimination.
We are not here concerned with the timing of transitional arrangements, but with a considered policy choice which could last indefinitely.
The appellants case is simple (and skilfully deployed).
He is responsible for looking after his children for three days a week.
He is dependent upon subsistence level benefits: his incapacity benefit is deducted from his income support and his disability living allowance is to meet the particular needs arising out of his disability.
He therefore has nothing with which to meet the needs of his children while they are with him.
The mother could agree to share the CTC and the child benefit with him, but she does not have to do so.
HMRC can give one of them the child benefit for one child and the other the benefit for the other child, but they cannot do this with the CTC.
The court which made the order in the family proceedings has no power to order the mother to share the CTC with the father: the family courts powers to make periodical payments orders for the benefit of children were removed with the introduction of the child support scheme: see Child Support Act 1991, s 8(3).
Splitting used to be possible under the fore-runner to income support and under the child tax allowance scheme, so it can be done.
And in fact it is now possible to share Child Tax Benefit under the comparable scheme in Canada (in Australia, shared carers can each claim the full benefit).
Comparisons with other European states are not helpful, because of their different approaches to the allocation of parental responsibility after separation and of their very different tax and social security systems.
The parties have each done a considerable amount of work on the systems in other countries.
The respondent has produced a Comparative Survey of Legislative Provisions governing the Allocation of Child Benefits in Shared Care Arrangements and the appellant has produced a Research Note into that survey.
Of the 30 countries surveyed, only six provide for splitting child benefits between separated parents; of these, five provide for equal sharing and one provides for sharing in proportion to the time spent caring for the child.
The difficulty, as the appellant points out, is knowing what is meant by a child benefit in the particular country and how it fits into their tax and social security systems as a whole.
Interesting though this information is, it is hard for us to draw any conclusions from it as to the justification for the UK rule, other than that there is little European consensus about the merits of sharing the care of children, let alone about the merits of splitting state support for them.
The respondents case is also simple (and skilfully deployed).
The aim of CTC is to provide support for children.
The principal policy objective is to target that support so as to reduce child poverty.
The benefit attaches to the child rather than the parent.
It is paid to the main carer because the main carer bears more of the everyday expenditure for the child and most of the capital expenditure on things such as clothes, shoes, sporting and leisure equipment, school trips and the like.
Splitting the benefit would reduce the amount available to the main carer, who is usually the one less well placed to earn income, and might result in neither household being able to afford such items as clothes and shoes.
Nor is it obvious how the means test should operate if the award is split.
Should it be based on the main carers household income, or on the minority carers household income, or on both carers household income, or a pro rata award to each based on their household income? Unless based on the main carers income, the total amount payable would go down when the minority carers income went up, thus reducing the amount available to the main carer even before the benefit was split.
Nor is it clear how the benefit should be apportioned between them, especially as shared care arrangements tend to vary over time, while CTC awards are made for a year at a time.
There would inevitably be increased administrative complexity and costs.
Given the overall limits on public expenditure, this would be likely to result in less money being available to support children.
It would also have knock-on effects elsewhere in the system, for example for those benefits which are pass-ported by receipt of the full rate of CTC.
The respondent also points out that the appellant is not attacking the no- splitting rule in every case, but only in cases such as his, where a substantial minority carer is dependent upon means-tested benefits.
In other words, he is asking for an exception to be made to an otherwise justifiable rule.
The more usual case of shared care is likely to involve a minority carer who is in full time work and a main carer who is not.
It is well-established that bright line rules of entitlement to benefits can be justified, even if they involve hardship in some cases.
Hence, this rule cannot be said to be unreasonable or manifestly without reasonable foundation.
As to Hockenjos, the respondents primary case is that it was wrongly decided.
Both Scott Baker LJ and Ward LJ based their decisions upon the view that the EU principle of equal treatment could not be frustrated and thus gave no weight to the margin of discretion.
Arden LJ set out the right test, which was little different from the domestic test of Wednesbury unreasonableness (para 107) but then failed to apply it.
It was unfair to criticise the Government for not addressing its mind to whether there was a viable alternative, as they clearly had done so when introducing the new CTC scheme.
It was also wrong for Ward LJ to base his conclusion on the fact that the parents were not claiming the same benefit and thus competing for the same child premiums.
In fact one was claiming jobseekers allowance and the other was claiming income support, both subsistence level means-tested benefits, to which additional payments for children could be made to one parent only, so the effect of the Court of Appeals decision was a double payment.
Furthermore, as entitlement was linked to child benefit, once the father had claimed and been awarded the child benefit for one child, he also qualified for the additional allowance for that child.
The respondents secondary case, if Hockenjos was rightly decided, is that this case can be distinguished, because it concerns a different test under the ECHR, a different benefit, consideration was given to the alternatives and separated parents are competing for the same benefit.
Discussion
I am a little sceptical about the objective of lifting the child from poverty or keeping him or her out of poverty.
This is, of course, a laudable aim.
But success in achieving it will depend upon how child poverty is defined, rather than upon the actual living standards of real children.
Both this government and the last have committed themselves to abolishing or at least reducing child poverty.
Precise targets are set out in the Child Poverty Act 2010.
But the definitions in the Act all depend upon the relevant income group into which the household where the child lives falls.
Thus, for example, for the target reduction of relative low income (in section 3), the household falls within the relevant income group if its equivalised net income is less than 60% of the median equivalised net household income for the year in question (equivalised means adjusted to take account of variations in household size and composition: s 7).
Thus if support is targeted upon only one household, it will be much easier to say that a child has been lifted out of poverty than it would be if the support had to be split between two households.
However, the statistical definition of child poverty may reflect a wider truth.
If funds are targeted at one household, it is likely that a child living in that household will be better off than he or she would be if the funds are split between two households with modest means.
The state is, in my view, entitled to conclude that it will deliver support for children in the most effective manner, that is, to the one household where the child principally lives.
This will mean that that household is better equipped to meet the childs needs.
It also happens to be a great deal simpler and less expensive to administer, thus maximising the amount available for distribution to families in this way.
The rule is also linked to the move from tax allowances and social security benefits into a seamless tax credit system.
When child additions to subsistence level benefits were decided on a week by week basis, it was practicable, although not easy, to divide them between two households which were claiming the same or essentially the same benefits.
Once the benefit is payable, on a means tested but not subsistence basis, irrespective of the work status of the parents, it becomes much harder to split it between two households who may move in and out of work at different times and whose incomes may be very different.
This brings with it all the problems of how to calculate the benefit mentioned earlier.
It would also mean that the benefit available to the lower income main carer would go down when the higher income minority carers income went up.
The ideal of integrating the tax and social security systems, so as to smooth the transition from benefit to work and reduce the employment trap, has been attractive to policy makers for some time.
The introduction of CTC (and working tax credit) was a step in that direction.
In my view it was reasonable for government to take that step and to regard the targeting of child support to one household as integral to it.
It is also reasonable for a government to regard the way in which the state delivers support for children, and indeed for families, as a separate question from the way in which children spend their time.
The arrangements which separated parents make for their children are infinitely various and variable.
They depend upon a multitude of factors, such as the childrens ages and preferences, where they go to school, how close the parents live to one another, and what the parents can afford.
Most parents can and do sort out these arrangements for themselves.
Only a small minority have to have these imposed upon them by a court, and even then they are free to change them if they both want to do so.
Some might think that the ideal solution would lie with restoring to the family courts the power to make appropriate orders to deal with such payments, either by ordering one parent to share it with the other, or by ordering a periodical payment to take account of the benefits which one parent receives.
Then the order could be properly tailored to the different means available in each household, rather than divided according to an arbitrary criterion of time spent with each parent.
It would not make sense to order a mother living on a low income to make a payment to a father living on a high income just because the children spent some of their time with him.
The children would need the money more when they were living with their mother than when they were living with their father.
But if the circumstances were the other way round, then of course it would make sense to order that the benefit be shared or even ceded entirely to a parent living at subsistence level.
The difficult case is where both parents are living at subsistence level, because without the full amount of the benefit neither might be able to provide properly for the child.
The less happy one of the parents was to share care with the other, the less likely it is that a satisfactory solution will be agreed.
Unfortunately, the advent of the child support scheme has removed the possibility of doing justice from the courts.
To restore it would obviously be the more rational solution to the problem under discussion.
For all the reasons given, I conclude that the no-splitting rule is a reasonable rule for the state to adopt and the indirect sex discrimination is justified.
Remedy
Had I reached a different conclusion, it would have been necessary to consider the difficult question of remedy.
It is difficult for several reasons, not least because this is a statutory appeal rather than judicial review, so that we are limited to upholding or setting aside the tribunals decision and if we set it aside to re-making it ourselves or sending it back to the tribunal to decide.
If we were to disapply Rule 2.2 in reg 3 (para 7 above), the effect of section 7(2) of the 2002 Act would appear to be that, as the father was in receipt of a prescribed benefit, he would be entitled to CTC at the full rate if he were held to be responsible for the children during the period in question, even though the mother has already received it at that rate and there is no machinery for recovering any part of it from her.
In other words, we would be disapplying a rule which has a discriminatory effect without any means of applying the only sensible alternative rule, which is to share the benefit between the parents.
Section 7(2) is in primary legislation and cannot simply be ignored.
Fortunately, we do not have to grapple with this conundrum, although of course that fact that it arises in this case would not have been a reason to hold that the impugned rule is justified.
However I agree with the Upper Tribunal and the Court of Appeal that the rule is justified and would therefore dismiss this appeal.
| UK-Abs | This case concerns the scope for justifying indirect discrimination against men in the allocation of Child Tax Credit (CTC).
CTC was introduced by the Tax Credits Act 2002 and replaced the previous separate systems of tax credits and benefit supplements for people looking after children, separately administered by the tax and benefits authorities.
CTC is a benefit payable in respect of each child irrespective of whether the applicant is employed.
It is administered solely by HMRC.
The amount of CTC payable depends on the income of the applicant.
Under the Child Tax Credit Regulations 2002 (SI 2002/2007), CTC in respect of each child is payable to only one person, even where the care of the child is shared between two or more persons.
Entitlement to CTC depends on who is deemed responsible for the child.
Regulation 3(1) creates a set of rules for determining this.
Rule 1 provides that where the child lives with one person, that person is treated as responsible.
Rule 2 provides that where a child lives with two or more persons in different households, the person having main responsibility for the child is treated as being responsible.
The Appellant is a father of two children.
Between January 2004 and December 2005 both children lived with their mother but retained substantial contact with the Appellant, spending most weekends and half of all school holidays with him.
The Appellant applied for CTC which was considered under Rule 2, above.
The Respondent determined that the mother had main responsibility for the children and the Appellants application was rejected.
The CTC was paid solely to the mother.
The Appellant appealed the refusal of CTC arguing that the legislative scheme breached article 14 read with article 1 of the First Protocol to the European Convention on Human Rights (the ECHR) in that it indirectly discriminates against men because, on the whole, fathers are more likely than mothers to have secondary, but nonetheless significant, responsibility for the care of their children.
Entitlement to CTC falls within the scope of the right to protection of property under article 1 of the First Protocol to the ECHR.
Article 14 of the ECHR provides that the enjoyment of rights and freedoms under the ECHR shall be secured without discrimination on grounds of, amongst others, sex.
The HMRC now accepts that the legislative scheme indirectly discriminates against men.
The key issue was whether that discrimination was objectively justified.
The appeal tribunal held that it was not and therefore that denying CTC to the father was a breach of article 14 of the ECHR read with article 1 of the First Protocol.
The Upper Tribunal held that the discrimination was justified and that decision was upheld by the Court of Appeal.
The Supreme Court unanimously dismisses the appeal.
Lady Hale gives the lead judgment with which Lord Walker, Lord Clarke, Lord Wilson and Lord Reed agree.
The Appellant relied upon the Court of Appeal decision in Hockenjos v Secretary of State for Social Security [2004] EWCA Civ 1749, [2005] EuLR 385 in which it was held that the denial of child supplements to a fathers jobseekers allowance where he and the mother shared roughly equal care of the children was unjustified indirect discrimination [12].
The case was brought under European Union anti discrimination law rather than the ECHR.
Following that decision HMRC conducted a review of the no splitting rule in CTC, the results of which helped persuade both the Upper Tribunal and the Court of Appeal that there were features of the instant case distinguishing it from Hockenjos.
The specific test under the ECHR for justifying discrimination in the context of state benefits is set out in Stec v United Kingdom (2006) 43 EHRR 1017, a decision of the Grand Chamber of the European Court of Human Rights [15].
The benefits in that case were for people who were required to stop work because of injury.
Entitlement reduced upon reaching retirement age which had a discriminatory effect on women who reached that age five years before men.
The Court repeated that A difference in 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 (para 51).
However, when it comes to general measures of economic and social strategy, a wide margin of appreciation is allowed to member states.
The Court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation [16].
Hence this particular measure was justified.
The test in Stec has been applied in other direct discrimination cases.
If it applies to direct discrimination cases, then it must also apply to indirect discrimination cases such as this.
In the context of state benefits, under the ECHR the normally strict test for justification of sex discrimination gives way to the manifestly without reasonable foundation test [19].
This does not mean however that the justifications put forward will escape careful scrutiny by the courts [22].
The Appellants main complaint is that the scheme leaves him with nothing to provide for the needs of his children when they stay with him [23].
Although the mother could choose to share the CTC, neither HMRC nor the courts can compel her to do so.
Against this, HMRC points out that the aim of the scheme is to reduce child poverty.
It is paid to the main carer on the expectation that that person incurs most of the expenditure in looking after the child [25].
Splitting the CTC between two carers of modest means could result in neither of them being able to provide for the childs needs [25].
Furthermore, splitting CTC on the basis of means would introduce administrative complexities and increase costs [25].
Finally, the Appellant is asking for an exception to be made to an otherwise justifiable rule.
It has been previously established that generally justifiable rules are not unreasonable or without foundation merely because they result in hardship in some cases [26].
The scheme in this case is geared towards reducing child poverty.
The current definitions of child poverty rely upon household income, which means that targets will be easier to meet if support is given to single households rather than split [28].
However, the state is entitled to conclude that children will in fact be better off if CTC is distributed in this way rather than divided between two households with modest means [29].
That method is also simpler and less expensive to administer, thereby maximising the funds available for distribution [29].
It was an integral part of the move to combine tax allowances and social security benefits into a seamless tax credit system [30].
It is also reasonable for the state to regard the way in which it delivers support for children and families as a separate issue from the way in which children spend their time [31].
It is perhaps unfortunate that the courts making orders about where children are to live no longer have the power to make consequential orders about benefit sharing, where appropriate [32].
However, the no splitting rule is a reasonable rule for the state to adopt and the indirect discrimination in this case is justified [33].
|
The Sea Fish Industry Authority (the Authority) is established under the Fisheries Act 1981 with powers granted for the purpose of promoting the efficiency of the sea fish industry and so as to serve the interests of that industry as a whole (section 2(1)).
For the purpose of financing its activities, the Authority may, by regulations confirmed by ministerial order, impose a levy on persons engaged in the sea fish industry (section 4(1) and (2)).
The issues on this appeal are, firstly, whether this power extends to imposing a levy in respect of sea fish or parts of sea fish first brought to land (by the catching or another vessel) outside the United Kingdom and only later imported into the United Kingdom (in the same form or in the form of some other fish product); and, secondly, if it does, whether the imposition of any such levy was and is a charge equivalent to a customs duty, contrary to articles 28 and 30 of the Treaty on the Functioning of the European Union (TFEU), in so far as it applies to imports from other EU member states.
The respondents are importers who have brought these proceedings to challenge the validity of levies made on them in respect of imports.
The appellants are the Department for Environment, Food and Rural Affairs, and the Authority, having been a defendant in the proceedings, now appears as intervener.
The respondents challenge failed before Hamblen J [2009] EWHC 1721 (QB), but succeeded in the Court of Appeal [2010] EWCA Civ 263, [2010] 1 WLR 2117.
Before the Supreme Court, they suggest that the second issue should also cover imports from non EU states and that consideration be given to a further issue under article 110, if articles 28 and 30 do not apply.
I will return to these suggestions later in this judgment.
Section 14(2) defines the sea fish industry and persons engaged in it: the sea fish industry means the sea fish industry in the United Kingdom and a person shall be regarded as engaged in the sea fish
industry
(a) he carries on the business of operating vessels for catching or processing sea fish or for transporting sea fish or sea fish products, being vessels registered in the United Kingdom; or (b) he carries on in the United Kingdom the business of breeding, rearing or cultivating sea fish for human consumption, of selling sea fish or sea fish products by wholesale or retail, of buying sea fish or sea fish products by wholesale, of importing sea fish or sea fish products or of processing sea fish (including the business of a fish fryer).
Section 4(3) to (5) state the bases upon which a levy may be imposed: (3) Regulations under this section may impose a levy either (a) in respect of the weight of sea fish or sea fish products landed in the United Kingdom or trans shipped within British fishery limits at a prescribed rate which, in the case of sea fish, shall not exceed 2p per kilogram; or (b) in respect of the value, ascertained in the prescribed manner, of sea fish or sea fish products landed or trans shipped as aforesaid at a prescribed rate not exceeding 1 per cent of that value. (4) If regulations under this section impose a levy as provided in subsection (3)(a) above the prescribed rate in relation to any sea fish product shall be such that its yield will not in the opinion of the Authority exceed the yield from a levy at the rate of 2p per kilogram on the sea fish required on average (whether alone or together with any other substance or article) to produce a kilogram of that product. (5) Different rates may be prescribed for sea fish or sea fish products of different descriptions; . (8) For the purposes of this section (a) parts of a sea fish shall be treated as sea fish products and not as sea fish; (b) references to the landing of fish include references to the collection for consumption of sea fish which have been bred, reared or cultivated in the course of fish farming whether in the sea or otherwise and references to the landing of fish or fish products include references to bringing them through the tunnel system as defined in the Channel Tunnel Act 1987.
The second part of section 4(8), referring to the landing of fish or fish products through the Channel Tunnel, was inserted by the Channel Tunnel (Amendment of the Fisheries Act 1981) Order 1994 (SI 1994/1390).
Section 2(2A) was inserted by the Fisheries Act 1981 (Amendment) Regulations 1989 (SI 1989/1190) to cater for a concern raised by the European Commission that the effect of the levy might be unduly to burden the sea fish industries of other EU states to the benefit of the United Kingdoms sea fish industry: (2A) If any levy imposed under section 4 below has effect in relation to sea fish or sea fish products from the sea fish industries of member States other than the United Kingdom, the Authority shall so exercise its powers under this Part of this Act as to secure that benefits are conferred on those industries commensurate with any burden directly or indirectly borne by them in consequence of the levy.
The regulations made by the Authority are currently the Sea Fish Industry Authority (Levy) Regulations 1995 ("the 1995 Regulations"), as contained in the Schedule to the Sea Fish Industry Authority (Levy) Regulations 1995 Confirmatory Order 1996 (SI 1996/160).
They cover imports expressly: 2.
Interpretation In these Regulations, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them . firsthand sale means (a) in relation to any sea fish or sea fish product which has been first landed in the United Kingdom the first sale thereof (other than a sale by retail) whether prior to or after landing in the United Kingdom; (b) in relation to any sea fish or sea fish product which has been first landed outside the United Kingdom and any sea fish product manufactured outside the United Kingdom from such sea fish or sea fish product which in either case is purchased by a person carrying on business in the sea fish industry and is imported or brought into the United Kingdom for the purposes of any such business, the first sale thereof (whether in the United Kingdom or elsewhere) to such a person as aforesaid; (c) in relation to any sea fish or sea fish product which is trans shipped within British fishery limits, the first sale thereof;. sale by retail means a sale to a person buying otherwise than for the purpose of resale or processing or use as bait, and includes a sale to a person for the purposes of a catering business (other than a fish frying business); and sell by retail has a corresponding meaning; 4.
Imposition of levy (1) There shall be paid to the Authority subject to and in accordance with the provisions of these Regulations by every person engaged in the sea fish industry who (a) purchases any sea fish or any sea fish product on a firsthand sale; or (b) trans ships within British fishery limits any sea fish or any sea fish product by way of firsthand sale; or (c) lands any sea fish or sea fish product in the United Kingdom for subsequent sale other than in the United Kingdom; a levy (hereinafter referred to as the levy) at the rate per kilogram set out in the second column of the Schedule hereto in respect of any sea fish or sea fish product specified opposite thereto in the first column of the said Schedule so purchased or trans shipped or landed by him. (6) Where the levy becomes payable in respect of any sea fish it shall not be payable in respect of the products of such sea fish. 5.
Time Limits for Payment (1) Levy payable by a person who purchases any sea fish or sea fish product on a firsthand sale shall be paid to the Authority within seven days after the end of (a) the week during which there took place the firsthand sale of the fish or fish product in respect of which the levy is payable; or (b) the week during which such fish or fish product was imported or brought into the country; whichever is the later.
The Schedule to the Regulations contains rates of levy for sea fish and sea fish products.
There are ten different categories of sea fish products, starting with fresh, frozen or chilled sea fish, under which different rates are set out for gutted, headless and gutted, fillets, skin on and fillets, skinless.
Consistently with section 4(8) of the Act, parts of a sea fish are treated as sea fish products.
Other categories include smoked sea fish, again with different rates for headless and gutted, fillets, skin on and fillets, skinless, salted and cured sea fish, with different rates for wet and dried, sea fish products sold for fishmeal, sea fishmeal, any sea fish product not referred to above and any pelagic fish product not referred to above, each with a different rate.
The different rates reflect the usable fish content in the various sub categories.
The meaning of landed
The first issue is whether the statutory power enables a levy in respect of sea fish or parts of sea fish first brought to land (by the catching or another vessel) outside the United Kingdom and only later imported into the United Kingdom (in the same form or in the form of some other fish product).
The issue has, strictly, to be formulated in these terms, because fish first landed in the United Kingdom from a vessel not registered in the United Kingdom are under European Union law to be regarded as imported.
There is a choice between a wider and a narrower sense of the word landed in section 4(3).
The former would cover any form of bringing into the United Kingdom, commonly by sea or air, wherever the sea fish or fish product may have been first landed after catch.
The latter would cover only their first landing after catch.
Hamblen J acknowledged that the narrower meaning was, in many contexts, likely to have been intended, but considered that, in the specific context of the 1981 Act, the wider meaning applied.
Richards LJ, giving the only full judgment in the Court of Appeal started with the provisional view that the normal meaning did not cover the arrival of fish or fish product on a ferry or aircraft from another country, and that it would be highly artificial to extend it to their importation by road or rail as might occur between Eire and Northern Ireland.
He looked at the factors on which the judge had relied, and found none of them sufficient to displace that view.
In matters of statutory construction, the statutory purpose and the general scheme by which it is to be put into effect are of central importance.
They represent the context in which individual words are to be understood.
In this area as in the area of contractual construction, the notion of words having a natural meaning is not always very helpful (Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 391C, per Lord Hoffmann), and certainly not as a starting point, before identifying the legislative purpose and scheme.
In the case of a statute which has, like the 1981 Act, been the subject of amendment it is not lightly to be concluded that Parliament, when making the amendment, misunderstood the general scheme of the original legislation, with the effect of creating a palpable anomaly (see eg the principle that provisions in a later Act in pari materia with an earlier may be used to aid the construction of the former, discussed in Bennion on Statutory Interpretation, 5th ed (2008), section 234).
The purpose and scheme of the 1981 Act are identified in sections 2(1) and 14(2).
The Authority is set up and given powers to promote the efficiency of the sea fish industry, and this is defined specifically to include importers of sea fish or sea fish products.
The purpose and scheme are expressed in terms extending to importers generally.
Yet the narrower sense of the word landed would mean that very few of such importers actually contributed to the levy.
Some of such importers would be the operators of foreign fishing vessels who first landed their fish in the United Kingdom, but the specific reference to importers in section 14(2) would be unnecessary to catch their fish, since (accepting that they would not themselves be likely to be carrying on business in the United Kingdom) those who purchased their fish would be covered by the reference in section 14(2) to buying by wholesale or selling by retail.
Section 2(2A) is clearly intended to address a concern that the burden of the levy would fall on those engaged in the sea fish industries of other EU member states, while the benefits would accrue disproportionately to those engaged in the United Kingdoms sea fish industry.
Such a situation would have involved an obvious risk of infringement of European Union law, in the form currently of TFEU article 110, considered below (see Case 73/79, Commission v Italy [1980] ECR 1533) that is the point that the European Commission had been making to the United Kingdom government (para 6 above).
Section 2(2A) is in terms which suggest a general concern, whereas the narrower sense would eliminate any impact on the sea fish industries of other member states, with the exception of the catching sector.
The predecessor schemes to that introduced by the 1981 Act had all involved levies imposed on imports.
In particular, under the Sea Fish Industry Act 1970, the White Fish Authority was given power to impose a general levy on persons engaged in the white fish industry in respect of white fish and white fish products landed in the United Kingdom (section 17(1)(a)) and references to persons so engaged were to be construed as including references to persons carrying on in Great Britain the business of buying the products of white fish by wholesale or of importing white fish or their products (section 17(8)).
The Authority had the general function of reorganising, developing and regulating the white fish industry in Great Britain, having regard to the interest of consumers in a plentiful supply of white fish at reasonable prices, as well as to the interests of the different sections of the white fish industry (section 1(1), 4(1) and 27(1)), and persons engaged and vessels used in the industry were required to be registered (sections 8 and 9).
For these purposes, a person was without prejudice to section 17(8) . deemed to engage in the white fish industry if he carries on the business of operating vessels to which this Part of the Act applies for catching or processing white fish or for transporting white fish or the products of white fish, or if he carries on in Great Britain the business of selling white fish by wholesale or by retail or of processing white fish (including the business of a fish fryer) (section 27(1)).
The conjunction of section 17(1)(a) and section 17(8), which Richards LJ did not mention, makes it impossible to suggest that the 1970 Act did not authorise levies on imports.
While the present Authority has no regulatory function, no reason has been suggested for any change of policy under the 1981 Act as regards the ambit of its promotional role or the source of its funding, so as largely to exclude fish importations and importers.
It is true that, in the 1981 Act, the reference to persons carrying on in the United Kingdom the business of importing sea fish or sea fish products appears in the interpretation section 14(2) at the end of Part I, rather than in section 2(1) identifying the Authoritys duties or section 4 providing for levies.
But that drafting change is of no significance.
The interpretation section defines the meanings of the sea fish industry to which the duties imposed by section 2(1) refer and of persons engaged in the sea fish industry on whom levies may be imposed under section 4(1) and (2).
It would be particularly surprising therefore if the word landed, introduced in section 4(3) as the basis on which levies may be imposed, had the effect that they could not be imposed at all on a large number of imports.
Taking landed in its narrower sense, the reference to sea fish products landed in the United Kingdom in section 4(3)(a) could in fact only apply to the sea fish parts which result from the de heading, gutting and filleting which occurs on board catching or mother vessels and which are by section 4(8) to be treated as sea fish products, rather than as sea fish.
Yet section 4(8) is not framed as an exclusive definition, and section 4(4) confirms that the concept of sea fish products is intended to operate more widely.
It refers expressly to sea fish products resulting from the addition of other substances or articles to, or their admixture with, fish parts.
Section 4(8), providing that landing includes bringing through the Channel Tunnel, is also significant.
Richards LJ accepted that, if the narrower sense of landed otherwise applied, the specific provision relating to the Channel Tunnel was a striking anomaly.
However, he thought it no more than that, saying that it could not have been intended to have any wider effect on the pre existing statutory language, that, if the wider meaning otherwise applied, then it was not necessary at all and that, if the wider meaning had been otherwise intended, the natural place to make this clear was section 4(8).
To my mind these are unconvincing responses to the discriminatory and on its face irrational distinction, between cross Channel imports by ferry or air and by the Tunnel, that results from the narrower sense of the word landed.
First, it is clear that section 4(8) in its original form was introduced with a clarificatory intent, to put beyond doubt, rather than because it was actually necessary.
The collection and bringing to shore of fish from a fish farm is an activity which one would have thought was anyway embraced within the narrow sense of the word landed.
But I can understand the draftsman making this clear, while at the same time assuming that there was no doubt about importations by cross Channel ferry or aircraft constituting landing in the United Kingdom.
Secondly, the Channel Tunnel was in 1994 the first land link to the rest of the Continent.
One can understand that those responsible for introducing legislation necessary to cater for this new phenomenon might wonder whether goods that remained on (or under) land throughout a Channel crossing could be regarded as landed, and might decide to put that beyond doubt.
It is inconceivable that they intended or thought to introduce a striking anomaly or to ensure anything other than a coherent scheme.
It is not surprising that they did not cater expressly for cross Channel importations by ferry or air: their remit was no doubt to cater for the Channel Tunnel and their starting point must have been that such importations were already embraced by the word landed.
As to the possibility of land importations of fish or fish products across the border from Eire to Northern Ireland, if the original draftsman of the 1981 Act intended the wider sense of landed and directed his or her mind to that possibility at all, he or she must have assumed that the wider meaning of landed would cover it.
It is again understandable if those concerned with ensuring that the Channel Tunnel was covered by appropriate legislation did not direct their minds to that specific border.
Most of these points were covered in the judges very clear judgment.
The Court of Appeals approach does not in my view give due weight to the legislative purpose and scheme as a whole, having particular regard to the definition of persons engaged in the sea fish industry which relates to the Authoritys duties and powers, including its power to levy.
Viewed in this context, the word landed, used as a measure of the levies which can be applied, is capable of covering and, to make sense of the legislative purpose and scheme, should be read as covering all sorts of arrival of sea fish and sea fish products in the United Kingdom.
The striking anomaly which would otherwise result from the provision catering for the Channel Tunnel is further confirmation of this conclusion.
It is in the circumstances unnecessary to address the detailed submissions made by the parties on the admissibility of various exchanges which took place in Parliament during the passage of the 1981 Act as reported in Hansard.
A primary issue here was, assuming the relevant provisions to be at least ambiguous, whether and how far it is legitimate to apply the rule in Pepper v Hart [1993] AC 593 to give rise to an expanded power to impose a levy, rather than to narrow executive power.
It is not necessary or appropriate to go further into that issue in this case.
The wider view of the word landed is, I consider, plainly correct.
Suffice it to say, that, had it been appropriate to have regard to Hansard, the ministerial statements in response to specific questions in the course of the Bills passage through Parliament would in my view have confirmed very clearly that it was intended, by section 14(2), to maintain the pre existing levying power in relation to imports generally.
The Court of Appeals conclusions on European Union law led it to add that a narrow interpretation of the word landed was in any event required to avoid incompatibility with European Union law: Case 106/89 Marleasing SA v La Comercial Internacional de Alimentacin SA [1991] ECR I 4135.
For reasons which will appear in the next section of this judgment, I do not agree with the Court of Appeals conclusion on European Union law.
But, even if I had done, I would not have considered them to require a narrow interpretation of landed.
The wider meaning would have been compatible with the making of regulations which complied with European Union law.
The incompatibility would have affected the validity of the present regulations, not the interpretation of the 1981 Act.
A charge having equivalent effect to customs duty (CEE)?
(a) The law
The second issue which arises in the light of my conclusion on the first issue is whether the levy constitutes a charge having equivalent effect to customs duty (a CEE) in respect of imports of sea fish or sea fish products from other member states of the European Union, contrary to TFEU articles 28 and 30.
If it is a CEE, then it is in relation to such imports void.
If it is not, it may fall to be considered as an internal tax or due within article 110, in which case it will be valid except to the extent that it may be held to be discriminatory in relation to imports from other member states.
The articles to which I have referred provide as follows: PART 3 UNION POLICIES AND INTERNAL ACTIONS TITLE II FREE MOVEMENT OF GOODS Article 28 The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
CHAPTER 1 THE CUSTOMS UNION Article 30 Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States.
This prohibition shall also apply to customs duties of a fiscal nature.
TITLE VII COMMON RULES ON COMPETITION.
TAXATION AND APPROXIMATION OF LAWS Article 110 No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
The distinction between a CEE within articles 28 and 30 and a tax within article 110 is clear cut in principle.
The two are alternatives, and a levy must fall into one category or the other.
It cannot fall into both.
But it is not always easy in practice to decide into which category a levy does fall.
The distinction, though clear cut, can be very fine.
So Advocate General Jacobs observed in Case C 90/94 Haahr Petroleum Ltd v benr Havn [1997] ECR I 4085, para 38 and again in Case C 213/96 Proceedings brought by Outokumpu Oy [1998] ECR I 1777, para 15.
The underlying objective is the same, to avoid discrimination against goods from other member states, and overlapping considerations apply in relation to each.
However, it is clear that a charge may be within the scope of and in breach of article 110 without this meaning that it is or becomes a CEE prohibited under articles 28 and 30: see eg Case 32/80 Officier van Justitie v Kortmann [1981] ECR 251, para 18 (which reads more intelligibly in the French), Haahr, paras 25 44 and Joined Cases C 78/90 to C 83/90 Compagnie commerciale de lOuest v Receveur principal des douanes de La Pallice Port [1992] ECR I 1847, discussed below.
There are thus different stages at which a question of prohibited discrimination may arise; one is where a charge constitutes a CEE, the other is where it does not constitute a CEE but is part of a general system of internal dues organised in a manner which discriminates against products originating in another member state.
The principal feature of a CEE is that it is levied solely or exclusively by reason of goods crossing the frontier, whereas domestic products are excluded from similar charge.
Internal taxation within article 110 falls in contrast on both imported and domestic products: Case 78/76 Firma Steinike und Weinlig v Germany [1977] ECR 595, paras 28 29, Case 32/80 Officier van Justitie v Kortmann [1981] ECR 251, para 18 and Outokumpu, para 27.
However, a charge may be regarded as levied solely or exclusively by reason of its crossing the frontier, although it is applied at a later stage, such as marketing or processing of the product: Steinike, para 29.
The Court amplified the distinction as follows in Steinike:
. the prohibition [of a CEE] is aimed at any tax demanded at the time of or by reason of importation and which, being imposed specifically on an imported product to the exclusion of a similar domestic product, results in the same restrictive consequences on the free movement of goods as a customs duty by altering the cost price of that product.
The essential characteristic of a charge having an effect equivalent to a customs duty, which distinguishes it from internal taxation, is that the first is imposed exclusively on the imported product whilst the second is imposed on both imported and domestic products.
A charge affecting both imported products and similar products could however constitute a charge having an effect equivalent to a customs duty if such a duty, which is limited to particular products, had the sole purpose of financing activities for the specific advantage of the taxed domestic products, so as to make good, wholly or in part, the fiscal charge imposed upon them. 28.
The last sentence (not directly relevant on the present appeal and deriving originally from Case 77/72 Capolongo v Maya [1973] ECR 611) needs to be read with the fuller explanation or qualification given in the later Joined Cases C 78/90 to C 83/90 Compagnie commerciale de lOuest v Receveur principal des douanes de La Pallice Port [1992] ECR I 1847: 26 Where a charge is imposed on domestic and imported products according to the same criteria, the Court has nevertheless stated that it may be necessary to take into account the purpose to which the revenue from the charge is put.
Thus, if the revenue from such a charge is intended to finance activities for the special advantage of the taxed domestic product, it may follow that the charge imposed on the basis of the same criteria nevertheless constitutes discriminatory taxation in so far as the fiscal burden on the domestic products is neutralized by the advantages which the charge is used to finance whilst the charge on the imported product constitutes a net burden (judgment in Case 73/79 Commission v Italy [1980] ECR 1533, para 15). 27 It follows from the foregoing considerations that if the advantages stemming from the use of the proceeds of the charge in question fully offset the burden borne by the domestic product when it is placed on the market, that charge constitutes a charge having an effect equivalent to customs duties, contrary to article 12 [now 30] et seq of the Treaty.
If, on the other hand, those advantages only partly offset the burden borne by domestic products, the charge in question is subject to article 95 [now 110] of the Treaty.
In the latter case, the charge would be incompatible with article 95 [110] of the Treaty and is therefore prohibited to the extent to which it discriminates against imported products, that is to say to the extent to which it partially offsets the burden borne by the taxed domestic product.
This explanation helps to point the differing spheres of operation of a CEE prohibited under articles 28 and 30 and an internal, but none the less discriminatory, tax falling within article 110.
In the present case, the respondents did in their pre trial skeleton argument seek to raise a case that the levy amounted to a CEE because its benefits went exclusively to domestic sea fish and products, or alternatively that it infringed article 110 because the latter derived proportionately greater benefit than imported sea fish and products.
This case raised factual issues which the judge ruled could not be dealt with at the trial.
However, by post trial order dated 24 July 2009, I understand that he ultimately permitted them to be raised by amendment as a separate issue for subsequent trial.
A charge levied by reason of goods crossing a frontier will not be regarded as a CEE if it forms part of a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products.
This or a close approximation is the formulation used in a large number of authorities from Case C 90/79 Commission v France [1981] ECR 283 to Case C 314/82 Commission v Belgium [1984] ECR 1543, paras 11, 13 and 19, Case C 90/94 Haahr Petroleum Ltd v benr Havn, above, para 20, Case C 213/96 Outokumpu, above, para 20, Case C 234/99 Nygrd v Svineafgiftsfonden [2002] ECR I 3657, para 29 and Case C 387/01 Weigel v Finanzlandesdirektion fr Vorarlberg [2004] ECR I 4951, para 64.
Another way of analysing the position may be that, if a charge forms part of a general system of internal dues meeting these conditions, then it is not imposed solely by reason of the goods crossing the frontier.
If a charge forms part of such a general system of internal dues, any suggestion of discrimination will fall to be considered under article 110.
The Court said in Steinike, para 30, that: The objective of article 95 [now 110] is to abolish direct or indirect discrimination against imported products but not to place them in a privileged tax position in relation to domestic products.
There is generally no discrimination such as is prohibited by article 95 [110] where internal taxation applies to domestic products and to previously imported products on their being processed into more elaborate products without any distinctions of rate, basis of assessment or detailed rules for the levying thereof being made between them by reason of their origin.
As an example, in Haahr a 40% import surcharge imposed on goods imported into Denmark by ship from other member states was held not to be a CEE.
Rather it was (as a surcharge) an integral part of a general system of internal dues for the use of commercial ports and their facilities imposed on goods, both domestic and imported, at the same time and in accordance with the same objective criteria, namely when they are taken on board or put ashore and according to the type of goods and their weight (paras 21 24); and, as a result: the fact that the import surcharge is payable ex hypothesi solely on imported goods and that the origin of the goods determines the amount of the duty to be levied cannot remove the tax in general or the surcharge in particular from the scope of article 95 [now 110] of the Treaty; accordingly, their compatibility with Community law must be assessed in the light of that provision and not articles 9 to 13 [now 28 to 31] of the Treaty The Court went on (in para 27) to refer to the issue of discrimination that can arise under article 110, saying: It is . beyond question that application of a higher charge to imported products than to domestic products or application to imported products alone of a surcharge in addition to the duty payable on domestic and imported products is contrary to the prohibition of discrimination laid down in article 95 [now 110].
The respondents rely upon statements from another case, important in the development of the case law under what are now articles 28 and 30 and pre dating those cited in paragraph 29 above: Case 132/78 Denkavit Loire Srl v France [1979] ECR 1923.
The Court there explained the criteria identifying a CEE, and distinguished a CEE from an internal tax within article 110, using somewhat different wording.
The respondents suggest that this wording establishes a need for identical treatment of imported and other goods in every relevant respect, before a levy will avoid being categorised as a CEE.
In particular, the Court in Denkavit referred to systematic application in accordance with the same criteria to domestic products and imported products alike (para 7) and continued (para 8): It is however appropriate to emphasise that in order to relate to a general system of internal dues, the charge to which an imported product is subject must impose the same duty on national products and identical imported products at the same marketing stage and that the chargeable event giving rise to the duty must also be identical in the case of both products.
It is therefore not sufficient that the objective of the charge imposed on imported products is to compensate for a charge imposed on similar domestic products or which has been imposed on those products or a product from which they are derived at a production or marketing stage prior to that at which the imported products are taxed.
To exempt a charge levied at the frontier from the classification of a charge having equivalent effect when it is not imposed on similar national products or is imposed on them at different marketing stages or, again, on the basis of a different chargeable event giving rise to duty, because that charge aims to compensate for a domestic fiscal charge applying to the same products apart from the fact that this would not take into account fiscal charges which had been imposed on imported products in the originating Member State would make the prohibition on charges having an effect equivalent to customs duties empty and meaningless.
The requirements set out in the first sentence of para 8 in Denkavit have themselves been echoed in a number of cases, including Joined Cases C 149/91 and C 150/91 Sanders Adour Snc v Directeur des Services Fiscaux des Pyrnes Atlantiques [1992] ECR I 3899 at para 17, Outokumpu at para 24, Joined Cases C 441/98 and C 442/98 Kapniki Mikhailidis AE v Idryma Kinonikon Asphaliseon [2000] ECR I 7145 and Nygrd at para 20.
The same requirements have however been given a generous interpretation.
In Sanders the Court said (para 18): As to the requirement that the chargeable events be identical, no difference may be discerned in the present case in the fact that the charge is levied on an imported product at the time of importation and on the domestic product when it is sold or used, for in actual economic terms the marketing stage is the same since both operations are carried out with a view to utilisation of the product.
In Outokumpu the Court treated a duty on electricity as forming part of a general system of taxation (and so within article 110, rather than the equivalents of articles 28 and 30) although it was levied not only on electrical energy as such but also on several primary energy sources such as coal products, peat, natural gas and pine oil (para 21).
The duty was levied on these primary sources, on electricity produced from other sources domestically and on imported electricity, and the Court, citing Sanders, para 18, said at para 25 that: . in circumstances such as those of this case, no difference may be discerned in the fact that imported electricity is taxed at the time of importation and electricity of domestic origin at the time of production, since in view of the characteristics of electricity the marketing stage is the same for both operations, namely the stage when the electricity enters the national distribution network .
In the same case, at para 30, Advocate General Francis Jacobs QC noted that in previous decisions the Court had accepted that a tax on the wort used in making beer domestically and a tax on imported beer adjusted to take account of the notional amount of wort used in its overseas production fell within article 110, rather than the equivalents of articles 28 and 30: Case 152/89 Commission v Luxembourg [1991] ECR I 3141 and Case 153/89 Commission v Belgium [1991] ECR I 3171.
In Nygrd the Court held that a levy on pigs sent for slaughter on the domestic market and exported live to other member states satisfied similarly stated requirements.
Citing Sanders, para 18, and Outokumpu, para 25, it said that: 29. the event giving rise to the levy here in issue in the main proceedings must be considered to be the withdrawal of the pigs from the national herd, regardless of whether that levy is charged on pigs intended for slaughter in Denmark or for live export.
In both cases, therefore, the fiscal obligation arises when the animals leave the primary national production. 30 In those circumstances, no difference may be discerned in the fact that pigs exported live are taxed at the time of exportation, whereas pigs intended for slaughter on the national market are taxed at the time of supply for purposes of slaughter, as in real economic terms those two moments correspond to the same marketing stage, both operations being carried out with a view to releasing the pigs from national primary production .
The approach in these cases is consistent with that taken in the earlier case of Case 90/79 Commission v France [1981] ECR 283, where the Court addressed the situation of a French levy on sales and appropriations for own use, other than for export, of reprographic machines, in circumstances where 99% of such machines were imported.
The Court said (para 14) that: . even a charge which is borne by a product imported from another Member State, when there is no identical or similar domestic product, does not constitute a charge having equivalent effect but internal taxation within the meaning of article 95 of the Treaty if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products.
It went on to treat the levy as internal taxation because its purpose was to redress the inequity resulting from the copying of published material, which would, if sold and bought in published form, have attracted a levy, and because it could be regarded as part of the same internal system of taxation as that levy: 16 The Court is of the opinion that the particular features of the levy in issue lead to its being accepted as forming part of such a general system of internal dues.
That follows first from its inclusion in taxation arrangements which have their origin in the breach made in legal systems for the protection of copyright by the increase in the use of reprography and which are designed to subject, if only indirectly, the users of those processes to a charge which compensates for that which they would normally have to bear. 17 That conclusion follows in the second place from the fact that the levy in issue forms a single entity with the levy imposed on book publishers by the same internal legislation and from the fact, too, that it is borne by a range of very different machines which are moreover classified under various customs headings but which have in common the fact that they are all intended to be used for reprographic purposes in addition to more specific uses.
(b) Application of the law to this case
Applying the guidance given in these authorities to the present case, the first question is whether the regulations impose any levy on sea fish and sea fish products by reason of their crossing a frontier within the European Union.
In Weigel the Court held that a tax imposed on the registration of second hand vehicles, as well as vehicles sold and hired out for the first time for use on the road, was not, in the case of an imported second hand car, imposed by reason of its import, but by reason of the need to register it.
In the present case, however, the levy is expressly authorised to be imposed on importers in respect of sea fish and sea fish products landed (accepting, as I do, the wider sense) from other member states, after first landing outside the United Kingdom.
The consideration that, under regulation 5, a firsthand sale is also required as the trigger for a chargeable event does not alter the fact that the levy is imposed by reason of the import: see Steinike, para 29, cited above.
That does not conclude the matter, or mean that the levy is imposed solely or exclusively by reason of the import, in particular if the levy forms part of a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products, or, to the extent that this differs, meets the generously interpreted requirements that it impose[s] the same duty on national products and identical imported products at the same marketing stage and that the chargeable event giving rise to the duty must also be identical in the case of both products: see paras 30 to 39 above.
On this, Richards LJ said: 55.
In purely formal terms the 1995 Regulations appear to meet those requirements.
They lay down a uniform system that draws no distinction between domestic and imported products as regards rates of levy, production or marketing stage or chargeable event.
The authorities make clear, however, that one must look beyond form and examine contents and effects.
It is here that, in my judgment, the scheme runs into difficulties in relation to sea fish products that have been processed on land.
By virtue of regulation 4(1)(a), a levy is payable by a person who purchases a sea fish product on a firsthand sale.
That takes one to the definition of firsthand sale in regulation 2.
Imported products are covered by paragraph (b) of that definition, the application of which will in practice generally produce a liability to levy, since there will be both an importation and a first sale of the products to a relevant person.
Domestic products are covered by paragraph (a) of the definition, but the application of that paragraph will in practice produce no liability to levy.
That is because liability arises only in relation to sea fish products which have been "first landed" in the United Kingdom; but products resulting from processing on land are in no sense "landed", let alone "first landed", in the United Kingdom.
The sea fish or sea fish product ingredients from which they are produced may have been first landed in the United Kingdom, but the resulting products are not. 56.
In practice, therefore, the 1995 Regulations involve a material difference of treatment between domestic and imported products.
This reasoning compares the levy payable on fish products imported into and bought by an importer, wholesaler or retailer carrying on business in the United Kingdom with the levy which it is assumed is not payable in respect of sea fish products which are both manufactured and sold in the United Kingdom.
However, sea fish products which are imported into and sold in the United Kingdom will be subject, in accordance with section 4(4) of the Act and the regulations, to a levy which will reflect their sea fish content.
If sea fish products are manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have themselves been the subject of a firsthand sale (or either of the other two levy triggering events identified in regulation 4(1)), the sea fish content of the subsequently manufactured sea fish products will have borne the levy, as a result of its imposition on the sea fish or sea fish products used in their manufacture.
Regulation 4(6) confirms that the manufactured sea fish products cannot themselves attract the levy on any sale.
But the reverse implication from regulation 4(6) is that, if sea fish products are manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have not themselves been the subject of a firsthand sale (or either of the other two levy triggering events identified in regulation 4(1)), then the subsequently manufactured sea fish products will bear the levy according to their sea fish content.
The manufactured sea fish products must in this connection be equated with the sea fish or sea fish products from which they were manufactured.
The wording of the regulations is not perfect, but they must be read as intended to introduce a coherent scheme.
It cannot have been intended that sea fish products manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have not themselves been the subject of levy should escape the levy.
This conclusion could, if it were necessary, also be reinforced by the consideration that, if the regulations would otherwise involve what would be a CEE favouring certain domestic producers as opposed to importers (as the Court of Appeal thought), then this too cannot have been intended, and the regulations should not be interpreted in this sense: Case 106/89 Marleasing SA v La Comercial Internacional de Alimentacin SA [1991] 1 ECR 4135.
Even on such an analysis, it appears that Richards LJ may have considered that the levy would constitute a CEE since it would involve the imposition of charges at differing production or marketing stages, which is impermissible although their effect is to compensate or balance each other.
I say appears, because a later comment in para 60 of his judgment (to which I will revert) leaves room for doubt.
On the other hand, he was not impressed by submissions that the scheme involved different chargeable events or higher rates on imported than domestic products (para 62).
As to the imposition of the levy at differing production or marketing stages, Richards LJ relied upon Denkavit and Kapniki.
In Denkavit the impugned tax was payable on lard and other pig fat produced by rendering or solvent extracted.
The only relevant domestic charge was levied on slaughter.
The Court said that a charge was a CEE, when it is imposed on imported goods, even though no charge is imposed on similar domestic products or according to different criteria, in particular by reason of a different chargeable event.
In Kapniki a special contribution (to go towards pensions and compensation payable to tobacco workers) was charged on unprocessed tobacco exported from Greece.
A preliminary ruling was sought on the basis that no equivalent contribution was levied on either imports or domestic products distributed in the home market, and it was unclear that any other tax on tobacco existed in any form at the relevant times, apart from VAT and excise duties on the retail consumption of processed tobacco.
Not surprisingly, the Court expressed serious doubts as to whether the special contribution matched any comparable charge levied on domestic products at the same rate and marketing stage and on the basis of an identical chargeable event, while emphasising that it was for the national court alone to determine the exact effect of the national legislative provisions at issue (para 25).
In contrast to the position in these cases, the present scheme identifies, according to objective criteria, the time when sea fish or sea fish products can be said to enter the United Kingdom market on a commercial basis, following upon their production or importation and firsthand sale (in whichever order these events occur).
In effect, it is as the judge said (para 125) imposed when the sea fish is placed on the market and enters the supply chain.
As the judge went on to note: the rate of levy paid on processed and unprocessed fish is proportionately the same, since the rate of levy rises according to the proportion of inedible parts removed by processing, and (one can add) is adjusted to leave out of account any other substance or article added to or mixed with sea fish parts to make a sea fish product these being the requirements of section 4(4).
If a general system of taxation within article 110 covers a tax on wort used in domestic production and a tax on beer reflecting the wort assessed as to have been used in the overseas production of imported beer (see para 37 above), that points strongly to the present scheme falling within article 110, rather than involving any CEE.
If, as in Outokumpu (para 36 above), an internal system of taxation within article 110 may embrace not only electricity imported and electricity produced domestically, but also a levy not only on electrical energy as such but also on several primary energy sources such as coal products, peat, natural gas and pine oil (para 21), then such a system must be well capable of embracing the present scheme.
So too, if, as in Commission v France (para 39 above), a levy on the sale or appropriation for use (other than for export) constitutes part of such an internal system, and a fortiori when the Courts analysis was that the levy forms a single entity [forme un ensemble] with the levy imposed on book publishers.
Like both the judge (and in this respect it seems also the Court of Appeal: para 62), I am also unable to accept that the chargeable events under the present scheme operate upon materially different bases, where, as here, the difference is as to whether the levy attaches on import or sale, but in actual economic terms the marketing stage is the same since both operations are carried out with a view to utilisation of the product: see Sanders, para 18 (para 35 above).
Arguments that the judge wrongly took the actual levies on domestic and imported sea fish or sea fish products as equating with each other were barely if at all raised, and I reject them both on the ground of the judges contrary finding and in any event.
I also doubt if they have any relevance under articles 28 and 30, as opposed to article 110.
It follows that I have no doubt that the present carefully structured scheme falls to be regarded as a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products within the requirements of the case law set out in paras 26, 30 and 33 34 above.
It falls therefore within the scope of article 110, rather than constituting a CEE under articles 28 and 30.
It also appears from para 60 of Richards LJs judgment that the Court of Appeal might itself have reached this conclusion, but for its view that sea fish products manufactured in the United Kingdom where there had been no sale of (or therefore levy on) either the sea fish or the sea fish products from which they were manufactured, escape all levy.
I have already indicated my disagreement with that view (paras 43 44 above).
The respondents suggested that, unless the appeal was dismissed, there should, before its resolution, be a preliminary reference to the Court of Justice under TFEU article 267.
The Court of Justice has however established the principles in a large number of authorities, including those which I have examined, in a manner which enables its resolution.
As the Court has stressed, it is for national courts to apply such principles to particular facts even in cases as apparently unpromising from the national governments viewpoint as Kapniki (para 46 above).
The Court of Justices role is one of interpretation, the national courts one of application.
There is no need to refer any question of principle to the Court of Justice in order to resolve this appeal.
This is despite the Court of Appeals differing conclusion as to the outcome, which in any event appears, as I have said (paras 43 45 and 50 above), to have revolved substantially if not entirely around a point of construction of the domestic regulations.
Additional points
Before the Supreme Court, the respondents sought to raise two additional points.
The first is that the prohibition of any CEE applies not merely to imports from other member states of the European Union, but to imports from other states in particular where a common customs tariff applies in respect of those products and there is a Cooperation Agreement between the EU and the countries from which the products are imported.
This is a new point.
It is one which cannot arise in view of my conclusion that the levy does not impose a CEE within articles 28 and 30, and I need say no more than that.
But I would add that it would have involved enquiries, eg as to the existence and dates of entry into force of any relevant common customs tariffs and Cooperation Agreements (see eg Case C 126/94 Socit Cadi Surgels v Ministre des Finances [1996] ECR I 5647).
This would in my view have made it in any event inappropriate to entertain it for the first time on this appeal.
The second is that, if article 110 applies, then the levy imposed taxation in excess of that imposed on similar domestic products.
The respondents wish is, in other words, to argue a point along the lines contemplated in Steinike, para 30 (para 31 above) and in Haahr (para 32 above) to the effect that, although the levy was part of a general system of internal taxation, it involved distinctions of rate, basis of assessment or detailed rules for the levying thereof being made on imported sea fish or sea fish product by reason of their origin.
This is also a new point, not covered by the judgment below or, so far as one can judge, by the permission to amend given by the judge on 29 June 2009, and it is also not one which this Court should now entertain.
Conclusion
I would allow the appeal and make such orders as are appropriate to restore the judges judgment dismissing the respondents claim and allow the Authoritys counterclaim for levy and otherwise.
LORD PHILLIPS
I agree with the judgment of Lord Mance on each of the issues that arise on this appeal.
The first is one of statutory interpretation and I wish to add some comments on this, because there is one feature of this case which is unusual, and which should not pass unnoticed.
The issue of interpretation turns on the meaning to be attached to landed in the United Kingdom in section 4(3)(a) of the Fisheries Act 1981.
Does this mean brought ashore for the first time in the United Kingdom (the narrow meaning), or does its meaning extend to embrace bringing onto the territory of the United Kingdom, whether directly from the sea or indirectly after having been brought ashore in another country (the broad meaning)?
The unusual feature is that for nearly thirty years everyone concerned has proceeded on the basis that the phrase should be given the broad meaning.
Thus the levy has been imposed and paid not only on fish and fish products brought ashore for the first time in the United Kingdom, but fish and fish products imported into the United Kingdom from other countries.
The funds raised by the levy have been disbursed in payment for schemes intended to benefit the sea fish industry, which includes those whose business involves importing sea fish or sea fish products from other countries.
By the time that these proceedings were commenced some 75% of the levy income was derived from imports.
If the decision of the Court of Appeal is correct, the activities of the Authority must be drastically curtailed.
Indeed, I would expect that the impact of potential claims for reimbursement of monies wrongfully levied would render the Authority insolvent.
In circumstances such as these there must be, at the very least, a powerful presumption that the meaning that has customarily been given to the phrase in issue is the correct one.
Carnwath LJ expressed one reason for this in Isle of Anglesey County Council v Welsh Ministers [2009] EWCA Civ 94, [2010] QB 163: Where an Act has been interpreted in a particular way without dissent over a long period, those interested should be able to continue to order their affairs on that basis without the risk of being upset by a novel approach.
This has the air of pragmatism rather than principle, but courts are understandably reluctant to disturb a settled construction and the practice that has been based on that construction see Bennion on Statutory Interpretation, 5th ed (2008), section 288 at p 913 and the authorities there cited.
A more principled justification for the principle is that of contemporaneous exposition.
Thus in Clyde Navigation (Trustees of) v Laird & Sons (1883) 8 App Cas 658 the issue was whether the Clyde Navigation Consolidation Act 1858 required dues to be paid on logs which were chained together and floated down the River Clyde.
The evidence was that these dues had been levied and paid without protest for a quarter of a century.
Lord Blackburn commented at p 670 that this raised a strong prima facie ground for thinking that there must exist some legal ground for exacting the dues.
Lord Watson at p 673 did not, however, agree with this approach.
An important element in the construction of a provision in a statute is the context in which that provision was enacted.
It is plain that those affected by the statute when it comes into force are better placed to appreciate that context than those subject to it thirty years later.
The 1981 Act was introduced as a successor to legislation of similar character dating back to 1935.
I would not readily have been persuaded that those who, when the 1981 Act came into force, charged and paid levies on imports of fish and fish products had misunderstood the effect of the Act.
The Court of Appeal reached this conclusion, however, on the basis of a narrow textual analysis that was, in my view, flawed and which produced a number of anomalies.
The textual analysis was flawed because it was dictated by the concept of landing a fish, which does indeed naturally suggest the bringing of the fish ashore for the first time.
It did not, however, give proper weight to the fact that the landing referred to was not just of sea fish but of sea fish products.
While these included parts of sea fish it was not suggested, nor sensibly could it have been, that sea fish products were confined to parts of sea fish.
As soon as one applies the meaning of landed in the United Kingdom to products the natural conclusion is that these must include products produced from fish brought ashore in countries other than the United Kingdom, so that landed must bear the broader meaning.
The anomalies produced by giving landed the narrow meaning are two fold.
The first is that it produces a disparity between those who contribute to the levy and those who benefit from it.
Those who carry on the business of importing sea fish or sea fish products are included in those for whose benefit the funds raised by the levy are used (see sections 2(1) and 14 (2)), but do not have to contribute to it.
The second anomaly, recognised by Richards LJ, relates to the amendment made to section 4(8) by the Channel Tunnel (Amendment of the Fisheries Act 1981) Order 1994 (SI 1994/1390).
If landed means brought ashore for the first time it is a nonsense to extend its meaning to cover sea fish or fish products brought into the United Kingdom through the Channel Tunnel.
Hamblen J referred to the principle that the meaning and effect of an amended statute should generally be ascertained by an examination of the language of that statute as amended (Inco Europe Ltd v First Choice Distribution [1999] 1 WLR 270, 272 273).
I do not think that that is the correct approach in this case.
Had it been right to interpret landed as bearing the narrow meaning before this amendment was made, I do not consider that it would have been right to treat this amendment as altering the overall interpretation of the Act so as to give landed the broad meaning.
The amendment was peripheral to the Act as a whole and it would not have been right to allow the tail (the amendment) to wag the dog (the Act).
The significance of the amendment is that it reflects the accepted meaning given by everybody, including Parliament, to the meaning of landed.
It thus reinforces the principle that I have identified at paras 58 to 61 above.
The same point applies to the insertion of section 2(2A) by the Fisheries Act 1981 (Amendment) Regulations 1989.
It is for these reasons that I agree with the conclusions of Lord Mance in relation to the first issue.
I have nothing to add to his analysis in respect of the second issue.
Accordingly I would allow this appeal.
| UK-Abs | This appeal concerns the extent of the power of the Sea Fish Industry Authority to impose a levy on persons engaged in the sea fish industry and the compatibility with EU law of the levy imposed.
The Sea Fish Industry Authority (the Authority) is established under the Fisheries Act 1981 (the 1981 Act) for the purposes of promoting the efficiency and serving the interests of the sea fish industry.
Section 4(3) of the 1981 Act provides that regulations may be made imposing a levy on persons engaged in the sea fish industry in respect of the weight of sea fish or sea fish products landed in the United Kingdom.
The regulations which have been made in pursuance of this power are the Sea Fish Industry Authority (Levy) Regulations 1995 (the 1995 Regulations).
They expressly make a levy payable not only on sea fish and sea fish products first brought to shore in the United Kingdom, but also on imported sea fish and sea fish products.
Bloomsbury International Limited and the other Respondents are importers who brought these proceedings to challenge the validity of levies made on them in respect of imports.
The Department for the Environment, Food and Rural Affairs, and the Authority appeared in the proceedings to defend the validity of the levy.
The first basis of challenge was that the power to levy contained in the 1981 Act did not extend to imposing a levy in respect of sea fish or parts of sea fish first brought to shore outside the United Kingdom and only later imported into the United Kingdom.
The second basis of challenge was that even if the statutory power did extend so far, the imposition of such a levy was and is a charge equivalent to a customs duty and therefore contrary to Articles 28 and 30 of the Treaty on the Functioning of the European Union (TFEU).
Hamblen J dismissed the claim at first instance, rejecting both grounds of challenge.
An appeal against that decision was upheld by the Court of Appeal, which acceded to both grounds.
The Appellants then appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal, holding that the statutory power extends to imposing a levy in respect of imported sea fish or parts of sea fish and that such a levy is not a charge equivalent to a customs duty contrary to EU law.
Lord Mance gives the lead judgment and Lord Phillips gives an additional judgment on the first issue only.
The first issue was whether the statutory power permitted the imposition of a levy on imported sea fish and sea fish products.
Lord Mance noted that there is a choice between a wider and a narrower sense of the word landed in section 4(3) of the 1981 Act.
The wider sense would cover any form of bringing into the United Kingdom, commonly by sea or air, wherever the sea fish or sea fish product may have been first brought to shore after catch.
The narrower sense would cover only the first bringing to shore after catch.
In matters of statutory construction, the statutory purpose and the general scheme by which it is to be put into effect are of central importance.
They represent the context in which individual words are to be understood.
The Authority is set up by the 1981 Act to promote the efficiency of the sea fish industry, which is defined specifically to include importers.
Thus the purpose and scheme of the 1981 Act are expressed in terms extending to importers generally.
Yet the narrower sense of the word landed would mean that very few such importers actually contributed to the levy. [11] Further, the predecessor schemes to that introduced by the 1981 Act had all involved levies imposed on imports and no reason was suggested for any change of policy under the 1981 Act so as to exclude fish importations and importers.
In addition, section 4(8) of the 1981 Act expressly included within the meaning of landed the bringing of sea fish and sea fish products through the Channel Tunnel.
Although not expressly defined so as to include imports by ferry or air, it would be discriminatory and irrational for the 1981 Act to distinguish between that mode of importation and by Channel Tunnel. [13]; [16] Lord Phillips also remarked on the unusual feature in this case that for nearly thirty years everyone concerned has proceeded on the basis that the phrase should be given the wider meaning.
In those circumstances there must be, at the least, a powerful presumption that the meaning that has customarily been given to the phrase is the correct one. [58] As to the second issue, Articles 28 and 30 TFEU prohibit and render void charges having equivalent effect to a customs duty (CEEs).
The principal feature of a CEE is that it is levied solely or exclusively by reason of goods crossing a frontier within the European Union, whereas domestic products are excluded from a similar charge.
In respect of the levy in question, it is imposed by reason of the sea fish or sea fish product crossing a frontier in the European Union.
As to whether the levy is imposed solely or exclusively by reason of the crossing of the frontier, however, this will not be the case if the levy forms part of a general system of internal dues applied systematically to categories of products according to objective criteria and without regard to the origin of the products.
The levy does form part of such a system.
In particular, the Court of Appeal was wrong to suggest that sea fish products which are both manufactured and sold in the United Kingdom would escape the levy, in contrast to imported sea fish products: the levy would be payable on the fish content of the domestic products either when the constituent fish was first sold, or if there had been no prior sale, at the sale of the fish product.
Nor could it be said that the levy would constitute a CEE on the basis that it would involve the imposition of charges at differing production or marketing stages, which is impermissible.
The levy is consistently imposed at the point at which the sea fish is placed on the market and enters the supply chain. [40]; [43]; [47] For these reasons the appeal was allowed and Respondents challenge to the levy dismissed. [54]
|
These appeals require the Court to consider once again the impact of article 2 of the European Convention on Human Rights (the Convention) on the scope of an inquest.
They arise because of a change that the Grand Chamber of the Strasbourg Court has made as to the nature of the obligations imposed by article 2.
I shall start by describing briefly the nature of that change.
The Convention is a living instrument and over time the Strasbourg Court has extended the ambit of application of Convention rights in many areas.
Article 2 provides a good example of this tendency.
Article 2 provides that (1) Everyones right to life shall be protected by law.
No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law.
In McCann v United Kingdom (1995) 21 EHRR 97 the Strasbourg Court held that article 2 by implication gave rise not merely to a substantive obligation on the state not to kill people but, where there was an issue as to whether the state had broken this obligation, a procedural obligation on the state to carry out an effective official investigation into the circumstances of the deaths (the procedural obligation).
Romania acceded to the Convention on 20 June 1994.
In 1993 a pogrom had taken place in a Roma village, resulting in a number of deaths and widespread destruction of property.
The State, in the form of the local police, was alleged to have been implicated.
Investigations into the pogrom, and proceedings arising out of it commenced in 1993 but continued up to 2000.
In Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) 13 March 2001 the applicants sought to invoke the procedural obligation under article 2, and a parallel obligation arising under article 3, alleging various deficiencies in the investigations.
The Court held that the Convention only applied with respect to Romania after the date of its accession; it did not apply to Romania at the time of the pogrom.
Because the procedural obligation to conduct an effective investigation was derived from the killings and the destruction of property, whose compatibility with the Convention could not be examined by the Court, it followed that the complaint of breach of the procedural obligations was also incompatible ratione temporis with the provisions of the Convention and had to be rejected.
This reasoning was followed by the Court, when reaching similar decisions, in Voroshilov v Russia (Application No 21501/02) (unreported) 8 December 2005 and Kholodov and Kholodova v Russia (Application No 30651/05) (unreported) 14 September 2006.
The issue that the Strasbourg Court considered in these cases was echoed by an issue that arose in this jurisdiction in relation to the application of the Human Rights Act 1998 (HRA).
In a series of decisions the House of Lords had decided that no claim lay in respect of an alleged breach of the Convention if the facts giving rise to the alleged breach predated the entry into force of the HRA.
The issue then arose of whether the procedural obligation to investigate a death applied after the HRA had come into force in relation to a death that had occurred before the Act came into force.
In In re McKerr [2004] UKHL 12; [2004] 1 WLR 807 the House of Lords held that it did not.
Their reasoning also echoed that of the Strasbourg Court.
Because the death occurred before the HRA came into force it was not within the reach of the Act.
Because the obligation to hold an investigation was triggered by the death, that consequential obligation was not within the reach of the Act either.
This decision was applied by the House of Lords in R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189 and Jordan v Lord Chancellor [2007] UKHL 14; [2007] 2 AC 226.
In 2009 the Grand Chamber of the Strasbourg Court took a decision which departed from the reasoning in Moldovan, Voroshilov and Kholodov and further extended the effect of article 2.
In ilih v Slovenia (2009) 49 EHRR 996 the Court ruled that article 2 imposed, in certain circumstances, a freestanding obligation in relation to the investigation of a death which applied even where the death itself had occurred before the member state ratified the Convention.
The appellants contend that the decision in ilih has destroyed the basis of the decision of the House of Lords in McKerr.
Henceforth, if an inquest is held into a death that predated the coming into force of the HRA there is none the less an obligation under the HRA to ensure that it complies with the requirements of article 2.
As the HRA came into force on 2 October 2000 it might be thought that this issue is of no great moment.
Such a conclusion would be wrong.
These appeals relate to two of a significant number of deaths that occurred in Northern Ireland well before 2 October 2000 in respect of which inquests are still pending.
The facts
The appellants are the next of kin of Martin McCaughey and Dessie Grew who were shot and killed by members of the British Army on 9 October 1990.
Allegations have been made that they were victims of a shoot to kill policy.
I need not go into the reasons why it is that, despite the fact that they died so long ago, no inquest has yet been held into their deaths, for on these appeals no issue arises in respect of this delay.
A Coroner has been assigned to the case, and on 14 September 2009 he held a preliminary hearing.
At that hearing the appellants applied to the Coroner for a ruling that he would hold an inquest into the two deaths that complied with the requirements of article 2.
The Coroner declined to give such a ruling.
He indicated, however, that he intended to hold a vigorous, thorough and transparent inquest.
Following a further hearing, on 1 December 2009 the Coroner issued the following preliminary definition of the scope of the inquest that he proposed to hold: The Coroner will consider the four basic factual questions concerning: (a) the identity of the deceased; (b) the place of death; (c) the time of death; and (d) how the deceased came by their deaths.
Further, related to the how question, the Coroner will examine in evidence the surveillance operation that culminated in the deaths with reference in particular to the following: (i) the purpose of the operation; (ii) the planning of the operation; (iii) the actions of those involved in the operation; (iv) the state of knowledge of those involved in the operation; (v) the nature and degree of the force used in the operation.
In considering this matter, the Coroner will also examine such evidence as exists concerning the circumstances in which the deceased came to be at the locus of death at the relevant time.
He stated that this was only preliminary and might be subject to revision at any time.
He invited written representations from the parties in relation to it.
The appellants made representations to the Coroner to the effect that the scope of the inquest should cover the question of whether the operation was planned and controlled so as to minimise to the greatest extent possible recourse to lethal force.
The Police Service of Northern Ireland and the Ministry of Defence made written representations which asserted that the Coroner was precluded from investigating the planning and control of the operation.
They asserted that McKerr established that there was no requirement for the inquest to comply with article 2.
It followed that the scope of the inquest was restricted to establishing by what means rather than in what broad circumstances the deceased came to their deaths, ie a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1.
The Coroner has not yet made any ruling in relation to these representations.
He is, no doubt, wisely awaiting the outcome of these proceedings.
It is by no means clear that, even if this Court rules that article 2 has no application to these inquests, the Coroner will not be able lawfully to conduct an inquest which satisfies the requirements of that article or that he will not do so: see the speech of Lord Bingham of Cornhill in Jordan and my comments at para 69 in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1.
What is clear is that a decision of this Court is needed to prevent the delay and expense involved in interlocutory in fighting in this and future inquests raising the same issue.
The proceedings below
In an application for permission to apply for judicial review [2009] NIQB 77 the appellants sought to persuade Weatherup J that they were entitled to a declaration that the Coroner was obliged to conduct the inquest in a way that satisfied the procedural obligation of article 2.
They argued that he was not bound by McKerr because the subsequent decision of the Grand Chamber in ilih was inconsistent with it.
Weatherup J held that whether or not ilih was inconsistent with McKerr, he was obliged by the law of precedent to follow the latter.
Accordingly he refused the appellants the relief that they sought.
The Court of Appeal in Northern Ireland [2010] NICA 13 agreed with Weatherup J that McKerr was binding, even if inconsistent with ilih.
Indeed that much was conceded by Ms Quinlivan for the appellants.
She did not succeed in persuading the Court that ilih was, in fact, in conflict with McKerr.
She did, however, persuade them that it was possible that this Court would choose to extend ilih to our domestic law, that they should give the appellants leave to apply for judicial review and, having denied them substantive relief, grant them permission to appeal to this Court.
The Strasbourg law at the time of the decision of the House of Lords in McKerr
As a backcloth to the decision of the House of Lords in McKerr it is helpful to identify the characteristics of the procedural obligation as laid down by the Strasbourg Court at the time of that decision.
McCann, the death on the Rock case, was the first occasion on which the Strasbourg Court identified that article 2 gave rise to the procedural obligation.
In so doing the Court was responding to a submission made by the applicants.
The applicants complained about the planning, or lack of planning, that had taken place before the shooting of the IRA unit.
They alleged that the shooting had either been premeditated or had resulted from negligence.
And they complained that the inquest that had been held into the deaths had not constituted an adequate investigation into the circumstances of the killings.
They submitted (see para 185 of the Commissions Opinion) that Article 2 should be interpreted as including a procedural element, namely, the provision of an effective procedure after the event for establishing the facts the procedures in this case were inadequate.
The Court accepted this last submission.
It held, at para 161: [The Court] confines itself to noting, like the Commission, that a general legal prohibition of arbitrary killing by the agents of the state would be ineffective, in practice, if there existed no procedure for reviewing the lawfulness of the use of lethal force by state authorities.
The obligation to protect the right to life under this provision [article 2], read in conjunction with the states general duty under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in [the] Convention, requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the state.
The Court held at para 162 that there was no need to decide on what form such investigation should take as the inquest that had been held had satisfied the procedural obligation.
The Strasbourg Court repeated the McCann formulation of the ancillary duty in Kaya v Turkey (1998) 28 EHRR 1 and Gle v Turkey (1998) 28 EHRR 121.
In McCann no issue of jurisdiction ratione temporis arose, for both the killings and the inquest had taken place long after the ratification of the Convention by the United Kingdom.
That issue arose for the first time in Moldovan.
I have already outlined the facts of Moldovan at para 3 above.
The applicants complained that the police had been implicated in the pogrom and that a failure to carry out an adequate criminal investigation had deprived them of their opportunity to file a civil claim for damages against the state.
The relevant passage in the Courts judgment on admissibility is at p 13: In the present case, the Court notes that the killings happened in September 1993 before the entry into force of the Convention with regard to Romania, ie 20 June 1994.
However, in accordance with the generally recognised rules of international law, the Convention only applies in respect of each contracting party to facts subsequent to its coming into force for that party.
The possible existence of a continuing situation must be determined, if necessary ex officio, in the light of the special circumstances of each case (eg, [X and Y v Portugal (1979) 16 DR 209]).
The Court must therefore verify whether it is competent ratione temporis to examine the present complaint.
It observes however that the alleged obligation under the Convention of the Romanian authorities to conduct an effective investigation capable of leading to the identification and punishment of all individuals responsible for the deaths of the applicants relatives is derived from the aforementioned killings whose compatibility with the Convention cannot be examined by the Court.
This passage suggests that the Court considered that it was implicit in the applicants case that the procedural obligation was a continuing obligation which would persist until an investigation was held that satisfied article 2.
The Court held that it was not necessary to consider whether this was correct.
It was enough to deprive the Court of competence that the obligation asserted was to investigate the circumstances of deaths whose compatibility with the Convention could not be examined by the Court.
Moldovan left unanswered the question of whether, if there is an initial obligation under article 2 to conduct an adequate investigation, that obligation continues until such an investigation has been held.
That question had, however, been answered by the Commission in a decision on admissibility in McDaid v United Kingdom (1996) 85 A DR 134. 14 residents of Derry made an application alleging inter alia that there had been a breach of the procedural obligation under article 2 to hold a full investigation into the Bloody Sunday killings in 1972.
They alleged inadequacies in the Widgery Report, an investigation conducted by the RUC and the inquest that had been held into the deaths.
In an attempt to get round the six month time limit for bringing a complaint they submitted that this was a continuing obligation.
In rejecting that submission the Commission said this, at p 140: In so far as the applicants complain that they are victims of a continuing violation to which the six month is inapplicable, the Commission recalls that the concept of a continuing situation refers to a state of affairs which operates by continuous activities by or on the part of the state to render the applicants victims (see, eg, [Montion v France (1987) 52 DR 227; Hilton v United Kingdom (1988) 57 DR 108; A P v United Kingdom (Application No 24841/94) (unreported) 30 November 1994]).
Since the applicants complaints have as their source specific events which occurred on identifiable dates, they cannot be construed as a continuing situation for the purposes of the six month rule.
While the Commission does not doubt that the events of Bloody Sunday continue to have serious repercussions on the applicants lives, this however can be said of any individual who has undergone a traumatic incident in the past.
The fact that an event has significant consequences over time does not itself constitute a continuing situation .
A precursor to the judicial review proceedings brought by Mr McKerr which ended in the House of Lords was an application that he made to the Strasbourg Court (2001) 34 EHRR 553.
It was heard together with three other applications which raised similar issues.
His complaint related to the killing of his father on 11 November 1982 by a special unit of the RUC.
He alleged, inter alia, that there had been a failure to satisfy the article 2 procedural obligation.
Specific complaint was made of a police investigation, a criminal trial, an independent police inquiry and an inquest.
These complaints were, in large measure, upheld by the Court.
At para 111 the Court expanded on the purpose of the procedural obligation beyond the explanation given in McCann: The essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life and, in those cases involving state agents or bodies, to ensure their accountability for deaths occurring under their responsibility.
What form of investigation will achieve those purposes may vary in different circumstances.
However, whatever mode is employed, the authorities must act of their own motion, once the matter has come to their attention.
This then became a standard part of the summary of the Strasbourg law given by the Court in cases where the procedural obligation was in issue.
By way of summary of this jurisprudence, the procedural obligation was initially closely related to the substantive obligation that article 2 imposed on the state.
The object of the procedural obligation was to check whether there had been a breach of the substantive obligation.
If the substantive obligation did not exist the procedural obligation could not exist either.
The expanded reason for the procedural obligation given by the Court in McKerr arguably extended the obligation to circumstances in which there was no allegation that the death had resulted from breach by the state of its primary duty under article 2.
None the less the instances where there had been a complaint of breach of the procedural obligation had always involved allegations of state implication in the death.
Furthermore the complaints had focussed on alleged deficiencies in the historic investigations that had been held.
In no case had it been held that there was a continuing obligation to hold an adequate investigation, and in McDaid the Commission had held that there was not.
There is one discordant note.
In Balasoiu v Romania (Application No 37424/97) (unreported) 20 April 2004 the applicant complained of being beaten up by police in 1993, before Romania had acceded to the Convention, but also of delay in the procedural investigation, which was still ongoing.
The Court held the latter complaint admissible, without explaining how this could be reconciled with the reasoning of the Court in Moldovan.
The reasoning of the House of Lords in McKerr
I must now consider the decision in McKerr in greater detail.
This is necessary because the question that arises on the current appeals is whether the reasoning in McKerr applies in the light of the change in nature of the procedural obligation that the decision in ilih has produced.
Having secured a finding by the Strasbourg Court of historic failures to comply with the procedural obligation imposed by article 2, Mr McKerr returned to the domestic courts.
In judicial review proceedings he contended that the procedural obligation was a continuing obligation and that failure to provide an article 2 compliant investigation was unlawful and a breach of section 6 of the HRA.
The Court of Appeal in Northern Ireland upheld this contention and made a declaration that the Government had failed to comply with article 2.
The majority in the House of Lords addressed an appeal advanced on the premise that article 2 gave rise to a continuing obligation to hold an adequate investigation that had persisted for over 20 years from the time of the death of Mr McKerrs father: see paras 25, 48, 61, 76.
This premise was, however, questioned by Lord Hoffmann in para 66, Lord Rodger at para 80 and Lord Brown at paras 92 to 95, rightly in my view: see para 22 above.
Section 6 of the HRA provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right.
The issue before the House was whether, on true interpretation of the HRA, this provision applied to the assumed continuing procedural obligation, notwithstanding that it had its origin in a death that occurred before the HRA had come into force.
By the time of McKerr it was well established that the death itself could not give rise to any breach of the HRA because the Act did not apply to conduct that took place before it came into force: see R v Kansal (No 2) [2001] UKHL 62; [2002] 2 AC 69; R v Lambert [2001] UKHL 37; [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816.
The Lords were unanimous in holding that the obligations created by the HRA did not, on the true interpretation of that Act, extend to the assumed continuing procedural obligation.
The reasoning of Lord Nicholls appears in the following passages: 19.
The application of section 6(1) of the Human Rights Act to a case of an unlawful killing is straightforward.
Section 6(1) applies if the act, namely, the killing, occurred after the Act came into force.
Section 6(1) does not apply if the unlawful killing took place before 2 October 2000.
So much is clear. 20.
The position is not so clear where the violation comprises a failure to carry out a proper investigation into a violent death.
Obviously there is no difficulty if the death in question occurred post Act.
The position is more difficult if the death occurred, say, shortly before the Act came into force and the necessary investigation would fall to be held in the ordinary course after the Act came into force.
On which side of the retrospectivity line is a post Act failure to investigate a pre Act death? 21.
In my view the answer lies in appreciating that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death.
The obligation to hold an investigation does not exist in the absence of such a death.
The obligation is consequential upon the death.
If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death.
Rather, one would expect to find that, for section 6 to apply, the death which is the subject of investigation must itself be a death to which section 6 applies.
The event giving rise to the article 2 obligation to investigate must have occurred post Act. 22.
I think this is the preferable interpretation of section 6 in the context of article 2.
This interpretation has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole.
Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death).
For this reason I consider these judicial review proceedings are misconceived so far as they are sought to be founded on the enabling power in section 7 of the 1998 Act.
At para 25 Lord Nicholls explained why it was that some of the lower courts had erred in reaching a contrary conclusion in earlier cases.
This was by failing to keep clearly in mind the distinction between (1) rights arising under the Convention and (2) rights created by the 1998 Act by reference to the Convention.
These two sets of rights now exist side by side.
But there are significant differences between them.
The former existed before the enactment of the 1998 Act and they continue to exist.
They are not as such part of this country's law because the Convention does not form part of this country's law.
That is still the position.
These rights, arising under the Convention, are to be contrasted with rights created by the 1998 Act.
The latter came into existence for the first time on 2 October 2000.
They are part of this countrys law.
The extent of these rights, created as they were by the 1998 Act, depends upon the proper interpretation of that Act.
It by no means follows that the continuing existence of a right arising under the Convention in respect of an act occurring before the 1998 Act came into force will be mirrored by a corresponding right created by the 1998 Act.
Whether it finds reflection in this way in the 1998 Act depends upon the proper interpretation of the 1998 Act.
Lord Steyn at para 48 appears to have decided the issue on the simple basis that there was no continuing article 2 obligation to hold an investigation.
Any breach of the procedural obligation occurred before the HRA came into force and could give rise to no remedy under domestic law.
Lord Hoffmann at para 66 reasoned as follows: the fallacy of the reasoning lies in the notion of a continuing breach of articles 2 and 3.
The judge was concerned with the rights of the claimants in domestic law.
Before 2 October 2000, there could not have been any breach of a human rights provision in domestic law because the Act had not come into force.
So there could be no continuing breach.
There may have been a breach of article 2 as a matter of international law and this may have continued after 1 October 2000, although, for the reasons given by my noble and learned friend, Lord Brown of Eaton under Heywood, I think it unlikely.
But that is irrelevant to whether the claimants had rights in domestic law, for which there can be no source other than the 1998 Act.
The Act did not transmute international law obligations into domestic ones.
It created new domestic human rights.
The simple question is whether as a matter of construction, those rights applied to deaths which occurred before the Act came into force. 67.
Your Lordships House has decided on a number of occasions that the Act was not retrospective.
So the primary right to life conferred by article 2 can have had no application to a person who died before the Act came into force.
His killing may have been a crime, a tort, a breach of international law but it could not have been a breach of section 6 of the Act.
Why then should the ancillary right to an investigation of the death apply to a person who died before the Act came into force? In my opinion it does not.
Otherwise there can in principle be no limit to the time one could have to go back into history and carry out investigations.
In R (Wright) v Secretary of State for the Home Department Jackson J was prepared to accept the possibility of investigations into breaches of article 2 during the 50 year period between the UKs accession to the Convention and the coming into force of the [1998 Act].
But that was because he regarded an international law right under the Convention as a necessary (and sufficient) springboard for a domestic claim on the basis of a continuing breach.
In my opinion, however, the international law obligation is irrelevant.
Either the Act applies to deaths before 2 October 2000 or it does not.
If it does, there is no reason why the date of accession to the Convention should matter.
It would in principle be necessary to investigate the deaths by state action of the Princes in the Tower.
Lord Hoffmann added at para 69: In my opinion Parliament intended section 6 of the 1998 Act to be enforced, but enforced only in respect of breaches occurring after it came into force.
I have not, with respect, found all of this reasoning easy to follow.
Some of it does not appear to focus on the basis of the claim, which was that a continuing obligation under the Convention had given rise to an obligation under domestic law once the HRA came into force.
He appears to have concluded, however, that any breach of the Convention that had taken place occurred at the time of the death, which was before the HRA had come into force, so that it gave rise to no breach of domestic law.
Lord Rodgers reasoning appears in the following paragraphs of his speech: 79.
What the applicant claims, however, is an article 2 Convention right under the Act to have his fathers death investigated even though, as he accepts, the killing did not violate, and is not to be regarded as having violated, any article 2 Convention right under the Act.
Such a claim is fatally flawed and must be rejected. 80.
Like Lord Brown I am doubtful whether, even in international law terms, there was by October 2000 any continuing breach of the relatives right to an effective investigation of Gervaise McKerrs death under article 2 of the Convention.
But, even supposing that there was, that continuing breach of an international obligation was not turned into a continuing breach of an article 2 Convention right in domestic law when the Act came into force.
Any breach that there was remained a breach in international law and nothing more.
The applicant relies on the Act as part of the domestic law of Northern Ireland.
Under the Act the right to an investigation, deriving from an article 2 Convention right, presupposes that the killing could have been in violation of that selfsame Convention right.
So, when the applicants father was killed in 1982, his relatives had no right to an investigation under the Act.
Moreover, since the Act is not retroactive, they are not now to be regarded as having had such a right in 1982 or at any time after that.
Conversely, the Secretary of State is not to be regarded as having been in breach, or continuing breach, of such a right either in 1982 or at any time after that. 81.
What the applicant is really saying, therefore, is that, when the Act came into force, it conferred on him a right under article 2 to have his fathers death investigated even though his killing was not, and is not to be regarded as having been, in breach of any article 2 Convention right under the Act.
Therefore, the applicant is not asking the courts to apply the Act according to its terms, but to amend them so as to fit this case.
That cannot be done.
If Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, then it would have provided for this expressly.
The potential objections are obvious.
It would be curious to give a right, under the Act, to an investigation of a killing to which the Act did not apply.
If there were to be such a right to an investigation, how far back would it go? Speculation is fruitless: what matters is that Parliament could have made, but did not make, any such transitional provision.
The obvious conclusion is that the right to an investigation under the Act is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act.
The applicant seeks to contradict the policy of Parliament.
There were a number of strands in this reasoning.
The one that most closely echoed the reasoning of the Strasbourg Court in Moldovan was that if the Act did not apply at the time of the death, the Act could not sensibly impose an obligation to have an investigation into the circumstances of the death.
But Lord Rodger also based his decision on an objective assessment of what Parliament must have intended.
Lord Brown, at paras 88 and 89, referred to the object of the procedural investigation as set out by the Strasbourg Court in McKerr at para 111.
He observed that the article 2 obligation asserted was a procedural obligation properly to be regarded as secondary or ancillary or adjectival to the substantive obligation to protect life, an obligation arising directly out of the loss of a life.
Lord Brown then held that because the obligation to investigate was linked to the death it could not arise under domestic law: The duty to investigate is, in short, necessarily linked to the death itself and cannot arise under domestic law save in respect of a death occurring at a time when article 2 rights were enforceable under domestic law, ie on and after 2 October 2000.
The issue in McKerr was whether, on true construction of the HRA, the article 2 procedural obligation could give rise to obligations under the Act after the Act had come into force notwithstanding that the death that triggered that obligation had occurred before the Act came into force.
The House of Lords gave a negative answer to that question.
In doing so their reasoning echoed that of the Strasbourg Court when giving a negative answer to the different question of whether the procedural obligation could arise under the Convention after it came into force in a particular state when the death that triggered the obligation occurred before the Convention had come into force in respect of that state.
The echo was, however, unconscious.
Moldovan was not referred to in McKerr and no analogy was drawn with the principle established by that decision.
Further developments at Strasbourg before ilih
In Voroshilov the Court applied, and extended, the reasoning in Moldovan in relation to an application that alleged breach of the procedural obligation in respect of a breach of the substantive obligation under article 3.
The applicant alleged that he had been tortured by the police in 1997, the year before the Convention came into force in respect of the Russian Federation.
Criminal proceedings were commenced in 1997 but had not concluded.
The applicant claimed that the state had failed to conduct an adequate investigation into his treatment.
The Court held the applicants complaint inadmissible for the following reasons: The Court observes that the procedural obligation under article 3 arises where an individual makes a credible assertion of having suffered treatment contrary to article 3 (see Labita, cited above).
However, since the Court is prevented from examining the applicants assertions relating to the events outside its jurisdiction ratione temporis, it is unable to reach a conclusion as to whether the applicant has made a credible assertion as required by the above provision.
Accordingly, it cannot examine whether or not the Russian authorities had an obligation under the Convention to conduct an effective investigation in the present case (see Moldovan v Romania (Application No 41138/98, 13 March 2001) Likewise the alleged failure to conduct the investigation cannot be held to constitute a continuous situation raising an issue under article 3 in the present case, since the Court is unable to conclude that such an obligation existed.
The Court applied similar reasoning to the same effect in Kholodov.
The Strasbourg Court gave further consideration to the object of the procedural obligation in Angelova and Iliev v Bulgaria (Application No 55523/00) (unreported) 26 July 2007.
The applicants were the mother and brother of a Roma man who had been stabbed to death by a gang of teenagers.
There was no suggestion that the killing itself was accompanied by any direct involvement of the state.
The applicants complained, however, of inadequacies in the investigation of the crime carried out by the police.
The Court held at para 93 that the absence of any direct state responsibility for the death did not exclude the applicability of section 2.
The Convention imposed a duty to secure the right to life by putting in place effective criminal law provisions to deter the commission of offences backed by law enforcement machinery.
The Court continued at para 94: The Court reiterates that in the circumstances of the present case this obligation requires that there should be some form of effective official investigation when there is reason to believe that an individual has sustained life threatening injuries in suspicious circumstances.
The investigation must be capable of establishing the cause of the injuries and the identification of those responsible with a view to their punishment.
Where death results, as in the present case, the investigation assumes even greater importance, having regard to the fact that the essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life.
The Court added at para 98 that it was particularly important that the investigation should be pursued with vigour and impartiality where the attack was racially motivated.
This was a further formulation of the purpose of the procedural investigation, whose effect was to treat the duty to investigate almost as part of the substantive duty imposed on the state by article 2 to take positive action to protect life.
I have drawn attention in para 20 above to the Commissions finding in McDaid that the article 2 procedural obligation to hold an investigation was not a continuing obligation.
In Brecknell v United Kingdom (2007) 46 EHRR 957 the Court considered the circumstances in which that obligation might be revived.
The applicant was the widow of a man gunned down by loyalist gunmen in 1975.
Investigations took place and consideration was given to criminal prosecutions, but these were concluded in 1981.
In 1999 and thereafter further evidence came to light suggesting the possibility of RUC and UDR collusion with loyalist paramilitaries.
The applicant contended that this revived the procedural obligation.
The Court upheld this contention.
It ruled at para 70 that if article 2 did not impose the obligation to pursue an investigation into an incident, the fact that the State chose to pursue some form of inquiry did not have the effect of imposing article 2 standards on the proceedings.
The Court then ruled, at para 71: With those considerations in mind, the Court takes the view that where there is a plausible, or credible, allegation, piece of evidence or item of information relevant to the identification, and eventual prosecution or punishment of the perpetrator of an unlawful killing, the authorities are under an obligation to take further investigative measures.
The steps that it will be reasonable to take will vary considerably with the facts of the situation.
The lapse of time will, inevitably, be an obstacle as regards, for example, the location of witnesses and the ability of witnesses to recall events reliably.
Such an investigation may in some cases, reasonably, be restricted to verifying the credibility of the source, or of the purported new evidence.
The Court would further underline that, in light of the primary purpose of any renewed investigative efforts (see para 65 above), the authorities are entitled to take into account the prospects of success of any prosecution.
The importance of the right under article 2 does not justify the lodging, willy nilly, of proceedings.
Meanwhile, the Grand Chamber had had occasion to reconsider its temporal jurisdiction in Blei v Croatia (2006) 43 EHRR 1038.
The claimant complained, inter alia, of violation of article 8 as a result of being deprived of a protected tenancy in her absence.
Litigation in relation to this continued until 15 February 1996, when the applicant lost an appeal to the Supreme Court.
She then lodged a constitutional complaint with the Constitutional Court, which was dismissed on 8 November 1999.
Croatia acceded to the Convention on 5 November 1997.
The State objected that the Court had no jurisdiction to hear the applicants complaint ratione temporis.
The Court held at paras 77 and 82 that this issue fell to be determined by reference to the facts constitutive of the alleged interference.
In consequence it was essential to identify, in each specific case, the exact time of the alleged interference.
The Court ruled that the complaint to the Constitutional Court did not constitute part of the alleged interference.
It was an attempt to obtain a remedy for it.
It followed that all the matters complained of had occurred before the date of accession and the Court had no jurisdiction.
The decision of the Grand Chamber in ilih
The decision in ilih was reached by a Grand Chamber of 17, of which 7 delivered concurring opinions and 2 dissented.
The applicants were the parents of a young man who died as a result of medical negligence on 19 May 1993.
The applicants made repeated attempts to bring criminal proceedings, which foundered finally and conclusively on 14 July 2003.
They also pursued civil proceedings, which reached an unsuccessful conclusion on 10 July 2008.
They then lodged a constitutional appeal with the Constitutional Court, which was still pending at the time of the Strasbourg judgment.
Slovenia acceded to the Convention on 28 June 1994.
The issue before the Grand Chamber was whether, in these circumstances, the applicants could demonstrate that alleged deficiencies in the criminal proceedings after that date violated the procedural obligation of article 2.
The Grand Chamber considered the prior jurisprudence and noted that it was faced with a conflict between Moldovan, Voroshilov and Kholodov on the one hand and Balasoiu on the other.
At para 152 the Grand Chamber analysed its task as being to determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date.
The Grand Chambers conclusion appears from the following passage of its judgment: 159.
Against this background, the Court concludes that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty.
Although it is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment .
In this sense it can be considered to be a detachable obligation arising out of article 2 capable of binding the state even when the death took place before the critical date. 161.
However, having regard to the principle of legal certainty, the Courts 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. 162.
First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the Courts temporal jurisdiction. 163.
Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect.
Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, para 89) will have been or ought to have been carried out after the critical date.
However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner.
Applying those principles, the Grand Chamber held that the applicants complaint fell within the Courts temporal jurisdiction.
The considerations that led to this conclusion were as follows: 165.
Applying the above principles to the circumstances of the present case, 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, while, with the exception of the preliminary investigation, all the criminal and civil proceedings were initiated and conducted after that date.
The criminal proceedings opened effectively on 26 April 1996 (see para 23 above) following the applicant's request of 30 November 1995, and the civil proceedings were instituted in 1995 (see para 48 above) and are still pending.
I am not alone in having difficulty in identifying the precise circumstances in which the procedural obligation attaches as a separate and autonomous duty.
Similar difficulty was expressed by those who delivered concurring opinions, five of them commenting that the application of the relevant principles was likely to be difficult, debatable and unforeseeable.
It is, however, necessary to identify what the Grand Chamber decided in order to determine how this impacts on the decision of the House of Lords in McKerr.
I can start by stating with some confidence what the Grand Chamber did not decide.
It did not decide that there is a continuing obligation to hold a procedural investigation that persists from the time of the death until the obligation has been satisfied.
On the contrary it proceeded on the premise that there was no such obligation.
That is quite plain from an earlier passage in the judgment.
At para 157 the Grand Chamber stated: Moreover, while it is normally death in suspicious circumstances that triggers the procedural obligation under article 2, this obligation binds the state throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidate the circumstances of death and establish responsibility for it (see, mutatis mutandis, Brecknell v United Kingdom 46 EHRR 957, paras 66 72 and Hackett v United Kingdom (Application No 34698/04) 10 May 2005).
This leads me directly to my next conclusion.
The procedural acts and/or omissions referred to in para 162 relate to specific incidents of a particular process or procedure.
Omissions cannot be read as applying to historic failings before the critical date that have not been remedied.
This conclusion is based on the natural meaning of the phrase acts or omissions and is also required by the conclusion expressed at para 47 above.
The meaning of each of the three sentences of para 163 is far from clear.
The concept of a connection between a death and the entry into force of the Convention for the state in question is not an easy one if, as seems to be the case, this connection is more than purely temporal.
The final sentence of the paragraph is totally Delphic and would seem designed to prevent the closing of the door on some unforeseen type of connection.
I shall say no more about it.
The second sentence is designed to explain the meaning of the first.
In part the explanation seems to me to be simple.
The obligation to comply with the procedural requirements of article 2 is to apply where a significant proportion of the procedural steps that article 2 requires (assuming that it applies) in fact take place after the Convention has come into force.
This appears to be a free standing obligation.
There is no temporal restriction on the obligation other than that the procedural steps take place after the Convention has come into force.
Thus if a state decides to carry out those procedural steps long after the date of the death, they must have the attributes that article 2 requires.
It is this obligation that is of potential relevance in the current case.
The United Kingdom is not under a continuing obligation under article 2 to carry out an investigation into the deaths over 20 years ago of Martin McCaughey or Dessie Grew.
But an inquest is going to be held into those deaths.
As a matter of international obligation it is now apparent that the United Kingdom has come under a free standing obligation under article 2 to ensure that the inquest complies with the procedural requirements of that article, at least in so far as this is possible under domestic law.
In ilih the Grand Chamber was satisfied that the two sets of proceedings that had been initiated were theoretically capable of leading to the establishment of the exact circumstances which had led to the death and potential responsibility for it at all levels, see para 125.
The appeals before us have proceeded on the basis that the Coroner will be able, if so required, to conduct an inquest that satisfies the requirements of article 2.
What of the requirement that the article 2 procedural obligation will apply where a significant proportion of the procedural steps required by the provisionought to have been carried out after the critical date? I think that the meaning of this is illuminated both by para 157 of the Grand Chambers judgment (see para 47 above) and by para 165 (see para 45 above).
If the death occurs so soon before the date that the Convention takes effect that (assuming it to have been applicable) the article 2 obligation to hold an investigation would still have persisted, then that obligation will arise as a free standing obligation.
I am fortified by the conclusions that I have reached about this difficult passage of the Grand Chambers judgment by the fact that it accords with the clearer statement of the relevant principles in the concurring opinion of Judge Lorenzen.
The majority judgment was a radical departure from the reasoning of the Court in Moldovan, Voroshilov and Kholodov, and one that Judges Bratza and Trmen were unable to endorse, as they indicated in a powerful dissent.
Sequels to ilih
In Varnava v Turkey (Application Nos 16064/90 16066/90, 16068/90 16073/90) (unreported) 18 September 2009 the Court held that where an individual has disappeared in circumstances that raise a suspicion that he may have been killed, article 2 imposes a continuing duty to investigate the death.
In that case the duty was said to have persisted for 34 years since the disappearance of a number of Greek Cypriots at the time of the Turkish invasion of Northern Cyprus.
An example of that duty was the obligation to investigate a mass grave discovered in 2007.
The activities of the Serious Crimes Review Team and the Historical Enquiry Team in relation to historic deaths in Northern Ireland was given by way of illustration of what was sufficient to satisfy this obligation: see para 192.
Lyubov Efimenko v Ukraine (Application No 75726/01) (unreported) 25 November 2010 is a very recent example of the application of the procedural obligation as identified in ilih.
The applicant was the mother of a young man who was robbed and killed in an attack in a bar.
He died on 6 June 1993, four years and three months before the Convention came into force in relation to Ukraine.
Investigations were suspended shortly after his death, but resumed after the Convention had come into force.
The Court held that the resumed investigations fell within its jurisdiction ratione temporis and that article 2 applied to them.
McKerr reviewed
The precise meaning of the most difficult passage of the Grand Chambers judgment, which I have analysed at para 52 above, has no implications for the United Kingdom, either directly or by analogy, for we ratified the Convention over half a century ago and incorporated it into our domestic law over a decade ago.
What matters is that this country is under an international obligation under the Convention to ensure that, if it does hold an inquest into an historic death, that inquest complies with the procedural obligations of article 2.
The issue directly raised by these appeals is whether that obligation is, on true interpretation of the HRA, one to which that Act applies.
In considering that issue, however, it is right to bear in mind that a similar issue arises in respect of the article 2 procedural obligation that the Strasbourg Court has held can revive on the discovery of fresh facts and which persists in respect of a suspicious disappearance.
The exercise that these appeals involve, as was also the case in McKerr, is one of deducing from the terms of the HRA, and from any relevant Parliamentary or background material, the presumed intention of Parliament as to the ambit of application of that Act.
I say presumed intention because Parliament cannot be expected to have foreseen the manner in which the Strasbourg Court would develop the ambit of particular Convention rights.
It is, however, possible to determine certain principles that Parliament intended should govern the application of the legislation.
There are two relevant principles, and they are potentially in conflict.
The first principle is that the HRA does not have retroactive effect (the non retroactive principle).
It does not permit a claimant to bring a claim for breach of a Convention obligation that occurred before the Act came into force.
I have at para 26 referred to the authorities that support that principle, and need say no more about it.
The second principle is that the ambit of application of the Act should mirror that of the Convention (the mirror principle).
The object of the Act was to bring human rights home.
This will only be achieved if claimants are able to bring in this jurisdiction claims that they would otherwise be permitted to bring before the Strasbourg Court.
This principle was applied in relation to the territorial ambit of the HRA in R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57; [2006] 1 AC 529 and R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153.
As Lord Rodger remarked in the latter case at para 57 in case of doubt, the Act should be read so as to promote, not so as to defeat or impair, its central purpose.
Lord Carswell added at para 98 that statements made both in and outside Parliament pointed very clearly to a general intention to equate the scope of the Act with the scope of the Convention and Lord Brown at para 140 protested at an interpretation of the HRA that required human rights complaints to be taken to Strasbourg rather than brought under the Act.
The two principles were in conflict in McKerr and the non retroactive principle prevailed.
It precluded the courts of this country from entertaining a claim by Mr McKerr in respect of the historic breaches of article 2 which pre dated the coming into force of the HRA.
Those human rights were not brought home and he had to go off to Strasbourg to assert them.
His subsequent domestic claim raised the spectre that claims could be made under the HRA for breach of a continuing duty to hold an inquest in respect of any death that had occurred since 1951 when this country ratified the Convention, founded on the possibility that the death had involved a breach of the substantive obligation imposed by article 2.
In these circumstances it is not surprising that the House of Lords applied the non retroactive principle rather than the mirror principle and held that Mr McKerrs claim did not fall within the scope of the HRA.
The close nexus between the post HRA obligation and the pre HRA obligation was of the essence of the approach of most of their Lordships to their decision on the ambit of the Act: see Lord Nicholls reference to treating all the article 2 rights as part of a single whole (para 27 above), his reference to the continuing existence of a right arising under the Convention (para 28 above), Lord Rodgers reference to rights under article 2 being split up (para 32 above) and my first quotation from the speech of Lord Brown (para 34 above).
What difference has ilih made? I believe that the most significant feature of the decision in ilih is that it makes it quite clear that the article 2 procedural obligation is not an obligation that continues indefinitely.
The spectre that the House of Lords confronted in McKerr is shown to be a chimera.
Just because there has been an historic failure to comply with the procedural obligation imposed by article 2 it does not follow that there is an obligation to satisfy that obligation now.
Insofar as article 2 imposes any obligation, this is a new, free standing obligation that arises by reason of current events.
The relevant event in these appeals is the fact that the Coroner is to hold an inquest into Martin McCaugheys and Dessie Grews deaths. ilih establishes that this event gives rise to a free standing obligation to ensure that the inquest satisfies the procedural requirements of article 2.
That obligation is not premised on the need to explore the possibility of unlawful state involvement in the death.
The development of the law by the Strasbourg Court has accorded to the procedural obligation a more general objective than this, albeit that in the circumstances of these appeals state involvement is likely to be a critical area of investigation.
Is the presumed intention of Parliament when enacting the HRA that there should be no domestic requirement to comply with this international obligation? This is a very different question to that considered by the House of Lords in McKerr, and so far as I am concerned it produces a different answer.
The mirror principle should prevail.
It would not be satisfactory for the Coroner to conduct an inquest that did not satisfy the requirements of article 2, leaving open the possibility of the appellants making a claim against the United Kingdom before the Strasbourg Court.
On the natural meaning of the provisions of the HRA they apply to any obligation that currently arises under article 2.
These appeals are concerned with such an obligation.
The mirror principle reinforces an interpretation that does not exclude this obligation from the ambit of the HRA.
It may be that this involves a departure from the decision of the House of Lords in McKerr.
I am inclined to think that it does.
If so, it is a departure that it is right to make having regard to the fact that the decision in McKerr was premised on the existence of an international obligation which was very different from that which is now seen to exist.
I am not dissuaded from this conclusion by the fact that it opens the door to the argument that the article 2 obligation to re open an investigation because of the discovery of fresh facts as held in Brecknell, or the article 2 continuing obligation to investigate a suspicious disappearance as held in Varnava, also fall within the scope of the HRA.
For these reasons I would allow these appeals.
LORD HOPE
The decision of the Grand Chamber of the Strasbourg Court in ilih v Slovenia (2009) 49 EHRR 996 requires us to take a fresh look at the present state of our domestic law about the holding of inquests in cases where the death occurred before the Human Rights Act 1998 was commenced on 2 October 2000.
There are two issues.
The first is whether article 2 of the European Convention on Human Rights as interpreted in McCann v United Kingdom (1995) 21 EHRR 97, para 161 gives rise to a procedural obligation on the state to carry out an effective public investigation into the circumstances of a death where agents of the state are, or may be, in some way implicated, even though because the death occurred before 2 October 2000 the substantive obligation does not apply to it in domestic law.
The second is whether, if there is no such obligation in domestic law but the state nevertheless decides to carry out an investigation into a pre commencement death of that kind, the investigation which it carries out must meet the procedural requirements of article 2 as explained in R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182.
These questions require us to attempt to understand what the Grand Chambers decision in ilih means, and then to see how the message that it conveys can be fitted into domestic law.
As we are concerned with pre commencement deaths, the focus must be on the transitional provisions in section 22(4) of the 1998 Act.
The struggle which some members of the House of Lords, including myself, had with those provisions are now a distant memory: see R v Kansal (No 2) [2002] 2 AC 69; R v Lambert [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816.
But they must now be addressed again, as the decision in ilih appears to have detached the procedural obligation under article 2 from the substantive obligation.
The question is whether giving effect to that decision in either of the two ways referred to above would contravene the policy choice by Parliament to which section 22(4) of the Act gave effect.
The policy choice was that, save to the limited extent referred to in section 22(4), the Act was not to apply retrospectively.
As Lord Nicholls of Birkenhead said in Wilson v First County Trust Ltd, para 12, sections 6 to 9 are forward looking in their reach: one would not expect a statute promoting human rights values to render unlawful acts which were lawful when done.
I would add that, as section 6(6) provides that an act includes a failure to act, one would not expect it to apply to failures to act which were not unlawful when the alleged failure occurred.
The deaths with which these appeals are concerned took place in October 1990.
The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings.
Those statements were not provided to him until 2002.
It was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2.
It is common ground that, as the deaths occurred before article 2 was made part of domestic law, the substantive aspects of that article cannot be applied to them under the Human Rights Act.
Section 22(4) of the Act precludes this.
Sections 6(1) and 7(1)(a) of the Act do not apply because the killings occurred before the Act came into force.
Any attempt that might have been made in domestic law prior to 2 October 2000 to require the Coroner to carry out an investigation into them that met the requirements of article 2 would have been bound to fail.
Human rights had not yet been brought home.
The simple fact is that from the date when the deaths occurred to the date immediately before the Act came into force there was no obligation to investigate these deaths in the manner that meets the procedural requirements of article 2 under domestic law.
The House of Lords held in In re McKerr [2004] 1 WLR 807 that, where there had been no breach of the procedural obligation before 2 October 2000, there could be no continuing breach thereafter.
But the proceedings that the Coroner was asked to undertake when the papers were passed to him were still pending when the Human Rights Act came into force, and they are still pending.
In ilih, para 159 the Grand Chamber held that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty.
It can give rise to a finding of a separate and independent interference with the article 2 right which is capable of binding a State even when the death took place before it ratified the Convention.
In so doing, as Judges Bratza and Trmen pointed out in their joint dissenting opinion, it departed from the general rule that the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place before the date of their entry into force with regard to that party.
The question is whether section 22(4) of the Human Rights Act permits that novel approach to be adopted in domestic law.
In para 21 of McKerr Lord Nicholls said that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death: The obligation to hold an investigation does not exist in the absence of such a death.
The obligation is consequential upon the death.
If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death.
So, for the new cause of action in section 6 to apply to it, the death which is the subject of investigation must itself be a death to which section 6 applies.
The event giving rise to the article 2 obligation to investigate must have occurred after the Act came into effect.
He went on in para 22 to say that in this way, for the transitional purpose, all obligations arising under article 2 must be treated as parts of a single whole: Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death).
The reasons given by Lord Hoffmann at para 67, by Lord Rodger of Earlsferry at para 81 and by Lord Brown of Eaton under Heywood at para 89, as I read them, are to the same effect.
Lord Rodger said that, if Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, it would have provided for this expressly.
When it made those observations the House was, of course, approaching the matter as one of domestic law.
But it was doing so at a time when there was no indication in the jurisprudence of the Strasbourg Court that the procedural obligation under article 2 was detachable from the substantive obligation.
The matter was being approached on the assumption, as Lord Nicholls made clear in para 21 of his speech, that it was not.
The question whether or not those obligations can be detached from one another is pre eminently a matter for Strasbourg.
Section 2(1) of the Act tells us that in determining any question that has arisen in connection with a Convention right we must take into account any judgment of the European Court of Human Rights so far as, in our opinion, it is relevant to the proceedings in which the question has arisen.
The judgment in ilih is such a judgment.
If we can find a clear ruling on the point in that judgment we should follow it, even if this contradicts the assumption on which the House based its decision in McKerr.
We are not absolutely bound to do so, as section 2(1) does not go that far.
But our practice is to follow the guidance of the international court unless there are strong reasons for not doing so.
As Lord Bingham of Cornhill said in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, its case law is not strictly binding but courts should, in the absence of some special circumstances, follow any clear and constant jurisprudence of the Strasbourg court as the Convention is an international instrument, the correct interpretation of which can be authoritatively expounded only by that court.
He added that it followed that a national court subject to a duty such as that imposed by section 2 should not without strong reason dilute or weaken the effect of the Strasbourg case law.
Only the most starry eyed admirer of the Strasbourg court could describe the guidance that the Grand Chamber offered in para 163 of its judgment in ilih as clear.
Judge Lorenzens criticisms in his concurring opinion of the reasoning of the majority and the powerful dissenting opinion of Judges Bratza and Trmen show that it has many shortcomings.
But I do not think that it is difficult to identify the point that matters for our purposes.
In para 159 the Court concluded from the fact that it had consistently examined the question of procedural obligations under article 2 separately from the question of compliance with the substantive obligation, and where appropriate found a separate violation of article 2 on that account, as revealed by the decisions listed in para 158, that the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty.
Although it was triggered by the acts concerning the substantive aspects of article 2, it could be considered to be a detachable obligation arising out of that article which was capable of binding a state even when the death took place before it ratified the Convention.
Support for the view that this was the essential basis for the decision is to be found in para 9 of the dissenting opinion, where Judges Bratza and Trmen said that they could not agree with the reasoning of the majority which was founded on the alleged detachability of the procedural obligation from the substantive obligation.
In para O IV14 they said that, while they had no quarrel with the idea that the procedural obligation had evolved into a separate and autonomous duty, they differed from them as to their view that it was detachable from the death which gives rise to it.
While the working out of the concept as indicated in para 163 of the Courts judgment is far from clear, the ruling that the procedural obligation is detachable from the death is not.
I return then to the two questions which I identified in para 65, above.
As to the first question, I see no reason to disagree with the way it was answered in McKerr.
One must distinguish between rights arising under the Convention and rights created by the Act by reference to the Convention.
The effect of section 22(4) of the Act is that the rights created by the Act came into existence for the first time on 2 October 2000: Lord Nicholls in McKerr, para 25.
The right to an investigation under the Act in domestic law is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act: Lord Rodger in McKerr, para 81.
The trigger that gives rise to the procedural obligation under the Convention is prevented from operating in domestic law in the case of a pre commencement death by the bar that has been applied by section 22(4).
I agree with Lord Rodger (see para 161, below) that, if it were otherwise, a time limit to identify which deaths trigger the duty in domestic law, and which do not, would have had to have been written into the Act.
There is none, and I do not think that we should be deflected from holding fast to that position by the way the Strasbourg court has attempted to work out the limits of its own temporal jurisdiction for its own purposes in para 163 of ilih.
The concept of a temporal connection with a pre commencement event, so as to bring the event itself within the scope of domestic law, is entirely alien to the system that the Act lays down.
As I see it, however, the second question can and does admit of a different answer.
We are told by Strasbourg that the procedural obligation, as now understood, has a life of its own as it is detachable from the substantive obligation.
Furthermore, there is no need for a trigger to bring the obligation into operation in this case, as it has been decided that an inquest is going to be held into these deaths.
The objection that this would be giving retrospective operation to section 6 of the 1998 Act does not arise.
The question whether the inquests must satisfy the procedural requirements of article 2 otherwise they will be unlawful in terms of that section is being directed to something that has yet to take place.
The answer to it is not to be found in McKerr, as the House treated the procedural and the substantive obligations in that case as inseparable.
Lord Rodger says (see para 155, below) that to approach the issue in this way does not reflect the decision in ilih.
I, for my part, think that it does.
It is true that it does not say this in terms.
What the decision seeks to do in para 163 is to identify those pre ratification deaths that will bring the procedural obligation into effect after the date of ratification.
Its concern is with the circumstances that the Strasbourg court will accept jurisdiction in such cases.
The question whether there is an article 2 obligation to investigate these deaths in domestic law is a different question.
But the holding of inquests into the deaths in this case will be a procedural act which the state itself has decided should take place and, as the deaths were the result of acts by agents of the state, the circumstances meet the test for an article 2 inquiry that was identified in R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 3.
These pre commencement deaths could not have given rise to any violation of the obligations of the state under article 2 in domestic law.
But I do not think that we can ignore the possibility that they may have violated the deceaseds article 2 rights under the Convention.
That certainly is how the matter would be viewed in Strasbourg.
There is no doubt that these deaths fall within the jurisdiction of the Strasbourg court, as the events that have happened since the appellants lodged their application with that court have shown.
The effect of ilih is to breathe life into the procedural obligation post commencement in a way that domestic law can recognise and give effect to.
It may be said that to extend the procedural obligation to these cases would be to give a more generous interpretation to the judgment in ilih than it deserves.
I think however that it would be unduly cautious for us not to do this.
The whole idea of bringing rights home was to enable effect to be given to the Convention rights in domestic law.
I do not think that we need any further guidance on this matter from Strasbourg.
As there is nothing in the wording of the 1998 Act to prevent us from directing that when he conducts these inquiries the Coroner must comply with the procedural obligation under article 2, I would hold that we should do so.
I would allow the appeals and direct the Coroner to hold an inquiry in each case that complies with the states procedural obligation under article 2 of the Convention.
LADY HALE
In ilih v Slovenia (2009) 49 EHRR 996, the Grand Chamber of the European Court of Human Rights decided that the procedural obligation under article 2 of the Convention, to investigate deaths where the state might have been in breach of its obligation to protect the right to life, was separate or detachable from the substantive obligation to protect life.
In certain ill defined circumstances, therefore, that procedural obligation might still be in existence after the date on which a new Member State had acceded to the Convention, and the Court would have jurisdiction to investigate whether or not it had been broken, even though the death to which it related had taken place before that date.
This controversial decision undoubtedly broke new ground.
But at first sight it has nothing to do with the United Kingdom.
The United Kingdom accepted the right of individual petition to the Strasbourg Court as from 14 January 1966.
The deaths in question in these appeals took place on 9 October 1990.
So there is no doubt that the Strasbourg Court has jurisdiction to decide whether the United Kingdom is in breach of any of its obligations under article 2.
The ilih case makes no difference to that.
The obligations of the United Kingdom in international law have not changed.
The question, however, is whether the obligations of United Kingdom public authorities in United Kingdom domestic law have changed.
This would not matter if all inquests were automatically sufficient to comply with the procedural obligation in article 2.
Unfortunately, there remain some differences between those which do, and those which do not, have to comply.
Those differences centre on the scope of the available verdict as to how the deceased met his death: in a conventional inquest, how means only by what means whereas in an article 2 compliant inquest it must also encompass in what broad circumstances: see R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182.
As Lord Bingham made clear in Jordan v Lord Chancellor [2007] UKHL 14, [2007] 2 AC 226, para 37, the scope of the inquiry is a different matter: . the purpose of an inquest is to investigate fully and explore publicly the facts pertaining to a death occurring in suspicious, unnatural or violent circumstances, or where the deceased was in the custody of the state, with the help of a jury in some of the most serious classes of case.
The coroner must decide how widely the inquiry should range to elicit the facts pertinent to the circumstances of the death and responsibility for it.
Furthermore, at para 39, there is nothing to prevent a jury finding facts directly relevant to the cause of death which may point very strongly towards a conclusion that criminal liability exists or does not exist.
And, at para 40, if those factual findings point towards the commission of a criminal offence, or it appears to the coroner that an offence may have been committed, the coroners duty . is to report promptly to the Director of Public Prosecutions .
In this case the coroner gave a preliminary ruling on the scope of the inquest which clearly encompassed the purpose and planning of the surveillance operation which led to these deaths.
The appellants were content with this but the Police Service of Northern Ireland argued that it should be made clear that this would be a conventional inquest, concerned in producing a verdict on how the deceased met their deaths, with by what means rather than in what broad circumstances.
Hence, in addition to a declaration on delay, which is no longer an issue, the appellants sought a declaration that the coroner is obliged to conduct the inquest in an article 2 compliant manner.
It is the refusal of that declaration which has led to these appeals.
The Human Rights Act 1998 came into force on 2 October 2000.
It became unlawful for a public authority to act in a way which is incompatible with a convention right: section 6(1).
A person claiming that a public authority has acted unlawfully may (a) bring proceedings against the authority, or (b) rely on the Convention right or rights concerned in any legal proceedings: section 7(1).
However, with one exception, this does not apply to an act taking place before section 7(1) came into force: section 22(4).
If the act in question is the death itself, then there is no remedy for deaths taking place before 2 October 2000 (In re McKerr [2004] UKHL 12, [2004] 1 WLR 807) nor does the interpretative obligation in section 3(1) apply (R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189).
The exception applies to proceedings brought by or at the instigation of a public authority; in such proceedings, a victim may rely on a Convention right whenever the act in question took place: section 22(4) read with section 7(1)(b).
It was argued in Hurst that an inquest was proceedings brought by or at the instigation of a public authority and that the mother of the deceased was therefore entitled to rely on her Convention right to an article 2 compliant inquiry whenever the death took place.
That argument was roundly rejected (at paras 60 to 64) on the basis that the exception was meant to allow people against whom a prosecution or civil proceedings had been brought to rely upon his Convention rights to defend himself against the state: Convention rights may be used as a shield to defeat proceedings brought against victims by public authorities, but not as a sword (Lord Brown of Eaton under Heywood, at para 62).
In Hurst, the mother was seeking to use the Human Rights Act to compel the coroner to re open an inquest when he had thought that it would serve no useful purpose.
Unless she succeeded, there would be no proceedings.
Similarly, in McKerr, the son of the deceased was seeking to use the Act to compel the holding of an inquiry which would not otherwise take place.
In this case, by contrast, there is indeed to be an inquest.
If the application of the exception in section 22(4) had first arisen in this context, I do wonder whether the result would have been the same.
Section 7(1)(b) does not require that the proceedings are brought against the victim: it simply says that the victim may rely upon the Convention right in any legal proceedings.
And it can plausibly be argued that, for the purpose of section 22(4), an inquest is a legal proceeding brought by a public authority, the coroner.
Thus, even if the act in question is the death, were it not for Hurst, I would have been inclined to hold that where there is an inquest on foot it must be conducted in an article 2 compliant way, whenever the death took place.
Unsurprisingly, in the light of Hurst, that is not how Ms Quinlivan puts the appellants case.
I mention the point only because it leads to the same result as that at which I have arrived by another route.
This is where the decision in ilih comes in.
The obligation to hold an article 2 compliant inquiry into certain deaths has now to be understood to be separate from the obligation to protect life.
The Attorney General complains that this is wrong: the object of the duty to hold an inquiry is to find out what happened, who was responsible, and to hold those responsible to account for the breach of their substantive obligations under article 2.
If what they did cannot be an actionable breach of those obligations, because the Human Rights Act was not then in force, it makes no sense to oblige the state to hold an inquiry into whether or not there was a breach.
That seems to me to take an unduly narrow view of the purpose of an article 2 investigation.
Where deaths take place for which the state may bear some responsibility, a fortiori where, as here, deaths take place at the hands of state agents, there is always a useful purpose in finding out, so far as is possible, what took place, so that everyone, but in particular the relatives, may learn the truth about what took place, and lessons may be learned for the future.
As the Court observed in ilih, at para 156, the procedural obligation has not been considered dependent on whether the State is ultimately found to be responsible for the death.
The serious criticism of the ilih decision is that it leaves so much uncertainty about when the investigative duty continues.
As the Court says in paragraph 161 of its judgment, the obligation cannot be open ended.
But, with respect, I agree with the concurring opinion of Judge Lorenzen, when he complains that the criteria laid down in paragraph 163 of the Courts judgment (quoted by Lord Phillips at para 44 above) are not easy to understand.
However, I also agree with him that in one respect, they are quite clear.
That is, in his words, where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date (p 1045, para O I4).
That is this case.
The Coroner began his inquiries at the very latest once the Director of Public Prosecutions had announced on 2 April 1993 that there was to be no prosecution.
But for a variety of reasons things have proceeded very slowly since then and a significant part of the investigation, in particular the inquest, has still to take place.
I do not see this as involving the retrospective operation of the 1998 Act.
As public authorities, the coroner and the court have now to act compatibly with the Convention rights.
The question is what the Convention rights now entail.
It has always been clear that the content of the Convention rights can evolve over time.
When the 1998 Act was passed, Parliament must be taken to have known of the jurisprudence which described the Convention as a living instrument in Tyrer v United Kingdom (1978) 2 EHRR 1; which implied further rights into those expressed in Golder v United Kingdom (1975) 1 EHRR 524; which developed autonomous concepts in Engel v The Netherlands (1976) 1 EHRR 647; which recognised positive obligations in Marckx v Belgium (1979) 2 EHRR 330; and which insisted that rights be made practical and effective rather than theoretical and illusory in Airey v Ireland (1979) 2 EHRR 305.
In the light of that well known jurisprudence, it cannot have been Parliaments intention that the Convention rights enshrined in the 1998 Act were to remain set in stone as they were when the Act was passed or when it came into force.
It must have been intended, as Lord Bingham famously put it in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, that the national courts would, at the very least, keep pace with the Strasbourg jurisprudence as it evolves over time.
If the evolutive interpretation of the Convention rights means that they now mean something different from what they meant when the 1998 Act was passed, then it is our duty to give effect to their current meaning, rather than to the one they had before.
In Bellinger v Bellinger [2003] UKHL 21, [2003] 2 AC 467, to take an obvious example, the House of Lords made a declaration that section 11(c) of the Matrimonial Causes Act 1973 was incompatible with the Convention rights, because in Goodwin v United Kingdom (2002) 35 EHRR 447, decided in July 2002, the Strasbourg court had finally held that the non recognition of a change of sex was in breach of articles 8 and 12 of the Convention.
This was a change, albeit well telegraphed in advance, from its previous jurisprudence in Rees v United Kingdom (1986) 9 EHRR 56, Cossey v United Kingdom (1990) 13 EHRR 622, and Sheffield and Horsham v United Kingdom (1998) 27 EHRR 163.
No one suggested that the Act did not apply.
At the same time, of course, we are not obliged to follow that jurisprudence if there are good reasons to depart from it.
We have not so far failed to follow a decision of the Grand Chamber; as Lord Rodger equally famously put it in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269, para 98, Argentoratum locutum, iudicium finitum.
But the day might come when we would find good reasons to do so.
Despite the urgings of the Attorney General, however, I do not think there are such good reasons here.
This case fits into the limited class of case identified by Judge Lorenzen in ilih.
Accepting that this inquest must comply with the procedural requirements of article 2 does not require that old inquests be re opened (unless there is important new material) or that inquiries be held into historic deaths.
The one case which does not quite fit into Judge Lorenzens formula is where there is a death before the relevant date and the decision to hold an inquest or other inquiry is taken after that date.
To my mind that would still fit into the criterion of a significant proportion of the procedural steps required by this provision . will have been . carried out after the critical date.
In other words, if there is now to be an inquiry into a death for which the state may bear some responsibility under article 2, it should be conducted in an article 2 compliant way.
The coroner himself obviously wishes to conduct these inquests in way which complies with article 2.
It will save a great many procedural arguments if he does.
His concern before us was with the wider potential ramifications of ilih.
I hope that these concerns are allayed by our judgments, which seek to provide a principled basis for drawing the line.
For these reasons, I would allow this appeal and make the declaration sought by the appellants.
LORD BROWN
In 1995 the European Court of Human Rights decided that article 2 of the European Convention on Human Rights gives rise to a procedural obligation to hold an inquiry to specified standards into those deaths which occur in circumstances where the states responsibility is or may be engaged.
Hitherto it has been understood that this obligation is secondary and ancillary to the death in question.
True, it was recognised by Strasbourg as a free standing obligation.
But that meant no more than that it was not dependent on the existence of a substantive violation of article 2.
It was on that understanding that the House of Lords decided in In re McKerr [2004] 1 WLR 807 that no such procedural obligation can arise in respect of a death occurring before 2 October 2000 when the Human Rights Act 1998 took effect.
The recent, post McKerr, decision of the Grand Chamber in ilih v Slovenia (2009) 49 EHRR 996 requires, however, submit the appellants, a fundamental change in that approach.
Now it appears that the article 2 procedural obligation is not correctly to be understood as merely ancillary to a particular death but is rather to be seen as a separate and autonomous duty, a detachable obligation arising out of article 2 . even when the death took place before the critical date (para 159 of the courts judgment).
In short, the court held that in point of time (and it is time which is all important in the present domestic context just as it was in the international context in which the court in ilih was determining its own temporal jurisdiction over subscribing states) the obligation may arise subsequent to the death requiring investigation and is not to be regarded as outwith the courts jurisdiction merely because the death itself preceded the courts assumption of jurisdiction.
I acknowledge, as Lord Rodger points out in his powerful dissenting judgment, that we are here concerned with what Parliament chose to enact in the 1998 Act, not with what it might have chosen to enact.
Equally, of course, we are concerned to decide the domestic courts jurisdiction under that Act, not the Strasbourg Courts jurisdiction under the Convention.
All that said, by the same token that had McCann v United Kingdom (1995) 21 EHRR 97 been decided after, rather than before, the 1998 Act, we should still have accepted the need under domestic law to give effect to the newly discovered ancillary article 2 procedural obligation, so too it now seems to me right to construe the Act as recognising a domestic law obligation to give effect to what we now learn is a detachable article 2 procedural duty.
As for the precise circumstances in which this detachable duty should henceforth be recognised to arise, this, I acknowledge, in the light of the deeply unsatisfactory purported delineation of the duty to be found at paras 161 163 of the Grand Chambers judgment in ilih, is more difficult.
Our essential task must be to construe the Act in the context of Parliaments underlying intention that Convention obligations arising after 2 October 2000 should be enforceable here rather than have to be litigated in Strasbourg, but provided always that no particular difficulty results from events having occurred before 2 October 2000 hence Parliaments decision not to apply the Act retroactively save to the limited extent provided for by section 22(4).
These considerations are, I believe, essentially those described by Lord Phillips (at paras 58 and 59 of his judgment) respectively as the mirror principle and the non retroactive principle.
On this approach I too, in common with Lord Phillips (para 61) and Lord Hope (para 77), would hold that any inquests still outstanding, even, as in these cases, in respect of deaths occurring before 2 October 2000, must so far as remains possible comply with the relatives article 2 Convention rights.
Such a conclusion will not to my mind present any great difficulties.
There are, we were told, 16 existing legacy inquests (involving 26 deaths) currently outstanding on the coroners books, a further six incidents (involving eight pre 2000 deaths) referred by the Attorney General to the Coroner for inquests pursuant to section 14 of the Coroners Act (Northern Ireland) 1959 and a further 7 deaths (between August 1994 and January 2000) not yet the subject of inquests.
Moreover, not merely will there therefore be only comparatively few inquests affected by this ruling but it may be doubted whether in reality there is all that much difference between an article 2 compliant inquest (a Middleton inquest: see R (Middleton) v West Somerset Coroner [2004] 2 AC 182) and one supposedly not (a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1) a topic exhaustively discussed by this court in R (Smith) v Oxfordshire Assistant Deputy Coroner [2011] 1 AC 1, see particularly Lord Phillips judgment at paras 73 78 and my own at paras 152 154.
I too, therefore, would allow these appeals.
LORD KERR
On 9 October 1990 Martin McCaughey and Desmond Grew were shot and killed by members of the British Army.
Some twenty one years later an inquest into their deaths has not been held.
These bare facts are testament to the difficulties that beset the investigation of controversial killings in Northern Ireland.
Those difficulties are, of course, by no means unique to that province.
Lord Phillips in his review of Strasbourg jurisprudence has amply illustrated the huge problems encountered in many member countries of the Council of Europe in the conduct of inquiries into how people come to be killed.
The stream of cases that have flowed throughout domestic courts and in Strasbourg paint a disheartening picture.
But perhaps the decision of this court in these appeals will mark the end of at least one area of controversy.
Lord Phillips has said that a decision of this court is needed to prevent the delay and expense involved in interlocutory in fighting in future inquests raising the same issue as arises here.
I share his hope that we can achieve that goal.
Before the hearing of this appeal, the appellants (who are the next of kin of Mr McCaughey and Mr Grew) lodged an application with the European Court of Human Rights (ECtHR) complaining of substantive and procedural breaches of article 2 of the European Convention on Human Rights and Fundamental Freedoms (ECHR).
That court asked the government of the United Kingdom to provide its written observations on the admissibility and merits of the appellants application.
The government applied to the court for suspension of the time limit within which those observations must be submitted while the decision of this court was awaited.
The Strasbourg court has agreed to this request.
As Lord Rodger has pointed out, ECtHR unquestionably has jurisdiction to deal with a complaint that there has been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of Mr McCaughey and Mr Grew.
If the appellants do not succeed in enforcing that duty in the courts of this jurisdiction, therefore, it is to be presumed that, if there is a failure on the part of the government to institute an article 2 compliant inquiry, the appellants will proceed with the application that they have already lodged.
This unsatisfactory and anomalous situation can be avoided if the decision in ilih v Slovenia (2009) 49 EHRR 996 that the procedural obligation to investigate deaths is detachable has the effect in domestic law for which the appellants contend.
Whatever may be said about the reasoning in ilih (and, as Lord Dyson has said, it has been the subject of trenchant criticism, not least by the Attorney General for Northern Ireland, intervening in these appeals) the essential ratio of the case is clear.
It is to the effect that article 2 involves two distinct and separable obligations, one procedural, the other substantive.
Where a death occurs before the accession of a member state to the ECHR, the procedural obligation to investigate the circumstances of the death will, in certain circumstances, require the acceding state to comply with article 2.
The real difficulty that the decision of the Grand Chamber creates is in defining the circumstances in which the procedural obligation arises.
Clearly not every death that occurred before the ratification of ECHR by a particular state can be subject to the duty to investigate under article 2.
Must there be a temporal connection between the death and the procedural obligation to investigate? If so, how close to the time of accession must the death have occurred? Or is another form of connection sufficient to generate the link? Is it sufficient that the ratifying state decides, after it has acceded to the Convention, to investigate a death that occurred before ratification? In that event, can the ratifying state avoid inspiring the procedural obligation by deciding not to investigate the death? Many of these questions remain unanswered by ilih.
It seems to me probable that they will ultimately require to be addressed by ECtHR and, for that reason alone, one cannot hope to provide a comprehensive statement on the precise, indispensable elements of the necessary connection but some aspects of this question require to be considered in order to determine whether, if ilih is to be applied to the HRA, these appeals can succeed.
First, however, it is necessary to grapple with the issue whether, in light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date.
Lord Rodger makes a powerful case for the proposition that the temporal application of the Convention is irrelevant for purposes of deciding the temporal application of the HRA but that, as it seems to me, does not provide an answer to the essential question.
The majority of the Grand Chamber in ilih elided the criticism of the dissenting minority that the effect of the majority judgment was to make the Convention retroactive.
It did so by finding that the procedural right was detachable.
The invocation of that right therefore could and did occur after Slovenia had ratified the Convention.
In this way, no impact on the temporal jurisdiction of the Convention was involved.
The duty arose or at least continued to exist after the Convention had been ratified.
The right could be asserted when Slovenia was squarely within the temporal jurisdiction of the Convention and no question of retroactive effect was involved.
This process of reasoning brings to centre stage the decisive finding that the separable right either comes to life or continues to exist after the critical date.
That central finding, that the procedural right is detachable and not linked inexorably to the death, cannot now be ignored in deciding whether, after the coming into force of HRA, there is a procedural obligation to investigate a death that occurred before that date.
The decision in McKerr depended crucially on the indissolubility of the procedural and substantive rights.
The passages from Lord Nicholls speech which have been quoted by Lord Phillips in para 27 of his judgment make that unmistakably clear.
In particular, Lord Nicholls statement that the interpretation that he proposed had the effect of treating all the obligations arising under article 2 as parts of a single whole makes the point decisively.
That stance is no longer possible.
Strasbourg has positively said that the obligations arising under article 2 are not parts of a single whole.
That inescapable conclusion must inform this courts approach to the application of the HRA.
The procedural right has the capacity to be animated or to continue to exist after the coming into force of HRA.
If it does come alive or if it continues to have life, then there is no question of HRA being applied retrospectively.
It is applied to an extant right.
Of course, it is undoubtedly true, as Lord Rodger has said, that Parliament had it in mind that Convention rights would only be accessible domestically for acts that occurred after 2 October 2000 (apart from the closely defined exceptions in section 22(4)).
But the phenomenon of an Act having an unintended consequence is by no means unusual.
Moreover, the divisibility of the article 2 rights which has now been recognised eliminates any conflict that might otherwise have occurred with Parliaments intention that only rights that accrue after the coming into force of HRA should be enforceable in this jurisdiction.
The procedural right to an article 2 compliant investigation, if it accrues or continues to exist after the coming into force of HRA, does not clash with that legislative intention.
It is entirely consonant with Parliaments manifest intention that HRA should apply to acts or omissions that take place after the date of the coming into force of HRA.
The essence of the decision in ilih is that the procedural obligation is either animated or that it endures after the critical date.
I therefore agree with all the judgments of the majority in this case that HRA requires that the procedural obligation under article 2 of the Convention, if it arises or endures after the coming into force of HRA, must be complied with notwithstanding that the death in respect of which the obligation arises occurred before October 2000.
How does one determine whether the procedural obligation exists after the critical date in the case of ilih the date of ratification of the Convention by Slovenia, in this case the coming into force of HRA? It is, I think, important to note that the Grand Chamber in ilih reiterated the well established principle that death in suspicious circumstances normally triggers the procedural obligation under article 2 see para 157.
But the court also found that this obligation binds the State throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidating the circumstances of death and establishing responsibility for it also para 157.
So, although the procedural obligation is detachable, it is triggered by the death of the deceased.
In this case the starting point for the existence of the obligation was plainly before the coming into force of HRA.
One must focus, therefore, on the question whether, by reason of its detachability from the substantive right, it continued to have an existence following the coming into force of HRA such as to keep alive after that date the procedural duty to conduct an article 2 compliant inquiry.
The fact that the right has been triggered before the critical date is in no sense determinative of whether it continues to have life after that date.
In para 159 the court said that Although [the right] is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment. (The decision in Blei v Croatia (2006) 43 EHRR 1038 is discussed by Lord Phillips in paras 40 and 41 of his judgment).
Although the court found that separate interference can arise after the critical date, it also made clear that only procedural acts and omissions occurring after that date can fall within the Court's temporal jurisdiction para 162.
It would appear, therefore, that procedural obligations spanning the period before and after the coming into force of HRA must be segregated in order to determine which are amenable to article 2 requirements and which are not.
This might well have implications in relation to a complaint of delay in holding an article 2 inquiry although, as Lord Phillips has pointed out, this is no longer an issue in the present appeals.
The critical passage in the majoritys judgment in ilih is contained in para 163: there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect.
Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, 89) will have been or ought to have been carried out after the critical date.
However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner.
A number of points should be noticed about the statements contained in this passage.
First, the majority stipulates that there must be a genuine connection between the death and the critical date.
It does not, however, specify what genuine connotes in this context.
True it is that it is stated that a significant proportion of the procedural steps required by article 2 will have been or ought to have been carried out after the critical date.
But it is not at all clear that the court is there postulating that this is an indispensable requirement for the connection to be established or merely observing that this is the consequence of the existence of the connection.
In any event, the catch all final section appears to contemplate that the connection could be established by circumstances quite unrelated to any temporal proximity between the death and the critical date.
Indeed, this final part of the paragraph is drawn in such wide and general terms that it is difficult to forecast the range of cases that might fall within its embrace.
The best, I think, that one can make of this paragraph is that a connection must exist between the death and the critical date; that where much of the investigation into the death occurs or should occur after the critical date, this will be evidence of the existence of the necessary connection; and that there are other unspecified circumstances in which, although the death is not proximate temporally to the critical date, the need to protect the basic guarantees and principles of the Convention dictates that such a connection should be recognised.
That this provides a less than clear prescription for all the circumstances in which a sufficient connection is to be recognised has already been made clear by the concurring opinion of Judge Lorenzen in the ilih case.
At pp 1044 1045, paras O I3 to O I4 of the report he said: I fail to see that the criteria established by the majority in paragraph 163 are in conformity with this requirement [of legal certainty].
Thus, it is not easy to understand what is meant by the requirement for a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect.
Furthermore the fact that the majority seem ready to accept such a connection based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner appears to confirm that the jurisdictional limits will be difficult to identify, if they exist at all.
I find it incompatible with the declared intention to respect the principle of legal certainty to define the Court's temporal jurisdiction in such a vague and far reaching way.
In my opinion, there must be a clear temporal connection between on the one hand the substantive event death, ill treatment, etc and the procedural obligation to carry out an investigation and, on the other, the entry into force of the Convention in respect of the respondent State.
This will be the case where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date.
Likewise where the event occurred or was only discovered so close to the critical date that it was not possible to commence an investigation before that date.
Where on the other hand no investigation was carried out despite knowledge of the event or where the investigation was terminated before the critical date, I would say that the Court would have jurisdiction only where an obligation to carry out investigative measures was triggered by relevant new evidence or information (see, mutatis mutandis, Brecknell v United Kingdom, no. 2457/04, 70 71, 27 November 2007).
The statement at the beginning of the second paragraph of this passage that there must be a clear temporal connection between the substantive event and the procedural obligation on the one hand and the critical date on the other hand suggests, at first sight, that Judge Lorenzen considered that unless the substantive event preceded the critical date by a short period, the necessary connection would not be present.
On this analysis, the appellants in this case could not succeed for the deaths preceded the coming into force of HRA by some ten years.
But Judge Lorenzen appears in the succeeding sentence of the second paragraph to have made an important qualification to his statement about the need for a temporal connection.
He suggests that the two elements will be sufficiently connected temporally where the event occurred and an investigation was initiated before the critical date, but a significant part of that investigation was carried out subsequent to that date.
On this formulation the appellants cases would qualify because an investigation into the deaths of Mr McCaughey and Mr Grew was begun before the coming into force of HRA but a significant part indeed, the most significant part, the inquest will take place subsequently.
It is perhaps unwise to parse the judgments of the majority and of Judge Lorenzen too closely in order to produce a set of precise principles from views which have been expressed at a level of some generality.
But it seems to me that the following may reasonably be deduced from both judgments: (i) There must be a connection between the substantive event (the death) and the critical date (in this case, the coming into force of HRA) the majority and Judge Lorenzen; (ii) A close temporal link (in other words where the death has preceded the critical date by a short period) will provide the necessary connection the majority and Judge Lorenzen; (iii) Where much of the investigation into the death occurs after the critical date, the connection is present the majority; (iv) Where a significant part of the investigation ought to take place after the critical date, this will be sufficient to make the connection the majority; (v) Where an investigation begins before the critical date but a significant part of this takes place after the critical date, the connection is present Judge Lorenzen.
Although expressed slightly differently from the manner in which the majority put it in para 163, this formulation approximates to that set out in (iii) above; (vi) In certain unspecified circumstances the connection might be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner the majority.
Judge Lorenzen expressly disagreed with this statement; (vii) If the investigation has been completed before the critical date or if, despite knowledge of the event, no investigation was conducted, there will be no sufficient connection.
In that event the procedural duty will only arise after the critical date if triggered by relevant new evidence or information Judge Lorenzen.
The present appeals come within (iii) and (v) of this list of the principles to be gleaned from the judgments of the majority and Judge Lorenzen.
On that account I too would allow the appeals.
LORD DYSON
The decision of the majority of the ECtHR in the Grand Chamber decision of ilih v Slovenia (2009) 49 EHRR 996 has, with justification, been the subject of trenchant criticism.
But I agree with Lord Hope (paras 73 and 74 of his judgment) that the core of the decision is clear enough.
It is that the procedural obligation to investigate a death under article 2 of the European Convention on Human Rights (the Convention) is not only distinct from the substantive aspect of the article but is autonomous and detachable from it.
It is not profitable to condemn the decision on the grounds that the language used by the majority, in particular at paras 161 to 163 of their judgment, is obscure.
Their decision is not a one off aberration.
It is an important decision of the Grand Chamber which is now well entrenched in the Strasbourg jurisprudence: see, for example, Varnava v Turkey (2008) 50 EHRR 467, paras 136 to 138 (another decision of the Grand Chamber).
There is no good reason not to follow ilih.
Both Lord Rodger and Lord Hope say that ilih is a decision about the temporal jurisdiction of the Convention and that it is therefore irrelevant to the interpretation and application of the Human Rights Act 1998 (HRA) and, in particular, to the temporal application of the HRA.
To hold otherwise, they say, in effect involves adding to the HRA a transitional provision that is not to be found in section 22 of the act.
It involves an impermissible application of the HRA.
I shall call this the section 22 argument.
Lord Hope would allow the appeals on the narrow basis that, if the state decides to hold an investigation post HRA into a pre HRA death, then it must do so in a way which is compatible with article 2 of the Convention.
The position under the Convention
In order to see whether the section 22 argument is right, it is necessary first to examine the essential reasoning of the majority decision in ilih.
The death in that case occurred before Slovenia ratified the Convention.
A question arose as to whether the ECtHR had temporal jurisdiction to adjudicate on the question whether Slovenia had discharged its procedural obligation under article 2 to investigate the death.
The fundamental principle that the ECtHR has no temporal jurisdiction to examine a complaint of breach of a Convention obligation by a state which is alleged to have occurred on a date before it ratified the Convention (referred to as the critical date) was not in issue.
There is no doubt that the Convention does not have retroactive effect.
Indeed, this important principle was asserted and acknowledged in ilih as being the source of the problem that arose in that case: how was the principle to be applied where the death occurs before the critical date and the investigation is conducted wholly or in part after the date of ratification? Thus at para 146, the majority referred to Blei v Croatia (2006) 43 EHRR 1038 (para 82) as confirming that in order to establish the Courts temporal jurisdiction it is therefore essential to identify, in each specific case, the exact time of the alleged interference.
At paras 149 to 151, the majority referred to the varying approaches taken by different Chambers of the Court to the issue of temporal jurisdiction in the particular context of a death occurring before the critical date and an investigation into the death occurring wholly or partly after the critical date.
These included the decision in Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) where the court held that it had no temporal jurisdiction to deal with the procedural obligation under article 2 as that obligation derived from killings which had taken place before Romania ratified the Convention.
At para 152 of their judgment in ilih, the majority said that having regard to the varying approaches taken by different Chambers of the Court to the problem: the Grand Chamber must now determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date.
This was the question that the court set itself to answer.
It is clear, therefore, that it was not the aim of the court to undermine or vary in any way the temporal jurisdiction principle.
The question was how that principle was to be applied where the death occurs before the date of ratification and the investigation is conducted wholly or in part after that date.
The majority answered that question by reinterpreting the investigative obligation created by article 2.
It was now declared to be a distinct free standing obligation.
As the majority put it at para 159 of the judgment, the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty which could give rise to a separate and independent interference within the meaning of the Blei judgment which can be considered to be a detachable obligation arising out of article 2 capable of binding the State even when the death took place before the critical date.
This new interpretation of the procedural obligation in article 2 had an important consequence for the temporal jurisdiction of the court.
It meant that the court would now have temporal jurisdiction to deal with complaints that investigations into deaths before the critical date were not being conducted in accordance with article 2.
Previously, this was not possible because the investigative obligation was seen as deriving from the death and an integral part of the substantive article 2 obligation.
If the courts temporal jurisdiction prevented it from dealing with a complaint of breach of the substantive obligation, it inevitably followed that for the same reason it was prevented from dealing with a complaint of breach of the procedural obligation.
But the principle that the Convention does not have retroactive effect was left untouched by ilih.
It is worth noting that in ilih an objection of the dissenting judges was that the majority interpretation of article 2 would be tantamount to giving retroactive effect to the Convention: see para 9 of the Joint Opinion of Judges Bratza and Trmen.
But the majority did not see it that way.
Their approach was that they were reinterpreting article 2 by detaching the investigative obligation from the death.
The consequence of this was that in certain circumstances there could now be an obligation to investigate deaths that occurred before the critical date.
But this was achieved by a substantive interpretation of the article and not by departing from the fundamental principle that the Convention does not have retroactive effect.
I have already said that the core reasoning of the decision of the majority in ilih is that the investigative obligation is distinct and detachable from the substantive obligation.
But the court recognised that there had to be limits to this distinct obligation in the particular context of the obligation to investigate deaths occurring before the critical date.
The court was alive to the need to exclude from the procedural obligation (i) investigations into deaths that occurred many years before the critical date and (ii) investigations into deaths that occurred (even shortly) before the critical date but which are not started until many years after the critical date.
Thus the majority said in terms at para 161 that, having regard to the principle of legal certainty, the courts 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.
They defined the limits at paras 162 and 163 in language which, in parts, is extremely obscure.
Lord Phillips has quoted the passages at para 44 above.
The use of the word genuine in the first sentence of para 163 to describe the nature of the connection that must exist between the death and the critical date is puzzling, but it is not necessary to decide what this means for the purposes of determining the present appeal.
There must, however, be a temporal connection between the death and the investigative obligation on the one hand and the critical date on the other hand.
Thus if the date of death was not long before the critical date and a significant proportion of the procedural steps required by article 2 falls to be carried out after the critical date, then the investigation should be carried out in accordance with article 2 and the ECtHR will entertain a complaint of non compliance.
This is made clear at para 165 of the judgment of the majority in ilih, where they noted that the death occurred little more than a year before the ratification of the Convention by Slovenia and that, with the exception of the preliminary investigation, all the relevant proceedings were initiated and conducted after that date.
It was in the light of these factors that they concluded that the alleged interference with the procedural article 2 rights fell within the courts temporal jurisdiction.
It was the closeness of the temporal connection between the death and the critical date that led Judge Lorenzen to agree at p 1045, para O I3 of the EHRR report, that the court had jurisdiction to examine the procedural complaint under article 2.
It does not, therefore, necessarily follow from the mere fact that an investigation is to take place after the critical date into a death that occurred before the critical date that the investigation must comply with the article 2 procedural obligation.
There must be some temporal connection between the investigation and the critical date.
That connection will exist where, for example, an investigation was initiated before the critical date, but a significant part was conducted after the critical date.
The position under the HRA
So much for the position under the Convention.
But how does this affect the position in our domestic law under the HRA? I return to the section 22 argument.
Unquestionably, the effect of section 22 of the HRA is that there is no remedy under the HRA for breach of the substantive aspect of article 2 of the Convention in respect of deaths occurring before 2 October 2000.
In In re McKerr [2004] 1 WLR 807, the House of Lords decided that, in the context of the article 2 investigative duty, the obligation in section 6(1) of the HRA did not apply to a death which occurred before the Act came into force.
It is sufficient to refer to the reasoning of Lord Nicholls which Lord Phillips has set out at para 28 above.
In particular, at para 22 Lord Nicholls said that this interpretation of section 6: has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole.
Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death).
But this reasoning cannot stand in the light of ilih.
It is no longer right to treat all the obligations arising under article 2 as parts of a single whole.
It has now been explained that the procedural obligation is distinct and detachable from the substantive obligation.
I agree with Lord Phillips that this is where the mirror principle becomes relevant.
Subject to the limits which I have mentioned, the ECtHR has now defined the procedural obligation in article 2 as being detachable from the substantive obligation.
That definition must be reflected in our domestic law.
This does not make the HRA retroactive in circumstances not permitted by section 22 any more than ilih made the Convention retroactive contrary to the long standing principle of temporal jurisdiction.
As Lord Hope said in Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, para 44 the purpose of [sections 6 and 7 of the HRA] is to provide a remedial structure in domestic law for rights guaranteed by the Convention.
One of those rights is to have an article 2 compliant investigation after the critical date into a death that occurred before the critical date.
Translated into terms of the HRA, that must mean that there is a right to have such an investigation after 2 October 2000 into a death that occurred before that date if such a right would be recognised by the ECtHR.
In my view, it is nothing to the point to speculate what Parliament might have chosen to do if ilih had been decided before the enactment of the HRA.
The same question might be asked about any development of the Convention by the ECtHR post HRA.
The fact is that Parliament chose to incorporate the Convention and must be taken to have known that, in doing so, it would be likely to be re interpreted by the ECtHR from time to time.
The Convention is a living instrument which evolves over time as a result of interpretative decisions of the ECtHR.
The procedural obligation implicit in article 2 is itself a good example of such evolution.
It was recognised by the ECtHR in McCann v United Kingdom (1995) 21 EHRR 97 when, for the first time, the court held that the obligation to protect life under article 2 requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the State (para 161).
Suppose that the decision in McCann itself had postdated the coming into force of the HRA.
It would not have been arguable on the basis of the section 22 argument that, since the re interpretation of article 2 had occurred after the HRA came into force, section 6(1) did not require an article 2 compliant investigation.
The present case
The deaths occurred on 9 October 1990.
The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings.
These were not provided until 2002 and it was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2.
The deaths were 10 years before the HRA came into force.
That is a relevant factor to be taken into account when considering whether there is a sufficient connection between the deaths and the coming into force of the Act.
But ilih shows that it is not the only factor.
In particular, of considerable importance is the fact that at that date the investigation had been initiated, but a significant proportion of the procedural steps required to be taken had not yet been taken.
In that respect, the facts of the case are similar to the facts in ilih.
This is the feature of ilih which is emphasised by the majority at para 165 and by Judge Lorenzen at p 1045, para O I4 of the EHRR report.
I would hold that the inquests into the deaths should be conducted in accordance with the requirements of article 2.
I also agree with Lord Phillips that this conclusion is reinforced by the mirror principle.
It would be unsatisfactory for the Coroner to conduct an inquest which did not satisfy article 2 leaving open the possibility of a claim against the United Kingdom in the ECtHR.
Conclusion
I would allow these appeals.
I would add that I hope that before long the ECtHR will have an opportunity to clarify the meaning of para 163 of the judgment of the majority.
If nothing else, the present appeal has served to highlight some of its obscurity and the difficulties of its application.
DISSENTING JUDGMENT
LORD RODGER
The appellants are the next of kin of Martin McCaughey and Dessie Grew, who were shot and killed by the Army on 9 October 1990 long after the United Kingdom had ratified the European Convention and recognised the right of individual petition under it.
So at all relevant times those who can be regarded as victims of the killings could have applied either to the Commission or, after 1999, to the Court in Strasbourg if they had considered that the United Kingdom had violated article 2 of the Convention and the matter had not been remedied by the domestic courts.
The Director of Public Prosecutions decided that no one should be prosecuted for the deaths and he passed papers to the coroner in 1994.
While preparatory steps have been taken, so far no inquest has been held.
In 1995 the European Court first identified a positive duty inherent in article 2 of the Convention that requires states to investigate relevant deaths: McCann v United Kingdom (1995) 21 EHRR 97.
Assuming, therefore, for the sake of the argument, that there had been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of McCaughey and Grew, the European Court would unquestionably have had jurisdiction ratione temporis to deal with it and to grant any appropriate remedy.
By contrast, the widow of Gervaise McKerr, who was shot and killed by police officers in November 1982, did make an application to Strasbourg, alleging inter alia a violation of article 2.
In McKerr v United Kingdom (2002) 14 EHRR 553 the European Court held that there had been a violation of article 2 in respect of failings in the investigative procedures relating to that death.
The court also awarded McKerrs son, who had taken over the case on his mothers death, 10,000 as just satisfaction in respect of the frustration, distress and anxiety which he must have suffered.
The Government paid that sum and presented a package of proposals to the Committee of Ministers with responsibility for supervising execution of judgments.
The Human Rights Act 1998 (HRA) came into force on 2 October 2000, some ten years after the deaths of McCaughey and Grew.
The issue in the present appeals is whether any failure by the authorities to investigate these deaths can give rise to a breach of the appellants article 2 Convention rights under the HRA.
In other words, even if the United Kingdom would be in violation of its international law obligation to investigate the deaths under article 2 of the Convention, would the same facts also constitute a breach of a domestic law duty of the relevant public authorities under the HRA to investigate those deaths?
In the case of McCaughey the House of Lords has already answered that question in the negative in Jordan v Lord Chancellor; McCaughey v Chief Constable of the Police Service of Northern Ireland [2007] 2 AC 226.
Lord Bingham simply observed, at p 240, para 4 and p 256, para 35, that, since the deaths occurred well before the HRA came into force, the decision of the House of Lords in In re McKerr [2004] 1 WLR 807 meant that the HRA did not apply to any investigation of them.
So, although no plea has been taken by the Chief Constable, in substance the point raised in the present appeals is res judicata, so far as the first appellant and the Chief Constable are concerned.
In McKerr the issue in the appeal by McKerrs son was the same as in the present appeal.
The House of Lords held, unanimously, that the obligation under section 6(1) of the HRA and the article 2 Convention right in Schedule 1 to the Act, to carry out a proper investigation into a violent death, did not apply to a death which occurred before the HRA came into force on 2 October 2000.
A significant element in the reasoning of the members of the Appellate Committee was their view that the investigative obligation on a state under article 2 of the Convention was designed to ensure that the state had procedures which would discover whether, in the case of a particular death, there had been a violation of the victims right to life under that article.
It followed that there was no obligation under article 2 of the Convention to investigate a death which could not involve a substantive violation of article 2.
Their Lordships concluded that, similarly, there was no obligation under section 6 of, and Schedule 1 to, the HRA to investigate a death which could not itself be unlawful under the same provisions.
The appellants do not suggest that in McKerr the House of Lords misunderstood the international law as it stood at the time.
Rather, they point out that, for the first time, in ilih v Slovenia (2009) 49 EHRR 996 the Grand Chamber of the European Court declared that the investigative obligation under article 2 of the Convention is not only independent of the substantive obligation (that had long been recognised) but also detachable from it.
Therefore the investigative obligation was capable of binding a state, even when the death had taken place before the date of the states ratification of the Convention: 49 EHRR 996, 1030, para 159.
Similarly, Ms Quinlivan argued, this court should now hold that, for the purposes of the HRA, the investigative obligation under section 6 and under the article 2 Convention right was capable of binding the relevant public authorities even when the death had taken place before the HRA came into force.
Having held that an obligation of investigation under article 2 could arise in respect of deaths which had occurred before the state ratified the Convention, the European Court added, at paras 161 163 of its judgment in ilih, that this obligation was limited in some way: 161.
However, having regard to the principle of legal certainty, the court's 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. 162.
First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the court's temporal jurisdiction. 163.
Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect.
Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account will have been or ought to have been carried out after the critical date.
However, the court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner (internal citation omitted).
It would be a work of supererogation for me to criticise the courts legal analysis in para 163 or to emphasise the blow to legal certainty which it has struck.
All that need be said on these matters has been said concisely, authoritatively and trenchantly by the best qualified of critics, Sir Nicolas Bratza, in his joint dissenting opinion with Judge Trmen, O IV: 49 EHRR 996, 1050 1055.
Since the majority of the Grand Chamber adopted the analysis in para 163 of its judgment in ilih despite this powerful dissent and despite the problems pointed out by other judges, they were clearly determined to bring at least some deaths occurring before a states ratification of the Convention within the courts temporal jurisdiction.
Predictably, the Strasbourg court has gone on to apply its new approach in other cases, including Varnava v Turkey (2008) 50 EHRR 467 where it held that it had jurisdiction over a disappearance in 1974, long before Turkey ratified the Convention.
Doubtless, similar decisions will follow in future.
This court has nothing to do with the temporal jurisdiction of the European Court.
Even on the most extensive interpretation of what it said in ilih, the European Court might hesitate to assert jurisdiction over the investigation of deaths before January 1966 when the United Kingdom recognised the right of individual petition.
But, even if it did assert jurisdiction, there would be nothing which this court could do about it.
In a novel twist to the thinking behind the HRA, however, Ms Quinlivan submits that this court should bring the many problems created by ilih home from Strasbourg.
In other words, this court should abandon its clear decision in McKerr and should hold that, in the light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date.
Understandably perhaps, she declined to formulate a version of the ilih principles which would define the scope of this new obligation under the HRA.
It was enough, she said, that the obligation would apply to the inquests into the deaths of McCaughey and Grew since they are to be held at a time when the HRA is in force.
According to counsel, ilih means that, even if the public authorities are not under an obligation to hold an investigation, if they actually choose to do so after 2 October 2000, the investigation must comply with the relatives article 2 Convention rights.
She drew a comparison with criminal proceedings: while the DPP may not be under an obligation to prosecute someone, if he chooses to do so, after 2 October 2000 the prosecution and trial must comply with the defendants article 6 Convention rights.
Whatever else may be said about this carefully crafted and deliberately low key submission, it does not reflect the decision in ilih.
Article 2 is not concerned simply with the procedures to be adopted in any investigation which a state may choose to hold after ratification: on the contrary, as para 163 of the decision makes clear by the use of ought, according to the European Court, in an appropriate case the Convention requires the State to hold an article 2 compliant investigation into pre ratification deaths.
So, if this court were to apply the reasoning of the European Court by analogy and there is no other pretended justification for overruling McKerr it would have to hold that the HRA requires the relevant public authorities to hold an investigation which complies with the article 2 Convention right into violent deaths that occurred before 2 October 2000.
As the court was told, quite a few violent deaths in Northern Ireland have not been investigated in this way.
Plainly, if ilih had been decided before McKerr, some of the reasoning of the Appellate Committee would have been different.
But it may be more instructive to suppose that ilih had been decided before royal assent was given to the HRA in November 1998.
In other words, suppose it had been known then that article 2 of the Convention could apply to the investigation of certain deaths that had occurred before a state ratified the Convention or recognised the right of individual petition.
In that situation Parliament would have known that individuals could apply to the Strasbourg court and allege that an investigation should be held into certain deaths occurring within the jurisdiction of the United Kingdom before 14 January 1966.
Perhaps let us suppose some such applications had already succeeded.
What difference, if any, would this have made to Parliaments decision as to the appropriate temporal application of the HRA? It is hard to see why it should have made any difference at all.
The decision as to the temporal application of the HRA cannot have depended on the technicalities of the analysis of the various rights.
Rather, recognising that it was about to make a major change to our domestic legal systems, Parliament had to decide how that major change was to be carried through.
So, for example, Parliament decided that the HRA should not come into operation for almost two years after royal assent in order to allow time for appropriate preparations to be made.
And then, except as provided by section 22(4), the Act was not to be retroactive.
Another question was whether, and, if so, how, the HRA was to apply to situations such as the situations in these appeals are said to be which were ongoing when it came into operation on 2 October 2000.
These were broad policy questions.
I find it impossible to believe that, if the Government and Parliament had been aware of the decision in ilih in 1998, this would have had any effect at all on their choice of policy.
After all, the temporal application of the Convention was irrelevant for purposes of deciding the temporal application of the HRA.
Moreover, the Government and Parliament knew very well, for example, that, between royal assent and 2 October 2000, there were liable to be many alleged violations of, say, articles 6 and 8 of the Convention.
It would have been easy to bring them within the scope of the Act by a suitable transitional provision saying that the Act applied to acts occurring on or after 8 November 1998.
But Parliament introduced no such transitional provision: subject to section 22(4), these acts would continue to be justiciable only in Strasbourg.
Making the HRA apply to the investigation of violent deaths occurring as far back as 1980 or 1990 would have raised particularly sensitive questions.
Is it really to be supposed that Parliament would have decided to introduce a transitional provision that would have imposed a duty to investigate all such pre commencement deaths merely because the European Court thought that it had jurisdiction in respect of violent deaths that had occurred before a state ratified the Convention? Surely not.
The reality is that including a transitional provision to cover the investigation of deaths in the 1980s and 1990s would have had significant practical effects.
These effects would have been felt, in particular, in Northern Ireland where as was well known from the McKerr case in Strasbourg among others there was pressure for such investigations to be held.
The Good Friday Agreement was still in its uncertain infancy.
Whether to bring past deaths within the scope of the Act was therefore a policy question, with potentially far reaching ramifications, for the executive and the legislature.
And, as the House of Lords held in McKerr, the plain text of the HRA shows that Parliament decided not to bring them within its scope.
If, by contrast, Parliament had intended to include them, the relevant provisions would have had to be drafted differently in order to reflect the difference in the way that section 6(1) was intended to apply both in relation to different article 2 Convention rights and in relation to article 2 Convention rights as opposed to, say, article 8 Convention rights.
See McKerr [2004] 1 WLR 807, 814, para 22, per Lord Nicholls, and p 831AB, para 81 of my speech.
This court is concerned with what Parliament chose to enact, rather than with what it might have chosen to enact.
Since the only transitional provision in the HRA is section 22(4), the inevitable inference is that, with this exception, all the provisions, including section 6(1) and the Convention rights in Schedule 1, were intended to apply only to events occurring on or after 2 October 2000.
So there was to be no article 2 Convention right to an inquiry into a death that occurred before the Act commenced.
If as the House of Lords held in McKerr that is indeed the correct interpretation of the temporal application of the HRA when it was passed, it is both incoherent and impossible to suggest that its temporal application can have been altered by the poorly reasoned and unstable decision of the Strasbourg court on the Convention in ilih more than ten years later.
To hold otherwise involves adding to the HRA a transitional provision that never was.
That is no small matter since drafters know very well that they must painstakingly consider how all the provisions of the legislation are to apply to circumstances as they will exist on commencement: G C Thornton, Legislative Drafting (4th edition, 1996), p 383.
Moreover, if the compelling force for introducing this imaginary transitional provision is para 163 of ilih, then it can safely be said that no Parliamentary counsel would ever have inserted a transitional provision that even remotely resembled the supposed principles in that paragraph.
But, if the imaginary transitional provision does not reflect and fully reflect that paragraph, including its open ended tailpiece, then the simple fact is that this court would be overruling McKerr by inventing its own transitional provision which is designed to insert into the Act a backwards time limit that Parliament did not enact.
In McKerr [2004] 1 WLR 807, 827, para 67, Lord Hoffmann commented that, if the HRA applies to pre commencement deaths, it would in principle be necessary to investigate the deaths by state action of the Princes in the Tower.
That was a vivid illustration of the point that provided the claimant was a victim there would be nothing in the Act to limit the deaths which would have to be investigated.
The campaigns by relatives of soldiers who were court martialled and shot during the First World War and by relatives of certain people who were executed in the 1950s suggest that the victim requirement could be satisfied long after the event.
A time limit for the deaths to be investigated would therefore have been essential if the HRA had been intended to apply to the investigation of pre commencement deaths.
The Act contains no time limit and nothing to provide a proper basis for inferring the existence of one.
This was one of the crucial reasons for the decision in McKerr and it remains as powerful today as it was seven years ago.
For all of these reasons I would dismiss the appeals.
If, having deciphered ilih, Parliament feels moved to amend the HRA so as to impose an obligation on public authorities to investigate deaths which occurred before the HRA came into force, it has every opportunity to do so.
It has not done so over the last two years.
Somehow, I would be surprised if it did so in future.
| UK-Abs | The appellants are the next of kin of Martin McCaughey and Dessie Grew, who were shot and killed by members of the British Army on 9 October 1990.
They believe that the men were the victims of a shoot to kill policy.
In 1994 the Director of Public Prosecutions decided that no prosecutions should be brought and the papers were passed to the Coroner.
Some preparatory steps have been taken but for various reasons the inquest into these deaths have still to take place.
The appellants seek a declaration that the scope of the inquest should comply with Article 2 of the European Convention on Human Rights (the Convention) and thereby extend to an examination of the planning and control of the operation that led to the deaths.
Article 2 (1) provides that Everyones right to life shall be protected by law.
No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law.
Article 2 gives rise not only to a substantive obligation on the state not to kill people but also a procedural obligation to carry out an effective investigation into the circumstances of the deaths (the procedural obligation).
It has been possible since 1966 for an individual to pursue a complaint that the United Kingdom has breached its obligations under Article 2 to the European Court of Human Rights (the ECtHR) if domestic law does not provide a remedy.
The issue arising in these appeals is whether the appellants are entitled to bring a domestic claim under the Human Rights Act 1998 (the HRA), which came into force on 2 October 2000.
In 2004 the House of Lords held in In re McKerr [2004] UKHL 12 that the procedural obligation to investigate a death was triggered by the death.
Investigations into deaths occurring before 2 October 2000 were not therefore within the reach of the HRA, as it was not retrospective.
In 2009 the Grand Chamber of the ECtHR extended the effect of Article 2 in ilih v Slovenia (2009) 49 EHRR 996, ruling that it imposed a freestanding procedural obligation, which in certain circumstances arose even where (as in that case) the death occurred before the member state had ratified the Convention.
In this case the Coroner assigned to conduct the inquest made a preliminary ruling as to its scope on 1 December 2009.
He proposed to consider the purpose and planning of the operation in which the deceased met their deaths.
The Chief Constable of the Police Service of Northern Ireland asserted that as there was no requirement to comply with Article 2 under the HRA (in the light of McKerr) the scope of the inquest was restricted to establishing by what means the deceased came to their deaths.
On the appellants application for a declaration, the High Court and Court of Appeal in Northern Ireland held that they were bound by McKerr to hold that the HRA did not apply to the appellants claims, even if that decision was now inconsistent with ilih.
The Supreme Court by a majority (Lord Rodger dissenting) allows the appeal and holds that the Coroner holding the inquest must comply with the procedural obligation under Article 2.
The Convention is a living instrument and the ECtHR has over time extended the ambit of Convention rights in many areas.
Article 2 is an example of this.
The procedural obligation was first identified in 1995.
In 2001 (in Moldovan v Romania) the ECtHR held that the procedural obligation was derived from the deaths, and the Convention would only apply to the procedural obligation if it applied also to the substantive obligation.
This reasoning was echoed by the House of Lords in 2004 in McKerr on the question of whether the HRA could apply to the procedural obligation when it did not apply at the time of the death [5].
The Grand Chamber of the ECtHR departed from its reasoning in Moldovan in ilih in 2009.
It held that in certain circumstances Article 2 imposed a freestanding or detachable obligation in relation to the investigation of a death which applied even when the death itself had occurred before the member state ratified the Convention.
Those circumstances included where a significant proportion of the procedural steps would take place after the Convention had come into force [50].
As a matter of international obligation, therefore, it is now apparent that the UK must ensure that the inquest which is the subject of this appeal complies with Article 2 as far as this is possible under domestic law [51][82].
The ambit of the HRA has to be interpreted by reference to Parliaments presumed intention on enactment concerning future developments by the ECtHR of Convention rights.
As to this, two principles could be detected, which were potentially in conflict.
The first was that the HRA should not operate retrospectively.
The second was that its ambit should mirror that of the Convention, so that claims could now be brought in the UK which would otherwise be permitted before the ECtHR.
The first principle prevailed in McKerr.
That case was argued on the basis that Article 2 imposed a continuing procedural obligation linked to the death. ilih made it clear, however, that if a State held an inquest, it was under a freestanding obligation to ensure that it complied with the procedural obligations of Article 2.
In the light of this, Parliament could be presumed to have intended that there should be a domestic requirement to mirror the international requirement which now applies [60 62].
In practice, comparatively few inquests will be affected by this ruling, given the ten years which have already passed since the HRA came into force [102] Lord Rodger dissented, considering that ilih was irrelevant to the interpretation of the HRA and that the decision of the majority involved adding a transitional provision to the HRA which for policy reasons Parliament had not included [161] Lord Hope agreed with him that there was no right in domestic law to an Article 2 compliant inquest in respect of deaths occurring prior to 2 October 2000.
However, he agreed with the majority that where the state has decided to hold an inquest into such a death, that inquest must comply with Article 2 [75].
|
The case of Seldon v Clarkson Wright and Jakes [2012] UKSC 16, which was heard alongside this case, concerned direct discrimination on the ground of age.
In that case there was no issue that the application of a mandatory retirement age constituted direct age discrimination.
The issue was how it might be justified.
This case concerns indirect discrimination on the ground of age.
Mr Homer appeals against the holding of the Court of Appeal that there was no such discrimination in his case.
The Chief Constable appeals against the holding that, if there was such discrimination, it could not be justified.
The proceedings
Mr Homer retired from the police force in October 1995 at the age of 51 with the rank of Detective Inspector.
He immediately began work with the Police National Legal Database (PNLD) as a legal adviser.
The PNLD provides legal advice and other resources to police forces and other organisations in the criminal justice system.
When he was appointed, a law degree or equivalent was not essential if the post holder had exceptional experience/skills in criminal law, combined with a lesser qualification in law.
This he was deemed to have by virtue of the experience gained and examinations passed in the police force.
After his appointment, the criteria were changed so that a law degree became an essential qualification for first appointment, but this did not immediately affect him.
The requirement was never applied to him, nor was he told that the possession of a law degree was an issue of concern to his employers, until the matters giving rise to these proceedings.
The PNLD experienced problems in attracting enough suitably qualified candidates and concluded that this was because the staff were comparatively underpaid and there was no formal career structure.
They were advised to create a new career structure with opportunities for progression and more competitive salaries.
At the same time they were advised that it was important to retain current employees and that they continued to be instrumental in the development and expansion of the database.
In 2005, therefore, the PNLD introduced a new grading structure with three thresholds above the starting grade.
In order to reach the third threshold it was necessary to have a law degree or similar fully completed.
In 2006, Mr Homer was regraded to the first and second thresholds, but not to the third, as he did not have a law degree, although he met the criteria in all other respects.
The evidence of the business director of the PNLD was that she supported Mr Homers application for the third threshold but felt constrained by the rules to deny it to him.
She supported his internal appeal against the decision but it was rejected in May 2006.
By then, he was aged 62.
The normal retirement age in the PNLD was 65, although employment might be extended for a year at a time subject to satisfactory medical reports and fulfilling other criteria not expected of people below the age of 65.
Mr Homer would reach the age of 65 in February 2009.
It was the expectation of both sides that he would retire then.
If he were to undertake a law degree by part time study it would take him at least four years.
The earliest he could have graduated would have been the summer of 2010, after his normal retirement date.
In any event, it was unlikely that he would have obtained a place on a course starting in September 2006 if he only applied in May 2006.
Mr Homer appealed against the rejection of his internal appeal in August 2006.
The Employment Equality (Age) Regulations 2006 (SI 2006/1031) came into force on 1 October 2006.
His further appeal was rejected in November 2006.
In December he issued a formal grievance, asking to be treated as a transitional exception, but the respondent did not hold the required meetings, and the grievance was eventually rejected in August 2007.
In April 2007 he issued these proceedings in the Employment Tribunal (ET) complaining of unlawful age discrimination.
In January 2008, the ET held that Mr Homer was indirectly discriminated against on grounds of age and that this was not objectively justified.
However, the Employment Appeal Tribunal (EAT) held that he had not been indirectly discriminated against on grounds of age, although if he had been, it would not have been justified: [2009] ICR 223.
The Court of Appeal dismissed both his appeal and the respondents cross appeal: [2010] EWCA Civ 419, [2010] ICR 987.
The same issues arise on the appeal to this Court.
The law
The Employment Equality (Age) Regulations 2006 were the means by which the United Kingdom transposed into UK law the requirements of Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation.
According to article 1, the purpose of the Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment.
Article 2 explains what this means.
The portions dealing with indirect discrimination are as follows: 1.
For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1. 2.
For the purposes of paragraph 1: . (b) indirect discrimination shall be taken to occur where an apparently neutral provision, criterion or practice would put persons having . a particular age . at a particular disadvantage compared with other persons unless: (i) that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary, .
This is transposed by regulation 3 of the Age Regulations as follows: (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if . (b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but (i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and (ii) which puts B at that disadvantage, and A cannot show the . provision, criterion or practice to be a proportionate means of achieving a legitimate aim. (2) A comparison of Bs case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other. (3) In this regulation (a) age group means a group of persons defined by reference to age, whether by reference to a particular age or a range of ages; and .
Unlike the case of direct discrimination, with which Seldon is concerned, it is not suggested that regulation 3 does not properly transpose the Directive into UK law.
The question is simply how it applies in this case.
Regulation 7 defines the relevant unlawful acts of discrimination: (2) It is unlawful for an employer, in relation to a person whom he employs at an establishment in Great Britain, to discriminate against that person (a) in the terms of employment which he affords him; (b) in the opportunities which he affords him for promotion, a transfer, training or receiving any other benefit; (c) by refusing to afford him, or deliberately not affording him, any such opportunity; or (d) by dismissing him, or subjecting him to any other detriment.
It is common ground that the failure to allow Mr Homer across the third threshold falls within the regulation.
The discrimination issue
The ET found that the appropriate age group was people aged 60 to 65, who would not be able to obtain a law degree before they retired [15].
That group was put at a particular disadvantage compared with people younger than that, because they were prevented from reaching the third threshold and the status and benefits associated with it [18].
The claimant was put at a disadvantage because he could not achieve the qualification (and therefore the status) before he retired.
The ET noted that it was not argued that he was put at a disadvantage because fewer people in his age group had law degrees [18].
The EAT and Court of Appeal were however persuaded that what put Mr Homer at a disadvantage was not his age but his impending retirement.
Had it not been for that, he would have been able to obtain a degree and reach the third threshold.
As Mr Lewis argues on behalf of the respondent, the key words in regulation 3(1)(b) are puts at.
What is it that puts him at or causes the disadvantage complained of? It is the fact that he is due to leave work within a few years.
Regulation 3(2) requires that the relevant circumstances in the complainants case must be the same, or not materially different, from the circumstances in the case of the persons with whom he is compared.
So, argues Mr Lewis, you have to build the relevant circumstance into the comparator group also, in this case the proximity of leaving work.
So Mr Homer must be compared with anyone else who is nearing the end of his employment for whatever reason.
Anyone who was contemplating leaving within a similar period whether for family reasons or some other reason would face the same difficulty.
That is what puts him at a disadvantage and not the age group to which he belongs.
Indeed, what Mr Homer is arguing for would put people of his age group at an advantage compared with younger people, because they would be able to get the benefits of the third threshold without having a law degree when others would not.
This argument involves taking the particular disadvantage which is suffered by a particular age group for a reason which is related to their age and equating it with a similar disadvantage which is suffered by others but for a completely different reason unrelated to their age.
If it were translated into other contexts it would have alarming consequences for the law of discrimination generally.
Take, for example, a requirement that employees in a particular job must have a beard.
This puts women at a particular disadvantage because very few of them are able to grow a beard.
But the argument leaves sex out of account and says that it is the inability to grow a beard which puts women at a particular disadvantage and so they must be compared with other people who for whatever reason, whether it be illness or immaturity, are unable to grow a beard.
Ironically, it is perhaps easier to make the argument under the current formulation of the concept of indirect discrimination, which is now also to be found in the Equality Act 2010.
Previous formulations relied upon disparate impact so that if there was a significant disparity in the proportion of men affected by a requirement who could comply with it and the proportion of women who could do so, then that constituted indirect discrimination.
But, as Mr Allen points out on behalf of Mr Homer, the new formulation was not intended to make it more difficult to establish indirect discrimination: quite the reverse (see the helpful account of Sir Bob Hepple in Equality: the New Legal Framework, Hart 2011, pp 64 to 68).
It was intended to do away with the need for statistical comparisons where no statistics might exist.
It was intended to do away with the complexities involved in identifying those who could comply and those who could not and how great the disparity had to be.
Now all that is needed is a particular disadvantage when compared with other people who do not share the characteristic in question.
It was not intended to lead us to ignore the fact that certain protected characteristics are more likely to be associated with particular disadvantages.
In any event, it cannot be right to equate leaving work because of impending retirement with other reasons for doing so.
They are materially different.
A person who leaves work for family reasons or takes early retirement generally has some choice in the matter.
Indeed, she may factor into her decision whether it would be advisable to obtain the law degree and with it the higher grading before doing so.
A person who is coming up against the mandatory retirement age does not have the same choice.
Any extension depends upon the decision of the employer which cannot be depended upon at the relevant time.
At the relevant time for this case, regulation 30 of the Age Regulations provided that the decision to retire an employee at the age of 65 did not need to be justified.
Hence, as Mr Allen puts it, this is a case of running up against the buffers of a mandatory retirement age rather than a matter of choice.
Nor is this a question of asking for more favourable treatment for people of their age.
It obviously has to be possible to cure the discrimination in a non discriminatory way.
In London Underground Ltd v Edwards (No 2) [1999] ICR 494, for example, the new rosters for underground train drivers were held to be indirectly discriminatory because all the men could comply with them but not all the women could do so: it was a striking fact that not a single man was disadvantaged despite the overwhelming preponderance of men in the pool of train drivers affected.
The reason, of course, was that the new rosters had a greater impact upon single parents and single parents are predominantly (though not exclusively) female.
But the problem could be solved, not by making an exception for the women, but by making arrangements for single parents of whatever sex.
This problem could have been solved by making arrangements for people appointed before the new criterion was introduced.
Ingenious though the argument put forward by Mr Lewis is, therefore, to my mind it is too ingenious.
The law of indirect discrimination is an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a I would therefore allow Mr Homers appeal on this point. particular protected characteristic.
A requirement which works to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age.
There is, as Lord Justice Maurice Kay acknowledged, unreality in differentiating between age and retirement [34].
Put simply, the reason for the disadvantage was that people in this age group did not have time to acquire a law degree.
And the reason why they did not have time to acquire a law degree was that they were soon to reach the age of retirement.
The resulting scrutiny may ultimately lead to the conclusion that the requirement can be justified.
But if it cannot, then it can be modified so as to remove the disadvantage.
Justification
The approach to the justification of what would otherwise be indirect discrimination is well settled.
A provision, criterion or practice is justified if the employer can show that it is a proportionate means of achieving a legitimate aim.
The range of aims which can justify indirect discrimination on any ground is wider than the aims which can, in the case of age discrimination, justify direct discrimination.
It is not limited to the social policy or other objectives derived from article 6(1), 4(1) and 2(5) of the Directive, but can encompass a real need on the part of the employers business: Bilka Kaufhaus GmbH v Weber von Hartz, Case 170/84, [1987] ICR 110.
As Mummery LJ explained in R (Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213, at [151]: . the objective of the measure in question must correspond to a real need and the means used must be appropriate with a view to achieving the objective and be necessary to that end.
So it is necessary to weigh the need against the seriousness of the detriment to the disadvantaged group.
He went on, at [165], to commend the three stage test for determining proportionality derived from de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69, 80: First, is the objective sufficiently important to justify limiting a fundamental right? Secondly, is the measure rationally connected to the objective? Thirdly, are the means chosen no more than is necessary to accomplish the objective? As the Court of Appeal held in Hardy & Hansons plc v Lax [2005] EWCA Civ 846, [2005] ICR 1565 [31, 32], it is not enough that a reasonable employer might think the criterion justified.
The tribunal itself has to weigh the real needs of the undertaking, against the discriminatory effects of the requirement.
The ET found that the aim of requiring a law degree was to facilitate the recruitment and retention of staff of appropriate calibre within the PNLD.
It is not disputed that this was a legitimate aim.
When it comes to considering proportionality, however, it is necessary to distinguish the aim of recruitment from the aim of retention.
It is also necessary to distinguish the aim of retaining newly or recently recruited staff, who stand to benefit from the opportunity of career progression, and the aim of retaining existing staff, who were recruited under a different system, and who may or may not be motivated to stay by such an incentive.
It was clearly important to the developing organisation to retain the skills and expertise of its existing highly valued staff, including Mr Homer.
This means, as the EAT pointed out, that it was necessary to distinguish between the justification of the criteria for recruitment and the justification of the criteria for the thresholds above that, and in particular the third threshold.
The ET (perhaps in reliance on the IDS handbook on age discrimination) regarded the terms appropriate, necessary and proportionate as equally interchangeable [29, 31].
It is clear from the European and domestic jurisprudence cited above that this is not correct.
Although the regulation refers only to a proportionate means of achieving a legitimate aim, this has to be read in the light of the Directive which it implements.
To be proportionate, a measure has to be both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so.
Some measures may simply be inappropriate to the aim in question: thus, for example, the aim of rewarding experience is not achieved by age related pay scales which apply irrespective of experience (Hennigs v Eisenbahn Bundesamt; Land Berlin v Mai, Joined Cases C 297/10 and C 298/10 [2011] European Court Reports); the aim of making it easier to recruit young people is not achieved by a measure which applies long after the employees have ceased to be young (Kckdeveci v Swedex GmbH & Co KG, Case C 555/07, [2011] 2 CMLR 703).
So it has to be asked whether requiring existing employees to have a law degree before they can achieve the highest grade is appropriate to the aims of recruiting and retaining new staff or retaining existing staff within the organisation.
The EAT expressed some scepticism about this [45, 46].
A measure may be appropriate to achieving the aim but go further than is (reasonably) necessary in order to do so and thus be disproportionate.
The EAT suggested that what has to be justified is the discriminatory effect of the unacceptable criterion [44].
Mr Lewis points out that this is incorrect: both the Directive and the Regulations require that the criterion itself be justified rather than that its discriminatory effect be justified (there may well be a difference here between justification under the anti discrimination law derived from the European Union and the justification of discrimination in the enjoyment of convention rights under the European Convention of Human Rights).
Part of the assessment of whether the criterion can be justified entails a comparison of the impact of that criterion upon the affected group as against the importance of the aim to the employer.
That comparison was lacking, both in the ET and in the EAT.
Mr Homer (and anyone else in his position, had there been someone) was not being sacked or downgraded for not having a law degree.
He was merely being denied the additional benefits associated with being at the highest grade.
The most important benefit in practice is likely to have been the impact upon his final salary and thus upon the retirement pension to which he became entitled.
So it has to be asked whether it was reasonably necessary in order to achieve the legitimate aims of the scheme to deny those benefits to people in his position? The ET did not ask itself that question.
To some extent the answer depends upon whether there were non discriminatory alternatives available.
It is not clear whether the ET were suggesting that an exception should have been made for Mr Homer (who was on any view an exceptional case) or whether they were suggesting that the criterion should have been modified to include qualifications other than law degrees.
As the EAT said, an ad hominem exception may be the right answer in personnel management terms but it is not the answer to a discrimination claim.
Any exception has to be made for everyone who is adversely affected by the rule.
Grandfather clauses preserving the existing status and seniority, with attendant benefits, of existing employees are not at all uncommon when salary structures are revised.
So it is relevant to ask whether such a clause could have represented a more proportionate means of achieving the legitimate aims of the organisation.
On the other hand, what is in issue here is not preserving existing benefits but affording entry to a newly created higher grade.
As the ET did not approach the question of justification in a suitably structured way, and ask itself all the right questions, the case should be remitted on the issue of justification.
We cannot be clear that if they had asked the right questions they would have reached the same conclusion, although it is possible that they would have done so.
However, as the EAT pointed out, there is nothing to stop the Chief Constable deciding to make a personal exception for Mr Homer, quite independently of his age discrimination claim (provided of course that it can be done without discriminating against someone else on a prohibited ground).
This litigation has been pursued in a friendly spirit and it is to be hoped that it might be resolved in similar vein.
It was important to establish the principles in a new area which many still find counter intuitive.
It is not long ago that it was taken for granted that age was a relevant criterion in deciding how long people should be allowed to go on working.
Now that has to be justified.
The same is true of apparently neutral criteria which have an adverse impact upon people of a particular age.
But both the Age Regulations and the Equality Act recognise that difficult balances have to be struck between the competing interests of different age groups.
We all have a lot of learning to do.
LORD HOPE
For the reasons that Lady Hale gives, with which I entirely agree, I would allow this appeal.
Mr Lewis QC for the Chief Constable made much of the point that it was Mr Homers own decision to retire when he reached the normal retirement age of 65 and not stay on so that he could get the benefit of his law degree.
But I do not think that it follows that his age had no bearing on the issue.
The time available to complete the law degree and get the benefits that would flow from it was inevitably linked to the age of the person concerned.
The effect of the measure was bound to vary from person to person, but I do not see this as a reason for saying that it did not discriminate against Mr Homer on account of his age.
The number of years that he had left to him before he could reasonably expect to retire meant that his age had a direct bearing on whether he would be disadvantaged by the requirement.
He was, in effect, being forced to work on beyond the normal retirement age so that he could obtain the benefit.
This was, in itself, indirectly discriminatory.
It was submitted that to exclude Mr Homer from the requirement to obtain a law degree would be to give him a benefit that was not available to others.
It is true that this would have meant that he would not have to go to the trouble of studying and preparing for the examinations.
Nor would he have to wait until he had passed the examinations before he got the benefit.
But I cannot accept that discrimination on the grounds of age can be regarded as justified simply because eliminating it would put others at a disadvantage that is not related to their age.
Any reversal of a discriminatory rule or practice that does not treat everyone equally is likely to have an impact on others which, from their point of view, may seem to be to their disadvantage.
This is especially so in the case of age discrimination, where a measure that affects some will inevitably affect others differently.
We all grow older as we progress through life.
Age is a characteristic which changes with time.
A disadvantage to others which is unrelated to their age will not be a ground in itself for holding that the age related discrimination of the person who complains of it must be regarded as justified.
That removing the discrimination would have this effect on others may, however, have a bearing on the issue of justification when it is looked at more broadly.
This is because it leads to the question whether there were other ways of dealing with the requirement of enhanced qualification.
The answers to that question may show that the discrimination could have been avoided without giving rise to any effects which were objectionable.
But the question whether there was a more proportionate way of doing this was not explored by the Employment Tribunal.
I agree with Lady Hale that the case must be remitted to it for a further consideration of that issue.
LORD MANCE
My initial reaction was that the case advanced by the appellant Mr Homer was counter intuitive (a word which Lady Hale uses in para 27).
But, having read her judgments in this case as well as in Seldon v Clarkson Wright and Jakes, I am fully persuaded that my initial reaction was wrong, and that the present case involved indirect discrimination on grounds of age, basically for the reasons she gives in paras 1 to 18.
The key to the resolution of Mr Homers claim therefore lies in the issue of justification, which must be remitted for further consideration by the Employment Tribunal as Lady Hale says in para 26.
In relation to that issue, I have difficulty about any suggestion that the Chief Constable should have made a personal exception for Mr Homer quite outside his age discrimination claim (Lady Hale, para 26) or make a modification of the provision, criterion or practice [requiring a law degree] for the appellants age group (Maurice Kay LJs phrase in the Court of Appeal, para 38).
The problem about such suggestions was identified by Elias J in the Employment Appeal Tribunal, para 49, when he held that the Tribunal was not correct to say if indeed it was intending to say that the discrimination should have been avoided by making a personal exception of the claimant.
He explained: If the imposition of the criterion of a law degree resulted in unjustified indirect discrimination, because the discriminatory effect was disproportionate to the aim, then all adversely affected by the rule must be treated equally.
That may well have had the consequence that only the claimant might qualify, but it is not the same as creating an ad hominem exception for him.
In other words, if (as the Tribunal appears to have concluded) there was no objective need for an employee as experienced, skilled and knowledgeable as Mr Homer to have had a law degree in order to qualify at the third threshold, then there may have been employees, with more than five years to go to retirement and so with sufficient years ahead in which to complete a law degree, whose experience, skill and knowledge would also have made such a requirement unnecessary.
An exception for Mr Homer personally, or a general exception for employees within four or five years of retirement age, could have discriminated unjustifiably against such younger employees on grounds of age.
No doubt, this is an aspect which the Tribunal will wish to consider, among others, in relation to the issue of justification.
| UK-Abs | This case concerns the scope of indirect discrimination on the ground of age.
It was heard alongside the case of Seldon v Clarkson Wright and Jakes [2012] UKSC 16 which concerned the scope for justification of direct discrimination on the ground of age.
Mr Homer began working for the Police National Legal Database (PNLD) as a legal advisor in 1995 at the age of 51.
When he was appointed the role did not require a law degree or equivalent if the post holder had exceptional experience or skills in criminal law combined with a lesser qualification in law.
Mr Homer fell within this latter category.
PNLD began to experience problems in attracting suitable people for the role of legal advisor.
In 2005 the organisation introduced a new grading structure to improve career progression and offer more competitive salaries.
The new structure provided for three promotion thresholds above the starting grade, the third and final of which requiring a law degree.
In 2006 Mr Homer was graded under the new system as reaching the first and second thresholds but not the third.
Because of his previous skills and experience he was, under the old grading structure, effectively at the top grade.
In order to reach the third and highest threshold under the new structure Mr Homer would have been required to study for a law degree part time alongside his work.
This would take four years to complete.
At this time Mr Homer was 62 years old and, being due to retire at 65, would have been unable to reach or benefit from being at the third threshold before leaving the employment.
His various internal appeals and grievances were dismissed and, in April 2007, he issued proceedings under the Employment Equality (Age) Regulations 2006, SI 2006/1031 (the Age Regulations) which came into force in October 2006.
Regulation 7 of the Age Regulations (which have since been repealed but substantially re enacted under the Equality Act 2010) makes it unlawful for an employer to discriminate against employees such as Mr Homer in respect of, amongst other things, opportunities for promotion or receiving of other benefits.
Regulation 3 provides that indirect discrimination occurs when a person (A) applies to another person (B) a provision, criterion or practice which he applies to persons not of the same age group as B, but which puts persons of the same age group as B at a particular disadvantage when compared with other persons, and which puts B at that disadvantage and A cannot show the . provision, criterion or practice to be a proportionate means of achieving a legitimate aim.
In contrast to the Seldon case, it was accepted that regulation 3 had properly transposed article 2(2)(b) of Council Directive 2000/78/EC on equal treatment in employment and occupation into UK law in cases of indirect age discrimination.
In January 2008 the Employment Tribunal found that the appropriate age group was employees aged between 60 and 65 as these persons would have been unable to obtain any real benefit from obtaining a law degree before retiring.
It went on to hold that Mr Homer had been indirectly discriminated against on the ground of age and that this was not objectively justifiable on the facts.
The Employment Appeal Tribunal held that there had been no indirect discrimination, but that if there had been then it would not be objectively justified.
The Court of Appeal dismissed Mr Homers appeal against the first finding, and dismissed the Respondents cross appeal against the second finding.
Both findings were then appealed to the Supreme Court.
The Supreme Court unanimously allows Mr Homers appeal on the first issue, finding that he was indirectly discriminated against by the Respondent.
The Court remits the case to the Employment Tribunal to reconsider the issue of justification.
Lady Hale gives the lead judgment with which all other members of the Court agree.
Lord Hope and Lord Mance add some comments of their own.
The Employment Appeal Tribunal and the Court of Appeal had been persuaded by the argument that Mr Homer was put at a disadvantage, not by his age but by his impending retirement [12].
It was accepted that his retirement was what prevented him from gaining any real benefit from acquiring a law degree.
What put B at a particular disadvantage was not his age as such but the fact that he was due to leave employment within four years, his position being comparable with any other employees nearing the end of their employment for whatever reason.
The Supreme Court disagrees with that analysis.
Its flaw is to ignore the fact that persons in the position of Mr Homer were disadvantaged because of a reason (retirement) that directly related to their age.
Persons similarly disadvantaged for reasons not related to their age would not fall within the scope of the Age Regulations and were not the intended recipients of its protection [13].
The form of words used under the Age Regulations was intended to make it more straightforward to establish claims of indirect discrimination with claimants simply having to establish that they in particular, and persons of their age group in general, were, in fact, disadvantaged when compared with other persons [14].
In any event, there are material differences between leaving work because of impending retirement and other reasons for doing so [15].
The law on indirect discrimination is an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a particular protected characteristic. [17].
As to justification, the issue is to be remitted to the Employment Tribunal for consideration in the light of the Supreme Courts findings.
The range of aims capable of justifying indirect discrimination is greater that those available in the context of direct discrimination (see Seldon v Clarkson Wright and Jakes [2012] UKSC 16) [19].
In particular, a real business need on the part of the employer alone may be sufficient.
In addition to pursuing a legitimate aim, the treatment must be proportionate which means it is both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so. [22].
It is the criterion itself that must be justified as opposed to its discriminatory effects on the individual [23]; however part of that assessment includes comparing the likely impact of the criterion on the affected group as against the importance of the aim to the employer [24].
It is noted that Mr Homer was not dismissed or downgraded for not having a law degree, but was simply denied the additional benefits attaching to the newly introduced third threshold.
The question was whether it was reasonably necessary in order to achieve the legitimate aims of the scheme to deny those benefits to people in his position [24].
It was not clear whether the Employment Tribunal had been suggesting a specific exception for Mr Homer alone: that was not an appropriate response to a discrimination claim.
There has to be some way of modifying the criterion for everyone adversely affected but without introducing discrimination against another group [16, 25].
Lord Hope addresses the argument made that exempting Mr Homer from the third threshold requirements would unfairly advantage persons of Mr Homers age group.
He does not accept that discrimination on grounds of age can be regarded as justified simply because eliminating it would put others at a disadvantage which is not related to their age [30].
Lord Mance however expresses some concern about the possibility of making an exemption for Mr Homer personally or for all those persons in the same age group as him, on the basis that it might unjustifiably discriminate against younger employees on the ground of their age [36].
|
The issue that arises on this appeal is whether the court has the power to order a closed material procedure as described in the preliminary issue that was tried by Silber J for the whole or part of the trial of a civil claim for damages and, if so, in what circumstances it is appropriate to exercise the power.
The preliminary issue was in these terms: (i) (ii) Could it be lawful and proper for a court to order that a closed material procedure (as defined below) be adopted in a civil claim for damages? Definition of closed material procedure A closed material procedure means a procedure in which (a) a party is permitted to comply with his obligations for disclosure of documents, and rely on pleadings and/or written evidence and/or oral evidence without disclosing such material to other parties if and to the extent that disclosure to them would be contrary to the public interest (such withheld material being known as closed material), and (b) disclosure of such closed material is made to special advocates and, where appropriate, the court; and (c) the court must ensure that such closed material is not disclosed to any other parties or to any other person, save where it is satisfied that such disclosure would not be contrary to the public interest.
For the purposes of this definition, disclosure is contrary to the public interest if it is made contrary to the interests of national security, the international relations of the United Kingdom, the detection and prevention of crime, or in any other circumstances where disclosure is likely to harm the public interest.
Silber J answered the question raised by the preliminary issue in the affirmative: [2009] EWHC 2959 (QB).
The Court of Appeal (Lord Neuberger of Abbotsbury MR, Maurice Kay and Sullivan LJJ) [2010] EWCA Civ 482, [2010] 3 WLR 1069 allowed the claimants appeal and held that the court has no such power in an ordinary civil claim for damages.
The defendants appeal with the permission of the Supreme Court.
The proceedings
The preliminary issue was raised in proceedings in which the claimants alleged that the Security Service and other organs of the state (the appellants) had been complicit in the detention and ill treatment of them by foreign authorities at various locations including Guantanamo Bay.
The pleaded causes of action included false imprisonment, trespass to the person, conspiracy to injure, torture and breach of the Human Rights Act 1998.
A more detailed exposition of the factual background is set out in paras 5 6 of the judgment of Lord Neuberger.
The appellants filed an open defence in which they admitted that the claimants had been transferred and detained, but they put in issue the alleged mistreatment and denied any liability for the claimants detention or alleged mistreatment.
At a case management hearing, the appellants said that they were in possession of material which they wished the court to consider, but which they would be obliged in the public interest to withhold from disclosure.
This material was contained in a closed defence.
The course contended for by the appellants would require parallel open and closed proceedings and parallel open and closed judgments.
Special advocates would represent the interests of the claimants in the closed hearings.
The claimants objected to this course.
They argued that a conventional public interest immunity (PII) exercise should be conducted ex parte by a judge in relation to the closed material.
Lord Clarke describes the PII procedure in detail at para 145 below.
In response, the appellants emphasised the difficulties that would be caused by the vast amount of sensitive material in their possession and the enormous scale of any PII exercise.
The evidence filed on behalf of the appellants suggested that there might be as many as 250,000 potentially relevant documents, and that PII might have to be considered in respect of as many as 140,000 of them.
It might take three years to complete the exercise of deciding in respect of which documents PII could properly be claimed.
Against this background, directions were sought from the court for the determination of four preliminary issues.
On 24 September 2009, Burnett J ordered that the first of these issues should be tried first.
This was the issue which, in its final form, is the subject of the present appeal.
After the decision of the Court of Appeal, but before the appeal came on for hearing before the Supreme Court, the claims were settled on confidential terms.
A question therefore arose as to whether the court should permit the appeal to continue.
It raises an important point of principle which was the subject of a full and carefully reasoned decision of the Court of Appeal.
In my view, it was right to entertain the appeal.
Having had the benefit of full legal argument over a period of two days, I am in no doubt that the Supreme Court should decide the issue raised by the preliminary issue so far as it is able to do so.
The positions of the parties in outline
The appellants submit that the right to a fair trial is absolute, but the means of satisfying that right vary according to the circumstances of the case.
The procedures of the court are the means of achieving real justice between the parties.
As a general rule, real justice and a fair trial can only be achieved by open hearings, open disclosure, each side confronting the others witnesses and open judgments.
But in certain circumstances, a closed procedure may be necessary in order to achieve real justice and a fair trial.
Such procedures are adopted in certain classes of case (for example, cases involving children and confidential information).
There is no reason in principle why in the exercise of its inherent jurisdiction the court should not be able to order such a procedure in other classes of case, such as cases where a defendant cannot deploy its defence fully (or sometimes not at all) if it is required to follow an open procedure.
The appellants primary case is that a court has the power to substitute, at least in exceptional cases, a closed material procedure for a conventional PII exercise.
The respondent says that open procedures are fundamental to our system of justice.
His case is that a closed material procedure would be such a fundamental change to the way in which ordinary civil litigation (including judicial review) is conducted that it should not be introduced by the courts.
Any such change can only be made by Parliament.
The essential features of a common law trial
There are certain features of a common law trial which are fundamental to our system of justice (both criminal and civil).
First, subject to certain established and limited exceptions, trials should be conducted and judgments given in public.
The importance of the open justice principle has been emphasised many times: see, for example, R v Sussex Justices, Ex p McCarthy [1924] 1 KB 256, at p 259, per Lord Hewart CJ, Attorney General v Leveller Magazine Ltd [1979] AC 440, at pp 449H 450B, per Lord Diplock, and recently R (Mohamed) v Secretary of State for Foreign and Commonwealth Affairs (No 2) (Guardian News and Media Ltd intervening) [2011] QB 218, paras 38 39, per Lord Judge CJ.
The open justice principle is not a mere procedural rule.
It is a fundamental common law principle.
In Scott v Scott [1913] AC 417, Lord Shaw of Dunfermline (p 476) criticised the decision of the lower court to hold a hearing in camera as constituting a violation of that publicity in the administration of justice which is one of the surest guarantees of our liberties, and an attack upon the very foundations of public and private security.
Lord Haldane LC (p 438) said that any judge faced with a demand to depart from the general rule must treat the question as one of principle, and as turning, not on convenience, but on necessity.
Secondly, trials are conducted on the basis of the principle of natural justice.
There are a number of strands to this.
A party has a right to know the case against him and the evidence on which it is based.
He is entitled to have the opportunity to respond to any such evidence and to any submissions made by the other side.
The other side may not advance contentions or adduce evidence of which he is kept in ignorance.
The Privy Council said in the civil case of Kanda v Government of Malaya [1962] AC 322, 337: If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him.
He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.
Another aspect of the principle of natural justice is that the parties should be given an opportunity to call their own witnesses and to cross examine the opposing witnesses.
As was said by the High Court of Australia in Lee v The Queen (1998) 195 CLR 594, at para 32: Confrontation and the opportunity for cross examination is of central significance to the common law adversarial system of trial.
I do not believe that any of this is controversial, but it needs to be emphasised because, unlike the law relating to PII, a closed material procedure involves a departure from both the open justice and the natural justice principles.
In recent years, both the courts and Parliament have been exercised by the problem of how to balance (i) the interest that we all have in maintaining a fair system of justice which, so far as possible, respects the essential elements of these principles and (ii) the interest that we also all have in the protection of national security, the international relations of the United Kingdom and the prevention, detection and prosecution of crime.
Thus, Parliament has reacted to the threat of terrorism to our national security interests by introducing a form of closed material procedure (with the use of special advocates) for use in certain categories of case, for example, by enacting the Prevention of Terrorism Act 2005 and the Counter Terrorism Act 2008.
A striking example of a case where the court had to balance these two competing interests is Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786.
A registered police informer brought an action against the police to recover payment for information and assistance provided to the police.
The defendants denied any contractual liability to make such payments or that any information or assistance provided by the plaintiff had led to the arrests or the prosecutions alleged.
The claim was struck out by the Court of Appeal on the grounds that a fair trial of the issues raised by the pleadings would require the police to disclose, and the court to investigate and adjudicate upon, sensitive information which should in the public interest remain confidential to the police.
Laws LJ (with whom Jonathan Parker LJ agreed) said at para 36: it is to my mind inevitable that the courts duty would be to hold that the public interest in withholding the evidence about it outweighed the countervailing public interest in having the claim litigated on the available relevant evidence.
In reality such a position could only be avoided if the police made comprehensive admissions which absolved the court from the duty to enter into any of these issues.
But a case which can only be justly tried if one side holds up its hands cannot, in truth, be justly tried at all.
This is the only case that was cited to us in which the court has decided that the public interest in maintaining confidential information trumps the public interest in the administration of justice to the extent that on that ground a trial has been denied altogether.
This is the background against which the important issues raised by this appeal fall to be considered.
The inherent power of the court to regulate its own procedure
A distinction should be made at the outset between the court (i) exercising its inherent power to control its own procedure and (ii) exercising its general power to develop the substantive common law incrementally.
We are not here concerned with (ii), a paradigm example of which would be the incremental development by the courts of the law of negligence.
We are concerned with (i).
In his seminal article The Inherent Jurisdiction of the Court, Current Legal Problems 1970, Sir Jack Jacob said: the source of the inherent jurisdiction of the court is derived from its nature as a court of law, so that the limits of such jurisdiction are not easy to define, and indeed appear to elude definition.
But there is no doubt that the courts inherent power to regulate its own procedures is not unlimited.
For example, the power may not be exercised in contravention of legislation or rules of court.
In the words of Sir Jack Jacob, loc cit at p 24: the court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or by rule of court, so long as it can do so without contravening any statutory provision.
In such a case, its power has been removed by statute and cannot be exercised.
In proceedings which are not regulated by statute or statutory rules, it might be thought that there are no limits to the inherent power of the court to regulate its own procedure and that it has an untrammelled power to manage litigation in whatever way it considers necessary or expedient in the interests of justice.
There are many examples of the court in the exercise of its inherent power introducing procedural innovations in the interests of justice.
Thus it invented the power to grant Mareva injunctions and make Anton Piller orders.
These orders were devised to prevent misuse of the courts procedure and to ensure that its procedure is effective.
The PII procedure was also a creature of the common law devised by the court in the exercise of its inherent power to regulate its own procedures.
The remedy of discovery (now known as disclosure) was developed by the courts of equity in order to aid the administration of justice.
Upon the amalgamation of the Court of Chancery and the common law courts into the High Court by the Judicature Acts, that remedy came to be governed by the Rules of Court.
It is now contained in CPR Part 31.
The rules governing disclosure recognised that conflict may arise between the public interest in the administration of justice and other public interests which preclude the disclosure of all relevant materials.
The law of PII was developed to deal with such situations.
The court was exercising its inherent power in controlling its own procedures by deciding the scope of disclosure in cases involving confidential material.
The scope of disclosure has long been seen as a matter on which the court has jurisdiction to decide.
But even in an area which is not the subject of statute or statutory procedural rules, there are limits to the courts inherent jurisdiction to regulate how civil and criminal proceedings should be conducted.
In my view, there is considerable force in what Professor Martin Dockray said in The Inherent Jurisdiction to Regulate Civil Proceedings (1997) 113 LQR 120, 131: .a matter which is procedural from the position of an applicant may be constitutional in the eyes of the respondent.
The fact that procedural law can be described as subordinate or adjectival because it aims to give effect to substantive rules should not conceal the truth that procedures can and do interfere with important human rights, while the means by which a decision is reached may be just as important as the decision which is made in the end.
Where procedure is as important as substance, procedural change requires the same degree of political accountability and economic and social foresight as reform of an equivalent rule of substantive law.
Major innovations in procedural law should therefore be recognised as an institutional responsibility, not a matter on which individual judges should respond to the pleas of particular litigants.
Procedural revolutions should appear first in statutes or in the Rules of Court, not in the law reports.
For example, it is surely not in doubt that a court cannot conduct a trial inquisitorially rather than by means of an adversarial process (at any rate, not without the consent of the parties) or hold a hearing from which one of the parties is excluded.
These (admittedly extreme) examples show that the courts power to regulate its own procedures is subject to certain limitations.
The basic rule is that (subject to certain established and limited exceptions) the court cannot exercise its power to regulate its own procedures in such a way as will deny parties their fundamental common law right to participate in the proceedings in accordance with the common law principles of natural justice and open justice.
To put the same point in a different way, the court must exercise the power to regulate its procedure in a way which respects these two important principles which are integral to the common law right to a fair trial.
Discussion Is there a common law power to require a closed material procedure?
Mr Crow QC submits that the PII system suffers from five serious defects.
These are that (i) the balancing exercise is inherently difficult to perform, because the two public interests are fundamentally different (it involves, as he put it, a comparison of apples and pears); (ii) if the balance is struck against disclosure, relevant evidence is excluded from the trial (thereby reducing the chances that the court will reach the right result); (iii) the party holding the sensitive undisclosed material knows its contents which may inform its preparation and/or conduct of the trial, thereby putting it at an unfair advantage over the other party; (iv) if the balance is struck in favour of disclosure, the party holding the material that is ordered to be disclosed is faced with the invidious choice of disclosing the material, despite the harm that this would or might cause to the public interest, or refusing disclosure and facing the possibility of having to concede the whole of the other sides case.
As Carnduff demonstrates, the court may be faced with the stark choice between depriving a defendant of the means to defend himself and striking out the claim on the grounds that it is untriable; and (v) the scale of the PII exercise is sometimes so vast that it can take years to complete.
As regards (v), as already pointed out, it is said that in the present case as many as 140,000 documents may have to be the subject of the PII process: a massive and expensive task which will inevitably mean that it will not be possible for the trial to take place for a very long time.
Mr Crow submits that the closed material procedure does not suffer from these defects.
If such a procedure is adopted, the court is able to see and take into account at trial relevant material (written and oral) whose disclosure would, applying the PII principles, be excluded from the trial process altogether, regardless of whether the material is of assistance to the claimant or the defendant.
If the balancing exercise favours non disclosure, the defendant may have no adequate basis to defend itself in reliance on the open material when, if the truth were known and the sensitive material were referred to, it had a complete answer to the claim.
The court would be able to review relevant material in the overall interests of justice and to do so with the assistance of special advocates who would be able to make submissions on behalf of the party from whom open disclosure was being withheld.
In short, in an appropriate case, a closed procedure is more likely than PII to achieve justice through a fair trial.
Since the shortcomings in the PII process to which Mr Crow draws attention are inherent in the process and are of general application, the logic of his arguments ought to lead to the conclusion that the court should exercise its power in most if not all cases to adopt a closed material procedure rather than PII.
But his submission is more modest.
He seeks to secure from the court no more than an acknowledgement that, in principle, the court has the power to adopt the closed material procedure and that it should exercise that power in exceptional cases where this is necessary in the interests of justice.
He derives the necessity test from Scott v Scott per Lord Haldane LC at p 436.
Scott v Scott was addressing the very important principle that justice should be administered in public and recognised that there may be a departure from that principle where that is necessary in the interests of justice.
It is one thing to say that the open justice principle may be abrogated if justice cannot otherwise be achieved.
As Lord Bingham of Cornhill said in R v Davis [2008] UKHL 36, [2008] AC 1128 at para 28, the rights of a litigating party are the same whether a trial is conducted in camera or in open court and whether or not the course of the proceedings may be reported in the media.
It is quite a different matter to say that the court may sanction a departure from the natural justice principle (including the right to be present at and participate in the whole or part of a trial).
Scott v Scott is no authority for such a proposition.
How can such a step ever satisfy the requirements of justice? And if the court does have the power to deny a litigant this fundamental common law right, in what circumstances is it appropriate to exercise it? These are the questions that lie at the heart of this appeal.
Before attempting to answer these questions, I think that it is instructive to consider Davis in more detail.
It concerned the question whether the judge at a criminal trial could permit witnesses to give evidence for the prosecution under conditions of anonymity.
The perceived need for anonymity arose because, owing to threats of intimidation, the witnesses would not be willing to give their evidence without it.
In the Court of Appeal [2006] 1 WLR 3130, para 13, Sir Igor Judge P said that the court possesses an inherent jurisdiction at common law to control its own proceedings, if necessary by adapting and developing its existing processes to defeat any attempted thwarting of its process: see per Lord Morris of Borth y Gest in Connelly v Director of Public Prosecutions [1964] AC 1254, 1301.
The court concluded that the anonymity ruling did not prevent proper investigation with the witnesses in open court of the essential elements of the defence.
The House of Lords disagreed.
Lord Bingham referred at para 5 to the long established principle of the English common law that, subject to certain exceptions and statutory qualifications, the defendant in a criminal trial should be confronted by his accusers in order that he may cross examine them and challenge their evidence.
The authorities to which Lord Bingham referred at para 5 in support of this proposition were in the field of both criminal and civil law.
Thus, for example, in 1720 in a civil case the court declared in Duke of Dorset v Girdler (1720) Prec Ch 531, 532 that the other side ought not to be deprived of the opportunity of confronting the witnesses, and examining them publicly, which has always been found the most effectual method for discovering of the truth.
In rejecting the conclusion of the Court of Appeal, Lord Bingham said at para 34 that at no point in its judgment did the Court of Appeal acknowledge that the right to be confronted by ones accusers is a right recognised by the common law for centuries, and it is not enough if counsel sees the accusers if they are unknown to and unseen by the defendant.
It is worthy of note that the House of Lords reached its decision in the face of arguments advanced on behalf of the Crown which included (i) the problem of witness intimidation is real and prevalent and, unless witnesses are allowed to give evidence under conditions of anonymity, dangerous criminals will walk free and society and the administration of justice will suffer; (ii) as Lord Haldane LC said in Scott v Scott, the paramount object must always be to do justice and if, in order to do justice, some adaptation of ordinary procedure is called for, it should be made, so long as the overall fairness of the trial is not compromised; and (iii) the Strasbourg jurisprudence does not condemn the use of measures to protect witnesses.
These arguments did not prevail.
The common law right to be confronted by ones accusers (an essential element of a fair trial) could not be abrogated by the courts.
Any such abrogation was a matter for Parliament.
Lord Bingham said at para 28 that it was pertinent to recall the observations of Lord Shaw in Scott at pp 477 478: There is no greater danger of usurpation than that which proceeds little by little, under cover of rules of procedure, and at the instance of judges themselves.
Lord Rodger of Earlsferry said at para 45 that Parliament was the proper body to decide whether a change in the law on the way that witnesses gave their evidence where intimidation is a problem was required, and, if so, to devise an appropriate system which still ensures a fair trial.
Lord Brown of Eaton under Heywood said at para 66 that it was for the government to decide whether to legislate in the field.
Meanwhile, the emasculation of the common law principle must not only be halted but reversed.
And Lord Mance made similar observations at para 98.
Lord Brown at para 78 of his judgment in the present case suggests that there is a real difference between this case and Davis in that legislation to meet the problem was envisaged in Davis, whereas it is highly doubtful whether Parliament will legislate speedily to introduce a closed procedure.
But I do not think that the House of Lords principled refusal to abrogate the common law right to be confronted by ones accusers can be explained by reference to a belief that Parliament would speedily intervene to resolve the problem.
The House did not state whether the protective measures imposed by the trial judge were ones which the court had no power to impose, or whether, although the power existed, it was inappropriate to exercise it.
That is no doubt because it makes no practical difference.
Lord Bingham was content to say at para 35 that the protective measures hampered the conduct of the defence in a manner and to an extent which was unlawful and rendered the trial unfair.
It is not difficult to see the similarities between the arguments that were rejected by the House of Lords in Davis and those advanced by Mr Crow.
The problem here is not that dangerous criminals will walk free.
It is that in sensitive material cases, parties will not be able to develop their true case on the basis of all the relevant material with the result that parties will sometimes lose cases that they should win.
A defendant who is ordered to disclose sensitive material on a PII hearing has the invidious choice of disclosing material that will damage some important public interest or making admissions and, in an extreme case, conceding the claim.
I return to the questions that lie at the heart of this appeal.
In my view, the analogy with Davis is compelling.
As I have said, the fact that Davis was a criminal case is not material.
The issues considered were of application to trials generally.
It decided that, subject to certain exceptions and statutory qualifications, the right to be confronted by ones accusers is such a fundamental element of the common law right to a fair trial that the court cannot abrogate it in the exercise of its inherent power.
Only Parliament can do that.
The closed material procedure excludes a party from the closed part of the trial.
He cannot see the witnesses who speak in that part of the trial; nor can he see closed documents; he cannot hear or read the closed evidence or the submissions made in the closed hearing; and finally he cannot see the judge delivering the closed judgment nor can he read it.
Can all of these flaws be cured by a special advocate system? No doubt, special advocates can mitigate these weaknesses to some extent and in some cases the litigant may be able to add little or nothing to what the special advocate can do.
For example, this will be the case where the litigant has no knowledge of the matters to which the closed material relates and can give no instructions which will enable the special advocate to perform his function more effectively.
But in many cases, the special advocate will be hampered by not being able to take instructions from his client on the closed material.
A further problem is that it may not always be possible for the judge (even with the benefit of assistance from the special advocate) to decide whether the special advocate will be hampered in this way.
The limitations of the special advocate system, even in the context of the statutory contexts for which they were devised, were highlighted by the Joint Committee on Human Rights in their report on Counter Terrorism Policy and Human Rights (Sixteenth report): Annual Renewal of Control Orders Legislation 2010 (HL Paper 64/HC 395) (dated 26 February 2010) in the context of the Prevention of Terrorism Act 2005 and cases heard by the Special Immigration Appeals Commission.
This report was based on the first hand experience of those who have acted as special advocates.
As the Court of Appeal noted at para 57, it is the Committees view after five years of operation that the closed material procedure (with special advocates) operated under the statutory regimes is not capable of ensuring the substantial measure of procedural justice that is required.
At para 210 of its earlier report, HL Paper 157, HC 394, (published on 30 July 2007), the Committee had concluded: After listening to the evidence of the Special Advocates, we found it hard not to reach for well worn descriptions of it as Kafkaesque or like the Star Chamber.
The Special Advocates agreed when it was put to them that, in the light of the concerns they had raised, the public should be left in absolutely no doubt that what is happeninghas absolutely nothing to do with the traditions of adversarial justice as we have come to understand them in the British legal system.
Indeed, we were left with the very strong feeling that this is a process which is not just offensive to the basic principles of adversarial justice in which lawyers are steeped, but it is very much against the basic notions of fair play as the lay public would understand them.
These views may not sufficiently take account of specific statutory protections, (such as those set out in rule 54 of the Employment Tribunals Rules of Procedure contained in Schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861)) to which Lord Mance refers at para 10 of his judgment in Tariq v Home Office [2011] UKSC 35 but they do throw light on the limitations of the special advocate system.
In my view, Mr Crow provided no satisfactory answer to the questions (i) why it is necessary to introduce a procedure which would deprive a litigant of his fundamental common law rights or (ii) in what circumstances the power to order a closed material procedure should be exercised.
Since he disavows the wholesale replacement of PII with the closed procedure, it is difficult to see the relevance of the defects alleged by him in the one and the advantages he claims for the other.
As regards the problem of the time consuming exercise that has to be performed in a PII process, I agree with what Lord Clarke says at para 152 of his judgment: a closed procedure would not achieve any saving.
Mr Crows answer to the two questions that I have posed is that the court has the power to order a closed material procedure in exceptional cases where this is necessary in the interests of justice.
But this simply prompts the further question: in what circumstances can it ever be in the interests of justice to deny a litigant in ordinary civil claims (including claims for judicial review) the rights which are entrenched in our common law system as being fundamental requirements of justice itself? I deal with special cases at paras 63 to 65 below.
Mr Crow did not give a concrete example of a case where the court would or might exercise this exceptional power.
This amply demonstrates that the test that he proposes is vague.
It is likely to cause uncertainty in the minds of litigants and their advisers and to lead to unwelcome satellite litigation.
Lord Clarke agrees that the court has the power to order a closed procedure where this is necessary in the interests of justice, and at paras 159 to 164 and 178 to 181 he suggests circumstances in which it may be appropriate to exercise the power.
He says that, in the exercise of its inherent jurisdiction, the court has the power after the PII process has been completed to order some form of closed procedure involving special advocates.
Thus the claimants might seek a closed procedure if they thought that there were advantages in such a procedure, especially if their case was thought to depend to any significant extent on documents in the possession of the defendants.
The defendants might also wish to have such a procedure depending on the circumstances.
Lord Clarke says that the court has adopted novel procedures in not dissimilar situations by way of development of the common law and pursuant to its obligation under CPR Part 1 to deal with cases justly.
There is no reason why the common law should not be able to develop along these lines.
It would be a development of the common law of PII.
I respectfully disagree with this approach.
First, no form of closed material procedure can properly be described as a development of the common law of PII, although there is no objection to the use of special advocates to enhance the PII process (see para 49 below).
In many ways, a closed procedure is the very antithesis of a PII procedure.
They are fundamentally different from each other.
The PII procedure respects the common law principles to which I have referred.
If documents are disclosed as a result of the process, they are available to both parties and to the court.
If they are not disclosed, they are available neither to the other parties nor to the court.
Both parties are entitled to full participation in all aspects of the litigation.
There is no unfairness or inequality of arms.
The effect of a closed material procedure is that closed documents are only available to the party which possesses them, the other sides special advocate and the court.
I have already referred to the limits of the special advocate system.
Secondly, it is obviously true that party A who is in possession of the closed material will know whether there is material on which it may wish to rely and will therefore be in a position to decide whether to ask the court to order a closed procedure in relation to that material.
But it is difficult to see how opposing party B will know whether his case will be assisted by, or even depend to a significant extent on, the closed material held by A without knowing what the material is and what it contains.
If a special advocate is appointed, he might be able to assess the importance of some of the documents, but the scope for doing so without being able to take instructions from B is bound to be limited.
It follows that, if the power to order a closed material procedure turns on such considerations, it is likely to operate in favour of A and to the disadvantage of B.
In my view, this is an approach which is inherently unfair.
It is certainly not necessary in the interests of justice.
Thirdly, it is difficult to see how on the suggested approach the court would be able to judge whether to order a closed procedure in any particular case.
Would the court be called upon to decide whether the closed documents are likely to advance the case of one or other of the parties and, if so, how would it do this and what test would it apply? Would the material have to be crucial to the case of the party seeking the closed procedure or would it be sufficient that it provides some support for it? This is not an exercise that the court should be required to perform.
It would be likely to give rise to argument about whether the closed material is or is not likely to help the cause of the party seeking to invoke the procedure.
It would be a recipe for satellite litigation.
It would merely add to the complexity and expense of the whole process.
Fourthly, to allow a closed procedure in circumstances which are not clearly defined could easily be the thin end of the wedge.
This is the point that was made by Lord Shaw in his celebrated speech in Scott v Scott (see para 31 above).
Mr Crows undefined exceptional circumstances in the interest of justice could develop into something more defined and exorbitant.
So too could Lord Clarkes suggested approach.
This would be a big step for the law to take in view of the fundamental principles at stake.
In my view, this is a matter for Parliament and not the courts.
Fifthly, like Lord Clarke (subject to the one qualification that he mentions as to which I express my views at paras 60 and 61 below), I accept the fundamental principles stated by the Court of Appeal at para 70 of its judgment which he has quoted at para 167 below.
But in my view these principles do not sit happily with what he proposes.
A closed procedure in the circumstances that he suggests would cut across the fundamental principles of the right to a fair trial and the right to know the reasons for the outcome.
It would complicate a well established procedure for dealing with the problem, namely the PII procedure.
And for the reasons that I have given would be likely to add to the uncertainty, cost, complexity and delay of all stages of the litigation.
As I understand it, Lord Mance (with whom Lady Hale agrees) adopts the view of Lord Clarke that the closed material procedure should not be an alternative to PII, but that it may be ordered in addition to PII in certain circumstances.
They differ, however, over the circumstances in which a closed procedure may be ordered.
Lord Mance limits himself to cases where closed material is in the defendants possession and the claimant, in order to avoid his or her claim being struck out, consents to a closed material procedure.
The differences between them show that different views may be held as to how the test of necessity should be applied in this context.
These differences lend further support to the view that, if a closed material procedure is to be available in ordinary civil claims, the decision as to when it might be necessary for such a procedure to be used should be left to Parliament.
I should make it clear that, like the Court of Appeal (para 71), I leave open the question whether a closed material procedure can properly be adopted where the parties agree.
We heard no argument on this point.
Closed material procedures and the use of special advocates continue to be controversial.
In my view, it is not for the courts to extend such a controversial procedure beyond the boundaries which Parliament has chosen to draw for its use thus far.
It is controversial precisely because it involves an invasion of the fundamental common law principles to which I have referred.
I would echo what Lord Phillips said in Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269.
It is true that this was a case concerning the requirements of a fair trial under article 6 of the European Convention on Human Rights, but in my view it is equally applicable in relation to the common law requirements of a fair trial.
At para 64, he said that the best way of producing a fair trial is to ensure that a party has the fullest information of the allegations against him and the evidence (both oral and documentary) that is relied on in support of those allegations.
Both our criminal and civil procedures set out to achieve those aims.
In some circumstances, however, they run into conflict with other aspects of the public interest.
He then said: How that conflict is to be resolved is a matter for Parliament and for government, subject to the law laid down by Parliament.
The common law principles to which I have referred are extremely important and should not be eroded unless there is a compelling case for doing so.
If this is to be done at all, it is better done by Parliament after full consultation and proper consideration of the sensitive issues involved.
It is not surprising that Parliament has seen fit to make provision for a closed material procedure in certain carefully defined situations and has required the making of detailed procedural rules to give effect to the legislation.
There is no compelling reason for taking the course that is urged by Mr Crow or that which is suggested by Lord Clarke.
The PII process is not perfect.
Perfection cannot be achieved in any system.
It has been improved over time as the history of its development shows.
One particular development to note is the use of special advocates to enhance the PII process.
There can be no objection to the use of special advocates for that purpose, since the PII process fully respects the principles of open justice and natural justice.
There is nothing objectionable about excluding a party from the PII process.
There can, therefore, be no objection to improving the position of that party in the process by the use of a special advocate.
It is true that, if a closed material procedure were introduced, it might not be necessary to strike out a claim such as Carnduff.
Looked at in isolation, that would be a good thing.
But the problem cannot be looked at so narrowly and in any event it seems that cases such as Carnduff are a rarity.
They do not pose a problem on a scale which provides any justification (let alone any compelling justification) for making a fundamental change to the way in which litigation is conducted in our jurisdiction with all the attendant uncertainties and difficulties that I have mentioned.
Previous authority
As in the Court of Appeal, so here Mr Crow relies on a number of previous authorities where the use of special advocates in a closed material procedure was approved.
These were discussed by the Court of Appeal at paras 58 to 66 of their judgment.
Lord Clarke suggests at para 166 below that the Court of Appeal distinguished these cases on the basis that they were not ordinary civil claims.
But that was not the only reason given by the Court of Appeal for refusing to follow those decisions.
In none of the cases was proper consideration given to the question whether a closed material procedure was a permissible development of the common law.
Thus, in Secretary of State for the Home Department v Rehman [2001] UKHL 47, [2003] 1 AC 153, para 31 Lord Woolf MR stated (obiter) that, albeit only in the most extreme circumstances, the Court of Appeal could hear submissions in the absence of a party and his counsel under the inherent jurisdiction of the court on the basis that the partys interests could be protected by a special advocate.
But there is no suggestion that the contrary was argued.
R v Shayler [2002] UKHL 11, [2003] 1 AC 247 was concerned with a preparatory hearing in relation to a defendant who was charged with unauthorised disclosure of material under the Official Secrets Act 1989.
A question arose as to whether the defendant could disclose the material to his lawyers.
At para 34, Lord Bingham said that, following what Lord Woolf said in Rehman, in the unlikely event of the court having to consider the material which could not be disclosed to the defendants lawyers, a special advocate could be appointed.
As the Court of Appeal said at para 61, there would have been no question of the defendant himself being in ignorance of the material or of his being excluded from the hearing where it was considered.
It was, therefore, not a closed material procedure at all.
In any event, what Lord Bingham said was based on para 31 of Rehman and does not appear to have been the subject of contrary argument.
In R v H [2004] UKHL 3, [2004] 2 AC 134 at para 22, Lord Bingham made some observations about the use of a special advocate in a PII procedure.
But as discussed at para 49 above, that is not the kind of closed material procedure with which we are concerned.
In R (Roberts) v Parole Board [2005] UKHL 45, [2005] 2 AC 738, the Parole Board decided that evidence on which the Home Secretary intended to rely should be heard in the absence of, and not disclosed to, the claimant or his legal representatives, since to do so would put an informant at risk.
Instead they directed that the evidence should be disclosed only to a special advocate.
The Board had express power under the relevant rules to withhold material which otherwise had to be served on a prisoner.
In other words, there was express statutory power to adopt a closed material procedure.
One of the issues was whether there was power to require a special advocate.
The Board had power under paragraph 1(2)(b) of Schedule 5 to the Criminal Justice Act 1991 to do anything incidental or conducive to the discharge of its functions.
It was held that appointing a special advocate to mitigate the adverse effects of the closed procedure would be an exercise of that power.
Roberts, therefore, provides no basis for concluding that a court may determine a civil claim on its merits using a closed material procedure in the absence of a specific enactment authorising it to do so.
In R (Malik) v Manchester Crown Court [2008] EWHC 1362 (Admin), [2008] 4 All ER 403, when giving the judgment of the Divisional Court, I reviewed a number of the authorities about the use of special advocates.
But as the Court of Appeal said at para 64, no argument was advanced that the Crown Court had no power to order a closed material procedure in the absence of an enactment enabling it to do so.
The sole question was whether the court should have appointed a special advocate of its own motion.
In A v HM Treasury [2008] EWCA Civ 1187, [2009] 3 WLR 25, when giving the majority judgment of the Court of Appeal, Sir Anthony Clarke MR said at paras 58 and 60 that in an appropriate case the court would have power to authorise or request the use of a special advocate even where this was not sanctioned by Parliament.
But here too there does not appear to have been any argument as to whether the court had power to order a closed material procedure in the first place.
Finally, in R (AHK) v Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287, [2009] 1 WLR 2049 at paras 37 38, Sir Anthony Clarke MR giving the judgment of the Court of Appeal gave guidance as to the circumstances in which a special advocate could be appointed.
Here too, there was no debate as to whether the court could order a closed material procedure.
It seems to have been assumed that it could.
None of these authorities is binding on this court.
In none of them was there any consideration of the issues which have been considered in detail over two days of argument by this court.
They do not amount to a secure and established line of authority to support the proposition that the court has power to order a closed material procedure in the absence of statutory authority.
The Civil Procedure Rules
At para 43, the Court of Appeal said that they considered that the defendants faced very serious difficulties in their contention that the closed material procedure is compatible with the CPR.
They explained why this was the case at paras 41 to 48.
I see the force of the points made by the Court of Appeal and they are supported by Ms Rose QC and Mr Howell QC.
In short, there are detailed rules for the filing and service of a defence (CPR r 15.2 and CPR r 16.5); disclosure (CPR r 31.5); giving of evidence orally (CPR r 32.2) and the provision of witness statements (CPR r 32.4 and 32.5).
There is no provision for the filing and service of a closed defence or for closed disclosure or the giving of evidence in a closed hearing or the provision of closed witness statements.
By contrast, CPR Parts 76 and 79 explicitly modify or disapply those Parts of the CPR for the purpose of the particular proceedings in which Parliament has decided that a closed material procedure may be used.
These points based on the CPR provide some further support for the conclusion which I have reached for other reasons.
The rules make no provision for a closed procedure except in circumstances where it is authorised by statute.
On the face of it, the general rules are inconsistent with a closed material procedure.
But I do not consider that, if the argument based on the CPR stood alone, it would have been sufficient to carry the day for the respondent.
It is not sufficiently clear that a closed material procedure would contravene the CPR to say that on that account the court has no power to order such a procedure.
Ordinary civil claims
I agree with Lord Clarke, for the reasons that he gives, that there can be no principled basis for distinguishing between ordinary civil claims and claims for judicial review.
I would accept the submission of Mr Howell that the mere fact that there may be a public interest involved in the determination of a case does not mean that the court may disregard the duty imposed on it by the law relating to PII or may override the fundamental rights of a party to civil litigation recognised at common law.
But I agree that there are certain classes of case where a departure from the normal rule may be justified for special reasons in the interests of justice.
Thus as Baroness Hale of Richmond said in Secretary of State for the Home Department v MB [2007] UKHL 46, [2008] AC 440 at para 58: If.the whole object of the proceedings is to protect and promote the best interests of a child, there may be exceptional circumstances in which disclosure of some of the evidence would be so detrimental to the childs welfare as to defeat the object of the exercise.
Wardship proceedings are an obvious example of such a case: see In re K (Infants) [1965] AC 201, per Lord Devlin at p 241A. Cases involving children raise different considerations from those which arise in ordinary civil litigation.
That is because the interests of children are paramount.
It follows that where the interests of the child are served, so too are the interests of justice.
Similarly, where the whole object of the proceedings is to protect a commercial interest, full disclosure may not be possible if it would render the proceedings futile.
This problem occurs in intellectual property proceedings.
It is commonplace to deal with the issue of disclosure by establishing confidentiality rings of persons who may see certain confidential material which is withheld from one or more of the parties to the litigation at least in its initial stages.
Such claims by their very nature raise special problems which require exceptional solutions.
I am not aware of a case in which a court has approved a trial of such a case proceeding in circumstances where one party was denied access to evidence which was being relied on at the trial by the other party.
In my view, the children and confidentiality cases cannot be relied on to justify creating a rule of general application in ordinary civil litigation.
These are two narrowly defined categories of case where a departure from the usual rules of procedure has been held to be justified.
So far as I am aware, the procedures adopted in these cases are not regarded as controversial and work satisfactorily.
By contrast, the closed material procedure is controversial and, in some quarters at least, is regarded as unsatisfactory.
Reference was also made by Mr Crow to proceedings before the Competition Appeal Tribunal (CAT) and, for example, the case of Carphone Warehouse Group v Office of Communications [2009] CAT 37 where the tribunal refused disclosure for the purpose of the substantive hearing.
But the CAT emphasised the distinction between the inquisitorial procedure that is adopted in statutory appeals before it and the adversarial procedure adopted in civil trials.
Conclusion
As Lord Clarke has emphasised, the common law is flexible.
It develops over time in response to changing circumstances.
Sometimes, it takes giant steps forward.
More often, it evolves gradually and cautiously.
But any change must be justified, otherwise the law becomes unstable.
This is particularly important where a change involves an inroad into a fundamental common law right.
The introduction of a closed material procedure in ordinary civil claims (including claims for judicial review) would do just that.
Mr Crow suggests that the court should have the power to replace the PII process with a closed material procedure in exceptional circumstances where this is in the interests of justice.
Lord Clarke suggests that the court should be able to supplement the PII process with such a procedure in exceptional circumstances.
For the reasons that I have given, there is no compelling reason for change.
The PII process is not perfect, but it works well enough.
In some cases, it is cumbersome and costly to operate, but a closed material procedure would be no less so.
It is true that, by a majority, this court has decided in Tariq v Home Office [2011] UKSC 35 that the use of a statutory closed material procedure before the Employment Tribunal is lawful under article 6 of the European Convention on Human Rights (the Convention) and EU law.
But the lawfulness of a closed material procedure under article 6 and under the common law are distinct questions.
As Lord Bingham said in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323 at para 20 [i]t is of course open to member states to provide for rights more generous than those guaranteed by the Convention.
It is, therefore, open to our courts to provide greater protection through the common law than that which is guaranteed by the Convention.
As the Court of Appeal said at para 69 of their judgment, never say never is often an appropriate catchphrase to use in the context of the common law.
Nobody can predict how the law will develop in the future.
We are concerned with the position as it is now.
But for the reasons that I have given, I agree with the Court of Appeal that the issues of principle raised by the closed material procedure are so fundamental that a closed material procedure should only be introduced in ordinary civil litigation (including judicial review) if Parliament sees fit to do so.
No doubt, if Parliament did decide on such a course, it would do so in a carefully defined way and would require detailed procedural rules to be made (such as CPR Parts 76 and 79) to regulate the procedure.
LORD HOPE
The issues in this case have been set out so clearly and so comprehensively by Lord Clarke and Lord Dyson that I can go directly to the heart of the question that is before us.
The word never is such a blunt and uncompromising expression that one has a natural reluctance to lean against it, especially in a case such as this where, as Lord Clarke points out in para 125, we are being asked to decide the issue without reference to the facts of any particular case.
But the issue is essentially one of principle.
I can see the attractions of the approach that Lord Phillips takes, which is to deal only with the preliminary issue which was before the Court of Appeal and not to engage in a consideration of the wider question as to whether it would ever be right for the closed material procedure to be introduced for ordinary civil litigation without the authority of Parliament: see paras 192 and 197.
I would like him give a negative answer, for the reasons that Lord Clarke has explained, to the question whether the established PII procedure should be replaced by some sort of closed procedure at common law.
I agree that such a fundamental change to that long established procedure cannot properly be seen as a development of the common law and that it could only be brought about by Parliament.
But the argument both in the Court of Appeal and before this court was addressed to the wider issue too.
I do not think that it would be right for us to leave the wider issue in a state of uncertainty.
I have always believed that a court of unlimited jurisdiction is the master of its own procedure.
But that does not mean that the court can do what it likes.
Everything that it does must have regard to the fundamental principles of open justice and of fairness.
The principle of legality demands nothing less than that.
There is, of course, a very wide area of procedure where these issues of principle are not engaged at all.
There comes a point, however, where the line must be drawn between procedural choices which are regulatory only and procedural choices that affect the very substance of the notion of a fair trial.
Choices as to how the conduct of the courts business may be simplified, made less expensive or made easier to understand are one thing.
Choices that cut across absolutely fundamental principles such as the right to a fair trial, the right to be confronted by ones accusers and the right to know the reasons for the outcome are entirely different.
The court has for centuries held the line as the guardian of these fundamental principles.
I can see the force of the argument that there are circumstances where justice cannot be done unless a closed procedure is adopted.
It is advanced, as Lord Brown puts it in para 81, as the least bad solution to a difficult problem.
But I think that the court must resist the temptation to go down that road.
It would, at best, be an uncertain journey, beset by problems of the kind that Lord Dyson refers to in para 43.
It would also run the risk of opening the door to something else.
As the Court of Appeal said, it is a melancholy truth that a procedure or approach which is sanctioned by the court expressly on the basis that it is applicable only in exceptional circumstances none the less often becomes common practice: [2010] 3 WLR 1069, para 69.
Lord Shaw of Dunfermlines warning in Scott v Scott [1913] AC 417, 477 478, against the usurpation of fundamental rights that proceeds little by little under the cover of rules of procedure remains just as true today as it was then.
This is not the time to weaken the laws defences.
On the contrary, any weakening in the face of advances in the methods and use of secret intelligence in a case such as this would be bound to lead to attempts to widen the scope for an exception to be made to the principle of open justice.
That would create a state of uncertainty in an area of our law which would be inimical to the concept of a fundamental right.
The proposition that a closed material procedure should only be introduced in ordinary civil litigation if Parliament sees fit to do so should not be seen as surrendering to Parliament something which lies within the area of the courts responsibility.
Instead it is a recognition that the basic question raises such fundamental issues as to where the balance lies between the principles of open justice and of fairness and the demands of national security that it is best left for determination through the democratic process conducted by Parliament, following a process of consultation and the gathering of evidence.
The detailed working out of any change to the procedure that Parliament may sanction would no doubt be left to the court in the exercise of its rule making powers.
The court will, of course, be conscious of its responsibility to see that, so far as it is possible to do so, anything that Parliament enacts is read and given effect in a way that is compatible with the Convention rights.
The question whether it would be open to the court to adopt a closed material procedure if the parties agreed to this raises difficult issues on which we did not hear any argument, not the least of which is the pressure that might be brought to bear on a claimant to agree.
Like Lord Kerr, I very much doubt whether this would ever be appropriate.
But, as we do not need to decide it in this case, the proper course is to leave the question open for the time being.
I would dismiss the appeal for the reasons given by Lord Dyson.
LORD BROWN
I have had the advantage (a very real advantage in this particular case) of reading in draft the judgments of Lord Clarke and Lord Dyson.
Lord Clarke envisages circumstances in which the courts could properly order a closed material procedure (with a special advocate) in ordinary civil litigation and so would allow the appeal.
Lord Dyson agrees with the Court of Appeal that this would be impermissible without express parliamentary authorisation.
I find it difficult to suppose that either viewpoint could be more persuasively expressed.
Yet neither conclusion do I find entirely satisfactory.
Let me try to explain.
If and in so far as the real issue before us is whether Parliament alone could provide for so fundamental an inroad into the principle of open justice as is proposed here whether, in other words, such a step is beyond the permissible development of the common law I am in Lord Dysons camp.
There seems to me at least as good a reason for saying that Parliament alone could sanction this development as for saying, as the House of Lords did in R v Davis [2008] UKHL 36; [2008] AC 1128, that Parliament alone could sanction the use of anonymous evidence in a criminal trial an invasion of the common law principle that the defendant has the right to be confronted by (or, as I preferred to put it, the right to know the identity of) his accusers.
But there is to my mind a real difference between this case and Davis.
This is not, as Lord Clarke suggests (at para 187), because Davis was a criminal case.
Rather it is because, whereas the majority in Davis envisaged early legislation to meet the problem legislation did indeed follow within days although whether it meets the problem remains to be decided by the long awaited judgment of the Grand Chamber in Strasbourg in Al Khawaja v United Kingdom it seems to me highly doubtful whether Parliament will legislate speedily here and even more doubtful whether the introduction of a closed procedure, certainly along the lines both Lord Clarke and Lord Dyson appear to envisage, would indeed meet the very real problems that arise in cases like this.
I speak of cases like this because it seems to me quite impossible to discuss the issue raised here on an entirely abstract basis and really only useful to do so in a specific context the very context, I would suggest, in which the question here was raised: a claim against the Intelligence Services and their sponsoring departments of the nature summarised by Lord Clarke (at para 132 of his judgment), essentially alleging complicity in the claimants extraordinary rendition, false imprisonment, torture and other ill treatment, involving (as Lord Clarke notes at para 135) up to 250,000 potentially relevant documents of which up to 140,000 may involve considerations of national security so that a conventional public interest immunity process, notwithstanding the employment of 60 lawyers specifically for the purpose, would be likely to take upwards of three years.
Both Lord Clarke and Lord Dyson envisage that, before any question could arise of introducing a closed procedure into the proceedings (save in so far as necessary to improve the PII process itself, as recognised by the House of Lords in R v H [2004] UKHL 3, [2004] 2 AC 134 see Lord Clarke at para 150 and Lord Dyson at paras 49 and 54) the conventional PII process would have to be completed with first the Minister (see R v Chief Constable of West Midlands Police, Ex p Wiley [1995] 1 AC 274) and then the court striking the relevant balances.
Lord Clarke makes this plain at paras 152 and 153, Lord Dyson at para 38.
Both, in short, appear to envisage that the only real object of the closed procedure proposed here would be to enable a party, wishing to rely on documents held to be undisclosable, and thus inadmissible, in the public interest, to rely on them in closed proceedings.
In all likelihood, of course, such a procedure would be invoked by the Crown in just such a case as this where many of the relevant documents would almost inevitably be undisclosable in the interests of national security. (Although theoretically it would be open to claimants to seek this procedure in order, first, through their special advocate, to examine the undisclosed documents and then, if thought favourable to their case, to deploy them in closed proceedings, frankly this appears a somewhat unrealistic prospect.)
The advantage of this approach, suggests Lord Clarke (at para 159), is that it avoids both the unpalatable alternative outcomes: either the trial proceeding without the undisclosable documents (generally, it must be supposed, to the Crowns considerable disadvantage) or the action being struck out on the basis that without the disclosed documents a fair trial is not possible (as in Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786).
In short, contend its proponents, it is the least bad solution to a difficult problem.
For my part, however, I am unpersuaded of this.
In the first place, it offers no solution at all to the very real problems of having to conduct a conventional PII process in a case like this.
To my mind there need to be compelling reasons to justify the enormous expense, effort and delay involved in such a process here.
Secondly, the problem is surely not confined to the disclosure, and thus admissibility, of documents.
What about oral evidence? Presumably in a case like this the Crown would wish, indeed need, to call witnesses from the Security Service and the Secret Intelligence Service. Documentation aside, how is it suggested that such evidence could satisfactorily be adduced at a public hearing (indeed, any hearing attended by the claimants themselves)? Thirdly, any closed material procedure with special advocates raises problems all its own, considerations of open justice apart.
As the Court of Appeal observed at para 70(e) of its judgment an observation expressly concurred in by both Lord Clarke (para 168) and Lord Dyson (para 45) the envisaged closed material procedure is likely to add to the uncertainty, cost, complication and delay in the initial and interlocutory stages of proceedings, the trial, the judgment, and any appeal.
Further, as Lord Dyson observes at para 43, it would be a recipe for satellite litigation.
And on top of all this, and by no means least in importance, is the whole question of open justice.
One need not take so extreme a view as that expressed by the Joint Committee on Human Rights last year (see Lord Dysons judgment at para 37) to recognise the grave inroads into our fundamental principles of open justice and fair trials that are made by closed procedures.
Without A type disclosure (see my judgment in Tariq v Home Office [2011] UKSC 35, at para 86), the claimants may not learn sufficient of the case against them to enable them to give effective instructions to the special advocate to meet it.
With such disclosure, however, national security may still be put at risk.
Whatever the extent of disclosure, moreover, it will be difficult for the claimants lawyers to advise on the merits (and difficult for the same reason to secure public funding), difficult similarly to advise on settlement offers, and difficult too to advise on any appeal.
But beyond all these considerations would be the damage done by a closed procedure to the integrity of the judicial process and the reputation of English justice.
As Lord Atkin, invoking Miltons Areopagitica, famously said in Ambard v Attorney General for Trinidad and Tobago [1936] AC 322, 335: Justice is not a cloistered virtue: she must be allowed to suffer the scrutiny and respectful, even though outspoken, comments of ordinary men.
A closed procedure in the present context would mean that claims concerning allegations of complicity, torture and the like by UK Intelligence Services abroad would be heard in proceedings from which the claimants were excluded, with secret defences they could not see, secret evidence they could not challenge, and secret judgments withheld from them and from the public for all time.
As the Court of Appeal observed below (at para 56): If the court was to conclude after a hearing, much of which had been in closed session attended by the defendants but not the claimants or the public, that for reasons, some of which were to be found in a closed judgment that was available to the defendants but not the claimants or the public, that the claim should be dismissed, there is a substantial risk that the defendants would not be vindicated and that justice would not be seen to have been done.
The outcome would be likely to be a pyrrhic victory for the defendants whose reputation would be damaged by such a process, but the damage to the reputation of the court would in all probability be even greater.
Lord Clarke (para 161) understands it to be common ground that there could be no objection to a closed procedure were the parties to agree to it (as claimants might, were the only alternative to be the striking out of their claims).
For my part I respectfully disagree.
The rule of law and the administration of justice concern more, much more, than just the interests of the parties to litigation.
The public too has a vital interest in the conduct of proceedings.
Open justice is a constitutional principle of the highest importance.
It cannot be sacrificed merely on the say so of the parties.
In Scott v Scott [1913] AC 417 itself, after all, there had been no objection at first instance to the proceedings being conducted in camera.
That did not prevent the process thereafter being roundly and resoundingly condemned by the House of Lords.
What, then, of the several exceptions to the open justice principle that have been recognised by the courts? In so far as these exceptions have a statutory basis, of course, no problem arises.
Tariq v Home Office [2011] UKSC 35 is, obviously, a case in point.
So, too, the control order cases.
And R (Roberts) v Parole Board [2005] UKHL 45, [2005] 2 AC 738 seems to me similarly explicable on essentially the same basis: given that the Parole Board was expressly empowered to withhold evidence from the prisoner and exclude him from hearings devoted to its consideration, the House of Lords understandably (although still only by the narrowest of majorities) sanctioned the use of special advocates specifically so as to provide additional protection for the prisoner.
No problem arises either in certain well established classes of case of which the most obvious (perhaps the only) examples are wardship/children proceedings (see Lord Dysons judgment at para 63) and, yet more narrowly circumscribed, certain intellectual property proceedings to protect commercial interests (see Lord Dysons judgment at para 64).
In so far, however, as the appellants seek to rely on other recent decisions or dicta of the Divisional Court or the Court of Appeal most notably in R (Malik) v Manchester Crown Court [2008] EWHC 1362 (Admin), [2008] 4 All ER 403, A v HM Treasury [2008] EWCA Civ 1187, [2009] 3 WLR 25 and R (AHK) v Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287, [2009] 1 WLR 2049 (albeit in none of these cases does it appear that the propriety of a closed procedure was ever actually argued) I would simply repeat what I said in Davis (at para 66): If . the government now think it right to legislate in this field, so be it.
Meantime, however, the creeping emasculation of the common law principle must be not only halted but reversed.
I come then, finally, to the way ahead.
If, as I believe, it would be quite wrong for the common law to be developed to provide for a closed procedure in cases like this, and if, as I have suggested, not even the introduction of such a procedure by Parliament would really solve the problems arising, what should instead be done? For my part I have reached the reluctant conclusion that, by their very nature, claims of the sort advanced here, targeted as they are principally against the Intelligence Services, are quite simply untriable by any remotely conventional open court process.
The problems they raise, of oral no less than documentary evidence, are just too deep seated to be capable of solution within such a process.
Far too little would be gained, and far too much lost, by the appellants proposed development of the common law.
In short, some altogether more radical solution is, I believe, required.
Realistically there seem to be only two possible solutions.
Either cases of this kind, necessarily involving highly sensitive security issues, should go for determination by some body akin to the Investigatory Powers Tribunal which does not pretend to be deciding such claims on a remotely conventional basis (see my judgment in Tariq v Home Office).
Or they must simply be regarded as untriable and struck out on the basis that, as Laws LJ put it in Carnduff at para 36: [They] cannot, in truth, be justly tried at all.
Obviously, I need hardly add, claims of the sort made here of the complicity of the Intelligence Services in torture ought not simply to be swept under the carpet.
That, of course, explains why, these particular claims having been settled without admission of liability, they are to be the subject of an inquiry under the chairmanship of Sir Peter Gibson.
It is to be hoped that, in the light of that inquirys findings, together with the responses to the Governments proposed Green Paper, an acceptable way ahead may be found for the resolution of this type of case.
Meanwhile, whatever else is to be done, it is certainly not the development of the common law in the way proposed.
This is one of those cases where the court should indeed say never.
The appeal should be dismissed.
LORD KERR
For the reasons given by Lord Dyson, with which I fully agree, I too would dismiss this appeal.
As I have observed in the associated case of Tariq v Home Office [2011] UKSC 35, the right to know and effectively challenge the opposing case has long been recognised by the common law as a fundamental feature of the judicial process.
I referred in my judgment in that case to various celebrated expressions of that principle and I need not repeat them here.
The right to be informed of the case made against you is not merely a feature of the adversarial system of trial, it is an elementary and essential prerequisite of fairness.
Without it, as Upjohn LJ put it in In re K (Infants) [1963] Ch 381, a trial between opposing parties cannot lay claim to the marque of judicial proceedings.
And so the key nature of this right and its utter indispensability to the fairness of proceedings must occupy centre stage in the debate as to whether it may be compromised to serve the interests which the appellants claim require to be served and which are said to justify a departure from it.
The appellants have advanced two principal arguments in support of the claim that a closed procedure is required in this case.
The first of these is pragmatic; the second purportedly a matter of principle.
It is first asserted that the exercise involved in conducting a conventional public interest immunity exercise would be so daunting that some means should be found to avoid it.
The second argument is that the adoption of a closed procedure will actually conduce to a fairer trial than would otherwise be possible.
The first of these arguments can easily be and, in the judgments of Lord Clarke and Lord Dyson, has been disposed of and I need say little more about it.
As has been observed, unless there is to be complete abandonment of public interest immunity procedure as a means of catering for the tension between disclosure of relevant material and protection of the public interest, the exercise cannot be avoided.
For the reasons given by Lord Clarke, to desert that procedure, so deeply embedded in our system of law, for reasons of expediency simply cannot be contemplated.
The seemingly innocuous scheme proposed by the appellants would bring to an end any balancing of, on the one hand, the litigants right to be apprised of evidence relevant to his case against, on the other, the claimed public interest.
This would not be a development of the common law, as the appellants would have it.
It would be, at a stroke, the deliberate forfeiture of a fundamental right which, as the Court of Appeal has said in para 70 of its judgment [2010] 3 WLR 1069, has been established for more than three centuries.
The appellants second argument proceeds on the premise that placing before a judge all relevant material is, in every instance, preferable to having to withhold potentially pivotal evidence.
This proposition is deceptively attractive for what, the appellants imply, could be fairer than an independent arbiter having access to all the evidence germane to the dispute between the parties? The central fallacy of the argument, however, lies in the unspoken assumption that, because the judge sees everything, he is bound to be in a better position to reach a fair result.
That assumption is misplaced.
To be truly valuable, evidence must be capable of withstanding challenge.
I go further.
Evidence which has been insulated from challenge may positively mislead.
It is precisely because of this that the right to know the case that ones opponent makes and to have the opportunity to challenge it occupies such a central place in the concept of a fair trial.
However astute and assiduous the judge, the proposed procedure hands over to one party considerable control over the production of relevant material and the manner in which it is to be presented.
The peril that such a procedure presents to the fair trial of contentious litigation is both obvious and undeniable.
In the solution offered by the appellants a state party can supply evidence to the judge with only (at best) the inquiring confrontation of the special advocate.
Quite apart from the reasons so clearly stated by Lord Dyson about the necessary, inevitable but ultimately inherent frailties of the special advocate system, the challenge that the special advocate can present is, in the final analysis, of a theoretical, abstract nature only.
It is, self evidently and admittedly, a distinctly second best attempt to secure a just outcome to proceedings.
It should always be a measure of last resort; one to which recourse is had only when no possible alternative is available.
It should never be regarded as an acceptable substitute for the compromise of a fundamental right such as is at stake in this case.
At a somewhat more prosaic level, the arguments against the case made by the appellants appear to me to be overwhelming.
If one starts, as I believe we must, with the position that there is a constitutional, common law right to be informed of the case made against you in civil litigation, it becomes clear that what we are here being asked to do is to create an entirely new, hitherto unrecognised exception which has no statutory underpinning.
The proposal for the radical change in the law which the appellants seek is openly policy driven.
On that account alone, one should be very wary of it.
Moreover, the claims that the present system creates impossible logistical burdens or that it produces unfair results on a massive scale are not backed up by any evidence.
To accept that claim we would simply be acting on the ipse dixit of counsel.
At the moment with PII, the state faces what might be described as a healthy dilemma.
It will want to produce as much material as it can in order to defend the claim and therefore will not be too quick to have resort to PII.
Under the closed material procedure, all the material goes before the judge and a claim that all of it involves national security or some other vital public interest will be very tempting to make.
In this connection, one should not lose sight of the public interest in maintaining confidence in the administration of justice referred to so pertinently by Lord Neuberger MR in para 56 of his judgment in the Court of Appeal in the present case.
For the reasons that he has given, I consider that this is an extremely important consideration and one which ought not to be overlooked.
On the question whether closed material might be provided to a judge where the claimant consents, I confess to grave misgivings as to how this might operate in practice.
Consent to the submission of closed material under threat of a Carnduff application would not be the most propitious basis on which to found a jurisdiction which would not otherwise exist.
I also entertain considerable doubt as to whether it is possible as a matter of principle to invest the court with jurisdiction in this way and tend to agree with what Lord Brown has had to say on the subject.
Since, however, this matter was not argued on the appeal, I consider that it is unnecessary to express any final view on it.
LORD MANCE, with whom Lady Hale agrees
A conventional PII exercise at common law involves comparing the public interest in the administration of justice secured by availability of the material with the public interest identified by the certificate and court favouring its suppression; and in striking a balance between these two competing interests: see Lord Reids speech in Conway v Rimmer [1968] AC 910, pp 940 and 951 952, quoted by Lord Clarke in paras 142 143.
The balance is struck somewhat differently in criminal and civil law contexts (see eg Balfour v Foreign and Commonwealth Office [1994] 1 WLR 681, at pp 688H 689A).
In a criminal context, the general rule is that, if material is necessary to prove the defendants innocence or avoid a miscarriage of justice, then the balance comes down resoundingly in favour of disclosing it: R v Keane [1994] 1 WLR 746, 751 752, per Lord Taylor of Gosforth CJ.
If the Crown still does not wish to disclose the material, it can and must forgo further prosecution.
In a civil law context, the liberty of the subject is not at stake.
Where a prima facie case of public interest immunity is made out, a party who wishes to invite the court to inspect material before determining whether it should after all be deployed must show that it is likely to give substantial support to his or her case: Air Canada v Secretary of State for Trade [1983] 2 AC 394.
When the court is balancing the competing interests, Cross & Tapper on Evidence, 12th ed (2010), p 484 suggests, with reference to case law from various common law jurisdictions, that the court will take into account factors such as the seriousness of the claim for which disclosure is sought, whether or not the government is itself a party or alleged to have acted unconscionably, the relevance of the particular evidence to the dispute, taking into account other possible sources of evidence, and on the other side, the nature of the states interest, and the length of time that has elapsed since the relevant discussion took place.
Thus, in both a criminal and a civil context, a judge dealing with an issue of PII has necessarily to form a view as to the relevance of the material for which PII is claimed.
This is a fortiori the position if a judge, having concluded that, in the public interest, material cannot be disclosed, goes on to consider whether, as a result, the case has become untriable: see Carnduff v Rock [2001] EWCA Civ 680, [2001]1 WLR 1786, below.
Mr Jonathan Crow QC representing the Crown identifies various problems about a conventional PII exercise.
Lord Dyson has set them out in para 23.
They include the obvious difficulty in some cases of comparing two such different interests as the administration of justice between parties and the general public interest in withholding from outside eyes sensitive state material, the fact that a successful claim to PII can leave a party with relevant knowledge that neither the other party nor the decision maker will have and may even make a case untriable and the dilemma (whether or not to pursue its case) in which an unsuccessful claim to PII can leave the state.
They also include essentially pragmatic concerns such as the cost and time burden imposed by a conventional PII exercise.
In their light, the Crowns primary case is that a court can decide to replace a conventional PII exercise by a closed material procedure, even without statutory authorisation such as arises for consideration in the linked appeal in Tariq v Home Office [2011] UKSC 35.
The court should be able, at least in exceptional cases, to order a closed procedure under which a special advocate would first ascertain the case being advanced by the litigant whose interests he or she was to serve; the material which the Crown seeks to withhold would then be made available to the judge and a special advocate, for the latter to make such forensic use of it as was possible.
A balancing of the competing interests in disclosure would become unnecessary, since the judge and the special advocate would have access to everything.
Whether or not it might, after a conventional PII exercise, have been excluded or made available would become irrelevant.
As a secondary and alternative case, the Crown suggests the possibility that a closed material procedure might be ordered after or at the end of a conventional PII exercise.
Ms Dinah Rose QCs submission on behalf of the respondent is that there are inalienable features of a civil trial which no English court can or should abandon or qualify, at least without Parliamentary authority, even though this would involve no infringement of the Convention rights domesticated by the Human Rights Act 1998 (cf Tariq v Home Office [2011] UKSC 35).
Lord Dyson has discussed them under the heads of open and natural justice in paras 10 to 13 and Lord Clarke has identified the principal features in para 126.
Ms Rose also noted a number of practical consequences which could flow from their abandonment, including difficulty on the part of the party without access to the material withheld to assess, take proper legal advice on the merits of or fund a case.
Taking the Crowns primary submission, I see no basis for the complete substitution of a conventional PII exercise by a closed material procedure, even if this were a possibility limited to exceptional circumstances.
The line between cases where a traditional PII exercise was undertaken and others would be unprincipled and uncertain.
It is inherent in a conventional PII exercise that there may be difficulty in comparing the interests of the administration of justice and the general public interest, that a successful claim to PII can leave one party with relevant knowledge, or may even make a case untriable and may place the Crown in a dilemma whether or not to pursue its case after an unsuccessful claim to PII.
It would be entirely unclear when these features might justify a judge in abandoning any attempt at a conventional PII exercise.
Further, the special advocate would often be likely to become engaged in a modified form of PII exercise, involving arguments as to whether material should after all be disclosed to the litigant, bearing in mind the potential disadvantages for the litigant of a closed material procedure; nothing would then be gained, except to shift the whole burden of conducting that form of PII exercise onto the special advocate.
The Crowns alternative submission, that a closed material procedure might be recognised after or as supplementary to a conventional PII exercise, merits close scrutiny.
As I understand it, no member of the Supreme Court doubts the approach in Carnduff v Rock [2001] 1 WLR 1786 as a possibility: see Lord Dyson at para 15, Lord Brown at para 86 and Lord Clarke at para 157.
In other words, a successful claim for PII can make an issue untriable, so that the court will simply refuse to adjudicate upon the case.
In some circumstances, therefore, the court is faced not with a binary choice, between trial with or without the material for which PII has been claimed, but with a trinary choice: the third possibility is no trial at all whoever happens to be the claimant then has no access to the court at all.
Logically, this third possibility may be capable of feeding back into the decision whether a claim for PII should be allowed.
If the effect of a successful claim to PII is that the case will not be tried at all, that introduces a different dimension, which may affect the striking of the balance of competing interests (para 103 above).
Lord Brown assumes (para 81) that a trial without the judge having any access to the PII material would be likely to be to the Crowns considerable disadvantage.
But it is not right to assume that the executive never errs or that material for which it claims PII is necessarily in its favour.
In any event, issues regarding PII can arise between non state parties, as for example in Asiatic Petroleum Co Ltd v Anglo Persian Oil Co Ltd [1916] 1 KB 822.
And it must certainly be regarded as being to a claimants considerable disadvantage, if as a result of the withholding of PII material, the court concludes, as in Carnduff, that the case is not triable at all.
Like a number of other members of the court, I believe that the issue upon which the Court of Appeal and now this Court has embarked is fraught with danger and in principle undesirable; and that any answer that we give should at least be confined to situations such as the present where the defendant is the state and has the material withheld in its possession.
If the court never has jurisdiction (in the strict sense) to order a closed material procedure, that means that, even where a court concluded that a claimant must be denied access to material and the case must otherwise be struck out as untriable, it would be impossible for the court to order, with the consent of the claimant, a closed material procedure.
There would be no way in which the material could be put before a judge, with the claimants interests being represented to the best extent possible by a special advocate.
I would be surprised if the courts inherent jurisdiction (in the strict sense) were inhibited to this extent.
I note that the judgment of the Court of Appeal, whose decision the respondent has invited the Supreme Court to uphold as correct for the reasons given by it, expressly leaves open the question of whether a closed material procedure can properly be adopted, in an ordinary civil case such as the present, where all parties agree, or in a civil claim involving a substantial public interest dimension, and adds that, although this is an issue to be considered as and when it arises, principle and the authorities relied upon [in the courts] below suggest that a different conclusion may well be justified in such cases, albeit only in exceptional circumstances (para 71).
Ms Rose did not challenge this qualification in her submissions.
On the contrary, she went even further than the Court of Appeal.
Her case (para 133) states: There is similarly no need for this court to reach a decision on whether a closed material procedure would be permissible if the parties consented to it, or in different sorts of proceedings, where the task of the judge was not simply to adjudicate on a private law claim for damages.
However, insofar as necessary, the respondent would submit: (1) A party may consent to absent himself from all or part of a hearing, and to allow the judge to see material which is not shown to him: there may be cases where it is in his interest to do so, and these are likely to include the public law contexts in which such consent has been given in the recent past. (2) The fundamental principles identified above, and the requirements of the CPR, apply with equal force to claims for judicial review, as to civil claims for damages.
In the absence of consent, a court hearing such claims has no power to adopt a closed procedure Cases of consent are also outside the basic rule which Lord Dyson identifies in para 22, that the court cannot exercise its power to deny parties their fundamental common law right to participate in proceedings in accordance with the common law principles of natural justice and open justice.
An inability to allow a voluntarily accepted closed material procedure, as an alternative to striking a claim out as untriable, would be to deny something even more basic, that is any access to justice at all.
Lord Dyson in the first sentence of para 22 uses the phrase at any rate, not without the consent of the parties and may therefore also accept this.
Further, once it is accepted, as Lord Dyson does (para 63), that there are certain classes of case where a departure from the normal rule may be justified for special reasons in the interests of justice, for example wardship and other cases where the interests of children are paramount, that to my mind also makes it difficult to suggest that the court lacks jurisdiction in a strict sense to vary the basic principles of open and natural justice mentioned in para 107 above.
There is however a real distinction between having jurisdiction and exercising it.
Principles as important as open and natural justice ought to be regarded as sacrosanct, as long as they themselves do not lead to a denial of justice.
Absent statutory authorisation, any significant deviation from the ordinary process and consequences of a conventional PII exercise can and should only be under the compulsion of necessity, in order to avoid such a denial.
Mr Crow acknowledged this as a possible approach.
He cited Viscount Haldane LCs well known statements in Scott v Scott [1913] AC 417, 437 438, that exceptions to the principle that justice be administered in public may arise from considerations of necessity (not convenience) as the outcome of a yet more fundamental principle that the chief object of Courts of justice must be to secure that justice is done.
In this connection, Viscount Haldane referred to two cases: (a) wards of court and of lunatics, where the court is really sitting primarily to guard [their] interests and the broad principle which ordinarily governs it therefore yields to the paramount duty, which is the care of the ward or the lunatic the courts role here, now regulated statutorily under the Mental Health Act 1983 and Mental Capacity Act 2005, has a parallel in that which it has in relation in children and (b) litigation as to a secret process, where the effect of publicity would be to destroy the subject matter and justice could not be done at all if it had to be done in public, in which case As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield.
Thus, while it is true, as Lord Brown observes (para 84), that in Scott v Scott the House deprecated the hearing in camera of a matrimonial issue in the interests of decency or delicacy, the House there expressly recognised the possibility that such a hearing might be ordered if the alternative was a defeat of the ends of justice (p 439).
Subsequent authorities discussing the principle of public justice and the circumstances in which it may be qualified include Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] QB 207, where the Court of Appeal recognised that the principle might require modification to respect the confidentiality inherent under English law in their choice of arbitration.
Party agreement can therefore have relevance to the modification in the interests of justice of what would otherwise be basic principles.
Viscount Haldane was speaking in Scott v Scott in the context of publicity, where the inroad into ordinary process is of a different order to that involved in any closed material procedure.
But a claimant who is told that, because of the defendants possession of material which cannot be disclosed, the claim is and must be struck out as untriable is just as effectively told, in Viscount Haldanes words, that justice cannot be done.
The inference may or may not be that the material favours the defendant state which has the documents and could rely on them for what they were worth in any closed material procedure.
The claimant must by definition have a properly arguable case without the documents, since otherwise his or her case would be susceptible to being struck out.
I myself see no reason why the court should not in such circumstances be able and prepared to offer the claimant the chance, if he or she wished, to pursue the claim by a closed material procedure, during which his or her interests would be represented by a special advocate.
Lord Brown suggests (paras 86 87) that such cases must go off to some specially constituted tribunal, which does not pretend to be deciding such claims on a remotely conventional basis.
I find this difficult to square with the fact that courts and judges can and do operate closed material procedures where there is statutory authorisation, and can and do also depart from otherwise basic common law principles in the special classes of case which Lord Dyson mentions in para 63.
Further, if one assumes that cases such as Carnduff are a rarity (Lord Dyson, para 50), that does not make it any more palatable, to my mind or to the individual claimant, to be denied any access to justice at all, in circumstances when he or she wishes to accept a closed material procedure.
I do not see why a court should, instead of permitting a closed material procedure, insist on washing its hands of the case in such circumstances.
In a public law context, statutory schemes, e.g. governing suspected terrorism, have given rise to repeated issues about the legitimacy in terms of the Convention rights of closed material procedures: see eg Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28; [2010] 2 AC 269 and Tariq v Home Office [2011] UKSC 35.
It is also possible, at least in theory, to conceive of ordinary civil cases where the material withheld is in the hands of the claimant.
A claim to PII is a duty, not an option, on the part of the state.
A claimant (who might in some circumstances not be the state itself: see the Asiatic Petroleum case, cited in para 110 above) might find itself, at one and the same time, wishing to pursue a claim, but bound to raise (or, in the case of a non state claimant, faced with) a claim for PII in respect of material in its possession.
Again, it must be assumed that the claimant could, without the material, show an arguable case.
If the court concluded that the material favoured the claimant, then the interests of justice would be unlikely to require its disclosure.
The problem arises if the court concluded that it favoured the defendant but that the public interest in its confidentiality outweighed any particular interest of the defendant and that as a result the case could not fairly be tried.
Would it then be open to the court, as an alternative, to avoid denying any access to the court to the claimant, to order that the defendant should accept a closed material procedure? In the case of a state claimant, the public interest which required the claim to PII might perhaps also be said to require the state to accept that it could not pursue certain claims which it would otherwise wish to pursue in the public interest.
In the case of a non state claimant, seeking to pursue an ordinary civil claim in his, her or its private interest, that consideration could not be deployed.
Nevertheless, it is far from clear that the court could go to the length of ordering a defendant to undergo a closed material procedure, in order to enable a non state actor to pursue an otherwise untriable civil claim.
But I shall express no opinion upon any such case since it lies far outside the realm of the present, and should be considered on its own merits were it ever to arise.
I should however address two further possibilities raised by Lord Clarkes judgment in relation to cases like the present where the relevant material is in the defendants possession.
One is the possibility, which I understand to be left open in paras 160 165, that, a judge might be able to order a closed material procedure at the claimants instance, even though the judge concluded that the case was triable without the disclosure of the material withheld.
The other is the suggestion in para 179 that the judge, if he or she declined to strike the claim out, might none the less accede to an application by the defendant for a closed material procedure based on necessity, namely that such a procedure would be necessary in order to permit a fair trial.
Both, it seems to me, involve an inconsistency.
If a judge declines both to order disclosure and to strike the claim out, that means that he or she is satisfied that a fair trial, albeit on incomplete or imperfect material, is possible.
There cannot in such a case be any necessity, in the strict sense emphasised in Scott v Scott, for any departure from basic principles of open and natural justice.
Both suggestions would in reality involve modifying the conventional PII exercise to introduce a fourth possibility, additional to the existing three (trial with or without disclosure, or no trial at all).
As I have already indicated, I see no principled basis for such a modification.
For these reasons, and confining myself to cases such as the present where the material withheld is in the defendants and not the claimants possession, I consider that the Court can safely decide that there is no general basis for modifying the well established rules governing the nature of a conventional PII exercise.
There is no scope for introducing a closed material procedure as an alternative to such an exercise.
I would not rule out a closed material procedure as outside the courts jurisdiction in a strict sense.
But, statutory permission aside, the only exception that I would presently accept is where, after a conventional PII exercise, the judge concludes that there should be no disclosure, and that the case is as a result untriable.
Then I think that the court could adopt some form of closed material procedure, if the claimant consented, in order to avoid denying the claimant any form of access to the court.
As regards consent, there is, as I see it, nothing between my conclusion and that of the Court of Appeal.
If the preliminary issue is treated as raising a question of jurisdiction in the strict sense, where there is no consent, then my view differs on the issue of jurisdiction in the strict sense from that of the Court of Appeals.
As to the exercise of any such jurisdiction, I am in full agreement with the Court of Appeal that it cannot be appropriate to contemplate a closed material procedure in lieu of a conventional PII exercise.
I can only envisage the jurisdiction ever being exercised after a conventional PII exercise in circumstances where a claimant would otherwise be denied any access to justice at all.
As to what those circumstances might be, I would express an opinion only in relation to cases like the present, where closed material is in the defendants possession.
If the claimant, in order to avoid his or her claim being struck out, consents to engage in a closed material procedure, it would and should be permissible in my opinion for a court to allow a closed material procedure.
The contrary, as I have pointed out (para 113), was not argued by the respondent.
LORD CLARKE
Introduction
The appellants in this appeal are the Security Service and various other organs of the state.
It is an appeal from a declaration made by the Court of Appeal (Lord Neuberger of Abbotsbury MR, Maurice Kay and Sullivan LJJ) [2010] EWCA Civ 482, [2010] 3 WLR 1069 on 4 May 2010 allowing an appeal from an order made by Silber J (the judge) on 18 November 2009 [2009] EWHC 2959 (QB).
That order was made after the hearing of a preliminary issue, which had been ordered on 24 September 2009 but was varied by agreement in the course of the hearing.
The preliminary issue as so varied was in these terms: Could it be lawful and proper for a court to order that a closed material procedure (as defined below) be adopted in a civil claim for damages? Definition of closed material procedure A closed material procedure means a procedure in which (a) a party is permitted to comply with his obligations for disclosure of (i) documents, and (iii) rely on pleadings and/or written evidence and/or oral evidence without disclosing such material to other parties if and to the extent that disclosure to them would be contrary to the public interest (such withheld material being known as closed material), and (b) disclosure of such closed material is made to special advocates and, where appropriate, the court; and (c) the court must ensure that such closed material is not disclosed to any other parties or to any other person, save where it is satisfied that such disclosure would not be contrary to the public interest.
For the purposes of this definition, disclosure is contrary to the public interest if it is made contrary to the interests of national security, the international relations of the United Kingdom, the detection and prevention of crime, or in any other circumstances where disclosure is likely to harm the public interest.
It is interesting to note that, as the judge said at para 2 of his judgment, in its original form the preliminary issue contained the words if satisfied that such a procedure is necessary for the just disposal of the case after the word damages in the third line, but those words were deleted by agreement as their meaning was not clear and they did not appear to add anything to the preceding words.
The judge granted the application for the declaration.
He declared that it could be lawful and proper for a court to order that a closed material procedure (as defined above) be adopted in a civil claim for damages.
He granted permission to appeal to the Court of Appeal, which allowed the appeal.
It made a declaration that the court does not have power to order that a closed material procedure (as so defined) be adopted in an ordinary civil claim for damages.
The appellants were granted permission to appeal by this Court.
The underlying claims for damages were then settled and the question arose whether the Court should allow the appeal to continue.
In very many cases the court would refuse to proceed in such a case but it decided to proceed with this appeal because the point of principle raised by the question whether the court has no power to make a declaration in the terms sought is of general public importance.
Moreover, given the fact that the Court of Appeal made the declaration in the bald terms which it did, it seemed appropriate for the court to consider it and not leave the matter to a future leapfrog appeal.
One of the problems raised by the appeal is that the declaration is stated in absolute terms, without reference to the facts of a particular case.
I am firmly of the view that it is in general undesirable to determine bare questions of law in this way.
I would expect the court ordinarily to require the relevant legal question to be decided in a particular factual context.
The parties cases in summary
The respondents case is that the judges have no power, by developing the common law on an ad hoc case by case basis, to abrogate a number of the most fundamental features of the trial of a civil claim for damages.
Ms Dinah Rose QC identifies a number of such features as follows: i) the requirement that each party must plead its case, identifying to all other parties the issues which are in dispute; ii) the requirement that all written or oral evidence on which a party wishes to rely in support of its case must be disclosed to the other parties to proceedings; iii) the requirement that each party must be permitted to test the disputed oral evidence of other parties by cross examination; iv) the rules which apply to the disclosure of relevant documents in the possession of a party to proceedings, including the principles that govern claims of public interest immunity (PII); and v) the requirement that a court must give a fully reasoned judgment, to be made available to all parties, so that each party knows why it has won or lost and can decide whether or not to appeal.
Ms Rose submits that these are requirements which have been developed and maintained over centuries in order to secure basic constitutional rights of fairness, open justice and equality of arms, as well as to maintain confidence in the integrity of the judicial system, and in order to balance those rights and interests against competing considerations, including the interests of national security.
Ms Rose cites many cases which support these fundamental principles, which, subject to what follows, are not disputed by Mr Jonathan Crow QC.
Those principles have been endorsed in ringing tones by Lord Kerr in his judgment in Tariq v Home Office [2011] UKSC 35, which was heard at the same time as this appeal by the same court and in which judgment has been handed down at the same time.
They have also been clearly and accurately set out by Lord Dyson at paras 10 to 17 above.
The appellants case was summarised by Mr Crow in a short document as follows.
The courts objective is to achieve real justice between the parties.
Everyone is entitled to a fair trial.
That right is absolute, but the means of achieving it are infinitely variable.
The practice and procedure of the court are the means of achieving that objective.
They should be the servants, not the masters, of justice.
As a general rule, real justice and a fair trial can only be achieved by a process which allows open hearings, open disclosure, each side confronting the others witnesses and open judgments.
There are, however, no absolute, inflexible rules as to how real justice or a fair trial can be achieved.
The requirements of fairness must always be responsive to the particular circumstances of the case.
In particular, the courts have adopted procedures for hearings in private, restricted disclosure, the exclusion of one party from part of the proceedings and closed judgments, with and without the assistance of special advocates.
The adoption of such unusual procedures is not confined to any limited class or category of case, whether involving children, wards of court, confidential information, patent actions, insolvency or anything else.
While the adoption of such procedures may be more likely in such categories of case, the common law proceeds by reference to principle and not by a tick box system.
If a particular procedure is necessary by reference to the circumstances of the particular case, it should be adopted whether or not it falls into a category in which such a procedure has been adopted in the past.
In the agreed statement of facts and issues, the issue is said to be whether, in the absence of a specific statutory power, a closed material procedure can ever be adopted in a civil claim for damages.
Defects in the order sought for the use of a closed material procedure
I will return below to the question whether the court would have power to make an order of the kind sought.
However, I should state at the outset that I cannot conceive of circumstances in which the court could in fact properly make an order for use of a closed material procedure as defined.
It contains no procedure setting out how the claim that disclosure of a particular document or class of document is contrary to the public interest should be made or determined.
Is it a matter for the judge and, if so, on what material, with whose assistance and in accordance with what principles? These are critical questions, especially the last.
As formulated it seems implicit in the procedure that there is to be no question of any balance between the public interests referred to and interests of the parties.
Yet the various public interests sought to be protected are very different.
They extend from national security to any other circumstances where disclosure is likely to harm the public interest, which is very broad indeed.
As I see it, very different considerations are likely to apply to each class of case.
In these circumstances, it seems to me to be clear that it would never be appropriate to make an order in the bald terms apparently sought.
It does not, however, follow that it would never be appropriate to make an order suitably tailored to the circumstances of the particular case which has the effect of limiting some of the common law rights identified by Ms Rose.
The appellants case was that there were circumstances in which it would or might have been appropriate to do so on the facts of this case.
The factual and procedural background
Although the issues between the parties have now been settled, it is appropriate to summarise the facts very briefly because it is rarely sensible to consider any legal principle in the abstract and because the facts here demonstrate some of the problems that can arise.
I can take them, albeit in less detail, from paras 5 to 10 of the judgment of the Court of Appeal, which was delivered by Lord Neuberger MR.
The claimants were individuals some of whom were detained at Guantanamo Bay.
They said that as a result of their detention and mistreatment while detained they had valid claims under at least some of the following heads, namely false imprisonment, trespass to the person, conspiracy to injure, torture, breach of contract, negligence, misfeasance in public office and breach of the Human Rights Act 1998.
The claims were based on the contention that, to put it in broad terms, each of the appellants caused or contributed towards the alleged detention, rendition and ill treatment of each of the claimants.
The appellants then filed an open defence in which, while admitting that each of the claimants was detained and transferred, they put in issue any mistreatment which the claimants alleged and, in any event, denied any liability in respect of any of the claimants detention or alleged mistreatment.
It was said that there was material not pleaded in the open defence which the appellants wished to contend that the court should consider but which could not be included without causing real harm to the public interest.
That material was said to be contained in a closed defence.
The open defence made it clear that the appellants wished the case to proceed throughout on the basis that it included what may be characterised as a closed element.
Thus, at least on the face of it, during the period prior to trial, there would be parallel open and closed pleadings, parallel open and closed disclosure and inspection, parallel open and closed witness statements and parallel open and closed directions hearings.
Similarly, at the trial, the hearing would be in part open and in part closed, no doubt with some documents and witnesses being seen and heard in the open hearing and others in the closed hearing (with some witnesses conceivably giving evidence at both hearings).
After trial, there would be a closed judgment and an open judgment, which would be in substantially the same terms save that those passages in the closed judgment which referred to or relied on closed material would be excluded from the open judgment.
In relation to the open elements of the proceedings, the claimants would be represented by their solicitors and counsel in the normal way, whereas, in relation to the closed elements, their interests would in effect be protected by special advocates.
The claimants objected to the course proposed by the appellants, contending for the normal approach in cases where the Crown or government emanations are parties and consider that they have relevant documents in respect of which PII might be claimed, and where the defendants could call relevant oral evidence which might not be able to be given on public interest grounds.
The appellants accepted that the PII procedure was well established, but contended that a closed material procedure was permissible in any civil case, at least before a judge sitting without a jury, and that it might well be appropriate in this case, where there was a very substantial amount of potentially relevant material which would be subject to PII.
The evidence filed on behalf of the appellants suggested that there might be as many as 250,000 potentially relevant documents, and that PII might have to be considered in respect of as many as 140,000 of them.
It was also said by the appellants that the PII exercise might take three years before the relevant ministers could conscientiously decide in respect of which documents PII could properly be claimed.
The appellants argued that the effort, cost and delay involved in such an exercise might well justify a different approach, such as that presaged by the open defence.
It was said in a witness statement served on the appellants behalf in support of the application to use a closed material procedure in this case that the principal motivation for it was the enormous scale of the disclosure exercise and the impracticability of carrying it out.
The appellants had initially sought directions from the High Court for the determination of preliminary issues as to whether a court has the power to order that a closed material procedure be adopted in a civil claim for damages if satisfied that such a procedure is necessary for the just disposal of the case; and, if so, whether and what arrangements for a closed material procedure should be adopted in relation to the claims brought by the respondent (and others).
The High Court accepted the respondents (and his then fellow claimants) submission that the first issue should be considered alone because the question whether the power to hold a closed material procedure should be exercised in this particular case could itself only be answered by looking at closed material.
The preliminary issue described above was subsequently ordered and, as varied, determined by the judge.
The common law
It is important to note that the issue between the parties is concerned only with the position at common law.
There are now a number of circumstances in which powers have been conferred on the courts to make similar orders by statute.
Tariq v Home Office is an example of such a case.
It concerns the permissibility and in particular compatibility with European Union law and with rights under the European Convention on Human Rights (the Convention) of a similar closed material procedure authorised by certain statutory provisions.
The issues there focus on the lawfulness and effect of those provisions and their compatibility, for example, with article 6 of the Convention, whereas in the instant appeal the court is concerned with the position at common law.
Mr Crow submits that the common law is in a permanent state of development and should not be allowed to stultify.
Ms Rose submits, by contrast, that the fundamental common law rights summarised in para 126 above lie at the heart of the right to fair treatment before the law and should not be limited or abrogated in any way.
She recognises that the common law has developed the principles of PII in order to cater for problems of the kind which concern the state, especially national security.
She submits that the state is sufficiently protected by those principles and that there is no warrant for permitting any kind of closed material procedure.
In these circumstances it is appropriate to consider how PII works and, to do so in the context of a case like this.
PII the principles
The principles of PII are a construct of the common law which were developed because it was appreciated that conflict may arise between the public interest and established rules of discovery and disclosure.
They were developed having regard to the public interest in the administration of justice and other public interests which precluded or were said to preclude disclosure of materials which would otherwise be disclosable.
As to disclosure, the general principle is that if the court is satisfied that it is necessary to order certain documents to be disclosed and inspected in order fairly to dispose of the proceedings, then the law requires that such an order should be made: see eg Science Research Council v Nass [1980] AC 1028, 1071E F.
The principles of PII have developed significantly over the years in a way which to my mind shows the flexibility of the common law.
In Duncan v Cammell Laird & Co Ltd [1942] AC 624 Viscount Simon LC (with whom the other six members of the House agreed) made it clear at p 629 that the question whether documents were subject to Crown privilege, which was the forerunner of PII, could arise, as in that case, in an action between private parties or, as here, in an action in which the Crown is a party.
Crown privilege could be relied upon in respect of an individual document or a class of documents.
The House of Lords held that it was for the minister personally to consider the question whether it or they should not be disclosed on grounds of public interest.
Viscount Simon made it clear at p 642 that disclosure must not be withheld in order to avoid criticism or embarrassment or to avoid paying compensation.
He said at pp 642 643: In a word, it is not enough that the minister of the department does not want to have the documents produced.
The minister, in deciding whether it is his duty to object, should bear these considerations in mind, for he ought not to take the responsibility of withholding production except in cases where the public interest would otherwise be damnified, for example, where disclosure would be injurious to national defence, or to good diplomatic relations, or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service.
When these conditions are satisfied and the minister feels it is his duty to deny access to material which would otherwise be available, there is no question but that the public interest must be preferred to any private consideration.
Viscount Simon had said a little earlier that an objection properly taken by the minister was conclusive.
Although he stressed that the ruling was to be made by the judge, not the executive, the proper ruling was to accept the ministers objection.
The House thus held that, although the decision excluding such documents was for the court, it had no discretion in the matter.
In short, Viscount Simon made it clear that a court could never question a claim to Crown privilege if the claim was made in the proper form.
However, in Conway v Rimmer [1968] AC 910 a five member appellate committee of the House of Lords disapproved the approach taken in Duncan v Cammell Laird.
It held, not only that it was for the court to decide whether Crown privilege should apply, but also that it was for the court, not the minister, to balance the competing public interests.
Lord Reid said this at p 940: It is universally recognised that here there are two kinds of public interest which may clash.
There is the public interest that harm shall not be done to the nation or the public service by disclosure of certain documents, and there is the public interest that the administration of justice shall not be frustrated by the withholding of documents which must be produced if justice is to be done.
There are many cases where the nature of the injury which would or might be done to the nation or the public service is of so grave a character that no other interest, public or private, can be allowed to prevail over it.
With regard to such cases it would be proper to say, as Lord Simon did, that to order production of the document in question would put the interest of the state in jeopardy.
But there are many other cases where the possible injury to the public service is much less and there one would think that it would be proper to balance the public interests involved.
I do not believe that Lord Simon really meant that the smallest probability of injury to the public service must always outweigh the gravest frustration of the administration of justice.
A little later, at pp 951 952, after quoting the reference in Duncan v Cammell Laird to the proper ruling referred to above, namely to accept the ministers view in every case, Lord Reid said: In considering what it is proper for a court to do we must have regard to the need shown by 25 years experience since Duncans case, that the courts should balance the public interest in the proper administration of justice against the public interest in withholding any evidence which a minister considers ought to be withheld.
I would therefore propose that the House ought now to decide that courts have and are entitled to exercise a power and duty to hold a balance between the public interest, as expressed by a minister, to withhold certain documents or other evidence, and the public interest in ensuring the proper administration of justice.
Lord Reid then gave a number of practical examples of how the balance might be struck in different classes of case.
He also said at p 953 that he could see nothing wrong with the judge seeing the documents without their being shown to the parties.
In the event the House of Lords (or at any rate Lord Reid) inspected the documents and, the House having found (at pp 996 997) that there was nothing in them which was in any way prejudicial to the proper administration of the relevant police force or to the general public interest, directed that they be disclosed for use in the litigation.
It is common ground that the current state of the law on what is now called PII is set out in R v Chief Constable of West Midlands Police, Ex p Wiley [1995] 1 AC 274.
In that case, the House of Lords held that there was no justification for a claim for immunity for the entire class of documents generated by an investigation into a complaint against the police.
I would accept the submission made by Ms Rose that the following principles correctly state the approach to PII as it has stood until now: i) A claim for PII must ordinarily be supported by a certificate signed by the appropriate minister relating to the individual documents in question: Duncan v Cammell Laird per Viscount Simon at p 638. ii) Disclosure of documents which ought otherwise to be disclosed under CPR Part 31 may only be refused if the court concludes that the public interest which demands that the evidence be withheld outweighs the public interest in the administration of justice. iii) In making that decision, the court may inspect the documents: Science Research Council v Nass at pp 1089 1090.
This must necessarily be done in an ex parte process from which the party seeking disclosure may properly be excluded.
Otherwise the very purpose of the application for PII would be defeated: see the Court of Appeal judgment at para 40. iv) In making its decision, the court should consider what safeguards may be imposed to permit the disclosure of the material.
These might include, for example, holding all or part of the hearing in camera; requiring express undertakings of confidentiality from those to whom documents are disclosed; restricting the number of copies of a document that could be taken, or the circumstances in which documents could be inspected (eg requiring the claimant and his legal team to attend at a particular location to read sensitive material); or requiring the unique numbering of any copy of a sensitive document. v) Even where a complete document cannot be disclosed it may be possible to produce relevant extracts, or to summarise the relevant effect of the material: Wiley at pp 306H 307B. vi) If the public interest in withholding the evidence does not outweigh the public interest in the administration of justice, the document must be disclosed unless the party who has possession of the document concedes the issue to which it relates: see Secretary of State for the Home Department v MB [2007] UKHL 46, [2008] AC 440 per Lord Hoffmann at para 51.
The question then arises, what, if any, use can be made of material which the court has held cannot be disclosed because of PII.
Ms Rose submits that, if the court concludes that the public interest in withholding the evidence outweighs the public interest in the administration of justice, then the evidence cannot in any circumstances be admitted, or relied on by either party.
She relies upon R v Lewes Justices, Ex p Secretary of State for the Home Department [1973] AC 388, per Lord Simon of Glaisdale at p 407.
He said there that Crown privilege is a misleading expression because it is not in truth a privilege.
It refers to the rule that certain evidence is inadmissible on the ground that to adduce it would be contrary to the public interest.
He recognised that PII has to be weighed against the public interest in the administration of justice in accordance with Conway v Rimmer.
He then said that, once the former privilege is held to outweigh the latter, the evidence cannot in any circumstances be admitted.
He added at p 407B C: It is not a privilege which may be waived by the Crown (see Marks v Beyfus (1890) 25 QBD 494 at p 500) or by anyone else.
The Crown has prerogatives, not privilege.
The right to procure that admissible evidence be withheld from, or inadmissible evidence adduced to, the courts is not one of the prerogatives of the Crown.
I will return to this point below.
PII the facts
In the course of the argument, Mr Crow referred the Court to the description of the PII certification process contained in the Attorney Generals statement made to the House of Commons on 18 December 1996 following the Matrix Churchill affair (Hansard (HC Debates) cols 949 58) and the decision in Wiley.
In it the Attorney General noted that PII is subject to the ruling of the court and that, in a criminal case, when government documents are in issue, the judge examines the documents and makes the actual decision on disclosure in the light of the facts of the case.
The statement also said that in what it described as the new approach, ministers would focus directly on the damage that disclosure would cause, the former division into class and contents claims would no longer be applied and they would only claim PII when it was believed that disclosure of a document would cause real damage or harm to the public interest.
The statement further said that the new approach was subject to the supervision of the courts and that it accorded with the view expressed by the then Lord Chief Justice that PII should only be claimed for the bare minimum of documents for which the claim of serious harm can be seen to be clearly justified.
Finally, the statement referred to the kinds of serious harm which might be involved.
Mr Crow described the certification process in a little more detail in this way.
Lawyers consider material to see if it passes the threshold test for disclosure under CPR Part 31.
In so far as it is prima facie disclosable, officials review material for potential to cause harm to the public interest.
If harm to the public interest is identified, the department carries out a balance between harm caused by the disclosure on the one hand and injustice in the litigation on the other.
It also considers whether it is possible to redact or gist the information or to make admissions of fact.
Officials consider whether and to what extent the balance falls against disclosure in order to give advice to the minister as to whether to certify.
If the minister, having considered the advice, decides that a certificate should be given, a PII certificate is prepared which includes a disclosable certificate or schedule describing the types of harm that might be caused to the public interest and a sensitive schedule as to why it is believed that disclosure of documents would cause real damage or harm to the public interest.
After the minister has signed a PII certificate, the balance between the relevant public interests must be made by the judge.
In a simple case he will hear argument on both sides and reach a conclusion, often having looked at the documents.
There will be no need for special advocates.
The position may be very different in a case of complexity, especially a case of great complexity such as this was or would have been but for the settlement.
The judge may need assistance in order carry out the balance.
Such assistance will not of course be available from counsel for the non state parties because they will not have seen the documents.
PII special advocates
It is common ground between the parties that it is in principle permissible for the court to approve the appointment of one or more special advocates to peruse the documents at an appropriate stage in order to assist the judge to decide how the balance should be struck between the public interest in disclosure and the public interest in non disclosure.
It is thus common ground that the court has the power to give such approval and, no doubt, to make other ancillary orders as to what the special advocate should do.
In my opinion the court does have such a power at common law.
Just as the House of Lords recognised in R v H [2004] UKHL 3, [2004] 2 AC 134, that the court had power at common law to give such approval in the context of criminal proceedings, so I would accept that there is such a power in this context.
This is to my mind a classic example of the measured development of the common law in confronting and solving new problems.
As Lord Bingham put it extra judicially in The Business of Judging, 2000, p 29, the last quarter century has seen fundamental, Judge made changes in the law relating to [PII].
The most obvious role for a special advocate would be to look at the documents which are the subject of a certificate and consider how the balance should be struck.
In a complex case like this the exercise would be close to impossible for the judge to do on his own without assistance.
One or more special advocates would to my mind be essential.
It may be that in such a case it would be sensible for the special advocates to be allowed to see the documents at an early stage in order to avoid or minimise delay, but that would depend upon the facts of the case.
However that may be, as I see it the use of special advocates would be (or would have been) necessary here in order to enable the judge to carry out the balancing exercise.
Should the PII exercise be abandoned?
The appellants proposed that there should be a closed material procedure instead of the well recognised and accepted PII procedure, partly if not largely because of the enormous scale of the PII disclosure exercise and the impracticability of carrying it out.
I am quite unable to accept that, at any rate in the absence of Parliamentary intervention, that was a sufficient reason for abandoning the established PII procedure and replacing it with some form of closed procedure at common law.
As I see it, whatever procedure was adopted, it would have been necessary for the appellants to identify what documents were relevant and in principle disclosable under CPR Part 31.
In addition it would have been necessary for the minister to decide which of those documents should not be disclosed in the public interest.
That in turn would have required officials to identify which documents potentially came into that category in order to enable the minister to carry out the appropriate balance.
A detailed review of the documents would have had to be carried out whether the procedure adopted was the PII procedure described above or the proposed closed procedure.
In both cases it would have been necessary for the relevant documents to be identified and the balance struck.
The critical difference between the two approaches is not that part of the exercise but what happens thereafter.
Since the first part of the exercise has to be carried out in any event, I can see no reason for abandoning the PII exercise.
Procedure after the balance is struck
In the ordinary case, where PII proceeds as outlined above and there is no closed procedure of the type sought, if the judge rules that some of the documents should not be disclosed because they attract PII, the position to date has been that identified by Lord Simon of Glaisdale in the Lewes Justices case, namely that they are not disclosed or produced to the non state parties and are not admissible in evidence.
In a criminal case, as explained in R v H [2004] 2 AC 134 and other cases, where the judge rules that they are necessary for the defence case, the prosecution must either disclose them or abandon the prosecution.
In a civil case of this kind Ms Rose submits that the effect of the PII rules is that (1) the court strikes the balance between the competing public interests, while duly acknowledging the opinion and expertise of the Secretary of State and those advising him; (2) the public interest in the administration of justice is given full weight; and (3) whatever the outcome of the exercise, the principles of natural justice and equality of arms are always preserved; both parties are equally treated in relation to the use which may be made of the sensitive material.
Mr Crow submits that that is far from a satisfactory result because in a case of this kind it may well be the position that the claimants are able to deploy their evidence in support of their claims, whereas, by reason of the inadmissibility of evidence which, but for the necessity to certify PII, would be admissible and upon which the appellants would wish to rely at the trial, the appellants are unable to defend the action, either at all or sufficiently.
He submits that both parties have the right to a fair trial and that in such circumstances the trial would not be fair to both parties.
He submits that it is in these circumstances that justice requires some form of closed procedure and that the court must have power at common law to permit it.
There is to my mind considerable force in that submission.
In Tariq v Home Office [2011] UKSC 35, Lord Brown describes at para 84 the suggestion that, where the defendants cannot defend themselves at all, it matters not because they can simply pay up as preposterous.
Another possibility canvassed in the course of the argument is for the court to decide that it would not be appropriate for a closed procedure to be introduced for the reasons given by Ms Rose but that the correct course would be to stay or strike out the action because, by reason of circumstances beyond the control of both parties, it was not possible for there to be a fair trial and that the just course was not to have a trial.
It was in this connection that the court was referred to Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786.
In that case a registered police informer brought an action against a police inspector and his chief constable to recover payment for information and assistance provided to the police.
The Court of Appeal struck out the action on the basis that a fair trial of the issues arising from the pleadings would require the police to disclose sensitive information which it would be contrary to the public interest to force the police to disclose.
Laws LJ said at para 36 that a case which can only be justly tried if one side holds up its hands cannot, in truth, be justly tried at all.
It is perhaps noteworthy that the claimant complained to the European Court of Human Rights in Strasbourg on the basis that his right of access to the court under Article 6 of the Convention had been infringed.
His complaint was rejected as unfounded: Carnduff v United Kingdom (Application No 18905/02) (unreported) 10 February 2004.
I note in this regard that in Tariq v Home Office [2011] UKSC 35 Lord Mance says (at para 40) that the striking out of the action for these reasons is not an option that the law should readily contemplate.
By contrast, Lord Kerr says at para 110 that it is a more palatable course than to adopt a closed procedure.
There is plainly a tension between these two approaches, which in my opinion should be resolved on the facts of a particular case.
It is not quite clear to me what approach Lord Dyson would take to the question whether the action should be struck out on what may be called Carnduff principles in a case of this kind.
A possible solution
It appears to me that the way forward is or should be along these lines.
After the PII process described above it should be for the parties to consider their respective positions and then to make representations to the judge as to the appropriate way forward.
Depending upon the submissions advanced, the judge may wish to consider the three possibilities to which I have referred.
They are (1) that the matter should proceed in the traditional way with the PII material simply being treated as both undisclosable and inadmissible and the trial proceeding on the basis of the disclosed and admissible evidence; (2) that the action should be stayed or struck out on the basis that through neither partys fault a fair trial is not possible; and (3) that there should be some form of closed procedure, involving special advocates, along the lines suggested by the appellants, but subject to the exigencies of the particular case.
The stance taken by the protagonists at that stage would no doubt depend very much upon the circumstances at the time.
Thus the claimants might adopt the stance now taken by Ms Rose.
On the other hand, they might conclude that there were advantages in some form of closed procedure, especially if their case was thought to depend to any significant extent upon documents in the possession of the defendants.
The defendants might also adopt a different position depending upon the circumstances.
However, as things stand at present, they might be expected to contend in every such case that the action should be struck out on the ground that, without the documents and/or evidence to which PII attached or would attach, a trial which was fair to both parties including the defendants would not be possible.
In that event, the claimants might well perceive it to be in their interest to consent to agree to a closed procedure of some kind as an alternative to their claims being struck out.
I understood it to be common ground between the parties that there would be no objection in principle to such consent being given.
It was not contended on behalf of the appellants that, if consent was given, such a procedure was contrary to principle.
Indeed, it follows from Mr Crows submission that it would be appropriate even without consent that, a fortiori, it would be appropriate with consent.
If a closed procedure were in principle a possibility, the precise nature of it would no doubt depend upon the circumstances of the particular case.
It is only at the conclusion of the PII process that the question whether to direct some form of closed material procedure would arise.
That will not of course happen in this case because it has settled.
By the time the question comes to be decided in a specific case, Parliament may have intervened.
It was suggested in the course of the argument that the common law should not consider inventing some form of closed material procedure but should leave it to Parliament.
I agree that it would be better for the problems which arise in this class of case to be dealt with by Parliament.
I understand that a green paper is in prospect and that thought is being given to possible Parliamentary intervention.
The approach of Parliament would plainly be potentially critical to the appropriate way forward at the conclusion of the PII procedure.
However, it may be that the question what directions should be given may arise in a case in circumstances (as occurred for example in A v HM Treasury (Nos 1 and 2), as explained in the Court of Appeal: see [2008] EWCA Civ 1187, [2010] 2 AC 534 at paras 59 and 64 65), where for one reason or another there has been delay and where Parliament has not decided whether or not to intervene or, perhaps, where it has decided not to intervene.
In such circumstances the court would have to decide what, if any, novel procedure to adopt.
As appears below the court has adopted novel procedures in not dissimilar situations, no doubt by way of development of the common law and pursuant to its obligation under the CPR Part 1 to act justly.
In considering the relationship between the role of Parliament and the role of the common law, Lord Bingham said in The Business of Judging at pp 386 387 that regard should be had to any relevantly analogous statute and that he saw no reason why statute and the common law should not feed and refresh each other.
I see no reason in principle why the common law should not be able to develop along these lines.
There are many statements in the books of the flexibility of the common law.
As Lord Slynn of Hadley memorably put it in Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122, at para 33, the genius of the common law is its capacity to develop.
See also, for example, Sir Frederick Pollock in The Genius of the Common Law (1912) at p 45 and Lord Denning MR in Comet Products UK Ltd v Hawkex Plastics Ltd [1971] 2 QB 67.
In so far as such a development would be a development of the common law of PII, it would be no more than a further development of a process which, as Lord Bingham put it in 2000, has been taking place over the last quarter of a century.
In these circumstances I would not grant a declaration such as that granted by the Court of Appeal.
The common law should in my opinion very rarely, if ever, say never.
Moreover, the argument in this appeal has persuaded me that it is not appropriate to make a declaration such as that granted by the Court of Appeal in a vacuum.
The court should consider what orders to make in the context of a specific case.
I turn to consider the terms of the declaration which was granted.
In it the Court of Appeal distinguishes between ordinary or normal civil claims and those which involve a substantial public interest dimension.
I note in this context that in the declaration granted by the judge he referred to a civil claim for damages, whereas the Court of Appeal added the word ordinary.
In its judgment at paras 59, 61, 63 67 and 71, it distinguished the various cases relied upon by the appellants on the ground that they were not ordinary civil claims for damages.
Some were criminal cases: see R v Shayler [2002] UKHL 11, [2003] 1 AC 247 and R v H. Others were civil cases of various kinds.
They include Secretary for State for the Home Department v Rehman [2001] UKHL 47, [2003] 1 AC 153; R (Roberts) v Parole Board [2005] UKHL 45, [2005] 2 AC 738, R (Malik) v Manchester Crown Court [2008] EWHC 1362 (Admin), [2008] 4 All ER 403; A v HM Treasury and R (AHK) Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287, [2009] 1 WLR 3049.
It is true that none of those cases involved an ordinary civil claim for damages, by which it appears from paras 59 and 71 that the Court of Appeal meant a case in which the court was simply an arbiter.
The reasons for the Courts view can be seen from its concluding remarks at paras 68 to 71.
It expressed concern at para 69 that a procedure which is said to apply only in exceptional circumstances often becomes common practice.
It then expressed these conclusions at paras 70 and 71: 70.
The importance of civil trials being fair, the procedures of the court being simple, and the rules of court being clear are all of cardinal importance.
It would, in our view, be wrong for judges to introduce into ordinary civil trials a procedure which (a) cuts across absolutely fundamental principles (the right to a fair trial and the right to know the reasons for the outcome), initially hard fought for and now well established for over three centuries, (b) is hard, indeed impossible, to reconcile satisfactorily with the current procedural rules, the CPR, (c) is for the legislature to consider and introduce, as it has done in certain specific classes of case, where it considers it appropriate to do so, (d) complicates a well established procedure for dealing with the problem in question, namely the PII procedure, and (e) is likely to add to the uncertainty, cost, complication and delay in the initial and interlocutory stages of proceedings, the trial, the judgment, and any appeal. 71.
We leave open the question of whether a closed material procedure can properly be adopted, in the absence of statutory sanction in an ordinary civil claim such as the present, where all the parties agree, or in a civil claim involving a substantial public interest dimension (ie where the judge is not simply sitting as an arbiter as between the parties).
Both principle and the authorities relied on below seem to us to suggest that a different conclusion may well be justified in such cases, albeit only in exceptional circumstances, but that is an issue which should be considered as and when it arises.
Save that I am not persuaded that an appropriate procedure could not be devised which is consistent with the CPR, I entirely accept the fundamental principles summarised in para 70.
However, I do not think that there is any principled distinction between an ordinary civil claim and any other civil claim for these purposes.
In any event, if there is potentially such a distinction, this is surely a case in which there is a public interest in the issue involved, at any rate on the approach I have identified.
The issue which has given rise to the question in this appeal is what is the correct approach to the fact that the appellants have what may be a valid claim to PII.
The question is what to do when such a claim is made and, in particular, what to do when the minister issues a PII certificate.
The public interest self evidently plays a central part in the resolution of those questions.
So, if there is a distinction between ordinary civil actions and those involving a substantial public interest dimension, this case falls on the latter side of the line.
On the question whether there is a principled difference between ordinary civil actions and others I would accept Mr Crows submissions on behalf of the appellants, which were shortly to this effect.
First, no such distinction has been drawn in the past.
Secondly, the question in this appeal is whether a closed material procedure can ever be adopted in the case of a civil claim for damages.
Distinctions between different claims for damages are irrelevant for the purposes of answering that bald question.
The distinction may be relevant to the answer to the question whether an order should be made in a particular case.
Thirdly none of the cases in which an exception has been made to the principle that all the material must be shown to both parties in every case depends upon this distinction.
They all depend upon what the interests of justice demand.
None of them depends upon a classification of the kind adopted by the Court of Appeal: see eg the wardship and children cases, including In re T (Wardship: Impact of Police Intelligence [2009] EWHC 2440 (Fam), [2010] 1 FLR 1048, Chief Constable v YK [2010] EWHC 2438 Fam and In re D (Minors) (Adoption Reports: Confidentiality) [1996] AC 593, 615, per Lord Mustill.
There have been other examples in the field of commercial confidentiality; see for example British Sky Broadcasting Group plc v Competition Commission [2010] EWCA Civ 2, [2010] 2 All ER 907.
Fourthly, there is no principled basis for accepting that the court can properly adopt a closed material procedure (subject to appropriate safeguards) when government action is subject to judicial review but not when the same action is subject to a claim in tort for damages.
The differences between the two procedures are irrelevant to this question.
Both may involve identical questions of law and fact.
Both may involve the examination of the same evidence and examination and cross examination of witnesses: see eg R (Al Sweady) v Secretary of State for Defence [2009] EWHC 2387 (Admin), [2010] HRLR 12.
Fifthly, the boundaries of the two classes of case are often blurred.
I note, for example that in R (Mohamed) v Secretary of State for Foreign and Commonwealth Affairs (No 1) [2008] EWHC 2048 (Admin), [2009] 1 WLR 2579, the claims were in part for judicial review and in part for Norwich Pharmacal relief: see Norwich Pharmacal Co v Customs and Excise Comrs [1974] AC 133.
The natural process for the latter would be by ordinary action.
It is of interest to note in passing that there were there both open and closed hearings and cross examination by a special advocate, no doubt by consent between the parties.
In these circumstances, I would not accept the jurisdictional distinction that the Court of Appeal draws between ordinary civil claims and other civil claims.
It appears from para 71 of the judgment quoted above that, subject to that distinction, the Court of Appeal accepted that both principle and the authorities relied on before the judge suggested that a different conclusion may well be justified in such cases, albeit only in exceptional circumstances, but said that was an issue which should be considered as and when it arose.
I appreciate that, as both Lord Dyson and the Court of Appeal have pointed out, the issues of jurisdiction were not argued in those cases.
That was certainly true in the two cases referred to in which I played a part, namely A v HM Treasury and the AHK case.
It is also true that, as the Court of Appeal pointed out, the decision in Ahmed was reversed by this court.
The principles relevant to this case were not however commented upon adversely.
They are summarised at para 58 of A and at para 17 et seq of AHK.
Both cases involved the appointment of special advocates without express statutory authority.
They are to much the same effect.
So I refer only to para 58 of A, where I said this: There is so far no statutory power to appoint a special advocate in proceedings arising out of a [Terrorism Order].
However, as I see it, there is no reason in principle why a special advocate should not be appointed in a particular case.
The authorities show that in an appropriate case the court would have power to authorise or request the use of a special advocate: see in particular the decision of the House of Lords in R (Roberts) v Parole Board [2005] 2 AC 738, where it was held that the court had power to do so even where it was not sanctioned by Parliament.
Whether it should do so or not would depend on the particular circumstances of the case.
It has very recently been held by the Divisional Court in Malik that the court has power to ask the Attorney General to appoint a special advocate, but that it should only do so in an exceptional case and as a last resort: per Dyson LJ, giving the judgment of the court, at paras 93 102, especially, at para 99.
In these circumstances the court would have power to procure the appointment of a special advocate through the Attorney General.
I am not persuaded by Ms Roses submissions that the principles do not remain sound and applicable in an appropriate case.
However, all depends upon the circumstances of the particular case and I agree with the view expressed in the Court of Appeal in para 71 (quoted above) that the issue of their correctness and application to the circumstances should be decided when they arise in a particular case.
If they ever arise in a context like this, it will be in very different circumstances from any of the other cases.
If they arise in a case of this kind it will be necessary to examine in detail the relationship between (a) PII and its application in this type of case, (b) the principle in Carnduff v Rock, including its correctness and its application and relationship to PII and (c) the prospect of fashioning a procedure which will on the one hand retain the principles of PII and on the other hand enable the action to proceed in a way which will provide a fair trial to both parties, while respecting their fundamental rights, including the fundamental rights of the claimants relied upon by Ms Rose.
In reaching these conclusions I do not wish to understate the fundamental nature of those rights.
It follows that any new procedure which affected them should only be adopted by the common law in most exceptional circumstances.
Whether those circumstances exist will depend upon the facts of the particular case and should only be determined in that context.
Since writing the above, I have had the opportunity of reading Lord Dysons judgment in draft.
I entirely understand his concern (and that of the Court of Appeal) that a principle that a closed procedure could be used only in exceptional circumstances may become the thin end of the wedge.
However, in my opinion the judges can be relied upon to ensure that that will not happen.
The test would be one of necessity: see Scott v Scott [1913] AC 417, per Viscount Haldane LC at pp 436 439.
As Lord Dyson himself recognises at paras 63 and 64, various exceptions to the fundamental principles he describes have been recognised by the common law.
These show that, although fundamental, the principles are not absolute and must yield where it is necessary in the interests of justice that they do so.
As Lord Dyson puts it at para 64 in the context of confidentiality, such claims by their very nature raise special problems which require exceptional solutions (his emphasis).
If the judge concludes after carrying out the PII balancing exercise that it is necessary to have some form of closed process, that same principle would permit such a process at common law.
Thus, at the conclusion of the PII process it will be necessary for the judge to decide how to proceed.
If he is persuaded that it is necessary in the interests of justice that some form of closed process should take place, I can see no reason why such a process should not be followed.
If, as is common ground, it was open to the courts to develop the common law in children or wardship cases or in confidentiality cases on the ground that it was necessary to do so in the interests of justice, the same principle should apply here.
I appreciate that this is at the end of what has hitherto been described as the PII process.
However, what to do at that point can to my mind fairly be regarded as part of that process.
It is certainly very closely related to it.
As stated above, at that stage the whole process and the way forward will have to be reviewed by the judge in the light of the submissions of the parties.
Much will depend upon those submissions.
In this regard it is important to note that those submissions will depend upon the facts of the particular case.
Thus in a case of this kind, where the state organs are the defendants in a civil claim, the position may be very different from a case in which the state has asserted or is asserting rights against a non state party and it is the latter which needs information in order to enable it to defend its position.
In the former case, as explained above, if the judge concludes that, absent some closed procedure the claim should be struck out because a fair trial to both parties is not possible, the claimant may consent to a closed procedure in order to allow his claim to proceed.
In that event the action will proceed on the basis of some appropriate closed procedure.
No question of necessity will arise.
On the other hand, if the judge declines to strike the claim out, the defendants might seek an order for such a procedure based on necessity, namely that such a procedure would be necessary in order to permit a fair trial.
Whether this is a realistic possibility should in my opinion be left for decision in a concrete case.
A closed procedure might also be necessary in a case in which it is the non state party which wishes to rely upon the material which would otherwise be subject to PII in order to defend itself in some way against the state.
In such a case either party might seek an order for such a procedure based on necessity, namely that such a procedure would be necessary in order to permit a fair trial.
These considerations to my mind demonstrate the importance of leaving the question of what, if any, procedure is permissible, to be determined in the context of a specific case.
The court should not in my judgment now rule out the possibility of some form of closed procedure in any case in circumstances in which it is not possible to predict what may happen in the future.
All should depend upon the particular circumstances after the judge has struck what may be called the PII balance.
In this regard the decision in R (Mohamed) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2009] EWHC 152 (Admin), [2009] 1 WLR 2653 is instructive.
At para 34 Thomas LJ set out four questions that arise when carrying out the balancing test: (i) Is there a public interest in bringing the redacted paragraphs into the public domain? (ii) Will disclosure bring about a real risk of serious harm to an important public interest, and if so, which interest? (iii) Can the real risk of serious harm to national security and international relations be protected by other methods or more limited disclosure? (iv) If the alternatives are sufficient, where does the balance of the public interest lie?
Thomas LJ then identified factors relevant to determining where the balance of public interest lies.
He did so under four headings: (i) the public hearing; (ii) making decisions and reasons public; (iii) public justice, the rule of law, free speech and democratic accountability; and (iv) the role of the media.
In discussing the need to uphold the rule of law, he said, at para 41 that the more serious the alleged infringement of the rule of law, the more strongly that principle applies and at para 46 he emphasised that the provision of information which enables public debate to take place and democratic accountability to be made more effective is one of the bases on which democracy rests.
Although the Court of Appeal expressed some disagreement with the Divisional Court on the facts, while they do not say so expressly, as I read their judgments, they agreed with its general approach in principle: see [2010] EWCA Civ 65, [2011] QB 218, per Lord Judge CJ at para 51, Lord Neuberger MR at para 187 and Sir Anthony May P at para 290.
At para 295 Sir Anthony emphasised that the balance is not to be struck by the Foreign Secretary but by the court.
As I read the judgments in Mohamed in both courts, in addition to that principle, they support these further propositions.
First, the rule of law and the democratic requirement that governments be held to account mean that the case for disclosure will always be very strong in cases involving alleged misconduct on the part of the state and, secondly, that the more serious the alleged misconduct on the part of the state, the more compelling the national security reasons must be to tip the balance against disclosure.
As I see it, the special advocates will have a significant role at that time because under the present system they will have played a substantial part in the consideration of which documents are relevant and which are (and which are not ) subject to PII.
In doing so, they will have learned a good deal about the issues between the parties and will have been able to make submissions to the judge on the question how the balance should be struck by the judge as between disclosure and non disclosure.
This might include inviting the judge to consider the balance between the public interest in non disclosure on the one hand and the public interest in disclosure having regard to the importance of each in the particular context, which would or might include the importance of ensuring that the state does not abuse its power or the rights of the citizen.
Equally special advocates would be likely to be valuable in the future, not only in the context of striking that balance, but also both in a consideration of the question which may arise at the end of the PII process as to whether a non state claimant should consent to some form of closed procedure or, in the case of a non state defendant, whether the circumstances meet the requirement of necessity such as to justify a closed evidence procedure.
In order to carry out these functions effectively and to provide a substantial measure of procedural justice to the party, it may well be that in the future special advocates will need to be permitted to communicate with the party and the parties representative.
The Joint Committee on Human Rights has long advocated relaxation of the rule against communication between special advocates and non state parties, most recently in its report Counter Terrorism Policy and Human Rights (Sixteenth Report): Annual Renewal of Control Orders Legislation (2010) HL Paper 64, HC 395.
This is essentially an issue for Parliament but it may also be an issue which, in the absence of Parliamentary intervention, a judge considering whether to order a closed procedure will wish to address, although proper safeguards would of course have to be put in place to protect the public interest.
As ever, all would depend upon the circumstances.
Finally, I should add that I am not persuaded that there is anything in the CPR which prevents an appropriate process being developed.
I respectfully doubt that the CPR require an adversarial process at every point.
In the pursuit of the overriding principle of dealing with cases justly it may well be necessary to introduce inquisitorial elements, as for example where the judge looks at some evidence which both parties do not.
Further, for my part, I would not accept the argument that there is no significant difference in this context between a criminal case and a civil case.
The decision in R v Davis [2008] UKHL 36, [2008] AC 1128 is of importance but it was a criminal case, where I well understand that the importance of the defendant being able to confront his accusers may be critical.
The same may be much less important in a civil case, especially where the state is the defendant and not the accuser.
Conclusion
In all the circumstances I would allow the appeal and set aside the declaration granted by the Court of Appeal.
I would do so because I can envisage circumstances in which it might be appropriate to develop the common law by directing that some form of closed material procedure take place.
Such a development would, as I see it, be a further step in the courts approach to PII which has already changed step by step without statutory assistance since Duncan v Cammell Laird.
For my part I would not replace the declaration granted by the Court of Appeal with the declaration granted by the judge.
I would simply leave these issues to be further considered in the light of the facts of a specific case.
LORD PHILLIPS
I have considered the judgments of Lord Clarke and Lord Dyson.
I agree with Lord Brown that each makes a compelling case.
That case relates, however, to a general issue which did not arise on the facts of this case.
Could the common law ever permit a closed material procedure to be used in litigation involving a civil claim? That issue is now doubly academic as this litigation has now been settled.
The preliminary issue with which the Court of Appeal was concerned was a narrower one.
Lord Clarke has set out that issue at para 123 of his judgment.
It is important to appreciate the full import of the issue.
What was proposed was an alternative to the manner in which public interest immunity (PII) is dealt with under the conventional process of discovery.
What the conventional exercise involves is summarised by Lord Clarke at para 145 of his judgment.
What that conventional exercise was likely to involve on the facts of the case is set out by Lord Clarke at para 135.
The proposed scheme, as set out in the preliminary issue, was a procedure which was intended to replace the conventional exercise.
It would not be necessary, in the case of each document, for the minister and the court to balance the damage that would be done to the public interest if the document were disclosed against the damage to the administration of justice if it were not.
Instead, any documents disclosure of which would be contrary to the public interest, as broadly defined in the preliminary issue, would be dealt with by the closed material procedure as defined.
Lord Clarke comments at para 130 that he cannot conceive of circumstances in which the court could properly make an order for the use of closed material procedure as defined.
And at para 152 he states that such a course would require Parliamentary intervention.
I agree.
The common law develops incrementally.
The change envisaged by the preliminary issue would be fundamental.
Only Parliament could bring about such a change.
This reasoning would have sufficed to enable the Court of Appeal to give a negative answer to the preliminary issue, and I consider that it would have been more satisfactory had the Court taken this course.
In the event the Court of Appeal gave the following reasons of principle for giving a negative answer to the preliminary issue [2010] 3 WLR 1069: 30.
In our view, the principle that a litigant should be able to see and hear all the evidence which is seen and heard by a court determining his case is so fundamental, so embedded in the common law, that, in the absence of parliamentary authority, no judge should override it, at any rate in relation to an ordinary civil claim, unless (perhaps) all parties to the claim agree otherwise.
At least so far as the common law is concerned, we would accept the submission that this principle represents an irreducible minimum requirement of an ordinary civil trial.
Unlike principles such as open justice, or the right to disclosure of relevant documents, a litigant's right to know the case against him and to know the reasons why he has lost or won is fundamental to the notion of a fair trial.
Later in its judgment the Court of Appeal ranged more widely.
It considered at para 51 the use of a closed material procedure after the conclusion of a conventional PII exercise, observing at para 53 that this was not the closed material procedure as defined in the preliminary issue.
It is not always easy to determine in some parts of the judgment of the Court of Appeal whether it was addressing the closed material procedure as defined in the preliminary issue, or a closed material procedure of some other description.
This is particularly true of the last paragraph of its judgment: We leave open the question of whether a closed material procedure can properly be adopted, in the absence of statutory sanction in an ordinary civil claim such as the present, where all the parties agree, or in a civil claim involving a substantial public interest dimension (ie where the judge is not simply sitting as an arbiter as between the parties).
Both principle and the authorities relied on below seem to us to suggest that a different conclusion may well be justified in such cases, albeit only in exceptional circumstances, but that is an issue which should be considered as and when it arises.
I consider that the judgment of the Court of Appeal should be treated as applying only to the preliminary issue with which it was concerned.
Whether the general principles applied by the Court of Appeal would necessarily preclude the use of a different closed material procedure, not as a substitute for the conventional PII exercise, but to mitigate the injustice that can occur when relevant evidence is excluded from disclosure because of PII, is a question that should be left open until it actually arises, just like the question left open by the last paragraph of the Court of Appeals judgment.
It follows that I do not propose to go down the hypothetical road followed by Lord Clarke in that part of his judgment that begins at para 154.
Nor do I propose to consider the merits of Lord Dysons dissent from that part of Lord Clarkes judgment.
I would dismiss this appeal on the narrow ground set out in para 192 above.
LORD RODGER
Lord Rodger, who died before judgment was given in this case, had indicated that he would have dismissed the appeal.
| UK-Abs | The question in this appeal is whether the court has the power to order a closed material procedure for the whole or part of the trial of a civil claim for damages.
This question is formulated as a preliminary issue which arose in the context of claims brought by the respondents against the appellants.
The respondents claimed compensation for their alleged detention, rendition and mistreatment by foreign authorities in various locations, including Guantanamo Bay.
They claimed that the appellants had been complicit in what they alleged had happened.
These claims settled prior to the hearing before the Supreme Court.
However, the appellants pursued their appeal which was accepted by the Supreme Court on the basis that a decision is needed to clarify the law on this point of general importance.
The appellants claimed that they had security sensitive material within their possession which they wished the court to consider in their defence but which could not be disclosed to the respondents.
They requested that this material be put into a closed defence and that the proceedings take place with parallel open and closed hearings and judgments.
The respondent and the other claimants objected and this dispute formed the basis of the preliminary issue.
The preliminary issue defined closed material procedure as a procedure whereby a party can withhold certain material from the other side where its disclosure would be contrary to the public interest.
The closed material would be available to special advocates, who act in the interests of the excluded party but who cannot take instructions from them, and the court.
At first instance, Silber J granted a declaration that it could be lawful and proper for a court to order a closed material procedure in a civil claim for damages: [2009] EWHC 2959 (QB).
The Court of Appeal (Lord Neuberger MR, Maurice Kay and Sullivan LJJ) disagreed.
They denied that a court had such a power: [2010] EWCA Civ 482.
The Supreme Court, by a majority, dismisses the appeal.
The lead judgment is given by Lord Dyson, with whom Lords Hope, Brown and Kerr agree.
Lord Phillips would also dismiss the appeal but for different reasons.
Lord Mance, with whom Lady Hale agrees, and Lord Clarke give dissenting judgments.
Lord Rodger, who died before judgment was given in this case, had indicated that he would have dismissed the appeal.
The court unanimously decides that there is no power at common law to replace public interest immunity (PII), whereby a judge decides whether in the public interest certain material should be excluded from a hearing, with a closed material procedure.
Such a change could only be for Parliament to make: [67] [69], [107], [152], [192].
Lords Dyson, Hope, Brown and Kerr further hold that there is no power at common law to introduce a closed material procedure following the conclusion of the
normal PII process.
A closed material procedure, unlike the law relating to PII, involves a departure from the principles of open and natural justice, which are essential features of a common law trial: [10] [14].
In certain specified cases, Parliament has enacted legislation which departs from the open justice and natural justice principles in introducing a form of closed material procedure and special advocates.
This legislation responds to the increasing need in recent years to balance the public interest in maintaining a fair justice system with the public interest in the protection of national security.
The court has an inherent power to regulate its own procedure.
In so doing it may introduce innovations in the interests of justice.
However, the court cannot exercise its power to regulate its own procedures in such a way that will deny parties their common law right to a fair trial: [18] [22].
The case of R v Davis [2008] AC 1128 is analogous.
The House of Lords in Davis decided that the right to be confronted by ones accusers is such a fundamental element of the common law right to a fair trial that the court cannot abrogate it in the exercise of its inherent power.
Only Parliament could do that.
The closed material procedure excludes a party from the closed part of the hearing.
This prevents him from being able to see and challenge the evidence and submissions made in the closed hearing.
It also prevents him from reading the closed part of the judgment.
He may never know why his case was decided the way it was.
The use of special advocates can mitigate some of these defects but they cannot cure them.
In many cases special advocates will be hampered by not being able to take instructions from their client on the closed evidence.
Accordingly, a closed material procedure cannot properly be described as a development of the common law process of PII: [27] [37].
There is no clear and established line of authority to support the proposition that the court has power to order a closed material procedure in the absence of statutory authority: [51] [59], [85].
There are certain limited classes of case, such as wardship cases in which the interests of the child are paramount, or intellectual property cases where the whole object of the proceedings is to protect a commercial interest, where a departure from the normal rule is justified for special reasons in the interests of justice.
However, these cannot be relied upon to justify the creation of a general rule applicable to all civil litigation: [62] [66].
It is not for the courts to extend something as controversial as the closed material procedure beyond the boundaries which Parliament has chosen to draw for its use.
If this is to be done at all, it is better done by Parliament: [47] [48], [67] [69], [72] [74], [78].
The question of whether it would be open to the court to adopt a closed material procedure if the parties consented does not need to be decided in this case and is left open: [46], [75], [99].
In Lord Browns view, however, consent cannot justify recourse to a closed material procedure: [84].
Lord Phillips leaves the question of whether there is a common law power to permit a closed material procedure open: [196].
Lord Mance, with whom Lady Hale agrees, and Lord Clarke would have held that the court has the power, in certain circumstances, to order a closed material procedure.
They disagree, however, over what those certain circumstances are.
In Lord Mances view, the court may order a closed material procedure, but only where the closed material is in the defendants possession and the claimant consents in order to avoid his claim being struck out: [112] [121].
For Lord Clarke, the circumstances in which a court may order a closed material procedure are not necessarily so limited.
In Lord Clarkes view, after the PII process has been completed the parties should consider their respective positions and make representations to the judge as to the appropriate way forward, which may be to order a closed material procedure.
The precise circumstances in which a closed material procedure may be ordered would be for the court to work out in a concrete case: [159] [188].
|
This appeal concerns the permissibility and in particular compatibility with European Union law and Human Rights Convention rights, of a procedure (conveniently described as a closed material procedure) whereby an applicant and his representatives may be excluded from certain aspects of employment tribunal proceedings on grounds of national security, and a special advocate may represent his interests so far as possible in relation to the aspects closed to him and his representatives.
In the relevant employment tribunal proceedings, the appellant, Mr Kashif Tariq, complains that his security clearance as an immigration officer was withdrawn in circumstances involving direct or indirect discrimination on grounds of race and/or religion, and that this was contrary to the Race Relations Act 1976 and the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660).
The Home Offices case is that there was no such discrimination, that the decisions taken in relation to Mr Tariq were taken for the purposes of safeguarding national security, and that the order for a closed material procedure made by the Employment Tribunal (on the Home Offices application) on 15 February 2008 was made justifiably and for the same protective purposes.
Mr Tariqs challenge to the Employment Tribunals order for a closed material procedure was dismissed by the Employment Appeal Tribunal on 16 October 2009, UKEAT 168/09, [2010] ICR 223 and the Court of Appeal on 4 May 2010 [2010] EWCA Civ 462, [2010] ICR 1034, but it was declared (by the Employment Appeal Tribunals order dated 24 November 2009, upheld in the Court of Appeal) that article 6 of the European Convention on Human Rights requires [Mr Tariq] to be provided with the allegations being made against him in sufficient detail to enable him to give instructions to his legal team so that those allegations can be challenged effectively (a requirement which can conveniently be described as gisting), even if this put the Home Office in the invidious position of having to make difficult decisions about disclosure and whether or how a claim is to be defended: [2010] ICR 1034, para 50, per Maurice Kay LJ.
The Home Office appeals to the Supreme Court against the latter conclusion, while Mr Tariq cross appeals against the conclusion that a closed material procedure was permissible.
The factual background in more detail
Mr Tariq started employment with the Home Office as an immigration officer on 21 April 2003, having received the necessary security clearance on 18 February 2003.
On 19 August 2006 he was suspended from duty on basic pay, while consideration was given to the withdrawal of his security clearance, and on 20 December 2006 his clearance was withdrawn.
His internal appeal against this decision was dismissed on 9 August 2007, and his further appeal to the Security Vetting Appeals Panel (SVAP) was unsuccessful in January 2011.
The background to the Home Offices decisions to suspend and withdraw Mr Tariqs security clearance consists in the arrest of his brother and cousin on 10 August 2006 during a major counter terrorism investigation into a suspected plot to mount a terrorist attack on transatlantic flights.
Mr Tariq's brother was subsequently released without charge.
Mr Tariq's cousin, Tanvir Hussain, was convicted on 8 September 2008 of conspiracy to murder, having previously also pleaded guilty to two counts of conspiracy to cause explosions and to commit a public nuisance.
He is now serving a sentence of life imprisonment.
Inquiries were made at the time of the arrests to establish whether or not Mr Tariq was involved in any way with the plot or could be affected by it.
No information suggested that Mr Tariq had himself been involved in any terrorism plot, but the Home Office (in grounds of resistance served in the Employment Tribunal proceedings on 6 August 2007 and amplified on 20 December 2007) states that it was concerned in August 2006 that [Mr Tariq] could be vulnerable to an approach to determine if terrorist suspects had been flagged to the authorities or to smuggle prohibited items airside and that its decision to withdraw security clearance in December 2006 was based on [his] close association with individuals suspected of involvement in plans to mount terrorist attacks and on its view that association with such individuals might make him vulnerable to attempts to exert undue influence on [him] to abuse his position.
Mr Tariq commenced the employment tribunal proceedings claiming direct or indirect discrimination on grounds of race and/or religion on 15 March 2007.
He stated at the outset that he had been advised that his suspension and the withdrawal of his security clearance were because of his perceived association with certain relatives or associates of relatives suspected of association with terrorist activities and the risk of their attempting to exert influence on him to abuse his position.
He denied any such association or risk.
On 10 July 2007 he provided what he said were (considering, he said, the extremely limited information as to the grounds for his treatment to that date given) the best further particulars possible to give pending disclosure by the Home Office.
These particulars alleged, inter alia, that the Home Office had relied upon stereotypical assumptions about him and/or Muslims and/or individuals of Pakistani origin such as susceptibility to undue influence, coercion or brainwashing and had indirectly discriminatory security policies, procedures and methods of investigation.
The Home Office in its grounds of resistance denied this and maintains, as stated, that it acted throughout to protect national security.
The legislation
The Race Relations Act 1976 provides: 1 Racial discrimination (1) A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if (a) on racial grounds he treats that other less favourably than he treats or would treat other persons; . (lA) A person also discriminates against another if, in any circumstances relevant for the purposes of any provision referred to in subsection (lB), he applies to that other a provision, criterion or practice which he applies or would apply equally to persons not of the same race or ethnic or national origins as that other, but (a) which puts or would put persons of the same race or ethnic or national origins as that other at a particular disadvantage when compared with other persons, (b) which puts or would put that other at that disadvantage, and (c) which he cannot show to be a proportionate means of achieving a legitimate aim. 42 Acts safeguarding national security Nothing in Parts II to IV shall render unlawful an act done for the purpose of safeguarding national security if the doing of the act was justified by that purpose.
The Race Relations Act 1976 is the means by which the United Kingdom gives effect to its obligations under Council Directive 2000/43/EC of 29 June 2000 (the Race Directive) implementing the principle of equal treatment between persons irrespective of racial or ethnic origin.
On 27 November 2000 Council Directive 2000/78/EC (the Employment Equality Directive) established a general framework for equal treatment in employment and occupation.
This led to the making, under section 2 of the European Communities Act 1972, of the Employment Equality (Religion or Belief) Regulations 2003 (the Employment Equality Regulations), prohibiting discrimination on grounds of religion or belief and providing: 3.(1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if (a) on grounds of religion or belief, A treats B less favourably than he treats or would treat other persons; or (b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same religion or belief as B, but (i) which puts or would put persons of the same religion or belief as B at a particular disadvantage when compared with other persons, (ii) which puts B at that disadvantage, and (iii) which A cannot show to be a proportionate means of achieving a legitimate aim.
Exception for national security 24.
Nothing in Part II or III shall render unlawful an act done for the purpose of safeguarding national security, if the doing of the act was justified by that purpose.
The issues regarding closed material procedure in more detail
Employment Tribunals are established under the Employment Tribunals Act 1996.
Section 7 entitles the Secretary of State to make by regulations (employment tribunal procedure regulations) . such provision as appears to him to be necessary or expedient with respect to proceedings before employment tribunals.
Section 10, which I set out in the annex to this judgment, specifically authorises the making in the interests of national security of regulations providing for a closed material procedure, either by direction of a minister or by order of the employment tribunal or judge, and for the appointment by the Attorney General in that context of a special advocate.
The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861) contain in Schedules 1 and 2 provisions made under sections 7 and 10 of the Act.
Schedule 1, headed the Employment Tribunals Rules of Procedure (the ET Procedure Rules), contains rule 54, set out in the annex, providing specifically for a closed material procedure where a minister so directs (rule 54(1)) or where the tribunal or employment judge concludes that such a procedure is appropriate and so orders (rule 54(2)).
Schedule 2, headed the Employment Tribunals (National Security) Rules of Procedure (the ET National Security Rules), contains rules 8 and 10, also set out in the annex, providing for special advocates and reasons in national security proceedings.
Regulation 16 provides that the rules in Schedule 1 apply to employment tribunal proceedings generally, but that such rules shall be modified in accordance with Schedule 2 wherever any power conferred on the minister, the tribunal or an employment judge by rule 54 of Schedule 1 is exercised.
Regulation 2 of the 2004 Regulations contains definitions, again set out in the annex.
Mr Tariqs cross appeal (a) general
The power to give directions conferred on the minister by rule 54(1) has not been exercised in this case.
The Supreme Court was told that it has never been exercised in any case.
The probable reasons are not difficult to discern, bearing in mind the scope for challenge both by judicial review and, more fundamentally, under the Human Rights Act 1998 or, Mr Robin Allen QC also submits for Mr Tariq, European Union law.
While the conferral of the power is expressly authorised by the 1996 Act, it is hard to see how it could be compatible with article 6 of the European Convention on Human Rights for a minister to have power to make such a direction to a judicial tribunal.
Instead of giving any direction, the minister made an application to the tribunal, asking it to order a closed material procedure with a special advocate under the discretionary power conferred by rule 54(2).
On 15 February 2008, the tribunal held that it was expedient in the interest of national security to make orders under rule 54 that the whole of the proceedings be in private, and directed that Mr Tariq and his representative should be excluded from part of the proceedings when closed evidence and/or documents were being considered, that the Tribunal would consider both open and closed documents and that the Home Office would make available the appropriate closed material to any special advocate appointed.
It further stated that the terms so ordered would be reviewed at a later case management discussion.
At a case management discussion held on 30 May 2008, in the presence of representatives of the parties and of Ms J Farbey of counsel nominated by the Attorney General to act as special advocate, the judge ordered that her role as special advocate should take effect and that she should proceed in discussions with Mr Tariq.
Meanwhile, reasons for the tribunals decision on 15 February 2008 were outstanding.
The minister, to whom the tribunal was required by rule 10 of the ET National Security Rules to submit such reasons in the first instance, directed that one paragraph be abridged and another omitted.
As a result, an edited version, identifying the positions of the amendment and abridgement, was initially issued to Mr Tariq and his representatives on 15 October 2008.
However, on 9 December 2008 the full reasons were released.
One may speculate that this resulted from submissions made by the special advocate.
The paragraphs amended and omitted do not, on their face, seem likely to impact on national security.
This course of events offers therefore a cautionary message, but, quite possibly also, an indication of at least one purpose which a special advocate may serve.
In the upshot, there is not now any ministerial order in effect under rule 10.
Whatever objections may be made to a rule giving the executive power to direct the judiciary with regard to reasons do not therefore arise for consideration on this appeal.
This appeal concerns an exercise by the Tribunal of its power under rule 54(2) of the ET Procedure Rules, read with rule 8 of the ET National Security Rules.
(b) The European Union Directives
On behalf of Mr Tariq, Mr Allen submits that rule 54(2) and rule 8 are contrary to European Union law and/or the European Human Rights Convention.
These rules were made pursuant to the express statutory authority to make such rules conferred by section 10 of the Employment Tribunals Act 1996.
Mr Allens first submission is that they are, none the less, in conflict with European legal principles governing discrimination, contained in the European Treaties and in the Race and Employment Equality Directives, to which the 1996 Act, the Race Relations Act 1976 and the Employment Equality Regulations must all be read, at least as far as possible, as being subject.
Mr Allen notes in this connection a contrast between the two Directives.
The Employment Equality Directive makes express reference to national security, providing in article 2(5): 5.
This Directive shall be without prejudice to measures laid down by national law which, in a democratic society, are necessary for public security, for the maintenance of public order and the prevention of criminal offences, for the protection of health and for the protection of the rights and freedoms of others.
There is no equivalent provision in the Race Directive.
Mr Allen suggests that this may be because the Race Directive does not preclude discrimination on grounds of nationality: article 3(2).
Mr Allen further notes that neither Directive makes express provision for closed hearings, and that the Court of Justice has on more than one occasion made clear that the European Treaties contain no general power for states to derogate from European law and the rights it confers on grounds of public safety or national defence, outside specific situations identified in Treaty articles, none of which applies here: Case 222/84 Johnston v Chief Constable of the Royal Ulster Constabulary [1987] QB 129; Case C 337/05 Commission of the European Communities v Italian Republic [2008] ECR I 2173.
None of these points is, in my view, relevant in the present context.
I agree with the reasoning and conclusions of Maurice Kay LJ in paras 12 to 22 of his judgment in the Court of Appeal: [2010] ICR 1034.
The authorities cited by Mr Allen deal with derogation from principles of substantive law, here the rights not to be discriminated against conferred by the Directives.
The legitimacy of closed hearings and of the use of a special advocate are matters of procedural law.
Procedure is primarily a matter for national law.
It is, however, a basic principle of European Union law that national law should provide effective legal protection, by establishing a system of legal remedies and procedures which ensure respect for the relevant right: Case C 312/93 Peterbroeck v Belgian State [1995] ECR I 4599; Case C 432/05 Unibet (London) Ltd v Justitie Kanslern [2007] ECR I 2271.
In that respect, European Union law directs attention primarily to principles established under articles 5 and 6 of the European Convention on Human Rights as a guide to what constitutes effective legal protection.
Mr Allen points out that the Directives both contain provisions (article 7(1) of the Race Directive and article 9 of the Employment Equality Directive), whereby: Member states shall ensure that judicial and/or administrative procedures, including where they deem it appropriate conciliation procedures, for the enforcement of obligations under this Directive are available to all persons who consider themselves wronged by failure to apply the principle of equal treatment to them, even after the relationship in which the discrimination is alleged to have occurred has ended.
Further, by articles 8 and 10 respectively of these Directives: Member states shall take such measures as are necessary, in accordance with their national judicial systems, to ensure that, when persons who consider themselves wronged because the principle of equal treatment has not been applied to them establish, before a court or other competent authority, facts from which it may be presumed that there has been direct or indirect discrimination, it shall be for the respondent to prove that there has been no breach of the principle of equal treatment.
Again, and as this wording contemplates, it is for each national judicial system to ensure an effective system of legal procedures enabling a claimant to establish facts from which it may be presumed that there has been direct or indirect discrimination.
In the present case, Mr Allen has not suggested that Mr Tariq has not been able to do this.
Mr Allen also submits that Mr Tariq could lose his claim by reason of section 42 of the Race Relations Act 1976 and/or regulation 24 of the Employment Equality Regulations on a basis which, by reason of the closed material procedure, would not be disclosed.
Section 42 and regulation 24 are dealing with substantive law.
If they were read and applied as excusing what would otherwise be unlawful discrimination, they might therefore be open to challenge under the principle of European Union law identified in para 14 above.
But the present case is far from involving any such issue.
First, the issue could only arise from a substantive decision, and the Tribunal is a long way from reaching such a decision.
Second, it is far from clear that section 42 and regulation 24 are to be read as entitling a tribunal or court to excuse what would otherwise be unjustified discrimination on grounds of national security.
The question would arise: if it would involve unjustified discrimination, how could the doing of the act be justified for the purpose of safeguarding national security? Third, the Home Offices dominant aim in the present proceedings is to show that there was no discrimination at all on any prohibited ground, but a rational and proportionate decision taken in the public interest.
If the Employment Tribunal were at some future stage to find that there was discrimination on a prohibited ground, but that the effect of section 42 and/or regulation 24 was that such discrimination could none the less be regarded as justified as being for the purpose of safeguarding national security, the Tribunal would be obliged to identify this basis of decision, however generally, in open reasons, to enable its legitimacy under European Union law to be challenged.
There is no reason to assume that the Tribunal, assisted as it would also be by a special advocate, would fail to do this.
(c) Effective legal protection
The question is therefore whether the closed material procedure authorised by United Kingdom law provides effective legal protection, by establishing a system of legal remedies and procedures to ensure respect for the relevant rights conferred by the Race Relations Act and the Employment Equality Regulations in implementation of the United Kingdoms obligations under the two Directives.
Mr Allen relies upon the decisions of the Court of Justice in Joined Cases C 402/05 P and C 415/05 P Kadi v Council of the European Union and the General Court in Case T 85/09 Kadi v Commission of the European Union (Council of the European Union intervening).
These two cases concerned the validity of the European Unions own measures, and the two European Courts were charged not merely with ascertaining and interpreting the relevant European legal principles applicable under the Treaties, but also with applying these to the particular measures and circumstances before them.
In the former case [2009] AC 1225, the Court of Justice addressed Council Regulation 881/2002 which aimed to mirror within Europe a similar asset freezing regime to that mandated by Security Council Resolutions for all member states of the United Nations.
The Regulation, in its Annex I, simply listed as persons whose assets were to be frozen persons whose names appeared on a list drawn up by the Security Councils Sanctions Committee, and no opportunity was given before or after its passing to such persons to mount any legal challenge to such listing at either the Security Council or the European level.
The Court of Justice accepted that: 342 . with regard to a Community measure intended to give effect to a resolution adopted by the Security Council in connection with the fight against terrorism, overriding considerations to do with safety or the conduct of the international relations of the Community and of its Member States may militate against the communication of certain matters to the persons concerned and, therefore, against their being heard on those matters.
It went on: 343 However, that does not mean, with regard to the principle of effective judicial protection, that restrictive measures such as those imposed by the contested regulation escape all review by the Community judicature once it has been claimed that the act laying them down concerns national security and terrorism. 344 In such a case, it is none the less the task of the Community judicature to apply, in the course of the judicial review it carries out, techniques which accommodate, on the one hand, legitimate security concerns about the nature and sources of information taken into account in the adoption of the act concerned and, on the other, the need to accord the individual a sufficient measure of procedural justice (see, to that effect, the judgment of the European Court of Human Rights in Chahal v United Kingdom (1996) 23 EHRR 413, para 131).
The Regulation was annulled in respect of Mr Kadi and Al Barakaat (a Swedish foundation) because there had been no procedure for communicating any evidence or for any hearing of persons listed, so that such persons rights of defence and to an effective legal remedy were infringed.
But the Court postponed the annulment for up to three months from 3 September 2008.
The second Kadi case [2011] 1 CMLR 697 was a sequel.
After the first case, the Commission sought and obtained from the Sanctions Committee a summary of its reasons for listing Mr Kadi, communicated that to him and received his comments on it on 10 November 2008.
On 28 November 2008 the Commission by Commission Regulation (EC) No 1190/2008, made pursuant to a power in Regulation 881/2002 to amend Annex I to that Regulation, recited this course of events and purported on that basis to amend Annex I to reinsert Mr Kadi and Al Barakaat.
Mr Kadi again successfully challenged this.
The General Court held that his rights of defence had been observed only in the most formal and superficial sense, as the Commission in actual fact considered itself strictly bound by the Sanctions Committees findings and therefore at no time envisaged calling those findings into question in the light of the applicants observations (para 171).
The General Court went on to say that the Commission, notwithstanding recitals in its Regulation, failed to take due account of the applicants comments (para 172) and that the procedure followed by the Commission, in response to the applicant's request, did not grant him even the most minimal access to the evidence against him.
In actual fact, the applicant was refused such access despite his express request, whilst no balance was struck between his interests, on the one hand, and the need to protect the confidential nature of the information in question, on the other (see, in that regard, the judgment of the Court of Justice in Kadi, paras 342 to 344) (para 173).
The General Court noted that this conclusion was consistent with the reasoning on the European Court of Human Rights in A v United Kingdom [2009] 49 EHRR 625 (para 176).
Earlier in its judgment, at paras 146 147, the General Court said this about national security issues, with reference to its previous judgment in Case T 228/02 Organisation des Modjahedines du Peuple d'Iran v Council of the European Union [2006] ECR II 4665 (OMPI): 146 The General Court also noted in that regard, at para 156 of OMPI, that, although the European Court of Human Rights recognises that the use of confidential information may be necessary when national security is at stake, that does not mean, in that court's view, that national authorities are free from any review by the national courts simply because they state that the case concerns national security and terrorism (see the judgment of the European Court of Human Rights in Chahal v United Kingdom, para 131, and case law cited, and its judgment in calan v Turkey (2003) 37 EHRR 238, para 106 and case law cited). 147 The General Court added, at para 158 of OMPI, that it was not necessary for it to rule, in the action before it, on the separate question as to whether the applicant and/or its lawyers could be provided with the evidence and information alleged to be confidential, or whether they had to be provided only to the Court, in accordance with a procedure which remained to be defined so as to safeguard the public interests at issue whilst affording the party concerned a sufficient degree of judicial protection.
The question identified by the General Court in para 147 did not arise for decision in either of the two Kadi cases.
It is, however, clear from both Kadi cases that the Court of Justice will look for guidance in the jurisprudence of the European Court of Human Rights when deciding whether effective legal protection exists, and how any balance should be struck when a question arises whether civil procedures should be varied to reflect concerns relating to national security.
A national court, faced with an issue of effective legal protection or, putting the same point in different terms, access to effective procedural justice, can be confident that both European courts, Luxembourg and Strasbourg, will have the same values and will expect and accept similar procedures.
Article 6(2) of the Treaty on the European Union (The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law) and the Charter of Fundamental Rights already point strongly in this direction.
Assuming that the European Union will in due course formally subscribe to the European Convention on Human Rights, as contemplated by the Treaty amendments introduced under the Treaty of Lisbon, the expectation will receive still further reinforcement.
In the present case, the Home Office applied for and obtained the Tribunals order for a closed material procedure in order to be able to defend itself against Mr Tariqs claim that the removal of his security clearance involved unlawful discrimination on grounds of race or religion.
The case concerns a different subject matter from that of both Kadi cases, where freezing orders were in issue.
The effect of freezing orders (made under United Kingdom legislation directly implementing the Security Councils Resolutions) was examined by the Supreme Court in A v HM Treasury (JUSTICE intervening) [2010] UKSC 2; [2010] 2 AC 534.
Persons subject to such orders became effectively prisoners of the state and there was a devastating effect on them and their families: para 60.
A v United Kingdom, to which the General Court in Kadi referred, also involved a different subject matter to the present, concerning, as it did, the detention of foreign nationals suspected of terrorist involvement.
Rights said that: In A v United Kingdom 49 EHRR 695 the European Court of Human 216 The Court takes as its starting point that, as the national courts found and it has accepted, during the period of the applicants detention the activities and aims of the AlQaeda network had given rise to a public emergency threatening the life of the nation.
It must therefore be borne in mind that at the relevant time there was considered to be an urgent need to protect the population of the United Kingdom from terrorist attack and, although the United Kingdom did not derogate from article 5(4), a strong public interest in obtaining information about AlQaeda and its associates and in maintaining the secrecy of the sources of such information (see also, right under article 5(4) in this connection, Fox, Campbell and Hartley (1991) 13 EHRR 157, para 39). 217 Balanced against these important public interests, however, was the applicants' to procedural fairness.
Although the Court has found that, with the exception of the second and fourth applicants, the applicants detention did not fall within any of the categories listed in sub paragraphs (a) to (f) of article 5(1), it considers that the case law relating to judicial control over detention on remand is relevant, since in such cases also the reasonableness of the suspicion against the detained person is a sine qua non (see para 197 above).
Moreover, in the circumstances of the present case, and in view of the dramatic impact of the lengthy and what appeared at that time to be indefinite deprivation of liberty on the applicants' fundamental rights, article 5(4) must import substantially the same fair trial guarantees as article 6(1) in its criminal aspect (Garcia Alva v Germany (2003) 37 EHRR 335, para 39, and see also see Chahal, cited above, paras 130 131). 218 Against this background, it was essential that as much information about the allegations and evidence against each applicant was disclosed as was possible without compromising national security or the safety of others.
Where full disclosure was not possible, article 5(4) required that the difficulties this caused were counterbalanced in such a way that each applicant still had the possibility effectively to challenge the allegations against him. 219 The Court considers that SIAC, which was a fully independent court (see para 84 above) and which could examine all the relevant evidence, both closed and open, was best placed to ensure that no material was unnecessarily withheld from the detainee.
In this connection, the special advocate could provide an important, additional safeguard through questioning the states witnesses on the need for secrecy and through making submissions to the judge regarding the case for additional disclosure.
On the material before it, the Court has no basis to find that excessive and unjustified secrecy was employed in respect of any of the applicants' appeals or that there were not compelling reasons for the lack of disclosure in each case. 220 The Court further considers that the special advocate could perform an important role in counterbalancing the lack of full disclosure and the lack of a full, open, adversarial hearing by testing the evidence and putting arguments on behalf of the detainee during the closed hearings.
However, the special advocate could not perform this function in any useful way unless the detainee was provided with sufficient information about the allegations against him to enable him to give effective instructions to the special advocate.
While this question must be decided on a case by case basis, the Court observes generally that, where the evidence was to a large extent disclosed and the open material played the predominant role in the determination, it could not be said that the applicant was denied an opportunity effectively to challenge the reasonableness of the Secretary of State's belief and suspicions about him.
In other cases, even where all or most of the underlying evidence remained undisclosed, if the allegations contained in the open material were sufficiently specific, it should have been possible for the applicant to provide his representatives and the special advocate with information with which to refute them, if such information existed, without his having to know the detail or sources of the evidence which formed the basis of the allegations.
An example would be the allegation made against several of the applicants that they had attended a terrorist training camp at a stated location between stated dates; given the precise nature of the allegation, it would have been possible for the applicant to provide the special advocate with exonerating evidence, for example of an alibi or of an alternative explanation for his presence there, sufficient to permit the advocate effectively to challenge the allegation.
Where, however, the open material consisted purely of general assertions and SIAC's decision to uphold the certification and maintain the detention was based solely or to a decisive degree on closed material, the procedural requirements of article 5(4) would not be satisfied.
In Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28; [2010] 2 AC 269, the House of Lords applied the reasoning in para 220 of A v United Kingdom when concluding that a closed material procedure involving a special advocate could be legitimate in the context of the imposition of a control order on a suspected terrorist, so long as the case was not based solely or to a decisive extent on closed material.
Mr Allen submits that the fundamental nature of equality rights makes it just as critical that Mr Tariq should receive the fullest procedural rights in this case as it was for Mr Kadi or A or AF to have such rights.
However, the reasoning in para 217 of the European Court of Human Rights judgment in A v United Kingdom emphasises the context of that decision, the liberty of the individual.
Detention, control orders and freezing orders impinge directly on personal freedom and liberty in a way to which Mr Tariq cannot be said to be exposed.
In R(AHK) v Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287; [2009] 1 WLR 2049, a claim for judicial review of the refusal of an application for British citizenship, the Court of Appeal distinguished A v United Kingdom on the ground that it was focusing on detention.
In my opinion, it was justified in making this distinction.
An applicant for British citizenship has, of course, an important interest in the appropriate outcome of his or her application.
Mr Tariq also has an important interest in not being discriminated against which is entitled to appropriate protection; and this is so although success in establishing discrimination would be measured in damages, rather than by way of restoration of his security clearance (now definitively withdrawn) or of his position as an immigration officer.
But the balancing exercise called for in para 217 of the European Courts judgment in A v United Kingdom depends on the nature and weight of the circumstances on each side, and cases where the state is seeking to impose on the individual actual or virtual imprisonment are in a different category to the present, where an individual is seeking to pursue a civil claim for discrimination against the state which is seeking to defend itself.
That the outcome of the balancing exercise may differ with the circumstances is confirmed by three decisions of the European Commission and Court of Human Rights: Leander v Sweden (1987) 9 EHRR 433, Esbester v United Kingdom (1993) 18 EHRR CD72 and Kennedy v United Kingdom (Application No 26839/05) (unreported) 18 May 2010.
In Leander, the applicant had been refused permanent employment as museum technician with the Naval Museum, which was adjacent to the Karlskrona Naval Base in which the Museum had storage rooms and other objects to which he would need access.
The refusal was on account of secret information, contained in an annex compiled by the police, which was alleged to make him a security risk and to which he was refused access.
He claimed that there had been breaches of, inter alia, articles 8 and 13 of the Convention.
The Court did not accept this.
Article 8 provides that everyone has the right to respect for his private life, and that 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 other specified interests.
As to article 8, the Court held that, although there was adverse interference with Mr Leanders private life through the consequences for his access to certain sensitive posts (para 59) and although he was refused any possibility of challenging the correctness of the information concerning him (para 61), the system for collecting and using the secret information contained a number of internal safeguards (para 62) and it could not be concluded that the interference involved in the non communication of the information to Mr Leander was not necessary in a democratic society in the interests of national security, as it is the very absence of such communication which, at least partly, ensures the efficacy of the personnel control procedure (para 66).
Article 13 provides that everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national authority.
As to article 13, the Court in Leander held by a majority (4 to 3) that an effective remedy under article 13 must mean a remedy that is as effective as can be, having regard to the restricted scope for recourse inherent in any system of secret surveillance for the protection of national security (para 84), and that, even if the procedure of complaint to the Government (which Mr Leander had followed and which had led to the Cabinet rejecting his complaint) were not considered sufficient, the aggregate of that and the other remedies of complaint to the Swedish Parliamentary Ombudsman and Chancellor of Justice (which he could also have pursued, although their views would only have been advisory) satisfied the conditions of article 13 (para 84).
In Esbester 18 EHRR CD72 the Commission was again concerned with a refusal to employ, in this case as an administrative officer with the Central Office of Information (COI).
The COI having offered to employ Mr Esbester subject to the satisfactory completion of our inquiries ., gave as its reasons for refusal simply that having completed our inquiries . we are unable to offer you an appointment.
Mr Esbester claimed infringement of articles 8 and 13, maintaining that it was likely that the intelligence services had in the course of negative vetting procedures obtained and relied upon information about his private life, which he had had no opportunity to refute.
He also alleged that there was inadequate legal regulation regarding the gathering of such information, and that the Security Service Tribunal responsible for investigating complaints gave inadequate protection and was prevented from giving reasons for its decisions.
The Commission accepted, following Leander, that security vetting based on information about a persons private life constitutes interference within article 8, and it accepted, following Klass v Federal Republic of Germany (1978) 2 EHRR 214 and Malone v United Kingdom (1985) 7 EHRR 14 that the existence in the United Kingdom of a system for secret surveillance for vetting and the circumstances giving rise to the refusal to employ Mr Esbester gave rise to an inference that such interference had taken place.
But it rejected Mr Esbesters complaints as manifestly unfounded.
In finding the United Kingdoms system to be in accordance with the law, the Commission noted that the Court had held in Leander that the requirement of foreseeability in the special context of employment vetting in sectors affecting national security cannot be the same as in many other fields.
In finding that the system was necessary in a democratic society, the Commission said, again with reference to Leander, that regard must also be had in this context to the margin of appreciation of the respondent state which in the area of assessing the requirements of and means of pursuing interests of national security has been held by the Court to be wide.
In considering whether there existed adequate and effective guarantees against abuse, as required by the Courts decision in Klass, the Commission noted that the term national security was not amenable to exhaustive definition, and that, as regards the lack of reasons for the decisions of the Tribunal, the Court in Klass, when considering a similar problem, had found that the state could legitimately fear that the efficacy of surveillance systems might be jeopardised if information is divulged to the person concerned.
The Commission concluded its discussion of article 8 by saying that In the absence of any evidence or indication that the system is not functioning as required by domestic law, the Commission finds that the framework of safeguards achieves a compromise between the requirements of defending democratic society and the rights of the individual which is compatible with the provisions of the Convention.
Consequently it concludes that the interference in the present case was necessary in a democratic society in the interests of national security.
As to article 13, the Commission held that the complaint of lack of an effective remedy failed in the absence of any arguable claim for breach of article 8.
In Kennedy v United Kingdom decided by its Fourth Section on 18 May 2010, the Court was concerned with a claim that there had been breaches of articles 6 (the right to a fair trial in the determination of civil rights and obligations), 8 and 13 in circumstances where the claimants requests to MI5 and GCHQ under the Data Protection Act 1998 to discover whether information about him was being processed had been refused on the grounds of national security.
Complaints about such refusals to the Investigatory Powers Tribunal (IPT) chaired by Lord Justice Mummery were examined in private.
They concluded with the IPT simply notifying Mr Kennedy that no determination had been made in his favour in respect of his complaints.
This meant either that there had been no interception or that any interception which took place was lawful (para 20).
As to article 8, the Court held that the domestic law, practice and safeguards relating to surveillance satisfied the conditions of that article.
It referred to, inter alia, Leander v Sweden as establishing that the requirement that the consequences of the domestic law must be foreseeable, before any interference could be said to be in accordance with the law under article 8(2), cannot be the same in the context of interception of communications as in many other fields (paras 151 152).
As to article 6, the Court in Kennedy found it unnecessary to decide whether this article applies to proceedings concerning a decision to put someone under surveillance, because it concluded that, assuming it does, the IPTs rules of procedure complied with the requirements of article 6(1) (para 179).
The parties respective cases appear from the following paragraphs of the Courts judgment: 181.
The applicant submitted that even where national security was at stake, a domestic court could not infringe the fair hearing principle in a blanket and uncritical manner.
He argued that less restrictive measures were available to achieve the aim pursued, including arrangements to protect witnesses' identities, disclosure of documents with redactions approved by the IPT, provision of a summary of particularly sensitive material under the supervision of the IPT and appointment of special advocates to whom disclosure of sensitive material could be made.
He referred to a recent report on secret evidence published in June 2009 by the non governmental organisation, JUSTICE, which called for the strengthening of disclosure procedures and increased transparency in court proceedings. 182.
The Government emphasised that even where article 6(1) applied to a field falling within the traditional sphere of public law, this did not in itself determine how the various guarantees of article 6 should be applied to such disputes (citing Vilho Eskelinen v Finland (2007) 45 EHRR 993, para 64).
The obligation to read the Convention as a whole meant that the scope of the article 6 guarantees in such a case should be in harmony with the Court's approach to judicial control under article 8.
The Government argued that the overarching consideration was that an individual could not be notified of interception measures while interception was ongoing or where notification would jeopardise the capabilities or operations of intercepting agencies.
They therefore disputed that the less restrictive measures proposed by the applicant were appropriate.
They noted that protection of witnesses' identities would not assist in keeping secret whether interception had occurred.
Nor would disclosure of redacted documents or summaries of sensitive material.
Further, unless they were appointed in every case, the appointment of special advocates would also allow a complainant to draw inferences about whether his communications had been intercepted. 183.
The Government argued that the procedure before the IPT offered as fair a procedure as could be achieved in the context of secret surveillance powers.
In particular, a complainant did not have to overcome any evidential burden to apply to the IPT and any legal issues could be determined in a public judgment after an inter partes hearing.
Further, the IPT had full powers to obtain any material it considered necessary from relevant bodies and could call upon the assistance of the Commissioner.
It could appoint an advocate to assist it at closed hearings.
Finally, in the event that the complainant was successful, a reasoned decision would be provided.
The Court, in holding that there had been no violation of article 6 or 13 in Kennedy, substantially aligned itself with the United Kingdom Governments position particularly in so far as it endorsed in relation to the concept of a fair trial under article 6 the relevance of similar considerations to those taken into account, previously and in Kennedy itself, when applying articles 8 and 13.
It held: 184.
The Court reiterates that according to the principle of equality of arms, as one of the features of the wider concept of a fair trial, each party must be afforded a reasonable opportunity to present his case under conditions that do not place him at a substantial disadvantage vis a vis his opponent .
The Court has held none the less that, even in proceedings under article 6 for the determination of guilt on criminal charges, there may be restrictions on the right to a fully adversarial procedure where strictly necessary in the light of a strong countervailing public interest, such as national security, the need to keep secret certain police methods of investigation or the protection of the fundamental rights of another person.
There will not be a fair trial, however, unless any difficulties caused to the defendant by a limitation on his rights are sufficiently counterbalanced by the procedures followed by the judicial authorities (see, for example, Doorson v The Netherlands (1996) 22 EHRR 330, para 70; Jasper v United Kingdom (2000) 30 EHRR 441, paras 51 to 53; and A v United Kingdom (2009) 49 EHRR 625, para 205).
A similar approach applies in the context of civil proceedings. 185.
The Court notes that the IPT, in its preliminary ruling of 23 January 2003, considered the applicant's complaints regarding the compliance of the Rules with article 6(1).
It found that, with the exception of rule 9(6) which required all oral hearings to be held in private, the Rules challenged by the applicant were proportionate and necessary, with special regard to the need to preserve the Government's neither confirm nor deny policy 186.
At the outset, the Court emphasises that the proceedings related to secret surveillance measures and that there was therefore a need to keep secret sensitive and confidential information.
In the Court's view, this consideration justifies restrictions in the IPT proceedings.
The question is whether the restrictions, taken as a whole, were disproportionate or impaired the very essence of the applicant's right to a fair trial. 187.
In respect of the rules limiting disclosure, the Court recalls that the entitlement to disclosure of relevant evidence is not an absolute right.
The interests of national security or the need to keep secret methods of investigation of crime must be weighed against the general right to adversarial proceedings (see, mutatis mutandis, Edwards and Lewis v United Kingdom (2005) 40 EHRR 593, para 46).
The Court notes that the prohibition on disclosure set out in rule 6(2) admits of exceptions, set out in rules 6(3) and (4).
Accordingly, the prohibition is not an absolute one.
The Court further observes that documents submitted to the IPT in respect of a specific complaint, as well as details of any witnesses who have provided evidence, are likely to be highly sensitive, particularly when viewed in light of the Government's neither confirm nor deny policy.
The Court agrees with the Government that, in the circumstances, it was not possible to disclose redacted documents or to appoint special advocates as these measures would not have achieved the aim of preserving the secrecy of whether any interception had taken place.
It is also relevant that where the IPT finds in the applicant's favour, it can exercise its discretion to disclose such documents and information under rule 6(4) . 188.
As regards limitations on oral and public hearings, the Court recalls, first, that the obligation to hold a hearing is not absolute.
There may be proceedings in which an oral hearing is not required and where the courts may fairly and reasonably decide the case on the basis of the parties' submissions and other written materials.
The character of the circumstances that may justify dispensing with an oral hearing essentially comes down to the nature of the issues to be decided by the competent national court (see Jussila v Finland (2006) 45 EHRR 900, paras 41 to 42).
The Court notes that rule 9(2) provides that oral hearings are within the IPT's discretion and it is clear that there is nothing to prevent the IPT from holding an oral hearing where it considers that such a hearing would assist its examination of the case. 189.
Concerning the provision of reasons, the Court emphasises that the extent to which the duty to give reasons applies may vary according to the nature of the decision and must be determined in the light of the circumstances of the case (see Ruiz Torija v Spain (1994) 19 EHRR 553, para 29).
In the context of the IPT's proceedings, the Court considers that the "neither confirm nor deny" policy of the Government could be circumvented if an application to the IPT resulted in a complainant being advised whether interception had taken place.
In the circumstances, it is sufficient that an applicant be advised that no determination has been in his favour.
The Court further notes in this regard that, in the event that a complaint is successful, the complainant is entitled to have information regarding the findings of fact in his case . 190.
In light of the above considerations, the Court considers that the restrictions on the procedure before the IPT did not violate the applicant's right to a fair trial.
In reaching this conclusion, the Court emphasises the breadth of access to the IPT enjoyed by those complaining about interception within the United Kingdom and the absence of any evidential burden to be overcome in order to lodge an application with the IPT.
In order to ensure the efficacy of the secret surveillance regime, and bearing in mind the importance of such measures to the fight against terrorism and serious crime, the Court considers that the restrictions on the applicant's rights in the context of the proceedings before the IPT were both necessary and proportionate and did not impair the very essence of the applicant's article 6 rights.
As regards article 13, the Court held that the IPT offered to the applicant an effective remedy insofar as his complaint was directed towards the alleged interception of his communications and, in respect of the applicants general complaint under article 8, it reiterated its case law to the effect that article 13 does not require the law to provide an effective remedy where the alleged violation arises from primary legislation, citing in this respect also Leander v United Kingdom 9 EHRR 433.
These three cases Leander, Esbester and Kennedy establish that the demands of national security may necessitate and under European Convention law justify a system for handling and determining complaints under which an applicant is, for reasons of national security, unable to know the secret material by reference to which his or her complaint is determined.
The critical questions under the Convention are whether the system is necessary and whether it contains sufficient safeguards.
But, subject to satisfactory answers on these questions, national security considerations may justify a closed material procedure, closed evidence (even without use of a special advocate) and, furthermore, (as in Kennedy itself) a blanket decision leaving the precise basis of determination unclear.
There is however a further decision, even more recent than Kennedy, on which Mr Allen relies in an opposite sense.
That is Uukauskas v Lithuania (Application No 16965/04) decided by the Second Section of the Court on 6 July 2010.
The applicant had a licence to keep a pistol and hunting rifle.
His request for a licence for another kind of firearm was refused and his existing licence was withdrawn, after his listing by the police in an operational records file maintained by the police to hold data for law enforcement bodies obtained during operational activities.
He instituted proceedings challenging his listing, and the court, after examining classified material submitted by the police without disclosure to the applicant, upheld the listing.
He complained to the European Court of Human Rights on the basis that there had been a breach of article 6(1).
The Court said (para 48): The Court is not insensitive to the goals which the Lithuanian law enforcement authorities pursued through their operational activities.
Likewise, the Court shares the Government's view that documents which constitute state secrets may only be disclosed to persons who possess the appropriate authorisation.
And yet the Court notes that Lithuanian law and judicial practice provide that such information may not be used as evidence in court against a person unless it has been declassified, and that it may not be the only evidence on which a court bases its decision (see paras 20 22 above).
It went on to indicate that the file was the only evidence of the applicants alleged danger to society, that he had repeatedly asked for its disclosure to him, even in part, and that, without it, he had no possibility of being apprised of the evidence against him or of being able to respond to it (paras 50 51).
The Court concluded (para 51): In conclusion, therefore, the Court finds that the decision making procedure did not comply with the requirements of adversarial proceedings or equality of arms, and did not incorporate adequate safeguards to protect the interests of the applicant.
It follows that there has been a violation of article 6(1) in the present case.
The case has the special feature that the procedure adopted was contrary to Lithuanian law.
Quite probably for this reason, no reference was made to any of the decisions considered in paras 28 to 36 of this judgment.
There was evidently also no procedure under Lithuanian law for the use of a special advocate to consider closed material: the choice lay between declassification and no use of the material at all.
The decision is therefore very far from the present, and does not offer assistance on the issues which arise on this appeal.
(d) Necessity for a closed material procedure in this case
In the present case, Mr Allen submits that no necessity is shown for a closed material procedure.
He submits that the rule of law and the maintenance of the modern democratic state [will] not [be] imperilled if the Home Office loses this case for want of advancing a secret case.
In other words, the worst that may happen is that the Home Office has to pay an unmeritorious claim.
On this basis, Mr Allen distinguishes control order cases such as AF (No 3), in which it could be said that national security would be directly imperilled if secret evidence could not be used to justify imposing a control order.
This distinction would positively encourage unmeritorious claims; and it would on any view mean that the government could only operate a security vetting system on pain of having to accept or pay all claims for discrimination which appeared sufficiently arguable to avoid being dismissed as abusive.
The only other possibility is that a court might, following the Court of Appeal decision in Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786, determine that, if the national security material could not be deployed in defence, the claim might not be fairly justiciable at all.
Laws LJ said of this situation in Carnduff (para 36) that . a case which can only be justly tried if one side holds up its hands cannot, in truth, be justly tried at all.
Under that possibility, it would be Mr Tariqs case which would fail in limine.
Neither of these possibilities is one which the law should readily contemplate.
In the penal context, an accused is presumed innocent until proved guilty; there is a public interest in the trial of suspects before a court, but it is better that the state should forego prosecution than that there should be any risk of an innocent person being found guilty through inability to respond to the full case against them.
These imperatives do not operate in quite the same way in a civil context like the present, where the state may not be directly involved as a party at all.
The rule of law must, so far as possible, stand for the objective resolution of civil disputes on their merits by a tribunal or court which has before it material enabling it to do this.
In considering how this may be achieved, if a defendant can only defend itself by relying on material the disclosure of which would damage national security, a balance may have to be struck between the interests of claimant and defendant in a civil context.
Mr Allens submission also involves anomalies.
The Leander, Esbester and Kennedy cases demonstrate that, had Mr Tariq been claiming that the decision to suspend or remove security clearance was unjustified on its merits, he could not have complained about the use of a closed material procedure.
Yet, on Mr Allens submission, all such a claimant would (presumably) have to do would be to claim damages, rather than any other relief.
The Home Office could still only defend the claim by disclosing material contrary to the national interest; but, on Mr Allens case, no problem arises: the Home Office would not have to damage the national interest by making disclosure; instead, it could simply admit liability or defend fruitlessly and lose for want of being able to deploy the material.
I cannot think that that is the law, in Strasbourg or domestically.
(e) The acceptability of a special advocate procedure
I do not therefore consider that a closed material procedure is in principle inconsistent with the right to an effective remedy in respect of alleged discrimination or with the Human Rights Convention.
But there are further strings to Mr Allens case, which call for closer examination of the actual procedure, in particular the use of a special advocate.
A special advocate procedure has been accepted as potentially useful in both United Kingdom and Strasbourg case law.
Thus, in A v United Kingdom, addressing the issue of detention of terrorist suspects without trial, the Court of Human Rights said (para 220): The Court further considers that the special advocate could perform an important role in counterbalancing the lack of full disclosure and the lack of a full, open, adversarial hearing by testing the evidence and putting arguments on behalf of the detainee during the closed hearings.
However, the special advocate could not perform this function in any useful way unless the detainee was provided with sufficient information about the allegations against him to enable him to give effective instructions to the special advocate.
The Court went on: While this question must be decided on a case by case basis, the Court observes generally that, where the evidence was to a large extent disclosed and the open material played the predominant role in the determination, it could not be said that the applicant was denied an opportunity effectively to challenge the reasonableness of the Secretary of State's belief and suspicions about him.
In other cases, even where all or most of the underlying evidence remained undisclosed, if the allegations contained in the open material were sufficiently specific, it should have been possible for the applicant to provide his representatives and the special advocate with information with which to refute them, if such information existed, without his having to know the detail or sources of the evidence which formed the basis of the allegations.
It concluded by saying that where the open material consisted of general assertions and the decision to maintain the detention was based solely or to a decisive degree on closed material, the procedural requirements of article 5(4) would not be satisfied.
Domestically, the House of Lords in both Secretary of State for the Home Department v MB [2007] UKHL 46; [2008] AC 440 and Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269 accepted a special advocate procedure, while endorsing in AF (No 3) the applicability, in the context of control orders, of the approach taken in A v United Kingdom.
Mr Allen draws attention to a report of the Joint Committee on Human Rights of the Houses of Lords and Commons on Counter Terrorism Policy and Human Rights (Session 2006 2007) (HL Paper 157, HC 394), published 30 July 2007, which precedes the cases mentioned in the previous paragraph.
The Committee was addressing the use of special advocates in, in particular, control order proceedings, but it also heard evidence from four special advocates (including Ms Farbey who acts in this case), which ranged more widely.
It identified a number of concerns.
These included, first, the overriding duty to which it saw both SIAC and a court as being subject, to ensure that material was not disclosed contrary to the public interest, in other words its inability to balance the interests of justice to the individual against the public interest in non disclosure (paras 196 and 199).
It was also concerned by, secondly, the difficulties presented if closed material was not gisted (paras 195 and 199) and, thirdly, the inflexibility of the prohibition on communication between special advocates and the person concerned or his or her legal representatives, once the special advocate had seen the closed material (paras 203 and 205).
The first of these concerns is covered and resolved by case law subsequent to the Joint Committees Report.
Under rule 54(2) the employment tribunal or judge has a discretion.
This is subject to rule 54(4), according to which a tribunal or judge, when exercising its or his functions, shall ensure that information is not disclosed contrary to the interests of national security.
But the tribunal or judge is subject to the overriding objective to deal with cases justly under regulation 3 of the Employment Procedure Regulations, and, most importantly also, obliged under section 3 of the Human Rights Act 1996 to interpret primary and secondary legislation in a way which is compatible with Convention rights.
In Secretary of State for the Home Department v MB [2008] AC 440 (decided 31 October 2007), the House of Lords held that paragraph 4(3)(d) of the Prevention of Terrorism Act 2005 (the terms of which parallel those of rule 54(2)) should be read and given effect except where to do so would be incompatible with the right . to a fair trial (para 72, per Lady Hale; and see paras 84 and 92 per Lord Carswell and Lord Brown).
The result was that, when and if the court did not consider that material could safely remain closed, the Secretary of State had a choice: either to disclose to the person concerned, or to withdraw reliance on the material.
The House followed and applied this reasoning in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269, when deciding that persons subject to control orders must be told the gist of the case against them.
Applying it in the context of the present secondary legislation in rule 54(2), it means that, even if disclosure of material to the person concerned might involve some potential damage to national security, an employment tribunal or court might, weighing the interests of justice, conclude that either the state should make such disclosure, not merely to the special advocate but also to the person concerned, or it should withdraw any reliance on the material.
Likewise, in relation to the third concern, it is a matter of discretion how far such contact is permitted, and the tribunal or judge can and should exercise such discretion flexibly and after balancing the competing interests.
The second concern involves consideration of the case law and issue discussed in paras 28 to 37 above and 63 to 68 below.
Mr Allen submits, first, that, despite the general endorsement of its potential appropriateness in these cases, the special advocate procedure involves flaws undermining its acceptability; and, secondly, that, even if the special advocate procedure is otherwise acceptable, this can only be on the basis of disclosure of the substance of the Home Offices case (gisting) in respect of Mr Tariq.
Since the Court of Appeal accepted this second submission, it arises for consideration as a result of the Home Offices cross appeal.
The flaws which Mr Allen identifies relate to the special advocates role and powers and the lack of guidance as to their exercise or supervision.
These are matters of detail which he submits have gone largely and unjustifiably without scrutiny in previous cases.
As to role, Mr Allen takes issue at the outset with the appointment of special advocates by the Attorney General who is the governments principal legal adviser.
This is a point which was addressed and is the subject of previous authority in the form of the House of Lords decision in R v H [2004] UKHL 3; [2004] 2 AC 134, where the suitability of the Attorney General to act in this respect had been questioned in the courts below.
Lord Bingham giving the unanimous opinion of the House said (para 46): In our opinion such doubt is misplaced.
It is very well established that when exercising a range of functions the Attorney General acts not as a minister of the Crown (although he is of course such) and not as the public officer with overall responsibility for the conduct of prosecutions, but as an independent, unpartisan guardian of the public interest in the administration of justice: see Halsbury's Laws of England, 4th ed, vol 44(1) (1995), para 1344; Edwards, The Law Officers of the Crown (1964), pp ix, 286, 301 302.
It is in that capacity alone that he approves the list of counsel judged suitable to act as special advocates or, now, special counsel, as when, at the invitation of a court, he appoints an amicus curiae.
Counsel roundly acknowledged the complete integrity shown by successive holders of the office in exercising this role, and no plausible alternative procedure was suggested.
It would perhaps allay any conceivable ground of doubt, however ill founded, if the Attorney General were to seek external approval of his list of eligible advocates by an appropriate professional body or bodies, but such approval is not in current circumstances essential to the acceptability of the procedure.
Special advocates are appointed from the independent bar or solicitor advocates on the basis of open competition, and are selected for inclusion on the panel on the basis of their abilities.
Mr Tariq was able to make representations as to the choice of his special advocate, in accordance with para 98 of the Treasury Solicitors Special Advocates Guide, Special Advocates A Guide to the Role of Special Advocates and the Special Advocates Support Office (SASO).
His suggested choice was appointed.
Para 88 of the Special Advocates Guide further makes clear that: The role of the Attorney General (or Solicitor General, acting in his place by virtue of section 1 Law Officers Act 1997) in appointing a special advocate is purely formal.
No 'instructions' (other than in the purely formal sense) will come from the Law Officers to special advocates indicating any particular way that the case in which the special advocate is instructed is to be argued.
That is a matter for special advocates and the appellant, to the extent that the appellant engages with the special advocates.
Mr Allens first point on role is therefore one I reject.
Mr Allen next submits that special advocates are subject to a conflict of interest which would be prohibited in private litigation.
This is said to arise from the fact that they are supported by a unit (SASO) which is located within the Treasury Solicitors Department.
It is not disputed (or disputable) that legal and administrative support is necessary for a special advocate procedure to work; and it is unclear as to where else such support might or should be located.
The submission is simply that there is an impermissible conflict of interest.
Reliance is placed on the Solicitors Code of Conduct 2007.
Rule 3 precludes a solicitor from acting (without informed consent) where there is a conflict of interests defined as existing where, inter alia, the solicitor or his firm owes separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict.
Mr Allen further submits that there is no sufficient Chinese wall between SASO and the remainder of the Treasury Solicitors Office to enable reliance on that possibility, which was discussed in the House of Lords in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222.
In my opinion, these objections also fail.
As to the former, the Treasury Solicitor does not have two clients and is not in breach of the professional code.
The special advocate is an independent (security cleared) member of the bar or solicitor advocate, who is not professionally engaged by or on behalf of Mr Tariq, though he or she is charged to represent Mr Tariqs interests.
As the Special Advocates Guide states (para 113): Actual conflicts of interest in the usual sense do not arise, since a special advocate owes no duty to the person whose interests he represents.
However, a special advocate should be careful to ensure that no situation arises in which there could be any perception of anything other than absolute independence on his part.
The Guide then reminds special advocates of the need for care to avoid any perceived conflict of interest when undertaking the role as well as in the future.
SASO, which supports special advocates, operates for all practical purposes as a separate unit, with an established Chinese wall arrangement dividing it from the rest of the Treasury Solicitors Office.
Maurice Kay LJ set out the position (para 30): SASO was set up in 2006 in response to the recommendation of the Constitutional Affairs Select Committee in its report on the operation of the Special Immigration Appeals Commission and use of SAs [special advocates] (7th report, session 2004 2005, 3 April 2005).
The functions of SASO are described in Special Advocates A Guide to the Role of Special Advocates and the Special Advocates' Support Office, which is published on the Treasury Solicitor's Department's website.
It is SASO that provides an SA with formal instructions.
It also provides legal and administrative support to SAs and acts as the librarian of closed case law for them.
Although formal instructions originate with SASO, it has no input into decisions such as whether to appeal a closed adverse judgment or to open part of a closed judgment.
Such matters are for the independent judgment of the SA alone.
Although SASO is physically located within the premises of the Treasury Solicitor at One Kemble Street, it has an established Chinese wall arrangement and is for all practical purposes a separate entity.
It comprises five lawyers and three administrators.
Four lawyers and two administrators form the SASO (closed) team, the remaining lawyer and administrator forming the SASO (open) team.
The open team does not have security clearance.
It alone communicates with the litigant's open representatives.
Although other relevant litigation teams within the office of the Treasury Solicitor are able to share their facilities, this is not so in relation to SASO's resources and facilities.
It has completely separate document handling, communication, storage and technology facilities.
The four lawyers who carry out casework on cases in which the SAs are instructed do not carry out any work for any other part of the Treasury Solicitor's office.
The fifth lawyer is at Grade 6 level.
He does not have his own casework in relation to cases involving SAs.
His role is more supervisory and he has a wider line management role which extends to the general private law litigation team.
He may report to the Attorney General but only in relation to open issues in matters where SAs are instructed.
In addition, in order to protect the independence of the SASO team, there are conflict checks to ensure that other members of the private law team do not act in cases which are in any way relevant to SASO.
Mr Allen challenges the adequacy of this system.
The information about its operation based on the Special Advocates Guide was amplified by a Home Office note produced during the Court of Appeal hearing.
Mr Tariq invites scepticism about information provided in the context of litigation in which, he suggests, the Treasury Solicitor has an interest in the status quo.
The information that SASO operates on a Chinese wall basis with the Treasury Solicitor teams who represent the Government in cases in which special advocates appear is however contained in the Special Advocates Guide (para 87).
The arrangements described in both documents evidence a serious intention to achieve such a separation, and there is no reason to doubt their genuineness or efficacy.
Significantly, as Maurice Kay LJ indicated in the passage quoted above, the position is that, although formal instructions originate with SASO, SASO has no input into special advocates decisions, which are taken only by the relevant independent special advocate.
One can also be confident that, if any special advocate or court at any point suspected that the separation between SASO and other government legal teams was in any way incomplete, this would at once be brought to light.
Maurice Kay LJ, based on his own experience, commented (para 32): If I may be permitted a subjective observation: if such problems were evident they would be expected to provoke adverse judicial comment but, in my experience, the system, although inherently imperfect, enjoys a high degree of confidence among the judges who deal with cases of this kind on a regular basis.
In these circumstances, Mr Allen focuses on the fifth of the five SASO lawyers, a grade 6 lawyer who has no case work responsibility at all, but who does have a line management role in relation to both the SASO team and the Treasury Solicitors general private law team.
He also chairs the monthly special advocates meetings at which cases and tactics are discussed, the minutes of which are sent to the Attorney Generals office, and he may occasionally brief the Attorney Generals office on open issues only.
After pointing out that a person in Mr Tariqs position will instruct the special advocate before any closed material procedure begins, Mr Allen suggests that the description given of the grade 6 lawyers activity means that the content of such instructions could be shared with parts of the Treasury Solicitors office outside the SASO team or even with the Attorney General.
I do not regard this as realistic.
Substantive legal decisions are, as stated, taken by the special advocate.
The grade 6 lawyer has no case work responsibility, and would not on the face of it be likely even to know of any instructions given by Mr Tariq.
Even if he did know, disclosure to anyone outside the SASO team would involve a serious breach of his duty.
There is no reason to think that minutes of the monthly meeting circulated to the Attorney Generals office would disclose such instructions, and the special advocate would presumably receive them and ensure that they did not.
There is also no reason to think any briefing of the Attorney Generals office could or would go into detail about individual cases, still less about instructions given by Mr Tariq.
It is clear that the Attorney General has no role and no detailed knowledge in relation to individual cases.
In Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 the House was concerned with accountants (KPMG) who were in possession of information confidential to a former client (Prince Jefri) which might be relevant to instructions which they then accepted from the Brunei Investment Agency, of which Prince Jefri had been chairman, to investigate the whereabouts of certain assets suggested to have been used by Prince Jefri for his own benefit.
The House granted an injunction restraining KPMG from acting for the Agency.
It held that the burden was on KPMG to show that there was no risk of the information coming into the possession of those within KPMG acting for the Agency.
KPMG had attempted to erect a Chinese wall, but this was ad hoc and within a single department; further the two teams involved one which had acted for Prince Jefri and the one which was acting for the Agency contained large and rotating memberships of persons accustomed to working with each other.
In these circumstances, the House held that, although there was no rule of law that Chinese walls or other similar arrangements were insufficient, nevertheless, to eliminate the risk, an effective Chinese wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work (per Lord Millett, at p 239D E).
The present case falls into an opposite category.
SASO has a small team which works separately under arrangements which are not ad hoc, but well established, and it uses the services of independent outside special advocates, who can be relied upon to reinforce the culture and reality of such separation.
There is no reason to doubt the genuineness and efficacy of the Chinese wall which has been set up in this way to service special advocates needs, in particular by providing assistance described in para 90 of the Special Advocates Guide.
Mr Allen makes other further criticisms of the arrangements for special advocates: he submits that special advocates lack supervision, that there is insufficient guidance as to their role and that they lack any or sufficiently defined powers in respect of matters such as disclosure, the calling and cross examination of witnesses and appeal.
I do not regard these criticisms as well founded or as rendering the whole closed material procedure unfair.
Special advocates are experienced independent practitioners, accustomed to act of their own initiative and to take difficult decisions, and able to raise points of doubt or difficulty with the tribunal or court before which they appear.
The special advocates role is familiar in a variety of contexts.
It has been extensively described in the Special Advocates Guide.
It divides into two parts, the open and closed.
The Guide notes that throughout the open part, where the parties are exchanging open material, the special advocate will have the opportunity to meet the person in whose interests he or she is to act and to obtain as good an understanding as possible of his or her case (paras 99 100).
Once the open stages have been completed the Secretary of State will serve his or her closed material upon the special advocate only (paras 101 102).
The Guide goes on (para 102): The receipt of closed material marks the end of the period in which the special advocate may communicate directly with the appellant.
It should be noted that communication with the appellant is still possible at this point but any communication from the special advocate to the appellant after this time requires the permission of the Court and the proposed format of it must be notified to the Secretary of State who can make objections if he so wishes (see SIAC Rule 36(4) and CPR 76.25(4)).
During the closed phase, the special advocates role was summarised by Sedley LJ in Murungaru v Secretary of State for the Home Department [2008] EWCA Civ 1015, [2009] INLR 180 in this way at para 17: The ways in which a special advocate will seek to represent the interests of an appellant are, first, to test by cross examination, evidence and argument the strength of the case for non disclosure.
Secondly, to the extent that non disclosure is maintained, the special advocate is to do what he or she can to protect the interests of the appellant, a task which has to be carried out without taking instructions on any aspect of the closed material.
In relation to the protection of the interests of the person in Mr Tariqs position in relation to disclosure after the closed phase has begun, the Guide amplifies the special advocates role (in the largely parallel context of his or her role in proceedings before SIAC) as follows (para 103): It is now for the special advocate to take a view himself on the material and to decide whether any of what is contained within the closed material should in fact be made open (and therefore be disclosed to the appellant) because its disclosure would not harm the public interest e.g. the material is already in the public domain or could not be regarded as damaging to national security or other public interests.
Sometimes, the special advocate will submit that a summary or gist of the material could be safely disclosed to the appellant.
The special advocate has a period after service of the closed material in which to consider and prepare written submissions on what, if any, of the 'closed' material should become open.
These are known as rule 38 submissions in SIAC and rule 29 submissions in Control Order proceedings (although they are in fact governed by CPR 76.29).
These submissions may also include requests to the Secretary of State for further information or documents to be provided to the special advocate.
This period has usually in SIAC been a period of two to three weeks (although no period is specified see SIAC Rules rule 38(3)).
In the CPR, similar provisions specify a period of two weeks for the special advocate to indicate whether he challenges the Secretary of state's assessment of what is open and what is closed (see rule 76.29(3)), though the Court may modify it in appropriate circumstances.
With regard to the hearing on the merits, the special advocate will be present during the open part, when he or she will have the opportunity to observe how the case is put by counsel both for and against the person whose interests the special advocate will be protecting during the closed phase.
The closed hearing will take place, and all but the special advocate and the Secretary of State will withdraw.
I see no reason why a special advocate may not, where appropriate, take steps to call factual or expert evidence during the closed phase, if necessary applying for any necessary witness summons.
The Guide is in my view correct in contemplating this (para 108): There is also a possibility that the special advocate may call his own witnesses.
This latter has never, to date, been undertaken, certainly not in a SIAC context.
There appears no reason in principle, however, why this should not be possible, and special advocates in proceedings in the High Court will have the considerable advantage of being able to call on both the remainder of the CPR (insofar as not disapplied) and on the inherent jurisdiction of the Court to achieve such an end.
In its June 2005 Response to the Constitutional Affairs Select Committee's Report into the Operation of SIAC and the Use of Special Advocates, the Government acknowledged that it is, in principle, open to special advocates in SIAC appeals to call expert evidence.
On any appeal, it is well established that the special advocate is able both to appear and represent an appellants interests in any closed phase of the appeal.
Mr Allen suggests that the special advocates role in positively instituting an appeal in relation to events or decisions occurring during the closed phase is insufficiently clear.
Again (and consistently with Maurice Kay LJs description in para 30, cited in para 50 above) I see no reason why the special advocates role should not embrace this.
The special advocate may, with the courts permission, communicate with Mr Tariq, even after the closed phase has begun (para 50 above); the court would no doubt permit a special advocate to inform a person in Mr Tariqs position that there were closed matters which merited consideration on appeal, even though such matters could not in any way be disclosed.
In this way, an appeal could be lodged to enable the special advocate to pursue such matters, although the subject matter and basis of the appeal would remain unknown to the person in Mr Tariqs position.
Reference to the Court of Justice
Mr Allen submits that the Supreme Court should refer to the Court of Justice points arising in this case on which European Union law is relevant.
Article 267 of the Treaty on the European Union provides: The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties; (b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union; Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.
Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring
the matter before the Court
The principles of European Union law which arise for consideration in this case are clear.
There must in particular be effective legal protection in respect of the rights not to be discriminated against which Mr Tariq invokes, and, so far as guidance is necessary, it is to be found for the relevant purposes in the European Convention on Human Rights and the case law of the European Court of Human Rights.
The principles which the European Court of Human Rights would apply in the area of national security have been confirmed recently by the decision in Kennedy.
The questions before the Supreme Court involve the application of such principles to the circumstances of this case, and in particular to the closed material procedure involving a special advocate which the Employment Tribunal has ordered.
There is on this basis no question of interpretation of the European Treaties which calls for a reference under article 267 as explained by the Court of Justice in Case 283/81 Srl CILFIT v Ministry of Health [1982] ECR 3415.
It is not the role of the Court of Justice to rule on the application of established general criteria to a particular provision or arrangement, which must be considered in the light of the particular circumstances of the case in question: compare Case C 237/02 Freiburger Kommunalbauten GmbH Baugesellschaft & Co KG v Hofstetter [2004] 2 CMLR 291, paras 21 23, explaining and distinguishing Joined Cases C 240/98 to 244/98 Ocano Grupo Editorial SA v Murciano Quintero [2002] 1 CMLR 1226.
I add that, if Mr Tariq were to have cause for complaint about the application of the relevant legal principles as established by the European Convention on Human Rights, there will always exist the potential to seek redress in Strasbourg.
The European Court of Human Rights is not limited to the examination of questions of interpretation or law arising under the Convention, but will re examine the fairness of their application as a whole in the light of the circumstances of the particular case.
It follows that I would hold that the use of a closed material procedure before the Employment Tribunal was and is lawful in the present case, and dismiss Mr Tariqs appeal accordingly.
The Home Offices appeal
It is as well to bear in mind at the outset that the general nature of the Home Offices case has been communicated to Mr Tariq.
It is that the Home Office was concerned in August 2006 that [Mr Tariq] could be vulnerable to an approach to determine if terrorist suspects had been flagged to the authorities or to smuggle prohibited items airside and that its decision to withdraw security clearance in December 2006 was based on [his] close association with individuals suspected of involvement in plans to mount terrorist attacks and on its view that association with such individuals might make him vulnerable to attempts to exert undue influence on [him] to abuse his position: para 5 above; Mr Tariq must be able to meet this case on a general basis, in particular, by disclosing and describing his relationship and the nature and extent of his association with those of his relatives suspected and his cousin who was ultimately convicted of terrorist activity; and he has, further, on the basis of, in particular, his questioning in interview also been able to mount a sufficiently arguable case of discrimination to avoid any application to strike out his claim: para 6 above.
What is in issue is the declaration made by the Employment Appeal Tribunal and upheld by the Court of Appeal to the effect that article 6 of the European Convention on Human Rights requires [Mr Tariq] to be provided with the allegations being made against him in sufficient detail to enable him to give instructions to his legal team so that those allegations can be challenged effectively: para 3 above.
This is worth repeating, because some language used in the Court of Appeal might suggest that Mr Tariq knew nothing at all of the nature of the case against him, as opposed to particular allegations supporting it.
Thus, for example, Maurice Kay LJ said that, although a closed material procedure was in principle justified, it was none the less the right of a litigant to know the essence of the case against him, if necessary by gisting ([2010] ICR 1034, para 43).
He went on to acknowledge that, in a particular case, this may put the public authority in the invidious position of having to make difficult decisions about disclosure and whether or how a claim is to be defended, but said that all that is for the future in this litigation.
It is the consequence of the requirements of justice.
The Home Office by its appeal challenges this conclusion, pointing out that it raises directly the dilemma addressed by the Court of Appeal in the case of Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786.
If the disclosure of material would harm national security, but without disclosure the public authority could not defend and would have to capitulate, the claim itself may not be justiciable.
The appeal raises the question whether there is an absolute requirement that a claimant should him or herself see and know the allegations forming the basis of the states defence in sufficient detail to give instructions to the defence legal team to enable the allegations to be challenged effectively.
One problem about the declaration made by the Employment Appeal Tribunal and upheld by the Court of Appeal is that it is questionable whether or how far it differs in any significant way from the ordinary duty of any party in any litigation to disclose the nature of its factual allegations, where no issue of national security arises at all.
A second point is that the declaration made does not correspond with any requirement expressed in section 7 of the Employment Tribunals Act 1996 or in the language of the statutory instruments made under that Act.
But the submission is no doubt that, if the Convention requires gisting of the nature declared in every case, even though this could damage national security, then the court should under section 3 of the Human Rights Act 1998 find it possible to read into the Employment Tribunals Act 1996 and the ET Procedure Rules and ET National Security Rules introduced under it, some qualification to enable such gisting to occur.
The question is therefore whether there is in the European Convention on Human Rights, as explained by the European Court of Human Rights, any such absolute requirement, where this would involve the disclosure to Mr Tariq of the detail of allegations which would in normal litigation require to be disclosed, but which the interests of national security require to be kept secret.
Clearly, it is a very significant inroad into conventional judicial procedure to hold a closed material procedure admissible, if it will lead to a claimant not knowing of such allegations in such detail.
As the Home Office acknowledges, it is an inroad which should only ever be contemplated or permitted by a court, if satisfied after inspection and full consideration of the relevant material as well as after hearing the submissions of the special advocate, that it is essential in the particular case; and this should be kept under review throughout the proceedings.
However, to say that it is not possible under the Convention as interpreted by the Court in Strasbourg is in my view impossible, in the light of the clear line of jurisprudence culminating in the Courts decision in Kennedy which I have already discussed in paras 27 to 37 above.
It is significant that, when the Court of Appeal reached its decision, it did not have the benefit of Kennedy.
I would therefore allow the Home Offices appeal, and set aside the declaration made below to the effect that there exists an absolute requirement that Mr Tariq personally or his legal representatives be provided with sufficient detail of the allegations made against him to enable him to give instructions to his legal representatives on them.
As I have indicated, both Mr Tariq and his legal representatives already know of the general nature of the Home Offices case.
The Employment Tribunal will, with the assistance of the special advocate, keep under review and will be able to determine whether any and what further degree of gisting of the Home Offices case, or of disclosure regarding the detail of allegations made in support of it, is required, having regard to (a) the nature of the relevant allegations and of the national security interest in their non disclosure and in the light of its best judgment as to (b) the significance of such allegations for the Home Offices defence and (c) the significance for Mr Tariqs claim of the disclosure or non disclosure of such allegations to him.
Employment Tribunals Act 1996, section 10 ANNEX (judgment, para 9) (5) Employment tribunal procedure regulations may make provision enabling a Minister of the Crown, if he considers it expedient in the interests of national security (a) to direct a tribunal to sit in private for all or part of particular Crown employment proceedings; (b) to direct a tribunal to exclude the applicant from all or part of particular Crown employment proceedings; (c) to direct a tribunal to exclude the applicant's representatives from all or part of particular Crown employment proceedings; (d) to direct a tribunal to take steps to conceal the identity of a particular witness in particular Crown employment proceedings; (e) to direct a tribunal to take steps to keep secret all or part of the reasons for its decision in particular Crown employment proceedings. (6) Employment tribunal procedure regulations may enable a tribunal, if it considers it expedient in the interests of national security, to do in relation to particular proceedings before it anything of a kind which, by virtue of subsection (5), employment tribunal procedure regulations may enable a Minister of the Crown to direct a tribunal to do in relation to particular Crown employment proceedings. (7) In relation to cases where a person has been excluded by virtue of subsection (5)(b) or (c) or (6), employment tribunal procedure regulations may make provision (a) for the appointment by the Attorney General . of a person to represent the interests of the applicant; .
The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861) Schedule 1 The Employment Tribunals Rules of Procedure 54(1) A Minister of the Crown (whether or not he is a party to the proceedings) may, if he considers it expedient in the interests of national security, direct a tribunal or Employment Judge by notice to the Secretary to: (a) conduct proceedings in private for all or part of particular Crown employment proceedings; (b) exclude the claimant from all or part of particular Crown employment proceedings; (c) exclude the claimant's representative from all or part of particular Crown employment proceedings; (d) take steps to conceal the identity of a particular witness in particular Crown employment proceedings. (2) A tribunal or Employment Judge may, if it or he considers it expedient in the interests of national security, by order (a) do in relation to particular proceedings before it anything which can be required by direction to be done in relation to particular Crown employment proceedings under paragraph (1); (b) order any person to whom any document (including any judgment or record of the proceedings) has been provided for the purposes of the proceedings not to disclose any such document or the content thereof: (i) to any excluded person; (ii) in any case in which a direction has been given under [sub ]paragraph (l)(a) or an order has been made under [sub ]paragraph (2)(a) read with sub paragraph (1)(a), to any person excluded from all or part of the proceedings by virtue of such direction or order; or (iii) in any case in which a Minister of the Crown has informed the Secretary in accordance with paragraph (3) that he wishes to address the tribunal or Employment Judge with a view to an order being made under sub paragraph (2)(a) read with sub paragraph (l)(b) or (c), to any person who may be excluded from all or part of the proceedings by virtue of such an order, if an order is made, at any time before the tribunal or Employment Judge decides whether or not to make such an order; (c) take steps to keep secret all or part of the reasons for its judgment.
The tribunal or Employment Judge (as the case may be) shall keep under review any order it or he has made under this paragraph. (3) In any proceedings in which a Minister of the Crown considers that it would be appropriate for a tribunal or Employment Judge to make an order as referred to in paragraph (2), he shall (whether or not he is a party to the proceedings) be entitled to appear before and to address the tribunal or Employment Judge thereon.
The Minister shall inform the Secretary by notice that he wishes to address the tribunal or Employment Judge and the Secretary shall copy the notice to the parties. (4) When exercising its or his functions, a tribunal or Employment Judge shall ensure that information is not disclosed contrary to the interests of national security.
The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 Schedule 2 The Employment Tribunals (National Security) Rules of Procedure 8 Special advocate (1) In any proceedings in which there is an excluded person the tribunal or Employment Judge shall inform the Attorney General of the proceedings before it with a view to the Attorney General , if he thinks it fit to do so, appointing a special advocate to represent the interests of the claimant in respect of those parts of the proceedings from which (a) any representative of his is excluded; (b) both he and his representative are excluded; or (c) he is excluded, where he does not have a representative. (2) A special advocate shall have a general qualification for the purposes of section 71 of the Courts and Legal Services Act 1990 or shall be an advocate or a solicitor admitted in Scotland. (3) Where the excluded person is the claimant, he shall be permitted to make a statement to the tribunal or Employment Judge before the commencement of the proceedings, or the part of the proceedings, from which he is excluded. (4) Except in accordance with paragraphs (5) to (7), the special advocate may not communicate directly or indirectly with any person (including an excluded person) (a) (except in the case of the tribunal, Employment Judge and the respondent) on any matter contained in the grounds for the response referred to in rule 3(3); (b) (except in the case of a person who was present) on any matter discussed or referred to during any part of the proceedings in which the tribunal or Employment Judge sat in private in accordance with a direction or an order given or made under rule 54. (5) The special advocate may apply for orders from the tribunal or Employment Judge authorising him to seek instructions from, or otherwise to communicate with, an excluded person (a) on any matter contained in the grounds for the response referred to in rule 3(3); or (b) on any matter discussed or referred to during any part of the proceedings in which the tribunal or Employment Judge sat in private in accordance with a direction or an order given or made under rule 54. (6) An application under paragraph (5) shall be made in writing to the Employment Tribunal Office and shall include the title of the proceedings and the grounds for the application. (7) The Secretary shall notify the Minister of an application under paragraph (5) and the Minister shall be entitled to address the tribunal or Employment Judge on the application. (8) In these rules and those in Schedule I, in any case in which a special advocate has been appointed to represent the interests of the claimant in accordance with paragraph (I), any reference to a party shall (save in those references specified in paragraph (9)) include the special advocate. 10 Reasons in national security proceedings (1) This rule applies to written reasons given under rule 30 of Schedule 1 for a judgment or order made by the tribunal or Employment Judge in national security proceedings. (2) Before the Secretary sends a copy of the written reasons ('the full written reasons') to any party, or enters them in the Register under rule 32 of Schedule I, he shall send a copy of the full written reasons to the Minister. (3) If the Minister considers it expedient in the interests of national security and he has given a direction or the tribunal or an Employment Judge has made an order under rule 54 in those proceedings, the Minister may (a) direct the tribunal or Employment Judge that the full written reasons shall not be disclosed to persons specified in the direction, and to prepare a further document ('the edited reasons') setting out the reasons for the judgment or order, but with the omission of such of the information as is specified in the direction; (b) direct the tribunal or Employment Judge that the full written reasons shall not be disclosed to persons specified in the direction, but that no further document setting out the tribunal or Employment Judge's reasons should be prepared. (4) Where the Minister has directed the tribunal or Employment Judge in accordance with sub paragraph 3(a), the edited reasons shall be signed by the Employment Judge and initialled in each place where an omission has been made. (5) Where a direction has been made under sub paragraph (3)(a), the Secretary shall (a) send a copy of the edited reasons referred to in subparagraph (3)(a) to any person specified in the direction and to the persons listed in paragraph (7); (b) enter the edited reasons in the Register, but omit from the Register the full written reasons; and (c) send a copy of the full written reasons to the persons listed in paragraph (7). (6) Where a direction has been made under sub paragraph (3)(b), the Secretary shall send a copy of the full written reasons to the persons listed in paragraph (7), but he shall not enter the full written reasons in the Register. (7) The persons to whom full written reasons should be sent in accordance with paragraph (5) or (6) are (a) the respondent; (b) the claimant or the claimant's representative if they were not specified in the direction made under paragraph (3); (c) if applicable, the special advocate; (d) where the proceedings were referred to the tribunal by a court, to that court; and (e) where there are proceedings before a superior court (or in Scotland, an appellate court) relating to the decision in question, to that court.
The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 Regulation 2 Definitions excluded person means, in relation to any proceedings, a person who has been excluded from all or part of the proceedings by virtue of: (a) a direction of a Minister of the Crown under rule 54(1)(b) or (c) of Schedule 1, or (b) an order of the tribunal under rule 54(2)(a) read with 54(1)(b) or (c) of Schedule 1; national security proceedings means proceedings in relation to which a direction is given under rule 54(1) of Schedule 1, or an order is made under rule 54(2) of that Schedule; special advocate means a person appointed in accordance with rule 8 of Schedule 2 .
LORD HOPE
I agree that, for the reasons so fully set out by Lord Mance in his judgment and the further reasons given by Lord Brown and Lord Dyson, the appeal by the Home Office should be allowed and that the cross appeal by Mr Tariq should be dismissed.
At the heart of both the appeal and the cross appeal are two principles of great importance.
They pull in different directions.
On the one hand there is the principle of fair and open justice.
As OConnor J declared in Hamdi v Rumsfeld 542 US 507 (2004), 533, parties whose rights are to be affected are entitled to be heard and in order that they may enjoy that right they must first be notified.
In European Convention terms, this is the principle of equality of arms which is part of the wider concept of a fair trial: Kennedy v United Kingdom (Application No 26839/05) (unreported) 18 May 2010, para 184.
On the other there is the principle that gives weight to the interests of national security.
This is one of the legitimate aims referred to in articles 8(2), 10(2) and 11(2) of the Convention.
The extent of the discretion that must be accorded to the national authorities in this field was recognised in Leander v Sweden (1987) 9 EHHR 433, para 59.
National security was described as a strong countervailing public interest in Kennedy, para 184.
But it must be weighed against the fundamental right to a fair trial.
The context will always be crucial to a resolution of questions as to where and how this balance is to be struck.
Mr Tariq was employed by the Home Office in a capacity for which security clearance was required in the interests of national security.
To be effective security vetting will usually, if not invariably, require to be carried out in secret.
Its methods and the sources of information on which it depends cannot be revealed to the person who is being vetted.
Those who supply the information must be able to do so in absolute confidence.
In some cases, their personal safety may depend on this.
The methods, if revealed to public scrutiny, may become unusable.
These are the unusual circumstances in which the claim Mr Tariq seeks to make in this case must be determined.
Mr Tariqs complaint against the Home Offices decision to suspend his security clearance is that it was based on grounds that amounted to direct or indirect discrimination against him on grounds of his race and religion.
There is no doubt that he is entitled to a fair and public hearing in the relevant tribunal of his claim that the rights conferred on him by the Race Relations Act 1976 and the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) have been breached.
The principle of equal treatment is part of European Union law, but it is for national law to ensure that the right to a fair hearing is respected according to the principles established under the European Convention.
By section 10(6) of the Employment Tribunals Act 1996 it is provided that the employment tribunal procedure regulations may enable a tribunal, if it considers it expedient in the interests of national security, to adopt a closed procedure.
Section 10(7) of the 1996 Act provides that the procedure regulations may make provision in that event for the appointment by the Attorney General of a special advocate to represent the interests of the applicant.
The provisions that were made in the exercise of that power are to be found in the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861).
Rule 54 of Schedule 1 to the Regulations provides for the use of closed procedure, and rule 8 of Schedule 2 provides for the appointment of special advocates.
No one doubts Mr Tariqs right not to be discriminated against on grounds of his race or his religion.
But it was his own choice to seek employment in a post for which, in the interests of national security, security clearance was required.
He was a volunteer, not a conscript.
This is not a case where he is the victim of action taken against him by the state which deprived him of his fundamental rights.
Furthermore, as I have already indicated, security vetting is a highly sensitive area.
Its intensity will no doubt vary from case to case, but common to them all is the need to preserve the integrity of sources of information and the methods of obtaining it.
That must always be the paramount consideration, whatever the nature of the proceedings in which the issue arises.
It ensures that the national interest is protected when people are appointed to posts where security clearance is required.
Issues of employment and discrimination law raised by people appointed to those posts may require access to the way this process has been carried out.
It was no doubt for that reason that the use of the closed procedure and the appointment of special advocates was expressly authorised by the statute.
The question then is whether the difficulties that Mr Tariq faces in making good his discrimination claim are sufficiently counterbalanced by the procedures that the Home Office wishes the employment tribunal to adopt.
First, there is the use of the closed procedure for the consideration of the material on which the Home Office wishes to rely in its defence.
Is the procedure that the Regulations have prescribed for use in national security cases compatible with European Union law? This is the point raised by Mr Tariqs cross appeal.
Second, if the use of the closed procedure is lawful, how is it to be applied in this case? Is the Home Office obliged to give sufficient detail of the material on which it relies to enable Mr Tariq to give detailed instructions to his special advocate to enable that material to be challenged effectively? This is the point raised by its appeal.
The Court of Appeal held that the principle illustrated by Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269 must apply.
This was despite the fact that this would put the Home Office in the invidious position of having to make decisions as to whether, and if so how, the claim was to be defended: [2010] EWCA Civ 462, [2010] ICR 1034, para 50.
I have found the second issue more troublesome than the first.
As to the first, which is the issue raised in Mr Tariqs cross appeal, the question is whether the use of the closed procedure in cases of this type impairs the very essence of his right to a fair trial.
The right to a fair trial itself is an absolute right, but rights that are to be implied from article 6 of the European Convention are not: Brown v Stott [2003] 1 AC 681, 719.
Their purpose is to give effect, in a practical way, to the fundamental right.
The right to a fair hearing must ordinarily carry with it the right to have proceedings conducted in open court, with full disclosure by both sides.
But, for the reasons already mentioned, the use of an open procedure where details of the security vetting process are in issue cannot be resorted to without risk to the integrity of the system which in the national interest must be preserved.
The observations of the Court of Justice in Joined Cases C 402/05P and C 415/05P Kadi v Council of the European Union [2009] AC 1225, para 344 indicate that European law is willing to accept a closed material procedure in the interests of national security so long as the individual is accorded a sufficient measure of procedural justice.
That this is the position that the Strasbourg court too has adopted is amply demonstrated by its decisions in Kennedy v United Kingdom, paras 184 190.
Parliament has expressed a clear democratic judgment that the tribunal may in its discretion make use of the closed procedure with the assistance of a special advocate.
As for the procedure that the 2004 Regulations provide for, several features indicate that the balance has been struck in the right place.
First, there is the fact that, under the procedure provided for by rule 54(2) of Schedule 1 to the Regulations, the decision as to whether closed procedure should be resorted to rests with the tribunal or the employment judge.
The fact that the decision is taken by a judicial officer is important.
It ensures that it is taken by someone who is both impartial and independent of the executive.
Second, there is the fact that, as this is a judicial decision, it will not be taken without hearing argument in open court from both sides.
It will be an informed decision, not one taken without proper regard to the interests of the individual.
Third, it opens the door to the use of the special advocate.
Fourth, it is a decision that can and should be kept under review as the case proceeds: see the last sentence of rule 54(2).
Fifth, the special advocate can and should be heard as the process of keeping it under review proceeds.
As against all that, account must be taken of the consequences for national security if this procedure were not to be available to the tribunal.
Without it, there would be a stark choice: to conduct the entire defence in open proceedings however damaging that might be to the system of security vetting, and in particular to those who contributed to it in this case; or to concede the case and accept the consequences.
They would not only be financial.
They would lead to the government being seen as an easy target for unjustified claims.
That would be a field day for the unscrupulous.
They could lead to tensions if those who were in a position to make discrimination claims were thought to be enjoying an unfair advantage because their claims were not likely to be contested if they were to be pressed to the point of a public hearing.
I think that the balance lies firmly in favour of allowing the tribunal, in its discretion, to make use of the closed procedure.
I would dismiss the cross appeal.
As for the second issue, there is a very real problem.
Procedural justice indicates that Mr Tariq should be given sufficient information to enable him to give detailed instructions to his special advocate so that she can challenge the withheld material on his behalf.
But Mr Eadie QC for the Home Office insists that the process of gisting as envisaged in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269 cannot be resorted to in this case without risk to those who were involved in the security vetting process.
In the AF (No 3) case I said that what would be needed would vary from case to case, and that the judge would be in the best position to strike the balance between what was needed to enable the special advocate to challenge the case against the individual and what could properly be kept closed: para 86.
But I also said that if the concept of an effective challenge was to be applied, where detail matters it must be met by detail: para 87.
That is what Mr Eadie objects to in this case.
Here again the context for the argument is what matters.
This is an entirely different case from Secretary of State for the Home Department v AF (No 3).
There the fundamental rights of the individual were being severely restricted by the actions of the executive.
Where issues such as that are at stake, the rule of law requires that the individual be given sufficient material to enable him to answer the case that is made against him by the state.
In this case the individual is not faced with criminal proceedings against him or with severe restrictions on personal liberty.
This is a civil claim and the question is whether Mr Tariq is entitled to damages.
He is entitled to a fair hearing of his claim before an independent and impartial tribunal.
But the Home Office says that it cannot defend the claim in open proceedings as, for understandable reasons, it cannot reveal how the security vetting was done in his case.
That conclusion is unavoidable, given the nature of the work Mr Tariq was employed to do.
How then is the balance to be struck here? Mr Tariq will be at a disadvantage if the closed procedure is adopted.
But the disadvantage to the Home Office is greater, as unless the closed procedure is adopted it will have to concede the claim.
There is no way that the disadvantage to the Home Office can be minimised.
It will simply be unable to defend itself.
It will be unable to obtain a judicial ruling on the point at all.
That would plainly be a denial of justice.
The disadvantage to Mr Tariq, on the other hand, is less clear cut.
He is not entirely without information, as the general nature of the Home Offices case has been disclosed to him.
He will have the services of the special advocate, with all that that involves second best by far, no doubt, but at least the special advocate will be there.
His claim will be judicially determined by an independent and impartial tribunal, which can be expected to take full account of the fact that the details of the case for the Home Office have had to be kept closed.
If inferences have to be drawn because of the quality or nature of the evidence for the Home Office, they will have to be drawn in Mr Tariqs favour and not against him.
And throughout the process the need for the evidence to be kept closed will be kept under review as rule 54 of Schedule 1 to the Regulations requires, with the assistance of the special advocate.
There cannot, after all, be an absolute rule that gisting must always be resorted to whatever the circumstances.
There are no hard edged rules in this area of the law.
As I said at the beginning, the principles that lie at the heart of the case pull in different directions.
It must be a question of degree, balancing the considerations on one side against those on the other, as to how much weight is to be given to each of them.
I would hold that, given the nature of the case, the fact that the disadvantage to Mr Tariq that the closed procedure will give rise to can to some extent be minimised and the paramount need to protect the integrity of the security vetting process, the balance is in favour of the Home Office.
I would allow the appeal.
LORD BROWN
I have read Lord Mances comprehensive judgment and, like him, would allow the Home Offices appeal and dismiss Mr Tariqs cross appeal.
As to the cross appeal the question whether a closed material procedure in the employment tribunal can ever be compatible with the Race Directive and the Equal Treatment Framework Directive there is almost nothing I wish to add to Lord Mances judgment.
To my mind plainly it can.
The submission that it is never necessary for reasons of national security to deploy secret evidence in employment tribunal discrimination proceedings because instead the government can simply pay up I find not merely unpersuasive but wholly preposterous.
Is it seriously to be suggested that, however unmeritorious such claims may be, the complainant should simply be paid off? Taxpayers money aside, consider the appalling consequences for the governments reputation were there to be a succession of findings of unlawful racial or religious discrimination and the insidious effect of all this upon relations between different racial groups.
As for the appeal in effect the question whether a complainant in Mr Tariqs position has to be provided with sufficient details of the allegations being made against him (however sensitive the information on which they are based) to enable him to give instructions to his special advocate in order effectively to challenge them I conclude no less clearly that this is not required.
On this question, however, I wish to add a few further thoughts of my own.
It is, as I understand it, Mr Tariqs case on the appeal apparently supported by Mr John Howell QC for JUSTICE and Liberty that, assuming (contrary to his primary case) that a closed material procedure is available at all in employment tribunal proceedings, the complainant has exactly the same rights to be provided with sufficient information about the allegations against him to enable him to give effective instructions to the special advocate as the Grand Chamber in A v United Kingdom (2009) 49 EHRR 625 (at para 220) decided had to be given to those deprived of their liberty at Belmarsh Prison pursuant to the Anti terrorism, Crime and Security Act 2001.
For simplicitys sake I shall call this degree of disclosure A type disclosure.
As is well known, the nine Members of the House of Lords sitting in Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269 unanimously held that A type disclosure was similarly required in control order cases under the regime established by the Prevention of Terrorism Act 2005 in place of the detention regime.
Substantially relying on A and on AF (No 3), Mr Allen QC submits that in any special advocate context to which article 6 applies, there is required an irreducible minimum standard of fairness which in every case demands A type disclosure.
Prominent amongst the passages prayed in aid from the AF (No 3) judgments are, to my considerable surprise, these from my own judgment: . the suspect must always be told sufficient of the case against him to enable him to give effective instructions to the special advocate, notwithstanding that sometimes this will be impossible and national security will thereby be put at risk (para 116).
Plainly there now is a rigid principle.
Strasbourg has chosen in para 220 of A to stipulate the need in all cases to disclose to the suspect enough about the allegations forming the sole or decisive grounds of suspicion against him to enable him to give effective instructions to the special advocate (para 119).
The argument, notwithstanding its apparent acceptance by the Court of Appeal, is to my mind unsustainable.
As all the judgments in AF (No 3), my own not least, made plain, the Grand Chambers judgment in A was to be regarded as indistinguishable simply because of the striking similarities between the two situations then under consideration: Belmarsh detention and the control order regime.
To suggest that the identical rigid principle will be imported into every situation where article 6 applies notwithstanding that sometimes this [A type disclosure] will be impossible and national security will thereby be put at risk is absurd.
It is, indeed, to re assert here the very argument already rejected in relation to the cross appeal: the argument that, if giving effect to A type disclosure will compromise national security, then it is always open to government instead to pay up.
True it is that in the control order context, government has on a number of occasions since AF (No 3) chosen to abandon the control order rather than make the necessary degree of disclosure.
That, however, is a far cry from recognising that governments should face the same dilemma in the context of a monetary claim for discrimination.
Although the Court of Appeal did not regard these cases as being in a different category (para 50 of Maurice Kay LJs judgment below), for my part I strongly disagree.
Not merely, moreover, is there no support for Mr Allens argument to be found in our domestic jurisprudence but, as Lord Mance convincingly demonstrates, it is now clearly belied by a series of Strasbourg decisions culminating most recently and most decisively in Kennedy v United Kingdom (Application No 26839/05) (unreported) 18 May 2010.
Kennedy concerned a complaint, largely on article 6 grounds, against the ruling of the Investigatory Powers Tribunal (IPT) made on 23 January 2003 as to the legality of various of their rules.
A sufficient description of the highly restrictive nature of these rules is to be found at paras 7 and 25 of my judgment in this Court in R (A) v Director of Establishments of the Security Service [2009] UKSC 12, [2010] 2 AC 1 (at paras 8 and 30 of which I noted that the IPTs own decision on these rules was shortly to be considered by the European Court of Human Rights, as now it has been in Kennedy).
The Court in Kennedy assumed (at para 179 of its judgment) that article 6 applies to proceedings before the IPT and then, at paras 181 190 of its judgment (cited by Lord Mance at paras 34 and 35 above) comprehensively rejected the claim that it had been violated.
There could hardly be a clearer example of a procedure being held compliant with article 6 notwithstanding the conspicuous absence of anything approaching A type disclosure.
The final comments I wish to make in the appeal are these.
Security vetting by its very nature often involves highly sensitive material.
As an immigration officer, Mr Tariq required security clearance to a comparatively high level (above that of a counter terrorist check albeit below that of developed vetting).
Immigration officers require long term, frequent and controlled access to secret information and assets.
It is surely, therefore, not altogether surprising that, upon his brothers and his cousins arrest and more particularly since his cousins conviction and life sentence for conspiracy to murder arising out of a terrorist plot to attack transatlantic flights from Heathrow he has been suspended from duty (albeit continuing to be paid) and his security clearance withdrawn.
No one suggests that Mr Tariq himself was involved in the plot.
What is suggested, however, is that he could be vulnerable to pressures from someone in his community to abuse his position as an immigration officer.
Mr Tariq submitted an internal appeal against the Departmental Security Officers decision to withdraw his security clearance but this was dismissed by the Permanent Secretary of the Home Office (following his consideration of a full report from the Director of Human Resource Services).
Mr Tariq then made a further appeal to the Security Vetting Appeals Panel (SVAP) (presided over by a retired High Court judge) which held both open and closed hearings, with a special advocate appointed for the closed hearings, and which as recently as January 2011 dismissed the appeal. (No objection is taken to the SVAPs use of a closed procedure and special advocate, apparently on the basis that it was bound to use such a procedure and that in any event its decision on the appeal is solely advisory, the department being free to ignore it.)
We know nothing of the underlying facts of this case.
Assume, however, in a case like the present that someone in the employees community (perhaps a relative or associate) has given information in confidence to those responsible for reviewing the employees security clearance which is detrimental to his case.
Perhaps it belies assurances he has given as to the limited nature and extent of his contacts with those suspected of terrorist activity.
It surely goes without saying that nothing of this could properly be disclosed to the employee beyond perhaps telling him that the department was not satisfied with the assurances he has given.
To give chapter and verse of any inconsistencies between those assurances and the information given to the department would be to betray the information provided and quite likely put its provider at risk.
Similar considerations could well apply even in respect of an initial vetting procedure.
Is it really sensible, one cannot help wondering, to attempt to force disputes in such cases as these into the comparative straitjacket of employment tribunal proceedings.
Even if it is, is it sensible to operate in parallel two sets of proceedings, both with closed procedures and special advocates, one before the SVAP, the other before the Employment Tribunal.
Of course I recognise that the issues they are determining are not identical.
But there must inevitably be some substantial overlap between them and the effort, time and expense involved in all this hardly bears thinking about.
In my judgment in R (A) v Director of Establishments of Security Service (at paras 34 and 35) I expressly contemplated that in certain circumstances the IPTs exclusive jurisdiction might with advantage be widened.
True, I was not considering a case like the present.
I seriously wonder, however, whether it might not be wise to channel all disputes arising in security vetting cases to a single tribunal if not the IPT itself, then a body sharing some at least of its characteristics.
That, however, is a thought for the future perhaps for consideration in relation to a Green Paper we are told will be published later this year with regard to possible ways of resolving, or at least mitigating, the undoubted problems faced by Government in litigation raising sensitive security issues.
LORD KERR
Introduction
On 14 February 2008 the Employment Tribunal dealing with Mr Tariqs case sent to the minister a copy of the reasons it proposed to give for making its order under rule 54 of the First Schedule to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861).
It was required to do so by rule 10 of the Employment Tribunals (National Security) Rules 2004 which are contained in Schedule 2 to the 2004 Regulations.
The reasons were amended by the minister (or, more probably, by someone acting on his behalf) and were eventually issued to the claimant and his advisers in their amended form on 15 October 2008.
The reasons that the tribunal proposed to give Mr Tariq related to the way in which his case would be dealt with.
They purported to explain why he and his representatives would be excluded from those parts of the proceedings at which closed evidence was to be given or closed documents were to be considered; why a special advocate was to be appointed to represent his interests in any part of the proceedings from which he and his representatives were to be excluded; and why the proceedings should be held entirely in private.
As a means of explaining these matters to Mr Tariq, the reasons given were, to say the least, not informative.
Para 10 encapsulated them.
It stated: Having read the relevant documents and having heard submissions, I was satisfied that it was expedient in the interest of national security to make an order under rule 54 as set out in the separate document marked as Orders.
I was further satisfied that it would be in the interest of the claimant if a special advocate were to be appointed for the matter to be further reviewed, as I am required to do, at the next case management discussion on 1 May 2008 when not only can the issues as to what documents should be in the closed and open bundles and what should be included in the closed and open witness statements be addressed but also any submissions from the special advocate in that regard at that case management discussion in the anticipation that there would have been such an appointment before then.
Beyond saying that the decisions as to the way in which his case was to be heard had been taken for reasons of national security, this paragraph conveyed precisely nothing to the claimant.
The paragraphs that had preceded it did little more.
Apart from rehearsing the submissions that had been made by either party, they said virtually nothing.
But that did not make them immune from the ministers blue pen.
In para 5 of the reasons the tribunal had set out (in 5.1, 5.2 and 5.3) the Home Office submissions that the entire proceedings should be held in private; that Mr Tariq and his representative should be excluded while closed evidence or documents were being considered; and that the tribunal should consider both the closed evidence and closed documents and that these would be provided to a special advocate, if one was appointed.
In its original form, the statement of reasons continued at para 6: The respondents made this application on the basis that given the circumstances and the relationship of the claimant to other parties involved in what was believed to be unlawful activities and the fact that he might have contact with them that there could be inadvertent disclosure by him of information that was either sensitive or classified.
Now it should be noted that on 30 August 2006, the departmental security officer, Jacqueline Sharland, had met Mr Tariq and his union representative and she had then explained that the review of Mr Tariq's security clearance had been prompted by national security concerns and that these related to Mr Tariq's vulnerability.
At that meeting Mr Tariq indicated that he understood that the withdrawal of his security clearance had occurred because his brother had been arrested.
There was no demur from Ms Sharland to this suggestion.
Despite this, in October 2008, more than two years later, the minister (or a civil servant acting on his behalf) felt that para 6 of the tribunals reasons required amendment.
He directed that it should be changed so as to read as follows: The respondents made the applications at paras 5.1 5.3 above, on the basis that the material in the closed bundle provided to the tribunal was sensitive on grounds of national security and accordingly should not be disclosed to the claimant or his representative.
So, although Mr Tariq had been informed by the departmental security officer that his security clearance had been reviewed because he was considered to be vulnerable, and although he had responded that he believed that that had happened because his brother had been arrested, the Home Office view was that it was necessary on national security grounds that he should not be told in October 2008 that others who were believed to be involved in unlawful activities might receive sensitive or classified information that he might inadvertently impart to them.
It has never been explained why the view was taken that this information could not be disclosed.
Mystifying though this is, the second change to the statement of reasons directed by the minister is even more inexplicable.
This required the complete deletion of para 8 of the reasons.
This paragraph had done no more than summarise an argument made on the respondents behalf in the presence of Mr Tariqs representative, an argument of which, therefore, it must be assumed, he was fully aware.
It had stated: The respondents further maintained that due to the nature of the contact and the place of contact (the claimant's parents home at which he partially resided with his family during most week ends), it was inappropriate for all these matters to be disclosed on a public basis and that there were matters properly to be dealt with on a closed basis and for the hearing generally to be in private.
Again no explanation for the decision to withhold this information has been given.
It seems likely that its subsequent disclosure and the full revelation of what para 6 contained was brought about by representations made by the special advocate appointed to act on Mr Tariqs behalf.
Lord Mance has said that this is an indication of one of the purposes that a special advocate may serve.
It may very well amount to such an indication but the fact that the intervention of the special advocate was required to secure the release of material which ought never to have been withheld is, in my opinion, profoundly troubling.
Lord Mance has suggested that the course of events about the disclosure of this information offers a cautionary message.
It does more than that.
It illustrates all too clearly the dangers inherent in a closed material procedure where the party which asks for it is also the repository of information on the impact that an open system will avowedly have on national security.
The common law right to know and effectively challenge the opposing case
The right to know and effectively challenge the opposing case has long been recognised by the common law as a fundamental feature of the judicial process.
In Kanda v Government of Malaya [1962] AC 322, 337 Lord Denning said: If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him.
He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.
This appears in all the cases from the celebrated judgment of Lord Loreburn LC in Board of Education v Rice down to the decision of their Lordships Board in Ceylon University v Fernando.
It follows, of course, that the judge or whoever has to adjudicate must not hear evidence or receive representations from one side made behind the back of the other.
The centrality of this right to the fairness of the trial process has been repeatedly emphasised.
Thus, in In re K (Infants) [1963] Ch 381 Upjohn LJ at pp 405 406 said: It seems to be fundamental to any judicial inquiry that a person or other properly interested party must have the right to see all the information put before the judge, to comment on it, to challenge it and if needs be to combat it, and to try to establish by contrary evidence that it is wrong.
It cannot be withheld from him in whole or in part.
If it is so withheld and yet the judge takes such information into account in reaching his conclusion without disclosure to those parties who are properly and naturally vitally concerned, the proceedings cannot be described as judicial.
And in Brinkley v Brinkley [1965] P 75, 78 Scarman J said that for a court to take into consideration evidence which a party to the proceedings has had no opportunity during trial to see or hear, and thus to challenge, explain or comment upon, seems to us to strike at the very root of the judicial process.
In Pamplin v Express Newspapers Ltd [1985] 1 WLR 689 at 691 Hobhouse J expressed the principle in similarly forthright terms: The first principle is the principle of natural justice which applies wherever legal proceedings involve more than one person and one party is asking the tribunal for an order which will affect and bind another.
Natural justice requires that each party should have an equivalent right to be heard.
This means that if one party wishes to place evidence or persuasive material before the tribunal, the other party or parties must have an opportunity to see that material and, if they wish, to submit counter material and, in any event, to address the tribunal about the material.
One party may not make secret communications to the court.
Exceptions to the rule that a party to the proceedings must be informed of every detail of his opponents case have, of course, been recognised.
But it is essential to be aware of the starting point from which one must embark on the inquiry whether the principle of equality of arms (which is such a vital hallmark of our adversarial system of the trial of contentious issues) may be compromised.
As a general indeed, basic rule, those who are parties to litigation need to know what it is that their opponent alleges against them.
They need to have the chance to counter those allegations.
If that vital entitlement is to be denied them, weighty factors must be present to displace it.
And it is self evident that he who wishes to have it displaced must show that there are sufficiently substantial reasons that this should happen.
Put shortly, he who thus avers must establish that nothing less will do.
The case made on behalf of the appellant in this appeal has been stigmatised by the suggestion that it amounts to a claim that the state must accept that it should pay compensation even in those instances where the claimant is known to be wholly undeserving but it is impossible to adduce evidence that would establish this because of national security considerations.
The respondent claimed and the majority have accepted that the law will not contemplate such a situation.
In my view, however, this approach carries the danger of allowing the possible consequences of the implementation of the proper principle to effect a modification of the principle itself.
So, because, it is said, the state, faced with the dilemma of having to choose between revealing the information on which it relies to defeat the claim and compromising national security by doing so, would be forced to settle the case, a better solution must be found.
That better solution is that the state should be allowed to deploy the information on which the claim can be defeated but be absolved from the need to disclose it to the claimant.
This solution, it is clear, is founded not on principle but on pragmatism.
Pragmatic considerations, of course, have their part to play in the resolution of difficult legal conundrums but, I suggest, they have no place here.
Where, as in this case, the challenged decision is the subject of factual inquiry or dispute and the investigation of the disputed facts centres on an individuals actions or, to bring the matter directly to the circumstances of this case, his supposed vulnerability, that individual is the critical source of information needed to discover the truth; in many cases he may be the only source.
If he is denied information as to the nature of the case made either directly against him or, as seems more likely here, against others whose presumed relationship with the claimant renders it unsuitable for him to retain security clearance and if he is thereby forced to speculate on the content of the defendants case, no truly adversarial proceedings are possible.
As Upjohn LJ put it in In re K, the proceedings are not judicial.
The withholding of information from a claimant which is then deployed to defeat his claim is, in my opinion, a breach of his fundamental common law right to a fair trial.
Even if the closed material procedure was compatible with article 6 of the European Convention on Human Rights (and for reasons that I will discuss presently, I do not believe that it is) this has no bearing on the appellants right at common law to be provided with details of the case against him sufficient to enable him to present a reasoned challenge to it.
This courts endorsement of a principle of non disclosure whereby a party in civil proceedings may have withheld from him the allegations forming the basis of the opposing case is a landmark decision, marking a departure from the common laws long established commitment to this basic procedural right.
In my view, the removal of that right may only be achieved by legislation and only then by unambiguous language that clearly has that effect.
In R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, dealing with Parliaments power to legislate contrary to fundamental human rights, Lord Hoffmann at p 131 said: Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights.
The Human Rights Act 1998 will not detract from this power.
The constraints upon its exercise by Parliament are ultimately political, not legal.
But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost.
Fundamental rights cannot be overridden by general or ambiguous words.
This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process.
In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.
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.
Although that statement of principle was made in the context of legislation overriding human rights, it applies with equal force to legislation affecting other constitutional rights such as arise in this case.
In R (Anufrijeva) v Secretary of State for the Home Department [2003] UKHL 36, [2004] 1 AC 604, at para 27 Lord Steyn said of Lord Hoffmanns dictum, this principle may find its primary application in respect of cases under the European Convention on Human Rights.
But the Convention is not an exhaustive statement of fundamental rights under our system of law.
Lord Hoffmann's dictum applies to fundamental rights beyond the four corners of the Convention.
In my view it is engaged in the present case.
And it therefore seems to me remarkable that a modification of such a fundamental right can be achieved without the unambiguous legislative provision that would be required to alter a right arising under the Convention.
To recognise that this right continues to exist at common law does not mean that every time the state wishes to withhold information from a claimant which, although vital to the defence of the claim, cannot be revealed for reasons of national security, it must submit to settlement of the claim.
As the experience in Carnduff v Rock [2001] EWCA Civ 680, [2001] 1 WLR 1786 illustrates, it is perfectly proper and, more importantly, principled to find in such cases that they cannot be regarded as justiciable because no just trial is possible.
Where insistence upon a fully fair hearing for a claimant will deny the defendant (or where it is not a party, the state) the protection of its vital interests that the law should recognise, then a truly fair proceeding is not possible and the trial should be halted in limine.
Lord Mance has said that this is not an option that the law should readily contemplate.
I agree but it seems to me to be a plainly more palatable course than to permit a proceeding in which one party knows nothing of the case made against him and which, by definition, cannot be subject to properly informed challenge.
At least in the Carnduff situation both parties are excluded from the judgment seat.
In the state of affairs that will result from the decision of the majority in this case, one party has exclusive access to that seat and the system of justice cannot fail to be tainted in consequence.
Article 6
Article 6(1) of the European Convention on Human Rights and Fundamental Freedoms provides: 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 is well established that the overriding right guaranteed by article 6(1), the right to a fair trial, is absolute see Montgomery v HM Advocate [2003] 1 AC 641, 673, Brown v Stott [2003] 1 AC 681, 719 and Dyer v Watson [2002] UKPC D1, [2004] 1 AC 379 at para 73.
But the constituent rights comprised, whether expressly or implicitly, within article 6 are not themselves absolute: Brown v Stott at 704 per Lord Steyn.
One of the implicit constituent rights of article 6 is that there should be equality of arms between the parties to proceedings.
Of this constituent right, Lord Bingham said in Brown v Stott at 695 that it lay at the heart of the right to a fair trial.
Equality of arms is the means by which a fair adversarial contest may take place.
It requires that there must be an opportunity for all parties to be aware of and to comment on all the evidence adduced or observations submitted, with a view to influencing the courts decision Vanjak v Croatia (Application No 29889/04) (unreported) 14 January 2010, at para 52.
Although, as a constituent element of article 6, equality of arms is not an absolute right, restrictions may only be placed upon it where it is strictly necessary and proportionate do so.
A strong countervailing public interest is required to satisfy this requirement.
Moreover, the restriction must be sufficiently counterbalanced by appropriate procedures allowed by the judicial authorities.
And the restrictions must not be such as effectively to extinguish the very essence of the right.
These propositions derive from a series of decisions of the European Court of Human Rights (ECtHR) which constitute a clear and constant line of authority emanating from Strasbourg.
One may begin with Tinnelly & Sons Ltd v United Kingdom (1998) 27 EHRR 249.
At para 72 the court said: 72.
The Court recalls that article 6(1) embodies the right to a court, of which the right of access, that is the right to institute proceedings before a court in civil matters, constitutes one aspect.
In this respect, the contracting states enjoy a certain margin of appreciation, although the final decision as to the observance of the Convention's requirements rests with the Court.
It must be satisfied that the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired.
Furthermore, a limitation will not be compatible with article 6(1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
So the very essence of the right must not be impaired and the restriction on the constituent right must be proportionate.
In Rowe and Davis v United Kingdom (2000) 30 EHRR 1 at para 61 the court said: . as the applicants recognised, the entitlement to disclosure of relevant evidence is not an absolute right.
In any criminal proceedings there may be competing interests, such as national security or the need to protect witnesses at risk of reprisals or keep secret police methods of investigation of crime, which must be weighed against the rights of the accused.
In some cases it may be necessary to withhold certain evidence from the defence so as to preserve the fundamental rights of another individual or to safeguard an important public interest.
However, only such measures restricting the rights of the defence which are strictly necessary are permissible under article 6(1).
Moreover, in order to ensure that the accused receives a fair trial, any difficulties caused to the defence by a limitation on its rights must be sufficiently counterbalanced by the procedures followed by the judicial authorities.
A precisely similar formula was employed by the court in para 52 of its judgment in Jasper v United Kingdom (2000) 30 EHRR 441 and in para 52 of Pocius v Lithuania (Application No 35601/04) (unreported) 6 July 2010.
Significantly, it was also used by the court at para 184 of its judgment in Kennedy v United Kingdom (Application No 26839/05) (unreported) 18 May 2010 where it was confirmed that these principles apply with equal force to civil proceedings.
From these statements it is clear that the balancing exercise between, on the one hand, full access to all the elements of the equality of arms principle and, on the other, the withholding of evidence on the grounds of national security, must be conducted on the basis that only such restriction on full access to relevant material as is absolutely required can be countenanced.
And even if that hurdle is surmounted, it must be shown that the limitation on the rights of the party who is denied such access is adequately offset by sufficient counterbalancing measures.
It seems to me that measures can only be regarded as sufficient if they either wholly eliminate the disadvantage that would otherwise have accrued or if they diminish the difficulties deriving from the non disclosure of the relevant material to a condition of insignificance.
Thus as the interveners, Justice and Liberty, have put it, restrictions on untrammelled access to relevant material can only be justified in a justiciable case where sufficient information about the substantive case which a party has to meet is disclosed so that he may effectively challenge it.
Otherwise, the limitation on the right to equality of arms can in no sense be regarded as having been sufficiently counterbalanced.
A function of the counterbalancing measures is to ensure that the very essence of the right is not impaired.
It is, I believe, important to have a clear understanding of what is meant by the essence of the right.
If equality of arms lies at the heart of a fair trial, the essence of the right must surely include the requirement that sufficient information about the case which is to be made against him be given to a party so that he can give meaningful instructions to answer that case.
In Secretary of State for the Home Department v MB [2007] UKHL 46, [2008] AC 440, a case involving a challenge to a non derogating control order, Lord Bingham referred to the general acceptance by the House of Lords in R (Roberts) v Parole Board [2005] UKHL 45, [2005] 2 AC 738 that there was a core, irreducible, minimum entitlement for the appellant, as a life sentence prisoner, to be able effectively to test and challenge any evidence which decisively bore on the legality of his detention.
That irreducible minimum entitlement also applied in the case of a control order: see para 43 of MB.
The opportunity to know and effectively test the case against him (the core irreducible minimum entitlement) surely captures the essence of the right.
And it seems to me that the essence of the right cannot change according to the context in which it arises.
Whether a hearing should be conducted in private or in open session; whether information about the case against an individual should be provided by way of full disclosure or by redacted statements or in the form of a summary or gist; whether witnesses should be anonymised all of these are variables to which recourse may be had in order to reflect the context in which the requirements of article 6 must be examined.
But if the essence of the right is to be regarded (as I believe it must be) as the indispensable and necessary attributes of the right as opposed to those which it may or may not have, its essence cannot alter according to the circumstances in which it falls to be considered.
Para 217 of the European Court of Human Rights judgment in A v United Kingdom (2009) 49 EHRR 625 has been cited by Lord Mance as an example of the emphasis given by the court to the context in which the requirements of the right were being considered.
That case involved a challenge to the decision of the Home Secretary to certify that each of the applicants should be detained because he reasonably believed that their presence in the United Kingdom posed a threat to national security.
As it seems to me the only relevant part of para 217 is contained in the following passage: In view of the dramatic impact of the lengthy and what appeared at that time to be indefinite deprivation of liberty on the applicants fundamental rights, article 5(4) must import substantially the same
fair trial guarantees as article 6(1) in its criminal aspect
This says nothing about the essence of the right to equality of arms.
It merely (but unsurprisingly) confirms that if ones liberty is to be deprived on foot of the order of the Secretary of State, the same guarantees as are available to defendants in a criminal trial should be extended to those who were the subject of detention orders.
Lord Mance also expressed agreement with the decision of the Court of Appeal in R(AHK) v Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287; [2009] 1 WLR 2049 where, according to Lord Mances analysis, it was held that a claim for judicial review of the refusal of an application for British citizenship could be distinguished from the requirements prescribed by A v United Kingdom on the ground that the latter cases focus was on detention.
I do not agree that the AHK case distinguished A v United Kingdom or, at least, that it suggested (contra the decision in A v UK), that abrogation of the right of a claimant to know the essential elements of the case to be made against him was permissible.
The AHK case was principally concerned with the question whether a special advocate should be appointed.
In the list of principles to be applied in cases where the Secretary of State has decided that the reasons for refusing British citizenship could not be fully disclosed Sir Anthony Clarke MR at para 37 (iv) (d) said: All depends upon the circumstances of the particular case, but it is important to have in mind the importance of the decision from the claimant's point of view, the difficulties facing the claimant in effectively challenging the case against him in open court and whether the assistance of a special advocate will or might assist the claimant in meeting the Secretary of State's case and the court in arriving at a fair conclusion.
Underlying this statement is the acknowledgment that the claimant must be assisted in meeting the Secretary of States case.
There is no reason to suppose that the Court of Appeal would have endorsed a procedure where the claimant was effectively prevented from knowing and meeting the essential case made against him.
At a theoretical level it is possible that advocates retained to consider material that cannot be disclosed to a claimant can supply the vital ingredient of ensuring that the case made against the claimant is effectively met.
In such circumstances the essence of the article 6 right is not lost.
But AHK is not authority for the proposition that where that indispensable requirement cannot be fulfilled and the claimant is prevented from presenting a fully informed opposition to the case made against him, no violation of article 6 arises because the consequences for the claimant are less serious than the deprivation of his liberty.
It is, I believe, crucial to a proper understanding of ECtHR jurisprudence in this area that the essence of the right under article 6 is that a party is entitled to know and effectively challenge the case made against him.
Equality of arms, or a properly set adversarial contest, requires that both parties have equal, or at least a sufficient, access to the material that will be deployed against them.
The adversarial contest sets the context and the adversarial contest arises in relation to article 6 rights as opposed to other Convention rights.
Thus cases such as Leander v Sweden (1987) 9 EHRR 433 (which was concerned with alleged violations of articles 8, 10 and 13) and Esbester v United Kingdom (1998) 18 EHRR CD72 (which dealt with claims under article 8 and 13) are of little assistance in determining the requirements of the equality of arms principle under article 6.
Equality of arms did not arise in these cases.
No adversarial contest was engaged.
Whether it is legitimate to withhold information in an article 8 or an article 10 context has nothing to do with the propriety of its non disclosure where parties are seeking a resolution of competing cases from a properly informed and impartial tribunal.
Articles 8 and 10 are qualified rights.
Interference with those rights may be justified on grounds specified in the articles.
By contrast, article 6 is not subject to exemption from the effect of interference.
Kennedy v United Kingdom involved complaints made by the applicant to the Investigatory Powers Tribunal (IPT) that his communications were being intercepted.
The applicant had sought specific directions regarding the conduct of the proceedings in order to ensure the protection of his Convention rights under article 6 (1).
In particular, he asked that his arguments and evidence be presented at an oral hearing; that all hearings be conducted in public; that there be mutual disclosure and inspection between the parties of all witness statements and evidence upon which parties sought to rely and exchange of skeleton arguments in relation to planned legal submissions; that evidence of each party be heard in the presence of the other party or their legal representatives, with oral evidence being open to cross examination by the other party; that any opinion received from a commissioner be disclosed to the parties; and that, following its final determination, the IPT state its findings and give reasons for its conclusions on each relevant issue.
IPT had held that the applicants proceedings before that tribunal engaged article 6.
That finding was somewhat diffidently contested before ECtHR, the government contending that there was no civil right involved.
It was not contended, as it might well have been, that article 6, according to the courts constant jurisprudence, did not apply to cases of surveillance.
ECtHR proceeded on the assumption that article 6 did apply.
It is significant that the courts judgment is largely preoccupied with a consideration of the various specific claims made by the applicant about how the proceedings should be conducted.
The question of providing him with sufficient information in the form of a gist or summary to meet the case against him did not feature in the list of those claims.
The question of supplying redacted documents is discussed, however, and the courts decision seems largely to have been influenced by the argument advanced on behalf of the government that it was simply not possible to produce the information that the applicant sought because national security would inevitably be compromised.
That stance is entirely consistent with the view that surveillance cases do not engage article 6.
It is surprising that more was not made of this by the government and that the court did not address the issue directly.
If it had done and if it had followed its own constant jurisprudence, the anomaly, which I believe the decision in Kennedy represents, would have been avoided.
In Klass v Federal Republic of Germany (1978) 2 EHRR 214 at para 75 ECtHR said this about secret surveillance: As long as it remains validly secret, the decision placing someone under surveillance is thereby incapable of judicial control on the initiative of the person concerned, within the meaning of article 6; as a consequence, it of necessity escapes the requirements of that article.
The logic of this position is inescapable.
The entire point of surveillance is that the person who is subject to it should not be aware of that fact.
It is therefore impossible to apply article 6 to any challenge to the decision to place someone under surveillance, at least until notice of termination of the surveillance has been given.
This approach has been consistently applied by the court.
So for instance in Rotaru v Romania (2000) 8 BHRC 449 at para 69 the court said where secret surveillance is concerned, objective supervisory machinery may be sufficient as long as the measures remain secret.
It is only once the measures have been divulged that legal remedies must become available to the individual.
It is precisely because the fact of surveillance must remain secret in order to be efficacious that article 6 cannot be engaged.
It appears to me, therefore, that the decision in Kennedy ought to have been made on the basis that article 6 was not engaged because the issues that the case raised were simply not justiciable.
That the decision is out of line with the established jurisprudence of the court is perhaps best exemplified by contrasting it with the approach of the Grand Chamber in A v United Kingdom as applied by the House of Lords in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269.
At para 59 Lord Phillips said this about the ratio in A v United Kingdom: I am satisfied that the essence of the Grand Chamber's decision lies in para 220 and, in particular, in the last sentence of that paragraph.
This establishes that the controlee must be given sufficient information about the allegations against him to enable him to give effective instructions in relation to those allegations.
Provided that this requirement is satisfied there can be a fair trial notwithstanding that the controlee is not provided with the detail or the sources of the evidence forming the basis of the allegations.
Where, however, the open material consists purely of general assertions and the case against the controlee is based solely or to a decisive degree on closed materials the requirements of a fair trial will not be satisfied, however cogent the case based on the closed materials may be.
Whilst Lord Phillips at para 65 implied that the Grand Chambers decision (that non disclosure cannot deny a party knowledge of the essence of the case against him) might apply only where the consequences for an individual were as severe as those normally imposed under a control order, there are indications in his and other speeches that the principle is of general application.
In particular, Lord Phillips rejected the suggestion that there should be a different standard where the control order did not amount to detention para 63 and at para 64 he said this: The best way of producing a fair trial is to ensure that a party to it has the fullest information of both the allegations that are made against him and the evidence relied upon in support of those allegations.
Where the evidence is documentary, he should have access to the documents.
Where the evidence consists of oral testimony, then he should be entitled to cross examine the witnesses who give that testimony, whose identities should be disclosed.
Both our criminal and our civil procedures set out to achieve these aims.
In some circumstances, however, they run into conflict with other aspects of the public interest, and this is particularly the case where national security is involved.
How that conflict is to be resolved is a matter for Parliament and for government, subject to the law laid down by Parliament.
That law now includes the Convention, as applied by the HRA.
That Act requires the courts to act compatibly with Convention rights, in so far as Parliament permits, and to take into account the Strasbourg jurisprudence.
That is why the clear terms of the judgment in A v United Kingdom resolve the issue raised in these appeals.
The views of Lord Hope were equally clear and comprehensive.
At para 83 he said: The approach which the Grand Chamber has adopted is not, as it seems to me, at all surprising.
The principle that the accused has a right to know what is being alleged against him has a long pedigree.
As Lord Scott of Foscote observed in A v Secretary of State for the Home Department [2005] 2 AC 68, para 155, a denunciation on grounds that are not disclosed is the stuff of nightmares.
The rule of law in a democratic society does not tolerate such behaviour.
The fundamental principle is that everyone is entitled to the disclosure of sufficient material to enable him to answer effectively the case that is made against him.
Lady Hale in para 103 said that Strasbourg had now made it entirely clear what the test of a fair hearing is.
The test was whether the controlled person had had the possibility to challenge effectively the allegations made against him.
He had to have sufficient information about those allegations to be able to give effective instructions to his special advocate.
If the majority in this appeal are right, however, the test of a fair hearing in Mr Tariqs case is different.
He need not be given sufficient information about the allegations against him to challenge them effectively or to give effective instructions to his special advocate.
For my part I cannot understand why this should be so.
The result of the decision of the majority is to create a different class of case from that where what Lord Brown has helpfully described as A type disclosure must be given.
The eligibility criteria for inclusion in this privileged group are not clear.
Certainly, the class is not confined to those whose liberty is at stake, as the speeches in AF (No 3) make clear.
And, presumably, it must also include freezing order cases Kadi v Council of the European Union Joined Cases C 402/05 P and C 415/05 P [2009] AC 1225, as applied by the European General Court in Kadi II Case T 85/09 [2011] 1 CMLR 697.
If A type disclosure is required in challenges to freezing orders, does it extend to property rights more generally? If it does, why should property rights be distinguished from loss of employment cases? After all, loss of livelihood may be just as devastating as having ones assets frozen.
It seems to me that there is no principled basis on which to draw a distinction between the essence of the right to a fair trial based on the nature of the claim that is made.
A fair trial in any context demands that certain indispensable features are present to enable a true adversarial contest to take place.
That conclusion is reflected in the later decision of ECtHR of Uukauskas v Lithuania (Application No 16965/04) (unreported) 6 July 2010.
Lord Mance has sought to distinguish this case on the basis that the procedure adopted was contrary to national law.
But that consideration was in no sense central to the courts reasoning.
On the contrary, the observation (at para 48) that Lithuanian law and judicial practice provide that such information may not be used as evidence in court against a person unless it has been declassified, and that it may not be the only evidence on which a court bases its decision was made in order to draw a contrast with the view that documents which constitute state secrets may only be disclosed to persons who possess the appropriate authorisation.
It is quite clear that the violation of article 6 which the court held to have occurred was based on conventional ECtHR principles.
This much is evident from para 51 where the court said; In conclusion, therefore, the Court finds that the decision making procedure did not comply with the requirements of adversarial proceedings or equality of arms, and did not incorporate adequate safeguards to protect the interests of the applicant.
It follows that there has been a violation of article 6(1) in the present case.
The unavoidable result from this case is that Strasbourg has again made it entirely clear what the test for a fair hearing is where someone seeks to challenge a decision that he should be removed from a firearms register.
He is entitled to know the reasons that this has happened in order to be able to effectively challenge them.
If that is so, why should someone who has been dismissed from his employment be in a less advantageous position?
Conclusions
I have concluded that the Court of Appeal was correct in finding that where article 6 is engaged, it is necessary for a party to proceedings to be provided with sufficient information about the allegations against him to allow him to give effective instructions to his legal representatives and, if one has been appointed, the special advocate so that those allegations can be effectively challenged.
I would therefore dismiss the appeal by the Home Office.
For the reasons given by Lord Mance, with which I agree, I would hold that the closed material procedure provided for in the Employment Tribunal legislative scheme is not in principle incompatible with article 6 and EU law.
I would therefore also dismiss the cross appeal.
LORD DYSON
I agree that for the reasons given by Lord Mance the Court of Appeal was correct to hold that the closed material procedure provided for in the Employment Tribunal legislative scheme, including its provision for the appointment of special advocates is in principle compatible with article 6 of the European Convention on Human Rights (ECHR) and EU law.
I also agree that the Court of Appeal was wrong to find that, in all cases in which article 6 (civil) is engaged, it is necessary for an individual to be provided with sufficient information about the allegations against him (the gist) to enable him to give effective instructions to his legal representatives and the special advocate (where one has been appointed) in relation to those allegations.
It is on this second question that I wish to add some words of my own.
General observations about closed procedures
The article 6 right to a fair trial is absolute: see, for example, per Lord Hope in Dyer v Watson [2002] UKPC D1 [2004] 1 AC 379 at para 73.
In principle, a fair trial presupposes adversarial proceedings and equality of arms.
Thus, for example, in Vanjak v Croatia (Application No 29889/04) (unreported) 14 January 2010, at para 52, the European Court of Human Rights said: . . independently of whether the case is a civil, criminal or disciplinary one, the right to adversarial proceedings has to be complied with.
That right means in principle the opportunity for the parties to court proceedings falling within the scope of article 6 to have knowledge of and comment on all evidence adduced or observations submitted, with a view to influencing the courts decision.
But the constituent elements of a fair process are not absolute or fixed: see Brown v Stott [2003] 1 AC 681 at 693D E per Lord Bingham; 719G H per Lord Hope; and 727H per Lord Clyde.
This was re affirmed by the ECtHR in relation to article 5(4) in A v United Kingdom (2009) 49 EHRR 625 at para 203: The requirement of procedural fairness under article 5(4) does not impose a uniform, unvarying standard to be applied irrespective of the context, facts and circumstances.
Moreover, it has been recognised by the ECtHR that there are circumstances where a limitation on what would otherwise be a general rule of fairness is permissible.
Thus in Rowe and Davis v United Kingdom (2000) 30 EHRR 1, at para 61, the European Court of Human Rights said: the entitlement to disclosure of relevant evidence is not an absolute right.
In any criminal proceedings there may be competing interests, such as national security or the need to protect witnesses at risk of reprisals or keep secret police methods of investigation of crime, which must be weighed against the rights of the accused.
In some cases it may be necessary to withhold certain evidence from the defence so as to preserve the fundamental rights of another individual or to safeguard an important public interest.
However, only such measures restricting the rights of the defence which are strictly necessary are permissible under article 6(1).
Moreover, in order to ensure that the accused receives a fair trial, any difficulties caused to the defence by a limitation on its rights may be sufficiently counterbalanced by the procedures followed by the judicial authorities.
Prima facie, a closed material procedure denies the party who is refused access to the closed material the right to full and informed participation in adversarial proceedings and to that extent is inconsistent with the principle of equality of arms.
There are two factors which the Secretary of State says are sufficient to counterbalance the effects of the closed material procedure in the present case.
The first is that there is scrutiny by an independent court (the Employment Tribunal) fully appraised of all relevant material and experienced in dealing with discrimination cases.
The second is the testing by a special advocate of the Home Offices case in closed session.
But are these factors sufficient in circumstances where the gist of the Home Office case is not disclosed to the claimant? How can the special advocate represent the claimants interests if the claimant is unable to give full instructions to him? The answer to these questions in the context of proceedings involving the liberty of the subject is clear.
If the special advocate is unable to perform his function in any useful way unless the detainee is provided with sufficient information about the allegations to enable him to give effective instructions to the special advocate, then there must be disclosure to the detainee of the gist of that information: see A v United Kingdom at para 220 and, in the context of control orders, Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269.
In such a case, there must be disclosure, regardless of how important the competing national interest may be in favour of withholding the information.
The consequence of this will inevitably be that in some cases the prosecuting or detaining authorities will be faced with the invidious choice of disclosing sensitive information or risking losing the case.
But what is the position in cases which do not involve the liberty of the subject? For the reasons given by Lord Mance and Lord Brown, I agree that neither A v United Kingdom nor AF (No3) decides this question.
Mr Allen QC and Mr Howell QC submit that the reasoning in A v United Kingdom is not limited to cases involving the liberty of the subject and should be applied to civil claims too.
They submit that, properly understood, the Strasbourg jurisprudence does not support the proposition that a different approach may be adopted to the problem in civil claims.
They also say that to distinguish between the requirements of article 6 on the basis of a classification of the type of case involved is unprincipled and will give rise to uncertainty and confusion.
But it is clear from para 203 of A v United Kingdom itself that article 6 does not require a uniform approach to be adopted in all classes of case.
In Kennedy v United Kingdom (Application No 26839) (unreported) 18 May 2010, the European Court of Human Rights said that the entitlement to disclosure of relevant evidence is not an absolute right (para 187); the character of the proceedings may justify dispensing with an oral hearing (para 188); and the extent to which the duty to give reasons applies may vary according to the nature of the decision and must be determined in the light of the circumstances of the case (para 189).
I therefore agree with what Sir Anthony Clarke MR said when giving the judgment of the court in R(AHK) v Secretary of State for the Home Department (Practice Note) [2009] EWCA Civ 287, [2009] 1 WLR 2049 at para 45: The above analysis shows that the European Court of Human Rights considers each class of case separately.
The issues in this class of case are a far cry from the issues that arise in the criminal cases discussed by the court in A v United Kingdom 19 February 2009.
Moreover, without in any way minimising the effect of being refused British citizenship, the consequences of a deprivation of (or even interference with) liberty are plainly very much more serious.
In these circumstances we do not think that the approach of the court in criminal cases or in cases of deprivation or interference with liberty can or should be applied directly to this class of case.
That is not to say that, as explained earlier, each individual is not entitled to a fair hearing of his application for judicial review.
Nevertheless, I would accept that the general rule is that an applicant should enjoy the full panoply of article 6 rights, including full disclosure of all relevant material and that any limitation on the ordinary incidents of article 6 requires careful justification.
In deciding how to strike the balance between the rights of the individual and other competing interests, the court must consider whether scrutiny by an independent court and the use of special advocates are sufficient to counterbalance the limitations on the individuals article 6 rights.
In many cases, an individuals case can be effectively prosecuted without his knowing the sensitive information which public interest considerations make it impossible to disclose to him.
For example, in a discrimination claim such as that of Mr Tariq, the central issue may well not be whether the underlying security concerns are well founded, but rather whether the decision making process was infected by discrimination.
As Mr Eadie QC points out, Mr Tariqs appeal is not against the assessments or conclusions of the Home Office as to the withdrawal of his security clearance.
SVAP provides the expert forum for considering such issues.
It was not for the Employment Tribunal to determine whether, for example, it believed or did not believe Mr Tariqs assertions about the nature of his relationships with persons involved in or associated with terrorist activities.
Thus in the conduct of a discrimination claim, the special advocate and indeed the judge can to a considerable extent test the case of the alleged discriminator without the input of the claimant.
The surveillance/security vetting cases
Lord Mance has referred at para 68 to what he describes as the clear line of jurisprudence culminating in the Courts decision in Kennedy which demonstrates that, in civil cases, it is not necessary to provide the gist of information which the interests of national security require to be kept secret.
I think that it is necessary to examine the authorities with some care to see precisely what these cases do establish.
In the absence of special circumstances, our courts should follow any clear and constant jurisprudence of the European Court of Human Rights: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295 at para 26.
The first case to note is Klass v Federal Republic of Germany (1978) 2 EHRR 214.
This involved a challenge to legislation which permitted the authorities to open and inspect mail and listen to telephone conversations in order to protect, inter alia, against imminent dangers threatening the existence or the security of the state.
The challenge was based on an alleged breach of articles 6, 8 and 13 of the European Convention on Human Rights.
At para 75, the European Court of Human Rights said : As long as it remains validly secret, the decision placing someone under surveillance is thereby incapable of judicial control on the initiative of the person concerned, within the meaning of article 6; as a consequence, it of necessity escapes the requirements of that article.
The cases of Leander v Sweden (1987) 9 EHRR 433 and Esbester v United Kingdom (1993) 18 EHRR CD72 are discussed by Lord Mance at paras 28 to 32 above.
They can be considered together, although at first sight it may seem odd to refer to them at all since they are not article 6 cases.
The claim in Leander was brought under articles 8, 10 and 13 and in Esbester under articles 8 and 13.
I accept that what may be a proportionate and justified interference with a persons rights under article 8 may not correspond precisely with what may be a strictly necessary and sufficiently counterbalanced invasion of his right to a fair trial under article 6.
Moreover, it is right to point out that Leander and Esbester were referred to by the European Court of Human Rights in Kennedy, but only in its discussion of the claims under articles 8 and 13: see paras 122, 152, 195 and 197.
The section in Kennedy which deals with article 6 does not refer to either of these authorities.
Mr Eadie accepts that Leander and Esbester did not concern article 6.
He relies on them as being directly analogous to the present case, relating to security vetting in an employment context.
Issues of fairness were central to the issues arising under articles 8 and 10 and the right to an effective remedy under article 13.
The European Court of Human Rights found that the vetting systems in those cases were compatible with article 8 and upheld the right of the state not to disclose the reasons for the rejection of the applicants application for employment as a result of a security vetting process.
Whereas Klass is a case where it seems to have been held that article 6 did not apply at all and Leander and Esbester are not article 6 cases, there can be no doubt that Kennedy is an article 6 case.
In Kennedy (which was decided after the decision of the Court of Appeal in the present case), the applicant complained about an alleged interception of his communications, claiming that it was a violation of his article 8 rights.
He also complained that the hearing before the Investigatory Powers Tribunal (IPT) was not attended by adequate safeguards as required under article 6 and that, as a result, he had been denied an effective remedy under article 13.
Lord Mance has set out the relevant passages of the judgment at paras 34 and 35 above.
The submissions of the parties summarised at paras 180 to 183 of the judgment were directed to the question of what article 6 required.
It is of note that the Government submitted that the scope of the article 6 guarantees in that case should be in harmony with the Courts approach to judicial control under article 8.
The courts assessment at paras 184 to 191 was explicitly on the basis of the application of article 6.
In contrast with para 75 of Klass, the court did not say that the case escapes the requirements of [article 6].
Thus at para 186, the court emphasised that the proceedings related to secret surveillance measures and that there was therefore a need to keep secret sensitive and confidential information.
The court continued: this consideration justifies restrictions in the IPT proceedings.
The question is whether the restrictions, taken as a whole, were disproportionate or impaired the very essence of the applicants right to a fair trial.
This is the classic approach to article 6.
The courts conclusion at para 190 was that the restrictions on the procedure before the IPT did not violate the applicants right to a fair trial.
In reaching this conclusion, the court took into account the breadth of access to the IPT (an independent court) enjoyed by those complaining about interception and the absence of any evidential burden to be overcome in order to lodge an application with the IPT.
It concluded: In order to ensure the efficacy of the secret surveillance regime, and bearing in mind the importance of such measures to the fight against terrorism and serious crime, the Court considers that the restrictions on the applicants rights in the context of the proceedings before the IPT were both necessary and proportionate and did not impair the very essence of the applicants article 6 rights.
Mr Allen and Mr Howell submit that Kennedy should be understood as a decision that, so long as the very subject matter of the dispute must justifiably remain secret, is effectively non justiciable and the substantive protections that article 6 contains cannot be applied in substance to its resolution.
In other words, they submit that the decision in Kennedy should be analysed as an application of para 75 of Klass.
If, however, the court had intended to adopt this approach, it would have said so.
Instead, it clearly purported to apply article 6.
Kennedy is a striking decision.
But for the security issues raised in the case, it is surely inconceivable that the court would have concluded that the restrictions on the applicants rights before the IPT (a completely closed procedure without even the protection of a special advocate) were necessary and proportionate and did not impair the very essence of the applicants article 6 rights.
The crucial reason for this conclusion was that the restrictions on the applicants rights were necessary in order to ensure the efficacy of the secret surveillance regime.
Kennedy was a case about a secret surveillance regime by interception of his communications.
This same language was used by the court in Klass at para 58 to justify the interference with the applicants article 8 rights in that case (another interception of communications case): the fact of not informing the individual once surveillance has ceased cannot itself be incompatible with this provision, since it is this very fact which ensures the efficacy of the interference.
The same reasoning appears in the security vetting cases of Leander and Esbester.
Thus, for example, at para 66 of Leander, the court said that the very fact that the information released to the military authorities was not communicated to Mr Leander cannot by itself warrant the conclusion that the interference was not necessary in a democratic society in the interests of national security, as it is the very absence of such communication which, at least partly, ensures the efficacy of the personnel control procedure.
In support of this proposition, the court referred to para 58 of Klass.
There is similar reasoning in the Commissions decision in Esbester.
In my view, the significance of Kennedy is that it is a decision explicitly based on an application of article 6 which adopted the same approach as that which was taken by the court in applying articles 8 and 13 in Leander and by the Commission in Esbester.
This provides clear support for the submission of Mr Eadie that, for the purposes of the issues that arise in the present case, there is no material difference between articles 8 and 13 on the one hand and article 6 on the other.
I do not consider that, if the complaints in Leander and Esbester had been based on article 6, the outcome in these cases would have been different.
The other point to emphasise is that these cases show that there is no material difference between surveillance cases (such as Klass and Kennedy) and security vetting cases (such as Leander and Esbester).
In the former, restrictions on an individuals right to disclosure and participation in a hearing will be considered necessary and proportionate if they are required in order to ensure the efficacy of the secret surveillance regime.
In the latter, the restrictions will be considered necessary and proportionate if they are required in order to ensure the efficacy of the personnel control procedure.
Mr Allen and Mr Howell submit that the limited significance of Leander, Esbester and Kennedy is demonstrated by the decision of the ECtHR in Uukauskas v Lithuania (Application No 16965/04) (unreported) 6 July 2010.
Lord Mance has set out the facts at para 37 above.
I find this a difficult decision to interpret.
On the one hand, the court approached the matter in conventional article 6 terms: see para 46 where it noted that (i) the entitlement to disclosure of relevant evidence is not an absolute right; (ii) it may be necessary to withhold certain evidence to safeguard an important public interest; but (iii) only such measures restricting the rights of the defence which are strictly necessary are permissible and there must be sufficient counterbalancing.
At para 48 the court referred to the fact that, according to Lithuanian law and judicial practice, secret information may not be used as evidence in court unless it has been declassified and it may not be the only evidence on which a court bases its decision.
It is not clear to me to what extent the court based its conclusion that there had been a breach of article 6 on the fact that use of the secret material against the applicant (which was of decisive importance to his case) was contrary to Lithuanian law.
But I accept that on the face of it, this is an article 6 decision which does not sit easily with the surveillance/vetting procedure cases to which I have referred.
There is no reference to them.
There is no weighing of the national interest in the protection of the community against crime against the general right to adversarial proceedings.
For these reasons and because it is unclear to what extent the position under Lithuanian law influenced the decision, I agree with Lord Mance that this decision does not cast doubt on the approach adopted in the surveillance/security vetting cases.
Unlike Lord Mance, however, I doubt whether the fact that there is no procedure under Lithuanian law for the use of a special advocate to consider closed material is of significance, since, as was pointed out by the European Court of Human Rights in Kennedy at para 187, the procedure before the IPT did not permit the use of special advocates either.
In my judgment, these decisions show that there is a clear line of authority to support the proposition that, in surveillance and security vetting cases, an individual is not entitled to full article 6 rights if to accord him such rights would jeopardise the efficacy of the surveillance or security vetting regime itself.
On the material shown to us, the line of authority may not be very long, but in my view it is sufficiently clear that it should be followed by our courts.
The cases show, in particular, that there is no right to be given the gist of relevant information if and to the extent that this would jeopardise the efficacy of the surveillance or security vetting regime.
The present case
I have no doubt that article 6 does not require that Mr Tariq should be given the gist of information which would damage or jeopardise national security.
First, and above all, this is a security vetting case and in such a case article 6 does not require gisting if and in so far as it would jeopardise the efficacy of the personnel control procedure.
That is a sufficient reason for allowing the Home Office appeal.
There is no sensible basis for distinguishing the present case from Leander and Esbester.
In those cases (which concerned a complaint about the manner in which security vetting was conducted where the applicant was applying for a sensitive post), article 8 did not require disclosure of the security material.
In the present case, the complaint is about the decision not to allow a person to remain in a post where security vetting was employed.
There can be no distinction in principle between the two cases.
A related point is that in all cases where security clearance is sought, it is because the individual has volunteered to undergo the clearance process for the purpose of doing (or continuing to do) the job that he is employed to do.
He must be taken to know that checks will be made that may produce material that cannot be shown to him.
As Lord Hope points out, he is a volunteer.
I would add the following points which reinforce the Home Office case.
First, the subject matter of the claim is a claim for damages for alleged discrimination.
I do not wish to underestimate the importance of the right not to be subjected to discrimination.
But on any view, discrimination is a less grave invasion of a persons rights than the deprivation of the right to liberty.
Secondly, the issues in the present case are such that the presence of an independent court and a special advocate are likely to go a long way to making up for the fact that Mr Tariq will be unable fully to participate in the proceedings.
As I have explained at para 147 above, there is likely to be only limited (if any) scope for Mr Tariq to be able to give instructions to the special advocate which are necessary to enable her to test the Home Office case effectively.
Conclusion
I would, therefore, allow the Home Offices appeal primarily on the ground that this case concerns a decision taken in the context of security vetting.
In other classes of civil case which are outside the surveillance/security vetting context, the balance between the individuals article 6 rights and other competing interests may be struck differently.
It is said that this gives rise to undesirable uncertainty.
But much of the content of the European Convention on Human Rights is about striking balances.
This is sometimes very difficult and different opinions can reasonably be held.
As a consequence, outcomes are sometimes difficult to predict.
This is inevitable.
But it is not a reason for striving to devise hard and fast rules and rigid classifications.
It is, however, at least possible to say that, in principle, article 6 requires as much disclosure as possible.
It is very easy for the state to play the security card.
The court should always be astute to examine critically any claim to withhold information on public interest grounds.
For the reasons that I have given, I would allow the Home Office appeal.
I would also dismiss the appeal of Mr Tariq for the reasons given by Lord Mance.
LORD PHILLIPS, LADY HALE AND LORD CLARKE
I agree that, for the reasons given by Lord Hope, Lord Brown, Lord Mance and Lord Dyson, the appeal of the Home Office should be allowed and that the cross appeal of Mr Tariq should be dismissed.
LORD RODGER
Lord Rodger, who died before judgment was given in this case, had indicated that he agreed with the judgments of Lord Mance and Lord Brown.
| UK-Abs | This appeal concerns the permissibility of a procedure whereby a claimant in employment tribunal proceedings may be excluded along with his representatives from certain aspects of those proceedings on grounds of national security.
In particular the question arises as to whether such a procedure, known as a closed material procedure, is compatible with European Union law and the European Convention on Human Rights.
Mr Tariq was employed as an immigration officer with the Home Office until 2006 when he was suspended and his security clearance withdrawn.
The background for these decisions was the arrest of Mr Tariqs brother and cousin during an investigation into a suspected plot to mount a terrorist attack on transatlantic flights.
Mr Tariqs cousin was convicted in 2008 of various offences in relation to that plot.
No information suggested that Mr Tariq had himself been involved in any terrorism plot.
Mr Tariq commenced proceedings in the Employment Tribunal claiming direct and indirect discrimination on grounds of race and religion.
He alleged that the Home Office had relied on stereotypical assumptions about him, Muslims and individuals of Pakistani origin such as susceptibility to undue influence and that the Home Office had indirectly discriminatory policies and procedures.
The Home Office denied this and stated that its decisions were based on Mr Tariqs association with individuals suspected of involvement in terrorist activities and the risk of their attempting to exert influence on him to abuse his position.
Section 10(6) of the Employment Tribunals Act 1996 provides that the Secretary of State may make regulations that enable a tribunal to adopt a closed material procedure if it considers this expedient in the interests of national security.
Rule 54(2) of Schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (the Regulations) provides for the adoption of a closed material procedure if the tribunal so orders.
Schedule 2 provides for the use of special advocates, whose role is to represent a claimants interests so far as possible in relation to the aspects closed to him and his representatives.
The Employment Tribunal made an order for a closed material procedure, directing that Mr Tariq and his representatives should be excluded from the proceedings when closed evidence or documents were being considered.
Mr Tariq appealed the order to the Employment Appeal Tribunal.
The appeal was dismissed and a further appeal was dismissed by the Court of Appeal.
The Court of Appeal, however, declared that Article 6 of the European Convention on Human Rights required Mr Tariq to be provided with the allegations being made against him in sufficient detail to enable him to give instructions to his legal team so that those allegations can be challenged effectively.
This requirement is known as gisting.
The Home Office appealed to the Supreme Court against the declaration and Mr Tariq cross appealed against the conclusion that a closed material procedure was permissible.
The Supreme Court by a majority of 8 1 allows the Home Offices appeal and sets aside the declaration made by the Court of Appeal requiring the provision of a gist.
Lord Kerr dissents.
The Supreme Court unanimously dismisses Mr Tariqs cross appeal, holding that a closed material procedure is compatible with Article 6 of the European Convention on Human Rights and EU Law.
Mr Tariqs Cross Appeal The issue in the cross appeal was whether the provisions in the Regulations providing for a closed material procedure were contrary to EU law or the European Convention on Human Rights.
It is a basic principle of EU law that national law should provide effective legal protection of EU law rights.
Those rights include the right not to be discriminated against on grounds of race or religion.
As to whether the closed material procedure provided effective legal protection, the case law of the European Court of Justice is clear that EU law will look for guidance on the subject in the case law of the European Court of Human Rights.
That Court has established in a line of cases culminating in Kennedy v UK that the demands of national security may necessitate a system for determining complaints under which a claimant is, for reasons of national security, unable to know the secret material by reference to which his complaint is determined.
The tests are whether the system is necessary and whether it contains sufficient safeguards.
On the facts, both were satisfied.
The system was necessary because security vetting is a highly sensitive area in which integrity of sources of information and the means of obtaining it must be protected.
The alternatives of the Home Office routinely having to pay unmeritorious claims or the courts refusing to hear claims at all are not possibilities that the law should readily contemplate.
The rule of law must, so far as possible, stand for the objective resolution of civil disputes on their merits by a court which has before it material enabling it to do so.
The system contained sufficient safeguards in the form of special advocates, who can usefully protect the claimants interests.
For these reasons the use of the closed material procedure in this case was lawful and the cross appeal must be dismissed.
The Home Offices Appeal The question in the appeal was whether there is an absolute requirement that a claimant should be able to see the allegations against him in sufficient detail to give instructions to his legal team to enable the allegations to be challenged effectively.
Mr Tariq argued that the European Convention on Human Rights contained such a principle.
The Supreme Court, however, held that the line of cases culminating in Kennedy v UK recognised that there was no absolute requirement.
Article 6 of the European Convention on Human Rights provides the right to a fair trial.
The European Court of Human Rights has held that where the liberty of the subject is involved, Article 6 requires the provision of a gist as described by the Court of Appeal.
In cases such as the present not involving the liberty of the subject, however, the question is whether the use of the closed material procedure will impair the very essence of the right to a fair trial.
That cannot be said to be so in this case, as Mr Tariqs claim will be determined by an independent and impartial tribunal and the disadvantages that the procedure gives rise to will as far as possible be minimised.
The appeal was therefore allowed.
Lord Kerr dissented.
He held, first, that the withholding of information from a claimant which is then deployed to defeat his claim is a breach of his fundamental common law right to a fair trial.
The removal of that right can only be achieved by legislation framed in unambiguous language.
Secondly, such withholding also constitutes a breach of a claimants Article 6 right to a fair trial.
Kennedy v UK was an anomaly.
Lord Kerr would therefore have dismissed the appeal.
|
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
| UK-Abs | These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
|
The issues raised by this appeal are whether the Court of Appeal (i) adopted the wrong approach to the assessment of the impact of MAs lies to the Asylum and Immigration Tribunal (AIT) on his claim for international protection on the basis of Article 3 of the European Convention on Human Rights (ECHR); and (ii) impermissibly interfered with the assessment of the facts made by the AIT, including the impact of MAs lies on a relevant aspect of his claim.
As will become apparent, there was little debate or disagreement between the parties to this appeal about the questions raised by the first issue, although they are unquestionably of general importance.
The second issue raises the question of how far it is legitimate for an appeal court to interfere with the assessment of facts made by a specialist tribunal on the grounds of error of law.
The facts
MA is a citizen of Somalia.
He is a member of the Isaaq clan, sub clan Habr Yunis.
He entered the United Kingdom illegally on 7 May 1995 and applied for asylum on 24 May 1995.
That application was refused on 14 February 1996, but he was granted exceptional leave to remain until February 1997.
He was then granted further leave until 14 February 2000.
On 23 July 1998, he was convicted of rape and indecency with a child.
He was sentenced to eight years imprisonment.
On 21 May 2002 the Secretary of State for the Home Department (the Secretary of State) served him with a notice of intention to make a deportation order.
MA appealed against the notice on human rights grounds.
The Secretary of State decided (under the Immigration Rules) that the grounds of appeal amounted to a fresh claim for asylum; but refused the claim in a letter dated 26 June 2003.
MA appealed.
His appeal was dismissed by an adjudicator on 25 November 2003.
On 5 April 2004, the Secretary of State made a deportation order, which was served on MA on 19 April 2004.
On 4 March 2005, MAs solicitors made further representations to the Secretary of State, who decided that these did not amount to a fresh claim.
Removal directions were set for 29 November 2006, but MA applied for judicial review, raising issues under Article 3 of the ECHR.
Following further submissions, on 1 February 2007 the Secretary of State accepted that MA had made a fresh claim for asylum, but refused the claim.
MA appealed again.
In a determination promulgated on 19 April 2007, the AIT allowed his appeal.
They did so on human rights grounds only, as they held that the appellant was precluded by section 72 of the Nationality, Immigration and Asylum Act 2002 from claiming protection under the Refugee Convention, and, by paragraph 339D of the Immigration Rules, from claiming humanitarian protection.
The AIT accepted the concession made by the Secretary of State that MA was a member of the Isaaq clan.
They also found that he was from Mogadishu, and that his parents were from Hargeisa in Somaliland.
After considering evidence about the situation of the Isaaq clan in Mogadishu, they held that the Isaaq in Mogadishu were in the position of a minority clan who did not have protection, and that he would be at a real risk of physical violence which crossed the Article 3 threshold.
The Secretary of State applied for an order requiring the AIT to reconsider their decision.
An order for reconsideration was made on 10 May 2007.
At the first stage reconsideration hearing on 28 February 2008, Senior Immigration Judge Spencer ordered a second stage hearing at which the appeal would be determined afresh.
He further ordered that the limited positive credibility findings made by the AIT about MA and their decision to prefer the evidence of Mr Hhne (MAs expert) to that relied on by the Secretary of State should be preserved.
MAs appeal was re heard on 18 December 2008, and in a determination promulgated on 1 July 2009 the AIT dismissed the appeal.
His application for permission to appeal to the Court of Appeal was granted by Sedley LJ on 18 December 2009.
In a judgment delivered on 23 April 2010 [2010] EWCA Civ 426, the Court of Appeal allowed the appeal.
It will be necessary to examine parts of the AITs determination of 1 July 2009 and the decision of the Court of Appeal in some detail.
In short, the Court of Appeal held that, although the AIT directed themselves impeccably, they did not apply that direction properly and they failed to take account of a material factor in reaching their conclusion.
The relevant country guidance decision of the AIT
The relevant country guidance for Somalia is to be found in the AIT decision of AM and AM (armed conflict: risk categories)(Somalia) [2008] UKAIT 00091.
At para 178, the AIT said: On the present evidence we consider that Mogadishu is no longer safe as a place to live for the great majority of its citizens.
We do not rule out that notwithstanding the above there may be certain individuals who on the facts may be considered to be able to live safely in the city, for example if they are likely to have close connections with powerful actors in Mogadishu, such as prominent businessmen or senior figures in the insurgency or in powerful criminal gangs.
However, barring cases of this kind, we consider that in the case of persons found to come from Mogadishu who are returnees from the UK, they would face on return to live there a real risk of persecution or serious harm and it is reasonably likely, if they tried staying there, that they would soon be forced to leave or that they would decide not to try and live there in the first place.
The Standard of Proof
It was not contended in the Court of Appeal or in this court that the AIT had applied the wrong standard of proof.
It is well established that a breach of Article 3 of the ECHR is proved where substantial grounds have been shown for believing that the person concerned faced a real risk of being subjected to torture or inhuman or degrading treatment (Vilvarajah v UK (1991) 14 EHRR 248 para 103) (emphasis added).
There was, however, some brief discussion before us on the question whether it is appropriate to apply the civil test of the balance of probabilities to some of the elements of what has to be proved in an Article 3 claim.
This is a difficult topic which has occupied the attention of our courts in recent years in the analogous context of extradition and Refugee Convention cases.
It was authoritatively decided by the House of Lords in R v Secretary of State for the Home Department, ex p Sivakumaran [1988] AC 958 that in order for a fear to be well founded for the purposes of the Refugee Convention, there must be a reasonable degree of likelihood that the applicant will be persecuted on return.
It will be seen that this test is expressed in slightly different terms from the Article 3 test.
But no argument was addressed to this court to suggest that there is a material difference between the two.
Although it is not necessary for the determination of this appeal to decide whether there is any difference, we are inclined to the view that there is no practical difference between them.
It would add considerably to the burdens of hard pressed immigration judges, who are often called upon to decide claims based both on the Refugee Convention and the ECHR at the same time, if they were required to apply slightly different standards of proof to the same facts when considering the two claims.
The question that was touched on in argument is whether the same standard of proof should be applied in relation to the proof of past or existing facts as in relation to the assessment of future risk.
In the extradition context, in Fernandez v Government of Singapore [1971] 1 WLR 987, the House of Lords had to interpret section 4(1)(c) of the Fugitive Offenders Act 1967, which entitled the applicant to avail himself of a prohibition on return if he might be restricted or detained if extradited.
Lord Diplock said that the balance of probabilities was a convenient phrase to use in relation to the existence of facts; but was inappropriate when applied not to ascertaining what had already happened, but to prophesying what, if it happened at all, could only happen in the future (994A).
In the latter situation, Lord Diplock found that a lesser degree of likelihood was sufficient (994G).
Prior to Sivakumaran, it seems that the general view in extradition and asylum cases was that past and existing facts should be determined according to the civil standard of proof (ie on the balance of probabilities); and the lower test propounded in Fernandez applied to assessing the risk of adverse treatment on the basis of those facts.
An example of this approach is to be found in R v Immigration Appeal Tribunal, ex p Jonah [1985] Imm AR 7 (Nolan J).
Following Sivakumaran, it was unclear whether the real risk/real possibility test should be applied to the proof of past and existing facts.
In Kaja v Secretary of State for the Home Department [1995] Imm AR 1 (IAT), the majority rejected a two stage test of a determination of past and present facts on the balance of probabilities and an assessment of real risk in relation to future possibilities.
They held that the test of reasonable degree of likelihood should be applied to all aspects of the determination.
Following Kaja, the practice of the IAT was to apply the real possibility test to past and present facts.
In Horvath v Secretary of State for the Home Department [2000] INLR 15, however, the Court of Appeal, obiter, favoured the Jonah approach.
Although Horvath was appealed to the House of Lords, nothing was said by their Lordships as to the correctness of these observations.
The Court of Appeal considered the issue fully in the asylum context in Karanakaran v Secretary of State for the Home Department [2000] 3 All ER 449.
We do not propose to examine the judgments of Brooke and Sedley LJJ in detail (with both of which Robert Walker LJ, as he then was, agreed).
They endorsed the approach of the majority in Kaja.
The degree of probability of the occurrence or non occurrence of past events was no more than a relevant factor to be taken into account in deciding whether there was a well founded fear of persecution.
The decision maker was bound to take account of all material considerations when making its assessment about the future.
GM (Eritrea), YT (Eritrea) and MY (Eritrea) v Secretary of State for the Home Department [2008] EWCA Civ 833 (which we shall refer to as GM (Eritrea)) was a group of three asylum cases which we shall consider in some detail later in this judgment in the context of the question of the relevance of lies.
But in relation to the standard of proof, it may be worth recording that the Court of Appeal stated that the applicants had to do no more than prove that there was a reasonable degree of likelihood that the past facts that they asserted (viz that they had left Eritrea illegally) were true.
This is consistent with the approach adopted by the Grand Chamber of the ECtHR in relation to Article 3 claims in Saadi v Italy (App no 37201/06, 28 February 2008): 132.
In cases where an applicant alleges that he or she is a member of a group systematically exposed to a practice of ill treatment, the Court considers that the protection of Article 3 of the Convention enters into play when the applicant establishes . that there are serious reasons to believe in the existence of the practice in question and his or her membership of the group concerned (emphasis added).
Nevertheless, the approach in Jonah and Horvath to the ascertainment of past facts may also be seen as consistent with the requirement for substantial grounds or serious reasons.
The argument before us, however, proceeded on the basis that real possibility was the correct test to apply to past and present facts both in Refugee Convention and Article 3 cases.
Without deciding the point, we are content to do the same in this appeal.
We express no view on the issue which is both difficult and important.
We think it would be desirable for the point to be decided authoritatively by this court on another occasion.
Relationship between lack of credibility and the assessment of risk
For appellants who appeal to the AIT in Refugee Convention or Article 3 cases, the stakes are often extremely high.
The consequences of failure for those whose cases are genuine are usually grave.
It is not, therefore, surprising that appellants frequently give fabricated evidence in order to bolster their cases.
The task of sorting out truth from lies is indeed a daunting one.
It is all too common for the AIT to find that an appellants account is incredible.
And yet there may be objective general undisputed evidence about the conditions in the country to which the Secretary of State wishes to send the appellant which shows that most of the persons who have the characteristics of, or fall into the category claimed by, the appellant would be at real risk of treatment contrary to Article 3 of the ECHR or persecution for a Refugee Convention reason (as the case may be), but that a minority of these, because of special circumstances, are not subject to such risk.
How should the AIT approach such general evidence where they do not believe the evidence given by the appellant that bears on the question of whether such special circumstances apply? That was the problem which confronted the AIT in the present case.
The Secretary of State wished to return MA to Somalia.
This involved sending him to Mogadishu.
The objective evidence about conditions in Somalia was that only a person who had close connections with powerful actors (such as prominent businessmen or senior figures in the insurgency or in powerful criminal gangs) was likely to be safe if returned to Mogadishu.
MA gave a great deal of conflicting evidence to the effect that he had no connections in Mogadishu at all.
The AIT found that he had not told them the truth about his links and circumstances in Mogadishu (para 109).
But they were unable to find positively that he did have connections there, still less that he had close connections with powerful actors.
A similar problem arose in GM (Eritrea).
The undisputed objective evidence in these cases was that there was a reasonable likelihood that a person who left Eritrea illegally would be persecuted on return.
The question for the AIT was whether there was a reasonable likelihood that the appellants had left Eritrea illegally.
Each of the appellants gave an account about his or her exit from Eritrea which was almost entirely disbelieved.
The issue was whether, in those circumstances and in the light of the objective background evidence, the AIT had been entitled to find that it was not reasonably likely that the appellants had left illegally.
The objective evidence was that more people left Eritrea illegally than legally, but that there were classes of people who could leave legally (party activists, Ministers and ex Ministers, persons over 40 who wished to visit relatives or go on Haj and government officials), and that those classes were not closed (eg it included those who had obtained student visas).
All three members of the Court agreed that two of the appeals (those of GM and YT) should be dismissed.
In these cases, Buxton LJ (with whom Laws and Dyson LJJ agreed) stated: 39.
While they are unlikely to have fallen into any of the categories reported in para 9 above, they were of an age to have moved into the student category envisaged by the AIT.
Since they put forward no truthful material about what they were doing in the relevant period, it is in my view impossible to say that there is a reasonable degree of likelihood that during that period the appellants did not move into the student category. 40.
At the same time, it is equally impossible to say that it is likely that they did enter that category.
That however is not the test.
Mr Nicol was wrong in suggesting that it was for the Secretary of State to produce evidence to that effect.
That would indeed be to reverse the burden of proof.
As this court put it in Ariaya and Sammy v Secretary of State for the Home Department [2006] EWCA Civ 40, cited in para 12 above, it may not be necessary for the appellant in such circumstances to say much, but he must say something, adduce some evidence that puts him in a vulnerable position, before the effective burden of contradicting his case passes to the Secretary of State.
The third appeal concerned MY.
The AIT found that MY (a 17 year old girl) had failed to show that she had left Eritrea illegally, because she had not given credible evidence as to how she had left the country.
The objective evidence showed that there were categories of 17 year old girls who were allowed to leave the country legally.
Buxton LJ would have allowed the third appeal, but Laws and Dyson LJJ agreed that it, too, should be dismissed.
In assessing the argument in the case of MY, Buxton LJ said (para 43) that her age alone made it very difficult indeed, even arguably, to fit her into any of the categories of person who might obtain exit visas, including the student category.
That being so, he held (para 44) that the immigration judge should have considered, on the basis of all the evidence, whether there was a reasonable degree of likelihood that during her residence in Eritrea MY did not fall into one of the categories that could or might leave the country legally.
He said (para 45) that the failure of the [evidential] case advanced by the appellant does not lead as a matter of necessity to the failure of her case if there is other evidence of general circumstances or probabilities against which what little is known about the applicant can be assessed.
Finally, at para 46, he expressed himself in these terms: The evidence referred to above, and despite MYs failure to give truthful evidence either about her activities in Eritrea or about her actual exit from that country, drives me to the conclusion that even though I cannot say how MY actually left Eritrea, there must, if only by elimination of other possibilities, be a reasonable likelihood that she left illegally.
Laws LJ, with whom Dyson LJ agreed, said that the concrete question for the immigration judge was whether there was a reasonable degree of likelihood that MY had left Eritrea illegally (para 51); there may be cases where the appellants testimony is disbelieved but other evidence proves his/her asylum claim (para 52).
He continued: 53.
In my judgment that circumstance poses great difficulties for MY's case.
The fact (if it be so) that it is reasonably likely that any 17 year old girl from Eritrea, about whom nothing else relevant is known, left the country illegally does not entail the conclusion that this particular 17 year old girl did so.
The reason is that the probability that a particular person has or has not left illegally must depend on the particular facts of her case.
Those facts may produce a conclusion quite different from that relating to illegal exit by members of such a class of persons about whose particular circumstances, however, the court knows nothing more than their membership of the class.
There may indeed be a general probability of illegal exit by members of the class; but the particular facts may make all the difference.
I think with respect that this consideration lies behind the observations approved by Richards LJ in Ariaya and Sammy v Secretary of State for the Home Department [2006] EWCA Civ 40, and para 449 in MA, which Buxton LJ cites at paras 12 and 13. 54.
The position would only be otherwise if the general evidence was so solid as to admit of only fanciful exceptions; if the court or tribunal concluded that the 17 year old must have left illegally whatever the particular facts.
He then applied this approach to the facts of MYs case.
At para 57 he said that, since her account of her departure had been rejected by the immigration judge, her claim could not succeed on the basis of general evidence unless the possibility that the particular facts may make a difference is effectively excluded.
Dyson LJ agreed that MYs appeal should be dismissed substantially for the reasons given by Laws LJ.
At para 61, he said: Unless it can safely be said that exit by any 17 year old girl is illegal, whether it is reasonably likely that the exit by an individual 17 year old girl was illegal will depend on the facts of her particular case.
Her failure to give a credible account of those facts may lead to the conclusion that she has not shown that there is a reasonable likelihood that her exit was illegal.
Like Laws LJ, he concluded on the basis of the general evidence that it was entirely possible that MY left Eritrea legally (para 64).
The appeal to this court has been conducted on the basis that the approach adopted by Laws and Dyson LJJ is substantially correct.
But Mr Drabble questioned para 54 of Laws LJs judgment.
We think that what Laws LJ had in mind was a case where (i) the claimants account is rejected as wholly incredible (it is riddled with contradictions and the tribunal is left in a state of being unable to believe anything that the claimant has said); but (ii) there is undisputed objective evidence about conditions in the relevant country which goes a long way to making good the shortcomings in the claimants own evidence.
In GM (Eritrea), for example, the AIT did not believe the account given to them by MY as to how she had left the country.
They could not, therefore, rely on her account as a basis for concluding that she had left the country illegally.
But if there had been objective evidence that no 17 year old girls were allowed to leave the country, her appeal would surely have succeeded despite her dishonest evidence.
In fact, the objective evidence did not go nearly that far and the appeal was dismissed.
What Laws LJ was saying at para 54 was that, where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong.
It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie.
But much depends on the bearing that the lie has on the case.
The Court of Appeal correctly stated at para 104 of its judgment in the present case: The lie may have a heavy bearing on the issue in question, or the tribunal may consider that it is of little moment.
Everything depends on the facts.
For example, if in the Eritrea cases the Secretary of State had prima facie evidence that the appellants had left legally, the tribunal might think it appropriate to put considerable weight on the fact that the claimant told lies when seeking to counter that evidence.
The lie might understandably carry far less weight where, as in YL itself, the judge is satisfied that the appellant has lied where the lie is against her interests.
Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence.
Suppose, for example, that at the interview stage the appellant made an admission which, if true, would destroy his claim; and at the hearing before the AIT he withdraws the admission, saying that his answer at interview was wrongly recorded or that he misunderstood what he was being asked.
If the AIT concludes that his evidence at the hearing on this point is dishonest, it is likely that his lies will assume great importance.
They will almost certainly lead the tribunal to find that his original answers were true and dismiss his appeal.
In other cases, the significance of an appellants dishonest testimony may be less clear cut.
The AIT in the present case was rightly alive to the danger of falling into the trap of dismissing an appeal merely because the appellant had told lies.
The dangers of that trap are well understood by judges who preside over criminal trials before juries.
People lie for many reasons.
In R v Lucas [1981] QB 720, the Court of Appeal had to consider whether a statement containing a lie was capable of amounting to corroboration.
At p 724F, Lord Lane CJ said: To be capable of amounting to corroboration the lie told out of court must first of all be deliberate.
Secondly, it must relate to a material issue.
Thirdly, the motive for the lie must be a realisation of guilt and fear of the truth.
The jury should in appropriate cases be reminded that people sometimes lie, for example, in an attempt to bolster up a just cause, or out of shame or out of a wish to conceal disgraceful behaviour from their family.
Although the analogy is not exact, it is close enough for these words to be of relevance in the present context.
So the significance of lies will vary from case to case.
In some cases, the AIT may conclude that a lie is of no great consequence.
In other cases, where the appellant tells lies on a central issue in the case, the AIT may conclude that they are of great significance.
MAs appeal was such a case.
The central issue was whether MA had close connections with powerful actors in Mogadishu.
The AIT found that he had not told the truth about his links with Mogadishu.
It is in such a case that the general evidence about the country may become particularly important.
It will be a matter for the AIT to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellants lies.
The AITs determination in more detail
This was a second stage reconsideration at the behest of SIJ Spencer who had decided that there was a material error of law in the earlier decision in failing to consider whether the appellant would be able to make arrangements for protection by the Hawiye through his connections with the Isaaq.
The immigration judge added: I take the view that in this regard the appellant had at least an evidential burden, which he failed to discharge, since what contacts and relationships he had was exclusively within his own knowledge and not that of the Secretary of State.
Thus the nature of those connections was of central importance at the second stage reconsideration.
At para 17 of their determination, the AIT recorded that it was for MA to prove his case.
He had to show that there was a real risk of his suffering ill treatment of such severity that his Article 3 rights would be breached.
MA gave evidence to the tribunal.
He did not need an interpreter.
He gave conflicting accounts about his connections with Mogadishu.
For example, para 31 of the determination records that his SEF form showed that his family tried to leave Somalia for Kenya, but had found that too risky.
His evidence before the tribunal was that his family left Somalia for Kenya together in 1992 or 1993.
But para 45 of the determination states that in his application form he said that he left his family behind in Somalia when he fled to Kenya in 1994.
Para 48 records that MA said that he left his family behind in Somalia, but they followed him to Kenya later.
Para 54 refers to his interview on 12 September 2002 when he said that, when he left Kenya for the UK, he believed that his family was in Somalia, although he did not know whether they were safe there.
This is to be contrasted with his witness statement dated 27 July 2008 in which he said that he last saw his parents in Kenya when he was leaving for the UK.
He said that his mother was in South Africa and his father divided his time between South Africa and Kenya.
He accepted that he had spoken to his sister about their parents while he was in prison.
He said that she had told him that she did not know where they were.
And yet in his witness statement he had said that he was in contact with his sister while he was in prison and she had told him that their parents were fine, but did not say where they were.
Unsurprisingly, the AIT found that it was so unlikely that his sister would know that her parents were fine but not know where they were, that they found MAs account as to what he knew about the whereabouts of his parents incredible.
MA told the AIT that he had not been in contact with his parents because he did not know how to contact them, but he was in contact with his sister.
He gave no satisfactory answer as to why he did not contact his parents.
The AIT then reviewed the expert evidence of Marcus Hhne on behalf of MA.
At para 88, they said: [W]e emphasise that although we have indicated our findings when we have considered the submissions, and, in places, the evidence, we did not make any findings until we had considered the entirety of the evidence in the round, with the submission made.
At para 104, they said that the submission made on behalf of the Secretary of State that MA was not believable and could not prove his case was wholly justified.
They continued: 105.
The Tribunal is not unfamiliar with the difficulties created by appellants who have not been truthful but who still may be at risk.
This was considered by the Court of Appeal in GM (Eritrea) v Secretary of State for the Home Department [2008] EWCA Civ 833.
We must be very careful not to dismiss an appeal just because an appellant has told lies.
Even if very large parts of his story have been disbelieved it is still possible that the appellant has shown that he would be at risk on return.
An appellant's own evidence has to be considered in the round with other evidence and that can include unimpeachable evidence from expert reports or country guidance cases or other evidence about the general state of affairs in that country. 106.
For reasons very properly emphasised by Mr Drabble and spelled out in the case of AM, Mogadishu is a desperately difficult place and it is probably not going too far to say that the respondent should think twice before making anybody go there against his or her will. 107.
We do not believe the appellant but we have to decide if the background conditions show that he will be at risk.
In para 178 of AM the Tribunal identified people as examples of people who may be safe in Mogadishu.
The Tribunal said: "We do not rule out that notwithstanding the above there may be certain individuals who on the facts may be considered to be able to live safely in the city, for example if they are likely to have close connections with powerful actors in Mogadishu, such as prominent businessmen or senior figures in the insurgency or in powerful criminal gangs.
However, barring cases of this kind, we consider that in the case of persons found to come from Mogadishu or returnees from the UK, they would face on return to live there a real risk of persecution or serious harm. " 108.
We are not able to find positively that the appellant is a person with close connections with powerful actors in Mogadishu and so on. 109.
The difficulty is that the appellant has not told us the truth about his links and circumstances in Mogadishu and we cannot exclude the possibility that he is a person with connections of this kind.
The point is that it is not fanciful to say that he would not necessarily be at risk on return.
Some people are not.
Even though the appellant has to prove only a real risk rather than a probability of him being at risk we cannot make the necessary findings when he will not tell the truth about his connections and contacts there. 118. [Mr Drabble] submitted that it was fanciful to suggest that the appellant came into any of the categories of people identified at para 178 of AM as being not at risk.
The appellant would be at risk in Mogadishu and his appeal should be allowed. 119.
Drawing all these things together we find that this appellant would be returned to Mogadishu.
We find that he has links with Somaliland and would probably be accepted by the community there if he could get there.
We find that it would be dangerous in fact too dangerous for him to travel from Mogadishu to Somaliland if he is telling the truth when he claims not to have any links with the country.
We accept that some people do make the journey.
There is no clear evidence about how they travelled.
We cannot find that this appellant could follow their example.
It is clearly the case (and no one has suggested otherwise) the appellant would be allowed through the airport at Hargeisa.
Whilst we accept that the risks diminish as a traveller gets further away from Mogadishu a traveller has to get away from Mogadishu before that becomes an advantage and there are risks travelling around there.
This appellant is going to be at risk if we accept his evidence of having no contacts there. 120.
We do not accept his evidence about that.
He was manifestly untruthful.
We have reflected carefully on this because we are aware of the time that has elapsed, of which a full explanation has been given, since the appeal was heard.
It is not a matter of nuance or inference.
The appellant is blatantly untruthful and no passage of time has impacted our findings on that point. 121.
Para 178 of AM does not give an exclusive list of people who are not at risk.
It makes the point there are people who are not at risk.
The burden is on the appellant and he has not told the truth about his links with Mogadishu and we are not able to say that he is a person who has shown he would be at risk there.
He has stopped proper enquiry of a kind that might reveal the links and protection he would have.
It would be very sad if, by so doing, the appellant has deprived himself of protection that he would otherwise need but he has told lies and must accept the consequence of that.
It does diminish his credibility and makes it harder for him to prove his case. 122.
In all the circumstances we dismiss the appeal.
Decision of the Court of Appeal
The court summarised the two submissions made by Mr Drabble.
The first was that the AIT could not properly have concluded in the light of the country guidance given in AM and AM, as they did at para 109, that it was not fanciful to say that MA may not be at risk on return.
The court rejected this submission.
At para 110 of their judgment, they said that the AIT were entitled on the basis of AM and AM to conclude that this case did not fall into the category of case identified by Laws LJ in GM where the general evidence would suffice, because anyone in MAs situation would necessarily be subject to persecution on return.
The second submission was that the AIT had misdirected themselves when considering the question of risk on return.
They had focused on the difficulties caused by MAs failure to tell the truth, but they should have asked whether there was other evidence relating to MAs own particular situation, even if his own rejected testimony was left out of account, which would support his case.
Mr Drabble submitted that there was such evidence which the Tribunal failed properly to evaluate.
This was summarised by the Court of Appeal at para 113 in these terms: The evidence he relies upon is in particular the fact that the appellant has been in the UK for some 15 years, and that for almost all of the last 12 or so he has been in detention of one sort or another.
In addition, his parents were from Hargeisa, not Mogadishu, and the evidence of Mr Hhne was to the effect that he would not get protection from the Isaaq clan in Mogadishu given the dramatic evacuation from that city.
In the circumstances, Mr Drabble submits that it is fanciful to think that the appellant would be likely to fall into the exceptional category of persons with contacts in Mogadishu who could provide the requisite protection.
At para 116, the court acknowledged that the AIT had directed themselves impeccably at para 105 of the determination.
But they said that the tribunal had not properly applied that direction.
They continued: 117.
We think, with respect to the Tribunal, that it is there adopting the wrong approach.
Their analysis suggests that the fact that the appellant has lied has of itself disabled them from reaching a conclusion on the article 3 risk.
They seem to be throwing up their hands in despair; since the appellant has concealed the truth, they cannot make any necessary findings.
This is further confirmed by para 121 when they say that because his lying has prevented a full and proper inquiry, there is no relevant finding the Tribunal can make. 118.
That does not, however, follow from GM.
They first have to ask whether there is other evidence, independently of his unreliable testimony, casting light on the appellant's particular situation.
If so, they must have regard to that evidence.
As Buxton LJ put it in GM see para 98 above), there does not need to be much evidence, only sufficient to suggest that there is a real risk of persecution and thereby shift the burden to the Secretary of State to show otherwise.
Nowhere does the Tribunal say that the only potential evidence is the appellant's rejected testimony and that without it there is no relevant evidence, and we do not think that it can be fairly inferred from their decision that this was how they approached the matter.
For example, there is no reference in the whole judgment to the fact that the appellant has spent the best part of the last 12 years in prison or administrative detention in the UK.
In our view that must on any view have relevance to the likelihood of this particular appellant having current contacts in Mogadishu which will afford him the necessary protection. 119.
In any event, in our judgment, if they did analyse the issue in that way, we agree with Mr Drabble that it was not a conclusion open to them on the evidence.
That evidence was that the appellant was from a clan which was in the minority in Mogadishu; that he had not been there for some 15 years; and that for most of that time he had been in detention.
Whatever links might exceptionally exist to provide protection for an Isaaq returning to Mogadishu, there was in our view sufficient evidence adduced before the Tribunal at least to establish a real risk that it was unlikely to apply to him.
He was not simply putting himself into the general category of persons returning to Mogadishu, nor even of a minority clan member taking that step, and then relying on the relevant statistics as to how such persons would in general be treated.
There was the particular feature of his history in the UK the lengthy period and the fact of detention which constituted evidence relevant to the particular and specific risks which he faced and which enabled the court to make an assessment of risk on the basis of evidence independent of his own testimony. 120.
We agree that the Tribunal ought to have made an assessment on the basis of that evidence, and had they done so, they must have concluded that there was a real risk that he would not obtain the relevant protection.
Without it, in the light of AM and AM he was plainly at risk of adverse article 3 treatment, and therefore his deportation would be unlawful.
Should the Court of Appeal have interfered in this case?
It is important to note what the Court of Appeal did not say.
They did not say that the AIT had misdirected themselves as to the correct test to be applied whether in relation to Article 3 cases generally or as to the impact of lies.
They accepted that the AIT were right to direct themselves in accordance with the majority in GM (Eritrea).
They acknowledged that the AIT did not commit the cardinal error of dismissing the appeal simply because MA had told lies.
The error they identified in the AITs approach was in relation to the application of GM (Eritrea).
In summary, they made two criticisms.
First, they said that paras 109 and 121 of the AITs determination showed that they did dismiss the appeal simply because MA had told lies.
As they put it at para 117 of their judgment, [t]hey seem to be throwing up their hands in despair; since the appellant has concealed the truth, they cannot make any necessary findings.
Secondly, they said that the AIT overlooked significant material which enabled the court to make an assessment of risk independent of MAs testimony and which, if it had been taken into account, must have led to the conclusion that there was a real risk that he would not obtain the relevant protection.
Before we examine these two criticisms, we need to make some general points about the proper role of the Court of Appeal in relation to appeals from specialist tribunals to it on the grounds of error of law.
Although this is not virgin territory, the present case illustrates the need to reinforce what has been said on other occasions.
The court should always bear in mind the remarks of Baroness Hale of Richmond in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] 1 AC 678 at para 30: This is an expert Tribunal charged with administering a complex area of law in challenging circumstances.[T]he ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the Tribunal will have got it right.
They and they alone are judges of the factsTheir decisions should be respected unless it is quite clear that they have misdirected themselves in law.
Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently.
Those general observations were made in a case where the Court of Appeal had allowed an appeal against a decision of the AIT.
The role of the court is to correct errors of law.
Examples of such errors include misinterpreting the ECHR (or in a refugee case, the Refugee Convention or the Qualification Directive); misdirecting themselves by propounding the wrong test on some legal question such as the burden or standard of proof; procedural impropriety such as a breach of the rules of natural justice; and the familiar errors of omitting a relevant factor or taking into account an irrelevant factor or reaching a conclusion on the facts which is irrational.
But the court should not be astute to characterise as an error of law what, in truth, is no more than a disagreement with the AITs assessment of the facts.
Moreover, where a relevant point is not expressly mentioned by the tribunal, the court should be slow to infer that it has not been taken into account.
We turn to the first of the Court of Appeals criticisms.
In our view, the court was wrong to interpret paras 109 and 121 of the determination as if the AIT were saying that they were dismissing the appeal because MAs account was incredible.
In the light of the clear and impeccable self direction set out only a few paragraphs earlier (at para 105), and having regard to the need for restraint to which we have referred, the court should surely have been very slow to reach the conclusion that it did.
It should only have interpreted these paragraphs in the way that it did if there was no doubt that this is what they meant.
It is often easy enough to find some ambiguity or obscurity in a judgment or determination, particularly in a field as difficult and complex as immigration, where the facts may be difficult to unravel and the law difficult to apply.
If, as occurred in this case, a tribunal articulates a self direction and does so correctly, the reviewing court should be slow to find that it has failed to apply the direction in accordance with its terms.
All the more so where the effect of the failure to apply the direction is that the tribunal will be found to have done precisely the opposite of what it said it was going to do.
The striking feature of the present case is that the Court of Appeal was of the view that at para 109, the AIT failed to apply the direction that they had set for themselves only four paragraphs earlier.
In our view, there was no need to interpret paras 109 and 121 in the way that the Court of Appeal did.
There is an interpretation of these paragraphs which is consistent with the self direction at para 105 and is unimpeachable.
In our view, all that the AIT were saying at para 109 was that, because MA had not told the truth about his links and circumstances in Mogadishu, the possibility that he was a person with connections in Mogadishu could not be excluded.
In other words, he had not discharged the burden of proof which the AIT had correctly said rested on him.
The fact that the AIT were considering the burden of proof is demonstrated by the last sentence of para 109: Even though the appellant has to prove only a real riskwe cannot make the necessary findings when he will not tell the truth (emphasis added).
So too at para 121 which we have set out at para 38 above.
The third sentence says: The burden is on the appellant and he has not told the truth about his links with Mogadishu.
Later in the paragraph, the AIT says that MA has told lies: It does diminish his credibility and makes it harder for him to prove his case (emphasis added).
In our view, on a fair reading of paras 109 and 121 in the light of para 105, it is clear that the AIT were not throwing up their hands and rejecting MAs appeal because he had lied without more.
They were saying that, because he had told lies, they were unable to make any relevant findings and the appeal failed because MA had not discharged the burden of proof.
We turn to the second criticism.
The first limb of this criticism is that the AIT overlooked the fact that MA had spent the last 12 years in prison and administrative detention in the UK.
It is true that there is no explicit reference to this fact in the determination.
But the AIT were well aware of it.
As we have already said, they considered the extent of his contact with his family when he was in prison during this period and set out MAs conflicting evidence at length at paras 35 to 65 of the determination.
There are various references to his having been in prison (paras 35, 40, 59, 60, 61 and 64).
In these circumstances, there is no warrant for holding that the AIT failed to have regard to the fact that MA was in custody or detention.
They said in terms at para 88 that they had considered the entirety of the evidence in the round.
This was a detailed and careful determination running to 122 paragraphs.
For that reason, as well as because of the need for restraint to which we have referred, the court should have been very slow to reach the conclusion that the AIT had not taken into account the fact that MA was in custody and detention for 12 years.
It was obvious from his own evidence that MA was able to communicate with some members of his family, presumably by using his mobile phone.
In these circumstances, the tribunal is likely to have thought that the fact that MA was deprived of his liberty for 12 years would not prevent him from maintaining his connections with the outside world.
It is of some significance that in his detailed skeleton argument for the appeal to the AIT, Mr Drabble made the point at paras 20 to 22 that MAs case was that he had no knowledge of or contact with his family or friends in Somalia.
But he did not say that MA would be unlikely to have such knowledge or contact because he was in prison and then administrative detention.
This brings us to the other limb of the second criticism made by the Court of Appeal, which is that, if the AIT had taken into account the fact that MA had been in prison and detention for 12 years, they must have concluded that there was a real risk that he would not obtain the relevant protection.
If this had been such an inevitable conclusion to draw from the fact of custody and detention for 12 years, it is indeed surprising that Mr Drabble did not invite the AIT to make it in his skeleton argument.
Although they did not use the language of perversity, what the Court of Appeal were saying in effect was that it would have been perverse of the AIT not to draw this conclusion if they had thought about the significance of the custody and detention.
In our view, this is quite untenable.
It was possible that the deprivation of liberty for 12 years would have prevented MA from maintaining or developing the necessary protective links.
But it was certainly not inevitable.
It was for the AIT to assess the matter in the light of all the evidence.
Conclusion
We would, therefore, allow this appeal.
The AIT did not adopt the wrong approach in their assessment of the impact of MAs lies and there was no error of law in their determination which warranted interference by the Court of Appeal.
| UK-Abs | The issues raised in this appeal are: (1) the correct approach to the relevance of lies told by an asylum seeker in the assessment of real risk of persecution on return to his or her country of origin; and (2) how far it is legitimate for an appeal court to interfere with the assessment of facts made by a specialist tribunal on the grounds of error of law.
MA is a citizen of Somalia.
He is a member of the Isaaq clan.
He entered the UK illegally on 24 May 1995.
He claimed asylum which was refused but he was granted exceptional leave to remain.
In 1998 he was convicted of rape and indecency with a child and was sentenced to eight years imprisonment.
On 21 May 2002, the Secretary of State for the Home Department served him with notice of intention to make a deportation order.
Following a series of failed appeals and fresh submissions, the Secretary of State made a deportation order on 5 April 2004 and removal directions were set.
MAs further submissions were accepted by the Secretary of State as a fresh claim to asylum.
The Asylum and Immigration Tribunal (AIT) on 19 April 2007 accepted this claim but reconsideration was ordered on 26 February 2008, directed to the issue whether MA as a member of the Isaaq clan would be able to arrange protection against a real risk of physical violence if returned to Mogadishu.
After hearing MA give evidence, the AIT concluded that MA had not told the truth about his links and circumstances in Mogadishu, and could not say that he had shown he would be at risk there contrary to Article 3 of the European Convention on Human Rights.
The Court of Appeal allowed MAs appeal on the grounds that the AIT seemed to be throwing up their hands in despair and saying that since [MA] has concealed the truth, they cannot make any relevant findings, and that had the AIT made an assessment, they must have concluded that there was a real risk that he would not obtain the relevant protection, having regard to the lengthy period he had been in the UK, including 12 years in prison.
The Supreme Court allows the Secretary of States appeal.
The AIT did not err in their assessment of MAs lies and there was no error of law which warranted interference by the Court of Appeal.
The Court recognises the difficulties facing the AIT in distinguishing truth from lies.
A particular problem arises where, as in MAs case, the AIT has disbelieved the majority of the claimants evidence, but there is objective evidence indicating that the majority of individuals with the characteristics of, or alleged by, the claimant would be at risk if returned to the home state: [21].
The Court of Appeal were faced with this problem in GM (Eritrea) [2008] EWCA Civ 833.
The Court endorses the approach in GM (Eritrea), the substance of which was not challenged in this appeal.
Where the claimants account is
rejected as incredible, he or she will only succeed where there is undisputed objective evidence which goes a long way to making good the shortcomings in the claimants own evidence.
This, in essence, is what Laws LJ meant in para 54 of his judgment GM (Eritrea): [30].
The weight a lie has in each case is fact sensitive.
In some cases, the AIT may conclude that the lie is of no great significance.
In others, where, for example, the appellant tells lies on a central issue in the case, the AIT may conclude that it is of great significance.
The AIT in this case was rightly alive to the danger of falling into the trap of dismissing the case merely because the appellant has told lies.
As recognised by the Lucas direction in the criminal context, people lie for many reasons: [32] [33].
In MAs case, the central issue was whether MA had connections with powerful actors in Mogadishu.
The AIT found that he had not told the truth about his links in Mogadishu.
Accordingly, in MAs case, the AIT concluded that his lie was of great significance: [33].
The AITs determination records the conflicts in the evidence given by MA about his connections with Mogadishu.
The AIT then directed itself on the basis of GM (Eritrea) as to the significance of MAs lies.
This direction was accepted by the Court of Appeal to be impeccable.
However, the Court of Appeal found that having so directed itself, the AIT then proceeded to misapply it: [34] [41].
The Supreme Court finds that the AIT did not misapply the direction.
The AIT did not dismiss the appeal because MAs account was incredible.
It is possible to interpret the AITs judgment consistently with the correct self direction: [42], [46] [48].
The Supreme Court also finds that the AIT had not overlooked the fact that MA had spent the last 12 years in prison and administrative detention in the UK.
There is no explicit reference to his imprisonment, however, it is clear from the AITs judgment that they were well aware of it: [49].
The AITs conclusion that MA did not satisfy them that he did not have the necessary protective links in Mogadishu was one which was open to them to make: [50].
The Court also makes some general observations about the proper role of the Court of Appeal in relation to appeals from specialist tribunals on grounds of error of law.
The appellate court should not characterise as an error of law what is, in reality, no more than a disagreement with the AITs assessment of the facts.
Furthermore, where a relevant point is not expressly mentioned in the judgment of the AIT, the court should be slow to infer that it has not been considered and taken into account: [43] [45].
Whilst expressing no view on the issue, the Court also comments on the question of standard of proof, in particular the correct test to apply to past and present facts: [12] [20].
The Court indicates the desirability for the point to be decided authoritatively in another case: [20].
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This appeal concerns a planning permission granted on 29 July 2009 for a proposed three mile (4.7km) stretch of roadway to provide a rapid bus service between Fareham and Gosport in South East Hampshire.
The permission was challenged on environmental grounds including not least its likely impact on several species of European protected bats inhabiting the general area around the proposed busway.
The challenge having failed before Judge Bidder QC (sitting as a Deputy High Court judge) on 17 November 2009 [2009] EWHC 2940 (Admin) and before the Court of Appeal (Ward, Hughes and Patten LJJ) on 10 June 2010 [2010] EWCA Civ 608, [2010] PTSR 1882 this Court on 27 July 2010 gave the appellant limited permission to appeal so as to raise two issues of some general importance.
Habitats Directive 92/43/EEC which provides that: Issue one concerns the proper interpretation of article 12 (1)(b) of the Member States shall take the requisite measures to establish a system of strict protection for the animal species listed [the protected species] in their natural range, prohibiting . (b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration; .
Issue two concerns the proper application of regulation 3(4) of the Conservation (Natural Habitats, etc) Regulations 1994 SI 1994/2716 (as amended first by the Amendment Regulations 2007 and then the Amendment Regulations 2009), by which domestic effect is given to the Directive: 3(4) . every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they [the requirements] may be affected by the exercise of those functions.
With that briefest of introductions let me turn to the essential factual context in which these issues now arise, noting as I do so that altogether fuller descriptions of the facts can be found in the judgments below.
The proposed new rapid busway the first and larger phase of which is already substantially under way, applications for interlocutory relief to stay its continuance having been refused by the Court of Appeal and refused by this Court on granting leave to appeal runs along the path of an old railway line, last used in 1991.
The scheme provides for buses to be able to join existing roads at various points along the route.
It will create a new and efficient form of public transport to the benefit of many residents, workers and visitors to the region.
Central Government has committed 20m to it.
Although most of the scheme lies within a built up area, there are a number of designated nature conservation sites nearby and, unsurprisingly, once the railway line ceased to be used, the surrounding area became thickly overgrown with vegetation and an ecological corridor for various flora and fauna.
Although, therefore, the scheme was widely supported, it also attracted a substantial number of objectors one of whom is Mrs Morge, the appellant, who lives close by.
The respondent authority is both the local planning authority for the relevant area and also the applicant for planning permission through its agent, Transport for South Hampshire, who submitted a planning application on 31 March 2009.
Taking it very shortly, on 30 April 2009 Natural England (the Governments adviser on nature conservation) objected to the planning application in part because of their concerns about the impact of the development on bats (an objection reiterated on 29 June 2009).
As a result the respondent authority commissioned an Updated Bat Survey (UBS) which was submitted on 9 July 2009.
On 17 July 2009, largely as a result of the UBS, Natural England withdrew their objections.
There then followed a Decision Report prepared by the respondents planning officers, a further letter from Natural England dated 23 July 2009, an Addendum Decision Report from the officers, and on 29 July 2009 a three hour meeting of the respondents Regulatory Committee which concluded with the grant of planning permission for the scheme by a majority of six to five with two abstentions.
The UBS is a document of some 70 pages.
For present purposes, however, its main findings can be summarised as follows.
No roosts were found on the site.
The removal of trees and vegetation, however, would result in a loss of good quality bat foraging habitats.
This would have a moderate adverse impact at local level on foraging bats for some nine years, the impact thereafter reducing, because of mitigating measures, to slight adverse/neutral.
In addition the busway would sever a particular flight path followed by common pipistrelle bats, increasing their risk of collision with buses (without, however, given the proposed mitigation of this risk, a significant impact on bats at a local level).
The Officers Decision Report (again a lengthy document) included these passages with regard to the bats: 3.7 Detailed ecological surveys have been undertaken across the site over the last eighteen months.
A number of bat species roost and forage along the corridor .
Accordingly, a strategy to mitigate the impact on these species has been developed.
The main principles of the strategy [include] enhancement of the habitat of the retained embankment to provide continued habitat for displaced species.
Bat surveys have also been carried out to enable appropriate measures to be implemented. 5.6 Natural England initially raised objections on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats . which are [a] legally protected species.
Further survey work was undertaken in response to this objection and provided to Natural England.
Following receipt of this information Natural England are now satisfied that the necessary information has been provided and have withdrawn their objection.
They recommend that if the council is minded to grant permission for this scheme conditions be attached requiring implementation of the mitigation and compensation measures set out in the reports.
Nature Conservation Impact 8.17 . the requirements of the Habitats Regulations need to be considered. 8.19.
The surveys also identified the presence of a diversity of bat species, which are protected, using the trees alongside the track for foraging.
An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them from these proposals.
Conclusion 8.24 . suitable mitigation measures are proposed for . protected species .
The Addendum Report dealt specifically with the Habitat Regulations and repeated that Natural England, having initially objected to the application and required further survey information regarding protected species, were now satisfied and had withdrawn their objection.
Against this essential factual background I turn now to the two main issues arising.
Issue 1 the proper interpretation of article 12(1)(b) of the Habitat Directive Article 12(1)(b) must, of course, be interpreted in the light of the Directive as a whole.
Included amongst the recitals in its preamble is this: Whereas, in the European territory of the member states, natural habitats are continuing to deteriorate and an increasing number of wild species are seriously threatened; whereas given that the threatened habitats and species form part of the Communitys natural heritage and the threats to them are often of a trans boundary nature, it is necessary to take measures at Community level in order to conserve them.
Article 1 is the definition article and defines species of Community interest in four categories, respectively endangered, vulnerable, rare, and endemic and requiring particular attention [for various specified reasons].
The six species of protected bats affected by the proposed busway fall variously into the second, third and fourth of those categories.
Article 1(i) defines conservation status of a species to mean the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its populations.
It further provides: The conservation status will be 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.
Article 2(2) provides that: Measures taken pursuant to this Directive shall be designed to maintain or restore, at favourable conservation status, natural habitats and species of wild fauna and flora of Community Interest.
There then follow articles 3 to 11 under the head Conservation of natural habitats and habitats of species.
Within these provisions one should note article 6(2): Member states shall take appropriate steps to avoid, in the special areas of conversation, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which the areas have been designated, in so far as such disturbance could be significant in relation to the objectives of this Directive.
Articles 12 to 16 inclusive then follow under the head Protection of species.
I have already set out article 12(1)(b).
Article 16 provides for derogation and so far as material provides: 16(1) Provided that that there is no satisfactory alternative and the derogation is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status in their natural range, member states may derogate from the provisions of articles 12 . : . (c) in the interests of public health and public safety, or for other imperative reasons of overriding public interest, including those of a social or economic nature and beneficial consequences of primary importance for the environment.
Besides the issues now before us the Court of Appeal had to deal in addition with challenges based upon article 12(1)(d) of the Directive and upon the respondents decision not to treat the proposal as an EIA development (matters upon which this court refused leave to appeal).
Ward LJ gave the only reasoned judgment, one of infinite care and thoughtfulness and, I may add, one of enormous assistance to this Court in its consideration of this further appeal.
As a background to deciding the meaning of article 12(1)(b), Ward LJ necessarily had regard to the European Commissions views upon the scope of the Directive, as set out in a Guidance document issued in February 2007 which include the following: (37) Disturbance (e.g. by noise, source of light) does not necessarily directly affect the physical integrity of a species but can nevertheless have an indirect negative effect on the species (eg by forcing them to use lots of energy to flee; bats, for example, when disturbed during hibernation, heat up as a consequence and take flight, so are less likely to survive the winter due to high loss of energy resources).
The intensity, duration and frequency of repetition of disturbances are important parameters when assessing their impact on a species.
Different species will have different sensitivities or reactions to the same type of disturbance, which has to be taken into account in any meaningful protection system.
Factors causing disturbance for one species might not create disturbance for another.
Also, the sensitivity of a single species might be different depending on the season or on certain periods of its life cycle e.g. (breeding period).
Article 12(1)(b) takes into account this possibility by stressing that disturbances should be prohibited particularly during the sensitive periods of breeding, rearing, hibernation and migration.
Again, a species by species approach is needed to determine in detail the meaning of disturbance. (38) The disturbance under article 12(1)(b) must be deliberate . and not accidental.
On the other hand, while disturbance under article 6(2) must be significant, this is not the case in article 12(1), where the legislator did not explicitly add this qualification.
This does not exclude, however, some room for manoeuvre in determining what can be described as disturbance.
It would also seem logical that for disturbance of a protected species to occur a certain negative impact likely to be detrimental must be involved. (39) In order to assess a disturbance, consideration must be given to its effect on the conservation status of the species at population level and biogeographic level in a member state .
For instance, any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area should be regarded as a disturbance in terms of article 12.
On the other hand, sporadic disturbances without any likely negative impact on the species, such as for example scaring away a wolf from entering a sheep enclosure in order to prevent damage, should not be considered as disturbance under article 12.
Once again, it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above.
No problem arises as to what is meant by deliberate in article 12(1)(b).
As stated by the Commission in paragraph 33 of their Guidance: Deliberate actions are to be understood as actions by a person who knows, in light of the relevant legislation that applies to the species involved, and the general information delivered to the public, that his action will most likely lead to an offence against the species, but intends this offence or, if not, consciously accepts the foreseeable results of his action.
Put more simply, a deliberate disturbance is an intentional act knowing that it will or may have a particular consequence, namely disturbance of the relevant protected species.
The critical, and altogether more difficult, question is what precisely in this context is meant by disturbance.
Having, as I too have sought to do, thus cleared the ground and recognised that the central difficulty in the case lies in determining the level of disturbance required to fall within the prohibition, Ward LJ rejected the appellants contention that any disturbing activity save only that properly to be characterised as de minimis too negligible for the law to be concerned with constitutes disturbance within the article.
As Ward LJ pointed out, the example given in paragraph 38 of the Commissions Guidance (scaring away a wolf from the sheep fold) must be an a fortiori, rather than a typical one.
The judgment then continues (and I make no apology for quoting it at some length): 35 . the disturbance does not have to be significant but, as para 38 of the guidance explains, there must be some room for manoeuvre which suggests the threshold is somewhere between de minimis and significant.
It must be certain, that is to say, identifiable.
It must be real, not fanciful.
Something above a discernible disturbance, not necessarily a significant one, is required.
Given that there is a spectrum of activity, the decision maker must exercise his or her judgment consistently with the aim to be achieved.
Given the broad policy objective which I explored . above [to ensure that the population of the species is maintained at a level which will ensure the species conservation so as to protect the distribution and abundance of the species in the long term], disturbing one bat, or even two or three, may or may not amount to disturbance of the species in the long term.
It is a matter of fact and degree in each case. 36 [Counsel for the appellant] seizes on the words in para 38 . of the guidance, a certain negative impact likely to be detrimental must be involved and he elevates this statement into a test for establishing a disturbance.
His difficulty is that that does not answer the critical question: when does the negative impact become detrimental? Para 39 seems to me to spell out the proper approach, namely to give consideration to the effect on the conservation status of the species at population level and bio geographic level.
This in my judgment is an important refinement.
The impact must be certain or real, it must be negative or adverse to the bats and it will be likely to be detrimental when it negatively or adversely effects the conservation status of the species.
Conservation status of a species is a term of art which . means the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its population.
That is why the guidance at para 39 makes the point that the disturbing activity must be such as affects the survival chances . of a protected species.
Furthermore, the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, to quote the concluding sentence of para 39.
The summary in the guidance . has the same emphasis: Disturbance is detrimental for a protected species eg by reducing survival chances, breeding success or reproductive ability.
A species by species approach needs to be taken as different species will react differently to potentially disturbing activities. 37.
Having regard to the aim and purpose of the Directive and of article 16 and having due consideration of the guidance, I am driven to conclude that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level. . 39.
In my judgment whether the disturbance will have a certain negative impact which is likely to be detrimental must be judged in the light of and having regard to the effect of the disturbance on the conservation status of the species, ie, how the disturbance affects the long term distribution and abundance of the population of bats.
I remind myself that according to the [Commissions] guidance . , favourable conservation status could be described as a situation where a . species is doing sufficiently well in terms of quality and quantity and has good prospects of continuing to do so in the future.
Whether there is a disturbance of the species must be judged in that light.
Finally, in a passage in the judgment headed Overall Conclusions, Ward LJ, expressing himself satisfied that the respondents planning committee had due regard to the requirements of the Directive, said this: 73.
I have been troubled by the fact that the conclusion of the bat survey upon which such reliance was placed is to the effect that no significant impacts to bats are anticipated.
The disturbance does not have to be significant and this is a misdirection or misunderstanding of . [article] 12(1)(b) . of the Habitats Directive.
The question for me is, therefore, whether the conclusions can be upheld.
I am satisfied that the decision of the planning committee should not be quashed. 74.
I reach that conclusion for these reasons.
I am satisfied that the loss of foraging habitat occasioned by cutting a swathe through the vegetation does not offend article 12(1)(b) which is concerned with protection of the species not with conservation of the species natural habitats.
I am satisfied that that bald statement that the bats have to travel further and expend more energy in foraging does not justify a conclusion that the conservation status of the bats is imperilled or at risk.
There is no evidence which would allow the planning committee to conclude that the long term distribution and abundance of the bat population is at risk.
There is no evidence that they will lose so much energy (as they might when disturbed during hibernation) that the habitat will not still provide enough sustenance for their survival, or their survival would be in jeopardy.
There is no evidence that the population of the species will not maintain itself on a long term basis.
There is therefore no evidence of any activity which would as a matter of law constitute a disturbance as the word has to [be] understood. 75.
As I have already concluded, the risk of collision cannot amount to a disturbance and article 12(1)(b) is not engaged in that respect.
Mr George QC submits that the Court of Appeal were wrong to hold that article 12(1)(b) is breached only when the activity in question goes so far as to imperil the conservation status of the species at population level i.e. that only then does the activity amount to a disturbance of the species.
This, he points out (and, indeed, Ward LJ himself recognised), puts the threshold for engaging the article higher than Mr Cameron QC for the respondent put it, Mr Camerons main concern being that such a construction would sit uneasily with article 16 (1) (a provision which itself necessarily implies that article 12(1)(b) may need to be, and be capable of being, derogated from notwithstanding that this is only permissible where it is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status).
The Court of Appeals construction is also, submits Mr George, inconsistent with an Additional Reasoned Opinion addressed to the UK by the Commission dated 18 September 2008 with regard inter alia to what was then the new Regulation 39(1), inserted by the 2007 Amendment Regulations, providing for an offence where someone deliberately disturbs wild animals of any species in such a way as to be likely significantly to affect (i) the ability of any significant group of animals of that species to survive, breed or rear or nurture their young .
The prohibition in the Directive, the Commission pointed out in their Opinion, is not limited to significant disturbances of significant groups of animals.
Article 12(1)(b) of the Directive, the Opinion later suggested, covers all disturbance of protected species.
Whilst not actually conceding that the Court of Appeal approach is wrong, Mr Cameron contends now that the proper approach is to ask whether the activity in question produces a certain negative impact likely to be detrimental to the species having regard to its effect on the conservation status of the species.
In my judgment certain broad considerations must clearly govern the approach to article 12(1)(b).
First, that it is an article affording protection specifically to species and not to habitats, although obviously, as here, disturbance of habitats can also indirectly impact on species.
Secondly, and perhaps more importantly, the prohibition encompassed in article 12(1)(b), in contrast to that in article 12(1)(a), relates to the protection of species, not the protection of specimens of these species.
Thirdly, whilst it is true that the word significant is omitted from article 12(1)(b) in contrast to article 6(2) and, indeed, article 12(4) which envisages accidental capture and killing having a significant negative impact on the protected species that cannot preclude an assessment of the nature and extent of the negative impact of the activity in question upon the species and, ultimately, a judgment as to whether that is sufficient to constitute a disturbance of the species.
Fourthly, it is implicit in article 12(1)(b) that activity during the period of breeding, rearing, hibernation and migration is more likely to have a sufficient negative impact on the species to constitute prohibited disturbance than activity at other times.
Beyond noting these broad considerations it seems to me difficult to take the question of the proper interpretation and application of article 12(1)(b) much further than it is taken in the Commissions own Guidance document. (The Commissions suggestion in their September 2008 Additional Reasoned Opinion that article 12(1)(b) covers all disturbance of protected species in truth begs rather than answers the question as to what activity in fact constitutes such disturbance and cannot sensibly be thought to involve a departure from their 2007 Guidance.) Clearly the illustrations given in paragraph 39 of the Guidance on the one hand any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area, on the other hand scaring away a wolf from entering a sheep enclosure represent no more than the ends of the spectrum within which the question arises as to whether any given activity constitutes a disturbance.
Equally clearly, to my mind, the suggestion in paragraph 39 that consideration must be given to its effect [the effect of the activity in question] on the conservation status of the species at population level and biogeographic level does not carry with it the implication that only activity which does have an effect on the conservation status of the species (i.e. which imperils its favourable conservation status) is sufficient to constitute disturbance.
I find myself, therefore, in respectful disagreement with Ward LJs conclusion (at para 37) that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level.
Nor can I accept his view (at para 36) that the guidance, at para 39, makes the point that the disturbing activity must be such as affects the survival chances . of a protected species.
On the contrary, as I have already indicated, para 39 of the guidance uses disturbing activity of that sort merely to illustrate one end of the spectrum.
Rather the guidance explains that, within the spectrum, every case has to be judged on its own merits.
A species by species approach is needed and, indeed, even with regard to a single species, the position might be different depending on the season or on certain periods of its life cycle (para 37 of the guidance).
As para 39 of the guidance concludes: it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above.
Two further considerations can, I think, usefully be identified to be borne in mind by the competent authorities deciding these cases (considerations which seem to me in any event implicit in the Commissions Guidance).
First (and this I take from a letter recently written to the respondent by Mr Huw Thomas, Head of the Protected and Non Native Species Policy at DEFRA, the Department responsible for policy with regard to the Directive): Consideration should . be given to the rarity and conservation status of the species in question and the impact of the disturbance on the local population of a particular protected species.
Individuals of a rare species are more important to a local population than individuals of more abundant species.
Similarly, disturbance to species that are declining in numbers is likely to be more harmful than disturbance to species that are increasing in numbers.
Second (and this is now enshrined in Regulation 41(2) of the Conservation of Habitats and Species Regulations 2010 SI 2010/490): 41(2) . disturbance of animals includes in particular any disturbance which is likely (a) to impair their ability (i) to survive, to breed or reproduce, or to rear or nurture their young, or (ii) in the case of animals of a hibernating or migratory species, to hibernate or migrate; or (b) to affect significantly the local distribution or abundance of the species to which they belong.
Note, however, that disturbing activity likely to have these identified consequences is included in particular in the prohibition; it does not follow that other activity having an adverse impact on the species may not also offend the prohibition.
In summary, therefore, whilst I prefer Mr Camerons suggested approach to this article (see para 18 above) than that adopted by the Court below or that contended for by Mr George, it seems to me in the last analysis somewhat simplistic.
To say that regard must be had to the effect of the activity on the conservation status of the species is not to say that it is prohibited only if it does affect that status.
And the rest of the formulation is hardly illuminating.
Tempting although in one sense it is to refer the whole question as to the proper interpretation and application of article 12(1)(b) to the Court of Justice of the European Union pursuant to article 267 of the Lisbon Treaty, I would not for my part do so.
It seems to me unrealistic to suppose that the Court of Justice would feel able to provide any greater or different assistance than we have here sought to give.
Issue Two The proper application of Regulation 3(4) of the 1994 Regulations (as amended)
I can deal with this issue altogether more briefly.
Article 12(1) requires member states to take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range.
Wisely or otherwise, the UK chose to implement the Directive by making a breach of the article 12 prohibition a criminal offence.
Regulation 39 of the 1994 Regulations (as amended) provides that: (1) a person commits an offence if he . (b) deliberately disturbs wild animals of any such species [i.e. a European protected species].
It is Natural England, we are told, who bear the primary responsibility for policing this provision.
It used to be the position that the implementation of a planning permission was a defence to a regulation 39 offence.
That, however, is no longer so and to my mind this is an important consideration when it comes to determining the nature and extent of the regulation 3(4) duty on a planning authority deliberating whether or not to grant a particular planning permission.
Ward LJ dealt with this question in paragraph 61 of his judgment as follows: 61.
The Planning Committee must grant or refuse planning permission in such a way that will establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range .
If in this case the committee is satisfied that the development will not offend article 12(1)(b) or (d) it may grant permission.
If satisfied that it will breach any part of article 12(1) it must then consider whether the appropriate authority, here Natural England, will permit a derogation and grant a licence under regulation 44.
Natural England can only grant that licence if it concludes that (i) despite the breach of regulation 39 (and therefore of article 12) there is no satisfactory alternative; (ii) the development will not be detrimental to the maintenance of the population of bats at favourable conservation status and (iii) the development should be permitted for imperative reasons of overriding public importance.
If the planning committee conclude that Natural England will not grant a licence it must refuse planning permission.
If on the other hand it is likely that it will grant the licence then the planning committee may grant conditional planning permission.
If it is uncertain whether or not a licence will be granted, then it must refuse planning permission.
In my judgment this goes too far and puts too great a responsibility on the Planning Committee whose only obligation under regulation 3(4) is, I repeat, to have regard to the requirements of the Habitats Directive so far as [those requirements] may be affected by their decision whether or not to grant a planning permission.
Obviously, in the days when the implementation of such a permission provided a defence to the regulation 39 offence of acting contrary to article 12(1), the Planning Committee, before granting a permission, would have needed to be satisfied either that the development in question would not offend article 12(1) or that a derogation from that article would be permitted and a licence granted.
Now, however, I cannot see why a planning permission (and, indeed, a full planning permission save only as to conditions necessary to secure any required mitigating measures) should not ordinarily be granted save only in cases where the Planning Committee conclude that the proposed development would both (a) be likely to offend article 12(1) and (b) be unlikely to be licensed pursuant to the derogation powers.
After all, even if development permission is given, the criminal sanction against any offending (and unlicensed) activity remains available and it seems to me wrong in principle, when Natural England have the primary responsibility for ensuring compliance with the Directive, also to place a substantial burden on the planning authority in effect to police the fulfilment of Natural Englands own duty.
Where, as here, Natural England express themselves satisfied that a proposed development will be compliant with article 12, the planning authority are to my mind entitled to presume that that is so.
The Planning Committee here plainly had regard to the requirements of the Directive: they knew from the Officers Decision Report and Addendum Report (see para 8 above and the first paragraph of the Addendum Report as set out in para 72 of Lord Kerrs judgment) not only that Natural England had withdrawn their objection to the scheme but also that necessary measures had been planned to compensate for the loss of foraging.
For my part I am less troubled than Ward LJ appears to have been (see his para 73 set out at para 16 above) about the UBSs conclusions that no significant impacts to bats are anticipated and, indeed, about the Decision Reports reference to measures to ensure there is no significant adverse impact to [protected bats].
It is certainly not to be supposed that Natural England misunderstood the proper ambit of article 12(1)(b) nor does it seem to me that the planning committee were materially misled or left insufficiently informed about this matter.
Having regard to the considerations outlined in para 29 above, I cannot agree with Lord Kerrs view, implicit in paras 75 and 76 of his judgment, that regulation 3(4) required the committee members to consider and decide for themselves whether the development would or would not occasion such disturbance to bats as in fact and in law to constitute a violation of article 12(1)(b) of the Directive.
Even, moreover, had the Planning Committee thought it necessary or appropriate to decide the question for themselves and applied to article 12(1)(b) the less exacting test described above rather than Ward LJs test of imperilling the bats conservation status, there is no good reason to suppose that they would not have reached the same overall conclusion as expressed in paras 74 and 75 of Ward LJs judgment (see para 16 above).
I would in the result dismiss this appeal.
LORD WALKER
For the reasons given in the judgment of Lord Brown, with which I agree, and for the further reasons given by Lady Hale and Lord Mance, I would dismiss this appeal.
LADY HALE
On the first issue, I have nothing to add to the judgment of Lord Brown, with which I agree.
I also agree with him on the second issue, but add a few observations of my own because we are not all of the same mind.
The issue is whether the Regulatory Committee of Hampshire County Council (the planning authority for this purpose) complied with their duty to have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of their planning functions (Conservation (Natural Habitats etc) Regulations 1994, reg 3(4); see also Conservation and Species and Habitats Regulations 2010, reg 9(5)).
It is, of course, always important that the legal requirements are properly complied with, perhaps the more so in cases such as this, where the County Council is both the applicant for planning permission and the planning authority deciding whether it should be granted.
Some may think this an unusual and even unsatisfactory situation, but it comes about because in this country planning decisions are taken by democratically elected councillors, responsible to, and sensitive to the concerns of, their local communities.
As Lord Hoffmann put it in R (Alconbury Developments Ltd and others) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 69, In a democratic country, decisions about what the general interest requires are made by democratically elected bodies or persons accountable to them.
Democratically elected bodies go about their decision making in a different way from courts.
They have professional advisers who investigate and report to them.
Those reports obviously have to be clear and full enough to enable them to understand the issues and make up their minds within the limits that the law allows them.
But the courts should not impose too demanding a standard upon such reports, for otherwise their whole purpose will be defeated: the councillors either will not read them or will not have a clear enough grasp of the issues to make a decision for themselves.
It is their job, and not the courts, to weigh the competing public and private interests involved.
It is important to understand the chronology in this case.
The planning application was dated 31 March 2009.
Natural England was consulted.
Their first reply is dated 30 April.
In it they objected to the application on the ground that that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species.
Specifically, they were concerned about the impact upon bats and great crested newts.
Reference was made to the impacts of the development and mitigation upon European Protected Species and the council were reminded of, among other things, their duty under regulation 3(4).
This objection was maintained in a letter dated 29 June 2009.
Further information on Great Crested Newts and the Updated Bat Survey were submitted in early July in response to this.
Based on this information, Natural England wrote on 17 July 2009 withdrawing their objection, subject to recommendations about the conditions to be imposed if planning permission were granted.
This letter also contained comments about common widespread reptiles and asking that these too be addressed although Natural England was not lodging an objection in relation to them.
Natural England wrote again on 23 July with their final response to the proposal.
This dealt, first, with the fact that the site was close to the Portsmouth Harbour Site of Special Scientific Interest, itself part of the Portsmouth Harbour Special Protection Area and Ramsar site and gave their advice on the requirements of regulation 48(1)(a) of the Habitats Regulations.
Regulation 48(1)(a) imposes a specific obligation on planning authorities, among others, to make an appropriate assessment of the implications for a European protected site before granting permission for a proposal which is likely to have a significant effect upon the site.
The letter advised that, provided that specified avoidance measures were fully implemented, the proposal would not be likely to have a significant effect upon the protected sites.
Thus they had no objection on this score and permission could be granted.
The letter went on to deal with Protected species and biodiversity under a separate heading, repeated that they had withdrawn their objection subject to the implementation of all the recommended mitigation, but reminded the council that whilst we have withdrawn our objection to the scheme in relation to European protected species, we have ongoing concerns regarding other legally protected species on site .
A separate paragraph went on to deal with biodiversity.
The Officers Report was prepared for the Committee meeting, which was due to take place on 29 July 2009, before receipt of the letter of 23 July.
It is 31 pages long.
The executive summary lists the main issues raised, including concern at the procedure because this is a County Council scheme and nature conservation impact (para 1.4).
The account of the Proposals refers to the detailed ecological surveys undertaken, including the bat surveys carried out to enable appropriate measures to be implemented; but states that the impact on the designated sites would be negligible (para 3.7).
The section on Consultations includes a paragraph explaining that Natural England had initially objected on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats and great crested newts which are legally protected species but that they had withdrawn their objection after further survey work was undertaken (para 5.6).
The section on Nature conservation impact deals first with the proximity to the protected sites and points out that the requirements of the Habitats Regulations needed to be considered (para 8.17).
This is a reference to the specific obligation in regulation 48(1)(a).
It went on to explain why it was thought that an appropriate assessment was not needed, noting that Natural England had raised no concerns about any impact on these sites (para 8.18).
The report then turns to the corridor itself, referring to the Environmental Report submitted with the application, which dealt with badgers, bats, great crested newts, and reptiles; on bats, it states that An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them for these proposals (para 8.19).
The report concludes by recommending that no appropriate assessment is required under the Habitats Regulations (para 9.2); that planning permission be granted (para 9.3); and that the proposed development accords with the Development Plan and the relevant Policies, because, among other things suitable mitigation measures are proposed for badgers and protected species (para 9.4).
There is a cross reference to the annexed policy C18 on Protected Species, which states that Development which would adversely affect species, or their habitats, protected by the Habitats Regulations 1994, the Wildlife and Countryside Act 1981 or other legislation will not be permitted unless measures can be undertaken which prevent harm to the species or damage to the habitats.
Where appropriate, a permission will be conditioned or a legal agreement sought to secure the protection of the species or their [habitat].
After receiving the letter from Natural England dated 23 July, an addendum to the report was prepared, dealing with three issues which had arisen since the report was finalised.
Under the heading Habitats Regulations it deals first with the objections raised by Natural England requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species.
It points out that the survey work was undertaken and Natural England had withdrawn their objection.
In two separate paragraphs, it goes on to explain that Natural England had now given specific advice on the requirements of regulation 48(1)(a) (thus reinforcing the recommendation made in para 9.2 of the main report).
It is quite clear from all of this that separate consideration was being given both to the effect upon European protected species and to the effect upon the protected sites, that both were being considered under the Habitats Regulations, and that the applicable Policy on Protected Species, which also refers to the Habitats Regulations 1994, was being applied.
It is true that the report does not expressly mention either regulation 3(4) or article 12 of the Directive.
In my view, it is quite unnecessary for a report such as this to spell out in detail every single one of the legal obligations which are involved in any decision.
Councillors were being advised to consider whether the proposed development would have an adverse effect on species or habitats protected by the 1994 Regulations.
That in my view is enough to demonstrate that they had regard to the requirements of the Habitats Directive for the purpose of regulation 3(4).
That is all they have to do in this context, whereas regulation 48(1)(a) imposes a more specific obligation to make an appropriate assessment if a proposal is likely to have a significant effect upon a European site.
It is not surprising, therefore, that the report deals more specifically with that obligation than it does with the more general obligation in regulation 3(4).
Furthermore, the United Kingdom has chosen to implement article 12 of the Directive by creating criminal offences.
It is not the function of a planning authority to police those offences.
Matters would, as Lord Brown points out, have been different if the grant of planning permission were an automatic defence.
But it is so no longer.
And it is the function of Natural England to enforce the Directive by prosecuting for these criminal offences (or granting licences to derogate from the requirements of the Directive).
The planning authority were entitled to draw the conclusion that, having been initially concerned but having withdrawn their objection, Natural England were content that the requirements of the Regulations, and thus the Directive, were being complied with.
Indeed, it seems to me that, if any complaint were to be made on this score, it should have been addressed to Natural England rather than to the planning authority.
They were the people with the expertise to assess the meaning of the Updated Bat Survey and whether it did indeed meet the requirements of the Directive.
The planning authority could perhaps have reached a different conclusion from Natural England but they were not required to make their own independent assessment.
But if I am wrong about this, and the planning authority did have to make an independent assessment in terms of article 12(1)(b), there is absolutely no reason to think that they would have reached a different conclusion and refused planning permission on this account.
They may have reached their decision by a majority of six votes to five.
But the Minutes make it clear that there were a great many other problems to worry about with this scheme.
While the impact on nature was among the many matters upon which members questioned officers, this was not one of their listed concerns.
If this scheme was not going to get planning permission, it would be because of the local residents concerns about the impact upon them rather than because of the members concerns about the impact upon the bats.
I would therefore dismiss this appeal on both issues.
LORD MANCE
I agree with the reasoning and conclusions of Lord Brown and Lady Hale on each of the issues.
I add only a few words because the court is divided on the second.
Lord Kerrs dissent on this issue is, I understand, based on the premise that (a) Natural England had not expressed a view that the proposal would not involve any breach of the Habitats Directive, and (b) if it had, the planning committee was not informed of this: see his paras 73 and 74.
For the reasons given in Lord Browns and Lady Hales judgments, I cannot agree with either aspect of this premise.
I add the following in relation to the suggestion that Natural England was, in its letter of 17 July 2009, preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive or that the letter was principally taken up with the question of possible impact on common widespread reptiles (para 69 below).
It is true that the longer part of the text of the letter of 17 July related to the latter topic, in relation to which Natural England at the end of the letter made clear it was not lodging an objection, but was only asking that further attention be given and comments supplied.
But the first, and in the circumstances obviously more significant, aspect of the letter consisted in its first three paragraphs.
These withdrew Natural Englands previous objection made on 30 April and reiterated on 29 June in relation to great crested newts and bats.
The withdrawal was in the light of the information, including the Updated Bat Survey, which the Council had earlier in July supplied.
In withdrawing their objection, Natural England emphasised the importance of the mitigation procedures outlined in section 10 of the Survey, and added the further recommendation that the Council look closely at the requirement for night working and keep any periods of such working to an absolute minimum.
This confirms the attention it gave to the information supplied.
When making its objection in its letter dated 30 April, Natural England had said: Our concerns relate specifically to the likely impact upon bats and Great Crested Newts.
The protection afforded these species is explained in Part IV and Annex A of Circular 06/2005 biodiversity and Geological Conservation Statutory Obligations and their Impact within the Planning System.
Part IV of Circular 06/2005 stated that the Habitats Regulations Conservation (Natural Habitats &c.) Regulations 1994 implemented the requirements of the Habitats Directive and that it was unlawful under regulation 39 deliberately to disturb a wild animal of a European protected species.
Annex A identified all species of bats as wild animals of European protected species.
It is therefore clear that Natural England was, from the outset, focusing on the protected status of all species of bats under the Directive and domestic law; and that its withdrawal of its objection on 17 July was directly relevant to the planning committees performance of its role under regulation 3(4) to have regard to the requirements of that Directive in the exercise of its functions.
The planning officers first report dated 29 July summarised the position for the planning committee in accurate terms.
Thereafter, as Lord Brown and Lady Hale record, Natural Englands further letter dated 23 July arrived, reiterating Natural Englands as position stated in its letter dated 17 July.
This too was again accurately summarised to the committee by the planning officer in his addendum dated 29 July to his previous report.
With regard to the Updated Bat Survey, there is no reason to believe that Natural England did not, when evaluating this, understand both the legal requirements and their general role and responsibilities at the stage at which they were approached by the Council.
The Survey repays study as a whole, and I merely make clear that I do not share the scepticism which Lord Kerr feels about some of its statements or agree in all respects with his detailed account of its terms and their effect.
The important point is, however, is that Natural England was well placed to evaluate this Survey, and, having done so, gave the advice they did.
This was, in substance, accurately communicated to the planning committee, in a manner to which the committee was entitled to have, and must be assumed to have had, regard.
In addition to my agreement with the other parts of Lord Browns and Lady Hales judgments, I confirm my specific agreement with Lady Hales penultimate paragraph.
LORD KERR
As legislative provisions go, regulation 3 (4) of the Conservation (Natural Habitats, &c.) Regulations 1994 (the Habitats Regulations) is relatively straightforward.
Its terms are uncomplicated and direct.
It provides: (4) every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of those functions.
In plain language this means that if you are an authority contemplating a decision that might have an impact on what the Directive requires, you must take its requirements into account before you reach that decision.
Of course, if you know that another agency has examined the question and has concluded that none of those requirements will be affected, and if you are confident that such agency is qualified to make that judgment, this may be sufficient to meet your obligation under the regulation.
What lies at the heart of this appeal is whether the regulatory committee of Hampshire County Council, when it came to make the decision whether to grant the planning permission involved in this case, either had regard itself to the requirements of the Habitats Directive or had sufficient information to allow it to conclude that some other agency, in whose judgment it could repose trust, had done so and had concluded that no violation arose.
An old and currently disused railway line runs between Gosport and Fareham in South Hampshire.
A section of this, between Redlands Lane, Fareham and Military Road, Gosport is some 4.7 kilometres in length.
On 31 March 2009 Hampshire County Council, acting on behalf of Transport for South Hampshire, applied for planning permission to develop this section in order to create what is described as a busway.
Transport for South Hampshire is a name used to describe three local authorities, Hampshire County Council, Gosport Borough Council and Fareham Borough Council.
Planning permission was granted on 29
July 2009
At present there is serious congestion on the main road between Gosport and Fareham.
It is planned that the busway should operate by allowing buses to join existing roads at various points along the route and that a fast, efficient and reliable public transport service will ensue.
It will also be possible to cycle on the route.
Local residents will be encouraged to use buses and bicycles in preference to their private vehicles and it is hoped that the congestion will thereby be relieved.
The busway is to be constructed in two phases, 1A and 1B. Clearance work for the first of these is already underway and funding is available to complete this phase.
The second phase does not yet have funding.
Its future development is not assured.
The railway line along which the busway is to be developed was closed as a result of recommendations made in the Beeching report of 1963.
It appears that closure did not finally take effect until June 1991, however.
In that month the last train ran along the line.
Since then the area has become overgrown.
It is now regarded as an ecological corridor for various flora and fauna.
Several species of bats fly through and forage in the area but no bat roosts have been found on the planning application site itself.
There are two bat roosts in proximity to the route, one in Savernake Close, near the southern section of Phase 1A, the other at Orange
Grove which is close to the northern section of Phase 1B
All bats are European Protected Species, falling within Annex IV (a) of Council Directive 92/43/EEC (the Habitats Directive).
Article 12 of this Directive requires Member States to take the requisite measures to establish a system of strict protection for the animal species listed in the annex.
The Conservation (Natural Habitats, &c.) Regulations 1994 were made for the purpose of implementing the Habitats Directive.
The regulations prescribe a number of measures (most notably in relation to this case, Regulation 39) which seek to achieve this level of protection.
Derogation from these measures is permitted to those who obtain a licence from the appropriate authority.
Natural England is the nature conservation body specified in the regulations as the licensing authority in relation to European protected species.
Although the issue of a licence is quite separate from the grant of planning permission, Natural England is regularly consulted on applications for development where the Habitats Directive and the regulations are likely to be in play and so it was that in April 2009 a letter was sent by the environment department of the Council seeking Natural Englands views about the proposal.
On 30 April 2009, Natural England replied, objecting to the scheme and recommending that planning permission be refused.
Bat surveys had been undertaken in 2008.
These considered the suitability of the habitat for bats; they also examined how bats used the site and which species of bats were present.
Clearly, however, the detail of the information yielded by these surveys was insufficient to satisfy Natural Englands requirements for it stated that the application contained insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species.
The letter also recommended that the local planning authority should consider all the points made in an annex that was attached to the letter.
This provided guidance on survey requirements and on how the authority should fulfil its duties on biodiversity issues under [among others] Regulation 3 (4) of The Conservation (Natural Habitats &c.) Regulations 1994 to ensure that the potential impact of the development on species and habitats of principal importance is addressed.
Amendments to the scheme were undertaken but these did not allay Natural Englands concerns and their objection to the planning application was repeated in a letter of 29 June 2009.
An updated bat survey (leading to the publication of a report entitled Survey Method Statement and Mitigation Strategy) was carried out on behalf of the Council.
The survey identified two species of bat which had not been detected in the 2008 survey.
Greater levels of foraging and commuting were also recorded along the disused railway.
No roost sites were found but the presence of a common pipistrelle roost was confirmed approximately 40 metres from planned works.
The report concluded that the works would result in the loss of a number of trees with low to moderate roost potential and approximately seven trees with moderate to high roost potential.
Although no known roosts would be lost, because of the difficulty in identifying tree roosts, the Bat Conservation Trust recommends that it should be assumed that trees with high potential as roosts are in fact used as roosts.
On this basis a number of roosts will be lost as a result of the works.
Impact on commuting of bats between foraging habitats was also anticipated.
It was felt that this could be restored in the longer term but, until restoration was complete, at least four species of bats that had been detected in the area would be affected.
It was concluded that the removal of trees and vegetation would result in the loss of good quality habitats for foraging.
Loss of foraging habitats would have an inevitable adverse impact on three species of local bats with one of these (Myotis sp) being more severely affected.
This was characterised as a moderate impact at local level during the time that the vegetation was being re established, a period estimated in the survey to be at least seven years.
On the issue of the long term impact of the loss of foraging habitats the report was somewhat ambivalent.
At one point it suggested that there would be a long term slight adverse to neutral impact.
Later, it suggested that it was probable that the re creation of good foraging habitats would result in an eventual neutral impact.
The introduction of artificial lighting would affect the quality of foraging habitat by attracting insects from unlit areas.
Although this would favour some species, it would adversely affect others.
Moreover, increased lighting can delay the emergence of bats from roosts and so reduce foraging opportunities.
Lighting also constitutes a barrier to bats gaining access to foraging areas.
Although the report is silent on the duration of these effects, it must be presumed that they will be permanent.
In a somewhat bland claim, however, the authors assert that with mitigation to reduce light spill and the selection of lights with a low UV output, the impact of lighting on bats is not anticipated to be significant.
Increased noise levels would also have an adverse impact on some species of bats, the Brown long eared in particular.
The report concludes at this point that is probable that there would be a slight adverse impact on foraging habitats from operational noise.
Again, the report does not expressly state how long this would last but, since the noise source is the operation of the busway, it must be presumed to be permanent.
The overall conclusion of the report was that it was probable that there would be a short term moderate adverse impact on bats. (As Lord Brown has pointed out, this short term impact is likely to continue for some nine years).
If planned mitigation measures are successful, the long term impact of the works was anticipated to be slight adverse.
On this basis the authors of the report concluded that no significant impacts to bats were anticipated.
This general conclusion requires to be treated with some caution, in my opinion.
There can be no doubt that effects which could not be described as insignificant will occur for some seven to nine years at least.
Thereafter, while the long term impact may not be quantitatively substantial, it will be permanent.
The bat survey, together with further information, was sent to Natural England in July 2009.
In consequence, the objection to the application was withdrawn.
Natural England considered that planning permission could now be granted, albeit subject to certain conditions.
The letter relaying the withdrawal of the objection contained the following: Natural England has reviewed the further information submitted (Great Crested Newt Survey Method Statement and Mitigation Strategy, June 2009 and Updated Bat Survey Method Statement and Mitigation Strategy, July 2009) and can now confirm that we are able to withdraw our objection of 30 April 2009, subject to the following comments: We recommend that should the Council be minded to grant permission for this scheme, conditions be attached requiring implementation of all the mitigation/compensation detailed within these reports.
Particularly at Section 10 of the Bat Report and Section 6 of the Great Crested Newt Report.
We would also recommend that the Council look closely at the requirement for night time working and associated flood lighting.
Natural England would not advocate night reasons of for time working disturbance/disruption to the lifecycle of nocturnal wildlife and the Council should ensure these periods are kept to an absolute minimum.
The head of planning and development made a report (referred to as the officers decision report) to the regulatory committee of the Council which was to take the planning decision on 29 July 2009.
The impact on nature conservation was one of the issues of concern identified in the report.
Lord Brown has quoted in para 8 of his judgment many of the material parts of the report that touch on this issue and I will not repeat all of those here.
It is important, however, I believe, to understand the context of the statement in para 8.17 (quoted in part by Lord Brown) that the Habitats Regulations needed to be considered.
The full para reads as follows: The site is not within any designated sites of importance for nature conservation.
However the site is within 30 metres, at its closest, to the Portsmouth Harbour Special Protection Area (SPA) and Portsmouth Harbour RAMSAR site.
Therefore the requirements of the Habitats Regulations need to be considered. (my emphasis)
As Lord Brown has pointed out, the report in para 8.19 stated that the updated bat survey report contained measures to ensure (emphasis added) there is no significant adverse impact to bats from the proposals.
This appears to me to be a gloss on what had in fact been said in the report.
The actual claim made (itself, in my opinion, not free from controversy) was that it was anticipated that there would be no significant impacts on bats if the mitigation measures succeeded.
Two points about the decision officers report should be noted, therefore.
Firstly, the enjoinder to consider the Habitats Regulations was made because of the proximity of the works to sites requiring special protection rather than in relation to the need to avoid disturbance of bats in the ecological corridor itself.
Secondly, it conveyed to the members of the regulatory committee the clear message that the updated bat survey report provided assurance that there would be no significant impact on bats.
No reference was made to the moderate adverse impact that would occur over the seven to nine year period that regeneration of the forage areas would take nor to the permanent, albeit slight, impact that those measures could not eliminate.
Lord Brown has said that the addendum to the officers report dealt specifically with the Habitats Regulations.
It did, but the context again requires to be carefully noted.
In order to do this, I believe that the entire section dealing with the regulations must be set out.
It is in these terms: Habitats Regulations As stated in the report Natural England initially raised a holding objection to the application, requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species.
This survey work was undertaken and sent to Natural England, who are now satisfied and subsequently withdrew their objection.
As also stated in the report the application site lies close to habitats which form part of the Portsmouth Harbour Site of Special Scientific Interest (SSSI).
This SSSI is part of the Portsmouth Harbour Special Protection Area (SPA) and Ramsar Site.
Under the Conservation (Natural Habitats etc) Regulations 1994, as amended ('the Habitats Regulations') the County Council is the competent authority and has to make an assessment of the impacts of the proposal on this European site, therefore the second recommendation for the Committee is to agree that the proposal is unlikely to have a significant impact on the European site.
It was implied that by withdrawing their objection Natural England did not consider there would be any significant impact, but they did not specifically give their advice.
Since the report was finalised Natural England have now given specific advice on the requirements of Regulation 48 (1) (a) of the "Habitats Regulations".
They raise no objection subject to the avoidance measures included in the application being fully implemented and advise that their view is that either alone or in combination with other plans or projects, this proposal would not be likely to have a significant effect on the European site and the permission may be granted under the terms of the Habitats Regulations.
Regulation 48 (1) (a) requires a competent authority, before deciding to undertake, or give any consent, permission or other authorisation for, a plan or project which is likely to have a significant effect on a European site in Great Britain to make an appropriate assessment of the implications for the site in view of that site's conservation objectives.
It has nothing to do with the need to ensure that there is no disturbance of species of bats.
The addendum to the decision officers report, therefore, offered no information whatever to the regulatory committee on the vital question whether the proposal would comply with article 12 of the Habitats Directive.
Indeed, it is clear from an examination of the letter from Natural England of 17 July 2009 that it was preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive.
The letter was principally taken up with the question of possible impact on common widespread reptiles.
In so far as the letter dealt with the question of the impact on bats, its tone certainly did not convey a view that the planning committee need not consider that matter further.
On the contrary, on a fair reading of the letter, Natural England was making it clear that this issue required to be addressed by the committee, not only in terms of the conditions to be applied but also as to whether night time working would be unacceptable because of disturbance to wildlife.
The committee considered the report of the decision officer and the addendum to it and received an oral presentation from officers of the council.
The minutes of their meeting record the following in relation to the oral presentation: In introducing the report, Officers informed Members that the proposal formed part of the strategy to improve the reliability and quality of public transport in South Hampshire and the access to Gosport and Fareham.
A Traffic Regulation Order would be imposed on the bus way to allow only cycles, buses and emergency vehicles to use it.
Members were advised that an Environmental Impact Assessment (EIA) was not required as the proposal was a freestanding project that did not give rise to 'significant environmental effects'.
Notwithstanding that, the County Council considered that important nature conservation, amenity and traffic issues had to be properly addressed and reports on these matters had been taken into account.
The addendum to the report provided reassurance that Natural England had no objection to the proposals and confirmed their view that an appropriate assessment under the Habitat Regulations was not required and provided further clarification about the application and the Issue of 'screening' under the EIA Regulations.
At best, this had the potential to mislead.
A committee member might well think that Natural England had concluded that there would be no violation of article 39 (1) (b) of the 1994 Regulations (which forbids the deliberate disturbance of wild animals of a European protected species) or, more particularly, article 12 of the Habitats Directive.
Of course the true position was that Natural England had expressed no explicit opinion whatever on that question.
At most, it might be presumed that this was its view.
Even if that presumption could be made, however, it does not affect the clear indication in the letter of 17 July 2009 that this matter was still one which required the committees attention.
I can find nothing in the letter which suggests that Natural England regarded this matter as closed.
Nor do I believe that the letter could have been properly interpreted by the committee as relieving it of the need to consider the issue.
The critical issue on this appeal, therefore, is whether there is any evidence that the regulatory committee considered at all the duty that it was required to fulfil under regulation 3 (4) of the 1994 Regulations.
In addressing this question I should immediately say that I agree with Lord Brown on his analysis of the nature of the requirement in article 12 (1) (b) of the Habitats Directive.
As he has observed, a number of broad considerations underlie the application of the article.
It is designed to protect species (not specimens of species) and its focus is on the protection of species rather than habitats, although, naturally, if major intrusion on habitats is involved, that may have an impact on the protection of the species.
Not every disturbance will constitute a breach of the article.
The nature and extent of the disturbance must be assessed on a case by case basis.
The European Commissions guidance document of February 2007 contains a number of wise observations as to how the application of the article should be approached.
While the word significant has not been employed in article 12 (1) (b), a certain negative impact likely to be detrimental must be involved.
In making any evaluation of the level of disturbance, the impact on survival chances, breeding success or reproductive ability of the affected species are all obviously relevant factors.
Like Lord Brown, I am sanguine about Mr Cameron QCs formulation of the test as one involving the question whether there has been a certain negative impact likely to have been detrimental to the species, having regard to its effect on the conservation status of the species.
And also like Lord Brown, I consider that the Court of Appeal pitched the test too high in saying that disturbance must have a detrimental impact on the conservation status of the species at population level or constitute a threat to the survival of the protected species.
Trying to refine the test beyond the broad considerations identified by Lord Brown and those contained in the Commissions guidance document is not only difficult, it is, in my view, pointless.
In particular, I do not believe that the necessary examination is assisted by recourse to such expressions as de minimis.
A careful investigation of the factors outlined in Lord Browns judgment (as well as others that might bear on the question in a particular case) is required.
The answer is not supplied by a pat conclusion as to whether the disturbance is more than trifling.
Ultimately, however, and with regret, where I must depart from Lord Brown is on his conclusion that the regulatory committee had regard to the requirements of the Habitats Directive.
True it is, as Lord Brown says, that they knew that Natural England had withdrawn its objection.
But that cannot substitute, in my opinion, for a consideration of the requirements of the Habitats Directive.
Regulation 3 (4) requires every competent authority to have regard to the Habitats Directive in the exercise of its functions.
The regulatory committee was unquestionably a competent authority.
It need scarcely be said that, in deciding whether to grant planning permission, it was performing a function.
Moreover the discharge of that function clearly carried potential implications for an animal species for which the Habitats Directive requires strict protection.
Neither the written material submitted to the committee nor the oral presentation made by officers of the council referred to the Habitats Directive.
The reference to Natural Englands consideration of the Habitats Regulations, if it was properly understood, could only have conveyed to the committee that that consideration had been for a purpose wholly different from the need to protect bats.
It could in no sense, therefore, substitute for a consideration of the Habitats Directive by the committee members whose decision might well directly contravene one of the directives central requirements.
It is for that reason that I have concluded that those requirements had to be considered by the committee members themselves.
It may well be that, if Natural England had unambiguously expressed the view that the proposal would not involve any breach of the Habitats Directive and the committee had been informed of that, it would not have been necessary for the committee members to go behind that view.
But that had not happened.
It was simply not possible for the committee to properly conclude that Natural England had said that the proposal would not be in breach of the Habitats Directive in relation to bats.
Absent such a statement, they were bound to make that judgment for themselves and to consider whether, on the available evidence the exercise of their functions would have an effect on the requirements of the directive.
I am afraid that I am driven to the conclusion that they plainly did not do so.
As I have said, Natural England (at the time that it was considering the Habitats Regulations in July 2009) had not explicitly addressed the question whether the disturbance of bats that the proposal would unquestionably entail would give rise to a violation of the directive.
The main focus of the letter of 19 July was on an entirely different question.
Lord Brown may well be correct when he says that it is not to be supposed that Natural England misunderstood the proper ambit of article 12 (1) (b), but the unalterable fact is that it did not say that it had concluded that no violation would be involved, much less that the planning committee did not need to consider the question.
It is, of course, tempting to reach ones own conclusion as to whether the undoubted impact on the various species of bats that will be occasioned by this development is sufficient or not to meet the requirement of disturbance within the meaning of article 12.
But this is not the function of a reviewing court.
Unless satisfied that, on the material evidence, the deciding authority could have reached no conclusion other than that there would not be such a disturbance, it is no part of a courts duty to speculate on what the regulatory committee would have decided if it had received the necessary information about the requirements of the Habitats Directive, much less to reach its own view as to whether those requirements had been met.
Since the planning permission was granted on a vote of six in favour and five against, with two abstentions, it is, in my view, quite impossible to say what the committee would have decided if it had been armed with the necessary knowledge to allow it to fulfil its statutory obligation.
Other members of the court have expressed the view that this is what the committee would have decided.
Had I felt it possible to do so, I would have been glad to be able to reach that conclusion.
As it is, I simply cannot.
I would therefore allow the appeal and quash the planning permission.
| UK-Abs | This appeal concerns, first, the meaning of the obligation imposed on the United Kingdom by the Habitats Directive, a European legislative instrument, to prohibit deliberate disturbance of certain species of bats.
It concerns, secondly, the scope of the obligation in domestic legislation on planning authorities to have regard to the requirements of the Habitats Directive.
Hampshire County Council, the Respondent in the appeal, granted planning permission on 29 July 2009 for a proposed three mile stretch of roadway to provide a rapid bus service between Fareham and Gosport in South East Hampshire.
The Appellant, Mrs Morge, lives close by and objects to the scheme.
The scheme, its supporters argue, will create a new and efficient form of public transport to the benefit of many residents, workers and visitors to the area.
Environmental objections have arisen, however, on grounds that the proposed path of the busway runs along the path of an old railway line, which has become an ecological corridor for various flora and fauna.
The planning application was submitted on 31 March 2009 and objected to by Natural England, the Governments adviser on nature conservation, in part because of their concerns about the impact of the development on bats.
The Council responded by submitting an Updated Bat Survey (UBS), largely as a result of which Natural England in a letter of 17 July 2009 withdrew their objections.
At a meeting of the Councils Planning Committee on 29 July 2009 planning permission was granted by a majority of six to five with two abstentions.
The UBS recorded that no bat roosts were found on the site.
The removal of trees and vegetation, however, would result in a loss of good quality bat foraging habitats.
This would have a moderate adverse impact at local level on foraging bats for nine years, the impact thereafter reducing to slight adverse / neutral.
In addition the busway would sever a bat flight path, increasing their risk of collision with buses.
Mrs Morge challenged the permission on environmental grounds, including its impact on several species of European protected bats.
The challenge failed before the High Court and Court of Appeal, but the Supreme Court granted the Appellant limited permission to appeal on two issues of general importance.
The first is the level of disturbance required to engage the prohibition in article 12(1)(b) of the Habitats Directive on deliberate disturbance of the bat species in question.
The second is the scope of the obligation in regulation 3(4) of Conservation (Natural Habitats etc.) Regulations 1994 on local authorities to have regard to the requirements of the Habitats Directive in deciding whether to grant planning permission, and whether the Council in this case complied with the obligation.
The Supreme Court by a majority of 4 1 dismisses the appeal.
Lord Brown gives the lead judgment for the majority, setting out the correct approaches to article 12(1)(b) of the Habitats Directive and regulation 3(4) of the 1994 Regulations, and finding that the Council complied with the obligation in regulation 3(4).
Lord Kerr agrees with majority on the article 12(1)(b) issue but dissents on the regulation 3(4) issue.
On the first issue, the Court held that certain broad considerations must govern the correct approach to article 12(1)(b) of the Habitats Directive.
First, it is an article affording protection specifically to species and not to habitats.
Secondly, the prohibition relates to the protection of species and not specimens of these species as in other articles.
Thirdly, an assessment is needed of the nature and extent of the negative impact of the activity upon the species and a judgment as to whether that is sufficient to constitute disturbance of the species.
Fourthly, it is implicit in the article that activity during the period of breeding, rearing, hibernation and migration is more likely to have a sufficient negative impact on the species to constitute disturbance: [19].
The European Commissions guidance document is of assistance.
It provides illustrations at either end of the spectrum within which the question arises as to whether any given activity constitutes disturbance, and explains that every case has to be judged on its own merits.
Two further considerations are also of relevance.
First, account should be given to the rarity and conservation status of the species in question and the impact of the disturbance on the local population of the species.
Secondly, disturbance includes in particular that which is likely to impair an animals ability to survive, breed, rear its young, hibernate or migrate, and that which is likely to affect the local distribution or abundance of the species: [20] [23].
On the second issue, the majority held that the correct approach to regulation 3(4) is that planning permission should ordinarily be granted save only in cases where the Planning Committee conclude that the proposed development would both be likely to offend article 12(1) and be unlikely to be licensed pursuant to the powers to derogate from the requirements of article 12(1).
Where Natural England express themselves satisfied that a proposed development will be compliant with article 12(1), the planning authority are entitled to presume that that is so.
In the present case the Planning Committee had sufficient regard to the requirements of the Directive so as to satisfy regulation 3(4): the Committee knew that Natural Englands objection had been withdrawn and that necessary measures had been planned to compensate for the loss of foraging: [30].
Lord Kerr, dissenting on this second issue, observed that Natural England had expressed no explicit opinion on the question of whether there would be violation of article 12(1).
Even if it could be presumed that Natural Englands view was of no violation, that did not affect the clear indication in the letter of 17 July 2009 that the matter was still one which required the Committees attention.
If Natural England had unambiguously expressed a view of no violation and the Committee had been informed of this, it may well have been unnecessary for the Committee to go behind that view.
But absent such a statement, they were bound to make the judgment for themselves, something which they did not do.
Lord Kerr would have quashed the planning permission on this basis: [75] [84].
|
It is now well established that an employment contract is subject to an implied term that the employer and employee may not, without reasonable and proper cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
In Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518, the claimant sought to rely on an alleged breach of this implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for damages for the manner of his dismissal.
But the House of Lords refused to extend the implied term to allow an employee to recover damages for loss arising from the manner of his dismissal because (per all members of the House except Lord Steyn) such a development of the law would be contrary to the intention of Parliament that there should be such a remedy, but that it should be limited by the statutory code regarding unfair dismissal now to be found in the Employment Rights Act 1996 (the 1996 Act).
Some regarded the decision in Johnson as contentious: see, for example, Deakin and Morris Labour Law, 5th ed (2009), at para 5 45.
At para 36 of Mr Bothams written case, Mr Reynold QC invited the court to depart from Johnson, but this suggestion was not developed in the written case or in oral argument.
Indeed, it was reaffirmed by the majority of the House of Lords in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2004] UKHL 35; [2005] 1 AC 503 (Eastwoods case).
Loss arising from the unfair manner of a dismissal is not therefore recoverable as damages for breach of the implied term of trust and confidence: it falls within what has been called the Johnson exclusion area.
The principal questions that arise in these two appeals are (i) whether the reasoning in Johnson applies so as to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and if so (ii) whether the claims made by Mr Edwards or Mr Botham fall within the Johnson exclusion area.
It is submitted on behalf of Mr Edwards and Mr Botham that the first question should be answered in the negative and that their claims for damages should be assessed in accordance with orthodox common law principles.
In Mr Edwards case, the Court of Appeal (Ward, Lloyd and Moore Bick LJJ) accepted this submission and in Mr Bothams case, Slade J did not.
By a consent order dated 31 August 2010, the Court of Appeal (Pill LJ) reversed the decision of Slade J.
The case of Mr Edwards
The Chesterfield Royal Hospital NHS Foundation Trust (the Trust) was established on 1 January 2005 as an NHS Foundation Trust and acquired the rights and liabilities of its predecessor, the Chesterfield and North Derbyshire Royal Hospital NHS Trust.
Mr Edwards had been employed by the Trusts predecessor as a consultant trauma and orthopaedic surgeon pursuant to a contract which incorporated the terms of its letter to Mr Edwards dated 2 June 1998.
Para 2 of the letter referred to the Trust terms and conditions of employment copies of which could be seen at the Medical Personnel Office.
Para 8 stated that the employment was subject to three months notice on either side.
Para 13 stated that in matters of professional misconduct, Mr Edwards would be subject to a separate procedure which had been negotiated and agreed by the Local Negotiating Committee.
By letter dated 22 December 2005, disciplinary proceedings were instituted against Mr Edwards arising from allegations that he had undertaken an inappropriate internal examination of a female patient and had then denied that the examination had taken place.
It is his case that the applicable procedure at that time was that set out in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
Annex B to HC(90)9 sets out in detail the procedures which authorities should use when handling serious disciplinary charges, for example, where the outcome of disciplinary action could be the dismissal of the medical or dental practitioner concerned (para 1).
A disciplinary hearing was held on 9 February 2006.
On 10 February, the disciplinary panel decided that Mr Edwards should be summarily dismissed from his employment on grounds of gross personal and professional misconduct.
This decision was confirmed by a letter dated 16 February which set out in detail the panels findings and the reasons for its decision.
Mr Edwards appeal against this decision was dismissed on 24 April 2006.
On 12 May 2006, Mr Edwards started unfair dismissal proceedings before the Sheffield Employment Tribunal.
The matters on which he relied as giving rise to the alleged unfairness of his dismissal included that the disciplinary panel had been inappropriately constituted.
His case was that his contract of employment entitled him to have a panel including a clinician of the same medical discipline as himself and a legally qualified chairman.
The disciplinary hearing of 9 February was chaired by the Trusts medical director who was not legally qualified and the panel did not include an orthopaedic or trauma surgeon.
Mr Edwards had always maintained that, if the panel had been properly constituted, it would not have made incorrect findings and he would not have been dismissed.
Prior to the pre hearing review before the tribunal, Mr Edwards withdrew his claim for unfair dismissal and it was dismissed by order of the tribunal on 17 August 2006.
The Trust referred the complaints against Mr Edwards to the General Medical Council (GMC).
The GMCs Investigation Committee decided not to refer the matter to a Fitness to Practise Panel and the complaint was closed.
In the result, Mr Edwards was not subjected to any practising restrictions by the GMC arising out of the subject matter of the Trusts disciplinary investigation.
By a claim issued on 15 August 2008, Mr Edwards issued proceedings in the High Court against the Trust in which he claimed damages for breach of his employment contract and its wrongful termination.
By his particulars of claim, he alleges that the termination of his contract was wrongful and in breach of contract in a number of procedural respects.
It is not necessary to refer to them all.
They include the plea that the panel had not been properly constituted.
Other allegations are that he was denied a fair hearing with legal representation before a properly constituted and unbiased panel; the Trust caused or permitted the Investigator of the allegations to become a witness and the effective prosecutor to become an adjudicator; and he was denied the right to cross examine the key witnesses who were called to give evidence against him.
His case is that, if the panel had included a clinician of the same discipline as himself, it would not have reached the erroneous conclusions it did and the Claimants contract would not have been wrongfully terminated.
The preliminary schedule of loss alleged that, but for his dismissal, Mr Edwards would have continued to work in his role as a consultant orthopaedic surgeon with the Trust until his retirement in 2022 and that he had suffered loss of earnings (including future earnings) in excess of 3.8 million.
By an application notice issued on 17 February 2009, the Trust applied to the court for an order that Mr Edwards claim for damages for loss in respect of a period in excess of his three months contractual notice period be struck out under CPR 24.4.
District Judge Jones acceded to the application.
Mr Edwards appealed.
Nicol J [2009] EWHC 2011 (QB) allowed the appeal, but only to the extent of holding that, subject to liability for breach of contract being established, in addition to compensation for the three months period of his contractual notice, Mr Edwards was also entitled to compensation for the additional period that it would have taken to conduct the disciplinary procedure if it were conducted and completed with reasonable expedition (the so called Gunton extension).
In allowing this additional compensation, the judge was applying the Court of Appeal decision in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Mr Edwards appealed to the Court of Appeal.
The lead judgment was given by Moore Bick LJ.
It was recorded at para 44 of his judgment that Mr Edwards was now advancing two discrete claims of breach of contract, namely (i) a claim of wrongful dismissal (termination of the contract without notice) and (ii) a claim that the Trust had failed to carry out the proper disciplinary procedure.
The failure to carry out the proper disciplinary procedure was alleged to have resulted in the findings of misconduct which damaged his reputation.
It was said that, even if Mr Edwards had continued in his employment with the Trust after the disciplinary process had concluded, he would still have suffered difficulty in obtaining (a) private work (b) expert witness work and (c) employment in a different NHS hospital in the event that he chose to leave Chesterfield Hospital.
The focus of the hearings before the Court of Appeal and the Supreme Court was on the claim for damages for loss of reputation resulting from the panels findings.
The Court of Appeal held that this second claim did not fall within the Johnson exclusion area and that Mr Edwards was in principle entitled to recover whatever damages he could prove he had suffered as a result of the Trusts failure to carry out the proper disciplinary procedure and that he was not limited in respect of that cause of action to compensation for the three months period or the three months period plus the Gunton extension.
Mr Sutton QC submitted to us that Mr Edwards should not be permitted to advance the second claim because it had not been pleaded in the particulars of claim.
There is some force in the submission that it had not been pleaded.
But the pleading point was not taken before the Court of Appeal.
The validity of the second claim was the subject of detailed submissions in the Court of Appeal.
It is too late for objection to be taken now.
At each stage of these proceedings, it has been accepted by the Trust that the court should proceed on the assumption that Mr Edwards will succeed in establishing all the allegations he makes in the particulars of claim.
The case of Mr Botham
Mr Botham was employed by the Ministry of Defence (MOD) as a youth community worker from 1988 until 30 September 2003.
His employment was terminable on three months notice.
He was suspended from work on 10 December 2002 and on 4 June 2003 charged with gross misconduct: it was alleged that he had behaved inappropriately in relation to two teenage girls.
Following disciplinary proceedings, on 30 September 2003 he was summarily dismissed for gross misconduct.
Because his dismissal was for gross misconduct in relation to young people, he was placed on the list of persons deemed unsuitable to work with children kept by the Department of Education and Skills pursuant to the Protection of Children Act 1999 (POCA).
Mr Botham brought a claim for unfair dismissal and wrongful dismissal in the Southampton Employment Tribunal.
By its liability judgment dated 17 May 2007, the tribunal found that he had been unfairly dismissed and that his summary dismissal was in breach of contract.
The conclusion of unfair dismissal was based on a number of findings including that the MOD had committed breaches of the express and implied terms of the contract of employment.
The express terms were set out in the Discipline Code contained in the MODs Personnel Manual and contained various requirements in relation to the disciplinary procedures that were to be followed.
After a remedies hearing on 19 October 2007, in its judgment dated 7 November 2007 the tribunal awarded Mr Botham damages for wrongful dismissal in the sum of approximately 7,000 based on loss of salary and benefits for the three months notice period; a basic award for unfair dismissal of 1,989 (after a 55% reduction for contributory fault); and a compensatory award for unfair dismissal of 53,500 (after a 55% reduction for contributory fault and the operation of the statutory cap).
Mr Bothams name had been removed from the unsuitable person POCA register on 27 July 2007.
The MODs appeal against liability was dismissed by the Employment Appeal Tribunal on 6 October 2008.
On 21 April 2009, Mr Botham issued proceedings in the High Court seeking damages for breach of the express terms of his contract of employment.
In his particulars of claim he relies on a number of findings that were made by the tribunal in its liability judgment that, in conducting the disciplinary process, the MOD failed to comply with several provisions of the Discipline Code.
The alleged breaches are (i) failing to establish the relevant facts before proceeding with the disciplinary action; (ii) failing sufficiently or at all to define the charge, set out the facts to support the charge and to provide and list any documentary evidence; (iii) recommending dismissal without a proper investigation of the facts; and (iv) causing or permitting the Deciding Officer to make reference to other unsubstantiated allegations or suspicions of other offences.
His case is that by reason of these breaches of contract, he was dismissed from his employment, suffered a loss of reputation, was placed on the POCA register and was precluded from further employment in his chosen field.
His claim for damages includes a claim for loss of future earnings.
His claim was dismissed by Slade J [2010] EWHC 646 (QB).
She noted at para 57 of her judgment that all the breaches of contract relied on by Mr Botham were alleged to have resulted in Mr Bothams dismissal and the damages claimed were consequential on the dismissal.
Accordingly, the claim fell within the Johnson exclusion area and the damages were not recoverable.
Mr Botham appealed to the Court of Appeal.
In view of the decision of the Court of Appeal in the case of Mr Edwards, on 1 September 2010 and by consent, Pill LJ allowed Mr Bothams appeal and granted the MOD permission to appeal to the Supreme Court.
Does the reasoning in Johnson preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract?
It is necessary to start with some background.
The statutory right to claim compensation for unfair dismissal was first introduced by the Industrial Relations Act 1971 (the 1971 Act).
It is clear from the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (Cmnd 3623) (the Donovan report) that the 1971 Act was intended to enhance the protection of employees.
The Donovan report stated at para 522: An employee has protection at common law against wrongful dismissal, but this protection is strictly limited; it means that if an employee is dismissed without due notice he can claim the payment of wages he would have earned for the period of notice.
Beyond this, the employee has no legal claim at common law, whatever hardship he suffers as a result of his dismissal.
Even if the way in which he is dismissed constitutes an imputation on his honesty and his ability to get another job is correspondingly reduced he cannotexcept through an action for defamationobtain any redress (see the decision of the House of Lords in [Addis v Gramophone Co Ltd [1909] AC 488]).
As the Donovan report stated, the relevant common law position was that stated in Addis.
There has been much debate as to whether the headnote to the law report of the decision in Addis accurately reflects the decision of the majority of the House of Lords: see, for example, per Lord Steyn in Mahmud at pp 50 51 and again in Johnson at paras 1 to 5 and 15 and 16.
The headnote is in these terms: Where a servant is wrongfully dismissed from his employment the damages for dismissal cannot include compensation for the manner of the dismissal, for his injured feelings, or for the loss he may sustain from the fact that the dismissal of itself makes it more
difficult for him to obtain fresh employment
But as Lord Nicholls said at para 2 in Eastwoods case, by the time of the Donovan report, it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The protection at common law was strictly limited.
The employer was entitled to bring the contract of employment to an end without cause.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard employees against unfair dismissal.
Parliament gave effect to this recommendation in the 1971 Act.
The relevant provisions are now contained in Part X of the 1996 Act.
An employee has the right not to be unfairly dismissed.
The remedies for unfair dismissal are set out in Chapter II of Part X. A complaint may be made to an employment tribunal.
If the tribunal upholds the complaint, it may make an order for reinstatement or re engagement or an award of compensation for unfair dismissal.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal and on the remedies available where unfair dismissal is proved.
The most striking of these are: (i) complaints of unfair dismissal must be brought within a period of three months and time will only be extended where timely presentation of the claim is not reasonably practicable (section 111); (ii) subject to exceptions for automatically unfair dismissals, the normal rule is that, in order to qualify to bring an unfair dismissal claim, an employee must have been continuously employed for not less than one year ending with the effective date of termination; (iii) there is a statutory cap on the level of the compensatory award which can be made by an employment tribunal (for dismissals on or after 1 February 2011 the cap is 68,400); and (iv) the employment tribunal has the power to reduce an employees compensation for unfair dismissal if it is satisfied that he has contributed to his dismissal by conduct which can be characterised as culpable or blameworthy (Nelson v British Broadcasting Corporation (No 2) [1980] ICR 110, 121 per Brandon LJ).
It can be seen, therefore, that Parliament decided to give a remedy that was strikingly less generous than that which the common law would give for a breach of contract in the ordinary way.
As Lord Nicholls said in Eastwoods case at paras 12 and 13, Parliament has addressed the highly sensitive and controversial issue of what compensation should be paid to employees who are dismissed unfairly.
In fixing the limits on the amount of compensatory awards, Parliament has expressed its view on how the interests of employers and employees, and the social and economic interests of the country as a whole, are best balanced in cases of unfair dismissal.
In Johnson, the employee claimed common law damages for breach of the implied term of trust and confidence.
He alleged that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable work.
His claim was struck out as disclosing no reasonable cause of action.
The ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal.
Lord Nicholls (para 2) was unwilling to create a new common law right covering the same ground as the statutory right not to be unfairly dismissed since it would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims.
He added that it would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law.
Lord Hoffmann also regarded the statutory background as determinative of the question whether the new common law right should be created.
He concluded (para 58) that for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent.
Lord Millett was of the same opinion.
At para 80, he said that the creation of the statutory right made the development of the common law for which the employee contended both unnecessary and undesirable.
He made the same points as those made by Lord Nicholls and Lord Hoffmann and added: even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Bingham agreed with Lord Hoffmann and Lord Millett and dismissed the appeal for the reasons they gave.
Only Lord Hoffmann in Johnson considered the question of what the position would be if the manner of the dismissal was in breach of express terms of the contract of employment.
He said: 60.
There is one further point.
During the argument there was some discussion of whether the provisions for disciplinary hearings were express terms of Mr Johnson's contract and what the consequences would be if they were.
No such express terms were pleaded and Mr Faulks, who appeared for Mr Johnson, was not enthusiastic about doing so.
Nevertheless, it may be useful to examine the matter in a little more detail. 61.
Section 1(1) of the 1996 Act provides that upon commencing employment, an employee shall be provided with a written statement of particulars of employment.
This includes, but is not limited to, the terms and conditions of employment concerning various matters, including the length of notice which the employee is obliged to give and entitled to receive to terminate his contract of employment (section 1(4)(e)).
Section 3(1) then provides that a statement under section 1 shall include a note. specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee. 62.
Consistently with these provisions, Mr Johnson was written a letter of engagement which stated his salary and summarised the terms and conditions of his employment, including the notice period.
Apart from the statement that in the event of gross misconduct, the company could terminate his employment without notice, it made no reference to disciplinary matters.
It was however accompanied by the employee handbook, which the letter of engagement said outlines all the terms and conditions of employment.
This was divided into various sections, the first being headed Employment terms and conditions.
These made no reference to the disciplinary procedure, which appeared in a subsequent section under the heading Other procedures.
There one could find the various stages of the disciplinary procedure: formal verbal warning, written warning, final written warning, culminating in dismissal, as well as the separate procedure for summary dismissal in cases of serious misconduct. 63.
So did the disciplinary procedures constitute express terms of the contract of employment? Perhaps for some purposes they did.
But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is Part X of the 1996 Act.
The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed.
So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson's employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts. 64.
Section 199(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 gives Acas power to issue Codes of Practice containing such practical guidance as it thinks fit for the purpose of promoting the improvement of industrial relations.
By section 207, a failure to comply with any provision of a Code is not in itself actionable but in any proceedings before an industrial tribunal any provision of the Code which appearsrelevant to any question arising in the proceedings shall be taken into account in determining that question.
In 1977 Acas issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
It explained why it was important to have disciplinary rules and procedures which were in writing and readily available to management and employees.
It said in paragraph 4: The importance of disciplinary rules and procedures has also been recognised by the law relating to dismissals, since the grounds for dismissal and the way in which the dismissal has been handled can be challenged before an industrial tribunal. 65.
In paragraph 10 it listed what disciplinary procedures should include.
The Unisys procedures have clearly been framed with regard to the Code of Practice. 66.
My Lords, given this background to the disciplinary procedures, I find it impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended that the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions and limits which Parliament had imposed on compensation for unfair dismissal.
The whole of the reasoning which led me to the conclusion that the courts should not imply a term which has this result also in my opinion supports the view that the disciplinary procedures do not do so either.
It is I suppose possible that they may have contractual effect in determining whether the employer can dismiss summarily in the sense of not having to give four weeks' notice or payment in lieu.
But I do not think that they can have been intended to qualify the employer's common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
Parliament has legislated on the subject of the disciplinary procedures applicable to contracts of employment on a number of occasions and in different ways.
I shall start with sections 1 and 3(1) of the 1996 Act.
Section 1 obliges an employer to provide the employee with a written statement of particulars of employment.
Section 3(1) provides: (1) A statement under section 1 shall include a note (a) specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee, (aa) specifying any procedure applicable to the taking of disciplinary decisions relating to the employee, or to a decision to dismiss the employee, or referring the employee to the provisions of a document specifying such a procedure which is reasonably accessible to the employee.
Section 3(1)(aa) was introduced on 1 October 2004 by section 35(2) of the Employment Act 2002 (the 2002 Act).
As is stated in Deakin and Morris (loc cit) at para 4.24: even if, in principle, contract and [the] statement [required by section 1] are conceptually discrete, in practice one or both of the parties may regard the statement as being equivalent to a contract in both form and effect.
Where the statement favours the employee, it represents strong prima facie evidence of the contract terms and the written particulars place a heavy burden on the employer to show that the actual terms of contract are different from those which he has set out in the statutory statement: per Browne Wilkinson J in System Floors (UK) Ltd v Daniel [1982] ICR 54, 58.
In so far as the statement specifies the disciplinary rules, it favours the employee because these rules are designed to ensure that the employee is not unfairly dismissed.
The effect of sections 1 and 3(1), therefore, is that Parliament has decided, at least in most cases, that contractual force should be given to applicable rules and procedures.
But Parliament has gone further than merely providing that if an employer has applicable disciplinary rules and procedures, they will normally have contractual effect.
It has recognised that a breach of disciplinary rules and procedures in the course of a dismissal process is relevant to the question whether the dismissal is unfair.
It has from time to time adopted different statutory mechanisms to encourage or enforce compliance with appropriate disciplinary procedures in order to protect employees from dismissals which are procedurally unfair.
Thus, in 1977, ACAS issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
Para 4 explained the importance of disciplinary rules and procedures which were in writing and readily available to management and employees: see para 64 of Lord Hoffmanns speech in Johnson.
The 1977 Code was revised in 1997.
Section 207 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act) provides that any provision of a Code of Practice which appears to be relevant to any question arising in unfair dismissal proceedings shall be taken into account in determining that question.
This is the point that was discussed by Lord Hoffmann at paras 64 and 65 of his speech.
The 2002 Act introduced statutory dispute resolution procedures: see section 29 and Schedule 2.
The dismissal and disciplinary procedures prescribed by Schedule 2 were similar to the ACAS procedures.
Section 30 provided: (1) Every contract of employment shall have effect to require the employer and employee to comply, in relation to any matter to which a statutory procedure applies, with the requirements of the procedure. (2) Subsection (1) shall have effect notwithstanding any agreement to the contrary, but does not affect so much of an agreement to follow a particular procedure as requires the employer or employee to comply with a requirement which is additional to, and not inconsistent with, the requirements of the statutory procedure.
Section 31 provided that if, in the case inter alia of unfair dismissal proceedings, it appeared to the employment tribunal that a claim to which the proceedings related concerned a matter to which one of the statutory procedures applied, and the statutory procedure was not completed before the proceedings began by reason of a failure of the employer or employee to comply with the requirements of the procedure, then the tribunal was required to increase or reduce any award in accordance with the provisions of section 31(2) or (3) (as the case may be).
Section 34 introduced a new section 98A into the 1996 Act.
It provided: (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal, (b) the procedure has not been completed, and (c) the non completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements.
Pursuant to the powers conferred by section 31(6), the Secretary of State made the Employment Act 2002 (Dispute Resolution) Regulations 2004 (SI 2004/752).
These were detailed regulations inter alia about the application of the statutory procedures and what constituted compliance with a requirement of a statutory procedure.
These procedures proved to be unduly complicated.
It was concluded by the Government that they carried an unnecessarily high administrative burden for both employers and employees and have had unintended negative consequences which outweigh their benefits: Better Dispute Resolution: A Review of Employment Dispute Resolution in Great Britain (the Gibbons Review) DTI, March 2007, p 8.
The Government therefore decided to return to reliance on an ACAS Code of Practice, but provided for tribunals to have a discretion to adjust awards by up to 25% in the event of non compliance with the Code.
Accordingly, sections 29 33 and 34(2) and Schedule 2 of the 2002 Act were repealed by the Employment Act 2008 (the 2008 Act) and the 2004 Regulations lapsed upon the repeal.
Section 3 of the 2008 Act introduced a new section 207A into the 1992 Act.
It provides that, if in the case inter alia of unfair dismissal proceedings it appears to an employment tribunal that the claim concerns a matter to which a relevant Code of Practice applies and the employer or employee has unreasonably failed to comply with the Code in relation to that matter, then the tribunal may, if it considers it just and equitable to do so, increase or reduce any award it makes to the employee by no more than 25%.
A relevant Code of Practice means a Code of Practice which relates exclusively or primarily to procedure for the resolution of disputes.
Relevant Codes of Practice have been issued by ACAS from time to time.
Thus, for example, the 2003 Code states that it: provides practical guidance to employers, workers and their representatives on The statutory requirements relating to disciplinary and grievance issues; What constitutes reasonable behaviour when dealing with disciplinary and grievance issues; Producing and using disciplinary and grievance procedures.
The April 2009 Code states that it sets out the basic requirements of fairness that will be applicable in most cases; it is intended to provide the standard of reasonable behaviour in most instances.
To summarise, under section 207 of the 1992 Act, any non compliance with the ACAS Code of Practice relevant to a question arising in unfair dismissal proceedings was to be taken into account in determining that question.
Under the 2002 Act, Parliament adopted the direct approach of introducing mandatory dispute resolution procedures and, if a statutory procedure had not been completed for reasons attributable to the employer, providing for the employee to be regarded as unfairly dismissed and for an adjustment of awards in unfair dismissal proceedings.
Under the 2008 Act, Parliament reverted to the earlier model (but with modifications) of providing that an unreasonable failure to comply with a relevant Code of Practice may be reflected in the amount of an award of compensation for unfair dismissal.
The important point is that in each case, Parliament linked a failure to comply with disciplinary or dismissal procedures with the outcome of unfair dismissal proceedings.
To adopt the language of Lord Hoffmann at para 63 of Johnson, the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair dismissal.
It follows that, if provisions about disciplinary procedure are incorporated as express terms into an employment contract, they are not ordinary contractual terms agreed by parties to a contract in the usual way.
At para 38 of his judgment, Moore Bick LJ said whether the parties intend the provisions relating to disciplinary procedures to sound in damages depends on the true construction of the contract.
As a general proposition, this is obviously true.
But in the present context, it ignores the statutory link between the provisions about disciplinary procedures and the law of unfair dismissal.
The question remains whether, if provisions about disciplinary procedure are incorporated into a contract of employment, they are intended to be actionable at common law giving rise to claims for damages in the ordinary courts.
Parliament intended such provisions to apply to contracts of employment inter alia in order to protect employees from unfair dismissal and to enhance their right not to be unfairly dismissed.
It has specified the consequences of a failure to comply with such provisions in unfair dismissal proceedings.
It could not have intended that the inclusion of these provisions in a contract would also give rise to a common law claim for damages for all the reasons given by the House of Lords in Johnson for not extending the implied term of trust and confidence to a claim for damages for unfair manner of dismissal.
It is necessarily to be inferred from this statutory background that, unless they otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
In these circumstances, I agree entirely with para 66 of Lord Hoffmanns speech.
The unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of a dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates disciplinary procedures leading to a dismissal.
Parliament has made certain policy choices as to the circumstances in which and the conditions subject to which an employee may be compensated for unfair dismissal.
A dismissal may be unfair because it is substantively unfair to dismiss the employee in the circumstances of the case and/or because the manner in which the dismissal was effected was unfair.
The manner may be unfair because it was done in a humiliating manner or because the procedure adopted was unfair inter alia because the agreed disciplinary procedure which led to the dismissal was not followed.
It may be unfair because defamatory findings were made which damage the employees reputation and which, following a dismissal, make it difficult for the employee to find further employment.
Any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal subject to the various constraints to which I have referred.
Parliament did not intend that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament for the exercise of this statutory jurisdiction.
Lord Phillips agrees that (at any rate in the absence of express agreement) damages are not recoverable for breach of an express term of an employment contract as to the manner of dismissal.
He reaches this conclusion by applying and extending the Addis principle (ie as a matter of common law), presumably, for reasons of principle or policy.
But the statutory dimension and the link between contractual disciplinary procedures and the statutory law of unfair dismissal cannot be ignored.
I think that Lord Phillips implicitly recognises this.
This is because he concludes that to permit a claim for damages for failure to comply with a disciplinary code leading to dismissal would undermine the decisions in Johnson and Eastwood.
I agree.
But those decisions are based on the intention of Parliament derived from the unfair dismissal legislation.
I need to deal with the suggestion that was made during the argument (accepted by Lady Hale and Lords Kerr and Wilson) that claims such as those made by Mr Edwards and Mr Botham would have been available as common law claims for breach of contract before the enactment of the 1971 Act and that neither that statute nor its successors should be interpreted as having taken away existing rights enjoyed by employees.
The answer to this argument is that the right to claim damages in respect of the manner of a dismissal did not exist before the 1971 Act: see paras 20 and 21 above.
I accept that there has been debate as to what Addis decided.
It is not necessary to enter into this debate.
It is, however, clear that the Donovan report which inspired the 1971 Act stated that the law was as summarised in the headnote to the law report to Addis and Lord Nicholls expressed the same view at para 2 in Eastwoods case.
In any event, at the very least it was not clear whether an employee could claim damages for the unfair manner in which he was dismissed.
No example was cited to us of any case decided before the 1971 Act in which an employee was awarded damages for breach of contract for the unfair manner in which he had been dismissed.
In these circumstances, I cannot accept that an application of the reasoning in Johnson should be rejected because it involves saying that the 1971 Act took away an employees existing rights and that this could not have been intended by Parliament.
That is not to say that an employer who starts a disciplinary process in breach of the express terms of the contract of employment is not acting in breach of contract.
He plainly is.
If that happens, it is open to the employee to seek an injunction to stop the process and/or to seek an appropriate declaration.
Miss ORourke QC submitted that, if in such a situation there is a breach of contract sufficient to support the grant of an injunction but (for whatever reason) the employee does not obtain an injunction, it is anomalous if the normal common law remedy of damages is in principle not available to him.
The short answer to this submission is that an injunction to prevent a threatened unfair dismissal does not cut across the statutory scheme for compensation for unfair dismissal.
None of the objections based on the co existence of inconsistent parallel common law and statutory rights applies.
The grant of injunctive or declaratory relief for an actual or threatened breach of contract would not jeopardise the coherence of our employment laws and would not be a recipe for chaos in the way that, as presaged by Lord Millett in Johnson, the recognition of parallel and inconsistent rights to seek compensation for unfair dismissal in the tribunal and damages in the courts would be.
Miss ORourke relies on the Court of Appeal decision in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 and in particular the House of Lords decision in Skidmore v Dartford and Gravesham NHS Trust [2003] UKHL 27; [2003] ICR 721 and on the Court of Appeal decision in Gunton [1981] Ch 448 in support of the conclusion reached by the Court of Appeal in the present case.
In Saeed at para 12, Hale LJ said that if an employee thinks that the employer has chosen the wrong disciplinary procedure, then he can try to have it changed in advance or seek damages after the event.
This was not a dismissal case and in any event it pre dates Johnson.
Understandably, it does not engage with the reasoning in Johnson and therefore it does not shed light on the issue that arises on these appeals.
Skidmore is an unfair dismissal case.
It was held that the employer had adopted the wrong disciplinary procedures and the employees unfair dismissal claim was remitted to an employment tribunal.
At para 15, Lord Steyn said that it was for the employer to decide which disciplinary route should be followed, but that the decision should be in accordance with the contract.
If a non conforming decision was taken and acted upon, there is a breach of contract resulting in the usual remedies.
Lord Steyn expressed his agreement with what Hale LJ had said in Saeed.
But these observations were obiter dicta.
The question of what remedy would be available to the employee if a non conforming decision was taken was not in issue in that case.
No doubt that is why Johnson was not cited to the House and not mentioned by Lord Steyn and why he did not grapple with the relationship between the statutory code which regulates unfair dismissal claims and common law claims for damages for breach of contract.
Although great respect should always be paid to any observations of Lord Steyn, I do not think that it would be right to place weight on these dicta.
Gunton was a wrongful dismissal case.
The claimant was employed under a contract of service terminable on one months notice.
Regulations prescribing a procedure for the dismissal of an employee on disciplinary grounds were incorporated into his contract.
The employer gave one months notice of termination, but without first having followed the prescribed disciplinary procedure in all respects.
It was held by the Court of Appeal by a majority that the employee could not lawfully be dismissed on a disciplinary ground until the procedure had been properly carried out and that his dismissal was accordingly wrongful.
The measure of damages for wrongful dismissal was loss of wages up to the date on which the contract could properly have been determined by the employer (on an application of the least onerous principle: see McGregor on Damages, 18th ed (2010), at para 8 094.) It was held that the period by reference to which damages were to be assessed was a reasonable period for carrying out the disciplinary process plus one month: see per Buckley LJ at p 470 and per Brightman LJ at p 474.
Miss ORourke submits that the case of Gunton is an example of damages being awarded for breach of a disciplinary process leading to a dismissal.
In my view, this submission is based on a misreading of the case.
It was a conventional wrongful dismissal case involving the breach of a term relating to a notice of termination.
It was held that it was not open to the employer to give one months notice without first undertaking the disciplinary process properly.
As Brightman LJ put it at p 474, the failure to undertake the process properly meant that the notice was invalid and a nullity.
It was not a claim for damages for breach of the disciplinary process.
It was a claim for wrongful dismissal for purporting to terminate the contract on the basis of an invalid notice.
In my view, there is nothing in this case which is inconsistent with the Johnson principle.
I would, therefore, hold that the reasoning in Johnson is a bar to a claim for damages for breach of an express term of an employment contract as to the manner of a dismissal.
The demarcation boundary
But that is not an end to the enquiry because the question remains in any given case whether the claim falls within the Johnson exclusion area or not.
The issue of where the boundary is to be found was considered in Eastwood [2005] 1 AC 503.
Lord Nicholls gave valuable guidance at paras 27 to 33: 27.
Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28.
In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29.
Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over. 30.
If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
Particularly in cases concerning financial loss flowing from psychiatric illnesses, some of the practical consequences are far from straightforward or desirable.
The first and most obvious drawback is that in such cases the division of remedial jurisdiction between the court and an employment tribunal will lead to duplication of proceedings.
In practice there will be cases where the employment tribunal and the court each traverse much of the same ground in deciding the factual issues before them, with attendant waste of resources and costs. 31.
Second, the existence of this boundary line means that in some cases a continuing course of conduct, typically a disciplinary process followed by dismissal, may have to be chopped artificially into separate pieces.
In cases of constructive dismissal a distinction will have to be drawn between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract.
The loss flowing from the impugned conduct taking place before actual or constructive dismissal lies outside the Johnson exclusion area, the loss flowing from the dismissal itself is within that area.
In some cases this legalistic distinction may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed.
Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed. 32.
The existence of this boundary line produces other strange results.
An employer may be better off dismissing an employee than suspending him.
A statutory claim for unfair dismissal would be subject to the statutory cap, a common law claim for unfair suspension would not.
The decision of the Court of Appeal in Gogay v Hertfordshire County Council [2000] IRLR 703 is an example of the latter.
Likewise, the decision in Johnson v Unisys Ltd [2003] 1 AC 518 means that an employee who is psychologically vulnerable is owed no duty of care in respect of his dismissal although, depending on the circumstances, he may be owed a duty of care in respect of his suspension. 33.
It goes without saying that an interrelation between the common law and statute having these awkward and unfortunate consequences is not satisfactory.
The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal.
Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss.
So, understandably, employees and their legal advisers are seeking to side step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's implied contractual obligation to act fairly.
This situation merits urgent attention by the Government and the legislature.
The question in each case is, therefore, whether or not the loss founding the cause of action flows directly from the employers failure to act fairly when taking steps leading to dismissal and precedes and is independent of the dismissal process (Lord Nicholls at para 29).
In other words, the court must decide whether earlier events do or do not form part of the dismissal process (Lord Steyn at para 39).
This is a fact specific question.
As Lord Nicholls observed at paras 15 and 30 to 33, drawing the boundary line in this way leads to unsatisfactory and anomalous results.
One of these is that an employer may be better off dismissing an employee than suspending him.
But this is the inevitable consequence of the interrelation between the common law and statute.
The unfair dismissal legislation occupies the unfair dismissal territory to the exclusion of the common law, but it does not impinge on any cause of action which is independent of a dismissal (such as a common law claim for damages for suspension in breach of contract).
It is instructive to see how the House of Lords approached this question in the Eastwood case itself.
The case of Eastwood v Magnox concerned two employees (Mr Eastwood and Mr Williams) both of whom pursued claims for unfair dismissal before the tribunal which were compromised.
They both then started proceedings in the county court claiming that they had suffered personal injuries in the form of psychiatric illnesses caused by a deliberate course of conduct by certain individuals using the machinery of the dismissal process.
On the assumed facts, the House of Lords held that these claims were independent of the dismissal process and did not fall within the Johnson exclusion area.
The claimants had acquired a cause of action for breach of contract before their dismissal.
On the other hand, as we have seen (para 24 above) in Johnson itself, the claim was for damages for the mental breakdown that the claimant alleged that he had suffered as a result of the manner and the fact of his dismissal: that claim did fall within the Johnson exclusion area.
The third case considered by the House of Lords in the Eastwood case was that of Mr McCabe.
Mr McCabe lodged a complaint of unfair dismissal with a tribunal on the grounds that his dismissal was in breach of the relevant disciplinary procedures.
He was awarded compensation and then started proceedings in the High Court against the employer claiming damages inter alia for breach of contract.
The primary complaint in his statement of claim as originally served was that by reason of the councils failure to investigate the allegations properly and to conduct the disciplinary hearings properly and his dismissal he had sustained psychiatric illness.
But later (and in response to the decision in Johnson), he sought to amend his statement of claim by limiting the focus of his complaint to the period before his dismissal, that is to the period of his suspension and to the employers failure to carry out a proper investigation of the allegations against him.
On the assumed facts on which the amended claim was based, the House of Lords held that Mr McCabes cause of action had accrued before his dismissal and was independent of it.
Do the present cases fall outside the Johnson exclusion area?
Mr Edwards
It is accepted by Miss ORourke that Mr Edwards claim for unfair dismissal falls within the Johnson exclusion area.
But she submits that his claim for damages for loss of reputation consequent on the findings of misconduct made by the disciplinary panel does not.
She contends that these findings resulted from the fact that (in breach of the contractual disciplinary procedures) the disciplinary panel was not properly constituted and acted in a manner which was procedurally unfair.
This breach, she submits, occurred independently of the dismissal.
The undisputed facts are that Mr Edwards disciplinary hearing was held on 9 February 2006.
He was notified of his summary dismissal on the following day.
The decision was confirmed in a long letter from the chairman of the disciplinary panel dated 16 February which set out in detail the allegations and the panels findings.
The complaint is that the panels erroneous conclusions flowed from these findings.
The findings and conclusions were first published in the letter which was sent six days after the decision to dismiss had been communicated to Mr Edwards and were contained in the letter which confirmed his dismissal.
In my view, it is impossible to divorce the findings on which Mr Edwards seeks to found his claim for damages for loss of reputation from the dismissal when they were the very reasons for the dismissal itself.
In these circumstances, Mr Edwards claim for damages for loss of reputation is not one of those exceptional cases to which Lord Nicholls referred in Eastwood where an employers failure to act fairly in the steps leading to a dismissal causes the employee financial loss.
This claim does not arise from anything that was said or done before the dismissal.
It is not independent of the dismissal.
It arises from what was said by the Trust as part of the dismissal process.
It follows that I cannot accept the distinction made by Lord Kerr and Lord Wilson between the findings or reasons for the dismissal and the dismissal itself.
I agree with what Lord Mance says about that.
Mr Botham
The case pleaded at para 20 of the particulars of claim is that as a result of the MODs breaches of contract, Mr Botham foreseeably, was dismissed from employment, and was caused (wrongly) to suffer loss and damage to his reputation and to be precluded from further employment in his chosen field and to be placed on the register of persons deemed unsuitable to work with children.
The damages claimed include loss of earnings and other benefits from the date of dismissal.
The statement of facts and issues agreed for the purposes of the appeal state that Mr Botham was placed on the register as a consequence of the dismissal for gross misconduct (para 5) and the relief sought by him includes damages on the grounds that his dismissal and his inclusion on the POCA precluded him from further employment as a youth community worker (para 15(3)).
In my view, this case is a fortiori that of Mr Edwards.
In Mr Edwards case, it is alleged that the damages for loss of reputation were caused by the erroneous findings made by the panel, rather than the dismissal.
Mr Botham goes further and says that the damages he claims for loss of reputation were caused by the dismissal itself.
For the reasons already given, it falls within the Johnson exclusion area.
That was the view of Slade J and I agree with it.
The consent order made by the Court of Appeal on 31 August 2010 should therefore be set aside.
Conclusion on the main issue in relation to Mr Edwards and Mr Botham
It follows that I would allow the appeals by the Trust and the MoD.
In both cases, the employment was terminated by dismissal.
Had they both been suspended, the position would have been completely different.
As it is, their claims are for damages arising from what was said in the course of the dismissal process and must be rejected for the reasons that I have given.
As I have said (para 10 above), Nicol J held that, subject to liability for breach of contract being established, the maximum amount of damages recoverable by Mr Edwards for wrongful dismissal was compensation for the three months notice period and the Gunton extension period.
There was some discussion before us as to whether Gunton was correctly decided.
The point was described as difficult by Staughton LJ in Boyo v Lambeth London Borough Council [1994] ICR 727 at 747H 748A.
But in view of my conclusion on the main issue, this point does not arise and I do not find it necessary to express a view on whether Gunton was correctly decided.
Claims by Mr Botham for costs as damages
Cost of legal representation in the disciplinary proceedings
Mr Botham had the benefit of legal assistance in the disciplinary proceedings.
It is common ground that, in view of the nature of the charge against him, it was reasonable and foreseeable that he would obtain such assistance.
Mr Reynold QC submits that, since the charge was preferred in circumstances which constituted a breach of the express terms of the contract of employment, Mr Botham is entitled to his legal costs on ordinary principles as loss flowing from the breach.
I reject this submission largely for the reasons given by Ms Outhwaite QC and the judge.
At para 6 of its remedies judgment, the Employment Tribunal made a finding that Mr Bothams culpable conduct was the sole reason for the disciplinary procedure.
It follows that the cost of legal assistance during the disciplinary process was caused by Mr Bothams culpable conduct in triggering the disciplinary process and did not arise out of a breach of contract by the MOD.
Furthermore, Parliament designed the Tribunal system so that there was no need for legal representation and, therefore, litigation costs are not normally recoverable.
It would be odd if an employee was entitled to recover costs for legal representation for the disciplinary proceedings before his employer, but could not recover costs for legal representation before the Employment Tribunal itself.
Litigation costs before the Employment Tribunal and the Employment Appeal
Tribunal
Mr Reynold submits that, but for the breaches of contract, the costs of legal representation before the Employment Tribunal and the Employment Appeal Tribunal would not have been incurred.
Mr Botham is, therefore, entitled to recover these costs as damages for breach of contract on normal common law principles.
I would also reject this submission again largely for the reasons given by Ms Outhwaite and the judge.
The unfair dismissal claim arose necessarily out of the dismissal and, for the reasons given earlier, fell within the Johnson exclusion area.
Legal costs were incurred because Mr Botham had been dismissed.
A claim in respect of these costs falls within the Johnson exclusion area and is not recoverable as damages for breach of contract for the same reasons as damages are not recoverable for loss of earnings and benefit.
Every unfair dismissal claim involves at the very least an alleged breach of the implied term of trust and confidence, and probably involves an alleged breach of express contractual terms as well.
If the court were to award damages for legal representation in dismissal proceedings, such claims would arise following all unfair dismissal claims.
This would defeat Parliaments statutory regime which was intended to provide a fast, cost free resolution to dismissals which are alleged to be unfair by a specialist tribunal.
All such claims would result in satellite litigation to recover litigation costs.
Nor would there be any reason to confine such satellite litigation to successful claims for unfair dismissal.
Mr Botham chose to bring a claim for unfair dismissal before the Employment Tribunal.
Having elected to bring a claim in a forum where no costs are usually awarded, he should bear the cost consequences of having done so.
There are strong policy reasons for awarding costs only in exceptional circumstances.
The statutory regime should not be circumvented so as to allow a damages action for costs.
Conversely, the MOD had no choice of forum.
It responded to the claim after the forum had been chosen by Mr Botham.
If the MOD had successfully defended the unfair dismissal claim, it too would not have been able to recover its costs.
Overall conclusion
For the reasons that I have given, I would allow the appeal of the Trust in the case of Mr Edwards and of the MOD in the case of Mr Botham.
LORD PHILLIPS
When initially I saw in draft the judgment of Lord Dyson, my reaction was that it was so plainly right in the result that my inclination was simply to add my agreement to it.
The judgments of Lady Hale and Lord Kerr have, however, caused me to give further consideration to this difficult area of the law.
While I have not changed my mind as to the result, the route by which I have reached it is not on all fours with that of Lord Dyson.
For that reason I am adding my judgment to those of Lord Dyson and Lord Mance.
Each of the claimants was dismissed from his employment after a disciplinary hearing.
Each disciplinary hearing should have complied with a disciplinary code that had contractual force.
Each hearing failed to comply with the code.
Each claimant alleges that as a consequence of this the relevant tribunal wrongly made findings of misconduct that have inhibited him from obtaining alternative employment and thus caused him financial loss.
Each claimant has sought to recover this loss in an action in the High Court for breach of contract.
I shall describe each of these claims as a stigma claim.
Mr Edwards has combined his stigma claim with what is now a separate claim for wrongful dismissal.
He has brought no proceedings other than these two claims.
Mr Botham initially commenced proceedings in the Southampton Employment Tribunal, pursuant to legislation that I shall describe compendiously as unfair dismissal legislation.
He successfully claimed compensation for both wrongful dismissal and unfair dismissal.
His damages for the former were limited to three months salary and benefits, in respect of the period of notice of which he was deprived.
His compensation for the latter was reduced to reflect a finding of 55% contributory fault and the effect of the statutory cap.
Mr Botham then commenced his stigma claim in the High Court.
Neither claim succeeded at first instance.
Each was held to be precluded because it fell within the so called Johnson exclusion area.
Mr Edwards appealed successfully to the Court of Appeal, after which Mr Botham made a similar appeal, which was allowed by consent.
Two questions arise. (1) Are the stigma claims outside the Johnson exclusion area because they are discrete from and independent of the claims for wrongful dismissal? (2) Are the stigma claims outside the Johnson exclusion area because they are claims for breaches of express, and not implied, contractual terms? The majority answers both questions in the negative.
Lady Hale answers the second question in the affirmative, and holds that the judgments of the Court of Appeal were correct for this reason.
Lord Kerr and Lord Wilson consider that the first question is critical.
So far as Mr Edwards is concerned, his stigma claim is sound because it is discrete and independent of the claim for wrongful dismissal.
Mr Bothams claim is, however, for loss consequential on his dismissal.
In these circumstances his claim is invalid.
Lord Dyson holds that each stigma claim arises out of the manner of the claimants wrongful dismissal.
I agree with him.
If that conclusion is correct it is, I believe, common ground that each claim must fail if Lord Hoffmanns obiter dicta in Johnson were correct.
Lord Dyson has set out at para 1 of his judgment the implied term upon which the claim in Johnson was founded (the trust and confidence implied term).
The majority in Johnson, Lord Steyn dissenting on the point, held that this implied term had no application to the manner of dismissal of an employee by his employer.
This was because Parliament had made alternative provision for this situation by the unfair dismissal legislation.
Lord Hoffmann alone expressed the view that, even if the manner of dismissal involved the failure to comply with a disciplinary code that had contractual effect, no claim at common law could be based upon that failure.
The vital question in the present case is whether Lord Hoffmann was correct.
That question might well have been raised in Eastwood.
There also the trust and confidence implied term was invoked to found common law claims by employees who had been dismissed after disciplinary hearings that had been improperly conducted.
Each of the employees claimed that the hearings had caused them psychiatric damage prior to dismissal.
The employers sought to rely on the Johnson exclusion.
No one suggested that the claims could be founded on breaches of express contractual obligations in relation to the disciplinary hearings.
Instead, the claims were held to be viable on the basis that they fell outside the Johnson exclusion area in as much as their causes of action preceded and were independent of their subsequent dismissals.
Lord Steyn devoted a lengthy concurring speech to the suggestion that there might be good reason to reconsider Johnson.
He did not suggest that it could simply be finessed by bringing a claim for failure to comply with the relevant disciplinary codes.
In Johnson at para 66, when dealing with the intention of Parliament when passing section 3(1) of the 1996 Act, Lord Hoffmann observed that the disciplinary procedures could not have been intended to qualify the employers common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
The intention of which he spoke was both that of Parliament and that of the parties themselves.
This is echoed by a passage in the judgment of Lord Dyson, when applying Lord Hoffmanns reasoning in the present case.
Lord Dyson sets out at para 26 of his judgment the critical passage from the speech of Lord Hoffmann in Johnson.
He then expands on the Parliamentary history of the requirement that disciplinary procedures should be incorporated in contracts of employment.
He demonstrates that Parliament also provided that failure to comply with those procedures should have specific consequences in unfair dismissal proceedings.
Lord Dyson at para 38 observes that disciplinary procedures incorporated into an employment contract are not ordinary contractual terms.
At para 39 he concludes that it is necessarily to be inferred from the statutory background that, unless the parties otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, on Lord Dysons analysis, no claim to damages can be founded on breach of a disciplinary code that is incorporated into the contract because it is to be inferred that the parties have so agreed.
This echoes Lord Hoffmanns reference to the intention of the parties themselves.
Courts often refer to the intention of Parliament.
When they do so the intention is usually implied or imputed.
The courts ascribe to Parliament an intention that the relevant legislation will bear a meaning that is rational and coherent.
The intention is thus somewhat artificial.
It is even more artificial in the present context to impute to every party to a contract of employment the same intention that Lord Hoffmann and Lord Dyson have ascribed to Parliament in relation to the effect of disciplinary codes.
While this may be a legitimate approach to making sense of this area of the law, I believe that there is a more satisfactory route that leads to the conclusion that Lord Dyson has reached in this case.
This case is about remoteness of damage.
That is what Addis was about.
In Addis the plaintiff was employed to manage a business in Calcutta on terms that entitled him to 6 months notice.
He was given 6 months notice, but immediately replaced, with the result that he returned to England.
His claim for breach of contract succeeded before judge and jury.
The jury awarded him 600 for wrongful dismissal.
In the House of Lords the principal issue was as to the measure of damage to which he was entitled.
There were a number of problems.
First it was not clear whether the breach of contract lay in constructively dismissing the plaintiff without notice, or in refusing to let him act as manager during the notice period.
Significantly, Lord Loreburn LC held at p 490 that it made no difference.
The damages were the same on either footing.
The second problem was that it was not clear on what bases the jury had awarded 600 damages.
Lord Atkinson at pp 494 and 496 and Lord Collins at pp 497, 498 and 501 considered the case on the footing that the jury might have purported to award exemplary damages.
The majority of their Lordships considered, however, that the case raised the issue of principle of whether it was open to the jury to award damages for the consequences of the dismissal in so far as these extended beyond direct financial loss.
They considered whether damages could be awarded in respect of injury to feelings or the fact that the dismissal of itself made it more difficult to obtain fresh employment see Lord Loreburn at p 491, Lord Atkinson at p 493, Lord Collins at p 497 and Lord Shaw of Dumferline at p 504.
It is particularly material in the present context that they considered whether wrongful dismissal could give rise to a claim for stigma damages.
The majority held that it could not.
The reason for this was that such a head of loss, together with any claim for distress or injury to feelings, was properly the subject of a claim in tort rather than in contract see Lord James of Hereford at p 492, Lord Atkinson at p 496, Lord Gorell at p 502 and Lord Shaw at pp 503 and 504.
Thus Addis was not a case about the scope of the contractual duty of an employer, but a case about the measure of damage recoverable for breach of the employers contractual duty.
As Lord Dyson points out at para 19, the 1971 Act was passed on the basis that the law had not changed since Addis.
That was the first of a series of statutes, set out by Lord Dyson, that put in place a complex scheme that provided a specifically limited remedy for employees for unfair dismissal that took account of the circumstances of the dismissal, including procedural unfairness and, in particular, any failure to comply with the procedural code that the legislation required to be incorporated in the contract.
In the meantime the common law relating to contracts of employment developed in a manner favourable to employees, both by the development of implied obligations on the part of the employer and by recognising heads of damage that could be recovered both in tort and in contract that had not been recognised at the time of Addis.
One such obligation arose under the trust and confidence implied term.
In Mahmud the House of Lords held that this implied term could give rise to stigma damages.
Stigma damage constituted a novel head of damage for breach of a contract of employment.
The stigma damages recognised in Mahmud were not caused by wrongful dismissal.
Stigma damages cannot be awarded for wrongful dismissal without reversing Addis.
In Addis at p 500 Lord Collins summarised, with approval, an observation of Lord Coleridge CJ in Maw v Jones (1890) 25 QBD 107 as follows: dismissal with an imputation might well be thought by a jury to hurt the plaintiffs prospects of finding another situation, and on that ground alone might give a legal claim to consequential damages within the ordinary rule.
The majority held, however, that stigma damages could not be recovered as a head of damage flowing from wrongful dismissal.
Johnson was decided on the premise that Addis remained good law see Lord Millett at para 68 although he did go on at para 70 to raise the question of whether Mahmud might have changed the position.
Addis was not challenged in Eastwood.
Addis has not been challenged in the present case.
Until Addis is reversed it remains the law that stigma damages cannot be recovered for wrongful dismissal.
The stigma effect can, however, be taken into account in a claim under statute for unfair dismissal.
If the courts in developing the common law principles of measure of damage can exclude a claim for stigma damages for breach of contract that consists of wrongful dismissal, it is equally open to them to exclude such a head of claim for breach of contract that consists of a failure to comply with a disciplinary code.
The question in this case is whether this Court should do so.
If this Court follows the reasoning of the House of Lords in Johnson and in Eastwood this question must be answered in the affirmative.
The chain of causation linking a failure to follow a disciplinary procedure with stigma is more tenuous than the chain of causation linking wrongful dismissal with stigma.
If the law does not permit recovery of stigma damages in the latter case, it makes no sense to permit it in the former.
More generally, to permit such a claim based on a failure to comply with a disciplinary code leading to dismissal undermines the decisions of the House of Lords in Johnson and Eastwood.
The same is not true of Gunton, if that case was rightly decided, for that case applied the same restrictive approach to measure of damage as Addis.
On my reading of Lady Hales judgment, I am inclined to suspect that her quarrel is not simply with Lord Hoffmanns obiter dicta, it is with Addis, with Johnson and with Eastwood.
If so, she stands shoulder to shoulder with Lord Steyn.
They may both be right.
It may be that this area of the law merits fundamental review.
That is not, however, the battleground on which this Court was invited to tread.
The issue before this Court is narrower.
It is whether the reasoning in the latter two cases can be subverted by applying to a claim for breach of a disciplinary code a head of damage that the law does not presently permit to be advanced in a claim for wrongful dismissal.
I agree with Lord Dyson and Lord Mance that the answer to that question is no.
Accordingly, I would allow each of these appeals.
LORD MANCE
I agree with Lord Dysons reasoning and conclusions.
Mr Bothams case, as pleaded in paragraph 20 of his particulars of claim and as Slade J said in paragraphs 17 18, 25, 29 and 66 of her judgment, is that the Armys breach of contractual terms relating to the implementation of the disciplinary procedure laid down in the Army Discipline Code led to his wrongful dismissal, which in turn led to his alleged loss (save the costs of disciplinary proceedings).
Lord Dyson concludes, and I agree, that such a claim is unsustainable in the light of the decision in Johnson v Unisys Ltd [2003] 1 AC 518, the dicta of Lord Hoffmann in that case at para 66, and the further considerations relating to the common law and statutory position mentioned by Lord Dyson at paras 19 to 48.
The law would be incoherent otherwise.
Lord Phillips prefers an analysis according to which the present case is governed by a principle of remoteness which he derives from Addis v Gramaphone Co Ltd [1909] AC 488.
That case establishes that an employee cannot recover damages for injured feelings, mental distress or damage to his reputation, arising out of the manner of his dismissal: Johnson v Unisys Ltd, para 44, per Lord Hoffmann.
But it is questionable whether this is a principle of remoteness, as opposed to causation: see eg Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51D E, per Lord Steyn and Johnson v Unisys Ltd, paras 39 and 44, citing McLachlin J s dictum in Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 39 that A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination in support of a conclusion that the only loss caused by a wrongful dismissal flows from a failure to give proper notice or make payment in lieu.
Put another way, a dismissal is wrongful where there is such a failure (and, of course, no basis for summary dismissal).
Other circumstances (such as the reasons for the failure, the employers state of mind or the impact on the employee) are simply irrelevant to the breach or the loss recoverable for it.
The respondent employees case on the present appeals is that the disciplinary procedures which they say were prescribed were, in contrast, by their nature intended to give then contractual protection against unfair dismissal, meaning dismissal for unfair reasons or in an unfair manner.
On this basis, they submit, there is no reason to treat as irrecoverable any financial loss caused to them by stigma resulting from improper disciplinary procedures leading to unfair findings.
I see the argument, but its acceptance would, as Lord Phillips points out, undermine the decisions of the House of Lords in both Johnson and Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503.
These decisions were in turn based upon a consideration of the legal position resulting from Parliaments introduction of a statutory scheme relating to and providing carefully delimited remedies for unfair dismissal.
Just as the employees argument depends upon the rationale for the prescribed disciplinary procedures, namely to avoid unfair dismissal, so the answer to it depends upon the existence of a statutory scheme providing remedies for unfair dismissal.
Employers and employees when contracting, in particular when introducing prescribed disciplinary procedures, must be taken to have in mind the statutory scheme relating to unfair dismissal, and to contemplate that scheme as providing the relevant remedies in the event of unfair dismissal.
It does not seem to me artificial to ascribe such an intention to them, any more than it did to Lord Hoffmann in Johnson, paras 63 and 66.
They cannot have intended that procedures put in place to avoid the need to invoke the statutory scheme should in fact circumvent and make irrelevant the careful limitations of that scheme.
Parties could by express agreement attach a different significance to the prescribed disciplinary procedures.
But, in the absence of express contrary agreement, the Johnson exclusion area must be taken to cover both loss arising from dismissal and financial loss arising from failures in the steps leading to such dismissal, unless the loss claimed can be regarded as occurring quite independently of the dismissal, as the psychiatric loss claimed by the claimants in Eastwood could be.
There are further potential objections to Mr Bothams proposed case.
It depends upon the propositions (a) that one alleged breach of contract or duty can be said to have caused the commission of another breach of contract or duty by the same person or entity, and (b) that where recovery for the latter breach is limited, a claim may, by relying on the former breach as causing the latter breach, avoid the limit.
Both propositions are in my view open to question.
First, so far as the failure to take proper disciplinary steps can be separated from the dismissal, then it constituted not a reason for dismissing, but a reason for not dismissing.
The dismissal was a fresh decision, which the employer ought not to have taken and without which there would have been no loss.
But, second, assuming the first point in Mr Bothams favour, any loss that he suffered flowed from the wrongful or unfair dismissal, and was recoverable either as compensation for breach of contract or for unfair dismissal, subject in either case to the relevant limits.
If the wrongful or unfair dismissal is to be attributed causatively to the prior failure to take proper disciplinary steps, I find it difficult to see why or how the damages recoverable for the prior failure should or could exceed the compensation recoverable for the later dismissal.
However, these points were not fully developed in argument, and I express no further view on them.
Reference was made in argument to the decision in King v University Court of the University of St Andrews [2002] IRLR 252, where the University had employed the claimant on terms that it was entitled . for good cause shown to terminate the appointment of the employee by giving three months notice in writing.
The claimant claimed on two bases, first, a breach of the alleged express term not to terminate his employment except on good cause shown, and, secondly, a breach of an alleged implied term of trust and confidence consisting in an alleged failure to act fairly and reasonably in investigating whether good cause was shown.
The issue before Lady Smith concerned the second basis of claim.
She distinguished Johnson on the basis that the University was only entitled to terminate the claimants appointment by three months notice for good cause shown, and she held that this involved the implication that there should, before any dismissal, be a prior hearing and investigation, fairly conducted in accordance with a mutual duty of trust and confidence.
Whether any and if so what damages could be recovered on that basis, in circumstances where the claimant had been dismissed (and the only damages pleaded were alleged to follow from the dismissal) was not discussed.
In any event, the decision, at first instance on a preliminary issue, concerned a contract very different to the present, in particular a contract containing express term which was treated as involving an obligation not to dismiss save for good cause shown.
The decision does not assist on the issues now before the Supreme Court.
Mr Edwardss written case identifies the issue as being whether a person who suffers damage as a result of findings of personal or professional misconduct leading to dismissal and loss of professional status that were made against him in disciplinary proceedings conducted in breach of contract, but which would not otherwise have been made, can recover damages at large (para 30); and the question for the Supreme Court as being whether damages flowing from a breach of an express term of an employment contract, anterior to and separate from dismissal, are in any way restricted; and, if so, on what basis (para 31).
In para 67 it accepts that there will be a burden on Mr Edwards to prove that if the procedure had been followed, no dismissal would have resulted, but suggests that, even if this could not be shown, he might still recover limited damages of an unspecified nature.
In para 95 it also asserts that the disciplinary findings would still have caused him recoverable damages, by way of restricted future working opportunities, even if they had not been followed by his dismissal by the Trust.
These ways of putting the case depart from or expand upon the pleaded particulars of claim, as I read them.
While I agree that that should not itself be an absolute bar to their pursuit, I would myself have wished to have a draft amended pleading, before any decision to permit their pursuit.
As, however, I have come to the conclusion that they cannot succeed, this is unnecessary.
The fact is that Mr Edwards was dismissed on the basis of and contemporaneously with the disciplinary findings about which he seeks to complain.
In so far as his claim consists of loss allegedly suffered by dismissal, it falls directly within the exclusion area which was recognised in Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 and which I have referred to in paragraphs 90 to 94 above.
But, in my opinion, it is quite unrealistic in this context to seek to differentiate any of the loss he has allegedly suffered from his dismissal.
Any breach of disciplinary procedure did not cause of itself identifiably separate loss or illness, as was alleged in Eastwood v Magnox Electric Ltd. [2004] UKHC 35, [2005] 1 AC 503, where (a) Mr Williams claimed that he had suffered stress related illness caused by a long campaign of deliberate harassment independently of his subsequent dismissal, and (b) Mr McCabes claim was for psychiatric injury caused by events occurring before any dismissal.
Where the findings reached in the disciplinary proceedings and the dismissal are, as in the present case, a part of a single process, the remedy for any unjustified stigma lies, short of circumstances establishing a claim for defamation, in the restoration of reputation which may in the ordinary course be expected to result from a successful claim for wrongful or unfair dismissal.
Since writing this judgment, I have read Lord Kerrs judgment, with which Lord Wilson agrees, by which they would allow the Ministry of Defences appeal in the case of Mr Botham, but dismiss the Trusts appeal in the case of Mr Edwards, as well as Lady Hales judgment, by which she would dismiss both appeals.
Essentially, Lord Kerr would permit Mr Edwards to recover damages for any reputational damage from the adverse findings accompanying his dismissal that he can show would have flowed from such findings even if they had not been accompanied by dismissal.
On this approach, although the alleged breach in failing to follow the correct investigatory process could not give rise to damages for dismissal (other than damages in lieu of notice), it could give rise to damages in respect of financial loss caused by the reasons given for the dismissal.
I am unable to agree with this suggested distinction.
The reasons given were part and parcel of the dismissal.
The reasons would be very relevant to a claim for unfair dismissal, as Lord Dyson explains in para 40.
But they fall to be dealt with in that context, rather than by a claim for damages (at least in the absence of actionable defamation).
The contrary approach advocated by Lord Kerr would outflank both the rule in Addis set out by Lord Dyson in para 20 and the Johnson exclusion as explained in Johnson itself and in Eastwood, as well in paras 90 to 94 above.
Bearing in mind the modern prevalence of disciplinary procedures (required under section 3(1) of the Employment Rights Act 1996 to be noted in any employees written statement of particulars of employment), it could also make commonplace what Lord Nicholls identified in para 29 in Eastwood as exceptional.
Further, on Lord Kerrs approach, damages could not and would not be awarded by reference to what actually happened.
The dismissal would have to be discounted.
Damages would be awarded on a hypothesis of adverse findings issued independently of any dismissal that is, either without any disciplinary measure at all or in conjunction with some different measure such as suspension.
This would involve an enquiry which was both speculative and unreal.
Quite apart from the difficulty of an assumption that the same findings would have been made without dismissal, how would one sensibly assess whether any and what loss would have been suffered from the findings if there had been no dismissal? The exercise would also involve, to an even greater degree, distinctions regarding causation and consequences of the sort that Lord Hoffmann found problematic in Johnson at paras 48 and 54.
As Lord Nicholls made clear in Eastwood at para 32, the applicability of the Johnson exclusion and so the recoverability of loss may depend upon whether an employer dismisses the employee, as opposed (for example) to simply suspending him.
The fact of dismissal can make all the difference.
Here, whatever the correct disciplinary process may or should have been, it required the employer to explain the reasons if dismissal was the outcome.
When applying the Johnson exclusion, the dismissal and the reasons accompanying it cannot be distinguished in the manner proposed.
If there was a failure in the disciplinary process, it led to both, and, if the law is to be coherent, both must fall within the Johnson exclusion.
Lady Hales approach would treat damages as recoverable at large for any breach of any contractually provided disciplinary procedure, irrespective of whether dismissal followed or led to the loss claimed.
For reasons indicated in paras 90 to 94 above, I do not agree with that approach.
The case of an employee with an express contractual right not to be dismissed save for cause is not before us, and gives rise to different issues to those which are.
Damages for wrongful dismissal in breach of such a contract would on the face of it be measured on the basis that the contract would have continued unless and until the employee left, retired or gave cause for dismissal (in relation to the prospects of all of which an assessment would have to be made), but questions would no doubt also arise as to whether the employee had accepted or had to accept the dismissal and/or had to mitigate or had mitigated his or her loss.
In view of my conclusion on the main issues, it is unnecessary to express any view about the decision of the Court of Appeal in Gunton v Richmond on Thames London Borough Council [1981] Ch 448, or in particular the so called Gunton extension, whereby the damages awarded for wrongful dismissal in that case were calculated by adding the one months contractual notice period to a notional period which a proper disciplinary process would have taken.
The Trust did not appeal against Nicol Js decision to award Mr Edwards damages in accordance with the Gunton extension.
Before the Supreme Court the Trust simply put a question mark in principle against the correctness of the extension.
Mr Edwards and Mr Bothams Cases sought to distinguish Gunton on its facts as well as to draw some support, for a proposition that damages can be recoverable at large, from the recovery under the Gunton extension of damages calculated by reference to the notional period of a proper disciplinary process.
I do not think that Gunton lends any real weight to that contention.
Indeed, the claimant in Gunton was by amendment seeking damages continuing until his normal retirement age (subject only to the contingencies of redundancy or dismissal under a proper disciplinary process).
These he was not awarded.
The reasoning upon which the Gunton extension was based appears to operate independently of what would or might have been the outcome of a proper disciplinary process.
It is not binding upon us.
The extension may be difficult to reconcile with Lord Hoffmanns view in Johnson, para 66, that any contractual disciplinary procedures cannot have been intended to qualify the employers common law power to dismiss without cause on giving such [ie due contractual] notice.
But, assuming it to be correct, it neither compels nor leads to any different conclusion to that which I have reached on the central issues whether Mr Edwards and Mr Botham can recover damages at large for the breaches of disciplinary procedures which they allege.
I therefore agree with Lord Dyson that both the appeal of the Trust in the case of Mr Edwards and the appeal of the Ministry of Defence in the case of Mr Botham be allowed.
LADY HALE
In my view the Court of Appeal reached the right conclusions for the right reasons and both appeals should be dismissed.
As the majority take a different view, I shall be brief.
But I should perhaps declare an interest, as the only member of this court to have spent a substantial proportion of her working life as an employee rather than as a self employed barrister or tenured office holder.
There is no reason at all to suppose that, in enacting the Industrial Relations Act 1971, Parliament intended to cut down upon or reduce the remedies available to employees whose employers acted in breach of their contracts of employment.
Quite the reverse.
Parliament intended to create a new statutory remedy for unfair dismissal which would supplement whatever rights the employee already had under his contract of employment.
Parliament did that because most employees had very few rights under their contracts of employment.
In particular, although many employees had a reasonable expectation that they would stay in their jobs unless and until there was a good reason to dispense with their services, most of them had no legal right to do so.
The 1971 Act gave them the right not to be dismissed without what appeared at the time to be a good reason, determined after a fair process.
They were to be compensated, within modest limits, not principally for their hurt feelings but for the loss of their job.
That the main target of the new jurisdiction is the loss of the job is borne out by the later inclusion of the remedy of reinstatement.
The common law would not normally give damages for the loss of a job.
Then, as now, the great majority of contracts of employment gave both the employer and the employee the right to terminate their relationship on giving the prescribed period of notice.
So if the employer terminated the relationship summarily, without giving the required period of notice, he would be liable to compensate the employee for that which he would have received had his contract been kept and no more: Addis v Gramophone Company Ltd [1909] AC 488, per Lord Atkinson at p 496.
In other words, he would get his pay during the period of notice which he should have had and any contractual commission or bonus which he would have earned during that period.
The majority of the House of Lords in Addis decided that the wrongfully dismissed employee was not entitled to any extra damages, either for the injury to his feelings caused by the way in which he had been dismissed or for the fact that his dismissal might make it more difficult for him to get another job.
Lord Collins disagreed: he thought that damages for wrongful dismissal might include compensation for the difficulty caused in getting another job.
But he was in a minority of one.
The majority view was that the employee was entitled to the normal measure of damages in contract, to be placed in the position in which he would have been had his contract been properly performed, and any consequential loss within the contemplation of the parties, but no more.
In short, there was no right to be compensated for the longer term consequences of the loss of a job.
But let us suppose a contract of employment where the employer is only entitled to dismiss the employee for good cause.
Rightly or wrongly, most University teachers employed under the contracts of employment which were current in the 1960s believed that they could only be dismissed for cause.
If judges, instead of being office holders, were employed under contracts of employment, they could only be dismissed for cause.
Under such a contract, if the employer dismisses the employee without good cause, the employee is entitled to be compensated for the consequences of the loss of the job.
Obviously, the calculation of damages will have to take account of contingencies such as the possibility of good cause arising in the future.
This is the application of the ordinary principles of the law of contract.
However, a great many contracts of employment, perhaps now the vast majority, fall between these two extremes.
They couple the right of either party to terminate it on giving a certain period of notice with a provision that, if the employer wishes to terminate it on disciplinary grounds, he must follow a prescribed procedure.
Such contracts could be analysed in a number of ways.
First, the contract could mean that the employee can be dismissed on notice for non disciplinary grounds, such as incapacity or redundancy or indeed for any other reason the employer might have for wanting to dismiss him; but that, if the employer wants to dismiss him on disciplinary grounds, he can only do so by following the required procedure.
Failure to follow this procedure correctly would lead to damages for loss of the job.
That was the result reached by the trial judge in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Second, the contract could mean that if the employer wants to dismiss the employee on disciplinary grounds, he can only do so after following the prescribed procedure, but that having followed the prescribed procedure and irrespective of the result, he remains entitled to dismiss the employee by giving the usual period of notice.
Thus the employee is entitled only to damages for the period during which the correct disciplinary process would have been taking place, plus the contractual notice period on top of that (presumably on the assumption that whatever findings the disciplinary process might have reached would not have justified a summary dismissal).
That is the result reached by the Court of Appeal in Gunton (the difference of opinion in the Court of Appeal was as to the effect of a repudiatory breach of contract by the employer whether it automatically brought the contract to an end or whether it only did so if accepted by the employee, an important point which does not arise in this case but does arise in another which may shortly come before this Court).
A third analysis is that the contract could mean that the employer always remains free to dismiss on giving the required period of notice, with or without following the contractual disciplinary process, so the employee is only ever entitled to the Addis measure of damages.
The two cases before us both fall into that ambiguous category.
There is a contractual notice period but also a contractual disciplinary process which (we must assume in Mr Edwards case) was not complied with.
But in neither case are we concerned with damages for loss of the job as such.
Mr Botham made a successful claim for unfair dismissal to the employment tribunal.
Mr Edwards withdrew his.
Both are concerned with the adverse consequences of the factual findings of a disciplinary process conducted in breach of contract.
In Mr Edwards case, those findings are said to have made it impossible for him to obtain another post as an NHS consultant and to have adversely affected his earnings in private practice.
In Mr Bothams case, those findings meant that the resulting dismissal had to be reported to the Department of Education and Skills, so that for a while he was placed on the register of people deemed unsuitable to work with children (the POCA list).
These are losses which flow from the breach of contractually agreed disciplinary processes.
Why should they not be recoverable in the ordinary way? Lord Phillips says that it is a matter of remoteness.
These are not losses which fall within the reasonable contemplation of the parties when they make the contract.
I have difficulty with that.
Why include disciplinary processes within the employment contract if you do not expect that they will influence the employers decision? The losses flowing from the breach of a contractually agreed disciplinary process are much more directly related to the breach of contract than are the losses flowing from the dismissal as such, especially where the employer was entitled to dismiss whenever he wanted provided that he gave the contractual notice.
There were no such contractually agreed processes in Addis, so the cases are readily distinguishable.
But for the others in the majority, it is said that such damages would fall within the so called exclusion area created by the House of Lords decision in Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, as further examined and explained in the House of Lords decision in Eastwood v Magnox Electric plc [2004] UKHL 35, [2005] 1 AC 503.
Both of those cases concerned alleged breaches of the term, now implied into all contracts of employment, that neither party will, without good cause, conduct themselves in a manner calculated to destroy or seriously damage their relationship of mutual trust and confidence.
Arnold J is generally credited as the first to recognise the existence of this implied term in Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84.
If the employer acted in breach of the term, the employee was entitled to treat himself as constructively dismissed and thus to take advantage of the remedies for unfair dismissal which Parliament had now provided.
Lord Nicholls explained in Eastwood v Magnox, at p 325, that this development of the common law was prompted by the 1971 Act, to enable employees to regard themselves as dismissed if their employers had conducted themselves in a way which no employee could be expected to tolerate.
In Johnson v Unisys Ltd, the majority of the House of Lords decided that the implied term of trust and confidence did not give the employee a right of action for damages at common law resulting from the manner in which he had been dismissed.
The House was persuaded that Parliament had provided the limited remedy of unfair dismissal to cover that ground and it would be wrong to develop the common law to circumvent the limits which Parliament had laid down.
In Eastwood v Magnox Electric, on the other hand, the House recognised that if the employee could establish a cause of action for breach of the implied term independently of the dismissal, then that was not excluded by the statutory regime.
However, as Lord Nicholls explained, at para 30, If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
He went on to illustrate the difficulties and anomalies, not least that an employer might have to pay full compensation to an employee who was suspended in breach of the implied term but only the statutorily limited compensation to an employee who was dismissed: see Gogay v Hertfordshire County Council [2000] IRLR 703.
This case is ample demonstration of the wisdom of Lord Nicholls words.
The majority have held that the Johnson exclusion area covers the breach of express as well as implied terms in an employment contract and that the particular losses claimed here fall within the exclusion area.
Lord Kerr and Lord Wilson also hold that the exclusion area extends to breach of express terms as well as the implied term; but they hold that it only extends to damage resulting from the dismissal itself, and not to damage resulting from the findings of the wrongful disciplinary process rather than the dismissal.
This enables them to distinguish between Mr Edwards and Mr Botham.
Mr Edwards is claiming for the adverse consequences of the findings made against him rather than for his dismissal as such.
Mr Botham is claiming for the adverse consequences of being placed on the POCA list, which could only happen because of his dismissal.
It is understandable to wish to distinguish between the two, as Mr Bothams claim is designed to circumvent the tribunals finding of contributory fault.
It seems to me, however, that it has long been recognised that the law of contract is defective in not recognising the concept of contributory fault in certain circumstances: see, for example, the Law Commissions Report on Contributory Negligence as a Defence in Contract (1993, Law Com No 219).
The solution to problems like that is principled and comprehensive law reform.
We have seen how the Johnson exclusion area has been productive of anomalies and difficulties.
There is no reason at all to extend it any further than the ratio of that case.
As the Court of Appeal held in this case, it should be limited to the consequences of dismissal in breach of the implied term of trust and confidence.
The House of Lords was persuaded that the common law implied term, developed for a different purpose, should not be extended to cover the territory which Parliament had occupied.
In fact, the territory which Parliament had occupied was the lack of a remedy for loss of a job to which the employee had no contractual right beyond the contractual notice period.
Parliament occupied that territory by requiring employers to act fairly when they dismissed their employees.
But there was and is nothing in the legislation to take away the existing contractual rights of employees.
There was and is nothing to suggest that Parliament intended to limit the entitlement of those few employees who did and do have a contractual right to the job, the right not to be dismissed without cause.
It is for that reason that I am afraid that I cannot agree that the key distinction is between the consequences of dismissal and the consequences of other breaches.
The key distinction must be between cases which must rely on the implied term to complain about the dismissal and cases which can rely on an express term.
I am uncertain as to how the majority would regard the case of an employee with the contractual right only to be dismissed for cause.
Like Lord Kerr, I am puzzled as to how it can be possible for an employee with a contractual right to a particular disciplinary process to enforce that right in advance by injunction but not possible for him to claim damages for its breach after the event.
And I am also puzzled why it should make a difference if the right to claim damages is expressly spelled out in the contract.
I would have dismissed both appeals.
LORD KERR (WITH WHOM LORD WILSON AGREES)
The Report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan Report) was commissioned because of the perceived inadequacy of the law relating to dismissal of employees.
This much, at least, is uncontroversial in this case.
But how did it set about making recommendations to deal with those inadequacies? Did it recommend, and more particularly, did its offspring, the Industrial Relations Act 1971, provide, a comprehensive and exclusive scheme for the compensation of those who had been improperly dismissed from employment? Or was the 1971 Act a statute simply designed to provide wrongly dismissed employees with greater rights than the then only available claim in respect of their dismissal viz for wages that they would have earned during the notice period, while leaving intact any other contractual rights that might have been available to them?
An insight into the essential purpose of the Donovan report can be obtained from a number of its passages, albeit that they do not speak directly to the issue that has been starkly expressed above.
Paragraph 522 of the report (quoted by Lord Dyson at para 19 of his judgment) sets the scene.
Beyond a claim for wrongful dismissal (with the limited redress that afforded) an employee had no rights whatever in relation to the circumstances in which he was dismissed.
The only action that he could take about the manner of his dismissal, where that involved an imputation on his honesty, was for defamation.
This was a situation which the Donovan report considered could no longer be tolerated.
Those who were unfairly dismissed, because of the potentially massive impact that such an event had on their lives, needed to have something more to compensate them beyond the few weeks or even months wages that they would have earned during a notice period.
The scene thus set is emphatically in the realm of dismissal from employment and the impact that dismissal has on the future fate of the dismissed employee.
That theme emerges strongly from para 526 of the report: In practice there is usually no comparison between the consequences for an employer if an employee terminates the contract of employment and those which will ensue for an employee if he is dismissed.
In reality people build much of their lives around their jobs.
Their incomes and prospects for the future are inevitably founded in the expectation that their jobs will continue.
For workers in many situations dismissal is a disaster.
For some workers it may make inevitable the breaking up of a community and the uprooting of homes and families.
Of course, at the time that this was written, contractual provisions in relation to disciplinary procedures, if not unheard of, were certainly not the staple of most contracts of employment.
It is not surprising, therefore, that there was no reference to the consequences of a failure on the part of employers to adhere to such provisions, whether in relation to the termination of employment or as regards the disadvantages that an employee might suffer in terms of future employability, even if he was not dismissed.
Significantly, there is no suggestion in the report that its authors contemplated a complete charter for all claims arising from dismissal from employment.
On the contrary, the statement in para 529 that it [is] urgently necessary for workers to be given better protection against unfair dismissal strongly suggests that the primary purpose of the proposals for a change in the law was to enlarge the remedies available to employees rather than to confine the remedies to a single unitary system.
Indeed, at para 551 the report states ideally, the remedy available to an employee who is found to have been unfairly dismissed is reinstatement in his old job.
The committee actually considered whether the remedy for unfair dismissal should be confined to reinstatement.
That stance would sit oddly with the notion that the legislation was designed to be a charter that would bring the curtain down on all manner of claims by employees following their dismissal.
Now it is true that at para 553 it is stated: The labour tribunal should normally be concerned to compensate the employee for the damage he has suffered in the loss of his employment and legitimate expectations for the future in that employment, in injured feelings and reputation and in the prejudicing of further employment opportunities. (emphasis supplied).
But, although at first sight this might be thought to indicate that actions for reputational damage should be subsumed into the unfair dismissal claim, I do not consider that this was the reports intention.
Obviously, the fact that one has been dismissed from employment, whatever the circumstances of the dismissal, can carry a disadvantage in terms of future employability.
It is right that this should be reflected in the recoverable compensation where the dismissal is unfair.
But that circumstance does not alone warrant the conclusion that breach of a term of the contract which leads to a finding that there has been misconduct on the part of the employee and which leads in turn to dismissal cannot have contractual consequences beyond the enhancement of a claim for unfair dismissal.
As a matter of elementary contract law, a term which binds an employer to a particular form of disciplinary hearing, if breached, will give rise to a claim on the part of the employee for the consequences of the breach.
Indeed, the employers in these cases concede that such a term would found an application for an injunction to restrain its breach.
But it is argued that when one comes to a remedy following the breach (as opposed to in anticipation of it) a claim for damages is not viable because of the effect of the 1971 Act and succeeding statutory provisions.
It is conceivable that legislation can have the effect of removing or nullifying a contractual right and it will be necessary to examine the basis on which it is said that this has occurred in the present context.
It is important, however, to start with the clear understanding, that, absent any such legislative intervention, there can be no question of terms in an agreement in relation to the conduct of disciplinary hearings being different from other contractual terms.
This is so, in my view, whether they have become incorporated into the contract as a result of statutory requirement or are the product of independent agreement between the parties to the contract.
Nothing in the 1971 Act suggests that Parliament intended to restrict an employees rights under his contract of employment.
If, at the time of the enactment of that legislation, an employees contract of employment included a term that his employer would conduct disciplinary proceedings against him according to a particular set of rules and if, in breach of that term, the employer failed to adhere to those rules, any loss suffered by the employee in consequence would surely be compensatable on a breach of contract claim.
As Hale LJ said in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 at para 12: The employer who is contemplating disciplinary action against an employee has to decide which procedure should be followed.
If the employee thinks that the employer has made the wrong choice, he can try to have it changed in advance or seek damages after the event.
The court will have to perform its usual task of construing the contract and applying it to the facts of the case.
I did not understand either of the employers in these appeals to challenge the correctness of that statement of the law although it is, of course, right, as Lord Dyson has pointed out in para 44, that Saeed was decided before Johnson (Johnson v Unisys Ltd [2003] 1 AC 518).
It will be necessary to say something presently about the effect that the later decision may have had on the reasoning in the earlier case but, for present purposes, Saeed is important authority for the proposition that breach of a contractual term in relation to the conduct of a disciplinary hearing could be relied on by an employee in a claim for damages.
Lord Dyson has observed that Saeed was not a dismissal case but that does not affect the essential point.
There is nothing unusual about breach of such a term giving rise to a claim for damages.
The importance of Saeed to the present appeals lies in its recognition that the contractual right to a particular form of disciplinary proceeding is no different from other contractual rights.
Ms Outhwaite QC suggested that a claim based on such a contractual right, if pursued after dismissal, would involve the creation of a new cause of action.
I do not accept that.
It is a perfectly conventional claim in contract involving the breach of an agreed term giving rise to loss on the part of the employee.
If one accepts that there is a claim in contract if there is no termination of employment, an impossibly anomalous situation arises if the claim cannot be pursued when the employment is terminated.
Suppose that someone who was the subject of disciplinary proceedings had an offer of extremely remunerative employment and that this was withdrawn as the result of adverse findings in the disciplinary proceedings but those findings did not result in his dismissal, would he be entitled to seek damages for the loss of his prospective new employment? Why not? If he has a contractual right to a properly constituted tribunal and can show that such a tribunal would not have made the findings that were instrumental in the offer of employment being withdrawn, can he not say that the failure to constitute a proper tribunal was a breach of a duty owed to him under contract? And if he can show that, as a direct consequence of that breach, he suffered a loss, can he not maintain an action for compensation for breach of contract? This does not represent a novel action or a novel development of the common law.
It is merely the application of settled principles of contract law to a particular set of circumstances.
Moreover, if an employee can maintain such an action if he is not dismissed, why should he not be able to maintain it if he is dismissed? The loss of the chance of more remunerative employment does not, in the mooted example, flow from the dismissal; it is the direct consequence of the adverse findings.
There is no logical reason to draw a distinction between the situation where he has not been dismissed and that where he has been.
The employers in these appeals attempt to confront this anomaly by saying that an injunction can be obtained and the employees legal rights should be confined to that.
But what is the legal or juridical basis for that assertion? As a matter of first principle, an injunction is available on the basis that a legal wrong is anticipated.
If that legal wrong materialises, why should it not be actionable at the suit of the person who could have obtained the injunction?
This point, albeit in a somewhat different context, was expressed by Lord Nicholls in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2005] 1 AC 503.
In that case one of the claimants, having obtained the statutory maximum compensation for unfair dismissal, sought damages for psychiatric injury caused by the defendant employers suspension of him and its failure to inform him of allegations made against him or to carry out a proper investigation of those allegations.
This was said to represent a breach of the necessary relationship between employer and employee of trust and confidence and breach of the employers duty to provide a safe system of work.
At para 27 Lord Nicholls said: If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
In the present appeals, on Mr Edwards case, he had a contractual right to have his disciplinary hearing conducted by a tribunal constituted as stipulated in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
At what point did this right (which for the purposes of the appeal, we must assume existed) give rise to a cause of action? Mr Edwards claims that there was a breach of the contractual right as soon as the wrongly constituted panel was convened.
Did the cause of action arise then? Or did it first materialise when the decision to dismiss him was taken? It might be argued that Mr Edwards suffered no loss until he was summarily dismissed but this seems to me to take too narrow a view of the position.
The Trust accepts that, if the facts as he asserts them are established, Mr Edwards could have applied for an injunction to prevent the tribunal from considering his case.
That (rightly made) concession must proceed on the premise that, on those facts, he already had a cause of action at that stage.
On Lord Nicholls analysis in Eastwood, therefore, if Mr Edwards can establish his case on the pleaded factual assertions, he had a cause of action at law before his dismissal which should remain unimpaired by his subsequent dismissal.
Mr Bothams case is somewhat different.
In the agreed Statement of Facts and Issues in his case it is stated that [a]s a consequence of the dismissal for gross misconduct, Mr Botham was reported to the Department of Education and Skills and was placed on the register of persons deemed unsuitable to work with children (emphasis supplied).
The reputational damage suffered by Mr Botham is therefore directly linked to his dismissal rather than any defect in the procedures which led to it.
The employers in both cases argue, however, that both involve claims for damages arising from the unfair manner of their dismissal and that the reasoning in the Johnson and Eastwood cases preclude such claims.
It is therefore necessary to look more closely at both decisions.
As Lord Dyson has pointed out (in paras 19 21), the background to the 1971 Act and the Donovan report was that at common law an employee was not entitled to recover damages in respect of the manner of his dismissal.
Moreover, an employee could only recover damages if he was actually dismissed.
If he had chosen to leave employment because of mistreatment by his employer, he could not maintain an action for wrongful dismissal.
In mitigation of the harshness of this rule, the courts developed the concept of the implied term of mutual trust and confidence which, shortly stated, stipulates that an employment contract is subject to the implied term that the parties to it may not conduct themselves in a manner likely to destroy the confidence and trust that is essential to the relationship of employer and employee: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
It was the concept of the implied term of mutual trust and confidence which predominated in Johnson.
The claimant sought to rely on such a term to promote a claim at common law relating to the manner of his dismissal.
He alleged that because of the way in which he had been dismissed, he had suffered a mental breakdown and was unable to work.
His claim was therefore inextricably, indeed uniquely, linked to the manner of his dismissal.
And the manner of his dismissal was in turn said to be unlawful because it was in breach of the implied term of mutual trust and confidence.
The issues which the House of Lords had to squarely face, therefore, were (i) whether the implied term of mutual trust and confidence could be used as a foundation for a claim that focused exclusively on the manner in which the employee was dismissed; and (ii) whether a common law action claiming damages could be maintained on that basis, notwithstanding that Parliament had legislated to provide a comprehensive code for compensation of unfair dismissal claims.
In dismissing the employees appeal, Lord Nicholls said in para 2 that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed.
At para 47 Lord Hoffmann suggested that it would be jurisprudentially possible to imply a term which would give a remedy in Mr Johnsons case but he doubted the wisdom of doing so.
This was not the basis on which he dismissed the appeal, however.
His reasons for doing so are contained in para 54: The remedy adopted by Parliament was not to build upon the common law by creating a statutory implied term that the power of dismissal should be exercised fairly or in good faith, leaving the courts to give a remedy on general principles of contractual damages.
Instead, it set up an entirely new system outside the ordinary courts, with tribunals staffed by a majority of lay members, applying new statutory concepts and offering statutory remedies.
Many of the new rules, such as the exclusion of certain classes of employees and the limit on the amount of the compensatory award, were not based upon any principle which it would have been open to the courts to apply.
They were based upon policy and represented an attempt to balance fairness to employees against the general economic interests of the community.
At para 79 Lord Millett suggested that, if the 1971 Act and subsequent legislation in this field had not been enacted, the courts might well have developed the law by imposing a more general obligation upon an employer to treat his employee fairly even in the manner of his dismissal.
He explained why this had not been necessary in para 80: the creation of the statutory right has made any such development of the common law both unnecessary and undesirable.
In the great majority of cases the new common law right would merely replicate the statutory right; and it is obviously unnecessary to imply a term into a contract to give one of the contracting parties a remedy which he already has without it.
In other cases, where the common law would be giving a remedy in excess of the statutory limits or to excluded categories of employees, it would be inconsistent with the declared policy of Parliament.
In all cases it would allow claims to be entertained by the ordinary courts when it was the policy of Parliament that they should be heard by specialist tribunals with members drawn from both sides of industry.
And, even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Dyson has suggested that the ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal (para 24).
Moore Bick LJ in the Court of Appeal in Edwards case cast it in slightly different terms.
At para 23 of his judgment he said: the ratio is that the common law does not imply into a contract of employment a term that the employer will not act unfairly towards the employee in relation to his dismissal and that the courts are not at liberty to develop the common law implied term of trust and confidence in order to give rise to such an obligation.
I would prefer to express the ratio in terms that more clearly recognise the two separate aspects of the decision.
In the first place, the House of Lords rejected the notion that the implied term of mutual trust and confidence had any role in determining the nature of the employers obligations at the time of the dismissal of the employee.
Secondly, it concluded that compensation for loss flowing from the manner in which an employee is dismissed must be sought within the statutory scheme devised by Parliament in the 1971 Act and continued in successor enactments.
It seems to me that it is the latter of these two which is the more relevant to the issues that arise on this appeal.
Importantly, I do not construe anything in the opinions in Johnson as casting doubt on the correctness of Hale LJs statement in Saeed that choice of the wrong form of disciplinary action can give rise to a claim for damages.
Indeed, para 44 of Lord Hoffmanns speech would appear to contemplate precisely that type of action.
He was there discussing the effect of Addis v Gramophone Co Ltd [1909] AC 488 (in which it had been held that if the way in which an employee was dismissed constituted an imputation on his honesty he could not except through an action in defamation obtain any redress).
On that subject, Lord Hoffmann said this: if wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation.
On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addiss case does not stand in the way. (emphasis supplied)
A claim for breach of contract arising from the employers selection of the wrong form of disciplinary proceeding need not be a claim for unfair or wrongful dismissal.
The choice of the wrong procedure might lead to dismissal but if the employer is contractually bound to follow a particular route, his failure to do so will give rise to a cause of action which can be entirely independent of any claim in respect of termination of employment.
The two aspects of the Johnson decision are reflected in the opinions of the House of Lords in the later cases of Eastwood and McCabe.
Perhaps significantly, at para 8 of his opinion, Lord Nicholls characterised the claim in Johnson as one which relied on breach of the trust and confidence implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for unfair dismissal.
It is clear from this and other statements made by Lord Nicholls that reliance on the implied term in a claim for damages unrelated to dismissal would be viable.
It was because Mr Johnson's claim was founded on the fact that he had been dismissed, and the trust and confidence implied term could not be applied to dismissal itself that it was bound to fail see para 10 of Eastwood.
In the most important part of his speech in Eastwood (at least, so far as the present appeals are concerned) in paras 27 29, Lord Nicholls discussed what he described as the boundary line drawn by the Johnson decision.
I have already quoted from para 27 (at para 135 above).
It is now necessary to set this passage out in full: The boundary line 27 Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employees remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28 In the ordinary course, suspension apart, an employers failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29 Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employers failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over.
A number of important principles can be distilled from these paragraphs: i) If a cause of action is in existence before dismissal, it is not extinguished by subsequent dismissal.
As I understand Lord Nicholls opinion, that statement holds true even if the dismissal is consequent on the state of affairs that gave rise to the cause of action; ii) If financial loss occurs (as it normally will in a dismissal situation) from the dismissal itself, such loss is not recoverable other than by a claim for unfair dismissal.
Although Lord Nicholls does not address the question directly (since he did not need to do so), it seems to me to be consistent with his opinion that, to be thus excluded, the financial loss must flow solely from dismissal; iii) Where financial loss flows directly from an employers failure to act fairly (or by his failure to abide by the terms of the contract of employment) even though that failure relates to steps taken which lead to dismissal, it is recoverable at the suit of the employee other than by an unfair dismissal claim.
Of course, Lord Nicholls was careful to point out that if an employee brings proceedings in court and before the tribunal, he cannot recover overlapping heads of loss twice over but he did not suggest that separate claims arising from the same set of circumstances could not be brought.
The same set of circumstances can give rise to an unfair dismissal claim and a claim for breach of contract.
Mr Edwards experience perfectly exemplifies this.
On his case, the adverse findings made by the wrongly constituted tribunal led to his dismissal but they also caused the reputational damage which, he says, causes his ongoing financial loss.
It is a fundamental error, his counsel argues, to conclude that, because the findings led to the dismissal, the financial loss caused by the findings must be subsumed in his unfair dismissal claim.
On that argument I believe that Miss ORourke is entirely right.
Lord Dyson has said in para 39 of his judgment that Parliament could not have intended that the incorporation of provisions in relation to disciplinary procedures into contracts of employment would give rise to a common law claim for damages.
It is not clear why this should be so.
Contractual terms, whether they are the product of incorporation or independent agreement, should have contractual force.
And if it is the case that breach of a contractual term, whether or not it has been incorporated by statute, can give rise to a cause of action which is quite separate and distinct from an unfair dismissal claim, why should it be assumed that Parliament intended to take away the right to such a cause of action? Lord Dyson says that this is to be necessarily inferred from the statutory background but this, with respect, is a circular argument, depending as it does on the proposition that Parliament intended that the legislation relating to unfair dismissal should provide a comprehensive charter for all claims made by an employee following dismissal.
In a further passage in para 39 Lord Dyson states that unless the contracting parties expressly agree they are to be taken as not having intended that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, if they do agree that terms of the contract should have normal contractual force and record that agreement, a common law claim for damages is feasible but if they fail to expressly state that they intend that a contractually binding term should have conventional contractual force, then it is to be treated as unenforceable by the normal route of a claim for damages.
This seems a curious result and I am unable to understand on what basis it can be reached unless for some unstated public policy reason.
And if it is the case that the proposition is underpinned by a public policy consideration, it seems highly curious that it can be displaced by the express agreement of the parties.
In Mr Edwards case Lord Dyson has said that it is impossible to divorce the findings on which he seeks to found his claim for reputational damage from the dismissal when the findings which allegedly caused the reputational damage also constituted the reasons for the dismissal (para 55).
In my respectful view, this conflates two quite distinct and readily separable sets of consequences.
The findings, on Mr Edwards case, were the reasons that he was dismissed.
But, quite independently of the dismissal, those findings, according to Mr Edwards, also did enormous damage to his reputation.
Lord Dyson appears to accept (in para 59) that if Mr Edwards had not been dismissed but had merely been suspended, and had been able to establish the facts needed to sustain his claim for reputational damage, he would have had a perfectly viable claim for breach of contract.
In such a scenario, the reputational damage claim would not have depended on the fact of suspension; it would have had a quite separate existence.
I cannot accept that it does not have an equally separate existence from the fact of dismissal.
As I have said, however, (at para 137 above) Mr Bothams case is different.
It is accepted that the reputational damage which he is alleged to have suffered was inextricably linked to the fact of his dismissal.
His cause of action in respect of that reputational damage did not exist before he was dismissed, therefore.
Such financial loss as he may have suffered as a consequence is the result of his dismissal.
I consider, therefore, that compensation for damage to his reputation could only have been sought as part of his unfair dismissal claim.
For these reasons, I would dismiss the appeal in Mr Edwards case but allow the appeal in the case of Mr Botham.
| UK-Abs | The central issue in these appeals is whether at common law an employee can recover damages for loss arising from the unfair manner of his dismissal in breach of an express term of an employment contract.
Each of Mr Edwardss and Mr Bothams employment contracts contained express terms governing the procedure for dismissal in cases of misconduct and each were summarily dismissed from their employment as, respectively, consultant orthopaedic surgeon and youth community worker [3], [15].
In Mr Edwards case, disciplinary proceedings were instituted against him in December 2005.
He was alleged to have undertaken an inappropriate internal examination of a female patient and then denied that the examination had taken place [4].
In February 2006, a disciplinary hearing was held and the panel decided that he should be summarily dismissed for gross personal and professional misconduct [5].
By a claim issued in the High Court in August 2008, Mr Edwards claimed damages for breach of his employment contract and its wrongful termination.
Among other procedural breaches, he alleged that the disciplinary panel had not been constituted in line with the applicable policy, which formed a term of his contract.
His case was that, if the panel had included a clinician of the same discipline as him, his contract would not have been terminated.
His preliminary schedule of loss alleged that he lost earnings (past and future) of over 3.8 million [9].
Mr Botham was suspended from work in December 2002 and was charged with gross misconduct for behaving inappropriately in relation to two teenage girls.
Following disciplinary proceedings, in September 2003 he was summarily dismissed for gross misconduct.
Because his misconduct was in relation to young people, he was placed on the list of persons deemed unsuitable to work with children under the Protection of Children Act 1999 (the POCA list) [14].
Mr Botham brought proceedings in respect of his dismissal in the employment tribunal.
In May 2007, it held he had been unfairly dismissed and his summary dismissal was a breach of contract.
In relation to the unfair dismissal, it found that the Ministry of Defence (MoD) had breached express terms of his contract set out in the Discipline Code found in the MoDs Personnel Manual [15].
The tribunal awarded him 7,000 loss of salary and benefits for his notice period, a basic award of 1,989 and a compensatory award of 53,500.
His name was removed from the POCA list [16].
Mr Botham then issued proceedings in the High Court seeking damages for breach of the express terms of his contract.
Relying on the findings of the tribunal, he alleged that the MoD, in conducting the disciplinary process, failed to comply with provisions of the Disciplinary Code, by reason of which he suffered a loss of reputation, was put on the POCA list and prevented from obtaining further employment in his chosen field.
The Supreme Court by a majority allows the appeal.
Employees may not recover damages for loss suffered as a result of a breach of a term in their employment contract as to the manner of their dismissal unless the loss can be said to precede and be independent of the dismissal.
Compensation for the manner of dismissal is limited to what they may recover pursuant to the Employment Rights Act 1996 (the 1996 Act).
Lord Dyson gives the leading judgment with which Lord Mance (adding further comments) and Lord Walker agree.
Lord Phillips agrees that the appeals should be allowed, but for different reasons.
Lady Hale and Lords Kerr and Wilson dissent.
In Johnson v Unisys Ltd [2001] UKHL 13, the House of Lords held that loss arising from the unfair manner of dismissal is not recoverable as damages for breach of the implied term of trust and confidence in employment contracts: it falls within what has been called the Johnson exclusion area [1].
By the time of the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan report) it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard against unfair dismissal [21].
Parliament gave effect to this recommendation in the Industrial Relations Act 1971.
The relevant provisions are now contained in the 1996 Act.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal, such as the three month time limit for bringing a claim, and on the remedies available: there is a cap on the level of the compensatory award (now 68,400).
Therefore, Parliament decided to give a remedy which was less generous than that which the common law would give for breach of contract in the ordinary way [19] [23].
In each legislative modification to the unfair dismissal scheme, Parliament linked failure to comply with disciplinary procedures with the outcome of unfair dismissal proceedings; the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair (not wrongful) dismissal [30] [37].
It follows that, if provisions about disciplinary procedures are incorporated as express terms of an employment contract, they are not ordinary contractual terms.
Parliament intended such provisions to apply to employment contracts to protect employees from unfair dismissal.
It has specified the consequences of a failure to comply in unfair dismissal proceedings.
It could not have intended that they would also give rise to a common law claim for damages.
Unless the parties express otherwise, they are taken not to intend that a failure to comply with contractual disciplinary procedures will give rise to a common law claim for damages [37] [39],[94].
This is regardless of whether the term is express or implied.
A dismissal may be unfair for a variety of reasons and any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal, not that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament [40].
However, other remedies, such as injunction, which do not cut across the statutory scheme, are not excluded [44].
Whether individual cases fall within the Johnson exclusion area is a matter of fact and depends on whether the procedural breach forms part of the dismissal process: [51].
Mr Edwards dismissal flowed from the panels erroneous findings, which flowed from its improper constitution.
Likewise, Mr Botham alleges that the loss of reputation was caused by the dismissal itself.
Both cases therefore fall within the Johnson exclusion area [55] [59], [99].
|
This appeal gives the Supreme Court the opportunity to revisit the decision of the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432.
That case, like this, was concerned with the determination of the beneficial interests in a house acquired in joint names by an unmarried couple who intended it to be their family home.
Its reasoning was closely examined, in particular by Rimer LJ, in the present appeal: [2010] EWCA Civ 578, [2010] 1 WLR 2401.
The fact that the Court of Appeal itself gave permission to appeal is a mark of the difficulties felt by the majority, not only with the reasoning but also with the outcome to which it led.
The decision in Stack v Dowden has also attracted a good deal of comment from legal scholars, which we have read although it was not referred to by counsel (who took a sensibly economical approach to the presentation of the appeal).
This ranges from qualified enthusiasm (K Gray & S Gray, Land Law, 6th ed (2009) para 7 072) to almost unqualified disapprobation (Swadling, The Common Intention Trust in the House of Lords: An Opportunity Missed (2007) 123 LQR 511; Dixon, The Never Ending Story Co Ownership After Stack v Dowden [2007] Conv 456).
But counsel have not argued that Stack v Dowden was wrongly decided or that this court should now depart from the principles which it laid down.
This appeal provides an opportunity for some clarification.
Stack v Dowden
Mr Stack and Ms Dowden lived together for 19 years, from 1983 to 2002.
They did not marry but they had four children born between 1986 and 1991.
Ms Dowden was a well qualified electrical engineer, and throughout the time when they lived together she worked full time (except for periods of maternity leave) for the LEB and its successor.
Mr Stack was a self employed builder and decorator until 1987, after which he was employed by Hammersmith and Fulham LBC.
They started living together in 1983 in a house acquired in Ms Dowdens sole name at the price of 30,000.
The deposit of 8,000 was paid out of a building society account in Ms Dowdens sole name; there was a conflict of evidence as to whether Mr Stack had made any contributions to the account.
The balance of 22,000 was raised on a mortgage for which Ms Dowden alone was responsible.
She made the mortgage payments and paid other household outgoings.
Mr Stack kept his finances separate (he had most of his post, including his bank statements, sent to his fathers address).
They carried out extensive repairs and improvements to the house.
The judge found that Mr Stack was responsible for most of this work but could not put a figure on its contribution to the sale value of the house.
They moved house in 1993.
Ms Dowden received over 66,000 from the sale of their first home.
Their new home was bought for 190,000.
Nearly 129,000 came from Ms Dowdens building society account and the balance from a bank loan secured on the house and on two endowment policies, one in joint names and one in Ms Dowdens sole name.
The house was transferred into their joint names with no express declaration of trust, but a standard form provision that the survivor could give a good receipt.
Mr Stack paid the mortgage interest and the premiums on the joint policy, to a total amount of nearly 34,000.
The principal of the mortgage loan was repaid by a series of lump sum payments, to which Mr Stack contributed 27,000 and Ms Dowden over 38,000.
The utility bills were in Ms Dowdens name and she paid all or most of them.
There were some improvements to the property, but not on a large scale.
The parties continued to maintain separate bank accounts and each made a number of separate investments.
In short, there was a substantial disparity between their respective financial contributions to the purchase.
The trial judge held that the proceeds of sale should be divided in equal shares.
Although Ms Dowden had been the bigger earner, they have both put their all into doing the best for themselves and their family as they could.
The Court of Appeal allowed Ms Dowdens appeal and divided the proceeds 65% to 35% as she had asked.
The House of Lords (Lord Hoffmann, Lord Hope, Lord Walker, Lady Hale and Lord Neuberger) unanimously upheld that order, although Lord Neuberger did so for different reasons from the majority.
The curious feature of the decided cases up until then had been that, once an intention to share ownership had been established, the courts had tended to adopt a more flexible and holistic approach to the quantification of the parties shares in cases of sole legal ownership than they had in cases of joint legal ownership.
In the former, they had adopted a concept of the common intention constructive trust which depends upon the shared intentions of the parties.
In the latter, they had tended to analyse the matter in terms of a resulting trust, which depends upon the laws presumption as to the intention of the party who makes a financial contribution to the purchase.
This point was made by Lady Hale in Stack v Dowden, paras 64 and 65 (see also Peter Gibson LJ in Drake v Whipp [1996] 1 FLR 826, 827, cited in Stack v Dowden, para 29).
The leading opinion in the House of Lords was that of Lady Hale.
Lord Hoffmann, Lord Hope and Lord Walker all agreed with it, though Lord Hope and Lord Walker added some observations of their own.
Lord Hope discussed Scots law, drawing attention to the importance in Scotland of the law of unjust enrichment.
Lord Walker contributed what he referred to as an extended footnote, with a detailed commentary on Lord Diplocks speech in Gissing v Gissing [1971] AC 886.
The conclusions in Lady Hales opinion were directed to the case of a house transferred into the joint names of a married or unmarried couple, where both are responsible for any mortgage, and where there is no express declaration of their beneficial interests.
In such cases, she held that there is a presumption that the beneficial interests coincide with the legal estate.
Specifically, in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved: Lady Hale, at para 58; Lord Walker at para 33.
Secondly, the mere fact that the parties had contributed to the acquisition of the home in unequal shares would not normally be sufficient to rebut the presumption of joint tenancy arising from the conveyance: It cannot be the case that all the hundreds of thousands, if not millions, of transfers into joint names . are vulnerable to challenge in the courts simply because it is likely that the owners contributed unequally to their purchase: Lady Hale, at para 68.
Thirdly, the task of seeking to show that the parties intended their beneficial interests to be different from their legal interests was not to be lightly embarked upon.
In family disputes, strong feelings are aroused when couples split up.
These often lead the parties, honestly but mistakenly, to reinterpret the past in self exculpatory or vengeful terms.
They also lead people to spend far more on the legal battle than is warranted by the sums actually at stake.
A full examination of the facts is likely to involve disproportionate costs.
In joint names cases it is also unlikely to lead to a different result, unless the facts are very unusual: Lady Hale, at para 68; also Lord Walker at para 33.
Fourthly, however, if the task is embarked upon, it is to ascertain the parties common intentions as to what their shares in the property would be, in the light of their whole course of conduct in relation to it: Lady Hale, at para 60.
It is the way in which this point was made which seems to have caused the most difficulty in the lower courts.
The difficulty is well illustrated in Lord Wilsons judgment, at paras 85 to 87, which read the judgment in a way which we would not read it.
It matters not which reading is correct.
It does matter that any confusion is resolved.
It was also accepted that the parties common intentions might change over time, producing what Lord Hoffmann referred to in the course of argument as an ambulatory constructive trust: Lady Hale, at para 62.
An example, given in para 70, was where one party had financed or constructed an extension or major improvement to the property, so that what they had now was different from what they had first acquired.
But of course there are other examples.
The principal question in this case is whether this is one.
At its simplest the principle in Stack v Dowden is that a common intention trust, for the cohabitants home to belong to them jointly in equity as well as on the proprietorship register, is the default option in joint names cases.
The trust can be classified as a constructive trust, but it is not at odds with the parties legal ownership.
Beneficial ownership mirrors legal ownership.
What it is at odds with is the presumption of a resulting trust.
A single regime?
In an interesting article by Simon Gardner and Katherine Davidson, The Future of Stack v Dowden (2011) 127 LQR 13, 15, the authors express the hope that the Supreme Court will make clear that constructive trusts of family homes are governed by a single regime, dispelling any impression that different rules apply to joint names and single name cases.
At a high level of generality, there is of course a single regime: the law of trusts (this is the second of Mustill LJs propositions in Grant v Edwards [1986] Ch 638, 651).
To the extent that we recognise that a common intention trust is of central importance to joint names as well as single names cases, we are going some way to meet that hope.
Nevertheless it is important to point out that the starting point for analysis is different in the two situations.
That is so even though it may be necessary to enquire into the varied circumstances and reasons why a house or flat has been acquired in a single name or in joint names (they range, for instance, from Lowson v Coombes [1999] Ch 373, where the property was in the womans sole name because the man was apprehensive of claims by his separated wife, to Adekunle v Ritchie [2007] WTLR 1505, where an enfranchised freehold was in joint names because the elderly tenant could not obtain a mortgage on her own).
The starting point is different because the claimant whose name is not on the proprietorship register has the burden of establishing some sort of implied trust, normally what is now termed a common intention constructive trust.
The claimant whose name is on the register starts (in the absence of an express declaration of trust in different terms, and subject to what is said below about resulting trusts) with the presumption (or assumption) of a beneficial joint tenancy.
The official Land Registry application form (TR1) for registration of a transfer was replaced on 1 April 1998 by a new form with a box enabling joint transferees to clarify the beneficial ownership of the property.
That should help to avoid uncertainty but in practice it does not always do so (this is explained in detail in a case note: Anything to Declare? Express Declarations of Trust in Stack v Dowden [2007] Conv 364).
We understand that the Land Registry does not propose to implement the recommendations for change made by an expert working party which it convened in response to Stack v Dowden: see Elizabeth Cooke, In the wake of Stack v Dowden: the tale of TR1 [2011] Fam Law 1142.
The presumption of a beneficial joint tenancy is not based on a mantra as to equity following the law (though many non lawyers would find it hard to understand the notion that equity might do anything else).
There are two much more substantial reasons (which overlap) why a challenge to the presumption of beneficial joint tenancy is not to be lightly embarked on.
The first is implicit in the nature of the enterprise.
If a couple in an intimate relationship (whether married or unmarried) decide to buy a house or flat in which to live together, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional and economic commitment to a joint enterprise.
That is so even if the parties, for whatever reason, fail to make that clear by any overt declaration or agreement.
The court has often drawn attention to this.
Jacob LJ did so in his dissenting judgment in this case: [2010] EWCA Civ 578, [2010] 1 WLR 2401, para 90.
One of the most striking expressions of this approach is in the judgment of Waite LJ in Midland Bank plc v Cooke [1995] 4 All ER 562, 575.
It is worth quoting it at some length, even though the case was a single name case and the couple were married (the husband was 19, and the wife a little older, at the time of the marriage): Equity has traditionally been a system which matches established principle to the demands of social change.
The mass diffusion of home ownership has been one of the most striking social changes of our own time.
The present case is typical of hundreds, perhaps even thousands, of others.
When people, especially young people, agree to share their lives in joint homes they do so on a basis of mutual trust and in the expectation that their relationship will endure.
Despite the efforts that have been made by many responsible bodies to counsel prospective cohabitants as to the risks of taking shared interests in property without legal advice, it is unrealistic to expect that advice to be followed on a universal scale.
For a couple embarking on a serious relationship, discussion of the terms to apply at parting is almost a contradiction of the shared hopes that have brought them together.
There will inevitably be numerous couples, married or unmarried, who have no discussion about ownership and who, perhaps advisedly, make no agreement about it.
It would be anomalous, against that background, to create a range of home buyers who were beyond the pale of equitys assistance in formulating a fair presumed basis for the sharing of beneficial title, simply because they had been honest enough to admit that they never gave ownership a thought or reached any agreement about it.
Gardner and Davidson make the same point at (2011) 127 LQR 13, 15 16: The context under discussion is one in which people will not normally formulate agreements, but (this is crucial) the very reason for this the parties familial trust in one another also warrants the laws intervention nonetheless.
Unless the law reacts to such trust as much as to more individualistic forms of interaction, those who put their faith in the former rather than the latter will find their interests thereby exposed.
Gardner has termed this a materially communal relationship: ie one in which, in practical terms, they pool their material resources (including money, other assets, and labour): An Introduction to Land Law, 2nd ed (2009) para 8.3.7.)
The notion that in a trusting personal relationship the parties do not hold each other to account financially is underpinned by the practical difficulty, in many cases, of taking any such account, perhaps after 20 years or more of the ups and downs of living together as an unmarried couple.
That is the second reason for caution before going to law in order to displace the presumption of beneficial joint tenancy.
Lady Hale pointed this out in Stack v Dowden at para 68 (see para 12 above), as did Lord Walker at para 33: In the ordinary domestic case where there are joint legal owners there will be a heavy burden in establishing to the courts satisfaction that an intention to keep a sort of balance sheet of contributions actually existed, or should be inferred, or imputed to the parties.
The presumption will be that equity follows the law.
In such cases the court should not readily embark on the sort of detailed examination of the parties relationship and finances that was attempted (with limited success) in this case.
The competing presumption: a resulting trust?
72, 73, footnote 6) William Swadling has commented: In an illuminating article, Explaining Resulting Trusts (2008) 124 LQR A resulting trust also traditionally arose where A and B contributed unequally to the purchase price and the title was conveyed to A and B as joint tenants, whereby A and B held as equitable tenants in common in proportion to their contributions (Lake v Gibson (1729) 1 Eq Cas Abr 290).
In Stack v Dowden [2007] UKHL 17, a majority of the House of Lords held that this rule no longer applied in the case of matrimonial or quasi matrimonial homes.
That is probably a reference to para 31 of Lord Walkers opinion.
Lady Hales opinion does not in terms reach that conclusion.
But the extended discussion from para 56 to para 70 (and in particular, the express disapproval of Walker v Hall [1984] FLR 126, Springette v Defoe [1992] 2 FLR 388 and Huntingford v Hobbs [1993] 1 FLR 736) is inconsistent with a resulting trust analysis in this context.
It is not possible at one and the same time to have a presumption or starting point of joint beneficial interests and a presumption (let alone a rule) that the parties beneficial interests are in proportion to their respective financial contributions.
In the context of the acquisition of a family home, the presumption of a resulting trust made a great deal more sense when social and economic conditions were different and when it was tempered by the presumption of advancement.
The breadwinner husband who provided the money to buy a house in his wifes name, or in their joint names, was presumed to be making her a gift of it, or of a joint interest in it.
That simple assumption which was itself an exercise in imputing an intention which the parties may never have had was thought unrealistic in the modern world by three of their Lordships in Pettitt v Pettitt [1970] AC 777.
It was also discriminatory as between men and women and married and unmarried couples.
That problem might have been solved had equity been able to extend the presumption of advancement to unmarried couples and remove the sex discrimination.
Instead, the tool which equity has chosen to develop law is the common intention constructive trust.
Abandoning the presumption of advancement while retaining the presumption of resulting trust would place an even greater emphasis upon who paid for what, an emphasis which most commentators now agree to have been too narrow: hence the general welcome given to the more promising vehicle of the constructive trust: see Gardner and Davidson at (2011) 127 LQR 13, 16.
The presumption of advancement is to receive its quietus when section 199 of the Equality Act 2010 is brought into force.
The time has come to make it clear, in line with Stack v Dowden (see also Abbott v Abbott [2007] UKPC 53, [2007] 2 All ER 432), that in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the deposit (or indeed the rest of the purchase) in unequal shares.
The presumption is that the parties intended a joint tenancy both in law and in equity.
But that presumption can of course be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resources.
Inference or imputation?
In Stack v Dowden Lord Neuberger observed (paras 125 126): While an intention may be inferred as well as express, it may not, at least in my opinion, be imputed.
That appears to me to be consistent both with normal principles and with the majority view of this House in Pettitt [1970] AC 777, as accepted by all but Lord Reid in Gissing v Gissing [1971] AC 886, 897H, 898B D, 900E G, 901B D, 904E F, and reiterated by the Court of Appeal in Grant v Edwards [1986] Ch 638 at 651F 653A.
The distinction between inference and imputation may appear a fine one (and in Gissing v Gissing [1971] AC 886, at 902G H, Lord Pearson, who, on a fair reading I think rejected imputation, seems to have equated it with inference), but it is important.
An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements.
An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention.
Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.
Rimer LJ made some similar observations in the Court of Appeal in this case [2010] EWCA Civ 578, [2010] 1 WLR 2401, paras 76 77.
Both observations had been to some extent anticipated as long ago as 1970 by Lord Reid in his speech in Gissing v Gissing [1971] AC 886, 897: Returning to the crucial question there is a wide gulf between inferring from the whole conduct of the parties that there probably was an agreement, and imputing to the parties an intention to agree to share even where the evidence gives no ground for such an inference.
If the evidence shows that there was no agreement in fact then that excludes any inference that there was an agreement.
But it does not exclude an imputation of a deemed intention if the law permits such an imputation.
If the law is to be that the court has power to impute such an intention in proper cases then I am content, although I would prefer to reach the same result in a rather different way.
But if it were to be held to be the law that it must at least be possible to infer a contemporary agreement in the sense of holding that it is more probable than not there was in fact some such agreement then I could not contemplate the future results of such a decision with equanimity.
The decision of the House of Lords in Gissing v Gissing has been so fully analysed and discussed that it is almost impossible to say anything new about it.
However it may be worth pointing out that their Lordships speeches were singularly unresponsive to each other.
The only reference to another speech is by Viscount Dilhorne (at p 900) where he agreed with Lord Diplock on a very general proposition as to the law of trusts.
The law reporter has managed to find a ratio for the headnote (at p 886) only by putting these two propositions together with some remarks by Lord Reid (at p 896) which have a quite different flavour.
We can only guess at the order in which the speeches were composed, but the third and fourth sentences of the passage from Lord Reids speech, set out in the preceding paragraph, suggest that Lord Reid had read Lord Diplocks speech in draft, and thought that it was about an imputation of a deemed intention.
This sort of constructive intention (or any other constructive state of mind), and the difficulties that they raise, are familiar in many branches of the law.
Whenever a judge concludes that an individual intended, or must be taken to have intended, or knew, or must be taken to have known, there is an elision between what the judge can find as a fact (usually by inference) on consideration of the admissible evidence, and what the law may supply (to fill the evidential gap) by way of a presumption.
The presumption of a resulting trust is a clear example of a rule by which the law does impute an intention, the rule being based on a very broad generalisation about human motivation, as Lord Diplock noted in Pettitt v Pettitt [1970] AC 777, 824: It would, in my view, be an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post war generation of married couples presumptions which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.
That was 40 years ago and we are now another generation on.
The decision in Stack v Dowden produced a division of the net proceeds of sale of the house in shares roughly corresponding to the parties financial contributions over the years.
The majority reached that conclusion by inferring a common intention (see Lady Hales opinion at para 92, following her detailed analysis of the facts starting at para 86).
Only Lord Neuberger reached the same result by applying the classic resulting trust doctrine (which involved, it is to be noted, imputing an intention to the parties).
In deference to the comments of Lord Neuberger and Rimer LJ, we accept that the search is primarily to ascertain the parties actual shared intentions, whether expressed or to be inferred from their conduct.
However, there are at least two exceptions.
The first, which is not this case, is where the classic resulting trust presumption applies.
Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32.
The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared.
In those two situations, the court is driven to impute an intention to the parties which they may never have had.
Lord Diplock, in Gissing v Gissing [1971] AC 886, 909, pointed out that, once the court was satisfied that it was the parties common intention that the beneficial interest was to be shared in some proportion or other, the court might have to give effect to that common intention by determining what in all the circumstances was a fair share.
And it is that thought which is picked up in the subsequent cases, culminating in the judgment of Chadwick LJ in Oxley v Hiscock [2005] Fam 211, paras 65, 66 and 69, and in particular the passage in para 69 which was given qualified approval in Stack v Dowden: the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property.
Chadwick LJ was not there saying that fairness was the criterion for determining whether or not the property should be shared, but he was saying that the court might have to impute an intention to the parties as to the proportions in which the property would be shared.
In deducing what the parties, as reasonable people, would have thought at the relevant time, regard would obviously be had to their whole course of dealing in relation to the property.
However, while the conceptual difference between inferring and imputing is clear, the difference in practice may not be so great.
In this area, as in many others, the scope for inference is wide.
The law recognizes that a legitimate inference may not correspond to an individuals subjective state of mind.
As Lord Diplock also put it in Gissing v Gissing [1971] AC 886, 906: As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that partys words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.
This point has been developed by Nick Piska, Intention, Fairness and the Presumption of Resulting Trust after Stack v Dowden (2008) 71 MLR 120.
He observes at pp 127 128: Subjective intentions can never be accessed directly, so the court must always direct itself to a consideration of the parties objective intentions through a careful consideration of the relevant facts.
The point is that the imputation/inference distinction may well be a distinction without a difference with regard to the process of determining parties intentions.
It is not that the parties subjective intentions are irrelevant but rather that a finding as to subjective intention can only be made on an objective basis.
In several parts of the British Commonwealth federal or provincial legislation has given the court a limited jurisdiction to vary or adjust proprietary rights in the home when an unmarried couple split up.
Most require a minimum period of two years cohabitation (or less if there are children) before the jurisdiction is exercisable.
In England the Law Commission has made recommendations on similar lines (Law Com No 307, Cohabitation: The Financial Consequences of Relationship Breakdown, 2007), but there are no plans to implement them in the near future.
In the meantime there will continue to be many difficult cases in which the court has to reach a conclusion on sparse and conflicting evidence.
It is the courts duty to reach a decision on even the most difficult case.
As the deputy judge (Mr Nicholas Strauss QC) said in his admirable judgment [2009] EWHC 1713 (Ch), [2010] 1 WLR 2401, para 33 (in the context of a discussion of fairness) that is what courts are for.
That was an echo (conscious or unconscious) of what Sir Thomas Bingham MR said, in a different family law context, in Re Z (A Minor) (Identification: Restrictions on Publication) [1997] Fam 1, 33.
The trial judge has the onerous task of finding the primary facts and drawing the necessary inferences and conclusions, and appellate courts will be slow to overturn the trial judges findings.
The facts of this case
The parties met in 1980.
Ms Jones worked as a mobile hairdresser.
Mr Kernott worked as a self employed ice cream salesman during the summer and claimed benefits during the winter if he could find no other work.
The judge found that their incomes were not very different from one another.
Ms Jones bought a mobile home in her sole name in 1981.
Mr Kernott moved in with her (according to the agreed statement of facts and issues) in 1983.
Their first child was born in June 1984.
In May 1985 Ms Jones sold her mobile home and the property in question in these proceedings, 39 Badger Hall Avenue, Thundersley, Essex, was bought in their joint names.
The purchase price was 30,000.
This was relatively cheap because the house had belonged to the elderly mother of a client of Ms Jones.
The deposit of 6000 was paid from the proceeds of sale of Ms Jones mobile home.
The balance was raised by way of an endowment mortgage in their joint names.
Mr Kernott paid 100 per week towards the household expenses while they lived at the property.
Ms Jones paid the mortgage and other household bills out of their joint resources.
In March 1986 they jointly took out a loan of 2000 to build an extension.
Mr Kernott did some of the labouring work and paid friends and relations to do other work on it.
The judge found that the extension probably enhanced the value of the property by around 50%, from 30,000 to 44,000.
Their second child was born in September 1986.
Mr Kernott moved out of the property in October 1993.
The parties had lived there together, sharing the household expenses, for eight years and five months.
Thereafter Ms Jones remained living in the property with the children and paid all the household expenses herself.
Mr Kernott made no further contribution towards the acquisition of the property and the judge also found that he made very little contribution to the maintenance and support of their two children who were being looked after by their mother.
This situation continued for some 14 and a half years until the hearing before the judge.
The Badger Hall Avenue property was put on the market in October 1995 for 69,995, but was not sold.
This may be some indication of its market value at that time but no more than that.
At some date which is not entirely clear, the parties agreed to cash in a joint life insurance policy (not, of course, the endowment policy supporting the mortgage) and the proceeds were divided between them.
The judge held that this was to enable Mr Kernott to put down a deposit on a home of his own.
This he did in May 1996, when he bought 114 Stanley Road, Benfleet, for around 57,000 with a deposit of 2,800 and a mortgage of 54,150.
The judge observed that he was able to afford his own accommodation because he was not making any contribution towards the former family home, nor was he making any significant contribution towards the support of his children.
The judge also found that whilst the intentions of the parties may well have been at the outset to provide them as a couple with a home for themselves and their progeny, those intentions have altered significantly over the years to the extent that [Mr Kernott] demonstrated that he had no intention until recently of availing himself of the beneficial ownership in this property, having ignored it completely by way of any investment in it or attempt to maintain or repair it whilst he had his own property on which he concentrated.
At the time of the hearing before the judge in April 2008, 39 Badger Hall Avenue was valued at 245,000.
The outstanding mortgage debt was 26,664.
The endowment policy supporting that mortgage was worth 25,209.
On the basis that they had contributed jointly to the endowment for eight years and five months and that Ms Jones had contributed alone for fourteen and a half years, it was calculated that Mr Kernott was entitled to around 4712 of its value, which would leave Ms Jones with 20,497. 114 Stanley Road was valued at 205,000, with an outstanding mortgage of 37,968 (suggesting that this was a repayment rather than an endowment mortgage).
If the whole of the endowment policy was used to discharge the mortgage, the net worth of 39 Badger Hall Avenue would be 243,545.
If the mortgage on 114 Stanley Road was an ordinary repayment mortgage, the net worth of 114 Stanley Road would be 167,032.
These proceedings
Mr Kernott initiated correspondence with a view to claiming his interest in the property in 2006.
Ms Jones began proceedings in the Southend County Court in October 2007, claiming a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996: (i) that she owned the entire beneficial interest in 39 Badger Hall Avenue; alternatively (ii) if Mr Kernott had any beneficial interest in 39 Badger Hall Avenue, that she also had a beneficial interest in 114 Stanley Road, and that these respective interests be determined by the court; and (iii) that either she be registered as sole proprietor of 39 Badger Hall Avenue, or that they be registered as joint proprietors of 114 Stanley Road.
At the trial, which took place in April 2008, Ms Jones conceded that, in 1993 when the couple separated, there would not have been enough evidence to displace the presumption that their beneficial interests followed the legal title, so that they were then joint tenants in law and equity.
She also conceded that she had no legal claim on 114 Stanley Road.
Her contention was that its purchase, along with other events since their separation, was evidence that their intentions with respect to the beneficial interests in 39 Badger Hall Avenue had changed.
The judge accepted that contention.
In the light of Stack v Dowden and Oxley v Hiscock he had to consider what is fair and just between the parties bearing in mind what I have found with regard to the whole course of dealing between them.
He concluded that the value of the property should be divided as to 90% for Ms Jones and 10% for Mr Kernott.
On the figures given above, had the property been sold then, and the whole of the endowment policy used to defray the mortgage debt, that would have given her 219,190 and him 24,355 (giving him a total of 191,387 from the equity in his home and the sale of the property).
Mr Kernott appealed to the High Court, arguing that the judge was wrong to infer or impute an intention that the parties beneficial interests should change after their separation and to quantify these in the way which he considered fair.
The deputy judge, Mr Nicholas Strauss QC, after a careful review of the authorities, concluded that the change in intention could readily be inferred or imputed from the parties conduct: [2009] EWHC 1713 (Ch), [2010] 1 WLR 2401, para 47.
In the absence of any indication by words or conduct as to how their shares should be altered, the appropriate criterion was what he considered to be fair and just: para 49.
The judges assessment could be justified, given that their direct contributions were a little over 4:1 in Ms Jones favour and that the larger part of the capital gain on the property must have arisen after 1993.
By not contributing to that property, Mr Kernott had been able to buy another property on which there was almost as great a capital gain.
The parties could not be taken to have intended that he should have a significant part of the increased value of 39 Badger Hall Avenue as well as the whole of the capital gain from 114 Stanley Road: para 51.
The Court of Appeal, by a majority, allowed Mr Kernotts appeal and declared that the parties owned the property as tenants in common in equal shares: [2010] EWCA Civ 578, [2010] 1 WLR 2401.
Jacob LJ, who dissented, held that the judge had applied the right legal test and that there was a proper basis in the evidence for concluding that the parties must be taken to have intended that they should each have a fair and just share.
He would not interfere with the judges assessment of the fair proportions.
Rimer LJ, in the majority, held that there was nothing to indicate that the parties intentions had changed after their separation.
A crucial part of his reasoning was his interpretation of the decision in Stack v Dowden: that it did not enable courts to find, by way of the imputation route, an intention where none was expressly uttered nor inferentially formed: para 77.
Wall P also concluded that he could not infer an intention to change the beneficial interests from the parties conduct: paras 57, 58.
Discussion
It is always salutary to be confronted with the ambiguities which later emerge in what seemed at the time to be comparatively clear language.
The primary search must always be for what the parties actually intended, to be deduced objectively from their words and their actions.
If that can be discovered, then, as Mr Nicholas Strauss QC pointed out in the High Court, it is not open to a court to impose a solution upon them in contradiction to those intentions, merely because the court considers it fair to do so.
In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time.
It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended.
But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time.
This is a fallback position which some courts may not welcome, but the court has a duty to come to a conclusion on the dispute put before it.
In this case, there is no need to impute an intention that the parties beneficial interests would change, because the judge made a finding that the intentions of the parties did in fact change.
At the outset, their intention was to provide a home for themselves and their progeny.
But thereafter their intentions did change significantly.
He did not go into detail, but the inferences are not difficult to draw.
They separated in October 1993.
No doubt in many such cases, there is a period of uncertainty about where the parties will live and what they will do about the home which they used to share.
This home was put on the market in late 1995 but failed to sell.
Around that time a new plan was formed.
The life insurance policy was cashed in and Mr Kernott was able to buy a new home for himself.
He would not have been able to do this had he still had to contribute towards the mortgage, endowment policy and other outgoings on 39 Badger Hall Avenue.
The logical inference is that they intended that his interest in Badger Hall Avenue should crystallise then.
Just as he would have the sole benefit of any capital gain in his own home, Ms Jones would have the sole benefit of any capital gain in Badger Hall Avenue.
Insofar as the judge did not in so many words infer that this was their intention, it is clearly the intention which reasonable people would have had had they thought about it at the time.
But in our view it is an intention which he both could and should have inferred from their conduct.
A rough calculation on this basis produces a result so close to that which the judge produced that it would be wrong for an appellate court to interfere.
If we take the value of the property as 60,000 in late 1993 (or 70,000 in late 1995) and the value in 2008 as 245,000, and share the 60,000 (or 70,000) equally between the parties, but leave the balance to Ms Jones, that gives him 30,000 (35,000) and her 215,000 (210,000), roughly 12% (14%) and 88% (86%) respectively.
This calculation ignores the mortgage, which may be the correct approach, as in 2008 the mortgage debt was almost fully covered by the endowment policy which was always meant to discharge it.
Introducing the mortgage liability in 1993 (or 1995) into the calculation would be to Mr Kernotts disadvantage, because at that stage the endowment policy would not have been sufficient to discharge the debt, so the equity would have been less.
Further accounting
On this approach, there is no scope for further accounting between the parties (which was obviously contemplated as a future possibility by Rimer LJ on his approach).
Had their beneficial interests in the property remained the same, there would have been the possibility of cross claims: Mr Kernott against Ms Jones for an occupation rent, and Ms Jones against Mr Kernott for his half share in the mortgage interest and endowment premiums which she had paid.
It is quite likely, however, that the court would hold that there was no liability to pay an occupation rent, at least while the home was needed for the couples children, whereas the liability to contribute towards the mortgage and endowment policy would accumulate at compound interest over the years since he ceased to contribute.
This exercise has not been done.
In a case such as this it would involve a quite disproportionate effort, both to discover the requisite figures (even supposing that they could be discovered) and to make the requisite calculations, let alone to determine what the ground rules should be.
The parties legal advisers are to be commended for the proportionate approach which they have taken to the preparation of this case.
Conclusion
In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests. tenants both in law and in equity. (1) The starting point is that equity follows the law and they are joint (2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change. (3) Their common intention is to be deduced objectively from their conduct: the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that partys words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party (Lord Diplock in Gissing v Gissing [1971] AC 886, 906).
Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69. (4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property: Chadwick LJ in Oxley v Hiscock [2005] FAm 211, para 69.
In our judgment, the whole course of dealing in relation to the property should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties actual intentions. (5) Each case will turn on its own facts.
Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).
This case is not concerned with a family home which is put into the name of one party only.
The starting point is different.
The first issue is whether it was intended that the other party have any beneficial interest in the property at all.
If he does, the second issue is what that interest is.
There is no presumption of joint beneficial ownership.
But their common intention has once again to be deduced objectively from their conduct.
If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.
The assumptions as to human motivation, which led the courts to impute particular intentions by way of the resulting trust, are not appropriate to the ascertainment of beneficial interests in a family home.
Whether they remain appropriate in other contexts is not the issue in this case.
judge.
It follows that we would allow this appeal and restore the order of the I agree that the appeal should be allowed for the reasons given in the joint
LORD COLLINS
judgment of Lord Walker and Lady Hale.
It is not surprising that the decision in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 gave rise to difficulties.
It was a decision which was responding to the increasing number of co habiting couples with joint interests in their homes, and to the fact that couples (whether married or unmarried) rarely make agreements about their respective shares in their homes, and to the enormous inflation in property prices which has made the division of ownership by reference to initial financial contributions artificial and potentially productive of injustice.
The absence of legislative intervention (which continues despite the Law Commission Report on Cohabitation: the Financial consequences of Relationship Breakdown, 2007) made it necessary for the judiciary to respond by adapting old principles to new situations.
That has not been an easy task.
It is illustrated by the fact that in both Stack v Dowden and in this case the results at the highest appellate level have been unanimous but the reasoning has not.
I would hope that this decision will lay to rest the remaining difficulties, and that it will not be necessary to revisit this question by reconsideration of the correctness of Stack v Dowden, by which this court is bound (subject to the application of Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 regarding departure from previous decisions).
It should not be necessary because the differences in reasoning are largely terminological or conceptual and are likely to make no difference in practice.
But should it be necessary, the court (no doubt with a panel of seven or nine) would need much fuller argument (together with citation of the enormous critical literature which the decision has spawned) than was presented to the court on this appeal.
There have been at least three causes of the difficulties with Stack v Dowden.
The first is that the previous authorities were mainly concerned with a different factual situation, namely where the property was registered in the name of only one of the parties.
Second, they did not in any event speak with one voice, particularly on that part of Stack v Dowden which has caused most difficulty, namely whether in this part of the law there is any useful distinction between inferred intention and imputed intention: contrast Gissing v Gissing [1971] AC 886 with Lloyds Bank v Rosset [1991] 1 AC 107.
The third reason is that (despite it being trite that it is wrong to do so) Baroness Hales speech has been treated as if it were a statute, and ambiguities in it have been exploited or exaggerated, particularly the passage at para 60 in which she has been taken as having treated inferred intention and imputed intention as interchangeable, and the passage at para 61 in which she approved, or substantially approved, the reasoning of Chadwick LJ in Oxley v Hiscock [2005] Fam 211, para 69.
The reasoning of Baroness Hale and Lord Walker, taken together, in Stack v Dowden was as follows: (1) When property is held in joint names, and without any express declaration of trust, the starting point is that the beneficial interest is held equally and there is a heavy burden on the party asserting otherwise: paras 14, 33, 54, 56, 68. (2) That is because it will almost always have been a conscious decision to put the property into joint names, and committing oneself to spend large sums of money on a place to live is not normally done by accident or without giving it thought: para 66. (3) Consequently it is to be expected that joint transferees would have spelled out their beneficial interests when they intended them to be different from their legal interests ([54]) and cases in which the burden will be discharged will be very unusual (para 68). (4) The contrary can be proved by looking at all the relevant circumstances in order to discern the parties common intention: [59]. (5) There is no presumption that the parties intended that the beneficial interest be shared in proportion to their financial contributions to the acquisition of the property: paras 31, 59 60 (thereby rejecting the approach of the resulting trust analysis as a starting point favoured by Lord Neuberger, dissenting, but not as to the result). (6) The search is to ascertain the parties shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it: para 60. (7) The search was for the result which reflected what the parties must, in the light of their conduct, be taken to have intended, and it did not enable the court to abandon that search in favour of the result which the court itself considered fair: para 61. (8) The matters to be taken into account are discussed in detail at paras 33 34 and 68 70, and it is not necessary to rehearse them here.
The crucial parts of Chadwick LJs summary of the principles in his magisterial judgment in Oxley v Hiscock [2005] Fam 211, paras 68 69 take their main inspiration from the speech of Lord Diplock in Gissing v Gissing [1971] AC 886 and the judgment of Nourse LJ in Anderson v Stokes [1991] 1 FLR 391, 400 401.
For present purposes it is only necessary to note that his discussion is dealing with the case where a home is purchased in the sole name of one party in a co habiting couple, each of them has made some financial contribution to the purchase, and there is no declaration of trust as to the beneficial ownership.
After a treatment of the way in which a common intention that each will have a beneficial interest can be inferred from discussions between the parties or, in the absence of discussion, from the fact that each has made contributions to the purchase price, Chadwick LJ moved at para 69 to a second question, namely what is the extent of the parties respective beneficial interests in the property?.
It was in that context that he said: [I]n many such cases, the answer will be provided by evidence of what they said and did at the time of the acquisition.
But, in a case where there is no evidence of any discussion between them as to the amount of the share which each was to haveand even in a case where the evidence is that there was no discussion on that pointthe question still requires an answer.
It must now be accepted that the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property.
And, in that context, the whole course of dealing between them in relation to the property includes the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax and utilities, repairs, insurance and housekeeping) which have to be met if they are to live in the property as their home.
It was in the light of the whole of Chadwick LJs reasoning that in Stack v Dowden Baroness Hale referred to the Law Commission Discussion Paper on Sharing Homes, para 4.27, and went on to say at para 61: First, it emphasises that the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended.
Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair.
In its context that was plainly a reference to the first stage of the enquiry, namely whether there was a common intention that the property be beneficially owned other than in line with the legal title.
I agree, therefore, that authority justifies the conceptual approach of Lord Walker and Lady Hale that, in joint names cases, the common intention to displace the presumption of equality can, in the absence of express agreement, be inferred (rather than imputed: see para 31 of the joint judgment) from their conduct, and where, in such a case, it is not possible to ascertain or infer what share was intended, each will be entitled to a fair share in the light of the whole course of dealing between them in relation to the property.
That said, it is my view that in the present context the difference between inference and imputation will hardly ever matter (as Lord Walker and Lady Hale recognise at para 34), and that what is one persons inference will be another persons imputation.
A similar point has arisen in many other contexts, for example, the difference between implied terms which depend on the parties actual intention, terms based on a rule of law, and implied terms based on an intention imputed to the parties from their actual circumstances: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108, 137, per Lord Wright.
Or the point under the law prior to the Contracts (Applicable Law) Act 1990 as to whether (in the absence of an express choice) the proper law of the contract depended on an intention to be inferred from the circumstances or on the law which had the closest connection with the contract.
Nor will it matter in practice that at the first stage, of ascertaining the common intention as to the beneficial ownership, the search is not, at least in theory, for what is fair.
It would be difficult (and, perhaps, absurd) to imagine a scenario involving circumstances from which, in the absence of express agreement, the court will infer a shared or common intention which is unfair.
The courts are courts of law, but they are also courts of justice.
LORD KERR
I agree that this appeal should be allowed.
There are differences of some significance in the reasoning that underlies the joint judgment of Lord Walker and Lady Hale and that contained in Lord Wilsons judgment.
I agree with Lord Collins that these are both terminological and conceptual.
I am less inclined to agree, however, that the divergence in reasoning is unlikely to make a difference in practice.
While it may well be that the outcome in many cases will be the same, whether one infers an intention or imputes it, that does not mean that the process by which the result is arrived at is more or less the same.
Indeed, it seems to me that a markedly and obviously different mode of analysis will generally be required.
Before elaborating briefly on that proposition, let me turn very shortly to the areas in which, as I see it, there is consensus among the other members of the court.
The following appear to be the areas of agreement: (i) In joint names cases, the starting point is that equity follows the law.
One begins the search for the proper allocation of shares in the property with the presumption that the parties are joint tenants and are thus entitled to equal shares; (ii) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home or (b) that they later formed the common intention that their respective shares would change; (iii) The common intention, if it can be inferred, is to be deduced objectively from the parties conduct; (iv) Where the intention as to the division of the property cannot be inferred, each is entitled to that share which the court considers fair.
In considering the question of what is fair the court should have
regard to the whole course of dealing between the parties
The areas of disagreement appear to be these: (a) is there sufficient evidence in the present case from which the parties intentions can be inferred? (b) is the difference between inferring and imputing an intention likely to be great as a matter of general practice? How far should the court go in seeking to infer actual intention as to shares?
At para 33 above Lord Walker and Lady Hale have quoted the important judgment of Chadwick LJ in Oxley v Hiscock [2005] Fam 211 and at para 52(4) have said that, on the authority of what was said in para 69 of Oxley, where it is not possible to ascertain what the actual intention of the parties was as to the shares in which they would own the property, each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property.
This, I believe, casts the test somewhat differently from the way that it was formulated by Chadwick LJ.
At para 69 of Oxley he said this: in a case where there is no evidence of any discussion between them as to the amount of the share which each was to haveand even in a case where the evidence is that there was no discussion on that pointthe question still requires an answer.
It must now be accepted that (at least in this court and below) the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the
property
Chadwick LJ did not confine the circumstances in which an intention is to be imputed to those where it was impossible to infer an intention.
Rather, he considered that it was proper and necessary to impute it when there had been no discussion about the amounts of the shares that each was to have or where there was no evidence of such a discussion.
Lord Walker and Lady Hale have pointed out that Oxley v Hiscock received qualified approval in Stack v Dowden [2007] 2 AC 432.
It seems clear, however, that there was no approval of the notion that an intention should be imputed where there had been no discussion between the parties for in para 69 of her opinion in Stack Lady Hale listed several factors that required to be considered in divining the parties true intentions few of which would involve any verbal exchange whatever.
It is hardly controversial to suggest that the parties intention should be given effect to where it can be ascertained and that, although discussions between them will always be the most reliable basis on which to draw an inference as to that intention, these are not the only circumstances in which that exercise will be possible.
There is a natural inclination to prefer inferring an intention to imputing one.
If the parties intention can be inferred, the court is not imposing a solution.
It is, instead, deciding what the parties must be taken to have intended and where that is possible it is obviously preferable to the courts enforcing a resolution.
But the conscientious quest to discover the parties actual intention should cease when it becomes clear either that this is simply not deducible from the evidence or that no common intention exists.
It would be unfortunate if the concept of inferring were to be strained so as to avoid the less immediately attractive option of imputation.
In summary, therefore, I believe that the court should anxiously examine the circumstances in order, where possible, to ascertain the parties intention but it should not be reluctant to recognise, when it is appropriate to do so, that inference of an intention is not possible and that imputation of an intention is the only course to follow.
In this context, it is important to understand what is meant by imputing an intention.
There are reasons to question the appropriateness of the notion of imputation in this area but, if it is correct to use this as a concept, I strongly favour the way in which it was described by Lord Neuberger in Stack v Dowden [2007] 2 AC 432 para 126, where he said that an imputed intention was one which was attributed to the parties, even though no such actual intention could be deduced from their actions and statements, and even though they had no such intention.
This exposition draws the necessary strong demarcation line between attributing an intention to the parties and inferring what their intention was in fact.
The reason that I question the aptness of the notion of imputing an intention is that, in the final analysis, the exercise is wholly unrelated to ascertainment of the parties views.
It involves the court deciding what is fair in light of the whole course of dealing with the property.
That decision has nothing to do with what the parties intended, or what might be supposed would have been their intention had they addressed that question.
In many ways, it would be preferable to have a stark choice between deciding whether it is possible to deduce what their intention was and, where it is not, deciding what is fair, without elliptical references to what their intention might have or should have been.
But imputing intention has entered the lexicon of this area of law and it is probably impossible to discard it now.
While the dichotomy between inferring and imputing an intention remains, however, it seems to me that it is necessary that there be a well marked dividing line between the two.
As soon as it is clear that inferring an intention is not possible, the focus of the courts attention should be squarely on what is fair and, as I have said, that is an obviously different examination than is involved in deciding what the parties actually intended.
Is there sufficient evidence in the present case from which the parties intentions can be inferred?
Lord Walker and Lady Hale have concluded that the failure of the parties to sell their home in Badger Hall Avenue in late 1995, leading as it did to the cashing in of the life insurance policy, meant that Mr Kernott intended that his interest in the Badger Hall Avenue property should crystallise then.
That may indeed have been his intention but, for my part, I would find it difficult to infer that it actually was what he then intended.
As the deputy High Court judge, Nicholas Strauss QC put it in para 48 of his judgment, the bare facts of his departure from the family home and acquisition of another property are a slender foundation on which to conclude that he had entirely abandoned whatever stake he had in the previously shared property.
On the other hand, I would have no difficulty in concluding, as did Mr Strauss and as would Lord Wilson, that it was eminently fair that the property should be divided between the parties in the shares decreed by Judge Dedman.
Like Lord Wilson, therefore, I would prefer to allow this appeal on the basis that it is impossible to infer that the parties intended that their shares in the property be apportioned as the judge considered they should be but that such an intention should be imputed to them.
LORD WILSON
In the light of the continued failure of Parliament to confer upon the courts limited redistributive powers in relation to the property of each party upon the breakdown of a non marital relationship, I warmly applaud the development of the law of equity, spear headed by Lady Hale and Lord Walker in their speeches in Stack v Dowden [2007] 2 AC 432, and reiterated in their judgment in the present appeal, that the common intention which impresses a constructive trust upon the legal ownership of the family home can be imputed to the parties to the relationship.
In his speech of dissent (other than in relation to the result) in Stack v Dowden Lord Neuberger observed, at para 125, that the distinction between inference and imputation was important.
He proceeded as follows: 126 An inferred intention is one which is objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements.
An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention.
Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.
Almost 40 years earlier, in Pettitt v Pettitt [1970] AC 777, Lord Diplock sought to develop the law in a way similar to that achieved in Stack v Dowden.
The action was between spouses and, analogously, was brought at a time when the divorce court lacked power to make a property adjustment order in relation to the matrimonial home.
Lord Diplock said, at p 823F G: Unless it is possible to infer from the conduct of the spouses at the time of their concerted action in relation to acquisition or improvement of the family asset that they did form an actual common intention as to the legal consequences of their acts upon the proprietary rights in the asset the court must impute to them a constructive common intention which is that which in the courts opinion would have been formed by reasonable spouses.
In Gissing v Gissing [1971] AC 886, 904E F, however, Lord Diplock accepted that in Pettitt he had been in the minority in suggesting that the common intention could be imputed.
So he proceeded to analyse the case in terms of whether the necessary intention could be inferred; but he added ingeniously at p 909 C E that it might be possible to infer a common intention on the part of the spouses that their interests in the property should be in such proportions as might ultimately be seen to be fair! It is worthy of note, that in Pettitt Lord Reid had, at p 795D G, also been cautiously amenable to the idea of imputing the necessary intention but had, at p 797A B, expressed a firm preference for Parliamentary intervention; and that in Gissing, in the passage quoted by Lady Hale and Lord Walker at para 29 above, Lord Reid saw fit to reiterate those views notwithstanding that the argument in favour of a power to impute had for the time being already been lost.
In Oxley v Hiscock [2005] Fam 211, paras 68 and 69 Chadwick LJ, pointed out that assertions that the family home was held under a constructive trust raised two questions.
The home had been held in Mr Hiscocks sole name so, for Chadwick LJ, the first question was whether Mrs Oxley could establish that they had nevertheless had a common intention that she should have some beneficial share in it.
In the present case, however, the home is held in the joint names of the parties so, for us, the first question is whether Ms Jones can establish that they nevertheless had (albeit not necessarily at the outset) a common intention that the beneficial shares of herself and Mr Kernott should be in some proportions other than joint and equal.
The second question, which arises in the event only of an affirmative answer to the first, is to determine the proportions in which the beneficial shares are held.
In relation to the second question Chadwick LJ concluded, in his summary at para 69, that, where there was no evidence of any discussion between the parties as to the proportions in which their beneficial shares in the family home were to be held, each was entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and he had made clear, at para 66, that such an entitlement arose because what the court is doing, in cases of this nature, is to supply or impute a common intention as to the parties respective shares (in circumstances in which there was, in fact, no common intention) on the basis of that whichis shown to be fair.
Emboldened by developments in the case law since the decision in Gissing, and apparently in particular by the decision of the Court of Appeal in Drake v Whipp [1996] FLR 826, Chadwick LJ thus saw fit to reassert the power to impute.
In Pettitt Lord Diplock had referred to reasonable spouses rather than to fairness; but reasonable spouses will intend only what is fair.
The analysis by Chadwick LJ of the proper approach to the second question was correct.
In paras 31 and 51(4) above Lord Walker and Lady Hale reiterate that, although its preference is always to collect from the evidence an expressed or inferred intention, common to the parties, about the proportions in which their shares are to be held, equity will, if collection of it proves impossible, impute to them the requisite intention.
Before us is a case in which Judge Dedman, the trial judge, found and, was entitled on the evidence to find that the common intention required by the first question could be inferred.
Thus the case does not require us to consider whether modern equity allows the intention required by the first question also to be imputed if it is not otherwise identifiable.
That question will merit careful thought.
In para 61 of her ground breaking speech in Stack v Dowden Lady Hale quoted, with emphasis, the words of Chadwick LJ in para 69 of Oxley v Hiscock, which I have quoted in para 83 above.
Then she quoted a passage from a Discussion Paper published by the Law Commission in July 2002 and entitled Sharing Homes about the proper approach to identifying the proportions which were intended .
Finally she added four sentences to each of which, in quoting them as follows, I take the liberty of attributing a number: [1.] That may be the preferable way of expressing what is essentially the same thought, for two reasons. [2.] First, it emphasises that the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended. [3.] Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair. [4.] For the court to impose its own view of what is fair upon the situation in which the parties find themselves would be to return to the days before Pettitt v Pettitt without even the fig leaf of section 17 of the 1882 Act.
I leave on one side Lady Hales first sentence although, whereas Chadwick LJ was identifying the criterion for imputing the common intention, the context of the passage in the Discussion Paper suggests that the Law Commission was postulating a criterion for inferring it.
On any view Lady Hales second sentence is helpful; and, by her reference to what the parties must, in the light of their conduct, be taken to have intended (as opposed to what they did intend), Lady Hale made clear that, by then, she was addressing the power to resort to imputation.
Lady Hales fourth sentence has been neatly explained by Mr Nicholas Strauss QC, deputy judge of the Chancery Division, who determined the first appeal in these proceedings, at para 30 as being that, in the event that the evidence were to suggest that, whether by expression or by inference, the parties intended that the beneficial interests in the home should be held in certain proportions, equity would not impose different proportions upon them; and, at para 47 above, Lord Walker and Lady Hale endorse Mr Strausss explanation.
The problem has lain in Lady Hales third sentence.
Where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair? The sentence was not obiter dictum so rightly, under our system, judges below the level of this court have been unable to ignore it.
Even in these proceedings judges in the courts below have wrestled with it.
Mr Strauss observed, at para 31, that it was difficult to see how at that final stage of the inquiry the process could work without the courts supply of what it considered to be fair.
In his judgment on the second appeal Lord Justice Rimer went so far as to suggest, at para 77, that Lady Hales third sentence must have meant that, contrary to appearances, she had not intended to recognise a power to impute a common intention at all.
I respectfully disagree with Lady Hales third sentence.
Lord Walker and Lady Hale observe, at para 34 above, that in practice the difference between inferring and imputing a common intention to the parties may not be great.
I consider that, as a generalisation, their observation goes too far at least if the court is to take (as in my view it should) an ordinarily rigorous approach to the task of inference.
Indeed in the present case they conclude, at paras 48 and 49, that, in relation to Chadwick LJs second question the proper inference from the evidence, which, if he did not draw, the trial judge should have drawn, was that the parties came to intend that the proportions of the beneficial interests in the home should be held on a basis which in effect equates to 90% to Ms Jones and to 10% to Mr Kernott (being the proportions in favour of which the judge ruled).
As it happens, reflective perhaps of the more rigorous approach to the task of inference which I prefer, I regard it, as did Mr Strauss at [48] and [49] of his judgment, as more realistic, in the light of the evidence before the judge, to conclude that inference is impossible but to proceed to impute to the parties the intention that it should be held on a basis which equates to those proportions.
At all events I readily concur in the result which Lord Walker and Lady Hale propose.
| UK-Abs | This case concerns the correct approach to calculating beneficial interests in property where the legal title to the property is held in joint names by an unmarried couple but there is no express statement of how it is to be shared.
Ms Jones and Mr Kernott met in 1981.
They had two children together.
In 1985 they purchased a house in Thundersley, Essex in their joint names.
The price paid was 30,000 with a 6,000 deposit paid exclusively by the proceeds of sale from Ms Joness previous home.
No declaration was made as to how the beneficial interest in the property was to be held.
The mortgage and upkeep on the house was shared between them.
In 1986 they jointly took out a loan of 2000 to build an extension.
Mr Kernott did some of the work himself.
The relationship deteriorated and in 1993 Mr Kernott moved out.
From that point onwards Ms Jones lived in the Thundersley property with both children.
In 1996 Mr Kernott bought his own house in Benfleet, Essex.
Over the years, the value of the Thundersley property increased and in 2006 Mr Kernott indicated that he wished to claim a beneficial share in it.
In response, Ms Jones, in 2007, applied to the county court for a declaration under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 that she owned the entire beneficial interest in the property.
By 2008 the property was valued at 245,000.
The county court judge noted that the house was first purchased to set up a family home.
It was bought in joint names and a presumption arose that they intended to jointly share the beneficial ownership of it as well.
Up until 1993 there was no evidence to rebut that presumption.
Ms Jones claimed however that in the 14 and a half years following there was evidence that their common intention had changed.
Mr Kernott had ceased to make contributions towards the running of the house and had made only very limited contributions towards the support of their children.
Furthermore it was mostly during that latter period that the value of the property had increased.
The judge held that their common intention had indeed changed.
In reliance upon the decision of the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, he held that once the initial presumption of joint beneficial ownership is displaced and there is no further clear evidence as to the division of shares in the property it falls upon the court to infer or impute an intention to the parties as to the division of the property that they, as reasonable and fair people, would have intended.
He decided that Mr Kernott was entitled to only a 10% share.
Mr Kernott appealed to the High Court arguing that it was wrong for the court to infer or impute a change of common intention and further wrong for the judge, in effect, to substitute a division that he considered to be fair as between the parties.
Mr Nicholas Straus, QC sitting as a High Court judge dismissed his appeal.
Mr Kernott appealed to the Court of Appeal which, by a majority (Jacob, LJ dissenting), allowed his appeal.
The Supreme Court unanimously allows the appeal and restores the order of the county court.
Lord Walker and Lady Hale give the lead judgment.
Lord Collins agrees with Lord Walker and Lady Hale and adds some reflections of his own.
Lord Kerr and Lord Wilson agree in the result but reach it by a different route.
Lord Walker and Lady Hale: The principle recognised in Stack v Dowden is that where people purchase a family home in their joint names the presumption is that they intend to own the property jointly in equity also [15].
The starting point is different in cases where the property is bought in the name of one party only.
The presumption of joint beneficial ownership arises because (i) purchasing property in joint names indicates an emotional and economic commitment to a joint enterprise and (ii) the practical difficulty of analysing respective contributions to the property over long periods of cohabitation [19 22].
The presumption may be rebutted by evidence that it was not, or ceased to be, the common intention of the parties to hold the property jointly.
This may more readily be shown where the parties did not share their financial resources [25].
In the absence of clear evidence of intention, a question arises as to when the court can infer such intention and when the court can, instead, impute an intention.
An inference is drawn where an actual intention is objectively deduced from the dealings of the parties; an imputation is one attributed to the parties by the court [26 27].
The search is primarily to ascertain the parties actual intentions, expressed or inferred but if it is clear that the beneficial interests are shared but impossible to infer a common intention as to the proportions in which they are shared, the court will have to impute an intention to them which they may never have had [31].
The following principles apply: (i) the starting point where a family home is bought in joint names is that they own the property as joint tenants in law and equity; (ii) that presumption can be displaced by evidence that their common intention was, in fact, different, either when the property was purchased or later; (iii) common intention is to be objectively deduced (inferred) from the conduct and dealings between the parties; (iv) where it is clear that they had a different intention at the outset or had changed their original intention, but it is not possible to infer an actual intention as to their respective shares, then the court is entitled to impute an intention that each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property; and (v) each case will turn on its own facts; financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair [51].
On the facts of this case the county court judge held that the parties intentions as regards the Thundersley property had changed after their separation.
It was a logical inference that they intended [Mr Kernotts] interest in Badger Hall Avenue should crystallise in 1995, when they took the house off the market, cashed in an insurance policy, so that Mr Kernott was able to buy a house in his own name [48].
The calculation of their shares on this basis produced a result so close to that produced by the judge that it would be wrong for an appellate court to interfere.
Lord Collins agrees with Lord Walker and Lady Hale, holding that the differences in reasoning set out below are largely terminological and conceptual and are likely to make no difference in practice. [58].
Lord Kerr holds that the divergence in reasoning might, in practice, make a difference [67].
The question concerns how far the court should go in seeking to infer intention and when it is justified in imputing it.
It is preferable to give effect to the parties intentions where possible but the courts should not be reluctant to recognise when it is not and to impute an intention accordingly.
In agreement with Lord Wilson it is not possible to infer the intention in this case but the division that the judge made is a fair one as between the parties and should stand.
Lord Wilson considers that on the facts of this case, it is impossible to infer the intentions of the parties and the court can only impute to the parties an intention that the house be held in fair proportions along the lines of those set out by the county court judge [89].
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This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) in a joint referral to the Special Commissioners by Scottish Widows Plc (the Company) and Her Majestys Revenue and Customs (HMRC) under para 31 of Schedule 18 to the Finance Act 1998: [2010] CSIH 47, 2010 SLT 885, 2010 STC 2133.
The question that was referred to the Special Commissioners for their determination was in these terms: Whether in computing the Case 1 profit or loss of Scottish Widows plc for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is agreed that the words as receipts, which were not in the question as referred, may be understood as following after the words into account.
The Special Commissioners answered that question in the affirmative.
The Company appealed against that decision and HMRC cross appealed.
The Court of Session by a majority (Lord Emslie dissenting) refused the appeal and unanimously refused the cross appeal.
Both sides have appealed against its decisions to this court.
The essence of the dispute between the parties is whether, in each of the three consecutive years in question, part of the entry in line 15 of the Companys form 40 must be taken as falling within the scope of either section 83(2) or section 83(3) of the Finance Act 1989, as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995 and paragraph 4 of Schedule 31 to the Finance Act 1996.
If it falls within the scope either of these two subsections, the sum concerned will fall to be treated as a chargeable receipt for the purposes of Case 1 of Schedule D in ascertaining whether, and if so to what extent, the Company made a loss during those years.
The Company carries on business as a life assurance company.
Insurance business is a trade within the meaning of Case 1 of Schedule D: Income and Corporation Taxes Act 1988, section 18.
The amounts to be taken into account in computing its profits include its investment income from its long term business fund and any increase in the value of its assets during the accounting period.
Those profits may be computed for tax purposes in one or other of two ways.
They may be computed on the Schedule D, Case 1 basis, the actuarial surplus being a suitable starting point for dealing with cases of this description: see Scottish Union and National Insurance Co v Inland Revenue (1889) 16 R 461, 475, per Lord President Inglis.
Or they may be computed on the basis of the income which the insurer receives on its investments less management expenses, known as the I E basis.
HMRC are entitled to elect to charge tax on the investment income, and they almost invariably do so as it nearly always pays the Crown to take the interest on the investments and not to trouble with the profits: Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227 per Lord President Dunedin.
But a Case 1 computation is nevertheless required in every case.
The dispute between the parties arises from the demutualisation in 2000 of the Scottish Widows Fund and Life Assurance Society (the Society) and the transfer, under a scheme sanctioned by the Court, of its business to the Company.
The scheme came into effect on 3 March 2000.
In para 22.1 it was provided that on or after the effective date the Company was to maintain a memorandum account within its long term fund, designated as the capital reserve, which was to represent the amount of the shareholders capital held within the long term business fund.
The capital reserve was to be divided between the Companys with profits fund and its non participating fund.
Para 22.4 provided that the Company was to maintain records of the capital reserve and of the parts of it allocated to each of these two funds.
While the funds comprised identifiable assets with all the qualities that attach to items of that kind, the capital reserve was a device or, as Lord Walker says in para 55, an abstraction.
It was created for accounting purposes only and had no real life of its own.
At the time of the transfer to the Company the value of the Societys assets was substantially in excess of its liabilities.
But the Company sustained trading losses in each of the relevant accounting periods.
The market value of its assets decreased from the inception of its long term business fund, due principally to falls in the value of the stock market.
The Company claims that account should be taken of its commercial losses in its non participating fund during the relevant accounting periods.
It has included Case 1 losses in its tax returns and computations for those periods equal to 28,689,437, 612,583,866 and 431,261, 757 respectively.
HMRC maintain that, on a proper construction of section 83(2) of the 1989 Act, which failing of section 83(3), and having regard to entries in the Companys statutory returns for the relevant periods in which it was required to show that it had a surplus in excess of its liabilities for regulatory purposes, these claims should be disallowed.
The Company brought various sums into account, described as transfers from the capital reserve, in the years in which they sustained losses.
HMRC submit that each increase in the regulatory value selected by the Company falls to be treated as an increase in the value of its assets within the meaning of section 83(2)(b).
In any event the amounts brought into account and recorded as transfers from the capital reserve fall to treated as receipts under section 83(3) because they were amounts which had previously been added to the long term business fund as part of the transfer of business to the Company from the Society.
The statutory provisions
Section 83, as amended, so far as relevant to this case provides as follows: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
In section 83(8) of the 1989 Act, as amended it is provided that the word add in that section, in relation to an amount and a companys long term business fund, includes transfer (whether from other assets of the company or otherwise).
Section 83A(1), which was inserted by section 51 of and paragraph 16 of Schedule 8 to the Finance Act 1995 and amended by paragraph 6 of Schedule 31 to the Finance Act 1996, provides that brought into account in sections 83 to 83AB (as inserted by paragraph 5 of Schedule 31 to the 1996 Act) means brought into account in an account which is recognised for the purposes of those sections.
Section 83A(2) provides: Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) any separate revenue account required to be prepared under that Act in respect of a part of that business.
Paragraph (b) above does not include accounts required in respect of internal linked funds.
The revenue account that section 83A(2)(b) refers to is the regulatory return in form 40: see para 12, below.
Section 431 of the 1988 Act contains a list of interpretative provisions relating to insurance companies.
They include a definition of the word value: see section 83(2)(b) of the 1989 Act.
It is in these terms: value, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the companys periodical return.
Insurance companies are under an obligation to submit annual returns to the Financial Services Authority (FSA) for regulatory purposes.
The purpose of these returns is to demonstrate that the insurer meets the regulatory standard of solvency.
They are required to show the results of a statutory actuarial investigation, which calculates the value of the insurers liabilities and identifies the amount of surplus in excess of those liabilities.
They must show that there is a sufficient surplus to cover any declared bonuses.
At the time of the demutualisation the relevant regulations were to be found in the Insurance Companies Act 1982, the Insurance Companies Regulations 1994 (SI 1994/1516) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943).
Section 17 of the 1982 Act provides that every insurance company carrying on insurance business in the United Kingdom must prepare a revenue account for each financial year of the company, a balance sheet and a profit and loss account, the contents of which are to be such as may be prescribed by regulations.
Section 18 provides for an actuarial investigation once in every period of twelve months of every insurance company which carries on long term business.
Section 28 provides that it must maintain an account of the assets and liabilities attributable to its ordinary long term insurance business.
Regulation 45(6) of the 1994 Regulations provides that an insurance company may, for the purposes of an investigation to which section 18 of the Act applied, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company.
This was already a practice of long standing in the insurance industry.
For a detailed description of the background to these requirements and to the provisions of the Finance Act 1989 about the taxation of the life assurance business of an insurance company, reference may be made to Lord Reeds opinion in the Court of Session to which, like Lord Walker, I would pay tribute: 2010 SLT 885, paras 91 126.
A useful summary of the FSA regime that was in force at the relevant time is to be found in Lord Emslies opinion, para 198 (ix) to (xii); see also Lord Walker, at paras 49 53, below.
In short, the regulatory returns which a company carrying on long term life insurance was required to complete and submit included a series of numbered forms.
Form 13 set out an analysis of all the companys admissible assets, entered at a value which broadly corresponded to their year end market value.
Form 14 set out in line 51 the amount by which the net admissible assets exceeded the companys long term business liabilities.
Form 40, which was headed Revenue account, set out revenue flows and expenditure for the Companys long term business fund, its with profits fund and its non participating fund, and the amount of each fund to be carried forward to form 58.
Form 58, which was headed Valuation result and distribution of surplus, determined the amount of the actuarial surplus by comparing the value of the insurers liabilities under the policies that it has issued with the fund shown on form 40.
The data that were used to prepare these regulatory returns were the same as those used to prepare the Companys statutory accounts.
The amounts that were calculated by the Company as the commercial losses of its non participating fund were derived from decreases in the market value of the admissible assets less liabilities in that fund during the relevant accounting periods.
For each of these periods, however, there were included in the figure entered as other income in line 15 of form 40 amounts described as transfers from capital reserve which reduced the capital reserve by an equivalent amount.
They should perhaps have been included as an increase in the value of assets brought into account in line 13.
But it is agreed that the way they fall to be treated does not depend on whether they were entered there or in line 15.
The Special Commissioners said there is no difference in principle, as both lines are brought into account in the total shown at line 19: para 51.
The amounts in aggregate for the relevant accounting periods were 33,410,000, 472,724,000 and 370,000,000 respectively.
The approach to construction
It is well understood that statutory provisions which bring profits and gains into charge to tax are to be construed as directed towards profits and gains in their natural and proper sense in a sense which no commercial man would misunderstand and that those words are equally applicable whatever the commercial concern may be: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
The objective is to ascertain and charge the true profits and gains of the business in question.
The requirement that there should be a true and fair view involves the application of a legal standard.
The courts are, in general, guided as to the content of the computation by expert opinions of accountants as to what the best current accounting practice requires: Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, 2007 SC (HL) 105, [2007] 1 WLR 1448, para 2, per Lord Hoffmann.
The special rules that section 83 of the 1989 Act lays down for the calculation of the profits of life assurance companies in respect of their life insurance business for the purposes of corporation tax are, in this respect, no different from the rules that apply to companies generally.
They provide a legal standard according to which these profits are to be ascertained.
As has already been noted, that section has been amended more than once.
But I do not think that it is helpful to look back into the legislative history.
Lord Wilberforce said in Farrell v Alexander [1977] AC 59, 73 that self contained statutes, whether consolidating previous law or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot solve.
Further amendments to section 83 were introduced by section 170 and paragraph 2 of Schedule 33 to the Finance Act 2003.
In Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 1716 Lord Diplock said that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
So the proper approach is to concentrate on the wording of sections 83(2) and 83(3) as they were at the relevant accounting periods.
With that background, and with the benefit of the much more comprehensive description of the facts that Lord Walker has provided and of the carefully reasoned opinions of all the judges in the Inner House, I now turn to the provisions of the 1989 Act which are under scrutiny in this case.
Section 83(2)
This subsection directs that there must be taken into account as receipts of the period for the purposes of Case 1 of Schedule D (a) the Companys investment income from the assets of its long term business fund and (b) any increase in value of those assets, in so far as these items have been brought into account by the Company.
The question is whether its language permits the Company to claim that it in fact sustained an allowable loss during the relevant period when the values as brought into account for that period indicate the contrary.
It is common ground that the reference to investment income in paragraph (a) of the subsection is a reference to actual income from assets actually comprised in the long term business fund.
The Company submits that, by parity of reasoning, the reference to any increase in value in paragraph (b) must be taken to be a reference to something that can be recognised on a commercial basis as a real increase in real assets.
So the word assets in both paragraphs meant assets of the long term business fund which had the capacity to earn income and to grow in value.
The fact was that its assets had decreased, not increased, in each of the relevant accounting periods.
The amounts included in line 15 of form 40 were there for regulatory purposes only.
They were book entries which had no commercial validity.
The fact was that the assets of the long term business fund had decreased, not increased, in each of the relevant accounting periods.
The mere fact that an amount, such as interest on unpaid tax, was entered in form 40 did not mean that it was taxable.
To arrive at a true and fair view it was necessary to go behind the entries on the forms and look at the facts.
In the Court of Session the judges of the First Division were unanimous in accepting this argument and rejecting the argument for HMRC.
The Lord President said that he was unable to accept that the contents of the revenue account that had been prepared for regulatory purposes had the definitional character for which HMRC contended.
The fact that the investment income was inevitably an actual receipt suggested that the increase in value should be an actual sum, as opposed to an accounting element: para 54.
Lord Reed made the same point in para 181, adding that the words whether realised or not were a strong indication that section 83(2) was concerned with real gains rather than a change in notional values.
Lord Emslie said that, consistent with the long established distinction between assets and fund, the reference to an increase in value of assets should be taken as reflecting commercial reality in the form of actual increases in the value of assets: para 204.
As Mr Andrew Young QC for HMRC pointed out, however, that section 83(2) is a special rule for the computation of the profits of an insurance company in respect of its life assurance business.
The general rules for the computation of profits and gains for the purposes of Case 1 of Schedule D must be taken to have been modified to the extent provided for in this subsection.
The Company was being taxed on the I minus E basis and it is this subsection, not the rules that are generally applicable, that must be construed.
An insurance company is entitled to elect, under regulation 45(6) of the 1994 Regulations, to assign to any of its assets the value given to the asset in the books or other records of the company.
Section 83(2) can be taken to have been drafted in the light of the fact that insurance companies almost always, if not invariably, choose to use book values (in the sense indicated by regulation 45(6)) to arrive at the necessary balance in form 40 to demonstrate solvency to the regulatory authority.
Once this point is grasped, it seems to me that the meaning to be given to section 83(2)(b) falls fairly easily into place.
The wording of the subsection follows that of the forms.
While the investment income in paragraph (a) is real income, the increase in value referred to in paragraph (b) may or may not be a real increase.
The assets which gave rise to this increase in value may or may not be the same assets as those referred to in paragraph (a).
It depends on the content of the amounts shown in lines 13 and 15 of form 40.
Amounts taken from its long term business fund were used by the Company to supplement its trading income in each of the three years in question.
It chose to use its own book values, not values computed according to the current value of the assets of its long term business fund, to arrive at the final values that were brought into account on form 40.
In the absence of further directions in the statute as to how the increase in value is to be computed in cases where that option has been chosen and there are none I would hold that the increase in value referred to in paragraph (b) must be taken to be the amount which has been brought into account on the form.
The phrase as brought into account for a period of account in the opening words of the paragraph lies at the heart of this interpretation.
It was suggested by the Company that this phrase determined the period for which items were to be treated as taxable receipts but not the items which were taxable.
But this interpretation of the phrase does not, I think, give full weight to the word as.
Linked to the words the following items which precede it, the phrase indicates that the computation must proceed on the basis of the way the items have actually been entered on the forms.
If values shown in the books or other records of the company have been used, instead of market values, it will be the book values that will determine whether or not there has been any increase in value during the relevant period and, if so, how much that increase is.
The phrase and not otherwise was said to support the Companys interpretation of paragraph (b) because it indicated that it was being assumed that the items that were being brought into account when any increase in value was being assessed were items that could be realised, not notional ones.
But I think that their purpose is to make it clear that the basis of computation referred to in subsection (2) is the only basis that is relevant for the purposes referred to in subsection (1).
The words whether realised or not are there to indicate a change from the computation indicated by the original wording of section 83.
If the company chooses to bring unrealised increases in value into account, those increases in value must be taken into account as receipts for the period in the same way as increases that have been realised.
For these reasons I am unable to agree with the judges of the Court of Session as to the meaning and effect of section 83(2)(b).
But in para 205 of his opinion Lord Emslie made some further points which, as they were attractively put, need to be answered too.
He said that a factor which favoured the Companys construction of section 83(2) was that it accorded well with the general principles (1) that the ascertainment of receipts or gains for tax purposes should prima facie reflect commercial reality; (2) that income or gains to be taxed should prima facie be the taxpayers and not those of a third party; and (3) that the ordinary recognition of shareholders capital to cover actual trading should not prima facie be a chargeable receipt.
He described these principles in more detail in paras 197 and 198, and I agree with him that prima facie they can be taken to be a reliable guide as to how tax legislation ought to be construed.
But his use of the phrase prima facie indicates, if I may say so quite correctly, that these are not absolute rules that are incapable of being disapplied by the statute.
In this case we are dealing with special rules that have been designed to take account of the unique nature of the business carried on by life assurance companies.
That in itself suggests that it is the language of the statute, rather than these general rules, that should be the determinative factor in this case.
Taking Lord Emslies three points in turn, I would hold, firstly, that the language of section 83(2) shows conclusively that, if the insurance company chooses to use book values to arrive at the final values shown on form 40, it is on those values that the computation referred to in section 83(1) must be based.
This can be said to reflect the commercial reality of the life assurance industry, as the Companys taxable receipts were based on its own figures as submitted to the regulatory authorities to justify the surplus of assets that it wished to recognise.
Secondly, there is no question, in this case, of taxing the income or gains of a third party.
The values brought into account on form 40 are the product of assets that were vested in the Company when it established its long term business fund.
Their link with the Society was entirely broken when the transfer under the scheme took effect.
As to Lord Emslies third point, it must be appreciated that the capital reserve was not, as he said in para 202, ordinary shareholders capital.
The words themselves might be taken as suggesting otherwise, but I think that the name that was given to what the scheme described as a memorandum account is a distraction.
The reality is that the reserve had no life of its own separate from the long term business fund.
It was an accounting mechanism which the Company had established for its own internal accounting purposes as part of its long term business fund.
It did not consist of particular assets but was a financial structure which was subject to all the statutory restrictions and requirements to which that fund was subject.
In para 205 he said that, as the capital reserve was shareholders capital, its ordinary recognition to cover actual trading receipts should not prima facie be deemed a chargeable receipt.
But, as the capital reserve had no life of its own, amounts that were described as transfers from the reserve fell to be treated in the same way as any other assets comprised within the long term business fund for regulatory purposes and, in consequence, for the purposes of section 83(2) too.
For these reasons, and those given by Lord Walker, I would allow the HMRCs cross appeal.
Section 83(3)
As I would answer the question in the reference in favour of HMRC on the ground that the amounts in question fall to be taken into account as receipts under section 83(2) with the result that there was a corresponding increase in the assets of the long term business fund for each of the relevant accounting periods within the meaning of paragraph (b) of that subsection, the question whether section 83(3) applies to those amounts does not arise.
This is because section 83(4) provides that subsection (3) of that section does not apply where, or to the extent that, the amount concerned is taken into account under subsection (2).
But, as the judges of the Court of Session were divided in this issue and out of respect for the care which they took to examine it, I would like to make these few brief comments.
The exercise to which section 83(3) is directed proceeds in two stages which are, as Lord Reed said in para 191(1), conceptually distinct from each other.
First, there is the question whether an amount has been added to the companys long term business fund as a part of or in connection with a transfer of business to the company.
Section 83(8) provides that the word add includes transfer.
As for the facts of this case, amounts were added to the Companys long term business fund when the scheme took effect as part of the transfer of the Societys business to the Company.
The whole of the amount that was to be treated as the capital reserve for accounting purposes was added or transferred to the Companys long term business fund as an integral part of the scheme.
It seems to me to be plain, having regard to the terms of the scheme, that the addition to the Companys long term business fund was as part of or in connection with the transfer of the Societys business to the Company.
The fact that it was only later that some amounts were brought into account by way of what were called transfers from the capital reserve does not matter.
The second stage is the bringing of the amount into account for the period in question.
It seems to me that this occurs as and when, and indeed whenever, the amount is brought into account as an increase in value to reduce or eliminate a loss that would otherwise have occurred during the relevant period.
As Lord Reed said in para 191(2), there are understandable reasons why Parliament might consider that the use of amounts acquired on a transfer of business to offset liabilities resulting from normal patterns of trading which were not otherwise chargeable to tax should be disallowed.
I agree with him that, when the amounts were subsequently brought into account on form 40, they would but for the fact that they were already caught by section 83(2) have fallen to be treated by section 83(3) as chargeable receipts for the purpose of ascertaining whether or to what extent the Company had incurred a loss in each of the relevant periods.
Lord Emslies point, which he made in para 228 of his dissenting opinion, that the transfers were made in a non chargeable context is answered by the two stage nature of the exercise to which section 83(3) is directed.
It is not the context in which the transfer was made at the outset that determines the way in which the amounts fall to be treated when, at some later stage, they are brought into account.
Had it been necessary to do so to arrive at an answer to the question that was referred to the Special Commissioners, I would have affirmed the decision of the majority in the Inner House on this issue and dismissed the Companys appeal.
Conclusion
I would recall the interlocutor of the Inner House of the Court of Session, allow the cross appeal by the HMRC and answer the question referred to the Special Commissioners in the affirmative.
LORD WALKER
Introduction
On 3 March 2000 Scottish Widows plc (the Company), a new company within the Lloyds TSB banking group, acquired the principal assets and liabilities of the life assurance business of the Scottish Widows Fund and Life Assurance Society (the Society).
The Society had a long and distinguished history.
It was established in Edinburgh in 1814 upon the principle of mutual assurance.
It was incorporated by statute in 1861 as a company without a share capital and it remained a mutual life office that is an entity owned by its members, the policyholders, with no outside shareholders until the change in 2000, which has been referred to as demutualisation.
The process of demutualisation was achieved by a scheme of transfer approved by the Court of Session under section 49 of and Schedule 2C to the Insurance Companies Act 1982 (ICA 1982).
Some of the provisions of the scheme are of central importance to this appeal.
The transfers which it effected were on a very large scale: the Company acquired, in round terms, assets with a market value of the order of 25bn and became subject to actuarial liabilities of the order of 19bn.
The qualifying members of the Society received compensation of approximately 5.846bn, representing the difference (with various adjustments and enhancements) between the assets and the liabilities.
This compensation was paid by the Companys holding company, Scottish Widows Financial Services Holdings Limited (Holdings), which owns the whole of the Companys issued share capital.
The Societys assets included large holdings of equities as well as fixed interest securities, immovable property and other investments.
As it happens the United Kingdom stock market reached what was (and remains) an all time high in the new year of 2000, and in the first years of the Companys business the market value of its holdings of equities was substantially reduced.
This unexpected and unwelcome turn of events has led to a dispute between the Company and HM Revenue and Customs (the Revenue) as to the tax consequences.
On 11 October 2006 the Company and the Revenue joined in making a referral to the Special Commissioners under Schedule 18, para 31 of the Finance Act 1998.
The agreed question to be determined was as follows (with a small agreed explanatory addition): Whether in computing the Case 1 profit or loss of [the Company] for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is common ground that the answer to this question depends on two issues, one turning on the meaning and application of a general provision in subsection 83(2) (read with subsection (1)) of the Finance Act 1989 as amended (FA 1989), and the other turning on the meaning and application of a more particular provision in subsection 83(3) (read with subsection (4)) of the same section.
The Company must win on both issues in order to succeed.
Conversely it is sufficient for the Revenue to succeed if it wins on either issue.
The first issue, once understood, is a short point of construction.
But for the non specialist a lot of background, some of it quite technical, is required in order to understand the point, and to be able to weigh the linguistic arguments against more general considerations based on the legislative scheme and purpose.
The second issue (which arises only if the Company is successful on the first issue) is a rather more intricate point of construction.
The complex background, and the large amounts of tax at stake, help to explain why these two points of construction took four and a half days before the Special Commissioners, and no less than seven and a half days before the Court of Session.
The Special Commissioners (Mr J Gordon Reid QC and Dr John F Avery Jones CBE) decided the first issue in favour of the Company and the second issue in favour of the Revenue, so that the Revenue was successful.
The First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) reached the same conclusions on both issues, unanimously on the first and with Lord Emslie dissenting on the second: [2010] CSIH 47; 2010 SLT 885; [2010] STC 2133.
The Company now appeals on the second issue and the Revenue cross appeals on the first issue.
The historical background.
The first issue (the subject of the Revenues cross appeal) comes naturally before the second issue (the subject of the Companys appeal).
But before getting to the detailed arguments on either issue it is necessary to say something about the historical background, and to cover regulatory as well as taxation aspects, since these two aspects have become closely interrelated.
The background has already been covered with conspicuous thoroughness and clarity in the judgment of Lord Reed (paras 87 104), to which I gratefully acknowledge my indebtedness.
This part of my judgment is largely based on the fuller description by Lord Reed, with the addition of a few points of my own.
Life assurance, in its many different forms, has played an important part in British social and economic history.
Actuarial science was already developing by the beginning of the eighteenth century (one of the founding fathers, Edmund Halley, published a paper on The Degrees of the Mortality of Mankind, commissioned by the Royal Society, in 1693).
The Life Assurance Act 1774 addressed the problem of insurable interest and curbed the scandal of tontines, then fashionable in some wealthy circles.
Interest in life policies was by no means restricted to the wealthy.
The Society was only one (and among the most prominent in Scotland) of many mutual societies by which working men could insure against the risk of their families being left in penury in the event of the early death or disablement of the main breadwinner.
In England the most prominent comparable body was probably the Friends Provident Society, founded in 1832 (it was a registered friendly society, regulated by a different statutory system).
The growth of these mutual societies was remarkable: they had just over 700,000 members in 1803, over 3 million in 1887, and over 6 million in 1910 (there are fuller statistics in D. Green, Reinventing Civil Society, 1993).
The mutual movement went into decline after Lloyd George introduced a system of compulsory national insurance in 1911.
The public interest in life assurance as encouraging prudent self reliance was reflected in its tax treatment, though for the most part the incentives were directed to policyholders rather than life offices.
In 1870, after several life offices had run into difficulties, Parliament introduced a new system of regulation.
It was the foundation of the more elaborate system that we have today.
The Life Assurance Companies Act 1870 (LACA 1870) required life offices (whether mutual or proprietary) to keep proper accounts and to prepare annual financial statements consisting of a revenue account and a balance sheet in a prescribed form.
Regular actuarial investigations were made mandatory.
Lord Reed explains in his judgment (paras 91 94) how section 4 of LACA 1870 introduced for the first time the statutory concept of a life assurance fund held as security for the rights of holders of life policies and annuities.
This was the origin of what is now referred to as a life offices long term business fund (LTBF).
As regards taxation, during the 19th century and the first two thirds of the 20th century there was no corporation tax and no capital gains tax.
Companies were subject, in much the same way as individuals, to income tax assessed and charged under the various schedules and cases defined in the Income Tax Acts.
If a taxpayer received income which could be regarded as falling within more than one schedule or case, the Revenue could not claim tax twice, but could choose which schedule to apply.
This choice (sometimes referred to as the Crown option) was available to the Revenue in relation to proprietary life offices, which held large reserves of income producing investments in order to meet their actuarial liabilities and provide for unforeseen contingencies.
They could be taxed either on the profits of a trade under Schedule D Case I, or on their investment income as such.
It was usually more advantageous for the Revenue to make an assessment on the companys investment income, as Lord President Dunedin noted in Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227.
The Crown option was abolished by the Finance Act 2007 and replaced by mandatory provisions.
With a mutual life office the Revenue never had a choice, since mutual trading does not produce profits taxable under Schedule D Case I.
The first statutory provisions giving special tax treatment to life offices were in the Finance Act 1915.
Life assurance was to be treated as a separate business.
Annuity funds were to be taxed separately from life funds.
Life offices taxed on their investment income were to be allowed a deduction for management expenses (including commission paid to brokers).
This system of taxation is generally referred to as the I minus E (that is, income minus expenses) basis of assessment.
It remained open to the Revenue to choose to assess a life office to tax under Schedule D Case I, but the basis of that assessment was altered (and the likelihood of its actually being adopted by the Revenue was reduced) by section 16 of the Finance Act 1923 (FA 1923), which gave effect to a recommendation in the report, published in 1920, of the Royal Commission on Income Tax (Cmd 615).
Profits allocated to with profits policies were to be excluded from the life offices taxable profits.
This was not unprincipled, since on allocation the profits became liabilities.
This provision has been re enacted in successive consolidating statutes, and finally in section 433 of the Income and Corporation Taxes Act 1988 (ICTA 1988), the terms of which are set out in para 103 of Lord Reeds judgment.
Section 433 of ICTA 1988 was repealed and replaced by FA 1989.
The change made by FA 1923 was an important change.
In practical terms it diminished the difference in tax treatment as between proprietary and mutual life offices.
Its importance increased with changes in economic conditions in Britain during the second half of the 20th century (in brief, monetary inflation and the prospect of substantial capital gains from investment in equities and property).
The Society was required by its constitution and regulations (to be found in their final form in the Scottish Widows Fund and Life Assurance Act 1980), as the Company is required under the scheme, to allocate to the holders of its with profits whole life and endowment policies nine tenths of the with profits part of the gains which it recognised, or brought into account (the expressions mean the same), in the revenue account of its LTBF.
After the introduction of capital gains tax and corporation tax on chargeable gains, realised gains made by the Society were taxed at differential rates, the details of which are not material.
But unrealised gains could be recognised (or brought into account) in order to enable larger bonuses to be allocated and paid to with profits policyholders without having been taxed in the Societys hands.
This was perceived by the Revenue as a serious defect in the system, as appears from an official consultation document published in 1988, The Taxation of Life Assurance, (summarised in paras 123 126 of Lord Reeds judgment).
This document gives a summary of how during the 1980s the life assurance industry was rapidly evolving into being part of a larger savings industry, in competition with unit trusts and other savings media, and itself increasingly making use of unit linked policies rather than traditional with profit policies (investment by small savers in authorised unit trusts and approved investment trusts was encouraged in a different way, by deferring tax on capital gains until individual unitholders or shareholders realised their gains).
Section 83 of FA 1989, which is at the heart of this appeal, was part of the changes which Parliament made in consequence of this review.
It makes an express link between the imposition of liability to tax (or the creation of an allowable loss) under Schedule D Case I and the regulatory regime under ICA 1982.
It is therefore necessary, before coming to section 83, to give a short account of the regulatory regime in ICA 1982 and regulations made under it.
ICA 1982 and regulations under it
The regulatory system introduced by LACA 1870 had been re enacted and modified from time to time.
ICA 1982 replaced it with a similar but much more detailed system, elaborated in a number of statutory instruments, of which the most relevant for present purposes are the Insurance Companies Regulations 1994 (SI 1994/1516) (the 1994 regulations) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943) (the 1996 regulations).
Section 17 of ICA 1982 required every insurance company to which Part II applied to prepare with respect to each financial year of the company, a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account (or for a mutual an income and expenditure account) for the year.
Each of these was to be in a form prescribed by regulations.
Under the 1996 regulations (as amended down to the year 2000) different forms were prescribed for different types of insurance companies, and they were still required by the new regulatory system mentioned in para 55 below.
The form of balance sheet prescribed (by regulation 6) for companies carrying on long term business were forms 13 (relating to assets) and 14 (relating to liabilities).
These together made up the two sides of the balance sheet.
The form prescribed (by regulation 8) for companies carrying on long term business was form 40; if the company had more than one LTBF a separate account was required for each LTBF, and a consolidated form for all of them.
The Company has three LTBFs, a with profits fund, a non participating fund for business taken over from the Society, and a non participating fund for new business.
Section 18 of ICA 1982 required every insurance company to which it applied, and which carried on long term business, to cause its actuary to make an annual investigation of its financial condition, and to cause an abstract of the actuarys report to be made.
Assets were to be valued and liabilities determined in accordance with valuation regulations, and the abstract was to be in a form prescribed by regulations.
Under regulation 25 of the 1996 regulations (as under the new regulatory system) the most relevant of the prescribed forms to be included in the abstract was form 58.
Regulation 45 of the 1994 regulations (as amended down to the material time) dealt with valuation of assets.
After some general provisions in paras (1) to (5) it dealt specifically with actuarial investigations under section 18 of ICA 1982: (6) Notwithstanding paragraph (1) above (but subject to the conditions set out in paragraph (7) below), an insurance company may, for the purposes of an investigation to which section 18 of the Act applies or an investigation made in pursuance of a requirement under section 42 of the Act, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company. (7) The conditions referred to in paragraph (6) above are (a) that the election shall not enable the company to bring into account any asset for the valuation of which no provision is made in this Part of these Regulations; (b) that the value assigned to the aggregate of the assets shall not be higher than the aggregate of the value of those assets as determined in accordance with regulations 46 to 57 of these Regulations.
Section 28 and 29 of ICA 1982 required separate accounts and funds to be maintained for long term business, and for the assets representing those funds to be applicable only for the purposes of the appropriate business, except so far as the value of the assets was shown, on a statutory actuarial investigation, to exceed the liabilities attributable to the fund.
I shall have to come back to the prescribed forms.
I add one comment.
Lord Reed observed (para 112), and I agree, that the use of the word fund in ICA 1982 is not entirely consistent.
Lord Reed had earlier quoted an observation of Lord Greene MR in Allchin v Coulthard [1942] 2 KB 228, 234: The word fund may mean actual cash resources of a particular kind (e.g. money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.
This is an important distinction, although Lord Greenes reference to cash resources is a little surprising and may have been influenced by the context of the particular case before him (it concerned the taxation of a local authoritys general rate fund).
In the context of life assurance a LTBF is a fund of investments of various types, and it falls within Lord Greenes first category.
The investments (the assets of the fund) change from time to time, as and when the investment managers need to raise money or exercise their judgment to switch investments, and the values of the assets fluctuate constantly.
But at any time it is possible to identify the assets for the time being constituting the fund, which is a continuing entity.
By contrast the Capital Reserve established by the scheme approved by the Court of Session and put into effect in 2000 (and here I am putting down a marker for later parts of this judgment), if it was a fund at all, was a fund in Lord Greenes second sense.
It was an accounting abstraction and it never consisted of identifiable assets.
Before going on to the scheme it is convenient to record, out of chronological sequence, that ICA 1982 was repealed by a statutory instrument made under the Financial Services and Markets Act 2000 which came into full force on 1 December 2001 (having come into force at earlier dates for limited purposes including rule making powers).
In consequence the new regime applied to the second and third of the Companys accounting periods relevant to this appeal that is, the calendar years 2001 and 2002; the Financial Services Authority (FSA) became the regulator, and the system of regulation was prescribed by rules made by the FSA rather than by statutory instrument.
But the substance of the system, and the identifying numbers of the forms, were unchanged.
In particular, rule 9.10(c) of the FSAs Interim Prudential Sourcebook for Insurers Instrument 2001 reproduced the effect of regulation 45(6) of the 1994 regulations.
There were some minor changes of terminology in the forms, which were set out in Appendices 9.1 (forms 13 and 14), 9.3 (form 40) and 9.4 (form 58) of the 2001 instrument.
The scheme
The scheme for the transfer of the Societys business to the Lloyds TSB group was preceded by an agreement dated 23 June 1999 between the Society and Lloyds TSB Group plc.
The agreement provided for the scheme to be approved by a special resolution of the Society in general meeting (which duly occurred) and for an application to be made to the Court of Session for sanction of the scheme under section 49 of and Schedule 2C to ICA 1982.
The Court of Session (Lord Nimmo Smith) sanctioned the scheme by an order made on 28 February 2000, and the scheme took effect on 3 March 2000.
The scheme also obtained regulatory approval and tax clearances.
The scheme is lengthy and in parts very technical.
It runs to 41 clauses and 12 schedules.
In bare outline, the bulk of the assets and liabilities of the Society were transferred to the Company; pension policies and assets and liabilities associated with them were transferred to another Lloyds TSB group company and are not relevant to this appeal.
Payment of the membership compensation to qualifying members of the Society (later quantified at 5,846m) was undertaken by Holdings, which is the owner of all the Companys issued share capital.
The provisions of the scheme which call for most attention are in Part D (Fund Structure) and Part E (operation of the Funds).
Clause 22 in Part E (Capital Reserve) is of particular importance.
Under Part D (Fund Structure) the most basic division was between the LBTF (defined as the Long Term Fund) and the Shareholders Fund.
The latter fund was to have allocated to it infrastructure assets and shares in seven subsidiaries and any joint venture companies (clause 15.1 and relevant definitions in Schedule 1).
All other assets (other than pension assets as mentioned above) were to be allocated to the LTBF, which was to be divided into two separate subfunds, the With Profits Fund and the Non Participating Fund (respectively the WPF and the NPF), with an appropriate allocation of existing policies (clauses 13 and 14.1).
The allocation of assets between the WPF and NPF was to be determined by the actuary in accordance with the detailed provisions of clause 15.2 to 15.6, 15.10 and 15.11.
Liabilities were to be similarly matched, subject to some special exceptions (clause 16).
In part E (Operation of the Funds) clause 18 deals with allocation of surplus arising in the WPF.
One ninth of the amount of bonuses allocated to conventional (that is, not unit linked) with profits policies (in other words one tenth of the gross allocation) is to be allocated to the NPF or the Shareholders Fund, as the board directs.
All other surplus is to be applied as bonus for the benefit of holders of with profits policies.
This replicates the position under the Societys constitution and regulations (para 47 above).
In life offices shorthand the WPF is a 90/10 fund.
The NPF, by contrast, is a 0/100 fund.
Following each actuarial valuation of the NPF the board may transfer to the WPF statutory surplus arising in the NPF (clause 21).
Finally I come to the Capital Reserve, provided for in clause 22.
Clause 22.1 is as follows: On and after [3 March 2000], [the Company] shall maintain a memorandum account within the [LTBF] designated as the Capital Reserve (the Capital Reserve).
At [3 March 2000] the Capital Reserve shall represent the amount of the shareholders capital held within the [LTBF].
Clause 22.2 provides for the Capital Reserve to be credited with an amount arrived at by a complicated formula.
It is common ground that this amount was 4,455m.
Clause 22.3 (headed Maintenance of Capital Reserve) provides that no more may be added to the Capital Reserve and that it may be reduced only by being brought into account in the revenue account of the WPF (up to a limit arrived at by a formula) or the revenue account of the NPF (without limit).
There does not seem to have been a finding or formal agreement as to the amount of the WPF limit, but the unchallenged evidence of Mr Adrian Eastwood, the Companys actuarial director at the material time, was that the amount was 432m.
Clause 22.4 to 22.6 provided for the Capital Reserve to be notionally allocated between the WPF and the NPF.
The initial division was 1,895m to the WPF and 2,560m to the NPF.
Tables B and C annexed to the agreed statement of facts and issues (SFI) show how the Companys opening capital of 4,769m in its LTBF can be reconciled with the opening Capital Reserve (4,455m) and the membership compensation (5,846m).
Clause 22A of the scheme provided for what was described as a contingent loan, free of interest, from the NPF to the WPF, repayable as mentioned in that clause.
Its purpose was to compensate the WPF for the fact that its right to future profits could not be included, for regulatory purposes, as an asset with an admissible value.
This inter subfund loan (described in SFI, para 29) hardly featured in the parties written and oral submissions, but it is a further complication in understanding the regulatory forms, to which I now turn.
The forms
The balance sheet consists of forms 13 and 14.
Form 13 sets out the values of the assets of the fund (that is, the LTBF or a subfund of it) at their admissible values (a technical term which in practice was not less than 99% of market value).
The effective bottom line of form 13 is line 89, Grand total of admissible values.
Form 14 sets out liabilities and margins.
For present purposes the most important lines are: 11, mathematical reserves (that is, actuarial liabilities which have not yet been finally quantified); 13, balance of surplus (or valuation deficit); 14, LTBF carried forward; 49, total other (ie non actuarial) liabilities; 51, excess of the value of net admissible assets; and 59, total liabilities and margins.
The entries at line 89 of form 13 and line 59 of form 14 must be the same.
The balancing items on form 14 are the figures entered at line 13 (balance of surplus) and line 51 (excess of the value of net admissible assets, which is also called the investment reserve: SFI para 53(2)).
The interrelation between the figures at lines 13 and 51 of form 14 is that the line 13 figure is generally a relatively small amount representing value that has been brought into account but not yet finally appropriated.
The line 51 figure is the true balancing figure, and is the last figure to be entered on the form.
It represents the (generally very much larger) value that has not yet been brought into account at all the amount by which the admissible value of the LTBF assets exceeds the book value that has been brought into account.
It illustrates the proposition stated (perhaps in rather question begging terms) in para 9 of the Revenues written case, that life offices are treated differently from most businesses in that they can shelter profits from taxation to meet unforeseen future liabilities.
This point is discussed further in paras 82 to 86 below headed Bringing assets into account at book value.
Form 40, the revenue account, shows movements during the accounting period.
The most important lines for present purposes are 11, earned premiums; 12, investment income; 13, increase (or decrease) in the value of non linked assets brought into account; 14, increase (or decrease) in the value of linked assets; 15, other income; 19, total income; 29, total expenditure; 39, increase (decrease) in fund in financial year; 49, fund brought forward; and 59, fund carried forward (39 + 49).
The entry at line 49 must be the same as line 14 on form 14 for the previous accounting period, and the entry at line 59 must be the same as line 14 on form 14 for the current period.
As to lines 13 and 14, Lord Reed explains in his judgment (para 116) that any increase or decrease in the value of linked investments (line 14) is required to be brought into account automatically, but unrealised increases in the value of non linked assets (line 13) need not be brought into account.
Form 58 (valuation result and distribution of surplus) shows the actuarial surplus (line 29), its movement during the accounting period (lines 31, 34 and 35), and its distribution as between policyholders (line 46), shareholders (line 47) and balance (line 49, this being the same as line 13 on form 14).
The term distribution as used in lines 41 48 does not imply that sums necessarily leave the Companys hands; it refers to an allocation as between policyholders and shareholders.
Three separate forms 58 were completed for the WPF, the transferred business in the NPF and the new business in the NPF.
How the forms were completed by the Company
Volume V of the papers before the Court contains over 500 pages of the Companys regulatory returns for the three relevant accounting periods, including completed forms 13, 14, 50 and 58 for the LTBF and its sub funds (except that form 58 was completed, as already noted, for three sub funds and not for the LTBF as a whole).
From these forms the following information as to the whole LTBF can be extracted (in bn, rounded to the nearest 1m, and with some rounding adjustments in the computations). 2000 2001 2002 Form 13 line 89: total assets at admissible value 20.962 Form 14 line 11: mathematical reserves 18.645 line 13: balance of surplus 0.181 line 14: LTBF carried forward 18.827 23.066 19.128 0.033 19.162 22.427 19.807 0.064 19.871 0.386 2.107 22.427 0.468 0.441 1.668 3.462 20.962 23.066 line 49: total non actuarial liabilities line 51: excess of value of net admissible assets line 59: total liabilities and margins Form 40 2.000 2.445 2.540 line 11: earned premiums 0.922 0.633 0.787 line 12: investment income line 13: increase (decrease) in value of non linked assets brought (2.254) 1.273 (1.168) into account line 14: increase (decrease) in value of (0.036) linked assets (0.031) (0.011) 0.408 0.502 16.875 line 15: other income 1.040 line 19: total income 21.216 2.631 1.921 2.084 2.054 line 29: total expenditure (1.045) line 39: increase (decrease) in LTBF 19.162 0.709 19.871 line 49: fund brought forward .000 19.162 19.162 19.871 18.827 line 59: fund carried forward Form 58 (WPF) line 59: distributed surplus line 61: percentage distributed to
policyholders
It would be imprudent to attempt any sophisticated commentary on these figures.
The entry on form 40, line 15 for 2000 is obviously exceptional, representing the effect of a change of ownership of a long established business; no one has suggested that the whole sum is taxable.
But we know that it included a sum of 33.410m as a transfer from Capital Reserve (see para 70 below).
Taken overall, the figures illustrate the effect of bringing into account value which, for prudential reasons, has not previously been recognised.
During the three accounting periods the admissible (for practical purposes, market) value of the assets of the LTBF fell by about 4bn (the figures can be collected from SFI, Table A and the Companys completed forms 13 for the three accounting periods).
The mathematical reserves decreased by a little under 0.5bn and the recognised value of the LTBF, tracking as it did the mathematical reserve and the unappropriated surplus, went down by about 0.3bn.
But the investment reserve, that is the excess of admissible value over the recognised value of the LTBF (line 51 on form 14) was reduced by almost 1.8bn.
The successive entries 0.633 0.915 94.72 96.64 0.576 97.05 on line 13 of form 40 are noteworthy.
In the accounting period ending on 31 December 2000 the value of non linked assets brought into account increased by over 1.2bn although their admissible value decreased during that period.
This disparity was reversed in the two following accounting periods, during which (taken together) admissible value fell further by about 1.6bn but the form 40, line 13 decrease was a good deal larger, about 3.4bn.
During the whole period the Company declared bonuses of significant amounts, and allocated more than the mandatory 90% to with profits policyholders.
Part of the form 40, line 15 amounts included sums described in the notes submitted with the statutory forms (volume V, pp1756, 2035 2036 and 2319) as transfers from Capital Reserve.
The amounts were as follows (SFI, paras 56 60): 2000 2001 2002 m to WPF 33.410 30.724 17.000 81.134 total 33.410 472.724 370.000 876.134 to NPF 442.000 353.000 795.000 Whether they should nevertheless have been brought into the computation of the Companys profit or loss under Schedule D Case I under section 83(1) and (2) of FA 1989 is the first issue.
Line 15 of form 40 is, it will be recalled, specifically mentioned in the referred question (set out at para 36 above).
The statutory provisions
The provisions which this Court has to construe are in a single section, section 83 of FA 1989.
A rapid survey of the landscape in which that section is found shows that in the consolidating statute, ICTA 1988, Part XII dealt with special classes of companies and businesses, and Chapter 1 of Part XII dealt with insurance companies, underwriters and capital redemption businesses.
I have already mentioned section 433, which was repealed by FA 1989 and replaced by similar (but more complex) provisions in section 82 of FA 1989.
Section 444A, inserted into ICTA 1988 by the Finance Act 1990, applies to a transfer of long term business in accordance with a scheme sanctioned under section 49 of ICA 1982, but neither side placed any reliance on this section.
At the time when the consolidating statute was enacted the government was engaged in a far reaching review of the taxation of life offices, as already noted (para 48 above).
The outcome was sections 82 to 90 of FA 1989 (together with Schedule 8 to that Act, amending Part XII of ICTA 1988).
These sections, and Schedule 8, were frequently amended between 1989 and 2000, especially by the Finance Acts of 1995 and 1996.
The details are set out in Lord Reeds judgment (paras 134 to 163).
But I agree with Lord Hope (in para 15 of his judgment) that it is unnecessary, and maybe unhelpful, to go into the legislative history.
What matters is the statutory provisions as they were in 2000, 2001 and 2002.
During that period section 83(1) to (4) was in the following terms: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
Section 83A(1) to (3) of FA 1989 was in the following terms: (1) In sections 83 to 83AB brought into account means brought into account in an account which is recognised for the purposes of those sections. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) that Act in respect of a part of that business. any separate revenue account required to be prepared under Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
It is common ground that the relevant revenue accounts are forms 40 for the whole LTBF and its constituent parts, the WPF and the NPF.
The first point of construction (which I have already described as a short point, but one which takes some getting to) is the meaning of value (whether realised or not) of those assets in section 83(2)(b).
The Company contends that it means market value, and that any reduction in their value (the form of words at the end of the subsection) is to be treated as an expense capable of giving rise to an allowable loss.
The Revenue contends that section 83(2) is referring to a difference in value (whether it be an increase or a reduction) as brought into account for the relevant period of account, and that section 83(A)(2) leaves no room for doubt as to what that means.
It directs attention to the appropriate regulatory account, in this case form 40.
The Lord President (para 54) described this approach as definitional.
Taxing a loss?
The Companys written case before this Court, and Mr Gardiner QCs robust oral submissions, characterised the Revenues position as unnatural, uncommercial and contrary to fundamental principles of tax law.
The Court was reminded of some famous judicial observations made more than a century ago, including Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315: The word profits I think is to be understood in its natural and proper sense in a sense which no commercial man would misunderstand and Lord Macnaghten in London County Council v Attorney General [1901] AC 26,35: Income tax, if I may be pardoned for saying so, is a tax on income.
It is not meant to be a tax on anything else.
In this case, Mr Gardiner submitted, the Revenue was attempting to tax what was in reality a loss of capital.
These submissions call for careful consideration.
The massive volume of documents and figures put before the Special Commissioners and the Court of Session, and now before this Court, creates a risk of getting lost in a labyrinth of abstractions.
Actuaries, accountants and lawyers are trying to converse in the same language, but it is not easy going.
It is a case in which there is a real danger, in the hackneyed phrase, of not seeing the wood for the trees.
It may help to avoid confusion to start with three simple points.
The first point is that the Revenue is not seeking to exact tax from the Company under Schedule D Case I either on profits or on losses incurred by the Company; it is taxing the Company on the I minus E basis.
Simultaneously the Company is seeking to establish large Schedule D Case I losses in order to have them available for surrender to obtain group relief.
The second point is that it is, and always has been, standard practice for life offices to bring the assets of their LTBFs into account, not at market values that fluctuate from year to year, but at a book value (though in practice that expression is applied to LTBFs in a way that an outsider may find surprising).
The third point is that the Capital Reserve is not, and never has been, a separate fund distinct from the Companys LTBF.
It has always been part of the LTBF.
Each of these three points calls for some further explanation.
The Crown option as it applies to this case
The Revenue is not seeking to charge tax under Schedule D Case I on losses incurred by the Company.
It is common ground (SFI, para 61) that at all material times since 3 March 2000 the Company has been taxed on the I minus E basis (the detailed computations for 2000 and 2002 can be seen in volume VII at pages 3211 and 3290; the relevant page for 2001 seems to have been inadvertently omitted).
Nevertheless (SFI paras 62 and 63) the Company seeks to claim an allowable loss under Schedule D Case I which would be available for surrender to other Lloyds TSB group companies by way of group relief.
The Revenue accepts (SFI, paras 62 and 63) that if the Company succeeds in this appeal the losses available for surrender would be approximately 28.7m for 2000, 612.6m for 2001 and 431.3m for 2002 (the relevant computations are at volume VII pages 3216, 3255 and 3295).
The fact that a proprietary life office can simultaneously pay tax on the I minus E basis and have an allowable loss under Schedule D Case I shows that whatever the position a century ago, when there were no special statutory provisions, the taxation of long term life assurance business is now a very specialised area.
Bringing assets into account at book value
Regulation 45(6) of the 1994 Regulations (set out in para 20 above, and later reproduced in Rule 9.10(c) of the FSAs 2001 instrument) allowed a life office, for the purposes of an actuarial investigation, to take the value of any of its assets as its value in the books or other records of the company.
This had been expressly permitted by the regulatory system since 1980, when Regulation 3 of the Insurance Companies (Valuation of Assets) Regulations 1976 (SI 1976/87), was amended by the Insurance Companies (Valuation of Assets) (Amendment) Regulations 1980 (SI 1980/5).
But the two expert witnesses agreed that it was a very long standing and well established practice, and the Special Commissioners made a finding to that effect (para 16 of their decision).
It would be potentially misleading to say that a life office is permitted to bring the assets of its LTBF into account at book value, since that is normally understood to mean historic cost.
In a LTBF some assets are normally brought into account at the full admissible value, and others at nil (Special Commissioners decision, para 48; also para 122 of Lord Reeds judgment).
It is unnecessary to go into the reasons for this practice, as to which there was no dispute.
The reasons for maintaining an investment reserve of unrecognised value are fundamental to the way in which long term life business, and especially with profits business, has been conducted in the United Kingdom.
It is the mechanism by which the life office, relying on the professional skills of its chief actuary and his staff, can achieve a balance between competing considerations and interests.
First and foremost is the overriding need for a sufficient margin of solvency.
Subject to that the life office will wish to produce consistently good results for its with profit policyholders, both in the policyholders interests and to preserve and enhance the companys reputation.
It must also achieve fairness between different classes of policyholders in accordance with their rights and expectations (the difficulties of which are illustrated by Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
Finally there are tax considerations.
No company likes to pay more tax than it has to, or to pay it sooner than it has to.
Before 1989 the tax system allowed life offices to defer taxation, especially on unrealised capital gains.
It is common ground that section 83 of FA 1989 was intended to change that; the controversy is as to the extent of the change.
These points were well made by Mr Brian Drummond, an accountant, in an article entitled Making Sense of the FSA Return in Life Company Tax Computations (Tax and Accountancy Review, June 2006, p6).
Some changes had taken place by then (both on the regulatory front and the taxation front) but the article is nevertheless instructive.
After mentioning recent changes the author gives a brief overview of the forms: In broad terms, however, the overall structure remains unchanged.
Form 13 remains a reasonably straightforward analysis of the total admissible value of the assets of the company by category with narratives that are commendably clear; Form 40 demonstrates how much of the Form 13 value is brought into account for the purposes of calculating surplus; Form 58 deals with the calculation, composition and distribution of the surplus; and, Form 14 then links that exercise back to Form 13 by showing how much of that original Form 13 value is covering liabilities and bonuses and how much of it is being held in reserve.
He describes form 14 as an area of linguistic opacity, and comments: This confusion is carried across into form 14 of the FSA return where it increases further.
The first line in form 14 is described as mathematical reserves, after distribution of surplus and in this one narrative only two of the six words (after and of) take their conventional or even accounting meaning.
The most relevant passage is on the general philosophy of with profits business (at pp 9 10): Form 40 is described as revenue account but in conventional terms it is a very partial one.
By reference to normal accounting convention it is surprising to have a revenue account that makes no explicit reference to a movement in liabilities to third parties.
The layout of Form 40 and its interaction with Form 58 reflects much more of the history of with profit funds than it reflects normal accounting principles.
In with profits funds the starting point in determining the extent to which surplus is recognised is establishing what bonus should be recommended.
This will be driven by a combination of the results of the company (in terms of investment return and underwriting profit) together with policyholder reasonable expectations and the need to treat customers fairly.
One of the principles of UK with profits business is smooth bonuses from year to year.
Having established what bonus it is appropriate to declare for the year it is then possible, depending on the structure of the fund, to calculate the minimum extent to which surplus must be recognised both to meet the bonus requirement and any corresponding entitlement of the shareholders to participate in surplus as a fraction of the amount allocated to policyholders (very often one ninth the 90:10 structure).
Historically with profit funds hesitated to recognise any more surplus than was required to meet the bonus, and associated shareholder entitlement, and hence the fund would generally be approximately equal to the liabilities (after current year bonus) plus any residual surplus not allocated.
The nature of the Capital Reserve
The third point mentioned in para 78 above is that the Capital Reserve is not, and never has been, an appropriated fund separate from the Companys LTBF.
It is, as para 22.1 of the scheme makes clear, part of the LTBF.
It is an account falling within Lord Greene MRs second category in Allchin v Coulthard [1942] 2 KB 228, 234 235 merely an accounting category.
Abstract though it is, the Capital Reserve is on the Companys case of central importance to this appeal.
It is not easy to discern its purpose.
The Companys own independent actuarial expert, Mr Chamberlain, stated in his report dated 18 September 2007, para 5.1: The Scheme by which [the Society] demutualised established something it refers to as a Capital Reserve.
This Reserve is a financial structure whose form and operation is defined by the Scheme, and does not meet any particular regulatory or other requirement, other than that emanating directly from the Scheme.
It is a memorandum account and does not consist of particular assets.
Mr Allen, the Revenues independent expert, stated in his report dated 5 October 2007, para 6.1: Within the notes to their returns I understand that [the Company] created a memorandum account (the Capital Reserve) with an initial balance of approximately 4.5bn.
Notwithstanding that this account was referred to in the Scheme which obtained approval from the Court of Session, in my opinion this memorandum account had no meaning or relevance, other than as an item of information, as regards either the Companys statutory report and accounts or its regulatory returns.
The memorandum account did not represent any particular assets, nor did it reflect any actual profit or loss incurred by the Company, it was simply a note of a particular transaction.
The experts did not give a further explanation of the expression memorandum account, nor did counsel offer any.
The Special Commissioners made a finding that reflects the natural meaning of memorandum (para 45): The purpose of the Capital Reserve was to keep a record of this initial value created by [Holdings] and to distinguish it from subsequent profits.
The notion that it was an item of information that ought to be remembered comes out most clearly in the witness statement of Mr Michael Ross.
He was an actuary who was employed by the Society for most of his career, becoming chief actuary of the Society in 1986 and the first chief executive of the Company in 2000.
In his witness statement (paras 18 to 27, not challenged in cross examination) he described how demutualisation involved a strategic choice between ring fencing the estate and monetising the estate (the estate is a term used to describe a mutuals excess of assets over liabilities, or investment reserve).
After careful thought the Lloyds TSB group and the Society opted for monetising the estate.
This course was likely to be more attractive to the Societys members but required the Lloyds TSB group to find a very large sum to pay the membership compensation.
But the payment of that compensation gave the Lloyds TSB group the advantage that the Company had a comfortable investment reserve at the inception of its business (whereas with ring fencing the group might have had to inject further capital).
The group wanted to earmark what Mr Ross (para 27) regarded as shareholder owned capital, held within the [LTBF] in order to be able, in the long term, to benefit from it.
That provides a clue, I think, to the purpose of the restriction on reduction of the Capital Reserve in para 22.3 of the Scheme (summarised in para 60 above).
Only a limited amount (432m out of 4,455m) of the Capital Reserve could be brought into account in the revenue account of the WPF, because it was a 90/10 fund and nine tenths of the distributed surplus were to go for the benefit of holders of with profit policies; only one tenth (at most) could find its way to the shareholder, Holdings.
There was no restriction (beyond the total amount of the Capital Reserve) on bringing it into account in the NPF, which was a 0/100 fund.
The decision of the Special Commissioners and the judgments in the Court of
Session
The Special Commissioners decided the first issue in favour of the Company, and the Court of Session unanimously upheld that decision (Lord Emslies dissent was on the second, narrower issue as to section 83(3)).
All three members of the Court delivered full judgments, so this Court has four separately reasoned routes to the same conclusion on the first issue.
The reasoning can be imprecisely classified under three heads: the correct approach to the construction of taxing statues, arguments based on the legislative scheme and purpose, and detailed linguistic arguments.
The Lord President dealt most fully with statutory construction (paras 45 to 49).
He cited the well known speech of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 9991000, in which Lord Steyn referred to Lord Wilberforces seminal speech in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, 323: Lord Wilberforce restated the principle of statutory construction that a subject is only to be taxed upon clear words .
To the question What are clear words? he gave the answer that the court is not confined to a literal interpretation.
He added 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.
This sentence was critical.
It marked the rejection by the House of pure literalism in the interpretation of tax statutes.
The Lord President ultimately decided the issue by applying the clear words principle in the light of his view of the statutory purpose (paras 55 and 56).
Lord Emslie relied on the same principle, and some other principles which he set out at para 197: Since this appeal concerns the construction of tax legislation, certain fundamental rules, principles and presumptions may be thought to apply.
First, as Lord Wilberforce explained in Vestey v Inland Revenue Commissioners [1980] AC 1148, 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
Second, in the absence of specific charging provisions, capital and capital receipts do not fall to be taxed as revenue and vice versa.
Third, corporation tax being an annual tax on the profits of a company, it is prima facie reasonable and appropriate to construe statutory charging provisions as directed towards real receipts and gains . in a sense which no commercial man would misunderstand: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
And fourth, as reflected in countless provisions of the taxing statutes, a subject is in general assessable to tax on his own profits and gains, and not on those of any third party.
The second, third and fourth of these principles (and especially the second) may be what the Special Commissioners had in mind (in para 79 of their decision) in a more general reference to tax principles as predisposing them in the Companys favour, and in characterising the transfer from the Capital Reserve as a capital receipt (para 80).
Arguments based on the legislative scheme and purpose move from the very general to the rather more particular.
What was the underlying purpose of section 83? In particular was it intended, as the Lord President stated in para 55 of his judgment, to reverse the effect of section 433 of ICTA 1988? Is there a key conceptual distinction (Lord Emslie, para 201) between the Companys LTBF and the assets representing that fund? Was a transfer from the Capital Reserve a capital receipt comparable to an injection of new capital (Special Commissioners, para 80)? How cogent is the argument (Lord Reed, para 183; Lord Emslie, para 197, fourth point, and para 205, second point) that one taxpayer should not be taxed on another taxpayers profits or gains? What practical results do the statutory provisions produce if construed (Lord Emslie, para 200) as a one stage or alternatively a two stage process? I shall consider these points in turn.
Legislative scheme and purpose
It is permissible, without getting into the territory of Pepper v Hart [1993] AC 593, to look at the official consultation paper published in 1988, The Taxation of Life Assurance, to see the general nature of the problem perceived by the Revenue.
The most relevant paragraphs are paras 6.2 to 6.7, 6.12 to 6.21, 6.33 and 7.1 to 7.8 A life office might have a large capital gain on a long term income producing investment (such as a fully let office block or a strategic holding of shares in an oil company) as part of the with profits part of its LTBF.
Before 1989 this gain could be recognised (or brought into account) in its revenue account without being realised so as to give rise to a chargeable gain.
Value representing at least nine tenths of the gain could then be distributed (in the form 58 sense, that is allocated) to the holders of with profits policies so as to obtain the protection of section 433 of ICTA 1988, as well as escaping income tax or capital gains tax in the policyholders hands on the maturity of their policies (assuming them to be qualifying policies).
Section 83 of FA 1989 made the recognition of an unrealised capital gain a receipt to be brought into the Schedule D Case I computation, while section 82 of FA 1989 re enacted the substance of section 433 in a more satisfactory form.
All this is very clearly set out, in a good deal more detail, in paras 123 to 133 of Lord Reeds judgment (which refer to section 83 in the form in which it was originally enacted).
I respectfully think that in para 55 of his judgment the Lord President was to some extent running together the functions of sections 82 and 83, and misunderstanding the purpose of the two sections in tandem.
Lord Emslie referred to section 433 (para 200) but not to section 82.
In my opinion Lord Reeds analysis is to be preferred.
Section 83 is concerned with the immediate implications, in making the necessary Case I computations, of bringing into account all or part of the difference between book value and market value, and section 82 is concerned with the next stage of the computations, that is adjustments in respect of the distribution of surplus to holders of with profits policies (covered by form 58, lines 41 to 59).
The next point is the term fund.
It is, as both Lord Reed (para 112) and Lord Emslie (para 199) observed, used inconsistently both in ICA 1982 and in the regulatory forms.
But the two principal and relevant meanings, in this context, are clear (and here I am repeating ground I have already covered).
The LTBF is an actual, appropriated fund of identifiable investments, the constituent assets of which (with their admissible values) appear in form 13.
The Capital Reserve is a notional part of that fund to an initial amount of 4,455m; the independent actuarial experts agreed that it serves no regulatory purpose.
The fund for the purposes of lines 39, 49 and 59 of form 40, and for all the purposes of form 58, is the same fund, but valued in a special way (that is at book values in the sense that actuaries use that term) in order to produce the life offices objectives solvency and prudent preservation of the investment reserve, but at the same time smooth progress in the allocation of bonuses to with profits policies.
I am not sure that I understand para 201 of Lord Emslies judgment.
In that paragraph he is (as I understand it) setting out part of the submissions made on behalf of the Company.
But later (para 204) Lord Emslie himself accepted that there is a significant distinction between the assets and the fund itself.
Of course there is a difference, the difference between the parts and the whole.
But the value of the whole is in this case the sum of the values of the parts, and the significant distinction, affecting both, is the basis of valuation.
It is common ground that if in 2001 or 2002 the Lloyds TSB Group had decided to inject fresh capital into the Companys LTBF (as might have been done by the Company issuing new shares to Holdings, paid for in cash that was appropriated to the LTBF) it would not have been treated as a receipt under section 83(2).
The new money would have appeared on line 26 of form 40 (transfer from non technical account).
The admissible value of the LTBF would have been increased, and so (if it was needed for solvency purposes) would its value as brought into account (lines 39 and 59 of form 40).
A transfer from the Capital Reserve, by contrast, costs the group nothing (although it may be an indication that the state of the business is disappointing).
The transfer does not increase the market value of the LTBF.
Nor has it any regulatory significance, as the experts agreed.
What happens is that part of the value held in the investment reserve is brought into account, a familiar event generally recorded (as Mr Allen stated, though Mr Chamberlain disagreed) on line 13 of form 40.
I respectfully consider that the Special Commissioners, and to some extent the Court of Session also, attached too much weight to the label Capital Reserve and to the notion that capital gains ought not to be taxed under Schedule D, Case I.
It could not be clearer that under section 83(2)(b) any increase in value (whether realised or not) of investments constituting a LTBF, as brought into account, is to come into the Case I computation.
The argument that (in the absence of very clear words) one taxpayer ought not to be taxed on another taxpayers profits or gains is, on the face of it, a strong one.
It is not satisfactorily answered simply by pointing out (though this should not be forgotten) that this appeal is not about taxing profits.
It is about allowing losses capable of being surrendered for the benefit of other group companies.
But the Company acquired a long established mutual business and a LTBF with a healthy investment reserve.
That reserve may have been built up by the Society largely by means of unrealised gains.
But it was the Company and the Lloyds TSB Group that decided, for entirely understandable reasons, to bring part of the investment reserve into account, rather than making an injection of new capital.
The language of section 83(3)(b) (as amended in 1996) shows that Parliament had demutualisation well in mind as a situation for which the legislation should make provision.
The last general point to be considered, before getting to linguistic arguments, is the implication of Lord Emslies illuminating distinction (para 200, summarising the Companys argument, and para 204, accepting it) between a two stage process (asking whether there are any real gains, and then how far they have been brought into account) and a one stage process (asking simply what increase in value, if any, has been brought into account).
Again, it is necessary to be reminded that this appeal is about losses, not gains; and the three accounting periods have to be considered separately, and not as a whole.
In any accounting period the operation of the statutory provisions, if analysed as a two stage process, allows six different combinations, although some of them may be fairly improbable in practice, as follows (AV denoting admissible value, and RV value recognised and brought into account): (1) AV up, RV up by less (2) AV up, RV up by more (3) AV up, RV down (4) AV down, RV down by less (5) AV down, RV down by more (6) AV down, RV up.
It is easy to see how the competing interpretations work in situations (1), (2), (4) and (5).
On the Companys two stage approach the lower figure (whether an increase or a reduction) will be brought into the computations; on the Revenues one stage approach the difference in RV will always be taken.
But it is not so easy to see how either sides interpretation would apply to situations (3) and (6); and the Companys regulatory return for 2000 disclosed situation (6).
It might be thought that though neither sides interpretation fits easily, the Companys two stage approach is distinctly more difficult to reconcile with the situation in which there is a reduction in admissible value, but an increase in value brought into account, in an accounting period, and the Company is seeking to establish an allowable loss during that period.
But so far as I can see that submission was not made either to the Special Commissioners or to the Court of Session, nor do I recollect it being put forward in this Court.
The terms of the agreed question do not positively require the point to be resolved.
Indeed SFI, para 63 suggests that the point may already have been agreed between the parties.
So the best course is, I think, to exclude that point, which was not argued, from any consideration of the statutory scheme and purpose.
Nevertheless, unlike the Special Commissioners and (to some extent) the Court of Session, I do not approach the narrower linguistic points with any predisposition in favour of the Companys case.
I approach them disposed towards the Revenues case as being more in accordance with the statutory scheme and purpose.
Linguistic points on the first issue
I can take these more shortly, and it is convenient to do so by reference to the numbered sub paragraphs at the end of para 181 of Lord Reeds judgment.
The first point is that an increase in value . of . assets is said to refer most naturally to capital gains.
In some contexts it might do so.
In the context of a system of computation which is closely and explicitly linked to the regulatory returns in respect of LTBFs I see little force in this point.
What is important is how value is to be measured, and to my mind sections 83(2) and 83A leave no doubt about that.
The second point is on the words (whether realised or not) in section 83(2)(b).
The section was making an important change in the law in that unrealised increases in value, so far as brought into account, were to come into the tax computation.
To my mind it would have been surprising if the draftsman had not inserted this parenthesis so as to leave no doubt as to the character of the change in the law.
The third point is on another parenthesis in section 83(2), (and not otherwise), though these words have come out in the text of Lord Reeds judgment before us as or otherwise.
Again, I have to say that I think the draftsman is being rather unfairly criticised for his efforts to leave no doubt about the intended meaning.
The preceding word as means in the manner that and the parenthesis means and in no other manner.
To my mind it is a bit hard to dismiss this as otiose.
Lord Reeds fourth point is that the expression brought into account is not apt to describe the overall effect of those entries.
I confess that I simply do not understand this point.
The critical entry is line 13 on form 40 (increase (decrease) in the value of non linked assets brought into account).
That is the only line on form 40 in which the words brought into account are found.
It was conceded that the line 15 entry could have been on line 13.
The bottom lines (39, 49 and 59) show the overall position, and do not use the words brought into account.
Lord Reeds remaining points on the first issue (in para 181(5) and (6) and para 183) are more general and I will not revisit them.
Conclusion
In my judgment the Revenues submissions on the first issue are correct, both as to the statutory scheme and purpose and as to the linguistic points just mentioned.
I have gone into the matter at some length because I am conscious that I am differing both from the Special Commissioners and from the unanimous view of the Court of Session.
But in the end I consider that it is simply a question of giving section 83(1) and (2) of FA 1989, as amended, their natural meaning.
On that basis the second issue does not arise and I prefer to say nothing about it.
I would allow the Revenues cross appeal and treat the Companys appeal as moot.
LADY HALE
As so often happens, what appears at first sight to be a very complicated question turns out on closer analysis to be quite a simple one.
When calculating the profits of an insurance company in respect of its life assurance business under Case 1 of Schedule D to the Taxes Act, does an increase in value or conversely a reduction in the value of the assets of its long term business fund refer to an increase or decrease in their actual value? Or does it refer to an increase or decrease in their value as brought into account for a period of account in the companys revenue account prepared for the purpose of the Insurance Companies Act 1982?
We know that the words as brought into account for a period of account (and not otherwise) in section 83(2) of the Finance Act 1989 (set out by Lord Walker at para 41 above) describe the words the following items; we know that the following items are (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets; we know from section 83A (set out by Lord Walker at para 74 above) that brought into account means brought into account in the revenue account (or accounts) prepared for the purposes of the Insurance Companies Act 1982 in respect of the companys long term business (or part of it); so the linguistic question boils down to what is meant by as in section 83(2).
The Company would have it that as means when.
The link to the regulatory returns is a purely temporal one.
Value means real value not whatever the company chose to put in the forms.
The Revenue would have it that as means as.
What is taken into account in computing the companys profits for income tax purposes is what the company brings into account in completing its revenue accounts for regulatory purposes.
In my experience, if Parliamentary counsel mean when, they write when, and if they mean as, they write as.
We should be slow to re write what they have written.
The words and not otherwise, if nothing else, make it clear that there might have been some other way of taking items (a) and (b) into account for income tax purposes, but this is the way it is to be done.
They are making a special rule for life insurance business.
This is not surprising, for all the reasons that Lord Walker has so clearly and carefully explained.
The words whether realised or not point to the real change which was being made by the 1989 Act.
Otherwise it was business as usual.
It was not until 1995 that these insurance companies were required to file any other sort of accounts than those which they had to file for regulatory purposes.
It was natural for the Revenue to use the figures in the regulatory revenue account as their starting point.
In full agreement with Lord Walker, and Lord Hope and Lord Neuberger, therefore, I would allow the Revenues cross appeal and regard the Companys appeal as moot.
LORD NEUBERGER
I too would recall the interlocutor of the Inner House of the Court of Session and allow HMRCs cross appeal.
Having had the great benefit of reading in draft the judgments of Lord Hope and Lord Walker, I can express my reasons shortly.
The cross appeal raises an issue as to the meaning of section 83(2) of the Finance Act 1989 (as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995).
It is unnecessary for me to set out section 83, as it is fully quoted in para 7 of Lord Hopes judgment and para 73 of Lord Walkers judgment.
As will be clear to anyone who has read those judgments, the difficulty in this case arises from the fact that the issue of interpretation arises in the context of a very complex background.
That complexity is attributable to a number of different factors, namely (i) the technical rules as regards the regulatory returns to be made by life assurance offices, (ii) the many changes in the legislation embodying those rules since they were first introduced in 1870, (iii) the many changes in the statutory provisions governing the taxation of life assurance offices, (iv) the extensive contractual provisions in the documentation governing the scheme (the scheme) for transferring of the business of Scottish Widows Fund and Life Assurance Society to Scottish Widows plc (the Company), and (v) the details of the regulatory returns made by the Company in the three accounting years in issue.
When considering the application of section 83(2) to the facts of this case, I am sceptical about the value of analysing the history of the statutory provisions governing either the returns to be made by life assurance offices or the taxation of profits made by life assurance offices i.e. what I have characterised as factors (ii) and (iii).
This cross appeal concerns the meaning of the statutory provision in force during the three relevant years, section 83(2), and its impact on the returns actually made in respect of those years, in the then stipulated form by the Company.
Particularly as the provisions of the scheme, the prescribed forms for returns, and the contents of the Companys returns for the three years in question, all require careful analysis, it seems to me that to focus in addition on the rather intricate history, as opposed to the present provisions, of the regulations, risks taking ones eye off the ball (or, as Lord Walker puts it, not seeing the wood for the trees).
Legislative archaeology has its place in statutory interpretation, but its role is limited.
Where a statutory provision, when read in its immediate statutory and practical context, has a meaning which is tolerably clear as a matter of language, and not unreasonable or unfair in terms of its consequences, it seems to me that little is to be gained, and much may be lost (in terms of time, expense and eventual confusion) by going into the genesis and development of the provision in earlier legislation.
As Lord Hope points out, such an approach is consistent with what was said both by Lord Wilberforce in Farrell v Alexander [1977] AC 59, 73 and by Lord Diplock in Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 6.
Once one understands the scheme, the relevant regulations, the forms, and the Companys returns for the three years in question, it appears to me that the answer to the question posed on the cross appeal, namely the meaning and effect of section 83(2), is tolerably clear.
I could not hope to equal the clarity of Lord Walkers analysis in paras 49 to 53, 57 to 70, and 82 to 91, and, very gratefully, adopt the benefit of his distillation of the various complex matters which he there explains.
Turning to the central issue on the cross appeal, the meaning of section 83(2), it may be a little glib to suggest that HMRCs case is ultimately vindicated by a single word.
However, if one was to isolate a single crucial point, it seems to me that it would involve focussing on the word as in that subsection, as Lady Hale suggested during argument.
Section 83(2) stipulates that the items which should be taken into account as receipts of [a particular accounting] period are to be those items identified in paras (a) and (b) as brought into account for [that] period of account.
The obvious and natural effect of the words which I have emphasised is that those items are to be taken into account for the period in question in the same way and to the same extent as they are brought into account for that period.
It was argued on behalf of the Company that the expression as brought into account for a period of account should be treated simply as a reference to the period in which the item was brought into account, and was not concerned with how the item was brought into account.
Particularly in the light of the inclusion of the word as, that does not seem to me to accord with the natural reading of the expression.
Although both the Company and HMRC relied on other provisions in the 1989 Act to support their respective cases on the meaning of the expression, I am unconvinced that they are of any real assistance.
Thus, it was suggested that the words (and not otherwise) in the subsection assisted the Companys interpretation.
I do not see how that is so: they are there simply to emphasise that an item is only to be brought into account if it falls within the expression, and therefore they can take the issue of what the expression means no further.
Equally, the fact that section 83A(1) (as inserted by paragraph 16 Schedule 8 to, the 1995 Act and amended by paragraph 6 of Schedule 31 to the 1996 Act) defines the term brought into account does not take matters further, as the position of each party is consistent with that definition.
The conclusion that HMRCs construction of section 83(2) is correct seems to me to be supported, rather than undermined, by the normal approach to taxation of business profits as explained by Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315 and by Lord Hoffmann in Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, [2007] SC (HL) 105, [2007] 1 WLR 1448, para 2.
In connection with taxing business profits, the concept of a profit should normally be accorded its proper meaning, which will obviously depend on the specific context, but current accountancy practice is generally a good, and often the best, guide as to the precise quantification of any profit.
In the case of a life assurance business, HMRCs case is that, in effect, statute requires the profit to be assessed by a rather unusual means, namely by reference to the returns in the regulatory forms.
This is entirely consistent with the normal approach to assessing the profits of companies for taxation purposes, as these returns effectively take the place of the statutory audited accounts, which are relied on to define the profits of the overwhelming majority of other businesses owned by limited companies.
Furthermore, although there is, at first sight, real force in the Companys argument that HMRCs case results in its business being taxed on some figure which cannot sensibly be said to be a profit, a closer analysis of the situation, as provided by Lord Walker in paras 81 to 90 and 95 to 105, shows that this is incorrect.
Accordingly, and in agreement with the fuller reasoning of Lord Hope and Lord Walker, I would allow HMRCs cross appeal.
As the cross appeal succeeds, it is unnecessary to consider the Companys appeal.
I agree with Lord Walker that it would be better not to go into the question whether the majority of the Inner House was right in finding for HMRC on section 83(3).
It is tempting to do so, given that there is a decision of the Inner House on the point.
However, at least on the basis of the argument we have heard on this appeal, it does seem to me that the interpretation of subsection (3) is rather difficult, and I think it would be better to wait for a case where the issue matters, not least as it may be that some assistance would be gleaned from the facts of such a case, which may throw light on the practical consequences of the rival interpretations.
LORD CLARKE
I confess that I was initially attracted by the approach of Lord Emslie to the issues in relation to both the cross appeal and the appeal.
However, having considered the masterly judgment of Lord Walker, I have found his reasoning compelling and agree with him (and indeed Lord Hope, Lady Hale and Lord Neuberger) that the Revenues cross appeal on the true construction of section 83(2) of the Finance Act 1989 as amended should be allowed.
Like Lord Walker, Lady Hale and Lord Neuberger, I prefer to express no view on the issue of the true construction of section 83(3).
I too would therefore allow the Revenues cross appeal and treat the Companys appeal as moot.
| UK-Abs | Scottish Widows Plc (Scottish Widows) is a life assurance company.
It was established in 2000, when it acquired the business of Scottish Widows Fund and Life Assurance Society (the Society) under a scheme of transfer which had been approved by the Court of Session in Scotland.
Scottish Widows acquired assets under the scheme which had an approximate value of 25bn, and it became subject to actuarial liabilities of approximately 19bn.
Members of the Society received compensation of approximately 5.8bn, which represented the surplus of the Societys assets over its liabilities at the time of the transfer.
The compensation was paid by Scottish Widows holding company, in return for the members of the Society giving up their right to participate in the surplus.
The scheme provided that Scottish Widows was to establish and maintain a Long Term Business Fund (LTBF) to fund its long term insurance business.
It also provided that there was to be a memorandum account within the LTBF, called the Capital Reserve.
This was said to represent the value of shareholders capital within the LTBF.
Life assurance companies are required to submit annual regulatory returns, in particular to demonstrate solvency.
Various forms are prescribed for these returns.
One these is known as Form 40, which is a revenue account in respect of the LTBF.
In the years following transfer the value of the assets of Scottish Widows LTBF fell substantially, principally because of falls in the stock markets.
To cover those losses and to allow for distributions to policyholders, Scottish Widows brought into account amounts on Form 40 for each of the accounting periods 2000, 2001 and 2002.
These amounts were recorded in line 15 of the relevant Form 40s.
They were described as transfers from the Capital Reserve.
Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business for the purposes of corporation tax.
In the terms that were in force between 2000 and 2003 section 83(2) provided that: [T]he following items, as brought into account for the period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
Section 83(3)(a) made provision for ascertaining whether or to what extent a company had incurred a loss in respect of its life assurance business where an amount was added to an insurance companys long term business fund as part of or in connection with a transfer of business to that company.
The Revenue maintained that the amounts to be brought into account as receipts for the computation of profits or losses for tax purposes under section 83(2)(b) or, in the alternative, under section 83(3)(a) were the amounts shown in line 15 on Form 40.
It maintained that the reference to a difference in value as brought into account directed attention to the figures that had been entered on Form 40, not the market value of the assets of the LTBF.
Scottish Widows argued that the words increase in value in section 83(2)(b) meant an increase in the actual value of actual assets, and that the words as brought into account were concerned with when the
increase was brought into account, not the extent of the increase.
Here the value of the assets of the LTBF had fallen during each of the relevant periods.
So there was no increase which could be brought into account.
The parties referred the question whether, in computing the Case I profit or loss of Scottish Widows for the accounting periods ending in 2000, 2001 and 2002, the amounts that fell to be taken into account as receipts to the Special Commissioners were the amounts shown in line 15 of Form 40.
It was agreed that, if Scottish Widows argument that it is actual values and not those amounts that should be taken into account is correct, it will have allowable losses in respect of those years of 28.7m, 612.6m and 431.3m.
The Special Commissioners answered the question in the affirmative.
They held that, although the amounts shown on Form 40 were not to be brought into account by section 83(2), they were covered by section 83(3)(a).
The Inner House unanimously dismissed the Revenues appeal against the decision on section 83(2) and by majority (Lord Emslie dissenting) dismissed Scottish Widows cross appeal against the decision in respect of section 83(3)(a).
Scottish Widows appealed and the Revenue cross appealed.
The Supreme Court unanimously allows the Revenues cross appeal and holds that the amounts that were to be taken into account as receipts by virtue of section 83(2) were the amounts shown on Form 40.
It therefore answers the question that was referred to the Special Commissioners in the affirmative.
Lord Hope and Lord Walker both give detailed judgments.
Lady Hale and Lord Neuberger give shorter judgments, agreeing with each other and with Lord Hope and Lord Walker.
Lord Clarke agrees with all of the judgments.
Although the applicable statutory provisions had been amended on various occasions, it was not helpful to look at their legislative history.
That should only be done where there is an interpretative difficulty which classical methods of construction cannot solve.
The proper approach was to concentrate on the wording of sections 83(2) and (3)(a) as they were during the relevant accounting periods: [15], [73], [122] [124].
Lord Walker analyses in detail the regulatory and taxation regime which applies to life assurance companies and the particular features of the demutualisation scheme so as to provide a backdrop to the statutory construction: [40] [71].
There were two particularly important points.
One was that when completing regulatory returns, book values could be used, and that an insurer enjoyed a certain freedom in determining what amount of its actuarial surplus to recognise in its returns: [82] [86].
It was also particularly important to appreciate the nature of the Capital Reserve.
It was not a fund of particular assets, separate from the LTBF, but was merely an accounting category recording an initial value within the LTBF: [87] [91] [101].
The key to interpreting section 83(2) was the phrase as brought into account and, in particular, the use of the word as: [22], [76], [116], [125].
This demonstrated that the computation must proceed on basis of what was actually entered on the appropriate regulatory account, in this case the form known as Form 40.
It was important that, when completing its returns, an insurance company should be permitted to use book values: [20].
The various arguments which were advanced in favour of Scottish Widows construction, based on general principles of interpreting tax legislation ([24] [26], [101] [102]), the statutory scheme and specific aspects of the drafting ([23], [107] [112]), fell to be rejected in the face of this clear statutory language.
The Special Commissioners and, to some extent, the Court of Session had attached too much weight to the label Capital Reserve, which had led them to attach undue weight to the notion that capital gains ought not to be taxed under Schedule D, Case I: [26], [101].
Given that the Court allows the Revenues cross appeal, a majority preferred to express no view on section 83(3)(a).
Lord Hope indicated that, had it been necessary to decide the point, he would have held in agreement with the majority in the Inner House that the relevant amounts would have been covered by section 83(3)(a): [28] [31].
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Some time after 17.00 hrs on 20 April 2005, Melanie Rabone hanged herself from a tree in Lyme Park, Cheshire.
She was 24 years of age and was the loved daughter of Mr and Mrs Rabone.
At the time, she was on two days home leave from Stepping Hill Hospital, Stockport where she was undergoing treatment for a depressive disorder as an informal patient (ie one who was not detained under the Mental Health Act 1983 (the MHA)).
She had been admitted to the hospital as an emergency following a suicide attempt.
She was assessed by the hospital as a high risk of a further suicide attempt.
Mr and Mrs Rabone have always maintained that the hospital authorities should not have allowed her home leave and that they were responsible for their daughters tragic death.
They started proceedings against the Pennine Care NHS Trust (the trust) alleging negligence and breach of the right to life protected by article 2 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention).
The trust eventually admitted negligence, but they have never admitted liability for breach of article 2.
A number of issues were raised in the proceedings all of which are live in this appeal.
The claim failed because the judge (Simon J) held that the operational duty implicit in article 2 did not apply in this case: there was no duty on the hospital authorities under article 2 to take reasonable steps to guard Melanie against the risk of suicide: [2010] EWHC 1827.
He also held that, if there was such a duty, there had been no breach of it by the trust on the facts of this case.
The Court of Appeal (Rix, Stanley Burnton and Jackson LJJ) dismissed Mr and Mrs Rabones appeal.
The only substantive judgment was given by Jackson LJ (now reported at [2011] QB 1019).
They agreed that there was no operational duty, but held that if there had been such a duty, the trust would have been in breach of it.
This appeal raises a number of issues, but before I come to them, I need to set out the relevant facts.
The facts
Melanie Rabone was born in 1981.
During 2000, she was diagnosed as suffering from depression and received medical treatment.
There was some improvement in the next few years, although she had intermittent episodes of anxiety.
On 4 March 2005, she tried to commit suicide by tying a pillow case round her neck.
She was admitted to Stepping Hill Hospital following an emergency referral by her General Practitioner.
On 7 March 2005, she was diagnosed by Dr Meagher, a consultant psychiatrist, as suffering from a severe episode of a recurrent depressive disorder.
On 18 March, she was assessed as having made a sufficient recovery to be discharged.
She went on holiday for a week with her family to Egypt.
On 31 March, she cut both of her wrists with broken glass.
Dr Meagher advised that she should be readmitted to the hospital.
No beds were available on Warren Ward, which is part of Stepping Hill Hospitals Mental Health Services Unit.
On 6 April, she was seen by Dr Cook, a senior house officer, as an outpatient.
She was noted as having occasional thoughts of suicide and frequent thoughts of deliberate self harm.
On 11 April, she tied lamp flex round her neck.
She was assessed by Dr Cook who noted: Impression: severe depressive episode. ? Psychosis, High risk DSH [deliberate self harm] and suicide.
Melanie agreed to an informal admission to the hospital.
Dr Cook noted that, if she attempted or demanded to leave, she should be assessed for detention under the MHA.
She was prescribed a course of drugs and thereafter kept under 15 minute observation.
A full mental state examination was carried out on admission by Nick Tatnall, one of the ward nurses.
He assessed Melanie as a moderate to high suicide risk.
On 13 April, Mr Rabone expressed his grave concern to Nurse Tatnall about Melanies condition and urged that she should not be allowed home on leave or discharged too soon.
There were further conversations during the week in which Melanies parents told the hospital staff that they were concerned about her impulsiveness and the risk of self harm.
At 13.00 hrs on 18 April, Mr Rabone spoke to the ward to state his concern that Melanie was not improving and that she had expressed fleeting suicidal thoughts since her admission and had asked her parents to get her out of the hospital.
On 19 April, Dr Meagher returned from leave.
He was told that Melanie was requesting home leave.
On his late afternoon ward round, he met Melanie and Mrs Rabone.
He agreed to allow her to have home leave for two days and nights.
Mrs Rabone said that she was concerned about Melanie coming home for the weekend, but Melanie was keen to do so.
She left the ward at 19.40 hrs.
She spent most of the following day with her mother.
In the late afternoon, she said she was going to see a friend.
Some time after 17.00 hrs, she hanged herself from a tree in Lyme Park.
On 31 August 2005, Mr Rabone wrote to the trust criticising the decision to grant home leave on 19 April.
On 13 September, the trust informed Mr Rabone that a thorough internal investigation was to be carried out, but that this would take some time.
They said that his complaint would be put on hold until the completion of the investigation.
On 15 September, they duly established a Serious Untoward Incident (SUI) investigation.
On 29 September, the Coroner for the Greater Manchester South District conducted an inquest and retuned a verdict of suicide.
In the summer of 2006, Mr Rabone contacted the trust on more than one occasion, expressing his concern about delays in the investigation.
Its report was not sent to Mr and Mrs Rabone until 16 March 2007.
The proceedings
A claim form was issued on 11 August 2006.
Mr Rabone claimed damages against the trust in negligence on behalf of Melanies estate under the Law Reform (Miscellaneous Provisions) Act 1934 (the 1934 Act); and he and Mrs Rabone claimed damages on their own behalf for breach of article 2 of the Convention.
Although the pleaded claim for breach of article 2 was for an alleged contravention of both the positive obligation to protect life and the investigative obligation under article 2, in the event the court has only been concerned with the former.
By its defence, the trust denied all allegations of breach.
It also alleged that the human rights claim was time barred under section 7(5) of the Human Rights Act 1998 (the HRA), since it had been issued more than one year after Melanies death.
By their reply, Mr and Mrs Rabone asked the court to extend the time limit by four months in the exercise of its discretion under section 7(5)(b) of the HRA.
The 1934 Act claim was settled in May 2008 for 7,500 plus costs.
It will be necessary to examine the implications of this settlement (and the admissions that were made by the trust in May 2009) for the article 2 claim later in this judgment.
Article 2 in outline
Before I come to the issues that arise on this appeal, I need to set the scene by making a few introductory comments about article 2 of the Convention which provides: Everyones right to life shall be protected by law.
These few words have been interpreted by the European Court of Human Rights (the ECtHR) as imposing three distinct duties on the state: (i) a negative duty to refrain from taking life save in the exceptional circumstances described in article 2(2); (ii) a positive duty to conduct a proper and open investigation into deaths for which the state might be responsible; and (iii) a positive duty to protect life in certain circumstances.
This latter positive duty contains two distinct elements.
The first is a general duty on the state to put in place a legislative and administrative framework designed to provide effective deterrence against threats to the right to life: see Oneryildiz v Turkey (2004) 41 EHRR 20 (para 89) applying, mutatis mutandis, what the court said in Osman v United Kingdom (2000) 29 EHRR 245 (para 115).
The second is what has been called the operational duty which was also articulated by the court in Osman.
This was a case about the alleged failure of the police to protect the Osman family who had been subjected to threats and harassment from a third party, culminating in the murder of Mr Osman and the wounding of his son.
The court said that in well defined circumstances the state should take appropriate steps to safeguard the lives of those within its jurisdiction including a positive obligation to take preventative operational measures to protect an individual whose life is at risk from the criminal acts of another (para 115).
At para 116, the court went on to say that the positive obligation must be interpreted in a way which does not impose an impossible or disproportionate burden on the authorities.
In a case such as Osman, therefore, there will be a breach of the positive obligation where: the authorities knew or ought to have known at the time of the existence of a real and immediate risk to the life of an identified individual or individuals from the criminal acts of a third party and that they failed to take measures within the scope of their powers which, judged reasonably, might have been expected to avoid that risk.
Since the date of its decision in Osman, the court has identified other circumstances in which the operational duty may exist as I shall explain.
There seems, however, to be no decision of the court which has considered whether the article 2 operational duty may exist to protect an informal (as opposed to a detained) psychiatric patient from the risk of suicide.
That is the first question that arises in the present case.
As I have said, the judge and the Court of Appeal held that no operational duty arose on the facts of the present case.
The issues
The six issues that arise in this appeal are: (i) whether the operational obligation under article 2 can in principle be owed to a hospital patient who is mentally ill, but who is not detained under the MHA; if the answer to (i) is yes, (ii) whether there was a real and immediate risk to the life of Melanie on 19 April 2005 of which the trust knew or ought to have known and which they failed to take reasonable steps to avoid; if the answer to (ii) is yes, (iii) whether Mr and Mrs Rabone were victims within the meaning of article 34 of the Convention; if the answer to (iii) is yes, (iv) whether they lost their victim status, because the trust made adequate redress and sufficiently acknowledged its breach of duty; if the answer to (iv) is no, (v) whether their claims are time barred by section 7(5) of the HRA; and if the answer to (v) is no, (vi) whether the Court of Appeal erred in holding that they would have awarded 5000 each to Mr and Mrs Rabone if their claims had been established.
The first issue: can an operational duty under article 2 be owed to a hospital patient who is mentally ill, but is not detained under the MHA?
As the ECtHR said at para 115 of Osman, the operational duty exists in certain well defined circumstances.
The court has held that there is a duty on the state to take reasonable steps to protect prisoners from being harmed by others including fellow prisoners (Edwards v United Kingdom (2002) 36 EHRR 487) and from suicide (Keenan v United Kingdom (2001) 33 EHRR 913).
The same duty exists to protect others who are detained by the state, such as immigrants who are kept in administrative detention Slimani v France (2006) 43 EHRR 49) and psychiatric patients who are detained in a public hospital (Savage v South Essex Partnership NHS Foundation Trust [2009] AC 681).
The operational duty is also owed to military conscripts.
Specifically, there is a duty to protect a conscript against the risk of suicide (Kilinc v Turkey (Application No 40145/98)).
I have already referred to the circumstances in Osman itself, where the deceased and his family were vulnerable to attack by a third party.
It would seem that the ECtHR considered that these might in principle have been sufficient to give rise to the operational duty, but the claim failed on the particular facts.
More recently, the court has expanded the circumstances in which the duty is owed so as to include what may generally be described as dangers for which in some way the state is responsible.
Thus in Oneryildiz, the applicant had lived with his family in a slum bordering on a municipal household refuse tip.
A methane explosion at the tip resulted in a landslide which engulfed the applicants house killing his close relatives.
The Grand Chamber held at para 101 that the Turkish authorities knew or ought to have known that the tip constituted a real and immediate risk to the lives of persons living close to it.
They consequently: had a positive obligation under article 2 of the Convention to take such preventive operational measures as were necessary and sufficient to protect those individuals, especially as they themselves had set up the site and authorised its operation, which gave rise to the risk in question.
Another example of a case in this broad category is Mammadov v Azerbaijan (Application No 4762/05) (2009) where the applicants wife set fire to herself during an attempt by police offices to evict the applicant and his family from accommodation that they were occupying.
The court made it clear at para 113 that it was necessary to determine whether this specific situation triggered the states operational duty that is whether at some point during the course of the operation the state agents became aware or ought to have become aware that there was a risk of suicide.
At para 115, the court continued: in a situation where an individual threatens to take his or her own life in plain view of state agents and, moreover where this threat is an emotional reaction directly induced by the state agents actions or demands, the latter should treat this threat with the utmost seriousness as constituting an imminent risk to that individuals life, regardless of how unexpected that threat might have been.
In Watts v United Kingdom (2010) 51 EHRR 66, the applicant complained that her transfer from her existing care home to another care home would reduce her life expectancy.
The court held at para 88 that a badly managed transfer of elderly residents of a care home could well have a negative impact on their life expectancy as a result of the general frailty and resistance to change of older people.
It followed that article 2 was applicable.
The operational duty was, therefore, capable of being owed in such circumstances, but for various reasons, the claim failed on the facts.
These are all examples of cases where the operational duty has been held to exist.
They are to be contrasted with cases involving hospital deaths resulting from what in Savage ([2009] AC 681, para 45) Lord Rodger described as casual acts of negligence.
The leading Strasbourg case in this category is Powell v United Kingdom (2000) 30 EHRR CD 362.
An article 2 complaint was made by parents in respect of the death of their son as a result of negligent treatment of him in hospital.
Their case was that there had been a breach of the Osman operational duty.
In holding that the claim was inadmissible, the court said at p 364; The court accepts that it cannot be excluded that the acts and omissions of the authorities in the field of health care policy may in certain circumstances engage their responsibility under the positive limb of article 2.
However, where a contracting state had made adequate provision for securing high professional standards among health professionals and the protection of the lives of patients, it cannot accept that matters such as error of judgment on the part of a health professional or negligent coordination among health professionals in the treatment of a particular patient are sufficient of themselves to call a contracting state to account from the standpoint of its positive obligations under article 2 of the Convention to protect life.
Thus to use the language of Lord Rodger in Savage, if the hospital authorities have performed their obligation to adopt appropriate general measures for the protection of the lives of patients in hospitals (for example, by ensuring that competent staff are recruited, high professional standards are maintained and suitable systems of work are put in place), casual acts of negligence by members of staff will not give rise to a breach of article 2.
The question that lies at the heart of the first issue in the present case is whether the admitted casual negligence of the trust in its treatment of Melanie is to be assimilated to the Powell line of cases or whether the fact that she was a psychiatric patient (though not detained) means that this case should be assimilated to the class of cases where an operational duty arises.
The judge and the Court of Appeal decided that it belongs to the Powell line of cases.
Jackson LJ said: 63.
On the law as it stands, I do not believe that health trusts have the article 2 operational obligation to voluntary patients in hospital, who are suffering from physical or mental illness, even where there is a real and immediate risk of death.
In my view, it is not possible to separate such patients into categories and to say that the operational obligation is owed to some categories of voluntary patients, but not others.
A patient undergoing major heart surgery may be at just as great a risk of death as a schizophrenic patient with suicidal ideation. 64.
It is important for court users (patients, NHS trusts, legal advisers and others) that legal obligations and liabilities should be clearly defined and understood.
I do not believe that it either is or should be the law that voluntary patients fall into different categories, some of whom (or some of whose families) can claim under article 2 but others of whom cannot.
The remedy for clinical negligence, even where real and immediate risk of death has been disregarded, is an action in negligence.
It is, therefore, necessary to attempt to discover the essential features of the cases where Strasbourg has so far recognised the existence of an operational duty.
It is clear that the existence of a real and immediate risk to life is a necessary but not sufficient condition for the existence of the duty.
This is because, as the Court of Appeal said, a patient undergoing major surgery may be facing a real and immediate risk of death and yet Powell shows that there is no article 2 operational duty to take reasonable steps to avoid the death of such a patient.
No decision of the ECtHR has been cited to us where the court clearly articulates the criteria by which it decides whether an article 2 operational duty exists in any particular circumstances.
It is therefore necessary to see whether the cases give some clue as to why the operational duty has been found to exist in some circumstances and not in others.
There are certain indicia which point the way.
As Miss Richards and Mr Bowen submit, the operational duty will be held to exist where there has been an assumption of responsibility by the state for the individuals welfare and safety (including by the exercise of control).
The paradigm example of assumption of responsibility is where the state has detained an individual, whether in prison, in a psychiatric hospital, in an immigration detention centre or otherwise.
The operational obligations apply to all detainees, but are particularly stringent in relation to those who are especially vulnerable by reason of their physical or mental condition: see, for example, Keenan (prisoner suffering from a mental disorder) and Tarariyeva v Russia (2009) 48 EHRR 609 (person detained in a prison hospital suffering from a serious physical illness).
The significance of the assumption of responsibility was summarised by Lord Rodger in Mitchell v Glasgow City Council [2009] AC 874, para 66: The obligation of the United Kingdom under article 2 goes wider, however, In particular, where a state has assumed responsibility for an individual, whether by taking him into custody, by imprisoning him, detaining him under mental health legislation, or conscripting him into the armed forces, the state assumes responsibility for that individuals safety.
So in these circumstances police authorities, prison authorities, health authorities and the armed forces are all subject to positive obligations to protect the lives of those in their care.
When finding that the article 2 operational duty has been breached, the ECtHR has repeatedly emphasised the vulnerability of the victim as a relevant consideration.
In circumstances of sufficient vulnerability, the ECtHR has been prepared to find a breach of the operational duty even where there has been no assumption of control by the state, such as where a local authority fails to exercise its powers to protect a child who to its knowledge is at risk of abuse as in Z v United Kingdom Application No 29392/95 (10 May 2001).
It is not relevant for the present purposes that this was a complaint of breach of article 3 rather than article 2.
A further factor is the nature of the risk.
Is it an ordinary risk of the kind that individuals in the relevant category should reasonably be expected to take or is it an exceptional risk? Thus in Stoyanovi v Bulgaria (Application No 42980/04) 9 November 2010, the ECtHR rejected an application made by the family of a soldier who died during a parachute exercise.
At paras 59 to 61, the court drew a distinction between risks which a soldier must expect as an incident of his ordinary military duties and dangerous situations of specific threat to life which arise exceptionally from risks posed by violent, unlawful acts of others or man made or natural hazards.
An operational obligation would only arise in the latter situation.
All of these factors may be relevant in determining whether the operational duty exists in any given circumstances.
But they do not necessarily provide a sure guide as to whether an operational duty will be found by the ECtHR to exist in circumstances which have not yet been considered by the court.
Perhaps that should not be altogether surprising.
After all, the common law of negligence develops incrementally and it is not always possible to predict whether the court will hold that a duty of care is owed in a situation which has not been previously considered.
Strasbourg proceeds on a case by case basis.
The jurisprudence of the operational duty is young.
Its boundaries are still being explored by the ECtHR as new circumstances are presented to it for consideration.
But it seems to me that the court has been tending to expand the categories of circumstances in which the operational duty will be found to exist.
I must now come to the central question, which is whether the lower courts were right to hold that Powell compels the conclusion that the trust owed no operational duty in the present case.
The following is a summary of the submissions of Miss Carss Frisk QC.
Powell and similar cases, such as Calvelli v Italy (Application No 32967/96), 17 January 2002 and Vo v France (2005) 40 EHRR 12, demonstrate the existence of a general rule that no operational duty is owed by the state in the field of medical treatment in public hospitals; but there is an exception to this general rule in the case of psychiatric patients, although only if they are detained in hospital.
The existence of this exception is shown by the decision in Savage.
It is true that (i) patients who are in hospital suffering from physical illnesses are often in a vulnerable state, (ii) the hospital authorities will have assumed responsibility for them and (iii) such patients may face a real and immediate risk to their lives.
But the Strasbourg jurisprudence shows that these factors are not sufficient to give rise to an article 2 operational duty on the part of the state.
As for psychiatric patients, there is a crucial difference between those who are informal patients voluntarily in hospital and those who are detained by the authority of the state.
A psychiatric patient who is voluntarily in hospital, like a patient with a physical illness, is free to refuse treatment and leave.
I accept, of course, that there are differences between detained and voluntary psychiatric patients; and there are similarities between voluntary patients who are suffering from mental illness and those who are suffering from physical illness.
But the differences between the two categories of psychiatric patient should not be exaggerated.
There are also important differences between informal psychiatric patients who are at real and immediate risk of suicide and patients in an ordinary healthcare setting who are at real and immediate risk of death, for example, because they are undergoing life saving surgery.
As regards the differences between an informal psychiatric patient and one who is detained under the MHA, these are in many ways more apparent than real.
It is true that the paradigm of a detained patient is one who is locked up in a secure hospital environment.
But a detained patient may be in an open hospital with freedom to come and go.
By contrast, an informal patient may be treated in a secure environment in circumstances where she is suicidal, receiving medication for her mental disorder which may compromise her ability to make an informed choice to remain in hospital and she would, in any event, be detained if she tried to leave.
Informal in patients can be detained temporarily under the holding powers given by section 5 of the MHA to allow an application to be made for detention under section 2 or 3 of the MHA.
The statutory powers of detention are the means by which the hospital is able to protect the psychiatric patient from the specific risk of suicide.
The patients position is analogous to that of the child at risk of abuse in Z v United Kingdom, where at paras 73 74 the court placed emphasis on the availability of the statutory power to take the child into care and the statutory duty to protect children.
No such powers exist, or are necessary, in the case of the capable patient in the ordinary healthcare setting.
Although informal patients are not detained and are therefore, in principle free to leave hospital at any time, their consent to remaining in hospital may only be as a result of a fear that they will be detained.
In Principles of Mental Health Law and Policy (2010 OUP) ed Gostin and others, the authors have written in relation to admission at para 11.03: Since the pioneering paper by Gilboy and Schmidt in 1979, it has been recognised that a significant proportion of [informal] admissions are not voluntary in any meaningful sense: something in the range of half of the people admitted voluntarily feel coerced into the admission; it is just that the coercion is situational, rather than using legal mechanisms.
As regards the voluntary psychiatric patient who is at risk of suicide and the patient suffering from a life threatening physical illness who is in an ordinary hospital setting, the nature of the risk to which these two categories of patient are exposed is very different.
In the case of the suicide of a psychiatric patient, the likelihood is that, given the patients mental disorder, her capacity to make a rational decision to end her life will be to some degree impaired.
She needs to be protected from the risk of death by those means.
The present case is a tragic illustration of this.
Melanie was admitted to hospital because she was suffering from a mental disorder and had attempted to commit suicide.
The very reason why she was admitted was because there was a risk that she would commit suicide from which she needed to be protected.
On the other hand, the patient who undergoes surgery will have accepted the risk of death on the basis of informed consent.
She may choose to avoid the risk by deciding not to go ahead with the medical treatment.
In the Savage case, [2009] AC 681, it was submitted on behalf of the defendant NHS Trust that, in the light of the principle stated in Powell v United Kingdom 30 EHRR CD 362, no operational duty was owed under article 2 to take steps to protect a detained mental patient from a real and immediate risk of suicide.
This submission was rejected by the House of Lords.
At para 59, Lord Rodger said: The circumstances in Powells case were quite different from circumstances where a patient presents a real and immediate risk of suicide.
Therefore, the decision of the European court, which I respectfully consider was correct, provides no guidance on the problem before the House.
And later he said: 65.
Neither Powells case. nor Dodovs case 47 EHRR 932 provides any basis whatever for the proposition that, as a matter of principle, medical staff in a mental hospital can never be subject to an operational duty under article 2 to take steps to prevent a (detained) patient from committing suicideeven if they know or ought to know that there is a real and immediate risk of her doing so.
The obvious response to that proposition is: Why ever not?.
As I have said, the ECtHR has not considered whether an operational duty exists to protect against the risk of suicide by informal psychiatric patients.
But the Strasbourg jurisprudence shows that there is such a duty to protect persons from a real and immediate risk of suicide at least where they are under the control of the state.
By contrast, the ECtHR has stated that in the generality of cases involving medical negligence, there is no operational duty under article 2.
So on which side of the line does an informal psychiatric patient such as Melanie fall? I am in no doubt that the trust owed the operational duty to her to take reasonable steps to protect her from the real and immediate risk of suicide.
Whether there was a real and immediate risk of suicide on 19 April 2005 (and if so whether there was a breach of duty) is the second issue that arises on this appeal.
But if there was a real and immediate risk of suicide at that time of which the trust was aware or ought to have been aware, then in my view the trust was under a duty to take reasonable steps to protect Melanie from it.
She had been admitted to hospital because she was a real suicide risk.
By reason of her mental state, she was extremely vulnerable.
The trust assumed responsibility for her.
She was under its control.
Although she was not a detained patient, it is clear that, if she had insisted on leaving the hospital, the authorities could and should have exercised their powers under the MHA to prevent her from doing so.
In fact, however, the judge found that, if the trust had refused to allow her to leave, she would not have insisted on leaving.
This demonstrates the control that the trust was exercising over Melanie.
In reality, the difference between her position and that of a hypothetical detained psychiatric patient, who (apart from the fact of being detained) was in circumstances similar to those of Melanie, would have been one of form, not substance.
Her position was far closer to that of such a hypothetical patient than to that of a patient undergoing treatment in a public hospital for a physical illness.
These factors, taken together, lead me to conclude that the ECtHR would hold that the operational duty existed in this case.
The second issue: was there a real and immediate risk to the life of Melanie on 19 April 2005 of which the trust knew or ought to have known and which they failed to take reasonable steps to avoid?
In the light of their conclusions on the first issue, both the judge and the Court of Appeal understandably dealt with all the remaining issues more briefly than they might otherwise have done.
In relation to the second issue, Simon J accepted the evidence of Dr Caplan (the trusts expert psychiatrist) that the risk of suicide was approximately 5% on 19 April (after Melanie left the hospital), increasing to 10% on 20 April and 20% on 21 April.
The judge said that the risk was low to moderate (but nevertheless, significant).
He concluded that there was a real, but not an immediate risk.
In assessing what steps it was reasonable to take to avoid the risk and taking account of the need to respect Melanies personal autonomy, he would not have held that there had been a breach of article 2.
The Court of Appeal agreed that the risk was real, but they also considered that it was immediate.
On the question of breach, they said that there was a simple and obvious way of preventing the risk from eventuating, namely by refusing Melanies request for home leave.
If that request had been refused, the judge found that she would not have insisted on going home contrary to medical advice.
In these circumstances, the Court of Appeal held that, if there was an operational duty, the trust failed to comply with it.
The trust has appealed against all aspects of the Court of Appeals decision in relation to this issue.
They say that the risk was neither real nor immediate and in any event there was no breach of the operational duty.
Miss Carss Frisk emphasises the fact that, as has often been said, the threshold for the operational duty (real and immediate risk to life) is high: see, for example, per Lord Rodger in the Savage case [2009] AC 681, para 41 and para 66, where he said that given the high threshold, a breach of the duty will be harder to establish then mere negligence.
See also per Baroness Hale at para 99.
I accept that it is more difficult to establish a breach of the operational duty than mere negligence.
This is not least because, in order to prove negligence, it is sufficient to show that the risk of damage was reasonably foreseeable; it is not necessary to show that the risk was real and immediate.
But to say that the test is a high one or more stringent than the test for negligence does not shed light on the meaning of real and immediate or on the question whether there was a real and immediate risk on the facts of any particular case.
It seems to me that the courts below were clearly right to say that the risk of Melanies suicide was real in this case.
On the evidence of Dr Caplan, it was a substantial or significant risk and not a remote or fanciful one.
Dr Caplan and Dr Britto (the claimants expert psychiatrist) agreed that all ordinarily competent and responsible psychiatrists would have regarded Melanie as being in need of protection against the risk of suicide.
The risk was real enough for them to be of that opinion.
I do not accept Miss Carss Frisks submission that there had to be a likelihood or fairly high degree of risk.
I have seen no support for this test in the Strasbourg jurisprudence.
As for whether the risk was immediate, Miss Carss Frisk submits that the Court of Appeal failed to take into account the fact that an immediate risk must be imminent.
She derives the word imminent from what Lord Hope said in Van Colle v Chief Constable of the Hertfordshire Police [2009] AC 225, para 66.
In the case of In re Officer L [2007] 1 WLR 2135, para 20, Lord Carswell stated that an apt summary of the meaning of an immediate risk is one that is present and continuing.
In my view, one must guard against the dangers of using other words to explain the meaning of an ordinary word like immediate.
But I think that the phrase present and continuing captures the essence of its meaning.
The idea is to focus on a risk which is present at the time of the alleged breach of duty and not a risk that will arise at some time in the future.
I think that this approach is supported by some of the Strasbourg jurisprudence.
In Opuz v Turkey (2010) 50 EHRR 695, para 134, the court concluded that there was a continuing threat to the health and safety of the victims (emphasis added) and, therefore, that there was an immediate risk.
In Renolde v France (2009) 48 EHRR 969, the deceased had attempted suicide 18 days before his death and thereafter continued to show signs of worrying behaviour, but made no further attempts at self harm.
The court said at para 89: Although his condition and the immediacy of the risk of a fresh suicide attempt varied, the court considers that that risk was real and that [the deceased] required careful monitoring in case of any sudden deterioration.
The risk of death was sufficiently immediate for the article 2 claim to succeed.
It was not necessary for the risk to be apparent just before death.
In my view, the Court of Appeal were right to say that the risk of suicide in the present case was immediate when Melanie was allowed home on 19 April 2005.
There was a real risk that she would take her life during the two day period of home leave.
That risk existed when she left the hospital and it continued (and increased) during the two day period.
That was sufficient to make the risk present and continuing and, therefore, immediate.
The judge gave no reasons for reaching the opposite conclusion.
Finally, there is the question of breach of the duty.
There is no doubt that the trust was or ought to have been aware of the risk.
Did they take all steps reasonably necessary to avoid the risk? Miss Carss Frisk submits that Dr Meagher had a margin of discretion which was wider than the law of negligence allows so that the trusts admission of negligence should not automatically lead to a finding of breach of the article 2 duty.
Bearing in mind the low levels of risk found by the judge, she submits that it was within Dr Meaghers margin of discretion to consider that it was appropriate for Melanie to go home on 19 April 2005.
I cannot accept this submission.
The standard demanded for the performance of the operational duty is one of reasonableness.
This brings in consideration of the circumstances of the case, the ease or difficulty of taking precautions and the resources available: per Lord Carswell in In re Officer L ([2007] 1 WLR 2135, para 21).
In this case, it also required a consideration of respect for the personal autonomy of Melanie.
But it was common ground that the decision to allow Melanie two days home leave was one that no reasonable psychiatric practitioner would have made.
In these circumstances, it seems to me that recourse to the margin of appreciation is misplaced.
The trust failed to do all that could reasonably have been expected to prevent the real and immediate risk of Melanies suicide.
The Court of Appeal were right so to hold.
The third issue: were Mr and Mrs Rabone victims within the meaning of article 34 of the Convention?
Section 7(1) of the HRA provides that a claim that a public authority has acted in a way which is incompatible with a Convention right may be brought before the courts only if the person bringing the complaint is (or would be) a victim of the unlawful act.
Section 7(7) provides that a person is a victim of an unlawful act only if he would be a victim for the purposes of article 34 of the Convention if proceedings were brought in the ECtHR in respect of that act.
Miss Carss Frisk submits that Mr and Mrs Rabone would not be treated as victims within the meaning of article 34.
She relies on the reasoning of Lord Scott in the Savage case [2009] AC 681, para 5.
Lord Scott said that he could well understand how a member of a deceaseds family may be regarded as a victim for the purposes of the article 2 investigative obligation.
But he could not understand how a close family member could claim to be a victim for the purpose of the article 2 substantive obligations.
He said that it was not any part of the function of article 2(1) to add to the class of persons who under ordinary domestic law can seek financial compensation for a death an undefined, and perhaps undefinable, class composed of persons close to the deceased who have suffered distress and anguish on account of the death.
Both the judge and the Court of Appeal rejected the trusts submissions.
In my view, they were right to do so.
The ECtHR has repeatedly stated that family members of the deceased can bring claims in their own right both in relation to the investigative obligation and the substantive obligations.
Examples of such cases are Yasa v Turkey (1999) 28 EHRR 408, para 64; Edwards v United Kingdom at para 106; Renolde v France (2009) 48 EHRR 969, para 69; and Kats v Ukraine (2010) 51 EHRR 1066, para 94.
Miss Carss Frisk realistically accepts that the Strasbourg jurisprudence is clear on this.
She points out that the question of victim status was not argued in any of these cases, so that the weight to be accorded to them is diminished.
But there is no basis for believing that the ECtHR would depart from this consistent line of authority if the contrary were argued.
In any event, the contrary was argued in Yasa v Turkey (1998) 28 EHRR 408 where the court held that a nephew was a victim.
It follows that the observations of Lord Scott in Savage (with which no other member of the House expressed agreement) are not correct.
They seem to have been made without the benefit of a consideration of the Strasbourg jurisprudence on the point.
The fourth issue: did Mr and Mrs Rabone lose their victim status as a result of the settlement of their negligence claim?
It is common ground that a person ceases to be a victim within the meaning of article 34 of the Convention if two conditions are satisfied.
These are that the domestic public authority has (i) provided adequate redress and (ii) acknowledged, either expressly or in substance, the breach of the Convention.
There is ample ECtHR jurisprudence to support both propositions.
It is sufficient to refer to the early case of Eckle v Germany (1982) 5 EHRR 1, para 66 and the recent case of R.R v Poland (Application No 27617/04), 26 May 2011 at para 97.
Both conditions must be satisfied.
On behalf of the trust, it is submitted that Mr and Mrs Rabone lost their victim status because both conditions were satisfied in the present case.
But before I address this submission, I should consider whether the settlement of itself has deprived Mr and Mrs Rabone of victim status.
As I have said, Mr Rabone accepted 7,500 (2,499 for funeral expenses and the balance as general damages for Melanies pain and suffering during the two months period before she died) in settlement of the 1934 Act negligence claim.
The effect of the settlement
Miss Carss Frisk submits that Mr and Mrs Rabone lost their victim status by reason of the settlement.
She says that, in the context of a complaint of medical negligence leading to death, a claimant loses the status of a victim for the purposes of pursuing a claim for breach of article 2 if he or she settles the negligence claim.
As I understand it, this is regardless of whether the settlement sum is lower than awards made by the ECtHR in similar cases.
Counsel relies on a number of authorities in support of this submission, in particular Powell (see para 19 above) and Rowley v United Kingdom (Application No 31914/03), February 2005.
In Powell, the parents of a 10 year old boy who died as a result of misdiagnosis by doctors brought claims including for negligence pursuant to the 1934 Act (on behalf of the boys estate) and pursuant to the Fatal Accidents Act 1976 on behalf of themselves.
The Health Authority admitted negligence and paid a sum in settlement.
The parents persisted with other claims relating to the falsification of medical records after their sons death.
These claims were unsuccessful and the parents complained to Strasbourg.
It is important to note that the parents complaint before the ECtHR was that there had been a breach of the procedural obligation under article 2 to conduct an effective investigation into their sons death.
The court said at p365: Of greater significance for the court is the fact that the applicants settled their civil action in negligence against the responsible health authority and did not pursue individual claims against the doctors.
In the courts opinion, the applicants by their decision closed another crucially important avenue for shedding light on the extent of the doctors responsibility for their sons death.
Having regard to the above considerations the court finds that it is not open to the applicants to complain under article 2 of the Convention that there was no effective investigation into their sons death.
In its opinion, where a relative of a deceased person accepts compensation in settlement of a civil claim based on medical negligence he or she is in principle no longer able to claim to be a victim in respect of the circumstances surrounding the treatment administered to the deceased person or with regard to the investigation carried out into his or her death (emphasis added).
The focus of the courts reasoning seems to have been on the effect of the settlement on the parents ability to complain about the adequacy of the investigation, rather than on their ability to pursue any other claim for compensation for breach of article 2.
Despite the existence of the words that I have emphasised, it is not clear what claim for compensation (if any) the parents wished to pursue.
The court emphasised that, by their decision to settle their negligence claim, the parents closed another and crucially important avenue for shedding light on the extent of the doctors responsibility for their sons death.
In other words, by settling their claim the parents lost the right to have an effective investigation by a civil court and they could not seek to pursue that right under the Convention.
It is true that in the words that I have emphasised the court also said that settlement prevented the applicants from being able to claim to be a victim in respect of the circumstances surrounding the treatment administered to the deceased person.
But there is no amplification of this statement.
Since this was not the focus of the issues in the case or the discussion in the judgment, I do not think that it provides a clear basis for holding that the settlement of a claim for compensation for negligence arising from a death of itself prevents an individual from pursuing a claim for compensation for breach of article 2.
In Rowley, the applicants son had drowned in the bath at a residential care home.
The applicant threatened to issue proceedings against the City Council, but accepted a settlement offer of compensation of 1,750 and a formal apology.
The complaint to the ECtHR included an allegation that there had been a violation of article 2.
The complaint was declared inadmissible.
The court noted that the applicant settled her civil claims for damages against the Council on the basis of damages and a formal apology.
But the judgment does not state whether the settlement sum of 1,750 was only in respect of one claim for compensation arising from the death and, if it was, what effect this would have on the ability of the applicant to make a different claim for compensation for breach of article 2.
In short, I do not consider that the decisions in Powell and Rowley clearly show that the ECtHR takes the view that acceptance of compensation in settlement of a domestic law cause of action arising from a death necessarily means that an individual can no longer be regarded as a victim for the purposes of an article 2 claim arising from the same death.
There is, however, a line of cases in which the court has held that, by accepting compensation in settlement of a domestic remedy for the consequences of a death, an applicant has renounced all claims for the consequences of the death including claims for breach of article 2.
Where this occurs, the applicant ceases to be a victim and cannot complain of a breach of article 2.
Thus in Caraher v United Kingdom (2000) 29 EHRR CD 119, the applicant accepted a sum in settlement of all claims on her own behalf and on behalf of the estate and dependants of the deceased.
It was said by the court that where a relative accepts a sum of compensation in settlement of civil claims and renounces further use of local remedies therefore, he or she will generally no longer be able to claim to be a victim in respect of those matters.
It is material that the settlement was of all claims on behalf of the applicant herself, the estate and the dependants.
A further example of the same reasoning is Hay v United Kingdom (Application No 41894/98), 17 October 2000.
In that case, the ECtHR declared inadmissible a complaint under article 2 in respect of the shooting dead by the police of the applicants brother, where civil proceedings against the police had been settled.
It made no difference that it was a term of the settlement that it was made without prejudice to the right of those representing the estate of the deceased to pursue a petition before the ECtHR.
I do not find it easy to extract from the Strasbourg jurisprudence a clear statement of the effect of the settlement of a domestic law claim on the ability of an individual to pursue a corresponding Convention claim.
The court does not, however, seem to adopt a strict approach to the interpretation of a settlement.
It does not say that a right of action is preserved unless it has clearly been compromised or renounced.
That is demonstrated by the decision in Hay.
Rather, the court seems to adopt a broad approach to determining the true meaning and effect of a settlement.
As they said in Caraher, if relatives settle their domestic law claims arising from a death, they will generally cease to be victims in relation to a corresponding Convention claim.
The phrase corresponding Convention claim is mine.
By this I mean that, if (i) the domestic law claim that is settled was made by the same person as seeks to make an article 2 claim and (ii) the head of loss embraced by the settlement broadly covers the same ground as the loss which is the subject of the article 2 claim, then I would expect the ECtHR to say that, by settling the former, the claimant is to be taken to have renounced any claim to the latter.
To return to the facts of the present case, I do not accept that by settling the 1934 Act negligence claim on behalf of Melanies estate, Mr Rabone renounced an article 2 claim on behalf of himself and Mrs Rabone for damages for non pecuniary loss for their bereavement.
No such claim had been made in the negligence proceedings because such a claim was not available in English law.
That is because section 1A of the Fatal Accidents Act 1976 provides that a claim by parents for damages for bereavement for the loss of a child (currently fixed by section 1A(3) at 11,800) shall only be for the benefit of the parents of a minor and Melanie was more than 18 years of age at the date of her death.
In these circumstances, the settlement of the 1934 Act claim did not amount to an implied renunciation of any article 2 claim.
In the absence of an express renunciation, the settlement of itself had no legal effect on the status of Mr and Mrs Rabone as victims for the purpose of their article 2 claim.
It remains to be considered whether (as the Court of Appeal held) the sum of 7,500 was nevertheless adequate redress.
Adequate redress
As I have said, the redress that the trust has made as a result of Melanies death has been limited to payment of compensation to Mr Rabone in respect of his claim on behalf of the estate.
Nothing has been paid to Mr or Mrs Rabone to compensate them for their bereavement.
No decision of the ECtHR has been cited to us which supports the surprising proposition that the compensation that has been paid in respect of the estates losses would be considered by the court to be adequate redress in respect of the personal losses of Mr and Mrs Rabone.
Miss Richards relies on Bubbins v United Kingdom (2005) 41 EHRR 458 as indicating that the ECtHR would not accept this proposition.
The applicants brother was shot dead by an armed police officer during a police operation.
The court held that there had been a breach of article 13, but not of article 2.
In relation to the claim under article 13, the court noted at para 172 that the applicant had no right to claim compensation for non pecuniary damage suffered by her.
The most that she could claim was funeral expenses on behalf of the estate under the 1934 Act.
It is true that this case was concerned with article 13 (the adequacy of domestic remedies) and not with the separate question of victim status.
But it is difficult to believe that the ECtHR would hold that an applicant had received adequate redress through proceedings that would not be regarded as an adequate remedy under article 13.
The importance of compensation for the non pecuniary damage flowing from a breach of article 2 was emphasised in Bubbins at para 171: compensation for non pecuniary damage flowing from the breach [of article 2] should, in principle, be available as part of the range of redress.
The court concluded that the applicant had no prospect of obtaining compensation for non pecuniary damage suffered by her if she established a breach of article 2.
Accordingly, there had been a breach of article 13.
Although Bubbins is not precisely in point, it provides a strong indication of the view that the ECtHR would take on the question whether the settlement sum of 7,500 would be adequate redress for the article 2 claim in the present case.
In my opinion, it would hold that there has been no adequate redress for the simple reason that there has been no compensation at all for the non pecuniary damage suffered by Mr and Mrs Rabone as a result of the breach of article 2.
It might be said that it is appropriate to look at the matter more broadly and ask whether the sum of 7,500 was adequate redress for the claims on behalf of the estate and on behalf of Mr and Mrs Rabone themselves, when these claims are aggregated.
In Gafgen v Germany (2011) 52 EHRR 1, para 116, the court said that the question whether redress is appropriate and sufficient is dependent on all the circumstances of the case, having regard in particular, to the nature of the Convention violation at stake.
It might be argued that, if an award to the estate of a deceased person is generous and an award to the familys victims is low, the court would say that there has been adequate redress in all the circumstances of the case.
I accept that the court might adopt this position in some circumstances.
But I am sure that it would not do so in the present case.
First, Mrs Rabone has been awarded no compensation at all.
Neither has Mr Rabone except as personal representative.
If Melanie died intestate, Mr and Mrs Rabone would take in equal shares ahead of Melanies sisters Amanda and Emma.
Secondly, although the sum awarded to the estate was reasonable, it was by no means unduly generous; and (as we shall see) the Court of Appeal assessed the damages for breach of article 2 at 10,000, a sum significantly higher than the settlement figure.
It is true that the correctness of that assessment is under challenge in this appeal (the sixth issue).
But for reasons that I give later, there is no justification for interfering with the Court of Appeals assessment.
In these circumstances, I do not see how it can reasonably be said that the settlement figure was adequate redress for the article 2 claim of Mr and Mrs Rabone.
For these reasons, I would hold that the trust did not make adequate redress and therefore that Mr and Mrs Rabone did not lose their victim status by accepting the settlement figure.
Acknowledgement
In view of my conclusion on the issue of the adequacy of redress, it is not necessary for me to consider the further question of whether Mr and Mrs Rabone lost their victim status because the trust acknowledged expressly or in substance their breach of the article 2 operational duty.
But since the matter was fully argued and it raises a point of some importance, I shall deal with it.
It is common ground that there was no express acknowledgement of a breach of article 2 in this case.
But it is submitted on behalf of the trust that there was such an acknowledgement in substance.
It is necessary to set out a little of the relevant history.
As I have said, the claims were (i) by Mr Rabone alone for negligence on behalf of Melanies estate under the 1934 Act and (ii) by Mr and Mrs Rabone on their own behalf for breach of article 2.
In May 2008, the negligence claim was settled by a consent order which provided for payment of 7,500 in respect of the estates claim.
There was no admission of liability in relation to either claim.
The consent order explicitly recorded that Mr and Mrs Rabone were continuing with their claim under the HRA.
The trust continued to deny negligence until 6 May 2009, when their solicitors wrote a letter headed letter of admission.
They wrote that the trust admitted that the common law duty of care owed to Melanie was breached when she was allowed home on 19 April 2005.
They went on to state expressly that they continued to deny the article 2 claims.
On the following day, the trusts chief executive wrote as follows: I have seen a copy of the report provided by my Trusts independent psychiatric expert, Dr Caplan, concerning the standard of care provided to your daughter Melanie during her admission to our Trusts unit in Stepping Hill Hospital in April 2005.
The Trust accepts Dr Caplans view that the decision to allow Melanie to have two days leave on 19 April fell below the standard of care which we owed to her at that time.
Having learned of Dr Caplans view and in addition to the condolences I expressed to you in September 2005, I wanted to write personally to you on behalf of the Trust to say how deeply sorry I am for the error we made on 19 April 2005.
I realise what deep grief Melanies death has caused to you and I know that this apology will not undo what has happened, but I wanted you to know how sorry we are for the error we have made.
Miss Richards submits that nothing less than a clear and unequivocal acknowledgement of a violation of article 2 would have sufficed.
She points out that the importance of the requirement that there be an acknowledgment of the breach of the Convention has been repeatedly emphasised by the ECtHR: see, for example, Jensen v Denmark (Application No 48470/99), Ludi v Switzerland (1993) 15 EHRR 173, para 34 and Gafgen v Germany 52 EHRR 1, para 120.
She says that the trust have not acknowledged the consequences of their error and have not accepted responsibility for Melanies death.
It follows that there has been no acknowledgement of its breach of article 2 and, without such an acknowledgement, Mr and Mrs Rabone would remain victims entitled to bring their claim.
In my view, the trust have clearly accepted that their error was the cause of Melanies death.
The chief executives letter of 7 May (in particular its last paragraph) contained a clear admission that the negligence for which the chief executive was apologising had caused Melanies death.
But the question remains whether that admission was a sufficient acknowledgment of the breach of article 2 to result in the loss of victim status.
The Strasbourg authorities shed some light on this question.
In Nikolova and Velichkova v Bulgaria (2009) 48 EHRR 915, the applicants were relatives of the deceased police officer who had died as a result of an attack on him by two fellow officers.
The two officers were convicted of causing the death by intentional grievous bodily harm and the applicants were awarded compensation in the criminal proceedings.
The applicants were also awarded compensation in civil proceedings that they brought against the police authority.
They then made a complaint to the ECtHR that there had been a breach of article 2.
The court upheld the complaint.
The applicants had not lost their victim status since the domestic authorities had failed to provide adequate redress.
But the court also held at para 51 that the judgments convicting the police officers and awarding compensation to the applicants amounted to an acknowledgement in substance that the death of Mr Nikolov had been in breach of article 2 of the Convention (emphasis added).
The importance of the words that I have emphasised is that they show that, despite the differences that there may be between the elements of a violation of the substantive article 2 obligation and the elements of criminal and/or civil liability in domestic law, an admission or a finding of criminal or civil liability will often be sufficient to amount to an acknowledgement in substance of a breach of article 2.
In Rowley (see para 54 above), the court said: In the present case there have been numerous findings that the applicants son was subject to inadequate care while under the responsibility of the council.
The internal complaints procedure by the Independent Investigator found defects in procedures as did the councils Senior Safety Officer.
Furthermore, the council pleaded guilty to an offence under the Health and Safety at Work Act 1974 for failure so far as reasonably practicable to ensure Malcolms safety and was fined a substantial amount.
The court would also note that the applicant settled her civil claims for damages against the council on the basis of damages and a formal apology to the effect that their failure in standards in care and safety had resulted in the death of her son. .
Having regard to the considerations above and the fact that the applicant settled her claims in civil proceedings accepting compensation and an apology, the court finds that she may no longer, in these circumstances, claim to be a victim of a violation of the Convention.
None of the domestic institutions in Rowley had dealt expressly with article 2 or made findings on whether there had been a real or immediate risk to the life of the applicants deceased son.
And yet the court held that the findings that were made and the apology and payment of compensation for negligently causing the death amounted to a sufficient acknowledgment in substance of the breach of article 2.
In both Nikolova and Rowley, the article 2 claim was declared to be inadmissible.
These cases show that an authority may in substance acknowledge a breach of article 2 without making an explicit admission of the elements of the breach of the article 2 duty (ie that there was a real and immediate risk etc).
To insist on that would be tantamount to insisting on an express acknowledgement of the breach.
In the present case, the trust admitted that they had negligently caused Melanies death and they paid compensation to reflect that admission.
There is a considerable degree of overlap between the claim in negligence and the article 2 claim.
The essential features of the case against the trust were that: (i) Melanie was a vulnerable patient in the care of the trust at the material time; (ii) she was known to be a suicide risk; (iii) the trust acted negligently in failing to take reasonable steps to protect her; and (iv) their negligence caused her death.
In substance these features formed the basis of the claim in negligence and the claim for breach of the article 2 operational duty.
Had it been necessary to decide the point, I would have held that the trust in substance acknowledged their breach of the article 2 duty.
The fifth issue: limitation
Section 7(5) of the HRA provides that proceedings under section 7(1)(a) (a claim that a public authority has acted in a way which is incompatible with a Convention right) must be brought before the end of (a) the period of one year beginning with the date on which the act complained of took place; or (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances.
Melanie died on 20 April 2005.
Proceedings were issued on 11 August 2006, almost four months after the expiry of the one year limitation period.
The question that arises, therefore, is whether it was equitable to extend the one year period by almost four months having regard to all the circumstances.
The relevant principles are not in dispute.
The court has a wide discretion in determining whether it is equitable to extend time in the particular circumstances of the case.
It will often be appropriate to take into account factors of the type listed in section 33(3) of the Limitation Act 1980 as being relevant when deciding whether to extend time for a domestic law action in respect of personal injury or death.
These may include the length of and reasons for the delay in issuing the proceedings; the extent to which, having regard to the delay, the evidence in the case is or is likely to be less cogent than it would have been if the proceedings had been issued within the one year period; and the conduct of the public authority after the right of claim arose, including the extent (if any) to which it responded to requests reasonably made by the claimant for information for the purpose of ascertaining facts which are or might be relevant.
However, I agree with what the Court of Appeal said in Dunn v Parole Board [2009] 1 WLR 728, paras 31, 43 and 48 that the words of section 7(5)(b) of the HRA mean what they say and the court should not attempt to rewrite them.
There can be no question of interpreting section 7(5)(b) as if it contained the language of section 33(3) of the Limitation Act 1980.
The judge expressed his final conclusion on the limitation issue at para 131: However, in my judgment, the decisive factor is that, at this stage of the trial process, I am in a position to conclude that there is no merit in the claims to which this issue is relevant.
In addition, the contents of the SUI Report, the formal acknowledgement of its negligence by the Trust and its letter of apology are very substantial matters to weigh in the balance when considering whether it would be right to extend time.
For these reasons, he refused to extend time.
The Court of Appeal agreed that the fact that the claim was doomed to failure was the decisive factor.
They said that, if the claim were otherwise well founded, they would have been inclined to extend time.
In the light of my conclusions on the earlier issues in the case, I would reject the premise on which the judge and the Court of Appeal exercised the section 7(5)(b) discretion.
It follows that I must exercise the discretion afresh.
The extension of time that is sought is less than four months.
There is no suggestion that the evidence has become less cogent as a result of the delay in issuing the proceedings or that the trust have been prejudiced in any other way by the delay.
Mr and Mrs Rabone made a formal complaint within five months of Melanies death.
They were advised that their complaint would be put on hold until an internal investigation had been completed.
Their evidence to the judge was that they believed that the trust would produce a reasonably prompt report providing a proper explanation about the decision to allow Melanie to have home leave: see per Simon J at para 129.
They said that their waiting for the report was a material factor in their decision not to issue proceedings.
As the judge found, if the investigation which began in September 2005 had produced a reasonably prompt report, they might have issued proceedings sooner.
The investigation report was not in fact sent to them until 16 March 2007.
A number of points are made on behalf of the trust.
First, a claim could have been brought at the time of the formal letter of complaint on 31 August 2005.
Secondly, Mr and Mrs Rabone accepted that, in the year following the death, they were aware in general terms of the HRA and the possibility of bringing a legal claim.
Even then, they did not seek legal advice, but only proceeded with a claim after a discussion with a friend in June or July 2006.
Thirdly, they could not have been waiting for the trusts final investigation report, because, in the event, they issued proceedings before a copy of it was sent to them.
I accept that Mr and Mrs Rabone could have issued proceedings within the one year period.
But in my view they acted reasonably in not issuing proceedings, rather than waiting for the report (as they were encouraged by the trust to do).
The strength of this point is not undermined by the fact that, in the end, they felt that the delay in publishing the report to them was so great that they could wait no longer and decided to issue proceedings before seeing it.
In summary, the points which strongly militate in favour of granting the extension of time are that the required extension is short; the trust have suffered no prejudice by the delay in the issue of the proceedings; Mr and Mrs Rabone acted reasonably in holding off proceedings in the hope that the report might obviate the need for them; and (most important of all) they have a good claim for breach of article 2.
I would, therefore, grant the necessary extension of time.
The sixth issue: quantum of damages
In the light of the judges decision on the main issues, the question of remedy did not arise.
Nevertheless, he dealt with it briefly.
He noted that the real purpose of Mr and Mrs Rabone was not to claim damages, but rather to achieve a public recognition of the serious errors that led to Melanies death.
He said that a proper award of damages would have been a modest sum which recognised the breaches of their Convention rights.
He would have assessed the sum at 1,500 each for Mr and Mrs Rabone.
At para 112, Jackson LJ said: If the issue were to arise, I would incline to the view that the judges award of 3,000 (1,500 for each claimant) was too low.
Looking at the sums awarded by the Strasbourg court in other cases, I would have proposed an award of 10,000 (5,000 for each claimant).
In my view, that is a more appropriate nominal sum.
It also reflects what would have been the claimants entitlement under the Fatal Accidents Act, if Melanie would have been under 18.
The power to award damages for breach of a Convention right derives from section 8(3) of the HRA.
No award of damages should 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: see Lester, Pannick and Herberg: Human Rights Law and Practice 3rd ed (2007), para 2.8.3.
In R (Greenfield)v Secretary of State for the Home Department [2005] 1 WLR 673, para 9, Lord Bingham approved the observations of the Court of Appeal in Anufrijeva v Southwark London Borough Council [2004] QB 1124 at paras 52 53 that the remedy of damages generally plays a less prominent role in actions based on breaches of the articles of the Convention, than in actions based on breaches of private law obligations. [w]here an infringement of an individuals human rights has occurred, the concern will usually be to bring the infringement to an end and any question of compensation will be of secondary, if any, importance.
It is also important to keep in mind section 8(4) of the HRA which provides that, in determining whether to award damages or the amount of an award, the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under article 41 of the Convention.
As Lord Bingham said in Greenfield (para 19), our courts should therefore look to Strasbourg for precedents on the levels of compensation.
With those considerations in mind, Miss Carss Frisk submits that the Court of Appeal should not have interfered with the judges assessment: the decision to award 1,500 to each claimant was not an error of law or principle.
There are many Strasbourg cases in which the court has awarded the victims of a breach of article 2 compensation for non pecuniary loss.
No decision has been cited to us which purports to be a guideline case in which the range of compensation is specified and the relevant considerations are articulated.
It is, therefore, necessary for our courts to do their best in the light of such guidance as can be gleaned from the Strasbourg decisions on the facts of individual cases.
In Savage (No 2) [2010] EWHC 865 (QB), Mackay J considered a substantial number of decisions of the ECtHR in which compensation has been awarded for non pecuniary loss to victims of a breach of the substantive article 2 obligation.
At para 97, he said that the range of awards for such loss was between 5,000 and 60,000.
This summary of the effect of the cases had not been disputed before us.
What they show is that the sums awarded are fairly modest, but nevertheless within a considerable range.
This is not surprising, because Strasbourg does not award a fixed conventional figure for this head of loss.
One would expect the court to have regard to the closeness of the family link between the victim and the deceased, the nature of the breach and the seriousness of the non pecuniary damage that the victim has suffered.
Factors which will tend to place the amount of the award towards the upper end of the range are the existence of a particularly close family tie between the victim and the deceased; the fact that the breach is especially egregious; and the fact that the circumstances of the death and the authoritys response to it have been particularly distressing to the victims.
Conversely, factors which will tend to place the award towards the lower end of the range are the weakness of the family ties, the fact that the breach is towards the lower end of the scale of gravity and the fact that the circumstances of the death have not caused the utmost distress to the victims.
There is a passing reference to some of these considerations in Kallis v Turkey (2009) ECHR 1662 (27 October 2009), where the court awarded 35,000 to each of the applicants (parents of the deceased), saying that an award should be made under that head bearing in mind the family ties between the applicants and the victim of the killing and the seriousness of the damage sustained, which cannot be compensated for solely by a finding of a violation.
I am in no doubt that the award of 1,500 each to Mr and Mrs Rabone was too low.
It may be that the judge was strongly influenced by the fact that their main purpose in bringing these proceedings was not to obtain an award of damages.
That is true, but the fact is that they did make a claim for damages and it is necessary to make a proper assessment in the light of such assistance as can be derived from the Strasbourg cases.
I would emphasise the following points.
First, the family ties between Mr and Mrs Rabone and Melanie were very strong.
They were a close family.
They had been on holiday to Egypt with Melanie for a week in March 2005.
They had shown the utmost concern for her mental health and had done all they could to support her.
Secondly, they had expressed their anxiety to the hospital authorities about the dangers of allowing Melanie to come home on leave for the weekend of 19 to 21 April 2005 and urged them not to allow it.
Thirdly, the fact that the very risk which they feared and warned the authorities against eventuated must have made the death all the more distressing for them.
This was a bad case of breach of the article 2 operational duty.
In my view, it merited an award well above the lower end of the range of awards.
There is real force in Miss Richards submission that 5,000 each was too low, but there is no appeal by Mr and Mrs Rabone against the decision on the Court of Appeal on this issue.
I would reject the trusts argument that the Court of Appeal should not have interfered with the judges awards.
Overall conclusion
For all these reasons, I would allow this appeal and award Mr and Mrs Rabone 5,000 each.
LORD WALKER
I agree that this appeal should be allowed for the reasons set out in the judgment of Lord Dyson.
I also agree with the further observations in the judgments of Lady Hale, Lord Brown and Lord Mance.
LADY HALE
A hospital trust, in breach of its duty of care towards its patient, allowed a young woman, who was suffering from a severe depressive episode with psychotic symptoms and had been admitted a week earlier after a serious suicide attempt, to go home on leave for two days.
The only support plan was the care of her parents who were not in favour of her being allowed home.
The following day she hanged herself from a tree in a well known local beauty spot, at last succeeding in the suicide which she had previously attempted and seriously threatened even more often.
The hospital trust has admitted liability to her and paid a sum in compensation to her estate.
So why, some might ask, are we here?
We are here because the ordinary law of tort does not recognise or compensate the anguish suffered by parents who are deprived of the life of their adult child.
In this day and age we all expect our children to outlive us.
Losing a child prematurely is agony.
No one who reads the hospitals notes of the series of telephone calls made by this patients father to the hospital on the night in question can be in any doubt of that; or that the agony may be made worse by knowing that the loss both could and should have been prevented.
It is not surprising, therefore, that parents are among the recognised victims when the right to life of their child, protected under article 2 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, is violated.
It is also not surprising that, as Lord Dyson has shown, they are victims, not only of the states failure properly to investigate the death, but also of the failure effectively to protect their childs life.
There is no warrant, in the jurisprudence or in humanity, for the distinction between the two duties drawn by Lord Scott in Savage v South Essex Partnership NHS Foundation Trust [2009] AC 681, para 5.
Article 2 begins Everyones right to life shall be protected by law.
As Lord Dyson has explained, it is now clear that this simple sentence imposes three distinct obligations upon the state.
The first, which does not arise here, is a negative obligation, not itself to take life except in the limited cases provided for in article 2(2).
The second, which also does not arise here, is a positive obligation to conduct a proper investigation into any death for which the State might bear some degree of responsibility.
And the third, with which this case is concerned, is a positive obligation to protect life.
As a general rule, that positive obligation is fulfilled by having in place laws and a legal system which deter threats to life from any quarter and punishes the perpetrators or compensates the victims if deterrence fails.
In the health care context, this also entails having effective administrative and regulatory systems in place, designed to protect patients from professional incompetence resulting in death.
But it is not suggested that English law and the English legal system are defective in this respect.
However, in certain circumstances, the states positive obligation to protect life goes further than that.
It entails an obligation to take positive steps to prevent a real and immediate risk to the life of a particular individual from materialising.
In Savage, the House of Lords held that this obligation arose in the case of a psychiatric patient detained in hospital under the Mental Health Act 1983.
In reaching that conclusion, the House of Lords was not following any exact Strasbourg precedent.
There was then, and still is, no Strasbourg decision cited to us which concerns a psychiatric hospital patient, whether informal or detained, as opposed to a mentally ill prisoner or detainee.
There is a line of Strasbourg cases, beginning with Powell v United Kingdom (2000) 30 EHRR CD 362, 364 holding that: . where a contracting state had made adequate provision for securing high professional standards among health professionals and the protection of the lives of patients, it cannot accept that matters such as error of judgment on the part of a health professional or negligent co ordination among health professionals in the treatment of a particular patient are sufficient of themselves to call a contracting state to account from the standpoint of its positive obligations under article 2 of the Convention to protect life. (emphasis supplied) But it would be wrong to see the House of Lords in Savage as carving out an exception to a general rule that the State is not responsible for the deaths of hospital patients.
The House was trying to deduce the principles applicable to when this so called operational duty might arise from such Strasbourg jurisprudence as there is and to decide, in the light of those principles, whether it did so in that case.
This is no easy task.
People suffering from mental disorders have the same human rights as everyone else and are entitled to enjoy those rights without discrimination on account of their mental status.
So we must start from the proposition that they are entitled to the same freedom and autonomy as everyone else, unless there is some justification within the scheme of the Convention for interfering in this.
The Convention recognises that it may be justifiable to interfere in their private and family lives, and even to deprive them of liberty in certain circumstances.
If they have already been deprived of their liberty for other reasons, the Convention recognises that there may be a special duty to protect them from the risk of self harm: see, in particular, Renolde v France (2009) 48 EHRR 969.
Because of the difficult and delicate issues raised, therefore, I would like to work them through for myself, although I have reached the same conclusions for essentially the same reasons as Lord Dyson has done.
Strasbourg has recognised the possibility of the operational duty arising in several cases since it was first articulated (but not violated) in Osman v United Kingdom (2000) 29 EHRR 245, paras 115 116.
Its tendency is to state the principle in very broad terms, without defining precisely the circumstances in which it will apply.
A recent example is Watts v United Kingdom (2010) 51 EHRR 66: 82.
The court observes at the outset that article 2 imposes both negative and positive obligations on the State.
The negative obligation prohibits the intentional and unlawful taking of life by agents of the state.
The positive obligation . requires that they take appropriate steps to safeguard the lives of those within their jurisdiction (see LCB v United Kingdom (1999) 27 EHRR 212, para 36; and Edwards v United Kingdom (2002) 35 EHRR 19, para 54).
This implies, in appropriate circumstances, a positive obligation on the authorities to take preventive operational measures to protect an individual whose life is at risk.
Although the court originally explained that this positive obligation arose when there was a risk to life from the criminal acts of another individual (see Osman v United Kingdom (2000) 29 EHRR 245 at para 115), it has since made it clear the positive obligations under article 2 are engaged in the context of any activity, whether public or not, in which the right to life may be at stake (see neryildiz v Turkey (2005) 41 EHRR 20, para 71). 83.
For the court to find a violation of the positive obligation to protect life, it must be established that the authorities knew or ought to have known at the time of the existence of a real and immediate risk to the life of an identified individual and that they failed to take measures within the scope of their powers which, judged reasonably, might have been expected to avoid that risk.
The court reiterates that the scope of any positive obligation must be interpreted in a way which does not impose an impossible or disproportionate burden on the authorities, including in respect of the operational choices which must be made in terms of priorities and resources.
Accordingly, not every claimed risk to life can entail for the authorities a Convention requirement to take operational measures to prevent that risk from materialising. (emphasis supplied.)
Such broad statements of principle are hard to interpret and even harder to apply.
It is tempting for a common lawyer to treat them as if they were Lord Atkins statement of the neighbour principle in Donoghue v Stevenson [1932] AC 562, p 580: the duty arises in the circumstances explained in para 82 of Watts and is breached in the circumstances explained in para 83.
But is the court in fact laying down a broad principle that, in the context of any public or private activity in which the right to life may be at stake, the State has a duty, if the authorities know or ought to know of a real and immediate risk to the life of a particular individual, to take such measures as might reasonably be expected of them to avoid that risk?
This is certainly how the decision in Mrs Watts case reads.
Mrs Watts was complaining that the local authoritys decision to close the care home in which she had lived for five years violated this duty because it put her life at risk.
The court accepted that the badly managed transfer of elderly residents could have a negative impact on their life expectancy and thus that article 2 was engaged (para 88).
However, what the authorities had to do about it would depend upon the extent of the risk, on which in that case the evidence was equivocal.
Bearing in mind the choices which had to be made by the authorities in providing residential care for the elderly and the careful steps which had been taken to minimise any risk to this applicants life, the authorities had met their positive obligations in that case (para 92).
On the other hand, is the reference to in appropriate circumstances (in Watts, para 82, among others) designed to set limits to the situations in which the operational duty can even arise? After all, in Mrs Watts case, the activity which gave rise to the risk to life moving the elderly residents out of their home was one in which the authorities were themselves engaged.
In that respect, it is like the case of neryildiz v Turkey, cited by the court for the broader proposition, where the authorities were responsible for the municipal rubbish tip which endangered the lives of local residents.
Another example where the duty not only arose but was violated is Branko Tomai and Others v Croatia, Application No 46598/06, 15 January 2009.
Shortly after his release from prison a man shot dead his former co habitant, their child and himself.
The risk to life was well known to the authorities when they released him from prison, but he had received no adequate psychiatric treatment while inside and there was no power to detain him for treatment after his sentence expired.
They had not, therefore, done all that could reasonably be expected to guard against the risk.
In the context of state activities constituting a risk to life, therefore, the court may have reached the point where the operational duty is engaged, but the circumstances will be carefully scrutinised to see what, reasonably, the authorities could be expected to do about it, bearing in mind the gravity of the risk and the problems they face in responding to it.
We are not here concerned with that broader question, but with the more precise question of when the state has a duty to protect an individual from taking his own life.
It does seem fairly clear that there is no general obligation on the State to prevent a person committing suicide, even if the authorities know or ought to know of a real and immediate risk that she will do so.
I say this because, in the case of Mammadov v Azerbaijan, Application No 4762/05, 17 December 2009, decided only a few months before Watts, the court twice stated, at paras 99 and 100, that the duty to protect a person from self harm arose only in particular circumstances, citing Keenan v United Kingdom (2001) 33 EHRR 913, Renolde vs France (2009) 48 EHRR 969, and Tanribilir vs Turkey, Application No 21422/93, 16 November 2000.
This is understandable.
Autonomous individuals have a right to take their own lives if that is what they truly want.
If a person announces her intention of travelling to Switzerland to be assisted to commit suicide there, this is not, by itself, sufficient to impose an obligation under article 2 to take steps to prevent her.
What those particular circumstances are is harder to determine.
All the Strasbourg cases so far have concerned prisoners (as in the three cases cited above) or conscript soldiers (as in Kilin v Turkey, Application No 40145/98, 7 June 2005; and more plainly Ataman v Turkey, Application No 46252/99, 27 April 2006).
There clearly is a general obligation to take certain routine steps to try to prevent prisoners and other detainees from committing suicide, because the very fact of incarceration heightens the risk of self harm.
The question then arises of whether more individualised steps are required.
This will depend upon whether the authorities should have foreseen a real and immediate risk and what more they could be expected to do.
Thus in Tanrilbir v Turkey, there was no violation when a young man with no apparent mental disorder calmly and silently committed suicide by hanging himself from a rope made from his unstitched shirt sleeves; he was accused of helping the Kurdish separatist organisation, the PKK, and there was a view that he might have decided to hang himself rather than reveal their secrets; but it could not reasonably have been foreseen that he would do so.
In Keenan v United Kingdom, although the prisoner was known to be mentally ill and from time to time to pose a risk to his own life, his condition varied, he was regularly monitored by the doctors, and there was nothing to suggest an immediate risk of suicide on the day in question, so it was not apparent that the authorities had omitted to take any steps which ought reasonably to have been taken to prevent it.
But in Renolde v France, the prisoner was known to be suffering from a psychotic disorder with delusions capable of causing him to commit acts of self harm, he had made previous attempts, but he was not transferred into psychiatric care; he was simply handed his anti psychotic medication twice a week without any monitoring of whether he was taking it; so the authorities had not done all that could reasonably be expected of them.
Throughout these cases, the special vulnerability of people suffering from mental disorders, especially psychosis, is stressed.
It was not, therefore, a large step in Savage for the House of Lords to conclude that a mentally ill person detained in hospital for psychiatric treatment was owed the same duty as a mentally ill prisoner.
But might the obligation stretch further than this? It seems clear from cases such as Mammadov that it can do so.
In Mammadov, the applicants wife poured petrol over herself and set herself alight while the police were trying to evict her and her family from the building in which they had taken up residence without permission.
Although the court found that there was no violation of the substantive obligation, the matter was discussed in terms of whether the police should have realised what she was going to do and stopped her (see para 115).
The court found itself unable to conclude whether they could or should have done more (para 118) and drew a contrast with the case of death in custody, where the burden would be on the State to provide a satisfactory and plausible explanation (para 119).
But there is no suggestion that the operational obligation to prevent suicide is limited to prisoners and detainees.
This too is not surprising.
The court has more than once found a violation of the prohibition of inhuman and degrading treatment in article 3 when the authorities have failed to use their powers to take action to protect children from the risk of serious abuse or ill treatment about which the authorities knew or ought to have known.
Thus in E v United Kingdom (2003) 36 EHRR 519, the court stated the general principles thus: 88.
The obligation on High Contracting Parties under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in the Convention, taken together with article 3, requires States to take measures designed to ensure that individuals within their jurisdiction are not subjected to torture or inhuman or degrading treatment, including such ill treatment administered by private individuals (A v United Kingdom (1999) 27 EHRR 611, para 22).
These measures should provide effective protection, in particular, of children and other vulnerable persons, and include reasonable steps to prevent ill treatment of which the authorities had or ought to have had knowledge (mutates mutandis, Osman v United Kingdom (2000) 29 EHRR 245, para 116).
Thus a failure, over four and a half years, to protect children from serious neglect and abuse of which the local authority were aware disclosed a breach of article 3 of the Convention in the case of Z v United Kingdom (2002) 34 EHRR 3.
In that case, the court was satisfied that the social services in Scotland should have been aware of the risk of sexual abuse to these children from a particular individual yet they failed to take any steps to discover the extent of the problem and protect the children from further abuse.
Thus, proper and effective management of their responsibilities might, judged reasonably, have been expected to avoid, or at least, minimise the risk of the damage suffered (para 100).
Accordingly there was a breach of article 3.
The cross reference to Osman indicates that the operational duties under both article 2 and article 3 are similar if not identical.
The State does have a positive obligation to protect children and vulnerable adults from the real and immediate risk of serious abuse or threats to their lives of which the authorities are or ought to be aware and which it is within their power to prevent.
Whether they are in breach of this obligation will depend upon the nature and degree of the risk and what, in the light of the many relevant considerations, the authorities might reasonably have been expected to do to prevent it.
This is not only a question of not expecting too much of hard pressed authorities with many other demands upon their resources.
It is also a question of proportionality and respecting the rights of others, including the rights of those who require to be protected.
The court acknowledged in Keenan that restraints would inevitably be placed upon the preventive measures available in the context of police activity by the guarantees in article 5 and 8 and also that the prison authorities, similarly must discharge their duties in a manner compatible with the rights and freedoms of the individual concerned (para 91).
In the light of all this, there can be little doubt that the operational duty under article 2 is engaged in the case of a patient such as Miss Rabone.
She was admitted to hospital precisely because of the risk that she would take her own life.
The purpose of the admission was both to prevent that happening and to bring about an improvement in her mental health such that she no longer posed a risk to herself.
The experts were agreed that for patients such as Miss Rabone, one of the most risky periods for further suicide attempts is within a week or so of beginning to recover.
Her mental disorder meant that she might well lack the capacity to make an autonomous decision to take her own life.
Although she was an informal patient, the hospital could at any time have prevented her leaving.
Section 5(4) of the Mental Health Act 1983 empowers a suitably qualified nurse to authorise the detention of an informal patient who is receiving treatment for mental disorder for up to six hours if the nurse believes that the patient is suffering from mental disorder to such a degree that it is necessary for her health or safety for her to be immediately restrained from leaving the hospital and it is not practicable to secure the immediate attendance of a doctor or approved clinician who can act under section 5(2).
Section 5(2) empowers a doctor or approved clinician to authorise detention for up to 72 hours if it appears appropriate that an application be made to detain her under the 1983 Act.
The experts were agreed that it would have been appropriate to detain her under the 1983 Act if she had intended to leave the hospital without medical approval.
The judge in fact found that she would not have done so.
The analogy with a patient detained under the Mental Health Act is much closer than the analogy with a patient admitted for treatment of a physical illness or injury.
A patient receiving treatment in hospital for a physical illness or injury is in a quite different position.
She has made an informed and autonomous choice to be in hospital and to receive the treatment in question.
There is no power to detain her should she decide to leave.
Any risk to her life stems from her physical condition.
Any failure to prevent her death is likely to stem from what in Savage Lord Rodger called casual acts of medical negligence rather than from a deliberate decision.
If there is a deliberate decision to take a risk, she should have given her informed consent to it.
By contrast, if in fact she is known to be at risk of harm from the criminal acts of a third party (a risk which ironically it appears may recently have arisen at this very hospital) the operational duty under article 2 would indeed be engaged in her case too.
However, it does not follow that because the operational duty was engaged in this case, it has necessarily been broken.
There is first the question of whether the risk was sufficiently real and immediate to require consideration of what might be done to prevent it.
I agree, for the reasons given by Lord Dyson, that it was.
Although the doctors gave different assessments of the degree of risk, they were agreed that it was real and ever present, or in the words of Weatherup J approved in In re Officer L, [2007] 1 WLR 2135 objectively verified and present and continuing.
There is next the question whether the hospital should have done more to prevent it.
There is a difficult balance to be struck between the right of the individual patient to freedom and self determination and her right to be prevented from taking her own life.
She wanted to go home and her doctor thought that it would be good for her to begin to take responsibility for herself.
He was obviously wrong about that, but was he so wrong that the hospital is to be held in breach of her human rights for failing to protect her? It may not always be enough simply to say that the experts were agreed that the decision to give her home leave was one which no reasonable psychiatrist would have taken.
But in this case it also appears that there was no proper assessment of the risks before she was given leave and no proper planning for her care during the leave.
This is unlike the situation of Mark Keenan, where the question was what further preventive measures, over and above the normal precautions already being taken within the prison, should have been taken at the time.
There is every indication that had she remained in hospital she would not have succeeded in killing herself.
The question was whether she should have been allowed to go home for a whole weekend.
Having regard to the nature and degree of the risk to her life, and the comparative ease of protecting her from it, I agree that her right to life was violated.
I also agree that her parents have not ceased to be victims of this violation simply because the hospital has paid compensation to her estate.
They are victims in their own right and remain so whether or not she died intestate so that, as it happens, her estate would be shared between them.
I also agree that it would obviously be equitable to extend their time for bringing this action.
The delay was short and readily explicable by the delay in the hospitals own inquiry.
No prejudice has been suffered.
The discretion is open ended but I agree with Lord Dyson that the factors set out in section 33(3) of the Limitation Act 1980 may be relevant.
A claim such as this, as I said in A v Essex County Council [2010] UKSC 33, [2011] 1 AC 280, para 116, is more in the nature of a claim in tort than for judicial review.
It is also important that fundamental human rights be vindicated, and never more so than when the most fundamental right of all, the right to life, is at stake.
That is what Mr and Mrs Rabone have sought to do and that is what they have achieved.
They are entitled to the modest compensation assessed by the Court of Appeal.
For all those reasons, therefore, I agree that this appeal should be allowed.
LORD BROWN
I agree with the leading judgment of Lord Dyson in this appeal and also with the additional observations made by Lady Hale and Lord Mance.
I too, therefore, would allow the appeal and make an award of 5,000 in favour of each appellant.
It may be said that in finding in the present case a violation of the article 2 duty on a state in certain circumstances to take preventative operational measures, this court is going rather further than the evolving jurisprudence of the European Court of Human Rights has yet clearly established to be required.
No Strasbourg decision has yet equated the position of voluntary patients with that of detained patients with regard to this article 2 duty.
Even assuming that to be so, however, I would not regard our decision here as offending against the familiar principle first adumbrated by Lord Bingham in R (Ullah) v Special Adjudicator [2004] 2 AC 323 (at para 20) and frequently since repeated as, for example, in R(Al Skeini) v Secretary of State for Defence [2008] AC 153, by Lady Hale (at para 90) and myself (at para 106).
Nobody has ever suggested that, merely because a particular question which arises under the Convention has not yet been specifically resolved by the Strasbourg jurisprudence, domestic courts cannot determine it in other words that it is necessary to await an authoritative decision of the ECtHR more or less directly in point before finding a Convention violation.
That would be absurd.
Rather what the Ullah principle importantly establishes is that the domestic court should not feel driven on Convention grounds unwillingly to decide a case against a public authority (which could not then seek a corrective judgment in Strasbourg) unless the existing Strasbourg case law clearly compels this.
Indeed, the more reluctant the domestic court may be to recognise in the circumstances a violation of the Convention, the readier it should be to reject the complaint unless there exists (as, of course, there existed in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269 and in R (GC) v Commissioner of Police of the Metropolis [2011] 1 WLR 1230 but did not exist in R v Horncastle [2010] 2 AC 373) an authoritative judgment of the Grand Chamber plainly decisive of the point at issue.
If, however, the domestic court is content (perhaps even ready and willing) to decide a Convention challenge against a public authority and believes such a conclusion to flow naturally from existing Strasbourg case law (albeit that it could be regarded as carrying the case law a step further), then in my judgment it should take that further step.
And that, indeed, is to my mind precisely the position in this very case.
Just as, I may add, it was the position in R(Limbuela) v Secretary of State for the Home Department [2006] 1 AC 396, In re G (Adoption: Unmarried Couple) [2009] AC 173 and EM (Lebanon) v Secretary of State for the Home Department [2009] AC 1198.
The other, less often considered, limb of the Ullah principle is that the court may in certain circumstances if it wishes decide a case against a public authority by developing the common law to provide for rights more generous than those conferred by the Convention; but that it should not grant such rights by purporting to extend the reach of the Convention beyond that recognised by, or reasonably envisaged within, existing Strasbourg jurisprudence.
As Lord Bingham observed in the Ullah case at para 20 and as again later noted by Lady Hale in the Al Skeini case at para 90 it is for Strasbourg alone definitively to interpret the Convention and determine what rights are guaranteed by it and the meaning of the Convention should be uniform throughout the states party to it.
Suppose, for example, that the domestic court was inclined to give a Convention right an altogether greater reach than Strasbourg showed any likelihood of giving it, but that, so interpreted, the right would plainly conflict with domestic legislation.
Is it seriously to be suggested that, pursuant to section 4 of the 1998 Act, the court could and should make a declaration of incompatibility? Or indeed, suppose there to be clear Grand Chamber authority directly in point, is it to be said that the domestic court, because section 2 of the 1998 Act requires it merely to take into account such an authority, should, if it regrets the Strasbourg judgment, itself decide the point differently? I cannot suppose that Parliament so intended or, indeed that such an approach would lead to satisfactory results.
In saying that the courts must take into account any judgment of the ECtHR, Parliament left it open to the courts to decide how far they should be influenced by a Strasbourg judgment in any particular circumstances.
I do not believe the Ullah principle, as I have here sought to illustrate its application, in any way offends section 2.
On the contrary, it operates to my mind to promote each of two frequently expressed aims: engaging in a dialogue with Strasbourg and bringing rights home.
LORD MANCE
I agree with the judgment prepared by Lord Dyson.
One can only have the greatest sympathy for the agony of parents who suffer the immeasurable tragedy of loss of a child by suicide, made even more acute by the knowledge that this was facilitated by avoidable negligence.
However, I have not found the resulting legal issues entirely easy either to identify or to resolve.
As Lord Dyson explains (para 12), the European Court of Human Rights has under article 2 of the Convention developed various obligations on states.
One is the general substantive obligation to establish a framework of laws, precautions and means of enforcement which will, to the greatest extent reasonably practicable, protect life: R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 2, per Lord Bingham.
This includes a general duty to have an appropriate regulatory, investigatory and judicial system: R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1, para 211.
Another is a specific operational duty to take appropriate steps, by way of preventative operational measures in defined circumstances to safeguard lives within the states jurisdiction.
This latter duty carries with it a specific Convention duty to provide for or ensure an effective public investigation by an independent official body of deaths or near deaths involved in breach of the specific operational duty.
An extending series of cases exemplifies the specific operational duty.
It starts with Osman v United Kingdom (2000) 29 EHRR 245 and continues with cases which Lord Dyson discusses at paras 15 to 18 above, and which I considered in R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1, para 210.
Although the European Court of Justice described the incidence of this duty as well defined in Osman, the subsequent case law suggests that this was over optimistic.
Lady Hale has in paras 96 to 104 cogently identified the uncertainty which exists about both the extent of the duty and its existence in the particular context of suicide.
But it is at least clear in that context that various factors, such as control, assumption of responsibility and the nature (as well as the reality or immediacy) of the risk, may lead to the duty arising.
Taking those factors into account in the present case, I agree with Lord Dyson that, for reasons he gives in para 34, the operational duty existed in relation to Melanie.
It was a duty to protect her from any real or immediate risk that she would commit suicide, of which state authorities knew or ought to have known.
In that context (although the contrary was submitted to us) simple negligence in failing to identify or to guard appropriately against such a risk appears sufficient to establish breach of the duty.
A line has been sought to be drawn between this series of cases and cases of casual acts of negligence by medical authorities in relation to persons submitting themselves voluntarily to medical care.
Such persons are entitled to the benefit of the general substantive duty referred to in paragraph 113 above, but the state does not answer directly for ordinary acts of negligence by public health authorities, however clear it was that the particular medical emergency, procedure or treatment in the context of which the negligence occurred involved a real or immediate risk to the patients life.
It follows that, in the event of a breach of the operational duty, the range of persons entitled as victims to bring claims against the state, and the nature and scale of compensation or just satisfaction which they may receive, will depend upon legal principles established by the European Court of Human Rights.
In contrast, in the event of ordinary negligence by a public health authority, the range of victim and the nature and scale of compensation are defined by the domestic law of tort.
In this way, the European Court of Human Rights has, under the operational duty, began to develop its own Convention rules of, in effect, tortious responsibility, when in other areas it is left to national systems (as part of their general systematic duty to establish a framework of laws, precautions and means of enforcement which will, to the greatest extent reasonably practicable, protect life) to develop an appropriate law of tort in the light of particular legal traditions and needs.
The court might have left it to national systems in all areas to address any real or immediate risk to life which is or ought to be within their knowledge.
It could have left it to national systems, in the event of any failure by state authorities to address such a risk, to recognise a range of victims and to provide compensation consistent with their ordinary law of tort.
The court could still have reviewed the appropriateness of the protection and of the recourse available under national tort law.
But that is not how the Convention has been interpreted.
Hence, the difficult line to be drawn between direct Convention rights and national tort law in cases such as the present.
In the event of a breach of the operational duty, we have to apply Convention jurisprudence on the question who counts as a victim.
This requires us to address some particularly difficult Convention jurisprudence on the impact of settlement of a domestic claim on victim status.
It requires us also to address numerous Strasbourg cases giving only limited guidance on the factors governing and the range of compensation appropriate under Convention.
Lord Dyson has dealt with these issues in his paragraphs 49 to 72 and 80 to 88.
In the last analysis, what he has done in each context is to identify and apply underlying principles which best make sense of the rights which have become part of domestic law under the Human Rights Act 1998.
That is in my view an appropriate course.
We are required to take account of the case law of the European Court of Human Rights no less but no more.
That requirement makes it inescapable that we examine the courts case law.
In doing so, common law habits are difficult to shake off.
But it is perhaps worth remembering expressly that individual section decisions of the court are not, and may not respond well to the same close linguistic analysis that a common lawyer would give to, binding precedents.
The apparently irreconcilable section decisions on the issue of loss of victim status, put before us in this case, make clear that any attempt at such an analysis can be a somewhat fruitless task.
In the result, Lord Dysons examination of the Strasbourg case law persuades me that the only coherent principle regarding loss of victim status is that found in R.R v Poland (Application No 27617/04).
That means that there must be both a recognition in substance of a failure to comply with the operational duty and adequate redress for all the heads of claim recognised under the Convention by the European Court of Human Rights.
I agree that Mr and Mrs Rabone did not in this case lose their victim status by Mr Rabones acceptance of a settlement figure which was on behalf of Melanies estate alone, and which did not cover their bereavement.
I agree that the time limit for proceedings should be extended.
Finally, I agree with the Court of Appeal that the judge undervalued the claims when he said that any award of compensation should have been in the sum of 1,500 each claimant, and the sum of 5,000 each claimant would be appropriate.
I would accordingly allow the appeal and award Mr and Mrs Rabone 5,000 each.
| UK-Abs | Melanie Rabone (Melanie) had a history of depression.
On 4 March 2005, she tried to commit suicide and was admitted to Stepping Hill Hospital (the hospital) and she was diagnosed by Dr Meagher, a consultant psychiatrist, as suffering from a severe episode of a recurrent depressive disorder.
By 18 March 2005, she had made a sufficient recovery to be discharged and she went on holiday for a week with her family: [2].
On 31 March, she cut both of her wrists with broken glass.
Dr Meagher advised that she should be readmitted to the hospital, but no beds were available so on 6 April she was seen as an outpatient by Dr Cook, a senior house officer.
On 11 April, Melanie tied a lamp flex around her neck.
Melanie agreed to an informal admission to the hospital.
Dr Cook noted that, if she attempted or demanded to leave, she should be assessed for detention under the Mental Health Act 1983.
She was prescribed a course of drugs and kept under 15 minute observation.
A full mental state examination was carried out on admission by a ward nurse, who assessed Melanie as a moderate to high suicide risk.
On various occasions after 13 April, Mr Rabone, Melanies father, expressed his concerns that she was not improving and that she should not be allowed home too soon: [3] [4].
On 19 April, Dr Meagher returned from leave.
He was told that Melanie was requesting home leave.
On his late afternoon ward round, he met Melanie and Mrs Rabone, Melanies mother.
He agreed to allow Melanie to have home leave for two days and nights.
Mrs Rabone expressed concern about Melanie coming home for the weekend, but Melanie was keen to do so.
On 20 April 2005, Melanie, aged 24, hanged herself from a tree: [1].
On 11 August 2006, Mr Rabone issued proceedings claiming damages in negligence on behalf of Melanies estate and under Article 2 (the right to life) of the European Convention on Human Rights (the Convention) on behalf of himself and Mrs Rabone: [9].
The estates claim was settled in May 2008 for 7,500 plus costs: [11].
In relation to the Article 2 claims, six issues arise on this appeal: (i) whether the operational obligation under Article 2 can in principle be owed to a hospital patient who is mentally ill but not detained; (ii) if so, whether the Respondent Trust breached that duty; (iii) if so, whether Mr and Mrs Rabone were victims within the meaning of the Convention; (iv) if so, whether they lost their victim status by reason of the settlement; (v) whether their claims were time barred; and, if not (vi) whether the Court of Appeal erred in holding that they would have awarded 5,000 each to Mr and Mrs Rabone if their claims had been established: [14].
The Supreme Court unanimously allows the appeal: (i) the operational obligation under Article 2 of the Convention is owed to a voluntary mentally ill hospital patient such as Melanie; (ii) the obligation was breached in this case; (iii) Mr and Mrs Rabone were victims for the purposes of Art 34 of the Convention; (iv) they had not lost this status by virtue of the settlement of the estates claim; (v)
claims were not time barred; and (vi) the Court of Appeal was not wrong to interfere with the judges assessment of damages in the sum of 2,500 to Mr and Mrs Rabone.
Lord Dyson gives the leading judgment, with which Lord Walker, Lady Hale, Lord Brown and Lord Mance agree.
Lady Hale, Lord Brown and Lord Mance each add further comments of their own.
This appeal concerns the positive duty imposed by Article 2 of the Convention on states to take preventative operational measures to safeguard an individuals life in certain circumstances: [12].
The central question in relation to the first issue is whether the admitted negligence of the Respondent in its treatment of Melanie is to be assimilated to the line of case law pertaining to negligent hospital treatment (in which case there is no duty under Article 2), or whether the fact that Melanie was a psychiatric patient (though not detained) means that this case should be assimilated to the class of cases where an operational duty arises: [20].
No European Court of Human Rights (ECtHR) decision was cited to the Court which clearly articulates the criteria by which such a duty exists in particular circumstances, but there are certain indicia which point the way: [22].
While there are differences between detained and voluntary psychiatric patients, these should not be exaggerated: [27].
Melanie was admitted to hospital because she was a real suicide risk.
By reason of her mental state, she was extremely vulnerable.
The Trust assumed responsibility for her; she was under its control.
The difference between Melanies position and that of a hypothetical detained psychiatric patient would have been one of form not substance: [34].
The Trust owed Melanie the operational duty to take reasonable steps to protect her from the real and immediate risk of suicide.
The risk of Melanies suicide was real; it was real enough for the expert psychiatrists to give evidence that all ordinarily competent and responsible psychiatrists would have regarded Melanie as being in need of protection against the risk of suicide: [38].
The risk existed when Melanie left hospital and continued during the two day period of home leave.
It was therefore also an immediate risk: [40] [41].
As the decision to allow home leave was one that no reasonable psychiatric practitioner would have made, the Trust failed to do all that could reasonably have been expected to prevent the real and immediate risk of Melanies suicide and it breached its operational duty: [43].
The ECtHR has repeatedly stated that family members of the deceased can bring claims in their own right under Article 2 of the Convention: [44] [46].
A person ceases to be a victim where the domestic authority has provided adequate redress and has acknowledged, either expressly or in substance, the breach of the Convention: [49].
By settling the estates claim, Mr Rabone did not renounce their article 2 claim for damages for non pecuniary loss for their bereavement.
No such claim was available in English law as damages for bereavement are only available for the loss of a child where the child is under 18: [58].
Nor was the 7,500 received by the estate adequate address: [59] [63].
Mr and Mrs Rabone are therefore victims and have not lost that status.
A claim against a public authority for breach of a Convention right must be brought within a year of the act complained of or such longer period as the court considers equitable.
The extension of time sought was less than four months, there is no suggestion that the evidence has become less cogent as a result of the delay, the Trust has suffered no prejudice by the delay, Mr and Mrs Rabone acted reasonably in not issuing proceedings and they have a good claim for breach of Article 2.
Time should therefore be extended: [77] [79].
This was a bad case of breach of the Article 2 operational duty which merited an award well above the lower end of the range of awards.
The Trusts challenge to the Court of Appeals assessment of 5,000 each therefore fails: [88].
|
FA is an Iraqi national who was born on 21 October 1991.
He arrived in the United Kingdom on 21 August 2007 when he was 15 years old.
He was not accompanied.
He applied for asylum.
On 9 October 2007 the Secretary of State refused the application.
The evidence that FA had supplied in support of his claim was deemed not to be credible.
Having refused FA asylum, the Secretary of State then considered whether he qualified for humanitarian protection and/or discretionary leave to remain in the United Kingdom.
Humanitarian protection in this context is the domestic means of providing the subsidiary protection which Council Directive 2004/83/EC of 29 April 2004 (the Qualification Directive) requires to be given to certain third country nationals or stateless persons.
It was decided that FA did not qualify for humanitarian protection.
He was granted discretionary leave to remain, however, limited in time until he was seventeen years and six months old.
As he was entitled to under section 83(2) of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act), FA appealed to the Asylum and Immigration Tribunal (AIT) against the refusal of his claim for asylum.
Included in the grounds of appeal, however, were claims that FAs rights under articles 2, 3 and 5 of the European Convention on Human Rights and Fundamental Freedoms would be contravened if he was removed from the United Kingdom to Iraq.
It was also averred that he might suffer serious harm as defined in the Qualification Directive.
FAs appeal was dismissed by Immigration Judge (IJ) Jhirad.
The dismissal was said to be on asylum grounds and humanitarian protection grounds.
FA applied to AIT for a reconsideration of his appeal.
Senior Immigration Judge (SIJ) Mather ordered that there should not be reconsideration of his appeal on asylum grounds but that the issue of whether there would be a serious and individual threat to his life by reason of indiscriminate violence during internal armed conflict should be reconsidered.
SIJ Mather felt that IJ Jhirad may not have considered whether there was a risk of serious harm under the Qualification Directive and para 339 of the Immigration Rules which incorporates into domestic law the subsidiary protection provisions of the Qualification Directive.
When the reconsideration application came on for hearing, AIT (IJs Lobo and Cohen) held that the original appeal before IJ Jhirad should have been confined to the refusal of the asylum claim.
In their view, no appeal was available to FA in relation to human rights claims or humanitarian protection grounds under section 83 of the 2002 Act.
That section provided for an appeal against the refusal of the application for asylum only.
On that account, AIT substituted IJ Jhirads decision with a dismissal of the original appeal on asylum grounds only.
The focus of FAs appeal against the decision of AIT to the Court of Appeal was initially on the construction of sections 82 to 84 of the 2002 Act and the question whether the decision of AIT deprived him of an effective judicial remedy against an adverse act of the administration, contrary to general principles of European Union law.
Shortly before the hearing of the appeal, a supplementary written submission was presented which developed the argument that the principle of equivalence (a general principle of EU law) required that claims based on EU law must not be subject to rules which are less favourable than those based on claims which have national law as their source.
It is this argument that principally preoccupied the Court of Appeal and it held centre stage in the appeal before this court.
Section 82 lists a number of immigration decisions from which, by virtue of section 82 (1), an appeal will lie.
Among these are a refusal to vary a persons leave to enter or remain (section 82 (2) (d)) and a decision that a person be removed from the United Kingdom pursuant to various directions (section 82 (2) (g)).
FA could not have recourse to these because there had not been a relevant refusal to vary the leave to remain that he had been given and there had not been, at the time that the matter came before AIT (or for that matter the Court of Appeal), a decision to remove him.
None of the other decisions listed in section 82 (2) was relevant to his situation. (As it happens on 11 January 2011, the Secretary of State rejected FA's application for an extension of his discretionary leave so that he now has a right of appeal under section 82(1) of the 2002 Act.)
Section 83 of the Act gives a specific right of appeal against a refusal of asylum to a person who, like FA, has been granted leave to enter or remain for a period exceeding one year.
It was this right of appeal that FA had exercised in appealing to AIT.
Before the Court of Appeal Mr Raza Husain QC, for FA, had argued that, by resort to normal canons of construction, section 83 could and should be interpreted as including a right of appeal against a humanitarian protection decision, particularly in light of the definition of asylum claim in section 113 of the 2002 Act.
That argument was rejected by the Court of Appeal and it has not been renewed before this court.
The Court of Appeal held that, although a section 83 appeal was a status appeal (i.e. one that depended on the status of the person making the appeal as opposed to the species of decision appealed against) it was nevertheless restricted to a particular class of persons, namely those who have been given leave to remain for at least twelve months.
Moreover, by virtue of section 84 (3) of the 2002 Act, the only grounds on which the appeal could be taken were that removal of the person appealing would breach the United Kingdoms obligation under the Refugee Convention.
These considerations meant that section 83 could not be construed on any conventional basis of interpretation as extending to an appeal against a humanitarian protection decision.
Mr Husains alternative submission was accepted, however.
In broad terms it was to the effect that the principle of equivalence required that a right of appeal against the humanitarian protection decision be recognised since the lack of an appeal would mean that this claim, based as it was on EU law, was being subjected to rules which were less favourable than those which applied to the asylum claim, such a claim being based on national law.
The Court of Appeal held that the definition section (113 (1) of the 2002 Act,) which provides that asylum claim means a claim made by a person that to remove him from or require him to leave the United Kingdom would breach the United Kingdom's obligations under the Refugee Convention would have to have the words and/or the Qualification Directive 2004/83/EC added to it.
A similar addition to section 84 (3) was required so as to enlarge the grounds on which the appeal might be brought.
The Secretary of State appeals against this decision on the ground that there is no purely domestic measure against which a comparison of the rules applicable to claims for humanitarian protection can be made.
It is argued that such claims have far closer similarities to those that are made under the Human Rights Act 1998.
The Secretary of State further contends that the mooted comparators (the asylum claim and the humanitarian protection claims) both have their origin in Chapter VII of the Qualification Directive.
Both therefore are rooted in EU law.
They do not spring from different sources and since that is the essential requirement for the activation of the equivalence principle, it cannot be prayed in aid in this instance.
The procedural autonomy of member states
In the absence of EU law stipulating a particular form of remedy to ensure protection of EU rights, it is for member states to decide which courts or tribunals will have jurisdiction to give effect to those rights and to prescribe the procedural conditions necessary for their enforcement article 19(1) of the Treaty on (TEU), Case 33/76 Rewe Zentralfinanz eG v European Union Landwirtschaftskammer fr das Saarland (Rewe I) [1976] ECR 1989, Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043 and Preston v Wolverhampton Healthcare NHS Trust (No 2) [2001] UKHL 5, [2001] 2 AC 455.
This is known as the procedural autonomy of member states.
Procedural autonomy is subject to two qualifications.
National rules may not render the exercise of rights conferred by EU law virtually impossible to achieve or excessively difficult to access.
This is known as the principle of effectiveness.
Nor must national rules be less favourable than those governing comparable domestic actions.
This is the principle of equivalence.
The equivalence principle
It is no longer suggested in this appeal that FA does not have effective access to his humanitarian protection or subsidiary rights.
The effectiveness principle is no longer in issue.
The critical question now is whether the equivalence principle requires, as the Court of Appeal decided it did, that a right of appeal must be available against the decision to dismiss FAs application for humanitarian protection.
This, in turn, depends on whether FA can demonstrate that there is a comparable domestic right which is subject to more favourable rules than is his humanitarian protection right.
In the particular circumstances of this case, this means that he must show that his asylum claim is a legitimate comparator with his claim for humanitarian protection.
If he is able to demonstrate this, it is clear that the humanitarian protection claim is subject to less favourable rules than the asylum claim.
The latter brings with it a status appeal.
The humanitarian protection claim does not.
FA must do more than show that there is a difference between the two claims in terms of the availability of a right of appeal, of course.
He must also establish that the proper basis of comparison exists.
It is on this particular point that crucial issue is joined between the parties.
The issue has a number of aspects.
Must the claim to asylum, in order to qualify as an effective comparator, be based exclusively on domestic or national law? Or is it sufficient that it partake partly of a national law and partly of EU law? If it is a measure that is given effect in domestic law in the fulfilment of a member states obligations under a treaty, does this affect its status as a potential comparator? How similar must the rights under domestic and Community law be? If there is a more marked similarity between the Community right and a human rights claim, how does this affect the application of the principle of equivalence? Must the comparator with the Community law claim be a purely domestic measure?
The nature of the required comparison exercise was described in the judgment of the Court of Justice of the European Union in Rewe I in the following passage, [1976] ECR 1989, para 5: Applying the principle of cooperation laid down in Article 5 of the Treaty, it is the national courts which are entrusted with ensuring the legal protection which citizens derive from the direct effect of the provisions of Community law.
Accordingly, in the absence of Community rules on this subject, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature.
This formulation recognises the primacy of the role of the domestic legal system in providing the necessary protection for Community rights, with what has become known as the principle of equivalence being a qualification on that autonomy.
Its purpose is to ensure that there is no dilution of the adequacy of the protection of the relevant rights and in that sense it is complementary to the principle of effectiveness.
The principle of equivalence received somewhat fuller consideration by the Court of Justice in the case of Case C 326/96 Levez v T. H. Jennings (Harlow Pools) Ltd [1998] ECR I 7835.
One of the questions referred to the Court of Justice by the Employment Appeals Tribunal in that case sought guidance on how the expression similar domestic actions should be interpreted in the field of equal pay legislation.
Advocate General Lger described the aim of the principle of equivalence in para 26 of his opinion: The aim of this principle is that domestic law remedies should safeguard Community law without discrimination that is to say, exercise of a Community right before the national courts must not be subject to conditions which are more strict (for example, in terms of limitation periods, conditions for recovering undue payment, rules of evidence) than those governing the exercise of similar rights derived wholly from domestic law.
In the present appeal, the Secretary of State draws particular attention to the phrase similar rights derived wholly from domestic law.
It is suggested that this conveys clearly the notion that the proposed comparable right must originate exclusively from a domestic source.
Similar expressions can be found in earlier jurisprudence of the Court of Justice.
In Joined Cases 205 to 215/82 Deutsche Milchkontor GmbH v Federal Republic of Germany [1983] ECR 2633, para 19 the court said that national legislation must be applied in a manner which is not discriminatory compared to procedures for deciding similar but purely national disputes. (emphasis supplied).
The expression purely internal in relation to the national measure was also used in the later case of Case C 34/02 Pasquini v Istituto Nazionale della Previdenza Sociale, judgment of 19 June 2003.
The respondent to the present appeal has drawn attention, however, to the fact that neither purely domestic nor purely internal are used in the latest decisions of the Court of Justice in cases involving the principle of equivalence.
A large number of cases have been cited by the respondent to support this proposition.
They include Joined Cases C 222/05 to C 225/05 Van der Weerd v Minister van Landbouw, Natuur en Voedselkwaliteit [2007] ECR I 4233; Case C 268/06 Impact v Minister for Agriculture and Food [2009] All ER (EC) 306; Case C 445/06 Danske Slagterier v Bundesrepublik Deutschland, 24 March 2009; Case C 118/08, Transportes Urbanos y Services Generales SAL v Adminisracin del Estado, 26 January 2010; Case C 542/08, Barth v Bundesministerium fr Wissenschaft und Forschung, 15 April 2010; Joined Cases C 145/08 and C 149/08, Club Hotel Loutraki AE v Ethniko Simvoulio Radiotileorasis, 6 May 2010; Case C 246/09 Bulicke v Deutsche Bro Service GmbH, 8 July 2010; and Case C 429/09 Gnter Fu v Stadt Halle, 25 November 2010; Case C 568/08 Combinatie Spijker Infrabouw/De Jonge Konstruktie, v Provincie Drenthe, 9 December 2010.
It is noteworthy (and, in the context of this particular debate, significant) that in none of these decisions of the Court of Justice has the expression purely domestic been expressly disavowed.
Notwithstanding this, the respondent confidently asserts that the Court of Justice has not definitively pronounced on the question whether the national measure that is proffered as a comparator must be purely domestic.
Moreover, it is claimed that it would be unwieldy and impractical to require the national court, as a condition of applying the principle of equivalence, to inquire in every case whether a particular procedure was designed exclusively for the protection of national rights.
It is also argued that an insistence on the compared right being uniquely domestic would give rise to anomalies in that a right based on national law that would qualify as a comparator might lose that status if subsumed under an EU measure.
This issue has not been expressly addressed in any of the decisions of the Court of Justice to which this court has been referred.
One can acknowledge the strength of the arguments on either side.
On the one hand, there is a consistent line of authority (which has not been renounced) to the effect that the domestic measure must be precisely what the term suggests a purely domestic provision.
If comparison with another Community law provision was possible, much of the underlying purpose of the principle, it is argued, would be diverted.
After all, the essential reason for the development of the principle was that a Community law right should not suffer disadvantageous treatment vis vis national rights which lie outside the field of Community law.
On the other hand, the aim of the principle is the elimination of discrimination and it would be, it is suggested, anomalous if comparison with another right was precluded because it could be branded as deriving partly form a Community law source.
Viewed as a complement to the principle of effectiveness, the principle of equivalence should not be thwarted by the imposition of what might arguably be said to be the artificial or technical requirement of a comparison between a Community law right and one which is distinctively and exclusively domestic.
What is required in order that the compared measures may be regarded as sufficiently similar?
On the separate question of what is required in terms of similarity between the Community law right and the domestic law right, at para 43 of its judgment in Levez the Court of Justice said: In order to determine whether the principle of equivalence has been complied with in the present case, the national court which alone has direct knowledge of the procedural rules governing actions in the field of employment law must consider both the purpose and the essential characteristics of allegedly similar domestic actions (see Palmisani, paragraphs 34 to 38) [Palmisani v Istituto Nazionale della Previdenza Sociale (Case C 261/95) [1997] ECR I 4025]
The court went on to point out (in para 44) that it was for the national court to examine the part played by the (avowedly similar) domestic measure in the procedure as a whole, and to take account of any special features of that procedure.
The theme of the need for close similarity between the Community law right and the domestic law right was taken up again in Case C 231/96 Edilizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze [1998] ECR I 4951.
At para 36 of its judgment the Court of Justice said: Observance of the principle of equivalence implies, for its part, that the procedural rule at issue applies without distinction to actions alleging infringements of Community law and to those alleging infringements of national law, with respect to the same kind of charges or dues (see, to that effect, Joined Cases 66/79, 127/79 and 128/79 Amministrazione delle Finanze dello Stato v Salumi [1980] ECR 1237, para 21).
That principle cannot, however, be interpreted as obliging a Member State to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied in breach of Community law. (emphasis supplied)
On the basis of these statements, the Secretary of State argues that simply because there is some similarity between the rights claimed, or because the rights are of the same generic type, it does not follow that the principle of equivalence comes into play.
The juristic structure of the two rights under comparison must be the same.
In advancing this argument the Secretary of State relies on two domestic authorities.
The first of these is Matra Communications SAS v Home Office [1999] 1 WLR 1646 where at 1658H Buxton LJ said: the principle of equivalence really does mean what it says.
The domestic court, in applying the principle, must look not merely for a domestic action that is similar to the claim asserting Community rights, but for one that is in juristic structure very close to the Community claim.
It does that, in the words of the Court of Justice in Levez vs T H. Jennings (Harlow Pools) Ltd. (Case C 326/96 ) [1999] I.C.R. 521, 545, para. 43, by considering the purpose and the essential characteristics, of allegedly similar domestic actions.
The second domestic case on which the Secretary of State relies is Preston v Wolverhampton Healthcare NHS Trust (No 2)[2001] UKHL 5, [2001] 2 AC 455.
In that case the majority expressed doubts about the view favoured by Lord Slynn of Hadley in his speech that a broad view of the exercise of comparing the domestic right with the Community law claim was permissible.
Lord Slynn had accepted that one should be careful not to accept superficial similarity as being sufficient.
He also accepted that it was not enough to say that both sets of claims arose (as they did in that case) in the field of employment law.
Nevertheless, he considered that claims under the Equal Pay Act 1970 (which by virtue of article 119 of the Treaty and Council Directive (75/117/EEC) were Community law claims) bore a sufficient resemblance to claims for breach of contract against an employer so as to permit the possible application of the principle of equivalence.
Lord Clyde, with whom Lord Goff of Chieveley and Lord Nolan agreed, thought that this conclusion was difficult to sustain.
The appellants claim under Community law was concerned not with arrears of pay or other remuneration but with retroactive membership for the applicants of an occupational pension scheme (para 43).
In effect this required something to be added to the contract, rather than being a claim for breach of contract.
Lord Clyde thought that it was extremely difficult to conclude that as between these two actions one would be comparing like with like.
The Secretary of State relies on the Matra and Preston decisions as authority for what is described as a cautious approach to the question of the recognition of one form of action as a true comparator of a Community law claim.
It is argued that where there is a far more readily comparable action to the Community law claim such as a human rights claim, the allegedly domestic law refugee claim had even less to commend it as a proper comparator.
There are, says the Secretary of State, significant structural and substantive reasons why section 83 is not sufficiently close in its juristic structure to serve as an appropriate comparator.
The purpose and the essential characteristics of the alleged domestic action are quite different.
The Preamble to the Qualification Directive ([14]) and the 1951 Refugee Convention make clear that the recognition of refugee status is a declaratory act of a pre existing right and, as a result, there is no discretion on the part of the decision maker in the Member State.
By contrast, subsidiary protection status is a status which has been created by the Qualification Directive and only arises upon a decision to grant such status.
Furthermore, subsidiary protection is only intended to be complementary and additional to the refugee protection enshrined in the Geneva Convention (preamble [24]) and is only available to those who do not qualify as a refugee.
As a result, the Secretary of State argues, the two are mutually exclusive.
The respondent disputes the claim that there is any significant or relevant difference between the claim to refugee status and the claim for subsidiary protection.
It is argued that recognition as a person eligible for subsidiary protection carries with it an entitlement to subsidiary protection status akin to the refugee status that an applicant for asylum acquires.
Moreover, the grant of that status carries with it certain benefits while the human rights claim (which the Secretary of State suggests is a more suitable comparator) does no more than prevent removal.
At a fundamental level, both refugee status and subsidiary protection exist to protect individuals from return to serious harm.
As to the effect of Matra and Preston the respondent counters the Secretary of States claims by reference to more recent authority, particularly Byrne v Motor Insurers Bureau [2009] QB 66 and Revenue and Customs Comrs v Stringer & Ors [2009] ICR 985.
In Byrne, the respondent claims, the Court of Appeal rejected the narrow approach advanced by the defendant and found a sufficient similarity between a claim for compensation against the Motor Insurers Bureau and an action in tort.
Mr Husain relied particularly on an observation by Carnwath LJ in para 27 of his judgment alluding to Buxton LJs statement in Matra that there should be a close relationship between the juristic structures of the Community law right and the domestic measure.
Carnwath LJ said that he did not find it helpful to argue in the present case that the claim against the MIB has a different juristic structure to a claim in tort.
I do not construe this as a rejection of the juristic structure approach to the question, however.
Carnwath LJs comment must be seen in its context.
In Byrne the court was dealing with a claim that the scheme for compensation for victims of uninsured drivers should not be any less favourable than the system whereby victims of drivers who were insured could claim compensation.
It was also, incidentally, confronted by a decision of the Court of Justice to the effect that the protection provided by the national scheme must be equivalent to and as effective as the protection available under the national legal system to victims of insured drivers Evans v Secretary of State for the Environment, Transport and the Regions (Case C 63/01) [2005] All ER (EC) 763; [2004] RTR 534; [2003] ECR I 14447, ECJ.
Against that background a technical argument that the juristic structure of a claim in tort differed from that of a claim whose purpose was to require the MIB to meet its contractual obligations (and that, on that account, the principle of equivalence did not apply) was unlikely to prevail.
It does not necessarily follow that the comparison of the juristic structures of mooted comparators in other, more appropriate, contexts will not be a relevant means of assessing their claimed similarity.
In Revenue and Customs Comrs v Stringer & Ors the comparison was between the statutory right to paid annual leave (based on the EC Working Time Directive 93/104/EC) and a contractual right to holidays with pay.
The House of Lords concluded both that the two claims were sufficiently similar for equivalence purposes, and that the different limitation periods applicable to each amounted to less favourable treatment of the Community law right.
The respondent in this appeal argued that this betokened a broader approach than had hitherto been taken to the question of similarity between rights for the purposes of equivalence.
For reasons that I will shortly state, I question that claim.
The Working Time Directive has as its foundation concern for health and welfare.
The House of Lords did not consider that this feature made it dissimilar to a contractual right to paid leave.
After commenting in not unfavourable terms to Lord Slynns admonition in Preston that one should be careful not to accept superficial similarity as sufficient, Lord Walker of Gestingthorpe, who delivered the principal speech said, at para 62: In these appeals, however, the parallel between the statutory right to paid annual leave and a contractual right to holidays with pay is to my mind much clearer and closer.
It is not less close because of the Working Time Directive's emphasis on health and safety at work.
Similar thinking has for many years informed the approach of responsible employers in framing contractual terms of employment.
Moreover in each case the remedy would be an order for payment of the liquidated sum due.
Lord Walker did not propound a different approach from that of the majority in Preston.
He merely commented that the two rights in the Stringer case had a much more obvious connection than did the rights that were involved in the earlier case.
Indeed, his reference to health and safety considerations informing contractual terms of employment illustrates Lord Walkers acceptance that something more than mere superficial similarity was required.
A similar stance can be detected from the opinion of Lord Neuberger of Abbotsbury.
At para 71 he said that the purpose of a holiday from work is, at least in part, the psychological and social well being of the employee.
But of perhaps greater consequence is the interesting and, in relation to the issues that arise in this case, highly pertinent observation that Lord Neuberger made in para 88 to the effect that the question of similarity, in the context of the principle of equivalence, has to be considered by reference to the context in which the principle is being invoked.
Various formulae have been employed to describe the nature of the similarity that is required.
For instance, whether the purpose and essential characteristics of the two measures are the same Palmisani, paras 34 to 38.
Or whether the role played by the provision in the procedure as a whole, as well as the operation and any special features of that procedure before different national courts, sustain or detract from the claim to equivalence Levez para 44.
Another criterion suggested is that the purpose and cause of action should be similar para 41 of Levez.
The latter part of this formulation prompted the statement by Buxton LJ that the juristic structure of the two measures should be closely related.
It is not clear, however, whether any or all of these criteria are indispensable requirements.
As Lord Clyde observed in Preston the requirement of similarity or comparability is an inexact one (para 41).
It is unlikely that juristic structures of exactly similar type are required if by that term it is implied that the means of securing the right should be the same or directly analogous.
If the essential characteristics of the rights claimed are identical or closely similar, it would be a curious result that equivalence should be denied simply because the legal means of obtaining vindication of the right asserted differed.
On the other hand, if the juristic structures are the same, this might well be a good indicator that the principle of equivalence applies.
On the whole therefore there is much to be said for Lord Neubergers view that the question of the required similarity and the criteria necessary to establish it in an individual case will depend on the context in which the application of the principle of equivalence is canvassed.
It does not appear, however, that this issue has been directly considered by the Court of Justice and on that account alone a reference is required.
The source of procedural rights of the asylum applicant
At para 47 of the Court of Appeals judgment, Pill LJ stated that the rights of a refugee, as now provided in national law, and the rights of a person with subsidiary protection status, as provided by the Directive are in many respects similar.
The Secretary of State contends that this clearly implied that the court had concluded that the source of FAs rights in relation to his asylum application was exclusively national law.
It is submitted that such a conclusion was plainly incorrect.
It is common case between the parties that by virtue of article 4 of the Treaty on the Functioning of the European Union (TFEU) the area of freedom, security and justice in Community law is one of shared competence between the EU and member states.
It is also agreed that EUs competence in this area is defined by article 78 of TFEU.
And both parties have referred to the requirement in article 2 (2) of TFEU that member states shall exercise their competence to the extent that the EU has not exercised its competence or to the extent that the Union has decided to cease exercising its competence.
Mr Eicke for the Secretary of State submits that the EU has exercised its competence under article 78 to define, among other things, the requirements for qualification as a refugee; the grant and content of refugee status; and the procedures, including the appeals procedure in relation to the grant and withdrawal of refugee status.
The last of these found expression in domestic law through sections 82, 83 and 83A of the 2002 Act.
In consequence, it is argued, the purported comparators (sections 82 83A) are not domestic measures at all.
Since, it is said, they are not eligible for that role, the principle of equivalence cannot be invoked.
Indeed, the appellant argues, the substantive content of both rights (i.e. the right to refugee status and the right to humanitarian protection) is derived from the same EU law instrument and, in fact, the same chapter within that EU law instrument: namely Chapter VII of the Qualification Directive.
It is claimed, therefore, that there can be no question of comparison with a domestic law right.
For the respondent Mr Husain emphasises that the United Kingdom is not prevented by the Qualification Directive from adopting and maintaining purely domestic legislation in the field of refugee law.
He points out that the Qualification Directive is a minimum standards instrument.
In stark contrast to Art 1A of the Refugee Convention, which applies the term refugee to any person who comes within the definition set out in Art 1A(1) and 1A(2), the Qualification Directive applies only to third country nationals.
Moreover, domestic legislation even transposing instruments has continued to define a claim to asylum by reference to the Refugee Convention rather than the Qualification Directive.
While these arguments are indisputable at a theoretical level, it is questionable that they have any relevance to the issues joined between the parties.
It is not a matter of dispute that the asylum claim is based on provisions that were enacted on foot of the United Kingdoms obligations under the Qualification Directive.
True it is that they mirror requirements set out in the Refugee Convention and that this may have been the original source of many of the provisions of the Qualification Directive.
But this does not answer the essential question of whether the claim to refugee status can qualify as a valid comparator either because it can be described as having a mixed source i.e. it is based on both EU and domestic law or because the Refugee Convention is the original source of the relevant claim to refugee status and its provisions shaped those contained in the Qualification Directive.
Again, it does not appear that these questions have been addressed directly in the case law of the Court of Justice and for that reason also a reference is required.
Conclusions
For the reasons given in this judgment a number of issues have arisen on this appeal which, in the opinion of this court, require a preliminary ruling by the Court of Justice of the European Union under article 267 of the Treaty on the Functioning of the European Union.
The parties are therefore invited to make submissions in writing within 28 days on the questions to be referred to the Court of Justice.
| UK-Abs | This appeal concerns the relationship between two rights which enable non nationals to remain in the United Kingdom: humanitarian protection, which derives from European law, and asylum, which derives from a combination of domestic law, European law, and international law.
The issue in the appeal is whether, because a right of appeal exists against a refusal of an asylum application, European law requires that a right of appeal also be available against a refusal of an application for humanitarian protection.
FA is an Iraqi national who arrived unaccompanied in the United Kingdom in August 2007 when he was 15 years old.
He made an application for asylum which the Secretary of State refused on the grounds that his claim was not credible.
The Secretary of State also considered whether FA qualified for humanitarian protection and / or discretionary leave to remain in the United Kingdom.
Humanitarian protection is the domestic means of providing the subsidiary protection which Directive 2004/83/EC (the Qualification Directive), a European legislative instrument, requires to be given to certain third country nationals and stateless persons.
The Secretary of State decided that FA did not qualify for humanitarian protection, but granted him discretionary leave to remain until he was 17 and a half years old.
Section 83(2) of the Nationality Immigration and Asylum Act 2002 entitled FA to appeal to the Asylum and Immigration Tribunal against the refusal of his claim to asylum.
FA made such an appeal and also appealed against the refusal of his claim for humanitarian protection.
The Tribunal dismissed both the asylum and humanitarian protection appeals, deciding in respect of the latter that no appeal was available to FA in relation to humanitarian protection.
On appeal to the Court of Appeal, FA relied upon the European law principle of equivalence.
This provides that, although it is for Member States to prescribe the procedural conditions necessary for the protection of European law rights, national rules regarding those procedural conditions must not be less favourable than those governing comparable domestic actions.
FA argued that he must be entitled to a right of appeal against the humanitarian protection decision since the lack of an appeal would mean that this claim, based as it was on European law, was being subjected to rules which were less favourable than those which applied to the asylum claim, such a claim being based on national law.
The Court of Appeal acceded to this argument and allowed FAs appeal.
The Secretary of State appealed to the Supreme Court against that decision.
The Supreme Court unanimously decides that a number of issues arise on the appeal which require a reference to the Court of Justice of the European Union for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union.
Lord Kerr delivers the judgment of the panel.
The critical question on the appeal is whether the principle of equivalence requires that a right of appeal must be available against the decision to dismiss FAs application for humanitarian protection.
This in turn depends on whether there is a comparable domestic right which is subject to more favourable rules than his humanitarian protection right.
It is clear that the humanitarian protection claim is subject to less favourable rules than the asylum claim, given that the latter provides FA with an appeal against the initial refusal.
The issue, however, is whether the asylum claim is a legitimate comparator.
This issue has a number of aspects, in particular: (i) whether the comparator with the European law claim must be a purely domestic measure; (ii) what is required in order that the compared measures may be regarded as sufficiently similar; and (iii) the source of the procedural rights of the asylum applicant.
As to (i), on the one hand there is a consistent line of authority from the European Court of Justice to the effect that the domestic measure must be a purely domestic provision.
If comparison with another European law provision was possible, much of the underlying purpose of the equivalence principle would be subverted, given that the essential reason for the development of the principle was that a European law right should not suffer disadvantageous treatment relative to national law rights.
On the other hand, however, it might be inconsistent with the aim of eliminating discrimination and overly technical to preclude comparison with another right on the basis that the right could be branded as deriving partly from a European law source. [24] [25] As to (ii), various formulae have been employed in case law to describe the nature of the similarity that is required, including whether the purpose, essential characteristics and / or juristic structures of the two measures are the same.
There is much to be said for the view that the question of the required similarity and the criteria necessary to establish it in an individual case will depend on the context in which the application of the principle of equivalence is canvassed. [40] [42] As to (iii), the asylum claim is based on provisions that were enacted in pursuance of the United Kingdoms obligations under the Qualification Directive.
Yet they mirror requirements set out in the Refugee Convention, an instrument of international and not European law, and this may have been the original source of many of the provisions of the Qualification Directive.
Whatever the answer to (iii), however, it does not provide an answer to (i) and (ii).
Those essential questions have not been directly addressed by the European Court of Justice and for that reason a reference to the Court for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union is required. [47] The Supreme Court decides to make such a reference and invites the parties to make submissions on the precise questions to be referred. [48]
|
Although the British Broadcasting Corporation (the BBC) is listed as a public authority in the Freedom of Information Act 2000, the Act, as I will call it, applies to the BBC only to a limited extent.
The words of limitation are found in Part VI of Schedule 1 to the Act: they provide that the Act applies only in respect of information held for purposes other than those of journalism, art or literature.
I will describe these words of limitation as the designation.
This appeal requires the court to consider the meaning of the designation.
The focus of the debate is on the word journalism rather than on the words art or literature.
How widely or narrowly should the phrase purposes other than those of journalism be construed?
The answer of course lies in the narrowness or width of the concept of the purposes ... of journalism in the context of the Act.
But the appeal also presents a more particular conundrum.
It proceeds, albeit not on foundations as solid as one might wish, upon the premise that the information in issue was held by the BBC partly for purposes of journalism and partly for purposes other than those of journalism (or, for that matter, of art or literature).
In a situation in which information is held for such dual and opposite purposes, does the information fall within the designation and thus within the scope of the Act?
The primary contention made on behalf of the BBC is that, where it is held by the BBC even only partly for purposes of journalism, information is beyond the scope of the Act; and thus that, provided that the purposes of journalism are significant (i.e. more than minimal), they leave the information beyond the scope of the Act even though it is also held perhaps even predominantly held for purposes other than those of journalism.
I will describe this as the BBCs polarised construction; and it was approved by the Court of Appeal (Lord Neuberger MR, Moses and Munby LJJ) on 23 June 2010, [2010] EWCA Civ 715, [2010] 1 WLR 2278, when making the order against which this appeal is brought.
The Court of Appeal, however, approved the construction only on the basis that the phrase purposes ... of journalism should be construed in a relatively narrow...way: see para 55, per Lord Neuberger.
Sadly the appellant, Mr Steven Sugar, is deceased.
His death occurred in January 2011, after he had filed Notice of Appeal to this court; and, by consent, the court appointed Ms Fiona Paveley to represent his estate in the appeal.
The contention made on behalf of Mr Sugar is precisely the opposite of the primary contention made on behalf of the BBC.
It is that, where it is held by the BBC even only partly for purposes other than those of journalism, information is within the scope of the Act; and thus that, provided that the purposes other than those of journalism are significant (i.e. more than minimal), they draw the information within the scope of the Act even though it is also held perhaps even predominantly held for purposes of journalism.
I will describe this as Mr Sugars polarised construction.
But the very expression of these polarities foreshadows a middle way, which represents the secondary contention made on behalf of the BBC.
It is that, in circumstances in which it holds information partly for purposes of journalism and partly for purposes other than those of journalism, the designation should be so construed as to draw the information within the scope of the Act only if the purposes other than those of journalism are the dominant purposes for which it is held.
I will describe this as the dominant purpose construction.
B: THE FACTS
By October 2003 the BBCs coverage of the Israeli-Palestinian conflict had come under close scrutiny from pressure groups both pro-Israeli and pro-Arab.
There were complaints, particularly from pro-Israeli groups, that its coverage was not impartial.
Mr Richard Sambrook, then the BBCs Director of News, decided to commission a senior journalist to analyse the BBCs domestic Middle Eastern coverage, to survey the views and analyse the complaints of the pressure groups and to suggest whether and if so how it might be improved.
Following discussion with Mr Mark Byford, then the Director of the BBCs World Service, Mr Sambrook caused Mr Malcolm Balen to be appointed to conduct the exercise.
Mr Balen had at one time been editor of the BBCs Nine OClock News but, by 2003, he had ceased to be employed by the BBC and was working as Head of News for a commercial television channel.
So Mr Sambrook caused Mr Balen to rejoin the BBC under a one-year contract, which took effect on 1 November 2003.
It was unusual to bring someone into the BBC from outside to make a report for internal use.
The contract described Mr Balen as a Middle Eastern Consultant in News but he and Mr Sambrook regarded his position more as that of a senior editorial adviser.
The contract did not specify his duties; but what was clear was that he was to have no line-management responsibilities.
For the first three months Mr Balen discussed the BBCs Middle Eastern coverage with journalists and editors, considered some of the complaints about it and gave regular oral reports to Mr Sambrook.
Then in about February 2004, in response to a request by Mr Sambrook, he began to compose a full, written, report.
It was to be a broad survey both of the quality (including the impartiality) of the BBCs coverage of Middle Eastern affairs in recent years and of the validity or otherwise of the complaints about it, taken as a whole; and it was to include practical suggestions, perhaps only tentative, for improvement of the quality of its coverage including of its impartiality.
In July 2004 Mr Balen sent the final version of the report to Mr Sambrook and Mr Byford.
The Balen report, as I will describe it, was an internal briefing document for the use of the BBCs top management and reflected only Mr Balens personal views.
Meanwhile, in the wake of the publication in January 2004 of Lord Huttons Report of the Inquiry into the Circumstances Surrounding the Death of Dr David Kelly CMG HC 247, there had been several changes in the top management of the BBC.
Mr Byford had become Deputy Director-General.
In August 2004 Mr Sambrook became Director of the Global News division and Ms Helen Boaden took his place as Director of News.
Mr Mark Thompson, the new Director-General, set up three new boards, including a Journalism Board (the Board), of which Mr Byford was the chair and Mr Sambrook, Ms Boaden and other senior managers were members.
The Board was to be responsible for setting the strategy which would direct, and for defining the values which would inform, journalism across all areas of the BBCs output.
At its meeting on 9 November 2004 the Board considered the Balen report.
It considered it as part of its review of strategy in relation to its coverage of conflict in the Middle East.
In response to the report the Board commissioned a paper, to be entitled Taking Forward BBC Coverage of the Middle East, which was intended to ensure that the BBC both met the highest standards of impartiality and honesty in its journalism and implemented recommendations in relation to training, editorial control and the handling of complaints, and which could be placed before even more senior bodies at the BBC.
The Taking Forward paper, which in effect took forward the Balen report, was first presented to the Board in February 2005.
Perhaps in part as a result of the consideration afforded to it in the Taking Forward paper, the Balen report had a number of practical consequences.
The most obvious to the ordinary viewer of BBC television was the establishment in 2005 of the post of Middle East Editor, to which Mr Jeremy Bowen was soon appointed.
There were also internal changes in the BBC in relation to its analysis of capability, its compilation of a Key Facts Guide, its audit of the use on air of Middle Eastern experts and its development of training.
In 2005 the Board of Governors of the BBC appointed Sir Quentin Thomas to chair a panel which was charged with undertaking an external, independent, review of the impartiality of the BBCs reporting of the Israeli- Palestinian conflict.
In his report, published in May 2006, Sir Quentin recorded that his panel had been supplied with the Balen report albeit on a confidential basis in that it had been only an unpublished report prepared internally for BBC management; that the report had been helpful; and that a number of its recommendations had already been implemented.
C: THE FORENSIC HISTORY
Mr Sugar was a respected solicitor and a supporter of the State of Israel; he considered that the BBCs coverage of Israels conflict with the Palestinians had been seriously biased against it.
By letter dated 8 January 2005 he made a request to the BBC for disclosure to him of a copy of the Balen report pursuant to the Act.
The BBC refused the request on the basis that it held the report or, more strictly, the information in the report for purposes of journalism and thus that it lay beyond the scope of the Act.
In March 2005 Mr Sugar applied to the Information Commissioner (the Commissioner) pursuant to section 50 (1) of the Act for a decision whether the BBC had determined his request in accordance with the requirements of the Act.
By letters to Mr Sugar dated 24 October and 2 December 2005 the Commissioner, who had privately read the Balen report, communicated his decision, which was to the effect that the BBC had lawfully rejected his request.
The Commissioner observed that: (a) the purpose of the designation was to protect journalistic, artistic and literary integrity by carving out a creative and journalistic space for programme-makers to produce programmes free from the interference and scrutiny of the public; information held by the BBC fell beyond the scope of the Act only if there was a direct and creative journalistic relationship between it and programme content; there was such a relationship between the Balen report and programme content; in this regard it was relevant that those mainly likely to be affected by the report were journalists and editors rather than managers and business advisers; (c) (d) (b) (e) if, which he did not accept, the report was held for any non-journalistic purpose, it continued to lie beyond the scope of the Act because the journalistic purpose was manifestly dominant; and (f) had it been impossible to discern which of two such opposite purposes was dominant, he would have applied a rebuttable presumption that the information lay within the scope of the Act.
Had the Commissioners observations stopped at that point, the issue about the disclosure of the Balen report to Mr Sugar would have been resolved long ago.
But, by a postscript, the Commissioner proceeded to set a hare running and, although he soon repented of what he had done and sought to recapture it, the hare remained at large and was chased all the way up to the Appellate Committee of the House of Lords.
It was to prove a most unfortunate distraction.
With respect to certain eminent judges with whom it was later to find favour, the postscript which the Commissioner appended to his decision was entirely misconceived.
It was that, because the Balen report was outside the designation and thus beyond the scope of the Act, the BBC was not a public authority for the purposes of the Act in relation to Mr Sugars request.
The consequence was, according to the Commissioner, that Mr Sugar had no right of appeal against his decision to the Information Tribunal (the Tribunal) under section 57 of the Act.
This consequence was said to flow from the conjunction of section 57 itself, which provided that an appeal to the Tribunal lay from the Commissioners decision notice, and of section 50, which provided that a decision notice related to a decision whether a request for information had been lawfully determined by a public authority.
At first, therefore, the Commissioner took the view that his letters to Mr Sugar could not represent a decision notice; and he advised Mr Sugar that, if he wished to challenge his decision, he should seek a judicial review of it rather than appeal to the Tribunal.
On 30 December 2005, undeterred, Mr Sugar appealed to the Tribunal under section 57 of the Act.
The Commissioner and the BBC entered a preliminary objection that the Tribunal lacked jurisdiction for the reasons set out above.
By the time when, in June 2006, the Tribunal heard argument about the preliminary objection, the Commissioner had changed his mind and was supporting Mr Sugars rebuttal of it.
But the BBC energetically pursued the objection.
The Tribunal overruled it (the jurisdiction decision) and proceeded to consider the merits of Mr Sugars appeal.
Its decision dated 29 August 2006, by which it upheld Mr Sugars contention that the Balen report was within the scope of the Act (the journalism decision), will require study.
But it is convenient first to chart the development of the argument on jurisdiction to its quietus.
The BBC appealed on points of law to the High Court under section 59 of the Act against the Tribunals jurisdiction decision as well as against its journalism decision.
Mr Sugar and the Commissioner opposed the appeal.
The BBC also issued an application for judicial review of the Tribunals jurisdiction decision, to which, in that no order was to be made on it, there is no need again to refer.
In order to protect himself against the risk that the High Court would set aside the Tribunals jurisdiction decision, Mr Sugar issued an application for judicial review of the Commissioners decision.
These proceedings came before Davis J. By a judgment delivered on 27 April 2007, [2007] EWHC 905 (Admin), [2007] 1 WLR 2583, he: (a) allowed the BBCs appeal against the Tribunals jurisdiction decision; (b) accordingly set aside its journalism decision; and (c) dismissed Mr Sugars protective application for judicial review on the ground that the Commissioners decision had been rational and therefore lawful.
Supported by the Commissioner, Mr Sugar appealed to the Court of Appeal against the decision of Davis J to allow the BBCs appeal against the Tribunals jurisdiction decision.
At this stage he ceased to appear in person and began to enjoy the benefit of representation by Mr Tim Eicke QC pro bono.
By order dated 25 January 2008, [2008] EWCA Civ 191, [2008] 1 WLR 2289, the Court of Appeal (Buxton and Lloyd LJJ and Sir Paul Kennedy) dismissed the appeal.
Mr Sugar appealed to the House of Lords against the dismissal of his appeal by the Court of Appeal.
By order dated 11 February 2009, [2009] UKHL 9, [2009] 1 WLR 430, the House (Lord Phillips, Lord Hope and Lord Neuberger, Lord Hoffmann and Baroness Hale dissenting) allowed the appeal.
Thus, at last, the effect of the BBCs inclusion in the Act became clear.
Even in relation to a request to the BBC for information which lay outside the designation and thus beyond the scope of the Act, the BBC remained a public authority for the purposes of the Act: see, in particular, paras 26 to 36 per Lord Phillips and para 54 per Lord Hope.
A decision by the Commissioner that a request was of such a character should therefore be, and in this case had been, set in a decision notice under section 50 of the Act and the proper avenue of challenge to it was by appeal to the Tribunal under section 57: see paras 37 and 38, per Lord Phillips.
The House therefore remitted to the High Court the BBCs appeal against the Tribunals journalism decision, which Davis J had found it unnecessary to consider.
For, from his further conclusion that the Commissioners decision had been lawful, it in no way followed that the BBCs appeal against the Tribunals journalism decision was entitled to succeed: see para 38, per Lord Phillips.
In reaching its journalism decision the Tribunal, which had privately read the Balen report, had addressed the application of the designation to a situation in which the requested information was held for dual and opposite purposes.
It had noted the polarised constructions advanced by Mr Sugar and by the BBC to which I have referred but had preferred the BBCs secondary contention, which accorded with the Commissioners approach, that in such a situation the Act required reference to the dominant purpose for which the information was held.
The Tribunal found that the BBC had originally held the Balen report predominantly for purposes of journalism; that, however, once the report had been placed before the Journalism Board on 9 November 2004, the BBC had begun to hold it predominantly for purposes other than those of journalism, namely for purposes of strategic policy and resource allocation; and thus that, at the date of its receipt of Mr Sugars request in January 2005, the information was within the scope of the Act.
The Tribunal did not find and Mr Sugar does not appear to have asked it to find that, at the date of its receipt of his request, the BBC held the report solely for purposes other than those of journalism.
The BBCs remitted appeal against the Tribunals journalism decision came to be determined by Irwin J. By order dated 2 October 2009, [2009] EWHC 2349 (Admin), [2010] 1 WLR 2278, he allowed the appeal.
Although Mr Sugar reserved the right to advance his polarised construction in the event of a further appeal, all three parties i.e. including the Commissioner, who in the further appeals has ceased to play an active part in the proceedings accepted before Irwin J that the Tribunal had been correct to adopt the dominant purpose construction; the issue between them related to its application of that test to the facts.
But at this point the litigation took another unexpected turn.
Concerned that he was being invited to determine the appeal on a false legal basis, the judge invited the parties to address him on the polarised constructions which the Tribunal had rejected.
In the event he adopted the BBCs polarised construction.
My conclusion is said the judge, at para 65, that the words in the Schedule mean the BBC has no obligation to disclose information which they hold to any significant extent for the purposes of journalism, art or literature, whether or not the information is also held for other purposes.
Not even Mr Sugar was disputing that, at the date of its receipt of his request, the BBC was continuing to hold the report to some (other than minimal) extent for purposes of journalism; so it followed that the appeal should be allowed.
The judge added that, had it been appropriate to determine the appeal by reference to the dominant purpose for which, at the date of its receipt of Mr Sugars request (or, rather, which the judge considered would be less arbitrary, in the period during which the request was made), the BBC held the report, he would, again, have allowed the appeal: for he considered that the Tribunal had erred in law, presumably in finding that, once it had been placed before the Journalism Board, the purposes for which the BBC held the report had become predominantly other than those of journalism.
It is against the dismissal by the Court of Appeal of Mr Sugars appeal against the order of Irwin J that the present appeal is brought.
In that court, and in the light of Irwin Js judgment, the BBC reverted to casting its polarised construction as its primary contention; and the dominant purpose construction once more became only its secondary contention.
In delivering the leading judgment, with which both Moses LJ (who delivered a concurring judgment) and Munby LJ agreed, Lord Neuberger rejected the dominant purpose construction and, although he described each of the polarised constructions as arguable, he agreed with Irwin J that that put forward by the BBC was preferable.
Since on any view the purposes for which the BBC held the report at the date of its receipt of Mr Sugars request to some extent included those of journalism, his appeal therefore failed.
But a question arises whether the Court of Appeal approached the case on the basis that the purposes for which the BBC held the report at the relevant date were solely those of journalism.
Observations which tend in that direction are to be found in the judgments both of Lord Neuberger at para 65 and of Moses LJ at para 83.
Nevertheless, had such been its conclusion, it would have been unnecessary for the Court of Appeal to address at length the application of the designation to a situation in which information is held for purposes partly of journalism and partly otherwise.
In considering it necessary to address the same point Irwin J must have held that, as the expert fact-finder, the Tribunal had been entitled at any rate to find that the purposes for which the BBC held the report had been to some extent for purposes other than those of journalism; and the Court of Appeal did not dissent from Irwin Js analysis in any way.
At all events the BBC positively invites this court to proceed on the premise that it held the report for purposes partly of journalism and partly otherwise: it seeks a definitive ruling on the application of the designation to such a situation.
D: THE SCHEME OF THE ACT
The purpose of the Act is stated at its outset to be to make provision for the disclosure of information held by public authorities or by persons providing services for them...
Section 1, described in the side-note as providing a General right of access to information held by public authorities, provides by subsection (1) that, subject to other specified provisions, any person making a request for information to a public authority is entitled (a) to be informed by the authority whether it holds information of the description specified in the request (described as the duty to confirm or deny) and (b), if so, to have the information communicated to him.
Subsection (4) provides that, for the purposes of the section, the information is that held at the time when the request is received.
Section 2 (2) is important for present purposes.
It provides: In respect of any information which is exempt information by virtue of any provision of Part II, section 1 (1) (b) does not apply if or to the extent that (a) the information is exempt information by virtue of a provision conferring absolute exemption, or (b) in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.
As the subsection foreshadows, Part II of the Act provides for the exemption of certain categories of information from disclosure.
Section 2(3) confers absolute exemption upon various of the categories.
The other categories enjoy only qualified exemption: information in such categories is not required to be disclosed only if the test in subsection (2)(b) is satisfied; and the bias of the Act in favour of disclosure is visible in the requirement that the public interest in maintaining the exemption should outweigh the public interest in disclosing the information.
Among the categories upon which the Act confers absolute exemption is information which relates in specified respects to national security (section 23), to court proceedings (section 32) or to personal data of which the applicant is the subject (section 40(1)), or the disclosure of which would constitute an actionable breach of confidence (section 41) or be unlawful in other specified respects (section 44).
Among the categories upon which the Act confers qualified exemption is information the disclosure of which would be likely to prejudice the defence of the British Islands and colonies (section 26) or the UKs international relations (section 27) or its economy (section 29) or law enforcement (section 31) or which relates to the formulation of government policy (section 35).
But, in the context of the present appeal, it is worth noting, in particular, two further categories of information upon which the Act confers qualified exemption.
The first is information the disclosure of which would be likely to prejudice the commercial interests of the public authority (section 43(2)).
The second is information the disclosure of which, in the reasonable opinion of a qualified person (which in the case of the BBC is the corporation itself, acting by its governors) would, or would be likely to, inhibit (i) the free and frank provision of advice, or (ii) the free and frank exchange of views for the purposes of deliberation (section 36(2)(b)).
One might have expected that, in the event that the Balen report were to be held to fall within the scope of the Act, the BBC would wish to seek exemption from its disclosure under section 36(2)(b).
By letter to Mr Sugar dated 10 June 2009, however, the BBC confirmed that, in that event, it would not claim any exemption under the Act.
Perhaps its stance was tactical, designed to sharpen the edge of the current issue.
Section 3 of the Act defines a public authority as any body, person or office-holder listed in Schedule 1 (or designated by future order of the Secretary of State) and any publicly-owned company, as defined.
Schedule 1 contains a long list of bodies, persons and office-holders, some defined generically and others specifically.
The schedule is divided into seven parts, namely I General, II Local Government, III The National Health Service, IV Maintained Schools and Other Educational Institutions, V Police, VI Other Public Bodies and Offices: General and VII Other Public Bodies and Offices: Northern Ireland The BBC (together with the designation) is placed into Part VI.
In para 56 of his judgment on the jurisdiction issue Lord Hope explained that the length of the list in Schedule 1 was testament to Parliaments wish to obviate dispute about the identity of the public authorities who were subject to the Act.
Section 7(1) of the Act provides: Where a public authority is listed in Schedule 1 only in relation to information of a specified description, nothing in Parts 1 to V of this Act applies to any other information held by the authority.
Four public authorities are listed in Schedule 1 in terms of the designation, i.e. in respect of information held for purposes other than those of journalism, art or literature; they are the BBC, the Channel Four Television Corporation, the Gaelic Media Service and Sianel Pedwar Cymru (being the Welsh television channel known as S4C).
Other authorities are listed only in relation to information of other specified descriptions.
For example the House of Commons, the House of Lords and the National Assembly for Wales are listed in respect of information other than of a specified sort which might serve to identify the residential addresses of their members (Part I, paras 2, 3 and 5, as amended by article 2 of the Freedom of Information (Parliament and National Assembly for Wales) Order 2008 (SI 2008/1967)).
The Sub-Treasurer of the Inner Temple and the Under- Treasurer of the Middle Temple are listed in respect of information held in their capacities as a local authority (Part II, para 10).
Those providing medical, dental and ophthalmic services are listed in respect of information relating to their provision of services under the NHS (Part III, paras 43A, 44 and 51).
Six bodies for example the Pharmaceutical Society of Northern Ireland are listed in respect of information held by them otherwise than as a tribunal (Parts VI and VII, as amended by articles 3 and 5 of, and Schedules 2 and 4 to, the Freedom of Information (Additional Public Authorities) Order 2005 (SI 2005/3593)).
And the Bank of England is listed in respect of information held for purposes other than those of its functions with respect to (a) monetary policy, (b) financial operations intended to support financial institutions for the purposes of maintaining stability, and (c) the provision of private banking services and related services.
PURPOSES ... OF JOURNALISM, ART OR LITERATURE E:
Although they also to some extent reflect the terms of section 12(4) of the Human Rights Act 1998 (to which I will refer in para 58), the words of the designation are essentially derived from the Data Protection Act 1998 (the DPA).
The DPA was passed pursuant to Directive 95/46/EC of the European Parliament and of the Council, dated 24 October 1995, on the protection of individuals with regard to the processing of personal data and on the free movement of such data.
Article 1(1) of the Directive declared its object to be the protection of a natural persons fundamental right to privacy with respect to the processing of personal data.
By recital 37, however, the European Parliament and the Council recognised that the processing of personal data for purposes of journalism or for purposes of literary or artistic expression also engaged the right to receive and impart information, as guaranteed in particular in article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 (the ECHR) and should therefore be exempt from the Directives requirements to the extent necessary for the reconciliation of such conflicting rights.
Article 9 of the Directive therefore mandated exemption for the processing of personal data carried out solely for journalistic purposes or the purpose of artistic or literary expression only if they are necessary to reconcile the right to privacy with the rules governing freedom of expression.
The UKs response to article 9 lies in sections 3 and 32 of the DPA.
The former defines the purposes of journalism and artistic and literary purposes as the special purposes.
The latter provides that personal data processed only for the special purposes are exempt from most of the provisions of the Act, in particular the individuals central right of access under section 7 to data of which he is the subject, if the processing is undertaken with a view to the publication of any journalistic, literary or artistic material and if the data controller reasonably believes both that, having regard in particular to the special importance of the public interest in freedom of expression, publication would be in the public interest and that compliance with the relevant provision would be incompatible with the special purposes.
The government had initially entertained doubts about the inclusion of the BBC in the Freedom of Information Bill.
In a published paper setting out background material relevant to the publication on 11 December 1997 of its White Paper entitled Your Right to Know (Cm 3818) about the proposed Bill, the government wrote, at para 23: the BBC, Channel 4 and S4C are public corporations that operate to a defined remit specified in the Royal Charter (BBC) and legislation (Channel 4 and S4C).
All three operate independently of Government editorially and to the greatest extent possible in economic and regulatory terms.
It might be regarded as anomalous for them to be within the scope of the FOI legislation when the private media (Channels 3 and 5, cable and satellite channels, the Internet, the press and freelances of all sorts) would not.
In the event the public service broadcasters were included in the Bill.
But, in the course of the passage of the Bill through Parliament and following representations to the Home Office both by the BBC and by Channel 4, their inclusion was made subject to the designation.
The designation had two, linked, purposes.
Its general purpose, reflective of the genesis of its three specified concepts in the EU Directive dated 24 October 1995 in relation to access to personal data, was to protect the right of the public service broadcasters to freedom of expression, in particular under article 10 of the ECHR.
Its particular purpose, foreshadowed in the background material quoted above, was (as confirmed in a letter dated 13 January 2000 from an officer in the Home Office, which had responsibility for the Bill, to an officer in another department) that the public service broadcasters should not be placed at a disadvantage in relation to their commercial rivals.
Before I turn to purposes, let me reflect on the meaning, in the context of the Act, of the words journalism, art and literature.
I suggest that the key to it lies in the omnibus word output.
Article 5 of the BBCs Royal Charter (Cm 6925), presented to Parliament in October 2006, provides, at para (1), that the BBCs main activities should be the promotion of its six Public Purposes, specified in article 4, through the provision of output which consists of information, education and entertainment supplied by means of television, radio, online and similar services; and the Charter provides, at article 5(2), that the BBC may carry out other activities, subordinate to its main activities, provided that they promote the Public Purposes.
In his letter to Mr Sugar dated 24 October 2005 the Commissioner, echoing the word in the Charter, wrote that he interpreted the three words in the designation broadly so as to include all types of the BBCs output.
In this respect I discern no dissent from his view in any of the three subsequent decisions in these proceedings; and in my opinion he was right.
I would be surprised if any later set of facts was to yield a conclusion that something which the BBC put out, or considered putting out, to the public or to a section of the public did not fall within the rubric either of journalism or of art or of literature.
So, although one might have an interesting debate whether nowadays the word journalism encompasses more than news and current affairs, the debate is likely in this context to be sterile.
For any output which did not obviously qualify as journalism would be likely to qualify either as literature or in particular, in that its meaning has a striking elasticity as article
On any view the subject of this appeal leads us to forsake art and literature and even output itself and to revert to journalism.
In what circumstances will the BBC hold information for the purposes of journalism?
The Tribunal attempted to answer that abstract question; and the substantial criticism of its decision has been directed not at its analysis but at its application of its analysis to the circumstances in which the BBC held the Balen report.
Within the word journalism in the designation (which it described as functional journalism a puzzling qualification in that, without elaboration, it implied the existence of other areas of journalism) the Tribunal identified three types of activity: first, the collecting, writing and verifying of material for publication; second, the editing of the material, including its selection and arrangement, the provision of context for it and the determination of when and how it should be broadcast; and third, the maintenance and enhancement of the standards of the output by reviews of its quality, in terms in particular of accuracy, balance and completeness, and the supervision and training of journalists.
In relation to this third type, the Tribunal added, at para 116: Self-critical review and analysis of output is a necessary part of safeguarding and enhancing quality.
The necessary frankness of such internal analysis would be damaged if it were to be written in an anodyne fashion, as would be likely to be the case if it were potentially disclosable to a rival broadcaster.
The Tribunal contrasted the three suggested types of journalistic activity with the direction of policy, strategy and resources which provides the framework within which a public service broadcaster conducts its operations.
In the Court of Appeal Lord Neuberger said, at para 53, that, at any rate in the present context, he could not improve upon the Tribunals general analysis.
Apart from pointing out that its tripartite classification does not readily encompass the actual exercise of broadcasting or publishing the material, the BBC does not quarrel with the Tribunals analysis of what falls within and without the concept of journalism for the purposes of the Act.
In my view, and subject to that point, this court should endorse the Tribunals analysis but should decline the BBCs invitation to clothe it with greater specificity.
It is important to note, however, that not all financial information will be held by the BBC for purposes other than those of journalism.
If financial information is directly related to the making of a particular programme, or group of programmes, it is likely to be held for purposes of journalism.
On the same day, namely 2 October 2009, as that on which he handed down his judgment in the present proceedings, Irwin J handed down his judgment in BBC v The Information Commissioner [2009] EWHC 2348 (Admin), [2010] EMLR 121.
He held that information about (among other things) costs referable to its broadcast of EastEnders, about its annual budget for Newsnight and about the price paid for its right to cover the winter Olympics in Turin in 2005/06, was held at an operational level in order to assist in the making of editorial and creative choices and so was held partly (and, if relevant, predominantly) for purposes of journalism.
The application of Irelands Freedom of Information Act 1997 to its public service broadcasters is worthy of note.
By regulations made in 2000, SI No 115 of 2000, Radio Telefis ireann and other broadcasters were made subject to the Irish Act in relation only to their functions of management, administration, finance, commerce, communications and entry into contracts of service; but the regulations provide that such functions are to be deemed not to include the gathering and recording of material for journalistic purposes, the consideration of programme content, the editing and storing of such material, the making of editorial decisions about programmes and the process of post-transmission internal review.
There is a close parallel between the effect of the express provisions made in Ireland and the meaning to be attributed to the bare words of the designation in our Act.
There was also an interesting application of the Irish Act in the decision of the Irish High Court in Radio Telefis ireann v The Information Commissioner [2004] IEHC 113.
RTE is under a statutory obligation to ensure that its broadcasts of current affairs are impartial.
To that end it collected data as to the amount of broadcast time which it had afforded to each political party during the general election campaign in 2002.
Caoimh J held that the data related to editorial decisions and to post-transmission internal review and so did not fall to be disclosed under the Irish Act.
The BBC has an obligation to seek to ensure that its broadcasting of news is impartial as well as accurate: see clause 6(1) of the Framework Agreement between the Secretary of State for Culture, Media and Sport and the BBC made on 30 June 2006 (Cm 6872) for the purposes of the BBCs Charter.
Inevitably the Tribunal found that, when it first came into existence, the Balen report into the impartiality or otherwise of the BBCs coverage of the Israeli/Palestinian conflict was held (or, as it preferred to say, was predominantly held) for purposes of journalism.
Its error, as correctly identified by Irwin J and the Court of Appeal, was to conclude that, once the report had been placed before the Journalism Board, it came predominantly to be held for purposes other than those of journalism, namely for those of strategic policy and resource allocation.
Irrespective of the level at which, within the BBC, it was appraised, the purpose for which the report was held remained the same: it was to enable the BBC to monitor its coverage of the conflict with a view to its making any and all such changes as might further secure its impartiality.
At all material times the BBC held the report at least predominantly for purposes of journalism.
But, since the appeal proceeds upon the premise that, at the date of its receipt of Mr Sugars request, the BBC also held the report for purposes other than journalism, I turn finally to address the application of the designation to a situation in which the information is held for such dual and opposite purposes.
Had I considered that the court was required to choose between the two polarised constructions of the designation in its application to a situation of dual and opposite purposes, I would on balance have chosen that advanced on behalf of Mr Sugar.
First, his contention should probably prevail at a purely literal level: if the purposes for which the BBC holds information comprise even only to a minor extent purposes other than those of journalism, then, so I would conclude, the BBC holds it for purposes other than those of journalism...; and in my view there is probably no scope for altering the conclusion by reference to the fact that it also holds the information for purposes of journalism.
But, were one to rearrange the terminology of the designation only marginally, so that it became in respect of information otherwise than held for purposes of journalism..., then the literal construction would probably yield the opposite conclusion.
These semantic reflections with which others might reasonably disagree in any event represent far too slender a thread upon which to hang any overall conclusion.
Second, however, and more importantly, the designation falls to be construed in the context of the Act as a whole, and thus, in particular of Part II.
The beauty (says Mr Eicke) of construing the situation of dual purposes as falling within the scope of the Act is that the focussed exemptions in Part II then become available so as to winnow the information which should not be disclosed from that which should be disclosed; by contrast, were such a situation to be drawn, as if on a blanket, beyond the scope of the Act, the focussed exercise would have no place.
Third, there is the bias of the Act in favour of disclosure and, in the resolution of any issue of construction, it would be permissible, as a last resort, to have regard to it.
The BBC strongly argues that the designation defines the extent to which its information is included within the scope of the Act, as opposed to the extent to which it is excluded from it.
But the distinction, though theoretically valid, is practically elusive: in reality the designation defines an exception, albeit very important, from the subjection of the BBC to the Act and should be construed accordingly.
In the Court of Appeal Lord Neuberger suggested, at para 55, that the question whether information is held for purposes... of journalism should be considered in a relatively narrow way.
With respect, his suggested departure from the natural construction of the word purposes raises in my mind a question-mark against his overall conclusion about the Acts application to a situation of dual and opposite purposes.
No doubt his suggestion flowed from his concern, expressed at para 48, that the effect of his overall conclusion would be that relatively little information held by the BBC fell within the scope of the Act; for a relatively narrow construction of the word purposes would mitigate such an effect.
There is in my respectful view a loose analogy here with the driver who, in proceeding down a straight road, nevertheless steers to the left and then has to rectify his position by steering to the right: he would have done better to keep straight.
So is it necessary to choose between the two polarised constructions?
G: THE DOMINANT PURPOSE
Sometimes Parliament specifically refers to the .... principal purpose (section 678 (2)(a) Companies Act 2006) or to the reason (or, if more than one, the principal reason) (section 103A Employment Rights Act 1996, as inserted by section 5 of the Public Interest Disclosure Act 1998).
Does Parliaments failure to make such a reference in the designation betoken its rejection of an approach that the purposes to which it there refers should be the dominant (or principal) purposes? We may confidently answer that question in the negative.
Everything points to a conclusion that Parliament failed to consider the application of the designation to a situation in which the BBC holds the information for purposes partly of journalism and partly otherwise.
Had it considered such a situation, it would have spelt out in one way or another how the designation should then operate.
Bennion on Statutory Interpretation, 5th ed (2008) states at p 1268: Similarly, an enactment may lay down a qualifying condition in terms of the purpose of some person in doing an act as if it were the only purpose possible, whereas it may in the instant case, be in fact, one of several purposes.
Here the court will construe the enactment as requiring the main or dominant purpose to be the one specified.
It has to be acknowledged that the two authorities cited in support of the statement represent a slender foundation for the bold and unequivocal terms in which it is couched.
The first authority is Chohan v Saggar [1992] BCC 306.
There the High Court held that the power under section 423 of the Insolvency Act 1986 to set aside a transaction entered into by a person at an undervalue for the purpose of putting assets beyond the reach of his creditor was exercisable if such was his dominant, even if not his sole, purpose.
As it happens, the decision was overruled by the Court of Appeal in Commissioners of Inland Revenue v Hashmi [2002] EWCA Civ 981, [2002] BCC 943, on the basis that, in the context of the 1986 Act, it sufficed that the statutory purpose should have been a substantial, even if not the dominant, purpose.
Laws LJ observed, at para 32, that to qualify the word purpose by the word dominant was not required in order to make sense of that Act or to give it pragmatic efficacy.
The second authority is Peach v Commissioner of Police of the Metropolis [1986] QB 1064.
There the Court of Appeal held that statements made to the police about the death of Mr Blair Peach should be disclosed to his mother in her action against the police because, although they were made partly for the purpose of a complaint against the police and so would to that extent, in principle, attract public interest immunity from disclosure, they were made predominantly for the purpose of the investigation by the police of a violent death, to which no such immunity attached.
The court applied the decision in Waugh v British Railways Board [1980] AC 521.
There the House of Lords held that a report into a fatal accident made for two purposes namely for the purpose of the operation and safety of the railway (in which respect it would fall to be disclosed) and for the purpose of obtaining legal advice (in which respect it would fall, in principle, not to be disclosed) should be disclosed because the former was the dominant purpose.
The decisions in Waugh and Peach thus both relate to the resolution of conflict between two principles of law which require the existence of different purposes and both of which are engaged by the facts of the case.
No doubt the decisions demonstrate in general terms the common sense which may lie behind resort to the dominant purpose but neither represents authority upon statutory construction.
But while therefore the statement in Bennion, set out above, is in my view expressed too strongly, I consider that, as it suggests, it may well be appropriate for the court to construe a statutory requirement of a specified purpose as mandating, in the case of dual purposes, examination of whether the specified purpose is dominant.
All will depend upon the objective meaning of the words in the statute when appraised in its context as a whole, including by reference to the purpose of the particular provision: see R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 396 G-H, per Lord Nicholls.
In ordinary conversation we frequently no doubt unconsciously refine our reference to purpose to a reference to dominant purpose.
You ask me why I went out last night.
I tell you that I went out in order to visit a friend in hospital.
I do not add that I did so in order also to catch the post, to buy sausages and to fill my petrol tank significant though those subsidiary purposes may have been for me.
In the Court of Appeal Lord Neuberger identified three objections to adoption of the dominant purpose test when applying the designation to a situation in which information is held for dual and opposite purposes.
First, he said, at para 40, that the test defied the natural meaning of the words of the designation and that Parliament had not spoken, yet could have spoken, of information predominantly held for purposes other than those of journalism....
Yet the Court of Appeals preferred solution also fails that test for its reading is of information solely held for purposes other than those of journalism....
Second, Lord Neuberger said, at para 41, that identification of the dominant purpose would be a subjective and often speculative exercise.
I respectfully disagree.
In the case of Waugh, in the course of explaining why they favoured a test of dominant purpose in the different context to which I have referred, both Lord Simon, at p 537G, and Lord Russell, at p 545E, observed that the test would not be difficult to apply.
In BBC v The Information Commissioner, cited above, Irwin J appears to have had no difficulty in concluding that the dominant purpose for which the BBC held the financial information was that of journalism.
Indeed in my opinion it is easier for the Commissioner and the Tribunal to identify the dominant purpose than to conduct an inquiry into the existence of any purpose of journalism in accordance with the various pieces of guidance given first by Lord Neuberger at para 55 (namely to consider it in a relatively narrow rather than a relatively wide way), then by Lord Phillips at para 67 below (namely to ask whether an immediate object of holding the information is to use it for that purpose) and finally by Lord Walker at para 83 below (namely to have some regard to the directness of the purpose).
And, third, Lord Neuberger drew attention, at para 42, to the fact that, if the word purposes in the designation referable to the BBC was, in the case of dual purposes, to be construed as a reference to the dominant purpose, the same word in the designations referable to the Bank of England and to the Competition Commission would need to be construed in the same way.
Lord Neuberger suggested that Parliament was unlikely to have intended that, to take the case of the Bank of England, information which it held for dual purposes would be within the scope of the Act unless the purposes of its functions with respect to monetary policy etc were dominant.
But Lord Neubergers point fails to take account of the exemptions in Part II of the Act which might in that event be available, particularly exemptions from disclosure likely to prejudice either the economic interests of the UK (section 29) or the effective conduct of public affairs (section 36(2) (b) and/or (c)).
So I find myself unable to subscribe to Lord Neubergers concerns about the dominant purpose test.
I am convinced that, had Parliament actively considered the situation of information held by the BBC for purposes partly of journalism and partly otherwise, it would expressly have provided that the information was within the scope of the Act if it was held predominantly for the other purposes; that, however, the words which in the event Parliament favoured, namely the words of the designation, are in themselves apt to permit such a construction; and that, since in my view it is more consonant with the Act as a whole than either of the polarities, this court should therefore proceed to endorse it.
The further submission on behalf of Mr Sugar is that his request for disclosure of the Balen report engaged his right to receive information under para 1 of article 10 of the ECHR and that such restrictions on the exercise of his right as are permitted by para 2 of the article extend no further than is reflected by the designation (when read in accordance with his polarised construction), together with the exemptions in Part II of the Act.
To this submission Lord Brown devotes paras 86 to 102 of his judgment below; with the essence of them I respectfully agree.
In short article 10 carries Mr Sugars case no further.
Even if (being a possibility which I would countenance somewhat more readily than does Lord Brown) the refusal to disclose the report did interfere with the freedom of Mr Sugar to receive information under the article, the words of the designation, when given the balanced interpretation which I favour, represent a restriction upon it which is legitimate under para 2 of the article in that it is necessary in a democratic society for the protection of the freedom to impart information enjoyed by the BBC under the same article.
This conclusion becomes all the stronger when the court obeys the injunction cast upon it by section 12(4) of the Human Rights Act 1998 to have particular regard to the importance of freedom of expression and, in particular, to the extent to which it would be in the public interest for journalistic, literary or artistic material...to be published.
In urging this court not to take an extravagant view of any rights of Mr Sugar under article 10 Miss Monica Carss-Frisk QC on behalf of the BBC cites the decision of the House of Lords in R (Al-Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008] AC 153 and, by reference, its earlier decision in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323.
It was in Ullah that, in para 20, Lord Bingham suggested that it was the duty of the House to keep pace with the evolving jurisprudence of the European Court of Human Rights (the ECtHR) no more, but certainly no less.
It was in Al Skeini that, in para 106, Lord Brown suggested that its duty was to keep pace with it no less, but certainly no more.
I would welcome an appeal, unlike the present, in which it was appropriate for this court to consider whether, of course without acting extravagantly, it might now usefully do more than to shadow the ECtHR in the manner hitherto suggested no doubt sometimes in aid of the further development of human rights and sometimes in aid of their containment within proper bounds.
It is, therefore, my view a solitary view that, after six years, the case returns, in a full circle, to where it began; and that it was the Commissioner who both adopted the correct test and properly applied it.
The Balen report was held for purposes of journalism.
On the premise that it was also held for purposes other than those of journalism, it was not predominantly so held.
That is why I consider that the report lay beyond the scope of the Act; and why I agree that the appeal should be dismissed.
The effect of the relevant provision of Part VI of Schedule 1, when read with section 7, to the Freedom of Information Act 2000 (the Act), is that Parts I to V of the Act apply in the case of the BBC only to information held for purposes other than those of journalism, art or literature (the definition).
I agree with the other members of the Court on the following matters that are sufficient to resolve this appeal in favour of the BBC: i) At all material times the Balen report was held by the BBC predominantly for the purposes of journalism; ii) On the true construction of Part VI of Schedule 1 to the Act information held predominantly for the purposes of journalism does not fall within the definition, even if the information is held for other purposes as well.
It follows that the BBC is under no duty to disclose the Balen report and that this appeal must be dismissed.
The judgments of Lord Wilson and Lord Walker have, however, disclosed an issue that is academic but is none the less of importance.
Does the definition mean information held solely for purposes other than journalism, art or literature or information held predominantly for purposes other than journalism, art or literature?
A similar issue arises in relation to the Bank of England, where the relevant definition is information held for purposes other than those of its functions with respect to- (a) monetary policy, (b) financial operations intended to support financial institutions for the purposes of maintaining stability, and (c) the provision of private banking services and related services.
I am not able to find an answer to the issue in the language of the definition itself.
It is capable of bearing either meaning.
The answer to the issue must lie in adopting a purposive approach to the definition.
We are concerned with a provision that provides protection against the disclosure obligations that are the object of the Act.
What is the purpose of that protection? It is not, as is the protection against disclosure of documents protected by legal professional privilege, designed to remove inhibition on the free exchange of information.
Were that the case the protection would focus on the purpose for which the information was obtained.
The protection is designed to prevent interference with the performance of the functions of the BBC in broadcasting journalism, art and literature.
That is why it focuses on the purpose for which the information is held.
The same is true of the information provided to the Bank of England.
The object of the protection is to prevent interference with the performance of the specified functions of the Bank.
A purposive construction of the definition will prevent disclosure of information when this would risk interference with the broadcasting function of the BBC.
This will not depend upon the predominant purpose of holding the information.
It will depend upon the likelihood that if the information is disclosed the broadcasting function will be affected.
The same is true in the case of the Bank of England.
For this reason I do not agree with the approach of Lord Wilson to this issue.
Lord Neuberger of Abbotsbury MR at para 53 remarked that todays journalism is tomorrows archive and at para 58 In the case of journalism, above all news journalism, information held for purposes of journalism may soon stop being held for that purpose and be held, instead, for historical or archival purposes.
I imagine that the Bank of England also archives information initially used for the purposes of carrying out its functions.
No doubt the BBC has recourse to its archives for journalistic purposes from time to time and, if held for purposes of journalism is given a broad meaning it could be said in relation to the BBC that one of the purposes of holding archived material is journalism, albeit a relatively remote purpose.
However, Lord Neuberger accepted that archived material would not, as such, fall within the protection afforded by the definition.
I consider that he was right to do so.
Disclosure of material that is held only in the archives will not be likely to interfere with or inhibit the BBCs broadcasting functions.
It ought to be susceptible to disclosure under the Act.
If possible information held for purposes other than those of journalism, art or literature should be given an interpretation that brings archived material within that phrase.
Can this be achieved?
I believe that Lord Walker has the answer.
He has concluded, as have I, that the protection is aimed at work in progress and BBCs broadcasting output.
He suggests that the Tribunal should have regard to the directness of the purpose of holding the information and the BBCs journalistic activities.
I agree.
Information should only be found to be held for purposes of journalism, art or literature if an immediate object of holding the information is to use it for one of those purposes.
If that test is satisfied the information will fall outside the definition, even if there is also some other purpose for holding the information and even if that is the predominant purpose.
If it is not, the information will fall within the definition and be subject to disclosure in accordance with the provisions of Parts I to V of the Act.
This appeal requires the Supreme Court to focus closely on the language and legislative purpose of the provisions of the Freedom of Information Act 2000 (FOIA) dealing with public authorities to which that statute has limited application.
Without that focus, a long trawl through the Strasbourg jurisprudence on article 10 of the European Convention on Human Rights is of little assistance.
The relevant provisions are in section 7 of and Schedule 1 to FOIA.
Section 7(1) provides that where a public authority is listed in Schedule 1 only in relation to information of a specified description, nothing in Parts I to V of the Act is to apply to any other information held by the authority.
Schedule 1, Part VI lists the British Broadcasting Corporation (BBC) in respect of information held for purposes other than those of journalism, art or literature.
A similar form of words appears (in adjectival form) in section 3 of the Data Protection Act 1998, which defines the special purposes as meaning any one or more of the following (a) the purposes of journalism, (b) artistic purposes, and (c) literary purposes.
Section 32 of the Data Protection Act gives a limited exemption where personal data is processed with a view to the publication by any person of any journalistic, literary or artistic material, and the data controller reasonably believes that, having regard in particular to the special importance of the public interest in freedom of expression, publication would be in the public interest, and that compliance with some specified provisions of the Data Protection Act would be incompatible with the special purposes.
Both sets of statutory provisions are evidently aimed at promoting freedom of expression, the value embodied in article 10 of the European Convention on Human Rights.
There is no relevant definition of journalism, art or literature in either statute.
The three words are abstract nouns which can be used to describe either an activity or the product of that activity.
Journalism is a word introduced into the English language from French in the 19th century.
The Oxford English Dictionary gives its primary meaning (by reference to journalist) as the occupation of editing or writing for a public journal.
In a loose sense it can cover the production of just about anything published in a newspaper (or, today, broadcast on sound radio or television).
But in the context of FOIA, its collocation with art and literature suggests that journalism is used to refer primarily to output on news and current affairs (no doubt including sport, an important part of the BBCs output); and the composite expression journalism, art or literature seems to be intended to cover the whole of the BBCs output in its mission (under article 5 of its Royal Charter) to inform, educate and entertain the public.
On that comprehensive approach the purposes of journalism, art or literature would be, quite simply, the purposes of the BBCs entire output to the public.
Mr Jeremy Clarkson must, it seems, have moved from the pigeonhole of journalism to that of literature when, as Irwin J recorded in British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin), [2010] EMLR 121, para 36, it was decided for editorial reasons to change the format of Top Gear so that it became primarily an entertainment programme rather than a consumer programme, [which] increased the production costs to an important degree.
British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin) (the financial information case) was heard by Irwin J immediately after he heard the case [2009] EWHC 2349 (Admin) in which this appeal is brought, and he handed down his judgment in the two cases on the same day, 2 October 2009.
Important parts of the two judgments are, as Irwin J noted in the first paragraph of each judgment, expressed in identical or very similar terms.
There is also one other first-instance judgment calling for mention, that is the judgment of Davis J in the first round of Mr Sugars litigation, British Broadcasting Corporation v Sugar [2007] EWHC 905 (Admin), [2007] 1 WLR 2583.
The judgment of Davis J contains a valuable discussion of the relevant provisions of FOIA but proceeds on the footing that the Information Tribunal (the Tribunal) had no jurisdiction, in the circumstances, to hear an appeal from the Information Commissioner (the Commissioner).
That premise was later shown by the decision of a bare majority of the House of Lords to be erroneous: [2009] UKHL 9, [2009] 1 WLR 430.
One of the most important issues of law considered by Irwin J in his twin judgments is whether, as a matter of construction, the word predominantly should in effect be inserted in Schedule 1, Part VI before the phrase for purposes other than those of journalism, art or literature).
Irwin J described this (in para 3 of each judgment) as a concession made by the BBC before the Tribunal, but that description depends on the spectators viewpoint.
The Court of Appeal (Lord Neuberger MR, para 36) described it as a successful argument.
So it is worth looking at how this point developed.
Apart from any de minimis principle, which the Court of Appeal (Lord Neuberger MR, para 59) rightly regarded as unhelpful in this context, there are four possible categories of information held by the BBC that need to be considered: (1) information held exclusively for non-journalistic purposes; (2) information held predominantly, but not exclusively, for non-journalistic purposes (the other purposes being those of journalism); (3) information held predominantly, but not exclusively, for journalistic purposes (the other purposes being non-journalistic); and (4) information held exclusively for journalistic purposes.
Before the Tribunal Mr Sugar argued that the BBCs immunity under Schedule 1 Part VI (as opposed to its possible exemption under other particular provisions of FOIA) was limited to information in category (4).
In other words he was insisting on disclosure (apart from particular exemptions) of categories (1), (2) and (3).
The BBC did not oppose categories (1) and (2) (so that category (2) could be termed a concession) but opposed disclosure of category (3), and was successful in that argument.
Irwin J felt unable to accept the concession, either in the Sugar appeal or in the appeal in the financial information case.
He held that category (1) was the only category of information that the BBC had to disclose (again, subject to particular exemptions).
His reasons are at paras 44 to 66 of his judgment in the Sugar case and at paras 53 to 73 of his judgment in the financial information case, which are in almost identical terms.
The Court of Appeal agreed with his reasoning and conclusions (Lord Neuberger MR, paras 39 to 52).
I respectfully agree.
In my judgment the correct view is that (as Lord Neuberger MR put it at para 44): once it is established that the information sought is held by the BBC for the purposes of journalism, it is effectively exempt from production under the Act, even if the information is also held by the BBC for other purposes.
So in effect there are only two categories: one is information held for purposes that are in no way those of journalism, and the other is information held for the purposes of journalism, even if it is also held for other (possibly more important) purposes.
That conclusion follows both from FOIAs legislative purpose and from its language.
First, legislative purpose.
It is common ground that FOIA was enacted in order to promote an important public interest in access to information about public bodies.
There are (as Schedule 1 to FOIA reveals) thousands of public authorities, large and small, which are paid for out of public funds, and whose actions or omissions may have a profound effect on citizens and residents of the United Kingdom.
There is a strong public interest in the press and the general public having the right, subject to appropriate safeguards, to require public authorities to provide information about their activities.
It adds to parliamentary scrutiny a further and more direct route to a measure of public accountability.
There is therefore force, in relation to FOIA as well as in relation to the Freedom of Information (Scotland) Act 2002, in the proposition that, as the whole purpose of the 2002 Act is the release of information, it should be construed in as liberal a manner as possible.
That is how it was put by Lord Marnoch in Common Services Agency v Scottish Information Commissioner [2006] CSIH 58, 2007 SC 231, para 32, approved by Lord Hope in the House of Lords [2008] UKHL 47, [2008] 1 WLR 1550, para 4.
But Lord Hope continued: But that proposition must not be applied too widely, without regard to the way the Act was designed to operate in conjunction with the [Data Protection Act 1998].
It is obvious that not all government can be completely open, and special consideration also had to be given to the release of personal information relating to individuals.
So while the entitlement to information is expressed initially in the broadest terms that are imaginable, it is qualified in respects that are equally significant and to which appropriate weight must also be given.
The scope and nature of the various exemptions plays a key role within the Acts complex analytical framework.
(The Commons Services Agency case serves to explain the position on freedom of information in Scotland, which is not immediately apparent from FOIA itself.
FOIA extends to Scotland and so applies to operations in Scotland of public authorities which operate throughout the United Kingdom; but Scotland also has its own statute applying to Scottish public authorities.)
In this case, there is a powerful public interest pulling in the opposite direction.
It is that public service broadcasters, no less than the commercial media, should be free to gather, edit and publish news and comment on current affairs without the inhibition of an obligation to make public disclosure of or about their work in progress.
They should also be free of inhibition in monitoring and reviewing their output in order to maintain standards and rectify lapses.
A measure of protection might have been available under some of the qualified exemptions in Part II of FOIA, in particular those in sections 36 (Prejudice to effective conduct of public affairs), 41 (Information provided in confidence) and 43 (Commercial interests).
But Parliament evidently decided that the BBCs important right to freedom of expression warranted a more general and unqualified protection for information held for the purposes of the BBCs journalistic, artistic and literary output.
That being the purpose of the immunity, section 7 and Schedule 1 Part VI, as they apply to the BBC, would have failed to achieve their purpose if the coexistence of other non-journalistic purposes resulted in the loss of immunity.
That is confirmed by the language of these statutory provisions.
The disclosable material is defined in terms (held for purposes other than those of journalism, art or literature) which are positive in form but negative in substance.
The real emphasis is on what is not disclosable that is material held for the purposes of the BBCs broadcasting output.
It is the most natural construction, which does not depend on reading in any words.
That was the view formed both by Irwin J (see especially paras 55 to 58 and 63 to 65 of his Sugar judgment) and by Lord Neuberger MR (see especially paras 40 to 42, 44 to 46, and 49 of his judgment).
Mr Eicke QC was critical of para 49, submitting that it assumed the very answer that the Court of Appeal was seeking to justify.
I consider that criticism to be unjustified, though the reasoning was perhaps rather compressed.
The unspoken premise is that Parliament must have intended to lay down a workable test, and both an exclusively and a predominantly test would raise almost insoluble problems in their practical application.
That is not to say that the test approved by Irwin J and the Court of Appeal is without its difficulties.
Parliament has, in trying to provide machinery for determining where the stronger public interest lies, placed a heavy burden on the Tribunal as an expert decision-maker.
Davis J cited the well-known speech of Lord Mustill in R v Monopolies and Mergers Commission, Ex p South Yorkshire Transport Ltd [1993] 1 WLR 23, 32-33 (where the relevant statute referred to a substantial part of the United Kingdom): But this clear-cut approach cannot be applied to every case, for the criterion so established may itself be so imprecise that different decision-makers, each acting rationally, might reach differing conclusions when applying it to the facts of a given case.
In such a case the court is entitled to substitute its own opinion for that of the person to whom the decision has been entrusted only if the decision is so aberrant that it cannot be classed as rational: Edwards v Bairstow [1956] AC 14.
The present is such a case.
Even after eliminating inappropriate senses of substantial one is still left with a meaning broad enough to call for the exercise of judgment rather than an exact quantitative measurement.
I consider that Davis J was right to regard the present case as falling within that category.
He was however mistaken in supposing that the Tribunal had no jurisdiction to hear an appeal, and so he should have treated the Tribunal, and not the Commissioner, as the crucial decision-maker.
Irwin J concluded (para 66 of his Sugar judgment) that the Tribunal had erred in law in applying the predominant purpose test.
So did Lord Neuberger MR (para 62).
So did Moses LJ (para 73), though I have some difficulty with the way his reasoning is expressed on this point, as it seems to come close to conflicting with the reasoning of the majority of the House of Lords in the first round of litigation, [2009] 1 WLR 430.
Munby LJ agreed with both judgments.
I would therefore dismiss this appeal, but for reasons different from those set out in the judgment of Lord Wilson.
I would add that I am conscious that this interpretation of the limitation may be seen as conferring on the BBC an immunity so wide as to make the particular statutory redemptions redundant, and leave the BBC almost free of obligations under FOIA.
As the Tribunal observed (paras 96 and 102): On a broad definition, it could be argued that all of the activities of the BBC are for the purposes of journalism, art and literature, as these are broad descriptions of a substantial part of its broadcast output . . .
However, if a very broad definition was intended, there would be little point in including the BBC in Schedule 1, Part VI of FOIA.
The BBC could have been omitted altogether from the scope of the Act.
The same point was made by Davis J [2007] 1 WLR 2583, para 55.
In my view the correct approach is for the Tribunal, while eschewing the predominance of purpose as a test, to have some regard to the directness of the purpose.
That is not a distinction without a difference.
It is not weighing one purpose against another, but considering the proximity between the subject-matter of the request and the BBCs journalistic activities and end-product.
As Irwin J observed in the financial information case, para 87, in the context of a critique of what was operational: The cost of cleaning the BBC Boardroom is only remotely linked to the product of the BBC.
I respectfully agree with the measured comments of Lord Neuberger MR (para 55): In my view, whatever meaning is given to journalism I would not be sympathetic to the notion that information about, for instance, advertising revenue, property ownership or outgoings, financial debt, and the like would normally be held for purposes . . . of journalism.
No doubt there can be said to be a link between such information and journalism: the more that is spent on wages, rent or interest payments, the less there is for programmes.
However, on that basis, literally every piece of information held by the BBC could be said to be held for the purposes of journalism.
In my view, save on particular facts, such information, although it may well affect journalism-related issues and decisions, would not normally be held for purposes . . .
of journalism.
The question whether information is held for the purposes of journalism should thus be considered in a relatively narrow rather than a relatively wide way.
That is the best way forward in order to strike the difficult balance of competing interests for which Parliament must be taken to have been aiming.
But it will still leave some difficult decisions for the Commissioner and, on appeal, the Tribunal.
There cannot be (in the words of Davis J, para 57) any unequivocal, bright-line test.
All of us agree that on any conventional approach to the construction of the Freedom of Information Act 2000 (the Act) and in particular the expression information held for purposes . . .
of journalism within the meaning of Schedule 1 to the Act, it clearly encompasses the Balen Report (the Report) throughout the whole period that the BBC has held it.
It is the appellants contention, however, that this approach to the construction of the Act and the consequent non-disclosure of the Report would violate article 10 of the European Convention on Human Rights and that the Court is accordingly bound, consistently with section 3 of the Human Rights Act 1998, to read and give effect to the Act so as to require the Reports disclosure.
It is this contention that I am here principally concerned to address.
Given, however, that a disagreement exists within the Court as to whether information held for the purposes of journalism but held also for other purposes must be subjected to a test as to which purpose is predominant and disclosed if the predominant purpose is non-journalistic, I shall in conclusion briefly address this issue too, irrelevant though it is to the outcome of this particular appeal.
The appellants article 10 contention is not one that appears to have been advanced before Irwin J at first instance (certainly there is no mention of article 10 in his judgment).
Article 10 was, however, invoked in the Court of Appeal, indeed by both sides.
The BBC submitted that disclosure of the Report (and any other information held for the purposes of journalism) would have a chilling effect upon their right to freedom of expression; the appellant submitted that, subject only to narrow exceptions (none being applicable here), article 10 gives him a right of access to all such information.
The Court of Appeal, however, derived no assistance from article 10 either way, Moses LJ (at para 77) finding it impossible to identify within the jurisprudence any pointer for or against the rival contentions.
Before this Court Mr Eicke QC has vigorously returned to article 10 and advances what is essentially a two stage argument.
First, he contends, in reliance principally upon a trilogy of Strasbourg decisions Matky v Czech Republic (Application No 19101/03) (unreported) 10 July 2006, (Matky), Tarsasag A Szabadsagjogokert v Hungary (2009) 53 EHRR 130 (14 April 2009) (Tarsasag), and Kenedi v Hungary (Application No 31475/05) (unreported) 26 August 2009 (Kenedi) that the ECtHR has recently moved towards the recognition of a right of access to information and that in the particular circumstances of the present case an interpretation of the Act which withholds from disclosure a document such as the Report interferes with the right of access to information protected by article 10(1).
Secondly he submits that such interference is not necessary in a democratic society so as to be justified under article 10(2).
He not only disputes that the release of the Report would have a chilling effect on freedom of expression but submits that only the need to protect journalistic sources or perhaps, indeed, more narrowly still, the need to protect sources who might otherwise be deterred from assisting journalists would constitute an overriding requirement of the public interest sufficient to justify this interference with the citizens article 10(1) right of access to information.
Before turning to the trilogy of decisions upon which the appellant mainly relies it is helpful first to note the well-established body of Strasbourg jurisprudence which is recognised to define, generally speaking, the nature and extent of the right under article 10(1) to receive . . .
information and ideas without interference by public authority.
It is sufficient for present purposes to cite a short passage from the unanimous Grand Chamber decision in Roche v United Kingdom (2005) 42 EHRR 599 at para 172: The Court reiterates its conclusion in Leander v Sweden (1987) 9 EHRR 433 and in Gaskin v United Kingdom (1989) 12 EHRR 36 and, more recently, confirmed in Guerra v Italy (1998) 26 EHRR 357, that the freedom to receive information prohibits a Government from restricting a person from receiving information that others wish or may be willing to impart to him and that that freedom cannot be construed as imposing on a State, in circumstances such as those of the present case, positive obligations to . . .
disseminate information of its own motion.
It is right to observe, before moving on, that the circumstances of those particular cases were that the applicants were attempting to obtain information respectively about their being regarded as a security risk (Leander), about their childhood (Gaskin), about a chemical factory (Guerra) and about long-past Porton Down tests in which they had participated (Roche).
I come then to the first of the trilogy of cases on which the appellant so strongly relies: Matky.
The complainant there was seeking, against the background of a general right to information under the Czech legal system, access to documentation concerning the construction of a new nuclear power station and in particular was challenging a requirement of the domestic legislation (article 133 of the Building Act) that a request for information had to be justified.
The Court accepted that the rejection of his request constituted an interference with the complainants right to receive information.
But it held that the decision could not be considered arbitrary, recognised that Contracting States enjoy a certain margin of appreciation in this area and unanimously rejected the complaint as manifestly ill-founded.
Matky seems accordingly an unpromising foundation upon which to build any significant departure from what may be called the Roche approach to the freedom to receive information protected by article 10.
Nevertheless, in Tarsasag (the second in the appellants trilogy of cases) it was to Matky that the Second Section of the Court referred as (the sole) authority for the proposition that, the Leander line of authority notwithstanding, the Court has recently advanced towards a broader interpretation of the notion of freedom to receive information and thereby towards the recognition of a right of access to information.
In Tarsasag the court upheld a complaint by the Hungarian Civil Liberties Union that a refusal by the Constitutional Court to grant them access to an MPs pending complaint as to the constitutionality of certain proposed amendments to the Criminal Code breached its article 10 right to receive information.
The Government having accepted that there had been an interference with the applicants article 10 rights, Mr Eicke relies in particular upon the following passage in the Courts judgment: [The Court] considers that the present case essentially concerns an interference by virtue of the censorial power of an information monopoly with the exercise of the functions of a social watchdog, like the press, rather than a denial of a general right of access to official documents. . . .
Moreover, the states obligations in matters of freedom of the press include the elimination of barriers to the exercise of press functions where, in issues of public interest, such barriers exist solely because of an information monopoly held by the authorities.
(para 36)
Kenedi, the third in the trilogy of cases, was decided just four months after Tarsasag, also by the Second Section of the Court (including six of the same seven judges who had decided Tarsasag).
The applicant there was a historian specialising in the functioning of the secret services of dictatorships.
Although a succession of domestic court judgments had held him to be entitled to access to various documents for research purposes, the Ministry had refused to disclose them.
Once again, hardly surprisingly in this case, the government conceded that there had been an interference with the applicants article 10 rights.
The Court had no difficulty in finding in the result a violation of article 10: the Court cannot but conclude that the obstinate reluctance of the respondent States authorities to comply with the execution orders was in defiance of domestic law and tantamount to arbitrariness.
In my judgment these three cases fall far short of establishing that an individuals article 10(1) freedom to receive information is interfered with whenever, as in the present case, a public authority, acting consistently with the domestic legislation governing the nature and extent of its obligations to disclose information, refuses access to documents.
Of course, every public authority has in one sense the censorial power of an information monopoly in respect of its own internal documents.
But that consideration alone cannot give rise to a prima facie interference with article 10 rights whenever the disclosure of such documents is refused.
Such a view would conflict squarely with the Roche approach.
The appellants difficulty here is not that Mr Sugar was not exercising the functions of a social watchdog, like the press.
(Perhaps he was.) The Jewish Chronicle would be in no different or better position.
The appellants difficulty to my mind is rather that article 10 creates no general right to freedom of information and where, as here, the legislation expressly limits such right to information held otherwise than for the purposes of journalism, it is not interfered with when access is refused to documents which are held for journalistic purposes.
True it is, as Lord Judge CJ noted when giving the judgment of the Court in Independent News and Media Ltd v A [2010] 1 WLR 2262 (para 42), that the Venice Commission has described Tarsasag as a landmark decision on the relation between freedom of information and the . . .
Convention.
Whatever else might be said about Mr Eickes trilogy of cases, however, they cannot to my mind be said to support his first proposition having regard to the particular relationship between the parties in this case.
I should perhaps add for the sake of completeness that there is absolutely nothing in Independent News and Media Ltd v A, still less in R (Mohamed) v Secretary of State for Foreign Affairs (No 2) [2011] QB 218, to support Mr Eickes reliance on article 10 in the present context.
It follows that for my part I would hold that the appellants article 10 case fails at the first stage.
There was no interference here with Mr Sugars freedom to receive information.
The Act not having conferred upon him any relevant right of access to information, he had no such freedom.
Even were that not so, however, I would reject the second stage of Mr Eickes argument too.
Even were one to start with the supposition that any refusal by a public authority to disclose information involves a prima facie interference with a persons freedom to receive that information, it seems to me open to the State to legislate, as here, a blanket exclusion of any requirement to disclose information held (whether predominantly or not) for the purposes of journalism.
The appellants contrary argument fixes in particular upon a line of Strasbourg cases concerned essentially with journalistic sources: Goodwin v United Kingdom (1996) 22 EHRR 123, Nordisk Film and TV A/S v Denmark (Application No 40485/02) (8 December 2005) and Sanoma Uitgevers BV v The Netherlands (Application No 38224/03) (14 September 2010).
What must be recognised, however, is that in each of these cases it was the journalists who were the complainants, that what they were complaining about were domestic court orders requiring disclosure of their sources or research material, and that the starting point for the Strasbourg Courts consideration of these complaints was, as the Grand Chamber noted at paragraph 59 of its judgment in Sanoma: In its earlier case-law the Court has found various acts of the authorities compelling journalists to give up their privilege and provide information on their sources or to obtain access to journalistic information to constitute interferences with journalistic freedom of expression.
The applicant in Goodwin succeeded on the basis that he had been ordered to reveal the identity of a person who had provided him with information on an unattributable basis.
The applicant in Nordisk failed because on the particular facts of that case (which it is not here necessary to rehearse) the applicant was not being ordered to disclose its journalistic source of information but rather part of its research material and that, even though the latter may have a chilling effect on the exercise of journalistic freedom of expression, there it was justified by an overriding requirement in the public interest: assisting in the prosecution of paedophiles.
The applicant company in Sanoma succeeded because there was an order for the compulsory surrender of journalistic material containing information capable of identifying journalistic sources, an interference with its article 10 rights which the Court there held was not prescribed by law: the quality of the law was deficient in that there was no procedure attended by adequate legal safeguards for the applicant company in order to enable an independent assessment as to whether the interest of the criminal investigation overrode the public interest in the protection of journalistic sources.
(para 100)
Helpful though these cases may be, however, in explaining the limitations placed upon a journalists prima facie right to protect both his sources and his research material from compulsory court orders for their disclosure, they say little if anything about what other interests and concerns may properly be invoked by journalists in resisting the disclosure to others (whether or not themselves journalists) of other information held for journalistic purposes (ie information apart from that necessary to protect confidential sources and research material, including for example the Balen Report).
To my mind it stands to reason that the disclosure of a document such as the Report would be likely to affect the candour of any similar future report.
As the Information Tribunal itself found in the present case (at para 116): Self-critical review and analysis of output is a necessary part of safeguarding and enhancing quality.
The necessary frankness of such internal analysis would be damaged if it were to be written in an anodyne fashion, as would be likely to be the case if it were potentially disclosable to a rival broadcaster.
(Or, one may add, to anyone else.) In short I would reject also the second stage of the appellants argument: the contention that section 3 of the Human Rights Act should be invoked here to limit the information stipulated by the Act to be undisclosable through being held for the purposes of journalism merely to that held for the purpose of safeguarding the BBCs confidential sources.
I turn then briefly to the question whether, in a case where information is held partly for journalistic and partly for non-journalistic purposes, it is necessary to ask which purpose is predominant and to disclose any information held predominantly for non-journalistic purposes.
I conclude, in common with Lord Phillips and Lord Walker (and, indeed, with the Court of Appeal), but in respectful disagreement with Lord Wilson, that the answer is No. My reasons being essentially the same as those given by both Lord Phillips and Lord Walker (although perhaps more particularly those of Lord Walker), I can explain my concurrence very shortly indeed.
Really it comes to this.
With regard both to the BBC (together with the three other listed broadcasters) and the Bank of England, Parliament, for differing but in each case compelling reasons of national interest, was concerned not to subject these institutions to the operation of the Act including, for example, the need to resort to Part II of the Act to justify any reluctance to withhold some particular information from disclosure save only in strictly limited circumstances.
In the case of the BBC and other broadcasters it is only in respect of information held for purposes other than those of journalism, art or literature.
In the event that information is held to any significant degree (and we are all agreed that the de minimis principle would otherwise apply) for the purposes of journalism, then to my mind it would seem artificial and impermissible to construe the Act as applying to that information.
Quite simply, it remains information held for the purposes of journalism and therefore constitutes (within the meaning of section 7) other information than information held for purposes other than those of journalism.
The mere fact that it may be held (even perhaps to a predominant extent) also for purposes other than those of journalism cannot sensibly serve to enlarge the basic category of information in respect of which the BBC is listed and with regard to which, therefore, the Act is not disapplied by section 7.
In short, like Lord Walker, I find that the natural construction of the Act, and Parliaments evident concern to ensure that the interests of free expression trump without more those of freedom of information, supports the BBCs case on this issue.
As for the point at which information will cease to be held to any significant degree for the purposes of journalism and become held instead, say, solely for archival purposes, that necessarily will depend on the facts of any particular case and involve a question of judgment.
I too agree with Lord Walker that the central question to be asked in such a context will be, not which purpose is predominant, but rather whether there remains any sufficiently direct link between the BBCs continuing holding of the information and the achievement of its journalistic purposes.
I too would dismiss this appeal.
The question on this appeal is whether the Balen Report commissioned by the BBC in relation to its Middle Eastern coverage and completed in July 2004 constituted information held for purposes other than those of journalism, art or literature (within Part VI of Schedule 1 to the Freedom of Information Act 2000).
The appeal falls to be approached on the basis that the Report was at the material time held predominantly for journalistic but partly also for other purposes.
The material time was in 2005, when Mr Sugar first requested disclosure of the Report.
I agree with the other members of the Court that this appeal should be dismissed.
However, there is a difference in the basis upon which different members of the Court would dismiss it.
Lord Wilson would only dismiss it on the basis that the critical test is whether the BBC held the Report predominantly for the purposes of journalism.
Were this not the test, he would have regarded the existence of other not insignificant purposes as sufficient to mean that the Report was held for purposes other than those of journalism, art or literature, and so disclosable.
The other members of the Court take an opposite view: once it is established that the BBC held the Report for purposes of journalism, art or literature, the Report was exempt from disclosure, and would have been even had these not been the predominant purposes for which it was held.
The rival arguments on this point are finely balanced, and its resolution in the present appeal on the basis of sparse facts causes me a certain concern.
However, after some hesitation, I have come to the conclusion that the test applied by Lords Phillips, Walker and Brown is to be preferred.
The Freedom of Information Act 2000 reflects the value to be attached to transparency and openness in the workings of public authorities in modern society, and its provisions should be construed in as liberal a manner as possible: Common Services Agency v Scottish Information Commissioner [2008] UKHL 47, [2008] 1 WLR 1550, para 4 per Lord Hope.
But, as Lord Walker notes (para 77), Lord Hope went on to add that that proposition must not be applied too widely, and special considerations may lead to restrictions.
In the present case, the special consideration to which the legislator gave effect was the freedom of the BBC as a public service broadcaster in relation to its journalistic, artistic and literary output.
Information held for any such purposes of journalism, art or literature was absolutely exempt from disclosure.
The legislator was not content with the more qualified protection from disclosure, often depending on a balancing exercise or evaluation, which would anyway have been available under section 2, read with sections 28, 29, 36, 41 and 43.
To read into the words information held for purposes other than those of journalism, art or literature a need to evaluate whether such purposes were dominant seems to me unjustified.
I share Lord Walkers view (para 79) that the real emphasis of the words is on what is not disclosable, so that the exemption applies, without more, if the information is held for any journalistic, artistic or literary purpose.
That conclusion is to my mind also fortified by consideration of the exemption relating to certain functions of the Bank of England.
Lord Phillips discusses the position regarding archived material.
We were not given any clear picture when or on what basis archiving might occur.
I assume that the reference is to material not envisaged as having any current purpose, but stored for historical purposes or against the possibility of some unforeseen need to revisit, or produce evidence of, past events.
A library maintained for current reference would in contrast contain material held for the purposes of journalism, art or literature.
I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini.
Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles.
It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law.
I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini.
Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles.
It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law.
| UK-Abs | By October 2003 pressure groups had complained that coverage by the British Broadcasting Corporation [BBC] of the Israeli Palestinian conflict was not impartial [6].
In November 2003 Mr Malcolm Balen was appointed by the BBC to produce a report on the quality and impartiality of its coverage of Middle Eastern affairs [the Balen Report], which was intended to be an internal briefing document [6 7].
In November 2004 the Balen Report was considered by the BBCs Journalism Board, which consequently commissioned a paper called Taking Forward BBC Coverage of the Middle East [9].
A number of internal changes resulted, including development of training, auditing of on air use of experts and the creation of a post of Middle East Editor [10].
On 8 January 2005, the Appellant, Mr Steven Sugar, made a request pursuant to s.1 of the Freedom of Information Act 2000 [FOIA] for disclosure of the Balen Report [12].
The BBC is designated as a public authority in FOIA only to a limited extent, namely in respect of information held for purposes other than those of journalism, art or literature [1].
The BBC refused the request on the basis that it held the Balen Report for purposes of journalism and thus it lay beyond the scope of FOIA [12].
In March 2005 Mr Sugar applied to the Information Commissioner pursuant to s.50(1) of FOIA for a decision whether the BBC had determined his request within the terms of FOIA.
The Commissioner concluded that the BBC had lawfully rejected his request as, even if the Balen Report had also been held for non journalistic purposes, it continued to lie beyond the scope of FOIA because the journalistic purpose was manifestly dominant [13].
The Commissioner also observed that BBC was not a public authority for the purposes of FOIA and thus Mr Sugar had no right of appeal under s.57 of FOIA to the Information Tribunal [15].
On 30 December 2005 Mr Sugar nevertheless appealed to the Tribunal, which determined it had jurisdiction.
The House of Lords upheld its jurisdiction decision (in Sugar v BBC [2009] UKHL 9) since, even in relation to a request for information which was held to lie outside the designation, the BBC remained a public authority for the purposes of FOIA [20].
Before the Tribunal, Mr Sugar contended that even if the information is held only partly for purposes other than those of journalism, the information is within the scope of FOIA [4].
The BBCs primary contention was that where information is held for the purposes of journalism, that information is beyond the scope of FOIA even if it is also held even predominantly held for purposes other than journalism [3].
The BBCs secondary contention was that the information is within the scope of FOIA only if the purposes other than journalism are the dominant purpose for which it is held [5].
On 29 August 2006 the Tribunal accepted the BBCs secondary contention but held that the Balen Report was within the scope of FOIA as, once the report had been placed before the Journalism Board, it was held predominantly for purposes other than journalism [21].
On 2 October 2009 Mr Justice Irwin allowed the BBCs appeal on the basis that the BBC had no obligation to disclose information that the BBC held to any significant extent for the purposes of journalism and further that, even if the test was one of dominant purpose, the Tribunal had erred in finding that the Balen Report had been held predominantly for purposes other than those of journalism [22].
The Court of Appeal dismissed Mr Sugars appeal, rejecting the dominant purpose construction and approving the BBCs primary construction of the designation [23].
Sadly Mr Sugar died in January 2011.
The court appointed his widow, Ms Fiona Paveley, to represent his estate in this appeal [4].
The Supreme Court unanimously dismisses the appeal.
Lord Phillips, Lord Walker, Lord Brown and Lord Mance dismiss the appeal on the basis that, even if information is held only partly for the purposes of journalism, art or literature, it is outside the scope of FOIA.
Lord Wilson would have dismissed it on the basis that, if
information is held predominantly for the purposes of journalism, art or literature, it is outside the scope of FOIA and that the Balen Report was held predominantly for those purposes [57].
Section 7(1) of FOIA provides that, where a public authority is listed in Schedule 1 of FOIA only in relation to information of a specified description, nothing in Parts I to V of FOIA is to apply to any other information held by the authority [31; 69].
Under Part VI of Schedule I to FOIA the BBC is designated as a public authority only in respect of information held for purposes other than those of journalism, art or literature [1].
At the material time BBC held the Balen Report for the purposes of journalism.
The issue is therefore how the phrase purposes other than those of journalism should be construed [2].
Four possible categories of information held by the BBC exist: (1) information held exclusively for purposes other than those of journalism [or art or literature]; (2) information held predominantly, but not exclusively, for non journalistic purposes; (3) information held predominantly, but not exclusively, for journalistic purposes and (4) information held exclusively for journalistic purposes [73].
The Appellant argued that the BBCs immunity under Part VI of Schedule I to FOIA was limited to information in category (4).
The BBCs primary contention, upheld by Irwin J and the Court of Appeal, was that the BBC had to disclose information only in category (1) subject to particular exemptions under other provisions of FOIA [73].
The BBCs secondary contention, adopting a dominant purpose construction, was that only information in categories (1) and (2) had to be disclosed, subject to the exemptions.
The court holds that the Court of Appeal was correct in deciding that once it is established that the information sought is held by the BBC to any significant degree for the purposes of journalism, it is exempt from production under FOIA, even if the information is also held for other purposes [67; 75; 104; 111].
The legislative purpose of FOIA is to promote an important public interest in access to information about public bodies [76]; but in this case there is a powerful public interest that the public service broadcasters, no less than the commercial media, should be free to gather, edit and publish news and comment on current affairs without the inhibition of an obligation to make public disclosure of or about their work [78].
The purpose of the designation would have failed if the coexistence of other non journalistic purposes resulted in the loss of immunity [78].
The real emphasis of the words is on what is not disclosable, namely material held for the purposes of the BBCs broadcasting output [79].
The Tribunal should have some regard to the directness of purpose, considering the proximity between the subject matter of the request and the BBCs journalistic activities and output [83].
The purpose of the designation is to protect the BBC from interference with its functions in broadcasting journalism, art and literature [64] and consequently a purposive construction of it would prevent disclosure that would risk such interference [65].
Information should be found to be held for the purposes of journalism, art or literature only if an immediate object of holding the information is to use it for one of those purposes [67].
As to the contention on behalf of the Appellant that this approach would violate Article 10 of the European Convention on Human Rights [ECHR], the Court noted the well established body of jurisprudence of the European Court of Human Rights that defines the nature of the right under Article 10(1) as prohibiting a government from restricting a person from receiving information that others are willing to impart to him but does not construe the article as imposing positive obligations on a State to disseminate information of its own motion [89].
The jurisprudence relied upon by the Appellant falls far short of establishing that an individuals freedom to receive information is interfered with whenever a public authority acting consistently with domestic legislation refuses access to documents [94].
Article 10 creates no general right to freedom of information [94] and consequently no interference with Mr Sugars ECHR rights [97].
Even if there had been such a right, it would be open to the State to legislate a blanket exclusion of any requirement to disclose information held for the purposes of journalism [98].
|
The Leasehold Reform Act 1967 is on its face a statute about houses, not commercial buildings.
The buildings with which we are concerned were originally designed and used as houses, but at the relevant date were used entirely for commercial purposes, one for offices, the other (in the judges words) as a self catering hotel.
In both cases the courts below felt constrained to hold that they were houses within the meaning of the 1967 Act, with the consequence that the lessees were entitled to enfranchise, that is, to acquire the freeholds compulsorily from their lessors on the terms fixed by the Act.
In the Court of Appeal [2010] EWCA Civ 748; [2010] 1 WLR 2317 Lord Neuberger of Abbotsbury MR regretted this result.
He saw it as the probably unintended consequence of amendments made by the Commonhold and Leasehold Reform Act 2002, removing the previous residence requirements.
However, he felt bound to apply his view of the relevant provisions as they stood after those amendments, rather than to decide what the legislature would have said if it had fully appreciated the consequences (para 57).
From the material we have been shown, he was clearly right to think that his interpretation did not reflect Parliaments intentions.
The thinking behind the 2002 legislation is apparent from the preceding Draft Bill and Consultation Paper Commonhold and Leasehold Reform (Cm 4843), published by the Lord Chancellor in 2000.
It included proposals for the introduction of an entirely new form of tenure, known as Commonhold, and for amendment of the existing provisions relating to leases of flats (under the Leasehold Reform, Housing and Urban Development Act 1993) and of houses (under the 1967 Act).
The first paragraph of the Introduction leaves no doubt that its purpose was to address perceived flaws in the residential leasehold system (p 107), not in the leasehold system more generally.
In relation to flats, the governments view was that the residence tests under the 1993 Act were too restrictive, for example, in excluding someone subletting a flat, or occupying a flat as a second home.
The residence requirement would therefore be abolished; but, to restrict the scope for short term speculative gains, it would be replaced by a rule requiring the qualifying tenant to have held the lease for at least two years (pp 155 6).
A similar approach was proposed for leases of houses under the 1967 Act: This would bring the residence test for houses in line with the proposals for flats.
It would allow long leaseholders of second homes to benefit and would also enable leaseholders who lease houses through a company to enfranchise.
Furthermore, as in the case of flats, it would restrict the scope for short term speculative gains (p 189).
There is no evidence then or thereafter of any ministerial or parliamentary intention to extend the scope of the Act more generally, or in particular to confer statutory rights on lessees of buildings used for purely non residential purposes.
Although the 1967 Act like the 1993 Act is in a sense expropriatory, in that it confers rights on lessees to acquire rights compulsorily from their lessors, this has been held not to give rise to any interpretative presumption in favour of the latter.
As Millett LJ said of the 1993 Act: It would, in my opinion, be wrong to disregard the fact that, while the Act may to some extent be regarded as expropriatory of the landlord's interest, nevertheless it was passed for the benefit of tenants.
It is the duty of the court to construe the 1993 Act fairly and with a view, if possible, to making it effective to confer on tenants those advantages which Parliament must have intended them to enjoy. (Cadogan v McGirk [1996] 4 All ER 643, 648) By the same token, the court should avoid as far as possible an interpretation which has the effect of conferring rights going beyond those which Parliament intended.
Statutory definition
Section 2(1) defines house in the following terms: 'house' includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes; and (a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate 'houses', though the building as a whole may be; and (b) where a building is divided vertically the building as a whole is not a 'house' though any of the units into which it is divided may be.
In the present cases, nothing turns directly on the qualifications introduced by the word notwithstanding (which I shall refer to as the proviso).
We are concerned with the main part of the definition, which raises two separate but overlapping questions: (i) is the building one designed or adapted for living in? (ii) is it a house reasonably so called? Both questions remain live in Hosebay; in Lexgorge the first has been conceded in favour of the lessees.
The two parts of the definition are in a sense belt and braces: complementary and overlapping, but both needing to be satisfied.
The first looks to the identity or function of the building based on its physical characteristics.
The second ties the definition to the primary meaning of house as a single residence, as opposed to say a hostel or a block of flats; but that in turn is qualified by the specific provision relating to houses divided horizontally.
Both parts need to be read in the context of a statute which is about houses as places to live in, not about houses as pieces of architecture, or features in a street scene, or names in an address book.
The facts
The first case (Hosebay) concerns three properties, 29, 31, and 39 Rosary Gardens, South Kensington, London SW7.
They were originally built as separate houses as part of a late Victorian terrace forming the west side of Rosary Gardens.
The current leases of Nos 29 and 39 were granted in 1966 for terms expiring in December 2020, subject to covenants for their use as 16 high class self contained private residential flatlets.
The current lease for No 31 was granted in 1971 for a term expiring in December 2030, subject to a covenant restricting its use to that of a single family residence or a high class furnished property for accommodating not more than 20 persons.
It was common ground that the current use, which had begun some time before 1981, was not in accordance with the covenants.
It was unclear from the evidence when the premises had been converted to their present layout.
The judge (para 83) proceeded on the basis that the conversions may well have been carried out substantially before the current leases were granted in 1966 and 1971.
Although there was no evidence as to the actual purpose of the conversions, the Master of the Rolls on the balance of probabilities inferred (principally from the lack of documentation in the hands of the landlords to indicate otherwise) that they had been for the uses described in the leases (para 37).
Hosebay Ltd acquired all three leases in 1996.
On 23 April 2007 it served notices on its landlords under section 8 of the 1967 Act to acquire the freeholds of the three properties.
Judge Marshall QC found that the three properties were at the relevant date being used together to provide short term accommodation for tourists and other visitors to London, or what she described as a self catering hotel (paras 8 and 19).
Each of the three properties had been fully adapted to provide individual rooms for letting out (para 9), with the exception of two rooms in No 31, one of which was used for office and reception purposes, and the other for storage.
The great majority of the rooms could be described as rooms with self catering facilities.
Each room had between one and four beds, furniture, and limited storage space, cooking facilities, and small wet rooms with shower, basin and WC.
Fresh bed linen and room cleaning, but no other services, were provided to those staying in the rooms.
On these facts, the judge concluded that each of the three properties was physically adapted for living in even though the current use was itself too transient to qualify as such.
The Court of Appeal agreed.
I quote the Master of the Rolls: 33.
My primary reason for that conclusion is that, in order to determine whether premises are adapted for living in, one looks at the most recent works of adaptation, and assesses objectively, whether they resulted in the property being adapted for living in 36.
In this case, I consider that the effect of the most recent works of conversion to the three properties, if they were works of adaptation, adapted those properties for living in.
Ignoring one or two rooms, each room in the three properties is a self contained unit of accommodation, with its own basic small shower room/WC, and its own even smaller and more basic cooking facilities.
As Moore Bick LJ pointed out in argument, the rooms are entirely appropriate for letting to students on three year degree courses, and, as Mr Johnson rightly accepted, if they had been, all the rooms, and therefore the three buildings, would have been used for living in.
Even if, as Mr Johnson argued and I am prepared to assume without deciding, the current use of the three properties is not for living in, that certainly does not mean that, viewed objectively, the three properties were not adapted for living in.
The judge and the Court of Appeal held also that the properties were houses reasonably so called, as the Master of the Rolls explained: externally, each of the three properties has the appearance of being a relatively large town house; internally, each of the three properties has been converted so that almost every room can be used as a self contained unit for one or more individuals, with cooking and toilet facilities.
I find it hard to see how the judge could be faulted for concluding that, even if each of the three properties might be called something else as well, they could each reasonably be called a house. (para 38)
The other case (Lexgorge) relates to 48 Queen Anne Street, in Marylebone, London W1.
It was built in the early 18th century as a house comprising five floors including basement, in a terrace of substantial houses.
It was occupied for that purpose for many years until 1888, when it began to be used for commercial purposes.
Coming to more recent times, planning permission was granted in December 1949 for conversion of the second and third floors into a self contained maisonette, and there is some evidence that it was implemented.
However, from about 1961, all four upper floors were used as offices, and they were so used when the notice was served under the Act on 4 March 2005.
The whole building was still in office use in June 2005.
However, by the time of the trial in October 2009, when the judge inspected the property, the upper two floors were in use for residential purposes.
The office use of the lower floors continued.
The current lease was granted in 1951 for a term of 110 years.
The lease described the property as a messuage or residential and professional premises, and restricted its use (subject to landlords' consent) to self contained flats or maisonettes on the upper two floors, professional offices on the first and ground floors, and in the basement storage and lavatory in connection with other parts of the demised premises.
In 1978, the lease was acquired by Lexgorge Ltd.
At the time of the notice the office use of all floors had become established, and therefore lawful for planning purposes, although in breach of the lease as respects the upper floors.
The building is listed as a building of special architectural or historic interest (grade 2); English Heritages records describe it as a Terraced House.
In this case, as already noted, it is conceded by the lessors that at the material date the premises, although used for offices, were still at least in part designed or adapted for living in.
It was held by the judge (Judge Dight) and by the Court of Appeal that it was a house reasonably so called, and therefore within the definition.
The Master of the Rolls said: 53.
If the upper two floors of the property had been empty, I have little doubt but that the property could reasonably have been called a house, bearing in mind its external character and appearance (a classic town house in London's West End), its internal character and appearance at least on the upper two floors (which were, as I understand it, substantially as constructed), the description of the property in the lease as messuage or residential or professional premises, and, to the extent that it is relevant, the terms of the lease (restricting the use of the upper two floors to residential).
I find it hard to see why the fact that the upper two floors had been used (even for many years) as offices (in contravention of the terms of the lease) should wreak such a change that the property could no longer reasonably be called a house.
The authorities
The first relevant case under the Act was Lake v Bennett [1970] 1 QB 663.
However, I find it helpful to start from an authority in a different statutory context, Lord Denning MRs judgment in Ashbridge Investments Ltd v Minister of Housing and Local Government [1965] 1 WLR 1320.
The case related to compulsory acquisition of two properties for the purpose of slum clearance under the Housing Acts.
The level of compensation would vary significantly depending on whether the property was or was not a house.
In the absence of a statutory definition of house, Lord Denning adopted the following formula: a building which is constructed or adapted for use as, or for the purposes of, a dwelling (p 1324).
In Lake v Bennett he suggested that the draftsman of the 1967 Act definition had adopted these words, but added the limitation reasonably so called (p 670).
Ashbridge itself concerned two adjoining buildings in the same terrace, which had been designated for compulsory purchase, the first (No 17) as an unfit house, the second (No 19) as a building other than a house.
The buildings were very similar in appearance; both had been designed as shops with rear living rooms and living quarters above, but neither was in current use for living purposes.
No 17, which had undergone no structural alterations, was held by the Minister to have retained its identity as a dwelling.
No 19, by contrast, was held to have lost its identity as a dwelling, following structural alterations involving the extension of the shop into the rear living area (p 1325).
The latter decision was described in the Court of Appeal as extraordinary (p 1327, per Harman LJ), but that did not undermine the validity of the decision in relation to No 17.
Lord Dennings formula can be seen as his way of expressing the present identity (in the inspectors words), or perhaps function, of a building not currently in use, defined by reference to the purpose of its construction or subsequent adaptation.
Lake v Bennett itself concerned a three storey house, the ground floor of which had been converted into a shop.
There was no issue as to the first part of the definition, as it was clear that the building was at least in part adapted for use for living in.
The Court of Appeal held that notwithstanding the commercial element, the building as a whole was a house reasonably so called and was therefore within the scope of the 1967 Act.
The reasoning of Lake v Bennett was adopted and extended by the House of Lords in Tandon v Trustees of Spurgeons Homes [1982] AC 755, which remains the leading House of Lords authority on this part of the definition.
Unfortunately the reasoning of the single majority speech of Lord Roskill, although carrying the unqualified support of Lord Scarman and Lord Bridge, is not without difficulty.
Further, the case needs to be read in its factual context.
As in Lake v Bennett, the main problem was to reconcile the statutory recognition (under the proviso) that the building need not be solely designed or adapted for living in, with the need for the building as a whole to be a house reasonably so called.
This is not a problem in the present cases.
At the end of his judgment Lord Roskill referred with approval to Lake v Bennett, which he welcomed as stating a principle and [confining] the question of fact to a narrow area , and from which he deduced the following three propositions of law : (1) as long as a building of mixed use can reasonably be called a house, it is within the statutory meaning of house, even though it may also reasonably be called something else; (2) it is a question of law whether it is reasonable to call a building a house; (3) if the building is designed or adapted for living in, by which, as is plain from section 1(1) of the Act of 1967, is meant designed or adapted for occupation as a residence, only exceptional circumstances, which I find it hard to envisage, would justify a judge in holding that it could not reasonably be called a house.
They would have to be such that nobody could reasonably call the building a house. (p 767)
Although expressed as propositions of law, they do not in my view offer much assistance as such, at least beyond the facts of the case.
The first proposition was in terms directed to a building in mixed residential and commercial use.
Such a building could plausibly be described either as a house with a shop below, or as a shop with a dwelling above.
That was enough to show that it could reasonably be called a house.
That proposition cannot in my view be applied more generally.
The mere fact that a building may be described as a house for other purposes (for example, in the English Heritage list) is not enough to bring it within this part of the definition.
The second proposition, that what is a house reasonably so called is a question of law, is not easy to extract from the judgments in Lake v Bennett.
Lord Denning described the judges negative answer to that question as an inference from primary facts depending in part at least on the true interpretation of the words reasonably so called, and one with which the court could interfere if it was a conclusion to which the judge could not reasonably come ([1970] 1 QB 663, 671).
Salmon LJ described it as partly a question of fact but also a question of law as to the true construction of the meaning of the word house in this Act. (p 672).
Elsewhere Lord Roskill himself had accepted counsels submission that the definition of house was a mixed question of fact and law ([1982] AC 755, 765), but he saw it as one in which, in the interests of consistency, the question of fact should be confined within narrow limits: p 767.
More modern authorities have leant against such conceptual debates (see, for example, Lord Hoffmann, in Moyna v Secretary of State for Work and Pensions [2003] UKHL 44, [2003] 1 WLR 1929, paras 25 27).
In any event, none of these formulations throws much light on how the question should be answered in any particular case.
The third proposition is again in terms hard to extract from Lake v Bennett.
Lord Denning described the case before them as a typical case, but thought that difficult issues might arise in other cases: [1970] 1 QB 663, 671.
He did not suggest that, in such cases, an affirmative answer to the first question would lead to any presumption in respect of the second.
The examples given in the judgments (pp 671, 672) of cases that would not satisfy the second test a block of flats, the Ritz Hotel or Rowton House (a working mens hostel) can hardly be described as exceptional.
Rather than a free standing proposition of law, deduced from Lake v Bennett, this proposition seems more an expression of Lord Roskills own view as to the correct policy approach to a building of the kind before him, which was adapted at least in part for occupation as a residence.
It may be that the real difference between the majority and the minority in Tandon came down to one of policy.
Lord Wilberforce (in the minority) thought it clear that the building could not reasonably be called a house; it was rather a mixed unit consisting in part of a shop and in part of a dwelling, and as such was not within the policy of the Act: [1982] AC 755, 760.
For Lord Roskill (in the majority) Parliament had made clear that such mixed units were not in principle to be excluded.
He noted that such small shops combined with living accommodation were a familiar feature of towns and villages across the country (p 766).
In this he echoed the view of Salmon LJ (Lake v Bennett [1970] 1 QB 663, 672), who thought that a tenant living above a shop in the circumstances of that case was obviously the sort of person to whom the legislature intended to give security of tenure.
Such policy considerations do not assist the lessees in this case.
For the reasons already given, policy if anything points the other way.
Of more significance for present purposes is the relative lack of weight given by the majority to the appearance of the buildings as a factor in answering the second question.
Lord Fraser of Tullybelton (in the minority) had regarded appearance as the main element in the character of a building: [1982] AC 755, 762.
He attached particular weight to the photograph which showed a shop in a row of shops, in contrast with the converted house in Lake v Bennett; to him it was obvious from the photograph that the building could not reasonably be called a house (p 763).
That, however, was not the approach of the majority.
Lord Roskill had apparently accepted that in determining the character of the building for these purposes, physical appearance could be relevant, as also its history and the terms of the lease (p 766).
However, those factors played no detectable part in the final decision.
The determinative points were that the proportion of residential use, even if only 25%, was substantial (p 766), and that a tenant occupying such a building as his residence was within what was perceived to be the scope of the protection intended by Parliament (p 766).
Those factors were enough to bring the case within the principle established by Lake v Bennett notwithstanding the differences from that case in relation to the original design and physical appearance of the respective buildings.
The only other relevant authority at the highest level is the much more recent decision in Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 WLR 289.
The House of Lords held that a building previously designed or adapted for living in remained a house, even though at the material time it was not only disused but in parts stripped out to the basic structural shell (para 24).
In contrast to Tandon this case was concerned solely with the first question.
It was not in dispute that if that question was answered in the affirmative the building qualified as a house reasonably so called.
As will be seen I do not regard the case as determinative in either of the present appeals.
However, some comment is desirable, in view of the change of view of Lord Neuberger on one aspect of his leading speech.
He had proposed the following grammatical analysis of the relevant words of the statutory definition: 18.
In my judgment, the words designed or adapted for living in, as a matter of ordinary English, require one first to consider the property as it was initially built: for what purpose was it originally designed? That is the natural meaning of the word designed, which is a past participle.
One then goes on to consider whether work has subsequently been done to the property so that the original design has been changed: has it been adapted for another purpose, and if so what purpose? When asking either question, one is ultimately concerned to decide whether the purpose for which the property has been designed or adapted, was for living in. 19.
The notion that the word designed in section 2(1) is concerned with the past is reinforced by the later words in the same section was or is [not] solely designed or adapted.
The use of the past tense is striking in a section which contains a number of verbs only in the present tense.
In my judgment, the expression is to be construed distributively: thus, the word was governs designed, and the word is governs adapted.
The present tense is appropriate for adapted because, as Lord Scott of Foscote pointed out in argument, there could have been several successive adaptations, and it is only the most recent which is relevant.
The word was is in any event difficult to reconcile with Grosvenor's case (as accepted by the judge and the Court of Appeal), as it would be irrelevant whether the property could have been fit for residential occupation at any time in the past.
Later in his speech, he considered the implications of this analysis for other cases, including how the definition should apply to a property which had been designed for living in, but had subsequently been adapted to another use.
As a matter of literal language, he thought such a property would be within the definition.
If, as appeared, designed and adapted were alternative qualifying requirements, a building which had been designed as a house would remain within the definition in spite of its adaptation to other uses.
Such a conclusion, he accepted, might seem surprising, but it could have been more readily understandable when taken with the residence requirement in the original Act (para 26).
It was on this latter point that, as Master of the Rolls in the present case, he has had second thoughts.
It had been put directly in issue by the tenants in Hosebay, who argued (as they have in this court) that because the buildings were originally designed for living in, that was sufficient to bring them within the definition, regardless of any subsequent adaptation to other uses.
On reconsideration, Lord Neuberger felt bound to reject the argument.
Although the literalist meaning of designed or adapted was that either alternative would do, that was not by any means what the words naturally convey.
His earlier thoughts had been based on an over literalist approach to the language used by the legislature: [2010] 1 WLR 2317, para 31.
In his revised view, a building originally designed for living in, but adapted for some other purpose, was not designed or adapted for living in, unless subsequently re adapted for that purpose (para 40).
I have no doubt, with respect, that Lord Neubergers second thoughts on this point were correct.
Context and common sense argue strongly against a definition turning principally on historic design, if that has long since been superseded by adaptation to some other use.
However, that approach may also have implications for the earlier part of his grammatical analysis in Boss Holdings (see para 31 above).
The expression was or is designed or adapted is, as he says, to be read distributively: that is, as equivalent to was designed or is adapted.
While that may support the view that the word designed is directed to the past, the same cannot be said of the expression is adapted.
Nor (pace Lord Scott) is that grammatically the same as was most recently adapted.
Logically that expression can only be taken as directed to the present state of the building.
Once it is accepted that a literalist approach to the definition is inappropriate, I find myself drawn back to a reading which accords more closely to what I have suggested was in Lord Dennings mind in Ashbridge [1965] 1 WLR 1320, that is a simple way of defining the present identity or function of a building as a house, by reference to its current physical character, whether derived from its original design or from subsequent adaptation.
Furthermore, I would not give any special weight in that context to the word adapted.
In ordinary language it means no more than made suitable.
It is true that the word is applied to the building, rather than its contents, so that a mere change of furniture is not enough.
However, the word does not imply any particular degree of structural change.
Where a building is in active and settled use for a particular purpose, the likelihood is that it has undergone at least some physical adaptation to make it suitable for that purpose.
That in most cases can be taken as the use for which it is currently adapted, and in most cases it will be unnecessary to look further.
That interpretation does not of course call into question the actual decision in Boss Holdings.
The basis of the decision, as I understand it, was that the upper floors, which had been designed or last adapted for residential purposes, and had not been put to any other use, had not lost their identity as such, merely because at the material time they were disused and dilapidated.
It was enough that the building was partially adapted for living in, and it was unnecessary to look beyond that: see [2008] 1 WLR 289, para 25.
That reasoning cannot be extended to a building in which the residential use has not merely ceased, but has been wholly replaced by a new, non residential use.
Finally I must refer to Prospect Estates Ltd v Grosvenor Estate Belgravia [2008] EWCA Civ 1281; [2009] 1 WLR 1313.
The Court of Appeal held that a building which had been designed and built as a house, but which for many years had been used almost wholly as offices, was not a house within the definition.
As in Tandon the case turned ultimately only on the second question, whether the building was a house reasonably so called.
The facts were much closer to those of the present cases.
The leading judgment was given by Mummery LJ.
The building had been built in the 1850s as a house for residential occupation, but since 1958 it had been used substantially (88.5% of the floorspace) for office purposes.
Under the most recent lease granted in 1972 the use was restricted to offices on all floors, except the top floor which was limited to use as a flat for a director or senior employee of a business occupying the offices below.
It was accepted by the lessors that there had been insufficient works of adaptation to conclude that it had ceased to be designed for living in (Mummery LJ, para 9), but they challenged the judges conclusion that it was a house reasonably so called.
That had been based, as the overwhelmingly significant factor, on the fact that the building was designed for living in and that its structure and appearance have (largely) remained unchanged (para 8).
Mummery LJ held that the judge had given too much weight to those factors, and insufficient weight to the prescriptive terms of the lease, the actual uses of the building and the relative proportions of the mixed use at the relevant date (para 20).
Goldring LJ, agreeing, found it impossible to accept that a building can reasonably be called a house although no one can lawfully live in virtually 90% of it (para 23).
In the present case, the Master of the Rolls ([2010] 1 WLR 2317, para 43) questioned the weight placed on that case by counsel for the present appellants in Hosebay: There can be no doubt that the external and internal appearance of the properties are highly relevant factors on this issue, and it is clear from the Prospect Estates case [2009] 1 WLR 1313 that, in so far as user is significant, the permitted use under the lease is a relevant factor.
In those circumstances, even assuming that actual use is also relevant, I find it hard to see how it can be sensibly said that each of the three properties cannot reasonably [be] called a house.
To hold otherwise would involve concluding that the actual user, even where it involved people occupying virtually all the rooms in the building for relaxing, sleeping, cooking and washing, albeit on a short term basis, trumped all the other factors to the extent of disabling the building from being able to be a house . reasonably so called.
He also doubted the decisive weight placed by Goldring LJ on the terms of the lease.
He thought the thrust of the judgments in Lake v Bennett [1970] 1 QB 663 and the opinion of Lord Roskill in Tandon [1982] AC 755 was that the question was to be determined essentially by reference to [the buildings] external and internal physical character and appearance (para 46).
He was not convinced that it would occur to most people, asked whether a building could reasonably be called a house, to ask about the permitted use under any lease, or that they would be influenced if told what the permitted use was (para 47).
He suggested that the ratio of Prospect Estates should be treated as being limited to a case where residential use is either prohibited entirely, or restricted to a very small part of the building, and the actual use accords with that (para 49).
As will be apparent from my earlier analysis of Tandon, I cannot agree that Lord Roskill regarded external and internal physical character and appearance as the determining factors.
I agree with the Master of the Rolls that the terms of the lease as such should not have been treated as the major factor.
However, in so far as Mummery LJ treated the use of the building, rather than its physical appearance, as determinative, his approach was in my view entirely consistent with the reasoning of the majority in Tandon as I have explained it.
I consider that Prospect Estates [2009] 1 WLR 1313 was rightly decided, and that the ratio need not be limited in the way the Master of the Rolls proposed.
The present cases
which I can deal with briefly.
I would allow the appeal in Hosebay on the grounds that a building which is wholly used as a self catering hotel is not a house reasonably so called within the meaning of this statute.
As appears from para 38 of their judgment (quoted above), the contrary view of the Court of Appeal turned on two main points: (i) the external appearance of each property as a town house; (ii) the internal conversion to self contained units, with cooking and toilet facilities.
I find it difficult with respect to see the relevance of the second point to this part of the definition, which only arises in relation to a building which is in some sense adapted for living in under the first part.
It is not suggested that the building is divided in a way which comes within the proviso.
The first point, for the reasons given in my analysis of Tandon, should not have been given determinative weight.
The fact that the buildings might look like houses, and might be referred to as houses for some purposes, is not in my view sufficient to displace the fact that their use was entirely commercial.
I turn to consider the application of these principles to the present appeals,
In these circumstances I find it unnecessary to reach a concluded view on the application of the first part of the definition in this appeal.
I agree with the appellants (and the judge) that living in means something more settled than staying in; and that the present use does not qualify as such.
There is more room for debate, however, whether the premises are to be taken as adapted solely for such use, to the exclusion of longer term occupation.
The Court of Appeal, as I understand it, were influenced not only by the consideration that the rooms might be used (for example) for longer term student occupation, but also that their current layout probably dates from earlier adaptation to the uses described in the leases, which could well be regarded as sufficiently settled to qualify as living in.
One of the values of the two part definition is that it becomes unnecessary to resolve such narrow factual issues.
In Lexgorge I would also allow the appeal on similar grounds.
A building wholly used for offices, whatever its original design or current appearance, is not a house reasonably so called.
The fact that it was designed as a house, and is still described as a house for many purposes, including in architectural histories, is beside the point.
In this case no issue arises under the first part of the definition.
It is unnecessary to consider whether the concession in that respect was rightly made, although it is possible that it was based on a wider interpretation of Boss Holdings [2008] 1 WLR 289 than my own analysis would have supported.
In summary, I would allow both appeals, and hold that neither building was on the relevant date a house within the meaning of section 2 of the 1967 Act.
| UK-Abs | These two joined appeals raise the question of whether a property used wholly for commercial purposes may qualify as a house for the purposes of legislation governing the right to leasehold enfranchisement (i.e. the right of a lessee in certain circumstances compulsorily to acquire the freehold of the building from his/her landlord) [1].
In the Hosebay case, the respondents owned the leases of three buildings in central London which had originally been built as separate houses as part of a late Victorian terrace [10].
The leases restricted the use of the houses to use for residential purposes, but on the date when the respondent served notices on the appellants under s.8 of the Leasehold Reform Act 1967 (the 1967 Act) seeking compulsorily to acquire the freehold of the buildings, they were being used wholly as a self catering hotel [10,13].
In the Lexgorge case, the respondent owned the lease of a five storey building in central London also originally built as a house [16].
The terms of the lease restricted the use of the upper two floors of the building to residential flats [18].
On the date when the respondent served a notice under s.8 of the 1967 Act, the building was used wholly for office purposes [17].
The building was listed as a building of special architectural or historic interest, and English Heritages records described it as a terraced house [18].
The issue in both appeals was whether the properties constituted houses within the meaning of s.2(1) of the 1967 Act.
This raised two separate but overlapping questions: (i) Were the buildings designed or adapted for living in? (ii) Were they houses reasonably so called? [8] Both elements of the definition were disputed by the appellants in the Hosebay case, but only second element of the definition was disputed by the appellant in the Lexgorge case [8].
The judge at first instance in each case concluded that the buildings were houses for the purposes the 1967 Act, and the Court of Appeal reluctantly upheld those decisions [1,2].
The Supreme Court unanimously allows both appeals.
It holds that neither property constituted a house for the purposes of the 1967 Act on the date when the relevant statutory notice was served.
The judgment of the Court is given by Lord Carnwath.
The decision of the Court of Appeal was not the result intended by Parliament when, pursuant to the Commonhold and Leasehold Reform Act 2002, it removed the requirements of residence from the 1967 Act [3 5].
As far as possible, an interpretation of the 1967 Act which has the effect of conferring rights on lessees going beyond those which Parliament intended to confer should be avoided [6].
The first element of the definition of house in s.2(1) of the 1967 Act (i.e. designed or adapted for living in) looks to the identity or function of the building based on its physical characteristics, the second element (i.e. a house reasonably so called) ties the definition to the primary meaning of house as a single residence, as opposed to, for example, a hostel or a block of flats [9].
Both parts of the definition need to be read in the context of a statute which is about houses as places to live in, not about houses as pieces of architecture or features in a street scene [9].
As to the first part of the definition of house in s.2(1) of the 1967 Act, the words designed and adapted do not constitute alternative qualifying requirements, despite the literal meaning of the provision [34].
Context and common sense argue strongly against a definition turning principally on historic design, if that has long been superseded by adaptation to some other use [34].
The words is adapted in s.2(1) refer to the present state of the building and do not imply any particular degree of structural change [34,35].
As to the second part of the definition, the external and internal physical appearance of a building should not be treated as determinative of whether it is a house reasonably so called , nor should the terms of the lease be treated as a major factor [41].
The buildings in the Hosebay case were not houses reasonably so called [43].
The fact that they might look like houses and might be referred to as houses for some purposes was not sufficient to displace the fact that their use was entirely commercial [43].
It was unnecessary to decide whether the buildings were designed or adapted for living in [44].
The building in the Lexgorge case was also not a house reasonably so called because it was used wholly for office purposes [45].
The fact that it was designed as a house and is still described as a house for many purposes (such as architectural histories) was beside the point [45].
|
A refugee who has been granted a right of lawful presence in the receiving state needs the assurance that this right will not be withdrawn, with the result that he or she may again become an uprooted person in search of refuge.
That assurance is given by article 32(1) of the Geneva Convention relating to the Status of Refugees (1951) (Cmd 9171) and the New York Protocol (1967) (Cmnd 3906), which provides: The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order.
This provision is to be contrasted with article 33(1), which provides: No Contracting State shall expel or return (refouler) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.
Every refugee has the protection of article 33.
The protection of article 32 is more generous.
Its effect is that, once a refugee has been admitted or his presence has been legalised and so long as entitlement to refugee status continues, he is entitled to stay indefinitely in the receiving state.
He can only forfeit that right by becoming a risk to national security or by disturbing the public order.
But he requires to have been afforded a certain degree of attachment to the receiving state before this privilege becomes available.
The question that this case raises is the extent of the attachment that is needed to attract that protection.
Does the protection of article 32 extend to a refugee who has been temporarily admitted to the United Kingdom according to the rules of its domestic law and has engaged with the processes that its legislation provides to determine his status, but has not yet been given leave to enter or to remain here? In other words, does article 32 apply only to a refugee who has been given the right lawfully to stay in the contracting state, as its domestic law would answer that question? Or must the words lawfully present in the territory be given an extended and autonomous meaning, so as to ensure that a refugee who has not yet been given a right to remain in the territory is afforded protection under article 32 that extends beyond the basic obligation under article 33 not to expel or return (refouler) to a territory where his life or freedom would be threatened for a Convention reason? Should they be given this extended meaning to prevent his removal to a country where he will not be able to enjoy the full extent of the rights that the Convention extends to a refugee?
The facts
The appellant is of Eritrean nationality.
But she has never lived in Eritrea.
She was born on 2 July 1981 and was formerly resident in Ethiopia.
She came to the United Kingdom on 3 July 1998.
Immediately on her arrival in this country she claimed protection as a refugee.
Her reason was that she feared persecution in both Eritrea and Ethiopia.
Her claim was registered, and she was granted temporary admission into the United Kingdom under paragraph 21 of Schedule 2 to the Immigration Act 1971.
Paragraph 16 of Schedule 2 provides that a person liable to examination and removal upon his arrival in the United Kingdom may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter.
Paragraph 21 of the Schedule provides that a person liable to detention under paragraph 16 may, under the written authority of an immigration officer, be temporarily admitted to the United Kingdom without being detained.
Section 11(1) of the 1971 Act provides that a person who has not otherwise entered the United Kingdom shall be deemed (for the purposes of that Act) not to do so as long as he is detained, or temporarily admitted or released while liable to detention under the powers conferred by Schedule 2 to the Act.
The appellants status has not changed since the date of her arrival more than 13 years ago.
Her temporary admission has been extended from time to time, and she remains liable to detention.
The latest notification of temporary admission was issued to her on 17 October 2011.
She was told that she must reside at the address given on the notification form and she was to report to an immigration official on 22 December 2011 and then on the fourth Thursday every two months.
She was also told that she was not allowed to work or engage in any business unless she had been explicitly granted permission to do so.
These instructions assume that, as she has been given temporary admission only and is still liable to be detained, she is not entitled to the rights that articles 18 and 26 of the Convention afford to refugees who are lawfully in this countrys territory: see para 23, below.
The appellant claimed in a statement made shortly after her arrival that she had a well founded fear of persecution if she were to be returned to Ethiopia.
This was because she was afraid that Ethiopia would send her to Eritrea.
In a later statement she said that she feared persecution in Eritrea because she had not taken part in the war between Eritrea and Ethiopia.
Her claims for asylum and humanitarian protection were refused in a letter dated 1 November 2004.
In a notice of refusal of leave to enter dated 5 November 2004 she was informed that the Secretary of State proposed to give directions for her removal to Eritrea.
She appealed to an adjudicator.
In a decision that was promulgated on 14 February 2005 the adjudicator said that he was satisfied that she would be at serious risk of persecution or ill treatment because of her religion as a born again Christian if she were to be removed to Eritrea.
But he was not satisfied that she would be considered as a draft evader or a deserter.
He dismissed her appeal on the basis that she could safely be returned to Ethiopia.
The appellant sought permission to appeal to the Immigration Appeal Tribunal.
This was on the basis that the adjudicator, having found her to be of Eritrean nationality, should have allowed her appeal as he found that she had a well founded fear of persecution in Eritrea.
On 23 January 2006 her appeal came before the Asylum and Immigration Tribunal, as the Immigration Appeal Tribunal had now become.
It was conceded on behalf of the Secretary of State that her appeal should have been allowed, as the proposal that had been communicated to the appellant on 5 November 2004 was that directions were to be given for her removal to Eritrea.
In his determination, which was promulgated on 1 February 2006 and forwarded to the appellants representatives on 20 February 2006, the senior immigration judge said that the tribunal was satisfied that the adjudicator had erred in law.
But, using the adjudicators clear and reasoned findings of fact, which were not challenged, the tribunal found that the appellant was a refugee and that she was entitled to international protection as her fear of persecution for a Convention reason in Eritrea was well founded.
It also found that her removal to Eritrea would be unlawful as it would lead to her ill treatment contrary to her protected rights under article 3 of the European Convention on Human Rights.
The Secretary of State did not appeal against this decision.
On 24 August 2006 the Secretary of State issued a fresh reasons for refusal letter and served a new notice of decision to refuse the appellant leave to enter.
Notwithstanding the fact that the appellant had already been recognised to be a refugee from Eritrea, she was told that this time her asylum and human rights claims had been examined on the basis that she was an Ethiopian national.
She was refused leave to enter the United Kingdom, and she was notified that it was proposed to give directions for her removal to Ethiopia.
The letter stated that, in the light of all the evidence available, it had been concluded that the appellant had not established a well founded fear of persecutions in Ethiopia and did not qualify for asylum, that her asylum claim was refused and that it had been recorded as determined on 1 November 2004.
It also stated that it had been concluded that her removal would not be contrary to the United Kingdoms obligations under the ECHR.
The appellant lodged an appeal against this decision in order to protect her position.
But her primary position is that she is entitled to the status of a refugee on the basis of the determination by the Asylum and Immigration Tribunal of 1 February 2006.
On 25 September 2006 the appellant commenced these proceedings for judicial review of the decision of 24 August 2006.
She seeks a mandatory order requiring the Secretary of State to implement the decision of the AIT granting her leave to remain in the United Kingdom as a refugee, and an order quashing the decision in the letter of 24 August 2006 refusing her leave to remain and proposing that directions be given for her removal to Ethiopia.
The Ethiopian appeal has been adjourned pending the outcome of these proceedings.
In a letter dated 13 November 2006 which was annexed to his Summary Grounds of Defence the Secretary of State informed the appellants solicitors that he was no longer proceeding on the basis that the appellant was an Ethiopian national.
He was proceeding on the basis that she was an Eritrean national.
But he maintained his position that the appellant could safely be removed to Ethiopia for the reasons given in the letter of 24 August 2006.
The appellant was granted permission to apply for judicial review by Pitchford J on 27 February 2007.
On 19 December 2008 Nicola Davies QC, sitting as a deputy judge of the High Court, quashed the decision declining to grant the appellant refugee status and ordered the Secretary of State to recognise her as a refugee and grant her leave to remain: [2008] EWHC 3162 (Admin).
In para 22 of her judgment she said: I am satisfied that a determination of the refugee status of the claimant in accordance with article 1 of the Refugee Convention was made by an appropriate tribunal, the AIT.
The decision is binding upon the defendant and affords the claimant the protection of article 32(1).
Accordingly I grant the relief sought by the claimant.
In reaching this decision the deputy judge applied the following observation of Lord Brown of Eaton under Heywood in Szoma v Secretary of State for Work and Pensions [2005] UKHL 64, [2006] 1 AC 564, para 24: The term refugee in article 32(1) of the Refugee Convention can only mean someone already determined to have satisfied the article 1 definition of that term (as for example in article 23 although in contrast to its meaning in article 33).
Were it otherwise there would be no question of removing asylum seekers to safe third countries and a number of international treaties, such as the two Dublin Conventions (for determining the EU state responsible for examining applications lodged in one member state) would be unworkable.
As she saw it, therefore, the effect of the tribunals determination that the appellant was a refugee of itself meant that she had a right to stay in this country under article 32.
The Court of Appeal (Sir Anthony May P, Longmore and Stanley Burnton LJJ) reversed the judges decision [2010] EWCA Civ 643, [2010] 1 WLR 2858.
In para 48 of his judgment Stanley Burnton LJ said that he would hold: that article 32 applies only to a refugee who has been granted leave to enter and to stay in the United Kingdom.
I would reject the contention that temporary admission or leave to enter for the purpose of the determination of a claim for asylum (or any other ground for claiming a right to stay) renders a stay lawful for the purpose of article 32.
The purpose of article 32 is to give security of residence to a refugee who has been given the right to live in the contracting state in question.
He declined to apply Lord Browns statement in Szoma v Secretary of State for Work and Pensions.
In para 45 he acknowledged that the decision in that case was binding authority of the meaning of lawfully present in the United Kingdom in paragraph 4 of Part 1 of the Schedule to the Social Security (Immigration and Asylum) Consequential Amendments Regulations 2000 (SI 2000/636), which was the provision under consideration in that case.
But he said that it was clear that Lord Brown was not deciding any question of removability under the 1971 Act.
He also held that the appeal that was determined by the tribunal was not a status appeal under section 83 of the Nationality, Immigration and Asylum Act 2002, but an appeal against an immigration decision under section 82 of that Act.
So it could not have the effect of a direction to the Secretary of State to grant asylum: para 58.
The legislative provisions
As the Secretary of States argument is that the answer to the question whether a refugee is lawfully in the territory must be determined solely with reference to domestic law, the provisions of domestic law which are relevant to the appellants case form an important part of the background.
The leading provision is section 11(1) of the Immigration Act 1971, which provides: A person arriving in the United Kingdom by ship or aircraft shall for purposes of this Act be deemed not to enter the United Kingdom unless and until he disembarks, and on disembarkation at a port shall further be deemed not to enter the United Kingdom so long as he remains in such area (if any) at the port as may be approved for this purpose by an immigration officer; and a person who has not otherwise entered the United Kingdom shall be deemed not to do so as long as he is detained, or temporarily admitted or released while liable to detention, under the powers conferred by Schedule 2 to this Act.
In R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514, the House of Lords applied that provision to the case of Mr Musisi, an asylum seeker of Ugandan nationality who had come to this country from Kenya and had been refused leave to enter the United Kingdom.
It held that, even if he were properly to be treated as a refugee from Uganda, this would not present an obstacle to his return to Kenya.
The argument that he was protected by article 32 because his status as a refugee meant that he was lawfully in the territory was rejected.
Lord Bridge of Harwich said at p 526: The United Kingdom was already a party to the Convention when the Act was passed and it would, to my mind, be very surprising if it had the effect contended for.
But I am satisfied that the deeming provision enacted by section 11(1) makes Mr Collinss submission on this point quite untenable.
Then there are the provisions which set out the procedure that is to be adopted.
Paragraph 2 of Schedule 2 to the 1971 Act provides for the examination of persons who have arrived in the United Kingdom by immigration officers for the purpose of determining whether, if he is not patrial, he may or may not enter the United Kingdom without leave and, if he may not, he should be given leave or should be refused leave.
Paragraph 16(1) provides: A person who may be required to submit to examination under paragraph 2 above may be detained under the authority of an immigration officer pending his examination and pending a decision to give or refuse him leave to enter.
Paragraphs 21(1) and (2) provide (as amended by section 10 of and paragraph 10 of the Schedule to the Immigration Act 1988): (1) A person liable to detention or detained under paragraph 16 above may, under the written authority of an immigration officer, be temporarily admitted to the United Kingdom without being detained or be released from detention; but this shall not prejudice a later exercise of the power to detain him. (2) So long as a person is at large in the United Kingdom by virtue of this paragraph, he shall be subject to such restrictions as to residence, as to his employment or occupation and as to reporting to the police or an immigration officer as may from time to time be notified to him in writing by an immigration officer.
Immigration and asylum appeals are provided for in Part V of the Nationality, Immigration and Asylum Act 2002.
Sections 82 and 83, as amended by sections 26(2) and 26(3) of the Asylum and Immigration (Treatment of Claimants, etc) Act 2004, and section 84 provide for a general right of appeal, for a right of appeal in the case of an asylum claim and for the grounds of appeal respectively.
Section 82(1) provides that where an immigration decision is made in respect of a person he may appeal to the tribunal.
A definition of the expression immigration decision is provided in section 82(2).
It includes, so far as relevant: (a) refusal of leave to enter the United Kingdom, (b) refusal of entry clearance (g) a decision that a person is to be removed from the United Kingdom by way of directions under section 10(1)(a), (b) or (c) of the Immigration and Asylum Act 1999 (c 33) (removal of person unlawfully in United Kingdom)
Section 83 provides that a person may appeal to the tribunal against the rejection of his asylum claim.
Section 84(3) provides that an appeal under section 83 must be brought on the grounds that removal of the appellant from the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention.
The expression asylum claim is defined in section 113, as substituted by section 12 of the Immigration, Asylum and Nationality Act 2006, as a claim made by a person that to remove the person from or require him to leave the United Kingdom would breach the United Kingdoms obligations under the Refugee Convention.
At the relevant time paragraph 334 of the Statement of Changes in Immigration Rules (1994) (HC 395) provided An asylum applicant will be granted asylum in the United Kingdom if the Secretary of State is satisfied that: (i) he is in the United Kingdom or has arrived at a port of entry in the United Kingdom; and (ii) he is a refugee, as defined by the [Refugee] Convention and Protocol; and (iii) refusing his application would result in him being required to go (whether immediately or after the time limited by any existing leave to enter or remain) in breach of the Convention and Protocol, to a country in which his life or freedom would be threatened on account of his race, religion, nationality, political opinion or membership of a particular social group.
Section 2 of the Asylum and Immigration Act 1993, which has as its side note the words Primacy of the Convention, provides: Nothing in the immigration rules (within the meaning of the 1971 Act) shall lay down any practice which would be contrary to the Convention.
The Refugee Convention
By article 1A(2) of the Convention the term refugee applies to any person who as a result of events occurring before 1 January 1951 and owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it.
The rights that attach to the status of refugee under the Convention depend in each case on the possession of some degree of attachment to the contracting state in which asylum is sought.
Drawing on the way the hierarchy of attachment has been described by Professor Hathaway, Rights of Refugees under International Law (Cambridge, 2005), pp154 160, under the heading Attachment to the Asylum State, the appellants written case provides a helpful analysis.
An examination of the Convention shows that it contemplates five levels of attachment to the contracting states, which from the weakest to the strongest may be set out as follows: a. subject to the contracting states jurisdiction (articles 3, 5, 7(1), 7(3), and (4), 9, 12, 16(1) and (3), 17(3), 20, 22, 24(3) and (4), 29, 30, 33 and 34); b. physical presence [sur leur territoire] (articles 4, 27 and 28(1)); c. lawful presence [se trouvant rgulirement sur leur territoire] (articles 18, 26 and 32); d. lawful stay [rsidant rgulirement sur leur territoire ] (articles 7(2), 10, 15, 17, 19, 21, 23, 24(1) (3), 25 and 28); and e. habitual residence [o il sa rsidence habituelle] (articles 14 and 16(2)).
The level of attachment which article 32 requires is commonly referred to by the commentators as lawful presence: eg Hathaway, Rights of Refugees in International Law, 657.
Article 32 provides: 1.
The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order. 2.
The expulsion of such a refugee shall be only in pursuance of a decision reached in accordance with due process of law.
Except where compelling reasons of national security otherwise require, the refugee shall be allowed to submit evidence to clear himself, and to appeal to and be represented for the purpose before competent authority or a person or persons specially designated by the competent authority. 3.
The Contracting States shall allow such a refugee a reasonable period within which to seek legal admission into another country.
The Contracting States reserve the right to apply during that period such internal measures as they may deem necessary.
Articles 18 and 26 require the same level of attachment.
Article 18, which is headed self employment, provides: The Contracting States shall accord to a refugee lawfully in their territory treatment as favourable as possible and, in any event, not less favourable than that accorded to aliens generally in the same circumstances, as regards the right to engage on his own account in agriculture, industry, handicrafts and commerce and to establish commercial and industrial companies.
Article 26, which is headed freedom of movement, provides: Each Contracting State shall accord to refugees lawfully in its territory the right to choose their place of residence to move freely within its territory, subject to any regulations applicable to aliens generally in the same circumstances.
The issues
The dispute between the parties is as to whether the appellant is entitled to the protection of article 32 of the Convention, which precludes the contracting states from expelling a refugee who is lawfully in their territory save on grounds of national security or public order.
At first sight the question at issue is a relatively narrow one, directed to the meaning of the phrase lawfully in their territory.
For the Secretary of State Miss Giovannetti QC submits that the appellant is not, and never has been, lawfully in the United Kingdom for the purposes of that article.
Nor will she be lawfully in the United Kingdom for its purposes if she loses the Ethiopian appeal.
There will be no obstacle to her removal should that event occur and she were to lose her article 3 case too.
The question is to be determined solely by reference to the domestic law of the state in question.
The effect of the relevant legislation is that a refugee is not lawfully present in the United Kingdom if she does not have leave to enter or remain in this country.
So the Secretary of State will be free to bring her temporary admission to an end if her appeal against the directions for her removal to Ethiopia is dismissed.
Mr Drabble QC for the appellant, on the other hand, invites the court to look at the issue much more broadly.
The basic thrust of his argument, which he did not develop in this form before the Court of Appeal, is that it would be contrary to the proper construction and spirit and intendment of the Convention to hold that the appellant was not lawfully present in the United Kingdom and that the Secretary of State was free to bring her lawful presence to an end by issuing directions for her removal to Ethiopia.
He takes his stand on the principle that the Convention is an international instrument which falls to be interpreted in accordance with the general rule of interpretation that article 31(1) of the Vienna Convention on the Law of Treaties 1969 (Cmnd 4140) sets out, that 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.
This approach, he said, should lead one to conclude that article 32 had a broader purpose than a study of its language, if taken on its own, might suggest.
Its purpose was to ensure that a refugee who had been admitted to the appeal process of a contracting state, and had been found to be a refugee by the operation of that process, was not removed to a country that could not provide the full panoply of rights to which a refugee was entitled under the Convention.
The way that Mr Drabble has invited us to approach the issue suggests that it would be helpful to take it in two stages.
The first is to examine the language of article 32 and to determine, provisionally, whether the words that it uses, taken by themselves, can accommodate the situation in which the appellant finds herself.
The second is to consider whether, if they cannot, the object and purpose of the Convention require the words to be read and given effect more broadly so as to afford the appellant the protection which she seeks against her removal to Ethiopia.
Two points need to be stressed, however.
First, it was no part of Mr Drabbles case that an exception should be made for the appellant simply because of the inordinate length of time that it is taking for her case to work its way through the appeal process.
He said that the mere passage of time was not the sole or main reason why she should have the benefit of article 32, although the stage which the proceedings had reached was relevant.
The issue whether the mere passage of time is an obstacle to her removal is for another day.
So Mr Drabbles argument, if sound, will apply to all refugees who have been given temporary permission to remain and have been admitted to the appeal process of the contracting state.
I do not see how his argument can be limited in its effect to the case of this particular appellant.
The second point is that Mr Drabble was not aware of any other case in which the Secretary of State has insisted on removing a person to a country, such as Ethiopia, which did not satisfy the general criteria of a safe country.
This case therefore breaks new ground.
He said that he was not aware of any other case like this, as the Secretary of State was not known ever to have claimed that Ethiopia satisfied the general criteria for a safe third country.
He finds some support for his argument that the class of beneficiary referred to in article 32 should be broadly interpreted in Professor James C Hathaways work, The Rights of Refugees under International Law (Cambridge, 2005), pp 177 179 and 667 668 and in the wide ranging discussion of the issue in Atle Grahl Madsen, The Status of Refugees in International Law (Leiden, 1972), vol II, paras 215 216 where the point is made that, while a refugee who is lawfully in a territory according to municipal law is clearly entitled to the benefit of those provisions of the Convention whose applicability is subject to this test, persons may be considered to be lawfully there although they are not formally so, while at the same time not lawfully there for other purposes: pp 359 360.
But I do not find anything in the passages to which we were referred that shows that their approach has universal acceptance, and there is no judicial authority that is directly in point.
The argument has to be examined, therefore, as raising an issue of principle. "Lawfully in their territory"
As Lord Bingham of Cornhill said in R (European Roma Rights Centre) v Immigration Officer at Prague Airport (United Nations High Commissioner for Refugees intervening) [2004] UKHL 55, [2005] 2 AC 1, para 15, the Refugee Convention, like most international conventions, represented a compromise between competing interests.
On the one hand there was the need to ensure humane treatment of the victims of oppression.
On the other there was the wish of sovereign states to maintain control over those seeking entry to their territory: Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR, 225, 247 248, 274; Rodriguez v United States (1987) 480 US 522, 525 526.
There is no doubt that the Convention should be given a generous and purposive interpretation, bearing in mind its humanitarian objects and the broad aims reflected in its preamble, which states: The high contracting parties Considering that the Charter of the United Nations and the Universal Declaration of Human Rights approved on 10 December 1948 by the General Assembly have affirmed the principle that human beings shall enjoy fundamental rights and freedoms without discrimination, Considering that the United Nations has, on various occasions, manifested its profound concern for refugees and endeavoured to assure refugees the widest possible exercise of these fundamental rights and freedoms, Considering that it is desirable to revise and consolidate previous international agreements relating to the status of refugees and to extend the scope of and protection accorded by such instruments by means of a new agreement, Considering that the grant of asylum may place unduly heavy burdens on certain countries, and that a satisfactory solution of a problem of which the United Nations has recognised the international scope and nature cannot therefore be achieved without international co operation, Expressing the wish that all states, recognising the social and humanitarian nature of the problem of refugees, will do everything within their power to prevent this problem from becoming a cause of tension between states, Noting that the United Nations High Commissioner for Refugees is charged with the task of supervising international convention, providing for the protection of refugees, and recognising that the effective co ordination of measures taken to deal with this problem will depend upon the co operation of states with the High Commissioner Support for this approach is to be found in article 31(1) of the Vienna Convention on the Law of Treaties to which Mr Drabble referred: see para 25, above.
Reflecting principles of customary international law, it requires a treaty to be interpreted in the light of its object and purpose.
So it must be interpreted as an international instrument, not a domestic statute.
It should not be given a narrow or restricted interpretation.
But it must be remembered too that, however generous and purposive its approach to interpretation may be, the courts task remains one of interpreting the document to which the contracting parties have committed themselves by their agreement.
As Lord Bingham was at pains to emphasise in the Roma Rights case, at para 18, it must interpret what the parties have agreed to.
It has no warrant to give effect to what they might, or in an ideal world would, have agreed.
One should not overlook the fact that article 31(1) of the Vienna Convention also states that a treaty should be interpreted in accordance with the ordinary meaning to be given to the terms of the treaty in their context.
So the starting point of the construction exercise should be the text of the Convention itself: Adan v Secretary of State for the Home Department [1999] 1 AC 293, per Lord Lloyd of Berwick at p 305; Januzi v Secretary of State for the Home Department [2006] UKHL 5, [2006] 2 AC 426, para 4.
A treaty must be interpreted in good faith.
But this is not to be taken to be a source of obligation where none exists, as the International Court of Justice has repeatedly emphasised: In re Border and Transborder Armed Actions (second phase) (Nicaragua v Honduras) [1988] ICJ Rep 69, para 94; In re Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v Nigeria) [1988] ICJ Rep 175, para 39.
As a general principle of law it has only marginal value as a source of rights and duties: see the Roma Rights case, para 62.
There is no want of good faith if the Convention is interpreted as meaning what it says and the contracting states decline to do something that its language does not require them to do.
Everything depends on what the Convention itself provides.
The context in which the word lawfully appears in article 32 is important too.
The phrase in which it appears contemplates that the refugee is not merely present in the territory of the contracting state, but that he is there lawfully.
This implies that his presence is not just being tolerated.
On the contrary, it is to be assumed that he has a right to be there.
As to the source of that right, the power to admit, exclude and expel aliens was among the earliest and most widely recognised powers of the sovereign state: Roma Rights, para 11.
The Convention itself shows that it has come to be recognised that there is a right and indeed a duty in sovereign states to give refuge to aliens who are fleeing from persecution and to refuse to surrender them to the authorities in their home states.
But states the world over consistently have exhibited great reluctance to give up their sovereign right to decide which persons will, and which will not, be admitted to their territory and be given a right to settle there: Hyndman, Refugees under International Law with a Reference to the Concept of Asylum (1986) 60 ALJ 148, 153, in a passage quoted by Lord Bingham in the Roma Rights case, para 19.
The approach which our own domestic law takes to this issue was explained by Lord Mustill in T v Secretary of State for the Home Department [1996] AC 742, 754: Neither under international nor English municipal law does a fugitive have any direct right to insist on being received by a country of refuge.
Subject only to qualifications created by statute this country is entirely free to decide, as a matter of executive discretion, what foreigners it allows to remain within its boundaries.
There is no indication in the travaux prparatoires that the other states who were party to the framing of the Convention were minded to surrender control over those seeking entry to their territory.
On the contrary, Nehemiah Robinsons analysis of the Commentary on the 1951 Convention and the most important documents which had a bearing on its interpretation, Convention relating to the Status of Refugees, its History, Contents and Interpretation (New York, 1953), pp 110 111, led him firmly to the contrary conclusion: Lawfully in the country was understood to refer to refugees either lawfully admitted or whose illegal entry was legalized but not to refugees who, although legally admitted or legalized, have overstayed the period for which they were admitted or were authorised to stay or who have violated any other condition attached to their admission or stay.
Referring to this passage, the UNHCR states in Lawfully Staying A Note on Interpretation (1988) that its conclusion from the travaux is that the lawfulness of the stay is to be judged against national rules and regulations governing such a stay: para 8.
The Michigan Guidelines on Protection Elsewhere, which were adopted on 3 January 2007 at a colloquium of which Professor James Hathaway was the convener, appear to contradict this approach.
They state in para 5: Lawful presence must be defined by the sending state in good faith and in accordance with the requirements of international law.
Lawful presence is in any event established not later than such time as a decision is reached on the admissibility of the protection claim.
This passage shows, as do Professor Hathaways own writings, that some of the current thinking on the subject has developed substantially from that which appears to have been the guiding force when the wording of the Convention were under discussion over 60 years ago.
But I agree with Lord Dyson that there is no consensus among the commentators that lawful presence should be given an autonomous meaning or what that meaning should be: para 63, below.
So we must take our guidance from what the framers of the Convention must be taken to have agreed to, as understood by the UNCHR.
The problem to which its note was addressed was that created by the practice of some states simply to tolerate a stay for long periods without regularising the status of the refugee.
The UNHCR recommended that a judgment as to lawfulness should take into account all the prevailing circumstances, including the fact that the stay in question is known and not prohibited tolerated, in other words because of the precarious circumstances of the person: para 23.
That is not the point that needs to be considered here.
The national rules and regulations are being applied in this case, and it is clear that the appellant has not yet been given leave to enter or to remain in the United Kingdom.
She is still liable to be detained and, in the words of section 11(1) of the 1971 Act, she is deemed not to have entered this country.
There is, of course, no question of the appellant being expelled from the United Kingdom while the processes of appeal that are afforded by the 2002 Act remain open to her and have not been brought to an end.
It might be thought, in these circumstances, that the Secretary of State could have no objection to it being held that, because she has been granted temporary admission pending her examination or removal, the appellant was lawfully in the territory within the meaning of article 32(1) so long as it was clear that she will cease to be lawfully present once her temporary admission comes to an end.
Mr Drabble made it clear that he would be content with that interpretation, subject to the qualification that the protection of article 32 would remain available after the removal of her temporary admission to prevent her being removed to a country which could not provide the full panoply of rights to which a refugee was entitled under the Convention.
But, as Miss Giovannetti explained, there is no basis in domestic law for holding that the appellant is entitled to be present in this country.
To give her the protection of article 32 at this stage would have far reaching consequences.
As Nehemiah Robinson explained in his Commentary, p 157: The prohibition of the expulsion of refugees lawfully in the country means in substance that, once a refugee has been admitted or legalized, he is entitled to stay there indefinitely and can forfeit this right only by becoming a national security risk or by disturbing public order and having these grounds established in accordance with the procedure prescribed in para 2.
So one should be cautious about saying that, just because in practice the appellant is not at risk of removal for the time being, she is here lawfully within the meaning of that article.
Furthermore, the proper interpretation of the word lawfully is of wider significance.
This can be seen from the use of the same phrase lawfully in their territory in articles 18 and 26.
A refugee who is lawfully present in the territory of a contracting state is entitled to the same treatment as regards self employment as is accorded to aliens generally who are in the same circumstances: article 18.
He must also be accorded the right to choose his place of residence and to move freely within the territory, subject to any regulations that are applicable to aliens generally in the same circumstances: article 26.
The notifications that have been issued to the appellant from time to time, which require her to reside at an address notified to her by an immigration officer, to report to an immigration official every two months and not to work or engage in any business unless she has explicitly been granted permission to do so, make it plain that she is not being accorded the rights referred to in these articles.
They are rights the granting of which a sovereign state could be expected to reserve to itself, in just the same way as it would wish to reserve to itself the decision as to whether a refugee should be granted permission to enter in its territory.
The fact that Mr Drabbles interpretation of the word lawfully in article 32 would apply to these articles too, so that the appellant could not be denied the rights that they afford to refugees lawfully in the territory, is a further indication that much caution is needed before that conclusion is drawn.
It seems unlikely that the contracting states would have agreed to grant to refugees the freedom to choose their place of residence and to move freely within their territory before they themselves had decided, according to their own domestic laws, whether or not to admit them to the territory in the first place.
Mr Drabble did not seek to rely on Lord Browns observations in Szoma v Secretary of State for Work and Pensions [2006] 1 AC 564, para 24, that in R v Secretary of State for the Home Department, Ex p Bugdacay [1987] AC 514 Lord Bridge has decided the case of In re Musisi rightly but for the wrong reasons, and that the term refugee in article 32(1) of the Refugee Convention must be taken to mean someone who has been determined to have satisfied the article 1 definition of that term.
I think that he was right not to do so.
The ancient maxim verba accipienda sunt secundum subjectam materiam (words are to be understood according to the subject matter with which they deal) provides the best guide to the meaning that should be given to what Lord Brown said in this paragraph.
As Stanley Burnton LJ said in the Court of Appeal, Lord Brown was not deciding any question of irremovability under the 1971 Act in Szomas case: [2010] 1 WLR 2858, para 45.
He was concerned with quite different legislation: see para 5.
I am confident that, if his mind had been directed to the issue which arises under the 1971 Act, he would have been less ready than he was, in the context of that case, to hold that Lord Bridges analysis in Bugdacay of the effect of section 11(1) of the 1971 Act was wrong.
For my part, I think that Lord Bridges analysis was right and it is directly in point in this case: see para 14, above.
I would endorse Sedley LJs way of reconciling the decision in Szoma with what Lord Bridge said in Bugdacay in JA (Ivory Coast) v Secretary of State for the Home Department [2010] Imm AR 381, para 20, where he said: Illegal entrants who are temporarily admitted rather than detained may thus be lawfully present here in the restricted sense material to the decision in Szomas case, but they remain without an entitlement to be here.
For these reasons I would hold, provisionally, that the word lawfully in article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state.
The "panoply of rights" argument
The essence of this argument is that there must be implied into article 32 a proposition that the article itself has not expressed.
This is not, perhaps, an impossible conclusion to draw.
But the general rule is that the parties to an international agreement are not to be treated as having agreed something that they did not agree, unless it is clear by necessary implication from the text or from uniform acceptance by states that they would have agreed or have subsequently done so: Januzi v Secretary of State for the Home Department [2006] 2 AC 426, para 4.
It is generally to be assumed that the parties have included the terms they wish to include and on which they were able to agree, omitting other terms which they did not wish to include or on which they were not able to agree: Brown v Stott [2003] 1 AC 681, 703.
It is not open to the court to give effect to what, in an ideal world, the parties would have agreed to as a matter of obligation binding on all states parties to the Convention.
One should bear in mind too that there may be a profound gap between what commentators, however respected, would like the article to mean and what it has actually been taken to mean in practice: R(Hoxha) v Special Adjudicator [2005] UKHL 19, [2005] 1 WLR 1063, para 5.
Mr Drabble submitted that it was not enough to give the appellant the protection against refoulement that article 33 provides.
What she needed, and was entitled to in view of the fact that the United Kingdom had accorded her substantial recognition as a refugee, was the assurance that she would not be removed to a third country that was not able to provide her with the full panoply of rights she would get as a refugee under the Convention.
Article 32(1) had to be read in that sense.
Her presence here was to be taken, for this purpose, to be lawful and it could not be brought to an end unless to do this would fit in with the purpose of the Convention as a whole.
He accepted that removal to another member state of the European Union under Council Regulation (EC) No 343/2003, which replaced the Dublin Convention 1990 and was designed to give effect to a common policy on asylum throughout the EU (see R (Yogathas) v Secretary of State for the Home Department [2002] UKHL 36, [2003] 1 AC 920, para 27), would not be objectionable, and article 32(1) was not to be construed as making the removal under that system of a refugee who had been temporarily admitted to the United Kingdom pending a decision to give or refuse him leave to enter impermissible.
So there would be no breach of article 32(1) if the refugee were to be returned immediately to another Dublin Convention country or to a country whose status as a safe country was not in doubt.
But removal to a third country such as Ethiopia was a quite different matter.
Mr Drabble relied on the discussion of the meaning to be given to lawful presence by Professor Hathaway, Rights of Refugees under International Law, pp 173 184 in support of his argument.
Support for his approach, as matter of principle, is also to be found elsewhere.
In Ng v Canada, UN Doc CCPR/C/49/469/1991 (7 January 1994), para 14.2 the Human Rights Committee established under article 28 of the International Covenant on Civil and Political Rights said: If a State party extradites a person within its jurisdiction in such circumstances that as a result there is a real risk that his or her rights under the Covenant will be violated in another jurisdiction, the State party itself may be in violation of the Covenant.
This proposition may be applied equally to the responsibility that attaches to States parties under the Refugee Convention, as Catherine Phuong, The concept of effective protection in the context of irregular secondary movements and protection in regions of origin, Global Migration Perspectives No 26, April 2005, has suggested.
At p 9 of her paper, having acknowledged her debt to Professor Hathaway for this thought in footnote 38, she states: It would surely defeat the purpose of the Convention if a state avoided its duties by merely transferring a refugee to another jurisdiction without ensuring that the receiving state protects the rights acquired by the refugee in the sending state.
Refugees ought not to be deprived of the protection of their rights as defined in the 1951 Refugee Convention by virtue of the fact that another state has assumed responsibility for their protection.
Mr Drabble also relied on a passage in Lord Clydes speech in Horvath v Secretary of State for the Home Department [2001] 1 AC 489 where he said at p 508: What [the Convention] seeks to achieve is the preservation of those rights and freedoms for individuals where they are denied them in their own state.
Another state is to provide a surrogate protection where protection is not available in the home state.
The Convention assumes that every state has the obligation to protect its own nationals.
But it recognises that circumstances may occur where that protection may be inadequate.
The purpose of the Convention is to secure that a refugee may in the surrogate state enjoy the rights and freedoms to which all are entitled without discrimination and which he cannot enjoy in his own state.
I am inclined to think, with respect, that the proposition in the last sentence of this passage was perhaps too widely expressed.
In my own speech, at p 495, I said that the purpose of the Convention was to afford protection and fair treatment for those for whom neither is available in the home country and that, if the principle of surrogacy was applied, the criterion must be whether the alleged lack of protection in the home state was such as to indicate that it was unable or unwilling to discharge its duty to establish and maintain a system for the protection against persecution of its own nationals.
Also, the issue in that case was very different from that which we are being asked to consider here.
The allegation was that the applicant was at risk of violence at the hand of non state agents whose actions the home state was unable or unwilling to control.
The question whether, leaving that problem aside, the home state was in a position to provide the full panoply of rights under the Convention was not in issue.
This case is not subject to the provisions of Council 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).
The Directive was designed to give effect to the Tampere conclusion which provided that there should be a Common European Asylum System, based on a full and inclusive application of the Convention as supplemented by the New York Protocol, and that the system should include the approximation of rules on the recognition of refugees and the content of refugee status.
It goes further in some respects than the Refugee Convention because, for example, it requires a residence permit to be issued as soon as possible where an applicant qualifies as a refugee: article 24(2).
This Directive entered into force on 20 October 2004, and member states were required by article 38 to bring into force such laws, regulations and administrative provisions necessary to comply with it before 10 October 2006.
The most recent decision to remove the appellant was dated 24 August 2006, before the date for its transposition.
Mr Drabble did not develop the argument of which he had given notice in his written case that the appellant was entitled to rely on its provisions against the Secretary of State.
But its provisions are of interest, because they show that the principle which he was urging upon this court is undergoing a process of development among the Member States of the European Union.
This process was taken a step further by article 27(1) of Council Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures in Member States for granting and withdrawing refugee status (the Minimum Standards Directive) which applies to applications for asylum lodged after 1 December 2007.
It provides: Member States may apply the safe third country concept only where the competent authorities are satisfied that a person seeking asylum will be treated in accordance with the following principles in the third country concerned: (a) life and liberty are not threatened on account of race, religion, nationality, membership of a particular social group or political opinion; (b) the principle of non refoulement in accordance with the Geneva Convention is respected; (c) the prohibition of removal in violation of the right to freedom from torture and cruel, inhuman or degrading treatment as laid down in international law is respected; and (d) the possibility exists to request refugee status and, if found to be a refugee, to receive protection in accordance with the Geneva Convention.
This provision sets out what the Member States must be taken to have agreed are the full panoply of rights that the person seeking asylum must be afforded if the principles on which articles 32 and 33 of the Refugee Convention are based are to receive effect.
But it is one thing to acknowledge, as I would readily do, the force of these principles, to expect that the Secretary of State will, even in this case, give effect to them and to express the hope too that they will be taken into account if it becomes necessary for the appellant to pursue her Ethiopian appeal.
It is another to find a basis in them for giving a different meaning to the words lawfully in their territory in article 32 of the Convention than the contracting states appear to have had in mind when they agreed to them, which is what Mr Drabble appeared to be urging the court to do on this branch of his argument.
I do not think that article 32 is capable of being expanded in the way that was being suggested.
The United Kingdom was entitled to design its rules as to what was needed for a refugee to come within its terms under domestic law, as were all the other states who have undertaken to be bound by the Convention, on the basis of the ordinary meaning of the words of the article in their context and in the light of their object and purpose, as article 31(1) of the Vienna Convention indicates.
Phrases such as these are entitled to be read in accordance with the principle of legal certainty.
They ought not to be taken to have their meaning changed or expanded unless this is expressly agreed to or is shown to have been recognised generally among the contracting states.
The weakness in Mr Drabbles argument was that he was unable to show how this could be done without breaching these fundamental principles.
Conclusion
For these reasons, I am not persuaded that there are sound grounds for departing from my provisional view that the word lawfully in article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state.
I think, in agreement with the Court of Appeal and with Lord Dyson, that this is what the framers of the Convention intended by the use of this word in this context.
I would dismiss the appeal.
LORD DYSON
The appellant is a national of Eritrea.
She was born in Ethiopia and lived there continuously until she departed for the United Kingdom arriving on 3 July 1998.
On arrival, she claimed protection as a refugee on the grounds of a fear of persecution in Eritrea and Ethiopia.
The Secretary of State granted her temporary admission pursuant to paragraph 21 of Schedule 2 to the Immigration Act 1971 (the 1971 Act).
The somewhat tortuous subsequent history has been described by Lord Hope.
It is sufficient to say that her claims were refused by the Secretary of State on 1 November 2004.
By a decision promulgated on 1 February 2006, the Asylum and Immigration Tribunal allowed her appeal and held that her fear of persecution in Eritrea on Refugee Convention grounds was well founded.
Her status as a refugee was thereby established.
The Secretary of State did not appeal against this decision.
On 24 August 2006, she served a new notice of decision to refuse the appellants application for leave to enter on the grounds of a fear of persecution in Ethiopia and on the following day gave notice of her intention to give directions for the removal of the appellant to Ethiopia.
The appellant appealed these decisions, but on 25 September 2006, she started judicial review proceedings seeking an order that she be given leave to enter/remain in the United Kingdom as a refugee pursuant to the tribunals decision of 1 February 2006 and an order quashing the removal directions to Ethiopia.
The appeal has been adjourned pending the outcome of the judicial review proceedings.
Two questions arise in these proceedings.
The first is whether the appellant is lawfully in the United Kingdom within the meaning of article 32(1) of the Refugee Convention where she has been granted temporary admission, has submitted an asylum application, has been admitted to the states appeal process and has been found to be a refugee by operation of that appeal process.
The second is whether, if the appellants presence in the United Kingdom is lawful but she loses her appeal against the removal directions to Ethiopia, the Secretary of State can terminate the temporary admission, thereby bringing the lawful presence to an end.
In summary, Mr Drabble QC submits that the meaning of the phrase lawfully in their territory in article 32(1) is to be determined not only by reference to the domestic law of the Contracting State.
The normative requirements of the Convention must also be taken into account and on that basis the appellants presence in the United Kingdom is lawful within the meaning of article 32(1) because she has temporary admission and has been permitted to embark on a substantive procedure to determine the question of whether she is entitled to refugee status and has been found to be a refugee.
As regards the second question, Mr Drabble submits that, whatever the outcome of the Ethiopian appeal, the Secretary of State cannot terminate the appellants lawful presence in the United Kingdom by bringing the temporary admission to an end and removing her to a territory where (i) she would be at risk of persecution (so as to place the Secretary of State in breach of article 33) and (ii) she would not be able to enjoy the full rights vouchsafed by the Convention (what were referred to in argument as the panoply of rights).
Ms Giovannetti QC submits that the question whether a person is lawfully in the territory of a Contracting State is to be determined exclusively by reference to the domestic law of that state.
As a matter of domestic law, a person is not lawfully in the United Kingdom if she does not have leave to enter or remain, but has merely been granted temporary admission pending examination of her case or pending removal: see section 11(1) of the 1971 Act which Lord Hope has set out at para 14 above.
As regards the second question, Ms Giovannetti submits that, if the appellants appeal against the removal directions is dismissed, then the Secretary of State will be free to terminate or not renew her temporary admission and there can at that stage be no question of the appellants presence in the United Kingdom being lawful within the meaning of article 32(1).
The meaning of lawfully in their territory in article 32(1)
The general approach to the interpretation of the Convention is not in doubt: see the discussion by Lord Hope at paras 29 to 31 above.
In summary, it is to be interpreted in good faith in accordance with the ordinary meaning of its terms read in their context and in the light of the object and purpose of the Convention.
The starting point is the language.
It is generally to be assumed that the parties to the Convention included the terms that they wished to include and on which they were able to agree and omitted other terms which they did not wish to include or on which they were unable to agree.
They are not to be treated as having agreed to something they did not agree, unless it is clear by necessary implication from the text or from uniform acceptance by states that they would have agreed or have subsequently done so.
Some provisions of the Convention have an autonomous single meaning.
Thus, in R v Secretary of State for the Home Department, ex p Adan [2001] 2 AC 477, the House of Lords held that there was a single autonomous meaning of the term refugee in article 1A(2).
The meaning of this term cannot vary according to the differing interpretations of the Contracting States.
It is not to be ascertained by reference to their domestic law.
But there is no single autonomous meaning of the phrase lawfully in the territory in article 32(1).
There is no international standard by reference to which lawful presence can be determined.
That is not surprising.
The power to admit, exclude and expel aliens is a widely recognised power of the sovereign state: a person has no right to live elsewhere than in his country of nationality and has no right to claim asylum: see the authorities to which Lord Hope refers at paras 32 and 33 above.
Lord Bingham referred to this as a familiar, uncontentious and fundamental principle in Januzi v Secretary of State for the Home Department [2006] 2 AC 426 at para 6.
Of all the commentators, Professor Hathaway provides perhaps the strongest support for the case advanced by Mr Drabble.
But even he acknowledges (with qualifications) the important part played by domestic law in determining lawful presence within the meaning of article 32(1) in his discussion in The Rights of Refugees under International Law (Cambridge, 2005).
He says at pp 177 178: As a starting point, the logic of deference to national legal understandings of lawful presence is clearly sensible.
Not only is it correct that there is no uniform and comprehensive international standard by reference to which lawful presence can be determined but, as the debates cited above regarding temporary admission confirm, the drafters did generally intend for the third level of attachment to be determined by reference to national standards.
Yet there is no indication that this deference was intended to be absolute, a proposition whichif carried to its logical conclusioncould result in refugees never being in a position to secure more than rights defined by the first two of the five levels of attachment agreed to by state parties Interpretation of the notion of lawful presence should therefore look primarily to domestic legal requirements, interpreted in the light of the small number of international legal understandings on point, in particular those reached by the drafters of the Refugee Convention.
Deference to domestic law cannot therefore be absolute.
At a minimum, the domestic meaning of lawful presence should not be adopted for refugee law purposes where to do so would be at odds with the normative requirements of the Refugee Convention.
What is the position under United Kingdom domestic law? Without statutory intervention, it might be difficult to decide whether a person who has been granted temporary admission pending determination of her application for asylum is lawfully present in the territory.
It is not self evident that she is not lawfully present in these circumstances.
After all, she is physically present in the territory and her presence has been authorised by the state, admittedly for a limited period.
But the power to grant temporary admission is conferred by Schedule 2 para 21 of the 1971 Act.
It was open to Parliament to define its legal effect and it did so in section 11(1) of the 1971 Act.
In Bugdaycay v Secretary of State for the Home Department; In re Musisi [1987] AC 514, Lord Bridge rejected the argument that, because Mr Musisi had been granted temporary admission pending the determination of his application for leave to enter, he was lawfully present within the meaning of article 32(1).
The effect of section 11(1) of the 1971 Act was that he was deemed not to have entered the United Kingdom at all.
The reasoning of Lord Bridge (although not the result) was said to have been wrong by the House of Lords in Szoma v Secretary of State for Work and Pensions [2006] 1 AC 564 at para 24.
Like Lord Hope, I agree with Lord Bridges reasoning and would hold, for the reasons given by Stanley Burnton LJ, that the criticism of it in Szoma was not well founded.
The position in domestic law is, therefore, now clear: the appellant is not lawfully present in the United Kingdom.
There is nothing in the language of article 32 itself which suggests that lawful presence should not be judged by reference to domestic law.
Moreover, there is support elsewhere in the Convention for the view that the grant of temporary admission pending the determination of an application for asylum does not give rise to lawful presence within the meaning of article 32(1).
The phrase lawfully in [a] territory is also used in articles 18 and 26.
Article 18 provides that the Contracting States shall accord to a refugee lawfully in their territory treatment as favourable as possible and, in any event, not less favourable than that accorded to aliens generally in the same circumstances as regards the right to engage on his own account in agriculture, industry, handicrafts and commerce and to establish commercial and industrial companies.
Article 26 provides that each Contracting State shall accord to refugees lawfully in its territory the right to choose their place of residence to move freely within its territory, subject to any regulations applicable to aliens generally in the same circumstances.
It is most unlikely that the Contracting States intended that refugees who apply for asylum and are given temporary admission while their application is being considered should be accorded rights of this kind.
It seems to me far more likely that they intended such rights to be given to refugees who have established some real right to stay in the territory.
I agree with what Lord Hope says at para 36.
More generally, an interpretation of article 32(1) which defers the question of lawful presence to the domestic law of the territory of refuge is consistent with the fundamental principle that the power to admit and expel is a power of the sovereign state.
Nor do I find it surprising that the generous protection afforded by article 32 should be confined to those whose claims for asylum have succeeded.
The fundamental objective of the Convention is to protect persons who have a well founded fear of persecution for the reasons stated in the article 1A(2) definition.
Article 33 (the duty of non refoulement) is an essential part of that protection.
That is the principal duty owed to refugees.
This is the point made by Lord Bingham in R (Yogathas)v Secretary of State for the Home Department [2003] 1 AC 920 at para 9: The second consideration is that the Convention is directed to a very important but very simple and very practical end, preventing the return of applicants to places where they will or may suffer persecution.
Legal niceties and refinements should not be allowed to obstruct that purpose.
It can never, save in extreme circumstances, be appropriate to compare an applicants living conditions in different countries if, in each of them, he will be safe from persecution or the risk of it.
It is true that, where a person is recognised as a refugee and is granted asylum, the signatory states are under a duty to discharge many other obligations under the Convention.
But the existence of the article 32(1) duty, which is plainly owed to refugees who have been granted asylum, does not detract from the fact that the overriding aim of the Convention is to provide refugees with protection against persecution.
Article 33 applies to refugees whether they are lawfully present in the territory or not.
It applies to any refugee to whom the Convention applies.
It provides the protection that lies at the heart of the Convention.
Article 32(1) does not provide protection to a refugee against the risk of persecution.
It provides protection against expulsion in any circumstances except on grounds of national security or public order.
It undoubtedly provides this additional protection to the refugee who has been granted asylum.
Bearing in mind the fundamental object of the Convention, it is not surprising that it was intended by the Contracting States that this degree of protection was not to be accorded to a refugee who has been given temporary permission to remain in a territory pending the determination of her claim to asylum.
If a refugee who is claiming asylum is to be protected from the risk of persecution, she needs the protection afforded by article 33.
She does not need the additional protection afforded by article 32(1).
We were shown various passages in the travaux prparatoires.
But in my view, they contain no clear indication that the parties to the Convention intended that the benefit of article 32(1) should be conferred on refugees who have not been granted asylum.
There is no consensus among the commentators that lawful presence within the meaning of article 32(1) should be given an autonomous Convention interpretation or what that meaning should be.
For that reason, I do not think that it is profitable to set out their differing views in any detail.
I have already referred to what Professor Hathaway says.
As we have seen, he suggests that lawful presence should be determined primarily by reference to domestic law, but modified if necessary to reflect the normative requirements of the Convention.
I do not know how this would work in practice.
It seems to me that this is a difficult interpretation and one which would be likely to give rise to much uncertainty and dispute.
A different view is expressed in Goodwin Gill and McAdam The Refugee in International Law (3rd edition) (2007) at p 524 525 where the editors say that in principle there appears to be no reason why the temporarily present refugee should not be subject to the same regime of deportation as applies to aliens generally.
They suggest: On balance, article 32 may be interpreted as a substantial limitation upon the States power of expulsion, but with its benefits confined to lawfully resident refugees, that is, those in a State on a more or less indefinite basis.
Professor Hathaway disagrees with this view.
He says (loc cit at p 173, footnote 97) that it is no more than an assertion and that no legal argument is offered to justify this clear deviation from the express provisions of the Convention, relying instead on a bald appeal to the importance of achieving consistency with relevant state practice.
In my view, if it had been intended to restrict the power of the Contracting States to decide whether a refugee is lawfully present in its territory, this would surely have been stated explicitly.
Where the Convention limits the power of a state to expel a refugee, it says so in terms: see articles 32 and 33.
There are no circumstances in which a refugee may be expelled in breach of article 33.
But if a refugee is to enjoy the additional protection afforded by article 32(1), she must be lawfully present in the territory.
As to what that means, I see no warrant for interpreting the article as prohibiting the expulsion of a refugee who is not lawfully present on the basis of domestic law, but whose expulsion would contravene Convention norms.
Whether a refugee would have the benefit of the panoply of Convention rights in a territory to which she is expelled cannot have any bearing on the question whether she is lawfully present in the territory from which she is being expelled.
In any event, Professor Hathaway and Mr Drabble are seeking to add a further restriction to the power to expel a refugee which cannot be found in article 32(1) or 33.
Applying the principles of interpretation to which I refer at para 5 above, I find it impossible to say that it is clear by necessary implication from the text that the Contracting States would have agreed to such an additional restriction to the power of expulsion.
I should add that Mr Drabble concedes that there is no breach of article 32(1) in immediately returning (i) an individual who arrives in the United Kingdom after residing in an obviously safe third country and (ii) an individual who can be sent to another Dublin Convention country so that her status can be investigated there.
I agree with this concession.
But it is difficult to see, on Mr Drabbles argument, why such individuals are not lawfully present in the United Kingdom.
They are likely to have been given temporary admission and their cases will have been considered.
I do not see why lawfulness of their presence is any different from that of others who are granted temporary admission, but whose cases are more difficult to determine.
For all these reasons, I would therefore hold that there is nothing in article 32(1) which requires us to disapply section 11(1) of the 1971 Act and say that a refugee who is given temporary admission pending determination of her status is lawfully in the United Kingdom.
Termination of temporary admission
If (as I have held) the appellant is not lawfully present in the United Kingdom within the meaning of article 32(1), clearly she does not enjoy the protection afforded by that provision.
It is rightly conceded by Ms Giovannetti that to attempt to remove the appellant from the United Kingdom before the application for asylum (including any appeals) has run its course would be improper.
She has no intention of doing that.
But if the appeal against the removal directions to Ethiopia is dismissed, the appellant will not be able to invoke article 32(1) as a reason for avoiding expulsion, although she may well have other grounds for doing so.
Conclusion
For these reasons as well as those given by Lord Hope, I would dismiss this appeal.
| UK-Abs | The Appellant is a national of Eritrea.
But she was born in Ethiopia on 2 July 1981, where she lived continuously until she departed for the United Kingdom in July 1998.
On arrival, she claimed protection as a refugee on the grounds of a fear of persecution in Eritrea.
She also claimed that she could not go back to Ethiopia because her life would be in danger there.
The Secretary of State granted her temporary admission under paragraph 21 of Schedule 2 to the Immigration Act 1971 (the 1971 Act).
Her status has not changed since her arrival in 1998.
Her temporary admission has been extended from time to time, and she remains liable to detention under paragraph 16 of Schedule 2 to the 1971 Act.
Her claim that she was a refugee was refused by the Secretary of State on 1 November 2004, and she was informed that the Secretary of State proposed to give directions for her removal to Eritrea.
The Appellant appealed.
By a decision of 1 February 2006, the Asylum and Immigration Tribunal allowed her appeal and held that her fear of persecution in Eritrea on Refugee Convention grounds was well founded.
Her status as a refugee was thereby established.
The Secretary of State did not appeal against this decision.
On 24 August 2006 the Secretary of State served a new notice of decision refusing the Appellants application for leave to enter on the grounds of a fear of persecution in Ethiopia and gave notice of her intention to give directions for the removal of the Appellant to Ethiopia.
The Appellant appealed these decisions, but at the same time started judicial review proceedings seeking an order that she be given leave to enter/remain in the UK as a refugee pursuant to the tribunals decision of 1 February 2006 and an order quashing the removal directions to Ethiopia.
The appeal has been adjourned pending the outcome of these judicial review proceedings.
The judge in the Administrative Court granted the relief sought, but her decision was reversed by the Court of Appeal.
The appellant now appeals to this court, arguing that she is entitled to protection under article 32 of the Refugee Convention and cannot therefore be removed to Ethiopia.
The Supreme Court unanimously dismisses the appeal.
The judgments are given by Lord Hope and Lord Dyson.
Article 33 of the 1951 Refugee Convention prohibits any contracting state from expelling or returning (refouler) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.
Every refugee has the protection of that provision.
The more generous protection of Article 32, however, is afforded to a more restricted category of persons.
Article 32(1) provides that The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order.
The effect of this is that, once a refugee has been admitted or his presence has been legalised and so long as he retains his status as a refugee, he is entitled to stay indefinitely in the receiving state.
He can only forfeit that right by becoming a risk to national security or by disturbing the public order.
The question in this case is whether Article 32 applies only to a refugee who has been given the right under domestic law lawfully to stay in the contracting state, or whether the words lawfully present in the territory must be given an extended and autonomous meaning, so that a refugee who has not yet been given a right to remain in the territory is afforded protection under Article
32 that extends beyond the basic obligation under Article 33 not to expel or return to a territory where his life or freedom would be threatened for a Convention reason [1 2].
The first step in this case is to examine the language of Article 32 and to determine, provisionally, whether the words that it uses, taken by themselves, can accommodate the situation in which the Appellant finds herself.
The second is to consider whether, if they cannot, the object and purpose of the Convention require the words to be read and given effect more broadly so as to afford the Appellant the protection which she seeks against her removal to Ethiopia [26].
There is some academic support for the Appellants argument that the class of beneficiary referred to in Article 32 should be broadly interpreted, but this approach is not universally accepted, and there is no judicial authority that is directly in point.
The argument has to be examined, therefore, as raising an issue of principle [28].
There is no doubt that the Convention should be given a generous and purposive interpretation [30].
However, it must be remembered that the Courts task is to interpret the document to which the contracting parties have committed themselves by their agreement.
It has no warrant to give effect to what they might, or in an ideal world would, have agreed [31].
The context in which the word lawfully appears in Article 32 is important.
The phrase in which it appears contemplates that the refugee is not merely present in the territory of the contracting state, but that he is there lawfully.
It implies that his presence is not just being tolerated, but he has a right to be there [32].
There is no consensus among the commentators that lawful presence should be given an autonomous meaning or what that meaning should be.
We must therefore take our guidance from what the framers of the Convention must be taken to have agreed to, as understood by the UN High Commissioner for Refugees [34 & 63].
That is, that the lawfulness of the stay is to be judged against national rules and regulations governing such a stay [33].
In this case, the relevant national rule is section 11(1) of the 1971 Act, which provides that a person who has not otherwise entered the UK shall be deemed not to do so as long as he is detained, or temporarily admitted or released while liable to detention, under the powers conferred by Schedule 2 to the Act.
Under that provision, the Appellant is deemed not to have entered this country [34 & 57].
There is no question of the Appellant being expelled from the UK while the statutory processes of appeal remain open to her and have not been brought to an end.
But one should be cautious about saying that, just because in practice the Appellant is not at risk of removal for the time being, she is here lawfully within the meaning of Article 32, as that would have far reaching consequences [35].
Furthermore, the same phrase lawfully in their territory is used in Articles 18 and 26 in relation to self employment and free movement [36].
It seems unlikely that the contracting states would have agreed to grant to refugees the freedom to choose their place of residence and to move freely within their territory before they themselves had decided, according to their own domestic laws, whether or not to admit them to the territory in the first place [37 & 57].
For these reasons, the word lawfully in Article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state [40].
This interpretation is consistent with the fundamental principle that the power to admit and expel foreign nationals is a power of the sovereign state [58].
Counsel for the Appellant submitted that, in view of the fact that the UK had recognised her as a refugee, the Appellant was entitled to the assurance that she would not be removed to a third country that was not able to provide her with the full panoply of rights she would get as a refugee under the Convention.
Article 32(1) had to be read in that sense [41 42].
However, whether a refugee would have the benefit of the panoply of Convention rights in a territory to which she is expelled cannot have any bearing on the question whether she is lawfully present in the territory from which she is being expelled.
This would be to infer a different meaning from the words lawfully in their territory than the contracting states appear to have had in mind when they agreed to them [47 & 64].
There are thus no sound grounds for departing from the view that lawfully in Article 32(1) must be taken to refer to what is to be treated as lawful according to the domestic laws of the contracting state.
This is what the framers of the Convention intended by the use of this word in this context [49].
|
The Leasehold Reform Act 1967 is on its face a statute about houses, not commercial buildings.
The buildings with which we are concerned were originally designed and used as houses, but at the relevant date were used entirely for commercial purposes, one for offices, the other (in the judges words) as a self catering hotel.
In both cases the courts below felt constrained to hold that they were houses within the meaning of the 1967 Act, with the consequence that the lessees were entitled to enfranchise, that is, to acquire the freeholds compulsorily from their lessors on the terms fixed by the Act.
In the Court of Appeal [2010] EWCA Civ 748; [2010] 1 WLR 2317 Lord Neuberger of Abbotsbury MR regretted this result.
He saw it as the probably unintended consequence of amendments made by the Commonhold and Leasehold Reform Act 2002, removing the previous residence requirements.
However, he felt bound to apply his view of the relevant provisions as they stood after those amendments, rather than to decide what the legislature would have said if it had fully appreciated the consequences (para 57).
From the material we have been shown, he was clearly right to think that his interpretation did not reflect Parliaments intentions.
The thinking behind the 2002 legislation is apparent from the preceding Draft Bill and Consultation Paper Commonhold and Leasehold Reform (Cm 4843), published by the Lord Chancellor in 2000.
It included proposals for the introduction of an entirely new form of tenure, known as Commonhold, and for amendment of the existing provisions relating to leases of flats (under the Leasehold Reform, Housing and Urban Development Act 1993) and of houses (under the 1967 Act).
The first paragraph of the Introduction leaves no doubt that its purpose was to address perceived flaws in the residential leasehold system (p 107), not in the leasehold system more generally.
In relation to flats, the governments view was that the residence tests under the 1993 Act were too restrictive, for example, in excluding someone subletting a flat, or occupying a flat as a second home.
The residence requirement would therefore be abolished; but, to restrict the scope for short term speculative gains, it would be replaced by a rule requiring the qualifying tenant to have held the lease for at least two years (pp 155 6).
A similar approach was proposed for leases of houses under the 1967 Act: This would bring the residence test for houses in line with the proposals for flats.
It would allow long leaseholders of second homes to benefit and would also enable leaseholders who lease houses through a company to enfranchise.
Furthermore, as in the case of flats, it would restrict the scope for short term speculative gains (p 189).
There is no evidence then or thereafter of any ministerial or parliamentary intention to extend the scope of the Act more generally, or in particular to confer statutory rights on lessees of buildings used for purely non residential purposes.
Although the 1967 Act like the 1993 Act is in a sense expropriatory, in that it confers rights on lessees to acquire rights compulsorily from their lessors, this has been held not to give rise to any interpretative presumption in favour of the latter.
As Millett LJ said of the 1993 Act: It would, in my opinion, be wrong to disregard the fact that, while the Act may to some extent be regarded as expropriatory of the landlord's interest, nevertheless it was passed for the benefit of tenants.
It is the duty of the court to construe the 1993 Act fairly and with a view, if possible, to making it effective to confer on tenants those advantages which Parliament must have intended them to enjoy. (Cadogan v McGirk [1996] 4 All ER 643, 648) By the same token, the court should avoid as far as possible an interpretation which has the effect of conferring rights going beyond those which Parliament intended.
Statutory definition
Section 2(1) defines house in the following terms: 'house' includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes; and (a) where a building is divided horizontally, the flats or other units into which it is so divided are not separate 'houses', though the building as a whole may be; and (b) where a building is divided vertically the building as a whole is not a 'house' though any of the units into which it is divided may be.
In the present cases, nothing turns directly on the qualifications introduced by the word notwithstanding (which I shall refer to as the proviso).
We are concerned with the main part of the definition, which raises two separate but overlapping questions: (i) is the building one designed or adapted for living in? (ii) is it a house reasonably so called? Both questions remain live in Hosebay; in Lexgorge the first has been conceded in favour of the lessees.
The two parts of the definition are in a sense belt and braces: complementary and overlapping, but both needing to be satisfied.
The first looks to the identity or function of the building based on its physical characteristics.
The second ties the definition to the primary meaning of house as a single residence, as opposed to say a hostel or a block of flats; but that in turn is qualified by the specific provision relating to houses divided horizontally.
Both parts need to be read in the context of a statute which is about houses as places to live in, not about houses as pieces of architecture, or features in a street scene, or names in an address book.
The facts
The first case (Hosebay) concerns three properties, 29, 31, and 39 Rosary Gardens, South Kensington, London SW7.
They were originally built as separate houses as part of a late Victorian terrace forming the west side of Rosary Gardens.
The current leases of Nos 29 and 39 were granted in 1966 for terms expiring in December 2020, subject to covenants for their use as 16 high class self contained private residential flatlets.
The current lease for No 31 was granted in 1971 for a term expiring in December 2030, subject to a covenant restricting its use to that of a single family residence or a high class furnished property for accommodating not more than 20 persons.
It was common ground that the current use, which had begun some time before 1981, was not in accordance with the covenants.
It was unclear from the evidence when the premises had been converted to their present layout.
The judge (para 83) proceeded on the basis that the conversions may well have been carried out substantially before the current leases were granted in 1966 and 1971.
Although there was no evidence as to the actual purpose of the conversions, the Master of the Rolls on the balance of probabilities inferred (principally from the lack of documentation in the hands of the landlords to indicate otherwise) that they had been for the uses described in the leases (para 37).
Hosebay Ltd acquired all three leases in 1996.
On 23 April 2007 it served notices on its landlords under section 8 of the 1967 Act to acquire the freeholds of the three properties.
Judge Marshall QC found that the three properties were at the relevant date being used together to provide short term accommodation for tourists and other visitors to London, or what she described as a self catering hotel (paras 8 and 19).
Each of the three properties had been fully adapted to provide individual rooms for letting out (para 9), with the exception of two rooms in No 31, one of which was used for office and reception purposes, and the other for storage.
The great majority of the rooms could be described as rooms with self catering facilities.
Each room had between one and four beds, furniture, and limited storage space, cooking facilities, and small wet rooms with shower, basin and WC.
Fresh bed linen and room cleaning, but no other services, were provided to those staying in the rooms.
On these facts, the judge concluded that each of the three properties was physically adapted for living in even though the current use was itself too transient to qualify as such.
The Court of Appeal agreed.
I quote the Master of the Rolls: 33.
My primary reason for that conclusion is that, in order to determine whether premises are adapted for living in, one looks at the most recent works of adaptation, and assesses objectively, whether they resulted in the property being adapted for living in 36.
In this case, I consider that the effect of the most recent works of conversion to the three properties, if they were works of adaptation, adapted those properties for living in.
Ignoring one or two rooms, each room in the three properties is a self contained unit of accommodation, with its own basic small shower room/WC, and its own even smaller and more basic cooking facilities.
As Moore Bick LJ pointed out in argument, the rooms are entirely appropriate for letting to students on three year degree courses, and, as Mr Johnson rightly accepted, if they had been, all the rooms, and therefore the three buildings, would have been used for living in.
Even if, as Mr Johnson argued and I am prepared to assume without deciding, the current use of the three properties is not for living in, that certainly does not mean that, viewed objectively, the three properties were not adapted for living in.
The judge and the Court of Appeal held also that the properties were houses reasonably so called, as the Master of the Rolls explained: externally, each of the three properties has the appearance of being a relatively large town house; internally, each of the three properties has been converted so that almost every room can be used as a self contained unit for one or more individuals, with cooking and toilet facilities.
I find it hard to see how the judge could be faulted for concluding that, even if each of the three properties might be called something else as well, they could each reasonably be called a house. (para 38)
The other case (Lexgorge) relates to 48 Queen Anne Street, in Marylebone, London W1.
It was built in the early 18th century as a house comprising five floors including basement, in a terrace of substantial houses.
It was occupied for that purpose for many years until 1888, when it began to be used for commercial purposes.
Coming to more recent times, planning permission was granted in December 1949 for conversion of the second and third floors into a self contained maisonette, and there is some evidence that it was implemented.
However, from about 1961, all four upper floors were used as offices, and they were so used when the notice was served under the Act on 4 March 2005.
The whole building was still in office use in June 2005.
However, by the time of the trial in October 2009, when the judge inspected the property, the upper two floors were in use for residential purposes.
The office use of the lower floors continued.
The current lease was granted in 1951 for a term of 110 years.
The lease described the property as a messuage or residential and professional premises, and restricted its use (subject to landlords' consent) to self contained flats or maisonettes on the upper two floors, professional offices on the first and ground floors, and in the basement storage and lavatory in connection with other parts of the demised premises.
In 1978, the lease was acquired by Lexgorge Ltd.
At the time of the notice the office use of all floors had become established, and therefore lawful for planning purposes, although in breach of the lease as respects the upper floors.
The building is listed as a building of special architectural or historic interest (grade 2); English Heritages records describe it as a Terraced House.
In this case, as already noted, it is conceded by the lessors that at the material date the premises, although used for offices, were still at least in part designed or adapted for living in.
It was held by the judge (Judge Dight) and by the Court of Appeal that it was a house reasonably so called, and therefore within the definition.
The Master of the Rolls said: 53.
If the upper two floors of the property had been empty, I have little doubt but that the property could reasonably have been called a house, bearing in mind its external character and appearance (a classic town house in London's West End), its internal character and appearance at least on the upper two floors (which were, as I understand it, substantially as constructed), the description of the property in the lease as messuage or residential or professional premises, and, to the extent that it is relevant, the terms of the lease (restricting the use of the upper two floors to residential).
I find it hard to see why the fact that the upper two floors had been used (even for many years) as offices (in contravention of the terms of the lease) should wreak such a change that the property could no longer reasonably be called a house.
The authorities
The first relevant case under the Act was Lake v Bennett [1970] 1 QB 663.
However, I find it helpful to start from an authority in a different statutory context, Lord Denning MRs judgment in Ashbridge Investments Ltd v Minister of Housing and Local Government [1965] 1 WLR 1320.
The case related to compulsory acquisition of two properties for the purpose of slum clearance under the Housing Acts.
The level of compensation would vary significantly depending on whether the property was or was not a house.
In the absence of a statutory definition of house, Lord Denning adopted the following formula: a building which is constructed or adapted for use as, or for the purposes of, a dwelling (p 1324).
In Lake v Bennett he suggested that the draftsman of the 1967 Act definition had adopted these words, but added the limitation reasonably so called (p 670).
Ashbridge itself concerned two adjoining buildings in the same terrace, which had been designated for compulsory purchase, the first (No 17) as an unfit house, the second (No 19) as a building other than a house.
The buildings were very similar in appearance; both had been designed as shops with rear living rooms and living quarters above, but neither was in current use for living purposes.
No 17, which had undergone no structural alterations, was held by the Minister to have retained its identity as a dwelling.
No 19, by contrast, was held to have lost its identity as a dwelling, following structural alterations involving the extension of the shop into the rear living area (p 1325).
The latter decision was described in the Court of Appeal as extraordinary (p 1327, per Harman LJ), but that did not undermine the validity of the decision in relation to No 17.
Lord Dennings formula can be seen as his way of expressing the present identity (in the inspectors words), or perhaps function, of a building not currently in use, defined by reference to the purpose of its construction or subsequent adaptation.
Lake v Bennett itself concerned a three storey house, the ground floor of which had been converted into a shop.
There was no issue as to the first part of the definition, as it was clear that the building was at least in part adapted for use for living in.
The Court of Appeal held that notwithstanding the commercial element, the building as a whole was a house reasonably so called and was therefore within the scope of the 1967 Act.
The reasoning of Lake v Bennett was adopted and extended by the House of Lords in Tandon v Trustees of Spurgeons Homes [1982] AC 755, which remains the leading House of Lords authority on this part of the definition.
Unfortunately the reasoning of the single majority speech of Lord Roskill, although carrying the unqualified support of Lord Scarman and Lord Bridge, is not without difficulty.
Further, the case needs to be read in its factual context.
As in Lake v Bennett, the main problem was to reconcile the statutory recognition (under the proviso) that the building need not be solely designed or adapted for living in, with the need for the building as a whole to be a house reasonably so called.
This is not a problem in the present cases.
At the end of his judgment Lord Roskill referred with approval to Lake v Bennett, which he welcomed as stating a principle and [confining] the question of fact to a narrow area , and from which he deduced the following three propositions of law : (1) as long as a building of mixed use can reasonably be called a house, it is within the statutory meaning of house, even though it may also reasonably be called something else; (2) it is a question of law whether it is reasonable to call a building a house; (3) if the building is designed or adapted for living in, by which, as is plain from section 1(1) of the Act of 1967, is meant designed or adapted for occupation as a residence, only exceptional circumstances, which I find it hard to envisage, would justify a judge in holding that it could not reasonably be called a house.
They would have to be such that nobody could reasonably call the building a house. (p 767)
Although expressed as propositions of law, they do not in my view offer much assistance as such, at least beyond the facts of the case.
The first proposition was in terms directed to a building in mixed residential and commercial use.
Such a building could plausibly be described either as a house with a shop below, or as a shop with a dwelling above.
That was enough to show that it could reasonably be called a house.
That proposition cannot in my view be applied more generally.
The mere fact that a building may be described as a house for other purposes (for example, in the English Heritage list) is not enough to bring it within this part of the definition.
The second proposition, that what is a house reasonably so called is a question of law, is not easy to extract from the judgments in Lake v Bennett.
Lord Denning described the judges negative answer to that question as an inference from primary facts depending in part at least on the true interpretation of the words reasonably so called, and one with which the court could interfere if it was a conclusion to which the judge could not reasonably come ([1970] 1 QB 663, 671).
Salmon LJ described it as partly a question of fact but also a question of law as to the true construction of the meaning of the word house in this Act. (p 672).
Elsewhere Lord Roskill himself had accepted counsels submission that the definition of house was a mixed question of fact and law ([1982] AC 755, 765), but he saw it as one in which, in the interests of consistency, the question of fact should be confined within narrow limits: p 767.
More modern authorities have leant against such conceptual debates (see, for example, Lord Hoffmann, in Moyna v Secretary of State for Work and Pensions [2003] UKHL 44, [2003] 1 WLR 1929, paras 25 27).
In any event, none of these formulations throws much light on how the question should be answered in any particular case.
The third proposition is again in terms hard to extract from Lake v Bennett.
Lord Denning described the case before them as a typical case, but thought that difficult issues might arise in other cases: [1970] 1 QB 663, 671.
He did not suggest that, in such cases, an affirmative answer to the first question would lead to any presumption in respect of the second.
The examples given in the judgments (pp 671, 672) of cases that would not satisfy the second test a block of flats, the Ritz Hotel or Rowton House (a working mens hostel) can hardly be described as exceptional.
Rather than a free standing proposition of law, deduced from Lake v Bennett, this proposition seems more an expression of Lord Roskills own view as to the correct policy approach to a building of the kind before him, which was adapted at least in part for occupation as a residence.
It may be that the real difference between the majority and the minority in Tandon came down to one of policy.
Lord Wilberforce (in the minority) thought it clear that the building could not reasonably be called a house; it was rather a mixed unit consisting in part of a shop and in part of a dwelling, and as such was not within the policy of the Act: [1982] AC 755, 760.
For Lord Roskill (in the majority) Parliament had made clear that such mixed units were not in principle to be excluded.
He noted that such small shops combined with living accommodation were a familiar feature of towns and villages across the country (p 766).
In this he echoed the view of Salmon LJ (Lake v Bennett [1970] 1 QB 663, 672), who thought that a tenant living above a shop in the circumstances of that case was obviously the sort of person to whom the legislature intended to give security of tenure.
Such policy considerations do not assist the lessees in this case.
For the reasons already given, policy if anything points the other way.
Of more significance for present purposes is the relative lack of weight given by the majority to the appearance of the buildings as a factor in answering the second question.
Lord Fraser of Tullybelton (in the minority) had regarded appearance as the main element in the character of a building: [1982] AC 755, 762.
He attached particular weight to the photograph which showed a shop in a row of shops, in contrast with the converted house in Lake v Bennett; to him it was obvious from the photograph that the building could not reasonably be called a house (p 763).
That, however, was not the approach of the majority.
Lord Roskill had apparently accepted that in determining the character of the building for these purposes, physical appearance could be relevant, as also its history and the terms of the lease (p 766).
However, those factors played no detectable part in the final decision.
The determinative points were that the proportion of residential use, even if only 25%, was substantial (p 766), and that a tenant occupying such a building as his residence was within what was perceived to be the scope of the protection intended by Parliament (p 766).
Those factors were enough to bring the case within the principle established by Lake v Bennett notwithstanding the differences from that case in relation to the original design and physical appearance of the respective buildings.
The only other relevant authority at the highest level is the much more recent decision in Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] UKHL 5; [2008] 1 WLR 289.
The House of Lords held that a building previously designed or adapted for living in remained a house, even though at the material time it was not only disused but in parts stripped out to the basic structural shell (para 24).
In contrast to Tandon this case was concerned solely with the first question.
It was not in dispute that if that question was answered in the affirmative the building qualified as a house reasonably so called.
As will be seen I do not regard the case as determinative in either of the present appeals.
However, some comment is desirable, in view of the change of view of Lord Neuberger on one aspect of his leading speech.
He had proposed the following grammatical analysis of the relevant words of the statutory definition: 18.
In my judgment, the words designed or adapted for living in, as a matter of ordinary English, require one first to consider the property as it was initially built: for what purpose was it originally designed? That is the natural meaning of the word designed, which is a past participle.
One then goes on to consider whether work has subsequently been done to the property so that the original design has been changed: has it been adapted for another purpose, and if so what purpose? When asking either question, one is ultimately concerned to decide whether the purpose for which the property has been designed or adapted, was for living in. 19.
The notion that the word designed in section 2(1) is concerned with the past is reinforced by the later words in the same section was or is [not] solely designed or adapted.
The use of the past tense is striking in a section which contains a number of verbs only in the present tense.
In my judgment, the expression is to be construed distributively: thus, the word was governs designed, and the word is governs adapted.
The present tense is appropriate for adapted because, as Lord Scott of Foscote pointed out in argument, there could have been several successive adaptations, and it is only the most recent which is relevant.
The word was is in any event difficult to reconcile with Grosvenor's case (as accepted by the judge and the Court of Appeal), as it would be irrelevant whether the property could have been fit for residential occupation at any time in the past.
Later in his speech, he considered the implications of this analysis for other cases, including how the definition should apply to a property which had been designed for living in, but had subsequently been adapted to another use.
As a matter of literal language, he thought such a property would be within the definition.
If, as appeared, designed and adapted were alternative qualifying requirements, a building which had been designed as a house would remain within the definition in spite of its adaptation to other uses.
Such a conclusion, he accepted, might seem surprising, but it could have been more readily understandable when taken with the residence requirement in the original Act (para 26).
It was on this latter point that, as Master of the Rolls in the present case, he has had second thoughts.
It had been put directly in issue by the tenants in Hosebay, who argued (as they have in this court) that because the buildings were originally designed for living in, that was sufficient to bring them within the definition, regardless of any subsequent adaptation to other uses.
On reconsideration, Lord Neuberger felt bound to reject the argument.
Although the literalist meaning of designed or adapted was that either alternative would do, that was not by any means what the words naturally convey.
His earlier thoughts had been based on an over literalist approach to the language used by the legislature: [2010] 1 WLR 2317, para 31.
In his revised view, a building originally designed for living in, but adapted for some other purpose, was not designed or adapted for living in, unless subsequently re adapted for that purpose (para 40).
I have no doubt, with respect, that Lord Neubergers second thoughts on this point were correct.
Context and common sense argue strongly against a definition turning principally on historic design, if that has long since been superseded by adaptation to some other use.
However, that approach may also have implications for the earlier part of his grammatical analysis in Boss Holdings (see para 31 above).
The expression was or is designed or adapted is, as he says, to be read distributively: that is, as equivalent to was designed or is adapted.
While that may support the view that the word designed is directed to the past, the same cannot be said of the expression is adapted.
Nor (pace Lord Scott) is that grammatically the same as was most recently adapted.
Logically that expression can only be taken as directed to the present state of the building.
Once it is accepted that a literalist approach to the definition is inappropriate, I find myself drawn back to a reading which accords more closely to what I have suggested was in Lord Dennings mind in Ashbridge [1965] 1 WLR 1320, that is a simple way of defining the present identity or function of a building as a house, by reference to its current physical character, whether derived from its original design or from subsequent adaptation.
Furthermore, I would not give any special weight in that context to the word adapted.
In ordinary language it means no more than made suitable.
It is true that the word is applied to the building, rather than its contents, so that a mere change of furniture is not enough.
However, the word does not imply any particular degree of structural change.
Where a building is in active and settled use for a particular purpose, the likelihood is that it has undergone at least some physical adaptation to make it suitable for that purpose.
That in most cases can be taken as the use for which it is currently adapted, and in most cases it will be unnecessary to look further.
That interpretation does not of course call into question the actual decision in Boss Holdings.
The basis of the decision, as I understand it, was that the upper floors, which had been designed or last adapted for residential purposes, and had not been put to any other use, had not lost their identity as such, merely because at the material time they were disused and dilapidated.
It was enough that the building was partially adapted for living in, and it was unnecessary to look beyond that: see [2008] 1 WLR 289, para 25.
That reasoning cannot be extended to a building in which the residential use has not merely ceased, but has been wholly replaced by a new, non residential use.
Finally I must refer to Prospect Estates Ltd v Grosvenor Estate Belgravia [2008] EWCA Civ 1281; [2009] 1 WLR 1313.
The Court of Appeal held that a building which had been designed and built as a house, but which for many years had been used almost wholly as offices, was not a house within the definition.
As in Tandon the case turned ultimately only on the second question, whether the building was a house reasonably so called.
The facts were much closer to those of the present cases.
The leading judgment was given by Mummery LJ.
The building had been built in the 1850s as a house for residential occupation, but since 1958 it had been used substantially (88.5% of the floorspace) for office purposes.
Under the most recent lease granted in 1972 the use was restricted to offices on all floors, except the top floor which was limited to use as a flat for a director or senior employee of a business occupying the offices below.
It was accepted by the lessors that there had been insufficient works of adaptation to conclude that it had ceased to be designed for living in (Mummery LJ, para 9), but they challenged the judges conclusion that it was a house reasonably so called.
That had been based, as the overwhelmingly significant factor, on the fact that the building was designed for living in and that its structure and appearance have (largely) remained unchanged (para 8).
Mummery LJ held that the judge had given too much weight to those factors, and insufficient weight to the prescriptive terms of the lease, the actual uses of the building and the relative proportions of the mixed use at the relevant date (para 20).
Goldring LJ, agreeing, found it impossible to accept that a building can reasonably be called a house although no one can lawfully live in virtually 90% of it (para 23).
In the present case, the Master of the Rolls ([2010] 1 WLR 2317, para 43) questioned the weight placed on that case by counsel for the present appellants in Hosebay: There can be no doubt that the external and internal appearance of the properties are highly relevant factors on this issue, and it is clear from the Prospect Estates case [2009] 1 WLR 1313 that, in so far as user is significant, the permitted use under the lease is a relevant factor.
In those circumstances, even assuming that actual use is also relevant, I find it hard to see how it can be sensibly said that each of the three properties cannot reasonably [be] called a house.
To hold otherwise would involve concluding that the actual user, even where it involved people occupying virtually all the rooms in the building for relaxing, sleeping, cooking and washing, albeit on a short term basis, trumped all the other factors to the extent of disabling the building from being able to be a house . reasonably so called.
He also doubted the decisive weight placed by Goldring LJ on the terms of the lease.
He thought the thrust of the judgments in Lake v Bennett [1970] 1 QB 663 and the opinion of Lord Roskill in Tandon [1982] AC 755 was that the question was to be determined essentially by reference to [the buildings] external and internal physical character and appearance (para 46).
He was not convinced that it would occur to most people, asked whether a building could reasonably be called a house, to ask about the permitted use under any lease, or that they would be influenced if told what the permitted use was (para 47).
He suggested that the ratio of Prospect Estates should be treated as being limited to a case where residential use is either prohibited entirely, or restricted to a very small part of the building, and the actual use accords with that (para 49).
As will be apparent from my earlier analysis of Tandon, I cannot agree that Lord Roskill regarded external and internal physical character and appearance as the determining factors.
I agree with the Master of the Rolls that the terms of the lease as such should not have been treated as the major factor.
However, in so far as Mummery LJ treated the use of the building, rather than its physical appearance, as determinative, his approach was in my view entirely consistent with the reasoning of the majority in Tandon as I have explained it.
I consider that Prospect Estates [2009] 1 WLR 1313 was rightly decided, and that the ratio need not be limited in the way the Master of the Rolls proposed.
The present cases
which I can deal with briefly.
I would allow the appeal in Hosebay on the grounds that a building which is wholly used as a self catering hotel is not a house reasonably so called within the meaning of this statute.
As appears from para 38 of their judgment (quoted above), the contrary view of the Court of Appeal turned on two main points: (i) the external appearance of each property as a town house; (ii) the internal conversion to self contained units, with cooking and toilet facilities.
I find it difficult with respect to see the relevance of the second point to this part of the definition, which only arises in relation to a building which is in some sense adapted for living in under the first part.
It is not suggested that the building is divided in a way which comes within the proviso.
The first point, for the reasons given in my analysis of Tandon, should not have been given determinative weight.
The fact that the buildings might look like houses, and might be referred to as houses for some purposes, is not in my view sufficient to displace the fact that their use was entirely commercial.
I turn to consider the application of these principles to the present appeals,
In these circumstances I find it unnecessary to reach a concluded view on the application of the first part of the definition in this appeal.
I agree with the appellants (and the judge) that living in means something more settled than staying in; and that the present use does not qualify as such.
There is more room for debate, however, whether the premises are to be taken as adapted solely for such use, to the exclusion of longer term occupation.
The Court of Appeal, as I understand it, were influenced not only by the consideration that the rooms might be used (for example) for longer term student occupation, but also that their current layout probably dates from earlier adaptation to the uses described in the leases, which could well be regarded as sufficiently settled to qualify as living in.
One of the values of the two part definition is that it becomes unnecessary to resolve such narrow factual issues.
In Lexgorge I would also allow the appeal on similar grounds.
A building wholly used for offices, whatever its original design or current appearance, is not a house reasonably so called.
The fact that it was designed as a house, and is still described as a house for many purposes, including in architectural histories, is beside the point.
In this case no issue arises under the first part of the definition.
It is unnecessary to consider whether the concession in that respect was rightly made, although it is possible that it was based on a wider interpretation of Boss Holdings [2008] 1 WLR 289 than my own analysis would have supported.
In summary, I would allow both appeals, and hold that neither building was on the relevant date a house within the meaning of section 2 of the 1967 Act.
| UK-Abs | These two joined appeals raise the question of whether a property used wholly for commercial purposes may qualify as a house for the purposes of legislation governing the right to leasehold enfranchisement (i.e. the right of a lessee in certain circumstances compulsorily to acquire the freehold of the building from his/her landlord) [1].
In the Hosebay case, the respondents owned the leases of three buildings in central London which had originally been built as separate houses as part of a late Victorian terrace [10].
The leases restricted the use of the houses to use for residential purposes, but on the date when the respondent served notices on the appellants under s.8 of the Leasehold Reform Act 1967 (the 1967 Act) seeking compulsorily to acquire the freehold of the buildings, they were being used wholly as a self catering hotel [10,13].
In the Lexgorge case, the respondent owned the lease of a five storey building in central London also originally built as a house [16].
The terms of the lease restricted the use of the upper two floors of the building to residential flats [18].
On the date when the respondent served a notice under s.8 of the 1967 Act, the building was used wholly for office purposes [17].
The building was listed as a building of special architectural or historic interest, and English Heritages records described it as a terraced house [18].
The issue in both appeals was whether the properties constituted houses within the meaning of s.2(1) of the 1967 Act.
This raised two separate but overlapping questions: (i) Were the buildings designed or adapted for living in? (ii) Were they houses reasonably so called? [8] Both elements of the definition were disputed by the appellants in the Hosebay case, but only second element of the definition was disputed by the appellant in the Lexgorge case [8].
The judge at first instance in each case concluded that the buildings were houses for the purposes the 1967 Act, and the Court of Appeal reluctantly upheld those decisions [1,2].
The Supreme Court unanimously allows both appeals.
It holds that neither property constituted a house for the purposes of the 1967 Act on the date when the relevant statutory notice was served.
The judgment of the Court is given by Lord Carnwath.
The decision of the Court of Appeal was not the result intended by Parliament when, pursuant to the Commonhold and Leasehold Reform Act 2002, it removed the requirements of residence from the 1967 Act [3 5].
As far as possible, an interpretation of the 1967 Act which has the effect of conferring rights on lessees going beyond those which Parliament intended to confer should be avoided [6].
The first element of the definition of house in s.2(1) of the 1967 Act (i.e. designed or adapted for living in) looks to the identity or function of the building based on its physical characteristics, the second element (i.e. a house reasonably so called) ties the definition to the primary meaning of house as a single residence, as opposed to, for example, a hostel or a block of flats [9].
Both parts of the definition need to be read in the context of a statute which is about houses as places to live in, not about houses as pieces of architecture or features in a street scene [9].
As to the first part of the definition of house in s.2(1) of the 1967 Act, the words designed and adapted do not constitute alternative qualifying requirements, despite the literal meaning of the provision [34].
Context and common sense argue strongly against a definition turning principally on historic design, if that has long been superseded by adaptation to some other use [34].
The words is adapted in s.2(1) refer to the present state of the building and do not imply any particular degree of structural change [34,35].
As to the second part of the definition, the external and internal physical appearance of a building should not be treated as determinative of whether it is a house reasonably so called , nor should the terms of the lease be treated as a major factor [41].
The buildings in the Hosebay case were not houses reasonably so called [43].
The fact that they might look like houses and might be referred to as houses for some purposes was not sufficient to displace the fact that their use was entirely commercial [43].
It was unnecessary to decide whether the buildings were designed or adapted for living in [44].
The building in the Lexgorge case was also not a house reasonably so called because it was used wholly for office purposes [45].
The fact that it was designed as a house and is still described as a house for many purposes (such as architectural histories) was beside the point [45].
|
On 27 November 2008, at the Crown Court in Isleworth, the respondent, Aloke Varma, pleaded guilty to three offences of being knowingly concerned in the fraudulent evasion of duty, contrary to section 170(2)(a) of the Customs and Excise Management Act 1979.
The offences were committed on 24 October 2007 and 3 and 13 April 2008.
On each occasion the defendant was stopped at Gatwick Airport and found to be in possession of a quantity of tobacco which he had brought into the United Kingdom without payment of the relevant import duties.
Following his pleas of guilty, the matter was adjourned for sentence.
I take these facts from the agreed statement of facts and issues.
On 15 January 2009 His Honour Judge Katkhuda (the judge), exercising his powers under section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, sentenced Varma to a conditional discharge for a period of two years.
In deciding that this was the appropriate sentence, the judge referred to Varmas psychological problems and facial neuralgia.
Confiscation proceedings under Part 2 of the Proceeds of Crime Act 2002 (the 2002 Act) were postponed.
The confiscation hearing was held on 3 April 2009.
The judge found the value of the defendants benefit to be 7,257.86 and the available amount to be 1,500.
Each of these figures had been agreed between the parties.
A confiscation order was made in the sum of 1,500, which was ordered to be paid by 31 March 2010, with a term of imprisonment of 45 days in default of payment.
On 13 July 2009 Varma sought leave to appeal out of time against the confiscation order.
He relied on R v Clarke [2009] EWCA Crim 1074, [2010] 1 WLR 223, in which the Court of Appeal (comprising Hooper LJ, Cox J and the Recorder of Nottingham) held in a reserved judgment that the Crown Court does not have the power to make a confiscation order against a defendant following conviction for an offence if he or she is made the subject of an absolute or conditional discharge in respect of that same offence.
The essential reasoning was that it was inappropriate to punish a defendant by imposing a confiscation order in a case in which (by virtue of the fact that a conditional discharge had been imposed) the court thought that punishment was inexpedient.
Varmas appeal was heard on 10 June 2010, together with three similar cases.
The defendant in each of the four cases before the Court of Appeal had pleaded guilty in the Crown Court to one or more offences, had received a conditional discharge and had been made the subject of a confiscation order under the 2002 Act.
The ground of appeal in each case was that, following Clarke, the Court had no power to make a confiscation order.
According to the agreed statement of facts and issues, oral argument was constrained by the Court of Appeals clear indication that it wished to focus on whether it was bound by Clarke.
On 8 July 2010 the Court of Appeal (Lord Judge CJ, Goldring LJ and Rafferty, Wilkie and King JJ) handed down their judgment in each of the four appeals: R v Magro, R v Brissett, R v Smith and R v Varma [2010] EWCA Crim 1575, [2011] QB 398.
The Court of Appeal held that, following the decision in Clarke, the Crown Court did not have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge in respect of that offence.
Giving the judgment of the court, Lord Judge CJ made clear (at para 29) that, but for the decision in Clarke, the court would have reached a contrary conclusion.
On this basis, the Court of Appeal extended time to appeal in the case of Varma, allowed the appeal against sentence and quashed the confiscation order.
The court held that a point of law of general public importance was involved in their decision and certified the following question: Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? This court subsequently granted permission to appeal.
The three remaining applications for leave to appeal against sentence were adjourned pending the outcome of this appeal.
As agreed in the statement of facts and issues, the issue which arises for consideration in this appeal is whether the Crown Court has power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence.
The statutory framework
provides: Section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, (1) Where a court by or before which a person is convicted of an offence . is of the opinion, having regard to the circumstances including the nature of the offence and the character of the offender, that it is inexpedient to inflict punishment, the court may make an order either (a) discharging him absolutely; or (b) if the court thinks fit, discharging him subject to the condition that he commits no offence during such period, not exceeding three years from the date of the order, as may be specified in the order . (7) Nothing in this section shall be construed as preventing a court, on discharging an offender absolutely or conditionally in respect of any offence, from making an order for costs against the offender or imposing any disqualification on him or from making in respect of the offence an order under section 130, 143 or 148 below (compensation orders, deprivation orders and restitution orders).
As is apparent, there is no reference in subsection (7) to confiscation orders.
At the date when section 12 of the 2000 Act came into force, section 2(6) of the Drug Trafficking Act 1994, repeating section 1(6) of the Drug Trafficking Offences Act 1986, provided: No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence." Similar provision was made, with necessary alterations to the language, to deal with non drug trafficking offences, by section 72(6) of the Criminal Justice Act 1988.
Section 14 of the 2000 Act provides: (1) Subject to subsection (2) below, a conviction of an offence for which an order is made under section 12 above discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made and of any subsequent proceedings which may be taken against the offender under section 13 above. (3) Without prejudice to subsections (1) and (2) above, the conviction of an offender who is discharged absolutely or conditionally under section 12 above shall in any event be disregarded for the purposes of any enactment or instrument which (a) imposes any disqualification or disability upon convicted persons; or (b) authorises or requires the imposition of any such disqualification or disability. (6) Subsection (1) above has effect subject to section 50(1A) of the Criminal Appeal Act 1968 and section 108(1A) of the Magistrates' Courts Act 1980 (rights of appeal); and this subsection shall not be taken to prejudice any other enactment that excludes the effect of subsection (1) or (3) above for particular purposes.
Section 6 of the Proceeds of Crime Act 2002, as amended, provides: (1) The Crown Court must proceed under this section if the following two conditions are satisfied. (2) The first condition is that a defendant falls within any of the following paragraphs (a) he is convicted of an offence or offences in proceedings before the Crown Court; (3) The second condition is that (a) the prosecutor asks the court to proceed under this section, or (b) the court believes it is appropriate for it to do so. (a) it must decide whether the defendant has a criminal lifestyle; (b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct; (4) The court must proceed as follows (c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct. (5) If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to it must (a) decide the recoverable amount, and (b) make an order (a confiscation order) requiring him to pay that amount. (6) But the court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct. (7) The court must decide any question arising under subsection (4) or (5) on a balance of probabilities.
Section 13 of the 2002 Act provides: (1) If the court makes a confiscation order it must proceed as mentioned in subsections (2) and (4) in respect of the offence or offences concerned. (2) The court must take account of the confiscation order before (a) it imposes a fine on the defendant, or (b) it makes an order falling within subsection (3). (3) These orders fall within this subsection (a) (compensation orders); (b) (forfeiture orders); (c) (deprivation orders); (d) (forfeiture orders). (4) Subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant .
Section 14 of the 2002 Act provides: (1) The court may (a) proceed under section 6 before it sentences the defendant for the offence . or (b) postpone proceedings under section 6 for a specified period. (11) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement. (12) But subsection (11) does not apply if before it made the confiscation order the court (a) imposed a fine on the defendant; (b) made an order falling within section 13(3); (c) made an order under section 130 of the Sentencing Act (compensation orders).
Section 15 of the 2002 Act provides: (1) If the court postpones proceedings under section 6 it may proceed to sentence the defendant for the offence (or any of the offences) concerned. (2) In sentencing the defendant for the offence (or any of the offences) concerned in the postponement period the court must not (a) impose a fine on him, (b) make an order falling within section 13(3), or (c) make an order for the payment of compensation under section 130 of the Sentencing Act. (3) If the court sentences the defendant for the offence (or any of the offences) concerned in the postponement period, after that period ends it may vary the sentence by (a) imposing a fine on him, (b) making an order falling within section 13(3), or (c) making an order for the payment of compensation under section 130 of the Sentencing Act. (4) But the court may proceed under subsection (3) only within the period of 28 days which starts with the last day of the postponement period. (7) The postponement period is the period for which proceedings under section 6 are postponed.
Statutory construction
In my opinion the question whether the Crown Court has power to make a confiscation order under Part 2 of the 2002 Act in a case where the court has given the defendant an absolute or conditional discharge depends upon the true construction of sections 6 and 13 to 15 of that Act.
I have reached the clear conclusion that there is, not only such a power, but in most cases a duty to make such an order for the reasons set out below.
It is first important to have regard to the duties imposed upon the court by section 6.
Those duties are contained in section 6(1), (4), (5) and (7).
The duties are absolute, subject to subsection (6), which qualifies subsection (5).
By subsection (1), the court must proceed under the section if the two conditions in subsections (2) and (3) are satisfied.
Subsection (2)(a) is satisfied if the defendant is convicted.
Subsection (3) is satisfied if, as in this case, the prosecutor asks the court to proceed under the section.
If the prosecutor does not ask the court to proceed under the section, subsection (3) will also be satisfied if the court believes that it is appropriate to do so.
There was no argument in this case as to the correct approach of the judge in such a case and I therefore say nothing about it.
If those conditions are met (as they were in this case), the court must proceed as set out in subsection (4), under which it must decide whether the defendant has a criminal lifestyle and, if so, whether he has benefited from his general criminal conduct and, if he does not have a criminal lifestyle, whether he has benefited from his particular criminal conduct.
There are specific provisions relating to those questions which are not relevant for the purposes of resolving the issue in this appeal.
By subsection (5), if the court decides that the defendant has benefited from his general criminal conduct or his particular criminal conduct, it must decide the recoverable amount and make a confiscation order requiring him to pay that amount.
Subsection (6) converts that duty into a power in circumstances which are not relevant for present purposes.
Sections 7 to 12 are also for the most part irrelevant for present purposes.
It can be seen that there is nothing in section 6 which suggests that the court should not make a confiscation order where it gives or proposes to give the defendant an absolute or conditional discharge.
On the contrary section 6(1) is expressed in absolute terms in that it leaves the court with no discretion whether or not to make a confiscation order if the conditions in subsections (2) and (3) are satisfied.
Subsection (4) then provides how the court must proceed and subsection (5) provides that, where the court decides that the defendant has benefited from relevant criminal conduct, it must decide the recoverable amount (in accordance with section 7) and must make a confiscation order requiring him to pay that amount.
Section 13 expressly provides what the court is to do if it makes a confiscation order.
By subsection (1) it must proceed as mentioned in subsections (2) and (4).
By subsection (2) it must take account of the confiscation order before it imposes a fine on the defendant or imposes any of the financial penalties specified in subsection (3).
Subsection (5) and (6) contain provisions which relate to a case where the court makes both a confiscation order and a compensation order under section 130 of the 2000 Act.
Section 13(4) is of significance in the context of this appeal.
It provides that, subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant.
It is important to note that the purpose of section 13(4) is not to limit the scope of the confiscation order, let alone to prohibit the making of such an order.
It could not have that effect because it assumes that a confiscation order has been made.
However that may be, as I see it, the expression in deciding the appropriate sentence for the defendant must be a reference to the sentencing process, at which the court will consider how the defendant should be dealt with.
As part of that process the court will no doubt consider all the options open to it, including the option of giving the defendant an absolute or conditional discharge.
It is sometimes said that an absolute or conditional discharge is not a sentence because, under section 12(1) of the 2000 Act, the court may make such an order only if it is of the opinion that it is inexpedient to inflict punishment.
Whether such an order is a sentence or not, it is in my opinion an order made as a result of deciding the appropriate sentence within the meaning of section 13(4).
The effect of section 13(4) is that, in making that decision, the court must leave the confiscation order out of account.
It was not suggested in argument that it would not be open to the court which had made a confiscation order to give the defendant an absolute or conditional discharge.
The Court of Appeal thought (at para 28) that it would in principle be free to do so.
I agree, although whether it would have power to do so would depend upon whether the court was of the opinion that it was inexpedient to inflict punishment.
In deciding that question, by reason of section 13(4), it must, subject to subsection (2), leave the confiscation order out of account.
All naturally depends upon the circumstances and it will no doubt be a rare case in which it will be appropriate to make an order in the form of an absolute or conditional discharge.
However, it does not seem to me to be necessarily wrong in principle for a court to conclude that it is inexpedient to inflict punishment in a case where the defendant has benefited from his criminal conduct and a confiscation order has been made.
For example, it may be inappropriate to impose a fine or other financial penalty in the light of the confiscation order, perhaps because of the defendants means, and there may be strong mitigation which persuades the court that it would not be appropriate to impose a sentence of imprisonment or a community order.
Some assistance is also to be derived from sections 14 and 15.
Subsections (1) to (4) of section 14 provide that the court may either (a) proceed under section 6 before it sentences the defendant or (b) postpone proceedings under section 6 for a period or periods up to a maximum of two years, although the maximum does not apply if there are exceptional circumstances.
Section 15(1) provides that, if the court postpones proceedings under section 6, it may proceed to sentence the defendant.
Although sections 14 and 15 contemplate the postponement of the section 6 proceedings, they do not nullify the duty of the court to act under section 6.
Thus, where, as is common in practice, the court proceeds to sentence before the confiscation proceedings under section 6, the duty of the court to proceed under section 6 remains.
The Court of Appeal has correctly so held on a number of occasions: see eg R v Hockey [2007] EWCA Crim 1577, [2008] 1 Cr App R (S) 279.
The effect of section 15(2) and (3) is that, where the confiscation proceedings are postponed and the defendant is sentenced during the postponement period, the court may not impose a fine or other financial penalty upon him, but (subject to subsection (4)) the court may subsequently vary the sentence, by imposing a fine or other financial penalty, after the postponement period.
Those provisions expressly contemplate confiscation proceedings after the end of the postponement period.
They are consistent with section 13(2), which provides that the court must take account of the confiscation order before it imposes a fine or other specified financial penalty.
Thus a sentence passed before a confiscation order is made cannot include a fine or other financial penalty because to do so would be inconsistent with section 13(2).
By section 15(3) the Act contemplates that in those circumstances, when a confiscation order is made after the end of the postponement period, the court may then think it appropriate to impose a fine or other financial penalty, in which case it must take account of the confiscation order in accordance with section 13(2).
The importance of these provisions for present purposes is that they show that the statutory scheme envisages, indeed requires, that confiscation proceedings take place after the end of the postponement period.
In summary, the position as I see it on the true construction of the 2002 Act is that the court remains under a duty to proceed under section 6 and, subject to the express terms of the section, must make an order.
In the case in which the section 6 proceedings take place before the defendant is sentenced, as stated above I can see no basis upon which it could be submitted to the court that no confiscation order should be made because it would be appropriate to give the defendant an absolute or conditional discharge.
There is nothing in the Act which gives the court power to decline to discharge its duty to make a confiscation order under section 6 on that or any other ground.
On the other hand, if the court decides (as it is entitled to do under section 15(1)) to postpone the confiscation proceedings under section 6 and proceed to sentence the defendant, if it makes an order for an absolute or conditional discharge, again I can see no basis upon which the making of such an order could absolve the Crown Court from its duty to proceed under section 6 or, having done so, from its duty to make a confiscation order under that section.
If the relevant subsections of section 6 were satisfied, it would be bound to make such an order by reason of the plain words of subsection (1).
I turn to consider those conclusions in the light of the decision in Clarke, the history of the 2002 Act, the meaning of punishment in section 12(1) of the 2000 Act and the position in Scotland.
The decision in Clarke
In Clarke the Court of Appeal said at para 48, in my opinion correctly, that, if the 2002 Act is read on its own, there could be no doubt that the court has jurisdiction to make a confiscation order.
Equally it recognised at para 77 that the fact that the 2002 Act imposes a mandatory regime is obviously a powerful argument for saying that the court must proceed under section 6 even though the defendant is being absolutely or conditionally discharged, but in the remainder of para 77 it summarised its reasons for rejecting the argument.
However before doing so, it considered the position under section 14 of the 2000 Act.
It first rejected the argument that, as a matter of jurisdiction, section 14 prevented the court from making both a confiscation order and an order for an absolute or conditional charge.
It did so on two bases.
The first (at para 46) was that the court had jurisdiction to make a confiscation order under section 14(1)(a) of the 2002 Act before proceeding to sentence the defendant.
There was nothing in section 14 of the 2000 Act retrospectively to deprive the court of that jurisdiction.
The second was this.
By section 14(1) of the 2000 Act, a conviction of an offence for which an order is made under section 12 of the 2000 Act discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made.
The court held that a conviction which leads to the conditional or absolute discharge in the circumstances of the instant case is a conviction in the same proceedings as those in which the confiscation order is made, so that the conviction is not deemed not to be a conviction, within section 14(1): see paras 68 and 70 in Clarke and para 17 in the Court of Appeals judgment in the instant case.
I agree with that analysis.
The critical question was whether section 12 of the 2000 Act prevents the Crown Court from making a confiscation order and an absolute or conditional discharge order.
The reasons given by the court in Clarke for answering that question in the affirmative were these (at para 77): However, in the light of R v Savage (1983) 5 Cr App R (S) 216 and R v Young (1990) 12 Cr App R (S) 262, section 12(7) [of the 2000 Act] and the history of section 12(7), we have reached the conclusion that the Crown Court has no power to make a confiscation order against a defendant following conviction of an offence if he or she receives an absolute or conditional discharge for that offence.
If Parliament had wanted to include confiscation orders within the 1973 predecessor to section 12 (see para 37 above) or in the 2000 Act, it could easily have done so.
We are mindful of the fact that the orders which had been made in R v Savage and R v Young were made under legislation which gave the power to make the order but did not require the making of an order, but we do not think that this affects the conclusion which we have reached.
The argument accepted by the court in Clarke was that, as a matter of principle or law, section 12 of the 2000 Act prevented the Crown Court from making both an order for an absolute or conditional discharge and a confiscation order.
The court concluded (at para 31) that there is a general principle or rule of law that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders) or (b) the enactment which permits or requires the punitive order to be made expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7).
As it said in para 77, the court derived that principle from the two earlier decisions of the Court of Appeal in Savage and Young.
The issue in Savage, in which the appellant pleaded guilty to handling stolen goods, was whether a deprivation order under section 43 of the Powers of Criminal Courts Act 1973 in respect of a motor car could stand with a conditional discharge for the handling.
The issue in Young, in which the appellant pleaded guilty to managing a company as an undischarged bankrupt, was whether a disqualification under section 2 of the Company Directors Disqualification Act 1986 could stand with a conditional discharge on the count on which he had pleaded guilty.
It was held in both cases that it could not.
As Brooke J put it in Young at p 267, it was quite inappropriate for a [disqualification] to be linked with a conditional discharge.
As is plain from section 12(7) of the 2000 Act, which re enacted earlier statutes, the result in both those cases was reversed by statute.
However that may be, in my opinion the principle in those cases does not apply to the problem under consideration in this appeal.
As expressly recognised in Clarke, in Savage and Young the court was considering whether a discretionary order (ie of deprivation or disqualification) could stand with an absolute or conditional discharge.
In the instant case, for the reasons given above, the confiscation order was not made in the exercise of a power to impose it but in the discharge of a duty to do so.
This is in my view a critical distinction.
See further paras 33 to 39 below.
The Court of Appeal in Clarke accepted the force of that point but held that Parliament must have intended that the court should not have a power or duty to make a confiscation order in circumstances in which an order for an absolute or conditional discharge was made because the Act did not include a reference to confiscation in section 12(7).
However, it was accepted in Clarke at paragraph 46 (and it is not and could not be in dispute) that the Crown Court has jurisdiction under section 6 of the 2000 Act to make a confiscation order before the judge decides on sentence.
The court added that such an order would (presumably) have to be quashed if, subsequently, an order of absolute or conditional discharge was made but it recognised that there was no express power to do that.
For my part, I can see no mechanism by which a lawful confiscation order made by a court pursuant to its duty under section 6 could be quashed.
The Crown Court would have no jurisdiction to quash it and I can see no basis upon which the Court of Appeal could properly quash it either.
In Clarke the courts only solution to this problem was as stated in para 78, namely that, given that a confiscation order can, at least in theory, be made before passing sentence it would, as the court put it, obviously be prudent in those very rare cases where an absolute or conditional discharge is a possibility, to decide upon sentence first.
In the instant case the Court of Appeal described that suggestion as an extra legislative process (para 28) and described the removal of the confiscation order as one which does not easily fit with the structure of the legislative provisions in sections 6, 14 and 15 of the 2002 Act.
I would go further.
In my opinion it is inconsistent with them.
As I see it, the fact that there is no reference to a confiscation order in section 12(7) of the 2000 Act does not lead to the conclusion that Parliament intended that such an order could not stand with an absolute or conditional discharge.
Whether it can or not depends upon the true construction of the 2002 Act, which to my mind is in clear terms.
For these reasons I would reject the first of the two reasons given in para 31 in Clarke, namely that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders).
The second reason was that no such order may be made unless (b) the enactment which permits or requires the punitive order to be made, here the 2002 Act, expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7).
I would not accept the second reason precisely as formulated, if only because it assumes that the principles in Savage and Young apply in the present context, whereas to my mind they do not apply to duties imposed upon the court as opposed to powers conferred upon it.
It is true that there is an argument, which was advanced on behalf of the respondent, that the principle in Savage and Young applies to duties as well as powers.
Thus attention was drawn to Taylor v Saycell [1950] 2 All ER 887 and Dennis v Tame [1954] 1 WLR 1338 and to section 46 of the Road Traffic Offenders Act 1988.
In this regard the submission made on behalf of the respondent can be summarised in this way.
Historically, an important forerunner of section 12(1) of the 2000 Act was section 7(1) of the Criminal Justice Act 1948 (the 1948 Act), which contained the original section which provided for an absolute or conditional discharge if it was inexpedient to inflict punishment.
Section 12(2) of the 1948 Act, which was a forerunner of section 14(3) of the 2000 Act, provided that the conviction of an offender who is discharged absolutely or conditionally shall be disregarded for the purposes of any enactment which imposes any disqualification or disability upon convicted persons, or authorises or requires the imposition of any such disqualification or disability.
These sections were considered in the cases of Taylor v Saycell and Dennis v Tame, which were both decisions of the Divisional Court presided over by Lord Goddard CJ.
In Taylor v Saycell the respondents were convicted by magistrates of using a vehicle without insurance.
They were fined and disqualified from holding a licence for 12 months.
They appealed to the Crown Court, which quashed the fines and the disqualifications and substituted conditional discharges.
On a case stated by the prosecutor, the Divisional Court quashed the conditional discharges on the basis that there was no evidence upon which it could be said that it was inexpedient to inflict punishment.
Moreover no special reasons had been advanced to avoid what would otherwise be a mandatory disqualification.
At p 889H Lord Goddard said, obiter, that convictions under the Road Traffic Act 1930 (the RTA 1930) were within section 12(2) of the 1948 Act, that it was within the jurisdiction of the court to make an order for a conditional discharge and that such an order would avoid the necessity for disqualification.
In Dennis v Tame the defendant was given a conditional discharge, which had the effect under section 12(2) of avoiding disqualification.
The conditional discharge was set aside on the basis that the Divisional Court had said more than once that the conditional discharge provisions should not be used in order to avoid disqualification in cases where, under the RTA 1930, the defendant must be disqualified in the absence of special circumstances.
It further held that there were no special circumstances on the facts.
Attention was also drawn to section 46 of the Road Traffic Offenders Act 1988 (the RTOA 1988), which was relied upon on behalf of the respondent.
It provides, so far as material (and as set out in Clarke at para 52): Notwithstanding anything in section 14(3) of the Powers of Criminal Courts (Sentencing) Act 2000 a court in England and Wales which on convicting a person of an offence involving obligatory or discretionary disqualification makes . an order discharging him absolutely or conditionally may or must disqualify or endorse.
It was noted in Clarke that the reference to section 14(3) must have been included because of Taylor v Saycell.
In Clarke the court said at para 52 that it followed from the reference to section 14(3) in section 46 of the RTOA 1988 that the draftsman was accepting Lord Goddards interpretation of what is now section 14(3), namely that it prevented the imposition of any disqualification or disability in the proceedings for the offence for which the conditional discharge had been granted, subject to any contrary enactment.
It was submitted on behalf of the respondent that the effect of Taylor v Saycell and Dennis v Tame was that sentencing courts should not impose absolute or conditional discharges in an attempt to avoid disqualification because such a result was inconsistent with the statutory requirement that special circumstances (or special reasons) must be found before disqualification could be avoided.
For my part, I am not persuaded that either those cases or section 46 of the RTOA 1988 carry the present debate much further forward.
The cases do no more than reflect the position as it stood under the statutes then in force.
Otherwise all that the cases did was to say that, as a matter of principle, the courts should not use an absolute or conditional discharge in order to avoid the effect of the RTA 1930, which required disqualification in the absence of special circumstances.
The reason the cases were decided as they were was because of section 12(2) of the 1948 Act.
They were concerned with the circumstances in which the court should impose an absolute or conditional discharge where to do so would avoid the effect of the statute.
They treated the provisions of the statute as paramount.
They were not concerned with the position we have here, where the terms of the statute are said to yield to the fact of a conditional discharge.
In all these circumstances I remain of the view that there is an important distinction between the correct approach where the court has a power to impose a penalty together with an absolute or conditional discharge and the correct approach where the court has a duty to do so on the true construction of the statute.
However, whether that is correct or not, all turns on the true construction of the 2002 Act.
In my opinion, for the reasons I have given in paras 12 to 22 above, on its true construction the 2002 Act imposes a duty upon the court to make a confiscation order, whether the section 6 proceedings take place before or after the sentencing process.
As to the second reason in para 31 of Clarke, the courts reasoning may be summarised in this way.
Parliament had enacted legislation empowering courts to make various other punitive orders and had in the same legislation specified that such orders could be made even where an absolute or conditional discharge had been imposed.
Examples of such punitive orders were orders disqualifying a person from driving under section 46(1) of the RTOA 1988, exclusion orders made under section 1 of the Licensed Premises (Exclusion of Certain Persons) Act 1980, designed to deal with persons who commit violent offences on licensed premises, banning orders made under the Football (Disorder) Act 2000 and orders made under the Sex Offenders Act 1997 requiring a defendant to comply with notification requirements.
The 2002 Act does not expressly provide for the making of a confiscation order where an order for discharge is imposed.
The absence of a specific provision in the 2002 Act could be taken to show Parliaments intention that confiscation orders should not be coupled with an order for absolute or conditional discharge.
This was so notwithstanding the fact that the 2002 Act imposed a mandatory regime for confiscation orders.
The difficulty with this general point is that identified on behalf of the appellant.
Each of the statutes referred to empowered or required the court to impose a disqualification or disability of one kind or another.
The explicit reference in those statutes to the regime for conditional and absolute discharges appears to have been designed principally to ensure that courts do not interpret section 14(3) of the 2000 Act as preventing the court from making such orders.
However, first, section 14(3) would have no application to confiscation orders because a confiscation order is not a disqualification or disability.
Secondly, it does not necessarily follow from the fact that other legislation contains an express provision permitting a punitive order and an absolute or conditional discharge to be made in respect of the same offence that the absence of such a provision in the 2002 Act has the effect of preventing a court from imposing both a confiscation order and an absolute or conditional discharge.
All depends upon the scheme of the particular Act and, for the reasons I have given, I would accept the submission made on behalf of the appellant that the scheme of the 2002 Act demonstrates an intention on the part of Parliament to put in place a mandatory scheme of confiscation designed to deprive offenders of the benefit of their offending.
The history of the 2002 Act
Some reliance was placed upon the history of the 2002 Act, which was considered in detail by the Court of Appeal in Clarke.
The first statute which provided for confiscation to which we were referred was the Drug Trafficking Offences Act 1986 (the 1986 Act).
Section 1(1) (5) were very similar to what became section 6 of the 2002 Act.
In summary, they required the court to take certain steps when a person appeared before the Crown Court for sentencing.
They required the court to determine whether he had benefited from the drug trafficking offence or offences for which he was to be sentenced.
Section 1(4), (5) and (6) then provided: (4) If the court determines that he has so benefited, the court shall, before sentencing or otherwise dealing with him in respect of the offence or, as the case may be, any of the offences concerned, determine in accordance with section 4 of this Act the amount to be recovered in his case by virtue of this section. (5) The court shall then, in respect of the offence or offences concerned (a) order him to pay that amount, (b) take account of the order before (i) imposing any fine on him, or (ii) making any order involving any payment by him, or (iii) making any (forfeiture orders), or (deprivation orders), and (c) subject to paragraph (b) above, leave the order out of account in determining the appropriate sentence or other manner of dealing with the defendant. (6) No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence.
The 1986 Act was followed by the Criminal Justice Act 1988 (the 1988 Act), which extended the confiscation regime beyond drug trafficking.
Section 72(5) and (6) of the 1988 Act were in very similar terms to sections 1(5) and (6) of the 1986 Act.
The 1988 Act was amended by a number of subsequent Acts.
Those amendments included the addition of section 72A, which provided for the postponement of the confiscation proceedings in very similar terms to the equivalent provisions of the 2002 Act.
It is of interest to note the following.
Section 72A(7) provided that, where the court exercised its power of postponement, it might nevertheless proceed to sentence, or otherwise deal with, the defendant in respect of the offence or any of the offences concerned.
See also section 72A(8)(c) and section 72A(9), which provided that in sentencing, or otherwise dealing with, the defendant during the period of postponement, the court must not impose a fine or other financial penalty on him.
The Drug Trafficking Act 1994 (the 1994 Act) repealed and replaced the 1986 Act.
It was limited to drug trafficking offences but was in very similar terms to the 2002 Act.
The equivalent of section 13(2), (3) and (4) in the 2002 Act was section 2(5) of the 1994 Act, although by section 2(5)(c) it provided that, subject to paragraph (b) (which was the equivalent of section 13(2) and (3)), the court must leave the confiscation order out of account in determining the appropriate sentence or other manner of dealing with the defendant.
Section 3 provided for postponed determinations in very similar terms to section 15 of the 2002 Act, save that in subsection (7) it gave the court power during the postponement to proceed to sentence, or otherwise deal with the defendant and in subsection (9) it prohibited the court from imposing a fine or other specified financial penalty in sentencing, or otherwise dealing with, the defendant.
The 2002 Act has replaced both the 1988 Act and the 1994 Act.
In the Court of Appeal in the instant case the court noted in para 28 that the position when the 2002 Act came into force was that the effect of section 72(6) of the 1988 Act and of section 2(6) of the 1994 Act, which was of course the successor to section 1(6) of the 1986 Act, was that the court was not deprived of its power to make a confiscation order in addition to an absolute or conditional discharge or vice versa.
In summary, the position when the 2002 Act came into force was that the court had both the duty (or in rare cases power) to make a confiscation order and also had the power to make an order for an absolute or conditional discharge in an appropriate case.
The Court of Appeal noted that an equivalent provision to section 2(6) of the 1994 Act was included as clause 14(7) of the Bill which led to the 2002 Act but that the clause was removed from the Bill before it was enacted.
The Court of Appeal plainly thought that it was very unlikely indeed that Parliament intended to change that position, when enacting the 2002 Act.
It held (or would have held) that section 13(4) was in sufficiently clear terms to make such a provision unnecessary.
It is of interest to note that, according to the explanatory note to section 13, it reproduces the effect of the existing legislation.
Conclusions
I would accept the approach of the Court of Appeal to the position as it was when the 2002 Act came into force.
However, I am aware that the distinguished commentator, Dr David Thomas QC, has expressed the view in [2010] Crim LR 64 and 790 that, in so far as the argument of the appellant rests upon section 1(6) of the 1986 Act and section 72(6) of the 1988 Act it rests on what he calls an uncertain foundation.
Fortunately the conclusion which I have reached does not depend upon that foundation, whether uncertain or not.
It depends upon my view of the true construction of the relevant provisions of the 2002 Act, which I have set out in paras 12 to 22 above.
I note in passing that Dr Thomas does not express a view on the Court of Appeals opinion that Clarke was wrongly decided.
For my part, I agree with the Court of Appeal that section 13(4) is in clear terms and that Clarke was wrongly decided.
In para 77 (quoted at para 26 above) the court in Clarke referred to the fact that the 2002 Act required the making of a confiscation order but simply said that it did not think that that affected the conclusion they had reached.
I respectfully disagree.
The issue was one of construction of the 2002 Act, which in my opinion required the making of a confiscation order whatever order was made as a result of the sentencing exercise.
In short it is my view that in Clarke the court placed insufficient weight upon the mandatory provisions of the statute.
On behalf of the appellant some reliance was placed upon the obligations of the United Kingdom under what is known as the Framework Decision, namely the Council Framework Decision of 26 June 2001 On Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime (2001/500/JHA).
In the light of the conclusion which I have reached above, it is not necessary further to lengthen this judgment by referring to its provisions.
Punishment
There was some discussion in the course of the argument as to whether the making of a confiscation order is or is not punishment within the meaning of section 12(1) of the 2000 Act.
The relevance of the issue is that, if a confiscation order is not punishment, it is not inconsistent with an order for an absolute or conditional discharge, which can only be made if it is inexpedient to inflict punishment, whereas if it is punishment, it is said to be inconsistent with an absolute or conditional discharge.
The argument that a confiscation order is not punishment is that it is not intended to punish the defendant but to ensure that he disgorges any benefit he has made from crime, at any rate to the extent of his assets.
On the other hand, the court in Clarke expressed the clear view that such an order is punishment: see in particular paras 65 and 74.
It noted in para 65 that it has been treated as part of the process of sentencing and that, at least for some purposes, has been held to be a penalty: see eg R v Briggs Price [2009] 1 AC 1026, paras 30, 63, 112, 113, 115 and 134.
At para 74 the court said: There can be no doubt that confiscation orders constitute punishment.
The regime under what is now the 2002 Act is aptly described as Draconian.
The use of the offender's realisable assets to recover any benefit (not merely profit), including benefits from criminal activity unassociated with the index offence with a maximum of ten years' imprisonment in default must constitute punishment.
Thus, applying these cases, the making of a confiscation order is inconsistent with a finding that it is inexpedient to inflict punishment.
It seems to me that must be correct.
However, it is not necessary to reach a final conclusion on that question because section 13(4) of the 2002 Act expressly provides that the confiscation order must be left out of account in deciding the appropriate sentence for the defendant.
It follows that whether a confiscation order is punishment or not is irrelevant to the question whether or not to make an order for an absolute or conditional discharge.
Scotland
The conclusions which I have reached seem to me to receive strong support from the position in Scotland, which is governed by Part 3 of the 2002 Act.
Section 92 of the 2002 Act is almost identical to section 6, most of which is set out above.
Section 92, however, provides three conditions rather than two.
So far as relevant to the question in this appeal, section 92 provides: or (1) The court must act under this section where the following three conditions are satisfied. (2) The first condition is that an accused falls within either of the following paragraphs (a) he is convicted of an offence or offences, whether in solemn or summary proceedings, (b) in the case of summary proceedings in respect of an offence (without proceeding to conviction) an order is made discharging him absolutely. (3) The second condition is that the prosecutor asks the court to act under this section. (4) The third condition is that the court decides to order some disposal in respect of the accused; and an absolute discharge is a disposal for the purpose of this subsection.
The remaining provisions are identical or almost identical to those in Part 2 relating to England and Wales which are quoted above.
The significant provisions for present purposes are subsections (2)(b) and (4).
Subsection (2)(b) provides that the first condition is satisfied in the case of summary proceedings if, without proceeding to a conviction, an order is made discharging the defendant absolutely and subsection (4) provides that the third condition is satisfied if the court decides to order a disposal, an absolute discharge being a disposal for that purpose.
It is thus plain that, at any rate in the case of Scotland, Parliament expressly contemplated that the court will have a duty to make a confiscation order in circumstances in which it thinks it right to make an order for an absolute discharge, both where there is a conviction and where there is not.
It seems inconceivable that Parliament intended that in England and Wales the making of an order for an absolute discharge should be a bar to the making of a confiscation order.
In these circumstances, the position in Scotland seems to me to give some force to the underlying rationale of the construction of the 2002 Act set out in paras 12 to 22 above.
Postscript
There was a suggestion that confiscation proceedings after an absolute or conditional discharge were or might be an abuse of process or an infringement of the appellants rights under Article 1 Protocol 1 of the European Convention on Human Rights (A1P1).
However, the duty of the court to make a confiscation order arises where the defendant has benefited from either general or particular criminal conduct and the court has determined the recoverable amount, which is defined in section 7(1) of the 2002 Act as an amount equal to the defendants benefit from the conduct concerned.
I do not see how such proceedings could be an abuse of process.
The present case is not concerned with the determination of the amount of that benefit or with the possible application, for example, of the provisions of A1P1 to that determination.
A1P1 may have its part to play on issues of proportionality but not in the context of this appeal.
Disposition
As stated in para 6 above, the certified question is Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? For the reasons I have given, I would answer that question in the affirmative but I would go further.
I would hold that, where the criteria in section 6 of the 2002 Act are satisfied, subject to subsection (6), the Crown Court has a duty to make a confiscation order against a defendant following conviction for an offence, whether or not he or she receives an absolute or conditional discharge for that offence.
Where subsection (6) applies, that duty must be treated as a power.
In all the circumstances I would allow the appeal and restore the confiscation order in the sum of 1,500.
LORD PHILLIPS
I am in full agreement with the judgment of Lord Clarke.
I wish, however, to add a footnote, based on information supplied pursuant to a request from the Court.
The prosecuting authority responsible for the prosecution of Mr Varma and for the decision to seek a confiscation order was the Revenue and Customs Prosecutions Office (the Customs).
Where the Customs seize goods that a defendant is seeking to bring into the country without paying duty it would be open to them to confiscate the goods, to prosecute the defendant and to exact the duty payable on them.
It is, however, their practice, where they prosecute in such circumstances, not to seek to exact payment of the duty but to initiate confiscation proceedings in the amount of the duty payable instead.
That is what they did in the case of Mr Varma.
This practice may well be convenient, but I doubt whether it is legitimate.
Mr Varma pleaded guilty to section 170(2)(a) of the Customs and Excise Management Act 1979, which provides, in so far as material: if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion (a) of any duty payable on the goods (my emphasis).
I consider it questionable whether, in confiscation proceedings, it is legitimate to treat a defendant in the position of Mr Varma as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it.
If I am correct, then it is doubtful whether there was any basis for bringing confiscation proceedings in this case.
I am aware that I am questioning the assumption that underlay the decision of the House of Lords in R v David Smith [2002] 1 WLR 54, but that aspect of that decision (at least) calls out for review.
It has not, however, been challenged in this case so the confiscation order made must stand.
I agree with the judgment delivered by Lord Clarke and with his proposed
LORD MANCE
disposal of this appeal.
As a member of the Court of Appeal with whose judgment the House of Lords disagreed in R v David Smith [2001] UKHL 68, [2002] 1 WLR 54, I have read with a particular interest Lord Phillipss supplementary judgment.
In it he doubts whether, in confiscation proceedings, it is legitimate to treat a defendant as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it.
That, he suggests, was the assumption underlying the decision in David Smith.
A problem about this suggestion appears to me to be that the evasion relied upon by the Customs in such cases as David Smith and the present lies in the initial importation of the dutiable goods without declaration or payment of duty, not in any non payment resulting from Customs failure to pursue the defendant.
On that basis, therefore, the argument resolves itself into a question whether he has benefited from his particular criminal conduct.
That was the question which the Court of Appeal answered in the favour of, and the House of Lords answered against, the defendant in David Smith.
As I understand Lord Phillipss current suggestion, it would be impossible to treat any smuggler as having actually evaded any duty payable on the goods, unless and until it was clear that Customs could not pursue him for and presumably actually recover the duty.
All that could be said until then was that the defendant was, by not declaring the importation and by not paying the duty, attempting to evade the duty payable.
Without having heard argument on the point, I see some difficulty in thinking that this analysis reflects the ingredients of the criminal offence created by section 170(2) of the Customs and Excise Management Act 1979.
That does not mean that I do not consider that the proper scope of confiscation orders in the present area merits further consideration at the highest level.
| UK-Abs | On 24 October 2007 and again on both 3 and 13 April 2008 the Respondent, Mr Varma, was stopped at Gatwick Airport and found to be in possession of a quantity of tobacco which he had brought into the United Kingdom without having made payment of the relevant import duties.
On 27 November Mr Varma was convicted in the Crown Court of being knowingly concerned in fraudulently evading duty chargeable on goods, contrary to section 170(2)(a) of the Customs and Excise Management Act 1979.
Following this, on 15 January 2009 the judge made Mr Varma subject to a conditional discharge under section 12 of the Powers of Criminal Courts (Sentencing) Act 2000 (the 2000 Act), the condition being that he did not commit any further offence for a two year period from the date of the order.
Confiscation proceedings under Part 2 of the Proceeds of Crime Act 2002 (the 2002 Act) were postponed until 3 April 2009.
On that date the judge made a confiscation order depriving Mr Varma of the profits of his crimes to the extent of the amount available for recovery.
The judge valued that sum at 1,500 and made a confiscation order in that amount.
On 13 July 2009 Mr Varma sought leave to appeal out of time against the confiscation order on the basis that there was Court of Appeal authority (R v Clarke [2009] EWCA Crim 1074) to the effect that the Crown Court has no power to impose a confiscation order against an offender following conviction for an offence in respect of which the offender has been absolutely or conditionally discharged.
This reflected the fact that the Court could only discharge an offender where it was of the opinion that it would be inexpedient to inflict punishment; this is subject to a number of specified exceptions listed in section 12(7) of the 2000 Act which the Court would not be prevented from imposing on an offender subject to a discharge.
Given that section 12(7) made no reference to confiscation orders the Court in Clarke held that confiscation proceedings could not be brought where an offender is absolutely or conditionally discharged.
The Court of Appeal granted permission to appeal, allowed Mr Varmas appeal and quashed the confiscation order, holding that it was bound by the decision in Clarke.
However, the Court made clear that, but for the decision in Clarke, it would have reached the contrary conclusion and allowed the confiscation order to be made.
The Court of Appeal certified the following point of law of general public importance for consideration by the Supreme Court of the United Kingdom: Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? The Supreme Court of the United Kingdom granted permission to appeal.
The Supreme Court unanimously allows the appeal; the Crown Court has the power and, where the criteria in section 6 of the 2002 Act are satisfied, the duty to make a confiscation order against an offender following conviction for an offence in respect of which the offender has been absolutely or conditionally discharged.
Lord Clarke gives the lead judgment with which Lord Dyson and Lord Reed agree.
Lord Phillips and Lord Mance give short concurring judgments.
Where the criteria in section 6 of the 2002 Act are satisfied the Crown Court is not only empowered to make a confiscation order but, unless it believes the victim of the conduct has started or intends to start civil proceedings against the offender for loss, injury or damage arising from that conduct, is under a duty to make such an order against the offender even where the offender has been absolutely or conditionally discharged following conviction for that offence [58].
The criteria in section 6 of the 2002 Act are satisfied in this case; (a) Mr Varma has been convicted of offences in proceedings before the Crown Court; (b) the prosecutor has requested that the court proceed under section 6 of the 2002 Act; (c) the Crown Court held Mr Varma benefited to the tune of 7,257.86; and, (d) the Court has decided upon the recoverable amount which it valued at 1,500.
Consequently, the Court was under a duty to make a confiscation order to the extent of that amount; even where an offender is absolutely or conditionally discharged.
There is nothing in the Act which gives the Court the power to decline to exercise its duty to make a confiscation order where the criteria in section 6 of the 2002 Act are satisfied.
The Court found that the purpose of section 13(4) of the 2002 Act was neither to prohibit nor to limit the scope of a confiscation order [17].
The reference in section 13(4) of the 2002 Act to deciding the appropriate sentence for the defendant referred to the sentencing process during which the court considers how the defendant should be dealt with.
It is unnecessary to decide whether an absolute or conditional discharge constitutes a sentence for these purposes; it is sufficient that an absolute or conditional discharge is an order made as a result of deciding the appropriate sentence within the meaning of section 13(4) of the 2002 Act [17].
Sections 14 and 15 of the 2002 Act contemplate circumstances in which confiscation proceedings may be postponed until after sentence is imposed.
The Court holds that such a postponement of confiscation proceedings in no way nullifies the courts duty to return to those proceedings after deciding upon the appropriate sentence [20].
The Court acknowledges that there is no express reference to confiscation orders amongst the measures the courts are not prevented from imposing under section 12(7) of the 2000 Act where an offender is absolutely or conditionally discharged.
Nonetheless, the Court holds that the lack of any express reference to a confiscation order in section 12(7) in no way nullifies the duty upon the court to make such an order where the criteria in section 6 of the 2002 Act are satisfied [29 31].
Lord Phillips gives a short concurring judgment in which he questions whether it is legitimate for the Revenue and Customs Prosecution Office (Customs), as the prosecuting authority in this case, to seek a confiscation order rather than seeking to exact the duty payable on the goods [59 60].
Lord Phillips questions whether, in confiscation proceedings, it is legitimate to treat a defendant as having evaded duty where the only reason he has done so is that Customs have chosen not to exact it.
Lord Mance gives a short concurring judgment in which he contends that Lord Phillipss suggestion would render it impossible to treat any smuggler as having evaded duty payable on goods, unless and until it is clear that Customs could not pursue and recover the duty.
Lord Mance expresses some doubt as to whether that position accurately reflects the ingredients of the criminal offence created by section 170(2) of the Customs and Excise Management Act 1979 [61 63].
|
This appeal is about the rights of the owner of a time chartered ship after the ship has been lawfully withdrawn for non payment of hire.
The question must often have arisen in practice but, oddly enough, there is no direct authority upon it.
The MT Kos is a 301,000 mt VLCC.
She was time chartered by her owners to Petroleo Brasileiro SA on 2 June 2006 for 36 months plus or minus 15 days at charterers option.
The charterparty, which was on the Shelltime 3 Form, contained a standard form of withdrawal clause providing that if hire was not paid when due, the owners should have the right to withdraw the vessel without prejudice to any claim owners may otherwise have on charterers under this charter.
It is increasingly common for such contracts to include anti technicality clauses requiring notice to be given before this right is exercised.
But for whatever reason no anti technicality clause was included in this case.
So when, on 31 May 2008, charterers failed to make the advance payment required for the month of June, the owners were entitled to withdraw the MT Kos, and did so at 14.41 GMT on 2 June 2008.
It is agreed between the parties to the appeal that the charterers failure to pay hire was not a repudiatory breach of contract.
At the time of the withdrawal, the MT Kos was at Angra dos Reis in Brazil, where she had just completed the loading of a parcel of cargo for the charterers account in accordance with their orders.
She was awaiting a second parcel, which in the event was not loaded.
There were no bills of lading in the hands of third parties.
On 2 and 3 June there was a number of exchanges between the parties.
The charterers tried to persuade the owners to cancel the withdrawal.
The owners refused.
Their position was set out in a message at 11.30 GMT on 3 June 2008.
They said that they would be willing to reinstate the charterparty or continue on a voyage basis, but only at the current market rate, which was much higher than the charterparty rate.
Otherwise, they required the charterers to make prompt arrangements to receive back their cargo.
Ultimately, after further fruitless exchanges, the charterers told the owners at 21.36 GMT on 3 June 2008 that they would arrange for the terminal to receive back the cargo.
The arrangements were duly made, and discharge of the cargo was completed at 06.00 GMT on 5 June 2008.
It is agreed that if the charterers had begun to make arrangements for the discharge of their cargo as soon as they received the owners notice of withdrawal, the vessel would have been detained at Angra dos Reis for one day.
As it was, she was detained there for 2.64 days.
The issue before us is whether the owners are entitled to be paid for the service of the vessel during that 2.64 days, and for bunkers consumed in the same period.
Leaving to one side points which have fallen by the wayside at earlier stages of these proceedings, their claim is put forward on four bases: (i) under clause 13 of the charterparty; (ii) under an express or implied new contract made after the vessel was withdrawn, to pay for the time and bunkers; (iii) on the ground of unjust enrichment; and (iv) under the law of bailment.
The judge, Andrew Smith J, held that they were entitled to succeed on basis (iv), but rejected every other basis which they put forward.
The Court of Appeal (Longmore and Smith LJJ and Sir Mark Waller) rejected the claim on all four bases, except that they allowed the owners to recover the value of bunkers consumed in actually discharging the cargo.
New contract after withdrawal
The argument that there was a new contract turns entirely on the facts and can be shortly dealt with.
Once the charterparty came to an end, the owners no longer had any obligation to carry the cargo to its destination or to discharge it.
Their duty was to make it available to the charterers.
It was then for the charterers to make any necessary arrangements for discharge.
For a day and a half after the notice of withdrawal, they did nothing because they declined to accept that the owners were entitled to withdraw the vessel.
Each party was trying to persuade the other to resume the contractual service (or a variant of it) on its own terms.
Each of them rejected the others terms.
On the footing that the owners were not willing to treat the old contract as subsisting and that no agreement could be reached upon a new one, both parties then submitted to the inevitable.
Owners called on charterers to take delivery of their cargo, as charterers in any event were bound to do.
The charterers then got on with it.
Both courts below held that it was impossible to spell a new contract out of these facts.
I agree.
Implications of the owners decision to withdraw
Under all the remaining heads of claim, the charterers argument is substantially the same, namely that any delay or loss arising from the need to discharge the cargo results from the owners decision to withdraw.
That was a decision made at their own election and for their own commercial purposes.
The owners, it is said, must bear the adverse as well as the beneficial consequences of an optional decision made in their own interest.
It is clear that this consideration influenced both courts below, and that it was decisive in the minds of the Court of Appeal.
The factual premise of the argument is of course correct.
It is axiomatic that a withdrawal clause operates at the election of owners, and not automatically.
Two main consequences follow from this.
The first is that owners will not exercise their right of withdrawal unless it is in their commercial interest to do so.
Usually, this will be because market rates of hire have risen.
But it may be in owners interest to withdraw the vessel even if they have not risen, for example, where the charterers are insolvent or owners depend on prompt payment to fund payments under a head charter or charterers payment record occasions administrative or other difficulties.
The second consequence is that any failure on the part of the charterers to pay hire when it falls due will not of itself entitle the owners to damages representing the loss of the bargain or the expenses of termination simply because the owners respond by withdrawing the vessel.
This is because the non payment does not itself destroy the bargain or occasion the expenses, unless in the circumstances it is a repudiation which owners have accepted as such.
But the present claim is not a claim for damages, and the non payment of the June 2008 hire payment in this case was not a repudiation.
This, however, is as much as can usefully be said.
The fact that rather than perform the contract the owners found it more advantageous to exercise an express right of termination is morally and legally neutral.
There are no standards by which the owners reasons may be judged, other than those to be found in the contract.
There is no legal policy specific to termination rights restricting their availability or the consequences of their exercise more narrowly than does the language of the contract or the general law.
More generally, the reasons for any particular withdrawal cannot affect the principle to be applied in resolving an issue like the present one.
Clause 13
Clause 13 provides, so far as relevant: The master (although appointed by owners) shall be under the orders and direction of charterers as regards employment of the vessel, agency or other arrangements.
Bill[s] of lading are to be signed as charterers or their agents may direct, without prejudice to this charter. charterers hereby indemnify owners against all consequences or liabilities that may arise from the master, charterers or their agents signing bills of lading or other documents, or from the master otherwise complying with charterers or their agents orders.
Clause 13 is the employment and indemnity clause which is found in most modern forms of time charter.
The indemnity reflects the breadth of the powers conferred on the charterers as to the employment of the vessel.
As Devlin J observed in Royal Greek Government v Minister of Transport (1949) 83 Ll L Rep 228, 234, if [the owner] is to surrender his freedom of choice and put his master under the orders of the charterer, there is nothing unreasonable in his stipulating for a complete indemnity in return.
Indeed, the courts have held that, subject to the express terms of any particular charterparty and to the limitations which I shall consider below, the indemnity is not just not unreasonable.
It is necessary.
It will generally be implied even in forms of time charter (such as the New York Produce Exchange Form) where it is not expressed.
The scope of the indemnity in clause 13, like that of the corresponding implied term, is very wide (all consequences or liabilities that may arise).
But it is not complete, nor is it unlimited.
In the first place, it has to be read in the context of the owners obligations under the charterparty as a whole.
The owners are not entitled to an indemnity against things for which they are being remunerated by the payment of hire.
There is therefore no indemnity in respect of the ordinary risks and costs associated with the performance of the chartered service.
The purpose of the indemnity is to protect them against losses arising from risks or costs which they have not expressly or implicitly agreed in the charterparty to bear.
What risks or costs the owners have agreed to bear may depend on the construction of other relevant provisions of the contract, or on an informed judgment of the broad range of physical and commercial hazards which are normally incidental to the chartered service, or on some combination of the two.
The classic example of a loss within the indemnity, and probably the commonest in practice, is one which arises from the master complying with the charterers direction to sign bills of lading on terms of carriage more onerous than those of the charterparty.
But the indemnity has been held to be applicable in principle to a wide variety of other circumstances, including compliance with an order to load cargo which is dangerous even on the footing that appropriate care is taken of it, or an order to proceed to a legally unsafe port.
On the other hand, the indemnity will not apply to risks which the owners have contractually assumed, which will usually be the case where they arise from, for example, their own negligence or breach of contract or consequences such as marine fouling which are incidental to the service for which the vessel was required to be available.
Secondly, clause 13 itself limits the indemnity to losses which were caused by complying with the charterers orders.
Like all questions of causation, this one is sensitive to the legal context in which it arises.
It depends on the intended scope of the indemnity as a matter of construction, which is necessarily informed by its purpose.
We are not therefore concerned with questions of remoteness and foreseeability of the kind which would arise in the law of damages, where the object is to limit the range of consequences for which a wrongdoer may be said to have assumed responsibility in the eyes of the law.
Indeed, as Sir Donald Nicholls V C pointed out in Triad Shipping Co v Stellar Chartering & Brokerage Inc (The Island Archon) [1994] 2 Lloyds Rep 227, 238, the more foreseeable the owners loss, the more likely it is to be an ordinary incident of the chartered service and therefore outside the scope of the indemnity.
The real question is whether the charterers order was an effective cause of the owner having to bear a risk or cost of a kind which he had not contractually agreed to bear.
I use the expression effective cause in contrast to a mere but for cause which does no more than provide the occasion for some other factor unrelated to the charterers order to operate.
If the charterers order was an effective cause in this sense, it does not matter whether it was the only one.
For present purposes, the relevant order of the charterers was the order to load the parcel of cargo which was on board the vessel when it was withdrawn.
In my judgment the loss claimed by owners was the consequence of that order.
The need to discharge the cargo in the owners time arose from the combination of two factors, namely (i) that the cargo had been loaded, and (ii) that the purpose for which it had been loaded (ie carriage under the charterparty to its destination) had come to an end with the termination of the charterparty.
In other words, the cargo which charterers had ordered the vessel to load was still on board when the charterparty came to an end.
On any realistic view, this was because the charterers had put it there.
The analysis would have been exactly the same if the charterparty had come to an end for any other reason with cargo still on board, for example by frustration or expiry at the end of the contractual term.
Andrew Smith J and the Court of Appeal both rejected the claim under clause 13 on the ground that the true cause was the owners withdrawal of the vessel.
The judge said at para 35 of his judgment that the owners claims were too remote from the order to load.
Longmore LJ, giving the reasons of the Court of Appeal, observed at para 15 that it was not a natural consequence of ordering [the cargo] to be loaded that it would have to be discharged at the self same port.
The true cause of the necessity for the discharge of the cargo was the fact that, in the light of the withdrawal, the owners required the charterers to discharge the cargo.
In effect, therefore, both courts below found that the withdrawal of the vessel was an independent cause of the loss, breaking the chain of causation between the order to load the cargo and the detention of the vessel after withdrawal.
The difficulty about this is that because the cargo had been loaded, it had to be discharged somewhere, if not at the port of loading then at its destination or possibly at an intermediate port.
The owners decision to withdraw the vessel or, to be precise, the adventitious timing of that decision, merely determined the place at which the discharge of the cargo occurred.
If the owners were to withdraw the vessel, they had to do it promptly upon hire going into default, and it so happened this was when the vessel was still at the port of loading.
But the precise timing of the withdrawal and location of the discharge are irrelevant to the owners loss.
If the vessel had been withdrawn immediately before discharge at the destination, the consequence would have been exactly the same.
It is of course true that discharge at the destination would have been a great deal more beneficial to the charterers than discharge at the port of loading.
This is a point that seems to have influenced the Court of Appeal.
But a claim under clause 13 does not depend on the benefit conferred on the charterers.
It depends on the detriment to the owners.
They would have suffered a detriment of much the same kind wherever the vessel had discharged.
It is fair to say that it was only because of the withdrawal of the vessel that the subsequent discharge of the cargo at Angra dos Reis had to be done in the owners time and without earning contractual hire.
But that is the very reason why the detention of the vessel falls within the indemnity.
The need to discharge the cargo in their own time and at their own expense was not an ordinary incident of the chartered service and was not a risk that the owners assumed under the contract.
It arose after the chartered service had come to an end in accordance with the withdrawal clause in the contract.
Mr Baker QC for the charterers asked rhetorically whether, in that case, the owners would be entitled to claim the cost of sending the vessel in ballast from Angra dos Reis to somewhere else where she could start employment under a new charterparty.
But a claim like that, although ultimately dependent on its particular facts, would be likely to fall on the other side of the line.
The need for a ballast voyage before a vessel can begin her next employment is an ordinary commercial risk associated with the trading of the vessel under a time charter.
case: (1) In my judgment the whole of the 2.64 days during which the vessel was detained resulted from the cargo being on board on the charterers orders at the time of the withdrawal.
The time required to remove it was unnecessarily prolonged by the charterers refusal to recognise the owners right to withdraw the vessel or to make immediate arrangements for the removal of their cargo from a ship that was no longer at their disposal contractually, but that does not alter the character or cause of the delay.
It remains to consider the measure of the indemnity on the facts of this (2) It is not suggested that there is any difference, in the circumstances of this case, between (i) the measure of the owners loss in having to await discharge and then discharge in their own time, and (ii) reasonable remuneration for involuntarily making their ship available during that period.
On the face of it, the opportunity cost to the owners of the detention of their ship is the market rate of hire at the time.
In the absence of any subsisting contractual obligation to make her available at any other rate, the owners loss is the market rate of hire for 2.64 days. (3) Although the Court of Appeal distinguished between the owners right to the value of bunkers consumed (in actually discharging the cargo) and the rest of the owners claim, it seems to me that the two heads of loss must stand or fall together.
The owners are therefore entitled to the value of bunkers consumed during the whole period of detention.
Bailment
Strictly speaking, this makes it unnecessary to address any of the other legal bases put forward by the owners in support of their claim.
But I propose to deal with the question whether the owners were also entitled to succeed at common law as non contractual bailees of the cargo after the withdrawal of the vessel.
I do so partly out of respect for the trial judge who decided the case on that basis, and partly because I think that the commercial and legal logic of the claim in bailment is close to the logic which brings it within clause 13 and would bring it within any corresponding implied term.
On the whole, one would expect a coherent system of law to produce a consistent answer under both heads, and in my judgment it does.
Unlike many civil law systems, English law does not allow a general right of recovery for benefits conferred on others or expenses incurred in the course of conferring them.
In the pejorative phrase which has become habitual, there is no recovery for benefits officiously conferred.
In Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, 248 Bowen LJ said: The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure.
Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.
While this remains the general principle, the exceptions have over the years become more important than the rule.
The particular feature of the present case which makes it difficult to apply the general rule is that the original bailment of the cargo had occurred under a previous contractual relationship.
The bailment was therefore consensual, albeit that after the withdrawal of the MT Kos from the time charter, it was no longer contractual.
It is common ground, and clear on the authorities that in these circumstances, the owners had a continuing duty to take reasonable care of the cargo, which they could not escape except by retaining it until arrangements were made to discharge it.
But the owners had in no sense officiously put themselves in this position, nor had they (as the charterers put it in argument), voluntarily assumed possession of the goods.
There is a thin, but consistent line of authority which deals with the legal consequences of this situation.
In Gaudet v Brown (1873) LR 5 PC 134 (Cargo ex Argos), petroleum was shipped in London on the Argos under a bill of lading providing for delivery at Le Havre.
The vessel arrived at Le Havre in the later stages of the Franco Prussian war, when the port was full of munitions, and the landing of flammable cargoes was forbidden.
The master therefore discharged the petroleum into lighters in the outer harbour, and it seems that the shippers (who had retained the bill of lading) could have taken delivery of it there and transported it elsewhere.
But they failed to present the bill of lading or to make any arrangements to receive it.
Having waited for as long as the port authorities would allow him to, the master reshipped the cargo and carried it back to London.
The owners then successfully sued the shippers for freight for the return voyage.
The case appears to have been decided on the footing that the contract of carriage was at an end when the Argos left Le Havre for London, either because the contractual service had been completed or because the contract was frustrated at Le Havre.
The ground of the decision was expressed at pp 165 166 as follows: . not merely is a power given, but a duty is cast on the master in many cases of accident and emergency to act for the safety of the cargo, in such manner as may be best under the circumstances in which it may be placed; and that, as a correlative right, he is entitled to charge its owner with the expenses properly incurred in so doing.
In a case like the present, where the goods could neither be landed nor remain where they were, it seems to be a legitimate extension of the implied agency of the master to hold that, in the absence of all advices, he had authority to carry or send them on to such other place as in his judgment, prudently exercised, appeared to be most convenient for their owner; and if so, it will follow from established principles that the expenses properly incurred may be charged to him.
The authority of the master being founded on necessity would not have arisen if he could have obtained instructions from the defendant or his assignees.
But under the circumstances this was not possible.
A year later, the Court of Exchequer reached a very similar conclusion in Great Northern Railway Co v Swaffield (1874) LR 9 Ex 132.
Mr Swaffield sent his horse by railway to a station at Sandy.
The horse arrived late at night, and the railway company lodged the horse overnight for their own account at a livery stable.
Mr Swaffield failed to collect it on the following morning.
The only basis on which he was prepared to give any instructions about the fate of his horse was that the railway company assumed all responsibility for storing and delivering it to him from the time of its arrival at Sandy.
After four months of this, the railway company lost patience.
They unilaterally delivered the horse to Mr Swaffields farm and then sued him for the livery charges to date.
As in Cargo ex Argos, the case was decided on the footing that the contract of carriage had come to an end, in this case on the day after the arrival of the horse at Sandy, when the performance required of them as carriers was completed.
Counsel did not refer to Cargo ex Argos.
But Baron Pollock drew attention to it in the course of argument and based his judgment upon it.
Having referred to previous authority to the effect that the railway company was bound to take reasonable care of the horse notwithstanding the termination of the contract of carriage, he observed (p 138) that if there were that duty without the correlative right, it would be a manifest injustice.
In his concurring judgment, at page 136, Kelly CB treated the principle as applying because it was necessary for the railway company to incur the expenditure.
They had no choice unless they would leave the horse at the station or in the high road to his own danger and the danger of other people.
The principle applied in these cases has commonly been analysed as depending on the agency of necessity of the carrier, which indeed is how Longmore LJ analysed it in his judgment in this case.
The existence of a coherent doctrine of agency of necessity has occasionally been doubted: see Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), para. 18 50, where it is suggested that the cases in which it has been invoked are now best understood in other ways.
But so far as the doctrine does have a coherent existence, the case law requires that a bailee of goods should have taken steps in an emergency for the sole benefit of the cargo in circumstances where it was impossible to communicate with the owners of the goods.
On that ground, the Court of Appeal held that the doctrine had no application to the present case, and that that was the end of the matter.
It is true that in Cargo ex Argos the Privy Council used the language of agency and necessity.
But the master of the Argos was not in fact acting as the cargo owners agent, as he would have been if (for example) he had purported to bind him to a contract with a third party, such as a lighterman or a warehouseman.
On the face of it, he was simply carrying the goods back to London on behalf of his owners, in circumstances where there was no contract to do so but no reasonable or practical alternative.
His claim was for additional remuneration for his own services, in excess of the performance required of him under the contract.
As for Swaffield, although Baron Pollock cited authority on agency of necessity, on its facts there was no emergency and no agency.
The true basis of the judgments in Swaffield was that where the property was originally bailed under a contract of carriage and the carrier had no choice but to remain in possession after the contract had ended, the existence of a continuing duty to care for the cargo was a sufficient basis for imposing on its owner an obligation to pay.
Pollock B, I think rightly, regarded this as the principle on which Cargo ex Argos was really founded.
This view of the matter was accepted by the House of Lords in China Pacific SA v Food Corpn of India (The Winson) [1982] AC 939.
The facts were that the Winson, bound for Bombay with a cargo of wheat, stranded on a reef in the South China Sea.
Salvors retained on behalf of the ship and cargo interests off loaded the wheat into barges and took it to Manila, where it was stored for their account in warehouses.
It was common ground that storage under cover was necessary to prevent deterioration of the wheat, and that upon its arrival at the warehouse the salvage services came to an end.
Some time after that, the owners gave notice that they were abandoning the voyage and the contract of carriage thereupon came to an end.
The salvors wrote to the cargo owners solicitors asking them to take delivery of their property, but received no answer.
On these facts the salvors were bailees under the salvage agreement from the time that the cargo was taken off the stranded vessel until it reached the warehouse, and were thereafter non contractual bailees until the cargo owners finally took possession of the wheat from the warehouse.
The issue was whether the cargo owners were liable to the salvors for warehouse charges incurred up to the time when the owners gave notice that they abandoned the voyage.
The cargo owners accepted liability for the charges after that point, but contended that while the contract of carriage subsisted the warehouse charges were the responsibility of the carriers alone.
It was held that the salvors were entitled to succeed.
The leading speech was given by Lord Diplock, with whom the rest of the House agreed.
Lord Diplock considered (p 957) that the case turned on the application of well known and basic principles of the common law of salvage, of bailment and of lien.
He expressed the principle (at p 960) as follows: the bailment which up to the conclusion of the salvage services had been a bailment for valuable consideration became a gratuitous bailment; and so long as that relationship of bailor and bailee continued to subsist the salvors, under the ordinary principles of the law of bailment too well known and too well established to call for any citation of authority, owed a duty of care to the cargo owner to take such measures to preserve the salved wheat from deterioration by exposure to the elements as a man of ordinary prudence would take for the preservation of his own property.
For any breach of such duty the bailee is liable to his bailor in damages for any diminution in value of the goods consequent upon his failure to take such measures; and if he fulfils that duty he has, in my view, a correlative right to charge the owner of the goods with the expenses reasonably incurred in doing so.
He regarded this as being the principle applied in Cargo ex Argos and Swaffield in which the decisive facts, on his analysis, had been (i) that the bailee was left in possession of the goods after the termination of the contract under which the bailment had originally been made, and (ii) that in the absence of any contrary instructions from the cargo owner, the warehousing of the goods was necessary for their preservation: see p 960G H. Lord Diplock added, at p 961: It is, of course, true that in English law a mere stranger cannot compel an owner of goods to pay for a benefit bestowed upon him against his will; but this latter principle does not apply where there is a pre existing legal relationship between the owner of the goods and the bestower of the benefit, such as that of bailor and bailee, which imposes upon the bestower of the benefit a legal duty of care in respect of the preservation of the goods that is owed by him to their owner.
Lord Diplock went on to consider the doctrine of agency of necessity, because it had been submitted on behalf of the cargo owners that a bailee in possession of goods could have authority on that basis only if it was impossible to communicate with the owner of the goods.
The argument was that although the cargo owners were not very communicative, they were never actually out of contact.
This submission was rejected because the restrictions placed by the case law on a bailees authority as an agent of necessity applied only where the bailee was acting as a true agent, ie by purporting to bind the bailor to arrangements with third parties.
They did not apply to a bailees right to reimbursement of his own expenses.
It was sufficient for that purpose that the bailor should have failed to give instructions: see pp 961G 962B.
It is clear that the relevance of this last point was that if the owner of the goods had given instructions, the salvor could by complying with them have relieved himself of any further responsibility.
The decisive point, and the sense in which the word necessity is used in these cases, is that if the bailee is in a position where he has no way of discharging his responsibility to care for the goods without incurring loss or expense, then the loss or expense is for the account of the goods owner.
Lord Simon of Glaisdale, who delivered a concurring judgment, took the same view.
He thought (p 965E) that to confine agency of necessity to cases where the issue was the bailees authority to bind the bailor to contracts with third parties was justified by the fact that the law of bailment will often resolve any issue between alleged principal and agent of necessity, as it has done here.
The Winson was a decision about the law of bailment.
It was not a decision about agency of necessity.
The circumstances which entitle the owners to recover in the present case correspond to those which were decisive in The Winson.
They are (i) that the cargo was originally bailed to the owners under a contract which came to an end while the cargo was still in their possession, (ii) that as a matter of law their obligation to look after the cargo continued notwithstanding the termination of the charterparty, and (iii) that the only reasonable or practical option open to them once the charterparty had come to an end was to retain the cargo until it could be discharged at the port where the vessel was then located.
The Winson was a claim for expenses incurred by the salvors, although Lord Diplocks adoption of the decision in Cargo ex Argos suggests that he would have applied the same principle to a claim for remuneration where the claimant stored and handled the goods with his own facilities.
In principle, that seems right.
The opportunity cost of retaining the vessel in Angra dos Reis while the charterers cargo remained on board was a true cost even if it was not an out of pocket expense.
However, it is unnecessary to go any further into that question because in this context as in that of clause 13, no point is taken about the difference between expenses and remuneration.
Smith J.
Unjust enrichment
It may well be that in the light of recent developments in this area of law, the owners might be entitled to succeed on this basis also, although the measure of recovery would not necessarily be the same.
This, however, raises larger issues which would be better decided in a case where they arise, and possibly in a less specialised context than a dispute about carriage by sea.
Conclusion
In the result, I agree with the conclusion reached on this point by Andrew I would allow the appeal and restore the order of Andrew Smith J.
LORD PHILLIPS
I agree, for the reasons given by Lord Sumption, that this appeal should be allowed.
I wish only to add a brief explanation of why I agree with him and Lord Clarke that the express indemnity provided by Clause 13 applied to the facts of this case.
I do not view the issue as turning upon a choice between competing causes of the requirement to discharge the cargo.
The obligation to discharge a cargo loaded under a time charter will normally be proximately caused by the order to load the cargo.
The reason why the consequences of the obligation to discharge are not normally covered by an indemnity clause such as clause 13 of the charter in this case is that those consequences form part of the services that the owners has contracted to provide under the charter and for which hire is being paid.
Where, however, the charter comes to an end before the cargo has been discharged in circumstances where the consequences are not expressly covered by the charter, those consequences fall naturally within the scope of the indemnity clause.
I accept that the application of the indemnity clause in such circumstances appears to be a novelty, but I can see no argument of principle that precludes this.
LORD MANCE
I agree with the result reached by the majority, but I do so not under clause 13, but on the basis of the principle in The Winson (China Pacific SA v Food Corpn of India [1982] AC 939), with which Lord Sumption deals in paras 18 30.
As he notes (para 29), the charterers in the present case have expressly disclaimed any reliance upon the distinction between reimbursement of expenses and remuneration (as to which, see eg The Principles of the Law of Resitution by Graham Virgo 2nd ed (2006), p 290).
They have done this on the basis that the two would on the facts here equate (ie it cost the owners the market rate to wait in Angra dos Reis).
It is unnecessary to consider the correctness of this concession, and I do not do so.
There is much case law on time charter indemnities.
They may be express, as in the time charters which were the subject of Larrinaga Steamship Co Ld v The King [1945] AC 246, 253 and Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 83 Ll L Rep 228 and in the Shelltime 3 form of charter in issue in the present case.
They may also be implied, as in the case of the New York Produce Exchange form of charter, in which the only relevant express obligation is that the owners or master shall be under the orders and directions of the charterers as regards employment, agency and other arrangements.
The existence of an implied time charter indemnity in respect of compliance with charterers orders and direction has long been recognised: see The Athanasia Comninos [1990] 1 Lloyds Rep 277, 290 per Mustill J, and Triad Shipping Co v Stellar Chartering & Brokerage Inc (The Island Archon) [1994] 2 Lloyds Rep 227, 234 per Evans LJ.
The scope and application of an indemnity clause depends upon its precise terms read in the context of the contract as a whole.
Other terms of the contract may mean that it is necessarily or impliedly limited in its scope.
In addition to that, an indemnity clause in the form of clause 13 will not cover matters of navigation or in respect of which owners can by the contract be taken to have assumed the risk.
Within its scope, the present clause also only applies to consequences or liabilities that may arise from [here] the master complying with charterers or their agents orders.
This raises a question of causation.
The search is for the proximate or determining cause.
This was stated in relation to a materially identical clause in Larrinaga Steamship Co Ltd v The King [1945] AC 246, 253 by Viscount Simon LC, with whose speech Lord Thankerton and Wright agreed at pp 253 254.
The issue of causation was considered in depth by Devlin J in The Ann Stathatos 83 Ll L Rep 228.
The decision is at the root of the modern jurisprudence on time charter indemnity clauses, and Lord Sumption cites it in para 9.
One particular passage is worth citing in full, because it bears on an argument advanced by owners in the present appeal, which the majority might otherwise be thought to be accepting.
In The Ann Stathatos the vessel had been damaged by an explosion resulting from an explosive atmosphere created by the cargo of coal and some unidentified act during repair work causing a flame or spark leading to a series of explosions.
The arbitrator selected as the direct or immediate or effective cause of the explosions the latter act.
Owners argued that it was enough that the explosive atmosphere generated by the cargo was a cause.
The argument mirrors a submission made by owners on the present appeal, which was rejected in the following passage: This conclusion clears the ground for consideration of a further submission on behalf of the owner.
The loading, if not the proximate cause, was at any rate, it is argued, a cause of the explosion, and that is sufficient for the purpose of clause 9.
Sir Robert Aske does not in this contention rely on the phrase all consequences; in this I think he is right, having regard to the dictum of Willes J in Ionides v Universal Marine Insurance Co (1863) 14 CB (NS) 259, 289.
He relies on the principle applicable in cases of tort, and he referred again to Burrows v March Gas and Coke Co LR 7 Ex 96, though Baron Pigott, in the court below (LR 5 Ex 67, 73) hardly supports the contention.
He referred also to Minister of Pensions v Chennell [1947] KB 250, where Denning J discusses the whole matter.
As against this, Sir William McNair argues that the term a cause can properly be used only when there are two or more causes equal in proximity, as in Reischer v Borwick [1894] 2 QB 548.
I need not consider this last contention, for I think it is clear that clause 9 is concerned with the proximate cause.
It is a contract of indemnity, and I can see no reason for treating it differently from any other contract of insurance.
The observations of Lord Shaw in The Ikaria [1918] AC 350, 368 and the dicta he there cites are also in point.
The search is therefore for the proximate cause.
Devlin J cited Reischer v Borwick [1894] 2 QB 548 as indicating that there can be situations in which two causes are so closely matched that both are identified as proximate causes.
That is a largely theoretical analysis which finds little practical application in the authorities, and has achieved any prominence only in discussion about exception clauses.
Reischer v Borwick itself was a case on a marine insurance policy covering only . collision, and so not perils of the seas.
The vessel was holed by collision, the hole was temporarily plugged, but the plug failed as she was being towed to safety and she sank due to the inflow of water.
Not surprisingly, the claim succeeded.
Only Lindley LJ addressed the possibility that this situation could and should be analysed as one of concurrent proximate causes (although even he in his concluding remarks identified the injury by collision as really the cause of the loss the causa causans and not merely the causa sine que non).
Both Lopes and Davey LJJ analysed the position throughout in what one would have thought to be more conventional terms as involving a single proximate cause of the sinking (the collision holing the vessel).
Another of the few cases in which courts have discussed the possibility of concurrent causes is Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57.
The case involved an insurance claim following on from the decision in Harbutts Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447.
Harbutts factory was burnt down in a fire.
The fire occurred because Wayne Tank had installed a pipeline made of unsuitable and dangerous plastic material and wrapped in heating tape attached to a useless thermostat, and had then switched on the heating and left it unattended overnight without testing.
Wayne Tanks policy contained an exclusion of damage caused by the nature or condition of any goods which they sold or supplied.
Again not surprisingly, both Lord Denning MR (pp 66G 67B and 68A) and Roskill LJ (p 74 B C) preferred to analyse the situation as one of a single effective, dominant and proximate clause (the defective plastic material and thermostat supplied), while only Cairns LJ (p 69A) preferred an analysis of approximately equal causes.
All three member of the Court also indicated that the claim anyway failed (because of the exclusion) even if analysed as one of two concurrent proximate causes (pp 67B 68A, 69B D and 74D 75E).
In both Reischer v Borwick and Wayne Tank, the courts further noted that merely because one can identify concurrent causes does not mean that both are in law proximate causes.
The same point had been made by Lord Shaw fifty years earlier in another leading authority on proximate cause, Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society [1918] AC 350, 370, when he said: Where various factors or causes are concurrent, and one has to be selected, the matter is determined as one of fact, and the choice falls upon the one to which may be variously ascribed the qualities of reality, predominance, efficiency.
That reasoning was followed and applied in Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] QC 691.
The issue in that case was whether a vessel lost by stranding in the course of a warlike operation was lost by reason of the warlike operation.
Viscount Simon LC said: Most results are brought about by a combination of causes, and a search for the cause involves a selection of the governing explanation in each case (p 698), Lord Macmillan said: it is not enough that the casualty arose in the course of a warlike operation.
It must also arise out of, and be proximately caused by the warlike operation (p 702), and Lord Wright underlined the point in a well known passage, including the statements that This choice of the real or efficient cause from out of the whole complex of the facts must be made by applying commonsense standards.
The question always is what is the cause, not merely what is a cause (p 706).
Another case involving an exceptions clause where the possibility of rival causes was considered briefly and obiter was Handelsbanken v Dandridge [2002] EWCA Civ 577. [2002] CLC 1227, where in para 47 Potter LJ remarked that the first task of the court is to look to see whether one of the causes is plainly the proximate cause of the loss and that It is only if the court is driven to the conclusion that there was not one dominant cause, but two causes which were equal or nearly equal in their efficiency in bringing about the damage one being a period, the other an exception, that the exception prevails, citing in support Wayne Tank, p 67.
That dictum may go further to blur lines than I would in referring to causes nearly equal in their efficiency, but, once again, the Courts actual view was that this was not the situation on the facts.
The position regarding exclusion clauses in situations where two causes might be said to be operating concurrently was most recently discussed in Global Process Systems Inc and another (Respondents) v Syarikat Takaful Malaysia Berhad [2011] UKSC 5, para 88.
As Devlin J pointed out in The Ann Stathatos at p 237, bottom left, the existence of an exceptions clause is itself likely to affect what falls to be regarded as dominant, proximate or relevant; this is because the whole of what one might call the area naturally appurtenant to the excepted area must be granted to it.
Indemnity clauses are not subject to such considerations.
They cover consequences proximately caused, no more and no less.
This is underlined by another way in which the scope of time charter indemnities is delimited in the case law.
Implied time charter indemnities and indemnities like clause 13 apply only where there is a direct causal link between the orders and the consequences.
The phrase and the emphasis are Lord Hobhouse of Woodboroughs in the leading speech, with which all other members of the House agreed, in Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC 638, 656.
Lord Hobhouse made the comment in the course of discussion of the decision in Larrinaga Steamship Co Ltd v The King [1945] AC 246, a case like the present of an express indemnity.
He cited in support The White Rose [1969] 1 WLR 1098, another case of an express indemnity.
As to implied indemnities: see The Hill Harmony itself and Triad Shipping Co v Stellar Chartering & Brokerage Ltd. (The Island Archon) [1994] 2 Lloyds Rep 227, 238, where Sir Donald Nicholls V C noted that the underlying principle is that the implied indemnity extends only to certain consequences flowing from a shipowner complying with charterers orders, one limitation being that to be within the implied indemnity the loss must arise directly from the charterers instruction (another being that it must also be one which, on a fair reading of the charter party, the shipowner cannot be taken to have accepted: see para 37 above).
In The White Rose, Donaldson J had the benefit of the formidable advocacy of Mr Anthony Evans for owners and Mr Robert Goff QC and Mr Davenport for charterers.
He recited Mr Goffs submission that one vital element had been omitted from Mr Evanss case: namely, that the right to indemnity only arises if and in so far as the loss suffered by the shipowners can be proved to have been caused by compliance with the time charterers instructions (p 1107).
Donaldson J went on to note Mr Goffs further observation that causation is rarely a live issue in cases where an owner has on charterers instructions signed bills of lading committing him to liabilities over and above his charterparty liabilities, but that causation is all important in other cases.
Donaldson J accepted Mr Goffs submission, holding that it was necessary in every case to establish an unbroken chain of causation, and that: A loss may well arise in the course of compliance with the time charterers orders, but this fact does not, without more, establish that it was caused by and is in law a consequence of such compliance and, in the absence of proof of such causation, there is no right to indemnity. (p 1108)
The facts in The White Rose were that a Finnish vessel had been ordered to load in Duluth, Minnesota, where Mr de Chambeau, an employee of charterers stevedores was injured while on board.
He had left his proper place for purposes unconnected with his work, but owners were liable to him under Minnesota law on the ground that the part of the ship where he had gone lacked fencing.
The owners were, it seems, in breach of Finnish law in this respect, but that was expressly disregarded as being irrelevant.
Donaldson J nonetheless agreed with the umpire that owners indemnity claim failed because what connected the accident with, and gave rise to, a potential liability and an actual loss was the provisions of Minnesota law.
There was lacking the necessary causal connection between the order to load and the loss (p 1108).
The selection of the proximate, determining or, in the more modern terminology, real or efficient cause for the purposes of an indemnity has traditionally been described as involving a choice to be made by applying common sense standards as the man in the street or a business or seafaring man would apply them: The Ann Stathatos 83 Ll L Rep 228, 236 per Devlin J, citing Lord Wright in Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] AC 691, 706.
Lord Wrights words were more recently cited under the implied indemnity which was in issue under a voyage charter in Total Transport Corpn v Arcadia Petroleum Ltd (The Eurus) [1998] 1 Lloyds Rep 351, 361 362.
Such an approach does not, or should not, conceal, or perhaps reveal in Lord Hoffmanns extra judicial words giving the Chancery Bar Association lecture in 1999 on Common Sense and Causing Loss a complete absence of any form of reasoning.
Rather, it should involve a conclusion reached after identifying the relevant context and purpose of the question and the relevant considerations.
I do not however regard it as wholly irrelevant that three experienced commercial judges have concluded, without it seems real doubt, that the present indemnity clause does not cover the present case.
Perhaps more striking, since the present constitution is also heavy in commercial experience, is the fact that no previous claim like the present can be identified under any express or implied time charter indemnity; this, despite the fact that time charter clauses entitling owners to withdraw in default of payment of any hire instalment, without anti technicality provisions, have been commonplace and have given rise to other contentious issues over many past decades.
Robert Goff J made no mention of any such possibility in Tropwood AG of Zug v Jade Enterprises Ltd (The Tropwind) [1982] 1 Lloyds Rep 45, when considering the nature of a shipowners right to recover from charterers remuneration for services rendered after a ship has been withdrawn from the charterers service under a time charter, pursuant to an express contractual right of withdrawal (p 53).
Apart from any express request which might be found to have been made (to render such services), he thought that their liability (if any) to pay remuneration for the services so rendered can only derive from the principles of the law of restitution.
Of course, if the owners were bound to third parties by bills of lading which charterers had required them to issue, the continuation of the voyage under those separate bill of lading contracts could engage the time charter indemnity, and could (despite Lord Denning MRs contrary dictum on appeal in The Tropwind [1982] 1 Lloyds Rep 232, 237) lead to charterers having to pay owners the market, rather than the charter, rate.
Further, if owners were left with no practical option but to carry the cargo to its destination, then they might still have an argument that their time and money were spent in compliance with the time charterers instructions.
No assistance on this latter situation is derived from the New South Wales Supreme Court decision in J Gadsden Pty Ltd v Strider 1 Ltd (The Aes Express) (1990) 20 NSWLR 57, where the owners failed in a claim against bill of lading holders, who, before the vessels withdrawal from charter, had pre paid freight to charterers under what were charterers bills.
The present case differs materially from both these situations.
Here, if one asks whether the loss suffered by the shipowners was caused by compliance with the time charterers instructions Robert Goff QCs words accepted by Donaldson J in The White Rose [1969] 1 WLR 1098, 1107 1108 the natural answer, it seems to me, is: certainly not.
It was caused because the charter was at an end, the owners were not performing the charterers instructions and they were not receiving hire for the time wasted prior to discharge.
The direct or unbroken causal link required by the authorities is lacking.
The loss did not even arise in the course of compliance with charterers orders, to use Donaldson Js words quoted in paragraph 70 above.
It is true, historically, that no cargo would have been on board but for charterers instructions.
But that is no test of the proximate or the effective cause, as the authorities make clear: see paragraphs 37 to 47 above.
It is also unrealistic to scissor up the instructions between loading and carriage to destination, and to attribute the loss to the instructions to load ignoring the failure to carry.
When one engages in such a division, one is in fact recognising that subsequent events superseded charterers orders and rendered them a matter of history.
The general contractual context in my view also supports a conclusion that the express indemnity clause is inapt to apply to the present situation.
Clause 8 of the charterparty gives owners a simple contractual option.
It is accepted that the mere late payment of one instalment did not constitute a repudiatory breach (or a breach of a condition in a sense like that used in the Sale of Goods Act 1979) which could entitle the owners to damages for loss of the charter.
That loss flowed from the owners exercise of their option to withdraw.
The phrase in clause 8 without prejudice to any claim owners may otherwise have on charterers under this charter does not create a right of action, and looks on its face only to pre existing claims.
So there is no way in which the time spent discharging in Angra dos Reis can be claimed as damages.
Yet it is submitted that, because the owners exercised an option to terminate the charter in mid flow, the charter indemnity provides them as of right not merely with the charter rate (US45,000 per day), but with the market rate (US158,864 per day) in respect of any delay before the vessel is free to move elsewhere to take advantage of the increased market rate.
That would be to give them a claim by way of indemnity for loss they cannot claim by way of damages.
It is also unclear where this submission could or would end.
In shipping law certainty is of recognised importance and disputes not to be encouraged.
The charter required redelivery at the same port as the port of delivery in the Arabian Gulf (clause 3), with hire being paid up to that point.
Logically, the consequences of the charterers orders to proceed to and load cargo at Angra dos Reis could, on owners case, embrace the whole period during which the vessel was returning to the Arabian Gulf, unless she found other paid employment to take her back.
The risk of having to return in ballast to her Arabian Gulf delivery port (or anywhere else) could not be described as an ordinary commercial risk which the owners were prepared to accept under this time charter (cf the last sentence of paragraph 16 of Lord Sumptions judgment), since the owners expressly stipulated against it.
The silence of clause 8 regarding the position post withdrawal also contrasts with clause 18 which expressly provides that, should the vessel be on a ballast or laden voyage at the date the charter should otherwise terminate, charterers shall continue to have the use of the vessel at the charter rate or the market rate if higher.
Under clause 18, the charterers are paying for completion of the services requested.
Under clause 8, owners, having elected to determine the charter, are now seeking by way of indemnity to recover the market rate, without of course having to give any credit for the considerable benefit likely to have accrued to them from such termination.
In conclusion, the majoritys present decision stretches the application of the express charter indemnity beyond any previous decision, without justification, without regard to the potential consequences (including the uncertainty or certainty of ever more ambitious claims) and without need.
The law is capable of dealing with this situation in a more conventional manner.
It will impose on charterers an obligation as bailors to reimburse the owners as bailees for their time and expense spent in looking after the cargo prior to its discharge.
It would, even apart from that, probably also impose on charterers an obligation in restitution in respect of any benefit they could be said to have had through the storage on board the vessel of the cargo.
But those remedies flow either from the service rendered in that respect by the owners under the compulsion of their legal obligations as bailees, or from the benefit received thereby by the charterers, and not from the express indemnity.
It follows that I too would allow the appeal and restore the order of Andrew Smith J, although I would do so for the reasons and on the basis that he gave, and not those adopted by the majority.
LORD CLARKE
I agree with Lord Sumption that, for the reasons he gives, this appeal should be allowed on the Winson point (China Pacific SA v Food Corpn of India [1982] AC 939).
I wish to add a few words of my own on the construction of clause 13 of the charterparty in the light of the sharp difference of opinion between Lord Mance and Lord Sumption.
I have not found this an easy question.
Lord Mance makes a powerful case for a narrower application of clause 13 than that preferred by Lord Sumption.
His analysis owes much to the approach adopted in a number of decided cases.
However, none of them is on facts such as these.
As I see it, the question whether the owners are entitled to succeed under the indemnity provided for in clause 13 involves two sub questions.
The first is one of construction of the clause and the second is whether the owners have shown that they are entitled to succeed under the clause on the particular facts of this case, which is essentially a question of causation.
Construction of clause 13
In order to succeed, the owners must show that the expenses (or loss) they sustained as a result of discharging the cargo at Angra dos Reis in Brazil, which was of course the loading port, in the circumstances described by Lord Sumption, were a consequence of their complying with the charterers order to load the cargo.
The relevant part of clause 13 is in these terms: charterers hereby indemnify owners against all consequences that may arise from the master complying with charterers orders .
I agree with Lord Sumption in paras 10 to 12 that the clause is very wide but that it is neither complete nor unlimited.
In particular, I agree with him that the indemnity is not intended to include consequences which are incidental to the service for which the vessel was required to be available under the charterparty.
So, for example, it would not include any cost of or in relation to the discharge of the cargo in the ordinary course of events, which would be covered by clauses 5 and 6 of the charterparty, which provide for the services to be provided and paid for by the owners and charterers respectively, or by clause 7, which provides for hire to be paid by the charterers to the owners.
Nor, as Lord Mance observes at para 37, would clause 13 cover matters of navigation or in respect of which owners can be taken to have assumed the risk by contract.
I further agree with Lord Sumption that the real question under clause 13 is whether the charterers order to load the cargo was an effective cause of the owners having had to bear a risk or cost of a kind which they had not contractually agreed to bear and that, if the charterers order was an effective cause in the sense that it was not a mere but for cause which did no more than provide the occasion for some other factor unrelated to the charterers order to operate, it does not matter whether it was the only effective cause.
It is not I think helpful to use other adjectives to describe the cause.
Different adjectives have been used over the years, including proximate cause, dominant cause and direct cause.
To my mind they are somewhat misleading because they tend to suggest that the cause must be the most proximate in time or that the search is for the sole cause.
Lord Mance says at para 37 that the search is for the proximate or determining cause.
However, I respectfully disagree because such a formulation suggests that there can be only one such cause, whereas there may, depending upon the circumstances, be more than one effective cause.
It is true that the cases make some reference to the determining or the proximate cause.
For example, in Larrinaga Steamship Co Ltd v The King [1945] AC 246, 252 Viscount Simon LC said that the proximate cause of the stranding of a vessel was not warlike operations.
As he put it at p 253, the vessel was attempting to make a voyage without cargo and suffered from a marine peril when doing so.
The fact that she was ordered to leave port sooner than her acting master thought was wise could not turn her disaster into the consequence of a warlike operation.
He concluded that the proximate or determining cause was a misfortune in navigation, not attributable to any warlike operation at all.
The House of Lords was not considering the possibility of two effective causes.
Lord Mance refers (at paras 38 to 40) in some detail to the decision of Devlin J in Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 83 Ll L Rep 228.
On my reading of the arbitrator's findings in that case (as described at pp 231 232) he identified four causes of the first explosion (using the word caused in the wide sense of the word).
Omitting two causes which are irrelevant for present purposes, the arbitrator found that the first explosion was caused by (a) the loading on board of gassy and dusty coal and the battening down of the hatches so as to trap the gasses and leave coal dust suspended in such air as existed in tween deck space and (d) some act on the part of the crew who were repairing the tanks, which act caused a flame or spark.
Devlin J said at p 237 that by the wide sense of the word, the arbitrator meant to include all suggested or possible causes, however remote, and whether causes in the legal sense or not.
He added: From these five [the arbitrator] selects the act which caused the flame or spark and the explosive atmosphere as the direct or immediate or effective causes of the first explosion.
The first explosion is the only explosion which is relevant for present purposes.
It would seem to follow from that conclusion that there were two effective causes and not one.
It would also seem to follow that the arbitrator was choosing causes (a) and (d) as the two effective causes.
However the arbitrator then held (as stated at p 232) that the loading of the coal, while one of the causes of the damage to the ship (using the word causes in its wide sense), was not the direct or immediate or effective cause of the loss or expenses claimed.
It is not clear to me how these findings can be reconciled.
One possibility is that the arbitrator treated cause (a) as two causes and not one, by treating the loading of the coal as a different cause from the presence of the gas.
If that is correct, the arbitrator held that there were two effective causes, namely the presence of the gas and the flame or spark.
It is not easy to see how that is consistent with the view later expressed by the judge that the arbitrator seems to have taken what is immediate in time, by which he must have meant the flame or spark (p 237).
If the arbitrator treated (a) as one cause, namely the loading of cargo in a gaseous state, it is not easy to see how his conclusion that the flame or spark and the explosive atmosphere were the direct or immediate or effective causes of the explosion is consistent with his conclusion that the loading of the coal, while one of the causes of the damage to the ship (using the word causes in its wide sense) was not the direct or immediate or effective cause of the loss or expenses claimed.
As I read the judgment of Devlin J, he concluded (at pp 237 238) that the arbitrator favoured the cause that was immediate in time, namely the initial flame or spark which ignited the gas.
He rejected the submission that the arbitrator misdirected himself by confusing immediate cause with direct or effective cause.
He also rejected (at p 238) the submission that the flame or spark was too remote in law to be the cause of the first explosion.
He then considered whether the loading, which the arbitrator rejected as the direct cause, was too remote in law to be a cause at all.
It was in the light of those conclusions that, in the passage quoted by Lord Mance at para 39, Devlin J considered, at p 238, whether, if it was not the proximate cause, loading was a cause of the explosion.
This part of Devlin Js judgment must be set in the context of the facts.
Perhaps naturally in the light of the arbitrators award, he started with the proximate cause, which the arbitrator had held was the flame or spark which ignited the methane gas.
He considered the possibility of there being more than one proximate cause, but said that it was not necessary to consider it because the indemnity clause was concerned with the proximate cause.
He then expressed his conclusion thus: So the matter comes down to this, that the arbitrator has selected one cause in preference to another as the proximate or direct cause.
I cannot see that any question of law is involved in this selection.
In short, Devlin J held that that conclusion was a conclusion of fact and that the arbitrator had not misdirected himself in law.
In these circumstances, I do not think that the decision or reasoning in The Ann Stathatos is of any real assistance.
The arbitrator had expressly held that there was a sole proximate cause.
It may be that, in the light of his earlier conclusion that the direct or immediate or effective causes of the collision were both (a) the act which caused the spark or flame and (b) the explosive atmosphere, the arbitrator made an error in concluding that the spark or flame was the proximate cause, in the sense of sole proximate cause.
However, if he did, on Devlin Js approach it was an error of fact, not an error of law.
In all the circumstances the decision of Devlin J is an unconvincing basis for a conclusion that the search is for the proximate cause.
As I see it, the question in each case, whether under a contract of insurance or under a contract of indemnity, is whether an effective cause of the alleged loss or expense was a peril insured against or an indemnifying event.
By reference to Devlin Js citation of Reischer v Borwick [1894] 2 QB 548, Lord Mance accepts in para 64 that two causes may be so closely matched that both are identified as effective causes.
However he says that that it is a largely theoretical analysis which finds little practical application in the authorities.
It is true that the authorities do not contain much discussion of the circumstances in which there may be two effective causes.
However, in my opinion, they clearly show that two effective causes can, in principle, exist.
To my mind this can be clearly seen from Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57, Lloyd (JJ) Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 32 and Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004] EWCA Civ 1042, [2004] 2 Lloyds Rep 604.
The present position can be most clearly seen from the Midland Mainline case, where Sir Martin Nourse, with whom Brooke and Jacob LJJ agreed, expressly held at para 48 that there can be more than one proximate cause of loss.
He cited Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, Wayne Tank and The Miss Jay Jay as authority for that proposition.
It is true that in Wayne Tank [1974] QB 57, on the facts (which are described by Lord Mance at para 41) the majority of the Court of Appeal, Lord Denning MR and Roskill LJ, held that the proximate cause of the fire was the defective plastic material and thermostat supplied and not the act of switching on the heating and leaving it unattended without testing.
However, in a passage quoted by Sir Martin Nourse at para 10 of the Midland Mainline case, Roskill LJ said that he found it impossible to say that the latter was the sole proximate cause of the fire and, that if he was wrong to say that the defective state of the material and thermostat was the sole proximate cause of the fire, there were two effective proximate causes.
Cairns LJ, whose approach Sir Martin described as different but instructive, said at p 68: But for my part I do not consider that the court should strain to find a dominant cause if, as here, there are two causes both of which can be properly described as effective causes of the loss.
Mr Le Quesne recognised that if there are two causes which are approximately equal in effectiveness, then it is impossible to call one rather than the other the dominant cause.
I should prefer to say that unless one cause is clearly more decisive than the other, it should be accepted that there are two causes of the loss and no attempt should be made to give one of them the quality of dominance.
Those were cases in which it was held that, where the or a proximate, or effective, cause of the loss is excepted by the policy, the insurers are not liable.
It is, however, clear from The Miss Jay Jay that, where there are two effective causes, neither of which is excluded but only one of which is insured, the insurers are liable.
In the Court of Appeal Slade LJ underlined (at p 39) that the authorities show that the question of proximate cause has to be determined by a broad commonsense view of the whole position and that, by proximate, is meant proximate in efficiency.
It was held that the faulty design and construction of the vessel, which was neither an insured peril nor an excepted cause, and perils of the seas, which was an insured peril, were both proximate causes of the loss since they were, as Slade LJ put it at p 40 equal or at least nearly equal in their efficiency in bringing about the damage.
These principles are as I see it correctly summarised in McGillivray on Insurance Law, 11th ed (2008) at para 19 005 under the heading Two effective causes and in McGee on The Modern Law of Insurance 3rd ed (2011) at pp 260 261.
See also to the same effect McCanns Executors v Great Lakes Reinsurance (UK) Plc [2010] CSOH 59, para 112 to 117, where Lord Hodge also stressed the importance of context; Orient Express Hotels Ltd v Assicurazioni General SpA (UK branch) (trading as Generali Global Risk) [2010] EWHC 1186 (Comm), [2011] Bus LR 7 per Hamblen J; and Global Process Systems Inc v Syarikat Takaful Malaysia Bhd [2011] UKSC 5, [2011] Bus LR 537, para 88 per Lord Mance and, in the Court of Appeal, [2009] EWCA Civ 1398, [2010] 2 All ER 248, para 32 per Waller LJ.
I entirely agree with Lord Mance that there must be a causal link between the order and the consequences relied upon.
In short, there must be no break in the chain of causation between the order and the consequences.
This is clear from The White Rose [1969] 1 WLR 1098.
As Lord Mance says at para 45, Donaldson J there accepted that it was necessary in every case to establish an unbroken chain of causation.
That is the sense in which I read Lord Hobhouse of Woodboroughs reference to the necessity for a direct causal link in Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC 638, 656.
Lord Hobhouse was not considering a case like the present.
I do not read him as intending a direct causal link to be different from an effective cause.
I remain of the view expressed above (and in agreement with Lord Sumption) that the question is whether the relevant order was an effective cause of the alleged consequence.
I agree with both Lord Sumption and Lord Mance that in deciding whether causation was established on the facts, it is important to have in mind the context in which the question is asked.
I do not think that the answer can be found in the conclusions on the facts to which Lord Mance has referred.
In particular, I do not think that Donaldson Js conclusion based on the vagaries of Minnesota law in The White Rose is of any assistance in deciding the relevant question of fact in this appeal.
Causation on the facts
Lord Sumption has identified the relevant commercial context.
It is that the charterers gave an order to load the cargo in the ordinary way.
The consequence of that order was that the cargo was indeed loaded and therefore had sooner or later to be discharged.
The failure of the charterers to pay hire timeously triggered the owners right of withdrawal.
When they exercised that right, the question was what should be done with the cargo which was still on board the vessel.
It had to be discharged somewhere.
As it happened, it was discharged at the port of loading but it might have been discharged at the port of discharge or at an intermediate port.
I entirely agree with Lord Sumptions analysis at paras 9 to 16.
In particular I agree with Lord Sumption that the owners motive for exercising the right to terminate is irrelevant.
It was adventitious where and when the termination occurred.
The position would have been the same if the termination had occurred for some other reason than the exercise of an option by the owners, as for example as a result of frustration.
The owners would have had to procure discharge of the cargo and would have incurred expenses and perhaps loss.
They would not have been able to recover such expenses and loss under any of the other provisions of the charterparty.
The reason they would have to incur the expenses is that the cargo was still on board the vessel.
Just as here there are two effective causes of the expenses and loss, namely the withdrawal and the fact that cargo had been loaded, so in a frustration case, there would be two such causes, namely the frustration and the fact that cargo had been loaded and was on board.
I agree with the view expressed by Lord Mance at para 50 that, if the owners were bound to third parties by bills of lading which charterers had required them to issue, the continuation of the voyage under those bill of lading contracts could engage the indemnity under clause 13.
Lord Mance further recognises (to my mind correctly) that if owners were left with no practical option but to carry the cargo to its destination, then they might have an argument that their time and money were spent in compliance with charterers orders.
Indeed, at present I see no reason why they should not succeed under the indemnity in such circumstances.
As I see it, that would be on the basis that the charterers orders would be the orders to load.
In terms of causation, I see no distinction in principle between that case and the present.
For these reasons and the reasons given by Lord Sumption I would allow this appeal on the indemnity point as well as the Winson point.
| UK-Abs | The appeal concerns the rights of the owner of a time chartered ship to payment for use of the ship and fuel by the charterer to discharge cargo after the ship has been lawfully withdrawn for non payment of hire.
The appellant is the owner of the ship MT Kos.
The ship was time chartered to the respondent on 2 June 2006 for 36 months.
The charterparty contained a standard form of withdrawal clause entitling the owner to withdraw the vessel if the hire was not paid when due without prejudice to any claim owners may otherwise have on charterers under this contract.
On 31 May 2008 the respondent failed to make the required payment and the appellant withdrew the ship on 2 June 2008.
At the time of the withdrawal the MT Kos was at Angra dos Reis in Brazil and was in the process of being loaded with cargo.
Over the course of 2 and 3 June, the respondent unsuccessfully sought to persuade the appellant to cancel the withdrawal.
The respondent then made arrangements to unload the cargo which was already on the ship, which took until 5 June.
The ship was therefore detained at Angra dos Reis for 2.64 days.
Had the cargo been unloaded immediately upon withdrawal, it would have been detained for one day.
The appellant claimed from the respondent the cost of the service of the ship for the 2.64 days, including bunkers (fuel) consumed in the same period, on a number of different bases: (i) the express terms of an indemnity given in clause 13 of the charterparty (ii) under the terms of a new contract made after the withdrawal (iii) on the ground of unjust enrichment, and (iv) under the law of bailment.
The High Court granted the claim on the last basis alone.
The Court of Appeal allowed the respondents appeal, rejecting all bases for the claim except for the recovery of the value of bunkers consumed in actually discharging the cargo.
The Supreme Court unanimously allows the appeal and restores the order of Andrew Smith J in the High Court.
Lord Sumption (with whom Lord Phillips, Lord Walker and Lord Clarke agree) gives the main judgment, concluding that the express indemnity in the charterparty applied on the facts of this case.
Lord Mance would not have allowed the appeal on this basis but all five justices agreed with Andrew Smith J that the claim could in any event succeed under the law of bailment.
The charterparty The respondent had argued that any delay or loss arising from the need to discharge the cargo was the result of the choice exercised by the appellant to withdraw.
This was however morally and legally neutral [7].
Clause 13 of the contract, an employment and indemnity clause that is found in most modern forms of time charter, provided that the charterers indemnified the owners against all consequences or liabilities that arose from the master complying with the charterers or their agents orders [8].
The clause was very wide, but not unlimited [10].
It had to be read in the context of the owners obligations under the charterparty as a whole [11], and was sensitive to the legal context in which it arose.
The real question was whether the respondents order to load the cargo was an effective cause (not necessarily the only one) of the appellant having to bear a risk or cost which he had not contractually agreed to bear [12] [62].
Here, the detention of the vessel in the appellants own time and at their own expense after the charter had come to an end was not an ordinary incident of the chartered service nor was it a risk that the appellant had assumed under the contract.
It therefore fell within the indemnity [16].
The appellant was entitled to the market rate of hire for 2.64 days and the value of the bunkers consumed [17].
Lord Mance would not have allowed the appeal on this ground.
He considered that the search was one for the proximate or determining cause [37] and that the loss suffered by the appellant was not caused by compliance with the respondents instructions but instead by the fact that the charter was at an end [51].
The fact that no cargo would have been on board but for the instructions was not the test of the proximate or effective cause.
Subsequent events had superseded those instructions and rendered them a matter of history [51].
To apply the indemnity was unnecessary, the general contractual context supported a conclusion that the indemnity clause was inapt to apply [52] and its application would, in his view, open the door to uncertainty [55].
Bailment The appellant was also entitled to succeed at common law as the non contractual bailee of the cargo after the withdrawal of the vessel.
The principles set out in the The Winson (China Pacific SA v Food Corpn of India) [1982] AC 939 applied: the cargo was bailed to the appellant under a contract which terminated whilst the cargo was still in its possession and the appellant could not escape the continuing duty to take reasonable care of the cargo until arrangements were made to discharge it [28].
As bailee, the appellant would be entitled to the bunkers and the opportunity cost of the ship remaining in Angra dos Reis [28].
Other bases for the claim The argument that a new contract had been made after the withdrawal turned entirely on the facts of the case and the courts below had correctly held that no such contract had been made [5].
The argument based on unjust enrichment raised larger issues which the Supreme Court decided not to address in the context of this dispute [31].
|
On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture agreement (the JVA), containing an arbitration clause which provided that, in the event of a dispute between them which they were unable to resolve, that dispute should be resolved by arbitration before three arbitrators, each of whom should be a respected member of the Ismaili community, of which they were both members.
The principal question in this appeal is whether that arbitration agreement became void with effect from 2 December 2003 under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) (the Regulations) on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The JVA
The JVA was established to make investments in real estate around the world.
By article 9 it is expressly governed by English law.
Article 8 provides, so far as material, as follows: (1) If any dispute difference or question shall at any time hereafter arise between the investors with respect to the construction of this agreement or concerning anything herein contained or arising out of this agreement or as to the rights liabilities or duties of the investors or either of them or arising out of (without limitation) any of the businesses or activities of the joint venture herein agreed the same (subject to sub clause 8(5) below) shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the HH Aga Khan National Council for the United Kingdom for the time being.
All arbitrators shall be respected members of the Ismaili community and holders of high office within the community. (2) The arbitration shall take place in London and the arbitrators' award shall be final and binding on both parties.
The Ismaili community comprises Shia Imami Ismaili Muslims.
It is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.
The disputes
During the 1980s the joint venture came to comprise substantial business interests, first in Canada and later in the United States, Pakistan and the United Kingdom, with investments in properties, hotels and the oil industry.
By late 1988 Mr Jivraj and Mr Hashwani had agreed to part company.
On 30 October 1988 they entered into an agreement under which they appointed a three man conciliation panel (the panel) for the purpose of the division of the joint venture assets.
Each member of the panel was a respected member of the Ismaili community.
The panel operated between October 1988 and February 1990 and many of the assets were divided between the parties in accordance with its directions.
It was however unable to resolve all the issues between the parties.
The parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community, namely Mr Zaher Ahamed.
He issued a determination in December 1993, whereafter he had further exchanges with the parties until 1995, when he declared himself defeated.
The principal matters which remained in dispute were, on the one hand, a claim by Mr Hashwani that there remained a balance due to him and, on the other hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax liabilities which left Mr Jivraj with a potential for secondary liability.
These matters remained in dispute for some years.
Then, on 31 July 2008, Messrs Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a claim for US$1,412,494, together with interest, compounded quarterly from 1994, making a total of US$4,403,817.
The letter gave notice that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator.
The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void.
It is common ground, on the one hand, that Sir Anthony Colman is not a member of the Ismaili community and, on the other hand, that he is a retired judge of the Commercial Court with substantial experience of the resolution of commercial disputes, both as a judge and as an arbitrator.
Mr Jivraj's response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he is not a member of the Ismaili community.
Mr Hashwani subsequently issued an arbitration claim form seeking an order that Sir Anthony be appointed sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 (the 1996 Act).
The application was made on the basis that the requirement that the arbitrators be members of the Ismaili community, although lawful when the agreement was made, had been rendered unlawful and was void because it contravened the Regulations.
The Regulations
The Regulations were made in the exercise of powers conferred by the European Communities Act 1972 following the making of the Council Framework Directive 2000/78/EC of 27 November 2000 (OJ 2000 L303, p 16) (the Directive) which, by article 1, was itself made for the purpose of establishing: a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
The Regulations (as amended by section 77(2) of the Equality Act 2006) provide, so far as material, as follows: 2 Interpretation (3) In these Regulations references to employer, in their application to a person at any time seeking to employ another, include a person who has no employees at that time; employment means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly ; 3 Discrimination on grounds of religion or belief (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if on the grounds of the religion or belief of B or of any other person except A (whether or not it is also As religion or belief), A treats B less favourably than he treats or would treat other persons; (a) Applicants and employees 6 (1) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person in the arrangements he makes for the purpose of (a) determining to whom he should offer employment; in the terms on which he offers that person (b) employment; or (c) by refusing to offer, or deliberately not offering, him employment. 7 Exception for genuine occupational requirement In relation to discrimination falling within regulation 3 (1) (discrimination on grounds of religion or belief) (a) regulation 6(1)(a) or (c) does not apply to any employment where paragraph (2) or (3) applies. (2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine and determining occupational requirement; it is proportionate to apply that requirement in the (b) particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it, and this paragraph applies whether or not the employer has an ethos based on religion or belief. (3) This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; it is proportionate to apply that requirement in the (b) particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it."
The Directive
It is common ground that the Regulations must, so far as possible, be construed to give effect to the objective of the Directive which they were designed to implement: see eg Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR I 4135 and Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546.
It is also common ground that, although the arbitration agreement was on any view lawful when it was made, it became subject to the provisions of the Regulations, insofar as they applied to it.
The Directive provides, so far as material, as follows: Article 1 Purpose The purpose of this Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
Article 2 Concept of discrimination (1) For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1.
Article 3 Scope (1) Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to (a) conditions for access to employment, to self employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion; (b) access to all types and to all levels of vocational guidance, vocational training, advanced vocational training and retraining, including practical work experience; (c) employment and working conditions, including dismissals and pay; (d) membership of, and involvement in, an organisation of workers or employers, or any organisation whose members carry on a particular profession, including the benefits provided for by such organisations.
As Moore Bick LJ, giving the judgment of the Court of Appeal, observed at para 8, the Directive is concerned with discrimination on the grounds of religion or belief, disability, age and sexual orientation.
It is therefore much wider in its scope than the Regulations, which are concerned only with discrimination on the grounds of religion or belief.
The explanation lies in the fact that the United Kingdom had already introduced legislation dealing with discrimination on most of the other grounds covered by the Directive in connection with employment and occupation.
Discrimination on the grounds of sex was rendered unlawful by the Sex Discrimination Act 1975 (the SDA 1975), discrimination on the grounds of race by the Race Relations Acts 1968 and 1976, discrimination on the grounds of disability by the Disability Discrimination Act 1995.
Legislation dealing with discrimination on the grounds of age, sexual orientation and religion or belief was still required to ensure compliance with the Directive.
The Regulations deal with discrimination on the grounds of religion or belief.
The Employment Equality (Sexual Orientation) Regulations 2003 (SI 2003/1661) provided for discrimination on the grounds of sexual orientation, and discrimination on the grounds of age was subsequently covered by the Employment Equality (Age) Regulations 2006.
Again as observed by the Court of Appeal (at para 9), the form of the Regulations follows closely that of the earlier legislation, in particular in defining "employment" as including a contract personally to do work of any kind.
Moreover, the language of regulation 6 is identical to, or differs in no significant respect from, that used in the other legislation dealing with discrimination.
It follows that the Regulations must be understood as complementing all the other legislation prohibiting discrimination.
This uniformity of the law relating to the areas in which discrimination is forbidden has now been reinforced by the Equality Act 2010 (the EA), which applies to all of the cases protected by the earlier legislation.
The EA is, among other things, an Act to reform and harmonise equality law and restate the greater part of the enactments relating to discrimination.
The Regulations were amongst those enactments restated by the EA.
They were revoked by section 211 and Schedule 27, Part 2.
The revocation took effect on 1 October 2010.
The current law is therefore as stated in the Act rather than the Regulations.
It was not however suggested in the course of the argument that any of the issues in this appeal is affected by the revocation of the Regulations.
First instance
Both parties applications were determined by David Steel J (the judge) on 26 June 2009: see [2009] EWHC 1364 (Comm), [2010] 1 All ER 302.
In the meantime on 11 March 2009, which was before the applications were heard, the solicitors for Mr Jivraj wrote an open letter to the solicitors for Mr Hashwani offering him the option of pursuing his claim in the High Court on the basis that Mr Jivraj would not seek a stay on the basis of the arbitration clause.
Mr Hashwani did not accept the offer.
It was submitted before the judge on behalf of Mr Hashwani that the term requiring arbitrators to be members of the Ismaili community was invalid by reason of one or more of the following: the Regulations, the Human Rights Act 1998 (the HRA), or public policy at common law.
The judge held (i) that the term did not constitute unlawful discrimination on any of those bases and, specifically, that arbitrators were not employed within the meaning of the Regulations; (ii) that if, nonetheless, appointment of arbitrators fell within the scope of the Regulations, it was demonstrated that one of the more significant characteristics of the Ismaili sect was an enthusiasm for dispute resolution within the Ismaili community, that this was an ethos based on religion within the meaning of the Regulations and that the requirement for the arbitrators to be members of the Ismaili community constituted a genuine occupational requirement which it was proportionate to apply within regulation 7(3); and (iii) that, if that was also wrong, the requirement was not severable from the arbitration provision as a whole, so that the whole arbitration clause would be void.
The judge ordered Mr Hashwani to pay Mr Jivrajs costs and refused Mr Hashwanis application for permission to appeal.
The Court of Appeal
On 7 October 2009 Sir Richard Buxton granted permission to appeal limited to the issues on the Regulations and on severance.
Permission was refused on the HRA and public policy issues.
The issues in the Court of Appeal were therefore these: i) Are arbitrators persons who are under a contract to do work so as to fall within the Regulations and, if so, do parties who make an arbitration agreement specifying religious qualifications for eligible arbitrators thereby make an arrangement for the purpose of determining to whom they should offer employment or do they agree to offer, or deliberately not to offer, employment within the meaning of the Regulations? If so, in the circumstances, did the requirement for all the arbitrators to be members of the Ismaili community constitute a genuine occupational requirement (GOR) which it was proportionate to apply within regulation 7(3)? If not, did the whole arbitration agreement fail or was only the discriminatory provision void? iii) ii)
The unanimous judgment of the Court of Appeal, which comprised Moore Bick and Aikens LJJ and Sir Richard Buxton, was handed down on 22 June 2010: see [2010] EWCA Civ 712, [2010] ICR 1435.
The Court of Appeal reached a different conclusion from the judge on the principal points.
It held that the appointment of an arbitrator involved a contract for the provision of services which constituted a contract personally to do any work, and therefore satisfied the definition of employment in regulation 2(3).
It followed that the appointor was an employer within the meaning of regulation 6(1) and that the restriction of eligibility for appointment as an arbitrator to members of the Ismaili community constituted unlawful discrimination on religious grounds, both in making arrangements for the purpose of determining to whom he should offer employment contrary to regulation 6(1)(a), and by refusing to offer, or deliberately not offering employment contrary to regulation 6(1)(c).
The Court of Appeal further held that being a member of the Ismaili community was not a genuine occupational requirement for the job within the meaning of the exception in regulation 7(3).
It is submitted on behalf of Mr Jivraj that both those conclusions were wrong.
Finally the Court of Appeal held that, although there would be no difficulty in operating the agreement if the offending requirement was struck out, so doing would render the agreement substantially different from that originally intended, the term was void in its entirety under paragraph 1(1) of Schedule 4 to the Regulations and Mr Hashwanis nomination of an arbitrator was invalid.
It is submitted on behalf of Mr Hashwani that both the judge and the Court of Appeal were wrong on this point, which I will call the severance issue.
A further point arises out of the Court of Appeals order on costs if its judgment is upheld on each of the above points.
Employment
The reasoning of the Court of Appeal was straightforward: see paras 15 17.
In short the Court of Appeal drew attention to the wide terms of articles 1 and 3 of the Directive.
In particular it noted at para 15 that the recitals to the Directive and the structure and language of article 3(1) as a whole indicate that it is concerned with discrimination affecting access to the means of economic activity, whether through employment, self employment or some other basis of occupation, access to vocational guidance and training (which can be expected to provide a means of access to economic activity), conditions of employment (which affect those who have gained access to a means of economic activity) and membership of bodies whose purpose is to affect conditions of recruitment or employment or to regulate access to a particular form of economic activity, such as professional bodies that directly or indirectly control access to the profession or a significant means of obtaining work.
The Court of Appeal then said at para 16: The paradigm case of appointing an arbitrator involves obtaining the services of a particular person to determine a dispute in accordance with the agreement between the parties and the rules of law, including those to be found in the legislation governing arbitration.
In that respect it is no different from instructing a solicitor to deal with a particular piece of legal business, such as drafting a will, or consulting a doctor about a particular ailment or an accountant about a tax return.
Since an arbitrator (or any professional person) contracts to do work personally, the provision of his services falls within the definition of employment, and it follows that his appointor must be an employer within the meaning of regulation 6(1)
In paras 16 and 17 it placed reliance on three cases.
It relied upon von Hoffmann v Finanzamt Trier (Case C 145/96) [1997] All ER (EC) 852 as showing that arbitrators had been treated as providing services for VAT purposes.
It also referred to domestic regulations relating to goods and services.
It further derived support from Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and from Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28.
It recognised that those cases were addressing slightly different points but concluded that they illustrate the width of the expression a contract personally to do any work in the various discrimination statutes.
It concluded thus in para 17: They confirm our view that the expression is apt to encompass the position of a person who provides services as an arbitrator, and why we think the judge was wrong to hold that the nature of the arbitrator's function takes his appointment outside the scope of the 2003 Regulations.
Moreover, a contract of that kind, once made, is a contract of employment within the meaning of the 2003 Regulations.
It follows, therefore, that for the purposes of the 2003 Regulations a person who has entered into a contract under which he is to obtain such services is an employer and the person engaged to provide them is an employee.
The critical question under this head is whether the Court of Appeal was correct to form a different view from the judge on this point.
In my opinion it was not.
As the Court of Appeal correctly observed at para 15, the meaning of article 3 of the Directive has not been considered by the Court of Justice, and is to be interpreted in the light of the recitals and given its natural meaning consistent with the EC Treaty and the existing case law of the court.
It is common ground, at any rate in this class of case, that there is a contract between the parties and the arbitrator or arbitrators appointed under a contract and that his or their services are rendered pursuant to that contract.
It is not suggested that such a contract provides for employment under a contract of service or of apprenticeship.
The question is whether it provides for employment under a contract personally to do any work.
There is in my opinion some significance in the fact that the definition does not simply refer to a contract to do work but to employment under such a contract.
I would answer the question in the negative on the ground that the role of an arbitrator is not naturally described as employment under a contract personally to do work.
That is because his role is not naturally described as one of employment at all.
I appreciate that there is an element of circularity in that approach but the definition is of employment and this approach is consistent with the decided cases.
Given the provenance of the Regulations, it is appropriate to consider first the decisions of the Court of Justice.
The most important of these is perhaps Allonby v Accrington and Rossendale College (Case C 256/01) [2004] ICR 1328, where the Court of Justice followed the principles laid down in Lawrie Blum v Land Baden Wurttemberg (Case C 66/85) [1987] ICR 483 and in Kurz v Land Baden Wurttemberg (Case C 188/00) [2002] ECR I 10691.
In Lawrie Blum, which was concerned with the free movement of workers under what was then article 48 of the Treaty, Advocate General Lenz said at para III 2(b) of his opinion that the term worker covers any employed person who is not self employed.
The court said at para 17: That concept [ie of worker] must be defined with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned.
The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.
In Kurz the court said at para 32 that it was settled case law that the concept of worker has a specific Community meaning and must not be interpreted narrowly.
The court then repeated the essential feature of the relationship identified in the above passage from Lawrie Blum.
In Allonby the court addressed an equal pay claim by a college lecturer who had been dismissed by the college and then re engaged, ostensibly as a self employed sub contractor supplied by an agency.
For the purposes of article 141(1) of the EC Treaty, the court drew a clear distinction between workers and independent suppliers of services.
It discussed the concept of worker within the meaning of article 141(1) between paras 62 and 72, which included the following: 62.
The criterion on which article 141(1) EC is based is the comparability of the work done by workers of each sex: see, to that effect, Defrenne v Sabena (No 2) (Case 149/77) [1978] ECR 1365, 1377, para 22.
Accordingly, for the purpose of the comparison provided for by article 141(1) EC, only women and men who are workers within the meaning of that article can be taken into consideration. 63.
In that connection, it must be pointed out that there is no single definition of worker in Community law: it varies according to the area in which the definition is to be applied: Martinez Sala v Freistaat Bayern (Case C 85/96) [1998] ECRI 2691, 2719, para 31. 64.
The term worker' within the meaning of article 141(1) EC is not expressly defined in the EC Treaty.
It is therefore necessary, in order to determine its meaning, to apply the generally recognised principles of interpretation, having regard to its context and to the objectives of the Treaty. 65.
According to article 2 EC, the Community is to have as its task to promote, among other things, equality between men and women.
Article 141(1) EC constitutes a specific expression of the principle of equality for men and women, which forms part of the fundamental principles protected by the Community legal order: see, to that effect, Deutsche Post AG v Sievers (Cases C 270 and 271/97) [2000] ECR I 929, 952, para 57.
As the court held in Defrenne v Sabena (Case 43/75) [1976] ICR 547, 566, para 12, the principle of equal pay forms part of the foundations of the Community. 66.
Accordingly, the term worker used in article 141(1) EC cannot be defined by reference to the legislation of the member states but has a Community meaning.
Moreover, it cannot be interpreted restrictively. 67.
For the purposes of that provision, there must be considered as a worker a person who, for a certain period of time, performs services for and under the direction of another person in return for which he receives remuneration see, in relation to free movement of workers, in particular Lawrie Blum para 17, and Martinez Sala, para 32. 68.
Pursuant to the first paragraph of article 141(2) EC, for the purpose of that article, pay means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.
It is clear from that definition that the authors of the Treaty did not intend that the term worker, within the meaning of article 141(1) EC, should include independent providers of services who are not in a relationship of subordination with the person who receives the services (see also, in the context of free movement of workers, Meeusen v Hoofddirectie van de Informatie Beheer Groep (Case C 337/97) [1999] ECR I 3289, 3311, para 15). 69.
The question whether such a relationship exists must be answered in each particular case having regard to all the factors and circumstances by which the relationship between the parties is characterised. 70.
Provided that a person is a worker within the meaning of article 141(1) EC, the nature of his legal relationship with the other party to the employment relationship is of no consequence in regard to the application of that article: . 71.
The formal classification of a self employed person under national law does not exclude the possibility that a person must be classified as a worker within the meaning of article 141(1) EC if his independence is merely notional, thereby disguising an employment relationship within the meaning of that article.
On the basis of those materials I would accept Mr Davies submission that the Court of Justice draws a clear distinction between those who are, in substance, employed and those who are independent providers of services who are not in a relationship of subordination with the person who receives the services.
I see no reason why the same distinction should not be drawn for the purposes of the Regulations between those who are employed and those who are not notionally but genuinely self employed.
In the light of Allonby, there can be no doubt that that would be the correct approach to the near identical definition in section 1(6) of the Equal Pay Act 1970 and must remain the correct approach to the definition of employment in section 83(2) of the EA, which provides, so far as relevant: Employment means (a) employment under a contract of employment, a contract of apprenticeship or a contract personally to do work; That definition is almost identical to the definition in regulation 2(3) of the Regulations and, since it applies to equal pay issues by virtue of sections 83(4), 80(2) and 64 of the EA, it must equally apply to the Regulations.
In my opinion there is nothing in the domestic authorities which requires the court to come to any different conclusion.
The problem with some of them is that they do not refer to the jurisprudence of the Court of Justice.
However, the most recent decision of the House of Lords does.
In Percy v Board of National Mission of the Church of Scotland [2006] 2 AC 28 the House of Lords considered a sex discrimination claim brought by a woman who was a minister of the Church of Scotland.
The issue was whether she was employed within the meaning of section 82(1) of the SDA 1975.
The House held that she was.
Lord Hoffmann dissented on the basis that she was the holder of an office but had no doubt (at para 66) that, if the arrangement had been contractual, it would plainly have been a contract of service.
Lord Hoffmann said at para 73 that the term workers is a term of art in Community law which was defined by the Court of Justice in the passage from para 17 of Lawrie Blum quoted at para 24 above.
Lord Hope of Craighead said much the same at para 126, where he also noted that the same approach was taken in Allonby.
Baroness Hale of Richmond referred at para 141 to para A[4] of Harvey on Industrial Relations and Employment Law, which stated that: the distinction is between those who work for themselves and those who work for others, regardless of the nature of the contract under which they are employed.
She then referred at para 143 to the decision of the Court of Appeal in Northern Ireland in Perceval Price v Department of Economic Development [2000] IRLR 380, where it was held that three full time judicial office holders, namely a full time chairman of industrial tribunals, a full time chairman of social security appeal tribunals and a social security commissioner were workers for the purposes of almost identical provisions.
In para 145, after quoting the definition of an employment relationship in Lawrie Blum, Baroness Hale noted that, in giving the judgment of the court in Perceval Price, Sir Robert Carswell LCJ said that the objective of the relevant EC legislation was to give protection against inequality and discrimination to those who might be vulnerable to exploitation.
He also said that the concept of a worker should be construed purposively by reference to this objective.
Baroness Hale then quoted this extract from the judgment of Sir Robert Carswell: All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the president of the industrial tribunals or the court service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self employed persons.
Their office accordingly partakes of some of the characteristics of employment .
At para 146 Baroness Hale continued: I have quoted those words at length because they illustrate how the essential distinction is, as Harvey says, between the employed and the self employed.
The fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition.
Judges are servants of the law, in the sense that the law governs all that they do and decide, just as clergy are servants of God, in the sense that God's word, as interpreted in the doctrines of their faith, governs all that they practise, preach and teach.
This does not mean that they cannot be workers or in the employment of those who decide how their ministry should be put to the service of the Church.
Some consideration was recently given to the position of part time judges by this court in OBrien v Ministry of Justice (Note) [2010] UKSC 34, [2010] 4 All ER 62 where the court considered Percy in some detail in a judgment of the court given by Lord Walker.
At para 25 it referred to the same passage in Lawrie Blum as having laid down the relevant principle and at para 26 it referred to the speech of Baroness Hale and approved the passage quoted above from the judgment of Sir Robert Carswell in Perceval Price.
As I read Percy, it sought to apply the principles identified by the Court of Justice, as indeed did this court in OBrien [2010] 4 All ER 62.
The essential questions in each case are therefore those identified in paras 67 and 68 of Allonby [2004] ICR 1328, namely whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services.
Those are broad questions which depend upon the circumstances of the particular case.
They depend upon a detailed consideration of the relationship between the parties.
As I see it, that is what Baroness Hale meant when she said that the essential difference is between the employed and the self employed.
The answer will depend upon an analysis of the substance of the matter having regard to all the circumstances of the case.
I would not accept the Court of Appeals analysis (at para 21) of Baroness Hales speech in this regard.
There have been a number of domestic cases which say that the question is whether the dominant purpose of the contract is the execution of personal work or labour: see eg Quinnen v Hovells [1984] ICR 525, Mirror Group Newspapers Ltd v Gunning [1986] 1 WLR 546, especially per Oliver LJ at 551H and Balcombe LJ at 556H; Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and Percy [2006] 2 AC 28 per Lord Hope at para 113, where he referred to two other cases in the Court of Appeal, namely Patterson v Legal Services Commission [2004] ICR 312 and Mingeley v Pennock (trading as Amber Cars) [2004] ICR 727.
Mr Michael Brindle QC also referred on behalf of the respondent to two earlier cases which focus on the question whether a contract is one personally to execute any work or labour: see Tanna v Post Office [1981] ICR 374 and Hugh Jones v St Johns College, Cambridge [1979] ICR 848.
However, none of these cases considered the approach in the decisions of the Court of Justice referred to above.
In particular, the cases did not focus on the fact that the employment must be employment under a contract of employment, a contract of apprenticeship or a contract personally to do work. (My emphasis).
Given the importance of the EC perspective in construing the legislation, including the Regulations, the cases must now be read in the light of those decisions.
They show that it is not sufficient to ask simply whether the contract was a contract personally to do work.
They also show that dominant purpose is not the test, or at any rate not the sole test.
That is not to say that the question of purpose is irrelevant but the focus is on the contract and relationship between the parties rather than exclusively on purpose.
Elias J, sitting as President of the Employment Appeal Tribunal, recognised some of the difficulties in James v Redcats (Brands) Ltd [2007] ICR 1006.
He discussed the relevance of dominant purpose in this context by reference to the cases at paras 53 to 68.
At para 59, after quoting from the judgment of Balcombe LJ in Gunning [1986] 1 WLR 546, he said that the dominant purpose test is really an attempt to identify the essential nature of the contract.
In the context of the case he was considering he posed the question whether it was in essence to be located in the field of dependent work relationships or whether it was in essence a contract between two independent business undertakings.
At paras 67 and 68, after referring to a number of cases and observing at para 65 that the description of the test as one of identifying the dominant purpose was perhaps not an altogether happy one, he said this: 67.
An alternative way of putting it may be to say that the courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not.
If it is, then the contract lies in the employment field; if it is not if, for example, the dominant feature of the contract is a particular outcome or objective and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field. 68.
This is not to suggest that a tribunal will be in error in failing specifically to apply the dominant purpose or indeed any other test.
The appropriate classification will in every case depend upon a careful analysis of all the elements of the relationship, as Mr Recorder Underhill QC pointed out in Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667.
It is a fact sensitive issue, and there is no shortcut to a considered assessment of all relevant factors.
However, in some cases the application of the dominant purpose test may help tribunals to decide which side of the boundary a particular case lies.
It is noteworthy that the European cases were not cited in many of the cases, including that before Elias J.
In the light of the European cases, dominant purpose cannot be the sole test, although it may well be relevant in arriving at the correct conclusion on the facts of a particular case.
After all, if the dominant purpose of the contract is the execution of personal work, it seems likely that the relationship will be, in the words of Allonby [2004] ICR 1328, para 67, a case in which the person concerned performs services for and under the direction of the other party to the contract in return for remuneration as opposed to an independent provider of services who is not in a relationship of subordination with him or it.
This may not be so however because, although the dominant purpose of the contract may be personal work, it may not be personal work under the direction of the other party to the contract.
All will depend upon the applications of the principles in Allonby to the circumstances of the particular case.
If the approach in Allonby is applied to a contract between the parties to an arbitration and the arbitrator (or arbitrators), it is in my opinion plain that the arbitrators role is not one of employment under a contract personally to do work.
Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties as contemplated in para 67 of Allonby.
He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services, as described in para 68.
The arbitrator is in critical respects independent of the parties.
His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party.
As the International Chamber of Commerce (the ICC) puts it, he must determine how to resolve their competing interests.
He is in no sense in a position of subordination to the parties; rather the contrary.
He is in effect a quasi judicial adjudicator: K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863, 885.
In England his role is spelled out in the 1996 Act.
By section 33, he has a duty to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case so as to provide a fair means of determination of the issues between the parties.
Section 34 provides that, subject to the right of the parties to agree any matter, it is for the arbitrator to decide all procedural matters.
Examples of the width of those powers can be seen in the particular examples in section 34(2).
Section 40 provides that the parties shall do all things necessary for the proper and expeditious conduct of the arbitration, which includes complying with any order of the arbitrator, whether procedural or otherwise.
Once an arbitrator has been appointed, at any rate in the absence of agreement between them, the parties effectively have no control over him.
Unless the parties agree, an arbitrator may only be removed in exceptional circumstances: see sections 23 and 24.
The court was referred to many other statutory provisions in other parts of the world and indeed many other international codes, including the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration 1985, the ICC Rules and the London Court of International Arbitration (the LCIA) Rules to similar effect.
The Regulations themselves include provisions which would be wholly inappropriate as between the parties and the arbitrator or arbitrators.
For example, regulation 22(1) provides: Anything done by a person in the course of his employment shall be treated for the purposes of these Regulations as done by his employer as well as by him, whether or not it was done with the employers knowledge or approval.
It is evident that such a provision could not apply to an arbitrator.
In this regard an arbitrator is in a very different position from a judge.
The precise status of a judge was left open by this court in OBrien [2010] 4 All ER 62, in which the court referred particular questions to the Court of Justice: see para 41.
However, as Sir Robert Carswell said in Perceval Price [2000] IRLR 380 and Lord Walker said in OBrien (at para 27), judges, including both recorders and all judges at every level are subject to terms of service of various kinds.
As Sir Robert put it, although judges must enjoy independence of decision without direction from any source, they are in other respects not free agents to work as and when they choose, as are self employed persons.
In both those cases the court was considering the relationship between the relevant department of state and the judges concerned.
It was not considering the relationship between the judges and the litigants who appear before them.
Here, by contrast, the court is considering the relationship between the parties to the arbitration on the one hand and the arbitrator or arbitrators on the other.
As I see it, there is no basis upon which it could properly be held that the arbitrators agreed to work under the direction of the parties as contemplated in para 67 of Allonby [2004] ICR 1328.
Further, in so far as dominant purpose is relevant, I would hold that the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.
In reaching this conclusion it is not necessary to speculate upon what the position might be in other factual contexts.
It was submitted that the effect of the decision of the Court of Appeal is that a customer who engages a person on a one off contract as, say, a plumber, would be subject to the whole gamut of discrimination legislation.
It would indeed be surprising if that were the case, especially given the fact that the travaux prparatoires contained no such suggestion: see the impact assessment in the Commissions Proposal for the Directive 1999/0225 (CNS), Brussels 1999, which was concerned solely with the position of enterprises of various types.
There was no consideration of the effect on individual choice by customers.
See also a memorandum from the Commissions Director General for Employment and Social Affairs to the EU Committee of the House of Lords dated 9 February 2000 to much the same effect.
This is not to say that the Regulations may not apply in the case of the plumber, solicitor, accountant or doctor referred to by the Court of Appeal in para 16.
As already stated, all will depend upon the application of the principles in Allonby to the particular case.
As I see it, the problem with the approach adopted by the Court of Appeal is that it focuses only on the question whether there is a contract to do work personally, whereas it is necessary to ask the more nuanced questions identified in Allonby.
In para 19 the Court of Appeal relied in support of its more general approach upon the opinion of Advocate General Maduro in Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Case C 54/07) [2008] ICR 1390.
It said this in paras 19 and 20: 19.
That the choice of a solicitor, plumber or arbitrator, whether on religious, racial or any other grounds, should fall foul of regulation 6(1) of the 2003 Regulations, even if made entirely privately, may strike some people as surprising.
However, in [the Firma Feryn case] Advocate General Maduro expressed the opinion, at para 14, that the Directive must be understood in the framework of a wider policy to foster conditions for a socially inclusive labour market and to ensure the development of democratic and tolerant societies which allow the participation of all persons irrespective of racial or ethnic origin.
That case arose out of a statement by a company that supplied and fitted up and over garage doors that it would not employ immigrants as fitters because its customers were unwilling to have them in their homes.
One can well see why a public statement of that kind might be regarded as discriminatory: it was liable to deter potential applicants for employment and thereby militate against a socially inclusive labour market.
The court itself did not expressly adopt the Advocate General's expression of opinion; rather it confined itself to holding, at para 25, that a general statement of the kind under consideration constituted direct discrimination because it was likely to deter some potential applicants and thus hinder their access to the labour market.
None the less, the Advocate General's view of the broad policy objective of the Directive is in our opinion supported by the recitals.
It is also one which is essentially incompatible with an acceptance of the right to discriminate between any providers of services on the basis of race, sex, religion or any of the other grounds covered by the Directive. 20.
Mr. Davies sought to meet that broad analysis by saying that the primary concern of the Directive is access to employment and economic activity, not private choices by consumers between those who have already gained access to the market.
The language of article 3 could be construed in that more limited way, but the expression access to employment, to self employment or to occupation is capable of a broader interpretation consistent with the policy objectives we have described.
In any event, we are concerned with the language of domestic legislation, which is not restricted by the scope of the Directive and which is underpinned by broadly the same policy considerations as those identified by Advocate General Maduro in the Firma Feryn case, whether it was introduced before or after the publication of the Directive.
I would not accept that analysis.
The Firma Feryn case was not relied upon in the course of the oral argument in the Court of Appeal.
It was referred to in answer to a letter from the Court of Appeal asking questions on the assumption that an engagement to provide services gave rise to an employment relationship under the Regulations.
The case concerned conventional employment relationships and did not discuss at all the extension of discrimination law to one off contracts for services.
The Court of Justice held that a racially discriminatory statement by an employer as to its recruitment policy could constitute direct discrimination even if there was no actual victim.
There was no actual victim because there was no evidence that anyone who might have lost out as a result of the policy had actually applied, or would have applied, for a position with that employer.
The Advocate General thus expressed his opinion in a case which was squarely concerned with employment and not with the boundary between employment and self employment and in which no reference was made to Lawrie Blum [1987] ICR 483, Kurz [2002] ECR I 10691 or Allonby [2004] ICR 1328.
Some reliance was placed upon the reference to the conditions for access to employment, to self employment or to occupation, including selection criteria and recruitment conditions in article 3(1)(a) of the Directive.
In para 20 the Court of Appeal gave a wide construction to that provision, rejecting the submission made by Mr Davies that it related to barriers to entry to trades, professions and occupations.
It did so on the same footing as before, namely that a wide meaning should be given to the terms of the Directive and, in any event, to the Regulations.
However, I would accept Mr Davies submission that the expression access to self employment or to occupation means what it says and is concerned with preventing discrimination from qualifying or setting up as a solicitor, plumber, greengrocer or arbitrator.
It is not concerned with discrimination by a customer who prefers to contract with one of their competitors once they have set up in business.
That would not be denying them access to self employment or to occupation.
I see no reason to give a different meaning to the Regulations from that given to the Directive.
For these reasons I prefer the conclusion of the judge to that of the Court of Appeal.
I agree with the judge that the Regulations are not applicable to the selection, engagement or appointment of arbitrators.
It follows that I would hold that no part of clause 8 of the JVA is invalid by reason of the Regulations and would allow the appeal on this ground.
Genuine occupational requirement
If the above conclusion is correct, this point does not arise but it was fully argued and I will briefly consider it.
The question considered by the judge was whether, if regulation 6(1)(a) or (c) would otherwise apply, it is prevented from applying by regulation 7(1) and (3).
It will be recalled that, by regulation 7(1), regulations 6(1)(a) and (c) do not apply where regulation 7(3) applies and that regulation 7(3) provides: This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it.
Those provisions were made in accordance with the exceptions in relation to occupational requirements made by article 4 of the Directive, which provides: 1.
Notwithstanding article 2(1) and (2), member states may provide that a difference of treatment which is based on a characteristic related to any of the grounds referred to in article 1 shall not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate. 2.
Member states may maintain national legislation in force at the date of adoption of this Directive or provide for future legislation incorporating national practices existing at the date of adoption of this Directive pursuant to which, in the case of occupational activities within churches and other public or private organisations the ethos of which is based on religion or belief, a difference of treatment based on a persons religion or belief shall not constitute discrimination where, by reason of the nature of these activities or of the context in which they are carried out, a persons religion or belief constitute a genuine, legitimate and justified occupational requirement, having regard to the organisations ethos.
This difference of treatment shall be implemented taking account of members states constitutional provisions and principles, as well as the general principles of Community law, and should not justify discrimination on another ground.
It is common ground that, as the judge said at para 40, a rigorous and strict approach must be adopted to the question whether the particular exception applies: Stadt Halle Thermische Restabfall und Energieverwertungsanlage TREA Leuna (Case C 26/03) [2005] ECR I 1 and Marleasing [1990] ECR I 4135.
v Arbeitgemeinschaft
Although some reliance was placed in the course of argument on regulation 7(2), I shall focus first on paragraph (3).
Since 1 October 2010 the provisions of regulation 7 have been replaced by those of Schedule 9 of the EA.
Regulation 7(3) has been replaced by paragraph (3) of that Schedule, which provides: A person (A) with an ethos based on religion or belief does not contravene a provision mentioned in paragraph 1(2) by applying in relation to work a requirement to be of a particular religion or belief if A shows that, having regard to that ethos and the nature or context of the work (a) it is an occupational requirement, the application of the requirement is a proportionate (b) means of achieving a legitimate aim, and the person to whom A applies the requirement does not meet it (or A has reasonable grounds for not being satisfied that the person meets it).
It was not suggested that there is any significant difference between that paragraph and regulation 7(3).
There are four relevant requirements under regulation 7(3).
The issue between the parties centres upon whether the second requirement is satisfied.
The requirements are (1) that the employer should have an ethos based on religion or belief; (2) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, being of a particular religion or belief is a genuine requirement for the job; (3) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, it is proportionate to apply that requirement on the facts; and (4) that the person to whom the requirement is applied, who here must be Sir Anthony Colman, does not meet the requirement.
As to (1) it is not (and could not be) suggested here that Mr Jivraj and Mr Hashwani did not have such an ethos.
As to (3), it is not in dispute that, if requirement (2) is satisfied, so that being an Ismaili is a genuine occupational requirement, it is or would be proportionate to apply it.
As to (4), it is plain that Sir Anthony Colman does not meet the requirement in the JVA that the arbitrators should be members of the Ismaili community.
The essential issue between the parties is whether requirement (2) is satisfied.
The question is therefore whether, having regard to the Ismaili ethos and to the nature of the employment or the context in which it is carried out, being of the Ismaili religion or belief is a genuine requirement for the job.
The judge held that this requirement was satisfied whereas the Court of Appeal held that it was not.
Our attention was drawn on behalf of Mr Jivraj to what is said to be an important difference between paragraphs (2) and (3) of regulation 7.
Paragraph (2) is concerned with the case where the employer does not have a particular ethos based on religion or belief but wishes to recruit a worker who does have such an ethos.
In that event, for the exception to apply, being of the particular ethos or belief must be a genuine and determining occupational requirement.
By contrast, where (as here) the employer has an ethos based on religion or belief, it is sufficient under paragraph (3) that being of a particular religion or belief is a genuine occupational requirement for the job.
Mr Davies submits that the difference between the two cases is this.
In the first case the question is whether being of a particular religion or belief is a genuine and determining occupational requirement.
That is to say it must be an essential requirement for the job.
Whether it is or not is an objective question which the court can readily decide.
In the second case, on the other hand, the question for the court is subjective, namely whether it is a genuine requirement for the job in the eyes of the employer or employers.
This, Mr Davies suggests, reflects the sensible principle that it is not for the court to sit in judgment over matters of religion or belief.
By contrast, Mr Brindle disputes the idea that the test is entirely subjective.
Regulation 7(3) requires that being of a particular religion or belief is not only genuine but also, as paragraph 2 of article 4 of the Directive shows, legitimate and justified.
It follows that it is not sufficient that the employer has a genuine belief that the particular religion or belief is required.
The requirement must also be legitimate and justified.
It would be remarkable, in his submission, if the justification could be found in the personal opinions of the prima facie discriminator.
I agree with Mr Davies that it is not for the court to sit in judgment on matters of religion or belief.
However, I also agree with Mr Brindle that the test for justifying prima facie discrimination cannot be entirely subjective.
This is because the Regulations must be construed consistently with the Directive.
It seems to me to be reasonably clear that paragraph 1 of article 4 of the Directive is the source of paragraph (2) of regulation 7 because they both refer to a genuine and determining occupational requirement.
In these circumstances paragraph 2 must be the source of paragraph (3) of the regulation, with the result that the expression genuine occupational requirement must (either alone or together with proportionality in requirement (3)) have been intended to reflect the expression genuine, legitimate and justified occupational requirement in paragraph 2 of article 4 of the Directive.
If the legitimacy or justification of a requirement were assessed purely by reference to the subjective view of the employer, they would add nothing to the stipulation that a requirement be genuine.
In my view, whether or not a particular religion or belief is a legitimate and justified requirement of an occupation is an objective question for the court.
This is not however as strict a test as that applied under regulation 7(2), namely that a particular religion or belief is an essential requirement for the job.
As I see it, the question is simply whether in all the circumstances of the case the requirement that the arbitrators should be respected members of the Ismaili community was, not only genuine, but legitimate and justified.
I do not agree with Mr Brindle that the requirement that arbitrators be Ismailis cannot be objectively justified.
His submission that an English law dispute in London under English curial law does not require an Ismaili arbitrator takes a very narrow view of the function of arbitration proceedings.
This characterisation reduces arbitration to no more than the application of a given national law to a dispute.
One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.
This is reflected in section 1 of the 1996 Act which provides that: the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.
The stipulation that an arbitrator be of a particular religion or belief can be relevant to this aspect of arbitration.
As the ICC puts in its written argument: The raison dtre of arbitration is that it provides for final and binding dispute resolution by a tribunal with a procedure that is acceptable to all parties, in circumstances where other fora (in particular national courts) are deemed inappropriate (eg because neither party will submit to the courts or their counterpart; or because the available courts are considered insufficiently expert for the particular dispute, or insufficiently sensitive to the parties positions, culture, or perspectives).
Under section 34 of the 1996 Act (referred to above) the arbitrators have complete power over all procedural and evidential matters, including how far the proceedings should be oral or in writing, whether or not to apply the strict rules of evidence, whether the proceedings should be wholly or partly adversarial or whether and to what extent they should make their own inquiries.
They are the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility.
In paras 41 to 44 of his judgment [2010] 1 All ER 302 the judge made detailed findings which seem to me to be relevant to this question.
I refer to only some of them.
In para 41 he described the history and development of the Ismaili Community.
He noted from the summary on the website of the Aga Khan Development Network that in the early part of the 20th century Aga Khan III introduced a range of organisational forms that gave Ismaili communities the means to structure and regulate their own affairs.
He added that those forms were established against the background of "the Muslim tradition of a communitarian ethic on the one hand, and responsible individual conscience with freedom to negotiate one's own moral commitment and destiny on the other".
included this: At para 42 the judge quoted extensively from the same summary which Spiritual allegiance to the Imam and adherence to the Shia Imami Ismaili tariqah (persuasion) of Islam according to the guidance of the Imam of the time, have engendered in the Ismaili community an ethos of self reliance, unity, and a common identity.
He noted that in 1986 the present Aga Khan: promulgated a Constitution that, for the first time, brought the social governance of the world wide Ismaili community into a single structure with built in flexibility to account for diverse circumstances of different regions.
Served by volunteers appointed by and accountable to the Imam, the Constitution functions as an enabler to harness the best in individual creativity in an ethos of group responsibility to promote the common well being.
Like its predecessors, the present constitution is founded on each Ismaili's spiritual allegiance to the Imam of the time, which is separate from the secular allegiance that all Ismailis owe as citizens to their national entities.
The guidance of the present Imam and his predecessor emphasised the Ismaili's allegiance to his or her country as a fundamental obligation.
These obligations discharged not by passive affirmation but through responsible engagement and active commitment to uphold national integrity and contribute to peaceful development.
In para 43 the judge quoted from a paper presented to the Council of Europe in March 2009 by the Director of International Training with the secretariat of the Aga Khan which included the following: Under the Constitution, the Imam has also established National and International Conciliation and Arbitration Boards to encourage amicable resolution of conflicts through impartial conciliation, mediation and arbitration, a service which is being increasingly used, in some countries, even by non Ismailis.
In fulfilling the mandate to sustain social, economic, cultural and civil society development, the Imamat collaborates with national governments, regional and international institutions as well as civil society organisations.
This paper highlights the work of the Conciliation and Arbitration Boards established under the Ismaili Constitution and more particularly the training programmes that have been conducted for them over the last decade, indicating some of the best practices.
Over the centuries, Ismaili communities in various parts of the world, have been conducting their own ADR processes based on the ethics of the faith as guided by the Imams of the Time. [The Aga Khan] was concerned about the massive costs of litigation faced by members of the Ismaili community in various parts of the world.
Not only were the legal costs very high, but the legal procedures, in many countries, were particularly lengthy and did not always result in outcomes that conformed with the principles of natural justice.
The Aga Khan was concerned about compliance with the ethics of the faith which promote a non adversarial approach to dispute resolution in keeping with the principles of negotiated settlement (sulh) enshrined in the Holy Qur'an.
The study indicated that a majority of the cases were in the field of family disputes and that the national courts in the countries, where the disputants were settled, were not always able to comprehend the inter generational attitudinal issues involved, let alone being able to resolve them.
This syndrome is very much in keeping with the notion of the "limited remedial imagination" that Menkel Meadow attributes to the adversarial system which focuses on a zero sum numbers game where the "winner takes all".
It was therefore decided by the Imam, in consultation with the leaders of the various Ismaili communities worldwide, to build on the community's existing tradition of settling disputes amicably within the ethics of Islam and to establish Conciliation and Arbitration Boards at various levels of social governance in the Ismaili communities throughout the world.
It was also felt that the system should be such that the first submission of an issue to an arbitrational or mediational body should ensure the highest degree of proficiency, probity and fairness so that the number of cases which go for appeal would be minimal and that the process would be seen as being equitable, fair and cost effective.
The Aga Khan's advice was that such a system should endeavour to resolve disputes within the community without the disputants having to resort to unnecessary litigation which is time consuming, expensive and destructive.
The Aga Khan saw the amicable resolution of disputes, without resorting to a court of law and within the ethics of the faith, as an important aspect of the improvement of the quality of life of the Ismailis globally.
Consequently, the Ismaili Constitution of 1986 made provision for the establishment of the Conciliation and Arbitration Boards.
The judge then in para 44 set out part of article XIII of the Constitution which set up a National Conciliation and Arbitration Board for all types of dispute, which provided by article 13.5: Each National Conciliation and Arbitration Board shall upon the application of any Ismaili assist him to settle any differences or disputes with another party residing in the area of jurisdiction of the National Conciliation and Arbitration Board in relation to any of the matters mentioned in article 13.1(a).
Article 13.1(a) provided that the Board was: to assist in the conciliation process between parties in differences or disputes arising from commercial, business and other civil liability matters, domestic and family matters, including those relating to matrimony, children of a marriage, matrimonial property, and testate and intestate succession;
In these circumstances the judge held that the provision in the JVA which provided that the arbitrators should be respected members of the Ismaili community and holders of high office within the community was a GOR within regulation 7(3).
He did so on the basis that the material set out above showed that, as he put it at para 45, one of the more significant and characteristic spirits of the Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili community.
He said that he had no difficulty in determining this spirit to be an "ethos based on religion".
He also relied upon the terms of the arbitration clause itself and the engagement by both sides of members of the Ismaili community to perform mediation and conciliation services from 1988 until 1994.
In my opinion the judge was justified in concluding that the requirement of an Ismaili arbitrator can be regarded as a genuine occupational requirement on the basis that it was not only genuine but both legitimate and justified, so that requirement (2) was satisfied.
As to requirement (3), the judge said at para 46 that, had proportionality been a live issue, having regard to the parties freedom in section 1 of the 1996 Act (quoted above) he would have held that article 8 of the JVA was proportionate.
The reasoning of the Court of Appeal [2010] ICR 1435 is set out in their para 29 as follows: The judge's findings about the nature and ethos of the Ismaili community were not challenged, but in our view he failed to pay sufficient regard to the other requirements of regulation 7(3), in particular, to whether, having regard to the ethos of that community and the nature of the arbitrator's function, being an Ismaili was a genuine occupational requirement for its proper discharge.
If the arbitration clause had empowered the tribunal to act ex aequo et bono it might have been possible to show that only an Ismaili could be expected to apply the moral principles and understanding of justice and fairness that are generally recognised within that community as applicable between its members, but the arbitrators' function under clause 8 of the joint venture agreement is to determine the dispute between the parties in accordance with the principles of English law.
That requires some knowledge of the law itself, including the provisions of the Arbitration Act 1996, and an ability to conduct the proceedings fairly in accordance with the rules of natural justice, but it does not call for any particular ethos.
Membership of the Ismaili community is clearly not necessary for the discharge of the arbitrator's functions under an agreement of this kind and we are unable to accept, therefore, that the exception provided in regulation 7 of the 2003 Regulations can be invoked in this case.
I prefer the approach of the judge.
For the reasons given earlier, I am not persuaded that the test is one of necessity.
The question is whether, in all the circumstances the provision that all the arbitrators should be respected members of the Ismaili community was legitimate and justified.
In my opinion it was.
The approach of the Court of Appeal seems to me to be too legalistic and technical.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which the parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence.
For these reasons I would, if necessary, have allowed the appeal on the basis that article 8 was a GOR within regulation 7(3).
This conclusion makes it unnecessary to consider whether it also satisfied regulation 7(2).
Severance and costs
In these circumstances, neither the severance issue raised by Mr Hashwani nor the appeal on costs advanced by Mr Jivraj arises and I say nothing about them.
Reference to the Court of Justice
I would not refer any of the questions which arise in this appeal to the Court of Justice.
On the first question, the only questions of EC law which arise relate to the true construction of the Directive.
The Court of Justice has resolved those issues in a number of cases, notably Allonby [2004] ICR 1328.
To my mind the principles are now acte clair.
On the second question, the principal issue between the parties relates to the application of the relevant principles to the facts.
As to the correct construction of regulation 7(3), I have accepted Mr Brindles submission that it does not involve a wholly subjective question on the ground that the relevant provision must be not only genuine, but also legitimate and justifiable.
In these circumstances, I see no basis for a reference in relation to GOR, which was in any event not determinative of the appeal.
CONCLUSION
I would allow the appeal.
LORD MANCE
The first point
I have read and agree entirely with the judgment of Lord Clarke on the first point: that is, whether the arbitrators contemplated by article 8 of the Joint Venture Agreement are persons who would be engaged in employment under a contract personally to do work within the meaning of regulation 2 of the Employment Equality (Religion or Belief) Regulations 2003, interpreted in the light of Council Directive 2000/78/EC to which the Regulations aim to give effect.
The conclusion that they would not be is, I think, unsurprising for all the reasons that Lord Clarke gives.
I note that as long ago as 1904 (RGZ 59, 247), the German Reichsgericht identified the particular nature of an arbitral contract, in terms which I think have a relevance to arbitration generally, when it said (in translation), that: It does not seem permissible to treat the arbitrator as equivalent to a representative or an employee or an entrepreneur.
His office has . an entirely special character, which distinguishes him from other persons handling the affairs of third parties.
He has to decide a legal dispute in the same way as and instead of a judge, identifying the law by matching the relevant facts to the relevant legal provisions.
The performance expected from him is the award, which constitutes the goal and outcome of his activity.
It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him.
But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge.
A more modern source, Gary B Borns authoritative work on International Commercial Arbitration (2009), convincingly discusses the general international legal understanding of the nature of an arbitrators engagement in the following passage (Vol I, pp 1607 1609): There is also debate about how to characterize the arbitrators contract, particularly in civil law jurisdictions where the characterization of contracts is often essential to determining their effects.
Some commentators consider the arbitrators contract to be an agency agreement, where the arbitrator serves as the parties agent.
Other authorities have suggested treating the arbitrators contract as an agreement for the provision of services.
A third approach has been to regard the arbitrators contract as a sui generis or hybrid form of agreement, not being categorizable in conventional terms and instead giving rise to a unique set of right and duties.
The proper analysis is to treat the arbitrators contract as a sui generis agreement.
That is in part because this characterization accords with the specialized and distinct nature of the arbitrators mandate: as noted above, that mandate differs in fundamental ways from the provision of many other services and consists in the performance of a relatively sui generis adjudicatory function.
It is therefore appropriate, and in fact necessary, that the arbitrators contract be regarded as sui generis.
At the same time, there are no other satisfactory characterizations of an arbitrators contract.
It makes no sense to treat the arbitrators contract as an agency agreement.
Under most legal systems, that characterization would require the arbitrator to follow the parties directions and to provide the parties with information and an accounting all of which can only with difficulty, if at all, be assimilated to the adjudicative role of an arbitrator.
Moreover, the role of an agent is inconsistent with the arbitrators adjudicative function which is precisely to be independent of the parties.
This was underscored by a French appellate decision, which held that an agreement for the parties representatives to resolve their dispute could not be an arbitration agreement: A stipulation of that kind is incompatible with the actual concept of arbitration, since the arbitrators, though appointed by the parties, can under no circumstances become their representatives.
That would imply, in particular, that they represent the parties and account for their functions.
Such a role, and the obligations it entails, are alien to the functions of an arbitrator, which are judicial in nature.
Equally, regarding the arbitrator as a service provider, like an accountant, investment banker, lawyer, or other professional, ignores the essential adjudicative character of his or her mandate.
Arbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship.
The proper analysis is therefore to regard the arbitrators contract as a sui generis agreement specifying the terms on which this adjudicative function is to be exercised vis vis particular parties and on particular terms.
Both these citations catch and support the essence of Lord Clarkes distinction between persons under the direction of another and arbitrators who perform an independent role, free of such control.
The second point
As Lord Clarke notes at para 51, the second point does not in these circumstances arise, since the whole situation falls outside the scope of regulation 2.
To ask how the exception permitted by regulation 7(3) and article 4(2) of the Directive might apply, when by definition it cannot, may risk giving a slightly false impression about the scope of the exception in situations to which it is potentially applicable.
The reasons which can, as Lord Clarke demonstrates, be given for concluding that the exception would not apply to a considerable extent duplicate those given for concluding that regulation 2 does not apply.
They are in particular that the arbitrators would not be under the direction of the parties: see paras 61 et seq.
Accordingly, it may be appropriate to say a few words about the application of the exception in a situation in which the regulation would apply.
If one takes a situation which is within regulation 2, say the engagement by the Ismaili community, or by any other organisation whose ethos is based on religion or belief, of an employed lawyer to undertake English law work, I would expect it to be much more difficult to maintain as valid a restriction to members of the Ismaili community or of the other religious or faith based organisation.
Many English as well as other lawyers believe in, are trained in and are familiar with techniques for the amicable resolution of disputes, including conciliation, mediation and arbitration.
The value of alternative dispute resolution, particularly mediation, is also recognised at the European legal level (see eg Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and commercial matters and Council of Europe Recommendation No R(2002)10 on civil mediation).
A religious or faith based communitys or organisations power first to select and then to direct its own employed lawyers would be a secure means of ensuring that its employed lawyers valued, understood and prioritised the handling of English law work so far as possible on a non confrontational basis, using alternative dispute resolution procedures wherever possible.
A refusal to employ anyone other than a member of the particular religion or faith would in that context seem unlikely to be justified or proportionate.
| UK-Abs | The parties entered into a joint venture agreement on 29 January 1981.
Article 8 provided that any dispute arising from the joint venture should be resolved by arbitration before three arbitrators, each of whom was required to be a respected member of the Ismaili community (the Requirement).
The Ismaili community comprises Shia Imami Ismaili Muslims and is led by the Aga Khan.
The issue arising on this appeal is whether the Requirement, and/or the arbitration agreement as a whole, became void when the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations) came into force on 2 December 2003, as an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The joint venture ended in 1988.
The division of the joint venture assets was largely determined by a three man panel appointed in accordance with the arbitration agreement, but some matters remained in dispute.
On 31 July 2008 Mr Hashwanis solicitors wrote to Mr Jivraj asserting that a balance of over US$4.4m was due to him and giving notice of his intention to appoint Sir Anthony Colman, a retired judge of the Commercial Court, as an arbitrator.
Sir Anthony was not a member of the Ismaili community.
Mr Jivraj commenced proceedings for a declaration that his appointment was void as a breach of the Requirement.
Mr Hashwani sought an order that Sir Anthony be appointed as sole arbitrator.
The High Court (David Steel J) held that the appointment of arbitrators fell outside the scope of the Regulations as they were not employed or, if they were, that the Requirement fell within the exception permitted for genuine occupational requirements which it was proportionate to apply.
Had he held that the Requirement was void, he would have held that the arbitration agreement as a whole was void.
The Court of Appeal allowed Mr Hashwanis appeal in relation to the Regulations, finding that arbitrators were employed and that there had been unlawful religious discrimination.
However, they concluded that the agreement should not be enforced with the Requirement severed from it and, accordingly, Sir Anthonys appointment was invalid (the severance issue).
Mr Jivraj appealed to the Supreme Court in respect of the finding that the clause was void by reason of the Regulations.
Mr Hashwani cross appealed on the severance issue.
The Supreme Court unanimously allows the appeal on the ground that an arbitrator is not a person employed under a contract personally to do work within the meaning of the Regulations, which do not therefore apply.
The majority (Lord Phillips, Lord Walker, Lord Clarke and Lord Dyson) also find that the Requirement would have fallen within the exception for genuine occupational requirements if
the Regulations had applied.
Lord Mance preferred not to deal with this issue as it did not arise in the light of the finding that the Regulations did not apply.
The judgment of the majority is given by Lord Clarke.
The High Court judge had correctly concluded that an arbitrator was not employed within the scope of the Regulations [22].
He or she fell outside the definition of a worker laid down by the case law of the European Court of Justice and was instead an independent provider of services who was not in a relationship of subordination with the person who received the services [34][40].
The dominant purpose of the contract was not the sole test for determining employment, although it might be relevant in arriving at the correct conclusion on the facts of a particular case [39].
An arbitrator was a quasi judicial adjudicator whose duty was not to act in the particular interests of either party [41].
The dominant purpose of the appointment, insofar as it was relevant, was the impartial resolution of the dispute [45].
The question of whether the Requirement was a genuine occupational requirement for the job for the purposes of the exception in regulation 7(3) of the Regulations did not therefore arise.
However, whether a particular religion or belief was a legitimate and justified requirement of an occupation was an objective question for the court [59].
Arbitration was more than the application of a given national law to a dispute and a stipulation that an arbitrator be of a particular religion or belief can be relevant to the manner in which disputes are resolved [61].
In this case, the judge had correctly found that the Ismaili community had demonstrated an ethos, based on religion, for dispute resolution contained within that community [68].
The test was not one of necessity.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence [70].
The severance issue did not therefore arise [72].
|
Permission to appeal was granted in this case in order to enable this Court to consider the following point of law, certified by the Court of Appeal as being of general public importance: If (1) D1 and D2 voluntarily engage in fighting each other, each intending to kill or cause grievous bodily harm to the other and each foreseeing that the other has the reciprocal intention, and if (2) D1 mistakenly kills V in the course of the fight, in what circumstances, if any, is D2 guilty of the offence of murdering V? The facts of this case are unusual, but the importance of the point of law lies in the implications that it may have in respect of the scope of potential liability of those who permit themselves to become involved in public order offences.
No previous decision in this jurisdiction provides a clear indication of how the point of law should be resolved.
The principles of law that fall to be applied are those of the common law, albeit that it will be necessary to consider a degree of statutory intervention.
The particular areas of criminal law that will have to be considered are (i) joint enterprise; (ii) transferred malice; (iii) exemption from liability where a party to what would normally be a crime is a victim of it.
No precedent indicates the result of the interaction of these three areas of law on the facts of this case.
In resolving the point of law it will be appropriate to have regard to policy.
The facts
The following account of the facts is taken from the Agreed Statement of Facts and Issues.
This reproduces almost verbatim the summary of the facts in the judgment of the Court of Appeal, delivered by Thomas LJ but to which all members of the court had contributed.
The other members were Hooper, Hughes and Gross LJJ and Hedley J.
Together the court brought to the problem very wide experience in the field of criminal law.
Shortly after 6 pm on Tuesday, 2 October 2007, a 26 year old Polish care worker, Magda Pniewska, was walking home from a nursing home through a car park for blocks of residential accommodation in New Cross, South London and up steps towards an open piece of ground.
She was on the telephone to her sister when she was killed by a single shot to her head.
That shot was fired in an exchange of fire between two gunmen one of whom was the respondent.
The respondent, who was born on 26 May 1990, and was 17 years of age at the time, had a dispute with another youth (TC).
At about 5 p.m. on 2 October 2007 he went with a friend, Nana Acheampong, by car to the home of his ex girlfriend, Roxanne Landell.
Shortly thereafter Nana Acheampong and the respondent drove round to a car park elsewhere on the same estate from where the respondent went on foot to an adjacent car park.
He had armed himself with a gun which was silver in colour and he had several rounds of live ammunition.
Nana Acheampong had remained in the car.
A red Volkswagen Polo was already in the car park.
There were four occupants of the car, one of whom was pregnant.
The respondent spoke to the occupants of the Polo, as they were about to leave.
According to two of them he told them that "he had come to meet someone to handle some business".
He asked if they had seen a man in a red bandana, saying that that man owed him some money.
Very shortly thereafter the occupants of the red Polo saw someone come down the steps towards the car park.
His face was covered with a red bandana.
At the trial, he was referred to as "Bandana Man" and I shall so describe him in this judgment.
He pulled out a gun, black in colour, and started shooting at the respondent.
The respondent crouched down behind the red Polo, pulled out his gun and returned the fire.
The respondent fired two or three shots over the roof of the car.
He then went to the front of the car and started shooting over the bonnet whilst the other man shot back.
The clear evidence of those in the red Polo was that the respondent was shooting at Bandana Man.
It was in that crossfire between the respondent and Bandana Man that Magda Pniewska was killed.
Scientific examination showed that the single bullet to the deceased's head did not come from the respondent's gun; it had come from the gun held by Bandana Man.
Both the respondent and Bandana Man fled from the scene.
TC, who was believed to be Bandana Man was arrested, but never charged.
The respondent was arrested four days later.
The car park, in which the gun fight took place, was surrounded by closely built, modern residential blocks in multiple occupation.
All had windows facing the parking area.
The areas of common law in play.
At this point we propose to summarise quite shortly the areas of common law in play.
It will be necessary to revert to these in greater detail when we come to consider their application to the facts of this case.
Joint enterprise
Section 8 of the Accessories and Abettors Act 1861, as amended by the Criminal Law Act 1977, provides: Whosoever shall aid, abet, counsel, or procure the commission of any indictable offence, whether the same be an offence at common law or by virtue of any Act passed or to be passed, shall be liable to be tried, indicted, and punished as a principal offender.
This section does not specify what is encompassed by the words aid, abet, counsel, or procure.
That question is determined by the common law.
There is no need in this case to attempt a comprehensive definition.
In particular we can ignore any complications that may arise in relation to the accessory before or after the fact, who is not present when the criminal act is committed.
Having regard to the facts of this case we can start with this simple proposition.
Where two persons, D1 and D2 agree to the commission of an indictable offence, where both are present at the place where the criminal act is to be performed and where one of them, D1, commits that act, both will be jointly liable for the crime.
The act will have taken place pursuant to their joint criminal purpose and D2 will be equally guilty with D1, having aided, abetted, counselled or procured D1 to commit the crime.
The law becomes more complicated where, in the course of committing, or attempting to commit the criminal act which is their common purpose, D1 commits a further criminal act which goes beyond that purpose.
The example that is usually given is the following.
D1 and D2 break into a house with the common intention of committing a burglary.
They are surprised by the householder, whereupon D1 hits him on the head with a jemmy and kills him.
D2 had had no intention, or wish, that either of them should inflict injury in the course of the burglary but had foreseen the possibility that D1 might inflict serious injury in the course of it.
The situation exemplified by these facts has been repeatedly considered in different factual contexts by the Court of Appeal and the House of Lords.
These authorities were recently analysed by Hughes LJ when giving the judgment of the Court of Appeal in R v A [2010] EWCA Crim 1622; [2011] QB 841.
His conclusion, which we would endorse, appears in the following passage from para 27 of his judgment: the liability of D2 rests, as all these citations show, on his having continued in the common venture of crime A when he realises (even if he does not desire) that crime B may be committed in the course of it.
Where crime B is murder, that means that he can properly be held guilty if he foresees that D1 will cause death by acting with murderous intent (viz either intent to kill or intent to do GBH).
He has associated himself with a foreseen murder.
Professor Sir John Smith coined the phrase parasitic accessory liability to describe this form of liability arising out of participation in a joint criminal enterprise.
While this is not the most elegant phraseology we propose to adopt it in this judgment by way of convenient shorthand.
Transferred malice
The principles that we are about to describe have long been recognised by commentators on the common law of crime, but there is a dearth of actual cases to illustrate them.
Where a defendant intends to kill or cause serious injury to one victim, V1, but accidentally kills another, V2, he will be guilty of the murder of V2.
The basis of this liability is customarily described as transferred malice, although a better description might be transferred mens rea see Archbold 2011 ed at 17 24; Blackstones Criminal Practice 2011 at A2.13.
The doctrine applies to secondary parties as it does to principal offenders.
Thus if D2 attempts to aid, abet, counsel or procure D1 to murder V1 but D1, intending to kill V1, accidentally kills V2 instead, D2 will be guilty of the murder of V2 see Smith & Hogan, Criminal Law,12th ed (2008) at p 205.
Exemption from liability where a party to what would normally be a crime is a
victim of it
In an article on Victims and other exempt parties in crime in (1990) 10 Legal Studies (1990), at p 245 Professor Glanville Williams identified a principle that he described as the victim rule.
He defined this as follows: where the courts perceive that the legislation is designed for the protection of a class of persons.
Such people should not be convicted as accessories to an offence committed in respect of them when they co operate in it.
Nor should they be convicted as conspirators.
Professor Glanville Williams stated that the principle was founded on a single English decision, but was widely accepted in common law countries.
That decision was R v Tyrrell [1894] 1 QB 710.
Section 5 of the Criminal Law Amendment Act 1885 made it an offence for a man to have carnal knowledge of a girl between the age of 13 and 16.
The defendant, a girl whose age fell within that bracket, was convicted of (1) aiding, abetting, counselling and procuring the commission of that offence by a man upon herself and (2) of inciting the man to commit the same offence.
On appeal these convictions were robustly quashed.
Lord Coleridge CJ, giving the leading judgment, said at p 712: The Criminal Law Amendment Act 1885 was passed for the purpose of protecting women and girls against themselves.
At the time it was passed there was a discussion as to what point should be fixed as the age of consent.
That discussion ended in a compromise, and the age of consent was fixed at sixteen.
With the object of protecting women and girls against themselves the Act of Parliament has made illicit connection with a girl under that age unlawful; if a man wishes to have such illicit connection he must wait until the girl is sixteen, otherwise he breaks the law; but it is impossible to say that the Act, which is absolutely silent about aiding or abetting, or soliciting or inciting, can have intended that the girls for whose protection it was passed should be punishable under it for the offences committed upon themselves.
I am of the opinion that this conviction ought to be quashed.
In R v Whitehouse [1977] QB 868 the Court of Appeal reluctantly held that this principle precluded the conviction of a father for inciting his daughter, who was under 16, to aid and abet him to commit incest with her.
Section 1 of the Criminal Law Act 1977 created a statutory offence of conspiracy to commit a crime.
Section 2(1) provides: 2. (1) A person shall not by virtue of section 1 above be guilty of conspiracy to commit any offence if he is an intended victim of that offence. (2) A person shall not by virtue of section 1 above be guilty of conspiracy to commit any offence or offences if the only other person or persons with whom he agrees are (both initially and at all times during the currency of the agreement) persons of any one or more of the following descriptions, that is to say (c) an intended victim of that offence or of each of those offences.
Blackstone comments at A6.38 that section 2(1) appears designed to apply the principle established by Tyrell.
It will be necessary to consider in due course the scope of this provision and whether, by analogy, the common law should prohibit the conviction of a defendant for aiding and abetting an offence against the person where he is the victim of the offence.
Relevant to these questions is the more restricted wording of section 51 of the Serious Crime Act 2007: (1) In the case of protective offences a person does not commit an offence under this Part by reference to such an offence if (a) he falls within the protected category; and (b) he is the person in respect of whom the protective offence was committed or would have been if it had been committed. (2) Protective offence means an offence that exists (wholly or in part) for the protection of a particular category of persons (the protected category) The judges ruling on the defence submission of no case to answer and the case
subsequently advanced by the Crown
At the end of the prosecution case Miss Bennett Jenkins QC for the defence submitted that there was no case to go to the jury.
Mr Altman QC for the Crown argued that there were two possible bases upon which the jury could convict.
It was common ground that Bandana Man had been guilty of murder of Miss Pniewska, applying the principle of transferred malice in that he had plainly been attempting to kill or cause serious bodily harm to the respondent.
The first basis upon which the jury could convict was that the respondent had aided and abetted this murder, in that he had encouraged Bandana Man to fire at him with homicidal intent.
When, however, the judge asked whether he was submitting that the respondent aided and abetted his own attempted murder he replied that he could not so submit.
He argued that the liability of the respondent flowed on a wider basis from the implicit agreement between himself and Bandana Man that they should meet in a public place, each with an intent to kill or cause serious harm to the other.
The judge rejected this argument.
He observed that there was difficulty in an analysis of a joint enterprise where the defendant was himself the intended victim of the other gunman: He neither intended nor consented to bodily injury to himself at the hand of the other, nor could he truly be said to be a party to a joint enterprise to kill or cause grievous bodily harm to himself as the intended target of the other.
Even if he contemplated that the other might shoot at him with the necessary intent, he not being a party to the enterprise to cause harm to himself, would not be liable for the unintended consequences on that basis alone.
About this, in my judgment, there can be no doubt.
There is no possible joint enterprise involving the killing of himself to which the defendant was privy as such.
If he and Bandana Man had a common enterprise to kill a third party, and Magda was killed by a bullet from Bandana Mans gun, then the doctrine of transferred malice could operate to make Bandana Man guilty as a primary party to the murder of Magda, and in as much as the defendant was privy to a joint enterprise to kill someone in common with Bandana Man, sharing that common intention, he would also be liable as a secondary party.
Here, however, there was no common intention to murder any particular person.
Each of the protagonists had a separate intent to kill or to seriously injure the other.
Their intentions were parallel but running in opposite directions.
He later added Here, however, it cannot be said, in my judgment, that the defendant actively encouraged Bandana Man to shoot at him, and even if he did, it would be a real oddity for a victim of an attempted murder to be a secondary party to that attempt.
In reality on the evidence, the defendant fired at Bandana Man in the hope of killing him or causing him grievous bodily harm, frightening him, or arguably, in self defence.
He cannot be said to have encouraged the other to fire back, whatever the order of shots as the jury might ultimately find them to be.
He might have provoked further firing, but he did not encourage it.
In the light of this ruling, Mr Altman did not pursue this way of putting his case.
The alternative case that Mr Altman advanced was one of parasitic accessory liability.
The judge accepted that this alternative was viable.
He held that it was open to the jury to find that the respondent and Bandana Man were subject to a joint enterprise to commit an affray and that, if the jury then found that the respondent foresaw and envisaged that Bandana Man might shoot and kill an innocent passer by this would found a verdict of murder on the part of the respondent.
The judges direction to the jury
The judge crafted his direction to the jury with great care.
He founded it on the principle of parasitic accessory liability.
For reasons that we shall explain we do not consider that this principle could properly be applied on the facts of this case.
None the less it is necessary to set out a large part of his direction in order to decide whether the jury must have been satisfied that the relevant elements of the crime of murder, as we shall identify them, were proved: Now what the prosecution say about the defendants role in this murder is that the defendant was involved in a joint enterprise, that is a term which I will explain to you in a moment and which again will appear in the piece of paper that I am going to give you.
It was a joint enterprise because it had a gunfight and both the defendant and Bandana Man, say the prosecution, each took part in that gunfight, realising that the other was likely to shoot, and might, in shooting, with the intention of killing or causing really serious injury, kill someone other than himself who was the immediate target of the shots.
And the prosecution say, in those circumstances, the defendant is jointly responsible for the murder with Bandana Man on the basis of this joint enterprise.
Joint enterprise: that is a word I need to explain to you.
Let me explain that concept.
It arises in the ordinary way where people jointly commit an offence.
Where a criminal offence is committed by two or more people, each of them may play a different part in that offence, but if they are in it together as part of a joint plan or joint agreement to commit it, each is guilty of the planned offence.
The words plan or agreement that I have just used do not mean that there has to be any formality about it.
An agreement to commit an offence may arise on the spur of the moment.
Nothing needs to be said at all.
It can be made with a nod or a wink or just a knowing look or by taking the first step in committing an offence in which the other person then joins, so that it can be inferred from their behaviour.
The essence of joint responsibility for a criminal offence is that each person shared the intention to commit the offence and took some part in it so as to achieve that aim, so in the ordinary way, you would consider each person said to be involved, and if you are sure that he took part in committing the offence with any intention necessary for that offence, he would be guilty.
But there is a further element in the concept of joint enterprise, and it is this: if two people agree or plan in the sense I have mentioned to commit one offence, one type of offence, but during the course of it, one of them commits another offence, both may still be responsible for that other offence.
Of course, the person who actually does the offence, the act which constitutes that further offence will be guilty of it, but the other person will also be guilty of it if he realised that the act done was something which the first person might do with the necessary intent as part of their planned offence.
Now here it is said by the prosecution that Bandana Man and the defendant planned to use unlawful violence towards another by having a shoot out, whether that plan was made beforehand and the meeting was pre arranged or was made on the spur of the moment when they saw each other and fired at each other from the steps and the car respectively.
If you are sure that Bandana Man and the defendant joined together to commit such unlawful violence by having a gunfight, whether pre planned or whether on the spur of the moment on the top of the steps and the side of the car, and that this joint enterprise came into being before Magda was killed by a shot from Bandana Man, then the defendant would be guilty of murder also, along with Bandana Man, provided the other requirements are satisfied.
So if you are sure that Bandana Man and the defendant were in a joint enterprise to cause an affray, to use unlawful violence against each other by having a gunfight and by firing at each other, whether this joint enterprise was the result of a pre planned meeting or arose on the spur of the moment when they saw each other, and that in the course of that joint enterprise fight, Magda was murdered by Bandana Man on the basis of transferred malice, as I have explained it to you, and that the defendant realised and the prosecution say that he must have realised that in the course of their joint enterprise gunfight, Bandana Man might kill with the requisite intention for murder, then the defendant would also be guilty of murder.
The decision of the Court of Appeal
Before the Court of Appeal Mr Altman made no attempt to revive the first way that he had sought to put the Crowns case.
He sought to uphold the judges direction on the basis of parasitic accessory liability.
Miss Bennett Jenkins submitted that this case was not viable.
The starting point for parasitic accessory liability was a joint enterprise.
There had been no joint enterprise.
The respondent and Bandana Man had each been engaged on a separate, individual and diametrically opposed enterprise, for each was out to harm the other.
So far as foresight of Bandana Mans conduct was concerned, all that the respondent could have foreseen was that Bandana Man would try to kill him.
Parasitic accessory liability was founded on encouragement to commit the further offence, implicit in pursuing the original joint venture.
The judge had rightly found that the respondent had not encouraged Bandana Man to shoot at him.
Thus the further essential element of encouragement was missing.
The Court of Appeal accepted this argument.
Its reasoning was complex and spanned paras 48 to 70 of its judgment, but we believe that we can summarise it quite shortly.
Parasitic accessory liability has to arise out of a joint enterprise that involves the two parties acting together, or in concert, or for a common purpose.
Where an affray is alleged to have arisen from a fight between two people it does not ordinarily involve a joint enterprise or common purpose.
Ordinarily the purpose of each protagonist to such an affray is the individual purpose of striking the other and avoiding being struck himself.
Such purposes are not shared by the two protagonists, they are reciprocal, or equal and opposite purposes.
It was none the less possible to envisage a scenario in which two persons shared a common purpose to strike and be struck a prize fight or a duel were examples of this.
On the facts of the present case there might have been a common purpose to shoot and be shot at, as in a duel, but the judge had never asked the jury to consider that possibility.
The reasoning of the court was summarised in para 59 of its judgment: What is at issue here is secondary liability.
The essence of secondary liability is that the parties are acting together or, as it is often put, in concert.
For what we have described as the third type of joint enterprise liability they must be acting together or in concert in crime A, here affray.
Two people who voluntarily engage in fighting each other might, exceptionally, be acting together or in concert, but ordinarily they are not.
It is not realistic to say that they acted in concert to cause fear; they acted independently and antagonistically in a manner which did so.
Absent a shared purpose to shoot and be shot at, the submission made by the appellant was correct that there was no room on the facts for any other common purpose.
The jury was never asked to confront the question whether the shared common purpose was not only to shoot, but to be shot at.
The Crown had accepted that the respondent could not be convicted on the basis that he had been party to a joint enterprise with Bandana Man to shoot at each other, with the intent to kill or cause really serious bodily injury for the following reason (para 33): The difficulty on the facts of the current case is that the appellant himself was the intended victim of the other man.
The appellant neither intended nor consented to bodily injury to himself at the hand of the other man nor could he truly be said to have been party to a joint enterprise to kill or cause harm to himself (being the intended target of the other man).
Even if he had contemplated that the other man might shoot at him with the necessary intent, he not being a party to the enterprise to cause harm to himself, could not be liable for any unintended consequences on that basis alone.
The Court of Appeal referred to this concession and emphasised at para 37 that it had not considered whether it was correctly made.
However the Court of Appeal returned to the concession in a post script to its judgment and set out the following arguments that raised a question mark over the concession. 73. (i) If two persons agree to a duel with the use of guns, they have agreed to shoot at each other with the intention of killing or seriously harming the other.
That activity, as a matter of ordinary language, could be described as an agreement to shoot and be shot at.
To that extent it is arguable that they have a shared common purpose. (ii) Clearly an agreement to a duel or to shoot at each other is illegal, as no one can consent to run the risk of being killed in such a way.
As Lord Templeman pointed out in R v Brown (Anthony) [1994] 1 AC 212, 231, the defence of consent never availed a person who maimed the other participant in a duel: Hawkins' Pleas of the Crown 8th ed (1824), vol 1, ch 15.
In Attorney Generals Reference (No 6 of 1980) [1981] 1 QB 715, it was made clear that it is not in the public interest that people should try to cause or should cause each other harm for no good reason.
It is immaterial whether the act occurs in private or in public; it is an assault if actual bodily harm is intended or caused. (iii) There can be an agreement to use unlawful violence by two opposing and antagonistic persons, illegal though it is.
In R v Coney (1882) 8 QBD 534, all the judges were agreed that both prize fighters were guilty of an assault on each other.
Although each would be guilty as a principal of a separate offence, it is arguable that the two prize fighters have a simple agreement to exchange blows and to that extent share a common purpose to hit and be hit. (iv) The question would then arise, if it was accepted that two prize fighters can have an agreement to hit and be hit, as to whether the use of lethal weapons made a difference.
If there really is an agreement to shoot and be shot at, it is arguable that it does not.
Just as in the case of prize fighters, each hoped that the other would be wounded or killed, but that he would not be.
But the fact that each hoped for a different outcome, did not necessarily mean that they did not share a common purpose of shooting and being shot at. (emphasis added)
The Court of Appeal went on to consider issues of policy: 74 There is at the heart of this issue a question of policy.
Does the justice and effectiveness of the criminal justice system require the imposition of liability in cases of genuinely agreed duels by acceptance that there can be a joint enterprise of the first type between opposing persons if they agree not only to hit but to be hit? 75 But there is also a second question.
At para 58, we referred, in the context of the judge's directions to the jury, to the wider implications for criminal liability for death or injury or damage that occurs in the course of a fight between two gangs.
Spelling that second question out may assist. i) Say a home group meet an away group, each seeing that the other is armed with sticks and bars.
They begin a fight. ii) In the course of the fight members of the home group use bars intentionally to cause really serious injuries to a member of the away group and in the course of doing so injure an innocent bystander; each receives really serious injuries from which he dies. iii) It could readily be inferred that all those engaged in the fight foresaw that there was a real possibility that one of those engaged in the fight or an innocent bystander might be caused serious bodily injury by being intentionally struck by one of those fighting with a bar in the course of the fight.
What are the circumstances in which the members of the away group bear criminal responsibility for the death of the member of their group or the innocent bystander caused by the home group? The court commented that both of these issues of policy were questions for the future.
Because of a change of tack by the Crown in this court the time has now come to consider them.
The Crown case before this Court
In the alternative Mr Altman has sought to rely upon the doctrine of
Before this Court Mr Altman QC for the Crown has sought to revive the case that he had abandoned at the trial and had not sought to advance before the Court of Appeal.
Paras 30 to 48 of his written case are devoted to arguing that the respondent had been an accessory to Bandana Mans attempt to kill him and thus shared Bandana Mans liability, as a result of the doctrine of transferred malice, for the murder of Miss Pniewska.
This radical change of case is perhaps inspired by the obiter comments of the Court of Appeal and by commentary on those comments in [2011] Crim L R 151, 156.
parasitic accessory liability that had been rejected by the Court of Appeal.
Discussion: Parasitic accessory liability in public order offences
We propose to start by considering Mr Altmans attempt to rely upon the doctrine of parasitic accessory liability.
We shall first of all explore the reasoning of the Court of Appeal in concluding that this was not a viable route to convicting the respondent of murder.
We shall then draw attention to a further significant difficulty that Mr Altman faces in seeking to rely upon this doctrine.
The nature of the offence of affray
Affray was a common law offence with its origin many centuries ago.
By the middle of the twentieth century it had been lost from sight, for as Lord Goddard CJ remarked at p 559 of R v Sharp; R v Johnson, [1957] 1 QB 552, the first case in which the offence resurfaced, there seemed to be no reported case which dealt with it.
That case involved a fight between the two defendants in a public place in the presence of a large number of spectators.
They were jointly indicted on a charge of affray and convicted.
On the basis of distinguished and venerable commentaries Lord Goddard identified the offence of affray as one committed where two or more persons fought in a public place to the terror of the Kings subjects.
In that case the convictions of the two appellants were quashed on the ground that each claimed to have been acting in self defence, and this defence had not been left to the jury.
Lord Goddard held at p 561: If two men are found fighting in a street one must be able to say that the other attacked him and that he was only defending himself.
If he was only defending himself and not attacking that is not a fight and consequently not an affray.
This comment proved to be an over simplification.
Having been rediscovered, affray became a very popular charge, being used on literally thousands of occasions, and in due course received consideration by the House of Lords.
In R v Button; R v Swain [1966] AC 591 the issue was whether an affray had to take place in a public place.
The House held that it did not.
Lord Gardiner LC, giving the only reasoned speech, held at p 625 that the essence of the offence was that two or more fought together to the terror of the Queens subjects.
In R v Taylor (Vincent) [1973] AC 964 the House of Lords, disapproving the dictum of Lord Goddard in Sharp and Johnson, held that a single defendant could be guilty of affray if he fought with another, who lawfully defended himself.
Lord Morris of Borth y Gest put the matter as follows at p 991: But if two men are seen to be fighting in a street with the result that terror is caused to the Queens subjects and if it has all come about because one is an aggressor while the other was merely defending himself I see no reason why the aggressor should be immune from conviction for affray.
Those who see the fighting may have no means of deciding how it came about or whose fault it was.
They may not be able to appreciate that one man is merely defending himself and doing his best to disengage.
The terror and alarm caused to them by the fighting will not be any the less because the fact may be that one man of the two was only of necessity engaged in the fighting.
In 1983 the Law Commission published a report, HC 85; Law Com No 123, on Offences Relating to Public Order.
They recommended that the common law offence of affray should be preserved in an Act that would replace the common law offences of riot, unlawful assembly and affray.
In the draft Bill appended to the Report they defined the offence of affray as follows: 3(1) Where two or more persons use or threaten unlawful violence against each other, or one or more persons use or threaten unlawful violence against another, and their conduct is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety, each of those persons commits the offence of affray.
This was followed by a White Paper, May 1985 Cmnd 9510, entitled Review of Public Order Law.
This stated at para 3.15 that the Government was content to accept the Law Commissions proposed statutory definition of affray.
Unfortunately the draftsman of what was to become the Public Order Act 1986 appears to have thought that he could improve on the drafting of the Law Commission.
Thus the definition of affray in section 3 of that Act is as follows: (1) A person is guilty of affray if he uses or threatens unlawful violence towards another and his conduct is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety. (2) Where 2 or more persons use or threaten the unlawful violence, it is the conduct of them taken together that must be considered for the purposes of subsection (1).
We have emphasised the words the unlawful violence because they gave rise to considerable debate on this appeal.
They are hard to reconcile with the passage that we have quoted from the speech of Lord Morris in R v Taylor.
More significantly, if given their natural meaning, they would appear to suggest that two defendants can only be jointly liable on a single count of affray if they join in using violence towards another; if they fight each other each commits an individual offence of affray, but they are not guilty of a joint offence.
This would be nonsensical.
We do not consider that the Act has altered the common law offence of affray in this way.
The joint offence of affray can be founded on the common product of individual conduct, viz violence capable of causing fear, and does not require any common intention or purpose on the part of the joint participants.
Section 6(2) sets out the mens rea of the offence as follows: A person is guilty of violent disorder or affray only if he intends to use or threaten violence or is aware that his conduct may be violent or threaten violence.
Thus an affray need not involve any common enterprise or common purpose.
The Court of Appeal rightly held that parasitic accessory liability must be founded on a common unlawful enterprise or purpose.
It is joining in this common enterprise that renders the conduct of the accomplice an encouragement to the principal to commit the additional offence, thereby justifying the conviction of the accomplice.
Because affray does not necessarily involve any common purpose it cannot automatically constitute a foundation for parasitic accessory liability.
The Court of Appeal left open, however, the possibility that, on the facts of an individual case, affray may be the product of a common purpose or enterprise capable of providing a foundation for parasitic accessory liability.
A duel was given as an example of such a situation.
So might the facts of the present case if they evidenced an agreement to shoot and be shot at.
The court held, however, that this possibility had not been left to the jury.
Many public order offences constitute a spontaneous outburst of reciprocal violence, often fuelled by alcohol.
They can, however, involve a common purpose indeed such a common purpose is an element of the offence of riot.
It is not uncommon for groups of youths, supporters of rival football clubs for example, to plan to meet in order to do battle.
It may be that most involved in such a skirmish have no wish to cause serious injury.
There will, however, be an obvious possibility that one or more of those involved may go beyond the common intention of the majority of the combatants and deliberately cause serious injury.
If such an event occurs and a victim suffers serious injury, or even dies, are all who were present guilty of causing grievous bodily harm, or murder where the victim dies, by reason of the doctrine of parasitic accessory liability? It is this question that the Court of Appeal raised, but left unanswered.
For reasons that we shall explain the facts of this case do not require an answer to the question, despite the reformulation of the Crowns case.
We would consider it undesirable, however, if a practice developed of relying on the doctrine of parasitic accessory liability to charge with murder parties to an affray who had not themselves intended that it would result in serious injury.
No issue of parasitic accessory liability arises in this case
Parasitic accessory liability arises where (i) D1 and D2 have a common intention to commit crime A (ii) D1, as an incident of committing crime A, commits crime B, and (iii) D2 had foreseen the possibility that he might do so.
Here there was no crime A and crime B.
It cannot be said that the two protagonists had a joint intention to commit violence of a type that fell short of the violence committed.
Either Bandana Man and the respondent had no common intention, or there was a common intention to have a shoot out.
If they intended to have a shoot out, then each necessarily accepted that the other would shoot at him with the intention to kill or cause serious injury.
Neither intended that the other should kill him but each accepted the risk that he might do so.
The Crown sought to suggest that there was a joint intention to have an affray, which was crime A, and that the killing by Bandana Man was crime B, for which the respondent was liable as an accessory because it was within his contemplation as a possible, albeit unintended, incident of crime A.
The fallacy of this argument is that, if there was a joint intention to have an affray, that intention was to have an affray by shooting at each other with homicidal intent.
It is artificial to treat the intention to have an affray as a separate intention from the intention to have a potentially homicidal shooting match.
The victim rule
Why was the Crown so keen to establish liability under the doctrine of parasitic accessory liability? The answer is, we believe, that the Crown believed that this route would enable it to by pass what was perceived to be a barrier to the direct route to the respondents liability for murder.
The direct route was as follows: i) Bandana Man attempted to kill the respondent; ii) By agreeing to the shoot out, the respondent aided and abetted Bandana Man in this attempted murder; iii) Bandana Man accidentally killed Miss Pniewska instead of the respondent.
Under the doctrine of transferred malice he was guilty of her murder. iv) The doctrine of transferred malice applied equally to the respondent as aider and abetter of Bandana Mans attempted murder.
He also was guilty of Miss Pniewskas murder.
The Crown believed that there was a barrier to this direct route to the respondents liability for murder.
This was the application of the victim rule.
Mr Altman, when discussing the law with the judge, stated that the respondent could not aid and abet his own attempted murder.
If this proposition correctly represents the law, we do not see how the Crown can avoid its effect by invoking the doctrine of parasitic accessory liability.
Parasitic accessory liability does not differ in principle from the more common basis for finding someone guilty of aiding, abetting, counselling or procuring the commission of a crime.
In so far as the law precludes conviction for aiding and abetting a crime in respect of which the defendant is the victim, it must surely do so whatever the route by which the defendant would otherwise be held to have been an accomplice.
We turn then to consider the Crowns new case, which is that the conviction of the respondent can be justified on the basis that the respondent aided and abetted the commission of the murder by actively encouraging Bandana Man to shoot at him.
In relation to this case it seems to us that the issues for the Court are as follows: i) Does the victim rule preclude the conviction of a defendant for aiding and abetting a crime in respect of which he is the victim, even where the crime is not designed to protect a particular class of which the victim is a member? If yes, ii) Does the victim rule preclude the conviction of a defendant for aiding and abetting a crime in respect of which he was the intended victim, but where the actual victim is a third party? iii) If the victim rule did not preclude the respondents conviction for aiding and abetting the murder of Miss Pniewska, was the judges direction to the jury a sound basis for the jurys guilty verdict?
The scope of the victim rule
The first question to consider under this head is whether there is any statutory bar to prosecuting the respondent for being party to a crime in respect of which he was the intended victim.
So stated this perhaps begs the question, for it presupposes that the respondent was a prospective victim for the purpose of the victim rule.
If the first question produces a negative reply, it will then be necessary to consider whether there either is, or should be, a victim rule under the existing common law, or the common law as this court should develop it.
The origin of the victim rule appears to lie in the decision in Tyrrell see para 18 above.
The decision in that case can best be interpreted as being based on a term to be implied into the Criminal Law Amendment Act, based as the reasoning was on the implied intention of Parliament.
The decision does, however, illustrate the application of the general rule defined by Professor Glanville Williams, as set out at para 17 above.
Section 2(1) of the Criminal Law Act 1977, set out at para 19 above, applies a wider principle than Glanville Williams formulation of the victim rule, if victim is given the wide meaning of any person who will be harmed by the offence.
The scope of the word victim in that context has not, however, received judicial consideration so far as we are aware.
If it is given the wide meaning it would seem to produce the surprising result that a conspiracy by two persons that one will commit a terrorist atrocity as a suicide bomber, or to set fire to a house owned by one of them in furtherance of some ulterior motive, would appear not to subject either to criminal liability.
There is a case for confining the meaning of victim to persons of a class that the relevant Act is intended to protect, thus bringing section 2(1) into accord with the victim rule, as defined by Glanville Williams.
At all events, section 2(1) is confined to the crime of conspiracy and can have no direct application to the facts of this case.
The case for giving a narrow construction to victim in section 2(1) of the Criminal Law Act 1977 is perhaps strengthened by the limited exemption from criminal liability conferred by section 51 of the Serious Crime Act 2007, which we have set out at para 19 above.
This section gave effect to a recommendation of the Law Commission that the principle in Tyrrell should apply to proposed offences of encouraging or assisting crime see 12(4) of Halsburys Statutes, 4th ed, at paras 401 and 408.
This provision also has no application to the facts of this case.
It follows that there is no applicable statutory victim rule that precludes conviction of the respondent on the basis that he aided and abetted Bandana Mans attempt to kill him or cause him serious injury.
Is there, or should there be a common law rule that does so?
The fact that Parliament found it necessary to enact section 2(1) of the 1977 Act and section 51 of the 2007 Act is cogent indication that there is no common law rule that precludes conviction of a defendant of being party to a crime of which he was the actual or intended victim.
We are satisfied that there is no such rule.
This is evident from the fact that, under common law, attempted suicide was a crime, as was aiding and abetting suicide.
The victim of a successful suicide attempt could not, of course, be prosecuted, but if in an attempt to commit suicide, the defendant killed a third person, he committed the crime of murder under the doctrine of transferred malice see R v Hopwood (1913) 8 Cr App R 143 and R v Spence (1957) 41 Cr App R 80.
We can see no reason why this Court should consider extending the common law so as to protect from conviction any defendant who is, or is intended to be, harmed by the crime that he commits, or attempts to commit.
Such an extension would defeat the intention of Parliament in circumscribing the victim rule in section 51 of the 2007 Act.
In R v Brown (Anthony) [1994] 1 AC 212 sado masochists were held to have been rightly convicted of causing injury to others who willingly consented to the injuries that they received.
There would have been no bar to conviction of the latter of having aided and abetted the infliction of those injuries upon themselves.
It is no doubt appropriate for prosecuting authorities to consider carefully whether there is justification for prosecuting anyone as party to a crime where he is the victim, or intended victim of that crime, but that is not to say that the actual or intended victim of a crime should on that ground alone be absolved from criminal responsibility in relation to it.
As Lord Lane CJ observed in Attorney Generals Reference (N0 6 of 1980) [1981] QB 715, 719: it is not in the public interest that people should try to cause, or should cause, each other actual bodily harm for no good reason
The victim rule and transferred malice
In the light of the conclusion that we have just reached, no question arises as to the application of the victim rule where, although the intended victim of the crime to which the defendant is party is the defendant himself, the actual victim proves to be a third party.
Was the judges direction to the jury a sound basis for their guilty verdict?
If the respondent aided, abetted, counselled and procured Bandana Man to shoot at him he was, on my analysis, guilty of aiding and abetting the attempted murder of himself.
Had he been killed by Bandana Man, he would have been a party to his own murder.
Although he had not intended that Bandana Man should succeed in hitting him, complicity in his attempt to do so would have rendered him a party to the successful achievement of that attempt.
As it was, Bandana Man accidentally shot Miss Pniewska.
Under the doctrine of transferred malice he was liable for her murder.
Under the same doctrine, the respondent, if he had aided abetted, counselled and procured the attempt, was party to the murder that resulted.
Does it follow that, having regard to the terms of the judges directions, the jury must have been satisfied that the respondent had aided, abetted, counselled and procured Bandana Man to shoot at him with murderous intent? If so, his conviction can stand.
If not, the Court of Appeal correctly quashed it.
In his ruling that there was a case to go to the jury the judge ruled that that it could not be said that the defendant actively encouraged Bandana Man to shoot at him.
He could not be said to have encouraged Bandana Man to fire at him, although he might have provoked this.
Perhaps it was with this passage of his ruling in mind that the Court of Appeal observed at para 59 that the jury was never asked to confront the question whether the shared common purpose was not only to shoot but be shot at.
In the next paragraph the Court of Appeal observed that, the judge was, in effect, leaving to the jury a limited common purpose limiting it to an exchange of gun fire which did not extend to the gunman being hit.
Having carefully considered the passages in the judges summing up that we have set out at para 23 above we do not consider that they support the Court of Appeals conclusion.
It may well be that the intention of the judge was to direct the jury to consider whether there was a common intention to have an affray that fell short of an intention to shoot at each other and be shot at.
For the reasons that we have given this would have been an incredible scenario.
Either there was no joint plan or agreement at all, or there was a common intention to shoot at one another, which can only mean to shoot and be shot at.
What matters, however, is not the route that the judge considered would lead to a conviction, but the direction that he gave to the jury.
He directed the jury that, in order to convict they had to be satisfied that there was a plan or agreement to have a shoot out whether made beforehandor made on the spur of the moment when they saw each other and fired at each other from the steps and the car park respectively.
This direction did not permit the jury to convict if they believed that one of the protagonists might have been the aggressor and the other merely responding in self defence.
It was an unequivocal direction that the jury could convict only if they were satisfied that the protagonists had formed a mutual plan or agreement to have a gun fight in which each would attempt to kill or seriously injure the other.
If the jury were satisfied of this, the consequence in law was that each of the protagonists was party, not merely to his own attempt to kill or seriously injure the other, but to the others attempt to kill or seriously injure him.
Contrary to the finding of the Court of Appeal, the direction of the judge required the jury to consider whether they were satisfied that the respondent and Bandana Man had a common plan or agreement to shoot at each other and be shot at.
If they were so satisfied, and their verdict indicates that they were, this was a proper basis for finding that the respondent was guilty of murder.
In arguing at the close of the prosecution case that there was a case of simple aiding and abetting to go to the jury Mr Altman sought to draw an analogy with a duel.
There is indeed a close analogy between a consensual gunfight and a duel.
In the case of a duel all who are present and who lend encouragement to the duel will be guilty of aiding and abetting each of the protagonists in his attempt to kill or injure the other.
If one is killed, all who gave encouragement will be guilty of murder, and this includes the seconds on each side see R v Young and Webber (1838) 8 C & P 644.
It logically follows that each protagonist will be party to the violence, or attempted violence, inflicted on himself by his opponent.
The same is true of a prize fight.
In R v Coney (1882) 8 QBD 534 each protagonist was held guilty of assaulting the other and a number of bystanders were held to have encouraged, and thus to have been guilty of aiding and abetting, the assaults of both.
Once again each protagonist could properly have been held guilty of aiding and abetting the assault by the other upon himself.
A guilty verdict in this case involves a combination of common law principles in relation to aiding and abetting and the common law doctrine of transferred malice, In Attorney Generals Reference (No 3 of 1994) [1998] AC 245, 261 Lord Mustill commented of the latter doctrine: Like many of its kind this is useful enough to yield rough justice, in particular cases, and it can sensibly be retained notwithstanding its lack of any sound intellectual basis.
But it is another matter to build a new rule upon it.
We have considered whether to hold the respondent guilty of murder would be so far at odds with what the public would be likely to consider the requirements of justice as to call for a reappraisal of the application of the doctrine in this case.
We have concluded to the contrary.
On the jurys verdict the respondent and Bandana Man had chosen to indulge in a gunfight in a public place, each intending to kill or cause serious injury to the other, in circumstances where there was a foreseeable risk that this result would be suffered by an innocent bystander.
It was a matter of fortuity which of the two fired what proved to be the fatal shot.
In other circumstances it might have been impossible to deduce which of the two had done so.
In these circumstances it seems to us to accord with the demands of justice rather than to conflict with them that the two gunmen should each be liable for Miss Pniewskas murder.
We have considered the judgments of Lord Brown and Lord Clarke.
They essentially agree with our conclusions.
Each, however, considers that the defendant was liable as a principal to the agreed joint activity of shooting with intent to kill or cause serious injury, rather than as an accessory to the act of firing the shot.
This is not a difference of substance.
It may well be that, in terms of the common law, Bandana Man was a principal in the first degree and the respondent was a principal in the second degree see Archbold, 2011 edition, para 18 1.
But as Archbold remarks at para 18.6: the distinction between a joint principal and an abettor is sometimes difficult, and unnecessary, to draw.
Whether the respondent is correctly described as a principal or an accessory is irrelevant to his guilt.
In R v Giannetto [1997] 1 Cr. App. 1 the appellant was convicted of murdering his wife.
The Crown was unable to say whether he had inflicted the fatal injuries himself or, at the very least, had arranged for someone else to do so.
On this basis however he was guilty of her murder either as a principal or as an accessory.
Following his conviction the appellant argued that the judge had erred in law when he failed to direct the jury that they must be unanimous as to which of the two versions of events advanced by the Crown they accepted.
If the jury were not sure which of the two alternatives they found proved, then the appellant was entitled to be acquitted.
After an examination of the authorities, the submission was rejected.
If the jury does convict it may do so with some jurors satisfied that the defendant was actually the killer, but all will be satisfied that if not himself the killer at least he encouraged and by reason of the statutory provision in the 1861 Act no more is necessary to prove the offence. (per Kennedy LJ at 5) This decision simply reflects the reality that whether an offence is committed as a principal or as an accessory, the offence is the same offence and the defendant is guilty of it.
There may be many situations in which it will be important to distinguish between the principal and the accessory, but this is not such a case.
On the jurys verdict, both men agreed to the joint enterprise of having a shoot out.
Whether, on strict analysis, that made the respondent guilty as a principal to Bandana Mans actus reus of firing the fatal shot, or guilty as one who had aided, abetted counselled or procured his firing of that shot creates no practical difficulty on the facts of this case and does not affect the result.
For these reasons we would answer the certified question in the affirmative, allow this appeal and restore the respondents conviction for murder.
LORD BROWN
The central question for decision on this appeal can be shortly posed.
Two armed men (let us call them A and B) confront one another in a south London car park and there engage in an unlawful gunfight, each with the intention of killing or at least seriously injuring the other.
Neither is acting in self defence.
Rather the gunfight was agreed, either pre arranged or resulting from a spur of the moment decision by both.
Neither in fact succeeds in hitting his adversary but in the course of their crossfire a passerby (C), one of several people in the vicinity, is accidentally killed.
B it was who fired the fatal bullet and indisputably he is guilty of Cs murder: the principle of transferred malice so dictates.
But is A too guilty of Cs murder? That is the critical question before us.
A here is the respondent, Mr Gnango (the successful appellant below), B is Bandana Man (as he has been called throughout these proceedings), and C is an unfortunate Polish careworker, killed on her way home from work.
Although the facts of this case are more fully described in Lord Phillips judgment, the appeal to my mind must necessarily be decided by reference to the bare scenario already outlined, not the many surrounding details that can all too easily obscure rather than clarify the real issue arising.
And to my mind the all important consideration here is that both A and B were intentionally engaged in a potentially lethal unlawful gunfight (a shoot out as it has also been described) in the course of which an innocent passerby was killed.
The general public would in my opinion be astonished and appalled if in those circumstances the law attached liability for the death only to the gunman who actually fired the fatal shot (which, indeed, it would not always be possible to determine).
Is he alone to be regarded as guilty of the victims murder? Is the other gunman really to be regarded as blameless and exonerated from all criminal liability for that killing? Does the decision of the Court of Appeal here, allowing As appeal against his conviction for murder, really represent the law of the land?
To my mind the answer to these questions is a plain no.
Realistically this case is indistinguishable from the succession of authorities establishing criminal liability on the part of anyone who willingly involves himself in the use of unlawful violence between protagonists intent on killing or seriously injuring each other, be they duellers, prize fighters or sado masochists see respectively R v Young & Webber (1838) 8 C & P 644, R v Coney (1882) 8 QBD 534 and R v Brown (Anthony) [1994] 1 AC 212.
It is the very purpose of those engaging in these various activities that injuries will occur.
The suggestion that certain of the perpetrators of such consensual violence, merely because they are also its prospective victims, cannot be liable for it, whether as principals or accessories by virtue of the decision in R v Tyrrell [1894] 1 QB 710 (discussed by Lord Phillips and Lord Judge at para 18 of their judgment), cannot be right.
The principle underlying criminal liability for duelling, prize fighting and so forth is not to be understood simply as the protection of those most directly at risk of the injuries intended.
Rather it is the protection of society generally from the damaging consequences of such injuries and the discouragement of violent conduct as a whole.
Another powerful illustration of the principle (discussed by Lord Phillips and Lord Judge at para 52) is the law with regard to suicide (modified although that now is).
Such being the rationale for criminal liability in this line of cases, how could the principle not encompass also the present case? Insofar as there are factual differences between this case and an old fashioned duel most notably the absence here of the civilities and formalities characterising a duel and the spur of the moment nature (if such it was) of the decision here to engage in a gunfight (ie to shoot and, inevitably, be shot at) none of these suggest any lesser criminality for whatever injuries may result than in the case of a duel itself.
Quite the contrary, indeed.
The public interest in criminalising the violence engaged in is yet more obvious: here there were others about so that the risk of harm was by no means confined merely to the protagonists themselves.
For my part I am not disposed to analyse As liability for Cs murder here in accessory terms as the aider or abetter, counsellor or procurer of Bs attempt to kill him (A himself) whose liability for Cs death thus arises, Tyrrell constituting no obstacle, under the doctrine of transferred malice.
Rather it seems to me that A is liable for Cs murder as a principal a direct participant engaged by agreement in unlawful violence (like a duel, a prize fight or sado masochism) specifically designed to cause and in fact causing death or serious injury.
But whichever analysis is adopted, As liability for Cs murder seems to me clear and I would regard our criminal law as seriously defective were it otherwise.
Does it follow that criminal responsibility for death would attach as widely as was envisaged by the Court of Appeal in this case, and which so plainly concerned them as a matter of policy (see paras 74 and 75 of the judgment below, cited in full by Lord Phillips and Lord Judge at para 28 of their judgment)? In my judgment not. In the scenario there described it could not be said, as here clearly it can, that the very purpose of such a fight is that death or serious injury shall result.
For these reasons I too would answer the certified question in the affirmative, allow this appeal and restore the respondents conviction for murder.
LORD CLARKE
Lord Phillips and Lord Judge have set out the facts in some detail.
I shall not therefore repeat them.
Lord Brown says at para 68 that the all important consideration here is that both the respondent and Bandana Man were intentionally engaged in a potentially lethal unlawful gunfight or shoot out, in which each intended to kill or seriously injure the other.
I agree that there was evidence upon which the jury could so conclude.
It is not in dispute that if they had agreed to fight a duel with guns and either had inadvertently shot and killed a passer by in the course of the duel they would both be guilty of murder.
It follows, as I see it, in agreement with Lord Phillips, Lord Judge and Lord Brown, that if the respondent and Bandana Man agreed to the shoot out, they were both guilty of murder, even though the victim was killed by a shot fired by Bandana Man and not by the respondent and even though Bandana Man intended to kill or seriously injure the respondent who was the other party to the agreement.
In so far as the trial judge, Cooke J, reached a different conclusion, I respectfully disagree.
As I see it, this analysis does not depend upon a conclusion that the respondent was aiding, abetting, counselling or procuring Bandana Man but simply on the proposition that the victim was shot and killed in the course of the respondent carrying out the agreement between the two men as principals to shoot and be shot at, just as in a duel.
In a passage quoted by Lord Phillips and Lord Judge at para 21 the trial judge, Cooke J, rejected the submission that the respondent actively encouraged Bandana Man to shoot at him.
He concluded that, by shooting at Bandana Man, the respondent might have provoked further firing but he did not encourage it.
I agree that there is a distinction in principle between provoking a person to do something and encouraging or aiding and abetting him to do it.
The question is whether the judge directed the jury correctly.
That depends upon the language he used.
The relevant passage is quoted by Lord Phillips and Lord Judge at para 23.
The whole passage is important but the critical parts seem to me to be these: Where a criminal offence is committed by two or more people, each of them may play a different part in that offence, but if they are in it together as part of a joint plan or joint agreement to commit it, each is guilty of the planned offence.
The words plan or agreement that I have just used do not mean that there has to be any formality about it.
An agreement to commit an offence may arise on the spur of the moment.
Nothing needs to be said at all.
It can be made with a nod or a wink or just a knowing look or by taking the first step in committing an offence in which the other person then joins, so that it can be inferred from their behaviour.
Now here it is said by the prosecution that Bandana Man and the defendant planned to use unlawful violence towards another by having a shoot out, whether that plan was made beforehand and the meeting was pre arranged or was made on the spur of the moment when they saw each other and fired at each other from the steps and the car respectively.
If you are sure that Bandana Man and the defendant joined together to commit such unlawful violence by having a gunfight, whether pre planned or whether on the spur of the moment on the top of the steps and the side of the car, and that this joint enterprise came into being before Magda was killed by a shot from Bandana Man, then the defendant would be guilty of murder also, along with Bandana Man, provided the other requirements are satisfied.
So if you are sure that Bandana Man and the defendant were in a joint enterprise to cause an affray, to use unlawful violence against each other by having a gunfight and by firing at each other, whether this joint enterprise was the result of a pre planned meeting or arose on the spur of the moment when they saw each other, and that in the course of that joint enterprise fight, Magda was murdered by Bandana Man on the basis of transferred malice, as I have explained it to you, and that the defendant realised and the prosecution say that he must have realised that in the course of their joint enterprise gunfight, Bandana Man might kill with the requisite intention for murder, then the defendant would also be guilty of murder.
As Lord Phillips and Lord Judge have explained, the judge had ruled that it was open to the jury to find that the respondent and Bandana Man were engaged on a joint enterprise to commit an affray and that, if the jury found that the respondent foresaw that Bandana Man might shoot and kill an innocent passer by this would found a verdict of murder on the part of the respondent.
I agree with Lord Phillips and Lord Judge (at para 42) that no issue of what they call parasitic accessory liability could arise here because it cannot be said that the two protagonists had a joint intention to commit violence of a type that fell short of the violence committed.
Either they had no common intention, or the common intention was to have a shoot out, which involved each necessarily accepting that the other would shoot at him with the intention to kill or cause serious injury.
It was thus open to the jury to find that there was an agreement to that effect which may have been made on the spur of the moment but was in any event made before Bandana Man shot and killed the victim, Miss Pniewska.
My only concern has been whether, in the light of the judges ruling, he intended to direct the jury that they could convict if the common intention fell short of an intention to shoot and be shot at.
However, I agree with the conclusion of Lord Phillips and Lord Judge at para 57 that it is not realistic to think that the jury could have found such a common intention and with their conclusion at para 58 that the direction the judge in fact gave was an unequivocal direction that the jury could only convict if they were sure that the protagonists had formed a mutual plan or agreement to have a gun fight in which each would attempt to kill or seriously injure the other.
It follows that I would not accept the conclusions of the Court of Appeal to the contrary.
At paras 55 to 60 Lord Phillips and Lord Judge return to the relevance of aiding and abetting.
For the reasons I have given, I do not think that this is a case of aiding and abetting.
It is a case of an agreement to shoot and be shot at just like the agreement between the principal protagonists to a duel.
It does not seem to me that any assistance is to be gained by a consideration of the position of the seconds at a duel or of those present at a duel or a prize fight.
In reaching these conclusions, I entirely agree with Lord Browns conclusions at paras 69 to 71.
Like him, I am not disposed to analyse the respondents liability for murder in accessory terms but as a principal to a joint enterprise (that is an agreement) to engage in unlawful violence specifically designed to cause death or serious injury, where death occurs as a result.
I would be inclined to describe this as a form of principal and not secondary liability, but if it is a form of secondary liability, so be it.
I also agree with Lord Brown that such a conclusion is consistent with public policy and, for the reasons he gives at para 72, does not extend criminal responsibility for death as widely as the Court of Appeal envisaged at paras 74 and 75 of their judgment.
For these reasons, I too would allow the appeal and restore the respondents conviction for murder.
By way of postscript I would like to mention another possible basis of liability for murder which was touched upon in argument.
It arises out of a consideration of the decision of the Court of Appeal in R v Pagett (1983) 76 Cr App Rep 279 to which Lord Judge drew attention in the course of the argument.
It appears to me to be at least arguable that it was or would have been open to the jury to conclude that one of the effective causes of the death of the victim was the respondent shooting at Bandana Man.
This is on the basis that it provoked (or caused) Bandana Man to shoot back with intent to kill or cause serious harm to the respondent as a result of which the victim was shot and killed.
This analysis does not depend upon the respondent and Bandana Man being parties to a joint enterprise.
The argument to the contrary would be that the sole cause of the death of the victim was that she was shot by Bandana Man and that the fact that he may have been returning fire directed at him by the respondent is irrelevant.
The argument would be that, even if Bandana Man would not have shot and killed the victim if he had not been shot at by the respondent, the deliberate and criminal act of Bandana Man in shooting back and killing the victim was a novus actus interveniens which broke the chain of causation between the shots fired by the respondent and the death of the victim.
In Pagett the appellant shot at police officers who were attempting to arrest him for various serious offences.
The appellant had with him a 16 year old girl who was pregnant by him.
Against her will he used her body to shield him from any retaliation by the officers.
The officers returned his fire and as a result the girl was killed.
The appellant was charged with her murder.
The trial judge left both murder and manslaughter to the jury.
The appellant was acquitted of murder but convicted of manslaughter.
In the Court of Appeal, which comprised Robert Goff LJ and Cantley and Farquarson JJ, the appellant challenged the judges directions on causation.
The judgment of the court was given by Robert Goff LJ.
It was held that it was for the judge to direct the jury as to the relevant principles relating to causation and then leave it to the jury to decide whether or not, in the light of those principles, the relevant causal link had been established.
In the rare case in which it was necessary to direct the jurys minds to the question of causation, it was usually enough to direct them simply that in law the accuseds act need not be the sole cause, or even the main cause, of the victims death, it being enough that the act contributed significantly to that result.
However, Robert Goff LJ said this at p 288: Occasionally a specific issue of causation may arise.
One such case is where, although an act of the accused constitutes a causa sine qua non of (or necessary condition for) the death of the victim, nevertheless the intervention of a third person may be regarded as the sole cause of the victim's death, thereby relieving the accused of criminal responsibility.
Such intervention, if it has such an effect, has often been described by lawyers as a novus actus interveniens.
We are aware that this time honoured Latin term has been the subject of criticism.
We are also aware that attempts have been made to translate it into English; though no simple translation has proved satisfactory, really because the Latin term has become a term of art which conveys to lawyers the crucial feature that there has not merely been an intervening act of another person, but that that act was so independent of the act of the accused that it should be regarded in law as the cause of the victim's death, to the exclusion of the act of the accused.
At the risk of scholarly criticism, we shall for the purposes of this judgment continue to use the Latin term.
The decision in Pagett is however instructive: see pp 291 292.
The judge directed the jury that, in order to convict the appellant, it was necessary that they should find both that he fired at the police officers and thereby caused them to fire back and that he used the girl as a shield by force and against her will.
The court held that that direction was generous to the appellant because either of those acts would have constituted the actus reus, whether of murder or manslaughter causing the victims death.
So, as Robert Goff LJ put it at p 291, if the jury were sure that, if the victim was killed by a shot fired from the gun of a police officer who, acting in reasonable self defence, fired his gun in response to a lethal attack by the appellant, it would be open to them to convict him of murder or manslaughter as the case may be.
This case is not on all fours with Pagett because Bandana Man was not acting in reasonable self defence.
However, once the respondent became aware that Bandana Man had a gun and was willing to use it, even assuming that there was no joint enterprise, it was undoubtedly foreseeable that, if the respondent continued shooting at Bandana Man, he would shoot back with intent to kill him or cause serious harm.
Indeed, the jurys verdict shows that the respondent foresaw precisely that.
In these circumstances, it was open to the jury to conclude that the respondents firing at Bandana Man was a cause of the latter shooting back.
It was the very thing that might have been expected.
There are of course many cases in the books which consider the correct approach to the suggestion that there has been a novus actus interveniens.
Many of them are claims in tort but the principles seem to me to be much the same.
I refer only to the well known judgment of Lord Wright in the Court of Appeal in The Oropesa [1943] P 32.
After noting at p 37 that human action does not itself sever the chain of causation and referring to a number of the cases, Lord Wright said at p 39: To break the chain of causation it must be shown that there is something which I will call ultroneous, something unwarrantable, a new cause which disturbs the sequence of events, something which can be described as either unreasonable or extraneous or extrinsic.
I doubt whether the law can be stated more precisely than that.
To my mind, the decision by Bandana Man to shoot at the respondent was not extraneous or ultroneous but the very thing that the respondent must have expected.
The mere fact that the immediate cause of the death was a criminal and deliberate act on the part of Bandana Man does not as a matter of law break the chain of causation: see eg, in the context of tort, Gray v Thames Trains Ltd [2009] EWHL 33, [2009] 1 AC 1339 per Lord Hoffmann at paras 27 29 and Corr v IBC Vehicles Ltd [2008] UKHL 13, [2008] AC 884.
All depends upon the circumstances of the particular case.
In these circumstances, as I see it, the case could have been left to the jury on the basis that it was open to them to hold that the respondent was guilty of murder if they were sure that his act in shooting at Bandana Man was a cause of Bandana Man shooting at him with intent to kill him or cause him serious harm and the victim was killed as a result.
It seems to me to be very likely that the jury would have concluded, as Robert Goff LJ put it, that the respondents act in shooting at Bandana Man contributed significantly to Bandana Man shooting at him with intent to kill or seriously injure him and thus to his killing the victim.
However, since the case was not put to the jury on this basis, I would not allow this appeal on the basis of causation but on the basis discussed in paras 74 to 82 above.
LORD DYSON
The facts have been fully set out by Lord Phillips and Lord Judge.
Several possible bases for upholding the respondents conviction call for consideration.
The first is the basis on which the case was left by the judge to the jury and on which they convicted.
This is that the respondent and Bandana Man participated in the commission of an affray and that in the course of it Bandana Man committed an offence (murder) which the respondent had foreseen he might commit.
Like Lord Phillips and Lord Judge, I shall adopt Sir John Smiths phrase of parasitic accessory liability for this.
The second is that the respondent aided and abetted Bandana Man to shoot at him (by encouraging him to do so).
This is a basis on which Lord Phillips and Lord Judge would uphold the conviction, although in his ruling the judge said that his view of the facts was that the respondent did not encourage Bandana Man to shoot at him and that accordingly he would not leave the issue of aiding and abetting to the jury.
The third basis is that the respondent and Bandana Man were liable as joint principals for the murder.
This is the basis on which Lord Brown and Lord Clarke would uphold the conviction.
Lord Clarke has suggested a fourth possible route, namely that the respondent caused Bandana Man to shoot at him and therefore to kill Magda Pniewska.
Parasitic accessory liability
The ingredients for parasitic accessory liability are that two parties participate in the commission of crime A and, in the course of committing it, D1 commits crime B which D2 foresees that he might commit.
The Court of Appeal rejected this as a basis for upholding the conviction in the present case on the grounds that it was necessary to show that the respondent and Bandana Man agreed to commit the affray and shared a common purpose in committing it (para 51).
They said (para 59) that it was not realistic to say that they acted in concert to cause fear; they acted independently and antagonistically in a manner which did so.
Absent a shared purpose to shoot and be shot at, the submission made by the appellant was correct that there was no room on the facts for any other common purpose.
The jury was never asked to confront the question whether the shared purpose was not only to shoot, but to be shot at.
I agree with the comments by Professor Ormerod in R v Gnango [2011] Crim LR 151 and by Professor Virgo in The doctrine of joint enterprise liability Archbold Review, Issue 10, 14 December 2010 that, in order to establish parasitic accessory liability, there was no need for the prosecution to prove that there was a common purpose that each man intended to shoot and to be shot at.
It was sufficient to establish a common purpose to commit an affray.
Consequently, a common purpose to fight or threaten a fight in a public place would be a sufficient common purpose to engage the parasitic accessory liability principle.
But at paras 42 and 43, Lord Phillips and Lord Judge have identified a different flaw in the parasitic accessory liability argument.
They say that there is no room for the application of this principle in the present case, because on the facts of this case it is artificial to treat the intention to have an affray as separate from the intention to have a potentially homicidal shooting match.
I agree.
There is no reason in general why the parasitic accessory liability principle cannot be applied where crime A is affray and crime B is murder.
All that is required is proof of (i) a common purpose to commit an affray which is shared by D1 and D2 in the sense that they have agreed to commit the offence and (ii) a murder committed by D1 in the course of the affray the commission of which is foreseen as a possibility by D2.
Suppose, for example, that a group of youths is involved in a fist fight in a public place and they are all aware that one member of the group is armed with a knife.
Let us further suppose that they are all guilty of causing an affray and that the youth who has the knife uses it with the intention to kill or cause really serious harm to kill another member of the group.
All the members of the group who foresee that he might use the knife to commit a murder would also be liable for the murder.
The fact that they were also guilty of an affray would be no bar to their liability for murder.
On the facts of this case, however, the Crown chose to put their case on the basis that the affray was the use of unlawful violence in a public place by having a gun fight and by firing at each other (summing up p 15 16).
I agree with Lord Phillips and Lord Judge that the way that the Crown chose to put its case left no room for the application of the parasitic accessory liability principle here.
Aiding and abetting
The Crown sought to persuade the judge to leave the case to the jury on the alternative basis that, by shooting at Bandana Man, the respondent encouraged him to shoot back at him and fire the fatal shot; and that he was guilty of the murder of Ms Pniewska as an accessory and by application of the transferred malice principle.
The judges view of the facts was that this was not a route open to the jury to finding the respondent guilty of murder.
As he said in his ruling, in reality on the evidence, [the respondent] fired at Bandana Man in the hope of killing him or causing him grievous bodily harm, frightening him, or arguably, in self defence.
He cannot be said to have encouraged the other to fire back, whatever the order of shots as the jury might ultimately find them to be.
He might have provoked further firing, but he did not encourage it.
Despite the judges declared intention (as expressed in his ruling) not to leave aiding and abetting to the jury, Lord Phillips and Lord Judge say that a basis on which the jurys verdict can be upheld is that they must have found that the respondent aided and abetted Bandana Man to shoot at him with intent to kill or cause really serious harm.
At para 59 they draw an analogy with a duel and a prize fight.
If the jurys view of the facts was that this case was indeed analogous to a duel (ie that the respondent and Bandana Man had a common purpose to shoot and be shot at), then I agree with the reasoning of Lord Phillips and Lord Judge.
It is important to distinguish between a combat which is analogous to a duel and a mere fight.
An essential element of the former is an agreement by the combatants to fight each other.
They encourage each other to fight.
The judge was right to distinguish between encouragement and provocation.
If A shoots back at B because he has been provoked by Bs shooting to do so, that is very different from saying that A shoots back at B because he has been encouraged to do so pursuant to an agreement to have a shoot out.
The question is whether the jury must have decided that the respondent and Bandana Man had a common purpose to shoot and be shot at and that by their words and/or conduct they encouraged each other to that end.
The Court of Appeals view of the facts was that the respondent and Bandana man had no such common purpose: in other words, that this was not analogous to a duel.
That was also the view of the judge as expressed in his ruling.
But what matters, of course, is what the jury decided.
That can only be determined by a consideration of their verdict in the light of the summing up, which must be interpreted in a sensible way and without regard to any ruling that preceded it (of which the jury would have been ignorant).
What counts is what the judge said in his summing up, and not what he intended to say or what he intended the words that he used to mean.
But where it is suggested that a summing up bears a meaning which differs from what the judge intended, it must be scrutinised with particular care.
In his summing up, the judge did not direct the jury on aiding and abetting.
He did not ask them in terms to consider whether, by shooting back, the respondent encouraged Bandana Man in turn to shoot back at him with intent to do so.
In view of his ruling, these omissions on the part of the judge were not by an oversight: they were quite deliberate.
But the question is whether, although the issue of aiding and abetting by encouragement was not before the jury in terms, they showed by their verdict on the issue that was before them (parasitic accessory liability) that they were sure that the respondent and Bandana Man had a common purpose to shoot and be shot at and encouraged each other to give effect to that purpose.
This question has caused me considerable anxiety, not least because (i) this was a murder charge, (ii) a finding of aiding and abetting by encouragement did not accord with this careful judges assessment of the facts and (iii) he did not direct the jury explicitly on the aiding and abetting issue.
But I have been persuaded by the reasoning of Lord Phillips and Lord Judge that the jury must nevertheless have been satisfied that there was an agreement between the respondent and Bandana Man to shoot and be shot at and that they encouraged each other to carry that agreement into effect.
The jury were directed that they had to be sure that the respondent and Bandana Man planned to use unlawful violence towards each other by having a shootout whether that plan was made beforehand and the meeting was pre arranged or was made on the spur of the moment when they saw each other and fired at each other from the steps and the car respectively.
The judge gave the standard direction for joint enterprise (in the context of parasitic accessory liability) that the offence (in this case affray by gunfight) had to be the joint commission of an offence by two or more people who are in it together as part of a joint plan.
In my view, a shootout pursuant to a plan must mean an exchange of fire pursuant to an agreement to shoot and be shot at; and persons who agree to shoot at each other must by virtue of their agreement intend to encourage each other to do so.
It differs from a simple exchange of fire.
Nor is it relevant that each of the participants hopes that his shot will prove fatal and that there will be no return of fire.
The fact that the jury convicted the respondent of the murder of Ms Pniewska following the judges directions must mean that, if they had been asked in terms whether the respondent and Bandana Man (i) agreed to shoot and be shot at and (ii) thereby encouraged each other to that end (intending to do so), they would have answered both questions in the affirmative.
In other words, the jury showed by their verdict that they considered that this was analogous to a duel.
I would, therefore, uphold the conviction on the basis that the jury must have been satisfied that the respondent aided and abetted the murder of Ms Pniewska by encouraging Bandana Man to shoot at him in the course of the planned shootout.
Liability as a joint principal
This is the route favoured by Lord Brown and Lord Clarke and accepted as an alternative by Lord Phillips and Lord Judge.
They say that the respondent is liable by reason of his participation by agreement in unlawful violence specifically designed to cause and causing death or serious injury.
For the reasons that I have given, I am persuaded that the jury must have been sure that Bandana Man and the respondent exchanged fire pursuant to an agreement to have a shoot out, ie an agreement to shoot and be shot at.
That is why in my view Lord Phillips and Lord Judge are right to say that in this case the difference between holding the respondent liable as a principal to an agreed joint activity rather than as an accessory is not a difference of substance.
Either way, the Crown had to prove that the respondent and Bandana Man agreed to shoot and be shot at with the necessary intent.
It follows that, for the reasons I have given, the jury must have been sure that the respondent participated with Bandana Man in an agreed shoot out or agreement to shoot and be shot at with the necessary intent.
Accordingly, if the jury had been asked whether the respondent was guilty of the murder of Ms Pniewska on the basis that he had acted in concert with Bandana Man in shooting at each other pursuant to an agreement to shoot and be shot at, in my view, in the light of the terms of the summing up, they would have answered that question in the affirmative.
I would, therefore, uphold the conviction on this basis too.
Causation
Lord Clarke has suggested, as an alternative, that the respondent caused Bandana Man to shoot back at him and thereby contributed to the death.
This way of putting the case was not left to the jury and causation was a matter for the jury to determine.
Furthermore, we heard very little argument on this point.
It seems to me that, if Bandana Mans act of shooting at the respondent was a free, deliberate and informed act, it broke the chain of causation between the respondents shooting at him and his shooting and killing Ms Pniewska: see R v Kennedy (No 2) [2007] UKHL 38; [2008] AC 269.
As Professor Ormerod points out in his article (loc cit), it might be argued that Bandana Mans act of shooting was not a free, deliberate and informed act because he was acting in self defence.
But that seems very difficult on the facts of this case.
It might also be argued that, even if Bandana Man was acting in a free, deliberate and informed manner, that is irrelevant if he and the respondent were acting in concert: see R v Latif [1996] 1 WLR 104, 115.
None of these issues was explored by the jury.
I agree with Lord Clarke that we cannot uphold the conviction on the basis that the respondent caused Bandana Man to fire the fatal shot.
Conclusion
I would, therefore, allow the appeal and restore the conviction.
In doing so, I wish to emphasise that the judge is not to be criticised for directing the jury in the way that he did.
This was a very difficult case.
I would add that, although I have disagreed with the analysis of the Court of Appeal, it contains a most useful discussion of some of the complex issues that arise in this area of the law.
LORD KERR
The respondent to this appeal, Armel Gnango, was convicted of the murder on Tuesday, 2 October 2007, of a 26 year old Polish care worker, Magda Pniewska.
She had been walking home from her place of employment when she was killed by a single shot to the head.
She was an entirely innocent young woman.
Her death is an appalling tragedy.
The shot which killed Ms Pniewska was fired by a person known throughout the proceedings by the somewhat unfortunate soubriquet of Bandana man.
I shall refer to him as B. He and Gnango had exchanged fire and it was in the course of this that Ms Pniewska was shot.
In their judgment, Lord Phillips and Lord Judge have outlined all the relevant facts and I need not dilate further on them.
The Court of Appeal quashed the murder conviction.
It certified a point of law of public general importance.
Its terms have been set out by Lord Phillips and Lord Judge in para 1 of their judgment and it is unnecessary to repeat them.
Various bases on which Gnango might or should be found guilty of the murder of Ms Pniewska have been canvassed in the course of argument and in the judgments of the other members of the court.
I have had the great advantage of reading these judgments in draft form.
Joint affray
In paras 32 35 of their judgment, Lord Phillips and Lord Judge have traced the evolution of the statutory offence of affray from its common law origins.
As he has pointed out, the Law Commission had recommended that the common law offence of affray should be preserved in an enactment and had suggested that it should be defined as the use or threat of unlawful violence by two or more persons against each other or by the use or threat of such violence by one or more persons against another.
Although the government expressed satisfaction with this definition, there was a significant omission in the final form of the provision that appeared in the legislation from that proposed by the Law Commission.
It contained no reference to the use or threat of violence by two persons against each other.
Instead, section 3(1) dealt only with the basis of a single individuals guilt.
A person was to be guilty if he used or threatened unlawful violence towards another.
Lord Phillips and Lord Judge consider that the use of the words unlawful violence in subsection (2) of section 3, if given their natural meaning, would lead to the conclusion that two defendants could only be jointly liable of affray if they join in using violence against another.
But it seems to me that this conclusion is the consequence not so much of the use of the words unlawful violence in subsection (2) as the unavoidable result of the requirement in subsection (1) that, for a person to be guilty of affray, he must have offered violence to another.
Therefore, I have difficulty with Lord Phillips and Lord Judges conclusion that the joint offence of affray can be founded on the common product of individual conduct, if this is to be applied to the use of violence by two persons against each other.
Using or threatening violence towards another must mean that in the case of a joint offence of affray the violence of those guilty of it is directed towards another person or other persons, not against each other.
This may produce an anomalous result, as Lord Phillips and Lord Judge have suggested, but it seems to me to be the inescapable conclusion that section 3(1) impels.
For a joint offence of affray to occur, the person represented by the word another in s 3(1) of the 1986 Act must be someone other than the person offering the violence.
It may be correct, as Lord Phillips and Lord Judge have stated (in para 38), that there does not need to be a common intention for a joint offence of affray but the activity comprising the actus reus of the offence, to be capable of giving rise to joint liability, must be directed towards the same target.
This is the unavoidable consequence of the stipulation that the violence must be used or threatened to another.
On this analysis, Gnango and B committed separate offences of affray.
A joint affray is not, in my opinion, available as a source of liability for Gnango.
In any event for parasitic accessory liability to arise, Gnango and B would have to have a common intention to commit an affray, if affray is the crime on which Gnango and B are to be said to have jointly embarked.
Whether or not a common intention is required for a joint offence of affray, it is most certainly required for parasitic accessory liability.
Even if it were possible, therefore, for them to be convicted of joint affray without a common intention to commit that offence, for the offence to provide the basis of parasitic accessory liability, it would have to be proved that they had a shared intention.
As Lord Phillips and Lord Judge stated in para 38, the Court of Appeal was right to hold that this form of liability depends on the existence of a common unlawful enterprise or purpose.
Although I disagree with Lord Phillips and Lord Judge that there can be a joint affray based on violence offered by two protagonists to each other, I do agree with him that participation in a joint affray cannot automatically constitute a foundation for parasitic accessory liability.
The essence of parasitic accessory liability is that there is a common purpose and in the course of furthering that common purpose, the principal goes beyond what was agreed but the secondary participant foresaw the possibility of this occurring.
The sine qua non of parasitic accessory liability, therefore, is the existence of an common purpose.
Aiding and abetting
Lord Phillips, Lord Judge and Lord Dyson have concluded that, although it was not left to the jury by the trial judge, the effect of their verdict is that Gnango was guilty because he aided and abetted B to fire at him.
This was on the basis that both shared a common intention to shoot at one another.
In particular, each intended to shoot at the other and to be shot at by him.
The Court of Appeal concluded that the jury was never asked to confront the question whether the shared common purpose was not only to shoot, but to be shot at (para 59 of the Court of Appeals judgment).
This is unquestionably correct.
The jury was not invited at any time during the judges carefully composed charge to address the question whether the shared intention included what seems to be the supremely important element of the avowed aiding and abetting of this offence the agreement to be shot at.
The judge had refused to allow aiding and abetting to go to the jury because he considered that it could not reasonably be concluded that Gnango had encouraged B to fire at him.
The mens rea of aiding and abetting is an intention by ones act to assist the principal in the commission of his offence.
Thus at para 18 18 of Archbold 2011 edition: To establish aiding and abetting on the basis of encouragement, it must be proved that the defendant intended to encourage and wilfully did encourage the crime committed.
Mere continued voluntary presence at the scene of a crime, even though it was not accidental, does not of itself necessarily amount to encouragement; but the fact that a person was voluntarily and purposely present witnessing the commission of a crime and offered no opposition, though he might reasonably be expected to prevent it and had the power to do so, or at least express his dissent, might in some circumstances afford cogent evidence upon which a jury would be justified in finding that he wilfully encouraged and so aided and abetted, but it would be purely a question of fact for the jury whether he did so or not: R v Clarkson, 55 Cr App R 445, Ct MAC.
Since mere presence at the scene of a crime can in certain circumstances be enough to justify a finding of guilt, it is perhaps difficult to see why Gnangos remaining at the scene and firing the gun at B could not amount, in law, to encouragement.
It seems likely, however, that the judge considered that the notion of someone encouraging another to fire at him was so at odds with common experience as to be unbefitting of the jurys consideration as a possible basis of liability for in his ruling he observed: it cannot be said, in my judgment, that the defendant actively encouraged [B] to shoot at him, and even if he did, it would be a real oddity for a victim of an attempted murder to be a secondary party to that attempt.
Be that as it may, the above passage from Archbold makes clear that, to be satisfied that Gnango intended to assist or encourage B to shoot at him, the jury would have to address directly not only the question whether his actions did encourage B to do so, but also whether he intended that B should do so see also Archbold at 17 67, what needs to be proved is an intention to render assistance to another.
If the jury was not invited to consider whether Gnango had that intention, the conclusion that their verdict admits of no view other than that Gnango intended to assist B in firing at him is somewhat startling and one which could only be reached after very careful examination of possible alternative explanations for the verdict.
The judge told the jury that the prosecution case was that there was a plan on the part of Gnango and B to have what he described as a shoot out: Now here it is said by the prosecution that Bandana Man and the defendant planned to use unlawful violence towards [one] another by having a shoot out, whether that plan was made beforehand and the meeting was pre arranged or was made on the spur of the moment when they saw each other and fired at each other from the steps and the car respectively.
A little later in his charge he gave this critical direction: If you are sure that Bandana Man and the defendant joined together to commit such unlawful violence by having a gunfight, whether pre planned or whether on the spur of the moment on the top of the steps and the side of the car, and that this joint enterprise came into being before Magda was killed by a shot from Bandana Man, then the defendant would be guilty of murder also, along with Bandana Man.
At para 58 Lord Phillips and Lord Judge have said that this amounted to an unequivocal direction that the jury could only convict if they were satisfied that Gnango and B had planned to have a gun fight in which each would attempt to kill or seriously injure the other.
He suggests that if the jury was satisfied of this, it meant in law that both were party not merely to his own attempt to kill or seriously injure the other but to the others attempt to kill or seriously injure him.
Lord Dyson expressed essentially the same view at para 101 where he said: In my view, a shootout pursuant to a plan must mean an exchange of fire pursuant to an agreement to shoot and be shot at; and persons who agree to shoot at each other must by virtue of their agreement intend to encourage each other to do so.
The terms of any plan are critical to any conclusion that the parties to it must be taken to have encouraged each other to shoot.
But an anterior question must be addressed.
Can it be said that solely because there was an exchange of fire, this must be on foot of a plan? Agreement to shoot it out with an opponent, if reached in advance, would be such a plan although there is no evidence that this is what happened here.
But where there has been what has been described as a spontaneous agreement to engage in a shoot out, the question arises whether this can truly be said to be the product of an agreement in any real sense.
Is it not at least as likely to be the result of a sudden, simultaneously reached, coincident intention by the two protagonists to fire at each other? I do not consider that because there was a shoot out (whatever that term may mean) and because the jury were asked to consider that Gnango and B joined together to commit unlawful violence, by returning a verdict of guilty, the jury must be taken to have concluded that there was a plan in the sense of an agreement between them.
But even if the jurys verdict can be taken as evidence of their conclusion that there had been a plan or agreement between Gnango and B, does it follow that an element of that plan must be that they agreed to be shot at, as well as to shoot? Agreeing to a shoot out does not necessarily mean agreeing to be shot at.
This is particularly so where the plan takes the form of (and here it could only take the form of) an instantaneous meeting of minds between Gnango and B on their first catching sight of each other on the occasion of the gunfight.
That type of situation is quite different from a duel where participants meet at a pre arranged place and an appointed time.
The essence of a duel conducted with firearms is that there should be an exchange of fire.
The parties to the duel anticipate and may be said to impliedly consent to being fired on as well as firing.
But there is no basis on which to infer that such was the intention of the two protagonists here, much less to conclude that the jurys verdict can only be consistent with such implicit intention on the part of Gnango and B. It is at least just as likely that neither agreed to be fired on and that both hoped that they would avoid that unpleasant eventuality by hitting the target with their own shot.
Put shortly, when the only material that the jury had to go on was that there was a shoot out, it is, in my view, impossible to conclude that the finding of guilt can only be explained on the basis that it had been proved that there was a plan between Gnango and B to shoot and be shot at.
Even if it were possible so to conclude, however, it does not follow that this amounted to an intention on the part of Gnango or B to assist or encourage each other to shoot.
One might be alive to the very real risk that firing, if the target was not hit, would prompt return fire, but that is a significantly different thing from saying that this was encouragement to fire back.
Being prepared to run the risk does not equate with encouraging an opponent to fire at you.
Before, therefore, one could be confident that the jurys verdict meant that they had found it established that Gnango had intended to encourage B to fire, it would have been necessary for them to receive directions about that vital component of aiding and abetting.
As the judge said, when ruling that he would not allow this to go to the jury as a possible basis of liability, on the evidence, the defendant fired at Bandana Man in the hope of killing him or causing him grievous bodily harm, frightening him, or arguably, in self defence.
Being shot at was hardly likely to have been a desired outcome on the part of Gnango.
Intending to encourage B to fire at him was even less likely.
This point was made by Graham Virgo in an article, The Doctrine of Joint Enterprise Liability, on the Court of Appeals decision in this case which appeared in Archbold Review 2010 Issue 10, p 6: if the appellant had, by his act of shooting at the opponent, encouraged him to shoot back, if the appellant had foreseen that the opponent might shoot with the intention for murder and then the opponent's shot had accidentally hit and killed a third party, the appellant could be guilty of murder as an accessory by virtue of the transferred malice doctrine The only difficulty with this analysis relates to whether the appellant's shooting at the opponent could have been regarded as a positive encouragement to shoot back.
Did the appellant want the opponent to shoot back at him or did he only want to kill or seriously injure the opponent? This is why the Court of Appeal's analysis of an intent to shoot and be shot at was relevant, but it was relevant to accessorial liability and not to the identification of a common purpose.
On the facts it would have been difficult to establish such encouragement of the opponent to shoot back, but it is conceivable that such encouragement could be identified if the appellant intended some kind of duel.
It is, of course, true that, in considering whether there was an intention to encourage, intent must be clearly distinguished from desire or motive.
In a trilogy of cases, R v Moloney [1985] AC 905; R v Hancock [1986] AC 455; and R v Woollin [1999] 1 AC 82 the House of Lords held that intention is not restricted to consequences that are wanted or desired, but includes consequences which a defendant might not want to ensue, but which the jury find (a) are the virtually certain result of the defendants actions (barring some unforeseen intervention); and (b) are consequences which the defendant appreciated were virtually certain to occur.
Before such an oblique intention could form the basis of a jurys verdict, of course, precise directions to this effect would have to be given.
In the absence of a specific direction on Gnangos intention to encourage B to shoot at him, I do not consider that the verdict of the jury can be upheld on the basis that it was founded on their conclusion that he either had the requisite intention or that the virtually certain result of his firing at B was that he would return fire and that Gnango knew that this was virtually certain to occur.
This is particularly so because there is an obvious explanation for the jurys verdict other than that they concluded that there had been a plan which included an intention on the part of Gnango and B to encourage the other to shoot at him.
The judge had put to the jury that if they were satisfied that Gnango and B had participated by agreement in an affray, in the course of which Gnango foresaw that B might commit intentional grievous bodily harm or kill, he could be found guilty on that account.
For the reasons given by Lord Phillips, Lord Judge and Lord Dyson, with which I agree, this form of parasitic accessory liability was not a basis on which the jury could convict.
But it seems to be likely in the extreme that this is the basis on which they did convict.
That being so, there was no occasion for them to consider whether the requisite intention on the part of Gnango to found a verdict of guilty on the basis of aiding and abetting was present.
Nor can their verdict be considered to supply the necessary ingredients of liability on that basis.
Liability as a joint principal
It is important at the start of this discussion to recognise the clear distinction that must be drawn between the concepts of joint principal liability and joint enterprise.
Joint principal offending is a species of primary liability.
In Smith & Hogans Criminal Law (2011) 13th ed the following definition of joint principals is given: D1 and D2 are joint principal offenders where each does an act which is a cause of the actus reus.
Unlike the position in a joint enterprise, no common purpose is required in order to render those who cause or contribute to a cause of the actus reus guilty as joint principals.
What is required is that each must contribute by his own act to the commission of the offence with the necessary mens rea.
By contrast, the doctrine of joint enterprise arises in situations where there are two offences, the first being that which has been jointly embarked on and the second the unplanned but foreseen offence committed by one of the participants alone.
It is therefore par excellence a species of secondary liability as Hughes LJ explained in A, B, C and D (Joint Enterprise) [2010] EWCA Crim 1622; [2011] QB 841 where he said at para 37: It is necessary to remember that guilt based upon common enterprise is a form of secondary liability.
The principle is that D2 is implicated in the guilt of D1 not only for the agreed crime A but for the further crime B which he foresaw D1 might commit in the course of A.
This form of liability therefore arises only where D1 has committed the further crime B.
The two models are therefore, if not mutually exclusive, at least conceptually distinct.
To speak of joint principal offenders being involved in a joint enterprise is, at least potentially, misleading.
The essential ingredient for joint principal offending is a contribution to the cause of the actus reus.
If this is absent, the fact that there is a common purpose or a joint enterprise cannot transform the offending into joint principal liability.
The actus reus in this case was the killing of Ms Pniewska.
To be guilty of that offence as a joint principal, it would have to be shown that Gnango caused or contributed to a cause of her death.
With great respect to the views of Lord Brown and Lord Clarke, it is not sufficient that he be shown to be engaged by agreement in violence designed to cause death or serious injury.
The crucial question is whether he caused or contributed to the death of the victim.
This is not an issue which was put to the jury and a conclusion as to whether Gnangos actions caused or contributed to Ms Pniewskas death cannot be inferred from their verdict.
In any event, major difficulties of proof lie in the way of a case that Gnangos actions were an effective cause of the killing of the victim.
As a thesis it depends on the proposition that B fired the fatal shot because he was caused to do so by Gnango firing on him.
That proposition faces the immediate problem that B fired on Gnango first.
It is, one might suppose, possible to assert that, notwithstanding this, Bs continued firing at Gnango was caused by the latters return of fire.
But that claim encounters the difficulty that was identified by Lord Bingham in R v Kennedy No 2 [2008] 1 AC 269 where he said at para 14: The criminal law generally assumes the existence of free will.
The law recognises certain exceptions, in the case of the young, those who for any reason are not fully responsible for their actions, and the vulnerable, and it acknowledges situations of duress and necessity, as also of deception and mistake.
But, generally speaking, informed adults of sound mind are treated as autonomous beings able to make their own decisions how they will act Thus D is not to be treated as causing V to act in a certain way if V makes a voluntary and informed decision to act in that way rather than another.
There are many classic statements to this effect.
In his article Finis for Novus Actus? [1989] CLJ 391, 392, Professor Glanville Williams wrote: I may suggest reasons to you for doing something; I may urge you to do it, tell you it will pay you to do it, tell you it is your duty to do it.
My efforts may perhaps make it very much more likely that you will do it.
But they do not cause you to do it, in the sense in which one causes a kettle of water to boil by putting it on the stove.
Your volitional act is regarded (within the doctrine of responsibility) as setting a new chain of causation going, irrespective of what has happened before.
In chapter XII of Causation in the Law, 2nd ed (1985), p 326, Hart & Honor wrote: The free, deliberate, and informed intervention of a second person, who intends to exploit the situation created by the first, but is not acting in concert with him, is normally held to relieve the first actor of criminal responsibility.
This statement was cited by the House with approval in R v Latif [1996] 1 WLR 104, 115.
The principle is fundamental and not controversial.
If B fired at Gnango first, it seems to me highly questionable (at least) that Gnangos returning fire caused B to fire again.
The first shot surely betokened an intention on the part of B to fire at and to hit Gnango, irrespective of whether Gnango fired back.
It might be said, to borrow the words of Professor Glanville Williams, that Gnangos firing on B made it much more likely that B would fire again, but that is not enough to show that B was caused to fire because of Gnangos shot.
I do not consider, therefore, that Gnango can be guilty of the murder of Ms Pniewska as a joint principal.
Conclusion
I would dismiss the appeal.
| UK-Abs | The facts of this case were extraordinary and tragic.
On 2 October 2007, a 26 year old Polish care worker, Magda Pniewska, was walking home from a nursing home through a car park in New Cross, South London.
She was on the telephone to her sister when she was shot in the head and killed.
The shot was fired in an exchange of fire in the car park between two gunmen, B and Mr Gnango, neither of whom had been aiming at Magda.
They had been shooting at each other.
Scientific evidence showed that the single bullet to Magdas head had come from Bs and not Mr Gnangos gun.
B was clearly guilty of murder under the doctrine of transferred malice.
B however was never caught.
Mr Gnango was charged with and convicted of murder following trial aged 17.
On his appeal, the Court of Appeal overturned his conviction.
The Court held that joint enterprise liability for murder, the basis on which the Court considered his conviction to rest, could not arise on the facts.
In considering the appeal by the Crown, the Supreme Court was asked to address the following question: If D1 and D2 voluntarily engage in fighting each other, each intending to kill or cause grievous bodily harm to the other and each foreseeing that the other has the reciprocal intention, and if D1 mistakenly kills V in the course of the fight, in what circumstances, if any, is D2 guilty of the offence of murdering V?
The Supreme Court allows the appeal by a 6 1 majority (Lord Kerr dissenting) and restores Mr Gnangos conviction for murder.
Lord Phillips and Lord Judge together give the leading judgment of the Court, with which Lord Wilson agrees.
The trial judge had directed the jury that, in order to convict, they had to be satisfied that there was a plan or an agreement to have a shoot out, whether made beforehand or on the spur of the moment when Mr Gnango and B saw and fired at each other in the car park [23, 57].
This was an unequivocal direction that the jury could convict only if they were satisfied that Mr Gnango and B had formed a mutual plan or agreement to have a gunfight, i.e. to shoot at each other and be shot at, in which each would attempt to kill or seriously injure the other.
The jurys verdict indicates that they were so satisfied.
Accordingly, this is a proper basis for finding that Mr Gnango aided and abetted the murder of the deceased by aiding and abetting B to shoot at him (i.e. Mr Gnango) [55 60].
The trial judges direction had properly been given on application of the principle of transferred malice: where a defendant intends to kill or cause serious injury to one victim, V1, but accidentally kills another, V2, he will be guilty of the murder of V2 [16, 60].
The application of this principle in the circumstances accords with the demands of justice: Mr Gnango and B had chosen to indulge in a gunfight in a public place, each intending to kill or cause serious injury to the other, in circumstances
where there was a foreseeable risk that this result would be suffered by an innocent bystander.
It was a matter of fortuity which of the two fired what proved to be the fatal shot [61].
There is no applicable statutory or common law bar that precludes conviction of Mr Gnango on the basis that he aided and abetted Bs attempt to kill him (i.e. Mr Gnango) or cause him serious injury [51 52].
Further, the Court can see no reason why it should extend the common law to protect from conviction any defendant who is, or is intended to be, harmed by the crime that he commits or attempts to commit [53].
Finally, whether Mr Gnango is correctly described as a principal or an accessory to the murder of the deceased is irrelevant to his guilt [62].
This is not such a case where it is important to distinguish between the principal and the accessory: the offence is the same offence and the defendant is guilty of it [63].
Lord Brown gives a concurring judgment.
He holds that the all important consideration here is that both Mr Gnango and B were intentionally engaged in a potentially lethal unlawful gunfight.
The general public would be astonished and appalled if in those circumstances the law attached liability for the death only to the gunman who actually fired the fatal shot (which it would not always be possible to determine) [68].
Lord Brown characterises Mr Gnangos liability for murder as that not of an accessory but a principal: a direct participant engaged by agreement in unlawful violence specifically designed to cause and in fact causing death [71].
Lord Clarke gives a concurring judgment.
He agrees with Lord Brown that Mr Gnango is guilty of murder not as an accessory but as a principal to an agreement to engage in unlawful violence specifically designed to cause death or serious injury, where death occurs as a result [81].
Lord Dyson gives a concurring judgment.
He holds that the jury must have been satisfied that there was an agreement between Mr Gnango and B to shoot at each other and be shot at [103], and that Mr Gnango aided and abetted the murder of the deceased by encouraging B to shoot at him in the course of the planned shoot out [104].
Lord Kerr gives the sole dissenting judgment of the Court.
He holds that the jury was not invited at any time during the trial judges summing up to address the question of whether the shared common purpose between Mr Gnango and B included the important element of the avowed aiding and abetting: the agreement to be shot at [115].
The exchange of fire between the gunmen was at least as likely to be the result of a sudden, simultaneously reached, coincident intention by them to fire at each other as it was to be the result of an agreement to shoot and be shot at [121].
If the jury did not conclude that there was an agreement to shoot and be shot at, there is no sound basis of accessory liability on which to uphold their verdict [126].
In any event, an agreement to shoot and be shot at does not necessarily amount to an intention to assist or encourage the other to shoot.
The jury would have needed to receive specific directions which they did not about this vital component of aiding and abetting [123].
Further, Lord Kerr considers that there is no sound basis for holding that Mr Gnango is liable for murder as a principal, since he had not by his own act caused or contributed to the commission of the offence with the necessary mens rea [127, 130].
Accordingly, Lord Kerr would dismiss the appeal.
|
This judgment deals with the first, and major, limb of this appeal.
At the end I shall explain the position in relation to the second limb.
On 2 June 2006 the appellant (TNL) published an article (the Article) which defamed the respondent, (Sergeant Flood), who is a Detective Sergeant in the Extradition Unit of the Metropolitan Police Service (MPS).
The Article stated that allegations had been made against Sergeant Flood that had led Scotland Yard to investigate whether he was guilty of corruption.
The police investigation subsequently ended with a finding that there was no evidence that Sergeant Flood had acted corruptly and the trial judge, Tugendhat J accepted Sergeant Floods evidence that he was not guilty of corruption.
That finding has not been challenged.
The issue before the Court is whether TNL are protected from liability to Sergeant Flood in defamation under the doctrine known as Reynolds privilege.
Put shortly Reynolds privilege protects publication of defamatory matter to the world at large where (i) it was in the public interest that the information should be published and (ii) the publisher has acted responsibly in publishing the information, a test usually referred to as responsible journalism although Reynolds privilege is not limited to publications by the media see Reynolds v Times Newspapers Ltd [2001] 2 AC 127.
Tugendhat J held that TNL are protected by Reynolds privilege [2009] EWHC 2375 (QB) [2010] EMLR 169, but his decision was reversed by the Court of Appeal, Lord Neuberger MR, Moore Bick and Moses LJJ, [2010] EWCA Civ 804 [2011] 1WLR 153.
The major reason for the Court of Appeals decision was their view that the journalists responsible for the Article had failed to act responsibly in that they had failed adequately to verify the allegations of fact that it contained.
The Article
The Article had the following heading, the first sentence of which was in large bold letters: Detective accused of taking bribes from Russian exiles.
Police investigating the alleged sale to a security company of intelligence on the Kremlin's attempts to extradite opponents of President Putin, Michael Gillard reports.
The relevant part of the text of the Article was helpfully numbered by the judge for purposes of reference.
I shall follow the example of the Court of Appeal in adopting that numbering. 1.
Allegations that a British security company with wealthy Russian clients paid a police officer in the extradition unit for sensitive information are being investigated by Scotland Yard. 2.
The officer, who has been moved temporarily from his post, is alleged to have provided Home Office and police intelligence concerning moves by Moscow to extradite a number of Russia's wealthiest and most wanted men living in Britain. 3.
Anti corruption detectives are examining documents detailing the client accounts of ISC Global (UK), a London based security firm at the centre of the investigation.
The financial dossier, seen by The Times, shows that ISC was paid more than 6m from off shore companies linked to the most vocal opponents of President Putin of Russia. 4.
Between 2001 and 2005, ISC provided a variety of specialist security services including monitoring the Kremlin's attempts to extradite key clients to Moscow, where they face fraud and tax evasion charges.
A former ISC insider passed the dossier to the intelligence arm of the anti corruption squad in February.
The informant directed handlers to a series of ISC payments, totalling 20,000, made to a recipient codenamed Noah.
Detectives from Scotland Yard professional standards directorate were told that Noah could be a reference to an officer in the extradition unit who was friendly with one of ISC's bosses.
The officer under investigation has been identified as Detective Sergeant Gary Flood.
His home and office were raided last month.
A spokesman for the Metropolitan Police said yesterday: 'We are conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money.'
Anti corruption detectives are examining the relationship between Sergeant Flood and a former Scotland Yard detective, one of the original partners in ISC.
The men admit to being close friends for more than 25 years but deny any impropriety and are willing to co operate with the inquiry.
Sergeant Flood has not been suspended.
His lawyer said: 'All allegations of impropriety in whatsoever form are categorically and unequivocally denied.'
ISC Global was set up in October 2000 by Stephen Curtis, a lawyer.
He was already acting for a group of billionaire Russians led by Mikhail Khodorkovsky and Leonid Nevzlin, who controlled Yukos Russia's privatised energy giant 15.
The dossier also reveals Boris Berezovsky was a client of ISC. 16.
Two companies linked to Mr Berezovsky Bowyer Consultants Ltd and Tower Management Ltd appear to have made payments totalling 600,000 to ISC. 19.
ISC stopped trading last year after Curtis, the chairman, died in a helicopter crash.
Subsequently, two former Scotland Yard officers, Keith Hunter and Nigel Brown, whom Curtis recruited to set up ISC, fell out and Mr Hunter bought the company and renamed it RISC. 20.
A spokesman for Mr Hunter said: 'Neither my client nor his associated companies have ever made illegal payments to a Scotland Yard officer.' 21.
Mr Brown, who lives in Israel said: 'Scotland Yard recently contacted me as a result of receiving certain information.
I have been asked not to discuss this matter.' 5.
Moore Bick LJ stated at para 88 of his judgment, that since the Article repeated allegations made by others the starting point was the repetition rule.
Under that rule a defendant who repeats a defamatory allegation made by another is treated as if he had made the allegation himself, even if he attempts to distance himself from the allegation see Stern v Piper [1997] QB 123, 128; Gatley on Libel and Slander 11th ed (2008) para 11.4; Carter Ruck on Libel and Privacy, 6th ed (2010) paras 9.34 37. 6.
Sergeant Floods claim is not founded simply on the repetition rule.
The Article reports a variety of matters only some of which repeat, without adopting, allegations made by others.
A central feature of the Article is the statement that the police are investigating the conduct of Sergeant Flood and the defamatory meaning alleged is derived in part from that fact.
The identification of the issues arising in this case is not easy and calls for some precision in the analysis of the Article. 7.
The heading, the first sentence, para 1 and para 7 of the Article report that allegations have been made to the police that an officer, identified elsewhere in the Article as Sergeant Flood, has corruptly taken bribes in exchange for the provision of sensitive information to a security company, identified elsewhere in the Article as ISC.
I shall describe these allegations as the Flood is guilty accusation.
Para 5 of the Article alleges that a former ISC insider (the ISC Insider) has stated that ISC made payments to Noah who could be an officer who was friendly with one of ISCs bosses.
The Article makes it plain that the officer in question is Sergeant Flood.
I shall describe this allegation as the Flood could be guilty accusation.
Most of the rest of the Article consists of allegations of fact, some of these derived from the dossier provided to the police and to TNL by the ISC Insider.
Of these Lord Neuberger, at para 25, identified paras 5, 8, 15, and 16, to which he later added paras 10 and 19 as containing what he called the Allegations.
Moses LJ preferred to describe these as the details of the foundation of the allegations against Sergeant Flood.
I shall call these the supporting facts. 8.
What is the defamatory meaning, or sting, to be derived from the Article when read as a whole? In Chase v News Group Newspapers Ltd [2002] EWCA Civ 1772; [2003] EMLR 218 Brooke LJ identified three possible defamatory meanings that might be derived from a publication alleging police investigations into the conduct of a claimant.
These have been adopted as useful shorthand in subsequent cases.
The Chase level 1 meaning is that the claimant was guilty.
The Chase level 2 meaning is that there were reasonable grounds to suspect that the claimant was guilty.
The Chase level 3 meaning is that there were grounds for investigating whether the claimant was guilty. 9.
The respondent has not alleged that the Article conveys a Chase level 1 meaning.
Rather he has pleaded what are in effect alternative Chase level 2 meanings, namely: The words complained of meant that there were strong grounds to believe, or alternatively that there were reasonable grounds to suspect, that he had abused his position as a police officer with the MPS extradition unit by corruptly accepting 20,000 in bribes. 10.
The meaning alleged by TNL, for the purposes of a plea of justification, is a Chase level 3 meaning.
This was: [DS Flood] was the subject of an internal police investigation and that there were grounds which objectively justified a police investigation into whether the claimant received payments in return for passing confidential information about Russia's possible plans to extradite Russian oligarchs.
The relevant facts
Tugendhat J made detailed findings of fact see [2009] EWHC 2375 (QB) at paras 15 to 121.
Those findings have not been challenged.
The Master of the Rolls made a brief summary of these at the beginning of his judgment.
This is not entirely accurate, so I shall adapt it into my own summary.
The Article was the result of a lengthy investigation by journalists, Michael Gillard, his father, Gillard senior, and Jonathan Calvert, the editor of "Insight" at The Sunday Times, under whose auspices the investigation had been carried out.
Following its decision not to publish, Michael Gillard took the story to The Times, with more success.
Michael Gillard was first told in December 2005 of alleged bribes for information from the Extradition Unit by one of his sources (A), who identified the police officer in question as Sergeant Flood or his brother (a police officer not in the Extradition Unit).
The information related to the extradition and asylum of Mr Berezovsky and another Russian.
Michael Gillard decided to investigate this matter.
He sought the assistance of his father in doing so.
Over the next three months Michael Gillard had meetings with A and two other sources, one of whom, B, was working with A together with the ISC Insider.
Michael Gillard concluded that A and B did not have direct knowledge about the alleged bribery of a police officer, but derived their information from the ISC Insider.
He learned that in February 2006 A and B had arranged for the ISC Insider to meet with the Intelligence Development Group (IDG) of the Directorate of Professional Standards (DPS) of the MPS.
On 13 March A provided Michael Gillard with a copy of a Note that he had arranged to be given to the IDG when arranging this meeting.
It read as follows: One of Hunter's clients is Boris Berezovsky The Russians regularly up date information on the warrants and details of the emendations are transmitted to all the extradition desks around the world.
Hunter has a long term detective friend called Flood (possibly Gary ) who either works at, or has contacts at the extradition department.
Flood provides Hunter with the information as it arrives.
Hunter pays Flood in cash.
Flood apparently uses, or has used the money in the past for [the sensitive information]It is not clear whether Berezovsky is aware of how Hunter obtains the information If President Putin discovers this information it is
likely to cause a Diplomatic incident
Meanwhile Mr Gillard Senior managed to have a series of meetings and telephone conversations with the ISC Insider.
He told Mr Gillard Senior about his visit to the IDG and expressed frustration that they did not appear to be taking any action in relation to the information that he had provided.
He provided Mr Gillard Senior with a copy of a CD Rom that he had provided to the IDG.
This contained details of ISCs internal accounts.
These showed a series of payments, totalling 20,000 to Noah.
The ISC Insider told Mr Gillard Senior that he believed that Noah was Sergeant Flood, although he did not know that this was the case.
He believed that Sergeant Flood had a corrupt relationship with Mr Hunter of ISC.
Mr Gillard Senior prepared a memorandum for Mr Michael Gillard setting out what he had been told by the ISC Insider.
This ran to 8 pages and included: [ ] aware of payment to Flood ISC management accounts Evidence of payments to 'Noah' for 2002 2003.
Believes but does not know 'Noah' codename for Flood.
Atkinson codename for Boris Berezovsky in ISC accounts.' Noah' payments related to 'Atkinson' 'Noah' payments made out of KH's [Mr Hunter's] suspense account.
Suspense account used to park items not immediately assignable to particular client or expense KH used to brag about my man at the Yard.
Talked about how my man would be in court and would agree to bail.
Described as in charge of all Russian cases.
Said to have been at Home Office meeting and taking notes regarding Berezovsky asylum/extradition.
KH also mentioned other possible contacts.
Could have been deliberate exaggeration.
At a long liquid lunch in Champers Wine Bar in Kingly Street KH talked openly about paying brown envelopes to my man at the Yard.
Problem arose when BB barrister spoke directly to Flood in court on one occasion and asked how to handle some legal issue.
KH very upset that BB lawyers had contacted my man.
An unsuccessful attempt by Michael Gillard and Mr Calvert to approach Sergeant Flood at his home on 26 April was reported to Mr Hunter, who in turn told Sergeant Flood.
He put matters in the hands of his superiors the following day.
They informed the MPS press office ("the Press Office"), who then made contact with Michael Gillard and Mr Calvert.
On 27 April, Mr Calvert provided to the Press Office, to be passed on to Sergeant Flood, details of allegations that Mr Calvert said that he understood had been passed to Scotland Yard earlier in the year.
These included the following: My understanding is that Scotland Yard received information early this year alleging that Mr Hunter paid you for information that you are privy to as a member of the Yard's Extradition Unit.
This information would be of particular use to certain Russian individuals, some of whom were clients of ISC Global (UK) We understand that Scotland Yard has been given financial accounts detailing how money was transferred from Berezovsky companies to ISC Global accounts here and in Gibraltar.
In addition Mr Hunter's 'suspense account' is said to have made a series of payments of at least 20,000 to 'Noah' We understand that you have been identified to the police as 'Noah'.
These events caused DPS to initiate a police investigation by its Investigation Command, with DCI Crump as the Senior Investigating Officer.
It seems that DCI Crump was unaware of the information that had been provided to the IDG by the ISC Insider in February.
The DPS obtained and executed search warrants in respect of Sergeant Flood's home and office.
On the same day the Press Office issued the statement quoted in para 7 of the Article, and a few days later, Sergeant Flood was moved from the Extradition Unit owing to the ongoing investigation.
Meanwhile the DPS officers, including DCI Crump, who were investigating the matter, had meetings with Michael Gillard and Mr Calvert, who were anxious to discover precisely why it was that the police had taken action.
I shall deal with the details of these meetings later in my judgment.
On 2 June 2006, The Times published the Article as a newspaper report and on its website.
On 2 December 2006 the DPS made their report ("the DPS Report"), in which the DPS concluded that they had been unable to find any evidence to show that [Sergeant Flood] has divulged any confidential information for monies or otherwise.
Consequently there are no recommendations made as to criminal or discipline proceedings in relation to that matter.
The respondent gave evidence in the course of which he denied that he had been guilty of any impropriety.
That evidence was not challenged and was accepted by the judge.
The issues
This appeal raises a number of issues of principle in relation to Reynolds privilege.
The parties were agreed, and the judge accepted, that the rival meanings set out in paras 9 and 10 above were so close that, for the purpose of resolving the issue of Reynolds privilege, it was not necessary to choose between them.
It will none the less be necessary to consider how the court should approach the meaning of a publication when considering a claim to Reynolds privilege.
This is the meaning issue.
Mr Price QC for Sergeant Flood has argued that, as a matter of principle, Reynolds privilege should not normally protect publication of accusations of criminal conduct on the part of a named individual made to the police, at least if they are accompanied by details of matters alleged to support those allegations.
This raises the public interest issue.
The public interest issue is whether, and in what circumstances, it is in the public interest to refer to the fact that accusations have been made, and in particular that accusations have been made to the police, that a named person has committed a criminal offence.
This issue embraces the question of whether, if it is in the public interest to report the fact of the accusation, it is also in the public interest to report the details of the accusation.
The third issue of principle raised by this appeal is the verification issue.
As I shall show when I come to examine Reynolds in detail, one relevant element in the approach of a responsible journalist was held to be the steps taken to verify the information.
Where the publication alleges that accusations have been made of misconduct on the part of the claimant, or alternatively that there are grounds to suspect him of misconduct, the question arises of what, if any, verification is required on the part of the responsible journalist? In particular, is the journalist required to take steps to check whether the accusations that have been made are well founded, or is his duty to do no more than verify that the accusations reported were in fact made?
Reynolds privilege
I propose at this point to consider the defence of Reynolds privilege.
In Reynolds at p 205 Lord Nicholls of Birkenhead recorded that, over time, a valuable corpus of case law would be built up in respect of that defence.
I shall examine how far that has occurred over the past decade, with particular attention to the questions of public interest and verification.
The publication in Reynolds involved an allegation that the claimant, who was the Taoiseach, or prime minister, had lied to the Dil and to his cabinet colleagues.
The defendants sought to establish a generic head of qualified privilege at common law in relation to political information, on the basis that this would protect them in the absence of malice.
The House of Lords rejected this attempt, but identified the defence that has since been termed Reynolds privilege, albeit that the term privilege is misleading.
It is more accurately described as a public interest defence.
The leading speech was delivered by Lord Nicholls, who having set out the elements of Reynolds privilege, held that it could not arise on the facts of the case.
Lord Cooke of Thorndon and Lord Hobhouse of Woodborough expressed full agreement with the speech of Lord Nicholls.
Lord Steyn and Lord Hope of Craighead differed in the result, but their speeches accorded with Lord Nicholls conclusion that qualified privilege could protect publication of defamatory matter to the world at large where the public interest justified the publication.
The passage in which Lord Nicholls set out his conclusions [2001] 2 AC 127, 204 205 has been cited in both the judgment of Lord Neuberger MR and that of Tugendhat J, but, as it is the foundation of Reynolds privilege, I shall set it out again: The elasticity of the common law principle enables interference with freedom of speech to be confined to what is necessary in the circumstances of the case.
This elasticity enables the court to give appropriate weight, in today's conditions, to the importance of freedom of expression by the media on all matters of public concern.
Depending on the circumstances, the matters to be taken into account include the following.
The comments are illustrative only. 1.
The seriousness of the allegation.
The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true. 2.
The nature of the information, and the extent to which the subject matter is a matter of public concern. 3.
The source of the information.
Some informants have no direct knowledge of the events.
Some have their own axes to grind, or are being paid for their stories. 4.
The steps taken to verify the information. 5.
The status of the information.
The allegation may have already been the subject of an investigation which commands respect. 6.
The urgency of the matter.
News is often a perishable commodity. 7.
Whether comment was sought from the plaintiff.
He may have information others do not possess or have not disclosed.
An approach to the plaintiff will not always be necessary. 8.
Whether the article contained the gist of the plaintiff's side of the story. 9.
The tone of the article.
A newspaper can raise queries or call for an investigation.
It need not adopt allegations as statements of fact. 10.
The circumstances of the publication, including the timing.
This passage is largely, but not entirely, concerned with responsible journalism.
The starting point is, however, that the publication should be in respect of a matter of public concern.
This is not a black and white test, for, as Lord Nicholls observed, it is necessary to consider the extent to which the subject matter is a matter of public concern (Emphasis added).
As he made plain, responsible journalism requires the striking of the right balance between the public interest in the subject matter of the publication on the one hand and the harm to the claimant, should the publication prove to be untrue on the other.
Lord Hobhouse of Woodborough observed at p 239: The publisher must show that the publication was in the public interest and he does not do this merely by showing that the subject matter was of public interest.
He went on to commend the test of what it is in the public interest that the public should know and what the publisher could properly consider that he was under a public duty to tell the public.
This echoed the observation made by Lord Steyn at p 213 and Lord Cooke at p 224 that it was appropriate to adopt the conventional test applied when considering qualified privilege in relation to publication to a limited class.
That is to ask whether the recipients had an interest in receiving the information and the publisher a duty to publish it.
Lord Nicholls had earlier, at p 197, said that he preferred to ask: in a simpler and more direct way, whether the public was entitled to know the particular information.
He referred to this as the right to know test.
While Lord Hobhouse was correct to observe that it will not always be in the public interest to publish matters which are of public interest, the starting point in considering whether publication was in the public interest must be to ask whether the subject matter of the publication was a matter of public interest.
Lord Bingham of Cornhill CJ, when giving judgment in the Court of Appeal in Reynolds attempted at p 176 the difficult task of defining a matter of public interest: By that we mean matters relating to the public life of the community and those who take part in it, including within the expression public life activities such as the conduct of government and political life, elections (subject to Section 10 of the Act 1952, so long as it remains in force) and public administration, but we use the expression more widely than that, to embrace matters such as (for instance) the governance of public bodies, institutions and companies which give rise to a public interest in disclosure, but excluding matters which are personal and private, such that there is no public interest in their disclosure.
So far as verification is concerned, Lord Nicholls included in his list of relevant factors the steps taken to verify the information.
He was, however, dealing with a case where the relevant allegations were made, or at least adopted, by the publisher.
The publication was not simply reporting allegations made by another.
In Al Fagih v HH Saudi Research and Marketing (UK) Ltd [2001] EWCA Civ 1634 [2002] EMLR 215 the Court of Appeal, by a majority, found that Reynolds privilege was made out in respect of a report in a newspaper of defamatory allegations made in the course of an ongoing political debate, notwithstanding that the publishers had made no attempt to verify the allegations.
The newspaper had not adopted or endorsed these allegations.
Giving the leading judgment Simon Brown LJ at p 236 identified circumstances where both sides to a political dispute were being reported fully, fairly and disinterestedly and where the public was entitled to be informed of the dispute.
In such circumstances there was no need for the newspaper to concern itself with whether the allegations reported were true or false.
The public interest that justified publication was in knowing that the allegations had been made, it did not turn on the content or the truth of those allegations.
A publication that attracts Reynolds privilege in such circumstances has been described as reportage.
In a case of reportage qualified privilege enables the defendant to avoid the consequences of the repetition rule.
The nature of reportage was extensively analysed by Ward LJ in Roberts v Gable [2007] EWCA Civ 721; [2008] QB 502.
At para 60 he correctly identified it as a special example of Reynolds privilege, a special kind of responsible journalism but with distinctive features of its own.
There is a danger in putting reportage in a special box of its own.
It is an example of circumstances in which the public interest justifies publication of facts that carry defamatory inferences without imposing on the journalist any obligation to attempt to verify the truth of those inferences.
Those circumstances may include the fact that the police are investigating the conduct of an individual, or that he has been arrested, or that he has been charged with an offence.
In the present case Mr Rampton QC, for TNL, has not expressly sought to rely on the principle of reportage as absolving TNL from any duty of verification in respect of the matters alleged in the article.
He has, however, relied upon the decision of the House of Lords in Jameel (Mohammed) v Wall Street Journal Europe Sprl [2006] UKHL 44; [2007] 1 AC 359 as demonstrating that TNLs duty of verification did not extend to verifying that the allegations made against Sergeant Flood were well founded.
When I come to consider Jameel I shall suggest that, on analysis, an approach similar to reportage was applied.
It will be necessary to examine whether such an approach can properly be applied in a case such as the present.
The next occasion on which the Court of Appeal considered Reynolds privilege was Loutchansky v Times Newspapers Ltd (Nos 2 5) [2001] EWCA Civ 1805, [2002] QB 783.
I shall refer to the defendant as the Times, to avoid any confusion with the present case.
The publication in that case reported in detail allegations made against the claimant of criminal activities including money laundering on a vast scale.
The Times invoked Reynolds privilege.
The judgment of the Court of Appeal set out in a short passage at para 10 the matters that the Times relied upon to demonstrate the exercise of responsible journalism.
In essence these were that the published allegations were based on reports from reliable, responsible and authoritative sources.
At para 23 the Court held: At the end of the day the court has to ask itself the single question whether in all the circumstances the duty interest test or the right to know test has been satisfied so that qualified privilege attaches.
The judgment went on to explore the nature of this test.
At paras 32 35 the court explained why Reynolds privilege was in reality sui generis, a different jurisprudential creature from the traditional form of privilege from which it sprang.
This was not accepted by all members of the House of Lords in Jameel, but I have no doubt that it was correct.
Reynolds privilege arises not simply because of the circumstances in which the publication is made, although these can bear on the test of responsible journalism.
Reynolds privilege arises because of the subject matter of the publication itself.
Furthermore, it arises only where the test of responsible journalism is satisfied, and this requirement leaves little or no room for separate consideration of malice.
The court went on at para 36 to say this about the interest/duty test: The interest is that of the public in a modern democracy in free expression and, more particularly, in the promotion of a free and vigorous press to keep the public informed.
The vital importance of this interest has been identified and emphasised time and again in recent cases and needs no restatement here.
The corresponding duty on the journalist (and equally his editor) is to play his proper role in discharging that function.
His task is to behave as a responsible journalist.
He can have no duty to publish unless he is acting responsibly any more than the public has an interest in reading whatever may be published irresponsibly.
That is why in this class of case the question whether the publisher has behaved responsibly is necessarily and intimately bound up with the question whether the defence of qualified privilege arises.
Unless the publisher is acting responsibly privilege cannot arise.
This passage did not attempt to define the criteria governing whether it is in the public interest that a particular matter should be published to the world at large, so that the journalist has a duty to publish it.
The CA rejected, however, the test applied by the judge of whether the publisher would be open to legitimate criticism if he failed to publish the information in question, holding that such a test was too stringent see paras 46 49.
I come now to the case of Jameel [2007] 1 AC 359, in which the House of Lords subjected Reynolds privilege to a searching analysis.
The defendant (the Journal) published an article that asserted that at the request of the United States the central bank of Saudi Arabia was monitoring certain bank accounts to prevent them from being used, wittingly or unwittingly, for channelling funds to terrorist organisations.
The article included a number of names that were alleged to be on the list, which I shall call the black list, including that of the claimants trading group.
The claimants succeeded at first instance.
The jury found that the article defamed the claimants, presumably concluding that the article suggested that there were some grounds for suspecting that the claimants might be involved in funnelling funds to terrorists.
The Journals claim to Reynolds privilege was rejected by both the trial judge and the Court of Appeal.
The House of Lords reversed those decisions.
The reasons why the House considered that reporting not only the existence of the black list but the names on it was in the public interest appears most clearly from the speeches of Lord Hoffmann at para 49, Lord Scott of Foscote at para 142 and Baroness Hale of Richmond at para 148.
The main thrust of the story was that Saudi Arabia was co operating with the United States in the fight against terrorism.
This was evidenced by the existence of the black list.
This was a matter of high public interest.
Publication of the names on the black list was justified because this gave credibility to the story, per Lord Scott, or because without the names the impact of the story would have been much reduced, per Lady Hale.
Lord Bingham at paras 34 35 seems to have viewed the publication of the names as peripheral to the thrust of the article, which was of great public interest.
Lord Hoffmann at paras 51 52 held that the article as a whole was in the public interest and the inclusion of the names was an important part of the story as it showed that Saudi cooperation extended to the heartland of the Saudi business world.
Lord Hope held at para 111 that the question of whether the publication was privileged had to be judged in the context of the article read as a whole.
As to the formulation of the test of public interest, different opinions were expressed.
Lord Bingham at para 30 referred, with approval, to the adoption by Lord Nicholls in Reynolds of the duty interest test or the simpler test of whether the public was entitled to know the particular information.
Lord Hoffmann at para 50 said that he did not find it helpful to apply the classic test of whether there was a duty to communicate the information and an interest in receiving it.
These requirements should be taken as read where the publication was in the public interest.
Lord Hope at para 107 commented that the duty interest test, based on the publics right to know, which lies at the heart of the matter, maintains the essential element of objectivity.
Lord Scott at paras 130 and 135, like Lord Bingham, endorsed Lord Nicholls adaption of the duty/interest test.
Lady Hale at para 146 observed that the Reynolds defence sprang from the general obligation of the press, media and other publishers to communicate important information upon matters of general public interest and the general right of the public to receive such information.
She added at para 147 that there must be some real public interest in having this information in the public domain.
I doubt if this formulation could be bettered.
I turn now to consider how the House of Lords dealt with the question of verification.
The article contained two material assertions.
The first was one of fact that the claimants name was on the black list.
The second was the implied assertion that, because of this, there were grounds for suspecting that the claimants might be wittingly or unwittingly involved in funnelling funds to terrorists.
That latter assertion was on the basis that the United States authorities must have told the central bank of Saudi Arabia that there were such grounds.
The House of Lords considered it relevant to the test of responsible journalism that the journalists should have sought to verify the first, factual, assertion see Lord Bingham at para 35, Lord Hoffmann, at great length, at paras 59 to 78, Lord Hope at para 110, Lord Scott at para 139 and Lady Hale at para 149.
It is significant that no one considered that the Journal was under any duty to attempt to check the truth of the implied, defamatory, assertion, namely that there were grounds for suspecting that the claimants might be involved in funnelling funds to terrorists.
Thus, on analysis, the Reynolds privilege in Jameel had strong similarities with reportage.
The article reported facts that had defamatory implications.
Privilege protected the publishers from being responsible for those implications and they were under no duty to seek to verify whether the implications were true.
The balancing act and human rights
Reynolds privilege is not reserved for the media, but it is the media who are most likely to take advantage of it, for it is usually the media that publish to the world at large.
The privilege has enlarged the protection enjoyed by the media against liability in defamation.
The decisions to which I have referred contain frequent emphasis on the importance of freedom of speech and, in particular, the freedom of the press.
That importance has been repeatedly emphasised by the European Court of Human Rights when considering article 10 of the Convention.
There is, however, a conflict between article 10 and article 8, and the Strasbourg Court has recently recognised that reputation falls within the ambit of the protection afforded by article 8 see Cumpana and Mazare v Romania (2004) 41 EHRR 200 (GC) at para 91 and Pfeifer v Austria (2007) 48 EHRR 175 at paras 33 and 35.
In Reynolds Lord Nicholls at p 205 described adjudicating on a claim to Reynolds privilege as a balancing operation.
It is indeed.
The importance of the public interest in receiving the relevant information has to be weighed against the public interest in preventing the dissemination of defamatory allegations, with the injury that this causes to the reputation of the person defamed.
There is a danger in making an exact comparison between this balancing exercise and other situations where article 8 rights have to be balanced against article 10 rights.
Before the development of Reynolds privilege, the law of defamation, as developed by Parliament and the courts, already sought to strike a balance between freedom of expression and the protection of reputation.
Thus a fair and accurate report of court proceedings is absolutely privileged.
Publication is permitted even though this may involve publishing allegations that are clearly defamatory.
The balance in respect of the reporting of such proceedings is heavily weighted in favour of freedom of speech.
The public interest in favour of publication is firmly established.
The judge has, however, jurisdiction to make an anonymity order, thereby tilting the balance back.
Decisions in relation to the exercise of this power cannot be automatically applied to a situation where the publication of defamatory allegations has no statutory protection.
In the former case one starts with a presumption in favour of protected publication; in the latter one starts with a presumption against it.
There is thus a need for care when applying to the law of defamation decisions on the tension between article 8 and article 10 in other contexts.
The fact remains, however, that the creation of Reynolds privilege reflected a recognition on the part of the House of Lords that the existing law of defamation did not cater adequately for the importance of the article 10 right of freedom of expression.
Their Lordships had well in mind the fact that Convention rights were about to be introduced into our domestic law as a consequence of the Human Rights Act 1998.
In developing the common law the courts as public authorities are obliged to have regard to the requirements of the Convention.
Article 10.2 provides that the right of freedom of expression may be subject to restrictions for the protection of the reputation or rights of others and the Strasbourg Court has had to address the tension between articles 8 and 10 in the context of the publication of statements by the press that prove to be defamatory.
The Court has been provided with a certified translation of the recent decision of the Strasbourg Court in Polanco Torres and Movilla Polanco v Spain (Application No 34147/06), Ruling of 21 September 2010, in which this tension arose.
The Spanish Newspaper El Mundo had published an article defamatory of the petitioners that was largely founded on computer disks of company accounts that had been authenticated by an accountant who had been dismissed by the company.
The Spanish Constitutional Court had applied a relevant principle of Spanish law described as due diligence, namely that if such publication is to be protected the journalist responsible for it must have taken effective steps to verify the published information.
The Strasbourg Court at para 43 identified as relevant matters when considering restrictions on freedom of expression under article 10 necessary to protect the reputation of others the degree of defamation involved and the question of knowing at what point the media might reasonably consider sources as credible for the allegations.
The latter had to be considered from the viewpoint of the journalists at the time and not with the benefit of hindsight.
The Strasbourg Court upheld the finding of the Spanish Constitutional Court that the requirement of due diligence had been satisfied.
The meaning issue
Reynolds privilege exists where the public interest justifies publication notwithstanding that this carries the risk of defaming an individual who will have no remedy.
This requires a balance to be struck between the desirability that the public should receive the information in question and the potential harm that may be caused if the individual is defamed.
In Reynolds at pp 200 201 Lord Nicholls dwelt at some length both on the importance of freedom of expression and on the importance of the protection of reputation.
As to the latter, he rightly observed that it is not simply the individual but also society that has an interest in ensuring that a reputation, and particularly the reputation of a public figure, is not falsely besmirched.
Lord Nicholls at p 205 commented that the more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true.
But, turning the coin over, the more serious the allegation the greater is likely to be the public interest in the fact that it may be true.
Either way, it may be a critical matter in striking the right balance.
It is commonplace, and sensible, for a claim to Reynolds privilege to be determined as a preliminary issue.
This can, however, raise a practical problem.
In order to perform the balancing act to which I have just referred it is necessary to determine the meaning of the article that has been published.
Furthermore, it is not possible to consider steps taken by way of verification without first deciding what it was that needed to be verified.
This also can raise a question as to the meaning of the publication.
Where there is an issue as to meaning, this is normally a matter for the jury, and in theory there is only one true meaning see Gatley at para 3.15.
How then is the judge to approach the meaning of an article when considering a claim to Reynolds privilege as a preliminary issue? It seems to me that the sensible way of avoiding this difficulty where there is a serious issue of Reynolds privilege will usually be for the parties to agree to trial by judge alone.
It will then be open to the judge to resolve for himself any issue that arises in relation to the meaning of the words published.
That course was not adopted in this case but the parties have, by their pleadings, effectively agreed that the meaning of the article lies on the spectrum that spans, at one extreme, that there were strong grounds for believing that Sergeant Flood had abused his position as a police officer by taking bribes and, at the other extreme, that there were grounds which objectively justified a police investigation into whether Sergeant Flood had acted in this way.
Where there is a range of meanings that a publication is capable of bearing, what approach should be adopted when considering whether the journalist acted responsibly in relation to it? In Bonnick v Morris [2002] UKPC 31; [2003] 1 AC 300, Lord Nicholls, when giving the advice of the Judicial Committee of the Privy Council on an appeal from Jamaica, held that the single meaning rule should not be applied when considering a claim to Reynolds privilege.
He continued at para 25 to say this: Where questions of defamation may arise ambiguity is best avoided as much as possible.
It should not be a screen behind which a journalist is willing to wound, and yet afraid to strike.
In the normal course a responsible journalist can be expected to perceive the meaning an ordinary, reasonable reader is likely to give to his article.
Moreover, even if the words are highly susceptible of another meaning, a responsible journalist will not disregard a defamatory meaning which is obviously one possible meaning of the article in question.
Questions of degree arise here.
The more obvious the defamatory meaning, and the more serious the defamation, the less weight will a court attach to other possible meanings when considering the conduct to be expected of a responsible journalist in the circumstances.
In Bonnick the Privy Council held the publishers to be protected by Reynolds privilege in circumstances where the journalist responsible for the publication had given evidence that he had not appreciated that the article that he had published bore the defamatory meaning found by the jury.
The Board held that a responsible journalist might well not have appreciated that the article bore that defamatory meaning.
While I find the result reached in Bonnick surprising, the approach to the test of responsible journalism adopted by the Board makes sound sense.
When deciding whether to publish, and when attempting to verify the content of the publication, the responsible journalist should have regard to the full range of meanings that a reasonable reader might attribute to the publication.
I do not know whether this was the reason why counsel agreed that it was unnecessary to choose between the meaning pleaded by Sergeant Flood and that pleaded by TNL, but it is one reason why I believe that their agreement was correct.
It is for the judge to rule on a claim to Reynolds privilege, just as it is for the judge to rule on the range of meanings that a publication is capable of bearing.
The judges conclusions as to the latter will inform his judgment as to whether the defendant acted responsibly in publishing the article.
TNL have not, in this case, sought to argue that the Article is not capable of bearing one or other of the Chase level 2 meanings that I have quoted in para 9.
A responsible journalist would have appreciated that the article might be read, by some readers at least, as indicating that there were strong grounds for suspecting that Sergeant Flood had been guilty of corruptly selling sensitive information to the ISC.
Others might read it as alleging no more than the meaning asserted by TNL.
The claim to Reynolds privilege must be assessed having regard to this range of meanings.
The public interest issue
Both Tugendhat J and the Court of Appeal considered that the subject matter of the article was of sufficient public interest to render publication of it justified in the public interest provided that the test of responsible journalism was satisfied.
This was in the context of a concession by Mr Price that the report of the statement of the Metropolitan Police reported at para 7 of the Article was subject to statutory qualified privilege pursuant to section 15(1) of the Defamation Act 1996 and that Sergeant Flood could not have complained had TNL simply reported that he was the officer under investigation.
That latter concession Mr Price withdrew, without objection from Mr Rampton.
Mr Prices primary grounds for complaint were not, however, that TNL had named Sergeant Flood as the person who was the subject of the police investigation, but that they had published the details of the supporting facts that had been placed before the police in support of the accusation that the police were investigating.
It follows that two matters have to be considered in relation to public interest. (i) Was it in the public interest that the details of the supporting facts should be published and (ii) was it in the public interest that Sergeant Flood should be named? Was it in the public interest that the supporting facts should be published?
Mr Price submitted that, as a matter of principle, publication in the mass media of complaints, charges or denunciations, made under cover of anonymity to the police, and of the allegedly supporting evidence, before the subject of them had had an opportunity of answering the charges and before the investigation had taken place, would in many cases be contrary to the public interest and oppressive to the subject.
He observed that accusations are often made to the police maliciously or misguidedly.
The police may, none the less, be under a duty to investigate them.
It cannot normally be in the public interest that, if the informant then informs the press of the allegations made to the police, the press should publish the allegations.
Publication would be likely, in such circumstances, to be unfairly prejudicial to the subject of the allegations.
Even if given the chance to respond to them, it would not be reasonable to expect him to do so.
The protections normally afforded to a person charged with a criminal offence would be by passed.
Mr Price conceded that there could be public interest in publishing reports of misconduct against a person that had been sufficiently verified by the press, but contended that they had not been in this case.
This argument exemplified the overlap between the test of public interest in publication and the test of responsible journalism.
Mr Price sought to support his submission that privilege should not attach to reports of allegations of misconduct by reference to two authorities of some antiquity.
The first was Purcell v Sowler (1877) 2 CPD 215.
In that case the defendant newspaper unsuccessfully claimed privilege for reporting charges of neglect made against the plaintiff, the medical officer of a union workhouse, which were made at a public meeting of the board of guardians for a local poor law union.
The plaintiff was not present, so had no opportunity to respond to the charges.
Mellish LJ, giving the leading judgment, plainly considered this significant.
He observed at p 221: there is no reason why the charges should be made public before the person charged has been told of the charges, and has had the opportunity of meeting themSuch a communication as the present ought to be confined in the first instance to those whose duty it is to investigate the charges.
The other case relied on by Mr Price was De Buse v McCarthy [1942] 1KB 156.
There the publication was of an agenda of a town council committee which was posted in a number of public places.
The agenda included a report that inferred that the four plaintiffs, who were council employees, had been involved in thefts of petrol.
The defendants argued that the publication was privileged because they had a duty to communicate the matters in the report to the ratepayers and the ratepayers had an interest in receiving the communication.
The defence failed because the Court of Appeal did not accept either proposition.
Tugendhat J discounted these decisions in part on the ground that they had been overtaken by Reynolds and Jameel.
The Master of the Rolls at para 38 remarked that Purcell was a decision on its facts.
He went on at para 40 to remark that it was rather dangerous to rely on cases of such antiquity when dealing with fundamental issues of freedom of speech and respect for private life, the more so as in Reynolds the House of Lords had set out to redress the balance between the two in favour of greater freedom to publish matters of genuine public interest.
I agree with those comments, and indeed Mr Price accepted that the law had moved on since those case were decided.
He submitted, however, that they remained of value inasmuch as they contained statements that privilege should not be accorded to publication of allegations that had not been investigated or tried.
Tugendhat J observed at para 131 that there was no dispute that the conduct of police officers in general, and police corruption in particular, was a matter of interest to the community.
At para 215 he expressed the view that the real issue was whether the journalism was responsible in the sense of whether the publication was fair to the respondent.
Was it a proportionate interference with his right to reputation given the legitimate aim in pursuit of which the publication was made? The legitimate aim was primarily the publication of a story that was of high public interest.
At para 183 Tugendhat J dismissed the suggestion that there was a general rule that it was against the public interest for the media to engage in investigative journalism on a matter which was, or which, in the view of the media, should be the subject of police investigation.
The law provided its own sanctions for publications that interfered with the course of justice.
So far as concerned Mr Prices submission that it was not in the public interest to publish allegations that had not been verified, Tugendhat J considered that this contention could not stand with the decision in Jameel, where no attempt had been made to verify the existence of grounds for suspecting that the claimants had been a conduit for terrorist funds see paras 135, 153 and 181 of his judgment.
I shall revert to this matter when I come to deal with verification.
Lord Neuberger held at paras 37 and 39 that there was no reason to exclude allegations made to the police from the ambit of potential Reynolds privilege.
Whether the allegations were made to the police, to a third party or directly to the journalist, and even if they amounted to allegations of criminal conduct, Reynolds privilege could, in principle, attach to them.
Lord Nicholls in Reynolds had made it clear that publication of allegations of wrongdoing might or might not attract privilege, depending on all the circumstances of the particular case.
So far as the publication of the supporting facts was concerned, Lord Neuberger at paras 57 to 59 accepted the following submission made by Mr Price: While allegations of police corruption are of public interest, the mere fact that particular allegations are being investigated by the police themselves should not enable the media to publish details of the allegations, without fear of being liable for defamation, unless (a) the publication of the allegations is in the public interest, and (b) the journalist responsible took reasonable steps to check on their accuracy.
Dealing with those two criteria, Lord Neuberger at paras 68 and 69 accepted that the details of the allegations were of considerable public concern.
He went on, however, to find that reasonable steps had not been taken to check on their accuracy.
It was essentially on that basis that he reversed the decision of Tugendhat J.
I shall consider his reasoning when I deal with verification.
Moore Bick LJ at para 100 remarked that as the subject matter of the article was police corruption, there could be no doubt that it was a matter of public interest.
He went on to consider whether this applied to the details of the allegations and the naming of DS Flood, and concluded that it did.
He held that the allegations were the whole story.
If the inclusion of the defamatory material was justifiable, so was the story, and vice versa.
At para 102 he observed that there was no public interest in knowing the mere fact that an ISC insider had made allegations against a member of the Metropolitan Police, but there was a public interest in knowing the facts, insofar as the allegations were true.
For this reason it was necessary to consider, in particular, what was the source of the journalists information and what steps were taken to verify it.
At the end of his judgment he expressed agreement with the Master of the Rolls that the judge had reached the wrong conclusion because he failed to have sufficient regard to the serious nature of the allegations against Sergeant Flood and the journalists failure to take any significant steps to verify their accuracy, and because he misunderstood the effect of Jameel.
Once again, failure to verify was at the heart of the refusal to accord TNL the protection of Reynolds privilege.
But it is right that I should quote in full para 104 of the Lord Justices judgment, which endorsed the submissions of Mr Price that I have summarised at para 56 above: In my view responsible journalism requires a recognition of the importance of ensuring that persons against whom serious allegations of crime or professional misconduct are made are not forced to respond to them before an investigation has been properly carried out and charges have been made.
It is very easy for allegations of impropriety or criminal conduct to be made, to the police, professional bodies and others who may have a duty to investigate their truth, out of malice, an excess of zeal or simple misunderstanding.
If the details of such allegations are made public, they are capable of causing a great deal of harm to the individual concerned, since many people are inclined to assume that there is no smoke without fire.
Moreover, there is a serious risk that once the allegations have been published the person against whom they are made will feel obliged to respond to them publicly, thereby depriving himself of the safeguard of the ordinary process and risking a measure of trial by press.
I am not dealing here with the publication of the simple fact that a complaint has been made against a person, without any details being given, or with the publication of the fact that a person has been charged with a criminal offence.
Such information is likely to be a matter of public interest.
It is routinely made public in statements issued by the police and when that occurs a report of the statement is protected under section 15 of the Defamation Act 1996.
However, it is unnecessary and inappropriate for such reports to set out the details of the allegations made against the person charged; the description of the charge itself is sufficient to inform the public of what it has an interest in knowing.
The alternative is trial by press without proper safeguards, which is clearly not in the public interest.
Moses LJ held that it was in the public interest that the public should learn that the police were pursuing an investigation of corruption against a fellow police officer.
This was because it was important that public trust in the police should be upheld.
He went on to hold, however, that there was not the same public interest in publication of the supporting facts on which the allegation against the respondent was based.
This was because they merely added credence to the grounds on which the investigation was pursued.
They invited the reader to think that there might be something in them notwithstanding that they had not been investigated let alone substantiated para 116.
Once again, emphasis was placed on failure to verify, for at para 118 the Lord Justice summarised his conclusions by saying: I agree that publication without investigation of the details on which the allegation was based was not in the public interest. (My emphasis)
Conclusions on publication of the details of the accusation
I have set out in full para 104 of the judgment of Moore Bick LJ because he identifies matters that will often weigh conclusively against publication of details that appear to support an accusation that has been made against an individual of criminal conduct that is being investigated by the police.
It may be that the details are, if true, of some public interest, but, the responsible journalist must weigh that fact against the prejudice that may be caused to the suspect that Moore Bick LJ has identified.
At the end of the day, however, each case will turn on its own facts and the overriding test is that of responsible journalism.
I have reached the conclusion that, subject to the issue of verification, it was in the public interest that both the accusation and most of the facts that supported it should be published.
The story, if true, was of high public interest.
That interest lay not merely in the fact of police corruption, but in the nature of that corruption.
The object of the Extradition Unit of the Metropolitan Police was to assist in the due process of extradition.
The accusation was that there were grounds for suspecting the respondent of selling sensitive information about extradition for the benefit of Russian oligarchs who might be subject to it.
What was suggested was not merely a corrupt breach of confidentiality, but the betrayal of the very object of his employment by the police.
The story told was a story of high public interest and, as Moore Bick LJ remarked, the allegations were the whole story.
Tugendhat J accepted evidence given by Michael Gillard to the effect that he had doubts as to whether the police were exercising due diligence in investigating the information provided to them by the ISC Insider.
He explained that one motive in publishing the Article was to ensure that the police investigation was carried out promptly.
This finding has not been directly challenged, albeit that some of Mr Prices oral submissions verged upon such a challenge and Moore Bick LJ at para 106 said that he was unable to accept this.
The judges finding was based upon his assessment of the oral evidence given by Michael Gillard see para 38 and there is no valid basis for challenging it.
Lord Neuberger observed at para 54 that the journalists motives for publishing were of little relevance.
In this instance I do not agree.
Tugendhat J considered that Michael Gillards motive was relevant both because it constituted a legitimate aim of publishing para 200, and because it was in the public interest to ensure that the investigation was carried out promptly para 216.
I consider that there is force in these points.
Michael Gillard had good reason to doubt whether the investigation was being pursued with diligence.
In fact, there is no evidence that there had been any investigation before the police reacted to TNLs intervention on 26 April.
Michael Gillards concern, coupled with the high public interest in the story, justified its publication.
There was, in the words of Lady Hale in Jameel at para 147, real public interest in having this information in the public domain.
I have said that it was in the public interest that most of the facts that supported the story should be published because I have yet to deal with the publication of the Sergeant Floods name, coupled with the codeword Noah, which identified for readers of the Article the officer suspected of corruption.
I now turn to the question of whether the publication of that matter also was in the public interest.
Was it in the public interest that the respondents name should be published?
Michael Gillard, who wrote the Article, gave the following reasons for naming the respondent: a.
The Met had confirmed that he was under investigation; b. Other possible witnesses might not have come forward with information had I not named him; c.
I suspected that the DPS was not properly investigating the matter and believed that if the matter was brought into the open it might help to ensure that they did so; d. The claimant was part of a reasonably small squad and if he was not named it would leave the newspaper open to complaints from others in the squad that the article referred to them; e. The claimant was already aware of the investigation, so was his family and colleagues in the extradition squad.
Tugendhat J at para 218 held that the naming of Sergeant Flood was within the range of judgments open to TNL, partly because it gave the story the interest referred to by Lord Steyn in In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47; [2005] 1 AC 593, para 34, but more importantly because not naming the claimant would not have saved his reputation entirely.
Rather it would have spread the damage to reputation to all the officers in the extradition unit.
The issue in In re S was whether reporting restrictions should be imposed in respect of the name of a defendant in a murder trial in order to protect the privacy of her son.
In para 46 above I have warned of the danger of applying directly to defamatory publications cases dealing with restrictions on publication in other contexts.
Mr Rampton argued that naming the respondent was responsible journalism because, had he not been named, the Article would have lacked interest.
Had it been possible to conceal Sergeant Floods identity by removing his name from the Article, together with the reference to Noah, but leaving it otherwise intact, I would not have accepted this argument.
Sergeant Flood was not a public figure.
Publication of his name can have meant nothing to most readers, and any interest that it added to the article would not have outweighed the damage that it caused to his reputation.
Furthermore, adding interest to the Article was not a reason advanced by Mr Michael Gillard for naming the respondent.
On the facts of this case, however, it was impossible to publish the details of the Article without disclosing to those close to the respondent that he was the officer to whom it related.
He would be identified as such by the other members of the Extradition Unit and anyone else who knew that he had been removed from that unit.
There is also force in the point that, if he were not named, other members of the Extradition Unit might come under suspicion.
Having regard to these matters, I have concluded that naming the respondent was not, of itself, in conflict with the test of responsible journalism or with the public interest.
The verification issue: the law
Not all the items in Lord Nicholls list in Reynolds were intended to be requirements of responsible journalism in every case.
The first question is whether, on the facts of this case, the requirements of responsible journalism included a duty of verification and, if so, the nature of that duty.
I should insert a word of warning at the outset.
Each case turns on its own facts.
I use the phrase duty of verification as shorthand for a requirement to verify in the circumstances of this case.
My comments should not be treated as laying down principles to be applied in cases of different facts.
Mr Price alleged that TNL should have verified the accusation against Sergeant Flood reported in the Article.
Tugendhat J concluded that Jameel was incompatible with such an obligation.
He considered that Jameel showed that if it was in the public interest to publish the fact of an accusation, there was no obligation to verify the grounds of the allegation.
Moore Bick LJ commented at para 95 that, if the judge were right, there was very little distinction to be drawn between the defence of reportage and the defence of responsible journalism in relation to the reporting of statements made by third parties.
The judge was not right.
Reportage is a special, and relatively rare, form of Reynolds privilege.
It arises where it is not the content of a reported allegation that is of public interest, but the fact that the allegation has been made.
It protects the publisher if he has taken proper steps to verify the making of the allegation and provided that he does not adopt it.
Jameel was analogous to reportage because it was the fact that there were names of substantial Saudi Arabian companies on the black list that was of public interest, rather than the possibility that there might be good reason for the particular names to be listed.
Just as in the case of reportage, the publishers did not need to verify the aspect of the publication that was defamatory.
The position is quite different where the public interest in the allegation that is reported lies in its content.
In such a case the public interest in learning of the allegation lies in the fact that it is, or may be, true.
It is in this situation that the responsible journalist must give consideration to the likelihood that the allegation is true.
Reynolds privilege absolves the publisher from the need to justify his defamatory publication, but the privilege will normally only be earned where the publisher has taken reasonable steps to satisfy himself that the allegation is true before he publishes it.
Lord Hoffmann put his finger on this distinction in Jameel at para 62, when he said In most cases the Reynolds defence will not get off the ground unless the journalist honestly and reasonably believed that the statement was true, but there are cases (reportage) in which the public interest lies simply in the fact that the statement was made, when it may be clear that the publisher does not subscribe to any belief in its truth.
Thus verification involves both a subjective and an objective element.
The responsible journalist must satisfy himself that the allegation that he publishes is true.
And his belief in its truth must be the result of a reasonable investigation and must be a reasonable belief to hold.
What then does the responsible journalist have to verify in a case such as this, and what does he have to do to discharge that obligation? If this were a Chase level 1 case he would have to satisfy himself, on reasonable grounds, that the respondent had in fact been guilty of corruption.
His defence would not get off the ground unless he reasonably believed in the respondents guilt.
This is not, however, a Chase level 1 case, see my discussion of the meaning of the Article at paras 48 to 50 above.
What did the duty of verification involve? There is authority at the level of the Court of Appeal that to justify a Chase level 2 allegation a defendant has to adduce evidence of primary facts that constituted reasonable grounds for the suspicion alleged.
These will normally relate to the conduct of the claimant.
Allegations made by others cannot be relied upon.
The same may be true of a Chase level 3 allegation.
The discussion in Gatley at para 11.6 and the three cases there cited support these principles.
No such hard and fast principles can be applied when considering verification for the purpose of Reynolds privilege.
They would impose too strict a fetter on freedom of expression.
Where a journalist alleges that there are grounds for suspecting that a person has been guilty of misconduct, the responsible journalist should satisfy himself that such grounds exist, but this does not necessarily require that he should know what those grounds are.
Their existence can be based on information from reliable sources, or inferred from the fact of a police investigation in circumstances where such inference is reasonable.
I derive support for this conclusion from the fact that in Jameel the House of Lords accepted that appropriate steps had been taken to verify the fact that the claimants were named on the black list where there had been reliance upon reliable sources, even though the defendants were not prepared to name them.
The present case has the following particular features.
The Article did not simply consist of the Flood could be guilty accusation.
It combined this with the Flood is guilty accusation and the supporting facts.
Although the latter, when taken on their own, did not amount to strong grounds for suspecting Sergeant Flood of corruption, their incorporation into the Article both provided detail of the nature of the corruption of which Sergeant Flood was suspected and, as Moses LJ observed, added credence to the case being investigated.
It was these features that made the Article capable of bearing the first of the two Chase level 2 meanings alleged by Sergeant Flood.
Before publishing this Article responsible journalism required that the journalists should be reasonably satisfied both that the supporting facts were true and that there was a serious possibility that Sergeant Flood had been guilty of the corruption of which he was suspected.
The latter requirement reflects the range of meanings that the Article was capable of conveying to its readers.
The verification issue: the facts
When considering the evidence, the trial judge made findings that were not challenged and that were highly relevant to the question of verification.
The challenge made by Mr Rampton to the decision of the Court of Appeal is founded on an assertion that the Court of Appeal made an erroneous assessment of the relevant facts and failed to have regard to some of the findings of the trial judge.
I propose first to summarise the relevant observations of the Court of Appeal before considering, in the light of these, the relevant findings of Tugendhat J.
When dealing with verification, Lord Neuberger focussed on what he described as the Allegations.
These he had, in para 25, identified as the matters alleged in paras 5, 8, 15 and 16 of the Article, but to these he subsequently added paras 10 and 19.
The relevant parts of his judgment appear in the following paragraphs: 68.
The Allegations were serious: accusing a fairly senior police officer of what was not inaccurately described in DS Flood 's pleaded case as an appalling breach of duty and betrayal of trust and . a very serious criminal offence is self evidently a very grave charge.
Being identified as the officer the subject of the investigation described in paragraph [7] of the article in The Times may, on its own, have been pretty damaging to DS Flood (although I have doubts as to whether The Times would have published on that limited basis).
However, by going further and publishing the allegations being made against him, with the details given in para [5], coupled with the references to Mr Berezovsky and others in paras [10], [15], [16] and [19], the journalists must have realised would be very likely to result in the article constituting a story with a far greater impact, and far greater effect on DS Flood 's reputation.
As Lord Nicholls said [2001] 2 AC 127, 205 the more serious the charge, the more the public is misinformed and the individual harmed. 69.
The nature of the information contained in the Allegations is of considerable public concern in that it involves police corruption, but the weight to be given to that point is very severely reduced by the fact that the information is contained in the Allegations, which, as the journalists knew, were largely unchecked and unsupported.
That factor is particularly important once one appreciates that the main content of the Article was the Allegations, coupled with the identification of DS Flood, and the link with named Russian migrs. 73.
When one turns to the steps taken to verify the information, the journalists do not seem to have done much to satisfy themselves that the Allegations were true.
When they were published in the article, they were, as the passages just quoted from the judgment show, and as the journalists must have appreciated, no more than unsubstantiated unchecked accusations, from an unknown source, coupled with speculation.
The only written evidence available to the journalists did not identify any police officer, let alone DS Flood, as the recipient of money from ISC at all, let alone for providing confidential information.
Moore Bick LJ agreed.
He accepted Mr Prices submission that the journalists had taken few, if any, steps to verify the truth of the allegations themselves.
Moreover the status of the information was no more than that of an uninvestigated and unsubstantiated allegation.
The dossier, which the journalists had seen, did not identify the respondent as Noah nor did it specifically support the allegation that any officer had been the recipient of payments from ISC.
As I explained at para 68, Moses LJ also attached importance to the failure to verify what, at para 115, he had described as the details of the foundation of the allegation.
At para 116 he commented that these exposed the respondent to the suggestion that unchecked and unsubstantiated allegations from an unknown source might be well founded.
Mr Rampton submitted that the reference by both Lord Neuberger and Moses LJ to allegations from an unknown source demonstrated a failure to appreciate the important fact that the ISC Insider was known to the journalists.
I do not believe that Lord Neuberger or Moses LJ had failed to appreciate this fact.
In para 11 of his judgment Lord Neuberger had recorded meetings between the ISC Insider and both Mr Gillard Senior and the Metropolitan Police.
Unknown should, I think, probably be read as undisclosed.
I have drawn attention to the importance that all three members of the Court of Appeal attached to the fact that the supporting details of the allegations made against Sergeant Flood were unverified.
I consider that importance to have been misplaced.
The supporting details were true.
Nor, so far as I can see, did Mr Price contend that the journalists were at fault for failing to verify them.
Tugendhat J held at para 204 that the fact that payments in cash were made to Noah was soundly based on the documents.
He added that it had not been suggested that the journalists ought to have doubted the authenticity of these.
It does not seem to have been any part of Sergeant Floods case that the journalists were at fault for failing to verify the supporting details.
The case that Mr Price has consistently advanced in relation to verification is very different.
In para 18 of his written case he submitted that no attempt worthy of the name had been made to verify what he described as the accusation.
By the accusation I understood him to mean the accusation that Sergeant Flood had corruptly received bribes in exchange for confidential information.
If so, he put his case too high.
For the reasons set out in para 82 above responsible journalism required that the journalists should be reasonably satisfied that there was a serious possibility that Sergeant Flood had been guilty of corruption.
The submissions in relation to the facts made by Mr Price were, however, equally applicable to this requirement.
I turn to consider whether, contrary to the submission of Mr Price, that requirement was satisfied.
Mr Prices complaint was that the journalists made no attempt to investigate the truth of the allegations made to the police by the ISC Insider.
This complaint focussed not on the contents of the dossier provided by the ISC Insider to the police but upon the ISC Insiders statement that he believed that the payments recorded as having been made to Noah had been made to Sergeant Flood.
Mr Prices submission was that responsible journalists would have discovered that this expressed belief had no foundation.
Sergeant Flood gave evidence, which was unchallenged, that he had had no information that would have been of any value to ISC.
In particular he had no information in relation to the attempt to extradite Mr Berezovsky or his application for asylum that was of value.
The journalists shortcoming, according to Mr Price, was in failing to inquire whether there was any confidential information available to Sergeant Flood that he could have sold to ISC.
Such inquiry would have disclosed that there was none and thus that the ISC Insiders expressed belief that Sergeant Flood was Noah was wholly without foundation.
Instead, the journalists had based their Article on allegations made by the ISC Insider, notwithstanding, as they had acknowledged, that he had his own axe to grind.
In answer to this submission, Mr Rampton relied on the implications that could reasonably be drawn from the actions of the police themselves.
The police, he argued, were best placed to form a view as to whether there was any substance in the allegations made against Sergeant Flood.
Their actions in not merely investigating the allegations but in obtaining and executing a search warrant were a basis upon which the journalists could properly conclude that the allegations made against Sergeant Flood were allegations of substance.
The inferences that could properly be drawn from the police activity constituted one of the central issues at the trial.
It was Sergeant Floods case that it was the journalists own intervention on 26 April that had resulted in the police activity, so that they could not treat this as adding weight to the allegations that they had made.
With hindsight it is apparent that this was factually correct.
It was Michael Gillards evidence, however, that he had believed that the police action was a response to the information that had been provided by the ISC Insider in February.
I turn to examine this part of the story in a little more detail.
On 28 April Mr Calvert and Michael Gillard had invited Mr Hunter to comment on the fact that the police were investigating allegations that he had made corrupt payments to Sergeant Flood.
Solicitors for Mr Hunter, in an e mail on 2 May followed by a letter on 3 May to Mr Calvert, alleged that the only reason for the police investigation had been TNLs own enquiries on 26 April.
This led Mr Calvert to contact the MPS Press Office to ask whether the police began their investigation following allegations received from TNL or whether the investigation was already ongoing.
The Press Office replied that they could not expand on their press statement of 28 April (which was that reported in para 7 of the Article) and so were unable to answer this question.
It now seems clear that, both when drafting the initial press notice and in replying to Mr Calvert on 3 May, the MPS Press Office was anxious not to disclose the fact that the police investigation had only just been commenced.
No doubt the Press Office were apprehensive, with good reason, that the police might be exposed to press allegations of dragging their feet.
Michael Gillard and Mr Calvert met with DCI Crump and two other officers concerned in the police investigation on 9 May. DCI Crump then confirmed that the police had received intelligence before the journalists communications with the Press Office, but that those communications had probably forced their hand.
Having heard Michael Gillard give evidence, the judge made the following findings.
By mid April Michael Gillard had formed the impression that the police were not investigating at all the information that they had received from the ISC Insider.
After 27 April, however, he changed his mind.
The MPS press notice of 28 April led him to believe that there was an ongoing investigation, which had started, or ought to have started in February.
He did not believe the suggestion made by Mr Hunters solicitors that the investigation had been started by TNLs own inquiries.
Those findings by the judge have not been challenged.
The judge considered that the fact of the police investigation augmented the ground for suspicion that arose from the supporting facts published in the Article.
He commented at para 191 that the police do not automatically investigate every allegation that is made to them.
They decide what to investigate and what not to investigate.
At para 203 he commented that while the basis for the allegations was weak, in that there was no evidence that the claimant was Noah or that any confidential information had been received by ISC, nevertheless as early as 9 May and up to the time of publication on 2 June the police had confirmed that they had sufficient evidence to obtain a search warrant and to carry out an investigation.
I have considered whether it was reasonable for Michael Gillard to conclude that the police activity at the end of April and the beginning of May owed at least something to the information that had been provided to them by the ISC Insider.
I have concluded that it was.
It is remarkable that the DPS should have obtained and executed a search warrant in respect of Sergeant Floods home and office, and removed him from the Extradition Unit, on the strength only of the inquiries made by the journalists on 26 April.
It was not unreasonable for the journalist to have assumed that this action was, at least in part, a response to information provided by the ISC Insider in February.
The natural inference was that the DPS had concluded that the accusation made against Sergeant Flood might be well founded.
The information provided by the ISC Insider, including that set out in the dossier, amounted to quite a strong circumstantial case against Sergeant Flood.
Michael Gillard stated that he regarded it as significant that the dossier showed in the same period payments by Mr Berezovsky to ISC and payments by ISC to Noah and that during that period Mr Flood was working at the Extradition Unit.
It was of course during that period that Russia was attempting to extradite Mr Berezovsky.
The statements attributed to Mr Hunter, as recorded in Mr Gillard Seniors memorandum, while gossipy in character, none the less lent support to the possibility that a police officer who fitted the description of Sergeant Flood was in the pay of Mr Hunter.
The known friendship between Sergeant Flood and Mr Hunter made this more credible.
It is true that Michael Gillard accepted that the ISC Insider might have had an axe to grind in making his allegations, but they were not allegations that were lightly made.
The ISC Insider went to considerable lengths to place his information before the police.
I am not greatly impressed by Mr Prices submission that inquiries should have been made which would have showed that Sergeant Flood had no confidential information to sell.
Mr Gillard Senior gave evidence that, in his experience the Russians were happy to corrupt government officials and that of his own experience and knowledge the Extradition Unit would have had information that would have been of interest.
Michael Gillard gave evidence that from his knowledge of the specialist squads of the MPS Sergeant Flood was likely to have confidential information at his fingertips.
He added that if there was no information that Sergeant Flood could have passed on to Mr Hunter he would have expected the police to dismiss the allegations as ill founded rather than remove Sergeant Flood from his post.
Having regard to all these matters I consider that the journalists could reasonably conclude that Sergeant Flood was in a position to provide information that Mr Berezovsky would consider justified payments to him.
Conclusion
Michael Gillard does not seem to have been asked in terms whether he believed that there was a serious possibility that Sergeant Flood had been guilty of corruption.
Tugendhat Js judgment, when read as a whole, leaves me in no doubt that had he been asked, he would have given an affirmative answer to this question.
Indeed the inference that I draw from that judgment is that Michael Gillard considered that Sergeant Flood had probably been guilty of corruption.
The case against the respondent was circumstantial, but I consider that the journalists, together with Mr Gillard senior, were justified in concluding that it was a strong circumstantial case.
They accepted that it was probable that the sources had interests of their own but Mr Gillard had had to seek out the ISC insider, and had had difficulty in persuading him to divulge the relevant information.
I find far fetched the suggestion that he might have deliberately set out to deceive the police and Mr Gillard.
Although the judge considered, on the basis of Jameel, that responsible journalism did not require verification of the accusation made by the Article, his careful analysis of the evidence involved consideration of the evidential base of the allegations made in the Article.
The judge concluded that the case against Sergeant Flood was not strong on the facts known to the journalists, but found it significant that the police appeared to have sufficient evidence to justify obtaining a search warrant and the other action that they took.
There is a danger of using hindsight in a case such as this.
My initial reaction on reading the facts of this case was that the journalists had been reasonably satisfied, on the basis both of the supporting facts and of the action of the police that there was a serious possibility that Sergeant Flood had been guilty of corruption.
After a detailed analysis of the case I remain of that view.
Contrary to the decision of the Court of Appeal, I consider that the requirements of responsible journalism were satisfied.
I would allow this limb of the appeal.
Post Script: The approach to the decision of the trial judge
Before concluding this judgment I wish to comment on one matter of general importance raised by the Court of Appeal.
Before that court TNL invoked the following statement of principle by Sir Anthony Clarke MR when giving the judgment of the Court of Appeal in Galloway v Telegraph Group Ltd [2006] EWCA Civ 17, [2006] EMLR 221, para 68 another case involving Reynolds privilege: The right to publish must however be balanced against the rights of the individual.
That balance is a matter for the judge.
It is not a matter for an appellate court.
This court will not interfere with the judges conclusion after weighing all the circumstances in the balance unless he has erred in principle or reached a conclusion which is plainly wrong.
The Court of Appeal had no need to comment on this statement, for the court concluded that Tugendhat J had erred in principle in misunderstanding the effect of Jameel and paying no heed to the question of verification.
However, Lord Neuberger MR and Moore Bick LJ suggested that the statement in Galloway wrongly treated the balancing exercise required by a judge in a case such as this as being akin to the exercise of a discretion.
Lord Neuberger, at para 46 drew a distinction between the exercise of a discretion and the value judgment or balancing exercise that was necessary on the basis of the facts found in a case such as this.
He described the latter as raising an issue of law, as to which there was only one right answer.
He went on, however, (in para 48) to comment on a statement of Lord Bingham in Jameel [2007] 1 AC 359 para 36: 48.
I note that, at the end of his opinion in Jameels case, Lord Bingham referred to the fact that the House of Lords had not, like the judge and the jury, heard the witnesses and seen the case develop day after day, and the fact that the House had read no more than a small sample of the evidence.
Accordingly, he described it as a large step for the House to decide for itself whether Reynolds privilege could be invoked in that case.
It could be said to be an even larger step for an appellate court, which has not (and should not have) been taken through all the evidence, and which has not seen the witnesses and the development of the case over four days, to disagree with the trial judge's assessment, unless he has misunderstood the evidence, taken into account a factor he ought not to have taken into account, failed to take into account a factor he ought to have taken into account, or reached a conclusion no reasonable judge could have reached. 49.
In my view, a decision in a case such as this does not involve the exercise of a discretion and cannot therefore be approached as the court suggested in Galloways case.
Where a first instance court carries out a balancing exercise, the appeal process requires the appellate court to decide whether the judge was right or wrong, but it should bear in mind the advantage that the trial judge had in the ways described in Jameels case.
Where the determination is a matter of balance and proportionality, it is, generally speaking, difficult for an appellant to establish that the judge has gone wrong.
Save in the first sentence of para 49, in this passage Lord Neuberger did no more than recognise the advantage that the trial judge has over the Court of Appeal where a decision turns, in part, on evidence heard by the trial judge.
The extent to which the trial judge is at an advantage over the Court of Appeal will depend on the circumstances of the particular case.
The greater the advantage of the trial judge, the greater the weight to be attached to his decision and the more cogent must be the basis for finding that his decision was wrong.
The passage cited from Galloway went further.
It applied in the context of Reynolds privilege the same test that an appeal court should apply when considering an appeal against an exercise of discretion by a judge of first instance.
A decision on Reynolds privilege does not involve the exercise of discretion.
There are, none the less, a number of cases in other contexts, some at the highest level, where appellate courts have applied or endorsed a similar approach to that stated in the fourth sentence of the quotation from Galloway set out above, principally in cases where there is room for a legitimate difference of judicial opinion as to what the answer should be and where it will be impossible to say that one view is demonstrably wrong and the other demonstrably right: see eg George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] AC 803, 815H per Lord Bridge, Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] FSR 113, 122 per Lord Hoffmann approving words of Buxton LJ in Novowzian v Arks (No 2) [2000] FSR 363, 370 and Pro Sieben Media AG v Carlton UK Television Ltd [1999] 1 WLR 605, 612 3 per Walker LJ; see also British Fame v MacGregor (The MacGregor) [1945] AC 197 and Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] UKHL 23, [[2007] 1 WLR 1325, para 46.
Context is all important.
There is a spectrum, well identified in In re Grayan Building Services Ltd [1995] Ch 241, 254, where Hoffmann LJ stated that generally speaking, the vaguer a standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards [i.e. the relevant legal standards or test] have been met, the more reluctant an appellate court will be to interfere with the trial judges decision.
How, and in particular whether within or outside this spectrum, an issue of Reynolds privilege should be addressed is a matter on which I would wish to hear oral argument in a context where it mattered before reaching any conclusion.
We have heard no oral argument on such points.
In these circumstances I do not consider that this Court should lay down any general principle as to the approach to be adopted by an appellate court to an issue of Reynolds privilege.
The second limb of the appeal.
The DPS report clearing Sergeant Flood was made, internally, on 2 December 2006.
Its result was not communicated to TNL until 5 September 2007.
On that date the Article still remained on the TNL website, and TNL neither removed it nor qualified it.
In these circumstances, Tugendhat J held that the protection of Reynolds privilege did not extend beyond 5 September 2007.
Before the Court of Appeal TNL appealed without success against that finding.
They have appealed against it before this Court.
Time did not permit us to hear argument in relation to this limb of TNLs appeal, and it was agreed that it should be adjourned, to be pursued, if appropriate, after judgment had been given in respect of the first limb of the appeal.
The Court is prepared to hear submissions on the second limb if so requested.
LORD BROWN
The critical issue for decision in this appeal is whether Reynolds priviledge attaches to TNLs publication of the article set out at para 4 of Lord Phillips judgment.
The undisputed background to the publication was that the Metropolitan Police were at the time carrying out an investigation into allegations that Sergeant Flood had abused his position as a police officer with the Extradition Unit by corruptly accepting substantial bribes in return for passing confidential information about possible plans to extradite certain Russian oligarchs.
The defamatory meanings contended for in respect of the article range from there were strong grounds to believe that Sergeant Flood was guilty of such corruption, through an intermediate meaning that there were reasonable grounds to suspect such guilt (these being Sergeant Floods alternative contended for meanings), to there were grounds which objectively justified such a police investigation (TNLs contended for meaning).
It follows that this case has little to do with the repetition rule.
It is not suggested that the article repeated as such an allegation that Sergeant Flood was guilty of corruption (Lord Phillips Chase level 1meaning see para 8).
Rather it asserted one or other of the above range of lesser allegations.
Accordingly, to attract Reynolds privilege, it is these lesser allegations that TNL must establish they were justified in publishing a different task, of course, from that which, were the Reynolds defence to fail, TNL would have a trial, namely to justify whichever meaning the jury then decided the Article in fact bore.
I agree with Lord Phillips view (para 51) that the responsible journalist should have regard to the full range of meanings that a reasonable reader might attribute to the publication.
As is now well established, Reynolds privilege attaches to a defamatory publication which may properly be regarded as being in the public interest notwithstanding that it may be incapable of being justified as true and may therefore leave the defamed individual with no opportunity to vindicate his reputation and no compensation for its destruction.
It has been exhaustively considered in a series of authoritative judgments, most helpfully perhaps in Reynolds itself Reynolds v Times Newspapers Ltd [2001] 2 AC 127 , Loutchansky v Times Newspapers Ltd (Nos 2 5) [2002] QB 783, Bonnick v Morris [2003] 1 AC 300 and Jameel (Mohammed) v Wall Street Journal Europe Sprl [2007] 1 AC 359.
In deciding whether Reynolds privilege attaches (whether the Reynolds public interest defence lies) the judge, on true analysis, is deciding but a single question: could whoever published the defamation, given whatever they knew (and did not know) and whatever they had done (and had not done) to guard so far as possible against the publication of untrue defamatory material, properly have considered the publication in question to be in the public interest? In deciding this single question, of course, a host of different considerations are in play.
One starts with the (expressly non exhaustive) list of ten factors identified by Lord Nicholls in Reynolds itself.
As the present case well illustrates, however, depending on the particular publication in question, there are likely to be other relevant considerations too.
Amongst the additional relevant considerations arising here are, for example, the journalists view (accepted by the judge) that the publication of the article would not merely inform the public of the particular allegation of corruption being investigated but would also tend to encourage its speedy and thorough investigation.
Further, with regard to the naming of Sergeant Flood, the consideration was, first, that his identity would in any event be known to all who knew that he had been removed from the Extradition Unit and, secondly, that, if he were not named, other members of that Unit might come under suspicion besides, of course, the consideration that names lend interest and impact to a publication, particularly where, as here, there is an obvious connection between Sergeant Floods name and Noah (referred to in paragraph 5 of the article).
To my mind the critical question in this appeal indeed the only real point of principle calling for decision is whether it can ever properly be said to be in the public interest to publish, as here, the detailed allegations underlying a criminal investigation to publish, in effect, a summary of the case against the suspect, reliant in part on anonymous sources, before even the police have investigated the allegations, let alone charged the suspect.
I confess that I was at one time very doubtful whether Reynolds privilege could ever attach to such a publication.
This is not, after all, a case of pure reportage a case in which the public interest lies simply in the fact that the statement was made, when it may be clear that the publisher does not subscribe to any belief in its truth (Lord Hoffmann in Jameel at para 62) a case like Al Fagih v H H Saudi Research and Marketing (UK) Ltd [2002] EMLR 215 where the disinterested publication of the respective allegations and responses by both sides to a political dispute was held to attract Reynolds privilege, the mere fact of such allegations being made being a matter of public interest.
Nor, indeed, is it a case like Jameel itself, helpfully described by Lord Phillips (para 78) as being analogous to reportage, where the real public interest in the publication lay in its demonstration of the fact that Saudi Arabia was cooperating with the United States in the fight against terrorism, the inclusion of the defamed companys name in the blacklist of those who might wittingly or unwittingly funnelled funds to terrorist organisations showing that this cooperation extended to companies which were by any test within the heartland of the Saudi business world (Lord Hoffmann at para 52).
Rather the justification for the publication of the article here must lie in it being in the public interest that the public should know, in advance of the outcome of the investigation, that such an allegation has been made and is being duly investigated.
TNL must establish that this public interest would not be sufficiently served by a report merely of the Metropolitan Police press release set out at para 7 of the statement (privileged as this is under section 15 of, and para 9(1) (b) of Schedule 1 to, the Defamation Act 1996) but rather required, or at least could properly be considered by TNL to require, an altogether fuller account of the nature of the alleged corruption and the case supporting it.
None of this has seemed to me by any means self evident and, indeed, a strong case against such a publication being in the public interest can be made, founded upon authorities such as Purcell v Sowler (1877) 2 CPD 215 and De Buse v McCarthy [1942] KB 156 and upon the consideration that there may be more to lose than to gain by ventilating in public an anonymous accusation such as that made here before even it is investigated by the police.
At the end of the day, however, I am persuaded that there is no principle of law which precludes TNL from invoking Reynolds privilege in a case such as this.
As the Court of Appeal themselves noted, authorities like Purcell and De Buse pre dated the Human Rights Act 1998 and, indeed, the development of the Reynolds public interest defence itself.
Reynolds, itself anticipating the 1998 Act and the impact of article 10 of the Convention, was intended, as Lord Hoffmann observed in Jameel (at para 38), to promote greater freedom for the press to publish stories of genuine public interest.
Lord Phillips (para 47) and Lord Mance (at para 142) have both cited examples of recent Strasbourg jurisprudence plainly supporting the view that the press should enjoy such greater freedom.
Of course not every anonymous denunciation to the police will attract Reynolds privilege.
Far from it.
That, as Mr Price QC for Sergeant Flood was at pains to point out, would indeed be a charter for malice.
But where, as here, the denunciation is of a public officer, relates to a matter of obvious public importance and interest, and may justifiably appear to the journalists to be supported by a strong circumstantial case, it seems to me properly open to the trial judge to find the defence made out.
I too, therefore, would allow the appeal and restore Tugendhat Js judgment on the first limb of the appeal.
LORD MANCE
Introduction
The appellants (TNL) published in The Times on 2 June 2006 and also on their website an article in defamatory terms about Detective Sergeant Flood.
TNL advance two defences, qualified justification and public interest privilege.
The present appeal concerns only the latter, which was tried as a preliminary issue.
Further, it concerns only the first limb of that issue: the existence of a public interest defence up to 5 September 2007, the date on which TNL learned of the internal police report clearing DS Flood but failed to remove or qualify the article on their website.
The public interest defence
The contours of a defence of public interest privilege have been considered in a line of recent cases including Reynolds v Times Newspapers Ltd [2001] 2 AC 127, Bonnick v Morris [2002] 1 AC 300 (PC) and Jameel Mohammed v Wall Street Journal Europe Sprl [2006] UKHL 44; [2007] 1 AC 359.
Its basic elements are the public interest of the material and the conduct of the journalists at the time.
Whether the material is true is a neutral circumstance.
In contrast, whether at the time the relevant journalists believed it to be true is (other than in cases of purely neutral reportage of allegations) highly material when considering their conduct.
See, on these points, Jameel, para 62, per Lord Hoffmann.
Although the words I have cited from Jameel treat the conduct of the journalists as a separate element of the test, an alternative approach subsumes the second element within the first.
It will not be, or is unlikely to be, in the public interest to publish material which has not been the subject of responsible journalistic enquiry and consideration.
The alternative approach appears in Lord Nichollss speech in Reynolds, listing a series of matters as being of potential relevance to an overall decision whether publication was in the public interest.
He said, at p 205A: Depending on the circumstances, the matters to be taken into account include the following.
The comments are illustrative only. 1.
The seriousness of the allegation.
The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true. 2.
The nature of the information, and the extent to which the subject matter is a matter of public concern. 3.
The source of the information.
Some informants have no direct knowledge of the events.
Some have their own axes to grind, or are being paid for their stories. 4.
The steps taken to verify the information. 5.
The status of the information.
The allegation may have already been the subject of an investigation which commands respect. 6.
The urgency of the matter.
News is often a perishable commodity. 7.
Whether comment was sought from the plaintiff.
He may have information others do not possess or have not disclosed.
An approach to the plaintiff will not always be necessary. 8.
Whether the article contained the gist of the plaintiff's side of the story. 9.
The tone of the article.
A newspaper can raise queries or call for an investigation.
It need not adopt allegations as statements of fact. 10.
The circumstances of the publication, including the timing.
This list is not exhaustive.
The weight to be given to these and any other relevant factors will vary from case to case.
Lord Nicholls did not regard any of these factors as a pre condition which must always be satisfied.
In particular, he viewed the steps taken to verify the information as one factor among all others.
The same approach appears in the opinion which he gave in the Privy Council in Bonnick v Morris [2003] 1 AC 300.
In determining the public interest of material, the court considers both its subject matter and content and the appropriateness of publishing it as and when it was (or is to be) published.
The speeches in Jameel [2007] 1 AC 359 discuss the extent to which it remains helpful to view the privilege in terms of the test (traditionally applied in cases of qualified privilege) of a reciprocal duty on the part of the press to publish and an interest on the part of the public to know.
It is a truism that what engages the interest of the public may not be material which engages the public interest: para 31 per Lord Bingham.
Lord Bingham, with whom Lord Hope agreed, thought that a duty/interest test still underpinned public interest privilege: paras 31, 92 and 105 106.
But Lord Hoffmann thought at para 50 that it should be regarded as a proposition of law that, where there is a public interest in publishing, the duty and interest are taken to exist.
Lady Hale said at para 147 that there must be a real public interest in communicating and receiving the information and in having [it] in the public domain, but that was less than a test of what the public need to know, which would be far too limited.
Lord Scott engaged in a detailed discussion at paras 128 138, concluding that the duty was the presss professional duty to publish information of real and unmistakeable public interest to the public, and the interest was the publics in free expression, both of which only existed provided that the press satisfied the test of responsible journalism.
In so far as there was any difference between the speeches of the members of the House, he agreed with Lord Hoffmanns.
Like Lord Phillips at para 44, I find Lady Hales formulation helpful.
It also seems consistent with both Lord Hoffmanns succinct and Lord Scotts more detailed discussion of the point.
It is for the court to determine whether any publication was in the public interest.
But the court gives weight to the ordinary standards of responsible journalism.
It does so in a broad and practical way, and in contexts going beyond the steps taken to check material.
This can be illustrated, first, by reference to Bonnick v Morris [2002] 1 AC 300.
In that case, a newspaper article had recorded in a restrained and even handed way a difference between an authoritative source and Mr Bonnick, former managing director of the company concerned, as to the legitimacy and propriety of two contracts.
But it had continued Mr Bonnicks services as managing director were terminated shortly after the second contract was agreed.
The article did not record Mr Bonnicks explanation that he had made [the company] fire him, because, based on the advice he had received, this would enable him to obtain more compensation.
Without this explanation, the natural and ordinary meaning of the article, to an ordinary reader, was that he had been dismissed because the company was dissatisfied with his handling of the contracts.
Nonetheless, the Privy Council held the public interest defence made out.
Two points arise.
First, the Privy Council held that the objective standard of responsible journalism was to be applied in a practical and flexible manner and not exclusively by reference to the single meaning which the law attributed to the particular words, para 24.
A journalist should not be penalised for making a wrong decision on a question of meaning on which different people might reasonably take different views, para 24, although questions of degree arose and the more obvious the defamatory meaning, and the more serious the defamation, the less weight will a court attach to other possible meanings when considering the conduct to be expected of a responsible journalist in the circumstances, para 25.
The report in Bonnick v Morris records, para 19, that the journalist (Mrs Morris) seems to have thought that she was not making any such statement as set out in the pre penultimate sentence of para 127 above, but the Privy Council said that rather more relevantly and importantly one of the judges in the Court of Appeal took the same view, in other words that the article was open to different readings in the eyes of reasonable persons.
The principle endorsed by the Privy Council in Bonnick v Morris appears to be, therefore, that a responsible journalist would have had in mind the less damaging of the possible meanings that reasonable persons might attach to the article, and would have been entitled to focus in that direction when checking and reporting the relevant subject matter.
In the present case, the possible meanings suggested by the opposing parties see para 154 below are so close that any such principle appears irrelevant.
At all events, the parties have not suggested that significance attaches for present purposes to the differences between such meanings.
I can therefore leave this aspect of Bonnick v Morris on one side, without attempting to analyse it or its implications further.
The second, presently relevant, aspect of Bonnick v Morris is that, in forming its overall judgment as to the availability of the defence of public interest on the facts, the Privy Council was prepared to overlook some respects in which the journalists conduct could legitimately be criticised.
The activities of the company and the competence of its management were matters of considerable public interest.
The journalist had fallen short of the standards to be expected of a responsible journalist by not making further enquiries of the anonymous source about the reasons for Mr Bonnicks dismissal and not including his explanation (so that the case was near the borderline).
But, despite this, the publication was held overall to be covered by public interest privilege: para 27.
The need to look at the position in the round was also identified by Lord Bingham in Jameel, para 34, when he disclaimed too close a focus on particular ingredients which have (or have not) been included in a composite story.
He said: This may, in some instances, be a valid point.
But consideration should be given to the thrust of the article which the publisher has published.
If the thrust of the article is true, and the public interest condition is satisfied, the inclusion of an inaccurate fact may not have the same appearance of irresponsibility as it might if the whole thrust of the article is untrue.
A similar latitude has been recognised with regard to the content and presentation of news items of general public interest, particularly with regard to the naming of persons whose reputations might be adversely affected.
In Jameel, the general public interest in the article was that it showed whether and how far the Saudi Arabian authorities were cooperating with United States authorities in cutting off funds to terrorist organisations.
The potential libel was that the article meant that there were reasonable grounds to suspect, or alternatively to investigate, the involvement of Mr Jameel and his trading company in the witting or unwitting channelling of funds to terrorist organisations.
Was it appropriate for the article to name Mr Jameel and his company? As to this, Lord Hoffmann said at paras 51 52: (b) Inclusion of the defamatory statement If the article as a whole concerned a matter of public interest, the next question is whether the inclusion of the defamatory statement was justifiable.
The fact that the material was of public interest does not allow the newspaper to drag in damaging allegations which serve no public purpose.
They must be part of the story.
And the more serious the allegation, the more important it is that it should make a real contribution to the public interest element in the article.
But whereas the question of whether the story as a whole was a matter of public interest must be decided by the judge without regard to what the editor's view may have been, the question of whether the defamatory statement should have been included is often a matter of how the story should have been presented.
And on that question, allowance must be made for editorial judgment.
If the article as a whole is in the public interest, opinions may reasonably differ over which details are needed to convey the general message.
The fact that the judge, with the advantage of leisure and hindsight, might have made a different editorial decision should not destroy the defence.
That would make the publication of articles which are, ex hypothesi, in the public interest, too risky and would discourage investigative reporting.
In the present case, the inclusion of the names of large and respectable Saudi businesses was an important part of the story.
It showed that co operation with the United States Treasury's requests was not confined to a few companies on the fringe of Saudi society but extended to companies which were by any test within the heartland of the Saudi business world.
To convey this message, inclusion of the names was necessary.
Generalisations such as "prominent Saudi companies", which can mean anything or nothing, would not have served the same purpose.
Weight was therefore given to the newspapers editorial judgment as to what details (by way of naming) were necessary to convey the essential message, which was that US Saudi co operation went to the heart of the Saudi business world.
This might simply have been asserted, without names, but the press was entitled to lend it credence by giving names.
Subsequent authority underlines the point with regard to the inclusion of names.
In re British Broadcasting Corpn; In re Attorney Generals Reference (No 3 of 1999) [2009] UKHL 34; [2010] 1 AC 145, the issue was whether an anonymity order should be discharged, to enable the BBC to identify a defendant who had been acquitted of rape on the basis of the trial judges decision (subsequently been held to be wrong in law) to exclude certain DNA evidence.
The BBCs aim was to undermine his acquittal and campaign for a retrial pursuant to Part 10 of the Criminal Justice Act 2003.
Lord Hope dealt with the issue of naming as follows: 25.
Lord Pannick suggested it would be open to the BBC to raise the issue of general interest without mentioning D's name or in any other way disclosing his identity.
But I think that Mr Millar was right when he said that the BBC should not be required to restrict the scope of their programme in this way.
The freedom of the press to exercise its own judgment in the presentation of journalistic material has been emphasised by the Strasbourg court.
In Jersild v Denmark (1994) 19 EHRR 1, para 31, the court said that it was not for it, nor for the national courts for that matter, to substitute their own views for those of the press as to what technique of reporting should be adopted by journalists.
It recalled that article 10 protects not only the substance of the ideas and the information expressed but also the form in which they are conveyed.
In essence article 10 leaves it for journalists to decide what details it is necessary to reproduce to ensure credibility: see Fressoz v France (1999) 31 EHRR 28, para 54.
So the BBC are entitled to say that the question whether D's identity needs to be disclosed to give weight to the message that the programme is intended to convey is for them to judge.
As Lord Hoffmann said in Campbell v MGN Ltd [2004] 2 AC 457, para 59, judges are not newspaper editors.
They are not broadcasting editors either.
The issue as to where the balance is to be struck between the competing rights must be approached on this basis. 26.
Will the revealing of D's identity in connection with the proposed programme pursue a legitimate aim? I would answer that question in the affirmative.
In Jersild v Denmark, at para 31 it was recognised that there is a duty to impart information and ideas of public interest which the public has a right to receive.
The programme that the BBC wish to broadcast has been inspired by the removal of the double jeopardy rule.
What this means in practice for our system of criminal justice is a matter of legitimate public interest. [T]he arguments that the programme wishes to present will lose much of their force unless they can be directed to the facts and circumstances of actual cases.
The point about D's name is that the producers of the programme believe that its disclosure will give added credibility to the account which they wish to present.
This is a view which they are entitled to adopt and, given the content of the programme as a whole, it is an aim which can properly be regarded as legitimate.
Lord Hope went on to deal with the question of proportionality, balancing the public's right to receive information against D's right to be protected against publication of details of his private life, in the light of the fact that the statute now enabled application to be made to retry him for the offence of rape, of which he had been previously convicted; the conclusion reached was that, although the interference with D's article 8 right would be significant, it would be proportionate when account was taken of the weight to be given to the competing right to freedom of expression that the BBC wished to assert.
Lord Brown put the matter tersely: 65.
What weight, then, should be attached to the BBC's article 10 right to free expression? Whilst Lord Pannick naturally recognises the high value ordinarily attaching to the freedom of the media to report on court proceedings and to discuss matters of obvious public interest such as arise here, he nevertheless suggests that very little weight should be given to that right in this case.
Why, he asks rhetorically, cannot the BBC broadcast their programme simply referring to D as D without actually identifying him? 66.
The short answer to that submission is in my opinion to be found in paragraph 34 of Lord Steyn's speech in In re S (A Child) [2005] 1 AC 593 . : such a programme would indeed be very much disembodied and have a substantially lesser impact upon its audience.
In a yet more recent case, re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 63, Lord Rodger summarised the position characteristically: 63.
Whats in a name? 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.
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, quoted at para 35 above.
More succinctly, Lord Hoffmann observed in Campbell v MGN Ltd, 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 courts therefore give weight to the judgment of journalists and editors not merely as to the nature and degree of the steps to be taken before publishing material, but also as to the content of the material to be published in the public interest.
The courts must have the last word in setting the boundaries of what can properly be regarded as acceptable journalism, but within those boundaries the judgment of responsible journalists and editors merits respect.
This is, in my view, of importance in the present case.
The European Convention on Human Rights
British courts have developed the defence of public interest privilege under the influence of principles laid down in the European Court of Human Rights.
The case law of that Court is cited in passages from the judgments of Lord Hope and Lord Rodger, cited above.
It emphasises the importance of the role of the press (and some other individuals or bodies, eg bodies protecting environmental interests) as public or social watchdogs (or chiens de garde): see eg Jersild v Denmark (1994) 19 EHRR 1, para 35, Goodwin v United Kingdom (1996) 22 EHRR 123, para 39, Affaire Vides Aizsardzbas Klubs v Lettonie (Application No 57829/00), para 42, Trsasg A Szabadsgjogokrt v Hungary (Application No 37374/05), paras 27, 36 and 38, Riolo v Italy (Application No 42211/07), para 55 and 62, Flux (No 7) v Moldova (Application No 25367/05), para 40, cited below in para 142, Axel Springer AG v Germany (Application No 39954/08) paras 79 and 91, Von Hannover v Germany (Applications Nos 40660/08 and 60641/08), paras 102 and 110.
In that context, the court has been ready to tolerate a degree of exaggeration or even provocation in the way the press expresses itself: see eg Prager v Oberschlick (1995) 21 EHRR 1, para 38, Standard Verlagsgesellschaft mbH (no 2) v Austria (Application No 37464/02), para 40, Riolo v Italy, para 68 and Axel Springer AG v Germany, para 81, and has confirmed that it is not for the Court, any more than it is for the national courts, to substitute its own views for those of the press as to what techniques of reporting should be adopted in a particular case: Axel Springer AG v Germany para 81 and Von Hannover v Germany, para 102.
It has also recognised that the bounds of press criticism admissible in respect of politicians and also, though not necessarily to the same extent, officials are larger than they are in relation to private individuals: see eg Affaire Vides, para 40c) and Flux (No 7) v Moldova, para 38, cited in para 142 below.
The conduct of the judiciary, above all in exercising their functions, but also in other contexts, is likewise a legitimate subject of press scrutiny: Affaire Polanco Torres and Movilla Polcanco v Spain (Application No 34147/06), para 42.
In relation to private individuals, the court stated in Pedersen and Baadsgaard v Denmark (No 2) (2006) 42 EHRR 486, para 78 that: special grounds are required before the media can be dispensed from their ordinary obligation to verify factual statements that are defamatory of private individuals.
Whether such grounds exist depends in particular on the nature and degree of defamation in question and the extent to which the media can reasonably regard their sources as reliable with respect to the allegations (see, among other authorities, McVicar v the United Kingdom, no 46311/99, 84, ECHR 2002 III, and Bladet Troms and Stensaas, cited above, 66).
This statement was effectively repeated in Riolo v Italy, para 61 and Standard Verlagsgesellschaft, para 38.
But in Affaire Polanco Torres, above, allegations of reported irregularity in corporate affairs by the spouses of two court presidents and a chief prosecutor were seen as matters of public interest, because they were directed to the spouses as such, as well as because one of the spouses had in her reported denial pointed at the president of the region of Cantabria, the most senior regional politician, as probably responsible for a manoeuvre implicating her.
The case did not therefore involve reporting on purely private aspects of a persons life: para 46.
The extent to which the press may reproduce information derived from sources which it cannot itself prove has been considered by that Court in several cases which merit some examination.
In White v Sweden (2006) 46 EHRR 23, two Swedish newspapers had published articles, which mainly contained reports of allegations made by others, in particular Dirk Coetzee, a former senior official of the South African security police.
The articles contained strong statements which designated the applicant as a serious criminal including a statement by an unnamed source that He kills without a seconds hesitation and as having a reprehensible life style, involving smuggling and poaching in southern Africa, although it did not appear that he had been convicted of any crime.
Among the criminal offences ascribed to him was the murder of Olof Palme, the Swedish Prime Minister (under a heading He is pointed out as PALMES MURDERER), although the articles also contained statements of other individuals which rejected the allegations made against the applicant and, in one case, a denial by the applicant himself.
The journalists had gathered much information from conservation groups to support what was said about smuggling and poaching, but, although they had had high ambition to find the degree of truth of Coetzees statements regarding murder and Coetzee appeared credible, the truth of such statements was not shown.
The Swedish Court of Appeal concluded in the light of the evidence about smuggling and poaching that Mr White was not an ordinary private person in respect of whom there was a particular need of protection (2006) 46 EHRR 23, para 28.
The Court of Human Rights said in this light that: 29.
The Court of Appeal balanced the applicants interests against the public interest in the relevant matters, namely the unsolved murder of the former Swedish Prime Minister Olof Palme and, especially, the so called South Africa trail, in the criminal investigation.
Undoubtedly, both the murder of Mr Palme and that particular avenue of investigation were matters of serious public interest and concern.
As such, there was little scope for restricting the communication of information on these subjects.
The Court of Human Rights found that the Swedish courts had balanced the opposing interests appropriately, and were justified in finding that the public interest in publishing the information in question outweighed the applicants right to the protection of his reputation.
The case involves unusual facts, but smuggling and poaching are not the same as murder, and the case indicates that there are circumstances in which the press may legitimately keep the public informed of matters of real public importance, even though they are under active criminal investigation, where the person affected is not an ordinary private person.
The later case of Flux (No 7) v Moldova (Application No 25367/05) involved media reports of stories about politicians emanating from a source other than the applicant.
The article complained of was published under the headline: Four more communists have obtained housing on our money, and it stated: According to certain sources in Parliament, who have asked to remain anonymous, the future owners of the relevant apartments include V.S., the president of the communist faction in Parliament, C.G., head of the Parliament apparatus, and M.R., the president of Floreti county.
V.S. issued proceedings.
The Court of Human Rights said that: 38.
The plaintiff in the domestic proceedings was a politician and president of the Communist faction in Parliament at the time of the events.
As such, he inevitably and knowingly lays himself open to close scrutiny of his every word and deed by both journalists and the public at large, and he must consequently display a greater degree of tolerance (see Lingens v Austria, 8 July 1986, 42, Series A no. 103).
The domestic courts would have had to find a particularly pressing social need to sanction the newspaper in such circumstances.
The Court observes that the article in question was aimed at criticising Parliament for alleged lack of transparency, rather than at disparaging V.S. specifically.
The latter's name appeared twice in the entire article.
While not focusing on any particular person, the article mentioned the names of all the alleged beneficiaries of the four apartments and described the attempts to verify the information with some of them, including V.S. 39.
The Court also notes that the article published by the applicant newspaper dealt with the issue of whether the Parliament leadership had spent public money in a non transparent manner.
This was therefore a matter of genuine public interest, which is also to be given additional protection under article 10 of the Convention. 40. [The Court] also reiterates that, as part of their role of public watchdog, the media's reporting on 'stories' or 'rumours' emanating from persons other than the applicant or 'public opinion' is to be protected where they are not completely without foundation (see Thorgeir Thorgeirson v Iceland, 25 June 1992, 65, Series A no. 239, and Timpul Info Magazin and Anghel, no. 42864/05 (27/11/2007), 36). 41.
In situations such as this, where on the one hand a statement of fact is made and insufficient evidence is adduced to prove it, and on the other the journalist is discussing an issue of genuine public interest, verifying whether the journalist acted professionally and in good faith becomes paramount (see Flux v Moldova (no. 6), no. 22824/04 (29/07/2008), 26 et seq.).
Flux (No 7) v Moldova is therefore an illustration of the more relaxed approach to press reporting on a matter of real public interest concerning an important public figure.
These cases may be compared with the Strasbourg Courts decision in A v Norway (Application No 28070/06), in which reference was made to White v Sweden as a case in which the Court has recognised reputation.
A v Norway was a case about a private individual, who had in 1988 been convicted of murder, attempted murder and assault using a knife and who now lived near and visited a recreation area known as Baneheira, in the city of Kristiansand.
In May 2000 two young girls aged 8 and 10 were raped and stabbed to death in Baneheira.
A newspaper then focused on two successive days on the applicant.
He was repeatedly described as a convicted murderer, with sub titles relating to his convictions such as Beserk with a knife and Victims at random.
In relation to the current rapes and killings, his assertions of innocence were recorded, but the place where the rapes and killings occurred was stated to be his nearest neighbour, and he was described as probably the most interesting of several criminally convicted persons whose movements are now being checked by the police.
In answer to the question whether the police had got the murderer in the papers?, the chief constable was quoted as saying that the police have received so much information of substance that they have the answer in their documents to the question who had murdered the two young girls.
Disagreeing with the majority judges in the Norwegian Supreme Court, the Strasbourg Court held at para 72 that the disputed press coverage was conducted in a manner which directly affected the applicants enjoyment of his right to respect for private life.
It noted in this connection that, as observed by the minority in the Norwegian Supreme Court, the applicant was persecuted by journalists against whom he found it difficult to protect himself at a time when he was in a phase of rehabilitation and social integration ., had a fixed abode and pursued gainful employment, whereas [a]fter the publications he found himself unable to pursue his job and he had to leave his home and was driven into social exclusion para 72.
There had been a particularly grievous prejudice to the applicants honour and reputation that was especially harmful to his moral and psychological integrity and to his private life para 73, and the majority in the Norwegian Supreme Court had failed to maintain a reasonable relationship of proportionality between the interests of the newspapers freedom of expression and those of the applicant in having his honour, reputation and privacy protected para 74.
The decision in A v Norway is in my view unsurprising, bearing in mind that it concerned newspaper conduct which the Strasbourg Court found to have persecuted a private individual, caused him to be unable to work and to have to leave his home, driven him into social exclusion and so been especially harmful to his moral and psychological integrity and private life.
The European Court of Human Rights in Affaire Polanco Torres (Application No 34147/06) affirmed the legitimacy under article 10 of the press reporting allegations of irregularity in corporate affairs based upon computer disks which El Mundo had received anonymously, in circumstances where (a) the companys former accountant (dismissed after the disappearance of its accounting disks) had verified to the newspaper as genuine in a meeting, and (b) the paper had contacted one of the spouses implicated and had published with its report her denial and her riposte pointing at the president of the region of Cantabria.
The European Court regarded these as important steps showing responsible journalism (para 50) and it noted the relevance of having regard to the nature and degree of the defamation involved; it also noted the need to consider the reasonableness of a journalists reliance on his sources as the situation appeared to the journalist at the time, and not with hindsight: para 43.
Most recently, in its judgment in Axel Springer AG v Germany (Application No 39954/08), delivered after the oral hearing in the present appeal, the Court stated, at para 82, that: special grounds are required before the media can be dispensed from their ordinary obligation to verify factual statements that are defamatory of private individuals.
Whether such grounds exist depends in particular on the nature and degree of the defamation in question and the extent to which the media can reasonably regard their sources as reliable.
In that case, the first article in issue involved the publication in the Bild Zeitung of a report that a well known actor who played the part of a police superintendent in a popular television series has been caught in possession of cocaine at the Munich Oktoberbierfest.
The article was based on information provided by the press officer at the Munich public prosecutors office, and the Court said, citing previous authority, that Consequently . it had a sufficient factual basis para 105.
The fact that the truth of the information was not in dispute in the subsequent proceedings in Germany and Strasbourg was mentioned by the Court as a separate point (para 105).
The Court went on to conclude that there was nothing to suggest that the newspaper had not undertaken the appropriate exercise of balancing its interest in publishing against the actors right to respect for his private life, and, disagreeing with the German courts, that there was no reason to disagree with the newspapers decision to publish.
The Court referred to both A v Norway and White v Sweden: see paras 61, 74, 83 and 90.
It also drew a broad distinction between private individuals and persons acting in a public context (para 91), which it reiterated in identical terms in its parallel judgment in Von Hannover v Germany, para 110.
German authority
It is of interest also to note in passing jurisprudence in the highest German courts, regarding the responsibility of the press in relation to the publication of allegations of the commission of criminal offences.
Of particular interest are decisions of the Federal Constitutional Court in 1 BvR 765/97, reported at NJW 1997, 2589 and 1 BvR 152/01 and 1 BvR 160/04, reported at BVerfGK 9, 317, and a decision of the Federal Supreme Court VI ZR 51/99, reported in BGHZ 143, 199 and referred to in the latter Constitutional Court case.
In short, these decisions recognise as permissible in principle under German law the reporting of matters giving rise to the suspicion of commission of criminal offences, including those already under criminal investigation.
Provided that the report is the product of appropriately careful journalism, identifying an appropriate minimum of facts speaking for its truth, so making it worthy of publication, and is fairly expressed without distortion or undue sensationalism, it is not incumbent on the press to be able to prove the truth of the reported suspicions.
The press will however have to consider, inter alia, whether it is appropriate to disclose the name of the suspect.
It usually will be with suspected criminality of a serious kind.
But, where the suspicion relates to misconduct in public office, a particular public interest exists, which can, even in a case of lesser criminality, justify the publication of both the subject matter and the name of the public servant involved.
Where a published article can be read as having a range of meanings, German law appears, from the Federal Supreme Courts decision (p 206), to take the meaning least detrimental to the suspect, and so most favourable to the press.
As further developments occur (eg an outcome of criminal proceedings favourable to the accused), the press may have to permit publication of a corresponding report.
The present case
Against this background I return to the circumstances of the present appeal.
It was common ground in the Court of Appeal that the publication of the polices press statement that that they were conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money was privileged under the express terms of section 15 of the Defamation Act 1996.
In the Court of Appeal, Mr Price QC for Mr Flood was prepared to accept, in the light of this privilege and the significance attached to names in cases such as re British Broadcasting Corpn [2010] 1 AC 145 and In re Guardian News and Media Ltd [2010] 2 AC 697, that TNL was entitled to identify Mr Flood as the officer the subject of investigation.
The Court of Appeal was prepared to proceed on that basis, although Lord Neuberger doubted whether TNL would have thought it worthwhile to publish an article which confined itself to doing this: para 68.
Before the Supreme Court, Mr Price took a different line.
He noted that Mr Flood would not have sued if all that had been done was report the police press statement and Mr Floods name.
But he submitted, if necessary, that naming Mr Flood was not covered by any privilege and he relied on A v Norway.
However, his principal submission was, that, whatever might be the position in that respect, the article went too far in the detail it gave of allegations made against Mr Flood.
In particular, he submitted, and the Court of Appeal accepted, that the police informants allegations in paragraphs 5. 8, 15 and 16 of the article were prejudicial details which added inappropriate credence to the grounds on which the investigation was being pursued, and that their publication was not in the public interest.
Tugendhat J held that the article as a whole was on a matter of public interest because the conduct of police officers in general, and police corruption in particular, is a matter of interest to the community: para 123 and 131.
A police investigation into an allegation of police corruption was a story of high public interest and the purpose of publishing the story was to ensure that that investigation was carried out promptly which was also a matter of public interest: para 216.
The journalism was responsible in the sense that the publication on 2 June 2006 was a proportionate interference with [the Claimants] right to reputation, given the legitimate aim in pursuit of which the publication was made: paras 215 216.
He went on, that That is not to say that the judgment of [Times Newspapers] was a good judgment in the circumstances, but only that it was within the range of permissible editorial judgments which the court is required to respect: para 217.
The Court of Appeal drew a distinction between the publication of detailed allegations of corruption where the corruption is proven, or reasonable steps have been take to verify its occurrence, and their publication in situations in which corruption is simply alleged and under investigation, paras 59, 63 and 68 per Lord Neuberger MR, paras 102 104 per Moore Bick LJ and paras 110 118 per Moses LJ.
Lord Neuberger noted that the presss editorial judgment could not dispense with the requirements of Reynolds privilege, from which he concluded that the publication of the allegations could not be privileged, unless it can be said to have been responsible journalism, ie to have been in the public interest with the journalists having taken reasonable steps to verify the truth of the allegations: paras 64 66.
Moore Bick LJ was unable to accept the judges conclusion that part of the public interest lay in prompting the police to pursue the investigation; had it been, the article would, he thought, have been written differently, para 106; Moses LJ also thought that the suggested subjective motives of the journalists to ensure that the investigation was vigorously pursued does [sic] not assist in identifying whether or not the publication was in the public interest and that the article was not drawn in a way which suggested such a purpose: para 114; he thought that the publication of an article simply recording that the police were pursuing an investigation of corruption against a fellow police officer would have been of public interest, as underlining the significance of alleged corruption, as providing some assurance to the public and also as providing some impetus to pursuing the investigation to conclusion: para 114, but that publication of the details on which the investigation was founded was not in the public interest, para 115 118.
The newspaper must be left to justify any imputation, as yet undetermined, without protection of qualified privilege: para 118.
In concluding that it was not in the public interest to publish the alleged details, the Court of Appeal was influenced by their largely unchecked and unsupported nature: para 69 per Lord Neuberger, para 90 per Moore Bick LJ and para 118 per Moses LJ.
Lord Neuberger also said that When they were published in the article, they were . , as the journalists must have appreciated, no more than unsubstantiated unchecked accusations, from an unknown source, coupled with speculation: para 73; and Moses LJ said that their publication exposed DS Flood to the suggestion that unchecked and unsubstantiated allegations, from an unknown source, might be well founded: para 116.
Analysis
There is no suggestion that the article contained mere reportage.
Equally, however, it did not contain out and out allegations that the details were true.
Rather, it reported alleged details from which the nature and to some extent basis of the investigation could be ascertained.
The libel alleged by DS Flood is that the article meant that there were strong grounds to believe, or alternatively reasonable grounds to suspect, that DS Flood had abused his position by corruptly accepting bribes from some of Russias most wanted suspected criminals in return for selling highly confidential Home Office and police intelligence about attempts to extradite them to Russia, to which TNLs response is that it meant that DS Flood was the subject of an internal police investigation and that there were grounds objectively justifying such an investigation into whether he had received payments in return for such information.
The judge considered that these alternative meanings were not so far apart as to require any decision on meaning for present purposes.
That conclusion has not been challenged.
The suggestion of possible corruption of a very serious nature on the part of DS Flood was clearly very injurious to his reputation and feelings.
On the other hand, the conduct under investigation was not only serious, but also of great public interest, involving the possibility of police corruption at the instance of Russian oligarchs in the context of proceedings for their extradition from the United Kingdom to Russia.
None of the possible meanings amounts to a suggestion that DS Flood was guilty of the conduct under investigation.
It was said only that Noah could be a reference to him.
It was made clear that the whole investigation was based on information emanating from an unnamed source not an unknown source, the phrase used twice in the Court of Appeal: paras 73 and 116.
It was also made clear that all parties concerned had been approached and offered the opportunity to comment, and that the conduct was categorically denied on all sides by DS Flood, by Mr Berezovsky and by Mr Hunter of ISC.
The article was moderate in its tone and phrasing.
It cannot be compared in content or in tone or in consequences with the persecution inflicted on the applicant in A v Norway.
DS Flood was temporarily removed from the police extradition unit, but remained in service until restored to that unit.
The judge was satisfied that the journalists had taken appropriate steps to verify the information.
They had obtained as many documents as they could.
They had not simply relied upon intermediaries, but had insisted on meeting the ISC insider, and had taken into account the possibility that he had an axe to grind in making the suggestions of corruption that he did.
The judge regarded Jameel as indicating that what was required was verification of the making of an accusation by a source, not verification of the information which led to the accusation: para 135.
The Court of Appeal concluded that this was insufficient, and, in passages from which I have quoted extracts in para 151 above, it concluded that what was required was that the journalists should verify, or at least take reasonable steps to verify, the truth of the details of the suggested corruption upon which they reported: paras 66, 103 and 118.
This reasoning has a number of inter related aspects.
One is that the article reported allegations made to the police and deriving from a source behind or beyond whom TNL had not gone.
But in Reynolds Lord Nicholls expressly contemplated that the source of information might be informants with no direct knowledge of the events (para 123 above).
In Jameel the reporter had relied upon a prominent Saudi businessman (source A) for information that the Saudi authorities were, at the request of US authorities, monitoring bank accounts to prevent them being used wittingly or unwittingly for the funnelling of funds to terrorist organisations: paras 4 and 8; but neither this information, nor so far as appears the alleged inference that there were reasonable grounds to suspect or investigate the involvement of Mr Jameel and his trading company in such funnelling, were or could be further investigated: paras 5 and 42.
Further, as the Strasbourg authority of Flux (No 7) v Moldova illustrates, it is part of [the presss] role of public watchdog to report on stories or rumours emanating from persons other than the claimant: paras 138 and 142 above.
The stories were in that case about politicians, but, as I have indicated in para 139 above, the European Court of Human Rights also recognises that stories which are in the public interest about officials also merit particular protection.
I agree in this connection with what I understand to be Lord Phillips view that the defence of public interest privilege involves a spectrum.
At one end is pure reportage, where the mere fact of a statement is itself of, and is reported as being of, public interest.
Higher up is a case like the present, where a greater or lesser degree of suspicion is reported and the press cannot disclaim all responsibility for checking their sources as far as practicable, but, provided the report is of real and unmistakeably public interest and is fairly presented, need not be in a position to produce primary evidence of the information given by such sources.
A second aspect of the Court of Appeals reasoning is that the source was unknown, or, better said, unnamed: para 73 per Lord Neuberger and para 116 per Moses LJ.
But the media is entitled to protect the anonymity of sources, as recognised in Jameel, para 59 per Lord Hoffmann as well as in the European Court of Human Rights in Flux (No 7) v Moldova.
It was in the present case (as in Flux (No 7) and presumably also Jameel) the wish of the sources to remain anonymous.
A third, associated aspect of the Court of Appeals reasoning is that the detailed allegations contained in the report related to corruption which was simply alleged and under investigation and were themselves largely unchecked and unsupported and coupled with speculation: para 153 above.
In para 73 Lord Neuberger went on to note that the only written evidence available to the journalists did not identify any police officer, let alone DS Flood, as the recipient of money from ISC at all, let alone for providing confidential information.
These passages in my view both overstate the requirements of responsible journalism in the present context, and undervalue the nature and significance of the steps which TNLs journalists actually took.
These steps are extensively summarised in Tugendhat Js judgment, paras 17 to 81.
I can further abbreviate my treatment of them by adopting the summary contained in Lord Phillips judgment at paras 12 to 20 above.
I note only a few specific points.
First, Mr Gillard juniors journalistic interest in the possibility of corruption involving ISC and DS Flood went back to December 2005 and pre dated any involvement of any arm of the police service.
By early January 2006 he had ascertained various matters which he concluded would suggest vulnerability on the part of DS Flood to a corrupt approach.
Only on 30 January 2006 was he informed by source A that source B, who had access to the Intelligence Development Group (IDG) of the Directorate of Professional Standards (DPS) of the Metropolitan Police Service (MPS), had been in touch with the IDG at source As request and on behalf of an ISC insider.
Mr Gillard junior spoke with and met source B, who told him that the police had been given a typed note of the allegations being made by the ISC insider, but that the DPSs attitude had been as if not interested.
If this had remained the position and no subsequent investigation had followed, but Mr Gillards own enquiries had elicited the other information used in the article of 2 June 2006 and had been published both to inform and to stimulate an investigation, any argument that he should have awaited the outcome of an investigation would have disappeared.
The second point relates to the claimants submission that it was pure speculation that Noah was DS Flood, the ISC having done no more than say that he believed Noah to be DS Flood.
But DS Flood worked in the police extradition unit (unlike his brother), and the ISC insider also recounted that Mr Hunter used to refer to paying brown envelopes to my man at the Yard, and that a problem had once arisen in court when Mr Beresovskys lawyer spoke directly to DS Flood in court on one occasion, and Mr Hunter became very upset at this contact with my man.
All this was recorded in the notes of the discussions with the ISC insider as well as in a long internal memorandum which Mr Gillard senior prepared.
It is the case, as the judge noted, that none of this specific information about my man at the Yard was put to DS Flood through the Metropolitan press office, but that is a minor point in the overall picture, and there could have been no real doubt but that DS Flood would simply have denied it, as he did the other matters which were put to him.
Third, Mr Gillard was aware (and so had in mind as a reason for caution) that the ISC insider had issues with Mr Hunter, or what might be called an axe to grind, but, as he said in evidence, sources often do have.
On 13 March 2006 source A also sent to Mr Michael Gillard a copy of the note which had been given to the police in January 2006.
The note was consistent with the conversations which Mr Gillard senior had had with the ISC, except that, rather than stating belief but not knowledge that NOAH was DS Flood, it was categorical in stating that DS Flood provided information for cash.
Bearing in mind the circumstantial information, which was also given as set out in the previous paragraph, the difference appears less stark than it might otherwise have done.
Fourth, in late April 2006 TNL approached the DPS asking the DPS to address a list of questions about their knowledge and position; and it was this, Tugendhat J found, that in fact led to the opening, for the first time, on 28 April 2006 of a police investigation by the police Investigations Unit.
However, the MPS statement issued to TNL on the same day said that the The .
Investigations Unit is currently conducting an investigation into allegations that a serving MPS officer made unauthorised disclosures of information to another individual in exchange for money, and the judge also found that this led Mr Gillard junior to think that the investigations related to what had been said to the police in February.
At a meeting on 9 May 2006 between Mr Gillard junior and DCI Crump and others, DCI Crump accepted that intelligence had been received by the IDG in February 2006, but said that he did not know what the IDG had done with it when received, and asserted that it was TNLs inquiries at the MPS press office that had probably forced their [the polices] hands and led to the Investigation Unit being involved.
Tugendhat J had in these circumstances to consider Mr Gillard juniors motivation in publishing the article of 2 June 2006.
He accepted Mr Gillards evidence that he was sceptical about DCI Crumps explanations and concerned about the MPSs failure to follow up the intelligence provided in February 2006 and that the article was published as a means of keeping up pressure on MPS to investigate properly (para 41) and to ensure that that investigation was carried out promptly, to which the judge added That too was a matter of public interest para 216.
Although the article did not itself focus on police dilatoriness or mention this motive, there was no appeal against these findings.
The Court of Appeal was not in my view justified in departing from them, as Moore Bick LJ and Moses LJ did in passages which I have set out in para 152 above.
Fifth, TNL also made attempts in late April 2006 to elicit their accounts from DS Flood, Mr Hunter and Mr Beresovsky.
DS Flood through solicitors denied all allegations of impropriety.
Mr Hunter through solicitors initially denied any knowledge of, but in a later letter gave an explanation, of operation Noah in a way which Mr Gillard junior thought suggested that he had something to hide.
He also made suggestions about the ISC insiders motivation which Mr Gillard junior discounted.
Mr Gillard junior also concluded that he could discount suggestions made by Mr Beresovskys solicitors that the police extradition unit would have no information of value to Mr Beresovsky.
Mr Gillard believed that, if so, the MPS would have dismissed the allegations outright.
The judge accepted his evidence on this point also: paras 164 and 199.
Tugendhat Js conclusion was that no criticism could be made of what the journalists did by way of steps taken to verify the information received from the informants, including the ISC insider.
In the light of what I have said in paras 158 to 166 above and the judges more detailed findings of fact, I do not consider that this conclusion can be faulted.
The Court of Appeal was in my view in error in so far as it based its decision on apparent conclusions, firstly, that more was required as a matter of principle and, secondly (and largely, if not entirely, as a result), that TNLs journalists conduct and reporting could not, on the facts found by the judge, be regarded as meeting the standards of responsible journalism.
The previous paragraphs lead back to the critical issues, which represent the fourth and fifth aspects of the Court of Appeals reasoning.
They are whether it was in the public interest for TNL to publish an article naming DS Flood and to publish an article with the detail which this article had, when the allegations which it recorded were only at the stage of investigation.
It is material here that the publication had the purpose of ensuring an effective investigation.
As noted in para 164 above, TNL started its own investigation well before anyone supplied any intelligence to the police.
It was of obvious public interest that the investigation should be pursued and the journalists were, not unreasonably, concerned that intelligence given to the MPS might not have been or be being handled as promptly or properly as would have been expected.
Taking first the naming of DS Flood (about which no issue was raised in the Court of Appeal: para 148 above), his identification did not underline a central aspect of the articles message in quite the same way as the naming of Mr Jameel and his company in Jameel.
But the naming was still in my judgment central to any publication.
Without names, there would have been little to publish at all.
Any article would have been very much disembodied: see para 135 above.
The allegations of corruption made by the ISC insider touched Mr Beresovsky, ISC and Mr Hunter as much as DS Flood.
To avoid the risk of identification of all or any of them, all would have had to have been anonymised.
An article excluding all names, and consisting of a general and anonymised report of investigation into possible corruption in the extradition unit at the instance of unidentified foreigners at risk of extradition, would have been unlikely to be readable or publishable.
It would also have been unlikely to fulfil the purpose of stimulating and ensuring diligent pursuit by the police of their investigation, which the judge found that Mr Gillard junior intended.
Further, as Mr Gillard junior also noted in his evidence, a generalised report of investigation into corruption involving the MPS extradition unit could have cast a shadow over all officers in that fairly small unit.
The authorities cited in para 127 136 above indicate that these are all material considerations.
As to the detail of the allegations, TNL could have reproduced the police statement of 28 April 2006, together with a bare statement identifying DS Flood as the officer under investigation.
But, as the Master of the Rolls acknowledged (Court of Appeal, para 68), it is doubtful how publishable any article would then have been.
Again, it is also doubtful whether it would have achieved the purpose which the journalists had in mind.
Here too, journalistic judgment and editorial freedom are entitled to weight: paras 132 137 above.
These considerations do not however themselves determine the question whether it was in the public interest to publish an article with the names and detail in fact included, or whether, if without such names and detail there was no publishable article, TNL should not simply have awaited the outcome of the police investigation before contemplating any publication.
Mr Price relied before the Supreme Court, as before the Court of Appeal, upon Purcell v Sowler (1877) 2 CPD 215 and De Buse v McCarthy [1942] 1 KB 156.
I agree with what Lord Phillips says about these cases in his judgment at paras 58 to 60 above.
Their significance needs to be reviewed in the light of more recent developments of legal principle, although they remain valuable for their emphasis on the significance of personal reputation in the face of unproven allegations of misconduct.
But it is worth underlining that they are, even on their own terms, decisions reached on facts very different from the present.
In Purcell v Sowler, no privilege was held to attach to the newspaper publication of a report of proceedings at a meeting of poor law guardians, at which ex parte charges of misconduct against the medical officer of the union were made, of neglect in not attending to the pauper patients when sent for.
The conduct of such a medical officer was accepted to be of the greatest importance in the district and so to concern the public in general.
But, although the meeting was a privileged occasion so far as the speaker was concerned, publication in the press was not: Reynolds, p 196A, per Lord Nicholls.
The reasons of the four judges involved in Purcell v Sowler do however not coincide.
Despite speaking earlier of the importance of the medical officers conduct, Cockburn CJ said that the court was concerned with a body with very limited jurisdiction, as to which it cannot be asserted that publicity is essentially necessary or usual, and he accepted that the proceedings of different bodies to whom part of the administration of the country is committed such as the Corporation of London might be matter of general discussion and publication.
Baggallay JA was unready to extend the privilege granted to bodies such as Parliament, because of the advantage of publicity, to bodies such as the poor law guardians.
In a case like the present, concerned with the possibility of police corruption in relation to extradition of Russian oligarchs, analogies with bodies with very limited jurisdiction or distinctions between the conduct of the MPS and the proceedings of bodies like the Corporation of London are unconvincing.
Mellish and Bramwell JJA adopted different reasoning.
First, they emphasised that there was no reason to make the charges public before the person charged had been told of them and had had an opportunity of meeting them.
Second, they distinguished situations where the facts had been ascertained or were not in controversy.
On the present appeal, DS Flood was told of and had the opportunity to respond to the allegations, though Mr Price points out that the facts have not been ascertained and are in controversy.
Mr Price also submits that it would be unfair to have expected DS Flood to respond in detail, beyond a full denial, when the police investigation was under way.
I am not, however, persuaded that this can have caused any unfairness on the facts of this case.
Assuming his innocence, DS Floods response can only ever have been that he knew nothing of Noah or of any attempts to obtain information about extradition proceedings involving any Russian oligarch, because he was not Noah.
In other words, the blanket denial which appeared in paragraph 11 of the article was essentially all that he would have said, however much detail about the allegations was put to him.
In De Buse a town clerk circulated to council members and, as was the practice, to all local public libraries, an agenda attached to which was a report on loss of petrol from a council depot.
The report recounted the conviction of two council employees for stealing the petrol, together with allegations of involvement on the part of other employees made by the convicted employees at their trial and repeated before the committee.
The committee report recounted that the other employees had denied any such involvement, contained in terms no statement that the committee found the charges proved, but recommended the removal and transfer to other positions of the other employees.
The Court of Appeal held that no privilege attached to the publication in public libraries.
Even the ratepayers had no proper interest in a matter which was going to be examined internally, before it emerged in the shape of some practical action or practical resolution: p 166 per Lord Greene.
Lord Greene went on to contrast Hunt v Great Northern Railway Co [1891] 2 QB 189, where a railway company, after dismissing a guard for gross neglect of duty, published the fact with details of the grounds in a circular to employees.
Lord Greene thought such a publication to be obviously privileged, because it was clearly to the interest of railway company to bring home to its employees the type of action which was regarded by it as a proper subject for punishment by dismissal, and it was also to the interest of the employees to know that: p 167.
De Buse therefore concerned a town clerks disclosure to the random cross section of society visiting public libraries of an agenda and report for a forthcoming meeting of the local authority.
The meeting itself would shortly determine the consequences of the reported allegations.
Several points arise.
First, the case did not concern the press or its role as social watchdog in disclosing to the public information of real public interest.
Tugendhat J pointed out (para 189), that the freedom of any public authority, including the police, to disclose information to the public body would now fall to be considered, not under the head of Reynolds public interest privilege, but under the Human Rights Act 1998 and article 8 of the Convention or the Data Protection Act 1998.
Second, the public interest, even at a local level, of the allegations in De Buse does not compare with the public interest, at a national and international level, of the allegations of corruption in the MPS relating to the extradition of Russian oligarchs in the present case.
Third, there was nothing in De Buse comparable to the feature of the present case, that the press had itself been investigating the matter, and was concerned that the police were not taking it as seriously as it appeared to merit.
More fundamental though is the point noted by Lord Phillips, that the House of Lords in Reynolds and later also in Jameel has reconsidered the weight to be attached to protection of reputation and freedom of the press, and reached decisions of which the effect is to liberalise and to redress the balance in favour of greater freedom to publish matters of genuine public interest: Jameel, para 35, per Lord Bingham and para 38, per Lord Hoffmann.
The Master of the Rolls took up these points and noted that the introduction of the Convention rights into domestic law potentially justified a different approach in relation to the circumstances of Purcell.
The analysis of Convention authority which I have included in paras 138 146 above in my view bears this out.
However, the Master of the Rolls was right to observe that both Purcell and De Buse remain as salutary reminders that publicising allegations of serious wrongdoing made by third parties, whether relayed to the police or not, can cause serious distress and reputational harm to the victim, and, if they turn out to be wrong, there should be a good reason before the victim is left without redress: para 43.
Only the last part of this statement may be open to criticism, since the existence or otherwise of Reynolds privilege must be judged on the facts as they reasonably appeared to the journalist at the time.
But any journalist who publishes allegations must consider carefully the public interest in doing so and the terms in which he does so, at a time when the allegations have not been investigated or their accuracy determined, and weigh these against the risk of unjustified damage to the reputations of those affected.
The Master of the Rolls also noted in this connection Lord Nicholls warning in Reynolds, at p 201, that Protection of reputation is conducive to public good.
It is in the public interest that the reputation of public figures should not be debased falsely.
On the other hand, public officers with a role as important as that of the police must expect that their conduct will be open to close scrutiny by the press, as the European Court of Human Rights has made clear in cases such as Flux (No 7) v Moldova, paras 19 and 22, and Axel Springer AG v Germany, paras 91 and 99, where the Court indicated that the fact that the actor was known for his role as a police superintendent, whose mission was law enforcement and crime protection, itself bore on the public interest in being informed about his arrest for a criminal offence.
Conclusion
It follows from the analysis in paragraphs 154 to 178 above that in my view the Court of Appeal erred in its approach and in the reasons it gave for reaching conclusions differing from the judge.
Balancing the competing interests in this case, the judge was in my view justified in the present case in regarding the article concerning DS Flood as covered by the public interest defence recognised in Reynolds and Jameel.
The starting point is that the investigation into possible police corruption in the area of extradition of a Russian oligarch to Russia informed the public on a matter of great public interest and sensitivity.
TNL journalists were motivated by a concern to ensure that the investigation was being or would be properly pursued.
They had themselves investigated the sources and nature of the allegations exhaustively over a substantial period as far as they could.
The article would have been unlikely to be publishable at all without details of the names and transactions involved in the alleged corruption.
The facts regarding such transactions were accurately stated.
The article, although undoubtedly damaging to DS Floods immediate reputation, was balanced in content and tone (certainly much more so, I add in parenthesis, than the articles in issue in White v Sweden: paras 140 141 above).
It did not assert the truth of the reported allegations of impropriety made by the ISC insider, but it identified them as the basis of an investigation in progress to establish whether there had been any impropriety.
DS Flood and all others implicated in the allegations of impropriety were given the opportunity of commenting, and their denials in that regard were in each case recorded.
Such omissions as there may have been in the reporting were in the overall context minor.
The judgment of the journalists and editors of TNL as to the nature and content of the article merits respect: paras 127 137 above.
All these and other relevant factors fell and fall to be weighed in the balance.
On this basis, there was, in my judgment, no good reason for the Court of Appeal to depart from the judges overall assessment that publication of the article was in the public interest, despite its immediate adverse effect on DS Floods reputation.
On the contrary, I agree with the judges assessment.
The proper appellate approach
I agree with Lord Phillips that this is not the case in which to consider the proper appellate approach to the issue or issues involved in a decision on Reynolds privilege.
It is unnecessary to do so.
For the reasons given in paragraphs 121 181, I would allow the appeal and restore the judgment of Tugendhat J on the first limb of the appeal.
LORD CLARKE
Introduction
I agree that the first limb of this appeal should be allowed for the reasons given by Lord Mance and Lord Dyson.
I agree with Lord Brown that, for the reasons he gives, there is no principle of law that precludes TNL from invoking Reynolds privilege in a case such as this.
I further agree with him that, as he puts it at para 113, in such a case the judge is deciding but a single question, namely whether those who published the defamation, given what they knew and did not know and whatever they had done or had not done to guard so far as possible against the publication of untrue defamatory material, could properly have considered the publication in principle to be in the public interest.
I further agree with Lord Brown that, in deciding that question, a host of different considerations are in play.
Lord Brown has identified some of them in para 113 above.
Finally, I agree with his conclusion at para 119 that, where, as here, the denunciation is of a public officer, relates to a matter of obvious public importance and interest, and may justifiably appear to the journalists to be supported by a strong circumstantial case, it is properly open to the trial judge to find the defence made out.
The question thus arises what is the correct approach of an appellate court to the determination of the question whether it was properly open to the trial judge to find the defence made out.
I agree with the other members of the court that the answer to that question is not critical to the determination of the appeal because, as I read their judgments, they all agree that the appeal should be allowed, whatever the correct test.
I had intended to express some views on this question.
However, given that the question what is the correct test in a Reynolds privilege case was not the subject of oral argument, I agree with Lord Phillips, for the reasons he gives, that this is not the case in which this court should lay down any general principle in this class of case.
LORD DYSON
The general principles of Reynolds privilege are now well established: see Reynolds v Times Newpapers Ltd [2001] 2 AC 127, Bonnick v Morris [2002] 1 AC 300 and Jameel (Mohammed) v Wall Street Journal Europe Sprl [2007] 1 AC 359.
These principles are not hard edged and, as is illustrated by the present case, their application in particular circumstances can give rise to real difficulty.
As Lord Nicholls said in Reynolds at p 205D, the weight to be given to relevant factors will vary from case to case.
Over time, a valuable corpus of case law will be built up.
In Loutchansky v Times Newspapers Ltd [2002] QB 783, para 23, the Court of Appeal said that at the end of the day the court has to ask itself the single question whether in all the circumstances the duty interest test, or the right to know test has been satisfied so that qualified privilege attaches.
Although this may be the ultimate question, the answer to it will usually depend on a number of specific considerations, which may include some or all of those identified by Lord Nicholls in his celebrated speech which is quoted by Lord Phillips at para 29 above.
Thus necessary conditions for a Reynolds privilege defence will include that (i) there is a real public interest in communicating and receiving the information (the public interest issue); and (ii) the journalist must have taken the care that a responsible journalist would take to verify the information published (the verification issue): see, for example, per Baroness Hale at paras 147 to 149 of Jameel.
But even if both of these conditions are fulfilled, it does not necessarily follow that the Reynolds privilege defence will be made out.
As Lord Nicholls said in Reynolds, the existence of the defence will depend on whether there has been responsible journalism in all the circumstances.
In the present case, the debate has focused on both the public interest and verification issues.
They are factually distinct, although the rationale for Reynolds privilege tends to conflate them.
Thus, it has been said that there is no duty to publish and the public has no interest to read material which the publisher has not taken reasonable steps to verify: see, for example, per Lord Bingham in Jameel at para 32.
Lord Phillips and Lord Mance have explained in detail first why they consider that there was a public interest in the publication of most, if not all, of the facts that supported the story and in the naming of DS Flood; and secondly why they would hold that the journalists had taken reasonable steps to verify that there was a serious possibility that DS Flood had been guilty of corruption.
I agree that the appeal should be allowed for the reasons given by Lord Mance and, subject to the qualifications that appear below, also for the reasons given by Lord Phillips.
I propose to say nothing about the verification issue.
But I wish to say something on three topics.
The first arises from para 69 above, where Lord Phillips comments on para 104 of the judgment of Moore Bick LJ (quoted at para 67 above).
The second is whether there was a public interest in naming DS Flood in the article.
The third is whether the motives of the journalists were relevant to the public interest issue.
Paragraph 104 of Moore Bick LJs judgment
At para 104 of his judgment, Moore Bick LJ seems to set out a general principle as to when it will be in the public interest to publish details that appear to support an accusation that has been made against an individual of criminal conduct that is being investigated by the police.
He appears to state in uncompromising terms as a general proposition that it is unnecessary and inappropriate (and therefore not in the public interest) for reports of serious allegations of crime or professional misconduct to set out the details of the allegations.
The journalist should go no further than to describe the charge itself.
That is sufficient to inform the public of what it has an interest in knowing.
The alternative is trial by press without proper safeguards, which is clearly not in the public interest.
In other words, regardless of the other circumstances of the case, it is not in the public interest to publish details that appear to support an accusation against an individual of criminal conduct that is being investigated by the police.
This general principle would appear to deny a Reynolds defence even where, for example, the journalist has taken all reasonable steps to verify the truth of the details of the accusation, his sources are apparently reliable, the individual has been invited to comment on the accusations and his response is fairly reported and the tone of the article is measured.
I can see no basis for a general rule in these uncompromising terms.
So far as I am aware, there is no support for it in the authorities.
I would reject it for three reasons.
First, such a rule is not consonant with the statement by Lord Nicholls in Reynolds that all the circumstances of the case should be taken into account, which may include (but are not limited to) the ten factors listed by him.
Secondly, Lord Nicholls emphasised the need to confine the interference with freedom of speech to what is necessary in the circumstances of the case.
This is a point which is emphasised in many of the cases.
It has particular importance in the light of the Human Rights Act 1998 and article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
In this respect, I agree with what Lord Mance says at paras 138 to 146 above.
If (as para 104 would appear to suggest) it is unlawful to publish the details of an accusation of criminal conduct regardless of the public interest in the subject matter of the article and the other circumstances of the case, this is bound to have a chilling effect on investigative journalism of this type.
This is undesirable in a democratic society.
Thirdly, such a general rule is inconsistent with another important principle which is that, although the question of whether the story as a whole was a matter of public interest must be determined by the court, the question of whether defamatory details should have been included is often a matter of how the story should have been presented.
On that issue, allowance must be made for editorial judgment: see per Lord Hoffmann in Jameel at para 51 quoted by Lord Mance at para 132 above.
Moore Bick LJ recognised the importance of this point at para 100 of his judgment.
He said: It has been recognised that a considerable degree of deference should be paid to editorial judgment when deciding whether the inclusion of the defamatory material was justified and undoubtedly setting out the allegations and naming DS Flood added force and credibility to the story.
The paragraphs about various Russian oligarchs, their business affairs and their relationship with the Kremlin, were no doubt included essentially for colour and presentational purposes.
Lord Phillips accepts that there is no general rule that it is not in the public interest to publish details that appear to support an accusation of criminal conduct that is being investigated by the police.
But he says that the matters identified by Moore Bick LJ at para 104 will often weigh conclusively against publication of the details.
In other words, the danger of trial by press without proper safeguards will often of itself determine that it is not in the public interest to publish the details.
In my view, it is necessary to distinguish between allegations made against ordinary individuals and allegations made against persons who perform public functions (especially where they are about the alleged performance of those functions).
I would accept that the danger of trial by press without proper safeguards will often weigh heavily against the publication of the details of an accusation against an ordinary individual.
But where the accusation is of crime or professional misconduct by a person in his performance of a public function, I do not think that the danger of trial by press without proper safeguards weighs heavily, still less conclusively, against publication.
As Lord Phillips says at para 69 above, subject to the issue of verification in this case, it was in the public interest to publish most of the facts that supported the accusation against DS Flood.
The details of the accusation were likely to excite particular public interest since it concerned allegations of selling sensitive information about extradition for the benefit of Russian oligarchs.
But I do not consider that the public interest in the publication of the details lay only in the particularly eye catching nature of the allegations of corruption in this case.
It is generally likely to be in the public interest to publish the details of allegations of police corruption, whatever the nature of the alleged corruption, provided that the test of responsible journalism is met.
It seems to me that the Reynolds privilege jurisprudence provides sufficient protection from the unjustified inclusion of the details of allegations of crime or professional misconduct.
Thus not only must the story as a whole be in the public interest, but there must also be a public interest in the publication of the details of the allegations.
The need for verification provides real protection for the individual concerned.
More generally, Reynolds privilege is not available where there is some indication that the professional judgment of the editor or journalist was made in a casual, cavalier, slipshod or careless manner: per Lord Bingham in Jameel at para 33.
And then there are other factors relevant to responsible journalism such as those identified by Lord Nicholls in Reynolds, including whether comment has been sought from the claimant, whether the article contains the gist of his side of the story and the tone of the article.
I accept that, where the details of allegations which are being investigated by the police are published, the individual concerned may feel compelled to say something in response which he would be wiser not to say.
But where he is asked by a journalist to comment on an allegation, he can seek legal advice.
He can always deny the allegation (as DS Flood did in this case).
Further, as Tugendhat J said at para 183 of his judgment, the law provides sanctions for interference with the course of justice or contempt of court.
I would, therefore, hold that for all the reasons summarised by Lord Mance at paras 179 to 181 above, there was a public interest in the publication of the details of the allegations or the supporting facts in the article.
Subject to what I have said at para 195 above, I also agree with what Lord Phillips says about this.
The naming of DS Flood
Lord Phillips deals with this at paras 73 to 75 and Lord Mance at paras 132 to 137 and 169.
There is a difference of emphasis between them.
The authorities referred to by Lord Mance at paras 132 to 137 show that weight should be given to a newspapers editorial judgment as to what details are necessary to convey the essential message.
These include whether an individual should be named.
Lord Phillips places little or no weight on the editorial judgment point but holds that, on the facts of this case, it was impossible to publish the details of the article without disclosing to those close to DS Flood that he was the officer to whom it related.
I agree that this particular aspect of the case would support the conclusion that naming the officer was responsible journalism.
But I would also reach this conclusion on the wider basis that the court should be slow to interfere with an exercise of editorial judgment and would hold on that ground too that the naming of the individual was justified in this case.
The motive question
The judge held that it was a matter of public interest that the police may not have been investigating allegations of police corruption in a timely fashion and that it was in pursuit of a legitimate aim (and therefore in the public interest) that TNL published the article with a view to attempting to ensure that an investigation took place, or took place in a timely fashion (paras 200 and 216).
The Court of Appeal disagreed: [2011] 1 WLR 153.
Lord Neuberger MR (para 54) said that the subjective motives of the journalist were irrelevant to whether the publication was in the public interest.
Moore Bick LJ (para 106) did not accept that part of the public interest in publishing the story lay in prompting the investigation.
He said that, if the purpose of the article had been to prompt the police to pursue an investigation, the article would have been written in a way that would have placed greater emphasis on the existence of the allegations and the failure of the police to pursue an investigation.
Moses LJ (para 114) agreed with both.
It is important to distinguish between the objective aim of a publication and the subjective motives of the journalist or publisher who publishes it.
I agree that the subjective motives are usually irrelevant to the question whether the publication is in the public interest.
That question should be determined objectively.
I think that this is what Lord Neuberger was saying.
The mere fact that an article is published because the journalist or publisher wants to hurt the subject of the article is not material to whether the publication is in the public interest.
A story that a police officer is being investigated for corruption is prima facie in the public interest even if the story is published in furtherance of a personal vendetta by the journalist or publisher against the officer.
If an investigation into allegations of police corruption is not being properly conducted, there is a public interest in the publication of a story about that failure.
Quite apart from the public interest in the subject matter of the story, the objective aim of its publication might legitimately be to draw attention to the failure and to encourage the proper conduct of the investigation.
It was in the public interest for the allegations against DS Flood to be investigated promptly, and that was relevant to whether it was in the public interest to publish a story about the investigation.
Lord Nicholls said in terms in Reynolds at p 205C: A newspaper can raise queries or call for an investigation.
By the same token, it can publish a story about an existing investigation and expressly or by implication criticise the manner in which the investigation is being conducted.
Moore Bick LJ seems implicitly to have accepted this, but concluded that, if that had been the purpose of the Article, it would have been expressed differently.
Like Lord Phillips (para 70) and Lord Mance (para 160), I am of the opinion that the Court of Appeal should not have interfered with the finding of the judge on this point (which in any event did not form a central part of his reasoning).
Like Lord Clarke, I had intended to express an opinion as to the circumstances in which an appellate court should interfere with the assessment of the lower court on an issue such as whether a publication should be protected by Reynolds privilege.
But I have been persuaded that, for the reasons given by Lord Phillips at paras 100 to 106 above, it would not be right to do so in the present case.
| UK-Abs | The respondent is a Detective Sergeant with the Metropolitan Police Service (MPS) Extradition Unit.
The appellant is the publisher of The Times newspaper and of material on The Times website.
On 2 June 2006 the appellant published an article which named the respondent as a detective accused of taking money to disclose confidential extradition information to a security firm, ISC Global (UK).
ISCs clients included high profile Russians who were the subject of extradition requests.
The respondent was a friend of one of the partners of ISC, Mr Hunter.
An ISC insider was said to have identified cash payments totalling 20,000, to a recipient codenamed as Noah in the accounts, which could be a reference to the respondent.
The appellant was told of and became interested in this possibility from December 2005.
The ISC insider later passed a dossier of information to the MPS and to the appellant.
The article quoted a spokesman from the MPS who confirmed that the MPS was conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money.
The article reported the denial of wrongdoing issued by the respondent.
The MPS had not in fact taken any steps to investigate the allegations before being contacted by the appellant in April 2006.
At that point warrants were issued and the respondents home was searched.
The respondent was temporarily moved from the Extradition Unit, returning in January 2007.
In September 2007 the MPS told the parties that the investigation had finished and that it had made no recommendations of criminal or disciplinary proceedings against the respondent.
The respondent issued a claim for libel, complaining that the article meant there were strong grounds to suspect he had abused his position as a police officer.
The appellant relied, amongst other defences, on the special defence for publications in the public interest known as Reynolds privilege.
The applicability of the defence in the circumstances of this case was determined as a preliminary issue.
On 16 October 2009 the judge in the High Court found that the publication of the article in the newspaper (and on the website up to the date the investigation was completed) was protected by Reynolds privilege.
This finding was overturned by the Court of Appeal on 13 July 2010.
The Supreme Court unanimously allows the appeal and holds that the article was protected by Reynolds privilege.
The main judgments are given by Lord Phillips and Lord Mance.
Reynolds privilege protects the publication of defamatory matter to the world at large where (i) it is in the public interest that the information should be published and (ii) the publisher has acted responsibly in publishing the
information [2].
The present appeal raised three issues of principle in relation to the privilege: how to approach the question of the meaning of the article, whether it was in the public interest to refer to the details of allegations made against the respondent and what verification was required to discharge the requirements of responsible journalism [22 25].
The Supreme Court addressed the issues as follows: Meaning The seriousness of the allegation being made is an important factor in the assessment of where the balance is to be struck between the desirability that the public should receive information and the potential harm caused if the individual is defamed [48].
It is commonplace for Reynolds privilege to be determined as a preliminary issue but this makes it necessary to determine the meaning of the article, which will also be relevant to verification.
The sensible way of achieving this is for the parties to agree to trial by judge alone, who can then resolve any dispute as to meaning at the same time [49].
In this case the parties agreed that the meanings of the article for which they respectively contended that there were strong grounds to investigate the respondent or that there were grounds justifying a police investigation were so close that it was not necessary to choose between them for the purposes of the preliminary issue.
However, where a publication is capable of bearing a range of meanings, Lord Phillips and Lord Brown thought that a journalist must have regard to the full range when deciding whether to publish and when attempting to verify [51][111].
Public interest The respondent maintained that while the general subject matter of the article police corruption was of public interest, as a matter of principle the publication of the facts giving rise to the allegations being investigated was not [53].
This may be so, but each case will turn on its own facts and on this occasion the publication of such details was justified.
The story was of high public importance and the allegations against the respondent were the whole story [68] [119].
They were published with the legitimate aim of ensuring the allegations were properly investigated by the police in circumstances where the journalist had good reason to doubt that they were being [69].
Naming the respondent was also justified as he would be identified in any event by his fellow officers and suspicion should not fall on other members of the Extradition Unit [75] [169].
Lord Mance held that journalistic judgment and editorial freedom were entitled to weight when considering how much detail should be published [170] but any journalist must consider carefully the public interest in doing so when allegations have not been investigated or their accuracy determined [177].
Lord Dyson considered that it was generally likely to be in the public interest to publish the details of allegations of police corruption, provided the test of responsible journalism was met [195].
Verification This was not a case of reportage, where the public interest lies in the fact that an allegation has been made.
Here the public interest lay in the content of the allegations and the fact that they might be true.
Privilege for this would only attach if the journalist honestly and reasonably believed the published facts to be true [78].
The hard and fast principles relating to the defence of justification do not apply when considering verification.
The existence of grounds for suspicion can be based on information from reliable sources or may reasonably be inferred from the fact of a police investigation [80].
In this case the judge found that the supporting facts were true and verified as such [87] [167].
It was reasonable for the journalists to conclude from the police investigation and application for a search warrant that the accusation against the respondent might be well founded.
There was a strong circumstantial case against him [98].
The Supreme Court declined to address the question of how, as a matter of principle, the Court of Appeal should approach a challenge to a decision of a trial judge on a defence of Reynolds privilege, in the absence of oral argument on this aspect [100 106].
The outstanding appeal, in relation to the continued publication of the article on the website after the completion of the investigation of the respondent, was adjourned for a further hearing [107].
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Mexfield Housing Co Operative Ltd (Mexfield) is a fully mutual housing co operative association, which was founded by a bank as part of a mortgage rescue scheme, ie with a view to buying mortgaged properties from individual borrowers who are in difficulty, and then letting the properties back to them.
In that capacity, it acquired a number of residential properties, which it then let out to the former owner mortgagors, who, in the normal way for tenants of a fully mutual housing co operative, were required by its rules to be members of Mexfield.
One of those properties is 17 Elton Avenue, Barnet (the premises), which, during 1993, Mexfield purchased from Ms Ruza Berrisford, and, by a written agreement made on 13 December 1993, agreed to let it back to her.
The agreement was described as an Occupancy Agreement (the Agreement), and it started by reciting that, in anticipation of her occupation of the premises, Ms Berrisford had become a member of Mexfield.
Clause 1 then provided as follows: [Mexfield] shall let and [Ms Berrisford] shall take the [premises] from 13 December 1993 and thereafter from month to month until determined as provided in this Agreement.
Clause 2 stipulated that the rent was to be payable weekly in advance, and the fourth schedule stated that it was to be 89 per week, subject to annual increase in accordance with the Retail Price Index plus 2%.
Clause 2(4) stated that any increase in rent was only to take effect after [a]t least one months notice in writing.
Clauses 3 and 4 contained a number of covenants of a familiar nature to those who are conversant with professionally drafted residential tenancy agreements.
Clause 3 was concerned with Ms Berrisfords obligations, and it included, in subclause (1), an obligation to take possession of the premises and to pay the rent, in subclause (9), an obligation to use the premises as her only or main residence, and, in subclause (11), an absolute obligation not to assign, sublet or part with possession or occupation of the whole or any part of the premises.
The only provisions of the Agreement which expressly provided for its determination were clauses 5 and 6, which were in these terms: 5.
This Agreement shall be determinable by [Ms Berrisford] giving [Mexfield] one months notice in writing.
This Agreement may be brought to an end by [Mexfield] by the exercise of the right of re entry specified in this clause but ONLY in the following circumstances: a) If the rent reserved hereby or any part thereof shall at any time be in arrear and unpaid for 21 days b) If [Ms Berrisford] shall at any time fail or neglect to perform or observe any of the [terms of] this Agreement which are to be performed and observed by [her] c) If [Ms Berrisford] shall cease to be a member of [Mexfield] d) If a resolution is passed under [Mexfields] Rules regarding a proposal to dissolve [Mexfield] THEN in each case it shall be lawful for [Mexfield] to re enter upon the premises and peaceably to hold and enjoy the premises thenceforth and so that the rights to occupy the premises shall absolutely end and determine as if this Agreement had not been made . 6.
Because Mexfield was a mutual housing association, any residential tenancy granted to one of its members attracted no statutory protection, save the very limited protection accorded by the Protection from Eviction Act 1977 (the 1977 Act).
For present purposes, the 1977 Act relevantly contains provisions which (i) preclude a residential property owner from physically excluding or evicting an existing or former licensee or tenant from the property without an order of the court, and (ii) entitle a residential occupier under a periodic tenancy to at least four weeks notice to quit.
Ms Berrisford remained in occupation of the premises, complying with her obligations under the Agreement, until (apparently through no fault of hers) she fell behind with her rent.
Mexfield could have invoked clause 6(a), but it did not do so, presumably because it is a forfeiture provision, and Ms Berrisford soon paid off the rent arrears, so it would have been a foregone conclusion that she would have obtained relief from forfeiture.
Rather than relying on clause 6(a), what Mexfield did was to serve a notice to quit on Mrs Berrisford on 11 February 2008, expiring on 17 March 2008.
Mexfield then brought proceedings for possession in the County Court, arguing that, despite the apparent limited circumstances in which, and the limited method by which, it could terminate the Agreement (sc. under clause 6), it nonetheless was entitled to put an end to Ms Berrisfords tenancy by serving a notice to quit.
The evidence advanced on behalf of Ms Berrisford suggests that, in the past five years or so, Mexfield, or its mortgagee, came under some financial pressure, and that, as a result of purchasing its mortgage debt, Mexfield is now effectively owned and controlled by a businessman, who is seeking to pursue the claim for possession for commercial reasons.
Mexfields evidence is that it is run by a committee of management, and nobody else.
For present purposes, it is unnecessary to address this dispute, but it is only fair to Mexfield to record that (i) even if Ms Berrisfords version of events is correct, Mexfield has done nothing wrong, (ii) this is a test case, as the Agreement is a standard form used by Mexfield, and (iii) Mexfield has agreed that it will enter into a fresh agreement with Ms Berrisford if her current appeal fails.
The essence of Mexfields case was that the effect of a number of cases, culminating in the decision of the House of Lords in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386, is that an arrangement such as that embodied in the Agreement could not be a valid tenancy as a matter of law.
Accordingly, Mexfield contended, Ms Berrisford had become a periodic (either weekly, because she paid a weekly rent, or monthly, because that was the parties apparent intention) tenant of the premises by virtue of the payment and acceptance of rent since 1993, and, pursuant to well established and unchallenged principles, Mexfield was entitled to determine such a tenancy with at least one weeks (or one months) notice in common law, but required to be at least four weeks notice by the 1977 Act.
At first instance, His Honour Judge Mitchell refused Mexfields application for summary judgment.
However, on appeal, Peter Smith J, and, on appeal from him, the Court of Appeal, accepted, albeit reluctantly, Mexfields argument, and made an order for possession see [2009] EWHC 2392 Ch and [2010] EWCA Civ 811; [2011] 1 Ch 244.
In the Court of Appeal, in three clear and illuminating judgments, Mummery and Aikens LJJ considered that they were bound by authority to make such an order, but Wilson LJ held that the contractual limitation on Mexfields right to determine the Agreement was enforceable by Ms Berrisford.
Ms Berrisfords primary claim that she has a subsisting tenancy
The argument in summary
The argument for Ms Berrisford, as developed by Mr Wonnacott in his conspicuously clear and learned submissions, is to this effect: (i) The Agreement purports to be the grant to Ms Berrisford of a tenancy for a term determinable by her on one months notice under clause 5, or by Mexfield through exercising its rights under clause 6, and in no other way; (ii) Subject to the points in sub paragraphs (iii) and (iv), such an arrangement cannot constitute a valid tenancy in law; (iii) Before 1926, the arrangement would have been a term for the life of the tenant, subject to the determination rights under clauses 5 and 6 before her death; (iv) By virtue of section 149(6) of the Law of Property Act 1925 (the 1925 Act), such a term is now a tenancy for 90 years, subject to the landlords right to determine on the tenants death, and to the rights under clauses 5 and 6; (v) As Ms Berrisford has not served notice under clause 5, and Mexfield is not relying on clause 6, Mexfield is not entitled to possession, as the 90 year tenancy created by the Agreement still subsists.
I shall consider those five points in turn.
Can the landlord determine the Agreement by giving one months notice?
The first point turns on the interpretation of the Agreement.
At any rate at first sight, it seems hard to quarrel with Mr Wonnacotts contention that it continues until either the tenant serves notice under clause 5 or the landlord can and does exercise its rights under clause 6.
After all, clause 1 provides that the Agreement is to subsist until determined as provided in this agreement, and the only provisions which deal with determination are clauses 5 and 6.
However, on behalf of Mexfield, Mr Gaunt QC relies on the fact that clause 1 describes the tenancy as being from month to month, and says that this carries with it a right in the landlord to determine the Agreement on one months notice.
This was not a point raised by Mexfield in the courts below, but it is a pure point of law, and no prejudice could be caused to Ms Berrisford by the fact that it was taken for the first time in this court.
We therefore permitted Mexfield to argue that it has the right to determine the Agreement on one months notice.
Having now heard the argument, which was advanced in attractive and well modulated terms, I would reject it.
Before considering the argument by reference to the terms of the Agreement, it is, of course, necessary to consider whether there is anything in the surrounding circumstances relevant to the interpretation of the Agreement.
Beyond the fact that Mexfield was a co operative housing association, of which Ms Berrisford was a member, and that the purpose of the Agreement was to provide Ms Berrisford with a home (all of which is anyway plain from the provisions of the Agreement), it does not appear to me that there are any relevant facts, save that the mortgage rescue background tends to support the notion that Ms Berrisfords right of occupation was not intended to be precarious. (There was some argument as to whether the Agreement was based on guidance given by the Housing Corporation, and there was an application to adduce further evidence in that connection.
I consider that whether or not Mexfield was following such guidance is irrelevant to any issue on this appeal.
I would therefore refuse the application, and will say no more about that aspect).
Turning to the language of the Agreement, Mr Gaunts central point is that the inclusion of the words from month to month mean that the Agreement was intended to be a monthly tenancy, and that, effectively by definition, a monthly tenancy can be determined by either side with one months notice.
I accept that, in the absence of any indication to the contrary, a tenancy granted from month to month is a monthly tenancy, and that, again in the absence of any indication to the contrary, a monthly tenancy may be determined by either party giving one months notice to the other.
For instance, as explained later in this judgment, it is clear that parties to a monthly tenancy could agree on a bar for a specific period on the right of a landlord to serve notice to quit, and they can also agree a longer (or indeed a shorter) period of notice than the one month which would normally be implied.
As observed by Lord Clarke a tenancy agreement has to be interpreted in the same way as any other written contract, so the precise rights and obligations of the parties under it must depend on the terms which the parties have agreed and the circumstances in which they were agreed.
However, in some circumstances, there may be principles of law which result in the parties intention being frustrated or modified, and, as is clear from the reasoning in Street v Mountford [1985] AC 809, the legal consequences of what the parties have agreed is a matter of law rather than dependent on what the parties intended.
In this case, it seems clear that the parties intended that the arrangement created by the Agreement should only be determinable pursuant to clause 5 or clause 6.
As already mentioned, that seems to follow from the closing words of clause 1.
However, Mr Gaunt argues that, by virtue of the fact that a tenancy from month to month is determinable by either party on one months notice by either party, the Agreement impliedly provided for determination by Mexfield on a months notice.
That ingenious argument appears to me to suffer from several flaws.
First, such an implied right of determination does not naturally fall within the scope of the natural meaning of the expression determined as provided in this Agreement.
Secondly, it would mean that clause 5 is redundant.
Thirdly, it seems scarcely consistent with the words but ONLY in clause 6.
Fourthly, if Mexfield does have the right to determine on one months notice, there seems to have been little point in giving it the right to forfeit in clause 6.
Finally, given the circumstances in which the Agreement was entered into, it seems unlikely that Ms Berrisfords security was intended to be so tenuous as to be determinable by Mexfield on one months notice at any time from the day the Agreement was made.
Accordingly, if a monthly tenancy is automatically determinable by either party giving the other one months notice, as Mr Gaunt contends, it seems to me clear that the Agreement did not give rise to a monthly tenancy, unless it is impossible to conclude, as a matter of law, that it did not.
In my view, it is perfectly possible to avoid such a conclusion.
The words from month to month could quite properly have been included to indicate that, if Ms Berrisford wished to serve notice under clause 5, or (more questionably) if Mexfield wished to serve notice under clause 2(4), such a notice must take effect on the thirteenth day of a month.
However, it is right to add that, for reasons given later in this judgment, I do not accept Mr Gaunts contention that, if the Agreement gave rise to a monthly tenancy, it would have to be automatically determinable on one months notice by either party.
Accordingly, whether or not the Agreement gave rise to a monthly tenancy, I consider that, as a matter of contractual interpretation, the effect of clauses 1, 5 and 6 is that that tenancy can only be determined by Ms Berrisford pursuant to clause 5 or by Mexfield pursuant to clause 6, and in no other way (save consensually, viz by surrender).
Is such an arrangement capable of being a tenancy as a matter of law?
I turn to the second issue, namely whether an arrangement, which can only come to an end by service of one months notice by the tenant, or by the landlord invoking a right of determination on one or more of the grounds set out in clause 6, is capable, as a matter of law, of being a tenancy in accordance with its terms.
Mr Wonnacott accepts that it is not so capable.
His concession is supported both by very old authority and by high modern authority.
It seems to have been established for a long time that an agreement for an uncertain term cannot be a tenancy in the sense of being a term of years.
In Say v Smith (1563) Plowd 269, 272, Anthony Brown J said that every contract sufficient to make a lease for years ought to have certainty in three limitations, viz in the commencement of the term, in the continuance of it, and in the end of it and words in a lease, which dont make this appear, are but babble.
That is consistent with what was stated in Bractons De Legibus et Consuetudinibus Angliae, written in the mid thirteenth century.
It is there stated that a grant of land until you have taken 40 pounds would be a free tenement (which could not be created without certain strict formalities), rather than a term certain (which did not require such formalities), because it cannot be known how long it may take for so many pounds to be raised from [the] land, because the term is uncertain and undetermined Bracton on the Laws and Customs of England (trans Professor E Thorne) (1977), vol 3, p 50 (f176b).
This statement was referred to with approval by Sir Edward Coke in Co Litt 42a (1628), and much the same is stated in Brooks New Cases (1554/5) pl 462.
So too in The Bishop of Baths Case (1605) 6 Co Rep 34b, 35b, Coke stated that a letting expressed to last until a certain amount of money had been levied of the issues and profits is but a lease at will without livery i.e. without the formalities required for the establishment of a freehold interest.
Much more recently, in Lace v Chantler [1944] KB 368, the Court of Appeal held that a purported letting for the duration [of the Second World War] could not take effect as a good tenancy for the duration of the war as it was for an uncertain term, and that it was consequently ineffective.
This decision was distinguished by a subsequent Court of Appeal in Ashburn Anstalt v Arnold [1989] Ch 1, where it was held that a right to occupy premises until the owner gave one quarters notice certifying he needed the premises for redevelopment created a tenancy binding on third parties.
Less than 20 years ago, the House of Lords approved and applied Lace [1944] KB 368, and disapproved and overruled Ashburn [1989] Ch 1.
In Prudential [1992] 2 AC 386, land was sold in 1930 by the owner, Mr Nathan, to the London County Council, who immediately leased it back to him at a weekly rent until the land is required by the council for the purposes of the widening of the road.
The House of Lords held that this arrangement was incapable of creating a tenancy, as it was for an uncertain, potentially perpetual, duration.
Lord Templeman (with whom the other members of the House of Lords agreed, albeit with reluctance in most cases) said at [1992] 2 AC 386, 394F, that there had been 500 years of judicial acceptance of the requirement that a term must be certain applies to all leases and tenancy agreements.
The position with regard to periodic tenancies containing a fetter on the right of either or both parties to serve a notice to quit seems to be much the same.
The concept of a periodic tenancy appears to have originated in a suggestion in Burgh v Potkyn (1522) YB 14 Hen 8 f10 pl 6, but it does not seem to have been accepted by the courts until the end of the 17th century, and then only on special facts see Taylor v Seed (1696) Comb 383.
Accordingly, there is not the long established learning which there is in relation to terms of uncertain duration.
In Doe d Warner v Browne (1807) 8 East 165, an agreement provided that a tenancy at 40 per annum would not be determined so long as the tenant paid the rent and did not harm the landlord.
At p 166, Lord Ellenborough CJ said in argument that it would be inconsistent with, and repugnant to a tenancy from year to year that it should not be determinable at the pleasure of either party giving the regular notice.
In his judgment on the following page, Lawrence J said much the same thing, tantalisingly (as it appears to have been in an unreported case) suggesting that Lord Mansfield had held otherwise, in a view which had been long exploded.
Mr Browne subsequently obtained equitable relief from Lord Eldon LC see Browne v Warner (1807) 14 Ves Jun 156 and (1808) 14 Ves Jun 409.
However, these reports only cover the grant of interlocutory relief, and the precise basis for its grant is not entirely clear.
In those circumstances, although Mr Wonnacott seeks to derive assistance from Lord Eldons observations (as did Malins V C in In re Kings Leasehold Estates (1873) LR 16 Eq 521, 526 527), I do not think that any conclusions can be safely drawn from his decision, save, perhaps, that any conclusion which may be derived from Doe v Browne 8 East 165 may not be as simple as more modern authorities suggest.
Despite what was said in Doe v Browne 8 East 165, the Court of Appeal in Breams Property Investment Co Ltd v Stroulger [1948] 2 KB 1, 6 held that an agreement by a landlord in a periodic tenancy not to serve notice to quit for three years unless it required the premises for its own use was valid.
In In re Midland Railway Cos Agreement, Charles Clay & Sons Ltd v British Railways Board [1971] Ch 725, the Court of Appeal held that an agreement by a landlord not to determine a half yearly tenancy until the premises were needed for the purposes of its undertaking was valid.
The Court distinguished Lace [1944] KB 368 on the ground that it did not concern a periodic tenancy, and derived assistance from Breams [1948] 2 KB 1.
In Prudential [1992] 2 AC 386, the House of Lords overruled Midland Railway [1971] Ch 725, effectively on the basis that a fetter of uncertain duration on the service of a notice to quit in relation to a periodic tenancy was as objectionable to the concept of a tenancy as was the existence of an uncertain term.
It was not, however, suggested by Lord Templeman that Breams [1948] 2 KB 1 was wrongly decided.
Following the decision of the House of Lords in Prudential [1992] 2 AC 386, the law appeared clear in its effect, intellectually coherent in its analysis, and, in part, unsatisfactory in its practical consequences.
The position appears to have been as follows. (i) An agreement for a term, whose maximum duration can be identified from the inception can give rise to a valid tenancy; (ii) an agreement which gives rise to a periodic arrangement determinable by either party can also give rise to a valid tenancy; (iii) an agreement could not give rise to a tenancy as a matter of law if it was for a term whose maximum duration was uncertain at the inception; (iv) (a) a fetter on a right to serve notice to determine a periodic tenancy was ineffective if the fetter is to endure for an uncertain period, but (b) a fetter for a specified period could be valid.
If we accept that that is indeed the law, then, subject to the point to which I next turn, the Agreement cannot take effect as a tenancy according to its terms.
As the judgment of Lady Hale demonstrates (and as indeed the disquiet expressed by Lord Browne Wilkinson and others in Prudential [1992] 2 AC 386 itself shows), the law is not in a satisfactory state.
There is no apparent practical justification for holding that an agreement for a term of uncertain duration cannot give rise to a tenancy, or that a fetter of uncertain duration on the right to serve a notice to quit is invalid.
There is therefore much to be said for changing the law, and overruling what may be called the certainty requirement, which was affirmed in Prudential [1992] 2 AC 386, on the ground that, in so far as it had any practical justification, that justification has long since gone, and, in so far as it is based on principle, the principle is not fundamental enough for the Supreme Court to be bound by it.
It may be added that Lady Hales Carrollian characterisation of the law on this topic is reinforced by the fact that the common law accepted perpetually renewable leases as valid: they have been converted into 2000 year terms by section 145 of the Law of Property Act 1922.
However, I would not support jettisoning the certainty requirement, at any rate in this case.
First, as the discussion earlier in this judgment shows, it does appear that for many centuries it has been regarded as fundamental to the concept of a term of years that it had a certain duration when it was created.
It seems logical that the subsequent development of a term from year to year (ie a periodic tenancy) should carry with it a similar requirement, and the case law also seems to support this.
Secondly, the 1925 Act appears to support this conclusion.
Having stated in section 1(1) that only two estates can exist in land, a fee simple and a term of years, it then defines a term of years in section 205(1)(xxvii) as meaning a term of years either certain or liable to determination by notice [or] re entry; as Lord Templeman said in Prudential [1992] 2 AC 386, 391B, this seems to underwrite the established common law position.
The notion that the 1925 Act assumed that the certainty requirement existed appears to be supported by the terms of section 149(6).
As explained more fully below, this provision effectively converts a life tenancy into a determinable term of 90 years.
A tenancy for life is a term of uncertain duration, and it was a species of freehold estate prior to 1926, but, in the light of section 1 of the 1925 Act, if it was to retain its status as a legal estate, it could only be a term of years after that date.
Presumably it was converted into a 90 year term because those responsible for drafting the 1925 Act thought it could not be a term of years otherwise.
Thirdly, the certainty requirement was confirmed only some 20 years ago by the House of Lords.
Fourthly, while not a very attractive point, there is the concern expressed by Lord Browne Wilkinson, namely that to change the law in this field might upset long established titles [1992] 2 AC 386, 397A.
Fifthly, at least where the purported grant is to an individual, as opposed to a company or corporation, the arrangement does in fact give rise to a valid tenancy, as explained below.
Finally, it has been no part of either partys case that the Agreement gave rise to a valid tenancy according to its terms (if, as I have concluded, it has the meaning for which Mr Wonnacott contends).
Would such a tenancy have been treated as a tenancy for life before 1926?
While Mr Wonnacott accepts that the arrangement contained in the Agreement would not be capable of constituting a tenancy in accordance with its terms, he contends that, at any rate before 1926, the arrangement would have been treated by the court as a tenancy for the life of Ms Berrisford, determinable before her death by her under clause 5, or by Mexfield under clause 6.
There is much authority to support the proposition that, before the 1925 Act came into force, an agreement for an uncertain term was treated as a tenancy for the life of the tenant, determinable before the tenants death according to its terms.
In Bracton (op cit) vol 3, p 50 (f176b), it will be recalled that the grant of an uncertain term was held to give rise to a free tenement, provided that the formalities had been complied with.
The nature of this free tenement would appear to be a tenancy for the life of the grantee.
That is clear from what was said in Littleton on Tenures (1481/2) vol 2, section 382 namely: [I]f an abbot make a lease to a man, to have and to hold to him during the time that he is abbot the lessee hath an estate for the term of his owne life: but this is on condition that if the abbot resign, or be deposed, that then it shall be lawful for his successor to enter.
In Co Litt vol 1, p 42a, it is similarly stated that if an estate is granted to a person until, inter alia, she marries, or so long as she pays 40 or for any like incertaine term, the lessee hath in judgment of law an estate for life determinable if [the formalities of creation are satisfied].
This passage was quoted and applied by North J in In re Carnes Settled Estates [1899] 1 Ch 324, 329.
The same point was made in Sheppards Touchstones on Common Assurances, where it is said that uncertain leases made with limitations may be good leases for life determinable on these contingents, albeit they be no good leases for years 7th ed (1821), vol 2, p 275.
In Doe v Browne 8 East 165, 166 167, Lord Ellenborough CJ and Lawrence J, both of whom rejected the contention that an agreement which was to continue so long as the tenant paid the rent and did not harm the landlords business could be a valid term of years, said that it could be an estate for life, but that it failed to achieve this status because the necessary formalities had not been complied with.
Such formalities have now largely been done away with, and they normally only require a written, signed document.
As Lord Dysons reference to Joshua Williamss 1920 textbook shows, the perceived legal position right up to the time of the 1925 property legislation was that terms of uncertain duration were converted into determinable terms for life.
On this basis, then it seems clear that, at least if the Agreement had been entered into before 1 January 1926 (when the 1925 Act came into force), it would have been treated by the court as being the grant of a tenancy to Ms Berrisford for her life, subject to her right to determine pursuant to clause 5 and Mexfields right to determine pursuant to clause 6.
Mr Gaunt relies on more recent authorities to support a contention that an agreement for an uncertain term was only regarded as creating a tenancy for life if, on a fair reading of the agreement, that was what the parties to the agreement intended.
That does indeed seem to have been the approach of Sir George Jessel MR in Kusel v Watson (1879) 11 Ch D 129, but that is of limited value as the agreement in that case could not have created a tenancy for life, as it was created by a lessee.
However, Mr Gaunts contention gets rather more support from the reasoning of the Court of Appeal in Zimbler v Abrahams [1903] 1 KB 577, 582 (per Vaughan Williams LJ) and 583 (per Stirling and Mathew LJJ).
In my judgment, however, there are three answers to that contention.
The first is that the reasoning in Zimbler [1903] 1 KB 577 is not strictly inconsistent with Mr Wonnacotts analysis: if, as a matter of interpretation, the agreement in that case did involve the grant of a tenancy for life, then there was no need to invoke Mr Wonnacotts analysis, but that does not mean that the analysis is wrong.
Secondly, if Zimbler [1903] 1 KB 577 did proceed on the assumption that an agreement which purported to create a tenancy for an uncertain term could not give rise to a tenancy for life unless it was the parties intention to do so, it was wrong, as it would have been inconsistent with the authoritative dicta relied on by Mr Wonnacott, in particular the clear statement in Littleton, vol 2, section 382. (I also note that neither counsel in Zimbler [1903] 1 KB 577 relied on the point made by Mr Gaunt: see pp 578 580).
Thirdly, even if an agreement which creates an uncertain term could only have resulted in a tenancy for the life of the tenant if that was the intention of the parties, I consider that, on a true construction of the Agreement, it was intended that Ms Berrisford enjoy the premises for life subject, of course, to determination pursuant to clauses 5 and 6.
I have in mind in particular clause 6(c), which will apply on Ms Berrisfords death, the fact that her interest is unassignable, and the fact that it was intended to ensure that she could stay in her home.
Is the agreement converted into a 90 year term by section 149(6)?
The next step in Mr Wonnacotts argument is that, given that the Agreement would have given rise to a tenancy for life prior to 1926, the effect of section 149(6) of the 1925 Act (section 149(6)) is that the Agreement is now to be treated as a term of 90 years determinable on the death of Ms Berrisford, subject to the rights of determination in clauses 5 and 6.
Section 149(6) provides: Any lease . at a rent . for life . or any contract therefor, made before or after the commencement of this Act, . shall take effect as a lease . or contract therefor, for a term of 90 years determinable after the death . of the original lessee . by at least one months notice in writing given to determine the same
on one of the quarter days applicable to the tenancy
As already mentioned, the 1925 Act began by limiting the number of permissible legal estates in land to two, a fee simple and a term of years.
Accordingly, it was necessary for the statute to deal with interests, such as estates for lives, which had previously been, but no longer were, valid legal estates.
Hence one of the reasons for section 149(6).
However, it is clear from its terms that the section was not merely concerned with preserving life interests which existed prior to 1 January 1926: it also expressly applies to life interests granted thereafter.
Therefore, says Mr Wonnacott, the section converts an arrangement such as the Agreement, which, according to the common law, is a life tenancy into a 90 year term.
The first argument which might be raised against this contention is that the Agreement was not a lease for life, merely a contract which would have been treated by established case law as such a lease.
I do not consider that can be right.
Apart from not being consistent with the wording of section 149(6), it would mean that an agreement such as that described in Littleton section 382, which existed as a continuing valid determinable life estate on the 1 January 1926, would have lost its status as a legal estate, as it would not have been saved by section 149(6): that cannot have been the legislatures intention.
Mr Gaunt contends that section 149(6) is concerned with tenancies which automatically end with the tenants death, not with tenancies which can be determined on the tenants death, and, in this case, the effect of clause 6(c) is that the tenancy can be determined, not that it automatically determines, on the tenants death.
I accept that section 149(6) only applies to tenancies which automatically determine on death, and I am prepared to assume that clause 6(c) can only be invoked by service of a notice.
However, the argument misses the point, because the Agreement is (or would be in the absence of sections 1 and 149 of the 1925 Act) a tenancy for life, not because of the specific terms of, or circumstances described in, clause 6(c), but because it is treated as such by a well established common law rule.
It is also suggested that section 149(6) does not apply to arrangements such as the Agreement which are determinable in circumstances other than the tenants death e.g. on the grounds set out in clause 6.
I can see no reasons of principle for accepting that contention, and it appears to me that there are strong practical reasons for rejecting it.
The common law rule that uncertain terms were treated as life tenancies applied, almost by definition, to arrangements which determined in I have read what Lord Walker has written about section 149(6) and Bass other events, and it is hard, indeed impossible, to see why the rule should be limited to cases where an event automatically determines the term, as opposed to cases where an event entitles the landlord to serve notice to determine the term.
In each case, the term is uncertain.
At least one of the reasons the common law treated uncertain terms as tenancies for lives was, as I see it, to save arrangements which would otherwise be invalidated for technical reasons, and I find it hard to accept that the modern law requires the court to adopt a less benevolent approach to saving contractual arrangements.
Holdings Ltd v Lewis [1986] 2 EGLR 40, and respectfully agree with him.
It is strongly pressed by Mr Gaunt that the conclusion that the Agreement gives rise to a valid tenancy for 90 years determinable on the tenants death would be inconsistent with high modern authority.
In particular, he said that such a conclusion would be contrary to the outcome in Lace [1944] KB 368, and inconsistent with clear dicta of Lord Greene MR in that case and of Lord Templeman in Prudential [1992] 2 AC 386.
I accept the factual basis for that argument, but do not agree with its suggested conclusion.
The fact is that it was not argued in either of those two cases that the arrangement involved would have created a life tenancy as a matter of common law, and that, following section 149(6), such an arrangement would now give rise to a 90 year term, determinable on the tenants death (and Mr Wonnacott was kind enough to point out that such an argument would not have assisted, and may even have harmed, the unsuccessful respondents case in Prudential [1992] 2 AC 386).
Some of the statements about the law by Lord Greene and Lord Templeman can now be seen to be extravagant or inaccurately wide, but it is only fair to them to repeat that this was, at least in part, because the tenancy for life argument was not raised before them.
Is Ms Berrisford accordingly entitled to retain possession?
For the reasons given, I accept Mr Wonnacotts case that (i) the arrangement contained in the Agreement could only be determined in accordance with clauses 5 and 6, and not otherwise, (ii) such an arrangement cannot take effect as a tenancy in accordance with its terms, but (iii) by virtue of well established common law rules and section 149(6), the arrangement is a tenancy for a term of 90 years determinable on the tenants death by one months notice from the landlord, and determinable in accordance with its terms, i.e. pursuant to clauses 5 and 6.
I indicated earlier in this judgment that this conclusion would apply irrespective of whether the purported tenancy created by the Agreement was simply for an indeterminate term or was a periodic tenancy with a fetter on the landlords right to determine.
There is no difficulty if the former is the right analysis.
If the latter is correct, then there is a monthly tenancy which the landlord is unable to determine unless he can rely on one or more of the grounds in clause 6.
In Breams [1948] 2 KB 1, the Court concluded that a periodic tenancy with a fetter on the landlords right to determine for three years was valid.
It seems to me that the term thereby created was equivalent to a fixed term of three years (subject to a restricted right of determination in the landlord and an unrestricted right of determination by the tenant) followed by a periodic tenancy.
Accordingly a periodic tenancy with an invalid fetter on the landlords right to determine should be treated in the same way as a tenancy for a fixed, if indeterminate, term.
That seems to me to be justified in principle, logical in theory, and it ensures the law in this area is the same for all types of tenancy, whether or not periodic in nature (which was, I think, part of the reasoning in Prudential [1992] 2 AC 386).
On that basis, even if the tenancy created by the Agreement was a monthly tenancy with an objectionable fetter, it seems to me that it would have been treated as a life estate under the old law (subject to the right to determine in accordance with the terms of the fetter), and so would now be a tenancy for 90 years.
Ms Berrisford is still alive, and it is common ground that she has not served notice under clause 5 and that Mexfield is not relying on clause 6.
In those circumstances, it follows that Ms Berrisford retains her tenancy of the premises and that Mexfield is not entitled to possession.
Ms Berrisfords alternative case in contract
This conclusion renders it unnecessary to consider two alternative arguments, which were raised by Mr Wonnacott, namely that (i) if the Agreement did not create a tenancy, it nonetheless gave rise to a binding personal contract between Mexfield and Ms Berrisford, which Ms Berrisford is entitled to enforce against Mexfield so long as it owns the premises, or (ii) if the Agreement created a periodic tenancy with an impermissible fetter on the right of the landlord to serve notice to quit, the fetter is nonetheless enforceable as against Mexfield so long as it is the owner of the premises.
However, having heard full submissions on those two arguments, I incline fairly strongly to the view that, if Ms Berisford had failed in establishing that she had a subsisting tenancy of the premises, she would nonetheless have defeated Mexfields claim for possession on the ground that she is entitled to enforce her contractual rights.
If the Agreement does not create a tenancy for technical reasons, namely because it purports to create an uncertain term, it is hard to see why, as a matter of principle, it should not be capable of taking effect as a contract, enforceable as between the parties personally, albeit not capable of binding their respective successors, as no interest in land or other proprietary interest would subsist.
The argument to the contrary rests in part on authority and in part on principle.
So far as authority is concerned, the point at issue was specifically addressed and rejected by Lord Greene in Lace [1944] KB 368, 371 372 in these terms: [Counsel] argued that the agreement could be construed as an agreement to grant a licence.
In my opinion, it is impossible to construe it in that sense.
The intention was to create a tenancy and nothing else.
The law says that it is bad as a tenancy.
The court is not then justified in treating the contract as something different from what the parties intended .
That would be setting up a new bargain which neither of the parties ever intended to enter into.
So, too, in Prudential [1992] 2 AC 386, it appears that Lord Templeman treated as void a fetter for an indefinite period on the right of the landlord under a periodic tenancy to serve a notice to quit.
It does not seem to me that the observations of Lord Greene, although they are strongly expressed views of a highly reputable judge, can withstand principled analysis.
As Lord Templeman made clear in Street [1985] AC 809, while the parties rights and obligations are primarily determined by what they have agreed, the legal characterisation of those rights is ultimately a matter of law.
If the Agreement is incapable of giving rise to a tenancy for some old and technical rule of property law, I do not see why, as a matter of principle, that should render the Agreement invalid as a matter of contract.
The fact that the parties may have thought they were creating a tenancy is no reason for not holding that they have agreed a contractual licence any more than in Street [1985] AC 809, the fact that the parties clearly intended to create a licence precluded the court from holding that they had, as a matter of law, created a tenancy.
So, too, as Mr Wonnacott points out, in Milmo v Carreras [1946] KB 306, the Court of Appeal (led by Lord Greene) held that what was plainly stated and understood by the parties to be an underlease operated as an assignment of the lease as a matter of law, because the duration of the purported underlease equalled or exceeded that of the lease.
Mr Gaunt relies on Street [1985] AC 809 to support another argument, namely that the Agreement could not amount to a licence because it granted the occupier exclusive possession, which is the hallmark of a tenancy.
In my view, there is nothing in that argument.
The hallmarks of a tenancy include the grant of exclusive possession, but they also include a fixed or periodic term.
That was emphasised by Lord Templeman in Street [1985] AC 809 at several points in his judgment, where he referred to a tenancy having to be for a term of years absolute, a fixed or periodic term certain, or (in a formulation which he approved and adopted) for a term or from year to year or for a life or lives [1985] AC 809, 814E F, 818E, and 827C and E. Further, as Lord Templeman made clear more than once, the rule that an occupier who enjoys possession is a tenant admits of exceptions, even where the occupier has been granted a fixed or periodic term see at [1985] AC 809, 818E F and 823D E.
It has been suggested (although not in argument before us) that the notion that the Agreement could give rise to a contractual licence if it cannot be a tenancy is somehow inconsistent with the reasoning of the House of Lords in Bruton v London & Quadrant Housing Trust [2000] 1 AC 406.
In that case, Lord Hoffmann said that an agreement can give rise to a tenancy even if it does not create an estate or other proprietary interest which may be binding upon third parties: p 415.
That statement was made in circumstances where a housing trust, which had been granted a licence by a local authority to use a block of flats, agreed that a Mr Bruton could occupy one of the flats.
The point being made by Lord Hoffmann was that the fact that the trust was only a licensee, and therefore could not grant a tenancy binding on its licensor, did not prevent the agreement with Mr Bruton amounting to a tenancy as between him and the trust.
The tenancy would thus have been binding as such not only on Mr Bruton and the trust, but also on any assignee of Mr Bruton or the trust.
Bruton [2000] 1 AC 406 was about relativity of title which is the traditional bedrock of English land law.
Lord Hoffmanns observations in that connection have no bearing on a case where the nature of the agreement is such that it cannot, as a matter of law, be a tenancy even as between the parties.
If the Agreement cannot give rise to a tenancy, then, if it is not a contractual licence, the only right that Ms Berrisford could claim would be that of a periodic tenant on the terms of the written Agreement in so far as they are consistent with a periodic tenancy, because she has been in possession purportedly under the Agreement, paying a weekly rent to Mexfield.
It is worth briefly considering why she would be a periodic tenant on this basis, not least because it is Mexfields contention that this is the right analysis.
It would be because the law will infer a contract on these terms from the actions of the parties, namely the terms they purported to agree in the Agreement, and Ms Berrisfords enjoyment of possession and payment of rent.
But the ultimate basis for inferring a tenancy (and its terms) is the same as the basis for inferring any contract (and its terms) between two parties, namely what a reasonable observer, knowing what they have communicated to each other, considers that they are likely to have intended.
Given that no question of statutory protection could arise, it seems to me far less likely that the parties would have intended a weekly tenancy determinable at any time on one months notice than a licence which could only be determined pursuant to clauses 5 and 6.
Since writing this, I have read what Lord Mance and Lord Clarke have written in connection with this point, and I respectfully agree with them.
It is also interesting to read Lord Hopes judgment, which demonstrates that the Scottish courts have also encountered difficulty when grappling with interests of uncertain duration, and seem to have come up with a similar answer.
That leaves Mr Wonnacotts further alternative argument, namely that, if Mexfield is right and there is a periodic tenancy, then, even if the fetter on the landlords right to serve a notice to quit is objectionable in landlord and tenant law, it can be enforced as between the original parties as a matter of contract.
That was the basis on which Wilson LJ felt able to find for Ms Berrisford in the Court of Appeal.
I prefer to say nothing about that point: I have already dealt with one alternative reason for allowing this appeal, so considering this argument would involve making two successive counter factual assumptions, rarely a satisfactory basis for deciding a point of law.
Conclusion
In these circumstances, I would allow Ms Berrisfords appeal, and discharge the order made against her.
It is only right to repeat that the Court of Appeal and Peter Smith J were bound by authority which made it impossible for them to reach the same conclusion as I have done on the points on which I would allow the appeal.
LORD HOPE
For the reasons given by Lord Neuberger, with which I entirely and respectfully agree, I too would allow this appeal.
I wish to add just a few words about the position in Scotland, as there are significant differences between the way English and Scots law treat agreements of the kind that are in issue in this case.
The first difference relates to the status of Mexfield as compared with the status that a similar body has in Scotland.
It is a fully mutual housing association within the meaning of section 1(2) of the Housing Associations Act 1985 and section 5(2) of the Housing Act 1985.
It cannot create an assured tenancy in England: section 1(2) of and paragraph 12(1)(d) of Schedule 1 to the Housing Act 1988.
Nor can it create a secure tenancy there, because it is registered under the Industrial and Provident Societies Act 1965.
A housing association is not a landlord for the purpose of creating a protected or statutory tenancy: Rent Act 1977, sections 15(1) and 15(3).
So its members have no statutory protection except that which is given to them by the Protection from Eviction Act 1977.
In Scotland a fully mutual co operative housing association which meets the conditions for registration set out in sections 58 and 59 of the Housing (Scotland) Act 2001 is eligible for registration as a social landlord under Part 2 of that Act.
Mexfield would meet these criteria if it was providing housing services in Scotland, as they extend to bodies established for the purpose of providing houses for occupation by members of that body where the rules restrict membership to persons entitled to occupy a house provided by that body: section 58(2)(b).
It is the normal practice for eligible bodies to apply for registration.
There were 211 registered social landlords in Scotland in 2011: see the annual report of the Scottish Housing Regulator.
Where the landlord is a registered social landlord which is a co operative housing association and the tenant is a member of the association the tenancy is a Scottish secure tenancy: section 11(1)(d).
The Protection from Eviction Act 1977 does not extend to Scotland: section 13(3).
But Ms Berrisford would have had statutory security of tenure if the house which she is occupying under the Occupancy Agreement was in Scotland and her landlord had been registered under the 2001 Act.
The other difference relates to the way the common law treats such agreements if statutory security of tenure is not available.
The starting point in Scots law is that a lease is a contract which gives the tenant a personal right to the subjects: Gordon, Scottish Land Law, 3rd ed (2009), vol 1, para 18 136.
A right of that kind is capable of being created simply by agreement between the parties.
The original parties to the contract are free to regulate the arrangements that are to apply between themselves as they wish.
They will be held to the terms of their contract so long as the original proprietor of the premises retains ownership of the property and the original tenant remains in occupation of it.
The situation becomes more complicated where the ownership of the premises passes to someone else.
In that event the tenant will need to have acquired a real, or proprietary, right if he wishes to enforce his exclusive right to remain there against the new owner.
The circumstances in which the lease will confer on the tenant a real right were set out in the Leases Act 1449, which remains in force: Gordon, para 18 137.
To obtain the benefit of the statute, which refers to the takers of the lands having terms and years thereof, there must be a term when it is to come to an end.
The lease must be for a definite duration, such as a number of years or the lifetime of the grantor or the grantee: Hunter on Landlord and Tenant, 4th ed (1876), vol 1, p 461.
A real right may also be obtained by registering the lease in the Land Register of Scotland if it is to endure for 20 years or more under the Registration of Leases (Scotland) Act 1857, as amended by the Land Tenure Reform (Scotland) Act 1974, section 18 and Schedule 6.
But the grant of a lease which could extend to more than 20 years is prohibited in the case of property which is to be used as or as part of a private dwelling house: 1974 Act, section 8(1).
In Carruthers v Irvine 1717 Mor 15195 the period for which the lease was granted was expressed by the words perpetually and continually as long as the grass groweth up and the water runneth down.
The grantor died and his heir sought to remove the tenant on the ground that the lease did not say when it was to come to an end.
His claim failed because the court found that by the meaning of [the] parties the contract was intended to be a perpetual right to the tenant and his successors.
This did not meet the requirements of the 1449 Act, and it was admitted that the tenant would not have been able to enjoy that right in a question with a singular successor of the grantor: see Hunter, p 462.
But the personal right against the heir under the contract was not affected.
In Crighton v Lord Air 1631 Mor 11182 the grant was to the tenant and his heirs and successors for five years and after that a further five years and then five years for ever.
The argument that the lease was a nullity because it did not say when it was to come to an end was repelled.
It was noted that the grantor might have objected on this ground in question with a singular successor of the grantee.
But it was held that he could not do so in a question with the grantees heirs, as he had bound himself by the words of the grant never to remove the grantees heirs.
These cases show that as between the original parties a lease may be granted for an indefinite period: Rankine, The Law of Leases in Scotland, 3rd ed (1916), p 115; Gordon, para 18 11.
The grantee will obtain security of tenure in a question with singular successors of the landlord if the lease sets out the term when it is to come to an end.
If no term of endurance at all is specified in the agreement, or it is for an uncertain term or it is potentially perpetual, it will not meet the requirements of the Act.
But this does not mean that effect cannot be given to the personal obligation.
If the issue arises as between the original parties to the agreement and the agreement does not provide for this, a term after which either party can bring it to an end will be implied by law.
In Redpath v White 1737 Mor 15196 there was no such term, but the court accepted the argument that it was open to it to fix the time of endurance.
The starting point is that a lease of that kind is regarded as good for one year only.
But if there are words in the lease which show that it was the intention of the parties that it should continue for more than one year, the court will select the minimum period that the words admit of: Erskine, Principles of the Law of Scotland, 21st ed (1911), II, vi, 10; Rankine, p 115.
As there were clauses in the lease which showed that it was intended to last for more than a year, the court in Redpath substituted a period of two years.
Where the term of the lease expires and the grantee remains in occupation without the parties having entered into a new agreement its terms are prolonged from year to year, or a shorter period if that is what the lease indicates, under tacit relocation: Rankine, p 602; Gordon, para 18.25.
Once it is under tacit relocation it is open to either party to bring the tenancy to an end by notice to quit.
The right to do so is implied by law, so any term of the contract which is inconsistent with tacit relocation is prima facie unenforceable: Gloag on Contract, 2nd ed (1929), p 733.
But tacit relocation is excluded as between the original parties to the lease if the parties make a bargain as to the terms on which the tenant is to stay on in occupation of the premises: Buchanan v Harris & Sheldon (1900) 2 F 935, 939, per Lord Adam.
It has also been held to be excluded if the parties to the lease provide expressly by their contract that tacit relocation is not to apply to it: MacDougall v Guidi 1992 SCLR 167; see also Stair Memorial Encyclopaedia, Landlord and Tenant, para 364.
Applying these various points to this case, clause 1 of the Occupancy Agreement states that it will continue from month to month until determined as provided in the agreement.
This is an indefinite period, so the agreement is not capable of conferring on the tenant a real right under the Leases Act 1449.
But there would be no need in Scots law for the court to imply any period in place of what is provided for in clause 1.
This is because the dispute in this case is between the original parties to the agreement and because the circumstances in which it may be brought to an end are sufficiently set out in the contract.
I agree with Lord Neubergers analysis of what, as a matter of contractual interpretation, is its effect: see para 22, above.
Clause 5 provides that the agreement is determinable by the member on giving the Association one months notice in writing.
Clause 6 provides that it may be brought to an end by the Association but only in the circumstances that that clause sets out.
The possibility of the Association bringing the agreement to an end by serving one months notice in writing is excluded by the terms of the agreement.
The question whether Ms Berrisfords agreement with Mexfield, which has now endured for more than 20 years, has the effect of excluding the implied right of the landlord to terminate under the rules relating to tacit relocation is not easy to answer.
But, as she would have had security of tenure under the statute, it is not one that would need to be addressed if her landlord had been registered under the 2001 Act.
I have to confess that I have found it difficult to understand why English law finds it so difficult to hold that, if an agreement of this kind cannot for technical reasons take effect as a tenancy, it can be regarded as binding on the parties simply by force of contract.
I appreciate the problems that would need to be faced if it was necessary for the agreement to have proprietary effect, which it would if the dispute had not been between the original contracting parties.
As it is, however, the essence of the dispute between the parties in this case seems to me to be about the effect of the contract which they entered into.
One might have expected it to be capable of being solved by applying the ordinary principles of the law of contract without having to resolve questions about the effect of the agreement on the parties proprietary interests or what the agreement is to be called.
But I entirely understand that the contrary view is supported by a very substantial body of authority.
It can by no means be lightly brushed aside, and I am persuaded that, for all the reasons that Lord Neuberger gives, it would not be appropriate for us to consider changing the law as to what constitutes what English law will hold to be a tenancy, at least in this case.
I also wonder whether the time has not now come for the legislative fetter which prevents mutual housing associations from granting protected or statutory tenancies in England and Wales to be removed, so that they are placed on the same footing as other providers of social housing as in Scotland.
The reason that was given by the Minister of State in the Department of the Environment, the Earl of Caithness, for introducing an amendment to the Bill which became the Housing Act 1988 that provided that a fully mutual housing association cannot create an assured tenancy was that a statutory regime designed to regulate the relationship between landlord and tenant had little relevance in a situation where, as is the nature of a co operative, the interests of landlord and tenants as a whole are in effect indivisible: Hansard (HL Debates), 3 November 1988, vol 501, col 395.
That statement was repeated in the House of Commons by the Parliamentary Under Secretary of State, David Trippier, when the Lords amendment was approved: Hansard (HC Debates), 9 November 1988, vol 140, col 337.
The facts of this case suggest that, as least so far as Mexfield is concerned, that happy state of affairs no longer exists.
The assumption on which that measure was put through Parliament seems now to rest on doubtful foundations, as financial pressures may cause the parties interests to diverge to the detriment of the residential occupier.
That is not something that this court can deal with.
But I suggest that it might be considered in any future programme for the reform of housing law.
LORD WALKER
I respectfully concur in the cogent and comprehensive judgment of Lord Neuberger MR.
I add a few words of my own as to the decision of the Court of Appeal in Bass Holdings Ltd v Lewis [1986] 2 EGLR 40.
In that case the Court of Appeal held that the word determinable, as used in section 149(6) of the Law of Property Act 1925, means liable to terminate automatically on a persons death, or some other uncertain event, rather than capable of being terminated by notice given after a persons death, or some other uncertain event.
With the exception of the case mentioned in the last paragraph of this judgment, Bass seems to be the only reported case that has made more than a passing reference to section 149(6).
The case was concerned with a standard form tenancy agreement made between a brewery company and the licensee of a public house in Deptford.
The tenancy was for three years and then continued as a tenancy from year to year, subject to provisions for termination set out in a schedule.
Para 1 allowed the landlord to terminate the tenancy on six months notice.
Para 4 provided that if the tenant died during the term the landlord could terminate the tenancy on 14 days notice, or three months if the tenant left a widow.
This shorter notice was no doubt thought appropriate because of the exigencies of the on licensed trade.
The brief report does not state what notice the tenant had to give, but it seems inconceivable that that was not covered in another paragraph of the schedule.
The issue was whether section 149(6) applied to the tenancy.
Nourse LJ gave the main judgment, with which Glidewell LJ and Sir John Donaldson MR agreed.
The court upheld the first instance decision of Hoffmann J that section 149(6) did not apply.
Determinable can, in the vocabulary of the law, have either of the meanings mentioned at the beginning of this judgment.
The three reasons given by Nourse LJ for preferring the narrower meaning are to my mind convincing.
But I think there is a more powerful reason based not on the language of section 149(6) but on its purpose.
It was intended to enable a commercial lease for life to exist as a legal estate under the new regime introduced by the Law of Property Act 1925.
It was not intended to apply to leases or tenancies which did not need that sort of helping hand.
Mr Lewiss tenancy in Bass was well able to stand on its own feet as a legal estate without being converted into a term of 90 years determinable by notice after Mr Lewiss death while still licensee of the public house.
That point is, I think, reflected in the short concurring judgment of Sir John Donaldson MR.
Lord Neuberger did not find it necessary to refer to Bass for reasons mentioned in para 47 of his judgment.
I agree with his reasoning, and also with what Lord Neuberger goes on to say in para 48.
Even if section 149(6) were supposed to have applied to the tenancy in Bass, there would be no good reason to make a fundamental change in its commercial effect by disregarding the landlords wider power to terminate on six months notice.
I echo Lord Neubergers tribute to Mr Wonnacotts clear and scholarly submissions.
He did not refer to what seems to be the only other case in which section 149(6) has been considered by the Court of Appeal, that is Skipton Building Society v Clayton (1993) 66 P & CR 223.
The facts are of some interest, illustrating the difficulties that can arise when a husband regularly forges his wifes signature.
The main point of law is whether the sale of a flat at a reduced price, with the retention of a rent free licence for life, constituted a fine (that is, a premium) for the purposes of section 149(6).
The Court of Appeal held that it did.
There is nothing in the judgment of Slade LJ that conflicts with any of the reasoning in Lord Neubergers judgment.
LADY HALE
Periodic tenancies obviously pose something of a puzzle if the law insists that the maximum term of any leasehold estate be certain.
The rule was invented long before periodic tenancies were invented and it has always been a problem how the rule is to apply to them.
In one sense the term is certain, as it comes to an end when the week, the month, the quarter or the year for which it has been granted comes to an end.
But that is not the practical reality, as the law assumes a re letting (or the extension of the term) at the end of each period, unless one or other of the parties gives notice to quit.
So the actual maximum term is completely uncertain.
But the theory is that, as long as each party is free to give that notice whenever they want, the legal maximum remains certain.
Uncertainty is introduced if either party is forbidden to give that notice except in circumstances which may never arise.
Then no one knows how long the term may last and indeed it may last for ever.
These rules have an Alice in Wonderland quality which makes it unsurprising that distinguished judges have sometimes had difficulty with them.
It is intriguing to read, in Doe d Warner v Browne (1807) 8 East 165, 167, that Lord Mansfield had once thrown out (obviously meaning suggested) the notion of a tenancy from year to year, the lessor binding himself not to give notice to quit.
By that date the notion cannot have been exploded for very long.
More recently, in Breams Property Investment Co Ltd v Stroulger [1948] 2 KB 1, the Court of Appeal held that it was not repugnant to the notion of a quarterly tenancy when the landlords promised that they would not terminate it within the first three years unless they required the premises for their own occupation, so the purchasers of the reversion could not give notice to quit until the three years were up.
Breams Property can, however, be explained on the basis that although phrased as a quarterly tenancy with a restriction on the landlords right to serve notice to quit, in effect it simply turned the quarterly tenancy into a three year term terminable by the tenant on notice before that, to be followed by a normal quarterly tenancy after that.
However, in In re Midland Railway Cos Agreement, Charles Clay & Sons Ltd v British Railways Board [1971] Ch 725, a strong Court of Appeal, in a reserved judgment of the Court, went much further and upheld a term in a half yearly tenancy which prohibited the landlords from serving notice to quit unless they required the property for their own undertaking.
The Court accepted that the maximum term of a single term of years had to be certain before the lease took effect.
Thus a letting for the duration of the war, as in Lace v Chantler [1944] KB 368, was invalid.
This rule was so long established that it was now too late to inquire why this aspect of the particular estate was considered essential to its existence or to question the doctrine: [1971] Ch 725, 731 732.
But it could be easily circumvented by granting a lease for (say) 90 years, terminable earlier than that should the uncertain event happen.
So the rule has an air of artificiality, of remoteness from practical considerations: p 732. (Had Mr Wonnacott been around then forcibly to remind their Lordships that in fact such a lease to an individual was treated at common law as a lease for life, provided that the necessary formalities were complied with, and had therefore been converted by section 149(6) of the Law of Property Act 1925 into a lease for 90 years, their Lordships might have expressed themselves even more strongly.) In any event, they held that the rule only applied to an attempt to grant a lease or tenancy for a single and uncertain period.
It was not repugnant to the nature of a periodic tenancy to place a curb on the landlords power to determine it, unless perhaps there was an attempt to prevent the landlord from ever doing so.
They could not see any distinction between this case and the curb of limited duration in Breams Property.
In Ashburn Anstalt v Arnold [1989] Ch 1, the Court of Appeal went even further and upheld as a tenancy a grant of what was described as a licence to occupy premises rent free which the landlords could only determine if they certified that they were ready immediately at the end of the quarters notice period to demolish and redevelop the property.
The Court considered that the vice of uncertainty was that neither party knew where they stood and the court did not know what to enforce.
In this case there would be no doubt about whether the determining event had occurred.
The parties should be held to their agreement even though this might not be a periodical tenancy as in the Midland Railway case.
Both the Midland Railway and Ashburn Anstalt cases were overruled by the House of Lords in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386.
There Mr Nathan had sold a strip of land between his shop and the road to the London County Council, which had let it back to him at a weekly rent, by an agreement which provided that the tenancy shall continue until the . land is required by the council for the purposes of the widening of the highway.
His successors in title sought to enforce this restriction against the county councils successors in title and the House of Lords held that they could not do so.
It is understandable that the House of Lords should have taken the view that this was in effect a single term of uncertain, indeed potentially perpetual, duration and thus incompatible with the long established rule of the common law against terms of uncertain duration.
It is understandable that the House should have taken the same view of the Ashburn Anstalt case and overruled it.
It was, as it seems to me, unnecessary for them to hold that a similar curb in an otherwise conventional periodical tenancy was similarly repugnant and thus to overrule Midland Railway but this is what they did.
Their Lordships were not invited to consider the argument which Mr Wonnacott has advanced in this case.
This is not surprising, as it would have done the company which had bought the land from Mr Nathan no good.
Mr Nathan was almost certainly already dead (and companies cannot have a lease for their own lives).
Indeed, Mr Wonnacotts argument does not appear previously to have been made in a case which concerns what would otherwise bear all the hallmarks of a periodic tenancy with a curb on the landlords power to determine it.
So we have now reached a position which is curiouser and curiouser.
There is a rule against uncertainty which applies both to single terms of uncertain duration and to periodic tenancies with a curb on the power of either party to serve a notice to quit unless and until uncertain events occur.
But this rule does not matter if the tenant is an individual, because the common law would have automatically turned the uncertain term into a tenancy for life, provided that the necessary formalities were complied with, before the Law of Property Act 1925.
A tenancy for life was permissible at common law, although of course it was quite uncertain when the event would happen, but it was certain that it would.
I suppose at the time of the hundred years war there was uncertainty both as to the when and the whether it would ever end.
Be that as it may, a tenancy for life is converted into a 90 year lease by the 1925 Act.
As it happens, in the particular agreement with which we are concerned, it is not difficult to conclude that the parties did in fact intend a lease for life determinable earlier by the tenant on one months notice and by the landlords on the happening of certain specified events.
So our conclusions are in fact reflecting the intentions of the parties.
But it is not difficult to imagine circumstances in which the same analysis would apply but be very far from the intentions of the parties.
And that analysis is not available where the tenant is a company or corporation.
So there the court is unable to give effect to the undoubted intentions of the parties.
Yet, as the Court pointed out in Midland Railway, it is always open to the parties to give effect to those intentions by granting a very long term of years, determinable earlier on the happening of the uncertain event.
The law, it would seem, has no policy objection to such an arrangement, so it is difficult to see what policy objection it can have to upholding the arrangement to which the parties in fact came.
It is even more bizarre that, had the tenancy for life analysis not been available, the conclusion might have been, not that this was a contractual tenancy enforceable as such as between the original parties, but that it was a contractual licence, also enforceable as such between the original parties.
This, as I understand it, is the difference between English and Scots law.
I do not understand that it makes any difference to the result.
As will be apparent, I entirely agree with the reasoning and conclusions reached by Lord Neuberger on the first question: does Ms Berrisford have a subsisting tenancy? For that reason, I do not think it necessary to express an opinion on the alternative case in contract.
But it seems to me obvious that the consequence of our having reached the conclusions which we have on the first issue is to make the reconsideration of the decision in Prudential, whether by this Court or by Parliament, a matter of some urgency.
As former Law Commissioner Stuart Bridge has argued ([2010] Conv 492, 497): If the parties to a periodic tenancy know where they stand, in the sense that the contract between them is sufficiently certain, then that should be enough.
If a landlord, in this case a fully mutual housing association, decides that its tenants should be entitled to remain in possession unless and until they fall into arrears with their rent or break other provisions contained in the tenancy agreement, it is difficult to see what policy objectives are being furthered in denying the tenant the rights that the agreement seeks to create.
Quite so.
LORD MANCE
I too agree with Lord Neubergers comprehensive judgment, including his tribute to Mr Wonnacotts exposition of the law.
For the present, I (like Lord Neuberger: paras 33 35) proceed on the basis that an essential characteristic of a contractual tenancy is lacking if the contract provides for a series of periods indefinitely renewable unless and until some future event occurs which may never occur.
The decision in this appeal is therefore that the present Agreement between the parties, being for a term uncertain at inception, would have been treated until 1925 as involving the grant of a tenancy for Ms Berrisfords life, and falls now, under the Law of Property Act 1925, section 149(6), to be treated as a tenancy for a term of 90 years determinable on Ms Berrisfords death.
But for this conclusion, the Court would have had to consider the effect of an Agreement which was on its face for an uncertain term, but incapable in law of taking effect as such.
Mr Gaunt QC for Mexfield submits that such an Agreement must take effect as a tenancy, but of a wholly different kind to any which the parties intended, in that it would be terminable at any time by Mexfield on a months notice.
There is in my opinion neither attraction in nor need to accept that submission.
The Agreement was to run from month to month until determined as provided in this Agreement an obvious reference to clauses 5 and 6, containing the parties agreement on the only permissible methods of contractual determination.
To treat the Agreement as one under which Mexfield could terminate at the end of any month on a months notice would undermine an evidently fundamental element in the parties contract.
I agree with Lord Clarke that ordinary principles of construction govern the Agreements true construction.
I note that Lord Hobhouse made a similar point in relation to the agreement, held to be a tenancy, in Bruton v London & Quadrant Housing Trust [2000] 1 AC 406, 417; he cited in that connection Reardon Smith Line Ltd v Yngvar Hansen Tangen (The Diana Prosperity) [1976] 1 WLR 989 a precursor, famous in commercial law, of the Investors Compensation and Mannai Investment cases.
The three characteristic hallmarks of a contractual tenancy, as distinct from a contractual licence, are (a) exclusive occupation, (b) rent and (c) a term which the law regards as certain: Street v Mountford [1985] AC 809, esp. 826E F, per Lord Templeman.
That case is authority for the proposition that a lease or tenancy is a contractually binding agreement, not referable to any other relationship between the parties, by which one person gives another the right to exclusive occupation of land for a fixed or renewable period or periods of time, usually in return for a periodic payment in money.
An agreement having these characteristics creates a relationship of landlord and tenant to which the common law or statute may then attach various incidents.
See Bruton v London & Quadrant Housing Trust [2000] 1 AC 406, 413E, per Lord Hoffmann.
Only in special circumstances (not here relevant) will an agreement having these characteristics not involve a tenancy: see Street v Mountford, p 822B and Bruton, pp 410E, 411C 412B, 414 B G and 417A
On the hypothesis I am presently considering, those three characteristics were not all present.
The basis for asserting that there was a contractual tenancy therefore falls away.
But the contract was valid as such.
There is no reason not to give it effect according to its terms.
As a matter of legal categorisation, because it was not a tenancy, it can only involve a licence.
Its terms precluded the giving by Mexfield of notice to terminate, except in circumstances falling within clause 6 of the Agreement.
To force the contract into the category of tenancy, by rewriting its essential terms to provide for a periodic monthly tenancy terminable on a months notice, would be to substitute for the Agreement that the parties have made a wholly different contract.
It would be to treat the first two of the three characteristics of a tenancy mentioned above as sufficient by themselves and as displacing any need to satisfy the third.
It would be to insist on terminology (such as the Agreements references to letting and taking possession from month to month and this Tenancy) over substance (the parties express limitation of the right to terminate and the consequent absence of an essential characteristic of a tenancy).
Like Lord Neuberger (para 69), I reserve my view on the position upon the hypothesis of a contract constituting a tenancy, but which was both subject to provisions restricting termination for an uncertain period and not capable of being treated as a tenancy for life at common law or a tenancy for 90 years under section 149(6) of the 1925 Act.
In the light of what I have already said and on the law as it stands, this is an impossible hypothesis, since such a contract could not give rise to what the law would regard as a tenancy; it could however take effect between the parties according to its terms, although it would not have proprietary effect as against third parties: see paras 101 102 above.
Parties can normally contract as they will, either inter se or indeed with third parties.
LORD CLARKE
I agree that this appeal should be allowed.
It seems remarkable to me that it is necessary to decide this appeal in 2011 by reference to jurisprudence developed over the centuries to the effect that an agreement for an uncertain term was treated as a tenancy for the life of the tenant, determinable before the tenants death according to its terms.
It is a mystery to me why in 2011 the position of a tenant who is a human being and a tenant which is a company should in this respect be different.
There is in my opinion much to be said for the view that the certainty rule should now be abandoned.
However, I agree with Lord Neuberger that it is not necessary to abandon it for the purposes of deciding this appeal.
I can understand why in this appeal Mexfield sought to abandon its concession that, on the true construction of the contract, which is called the Agreement, it could not serve a notice to quit under the contract and that the only way the contract could come to an end was by Ms Berrisford serving a notice under clause 5 or by Mexfield exercising its rights under clause 6.
One might have thought that, if the contract was not brought to an end in one of those ways it would continue, at least as a contract which governed the rights and obligations of the parties to it.
Moreover, it would do so even if, by some quirk of the law, the parties had failed to create a tenancy.
It was thus of some importance for Mexfield to abandon its concession.
As I see it, the ordinary principles governing the true construction of a contract apply to tenancy agreements and leases.
The principles have been discussed in many cases, notably of course, as Lord Neuberger MR said in Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, para 17, by Lord Hoffmann in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, passim, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912F 913G and in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, paras 21 26.
I agree with Lord Neuberger (also at para 17) that those cases show that the ultimate aim of interpreting a provision in a contract is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant.
As Lord Hoffmann made clear in the first of the principles he summarised in the Investors Compensation Scheme case at p 912H, the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
Here the language used is simple and straightforward.
I agree with Lord Neuberger for the reasons he has given that the contract makes it clear that the two ways in which the contract could be brought to an end under the contract were those described in clauses 5 and 6.
Since the contract has not been brought to an end in either of those ways, it must, at any rate for the purposes of the law of contract, remain on foot.
Even if the contract somehow failed to create a tenancy so that Mrs Berrisford does not have an estate in the property, there is in my opinion no principle of the law of contract which prevents the terms of the contract having effect as between the parties to it.
In this regard I agree with the views of Lord Neuberger expressed at paras 57 to 64 above.
Ms Berrisford has been living in the property for a considerable time and, except for a short period referred to by Lord Neuberger at para 7, has been paying rent at the rate provided for in the contract.
It would to my mind be bizarre for the law to imply or infer a contract between the parties to the effect that there was a periodic tenancy between them at the contractual rate.
That would mean that Mexfield can bring the contract to an end by giving one months notice to quit.
I see no basis for such an inference or implication.
It would be contrary to the express terms of the agreement, namely that the only way that Mexfield can determine it is under clause 6.
There is no need for any process of implication or inference because the parties have expressly agreed the position.
In particular, Ms Berrisford at no time agreed that Mexfield could give her a months notice to quit.
If, as a matter of law, the parties have created a licence and not a tenancy, so be it.
I appreciate that the point just discussed is Ms Berrisfords alternative case and is discussed as such by Lord Neuberger.
I take it first because it seems to me to be of critical importance to ascertain the contractual position between the parties.
It follows that, as I see it, even if the contract does not create a tenancy, it creates rights and obligations between the parties, so that in an appropriate case Ms Berrisford could in principle obtain an injunction against Mexfield for a threatened breach of contract.
In the meantime the contract remains on foot.
On the question whether there is a valid tenancy between the parties, with some misgiving I shall assume that Mr Wonnacotts concession that the contract is not capable, as a matter of law, of creating a tenancy in accordance with its terms because it is an agreement for an uncertain term is correct.
However, I agree with Lord Neuberger for the reasons he gives at paras 36 to 42 that, at any rate before 1926, the arrangement between the parties would have been treated as a tenancy or lease for life, determinable before her death in accordance with its terms.
I further agree with him (at paras 43 to 54) that the effect of section 149(6) of the Law of Property Act, which applies to arrangements made before and after the 1925 Act came into force, is that the lease for life is converted to a lease or contract for a term of 90 years determinable on Ms Berrisfords death.
For these reasons, which are essentially the same as those given by Lord Neuberger, I agree with him that the appeal should be allowed.
I am pleased to be able to arrive at this conclusion because any other conclusion would be contrary to the agreement freely entered into by the parties and, in particular, would be most unjust to Ms Berrisford.
LORD DYSON
I agree that this appeal should be allowed for the reasons stated by Lord Neuberger in his comprehensive judgment.
My views can be summarised quite shortly.
The starting point must be the true construction of the Agreement applying ordinary principles of contractual interpretation.
In this respect, an agreement which purports to create a tenancy agreement is no different from any other agreement.
For the reasons given by Lord Neuberger, I have no hesitation in concluding that, as a matter of construction, the Agreement provides that Mexfield can only determine it on one of the grounds specified in clause 6: it cannot determine it by simply serving one months notice to quit.
The next point is that there is nothing in the general law of contract which makes such an agreement void or unenforceable according to its terms.
But this is not an ordinary contract.
On its face, it purports to be a tenancy agreement ie an agreement which purports to grant an interest in land.
It is notorious that the law of landlord and tenant is highly technical, not least because its development has been affected by rules of law of ancient origin.
It is, therefore, necessary to turn to the law of landlord and tenant to see whether the fact that the Agreement purports to create a tenancy determinable by Mexfield, but only on the grounds specified in clause 6, requires a different approach to be adopted to the ascertainment of its meaning and effect.
As Lord Neuberger explains (paras 24 to 33), it seems to have been long established that an agreement for an uncertain term cannot be a tenancy in the sense of being a term of years; and a fetter on a right to serve a notice to determine a periodic tenancy is ineffective if the fetter is of uncertain duration.
Such a fetter is repugnant to a periodic tenancy: see Doe d Warner v Browne (1807) 8 East 165, 166.
As Lord Browne Wilkinson said in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386, 396, this bizarre outcome results from an application of an ancient and technical rule of law for the genesis of which there is no satisfactory rationale and for which there is no apparent useful purpose.
Despite the concern expressed by Lord Browne Wilkinson that to depart from a rule relating to land law which has been established for many centuries might upset long established titles, there is much to be said in favour of getting rid of the rule.
But I think that, rather than the court introducing a change to such a fundamental tenet of the law of landlord and tenant, it would be better if this were done by Parliament after full consultation of interested parties of the kind that is routinely undertaken by the Law Commission.
At all events, as a result of Mr Wonnacotts impressive and scholarly research (which was not placed before the Court of Appeal), it is clear that it is unnecessary to get rid of the uncertainty rule in this case.
This is because before the enactment of the Law of Property Act 1925 (the 1925 Act), the tenancy purportedly created by the Agreement would have been treated as a tenancy for life, defeasible by determination on any of the grounds specified in clauses 5 and 6.
Lord Neuberger has referred to some of the pre 1926 authorities at paras 37 to 39.
The position is well summarised in the last edition of the standard work on land law before the 1925 legislation, Joshua Williams Law of Real Property, 23rd ed (1920), p 135 in these terms: Where land is given to a widow during her widowhood, or to a man until he shall become bankrupt, or for any other definite period of time of uncertain duration, a freehold estate is conferred, as in the case of a gift for life.
Such estates are regarded in law as determinable life estates (emphasis added).
Accordingly, a periodic tenancy determinable on an uncertain event was treated as a defeasible tenancy for life.
In disputing this proposition, Mr Gaunts principal submission was that, before the enactment of the 1925 Act, the question whether a periodic tenancy determinable on an uncertain event was a defeasible tenancy for life was one of construction of the particular agreement.
But, as Lord Neuberger explains, it is clear from the authorities that this is incorrect.
It was a rule of the common law that such a tenancy was automatically treated as a tenancy for life.
It had nothing to do with the intention of the parties.
The effect of section 149(6) of the 1925 Act was to convert such a tenancy into a term for 90 years, subject to earlier termination in accordance with its terms.
It follows that the Agreement is such a tenancy and all the terms of clause 6 apply with full force and effect.
Mexfield cannot terminate the Agreement by serving a notice to quit as if this were a simple monthly tenancy without more.
This is a just result which plainly accords with the intention of the parties.
But it may legitimately be said that it is not satisfactory in the 21st century to have to adopt this chain of reasoning in order to arrive at such a result.
It is highly technical.
There should be no need to have to resort to such reasoning in order to arrive at the result which the parties intended.
That is why the radical solution of doing away with the uncertainty rule altogether is so attractive.
There is the further point that the section 149(6) route to the right result can only be followed where the purported tenant is an individual and not a corporate entity.
To treat an individual and a corporate entity differently in this respect can only be explained on historical grounds.
The explanation may lie in the realms of history, but that hardly provides a compelling justification for maintaining the distinction today.
To conclude, in my view the answer to this appeal lies in the law of landlord and tenant and the appeal must be allowed.
I do not find it necessary to address the alternative arguments advanced by Mr Wonnacott.
I would, however, go so far as to say that, like Lord Neuberger (paras 57 to 62), I am strongly attracted by the submission that, if by reason of the uncertainty argument the Agreement did not create a tenancy, then it was enforceable as a contract according to its terms like any other contract.
| UK-Abs | Mexfield Housing Co Operative Ltd (Mexfield) is a fully mutual housing co operative association founded by a bank as part of a mortgage rescue scheme with a view to buying mortgaged properties from borrowers in difficulty and letting the properties back to them.
The borrowers were required by Mexfields rules to become members of the association: [1].
One of the properties acquired in that way was 17 Elton Avenue, Barnet, which Mexfield bought from Ms Ruza Berrisford and let back to her under an Occupancy Agreement dated 13 December 1993: [2].
The Occupancy Agreement provided that rent was to be payable weekly in advance at 89 per week (subject to annual increases).
The only express provisions of the Occupancy Agreement dealing with its termination provided that it could be determined, under clause 5, by Ms Berrisford giving Mexfield one months notice in writing and, under clause 6, by Mexfield by the exercise of the right of re entry specified in this clause but ONLY in [certain specified] circumstances which did not include the giving of notice to quit: [5].
Because Mexfield was a mutual housing association the only statutory protection from which Ms Berrisford benefited was a right to (a) not be evicted without a court order and (b) at least four weeks notice to quit: [6].
Ms Berrisford remained in occupation and complied with her obligations under the Occupancy Agreement until (apparently through no fault of her own) she fell into arrears with her rent, which she soon paid off.
Rather than invoke any of the provisions of clause 6 of the Agreement, Mexfield sought to end Ms Berrisfords occupancy by serving a notice to quit: [7].
Mexfield applied for summary judgment on the basis that the Occupancy Agreement could not be a valid express tenancy because it was of uncertain duration.
However, it said, an implied periodic tenancy arose by virtue of the payment and acceptance of rent since 1993, and, pursuant to well established principles, Mexfield was therefore entitled to determine such a tenancy by notice to quit: [9].
At first instance, His Honour Judge Mitchell refused Mexfields application for summary judgment.
On appeal, Peter Smith J, and on appeal from him, the Court of Appeal, accepted Mexfields argument and made an order for possession: [10].
The Supreme Court unanimously allows the appeal.
The Occupancy Agreement takes effect as a lease for 90 years, determinable by Mexfield only on one months notice on Ms Berrisfords death or in accordance with the provisions of clause 6 of the Occupancy Agreement.
Lord Neuberger gives the leading judgment with which Lord Hope, Lord Walker, Lady Hale, Lord Mance, Lord Clarke and Lord Dyson agree, each adding further comments of their own.
The first point to consider was whether Mexfield was entitled on a proper construction of the Agreement, to terminate Ms Berrisfords occupancy on one months notice.
For the purposes of interpreting the Occupancy Agreement, the surrounding circumstances were that Mexfield was a co operative housing association and the purpose of the agreement was to provide Ms Berrisford with a home; these factors together with the mortgage rescue background tends to support the notion that Ms Berrisfords right of occupation was not intended to be precarious: [15].
Despite the fact that the Agreement is expressed to be a tenancy from month to month, it seems clear from the language of the Agreement that the parties intended that the arrangement should only be determinable pursuant to clauses 5 or 6:[18] [22].
On a review of the authorities, such an agreement cannot take effect as a tenancy according to its terms as it is for an uncertain duration: [23] [34].
While there is no apparent justification for the rule that an agreement for a term of uncertain duration cannot give rise to a tenancy and the law is not in a satisfactory state, this rule has been established for many centuries and should not be jettisoned, at least in this case: [34] [37].
However, before the Law of Property Act 1925 came into force, the common law treated an agreement for an uncertain terms such as the Occupancy Agreement as a tenancy for the life of the tenant, determinable before the tenants death according to its terms: [38] [44].
The effect of section 149(6) of the 1925 Act is that the Occupancy Agreement, as a tenancy for life at common law, is to be treated as a term of 90 years determinable on the death of Ms Berrisford, subject to the rights of determination in clauses 5 and 6: [45] [53].
Accordingly Ms Berrisford retains her tenancy and Mexfield is not entitled to possession: [57].
Although this conclusion makes it unnecessary to consider Ms Berrisfords alternative case in contract, having heard full submissions, Lord Neuberger expresses the view that, if Ms Berrisford had failed in establishing that she had a subsisting tenancy, she would have defeated Mexfields claim for possession on the ground that she is entitled to enforce her contractual rights as between the parties, albeit that they are not capable of binding the parties successors as no interest in land or other proprietary interest would subsist: [58] [68].
Lady Hale does not think it necessary to express an opinion on this alternative case in contract: [96].
|
On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture agreement (the JVA), containing an arbitration clause which provided that, in the event of a dispute between them which they were unable to resolve, that dispute should be resolved by arbitration before three arbitrators, each of whom should be a respected member of the Ismaili community, of which they were both members.
The principal question in this appeal is whether that arbitration agreement became void with effect from 2 December 2003 under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) (the Regulations) on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The JVA
The JVA was established to make investments in real estate around the world.
By article 9 it is expressly governed by English law.
Article 8 provides, so far as material, as follows: (1) If any dispute difference or question shall at any time hereafter arise between the investors with respect to the construction of this agreement or concerning anything herein contained or arising out of this agreement or as to the rights liabilities or duties of the investors or either of them or arising out of (without limitation) any of the businesses or activities of the joint venture herein agreed the same (subject to sub-clause 8(5) below) shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the HH Aga Khan National Council for the United Kingdom for the time being.
All arbitrators shall be respected members of the Ismaili community and holders of high office within the community.
(2) The arbitration shall take place in London and the arbitrators' award shall be final and binding on both parties.
The Ismaili community comprises Shia Imami Ismaili Muslims.
It is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.
The disputes
During the 1980s the joint venture came to comprise substantial business interests, first in Canada and later in the United States, Pakistan and the United Kingdom, with investments in properties, hotels and the oil industry.
By late 1988 Mr Jivraj and Mr Hashwani had agreed to part company.
On 30 October 1988 they entered into an agreement under which they appointed a three man conciliation panel (the panel) for the purpose of the division of the joint venture assets.
Each member of the panel was a respected member of the Ismaili community.
The panel operated between October 1988 and February 1990 and many of the assets were divided between the parties in accordance with its directions.
It was however unable to resolve all the issues between the parties.
The parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community, namely Mr Zaher Ahamed.
He issued a determination in December 1993, whereafter he had further exchanges with the parties until 1995, when he declared himself defeated.
The principal matters which remained in dispute were, on the one hand, a claim by Mr Hashwani that there remained a balance due to him and, on the other hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax liabilities which left Mr Jivraj with a potential for secondary liability.
These matters remained in dispute for some years.
Then, on 31 July 2008, Messrs Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a claim for US$1,412,494, together with interest, compounded quarterly from 1994, making a total of US$4,403,817.
The letter gave notice that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator.
The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void.
It is common ground, on the one hand, that Sir Anthony Colman is not a member of the Ismaili community and, on the other hand, that he is a retired judge of the Commercial Court with substantial experience of the resolution of commercial disputes, both as a judge and as an arbitrator.
Mr Jivraj's response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he is not a member of the Ismaili community.
Mr Hashwani subsequently issued an arbitration claim form seeking an order that Sir Anthony be appointed sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 (the 1996 Act).
The application was made on the basis that the requirement that the arbitrators be members of the Ismaili community, although lawful when the agreement was made, had been rendered unlawful and was void because it contravened the Regulations.
The Regulations
The Regulations were made in the exercise of powers conferred by the European Communities Act 1972 following the making of the Council Framework Directive 2000/78/EC of 27 November 2000 (OJ 2000 L303, p 16) (the Directive) which, by article 1, was itself made for the purpose of establishing: a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
The Regulations (as amended by section 77(2) of the Equality Act 2006) provide, so far as material, as follows: Interpretation 2 (3) In these Regulations references to employer, in their application to a person at any time seeking to employ another, include a person who has no employees at that time; employment means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly ; 3 Discrimination on grounds of religion or belief (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if on the grounds of the religion or belief of B or of any (a) other person except A (whether or not it is also As religion or belief), A treats B less favourably than he treats or would treat other persons; Applicants and employees 6 (1) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person in the arrangements he makes for the purpose of (a) determining to whom he should offer employment; in the terms on which he offers that person (b) employment; or (c) by refusing to offer, or deliberately not offering, him employment.
Exception for genuine occupational requirement 7 In relation to discrimination falling within regulation 3 (1) (discrimination on grounds of religion or belief) (a) regulation 6(1)(a) or (c) does not apply to any employment where paragraph (2) or (3) applies.
(2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out - (a) being of a particular religion or belief is a genuine and determining occupational requirement; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it, and this paragraph applies whether or not the employer has an ethos based on religion or belief.
(3) This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out - (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it."
The Directive
It is common ground that the Regulations must, so far as possible, be construed to give effect to the objective of the Directive which they were designed to implement: see eg Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-4135 and Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546.
It is also common ground that, although the arbitration agreement was on any view lawful when it was made, it became subject to the provisions of the Regulations, insofar as they applied to it.
The Directive provides, so far as material, as follows: Article 1 Purpose The purpose of this Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
Article 2 Concept of discrimination (1) For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1.
Article 3 Scope (1) Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to- (a) conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion; (b) access to all types and to all levels of vocational guidance, vocational training, advanced vocational training and retraining, including practical work experience; (c) employment and working conditions, including dismissals and pay; (d) membership of, and involvement in, an organisation of workers or employers, or any organisation whose members carry on a particular profession, including the benefits provided for by such organisations.
As Moore-Bick LJ, giving the judgment of the Court of Appeal, observed at para 8, the Directive is concerned with discrimination on the grounds of religion or belief, disability, age and sexual orientation.
It is therefore much wider in its scope than the Regulations, which are concerned only with discrimination on the grounds of religion or belief.
The explanation lies in the fact that the United Kingdom had already introduced legislation dealing with discrimination on most of the other grounds covered by the Directive in connection with employment and occupation.
Discrimination on the grounds of sex was rendered unlawful by the Sex Discrimination Act 1975 (the SDA 1975), discrimination on the grounds of race by the Race Relations Acts 1968 and 1976, discrimination on the grounds of disability by the Disability Discrimination Act 1995.
Legislation dealing with discrimination on the grounds of age, sexual orientation and religion or belief was still required to ensure compliance with the Directive.
The Regulations deal with discrimination on the grounds of religion or belief.
The Employment Equality (Sexual Orientation) Regulations 2003 (SI 2003/1661) provided for discrimination on the grounds of sexual orientation, and discrimination on the grounds of age was subsequently covered by the Employment Equality (Age) Regulations 2006.
Again as observed by the Court of Appeal (at para 9), the form of the Regulations follows closely that of the earlier legislation, in particular in defining "employment" as including a contract personally to do work of any kind.
Moreover, the language of regulation 6 is identical to, or differs in no significant respect from, that used in the other legislation dealing with discrimination.
It follows that the Regulations must be understood as complementing all the other legislation prohibiting discrimination.
This uniformity of the law relating to the areas in which discrimination is forbidden has now been reinforced by the Equality Act 2010 (the EA), which applies to all of the cases protected by the earlier legislation.
The EA is, among other things, an Act to reform and harmonise equality law and restate the greater part of the enactments relating to discrimination.
The Regulations were amongst those enactments restated by the EA.
They were revoked by section 211 and Schedule 27, Part 2.
The revocation took effect on 1 October 2010.
The current law is therefore as stated in the Act rather than the Regulations.
It was not however suggested in the course of the argument that any of the issues in this appeal is affected by the revocation of the Regulations.
First instance
Both parties applications were determined by David Steel J (the judge) on 26 June 2009: see [2009] EWHC 1364 (Comm), [2010] 1 All ER 302.
In the meantime on 11 March 2009, which was before the applications were heard, the solicitors for Mr Jivraj wrote an open letter to the solicitors for Mr Hashwani offering him the option of pursuing his claim in the High Court on the basis that Mr Jivraj would not seek a stay on the basis of the arbitration clause.
Mr Hashwani did not accept the offer.
It was submitted before the judge on behalf of Mr Hashwani that the term requiring arbitrators to be members of the Ismaili community was invalid by reason of one or more of the following: the Regulations, the Human Rights Act 1998 (the HRA), or public policy at common law.
The judge held (i) that the term did not constitute unlawful discrimination on any of those bases and, specifically, that arbitrators were not employed within the meaning of the Regulations; (ii) that if, nonetheless, appointment of arbitrators fell within the scope of the Regulations, it was demonstrated that one of the more significant characteristics of the Ismaili sect was an enthusiasm for dispute resolution within the Ismaili community, that this was an ethos based on religion within the meaning of the Regulations and that the requirement for the arbitrators to be members of the Ismaili community constituted a genuine occupational requirement which it was proportionate to apply within regulation 7(3); and (iii) that, if that was also wrong, the requirement was not severable from the arbitration provision as a whole, so that the whole arbitration clause would be void.
The judge ordered Mr Hashwani to pay Mr Jivrajs costs and refused Mr Hashwanis application for permission to appeal.
ii)
The Court of Appeal
On 7 October 2009 Sir Richard Buxton granted permission to appeal limited to the issues on the Regulations and on severance.
Permission was refused on the HRA and public policy issues.
The issues in the Court of Appeal were therefore these: i) Are arbitrators persons who are under a contract to do work so as to fall within the Regulations and, if so, do parties who make an arbitration agreement specifying religious qualifications for eligible arbitrators thereby make an arrangement for the purpose of determining to whom they should offer employment or do they agree to offer, or deliberately not to offer, employment within the meaning of the Regulations? If so, in the circumstances, did the requirement for all the arbitrators to be members of the Ismaili community constitute a genuine occupational requirement (GOR) which it was proportionate to apply within regulation 7(3)? iii) If not, did the whole arbitration agreement fail or was only the discriminatory provision void?
The unanimous judgment of the Court of Appeal, which comprised Moore- Bick and Aikens LJJ and Sir Richard Buxton, was handed down on 22 June 2010: see [2010] EWCA Civ 712, [2010] ICR 1435.
The Court of Appeal reached a different conclusion from the judge on the principal points.
It held that the appointment of an arbitrator involved a contract for the provision of services which constituted a contract personally to do any work, and therefore satisfied the definition of employment in regulation 2(3).
It followed that the appointor was an employer within the meaning of regulation 6(1) and that the restriction of eligibility for appointment as an arbitrator to members of the Ismaili community constituted unlawful discrimination on religious grounds, both in making arrangements for the purpose of determining to whom he should offer employment contrary to regulation 6(1)(a), and by refusing to offer, or deliberately not offering employment contrary to regulation 6(1)(c).
The Court of Appeal further held that being a member of the Ismaili community was not a genuine occupational requirement for the job within the meaning of the exception in regulation 7(3).
It is submitted on behalf of Mr Jivraj that both those conclusions were wrong.
Finally the Court of Appeal held that, although there would be no difficulty in operating the agreement if the offending requirement was struck out, so doing would render the agreement substantially different from that originally intended, the term was void in its entirety under paragraph 1(1) of Schedule 4 to the Regulations and Mr Hashwanis nomination of an arbitrator was invalid.
It is submitted on behalf of Mr Hashwani that both the judge and the Court of Appeal were wrong on this point, which I will call the severance issue.
A further point arises out of the Court of Appeals order on costs if its judgment is upheld on each of the above points.
Employment
The reasoning of the Court of Appeal was straightforward: see paras 15-17.
In short the Court of Appeal drew attention to the wide terms of articles 1 and 3 of the Directive.
In particular it noted at para 15 that the recitals to the Directive and the structure and language of article 3(1) as a whole indicate that it is concerned with discrimination affecting access to the means of economic activity, whether through employment, self-employment or some other basis of occupation, access to vocational guidance and training (which can be expected to provide a means of access to economic activity), conditions of employment (which affect those who have gained access to a means of economic activity) and membership of bodies whose purpose is to affect conditions of recruitment or employment or to regulate access to a particular form of economic activity, such as professional bodies that directly or indirectly control access to the profession or a significant means of obtaining work.
The Court of Appeal then said at para 16: The paradigm case of appointing an arbitrator involves obtaining the services of a particular person to determine a dispute in accordance with the agreement between the parties and the rules of law, including those to be found in the legislation governing arbitration.
In that respect it is no different from instructing a solicitor to deal with a particular piece of legal business, such as drafting a will, or consulting a doctor about a particular ailment or an accountant about a tax return.
Since an arbitrator (or any professional person) contracts to do work personally, the provision of his services falls within the definition of employment, and it follows that his appointor must be an employer within the meaning of regulation 6(1)
In paras 16 and 17 it placed reliance on three cases.
It relied upon von Hoffmann v Finanzamt Trier (Case C-145/96) [1997] All ER (EC) 852 as showing that arbitrators had been treated as providing services for VAT purposes.
It also referred to domestic regulations relating to goods and services.
It further derived support from Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and from Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28.
It recognised that those cases were addressing slightly different points but concluded that they illustrate the width of the expression a contract personally to do any work in the various discrimination statutes.
It concluded thus in para 17: They confirm our view that the expression is apt to encompass the position of a person who provides services as an arbitrator, and why we think the judge was wrong to hold that the nature of the arbitrator's function takes his appointment outside the scope of the 2003 Regulations.
Moreover, a contract of that kind, once made, is a contract of employment within the meaning of the 2003 Regulations.
It follows, therefore, that for the purposes of the 2003 Regulations a person who has entered into a contract under which he is to obtain such services is an employer and the person engaged to provide them is an employee.
The critical question under this head is whether the Court of Appeal was correct to form a different view from the judge on this point.
In my opinion it was not.
As the Court of Appeal correctly observed at para 15, the meaning of article 3 of the Directive has not been considered by the Court of Justice, and is to be interpreted in the light of the recitals and given its natural meaning consistent with the EC Treaty and the existing case law of the court.
It is common ground, at any rate in this class of case, that there is a contract between the parties and the arbitrator or arbitrators appointed under a contract and that his or their services are rendered pursuant to that contract.
It is not suggested that such a contract provides for employment under a contract of service or of apprenticeship.
The question is whether it provides for employment under a contract personally to do any work.
There is in my opinion some significance in the fact that the definition does not simply refer to a contract to do work but to employment under such a contract.
I would answer the question in the negative on the ground that the role of an arbitrator is not naturally described as employment under a contract personally to do work.
That is because his role is not naturally described as one of employment at all.
I appreciate that there is an element of circularity in that approach but the definition is of employment and this approach is consistent with the decided cases.
Given the provenance of the Regulations, it is appropriate to consider first the decisions of the Court of Justice.
The most important of these is perhaps Allonby v Accrington and Rossendale College (Case C-256/01) [2004] ICR 1328, where the Court of Justice followed the principles laid down in Lawrie-Blum v Land Baden-Wurttemberg (Case C-66/85) [1987] ICR 483 and in Kurz v Land Baden-Wurttemberg (Case C-188/00) [2002] ECR I-10691.
In Lawrie-Blum, which was concerned with the free movement of workers under what was then article 48 of the Treaty, Advocate General Lenz said at para III 2(b) of his opinion that the term worker covers any employed person who is not self-employed.
The court said at para 17: That concept [ie of worker] must be defined with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned.
The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.
In Kurz the court said at para 32 that it was settled case law that the concept of worker has a specific Community meaning and must not be interpreted narrowly.
The court then repeated the essential feature of the relationship identified in the above passage from Lawrie-Blum.
In Allonby the court addressed an equal pay claim by a college lecturer who had been dismissed by the college and then re-engaged, ostensibly as a self- employed sub-contractor supplied by an agency.
For the purposes of article 141(1) of the EC Treaty, the court drew a clear distinction between workers and independent suppliers of services.
It discussed the concept of worker within the meaning of article 141(1) between paras 62 and 72, which included the following: 62.
The criterion on which article 141(1) EC is based is the comparability of the work done by workers of each sex: see, to that effect, Defrenne v Sabena (No 2) (Case 149/77) [1978] ECR 1365, 1377, para 22.
Accordingly, for the purpose of the comparison provided for by article 141(1) EC, only women and men who are workers within the meaning of that article can be taken into consideration.
63.
In that connection, it must be pointed out that there is no single definition of worker in Community law: it varies according to the area in which the definition is to be applied: Martinez Sala v Freistaat Bayern (Case C-85/96) [1998] ECRI-2691, 2719, para 31. 64.
The term worker' within the meaning of article 141(1) EC is not expressly defined in the EC Treaty.
It is therefore necessary, in order to determine its meaning, to apply the generally recognised principles of interpretation, having regard to its context and to the objectives of the Treaty.
65.
According to article 2 EC, the Community is to have as its task to promote, among other things, equality between men and women.
Article 141(1) EC constitutes a specific expression of the principle of equality for men and women, which forms part of the fundamental principles protected by the Community legal order: see, to that effect, Deutsche Post AG v Sievers (Cases C-270 and 271/97) [2000] ECR I-929, 952, para 57.
As the court held in Defrenne v Sabena (Case 43/75) [1976] ICR 547, 566, para 12, the principle of equal pay forms part of the foundations of the Community.
66.
Accordingly, the term worker used in article 141(1) EC cannot be defined by reference to the legislation of the member states but has a Community meaning.
Moreover, it cannot be interpreted restrictively.
67.
For the purposes of that provision, there must be considered as a worker a person who, for a certain period of time, performs services for and under the direction of another person in return for which he receives remuneration see, in relation to free movement of workers, in particular Lawrie-Blum para 17, and Martinez Sala, para 32.
68.
Pursuant to the first paragraph of article 141(2) EC, for the purpose of that article, pay means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.
It is clear from that definition that the authors of the Treaty did not intend that the term worker, within the meaning of article 141(1) EC, should include independent providers of services who are not in a relationship of subordination with the person who receives the services (see also, in the context of free movement of workers, Meeusen v Hoofddirectie van de Informatie Beheer Groep (Case C-337/97) [1999] ECR I-3289, 3311, para 15).
69.
The question whether such a relationship exists must be answered in each particular case having regard to all the factors and circumstances by which the relationship between the parties is characterised.
70.
Provided that a person is a worker within the meaning of article 141(1) EC, the nature of his legal relationship with the other party to the employment relationship is of no consequence in regard to the application of that article: ... 71.
The formal classification of a self-employed person under national law does not exclude the possibility that a person must be classified as a worker within the meaning of article 141(1) EC if his independence is merely notional, thereby disguising an employment relationship within the meaning of that article.
On the basis of those materials I would accept Mr Davies submission that the Court of Justice draws a clear distinction between those who are, in substance, employed and those who are independent providers of services who are not in a relationship of subordination with the person who receives the services.
I see no reason why the same distinction should not be drawn for the purposes of the Regulations between those who are employed and those who are not notionally but genuinely self-employed.
In the light of Allonby, there can be no doubt that that would be the correct approach to the near identical definition in section 1(6) of the Equal Pay Act 1970 and must remain the correct approach to the definition of employment in section 83(2) of the EA, which provides, so far as relevant: Employment means (a) employment under a contract of employment, a contract of apprenticeship or a contract personally to do work; That definition is almost identical to the definition in regulation 2(3) of the Regulations and, since it applies to equal pay issues by virtue of sections 83(4), 80(2) and 64 of the EA, it must equally apply to the Regulations.
In my opinion there is nothing in the domestic authorities which requires the court to come to any different conclusion.
The problem with some of them is that they do not refer to the jurisprudence of the Court of Justice.
However, the most recent decision of the House of Lords does.
In Percy v Board of National Mission of the Church of Scotland [2006] 2 AC 28 the House of Lords considered a sex discrimination claim brought by a woman who was a minister of the Church of Scotland.
The issue was whether she was employed within the meaning of section 82(1) of the SDA 1975.
The House held that she was.
Lord Hoffmann dissented on the basis that she was the holder of an office but had no doubt (at para 66) that, if the arrangement had been contractual, it would plainly have been a contract of service.
Lord Hoffmann said at para 73 that the term workers is a term of art in Community law which was defined by the Court of Justice in the passage from para 17 of Lawrie-Blum quoted at para 24 above.
Lord Hope of Craighead said much the same at para 126, where he also noted that the same approach was taken in Allonby.
Baroness Hale of Richmond referred at para 141 to para A[4] of Harvey on Industrial Relations and Employment Law, which stated that: the distinction is between those who work for themselves and those who work for others, regardless of the nature of the contract under which they are employed.
She then referred at para 143 to the decision of the Court of Appeal in Northern Ireland in Perceval-Price v Department of Economic Development [2000] IRLR 380, where it was held that three full-time judicial office holders, namely a full- time chairman of industrial tribunals, a full-time chairman of social security appeal tribunals and a social security commissioner were workers for the purposes of almost identical provisions.
In para 145, after quoting the definition of an employment relationship in Lawrie-Blum, Baroness Hale noted that, in giving the judgment of the court in Perceval-Price, Sir Robert Carswell LCJ said that the objective of the relevant EC legislation was to give protection against inequality and discrimination to those who might be vulnerable to exploitation.
He also said that the concept of a worker should be construed purposively by reference to this objective.
Baroness Hale then quoted this extract from the judgment of Sir Robert Carswell: All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the president of the industrial tribunals or the court service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self-employed persons.
Their office accordingly partakes of some of the characteristics of employment . . .
At para 146 Baroness Hale continued: I have quoted those words at length because they illustrate how the essential distinction is, as Harvey says, between the employed and the self-employed.
The fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition.
Judges are servants of the law, in the sense that the law governs all that they do and decide, just as clergy are servants of God, in the sense that God's word, as interpreted in the doctrines of their faith, governs all that they practise, preach and teach.
This does not mean that they cannot be workers or in the employment of those who decide how their ministry should be put to the service of the Church.
Some consideration was recently given to the position of part-time judges by this court in OBrien v Ministry of Justice (Note) [2010] UKSC 34, [2010] 4 All ER 62 where the court considered Percy in some detail in a judgment of the court given by Lord Walker.
At para 25 it referred to the same passage in Lawrie-Blum as having laid down the relevant principle and at para 26 it referred to the speech of Baroness Hale and approved the passage quoted above from the judgment of Sir Robert Carswell in Perceval-Price.
As I read Percy, it sought to apply the principles identified by the Court of Justice, as indeed did this court in OBrien [2010] 4 All ER 62.
The essential questions in each case are therefore those identified in paras 67 and 68 of Allonby [2004] ICR 1328, namely whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services.
Those are broad questions which depend upon the circumstances of the particular case.
They depend upon a detailed consideration of the relationship between the parties.
As I see it, that is what Baroness Hale meant when she said that the essential difference is between the employed and the self- employed.
The answer will depend upon an analysis of the substance of the matter having regard to all the circumstances of the case.
I would not accept the Court of Appeals analysis (at para 21) of Baroness Hales speech in this regard.
There have been a number of domestic cases which say that the question is whether the dominant purpose of the contract is the execution of personal work or labour: see eg Quinnen v Hovells [1984] ICR 525, Mirror Group Newspapers Ltd v Gunning [1986] 1 WLR 546, especially per Oliver LJ at 551H and Balcombe LJ at 556H; Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and Percy [2006] 2 AC 28 per Lord Hope at para 113, where he referred to two other cases in the Court of Appeal, namely Patterson v Legal Services Commission [2004] ICR 312 and Mingeley v Pennock (trading as Amber Cars) [2004] ICR 727.
Mr Michael Brindle QC also referred on behalf of the respondent to two earlier cases which focus on the question whether a contract is one personally to execute any work or labour: see Tanna v Post Office [1981] ICR 374 and Hugh-Jones v St Johns College, Cambridge [1979] ICR 848.
However, none of these cases considered the approach in the decisions of the Court of Justice referred to above.
In particular, the cases did not focus on the fact that the employment must be employment under a contract of employment, a contract of apprenticeship or a contract personally to do work.
(My emphasis).
Given the importance of the EC perspective in construing the legislation, including the Regulations, the cases must now be read in the light of those decisions.
They show that it is not sufficient to ask simply whether the contract was a contract personally to do work.
They also show that dominant purpose is not the test, or at any rate not the sole test.
That is not to say that the question of purpose is irrelevant but the focus is on the contract and relationship between the parties rather than exclusively on purpose.
Elias J, sitting as President of the Employment Appeal Tribunal, recognised some of the difficulties in James v Redcats (Brands) Ltd [2007] ICR 1006.
He discussed the relevance of dominant purpose in this context by reference to the cases at paras 53 to 68.
At para 59, after quoting from the judgment of Balcombe LJ in Gunning [1986] 1 WLR 546, he said that the dominant purpose test is really an attempt to identify the essential nature of the contract.
In the context of the case he was considering he posed the question whether it was in essence to be located in the field of dependent work relationships or whether it was in essence a contract between two independent business undertakings.
At paras 67 and 68, after referring to a number of cases and observing at para 65 that the description of the test as one of identifying the dominant purpose was perhaps not an altogether happy one, he said this: 67.
An alternative way of putting it may be to say that the courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not.
If it is, then the contract lies in the employment field; if it is not - if, for example, the dominant feature of the contract is a particular outcome or objective - and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field.
68.
This is not to suggest that a tribunal will be in error in failing specifically to apply the dominant purpose or indeed any other test.
The appropriate classification will in every case depend upon a careful analysis of all the elements of the relationship, as Mr Recorder Underhill QC pointed out in Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667.
It is a fact sensitive issue, and there is no shortcut to a considered assessment of all relevant factors.
However, in some cases the application of the dominant purpose test may help tribunals to decide which side of the boundary a particular case lies.
It is noteworthy that the European cases were not cited in many of the cases, including that before Elias J. In the light of the European cases, dominant purpose cannot be the sole test, although it may well be relevant in arriving at the correct conclusion on the facts of a particular case.
After all, if the dominant purpose of the contract is the execution of personal work, it seems likely that the relationship will be, in the words of Allonby [2004] ICR 1328, para 67, a case in which the person concerned performs services for and under the direction of the other party to the contract in return for remuneration as opposed to an independent provider of services who is not in a relationship of subordination with him or it.
This may not be so however because, although the dominant purpose of the contract may be personal work, it may not be personal work under the direction of the other party to the contract.
All will depend upon the applications of the principles in Allonby to the circumstances of the particular case.
If the approach in Allonby is applied to a contract between the parties to an arbitration and the arbitrator (or arbitrators), it is in my opinion plain that the arbitrators role is not one of employment under a contract personally to do work.
Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties as contemplated in para 67 of Allonby.
He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services, as described in para 68.
The arbitrator is in critical respects independent of the parties.
His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party.
As the International Chamber of Commerce (the ICC) puts it, he must determine how to resolve their competing interests.
He is in no sense in a position of subordination to the parties; rather the contrary.
He is in effect a quasi-judicial adjudicator: K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863, 885.
In England his role is spelled out in the 1996 Act.
By section 33, he has a duty to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case so as to provide a fair means of determination of the issues between the parties.
Section 34 provides that, subject to the right of the parties to agree any matter, it is for the arbitrator to decide all procedural matters.
Examples of the width of those powers can be seen in the particular examples in section 34(2).
Section 40 provides that the parties shall do all things necessary for the proper and expeditious conduct of the arbitration, which includes complying with any order of the arbitrator, whether procedural or otherwise.
Once an arbitrator has been appointed, at any rate in the absence of agreement between them, the parties effectively have no control over him.
Unless the parties agree, an arbitrator may only be removed in exceptional circumstances: see sections 23 and 24.
The court was referred to many other statutory provisions in other parts of the world and indeed many other international codes, including the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration 1985, the ICC Rules and the London Court of International Arbitration (the LCIA) Rules to similar effect.
The Regulations themselves include provisions which would be wholly inappropriate as between the parties and the arbitrator or arbitrators.
For example, regulation 22(1) provides: Anything done by a person in the course of his employment shall be treated for the purposes of these Regulations as done by his employer as well as by him, whether or not it was done with the employers knowledge or approval.
It is evident that such a provision could not apply to an arbitrator.
In this regard an arbitrator is in a very different position from a judge.
The precise status of a judge was left open by this court in OBrien [2010] 4 All ER 62, in which the court referred particular questions to the Court of Justice: see para 41.
However, as Sir Robert Carswell said in Perceval-Price [2000] IRLR 380 and Lord Walker said in OBrien (at para 27), judges, including both recorders and all judges at every level are subject to terms of service of various kinds.
As Sir Robert put it, although judges must enjoy independence of decision without direction from any source, they are in other respects not free agents to work as and when they choose, as are self-employed persons.
In both those cases the court was considering the relationship between the relevant department of state and the judges concerned.
It was not considering the relationship between the judges and the litigants who appear before them.
Here, by contrast, the court is considering the relationship between the parties to the arbitration on the one hand and the arbitrator or arbitrators on the other.
As I see it, there is no basis upon which it could properly be held that the arbitrators agreed to work under the direction of the parties as contemplated in para 67 of Allonby [2004] ICR 1328.
Further, in so far as dominant purpose is relevant, I would hold that the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.
In reaching this conclusion it is not necessary to speculate upon what the position might be in other factual contexts.
It was submitted that the effect of the decision of the Court of Appeal is that a customer who engages a person on a one- off contract as, say, a plumber, would be subject to the whole gamut of discrimination legislation.
It would indeed be surprising if that were the case, especially given the fact that the travaux prparatoires contained no such suggestion: see the impact assessment in the Commissions Proposal for the Directive 1999/0225 (CNS), Brussels 1999, which was concerned solely with the position of enterprises of various types.
There was no consideration of the effect on individual choice by customers.
See also a memorandum from the Commissions Director General for Employment and Social Affairs to the EU Committee of the House of Lords dated 9 February 2000 to much the same effect.
This is not to say that the Regulations may not apply in the case of the plumber, solicitor, accountant or doctor referred to by the Court of Appeal in para 16.
As already stated, all will depend upon the application of the principles in Allonby to the particular case.
As I see it, the problem with the approach adopted by the Court of Appeal is that it focuses only on the question whether there is a contract to do work personally, whereas it is necessary to ask the more nuanced questions identified in Allonby.
In para 19 the Court of Appeal relied in support of its more general approach upon the opinion of Advocate General Maduro in Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Case C- 54/07) [2008] ICR 1390.
It said this in paras 19 and 20: 19.
That the choice of a solicitor, plumber or arbitrator, whether on religious, racial or any other grounds, should fall foul of regulation 6(1) of the 2003 Regulations, even if made entirely privately, may strike some people as surprising.
However, in [the Firma Feryn case] Advocate General Maduro expressed the opinion, at para 14, that the Directive must be understood in the framework of a wider policy to foster conditions for a socially inclusive labour market and to ensure the development of democratic and tolerant societies which allow the participation of all persons irrespective of racial or ethnic origin.
That case arose out of a statement by a company that supplied and fitted up-and-over garage doors that it would not employ immigrants as fitters because its customers were unwilling to have them in their homes.
One can well see why a public statement of that kind might be regarded as discriminatory: it was liable to deter potential applicants for employment and thereby militate against a socially inclusive labour market.
The court itself did not expressly adopt the Advocate General's expression of opinion; rather it confined itself to holding, at para 25, that a general statement of the kind under consideration constituted direct discrimination because it was likely to deter some potential applicants and thus hinder their access to the labour market.
None the less, the Advocate General's view of the broad policy objective of the Directive is in our opinion supported by the recitals.
It is also one which is essentially incompatible with an acceptance of the right to discriminate between any providers of services on the basis of race, sex, religion or any of the other grounds covered by the Directive.
20.
Mr. Davies sought to meet that broad analysis by saying that the primary concern of the Directive is access to employment and economic activity, not private choices by consumers between those who have already gained access to the market.
The language of article 3 could be construed in that more limited way, but the expression access to employment, to self-employment or to occupation is capable of a broader interpretation consistent with the policy objectives we have described.
In any event, we are concerned with the language of domestic legislation, which is not restricted by the scope of the Directive and which is underpinned by broadly the same policy considerations as those identified by Advocate General Maduro in the Firma Feryn case, whether it was introduced before or after the publication of the Directive.
I would not accept that analysis.
The Firma Feryn case was not relied upon in the course of the oral argument in the Court of Appeal.
It was referred to in answer to a letter from the Court of Appeal asking questions on the assumption that an engagement to provide services gave rise to an employment relationship under the Regulations.
The case concerned conventional employment relationships and did not discuss at all the extension of discrimination law to one-off contracts for services.
The Court of Justice held that a racially discriminatory statement by an employer as to its recruitment policy could constitute direct discrimination even if there was no actual victim.
There was no actual victim because there was no evidence that anyone who might have lost out as a result of the policy had actually applied, or would have applied, for a position with that employer.
The Advocate General thus expressed his opinion in a case which was squarely concerned with employment and not with the boundary between employment and self-employment and in which no reference was made to Lawrie-Blum [1987] ICR 483, Kurz [2002] ECR I-10691 or Allonby [2004] ICR 1328.
Some reliance was placed upon the reference to the conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions in article 3(1)(a) of the Directive.
In para 20 the Court of Appeal gave a wide construction to that provision, rejecting the submission made by Mr Davies that it related to barriers to entry to trades, professions and occupations.
It did so on the same footing as before, namely that a wide meaning should be given to the terms of the Directive and, in any event, to the Regulations.
However, I would accept Mr Davies submission that the expression access to self-employment or to occupation means what it says and is concerned with preventing discrimination from qualifying or setting up as a solicitor, plumber, greengrocer or arbitrator.
It is not concerned with discrimination by a customer who prefers to contract with one of their competitors once they have set up in business.
That would not be denying them access to self-employment or to occupation.
I see no reason to give a different meaning to the Regulations from that given to the Directive.
For these reasons I prefer the conclusion of the judge to that of the Court of Appeal.
I agree with the judge that the Regulations are not applicable to the selection, engagement or appointment of arbitrators.
It follows that I would hold that no part of clause 8 of the JVA is invalid by reason of the Regulations and would allow the appeal on this ground.
Genuine occupational requirement
If the above conclusion is correct, this point does not arise but it was fully argued and I will briefly consider it.
The question considered by the judge was whether, if regulation 6(1)(a) or (c) would otherwise apply, it is prevented from applying by regulation 7(1) and (3).
It will be recalled that, by regulation 7(1), regulations 6(1)(a) and (c) do not apply where regulation 7(3) applies and that regulation 7(3) provides: This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it.
Those provisions were made in accordance with the exceptions in relation to occupational requirements made by article 4 of the Directive, which provides: 1.
Notwithstanding article 2(1) and (2), member states may provide that a difference of treatment which is based on a characteristic related to any of the grounds referred to in article 1 shall not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate.
2.
Member states may maintain national legislation in force at the date of adoption of this Directive or provide for future legislation incorporating national practices existing at the date of adoption of this Directive pursuant to which, in the case of occupational activities within churches and other public or private organisations the ethos of which is based on religion or belief, a difference of treatment based on a persons religion or belief shall not constitute discrimination where, by reason of the nature of these activities or of the context in which they are carried out, a persons religion or belief constitute a genuine, legitimate and justified occupational requirement, having regard to the organisations ethos.
This difference of treatment shall be implemented taking account of members states constitutional provisions and principles, as well as the general principles of Community law, and should not justify discrimination on another ground. .
It is common ground that, as the judge said at para 40, a rigorous and strict approach must be adopted to the question whether the particular exception applies: Stadt Halle Thermische Restabfall-und Energieverwertungsanlage TREA Leuna (Case C-26/03) [2005] ECR I-1 and Marleasing [1990] ECR I-4135.
v Arbeitgemeinschaft
Although some reliance was placed in the course of argument on regulation 7(2), I shall focus first on paragraph (3).
Since 1 October 2010 the provisions of regulation 7 have been replaced by those of Schedule 9 of the EA.
Regulation 7(3) has been replaced by paragraph (3) of that Schedule, which provides: A person (A) with an ethos based on religion or belief does not contravene a provision mentioned in paragraph 1(2) by applying in relation to work a requirement to be of a particular religion or belief if A shows that, having regard to that ethos and the nature or context of the work (a) it is an occupational requirement, (b) the application of the requirement is a proportionate means of achieving a legitimate aim, and the person to whom A applies the requirement does not meet it (or A has reasonable grounds for not being satisfied that the person meets it).
It was not suggested that there is any significant difference between that paragraph and regulation 7(3).
There are four relevant requirements under regulation 7(3).
The issue between the parties centres upon whether the second requirement is satisfied.
The requirements are (1) that the employer should have an ethos based on religion or belief; (2) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, being of a particular religion or belief is a genuine requirement for the job; (3) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, it is proportionate to apply that requirement on the facts; and (4) that the person to whom the requirement is applied, who here must be Sir Anthony Colman, does not meet the requirement.
As to (1) it is not (and could not be) suggested here that Mr Jivraj and Mr Hashwani did not have such an ethos.
As to (3), it is not in dispute that, if requirement (2) is satisfied, so that being an Ismaili is a genuine occupational requirement, it is or would be proportionate to apply it.
As to (4), it is plain that Sir Anthony Colman does not meet the requirement in the JVA that the arbitrators should be members of the Ismaili community.
The essential issue between the parties is whether requirement (2) is satisfied.
The question is therefore whether, having regard to the Ismaili ethos and to the nature of the employment or the context in which it is carried out, being of the Ismaili religion or belief is a genuine requirement for the job.
The judge held that this requirement was satisfied whereas the Court of Appeal held that it was not.
Our attention was drawn on behalf of Mr Jivraj to what is said to be an important difference between paragraphs (2) and (3) of regulation 7.
Paragraph (2) is concerned with the case where the employer does not have a particular ethos based on religion or belief but wishes to recruit a worker who does have such an ethos.
In that event, for the exception to apply, being of the particular ethos or belief must be a genuine and determining occupational requirement.
By contrast, where (as here) the employer has an ethos based on religion or belief, it is sufficient under paragraph (3) that being of a particular religion or belief is a genuine occupational requirement for the job.
Mr Davies submits that the difference between the two cases is this.
In the first case the question is whether being of a particular religion or belief is a genuine and determining occupational requirement.
That is to say it must be an essential requirement for the job.
Whether it is or not is an objective question which the court can readily decide.
In the second case, on the other hand, the question for the court is subjective, namely whether it is a genuine requirement for the job in the eyes of the employer or employers.
This, Mr Davies suggests, reflects the sensible principle that it is not for the court to sit in judgment over matters of religion or belief.
By contrast, Mr Brindle disputes the idea that the test is entirely subjective.
Regulation 7(3) requires that being of a particular religion or belief is not only genuine but also, as paragraph 2 of article 4 of the Directive shows, legitimate and justified.
It follows that it is not sufficient that the employer has a genuine belief that the particular religion or belief is required.
The requirement must also be legitimate and justified.
It would be remarkable, in his submission, if the justification could be found in the personal opinions of the prima facie discriminator.
I agree with Mr Davies that it is not for the court to sit in judgment on matters of religion or belief.
However, I also agree with Mr Brindle that the test for justifying prima facie discrimination cannot be entirely subjective.
This is because the Regulations must be construed consistently with the Directive.
It seems to me to be reasonably clear that paragraph 1 of article 4 of the Directive is the source of paragraph (2) of regulation 7 because they both refer to a genuine and determining occupational requirement.
In these circumstances paragraph 2 must be the source of paragraph (3) of the regulation, with the result that the expression genuine occupational requirement must (either alone or together with proportionality in requirement (3)) have been intended to reflect the expression genuine, legitimate and justified occupational requirement in paragraph 2 of article 4 of the Directive.
If the legitimacy or justification of a requirement were assessed purely by reference to the subjective view of the employer, they would add nothing to the stipulation that a requirement be genuine.
In my view, whether or not a particular religion or belief is a legitimate and justified requirement of an occupation is an objective question for the court.
This is not however as strict a test as that applied under regulation 7(2), namely that a particular religion or belief is an essential requirement for the job.
As I see it, the question is simply whether in all the circumstances of the case the requirement that the arbitrators should be respected members of the Ismaili community was, not only genuine, but legitimate and justified.
I do not agree with Mr Brindle that the requirement that arbitrators be Ismailis cannot be objectively justified.
His submission that an English law dispute in London under English curial law does not require an Ismaili arbitrator takes a very narrow view of the function of arbitration proceedings.
This characterisation reduces arbitration to no more than the application of a given national law to a dispute.
One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.
This is reflected in section 1 of the 1996 Act which provides that: the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.
The stipulation that an arbitrator be of a particular religion or belief can be relevant to this aspect of arbitration.
As the ICC puts in its written argument: The raison dtre of arbitration is that it provides for final and binding dispute resolution by a tribunal with a procedure that is acceptable to all parties, in circumstances where other fora (in particular national courts) are deemed inappropriate (eg because neither party will submit to the courts or their counterpart; or because the available courts are considered insufficiently expert for the particular dispute, or insufficiently sensitive to the parties positions, culture, or perspectives).
Under section 34 of the 1996 Act (referred to above) the arbitrators have complete power over all procedural and evidential matters, including how far the proceedings should be oral or in writing, whether or not to apply the strict rules of evidence, whether the proceedings should be wholly or partly adversarial or whether and to what extent they should make their own inquiries.
They are the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility.
In paras 41 to 44 of his judgment [2010] 1 All ER 302 the judge made detailed findings which seem to me to be relevant to this question.
I refer to only some of them.
In para 41 he described the history and development of the Ismaili Community.
He noted from the summary on the website of the Aga Khan Development Network that in the early part of the 20th century Aga Khan III introduced a range of organisational forms that gave Ismaili communities the means to structure and regulate their own affairs.
He added that those forms were established against the background of "the Muslim tradition of a communitarian ethic on the one hand, and responsible individual conscience with freedom to negotiate one's own moral commitment and destiny on the other".
At para 42 the judge quoted extensively from the same summary which included this: Spiritual allegiance to the Imam and adherence to the Shia Imami Ismaili tariqah (persuasion) of Islam according to the guidance of the Imam of the time, have engendered in the Ismaili community an ethos of self-reliance, unity, and a common identity.
He noted that in 1986 the present Aga Khan: promulgated a Constitution that, for the first time, brought the social governance of the world-wide Ismaili community into a single structure with built-in flexibility to account for diverse circumstances of different regions.
Served by volunteers appointed by and accountable to the Imam, the Constitution functions as an enabler to harness the best in individual creativity in an ethos of group responsibility to promote the common well-being.
Like its predecessors, the present constitution is founded on each Ismaili's spiritual allegiance to the Imam of the time, which is separate from the secular allegiance that all Ismailis owe as citizens to their national entities.
The guidance of the present Imam and his predecessor emphasised the Ismaili's allegiance to his or her country as a fundamental obligation.
These obligations discharged not by passive affirmation but through responsible engagement and active commitment to uphold national integrity and contribute to peaceful development.
In para 43 the judge quoted from a paper presented to the Council of Europe in March 2009 by the Director of International Training with the secretariat of the Aga Khan which included the following: Under the Constitution, the Imam has also established National and International Conciliation and Arbitration Boards to encourage amicable resolution of conflicts through impartial conciliation, mediation and arbitration, a service which is being increasingly used, in some countries, even by non-Ismailis.
In fulfilling the mandate to sustain social, economic, cultural and civil society development, the Imamat collaborates with national governments, regional and international institutions as well as civil society organisations.
This paper highlights the work of the Conciliation and Arbitration Boards established under the Ismaili Constitution and more particularly the training programmes that have been conducted for them over the last decade, indicating some of the best practices.
Over the centuries, Ismaili communities in various parts of the world, have been conducting their own ADR processes based on the ethics of the faith as guided by the Imams of the Time.
[The Aga Khan] was concerned about the massive costs of litigation faced by members of the Ismaili community in various parts of the world.
Not only were the legal costs very high, but the legal procedures, in many countries, were particularly lengthy and did not always result in outcomes that conformed with the principles of natural justice.
The Aga Khan was concerned about compliance with the ethics of the faith which promote a non-adversarial approach to dispute resolution in keeping with the principles of negotiated settlement (sulh) enshrined in the Holy Qur'an.
The study indicated that a majority of the cases were in the field of family disputes and that the national courts in the countries, where the disputants were settled, were not always able to comprehend the inter-generational attitudinal issues involved, let alone being able to resolve them.
This syndrome is very much in keeping with the notion of the "limited remedial imagination" that Menkel-Meadow attributes to the adversarial system which focuses on a zero-sum numbers game where the "winner takes all".
It was therefore decided by the Imam, in consultation with the leaders of the various Ismaili communities worldwide, to build on the community's existing tradition of settling disputes amicably within the ethics of Islam and to establish Conciliation and Arbitration Boards at various levels of social governance in the Ismaili communities throughout the world.
It was also felt that the system should be such that the first submission of an issue to an arbitrational or mediational body should ensure the highest degree of proficiency, probity and fairness so that the number of cases which go for appeal would be minimal and that the process would be seen as being equitable, fair and cost effective.
The Aga Khan's advice was that such a system should endeavour to resolve disputes within the community without the disputants having to resort to unnecessary litigation which is time consuming, expensive and destructive.
The Aga Khan saw the amicable resolution of disputes, without resorting to a court of law and within the ethics of the faith, as an important aspect of the improvement of the quality of life of the Ismailis globally.
Consequently, the Ismaili Constitution of 1986 made provision for the establishment of the Conciliation and Arbitration Boards.
The judge then in para 44 set out part of article XIII of the Constitution which set up a National Conciliation and Arbitration Board for all types of dispute, which provided by article 13.5: Each National Conciliation and Arbitration Board shall upon the application of any Ismaili assist him to settle any differences or disputes with another party residing in the area of jurisdiction of the National Conciliation and Arbitration Board in relation to any of the matters mentioned in article 13.1(a).
Article 13.1(a) provided that the Board was: to assist in the conciliation process between parties in differences or disputes arising from commercial, business and other civil liability matters, domestic and family matters, including those relating to matrimony, children of a marriage, matrimonial property, and testate and intestate succession;
In these circumstances the judge held that the provision in the JVA which provided that the arbitrators should be respected members of the Ismaili community and holders of high office within the community was a GOR within regulation 7(3).
He did so on the basis that the material set out above showed that, as he put it at para 45, one of the more significant and characteristic spirits of the Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili community.
He said that he had no difficulty in determining this spirit to be an "ethos based on religion".
He also relied upon the terms of the arbitration clause itself and the engagement by both sides of members of the Ismaili community to perform mediation and conciliation services from 1988 until 1994.
In my opinion the judge was justified in concluding that the requirement of an Ismaili arbitrator can be regarded as a genuine occupational requirement on the basis that it was not only genuine but both legitimate and justified, so that requirement (2) was satisfied.
As to requirement (3), the judge said at para 46 that, had proportionality been a live issue, having regard to the parties freedom in section 1 of the 1996 Act (quoted above) he would have held that article 8 of the JVA was proportionate.
The reasoning of the Court of Appeal [2010] ICR 1435 is set out in their para 29 as follows: The judge's findings about the nature and ethos of the Ismaili community were not challenged, but in our view he failed to pay sufficient regard to the other requirements of regulation 7(3), in particular, to whether, having regard to the ethos of that community and the nature of the arbitrator's function, being an Ismaili was a genuine occupational requirement for its proper discharge.
If the arbitration clause had empowered the tribunal to act ex aequo et bono it might have been possible to show that only an Ismaili could be expected to apply the moral principles and understanding of justice and fairness that are generally recognised within that community as applicable between its members, but the arbitrators' function under clause 8 of the joint venture agreement is to determine the dispute between the parties in accordance with the principles of English law.
That requires some knowledge of the law itself, including the provisions of the Arbitration Act 1996, and an ability to conduct the proceedings fairly in accordance with the rules of natural justice, but it does not call for any particular ethos.
Membership of the Ismaili community is clearly not necessary for the discharge of the arbitrator's functions under an agreement of this kind and we are unable to accept, therefore, that the exception provided in regulation 7 of the 2003 Regulations can be invoked in this case.
I prefer the approach of the judge.
For the reasons given earlier, I am not persuaded that the test is one of necessity.
The question is whether, in all the circumstances the provision that all the arbitrators should be respected members of the Ismaili community was legitimate and justified.
In my opinion it was.
The approach of the Court of Appeal seems to me to be too legalistic and technical.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which the parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence.
For these reasons I would, if necessary, have allowed the appeal on the basis that article 8 was a GOR within regulation 7(3).
This conclusion makes it unnecessary to consider whether it also satisfied regulation 7(2).
Severance and costs
In these circumstances, neither the severance issue raised by Mr Hashwani nor the appeal on costs advanced by Mr Jivraj arises and I say nothing about them.
Reference to the Court of Justice
I would not refer any of the questions which arise in this appeal to the Court of Justice.
On the first question, the only questions of EC law which arise relate to the true construction of the Directive.
The Court of Justice has resolved those issues in a number of cases, notably Allonby [2004] ICR 1328.
To my mind the principles are now acte clair.
On the second question, the principal issue between the parties relates to the application of the relevant principles to the facts.
As to the correct construction of regulation 7(3), I have accepted Mr Brindles submission that it does not involve a wholly subjective question on the ground that the relevant provision must be not only genuine, but also legitimate and justifiable.
In these circumstances, I see no basis for a reference in relation to GOR, which was in any event not determinative of the appeal.
CONCLUSION
I would allow the appeal.
The first point
I have read and agree entirely with the judgment of Lord Clarke on the first point: that is, whether the arbitrators contemplated by article 8 of the Joint Venture Agreement are persons who would be engaged in employment under a contract personally to do work within the meaning of regulation 2 of the Employment Equality (Religion or Belief) Regulations 2003, interpreted in the light of Council Directive 2000/78/EC to which the Regulations aim to give effect.
The conclusion that they would not be is, I think, unsurprising for all the reasons that Lord Clarke gives.
I note that as long ago as 1904 (RGZ 59, 247), the German Reichsgericht identified the particular nature of an arbitral contract, in terms which I think have a relevance to arbitration generally, when it said (in translation), that: It does not seem permissible to treat the arbitrator as equivalent to a representative or an employee or an entrepreneur.
His office has .
an entirely special character, which distinguishes him from other persons handling the affairs of third parties.
He has to decide a legal dispute in the same way as and instead of a judge, identifying the law by matching the relevant facts to the relevant legal provisions.
The performance expected from him is the award, which constitutes the goal and outcome of his activity.
It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him.
But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge.
A more modern source, Gary B Borns authoritative work on International Commercial Arbitration (2009), convincingly discusses the general international legal understanding of the nature of an arbitrators engagement in the following passage (Vol I, pp 1607-1609): There is also debate about how to characterize the arbitrators contract, particularly in civil law jurisdictions where the characterization of contracts is often essential to determining their effects.
Some commentators consider the arbitrators contract to be an agency agreement, where the arbitrator serves as the parties agent.
Other authorities have suggested treating the arbitrators contract as an agreement for the provision of services.
A third approach has been to regard the arbitrators contract as a sui generis or hybrid form of agreement, not being categorizable in conventional terms and instead giving rise to a unique set of right and duties.
The proper analysis is to treat the arbitrators contract as a sui generis agreement.
That is in part because this characterization accords with the specialized and distinct nature of the arbitrators mandate: as noted above, that mandate differs in fundamental ways from the provision of many other services and consists in the performance of a relatively sui generis adjudicatory function.
It is therefore appropriate, and in fact necessary, that the arbitrators contract be regarded as sui generis.
At the same time, there are no other satisfactory characterizations of an arbitrators contract.
It makes no sense to treat the arbitrators contract as an agency agreement.
Under most legal systems, that characterization would require the arbitrator to follow the parties directions and to provide the parties with information and an accounting all of which can only with difficulty, if at all, be assimilated to the adjudicative role of an arbitrator.
Moreover, the role of an agent is inconsistent with the arbitrators adjudicative function which is precisely to be independent of the parties.
This was underscored by a French appellate decision, which held that an agreement for the parties representatives to resolve their dispute could not be an arbitration agreement: A stipulation of that kind is incompatible with the actual concept of arbitration, since the arbitrators, though appointed by the parties, can under no circumstances become their representatives.
That would imply, in particular, that they represent the parties and account for their functions.
Such a role, and the obligations it entails, are alien to the functions of an arbitrator, which are judicial in nature.
Equally, regarding the arbitrator as a service provider, like an accountant, investment banker, lawyer, or other professional, ignores the essential adjudicative character of his or her mandate.
Arbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship.
The proper analysis is therefore to regard the arbitrators contract as a sui generis agreement specifying the terms on which this adjudicative function is to be exercised vis--vis particular parties and on particular terms.
Both these citations catch and support the essence of Lord Clarkes distinction between persons under the direction of another and arbitrators who perform an independent role, free of such control.
The second point
As Lord Clarke notes at para 51, the second point does not in these circumstances arise, since the whole situation falls outside the scope of regulation 2.
To ask how the exception permitted by regulation 7(3) and article 4(2) of the Directive might apply, when by definition it cannot, may risk giving a slightly false impression about the scope of the exception in situations to which it is potentially applicable.
The reasons which can, as Lord Clarke demonstrates, be given for concluding that the exception would not apply to a considerable extent duplicate those given for concluding that regulation 2 does not apply.
They are in particular that the arbitrators would not be under the direction of the parties: see paras 61 et seq.
Accordingly, it may be appropriate to say a few words about the application of the exception in a situation in which the regulation would apply.
If one takes a situation which is within regulation 2, say the engagement by the Ismaili community, or by any other organisation whose ethos is based on religion or belief, of an employed lawyer to undertake English law work, I would expect it to be much more difficult to maintain as valid a restriction to members of the Ismaili community or of the other religious or faith-based organisation.
Many English as well as other lawyers believe in, are trained in and are familiar with techniques for the amicable resolution of disputes, including conciliation, mediation and arbitration.
The value of alternative dispute resolution, particularly mediation, is also recognised at the European legal level (see eg Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and commercial matters and Council of Europe Recommendation No R(2002)10 on civil mediation).
A religious or faith-based communitys or organisations power first to select and then to direct its own employed lawyers would be a secure means of ensuring that its employed lawyers valued, understood and prioritised the handling of English law work so far as possible on a non-confrontational basis, using alternative dispute resolution procedures wherever possible.
A refusal to employ anyone other than a member of the particular religion or faith would in that context seem unlikely to be justified or proportionate.
| UK-Abs | The parties entered into a joint venture agreement on 29 January 1981.
Article 8 provided that any dispute arising from the joint venture should be resolved by arbitration before three arbitrators, each of whom was required to be a respected member of the Ismaili community (the Requirement).
The Ismaili community comprises Shia Imami Ismaili Muslims and is led by the Aga Khan.
The issue arising on this appeal is whether the Requirement, and/or the arbitration agreement as a whole, became void when the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations) came into force on 2 December 2003, as an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The joint venture ended in 1988.
The division of the joint venture assets was largely determined by a three man panel appointed in accordance with the arbitration agreement, but some matters remained in dispute.
On 31 July 2008 Mr Hashwanis solicitors wrote to Mr Jivraj asserting that a balance of over US$4.4m was due to him and giving notice of his intention to appoint Sir Anthony Colman, a retired judge of the Commercial Court, as an arbitrator.
Sir Anthony was not a member of the Ismaili community.
Mr Jivraj commenced proceedings for a declaration that his appointment was void as a breach of the Requirement.
Mr Hashwani sought an order that Sir Anthony be appointed as sole arbitrator.
The High Court (David Steel J) held that the appointment of arbitrators fell outside the scope of the Regulations as they were not employed or, if they were, that the Requirement fell within the exception permitted for genuine occupational requirements which it was proportionate to apply.
Had he held that the Requirement was void, he would have held that the arbitration agreement as a whole was void.
The Court of Appeal allowed Mr Hashwanis appeal in relation to the Regulations, finding that arbitrators were employed and that there had been unlawful religious discrimination.
However, they concluded that the agreement should not be enforced with the Requirement severed from it and, accordingly, Sir Anthonys appointment was invalid (the severance issue).
Mr Jivraj appealed to the Supreme Court in respect of the finding that the clause was void by reason of the Regulations.
Mr Hashwani cross appealed on the severance issue.
The Supreme Court unanimously allows the appeal on the ground that an arbitrator is not a person employed under a contract personally to do work within the meaning of the Regulations, which do not therefore apply.
The majority (Lord Phillips, Lord Walker, Lord Clarke and Lord Dyson) also find that the Requirement would have fallen within the exception for genuine occupational requirements if
the Regulations had applied.
Lord Mance preferred not to deal with this issue as it did not arise in the light of the finding that the Regulations did not apply.
The judgment of the majority is given by Lord Clarke.
The High Court judge had correctly concluded that an arbitrator was not employed within the scope of the Regulations [22].
He or she fell outside the definition of a worker laid down by the case law of the European Court of Justice and was instead an independent provider of services who was not in a relationship of subordination with the person who received the services [34][40].
The dominant purpose of the contract was not the sole test for determining employment, although it might be relevant in arriving at the correct conclusion on the facts of a particular case [39].
An arbitrator was a quasi judicial adjudicator whose duty was not to act in the particular interests of either party [41].
The dominant purpose of the appointment, insofar as it was relevant, was the impartial resolution of the dispute [45].
The question of whether the Requirement was a genuine occupational requirement for the job for the purposes of the exception in regulation 7(3) of the Regulations did not therefore arise.
However, whether a particular religion or belief was a legitimate and justified requirement of an occupation was an objective question for the court [59].
Arbitration was more than the application of a given national law to a dispute and a stipulation that an arbitrator be of a particular religion or belief can be relevant to the manner in which disputes are resolved [61].
In this case, the judge had correctly found that the Ismaili community had demonstrated an ethos, based on religion, for dispute resolution contained within that community [68].
The test was not one of necessity.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence [70].
The severance issue did not therefore arise [72].
|
Biometric data such as DNA samples, DNA profiles and fingerprints is of enormous value in the detection of crime.
It sometimes enables the police to solve crimes of considerable antiquity.
There can be no doubt that a national database containing the data of the entire population would lead to the conviction of persons who would otherwise escape justice.
But such a database would be controversial.
It is not permitted by our law.
Parliament has, however, allowed the taking and retention of data from certain persons.
The questions raised by these appeals are whose data may be retained and for how long.
originally enacted, provided: Section 64 of the Police and Criminal Evidence Act 1984 (PACE), as (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
Section 64(1A) of PACE was enacted by section 82 of the Criminal Justice
and Police Act 2001.
It is still in force.
It provides: (1A) Where(a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
It will be seen at once that section 64(1A) does not specify any time limit for the retention of the data or any procedure to regulate its destruction.
These are matters which are addressed in guidelines issued by the Association of Chief Police Officers (the ACPO guidelines) entitled Exceptional Case Procedure for Removal of DNA, Fingerprints and PNC Records and published on 16 March 2006.
So far as is material, these provide: it is important that national consistency is achieved when considering the removal of such records.
Chief Officers have the discretion to authorise the deletion of any specific data entry on the [Police National Database] owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases.
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
In R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) the claimants sought judicial review of the retention by the police of their fingerprints and DNA samples on the grounds inter alia that it was incompatible with article 8 of the European Convention on Human Rights (ECHR).
The majority of the House of Lords held that the retention did not constitute an interference with the claimants article 8 rights, but they unanimously held that any interference was justified under article 8(2).
The ECtHR disagreed: see its decision in S and Marper v United Kingdom (2008) 48 EHRR 1169 (Marper ECtHR).
In considering whether retention of data in accordance with the ACPO guidelines was proportionate and struck a fair balance between the competing public and private interests, the court said at para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be takenand retainedfrom a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court concluded at para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
On 16 December 2008, the Secretary of the State for the Home Department announced the Governments preliminary response to the ECtHR decision.
The data of children under the age of 10 would be removed from the database immediately and the Government would issue a White Paper and consult on bringing greater flexibility and fairness into the system by stepping down some individuals over timea differentiated approach, possibly based on age, or on risk, or on the nature of the offences involved.
The White Paper, Keeping the Right People on the DNA Database, was published on 7 May 2009.
It contained a series of proposals for the retention of data, the details of which are immaterial for present purposes.
On 28 July 2009, ACPOs Director of Information wrote to all chief constables (including the respondent Commissioner) saying that the final draft for publication of new guidelines was not expected to take effect until 2010 and that until that time the current retention policy on fingerprints and DNA remains unchanged.
On 11 November 2009, after the consultation period had ended, the Secretary of State made a written ministerial statement outlining a revised set of proposals.
Again, the details are not material.
It was decided to include these proposals in the Crime and Security Act 2010 (the 2010 Act) which had its first reading on 19 November 2009.
The 2010 Act received the Royal Assent on 8 April 2010, but the relevant provisions (sections 14, 22 and 23) have not been brought into effect.
Section 23 provides that the Secretary of State must make arrangements for a National DNA Database Strategy Board (Database Board) to oversee the operation of the National DNA Database (section 23(1)); the Database Board must issue guidance about the immediate destruction of DNA samples and DNA profiles which are or may be retained under PACE (section 23(2)); and any chief officer of a police force in England and Wales must act in accordance with any such guidance issued (section 23(3)).
The Coalition Government stated in the Queens Speech on 25 May 2010 that it intended to seek amendment of the 2010 Act by bringing forward legislative proposals (in Chapter 1 of Part 1 of the Protection of Freedoms Bill) along the lines of the Scottish system.
This system permits retention of data for no more than three years if the person is suspected (but not convicted) of certain sexual or violent offences, and permits an application to be made to a Sheriff by a Chief Constable for an extension of that period (for a further period of not more than two years, although successive applications may be made): see sections 18 and 18A of the Criminal Procedure (Scotland) Act 1995, as inserted by sections 83(2) and 104 of the Police, Public Order and Criminal Justice (Scotland) Act 2006.
GC and C issued proceedings for judicial review of the retention of their data on the grounds that, in the light of Marper ECtHR, its retention was incompatible with their article 8 rights.
Recognising that there was an irreconcilable conflict between Marper UK and Marper ECtHR and that the former decision was binding on it, the Divisional Court (Moses LJ and Wyn Williams J) dismissed both judicial review challenges on 16 July 2010 and in both cases granted a certificate pursuant to section 12 of the Administration of Justice Act 1969 that the cases were appropriate for a leapfrog appeal to the Supreme Court.
The facts of these two cases can be stated briefly.
On 20 December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day, he was released on police bail without charge.
Before the return date of 21 February 2008, he was informed that no further action would be taken.
On 23 March 2009, GCs solicitors requested the destruction of the DNA sample, DNA profile and fingerprints.
The Commissioner refused to do so on the grounds that there were no exceptional circumstances within the meaning of the ACPO guidelines.
On 17 March 2009, C was arrested on suspicion of rape, harassment and fraud.
His fingerprints and a DNA sample were taken.
He denied the allegations saying that they had been fabricated by his ex girlfriend and members of her family.
No further action was taken by the police in respect of the harassment and fraud allegations.
On 18 March 2009, he was charged with rape.
On 5 May 2009 at Woolwich Crown Court, the prosecution offered no evidence and C was acquitted.
C requested the destruction of the data and its deletion from the police database.
On 12 November and again on 2 February 2010, the Commissioner informed C that his case was not being treated as exceptional within the meaning of the ACPO guidelines and his request was refused.
The issue
It is common ground that, in the light of Marper ECtHR, the indefinite retention of the appellants data is an interference with their rights to respect for private life protected by article 8 of the ECHR which, for the reasons given by the ECtHR, is not justified under article 8(2).
It is agreed that Marper UK cannot stand.
The issue that arises on these appeals is what remedy the court should grant in these circumstances.
On behalf of C, Mr Fordham QC submits that the court should grant a declaration under section 8(1) of the Human Rights Act 1998 (HRA) that the retention of Cs biometric data is unlawful.
Section 8(1) provides that In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
He seeks no other relief.
On behalf of GC, Mr Cragg seeks an order quashing the ACPO guidelines and a reconsideration of the retention of GCs data within 28 days.
The primary submission of Lord Pannick QC (on behalf of the Commissioner of Police of the Metropolis) is that the correct remedy is to grant a declaration of incompatibility under section 4 of the HRA.
The primary submission of Mr Eadie QC (on behalf of the Secretary of State) is that, although there is no fundamental objection to a declaration of incompatibility, it is not necessary to grant one.
The arguments in support of a declaration of incompatibility
Section 6 of the HRA provides: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
In summary, Lord Pannick and Mr Eadie say that it is not possible to read or give effect to section 64(1A) of PACE in a way which is consistent with Marper ECtHR.
They accept that section 64(1A) confers a discretionary power on the police to retain the data obtained from a suspect in connection with the investigation of an offence.
That is why they concede that section 6(2)(a) of the HRA is not in play.
But they say that it is a power which, save in exceptional circumstances, must be exercised so as to retain the data indefinitely in all cases.
Section 64(1A) cannot, therefore, be read or given effect so as to permit the power to be exercised proportionately in the way described in Marper ECtHR.
The hands of the police are tied by section 64(1A) and that position is faithfully reflected in the ACPO guidelines.
Two arguments are advanced in support of this submission.
The first (and principal) argument is that to interpret section 64(1A) as requiring police authorities to comply with article 8 would defeat the statutory purpose of establishing a scheme for the protection of the public interest free from the limits and protections required by article 8.
It would rewrite the statutory provision in a manner inconsistent with a fundamental feature of the legislative scheme which is that, instead of being destroyed, data taken from all suspects shall be retained indefinitely.
It is this feature of the scheme which leads Lord Rodger to invoke authorities such as Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
Parliament intended that the discretion conferred by section 64(1A) should be exercised to promote the statutory policy and object that data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
Accordingly, any exercise of the discretion conferred by section 64(1A) which does not meet this statutory policy and object would frustrate the intention of Parliament.
The second argument is that the nature of the changes to the ACPO guidelines that would be required in order to make them compatible with the ECHR is such that, for reasons of institutional competence and democratic accountability, these should be left to Parliament to make.
The choice of compatible scheme involves a difficult and sensitive balancing of the interests of the general community against the rights of the individual and a number of different schemes would be compatible.
Neither the police nor the court (in the event of a judicial review challenge to the scheme devised by the police) is equipped to make the necessary policy choices.
Thus, for example, only Parliament is constitutionally and institutionally competent to decide whether to adopt the Scottish model in preference to the 2010 Act model.
Discussion
The first argument
This argument is based on the premise that it was the intention of Parliament that, save in exceptional cases, the data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
It goes without saying that, if that premise is correct, section 64(1A) of PACE can only be interpreted as conferring a discretion which must be exercised so as to give effect to that intention.
The conclusion necessarily follows from the premise.
On that hypothesis, a purposive interpretation of the statute inevitably leads to the conclusion that the first argument is correct.
But I do not accept the premise.
It is uncontroversial that Parliament intended (i) to abrogate section 64(1) of PACE and remove the obligation to destroy data as soon as practicable after the conclusion of the proceedings if the suspect is cleared of the offence; (ii) to create a scheme for the retention of the data taken from a suspect, whether or not he is cleared of the offence and whether or not he is even prosecuted; and (iii) that the data was to be retained so that it might be used for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came (to use the language of section 64(1A)).
I shall refer to these purposes as the statutory purposes.
It is also clear that, in order to promote the statutory purposes, Parliament must have intended that an extended, even a greatly extended, database should be created.
But in my view that is as far as it goes.
To argue from the premise that Parliament intended that a greatly extended database should be created to the conclusion that it intended that, save in exceptional circumstances, the data should be retained indefinitely in all cases is a non sequitur.
Parliament did not prescribe the essential elements of the scheme by which the statutory purposes were to be promoted.
That task was entrusted to the police, no doubt with the assistance of the Secretary of State.
If it had been intended to require a scheme whose essential elements included an obligation that, save in exceptional circumstances, the data lawfully obtained from all suspects should be retained indefinitely, that could easily have been expressly stated in the statute.
If that had been intended, surely section 64(1A) would have said in terms that, save in exceptional circumstances, the fingerprints and samples taken shall in every case be retained indefinitely after they have fulfilled the purpose for which they were taken.
This would have been the obvious way of expressing that intention.
The grant of an apparently unfettered discretion (signalled by the unqualified use of the word may) was certainly not the obvious way of expressing that intention.
The natural meaning of the word may is permissive, not mandatory.
As I have said, it is clear that Parliament intended to get rid of the requirement to destroy data after it has served its immediate purpose and to permit the retention of data in order to fulfil the statutory purposes.
But the statute is silent as to how the statutory purposes are to be fulfilled.
There is no reason to suppose that Parliament must have intended that this should be achieved in a disproportionate way so as to be incompatible with the ECHR.
Lord Rodger suggests that Mr Fordhams argument entails the proposition that under section 64(1A) the police were free to do what they liked and that the subsection contains nothing to delimit the exercise of their discretion.
I agree that, if this is the effect of Mr Fordhams argument, it would cast doubt as to its correctness.
But section 64(1A) clearly delimits the exercise of the discretion.
It must be exercised to enable the data to be used for the statutory purposes.
I would add that the discretion must be exercised in a way which is proportionate and rationally connected to the achievement of these purposes.
Thus, for example, the police could not exercise the power to retain the data only of those suspected of minor offences; or only of serious offences of a particular type; or only of suspects of a certain age or gender; or only for a short period.
But it is possible to exercise the discretion in a rational and proportionate manner which respects and fulfils the statutory purpose and does not involve the indefinite retention of data taken from all suspects, regardless of their age and the nature of the alleged offence.
The Commissioner and the Secretary of State assert that a fundamental feature (possibly the fundamental feature) of section 64(1A) is that data should be retained for use from all suspects indefinitely.
But, although expressed in different words, this is the same as the premise argument that I have already rejected.
For the reasons I have given for rejecting that argument, it is not possible to extract this fundamental feature from the statute, whether one looks at its language alone or in the context of the mischief which it was intended to cure.
In my view, the fundamental feature of section 64(1A) is that it gives the police the power to retain and use data from suspects for the stated statutory purposes of preventing crime, investigation of offences and the conduct of prosecutions.
But that does not justify a blanket or disproportionate practice.
Neither indefinite retention nor indiscriminate retention can properly be said to be fundamental features of section 64(1A).
As I have said, following the judgment of the ECtHR the Secretary of State for the Home Department took steps to take the DNA of children under the age of 10 off the database.
If the meaning of section 64(1A) is that, save in exceptional cases, there is a duty to retain samples taken from all suspects indefinitely, then surely this amendment to the ACPO guidelines was ultra vires section 64(1A).
That is not, however, suggested by Lord Pannick or Mr Eadie.
It seems to me that, once it is accepted that section 64(1A) permits a scheme which does not insist on the indefinite retention of data in all cases, then the extreme position advocated by the Commissioner and the Secretary of State cannot be maintained.
So what did Parliament intend if it was not a scheme of indefinite retention in all cases? The obvious answer is a proportionate scheme which gives effect to the statutory purposes and is compatible with the ECHR.
The fact that it is possible to create a number of different schemes all of which would meet these criteria does not matter.
Section 64(1A) gives a power.
Powers can often be lawfully exercised in different ways.
The Commissioner and the Secretary of State seek support for the first argument from two sources.
The first is the Explanatory Notes to the 2001 Act which explained at para 210: An additional measure has been included to allow all fingerprints and DNA samples lawfully taken from suspects during the course of an investigation to be retained and used for the purposes of prevention and detection of crime and the prosecution of offences.
This arises from the decisions of the Court of Appeal (Criminal Division) in R v Weir and R v B (Attorney General's Reference No 3/199) May 2000.
These raised the issue of whether the law relating to the retention and use of DNA samples on acquittal should be changed.
In these two cases compelling DNA evidence that linked one suspect to a rape and the other to a murder could not be used and neither could be convicted.
This was because at the time the matches were made both defendants had either been acquitted or a decision made not to proceed with the offences for which the DNA profiles were taken.
Currently section 64 of PACE specifies that where a person is not prosecuted or is acquitted of the offence the sample must be destroyed and the information derived from it can not be used.
The subsequent decision of the House of Lords overturned the ruling of the Court of Appeal.
The House of Lords ruled that where a DNA sample fell to be destroyed but had not been, although section 64 of PACE prohibited its use in the investigation of any other offence, it did not make evidence obtained as a failure to comply with that prohibition inadmissible, but left it to the discretion of the trial judge.
The Act removes the requirement of destruction and provides that fingerprints and samples lawfully taken on suspicion of involvement in an offence or under the Terrorism Act can be used in the investigation of other offences.
This new measure will bring the provisions of PACE for dealing with fingerprint and DNA evidence in line with other forms of evidence.
But this does not advance matters.
It shows that Parliament intended to remove the requirement of destruction of data and that fingerprints and samples lawfully taken on suspicion of involvement in an offence . can be used in the investigation of other offences.
But that sheds no light on whether it was intended that there should be a policy of blanket indefinite retention.
The Commissioner and the Secretary of State draw attention to the words an additional measure has been included to allow all [data]to be retained (emphasis added).
But in my view this is an insufficient foundation on which to base a conclusion that the true meaning of section 64(1A) is that, save in exceptional circumstances, biometric data must be retained indefinitely in all cases.
Even if all means all data taken from all suspects, the Explanatory Notes do not say that data must be retained in all cases, still less do they say anything about how long the data must or may be kept.
There is no indication in the Notes that Parliament intended all material to be kept indefinitely even if it was not necessary to do so in an individual case within the meaning of article 8(2) of the ECHR.
The second source is certain passages in speeches of the House of Lords in Marper UK.
The issue there was whether section 64(1A) and the ACPO guidelines were compatible with article 8 and 14 of the ECHR: see para 6 of the speech of Lord Steyn.
At para 2, Lord Steyn said: But as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable.
But that is a statement at a high level of generality.
Lord Steyn was not purporting to define the statutory purpose with any precision.
At para 39 Lord Steyn addressed the submission on behalf of the appellants that the legislative aim (of assisting in the investigation of crimes in the future) could be achieved by less intrusive means.
He considered the conclusion of Sedley LJ in the Court of Appeal that the degree of suspicion should be considered in individual cases before a decision was made whether or not to retain the data.
He rejected this suggestion saying: this would not confer the benefits of a greatly expanded database and would involve the police in interminable and invidious disputes (subject to judicial review of individual decisions) about offences of which the individual had been acquitted.
I have already accepted that Parliament intended that the exercise of the section 64(1A) power should lead to a greatly expanded database and that Lord Steyn was rejecting the idea that the scheme contemplated by section 64(1A) should involve assessment of the degree of suspicion on a case by case basis.
But he was not saying that, subject to exceptional circumstances, section 64(1A) required the introduction of a scheme under which the data taken from all suspects would be retained indefinitely, since any other interpretation would undermine the statutory purpose.
At para 78, Lady Hale said that the whole community (as well as the individuals whose samples are collected) benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
That is undoubtedly true.
But the system included the ACPO guidelines.
It was, therefore, not contentious that the system was designed to catch and retain as many samples as possible.
Moreover, leaving ECHR issues aside, section 64(1A) does allow the collection and retention of as many samples as possible.
Lady Hale was not, however, saying that section 64(1A) required the collection and retention of as many samples as possible.
Similarly, at para 88 Lord Brown said that the benefits of the larger database brought about by the now impugned amendment to PACE were manifest.
The more complete the database, the better the chance of detecting criminals and of deterring future crime.
But here too, Lord Brown was not considering the question whether section 64(1A) conferred a power which, save in exceptional circumstances, could only be exercised by requiring the retention of the data taken from all suspects indefinitely.
The question whether, leaving ECHR issues aside, section 64(1A) required the retention of the data taken from all suspects indefinitely was not in issue in Marper UK.
The focus of the argument in Marper UK was on whether section 64(1A) and the ACPO guidelines were compatible with the ECHR.
In particular, it was on whether article 8(1) was engaged and whether the ACPO scheme was justified under article 8(2).
The context of the observations relied on to support the first argument was the practice of the police, save in exceptional cases, to retain all data indefinitely.
There was no debate on whether, if article 8(1) was engaged and the ACPO guidelines could not be justified under article 8(2), section 64(1A) could be read and given effect in a way compatible with the ECHR.
So I reject the submission that Marper UK provides support for the submission that underpins the first argument, namely that it was the intention of Parliament that, save in exceptional cases, the data of all suspects should be retained indefinitely.
In my view, section 64(1A) permits a policy which (i) is less far reaching than the ACPO guidelines; (ii) is compatible with article 8 of the ECHR; and (iii) nevertheless, promotes the statutory purposes.
Those purposes can be achieved by a proportionate scheme.
It is possible to read and give effect to section 64(1A) in a way which is compatible with the ECHR and section 6(2)(b) of the HRA cannot be invoked to defeat the claim that the ACPO guidelines are unlawful by reason of section 6(1) of the HRA.
For the reasons that I have given, to interpret section 64(1A) compatibly with article 8 does not impermissibly cross the line where, to use the words of Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 28, it would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation.
This conclusion is consistent with the decision in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410.
The claimant was employed by an agency providing staff for schools.
The agency required her to apply under section 115(1) of the Police Act 1997 for an enhanced criminal record certificate giving the prescribed details of every relevant matter relating to her which was recorded in central records, since she was a prospective employee who was being considered for a position involving regularly being involved with persons under the age of 18.
Section 115(7) provided that, before issuing a certificate, the Secretary of State shall request the chief police officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate.
The Commissioner of Police of the Metropolis disclosed certain information about the claimant which was included in the certificate.
She sought judicial review of the decision to disclose the information on the ground that her article 8 rights had been violated.
On behalf of the Secretary of State, it was submitted that the words any information and ought to be included in section 115(7) showed that Parliament intended widespread disclosure of relevant material and a narrow exception.
This interpretation was supported by the protective purpose of the legislation: see p 416G.
That was the practice under the relevant police guidelines.
It is true that there was no issue in that case about section 6(2) of the HRA.
That is why the analogy cannot be pressed too far.
But in essence it was being argued in the context of article 8(2) of the ECHR that it was a fundamental feature of the Police Act 1997 that all relevant information could (and should) be disclosed in a criminal record certificate, since anything less would defeat the fundamental protective purpose of the statute.
These submissions are similar to those advanced in the present case.
But they were rejected.
Despite the protective purpose of the legislation and the use of the word any, at para 44, Lord Hope said that the words ought to be included should be read and given effect in a way that was compatible with the applicants article 8 rights.
At para 81, Lord Neuberger MR adopted a broad interpretation of section 115(7)(b) and said that, in deciding whether the information ought to be included, there would be a number of different, sometimes competing, factors to weigh up.
For all these reasons, I would reject the first argument advanced on behalf of the Commissioner and the Secretary of State.
The second argument
The second argument is that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police (with or without the assistance of the Secretary of State) subject only to the judicial review jurisdiction of the court.
It is said that the creation of guidelines for the exercise of the section 64(1A) power is a matter for Parliament alone and that it could not have been intended that section 64(1A) should grant a broad discretion to the police such as is contended for by Mr Fordham.
This is because the context involves high policy, balancing the public interest in the effective detection, prosecution and prevention of crime against individual freedoms.
It is a matter of political controversy, as evidenced by the different policy solutions of the previous and present Government.
There are choices to be made between a variety of compatible legislative schemes.
These choices are for Parliament alone.
The police are in no position, constitutionally or institutionally, to choose between them.
It is important to note the scope of this argument.
It is not that Parliament could not have granted the police a discretionary power to retain data otherwise than on a blanket indefinite basis.
If it had wished to grant such a power to the police, Parliament obviously could have done so.
Rather, the argument is that the constitutional and institutional limits on the competence of the police are such that Parliament could not have intended to grant such a power to them.
I cannot accept this argument.
No question of constitutional competence arises here.
Parliament is entitled to give the police the power to create a scheme.
No doubt it would have envisaged that a national scheme would be produced such as the ACPO guidelines.
The Secretary of State is accountable to Parliament for the scheme so that the democratic principle is preserved.
There are circumstances in which institutional competence is a factor in the courts deciding the extent to which it should pay deference to a decision of the executive and allow a discretionary area of judgment.
But we are not concerned with the courts judicial review jurisdiction in the present context.
We are concerned with a question of statutory interpretation.
There is no reason in principle why the police (together with the Secretary of State) should be less well equipped than Parliament to create guidelines for the exercise of the section 64(1A) power.
In creating a proportionate scheme, they have to strike a balance.
That is inherent in any exercise of this kind, whether it is performed by the executive or Parliament.
The police guidelines that were in play in L were not the product of work by Parliament.
Policy and guidance documents of this kind, often in areas of acute sensitivity, are frequently created by the executive.
Provided that they fulfil the purposes of the enabling statute, they are valid and enforceable.
In my view, the fact that difficult decisions would have to be made in producing guidelines for the exercise of the section 64(1A) power is not a sufficient reason for concluding that Parliament could not have intended to give the power to produce them to the police and the Secretary of State.
What relief, if any, should be granted?
The Biometric Data
In deciding what relief to grant, it is important to have regard to the present state of play.
As previously stated, Chapter 1 of Part 1 of the Protection of Freedoms Bill includes proposals along the lines of the Scottish model.
The history of the varying responses to Marper ECtHR shows that it is not certain that it will be enacted.
But we were told by Mr Eadie that it is the present intention of the Government to bring the legislation into force later this year.
In shaping the appropriate relief in the present case, I consider that it is right to proceed on the basis that this is likely to happen, although not certain to do so.
In these circumstances, in my view it is appropriate to grant a declaration that the present ACPO guidelines (amended as they have been to exclude children under the age of 10), are unlawful because, as clearly demonstrated by Marper ECtHR, they are incompatible with the ECHR.
It is important that, in such an important and sensitive area as the retention of biometric data by the police, the court reflects its decision by making a formal order to declare what it considers to be the true legal position.
But it is not necessary to go further.
Section 8(1) of the HRA gives the court a wide discretion to grant such relief or remedy within its powers as it considers just and appropriate.
Since Parliament is already seised of the matter, it is neither just nor appropriate to make an order requiring a change in the legislative scheme within a specific period.
The ECtHR has recently decided that, where one of its judgments raises issues of general public importance and sensitivity, in respect of which the national authorities enjoy a discretionary area of judgment, it may be appropriate to leave the national legislature a reasonable period of time to address those issues: see Greens and MT v United Kingdom (Application Nos 60041/08 and 60054/08) (ECtHR, 23 November 2010) at paras 113 115.
This is an obviously sensible approach.
The legislature must be allowed a reasonable time in which to produce a lawful solution to a difficult problem.
Nor would it be just or appropriate to make an order for the destruction of data which it is possible (to put it no higher) it will be lawful to retain under the scheme which Parliament produces.
In these circumstances, the only order that should be made is to grant a declaration that the present ACPO guidelines (as amended) are unlawful.
If Parliament does not produce revised guidelines within a reasonable time, then the appellants will be able to seek judicial review of the continuing retention of their data under the unlawful ACPO guidelines and their claims will be likely to succeed.
The Photographs of GC
Mr Cragg raises a discrete issue about the photographs that were taken of GC when he was arrested.
Section 64A of PACE confers a power to take, use and retain photographs of arrested persons who are not subsequently convicted of the offence for which they were arrested.
In the application for judicial review, the issue of whether the retention of the photographs violated GCs article 8 rights was mentioned in what Moses LJ described as a passing reference in the claim form and in paragraph 20 of the grounds.
At para 43, Moses LJ said: the issues of justification for their retention cannot now properly be considered where the Commissioner has had no opportunity to give evidence as to justification.
Lord Pannick submits that, in view of the manner in which the issue was raised in the Divisional Court, the consequent absence of any evidence as to justification and the absence of any substantive judgment on the issue from the Divisional Court, the Supreme Court should express no opinion on this part of the appeal, but leave the matter to be determined if and when the point is properly raised in another case.
I accept these submissions.
I should also mention that Mr Fordham raises a discrete point about information held on the Police National Computer about C.
This was the subject of two agreed issues which were dealt with by the Divisional Court at paras 24 26 and 46 47 of the judgment of Moses LJ.
It is common ground that the retention of this information raises no separate issues from those raised by the retention of Cs DNA material and his fingerprints.
Conclusion
For the reasons that I have given, I would allow the appeals and grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
I would grant no other relief.
I agree with the judgment of Lord Dyson.
I have, however, a little that
LORD PHILLIPS
would add to his reasoning.
Section 3 of the Human Rights Act 1998 (the HRA) requires this Court, in so far as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
Sometimes this results in the Court according to a statutory provision a meaning that conflicts with the natural meaning of a statutory provision see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557.
In summarising the effect of that decision in Sheldrake v Director of Public Prosecutions [2004] UKHL 43; [2005] 1 AC 264, para 28 Lord Bingham of Cornhill stated that the interpretative obligation under section 3 was very strong and far reaching and might require the court to depart from the legislative intention of Parliament.
This is not a case where the HRA requires the Court to accord to a statutory provision a meaning which it does not naturally bear.
There is no difficulty in giving section 64(1A) of PACE, set out in para 3 of Lord Dysons judgment (section 64(1A)), an interpretation which is compatible with article 8 of the Convention, as interpreted by the Strasbourg Court in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The section gives a discretionary power to the police to retain samples taken from a person in connection with the investigation of an offence.
Section 3 of the HRA imposes a duty on the police, as a public authority, in so far as it is possible to do so, to give effect to the power conferred on them in a way which is compatible with Convention rights.
There is nothing in the wording of section 64(1A), giving it its natural meaning, which either requires or permits the police to exercise the power conferred on them in a manner which is incompatible with article 8.
In order to hold that section 64(1A) is incompatible with the Convention it is thus necessary to identify some matter, extrinsic to the wording of the section itself, that compels one to interpret the section as either requiring or permitting the police to exercise the power conferred on them in a manner incompatible with article 8.
Such a matter needs to be extraordinarily cogent in order to overcome the effect of section 3 of the HRA.
I have not been able to identify any such matter.
In R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] UKHL 39; [2004] 1 WLR 2196 the House of Lords held, wrongly as the Strasbourg Court was to rule, that in so far as section 64(1A) interfered with article 8 rights the interference was justified under article 8(2).
In so far as Parliament considered the matter when enacting section 64(1A) it is likely to have taken the same view.
Parliament may well have considered that the Convention did not require any restriction to be placed on the exercise of the power conferred by section 64 (1A).
It does not follow, however, that Parliament must be presumed to have intended that, if the Convention did require the power to be exercised subject to constraints, the police should none the less be required, or permitted, to disregard those constraints.
The effect of section 64(1A) was to reverse the requirement of the previous section 64 of PACE that fingerprints and samples should be destroyed when a suspect was cleared of an offence.
The purpose of this reversal was plainly that the police should be permitted to establish a database of such material obtained from those suspected of criminal activity.
I see no basis for concluding, however, that Parliament intended that the establishment and maintenance of this database should be untrammelled by any requirements that might be imposed by the Convention.
While those requirements limit the circumstances in which material can be retained by application of the familiar test of proportionality, they do not prohibit the maintenance of a database that satisfies that test.
Had Parliament foreseen that the Convention required restrictions on the power conferred by section 64(1A) the likelihood is that Parliament, guided by the executive, would itself have wished to define those restrictions rather than leaving them to be determined by executive action.
That can be deduced from the fact that Parliaments reaction to Strasbourgs ruling in S and Marper (2008) 48 EHRR 1169 was to pass amending legislation and that the present Government intends to introduce an amending Bill.
I do not consider, however, that it follows from this that one must interpret section 64(1A) as requiring the police to exercise the power conferred by that section in a manner which infringes the requirements of the Convention, or even as permitting the police to disregard those requirements.
For these additional reasons I can see no warrant for making a declaration of incompatibility, convenient though this might be, and concur in the order proposed by Lord Dyson.
LADY HALE
Whether and in what circumstances the police should be able to keep the DNA samples and profiles, fingerprints and photographs of people who have been arrested but not convicted is a deeply controversial question.
The Government is promoting the Protection of Freedoms Bill which will adopt in England and Wales the present system in Scotland.
This allows retention only for a limited period and in respect of certain crimes.
It reflects a strong popular sentiment that the police should not be keeping such sensitive material relating to innocent people, even if they are only allowed to use it for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution (Police and Criminal Evidence Act 1984, section 64(1A), as substituted by the Criminal Justice and Police Act 2001, section 82).
If the popular press is any guide to public opinion, the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169 is one which captures the public mood in Britain much more successfully than many of its other decisions.
Among the arguments marshalled against retaining the data are these: (a) The agencies of the state cannot be trusted to use such information only for the permitted purposes, nor can the state be trusted not to enlarge those purposes in future.
DNA samples, in particular, might be put to many more controversial uses should the state feel so inclined. (b) Serious bodies have cast doubt upon the usefulness of retaining it even for the permitted purposes.
Both the Human Genetics Commission (Nothing to hide, nothing to fear? Balancing individual rights and the public interest in the governance and use of the national DNA Database, November 2009) and the Nuffield Council on Bioethics (The forensic use of bioinformation: ethical issues, September 2007) suggest that the value of casting the net so wide has not yet been proved. (c) The Equality and Human Rights Commission argue, in their intervention in this case, that the premise on which such data are kept, that people who are arrested are more likely than the general population to be involved in future offending, is unsustainable. (d) Liberty point out, in their intervention, that certain sections of the population, in particular men and people from the black and minority ethnic communities, run a disproportionate risk of arrest and therefore of having their data taken and kept.
This is a detriment with a discriminatory impact. (e) The detriment is the stigma, certainly felt and possibly perceived by others, involved in having ones data on the database.
This stigma, together with wider concerns about potential misuse, is sufficient to outweigh the benefits in the detection and prosecution of crime.
Among the arguments marshalled in favour of retaining the data are these: (a) Those of a more trusting nature find it difficult to imagine that there is a serious risk that the agencies of the state will indeed misuse this information for more sinister purposes.
The risk would in any event be much reduced if DNA samples were destroyed and only profiles, fingerprints and photographs retained. (b) As to their usefulness, the Chief Constable of the West Midlands gave evidence on 22 March 2011 to the House of Commons Public Bill Committee hearing on the Protection of Freedoms Bill that between 2 and 3 per cent of the 36,000 hits on the database would be lost if the proposals in the Bill became law.
These may only be a small proportion of the total, but among the 1000 or so crimes which would not be solved some would be very serious. (c) It is not clear that the underlying premise is indeed that people who have been arrested but not charged or convicted are more likely than the general population to commit crimes.
After all, the Act also allows the police to keep data they have collected from people who have never been arrested, provided that they consent.
The reality is that arrest gives the police the opportunity compulsorily to collect the data: it is not the reason why they do so. (d) The discriminatory impact of disproportionate arrest rates among male and black and minority ethnic members of the population could as logically be addressed by compiling a national database of everyone, rather than by restricting it to people involved in the criminal justice system.
There is now a proliferation of national databases holding data on large sections of the population which data can be put to far more detrimental uses than this. (e) Any stigma felt or perceived is irrational, at least if the information is used for its permitted purposes.
A person who might otherwise have been among the usual suspects arrested for a crime may be eliminated before he even gets to the police station.
A person who is rightly arrested, prosecuted and convicted because a match is found does not deserve our sympathy.
We should be concentrating on the quality of the scientific evidence as to sampling and matching rather than on the feelings of those whose samples have been kept.
The feelings of the victims of crime are at least as important as the feelings of the criminals.
They too have a human right to have their physical and mental integrity protected by the law, and it is in this context that DNA evidence, in particular, has proved most useful.
We are not called upon to resolve that debate in this case.
It is common ground that the decision of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) cannot stand in the light of the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The only question is what we should do about it in this case.
This is, as I understand it, a question governed by legal principle and the Human Rights Act 1998 and not by our particular preferences for how the United Kingdom should solve the problem.
There are three broad options open to the court: (i) We could decide, in the light of the individual facts of the cases before us, whether the retention of data in each case is compatible with the appellants Convention rights.
If it is not, we could make declarations to that effect and even mandatory orders for the deletion and destruction of the data involved. (ii) We could declare that the current ACPO guidelines, approved in Marper UK, are unlawful, without determining what would be lawful in the cases before us. (iii) We could declare that section 64(1A) of PACE is incompatible with the Convention rights, thus leaving the current guidelines in place and everything done under them lawful until Parliament enacts a replacement either by primary legislation or under the fast track remedial procedure laid down in section 10 of the Human Rights Act.
The choice between (i) or (ii), on the one hand, and (iii), on the other hand, depends upon the difficult and important question (see Lord Mance in Doherty v Birmingham City Council [2008] UKHL 57, [2009] 1 AC 367, para 141) of the meaning and scope of section 6(2)(b) of the Human Rights Act.
This, rather than the policy debate outlined above, is the important issue in this case.
If it is resolved in favour of (i) or (ii) and against (iii), then the choice between (i) and (ii) depends upon what the court considers a just and appropriate remedy under section 8(1) of the 1998 Act.
I should say at once that on both issues I agree with the conclusions reached by Lord Dyson.
Under section 6(1) of the Act, it is unlawful for a public authority to act in a way which is incompatible with a Convention right.
But the sovereignty of Parliament requires that exceptions be made for certain things which are done pursuant to an Act of the United Kingdom Parliament.
As the annotations to the Act (by Peter Duffy QC and Paul Stanley) in Current Law Statutes explain, the exceptions are all designed to prevent section 6 being used to circumvent the general principle of the Act embodied in sections 3(2)(b) and 4(6)(a), that incompatible primary legislation shall remain fully effective unless and until repealed or modified.
In that event, the most that the court can do is make a declaration under section 4(2) that the Act is incompatible and leave it to Parliament to decide what, if anything, to do about it.
It follows, however, that the exceptions must be read along with section 3(1).
Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.
This obligation is laid upon everyone, not just upon the courts.
Two exceptions to the general rule in section 6(1) are provided by section 6(2).
Section 6(2)(a) has presented little difficulty: it provides that subsection (1) does not apply if as the result of one or more provisions of primary legislation, the authority could not have acted differently.
This covers situations where the public authority was required by an incompatible Act of Parliament to do as it did (or perhaps where it had a choice between various courses of action, each of which was incompatible with the Convention rights).
Although section 6(2)(a) does not say so, it must be read subject to section 3(1).
So both the public authority and the courts, in deciding whether or not the authority could have acted differently, will have first to decide whether the Act of Parliament can be read or given effect in a way which is compatible rather than incompatible with the Convention rights.
If the Act can be read compatibly, then it follows that the authority could have acted differently and will have no defence if it has acted incompatibly.
Section 6(2)(b) makes the link with section 3(1) explicit, but has caused much more difficulty in practice.
It provides that section 6(1) does not apply to an act (or failure to act) if in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
So the first question is always whether the primary legislation can be read or given effect in a compatible way.
If it can, that is an end of the matter: see Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441, paras 93 to 103.
In that case, both the provision requiring the court to make a possession order in respect of a demoted tenancy and the provision empowering the local authority to seek one could be read and given effect in a compatible way.
This bears out the prediction by Beatson and others, in Human Rights: Judicial Protection in the United Kingdom (2008), para 6 23, that cases where legislation cannot be read down under section 3 are likely to be rare.
However, if the legislation cannot be so read or given effect, the second question is whether the public authority was acting so as to give effect to or enforce it.
As to this, it is possible to detect some differences of opinion among the judges.
Some have taken the view that the fact that there may be choices involved in whether or not to give effect to or enforce the incompatible provision makes no difference: the authority was acting so as to give effect to or enforce it.
Others, most notably Lord Mance in Doherty, would draw a distinction between the court, which might have no choice but to give effect to an incompatible provision, and the public authority bringing the proceedings, which could choose whether or not to do so and should be guided by Convention values when making its decisions.
Fortunately, we do not have to resolve that debate.
This case is about the first question: can section 64(1A) be read and given effect compatibly with the Convention rights? In my view it clearly can.
This is for two principal reasons.
The first relates to the requirement to read that is, interpret statutory language compatibly with the Convention rights.
In this case, to say that section 64(1A) cannot be so read involves reading may be retained as must be retained, save in exceptional circumstances.
This would be doing the reverse of what section 3(1) requires.
In other words, it would be reading into words which can be read compatibly with the Convention rights a meaning which is incompatible with those rights.
It would be giving the broad discretion provided in section 64(1A) an unnatural or strained meaning to require it to be given effect in an incompatible way.
That view is reinforced by the fact that it was the clear intention of Parliament to legislate compatibly rather than incompatibly with the Convention rights.
Section 64(1A) was introduced into PACE by section 82 of the Criminal Justice and Police Act 2001.
When the Bill which became that Act was introduced into Parliament, it was prefaced by the ministerial statement required by section 19(1)(a) of the Human Rights Act.
The Home Secretary, Mr Straw, stated that In my view the provisions of the Criminal Justice and Police Bill are compatible with the Convention rights.
He was not alone in that view.
After all, the House of Lords in Marper UK unanimously took the view that section 64(1A) was compatible with the Convention rights.
But this does not suggest to me that Parliaments intention was that the apparent discretion which it conferred should inevitably be read incompatibly with the Convention rights should that view later prove to be unfounded.
Quite the reverse.
The second relates to the requirement in section 3(1) that legislation be given effect compatibly with the Convention rights.
As Lord Rodger emphasised in Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, para 107, section 3(1) contains not one, but two, obligations.
In retrospect, that is what the Court of Appeal had in mind in the case which became In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10, [2002] 2 AC 291: that the courts power to make a care order giving the local authority enhanced (that is, determinative) parental responsibility for a child should be given effect in such a way as to prevent the local authority exercising that responsibility incompatibly with the Convention rights of either the child or his parents.
Also in retrospect, one can see that the proper remedy for incompatible actions by the local authority is a free standing action under section 7(1)(a) of the Human Rights Act, rather than by the care court adopting powers which contradicted the cardinal principle of the separation of powers between court and local authority in care proceedings.
In re S is the strongest case in favour of the position adopted by the Chief Constable and the Secretary of State in this case.
They have to argue that, despite ostensibly giving the police a discretion, the cardinal principle was, not that data may be kept, but that they must be kept.
The ACPO guidelines could say only one thing.
Further, they must argue that that principle is so fundamental to the legislative purpose that only Parliament can modify it if it turns out that those guidelines are incompatible with the Convention rights.
I can readily accept that it may be desirable for Parliament rather than the Association of Chief Police Officers to put something in its place.
But I cannot see how it was possible for the discretion conferred by section 64(1A) to be exercised in accordance with ACPO guidelines when it was first enacted but it is not possible for it to be so exercised now.
In other words, if it was possible to read and give effect to section 64(1A) by means of ACPO guidelines when it was first enacted, it must be possible to do so now.
And ACPO as a public authority has to act compatibly with the Convention rights.
For these reasons, therefore, section 64(1A) is not incompatible with the Convention rights and cannot be so declared.
However, the need for a consistent national approach must be relevant to the choice between remedy (i) and remedy (ii).
The court is empowered by section 8(1) to grant such relief or remedy in relation to an unlawful act as it considers just and appropriate.
There would be nothing to stop ACPO promulgating some new and Convention compliant guidelines.
Now that Marper UK has been overruled, they clearly should set about doing so unless Parliament does it for them within a reasonably short time.
But I certainly accept that the system will not work if different police forces adopt different policies.
So it would not be appropriate (such a flexible word) for this court to make mandatory decisions in individual cases unless and until it becomes clear that neither ACPO or Parliament is prepared to make the difficult choices involved.
I therefore agree that we should declare the current guidelines unlawful but grant no further relief.
LORD JUDGE
I agree with the reasoning and conclusions of the majority of the members of the Court.
In deference to the contrary views I shall add some brief words of my own.
The insertion of section 64(1A) in the Police and Criminal Evidence Act 1984 (the 1984 Act) by section 82 of the Criminal Justice and Police Act 2001 resulted in the promulgation of the Retention Guidelines for Nominal Records on the Police National Computer (the ACPO Guidelines) 2006.
Thereafter in England and Wales the retention of biometric data (DNA samples) was governed by these guidelines which derived their authority from section 64(1A).
The judicial examination of these provisions in England and Wales culminated in a decision of the House of Lords in R (S and Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 that the retention of DNA samples did not constitute an interference with the rights granted by article 8 of the European Convention of Human Rights, or if it did, that the interference was modest and proportionate.
The Grand Chamber of the European Court of Human Rights disagreed, and concluded that the system created by the ACPO Guidelines constituted an interference with article 8 rights. (S v United Kingdom (2008) 48 EHRR 1169).
Taking account of the decision and applying its reasoning we are all agreed that the decision of the House of Lords should no longer be treated as authoritative.
Therefore these appeals must be allowed.
The forensic battle is directed at the consequences which should now flow.
The starting point is the reasoning of the Grand Chamber which identified the way in which different member states addressed the retention issue, and acknowledged that even following acquittal, it was permissible, subject to specific limitations within the domestic arrangements, for DNA samples to be retained.
What however was required of any arrangements for retention was an approach which discriminated between different kinds of cases and for the application of strictly defined storage periods for data, even in more serious cases.
Attention was drawn to the position in Scotland where the legislative arrangements permitted the retention of the DNA of unconvicted individuals, limited in the case of adults to those charged with violent or sexual offences and even then, for three years only, with the possibility of an extension for a further two years with judicial agreement.
These arrangements were not criticised.
Indeed the court acknowledged that the retention of DNA profiles represented the legitimate purpose of assisting in the identification of future offenders.
In short the existence of the legislative provisions for the retention of DNA samples was endorsed, but criticism was directed at the blanket and indiscriminate nature of the power of retention found in the ACPO Guidelines.
Accordingly nothing in the judgment of the Court leads to the conclusion that a different, less all encompassing scheme deriving its authority from section 64(1A) would contravene article 8, or that the law in relation to DNA samples should revert to the former wide ranging prohibition against the retention of samples of any kind which was the striking feature of section 64 of the 1984 Act as originally enacted.
Rather the judgement confirmed that legislative arrangements may provide for the retention of the DNA samples of those acquitted of criminal offences.
That is what section 64(1A), reversing the provisions of section 64, permits.
In these circumstances it was open to ACPO to reconsider and amend the guidelines (as indeed, at least in part, it did) in the light of the decision of the European Court, and it would be open to ACPO to do so in the light of the decision of this court.
Section 64(1A) does not preclude an amendment to the Guidelines which addresses the criticisms.
In other words, although the process of further amendment to the arrangements for the retention of DNA samples in England and Wales has been and continues to be addressed through legislation, this was not and is not the only way to provide for the protection of article 8 rights against the current scheme for their indiscriminate retention.
In my judgment section 64(1A) is Convention compliant, whereas the ACPO Guidelines in their present form are not.
Accordingly, the retention of the DNA samples of these appellants was unlawful, but a declaration of incompatibility would be inappropriate.
LORD KERR
Lord Rodger and Lord Brown in powerfully reasoned judgments, which I initially found persuasive, have concluded that section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE) had as its purpose the institution of a scheme for the indefinite retention of biometric data taken from all suspects (with very limited exceptions) in connection with the investigation of offences.
On that account they found that, despite the seemingly permissive language of the subsection, the Association of Chief Police Officers (ACPO), to whom the task of drawing up guidelines for the implementation of section 64(1A) had been entrusted, were obliged to ensure that, instead of being destroyed as previously required by section 64(1) of PACE, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
If indefinite retention of data was indeed section 64(1A)s unmistakable purpose, I would have readily agreed that the discretion that samples may be retained after they have fulfilled the purposes for which they were taken would have to be exercised so as to give effect to that intention.
That, as Lord Rodger has said, would be the inevitable consequence of the application of the principle for which Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 is the seminal authority: that a discretion conferred with the intention that it should be used to promote the policy and objects of the Act can only be validly exercised in a manner that will advance that policy and those objects.
More pertinently, the discretion may not be exercised in a way that would frustrate the legislations objectives.
Everything therefore depends on what one decides is the true intention or purpose of the legislation.
This is not as easy a question to answer as the simple formulation, what was the purpose of the legislation, suggests.
As Lord Brown has pointed out in para 145 of his judgment, the search for the purpose of a particular item of legislation may have to follow a number of avenues and may require consideration of several aspects of the enactment what is the grain of the legislation, what its underlying thrust etc.
An important factor in the conclusion on this critical question which Lord Rodger has identified is the fact that Parliament clearly saw the need for retreat from the position that had hitherto obtained under section 64(1) and (3) of PACE as originally enacted.
Those subsections were in these terms: (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
As Lord Rodger has pointed out, the decision of the House of Lords in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 brought to the attention of the public and Parliament the effect of these provisions.
Potentially useful evidence was not being used for reasons that, as Lord Steyn put it, were contrary to good sense (p 118).
No doubt reaction to the experience in that case contributed to Parliaments decision to enact section 64(1A) but did it, as Lord Rodger has concluded, lead to Parliaments resolve that samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database? In my judgment, and largely for the reasons given by Lord Dyson, it did not.
In the first place, if that was Parliaments intention it chose a curious way to achieve it.
A simple, unambiguous provision to that effect would not have been difficult to devise.
And if the purpose of the legislation was to obtain a blanket, universally applied (apart from exceptional cases) policy, why would Parliament have left the practicalities of implementing the policy to ACPO? The drafting of the provision at a level of generality surely suggests that Parliament intended a measure of flexibility to be a feature of its application.
This is unsurprising.
The history of evolving knowledge as to the use to which DNA evidence could be put provided the clearest possible reasons not to adopt over prescriptive rules that might impede its full exploitation in circumstances unforeseen at the time of their enactment.
Just as it was judged, in retrospect, to be unwise to have an immutable requirement to destroy all samples from certain categories of suspects and defendants, so also it would be unwise to substitute that obligation with a blanket requirement to retain all samples.
Various members of the Appellate Committee of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 described the benefits that can flow from the maintenance of an expanded database for DNA samples and I am in respectful agreement with all that Lord Steyn, Lady Hale and Lord Brown had to say on this subject in that case.
But I do not consider that it necessarily follows that an inflexible policy requiring retention of virtually every sample taken from suspects and defendants is needed in order to have a viable and worthwhile resource.
Whatever view one takes of the competing policy arguments on this issue, however, it is, to my mind, quite clear that Parliament did not intend that this was the only way in which the legislation could be implemented.
Not only does section 64(1A) use the permissive may in relation to the retention of samples but subsection (3) is retained in its original state, albeit that it may now be disapplied in a variety of circumstances outlined in section 64(3AA) to (3AD).
This seems to me clearly to indicate recognition that there should be limits on the retention of samples but, not surprisingly, Parliament did not attempt to forecast comprehensively what those limits should be.
The structure of the new section 64 is strongly suggestive of an intention to devise a scheme that would respond to developments in this field, not least any view that might be taken as to the human rights implications that might come to be recognised.
As Lord Dyson has put it, Parliaments intention must be taken to have been to create a proportionate scheme which is compatible with ECHR.
There is nothing to impel the conclusion that Parliament intended that the scheme could not adapt to whatever the compatibility requirements were found to be.
On the contrary, there is every reason to suppose that Parliament intended that the scheme could be adapted to meet those requirements as and when they became apparent.
What the Commissioner and the Secretary of States argument resolves to is that, in interpreting section 64, we should recognise that an underlying, not expressly articulated, purpose was that the samples had to be retained indefinitely, regardless of the circumstances in which they were taken or of the circumstances of the individual from whom they had been taken.
There is nothing in the language of the section itself that compels such an exclusive interpretation.
Indeed, as Lord Phillips has pointed out, acceptance of this argument would involve reading more into section 64(1A) than its ordinary language conveys.
ACPOs guidelines were an essential complement to the statutory scheme.
Those guidelines have been altered (in relation to children under 10) as a result of the decision of the Grand Chamber in S and Marper v United Kingdom (2008) 48 EHRR 1169.
There is no lawful impediment to ACPO devising and implementing guidelines that take full account of the other features which Strasbourg has decreed are necessary for the operation of the scheme to be Convention compliant.
Classifications (as to which categories of offences or individuals should require retention of samples) and long stop provisions (as to the period that they should be retained) are well within the institutional reach of ACPO.
So also are the circumstances in which exceptions to the guidelines can be permitted.
ACPO chose the exceptionality criteria.
They may equally change those criteria.
And because there is no legal impediment in them doing so, then under section 6 of HRA, they or Parliament must.
Section 6(2)(b) can only come into play if ACPO cannot act.
If it can, then it must.
Because Parliamentary change is imminent, however, and because significant policy issues need to be considered, it is not unreasonable to leave this to Parliament.
I therefore agree with the order proposed by Lord Dyson.
I also agree with all that Lord Dyson has had to say on the argument that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police subject only to the judicial review jurisdiction of the court.
As he has said, the scope of the argument is confined.
It is to the effect that, although it could have done so if it had considered it appropriate, Parliament must be taken not to have intended to grant such a power because of the constitutional and institutional limits on the competence of the police.
But Parliament does not appear to have felt such qualms in giving the initial responsibility for the devising of guidelines to ACPO and, as Lord Dyson has pointed out, no question of constitutional competence arises.
Finally, I agree with Lord Dysons conclusion on the discrete issue of GCs photographs.
DISSENTING JUDGMENTS ON THE APPROPRIATE RELIEF
LORD RODGER
In September 1984 Sir Alec Jeffreys made his ground breaking discovery of DNA fingerprints.
A few weeks later, on 31 October, the Police and Criminal Evidence Act 1984 (PACE) was enacted.
Within a few years Sir Alecs discovery was being used routinely in the criminal courts in this country.
Section 64(1) of PACE, as originally enacted in ignorance of this major development that lay just ahead, provided: If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings.
In January 1997 an unidentified intruder raped and assaulted a woman in her home in London.
Swabs were taken from her and were found to contain semen.
A DNA profile was obtained from the semen and placed on the national DNA database.
In January 1998 a man was arrested for an unrelated offence of burglary.
A saliva sample was taken from him and a DNA profile was derived from it.
In August of the same year the man was acquitted of the burglary and, by virtue of section 64(1) of PACE, his sample should have been destroyed.
In fact, however, his profile was left on the DNA database and in October a match was made between this profile and the DNA profile derived from the semen in the swabs taken from the woman who had been raped in January 1997.
The man was arrested and a DNA profile was obtained from a hair plucked from him.
As was to be expected, this profile also matched the DNA derived from the semen.
At his trial for the rape the judge held, however, that, since the material which had led to his identification should have been destroyed as required by section 64(1), the evidence relating to the profile from the plucked hair was not admissible.
The man was acquitted.
The Attorney General referred the matter to the Court of Appeal who agreed with the judge but referred the point to the House of Lords.
In Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 the House reversed the Court of Appeal.
The speech of Lord Steyn, with which the other members of the appellate committee agreed, was notable for his observation, at p 118, that the austere interpretation of the Court of Appeal produced results which were contrary to good sense.
For present purposes, that case is important because it alerted the public and politicians to the fact that the obligation under section 64(1) of PACE to destroy samples if the suspect was acquitted meant that evidence which might lead to the detection and prosecution of the perpetrators of other crimes would be lost.
Just a few weeks after their Lordships decision, in the course of the second reading debate on the Criminal Justice and Police Bill, the Home Secretary introduced Part IV of the Bill which, he explained, was designed, inter alia, to amend section 64(1) of PACE to prevent evidence being lost in this way.
The Home Secretary referred to Lord Steyns speech as demonstrating the need for the change: Hansard (HC Debates), 29 January 2001, col 42.
This history shows beyond doubt that Parliaments purpose in enacting section 82 of the Criminal Justice and Police Act 2001, which inserted section 64(1A) into PACE, was to ensure that, in future, instead of being destroyed, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
This would protect the public by facilitating the detection and prosecution of the perpetrators of crimes.
Section 64(1A) provides: (1A) Where (a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
After this provision came into force, in accordance with guidelines from the Association of Chief Police Officers (ACPO) the police proceeded to retain data indefinitely and so to build up their DNA database of samples and profiles obtained from people who had been suspected of crimes, even if they had not been prosecuted or had been acquitted.
In due course in two appeals to the House of Lords this system was challenged as being in violation of the suspects article 8 Convention rights: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
In the leading speech Lord Steyn said, at p 2198E F, para 2, that as a matter of policy it is a high priority that police forces should expand the use of [DNA] evidence where possible and practicable.
He went on to refer to public disquiet that the obligation to destroy samples under the unamended section 64(1) of PACE had sometimes enabled defendants who had in all likelihood committed grave crimes to walk free.
Baroness Hale of Richmond observed, at p 2219G H, para 78, that The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced.
In the light of such considerations the House of Lords held unanimously that the system did not violate the appellants article 8 Convention rights.
To Strasbourg, however, the matter appeared differently.
In S v United Kingdom (2008) 48 EHRR 1169 the Grand Chamber first held unanimously and contrary to the majority view in the House of Lords that the English system did indeed involve an interference with suspects article 8 rights.
Then, when considering the proportionality of that interference, the court observed, at pp 1200 1201, para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court went on to conclude, at p 1202, para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
In response to the European Courts judgment the last Parliament passed the Crime and Security Act 2010, section 14 of which was designed to amend section 64 of PACE with a view to establishing a regime for the retention and destruction of DNA material and profiles that would be compatible with article 8 as interpreted by the European Court.
The new Government, which came into office in May 2010, decided, however, not to commence this legislation Instead, in Chapter 1 of Part 1 of the Protection of Freedoms Bill, it has put fresh legislative proposals, along similar lines to the legislation in Scotland, before Parliament.
There were indications in the European Courts judgment that a system along those lines would indeed be compatible with article 8.
As in the earlier legislation, the complex proposals include provision for a National DNA Database Strategy Board to oversee the operation of the DNA database.
Obviously, in the light of the European Courts judgment the indefinite retention of the data relating to the appellants under the existing system is incompatible with their article 8 rights.
The decision of the House of Lords to the contrary in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 must accordingly be overruled.
That is accepted by the respondent, the Metropolitan Police Commissioner, and by the Home Secretary, who has intervened in the proceedings.
Where the Commissioner and the Home Secretary part company with the appellants is as to the order, if any, which the court should pronounce in these circumstances.
In effect, for the appellant C Mr Fordham QC argued that section 64(1A) is worded (may be retained) so as to give the Commissioner and chief constables an open discretion as to whether data should be retained and, if so, for how long and subject to what conditions.
The position was therefore quite straightforward.
By virtue of section 6(1) of the Human Rights Act 1998 the Commissioner and chief constables were obliged to exercise that discretion so as to establish and maintain a system for the retention of samples and data that would comply with suspects article 8 Convention rights as they are now to be interpreted in the light of the decision of the European Court.
It was unlawful for them not to do so.
Mr Fordham indicated that he would be content for the court to pronounce a declaration to this effect, without making any order for the removal of the data relating to his client.
While adopting the bulk of Mr Fordhams submissions, on behalf of the appellant GC, Mr Cragg asked the court to go further and indicate that in his case the position should be put right within 28 days.
Mr Fordhams argument is, of course, unanswerable if he is right to say that the crucial words (may be retained) in section 64(1A) confer a wide indeed open discretion on the Commissioner and the chief constables whose forces retain the samples and data that make up the national DNA database.
If that is correct, then, even though, when section 64(1A) came into force, ACPO issued guidelines requiring that subject to a narrow exception all the DNA samples and data relating to suspects should be retained indefinitely, the Association could with equal propriety have issued completely different guidelines which would have resulted in a system that did not provide for the indefinite retention of the samples and data.
On that interpretation, any credit for the creation of the present DNA database is to be accorded to ACPO for choosing, of its own freewill, to issue the guidelines which it did.
More particularly, since ACPO had been, and still was, free to adopt other completely different guidelines, ACPO could now issue fresh guidelines which would produce a system that was compatible with the European Courts judgment.
The key question, therefore, is whether Mr Fordhams construction of section 64(1A) as conferring this wide discretion on the police is correct.
On behalf of the Commissioner Lord Pannick QC argued that it is not.
He drew attention to the context, which I have already described, in which Parliament enacted section 64(1A).
This showed that Parliament had set out to cure the mischief that the original version of section 64(1) of PACE meant that suspects samples and data were removed from the database even although as Attorney Generals Reference (No 3 of 1999) demonstrated the retention of that material could potentially result in the detection and prosecution of serious criminals.
Parliament plainly intended that in future this material should be retained on the DNA database indefinitely.
In other words, under section 64(1A) the police had to retain it indefinitely.
Mr Fordham said, rhetorically, that, if this were correct, then the Home Secretary could have brought proceedings against the police if they had failed to retain the material indefinitely.
Accepting the challenge, Mr Eadie QC said that, while the matter would probably have been sorted out in a different way, if necessary, such proceedings could indeed have been brought.
It is useful to notice just how far reaching Mr Fordhams argument is: essentially, under section 64(1A) the police were free to do what they liked.
On his approach the provision contained nothing to delimit the exercise of their discretion.
When listening to his argument, at times I felt that unconsciously, of course he was intent on pulling down one of the most important bulwarks which our predecessors so painstakingly erected against arbitrary acts of the executive.
In Car Owners Mutual Insurance Co Ltd v Treasurer of the Commonwealth of Australia [1970] AC 527, 537E F, Lord Wilberforce observed that in a statutory framework it is impossible to conceive of a discretion not controlled by any standard or consideration stated, or to be elicited from, the terms of the Act.
He was, of course, reflecting the thinking in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 where Lord Reid had said, at p 1030B D, that Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act, the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court.
Following that classic authority, in my view the power which was conferred on the police by section 64(1A) had to be exercised in accord with the policy and objects of that enactment.
As I have explained, the policy and objects of Parliament in enacting section 64(1A) were plainly that DNA samples and data derived from suspects should be retained indefinitely so that a large and expanding database should be available to aid the detection and prosecution of the perpetrators of crimes.
The police were therefore bound to exercise the power given to them by section 64(1A) in order to promote that policy and those objects.
This meant, in effect, that, subject to possible very narrow exceptions (e g, those suspected of a crime which turned out not to be a crime at all), the police had to retain on their database the samples and profiles of all suspects.
In short, the police were under a duty to do so.
By a slightly different route this analysis reaches the same result as the older well known line of authority to the effect that, on the proper construction of a statute as a whole and in its context, it can sometimes be seen that a power granted to, say, an official, court or other body in the public interest must be regarded as having been coupled with an implied duty on the recipient to exercise the power in the circumstances envisaged for its exercise.
See, for instance, Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Attorney General v Antigua Times Ltd [1976] AC 16, 33F G, per Lord Fraser of Tullybelton.
In my view, therefore, given the policy and objects of the enactment, before the decision of the European Court the police could not have exercised their power under section 64(1A) by choosing to retain samples and data for, say, only three years (or any other period deliberately not prescribed in the legislation) and then destroying them.
Similarly, given the policy and objects of the enactment, the police could not have exercised the power to detain material indefinitely by choosing to delete material from those against whom, in their view, suspicion fell below some arbitrary level not recognised in the legislation.
Any such exercise of their power would have defeated, rather than promoted, the policy of the enactment and would therefore have been unlawful.
In the light of the European Courts decision, it can now be seen that the policy and objects of section 64(1A), to create a virtually comprehensive and expanding database of DNA profiles from suspects, violate the article 8 Convention rights of unconvicted suspects.
Given that the Protection of Freedoms Bill has been introduced into Parliament, there is good reason to believe that legislation will be passed in the foreseeable future to establish a new system.
The question in the present proceedings is whether in the meantime, by virtue of section 3(1) of the HRA or otherwise, the police must read and give effect to section 64(1A) in a way that is compatible with article 8 as interpreted by the European Court and whether they act unlawfully if they do not.
Since I reject Mr Fordhams argument that section 64(1A) gives the police an open discretion as to what to do, I also reject his further, seductive, argument that, having regard to section 6(1) of the HRA, they can and should simply exercise that discretion in such a way as to establish a lawful system that meets the requirements of the Strasbourg court for example, by choosing to retain samples and data for only three years, subject, perhaps, to a power in an independent body to extend the period for some further defined period (as under the Scottish legislation), or by only retaining the material from those suspected of certain classes of crimes, or by only retaining the material from those against whom there is a high degree of suspicion etc.
All of those suggested steps would have been inconsistent with the policy and objects of section 64(1A) as originally enacted.
So they could only be adopted now, in order to comply with the European Courts decision, if section 3(1) of the HRA makes that not only possible but indeed obligatory.
Section 3 provides: (1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.
The opening phrase in subsection (1) shows that there are limits to the duty which it imposes.
The words of Lord Nicholls of Birkenhead in In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, are a useful guide to where those limits lie: For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment.
This is especially so where the departure has important practical repercussions which the court is not equipped to evaluate.
In such a case the overall contextual setting may leave no scope for rendering the statutory provision Convention compliant by legitimate use of the process of interpretation.
Mr Fordham submitted that the fundamental feature of section 64(1A) was the retention of the material for the purposes of creating a DNA database, not the indefinite retention of the material with a view to establishing a virtually comprehensive database of DNA material from suspects.
In my view that submission is unrealistic.
The truth is that Parliament wanted to eliminate the danger, which existed under the pre existing legislation, that valuable evidence would be lost and potential prosecutions of the guilty based on the latest science would be jeopardised if material had to be removed from the database.
Providing for the material to be retained on the database indefinitely was therefore the fundamental feature of the amending legislation which inserted section 64(1A) into PACE.
That being so, section 3(1) of the HRA does not oblige or permit the courts or the police to read or give effect to section 64(1A) in a way that departs substantially from that fundamental feature.
And it is quite obvious that any reading of section 64(1A) which would be apt to obviate the defects identified in the existing system by the European Court would depart very substantially indeed from that fundamental feature of the provision would, indeed, contradict it.
It is therefore nothing to the point that, from a linguistic point of view, the provision might easily be read as though it said that samples may be retained, consistently with the suspects article 8 Convention rights.
The hypothetical additional words, though few in number, would have the effect, and would be intended to have the effect, of altering the provision so as, say, to limit the samples and data that were to be retained and the time for which they could be retained, and to impose a duty to remove them after that time and so to negate the defining feature of the legislation.
In other words, the court would have crossed the line from interpreting to amending the legislation.
Amending section 64(1A) in that way is something which only Parliament can do.
Parliament showed itself willing to pass amending legislation in the Crime and Security Act 2010.
The fact that the new Government decided not to commence that legislation, but chose to introduce a Bill providing for a different scheme shows that there is a range of possible ways to bring the system into line with the requirements of article 8 and room for doubt about which is the best policy to adopt.
This court is in no position to weigh the competing practical advantages and disadvantages of the possible solutions.
These are further features which confirm that the necessary changes require legislation and cannot be made by any legitimate interpretation, however extensive, under section 3(1): In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, per Lord Nicholls.
Section 64(1A) is therefore incompatible with suspects article 8 Convention rights and cannot be made compatible under section 3(1) of the HRA.
Section 3(2)(b) ensures that in these circumstances the continuing operation of section 64(1A) is unaffected.
Section 6(1) and (2) provide: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
Like sections 3(2) and 4(6), section 6(2) is concerned to preserve the primacy and legitimacy of primary legislation.
See Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, 556 557, para 19, per Lord Nicholls, cited with approval by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 51.
If that is correct and section 3(1) of the HRA cannot be invoked in the present case, then section 64(1A) continues to operate, and Parliament intends it to operate, in the same way as when enacted.
It therefore falls to be interpreted and applied just as when enacted.
It is accepted that section 6(2)(a) applies to cases where the legislation, which cannot be read compatibly with Convention rights, imposed a duty on a public authority to act in one particular way the authority could not have acted differently.
It follows, of course as Lord Hoffmann remarked in Hooper [2005] 1 WLR 1681, 1696, para 49 that, by contrast, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
Since the Convention non compliant provision continues to operate, any public authority which is exercising a power conferred by it must continue do so in a way that promotes the object and purposes for which the provision confers the power and these are, ex hypothesi, incompatible with Convention rights.
As Lord Hoffmann noted, section 6(2)(b) assumes, however, that under the relevant legislation the public authority could have acted in more than one way.
For example, it might be that a public authority could have adopted either of two schemes, A and B, both of which would have promoted the policy and objects of the legislation.
So it cannot be said that, when it chose to adopt scheme A, the public authority could not have acted differently.
Nevertheless, since, when it adopted scheme A, the authority was promoting the policy and objects of the primary legislation and so was acting to give effect to the legislation, section 6(2)(b) disapplies section 6(1) and ensures that the authority was acting lawfully.
In this way the primacy and legitimacy of the provision of primary legislation are preserved.
For all the reasons which I have set out, in the present case, in substance the police could really not have acted differently: in order to promote the object and purposes of section 64(1A) of PACE, they had to retain all the samples which they did, indefinitely.
If that is so, then what the police did, and continue to do, falls within section 6(2)(a) and is accordingly lawful.
Even if one assumes, however, that, while promoting the policy and objects of the legislation, the police could, for example, have recognised a slightly wider exception and so created a slightly different system, that does not matter.
The same goes if, while promoting the policy and objects of the legislation, the police could have chosen not to recognise even the very narrow exception which they did and could have decided to retain the samples and data relating to absolutely all suspects.
In either event, even though the police could have done something (slightly) different, by doing what they actually did and are still doing, they were acting and are continuing to act so as to give effect to section 64(1A).
Section 6(2)(b) of the HRA accordingly applies and so the police have at all times acted, and continue to act, lawfully.
In these circumstances section 64(1A) is incompatible with suspects article 8 Convention rights.
Even though Parliament and the Government have the matter under review, I consider that the better course is for this court to grant a declaration of incompatibility in terms of section 4(2) of the HRA.
Cf Bellinger v Bellinger [2003] 2 AC 467, 482, para 55, per Lord Nicholls.
I would accordingly allow the appeals to the extent of making a declaration that section 64(1A) of the Police and Criminal Evidence Act 1984 is incompatible with the article 8 Convention rights of suspects.
LORD BROWN
On 4 December 2008 the Grand Chamber of the ECtHR in S v UK (2008) 48 EHRR 1169 condemned on article 8 grounds the scheme for the indefinite retention of biometric data adopted in England and Wales pursuant to section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE).
The critical issue for decision on these appeals is whether, following that decision and pending the enactment by Government of a fresh legislative scheme compatible with article 8, the police have been acting unlawfully in continuing to operate the indefinite retention scheme.
That in turn depends upon whether section 64(1A) can or cannot be read or given effect in a way which is compatible with the Convention rights within the meaning of section 6(2)(b) of the Human Rights Act 1998 (the HRA).
Before turning to address this issue it is necessary to sketch out something of the background to the appeal and the circumstances in which the point now arises for decision.
These appellants are two amongst the 850,000 odd unconvicted persons whose profiles are kept on the national DNA database, their fingerprints and samples having been taken from them when they were arrested as suspects (from 2003, whether or not they were actually charged).
This database has built up following Parliaments introduction on 11 May 2001 of section 64(1A) of PACE in substitution for the original section 64(1) which had required the destruction of a suspects fingerprints and samples as soon as practicable after he was cleared.
Section 64(1A) provides so far as is material: Where . fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence . [they] may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
In 2004 this change in the law was unsuccessfully challenged, principally on article 8 grounds, all the way up to the House of Lords, by two complainants: S, an eleven year old boy with no previous convictions who had been acquitted of attempted robbery, and Mr Marper, a man of 38, also of good character, whose case was discontinued following his arrest on the charge of harassing his partner: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
Lady Hale alone amongst the Appellate Committee thought that the retention and storage of DNA profiles constituted an interference with the claimants rights under article 8.
But each member of the Committee, Lady Hale included, was quite clear that, even if it did, it was readily justifiable under article 8(2).
Lord Steyn described such evidence as having the inestimable value of cogency and objectivity (para 1) and said that as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable (para 2).
At para 3 he observed that: It can play a significant role in the elimination of the innocent, the correction of miscarriages of justice and the detection of the guilty.
At para 36 Lord Steyn dealt with a submission that retention is not in accordance with law (on the basis that a law which confers a discretion must indicate the scope of that discretion: Silver v United Kingdom (1983) 5 EHRR 347, 372, para 88): The discretion involved in the power to retain fingerprints and samples makes allowance for exceptional circumstances, eg where an undertaking to destroy the fingerprints or sample was given or where they should not have been taken in the first place, as revealed by subsequent malicious prosecution proceedings.
At para 38 Lord Steyn observed that the expansion of the database by the retention confers enormous advantages in the fight against serious crime and at para 39 he remarked upon the benefits of a greatly extended database.
Lord Rodger and Lord Carswell agreed with Lord Steyn.
Lady Hale agreed that retention and storage of DNA samples and profiles was readily justifiable for the reasons given by Lord Steyn and myself.
She added: The whole community, as well as the individuals whose samples are collected, benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. (para 78) I myself suggested (para 88): that the benefits of the larger database . are so manifest . that the cause of human rights generally (including the better protection of society against the scourge of crime which dreadfully afflicts the lives of so many of its victims) would inevitably be better served by the databases expansion than by its proposed contraction.
The more complete the database, the better the chance of detecting criminals, both those guilty of crimes past and those whose crimes are yet to be committed.
The better chance too of deterring from future crime those whose profiles are already on the database.
And I pointed out too that: The larger the database, the less call there will be to round up the usual suspects.
Instead, those amongst the usual suspects who are innocent will at once be exonerated.
These views notwithstanding, the Grand Chamber in Strasbourg, as already indicated, on the application of the same complainants, some four years later unanimously condemned the scheme as unjustifiable under article 8.
It is sufficient for present purposes to quote just three paragraphs from the Courts lengthy judgment: 119 . the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely, whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. 125 In conclusion, the Court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. 134 .
In accordance with article 46 of the Convention, it will be for the respondent State to implement, under the supervision of the Committee of Ministers, appropriate general and/or individual measures to fulfil its obligations to secure the rights of the applicants and other persons in their position to respect for their private life.
Before turning to the circumstances in which these particular appellants had their fingerprints and samples taken and the precise nature of the argument they advance on this appeal, it is convenient first to indicate something of the response to the Grand Chambers judgment, on the part both of the Government and of the police.
So far as the Government was concerned, the then Home Secretary in a Press Release on 16 December 2008 indicated that the Home Office would institute a consultation process but that meantime: The DNA of children under ten the age of criminal responsibility should no longer be held on the database.
There are around 70 such cases [we are told that there were in fact 96], and we will take immediate steps to take them off. (S and Mr Marpers data was also removed.)
On 7 May 2009 the Home Office published a White Paper, Keeping the Right People on the DNA Database, setting out certain key proposals for the future and inviting views upon them.
The White Paper also considered what should happen to the 850,000 odd profiles already on the national DNA database.
On 28 July 2009 ACPOs Director of Information wrote to all Chief Constables indicating that new guidelines were not expected to take effect until 2010 and that: Until that time, the current retention policy on fingerprints and DNA remains unchanged.
ACPO strongly advise that decisions to remove records should not be based on proposed changes.
It is therefore vitally important that any applications for removals of records should be considered against current legislation and the Retention Guidelines Exceptional Case Procedure .
Those Guidelines, which have remained essentially the same since section 64(1A) was introduced, provide: Chief Officers have the discretion to authorise the deletion of any specific data entry on the PNC owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases .
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
On 11 November 2009, following the consultation period, the Home Secretary made a written Ministerial statement outlining a revised set of proposals for the retention of fingerprints and DNA data (Hansard (HC Debates), 11 November 2009, col 25WS).
It was originally intended to implement these by way of order making powers under the Policing and Crime Act 2009 but, following strong opposition to the introduction of a new scheme by secondary rather than primary legislation, the proposed new scheme was included in the Crime and Security Act 2010, introduced in the House of Commons on 19 November 2009 and receiving Royal Assent on 8 April 2010.
Following a change of government in May 2010, however, rather than bringing the Crime and Security Act into force, the incoming government instead announced its proposal for new legislation designed essentially to mirror the Scottish system and this finally, by the Protection of Freedoms Bill 2011, introduced in the House of Commons as recently as 11 February 2011, it has now set in train.
For reasons which will shortly become clear, it is unnecessary for the purposes of this judgment to indicate anything of the detailed nature of the various proposals which at one time or another have been considered for enactment in substitution for the existing scheme so as to achieve compatibility with article 8 pursuant to the Grand Chamber judgment.
It is sufficient to indicate that a wide range of differing schemes have been canvassed and considered and that arriving at the preferred solution has inevitably involved complex and sensitive choices.
It is similarly unnecessary to describe in any detail the facts of these appellants cases and the following brief summary will suffice.
GC is 41.
On 20 December 2007, following his girlfriends complaint that he had assaulted her (albeit without causing her injury), he voluntarily attended the police station and was arrested on suspicion of common assault.
He strongly denied the allegation, explaining rather that he had been defending himself against attack by her.
Following the taking of DNA samples, fingerprints and a photograph, GC was released on police bail without charge.
Before 21 February 2008, when he was due to surrender to his bail, GC was told that no further action would be taken against him.
GCs fingerprints (but not DNA) had in fact been taken previously and retained in connection with a firearms offence for which he had been sentenced at the Central Criminal Court on 18 February 1992 to seven years imprisonment.
C is 34, a man of good character.
On 17 March 2009 he was arrested on suspicion of rape, harassment and fraud following allegations made the previous day by a former girlfriend and members of her family, allegations which C strenuously denied.
The same day, Cs fingerprints and DNA samples were taken.
Although no further action was taken in relation to the alleged harassment and fraud, on 18 March 2009 C was charged with rape.
On 5 May 2009, however, the prosecution offered no evidence on the rape charge and C was accordingly acquitted.
Both appellants, through solicitors, applied to the respondent Police Commissioner to have their fingerprints and DNA data deleted from police records GC on 23 March 2009, C on 19 August 2009 (in each case, of course, after the Grand Chambers decision in S v UK).
Consistently with ACPOs guidelines, however, both applications were refused.
The appellants then issued judicial review proceedings, GC on 11 December 2009, C on 9 February 2010.
The applications were heard together by the Divisional Court (Moses LJ and Wyn Williams J) on 15 July 2010 and on 16 July 2010 were dismissed, the Divisional Court correctly holding itself bound by the decision of the House of Lords in S and Marper v Chief Constable of the South Yorkshire Police (the subsequent Grand Chamber decision notwithstanding).
The Divisional Court did, however, certify a point of law of general importance and, with the consent of all parties, granted a certificate pursuant to section 12 of the Administration of Justice Act 1969, thus enabling the matter to proceed directly to this court.
Before this court, Mr Fordham QC for C and Mr Cragg for GC both submit that, in the light of the Grand Chambers judgment, the earlier decision of the House of Lords can no longer stand and the existing scheme must now be recognised to be unlawful so much, indeed, is clear and conceded.
Pursuant to section 6 of the HRA, their argument then continues, the police must now therefore cease retaining their data incompatibly with their article 8 rights.
Instead, they submit, the police must take account of the various criticisms made by the Grand Chamber of the existing scheme, must devise a new, compatible scheme, and must then deal with these appellants requests (and any other outstanding or future requests) for the removal of information from the national DNA database this, indeed, in GCs case, within 28 days, contends Mr Cragg.
Not so, submit Lord Pannick QC for the Metropolitan Police Commissioner and Mr Eadie QC for the Home Secretary (properly joined in the proceedings as an interested party).
It is, they submit, for the government, not for the police, to devise and enact a new scheme; the police meantime have no alternative but to continue operating the existing scheme pursuant to section 64(1A) of PACE.
Their case is founded on section 6(2)(b) of the HRA which, they argue, disapplies section 6(1) and thus relieves the police of liability for continuing to operate what the Grand Chamber has ruled to be (in international law) an unlawful scheme.
The most the appellants are entitled to is a declaration of incompatibility pursuant to section 4 of the HRA.
As I indicated at the outset, this is the critical issue in the appeal and plainly it centres upon the proper understanding of, and interplay between, sections 3, 4 and 6 of the HRA which (as to their most material parts) I now set out: 3(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. 4(2) If the court is satisfied that [a provision of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility. 6(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. 6(2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
The precise symmetry between section 3(1) and section 6(2)(b) will at once be noted: each invites consideration of whether legislation can be read or given effect in a way which is [Convention] compatible section 3 indicating what must be done if this is possible, section 6(2)(b) indicating the consequence (the disapplication of section 6(1)) if it is not.
At first blush the respondents argument appears distinctly unpromising.
Section 64(1A) is, after all, couched in terms that appear to confer on the police an open discretion: samples may be retained.
On the face of it, therefore, the police appear to be in a position to act compatibly with the article 8 rights of those whose samples have been taken and this, indeed, even without resort to section 3.
But suppose there were some doubt about this, why would that not fall to be resolved by the interpretative imperative of section 3? How can it be appropriate, in the face of such a strong statutory direction, to place upon section 64(1A) a construction which denies the police the ability to exercise their data retention power compatibly? I confess to having come only comparatively late to the conclusion that, difficult though the respondents argument initially appears, it is in fact correct.
Section 6(2)(b) has long been recognised to give rise to difficulty at the margins see, for example, the judgments respectively of Lord Hope, Lord Walker and Lord Mance in Doherty v Birmingham City Council [2009] AC 367.
Clearly, as Lord Hoffmann observed in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 49, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
This, as was pointed out, was in contradistinction to section 6(2)(a) which applies when a public authority could not have acted differently when, in other words, the authority has been compelled by primary legislation to act in a way ex hypothesi incompatible with Convention rights.
Superficially, of course, the very assumption that a public authority could have acted differently appears to postulate that the power in question could therefore have been exercised compatibly with Convention rights.
Plainly, however, section 3 notwithstanding, it cannot follow that the power must therefore in all cases be exercised compatibly else section 6(2)(b) could never come into play.
A simple illustration of section 6(2)(b) in operation is, of course, where primary legislation confers a power on a public authority and where a decision to exercise that power (or, as the case may be, not to exercise it) would in every case inevitably give rise to an incompatibility.
R v Kansal (No 2) [2002] 2 AC 69 was just such a case and in such situations it can readily be understood why section 6(2)(b) applies.
Otherwise, instead of giving effect to a provision conferring a power, the public authority would have to treat the provision (in cases where not to exercise it would give rise to incompatibility) as if it imposed a duty or, in cases where any exercise of the power would give rise to incompatibility (as in Kansal (No 2) itself), would have to abstain from ever exercising the power.
In either instance, it is obvious, Parliaments will would be thwarted.
I would take this opportunity to resile from what I myself said in the latter part of para 118 of my own judgment in Hooper.
I was surely right to say in the first part of that paragraph: Plainly it is not the case that section 6(2)(b) applies whenever a statutory discretion falls to be exercised in a particular way to ensure compliance with a Convention right.
This occurs in a host of different situations and, so far as I am aware, no one has ever suggested that, had the discretion not been exercised compatibly, the public authority would nevertheless have been protected against a domestic law claim by the section 6(2)(b) defence on the basis that otherwise a power would be turned into a duty.
I was, however, wrong to suggest that the situation would be no different if to secure Convention compliance the statutory discretion had to be exercised in every case.
It now seems to me that the underlying question in all these cases indeed, the determinative question in every case lying between the two extremes I have thus far dealt with is: what essentially was Parliament intent on achieving by this legislation? Is it or is it not something which could realistically be achieved consistently with the observance of Convention rights? If it is, then it must be so construed and applied.
If, however, it is not, then section 6(2)(b) will apply: the legislation will be incompatible, a declaration of incompatibility may be made, and the public authority will be immune from liability.
In short, the question to be asked in deciding whether section 6(2)(b) applies is essentially the same question as is more usually asked under section 3 when deciding whether or not, by a strained construction of apparently incompatible legislation, it is possible to read and give effect to it compatibly with Convention rights.
Would such a construction depart substantially from a fundamental feature of the legislation? Would it be inconsistent with the underlying thrust of the legislation? Would it go with the grain of the legislation? Would it violate a cardinal principle of the legislation? Would it remove its pith and substance? Would it create an entirely different scheme? The Court must not cross the boundary from interpretation into legislation.
All these familiar concepts and phrases are to be found in the well known cases on section 3 but their importance has hitherto not perhaps been fully recognised in the context also of section 6(2)(b).
It is time to return to section 64(1A) of PACE and in the light of these considerations to ask whether realistically it could be construed for all the world as if, in enacting it, the government was leaving it to individual police forces or even to ACPO acting on their joint behalf to decide upon just what sort of scheme should be implemented for the future retention of biometric data.
Is it really suggested that the police could and should then (in 2001) of their own volition have decided that, instead of retaining data indefinitely, they would retain it for only, say, one year or five years, or different periods in different cases and so forth? And if this was not open to them in 2001, how then could it become so merely because of the Grand Chambers condemnation of the indefinite scheme some years later? As Lord Nicholls observed in Ghaidan v Godin Mendoza [2004] 2 AC 557, 572, para 33, when indicating the limits of the courts section 3 powers: There may be several ways of making a provision Convention compliant, and the choice may involve issues calling for legislative deliberation. It is difficult to think of any case in which that objection to a section 3 construction applies more obviously than here.
Lord Steyn reflected the same objection in the same case (para 49): Interpretation could not provide a substitute scheme.
It is surely plain that legislative deliberation was required here.
DNA retention can only sensibly operate on a national basis and section 64(1A), properly understood, in my judgment not merely authorised but required precisely the sort of scheme for the indefinite retention of biometric data that the House of Lords came to describe (and, indeed, so enthusiastically to support, in my case unrepentingly) in S and Marper.
Realistically it was just not possible to construe the section differently, least of all as authorising the police to create for themselves a fundamentally different scheme which would achieve compatibility with the requirements of article 8 as subsequently identified by the Grand Chamber.
Of course, some degree of latitude was given to the police as to how precisely the retention scheme was to operate.
But this was essentially to decide what narrow categories should be excluded from its scope cases of the sort described by Lord Steyn at para 36 of S and Marper (see para 125 above) and, indeed, in the ACPO Guidelines (see para 129 above).
The discretion could not sensibly be construed as extending to the basic nature of the scheme: whether retention should be indefinite or time limited.
That section 64(1A) was intended to introduce a database for the indefinite retention of DNA samples is surely clear from the very circumstances in which this legislative change was brought about the deeply disturbing circumstances in which a violent rapist and a brutal murderer had both gone free because of the unsatisfactory existing scheme see Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 and In re British Broadcasting Corporation [2010] 1 AC 145 and, indeed, to my mind clear also from the speeches in the House in S and Marper to which I have already referred.
One of the specific issues before the House in S and Marper was, it should be noted: (4) if the retention of fingerprints and DNA profiles and/or samples is an unjustified interference with the appellants Convention rights, whether it would be possible to give section 64(1A) a Convention compatible interpretation under section 3 of the 1998 Act (Lord Steyns judgment at para 17) an issue, of course, as Lord Steyn observed at para 57, that in the event fell away.
In short, the argument before the House assumed that section 64(1A) called for the indefinite retention of data and that, if this was incompatible with article 8, the appellants then needed to resort to section 3 of HRA for their requests for data removal to succeed.
The appellants here submit that, following the Grand Chamber judgment, it was open to the police to adjust their data retention policy to meet the newly recognised requirements of article 8 in just the same way as they were required by this court in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410 on article 8 grounds to adjust their previous approach to the disclosure of information for the purposes of enhanced criminal record certificates (ECRCs) pursuant to section 115(7) of the Police Act 1997.
In my judgment, however, the two situations are entirely different: in L all that the courts decision required of the police was that in future they give no less weight to the statutory requirement that in their opinion the information ought to be included in the certificate than the requirement that they think it might be relevant (and in borderline cases give the prospective employee an opportunity to say why the information ought not to be disclosed).
There was no requirement whatever for fresh policy choices to be made let alone legislative deliberation or democratic accountability.
Rather the court was well able to decide the limited adjustment that needed to be made.
Contrast the position in the present case.
The Grand Chamber, in para 134 of its judgment (see para 126 above), can hardly have been expecting the police, rather than the Government, to implement the newly required measures under the supervision of the Committee of Ministers.
Correspondingly, the States reaction to the Grand Chambers judgment was that it was plainly for Government, not the police, to devise and implement a new and Convention compliant scheme.
It was, indeed, the Home Office rather than the police who decided that children under ten should be removed from the database (see para 127 above).
No less significantly, the perceived need for a fully legitimate parliamentary solution to the problem was manifested by the political insistence upon the new scheme being introduced by primary and not merely secondary legislation.
If this was not appropriate by secondary legislation, how much less so by revised ACPO guidelines.
Even if it is suggested that section 64(1A) does not preclude ACPO from now amending their Guidelines to address the Grand Chambers criticisms in S v UK, that with respect is not a sufficient answer to the section 6(2)(b) defence.
As I have said (para 143 above), the section 6(2)(b) defence necessarily postulates that the public authority could act differently.
The critical question is whether they could do so consistently with the essential scheme and thrust of the legislation and a good test of that, I would suggest, is to ask whether it can really be said to be their duty to do so and to be unlawful and wrong for them not to do so.
The whole purpose of section 6(2)(b) is to safeguard a public authority from liability (and, indeed, from misplaced criticism) in circumstances where in truth it is acting (as for my part I have no doubt that the police are acting here) perfectly properly.
It follows from all this that, in common with Lord Rodger, with whose judgment on the section 6 issue I respectfully agree, I would hold that it is not unlawful (under domestic law) for the respondent police commissioner to continue to hold the appellants data on the national DNA database.
As to whether this Court should now make a declaration of incompatibility in respect of section 64(1A) I hold no strong view.
Nowhere is this identified as an issue before us and frankly I find it difficult to see any possible need or use for it in the present circumstances.
But if others think it desirable, I would be quite content with that.
I would add that, even had I concluded that the police could now act compatibly with article 8 under section 64(1A), I should certainly not have thought it just and appropriate within the meaning of section 8 of the HRA to require them to change their existing practice pending the introduction of a new legislative data retention scheme.
It may be, indeed, that the strength of this reaction to the respondents fall back argument under section 8, on true analysis, reinforces the correctness of my primary conclusion on the section 6 issue: quite simply it would be wrong for the police to change their approach to section 64(1A) before Parliament so dictates and this court cannot properly direct them to do so.
If anyone is to be criticised for the failure of the existing database to meet the States obligations under article 8, it is surely the Government, not the police.
In my judgment they have a section 6(2)(b) defence to these claims.
| UK-Abs | Section 64 of the Police and Criminal Evidence Act 1984 (PACE) required the destruction of samples or fingerprints taken from a person in connection with the investigation of an offence if he was cleared of that offence.
Section 64(1A) of PACE, enacted by section 82 of the Justice and Police Act 2001 (the 2001 Act), replaced that statutory obligation to destroy data with a discretion.
Section 64(1A) provides that samples taken in connection with the investigation of an offence may be retained after they have fulfilled the purposes for which they were taken.
Section 64(1A) was supplemented by guidelines issued by the Association of Chief Police Officers (ACPO).
These guidelines provided that data should be destroyed only in exceptional cases.
The polices retention policy was challenged in R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of South Yorkshire Police [2004] 1 WLR 2196 (Marper UK).
The claimants argued that the retention by the police of their finger prints and DNA samples was incompatible with article 8 of the European Convention on Human Rights (the ECHR).
The majority of the House of Lords held that retention did not constitute an interference with the claimants article 8 rights and they held unanimously that in any event any such interference was justified under article 8(2).
However, in 2008, the European Court of Human Rights (ECtHR) disagreed: see S and Marper v United Kingdom (2008) 48 EHRR 50 (Marper ECtHR).
It found the indefinite retention of data to be an interference which was not justified under Article 8(2).
The Governments immediate response was to remove children under the age of 10 from the database.
They then opened a consultation period to consider the appropriate legislative reform.
This resulted in legislation which, following the change of government in May 2010, was not brought into force.
The Coalition Government is promoting new legislation to take account of the ECtHRs judgment.
In December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day he was released on police bail without charge and was subsequently informed that no further action would be taken.
In March 2009, C was arrested on suspicion of rape, harassment and fraud.
His finger prints and a DNA sample were taken.
He denied the allegations.
He was charged in respect of the rape allegation but no further action was taken in respect of the harassment and fraud allegations.
In the Woolwich Crown Court in May 2009, the prosecution offered no evidence and C was acquitted.
In both cases, the appellants requested the destruction of the data taken.
Their requests were refused as there were no exceptional circumstances within the meaning of the ACPO guidelines.
The appellants issued proceedings for judicial review of the retention of their data on grounds that, in light of Marper
ECtHR, its retention was incompatible with their article 8 rights.
In the circumstances, the Divisional Court (Moses LJ and Wyn Williams J) dismissed the applications for judicial review and granted a certificate that the cases were appropriate for a leapfrog appeal to the Supreme Court: [2010] EWHC 2225 (Admin).
The Supreme Court, by a majority, allows the appeals (Lords Rodger and Brown dissenting).
Lord Dyson gives the lead judgment.
The majority grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
They grant no other relief.
Interpretation of section 64(1A) of PACE It is common ground that Marper UK should be overruled.
It is also agreed that in light of Marper ECtHR, the indefinite retention of the appellants data under the current retention policy is a breach of article 8 ECHR.
The only issue in these appeals, therefore, is what the court should do about that in the present circumstances.
Section 3 of the Human Rights Act 1998 (HRA) requires the court, insofar as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
It is uncontroversial that the statutory purpose of section 64(1A) was to remove the requirement to destroy data after it had served its immediate purpose so as to create a greatly extended database.
The extended database was to facilitate the prevention of crime, the investigation of offences and the conduct of prosecutions.
However, this does not mean that Parliament intended that, save in exceptional circumstances, the data should be retained indefinitely.
Rather, Parliament conferred a discretion on the police to retain data.
The natural meaning of the word may in section 64(1A) is permissive not mandatory.
There is no reason to suppose that Parliament must have intended its statutory purpose to be achieved in a disproportionate way so as to be incompatible with article 8: [23] [24], [88] [89].
The police were entrusted with setting out the precise means of achieving the statutory purpose: [26].
There is no reason in principle why the police, with the input of the Secretary of State, should be less well equipped than Parliament to create guidelines for the exercise of this power: [40] [44].
Accordingly, it is possible to read section 64(1A) in a way which is compatible with article 8 ECHR as interpreted in Marper ECtHR.
A declaration of incompatibility is not appropriate and section 6(2)(b) of the HRA is not engaged: [35], [55], [69].
Lords Rodger and Brown dissent.
They would have dismissed the appeals.
In their view, the history shows that Parliament's purpose in enacting section 64(1A) was to ensure that in future samples taken from suspects would be retained indefinitely: [94] [97].
Therefore, the police had no choice but to retain the data: [108] [109].
In their view, it is not possible to interpret section 64(1A) in accordance with section 3 HRA: [115], [146] [147].
However, since the police could not have acted differently in substance, what they did and what they continue to do, falls within section 6(2)(a) or section 6(2)(b) HRA and is lawful: [119].
Appropriate relief The present intention of the government is to bring the new legislation into force later this year.
In these circumstances, in relation to biometric data it is sufficient to grant a declaration under section 8(1) HRA that the present ACPO guidelines are unlawful because they are incompatible with the ECHR.
Where Parliament is seised of the matter, it is not appropriate to make an order requiring a change in the legislative scheme within a specific period or an order requiring destruction of data: [45] [49], [73], [91] [92].
It is, however, open to ACPO to reconsider and amend the guidelines in the interim: [73], [81], [90].
Lord Rodger would have preferred to grant a declaration of incompatibility under section 4 HRA: [121].
In relation to the photographs of GC, in view of the manner in which the issue was raised in the Divisional Court and the consequent lack of any substantive judgment, the Supreme Court expresses no opinion on this part of the appeal: [50] [51].
|
There are three cases before the Court, two on appeal from the Court of Appeal of England and Wales and one from the Inner House of the Court of Session in Scotland.
This judgment deals with the two English cases, while a separate judgment will deal with the Scottish case.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
It is no longer argued on behalf of the Government that such decisions are not amenable to judicial review at all.
But it is argued that they are only reviewable in exceptional circumstances.
The claimants argue that no such limit exists.
The debate, therefore, has focussed upon the effect of the creation of a wholly new and integrated tribunal structure under the 2007 Act.
The cases
It has been helpful to hear three different cases together, all raising essentially the same question in different contexts.
In all of them the claimant failed in an appeal to the First tier Tribunal set up under the 2007 Act and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
In R (Cart) v The Upper Tribunal, Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency (whose functions have since been taken over by the Child Maintenance and Enforcement Commission) to revise a variation in the level of child maintenance to be paid to his ex wife for the support of their children.
His appeal was dismissed in October 2007.
He applied for permission to appeal to the Child Support Commissioners.
In June 2008, Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The functions of the Child Support Commissioners were then taken over by the Administrative Appeals Chamber of the Upper Tribunal.
Following a hearing in January 2009 the Upper Tribunal, consisting of the Senior President, Carnwath LJ, and Tribunal Judge Jacobs (as the Commissioner had now become) dismissed his appeal on the three grounds for which permission had been given and declined permission to reopen the fourth: [2009] UKUT 62 (AAC).
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
It was agreed that the amenability of the Upper Tribunal to judicial review should be determined as a preliminary issue.
In December 2009, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances: [2009] EWHC 3052 (Admin), [2010] 2 WLR 1012.
In July 2010, the Court of Appeal dismissed his appeal, reaching the same result but by a different route: [2010] EWCA Civ 859; [2011] 2 WLR 36.
It will be necessary to return to their reasoning in due course.
Mr Cart now appeals to this Court.
R (MR (Pakistan)) v The Upper Tribunal concerns a native of Pakistan who has been in the United Kingdom since June 2007.
At that stage he had a multi visit visa valid until June 2009.
In March 2010 he applied for asylum on the basis of his conversion to Christianity.
This was refused in April 2010.
His appeal to the Immigration and Asylum Chamber of the First tier Tribunal was dismissed less than two weeks later.
His application to the First tier Tribunal for permission to appeal to the Upper Tribunal was refused in May and his application to the Upper Tribunal was refused only days later by Ouseley J, sitting as a judge of the Upper Tribunal.
MR sought judicial review of Ouseley Js decision.
Permission to apply was granted by Judge Nicholas Cooke QC, sitting as a High Court Judge.
But at the hearing of the claim in December 2010, Sullivan LJ determined a preliminary issue concerning the amenability of the Upper Tribunal to judicial review in accordance with the decision of the Court of Appeal in Cart and dismissed the claim: [2010] EWHC 3558 (Admin).
He granted a certificate under section 12 of the Administration of Justice Act 1969, so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
In Eba v Advocate General for Scotland, Ms Eba appealed to the Social Entitlement Chamber of the First tier Tribunal against the refusal of her claim for disability living allowance.
Her appeal was also refused, as were her applications both to the First tier Tribunal and to the Upper Tribunal for permission to appeal to the Upper Tribunal against that refusal.
Ms Ebas petition for judicial review of each of those decisions was dismissed by the Lord Ordinary, who followed the reasoning of the Divisional Court in Cart: [2010] CSOH 45, 2010 SLT 547.
She reclaimed that refusal, on the ground that judicial review was not so limited.
The Advocate General cross appealed on the ground that the Upper Tribunal was not amenable to judicial review at all.
The First Division refused the cross appeal but allowed Ms Ebas reclaiming motion on the basis that the supervisory jurisdiction of the Court of Session was not so limited and that, notwithstanding the decision of the Court of Appeal in Cart, it did not follow that the result should be the same in Scotland: [2010] CSIH 78; 2010 SLT 1047.
The First Division granted the Advocate General permission to appeal to this Court.
Conveniently, however, we heard first the arguments of all three claimants, Mr Richard Drabble QC for Mr Cart, Mr Jonathan Mitchell QC for Ms Eba, and Mr Manjit Gill QC for MR, followed by oral arguments for two of the interveners, Mr Michael Fordham QC for the Public Law Project, and Mr James Mure QC for the Lord Advocate, followed by Mr James Eadie QC for the Secretaries of State for Justice and for the Home Department and the Child Maintenance and Enforcement Commission and Mr David Johnston QC for the Advocate General for Scotland.
Mr Alex Bailin QC and others also made helpful written submissions on behalf of the intervener JUSTICE.
It has been particularly useful to be able to look at the issues in the context of the two jurisdictions, social security (including for this purpose child support) and immigration and asylum, which together make up the great bulk of the business of the new tribunal system, and in the context of the supervisory jurisdiction of the higher courts in both Scotland and England and Wales.
The judgment in Eba will deal with the supervisory jurisdiction of the Court of Session in Scotland while this judgment will deal with the supervisory jurisdiction of the High Court in England and Wales.
The tribunal systems with which we are concerned, both before and after their restructuring in the 2007 Act, however, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
The tribunal system
One of the most important and controversial features of the development of the legal system in the 20th century was the creation and proliferation of statutory tribunals separate from the ordinary courts.
Mostly they were set up to determine claims between an individual and the state to war pensions, to social security benefits, to immigration and asylum, to provision for special educational needs, to be released from detention in a psychiatric hospital, against the refusal or withdrawal of licences or approvals to conduct certain kinds of business, for the determination of liability to direct and indirect taxation, for compensation for compulsory purchase and so on.
In some instances, they were set up to adjudicate upon statutory schemes, generally those which modified what would otherwise be an ordinary contractual relationship between private persons between employer and employee or between landlord and tenant of residential property.
These jurisdictions were and remain very diverse.
The subject matter can range from liability to VAT or entitlement to performing rights or the price of leasehold enfranchisement, which can be worth millions of pounds, to the amount of weekly means tested benefits or war pensions entitlement, which may be worth only a few pounds at a time but may mean a great deal to the claimants involved and to others like them.
The judiciary, also, could and still can be very diverse, ranging from seconded High Court judges or senior Queens Counsel to fee paid part timers from a great variety of legal professional backgrounds.
In many cases, tribunals also had and still may have members who were not legally qualified but had other professional qualifications or experience which was particularly suited to the subject matter of the claim.
Some had single tier structures, some with and some without a right of appeal to the High Court or Court of Appeal.
Some had two tier structures with their own appellate tier, again with or without a right of appeal to the High Court or Court of Appeal.
But in general these tribunal systems shared some common characteristics.
They were set up by statute to administer complex and rapidly changing areas of the law.
Their judges were expected to know this law without having to have lawyers for the parties to explain it to them.
Their members were expected to have relevant expertise or experience in the subject matter of the dispute, not only so that they would be able to adjudicate upon factual issues without the help of lawyers for the parties, but also so that the parties could feel confident that the overall balance of the panel (for example between employers and employees) would produce impartial results.
Their procedures were also tailored to the subject matter of the dispute and they were not bound by the technical rules of evidence.
While legal representation was common in those tribunals where large sums of money were at stake, and latterly in mental health review tribunals where personal liberty was at stake, the original expectation in most tribunals was that people would not need representation, or could be helped by specialist non lawyer representatives.
In theory, therefore, the respective roles of the tribunal and the parties were rather different from their roles in the ordinary courts.
The tribunal was more than a neutral referee before whom each party was expected to lay out all the material necessary to decide the case for the judge to choose which he preferred (compare Bingham, The Rule of Law, 2010, p 89).
In general, this diverse specialism was regarded as a strength rather than a weakness, although the concomitant lack of legal aid in almost all tribunals was regretted by those who saw the benefits which skilled representation could bring.
However, another feature of these tribunal systems was more controversial.
They were mostly resourced and administered by whichever Department of State was responsible for the statutory scheme in question, rather than by the Department which was responsible for the administration of justice in the ordinary courts.
This led to fears that they were not, or at least were not seen to be, sufficiently independent of those sponsoring Departments.
The Department may have seen the independence and expertise of the tribunals as an integral part of the proper administration of a statutory scheme which was designed to bring certain benefits to the people.
But others may have feared that they were simply accomplices with the Department in denying to claimants the benefits which were properly theirs.
In between these two extremes, there might well be a perceived risk that the tribunals would be more inclined to accept the Departmental view of what the law was, rather than an alternative view which was more favourable to the claimant or taxpayer or whomever.
The system was greatly improved by the Tribunals and Inquiries Act 1958, following the Report of the Franks Committee on Administrative Tribunals and Inquiries in 1957 (Cmnd 218), with its insistence on openness and accountability to the higher courts.
In particular, provision was made in section 9 for appeals to the High Court which could be applied to any specified tribunal; and all (save two) previous exclusions of judicial review were abrogated by section 11.
The Franks Committee was firm that the prerogative orders were clearly necessary in cases where questions of jurisdiction are involved and in cases where no provision is made for appeals on points of law.
Accordingly no statute should contain words purporting to oust those remedies (para 117).
A later improvement was to strengthen the leadership of particular tribunal systems by introducing a presidential structure, headed by a High Court or Circuit Judge.
The final solution, following the Report of Sir Andrew Leggatt, Tribunals for Users One System, One Service (TSO, March 2001), was to transfer the administration of tribunals to the Ministry of Justice and to set up a new, integrated tribunal structure to take over the jurisdiction of most, but not all, of the existing systems under the 2007 Act.
But before turning to the effect of that Act, it is necessary to see how judicial review was employed under the old system.
Judicial review in its modern form, of course, is the product of two developments.
One was the integration and simplification of the procedures for obtaining the former prerogative writs of certiorari, prohibition and mandamus or declaratory relief, in the revised Order 53 of the Rules of the Supreme Court, introduced in 1978 following the recommendations of the Law Commissions Report on Remedies in Administrative Law (1976, Law Com No 73).
The other was the vigorous development of the substantive law, most notably of course in Anisminic v Foreign Compensation Commission [1969] 2 AC 147.
Mr Fordham, for the Public Law Project, rightly reminds us that the remedy of certiorari had long been available to quash the decision of an inferior court or tribunal for error of law on the face of the record: see R v Northumberland Compensation Appeal Tribunal, Ex p Shaw [1952] 1 KB 338.
There the tribunal had wrongly interpreted the service to be taken into account in assessing the applicants compensation for loss of office.
There was no right of appeal against its decisions.
The Attorney General had argued that certiorari would only lie to prevent a tribunal exceeding its jurisdiction.
Both the Divisional Court and the Court of Appeal emphatically disagreed.
This was not to assume an appellate function which had not been given to it; the court had an inherent jurisdiction to control all inferior tribunals, not in an appellate capacity, but in a supervisory capacity.
This control extends not only to seeing that the inferior tribunals keep within their jurisdiction, but also to seeing that they observe the law.
The control is exercised by means of a power to quash any determination by the tribunal which, on the face of it, offends against the law.
The Kings Bench does not substitute its own views for those of the tribunal, as a Court of Appeal would do.
It leaves it to the tribunal to hear the case again . : see Denning LJ, at pp 346 7.
Singleton LJ lamented the lack of a right of appeal on a point of law, which he thought would save a great deal of time and trouble in deciding whether certiorari would lie: see pp 345 6.
No doubt such views were influential when the Franks Committee came to recommend such a right.
Then came Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, where not only was there no right of appeal from the Commissions decisions but there was also an express provision in the Foreign Compensation Act 1950 that those decisions shall not be called in question in any court of law (s 4(4)).
This provision was one of the two expressly excepted from the general abrogation of such clauses in section 11 of the 1958 Act.
In holding that, nevertheless, it was not effective to oust the jurisdiction of the High Court to set aside a decision which was a nullity, and that a decision made in error of law was a nullity, the House of Lords effectively removed the distinction between error of law and excess of jurisdiction.
Where there was a right of appeal, of course, an aggrieved party would be expected to use that rather than judicial review.
Judicial review was always a remedy of last resort.
However, where there was no such right, there are numerous examples, at the highest level, of resort to judicial review to correct an error of law made by an inferior tribunal.
Two will suffice.
In Re Woodling, Woodling v Secretary of State for Social Services [1984] 1 WLR 348, the question of law was whether cooking meals was attention in connection with bodily functions for the purpose of attendance allowance.
It reached the House of Lords by way of judicial review of the refusal of the Social Security Commissioner to grant leave to appeal from the decision of the Attendance Allowance Board.
Significantly for the cases before this Court, the Board and the Commissioner were bound by an earlier decision of the Court of Appeal (R v National Insurance Commissioner, Ex p Secretary of State for Social Services [1981] 1 WLR 1017) excluding cooking; and when it was suggested to the Commissioner that this decision was wrong he indicated that he could add nothing to his earlier refusal of leave. (The challenge failed in the House of Lords, their lordships taking the view that attention in connection with bodily functions referred to things which the fit man normally does for himself, it not occurring to them that this might include cooking his own meals.)
That was a social security case.
R v Immigration Appeal Tribunal, Ex p Bakhtaur Singh [1986] 1 WLR 910 was an immigration case.
The claimants appeal against the decision of the Secretary of State to deport him failed before the adjudicator and the Immigration Appeal Tribunal refused leave to appeal to that Tribunal.
The case reached the House of Lords by way of judicial review of that refusal.
The issue was whether the public interest in paragraph 154 of the Immigration Rules could include the interests of the Sikh community as well as the public interest in maintaining effective immigration control.
Once again, the adjudicator had considered himself bound by dicta in an earlier High Court case (R v Immigration Appeal Tribunal, ex p Darsham Singh Sohal [1981] Imm AR 20).
Thus the principle was firmly established that the unappealable decisions of inferior tribunals, including the refusal of leave to appeal, were amenable to judicial review on all the usual grounds.
Indeed, in some cases, judicial review was considered a more appropriate remedy, even though statute provided another way of correcting errors of law: in Bone v Mental Health Review Tribunal [1985] 3 All ER 330, for example, Nolan J thought judicial review preferable to the power of a mental health review tribunal to state a case for the opinion of the High Court and the case stated procedure fell into disuse.
However, the availability of judicial review was seen as a particular problem in the context of immigration and asylum appeals.
In the Nationality, Immigration and Asylum Act 2002, s 101(2), Parliament introduced a form of statutory review of the refusal by the Immigration Appeal Tribunal of permission to appeal to that Tribunal.
This was conducted by a single High Court judge without either an oral hearing or any appeal from his decision.
It was therefore much swifter than the standard judicial review process, which involves the possibility of both written and oral submissions before both a High Court judge and a Lord Justice of Appeal.
In R (G) v Immigration Appeal Tribunal [2005] 1 WLR 1445, the Court of Appeal held that, although the introduction of this new statutory procedure did not remove the judicial review jurisdiction, the new procedure was an adequate and proportionate protection for the claimants rights and it was therefore a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which were or could have been the subject of statutory review.
Lord Phillips MR observed, at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
When Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
The same approach was adopted when the Asylum and Immigration (Treatment of Claimants et cetera) Act 2004 collapsed the former two tier appellate structure into one.
If the Asylum and Immigration Tribunal refused to order the reconsideration of a decision, the aggrieved party could ask the High Court to review the matter on paper and its decision was final (2002 Act, s 103A).
The Tribunals, Courts and Enforcement Act 2007
Part 1 of the 2007 Act established the new unified tribunal structure which was recommended in the Leggatt Report.
There is a First tier Tribunal, which is organised into chambers according to subject matter, each with its own President.
It consists of its judges and other (non lawyer) members.
There is an Upper Tribunal, also organised into chambers according to subject matter, each with its own President.
With one exception, the Upper Tribunal Presidents are all High Court judges, but this is not a statutory requirement.
It too consists of its judges and other (non lawyer) members.
While most of the tribunal judiciary are specifically appointed to that role, all the judges in the ordinary courts, from the Lords Justices of Appeal to the District Judges in the Magistrates Courts, are automatically judges of both the First tier and Upper Tribunals.
The whole is presided over by the Senior President of Tribunals, who shares the responsibility for organising the chambers with the Lord Chancellor (see s 7).
The Senior President is currently a Lord Justice of Appeal, but the Act provides two routes to appointment: the first is that the Lord Chancellor and heads of the judiciary in England and Wales, Scotland and Northern Ireland all agree to recommend an appeal court judge for appointment; and only if that process does not produce a result does the second route, selection by the Judicial Appointments Commission, which is not limited to appeal court judges, apply (see Schedule 1, para 2(5)).
Parliament has therefore expected, but not insisted, that the Senior President be an appeal court judge.
The new structure may look neat but the diversity of jurisdictions accommodated means that it is not as neat as it looks.
Thus, for example, the jurisdiction of the Special Commissioners of Income Tax and the VAT and Duties Tribunal has been assigned to the First tier Tribunal, although the importance of the decisions they make and the expertise of their judiciaries is, and should be, at least the equivalent of that of the Social Security Commissioners, who as appellate judges are assigned to the Upper Tribunal.
Section 3(5) provides that The Upper Tribunal is to be a superior court of record.
The Upper Tribunal has in fact three different roles.
First, it may be the tribunal of first instance.
Thus, for example, the Lands Chamber has both the first instance and appellate jurisdictions of the former Lands Tribunal; the Administrative Appeals Chamber has the jurisdiction of the former Transport Tribunal; and the Tax and Chancery Chamber has the jurisdiction of the former Financial Services and Markets Tribunal.
Thus some first instance jurisdictions have been transferred to the Upper Tribunal whereas others of equivalent importance and difficulty, particularly in the tax field, have been transferred to the First tier Tribunal.
Second, and this is a major innovation in the 2007 Act, it may exercise a statutory jurisdiction which is the equivalent of the judicial review jurisdiction of the High Court in England and Wales or Northern Ireland (ss 15, 16, 17).
This only applies if certain conditions are met, the most important of which is that the application falls within a class specified in a direction given by the Lord Chief Justice or his nominee with the consent of the Lord Chancellor under Part 1 of Schedule 2 to the Constitutional Reform Act 2005 (s 18(6)).
Once such a direction has been given, any application for judicial review or permission to apply for judicial review which is made to the High Court in that class of case must be transferred to the Upper Tribunal (Senior Courts Act 1981, s 31A(2)).
The High Court also has power to transfer judicial review cases of other kinds to the Upper Tribunal if it appears just and convenient to do so (1981 Act, s 31A(3)).
Similar provision is made in Scotland, in that judicial review cases in a specified class must, and others may, be transferred from the Court of Session to the Upper Tribunal (2007 Act, s 20(1)).
The difference is that the application must first be made to the Court of Session, whereas in England and Wales and Northern Ireland applications in the specified classes should be made direct to the Upper Tribunal.
Third, and probably most important, there is a right of appeal to the Upper Tribunal on any point of law arising from a decision made by the First tier Tribunal other than an excluded decision (s 11(1), (2)).
This right may only be exercised with the permission of either the First tier or the Upper Tribunal (s 11(3), (4)).
Section 11(5) lists the decisions which are excluded from the right of appeal.
These include decisions of a description specified in an order made by the Lord Chancellor (s 11(5)(f)).
The current list is contained in the Appeals (Excluded Decisions) Order 2009, as amended in 2010 to take account of the inclusion of immigration and asylum appeals within the new structure.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application under section 11(4)(b) (application for permission or leave to appeal) (s 13(8)(c)).
These appeals also require permission either from the Upper Tribunal or, if refused by the Upper Tribunal, from the relevant appellate court (s 13(3), (4), (5)).
Where this would be a second tier appeal (that is, an appeal from the decision of the Upper Tribunal on appeal from the First tier Tribunal), the Lord Chancellor has exercised the power granted to him by section 13(6) to order that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal (Appeals from the Upper Tribunal to the Court of Appeal Order 2008, SI 2008 No 2834, art 2).
Equivalent provision has been made for appeals from the Upper Tribunal to the Court of Session in Scotland by rule 41.59 of the Act of Sederunt (Rules of Court of Session 1994) 1994 (inserted by SSI 2008 No 349).
These criteria are, of course, those applicable to a second tier appeal from a court to the Court of Appeal in England and Wales under section 55(1) of the Access to Justice Act 1999.
It is worth noting that both the First tier Tribunal and the Upper Tribunal have power to review their own decisions, but this power does not apply to excluded decisions (see ss 9(1) and 10(1) respectively).
This means that the Upper Tribunal has no power to review its own decision to refuse permission to appeal to the Upper Tribunal, even if it is convinced that that decision was wrong (compare the facts of Re Wooding, para 19 earlier).
There is no express provision in the 2007 Act which makes any attempt to limit or remove the supervisory jurisdiction of the High Courts of England and Wales or Northern Ireland and the Court of Session in Scotland to review the decisions of the Upper Tribunal.
It is nevertheless argued, and both the Divisional Court and the Court of Appeal held, that in the light of the system introduced by the 2007 Act the exercise of that jurisdiction should be limited to certain exceptional cases.
Before turning to the possible approaches available to this Court, it is worth noting the various ways in which that argument has been put in the course of these proceedings.
The developing argument
The Cart case was heard by the Divisional Court along with two cases involving the Special Immigration Appeals Commission (SIAC).
As does section 3(5) of the 2007 Act, section 1(3) of the Special Immigration Appeals Commission Act 1997 provides that SIAC shall be a superior court of record.
The Governments primary case was that this made both tribunals immune from judicial review.
This is not surprising, given that the same view had been expressed, of the Employment Appeal Tribunal, by Morison J in Chessington World of Adventures Ltd v Reed [1998] ICR 97, and by Sedley LJ in R v Regional Office of the Employment Tribunals (London North), Ex p Sojorin (unreported), 21 February 2000, and at para 6.31 of the Leggatt Report, and of the Upper Tribunal itself in de Smiths Judicial Review 6th ed (2007), para I 093.
Nevertheless the argument was comprehensively demolished by Laws LJ, with whom Owen J agreed, in a typically subtle and erudite judgment, to which the following brief summary cannot do justice.
It was a constitutional solecism to consider that merely to designate a body a superior court of record was sufficient to preclude judicial review.
This could only be done by the most clear and explicit language and not by implication, still less by what was effectively a deeming provision.
The rule of law requires that statute law be interpreted by an authoritative and independent judicial source: . the need for such an authoritative judicial source cannot be dispensed with by Parliament.
This is not a denial of legislative sovereignty, but an affirmation of it .
The requirement of an authoritative judicial source for the interpretation of law means that Parliaments statutes are always effective; . (para 38).
That source was the High Court.
This was not because it was a superior court of record but because it was a court of unlimited jurisdiction.
Other courts and tribunals, having a limited jurisdiction, were not that source and were susceptible to judicial review by the High Court.
Unreviewable courts of limited jurisdiction were exceptional.
In the light of that comprehensive demolition, Mr Eadie has not since tried to rebuild the argument.
He does not need to do so, because (in relation to the Upper Tribunal but not to SIAC) he has succeeded on his secondary case, that judicial review is only exercisable in rare and exceptional cases.
Laws LJ accepted the argument on the basis that the newly constituted Upper Tribunal was the alter ego of the High Court within the areas covered by the tribunal system: it constituted an authoritative, impartial and independent judicial source for the interpretation and application of the relevant statutory tests.
The rule of law did not require that it be subject to review for error of law within its jurisdiction: it had the final power to interpret for itself the law it must apply (para 94).
But in the grossly improbable event that [Upper Tribunal] were to embark upon a case which was frankly beyond the four corners of its statutory remit there was no reason why the High Court should not correct it.
With more caution, he accepted that it might also intervene where there has been a wholly exceptional collapse of fair procedure: something as gross as actual bias on the part of the tribunal (para 99).
Laws LJ recognised that if the Upper Tribunal were in truth the alter ego of the High Court the logical consequence would be that it was wholly immune from the supervision of the High Court.
The Government therefore pursued that argument before the Court of Appeal.
Sedley LJ, giving the judgment of the court, rejected it: . the [Upper Tribunal] is not an avatar of the High Court at all: far from standing in the High Courts shoes, . , the shoes the [Upper Tribunal] stands in are those of the tribunals it has replaced (para 19).
But he agreed that the supervisory jurisdiction of the High Court, well known to Parliament as one of the great historic artefacts of the common law, runs to statutory tribunals both in their old and in their new incarnation unless ousted by the plainest possible statutory language.
There is no such language in the 2007 Act (para 20).
Nevertheless, it did not follow that judicial review should be available on the full panoply of grounds which had been developed over the last half century.
Judicial review had always been a remedy of last resort.
As the Court of Appeal had recognised in R (Sivasubramaniam) v Wandsworth County Court [2003] 1 WLR 475, permission would not be granted where satisfactory alternative recourse existed, whether or not it had been exhausted.
The scope of judicial review was a matter of principle, not discretion.
But it could be changed to keep pace with other changes.
The complete reordering of administrative justice was such a change: The tribunal system is designed to be so far as possible a self sufficient structure, dealing internally with errors of law made at first instance and resorting to higher appellate authority only where a legal issue of difficulty or of principle requires it.
By this means serious questions of law are channelled into the legal system without the need of post Anisminic judicial review. (para 30) Two principles needed to be reconciled: one was the relative autonomy which Parliament had invested the tribunals as a whole and the Upper Tribunal in particular; the other was the constitutional role of the High Court as guardian of the standard of legality and due process from which the Upper Tribunal was not exempt (para 35).
There was a true jurisprudential difference between an error of law made in the course of an adjudication which a tribunal is authorised to conduct and the conducting of an adjudication without lawful authority.
For the former, no system of law can guarantee to be infallible.
But [o]utright excess of jurisdiction by the [Upper Tribunal] and or denial by it of fundamental justice, should they ever occur, are in a different class: they represent the doing by the [Upper Tribunal] of something that Parliament cannot possibly have authorised it do so (para 36).
Thus, by this rather different route, the Court of Appeal in Cart arrived at the same practical conclusion as had both the Divisional Court in Cart and the Court of Appeal in Sivasubramaniam [2003] 1 WLR 475.
Sivasubramaniam was, of course, dealing with the new system of civil appeals brought in under the Access to Justice Act 1999 in response to the Bowman Report (1997).
For the first time, virtually all appeals from a district judge to a circuit judge in a county court required permission to appeal.
Refusal of permission by the circuit judge meant that there was no way, other than by judicial review, of having the case scrutinised by a High Court judge.
However, while judicial review was not ousted, the Court of Appeal considered the new scheme provided the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error (para 54).
Permission to apply for judicial review should therefore not be granted except in very rare cases where it was sought on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing (para 56).
In R (Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305, [2006] 3 All ER 650, essentially the same approach was applied to the refusal, by a non lawyer member of the Lands Tribunal, of permission to appeal from a determination of a Leasehold Valuation Tribunal relating to residential service charges.
Thus the mere fact that a decision by the Lands Tribunal was obviously wrong in law was not enough to justify its being judicially reviewed (para 56); although there might be exceptional circumstances other than those identified in Sivasubramaniam which would justify this, for example where there were conflicting decisions in Leasehold Valuation Tribunals which cried out for definitive resolution (para 57).
On the other hand, in Sivasubramaniam itself, the Court of Appeal had recognised the special features of the asylum jurisdiction which justified the former practice of unrestricted judicial review of refusals of leave to appeal.
In MR (Pakistan), therefore, Mr Manjit Gill argued that those special features justified making an exception to the principles adopted by the Court of Appeal in Cart.
Sullivan LJ disagreed.
The immigration and asylum jurisdiction was not the only one in which claimants might be unrepresented, or particularly vulnerable, or where fundamental human rights were involved, or where the law was complex.
There was no principled justification for maintaining a historical exemption: one of the basic purposes of the 2007 Act was to unify the procedures of the many and disparate tribunals which had been gathered into the new structure.
It would be a significant invasion of the coherence of the new system to maintain such a historical exemption (para 53).
The field of choice in this Court
The way in which the argument has developed through the proceedings which are now collected before us enables us to be clear on three points.
First, there is nothing in the 2007 Act which purports to oust or exclude judicial review of the unappealable decisions of the Upper Tribunal.
Clear words would be needed to do this and they are not there.
The argument that making the Upper Tribunal a superior court of record was sufficient to do this was killed stone dead by Laws LJ and has not been resurrected.
Second, it would be completely inconsistent with the new structure introduced by the 2007 Act to distinguish between the scope of judicial review in the various jurisdictions which have now been gathered together in that new structure.
The duties of the Senior President, set out in section 1(2), clearly contemplate that the jurisdictions will retain their specialist expertise, so that one size does not necessarily fit all; but the relationships of its component parts with one another and with the ordinary courts are common to all.
So too must be the principles adopted by the High Court in deciding the scope of judicial review.
Third, the scope of judicial review is an artefact of the common law whose object is to maintain the rule of law that is to ensure that, within the bounds of practical possibility, decisions are taken in accordance with the law, and in particular the law which Parliament has enacted, and not otherwise.
Both tribunals and the courts are there to do Parliaments bidding.
But we all make mistakes.
No one is infallible.
The question is, what machinery is necessary and proportionate to keep such mistakes to a minimum? In particular, should there be any jurisdiction in which mistakes of law are, either in theory or in practice, immune from scrutiny in the higher courts?
In the course of oral argument before the Court it became clear that there were three possible approaches which the Court could take.
First, we could accept the view of the courts below in Cart and MR that the new system is such that the scope of judicial review should be restricted to pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances such as those identified in Sinclair Gardens).
Second, we could accept the argument, variously described in the courts below as elegant and attractive, that nothing has changed.
Judicial review of refusals of leave to appeal from one tribunal tier to another has always been available and with salutary results for the systems of law in question.
Third, we could adopt a course which is somewhere between those two options, and was foreshadowed by Dyson LJ (with the enthusiastic support of Longmore LJ) in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258 but rejected by the Court of Appeal in Cart, namely that judicial review in these cases should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted.
(i) The exceptional circumstances approach
The approach of the Divisional Court and Court of Appeal would lead us back to the distinction between jurisdictional and other errors which was effectively abandoned after Anisminic.
It is a distinction which lawyers can readily grasp.
As Denning MR put it in Shaws case [1952] 1 KB 338, 346, A tribunal may often decide a point of law wrongly whilst keeping well within its jurisdiction.
There are, however, several objections to reviving it.
First, we would not in fact be turning the clock back to the days before Anisminic because, as we have seen, certiorari was available to correct errors of law on the face of the record made by tribunals of limited jurisdiction.
We would be re introducing a distinction which had become relevant for the most part only where judicial review was expressly excluded, which it is not here.
Secondly, the distinction was given its quietus by the majority in Anisminic not least because the word jurisdiction has many meanings ranging from the very wide to the very narrow.
By the narrow original sense both Lord Reid and Lord Pearson meant that the tribunal had asked itself the wrong question.
But, as Lord Reid explained, a tribunal does this if it does any of the things which would ordinarily render its decision susceptible to judicial review (at p 171).
And, as Lord Pearson observed, there has been evolution over the centuries and there have been many technicalities.
There have also been many border line cases (at p 195).
And Lord Wilberforce did not find the expressions asking the wrong question or applying the wrong test wholly satisfactory, although he agreed that such decisions were a nullity (at p 210).
If the approach of the Court of Appeal in Cart is maintained we may expect a return to some of the technicalities of the past.
Thirdly, as Lord Wilberforce pointed out (at p 207), it does of course lie within the power of Parliament to provide that a tribunal of limited jurisdiction should be the ultimate interpreter of the law which it has to administer: the position may be reached, as the result of statutory provisions, that even if they make what the courts might regard as decisions wrong in law, these are to stand.
But there is no such provision in the 2007 Act.
There is no clear and explicit recognition that the Upper Tribunal is to be permitted to make mistakes of law.
Certain decisions are unappealable and for the most part there are obvious practical reasons why this should be so.
But this does not mean that the tribunal must always be permitted to make errors of law when making them.
The consideration which weighed most heavily with the Court of Appeal in Sivasubramaniam was proportionality.
There must be a limit to the resources which the legal system can devote to the task of trying to get the decision right in any individual case.
There must be a limit to the number of times a party can ask a judge to look at a question.
The Court of Appeal took the view that, in the sorts of cases coming before the district judges in the county courts, it was enough if both the district judge and the circuit judge could detect no arguable case that the district judge had gone wrong.
There was no need, save in the two extreme and exceptional cases identified, for a High Court judge to take another look especially as, under the current judicial review procedures, it would then be possible for the case to be looked at another four times.
This approach accepts that a certain level of error is acceptable in a legal system which has so many demands upon its limited resources.
Some might question whether it does provide sufficient protection against mistakes of law.
In the ordinary courts, unlike the new tribunal system, there may be an appeal on a point of fact as well as law.
It makes sense to limit such appeals to those with a real prospect of success.
But judicial review is not such an appeal.
The district judge and the circuit judge may both have gone wrong in law.
They may work so closely and regularly together that the latter is unlikely to detect the possibility of error in the former.
But at least in the county courts such errors are in due course likely to be detected elsewhere and put right for the future.
The county courts are applying the ordinary law of the land which is applicable in courts throughout the country, often in the High Court as well as in the county courts.
The risk of their developing local law is reduced although by no means eliminated.
But that risk is much higher in the specialist tribunal jurisdictions, however expert and high powered they may be.
As a superior court of record, the Upper Tribunal is empowered to set precedent, often in a highly technical and fast moving area of law.
The judge in the First tier Tribunal will follow the precedent set by the Upper Tribunal and refuse permission to appeal because he is confident that the Upper Tribunal will do so too.
The Upper Tribunal will refuse permission to appeal because it considers the precedent to be correct.
It may seem only a remote possibility that the High Court or Court of Appeal might take a different view.
Indeed, both tiers may be applying precedent set by the High Court or Court of Appeal which they think it unlikely that a higher court would disturb.
The same question of law will not reach the High Court or the Court of Appeal by a different route.
There is therefore a real risk of the Upper Tribunal becoming in reality the final arbiter of the law, which is not what Parliament has provided.
Serious questions of law might never be channelled into the legal system (as Sedley LJ put it at para 30) because there would be no independent means of spotting them.
High Court judges may sit in the Upper Tribunal but they will certainly not be responsible for all the decisions on permission to appeal, nor is it possible for the Upper Tribunal to review its own refusals, even when satisfied that they are wrong in law.
Furthermore, it appears to be accepted that full judicial review of the unappealable decisions of the First tier Tribunal, and possibly of excluded decisions of the Upper Tribunal other than the refusal of permission to appeal, remains available.
It is difficult to spell out a principled basis for such anomalies.
In short, while the introduction of the new system may justify a more restricted approach, the approach of the Court of Appeal in Cart is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected. (ii) The status quo ante but which?
Mr Drabble, together with (in the rather different context of Scotland) Mr Mitchell, makes a powerful case for the status quo, by which he means the position obtaining in the social security system before the 2007 Act.
The Social Security Commissioners were a highly skilled body of senior lawyers, thoroughly steeped in the intricacies of social security law, yet they could occasionally fail to detect the possibility of error in a social security tribunals decision for example because both were following an authoritative decision of the High Court or Court of Appeal which had stood for some time.
Judicial review of the refusal of leave enabled such questions of law, often important to a great many people, to be examined in the higher courts to the benefit of the jurisdiction in question.
It is, after all, the object of the benefits system to get things right to pay people the benefits to which Parliament has said that they are entitled, not a penny more but also not a penny less.
He also rightly points out that nothing much has changed.
The Social Security Commissioners are now judges of the Upper Tribunal but they are (mostly) the same people doing the same job.
The new structure has followed the model of the previous social security adjudication system.
What is so different that it justifies the removal of a right from which each party in a social security claim could benefit, the Department as well as the individual claimant?
Mr Manjit Gill makes essentially the same argument in immigration and asylum cases.
They too had a two tier appellate structure with the possibility of judicial review of unappealable decisions until the 2002 Act.
The 2002 Act introduced the alternative form of statutory review, but it still gave access to a High Court judge.
The 2004 Act collapsed the two tier structure into one, but provided an equivalent form of statutory review giving access to a High Court judge.
Now, as Sullivan LJ put it in FA (Iraq) and PD (India) v Secretary of State for the Home Department [2010] EWCA Civ 827, at para 1, The wheel has come full circle.
Once again there is a two tier appellate structure with a right of appeal with permission on a point of law from the First tier to the Upper Tribunal and a further right of appeal, with permission, to the Court of Appeal.
The only change from the old two tier structure is the introduction of the limited grounds for a second tier appeal to the Court of Appeal.
The statutory reviews introduced by the 2002 and 2004 Acts have been abolished.
Hence, he argues, in that system too we are now back where we began and there is no reason to restrict the availability of judicial review of unappealable decisions.
But it is impossible to leave out of account the reasons why those statutory reviews were introduced.
It is not difficult to dress up an argument as a point of law when in truth it is no more than an attack upon the factual conclusions of the first instance judge.
In most tribunal cases, a claimant will have little to gain by pressing ahead with a well nigh hopeless case.
He may have less money than he otherwise would, but he will not have to leave the country and may make another claim if circumstances change.
But in immigration and asylum cases, the claimant may well have to leave the country if he comes to the end of the road.
There is every incentive to make the road as long as possible, to take every possible point, and to make every possible application.
This is not a criticism.
People who perceive their situation to be desperate are scarcely to be blamed for taking full advantage of the legal claims available to them.
But the courts resources are not unlimited and it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
Mr Gills answer is that under the new system the burden on the High Court and Court of Appeal is to be reduced by transferring judicial review applications relating to the refusal of the Secretary of State to treat new representations as a fresh claim to the Upper Tribunal (see the announcement made by Lord McNally, Hansard (HL), 3 March 2011, col WS120).
But this, of course, does not address the perceived burden resulting from attempts to achieve a judicial review of the decisions of the Tribunal itself.
Mr Fordham, in particular, argues that there is no need to introduce further restrictions upon judicial review.
The courts have already adopted principles of judicial restraint when considering the decisions of expert tribunals.
As long ago as R v Preston Supplementary Benefits Appeal Tribunal, Ex p Moore [1975] 1 WLR 624, before the creation of the unified social security appeal tribunals with a common right of appeal to the Commissioners, Lord Denning MR observed, at pp 631 2, that the courts should leave the tribunals to interpret the Supplementary Benefits Act in a broad reasonable way, according to the spirit and not the letter.
But it was important that cases raising the same points should be dealt with in the same way, so the courts should be prepared to consider points of law of general application.
Individual cases of particular application should be left to the tribunals.
More recently, in Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All ER 279, paras 15 17, I (with the agreement of both Clarke LJ and Butterfield J) urged appropriate caution in giving permission to appeal from the Social Security Commissioners, because of their particular expertise in a highly specialised area of the law, where it was quite probable that . the Social Security Commissioner will have got it right.
Those observations have been referred to many times since, not least by Dyson LJ in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, paras 53 54, where he said this: Thus, in seeing whether it can detect some error of law by the commissioner who has refused leave to appeal, the reviewing court should not be astute to find such error.
This is a further reason why there need be no real concern that the established approach to judicial review in these cases would lead to an opening of the floodgates.
It is, however, fair to say that this restraint has found more favour in some contexts than in others.
Although it was adopted in the asylum context in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] AC 678, at para 30, the courts are also well aware of the anxious scrutiny required in asylum cases and of the particular difficulties facing the tribunals in this jurisdiction.
Had they adopted the same restraint in asylum as in social security cases, it might not have been thought necessary to introduce the statutory review procedures.
Ironically, therefore, the more troubling the context, the more necessary it has seemed to limit the availability of judicial review.
The real question, as all agree, is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever.
Equally the fact that the courts have hitherto found it difficult to deter repeated or unmeritorious applications in immigration and asylum cases does not mean that such applications should become virtually impossible.
There must be a principled but proportionate approach.
(iii) The second tier appeals criteria
An important innovation in the 2007 Act was the power given to the Lord Chancellor in section 13(6), to prescribe the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales.
These have now been prescribed for second tier appeals from the Upper Tribunal in all three jurisdictions. (It was the previous lack of such criteria which led to the remarks about restraint in Cooke.) This gives, at the very least, an indication of the circumstances in which Parliament considered that questions of law should be, as Sedley LJ put it, channelled into the legal system.
In Wiles, Dyson LJ considered that there was much to be said for applying the same criteria to judicial review of a Social Security Commissioners refusal of permission to appeal to himself (para 48).
This would reflect the fact that (i) the issues that arise . may affect the lives not only of the individual claimant, but also of many others who are in the same position, some of whom are among the most vulnerable members of our society; and (ii) the issues may be of fundamental importance to them, sometimes making the difference between a reasonable life and a life of destitution (para 47).
This proposal was warmly endorse[d] by Longmore LJ (para 79).
It was, however, expressly rejected by Sedley LJ in Cart, because the new tribunal structure is something greater than the sum of its parts.
It represents a newly coherent and comprehensive edifice designed, among other things, to complete the long process of divorcing administrative justice from departmental policy, to ensure the application across the board of proper standards of adjudication, and to provide for the correction of legal error within rather than outside the system (para 42).
While all of this is true, it seems to me to do little justice to the independence and expertise of the tribunal judiciaries in the old system and to over estimate what has changed in the new.
There must be some risk that the amalgamation of very different jurisdictions in the new chambers will dilute rather than enhance the specialist expertise of their judges and members.
Mental health and special educational needs, for example, are similar in some ways but very different in others.
It would be difficult to say that bringing them together has reduced the capacity for error although of course we all hope that it has not been increased.
The claimants accept that if there is to be any restriction on the availability of judicial review, this approach would be far preferable to that of the Court of Appeal in Cart.
Their main objection is that it would deprive the parties of the second substantive hearing to which they would have been entitled if the Upper Tribunal had spotted the error and given permission to appeal.
Another objection is that it would leave uncorrected those errors of law which do not raise an important point of principle or practice and where there is no other compelling reason for the court to hear the case.
But no system of decision making is perfect or infallible.
There is always the possibility that a judge at any level will get it wrong.
Clearly there should always be the possibility that another judge can look at the case and check for error.
That second judge should always be someone with more experience or expertise than the judge who first heard the case (it is to be hoped that the new structure will not perpetuate the possibility, exemplified in Sinclair Gardens, that a non lawyer member might be entrusted with deciding whether a tribunal chaired by a legally qualified tribunal judge had gone wrong in law, but this is left to the good sense of the Senior President rather than enshrined in the legislation).
But it is not obvious that there should be a right to any particular number of further checks after that.
The adoption of the second tier appeal criteria would lead to a further check, outside the tribunal system, but not one which could be expected to succeed in the great majority of cases.
Conclusion
For all those reasons, together with those given by Lord Dyson (in this case) and Lord Hope (in Eba), the adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
It follows that the approach in Sinclair Gardens should no longer be followed.
If this approach is adopted, the Civil Procedure Rules Committee might also wish to consider the scope for stream lining the procedure for considering applications for permission to apply for judicial review of these decisions.
I agree with Lord Phillips that it would be totally disproportionate to allow the four stage system of paper and oral applications to both the High Court and the Court of Appeal in such cases.
The previous procedures for statutory reviews in immigration and asylum cases showed that there is nothing inherently objectionable in a paper procedure, particularly if there has been an oral hearing of the first application for permission to appeal.
But, in agreement with Lord Clarke, it seems to me that this is a matter for the rules committee rather than for this Court to determine.
In the result, however, there is clearly nothing in Mr Carts case to bring it within the second tier appeal criteria.
The tribunal considered very carefully whether he had been prejudiced by the failure of the Secretary of State to give him notice of the application to vary and it was clear that he had not, so any difference of approach to whether prejudice was necessary would not affect the result.
The same is true of the case of MR (Pakistan).
As Ouseley J said in refusing permission to appeal to the Upper Tribunal, crucial to the decision was the finding that the applicant was not a genuine convert to Christianity.
The question of how a genuine convert would be treated did not arise.
I would therefore dismiss the appeals in the cases of Cart and MR (Pakistan) but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
LORD PHILLIPS
I have had the benefit of reading the judgment of Lady Hale, which illuminates the background to the English appeals, and the issues that are raised by them.
I have also had the benefit of reading the judgment of Lord Hope in the Scottish appeal.
His conclusions are in harmony with those of Lady Hale.
I am in agreement with both judgments.
My own contribution is essentially by way of emphasis, directed largely to the fundamental issue of principle raised by these appeals.
That is whether the courts should apply a principle of proportionality when deciding whether to accede to an application to judicially review a decision of the Upper Tribunal.
For the reasons that follow I have decided that they should, but that, at least in England and Wales, the needs of proportionality also require changes in the Civil Procedure Rules (CPR).
Introduction
In March 2001 a Committee chaired by Sir Andrew Leggatt delivered a report (the Leggatt Report) to the Lord Chancellor on the delivery of justice through tribunals.
The Committee was confronted with 70 different administrative tribunals employing about 3,500 people and handling nearly one million cases a year.
The Leggatt Report made recommendations for bringing these tribunals into a single Tribunals System.
In July 2004 a Government White Paper accepted the broad thrust of those recommendations.
Parliament then implemented this by enacting the Tribunals, Courts and Enforcement Act 2007 (TCEA).
A striking feature of the tribunals system created by the TCEA is the creation of two tiers, a First tier Tribunal and an Upper Tribunal.
Appeals lie from the First tier Tribunal to the Upper Tribunal.
Carnwath LJ was appointed the first Senior President of the new system.
In his article Tribunal Justice a New Start in [2009] Public Law 48 he commented of the Upper Tribunal that it would be operating in parallel with the existing Administrative Court and would become the principal agency for judicial review of the legality of tribunal decisions.
He suggested that there was scope for rethinking the traditional allocation, as between courts and tribunals, of responsibilities for definitive interpretation of substantive law, including human rights law, in specialist fields.
These three conjoined appeals raise a single issue.
This is the extent to which decisions of the Upper Tribunal are properly subject to judicial review by the Administrative Court in England and Wales and the Court of Session in Scotland.
That issue calls for a review of the roles of the legislature, the executive and the judiciary in maintaining the rule of law in this country.
The rule of law requires that the laws enacted by Parliament, together with the principles of common law that subsist with those laws, are enforced by a judiciary that is independent of the legislature and the executive.
Laws LJ, in paras 43 to 51 of his judgment in Cart [2009] EWHC 3052 (Admin), has summarised the history of the role of the courts from 1066 to 1873 in upholding and developing the law.
In particular, he has described the growth of the supremacy under the common law of the court of the Kings Bench as a court of unlimited jurisdiction with the power by means of the prerogative writs to supervise the other courts, described as inferior courts of record.
The Judicature Act 1873 marked the assumption by Parliament of responsibility for the infrastructure necessary for the administration of justice.
A new hierarchy of courts was created, including a High Court and a Court of Appeal.
The common law powers of the Kings Bench were vested in the High Court.
The creation of a Court of Appeal provided, however, an alternative means of reviewing errors of law on the part of inferior courts and, in particular, the County Court, which replaced the use of the prerogative writs.
Since 1873 there has been a series of statutes dealing with the administration of justice, of which the Supreme Court Act 1981 (now the Senior Courts Act 1981) was particularly significant.
Section 4 of that Act defined the composition of the High Court.
Section 19 provided that the High Court should continue to exercise the jurisdiction that it enjoyed prior to the 1981 Act.
Thus the common law powers of judicial review were preserved.
Section 31 of the 1981 Act provided for rules of court to be made governing the procedure to be followed on an application for judicial review and required the leave of the High Court to be obtained for such an application.
Part 54 of the CPR gives effect to that requirement.
At the same time as making provision for the structure of the general court system, Parliament created tribunals to adjudicate on disputes in specialised areas and a number of specialist courts.
A common theme can be identified in relation to most of these, as well as in relation to the general court system.
The possibility of at least one appeal is desirable in order to address the possibility of error of law on the part of the court or tribunal first seised of the matter.
Legislation dealing with the court system in general and with specialist courts and tribunals usually makes provision for appeals.
Prior to 1999 there was growing concern that rights of appeal in civil proceedings were over generous with the result that the pursuit of appeals that lacked merit was resulting in unnecessary delay and consumption of limited judicial resources.
Lord Woolfs final report on Access to Justice published in July 1996 reached a similar conclusion on this topic to that subsequently reached by the Bowman Report published in September 1997.
Both concluded that civil appeals served both a private and a public purpose.
The private purpose was to correct an error, unfairness or wrong exercise of discretion leading to an unjust result.
The public purpose was to ensure public confidence in the administration of justice and, in appropriate cases, to clarify and develop the law, practice and procedure and to help maintain the standards of first instance courts and tribunals.
Many of the existing provisions for appeals failed, however, to have regard to proportionality.
Rights of appeal should be proportionate to the grounds of complaint and the subject matter of the dispute.
More than one level of appeal would not normally be justified unless an important point of principle or practice was involved.
The Bowman Report led to provisions in the Access to Justice Act 1999 which resulted in a new Part 52 of the CPR to replace the provisions of the Rules of the Supreme Court dealing with, inter alia, appeals to the High Court from lower courts and tribunals and appeals to the Court of Appeal.
Section 54 of the 1999 Act provided that rules of court could introduce a requirement that any right of appeal be exercised only with permission.
It further provided that no appeal could be made against a decision of a court to give or refuse permission, albeit that rules of court might provide for the making of a further application for permission to that court or another court.
CPR 52.3 introduced a permission requirement in relation to appeals from lower courts, but not from tribunals, albeit that it stated that other enactments might require permission for particular appeals.
CPR 52.3(6) provides that permission to appeal may only be given where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason why the appeal should be heard.
CPR 52.13(2) provides that in the case of a second appeal to the Court of Appeal the court will only give permission to appeal if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
The power of the High Court to conduct judicial review subsists alongside these statutory provisions for appeal.
It is not, however, the practice of the Court to use this power where a satisfactory alternative remedy has been provided by Parliament.
Where this is not the case the power of judicial review is a valuable safeguard of the rule of law.
It is one which the judges guard jealously.
The decision of the House of Lords in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 finessed what, on its face, appeared to be an attempt by Parliament to exclude judicial review of the decisions of the Commission.
Since that case Parliament has not purported, as it might have done, expressly to preclude the exercise by the High Court of the power of judicial review.
At paras 39 to 40 of his judgment in Cart Laws LJ stated that the general principle was clear: The rule of law requires that statute should be mediated by an authoritative and independent judicial source; and Parliaments sovereignty itself requires that it respect this rule.
None of this, of course, is to say that Parliament may not modify, sometimes radically, the procedures by which statute law is mediated.
It may impose tight time limits within which proceedings must be bought.
It may provide a substitute procedure for judicial review, as it has by a regime of statutory appeals in fields such as town and country planning, highways, and compulsory purchase: where, however, the appeal body remains the High Court.
It may create new judicial authorities with extensive powers.
It may create rights of appeal from specialist tribunals direct to the Court of Appeal.
The breadth of its power is subject only to the principle I have stated.
The proposition that Parliamentary sovereignty requires Parliament to respect the power of the High Court to subject the decisions of public authorities, including courts of limited jurisdiction, to judicial review is controversial.
Hopefully the issue will remain academic.
Before the Divisional Court in Cart the Secretary of State contended that, by enacting in section 3(5) of TCEA that the Upper Tribunal should be a superior court of record, Parliament had rendered its decisions immune from judicial review.
The Divisional Court rejected that submission, and it has not been pursued.
The issue before this Court relates to the principles that should govern the exercise of the power judicially to review the decisions of the Upper Tribunal.
The appellants in the English appeals, supported by JUSTICE as intervener, adopt the same approach as the Lord Advocate in the Scottish Appeal and contend that judicial review should be permitted whenever there is an arguable case that the Upper Tribunal has made any error of law.
The Secretary of State submits that the statutory provisions for appeal in the TCEA meet the requirements of the rule of law in all ordinary circumstances.
Judicial review of the Upper Tribunal is only appropriate in exceptional circumstances, which do not exist in any of the appeals before the Court.
The issue of principle raised by these appeals is thus whether, and on what basis, the right to judicial review of a decision of the Upper Tribunal should be restricted.
All three appeals have, however, an important common factor.
Each arises out of the refusal of the Upper Tribunal to give permission to appeal to it from a decision of the First tier Tribunal or, in the case of Cart, of the Tribunal whose functions have been taken over by the First tier Tribunal.
In each of the English cases a claim for judicial review of the Upper Tribunals decision was dismissed on the ground that this could only be justified in exceptional circumstances.
In the Scottish case a similar application was granted, and the Advocate General appeals against the decision granting the application for judicial review.
It became apparent in the course of argument that the appellants in the English cases were particularly aggrieved that they had been denied the right to have their appeals heard.
Because there was no right to appeal to the Court of Appeal from the Upper Tiers refusal to give permission to appeal, they had only had one substantive hearing.
Mr Gill QC for MR accepted that it was this fact, rather than the status of the tribunal that had refused permission to appeal, that gave rise to his principal complaint.
There have already been a number of decisions of lower courts in which it has been held appropriate to circumscribe the right to judicial review.
The appellants in the English appeals submit that they were wrongly decided and I propose first to consider them.
Next I shall consider the recommendations made by the Leggatt Report in relation to the availability of judicial review.
After that I shall examine the extent to which Parliament gave effect to those recommendations.
Finally I shall answer the issue of principle posed above, with specific reference to the individual appeals.
Restrictions on the right to judicial review
The first of a series of cases in which the court held that there was a right to judicial review which was restricted involved two appeals by the same appellant in relation to two unsuccessful applications for judicial review.
In R (Sivasubramaniam) v Wandsworth County Court; R (Sivasubramaniam) v Kingston upon Thames County Court (Lord Chancellors Department intervening) [2002] EWCA Civ 1738, [2003] 1 WLR 475, which I shall hereafter refer to as Siva, the applicant brought bizarre claims before two district judges.
Each had been dismissed.
Applications for permission to appeal were dismissed in each case by a county court judge.
In the latter, but not the former, case he could have appealed to the Court of Appeal.
He did not do so.
He applied in each case to the High Court for permission to claim judicial review.
His applications were dismissed.
He appealed against the dismissals to the Court of Appeal.
In the second case the Court of Appeal refused the application on the ground that there had been a satisfactory alternative remedy.
The Court rejected the submission by the respondents that section 54(4) of the Access to Justice Act ousted judicial review of the decision of the county court judge.
It held, however, at para 48: Under the 1999 Act, and the rules pursuant to it, a coherent statutory scheme has been set up governing appeals at all levels short of the House of Lords.
One object of the scheme is to ensure that, where there is an arguable ground for challenging a decision of the lower court, an appeal will lie, but to prevent court resources being wasted by the pursuit of appeals which have no prospect of success.
The other object of the scheme is to ensure that the level of judge dealing with the application for permission to appeal, and the appeal if permission is given, is appropriate to the dispute.
This is a sensible scheme which accords with the object of access to justice and the Woolf reforms.
It has the merit of proportionality.
To permit an applicant to bypass the scheme by pursuing a claim for judicial review before a judge of the Administrative Court is to defeat the object of the exercise.
We believe that this should not be permitted unless there are exceptional circumstances and we find it hard to envisage what these could be.
So far as the first case was concerned, the Court adopted a similar approach.
It held: 54 This scheme we consider provides the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error.
The substantive issue will have been considered by a judge of a court at two levels.
On what basis can it be argued that the decision of the judge of the appeal court should be open to further judicial review? The answer, as a matter of jurisprudential theory, is that the judge in question has limited statutory jurisdiction and that it must be open to the High Court to review whether that jurisdiction has been exceeded.
But the possibility that a circuit judge may exceed his jurisdiction, in the narrow pre Anisminic sense, where that jurisdiction is the statutory power to determine an application for permission to appeal from the decision of a district judge, is patently unlikely.
In such circumstances an application for judicial review is likely to be founded on the assertion by the litigant that the circuit judge was wrong to conclude that the attack on the decision of the district judge was without merit.
The attack is likely to be misconceived, as exemplified by the cases before us.
We do not consider that judges of the Administrative Court should be required to devote time to considering applications for permission to claim judicial review on grounds such as these.
They should dismiss them summarily in the exercise of their discretion.
The ground for so doing is that Parliament has put in place an adequate system for reviewing the merits of decisions made by district judges and it is not appropriate that there should be further review of these by the High Court.
This, we believe, reflects the intention of Parliament when enacting section 54 (4) of the 1999 Act.
While Parliament did not legislate to remove the jurisdiction of the High Court judicially to review decisions of county court judges to grant or refuse permission to appeal, we do not believe that Parliament can have anticipated the spate of applications for judicial review that section 54 (4) appears to have spawned. 55 Everything that we have said should be applied equally to an application for permission to claim judicial review of the decision of a judge of the county court granting permission to appeal.
We are not aware that such an application has yet been made.
Exceptional circumstances 56 The possibility remains that there may be very rare cases where a litigant challenges the jurisdiction of a circuit judge giving or refusing permission to appeal on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicant's right to a fair hearing.
If such grounds are made out we consider that a proper case for judicial review will have been established.
The Court commented on the fact that permission to claim judicial review was regularly given in relation to refusals by the Immigration Appeal Tribunal of permission to appeal to the tribunal against decisions of special adjudicators.
The Court observed at para 52 that on the face of it judicial review of such decisions might seem anomalous, but explained the practice as follows: There are, in our judgment, special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the tribunal.
In asylum cases, and most cases are asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
The number of applications for asylum is enormous, the pressure on the tribunal immense and the consequences of error considerable.
The most anxious scrutiny of individual cases is called for and review by a High Court judge is a reasonable, if not an essential, ingredient in that scrutiny.
In Gregory v Turner [2003] EWCA Civ 183; [2003] 1 WLR 1149 the Court of Appeal followed Siva when it refused an application for judicial review of the decision of a circuit judge who refused permission to appeal from the decision of a district judge, despite the fact that there were grounds for concluding that the district judge had fallen into error.
At para 46 Brooke LJ explained the reason for what might appear to be an injustice: In his Interim Report on Access to Justice (1995), Section I, Chapter 4, paras 5 and 6 Lord Woolf highlighted the tensions that exist between a desire to achieve perfection and a desire to achieve a system of justice which is not inaccessible to most people on grounds of the time and cost involved.
He quoted tellingly from a 1970 broadcast by Lord Devlin: is it right to cling to a system that offers perfection for the few and nothing at all for the many? Perhaps: if we could really be sure that our existing system was perfect.
But of course it is not.
We delude ourselves if we think that it always produces the right judgment.
Every system contains a percentage of error; and if by slightly increasing the percentage of error, we can substantially reduce the percentage of cost, it is only the idealist who will revolt.
Both Siva and Gregory v Turner involved attempts to review decisions of the County Court.
In R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305; [2006] 3 All ER 650 the Court of Appeal applied the same reasoning to the scheme laid down by Parliament for leasehold valuation.
The statutory scheme in that case provided for an appeal from the Leasehold Valuation Tribunal to the Lands Tribunal provided that one or the other gave permission to appeal.
Both having refused permission, a landlord sought permission to review the decision of the Lands Tribunal to refuse permission to appeal.
The application was refused and the landlord appealed to the Court of Appeal.
The Court dismissed the appeal.
Giving the only reasoned judgment, Neuberger LJ said this: 56 I do not accept that the mere fact that a decision of the Lands Tribunal refusing permission to appeal was obviously wrong in law would be sufficient to justify its being judicially reviewed.
Such a basis for judicial review would fly in the face of the conclusion and reasoning in Sivasubramaniams case and in Gregory v Turner, which appear to me to be applicable in this case for the reasons given above.
Before permission to seek judicial review could be granted, it would not be enough to show that the refusal of permission to appeal was plainly wrong in law.
It would also have to be established that the error was sufficiently grave to justify the case being treated as exceptional. 57 I think it is appropriate to say, that there could, in my view, be cases, which would be wholly exceptional, where it would be right to consider an application for judicial review of such a decision on the basis of what could be said to be an error of law.
A possible example would be if the Lands Tribunal, despite being aware of the position, refused, without any good reason, permission to appeal on a difficult point of law of general application, which had been before a number of different LVTs which had taken different views on it, and which cried out for a definitive answer in the public interest.
In that connection, it seems to me that one could say that it was not so much the point of law itself which justified judicial review, but more the failure of a public tribunal to perform its duty to the public, as well as what one might call its duty to the parties in that particular case.
In Siva the Court of Appeal recognised that there were special circumstances that justified judicial review of decisions of the Immigration Appeal Tribunal that refused permission to appeal to it.
Parliament then intervened by section 101(2) of the Nationality, Immigration and Asylum Act 2002 to provide for a statutory review, to be carried out by a High Court judge on paper, of such refusals.
In R(G) v Immigration Appeal Tribunal [2004] EWCA Civ 1731, [2005] 1 WLR 1445 the Court of Appeal endorsed the view of Collins J at first instance that it was Parliaments intention that this should provide a satisfactory alternative to judicial review, thereby avoiding the delay that was involved in the four stage process of the latter.
The Court of Appeal held that the statutory regime provided adequate and proportionate protection of the asylum seekers rights and that it was, accordingly, a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which had been, or could have been the subject of statutory review.
The Court stated at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
Where Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
This approach was followed by the Court of Appeal in R (F (Mongolia)) v Asylum and Immigration Tribunal [2007] 1 WLR 2523 in relation to the new review procedure introduced under the Asylum and Immigration (Treatment of Claimants, etc Act) 2004 see Lady Hales judgment at para 31.
This series of cases was considered by the Court of Appeal in Wiles v Social Security Commissioner [2010] EWCA Civ 258, when considering an appeal against the refusal to grant judicial review of the decision of a social security commissioner refusing permission to appeal from a decision of the Social Security Appeal Tribunal under the regime that pre dated the TCEA.
Giving the leading judgment, Dyson LJ held at para 43 that it was impossible to find in the relevant legislation any indication that Parliament intended to oust, or even to limit, the jurisdiction to grant judicial review.
That jurisdiction had been exercised in social security cases for nearly thirty years.
In the light of this it would not be right to curtail it.
But for this, however, Dyson LJ would have favoured applying the same criteria to an application for judicial review as was applied by the court when considering an application for permission to bring a second appeal, as set out at para 70 above.
The Leggatt recommendations
The Leggatt Report recommended a two tier tribunal system, describing the upper tier as the appellate Division.
There would be a comprehensive and systematic right of appeal from first tier tribunals to the appellate Division, and from there to the Court of Appeal.
In these circumstances the Report recommended that the right of judicial review should be excluded 6.30.
This recommendation had regard to the waste of scarce resources involved where judicial review was available in parallel with statutory rights of appeal to a tribunal and to the huge number of judicial review applications in immigration and asylum cases, most of which were unsuccessful 6.27.
The Report commented, erroneously, that this goal could be achieved by making the appellate Division a superior court of record 6.33.
It recommended, however, an express statutory exclusion of judicial review 6.34.
Parliaments response
Parliament made the Upper Tribunal a superior court of record see section 3(5) of the TCEA.
Although the Government argued in Cart that this meant that its decisions were not susceptible to judicial review see Lady Hales judgment at para 30 it does not follow that this was Parliaments intention, or indeed the Governments intention in promoting the Act.
In the Home Office Consultation Paper on immigration appeals, Fair Decisions; Faster Justice, of 12 August 2008 it was stated at para 23 that the Government had been advised that except in the most exceptional circumstances decisions of the Upper Tribunal would not be subject to judicial review.
What must, I believe, be beyond doubt is that it was Parliaments intention that the two tier structure set up by the TCEA would provide a statutory right of appeal in relation to decisions of tribunals that would, in most cases, provide a satisfactory alternative to judicial review.
Discussion
It is now common ground that the fact that the Upper Tribunal is a superior court of record does not render its decisions immune from judicial review.
The issue raised by these appeals falls into two parts: (i) is it right to impose restrictions on the grant of judicial review in relation to decisions of the Upper Tribunal? (ii) If it is, what restrictions should be imposed?
It was submitted on behalf of the English appellants, with support from the Public Law Project represented by Mr Fordham QC as intervener, that the courts had taken a wrong turning in the recent series of cases that had imposed restrictions on the grant of judicial review.
There was no justification for departing from the long established practice of the court to entertain a claim for judicial review whenever there were reasonable grounds for contending that an inferior court had made an error of law.
The Scottish respondent contended that the Court of Session had rightly applied the ordinary principles of judicial review to a decision of the Upper Tribunal.
Mr Eadie QC, responding to the English appeals, and Mr Johnston QC, for the Advocate General for Scotland, submitted that Parliament had by the TCEA deliberately set up a self sufficient structure dealing internally with errors of law and that, in accordance with Parliaments intention, applications for judicial review should only be entertained in exceptional circumstances.
I am in no doubt that the submissions of the English appellants should be rejected.
The administration of justice and upholding of the rule of law involves a partnership between Parliament and the judges.
Parliament has to provide the resources needed for the administration of justice.
The size and the jurisdiction of the judiciary is determined by statute.
Parliament has not sought to oust or fetter the common law powers of judicial review of the judges of the High Court and I hope that Parliament will never do so.
It should be for the judges to decide whether the statutory provisions for the administration of justice adequately protect the rule of law and, by judicial review, to supplement these should it be necessary.
But, in exercising the power of judicial review, the judges must pay due regard to the fact that, even where the due administration of justice is at stake, resources are limited.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law.
Lady Hale observes in para 51 of her judgment, that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
To this question I would add the two words if any.
I add those two words because if the court is to entertain applications for judicial review of the decisions of the Upper Tribunal this will require a High Court or Deputy High Court judge to consider every such application, however stringent may be the criteria for granting permission.
For the reasons given by Lady Hale in para 47 of her judgment, the stringency of the criteria that must be demonstrated will not discourage a host of applications in the field of immigration and asylum which are without any merit.
Thus the first question is whether there is justification for imposing this burden on the High Court.
My initial inclination was to treat the new two tier tribunal system as wholly self sufficient.
It is under the presidency of a judge who is likely to be a member of the Court of Appeal, and High Court judges can and will sit in the Upper Tribunal.
There is considerable flexibility in the system in relation to the administration and composition of the Upper Tribunal.
Can it not be left to the Senior President, in consultation with the President of the Queens Bench Division and other judicial colleagues to ensure that the tribunal judiciary is so deployed as to ensure the appropriate degree of judicial scrutiny of decisions of the lower tier?
Having considered, however, the judgment of Lady Hale, who has great experience in this field, and those of other members of the Court, I have been persuaded that there is, at least until we have experience of how the new tribunal system is working in practice, the need for some overall judicial supervision of the decisions of the Upper Tribunal, particularly in relation to refusals of permission to appeal to it, in order to guard against the risk that errors of law of real significance slip through the system.
What would, however, be totally disproportionate, is that this judicial supervision should extend to the four stage system of paper and oral applications first to the Administrative Court and then, by way of appeal, to the Court of Appeal, to which the ordinary judicial review procedure is subject.
What are first required are readily identifiable criteria for the grant of permission to seek judicial review.
That these exist should be capable of demonstration by paper applications, and my firm view is that applications for judicial review should be restricted to a single paper application, unless the court otherwise orders.
This is, however, a matter for the Civil Procedure Rule Committee.
As to the criteria, I have been persuaded, for the reasons given by Lady Hale, that the test laid down by the Court of Appeal in Siva is not the most satisfactory, and that the test governing second appeals in the courts of England and Wales should be adopted.
For these reasons I endorse the conclusions reached by Lady Hale.
I consider, however, that the procedural change, the possibility of which she contemplates in paragraph 58 of her judgment, will prove a necessity.
I concur in the order that she proposes at para 60.
LORD HOPE AND LORD RODGER
For the reasons given by Lady Hale, Lord Phillips and Lord Dyson, we would make the order proposed by Lady Hale.
LORD BROWN
The critical issue raised by these appeals is the scope of the High Courts supervisory jurisdiction over a particular but important category of unappealable decisions of the Upper Tribunal, namely those by which the Upper Tribunal refuses leave to appeal to it from a First tier Tribunal decision.
Having had the advantage of reading in draft the detailed judgments of Lord Phillips, Lord Hope (in Eba), Lady Hale and Lord Dyson, and respectfully agreeing with all of them as I do, there is singularly little that I wish to add.
Really the only point I am concerned to emphasise is that our decision on these appeals to adopt the second appeals approach when deciding whether or not to permit a judicial review challenge in these cases cannot properly be regarded as in any way contrary to principle.
The point can be simply made.
The very fact that Parliament, by section 13(6) of the 2007 Act, has prescribed the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales destroys any possibility of an absolutist argument to the effect that the rule of law requires, post Anisminic (Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147), unrestricted judicial review over all unappealable decisions of courts or tribunals of limited jurisdiction to ensure that they are not permitted, unsupervised by the higher courts, to commit errors of law.
The second tier appeals approach expressly contemplates that some Upper Tribunal decisions, even though erroneous in point of law, will be refused leave to appeal on the basis that they raise no important point of principle or practice and that there is no other compelling reason to hear them.
Understandably, it has never been suggested that, following a refusal of leave to appeal on this basis, the underlying decision is nonetheless judicially reviewable for error of law.
If, then, the rule of law allows certain errors of law in substantive decisions of the Upper Tribunal on appeal from the First tier Tribunal to go uncorrected, why as a matter of principle should it not similarly allow this in respect of decisions of the Upper Tribunal refusing leave to appeal to itself from the First tier Tribunal? True it is, of course, that the refusal of leave to appeal will have deprived the party refused of a second substantive hearing.
Realistically, however, the very fact that he was refused leave to appeal to the Upper Tribunal (by both tribunals) tends to indicate the unlikelihood of there having been a genuinely arguable error of law in the first place.
And certainly this situation calls no less for a proportionate answer to the question arising as to the required scope of the Courts supervisory jurisdiction to safeguard the rule of law.
The rule of law is weakened, not strengthened, if a disproportionate part of the courts resources is devoted to finding a very occasional grain of wheat on a threshing floor full of chaff.
For the reasons given in the other judgments to which I have referred (together with the reasoning above if, indeed, it adds anything to what others have said), I too would make the order proposed and leave it to the Rules Committee to decide how precisely to stream line the procedure for considering applications for permission to apply for judicial review in this class of case.
LORD CLARKE
I entirely agree with paras 1 to 50 of Lady Hales judgment, which set out the relevant history and issues with great clarity.
I also agree with her that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
It was common ground between the parties that at least some judicial scrutiny was required.
It is, as I see it, a matter for the courts to determine what that scrutiny should be.
I am not persuaded that judicial review requires the same degree of scrutiny in every case.
All depends upon the circumstances.
The circumstances have been described in detail by both Lady Hale and Lord Phillips as regards England and, in the Eba case, by Lord Hope as regards Scotland.
The relevant circumstances include the following.
The tribunal structure provides for the Upper Tribunal, as a superior court of record, to review the decision of the First tier tribunal.
As Lord Phillips observes at para 91, the new system is under the presidency of a judge who is likely to be a member of the Court of Appeal and High Court judges can and will sit in the Upper Tribunal.
Further scrutiny of a decision by the Upper Tribunal refusing permission to appeal is only needed in case something has gone seriously wrong.
I agree with Lady Hale, Lord Phillips and Lord Dyson (and with Lord Hope in Eba) that adequate scrutiny will be provided if the High Court applies the same test as is applied by the Court of Appeal in the case of a second appeal.
As Lord Phillips observes at para 70, in such a case the Court of Appeal will only give permission to appeal under CPR 52.13(2) if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
My experience as Master of the Rolls was that such a test worked well for second appeals.
On the one hand it limited the number of appeals and thus the expenditure of excessive resources while, on the other hand, it enabled the court to hear cases raising an important point and cases where there was some other compelling reason to do so.
In that way the court has been able to deal with cases where something has gone seriously wrong.
In my opinion the same would be true in the case of a proposed challenge to a refusal of permission to appeal by the Upper Tribunal.
I agree with Lady Hale at para 57 that such an approach would be both rational and proportionate.
I also agree with Lord Phillips at para 86 that there can be no doubt that Parliament intended that the two tier tribunal structure would provide a statutory right of appeal in relation to decisions of lower tier tribunals which would, in most cases, provide a satisfactory alternative to judicial review.
Finally I agree with Lord Phillips at para 94 that the second appeals test should be adopted in preference to the approach laid down in Siva.
The question which then arises is whether the application for permission to apply for judicial review should be dealt with wholly on paper or whether, if it was refused on paper, there should be a right to renew the application orally.
There would then be a further question whether, if the application was refused at the first instance, it would be open to the applicant to apply to the Court of Appeal for permission to appeal and, if so, what the procedure should be.
I agree with Lord Phillips at para 93 that it would be totally disproportionate to provide for the four stage system of paper and oral applications to which the ordinary judicial review procedure is subject.
Although there is much to be said for his view that the application should be determined on paper unless the court otherwise orders, I also agree with him that this is a matter for the Civil Procedure Rules Committee.
For these reasons I concur with the order proposed by Lady Hale at para 60.
LORD DYSON
Introduction
It is common ground (and rightly so) that the Tribunals, Courts and Enforcement Act 2007 (TCEA) does not oust the courts jurisdiction to grant judicial review of unappealable decisions of the Upper Tribunal (UT).
What is in issue is the scope of this jurisdiction.
The Divisional Court and the Court of Appeal described it in similar terms.
Laws LJ in the Divisional Court said ([2010] 2 WLR 1012, para 99) that it was limited to exceptional cases where there was an excess of jurisdiction in the narrow pre Anisminic sense ([1969] 2 AC 147) or where there has been a wholly exceptional collapse of fair procedure.
Sedley LJ, delivering the judgment of the Court of Appeal, adopted at [2011] 2 WLR 36, para 42 what he described as the Sivasubramaniam model ([2003] 1 WLR 475) ie excess of jurisdiction in the pre Anisminic sense or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing Sivasubramaniam para 56.
This is the scope of the jurisdiction for which Mr Eadie QC (in Cart) and Mr Johnston QC (in Eba) contend.
Like Lady Hale, I shall refer to it as the exceptional circumstances approach.
On the other hand, Mr Drabble QC (supported by Mr Fordham QC and Mr Bailin QC) in Cart and Mr Mitchell in Eba submit that there is no justification for any restriction in the scope of the judicial review jurisdiction: it should in principle be available in all cases of legal error; and Mr Manjit Gill QC in MR (Pakistan) makes the same submission in the particular context of immigration and asylum cases.
The exceptional circumstances approach
I agree with Lady Hale that, for the reasons that she gives, the exceptional circumstances approach is not justified.
As Mr Fordham points out, there are objections to it both in principle and in practice.
As regards principle, the concept of jurisdictional error in the pre Anisminic sense (where, for example, a tribunal embarks on a case that is beyond its statutory remit) was used to indicate that a decision was so fundamentally flawed as to be a nullity, so that judicial review could be granted notwithstanding the existence of a statutory ouster.
There is no statutory ouster in the present context.
Even if there were, the importance of Anisminic is that it showed that a material error of law renders a decision a nullity so that the decision is in principle judicially reviewable.
It is difficult to see any principled basis for holding that only jurisdictional errors of law by the UT should be judicially reviewable.
In practical terms, it is immaterial to the victim of an error of law whether it is a jurisdictional error or should be differently classified.
Non jurisdictional error may be egregious and obvious.
Laws LJ accepted (para 99) that on the exceptional circumstances approach a decision which gets it wrong, even extremely wrong will not justify judicial review, whereas if the issue can be classified as jurisdictional, mere error will suffice.
Thus a non jurisdictional error of law on a point of general public importance (for example, an important point of statutory interpretation) would not be amenable to judicial review; whereas a one off jurisdictional error of no general significance would be.
Such a distinction does not promote the rule of law.
In my view, as a matter of principle, there is no justification for drawing the line at jurisdictional error.
Lady Hale has referred to the problem of practice.
The distinction between jurisdictional error and other error is artificial and technical.
I agree with what the editors of De Smiths Judicial Review 6th ed, (2007) state at para 4 046: It is, however, doubtful whether any test of jurisdictional error will prove satisfactory.
The distinction between jurisdictional and non jurisdictional error is ultimately based on foundations of sand.
Much of the super structure had already crumbled.
What remains is likely quickly to fall away as the courts rightly insist that all administrative actions should be simply, lawful, whether or not jurisdictionally lawful.
Unrestricted judicial review
In my view, the case for retaining unrestricted judicial review is more formidable.
There are a number of strands to the argument.
First, there is nothing to indicate that Parliament intended to restrict the High Courts previous jurisdiction over unappealable decisions of tribunals.
Although the TCEA made substantial changes to the organisation of tribunals, it is contended that these do not justify the court, as a matter of judicial policy, making a major change to the scope of judicial review.
The High Courts supervisory jurisdiction to correct any error of law in unappealable decisions of the predecessors of the UT has been beneficial for the rule of law.
There is a real risk that the exclusion of judicial review will lead to the fossilisation of bad law such, for example, as that which was corrected in Woodling v Secretary of State for Social Services [1984] 1 WLR 348 (see para 19 of Lady Hales judgment).
There are also risks in restricting the judicial review jurisdiction in relation to errors of law in unappealable decisions of tribunals in cases involving fundamental rights and EU law.
In such cases, if the UT makes an error of law in refusing permission to appeal, the consequences for the individual concerned may be extremely grave.
Indeed, in Sivasubramaniam itself, the Court of Appeal recognised the existence of special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the [immigration appeal tribunal] (para 52).
In asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
Secondly, as Lady Hale says (para 49), the courts have established a principle of judicial restraint when considering decisions of expert tribunals.
If this principle towards decisions of the UT is respected (as it should be), then judicial review of unappealable decisions provides a system of justice which is proportionate and appropriate to protect the rule of law.
Further restrictions on the scope of judicial review are unnecessary.
Finally, in so far as a floodgates argument is relied on by the respondents to justify restricting the scope of judicial review, this should be resisted.
First, there is no evidence of a floodgates problem in relation to any tribunals except in the field of immigration and asylum.
Secondly, this is in any event not a legitimate basis for the courts to restrict the scope of judicial review as a matter of judicial policy where Parliament, in enacting the TCEA, decided not to do so for itself.
As Lord Bridge said in Leech v Deputy Governor of HMP Parkhurst [1988] AC 533 at 566C: In a matter of jurisdiction it cannot be right to draw lines on a purely defensive basis and determine that the court has no jurisdiction over one matter which it ought properly to entertain for fear that acceptance of jurisdiction may set a precedent which will make it difficult to decline jurisdiction over other matters which it ought not to entertain.
Historically, the development of the law in accordance with coherent and consistent principles has all too often been impeded, in diverse areas of the law besides that of judicial review, by the courts fear that unless an arbitrary boundary is drawn it will be inundated by a flood of unmeritorious claims.
Despite their apparent strength, I cannot accept these arguments.
The TCEA has made a major change to the order of things.
It implemented many of the recommendations of the committee chaired by Sir Andrew Leggatt, Tribunals for usersOne System, One Service (2001).
The committees terms of reference included a review of the delivery of justice through tribunals to ensure that there are fair, timely, proportionate and effective arrangements for handling those disputes, within an effective framework for decision making which encourages the systematic development of the area of law concerned, and which forms a coherent structure, together with the superior courts, for the delivery of administrative justice.
As stated in the overview of its report, the committee considered that its proposals would give to tribunals a collective standing to match that of the Court System and a collective power to fulfil the needs of users in the way that was originally intended (para 8).
The report contains many proposals which were designed to meet that overall objective.
Para 6.16 is important: These arrangements will create for the first time a complete structure of appellate tribunals, covering all tribunal jurisdictions.
As we explain in further detail in paragraphs 6.376.38 below, the President of each Division will be a judge, often a senior one.
All members will be experts, specialising in the jurisdiction of the Division or Divisions in which they sit.
They will also be trained to conduct hearings in the distinctive enabling approach common to all tribunals.
For all these reasons, we think the time has come for a change in the relationship between tribunals and the courts.
Hitherto, tribunal decisions have in general not set precedents.
In some tribunals, there have been arrangements to identify individual cases as carrying particular weight or authority, which future tribunals are normally expected to observe.
We do not think that will suffice to give the greater coherence and consistency that we would recommend in the Tribunals System.
We therefore wish to see systematic arrangements for the setting of precedent.
We think that this should lead to changing the relationship between tribunals and the supervisory jurisdiction of the High Court.
There is also a section of the report (paras 6.27 to 6.36) headed The place of judicial review.
It notes (para 6.27) that the proportion of immigration and (mostly) asylum cases in applications for permission for judicial review in 1999 was approaching two thirds of the total.
While the great majority of them were unsuccessful, they demonstrated the waste of scarce resources which can arise from problems in the relationship between tribunals and courts.
It states (para 6.31) that the EAT and the Transport Tribunal have been designated as superior courts of record and as such have a status formally equivalent to that of the High Court and therefore escape judicial review.
Others do not.
Para 6.32 states that the aim of the new appellate Division would be to develop by its general expertise and the selective identification of binding precedents, a coherent approach to the law.
It would be comparable in authority to the High Court so far as tribunals are concerned.
For that reason, it would be inappropriate to subject the Presidents of the appellate Division to review by another judge of equal status.
The report considers two ways of excluding judicial review.
One is by constituting all the appeal tribunals as a superior court of record, but this is rejected for the reasons stated in para 6.33.
The other is to exclude judicial review by express statutory provision (para 6.34).
It is this proposal that is recommended, the advantage being said to be that it would preserve a clear distinction between the new System and the courts.
It is true that this last proposal was not accepted by Parliament.
But it is clear that the Leggatt committee proposed that judicial review of decisions by what was to become the UT should be excluded altogether because they thought that their proposals for restructuring and enhancing the tribunal system and the resultant change in the relationship between the tribunals and the courts meant that judicial review was no longer necessary.
Since Parliament adopted the main thrust of the committees proposals, the views of the committee as to the significance of those changes for the relationship between the tribunals and the courts are entitled to respect.
The fact that Parliament did not accept the recommendation to exclude judicial review of unappealable decisions of the UT does not mean that it rejected the committees view that there had been a significant change in the structure of the tribunal system such as might justify a reappraisal of the scope of the judicial review jurisdiction.
As I shall explain, the Government certainly did not disagree with that view and there is no reason to think that Parliament disagreed with it either.
It merely means that Parliament was not willing to adopt the controversial suggestion that judicial review should be excluded altogether.
An insight into the thinking of Government and Parliament is to be found in the Government White Paper: Transforming Public Services: Complaints, Redress and Tribunals presented to Parliament in July 2004 (Cm 6243).
At para 7.27, the paper stated that it was intended to strengthen the UT by the secondment of circuit judges and, for cases of sufficient weight, High Court judges with relevant expertise.
Para 7.28 stated: With this structure the only possible role for judicial review in the High Court would be on a refusal by the first and second tier to grant permission to appeal.
It is this possible route to redress which has caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
When permission to appeal has been refused by both tiers, and provided that the tribunal appellate judiciary are of appropriate quality, as we intend that they should be, there ought not to be a need for further scrutiny of a case by the courts.
However, complete exclusion of the courts from their historic supervisory role is a highly contentious constitutional proposition and so we see merit in providing as a final form of recourse a statutory review on paper by a judge of the Court of Appeal.
Thus a consequence of giving effect to the Leggatt report was to bring about a strategic reorganisation of the tribunals system by making it more coherent and improving its expertise and standing.
I agree with the views expressed in the Leggatt report and the 2004 White Paper that the changes demanded a reappraisal of the scope of judicial review.
Parliament refused to undertake it.
The task of deciding the scope of the judicial review jurisdiction falls therefore to be performed by the courts.
It follows that the fact that in the pre TCEA era there was unrestricted availability of judicial review of refusals of permission to appeal by appeal tribunals is not of itself a good reason for holding that that situation should survive the enactment of the TCEA.
It is for the court to decide in the post TCEA world whether any and, if so, what restrictions should be placed on the availability of judicial review.
I accept that any restrictions call for justification.
Prima facie, judicial review should be available to challenge the legality of decisions of public bodies.
Authority is not needed (although much exists) to show that there is no principle more basic to our system of law than the maintenance of rule of law itself and the constitutional protection afforded by judicial review.
But the scope of judicial review should be no more (as well as no less) than is proportionate and necessary for the maintaining of the rule of law.
The status and functions of the UT to which I have already referred are important here.
In my view, there are three reasons why unrestricted judicial review of unappealable decisions of the UT is neither proportionate nor necessary for maintaining the rule of law.
First, there is the status, nature and role of the UT to which I have already referred.
Secondly, the TCEA gives those who wish to challenge the decision of a First tier Tribunal (FTT) the opportunity to have the decision scrutinised on several occasions: first when the FTT decides whether or not to review its decision under section 9(1) and (2); second, if the FTT decides not to review its decision, when it decides whether or not to grant permission to appeal to the UT under section 11(4)(a); third, if the FTT refuses permission to appeal, when the UT decides whether or not to grant permission to appeal under section 11(4)(b).
The UT initially decides this on the papers.
In certain categories of case, there is a right to renew the application at an oral hearing (Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698) rules 22(3) and (4); in any event, the UT has the power, if it considers it appropriate to do so, to hold an oral hearing to decide permission (ibid, rules 5(1) and 5(3)(g)).
The third reason involves the issue of resources.
There is no doubt that immigration and asylum cases have presented huge problems for the justice system.
The relevant history is summarised at paras 46 and 47 of Lady Hales judgment.
It is singled out for particular mention in the 2004 White Paper as having caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
The adoption of unrestricted judicial review of refusals of permission to appeal by the Upper Tribunal (Immigration and Asylum Chamber) would involve a return to the position under the Immigration Act 1971 and the Asylum and Immigration Appeals Act 1993 when the courts were inundated with unmeritorious applications for judicial review of refusals by the Immigration Appeal Tribunal of decisions of the special adjudicator.
Parliament recognised the existence of the problem and sought to overcome it successively by enacting Nationality, Immigration and Asylum Act 2002 and the Asylum and Immigration (Treatment of Claimants etc) Act 2004 (see para 21 of Lady Hales judgment).
It cannot have been intended by Parliament when it enacted the TCEA that there should, in effect, be a return to the situation that obtained before the enactment of the 2002 Act.
Mr Gill does not suggest that this was Parliaments intention.
His point is simply that, in the absence of the plainest express words to restrict the courts historical role of supervising statutory tribunals of limited jurisdiction, it is unconstitutional for the courts to limit that role.
Recognising that a return to the pre 2002 Act days would be unlikely to commend itself to this court as necessary and proportionate for the maintenance of the rule of law, Mr Gill suggested in his reply, as an alternative to his principal submission, that judicial review should lie in cases where there was clear and obvious error and where the prospects of success were strong as opposed to real.
One can readily sympathise with the argument that problems that are peculiar to the immigration and asylum cases should not determine the scope of judicial review in all other cases.
It seems that the courts have not been inundated with unmeritorious applications for judicial review of the refusal of leave to appeal from other tribunals.
But Sullivan LJ was right, for the reasons that he gave at paras 51 to 53 of his judgment in MR (Pakistan), to hold that the same approach should be applied to permission decisions made by the Immigration and Asylum Chamber of the Upper Tribunal as they do to decisions made by other chambers.
In the light of the unified tribunal structure created by the TCEA, there should be a unified approach as to the grounds, if any, on which a judicial review of decisions of the UT can be sought.
It would be contrary to the unifying purpose of the TCEA for a different approach to be adopted depending on the subject matter of the decision being appealed.
I accept that floodgates arguments must be examined with care.
But they cannot be ignored, particularly in the light of the experience in the immigration and asylum field.
As Lord Phillips says, judicial resources are limited.
It is clear from the general acceptance of the Leggatt report and from the terms of the 2004 White Paper that Parliament intended that there should not be a return to the pre 2002 Act days in immigration and asylum cases when the courts were overwhelmed with unmeritorious judicial review claims.
If the floodgates argument were the only point militating against unrestricted judicial review, I doubt whether it would be enough.
But it does not stand alone.
The various factors to which I have drawn attention (in particular, the reorganisation of the tribunal system) lead me to conclude that it is not necessary or proportionate for the maintaining of the rule of law to allow unrestricted judicial review of unappealable decisions of the UT.
For these reasons, I would hold that unrestricted judicial review is not necessary for the maintenance of the rule of law and is not proportionate.
The second tier appeals approach
It follows from what I have said so far that the court must find another solution.
The problem with the exceptional circumstances approach is that, although it recognises the need to restrict the scope of judicial review, it does so in a way which creates its own problems and does not target arguable errors of law of general importance.
The problem with unrestricted judicial review is that it captures all arguable errors of law without discriminating between them notwithstanding the countervailing factors to which I have referred.
In R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, I suggested that there was much to be said for applying (by analogy) the criteria for the grant of permission by the UT to the Court of Appeal.
Section 13(6) of the TCEA provides that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal.
These criteria are identical to those that apply to any second appeal in the courts: see section 55(1) of the Access to Justice Act 1999.
It seems to me that the second appeal criteria approach offers a number of advantages.
First, and obviously, it does not suffer from the defects of the two alternatives that I have rejected.
Secondly, and positively, it ensures that errors on important points of principle or practice do not become fossilised within the UT system.
An individual who has been unsuccessful before the FTT will be able to raise an important point of law in the courts if the UT refuses to grant permission to appeal to itself.
As explained by the Court of Appeal in Uphill v BRB (Residuary) Ltd [2005] 1 WLR 2070, it is not enough to point to a litigants private interest in the correction of error in order to obtain permission for a second appeal.
Permission will only be given where there is an element of general interest, which justifies the use of the courts scarce resources: see also Zuckerman on Civil Procedure 2nd ed, (2006) para 23.139.
It follows that, if the law is clear and well established but arguably has not been properly applied in the particular case, it will be difficult to show that an important point of principle or practice would be raised by an appeal.
The position might be different where it is arguable that, although the law is clear, the UT is systematically misapplying it: see, for example, Cramp v Hastings Borough Council [2005] 4 All ER 1014.
Thirdly, the second limb of the test (some other compelling reason) would enable the court to examine an arguable error of law in a decision of the FTT which may not raise an important point of principle or practice, but which cries out for consideration by the court if the UT refuses to do so.
Care should be exercised in giving examples of what might be some other compelling reason, because it will depend on the particular circumstances of the case.
But they might include (i) a case where it is strongly arguable that the individual has suffered what Laws LJ referred to at para 99 as a wholly exceptional collapse of fair procedure or (ii) a case where it is strongly arguable that there has been an error of law which has caused truly drastic consequences.
The second appeal criteria have been in force in the courts since October 2000.
The exceptional nature of the test is well understood.
A perusal of the commentary in Civil Procedure (2011) (The White Book) on CPR 52 r 13(2)(a) and (b) suggests that the application of the second appeals test has not caused difficulty.
That also accords with the experience of Lord Clarke.
It also accords with mine.
I agree with others that rules should be made by the Civil Procedure Rule Committee (CPRC) to govern the exercise of the judicial review jurisdiction of unappealable decisions of the UT.
The mistakes of the past should not be repeated.
A fair but streamlined system should be introduced with an emphasis on applications being made and dealt with on paper.
Ultimately, however, it will be for the CPRC, taking account of the judgments of this court and after due consultation, to decide what is the appropriate procedure to adopt.
In practice, there is little if any substantive difference between an appeal on a point of law and judicial review, although each may, of course, be subject to different procedural conditions.
Parliament has shown a liking for the second appeal criteria in second appeals and in particular in the tribunal context of appeals from the UT to the Court of Appeal.
It can at least be said that to import those criteria into the judicial review jurisdiction in the present context does not go against the grain of the TCEA.
More positively, in my view the second tier appeals approach provides a proportionate answer to the question: what scope of judicial review of unappealable decisions of the UT is required to maintain the rule of law?
For these reasons, as well as those given by Lady Hale and Lord Phillips (in Cart) and by Lord Hope (in Eba), I would allow these appeals on the jurisdictional issue.
But, in agreement with them, I would dismiss the appeals in both cases as well as in MR (Pakistan).
| UK-Abs | This judgment deals with two English cases, while a separate judgment deals with the Scottish case Eba v Advocate General for Scotland.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
In all of them the claimant failed in an appeal to the First tier Tribunal and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
The tribunal systems with which the three cases are concerned, both before and after their restructuring in the 2007 Act, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
Part 1 of the 2007 Act established a new unified tribunal structure, which accommodates a diversity of jurisdictions.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application for permission or leave to appeal (s 13(8)(c)).
Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency to revise a variation in the level of child maintenance to be paid to his ex wife.
His appeal was dismissed.
He applied for permission to appeal to the Child Support Commissioners (whose functions were subsequently taken over by the Administrative Appeals Chamber of the Upper Tribunal).
Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The Upper Tribunal dismissed his appeal on the first three grounds and declined permission to reopen the fourth.
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
Determining the amenability of the Upper Tribunal to judicial review as a preliminary issue, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances.
The Court of Appeal dismissed his appeal, reaching the same result but by a different route.
MR is a native of Pakistan whose application for asylum was refused.
His appeal to the Immigration and Asylum chamber of the First tier Tribunal was dismissed.
Both the First tier Tribunal and then the
Upper Tribunal refused his application for permission to appeal to the Upper Tribunal.
MR sought judicial review of the Upper Tribunals refusal of permission to appeal.
Sullivan LJ dismissed the judicial review claim in accordance with the decision of the Court of Appeal in Cart.
He granted a certificate so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
The Supreme Court unanimously dismisses the appeals but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
It decides that permission for judicial review should only be granted where the criteria for a second tier appeal apply, that is where there is an important point of principle or practice or some other compelling reason to review the case.
Lady Hale gives the leading judgment.
The scope of judicial review is an artefact of the common law whose object is to maintain the rule of law.
The question is, what machinery is necessary and proportionate to keep mistakes of law to a minimum? What level of independent scrutiny outside the tribunal structure is required by the rule of law? [37], [51] There are three possible approaches which the Court could take.
First, that the scope of judicial review should be restricted to the exceptional circumstances identified in the Divisional Court and Court of Appeal, namely pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances).
Second, that unrestricted judicial review should be available.
Third, that judicial review should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted, namely (a) the proposed appeal would raise some important point of principle or practice, or (b) there is some other compelling reason for the court to hear the appeal. [38] While the introduction of the new system may justify a more restricted approach, the exceptional circumstances approach is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected.
As regards the second approach, it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever. [44], [47], [51] The adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
There is clearly nothing in Mr Cart or MRs cases to bring them within the second tier appeal criteria. [57], [59], [128], [130], [131], [133] Per Lord Phillips.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of limited judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law. [89]
|
This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) in a joint referral to the Special Commissioners by Scottish Widows Plc (the Company) and Her Majestys Revenue and Customs (HMRC) under para 31 of Schedule 18 to the Finance Act 1998: [2010] CSIH 47, 2010 SLT 885, 2010 STC 2133.
The question that was referred to the Special Commissioners for their determination was in these terms: Whether in computing the Case 1 profit or loss of Scottish Widows plc for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is agreed that the words as receipts, which were not in the question as referred, may be understood as following after the words into account.
The Special Commissioners answered that question in the affirmative.
The Company appealed against that decision and HMRC cross appealed.
The Court of Session by a majority (Lord Emslie dissenting) refused the appeal and unanimously refused the cross appeal.
Both sides have appealed against its decisions to this court.
The essence of the dispute between the parties is whether, in each of the three consecutive years in question, part of the entry in line 15 of the Companys form 40 must be taken as falling within the scope of either section 83(2) or section 83(3) of the Finance Act 1989, as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995 and paragraph 4 of Schedule 31 to the Finance Act 1996.
If it falls within the scope either of these two subsections, the sum concerned will fall to be treated as a chargeable receipt for the purposes of Case 1 of Schedule D in ascertaining whether, and if so to what extent, the Company made a loss during those years.
The Company carries on business as a life assurance company.
Insurance business is a trade within the meaning of Case 1 of Schedule D: Income and Corporation Taxes Act 1988, section 18.
The amounts to be taken into account in computing its profits include its investment income from its long term business fund and any increase in the value of its assets during the accounting period.
Those profits may be computed for tax purposes in one or other of two ways.
They may be computed on the Schedule D, Case 1 basis, the actuarial surplus being a suitable starting point for dealing with cases of this description: see Scottish Union and National Insurance Co v Inland Revenue (1889) 16 R 461, 475, per Lord President Inglis.
Or they may be computed on the basis of the income which the insurer receives on its investments less management expenses, known as the I E basis.
HMRC are entitled to elect to charge tax on the investment income, and they almost invariably do so as it nearly always pays the Crown to take the interest on the investments and not to trouble with the profits: Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227 per Lord President Dunedin.
But a Case 1 computation is nevertheless required in every case.
The dispute between the parties arises from the demutualisation in 2000 of the Scottish Widows Fund and Life Assurance Society (the Society) and the transfer, under a scheme sanctioned by the Court, of its business to the Company.
The scheme came into effect on 3 March 2000.
In para 22.1 it was provided that on or after the effective date the Company was to maintain a memorandum account within its long term fund, designated as the capital reserve, which was to represent the amount of the shareholders capital held within the long term business fund.
The capital reserve was to be divided between the Companys with profits fund and its non participating fund.
Para 22.4 provided that the Company was to maintain records of the capital reserve and of the parts of it allocated to each of these two funds.
While the funds comprised identifiable assets with all the qualities that attach to items of that kind, the capital reserve was a device or, as Lord Walker says in para 55, an abstraction.
It was created for accounting purposes only and had no real life of its own.
At the time of the transfer to the Company the value of the Societys assets was substantially in excess of its liabilities.
But the Company sustained trading losses in each of the relevant accounting periods.
The market value of its assets decreased from the inception of its long term business fund, due principally to falls in the value of the stock market.
The Company claims that account should be taken of its commercial losses in its non participating fund during the relevant accounting periods.
It has included Case 1 losses in its tax returns and computations for those periods equal to 28,689,437, 612,583,866 and 431,261, 757 respectively.
HMRC maintain that, on a proper construction of section 83(2) of the 1989 Act, which failing of section 83(3), and having regard to entries in the Companys statutory returns for the relevant periods in which it was required to show that it had a surplus in excess of its liabilities for regulatory purposes, these claims should be disallowed.
The Company brought various sums into account, described as transfers from the capital reserve, in the years in which they sustained losses.
HMRC submit that each increase in the regulatory value selected by the Company falls to be treated as an increase in the value of its assets within the meaning of section 83(2)(b).
In any event the amounts brought into account and recorded as transfers from the capital reserve fall to treated as receipts under section 83(3) because they were amounts which had previously been added to the long term business fund as part of the transfer of business to the Company from the Society.
The statutory provisions
Section 83, as amended, so far as relevant to this case provides as follows: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
In section 83(8) of the 1989 Act, as amended it is provided that the word add in that section, in relation to an amount and a companys long term business fund, includes transfer (whether from other assets of the company or otherwise).
Section 83A(1), which was inserted by section 51 of and paragraph 16 of Schedule 8 to the Finance Act 1995 and amended by paragraph 6 of Schedule 31 to the Finance Act 1996, provides that brought into account in sections 83 to 83AB (as inserted by paragraph 5 of Schedule 31 to the 1996 Act) means brought into account in an account which is recognised for the purposes of those sections.
Section 83A(2) provides: Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) any separate revenue account required to be prepared under that Act in respect of a part of that business.
Paragraph (b) above does not include accounts required in respect of internal linked funds.
The revenue account that section 83A(2)(b) refers to is the regulatory return in form 40: see para 12, below.
Section 431 of the 1988 Act contains a list of interpretative provisions relating to insurance companies.
They include a definition of the word value: see section 83(2)(b) of the 1989 Act.
It is in these terms: value, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the companys periodical return.
Insurance companies are under an obligation to submit annual returns to the Financial Services Authority (FSA) for regulatory purposes.
The purpose of these returns is to demonstrate that the insurer meets the regulatory standard of solvency.
They are required to show the results of a statutory actuarial investigation, which calculates the value of the insurers liabilities and identifies the amount of surplus in excess of those liabilities.
They must show that there is a sufficient surplus to cover any declared bonuses.
At the time of the demutualisation the relevant regulations were to be found in the Insurance Companies Act 1982, the Insurance Companies Regulations 1994 (SI 1994/1516) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943).
Section 17 of the 1982 Act provides that every insurance company carrying on insurance business in the United Kingdom must prepare a revenue account for each financial year of the company, a balance sheet and a profit and loss account, the contents of which are to be such as may be prescribed by regulations.
Section 18 provides for an actuarial investigation once in every period of twelve months of every insurance company which carries on long term business.
Section 28 provides that it must maintain an account of the assets and liabilities attributable to its ordinary long term insurance business.
Regulation 45(6) of the 1994 Regulations provides that an insurance company may, for the purposes of an investigation to which section 18 of the Act applied, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company.
This was already a practice of long standing in the insurance industry.
For a detailed description of the background to these requirements and to the provisions of the Finance Act 1989 about the taxation of the life assurance business of an insurance company, reference may be made to Lord Reeds opinion in the Court of Session to which, like Lord Walker, I would pay tribute: 2010 SLT 885, paras 91 126.
A useful summary of the FSA regime that was in force at the relevant time is to be found in Lord Emslies opinion, para 198 (ix) to (xii); see also Lord Walker, at paras 49 53, below.
In short, the regulatory returns which a company carrying on long term life insurance was required to complete and submit included a series of numbered forms.
Form 13 set out an analysis of all the companys admissible assets, entered at a value which broadly corresponded to their year end market value.
Form 14 set out in line 51 the amount by which the net admissible assets exceeded the companys long term business liabilities.
Form 40, which was headed Revenue account, set out revenue flows and expenditure for the Companys long term business fund, its with profits fund and its non participating fund, and the amount of each fund to be carried forward to form 58.
Form 58, which was headed Valuation result and distribution of surplus, determined the amount of the actuarial surplus by comparing the value of the insurers liabilities under the policies that it has issued with the fund shown on form 40.
The data that were used to prepare these regulatory returns were the same as those used to prepare the Companys statutory accounts.
The amounts that were calculated by the Company as the commercial losses of its non participating fund were derived from decreases in the market value of the admissible assets less liabilities in that fund during the relevant accounting periods.
For each of these periods, however, there were included in the figure entered as other income in line 15 of form 40 amounts described as transfers from capital reserve which reduced the capital reserve by an equivalent amount.
They should perhaps have been included as an increase in the value of assets brought into account in line 13.
But it is agreed that the way they fall to be treated does not depend on whether they were entered there or in line 15.
The Special Commissioners said there is no difference in principle, as both lines are brought into account in the total shown at line 19: para 51.
The amounts in aggregate for the relevant accounting periods were 33,410,000, 472,724,000 and 370,000,000 respectively.
The approach to construction
It is well understood that statutory provisions which bring profits and gains into charge to tax are to be construed as directed towards profits and gains in their natural and proper sense in a sense which no commercial man would misunderstand and that those words are equally applicable whatever the commercial concern may be: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
The objective is to ascertain and charge the true profits and gains of the business in question.
The requirement that there should be a true and fair view involves the application of a legal standard.
The courts are, in general, guided as to the content of the computation by expert opinions of accountants as to what the best current accounting practice requires: Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, 2007 SC (HL) 105, [2007] 1 WLR 1448, para 2, per Lord Hoffmann.
The special rules that section 83 of the 1989 Act lays down for the calculation of the profits of life assurance companies in respect of their life insurance business for the purposes of corporation tax are, in this respect, no different from the rules that apply to companies generally.
They provide a legal standard according to which these profits are to be ascertained.
As has already been noted, that section has been amended more than once.
But I do not think that it is helpful to look back into the legislative history.
Lord Wilberforce said in Farrell v Alexander [1977] AC 59, 73 that self contained statutes, whether consolidating previous law or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot solve.
Further amendments to section 83 were introduced by section 170 and paragraph 2 of Schedule 33 to the Finance Act 2003.
In Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 1716 Lord Diplock said that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
So the proper approach is to concentrate on the wording of sections 83(2) and 83(3) as they were at the relevant accounting periods.
With that background, and with the benefit of the much more comprehensive description of the facts that Lord Walker has provided and of the carefully reasoned opinions of all the judges in the Inner House, I now turn to the provisions of the 1989 Act which are under scrutiny in this case.
Section 83(2)
This subsection directs that there must be taken into account as receipts of the period for the purposes of Case 1 of Schedule D (a) the Companys investment income from the assets of its long term business fund and (b) any increase in value of those assets, in so far as these items have been brought into account by the Company.
The question is whether its language permits the Company to claim that it in fact sustained an allowable loss during the relevant period when the values as brought into account for that period indicate the contrary.
It is common ground that the reference to investment income in paragraph (a) of the subsection is a reference to actual income from assets actually comprised in the long term business fund.
The Company submits that, by parity of reasoning, the reference to any increase in value in paragraph (b) must be taken to be a reference to something that can be recognised on a commercial basis as a real increase in real assets.
So the word assets in both paragraphs meant assets of the long term business fund which had the capacity to earn income and to grow in value.
The fact was that its assets had decreased, not increased, in each of the relevant accounting periods.
The amounts included in line 15 of form 40 were there for regulatory purposes only.
They were book entries which had no commercial validity.
The fact was that the assets of the long term business fund had decreased, not increased, in each of the relevant accounting periods.
The mere fact that an amount, such as interest on unpaid tax, was entered in form 40 did not mean that it was taxable.
To arrive at a true and fair view it was necessary to go behind the entries on the forms and look at the facts.
In the Court of Session the judges of the First Division were unanimous in accepting this argument and rejecting the argument for HMRC.
The Lord President said that he was unable to accept that the contents of the revenue account that had been prepared for regulatory purposes had the definitional character for which HMRC contended.
The fact that the investment income was inevitably an actual receipt suggested that the increase in value should be an actual sum, as opposed to an accounting element: para 54.
Lord Reed made the same point in para 181, adding that the words whether realised or not were a strong indication that section 83(2) was concerned with real gains rather than a change in notional values.
Lord Emslie said that, consistent with the long established distinction between assets and fund, the reference to an increase in value of assets should be taken as reflecting commercial reality in the form of actual increases in the value of assets: para 204.
As Mr Andrew Young QC for HMRC pointed out, however, that section 83(2) is a special rule for the computation of the profits of an insurance company in respect of its life assurance business.
The general rules for the computation of profits and gains for the purposes of Case 1 of Schedule D must be taken to have been modified to the extent provided for in this subsection.
The Company was being taxed on the I minus E basis and it is this subsection, not the rules that are generally applicable, that must be construed.
An insurance company is entitled to elect, under regulation 45(6) of the 1994 Regulations, to assign to any of its assets the value given to the asset in the books or other records of the company.
Section 83(2) can be taken to have been drafted in the light of the fact that insurance companies almost always, if not invariably, choose to use book values (in the sense indicated by regulation 45(6)) to arrive at the necessary balance in form 40 to demonstrate solvency to the regulatory authority.
Once this point is grasped, it seems to me that the meaning to be given to section 83(2)(b) falls fairly easily into place.
The wording of the subsection follows that of the forms.
While the investment income in paragraph (a) is real income, the increase in value referred to in paragraph (b) may or may not be a real increase.
The assets which gave rise to this increase in value may or may not be the same assets as those referred to in paragraph (a).
It depends on the content of the amounts shown in lines 13 and 15 of form 40.
Amounts taken from its long term business fund were used by the Company to supplement its trading income in each of the three years in question.
It chose to use its own book values, not values computed according to the current value of the assets of its long term business fund, to arrive at the final values that were brought into account on form 40.
In the absence of further directions in the statute as to how the increase in value is to be computed in cases where that option has been chosen and there are none I would hold that the increase in value referred to in paragraph (b) must be taken to be the amount which has been brought into account on the form.
The phrase as brought into account for a period of account in the opening words of the paragraph lies at the heart of this interpretation.
It was suggested by the Company that this phrase determined the period for which items were to be treated as taxable receipts but not the items which were taxable.
But this interpretation of the phrase does not, I think, give full weight to the word as.
Linked to the words the following items which precede it, the phrase indicates that the computation must proceed on the basis of the way the items have actually been entered on the forms.
If values shown in the books or other records of the company have been used, instead of market values, it will be the book values that will determine whether or not there has been any increase in value during the relevant period and, if so, how much that increase is.
The phrase and not otherwise was said to support the Companys interpretation of paragraph (b) because it indicated that it was being assumed that the items that were being brought into account when any increase in value was being assessed were items that could be realised, not notional ones.
But I think that their purpose is to make it clear that the basis of computation referred to in subsection (2) is the only basis that is relevant for the purposes referred to in subsection (1).
The words whether realised or not are there to indicate a change from the computation indicated by the original wording of section 83.
If the company chooses to bring unrealised increases in value into account, those increases in value must be taken into account as receipts for the period in the same way as increases that have been realised.
For these reasons I am unable to agree with the judges of the Court of Session as to the meaning and effect of section 83(2)(b).
But in para 205 of his opinion Lord Emslie made some further points which, as they were attractively put, need to be answered too.
He said that a factor which favoured the Companys construction of section 83(2) was that it accorded well with the general principles (1) that the ascertainment of receipts or gains for tax purposes should prima facie reflect commercial reality; (2) that income or gains to be taxed should prima facie be the taxpayers and not those of a third party; and (3) that the ordinary recognition of shareholders capital to cover actual trading should not prima facie be a chargeable receipt.
He described these principles in more detail in paras 197 and 198, and I agree with him that prima facie they can be taken to be a reliable guide as to how tax legislation ought to be construed.
But his use of the phrase prima facie indicates, if I may say so quite correctly, that these are not absolute rules that are incapable of being disapplied by the statute.
In this case we are dealing with special rules that have been designed to take account of the unique nature of the business carried on by life assurance companies.
That in itself suggests that it is the language of the statute, rather than these general rules, that should be the determinative factor in this case.
Taking Lord Emslies three points in turn, I would hold, firstly, that the language of section 83(2) shows conclusively that, if the insurance company chooses to use book values to arrive at the final values shown on form 40, it is on those values that the computation referred to in section 83(1) must be based.
This can be said to reflect the commercial reality of the life assurance industry, as the Companys taxable receipts were based on its own figures as submitted to the regulatory authorities to justify the surplus of assets that it wished to recognise.
Secondly, there is no question, in this case, of taxing the income or gains of a third party.
The values brought into account on form 40 are the product of assets that were vested in the Company when it established its long term business fund.
Their link with the Society was entirely broken when the transfer under the scheme took effect.
As to Lord Emslies third point, it must be appreciated that the capital reserve was not, as he said in para 202, ordinary shareholders capital.
The words themselves might be taken as suggesting otherwise, but I think that the name that was given to what the scheme described as a memorandum account is a distraction.
The reality is that the reserve had no life of its own separate from the long term business fund.
It was an accounting mechanism which the Company had established for its own internal accounting purposes as part of its long term business fund.
It did not consist of particular assets but was a financial structure which was subject to all the statutory restrictions and requirements to which that fund was subject.
In para 205 he said that, as the capital reserve was shareholders capital, its ordinary recognition to cover actual trading receipts should not prima facie be deemed a chargeable receipt.
But, as the capital reserve had no life of its own, amounts that were described as transfers from the reserve fell to be treated in the same way as any other assets comprised within the long term business fund for regulatory purposes and, in consequence, for the purposes of section 83(2) too.
For these reasons, and those given by Lord Walker, I would allow the HMRCs cross appeal.
Section 83(3)
As I would answer the question in the reference in favour of HMRC on the ground that the amounts in question fall to be taken into account as receipts under section 83(2) with the result that there was a corresponding increase in the assets of the long term business fund for each of the relevant accounting periods within the meaning of paragraph (b) of that subsection, the question whether section 83(3) applies to those amounts does not arise.
This is because section 83(4) provides that subsection (3) of that section does not apply where, or to the extent that, the amount concerned is taken into account under subsection (2).
But, as the judges of the Court of Session were divided in this issue and out of respect for the care which they took to examine it, I would like to make these few brief comments.
The exercise to which section 83(3) is directed proceeds in two stages which are, as Lord Reed said in para 191(1), conceptually distinct from each other.
First, there is the question whether an amount has been added to the companys long term business fund as a part of or in connection with a transfer of business to the company.
Section 83(8) provides that the word add includes transfer.
As for the facts of this case, amounts were added to the Companys long term business fund when the scheme took effect as part of the transfer of the Societys business to the Company.
The whole of the amount that was to be treated as the capital reserve for accounting purposes was added or transferred to the Companys long term business fund as an integral part of the scheme.
It seems to me to be plain, having regard to the terms of the scheme, that the addition to the Companys long term business fund was as part of or in connection with the transfer of the Societys business to the Company.
The fact that it was only later that some amounts were brought into account by way of what were called transfers from the capital reserve does not matter.
The second stage is the bringing of the amount into account for the period in question.
It seems to me that this occurs as and when, and indeed whenever, the amount is brought into account as an increase in value to reduce or eliminate a loss that would otherwise have occurred during the relevant period.
As Lord Reed said in para 191(2), there are understandable reasons why Parliament might consider that the use of amounts acquired on a transfer of business to offset liabilities resulting from normal patterns of trading which were not otherwise chargeable to tax should be disallowed.
I agree with him that, when the amounts were subsequently brought into account on form 40, they would but for the fact that they were already caught by section 83(2) have fallen to be treated by section 83(3) as chargeable receipts for the purpose of ascertaining whether or to what extent the Company had incurred a loss in each of the relevant periods.
Lord Emslies point, which he made in para 228 of his dissenting opinion, that the transfers were made in a non chargeable context is answered by the two stage nature of the exercise to which section 83(3) is directed.
It is not the context in which the transfer was made at the outset that determines the way in which the amounts fall to be treated when, at some later stage, they are brought into account.
Had it been necessary to do so to arrive at an answer to the question that was referred to the Special Commissioners, I would have affirmed the decision of the majority in the Inner House on this issue and dismissed the Companys appeal.
Conclusion
I would recall the interlocutor of the Inner House of the Court of Session, allow the cross appeal by the HMRC and answer the question referred to the Special Commissioners in the affirmative.
LORD WALKER
Introduction
On 3 March 2000 Scottish Widows plc (the Company), a new company within the Lloyds TSB banking group, acquired the principal assets and liabilities of the life assurance business of the Scottish Widows Fund and Life Assurance Society (the Society).
The Society had a long and distinguished history.
It was established in Edinburgh in 1814 upon the principle of mutual assurance.
It was incorporated by statute in 1861 as a company without a share capital and it remained a mutual life office that is an entity owned by its members, the policyholders, with no outside shareholders until the change in 2000, which has been referred to as demutualisation.
The process of demutualisation was achieved by a scheme of transfer approved by the Court of Session under section 49 of and Schedule 2C to the Insurance Companies Act 1982 (ICA 1982).
Some of the provisions of the scheme are of central importance to this appeal.
The transfers which it effected were on a very large scale: the Company acquired, in round terms, assets with a market value of the order of 25bn and became subject to actuarial liabilities of the order of 19bn.
The qualifying members of the Society received compensation of approximately 5.846bn, representing the difference (with various adjustments and enhancements) between the assets and the liabilities.
This compensation was paid by the Companys holding company, Scottish Widows Financial Services Holdings Limited (Holdings), which owns the whole of the Companys issued share capital.
The Societys assets included large holdings of equities as well as fixed interest securities, immovable property and other investments.
As it happens the United Kingdom stock market reached what was (and remains) an all time high in the new year of 2000, and in the first years of the Companys business the market value of its holdings of equities was substantially reduced.
This unexpected and unwelcome turn of events has led to a dispute between the Company and HM Revenue and Customs (the Revenue) as to the tax consequences.
On 11 October 2006 the Company and the Revenue joined in making a referral to the Special Commissioners under Schedule 18, para 31 of the Finance Act 1998.
The agreed question to be determined was as follows (with a small agreed explanatory addition): Whether in computing the Case 1 profit or loss of [the Company] for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is common ground that the answer to this question depends on two issues, one turning on the meaning and application of a general provision in subsection 83(2) (read with subsection (1)) of the Finance Act 1989 as amended (FA 1989), and the other turning on the meaning and application of a more particular provision in subsection 83(3) (read with subsection (4)) of the same section.
The Company must win on both issues in order to succeed.
Conversely it is sufficient for the Revenue to succeed if it wins on either issue.
The first issue, once understood, is a short point of construction.
But for the non specialist a lot of background, some of it quite technical, is required in order to understand the point, and to be able to weigh the linguistic arguments against more general considerations based on the legislative scheme and purpose.
The second issue (which arises only if the Company is successful on the first issue) is a rather more intricate point of construction.
The complex background, and the large amounts of tax at stake, help to explain why these two points of construction took four and a half days before the Special Commissioners, and no less than seven and a half days before the Court of Session.
The Special Commissioners (Mr J Gordon Reid QC and Dr John F Avery Jones CBE) decided the first issue in favour of the Company and the second issue in favour of the Revenue, so that the Revenue was successful.
The First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) reached the same conclusions on both issues, unanimously on the first and with Lord Emslie dissenting on the second: [2010] CSIH 47; 2010 SLT 885; [2010] STC 2133.
The Company now appeals on the second issue and the Revenue cross appeals on the first issue.
The historical background.
The first issue (the subject of the Revenues cross appeal) comes naturally before the second issue (the subject of the Companys appeal).
But before getting to the detailed arguments on either issue it is necessary to say something about the historical background, and to cover regulatory as well as taxation aspects, since these two aspects have become closely interrelated.
The background has already been covered with conspicuous thoroughness and clarity in the judgment of Lord Reed (paras 87 104), to which I gratefully acknowledge my indebtedness.
This part of my judgment is largely based on the fuller description by Lord Reed, with the addition of a few points of my own.
Life assurance, in its many different forms, has played an important part in British social and economic history.
Actuarial science was already developing by the beginning of the eighteenth century (one of the founding fathers, Edmund Halley, published a paper on The Degrees of the Mortality of Mankind, commissioned by the Royal Society, in 1693).
The Life Assurance Act 1774 addressed the problem of insurable interest and curbed the scandal of tontines, then fashionable in some wealthy circles.
Interest in life policies was by no means restricted to the wealthy.
The Society was only one (and among the most prominent in Scotland) of many mutual societies by which working men could insure against the risk of their families being left in penury in the event of the early death or disablement of the main breadwinner.
In England the most prominent comparable body was probably the Friends Provident Society, founded in 1832 (it was a registered friendly society, regulated by a different statutory system).
The growth of these mutual societies was remarkable: they had just over 700,000 members in 1803, over 3 million in 1887, and over 6 million in 1910 (there are fuller statistics in D. Green, Reinventing Civil Society, 1993).
The mutual movement went into decline after Lloyd George introduced a system of compulsory national insurance in 1911.
The public interest in life assurance as encouraging prudent self reliance was reflected in its tax treatment, though for the most part the incentives were directed to policyholders rather than life offices.
In 1870, after several life offices had run into difficulties, Parliament introduced a new system of regulation.
It was the foundation of the more elaborate system that we have today.
The Life Assurance Companies Act 1870 (LACA 1870) required life offices (whether mutual or proprietary) to keep proper accounts and to prepare annual financial statements consisting of a revenue account and a balance sheet in a prescribed form.
Regular actuarial investigations were made mandatory.
Lord Reed explains in his judgment (paras 91 94) how section 4 of LACA 1870 introduced for the first time the statutory concept of a life assurance fund held as security for the rights of holders of life policies and annuities.
This was the origin of what is now referred to as a life offices long term business fund (LTBF).
As regards taxation, during the 19th century and the first two thirds of the 20th century there was no corporation tax and no capital gains tax.
Companies were subject, in much the same way as individuals, to income tax assessed and charged under the various schedules and cases defined in the Income Tax Acts.
If a taxpayer received income which could be regarded as falling within more than one schedule or case, the Revenue could not claim tax twice, but could choose which schedule to apply.
This choice (sometimes referred to as the Crown option) was available to the Revenue in relation to proprietary life offices, which held large reserves of income producing investments in order to meet their actuarial liabilities and provide for unforeseen contingencies.
They could be taxed either on the profits of a trade under Schedule D Case I, or on their investment income as such.
It was usually more advantageous for the Revenue to make an assessment on the companys investment income, as Lord President Dunedin noted in Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227.
The Crown option was abolished by the Finance Act 2007 and replaced by mandatory provisions.
With a mutual life office the Revenue never had a choice, since mutual trading does not produce profits taxable under Schedule D Case I.
The first statutory provisions giving special tax treatment to life offices were in the Finance Act 1915.
Life assurance was to be treated as a separate business.
Annuity funds were to be taxed separately from life funds.
Life offices taxed on their investment income were to be allowed a deduction for management expenses (including commission paid to brokers).
This system of taxation is generally referred to as the I minus E (that is, income minus expenses) basis of assessment.
It remained open to the Revenue to choose to assess a life office to tax under Schedule D Case I, but the basis of that assessment was altered (and the likelihood of its actually being adopted by the Revenue was reduced) by section 16 of the Finance Act 1923 (FA 1923), which gave effect to a recommendation in the report, published in 1920, of the Royal Commission on Income Tax (Cmd 615).
Profits allocated to with profits policies were to be excluded from the life offices taxable profits.
This was not unprincipled, since on allocation the profits became liabilities.
This provision has been re enacted in successive consolidating statutes, and finally in section 433 of the Income and Corporation Taxes Act 1988 (ICTA 1988), the terms of which are set out in para 103 of Lord Reeds judgment.
Section 433 of ICTA 1988 was repealed and replaced by FA 1989.
The change made by FA 1923 was an important change.
In practical terms it diminished the difference in tax treatment as between proprietary and mutual life offices.
Its importance increased with changes in economic conditions in Britain during the second half of the 20th century (in brief, monetary inflation and the prospect of substantial capital gains from investment in equities and property).
The Society was required by its constitution and regulations (to be found in their final form in the Scottish Widows Fund and Life Assurance Act 1980), as the Company is required under the scheme, to allocate to the holders of its with profits whole life and endowment policies nine tenths of the with profits part of the gains which it recognised, or brought into account (the expressions mean the same), in the revenue account of its LTBF.
After the introduction of capital gains tax and corporation tax on chargeable gains, realised gains made by the Society were taxed at differential rates, the details of which are not material.
But unrealised gains could be recognised (or brought into account) in order to enable larger bonuses to be allocated and paid to with profits policyholders without having been taxed in the Societys hands.
This was perceived by the Revenue as a serious defect in the system, as appears from an official consultation document published in 1988, The Taxation of Life Assurance, (summarised in paras 123 126 of Lord Reeds judgment).
This document gives a summary of how during the 1980s the life assurance industry was rapidly evolving into being part of a larger savings industry, in competition with unit trusts and other savings media, and itself increasingly making use of unit linked policies rather than traditional with profit policies (investment by small savers in authorised unit trusts and approved investment trusts was encouraged in a different way, by deferring tax on capital gains until individual unitholders or shareholders realised their gains).
Section 83 of FA 1989, which is at the heart of this appeal, was part of the changes which Parliament made in consequence of this review.
It makes an express link between the imposition of liability to tax (or the creation of an allowable loss) under Schedule D Case I and the regulatory regime under ICA 1982.
It is therefore necessary, before coming to section 83, to give a short account of the regulatory regime in ICA 1982 and regulations made under it.
ICA 1982 and regulations under it
The regulatory system introduced by LACA 1870 had been re enacted and modified from time to time.
ICA 1982 replaced it with a similar but much more detailed system, elaborated in a number of statutory instruments, of which the most relevant for present purposes are the Insurance Companies Regulations 1994 (SI 1994/1516) (the 1994 regulations) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943) (the 1996 regulations).
Section 17 of ICA 1982 required every insurance company to which Part II applied to prepare with respect to each financial year of the company, a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account (or for a mutual an income and expenditure account) for the year.
Each of these was to be in a form prescribed by regulations.
Under the 1996 regulations (as amended down to the year 2000) different forms were prescribed for different types of insurance companies, and they were still required by the new regulatory system mentioned in para 55 below.
The form of balance sheet prescribed (by regulation 6) for companies carrying on long term business were forms 13 (relating to assets) and 14 (relating to liabilities).
These together made up the two sides of the balance sheet.
The form prescribed (by regulation 8) for companies carrying on long term business was form 40; if the company had more than one LTBF a separate account was required for each LTBF, and a consolidated form for all of them.
The Company has three LTBFs, a with profits fund, a non participating fund for business taken over from the Society, and a non participating fund for new business.
Section 18 of ICA 1982 required every insurance company to which it applied, and which carried on long term business, to cause its actuary to make an annual investigation of its financial condition, and to cause an abstract of the actuarys report to be made.
Assets were to be valued and liabilities determined in accordance with valuation regulations, and the abstract was to be in a form prescribed by regulations.
Under regulation 25 of the 1996 regulations (as under the new regulatory system) the most relevant of the prescribed forms to be included in the abstract was form 58.
Regulation 45 of the 1994 regulations (as amended down to the material time) dealt with valuation of assets.
After some general provisions in paras (1) to (5) it dealt specifically with actuarial investigations under section 18 of ICA 1982: (6) Notwithstanding paragraph (1) above (but subject to the conditions set out in paragraph (7) below), an insurance company may, for the purposes of an investigation to which section 18 of the Act applies or an investigation made in pursuance of a requirement under section 42 of the Act, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company. (7) The conditions referred to in paragraph (6) above are (a) that the election shall not enable the company to bring into account any asset for the valuation of which no provision is made in this Part of these Regulations; (b) that the value assigned to the aggregate of the assets shall not be higher than the aggregate of the value of those assets as determined in accordance with regulations 46 to 57 of these Regulations.
Section 28 and 29 of ICA 1982 required separate accounts and funds to be maintained for long term business, and for the assets representing those funds to be applicable only for the purposes of the appropriate business, except so far as the value of the assets was shown, on a statutory actuarial investigation, to exceed the liabilities attributable to the fund.
I shall have to come back to the prescribed forms.
I add one comment.
Lord Reed observed (para 112), and I agree, that the use of the word fund in ICA 1982 is not entirely consistent.
Lord Reed had earlier quoted an observation of Lord Greene MR in Allchin v Coulthard [1942] 2 KB 228, 234: The word fund may mean actual cash resources of a particular kind (e.g. money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.
This is an important distinction, although Lord Greenes reference to cash resources is a little surprising and may have been influenced by the context of the particular case before him (it concerned the taxation of a local authoritys general rate fund).
In the context of life assurance a LTBF is a fund of investments of various types, and it falls within Lord Greenes first category.
The investments (the assets of the fund) change from time to time, as and when the investment managers need to raise money or exercise their judgment to switch investments, and the values of the assets fluctuate constantly.
But at any time it is possible to identify the assets for the time being constituting the fund, which is a continuing entity.
By contrast the Capital Reserve established by the scheme approved by the Court of Session and put into effect in 2000 (and here I am putting down a marker for later parts of this judgment), if it was a fund at all, was a fund in Lord Greenes second sense.
It was an accounting abstraction and it never consisted of identifiable assets.
Before going on to the scheme it is convenient to record, out of chronological sequence, that ICA 1982 was repealed by a statutory instrument made under the Financial Services and Markets Act 2000 which came into full force on 1 December 2001 (having come into force at earlier dates for limited purposes including rule making powers).
In consequence the new regime applied to the second and third of the Companys accounting periods relevant to this appeal that is, the calendar years 2001 and 2002; the Financial Services Authority (FSA) became the regulator, and the system of regulation was prescribed by rules made by the FSA rather than by statutory instrument.
But the substance of the system, and the identifying numbers of the forms, were unchanged.
In particular, rule 9.10(c) of the FSAs Interim Prudential Sourcebook for Insurers Instrument 2001 reproduced the effect of regulation 45(6) of the 1994 regulations.
There were some minor changes of terminology in the forms, which were set out in Appendices 9.1 (forms 13 and 14), 9.3 (form 40) and 9.4 (form 58) of the 2001 instrument.
The scheme
The scheme for the transfer of the Societys business to the Lloyds TSB group was preceded by an agreement dated 23 June 1999 between the Society and Lloyds TSB Group plc.
The agreement provided for the scheme to be approved by a special resolution of the Society in general meeting (which duly occurred) and for an application to be made to the Court of Session for sanction of the scheme under section 49 of and Schedule 2C to ICA 1982.
The Court of Session (Lord Nimmo Smith) sanctioned the scheme by an order made on 28 February 2000, and the scheme took effect on 3 March 2000.
The scheme also obtained regulatory approval and tax clearances.
The scheme is lengthy and in parts very technical.
It runs to 41 clauses and 12 schedules.
In bare outline, the bulk of the assets and liabilities of the Society were transferred to the Company; pension policies and assets and liabilities associated with them were transferred to another Lloyds TSB group company and are not relevant to this appeal.
Payment of the membership compensation to qualifying members of the Society (later quantified at 5,846m) was undertaken by Holdings, which is the owner of all the Companys issued share capital.
The provisions of the scheme which call for most attention are in Part D (Fund Structure) and Part E (operation of the Funds).
Clause 22 in Part E (Capital Reserve) is of particular importance.
Under Part D (Fund Structure) the most basic division was between the LBTF (defined as the Long Term Fund) and the Shareholders Fund.
The latter fund was to have allocated to it infrastructure assets and shares in seven subsidiaries and any joint venture companies (clause 15.1 and relevant definitions in Schedule 1).
All other assets (other than pension assets as mentioned above) were to be allocated to the LTBF, which was to be divided into two separate subfunds, the With Profits Fund and the Non Participating Fund (respectively the WPF and the NPF), with an appropriate allocation of existing policies (clauses 13 and 14.1).
The allocation of assets between the WPF and NPF was to be determined by the actuary in accordance with the detailed provisions of clause 15.2 to 15.6, 15.10 and 15.11.
Liabilities were to be similarly matched, subject to some special exceptions (clause 16).
In part E (Operation of the Funds) clause 18 deals with allocation of surplus arising in the WPF.
One ninth of the amount of bonuses allocated to conventional (that is, not unit linked) with profits policies (in other words one tenth of the gross allocation) is to be allocated to the NPF or the Shareholders Fund, as the board directs.
All other surplus is to be applied as bonus for the benefit of holders of with profits policies.
This replicates the position under the Societys constitution and regulations (para 47 above).
In life offices shorthand the WPF is a 90/10 fund.
The NPF, by contrast, is a 0/100 fund.
Following each actuarial valuation of the NPF the board may transfer to the WPF statutory surplus arising in the NPF (clause 21).
Finally I come to the Capital Reserve, provided for in clause 22.
Clause 22.1 is as follows: On and after [3 March 2000], [the Company] shall maintain a memorandum account within the [LTBF] designated as the Capital Reserve (the Capital Reserve).
At [3 March 2000] the Capital Reserve shall represent the amount of the shareholders capital held within the [LTBF].
Clause 22.2 provides for the Capital Reserve to be credited with an amount arrived at by a complicated formula.
It is common ground that this amount was 4,455m.
Clause 22.3 (headed Maintenance of Capital Reserve) provides that no more may be added to the Capital Reserve and that it may be reduced only by being brought into account in the revenue account of the WPF (up to a limit arrived at by a formula) or the revenue account of the NPF (without limit).
There does not seem to have been a finding or formal agreement as to the amount of the WPF limit, but the unchallenged evidence of Mr Adrian Eastwood, the Companys actuarial director at the material time, was that the amount was 432m.
Clause 22.4 to 22.6 provided for the Capital Reserve to be notionally allocated between the WPF and the NPF.
The initial division was 1,895m to the WPF and 2,560m to the NPF.
Tables B and C annexed to the agreed statement of facts and issues (SFI) show how the Companys opening capital of 4,769m in its LTBF can be reconciled with the opening Capital Reserve (4,455m) and the membership compensation (5,846m).
Clause 22A of the scheme provided for what was described as a contingent loan, free of interest, from the NPF to the WPF, repayable as mentioned in that clause.
Its purpose was to compensate the WPF for the fact that its right to future profits could not be included, for regulatory purposes, as an asset with an admissible value.
This inter subfund loan (described in SFI, para 29) hardly featured in the parties written and oral submissions, but it is a further complication in understanding the regulatory forms, to which I now turn.
The forms
The balance sheet consists of forms 13 and 14.
Form 13 sets out the values of the assets of the fund (that is, the LTBF or a subfund of it) at their admissible values (a technical term which in practice was not less than 99% of market value).
The effective bottom line of form 13 is line 89, Grand total of admissible values.
Form 14 sets out liabilities and margins.
For present purposes the most important lines are: 11, mathematical reserves (that is, actuarial liabilities which have not yet been finally quantified); 13, balance of surplus (or valuation deficit); 14, LTBF carried forward; 49, total other (ie non actuarial) liabilities; 51, excess of the value of net admissible assets; and 59, total liabilities and margins.
The entries at line 89 of form 13 and line 59 of form 14 must be the same.
The balancing items on form 14 are the figures entered at line 13 (balance of surplus) and line 51 (excess of the value of net admissible assets, which is also called the investment reserve: SFI para 53(2)).
The interrelation between the figures at lines 13 and 51 of form 14 is that the line 13 figure is generally a relatively small amount representing value that has been brought into account but not yet finally appropriated.
The line 51 figure is the true balancing figure, and is the last figure to be entered on the form.
It represents the (generally very much larger) value that has not yet been brought into account at all the amount by which the admissible value of the LTBF assets exceeds the book value that has been brought into account.
It illustrates the proposition stated (perhaps in rather question begging terms) in para 9 of the Revenues written case, that life offices are treated differently from most businesses in that they can shelter profits from taxation to meet unforeseen future liabilities.
This point is discussed further in paras 82 to 86 below headed Bringing assets into account at book value.
Form 40, the revenue account, shows movements during the accounting period.
The most important lines for present purposes are 11, earned premiums; 12, investment income; 13, increase (or decrease) in the value of non linked assets brought into account; 14, increase (or decrease) in the value of linked assets; 15, other income; 19, total income; 29, total expenditure; 39, increase (decrease) in fund in financial year; 49, fund brought forward; and 59, fund carried forward (39 + 49).
The entry at line 49 must be the same as line 14 on form 14 for the previous accounting period, and the entry at line 59 must be the same as line 14 on form 14 for the current period.
As to lines 13 and 14, Lord Reed explains in his judgment (para 116) that any increase or decrease in the value of linked investments (line 14) is required to be brought into account automatically, but unrealised increases in the value of non linked assets (line 13) need not be brought into account.
Form 58 (valuation result and distribution of surplus) shows the actuarial surplus (line 29), its movement during the accounting period (lines 31, 34 and 35), and its distribution as between policyholders (line 46), shareholders (line 47) and balance (line 49, this being the same as line 13 on form 14).
The term distribution as used in lines 41 48 does not imply that sums necessarily leave the Companys hands; it refers to an allocation as between policyholders and shareholders.
Three separate forms 58 were completed for the WPF, the transferred business in the NPF and the new business in the NPF.
How the forms were completed by the Company
Volume V of the papers before the Court contains over 500 pages of the Companys regulatory returns for the three relevant accounting periods, including completed forms 13, 14, 50 and 58 for the LTBF and its sub funds (except that form 58 was completed, as already noted, for three sub funds and not for the LTBF as a whole).
From these forms the following information as to the whole LTBF can be extracted (in bn, rounded to the nearest 1m, and with some rounding adjustments in the computations). 2000 2001 2002 Form 13 line 89: total assets at admissible value 20.962 Form 14 line 11: mathematical reserves 18.645 line 13: balance of surplus 0.181 line 14: LTBF carried forward 18.827 23.066 19.128 0.033 19.162 22.427 19.807 0.064 19.871 0.386 2.107 22.427 0.468 0.441 1.668 3.462 20.962 23.066 line 49: total non actuarial liabilities line 51: excess of value of net admissible assets line 59: total liabilities and margins Form 40 2.000 2.445 2.540 line 11: earned premiums 0.922 0.633 0.787 line 12: investment income line 13: increase (decrease) in value of non linked assets brought (2.254) 1.273 (1.168) into account line 14: increase (decrease) in value of (0.036) linked assets (0.031) (0.011) 0.408 0.502 16.875 line 15: other income 1.040 line 19: total income 21.216 2.631 1.921 2.084 2.054 line 29: total expenditure (1.045) line 39: increase (decrease) in LTBF 19.162 0.709 19.871 line 49: fund brought forward .000 19.162 19.162 19.871 18.827 line 59: fund carried forward Form 58 (WPF) line 59: distributed surplus line 61: percentage distributed to
policyholders
It would be imprudent to attempt any sophisticated commentary on these figures.
The entry on form 40, line 15 for 2000 is obviously exceptional, representing the effect of a change of ownership of a long established business; no one has suggested that the whole sum is taxable.
But we know that it included a sum of 33.410m as a transfer from Capital Reserve (see para 70 below).
Taken overall, the figures illustrate the effect of bringing into account value which, for prudential reasons, has not previously been recognised.
During the three accounting periods the admissible (for practical purposes, market) value of the assets of the LTBF fell by about 4bn (the figures can be collected from SFI, Table A and the Companys completed forms 13 for the three accounting periods).
The mathematical reserves decreased by a little under 0.5bn and the recognised value of the LTBF, tracking as it did the mathematical reserve and the unappropriated surplus, went down by about 0.3bn.
But the investment reserve, that is the excess of admissible value over the recognised value of the LTBF (line 51 on form 14) was reduced by almost 1.8bn.
The successive entries 0.633 0.915 94.72 96.64 0.576 97.05 on line 13 of form 40 are noteworthy.
In the accounting period ending on 31 December 2000 the value of non linked assets brought into account increased by over 1.2bn although their admissible value decreased during that period.
This disparity was reversed in the two following accounting periods, during which (taken together) admissible value fell further by about 1.6bn but the form 40, line 13 decrease was a good deal larger, about 3.4bn.
During the whole period the Company declared bonuses of significant amounts, and allocated more than the mandatory 90% to with profits policyholders.
Part of the form 40, line 15 amounts included sums described in the notes submitted with the statutory forms (volume V, pp1756, 2035 2036 and 2319) as transfers from Capital Reserve.
The amounts were as follows (SFI, paras 56 60): 2000 2001 2002 m to WPF 33.410 30.724 17.000 81.134 total 33.410 472.724 370.000 876.134 to NPF 442.000 353.000 795.000 Whether they should nevertheless have been brought into the computation of the Companys profit or loss under Schedule D Case I under section 83(1) and (2) of FA 1989 is the first issue.
Line 15 of form 40 is, it will be recalled, specifically mentioned in the referred question (set out at para 36 above).
The statutory provisions
The provisions which this Court has to construe are in a single section, section 83 of FA 1989.
A rapid survey of the landscape in which that section is found shows that in the consolidating statute, ICTA 1988, Part XII dealt with special classes of companies and businesses, and Chapter 1 of Part XII dealt with insurance companies, underwriters and capital redemption businesses.
I have already mentioned section 433, which was repealed by FA 1989 and replaced by similar (but more complex) provisions in section 82 of FA 1989.
Section 444A, inserted into ICTA 1988 by the Finance Act 1990, applies to a transfer of long term business in accordance with a scheme sanctioned under section 49 of ICA 1982, but neither side placed any reliance on this section.
At the time when the consolidating statute was enacted the government was engaged in a far reaching review of the taxation of life offices, as already noted (para 48 above).
The outcome was sections 82 to 90 of FA 1989 (together with Schedule 8 to that Act, amending Part XII of ICTA 1988).
These sections, and Schedule 8, were frequently amended between 1989 and 2000, especially by the Finance Acts of 1995 and 1996.
The details are set out in Lord Reeds judgment (paras 134 to 163).
But I agree with Lord Hope (in para 15 of his judgment) that it is unnecessary, and maybe unhelpful, to go into the legislative history.
What matters is the statutory provisions as they were in 2000, 2001 and 2002.
During that period section 83(1) to (4) was in the following terms: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
Section 83A(1) to (3) of FA 1989 was in the following terms: (1) In sections 83 to 83AB brought into account means brought into account in an account which is recognised for the purposes of those sections. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) that Act in respect of a part of that business. any separate revenue account required to be prepared under Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
It is common ground that the relevant revenue accounts are forms 40 for the whole LTBF and its constituent parts, the WPF and the NPF.
The first point of construction (which I have already described as a short point, but one which takes some getting to) is the meaning of value (whether realised or not) of those assets in section 83(2)(b).
The Company contends that it means market value, and that any reduction in their value (the form of words at the end of the subsection) is to be treated as an expense capable of giving rise to an allowable loss.
The Revenue contends that section 83(2) is referring to a difference in value (whether it be an increase or a reduction) as brought into account for the relevant period of account, and that section 83(A)(2) leaves no room for doubt as to what that means.
It directs attention to the appropriate regulatory account, in this case form 40.
The Lord President (para 54) described this approach as definitional.
Taxing a loss?
The Companys written case before this Court, and Mr Gardiner QCs robust oral submissions, characterised the Revenues position as unnatural, uncommercial and contrary to fundamental principles of tax law.
The Court was reminded of some famous judicial observations made more than a century ago, including Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315: The word profits I think is to be understood in its natural and proper sense in a sense which no commercial man would misunderstand and Lord Macnaghten in London County Council v Attorney General [1901] AC 26,35: Income tax, if I may be pardoned for saying so, is a tax on income.
It is not meant to be a tax on anything else.
In this case, Mr Gardiner submitted, the Revenue was attempting to tax what was in reality a loss of capital.
These submissions call for careful consideration.
The massive volume of documents and figures put before the Special Commissioners and the Court of Session, and now before this Court, creates a risk of getting lost in a labyrinth of abstractions.
Actuaries, accountants and lawyers are trying to converse in the same language, but it is not easy going.
It is a case in which there is a real danger, in the hackneyed phrase, of not seeing the wood for the trees.
It may help to avoid confusion to start with three simple points.
The first point is that the Revenue is not seeking to exact tax from the Company under Schedule D Case I either on profits or on losses incurred by the Company; it is taxing the Company on the I minus E basis.
Simultaneously the Company is seeking to establish large Schedule D Case I losses in order to have them available for surrender to obtain group relief.
The second point is that it is, and always has been, standard practice for life offices to bring the assets of their LTBFs into account, not at market values that fluctuate from year to year, but at a book value (though in practice that expression is applied to LTBFs in a way that an outsider may find surprising).
The third point is that the Capital Reserve is not, and never has been, a separate fund distinct from the Companys LTBF.
It has always been part of the LTBF.
Each of these three points calls for some further explanation.
The Crown option as it applies to this case
The Revenue is not seeking to charge tax under Schedule D Case I on losses incurred by the Company.
It is common ground (SFI, para 61) that at all material times since 3 March 2000 the Company has been taxed on the I minus E basis (the detailed computations for 2000 and 2002 can be seen in volume VII at pages 3211 and 3290; the relevant page for 2001 seems to have been inadvertently omitted).
Nevertheless (SFI paras 62 and 63) the Company seeks to claim an allowable loss under Schedule D Case I which would be available for surrender to other Lloyds TSB group companies by way of group relief.
The Revenue accepts (SFI, paras 62 and 63) that if the Company succeeds in this appeal the losses available for surrender would be approximately 28.7m for 2000, 612.6m for 2001 and 431.3m for 2002 (the relevant computations are at volume VII pages 3216, 3255 and 3295).
The fact that a proprietary life office can simultaneously pay tax on the I minus E basis and have an allowable loss under Schedule D Case I shows that whatever the position a century ago, when there were no special statutory provisions, the taxation of long term life assurance business is now a very specialised area.
Bringing assets into account at book value
Regulation 45(6) of the 1994 Regulations (set out in para 20 above, and later reproduced in Rule 9.10(c) of the FSAs 2001 instrument) allowed a life office, for the purposes of an actuarial investigation, to take the value of any of its assets as its value in the books or other records of the company.
This had been expressly permitted by the regulatory system since 1980, when Regulation 3 of the Insurance Companies (Valuation of Assets) Regulations 1976 (SI 1976/87), was amended by the Insurance Companies (Valuation of Assets) (Amendment) Regulations 1980 (SI 1980/5).
But the two expert witnesses agreed that it was a very long standing and well established practice, and the Special Commissioners made a finding to that effect (para 16 of their decision).
It would be potentially misleading to say that a life office is permitted to bring the assets of its LTBF into account at book value, since that is normally understood to mean historic cost.
In a LTBF some assets are normally brought into account at the full admissible value, and others at nil (Special Commissioners decision, para 48; also para 122 of Lord Reeds judgment).
It is unnecessary to go into the reasons for this practice, as to which there was no dispute.
The reasons for maintaining an investment reserve of unrecognised value are fundamental to the way in which long term life business, and especially with profits business, has been conducted in the United Kingdom.
It is the mechanism by which the life office, relying on the professional skills of its chief actuary and his staff, can achieve a balance between competing considerations and interests.
First and foremost is the overriding need for a sufficient margin of solvency.
Subject to that the life office will wish to produce consistently good results for its with profit policyholders, both in the policyholders interests and to preserve and enhance the companys reputation.
It must also achieve fairness between different classes of policyholders in accordance with their rights and expectations (the difficulties of which are illustrated by Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
Finally there are tax considerations.
No company likes to pay more tax than it has to, or to pay it sooner than it has to.
Before 1989 the tax system allowed life offices to defer taxation, especially on unrealised capital gains.
It is common ground that section 83 of FA 1989 was intended to change that; the controversy is as to the extent of the change.
These points were well made by Mr Brian Drummond, an accountant, in an article entitled Making Sense of the FSA Return in Life Company Tax Computations (Tax and Accountancy Review, June 2006, p6).
Some changes had taken place by then (both on the regulatory front and the taxation front) but the article is nevertheless instructive.
After mentioning recent changes the author gives a brief overview of the forms: In broad terms, however, the overall structure remains unchanged.
Form 13 remains a reasonably straightforward analysis of the total admissible value of the assets of the company by category with narratives that are commendably clear; Form 40 demonstrates how much of the Form 13 value is brought into account for the purposes of calculating surplus; Form 58 deals with the calculation, composition and distribution of the surplus; and, Form 14 then links that exercise back to Form 13 by showing how much of that original Form 13 value is covering liabilities and bonuses and how much of it is being held in reserve.
He describes form 14 as an area of linguistic opacity, and comments: This confusion is carried across into form 14 of the FSA return where it increases further.
The first line in form 14 is described as mathematical reserves, after distribution of surplus and in this one narrative only two of the six words (after and of) take their conventional or even accounting meaning.
The most relevant passage is on the general philosophy of with profits business (at pp 9 10): Form 40 is described as revenue account but in conventional terms it is a very partial one.
By reference to normal accounting convention it is surprising to have a revenue account that makes no explicit reference to a movement in liabilities to third parties.
The layout of Form 40 and its interaction with Form 58 reflects much more of the history of with profit funds than it reflects normal accounting principles.
In with profits funds the starting point in determining the extent to which surplus is recognised is establishing what bonus should be recommended.
This will be driven by a combination of the results of the company (in terms of investment return and underwriting profit) together with policyholder reasonable expectations and the need to treat customers fairly.
One of the principles of UK with profits business is smooth bonuses from year to year.
Having established what bonus it is appropriate to declare for the year it is then possible, depending on the structure of the fund, to calculate the minimum extent to which surplus must be recognised both to meet the bonus requirement and any corresponding entitlement of the shareholders to participate in surplus as a fraction of the amount allocated to policyholders (very often one ninth the 90:10 structure).
Historically with profit funds hesitated to recognise any more surplus than was required to meet the bonus, and associated shareholder entitlement, and hence the fund would generally be approximately equal to the liabilities (after current year bonus) plus any residual surplus not allocated.
The nature of the Capital Reserve
The third point mentioned in para 78 above is that the Capital Reserve is not, and never has been, an appropriated fund separate from the Companys LTBF.
It is, as para 22.1 of the scheme makes clear, part of the LTBF.
It is an account falling within Lord Greene MRs second category in Allchin v Coulthard [1942] 2 KB 228, 234 235 merely an accounting category.
Abstract though it is, the Capital Reserve is on the Companys case of central importance to this appeal.
It is not easy to discern its purpose.
The Companys own independent actuarial expert, Mr Chamberlain, stated in his report dated 18 September 2007, para 5.1: The Scheme by which [the Society] demutualised established something it refers to as a Capital Reserve.
This Reserve is a financial structure whose form and operation is defined by the Scheme, and does not meet any particular regulatory or other requirement, other than that emanating directly from the Scheme.
It is a memorandum account and does not consist of particular assets.
Mr Allen, the Revenues independent expert, stated in his report dated 5 October 2007, para 6.1: Within the notes to their returns I understand that [the Company] created a memorandum account (the Capital Reserve) with an initial balance of approximately 4.5bn.
Notwithstanding that this account was referred to in the Scheme which obtained approval from the Court of Session, in my opinion this memorandum account had no meaning or relevance, other than as an item of information, as regards either the Companys statutory report and accounts or its regulatory returns.
The memorandum account did not represent any particular assets, nor did it reflect any actual profit or loss incurred by the Company, it was simply a note of a particular transaction.
The experts did not give a further explanation of the expression memorandum account, nor did counsel offer any.
The Special Commissioners made a finding that reflects the natural meaning of memorandum (para 45): The purpose of the Capital Reserve was to keep a record of this initial value created by [Holdings] and to distinguish it from subsequent profits.
The notion that it was an item of information that ought to be remembered comes out most clearly in the witness statement of Mr Michael Ross.
He was an actuary who was employed by the Society for most of his career, becoming chief actuary of the Society in 1986 and the first chief executive of the Company in 2000.
In his witness statement (paras 18 to 27, not challenged in cross examination) he described how demutualisation involved a strategic choice between ring fencing the estate and monetising the estate (the estate is a term used to describe a mutuals excess of assets over liabilities, or investment reserve).
After careful thought the Lloyds TSB group and the Society opted for monetising the estate.
This course was likely to be more attractive to the Societys members but required the Lloyds TSB group to find a very large sum to pay the membership compensation.
But the payment of that compensation gave the Lloyds TSB group the advantage that the Company had a comfortable investment reserve at the inception of its business (whereas with ring fencing the group might have had to inject further capital).
The group wanted to earmark what Mr Ross (para 27) regarded as shareholder owned capital, held within the [LTBF] in order to be able, in the long term, to benefit from it.
That provides a clue, I think, to the purpose of the restriction on reduction of the Capital Reserve in para 22.3 of the Scheme (summarised in para 60 above).
Only a limited amount (432m out of 4,455m) of the Capital Reserve could be brought into account in the revenue account of the WPF, because it was a 90/10 fund and nine tenths of the distributed surplus were to go for the benefit of holders of with profit policies; only one tenth (at most) could find its way to the shareholder, Holdings.
There was no restriction (beyond the total amount of the Capital Reserve) on bringing it into account in the NPF, which was a 0/100 fund.
The decision of the Special Commissioners and the judgments in the Court of
Session
The Special Commissioners decided the first issue in favour of the Company, and the Court of Session unanimously upheld that decision (Lord Emslies dissent was on the second, narrower issue as to section 83(3)).
All three members of the Court delivered full judgments, so this Court has four separately reasoned routes to the same conclusion on the first issue.
The reasoning can be imprecisely classified under three heads: the correct approach to the construction of taxing statues, arguments based on the legislative scheme and purpose, and detailed linguistic arguments.
The Lord President dealt most fully with statutory construction (paras 45 to 49).
He cited the well known speech of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 9991000, in which Lord Steyn referred to Lord Wilberforces seminal speech in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, 323: Lord Wilberforce restated the principle of statutory construction that a subject is only to be taxed upon clear words .
To the question What are clear words? he gave the answer that the court is not confined to a literal interpretation.
He added 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.
This sentence was critical.
It marked the rejection by the House of pure literalism in the interpretation of tax statutes.
The Lord President ultimately decided the issue by applying the clear words principle in the light of his view of the statutory purpose (paras 55 and 56).
Lord Emslie relied on the same principle, and some other principles which he set out at para 197: Since this appeal concerns the construction of tax legislation, certain fundamental rules, principles and presumptions may be thought to apply.
First, as Lord Wilberforce explained in Vestey v Inland Revenue Commissioners [1980] AC 1148, 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
Second, in the absence of specific charging provisions, capital and capital receipts do not fall to be taxed as revenue and vice versa.
Third, corporation tax being an annual tax on the profits of a company, it is prima facie reasonable and appropriate to construe statutory charging provisions as directed towards real receipts and gains . in a sense which no commercial man would misunderstand: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
And fourth, as reflected in countless provisions of the taxing statutes, a subject is in general assessable to tax on his own profits and gains, and not on those of any third party.
The second, third and fourth of these principles (and especially the second) may be what the Special Commissioners had in mind (in para 79 of their decision) in a more general reference to tax principles as predisposing them in the Companys favour, and in characterising the transfer from the Capital Reserve as a capital receipt (para 80).
Arguments based on the legislative scheme and purpose move from the very general to the rather more particular.
What was the underlying purpose of section 83? In particular was it intended, as the Lord President stated in para 55 of his judgment, to reverse the effect of section 433 of ICTA 1988? Is there a key conceptual distinction (Lord Emslie, para 201) between the Companys LTBF and the assets representing that fund? Was a transfer from the Capital Reserve a capital receipt comparable to an injection of new capital (Special Commissioners, para 80)? How cogent is the argument (Lord Reed, para 183; Lord Emslie, para 197, fourth point, and para 205, second point) that one taxpayer should not be taxed on another taxpayers profits or gains? What practical results do the statutory provisions produce if construed (Lord Emslie, para 200) as a one stage or alternatively a two stage process? I shall consider these points in turn.
Legislative scheme and purpose
It is permissible, without getting into the territory of Pepper v Hart [1993] AC 593, to look at the official consultation paper published in 1988, The Taxation of Life Assurance, to see the general nature of the problem perceived by the Revenue.
The most relevant paragraphs are paras 6.2 to 6.7, 6.12 to 6.21, 6.33 and 7.1 to 7.8 A life office might have a large capital gain on a long term income producing investment (such as a fully let office block or a strategic holding of shares in an oil company) as part of the with profits part of its LTBF.
Before 1989 this gain could be recognised (or brought into account) in its revenue account without being realised so as to give rise to a chargeable gain.
Value representing at least nine tenths of the gain could then be distributed (in the form 58 sense, that is allocated) to the holders of with profits policies so as to obtain the protection of section 433 of ICTA 1988, as well as escaping income tax or capital gains tax in the policyholders hands on the maturity of their policies (assuming them to be qualifying policies).
Section 83 of FA 1989 made the recognition of an unrealised capital gain a receipt to be brought into the Schedule D Case I computation, while section 82 of FA 1989 re enacted the substance of section 433 in a more satisfactory form.
All this is very clearly set out, in a good deal more detail, in paras 123 to 133 of Lord Reeds judgment (which refer to section 83 in the form in which it was originally enacted).
I respectfully think that in para 55 of his judgment the Lord President was to some extent running together the functions of sections 82 and 83, and misunderstanding the purpose of the two sections in tandem.
Lord Emslie referred to section 433 (para 200) but not to section 82.
In my opinion Lord Reeds analysis is to be preferred.
Section 83 is concerned with the immediate implications, in making the necessary Case I computations, of bringing into account all or part of the difference between book value and market value, and section 82 is concerned with the next stage of the computations, that is adjustments in respect of the distribution of surplus to holders of with profits policies (covered by form 58, lines 41 to 59).
The next point is the term fund.
It is, as both Lord Reed (para 112) and Lord Emslie (para 199) observed, used inconsistently both in ICA 1982 and in the regulatory forms.
But the two principal and relevant meanings, in this context, are clear (and here I am repeating ground I have already covered).
The LTBF is an actual, appropriated fund of identifiable investments, the constituent assets of which (with their admissible values) appear in form 13.
The Capital Reserve is a notional part of that fund to an initial amount of 4,455m; the independent actuarial experts agreed that it serves no regulatory purpose.
The fund for the purposes of lines 39, 49 and 59 of form 40, and for all the purposes of form 58, is the same fund, but valued in a special way (that is at book values in the sense that actuaries use that term) in order to produce the life offices objectives solvency and prudent preservation of the investment reserve, but at the same time smooth progress in the allocation of bonuses to with profits policies.
I am not sure that I understand para 201 of Lord Emslies judgment.
In that paragraph he is (as I understand it) setting out part of the submissions made on behalf of the Company.
But later (para 204) Lord Emslie himself accepted that there is a significant distinction between the assets and the fund itself.
Of course there is a difference, the difference between the parts and the whole.
But the value of the whole is in this case the sum of the values of the parts, and the significant distinction, affecting both, is the basis of valuation.
It is common ground that if in 2001 or 2002 the Lloyds TSB Group had decided to inject fresh capital into the Companys LTBF (as might have been done by the Company issuing new shares to Holdings, paid for in cash that was appropriated to the LTBF) it would not have been treated as a receipt under section 83(2).
The new money would have appeared on line 26 of form 40 (transfer from non technical account).
The admissible value of the LTBF would have been increased, and so (if it was needed for solvency purposes) would its value as brought into account (lines 39 and 59 of form 40).
A transfer from the Capital Reserve, by contrast, costs the group nothing (although it may be an indication that the state of the business is disappointing).
The transfer does not increase the market value of the LTBF.
Nor has it any regulatory significance, as the experts agreed.
What happens is that part of the value held in the investment reserve is brought into account, a familiar event generally recorded (as Mr Allen stated, though Mr Chamberlain disagreed) on line 13 of form 40.
I respectfully consider that the Special Commissioners, and to some extent the Court of Session also, attached too much weight to the label Capital Reserve and to the notion that capital gains ought not to be taxed under Schedule D, Case I.
It could not be clearer that under section 83(2)(b) any increase in value (whether realised or not) of investments constituting a LTBF, as brought into account, is to come into the Case I computation.
The argument that (in the absence of very clear words) one taxpayer ought not to be taxed on another taxpayers profits or gains is, on the face of it, a strong one.
It is not satisfactorily answered simply by pointing out (though this should not be forgotten) that this appeal is not about taxing profits.
It is about allowing losses capable of being surrendered for the benefit of other group companies.
But the Company acquired a long established mutual business and a LTBF with a healthy investment reserve.
That reserve may have been built up by the Society largely by means of unrealised gains.
But it was the Company and the Lloyds TSB Group that decided, for entirely understandable reasons, to bring part of the investment reserve into account, rather than making an injection of new capital.
The language of section 83(3)(b) (as amended in 1996) shows that Parliament had demutualisation well in mind as a situation for which the legislation should make provision.
The last general point to be considered, before getting to linguistic arguments, is the implication of Lord Emslies illuminating distinction (para 200, summarising the Companys argument, and para 204, accepting it) between a two stage process (asking whether there are any real gains, and then how far they have been brought into account) and a one stage process (asking simply what increase in value, if any, has been brought into account).
Again, it is necessary to be reminded that this appeal is about losses, not gains; and the three accounting periods have to be considered separately, and not as a whole.
In any accounting period the operation of the statutory provisions, if analysed as a two stage process, allows six different combinations, although some of them may be fairly improbable in practice, as follows (AV denoting admissible value, and RV value recognised and brought into account): (1) AV up, RV up by less (2) AV up, RV up by more (3) AV up, RV down (4) AV down, RV down by less (5) AV down, RV down by more (6) AV down, RV up.
It is easy to see how the competing interpretations work in situations (1), (2), (4) and (5).
On the Companys two stage approach the lower figure (whether an increase or a reduction) will be brought into the computations; on the Revenues one stage approach the difference in RV will always be taken.
But it is not so easy to see how either sides interpretation would apply to situations (3) and (6); and the Companys regulatory return for 2000 disclosed situation (6).
It might be thought that though neither sides interpretation fits easily, the Companys two stage approach is distinctly more difficult to reconcile with the situation in which there is a reduction in admissible value, but an increase in value brought into account, in an accounting period, and the Company is seeking to establish an allowable loss during that period.
But so far as I can see that submission was not made either to the Special Commissioners or to the Court of Session, nor do I recollect it being put forward in this Court.
The terms of the agreed question do not positively require the point to be resolved.
Indeed SFI, para 63 suggests that the point may already have been agreed between the parties.
So the best course is, I think, to exclude that point, which was not argued, from any consideration of the statutory scheme and purpose.
Nevertheless, unlike the Special Commissioners and (to some extent) the Court of Session, I do not approach the narrower linguistic points with any predisposition in favour of the Companys case.
I approach them disposed towards the Revenues case as being more in accordance with the statutory scheme and purpose.
Linguistic points on the first issue
I can take these more shortly, and it is convenient to do so by reference to the numbered sub paragraphs at the end of para 181 of Lord Reeds judgment.
The first point is that an increase in value . of . assets is said to refer most naturally to capital gains.
In some contexts it might do so.
In the context of a system of computation which is closely and explicitly linked to the regulatory returns in respect of LTBFs I see little force in this point.
What is important is how value is to be measured, and to my mind sections 83(2) and 83A leave no doubt about that.
The second point is on the words (whether realised or not) in section 83(2)(b).
The section was making an important change in the law in that unrealised increases in value, so far as brought into account, were to come into the tax computation.
To my mind it would have been surprising if the draftsman had not inserted this parenthesis so as to leave no doubt as to the character of the change in the law.
The third point is on another parenthesis in section 83(2), (and not otherwise), though these words have come out in the text of Lord Reeds judgment before us as or otherwise.
Again, I have to say that I think the draftsman is being rather unfairly criticised for his efforts to leave no doubt about the intended meaning.
The preceding word as means in the manner that and the parenthesis means and in no other manner.
To my mind it is a bit hard to dismiss this as otiose.
Lord Reeds fourth point is that the expression brought into account is not apt to describe the overall effect of those entries.
I confess that I simply do not understand this point.
The critical entry is line 13 on form 40 (increase (decrease) in the value of non linked assets brought into account).
That is the only line on form 40 in which the words brought into account are found.
It was conceded that the line 15 entry could have been on line 13.
The bottom lines (39, 49 and 59) show the overall position, and do not use the words brought into account.
Lord Reeds remaining points on the first issue (in para 181(5) and (6) and para 183) are more general and I will not revisit them.
Conclusion
In my judgment the Revenues submissions on the first issue are correct, both as to the statutory scheme and purpose and as to the linguistic points just mentioned.
I have gone into the matter at some length because I am conscious that I am differing both from the Special Commissioners and from the unanimous view of the Court of Session.
But in the end I consider that it is simply a question of giving section 83(1) and (2) of FA 1989, as amended, their natural meaning.
On that basis the second issue does not arise and I prefer to say nothing about it.
I would allow the Revenues cross appeal and treat the Companys appeal as moot.
LADY HALE
As so often happens, what appears at first sight to be a very complicated question turns out on closer analysis to be quite a simple one.
When calculating the profits of an insurance company in respect of its life assurance business under Case 1 of Schedule D to the Taxes Act, does an increase in value or conversely a reduction in the value of the assets of its long term business fund refer to an increase or decrease in their actual value? Or does it refer to an increase or decrease in their value as brought into account for a period of account in the companys revenue account prepared for the purpose of the Insurance Companies Act 1982?
We know that the words as brought into account for a period of account (and not otherwise) in section 83(2) of the Finance Act 1989 (set out by Lord Walker at para 41 above) describe the words the following items; we know that the following items are (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets; we know from section 83A (set out by Lord Walker at para 74 above) that brought into account means brought into account in the revenue account (or accounts) prepared for the purposes of the Insurance Companies Act 1982 in respect of the companys long term business (or part of it); so the linguistic question boils down to what is meant by as in section 83(2).
The Company would have it that as means when.
The link to the regulatory returns is a purely temporal one.
Value means real value not whatever the company chose to put in the forms.
The Revenue would have it that as means as.
What is taken into account in computing the companys profits for income tax purposes is what the company brings into account in completing its revenue accounts for regulatory purposes.
In my experience, if Parliamentary counsel mean when, they write when, and if they mean as, they write as.
We should be slow to re write what they have written.
The words and not otherwise, if nothing else, make it clear that there might have been some other way of taking items (a) and (b) into account for income tax purposes, but this is the way it is to be done.
They are making a special rule for life insurance business.
This is not surprising, for all the reasons that Lord Walker has so clearly and carefully explained.
The words whether realised or not point to the real change which was being made by the 1989 Act.
Otherwise it was business as usual.
It was not until 1995 that these insurance companies were required to file any other sort of accounts than those which they had to file for regulatory purposes.
It was natural for the Revenue to use the figures in the regulatory revenue account as their starting point.
In full agreement with Lord Walker, and Lord Hope and Lord Neuberger, therefore, I would allow the Revenues cross appeal and regard the Companys appeal as moot.
LORD NEUBERGER
I too would recall the interlocutor of the Inner House of the Court of Session and allow HMRCs cross appeal.
Having had the great benefit of reading in draft the judgments of Lord Hope and Lord Walker, I can express my reasons shortly.
The cross appeal raises an issue as to the meaning of section 83(2) of the Finance Act 1989 (as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995).
It is unnecessary for me to set out section 83, as it is fully quoted in para 7 of Lord Hopes judgment and para 73 of Lord Walkers judgment.
As will be clear to anyone who has read those judgments, the difficulty in this case arises from the fact that the issue of interpretation arises in the context of a very complex background.
That complexity is attributable to a number of different factors, namely (i) the technical rules as regards the regulatory returns to be made by life assurance offices, (ii) the many changes in the legislation embodying those rules since they were first introduced in 1870, (iii) the many changes in the statutory provisions governing the taxation of life assurance offices, (iv) the extensive contractual provisions in the documentation governing the scheme (the scheme) for transferring of the business of Scottish Widows Fund and Life Assurance Society to Scottish Widows plc (the Company), and (v) the details of the regulatory returns made by the Company in the three accounting years in issue.
When considering the application of section 83(2) to the facts of this case, I am sceptical about the value of analysing the history of the statutory provisions governing either the returns to be made by life assurance offices or the taxation of profits made by life assurance offices i.e. what I have characterised as factors (ii) and (iii).
This cross appeal concerns the meaning of the statutory provision in force during the three relevant years, section 83(2), and its impact on the returns actually made in respect of those years, in the then stipulated form by the Company.
Particularly as the provisions of the scheme, the prescribed forms for returns, and the contents of the Companys returns for the three years in question, all require careful analysis, it seems to me that to focus in addition on the rather intricate history, as opposed to the present provisions, of the regulations, risks taking ones eye off the ball (or, as Lord Walker puts it, not seeing the wood for the trees).
Legislative archaeology has its place in statutory interpretation, but its role is limited.
Where a statutory provision, when read in its immediate statutory and practical context, has a meaning which is tolerably clear as a matter of language, and not unreasonable or unfair in terms of its consequences, it seems to me that little is to be gained, and much may be lost (in terms of time, expense and eventual confusion) by going into the genesis and development of the provision in earlier legislation.
As Lord Hope points out, such an approach is consistent with what was said both by Lord Wilberforce in Farrell v Alexander [1977] AC 59, 73 and by Lord Diplock in Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 6.
Once one understands the scheme, the relevant regulations, the forms, and the Companys returns for the three years in question, it appears to me that the answer to the question posed on the cross appeal, namely the meaning and effect of section 83(2), is tolerably clear.
I could not hope to equal the clarity of Lord Walkers analysis in paras 49 to 53, 57 to 70, and 82 to 91, and, very gratefully, adopt the benefit of his distillation of the various complex matters which he there explains.
Turning to the central issue on the cross appeal, the meaning of section 83(2), it may be a little glib to suggest that HMRCs case is ultimately vindicated by a single word.
However, if one was to isolate a single crucial point, it seems to me that it would involve focussing on the word as in that subsection, as Lady Hale suggested during argument.
Section 83(2) stipulates that the items which should be taken into account as receipts of [a particular accounting] period are to be those items identified in paras (a) and (b) as brought into account for [that] period of account.
The obvious and natural effect of the words which I have emphasised is that those items are to be taken into account for the period in question in the same way and to the same extent as they are brought into account for that period.
It was argued on behalf of the Company that the expression as brought into account for a period of account should be treated simply as a reference to the period in which the item was brought into account, and was not concerned with how the item was brought into account.
Particularly in the light of the inclusion of the word as, that does not seem to me to accord with the natural reading of the expression.
Although both the Company and HMRC relied on other provisions in the 1989 Act to support their respective cases on the meaning of the expression, I am unconvinced that they are of any real assistance.
Thus, it was suggested that the words (and not otherwise) in the subsection assisted the Companys interpretation.
I do not see how that is so: they are there simply to emphasise that an item is only to be brought into account if it falls within the expression, and therefore they can take the issue of what the expression means no further.
Equally, the fact that section 83A(1) (as inserted by paragraph 16 Schedule 8 to, the 1995 Act and amended by paragraph 6 of Schedule 31 to the 1996 Act) defines the term brought into account does not take matters further, as the position of each party is consistent with that definition.
The conclusion that HMRCs construction of section 83(2) is correct seems to me to be supported, rather than undermined, by the normal approach to taxation of business profits as explained by Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315 and by Lord Hoffmann in Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, [2007] SC (HL) 105, [2007] 1 WLR 1448, para 2.
In connection with taxing business profits, the concept of a profit should normally be accorded its proper meaning, which will obviously depend on the specific context, but current accountancy practice is generally a good, and often the best, guide as to the precise quantification of any profit.
In the case of a life assurance business, HMRCs case is that, in effect, statute requires the profit to be assessed by a rather unusual means, namely by reference to the returns in the regulatory forms.
This is entirely consistent with the normal approach to assessing the profits of companies for taxation purposes, as these returns effectively take the place of the statutory audited accounts, which are relied on to define the profits of the overwhelming majority of other businesses owned by limited companies.
Furthermore, although there is, at first sight, real force in the Companys argument that HMRCs case results in its business being taxed on some figure which cannot sensibly be said to be a profit, a closer analysis of the situation, as provided by Lord Walker in paras 81 to 90 and 95 to 105, shows that this is incorrect.
Accordingly, and in agreement with the fuller reasoning of Lord Hope and Lord Walker, I would allow HMRCs cross appeal.
As the cross appeal succeeds, it is unnecessary to consider the Companys appeal.
I agree with Lord Walker that it would be better not to go into the question whether the majority of the Inner House was right in finding for HMRC on section 83(3).
It is tempting to do so, given that there is a decision of the Inner House on the point.
However, at least on the basis of the argument we have heard on this appeal, it does seem to me that the interpretation of subsection (3) is rather difficult, and I think it would be better to wait for a case where the issue matters, not least as it may be that some assistance would be gleaned from the facts of such a case, which may throw light on the practical consequences of the rival interpretations.
LORD CLARKE
I confess that I was initially attracted by the approach of Lord Emslie to the issues in relation to both the cross appeal and the appeal.
However, having considered the masterly judgment of Lord Walker, I have found his reasoning compelling and agree with him (and indeed Lord Hope, Lady Hale and Lord Neuberger) that the Revenues cross appeal on the true construction of section 83(2) of the Finance Act 1989 as amended should be allowed.
Like Lord Walker, Lady Hale and Lord Neuberger, I prefer to express no view on the issue of the true construction of section 83(3).
I too would therefore allow the Revenues cross appeal and treat the Companys appeal as moot.
| UK-Abs | Scottish Widows Plc (Scottish Widows) is a life assurance company.
It was established in 2000, when it acquired the business of Scottish Widows Fund and Life Assurance Society (the Society) under a scheme of transfer which had been approved by the Court of Session in Scotland.
Scottish Widows acquired assets under the scheme which had an approximate value of 25bn, and it became subject to actuarial liabilities of approximately 19bn.
Members of the Society received compensation of approximately 5.8bn, which represented the surplus of the Societys assets over its liabilities at the time of the transfer.
The compensation was paid by Scottish Widows holding company, in return for the members of the Society giving up their right to participate in the surplus.
The scheme provided that Scottish Widows was to establish and maintain a Long Term Business Fund (LTBF) to fund its long term insurance business.
It also provided that there was to be a memorandum account within the LTBF, called the Capital Reserve.
This was said to represent the value of shareholders capital within the LTBF.
Life assurance companies are required to submit annual regulatory returns, in particular to demonstrate solvency.
Various forms are prescribed for these returns.
One these is known as Form 40, which is a revenue account in respect of the LTBF.
In the years following transfer the value of the assets of Scottish Widows LTBF fell substantially, principally because of falls in the stock markets.
To cover those losses and to allow for distributions to policyholders, Scottish Widows brought into account amounts on Form 40 for each of the accounting periods 2000, 2001 and 2002.
These amounts were recorded in line 15 of the relevant Form 40s.
They were described as transfers from the Capital Reserve.
Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business for the purposes of corporation tax.
In the terms that were in force between 2000 and 2003 section 83(2) provided that: [T]he following items, as brought into account for the period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
Section 83(3)(a) made provision for ascertaining whether or to what extent a company had incurred a loss in respect of its life assurance business where an amount was added to an insurance companys long term business fund as part of or in connection with a transfer of business to that company.
The Revenue maintained that the amounts to be brought into account as receipts for the computation of profits or losses for tax purposes under section 83(2)(b) or, in the alternative, under section 83(3)(a) were the amounts shown in line 15 on Form 40.
It maintained that the reference to a difference in value as brought into account directed attention to the figures that had been entered on Form 40, not the market value of the assets of the LTBF.
Scottish Widows argued that the words increase in value in section 83(2)(b) meant an increase in the actual value of actual assets, and that the words as brought into account were concerned with when the
increase was brought into account, not the extent of the increase.
Here the value of the assets of the LTBF had fallen during each of the relevant periods.
So there was no increase which could be brought into account.
The parties referred the question whether, in computing the Case I profit or loss of Scottish Widows for the accounting periods ending in 2000, 2001 and 2002, the amounts that fell to be taken into account as receipts to the Special Commissioners were the amounts shown in line 15 of Form 40.
It was agreed that, if Scottish Widows argument that it is actual values and not those amounts that should be taken into account is correct, it will have allowable losses in respect of those years of 28.7m, 612.6m and 431.3m.
The Special Commissioners answered the question in the affirmative.
They held that, although the amounts shown on Form 40 were not to be brought into account by section 83(2), they were covered by section 83(3)(a).
The Inner House unanimously dismissed the Revenues appeal against the decision on section 83(2) and by majority (Lord Emslie dissenting) dismissed Scottish Widows cross appeal against the decision in respect of section 83(3)(a).
Scottish Widows appealed and the Revenue cross appealed.
The Supreme Court unanimously allows the Revenues cross appeal and holds that the amounts that were to be taken into account as receipts by virtue of section 83(2) were the amounts shown on Form 40.
It therefore answers the question that was referred to the Special Commissioners in the affirmative.
Lord Hope and Lord Walker both give detailed judgments.
Lady Hale and Lord Neuberger give shorter judgments, agreeing with each other and with Lord Hope and Lord Walker.
Lord Clarke agrees with all of the judgments.
Although the applicable statutory provisions had been amended on various occasions, it was not helpful to look at their legislative history.
That should only be done where there is an interpretative difficulty which classical methods of construction cannot solve.
The proper approach was to concentrate on the wording of sections 83(2) and (3)(a) as they were during the relevant accounting periods: [15], [73], [122] [124].
Lord Walker analyses in detail the regulatory and taxation regime which applies to life assurance companies and the particular features of the demutualisation scheme so as to provide a backdrop to the statutory construction: [40] [71].
There were two particularly important points.
One was that when completing regulatory returns, book values could be used, and that an insurer enjoyed a certain freedom in determining what amount of its actuarial surplus to recognise in its returns: [82] [86].
It was also particularly important to appreciate the nature of the Capital Reserve.
It was not a fund of particular assets, separate from the LTBF, but was merely an accounting category recording an initial value within the LTBF: [87] [91] [101].
The key to interpreting section 83(2) was the phrase as brought into account and, in particular, the use of the word as: [22], [76], [116], [125].
This demonstrated that the computation must proceed on basis of what was actually entered on the appropriate regulatory account, in this case the form known as Form 40.
It was important that, when completing its returns, an insurance company should be permitted to use book values: [20].
The various arguments which were advanced in favour of Scottish Widows construction, based on general principles of interpreting tax legislation ([24] [26], [101] [102]), the statutory scheme and specific aspects of the drafting ([23], [107] [112]), fell to be rejected in the face of this clear statutory language.
The Special Commissioners and, to some extent, the Court of Session had attached too much weight to the label Capital Reserve, which had led them to attach undue weight to the notion that capital gains ought not to be taxed under Schedule D, Case I: [26], [101].
Given that the Court allows the Revenues cross appeal, a majority preferred to express no view on section 83(3)(a).
Lord Hope indicated that, had it been necessary to decide the point, he would have held in agreement with the majority in the Inner House that the relevant amounts would have been covered by section 83(3)(a): [28] [31].
|
This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) in a joint referral to the Special Commissioners by Scottish Widows Plc (the Company) and Her Majestys Revenue and Customs (HMRC) under para 31 of Schedule 18 to the Finance Act 1998: [2010] CSIH 47, 2010 SLT 885, 2010 STC 2133.
The question that was referred to the Special Commissioners for their determination was in these terms: Whether in computing the Case 1 profit or loss of Scottish Widows plc for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is agreed that the words as receipts, which were not in the question as referred, may be understood as following after the words into account.
The Special Commissioners answered that question in the affirmative.
The Company appealed against that decision and HMRC cross appealed.
The Court of Session by a majority (Lord Emslie dissenting) refused the appeal and unanimously refused the cross appeal.
Both sides have appealed against its decisions to this court.
The essence of the dispute between the parties is whether, in each of the three consecutive years in question, part of the entry in line 15 of the Companys form 40 must be taken as falling within the scope of either section 83(2) or section 83(3) of the Finance Act 1989, as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995 and paragraph 4 of Schedule 31 to the Finance Act 1996.
If it falls within the scope either of these two subsections, the sum concerned will fall to be treated as a chargeable receipt for the purposes of Case 1 of Schedule D in ascertaining whether, and if so to what extent, the Company made a loss during those years.
The Company carries on business as a life assurance company.
Insurance business is a trade within the meaning of Case 1 of Schedule D: Income and Corporation Taxes Act 1988, section 18.
The amounts to be taken into account in computing its profits include its investment income from its long term business fund and any increase in the value of its assets during the accounting period.
Those profits may be computed for tax purposes in one or other of two ways.
They may be computed on the Schedule D, Case 1 basis, the actuarial surplus being a suitable starting point for dealing with cases of this description: see Scottish Union and National Insurance Co v Inland Revenue (1889) 16 R 461, 475, per Lord President Inglis.
Or they may be computed on the basis of the income which the insurer receives on its investments less management expenses, known as the I E basis.
HMRC are entitled to elect to charge tax on the investment income, and they almost invariably do so as it nearly always pays the Crown to take the interest on the investments and not to trouble with the profits: Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227 per Lord President Dunedin.
But a Case 1 computation is nevertheless required in every case.
The dispute between the parties arises from the demutualisation in 2000 of the Scottish Widows Fund and Life Assurance Society (the Society) and the transfer, under a scheme sanctioned by the Court, of its business to the Company.
The scheme came into effect on 3 March 2000.
In para 22.1 it was provided that on or after the effective date the Company was to maintain a memorandum account within its long term fund, designated as the capital reserve, which was to represent the amount of the shareholders capital held within the long term business fund.
The capital reserve was to be divided between the Companys with profits fund and its non participating fund.
Para 22.4 provided that the Company was to maintain records of the capital reserve and of the parts of it allocated to each of these two funds.
While the funds comprised identifiable assets with all the qualities that attach to items of that kind, the capital reserve was a device or, as Lord Walker says in para 55, an abstraction.
It was created for accounting purposes only and had no real life of its own.
At the time of the transfer to the Company the value of the Societys assets was substantially in excess of its liabilities.
But the Company sustained trading losses in each of the relevant accounting periods.
The market value of its assets decreased from the inception of its long term business fund, due principally to falls in the value of the stock market.
The Company claims that account should be taken of its commercial losses in its non participating fund during the relevant accounting periods.
It has included Case 1 losses in its tax returns and computations for those periods equal to 28,689,437, 612,583,866 and 431,261, 757 respectively.
HMRC maintain that, on a proper construction of section 83(2) of the 1989 Act, which failing of section 83(3), and having regard to entries in the Companys statutory returns for the relevant periods in which it was required to show that it had a surplus in excess of its liabilities for regulatory purposes, these claims should be disallowed.
The Company brought various sums into account, described as transfers from the capital reserve, in the years in which they sustained losses.
HMRC submit that each increase in the regulatory value selected by the Company falls to be treated as an increase in the value of its assets within the meaning of section 83(2)(b).
In any event the amounts brought into account and recorded as transfers from the capital reserve fall to treated as receipts under section 83(3) because they were amounts which had previously been added to the long term business fund as part of the transfer of business to the Company from the Society.
The statutory provisions
Section 83, as amended, so far as relevant to this case provides as follows: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
In section 83(8) of the 1989 Act, as amended it is provided that the word add in that section, in relation to an amount and a companys long term business fund, includes transfer (whether from other assets of the company or otherwise).
Section 83A(1), which was inserted by section 51 of and paragraph 16 of Schedule 8 to the Finance Act 1995 and amended by paragraph 6 of Schedule 31 to the Finance Act 1996, provides that brought into account in sections 83 to 83AB (as inserted by paragraph 5 of Schedule 31 to the 1996 Act) means brought into account in an account which is recognised for the purposes of those sections.
Section 83A(2) provides: Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) any separate revenue account required to be prepared under that Act in respect of a part of that business.
Paragraph (b) above does not include accounts required in respect of internal linked funds.
The revenue account that section 83A(2)(b) refers to is the regulatory return in form 40: see para 12, below.
Section 431 of the 1988 Act contains a list of interpretative provisions relating to insurance companies.
They include a definition of the word value: see section 83(2)(b) of the 1989 Act.
It is in these terms: value, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the companys periodical return.
Insurance companies are under an obligation to submit annual returns to the Financial Services Authority (FSA) for regulatory purposes.
The purpose of these returns is to demonstrate that the insurer meets the regulatory standard of solvency.
They are required to show the results of a statutory actuarial investigation, which calculates the value of the insurers liabilities and identifies the amount of surplus in excess of those liabilities.
They must show that there is a sufficient surplus to cover any declared bonuses.
At the time of the demutualisation the relevant regulations were to be found in the Insurance Companies Act 1982, the Insurance Companies Regulations 1994 (SI 1994/1516) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943).
Section 17 of the 1982 Act provides that every insurance company carrying on insurance business in the United Kingdom must prepare a revenue account for each financial year of the company, a balance sheet and a profit and loss account, the contents of which are to be such as may be prescribed by regulations.
Section 18 provides for an actuarial investigation once in every period of twelve months of every insurance company which carries on long term business.
Section 28 provides that it must maintain an account of the assets and liabilities attributable to its ordinary long term insurance business.
Regulation 45(6) of the 1994 Regulations provides that an insurance company may, for the purposes of an investigation to which section 18 of the Act applied, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company.
This was already a practice of long standing in the insurance industry.
For a detailed description of the background to these requirements and to the provisions of the Finance Act 1989 about the taxation of the life assurance business of an insurance company, reference may be made to Lord Reeds opinion in the Court of Session to which, like Lord Walker, I would pay tribute: 2010 SLT 885, paras 91 126.
A useful summary of the FSA regime that was in force at the relevant time is to be found in Lord Emslies opinion, para 198 (ix) to (xii); see also Lord Walker, at paras 49 53, below.
In short, the regulatory returns which a company carrying on long term life insurance was required to complete and submit included a series of numbered forms.
Form 13 set out an analysis of all the companys admissible assets, entered at a value which broadly corresponded to their year end market value.
Form 14 set out in line 51 the amount by which the net admissible assets exceeded the companys long term business liabilities.
Form 40, which was headed Revenue account, set out revenue flows and expenditure for the Companys long term business fund, its with profits fund and its non participating fund, and the amount of each fund to be carried forward to form 58.
Form 58, which was headed Valuation result and distribution of surplus, determined the amount of the actuarial surplus by comparing the value of the insurers liabilities under the policies that it has issued with the fund shown on form 40.
The data that were used to prepare these regulatory returns were the same as those used to prepare the Companys statutory accounts.
The amounts that were calculated by the Company as the commercial losses of its non participating fund were derived from decreases in the market value of the admissible assets less liabilities in that fund during the relevant accounting periods.
For each of these periods, however, there were included in the figure entered as other income in line 15 of form 40 amounts described as transfers from capital reserve which reduced the capital reserve by an equivalent amount.
They should perhaps have been included as an increase in the value of assets brought into account in line 13.
But it is agreed that the way they fall to be treated does not depend on whether they were entered there or in line 15.
The Special Commissioners said there is no difference in principle, as both lines are brought into account in the total shown at line 19: para 51.
The amounts in aggregate for the relevant accounting periods were 33,410,000, 472,724,000 and 370,000,000 respectively.
The approach to construction
It is well understood that statutory provisions which bring profits and gains into charge to tax are to be construed as directed towards profits and gains in their natural and proper sense in a sense which no commercial man would misunderstand and that those words are equally applicable whatever the commercial concern may be: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
The objective is to ascertain and charge the true profits and gains of the business in question.
The requirement that there should be a true and fair view involves the application of a legal standard.
The courts are, in general, guided as to the content of the computation by expert opinions of accountants as to what the best current accounting practice requires: Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, 2007 SC (HL) 105, [2007] 1 WLR 1448, para 2, per Lord Hoffmann.
The special rules that section 83 of the 1989 Act lays down for the calculation of the profits of life assurance companies in respect of their life insurance business for the purposes of corporation tax are, in this respect, no different from the rules that apply to companies generally.
They provide a legal standard according to which these profits are to be ascertained.
As has already been noted, that section has been amended more than once.
But I do not think that it is helpful to look back into the legislative history.
Lord Wilberforce said in Farrell v Alexander [1977] AC 59, 73 that self contained statutes, whether consolidating previous law or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot solve.
Further amendments to section 83 were introduced by section 170 and paragraph 2 of Schedule 33 to the Finance Act 2003.
In Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 1716 Lord Diplock said that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
So the proper approach is to concentrate on the wording of sections 83(2) and 83(3) as they were at the relevant accounting periods.
With that background, and with the benefit of the much more comprehensive description of the facts that Lord Walker has provided and of the carefully reasoned opinions of all the judges in the Inner House, I now turn to the provisions of the 1989 Act which are under scrutiny in this case.
Section 83(2)
This subsection directs that there must be taken into account as receipts of the period for the purposes of Case 1 of Schedule D (a) the Companys investment income from the assets of its long term business fund and (b) any increase in value of those assets, in so far as these items have been brought into account by the Company.
The question is whether its language permits the Company to claim that it in fact sustained an allowable loss during the relevant period when the values as brought into account for that period indicate the contrary.
It is common ground that the reference to investment income in paragraph (a) of the subsection is a reference to actual income from assets actually comprised in the long term business fund.
The Company submits that, by parity of reasoning, the reference to any increase in value in paragraph (b) must be taken to be a reference to something that can be recognised on a commercial basis as a real increase in real assets.
So the word assets in both paragraphs meant assets of the long term business fund which had the capacity to earn income and to grow in value.
The fact was that its assets had decreased, not increased, in each of the relevant accounting periods.
The amounts included in line 15 of form 40 were there for regulatory purposes only.
They were book entries which had no commercial validity.
The fact was that the assets of the long term business fund had decreased, not increased, in each of the relevant accounting periods.
The mere fact that an amount, such as interest on unpaid tax, was entered in form 40 did not mean that it was taxable.
To arrive at a true and fair view it was necessary to go behind the entries on the forms and look at the facts.
In the Court of Session the judges of the First Division were unanimous in accepting this argument and rejecting the argument for HMRC.
The Lord President said that he was unable to accept that the contents of the revenue account that had been prepared for regulatory purposes had the definitional character for which HMRC contended.
The fact that the investment income was inevitably an actual receipt suggested that the increase in value should be an actual sum, as opposed to an accounting element: para 54.
Lord Reed made the same point in para 181, adding that the words whether realised or not were a strong indication that section 83(2) was concerned with real gains rather than a change in notional values.
Lord Emslie said that, consistent with the long established distinction between assets and fund, the reference to an increase in value of assets should be taken as reflecting commercial reality in the form of actual increases in the value of assets: para 204.
As Mr Andrew Young QC for HMRC pointed out, however, that section 83(2) is a special rule for the computation of the profits of an insurance company in respect of its life assurance business.
The general rules for the computation of profits and gains for the purposes of Case 1 of Schedule D must be taken to have been modified to the extent provided for in this subsection.
The Company was being taxed on the I minus E basis and it is this subsection, not the rules that are generally applicable, that must be construed.
An insurance company is entitled to elect, under regulation 45(6) of the 1994 Regulations, to assign to any of its assets the value given to the asset in the books or other records of the company.
Section 83(2) can be taken to have been drafted in the light of the fact that insurance companies almost always, if not invariably, choose to use book values (in the sense indicated by regulation 45(6)) to arrive at the necessary balance in form 40 to demonstrate solvency to the regulatory authority.
Once this point is grasped, it seems to me that the meaning to be given to section 83(2)(b) falls fairly easily into place.
The wording of the subsection follows that of the forms.
While the investment income in paragraph (a) is real income, the increase in value referred to in paragraph (b) may or may not be a real increase.
The assets which gave rise to this increase in value may or may not be the same assets as those referred to in paragraph (a).
It depends on the content of the amounts shown in lines 13 and 15 of form 40.
Amounts taken from its long term business fund were used by the Company to supplement its trading income in each of the three years in question.
It chose to use its own book values, not values computed according to the current value of the assets of its long term business fund, to arrive at the final values that were brought into account on form 40.
In the absence of further directions in the statute as to how the increase in value is to be computed in cases where that option has been chosen and there are none I would hold that the increase in value referred to in paragraph (b) must be taken to be the amount which has been brought into account on the form.
The phrase as brought into account for a period of account in the opening words of the paragraph lies at the heart of this interpretation.
It was suggested by the Company that this phrase determined the period for which items were to be treated as taxable receipts but not the items which were taxable.
But this interpretation of the phrase does not, I think, give full weight to the word as.
Linked to the words the following items which precede it, the phrase indicates that the computation must proceed on the basis of the way the items have actually been entered on the forms.
If values shown in the books or other records of the company have been used, instead of market values, it will be the book values that will determine whether or not there has been any increase in value during the relevant period and, if so, how much that increase is.
The phrase and not otherwise was said to support the Companys interpretation of paragraph (b) because it indicated that it was being assumed that the items that were being brought into account when any increase in value was being assessed were items that could be realised, not notional ones.
But I think that their purpose is to make it clear that the basis of computation referred to in subsection (2) is the only basis that is relevant for the purposes referred to in subsection (1).
The words whether realised or not are there to indicate a change from the computation indicated by the original wording of section 83.
If the company chooses to bring unrealised increases in value into account, those increases in value must be taken into account as receipts for the period in the same way as increases that have been realised.
For these reasons I am unable to agree with the judges of the Court of Session as to the meaning and effect of section 83(2)(b).
But in para 205 of his opinion Lord Emslie made some further points which, as they were attractively put, need to be answered too.
He said that a factor which favoured the Companys construction of section 83(2) was that it accorded well with the general principles (1) that the ascertainment of receipts or gains for tax purposes should prima facie reflect commercial reality; (2) that income or gains to be taxed should prima facie be the taxpayers and not those of a third party; and (3) that the ordinary recognition of shareholders capital to cover actual trading should not prima facie be a chargeable receipt.
He described these principles in more detail in paras 197 and 198, and I agree with him that prima facie they can be taken to be a reliable guide as to how tax legislation ought to be construed.
But his use of the phrase prima facie indicates, if I may say so quite correctly, that these are not absolute rules that are incapable of being disapplied by the statute.
In this case we are dealing with special rules that have been designed to take account of the unique nature of the business carried on by life assurance companies.
That in itself suggests that it is the language of the statute, rather than these general rules, that should be the determinative factor in this case.
Taking Lord Emslies three points in turn, I would hold, firstly, that the language of section 83(2) shows conclusively that, if the insurance company chooses to use book values to arrive at the final values shown on form 40, it is on those values that the computation referred to in section 83(1) must be based.
This can be said to reflect the commercial reality of the life assurance industry, as the Companys taxable receipts were based on its own figures as submitted to the regulatory authorities to justify the surplus of assets that it wished to recognise.
Secondly, there is no question, in this case, of taxing the income or gains of a third party.
The values brought into account on form 40 are the product of assets that were vested in the Company when it established its long term business fund.
Their link with the Society was entirely broken when the transfer under the scheme took effect.
As to Lord Emslies third point, it must be appreciated that the capital reserve was not, as he said in para 202, ordinary shareholders capital.
The words themselves might be taken as suggesting otherwise, but I think that the name that was given to what the scheme described as a memorandum account is a distraction.
The reality is that the reserve had no life of its own separate from the long term business fund.
It was an accounting mechanism which the Company had established for its own internal accounting purposes as part of its long term business fund.
It did not consist of particular assets but was a financial structure which was subject to all the statutory restrictions and requirements to which that fund was subject.
In para 205 he said that, as the capital reserve was shareholders capital, its ordinary recognition to cover actual trading receipts should not prima facie be deemed a chargeable receipt.
But, as the capital reserve had no life of its own, amounts that were described as transfers from the reserve fell to be treated in the same way as any other assets comprised within the long term business fund for regulatory purposes and, in consequence, for the purposes of section 83(2) too.
For these reasons, and those given by Lord Walker, I would allow the HMRCs cross appeal.
Section 83(3)
As I would answer the question in the reference in favour of HMRC on the ground that the amounts in question fall to be taken into account as receipts under section 83(2) with the result that there was a corresponding increase in the assets of the long term business fund for each of the relevant accounting periods within the meaning of paragraph (b) of that subsection, the question whether section 83(3) applies to those amounts does not arise.
This is because section 83(4) provides that subsection (3) of that section does not apply where, or to the extent that, the amount concerned is taken into account under subsection (2).
But, as the judges of the Court of Session were divided in this issue and out of respect for the care which they took to examine it, I would like to make these few brief comments.
The exercise to which section 83(3) is directed proceeds in two stages which are, as Lord Reed said in para 191(1), conceptually distinct from each other.
First, there is the question whether an amount has been added to the companys long term business fund as a part of or in connection with a transfer of business to the company.
Section 83(8) provides that the word add includes transfer.
As for the facts of this case, amounts were added to the Companys long term business fund when the scheme took effect as part of the transfer of the Societys business to the Company.
The whole of the amount that was to be treated as the capital reserve for accounting purposes was added or transferred to the Companys long term business fund as an integral part of the scheme.
It seems to me to be plain, having regard to the terms of the scheme, that the addition to the Companys long term business fund was as part of or in connection with the transfer of the Societys business to the Company.
The fact that it was only later that some amounts were brought into account by way of what were called transfers from the capital reserve does not matter.
The second stage is the bringing of the amount into account for the period in question.
It seems to me that this occurs as and when, and indeed whenever, the amount is brought into account as an increase in value to reduce or eliminate a loss that would otherwise have occurred during the relevant period.
As Lord Reed said in para 191(2), there are understandable reasons why Parliament might consider that the use of amounts acquired on a transfer of business to offset liabilities resulting from normal patterns of trading which were not otherwise chargeable to tax should be disallowed.
I agree with him that, when the amounts were subsequently brought into account on form 40, they would but for the fact that they were already caught by section 83(2) have fallen to be treated by section 83(3) as chargeable receipts for the purpose of ascertaining whether or to what extent the Company had incurred a loss in each of the relevant periods.
Lord Emslies point, which he made in para 228 of his dissenting opinion, that the transfers were made in a non chargeable context is answered by the two stage nature of the exercise to which section 83(3) is directed.
It is not the context in which the transfer was made at the outset that determines the way in which the amounts fall to be treated when, at some later stage, they are brought into account.
Had it been necessary to do so to arrive at an answer to the question that was referred to the Special Commissioners, I would have affirmed the decision of the majority in the Inner House on this issue and dismissed the Companys appeal.
Conclusion
I would recall the interlocutor of the Inner House of the Court of Session, allow the cross appeal by the HMRC and answer the question referred to the Special Commissioners in the affirmative.
LORD WALKER
Introduction
On 3 March 2000 Scottish Widows plc (the Company), a new company within the Lloyds TSB banking group, acquired the principal assets and liabilities of the life assurance business of the Scottish Widows Fund and Life Assurance Society (the Society).
The Society had a long and distinguished history.
It was established in Edinburgh in 1814 upon the principle of mutual assurance.
It was incorporated by statute in 1861 as a company without a share capital and it remained a mutual life office that is an entity owned by its members, the policyholders, with no outside shareholders until the change in 2000, which has been referred to as demutualisation.
The process of demutualisation was achieved by a scheme of transfer approved by the Court of Session under section 49 of and Schedule 2C to the Insurance Companies Act 1982 (ICA 1982).
Some of the provisions of the scheme are of central importance to this appeal.
The transfers which it effected were on a very large scale: the Company acquired, in round terms, assets with a market value of the order of 25bn and became subject to actuarial liabilities of the order of 19bn.
The qualifying members of the Society received compensation of approximately 5.846bn, representing the difference (with various adjustments and enhancements) between the assets and the liabilities.
This compensation was paid by the Companys holding company, Scottish Widows Financial Services Holdings Limited (Holdings), which owns the whole of the Companys issued share capital.
The Societys assets included large holdings of equities as well as fixed interest securities, immovable property and other investments.
As it happens the United Kingdom stock market reached what was (and remains) an all time high in the new year of 2000, and in the first years of the Companys business the market value of its holdings of equities was substantially reduced.
This unexpected and unwelcome turn of events has led to a dispute between the Company and HM Revenue and Customs (the Revenue) as to the tax consequences.
On 11 October 2006 the Company and the Revenue joined in making a referral to the Special Commissioners under Schedule 18, para 31 of the Finance Act 1998.
The agreed question to be determined was as follows (with a small agreed explanatory addition): Whether in computing the Case 1 profit or loss of [the Company] for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is common ground that the answer to this question depends on two issues, one turning on the meaning and application of a general provision in subsection 83(2) (read with subsection (1)) of the Finance Act 1989 as amended (FA 1989), and the other turning on the meaning and application of a more particular provision in subsection 83(3) (read with subsection (4)) of the same section.
The Company must win on both issues in order to succeed.
Conversely it is sufficient for the Revenue to succeed if it wins on either issue.
The first issue, once understood, is a short point of construction.
But for the non specialist a lot of background, some of it quite technical, is required in order to understand the point, and to be able to weigh the linguistic arguments against more general considerations based on the legislative scheme and purpose.
The second issue (which arises only if the Company is successful on the first issue) is a rather more intricate point of construction.
The complex background, and the large amounts of tax at stake, help to explain why these two points of construction took four and a half days before the Special Commissioners, and no less than seven and a half days before the Court of Session.
The Special Commissioners (Mr J Gordon Reid QC and Dr John F Avery Jones CBE) decided the first issue in favour of the Company and the second issue in favour of the Revenue, so that the Revenue was successful.
The First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) reached the same conclusions on both issues, unanimously on the first and with Lord Emslie dissenting on the second: [2010] CSIH 47; 2010 SLT 885; [2010] STC 2133.
The Company now appeals on the second issue and the Revenue cross appeals on the first issue.
The historical background.
The first issue (the subject of the Revenues cross appeal) comes naturally before the second issue (the subject of the Companys appeal).
But before getting to the detailed arguments on either issue it is necessary to say something about the historical background, and to cover regulatory as well as taxation aspects, since these two aspects have become closely interrelated.
The background has already been covered with conspicuous thoroughness and clarity in the judgment of Lord Reed (paras 87 104), to which I gratefully acknowledge my indebtedness.
This part of my judgment is largely based on the fuller description by Lord Reed, with the addition of a few points of my own.
Life assurance, in its many different forms, has played an important part in British social and economic history.
Actuarial science was already developing by the beginning of the eighteenth century (one of the founding fathers, Edmund Halley, published a paper on The Degrees of the Mortality of Mankind, commissioned by the Royal Society, in 1693).
The Life Assurance Act 1774 addressed the problem of insurable interest and curbed the scandal of tontines, then fashionable in some wealthy circles.
Interest in life policies was by no means restricted to the wealthy.
The Society was only one (and among the most prominent in Scotland) of many mutual societies by which working men could insure against the risk of their families being left in penury in the event of the early death or disablement of the main breadwinner.
In England the most prominent comparable body was probably the Friends Provident Society, founded in 1832 (it was a registered friendly society, regulated by a different statutory system).
The growth of these mutual societies was remarkable: they had just over 700,000 members in 1803, over 3 million in 1887, and over 6 million in 1910 (there are fuller statistics in D. Green, Reinventing Civil Society, 1993).
The mutual movement went into decline after Lloyd George introduced a system of compulsory national insurance in 1911.
The public interest in life assurance as encouraging prudent self reliance was reflected in its tax treatment, though for the most part the incentives were directed to policyholders rather than life offices.
In 1870, after several life offices had run into difficulties, Parliament introduced a new system of regulation.
It was the foundation of the more elaborate system that we have today.
The Life Assurance Companies Act 1870 (LACA 1870) required life offices (whether mutual or proprietary) to keep proper accounts and to prepare annual financial statements consisting of a revenue account and a balance sheet in a prescribed form.
Regular actuarial investigations were made mandatory.
Lord Reed explains in his judgment (paras 91 94) how section 4 of LACA 1870 introduced for the first time the statutory concept of a life assurance fund held as security for the rights of holders of life policies and annuities.
This was the origin of what is now referred to as a life offices long term business fund (LTBF).
As regards taxation, during the 19th century and the first two thirds of the 20th century there was no corporation tax and no capital gains tax.
Companies were subject, in much the same way as individuals, to income tax assessed and charged under the various schedules and cases defined in the Income Tax Acts.
If a taxpayer received income which could be regarded as falling within more than one schedule or case, the Revenue could not claim tax twice, but could choose which schedule to apply.
This choice (sometimes referred to as the Crown option) was available to the Revenue in relation to proprietary life offices, which held large reserves of income producing investments in order to meet their actuarial liabilities and provide for unforeseen contingencies.
They could be taxed either on the profits of a trade under Schedule D Case I, or on their investment income as such.
It was usually more advantageous for the Revenue to make an assessment on the companys investment income, as Lord President Dunedin noted in Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227.
The Crown option was abolished by the Finance Act 2007 and replaced by mandatory provisions.
With a mutual life office the Revenue never had a choice, since mutual trading does not produce profits taxable under Schedule D Case I.
The first statutory provisions giving special tax treatment to life offices were in the Finance Act 1915.
Life assurance was to be treated as a separate business.
Annuity funds were to be taxed separately from life funds.
Life offices taxed on their investment income were to be allowed a deduction for management expenses (including commission paid to brokers).
This system of taxation is generally referred to as the I minus E (that is, income minus expenses) basis of assessment.
It remained open to the Revenue to choose to assess a life office to tax under Schedule D Case I, but the basis of that assessment was altered (and the likelihood of its actually being adopted by the Revenue was reduced) by section 16 of the Finance Act 1923 (FA 1923), which gave effect to a recommendation in the report, published in 1920, of the Royal Commission on Income Tax (Cmd 615).
Profits allocated to with profits policies were to be excluded from the life offices taxable profits.
This was not unprincipled, since on allocation the profits became liabilities.
This provision has been re enacted in successive consolidating statutes, and finally in section 433 of the Income and Corporation Taxes Act 1988 (ICTA 1988), the terms of which are set out in para 103 of Lord Reeds judgment.
Section 433 of ICTA 1988 was repealed and replaced by FA 1989.
The change made by FA 1923 was an important change.
In practical terms it diminished the difference in tax treatment as between proprietary and mutual life offices.
Its importance increased with changes in economic conditions in Britain during the second half of the 20th century (in brief, monetary inflation and the prospect of substantial capital gains from investment in equities and property).
The Society was required by its constitution and regulations (to be found in their final form in the Scottish Widows Fund and Life Assurance Act 1980), as the Company is required under the scheme, to allocate to the holders of its with profits whole life and endowment policies nine tenths of the with profits part of the gains which it recognised, or brought into account (the expressions mean the same), in the revenue account of its LTBF.
After the introduction of capital gains tax and corporation tax on chargeable gains, realised gains made by the Society were taxed at differential rates, the details of which are not material.
But unrealised gains could be recognised (or brought into account) in order to enable larger bonuses to be allocated and paid to with profits policyholders without having been taxed in the Societys hands.
This was perceived by the Revenue as a serious defect in the system, as appears from an official consultation document published in 1988, The Taxation of Life Assurance, (summarised in paras 123 126 of Lord Reeds judgment).
This document gives a summary of how during the 1980s the life assurance industry was rapidly evolving into being part of a larger savings industry, in competition with unit trusts and other savings media, and itself increasingly making use of unit linked policies rather than traditional with profit policies (investment by small savers in authorised unit trusts and approved investment trusts was encouraged in a different way, by deferring tax on capital gains until individual unitholders or shareholders realised their gains).
Section 83 of FA 1989, which is at the heart of this appeal, was part of the changes which Parliament made in consequence of this review.
It makes an express link between the imposition of liability to tax (or the creation of an allowable loss) under Schedule D Case I and the regulatory regime under ICA 1982.
It is therefore necessary, before coming to section 83, to give a short account of the regulatory regime in ICA 1982 and regulations made under it.
ICA 1982 and regulations under it
The regulatory system introduced by LACA 1870 had been re enacted and modified from time to time.
ICA 1982 replaced it with a similar but much more detailed system, elaborated in a number of statutory instruments, of which the most relevant for present purposes are the Insurance Companies Regulations 1994 (SI 1994/1516) (the 1994 regulations) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943) (the 1996 regulations).
Section 17 of ICA 1982 required every insurance company to which Part II applied to prepare with respect to each financial year of the company, a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account (or for a mutual an income and expenditure account) for the year.
Each of these was to be in a form prescribed by regulations.
Under the 1996 regulations (as amended down to the year 2000) different forms were prescribed for different types of insurance companies, and they were still required by the new regulatory system mentioned in para 55 below.
The form of balance sheet prescribed (by regulation 6) for companies carrying on long term business were forms 13 (relating to assets) and 14 (relating to liabilities).
These together made up the two sides of the balance sheet.
The form prescribed (by regulation 8) for companies carrying on long term business was form 40; if the company had more than one LTBF a separate account was required for each LTBF, and a consolidated form for all of them.
The Company has three LTBFs, a with profits fund, a non participating fund for business taken over from the Society, and a non participating fund for new business.
Section 18 of ICA 1982 required every insurance company to which it applied, and which carried on long term business, to cause its actuary to make an annual investigation of its financial condition, and to cause an abstract of the actuarys report to be made.
Assets were to be valued and liabilities determined in accordance with valuation regulations, and the abstract was to be in a form prescribed by regulations.
Under regulation 25 of the 1996 regulations (as under the new regulatory system) the most relevant of the prescribed forms to be included in the abstract was form 58.
Regulation 45 of the 1994 regulations (as amended down to the material time) dealt with valuation of assets.
After some general provisions in paras (1) to (5) it dealt specifically with actuarial investigations under section 18 of ICA 1982: (6) Notwithstanding paragraph (1) above (but subject to the conditions set out in paragraph (7) below), an insurance company may, for the purposes of an investigation to which section 18 of the Act applies or an investigation made in pursuance of a requirement under section 42 of the Act, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company. (7) The conditions referred to in paragraph (6) above are (a) that the election shall not enable the company to bring into account any asset for the valuation of which no provision is made in this Part of these Regulations; (b) that the value assigned to the aggregate of the assets shall not be higher than the aggregate of the value of those assets as determined in accordance with regulations 46 to 57 of these Regulations.
Section 28 and 29 of ICA 1982 required separate accounts and funds to be maintained for long term business, and for the assets representing those funds to be applicable only for the purposes of the appropriate business, except so far as the value of the assets was shown, on a statutory actuarial investigation, to exceed the liabilities attributable to the fund.
I shall have to come back to the prescribed forms.
I add one comment.
Lord Reed observed (para 112), and I agree, that the use of the word fund in ICA 1982 is not entirely consistent.
Lord Reed had earlier quoted an observation of Lord Greene MR in Allchin v Coulthard [1942] 2 KB 228, 234: The word fund may mean actual cash resources of a particular kind (e.g. money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.
This is an important distinction, although Lord Greenes reference to cash resources is a little surprising and may have been influenced by the context of the particular case before him (it concerned the taxation of a local authoritys general rate fund).
In the context of life assurance a LTBF is a fund of investments of various types, and it falls within Lord Greenes first category.
The investments (the assets of the fund) change from time to time, as and when the investment managers need to raise money or exercise their judgment to switch investments, and the values of the assets fluctuate constantly.
But at any time it is possible to identify the assets for the time being constituting the fund, which is a continuing entity.
By contrast the Capital Reserve established by the scheme approved by the Court of Session and put into effect in 2000 (and here I am putting down a marker for later parts of this judgment), if it was a fund at all, was a fund in Lord Greenes second sense.
It was an accounting abstraction and it never consisted of identifiable assets.
Before going on to the scheme it is convenient to record, out of chronological sequence, that ICA 1982 was repealed by a statutory instrument made under the Financial Services and Markets Act 2000 which came into full force on 1 December 2001 (having come into force at earlier dates for limited purposes including rule making powers).
In consequence the new regime applied to the second and third of the Companys accounting periods relevant to this appeal that is, the calendar years 2001 and 2002; the Financial Services Authority (FSA) became the regulator, and the system of regulation was prescribed by rules made by the FSA rather than by statutory instrument.
But the substance of the system, and the identifying numbers of the forms, were unchanged.
In particular, rule 9.10(c) of the FSAs Interim Prudential Sourcebook for Insurers Instrument 2001 reproduced the effect of regulation 45(6) of the 1994 regulations.
There were some minor changes of terminology in the forms, which were set out in Appendices 9.1 (forms 13 and 14), 9.3 (form 40) and 9.4 (form 58) of the 2001 instrument.
The scheme
The scheme for the transfer of the Societys business to the Lloyds TSB group was preceded by an agreement dated 23 June 1999 between the Society and Lloyds TSB Group plc.
The agreement provided for the scheme to be approved by a special resolution of the Society in general meeting (which duly occurred) and for an application to be made to the Court of Session for sanction of the scheme under section 49 of and Schedule 2C to ICA 1982.
The Court of Session (Lord Nimmo Smith) sanctioned the scheme by an order made on 28 February 2000, and the scheme took effect on 3 March 2000.
The scheme also obtained regulatory approval and tax clearances.
The scheme is lengthy and in parts very technical.
It runs to 41 clauses and 12 schedules.
In bare outline, the bulk of the assets and liabilities of the Society were transferred to the Company; pension policies and assets and liabilities associated with them were transferred to another Lloyds TSB group company and are not relevant to this appeal.
Payment of the membership compensation to qualifying members of the Society (later quantified at 5,846m) was undertaken by Holdings, which is the owner of all the Companys issued share capital.
The provisions of the scheme which call for most attention are in Part D (Fund Structure) and Part E (operation of the Funds).
Clause 22 in Part E (Capital Reserve) is of particular importance.
Under Part D (Fund Structure) the most basic division was between the LBTF (defined as the Long Term Fund) and the Shareholders Fund.
The latter fund was to have allocated to it infrastructure assets and shares in seven subsidiaries and any joint venture companies (clause 15.1 and relevant definitions in Schedule 1).
All other assets (other than pension assets as mentioned above) were to be allocated to the LTBF, which was to be divided into two separate subfunds, the With Profits Fund and the Non Participating Fund (respectively the WPF and the NPF), with an appropriate allocation of existing policies (clauses 13 and 14.1).
The allocation of assets between the WPF and NPF was to be determined by the actuary in accordance with the detailed provisions of clause 15.2 to 15.6, 15.10 and 15.11.
Liabilities were to be similarly matched, subject to some special exceptions (clause 16).
In part E (Operation of the Funds) clause 18 deals with allocation of surplus arising in the WPF.
One ninth of the amount of bonuses allocated to conventional (that is, not unit linked) with profits policies (in other words one tenth of the gross allocation) is to be allocated to the NPF or the Shareholders Fund, as the board directs.
All other surplus is to be applied as bonus for the benefit of holders of with profits policies.
This replicates the position under the Societys constitution and regulations (para 47 above).
In life offices shorthand the WPF is a 90/10 fund.
The NPF, by contrast, is a 0/100 fund.
Following each actuarial valuation of the NPF the board may transfer to the WPF statutory surplus arising in the NPF (clause 21).
Finally I come to the Capital Reserve, provided for in clause 22.
Clause 22.1 is as follows: On and after [3 March 2000], [the Company] shall maintain a memorandum account within the [LTBF] designated as the Capital Reserve (the Capital Reserve).
At [3 March 2000] the Capital Reserve shall represent the amount of the shareholders capital held within the [LTBF].
Clause 22.2 provides for the Capital Reserve to be credited with an amount arrived at by a complicated formula.
It is common ground that this amount was 4,455m.
Clause 22.3 (headed Maintenance of Capital Reserve) provides that no more may be added to the Capital Reserve and that it may be reduced only by being brought into account in the revenue account of the WPF (up to a limit arrived at by a formula) or the revenue account of the NPF (without limit).
There does not seem to have been a finding or formal agreement as to the amount of the WPF limit, but the unchallenged evidence of Mr Adrian Eastwood, the Companys actuarial director at the material time, was that the amount was 432m.
Clause 22.4 to 22.6 provided for the Capital Reserve to be notionally allocated between the WPF and the NPF.
The initial division was 1,895m to the WPF and 2,560m to the NPF.
Tables B and C annexed to the agreed statement of facts and issues (SFI) show how the Companys opening capital of 4,769m in its LTBF can be reconciled with the opening Capital Reserve (4,455m) and the membership compensation (5,846m).
Clause 22A of the scheme provided for what was described as a contingent loan, free of interest, from the NPF to the WPF, repayable as mentioned in that clause.
Its purpose was to compensate the WPF for the fact that its right to future profits could not be included, for regulatory purposes, as an asset with an admissible value.
This inter subfund loan (described in SFI, para 29) hardly featured in the parties written and oral submissions, but it is a further complication in understanding the regulatory forms, to which I now turn.
The forms
The balance sheet consists of forms 13 and 14.
Form 13 sets out the values of the assets of the fund (that is, the LTBF or a subfund of it) at their admissible values (a technical term which in practice was not less than 99% of market value).
The effective bottom line of form 13 is line 89, Grand total of admissible values.
Form 14 sets out liabilities and margins.
For present purposes the most important lines are: 11, mathematical reserves (that is, actuarial liabilities which have not yet been finally quantified); 13, balance of surplus (or valuation deficit); 14, LTBF carried forward; 49, total other (ie non actuarial) liabilities; 51, excess of the value of net admissible assets; and 59, total liabilities and margins.
The entries at line 89 of form 13 and line 59 of form 14 must be the same.
The balancing items on form 14 are the figures entered at line 13 (balance of surplus) and line 51 (excess of the value of net admissible assets, which is also called the investment reserve: SFI para 53(2)).
The interrelation between the figures at lines 13 and 51 of form 14 is that the line 13 figure is generally a relatively small amount representing value that has been brought into account but not yet finally appropriated.
The line 51 figure is the true balancing figure, and is the last figure to be entered on the form.
It represents the (generally very much larger) value that has not yet been brought into account at all the amount by which the admissible value of the LTBF assets exceeds the book value that has been brought into account.
It illustrates the proposition stated (perhaps in rather question begging terms) in para 9 of the Revenues written case, that life offices are treated differently from most businesses in that they can shelter profits from taxation to meet unforeseen future liabilities.
This point is discussed further in paras 82 to 86 below headed Bringing assets into account at book value.
Form 40, the revenue account, shows movements during the accounting period.
The most important lines for present purposes are 11, earned premiums; 12, investment income; 13, increase (or decrease) in the value of non linked assets brought into account; 14, increase (or decrease) in the value of linked assets; 15, other income; 19, total income; 29, total expenditure; 39, increase (decrease) in fund in financial year; 49, fund brought forward; and 59, fund carried forward (39 + 49).
The entry at line 49 must be the same as line 14 on form 14 for the previous accounting period, and the entry at line 59 must be the same as line 14 on form 14 for the current period.
As to lines 13 and 14, Lord Reed explains in his judgment (para 116) that any increase or decrease in the value of linked investments (line 14) is required to be brought into account automatically, but unrealised increases in the value of non linked assets (line 13) need not be brought into account.
Form 58 (valuation result and distribution of surplus) shows the actuarial surplus (line 29), its movement during the accounting period (lines 31, 34 and 35), and its distribution as between policyholders (line 46), shareholders (line 47) and balance (line 49, this being the same as line 13 on form 14).
The term distribution as used in lines 41 48 does not imply that sums necessarily leave the Companys hands; it refers to an allocation as between policyholders and shareholders.
Three separate forms 58 were completed for the WPF, the transferred business in the NPF and the new business in the NPF.
How the forms were completed by the Company
Volume V of the papers before the Court contains over 500 pages of the Companys regulatory returns for the three relevant accounting periods, including completed forms 13, 14, 50 and 58 for the LTBF and its sub funds (except that form 58 was completed, as already noted, for three sub funds and not for the LTBF as a whole).
From these forms the following information as to the whole LTBF can be extracted (in bn, rounded to the nearest 1m, and with some rounding adjustments in the computations). 2000 2001 2002 Form 13 line 89: total assets at admissible value 20.962 Form 14 line 11: mathematical reserves 18.645 line 13: balance of surplus 0.181 line 14: LTBF carried forward 18.827 23.066 19.128 0.033 19.162 22.427 19.807 0.064 19.871 0.386 2.107 22.427 0.468 0.441 1.668 3.462 20.962 23.066 line 49: total non actuarial liabilities line 51: excess of value of net admissible assets line 59: total liabilities and margins Form 40 2.000 2.445 2.540 line 11: earned premiums 0.922 0.633 0.787 line 12: investment income line 13: increase (decrease) in value of non linked assets brought (2.254) 1.273 (1.168) into account line 14: increase (decrease) in value of (0.036) linked assets (0.031) (0.011) 0.408 0.502 16.875 line 15: other income 1.040 line 19: total income 21.216 2.631 1.921 2.084 2.054 line 29: total expenditure (1.045) line 39: increase (decrease) in LTBF 19.162 0.709 19.871 line 49: fund brought forward .000 19.162 19.162 19.871 18.827 line 59: fund carried forward Form 58 (WPF) line 59: distributed surplus line 61: percentage distributed to
policyholders
It would be imprudent to attempt any sophisticated commentary on these figures.
The entry on form 40, line 15 for 2000 is obviously exceptional, representing the effect of a change of ownership of a long established business; no one has suggested that the whole sum is taxable.
But we know that it included a sum of 33.410m as a transfer from Capital Reserve (see para 70 below).
Taken overall, the figures illustrate the effect of bringing into account value which, for prudential reasons, has not previously been recognised.
During the three accounting periods the admissible (for practical purposes, market) value of the assets of the LTBF fell by about 4bn (the figures can be collected from SFI, Table A and the Companys completed forms 13 for the three accounting periods).
The mathematical reserves decreased by a little under 0.5bn and the recognised value of the LTBF, tracking as it did the mathematical reserve and the unappropriated surplus, went down by about 0.3bn.
But the investment reserve, that is the excess of admissible value over the recognised value of the LTBF (line 51 on form 14) was reduced by almost 1.8bn.
The successive entries 0.633 0.915 94.72 96.64 0.576 97.05 on line 13 of form 40 are noteworthy.
In the accounting period ending on 31 December 2000 the value of non linked assets brought into account increased by over 1.2bn although their admissible value decreased during that period.
This disparity was reversed in the two following accounting periods, during which (taken together) admissible value fell further by about 1.6bn but the form 40, line 13 decrease was a good deal larger, about 3.4bn.
During the whole period the Company declared bonuses of significant amounts, and allocated more than the mandatory 90% to with profits policyholders.
Part of the form 40, line 15 amounts included sums described in the notes submitted with the statutory forms (volume V, pp1756, 2035 2036 and 2319) as transfers from Capital Reserve.
The amounts were as follows (SFI, paras 56 60): 2000 2001 2002 m to WPF 33.410 30.724 17.000 81.134 total 33.410 472.724 370.000 876.134 to NPF 442.000 353.000 795.000 Whether they should nevertheless have been brought into the computation of the Companys profit or loss under Schedule D Case I under section 83(1) and (2) of FA 1989 is the first issue.
Line 15 of form 40 is, it will be recalled, specifically mentioned in the referred question (set out at para 36 above).
The statutory provisions
The provisions which this Court has to construe are in a single section, section 83 of FA 1989.
A rapid survey of the landscape in which that section is found shows that in the consolidating statute, ICTA 1988, Part XII dealt with special classes of companies and businesses, and Chapter 1 of Part XII dealt with insurance companies, underwriters and capital redemption businesses.
I have already mentioned section 433, which was repealed by FA 1989 and replaced by similar (but more complex) provisions in section 82 of FA 1989.
Section 444A, inserted into ICTA 1988 by the Finance Act 1990, applies to a transfer of long term business in accordance with a scheme sanctioned under section 49 of ICA 1982, but neither side placed any reliance on this section.
At the time when the consolidating statute was enacted the government was engaged in a far reaching review of the taxation of life offices, as already noted (para 48 above).
The outcome was sections 82 to 90 of FA 1989 (together with Schedule 8 to that Act, amending Part XII of ICTA 1988).
These sections, and Schedule 8, were frequently amended between 1989 and 2000, especially by the Finance Acts of 1995 and 1996.
The details are set out in Lord Reeds judgment (paras 134 to 163).
But I agree with Lord Hope (in para 15 of his judgment) that it is unnecessary, and maybe unhelpful, to go into the legislative history.
What matters is the statutory provisions as they were in 2000, 2001 and 2002.
During that period section 83(1) to (4) was in the following terms: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
Section 83A(1) to (3) of FA 1989 was in the following terms: (1) In sections 83 to 83AB brought into account means brought into account in an account which is recognised for the purposes of those sections. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) that Act in respect of a part of that business. any separate revenue account required to be prepared under Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
It is common ground that the relevant revenue accounts are forms 40 for the whole LTBF and its constituent parts, the WPF and the NPF.
The first point of construction (which I have already described as a short point, but one which takes some getting to) is the meaning of value (whether realised or not) of those assets in section 83(2)(b).
The Company contends that it means market value, and that any reduction in their value (the form of words at the end of the subsection) is to be treated as an expense capable of giving rise to an allowable loss.
The Revenue contends that section 83(2) is referring to a difference in value (whether it be an increase or a reduction) as brought into account for the relevant period of account, and that section 83(A)(2) leaves no room for doubt as to what that means.
It directs attention to the appropriate regulatory account, in this case form 40.
The Lord President (para 54) described this approach as definitional.
Taxing a loss?
The Companys written case before this Court, and Mr Gardiner QCs robust oral submissions, characterised the Revenues position as unnatural, uncommercial and contrary to fundamental principles of tax law.
The Court was reminded of some famous judicial observations made more than a century ago, including Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315: The word profits I think is to be understood in its natural and proper sense in a sense which no commercial man would misunderstand and Lord Macnaghten in London County Council v Attorney General [1901] AC 26,35: Income tax, if I may be pardoned for saying so, is a tax on income.
It is not meant to be a tax on anything else.
In this case, Mr Gardiner submitted, the Revenue was attempting to tax what was in reality a loss of capital.
These submissions call for careful consideration.
The massive volume of documents and figures put before the Special Commissioners and the Court of Session, and now before this Court, creates a risk of getting lost in a labyrinth of abstractions.
Actuaries, accountants and lawyers are trying to converse in the same language, but it is not easy going.
It is a case in which there is a real danger, in the hackneyed phrase, of not seeing the wood for the trees.
It may help to avoid confusion to start with three simple points.
The first point is that the Revenue is not seeking to exact tax from the Company under Schedule D Case I either on profits or on losses incurred by the Company; it is taxing the Company on the I minus E basis.
Simultaneously the Company is seeking to establish large Schedule D Case I losses in order to have them available for surrender to obtain group relief.
The second point is that it is, and always has been, standard practice for life offices to bring the assets of their LTBFs into account, not at market values that fluctuate from year to year, but at a book value (though in practice that expression is applied to LTBFs in a way that an outsider may find surprising).
The third point is that the Capital Reserve is not, and never has been, a separate fund distinct from the Companys LTBF.
It has always been part of the LTBF.
Each of these three points calls for some further explanation.
The Crown option as it applies to this case
The Revenue is not seeking to charge tax under Schedule D Case I on losses incurred by the Company.
It is common ground (SFI, para 61) that at all material times since 3 March 2000 the Company has been taxed on the I minus E basis (the detailed computations for 2000 and 2002 can be seen in volume VII at pages 3211 and 3290; the relevant page for 2001 seems to have been inadvertently omitted).
Nevertheless (SFI paras 62 and 63) the Company seeks to claim an allowable loss under Schedule D Case I which would be available for surrender to other Lloyds TSB group companies by way of group relief.
The Revenue accepts (SFI, paras 62 and 63) that if the Company succeeds in this appeal the losses available for surrender would be approximately 28.7m for 2000, 612.6m for 2001 and 431.3m for 2002 (the relevant computations are at volume VII pages 3216, 3255 and 3295).
The fact that a proprietary life office can simultaneously pay tax on the I minus E basis and have an allowable loss under Schedule D Case I shows that whatever the position a century ago, when there were no special statutory provisions, the taxation of long term life assurance business is now a very specialised area.
Bringing assets into account at book value
Regulation 45(6) of the 1994 Regulations (set out in para 20 above, and later reproduced in Rule 9.10(c) of the FSAs 2001 instrument) allowed a life office, for the purposes of an actuarial investigation, to take the value of any of its assets as its value in the books or other records of the company.
This had been expressly permitted by the regulatory system since 1980, when Regulation 3 of the Insurance Companies (Valuation of Assets) Regulations 1976 (SI 1976/87), was amended by the Insurance Companies (Valuation of Assets) (Amendment) Regulations 1980 (SI 1980/5).
But the two expert witnesses agreed that it was a very long standing and well established practice, and the Special Commissioners made a finding to that effect (para 16 of their decision).
It would be potentially misleading to say that a life office is permitted to bring the assets of its LTBF into account at book value, since that is normally understood to mean historic cost.
In a LTBF some assets are normally brought into account at the full admissible value, and others at nil (Special Commissioners decision, para 48; also para 122 of Lord Reeds judgment).
It is unnecessary to go into the reasons for this practice, as to which there was no dispute.
The reasons for maintaining an investment reserve of unrecognised value are fundamental to the way in which long term life business, and especially with profits business, has been conducted in the United Kingdom.
It is the mechanism by which the life office, relying on the professional skills of its chief actuary and his staff, can achieve a balance between competing considerations and interests.
First and foremost is the overriding need for a sufficient margin of solvency.
Subject to that the life office will wish to produce consistently good results for its with profit policyholders, both in the policyholders interests and to preserve and enhance the companys reputation.
It must also achieve fairness between different classes of policyholders in accordance with their rights and expectations (the difficulties of which are illustrated by Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
Finally there are tax considerations.
No company likes to pay more tax than it has to, or to pay it sooner than it has to.
Before 1989 the tax system allowed life offices to defer taxation, especially on unrealised capital gains.
It is common ground that section 83 of FA 1989 was intended to change that; the controversy is as to the extent of the change.
These points were well made by Mr Brian Drummond, an accountant, in an article entitled Making Sense of the FSA Return in Life Company Tax Computations (Tax and Accountancy Review, June 2006, p6).
Some changes had taken place by then (both on the regulatory front and the taxation front) but the article is nevertheless instructive.
After mentioning recent changes the author gives a brief overview of the forms: In broad terms, however, the overall structure remains unchanged.
Form 13 remains a reasonably straightforward analysis of the total admissible value of the assets of the company by category with narratives that are commendably clear; Form 40 demonstrates how much of the Form 13 value is brought into account for the purposes of calculating surplus; Form 58 deals with the calculation, composition and distribution of the surplus; and, Form 14 then links that exercise back to Form 13 by showing how much of that original Form 13 value is covering liabilities and bonuses and how much of it is being held in reserve.
He describes form 14 as an area of linguistic opacity, and comments: This confusion is carried across into form 14 of the FSA return where it increases further.
The first line in form 14 is described as mathematical reserves, after distribution of surplus and in this one narrative only two of the six words (after and of) take their conventional or even accounting meaning.
The most relevant passage is on the general philosophy of with profits business (at pp 9 10): Form 40 is described as revenue account but in conventional terms it is a very partial one.
By reference to normal accounting convention it is surprising to have a revenue account that makes no explicit reference to a movement in liabilities to third parties.
The layout of Form 40 and its interaction with Form 58 reflects much more of the history of with profit funds than it reflects normal accounting principles.
In with profits funds the starting point in determining the extent to which surplus is recognised is establishing what bonus should be recommended.
This will be driven by a combination of the results of the company (in terms of investment return and underwriting profit) together with policyholder reasonable expectations and the need to treat customers fairly.
One of the principles of UK with profits business is smooth bonuses from year to year.
Having established what bonus it is appropriate to declare for the year it is then possible, depending on the structure of the fund, to calculate the minimum extent to which surplus must be recognised both to meet the bonus requirement and any corresponding entitlement of the shareholders to participate in surplus as a fraction of the amount allocated to policyholders (very often one ninth the 90:10 structure).
Historically with profit funds hesitated to recognise any more surplus than was required to meet the bonus, and associated shareholder entitlement, and hence the fund would generally be approximately equal to the liabilities (after current year bonus) plus any residual surplus not allocated.
The nature of the Capital Reserve
The third point mentioned in para 78 above is that the Capital Reserve is not, and never has been, an appropriated fund separate from the Companys LTBF.
It is, as para 22.1 of the scheme makes clear, part of the LTBF.
It is an account falling within Lord Greene MRs second category in Allchin v Coulthard [1942] 2 KB 228, 234 235 merely an accounting category.
Abstract though it is, the Capital Reserve is on the Companys case of central importance to this appeal.
It is not easy to discern its purpose.
The Companys own independent actuarial expert, Mr Chamberlain, stated in his report dated 18 September 2007, para 5.1: The Scheme by which [the Society] demutualised established something it refers to as a Capital Reserve.
This Reserve is a financial structure whose form and operation is defined by the Scheme, and does not meet any particular regulatory or other requirement, other than that emanating directly from the Scheme.
It is a memorandum account and does not consist of particular assets.
Mr Allen, the Revenues independent expert, stated in his report dated 5 October 2007, para 6.1: Within the notes to their returns I understand that [the Company] created a memorandum account (the Capital Reserve) with an initial balance of approximately 4.5bn.
Notwithstanding that this account was referred to in the Scheme which obtained approval from the Court of Session, in my opinion this memorandum account had no meaning or relevance, other than as an item of information, as regards either the Companys statutory report and accounts or its regulatory returns.
The memorandum account did not represent any particular assets, nor did it reflect any actual profit or loss incurred by the Company, it was simply a note of a particular transaction.
The experts did not give a further explanation of the expression memorandum account, nor did counsel offer any.
The Special Commissioners made a finding that reflects the natural meaning of memorandum (para 45): The purpose of the Capital Reserve was to keep a record of this initial value created by [Holdings] and to distinguish it from subsequent profits.
The notion that it was an item of information that ought to be remembered comes out most clearly in the witness statement of Mr Michael Ross.
He was an actuary who was employed by the Society for most of his career, becoming chief actuary of the Society in 1986 and the first chief executive of the Company in 2000.
In his witness statement (paras 18 to 27, not challenged in cross examination) he described how demutualisation involved a strategic choice between ring fencing the estate and monetising the estate (the estate is a term used to describe a mutuals excess of assets over liabilities, or investment reserve).
After careful thought the Lloyds TSB group and the Society opted for monetising the estate.
This course was likely to be more attractive to the Societys members but required the Lloyds TSB group to find a very large sum to pay the membership compensation.
But the payment of that compensation gave the Lloyds TSB group the advantage that the Company had a comfortable investment reserve at the inception of its business (whereas with ring fencing the group might have had to inject further capital).
The group wanted to earmark what Mr Ross (para 27) regarded as shareholder owned capital, held within the [LTBF] in order to be able, in the long term, to benefit from it.
That provides a clue, I think, to the purpose of the restriction on reduction of the Capital Reserve in para 22.3 of the Scheme (summarised in para 60 above).
Only a limited amount (432m out of 4,455m) of the Capital Reserve could be brought into account in the revenue account of the WPF, because it was a 90/10 fund and nine tenths of the distributed surplus were to go for the benefit of holders of with profit policies; only one tenth (at most) could find its way to the shareholder, Holdings.
There was no restriction (beyond the total amount of the Capital Reserve) on bringing it into account in the NPF, which was a 0/100 fund.
The decision of the Special Commissioners and the judgments in the Court of
Session
The Special Commissioners decided the first issue in favour of the Company, and the Court of Session unanimously upheld that decision (Lord Emslies dissent was on the second, narrower issue as to section 83(3)).
All three members of the Court delivered full judgments, so this Court has four separately reasoned routes to the same conclusion on the first issue.
The reasoning can be imprecisely classified under three heads: the correct approach to the construction of taxing statues, arguments based on the legislative scheme and purpose, and detailed linguistic arguments.
The Lord President dealt most fully with statutory construction (paras 45 to 49).
He cited the well known speech of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 9991000, in which Lord Steyn referred to Lord Wilberforces seminal speech in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, 323: Lord Wilberforce restated the principle of statutory construction that a subject is only to be taxed upon clear words .
To the question What are clear words? he gave the answer that the court is not confined to a literal interpretation.
He added 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.
This sentence was critical.
It marked the rejection by the House of pure literalism in the interpretation of tax statutes.
The Lord President ultimately decided the issue by applying the clear words principle in the light of his view of the statutory purpose (paras 55 and 56).
Lord Emslie relied on the same principle, and some other principles which he set out at para 197: Since this appeal concerns the construction of tax legislation, certain fundamental rules, principles and presumptions may be thought to apply.
First, as Lord Wilberforce explained in Vestey v Inland Revenue Commissioners [1980] AC 1148, 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
Second, in the absence of specific charging provisions, capital and capital receipts do not fall to be taxed as revenue and vice versa.
Third, corporation tax being an annual tax on the profits of a company, it is prima facie reasonable and appropriate to construe statutory charging provisions as directed towards real receipts and gains . in a sense which no commercial man would misunderstand: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
And fourth, as reflected in countless provisions of the taxing statutes, a subject is in general assessable to tax on his own profits and gains, and not on those of any third party.
The second, third and fourth of these principles (and especially the second) may be what the Special Commissioners had in mind (in para 79 of their decision) in a more general reference to tax principles as predisposing them in the Companys favour, and in characterising the transfer from the Capital Reserve as a capital receipt (para 80).
Arguments based on the legislative scheme and purpose move from the very general to the rather more particular.
What was the underlying purpose of section 83? In particular was it intended, as the Lord President stated in para 55 of his judgment, to reverse the effect of section 433 of ICTA 1988? Is there a key conceptual distinction (Lord Emslie, para 201) between the Companys LTBF and the assets representing that fund? Was a transfer from the Capital Reserve a capital receipt comparable to an injection of new capital (Special Commissioners, para 80)? How cogent is the argument (Lord Reed, para 183; Lord Emslie, para 197, fourth point, and para 205, second point) that one taxpayer should not be taxed on another taxpayers profits or gains? What practical results do the statutory provisions produce if construed (Lord Emslie, para 200) as a one stage or alternatively a two stage process? I shall consider these points in turn.
Legislative scheme and purpose
It is permissible, without getting into the territory of Pepper v Hart [1993] AC 593, to look at the official consultation paper published in 1988, The Taxation of Life Assurance, to see the general nature of the problem perceived by the Revenue.
The most relevant paragraphs are paras 6.2 to 6.7, 6.12 to 6.21, 6.33 and 7.1 to 7.8 A life office might have a large capital gain on a long term income producing investment (such as a fully let office block or a strategic holding of shares in an oil company) as part of the with profits part of its LTBF.
Before 1989 this gain could be recognised (or brought into account) in its revenue account without being realised so as to give rise to a chargeable gain.
Value representing at least nine tenths of the gain could then be distributed (in the form 58 sense, that is allocated) to the holders of with profits policies so as to obtain the protection of section 433 of ICTA 1988, as well as escaping income tax or capital gains tax in the policyholders hands on the maturity of their policies (assuming them to be qualifying policies).
Section 83 of FA 1989 made the recognition of an unrealised capital gain a receipt to be brought into the Schedule D Case I computation, while section 82 of FA 1989 re enacted the substance of section 433 in a more satisfactory form.
All this is very clearly set out, in a good deal more detail, in paras 123 to 133 of Lord Reeds judgment (which refer to section 83 in the form in which it was originally enacted).
I respectfully think that in para 55 of his judgment the Lord President was to some extent running together the functions of sections 82 and 83, and misunderstanding the purpose of the two sections in tandem.
Lord Emslie referred to section 433 (para 200) but not to section 82.
In my opinion Lord Reeds analysis is to be preferred.
Section 83 is concerned with the immediate implications, in making the necessary Case I computations, of bringing into account all or part of the difference between book value and market value, and section 82 is concerned with the next stage of the computations, that is adjustments in respect of the distribution of surplus to holders of with profits policies (covered by form 58, lines 41 to 59).
The next point is the term fund.
It is, as both Lord Reed (para 112) and Lord Emslie (para 199) observed, used inconsistently both in ICA 1982 and in the regulatory forms.
But the two principal and relevant meanings, in this context, are clear (and here I am repeating ground I have already covered).
The LTBF is an actual, appropriated fund of identifiable investments, the constituent assets of which (with their admissible values) appear in form 13.
The Capital Reserve is a notional part of that fund to an initial amount of 4,455m; the independent actuarial experts agreed that it serves no regulatory purpose.
The fund for the purposes of lines 39, 49 and 59 of form 40, and for all the purposes of form 58, is the same fund, but valued in a special way (that is at book values in the sense that actuaries use that term) in order to produce the life offices objectives solvency and prudent preservation of the investment reserve, but at the same time smooth progress in the allocation of bonuses to with profits policies.
I am not sure that I understand para 201 of Lord Emslies judgment.
In that paragraph he is (as I understand it) setting out part of the submissions made on behalf of the Company.
But later (para 204) Lord Emslie himself accepted that there is a significant distinction between the assets and the fund itself.
Of course there is a difference, the difference between the parts and the whole.
But the value of the whole is in this case the sum of the values of the parts, and the significant distinction, affecting both, is the basis of valuation.
It is common ground that if in 2001 or 2002 the Lloyds TSB Group had decided to inject fresh capital into the Companys LTBF (as might have been done by the Company issuing new shares to Holdings, paid for in cash that was appropriated to the LTBF) it would not have been treated as a receipt under section 83(2).
The new money would have appeared on line 26 of form 40 (transfer from non technical account).
The admissible value of the LTBF would have been increased, and so (if it was needed for solvency purposes) would its value as brought into account (lines 39 and 59 of form 40).
A transfer from the Capital Reserve, by contrast, costs the group nothing (although it may be an indication that the state of the business is disappointing).
The transfer does not increase the market value of the LTBF.
Nor has it any regulatory significance, as the experts agreed.
What happens is that part of the value held in the investment reserve is brought into account, a familiar event generally recorded (as Mr Allen stated, though Mr Chamberlain disagreed) on line 13 of form 40.
I respectfully consider that the Special Commissioners, and to some extent the Court of Session also, attached too much weight to the label Capital Reserve and to the notion that capital gains ought not to be taxed under Schedule D, Case I.
It could not be clearer that under section 83(2)(b) any increase in value (whether realised or not) of investments constituting a LTBF, as brought into account, is to come into the Case I computation.
The argument that (in the absence of very clear words) one taxpayer ought not to be taxed on another taxpayers profits or gains is, on the face of it, a strong one.
It is not satisfactorily answered simply by pointing out (though this should not be forgotten) that this appeal is not about taxing profits.
It is about allowing losses capable of being surrendered for the benefit of other group companies.
But the Company acquired a long established mutual business and a LTBF with a healthy investment reserve.
That reserve may have been built up by the Society largely by means of unrealised gains.
But it was the Company and the Lloyds TSB Group that decided, for entirely understandable reasons, to bring part of the investment reserve into account, rather than making an injection of new capital.
The language of section 83(3)(b) (as amended in 1996) shows that Parliament had demutualisation well in mind as a situation for which the legislation should make provision.
The last general point to be considered, before getting to linguistic arguments, is the implication of Lord Emslies illuminating distinction (para 200, summarising the Companys argument, and para 204, accepting it) between a two stage process (asking whether there are any real gains, and then how far they have been brought into account) and a one stage process (asking simply what increase in value, if any, has been brought into account).
Again, it is necessary to be reminded that this appeal is about losses, not gains; and the three accounting periods have to be considered separately, and not as a whole.
In any accounting period the operation of the statutory provisions, if analysed as a two stage process, allows six different combinations, although some of them may be fairly improbable in practice, as follows (AV denoting admissible value, and RV value recognised and brought into account): (1) AV up, RV up by less (2) AV up, RV up by more (3) AV up, RV down (4) AV down, RV down by less (5) AV down, RV down by more (6) AV down, RV up.
It is easy to see how the competing interpretations work in situations (1), (2), (4) and (5).
On the Companys two stage approach the lower figure (whether an increase or a reduction) will be brought into the computations; on the Revenues one stage approach the difference in RV will always be taken.
But it is not so easy to see how either sides interpretation would apply to situations (3) and (6); and the Companys regulatory return for 2000 disclosed situation (6).
It might be thought that though neither sides interpretation fits easily, the Companys two stage approach is distinctly more difficult to reconcile with the situation in which there is a reduction in admissible value, but an increase in value brought into account, in an accounting period, and the Company is seeking to establish an allowable loss during that period.
But so far as I can see that submission was not made either to the Special Commissioners or to the Court of Session, nor do I recollect it being put forward in this Court.
The terms of the agreed question do not positively require the point to be resolved.
Indeed SFI, para 63 suggests that the point may already have been agreed between the parties.
So the best course is, I think, to exclude that point, which was not argued, from any consideration of the statutory scheme and purpose.
Nevertheless, unlike the Special Commissioners and (to some extent) the Court of Session, I do not approach the narrower linguistic points with any predisposition in favour of the Companys case.
I approach them disposed towards the Revenues case as being more in accordance with the statutory scheme and purpose.
Linguistic points on the first issue
I can take these more shortly, and it is convenient to do so by reference to the numbered sub paragraphs at the end of para 181 of Lord Reeds judgment.
The first point is that an increase in value . of . assets is said to refer most naturally to capital gains.
In some contexts it might do so.
In the context of a system of computation which is closely and explicitly linked to the regulatory returns in respect of LTBFs I see little force in this point.
What is important is how value is to be measured, and to my mind sections 83(2) and 83A leave no doubt about that.
The second point is on the words (whether realised or not) in section 83(2)(b).
The section was making an important change in the law in that unrealised increases in value, so far as brought into account, were to come into the tax computation.
To my mind it would have been surprising if the draftsman had not inserted this parenthesis so as to leave no doubt as to the character of the change in the law.
The third point is on another parenthesis in section 83(2), (and not otherwise), though these words have come out in the text of Lord Reeds judgment before us as or otherwise.
Again, I have to say that I think the draftsman is being rather unfairly criticised for his efforts to leave no doubt about the intended meaning.
The preceding word as means in the manner that and the parenthesis means and in no other manner.
To my mind it is a bit hard to dismiss this as otiose.
Lord Reeds fourth point is that the expression brought into account is not apt to describe the overall effect of those entries.
I confess that I simply do not understand this point.
The critical entry is line 13 on form 40 (increase (decrease) in the value of non linked assets brought into account).
That is the only line on form 40 in which the words brought into account are found.
It was conceded that the line 15 entry could have been on line 13.
The bottom lines (39, 49 and 59) show the overall position, and do not use the words brought into account.
Lord Reeds remaining points on the first issue (in para 181(5) and (6) and para 183) are more general and I will not revisit them.
Conclusion
In my judgment the Revenues submissions on the first issue are correct, both as to the statutory scheme and purpose and as to the linguistic points just mentioned.
I have gone into the matter at some length because I am conscious that I am differing both from the Special Commissioners and from the unanimous view of the Court of Session.
But in the end I consider that it is simply a question of giving section 83(1) and (2) of FA 1989, as amended, their natural meaning.
On that basis the second issue does not arise and I prefer to say nothing about it.
I would allow the Revenues cross appeal and treat the Companys appeal as moot.
LADY HALE
As so often happens, what appears at first sight to be a very complicated question turns out on closer analysis to be quite a simple one.
When calculating the profits of an insurance company in respect of its life assurance business under Case 1 of Schedule D to the Taxes Act, does an increase in value or conversely a reduction in the value of the assets of its long term business fund refer to an increase or decrease in their actual value? Or does it refer to an increase or decrease in their value as brought into account for a period of account in the companys revenue account prepared for the purpose of the Insurance Companies Act 1982?
We know that the words as brought into account for a period of account (and not otherwise) in section 83(2) of the Finance Act 1989 (set out by Lord Walker at para 41 above) describe the words the following items; we know that the following items are (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets; we know from section 83A (set out by Lord Walker at para 74 above) that brought into account means brought into account in the revenue account (or accounts) prepared for the purposes of the Insurance Companies Act 1982 in respect of the companys long term business (or part of it); so the linguistic question boils down to what is meant by as in section 83(2).
The Company would have it that as means when.
The link to the regulatory returns is a purely temporal one.
Value means real value not whatever the company chose to put in the forms.
The Revenue would have it that as means as.
What is taken into account in computing the companys profits for income tax purposes is what the company brings into account in completing its revenue accounts for regulatory purposes.
In my experience, if Parliamentary counsel mean when, they write when, and if they mean as, they write as.
We should be slow to re write what they have written.
The words and not otherwise, if nothing else, make it clear that there might have been some other way of taking items (a) and (b) into account for income tax purposes, but this is the way it is to be done.
They are making a special rule for life insurance business.
This is not surprising, for all the reasons that Lord Walker has so clearly and carefully explained.
The words whether realised or not point to the real change which was being made by the 1989 Act.
Otherwise it was business as usual.
It was not until 1995 that these insurance companies were required to file any other sort of accounts than those which they had to file for regulatory purposes.
It was natural for the Revenue to use the figures in the regulatory revenue account as their starting point.
In full agreement with Lord Walker, and Lord Hope and Lord Neuberger, therefore, I would allow the Revenues cross appeal and regard the Companys appeal as moot.
LORD NEUBERGER
I too would recall the interlocutor of the Inner House of the Court of Session and allow HMRCs cross appeal.
Having had the great benefit of reading in draft the judgments of Lord Hope and Lord Walker, I can express my reasons shortly.
The cross appeal raises an issue as to the meaning of section 83(2) of the Finance Act 1989 (as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995).
It is unnecessary for me to set out section 83, as it is fully quoted in para 7 of Lord Hopes judgment and para 73 of Lord Walkers judgment.
As will be clear to anyone who has read those judgments, the difficulty in this case arises from the fact that the issue of interpretation arises in the context of a very complex background.
That complexity is attributable to a number of different factors, namely (i) the technical rules as regards the regulatory returns to be made by life assurance offices, (ii) the many changes in the legislation embodying those rules since they were first introduced in 1870, (iii) the many changes in the statutory provisions governing the taxation of life assurance offices, (iv) the extensive contractual provisions in the documentation governing the scheme (the scheme) for transferring of the business of Scottish Widows Fund and Life Assurance Society to Scottish Widows plc (the Company), and (v) the details of the regulatory returns made by the Company in the three accounting years in issue.
When considering the application of section 83(2) to the facts of this case, I am sceptical about the value of analysing the history of the statutory provisions governing either the returns to be made by life assurance offices or the taxation of profits made by life assurance offices i.e. what I have characterised as factors (ii) and (iii).
This cross appeal concerns the meaning of the statutory provision in force during the three relevant years, section 83(2), and its impact on the returns actually made in respect of those years, in the then stipulated form by the Company.
Particularly as the provisions of the scheme, the prescribed forms for returns, and the contents of the Companys returns for the three years in question, all require careful analysis, it seems to me that to focus in addition on the rather intricate history, as opposed to the present provisions, of the regulations, risks taking ones eye off the ball (or, as Lord Walker puts it, not seeing the wood for the trees).
Legislative archaeology has its place in statutory interpretation, but its role is limited.
Where a statutory provision, when read in its immediate statutory and practical context, has a meaning which is tolerably clear as a matter of language, and not unreasonable or unfair in terms of its consequences, it seems to me that little is to be gained, and much may be lost (in terms of time, expense and eventual confusion) by going into the genesis and development of the provision in earlier legislation.
As Lord Hope points out, such an approach is consistent with what was said both by Lord Wilberforce in Farrell v Alexander [1977] AC 59, 73 and by Lord Diplock in Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 6.
Once one understands the scheme, the relevant regulations, the forms, and the Companys returns for the three years in question, it appears to me that the answer to the question posed on the cross appeal, namely the meaning and effect of section 83(2), is tolerably clear.
I could not hope to equal the clarity of Lord Walkers analysis in paras 49 to 53, 57 to 70, and 82 to 91, and, very gratefully, adopt the benefit of his distillation of the various complex matters which he there explains.
Turning to the central issue on the cross appeal, the meaning of section 83(2), it may be a little glib to suggest that HMRCs case is ultimately vindicated by a single word.
However, if one was to isolate a single crucial point, it seems to me that it would involve focussing on the word as in that subsection, as Lady Hale suggested during argument.
Section 83(2) stipulates that the items which should be taken into account as receipts of [a particular accounting] period are to be those items identified in paras (a) and (b) as brought into account for [that] period of account.
The obvious and natural effect of the words which I have emphasised is that those items are to be taken into account for the period in question in the same way and to the same extent as they are brought into account for that period.
It was argued on behalf of the Company that the expression as brought into account for a period of account should be treated simply as a reference to the period in which the item was brought into account, and was not concerned with how the item was brought into account.
Particularly in the light of the inclusion of the word as, that does not seem to me to accord with the natural reading of the expression.
Although both the Company and HMRC relied on other provisions in the 1989 Act to support their respective cases on the meaning of the expression, I am unconvinced that they are of any real assistance.
Thus, it was suggested that the words (and not otherwise) in the subsection assisted the Companys interpretation.
I do not see how that is so: they are there simply to emphasise that an item is only to be brought into account if it falls within the expression, and therefore they can take the issue of what the expression means no further.
Equally, the fact that section 83A(1) (as inserted by paragraph 16 Schedule 8 to, the 1995 Act and amended by paragraph 6 of Schedule 31 to the 1996 Act) defines the term brought into account does not take matters further, as the position of each party is consistent with that definition.
The conclusion that HMRCs construction of section 83(2) is correct seems to me to be supported, rather than undermined, by the normal approach to taxation of business profits as explained by Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315 and by Lord Hoffmann in Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, [2007] SC (HL) 105, [2007] 1 WLR 1448, para 2.
In connection with taxing business profits, the concept of a profit should normally be accorded its proper meaning, which will obviously depend on the specific context, but current accountancy practice is generally a good, and often the best, guide as to the precise quantification of any profit.
In the case of a life assurance business, HMRCs case is that, in effect, statute requires the profit to be assessed by a rather unusual means, namely by reference to the returns in the regulatory forms.
This is entirely consistent with the normal approach to assessing the profits of companies for taxation purposes, as these returns effectively take the place of the statutory audited accounts, which are relied on to define the profits of the overwhelming majority of other businesses owned by limited companies.
Furthermore, although there is, at first sight, real force in the Companys argument that HMRCs case results in its business being taxed on some figure which cannot sensibly be said to be a profit, a closer analysis of the situation, as provided by Lord Walker in paras 81 to 90 and 95 to 105, shows that this is incorrect.
Accordingly, and in agreement with the fuller reasoning of Lord Hope and Lord Walker, I would allow HMRCs cross appeal.
As the cross appeal succeeds, it is unnecessary to consider the Companys appeal.
I agree with Lord Walker that it would be better not to go into the question whether the majority of the Inner House was right in finding for HMRC on section 83(3).
It is tempting to do so, given that there is a decision of the Inner House on the point.
However, at least on the basis of the argument we have heard on this appeal, it does seem to me that the interpretation of subsection (3) is rather difficult, and I think it would be better to wait for a case where the issue matters, not least as it may be that some assistance would be gleaned from the facts of such a case, which may throw light on the practical consequences of the rival interpretations.
LORD CLARKE
I confess that I was initially attracted by the approach of Lord Emslie to the issues in relation to both the cross appeal and the appeal.
However, having considered the masterly judgment of Lord Walker, I have found his reasoning compelling and agree with him (and indeed Lord Hope, Lady Hale and Lord Neuberger) that the Revenues cross appeal on the true construction of section 83(2) of the Finance Act 1989 as amended should be allowed.
Like Lord Walker, Lady Hale and Lord Neuberger, I prefer to express no view on the issue of the true construction of section 83(3).
I too would therefore allow the Revenues cross appeal and treat the Companys appeal as moot.
| UK-Abs | Scottish Widows Plc (Scottish Widows) is a life assurance company.
It was established in 2000, when it acquired the business of Scottish Widows Fund and Life Assurance Society (the Society) under a scheme of transfer which had been approved by the Court of Session in Scotland.
Scottish Widows acquired assets under the scheme which had an approximate value of 25bn, and it became subject to actuarial liabilities of approximately 19bn.
Members of the Society received compensation of approximately 5.8bn, which represented the surplus of the Societys assets over its liabilities at the time of the transfer.
The compensation was paid by Scottish Widows holding company, in return for the members of the Society giving up their right to participate in the surplus.
The scheme provided that Scottish Widows was to establish and maintain a Long Term Business Fund (LTBF) to fund its long term insurance business.
It also provided that there was to be a memorandum account within the LTBF, called the Capital Reserve.
This was said to represent the value of shareholders capital within the LTBF.
Life assurance companies are required to submit annual regulatory returns, in particular to demonstrate solvency.
Various forms are prescribed for these returns.
One these is known as Form 40, which is a revenue account in respect of the LTBF.
In the years following transfer the value of the assets of Scottish Widows LTBF fell substantially, principally because of falls in the stock markets.
To cover those losses and to allow for distributions to policyholders, Scottish Widows brought into account amounts on Form 40 for each of the accounting periods 2000, 2001 and 2002.
These amounts were recorded in line 15 of the relevant Form 40s.
They were described as transfers from the Capital Reserve.
Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business for the purposes of corporation tax.
In the terms that were in force between 2000 and 2003 section 83(2) provided that: [T]he following items, as brought into account for the period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
Section 83(3)(a) made provision for ascertaining whether or to what extent a company had incurred a loss in respect of its life assurance business where an amount was added to an insurance companys long term business fund as part of or in connection with a transfer of business to that company.
The Revenue maintained that the amounts to be brought into account as receipts for the computation of profits or losses for tax purposes under section 83(2)(b) or, in the alternative, under section 83(3)(a) were the amounts shown in line 15 on Form 40.
It maintained that the reference to a difference in value as brought into account directed attention to the figures that had been entered on Form 40, not the market value of the assets of the LTBF.
Scottish Widows argued that the words increase in value in section 83(2)(b) meant an increase in the actual value of actual assets, and that the words as brought into account were concerned with when the
increase was brought into account, not the extent of the increase.
Here the value of the assets of the LTBF had fallen during each of the relevant periods.
So there was no increase which could be brought into account.
The parties referred the question whether, in computing the Case I profit or loss of Scottish Widows for the accounting periods ending in 2000, 2001 and 2002, the amounts that fell to be taken into account as receipts to the Special Commissioners were the amounts shown in line 15 of Form 40.
It was agreed that, if Scottish Widows argument that it is actual values and not those amounts that should be taken into account is correct, it will have allowable losses in respect of those years of 28.7m, 612.6m and 431.3m.
The Special Commissioners answered the question in the affirmative.
They held that, although the amounts shown on Form 40 were not to be brought into account by section 83(2), they were covered by section 83(3)(a).
The Inner House unanimously dismissed the Revenues appeal against the decision on section 83(2) and by majority (Lord Emslie dissenting) dismissed Scottish Widows cross appeal against the decision in respect of section 83(3)(a).
Scottish Widows appealed and the Revenue cross appealed.
The Supreme Court unanimously allows the Revenues cross appeal and holds that the amounts that were to be taken into account as receipts by virtue of section 83(2) were the amounts shown on Form 40.
It therefore answers the question that was referred to the Special Commissioners in the affirmative.
Lord Hope and Lord Walker both give detailed judgments.
Lady Hale and Lord Neuberger give shorter judgments, agreeing with each other and with Lord Hope and Lord Walker.
Lord Clarke agrees with all of the judgments.
Although the applicable statutory provisions had been amended on various occasions, it was not helpful to look at their legislative history.
That should only be done where there is an interpretative difficulty which classical methods of construction cannot solve.
The proper approach was to concentrate on the wording of sections 83(2) and (3)(a) as they were during the relevant accounting periods: [15], [73], [122] [124].
Lord Walker analyses in detail the regulatory and taxation regime which applies to life assurance companies and the particular features of the demutualisation scheme so as to provide a backdrop to the statutory construction: [40] [71].
There were two particularly important points.
One was that when completing regulatory returns, book values could be used, and that an insurer enjoyed a certain freedom in determining what amount of its actuarial surplus to recognise in its returns: [82] [86].
It was also particularly important to appreciate the nature of the Capital Reserve.
It was not a fund of particular assets, separate from the LTBF, but was merely an accounting category recording an initial value within the LTBF: [87] [91] [101].
The key to interpreting section 83(2) was the phrase as brought into account and, in particular, the use of the word as: [22], [76], [116], [125].
This demonstrated that the computation must proceed on basis of what was actually entered on the appropriate regulatory account, in this case the form known as Form 40.
It was important that, when completing its returns, an insurance company should be permitted to use book values: [20].
The various arguments which were advanced in favour of Scottish Widows construction, based on general principles of interpreting tax legislation ([24] [26], [101] [102]), the statutory scheme and specific aspects of the drafting ([23], [107] [112]), fell to be rejected in the face of this clear statutory language.
The Special Commissioners and, to some extent, the Court of Session had attached too much weight to the label Capital Reserve, which had led them to attach undue weight to the notion that capital gains ought not to be taxed under Schedule D, Case I: [26], [101].
Given that the Court allows the Revenues cross appeal, a majority preferred to express no view on section 83(3)(a).
Lord Hope indicated that, had it been necessary to decide the point, he would have held in agreement with the majority in the Inner House that the relevant amounts would have been covered by section 83(3)(a): [28] [31].
|
This is a judgment in two appeals that this Court heard together.
They raise issues as to the scope of the powers conferred by the Proceeds of Crime Act 2002 (POCA).
They arise out of attempts by the respondent (SOCA), acting apparently on its own initiative, to deprive the first appellant (Mr Perry), together with members of his family or entities associated with them, of the fruits of serious criminal fraud for which Mr Perry has been convicted in Israel, wherever in the world those fruits may be found.
SOCA intends to achieve this aim by invoking the powers of civil recovery conferred on the High Court by Part 5 of POCA.
So far, however, it has not got beyond preliminary steps aimed at ensuring that the substantive relief which it seeks is effective.
One of those steps has been obtaining a worldwide property freezing order in respect of property held by the appellants in appeal 0143.
I shall call this the PFO appeal.
The other step has been to obtain a disclosure order, under which notices have been given to the appellants in appeal 0182.
I shall call this the DO appeal.
It is logical to consider the PFO appeal first, for the result of this appeal will have some bearing on the DO appeal.
THE PFO APPEAL
Introduction and factual background
Some of this introduction will be relevant to both appeals.
The substantive relief that SOCA seeks consists of civil recovery orders in relation to property obtained through Mr Perrys unlawful conduct.
In order to prevent the dissipation of that property SOCA has obtained a worldwide property freezing order pursuant to section 245A of POCA (in future all statutory references will be to POCA unless I state otherwise).
Section 245A gives SOCA the power to seek a property freezing order where it is empowered to take proceedings for a civil recovery order.
It is common ground that a property freezing order can only relate to property that can properly be made the subject of a civil recovery order.
The appellants contend that, subject to a limited exception, a civil recovery order can only be made in respect of property that is within the territorial jurisdiction of the court making it.
On this ground the appellants attack the validity of the property freezing order in so far as this extends to property outside that jurisdiction.
Thus the important issue raised by the PFO appeal is the extent to which a recovery order can be made in respect of property outside the United Kingdom.
Lea Perry is Mr Perrys wife and Tamar Greenspoon and Yael Perry are his daughters.
Leadenhall Property Ltd is an Isle of Man company alleged to hold assets on behalf of Mr Perry.
On 24 October 2007 Mr Perry was convicted in Israel of a number of offences in relation to a pension scheme that he had operated in Israel.
On 19 February 2008 he was sentenced to 12 years imprisonment and fined the equivalent of approximately 3m.
He has paid that fine.
Two subsequent appeals had limited success inasmuch as they resulted in a reduction of his sentence to 10 years imprisonment and a reduction in the finding of the amount that he had stolen.
In or about May 2008 Hoares Bank in London disclosed to SOCA that Mr Perry, Tamar and Yael had accounts there.
Subsequently SOCA discovered that Mr Perry had accounts in London in the Bank J Safra (Gibraltar) Ltd. The total in these various accounts amounted to approximately 14m.
On 8 August 2008 SOCA obtained a disclosure order from HH Judge Kay QC, sitting as a Deputy High Court Judge, on a paper application without notice.
Notices under that order addressed to the DO appellants, all of whom were at all material times outside the jurisdiction, were communicated to them by letter addressed to a residence that Mr Perry maintains in Mayfair.
On 28 October 2009 SOCA obtained a worldwide property freezing order from Cranston J on an application without notice against eight respondents, including the appellants in the PFO appeal.
So far as Mrs Perry was concerned, the order froze certain identified assets, but it froze worldwide all the assets of the other defendants.
The order also required all the defendants to disclose all their worldwide assets.
The hearings below
The PFO appellants sought an order from Mitting J varying the property freezing order so as, inter alia, to exclude from its ambit property that was located outside England and Wales and to limit the disclosure obligations under the order to assets located within England and Wales.
In a judgment dated 28 June 2010 [2010] EWHC 1711 (Admin); [2010] 1 WLR 2761 Mitting J varied some of the disclosure obligations but otherwise rejected the application.
Mitting Js judgment was admirably clear and concise.
He started with a presumption against giving the relevant provisions of POCA extraterritorial effect, but concluded that, with the exception of section 286, which applied only to an order made in Scotland, the language of the relevant provisions so clearly applied to property outside the jurisdiction that it displaced this presumption.
The appellants appeal to the Court of Appeal was heard on 8 and 9 December 2010 and judgment was delivered on 18 May 2011 [2011] EWCA Civ 578; [2011] 1 WLR 2817.
The lengthy lead judgment of Hooper LJ was a reflection not only of the complexities of POCA but of the very detailed submissions advanced by Mr Philip Jones QC for the appellants, which were summarised at some length by the Lord Justice.
Among many other arguments Mr Jones relied on the presumption against extraterritoriality.
A civil recovery order vests property in a trustee for civil recovery.
Mr Jones submitted that such an order took effect in rem.
He submitted that it would be a breach of international law for the English Court to make an order in rem in respect of property in a foreign jurisdiction, the more so if that property was real property.
Hooper LJ rejected this argument.
He held that a civil recovery order operated in personam against the holder of the property.
The effect, if any, of a civil recovery order in relation to property in a foreign jurisdiction would depend upon the law applied in that jurisdiction and, in those circumstances, there was nothing untoward in making such an order.
Like Mitting J, Hooper LJ concluded that the clear meaning of the relevant provisions was that a civil recovery order could be made in respect of property wherever in the world the property was located, and there was no reason not to give effect to the natural meaning of the language.
Like Mitting J, Hooper LJ concluded that section 286 made an exception in the case of an order made in Scotland.
Hooper LJ derived support for his conclusions from analogies with the law of bankruptcy and from the practice of issuing worldwide freezing orders.
In a shorter judgment Tomlinson LJ concurred both with the result reached by Hooper LJ and with his reasoning.
Maurice Kay LJ agreed with both judgments.
It is common ground that, on its face, section 286 makes provision in respect of the scope of a recovery order that distinguishes the position in Scotland from that in the rest of the United Kingdom.
There is a dispute as to the nature of that distinction and, whatever its nature, no one has yet been able to suggest an explanation for it.
A summary of my conclusions
Because of the complexity of the subject matter of this appeal I propose to follow the example of Hooper LJ by summarising my conclusions at the outset. (i) The courts below placed undue weight on the definition of property in POCA. (ii) The appellants have placed undue weight on the presumption that a statute does not have extraterritorial effect. (iii) States have, by agreement, departed from the customary principles of international law in the case of confiscating the proceeds of crime.
Of particular relevance is the 1990 Strasbourg Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (the Strasbourg Convention).
POCA must be read in the light of that Convention. (iv) The Convention recognises that the courts of state A may make an order purporting to vest in the authorities of state A property that is situated in state B in circumstances where the property is the proceeds of the criminal conduct of a defendant subject to the criminal jurisdiction of state A. (v) The Convention provides that effect should be given to such an order by confiscation proceedings in state B at the request of state A. (vi) The answer to the issue raised by the PFO appeal depends upon an analysis of both the scheme and the language of POCA considered in the light of the Convention. (vii) Parts 2, 3 and 4 of POCA provide for (a) the imposition in personam of obligations in respect of property worldwide; (b) measures in rem to secure and realise property within the United Kingdom; and (c) requests to be made to other states to take such measures in respect of property within their territories. (viii) Part 5 of POCA makes provision for in rem proceedings in respect of property within the United Kingdom but not outside it. (ix) The scheme of POCA, as described above, accords with arrangements made by the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (SI 2005/3181) (the Order) for giving effect to requests from other states in relation to the confiscation of the proceeds of crime. (x) The scheme of POCA as described above also accords with the requirements of a coherent international scheme for confiscation of the proceeds of crime and with principles of public international law.
The converse is the case if SOCAs submissions as to the extraterritorial effect of Part 5 are correct. (xi) Section 286 is an anomalous enigma and cannot justify giving the provisions of POCA that relate to the rest of the United Kingdom a meaning different from that which they would bear in the absence of section 286. (xii) For all these reasons the PFO appeal should be allowed.
The definition
Part 5 of POCA places on the High Court in England and Wales and Northern Ireland and the Court of Session in Scotland the obligation, in prescribed circumstances, to make a civil recovery order in respect of property which is, or represents, property obtained through unlawful conduct.
Section 316(4) has a definition of property (the definition) that applies in Part 5: Property is all property wherever situated and includes (i) money, (ii) all forms of property, real or personal, heritable or moveable, (c) incorporeal property. things in action and other intangible or Mitting J and the Court of Appeal were impressed by the natural meaning of the words wherever situated and concluded that these words should be applied, without restriction, to property in respect of which a recovery order could be made.
Thus a recovery order could be made in respect of any form of property, whether real, personal or a chose in action, and wherever in the world that property was situated.
The words wherever situated do not describe the type of property to which Part 5 applies.
Rather they indicate the location of the property to which the provisions of Part 5 can apply.
The definition is repeated no less than eight times in POCA sections 84(1), 150(1), 232(1), 316(4), 326(9), 340(9), 414(1) and 447(4).
POCA is peppered with references to property.
All fall within the definition.
But the definition cannot be applied so as to add to the words property, wherever it appears, the words wherever situated.
As I shall demonstrate, most of the provisions of POCA apply only to property within England and Wales, Scotland or Northern Ireland.
By way simply of example, I can refer to section 45(1) which confers on a constable the power to seize property to prevent its removal from England and Wales.
Some provisions refer, however, to property worldwide.
Whether or not the location of property to which a provision of POCA refers is subject to a territorial restriction depends upon the context.
I so held, when giving the only reasoned speech, in King v Director of the Serious Fraud Office [2008] UKHL 17; [2009] 1 WLR 718, para 37.
For these reasons I do not attach to the words in the definition wherever situated the weight that they have carried with the courts below.
In order to decide on the scope of the application of Part 5 of POCA it is necessary to consider both the structure and the language of the Act having regard to relevant principles of international law.
The presumption against extraterritoriality and the Strasbourg Convention
Mr Jones QC for the appellants submitted that it was a breach of international law for a United Kingdom statute even to purport to vest in a United Kingdom authority property situated in the territory of another state.
Mitting J began his judgment by reference to the presumption of statutory interpretation that a statute will not have extraterritorial effect and to the statement of Lord Hoffmann in Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, para 54: it is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated within the jurisdiction of the foreign state or compelling its citizens to do acts within its boundaries.
Hooper LJ himself cited the statement of Lord Diplock in R v Cuthbertson [1981] AC 470, 485: Under English rules of conflict of laws it is in my view well established that an English court has no jurisdiction either in a criminal or a civil matter to make orders purporting ipso jure to transfer moveable property situate abroad.
Confiscation of the proceeds of crime is, however, an activity in respect of which States have departed from these principles.
Of particular relevance is the Strasbourg Convention, to which the United Kingdom is a party.
The question of whether the exorbitant effect of Part 5 of POCA for which SOCA contends would involve a breach of international law must be considered in the light of the Strasbourg Convention.
Hooper LJ set out relevant provisions of the Strasbourg Convention in some detail and I must do the same.
The Strasbourg Convention
Chapter I contains definitions which include: (b) property includes property of any description, whether corporeal or incorporeal, movable or immovable, and legal documents or instruments evidencing title to, or interest in such property; (c) instrumentalities means any property used or intended to be used, in any manner, wholly or in part, to commit a criminal offence or criminal offences; (d) confiscation means a penalty or a measure, ordered by a court following proceedings in relation to a criminal offence or criminal offences resulting in the final deprivation of property;
Chapter II deals with measures to be taken at national level to identify and trace properties subject to confiscation.
Chapter III deals with international co operation.
Section 1 sets out the relevant principles.
Article 7 lays down general principles and measures for international co operation.
It provides: 1.
The Parties shall co operate with each other to the widest extent possible for the purposes of investigations and proceedings aiming at the confiscation of instrumentalities and proceeds. 2.
Each Party shall adopt such legislative or other measures as may be necessary to enable it to comply, under the conditions provided for in this chapter, with requests: a. for confiscation of specific items of property representing proceeds or instrumentalities, as well as for confiscation of proceeds consisting in a requirement to pay a sum of money corresponding to the value of proceeds; b. for investigative assistance and provisional measures with a view to either form of confiscation referred to under a. above.
The Explanatory Report submitted to the Committee of Ministers of the Council of Europe by the committee of experts who drew up the Convention, illuminates article 7: 10.
Where the law enforcement agencies and judicial authorities have gathered information through investigations, there should also be efficient means available to ensure that the offender does not remove the instruments and proceeds of his criminal activities.
Freezing of bank accounts, seizure of property or other measures of conservancy need to be taken to ensure this.
Section 3 of Chapter III provides for international co operation in respect of provisional measures.
In order to secure the confiscation of the instruments and proceeds from crime, the Convention provides in section 4 of Chapter III principally two forms of international co operation, namely the execution by the requested State of a confiscation order made abroad and, secondly, the institution, under its own law, of national proceedings leading to a confiscation by the requested State at the request of another State.
In respect of the first alternative, the Convention follows the pattern of the European Convention on the International Validity of Criminal Judgments.
The second method of international co operation could be compared to the one which is provided for in the European Convention on the Transfer of Proceedings in Criminal Matters.
Section 2 deals with mutual assistance in identifying and tracing property liable to confiscation and requires a party to comply with a request for assistance from another party to the extent compatible with the law of the former.
Section 3 deals with provisional measures.
Where a party has instituted criminal proceedings or proceedings for the purpose of confiscation and so requests, another party must take provisional measures such as freezing or seizing to secure property which may become subject to confiscation, in so far as permitted by its domestic legislation.
The same applies where a party receives a request for confiscation.
Section 4 deals with confiscation.
It provides: Article 13 Obligation to confiscate 1.
A Party, which has received a request made by another Party for confiscation concerning instrumentalities or proceeds, situated in its territory, shall: a. enforce a confiscation order made by a court of a requesting Party in relation to such instrumentalities or proceeds; or b. submit the request to its competent authorities for the purpose of obtaining an order of confiscation and, if such order is granted, enforce it. 2.
For the purposes of applying paragraph 1.b of this article, any Party shall whenever necessary have competence to institute confiscation proceedings under its own law. 3.
The provisions of paragraph 1 of this article shall also apply to confiscation consisting in a requirement to pay a sum of money corresponding to the value of proceeds, if property on which the confiscation can be enforced is located in the requested Party.
In such cases, when enforcing confiscation pursuant to paragraph 1, the requested Party shall, if payment is not obtained, realise the claim on any property available for that purpose. 4.
If a request for confiscation concerns a specific item of property, the Parties may agree that the requested Party may enforce the confiscation in the form of a requirement to pay a sum of money corresponding to the value of the property.
Article 14 Execution of confiscation 1.
The procedures for obtaining and enforcing the confiscation under article 13 shall be governed by the law of the requested Party. 2.
The requested Party shall be bound by the findings as to the facts in so far as they are stated in a conviction or judicial decision of the requesting Party or in so far as such conviction or judicial decision is implicitly based on them. 3.
Each Party may, at the time of signature or when depositing its instrument of ratification, acceptance, approval or accession, by a declaration addressed to the Secretary General of the Council of Europe, declare that paragraph 2 of this article applies only subject to its constitutional principles and the basic concepts of its legal system.
There was an issue in the Court of Appeal as to whether the Strasbourg Convention applied to Part 5 proceedings.
Hooper LJ held at para 72 that it did.
I agree with him.
The Explanatory Report makes the following comment at para 15: The experts were also able to identify considerable differences in respect of the procedural organisation of the taking of decisions to confiscate (decisions taken by criminal courts, administrative courts, separate judicial authorities, in civil or criminal proceedings totally separate from those in which the guilt of the offender is determined (these proceedings are referred to in the text of the Convention as proceedings for the purpose of confiscation and in the explanatory report sometimes as in rem proceedings), etc).
It was also possible to distinguish differences in respect of the procedural framework of such decisions (presumptions of licitly/illicitly acquired property, time limits, etc).
The experts agreed that it would be impossible to devise an efficient instrument of international co operation without taking into account these basic differences in national legislation.
On the other hand, effective co operation must recognise that the systems may not be alike but that they aim to achieve the same goals.
This is why the committee agreed to put the two systems (value and property confiscation) of confiscation on an equal footing and to make the text unambiguous on this point.
The Explanatory Report adds at para 43 in relation to article 13: Any type of proceedings, independently of their relationship with criminal proceedings and of applicable procedural rules, might qualify in so far as they may result in a confiscation order, provided that they are carried out by judicial authorities and that they are criminal in nature, that is, that they concern instrumentalities or proceeds.
Such types of proceedings (which include, for instance, the so called in rem proceedings) are, as indicated under General considerations above, referred to in the text of the Convention as proceedings for the purpose of confiscation.
The Explanatory Report adds this further comment at para 48: [According to para 3 of article 13], parties must, for purposes of international co operation in the confiscation of proceeds, be able to apply both the system of property confiscation and the system of value confiscation.
This is made clear by article 7, paragraph 2.a.
It may imply that Parties which have only a system of property confiscation in domestic cases have to introduce legislation providing for a system of value confiscation of proceeds, including the taking of provisional measures on any realisable property, in order to be able to comply with requests to that effect from value confiscation countries.
On the other hand, Parties which have only a system of value confiscation of proceeds in domestic cases must introduce legislation providing for a system of property confiscation of proceeds in order to be able to comply with requests to that effect from property confiscation countries.
Confiscation under the Strasbourg Convention has to be ordered by a court following proceedings in relation to a criminal offence or criminal offences see article 1(d).
Thus it would seem that the Convention applies to (i) a confiscation order in rem made by party A after conviction of a defendant within its territory in respect of property owned by the defendant situated within the territory of party B; (ii) a confiscation order in rem made by party A in respect of property situated within its territory after conviction of the owner of that property in the territory of party B. One thing is plain beyond doubt.
The Strasbourg Convention envisages the courts in one state making an order confiscating property situated in another state.
There would thus appear to be established, in respect of the proceeds of crime, an exception to the principle stated by Lord Diplock in Cuthbertson to which I have referred at para 17 above.
I believe, however, that the exorbitant in rem confiscation order that the Strasbourg Convention envisages is one where the jurisdiction to make the order is an in personam jurisdiction founded on the conviction of the owner of the property by the court of the state making the order.
The much wider exorbitant jurisdiction that SOCA contends is conferred by Part 5 is, so far as I am aware, without precedent anywhere in the world.
I can summarise the position as follows.
The Strasbourg Convention envisages two types of confiscation proceedings: (i) value confiscation and (ii) confiscation of specific property.
It requires parties to give effect, by proceedings within their own jurisdictions and in accordance with their own laws, to requests for assistance in respect of both types of confiscation proceedings that are taking place or have taken place in the jurisdictions of other parties.
The scheme of confiscation under POCA
Confiscation
Parts 2, 3 and 4 of POCA make provision for value confiscation by the criminal court, by means of what is described as a confiscation order.
Confiscation is a misnomer.
The scheme of these Parts involves the imposition of the obligation to make a money payment, which is enforced in the same way as a fine, on a person who has been convicted in the relevant jurisdiction.
Thus the order is in personam and it is made as part of the criminal process.
The amount of the confiscation order is the amount of benefit that the defendant has obtained from his criminal conduct, calculated in accordance with complex provisions of POCA and subject to an upper limit, which is the amount of the defendants available assets.
The provisions in Part 2 relate to England and Wales.
Similar provision in relation to Scotland are set out in Part 3 and in relation to Northern Ireland in Part 4.
I shall describe the effect of the provisions in Part 2.
The confiscation order is made by the Crown Court after a defendant has been convicted by the court or committed to the court for sentencing or for the imposition of a confiscation order.
Thus the order is in personam on a defendant who is within the jurisdiction of the Crown Court.
To calculate the amount of the confiscation order, the court must (i) identify the property that the defendant initially obtained as a result of or in connection with his criminal conduct and value this; (ii) decide whether the defendant still holds that property, or property that represents it and value this; and (iii) identify all the realisable property that the defendant owns and value this.
The confiscation order is made in the higher of the values arrived at under process (i) and process (ii) subject to an upper limit in the amount of the value arrived at under process (iii).
Where POCA speaks of property in the context of these processes, the property is worldwide.
It matters not where in the world the defendant obtained property through his criminal conduct or where in the world he owns property when his realisable assets fall to be assessed.
Thus where property is referred to in sections 76 to 83, which deal with these matters, the property referred to is property wherever situated in the world.
Many of the provisions in Parts 2, 3 and 4 are concerned with identifying and securing property in each of the three jurisdictions, either in anticipation of the possibility of the making of a confiscation order or by way of enforcing a confiscation order.
The relevant powers are conferred on the Crown Court in England and Wales and in Northern Ireland and on the Court of Session or the sheriff in Scotland.
The provisions of the three Parts begin to apply as soon as a criminal investigation has been started in circumstances where there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct.
Although the terminology and the precise nature of the measures that can be ordered by the court differ in the case of Scotland from those in the other two jurisdictions, their effect is in substance the same.
I shall refer to some of the more material provisions that relate to England and Wales.
Section 41 permits the Crown Court to make a restraint order prohibiting any specified person from dealing with any realisable property held by him.
The property need not be described in the order.
Section 45 permits a constable, inter alios, to seize realisable property to which a restraint order relates to prevent it being taken out of England and Wales.
Section 48 permits the Crown Court to appoint a receiver, described as a management receiver in respect of realisable property to which the restraint order applies.
Section 50 permits the Crown Court to appoint a receiver, described as an enforcement receiver in relation to realisable property for the purpose of the enforcement of a confiscation order that has been made.
While the restraint order takes effect in personam and is of worldwide effect, the provisions that relate to securing and realising property apply to such activities within England and Wales, for each of Parts 2, 3 and 4 deals with activities in the jurisdiction to which it relates.
This is made plain by section 443 which provides, inter alia, for the making of Orders in Council (i) for an order made under Part 2 to be enforced in Scotland or Northern Ireland, for an order made under Part 3 to be enforced in England and Wales or Northern Ireland and for an order made under Part 4 to be enforced in England and Wales or Scotland; (ii) for a function of a receiver appointed pursuant to Part 2 to be exercisable in Scotland or Northern Ireland, for a function of an administrator appointed pursuant to Part 3 to be exercisable in England and Wales or Northern Ireland and for a function of a receiver appointed pursuant to Part 4 to be exercisable in England and Wales or Scotland.
These provisions would seem to indicate, a fortiori, that the powers or functions conferred by Parts 2, 3 or 4 cannot be exercised outside the United Kingdom.
Orders in Council pursuant to the above provisions have been made.
The effect of these provisions is as I have summarised them at para 12(vii) above.
Value confiscation is ordered in personam having regard to property worldwide, but no power is granted to authorities within the United Kingdom to secure or realise property that is situated outside the jurisdiction.
This situation is dealt with by section 74.
Section 74 relates to confiscation under Part 2 (sections 141 and 222 are analogous provisions in Parts 3 and 4).
Section 74 deals with securing property abroad in anticipation of making a confiscation order and realising property in satisfaction of a confiscation order that has been made.
It provides: Enforcement abroad (1) This section applies if (a) any of the conditions in section 40 is satisfied, (b) the prosecutor believes that realisable property is situated in a country or territory outside the United Kingdom (the receiving country), and (c) the prosecutor sends a request for assistance to the Secretary of State with a view to it being forwarded under this section. (2) In a case where no confiscation order has been made, a request for assistance is a request to the government of the receiving country to secure that any person is prohibited from dealing with realisable property. (3) In a case where a confiscation order has been made and has not been satisfied, discharged or quashed, a request for assistance is a request to the government of the receiving country to secure that (a) any person is prohibited from dealing with realisable property; (b) realisable property is realised and the proceeds are applied in accordance with the law of the receiving country. (4) No request for assistance may be made for the purposes of this section in a case where a confiscation order has been made and has been satisfied, discharged or quashed. (5) If the Secretary of State believes it is appropriate to do so he may forward the request for assistance to the government of the receiving country. (6) If property is realised in pursuance of a request under subsection (3) the amount ordered to be paid under the confiscation order must be taken to be reduced by an amount equal to the proceeds of realisation.
These provisions are in accord with the scheme of the Strasbourg Convention.
Civil Recovery
As section 240, which introduces Part 5, explains, the purpose of that Part is to enable recovery in civil proceedings before the High Court or Court of Session of property which is, or represents, property obtained through unlawful conduct.
Parts 2, 3 and 4 impose personal liability on defendants convicted of criminal conduct in each of the three jurisdictions.
Part 5 is of very different effect.
The focus is not on a particular defendant but upon property that is the product of criminal conduct, wherever in the world this is committed, as section 241 makes plain.
It is not necessary that the person who holds or owns the property should be the person guilty of the criminal conduct.
The claim form in the relevant proceedings has to be served on the holder of the property, wherever that person is domiciled, resident or present: see sections 243 and 244.
Sections 245A to 255 provide for the measures that a court in England and Wales or Northern Ireland can take to preserve property in respect of which a recovery order may be sought.
Sections 255A to 265 make similar provisions in respect of Scotland.
Section 245A provides for a property freezing order.
As this is the order under attack in this appeal I shall set out the material part of its provisions in full: (1) Where the enforcement authority may take proceedings for a recovery order in the High Court, the authority may apply to the court for a property freezing order (whether before or after starting the proceedings). (2) A property freezing order is an order that (a) specifies or describes the property to which it applies, and (b) subject to any exclusions (see section 245C(1)(b) and (2)), prohibits any person to whose property the order applies from in any way dealing with the property. (3) An application for a property freezing order may be made without notice if the circumstances are such that notice of the application would prejudice any right of the enforcement authority to obtain a recovery order in respect of any property. (4) The court may make a property freezing order on an application if it is satisfied that the condition in subsection (5) is met and, where applicable, that the condition in subsection (6) is met. (5) The first condition is that there is a good arguable case (a) that the property to which the application for the order relates is or includes recoverable property .
Sections 245E to 245G make provision for the appointment by the High Court of a receiver in respect of property to which a property freezing order relates.
Sections 246 to 247 make similar provision in relation to property that is not subject to such an order.
In each case the order may require any person to whose property the order applies to bring the property to a place (in England and Wales or, as the case may be, Northern Ireland) specified by the receiver or to place it in the custody of the receiver (if, in either case, he is able to do so).
Section 255A provides (1) Where the enforcement authority may take proceedings for a recovery order in the Court of Session, the authority may apply to
the court for a prohibitory property order
Section 266 sets out the circumstances in which the court must make a recovery order: (1) If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order. (2) The recovery order must vest the recoverable property in the trustee for civil recovery. (3) But the court may not make in a recovery order (a) any provision in respect of any recoverable property if each of the conditions in subsection (4) or (as the case may be) (5) is met and it would not be just and equitable to do so, or (b) any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998 (c 42)). (4) In relation to a court in England and Wales or Northern Ireland, the conditions referred to in subsection (3)(a) are that (a) the respondent obtained the recoverable property in good faith, (b) he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it, (c) when he took the steps, he had no notice that the property was recoverable, (d) if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.
The provisions in (4) are repeated virtually verbatim in (5) in relation to a court in Scotland.
The very fact that separate provision is made for making property recovery orders in England and Wales, Scotland and Northern Ireland indicates that these, and the ancillary steps in relation to securing and realising property, were, at least primarily, designed to apply to property within one of the three jurisdictions of the United Kingdom.
Some of the provisions plainly relate exclusively to property within the United Kingdom, such as those in section 248, which deal with registration of property freezing orders and interim receiving orders in relation to land.
The question raised by the PFO appeal is whether the totality of Part 5 relates exclusively to property within the United Kingdom.
Provisions of Part 5 that relate to the recovery order itself
Mr Jones drew attention to a number of provisions in relation to the recovery order itself, which he submitted could only apply in respect of property within the three jurisdictions of the United Kingdom.
He relied upon the absence of any similar provisions that would apply in relation to property situated outside the United Kingdom as indicating that Part 5 did not apply to property outside the United Kingdom.
Mr Eadie QC on behalf of SOCA did not accept that the provisions in question carried that significance.
I shall refer to two exceptions.
Section 269(1) provides that a recovery order is to have effect in relation to any property despite any provision (of whatever nature) which would otherwise prevent, penalise or restrict the vesting of the property.
Section 269(2) then specifies a number of rights that are to be overridden by a recovery order.
These include a right of return or other similar right, a right of return being defined as any right under a provision for the return or reversion of property in specified circumstances.
Mr Eadie submitted that these provisions applied implicitly only to property within the jurisdiction.
Mr Jones agreed with this submission, and argued that this was a further indication that recovery orders could only be made in respect of property within the jurisdiction.
Hooper LJ dealt with section 269 in a different way.
He held at para 155 that section 269(1) should be interpreted as applying only to provisions of English law as it could never have been intended to apply to provisions of the law of a foreign country in relation to property situated in that country.
Mr Jones accepted the last part of this proposition, but on the basis that Part 5 as a whole did not apply to property situated in a foreign country.
He did not, however, accept that section 269(1) only applied to provisions of English law.
He pointed out that under the English rules of conflict of laws foreign law is sometimes determinative of title to property situated in this country.
On the premise that Part 5 applies only to property within this jurisdiction there is no basis for restricting the ambit of section 269(1) to rules of English law.
I found Mr Jones submissions compelling.
Section 269 makes sense if Part 5 is concerned only with property within the United Kingdom.
It does not make sense if the property is worldwide.
Section 269 deals with provisions that are overridden by a recovery order.
Sections 281 and 282 deal with exemptions from the effect of a recovery order.
The first of these, under section 281, arises where the victim of the offence to which the recovery order relates demonstrates to the court that the property belongs to him.
The implications of this I shall consider when I come, at paras 65 and 66, to deal with the coherence of the scheme laid down by POCA.
Section 282 sets out a number of other exemptions, including property held by the Financial Services Authority, property held by a person in his capacity as an insolvency practitioner and property subject to any of a number of charges under United Kingdom statutes.
Mr Jones submitted that if property subject to a recovery order were worldwide property, there would have to be equivalent provisions, even if only in general terms, to acknowledge exceptions that would be required in order to accommodate the laws of the countries in which the property was situated.
Mr Eadies answer to this was that this was unnecessary as those laws would apply to defeat any claim based on the recovery order in any event.
This is a fair response to Mr Jones point.
None the less, these domestic provisions in relation to the reach of a recovery order add force to the submission that Part 5 is concerned only with property within the United Kingdom.
In summary, apart from the definition of property in section 316(4), and the enigmatic section 286, there is nothing in Part 5, from first to last, that suggests that its application extends to property outside England and Wales, Scotland and Northern Ireland.
Many of its provisions clearly relate to property within those jurisdictions.
What then of the definition? If a recovery order can only be made in respect of property within England and Wales, Scotland and Northern Ireland, can the words in the definition wherever situated, which appear in the definition of property in Part 5, have any application in Part 5 at all?
The answer to that question is that there are places in Part 5 where property means property wherever situated, even if a recovery order can only be made in respect of property within the United Kingdom.
Section 240 provides in relation to Part 5: (1) This Part has effect for the purposes of (a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct, Even if property when first used means property within the United Kingdom Courts, the second time that the word is used it unquestionably means property wherever situated.
Property within the United Kingdom that represents property obtained by criminal conduct, wherever the property was when obtained, is on any view, covered by Part 5.
The same point can be made in relation to property in section 242, which deals with the initial obtaining of property through unlawful conduct, and to the original property in section 305, which deals with tracing property that represents the original property.
Thus it is not right to postulate that the words wherever situated in the definition of property in section 316 make no sense if Part 5 does not permit the making of a recovery order in respect of property abroad.
For these reasons, giving the words of Part 5 their natural meaning, and ignoring section 286, I would conclude that the provisions that they make in relation to an order for civil recovery apply only within the United Kingdom.
Thus far I have been considering the provisions that appear in Part 5.
Of perhaps greater significance are the provisions that do not appear in that Part.
There are no provisions in relation to enforcement abroad to mirror those that appear at sections 74, 141 and 222 in relation to Parts 2, 3 and 4.
Mr Jones submitted to the Court of Appeal that this indicated that Parliament did not intend that civil recovery orders could be made in respect of property situated abroad.
Hooper LJ dismissed this submission out of hand at para 113 of his judgment.
He held that, having taken the view that the Strasbourg Convention applied to enforcement orders made in civil proceedings, SOCA was entitled to seek to enforce both interim and final Part 5 orders abroad in those countries in which the Convention was in force or in which provisions similar to the Convention had been implemented.
I find Hooper LJs conclusions surprising.
They are at odds with the scheme of the Strasbourg Convention: see para 30 above.
I do not understand how SOCA could seek to enforce abroad interim or final orders under Part 5.
Part 5 makes no provisions for SOCA to take steps to secure property or enforce confiscation abroad.
The relevant provisions in Part 5 in relation to securing property apply within the United Kingdom: see para 44 above.
Realisation of confiscated property is exclusively a matter for the trustee for civil recovery in whom property vests under a recovery order.
The suggestion that he would be able to recover property situated abroad is unrealistic: see para 71 below.
Had Parliament, or those responsible for drafting POCA, intended Part 5 confiscation to extend to property outside the United Kingdom they would surely have included provisions parallel to section 74.
The fact that they did not do so strongly suggests that there was no intention that Part 5 should have extraterritorial effect.
Reciprocity
I now turn to demonstrate that provisions for giving effect to requests for assistance from other states accord with an interpretation of Part 5 that restricts its application to property within the United Kingdom.
One obvious explanation for the provisions of Part 5 is that they were intended to comply with the obligations of the United Kingdom in respect of incoming requests under the Strasbourg Convention, and to afford similar assistance to states not party to that convention.
Section 444(1) provides for the making of an Order in Council to make provision for a prohibition on dealing with property which is the subject of an external request and for the realisation of property for the purpose of giving effect to an external order.
Section 444(2) provides that such an Order may include provision which (subject to any specified modification) corresponds to any provision of Part 2, 3, 4 or 5, excluding Chapter 3, which deals with cash seizure.
Section 447 defines an external request and an external order as follows: (1) An external request is a request by an overseas authority to prohibit dealing with relevant property which is identified in the request. (2) An external order is an order which (a) is made by an overseas court where property is found or believed to have been obtained as a result of or in connection with criminal conduct, and (b) is for the recovery of specified property or a specified sum of money.
Thus, where a foreign court makes a finding that property has been, or is believed to have been, obtained as a result of or in connection with criminal conduct and orders the recovery of specified property or a specified sum of money, section 444 provides for an Order in Council that permits realisation of property to give effect to the order of the foreign court.
Section 444 addresses both forms of confiscation order referred to in the Explanatory Report to the Strasbourg Convention: see para 28 above.
Section 444 does not provide in terms that the property to be realised should be within the United Kingdom.
The power conferred by section 444 was exercised by the making of the Order.
The Order enables the powers conferred by Parts 2, 3, 4 and 5 of POCA to be exercised for the purpose of giving effect to external requests and external orders, so that the provisions of the Order mirror the provisions of POCA.
Part 2 of the Order provides for the Secretary of State to refer an external request in connection with criminal investigation or proceedings, or an external order arising from a criminal conviction, to, among others in England and Wales, the Director of Public Prosecutions.
He will then apply to the Crown Court for the exercise of the powers conferred by Part 2.
Parts 3 and 4 of the Order make equivalent provisions in respect of Scotland and Northern Ireland.
Parts 2, 3 and 4 provide for measures to secure and realise relevant property.
Section 447(7) of POCA states that property is relevant property if there are reasonable grounds to believe that it may be needed to satisfy an external order which has been or may be made.
Part 2 of the Order is headed Giving Effect in England and Wales to External Requests in Connection with Criminal Investigations or Proceedings and to External Orders Arising from Such Proceedings.
Parts 3 and 4 have equivalent headings.
Parts 2, 3 and 4 of the Order expressly provide that the external request or order must relate to property in, respectively, England and Wales, Scotland and Northern Ireland.
In King v Director of the Serious Fraud Office [2009] UKHL 17; [2009] 1 WLR 718 the House of Lords held that the provisions of Part 2 of the Order only permitted a restraint order to be made in respect of property within England and Wales and that the same territorial restriction applied in respect of seizure and enforcement provisions.
Why do Parts 2, 3 and 4 of the Order expressly limit the assistance that can be sought by the foreign state to assistance in respect of property within England and Wales, Scotland and Northern Ireland? The answer must be that which I gave in King v Director of the Serious Fraud Office at para 31: If a country wishes assistance from other countries in preserving or recovering property that is related to criminal activity, it makes sense for its request to each of those other countries to be restricted to the provision of assistance in relation to property located within its own jurisdiction.
If each country were requested to take steps to procure the preservation or recovery of property on a worldwide basis, this would lead to a confusing, and possibly conflicting, overlap of international requests for assistance.
Not only would such multiplication of activity be confusing, it would involve significant and unnecessary multiplication of effort and expense.
This reasoning underlies the scheme for assistance laid down in the Strasbourg Convention.
Part 5 of the Order provides for the Secretary of State to forward an external order to the enforcement authority in the United Kingdom for the purpose of enabling the enforcement authority to realise recoverable property in civil proceedings for the purpose of giving effect to the external order.
The procedure for a civil recovery order in response to the external order is thus put in train.
Part 5 of the Order is headed: Giving Effect in the United Kingdom to External Orders by Means of Civil Recovery (my emphasis).
In contrast to Parts 2, 3 and 4, however, the body of Part 5 contains no express territorial limitation in relation to the property to which the Order relates.
There would seem to be two possible explanations for this.
One is that SOCA is correct in contending that Part 5 of POCA has extraterritorial effect and Part 5 of the Order is similarly intended to apply without territorial limitation.
The other is that Part 5 of POCA applies only to property within the United Kingdom, so that there was no need to insert a territorial restriction in Part 5 of the Order.
I believe that the latter is the correct explanation.
In the first place that accords with the heading of Part 5 of the Order.
In the second place, if Part 5 of POCA had extraterritorial effect, there would seem no reason to restrict Parts 2, 3 and 4 of the Order to property within the United Kingdom but to impose no such restriction in relation to Part 5.
In summary, the terms of the Order accord with an interpretation of POCA that restricts the making of recovery orders under Part 5 to property that is situated within the United Kingdom.
A coherent scheme that accords with international law
The provisions of Part 5 of POCA comply with the requirements of reciprocity contained in the Strasbourg Convention.
If a foreign court makes an order by way of value confiscation, the property of the defendant in England and Wales, Scotland or Northern Ireland can be seized and realised in satisfaction, or part satisfaction, of the order.
If, after conviction, a foreign court makes an order for the confiscation of specific proceeds of crime which are in one of the three United Kingdom jurisdictions, they can be seized and realised.
However Part 5 of POCA goes further than is necessary to meet the requirements of the Strasbourg Convention.
Section 241 requires the court or sheriff to decide on a balance of probabilities whether the property is or represents property obtained through unlawful conduct, irrespective of whether such conduct occurred in the United Kingdom or abroad.
If it is, or does, the Court must, subject to the provisions of Part 5, make a recovery order in respect of the property, whether or not any proceedings have been brought for an offence in connection with the property: see section 240(2).
The claim form has to be served on the person holding the property and on any person holding associated property which the authority wishes to be subject to a recovery order, wherever domiciled, resident or present (section 243(2)).
Part 5 makes complex provision for the protection of the rights of holders of associated property and of third parties who claim ownership of property that is subject to Part 5 proceedings.
Those provisions require those persons to make their claims before the court in England and Wales, Scotland or Northern Ireland seised of the Part 5 proceedings.
If the jurisdiction described above is founded on the presence of the property in question within the jurisdiction of the Court making the order, the action permitted by Part 5 is neither unreasonable nor contrary to international law.
It is perfectly understandable that Parliament should wish to make provision for the confiscation of proceeds of crime held in the United Kingdom by someone outside the jurisdiction and proper that anyone holding that property, or associated property, should be served with the claim to confiscate it and that anyone claiming ownership of it or an interest in it should be expected to assert that claim before the court conducting the confiscation proceedings.
Part 5 proceedings brought in respect of property held within the jurisdiction are also likely to be effective, thanks to the provisions in Part 5 for securing and realising the property in question.
Thus the scheme of Part 5 is simple and rational.
If property is identified in England and Wales, Scotland or Northern Ireland that is believed to be or to represent the proceeds of a crime committed outside the United Kingdom, recovery proceedings can be begun in the jurisdiction concerned.
Steps can be taken to secure the property in question and subsequently to realise it within the jurisdiction in question.
The proceeds of realisation of the property will be available to defray the cost of the proceedings.
The holder of the property, and any holder of associated property or person claiming to own the property can reasonably be expected to take part in the proceedings to assert his right or otherwise to challenge the making of the recovery order.
The picture is very different if SOCAs submissions as to the scope of Part 5 proceedings are correct.
Part 5 proceedings in respect of property outside the jurisdiction would involve the assertion of an exorbitant jurisdiction in personam without any basis in international law.
They would also be likely to prove ineffective.
At para 14 of his judgment Hooper LJ cited the following description by the appellants of the effect of SOCAs submissions: Parliament has conferred authority on the enforcement authorities to bring proceedings to vest in a trustee for civil recovery property situated abroad which derives entirely from unlawful conduct abroad where neither the holder of the property, nor any intermediate holders of the property, or property from which the holder's property is derived, have ever been domiciled, resident or present within the jurisdiction; in other words, where there is no connection with the jurisdiction whatsoever.
Hooper LJ accepted that this result was startling.
He was right to do so.
Asserting in personam jurisdiction over the holder of such property, or of associated property, has, as I have said, no precedent in international law.
It would not be reasonable to expect the holder of the property, or any person holding associated property or claiming to own the property, to submit to the jurisdiction of a United Kingdom court when neither they nor the property had any connection with that jurisdiction.
Any order made would be likely to be made unopposed.
In these circumstances the exorbitant confiscation proceedings that had resulted in an unopposed recovery order would be unlikely to bear fruit.
Hooper LJ stated on a number of occasions that the recovery order would operate in personam so as to give the trustee for civil recovery a right against the holder of the property.
Such a right would, however, be likely to be nugatory, for there would be no basis upon which the trustee for civil recovery could found jurisdiction in the United Kingdom over the holder of the property or any associated property so long as they remained outside the jurisdiction.
The fact that they had been served in the Part 5 proceedings would not confer jurisdiction in relation to a claim by the trustee.
It was common ground that if in such circumstances the trustee sought to bring a civil claim in respect of the property in the state where it was located, his title would not be likely to be recognised.
Hooper LJ advanced the following practical justification for according Part 5 extraterritorial effect.
He held, at para 15, that if the appellants were correct: a court in this jurisdiction would be unable to make a civil recovery order in respect of land or other property in Spain bought with the proceeds of crimes committed here by a person resident here.
Unable to obtain a civil recovery order, the enforcement authority could not take any steps here to require the person to hand over the property in Spain.
Nor (so it appears) could the United Kingdom take enforcement action in Spain pursuant to [the Strasbourg Convention] (to which I return below) because there would be no order of the court to enforce: see paragraph 81 below.
This reasoning is not compelling.
The appropriate course in the circumstances envisaged by Hooper LJ would be to obtain a confiscation order under Part 2, 3 or 4 and to make a request for assistance via the Secretary of State in accordance with section 74.
I can see no compelling reason why Parliament should have wished to confer on SOCA a right to seek a civil recovery order in respect of the proceeds of a crime that was not committed within the United Kingdom where those proceeds are not within the United Kingdom.
There will, of course, be the possibility that SOCA will become aware of the existence of property in another jurisdiction that it has reason to believe is, or may be, the proceeds of crime.
The natural course in those circumstances will be to pass on such information as it has about the property to the appropriate authorities in the country where the property is situated.
For all these reasons, but for the effect of section 286, I would have reached the firm conclusion that the jurisdiction to make a civil recovery order conferred by Part 5 of POCA applied only in respect of property that is situated in England and Wales, Scotland or Northern Ireland.
What is the effect of section 286?
The enigma
Section 286 provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a persons moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland.
It is implicit in this provision that, if POCA did not include it, the jurisdiction that it confers would not exist.
Thus section 286(2) purports to confer on the Court of Session the jurisdiction to make an order in respect of moveable property outside Scotland provided either that the holder is domiciled, resident or present in Scotland or the unlawful conduct through which the property was obtained took place in Scotland.
The only thing that is agreed about this provision is that it purports to create for Scotland a position that differs from that which the Act provides in relation to the rest of the United Kingdom.
This is puzzling as, when moving the amendment that introduced it in the House of Lords, Lord Goldsmith stated on 25 June 2002 that the intention was to achieve the same effect in all the jurisdictions of the United Kingdom: see Hansard (HL Debates), 25 June 2002, vol 636, col 1291.
Equally puzzling is section 399 in the Explanatory Notes to the Act, the second sentence of which echoes a comment that Lord Goldsmith made on the same occasion: 399.
The section provides that the Court of Session may make an order in respect of a person whether or not he is domiciled, present or resident in the United Kingdom.
No similar provision is required in respect of England, Wales and Northern Ireland, due to the jurisdiction of the civil courts and the general provisions on property in section 316.
In relation to this note Hooper LJ understandably remarked at para 128 that he could not understand the reference to section 316 of the Act as this applied to all three jurisdictions.
No one has been able to proffer a satisfactory explanation for section 286(2).
Part 3 of POCA would be the normal and appropriate route for confiscation in relation to property outside Scotland that was or represented proceeds of unlawful conduct that had taken place in Scotland.
Why, in the case of Scotland, should special provision be made to bring such property within the scope of Part 5? Section 286(2) remains an enigma.
It does not lead me to alter the conclusion that I have expressed in para 74 above, at least in so far as it relates to the position in England and Wales and Northern Ireland.
Conclusion
The High Court of England and Wales has no jurisdiction under Part 5 to make a recovery order in relation to property outside England and Wales.
It follows that the court had no jurisdiction to make the worldwide property freezing order that was made in this case.
The PFO appeal should be allowed and the property freezing order redrawn so that it applies only to property within the jurisdiction of the Court.
It may be necessary for the Court to hear further argument as to how this should be done, for a question remains, that has not yet been addressed, as to whether the form of the order made in this case is appropriate even if its ambit is restricted to property within the jurisdiction.
The foundation of the jurisdiction conferred under Part 5 of POCA is the existence of property believed to be the proceeds of crime.
The existence of such property enables SOCA, as the enforcement authority, to serve a claim form on the holder of the property and on any other person who SOCA thinks holds associated property, even if that person is outside the jurisdiction, if SOCA wishes the property to be the subject of a civil recovery order see section 243.
Section 243(3) requires the property either to be specified or described in the form in general terms.
Section 245A, which I have set out at para 40 above, sets out the requirements of a property freezing order.
Subsection (2)(a) states that a property freezing order is one that specifies or describes the property to which it applies.
The property freezing order obtained in this case set out schedules of property to which the order applied.
But the order was not restricted to specific property.
It provided that the prohibition on disposal of assets applies, but is not limited to, the following categories of assets: (1) all real property, including, but not limited to the properties listed at Schedule 1 to this Order; (2) the balances standing to the credit of any bank and/or building society accounts, including, but not limited to the accounts listed at Schedule 2 to this Order; (3) any Personal Equity Plan (PEP); (4) any endowment policy; (5) any securities, including any debentures or shares in any company (wheresoever incorporated); and (6) any chattels, motor vehicles, or other personal property valued in excess of 2000, including, but not limited to the property listed at Schedule 3 to this Order. wheresoever located (whether within England and Wales or otherwise).
It is questionable whether these general descriptions specify or describe property as required by section 245A.
The property freezing order also required all the PFO appellants, together with the other respondents to the property freezing order, to disclose all their worldwide assets.
It is not clear to me how the court had jurisdiction to make such an order.
Part 8 of POCA expressly deals with disclosure, which is the subject of the DO appeal.
If this Court is invited to make a revised property freezing order in which property is described in terms as general and speculative as have been adopted in this case it will require to be satisfied that they fall within the scope of section 245A.
If the Court is invited to include in the revised freezing order an order for disclosure of assets it will require to be satisfied that it has jurisdiction to do so.
The DO appeal
This appeal challenges the validity of information notices addressed to Mr Perry and his daughters by SOCA pursuant to the disclosure order issued by Judge Kay QC on 8 August 2008: see para 6 above.
The disclosure order was issued under Part 8 of POCA, which deals with Investigations.
Part 8 applies to both confiscation proceedings under Parts 2, 3 and 4 of POCA and civil recovery proceedings under Part 5.
In relation to Part 5 a disclosure order can be made only if property specified in the application for the order is subject to a civil recovery investigation and the order is sought for the purposes of the investigation: see section 357(3)(b).
A civil recovery investigation is defined by section 341(2): For the purposes of this Part a civil recovery investigation is an investigation into (a) whether property is recoverable property or associated property, (b) who holds the property, or (c) its extent or whereabouts.
Section 357 defines a disclosure order as follows: (4) A disclosure order is an order authorising an appropriate officer to give to any person the appropriate officer considers has relevant information notice in writing requiring him to do, with respect to any matter relevant to the investigation for the purposes of which the order is sought, any or all of the following (a) answer questions, either at a time specified in the notice or at once, at a place so specified; (b) provide information specified in the notice, by a time and in a manner so specified; (c) produce documents, or documents of a description, specified in the notice, either at or by a time so specified or at once, and in a manner so specified. (5) Relevant information is information (whether or not contained in a document) which the appropriate officer concerned considers to be relevant to the investigation.
Section 358 sets out the requirements for making a "disclosure order": (1) These are the requirements for the making of a disclosure order. (2) There must be reasonable grounds for suspecting that (b) in the case of a civil recovery investigation, the property specified in the application for the order is recoverable property or associated property. (3) There must be reasonable grounds for believing that information which may be provided in compliance with a requirement imposed under the order is likely to be of substantial value (whether or not by itself) to the investigation for the purposes of which the order is sought. (4) There must be reasonable grounds for believing that it is in the public interest for the information to be provided, having regard to the benefit likely to accrue to the investigation if the information is obtained.
Section 359(1) provides that a person commits an offence if without reasonable excuse he fails to comply with a requirement imposed on him under a disclosure order.
The offence carries a maximum sentence on summary conviction of imprisonment for six months.
Section 359(3) provides for the more serious offence of knowingly or recklessly making a false statement in purported compliance with a requirement imposed under a disclosure order.
This carries a maximum sentence of two years imprisonment in respect of a conviction after a trial on indictment.
SOCAs application for a disclosure order was supported by a witness statement of Vanessa Ewing, a Financial Investigator on SOCAs staff.
The application notice named as respondents Mr Perry, Mrs Lea Perry, Mrs Greenspoon, Miss Yael Perry and any other individual or entity specifically associated to the named respondents and property identified as relevant to the civil recovery investigation conducted by the Director General.
In para 5.7 Miss Ewing described the property that was subject to the civil recovery investigation as any property held by or on behalf of Perry including, but not limited to, the following: (i) monies which have been credited to or have passed through the following: (a) accounts held by or on behalf of Israel Perry, including accounts held by his wife, Mrs Lea Lili Perry, and/or his two adult daughters, Mrs Tamar Greenspoon and Miss Yael Perry.
In explaining why the order was sought in relation to Mr Perrys wife and
daughters, Miss Ewing explained: I believe that it is common practice for criminals to use the proceeds of crime to acquire property held in the names of other family members or trusted associates.
Persons involved in criminal activity often seek to reduce the amount of money and other property held in their own names in an attempt to minimise their exposure to the risk of confiscation or to avoid paying tax.
It is therefore reasonable for the investigation to include property owned by Mrs Lea Lili Perry, Miss Yael Perry and Mrs Tamar Greenspoon in order to ascertain whether such property has a legitimate origin or whether it represents the proceeds of criminal conduct.
The Order made by Judge Kay was addressed to all those named in the application notice, included, inappropriately, a penal notice, and conferred authority on SOCA in the general terms of section 357(4).
The property referred to by Miss Ewing in her application was described in the most general terms.
The purpose of the application, as explained by her, appears to have been to enable SOCA to carry out a roving commission aimed at identifying any property that might be the proceeds of Mr Perrys criminal conduct.
A number of notices were issued by Miss Ewing pursuant to the disclosure order.
Some sought information of funds in specific accounts.
Some sought information in the following terms: (1) Provide the following information under section 357(4)(b) of the Act: (i) A statement of assets held by, or on behalf of, Israel PERRY in the United Kingdom including Crown Dependencies and British Overseas Territories; (ii) A statement of assets held by, or on behalf of, Israel PERRY in any other country other than the United Kingdom.
The information sought includes, but is not limited to, the following: (a) Any assets held by a legal entity of which Mr PERRY is the beneficiary including worldwide companies, trusts and corporations; (b) Any precious metals and gems held by, or on behalf of, Israel PERRY; (c) Any valuable art, antiques and the like held by, or on behalf of, Israel PERRY; (d) Any loans made by, or on behalf of, Israel PERRY; (e) Any real estate held by, or on behalf of, Israel PERRY; (f) Any vehicles, pleasure craft etc held by, or on behalf of, Israel PERRY; (g) Any stocks, bonds, shares, bearer bonds, negotiable instruments, investment funds etc held by, or on behalf of, Israel PERRY; (h) Any bank accounts, in any currency, held by, or on behalf of, Israel PERRY; The exercise carried out by Miss Ewing seems to go beyond the purpose of a civil recovery investigation as defined in section 341(2).
That investigation, as I understand the relevant provisions, relates to property whose existence has already been identified.
Similar questions arise in relation to the scope of the disclosure order and some of the notices served under it as to those that I have raised in paras 79 to 83 above in relation to the scope of the property freezing order.
Under section 357(4) the authority conferred by a disclosure order is restricted to enquiries with respect to any matter relevant to the investigation for the purposes of which the order is sought.
It is questionable whether this authority extends beyond seeking information about property whose existence has already been identified.
Mr Jones has not, however, sought to challenge the scope of the order or of the notices issued under it.
He has made a more fundamental attack on SOCAs authority to issue the notices.
Those notices were given to persons who were, and were known by SOCA to be, outside the jurisdiction of the United Kingdom.
It was Mr Jones submission, advanced before the Court of Appeal, that the authority given by a disclosure order to give disclosure notices only applies to notices given to persons within the jurisdiction.
In making this submission Mr Jones relied particularly on the presumption that, unless it clearly provides to the contrary, a statute will not have extraterritorial effect.
The majority of the Court of Appeal, Ward and Carnwath LJJ, rejected the appellants attack on the validity of the notices; Richards LJ dissented [2010] EWCA Civ 907; [2011] 1 WLR 542.
The gist of the reasoning of Carnwath LJ appears in the following short passage of his judgment: 50. is there any reason why persons who are reasonably considered to have an interest in property validly subject to a disclosure order, and who have a sufficient presence within the jurisdiction for a notice to be effectively given to them, should be treated as outside the legislative grasp of the statutory scheme? 51.
As a matter of common sense, it is difficult to see why mere presence in or absence from the country at the time of sending or delivery of the notice is the critical factor.
For example, a person normally resident at an address in this country could not sensibly seek to deny that the notice had been given to him at that address, merely because he happened to be out of the country at the time (for example, on a business or holiday trip).
Ward LJ proceeded on the premise that a recovery order could be made in respect of property outside the jurisdiction.
He commented at para 77 that the extraterritorial effect of Part 5 could not be denied and that he could not see why Part 8 should not act in the same way.
For the reasons that I have given I consider that he proceeded on a false premise.
The point is a very short one.
No authority is required under English law for a person to request information from another person anywhere in the world.
But section 357 authorises orders for requests for information with which the recipient is obliged to comply, subject to penal sanction.
Subject to limited exceptions, it is contrary to international law for country A to purport to make criminal conduct in country B committed by persons who are not citizens of country A. Section 357, read with section 359, does not simply make proscribed conduct a criminal offence.
It confers on a United Kingdom public authority the power to impose on persons positive obligations to provide information subject to criminal sanction in the event of non compliance.
To confer such authority in respect of persons outside the jurisdiction would be a particularly startling breach of international law.
For this reason alone I consider it implicit that the authority given under section 357 can only be exercised in respect of persons who are within the jurisdiction.
Mr Jones referred to a number of other provisions of POCA which, so he submitted, indicated that notices under a disclosure order could only be given to persons within the jurisdiction.
He pointed out that Part 8 applies to confiscation as well as to civil recovery.
Section 376 as originally drafted included provision for the issue by the judge of a letter of request for the purpose of obtaining information relevant to a confiscation order.
He submitted that this provision would have been superfluous if the authority conferred by section 357 extended to persons beyond the United Kingdom.
Part 8 gives other investigatory powers, including the power to make a production order in relation to specified material, the power to issue search and seizure warrants and the power to make a customer information order.
Mr Jones submitted that the provisions conferring these powers, either as a matter of language or because of the presumption against extraterritoriality, could only be exercised within the United Kingdom.
These submissions have some merit and reinforce my view of the limited ambit of section 357.
For these reasons I would also allow the DO appeal.
I agree with Mr Jones suggestion that the appropriate relief is a declaration that the Disclosure Order made by Judge Kay does not authorise sending information notices to persons who are outside the United Kingdom.
LORD REED
I agree with Lord Phillips, for all the reasons that he gives, that these appeals must be allowed.
In relation to the appeal concerning the property freezing order, however, I wish to consider further section 286 of POCA, in view of the extent to which the submissions of the parties, and the division of opinion in the court, have focused upon that provision.
In expressing views about it, I am conscious that the provision is concerned with the jurisdiction of the Court of Session, that these are not Scottish appeals, and that this court has not had the benefit of consideration of the provision by the Scottish courts.
In those circumstances, it would be undesirable to express any definite view about the effect of section 286 unless it is necessary to do so in order to determine the present appeal; and, in my view, it is not.
Nevertheless, since the provision appears in a United Kingdom statute which must be read and understood as a whole, it is potentially relevant to the construction of the provisions with which the appeal is directly concerned.
It was also the subject of much of the argument in the present appeal.
Some consideration of its effect is therefore unavoidable.
In recognition of that, both parties adduced expert evidence from Scottish counsel before the Court of Appeal.
This court, on the other hand, as the final court of appeal in civil matters from all parts of the United Kingdom, has judicial knowledge of Scots, English and Northern Irish law, and may take cognisance of the law of one jurisdiction in an appeal originating in another (Elliot v Joicey [1935] AC 209; 1935 SC (HL) 57; Bank of East Asia Ltd v Scottish Enterprise 1997 SLT 1213).
Both the appellants and the respondent were therefore represented by Scottish as well as English counsel.
The international background
In order to understand the relevant provisions of POCA, including section 286, it is necessary to begin by considering an important aspect of the background to the legislation.
As Lord Phillips has explained, POCA is intended to fulfil certain international obligations of the United Kingdom.
These include, in particular, the obligations arising under the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna, 20 December 1988), the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (Strasbourg, 8 November 1990), and the Council Framework Decision of 26 June 2001 on Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime (OJ 5.7.2001, L182/1).
The legislation must therefore be considered in the light of those instruments.
For present purposes, the most significant of them are the Vienna Convention and the Strasbourg Convention.
The Vienna Convention
The Vienna Convention is concerned with drugs offences.
Article 5 relates to confiscation, defined by article 1 as meaning the permanent deprivation of property by order of a court or other competent authority.
Article 5(1) requires each party to adopt such measures as may be necessary to enable confiscation of proceeds derived from relevant offences.
Proceeds are defined in article 1 as meaning any property derived from or obtained, directly or indirectly, through the commission of a relevant offence.
Article 5(2) requires each party also to adopt such measures as may be necessary to enable its authorities to identify, trace, and freeze or seize proceeds for the purpose of eventual confiscation.
Article 5(4) relates to international co operation.
Put shortly, article 5(4)(a) envisages that a request may be made by a party having jurisdiction over an offence to another party in whose territory proceeds referred to in article 5(1) that is to say, proceeds derived from offences are situated.
On receipt of such a request, the party requested must either submit the request to its competent authorities for the purpose of obtaining an order of confiscation and, if such order is granted, give effect to it, or it must submit to its competent authorities an order of confiscation issued by the requesting party, with a view to giving effect to it in so far as it relates to proceeds situated in its territory.
Article 5(4)(b) in addition provides for effect to be given to requests for the taking of provisional measures for the purpose of eventual confiscation.
In terms of article 5(5)(a), proceeds confiscated by a party pursuant to article 5(4) are to be disposed of by that party according to its domestic law.
The Strasbourg Convention
The Strasbourg Convention is wider in its subject matter than the Vienna Convention, in that it applies to criminal offences generally, but narrower in its geographical scope, in so far as it was made under the auspices of the Council of Europe rather than the United Nations, and fewer states are party to it.
Chapter III is concerned with international co operation in relation to confiscation of the proceeds of crime.
The relevant provisions have been set out by Lord Phillips.
Confiscation is defined by article 1(d) as meaning a penalty or a measure, ordered by a court following proceedings in relation to a criminal offence or criminal offences resulting in the final deprivation of property.
It is to be noted that, as in the Vienna Convention, the term confiscation has a wider scope than a confiscation order within the meaning of Parts 2, 3 and 4 of POCA, and is apt to include recovery orders of the kind for which Part 5 makes provision.
Section 1 of Chapter III of the Convention, comprising article 7, sets out the general principles in relation to international co operation.
In particular, article 7(2) imposes an obligation upon each party to the Convention to adopt such legislative and other measures as may be necessary to enable it to comply, under the conditions provided for in that chapter, with requests for confiscation, and with requests for investigative assistance and provisional measures with a view to confiscation.
Section 2, comprising articles 8 to 10, is concerned with investigative assistance.
In terms of article 8, in particular, parties undertake to afford each other, upon request, the widest possible measure of assistance in the identification and tracing of proceeds and other property liable to confiscation.
Such assistance is to include any measure providing and securing evidence as to, amongst other matters, the existence and location of such property.
Section 3, comprising articles 11 and 12, is concerned with provisional measures.
In terms of article 11(1), in particular, parties are obliged, at the request of another party which has instituted criminal proceedings or proceedings for the purpose of confiscation, to take the necessary provisional measures, such as freezing or seizing, to prevent any dealing in, transfer or disposal of property which, at a later stage, may be the subject of a request for confiscation or which might be such as to satisfy the request.
Section 4, comprising articles 13 to 17, is concerned with confiscation.
Article 13, in particular, is concerned with the obligation to confiscate.
Following the dual scheme created by article 5(4) of the Vienna Convention, article 13(1) of the Strasbourg Convention envisages alternative means by which a party may respond to a request made by another party for the confiscation of proceeds of crime which are situated in its territory.
The first alternative, set out in article 13(1)(a), is that the requested party may enforce a confiscation order made by a court of the requesting party.
The second alternative, set out in article 13(1)(b), is that the requesting party may submit a request to the competent authorities of the requested party so that the latter may obtain and enforce a confiscation order.
Finally, in relation to the Strasbourg Convention, article 15 follows article 5(5)(a) of the Vienna Convention in providing that any property confiscated by the requested party shall be disposed of by that party in accordance with its domestic law, unless otherwise agreed by the parties concerned.
As I shall explain, that provision is not reflected in the effect of a recovery order made under Part 5 of POCA.
The contrast is relevant to the question whether such orders can be of the kind contemplated by article 13(1)(a) of the Convention, and therefore to the question whether such orders may fall within the scope of that exception to the ordinary principles of international law.
The Framework Decision
The Framework Decision seeks to ensure the effective implementation of the Strasbourg Convention within the EU.
It does not however add anything of significance in relation to the issues with which the appeal is concerned.
Parts 2, 3 and 4 of POCA
Parts 2, 3 and 4 of POCA are concerned primarily with confiscation orders: orders, that is to say, made against a person convicted in criminal proceedings, for the payment of a sum of money equivalent to the value of any property or pecuniary advantage obtained as a result of or in connection with his criminal conduct (or such lesser amount as may be available).
Such orders can be made in criminal proceedings in England and Wales, Scotland or Northern Ireland: see section 6 in relation to England and Wales, section 92 in relation to Scotland, and section 156 in relation to Northern Ireland.
The order operates in personam, and the person against whom it is made is necessarily subject to the criminal jurisdiction of the court which makes the order.
The courts are also empowered to order provisional measures.
In particular, a restraint order can be made if, put shortly, a criminal investigation or criminal proceedings have been started in England and Wales, Scotland or Northern Ireland, and there is reasonable cause to believe that the alleged offender or defendant has benefited from his criminal conduct: see sections 41, 120 and 190.
Such orders again operate in personam.
The courts can also order enforcement measures, including measures authorising the securing and realisation of property.
Such orders operate in rem.
Parts 2, 3 and 4 each contain a provision concerned with overseas jurisdictions.
If the conditions for the making of a restraint order are met, and the prosecutor believes that realisable property that is to say, property held by the defendant or by the recipient of a tainted gift is situated in a country outside the United Kingdom, then the prosecutor can send a request to the Secretary of State, with a view to its being forwarded to the government of the country where the property is situated: see sections 74, 141 and 222.
In a case where no confiscation order has been made, the request is to secure that any person is prohibited from dealing with the property.
If a confiscation order has been made and has not been satisfied, the request is also to secure that the property is realised and the proceeds are applied in accordance with the law of the requested country.
These provisions fall within the ambit of articles 5(4) and (5) of the Vienna Convention and 11 and 13(3) of the Strasbourg Convention.
It appears, therefore, that although property is defined by section 84(1), and by the corresponding provisions for Scotland and Northern Ireland, as all property wherever situated, and the powers to make restraint orders under sections 41, 120 and 190 can therefore be exercised in relation to property situated overseas, it is envisaged that the securing and realisation of such property will be dealt with by means of requests to foreign governments for assistance.
That is as one would expect, since it is only the authorities of the jurisdiction where the property is situated which have the power to make effective orders of that nature in respect of such property.
The wide definition of property is nevertheless essential in the context of Parts 2, 3 and 4, not only for the purposes of sections 74, 141 and 222 but more generally.
In particular, as I have explained, a confiscation order is an order for the payment of a sum of money equal to the value of any property or pecuniary advantage obtained by the defendant from his criminal conduct.
Although the court must have jurisdiction over the defendant in the criminal proceedings, there is no reason why the property obtained as a result of or in connection with the offence need also be situated within the United Kingdom, or within the part of the United Kingdom where the court is located.
Part 5 of POCA
As section 240(1) of POCA states, Part 5 has two purposes.
The first, with which the present case is concerned, is to enable the enforcement authority to recover, in civil proceedings before the High Court or the Court of Session, property which is or represents property obtained through unlawful conduct.
The Act thus creates an entirely new form of remedy.
Section 240(2) makes it clear that such proceedings may be brought whether or not any criminal proceedings have been brought for an offence in connection with the property.
Section 241 explains what is meant by unlawful conduct, and in particular that such conduct may occur in the United Kingdom or elsewhere.
Accordingly, in distinction to Parts 2, 3 and 4, proceedings can be brought under Part 5 in circumstances where the court has no jurisdiction in respect of the offence in question.
Chapter 2 of Part 5 is concerned with civil recovery.
In particular, sections 243 and 244 are concerned with proceedings for recovery orders in England and Wales or Northern Ireland, and in Scotland, respectively.
Each provision permits proceedings for a recovery order to be taken against any person who the enforcement authority thinks holds recoverable property, and requires the enforcement authority to serve the claim form or application upon the respondent wherever domiciled, resident or present.
Accordingly, proceedings for a recovery order can be brought in circumstances where not only the court has no jurisdiction in respect of the offence in question, but the defendant is not domiciled, resident or present within the jurisdiction of the court.
Having read only this far into the legislation, if one were to ask what connecting factor is required in order for the Court of Session to have jurisdiction in proceedings under Part 5, if the respondent is not domiciled, resident or present in Scotland, and if the Scottish courts do not have criminal jurisdiction over him, the answer which one would naturally expect is that the necessary connecting factor is the situation within Scotland of the property which is sought to be recovered.
It is difficult to see what else it might be.
It is however necessary to read further to find out whether that expectation is well founded.
This is perhaps an appropriate point at which to note SOCAs submission that there need not be any connecting factor: POCA, it is argued, enables the enforcement authorities to bring proceedings in the High Court or the Court of Session to vest property situated abroad in a trustee for civil recovery, even where there is no connection with the United Kingdom whatsoever.
As it is put in SOCAs written case, Parliament has decided that a Chinese thief, living in China, who has stolen property in China from a Chinese citizen may be the subject of civil recovery action.
It is however inherently unlikely that such a result could have been intended by Parliament: in such circumstances, there would be no reason for the holder of the property to submit to the jurisdiction of the courts of this country, and no likelihood that any order granted by those courts without appearance would be given effect overseas.
Again, however, it is necessary to examine the legislation further in order to determine what Parliament has done.
A recovery order must vest the recoverable property in the trustee for civil recovery: section 266(2).
The order may sever any property: section 266(7).
Furthermore, the order may impose conditions as to the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it: section 266(8).
The trustee for civil recovery is a person appointed by the court to give effect to a recovery order: section 267(1).
His functions include securing the detention, custody or preservation of any property vested in him by the recovery order and realising the value of the property, other than money: section 267(3).
By virtue of section 267(6), he has the powers mentioned in Schedule 7.
The first of these is power to sell the property: paragraph 1.
There is no equivalent of these provisions in Parts 2, 3 or 4.
These provisions suggest strongly, if not conclusively, that a recovery order operates in rem to transfer title to the property to the trustee.
That is the usual, although not invariable, sense in which the concept of vesting is employed, and that sense is consistent with the power to sever the property, and with the power of the trustee to sell the property and his function of realising its value.
This interpretation of section 266 derives further support from section 269, which is concerned with rights, such as rights of pre emption or irritancy, which might otherwise be triggered by the vesting of the property in the trustee.
Section 269 provides, so far as material: (1) A recovery order is to have effect in relation to any property despite any provision (of whatever nature) which would otherwise prevent, penalise or restrict the vesting of the property. (2) A right of pre emption, right of irritancy, right of return or other similar right does not operate or become exercisable as a result of the vesting of any property under a recovery order.
A right of return means any right under a provision for the return or reversion of property in specified circumstances. (3) Where property is vested under a recovery order, any such right is to have effect as if the person in whom the property is vested were the same person in law as the person who held the property and as if no transfer of the property had taken place.
The most significant of these provisions for present purposes is section 269(3), since that provision implies that the vesting of property under a recovery order involves the transfer of the property, so that it is held by the trustee rather than by the person who formerly held it.
It was also accepted on behalf of SOCA that section 269(2) is one of a number of provisions in Part 5 which can only apply to property if POCA forms part of the lex situs: in other words, if the property is situated in one of the parts of the United Kingdom.
One would ordinarily expect an order having the effect of transferring a real right of ownership to apply only in relation to property situated in the territory of the state where the order is made.
As Lord Mance, delivering the judgment of the Board, said in Pattni v Ali [2006] UKPC 51; [2007] 2 AC 85 (para 24): Their Lordships also note the existence of a more general principle.
The actual transfer or disposition of property is, in principle, a matter for the legislature and courts of the jurisdiction where the property is situate (state A), and will be recognised accordingly by courts in any other state (state B) It follows from it, conversely, that in the unlikely event that the courts of state A were to purport actually to transfer or dispose of property in state B, the purported transfer or disposal should not be recognised as effective in courts outside state A.
That principle would apply with particular force if the order were made for the purpose of seizure or confiscation: Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, para 54 per Lord Hoffmann; Government of the Republic of Spain v National Bank of Scotland 1939 SC 413.
Lord Justice Clerk Aitchison said in the latter case (at pp 433 434): such decrees of a foreign country as purport to have extra territorial effect, and to attach property in a subject situated, and at a time when it is situated, within this country or its territorial waters, will not be recognised by our laws and courts.
As I have previously explained, however, article 5(4) of the Vienna Convention and article 13(1)(a) of the Strasbourg Convention allow for the possibility that a party may make an order confiscating property situated in the territory of another party, to which the latter party may choose to give effect, but is not obliged to do so.
It therefore cannot be taken for granted that POCA does not allow for that possibility.
It is necessary to examine the legislation further in order to decide whether POCA does so or not.
Other provisions in Chapter 2 concern provisional measures.
The available measures in England and Wales, and in Northern Ireland, are property freezing orders and interim receiving orders.
The corresponding measures in Scotland are prohibitory property orders and interim administration orders.
A property freezing order and a prohibitory property order are orders that prohibit any person to whose property the order applies from dealing with the property: sections 245A(2)(b) and 255A(2)(b).
The court can make such an order only if it is satisfied that there is a good arguable case that the property to which the application for the order relates is or includes recoverable property, and that, if any of it is not recoverable property, it is associated property: sections 245A(4) and (5), and 255A(4) and (5).
One consequence of that requirement is that such orders can be made only in respect of property which is, in principle, capable of being made the subject of a recovery order, or is mixed with such property in such a way as to be associated property as defined in section 245.
If a recovery order operates in rem, as one might infer for the reasons I have explained at paragraphs 123 to 125, it follows that the scope of property freezing orders and prohibitory property orders is more limited than the nature of the orders themselves might otherwise have led one to expect.
Part 5 contains no provision concerned with overseas jurisdictions.
There is, in particular, no equivalent of sections 74, 141 and 222.
This contrast with Parts 2, 3 and 4 (and also with Part 8, as originally enacted: see section 376) provides further support for the view that recovery orders are concerned solely with property situated within the part of the United Kingdom where the order was made.
If such orders had extraterritorial scope, the absence of any provision corresponding to sections 74, 141 and 222 would be difficult to understand.
In that connection, it is also relevant to note that Part 5 requires that the realised proceeds of property vested in the trustee must be applied in accordance with section 280.
That section requires that the net proceeds, after payment of the remuneration and expenses of the trustee, must be paid to the enforcement authority.
No provision is made for the possibility that the proceeds of realization of property situated in another jurisdiction might be applied in accordance with the law of that jurisdiction, as envisaged by article 5(5)(a) of the Vienna Convention and article 15 of the Strasbourg Convention.
In that respect, recovery orders again differ from confiscation orders made under Parts 2, 3 and 4: in the case of those orders, sections 74(3), 141(3) and 222(3) provide, in relation to enforcement abroad, that the request is to be that realisable property is realised and the proceeds are applied in accordance with the law of the receiving country.
I shall return to section 286, which is concerned with the power of the Court of Session to make orders under Chapter 2 of Part 5, and to section 316(4), which defines property for the purposes of Part 5.
Part 11 of POCA
It is also relevant to note one of the provisions in Part 11 of POCA, which is concerned with co operation.
Section 444 deals with external requests and orders.
It allows provision to be made by Order in Council for a prohibition on dealing with property which is the subject of an external request, or for the realisation of property for the purpose of giving effect to an external order.
An external request is a request by an overseas authority to prohibit dealing with property which may be needed to satisfy an external order which has been or may be made: section 447(1) and (7).
An external order is an order made by an overseas court where property is found or believed to have been obtained as a result of or in connection with criminal conduct, and is for the recovery of specified property or a specified sum of money.
Such an Order in Council may include provision which (subject to any specified modifications) corresponds to any provision of Part 2, 3 or 4 or Part 5, except Chapter 3, which concerns the recovery of cash in summary proceedings.
Section 444 thus enables articles 11 and 13(1) of the Strasbourg Convention, and the corresponding provisions of the Vienna Convention, to be implemented by the United Kingdom.
The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (SI 2005/3181) was made under sections 444 and 459(2) of POCA.
Part 5 of the Order concerns recovery orders, and contains articles corresponding to sections 286 and 316(4) of POCA: see articles 197 and 213(4) respectively.
The Order was construed by the House of Lords in King v Director of the Serious Fraud Office [2009] UKHL 17; [2009] 1 WLR 718 as conferring jurisdiction upon the Crown Court to make a restraint order in response to an external request only where the request concerned property in England and Wales.
The same territorial requirement was also held to apply to the seizure and enforcement provisions of Part 2 of the Order.
Although the terms of the Order differ in some significant respects from the terms of POCA, the speech of Lord Phillips, with which the other members of the committee agreed, contains observations which are equally germane to the present case.
In particular, Lord Phillips rejected the contention that an Order made under section 444 might have been intended to enable foreign countries to obtain worldwide orders from the British courts (para 37).
His Lordship also observed that, although property was defined by section 447(4) of POCA as meaning property wherever situated, whether the word bore that meaning depended on the context in which the word was used.
Thus, where the Order expressly or by implication referred to property in England and Wales, it necessarily referred only to property there situated (para 37).
Section 316(4)
It is necessary next to consider section 316(4), which defines property for the purposes of Part 5 as all property wherever situated.
At first sight, that might be thought to entail that the power to make a recovery order extended to property anywhere in the world, provided that it had been obtained through unlawful conduct occurring anywhere in the world and was therefore recoverable property as defined in section 304(1).
As I have explained, however, there are a number of factors which point away from that conclusion.
To recap: (1) Part 5, unlike Parts 2, 3 and 4, makes no provision in respect of overseas jurisdictions; (2) Part 5, unlike Parts 2, 3 and 4, makes no provision for the proceeds of realisation of recoverable property to be applied in accordance with foreign law, as contemplated by article 5(5)(a) of the Vienna Convention and article 15 of the Strasbourg Convention; (3) recovery orders under Part 5, unlike confiscation and restraint orders under Parts 2, 3 and 4, appear on the face of the provisions (notably sections 266, 267, 269 and Schedule 7) to operate in rem; (4) orders taking effect in rem ordinarily apply only to property situated within the territorial jurisdiction of the court; (5) there is a presumption that Parliament does not intend to legislate in respect of property outside the United Kingdom, and in particular that legislation is not intended to authorise the seizure or confiscation of property situated outside the United Kingdom; (6) courts in the United Kingdom have no power to make effective orders purporting to transfer real rights of ownership of property situated outside the jurisdiction of the court; and (7) it is accepted that references to property in a number of other provisions of POCA, including provisions of Part 5, can refer only to property situated in the United Kingdom.
Some of these points have greater force than others.
Cumulatively, however, they provide compelling support for the conclusion that the ambit of recovery orders is intended to be confined to property located within the part of the United Kingdom where the court in question exercises jurisdiction.
Subject to section 286, it appears therefore that, although property is defined so widely by section 316(4) that the power to make recovery orders under section 266 might be understood as extending to property located overseas, such an interpretation of section 266 would be mistaken: in the context of the section, the word property has to be understood as referring only to property situated within the territorial jurisdiction of the High Court or the Court of Session, as the case may be.
The wide definition of property is nevertheless essential in the context of other provisions of Part 5.
In particular, the tracing provisions in Part 5 have the consequence that a recovery order may be appropriate in respect of property located within the jurisdiction of the court which represents property unlawfully obtained elsewhere: see, for example, section 305.
Civil jurisdiction in the Scottish courts
Before coming finally to section 286, it is necessary to explain in outline the relevant aspects of Scots law in relation to jurisdiction, apart from POCA.
I should emphasise that my purpose here is merely to explain matters in the most general terms, so as to provide some background against which to attempt to understand the effect of section 286.
In most ordinary civil proceedings before the Scottish courts, jurisdiction is regulated by the rules contained in Schedule 8 to the Civil Jurisdiction and Judgments Act 1982, as amended.
In the present context, it is convenient to begin with rule 5(1)(a), which confers upon the courts for the place where immovable property is situated exclusive jurisdiction in proceedings which have as their object rights in rem in immovable property (sic: the terms movable and immovable are derived from the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters rather than the Scots law of property, which distinguishes between heritable and moveable property.
It is the latter terminology which is employed in section 316(4) of POCA).
The exclusive jurisdiction of the forum rei is reinforced by rule 5(2), which precludes a Scottish court from exercising jurisdiction in a case where immovable property is situated outside Scotland and the court would have exclusive jurisdiction if the property were situated in Scotland.
A similar rule applies to the allocation of jurisdiction within the United Kingdom: Schedule 4, rule 11(a)(i).
Even before the enactment of the 1982 Act, that approach had long been established under the common law.
For example, in Cathcart v Cathcart (1902) 12 SLT 182 Lord Low declined to grant a declarator that the pursuer was entitled to a liferent of land situated in England.
He observed, at p 185: Real estate in England is beyond the jurisdiction of the Scotch courts Further, if decree of declarator in terms of the second conclusion was pronounced, this court would have no power to give practical effect to the right thereby declared.
The pursuer would require to go to England to obtain his remedy.
Would the English courts, according to the principles of international law, be bound to recognise and act upon the declarator of this court? I am of opinion that they would not I think that the answer would be that it was for the court of the country where the real estate was situated to say what was the result, as regards the rights of the parties [of the relevant events].
I am therefore of opinion that the question is one with which this court is not competent to deal.
In relation to proceedings concerned with moveable property, Schedule 8 contains a number of relevant rules.
Under rule 1, the general rule is that persons can be sued in Scotland if they are domiciled there.
The concept of domicile is defined for this purpose on the basis of residence: section 41.
Under rule 2, there are also a number of special grounds on which the Scottish courts may have jurisdiction.
In particular, under rule 2(i) a person may be sued in Scotland in proceedings which are brought to assert, declare or determine proprietary or possessory interests, or rights of security, in or over movable property, or to obtain authority to dispose of movable property, if the property is situated in Scotland.
There are in addition other rules which may be relevant to confer jurisdiction in particular circumstances.
Broadly similar rules apply to the allocation of jurisdiction within the United Kingdom, under Schedule 4, rules 1 and 3(h)(ii).
The Scottish courts may therefore have jurisdiction in proceedings concerned with the ownership of moveable property situated outside Scotland.
In practice, however, as I have explained, the courts in Scotland, as in the other parts of the United Kingdom, would be unlikely to make an order in rem purporting to transfer or dispose of property in another state.
Accordingly, summarising the matter broadly, proceedings concerned with rights in rem can ordinarily be brought in the Scottish courts in relation to heritable property only if the property is situated in Scotland.
They can ordinarily be brought in relation to moveable property if the property is situated in Scotland or if the defender is domiciled in Scotland.
They cannot otherwise ordinarily be brought, in the absence of particular circumstances in which other grounds of jurisdiction may arise (for example, under rule 2(h) of Schedule 8).
There are a number of circumstances where jurisdiction is not governed by Schedules 4 or 8.
In particular, those schedules do not affect the operation of any enactment which confers jurisdiction on a Scottish court in respect of a specific subject matter on specific grounds: sections 17(1) and 21(1)(a) of the 1982 Act.
Section 286 of POCA is an example of such an enactment.
Section 286
I can now turn at last to section 286 itself.
It is headed Scope of powers (Scotland), and provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a person's moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland.
The words this Chapter refer to Chapter 2 of Part 5 of POCA, which as I have explained is concerned with civil recovery.
The orders which may be made by the Court of Session under Chapter 2 are recovery orders, prohibitory property orders, interim administration orders and consent orders (made under section 276).
Since these orders can only be made in respect of property which is at least arguably recoverable (or associated property), it is the extent of the courts jurisdiction in relation to the power to make recovery orders which is of critical importance.
Section 286 provides further support for the conclusion that the definition of property in section 316(4) does not have the effect of enabling a recovery order to be made under section 266 in respect of property anywhere in the world.
If section 266, read with section 316(4), had that effect, the provision made by section 286(2) in respect of moveable property would be redundant, and the distinction implicitly drawn between heritable and moveable property would be inexplicable.
Section 286(3) is also difficult to reconcile with such an interpretation, since it qualifies the jurisdiction conferred by section 286(2) in relation to moveable property.
This supports the view that section 266 does not itself define the courts jurisdiction to make a recovery order, but confers a power which can be exercised in circumstances in which the court possesses jurisdiction, based upon some independent foundation.
A distinction has to be drawn, that is to say, between the nature of the power conferred by section 266, on the one hand, and the jurisdiction of the court: a jurisdiction arising, in relation to the Court of Session, from section 286 and from the background rules of civil jurisdiction, so far as they are not implicitly displaced.
If recovery orders operate in rem, and the jurisdiction of the Scottish courts to make orders of that character is not ordinarily conditional upon the holder of the property being domiciled, resident or present in Scotland, section 286(1) is as one would expect.
It also enables the jurisdiction of the court to meet the requirements of article 5(4) of the Vienna Convention and article 13 of the Strasbourg Convention.
The absence from section 286 of any provision in respect of heritable property is also as one would expect.
As I have explained, one would not expect the court to have jurisdiction to make orders in rem in respect of heritable property outside Scotland.
Since the court would not possess such a jurisdiction under the 1982 Act or under the common law, there is no necessity for POCA to alter that position.
In relation to moveable property, on the other hand, the position is different.
As I have explained, the ordinary rules of civil jurisdiction in Scotland enable the courts to exercise jurisdiction in relation to moveable property outside Scotland (including questions concerning proprietary rights in respect of such property), provided the defender is domiciled in Scotland or other requirements specified in the 1982 Act are met.
At the same time, one would not expect the court to exercise a power to transfer or dispose of moveable property situated outside Scotland, in accordance with the principle explained in Pattni v Ali [2006] UKPC 51; [2007] 2 AC 85, or to purport to confiscate moveable property situated in another sovereign state, in accordance with the principles discussed in Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260 and in Government of the Republic of Spain v National Bank of Scotland 1939 SC 413.
The width of the courts formal jurisdiction does not therefore entail that the court will exercise its powers to the limits of its jurisdiction, where for example such an exercise would be ineffective or would contravene recognized principles of international law.
The jurisdiction conferred by section 286(2) and (3) in relation to moveable property differs in a number of respects from the courts ordinary jurisdiction: instead of the possible grounds of jurisdiction set out, in particular, in rules 1 and 2 of Schedule 8 to the 1982 Act, the apparent effect of section 286(2) and (3) is to confer jurisdiction upon the court, for the purposes of chapter 2 of Part 5 of POCA, where moveable property is situated in Scotland, and also where it is situated elsewhere and either (a) the holder of the property is domiciled, resident or present in Scotland, or (b) the unlawful conduct took place in Scotland.
The rationale of such a wide jurisdiction is not obvious, given that the power conferred by section 266 to make a recovery order (and therefore the powers to make other orders in respect of property which is at least arguably recoverable) is more limited in scope, as I have explained.
In the circumstances, counsel referred the court to the legislative history of the provision, and in particular to statements made in Parliament during the passage of the Bill.
These statements, even if admissible as an aid to interpretation, do not however provide any clear explanation of the intention of section 286(2) and (3).
They confirm that section 286 was intended to regulate the question of jurisdiction, and indicate that its effect was intended to be the same as was achieved for England and Wales and Northern Ireland by a combination of the provisions on property in section 316 and the general rules on the jurisdiction of the civil courts.
One matter on which all parties to these proceedings are agreed, however, is that that is not the case: on any view, the position in England and Wales and Northern Ireland is not the same as that set out in section 286(2) and (3).
It appears therefore to be possible that the drafting of section 286(2) and (3) may have reflected a misunderstanding.
Since POCA deals with matters falling partly within the competence of the Scottish Parliament, proceedings also took place in that Parliament in accordance with the arrangements known colloquially as the Sewel convention: see Hansard (HL Debates), 21 July 1998, col 791.
Section 286 was not however specifically considered, and neither the discussion in the Parliament nor the Sewel memorandum prepared by the Scottish Executive appears to shed any light on its intended effect.
As Sir Winston Churchill once said in another context, it is a riddle, wrapped in a mystery, inside an enigma.
The effect of section 286 is however not of critical importance in the present context.
If section 266 is to be understood as referring to property within the territorial jurisdiction of the relevant court, for the reasons I have explained, then it follows that the power conferred by section 266 is consequently restricted to such property.
The fact that the jurisdiction of the Court of Session, as regulated by section 286 for the purposes of chapter 2 of Part 5, may be wider than that of the High Court does not alter the meaning and effect of section 266 in relation to the High Court, which is the issue at the heart of the present appeal.
If section 266 confers the same power upon courts in all parts of the United Kingdom, as it appears to do, then it may be that section 286 has equally little practical effect upon the ambit of recovery orders made by the Court of Session.
That is not however an issue which need be, or ought to be, decided in the present case.
SIR ANTHONY HUGHES
I respectfully agree with Lord Phillips that both appeals must be allowed, and for the reasons which he gives.
I add only some very brief words about the PFO appeal.
For my part, if it were possible to construe the complex provisions of POCA in such a way as to admit of limited extraterritorial effect for Part 5, but only where there is a sufficient jurisdictional connection between a part of the UK and the criminal proceeds, I should have wished to do so.
I am, however, reluctantly persuaded that this cannot be achieved by construction and would involve illegitimately re writing the statute.
For the reasons explained by Hooper LJ, cited by Lord Phillips at para 72 above, it would make excellent sense for the English court to have jurisdiction to make a civil recovery order in relation to real or personal property in Spain bought with the profits of crime by an English criminal, or by someone who committed his offence in England and Wales.
It will not always be possible to achieve removal of such proceeds by means of a post conviction confiscation order under Part 2; there may, for a number of reasons, be no conviction for example the criminal may be dead, or untriable because resident in a country from which no extradition is possible.
It seems to me that the kind of jurisdictional links contemplated by section 286 for the limited case of moveable property in the case of Scottish courts could sensibly serve as a model for all property and for all UK courts: that is to say links (1) because the crime was committed here, (2) because the offender or holder of the property is domiciled, resident or present here, or (3) because the relevant property is here.
Such jurisdiction would not, as it seems to me at least, be exorbitant, nor would it offend the sovereignty of other States.
That, however, is not what the statute can be made to say.
What cannot, as it seems to me, be the correct construction is that, as SOCA was obliged to submit, it has jurisdiction to seek a (mandatory) civil recovery order over property in China which is the product of a crime committed in China by an offender who has never left that country.
LORD JUDGE AND LORD CLARKE
We will explain briefly why we are unable to agree with the conclusions of the majority of the Court that the appeal in relation to the worldwide property freezing order (PFO) should be allowed.
We agree that the Proceeds of Crime Act 2002 (the Act) is poorly drafted.
Nevertheless its objective is clear and can be explained in uncomplicated terms.
Those who engage in criminal or unlawful conduct, whether here or abroad, should be deprived of the property which is or which represents the proceeds of their crimes or unlawful conduct.
Part 2 of the Act addresses confiscation orders which may be made following convictions recorded in England and Wales.
For these purposes section 84(1) provides: Property is all property wherever situated and includes (a) money; (b) all forms of real or personal property; (c) things in action and other intangible or incorporeal property.
For present purposes, there are two crucial features.
First, the property extends to all property including all forms of real or personal property and it applies to all such property wherever in the world it is situated.
It was not suggested in the course of argument that, where these words appear in Part 2, they should be given a limited meaning.
They mean what they say, that is, wherever in the world the property (whatever form it may take) is situated.
Given the ease with which professional criminals in particular can move their assets around the world, by section 74 the Act unsurprisingly makes provision for the enforcement of confiscation orders abroad.
It is an elementary principle of statutory construction that legislation in this country which purports to have effect abroad requires to be expressed in unequivocal language.
Sovereign states are sovereign.
We do not interfere in the affairs of a sovereign country in order to enforce orders made here which impact on people living and property located abroad.
Accordingly, the provisions relating to the enforcement abroad of a confiscation order made here are structured so as to give full recognition to these principles, and the structures created for these purposes have not been called into question.
Part 5 of the Act is concerned with the recovery of the proceeds of unlawful conduct when there is no criminal conviction in this jurisdiction.
It applies to conduct which is unlawful within the United Kingdom or conduct which would be criminal abroad and which would be recognised as criminal here.
Among its other wide ranging effects, it provides the statutory process by which those convicted of crimes abroad (including citizens of the relevant country) may be deprived of the proceeds or profits which have found their way into this country.
Where the statutory conditions are satisfied the court is required to make a civil recovery order: by contrast, the effect of the order is that the enforcement authority is enabled to take the appropriate steps to enforce it.
For the purposes of a civil recovery order under Part 5, property is identified in identical terms to the property which may be made the subject of the confiscation processes in Part 2 of the Act.
An almost identical definition of property to that in section 84(1) is contained in Parts 3, 4, 5, 6, 7, 8 and 11 of the Act.
Section 316 is the general interpretation section for the purposes of Part 5.
Section 316(2) provides that the following provisions apply for the purposes of Part 5.
Those provisions include section 316(4), which provides: Property is all property wherever situated and includes (a) money, (b) all forms of property, real or personal, heritable or moveable, (c) things in action and other intangible or incorporeal property.
It can be seen that the language is the same as that in section 84, save that it expressly includes language referable to Scottish property.
In our judgment the expression all property wherever situated must have the same meaning in each of the sections in which it appears, including section 316(4).
With respect to those who take a contrary view, it seems to us that the language unequivocally describes not only the whereabouts of the property encompassed within Part 5, but also the nature and type of property covered by it.
This does not mean that absolutely every provision in the Act which refers to property must be taken as a reference to property wherever situated because it might be clear from the particular provision that it must be more limited.
A good example is section 45(1) which is referred to in paras 14 and 35 above.
It confers on a constable the power to seize property to prevent its removal from England and Wales.
Since the power only arises in the case of property in England and Wales, it cannot refer to property wherever situated.
Subject to such cases, the definition sections are of general effect.
Until Mr James Eadie QC addressed the problems to which this appeal has given rise, we suspect that the extent of the control mechanisms built into the statutory processes had not been fully appreciated.
However, as it seems to us, a civil recovery order in relation to property situated outside the jurisdiction of the United Kingdom is not designed to have extra territorial effect in the sense that it should operate so as to oblige a court or authority in a foreign country, or for that matter anyone living in that country, to obey the order.
That would contravene the sovereignty principle.
Indeed, if the enforcement authorities or the trustee for civil recovery were to barge into a foreign country demanding the return of property situated there on the basis of a civil recovery order made here, the response would almost certainly be decidedly cold, and ultimately ineffective.
On the other hand, when properly informed that a court in this jurisdiction has made such an order, the authorities abroad would be likely to appreciate that there is or may be property within its jurisdiction which represents the proceeds of unlawful conduct and that, in accordance with their own procedures, this might, with advantage, be removed from the criminal, and dealt with in accordance with domestic principles within its own jurisdiction.
In this way the criminal would be deprived of the proceeds and profits of crime or unlawful conduct.
Notwithstanding the requirement on the court here to make a recovery order if satisfied that the necessary conditions are satisfied, we believe that control mechanisms have been created within Part 5 to ensure that the order may be made subject to appropriate conditions which would avoid any improper extra territorial effect or infringement of the principle of sovereignty.
In the language of section 266(8) the order may address the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it.
Section 267(5) acknowledges that the obligation on the trustee to maximise the amount payable to the enforcement authority must be realised only so far as practicable.
The powers of the trustee under Schedule 7 extend to starting or continuing legal proceedings in relation to property, that is, property wherever situated.
In our judgment this provides the trustee with the power to do so where the property is situated abroad.
If so, any such proceedings would be governed by the legal structures which obtain in the relevant foreign country.
Mr Eadie accepted in argument that the exercise of the functions of the trustee for civil recovery specified in section 267 of and Schedule 7 to the Act are subject to the powers of our court to impose conditions in relation to the recovery process which acknowledge the sovereignty principle and give effect to it.
We agree.
Some reliance was placed on section 269.
However, in our opinion section 269 is directed only to the courts of England and Wales, Scotland or Northern Ireland as the case might be.
It tells those courts which legal rights must take priority over a recovery order.
These may include rights under provisions of foreign law, where those provisions of foreign law are applicable under English conflicts rules.
However section 269 does not purport to tell foreign courts what rules they may or may not apply.
It therefore respects the principle of sovereignty.
Section 243 provides that the enforcement authority must serve the claim form on the respondent wherever domiciled, resident or present.
The parties agreed that it was not necessary to obtain permission to serve the claim form out of the jurisdiction on the basis that this is a claim which the court has power to determine within CPR 6.33(3).
We assume for present purposes (without deciding) that that is correct.
The claim form must then be served in accordance with CPR 6.40, which includes safeguards and, at any rate in many cases, requires service in accordance with the local law.
In short, in relation to property situated abroad, to which Part 5 applies, we believe that it is open to the court making a civil recovery order to direct that any attempt to enforce the order abroad should not be made, save and except through the legal processes which obtain in the country where the property is situated, or in accordance with the procedures which apply to the enforcement of a confiscation order abroad, or subject to any other appropriate conditions.
Viewed in this way, Part 5 of the Act is not inconsistent with and does not contravene the sovereignty principle.
We recognise that the Strasbourg Convention does not expressly authorise proceedings of this kind but there is nothing in it which prohibits them.
There is in our opinion nothing in the scheme or language of the Act which supports the conclusion that Part 5 is limited to property within the jurisdiction.
Indeed section 286 shows that it was not so restricted.
Section 286 is part of a series of sections entitled Miscellaneous and is itself entitled Scope of powers (Scotland).
It provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a persons moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland.
The section thus provides for the making of a recovery order where the relevant person is not domiciled, resident or present in Scotland and where the property is not situated in Scotland.
The view expressed by the majority is inconsistent with that section, which (whether or not it is an enigma) is part of the Act.
It is true that the section does require that in such circumstances a recovery order can only be made where the unlawful conduct took place in Scotland but that is not relevant to the question which divides the court, which is whether Part 5 applies to property outside the jurisdiction.
Section 286 also provides assistance on the true construction of section 316(4).
The expression wherever domiciled, resident or present in section 286(1) plainly means wherever situated in the world and the expression in respect of moveable property wherever situated in section 286(2) equally plainly means wherever the moveable property is situated in the world.
The contrary is not suggested.
In our judgment, there is no escape from the conclusion that wherever situated in section 316(4) means the same.
It follows that, if, as the majority say at para 44, the question raised by the PFO appeal is whether the totality of Part 5 relates exclusively to property within the United Kingdom, the question must be answered in the negative.
That conclusion seems to us to be supported by the scheme of Part 5.
The general purpose of Part 5 is set out in section 240, which is defined in section 240(1) as for the purposes of enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct.
The majority recognise that the second reference to property in that subsection must be to property wherever situated because section 241(2) makes it clear that unlawful conduct includes conduct which takes place outside the United Kingdom provided that it is unlawful in the place where it occurs and would be unlawful if it took place in the United Kingdom.
There is nothing in section 240(1) which supports the conclusion that property where it is first used is to have a different meaning from property in the same section.
Indeed, read naturally, it has the same meaning.
The section provides for a recovery order to recover property which is property obtained through unlawful conduct.
Given that it is agreed that property obtained through unlawful conduct can be property outside the jurisdiction, it must follow that property which is such property can be property outside the jurisdiction.
The plain effect of section 240(1) read together with the definition section in section 316(4), which by section 316(2) applies for the purposes of Part 5, is that both references to property are references to property wherever situated.
So too, as is accepted, are the references to obtaining property by unlawful conduct in section 242.
This conclusion does not depend upon section 286 but is supported by it because it provides a particular example of a case where a recovery order may be made in respect of property outside the jurisdiction.
So far as moveable property is concerned, the position in Scotland is clear.
Section 286 shows that it includes moveable property anywhere in the world.
It does not however apply in England.
The provisions which apply in England are not limited in any relevant respect.
As already stated, the definitions of property as being wherever situated in sections 84(1) in Part 2 and section 316(4) in Part 5 are part of the central provisions of those Parts.
Moreover, section 240(2) provides that the powers conferred by Part 5 are exercisable in relation to any property regardless of whether any proceedings have been brought for an offence in connection with the property.
Section 266(1) provides that If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.
By section 304(1) property obtained through unlawful conduct is recoverable property.
It follows that (subject to the exceptions in section 308), recoverable property is a very wide term.
It thus appears to us that property in section 266(1) is the property defined in section 316(4), which is all property wherever situated in the world.
It was submitted that, by reason of the principles of international sovereignty, property situated abroad must be excluded because of section 266(2), which provides that the recovery order must vest the recoverable property in the trustee for civil recovery.
We have already expressed our view that those principles are not infringed merely by including foreign property in the order because the order would be subject to the local law or lex situs.
The problem is said to arise from the use of the word vest in section 266(2).
There are two reasons why in our view there is no such problem.
The first is that the majority accept that the expression moveable property wherever situated in section 286(2) means wherever situated in the world.
In cases falling outside the restriction imposed by section 286(3), the majority therefore accept that moveable property situated anywhere in the world may be made the subject of a recovery order.
Indeed, it must be made the subject of a recovery order under section 266(1) if the other criteria are satisfied.
It follows that the majority see no problem with the making of an order in Scottish proceedings which vests moveable property which is outside the jurisdiction in the trustee for civil recovery.
This is no doubt because, as explained above, any such order must be subject to the provisions of the local law and may be subject to appropriate conditions under section 266(8).
Moreover, under section 267(5) the trustees obligation to sell the property is expressly limited by what is practicable.
If there are no problems with applying section 266(1) and (2) to moveable property in the case of orders made by the Scottish courts, it follows that there are no problems in applying them to moveable property in the case of orders made by the English courts.
The only difference between the jurisdiction of the two courts, so far as moveable property is concerned, is that the Scottish courts cannot make an order if the restriction imposed by section 286(3) is satisfied, whereas the jurisdiction of the English courts is not limited in the same way.
The second reason why the use of the word vest does not gives rise to a difficulty is that it is capable of operating in personam.
Mr Eadie relies upon the similar use of the verb vests in section 306(1) of the Insolvency Act 1986, which provides that a bankrupts estate shall vest in the trustee immediately upon his appointment taking effect.
He relies upon the decision of the Court of Appeal in Ashurst v Pollard [2001] Ch 595, which related to real property in Portugal which was owned by the bankrupt and his wife.
Jonathan Parker LJ (with whom Kennedy and Potter LJJ agreed) said at para 11 that the vesting provisions of section 306 cannot effect a change in the Portuguese register of title, which continues to record Mr and Mrs Pollard as the joint owners of the property.
Thus in those circumstances, as here, the mere making of a vesting order does not have the inevitable consequence of transferring the legal interest in (or legal title to) real property to the trustee in bankruptcy or (here) the trustee for civil recovery.
We would accept Mr Eadies submission that the consequences of a vesting order in relation to property situate abroad depend upon the local law or lex situs.
We recognise that there are differences between the Insolvency Act and the Act but in our opinion the Insolvency Act provides a valuable pointer to the correct conclusion under Part 5 of the Act, namely that, as Tomlinson LJ concisely put it in the Court of Appeal at para 168, vest is simply an ordinary English word which takes its meaning from its context and is not here used as a term of art which carries with it inevitable consequences as to the effective transfer of title.
In these circumstances, given the fact that section 266 must be construed so that it does not offend against the principles of sovereignty in international law, we see no difficulty in applying it to orders relating to moveable property made by the English courts.
What then of immoveable property? Again, we see no reason in either the language of the Act or the principles of international law to prohibit a recovery order in such a case.
The effectiveness of such an order would simply be subject to the rules of the lex situs.
The definition of property in sections 84(1) and 316(4) expressly applies to all forms of property including real property wherever situated.
It thus applies on its face to real property outside the United Kingdom and, whatever the position in Scotland in the light of section 286(2), the Act gives the English courts jurisdiction to make a recovery order in respect of such real property.
The provisions of Part 5 of the Act, at any rate in relation to proceedings in England and Wales, are in our view unequivocal.
They plainly apply to all property, whether real or personal and wherever situated in the world.
Moreover they reflect the purpose behind the Act, namely to deprive criminals of their ill gotten gains.
We recognise that how effective the approach we favour will be depends upon the co operation of courts elsewhere.
However, for the reasons we have given, we are firmly of the view that nothing we have said infringes or would infringe the sovereignty of other states or the principles of international law.
We prefer the views of Mitting J at first instance and of Maurice Kay, Hooper and Tomlinson LJJ in the Court of Appeal to those of the majority.
For these reasons we would dismiss the PFO appeal.
As to the disclosure order (DO) appeal, we agree that the appeal should be allowed for the reasons given by Lord Phillips in para 94 above.
There is nothing in section 357 or 358 to indicate that it was intended that a notice under a disclosure order could be given to a person outside the jurisdiction.
The position under section 357 is not inconsistent with our analysis of Part 5.
A core feature of our analysis of Part 5 is that recovery orders take effect in personam subject to the local law, or lex situs.
In other words, they have no legal consequences outside the United Kingdom except those positively prescribed by local law.
For this reason, recovery orders do not impinge upon the sovereignty of foreign states.
By contrast, an information notice given to someone outside the United Kingdom has the potential to criminalise acts and omissions committed abroad by foreign citizens who are outside the jurisdiction of the United Kingdom courts.
There is no scope for reading the relevant provisions of Part 8 as taking effect subject to the local law or lex situs.
The statutory language is clear and unequivocal unless the recipient of an information notice has a reasonable excuse he is guilty of an offence if he fails to comply with an information notice.
Further, Part 5 clearly contemplates service on persons anywhere in the world.
Section 243(2) states that the claim form must be served on the respondent wherever domiciled, resident or present.
If Parliament intended SOCA to have authority to give information notices anywhere in the world, one would expect to see an equivalent provision in Part 8.
However Part 8 contains no such provision.
Section 357(4) defines a disclosure order as an order authorising SOCA to give information notices to any person the appropriate officer considers has relevant information.
There is nothing in this language to suggest that SOCAs power may be exercised extra territorially.
In addition, paragraph 15 of Practice Direction Civil Recovery Proceedings states: Disclosure order 15.1 The application notice should normally name as respondents the persons on whom the appropriate officer intends to serve notices under the disclosure order sought. 15.2 A disclosure order must (1) give an indication of the nature of the investigation for the purposes of which the order is made; (2) set out the action which the order authorises the appropriate officer to take in accordance with section 357(4) of the Act; (3) contain a statement of (a) the offences relating to disclosure orders under section 359 of the Act; and (b) the right of any person affected by the order to apply to discharge or vary the order. 15.3 Where, pursuant to a disclosure order, the appropriate officer gives to any person a notice under section 357(4) of the Act, he must also at the same time serve on that person a copy of the disclosure order.
Paragraph 15.3 suggests that the recipient of an information notice is not obliged to comply with the notice unless and until SOCA serves a copy of the disclosure order on him.
Presumably, that service must take place in accordance with the CPR.
However it is not at all clear by what mechanism under the CPR SOCA could serve a copy of a disclosure order on a person outside the United Kingdom.
This reinforces the view that information notices can only be served on persons who are physically present within the United Kingdom.
We agree that the appropriate relief is a declaration that the DO does not authorise sending information notices to persons who are outside the United Kingdom.
| UK-Abs | On 24 October 2007 Mr Perry, was convicted in Israel of a number of fraud offences in relation to a pension scheme that he had operated in Israel.
He was given a substantial prison sentence and paid a fine of approximately 3m.
The Serious Organised Crime Agency (SOCA) is now seeking to deprive Mr Perry, together with members of his family and entities associated with them, of assets obtained in connection with his criminal conduct, wherever in the world those assets may be situated.
None of these persons resides in the United Kingdom.
As a preliminary step, aimed at ensuring that its action to recover assets is effective, SOCA obtained a worldwide property freezing order (PFO) against Mr Perry, his wife and Leadenhall Property Limited (the PFO appellants).
Before that, it had obtained a disclosure order (DO) under which notices requesting information were given to Mr Perry and his daughters (the DO appellants) by letter addressed to Mr Perrys house in London.
The PFO appellants challenged the PFO on the basis that a civil recovery order could only be made in respect of property that was within the territorial jurisdiction of the court making it.
The DO appellants contended that notices under the DO could not be addressed to persons who were not within the UK.
In the PFO matter, the High Court ruled that the provisions of the Proceeds of Crime Act 2002 (POCA) relied on by SOCA did apply, save as to orders made in Scotland, to property outside the jurisdiction and upheld the scope of the PFO.
An appeal from this decision was dismissed by the Court of Appeal on 18 May 2011.
Earlier, the Court of Appeal had also upheld the validity of the notices requesting information given to the DO appellants under the DO.
Appeals against the PFO and the DO notices were brought to the Supreme Court and were heard together.
The Supreme Court allows both appeals: the PFO appeal by a majority (Lord Judge and Lord Clarke dissenting) and the DO appeal unanimously.
Lord Phillips (with whom Lady Hale, Lord Brown, Lord Kerr and Lord Wilson agree) gives the main judgment.
Lord Reed and Sir Anthony Hughes give shorter concurring judgments.
Lord Judge and Lord Clarke give a joint dissenting judgment on the PFO appeal.
SOCAs application was pursuant to the powers in Part 5 of POCA for the court to make a civil recovery order in respect of property which is, or represents, property obtained through criminal conduct.
The applicable definition of the term property is in section 316(4) which provides that property is all property wherever situated.
However, many of the provisions referring to property in POCA plainly apply only to property within the UK and the scope of the term depends on its context.
Thus the definition should not have been given the weight it had carried in the courts below [14].
Although there was a presumption under principles of international law that a statute does not have extraterritorial effect, states have departed from this by agreement in the case of confiscating the proceeds of crime.
POCA must be read in the light of the Strasbourg Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, which recognises that the courts of state A may seek to seize property in state B which is the proceeds of the criminal conduct of a defendant subject to the criminal jurisdiction of state A [18 29].
Parts 2, 3 and 4 of POCA provide for (a) the imposition of personal obligations in respect of property worldwide; (b) proprietary measures to secure and realise property within the UK and (c) requests to be made to other states to take such measures in respect of property within their territories.
This represents a coherent international scheme which accords with the Strasbourg Convention and with principles of international law [31 38].
The purpose of Part 5 of POCA is to enable recovery in civil proceedings in each part of the UK of property which is or represents property obtained through unlawful conduct.
The focus is on the property rather than a particular defendant.
In their natural meaning, and in the absence of provisions corresponding to those for enforcement abroad in Parts 2, 3 and 4, the provisions of Part 5 apply only to property within the UK [53 56, 136].
The only anomaly with this analysis was the presence of section 286(2) POCA which purported to create a different position in Scotland from that in the rest of the UK.
There was no satisfactory explanation for this and it remained an enigma [75 77] (Lord Reed thought it may have reflected a misunderstanding [152]), but it did not alter the overall conclusion that the High Court of England and Wales had no jurisdiction under Part 5 to make a recovery order in relation to property outside England and Wales.
Thus the property covered by the PFO must be limited to such property, and the appellants could not be required under it to disclose all their worldwide assets [78 82].
The notices under the DO were given to persons who were, and were known by SOCA to be, outside the jurisdiction of the UK.
Compliance with such orders was subject to penal sanction.
It was generally contrary to international law for country A to purport to make criminal conduct in country B committed by persons who are not citizens of country A.
It was therefore implicit that the power to impose positive obligations to provide information could only be exercised in respect of persons who were within the UK and the DO did not authorise the sending of notices to persons outside the UK [94, 98].
Lord Judge and Lord Clarke, dissenting on the PFO appeal, agreed that POCA was poorly drafted but held that the objective was clearly to deprive criminals of the proceeds of their crimes, whether here or abroad [160].
The expression all property wherever situated should have the same meaning in all sections in which it appeared [164].
Control mechanisms had been created in Part 5 to ensure that orders made could avoid any improper extra territorial effect or infringement of the principle of sovereignty.
Recovery orders took personal effect and, in respect of foreign property, were subject to the local law [167].
|
There are two appeals before the court: Rubin v Eurofinance SA (Rubin) and New Cap Reinsurance Corpn Ltd v Grant (New Cap).
These appeals raise an important and novel issue in international insolvency law.
The issue is whether, and if so, in what circumstances, an order or judgment of a foreign court (on these appeals the United States Bankruptcy Court for the Southern District of New York, and the New South Wales Supreme Court) in proceedings to adjust or set aside prior transactions, eg preferences or transactions at an undervalue (avoidance proceedings), will be recognised and enforced in England.
The appeals also raise the question whether enforcement may be effected through the international assistance provisions of the UNCITRAL Model Law (implemented by the Cross Border Insolvency Regulations 2006 (SI 2006/1030) (CBIR)), which applies generally, or the assistance provisions of section 426 of the Insolvency Act 1986, which applies to a limited number of countries, including Australia.
In Rubin a judgment of the US Federal Bankruptcy Court for the Southern District of New York (the US Bankruptcy Court) in default of appearance for about US$10m under State and Federal law in respect of fraudulent conveyances and transfers was enforced in England at common law.
In New Cap (in which the Court of Appeal was bound by the prior decision in Rubin) a default judgment of the New South Wales Supreme Court, Equity Division, for about US$8m in respect of unfair preferences under Australian law was enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the 1933 Act), and, alternatively, pursuant to powers under section 426 of the Insolvency Act 1986.
In each of the appeals it was accepted or found that the party against whom they were given was neither present (nor, for the purposes of the 1933 Act, resident) in the foreign country nor submitted to its jurisdiction (which are the relevant conditions for enforceability at common law and under the 1933 Act), but that those conditions did not apply to judgments or orders in foreign insolvency proceedings.
In addition to the arguments on these two appeals, the court has had the great benefit of written submissions on behalf of parties to proceedings pending in Gibraltar.
Those proceedings are to enforce default judgments entered by the US Bankruptcy Court for some $247m in respect of alleged preferential payments to companies in the British Virgin Islands and Cayman Islands arising out of the notorious Ponzi scheme operated by Mr Bernard Madoff.
It has been necessary to emphasise that the judgments in all three matters were in default of appearance, because if the judgment debtors had appeared and defended the proceedings in the foreign courts, the issues on these appeals would not have arisen.
The reason is that the judgments would have been enforceable on the basis of the defendants submission to the jurisdiction of the foreign court.
Enforcement would have been at common law, or, in the New Cap case either under the common law, or under the 1933 Act which substantially reproduces the common law principles there is a subsidiary issue on this appeal as to whether the 1933 Act applies to judgments in insolvency proceedings, dealt with in section IX below.
Under the common law a court of a foreign country has jurisdiction to give a judgment in personam where (among other cases) the judgment debtor was present in the foreign country when the proceedings were instituted, or submitted to the jurisdiction of the foreign court by voluntarily appearing in the proceedings.
In the case of the 1933 Act the foreign court is deemed to have jurisdiction where the judgment debtor submitted to the jurisdiction by voluntarily appearing in the proceedings otherwise than for the purpose (inter alia) of contesting the jurisdiction; or where the judgment debtor was resident at the time when the proceedings were instituted, or being a body corporate had an office or place of business there: section 4(2)(a)(i),(iv).
The Dicey Rule
The general principle has been referred to on these appeals, by reference to the common law rule set out in Dicey, Morris & Collins, Conflict of Laws (14th edition, 2006), as Diceys Rule 36.
This was only by way of shorthand, because the rules in the 1933 Act are not quite identical, and in any event has been purely for convenience, because the Rule has no standing beyond the case law at common law which it seeks to re state.
What was Rule 36 now appears (incorporating some changes which are not material on this appeal) as Rule 43 in the new 15th edition, and I shall refer to it as the Dicey Rule.
So far as relevant, Rule 43 (Dicey, Morris and Collins, Conflict of Laws, 15th ed, 2012, para 14R 054) states: a court of a foreign country outside the United Kingdom has jurisdiction to give a judgment in personam capable of enforcement or recognition as against the person against whom it was given in the following cases: First CaseIf the person against whom the judgment was given was, at the time the proceedings were instituted, present in the foreign country.
Second CaseIf the person against whom the judgment was given was claimant, or counterclaimed, in the proceedings in the foreign court.
Third CaseIf the person against whom the judgment was given submitted to the jurisdiction of that court by voluntarily appearing in the proceedings.
Fourth CaseIf the person against whom the judgment was given had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of that country.
The first edition of Dicey in 1896 stated (Rule 80) that the foreign court would have jurisdiction if the defendant was resident [or present?] in the foreign country so as to have the benefit, and be under the protection, of the laws thereof.
By the 6th edition in 1949 the formula was repeated by Professor Wortley (Rule 68) but without the doubt about presence as a basis of jurisdiction.
In the 8th edition in 1958 Dr (later Professor) Clive Parry removed the phrase (then Rule 189) about the benefit and protection of the foreign countrys laws.
The Rule, subsequently edited by Dr Morris and then by Professor Kahn Freund, remained in that form until the decision in Adams v Cape Industries plc [1990] Ch 433 (CA), which established that presence in the foreign jurisdiction, as opposed to residence, was a sufficient basis for the recognition of foreign judgments.
Then, edited by myself and later by Professor Briggs, the Rule took substantially its present form in the 12th edition in 1993.
The theoretical basis for the enforcement of foreign judgments at common law is that they are enforced on the basis of a principle that where a court of competent jurisdiction has adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained: Williams v Jones (1845) 13 M & W 628, 633 per Parke B; Godard v Gray (1870) LR 6 QB 139, 147, per Blackburn J; Adams v Cape Industries plc [1990] Ch 433, 513; Owens Bank Ltd v Bracco [1992] 2 AC 443, 484, per Lord Bridge of Harwich.
As Blackburn J said in Godard v Gray, this was based on the mode of pleading an action on a foreign judgment in debt, and not merely as evidence of the obligation to pay the underlying liability: LR 6 QB 139, 150.
But this is a purely theoretical and historical basis for the enforcement of foreign judgments at common law.
It does not apply to enforcement under statute, and makes no practical difference to the analysis, nor, in my judgment, to the issues on these appeals.
Consequently, if the judgments in issue on the appeals are regarded as judgments in personam within the Dicey Rule, then they will only be enforced in England at common law if the judgment debtors were present (or, if the 1933 Act applies, resident) in the foreign country when the proceedings were commenced, or if they submitted to its jurisdiction.
It is common ground that the judgment debtors were not present or resident, respectively, in the United States or in Australia, although there is an issue as to whether the New Cap defendants submitted to the jurisdiction of the Australian court, which is dealt with in section VIII below.
Insolvency proceedings and the international dimension
There are some general remarks to be made.
First, from as early as the mid 18th century the English courts have recognised the effect of foreign personal bankruptcies declared under the law of the domicile: Solomons v Ross (1764) 1 H Bl 131n, where Dutch merchants were declared bankrupt in Amsterdam, and the Dutch curator was held entitled to recover an English debt in priority to an English creditor of the merchants who had attached the debt after the bankruptcy: see Nadelmann, Conflict of Laws: International and Interstate (1972), p 273; Blom Cooper, Bankruptcy in Private International Law (1954), pp 107 108.
In Galbraith v Grimshaw [1910] AC 508 Lord Dunedin said that there should be only one universal process of the distribution of a bankrupts property and that, where such a process was pending elsewhere, the English courts should not allow steps to be taken in its jurisdiction which would interfere with that process (p 513): Now so far as the general principle is concerned it is quite consistent with the comity of nations that it should be a rule of international law that if the court finds that there is already pending a process of universal distribution of a bankrupts effects it should not allow steps to be taken in its territory which would interfere with that process of universal distribution.
Second, in the case of corporations the English courts have exercised a winding up jurisdiction which is wider than that which at common law they have accorded to foreign courts.
The court exercises jurisdiction to wind up a foreign company if there is a sufficient connection between the company and England, there are persons who would benefit from the making of a winding up order, and there are persons interested in the distribution of assets of the company who are persons over whom the court can exercise jurisdiction: see Dicey, 15th ed, para 30R 036.
But as regards foreign liquidations, the general rule is that the English court recognises at common law only the authority of a liquidator appointed under the law of the place of incorporation (Dicey, 15th ed, para 30R 100).
That is in contrast to the modern approach in the primary international and regional instruments, the EC Insolvency Regulation on Insolvency Proceedings (Council Regulation (EC) No 1346/2000) (the EC Insolvency Regulation) and the Model Law, which is that the jurisdiction with international competence is that of the country of the centre of main interests of the debtor (an expression not without its own difficulties).
It is ultimately derived from the civil law concept of a traders domicile, and was adopted in substance in the draft EEC Convention of 1980 as a definition of the debtors centre of administration: see Report by M Lemontey on the draft EEC Bankruptcy Convention, Bulletin of the European Communities, Supp 2/82, p 58; American Law Institute, Transnational Insolvency: Global Principles for Co operation in International Insolvency Cases (2012), Principle 13, pp 83 et seq.
Third, it is not only in recent times that there have been large insolvency proceedings with significant cross border implications.
Even before then there were the Russian Bank cases in the 1930s (arising out of the nationalisation and dissolution of the banks by the Soviet Government) and the Barcelona Traction case in the 1940s and 1950s (see In re Barcelona Traction, Light and Power Co Ltd (second phase) (Belgium v Spain) [1970] ICJ Rep 69), but there is no doubt that today international co operation in cross border insolvencies has become a pressing need.
It is only necessary to recall the bankruptcies or liquidations of Bank of Credit and Commerce International, Maxwell Communications, or Lehman Brothers, each with international businesses, assets in many countries, and potentially competing creditors in different countries with different laws.
There is not only a need to balance all these interests but also to provide swift and effective remedies to combat the use of cross border transfers of assets to evade and to defraud creditors.
Fourth, there is no international unanimity or significant harmonisation on the details of insolvency law, because to a large extent insolvency law reflects national public policy, for example as regards priorities or as regards the conditions for the application of avoidance provisions: the process of collection of assets will include, for example, the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme: In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 1 WLR 852, para 19, per Lord Hoffmann.
Fifth, there has been a trend, but only a trend, to what is called universalism, that is, the administration of multinational insolvencies by a leading court applying a single bankruptcy law: Westbrook, A Global Solution to Multinational Default (2000) 98 Mich L Rev 2276, 2277.
What has emerged is what is called by specialists modified universalism.
The meaning of the expression universalism has undergone a change since the time it was first used in the 19th century, and it later came to be contrasted with the doctrine of unity.
In 1834 Story referred to the theory that assignments under bankrupt or insolvent laws were, and ought to be, of universal operation to transfer movable property, in whatever country it might be situate, and concluded that there was great wisdom in adopting the rule that an assignment in bankruptcy should operate as a complete and valid transfer of all his movable property abroad, as well as at home, and for a country to prefer an attaching domestic creditor to a foreign assignee or to foreign creditors could hardly be deemed consistent with the general comity of nations [T]he true rule is, to follow out the lead of the general principle that makes the law of the owners domicil conclusive upon the disposition of his personal property, citing Solomons v Ross as supporting that doctrine: Story, Commentaries on the Conflict of Laws, 1st ed (1834), pp 340 341, para 406.
Professor Cheshire, in his first edition (Cheshire, Private International Law, 1935, pp 375 376), said that although English law neglects the doctrine of unity it recognizes the doctrine of universality.
What he meant was that English law was committed to separate independent bankruptcies in countries where the assets were situate, rather than one bankruptcy in the country of the domicile (the doctrine of unity), but also accepted the title of the foreign trustee to English movables provided that no bankruptcy proceedings had begun within England (universality).
He cited Solomons v Ross for this proposition: The English Courts have consistently applied the doctrine of universality, according to which they hold that all movable property, no matter where it may be situated at the time of the assignment by the foreign law, passes to the trustee.
In In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008]
1 WLR 852, para 30, Lord Hoffmann said: The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross border insolvency law since the 18th century.
That principle requires that English courts should, so far as is consistent with justice and UK public policy, co operate with the courts in the country of the principal liquidation to ensure that all the companys assets are distributed to its creditors under a single system of distribution. and in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26, [2007] 1 AC 508, para 16 he said, speaking for the Privy Council: The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application.
There should be a single bankruptcy in which all creditors are entitled and required to prove.
No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors
are situated
The US Bankruptcy Court accepted in Re Maxwell Communication Corp, 170 BR 800 (Bankr SDNY 1994) that the United States courts have adopted modified universalism as the approach to international insolvency: the United States in ancillary bankruptcy cases has embraced an approach to international insolvency which is a modified form of universalism accepting the central premise of universalism, that is, that assets should be collected and distributed on a worldwide basis, but reserving to local courts discretion to evaluate the fairness of home country procedures and to protect the interests of local creditors.
International co operation and assistance
Jurisdiction in international bankruptcy has been the subject of multilateral international instruments at least since the Montevideo Treaty on International Commercial Law of 1889, Title X, although bilateral treaties go back much further, and the subject of international recognition and co operation in insolvency was the subject of early discussion by the International Law Association (1879), the Institut de droit international (1888 1912) and the Hague Conference on Private International Law (1904): Nadelmann, op. cit. pp 299 et seq.
In more modern times, the European Convention on Certain International Aspects of Bankruptcy (the Istanbul Convention) was concluded under the auspices of the Council of Europe in 1990, but never came into force.
The European Community/Union initiative took 40 years to come to fruition.
In 1960 the European Community embarked on a project for a Bankruptcy Convention, which resulted in a draft Convention in 1980, to which there was significant opposition.
But the project was renewed in 1989, and this led to the tabling of a draft Convention in 1995, which provided that it would only come into force when signed by all 15 of the then member states.
The United Kingdom, however, alone of the states, did not sign the Convention (for political reasons), and it never came into force.
In 1999 the project was re launched as a Council Regulation, which resulted in the EC Insolvency Regulation in 2000.
The United Nations Commission on International Trade Law (UNCITRAL) adopted a Model Law on cross border insolvency in 1997.
The Model Law was adopted following initiatives in the 1980s by the International Bar Association and later by INSOL International (the International Association of Restructuring, Insolvency and Bankruptcy Professionals).
In 1993 UNCITRAL adopted a resolution to investigate the feasibility of harmonised rules of cross border insolvencies.
In 1994 an expert committee was assembled consisting of members of INSOL and representatives of the UNCITRAL Secretariat, and following a series of reports and drafts, UNCITRAL adopted the Model Law in May 1997.
The Model Law provides for a wide range of assistance to foreign courts and office holders.
It has been implemented by 19 countries and territories, including the United States and Great Britain (although by some states only on the basis of reciprocity).
It was not enacted into law in Great Britain until 2006, by the CBIR.
Apart from the EC Insolvency Regulation, none of these instruments deals expressly with the enforcement of judgments in insolvency proceedings.
The question whether the Model Law does so by implication will be considered below in section IV.
Consequently, there are four main methods under English law for assisting insolvency proceedings in other jurisdictions, two of which are part of regionally or internationally agreed schemes.
First, section 426 of the Insolvency Act 1986 provides a statutory power to assist corporate as well as personal insolvency proceedings in countries specified in the Act or designated for that purpose by the Secretary of State.
All the countries to which it currently applies are common law countries or countries sharing a common legal tradition with England.
They include Australia: the Co operation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986 (SI 1986/2123).
Second, the EC Insolvency Regulation applies to insolvency proceedings in respect of debtors with their centres of main interests (COMI) within the European Union (excluding Denmark).
The EC Insolvency Regulation has no role in the present appeal because none of the debtors has its centre of main interests in the European Union.
Third, the CBIR came into force on 4 April 2006, implementing the Model Law.
The CBIR supplement the common law, but do not supersede it.
Article 7 of the Model Law provides: Nothing in this Law limits the power of a court or British insolvency officeholder to provide additional assistance to a foreign representative under other laws of Great Britain.
Article 23 of the Model Law allows avoidance claims to be made by foreign representatives under the Insolvency Act 1986, and the CBIR apply to preferences after they came into force on 4 April 2006.
The UNCITRAL Guide to Enactment (to which resort may be had for the purposes of interpretation of the CBIR) also emphasises that the Model Law enables enacting states to make available to foreign insolvency proceedings the type of relief which would be available in the case of a domestic insolvency (UNCITRAL Legislative Guide on Insolvency Law (2005), Annex III, Ch IV, p 311, para 20(b)): The Model Law presents to enacting states the possibility of aligning the relief resulting from recognition of a foreign proceeding with the relief available in a comparable proceeding in the national law.
Fourth, at common law the court has power to recognise and grant assistance to foreign insolvency proceedings.
The common law principle is that assistance may be given to foreign officeholders in insolvencies with an international element.
The underlying principle has been stated in different ways: recognition carries with it the active assistance of the court: In re African Farms Ltd [1906] TS 373, 377; This court will do its utmost to co operate with the United States Bankruptcy Court and avoid any action which might disturb the orderly administration of [the company] in Texas under ch 11: Banque Indosuez SA v Ferromet Resources Inc [1993] BCLC 112, 117.
In Credit Suisse Fides Trust v Cuoghi [1998] QB 818, 827, Millett LJ said: In other areas of law, such as cross border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co operation to be sanctioned by international convention It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each others jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.
The common law assistance cases have been concerned with such matters as the vesting of English assets in a foreign officeholder, or the staying of local proceedings, or orders for examination in support of the foreign proceedings, or orders for the remittal of assets to a foreign liquidation, and have involved cases in which the foreign court was a court of competent jurisdiction in the sense that the bankrupt was domiciled in the foreign country or, if a company, was incorporated there.
An early case of recognition was Solomons v Ross 1 H B1 131n, where, as I have said, the bankruptcy was in Holland, and the bankrupts were Dutch merchants declared bankrupt in Amsterdam, and the Dutch curator was held entitled to recover an English debt: see also Bergerem v Marsh (1921) B&CR 195 (English member of Belgian firm submitted to Belgian bankruptcy proceedings: movable property in England vested in Belgian trustee).
One group of cases involved local proceedings which were stayed or orders which were discharged because of foreign insolvency proceedings.
Thus in Banque Indosuez SA v Ferromet Resources Inc [1993] BCLC 112 an English injunction against a Texas corporation in Chapter 11 proceedings was discharged; cf In re African Farms Ltd [1906] TS 373 (execution in Transvaal by creditor in proceedings against English company in liquidation in England stayed by Transvaal court), applied in Turners & Growers Exporters Ltd v The Ship Cornelis Verolme [1997] 2 NZLR 110 (Belgian shipowner in Belgian bankruptcy: ship released from arrest); Modern Terminals (Berth 5) Ltd v States Steamship Co [1979] HKLR 512 (stay in Hong Kong of execution against Nevada corporation in Chapter 11 proceedings in United States federal court in California), followed in CCIC Finance Ltd v Guangdong International Trust & Investment Corpn [2005] 2 HKC 589 (stay of Hong Kong proceedings against Chinese state owned enterprise in Mainland insolvency).
Cases of judicial assistance in the traditional sense include In re Impex Services Worldwide Ltd [2004] BPIR 564, where a Manx order for examination and production of documents was made in aid of the provisional liquidation in England of an English company.
Cases involving remittal of assets from England to a foreign office holder include In re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213 (Luxembourg liquidation of Luxembourg company); and In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 1 WLR 852 (the view of Lord Hoffmann and Lord Walker) (Australian liquidation of Australian insurance company); and In re SwissAir Schweizerische Luftverkehr Aktiengesellschaft [2009] EWHC 2099 (Ch), [2010] BCC 667 (Swiss liquidation of Swiss company).
III The Cambridge Gas and HIH decisions
The opinion of Lord Hoffmann, speaking for the Privy Council, in Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26, [2007] 1 AC 508 (Cambridge Gas) and his speech in the House of Lords in In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 1 WLR 852 (HIH) have played such a major role in the decisions of the Court of Appeal and in the arguments of the parties on these appeals that it is appropriate to put them in context at this point.
Cambridge Gas
The broad facts of Cambridge Gas were these.
In 1997 a shipping business was initiated by a Swiss businessman, Mr Giovanni Mahler.
The investors borrowed $300m on the New York bond market and the business bought five gas transport vessels.
The venture was a failure, and ended with a Chapter 11 proceeding in the US Bankruptcy Court in New York.
The question for the Privy Council on appeal from the Isle of Man was whether an order of the New York court was entitled to implementation in the Isle of Man.
The corporate structure of the business was that the investors owned, directly or indirectly, a Bahamian company called Vela Energy Holdings Ltd (Vela).
Vela owned (through an intermediate Bahamian holding company) Cambridge Gas, a Cayman Islands company.
Cambridge Gas owned directly or indirectly about 70% of the shares of Navigator Holdings plc (Navigator), an Isle of Man company.
Navigator owned all the shares of an Isle of Man company which in turn owned companies which each owned one ship.
In 2003 Navigator petitioned the US Bankruptcy Court for relief under Chapter 11 of the US Bankruptcy Code, which allows insolvent companies, under supervision of the court and under cover of a moratorium, to negotiate a plan of reorganisation with their creditors.
The petition was initiated by the investor interests, who proposed a plan to sell the ships nominally by auction but in fact to the previous investors, but the bondholders did not accept this and proposed their own plan under which the assets of Navigator would be vested in the creditors and the equity interests of the previous investors would be extinguished.
The judge rejected the investors plan and approved the creditors plan.
The mechanism which the plan used to vest the assets in the creditors was to vest the shares in Navigator in their representatives, ie, the creditors committee.
That would enable them to control the shipping companies and implement the plan.
The plan provided that upon entry of the confirmation order title to all the common stock of Navigator would vest in the creditors committee to enable it to implement the plan.
The order of the New York court confirming the plan recorded the intention of the court to send a letter of request to the Manx court asking for assistance in giving effect to the plan and confirmation order and such a letter was sent.
The committee of creditors then petitioned the Manx court for an order vesting the shares in their representatives.
At this point it is necessary to emphasise two features of the case.
The first feature is that Navigator was an Isle of Man company and 70% of its common stock was owned directly or indirectly by Cambridge Gas.
Under the normal principles of the conflict of laws the shares would have been situate in the Isle of Man: Dicey, 15th ed, para 22 045.
That is why Lord Hoffmann said, at para 6, that the New York court was aware that the order vesting title to the common stock of Navigator in the creditors committee could not automatically have effect under the law of the Isle of Man; and also why he accepted (paras 12 13) that if the judgment were a judgment in rem it could not affect title to shares in the Isle of Man.
The second feature which it is necessary to emphasise is that Cambridge Gas was a Cayman Islands company which (as held by the Manx courts) had not submitted to the jurisdiction of the US Bankruptcy Court.
Lord Hoffmann said, at para 8, that the position that Cambridge Gas had not submitted to the jurisdiction of the US Bankruptcy Court bore little relation to economic reality since the New York proceedings had been conducted on the basis that the contest was between rival plans put forward by the shareholders and the creditors; Vela, the parent company of Cambridge Gas, participated in the Chapter 11 proceedings; and they had been instituted by Navigator.
Consequently the claim by Cambridge Gas that it had not submitted was highly technical, but there was no appeal from the decisions of the Manx courts that it had not submitted.
But Lord Hoffmann also accepted that if the order of the US Bankruptcy Court were to be regarded as a judgment in personam it would not be entitled to recognition or enforcement in the Isle of Man because the New York court had no personal jurisdiction over Cambridge [Gas]: para 10.
Nevertheless the Privy Council held that the plan could be carried into effect in the Isle of Man.
The reasoning was as follows: first, if the judgment had to be classified as in personam or in rem the appeal would have to be allowed, but bankruptcy proceedings did not fall into either category: [13] Judgments in rem and in personam are judicial determinations of the existence of rights: in the one case, rights over property and in the other, rights against a person.
When a judgment in rem or in personam is recognised by a foreign court, it is accepted as establishing the right which it purports to have determined, without further inquiry into the grounds upon which it did so.
The judgment itself is treated as the source of the right. [14] The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the existence of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established. [15] [B]ankruptcy, whether personal or corporate, is a collective proceeding to enforce rights and not to establish them.
Of course, as Brightman LJ pointed out in In re Lines Bros Ltd [1983] Ch 1, 20, it may incidentally be necessary in the course of bankruptcy proceedings to establish rights which are challenged: proofs of debt may be rejected; or there may be a dispute over whether or not a particular item of property belonged to the debtor and is available for distribution.
There are procedures by which these questions may be tried summarily within the bankruptcy proceedings or directed to be determined by ordinary action.
But these again are incidental procedural matters and not central to the purpose of the proceedings.
Second, the principle of universality underlay the common law principles of judicial assistance in international insolvency, and those principles were sufficient to confer jurisdiction on the Manx court to assist, by doing whatever it could have done in the case of a domestic insolvency: paras 21 22.
Third, exactly the same result could have been achieved by a scheme under the Isle of Man Companies Act 1931.
Fourth, it was no objection to implementation of the plan in the Isle of Man that the shares in Navigator belonged to a person (Cambridge Gas) which was not a party to the bankruptcy proceedings for these reasons, at para 26: [A] share is the measure of the shareholders interest in the company: a bundle of rights against the company and the other shareholders.
As against the outside world, that bundle of rights is an item of property a chose in action.
But as between the shareholder and the company itself, the shareholders rights may be varied or extinguished by the mechanisms provided by the articles of association or the Companies Act.
One of those mechanisms is the scheme of arrangement under section 152 [of the Isle of Man Companies Act 1931].
As a shareholder Cambridge is bound by the transactions into which the company has entered, including a plan under Chapter 11 or a scheme under section 152.
At this point it is necessary to point out that the opinion in Cambridge Gas does not articulate any reason for holding that, in the eyes of the Manx court, the US Bankruptcy Court had international jurisdiction in either of two relevant senses.
The first sense is the jurisdiction of the US Bankruptcy Court in relation to the Chapter 11 proceedings themselves.
The entity which was in Chapter 11 was Navigator.
The English courts exercise a wider jurisdiction in bankruptcy and (especially) in winding up than they recognise in foreign courts.
At common law, the foreign court which is recognised as having jurisdiction in personal bankruptcy is the court of the bankrupts domicile or the court to which the bankrupt submitted (Dicey, 15th ed, para 31R 059) and the foreign court with corresponding jurisdiction over corporations is the court of the place of incorporation (Dicey, 15th ed, para 30R 100).
Under United States law the US Bankruptcy Court has jurisdiction over a debtor, and such a debtor must reside or have a domicile or place of business, or property in the United States.
From the standpoint of English law, the US Bankruptcy Court had international jurisdiction because although Navigator was not incorporated in the United States, it had submitted to the jurisdiction by initiating the proceedings.
The second sense in which international jurisdiction is relevant is the jurisdiction over the third party, Cambridge Gas, and its shares in Navigator.
Cambridge Gas was not incorporated in the United States, and it was held by the Isle of Man courts that it had not submitted to the jurisdiction of the US Bankruptcy Court (and this was, as I have said, accepted with evident reluctance by the Privy Council).
The property which was the subject of the order of the US Bankruptcy Court was shares in an Isle of Man company.
Consequently the property dealt with by the US Bankruptcy Court was situate, by Manx rules of the conflict of laws, in the Isle of Man, and the shareholder relationship was governed by Manx law.
Cambridge Gas was the subject of brief comment a few months later by the Privy Council in Pattni v Ali [2006] UKPC 51, [2007] 2 AC 85.
The decision in that case was simply that a Kenyan judgment deciding that A was bound to sell shares in a Manx company to B was entitled to recognition in the Isle of Man.
It resulted in an order in personam against a person subject to the jurisdiction of the Kenyan court, and was not a judgment in rem against property in the Isle of Man and outside the jurisdiction of the Kenyan court, because the fact that a judicial determination determines or relates to the existence of property rights between parties does not in itself mean that it is in rem.
Lord Mance, speaking for the Board, said, at para 23: In Cambridge Gas the Board touched on the concepts of in personam and in rem proceedings, but held that the bankruptcy order with which it was concerned fell into neither category.
Its purpose was simply to establish a mechanism of collective execution against the property of the debtor by creditors whose rights were admitted or established.
The decision in HIH does not deal with foreign judgments.
HIH concerned four Australian insurance companies which were being wound up in Australia and in respect of which provisional liquidators had been appointed in England.
The question was whether the English court had power to direct remission of assets collected in England to Australia, notwithstanding that there were differences between the English and Australian statutory regimes for distribution which meant that some creditors would benefit from remission whilst some creditors would be worse off.
The House of Lords unanimously directed that remission should take place, but the reasons differed.
The reasoning of the majority (Lord Scott of Foscote and Lord Neuberger of Abbotsbury, with Lord Phillips of Worth Matravers agreeing)) was based exclusively on the statutory power to assist foreign insolvency proceedings under section 426 of the Insolvency Act 1986, but Lord Hoffmann (with whom Lord Walker agreed) also considered that such a power existed at common law.
Lord Hoffmann characterised the principle of universality as a principle of English private international law that, where possible, there should be a unitary insolvency proceeding in the courts of the insolvents domicile which receives worldwide recognition and which should apply universally to all the bankrupts assets, at para 6: Despite the absence of statutory provision, some degree of international co operation in corporate insolvency had been achieved by judicial practice.
This was based upon what English judges have for many years regarded as a general principle of private international law, namely that bankruptcy (whether personal or corporate) should be unitary and universal.
There should be a unitary bankruptcy proceeding in the court of the bankrupt's domicile which receives worldwide recognition and it should apply universally to all the bankrupt's assets.
Other parts of Lord Hoffmanns speech have already been quoted above, and it is only necessary for present purposes to recall that he said that (a) the process of collection of assets will include, for example, the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme (at para 19) and (b) that the purpose of the principle of universality was to ensure that the debtors assets were distributed under one scheme of distribution, and that the principle required that English courts should co operate with the courts in the country of the principal liquidation to ensure that all the companys assets are distributed to its creditors under a single system of distribution: para 30.
Subsequent treatment of Cambridge Gas
The decision in Cambridge Gas was not applied by the Supreme Court of Ireland in In re Flightlease (Ireland) Ltd [2012] IESC 12 (to which I shall revert) and has been subject to academic criticism.
Professor Briggs has expressed the view ((2006) 77 BYIL 575, 581) that the decision in [Cambridge Gas] is wrong, for it requires a Manx court to give effect to a confiscation order made by a foreign court of property belonging to a person who was not subject to the personal jurisdiction of the foreign court.
That a Manx court could have done so itself is nothing to the point.
I shall return to the question whether it was correctly decided.
IV The cases before the court and the issues
Eurofinance SA is a company incorporated in the British Virgin Islands.
It was established by Adrian Roman, the second appellant on the Rubin appeal.
Eurofinance SA settled The Consumers Trust (TCT) under a deed of trust made in 2002 under English law, with trustees resident in England, of whom two were accountants and two were solicitors.
TCT was established to carry on a sales promotion scheme in the USA and Canada.
The class of beneficiaries was made up of persons who had successfully participated in the scheme by claiming validly in certain sales promotions owned and operated by Eurofinance SA.
The trustees were to hold the capital and income of TCT for the beneficiaries and subject thereto for Eurofinance SA as beneficiary in default.
The promotion, known as the Cashable Voucher Programme, was entered into with participating merchants in the United States and Canada who, when they sold products or services to their customers, offered those customers a cashable voucher comprising a rebate of up to 100% of the purchase price for the product or service.
Under the terms of the voucher the rebate was to be paid to customers in three years time provided that certain conditions were followed by the customer involving the completion by the customer of both memory and comprehension tests.
The participating merchants paid TCT 15% of the face value of each cashable voucher issued by the merchant during a week.
TCT retained 40% of the payments received (ie 6% of the face value of each cashable voucher).
About one half of the 60% balance received from merchants was paid to Eurofinance SA (and so effectively to Adrian Roman) and the remainder was paid to others involved in the operation of the programme, such as solicitors, accountants and US lawyers.
From about 2002 Adrian Romans sons, Nicholas Roman and Justin Roman, each began to receive about 2%.
The trustees maintained bank accounts in the USA and Canada where the payments they had received from merchants were kept.
Since the trustees only retained 6% of the face value of the issued vouchers, the success of the scheme necessarily involved the consumers either forgetting to redeem the vouchers or being unsuccessful in navigating the process required to be followed in order to obtain payment.
When the scheme folded in 2005 the trustees held nearly US$10m in bank accounts in the United States and Canada.
By about 2005 TCTs business ceased after the Attorney General of Missouri brought proceedings under Missouris consumer protection legislation which resulted in a settlement involving a payment by the trustees of US$1,650,000 and US$200,000 in costs.
When it became clear that further proceedings were likely to be brought by Attorneys General in other states, that the number of consumer claims would increase, and that TCT would not have sufficient funds to meet all the valid claims of its beneficiaries, in November 2005 Adrian Roman caused Eurofinance to apply for the appointment by the High Court of the respondents on the Rubin appeal, David Rubin and Henry Lan, as receivers of TCT for the purposes of causing TCT then to obtain protection under Chapter 11 of Title 11 of the United States Code (Chapter 11).
The English court was told that Chapter 11 reorganisation proceedings would result in an automatic stay of proceedings against TCT, would enable the receivers to reject unprofitable or burdensome executory contracts, and might result in the recovery as preferential payments of sums paid to consumers and to the Missouri Attorney General.
In November 2005 the respondents were appointed as receivers by order of Lewison J, and in the following month, the respondents and the trustees then caused TCT to present a voluntary petition to the US Bankruptcy Court for relief under Chapter 11.
TCT was placed into Chapter 11 proceedings in New York as virtually all of its 60,000 creditors were located in the United States or Canada as were its assets.
As a matter of United States bankruptcy law, TCT could be the subject matter of a petition for relief under Chapter 11 as a debtor.
This is because a trust such as TCT is treated under Chapter 11 as a separate legal entity under the classification of a business trust.
A joint plan of liquidation for TCT was prepared, and in September 2007 Lewison J ordered that the respondents (as receivers) be at liberty to seek approval of the plan from the US Bankruptcy Court.
Under the terms of the plan the respondents were appointed legal representatives of TCT and given the power to commence, prosecute and resolve all causes of action against potential defendants including the appellants.
The US Bankruptcy Court approved the plan in October 2007, and appointed the respondents as foreign representatives of the debtor to make application to the Chancery Division in London for recognition of the Chapter 11 proceedings as a foreign main proceeding under the CBIR; and to seek aid, assistance and co operation from the High Court in connection with the Chapter 11 proceedings, and, in particular to seek the High Courts assistance and co operation in the prosecution of litigation which might be commenced in the US Bankruptcy Court including the enforcement of judgments of this court that may be obtained against persons and entities residing or owning property in Great Britain
In December 2007 proceedings were commenced in the US Bankruptcy
Court by the issue of a complaint against a number of defendants including the appellants.
These claims fall within the category of adversary proceedings under the US bankruptcy legislation, and I will use this term to refer to them.
The adversary proceedings comprised a number of claims including causes of action arising under the US Bankruptcy Code, which related to funds received by TCT from merchants which were paid out to the defendants (including the appellants), or to amounts transferred to the defendants within one year prior to the commencement of the TCT bankruptcy case including the appellants.
The defendants were the appellants and other parties involved with the programme.
The appellants were served personally with the complaint commencing the adversary proceedings but did not defend, or participate, in the adversary proceedings, although it appears from a judgment of the US Bankruptcy Court that Eurofinance SA had filed a notice of appearance in the main Chapter 11 proceedings (Order of 22 July 2008, paras 42 43).
On 22 July 2008 default and summary judgment was entered against the appellants in the adversary proceedings by the US Bankruptcy Court.
The US Bankruptcy Court entered a judgment against the appellants on the ten counts of the complaint.
In November 2008 the respondents applied as foreign representatives to the Chancery Division for, inter alia, (a) an order that the Chapter 11 proceedings be recognised as a foreign main proceeding (b) an order that the respondents be recognised as foreign representatives within the meaning of article 2(j) of the Model Law in relation to those proceedings; and (c) an order that the US Bankruptcy Courts judgment be enforced as a judgment of the English court in accordance with CPR Pts 70 and 73.
Nicholas Strauss QC, sitting as a deputy judge of the Chancery Division, recognised the Chapter 11 proceedings (including the adversary proceedings) as foreign main proceedings, and the respondents as foreign representatives, but refused to enforce the judgments in the adversary proceedings because (a) at common law the English court will not enforce a judgment in personam contrary to the normal jurisdictional rules for foreign judgments; and (b) there was nothing in CBIR, articles 21(e) (realisation of assets) and 25 (judicial co operation), which justified the enforcement of judgments in insolvency proceedings.
At first instance the respondents sought to enforce the entirety of the US Bankruptcy Courts judgment, but before the Court of Appeal they sought an order for the enforcement of those parts of the judgment which were based on state or federal avoidance laws, including fraudulent conveyance under State Fraudulent Conveyance Laws, and under federal law, namely fraudulent transfers under section 548(a) of 11 USC; liability of transferees of avoided transfers under section 550; fraudulent transfers under section 548(b) and liability of transferees of avoided transfers under section 550.
The Court of Appeal (Ward and Wilson LJJ and Henderson J) allowed an appeal, and held that the judgment was enforceable: [2010] EWCA Civ 895, [2011] Ch 133.
New Cap
In the New Cap appeal the appellants are members of Lloyds Syndicate Number 991 (the Syndicate) for the 1997 and 1998 years of account.
The respondents are a reinsurance company (New Cap) and its liquidator, a partner in Ernst & Young in Sydney.
New Cap is an Australian company, which was licensed as an insurance company in Australia under the Australian Corporations Act 2001 (Cth) (the Australian Act).
New Cap did not conduct insurance business in any country other than Australia, and the majority of New Cap's business was generated through reinsurance brokers conducting business in Australia and the balance was generated from overseas insurance brokers.
New Cap reinsured the Syndicate in relation to losses occurring on risks attaching during the 1997 and 1998 years of account under reinsurance contracts which were subject to English law, and contained London arbitration clauses and also (oddly) English jurisdiction clauses.
The reinsurance contracts were placed with New Cap by the Syndicates Australian broker, which was the sub broker for the Syndicates London broker.
Each reinsurance contract contained a commutation clause.
The Syndicate and New Cap entered into a commutation agreement to commute the reinsurances with effect from 11 December 1998.
Under the commutation agreement, New Cap agreed to make a lump sum payment to the Syndicate by 31 December 1998 in consideration for its release from liability under the reinsurance contracts.
The payments were calculated on the basis of a 7.5% discount and a deduction from premium.
New Cap made payment pursuant to the commutation agreements in two instalments of US$2,000,000 and US$3,980,600 in January 1999.
The commutation payments were made from a bank account held by New Cap at the Sydney branch of the Commonwealth Bank of Australia to a bank account in London.
The second respondent was appointed the administrator of New Cap by a resolution of its directors in April 1999.
In September 1999 the creditors of New Cap resolved that New Cap be wound up and the second respondent (the liquidator) was appointed its liquidator.
Under the Australian legislation, the winding up is deemed to have commenced on the day on which the administration began.
In April 2002 the liquidator caused proceedings to be commenced against the Syndicate in the Supreme Court of New South Wales alleging that because New Cap was insolvent when the commutation payments were made in January 1999, and because those payments were made within the period of six months ending on the date when the administrator was appointed, they constituted unfair preferences and were thus voidable transactions under Part 5.7B of the Australian Act.
The Syndicate (which does not accept that the payments were preferences) refused to accept service of the Australian proceedings.
The liquidator obtained leave from the Australian court to serve the Australian proceedings on the Syndicates English solicitors in London.
The Syndicate did not enter an appearance to the proceedings, but corresponded with the liquidators solicitors, including commenting on an Independent Expert's Report to be used by the respondents as evidence of New Caps insolvency in all of the avoidance proceedings including the proceedings against the Syndicate.
The Australian court (White J in a judgment in September 2008, and Barrett J in a judgment in July 2009) recognised that there had been no submission by the Syndicate to the jurisdiction of the Australian court in that it did not enter an appearance, but White J held that the Australian court had jurisdiction over the Syndicate because a cause of action available under the Australian Act for the recovery of a preferential payment to an overseas party made when the company is insolvent was a cause of action which arose in New South Wales for the purposes of the New South Wales provisions for service out of the jurisdiction.
Barrett J gave a reasoned judgment in July 2009 holding the Syndicate liable.
After the respondents had been given leave to re open their case so that the orders made by the Australian court would more accurately reflect the differences between those appellants who were members of the Syndicate for the 1997 year of account and those appellants who were members for the 1998 year of account, the Australian court entered final judgment against the Syndicate in its absence on 11 September 2009.
The Australian judgment declared that the commutation payments were voidable transactions within the meaning of part 5.7B of the Australian Act and ordered the Syndicate to repay the amount of the commutation payments to the liquidator together with interest.
On the liquidators application the Australian court issued, in October 2009, a letter of request to the High Court in England and Wales requesting that the court act in aid of and assist the Australian court and exercise jurisdiction under section 426 of the Insolvency Act 1986 by: (1) ordering the Syndicate to pay the sums specified in the Australian judgment; alternatively (2) allowing the liquidator to commence fresh proceedings under the Australian Act in the English Court; (3) granting such further and other relief as the High Court may consider just; and (4) making such further or other orders as may, in the opinion of the High Court, be necessary or appropriate to give effect to the foregoing orders.
On 30 July 2010, the Court of Appeal handed down judgment in Rubin.
As a result, the respondents' alternative application for permission to commence fresh proceedings against the Syndicate under the Australian Act in England pursuant to section 426 of the Insolvency Act 1986 was adjourned generally, and the respondents were granted permission to seek relief at common law as an alternative to relief under section 426.
In New Cap Lewison J and the Court of Appeal were bound by the decision of the Court of Appeal in Rubin.
Lewison J held: (a) the judgment was not enforceable under the Foreign Judgments (Reciprocal Enforcement) Act 1933 because, although it applied to Australian judgments, it did not apply to orders made in insolvency proceedings; but (b) the judgment was enforceable under the assistance provision of section 426 of the Insolvency Act 1986 and also at common law: [2011] EWHC 677 (Ch).
The Court of Appeal (Mummery, Lloyd and Macfarlane LJJ) affirmed Lewison Js judgment on these grounds: (a) the 1933 Act applied, and registration would not be set aside for lack of jurisdiction in the foreign court, because of the Rubin decision; (b) section 426 could also be used and was not excluded by section 6 of the 1933 Act; (c) but section 6 would preclude an action at common law; (d) it was not necessary to decide whether the courts power of assistance at common law was exercisable where the statutory power was available: [2011] EWCA Civ 971, [2012] 2 WLR 1095.
Picard v Vizcaya Partners Ltd
This court gave permission for intervention by a written submission on behalf of Mr Irving Picard (the trustee), the trustee for the liquidation in the United States under the Securities Investor Protection Act of 1970 (SIPA) of Bernard L Madoff Investment Securities LLC (Madoff), which was Bernard Madoffs broking company.
The trustee is seeking to enforce at common law in Gibraltar judgments of the US Bankruptcy Court against Vizcaya Partners Ltd (Vizcaya), a BVI company, for $180m, and against Asphalia Fund Ltd (Asphalia), a Cayman Islands company, for $67m, representing alleged preferential payments.
He is also seeking to enforce a US Bankruptcy Court default judgment in excess of $1 billion in the Cayman Islands in Picard v Harley International (Cayman) Ltd. The Gibraltar and Cayman Islands proceedings have been adjourned to await the outcome of the present appeals.
In Picard v Vizcaya Partners Ltd proceedings have been brought in Gibraltar to enforce the default judgments against Vizcaya and Asphalia because $73m is held there on behalf of Vizcaya which the trustee maintains is available to satisfy the judgments.
Vizcaya and Asphalia have also, with the permission of the court, intervened by written submission.
There is no agreed statement of facts relating to this aspect of the case, and nothing which is said here about the facts should be taken as representing or reflecting any finding.
According to Vizcaya and Asphalia the position is as follows.
Between 2002 and 2007, a bank in Europe, acting as a custodian trustee for Vizcaya, sent $327m to Madoff for investment in securities.
Unknown to the bank, or to Vizcaya, or its shareholder Asphalia, Madoff had been engaged in a Ponzi scheme for some 30 years, and their money was never invested in securities.
In 2008, at the time of the credit crunch and the banking crisis, the custodian trustee withdrew $180m (leaving $147m with Madoff) and $67m of the $180m was paid to Asphalia.
In late 2008, the Madoff fraud came to light, and the trustee was appointed.
The trustee targeted investors who had withdrawn investments from Madoff in the two years before its collapse in December 2008 as a source for recovery of customer property for the benefit of other investors who had not withdrawn their investments.
The trustee commenced adversary proceedings in the US Bankruptcy Court alleging preference and fraudulent conveyance against Vizcaya and Asphalia under SIPA and under the Bankruptcy Code, the effect of which, they say, is that (a) as the trustee argues, a person who, on the basis that he has received customer money has been required to repay a preference, does not necessarily become a customer and thereby entitled to share with other customers in the bankruptcy; and (b) the trustee may avoid a payment made by the bankrupt to a creditor 90 days before the commencement of the bankruptcy, irrespective of the intention with which the payment is made or received.
The trustee obtained judgments in default, and Vizcaya and Asphalia say that they took no part in the New York proceedings because they had no connection with New York, and in particular (a) Asphalia was not a customer of Madoff but a shareholder of Vizcaya; (b) arguably Vizcaya was not a customer since it had appointed the bank to act as custodian trustee and it was the bank which entered into contracts with Madoff.
The issues
The principal issue on these appeals is whether the rules at common law or under the 1933 Act regulating those foreign courts which are to be regarded as being competent for the purposes of enforcement of judgments apply to judgments in avoidance proceedings in insolvency, and, if not, what rules do apply (section V below).
The other issues are whether, in the Rubin appeal, enforcement may be effected through the assistance provisions of the Cross Border Insolvency Regulations 2006 (section VI) or, in the New Cap appeal, section 426 of the Insolvency Act 1986 (section VII); whether the judgments are enforceable as a result of the submission by the judgment debtors to the jurisdiction of the foreign courts (section VIII); and, in the New Cap appeal, if the judgment is enforceable, whether enforcement is at common law or under the 1933 Act (section IX).
V The first issue: recognition and enforcement of foreign judgments in insolvency proceedings
Reasoning of the Court of Appeal in Rubin and the issue on the appeal
The Court of Appeal in the Rubin appeal decided that a foreign insolvency judgment could be enforced in England and Wales at common law against a defendant not subject to the jurisdiction of the foreign court under the traditional rule as formulated in the Dicey Rule.
As I have already said, on the Rubin appeal in the Court of Appeal the receivers sought only to enforce those parts of the judgment which in effect related to the avoidance causes of action.
The Court of Appeal held that the judgment (as narrowed) was enforceable at common law.
The reasoning was as follows: (a) the judgment was final and conclusive, and for definite sums of money, and on the face of the orders was a judgment in personam; (b) it was common ground that the judgment debtors were not resident (this was a slip for present since the action was at common law and not under the 1933 Act) when the proceedings were instituted, and did not submit to the jurisdiction, and so at first blush had an impregnable defence; (c) Cambridge Gas decided that the bankruptcy order with which it was concerned was neither in personam nor in rem, and its purpose was simply to establish a mechanism of collective execution against the property of the debtor by creditors whose rights were admitted or established: Pattni v Ali [2006] UKPC 51, [2007] 2 AC 85, para 23; (d) bankruptcy was a collective proceeding to enforce rights and not to establish them: Cambridge Gas [2006] UKPC 26, [2007] 1 AC 508, para 15; (e) the issue was whether avoidance proceedings which could only be brought by the representative of the bankrupt were to be characterised as part of the bankruptcy proceedings, ie part of the collective proceeding to enforce rights and not to establish them; (f) the adversary proceedings were part and parcel of the Chapter 11 proceedings; (g) the ordinary rules for enforcing foreign judgments in personam did not apply to bankruptcy proceedings; (h) avoidance mechanisms were integral to and central to the collective nature of bankruptcy and were not merely incidental procedural matters; (i) the process of collection of assets will include the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme: HIH [2008] UKHL 21, [2008] 1 WLR 852, para 19; (j) the judgment of the US Bankruptcy Court was a judgment in, and for the purposes of, the collective enforcement regime of the insolvency proceedings, and was governed by the sui generis private international law rules relating to insolvency; (k) that was a desirable development of the common law founded on the principles of modified universalism, and did not require the court to enforce anything that it could not do, mutatis mutandis, in a domestic context; (l) there was a principle of private international law that bankruptcy should be unitary and universal, and there should be a unitary insolvency proceeding in the court of the bankrupts domicile which receives worldwide recognition and should apply universally to all the bankrupts assets; (m) there was a further principle that recognition carried with it the active assistance of the court which included assistance by doing whatever the English court could do in the case of a domestic insolvency; (n) there was no unfairness to the appellants in upholding the judgment because they were fully aware of the proceedings, and after taking advice chose not to participate: [2011] Ch 133, paras 38, 41, 43, 45, 48, 50, 61 62, 64.
It was unnecessary to decide whether the judgment was enforceable under the CBIR: para 63.
In short, Ward LJ accepted that the judgment was an in personam judgment, but he decided that the Dicey Rule did not apply to foreign judgments in avoidance proceedings because they were central to the collective enforcement regime in insolvency and were governed by special rules.
The essential questions on this aspect of the appeals are these.
Is the judgment in each case to be regarded as a judgment in personam within the scope of the traditional rules embodied in the Dicey Rule, or is it to be characterised as an insolvency order which is part of the bankruptcy proceedings, ie part of the collective proceeding to enforce rights and not to establish them? Is that a distinction which has a role to play? Is there a distinction between claims which are central to the purpose of the proceedings and claims which are incidental procedural matters? As a matter of policy, should the court, in the interests of universality of insolvency proceedings, devise a rule for the recognition and enforcement of judgments in foreign insolvency proceedings which is more expansive, and more favourable to liquidators, trustees in bankruptcy, receivers and other officeholders, than the traditional common law rule embodied in the Dicey Rule, or should it be left to legislation preceded by any necessary consultation?
Ward LJs conclusion derives from a careful synthesis of dicta in Lord Hoffmanns brilliantly expressed opinion in Cambridge Gas and his equally brilliant speech in HIH, each of which has on these appeals been subjected to an exceptionally detailed analysis.
For reasons which will be developed, I do not agree with the conclusions which Ward LJ draws.
But I begin with two matters on which I accept the respondents analysis.
The first is that avoidance proceedings have characteristics which distinguish them from ordinary claims such as claims in contract or tort.
The second is that, if it were necessary to draw a distinction between insolvency orders and other orders, it would not be difficult to formulate criteria for the distinction, along similar lines to that drawn by the European Court in relation to the Brussels Convention, the Brussels I Regulation (Council Regulation (EC) 44/2001) and the EC Insolvency Regulation.
Nature of avoidance proceedings
In order to achieve a proper and fair distribution of assets between creditors, it will often be necessary to adjust prior transactions and to recover previous dispositions of property so as to constitute the estate which is available for distribution.
The principle of equality among creditors which underlies the pari passu principle may require the adjustment of concluded transactions which but for the winding up of the company would have remained binding on the company, and the return to the company of payments made or property transferred under the transactions or the reversal of their effect.
Systems of insolvency law use avoidance proceedings as mechanisms for adjusting prior transactions by the debtor and for recovering property disposed of by the debtor prior to the insolvency.
Thus under the Insolvency Act 1986 an administrator, or liquidator, or trustee in bankruptcy may, where there has been a transaction at an undervalue, or amounting to an unlawful preference, apply for an order restoring the position to what it would have been had the transaction not taken place: sections 238 et seq and 339 et seq.
Other systems of law have similar mechanisms, but they will differ in matters such as the period during which such transactions are at risk of reversal and the role of good faith of the parties to the transaction.
The underlying policy is to protect the general body of creditors against a diminution of the assets by a transaction which confers an unfair or improper advantage on the other party, and it is therefore an essential aspect of the process of liquidation that antecedent transactions whose consequences have been detrimental to the collective interest of the creditors should be amenable to adjustment or avoidance: Fletcher, Law of Insolvency, 4th ed (2009), para 26 002; Goode, Principles of Corporate Insolvency Law, 4th ed (2011), para 13 03.
Thus the UNCITRAL Legislative Guide on Insolvency Law (2005) says: 150.
Many insolvency laws include provisions that apply retroactively from a particular date (such as the date of application for, or commencement of, insolvency proceedings) for a specified period of time (often referred to as the suspect period) and are designed to overturn those past transactions to which the insolvent debtor was a party or which involved the debtor's assets where they have certain effects. 151.
It is a generally accepted principle of insolvency law that collective action is more efficient in maximizing the assets available to creditors than a system that leaves creditors free to pursue their individual remedies and that it requires all like creditors to receive the same treatment.
Provisions dealing with avoidance powers are designed to support these collective goals, ensuring that creditors receive a fair allocation of an insolvent debtors assets consistent with established priorities and preserving the integrity of the insolvency estate.
In In re Condor Insurance Ltd, 601 F 3d 319, 326 (5th Cir 2010), the Court
of Appeals for the Fifth Circuit said that: Avoidance laws have the purpose and effect of re ordering the distribution of a debtors assets in favor of the collective priorities established by the distribution statute [and] must be treated as an integral part of the entire bankruptcy system.
In different phases of the Australian proceedings in New Cap Barrett J made similar points.
He said that in an action for unfair preference under the Australian legislation the liquidator might obtain an order for the payment of money, but the action did not contemplate recovery in the sense applicable to damages and debts; and the proceedings sought to remedy or counter the effects of that depletion caused by the payment by New Cap: New Cap Reinsurance Corpn v Renaissance Reinsurance Ltd [2002] NSWSC 856, paras 23, 27.
The order does not vindicate property rights which the company itself would have had prior to liquidation, but statutory rights which the liquidator has under the statutory scheme in consequence of winding up.
The purpose of the order for the payment of money to a company in liquidation is not to compensate the company, but to adjust the rights of creditors among themselves in such a way as to eliminate the effects of favourable treatment afforded to one or more creditors, to the exclusion of others, in the period immediately before an insolvent administration commences: New Cap Reinsurance Corpn v Grant [2009] NSWSC 662, 257 ALR 740, paras 20 21.
Difference between insolvency claims and others
I also accept that, if there were to be a separate rule for the recognition and enforcement of insolvency orders, it would not normally be difficult to distinguish between judgments in insolvency proceedings which are peculiarly the subject of insolvency law such as avoidance proceedings, and other judgments of the kind which are covered by the Dicey Rule.
In the context of the Brussels Convention, the Brussels I Regulation and the EC Insolvency Regulation, the European Court has developed a distinction between claims which derive directly from the bankruptcy or winding up, and which are closely connected with them, on the one hand, and those which do not, on the other hand, and the distinction has been applied by the English court.
In my judgment, the distinction is a workable one which could be adapted to other contexts should it be useful or necessary to do so.
Claims which were regarded as bankruptcy claims have been held to include a claim under French law by a liquidator against a director to make good a deficiency in the assets of a company (Gourdain v Nadler (Case 133/78) [1979] ECR 733); or a claim under German law to set aside a transaction detrimental to creditors (Seagon v Deko Marty NV (Case C 339/07) [2009] 1 WLR 2168).
Claims outside the category of bankruptcy claims have been held to include an action brought by a seller based on a reservation of title against a purchaser who was insolvent (German Graphics Graphische Maschinen GmbH v van der Schee (Case C 292/08) [2009] ECR I 8421) or a claim by a liquidator as to beneficial ownership of an asset (Byers v Yacht Bull Corp [2010] EWHC 133 (Ch), [2010] BCC 368).
In Oakley v Ultra Vehicle Design Ltd [2005] EWHC 872 (Ch), [2006] BCC 57, Lloyd LJ (sitting as an additional judge of the Chancery Division) said, at para 42): it has been held that a claim by a liquidator to recover pre liquidation debts, although made in the course of the winding up and so, in a sense, relating to it, does not derive directly from it and is therefore not excluded from the Brussels Convention (and therefore now not from the [Brussels I] Regulation) by article 1.2(b): see In re Hayward decd [1997] Ch 45, and UBS AG v Omni Holding AG [2000] 1 WLR 916.
By contrast, proceedings by a liquidator against a director or a third party to set aside a transaction as having been effected at an undervalue or on the basis of wrongful or fraudulent trading would be claims deriving directly from the winding up and therefore excluded from the Brussels Convention and now from the [Brussels I] Regulation.
In personam or sui generis?
I have already quoted the passage in Cambridge Gas in which Lord Hoffmann distinguished between judgments in rem and in personam, on the one hand, and judgments in bankruptcy proceedings, on the other, but it is necessary to repeat it at this point.
He said: 13.
Judgments in rem and in personam are judicial determinations of the existence of rights: in the one case, rights over property and in the other, rights against a person.
When a judgment in rem or in personam is recognised by a foreign court, it is accepted as establishing the right which it purports to have determined, without further inquiry into the grounds upon which it did so.
The judgment itself is treated as the source of the right. 14.
The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the existence of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established.
There is no doubt that the order of the US Bankruptcy Court in Cambridge Gas did not fall into the category of an in personam order.
Even though the question whether a foreign judgment is in personam or in rem is sometimes a difficult one (Dicey, 15th ed, para 14 109), that was not a personal order against its shareholders, including Cambridge Gas.
The order vested the shares in Navigator in the creditors committee.
It did not declare existing property rights.
Indeed the whole purpose of what was the functional equivalent of a scheme of arrangement was to alter property rights.
But it is not easy to see why it was not an in rem order in relation to property in the Isle of Man in the sense of deciding the status of a thing and purporting to bind the world: see Jowitts Dictionary of English Law, 3rd ed (2010) (ed Greenberg), p 1249.
The judgments in the Rubin and New Cap appeals were based on avoidance legislation which, with some differences of substance, performs the same function as the equivalent provisions in the Insolvency Act 1986 and its predecessors.
But Ward LJ in Rubin accepted that the judgment was in personam and the Rubin respondents have not sought to argue that it was not an in personam judgment.
What they say is that, even if it is in personam, it is within a sui generis category of insolvency orders or judgments subject to special rules.
There can be no doubt that the avoidance orders in the present appeals are in personam.
In In re Paramount Airways Ltd [1993] Ch. 223, 238, Nicholls LJ said that the remedies under section 238 of the Insolvency Act 1986, (transactions at an undervalue) were primarily of an in personam character, and that accords with the nature of the orders in these appeals.
The form of judgment of the US Bankruptcy Court in the Rubin case was that plaintiffs have judgment against the defendants in the sums awarded, and the orders of the New South Wales Supreme Court in the New Cap case included orders that the defendants pay to the first plaintiff the sums due under section 588FF(1) of the Australian Corporations Act.
The question of principle and policy
Since the judgments are in personam the principles in the Dicey Rule are applicable unless the court holds that there is, or should be, a separate rule for judgments in personam in insolvency proceedings, at any rate where those judgments are not designed to establish the existence of rights, but are central to the purpose of the insolvency proceedings or part of the mechanism of collective execution.
Prior to Cambridge Gas and the present cases, there had been no suggestion that there might be a different rule for judgments in personam in insolvency proceedings and other proceedings.
There are no cases in England which are helpful.
The normal rules for enforcement of foreign judgments were applied to a claim by a liquidator for moneys due to the company (Gavin Gibson & Co Ltd v Gibson [1913] 3 KB 379) and to a claim on a debt ascertained in bankruptcy under German law (Berliner Industriebank Aktiengesellschaft v Jost [1971] 2 QB 463).
A judgment of the US Bankruptcy Court in Chapter 11 proceedings for repayment of a preferential transfer was enforced in Ontario on the basis of the judgment debtors submission to the New York court, without any suggestion that the normal rules did not apply: Gourmet Resources International Inc v Paramount Capital Corpn (1991) 3 OR (3d) 286, [1993] ILPr 583, app dismissed (1993) 14 OR (3d) 319 (Ont CA).
The principles in the Dicey Rule have never received the express approval of the House of Lords or the UK Supreme Court and the leading decisions remain Adams v Cape Industries plc [1990] Ch 433 and the older Court of Appeal authorities which it re states or re interprets.
But there can be no doubt that the references by the House of Lords in the context of foreign judgments to the foreign court of competent jurisdiction are implicit references to the common law rule: eg In re Henderson, Nouvion v Freeman (1890) 15 App Cas 1, 8; Owens Bank Ltd v Bracco [1992] 2 AC 443, 484.
The Rubin respondents question whether the rules remain sound in the modern world.
It is true that the common law rule was rejected in Canada, at first in the context of the inter provincial recognition of judgments.
The Supreme Court of Canada held that the English rules developed in the 19th century for the recognition and enforcement of judgments of foreign countries could not be transposed to the enforcement of judgments from sister provinces in a single country with a common market and a single citizenship.
Instead a judgment given against a person outside the jurisdiction should be recognised and enforced if the subject matter of the action had a real and substantial connection with the province in which the judgment was given: Morguard Investments Ltd v De Savoye [1990] 3 SCR 1077, para 45.
This approach was applied, by a majority, to foreign country judgments in Beals v Saldanha [2003] 3 SCR 416 (applied to the recognition of an English order convening meetings in a scheme of arrangement in Re Cavell Insurance Co (2006) 269 DLR (4th) 679 (Ont CA)).
There is no support in England for such an approach except in the field of family law.
In Indyka v Indyka [1969] 1 AC 33 it was held that a foreign decree of divorce would be recognised at common law if there was a real and substantial connection between the petitioner (or the respondent) and the country where the divorce was obtained.
This rule (now superseded by the Family Law Act 1986) was in part devised to avoid limping marriages, ie cases where the parties were regarded as divorced in one country but regarded as married in another country.
It has never been adopted outside the family law sphere in the context of foreign judgments.
The Supreme Court of Ireland in In re Flightlease (Ireland) Ltd [2012] IESC 12 declined to follow Cambridge Gas (and also the decision of the Court of Appeal in Rubin) and also held that the Dicey Rule should not be rejected in favour of a real and substantial connection test.
In Flightlease the airline Swissair was in a form of debt restructuring proceeding in Switzerland, where it was incorporated.
Flightlease is an Irish company in the same group as Swissair.
An application was before the Swiss courts under the Swiss federal statute on debt enforcement and bankruptcy seeking the return of money paid by Swissair to Flightlease.
The proceedings had reached the stage of judgment, but the liquidators of Flightlease were concerned to know whether a Swiss judgment would be enforceable in Ireland so that they could decide whether to appear in the Swiss proceedings.
The Irish Supreme Court held that the judgment would not be enforceable if Flightlease did not appear in the Swiss proceedings for these reasons: (1) the effect of the Swiss order would be to establish a liability on Flightlease to repay moneys and would therefore result in a judgment in personam; (2) it would be preferable for any change in the rules relating to the enforcement of foreign judgments to take place in the context of international consensus by way of treaty or convention given effect by legislation.
In particular, the Irish Supreme Court said that it would not adopt the approach in Cambridge Gas because it had resulted from legislative changes in the United Kingdom (this appears to have been based on a misapprehension), and should not be adopted in Ireland in the absence of consensus among common law jurisdictions.
But there is no suggestion on this appeal that the principles embodied in the Dicey Rule should be abandoned.
Instead the Rubin respondents suggest that the principles should not apply to foreign insolvency orders.
The respondents accept that the Dicey Rule applies to claims which may be of considerable significance by an officeholder in a foreign insolvency, such as a claim for breach of contract, or a tort claim, or a claim to recover debts.
It is clear that such claims may affect the size of the insolvent estate just as much, and often more, than avoidance claims.
Like claims to recover money due to the insolvent estate such as restitutionary claims not involving avoidance, avoidance claims may establish a liability to pay or repay money to the bankrupt estate (as in the present cases).
There is no difference of principle.
The question, therefore, is one of policy.
Should there be a more liberal rule for avoidance judgments in the interests of the universality of bankruptcy and similar procedures? In my judgment the answer is in the negative for the following reasons.
First, although I accept that it is possible to distinguish between avoidance claims and normal claims, for example in contract or tort, it is difficult to see in the present context a difference of principle between a foreign judgment against a debtor on a substantial debt due to a company in liquidation and a foreign judgment against a creditor for repayment of a preferential payment.
The respondents suggest that a person who sells goods to a foreign company accepts the risk of the insolvency legislation of the place of incorporation.
Quite apart from the fact that the suggestion is wholly unrealistic, why should the seller/creditor be in a worse position than a buyer/debtor?
The second reason is that if there is to be a different rule for foreign judgments in such proceedings as avoidance proceedings, the court will have to ascertain (or, more accurately, develop) two jurisdictional rules.
There are two aspects of jurisdiction which would have to be satisfied if a foreign insolvency judgment or order is to be outside the scope of the Dicey Rule: the first is the requisite nexus between the insolvency and the foreign court, and the second is the requisite nexus between the judgment debtor and the foreign court.
In Cambridge Gas Navigator was an Isle of Man company, and the jurisdiction of the United States Bankruptcy Court depends on whether the debtor resides or has a domicile or place of business, or property, in the United States.
The shares in Navigator owned by Cambridge Gas (a Cayman Islands company) were, on ordinary principles of the conflict of laws, situated in the Isle of Man, and the shareholder relationship between Navigator and Cambridge Gas was governed by Manx law.
The Privy Council, as noted above, did not articulate any rule for the jurisdiction of the US Bankruptcy Court over Navigator (although it had plainly submitted to its jurisdiction) or over Cambridge Gas (which, the Manx courts had held and the Privy Council accepted, had not submitted) or over Cambridge Gas Manx assets.
Nor did the Court of Appeal in Rubin articulate the reasons why the English court recognised the jurisdiction of the US Bankruptcy Court over TCT, or over the appellants.
The receivers appear to have proceeded originally on the basis that the United States Bankruptcy Court had jurisdiction under United States bankruptcy law because of TCTs residence and principal place of business in New York (petition, 5 December 2005), but the US Bankruptcy Court, in deciding to appoint the receivers as foreign representatives also noted that TCTs business operations were conducted primarily in the United States, the majority of its creditors, substantially all of its assets, and its centre of main interests, were all in the United States.
The basis of jurisdiction of the US Bankruptcy Court under United States law over the individual defendants in Rubin was that they were subject both to the general jurisdiction of the court (ie connection of the defendant with the jurisdiction) and also to the specific jurisdiction of the court (ie connection of the cause of action with the jurisdiction) because they specifically sought out the United States as a place to do business and specifically sought out United States merchants and consumers with whom to do business.
Accordingly, the exercise of jurisdiction satisfied the due process requirements of the Fifth Amendment.
The basis of jurisdiction in New Cap over New Cap itself was of course that it was incorporated in Australia.
The basis of jurisdiction over the Syndicate under New South Wales law was that the cause of action against the Syndicate arose in New South Wales.
The respondents do not put forward any principled suggestion for rules which will deal with the two aspects of jurisdiction.
They accept, as regards the jurisdictional link between the foreign country and the insolvent estate, that English law has traditionally recognised insolvency proceedings taking place in an individual bankrupts place of domicile, or, in the case of corporations, the place of incorporation, but (because the connection which the trustees of the TCT, or the TCT itself, had with the United States was that the trusts main business was there) they rely on what Lord Hoffmann said in HIH [2008] UKHL 21, [2008] 1 WLR 852, para 31: I have spoken in a rather old fashioned way of the companys domicile because that is the term used in the old cases, but I do not claim it is necessarily the best one.
Usually it means the place where the company is incorporated but that may be some offshore island with which the company's business has no real connection.
The Council Regulation on insolvency proceedings (Council Regulation (EC) No 1346/2000 of 29 May 2000) uses the concept of the centre of a debtor's main interests as a test, with a presumption that it is the place where the registered office is situated: see article 3.1.
That may be more appropriate.
They propose that each of these issues be resolved, not by a black letter rule like the common law rule for enforcement of judgments, but instead by an appeal to what was said in oral argument to be the discretion of the English court to assist the foreign court.
On the second aspect, the jurisdictional link between the foreign country and the judgment debtor, they accept that it is necessary for there to be an appropriate connection between the foreign insolvency proceeding and the insolvency order in respect of which recognition and enforcement is sought.
They propose that, in the exercise of the discretion, the court should adopt an approach similar to that taken by the English court in deciding whether to apply provisions of the Insolvency Act 1986, such as section 238 (transactions at an undervalue), to persons abroad, relying on In re Paramount Airways Ltd [1993] Ch 223.
That case decided that there is no implied territorial limitation to the exercise of jurisdiction over any person.
The Court of Appeal rejected the argument that the section applied only to British subjects and to persons present in England at the time of the impugned transaction.
In particular the physical absence or presence of the party at the time of the transaction bore no necessary relationship to the appropriateness of the remedy.
Nor was the test of sufficient connection with England satisfactory because it would hardly be distinguishable from the ambit of the sections being unlimited territorially: p 237.
Instead, the approach was to be found in the discretion of the court, first to grant permission to serve the proceedings out of the jurisdiction, and secondly, to make an order under the section.
On both aspects the court would take into account whether the defendant was sufficiently connected with England for it to be just and proper to make the order against him despite the foreign element.
The Rubin respondents say that In re Paramount Airways Ltd is instructive because, if the facts of the present case were reversed such that TCT had carried on the scheme in England and had been placed into insolvency proceedings here and the appellants were resident in New York, then it can be expected that the English court would have considered that England was the correct forum in which to bring section 238 proceedings to recover payments made to the appellants and would have given permission to serve out of the jurisdiction accordingly.
They go on to say that it is implicit in this that the English court would have expected the New York court then to recognise and enforce any judgment of the English court even if the appellants had remained in New York and had not contested the proceedings; and that by the same token that the court seeks and expects the recognition and enforcement abroad of its own insolvency orders, the court should recognise and enforce in England insolvency orders made in insolvency proceedings in other jurisdictions.
There is no basis for this line of reasoning.
There is no necessary connection between the exercise of jurisdiction by the English court and its recognition of the jurisdiction of foreign courts, or its expectation of the recognition of its judgments abroad.
It has frequently been said that the jurisdiction exercised under what used to be RSC Ord 11, r. 1 (and is now CPR Practice Direction 6B, para 3.1) is an exorbitant one, in that it was a wider jurisdiction than was recognised in English law as being possessed by courts of foreign countries in the absence of a treaty providing for recognition: see The Siskina (Owners of cargo lately laden on board) v Distos Cia Naviera SA [1979] AC 210, 254 per Lord Diplock; Amin Rasheed Shipping Corpn v Kuwait Insurance Co [1984] AC 50, 65 per Lord Diplock; Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460, 481 per Lord Goff of Chieveley.
Outside the sphere of matrimonial proceedings (see Travers v Holley [1953] P 246, disapproved on this aspect in Indyka v Indyka [1969] 1 AC 33) reciprocity has not played a part in the recognition and enforcement of foreign judgments at common law.
The English court does not concede jurisdiction in personam to a foreign court merely because the English court would, in corresponding circumstances, have power to order service out of the jurisdiction: In re Trepca Mines Ltd [1960] 1 WLR 1273.
In my judgment, the dicta in Cambridge Gas and HIH do not justify the result which the Court of Appeal reached.
This would not be an incremental development of existing principles, but a radical departure from substantially settled law.
There is a reason for the limited scope of the Dicey Rule and that is that there is no expectation of reciprocity on the part of foreign countries.
Typically today the introduction of new rules for enforcement of judgments depends on a degree of reciprocity.
The EC Insolvency Regulation and the Model Law were the product of lengthy negotiation and consultation.
A change in the settled law of the recognition and enforcement of judgments, and in particular the formulation of a rule for the identification of those courts which are to be regarded as courts of competent jurisdiction (such as the country where the insolvent entity has its centre of interests and the country with which the judgment debtor has a sufficient or substantial connection), has all the hallmarks of legislation, and is a matter for the legislature and not for judicial innovation.
The law relating to the enforcement of foreign judgments and the law relating to international insolvency are not areas of law which have in recent times been left to be developed by judge made law.
As Lord Bridge of Harwich put it in relation to a proposed change in the common law rule relating to fraud as a defence to the enforcement of a foreign judgment, if the law is now in need of reform, it is for the legislature, not the judiciary, to effect it: Owens Bank Ltd v Bracco [1992] 2 AC 443, 489.
Furthermore, the introduction of judge made law extending the recognition and enforcement of foreign judgments would be only to the detriment of United Kingdom businesses without any corresponding benefit.
I accept the appellants point that if recognition and enforcement were simply left to the discretion of the court, based on a factor like sufficient connection, a person in England who might have connections with a foreign territory which were only arguably sufficient would have to actively defend foreign proceedings which could result in an in personam judgment against him, only because the proceedings are incidental to bankruptcy proceedings in the courts of that territory.
Although I say nothing about the facts of the Madoff case, it might suggest that foreigners who have bona fide dealings with the United States might have to face the dilemma of the expense of defending enormous claims in the United States or not defending them and being at risk of having a default judgment enforced abroad.
Nor is there likely to be any serious injustice if this court declines to sanction a departure from the traditional rule.
It would not be appropriate to express a view on whether the officeholders in the present cases would have, or would have had, a direct remedy in England, because there might be, or might have been, issues as to the governing law, or issues as to time limits or as to good faith.
Subject to those reservations, several of the ways in which the claims were put (especially those parts of the judgment which were not the subject of these proceedings) in the United States proceedings in Rubin could have founded proceedings by trustees in England for the benefit of the creditors (as beneficiaries of the express trust).
In addition there are several other avenues available to officeholders.
Avoidance claims by a liquidator of an Australian company may be the subject of a request by the Australian court pursuant to section 426(4) of the Insolvency Act 1986, applying Australian law under section 426(5).
In appropriate cases, article 23 of the Model Law will allow avoidance claims to be made by foreign representatives under the Insolvency Act 1986.
In the cases where the insolvent estate has its centre of main interests in the European Union, judgments will be enforceable under Article 25 of the EC Insolvency Regulation.
It follows that, in my judgment, Cambridge Gas was wrongly decided.
The Privy Council accepted (in view of the conclusion that there had been no submission to the jurisdiction of the court in New York) that Cambridge Gas was not subject to the personal jurisdiction of the US Bankruptcy Court.
The property in question, namely the shares in Navigator, was situate in the Isle of Man, and therefore also not subject to the in rem jurisdiction of the US Bankruptcy Court.
There was therefore no basis for the recognition of the order of the US Bankruptcy Court in the Isle of Man.
Regulations
In the Rubin appeal it was argued by the respondents that the judgment should also be enforced through the CBIR, implementing the UNCITRAL Model Law.
The order made by the deputy judge recognised the Chapter 11 proceeding including the Adversary Proceedings, because bringing adversary proceedings against debtors of the bankrupt is clearly part of collecting the bankrupts assets with a view to distributing them to creditors and the adversary proceedings are part and parcel of the Chapter 11 insolvency proceedings: [2010] 1 All ER (Comm) 81, paras 46, 47.
The Court of Appeal was of the same view: [2011] Ch 133, para 61(2) (3).
The appellants no longer maintain that the adversary proceedings should not be recognised under the Model Law.
Issue 2: Rubin: Enforcement under the Cross Border Insolvency
The issue which still arises in relation to the Model Law as implemented by the CBIR is whether the court has power to grant relief recognising and enforcing the relevant parts of the judgment.
Article 21 provides that: 1.
Upon recognition of a foreign proceeding, whether main or non main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including (a) staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph l(a) of article 20; (b) staying execution against the debtor's assets to the extent it has not been stayed under paragraph l(b) of article 20; suspending the right to transfer, encumber or otherwise (c) dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of article 20; (d) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities; (e) entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court; (f) extending relief granted under paragraph 1 of article 19; and (g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986.
The reference to relief under paragragh 43 of Schedule B1 to the Insolvency Act 1986 is a reference to a moratorium on claims in an administration.
The Guide to Enactment states, at paras 154, 156: [154] The types of relief listed in article 21, paragraph 1, are typical or most frequent in insolvency proceedings; however, the list is not exhaustive and the court is not restricted unnecessarily in its ability to grant any type of relief that is available under the law of the enacting state and needed in the circumstances of the case. [156] It is in the nature of discretionary relief that the court may tailor it to the case at hand.
This idea is reinforced by article 22, paragraph 2, according to which the court may subject the relief granted to conditions that it considers appropriate.
Article 25 provides (under the heading Co operation and direct communication between a court of Great Britain and foreign courts or foreign representatives) that: 1. the court may co operate to the maximum extent possible with foreign courts or foreign representatives, either directly or through a British insolvency officeholder. 2.
The court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives.
Article 27 provides that the co operation referred to in article 25 may be implemented by any appropriate means, including (a) appointment of a person to act at the direction of the court; (b) communication of information by any means considered appropriate by the court; (c) coordination of the administration and supervision of the debtor's assets and affairs; (d) approval or implementation by courts of agreements concerning the coordination of proceedings; (e) coordination of concurrent proceedings regarding the same debtor.
The respondents say that (a) the power under article 21 is to grant any type of relief that is available under the law of the relevant state, and that the fact that recognition and enforcement of foreign judgments is not specifically mentioned in article 21 as one of the forms of relief available, does not mean that such relief cannot be granted; (b) the recognition and enforcement of the judgments of a foreign court is the paradigm means of co operation with that court; and (c) the examples of co operation in article 27 are merely examples and are not exhaustive.
But the CBIR (and the Model Law) say nothing about the enforcement of foreign judgments against third parties.
As Lord Mance pointed out in argument, recognition and enforcement are fundamental in international cases.
Recognition and enforcement of judgments in civil and commercial matters (but not in insolvency matters) have been the subject of intense international negotiations at the Hague Conference on Private International Law, which ultimately failed because of inability to agree on recognised international bases of jurisdiction.
It would be surprising if the Model Law was intended to deal with judgments in insolvency matters by implication.
Articles 21, 25 and 27 are concerned with procedural matters.
No doubt they should be given a purposive interpretation and should be widely construed in the light of the objects of the Model Law, but there is nothing to suggest that they apply to the recognition and enforcement of foreign judgments against third parties.
The respondents rely on United States decisions but the only case involving enforcement of a foreign judgment in fact supports the appellants argument.
The Model Law has been implemented into United States law through Chapter 15 of Title 11 of the United States Code, which has in sections 1521, 1525 and 1527 provisions which are, with modifications not relevant for present purposes, equivalent to articles 21, 25 and 27 of the CBIR.
In Re Metcalfe & Mansfield Alternative Investments 421 BR 685 (Bankr SDNY 2010) the US Bankruptcy Court ordered that orders made by a Canadian court in relation to a plan of compromise and arrangement under the (Canadian) Companies Creditors Arrangement Act 1985 be enforced.
That decision does not assist the respondents because the US Bankruptcy Court applied the normal rules in non bankruptcy cases for enforcement of foreign judgments in the United States: pp 698 700.
In my judgment the Model Law is not designed to provide for the reciprocal enforcement of judgments.
VII Issue 3: New Cap: Enforcement through assistance under section 426 of
the Insolvency Act 1986
In view of my conclusion in the next section (section VIII) that the Syndicate submitted to the jurisdiction of the Australian court, the issues on section 426(4) and (5) of the Insolvency Act 1986, and their relationship with section 6 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 do not arise, but since the matter was fully argued I will express a view on the applicability of section 426(4) to a case such as this.
Section 426(4) (5) of the Insolvency Act 1986 provides: (4) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory. (5) For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom, or in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matter specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.
In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
The reference to the application of rules of private international law in section 426(5) is difficult and obscure: see Dicey, 15th ed, para 30 119; my discussion in In re Television Trade Rentals [2002] EWHC 211 (Ch), [2002] BCC 807, para 17, and the cases there cited; and Al Sabah v Grupo Torras SA [2005] UKPC 1, [2005] 2 AC 333, para 47.
But nothing turns on it on these appeals.
The question is whether section 426(4) of the 1986 Act provides a procedure by which a judgment of a court having jurisdiction in relation to insolvency law in a relevant country or territory may be enforced in the United Kingdom.
As I have said, Australia is a relevant country.
A further question arises if section 426(4) applies to the enforcement of foreign judgments and that is whether section 426 is ousted by section 6 of the Foreign Judgments (Reciprocal Enforcement) Act 1933, which provides: No proceedings for the recovery of a sum payable under a foreign judgment, being a judgment to which this Part of the Act applies, other than proceedings by way of registration of the judgment, shall be entertained by any court in the United Kingdom.
Both Lewison J and the Court of Appeal [2012] 2 WLR 1095 held that section 426(4) was available as a tool for the enforcement of the judgment.
Section 426(4) has been given a broad interpretation: see Hughes v Hannover Rckversicherungs Aktiengesellschaft [1997] 1 BCLC 497 (CA); England v Smith [2001] Ch 419 (CA); HIH [2008] UKHL 21, [2008] 1 WLR 852.
It has been held that the fact that a letter of request has been made is a weighty factor, and public policy and comity favour the giving of assistance: Hughes v Hannover, at pp 517 518; England v Smith, at p 433.
Thus in England v Smith the Australian court overseeing the liquidation of the Bond Corporation made an order for the examination of a London partner in Arthur Andersen.
It issued a letter of request asking the English court to assist it by making its own order for the examination.
The Court of Appeal decided that the order should be made.
But, despite the respondents argument to the contrary, England v Smith was not a case of the enforcement of the Australian order, but rather the making of the courts own order in aid of the Australian liquidation.
In my judgment, subsections 426(4) and (5) of the 1986 Act are not concerned with enforcement of judgments.
Section 426(1) (2), by contrast, deals with enforcement of orders in one part of the United Kingdom in another part, and refer expressly to the enforcement of such orders (shall be enforced in section 426(1)).
Section 426(4) deals with assistance not only for foreign designated countries such as Australia but also to intra United Kingdom assistance.
If section 426(4) applied to intra United Kingdom enforcement of orders, then section 426(1) would be largely redundant, going beyond what the Court of Appeal [2012] 2 WLR 1095, para 57 described as a degree of overlap.
Sections 426(1) and (4) have their origin in sections 121 and 123 of the Bankruptcy Act 1914.
Section 121 of the 1914 Act provided that orders of bankruptcy courts in one part of the United Kingdom were to be enforced in other parts.
Section 122 provided that the courts exercising bankruptcy and insolvency jurisdiction in the United Kingdom and every British court elsewhere were to act in aid of, and be auxiliary to, each other; and, upon a request by the non English court, could exercise the jurisdiction of either court.
The Insolvency Law and Practice Report of the Review Committee (1982) (Cmnd 8558) (the Cork Report) said (paras 1909 1913) that section 122 was the vital section in this context, and recommended that the section should be extended to winding up.
But, despite the respondents arguments, I do not discern any recommendation which would suggest that section 426(4) applies to the enforcement of foreign judgments.
Consequently the applicability of section 6 of the 1933 Act does not arise for decision, except in a context which makes little practical difference, and to which I will revert.
VIII Submission
If the Dicey Rule applies the judgments in issue will be enforceable in England if the judgment debtors submitted to the jurisdiction of the foreign court.
New Cap
The Australian court granted leave to serve these proceedings out of the jurisdiction on the Syndicate: section IV, above.
The Syndicate did not enter an appearance, but its solicitors commented in writing on evidence presented to the Australian court about New Caps insolvency and their comments were placed before the Australian judge.
More relevant is the fact that from August 1999 the Syndicate submitted proofs of debt (in relation to unsettled claims and outstanding premiums for the 1997, 1998, and 1999 years of account, and not to the reinsurance contracts which are the subject of these proceedings) and attended and participated in creditors meetings.
In particular at an adjourned meeting of creditors on 16 September 2009 the Syndicate had given a proxy for that meeting to the chairman, and submitted a proof of debt and proxy form for that meeting.
The Syndicate voted at a meeting of creditors in favour of a scheme of arrangement.
The liquidator has admitted claims by the Syndicate for the sterling equivalent of more than 650,000, although the liquidator is retaining the dividend in partial settlement of the costs incurred in these proceedings.
The general rule in the ordinary case in England is that the party alleged to have submitted to the jurisdiction of the English court must have taken some step which is only necessary or only useful if an objection to jurisdiction has been actually waived, or if the objection has never been entertained at all: Williams & Glyns Bank plc v Astro Dinamico Compania Naviera SA [1984] 1 WLR 438, 444 (HL) approving Rein v Stein (1892) 66 LT 469, 471 (Cave J).
The same general rule has been adopted to determine whether there has been a submission to the jurisdiction of a foreign court for the purposes of the rule that a foreign judgment will be enforced on the basis that the judgment debtor has submitted to the jurisdiction of the foreign court: Adams v Cape Industries [1990] Ch 433, 459 (Scott J); Akai Pty Ltd v Peoples Insurance Co Ltd [1998] 1 Lloyds Rep 90, 96 97 (Thomas J); see also Desert Sun Loan Corpn v Hill [1996] 2 All ER 847, 856 (CA); Akande v Balfour Beatty Construction Ltd [1998] ILPr 110; Starlight International Inc v Bruce [2002] EWHC 374 (Ch), [2002] ILPr 617, para 14 (cases of foreign judgments); Industrial Maritime Carriers (Bahamas) Inc v Sinoca International Inc (The Eastern Trader) [1996] 2 Lloyds Rep 585, 601 (a case involving the question whether the party seeking an anti suit injunction in support of an English arbitration clause had waived the agreement by submitting to the jurisdiction of the foreign court).
The characterisation of whether there has been a submission for the purposes of the enforcement of foreign judgments in England depends on English law.
The court will not simply consider whether the steps taken abroad would have amounted to a submission in English proceedings.
The international context requires a broader approach.
Nor does it follow from the fact that the foreign court would have regarded steps taken in the foreign proceedings as a submission that the English court will so regard them.
Conversely, it does not necessarily follow that because the foreign court would not regard the steps as a submission that they will not be so regarded by the English court as a submission for the purposes of the enforcement of a judgment of the foreign court.
The question whether there has been a submission is to be inferred from all the facts.
It is in that context that Scott J said at first instance in Adams v Cape Industries plc [1990] 1 Ch 433, 461 (a case in which the submission issue was not before the Court of Appeal): If the steps would not have been regarded by the domestic law of the foreign court as a submission to the jurisdiction, they ought not to be so regarded here, notwithstanding that if they had been steps taken in an English court they might have constituted a submission.
The implication of procedural steps taken in foreign proceedings must be assessed in the context of the foreign proceedings.
I agree with the way it was put by Thomas J in Akai Pty Ltd v Peoples Insurance Company Ltd [1998] 1 Lloyds Rep 90, 97: The court must consider the matter objectively; it must have regard to the general framework of its own procedural rules, but also to the domestic law of the court where the steps were taken.
This is because the significance of those steps can only be understood by reference to that law.
If a step taken by a person in a foreign jurisdiction, such as making a counterclaim, might well be regarded by English law as amounting to a submission to the jurisdiction, but would not be regarded by that foreign court as a submission to its jurisdiction, an English court will take into account the position under foreign law.
The Syndicate did not take any steps in the avoidance proceedings as such which would be regarded either by the Australian court or by the English court as a submission.
Were the steps taken by the Syndicate in the liquidation a submission for the purposes of the rules relating to foreign judgments?
In English law there is no doubt that orders may be made against a foreign creditor who proves in an English liquidation or bankruptcy on the footing that by proving the foreign creditor submits to the jurisdiction of the English court.
In Ex p Robertson, In re Morton (1875) LR 20 Eq 733 trustees were appointed over the property of bankrupt potato merchants in a liquidation by arrangement.
A Scots merchant received payment of 120 after the liquidation petition was presented, and proved for a balance of 247 and received a dividend of what is now 20p in the pound.
The trustees served a notice of motion, seeking repayment of the 120 paid out of the insolvent estate, out of the jurisdiction.
The respondent objected to the jurisdiction of the English court on the ground that he was a domiciled Scotsman.
On appeal from the county court, Sir James Bacon CJ held that the court had jurisdiction.
He said, at pp 737 738: what is the consequence of creditors coming in under a liquidation or bankruptcy? They come in under what is as much a compact as if each of them had signed and sealed and sworn to the terms of it that the bankrupt's estate shall be duly administered among the creditors.
That being so, the administration of the estate is cast upon the court, and the court has jurisdiction to decide all questions of whatever kind, whether of law, fact, or whatever else the court may think necessary in order to effect complete distribution of the bankrupt's estate. [C]an there be any doubt that the Appellant in this case has agreed that, as far as he is concerned, the law of bankruptcy shall take effect as to him, and under this jurisdiction, to which he is not only subjected, but under which he has become an active party, and of which he has taken the benefit . [The Appellant] is as much bound to perform the conditions of the compact, and to submit to the jurisdiction of the court, as if he had never been out of the limits of England.
The Syndicate objected to the jurisdiction of the Australian court.
Barrett J in his judgment of 14 July 2009 accepted that it had made it clear that it was not submitting to its jurisdiction, and he also accepted that as a result the judgment of the Australian court would not be enforceable in England.
His judgment is concerned exclusively with the preference claims, and he did not deal with the question of submission by reference to the Syndicates participation in the liquidation by way of proof and receipt of dividends.
He decided that the court had jurisdiction because the New South Wales rules justified service out of the jurisdiction on the basis that the cause of action arose in New South Wales.
I would therefore accept the liquidators submission that, having chosen to submit to New Cap's Australian insolvency proceeding, the Syndicate should be taken to have submitted to the jurisdiction of the Australian court responsible for the supervision of that proceeding.
It should not be allowed to benefit from the insolvency proceeding without the burden of complying with the orders made in that proceeding.
The position is different in the Rubin appeal.
It would certainly have been arguable that Eurofinance SA had submitted to the jurisdiction of the United States District Court, for these reasons: first, it was Eurofinance SA which applied for the appointment by the High Court of Mr Rubin and Mr Lan as receivers of TCT specifically for the purpose of causing TCT then to obtain protection under Chapter 11; second, it was Eurofinance SA which represented to the English court that officeholders appointed by the United States court would be able to pursue claims against third parties; third, the judgment of the US Bankruptcy Court states that the court had personal jurisdiction over Eurofinance SA not only because it did business in the United States but also (as I have mentioned above) because it had filed a notice of appearance in the Chapter 11 proceedings (Order 22 of July 2008, paras 42 43).
But the Rubin appellants did not appear in the adversary proceedings, and it was not argued in these proceedings that Eurofinance SA (or Mr Adrian Roman, who caused Eurofinance SA to make the application) had submitted to the jurisdiction of the US Bankruptcy Court in any other way and it is not necessary therefore to explore the matter further.
IX New Cap: enforcement at common law or under the 1933 Act
In view of my conclusion that the Australian judgment in New Cap is enforceable by reason of the Syndicates submission, a purely technical point arises on the method of enforcement.
The point is whether the enforcement is to be under the 1933 Act or at common law.
If insolvency proceedings are excluded from the 1933 Act, then enforcement would be at common law.
If they are not excluded, then (as I have said) section 6 has the effect of excluding an action at common law on the judgment and making registration under the 1933 Act the only method of enforcement of judgments within Part I of the Act.
Section 11(2) of the 1933 Act provides that the expression action in personam shall not be deemed to include (inter alia) proceedings in connection with bankruptcy and winding up of companies.
But the effect of section 4(2)(c) is that in the case of a judgment given in an action other than an action in personam or an action in rem, the foreign court shall be deemed to have jurisdiction if its jurisdiction is recognised by the English court, ie at common law.
Accordingly, the question whether insolvency proceedings are wholly excluded from the operation of the 1933 Act still arises.
There is no other provision in the 1933 Act which throws any light on the point.
The main object of the 1933 Act was to facilitate the enforcement of commercial judgments abroad by making reciprocity easier.
The only reference to insolvency proceedings in the Report of the Foreign Judgments (Reciprocal Enforcement) Committee (1932) (Cmnd 4213), (the Greer Report), which recommended the legislation, is the statement (para 4): It is not necessary for our present purposes to consider the effect in England of foreign judgments in bankruptcy proceedings.
The Report annexed draft Conventions which had been drawn up in consultation with experts from Belgium, France and Germany.
The draft Conventions with Belgium (article 4(3), (4)) and Germany (article 4(4)) provided that the jurisdictional rules in the Convention did not apply to judgments in bankruptcy proceedings or proceedings relating to the winding up of companies or other bodies corporate, but that the jurisdiction of the original court would be recognised where such recognition was in accordance with the rules of private international law observed by the court applied to.
That provision paralleled what became sections 4(2)(c) and 11(2) of the 1933 Act.
The draft Convention with France did not apply to judgments in bankruptcy proceedings etc (article 2(3)), but provided that nothing was deemed to preclude the recognition and enforcement of judgments to which the Convention did not apply: article 2(4).
The Conventions concluded with countries to which the 1933 Act applied adopted similar techniques.
It is unnecessary to set them out in detail.
But there is no reason to suppose that bankruptcy proceedings were not regarded as being civil and commercial matters.
Thus the 1961 Convention with the Federal Republic of Germany of 1961 (the Reciprocal Enforcement of Foreign Judgments (Germany) Order) (SI 1961/1199) provided in article I(6) that the expression judgments in civil and commercial matters did not include judgments for fines or penalties, and had a separate provision in article II(2) that the Convention did not apply to judgments in bankruptcy proceedings or proceedings relating to the winding up of companies or other bodies corporate (although, in accordance with the usual technique, it did not rule out recognition and enforcement: Art II(3)).
Other Conventions simply excluded bankruptcy proceedings from the specific jurisdictional provisions of the Convention, like the draft Conventions annexed to the Greer Report: article 4(5) of the Reciprocal Enforcement of Foreign Judgments (Austria) Order 1962 (SI 1962/1339), article 4(3) of the Reciprocal Enforcement of Foreign Judgments (Norway) Order 1962 (SI 1962/636), and article IV(3) of the Reciprocal Enforcement of Foreign Judgments (Italy) Order 1963 (SI 1973/1894).
The Reciprocal Enforcement of Judgments (Australia) Order 1994 (SI 1994/1901) extended the 1933 Act to Australia, implementing the UK Australia Agreement for the reciprocal enforcement of judgments in civil and commercial matters.
The Agreement is expressed in article I(c)(i) to apply to judgments in civil and commercial matters.
The Order applies Part I of the Act to judgments in respect of a civil or commercial matter (article 4(a)).
There is no reason to conclude that the phrase civil and commercial matters does not include insolvency proceedings, and the history of the 1933 Act and the Conventions shows that it does.
The fact that insolvency was expressly excluded from the operation of the Brussels Convention, the original and revised Lugano Conventions and the Brussels I Regulation in fact suggests that otherwise they would have been within their scope.
The respondents relied on a passage in the ruling of the European Court of Justice in Gourdain v Nadler (Case 133/78) [1979] ECR 733, paras 3 4, as suggesting that the exclusion of bankruptcy in article 1 of the Brussels Convention was an example of a matter excluded from the concept of civil and commercial matters.
But it is clear from the context (and from the opinion of Advocate General Reischl) that the court was simply saying that because the expression civil and commercial matters in Article 1 had to be given an autonomous meaning, so also was the case with the expression bankruptcy.
That the exclusion of bankruptcy proceedings does not affect their character as civil or commercial matters is confirmed by the recent ruling in F Tex SIA v Lietuvos Anglijos UAB Jadecloud Vilma (Case C 213/10) 19 April 2012, where the court said that the Brussels I Regulation was intended to apply to all civil and commercial matters apart from certain well defined matters and as a result actions directly deriving from insolvency proceedings and closely connected with them were excluded: para 29.
It follows that the 1933 Act applies to the Australian judgment and that enforcement should be by way of registration under the 1933 Act.
X Disposition
I would therefore allow the appeal in Rubin, but dismiss the appeal in New Cap on the ground that the Syndicate submitted to the jurisdiction of the Australian court.
LORD MANCE
I agree with Lord Collins reasoning and conclusions in his judgment on these appeals, essentially for the reasons he gives, though without subscribing to his incidental observation (para 132) that the Privy Council decision in Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26, [2007] 1 AC 508 was necessarily wrongly decided.
This was not argued before the Supreme Court, and I would wish to reserve my opinion upon it.
Cambridge Gas is, on any view, distinguishable.
The common law question central to these appeals is whether the Supreme Court should endorse or introduce a special rule of recognition and enforcement, one falling outside the scope of the Dicey Rule which Lord Collins has identified (Rule 36 in the 14th and Rule 43 in the 15th edition) and applicable to judgments in foreign insolvency proceedings setting aside voidable pre insolvency transactions.
For the principal reasons which Lord Collins gives in paras 95 to 131, I agree that we should not do so.
Since much weight was placed by the respondents and the Court of Appeal upon the Boards reasoning and decision in Cambridge Gas, I add some observations to indicate why, as the present appellants submitted, it concerned circumstances and proceeded upon factual assumptions and a legal analysis which have no parallel in the present case.
Cambridge Gas has attracted both Irish judicial dissent and English academic criticism, to which Lord Collins refers in paras 53 and 111 112.
Giving the judgment of the Board in Pattni v Ali [2006] UKPC 51, [2007] 2 AC 85, I said that the purpose of the bankruptcy order with which the Board was concerned in Cambridge Gas was simply to establish a mechanism of collective execution against the property of the debtor [Navigator] by creditors whose rights were admitted or established (para 23).
This analysis, admittedly, involved treating the vesting in creditors of shares in Navigator as no different in substance from the vesting in creditors of Navigators shares in its ship owning subsidiaries.
But it is clear from paras 8 and 9 and again 24 to 26 of the Boards advice in Cambridge Gas that the Board saw no difference.
It did not regard Cambridge Gas as having any interest of value to advance or protect in the shares still held nominally in its name.
Their vesting in Navigators creditors was no more than a mechanism for disposing of Navigators assets, which did not affect or concern Cambridge Gas.
The Board was therefore, in its view (and rightly or wrongly), concerned with distribution of the insolvent companys assets in a narrow and traditional sense.
Amplifying this, the Board approached the situation in Cambridge Gas as follows.
The New York court had jurisdiction over Navigators assets, since Navigator had submitted to the New York proceedings.
Cambridge Gass shares in Navigator (located in the Isle of Man, Navigators place of incorporation) were completely and utterly worthless: [2007] 1 AC 508, para 9.
The transfer to Navigators creditors of Cambridge Gass shares in Navigator had the like effect to a transfer of Navigators assets, since Navigator was an insolvent company, in which the shareholders ha[d] no interest of any value (para 26).
Cambridge Gass shares in Navigator were vulnerable in the Isle of Man, under section 152 of the Companies Act 1931, to a similar scheme of arrangement to that which the New York Court intended by its Chapter 11 order.
More generally, as I noted in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39, [2009] AC 1391, paras 236 to 238, in insolvency shareholders interests yield to those of creditors.
It was in this limited context that the Board concluded that the New York and Manx courts orders could be regarded as doing no more than facilitating or enabling collective execution against Navigators property.
The Court of Appeal believed on the contrary that the answer to the present cases lay in the Boards general statements in Cambridge Gas at paras 19 to 21 regarding the nature of insolvency proceedings.
It is true that proceedings to avoid pre insolvency transactions can be related to the process of collection of assets.
That is, their general purpose and effect is to ensure a fair allocation of assets between all who are and were within some specified pre insolvency period creditors.
A dictum of Lord Hoffmann in In re HIH Casualty and General Insurance Ltd [2008] UKHL 21, [2008] 1 WLR 852, para 19, quoted by Lord Collins in paras 15 and 52, is to that effect, though again uttered in a different context to the present.
However, the Board did not see these considerations as answering or eliminating all questions regarding the existence of jurisdiction or at least its exercise in Cambridge Gas.
On the contrary, it went on to examine in close detail in paras 22 to 26 the limits of the assistance that a court could properly give.
In rejecting the argument that the interference with the shareholding held in Cambridge Gass name was beyond the Manx courts jurisdiction (para 26), the only reason it gave related to the nature of shares in an insolvent company.
This meant, according to its advice, that Cambridge Gas had no interest of any value to protect and that registration of the shares in Navigators creditors name was no more than a mechanism for giving creditors access to Navigators assets.
On this basis, the decision in Cambridge Gas is, as Professor Adrian Briggs noted in a penetrating case note in The British Year Book of International Law (2006) p575 581, less remarkable (although, as Professor Briggs also notes, it perhaps still poses problems of reconciliation with the Houses decision in Socit Eram Shipping Co Ltd v Hong Kong & Shanghai Banking Corp Ltd [2003] UKHL 30, [2004] AC 260).
But, because the actual decision in Cambridge Gas was so narrowly focused on the nature of a shareholders rights in an insolvent company and was not directly challenged, I prefer to leave open its correctness.
Whatever view may be taken as to the validity of the Boards reasoning in Cambridge Gas, it is clear that it does not cover or control the present appeal.
The present cases are not concerned with shares, with situations in which shares are, or are treated by the court as, no more than a key to the insolvent companys assets or even with situations in which it is clear that those objecting to recognition and enforcement of the foreign courts orders have no interests to protect.
There are, on the contrary, substantial issues as to whether there were fraudulent preferences giving rise to in personam liability in large amounts.
The persons allegedly benefitting by fraudulent preferences did not appear in the relevant foreign insolvency proceedings in which judgment was given against them.
They were (leaving aside any question of submission) outside the international jurisdiction of the relevant foreign courts.
Lord Clarke takes a different view from Lord Collins, but does not define either the circumstances in which a foreign court should, under English private international law rules, be recognised as having jurisdiction to entertain bankruptcy proceedings or, if one were (wrongly in my view) to treat the whole area as one of discretion, the factors which might make it either unjust or contrary to public policy to recognise an avoidance order made in such foreign proceedings (see paras 193, 200 and 201 of Lord Clarkes judgment).
The scope of the jurisdiction to entertain bankruptcy proceedings which English private international law will recognise a foreign court as having is described in Dicey (in para 31 064 in the 14th and 15th editions) as a vexed and controversial question.
But it would include situations in which the bankrupt or insolvent company had simply submitted to the foreign bankruptcy jurisdiction.
On Lord Clarkes analysis, in such a case (of which Rubin v Eurofinance is an example), it would be irrelevant that the debtor under the avoidance order had not submitted, and was not on any other basis subject, to the foreign jurisdiction.
It would be enough that the judgment debtor had had the chance of appearing and defending before the foreign court.
For the reasons given by Lord Collins, I do not accept that this is the common law.
In the light of the above, the Court of Appeal was, in my view, in error in seeing the solution to the present appeals as lying in the advice given by the Board in Cambridge Gas.
Even on an assumption that the actual decision in Cambridge Gas can be supported, it cannot and should not be treated as supporting the respondents case that fraudulent preference claims and avoidance orders in insolvency proceedings generally escape the common law rules requiring personal or in rem jurisdiction.
LORD CLARKE
I would like to pay tribute to the learning in Lord Collins comprehensive judgment.
However, left to myself, I would dismiss the appeal in the Rubin case.
Since I am in a minority of one, little is to be gained by my writing a long dissent.
I will therefore try to explain my reasons shortly.
In doing so, I adopt the terminology and abbreviations used by Lord Collins.
I agree with Lord Collins and Lord Mance that the decision of the Privy Council in Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 is distinguishable.
The facts there were quite different from those here.
However, in so far as it is suggested that Cambridge Gas was wrongly decided, I do not agree.
Moreover, I do not think that it would be appropriate so to hold because it was not submitted to be wrong in the course of the argument.
To my mind the approach which should be adopted is presaged in the speech of Lord Hoffmann in In re HIH Casualty and General Insurance Ltd [2008] 1 WLR 852 and in his judgment in Cambridge Gas.
As I see it, the issue is simply whether an avoidance order made by a foreign bankruptcy court made in the course of the bankruptcy proceedings, whether personal or corporate, which the court has jurisdiction to entertain, is unenforceable if it can fairly be said to be an order made either in personam or in rem.
I would answer that question in the negative.
Put another way, the question is whether the English court has jurisdiction under English rules of private international law to enforce an avoidance order made in foreign bankruptcy proceedings in circumstances where, under those rules, the foreign court has jurisdiction to entertain the bankruptcy proceedings themselves.
I would answer that question in the affirmative.
It is not, as I understand it, suggested here that the US court did not have jurisdiction to entertain the bankruptcy proceedings themselves.
The relevant paragraphs of Lord Hoffmanns judgment in Cambridge Gas are in these terms (as quoted by Lord Collins at para 43 above): 13.
Judgments in rem and in personam are judicial determinations of the existence of rights: in the one case, rights over property and in the other, rights against a person.
When a judgment in rem or in personam is recognised by a foreign court, it is accepted as establishing the right which it purports to have determined, without further inquiry into the grounds upon which it did so.
The judgment itself is treated as the source of the right. 14.
The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the existence of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established. 15 [B]ankruptcy, whether personal or corporate, is a collective proceeding to enforce rights and not to establish them.
Of course, as Brightman LJ pointed out in In re Lines Bros Ltd [1983] Ch 1, 20, it may incidentally be necessary in the course of bankruptcy proceedings to establish rights which are challenged: proofs of debt may be rejected; or there may be a dispute over whether or not a particular item of property belonged to the debtor and is available for distribution.
There are procedures by which these questions may be tried summarily within the bankruptcy proceedings or directed to be determined by ordinary action.
But these again are incidental procedural matters and not central to the purpose of the proceedings.
The critical paragraph is para 15, which seems to me to make it clear that it is possible to have an order which is both in personam or in rem and an order of the kind referred to by Lord Hoffmann in para 14.
Thus it may be incidentally necessary to establish substantive rights in the course of the bankruptcy proceedings as part of a collective proceeding to enforce rights.
In such a case the order will be doing two things.
It will be both establishing the right and enforcing it.
This can be seen from the examples given in para 15.
Proofs of debt may be rejected, which is a process which may involve determining, for example, the substantive rights of the creditor against the debtor.
Or it may be necessary to determine whether or not a particular item of property belongs to the debtor and is available for distribution.
As para 15 contemplates, such procedures may be tried either summarily within the bankruptcy proceedings or by ordinary action.
In either such case Lord Hoffmann describes them as incidental procedures which are not central to the purpose of the bankruptcy proceedings.
As I see it, in such a case, an avoidance order may be both an order in personam or in rem and an order in the bankruptcy proceedings.
I agree with Lord Collins at para 103 that it is not easy to see why the order of the US Bankruptcy Court in Cambridge Gas was not an order in rem.
However, that does not to my mind show that Cambridge Gas was wrongly decided but demonstrates that it is possible to have an in rem order which is made as incidental to bankruptcy proceedings but which is enforceable at common law, provided that the bankruptcy court has jurisdiction in the bankruptcy.
The approach is explained by Lord Hoffmann in HIH at para 30 and in Cambridge Gas at para 16, both of which are quoted by Lord Collins at para 19 above.
In HIH he said: The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross border insolvency law since the 18th century.
That principle requires that English courts should, so far as is consistent with justice and UK public policy, co operate with the courts in the country of the principal liquidation to ensure that all the companys assets are distributed to its creditors under a single system of distribution.
In Cambridge Gas he said: The English common law has traditionally taken the view that fairness between creditors requires that, ideally, bankruptcy proceedings should have universal application.
There should be a single bankruptcy in which all creditors are entitled and required to prove.
No one should have an advantage because he happens to live in a jurisdiction where more of the assets or fewer of the creditors are situated.
At paras 94 to 98 above Lord Collins discusses the nature of avoidance proceedings.
I entirely agree with his analysis.
Avoidance provisions requiring the adjustment of prior transactions and the recovery of previous dispositions of property so as to constitute the estate available for distribution are necessary in order to maintain the principle of equality among creditors.
At para 15 Lord Collins notes that Lord Hoffmann said at para 19 of HIH that the process of collection of assets will include, for example, the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme.
In short, avoidance proceedings, and therefore avoidance orders, are central to the bankruptcy proceedings.
As Lord Collins puts it at para 98, avoidance proceedings are peculiarly the subject of insolvency law.
I accept that to permit the enforcement of an avoidance order in circumstances of this kind would be a development of the common law.
However, it seems to me that it would be a principled development.
It would in essence be an application of the principle identified by Lord Hoffmann in the passage quoted above from para 30 of HIH that the principle of modified universalism requires that English courts should, so far as is consistent with justice and United Kingdom public policy, co operate with the courts in the country of the principal liquidation to ensure that all the companys assets are distributed to its creditors under a single system of distribution.
The position of the judgment debtor in such a case would be protected by the principle that the English court would only enforce a judgment in a case like this where to do so was consistent with justice and United Kingdom public policy.
All would depend upon the facts of the particular case.
In the case of Rubin, there would be no injustice in enforcing the judgment against the appellants.
Lord Mance notes at para 189 that I do not define either the circumstances in which a foreign court should be recognised as having jurisdiction to entertain bankruptcy proceedings or the factors which would make it unjust or contrary to public policy to recognise an avoidance order made in such foreign proceedings.
As I see it, these are matters which would be worked out on a case by case basis in (as Lord Hoffmann put it in HIH at para 30) co operating with the courts in the country of the principal liquidation to ensure that all the companys assets are distributed to its creditors under a single system of distribution.
It would not be irrelevant that the debtor under the avoidance order had not submitted.
All would depend upon the particular circumstances of the case, including the reasons why the debtor had not submitted.
In essence, on the critical question, I prefer the reasoning of the Court of Appeal, which is contained in the judgment of Ward LJ, with whom Wilson LJ and Henderson J agreed.
Lord Collins has concisely summarised their reasoning in paras 88 to 90, substantially as follows: (a) the judgment was final and conclusive, and for definite sums of money, and on the face of the orders was a judgment in personam; (b) it was common ground that the judgment debtors were not present when the proceedings were instituted, and did not submit to the jurisdiction, and so at first blush had an impregnable defence; (c) Cambridge Gas decided that the bankruptcy order with which it was concerned was neither in personam nor in rem, and its purpose was simply to establish a mechanism of collective execution against the property of the debtor by creditors whose rights were admitted or established: Pattni v Ali [2007] 2 AC 85, para 23; (d) bankruptcy was a collective proceeding to enforce rights and not to establish them: Cambridge Gas [2007] 1 AC 508, para 15; (e) the issue was whether avoidance proceedings which could only be brought by the representative of the bankrupt were to be characterised as part of the bankruptcy proceedings, ie part of the collective proceeding to enforce rights and not to establish them; (f) the adversary proceedings were part and parcel of the Chapter 11 proceedings; (g) the ordinary rules for enforcing foreign judgments in personam did not apply to bankruptcy proceedings; (h) avoidance mechanisms were integral to and central to the collective nature of bankruptcy and were not merely incidental procedural matters; (i) the process of collection of assets will include the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme: HIH [2008] 1 WLR 852, para 19; (j) the judgment of the US Bankruptcy Court was a judgment in, and for the purposes of, the collective enforcement regime of the insolvency proceedings, and was governed by the sui generis private international law rules relating to insolvency; (k) that was a desirable development of the common law founded on the principles of modified universalism, and did not require the court to enforce anything that it could not do, mutatis mutandis, in a domestic context; (l) there was a principle of private international law that bankruptcy should be unitary and universal, and there should be a unitary insolvency proceeding in the court of the bankrupts domicile which receives worldwide recognition and should apply universally to all the bankrupts assets; (m) there was a further principle that recognition carried with it the active assistance of the court which included assistance by doing whatever the English court could do in the case of a domestic insolvency; (n) there was no unfairness to the appellants in upholding the judgment because they were fully aware of the proceedings, and after taking advice chose not to participate: see [2011] Ch 133, paras 38, 41, 43, 45, 48, 50, 61 62 and 64.
That seems to me to be a correct summary of the views of the Court of Appeal.
I agree with those views subject to this comment on point (c).
I am not sure that in Cambridge Gas the Privy Council decided that the bankruptcy order with which it was concerned was neither in personam nor in rem.
It held that the purpose of the order was simply to establish a mechanism of collective execution against the property of the debtor by creditors whose rights were admitted or established.
As discussed above, it may well have appreciated that it was also an order in rem.
However that may be, I agree with Lord Collins at para 90 that, in short, the Court of Appeal accepted that the judgment sought to be enforced in the instant cases was an in personam judgment, but decided that the Dicey Rule did not apply to foreign judgments in avoidance proceedings because they were central to the collective enforcement regime in insolvency and were governed by special rules.
I agree with the reasoning of the Court of Appeal.
Put another way, the Dicey Rule should in my opinion be modified to include a fifth case in which a foreign court has jurisdiction to give a judgment in personam capable of enforcement or recognition as against the person against whom it is given.
That fifth case would be if the judgment was given in avoidance proceedings as part of foreign bankruptcy proceedings which the foreign court had jurisdiction to entertain.
I recognise that there are other ways of achieving such a result, as for example by an equivalent provision to the EC Insolvency Regulation: per Lord Collins at paras 99 101.
I also recognise that it would be possible to adopt a more radical approach not limited to avoidance proceedings.
However, so limited, I respectfully disagree with the view expressed by Lord Collins at para 128 that this development would not be an incremental development of existing principles but a radical departure from substantially settled law.
For the reasons given in para 198, it would in essence be an application of the principle of modified universalism.
It seems to me that in these days of global commerce, the step taken by the Court of Appeal was but a small step forward.
Judgment debtors are protected by the principle that no order would be made if it were contrary to justice or United Kingdom public policy.
Moreover, on the facts here, I can see no basis upon which the order made by the Court of Appeal would be either unjust or contrary to public policy.
Finally, I do not think that that conclusion is undermined by any absence of reciprocity.
For these reasons, I would dismiss the appeal in the Rubin case on the common law point.
On all other issues I agree with the judgment of Lord Collins.
| UK-Abs | The two appeals concern whether, and if so, in what circumstances, an order or judgment of a foreign court in proceedings to set aside prior transactions, such as preferences or transactions at an undervalue (avoidance proceedings), will be recognised and enforced in England and Wales.
The appeals also raise the question of whether enforcement may be effected through the international assistance provision of the UNCITRAL Model Law implemented by the Cross Border Insolvency Regulations 2006, which apply generally, or the assistance provisions of s.426 of the Insolvency Act 1986 (the Insolvency Act), which applies to a limited number of countries, including Australia.
In Rubin a judgment of the US Federal Bankruptcy Court for the Southern District of New York in default of appearance for around US$10m in respect of fraudulent conveyances and transfer was enforced in England at common law.
In New Cap, bound by the prior decision in Rubin, a default judgment of the New South Wales Supreme Court for about US$8m in respect of unfair preferences under Australian law was enforced under the Foreign Judgments (Reciprocal Enforcement) Act 1933 (1933 Act) and, alternatively, pursuant to the Insolvency Act.
In both appeals the parties against whom the judgments were made were neither present in the foreign country nor had they submitted to the jurisdiction.
Since both judgments were in personam, the essential issue was whether the existing principles were applicable or whether the Court should adopt separate rules for judgments in personam in avoidance proceedings, where the judgments were central to the purposes of the insolvency proceedings or part of the mechanism of collective execution.
The Supreme Court by a majority of 4:1 (Lord Clarke dissenting) allowed the appeal in Rubin holding that there should not be special rules for avoidance judgments but dismissed the appeal in New Cap on the ground that the Syndicate submitted to the jurisdiction of the Australian Court.
Lord Collins gave the leading judgement.
Broadly, under both the common law and the 1933 Act, a foreign court has jurisdiction to give a judgment in personam capable of recognition and enforcement against the person whom the judgment was given if the person (i) was present in the foreign court when proceedings were instituted; (ii) was a claimant, or counterclaimed, in the foreign proceedings; (iii) submitted to the jurisdiction of the foreign
court by voluntarily appearing in the proceedings; or (iv) agreed to submit to the jurisdiction of the foreign court before the commencement of the proceedings.
As a matter of policy, the Court did not agree that, in the interests of the universality of bankruptcy and similar procedures, there should be a more liberal rule for judgments given in foreign insolvency proceedings for the avoidance of transactions. [115] A different rule for avoidance proceedings would mean courts would have to develop two aspects of jurisdiction: a requisite nexus between the insolvency and the foreign court and a requisite nexus between the judgment debtor and the foreign court. [117] Such a change would not be an incremental development of existing principles but a radical departure from substantially settled law, and more suitable for the legislature than judicial innovation.
The restricted scope of the existing rules reflects the fact that there is no expectation of reciprocity on the part of foreign countries. [128 29] Expanding the principal would also be detrimental to United Kingdom businesses without any corresponding benefit. [130] Nor would any serious injustice result from adhering to the traditional rule.
There were several other avenues open to officeholders.
Rubin, for example, could have been founded on proceedings by trustees in England for the benefit of creditors under an express trust, and avoidance claims by the liquidator of an Australian company may be the subject of a request by the Australian court under the Insolvency Act. [131] Lord Collins (with the agreement of Lord Walker and Lord Sumption) held that the earlier Privy Council decision in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 was wrongly decided as there was no basis for the recognition of the US Bankruptcy order in the Isle of Mann in that case. [132] Whilst agreeing it was distinguishable, Lord Mance reserved judgment on whether it was wrongly decided. [178] As for enforcement under the Cross Border Insolvency Regulations 2006, there was nothing expressly or by implication in the UNICTRAL Model Law that applied to the recognition or enforcement of foreign judgments against third parties. [142 44] In relation to New Cap, Lord Collins concluded that the Syndicate had submitted to the jurisdiction of Australia having chosen to prove in New Caps Australian insolvency proceedings.
It should not be allowed to benefit from the insolvency proceeding in this way without the burden of complying with orders made in that proceeding. [156 167] In these circumstances, the 1933 Act would apply to the Australian judgment and enforcement should be by way of registration under the 1933 Act rather than by the common law.
In view of the conclusion that the Syndicate submitted to the Australian jurisdiction, the issue of enforcement under the Insolvency Act did not arise.
However, Lord Collins expressed the opinion that the relevant subsections of the Insolvency Act were not concerned with enforcement of judgements having examined their construction and the statutory history. [152 154] Lord Clarke dissented on the Rubin appeal.
He relied on the principle that avoidance orders made by a foreign courts in bankruptcy proceedings (personal or corporate), which the court has jurisdiction to entertain, were enforceable if it could fairly be said to have been made in personam or in rem. [193] It was possible to have a rem order incidental to bankruptcy proceedings but which is enforceable at common law, provided that the bankruptcy court has jurisdiction in the bankruptcy [195 6].
Avoidance orders are central to bankruptcy proceedings.
To allow for their enforcement was in keeping with the principle of modified universalism requiring English courts, so far as is consistent with justice and UK public policy, to co operate with the courts in the country of the principal liquidation to ensure a companys assets are distributed to the creditors under a single system of distribution [199].
This would be worked out on a case by case basis depending on the facts of the particular case. [200 1]
|
Biometric data such as DNA samples, DNA profiles and fingerprints is of enormous value in the detection of crime.
It sometimes enables the police to solve crimes of considerable antiquity.
There can be no doubt that a national database containing the data of the entire population would lead to the conviction of persons who would otherwise escape justice.
But such a database would be controversial.
It is not permitted by our law.
Parliament has, however, allowed the taking and retention of data from certain persons.
The questions raised by these appeals are whose data may be retained and for how long.
originally enacted, provided: Section 64 of the Police and Criminal Evidence Act 1984 (PACE), as (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
Section 64(1A) of PACE was enacted by section 82 of the Criminal Justice
and Police Act 2001.
It is still in force.
It provides: (1A) Where(a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
It will be seen at once that section 64(1A) does not specify any time limit for the retention of the data or any procedure to regulate its destruction.
These are matters which are addressed in guidelines issued by the Association of Chief Police Officers (the ACPO guidelines) entitled Exceptional Case Procedure for Removal of DNA, Fingerprints and PNC Records and published on 16 March 2006.
So far as is material, these provide: it is important that national consistency is achieved when considering the removal of such records.
Chief Officers have the discretion to authorise the deletion of any specific data entry on the [Police National Database] owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases.
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
In R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) the claimants sought judicial review of the retention by the police of their fingerprints and DNA samples on the grounds inter alia that it was incompatible with article 8 of the European Convention on Human Rights (ECHR).
The majority of the House of Lords held that the retention did not constitute an interference with the claimants article 8 rights, but they unanimously held that any interference was justified under article 8(2).
The ECtHR disagreed: see its decision in S and Marper v United Kingdom (2008) 48 EHRR 1169 (Marper ECtHR).
In considering whether retention of data in accordance with the ACPO guidelines was proportionate and struck a fair balance between the competing public and private interests, the court said at para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be takenand retainedfrom a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court concluded at para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
On 16 December 2008, the Secretary of the State for the Home Department announced the Governments preliminary response to the ECtHR decision.
The data of children under the age of 10 would be removed from the database immediately and the Government would issue a White Paper and consult on bringing greater flexibility and fairness into the system by stepping down some individuals over timea differentiated approach, possibly based on age, or on risk, or on the nature of the offences involved.
The White Paper, Keeping the Right People on the DNA Database, was published on 7 May 2009.
It contained a series of proposals for the retention of data, the details of which are immaterial for present purposes.
On 28 July 2009, ACPOs Director of Information wrote to all chief constables (including the respondent Commissioner) saying that the final draft for publication of new guidelines was not expected to take effect until 2010 and that until that time the current retention policy on fingerprints and DNA remains unchanged.
On 11 November 2009, after the consultation period had ended, the Secretary of State made a written ministerial statement outlining a revised set of proposals.
Again, the details are not material.
It was decided to include these proposals in the Crime and Security Act 2010 (the 2010 Act) which had its first reading on 19 November 2009.
The 2010 Act received the Royal Assent on 8 April 2010, but the relevant provisions (sections 14, 22 and 23) have not been brought into effect.
Section 23 provides that the Secretary of State must make arrangements for a National DNA Database Strategy Board (Database Board) to oversee the operation of the National DNA Database (section 23(1)); the Database Board must issue guidance about the immediate destruction of DNA samples and DNA profiles which are or may be retained under PACE (section 23(2)); and any chief officer of a police force in England and Wales must act in accordance with any such guidance issued (section 23(3)).
The Coalition Government stated in the Queens Speech on 25 May 2010 that it intended to seek amendment of the 2010 Act by bringing forward legislative proposals (in Chapter 1 of Part 1 of the Protection of Freedoms Bill) along the lines of the Scottish system.
This system permits retention of data for no more than three years if the person is suspected (but not convicted) of certain sexual or violent offences, and permits an application to be made to a Sheriff by a Chief Constable for an extension of that period (for a further period of not more than two years, although successive applications may be made): see sections 18 and 18A of the Criminal Procedure (Scotland) Act 1995, as inserted by sections 83(2) and 104 of the Police, Public Order and Criminal Justice (Scotland) Act 2006.
GC and C issued proceedings for judicial review of the retention of their data on the grounds that, in the light of Marper ECtHR, its retention was incompatible with their article 8 rights.
Recognising that there was an irreconcilable conflict between Marper UK and Marper ECtHR and that the former decision was binding on it, the Divisional Court (Moses LJ and Wyn Williams J) dismissed both judicial review challenges on 16 July 2010 and in both cases granted a certificate pursuant to section 12 of the Administration of Justice Act 1969 that the cases were appropriate for a leapfrog appeal to the Supreme Court.
The facts of these two cases can be stated briefly.
On 20 December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day, he was released on police bail without charge.
Before the return date of 21 February 2008, he was informed that no further action would be taken.
On 23 March 2009, GCs solicitors requested the destruction of the DNA sample, DNA profile and fingerprints.
The Commissioner refused to do so on the grounds that there were no exceptional circumstances within the meaning of the ACPO guidelines.
On 17 March 2009, C was arrested on suspicion of rape, harassment and fraud.
His fingerprints and a DNA sample were taken.
He denied the allegations saying that they had been fabricated by his ex girlfriend and members of her family.
No further action was taken by the police in respect of the harassment and fraud allegations.
On 18 March 2009, he was charged with rape.
On 5 May 2009 at Woolwich Crown Court, the prosecution offered no evidence and C was acquitted.
C requested the destruction of the data and its deletion from the police database.
On 12 November and again on 2 February 2010, the Commissioner informed C that his case was not being treated as exceptional within the meaning of the ACPO guidelines and his request was refused.
The issue
It is common ground that, in the light of Marper ECtHR, the indefinite retention of the appellants data is an interference with their rights to respect for private life protected by article 8 of the ECHR which, for the reasons given by the ECtHR, is not justified under article 8(2).
It is agreed that Marper UK cannot stand.
The issue that arises on these appeals is what remedy the court should grant in these circumstances.
On behalf of C, Mr Fordham QC submits that the court should grant a declaration under section 8(1) of the Human Rights Act 1998 (HRA) that the retention of Cs biometric data is unlawful.
Section 8(1) provides that In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
He seeks no other relief.
On behalf of GC, Mr Cragg seeks an order quashing the ACPO guidelines and a reconsideration of the retention of GCs data within 28 days.
The primary submission of Lord Pannick QC (on behalf of the Commissioner of Police of the Metropolis) is that the correct remedy is to grant a declaration of incompatibility under section 4 of the HRA.
The primary submission of Mr Eadie QC (on behalf of the Secretary of State) is that, although there is no fundamental objection to a declaration of incompatibility, it is not necessary to grant one.
The arguments in support of a declaration of incompatibility
Section 6 of the HRA provides: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
In summary, Lord Pannick and Mr Eadie say that it is not possible to read or give effect to section 64(1A) of PACE in a way which is consistent with Marper ECtHR.
They accept that section 64(1A) confers a discretionary power on the police to retain the data obtained from a suspect in connection with the investigation of an offence.
That is why they concede that section 6(2)(a) of the HRA is not in play.
But they say that it is a power which, save in exceptional circumstances, must be exercised so as to retain the data indefinitely in all cases.
Section 64(1A) cannot, therefore, be read or given effect so as to permit the power to be exercised proportionately in the way described in Marper ECtHR.
The hands of the police are tied by section 64(1A) and that position is faithfully reflected in the ACPO guidelines.
Two arguments are advanced in support of this submission.
The first (and principal) argument is that to interpret section 64(1A) as requiring police authorities to comply with article 8 would defeat the statutory purpose of establishing a scheme for the protection of the public interest free from the limits and protections required by article 8.
It would rewrite the statutory provision in a manner inconsistent with a fundamental feature of the legislative scheme which is that, instead of being destroyed, data taken from all suspects shall be retained indefinitely.
It is this feature of the scheme which leads Lord Rodger to invoke authorities such as Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
Parliament intended that the discretion conferred by section 64(1A) should be exercised to promote the statutory policy and object that data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
Accordingly, any exercise of the discretion conferred by section 64(1A) which does not meet this statutory policy and object would frustrate the intention of Parliament.
The second argument is that the nature of the changes to the ACPO guidelines that would be required in order to make them compatible with the ECHR is such that, for reasons of institutional competence and democratic accountability, these should be left to Parliament to make.
The choice of compatible scheme involves a difficult and sensitive balancing of the interests of the general community against the rights of the individual and a number of different schemes would be compatible.
Neither the police nor the court (in the event of a judicial review challenge to the scheme devised by the police) is equipped to make the necessary policy choices.
Thus, for example, only Parliament is constitutionally and institutionally competent to decide whether to adopt the Scottish model in preference to the 2010 Act model.
Discussion
The first argument
This argument is based on the premise that it was the intention of Parliament that, save in exceptional cases, the data taken from all suspects in connection with the investigation of an offence should be retained indefinitely.
It goes without saying that, if that premise is correct, section 64(1A) of PACE can only be interpreted as conferring a discretion which must be exercised so as to give effect to that intention.
The conclusion necessarily follows from the premise.
On that hypothesis, a purposive interpretation of the statute inevitably leads to the conclusion that the first argument is correct.
But I do not accept the premise.
It is uncontroversial that Parliament intended (i) to abrogate section 64(1) of PACE and remove the obligation to destroy data as soon as practicable after the conclusion of the proceedings if the suspect is cleared of the offence; (ii) to create a scheme for the retention of the data taken from a suspect, whether or not he is cleared of the offence and whether or not he is even prosecuted; and (iii) that the data was to be retained so that it might be used for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came (to use the language of section 64(1A)).
I shall refer to these purposes as the statutory purposes.
It is also clear that, in order to promote the statutory purposes, Parliament must have intended that an extended, even a greatly extended, database should be created.
But in my view that is as far as it goes.
To argue from the premise that Parliament intended that a greatly extended database should be created to the conclusion that it intended that, save in exceptional circumstances, the data should be retained indefinitely in all cases is a non sequitur.
Parliament did not prescribe the essential elements of the scheme by which the statutory purposes were to be promoted.
That task was entrusted to the police, no doubt with the assistance of the Secretary of State.
If it had been intended to require a scheme whose essential elements included an obligation that, save in exceptional circumstances, the data lawfully obtained from all suspects should be retained indefinitely, that could easily have been expressly stated in the statute.
If that had been intended, surely section 64(1A) would have said in terms that, save in exceptional circumstances, the fingerprints and samples taken shall in every case be retained indefinitely after they have fulfilled the purpose for which they were taken.
This would have been the obvious way of expressing that intention.
The grant of an apparently unfettered discretion (signalled by the unqualified use of the word may) was certainly not the obvious way of expressing that intention.
The natural meaning of the word may is permissive, not mandatory.
As I have said, it is clear that Parliament intended to get rid of the requirement to destroy data after it has served its immediate purpose and to permit the retention of data in order to fulfil the statutory purposes.
But the statute is silent as to how the statutory purposes are to be fulfilled.
There is no reason to suppose that Parliament must have intended that this should be achieved in a disproportionate way so as to be incompatible with the ECHR.
Lord Rodger suggests that Mr Fordhams argument entails the proposition that under section 64(1A) the police were free to do what they liked and that the subsection contains nothing to delimit the exercise of their discretion.
I agree that, if this is the effect of Mr Fordhams argument, it would cast doubt as to its correctness.
But section 64(1A) clearly delimits the exercise of the discretion.
It must be exercised to enable the data to be used for the statutory purposes.
I would add that the discretion must be exercised in a way which is proportionate and rationally connected to the achievement of these purposes.
Thus, for example, the police could not exercise the power to retain the data only of those suspected of minor offences; or only of serious offences of a particular type; or only of suspects of a certain age or gender; or only for a short period.
But it is possible to exercise the discretion in a rational and proportionate manner which respects and fulfils the statutory purpose and does not involve the indefinite retention of data taken from all suspects, regardless of their age and the nature of the alleged offence.
The Commissioner and the Secretary of State assert that a fundamental feature (possibly the fundamental feature) of section 64(1A) is that data should be retained for use from all suspects indefinitely.
But, although expressed in different words, this is the same as the premise argument that I have already rejected.
For the reasons I have given for rejecting that argument, it is not possible to extract this fundamental feature from the statute, whether one looks at its language alone or in the context of the mischief which it was intended to cure.
In my view, the fundamental feature of section 64(1A) is that it gives the police the power to retain and use data from suspects for the stated statutory purposes of preventing crime, investigation of offences and the conduct of prosecutions.
But that does not justify a blanket or disproportionate practice.
Neither indefinite retention nor indiscriminate retention can properly be said to be fundamental features of section 64(1A).
As I have said, following the judgment of the ECtHR the Secretary of State for the Home Department took steps to take the DNA of children under the age of 10 off the database.
If the meaning of section 64(1A) is that, save in exceptional cases, there is a duty to retain samples taken from all suspects indefinitely, then surely this amendment to the ACPO guidelines was ultra vires section 64(1A).
That is not, however, suggested by Lord Pannick or Mr Eadie.
It seems to me that, once it is accepted that section 64(1A) permits a scheme which does not insist on the indefinite retention of data in all cases, then the extreme position advocated by the Commissioner and the Secretary of State cannot be maintained.
So what did Parliament intend if it was not a scheme of indefinite retention in all cases? The obvious answer is a proportionate scheme which gives effect to the statutory purposes and is compatible with the ECHR.
The fact that it is possible to create a number of different schemes all of which would meet these criteria does not matter.
Section 64(1A) gives a power.
Powers can often be lawfully exercised in different ways.
The Commissioner and the Secretary of State seek support for the first argument from two sources.
The first is the Explanatory Notes to the 2001 Act which explained at para 210: An additional measure has been included to allow all fingerprints and DNA samples lawfully taken from suspects during the course of an investigation to be retained and used for the purposes of prevention and detection of crime and the prosecution of offences.
This arises from the decisions of the Court of Appeal (Criminal Division) in R v Weir and R v B (Attorney General's Reference No 3/199) May 2000.
These raised the issue of whether the law relating to the retention and use of DNA samples on acquittal should be changed.
In these two cases compelling DNA evidence that linked one suspect to a rape and the other to a murder could not be used and neither could be convicted.
This was because at the time the matches were made both defendants had either been acquitted or a decision made not to proceed with the offences for which the DNA profiles were taken.
Currently section 64 of PACE specifies that where a person is not prosecuted or is acquitted of the offence the sample must be destroyed and the information derived from it can not be used.
The subsequent decision of the House of Lords overturned the ruling of the Court of Appeal.
The House of Lords ruled that where a DNA sample fell to be destroyed but had not been, although section 64 of PACE prohibited its use in the investigation of any other offence, it did not make evidence obtained as a failure to comply with that prohibition inadmissible, but left it to the discretion of the trial judge.
The Act removes the requirement of destruction and provides that fingerprints and samples lawfully taken on suspicion of involvement in an offence or under the Terrorism Act can be used in the investigation of other offences.
This new measure will bring the provisions of PACE for dealing with fingerprint and DNA evidence in line with other forms of evidence.
But this does not advance matters.
It shows that Parliament intended to remove the requirement of destruction of data and that fingerprints and samples lawfully taken on suspicion of involvement in an offence . can be used in the investigation of other offences.
But that sheds no light on whether it was intended that there should be a policy of blanket indefinite retention.
The Commissioner and the Secretary of State draw attention to the words an additional measure has been included to allow all [data]to be retained (emphasis added).
But in my view this is an insufficient foundation on which to base a conclusion that the true meaning of section 64(1A) is that, save in exceptional circumstances, biometric data must be retained indefinitely in all cases.
Even if all means all data taken from all suspects, the Explanatory Notes do not say that data must be retained in all cases, still less do they say anything about how long the data must or may be kept.
There is no indication in the Notes that Parliament intended all material to be kept indefinitely even if it was not necessary to do so in an individual case within the meaning of article 8(2) of the ECHR.
The second source is certain passages in speeches of the House of Lords in Marper UK.
The issue there was whether section 64(1A) and the ACPO guidelines were compatible with article 8 and 14 of the ECHR: see para 6 of the speech of Lord Steyn.
At para 2, Lord Steyn said: But as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable.
But that is a statement at a high level of generality.
Lord Steyn was not purporting to define the statutory purpose with any precision.
At para 39 Lord Steyn addressed the submission on behalf of the appellants that the legislative aim (of assisting in the investigation of crimes in the future) could be achieved by less intrusive means.
He considered the conclusion of Sedley LJ in the Court of Appeal that the degree of suspicion should be considered in individual cases before a decision was made whether or not to retain the data.
He rejected this suggestion saying: this would not confer the benefits of a greatly expanded database and would involve the police in interminable and invidious disputes (subject to judicial review of individual decisions) about offences of which the individual had been acquitted.
I have already accepted that Parliament intended that the exercise of the section 64(1A) power should lead to a greatly expanded database and that Lord Steyn was rejecting the idea that the scheme contemplated by section 64(1A) should involve assessment of the degree of suspicion on a case by case basis.
But he was not saying that, subject to exceptional circumstances, section 64(1A) required the introduction of a scheme under which the data taken from all suspects would be retained indefinitely, since any other interpretation would undermine the statutory purpose.
At para 78, Lady Hale said that the whole community (as well as the individuals whose samples are collected) benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
That is undoubtedly true.
But the system included the ACPO guidelines.
It was, therefore, not contentious that the system was designed to catch and retain as many samples as possible.
Moreover, leaving ECHR issues aside, section 64(1A) does allow the collection and retention of as many samples as possible.
Lady Hale was not, however, saying that section 64(1A) required the collection and retention of as many samples as possible.
Similarly, at para 88 Lord Brown said that the benefits of the larger database brought about by the now impugned amendment to PACE were manifest.
The more complete the database, the better the chance of detecting criminals and of deterring future crime.
But here too, Lord Brown was not considering the question whether section 64(1A) conferred a power which, save in exceptional circumstances, could only be exercised by requiring the retention of the data taken from all suspects indefinitely.
The question whether, leaving ECHR issues aside, section 64(1A) required the retention of the data taken from all suspects indefinitely was not in issue in Marper UK.
The focus of the argument in Marper UK was on whether section 64(1A) and the ACPO guidelines were compatible with the ECHR.
In particular, it was on whether article 8(1) was engaged and whether the ACPO scheme was justified under article 8(2).
The context of the observations relied on to support the first argument was the practice of the police, save in exceptional cases, to retain all data indefinitely.
There was no debate on whether, if article 8(1) was engaged and the ACPO guidelines could not be justified under article 8(2), section 64(1A) could be read and given effect in a way compatible with the ECHR.
So I reject the submission that Marper UK provides support for the submission that underpins the first argument, namely that it was the intention of Parliament that, save in exceptional cases, the data of all suspects should be retained indefinitely.
In my view, section 64(1A) permits a policy which (i) is less far reaching than the ACPO guidelines; (ii) is compatible with article 8 of the ECHR; and (iii) nevertheless, promotes the statutory purposes.
Those purposes can be achieved by a proportionate scheme.
It is possible to read and give effect to section 64(1A) in a way which is compatible with the ECHR and section 6(2)(b) of the HRA cannot be invoked to defeat the claim that the ACPO guidelines are unlawful by reason of section 6(1) of the HRA.
For the reasons that I have given, to interpret section 64(1A) compatibly with article 8 does not impermissibly cross the line where, to use the words of Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 28, it would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation.
This conclusion is consistent with the decision in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410.
The claimant was employed by an agency providing staff for schools.
The agency required her to apply under section 115(1) of the Police Act 1997 for an enhanced criminal record certificate giving the prescribed details of every relevant matter relating to her which was recorded in central records, since she was a prospective employee who was being considered for a position involving regularly being involved with persons under the age of 18.
Section 115(7) provided that, before issuing a certificate, the Secretary of State shall request the chief police officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate.
The Commissioner of Police of the Metropolis disclosed certain information about the claimant which was included in the certificate.
She sought judicial review of the decision to disclose the information on the ground that her article 8 rights had been violated.
On behalf of the Secretary of State, it was submitted that the words any information and ought to be included in section 115(7) showed that Parliament intended widespread disclosure of relevant material and a narrow exception.
This interpretation was supported by the protective purpose of the legislation: see p 416G.
That was the practice under the relevant police guidelines.
It is true that there was no issue in that case about section 6(2) of the HRA.
That is why the analogy cannot be pressed too far.
But in essence it was being argued in the context of article 8(2) of the ECHR that it was a fundamental feature of the Police Act 1997 that all relevant information could (and should) be disclosed in a criminal record certificate, since anything less would defeat the fundamental protective purpose of the statute.
These submissions are similar to those advanced in the present case.
But they were rejected.
Despite the protective purpose of the legislation and the use of the word any, at para 44, Lord Hope said that the words ought to be included should be read and given effect in a way that was compatible with the applicants article 8 rights.
At para 81, Lord Neuberger MR adopted a broad interpretation of section 115(7)(b) and said that, in deciding whether the information ought to be included, there would be a number of different, sometimes competing, factors to weigh up.
For all these reasons, I would reject the first argument advanced on behalf of the Commissioner and the Secretary of State.
The second argument
The second argument is that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police (with or without the assistance of the Secretary of State) subject only to the judicial review jurisdiction of the court.
It is said that the creation of guidelines for the exercise of the section 64(1A) power is a matter for Parliament alone and that it could not have been intended that section 64(1A) should grant a broad discretion to the police such as is contended for by Mr Fordham.
This is because the context involves high policy, balancing the public interest in the effective detection, prosecution and prevention of crime against individual freedoms.
It is a matter of political controversy, as evidenced by the different policy solutions of the previous and present Government.
There are choices to be made between a variety of compatible legislative schemes.
These choices are for Parliament alone.
The police are in no position, constitutionally or institutionally, to choose between them.
It is important to note the scope of this argument.
It is not that Parliament could not have granted the police a discretionary power to retain data otherwise than on a blanket indefinite basis.
If it had wished to grant such a power to the police, Parliament obviously could have done so.
Rather, the argument is that the constitutional and institutional limits on the competence of the police are such that Parliament could not have intended to grant such a power to them.
I cannot accept this argument.
No question of constitutional competence arises here.
Parliament is entitled to give the police the power to create a scheme.
No doubt it would have envisaged that a national scheme would be produced such as the ACPO guidelines.
The Secretary of State is accountable to Parliament for the scheme so that the democratic principle is preserved.
There are circumstances in which institutional competence is a factor in the courts deciding the extent to which it should pay deference to a decision of the executive and allow a discretionary area of judgment.
But we are not concerned with the courts judicial review jurisdiction in the present context.
We are concerned with a question of statutory interpretation.
There is no reason in principle why the police (together with the Secretary of State) should be less well equipped than Parliament to create guidelines for the exercise of the section 64(1A) power.
In creating a proportionate scheme, they have to strike a balance.
That is inherent in any exercise of this kind, whether it is performed by the executive or Parliament.
The police guidelines that were in play in L were not the product of work by Parliament.
Policy and guidance documents of this kind, often in areas of acute sensitivity, are frequently created by the executive.
Provided that they fulfil the purposes of the enabling statute, they are valid and enforceable.
In my view, the fact that difficult decisions would have to be made in producing guidelines for the exercise of the section 64(1A) power is not a sufficient reason for concluding that Parliament could not have intended to give the power to produce them to the police and the Secretary of State.
What relief, if any, should be granted?
The Biometric Data
In deciding what relief to grant, it is important to have regard to the present state of play.
As previously stated, Chapter 1 of Part 1 of the Protection of Freedoms Bill includes proposals along the lines of the Scottish model.
The history of the varying responses to Marper ECtHR shows that it is not certain that it will be enacted.
But we were told by Mr Eadie that it is the present intention of the Government to bring the legislation into force later this year.
In shaping the appropriate relief in the present case, I consider that it is right to proceed on the basis that this is likely to happen, although not certain to do so.
In these circumstances, in my view it is appropriate to grant a declaration that the present ACPO guidelines (amended as they have been to exclude children under the age of 10), are unlawful because, as clearly demonstrated by Marper ECtHR, they are incompatible with the ECHR.
It is important that, in such an important and sensitive area as the retention of biometric data by the police, the court reflects its decision by making a formal order to declare what it considers to be the true legal position.
But it is not necessary to go further.
Section 8(1) of the HRA gives the court a wide discretion to grant such relief or remedy within its powers as it considers just and appropriate.
Since Parliament is already seised of the matter, it is neither just nor appropriate to make an order requiring a change in the legislative scheme within a specific period.
The ECtHR has recently decided that, where one of its judgments raises issues of general public importance and sensitivity, in respect of which the national authorities enjoy a discretionary area of judgment, it may be appropriate to leave the national legislature a reasonable period of time to address those issues: see Greens and MT v United Kingdom (Application Nos 60041/08 and 60054/08) (ECtHR, 23 November 2010) at paras 113 115.
This is an obviously sensible approach.
The legislature must be allowed a reasonable time in which to produce a lawful solution to a difficult problem.
Nor would it be just or appropriate to make an order for the destruction of data which it is possible (to put it no higher) it will be lawful to retain under the scheme which Parliament produces.
In these circumstances, the only order that should be made is to grant a declaration that the present ACPO guidelines (as amended) are unlawful.
If Parliament does not produce revised guidelines within a reasonable time, then the appellants will be able to seek judicial review of the continuing retention of their data under the unlawful ACPO guidelines and their claims will be likely to succeed.
The Photographs of GC
Mr Cragg raises a discrete issue about the photographs that were taken of GC when he was arrested.
Section 64A of PACE confers a power to take, use and retain photographs of arrested persons who are not subsequently convicted of the offence for which they were arrested.
In the application for judicial review, the issue of whether the retention of the photographs violated GCs article 8 rights was mentioned in what Moses LJ described as a passing reference in the claim form and in paragraph 20 of the grounds.
At para 43, Moses LJ said: the issues of justification for their retention cannot now properly be considered where the Commissioner has had no opportunity to give evidence as to justification.
Lord Pannick submits that, in view of the manner in which the issue was raised in the Divisional Court, the consequent absence of any evidence as to justification and the absence of any substantive judgment on the issue from the Divisional Court, the Supreme Court should express no opinion on this part of the appeal, but leave the matter to be determined if and when the point is properly raised in another case.
I accept these submissions.
I should also mention that Mr Fordham raises a discrete point about information held on the Police National Computer about C.
This was the subject of two agreed issues which were dealt with by the Divisional Court at paras 24 26 and 46 47 of the judgment of Moses LJ.
It is common ground that the retention of this information raises no separate issues from those raised by the retention of Cs DNA material and his fingerprints.
Conclusion
For the reasons that I have given, I would allow the appeals and grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
I would grant no other relief.
I agree with the judgment of Lord Dyson.
I have, however, a little that
LORD PHILLIPS
would add to his reasoning.
Section 3 of the Human Rights Act 1998 (the HRA) requires this Court, in so far as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
Sometimes this results in the Court according to a statutory provision a meaning that conflicts with the natural meaning of a statutory provision see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557.
In summarising the effect of that decision in Sheldrake v Director of Public Prosecutions [2004] UKHL 43; [2005] 1 AC 264, para 28 Lord Bingham of Cornhill stated that the interpretative obligation under section 3 was very strong and far reaching and might require the court to depart from the legislative intention of Parliament.
This is not a case where the HRA requires the Court to accord to a statutory provision a meaning which it does not naturally bear.
There is no difficulty in giving section 64(1A) of PACE, set out in para 3 of Lord Dysons judgment (section 64(1A)), an interpretation which is compatible with article 8 of the Convention, as interpreted by the Strasbourg Court in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The section gives a discretionary power to the police to retain samples taken from a person in connection with the investigation of an offence.
Section 3 of the HRA imposes a duty on the police, as a public authority, in so far as it is possible to do so, to give effect to the power conferred on them in a way which is compatible with Convention rights.
There is nothing in the wording of section 64(1A), giving it its natural meaning, which either requires or permits the police to exercise the power conferred on them in a manner which is incompatible with article 8.
In order to hold that section 64(1A) is incompatible with the Convention it is thus necessary to identify some matter, extrinsic to the wording of the section itself, that compels one to interpret the section as either requiring or permitting the police to exercise the power conferred on them in a manner incompatible with article 8.
Such a matter needs to be extraordinarily cogent in order to overcome the effect of section 3 of the HRA.
I have not been able to identify any such matter.
In R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] UKHL 39; [2004] 1 WLR 2196 the House of Lords held, wrongly as the Strasbourg Court was to rule, that in so far as section 64(1A) interfered with article 8 rights the interference was justified under article 8(2).
In so far as Parliament considered the matter when enacting section 64(1A) it is likely to have taken the same view.
Parliament may well have considered that the Convention did not require any restriction to be placed on the exercise of the power conferred by section 64 (1A).
It does not follow, however, that Parliament must be presumed to have intended that, if the Convention did require the power to be exercised subject to constraints, the police should none the less be required, or permitted, to disregard those constraints.
The effect of section 64(1A) was to reverse the requirement of the previous section 64 of PACE that fingerprints and samples should be destroyed when a suspect was cleared of an offence.
The purpose of this reversal was plainly that the police should be permitted to establish a database of such material obtained from those suspected of criminal activity.
I see no basis for concluding, however, that Parliament intended that the establishment and maintenance of this database should be untrammelled by any requirements that might be imposed by the Convention.
While those requirements limit the circumstances in which material can be retained by application of the familiar test of proportionality, they do not prohibit the maintenance of a database that satisfies that test.
Had Parliament foreseen that the Convention required restrictions on the power conferred by section 64(1A) the likelihood is that Parliament, guided by the executive, would itself have wished to define those restrictions rather than leaving them to be determined by executive action.
That can be deduced from the fact that Parliaments reaction to Strasbourgs ruling in S and Marper (2008) 48 EHRR 1169 was to pass amending legislation and that the present Government intends to introduce an amending Bill.
I do not consider, however, that it follows from this that one must interpret section 64(1A) as requiring the police to exercise the power conferred by that section in a manner which infringes the requirements of the Convention, or even as permitting the police to disregard those requirements.
For these additional reasons I can see no warrant for making a declaration of incompatibility, convenient though this might be, and concur in the order proposed by Lord Dyson.
LADY HALE
Whether and in what circumstances the police should be able to keep the DNA samples and profiles, fingerprints and photographs of people who have been arrested but not convicted is a deeply controversial question.
The Government is promoting the Protection of Freedoms Bill which will adopt in England and Wales the present system in Scotland.
This allows retention only for a limited period and in respect of certain crimes.
It reflects a strong popular sentiment that the police should not be keeping such sensitive material relating to innocent people, even if they are only allowed to use it for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution (Police and Criminal Evidence Act 1984, section 64(1A), as substituted by the Criminal Justice and Police Act 2001, section 82).
If the popular press is any guide to public opinion, the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169 is one which captures the public mood in Britain much more successfully than many of its other decisions.
Among the arguments marshalled against retaining the data are these: (a) The agencies of the state cannot be trusted to use such information only for the permitted purposes, nor can the state be trusted not to enlarge those purposes in future.
DNA samples, in particular, might be put to many more controversial uses should the state feel so inclined. (b) Serious bodies have cast doubt upon the usefulness of retaining it even for the permitted purposes.
Both the Human Genetics Commission (Nothing to hide, nothing to fear? Balancing individual rights and the public interest in the governance and use of the national DNA Database, November 2009) and the Nuffield Council on Bioethics (The forensic use of bioinformation: ethical issues, September 2007) suggest that the value of casting the net so wide has not yet been proved. (c) The Equality and Human Rights Commission argue, in their intervention in this case, that the premise on which such data are kept, that people who are arrested are more likely than the general population to be involved in future offending, is unsustainable. (d) Liberty point out, in their intervention, that certain sections of the population, in particular men and people from the black and minority ethnic communities, run a disproportionate risk of arrest and therefore of having their data taken and kept.
This is a detriment with a discriminatory impact. (e) The detriment is the stigma, certainly felt and possibly perceived by others, involved in having ones data on the database.
This stigma, together with wider concerns about potential misuse, is sufficient to outweigh the benefits in the detection and prosecution of crime.
Among the arguments marshalled in favour of retaining the data are these: (a) Those of a more trusting nature find it difficult to imagine that there is a serious risk that the agencies of the state will indeed misuse this information for more sinister purposes.
The risk would in any event be much reduced if DNA samples were destroyed and only profiles, fingerprints and photographs retained. (b) As to their usefulness, the Chief Constable of the West Midlands gave evidence on 22 March 2011 to the House of Commons Public Bill Committee hearing on the Protection of Freedoms Bill that between 2 and 3 per cent of the 36,000 hits on the database would be lost if the proposals in the Bill became law.
These may only be a small proportion of the total, but among the 1000 or so crimes which would not be solved some would be very serious. (c) It is not clear that the underlying premise is indeed that people who have been arrested but not charged or convicted are more likely than the general population to commit crimes.
After all, the Act also allows the police to keep data they have collected from people who have never been arrested, provided that they consent.
The reality is that arrest gives the police the opportunity compulsorily to collect the data: it is not the reason why they do so. (d) The discriminatory impact of disproportionate arrest rates among male and black and minority ethnic members of the population could as logically be addressed by compiling a national database of everyone, rather than by restricting it to people involved in the criminal justice system.
There is now a proliferation of national databases holding data on large sections of the population which data can be put to far more detrimental uses than this. (e) Any stigma felt or perceived is irrational, at least if the information is used for its permitted purposes.
A person who might otherwise have been among the usual suspects arrested for a crime may be eliminated before he even gets to the police station.
A person who is rightly arrested, prosecuted and convicted because a match is found does not deserve our sympathy.
We should be concentrating on the quality of the scientific evidence as to sampling and matching rather than on the feelings of those whose samples have been kept.
The feelings of the victims of crime are at least as important as the feelings of the criminals.
They too have a human right to have their physical and mental integrity protected by the law, and it is in this context that DNA evidence, in particular, has proved most useful.
We are not called upon to resolve that debate in this case.
It is common ground that the decision of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) cannot stand in the light of the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169.
The only question is what we should do about it in this case.
This is, as I understand it, a question governed by legal principle and the Human Rights Act 1998 and not by our particular preferences for how the United Kingdom should solve the problem.
There are three broad options open to the court: (i) We could decide, in the light of the individual facts of the cases before us, whether the retention of data in each case is compatible with the appellants Convention rights.
If it is not, we could make declarations to that effect and even mandatory orders for the deletion and destruction of the data involved. (ii) We could declare that the current ACPO guidelines, approved in Marper UK, are unlawful, without determining what would be lawful in the cases before us. (iii) We could declare that section 64(1A) of PACE is incompatible with the Convention rights, thus leaving the current guidelines in place and everything done under them lawful until Parliament enacts a replacement either by primary legislation or under the fast track remedial procedure laid down in section 10 of the Human Rights Act.
The choice between (i) or (ii), on the one hand, and (iii), on the other hand, depends upon the difficult and important question (see Lord Mance in Doherty v Birmingham City Council [2008] UKHL 57, [2009] 1 AC 367, para 141) of the meaning and scope of section 6(2)(b) of the Human Rights Act.
This, rather than the policy debate outlined above, is the important issue in this case.
If it is resolved in favour of (i) or (ii) and against (iii), then the choice between (i) and (ii) depends upon what the court considers a just and appropriate remedy under section 8(1) of the 1998 Act.
I should say at once that on both issues I agree with the conclusions reached by Lord Dyson.
Under section 6(1) of the Act, it is unlawful for a public authority to act in a way which is incompatible with a Convention right.
But the sovereignty of Parliament requires that exceptions be made for certain things which are done pursuant to an Act of the United Kingdom Parliament.
As the annotations to the Act (by Peter Duffy QC and Paul Stanley) in Current Law Statutes explain, the exceptions are all designed to prevent section 6 being used to circumvent the general principle of the Act embodied in sections 3(2)(b) and 4(6)(a), that incompatible primary legislation shall remain fully effective unless and until repealed or modified.
In that event, the most that the court can do is make a declaration under section 4(2) that the Act is incompatible and leave it to Parliament to decide what, if anything, to do about it.
It follows, however, that the exceptions must be read along with section 3(1).
Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.
This obligation is laid upon everyone, not just upon the courts.
Two exceptions to the general rule in section 6(1) are provided by section 6(2).
Section 6(2)(a) has presented little difficulty: it provides that subsection (1) does not apply if as the result of one or more provisions of primary legislation, the authority could not have acted differently.
This covers situations where the public authority was required by an incompatible Act of Parliament to do as it did (or perhaps where it had a choice between various courses of action, each of which was incompatible with the Convention rights).
Although section 6(2)(a) does not say so, it must be read subject to section 3(1).
So both the public authority and the courts, in deciding whether or not the authority could have acted differently, will have first to decide whether the Act of Parliament can be read or given effect in a way which is compatible rather than incompatible with the Convention rights.
If the Act can be read compatibly, then it follows that the authority could have acted differently and will have no defence if it has acted incompatibly.
Section 6(2)(b) makes the link with section 3(1) explicit, but has caused much more difficulty in practice.
It provides that section 6(1) does not apply to an act (or failure to act) if in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
So the first question is always whether the primary legislation can be read or given effect in a compatible way.
If it can, that is an end of the matter: see Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441, paras 93 to 103.
In that case, both the provision requiring the court to make a possession order in respect of a demoted tenancy and the provision empowering the local authority to seek one could be read and given effect in a compatible way.
This bears out the prediction by Beatson and others, in Human Rights: Judicial Protection in the United Kingdom (2008), para 6 23, that cases where legislation cannot be read down under section 3 are likely to be rare.
However, if the legislation cannot be so read or given effect, the second question is whether the public authority was acting so as to give effect to or enforce it.
As to this, it is possible to detect some differences of opinion among the judges.
Some have taken the view that the fact that there may be choices involved in whether or not to give effect to or enforce the incompatible provision makes no difference: the authority was acting so as to give effect to or enforce it.
Others, most notably Lord Mance in Doherty, would draw a distinction between the court, which might have no choice but to give effect to an incompatible provision, and the public authority bringing the proceedings, which could choose whether or not to do so and should be guided by Convention values when making its decisions.
Fortunately, we do not have to resolve that debate.
This case is about the first question: can section 64(1A) be read and given effect compatibly with the Convention rights? In my view it clearly can.
This is for two principal reasons.
The first relates to the requirement to read that is, interpret statutory language compatibly with the Convention rights.
In this case, to say that section 64(1A) cannot be so read involves reading may be retained as must be retained, save in exceptional circumstances.
This would be doing the reverse of what section 3(1) requires.
In other words, it would be reading into words which can be read compatibly with the Convention rights a meaning which is incompatible with those rights.
It would be giving the broad discretion provided in section 64(1A) an unnatural or strained meaning to require it to be given effect in an incompatible way.
That view is reinforced by the fact that it was the clear intention of Parliament to legislate compatibly rather than incompatibly with the Convention rights.
Section 64(1A) was introduced into PACE by section 82 of the Criminal Justice and Police Act 2001.
When the Bill which became that Act was introduced into Parliament, it was prefaced by the ministerial statement required by section 19(1)(a) of the Human Rights Act.
The Home Secretary, Mr Straw, stated that In my view the provisions of the Criminal Justice and Police Bill are compatible with the Convention rights.
He was not alone in that view.
After all, the House of Lords in Marper UK unanimously took the view that section 64(1A) was compatible with the Convention rights.
But this does not suggest to me that Parliaments intention was that the apparent discretion which it conferred should inevitably be read incompatibly with the Convention rights should that view later prove to be unfounded.
Quite the reverse.
The second relates to the requirement in section 3(1) that legislation be given effect compatibly with the Convention rights.
As Lord Rodger emphasised in Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, para 107, section 3(1) contains not one, but two, obligations.
In retrospect, that is what the Court of Appeal had in mind in the case which became In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10, [2002] 2 AC 291: that the courts power to make a care order giving the local authority enhanced (that is, determinative) parental responsibility for a child should be given effect in such a way as to prevent the local authority exercising that responsibility incompatibly with the Convention rights of either the child or his parents.
Also in retrospect, one can see that the proper remedy for incompatible actions by the local authority is a free standing action under section 7(1)(a) of the Human Rights Act, rather than by the care court adopting powers which contradicted the cardinal principle of the separation of powers between court and local authority in care proceedings.
In re S is the strongest case in favour of the position adopted by the Chief Constable and the Secretary of State in this case.
They have to argue that, despite ostensibly giving the police a discretion, the cardinal principle was, not that data may be kept, but that they must be kept.
The ACPO guidelines could say only one thing.
Further, they must argue that that principle is so fundamental to the legislative purpose that only Parliament can modify it if it turns out that those guidelines are incompatible with the Convention rights.
I can readily accept that it may be desirable for Parliament rather than the Association of Chief Police Officers to put something in its place.
But I cannot see how it was possible for the discretion conferred by section 64(1A) to be exercised in accordance with ACPO guidelines when it was first enacted but it is not possible for it to be so exercised now.
In other words, if it was possible to read and give effect to section 64(1A) by means of ACPO guidelines when it was first enacted, it must be possible to do so now.
And ACPO as a public authority has to act compatibly with the Convention rights.
For these reasons, therefore, section 64(1A) is not incompatible with the Convention rights and cannot be so declared.
However, the need for a consistent national approach must be relevant to the choice between remedy (i) and remedy (ii).
The court is empowered by section 8(1) to grant such relief or remedy in relation to an unlawful act as it considers just and appropriate.
There would be nothing to stop ACPO promulgating some new and Convention compliant guidelines.
Now that Marper UK has been overruled, they clearly should set about doing so unless Parliament does it for them within a reasonably short time.
But I certainly accept that the system will not work if different police forces adopt different policies.
So it would not be appropriate (such a flexible word) for this court to make mandatory decisions in individual cases unless and until it becomes clear that neither ACPO or Parliament is prepared to make the difficult choices involved.
I therefore agree that we should declare the current guidelines unlawful but grant no further relief.
LORD JUDGE
I agree with the reasoning and conclusions of the majority of the members of the Court.
In deference to the contrary views I shall add some brief words of my own.
The insertion of section 64(1A) in the Police and Criminal Evidence Act 1984 (the 1984 Act) by section 82 of the Criminal Justice and Police Act 2001 resulted in the promulgation of the Retention Guidelines for Nominal Records on the Police National Computer (the ACPO Guidelines) 2006.
Thereafter in England and Wales the retention of biometric data (DNA samples) was governed by these guidelines which derived their authority from section 64(1A).
The judicial examination of these provisions in England and Wales culminated in a decision of the House of Lords in R (S and Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 that the retention of DNA samples did not constitute an interference with the rights granted by article 8 of the European Convention of Human Rights, or if it did, that the interference was modest and proportionate.
The Grand Chamber of the European Court of Human Rights disagreed, and concluded that the system created by the ACPO Guidelines constituted an interference with article 8 rights. (S v United Kingdom (2008) 48 EHRR 1169).
Taking account of the decision and applying its reasoning we are all agreed that the decision of the House of Lords should no longer be treated as authoritative.
Therefore these appeals must be allowed.
The forensic battle is directed at the consequences which should now flow.
The starting point is the reasoning of the Grand Chamber which identified the way in which different member states addressed the retention issue, and acknowledged that even following acquittal, it was permissible, subject to specific limitations within the domestic arrangements, for DNA samples to be retained.
What however was required of any arrangements for retention was an approach which discriminated between different kinds of cases and for the application of strictly defined storage periods for data, even in more serious cases.
Attention was drawn to the position in Scotland where the legislative arrangements permitted the retention of the DNA of unconvicted individuals, limited in the case of adults to those charged with violent or sexual offences and even then, for three years only, with the possibility of an extension for a further two years with judicial agreement.
These arrangements were not criticised.
Indeed the court acknowledged that the retention of DNA profiles represented the legitimate purpose of assisting in the identification of future offenders.
In short the existence of the legislative provisions for the retention of DNA samples was endorsed, but criticism was directed at the blanket and indiscriminate nature of the power of retention found in the ACPO Guidelines.
Accordingly nothing in the judgment of the Court leads to the conclusion that a different, less all encompassing scheme deriving its authority from section 64(1A) would contravene article 8, or that the law in relation to DNA samples should revert to the former wide ranging prohibition against the retention of samples of any kind which was the striking feature of section 64 of the 1984 Act as originally enacted.
Rather the judgement confirmed that legislative arrangements may provide for the retention of the DNA samples of those acquitted of criminal offences.
That is what section 64(1A), reversing the provisions of section 64, permits.
In these circumstances it was open to ACPO to reconsider and amend the guidelines (as indeed, at least in part, it did) in the light of the decision of the European Court, and it would be open to ACPO to do so in the light of the decision of this court.
Section 64(1A) does not preclude an amendment to the Guidelines which addresses the criticisms.
In other words, although the process of further amendment to the arrangements for the retention of DNA samples in England and Wales has been and continues to be addressed through legislation, this was not and is not the only way to provide for the protection of article 8 rights against the current scheme for their indiscriminate retention.
In my judgment section 64(1A) is Convention compliant, whereas the ACPO Guidelines in their present form are not.
Accordingly, the retention of the DNA samples of these appellants was unlawful, but a declaration of incompatibility would be inappropriate.
LORD KERR
Lord Rodger and Lord Brown in powerfully reasoned judgments, which I initially found persuasive, have concluded that section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE) had as its purpose the institution of a scheme for the indefinite retention of biometric data taken from all suspects (with very limited exceptions) in connection with the investigation of offences.
On that account they found that, despite the seemingly permissive language of the subsection, the Association of Chief Police Officers (ACPO), to whom the task of drawing up guidelines for the implementation of section 64(1A) had been entrusted, were obliged to ensure that, instead of being destroyed as previously required by section 64(1) of PACE, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
If indefinite retention of data was indeed section 64(1A)s unmistakable purpose, I would have readily agreed that the discretion that samples may be retained after they have fulfilled the purposes for which they were taken would have to be exercised so as to give effect to that intention.
That, as Lord Rodger has said, would be the inevitable consequence of the application of the principle for which Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 is the seminal authority: that a discretion conferred with the intention that it should be used to promote the policy and objects of the Act can only be validly exercised in a manner that will advance that policy and those objects.
More pertinently, the discretion may not be exercised in a way that would frustrate the legislations objectives.
Everything therefore depends on what one decides is the true intention or purpose of the legislation.
This is not as easy a question to answer as the simple formulation, what was the purpose of the legislation, suggests.
As Lord Brown has pointed out in para 145 of his judgment, the search for the purpose of a particular item of legislation may have to follow a number of avenues and may require consideration of several aspects of the enactment what is the grain of the legislation, what its underlying thrust etc.
An important factor in the conclusion on this critical question which Lord Rodger has identified is the fact that Parliament clearly saw the need for retreat from the position that had hitherto obtained under section 64(1) and (3) of PACE as originally enacted.
Those subsections were in these terms: (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken.
As Lord Rodger has pointed out, the decision of the House of Lords in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 brought to the attention of the public and Parliament the effect of these provisions.
Potentially useful evidence was not being used for reasons that, as Lord Steyn put it, were contrary to good sense (p 118).
No doubt reaction to the experience in that case contributed to Parliaments decision to enact section 64(1A) but did it, as Lord Rodger has concluded, lead to Parliaments resolve that samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database? In my judgment, and largely for the reasons given by Lord Dyson, it did not.
In the first place, if that was Parliaments intention it chose a curious way to achieve it.
A simple, unambiguous provision to that effect would not have been difficult to devise.
And if the purpose of the legislation was to obtain a blanket, universally applied (apart from exceptional cases) policy, why would Parliament have left the practicalities of implementing the policy to ACPO? The drafting of the provision at a level of generality surely suggests that Parliament intended a measure of flexibility to be a feature of its application.
This is unsurprising.
The history of evolving knowledge as to the use to which DNA evidence could be put provided the clearest possible reasons not to adopt over prescriptive rules that might impede its full exploitation in circumstances unforeseen at the time of their enactment.
Just as it was judged, in retrospect, to be unwise to have an immutable requirement to destroy all samples from certain categories of suspects and defendants, so also it would be unwise to substitute that obligation with a blanket requirement to retain all samples.
Various members of the Appellate Committee of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 described the benefits that can flow from the maintenance of an expanded database for DNA samples and I am in respectful agreement with all that Lord Steyn, Lady Hale and Lord Brown had to say on this subject in that case.
But I do not consider that it necessarily follows that an inflexible policy requiring retention of virtually every sample taken from suspects and defendants is needed in order to have a viable and worthwhile resource.
Whatever view one takes of the competing policy arguments on this issue, however, it is, to my mind, quite clear that Parliament did not intend that this was the only way in which the legislation could be implemented.
Not only does section 64(1A) use the permissive may in relation to the retention of samples but subsection (3) is retained in its original state, albeit that it may now be disapplied in a variety of circumstances outlined in section 64(3AA) to (3AD).
This seems to me clearly to indicate recognition that there should be limits on the retention of samples but, not surprisingly, Parliament did not attempt to forecast comprehensively what those limits should be.
The structure of the new section 64 is strongly suggestive of an intention to devise a scheme that would respond to developments in this field, not least any view that might be taken as to the human rights implications that might come to be recognised.
As Lord Dyson has put it, Parliaments intention must be taken to have been to create a proportionate scheme which is compatible with ECHR.
There is nothing to impel the conclusion that Parliament intended that the scheme could not adapt to whatever the compatibility requirements were found to be.
On the contrary, there is every reason to suppose that Parliament intended that the scheme could be adapted to meet those requirements as and when they became apparent.
What the Commissioner and the Secretary of States argument resolves to is that, in interpreting section 64, we should recognise that an underlying, not expressly articulated, purpose was that the samples had to be retained indefinitely, regardless of the circumstances in which they were taken or of the circumstances of the individual from whom they had been taken.
There is nothing in the language of the section itself that compels such an exclusive interpretation.
Indeed, as Lord Phillips has pointed out, acceptance of this argument would involve reading more into section 64(1A) than its ordinary language conveys.
ACPOs guidelines were an essential complement to the statutory scheme.
Those guidelines have been altered (in relation to children under 10) as a result of the decision of the Grand Chamber in S and Marper v United Kingdom (2008) 48 EHRR 1169.
There is no lawful impediment to ACPO devising and implementing guidelines that take full account of the other features which Strasbourg has decreed are necessary for the operation of the scheme to be Convention compliant.
Classifications (as to which categories of offences or individuals should require retention of samples) and long stop provisions (as to the period that they should be retained) are well within the institutional reach of ACPO.
So also are the circumstances in which exceptions to the guidelines can be permitted.
ACPO chose the exceptionality criteria.
They may equally change those criteria.
And because there is no legal impediment in them doing so, then under section 6 of HRA, they or Parliament must.
Section 6(2)(b) can only come into play if ACPO cannot act.
If it can, then it must.
Because Parliamentary change is imminent, however, and because significant policy issues need to be considered, it is not unreasonable to leave this to Parliament.
I therefore agree with the order proposed by Lord Dyson.
I also agree with all that Lord Dyson has had to say on the argument that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police subject only to the judicial review jurisdiction of the court.
As he has said, the scope of the argument is confined.
It is to the effect that, although it could have done so if it had considered it appropriate, Parliament must be taken not to have intended to grant such a power because of the constitutional and institutional limits on the competence of the police.
But Parliament does not appear to have felt such qualms in giving the initial responsibility for the devising of guidelines to ACPO and, as Lord Dyson has pointed out, no question of constitutional competence arises.
Finally, I agree with Lord Dysons conclusion on the discrete issue of GCs photographs.
DISSENTING JUDGMENTS ON THE APPROPRIATE RELIEF
LORD RODGER
In September 1984 Sir Alec Jeffreys made his ground breaking discovery of DNA fingerprints.
A few weeks later, on 31 October, the Police and Criminal Evidence Act 1984 (PACE) was enacted.
Within a few years Sir Alecs discovery was being used routinely in the criminal courts in this country.
Section 64(1) of PACE, as originally enacted in ignorance of this major development that lay just ahead, provided: If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings.
In January 1997 an unidentified intruder raped and assaulted a woman in her home in London.
Swabs were taken from her and were found to contain semen.
A DNA profile was obtained from the semen and placed on the national DNA database.
In January 1998 a man was arrested for an unrelated offence of burglary.
A saliva sample was taken from him and a DNA profile was derived from it.
In August of the same year the man was acquitted of the burglary and, by virtue of section 64(1) of PACE, his sample should have been destroyed.
In fact, however, his profile was left on the DNA database and in October a match was made between this profile and the DNA profile derived from the semen in the swabs taken from the woman who had been raped in January 1997.
The man was arrested and a DNA profile was obtained from a hair plucked from him.
As was to be expected, this profile also matched the DNA derived from the semen.
At his trial for the rape the judge held, however, that, since the material which had led to his identification should have been destroyed as required by section 64(1), the evidence relating to the profile from the plucked hair was not admissible.
The man was acquitted.
The Attorney General referred the matter to the Court of Appeal who agreed with the judge but referred the point to the House of Lords.
In Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 the House reversed the Court of Appeal.
The speech of Lord Steyn, with which the other members of the appellate committee agreed, was notable for his observation, at p 118, that the austere interpretation of the Court of Appeal produced results which were contrary to good sense.
For present purposes, that case is important because it alerted the public and politicians to the fact that the obligation under section 64(1) of PACE to destroy samples if the suspect was acquitted meant that evidence which might lead to the detection and prosecution of the perpetrators of other crimes would be lost.
Just a few weeks after their Lordships decision, in the course of the second reading debate on the Criminal Justice and Police Bill, the Home Secretary introduced Part IV of the Bill which, he explained, was designed, inter alia, to amend section 64(1) of PACE to prevent evidence being lost in this way.
The Home Secretary referred to Lord Steyns speech as demonstrating the need for the change: Hansard (HC Debates), 29 January 2001, col 42.
This history shows beyond doubt that Parliaments purpose in enacting section 82 of the Criminal Justice and Police Act 2001, which inserted section 64(1A) into PACE, was to ensure that, in future, instead of being destroyed, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database.
This would protect the public by facilitating the detection and prosecution of the perpetrators of crimes.
Section 64(1A) provides: (1A) Where (a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
After this provision came into force, in accordance with guidelines from the Association of Chief Police Officers (ACPO) the police proceeded to retain data indefinitely and so to build up their DNA database of samples and profiles obtained from people who had been suspected of crimes, even if they had not been prosecuted or had been acquitted.
In due course in two appeals to the House of Lords this system was challenged as being in violation of the suspects article 8 Convention rights: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
In the leading speech Lord Steyn said, at p 2198E F, para 2, that as a matter of policy it is a high priority that police forces should expand the use of [DNA] evidence where possible and practicable.
He went on to refer to public disquiet that the obligation to destroy samples under the unamended section 64(1) of PACE had sometimes enabled defendants who had in all likelihood committed grave crimes to walk free.
Baroness Hale of Richmond observed, at p 2219G H, para 78, that The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced.
In the light of such considerations the House of Lords held unanimously that the system did not violate the appellants article 8 Convention rights.
To Strasbourg, however, the matter appeared differently.
In S v United Kingdom (2008) 48 EHRR 1169 the Grand Chamber first held unanimously and contrary to the majority view in the House of Lords that the English system did indeed involve an interference with suspects article 8 rights.
Then, when considering the proportionality of that interference, the court observed, at pp 1200 1201, para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
The court went on to conclude, at p 1202, para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society.
In response to the European Courts judgment the last Parliament passed the Crime and Security Act 2010, section 14 of which was designed to amend section 64 of PACE with a view to establishing a regime for the retention and destruction of DNA material and profiles that would be compatible with article 8 as interpreted by the European Court.
The new Government, which came into office in May 2010, decided, however, not to commence this legislation Instead, in Chapter 1 of Part 1 of the Protection of Freedoms Bill, it has put fresh legislative proposals, along similar lines to the legislation in Scotland, before Parliament.
There were indications in the European Courts judgment that a system along those lines would indeed be compatible with article 8.
As in the earlier legislation, the complex proposals include provision for a National DNA Database Strategy Board to oversee the operation of the DNA database.
Obviously, in the light of the European Courts judgment the indefinite retention of the data relating to the appellants under the existing system is incompatible with their article 8 rights.
The decision of the House of Lords to the contrary in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 must accordingly be overruled.
That is accepted by the respondent, the Metropolitan Police Commissioner, and by the Home Secretary, who has intervened in the proceedings.
Where the Commissioner and the Home Secretary part company with the appellants is as to the order, if any, which the court should pronounce in these circumstances.
In effect, for the appellant C Mr Fordham QC argued that section 64(1A) is worded (may be retained) so as to give the Commissioner and chief constables an open discretion as to whether data should be retained and, if so, for how long and subject to what conditions.
The position was therefore quite straightforward.
By virtue of section 6(1) of the Human Rights Act 1998 the Commissioner and chief constables were obliged to exercise that discretion so as to establish and maintain a system for the retention of samples and data that would comply with suspects article 8 Convention rights as they are now to be interpreted in the light of the decision of the European Court.
It was unlawful for them not to do so.
Mr Fordham indicated that he would be content for the court to pronounce a declaration to this effect, without making any order for the removal of the data relating to his client.
While adopting the bulk of Mr Fordhams submissions, on behalf of the appellant GC, Mr Cragg asked the court to go further and indicate that in his case the position should be put right within 28 days.
Mr Fordhams argument is, of course, unanswerable if he is right to say that the crucial words (may be retained) in section 64(1A) confer a wide indeed open discretion on the Commissioner and the chief constables whose forces retain the samples and data that make up the national DNA database.
If that is correct, then, even though, when section 64(1A) came into force, ACPO issued guidelines requiring that subject to a narrow exception all the DNA samples and data relating to suspects should be retained indefinitely, the Association could with equal propriety have issued completely different guidelines which would have resulted in a system that did not provide for the indefinite retention of the samples and data.
On that interpretation, any credit for the creation of the present DNA database is to be accorded to ACPO for choosing, of its own freewill, to issue the guidelines which it did.
More particularly, since ACPO had been, and still was, free to adopt other completely different guidelines, ACPO could now issue fresh guidelines which would produce a system that was compatible with the European Courts judgment.
The key question, therefore, is whether Mr Fordhams construction of section 64(1A) as conferring this wide discretion on the police is correct.
On behalf of the Commissioner Lord Pannick QC argued that it is not.
He drew attention to the context, which I have already described, in which Parliament enacted section 64(1A).
This showed that Parliament had set out to cure the mischief that the original version of section 64(1) of PACE meant that suspects samples and data were removed from the database even although as Attorney Generals Reference (No 3 of 1999) demonstrated the retention of that material could potentially result in the detection and prosecution of serious criminals.
Parliament plainly intended that in future this material should be retained on the DNA database indefinitely.
In other words, under section 64(1A) the police had to retain it indefinitely.
Mr Fordham said, rhetorically, that, if this were correct, then the Home Secretary could have brought proceedings against the police if they had failed to retain the material indefinitely.
Accepting the challenge, Mr Eadie QC said that, while the matter would probably have been sorted out in a different way, if necessary, such proceedings could indeed have been brought.
It is useful to notice just how far reaching Mr Fordhams argument is: essentially, under section 64(1A) the police were free to do what they liked.
On his approach the provision contained nothing to delimit the exercise of their discretion.
When listening to his argument, at times I felt that unconsciously, of course he was intent on pulling down one of the most important bulwarks which our predecessors so painstakingly erected against arbitrary acts of the executive.
In Car Owners Mutual Insurance Co Ltd v Treasurer of the Commonwealth of Australia [1970] AC 527, 537E F, Lord Wilberforce observed that in a statutory framework it is impossible to conceive of a discretion not controlled by any standard or consideration stated, or to be elicited from, the terms of the Act.
He was, of course, reflecting the thinking in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 where Lord Reid had said, at p 1030B D, that Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act, the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court.
Following that classic authority, in my view the power which was conferred on the police by section 64(1A) had to be exercised in accord with the policy and objects of that enactment.
As I have explained, the policy and objects of Parliament in enacting section 64(1A) were plainly that DNA samples and data derived from suspects should be retained indefinitely so that a large and expanding database should be available to aid the detection and prosecution of the perpetrators of crimes.
The police were therefore bound to exercise the power given to them by section 64(1A) in order to promote that policy and those objects.
This meant, in effect, that, subject to possible very narrow exceptions (e g, those suspected of a crime which turned out not to be a crime at all), the police had to retain on their database the samples and profiles of all suspects.
In short, the police were under a duty to do so.
By a slightly different route this analysis reaches the same result as the older well known line of authority to the effect that, on the proper construction of a statute as a whole and in its context, it can sometimes be seen that a power granted to, say, an official, court or other body in the public interest must be regarded as having been coupled with an implied duty on the recipient to exercise the power in the circumstances envisaged for its exercise.
See, for instance, Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Attorney General v Antigua Times Ltd [1976] AC 16, 33F G, per Lord Fraser of Tullybelton.
In my view, therefore, given the policy and objects of the enactment, before the decision of the European Court the police could not have exercised their power under section 64(1A) by choosing to retain samples and data for, say, only three years (or any other period deliberately not prescribed in the legislation) and then destroying them.
Similarly, given the policy and objects of the enactment, the police could not have exercised the power to detain material indefinitely by choosing to delete material from those against whom, in their view, suspicion fell below some arbitrary level not recognised in the legislation.
Any such exercise of their power would have defeated, rather than promoted, the policy of the enactment and would therefore have been unlawful.
In the light of the European Courts decision, it can now be seen that the policy and objects of section 64(1A), to create a virtually comprehensive and expanding database of DNA profiles from suspects, violate the article 8 Convention rights of unconvicted suspects.
Given that the Protection of Freedoms Bill has been introduced into Parliament, there is good reason to believe that legislation will be passed in the foreseeable future to establish a new system.
The question in the present proceedings is whether in the meantime, by virtue of section 3(1) of the HRA or otherwise, the police must read and give effect to section 64(1A) in a way that is compatible with article 8 as interpreted by the European Court and whether they act unlawfully if they do not.
Since I reject Mr Fordhams argument that section 64(1A) gives the police an open discretion as to what to do, I also reject his further, seductive, argument that, having regard to section 6(1) of the HRA, they can and should simply exercise that discretion in such a way as to establish a lawful system that meets the requirements of the Strasbourg court for example, by choosing to retain samples and data for only three years, subject, perhaps, to a power in an independent body to extend the period for some further defined period (as under the Scottish legislation), or by only retaining the material from those suspected of certain classes of crimes, or by only retaining the material from those against whom there is a high degree of suspicion etc.
All of those suggested steps would have been inconsistent with the policy and objects of section 64(1A) as originally enacted.
So they could only be adopted now, in order to comply with the European Courts decision, if section 3(1) of the HRA makes that not only possible but indeed obligatory.
Section 3 provides: (1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.
The opening phrase in subsection (1) shows that there are limits to the duty which it imposes.
The words of Lord Nicholls of Birkenhead in In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, are a useful guide to where those limits lie: For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment.
This is especially so where the departure has important practical repercussions which the court is not equipped to evaluate.
In such a case the overall contextual setting may leave no scope for rendering the statutory provision Convention compliant by legitimate use of the process of interpretation.
Mr Fordham submitted that the fundamental feature of section 64(1A) was the retention of the material for the purposes of creating a DNA database, not the indefinite retention of the material with a view to establishing a virtually comprehensive database of DNA material from suspects.
In my view that submission is unrealistic.
The truth is that Parliament wanted to eliminate the danger, which existed under the pre existing legislation, that valuable evidence would be lost and potential prosecutions of the guilty based on the latest science would be jeopardised if material had to be removed from the database.
Providing for the material to be retained on the database indefinitely was therefore the fundamental feature of the amending legislation which inserted section 64(1A) into PACE.
That being so, section 3(1) of the HRA does not oblige or permit the courts or the police to read or give effect to section 64(1A) in a way that departs substantially from that fundamental feature.
And it is quite obvious that any reading of section 64(1A) which would be apt to obviate the defects identified in the existing system by the European Court would depart very substantially indeed from that fundamental feature of the provision would, indeed, contradict it.
It is therefore nothing to the point that, from a linguistic point of view, the provision might easily be read as though it said that samples may be retained, consistently with the suspects article 8 Convention rights.
The hypothetical additional words, though few in number, would have the effect, and would be intended to have the effect, of altering the provision so as, say, to limit the samples and data that were to be retained and the time for which they could be retained, and to impose a duty to remove them after that time and so to negate the defining feature of the legislation.
In other words, the court would have crossed the line from interpreting to amending the legislation.
Amending section 64(1A) in that way is something which only Parliament can do.
Parliament showed itself willing to pass amending legislation in the Crime and Security Act 2010.
The fact that the new Government decided not to commence that legislation, but chose to introduce a Bill providing for a different scheme shows that there is a range of possible ways to bring the system into line with the requirements of article 8 and room for doubt about which is the best policy to adopt.
This court is in no position to weigh the competing practical advantages and disadvantages of the possible solutions.
These are further features which confirm that the necessary changes require legislation and cannot be made by any legitimate interpretation, however extensive, under section 3(1): In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, per Lord Nicholls.
Section 64(1A) is therefore incompatible with suspects article 8 Convention rights and cannot be made compatible under section 3(1) of the HRA.
Section 3(2)(b) ensures that in these circumstances the continuing operation of section 64(1A) is unaffected.
Section 6(1) and (2) provide: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
Like sections 3(2) and 4(6), section 6(2) is concerned to preserve the primacy and legitimacy of primary legislation.
See Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, 556 557, para 19, per Lord Nicholls, cited with approval by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 51.
If that is correct and section 3(1) of the HRA cannot be invoked in the present case, then section 64(1A) continues to operate, and Parliament intends it to operate, in the same way as when enacted.
It therefore falls to be interpreted and applied just as when enacted.
It is accepted that section 6(2)(a) applies to cases where the legislation, which cannot be read compatibly with Convention rights, imposed a duty on a public authority to act in one particular way the authority could not have acted differently.
It follows, of course as Lord Hoffmann remarked in Hooper [2005] 1 WLR 1681, 1696, para 49 that, by contrast, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
Since the Convention non compliant provision continues to operate, any public authority which is exercising a power conferred by it must continue do so in a way that promotes the object and purposes for which the provision confers the power and these are, ex hypothesi, incompatible with Convention rights.
As Lord Hoffmann noted, section 6(2)(b) assumes, however, that under the relevant legislation the public authority could have acted in more than one way.
For example, it might be that a public authority could have adopted either of two schemes, A and B, both of which would have promoted the policy and objects of the legislation.
So it cannot be said that, when it chose to adopt scheme A, the public authority could not have acted differently.
Nevertheless, since, when it adopted scheme A, the authority was promoting the policy and objects of the primary legislation and so was acting to give effect to the legislation, section 6(2)(b) disapplies section 6(1) and ensures that the authority was acting lawfully.
In this way the primacy and legitimacy of the provision of primary legislation are preserved.
For all the reasons which I have set out, in the present case, in substance the police could really not have acted differently: in order to promote the object and purposes of section 64(1A) of PACE, they had to retain all the samples which they did, indefinitely.
If that is so, then what the police did, and continue to do, falls within section 6(2)(a) and is accordingly lawful.
Even if one assumes, however, that, while promoting the policy and objects of the legislation, the police could, for example, have recognised a slightly wider exception and so created a slightly different system, that does not matter.
The same goes if, while promoting the policy and objects of the legislation, the police could have chosen not to recognise even the very narrow exception which they did and could have decided to retain the samples and data relating to absolutely all suspects.
In either event, even though the police could have done something (slightly) different, by doing what they actually did and are still doing, they were acting and are continuing to act so as to give effect to section 64(1A).
Section 6(2)(b) of the HRA accordingly applies and so the police have at all times acted, and continue to act, lawfully.
In these circumstances section 64(1A) is incompatible with suspects article 8 Convention rights.
Even though Parliament and the Government have the matter under review, I consider that the better course is for this court to grant a declaration of incompatibility in terms of section 4(2) of the HRA.
Cf Bellinger v Bellinger [2003] 2 AC 467, 482, para 55, per Lord Nicholls.
I would accordingly allow the appeals to the extent of making a declaration that section 64(1A) of the Police and Criminal Evidence Act 1984 is incompatible with the article 8 Convention rights of suspects.
LORD BROWN
On 4 December 2008 the Grand Chamber of the ECtHR in S v UK (2008) 48 EHRR 1169 condemned on article 8 grounds the scheme for the indefinite retention of biometric data adopted in England and Wales pursuant to section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE).
The critical issue for decision on these appeals is whether, following that decision and pending the enactment by Government of a fresh legislative scheme compatible with article 8, the police have been acting unlawfully in continuing to operate the indefinite retention scheme.
That in turn depends upon whether section 64(1A) can or cannot be read or given effect in a way which is compatible with the Convention rights within the meaning of section 6(2)(b) of the Human Rights Act 1998 (the HRA).
Before turning to address this issue it is necessary to sketch out something of the background to the appeal and the circumstances in which the point now arises for decision.
These appellants are two amongst the 850,000 odd unconvicted persons whose profiles are kept on the national DNA database, their fingerprints and samples having been taken from them when they were arrested as suspects (from 2003, whether or not they were actually charged).
This database has built up following Parliaments introduction on 11 May 2001 of section 64(1A) of PACE in substitution for the original section 64(1) which had required the destruction of a suspects fingerprints and samples as soon as practicable after he was cleared.
Section 64(1A) provides so far as is material: Where . fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence . [they] may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
In 2004 this change in the law was unsuccessfully challenged, principally on article 8 grounds, all the way up to the House of Lords, by two complainants: S, an eleven year old boy with no previous convictions who had been acquitted of attempted robbery, and Mr Marper, a man of 38, also of good character, whose case was discontinued following his arrest on the charge of harassing his partner: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196.
Lady Hale alone amongst the Appellate Committee thought that the retention and storage of DNA profiles constituted an interference with the claimants rights under article 8.
But each member of the Committee, Lady Hale included, was quite clear that, even if it did, it was readily justifiable under article 8(2).
Lord Steyn described such evidence as having the inestimable value of cogency and objectivity (para 1) and said that as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable (para 2).
At para 3 he observed that: It can play a significant role in the elimination of the innocent, the correction of miscarriages of justice and the detection of the guilty.
At para 36 Lord Steyn dealt with a submission that retention is not in accordance with law (on the basis that a law which confers a discretion must indicate the scope of that discretion: Silver v United Kingdom (1983) 5 EHRR 347, 372, para 88): The discretion involved in the power to retain fingerprints and samples makes allowance for exceptional circumstances, eg where an undertaking to destroy the fingerprints or sample was given or where they should not have been taken in the first place, as revealed by subsequent malicious prosecution proceedings.
At para 38 Lord Steyn observed that the expansion of the database by the retention confers enormous advantages in the fight against serious crime and at para 39 he remarked upon the benefits of a greatly extended database.
Lord Rodger and Lord Carswell agreed with Lord Steyn.
Lady Hale agreed that retention and storage of DNA samples and profiles was readily justifiable for the reasons given by Lord Steyn and myself.
She added: The whole community, as well as the individuals whose samples are collected, benefits from there being as large a database as it is possible to have.
The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has.
The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. (para 78) I myself suggested (para 88): that the benefits of the larger database . are so manifest . that the cause of human rights generally (including the better protection of society against the scourge of crime which dreadfully afflicts the lives of so many of its victims) would inevitably be better served by the databases expansion than by its proposed contraction.
The more complete the database, the better the chance of detecting criminals, both those guilty of crimes past and those whose crimes are yet to be committed.
The better chance too of deterring from future crime those whose profiles are already on the database.
And I pointed out too that: The larger the database, the less call there will be to round up the usual suspects.
Instead, those amongst the usual suspects who are innocent will at once be exonerated.
These views notwithstanding, the Grand Chamber in Strasbourg, as already indicated, on the application of the same complainants, some four years later unanimously condemned the scheme as unjustifiable under article 8.
It is sufficient for present purposes to quote just three paragraphs from the Courts lengthy judgment: 119 . the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences.
The retention is not time limited; the material is retained indefinitely, whatever the nature or seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. 125 In conclusion, the Court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. 134 .
In accordance with article 46 of the Convention, it will be for the respondent State to implement, under the supervision of the Committee of Ministers, appropriate general and/or individual measures to fulfil its obligations to secure the rights of the applicants and other persons in their position to respect for their private life.
Before turning to the circumstances in which these particular appellants had their fingerprints and samples taken and the precise nature of the argument they advance on this appeal, it is convenient first to indicate something of the response to the Grand Chambers judgment, on the part both of the Government and of the police.
So far as the Government was concerned, the then Home Secretary in a Press Release on 16 December 2008 indicated that the Home Office would institute a consultation process but that meantime: The DNA of children under ten the age of criminal responsibility should no longer be held on the database.
There are around 70 such cases [we are told that there were in fact 96], and we will take immediate steps to take them off. (S and Mr Marpers data was also removed.)
On 7 May 2009 the Home Office published a White Paper, Keeping the Right People on the DNA Database, setting out certain key proposals for the future and inviting views upon them.
The White Paper also considered what should happen to the 850,000 odd profiles already on the national DNA database.
On 28 July 2009 ACPOs Director of Information wrote to all Chief Constables indicating that new guidelines were not expected to take effect until 2010 and that: Until that time, the current retention policy on fingerprints and DNA remains unchanged.
ACPO strongly advise that decisions to remove records should not be based on proposed changes.
It is therefore vitally important that any applications for removals of records should be considered against current legislation and the Retention Guidelines Exceptional Case Procedure .
Those Guidelines, which have remained essentially the same since section 64(1A) was introduced, provide: Chief Officers have the discretion to authorise the deletion of any specific data entry on the PNC owned by them.
They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry.
It is suggested that this discretion should only be exercised in exceptional cases .
Exceptional cases will by definition be rare.
They might include cases where the original arrest or sampling was found to be unlawful.
Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance.
On 11 November 2009, following the consultation period, the Home Secretary made a written Ministerial statement outlining a revised set of proposals for the retention of fingerprints and DNA data (Hansard (HC Debates), 11 November 2009, col 25WS).
It was originally intended to implement these by way of order making powers under the Policing and Crime Act 2009 but, following strong opposition to the introduction of a new scheme by secondary rather than primary legislation, the proposed new scheme was included in the Crime and Security Act 2010, introduced in the House of Commons on 19 November 2009 and receiving Royal Assent on 8 April 2010.
Following a change of government in May 2010, however, rather than bringing the Crime and Security Act into force, the incoming government instead announced its proposal for new legislation designed essentially to mirror the Scottish system and this finally, by the Protection of Freedoms Bill 2011, introduced in the House of Commons as recently as 11 February 2011, it has now set in train.
For reasons which will shortly become clear, it is unnecessary for the purposes of this judgment to indicate anything of the detailed nature of the various proposals which at one time or another have been considered for enactment in substitution for the existing scheme so as to achieve compatibility with article 8 pursuant to the Grand Chamber judgment.
It is sufficient to indicate that a wide range of differing schemes have been canvassed and considered and that arriving at the preferred solution has inevitably involved complex and sensitive choices.
It is similarly unnecessary to describe in any detail the facts of these appellants cases and the following brief summary will suffice.
GC is 41.
On 20 December 2007, following his girlfriends complaint that he had assaulted her (albeit without causing her injury), he voluntarily attended the police station and was arrested on suspicion of common assault.
He strongly denied the allegation, explaining rather that he had been defending himself against attack by her.
Following the taking of DNA samples, fingerprints and a photograph, GC was released on police bail without charge.
Before 21 February 2008, when he was due to surrender to his bail, GC was told that no further action would be taken against him.
GCs fingerprints (but not DNA) had in fact been taken previously and retained in connection with a firearms offence for which he had been sentenced at the Central Criminal Court on 18 February 1992 to seven years imprisonment.
C is 34, a man of good character.
On 17 March 2009 he was arrested on suspicion of rape, harassment and fraud following allegations made the previous day by a former girlfriend and members of her family, allegations which C strenuously denied.
The same day, Cs fingerprints and DNA samples were taken.
Although no further action was taken in relation to the alleged harassment and fraud, on 18 March 2009 C was charged with rape.
On 5 May 2009, however, the prosecution offered no evidence on the rape charge and C was accordingly acquitted.
Both appellants, through solicitors, applied to the respondent Police Commissioner to have their fingerprints and DNA data deleted from police records GC on 23 March 2009, C on 19 August 2009 (in each case, of course, after the Grand Chambers decision in S v UK).
Consistently with ACPOs guidelines, however, both applications were refused.
The appellants then issued judicial review proceedings, GC on 11 December 2009, C on 9 February 2010.
The applications were heard together by the Divisional Court (Moses LJ and Wyn Williams J) on 15 July 2010 and on 16 July 2010 were dismissed, the Divisional Court correctly holding itself bound by the decision of the House of Lords in S and Marper v Chief Constable of the South Yorkshire Police (the subsequent Grand Chamber decision notwithstanding).
The Divisional Court did, however, certify a point of law of general importance and, with the consent of all parties, granted a certificate pursuant to section 12 of the Administration of Justice Act 1969, thus enabling the matter to proceed directly to this court.
Before this court, Mr Fordham QC for C and Mr Cragg for GC both submit that, in the light of the Grand Chambers judgment, the earlier decision of the House of Lords can no longer stand and the existing scheme must now be recognised to be unlawful so much, indeed, is clear and conceded.
Pursuant to section 6 of the HRA, their argument then continues, the police must now therefore cease retaining their data incompatibly with their article 8 rights.
Instead, they submit, the police must take account of the various criticisms made by the Grand Chamber of the existing scheme, must devise a new, compatible scheme, and must then deal with these appellants requests (and any other outstanding or future requests) for the removal of information from the national DNA database this, indeed, in GCs case, within 28 days, contends Mr Cragg.
Not so, submit Lord Pannick QC for the Metropolitan Police Commissioner and Mr Eadie QC for the Home Secretary (properly joined in the proceedings as an interested party).
It is, they submit, for the government, not for the police, to devise and enact a new scheme; the police meantime have no alternative but to continue operating the existing scheme pursuant to section 64(1A) of PACE.
Their case is founded on section 6(2)(b) of the HRA which, they argue, disapplies section 6(1) and thus relieves the police of liability for continuing to operate what the Grand Chamber has ruled to be (in international law) an unlawful scheme.
The most the appellants are entitled to is a declaration of incompatibility pursuant to section 4 of the HRA.
As I indicated at the outset, this is the critical issue in the appeal and plainly it centres upon the proper understanding of, and interplay between, sections 3, 4 and 6 of the HRA which (as to their most material parts) I now set out: 3(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. 4(2) If the court is satisfied that [a provision of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility. 6(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. 6(2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
The precise symmetry between section 3(1) and section 6(2)(b) will at once be noted: each invites consideration of whether legislation can be read or given effect in a way which is [Convention] compatible section 3 indicating what must be done if this is possible, section 6(2)(b) indicating the consequence (the disapplication of section 6(1)) if it is not.
At first blush the respondents argument appears distinctly unpromising.
Section 64(1A) is, after all, couched in terms that appear to confer on the police an open discretion: samples may be retained.
On the face of it, therefore, the police appear to be in a position to act compatibly with the article 8 rights of those whose samples have been taken and this, indeed, even without resort to section 3.
But suppose there were some doubt about this, why would that not fall to be resolved by the interpretative imperative of section 3? How can it be appropriate, in the face of such a strong statutory direction, to place upon section 64(1A) a construction which denies the police the ability to exercise their data retention power compatibly? I confess to having come only comparatively late to the conclusion that, difficult though the respondents argument initially appears, it is in fact correct.
Section 6(2)(b) has long been recognised to give rise to difficulty at the margins see, for example, the judgments respectively of Lord Hope, Lord Walker and Lord Mance in Doherty v Birmingham City Council [2009] AC 367.
Clearly, as Lord Hoffmann observed in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 49, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3.
This, as was pointed out, was in contradistinction to section 6(2)(a) which applies when a public authority could not have acted differently when, in other words, the authority has been compelled by primary legislation to act in a way ex hypothesi incompatible with Convention rights.
Superficially, of course, the very assumption that a public authority could have acted differently appears to postulate that the power in question could therefore have been exercised compatibly with Convention rights.
Plainly, however, section 3 notwithstanding, it cannot follow that the power must therefore in all cases be exercised compatibly else section 6(2)(b) could never come into play.
A simple illustration of section 6(2)(b) in operation is, of course, where primary legislation confers a power on a public authority and where a decision to exercise that power (or, as the case may be, not to exercise it) would in every case inevitably give rise to an incompatibility.
R v Kansal (No 2) [2002] 2 AC 69 was just such a case and in such situations it can readily be understood why section 6(2)(b) applies.
Otherwise, instead of giving effect to a provision conferring a power, the public authority would have to treat the provision (in cases where not to exercise it would give rise to incompatibility) as if it imposed a duty or, in cases where any exercise of the power would give rise to incompatibility (as in Kansal (No 2) itself), would have to abstain from ever exercising the power.
In either instance, it is obvious, Parliaments will would be thwarted.
I would take this opportunity to resile from what I myself said in the latter part of para 118 of my own judgment in Hooper.
I was surely right to say in the first part of that paragraph: Plainly it is not the case that section 6(2)(b) applies whenever a statutory discretion falls to be exercised in a particular way to ensure compliance with a Convention right.
This occurs in a host of different situations and, so far as I am aware, no one has ever suggested that, had the discretion not been exercised compatibly, the public authority would nevertheless have been protected against a domestic law claim by the section 6(2)(b) defence on the basis that otherwise a power would be turned into a duty.
I was, however, wrong to suggest that the situation would be no different if to secure Convention compliance the statutory discretion had to be exercised in every case.
It now seems to me that the underlying question in all these cases indeed, the determinative question in every case lying between the two extremes I have thus far dealt with is: what essentially was Parliament intent on achieving by this legislation? Is it or is it not something which could realistically be achieved consistently with the observance of Convention rights? If it is, then it must be so construed and applied.
If, however, it is not, then section 6(2)(b) will apply: the legislation will be incompatible, a declaration of incompatibility may be made, and the public authority will be immune from liability.
In short, the question to be asked in deciding whether section 6(2)(b) applies is essentially the same question as is more usually asked under section 3 when deciding whether or not, by a strained construction of apparently incompatible legislation, it is possible to read and give effect to it compatibly with Convention rights.
Would such a construction depart substantially from a fundamental feature of the legislation? Would it be inconsistent with the underlying thrust of the legislation? Would it go with the grain of the legislation? Would it violate a cardinal principle of the legislation? Would it remove its pith and substance? Would it create an entirely different scheme? The Court must not cross the boundary from interpretation into legislation.
All these familiar concepts and phrases are to be found in the well known cases on section 3 but their importance has hitherto not perhaps been fully recognised in the context also of section 6(2)(b).
It is time to return to section 64(1A) of PACE and in the light of these considerations to ask whether realistically it could be construed for all the world as if, in enacting it, the government was leaving it to individual police forces or even to ACPO acting on their joint behalf to decide upon just what sort of scheme should be implemented for the future retention of biometric data.
Is it really suggested that the police could and should then (in 2001) of their own volition have decided that, instead of retaining data indefinitely, they would retain it for only, say, one year or five years, or different periods in different cases and so forth? And if this was not open to them in 2001, how then could it become so merely because of the Grand Chambers condemnation of the indefinite scheme some years later? As Lord Nicholls observed in Ghaidan v Godin Mendoza [2004] 2 AC 557, 572, para 33, when indicating the limits of the courts section 3 powers: There may be several ways of making a provision Convention compliant, and the choice may involve issues calling for legislative deliberation. It is difficult to think of any case in which that objection to a section 3 construction applies more obviously than here.
Lord Steyn reflected the same objection in the same case (para 49): Interpretation could not provide a substitute scheme.
It is surely plain that legislative deliberation was required here.
DNA retention can only sensibly operate on a national basis and section 64(1A), properly understood, in my judgment not merely authorised but required precisely the sort of scheme for the indefinite retention of biometric data that the House of Lords came to describe (and, indeed, so enthusiastically to support, in my case unrepentingly) in S and Marper.
Realistically it was just not possible to construe the section differently, least of all as authorising the police to create for themselves a fundamentally different scheme which would achieve compatibility with the requirements of article 8 as subsequently identified by the Grand Chamber.
Of course, some degree of latitude was given to the police as to how precisely the retention scheme was to operate.
But this was essentially to decide what narrow categories should be excluded from its scope cases of the sort described by Lord Steyn at para 36 of S and Marper (see para 125 above) and, indeed, in the ACPO Guidelines (see para 129 above).
The discretion could not sensibly be construed as extending to the basic nature of the scheme: whether retention should be indefinite or time limited.
That section 64(1A) was intended to introduce a database for the indefinite retention of DNA samples is surely clear from the very circumstances in which this legislative change was brought about the deeply disturbing circumstances in which a violent rapist and a brutal murderer had both gone free because of the unsatisfactory existing scheme see Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 and In re British Broadcasting Corporation [2010] 1 AC 145 and, indeed, to my mind clear also from the speeches in the House in S and Marper to which I have already referred.
One of the specific issues before the House in S and Marper was, it should be noted: (4) if the retention of fingerprints and DNA profiles and/or samples is an unjustified interference with the appellants Convention rights, whether it would be possible to give section 64(1A) a Convention compatible interpretation under section 3 of the 1998 Act (Lord Steyns judgment at para 17) an issue, of course, as Lord Steyn observed at para 57, that in the event fell away.
In short, the argument before the House assumed that section 64(1A) called for the indefinite retention of data and that, if this was incompatible with article 8, the appellants then needed to resort to section 3 of HRA for their requests for data removal to succeed.
The appellants here submit that, following the Grand Chamber judgment, it was open to the police to adjust their data retention policy to meet the newly recognised requirements of article 8 in just the same way as they were required by this court in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410 on article 8 grounds to adjust their previous approach to the disclosure of information for the purposes of enhanced criminal record certificates (ECRCs) pursuant to section 115(7) of the Police Act 1997.
In my judgment, however, the two situations are entirely different: in L all that the courts decision required of the police was that in future they give no less weight to the statutory requirement that in their opinion the information ought to be included in the certificate than the requirement that they think it might be relevant (and in borderline cases give the prospective employee an opportunity to say why the information ought not to be disclosed).
There was no requirement whatever for fresh policy choices to be made let alone legislative deliberation or democratic accountability.
Rather the court was well able to decide the limited adjustment that needed to be made.
Contrast the position in the present case.
The Grand Chamber, in para 134 of its judgment (see para 126 above), can hardly have been expecting the police, rather than the Government, to implement the newly required measures under the supervision of the Committee of Ministers.
Correspondingly, the States reaction to the Grand Chambers judgment was that it was plainly for Government, not the police, to devise and implement a new and Convention compliant scheme.
It was, indeed, the Home Office rather than the police who decided that children under ten should be removed from the database (see para 127 above).
No less significantly, the perceived need for a fully legitimate parliamentary solution to the problem was manifested by the political insistence upon the new scheme being introduced by primary and not merely secondary legislation.
If this was not appropriate by secondary legislation, how much less so by revised ACPO guidelines.
Even if it is suggested that section 64(1A) does not preclude ACPO from now amending their Guidelines to address the Grand Chambers criticisms in S v UK, that with respect is not a sufficient answer to the section 6(2)(b) defence.
As I have said (para 143 above), the section 6(2)(b) defence necessarily postulates that the public authority could act differently.
The critical question is whether they could do so consistently with the essential scheme and thrust of the legislation and a good test of that, I would suggest, is to ask whether it can really be said to be their duty to do so and to be unlawful and wrong for them not to do so.
The whole purpose of section 6(2)(b) is to safeguard a public authority from liability (and, indeed, from misplaced criticism) in circumstances where in truth it is acting (as for my part I have no doubt that the police are acting here) perfectly properly.
It follows from all this that, in common with Lord Rodger, with whose judgment on the section 6 issue I respectfully agree, I would hold that it is not unlawful (under domestic law) for the respondent police commissioner to continue to hold the appellants data on the national DNA database.
As to whether this Court should now make a declaration of incompatibility in respect of section 64(1A) I hold no strong view.
Nowhere is this identified as an issue before us and frankly I find it difficult to see any possible need or use for it in the present circumstances.
But if others think it desirable, I would be quite content with that.
I would add that, even had I concluded that the police could now act compatibly with article 8 under section 64(1A), I should certainly not have thought it just and appropriate within the meaning of section 8 of the HRA to require them to change their existing practice pending the introduction of a new legislative data retention scheme.
It may be, indeed, that the strength of this reaction to the respondents fall back argument under section 8, on true analysis, reinforces the correctness of my primary conclusion on the section 6 issue: quite simply it would be wrong for the police to change their approach to section 64(1A) before Parliament so dictates and this court cannot properly direct them to do so.
If anyone is to be criticised for the failure of the existing database to meet the States obligations under article 8, it is surely the Government, not the police.
In my judgment they have a section 6(2)(b) defence to these claims.
| UK-Abs | Section 64 of the Police and Criminal Evidence Act 1984 (PACE) required the destruction of samples or fingerprints taken from a person in connection with the investigation of an offence if he was cleared of that offence.
Section 64(1A) of PACE, enacted by section 82 of the Justice and Police Act 2001 (the 2001 Act), replaced that statutory obligation to destroy data with a discretion.
Section 64(1A) provides that samples taken in connection with the investigation of an offence may be retained after they have fulfilled the purposes for which they were taken.
Section 64(1A) was supplemented by guidelines issued by the Association of Chief Police Officers (ACPO).
These guidelines provided that data should be destroyed only in exceptional cases.
The polices retention policy was challenged in R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of South Yorkshire Police [2004] 1 WLR 2196 (Marper UK).
The claimants argued that the retention by the police of their finger prints and DNA samples was incompatible with article 8 of the European Convention on Human Rights (the ECHR).
The majority of the House of Lords held that retention did not constitute an interference with the claimants article 8 rights and they held unanimously that in any event any such interference was justified under article 8(2).
However, in 2008, the European Court of Human Rights (ECtHR) disagreed: see S and Marper v United Kingdom (2008) 48 EHRR 50 (Marper ECtHR).
It found the indefinite retention of data to be an interference which was not justified under Article 8(2).
The Governments immediate response was to remove children under the age of 10 from the database.
They then opened a consultation period to consider the appropriate legislative reform.
This resulted in legislation which, following the change of government in May 2010, was not brought into force.
The Coalition Government is promoting new legislation to take account of the ECtHRs judgment.
In December 2007, GC was arrested on suspicion of common assault on his girlfriend.
He denied the offence.
A DNA sample, fingerprints and photographs were taken after his arrest.
On the same day he was released on police bail without charge and was subsequently informed that no further action would be taken.
In March 2009, C was arrested on suspicion of rape, harassment and fraud.
His finger prints and a DNA sample were taken.
He denied the allegations.
He was charged in respect of the rape allegation but no further action was taken in respect of the harassment and fraud allegations.
In the Woolwich Crown Court in May 2009, the prosecution offered no evidence and C was acquitted.
In both cases, the appellants requested the destruction of the data taken.
Their requests were refused as there were no exceptional circumstances within the meaning of the ACPO guidelines.
The appellants issued proceedings for judicial review of the retention of their data on grounds that, in light of Marper
ECtHR, its retention was incompatible with their article 8 rights.
In the circumstances, the Divisional Court (Moses LJ and Wyn Williams J) dismissed the applications for judicial review and granted a certificate that the cases were appropriate for a leapfrog appeal to the Supreme Court: [2010] EWHC 2225 (Admin).
The Supreme Court, by a majority, allows the appeals (Lords Rodger and Brown dissenting).
Lord Dyson gives the lead judgment.
The majority grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR.
They grant no other relief.
Interpretation of section 64(1A) of PACE It is common ground that Marper UK should be overruled.
It is also agreed that in light of Marper ECtHR, the indefinite retention of the appellants data under the current retention policy is a breach of article 8 ECHR.
The only issue in these appeals, therefore, is what the court should do about that in the present circumstances.
Section 3 of the Human Rights Act 1998 (HRA) requires the court, insofar as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights.
It is uncontroversial that the statutory purpose of section 64(1A) was to remove the requirement to destroy data after it had served its immediate purpose so as to create a greatly extended database.
The extended database was to facilitate the prevention of crime, the investigation of offences and the conduct of prosecutions.
However, this does not mean that Parliament intended that, save in exceptional circumstances, the data should be retained indefinitely.
Rather, Parliament conferred a discretion on the police to retain data.
The natural meaning of the word may in section 64(1A) is permissive not mandatory.
There is no reason to suppose that Parliament must have intended its statutory purpose to be achieved in a disproportionate way so as to be incompatible with article 8: [23] [24], [88] [89].
The police were entrusted with setting out the precise means of achieving the statutory purpose: [26].
There is no reason in principle why the police, with the input of the Secretary of State, should be less well equipped than Parliament to create guidelines for the exercise of this power: [40] [44].
Accordingly, it is possible to read section 64(1A) in a way which is compatible with article 8 ECHR as interpreted in Marper ECtHR.
A declaration of incompatibility is not appropriate and section 6(2)(b) of the HRA is not engaged: [35], [55], [69].
Lords Rodger and Brown dissent.
They would have dismissed the appeals.
In their view, the history shows that Parliament's purpose in enacting section 64(1A) was to ensure that in future samples taken from suspects would be retained indefinitely: [94] [97].
Therefore, the police had no choice but to retain the data: [108] [109].
In their view, it is not possible to interpret section 64(1A) in accordance with section 3 HRA: [115], [146] [147].
However, since the police could not have acted differently in substance, what they did and what they continue to do, falls within section 6(2)(a) or section 6(2)(b) HRA and is lawful: [119].
Appropriate relief The present intention of the government is to bring the new legislation into force later this year.
In these circumstances, in relation to biometric data it is sufficient to grant a declaration under section 8(1) HRA that the present ACPO guidelines are unlawful because they are incompatible with the ECHR.
Where Parliament is seised of the matter, it is not appropriate to make an order requiring a change in the legislative scheme within a specific period or an order requiring destruction of data: [45] [49], [73], [91] [92].
It is, however, open to ACPO to reconsider and amend the guidelines in the interim: [73], [81], [90].
Lord Rodger would have preferred to grant a declaration of incompatibility under section 4 HRA: [121].
In relation to the photographs of GC, in view of the manner in which the issue was raised in the Divisional Court and the consequent lack of any substantive judgment, the Supreme Court expresses no opinion on this part of the appeal: [50] [51].
|
The Proceeds of Crime Act 2002 (POCA), as amended by the Serious Organised Crime and Police Act 2005, is designed to prevent the enjoyment of the fruits of criminal activity.
Part 2 focuses on the criminal.
To the extent that it is proved, in the manner prescribed, that a criminal has benefitted from criminal conduct, a levy can be made upon his assets, whether or not those assets are themselves the product of his criminal conduct, by a process inaccurately described as confiscation.
A conviction of the criminal is a precondition to the power to confiscate.
Part 5 concentrates on the fruits of crime themselves.
The Serious Organised Crime Agency (SOCA) is given the task of tracking down and recovering the fruits of criminal activity, whether they remain in the hands of the criminal or have been passed on to someone else subject to exceptions for which POCA makes provision.
The fruits of criminal activity can be recovered under Part 5 whether or not anyone has been convicted of the crime or crimes that have produced them.
This appeal is concerned with Part 5 proceedings.
SOCA has obtained an order for the recovery of property to the value of some 2m (the property) held by the appellants, David Gale and his former wife Teresa Gale.
SOCA did so by persuading Griffith Williams J, sitting in the High Court, that the property was derived from criminal activity on the part of one or other or both of the appellants, in the form of drug trafficking, money laundering and tax evasion in the United Kingdom, Spain, Portugal and other jurisdictions.
The judge so found notwithstanding that David Gale had never been convicted of drug trafficking albeit that in Portugal he was prosecuted and acquitted of drug trafficking and in Spain criminal proceedings against him for drug trafficking were brought but discontinued.
In order to recover property under Part 5 SOCA has to prove that it was obtained by unlawful conduct, or that it is property obtained in place of such property.
Section 241 defines unlawful conduct as being conduct which is unlawful under the criminal law of the country in which it occurs, whether this is the United Kingdom or elsewhere.
The section requires the court to decide on a balance of probabilities whether it is proved that any of the matters alleged to constitute unlawful conduct occurred.
Section 242 provides that in deciding whether property was obtained through unlawful conduct it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct.
Thus it is not necessary to prove that individual items of property were derived from specific offences.
Balance of probabilities is the standard of proof applied in civil proceedings under English law (the civil standard of proof).
In criminal proceedings guilt has to be proved beyond reasonable doubt (the criminal standard of proof).
In concluding that the property recovered was the product of criminal conduct on the part of the appellants, Griffith Williams J applied the civil standard of proof, albeit that he used language that suggested that the criminal standard might well have been satisfied.
It is the appellants case, advanced without success in the Court of Appeal, that this was contrary to the Human Rights Act 1998 in that it infringed their right to a fair trial under article 6 of the European Convention on Human Rights (the Convention).
They urge that, despite the language of section 241(3), we should read down the subsection so as to accord to it the meaning that the court must decide whether it is proved beyond reasonable doubt that matters alleged to constitute unlawful conduct occurred.
Alternatively, they submit that the Court should declare the subsection to be incompatible with the Convention pursuant to section 4 of the Human Rights Act.
This is the only issue concerning the recovery order that arises with regard to the recovery order; other issues that were raised below have not been pursued.
There is a second issue.
On 28 July 2005 Collins J made an Interim Receiving Order pursuant to section 246 of POCA.
The findings of the Interim Receivers report formed the basis for commencing the proceedings for civil recovery.
At the end of those proceedings the judge made an order for costs against the appellants.
He refused, however, to direct that those costs should include the costs of the Interim Receivers investigation and report.
SOCA cross appealed successfully against that refusal.
The appellants seek to reverse the Court of Appeal on this issue and to restore the order of the judge.
Is there scope for reading down?
The Secretary of State, represented by Mr Eadie QC, has intervened because of the possibility of a declaration of incompatibility.
The Secretary of State has supported the respondent, SOCA, in relation to the first issue.
Mr Eadie has submitted, however, that regardless of the merits of the human rights challenge there can be no question of reading down section 241(3).
This is because it represents a clear, advised expression of Parliamentary intent lying at the heart of the statutory scheme.
This submission runs counter to an obiter view that I expressed at para 24 in R v Briggs Price [2009] UKHL 19; [2009] AC 1026, when dealing with analogous provisions of the Drug Trafficking Act 1994.
Lord Rodger of Earlsferry expressed the same view at para 79.
I see the force in Mr Eadies argument and, if necessary, it will be necessary to reconsider the views that I and Lord Rodger expressed.
The first issue is, however, whether section 241(3), if given its natural and very clear meaning, is compatible with the Convention.
Section 241(3) forms part of a statutory code of some complexity.
I do not believe that for the purposes of resolving the issue raised on this appeal it is necessary to give a more detailed explanation of the legislation than that which I have given.
A summary of the relevant provisions of POCA can, however, be found in paras 5 to 11 of the judgment of Carnwath LJ in the Court of Appeal [2010] EWCA Civ 759, [2010] 1 WLR 2881.
The judgment of Griffith Williams J
The judgment of Griffith Williams J [2009] EWHC 1015 (QB) runs to nearly 60 closely printed pages.
I would endorse the commendation of Carnwath LJ of this meticulous and comprehensive judgment.
The judge started by quoting from the Executive Summary of the Report of the Interim Receiver to the effect that there was no documentary evidence that supported the appellants assertion that their assets had been derived from legitimate activities but, on the contrary, evidence of unlawful conduct and complex financial dealings indicative of money laundering and concealment.
The judge then addressed the burden and standard of proof.
He held: 9.
The burden of proof is on the claimant and the standard of proof they must satisfy is the balance of probabilities.
While the claimant alleged serious criminal conduct, the criminal standard of proof does not apply, although cogent evidence is generally required to satisfy a civil tribunal that a person has been fraudulent or behaved in some other reprehensible manner.
But the question is always whether the tribunal thinks it more probable than not see Secretary of State for the Home Department v Rehman [2003] 1 AC 153 at para 55, per Lord Hoffmann.
The judge went on to quote from Lord Carswells elaboration of this approach, in which the other members of the House concurred, in In re D (Secretary of State for Northern Ireland intervening) [2008] UKHL 33, [2008] 1 WLR 1499.
In para 18 of his judgment the judge set out his approach to the evidence, in the context of the question of the attitude that he should take to the acquittal of David Gale by the Portuguese Court: It is not contended that the doctrine of issue estoppel applies and clearly the criminal law principle of autrefois acquit has no application in civil proceedings.
On behalf of DG, it was submitted that the Portuguese charges cannot be re litigated without hearing from all the relevant witnesses or considering a full transcript which is not available.
However, I do not accept this contention.
To consider the evidence adduced in the Portuguese proceedings is not to re litigate because what is in issue in these proceedings is not the commission of the specific offences alleged against DG in Portugal but whether on the evidence before this court of the material considered by the Portuguese Court, together with the evidence available to the Spanish Courts and other material not considered by the courts in either jurisdiction, the claimant has proved on the balance of probabilities that DGs wealth was obtained through unlawful conduct of a particular kind or of one of a number of kinds, each of which would have been unlawful conduct: see section 242(2)(b) of POCA that is to say drug trafficking, money laundering and tax evasion.
The judge gave detailed consideration to the acquisition of numerous assets by the appellants and the explanations, or lack of explanations, proffered to explain how these were funded.
He examined the evidence that had led to the Portuguese prosecution and the commencement of criminal proceedings in Spain, which were subsequently discontinued on account of prescription.
His conclusions were summarised in the following passage from para 140 of his judgment: I am in no doubt that DG and TG engaged in unlawful conduct in DGs case, money laundering and drug trafficking, in TGs case money laundering.
There is also evidence of tax evasion in four jurisdictions.
They have acquired capital and various assets as a direct consequence of the money laundering and/or drug trafficking, but it is not possible to quantify the extent of the tax evasion or to estimate the extent, if at all, that it contributed to their capital wealth.
For reasons given during the course of the judgment and below, I am satisfied the Receiver has correctly identified recoverable property.
I found DG a witness whose evidence, on the central issues, was wholly unreliable.
He was so often demonstrably lying.
I am not prepared to believe the evidence of TG insofar as she purported to confirm his account or to explain her involvement; she too was shown to be a liar about matters of real moment.
While I am prepared to accept that DG was the moving force behind all criminal conduct, she was hardly ignorant of what he was doing and played her full part in the money laundering.
The judge then summarised the facts that he had found earlier in his judgment, which formed the basis for his conclusions.
They ranged more widely than the facts that formed the basis of the criminal proceedings in Portugal and Spain.
The appellants case
Article 6 of the Convention provides: 1.
In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing 2.
Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.
Article 6(3) lays down a number of procedural minimum rights to be accorded to a person charged with a criminal offence.
Mr Mitchell QCs submissions on behalf of the appellants founded upon the fact that an essential stepping stone toward proving that the property owned by the appellants was the product of crime was proof that the appellants had been guilty of criminal conduct, in the form of drug trafficking and money laundering.
He submitted that in these circumstances article 6(2) applied.
The appellants were entitled to the presumption of innocence afforded by that article.
Rebuttal of the presumption of innocence required proof of guilt to the criminal standard, this being implicit in the words according to law.
He added to this the submission that once David Gale had been acquitted of drug trafficking by the Portuguese Court no adverse finding could be made that implicated him in the conduct of which he had been acquitted.
As the legal basis for these submissions Mr Mitchell relied first on a considerable body of Strasbourg jurisprudence and secondly on the analysis of this jurisprudence of the House of Lords in R v Briggs Price.
In considering the jurisprudence I acknowledge the assistance that I have derived from Mr Eadies printed case.
He has there propounded a number of principles to be derived from the Strasbourg cases, which were not challenged by Mr Mitchell and which I have found to be both well founded and helpful.
The Strasbourg jurisprudence
Charged with a criminal offence has an autonomous meaning see Engel v The Netherlands (No 1) (1976) 1 EHRR 647.
Thus the fact that POCA unequivocally designates recovery proceedings as civil recovery does not establish conclusively that they do not involve the charge of a criminal offence.
None the less, the classification of proceedings under national law is one of three relevant considerations (the three factors) to which the ECtHR always has regard when deciding whether or not article 6(2) is engaged.
The second is the essential nature of the proceedings and the third is the type and severity of the consequence that may flow from the proceedings, usually described by the ECtHR as the penalty that the applicant risked incurring.
These three factors, and some of the jurisprudence in which they feature, were identified by Kerr LCJ in Walsh v Director of the Assets Recovery Agency [2005] NICA 6, [2005] NI 383, at para 20, where he observed that they tend to blend into each other.
If the proceedings are properly analysed as civil rather than criminal, article 6(1) applies, but not article 6(2) or (3).
There is a possibility, however, that the requirements of article 6(2) and (3) may creep in by the back door on the basis that the notion of a fair trial demands that they be applied see Bochan v Ukraine (Application No 7577/02) (unreported) 3 May 2007.
I now come to a series of cases dealing with the application of article 6(2) after a person has been acquitted in criminal proceedings.
These are of relevance in the present case having regard to Mr Mitchells contention that the Portuguese acquittal posed a bar to reliance in these proceedings on the alleged conduct which formed the basis of the Portuguese proceedings.
Some of these decisions are mutually inconsistent and it is not easy to identify the principle underlying others.
Before looking at these cases it may be helpful to make some preliminary observations.
Many signatories to the Convention require guilt in criminal proceedings to be established according to an enhanced standard of proof in comparison to civil or disciplinary proceedings.
In this jurisdiction the standard is proof beyond reasonable doubt.
In such circumstances it is perfectly obvious that failure to establish guilt according to the required standard does not demonstrate that the defendant did not commit the criminal act.
It demonstrates simply that the evidence adduced against him was insufficient to discharge the enhanced burden of proof.
After acquittal, the possibility exists that claims for relief by, or against, the defendant may be brought that are based upon, or involve consideration of, the evidence that was inadequate to establish the defendants criminal guilt.
The resolution of those claims may turn on lesser standards of proof, or different criteria, from those which governed the criminal proceedings.
Examples are a claim by the defendant in respect of his legal costs, a claim by the defendant for compensation for time spent remanded in custody, disciplinary proceedings brought against the defendant in respect of the alleged conduct that formed the subject of the criminal charge, or a claim for damages by an alleged victim of that conduct.
The Strasbourg Court has never suggested that it is unlawful to require a defendant who has been acquitted to satisfy some additional criterion in order to qualify for reimbursement of his costs, or for compensation for time spent on remand: see for instance Leutscher v The Netherlands (1996) 24 EHRR 181.
The Strasbourg Court has also recognised that it is legitimate for a victim to bring a civil claim for compensation in proceedings that apply a lesser burden of proof to the issue of whether the defendant committed the acts that had formed the basis of the criminal charge on which he was acquitted see for instance Ringvold v Norway (Application No 34964/97) (unreported) 11 February 2003.
And the Strasbourg Court has recognised that, after acquittal, it may still be legitimate to bring disciplinary proceedings or care proceedings under which a lesser standard of proof may be applied to the question of whether the defendant committed the conduct that had formed the basis of the criminal charge of which he was acquitted: see for example Moullet v France (Application No 27521/04) (unreported) 13 September 2007; HK v Finland (Application No 36065/97) (unreported) 27 September 2005.
Most of the cases to which I have just referred involved discrete proceedings after the defendants acquittal in the criminal trial.
There are a number of cases, however, where the Strasbourg Court has held that the presumption of innocence in article 6(2) was infringed by findings in subsequent proceedings that cast doubt on the validity of a prior acquittal in criminal proceedings.
The common factor in these cases has been a procedural connection between the criminal trial and the subsequent proceedings the mantra oft repeated has been that the latter proceedings were a consequence and the concomitant of the criminal proceedings.
The Court has also condemned as infringing article 6(2) statements by public authorities suggesting that a person acquitted might none the less have been guilty.
This line of authority starts with Sekanina v Austria (1993) 17 EHRR 221.
The applicant was tried and acquitted of a charge of murder.
The jury gave as their reason that there was no conclusive evidence on which to convict him.
He then claimed compensation for a year during which he was remanded in custody.
Under the relevant statute a defendant was entitled to compensation if he was acquitted and the suspicion that he committed the offence is dispelled.
He was refused compensation by the court which had presided over the trial on the ground that, having regard to the evidence, his acquittal did not dispel suspicion of his guilt.
He alleged violation of article 6(2).
The Commission in ruling the application admissible adopted the following passage from X v Austria (1982) 30 DR 227: No authority may treat a person as guilty of a criminal offence unless he has been convicted by the competent court and in the case of an acquittal the authorities may not continue to rely on the charges which have been raised before that court but which have been proved to be unfounded.
This rule also applies to courts which have to deal with non criminal consequences of behaviour which has been subject to criminal proceedings.
They must be bound by the criminal courts finding according to which there is no criminal responsibility for the acts in question although this naturally does not prevent them to establish, eg a civil responsibility arising out of the same facts.
The ECtHR agreed that article 6(2) applied.
In doing so it relied on a link between the criminal proceedings and the compensation proceedings.
It held at para 22: Admittedly, the Linz Regional Court gave its decision rejecting the claim on 10 December 1986, several months after the judgment acquitting the applicant on 30 July 1986.
In the Courts opinion, Austrian legislation and practice nevertheless link the two questions the criminal responsibility of the accused and the right to compensation to such a degree that the decision on the latter issue can be regarded as a consequence and, to some extent, the concomitant of the decision on the former.
Moreover, as is the case under the legislation of several other European countries in which a right to compensation in respect of detention on remand is recognised in the event of acquittal, the criminal court which tries the case on its merits, in this instance the Linz Landesgericht, albeit composed differently, in principle has jurisdiction in the matter.
Finally, the Austrian courts relied heavily on the evidence from the Assize Courts case file in order to justify their decision rejecting the applicants claims, thus demonstrating that, in their opinion, there was indeed a link between the two sets of proceedings.
The applicant can therefore invoke article 6(2) in relation to the impugned decision.
Subsequently, at para 30, the ECtHR made the following comment on the Austrian courts affirmations that there were still grounds for suspicion of the applicants guilt: Such affirmations not corroborated by the judgment acquitting the applicant or by the record of the jurys deliberations left open a doubt both as to the applicants innocence and as to the correctness of the Assize Courts verdict.
Despite the fact that there had been a final decision acquitting Mr Sekanina, the courts which had to rule on the claim for compensation undertook an assessment of the applicants guilt on the basis of the contents of the Assize Court file.
The voicing of suspicions regarding an accuseds innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits of the accusation.
However, it is no longer admissible to rely on such suspicions once an acquittal has become final.
Consequently, the reasoning of the Linz Regional Court and the Linz Court of Appeal is incompatible with the presumption of innocence.
Sekanina was followed in Rushiti v Austria (2000) 33 EHRR 1331, a case
of essentially similar facts.
The Court stated at para 31: In any case, the Court is not convinced by the Governments principal argument, namely that a voicing of suspicions is acceptable under article 6(2) if those suspicions have already been expressed in the reasons for the acquittal.
The Court finds that this is an artificial interpretation of the Sekanina judgment, which would moreover not be in line with the general aim of the presumption of innocence which is to protect the accused against any judicial decision or other statements by state officials amounting to an assessment of the applicants guilt without him having previously been proved guilty according to law (see Allenet de Ribemont v France (1995) 20 EHRR 557, para 35, with further references).
The Court cannot but affirm the general rule stated in the Sekanina judgment that, following a final acquittal, even the voicing of suspicions regarding an accuseds innocence is no longer admissible.
The Court, thus, considers that once an acquittal has become final be it an acquittal giving the accused the benefit of the doubt in accordance with article 6(2) the voicing of any suspicions of guilt, including those expressed in the reasons for the acquittal, is incompatible with the presumption of innocence.
Taken at face value these decisions seem to convert a presumption of innocence prior to conviction which is rebuttable into an irrebuttable presumption of innocence after acquittal.
Two matters demonstrate that this is not the case.
The first is the relief granted, or more significantly denied, to the applicants.
Each of the applicants sought damages by way of compensation for his detention on remand ie the relief he had sought in the domestic proceedings, to which he was entitled under domestic law if suspicion of his guilt had been dispelled.
This was denied on the ground that there was no connection between the violation of article 6(2) and the damage in question.
If, however, the acquittals had been conclusive of the applicants innocence his right to compensation would logically have followed.
The other matter is the reasoning of the ECtHR in a number of subsequent applications against Norway, which were heard together.
Ringvold v Norway (Application No 34964/97) (unreported) 11 February 2003 and Y v Norway (2003) 41 EHRR 87 each concerned a case where the victim of conduct that had been the subject of an unsuccessful criminal prosecution was awarded compensation.
Under Norwegian criminal law guilt of an accused must be proved beyond reasonable doubt.
Under the Code of Criminal Procedure 1981 the civil claim of a victim may be determined in connection with a criminal case provided that the claim arises from the same act that forms the basis of the prosecution.
Under the Damage Compensation Act 1969 a purported victim is entitled to claim damages for personal injury caused with intent or by gross negligence regardless of the outcome of criminal proceedings.
The standard of proof in respect of such a claim is balance of probabilities.
In Y v Norway the applicant was charged with sexual assault and homicide of his cousin.
He was convicted and sentenced to 14 years imprisonment.
In linked civil proceedings he was ordered to pay compensation to the victims parents.
He appealed to the High Court, where the hearing was before three professional judges and a jury.
The jury acquitted the applicant.
The next day the three professional judges sat to consider the compensation order on the basis of the evidence that they had heard.
They upheld the order for compensation.
The applicant claimed violation of article 6(2) but did not claim pecuniary damages.
The ECtHR considered the three relevant factors to which I have referred in para 16 above.
It held at para 40 that the compensation proceedings were classified as civil under Norwegian domestic law.
As to the second factor the Court held at para 41 that, notwithstanding that the compensation claim was based on the same evidence and involved the same constitutive elements as the criminal offence, it could not properly be said to render the defendant charged with a criminal offence.
The Court continued: Thus, the Court considers that, while the acquittal from criminal liability ought to be maintained in the compensation proceedings, it should not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof (see, mutatis mutandis, X v Austria (1982) 30 DR 227; MC v United Kingdom (1987) 54 DR 162). 42.
However, if the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention. 43.
The Court will therefore examine the question whether the domestic courts acted in such a way or used such language in their reasoning as to create a clear link between the criminal case and the ensuing compensation proceedings as to justify extending the scope of the application of article 6(2) to the latter. 44.
The Court notes that the High Court opened its judgment with the following finding (para 13 above): Considering the evidence adduced in the case as a whole, the High Court finds it clearly probable that [the applicant] has committed the offences against Ms T with which he was charged and that an award of compensation to her parents should be made under article 3 5 (2) of the Damage Compensation Act. (Emphasis added) 45.
This judgment was upheld by the majority of the Supreme Court (para 16 above), albeit using more careful language.
However, that judgment, by not quashing the former, did not rectify the issue, which in the Courts opinion, thereby arises. 46.
The Court is mindful of the fact that the domestic courts took note that the applicant had been acquitted of the criminal charges.
However, in seeking to protect the legitimate interests of the purported victim, the Court considers that the language employed by the High Court, upheld by the Supreme Court, overstepped the bounds of the civil forum, thereby casting doubt on the correctness of that acquittal.
Accordingly, there was a sufficient link to the earlier criminal proceedings which was incompatible with the presumption of innocence. 47.
In the light of these considerations, the Court concludes that article 6(2) was applicable to the proceedings relating to the compensation claim against the present applicant and that this provision was violated in the instant case.
The Court awarded 20,000 Euros by way of non pecuniary damages.
In Ringvold v Norway the applicant was charged with sexual abuse of a minor, G, on whose behalf a claim was submitted for civil compensation.
He was acquitted and the claim for compensation dismissed.
G appealed to the Supreme Court against the failure to award compensation.
The Supreme Court heard fresh evidence but also had regard to the evidence given in the criminal proceedings.
The ECtHR considered the usual three factors and concluded that the compensation claim did not amount to the bringing of another criminal charge.
It observed, however, that had the national decision on compensation contained a statement imputing criminal liability to the applicant this would have raised an issue falling within the ambit of article 6(2).
following manner: The Court then went on to distinguish Sekanina and Rushiti in the 41.
The question remains whether there were such links between the criminal proceedings and the ensuing compensation proceedings as to justify extending the scope of article 6(2) to cover the latter.
The Court reiterates that the outcome of the criminal proceedings was not decisive for the issue of compensation.
In this particular case, the situation was reversed: despite the applicants acquittal it was legally feasible to award compensation.
Regardless of the conclusion reached in the criminal proceedings against the applicant, the compensation case was thus not a direct sequel to the former.
In this respect, the present case is clearly distinguishable from those referred to above, where the Court found that the proceedings concerned were a consequence and the concomitant of the criminal proceedings, and that article 6(2) was applicable to the former.
Sekanina and Rushiti were, however applied, and Ringvold distinguished, in Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
The applicant in that case had been acquitted on charges of sexual abuse of minors.
He then sought compensation in respect of time during which he had been remanded in custody.
Under article 444 of the Code of Criminal Procedure he was entitled to this if it is shown to be probable that he did not carry out the act that formed the basis for the charge.
The ECtHR held at para 42 that the compensation proceedings did not give rise to a criminal charge against the applicant, but went on to hold that the linkage between the compensation proceedings and the criminal proceedings had the consequence of bringing the former within the scope of article 6(2).
At para 44 the Court held that it was significant that the proceedings engaged the responsibility of the state, not a private party.
It went on to give the following reasons for holding article 6(2) to be applicable: 45.
Moreover, unlike in criminal proceedings where it was for the prosecution to prove beyond reasonable doubt that the defendant had committed the incriminated act in a compensation case of the present kind it was for the acquitted person to show that, on the balance of probabilities, it was more than 50% probable that he or she did not carry out the act grounding the charge.
Leaving aside this difference in evidentiary standards, the latter issue overlapped to a very large extent with that decided in the applicant's criminal trial.
It was determined on the basis of evidence from that trial by the same court, sitting largely in the same formation, in accordance with the requirements of article 447 of the Code. 46.
Thus, the compensation claim not only followed the criminal proceedings in time, but was also tied to those proceedings in legislation and practice, with regard to both jurisdiction and subject matter.
Its object was, put simply, to establish whether the state should have a financial obligation to compensate the burden it had created for the acquitted person by the prosecution it had engaged against him.
Although the applicant was not charged with a criminal offence, the Court considers that, in the circumstances, the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner as to bring the proceedings within the scope of article 6(2), which accordingly is applicable.
Ringvold and Y were applied by the ECtHR when ruling inadmissible the application in Lundkvist v Sweden (Application No 48518/99) (unreported) 13 November 2003.
The applicant was charged with setting his house on fire after a row with his wife.
He was acquitted on the grounds that, while there was a strong inferential case against him, it did not establish his guilt beyond reasonable doubt.
He then brought a civil claim against his insurers for the loss of his house.
Evidence was adduced, which included evidence that had been adduced at the criminal trial.
The court dismissed his claim, holding that the insurance company had proved, on balance of probabilities that he was responsible for the fire.
Considering the three factors the Court held that the civil proceedings did not involve bringing a criminal charge against the applicant.
It went on to hold: As to the further question of whether there were links between the criminal case and the ensuing compensation case such as to justify extending the scope of the application of article 6(2) to the latter, the Court reiterates that the outcome of the criminal proceedings was not decisive for the compensation issue.
In this particular case, the situation was reversed: despite the applicants acquittal it was legally feasible to deny him insurance compensation for the destroyed house.
Regardless of the conclusion reached in the criminal trial against the applicant, the compensation case was therefore not a direct sequel to the former or a consequence and concomitant of it.
Discussion
With respect, I find unconvincing the attempts of the Strasbourg Court to distinguish between claims for compensation by an acquitted defendant and claims for compensation by a third party against an acquitted defendant.
As the cases to which I have just referred show, the link between the criminal proceedings and the subsequent proceedings can be close in either case.
The evidence may be common to both proceedings, as may the judges who have to consider it.
In each case the compensation proceedings can put in issue the facts that were alleged as the foundation of the criminal charges.
In each case facts were held proved according to the civil standard of proof which had not been established according to the criminal standard in the earlier proceedings.
How can it credibly be said that the claim for compensation by the defendant is consequential and concomitant to the criminal proceedings but not the claim by a third party? May it not be that the Strasbourg Court took a wrong turn in Sekanina and Rushiti? It might be thought that the judges who sat on the criminal proceedings will be well placed to determine the outcome of issues that depend upon the application of a lesser standard of proof to the same factual evidence; the Norwegian procedure, illustrated in Y, proceeded on that basis.
Yet this is something that the Strasbourg jurisprudence appears to discourage.
This confusing area of Strasbourg law would benefit from consideration by the Grand Chamber.
What follows from the findings of the Strasbourg Court that claims for compensation by acquitted defendants fall within the scope of article 6(2)? This is a question to which I drew attention in para 25 above.
It was considered in a concurring opinion by Judge Greve in Hammern.
The judges conclusion was that the test laid down by the Norwegian Code of Criminal Procedure for recovering compensation could the defendant show that on balance of probabilities he did not carry out the act that formed the basis of the charge was simply not viable because it violated article 6(2).
The focus had to be on whether the prosecution had been warranted on the facts known at the time.
I comment that if this were correct the effect of article 6(2) was to prejudice the rights of the defendant that it was designed to protect.
An alternative view is that all that the cases establish is that article 6(2) prohibits a public authority from suggesting that an acquitted defendant should have been convicted on the application of the criminal standard of proof and that to infringe article 6(2) in this way entitles an applicant to compensation for damage to reputation or injury to feelings.
I am inclined to this view, albeit that it involves a remarkable extension of a provision that on its face is concerned with the fairness of the criminal trial see my comment on Taliadorou and Stylianou v Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008) in R (Adams) v Secretary of State for Justice [2011] UKSC 18, [2011] 2 WLR 1180.
On no view does this jurisprudence support Mr Mitchells submission that the appellants acquittal in Portugal precludes the English court in proceedings under POCA from considering the evidence that formed the basis of the charges in Portugal.
The link between the Portuguese criminal proceedings and the English civil proceedings, which Strasbourg would appear to consider so critical, is not there.
Nor does this jurisprudence lend any support to the proposition that the criminal standard must be applied to proof of criminal conduct in proceedings under POCA.
That proposition requires further consideration of Strasbourg authority.
Consideration of Strasbourg jurisprudence resumed
Before the decision of the ECtHR in Geerings v The Netherlands (2007) 46 EHRR 1222 and the decision of the House of Lords in R v Briggs Price [2009] AC 1026 the law was not in doubt.
Confiscation proceedings that proceed on the basis that property in the hands of a convicted criminal was derived from other criminal activity did not involve the defendant being charged with a criminal offence in relation to the other offending, or engage article 6(2).
The cases supporting this proposition, and applying them to the United Kingdom confiscation legislation, are analysed in detail in Briggs Price and I do not propose to repeat that exercise.
I should record, however, that Mr Eadie referred the Court to two lines of Strasbourg authority, not considered in Briggs Price, that supported this proposition.
The first involved admissibility decisions in relation to proceedings in Italy to seize and confiscate the assets of those associated with Mafia activities: M v Italy (1991) 70 DR 59, Raimondo v Italy (1994) 18 EHRR 237; Arcuri v Italy (Application No 52024/99) (unreported) 5 July 2001.
M v Italy was a decision of the Commission.
The application related to confiscation of property on the ground that there was circumstantial evidence that the property was derived from unlawful activities.
The Commission considered the usual three factors and concluded that the proceedings did not involve a criminal charge so as to engage article 6(2).
Rather they were preventative in character.
In Raimondo v Italy the ECtHR made a similar finding at para 43, although article 6(2) itself was not invoked.
The position was the same in Arcuri v Italy.
The other authorities were two admissibility decisions in relation to seizure and confiscation of cash on the ground that it was the proceeds of, or intended to be used for, drug trafficking, pursuant to sections 42 43 of the Drug Trafficking Act 1994: Butler v United Kingdom (Application No 41661/98) (unreported) 27 June 2002 and Webb v United Kingdom (Application No 56054/00) (unreported) 10 February 2004.
In each case the ECtHR rejected the contention that the proceedings involved a criminal charge and resulted in the imposition of a penalty or punishment.
It held that forfeiture was preventative and not a penal sanction.
Accordingly it was permissible that, pursuant to section 43(3), the standard of proof required to justify forfeiture was that applicable to civil proceedings.
Geerings and Briggs Price
Mr Mitchell did not deal in detail with earlier authority.
Rather he founded his argument on the decision of the Strasbourg Court in Geerings, as applied by the House of Lords in Briggs Price.
I do not propose to repeat the review of the earlier authorities that is to be found in the speeches in that case.
The relevant background to Geerings was the decision of the ECtHR in Phillips v United Kingdom (2001) 11 BHRC 280 and in van Offeren v The Netherlands (Application No 19581/04) (unreported) 5 July 2005.
In each case the Court held that confiscation proceedings in relation to the benefits of drug trafficking did not involve charging the defendant with a criminal offence so as to bring them within the scope of article 6(2).
In each case the applicant had been convicted of drug offences and the confiscation proceedings related to property held by him.
The issue was whether article 6(2) was infringed by a presumption that this property was derived from similar offences.
In holding that it was not the Court treated the confiscation procedure as analogous to the sentencing process.
It does not seem to me that the analogy is very precise.
The important point is, however, that the ECtHR approved of the confiscation of property on the basis that it was derived from drug trafficking without treating the proof that it was so derived as involving criminal charges and thus involving the application of article 6(2).
Geerings v The Netherlands
The position in Geerings 46 EHRR 1222 was very different.
The applicant had been charged with a number of specific offences of theft and handling stolen goods and initially convicted of these.
On appeal most, but not all, the convictions were quashed on the ground that the evidence did not satisfy the criminal standard of proof.
None the less the Public Prosecutions Department sought a confiscation order for payment by the defendant of a sum equivalent to the benefit that he had derived from not merely the offences of which he had been convicted, but also from the offences of which he had been acquitted.
The Supreme Court held that the Department was entitled to this order on the basis that, for the purposes of the confiscation proceedings, the standard of proof that he had benefited from the offences in question was less stringent than the standard of proof that had been required to procure his conviction of them.
Thus the fact that he had been acquitted of the offences was no bar to the claims in respect of them in the confiscation proceedings.
As a matter of strict logic I am in sympathy with the reasoning of the Supreme Court.
None the less there is something unattractive about a prosecuting authority, which has failed to procure a conviction, proceeding to seek a confiscation order on the basis that the defendant committed the specific crimes of which he was acquitted.
The ECtHR declined to accept this situation.
The following passage from the judgment of the Court sets out the basis upon which it avoided doing so: 44.
The Court has in a number of cases been prepared to consider confiscation proceedings following on from a conviction as part of the sentencing process and therefore beyond the scope of article 6(2) (see, in particular, Phillips, cited above, para 34; van Offeren v The Netherlands (Application No 19581/04), 5 July 2005).
The features which these cases had in common are that the applicant was convicted of drugs offences; that the applicant continued to be suspected of additional drugs offences; that the applicant demonstrably held assets whose provenance could not be established; that these assets were reasonably presumed to have been obtained through illegal activity; and that the applicant had failed to provide a satisfactory alternative explanation. 45.
The present case has additional features which distinguish it from Phillips and van Offeren. 46.
First, the Court of Appeal found that the applicant had obtained unlawful benefits from the crimes in question although the applicant in the present case was never shown to hold any assets for whose provenance he could not give an adequate explanation.
The Court of Appeal reached this finding by accepting a conjectural extrapolation based on a mixture of fact and estimate contained in a police report. 47.
The Court considers that confiscation following on from a conviction or, to use the same expression as the Netherlands Criminal Code, deprivation of illegally obtained advantage is a measure (maatregel) inappropriate to assets which are not known to have been in the possession of the person affected, the more so if the measure concerned relates to a criminal act of which the person affected has not actually been found guilty.
If it is not found beyond a reasonable doubt that the person affected has actually committed the crime, and if it cannot be established as fact that any advantage, illegal or otherwise, was actually obtained, such a measure can only be based on a presumption of guilt.
This can hardly be considered compatible with article 6(2) (compare, mutatis mutandis, Salabiaku v France (1988) 13 EHRR 379, para 28). 48.
Secondly, unlike in the Phillips and van Offeren cases, the impugned order related to the very crimes of which the applicant had in fact been acquitted. 49.
In the Rushiti judgment (cited above, para 31), the Court emphasised that article 6(2) embodies a general rule that, following a final acquittal, even the voicing of suspicions regarding an accuseds innocence is no longer admissible. 50.
The Court of Appeal's finding, however, goes further than the voicing of mere suspicions.
It amounts to a determination of the applicants guilt without the applicant having been found guilty according to law (compare Baars v The Netherlands, (2003) 39 EHRR 538, para 31). 51.
There has accordingly been a violation of article 6(2).
This passage might be read as supporting one or more of the following propositions in relation to confiscation proceedings, by which I mean proceedings that require payment by a defendant of a sum equivalent to the value of property derived directly or indirectly from crime: i) Where a defendant has been tried and acquitted of an offence no claim can be based upon an assertion that he committed that offence. ii) In no case can confiscation be ordered unless it is proved to the criminal standard that the defendant committed the offences from which the property is alleged to have been derived. iii) Where it is not proved by independent evidence that the defendant possesses or possessed property for which there is no innocent explanation, but asserted that this is to be inferred from the fact that he committed a crime or crimes, the latter fact must be proved according to the criminal standard of proof.
The first proposition can readily be deduced from paras 48, 49 and 50.
None the less, as I have already indicated, I believe that this proposition is contrary to principle.
If confiscation proceedings do not involve a criminal charge, but are subject to the civil standard of proof, I see no reason in principle why confiscation should not be based on evidence that satisfies the civil standard, notwithstanding that it has proved insufficiently compelling to found a conviction on application of the criminal standard.
At all events, insofar as other Strasbourg jurisprudence supports the first proposition, it is only in circumstances where there is a procedural link between the criminal prosecution and the subsequent confiscation proceedings.
There was no such link in the present case.
The acquittal was in Portugal and the recovery proceedings here in England.
Furthermore, the evidence in the latter ranged much wider than the evidence that was relied upon in the Portuguese prosecution.
The third proposition is also one that can readily be derived from the passages cited in para 44.
That proposition would not, however, put the decision of Griffith Williams J in doubt, for that decision was founded on property in the hands of the appellant whose provenance had not been sufficiently explained.
The second proposition is the critical one in the present case.
If it is sound this appeal must be allowed, for Griffith Williams J applied the civil, not the criminal standard of proof.
In Briggs Price I held that the proposition could not properly be derived from Geerings.
I remain of that view.
The second proposition is inconsistent with the decisions in Phillips and van Offeren.
The ECtHR in Geerings did not purport to depart from those decisions.
On the contrary, in para 45 it expressly distinguished those cases on the basis that there were additional features in Geerings.
Briggs Price
The procedural position in Briggs Price was, happily, unusual.
It is summarised in paras 8 to 15 of my speech in that case.
To summarise that summary, the appellant had been convicted of conspiring to import heroin.
The conspiracy was, however, never implemented, so it produced no benefit.
Evidence was adduced at the trial, however, that the appellant had carried on substantial dealings in cannabis.
After his conviction the trial judge embarked on confiscation proceedings under the Drug Trafficking Act 1994.
He held, on the basis of the evidence that he had heard about the appellants cannabis dealing that he was satisfied that the appellant had benefited from such dealing to the extent of at least 2,628,490 and made a confiscation order in that sum.
The judge made it clear that he was satisfied that the appellants involvement in dealing in cannabis had been proved to the criminal standard.
The House was unanimous in finding that the judge had been satisfied on the evidence to the criminal standard of proof that the appellant had benefited from cannabis dealing to the extent found.
Thus, even if article 6(2) applied to the confiscation exercise, its requirement that the appellants criminal behaviour should be established according to the criminal standard of proof had been satisfied.
The House gave, however, lengthy obiter consideration to the question of whether, taking due account of the decision in Geerings, the confiscation order could only be made if the judge was satisfied to the criminal standard of proof that the appellant had committed the cannabis offences in respect of which evidence had been led at his trial.
At paras 38 to 41 in Briggs Price I gave my reasons for concluding that Geerings did not support the proposition that, in confiscation proceedings, the commission by the defendant of the offences from which benefit had been derived had to be proved to the criminal, rather than the civil, standard of proof.
At paras 112 to 132 Lord Mance carried out a detailed analysis of the Strasbourg jurisprudence, culminating in Geerings.
He also decided that this did not justify the conclusion that article 6(2) applied to the confiscation order procedure, nor to proving the commission of criminal offences as part of that procedure.
Lord Rodger expressed a contrary view at para 79.
He concluded that in confiscation proceedings the commission of the criminal offences from which the relevant benefit was derived had to be proved to the criminal standard of proof, although the derivation of the benefit could be proved to the civil standard.
In para 77 he summarised his reason for so concluding: Although I do not share his view that article 6(2) applies, I have none the less reached the same conclusion as Lord Brown on the standard of proof.
If a presumption of innocence is implied into article 6(1), then it, too, must require that the person be proved guilty according to law.
In the context of a criminal trial, the standard of proof, according to our law, is beyond reasonable doubt.
Indeed, if that were not the position, the Crown could ask the court to make a confiscation order on the basis of an alleged benefit from a specific offence of which the defendant would have been acquitted if he had been prosecuted for it.
Lord Neuberger of Abbotsbury at para 152 agreed with Lord Rodgers
conclusions on standard of proof.
Lord Brown of Eaton under Heywood concluded that Geerings established the third of the propositions that I have set out at para 45 above.
His reasoning is set out in the following passage from his opinion: 94.
I understand the Court's reasoning in paras 46 and 47 to amount to this: the prosecution must either demonstrate that the defendant holds or has held assets the provenance of which he cannot satisfactorily explain (as in Phillips and van Offeren: see para 44), or must establish beyond reasonable doubt that the defendant has committed some other offence (or offences) from which it can be presumed that he obtained advantage.
In the latter case, of course, article 6(2) applies but is satisfied.
Conclusions
The views on standard of proof expressed in Briggs Price by members of the House were obiter but the application of the common ground in the views of Lord Phillips, Lord Brown and Lord Mance leads to the following conclusion.
The commission by the appellants in the present case of criminal conduct from which the property that they held was derived had to be established according to the civil and not the criminal standard of proof.
For the reasons that I have given that remains my conclusion.
It is a conclusion which, prior to Geerings, appeared to be firmly founded on the decision of the Privy Council in McIntosh v Lord Advocate [2001] UKPC D1; [2003] 1 AC 1078.
In my view that foundation is unshaken.
The starting point in this case is the possession of property by the appellants for whose provenance they were unable to provide a legitimate explanation.
There was an abundance of evidence, set out at length by the judge with great care, which implicated them in criminal activity that provided the explanation for the property that they owned.
The judge rightly applied the civil standard of proof, but on my reading of his judgment he would have been satisfied to the criminal standard of the appellants wrongdoing.
For the reasons that I have given I would dismiss the appeal in relation to the first issue.
LORD CLARKE (WITH WHOM LORD PHILLIPS, LORD MANCE, LORD JUDGE AND LORD REED AGREE)
The first issue
Lord Phillips and Lord Dyson and, to a lesser extent, Lord Brown have discussed the Strasbourg jurisprudence at some length.
As I read their judgments, however, their view that the appeal should be dismissed on the first issue does not depend upon that analysis.
I agree with Lord Phillips opinion expressed at para 35 (and those of Lord Brown at para 111 and Lord Dyson at para 133) that on no view of the Strasbourg jurisprudence does it support the submission that Mr Gales acquittal in Portugal precludes the English court in proceedings under POCA from considering the evidence that formed the basis of the charges in Portugal.
There is here no procedural link between the two sets of proceedings.
As to the standard of proof, I agree with Lord Phillips that the Strasbourg jurisprudence does not support the proposition (ie the second proposition in para 43 above) that in no case can confiscation be ordered unless it is proved to the criminal standard that the defendant committed the offences from which the property is said to have been derived.
I agree with his conclusion and reasons summarised in para 54 to the effect that the commission of criminal conduct from which the property the appellants held was derived had to be established according to the civil and not the criminal standard of proof.
I also agree with his conclusion in para 55 that there was ample evidence upon which the judge could find that the civil standard of proof was satisfied.
Lord Dyson concludes at paras 141 and 142 that the judge did not impute criminal liability to the appellants and that the judges approach to the evidence was correct.
I agree.
For these reasons I too would dismiss the appeal on the first issue.
This conclusion does not involve a detailed consideration of the issues raised by the Strasbourg jurisprudence or a resolution of the issues or potential issue identified by Lord Phillips and Lord Dyson.
I would prefer to defer reaching definitive conclusions on them until they require a decision on specific facts.
I would only add two points.
First, I agree with Lord Brown that it is highly desirable that these issues should be considered by the Grand Chamber in Strasbourg in order to clarify and rationalise what he aptly calls this whole confusing area.
Secondly, I note that in the recent case of R (Adams) v Secretary of State for Justice (JUSTICE intervening) [2011] UKSC 18; [2011] 2 WLR 1180, where some of these issues were touched on, Lord Hope said at para 111 that the principle that is applied in Strasbourg is that it is not open to a state to undermine the effect of an acquittal.
It appears to me that that is indeed the underlying principle and that if, as here and indeed in Adams, the effect of the acquittal is not undermined there should be no question of holding that there is any conflict with the presumption of innocence enshrined in article 6(2) of the European Convention on Human Rights.
Issue 2 Introduction
The second issue in this appeal relates to costs.
It raises a single question of principle.
That question is whether an order for costs made in favour of SOCA against a person against whom a recovery order has been made under section 266 of the Proceeds of Crime Act 2002 (the 2002 Act) can include the investigation costs incurred by an interim receiver (the receiver) appointed under section 246 of the 2002 Act.
Griffith Williams J (the judge) made a recovery order against the appellants on 2 June 2009.
By a later order of 6 July 2009, the judge ordered the appellants to pay SOCAs costs but refused an application that those costs should include the remuneration of the interim receiver in respect of his investigation.
The application for costs was made pursuant to the jurisdiction conferred on the court by section 51(1) of the Senior Courts Act 1981 (the SCA).
In refusing to make the part of the order relating to the costs of the investigation, the judge followed the decision of the Northern Ireland Court of Appeal in SOCA v Wilson [2009] NICA 20; [2009] NI 28.
In the instant case the Court of Appeal allowed an appeal against that refusal.
In doing so, it declined to follow SOCA v Wilson.
On 29 July 2010 it ordered that the appellants pay SOCAs legal costs of and occasioned by the proceedings against them on an indemnity basis and that they pay to SOCA the receivers remuneration for his investigative function on the standard basis.
It directed that in each case the costs should be subject to detailed assessment.
No such assessment has yet taken place.
The question in this part of the appeal is whether the Court of Appeal erred in principle in ordering the appellants to pay to SOCA the costs of the receivers investigation.
The appointment of the receiver and his powers and duties
On 28 July 2005, on the application of the Director of the Assets Recovery Agency (the functions of which were transferred to SOCA on 1 April 2008), Collins J made an interim receiving order and appointed Mr James Earp as the receiver.
The order was made under section 246 of the 2002 Act, which is contained in Part 5.
Paras 2 to 4 of the order, which appear under the heading detention, custody, preservation and custody of property, provided inter alia that the appellants must not remove the property identified in a schedule from England and Wales or in any way dispose of or deal with the property and that they must transfer monies to an account specified by the receiver and deliver certain property into his possession.
Under the heading of disclosure, paras 5 to 8 made detailed provision for disclosure of the existence and whereabouts of the appellants assets.
Para 9 set out the powers of the receiver, which were stated to be in accordance with Schedule 6 to the 2002 Act and to be without prejudice to any existing powers that the receiver might have whether by statute or otherwise.
It included powers to seize property, to take possession of property and to manage it, to enter and search premises, to execute all such documents on behalf of the appellants as might be necessary to manage the property, to require the appellants and others to take such steps as may be required to enable the receivership to be conducted and to obtain information from the appellants and others.
In addition it included a power to appoint lawyers, accountants and others to advise and/or act on behalf of the receiver and a power to bring proceedings in the name of or on behalf of the appellants against any person having possession of relevant property.
In short the powers were very extensive indeed.
Paras 11 to 14 of the order set out the duties of the receiver.
By para 11 it provided that, pursuant to section 247(2)(a) of the 2002 Act, the receiver must consider such information and documents as were obtained by him in pursuance of the order to establish whether or not the property in the schedule was recoverable property or associated property and, if the latter, to what extent.
By para 12, it provided that, pursuant to section 247(2)(b), the receiver must take all reasonable and necessary steps to establish whether or not any other property was recoverable property (in relation to the same unlawful conduct) and, if so, who was holding it.
The order also provided by paras 13 and 14 that the receiver must provide certain information to SOCA and to the court and make a report to SOCA under section 255(1) and (2) respectively.
It can thus be seen that the receiver had both extensive powers and duties of investigation under the order.
He also had powers of management of the relevant property.
The order further provided, in para 26, that the receiver could charge for his services and that he must prepare and serve on SOCA accounts in accordance with terms set out in a letter dated 19 July 2005 inviting him to accept nomination as an interim receiver.
The letter enclosed a draft Memorandum of Understanding (MOU) and a draft of the proposed order.
It also described the property in some detail.
It made it clear that the terms of the MOU formed part of the terms upon which the receiver was to proceed.
Although the MOU states that it was not (and was not intended to be) a binding contract, it was a detailed document which provided for the assessment that the receiver was to carry out and made provision for the fees to be charged and the accounts to be kept.
For example, it provided for bills to be submitted and for them to be paid by SOCA within 28 days.
The MOU was signed by the receiver on 25 July 2005.
As stated above, the order was made under section 246 of the 2002 Act.
By section 246(2), an interim receiving order is an order for (a) the detention, custody or preservation of property, and (b) the appointment of an interim receiver.
By section 246(7) SOCA may not nominate an interim receiver who is a member of its staff.
Section 247 defines the functions of the interim receiver, so far as relevant, as follows: (1) An interim receiving order may authorise or require the interim receiver (a) to exercise any of the powers mentioned in Schedule 6, (b) to take any other steps the court thinks appropriate, for the purpose of securing the detention, custody or preservation of the property to which the order applies or of taking any steps under subsection (2). (2) An interim receiving order must require the interim receiver to take any steps which the court thinks necessary to establish (a) whether or not the property to which the order applies is recoverable property or associated property, (b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if it is, who holds it.
Section 255 provides that an interim receiving order must require the receiver to report his findings to the court.
The combined effect of section 246(7) and section 247(2) is that the interim receiving order must provide that the interim receiver will conduct the investigation.
Schedule 6 provides for an interim receiver to have powers ancillary to those contained in section 247.
They include a power to seize property to which the order applies; a power (subject to certain safeguards) to obtain information or to require a person to answer any question; and powers of entry and search.
They also include in paragraph 5(1) a power to manage any property to which the order applies.
By sub paragraph (2), managing property includes (a) selling or otherwise disposing of assets comprised in the property which are perishable or which ought to be disposed of before their value diminishes, (b) where the property comprises assets of a trade or business, carrying on, or arranging for another to carry on, the trade or business, and (c) incurring capital expenditure in respect of the property.
The provision that there is a power to sell only where assets are perishable or diminishing in value is consistent with the fact that the receiver is only an interim receiver and that the order is intended to hold the ring until the question whether a recovery order should be made is resolved.
It may be noted that these powers are different both from the powers of a trustee appointed under a recovery order (see below) and the powers of a receiver appointed under section 48, which is in Part 2 of the 2002 Act and applies where the court makes a restraint order.
Those powers are set out in section 49.
By section 49(2)(d) the court may confer on such a receiver the power to realise so much of the property as is necessary to meet the receivers remuneration and expenses.
Moreover, by contrast with the position of an interim receiver set out in paragraph 5(2), as explained above, where the power to sell property is limited to perishable property or property of diminishing value, section 49(10) provides that the power of managing or otherwise dealing in property referred to in section 49(2)(b) includes selling the property or any part of it.
The investigation
The receivers investigation took over three years, culminating in a final report of over 400 pages.
That was at least in part because of the failure on the part of Mr Gale to co operate with the receiver.
Toulson LJ summarised the position at [2010] 1 WLR 2881, paras 90 92 as follows: 90.
Obtaining the information ultimately set out in the receiver's report, which led to the judge making the recovery order, proved to be a lengthy, complicated and expensive process, because of the deliberately obscure way in which Mr Gale had conducted his financial affairs and his persistent and deliberate failure to cooperate with the receiver's investigation. 91. 4.
It is alleged that the overall evidence establishes that DG has been leading a life of serial drug trafficking, money laundering In his judgment the judge said, at paras 4 and 5: and tax evasion; it is alleged that he went to extreme lengths to avoid detection by using: (i) a web of lies, false names, multiple passports, nominees and offshore corporate fronts; (ii) at least 68 bank accounts both on and off shore and in a number of different jurisdictions which together have received millions of pounds from unidentified sources; (iii) needlessly complicated bank transfers and (iv) fleeing his country of residence (from the United Kingdom to Spain, from Spain to the United States of America and from the United States of America to Portugal via the Bahamas) when he feared the authorities were or may be interested in his criminal activities 5.
It is alleged that the absence in large part due to his deliberate failure to co operate with the receiver's investigation of any paper trail of records, financial documents, accounts, invoices, receipts, bank statements and tax returns and any details of business transactions, customers, suppliers and profits establishes that the millions of pounds he acquired could not have been acquired through a legitimate business or businesses. 92.
It is clear from the details set out in the judge's comprehensive judgment that he accepted the allegations that Mr Gale had gone to extreme lengths to avoid detection, by the methods identified by the receiver, and had deliberately failed to co operate with the receiver's investigation.
The material assembled by the receiver was therefore a painstaking task and one which was necessary in order for the agency to succeed in the civil recovery proceedings brought by it against Mr Gale.
SOCA has paid the interim receiver in respect of investigation costs said to have totalled some 1m.
It seeks to recover those costs from the appellants.
The recovery order
As already stated, on 2 June 2009, the judge made a recovery order under section 266 of the 2002 Act against the appellants in respect of assets valued at some 2m.
By the same order, Mr James Earp was appointed trustee for civil recovery pursuant to section 267(1) of the 2002 Act and the property was vested in him.
The functions of the trustee for civil recovery are set out in section 267.
They are of course much greater than the powers of an interim receiver because they extend to realising the value of the assets for the benefit of SOCA.
Unlike an interim receiving order, the purpose of a recovery order and the appointment of a trustee for civil recovery is not merely to hold the ring but to sell the assets and pay the proceeds of sale to SOCA.
Jurisdiction to award costs
The courts jurisdiction to award costs in civil proceedings is governed by section 51 of the SCA, which provides: (1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal, the High Court and any county court (a) (b) (c) shall be in the discretion of the court. (2) Without prejudice to any general power to make rules of court, such rules may make provisions for regulating matters relating to the costs of those proceedings, including, in particular, prescribing scales of costs to be paid to legal or other representatives or for securing that the amount awarded to a party in respect of the costs to be paid by him to such representatives is not limited to what would have been payable by him to them if he had not been awarded costs. (3) The court shall have full power to determine by whom and to what extent the costs are to be paid.
As I read that section, costs are in principle recoverable if they are either costs of or incidental to the relevant proceedings.
That is because both the costs of and incidental to the proceedings are in the discretion of the court.
As stated by Aikens LJ at para 134 by reference to the judgment of Lord Goff in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, section 51 of the SCA 1981 confers a wide jurisdiction on the courts to make orders as to costs.
That is so but, as Lord Goff also observed, at p 975, the exercise of this jurisdiction may be limited: It is, I consider, important to remember that section 51(1) of the Act of 1981 is concerned with the jurisdiction of the court to make orders as to costs.
Furthermore, it is not to be forgotten that the jurisdiction conferred by the subsection is expressed to be subject to rules of court, as was the power conferred by section 5 of the Act of 1890.
It is therefore open to the rule making authority (now the Supreme Court Rule Committee) to make rules which control the exercise of the courts jurisdiction under section 51(1).
In these circumstances, it is not surprising to find the jurisdiction conferred under section 51(1), like its predecessors, to be expressed in wide terms.
The subsection simply provides that the court shall have full power to determine by whomthe costs are to be paid.
Such a provision is consistent with a policy under which jurisdiction to exercise the relevant discretionary power is expressed in wide terms, thus ensuring that the court has, so far as possible, freedom of action, leaving it to the rule making authority to control the exercise of discretion (if it thinks it right to do so) by the making of rules of court, and to the appellate courts to establish principles upon which the discretionary power may, within the framework of the statute and the applicable rules of court, be exercised.
It follows that, as Aikens LJ correctly stated at para 133, the legal framework yields two questions: first, are the expenses of the interim receiver costs of and incidental to the civil recovery proceedings so that they can be the subject of a costs order in the proceedings; and, secondly, if they are, is there any statutory rule or provision or authority that prevents the court from having jurisdiction to order that the appellants bear the costs of the receiver?
It is in my opinion appropriate to pose these two questions.
It is important to note that the question in this appeal is not what powers an interim receiver has to charge for his services or how those powers may be enforced and against what or whom.
The receivers right to recover his remuneration is entirely contained in the order of the court and the MOU.
He is entitled to recover his reasonable remuneration from SOCA.
The question here is whether SOCA is in principle entitled to claim against the appellants by way of costs the reasonable sums it has paid or is liable to pay to the receiver in respect of his investigation carried out pursuant to the interim receiving order.
It is therefore appropriate to consider first whether those costs are in principle costs of and incidental to the civil recovery proceedings within the meaning of section 51 of the SCA and, if so, whether there is a statutory rule or provision or authority that prevents the court from having jurisdiction.
Are the expenses of the interim receiver costs of and incidental to the civil recovery proceedings?
SOCA submits that the investigation costs which it has reasonably paid to the receiver are part of the costs of or incidental to the civil recovery proceedings.
The essence of its argument is that the investigatory work carried out by the receiver had to be done in order to bring the civil recovery claim and so the costs of the investigation are properly costs of or incidental to the civil recovery proceedings.
The appellants submit, by contrast, that the receivers remuneration is an expense of the receivership and not a cost of or incidental to the proceedings in which he is appointed.
In support of this submission they rely on the judgment of the Northern Ireland Court of Appeal in SOCA v Wilson, as well as the decisions in Capewell v Revenue and Customs Comrs [2007] UKHL 2, [2007] 1 WLR 386, Boehm v Goodall [1911] 1 Ch 155, Hughes v Customs and Excise Comrs [2002] EWCA Civ 734, [2003] 1 WLR 177, In re Andrews [1999] 1 WLR 1236 and Evans v Clayhope Properties Ltd [1988] 1 WLR 358.
Before discussing the cases, it is convenient to consider the position as a matter of principle without reference to the authorities.
The statutory question is clearly identified.
It is whether the particular costs claimed are costs of or incidental to the proceedings.
In the case of the investigative costs incurred by the receiver and reimbursed by SOCA under the MOU (including the reasonable remuneration of the receiver) the answer to the question is in my opinion plainly in the affirmative.
The position was succinctly put by Toulson LJ at para 93, after paras 90 to 92 quoted above.
He said this: Unless compelled by authority to hold otherwise, I would regard the costs incurred by the agency in paying the receiver to investigate Mr Gale's finances and assemble that material as costs of the litigation, which Mr Gale ought justly to pay, and I would not see such an order as inconsistent with the statutory scheme.
I entirely agree.
I also agree with Aikens LJs conclusion to much the same effect at para 134.
This can be seen clearly from both the powers and the duties of an interim receiver under the order.
In particular, it can be seen from the duties of such a receiver set out above, namely (a) to consider the information and documents obtained by him under the order in order to establish whether or not the property in the schedule was recoverable property or associated property and (b) to take all reasonable and necessary steps to establish whether or not any other property was recoverable property (in relation to the same unlawful conduct) and, if so, who was holding it.
His duty was then to report to both SOCA and the court.
In order to bring a claim for civil recovery under Part 5 of the 2002 Act, SOCA had to obtain sufficient information to demonstrate that property in the hands of the appellants was recoverable property within the meaning of sections 304 310 of the 2002 Act.
This required investigative work to be done.
It was entirely reasonable to appoint an interim receiver in order to carry out the investigation and to hold the ring in the meantime.
Indeed, it is difficult to see how SOCA could in practice proceed without the appointment of an interim receiver and, as stated above, section 246(7) provides that it could not nominate a member of its staff to be the interim receiver appointed.
In these circumstances, it seems to me that the investigation was an essential part of the civil recovery proceedings.
I can see no reason in principle why these costs of the receivership cannot at the same time be costs of or incidental to the civil recovery proceedings.
Is there any statutory rule or provision or authority that prevents the court from having jurisdiction to order that the appellants bear the investigation costs?
This is the second question posed by Aikens LJ.
There is to my mind no statutory rule or provision that leads to the conclusion that these costs are not costs of or incidental to the civil recovery proceedings.
The powers of the receiver, which are contained in section 247 of and Schedule 6 to the 2002 Act, are described above.
They do not include a lien on the property in respect of his fees and do not entitle him to sell the property or part of it in order to meet his fees.
Nor does the order appointing the receiver in this case.
As between SOCA and the receiver, the latters right to remuneration is contained solely in the interim receiving order and the MOU.
Some reference was made to section 280(3) of the 2002 Act, which provides that SOCA may apply moneys received by it under a recovery order in making payment of the remuneration and expenses of (a) the trustee or (b) any interim receiver appointed in, or in anticipation of, the proceedings for the recovery order.
That subsection must be set in its context.
Section 266(2) provides that any recovery order made by the court must vest the recoverable property in the trustee for civil recovery.
There is nothing to prevent the interim receiver being appointed also as trustee, as occurred in this case, but the powers and duties of a trustee are entirely distinct from those of an interim receiver and the fact that they were the same person is irrelevant for the purposes of the issues in this appeal.
Section 267 states that in performing his functions the trustee acts on behalf of the enforcement authority and must comply with any direction given by the authority.
The sums paid to SOCA by the trustee will be or include the net proceeds of sale of the appellants property after the trustee has first made the payments identified by section 280(2).
I agree with the view expressed by Aikens LJ at para 135 that there is nothing in section 280(3), or any other provision of the 2002 Act, to prevent the cost to SOCA of paying an interim receiver from being part of the costs of or incidental to the civil recovery proceedings.
As Aikens LJ put it, the subsection simply grants SOCA the power to pay the interim receiver out of sums it receives from the trustee for civil recovery, who is the person identified in the legislation who will give effect to a recovery order made by the court.
The fact that SOCA has a discretion to use those sums to pay the interim receiver does not seem to me to be relevant to the question whether the costs were costs of and incidental to the proceedings.
As I see it, the liability, if ordered, to pay the costs of the proceedings is distinct from, but ancillary to, the liability in the civil recovery order itself.
I also agree with Aikens LJ at para 136 that there is nothing in CPR Pt 44 or Pt 69 which precludes the court from making an order that a party to civil recovery proceedings must pay as costs the remuneration of a court appointed receiver.
CPR Pt 44 contains general rules about costs.
It is to be noted that by CPR r 44.4(1) costs will not be allowed which have been unreasonably incurred or are unreasonable in amount.
CPR Pt 69 contains general rules about the courts power to appoint a receiver.
CPR r 69.7 provides: (1) A receiver may only charge for his services if the court (a) so directs; and (b) specifies the basis on which the receiver is to be remunerated. (2) The court may specify (a) who is to be responsible for paying the receiver; and (b) the fund or property from which the receiver is to recover his remuneration.
Under CPR r 69.7 the court has a discretion to specify who is to be responsible for paying the receiver appointed by court order.
It does not follow from the terms of that provision, or by necessary implication, that the court may not make an order that a party to civil proceedings pay to the other party costs which include the remuneration of the interim receiver.
CPR r 69.7 regulates the position as between the receiver and others, whereas section 51 of the SCA 1981 and CPR Pt 44 regulate the position as between the parties to the litigation.
What then of the authorities? First, there is no question but that costs incurred prior to proceedings, such as investigation costs, are capable in principle of being recoverable as costs of or incidental to proceedings.
This principle was summarised by Lord Hanworth MR in Socit Anonyme Pcheries Ostendaises v Merchants Marine Insurance Co [1928] 1 KB 750 at p 757: There is power in the master to allow costs incurred before action brought, and if the costs are in respect of materials ultimately proving of use and service in the action, the master has a discretion to allow these costs.
It is on the basis of this general principle that costs of attending an inquest have been held to be recoverable as costs of related civil proceedings where evidence referable to attendance at the inquest was potentially relevant to those proceedings: see Ross v Bowbelle (Owners) (Note) [1997] 1 WLR 1159 and Roach v Home Office [2009] EWHC 312, [2010] QB 256.
It is commonplace for parties to proceedings to instruct experts of all kinds in connection with litigation.
They include forensic accountants in a fraud case and consultants of all kinds in the investigation of, say, a maritime casualty or a death in a hospital.
The reasonable amounts paid to such experts are treated as the costs of and incidental to the proceedings.
In my opinion reasonable sums paid by SOCA to an interim receiver, at least in respect of his investigation should in principle be regarded in the same way.
The appellants rely upon the cases referred to in para 78 above as support for the general proposition that remuneration of a receiver is not a cost of or incidental to civil recovery proceedings.
It is convenient to begin with the decision of the Northern Ireland Court of Appeal in SOCA v Wilson, which raised the very question arising in this appeal.
As in the instant case, SOCA sought to recover expenses and remuneration paid to an interim receiver appointed under Part 5 of the 2002 Act as costs of the civil recovery proceedings.
Girvan LJ, giving the judgment of the court, held that such expenses and remuneration were not costs of or relating to the civil recovery proceedings.
Girvan LJ began his analysis by observing at para 11, by reference to Hopkins v Worcester and Birmingham Canal Proprietors (1868) LR 6 Eq 437, that the equitable jurisdiction to appoint a receiver is of ancient origin.
He stated the principle as being that the receiver, being appointed by the court, is an officer of the court, and his duty is to act impartially in administering the property to which the receivership extends and to do so under the direction and supervision of the court.
He referred to the statement by Lord Walker in Capewell v Revenue and Customs Comrs [2007] UKHL 2, [2007] 1 WLR 386, at para 21 that it has always been a basic principle of receivership that the receiver is entitled to be indemnified in respect of his costs and expenses, and his remuneration if he is entitled to be remunerated, out of the assets in his hands as receiver.
Lord Walker approved the principle stated by Warrington J in Boehm v Goodall [1911] 1 Ch 155 at 161 as follows: Such a receiver and manager [that is one appointed by the court] is not the agent of the parties, he is not a trustee for them, and they cannot control him.
He may as far as they are concerned, incur expenses or liabilities without their having a say in the matter.
I think it is of the utmost importance that receivers and managers in this position should know that they must look for their indemnity to the assets which are under the control of the court.
The court itself cannot indemnify receivers but it can, and will, do so out of the assets so far as they extend, for expenses properly incurred; but it cannot go further.
It would be an extreme hardship in most cases to parties to an action if they were to be held personally liable for expenses incurred by receivers and managers over which they have no control.
Lord Walker noted that some doubts had subsequently been expressed as to whether a receivers remuneration could be recovered as litigation costs.
Lord Walker further approved the statement by Simon Brown LJ in Hughes v Customs and Excise Comrs [2003] 1 WLR 177 at para 50 that statutory receivers are to be treated precisely as their common law counterparts save to the extent that the legislation otherwise provides.
At para 23 Lord Walker set out this passage from para 45 of the judgment of Simon Brown LJ, saying that it sets out the argument accepted by the Court of Appeal: Mr Mitchell's central argument to the contrary focuses, first, on the use of the word 'receiver' to describe the person being appointed under this legislation to conserve, manage and realise assets.
A receiver is a recognisable creature of the common law, an officer of the court, someone whose essential rights, powers and duties have been established down the years.
It is not apparently disputed that a receiver appointed under the CJA despite the statute's silence on the matter will have the right, for example, to bring an action or to sell property.
Why then, unless the statute expressly so provides, should he be denied the other ordinary consequences of his receivership, including not least the right (indeed the requirement) to recover the costs of the receivership from the assets under his control?
Girvan LJ regarded those principles as applicable here, that is under Part 5 of the 2002 Act.
He noted at para 12 that, under Part 2 of the 2002 Act dealing with confiscation proceedings, management receivers may be appointed in England under section 48 and enforcement receivers under section 50 and that in Northern Ireland the equivalent provisions are sections 196 and 198.
Similar provisions apply in Part 3 in relation to confiscation proceedings in Scotland, the equivalent of a receiver there being called an administrator.
Under the earlier confiscatory statutory provisions in the Criminal Justice Act 1988 (the CJA 1988) and the Drug Trafficking Act 1994 statutory powers had also been introduced for the appointment of receivers.
I return below to the question whether the principles in those cases apply to the investigation costs of an interim receiver.
Girvan LJ further referred to the decision in In re Andrews [1999] 1 WLR 1236.
In that case the defendant was acquitted of the offence in respect of which a receivership order had been made.
He was awarded his costs out of central funds but the taxing master held that these costs did not include the costs of the receivership proceedings.
The receiver deducted her expenses out of the property released in consequence of the discharge of the order.
The defendant applied for an order that the prosecution pay his costs of the receivership proceedings.
The court concluded that the receiver was entitled to recover her remuneration and expenses from the assets under the court's control.
A party seeking appointment of a receiver is not thereby liable for his remuneration.
A receiver had a lien for his costs and remuneration against the assets which gave him a continuing right to possession of the assets even after discharge of the receivership order.
The receiver's remuneration was an expense of the receivership and not a cost of or an incidental to the proceedings and thus not within the courts discretionary jurisdiction to award costs.
As Aldous LJ put it succinctly at [1999] 1 WLR 1236, 1248F G: The remuneration of a receiver is an expense of the receivership, not costs incidental to the proceedings in which he is appointed.
Girvan LJ also relied upon the principle stated by Longmore LJ in Sinclair v Glatt [2009] EWCA Civ 176, [2009] 1 WLR 1845, at para 1: It is now settled that such a receiver [appointed pursuant to section 77 of the Criminal Justice Act 1988], like a receiver at common law, is entitled to recover his remuneration, costs and expenses from the assets which he has been appointed to receive ('the receivership assets').
That is so whether or not he ought to have been appointed in the first place or the order appointing him has been discharged, see Mellor v Mellor [1992] 1 WLR 517.
Even if the defendant, whose assets have been caught by the order appointing the receiver is subsequently acquitted or has his conviction quashed, the receivership assets must bear the costs of the receivership; this is also the position if, as in the present case, confiscation orders are made but subsequently quashed, Hughes v Customs and Excise Comrs .
Even if the receiver carries on his receivership unnecessarily and should have agreed that his receivership should have been discharged at a time before a court application is made to terminate his receivership, the receivership assets bear those costs reasonably incurred up to the date he is actually discharged: see
Capewell v Revenue and Customs Comrs
Girvan LJ noted that in In re Andrews and Sinclair v Glatt the Court of Appeal held that the expense of a receiver appointed under the confiscatory regime in Part 6 of the CJA 1988 was an expense of the receivership which should be met out of the assets in the receivership.
He rejected the submission made on behalf of SOCA that the position of interim receivers appointed under Part 5 of the 2002 Act could be distinguished from other statutory receivers on account of the wide ranging investigatory powers given to interim receivers in Part 5 cases.
He observed that receivers appointed by way of equitable relief or under confiscatory statutory provisions frequently have to carry out extensive investigations to enable them to get in and protect the assets and that it had never been suggested that such investigation costs fell to be treated differently from other management costs.
Girvan LJ further noted that Part 5 of the 2002 Act had been enacted following case law such as In re Andrews.
In the light of that case law it was to be inferred that in England and Wales and Northern Ireland express provision for the costs of interim receivers was considered unnecessary because of the standard receivership lien on the assets for the receivers costs.
I respectfully disagree.
In my opinion the regime set out in Part 5 of the 2002 Act is distinguishable in important respects from that in the other legislation discussed in the cases.
As paras 79 to 86 show, Carnwath LJ was initially inclined to follow the decision in SOCA v Wilson.
However he was persuaded by the analysis of Toulson and Aikens LJJ that the cases relied upon by the appellants are distinguishable from this on the ground that the scheme under Part 5 is significantly different from those discussed in them.
I am also persuaded by the reasoning of Toulson and Aikens LJJ for these short reasons.
The critical feature of the other cases is that the receiver was left to look for his indemnity to the assets in his hands which are under the control of the court, as it was put in Boehm v Goodall in the passage quoted in para 89 above.
Then in the passage quoted at para 90 Simon Brown LJ described the receiver in Hughes as being the person appointed to conserve, manage and realise assets with the right to sell property.
He asked why, unless the statute expressly so provides, the receiver should be denied the other ordinary consequences of his receivership, including the right (and requirement) to recover the costs of the receivership from the assets under his control.
Similar principles were stated by Longmore LJ in Sinclair v Glatt.
The position of an interim receiver appointed under Part 5 of the 2002 Act is significantly different.
He has no power to sell the assets unless they are perishable or diminishing in value and he has no lien on the assets.
He is however entitled to recover his costs and remuneration from SOCA.
The power to sell is vested in the trustee, not in the interim receiver, and then only once a civil recovery order has been made.
Moreover the powers of the interim receiver are not merely to take possession of and to conserve the assets but to carry out an investigation into the question whether or not the assets are the proper subject of a recovery order.
More generally, I agree with the analysis of Aikens LJ at paras 137 to 140.
It was further said in the passage from Boehm v Goodall that it would be a hardship for parties to be held liable for the remuneration of receivers over whom they have no control.
However, that does not apply to these facts.
There is a much closer relationship between the parties and an interim receiver appointed under Part 5 of the 2002 Act than there was in the cases referred to.
The 2002 Act draws a clear distinction between a receiver appointed under Part 2, as for example under section 49 which, as already noted, by section 49(2)(d) expressly provides for payment of the costs of receivers appointed under Part 2 of the 2002 Act out of receivership assets and an interim receiver appointed under Part 5.
I would infer that the draftsman made an express decision not so to provide in the case of interim receivers appointed under Part 5.
I agree with Toulson LJ that, as he put it at para 104, there will be no extreme hardship if Mr Gale is ordered to pay the costs of investigating facts which he tried so hard to conceal and the costs of assembling the evidence which proved the case against him.
Although In re Andrews did involve a consideration of section 51 of the SCA, it was a very different case from this under a very different statute: see per Toulson LJ at paras 106 to 113.
In particular, he quoted a passage from the judgment of Ward LJ in which he said that it appeared to him that the true position was that the investigation of whether or not the defendant has suffered loss by reason of the receivership is an investigation which should be and ordinarily would be conducted in deciding whether or not damages should be awarded against the claimant for breach of the usual undertaking as to damages he would normally be required to give.
Under the Criminal Justice Act 1988 (the CJA 1988), compensation for loss resulting from a receivership was not to be ordered unless the court was satisfied that there had been some serious default on the part of a person concerned in the investigation or prosecution of the offence concerned.
As Toulson LJ said at para 111, in those circumstances Ward LJ concluded, with reluctance, that the expenses of the receivership were not to be regarded as costs of and incidental to the proceedings within the meaning of section 51 of the SCA.
I should however refer to the statement of Aldous LJ in In re Andrews quoted in para 92 above that the remuneration of a receiver is an expense of the receivership, not costs incidental to the proceedings in which he is appointed.
Taken at face value, that might suggest that the remuneration of a receiver can never be recoverable as costs of or incidental to litigation under section 51 of the SCA.
If Aldous LJ intended to state such a broad proposition, I respectfully differ from him.
I do not however think that he did.
As Toulson LJ observed at para 112, he was concerned with the problem which would result if the receiver's remuneration for running the company were to be treated as a cost of the proceedings recoverable by the successful appellant in circumstances where the company would not have traded as profitably as it did without the accountancy advice of the receiver.
He considered (like Ward LJ) that the application was really a claim for compensation dressed up as an application for an award of costs, and it was therefore very significant that by section 89 of the CJA 1988 Parliament had laid down a carefully regulated code for such a claim.
He concluded that section 89 was the proper avenue for a compensation claim of the kind being made by the appellant.
That is not to say that a claim by a party to proceedings who has obtained an order for the appointment of a receiver in respect of costs or remuneration which he has paid to a receiver can never be recovered from the other party to the proceedings under section 51 of the SCA.
All will depend upon the circumstances.
As Toulson LJ observed at para 113, this is a very different case from In re Andrews under a very different statutory scheme.
By contrast with the position in In re Andrews, SOCAs claim is not a concealed claim for a form of compensation for which the statute provides a regulated code.
It is a genuine claim for litigation costs and not a dressed up claim for something else.
Moreover, SOCA is not seeking to recover that part of the receivers costs or remuneration which relates to the costs of managing Mr Gale's assets.
It only seeks the costs of the investigation.
I agree with Toulson LJ that those costs would undoubtedly have been recoverable in principle as costs of the proceedings if the work had been done by anyone other than the receiver.
I also agree with him that the costs in their essential nature were not merely incidental but integral to the prosecution of the claim made by the agency against the appellants.
Finally, I agree with Aikens LJs approach to In re Andrews at paras 141 to 144.
The decisions in Hughes and in Capewell are also distinguishable on much the same basis.
Again I agree with the approach of Toulson LJ to both cases at paras 114 to 116 and 117 to 120 respectively and with the approach of Aikens LJ at para 146.
I note in passing that section 283 of the 2002 Act contains detailed provisions for compensation but there is, as I see it, no conflict between those provisions and the conclusion that the costs claimed here are within section 51 of the SCA.
Finally, I should refer to three further points made by Girvan LJ in SOCA v Wilson.
First, he noted that section 284(1) of the 2002 Act provides that Scottish Ministers are to reimburse an interim administrator or trustee for civil recovery appointed under Part 5 of the 2002 Act.
He expressed the view at para 17 that it is inherently unlikely that Parliament intended to confer protections on defendants in relation to administrators fees and costs in Scotland and not in England and Wales and Northern Ireland in relation to receivers fees and costs.
The problem with this reasoning is that it ignores the clear differences between section 284(1), which makes special provision for Scotland in order to meet the requirements of the Scotland Act 1998, and section 280(3), which (as stated above) gives the enforcement authority in England and Wales the power to apply any sum received by it from the trustee for civil recovery to make payments of the remuneration and expenses of a interim receiver appointed in the proceedings for the recovery order.
As Aikens LJ points out at para 147, neither provision prevents the enforcement authority from seeking to recover those sums as costs of and incidental to the recovery proceedings.
Secondly, Girvan LJ states, at para 18, that the policy behind civil recovery proceedings is to strip the defendant of criminal assets.
He points out that this objective is achieved by the recovery order even if part of the defendants assets go to the receiver.
Requiring them to meet the costs of the interim receivers investigation work would strip them of further assets and clear statutory wording would be needed to establish the states right to do so.
It is correct that clear statutory language is needed in order to require a party to meet such costs, but, in my opinion, for the reasons given above, such language is found in section 51 of the SCA 1981.
Thirdly, Girvan LJ makes the point that the costs and fees of the interim receiver cannot sensibly be considered as costs of SOCA since the interim receiver is independent and separate from SOCA so that his costs cannot be considered as costs incurred by SOCA as part of its costs of and incidental to the proceedings.
I respectfully disagree.
On the facts here SOCA had to bear the costs of the interim receiver in order to pursue the civil recovery proceedings and in order to obtain a recovery order.
In these circumstances, as I said earlier, they seem to me to be costs borne by SOCA in much the same way as other costs of instructing an expert would be.
Finally, it is important to note that this appeal is only concerned with the recovery by way of costs of investigation costs incurred by SOCA as a result of liability to the interim receiver.
It is not concerned with management costs.
I would leave open the question whether management costs could be treated as costs of or incidental to civil recovery proceedings until it arises for decision in a particular case.
CONCLUSION
For these reasons, which are largely the reasons they gave, I agree with Toulson and Aikens LJJ that the Court of Appeal in Northern Ireland reached the wrong conclusion in SOCA v Wilson.
The costs which SOCA was or is liable to pay to the receiver in respect of his investigation were costs of or incidental to the civil recovery proceedings and are in principle recoverable from the appellants.
I would therefore dismiss the appeal on this issue.
I would only add that by CPR r 44.4(1) costs will not be allowed which have been unreasonably incurred or are unreasonable in amount.
It follows that whether a particular item of costs claimed is recoverable in whole or in part will of course be a matter for the costs judge.
LORD BROWN
I too would dismiss both limbs of this appeal for the reasons given respectively by Lord Phillips and Lord Clarke with whose judgments I agree.
As will readily be appreciated, the conclusion arrived at by Lord Phillips on the standard of proof issue is in no way dependent on the view one takes with regard to the Sekanina v Austria (1993) 17 EHRR 221/ Ringvold v Norway (Application No 34964/97) (unreported) 11 February 2003) line of Strasbourg authority.
As Lord Phillips observes (para 35): On no view does this jurisprudence support Mr Mitchells submission that the appellants acquittal in Portugal precludes the English court in proceedings under POCA from considering the evidence that formed the basis of the charges in Portugal.
None the less however, it has been necessary to consider this jurisprudence in some detail and there appears to be some difference of opinion between us as to how logical and satisfactory it is.
Lord Phillips in the Discussion section of his judgment (para 32) find[s] unconvincing the attempts of the Strasbourg Court to distinguish between claims for compensation by an acquitted defendant and claims for compensation by a third party against an acquitted defendant and concludes that: this confusing area of Strasbourg law would benefit from consideration by the Grand Chamber.
Lord Dyson by contrast (para 131) would be less critical of the Strasbourg jurisprudence although he does not indicate whether he would exempt it from all criticism and, if not, what concerns he has about it.
I have to say that for my part I share Lord Phillips views on this matter.
Of course, as Lord Dyson more than once points out, judgments which determine an acquitted defendants entitlement to costs and/or compensation for detention on remand are in one sense closely linked to the criminal trial itself: but for the defendants acquittal these issues as to costs and compensation would simply not arise.
But it by no means follows from this that the criminal standard of proof (presumably with the burden still on the state) should apply equally to these linked claims, consequential and concomitant though clearly they can be characterised.
Lord Dyson suggests (para 132): If the outcome of the criminal proceedings is decisive for the civil proceedings, then there is a sufficiently close connection for article 6(2) to apply.
That assertion, however, to my mind begs the very question it purports to answer.
As already explained, the outcome of the criminal proceedings is only decisive for the civil proceedings in the sense that, but for the acquittal, these civil proceedings would not arise.
Unless, however, Strasbourg is really saying that a state has no option but to compensate an acquitted defendant for his costs incurred in securing his acquittal and his detention in custody meantime for which article 6 appears to me to provide no warrant whatsoever I cannot for the life of me see why the state should not decline to reimburse legal costs and withhold compensation for detention on remand unless the defendant can show on the balance of probabilities that he was in fact innocent.
Take a case where, following a defendants acquittal for rape, at one and the same time he is seeking compensation for his detention on remand and his victim is seeking compensation for his violation of her.
Is it really to be said that his claim falls to be determined on the criminal standard of proof (and must, therefore, be met); hers on the civil standard (and so may also be found established)? That seems to me nonsensical.
Obviously, in all proceedings following an acquittal the court should be astute to ensure that nothing that it says or decides is calculated to cast the least doubt upon the correctness of the acquittal.
But the point to be emphasised is that the acquittal is correct because, and only because, the prosecution failed in the criminal proceedings to establish beyond reasonable doubt that the defendant was guilty.
Not having been proved guilty to the criminal standard, the defendant is not thereafter to be branded a criminal and no criminal penalty can properly be exacted from him.
But, contrary to widespread popular misconception, acquittal does not prove the defendant innocent.
In the result, I too incline to the view expressed by Lord Phillips (para 34) that perhaps the only logical explanation of the Strasbourg case law is that applicants are being compensated for reputational damage when by a courts judgments or statements subsequent to an acquittal it appears nevertheless to be suggesting that the defendant should after all have been found guilty to the criminal standard.
I repeat, however, that what surely is now required is an authoritative Grand Chamber decision clarifying and rationalising this whole confusing area of the Courts jurisprudence.
LORD DYSON
The Proceeds of Crime Act 2002 (POCA) provides for two distinct mechanisms for the recovery of proceeds of crime: (i) confiscation by the Crown Court following conviction (Part 2); and (ii) civil recovery proceedings in the High Court, which may be instituted by the enforcement authority (The Serious Organised Crime Agency) to recover property which is, or represents, property obtained through unlawful conduct (recoverable property) (Part 5).
Section 241(1) provides that conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.
Section 241(3)(a) provides that the court must decide on a balance of probabilities whether it is proved that any matters alleged to constitute unlawful conduct have occurred.
I substantially agree with the reasons given by Lord Phillips (as well as those given by the Court of Appeal) for deciding the first issue in favour of SOCA and concluding that article 6(2) of the European Convention on Human Rights (the Convention) does not apply to civil recovery proceedings under Part 5 of POCA.
Because of the general importance of the issue, I wish to say in my own words why I have reached this conclusion.
Article 6(2) provides: Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.
The question raised by the first issue is whether proving unlawful conduct in civil recovery proceedings amounts to the bringing of a criminal charge so as to engage article 6(2).
The criminal procedural guarantees in article 6 apply to proceedings in which a person is, within the autonomous ECHR meaning, charged with a criminal offence.
Three criteria are taken into account when deciding whether a person is charged with a criminal offence, namely (i) the classification of the proceedings under national law, (ii) their essential nature and (iii) the type and severity of penalty to which the person is potentially exposed (see Engel v The Netherlands (No 1) (1976) 1 EHRR 647 at para 82) as applied in many decisions of the ECtHR such as, for example, Ringvold v Norway (Application No 34964/97) (unreported) 11 February 2003, at para 36.
These criteria are not hermetically sealed from each other.
As is made clear at para 82 of Engel, the classification under national law is only a starting point and the essential nature of the proceedings is of greater importance.
Application of the Engel criteria
There can be no doubt that, on the basis of an application of these three criteria, recovery proceedings under Part 5 of POCA are properly to be characterised as civil for article 6 purposes.
They are classified as civil under our domestic law: section 240(1)(a) of POCA provides that Part 5 has effect for the purposes of enabling the enforcement authority to recover, in civil proceedings property which is, or represents, property obtained through unlawful conduct (emphasis added).
The essential nature of the proceedings is civil.
The respondent to the proceedings is not charged with any offence.
He does not acquire a criminal conviction if he is required to deliver up property at the conclusion of the Part 5 proceedings.
None of the domestic criminal processes are in play.
On the contrary, as Kerr LCJ put it in Walsh v Director of the Assets Recovery Agency [2005] NICA 6, [2005] NI 383, at para 23: all the trappings of the proceedings are those normally associated with a civil claim.
These include the express provision that the standard of proof is on the balance of probabilities.
The nature of the proceedings is essentially different from that of criminal proceedings.
The claim can be brought whether a respondent has been convicted or acquitted, and irrespective of whether any criminal proceedings have been brought at all.
This was a factor which weighed with the ECtHR in Ringvold v Norway at para 38 when the court was considering whether article 6(2) applied to a claim for compensation by the alleged victim of a sexual offence against the alleged perpetrator.
The purpose of Part 5 proceedings is not to determine or punish for any particular offence.
Rather it is to ensure that property derived from criminal conduct is taken out of circulation.
It is also of importance that Part 5 proceedings operate in rem.
The governing concept is that of recoverable property which represents both property obtained directly by unlawful conduct and also property which represents the original property.
But the fact that, on an application of the Engel criteria, it is plain beyond argument that Part 5 proceedings are properly to be characterised as civil proceedings for the purposes of article 6 is not determinative of the question whether article 6(2) applies.
There is a line of Strasbourg decisions which show that, even if proceedings are properly characterised as civil on the basis of the Engel criteria, article 6(2) may nevertheless apply if the links between the proceedings and criminal proceedings are sufficiently close.
Sufficiently close link between criminal proceedings and civil proceedings to engage article 6(2).
It is explained in Ringvold at para 36 and the cases cited there that, in certain circumstances article 6(2) may apply to proceedings instituted after the discontinuation of criminal proceedings or following an acquittal, even if on an application of the Engel criteria those proceedings would be characterised as civil.
As the court said: Those judgments concerned proceedings relating to such matters as an accuseds obligation to bear court costs and prosecution expenses, a claim for reimbursement of his (or his heirs) necessary costs, or compensation for detention on remand, matters which were found to constitute a consequence and the concomitant of the criminal proceedings.
The focus of the inquiry is on whether the proceedings were the direct sequel or a consequence and the concomitant of the criminal proceedings (ibid at para 41).
Claims by an accused person following a discontinuation or acquittal for costs incurred as a result of the criminal proceedings and claims for compensation for detention are paradigm examples of such proceedings.
The link between such claims and the criminal proceedings is so close that article 6(2) applies to both of them.
The claims for compensation flow from the criminal proceedings.
But for these proceedings, there would be no claims.
As will become clear, the link was absent in Ringvold because, despite the applicants acquittal, the victims claim for compensation could succeed.
The compensation case was, therefore, not a direct sequel of the criminal proceedings.
Put another way, the outcome of the criminal proceedings was not decisive for the compensation case (Ringvold para 38).
There are several reported decisions of the ECtHR where an applicant, acquitted of a criminal charge offence, complained that his claim for compensation for detention and reimbursement of costs had been rejected in violation of article 6(2).
In Sekanina v Austria (1993) 17 EHRR 221, the relevant legislation gave a right to compensation to a person who (i) had been remanded in custody or placed in detention on suspicion of having committed a criminal offence and (ii) was subsequently acquitted or otherwise freed from prosecution, where (iii) the suspicion that he had committed the offence was dispelled or prosecution was excluded on other grounds.
It was held by the ECtHR that the relevant Austrian legislation and practice linked the question of the accuseds criminal responsibility and the right to compensation to such a degree that the decision on the latter issue can be regarded as a consequence and, to some extent, the concomitant of the decision on the former (para 22).
Accordingly, article 6(2) applied to the compensation proceedings.
As regards the question whether there had been a breach of article 6(2), the Austrian court rejected the applicants claim for compensation saying that, in acquitting him, the jury took the view that the suspicion was not sufficient to reach a guilty verdict, but there was, however, no question of that suspicions being dispelled (para 29).
The ECtHR said at para 30 that this left open a doubt as to the correctness of the acquittal and: The voicing of suspicions regarding an accuseds innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits of the accusation.
However, it is no longer admissible to rely on such suspicions once an acquittal has become final.
Consequently, the reasoning of the Linz Regional Court and the Linz Court of Appeal is incompatible with the presumption of innocence.
Accordingly, there had been a violation of article 6(2).
The same approach to the application and violation of article 6(2) was taken in the similar case of Rushiti v Austria (2000) 33 EHRR 1331.
The rationale for these decisions appears to be that voicing any suspicions of guilt in proceedings following an acquittal is incompatible with the presumption of innocence.
The general aim of the presumption of innocence is to protect the accused against any judicial decision or other statements by state officials amounting to an assessment of the applicants guilt without him having previously been proved guilty according to law (para 31).
The same reasoning was adopted, with the same result, in Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003, paras 47 to 49.
In Hammern, an acquitted person brought proceedings for compensation for damage suffered as a result of the prosecution.
The relevant legislation provided for compensation where a person had been acquitted if it was shown to be probable that he did not carry out the act that formed the basis for the charge.
The link between the compensation proceedings and the prosecution was sufficiently strong for article 6(2) to apply.
The ECtHR emphasised the following points: (a) the decisions on compensation were taken under domestic criminal law provisions pursuant to which a person who had been charged could seek compensation with respect to matters directly linked to the criminal proceedings against him; (b) time limits for bringing the claim were directly linked to the conclusion of the criminal proceedings; (c) if possible the composition of the court had to be the same; (d) the damage engaged the responsibility of the state, not of a private party; (e) the outcome of the criminal proceedings was a decisive factor, it being a prerequisite that the person charged had been acquitted. ; and (f) there was a very large extent of overlap between the issues in the criminal trial and those in the compensation proceedings, the latter being determined on the basis of the evidence from the [criminal] trial.
On the other hand, in Ringvold the applicant faced a criminal charge of a sexual offence against a young person (G) and a claim for compensation by G.
Both proceedings were heard before the same jury at the same time.
The jury acquitted the applicant of the offence and rejected Gs claim for compensation.
The Supreme Court allowed Gs appeal and awarded her compensation.
The ECtHR decided that article 6(2) did not apply to the compensation proceedings.
The court held (para 38) that the second and third of the Engel criteria did not point to the compensation proceedings being a criminal charge.
In particular, the civil claim was to be determined on the basis of principles that were proper to the civil law of tort.
The outcome of the criminal proceedings was not decisive for the compensation case.
The victim had a right to claim compensation regardless of whether the defendant was convicted or acquitted and the compensation issue was to be the subject of a separate legal assessment based on criteria and evidentiary standards which in several important respects differed from those that applied to criminal liability.
At para 41, the court dealt explicitly with the question whether the links between the criminal proceedings and the compensation proceedings were sufficient to justify extending article 6(2) to apply to the latter.
It concluded that the compensation case was not a direct sequel to the criminal proceedings because it was legally feasible to award G compensation despite the applicants acquittal.
Lord Phillips says at para 32 that the distinction between claims for compensation by an acquitted defendant and claims for compensation by an alleged victim of an acquitted defendant is unconvincing and that it is not credible to say that the claim for compensation by the acquitted defendant is consequential and concomitant to the criminal proceedings but the claim by the victim is not.
I would be less critical of the Strasbourg jurisprudence.
In the view of the ECtHR, the crucial question is whether the subject matter of the civil proceedings is so closely connected with some criminal proceedings that the Convention protections available in the criminal proceedings should also be available in the civil proceedings.
If the outcome of the criminal proceedings is decisive for the civil proceedings, then there is a sufficiently close connection for article 6(2) to apply.
This will occur, for example, where an acquitted defendant claims compensation for his detention on remand and the costs he incurred in the criminal proceedings.
The defendant would not have been detained or incurred the costs which he claims in the civil proceedings but for the criminal proceedings.
The position of the person who claims damages as the victim of the defendant is different.
As was said in Ringvold, the victim of the alleged crime has a right to claim damages regardless of whether the defendant has been convicted or acquitted.
The victims claim is not even dependent on the defendant being prosecuted at all.
There is, therefore, no link between the civil proceedings and any criminal proceedings that may have been instituted.
The court held that the fact that an act may give rise to a civil claim in damages and also constitute a crime is not sufficient.
There is also the point that, as was pointed out by the court in Ringvold, if the position were otherwise, article 6(2) would have the undesirable effect of pre empting the victims possibilities of claiming compensation under the civil law of tort, entailing an arbitrary and disproportionate limitation on his or her right of access to a court under article 6(1) of the Convention.
This is a further indication that there is a real distinction between claims for compensation by an acquitted defendant and claims by an alleged victim of an acquitted defendant.
To return to the present case and applying the Strasbourg jurisprudence, I would hold that there is no sufficient link between civil recovery proceedings under Part 5 of SOCA and any criminal proceedings to justify the application of article 6(2) to the Part 5 proceedings.
Indeed, there is no link at all.
The Part 5 proceedings are not a direct sequel or a consequence and the concomitant of any criminal proceedings.
They are free standing proceedings instituted whether or not there have been criminal proceedings against the respondent or indeed anyone at all.
The link with criminal proceedings is created by language used by the court in the
civil proceedings
But the Strasbourg jurisprudence shows that there may be a yet further route by which article 6(2) may apply to proceedings which (i) are not civil on an application of the Engel criteria and (ii) do not objectively have the necessary close link with criminal proceedings.
There is a principle that, if in the civil proceedings, the courts decision contains a statement imputing the criminal liability of the [applicant], that of itself will be sufficient to create the necessary link for article 6(2) to apply in those proceedings.
The clearest statement of this principle is to be found in Y v Norway (2005) 41 EHRR 87.
The applicant was convicted of sexual assault and homicide.
In linked civil proceedings he was ordered to pay compensation to the victims parents.
On appeal, he was acquitted of the criminal charges, but the lower courts compensation order was upheld.
His appeal against the compensation order was dismissed by the Supreme Court.
Before the ECtHR, he complained that the award of compensation, despite the acquittal, violated article 6(2).
Applying the approach to which I have referred at para 132 above, the court held that the acquittal did not in principle preclude the establishment of civil liability to pay compensation arising out of the same set of facts on the basis of a less strict standard of proof.
If, however the national decision on compensation contains a statement imputing the criminal liability of the respondent party, this could raise an issue falling within the ambit of article 6(2) of the Convention (para 42).
The court continued: 43.
The Court will therefore examine the question whether the domestic courts acted in such a way or used such language in their reasoning as to create a clear link between the criminal case and the ensuing compensation proceedings as to justify extending the scope of the application of article 6(2) to the latter (emphasis added). 44.
The Court notes that the High Court opened its judgment with the following finding: Considering the evidence adduced in the case as a whole, the High Court finds it clearly probable that [the applicant] has committed the offences against Ms T with which he was charged and that an award of compensation to her parents should be made under article 3 5 (2) of the Damage Compensation Act.(emphasis added) 45.
This judgment was upheld by the majority of the Supreme Court, albeit using more careful language.
However, that judgment, by not quashing the former, did not rectify the issue which in the Courts opinion thereby arises. 46.
The Court is mindful of the fact that the domestic courts took note that the applicant had been acquitted of the criminal charges.
However, in seeking to protect the legitimate interests of the purported victim, the Court considers that the language employed by the High Court, upheld by the Supreme Court, overstepped the bounds of the civil forum, thereby casting doubt on the correctness of that acquittal.
Accordingly, there was a sufficient link to the earlier criminal proceedings which was incompatible with the presumption of innocence. 47.
In the light of these considerations, the Court concludes that article 6(2) was applicable to the proceedings relating to the compensation claim against the present applicant and that this provision was violated in the instant case.
Thus, the court has held that the necessary link between the criminal case and the civil proceedings can be created by the language in which the decision in the civil proceedings is expressed.
In Y v Norway, the ECtHR held that the court had overstepped the bounds of the civil forum by deciding that the applicant had committed the criminal offences.
It is worth considering two cases where this principle was applied to reach the opposite conclusion.
The first is Moullet v France (Application No 27521/04) (unreported) 13 September 2007.
The applicant was a former manager of the transport, workshop and warehouse department of Marseilles.
He was charged with accepting bribes and aiding and abetting fraud.
He was discharged by the criminal court and the proceedings terminated on the grounds that they were time barred.
The Mayor of Marseilles then ordered the applicants compulsory retirement on the grounds that the evidence showed that the applicant had received bribes and that, although the criminal court had found the proceedings to be time barred, disciplinary action by the local authority was not subject to any time limitation.
The Mayors decision was the subject of challenge in administrative court proceedings.
The Conseil dEtat upheld the Mayors decision on the grounds that the disciplinary board and the disciplinary appeals board had based their findings on accurate facts and the reasoning behind the impugned sanction was not faulty and the reasons on which the decision was based were not materially or factually incorrect.
The applicant complained to the ECtHR that there had been a violation of the presumption of innocence in breach of article 6(2).
He contended that the Conseil dEtat should not have relied on the facts which formed the basis of the criminal charges.
The court considered whether the Conseil dEtat used such language in its reasoning as to create a clear link between the criminal case and the ensuing administrative proceedings and thus to justify extending the scope of article 6(2) to cover the latter.
The court noted that the applicant was not formally declared guilty of the criminal offence of accepting bribes by the Conseil dEtat.
The Conseil dEtat had confined itself to determining the facts without suggesting any criminal characterisation whatsoever.
It had confined itself to assessing the impact of the alleged facts on the duties and obligations of probity incumbent on all local and regional government staff.
In other words, the domestic authorities managed in the instant case to keep their decision within a purely administrative sphere, where the presumption of innocence the applicant relied on did not obtain.
The second example is Ringvold where the ECtHR said at para 38 that the impugned national ruling awarding compensation to the alleged victim of sexual abuse following the defendants acquittal did not state, either expressly or in substance, that all the conditions were fulfilled for holding the applicant criminally liable with respect to the charges of which he had been acquitted.
The Supreme Court acknowledged that the standard of proof was stricter than the balance of probabilities, but less strict than that applied to establish criminal liability.
It emphasised that its decision was taken independently of the decision in the criminal case and did not undermine the acquittal.
It seems, therefore, that the necessary link can be created by this route only if the court in the civil proceedings bases its decision adverse to the defendant using language which casts doubt on the correctness of an acquittal.
The rationale must be that in such a case the court has chosen to reach its decision by explicitly finding that a criminal charge has been committed.
If it chooses to reach its decision in that way, then the protections afforded by article 6(2) should be available as if the civil proceedings were criminal proceedings.
But if the decision in the civil proceedings is based on reasoning and language which goes no further than is necessary for the purpose of determining the issue before that court and without making imputations of criminal liability, then the necessary link will not have been created.
The distinction can be illustrated by reference to the common example of the case where A is acquitted of assaulting B, but B brings a claim for damages in tort.
The ECtHR recognises in principle that article 6(2) does not apply to the claim for damages: see, for example, Ringvold para 38.
Thus the acquittal ought to stand in the compensation proceedings, but it does not preclude the establishment of civil liability to pay compensation arising out of the same facts on the basis of a less strict burden of proof.
The fact that the findings of fact in the compensation proceedings may implicitly cast doubt on the acquittal is not enough to import article 6(2).
What is required is that the decision in the compensation proceedings contains a statement imputing criminal liability (emphasis added) (Y v Norway para 42) for article 6(2) to be imported.
The idea seems to be that article 6(2) applies if the court treats the compensation proceedings as if they are proceedings in which the issue of criminal liability falls to be determined.
The most obvious way of doing this is to state expressly or, perhaps by necessary implication, that the defendant was wrongly acquitted.
There is, of course, no need for the court to create the link with the criminal proceedings in this way because, as the ECtHR explains in Ringvold, the compensation proceedings are not directly concerned with the outcome of the criminal proceedings.
It will be seen that the circumstances in which the necessary link can be created when otherwise it would not exist echo the circumstances in which article 6(2) may be violated where the link is otherwise sufficiently close.
In practice, therefore, if the court imputes criminal liability to an individual, article 6(2) will apply whether or not the link between the two proceedings is otherwise sufficiently close.
But the analysis adopted by the ECtHR suggests that the issue should be addressed sequentially in the way that I have described.
I can now turn to consider whether Griffith Williams J did impute criminal liability to the appellants or cast doubt on their acquittal.
SOCAs case is that the wealth of Mr and Mrs Gale has been acquired through money laundering and tax evasion in the United Kingdom, Spain, Portugal and elsewhere.
Criminal proceedings for drug trafficking offences were started against Mr Gale in Spain, but these were discontinued because the relevant time limits had been exceeded.
He was acquitted of drug trafficking offences in Portugal after a trial.
At para 18 of his judgment, Griffith Willams J said that what was in issue before him was not the commission of the specific offences alleged against DG in Portugal but whether on all the evidence (including but not limited to the evidence considered by the Portuguese Court and that which was available to the Spanish Courts) SOCA had proved that the wealth of Mr and Mrs Gale had been obtained through unlawful conduct.
Nowhere in his judgment does the judge depart from this view of the case.
I accept the submission of Mr Peto QC that none of the judges findings specifically calls into question the correctness of Mr Gales acquittal in Portugal.
As for the drug trafficking proceedings in Spain, these were discontinued.
Even if (contrary to my view) the judge had made specific findings that Mr Gale was guilty of the Spanish offences, these findings could not be relied on by Mr Mitchell QC.
That is because article 6(2) would only apply if there had been an acquittal on the merits and not one solely based on a time bar (as the discontinuance in the Spanish proceedings was): see Leutscher v The Netherlands (1996) 24 EHRR 181 and R (Mullen) v Secretary of State for the Home Department [2005] 1 AC 1 para 10.
For these reasons, I would dismiss the appeal on the first issue.
I should add that I do not find it necessary to express any view on the application of Geerings v The Netherlands (2007) 46 EHRR 1222 or R v Briggs Price [2009] AC 1026 to the present case.
On the second issue, I agree with the judgment of Lord Clarke.
| UK-Abs | The Serious Organised Crime Agency (SOCA) obtained an order under Part 5 of the Proceeds of Crime Act 2002 (POCA) for the recovery of property to the value of 2m from the appellants.
The order was made on the basis that the court was satisfied pursuant to section 241(3) of POCA on the balance of probabilities (the civil standard of proof) that the property was derived from criminal activity in the form of drug trafficking, money laundering and tax evasion, offences for which the appellants had not been convicted.
Mr Gale had been acquitted of drug trafficking in Portugal and criminal proceedings in Spain against him were discontinued.
The appellants argued that the application of the civil standard of proof, rather than the criminal standard of beyond reasonable doubt, breached their right to a fair trial under article 6 of the European Convention on Human Rights.
They asked the court either to interpret s 241 to require the application of the criminal standard of proof, or to make a declaration of incompatibility pursuant to section 4 of the Human Rights Act 1998.
The judge, Griffith Williams J, refused to do so and the appellants appeal to the Court of Appeal on this issue was dismissed.
The appellants also objected to the making of an order under section 246 of POCA that they should bear the costs of the report made by the Interim Receiver appointed by the court in connection with the recovery proceedings against them.
The High Court had refused to make such an order, but this decision was reversed by the Court of Appeal.
The Supreme Court unanimously dismisses the appeal on the article 6 and the costs issues.
Lord Phillips gives the main judgment on the first issue and Lord Clarke on the second.
Lord Brown and Lord Dyson add concurring judgments on the first issue.
The article 6 issue The appellants case was that an essential stepping stone towards proving that the relevant property was the product of crime was proof that the appellants were guilty of criminal conduct.
In these
circumstances it was argued that they were entitled to the presumption of innocence afforded by article 6(2), and that rebutting this required proof of guilt to the criminal standard.
Further, it was said that no adverse finding could be made which implicated the first appellant in the conduct of which he had been acquitted in the Portuguese criminal proceedings [14].
Having reviewed the case law of the European Court of Human Rights at Strasbourg on the application of article 6(2) after a person has been acquitted in criminal proceedings, Lord Phillips observed that some of the decisions were mutually inconsistent.
However, a common factor in cases involving subsequent proceedings was that the court required a procedural connection between the two sets of proceedings before article 6(2) applied to civil claims [21].
In this case, the link between the Portuguese proceedings and the English civil proceedings was not there.
The English court was not precluded from considering the evidence which formed the basis of the charges in Portugal [35].
In the absence of such a link, there was no reason in principle why confiscation should not be based on evidence which satisfied the civil standard of proof, notwithstanding that such evidence had proved insufficiently compelling to found a conviction on the application of the criminal standard [44].
The starting point was possession of property by the appellants for whose provenance they were unable to provide a legitimate explanation.
There was an abundance of evidence which implicated them in criminal activity that provided the explanation for the property that they owned [55].
Lord Brown remarked that an authoritative Grand Chamber decision from Strasbourg clarifying and rationalising this whole confusing area of the courts case law was required [117].
Lord Clarke agreed [60].
Lord Dyson was less critical of the Strasbourg case law than Lord Phillips [131] but agreed that in this case there was no sufficient link between the two sets of proceedings.
The English civil proceedings were not a direct sequel or consequence of any criminal proceedings and none of the judges findings specifically called into question the correctness of the first appellants acquittal in Portugal [142].
The costs order Lord Clarke stated that the costs issue raised a single question of principle: whether an order for costs in favour of SOCA made against a person for whom a recovery order has been made can include the investigation costs incurred by the interim receiver appointed under POCA.
In this case, the receivers investigation took over three years and culminated in a final report of over 400 pages, in part because of a failure of the first appellant to cooperate with the receiver.
The costs paid by SOCA totalled some 1m [72].
The jurisdiction to award costs was governed by section 51 of the Senior Courts Act 1981 which makes the costs of or incidental to proceedings recoverable at the discretion of the court, subject to any express rules [76].
The investigative costs in this case were plainly costs of or incidental to the proceedings.
Investigative work was an essential part of civil recovery proceedings [79].
Nothing in POCA or in the Civil Procedural Rules precluded the court from making the order [81].
The position of a receiver appointed under Part 5 of POCA was significantly different from an ordinary receiver.
As well as the duty to investigate, he had no power to sell the assets nor did he have a lien over them for his costs.
There was a much closer relationship between the parties and an interim receiver.
The Supreme Court agreed with the Court of Appeal that it would decline to follow the decision of the Court of Appeal in Northern Ireland in SOCA v Wilson [2009] NI 28, and dismissed the appeal [109].
|
This appeal is concerned with the meaning and application of the client money rules and client money distribution rules contained in Chapter 7 of the Client Assets Sourcebook (CASS 7) issued by the Financial Services Authority for the safeguarding and distribution of client money in implementation of the Markets in Financial Instruments Directive 2004/39/EC (MiFID).
The central feature of the client money rules is the requirement that CASS 7 imposes on MiFID firms to segregate money that they receive from or hold for or on behalf of their clients in the course of MiFID business by placing it into a client money account so that it is kept apart from the firms own money.
Under English law the mere segregation of money into separate bank accounts is not sufficient to establish a proprietary interest in those funds in anyone other than the account holder.
A declaration of trust over the balances standing to the credit of the segregated accounts is needed to protect those funds in the event of the firms insolvency.
Segregation on its own is not enough to provide that protection.
Nor is a declaration of trust, in a case where the clients money has been so mixed in with the firms money that it cannot be traced.
So segregation is a necessary part of the system.
When both elements are present they work together to give the complete protection against the risk of the firms insolvency that the client requires.
That is why rule 14.1 of the Solicitors Regulation Authority Accounts Rules 2011 provides that client money must without delay be paid into a client account, except when the rules provide to the contrary.
Rule 6.3.1(b) of the Law Society of Scotland Practice Rules 2011 contains a provision to the same effect.
The Law Society of Scotlands guidance to rule 6.3.1(b) states that without delay normally means on the same day.
These elementary principles were adopted by section 139 of the Financial Services and Markets Act 2000 (the 2000 Act) when the rule making powers conferred on the FSA relating to the handling of client money were being formulated.
CASS 7 provides for the segregation of client money, and it creates a statutory trust over client money to support and reinforce the purposes of segregation.
This ensures that client money is kept separate and not used for the firms own purposes.
It protects the segregated funds from the claims of the firms creditors in the event that protection is most needed, which is the firms insolvency.
It also enables client money to be returned to the clients without delay, as it is beyond the reach of the firms creditors.
If the system works in the same way as it does under the accounts rules that regulate the activities of solicitors, the clients whose money has been segregated will be assured that their client money entitlement is not depleted by having to share the money in the clients account with others who may have claims against the firm, such as those whose client money has not been segregated and those for whom the firm does not hold any client money at all.
The rules that CASS 7 sets out are complex, and in the present case they have given rise to many problems.
This appeal raises three issues that are of fundamental importance to the way the system that CASS 7 lays down is to be worked out.
The first is when does the statutory trust arise? Does it arise only when the money has been placed in a segregated client account, or is the money subject to the trust as soon as it is in the firms hands irrespective of where it puts the money? If the latter is the case, the trust will extend to any client money that is held in the firms house account and has not yet been segregated as well as to money that has been segregated.
The second and third issues are concerned with what happens to client money in the event of the failure of the firm (described by CASS 7 as a primary pooling event).
The second is directed to the rules that CASS 7 lays down for the way client money is to be distributed should that event occur.
It asks whether these arrangements apply to money that is identifiable as client money in the firms house accounts or only to money that is in the segregated client accounts.
The third asks whether the right to participate in the pool that is to be distributed rateably to the clients is given only to those clients for whose benefit client money is held in the segregated client accounts, or whether a client whose money ought to have been segregated but was being held in a house account when the event occurs is entitled to participate in that money too.
I have had the great advantage of reading in draft Lord Walkers judgment, in which the background to the issues that we have to consider is so fully and carefully set out.
Those who are interested will find most of the provisions of CASS 7 that are relevant to those issues set out in appendix 1 to the judgment of Arden LJ in the Court of Appeal [2011] Bus LR 277, 325.
There are some omissions, but they are not important.
All the provisions that Lord Walker refers to in his analysis of the points that matter are to be found there.
As to the first issue, which is the time at which the statutory trust arises, I agree for the reasons Lord Walker gives that the trust arises on receipt of the money.
But I have also found it helpful to consider the issue from the position of Scots law.
As Lord Walker has explained in para 47, it is clear that CASS 7 was intended when transposing the Directives into national law to make use of the concept of holding money on trust.
But this is expressed by section 139(1) of the 2000 Act to be the position in relation to England and Wales and Northern Ireland only.
Section 139(3) provides: In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.
This provision is carried forward into the description of the statutory trust in section 7.7 of CASS which Lord Walker has quoted in full in para 41, below.
The wording of section 139(3) might be taken as an indication that the concept of trust is unknown in Scots law.
That would be a misconception.
There certainly is a law of trusts in Scotland.
This has been recognised from time to time by statute: see, for example, the Trusts (Scotland) Act 1961 and section 17(5) of the Trustee Investments Act 1961.
There are significant differences between English and Scots law as to its nature and origin.
For example, the law of Scotland does not accept that a relationship in trust can arise in equity.
It has a more limited basis.
Its origin can be traced back to mandate or commission, which is part of the law of obligations: Stair, Institutes of the Law of Scotland (1693), I.12.17.
Various attempts have been made to explain the basis for the concept.
They have not been successful, as its nature is considered to be of too anomalous a character to admit of a precise definition.
But it can at least be said that the duty that the trustee owes to the beneficiary is fiduciary in character: Wilson and Duncan, Trusts, Trustees and Executors 2nd ed, (1995), para 1 63.
In Council of the Law Society of Scotland v McKinnie 1991 SC 355 a question arose as to the character of funds held by a solicitor to the credit of his client account as at the date of his sequestration under section 31(1) of the Bankruptcy (Scotland) Act 1985.
Delivering the opinion of the court Lord President Hope said at pp 358 359: The order of priority in distribution which is prescribed by section 51 of the 1985 Act leaves no room for doubt that if sums at credit of the clients account were to be regarded as having vested in the permanent trustee, these funds would be exposed to the claims of all those entitled to a ranking on the debtors estate.
But property held on trust by the debtor for any other person lies outside this scheme of distribution altogether.
Section 33(1)(b) of the Act provides that such property shall not vest in the permanent trustee.
So if sums at credit of the clients account are to be regarded as having been held by the solicitor on trust on his clients behalf, it must follow that these sums do not vest in the permanent trustee on the sequestration of the solicitor, and accordingly that the judicial factor was right to resist the instruction by the accountant that the sums held on clients account in this case were to be made over to the permanent trustee.
We are in no doubt that sums held to the credit of the clients account are fiduciary in character and that for this reason they are sums to which section 33(1)(b) of the 1985 Act applies.
It is well settled that a solicitor stands in a fiduciary relation to his client in regard to all sums of money which he has received on the clients behalf.
Authority for the proposition in the last sentence of that passage is to be found in Jopp v Johnstons Trustee (1904) 6 F 1028.
In that case a law agent sold shares belonging to his client Mrs Jopp and lodged the money that he received for them in his own bank account, which at that time was in credit.
He later died insolvent and his estates were thereafter sequestrated.
It was held that, as he was in the position of a trustee in regard to the sum realised by the sale of his clients shares, the amount in his account at his death which represented the trust money still belonged to his client and did not form part of his sequestrated estate.
The case was concerned principally with the problem that had been created by the fact that the clients money had been mixed by the law agent with his own funds.
But some passages in the opinion of Lord Justice Clerk Macdonald are of particular interest in the present context.
At p 1034 the Lord Justice Clerk said: Now, there can be no doubt whatever that throughout the whole time during which the price of these shares was dealt with, Mr Johnston stood in a fiduciary relation to Mrs Jopp.
At p 1035 he referred to, and adopted, the solution to the problem that was to be found in English law: I have no difficulty in holding with Sir George Jessel MR in the case of In re Halletts Estate (1880) LR 13 Ch Div 696, 719, that, as he quoted from Lord Hatherley, if a man mixes trust funds with his own, the whole will be treated as [the] trust property, except [] so far as he may be able to distinguish what is his own.
It is no doubt true that Mr Johnston was not in the strict sense of the word Mrs Jopps trustee.
He was undoubtedly, while he held the money, under the obligations of trust, the obligation to hold it for another and to deal with it solely for that others interest.
After referring to a passage in the judgment of Thesiger LJ in Hallett at p 723 to the same effect, he added these words: Now, here, whatever Mr Johnston did, the fiduciary relation of agent undoubtedly subsisted, and to have uplifted the whole of these deposit receipts and used the contents for his own purposes would undoubtedly have been an absolute breach of his duty and the fiduciary position in which he stood.
I think that these passages tell us two things.
The first thing is that, while Scots law has no difficulty in using the word trust in this context, the concept is more accurately and precisely analysed by referring to the fiduciary duty that the agent owes to his client with regard to money that he holds on his clients behalf.
So the fact that a statutory trust is rejected by section 139(3) of the 2000 Act in favour of agency in the application of section 139(1) to Scotland, while at first sight surprising, does appear to have some basis in the language that was used to explain the relationship in Jopp v Johnstons Trustee.
We were shown a copy of a letter by the Chairman of the Scottish Law Commission, Lord Drummond Young, to the Advocate General for Scotland dated 28 September 2010 in which the Advocate Generals attention was drawn to section 139(3) of the 2000 Act, to CASS 7.7.1G and to an almost identical provision which is to be found in Chapter 5.3 of CASS in respect of insurance moneys.
Inquiries by the Commissions trust team of lawyers in HM Treasury had received a reply to the effect that the instructions for the 2000 Act did not disclose a policy reason for the choice of agency.
It appeared that an identical provision in section 55(5) of the Financial Services Act 1986 had been adopted without any independent policy consideration being given to the matter when the 2000 Act was being prepared.
The question was raised as to whether the CASS rules would achieve the intended level of client protection in the event of an insolvency north of the border.
This brings me to the second point that can be taken from the passages that I have quoted from Jopp v Johnstons Trustee.
It is directed to the question of how the agency approach that must be applied in Scotland can guide us towards a solution of the issues raised in this appeal.
I would approach this question on the assumption that it was the intention of Parliament to provide the same level of client protection north of the border as was to be available in England and Wales and in Northern Ireland.
This assumption is based on the fact that no policy reason has been disclosed for the different treatment that the legislation has laid down for the application of section 139(1) of the 2000 Act to Scotland.
The explanation for the difference may lie with the Parliamentary draftsman in the Lord Advocates department.
It is the kind of thing that would be picked up when he was checking through the legislation to see whether it should be expressed differently in the terminology of Scots law so as to achieve what he understood its effect to be in the other parts of the United Kingdom.
The Lord Justice Clerks opinion in Jopp v Johnstons Trustee would have provided him with the terminology he was looking for.
Returning then to the first issue, which is the time at which the statutory trust arises, the solution that would be arrived at under the agency approach is very simple.
As Lord Justice Clerk Macdonald said in Jopp v Johnstons Trustee at p 1034, the agent stands in a fiduciary relation to his client throughout the whole time that the clients money is in his hands.
The relationship from start to finish is one of agency.
At no stage does the money cease to be the clients money and become the property of the agent.
The fiduciary relationship which gives rise to the statutory trust arises on receipt of the money.
There is no interval between the moment of receipt and the commencement of the fiduciary relationship during which the agent can treat the money as his own.
The relationship remains throughout the period while the money is held in a client or house account until the obligation to the client has been discharged.
That was held to be the position in Council of the Law Society of Scotland v McKinnie, and I would apply the same reasoning here.
So if this were a Scottish case I would have no difficulty in adopting the reasons that Lord Walker gives in para 63.
As he explains in para 76, the clear conclusion he reaches on the first issue is that the effect of CASS 7 is that under the alternative approach referred to in 7.4.16, as well as under the normal approach referred to in 7.4.17, a firm receives and holds clients money as a trustee, with the beneficial ownership remaining in the clients.
I have no doubt that the law of Scotland would arrive at the same conclusion.
Lord Walker found it helpful to consider the third issue, which is whether participation in the client money pool (CMP) is dependent on actual segregation (in other words, how the CMP is to be distributed), before the second issue, which is whether the primary pooling arrangements apply only to the client money in house accounts (in other words, what is to go into the CMP): see para 89.
I agree, and like him I would approach the third issue on the basis that the CMP consists of the aggregate of the segregated funds holding clients money immediately before the primary pooling event (PPE).
I also agree that the words each client in the rule of distribution set out in 7.9.6R(2) must be taken in context to mean each client for whom client money is held as identified in the last reconciliation before the PPE.
The agency approach would lead one to expect that the CMP was to be distributed on the basis of what has been referred to as the contributions theory, rather than on the basis of the claims theory.
Sums received from or on behalf of the client are fiduciary in character.
They retain that character until all the obligations arising from the fiduciary relationship are discharged.
The fiduciary relationship protects them from being used to meet claims against the agent for breach of duties that he owes to others.
It would be surprising if the rule of distribution was intended to have the effect of removing that protection, which is what the claims basis of distribution would achieve.
As I see it, clear language would be needed to achieve such a paradoxical result.
Lord Dyson says in para 144 that the general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money by the firm and that the distribution rules are intended to protect all the clients money received prior to a PPE.
He disagrees with Lord Walkers description of the notion that clients must be taken to have implicitly accepted the risk, on a PPE, of having to share their segregated funds with non segregated clients as unrealistic.
He finds nothing surprising in the notion that, once a PPE occurs, the treatment of client money is subject to a different regime from that to which it was subject before.
Lord Neuberger of Abbotsbury MR was of the same view in the Court of Appeal.
In para 216 he said that it seemed to him unlikely that the FSA would have intended that client money which had yet to be segregated was intended to be treated differently from client money which had been segregated either under the normal approach or under the alternative approach.
I find it hard to understand, for my part, why it should be thought that it was the intention of the FSA to depart from the basic principles upon which the rules that regulate the activities of solicitors have been based.
As I explained at the outset of this judgment, a declaration of trust, in a case where a clients money has been so mixed in with the firms money that it cannot be traced, is not enough to provide the protection that the client needs in the event of the firms insolvency.
Segregation is a necessary part of the system.
When both elements are present they work together to give the protection that the client requires.
To construe CASS 7 in the way Lord Dyson suggests would have the effect of depriving the client of the protection which the rules were designed to achieve at the very moment when it is most needed.
It is not just the exceptional nature of the facts of this case that make the consequences of his approach so striking.
It affects every client whose money is handled by any firm operating in the area of MiFID business, however large or small that amount may be.
If authority is needed to show that the requirement of segregation is crucial for their protection and how segregation works hand in hand with the fiduciary character that is attached to the funds that are segregated, it can be found in the observations by Professor Gower in his report, Review of Investor Protection which are quoted by Lord Collins in para 186, in the consultation papers to which he refers in para 187 and in Council of the Law Society of Scotland v McKinnie 1991 SC 355 to which I refer in para 9, above.
Like Lord Walker, I agree with the conclusion that Briggs J reached as to the effect of the final words of 7.9.6R(2) (calculated in accordance with CASS 7.9.7R).
Their effect, as Briggs J said in para 255, was to provide a basis for the clients rateable participation in the CMP.
It makes mandatory in the event of a PPE the standard method of money reconciliation that is set out in Annex 1 to CASS 7.
Given that it is to be expected that this exercise will have been carried out according to the rules at the Point of Last Segregation (PLS), it is hard to see why it must be gone over again now.
But whatever the purpose is that this rule is designed to serve, it does not contain a direction of the kind that I think would be needed to override the protection that attaches to the money that clients have actually contributed in consequence of the fiduciary relationship.
I agree with Lord Walker that GLGs appeal on the third issue should be allowed.
The second issue has to be approached on the assumption that there were movements in the client money requirement during the gap period between the PLS and the PPE and that significant sums of client money were still traceable in the house accounts at the PPE.
As Lord Walker points out in para 101, the issue resolves itself into a contest between what has been referred to as the final reconciliation theory and the general trust law theory.
The problem is best focussed by looking at the position of the unsegregated last minute provider of client money.
Is that client to be left to claim against LBIE as an unsecured creditor, or is its contribution to be protected in the same way as the contributions of those whose money was contributed before the PLS? Here again the agency approach tends to indicate that the money that this client provided should be protected by the fiduciary obligation which attached to that money as soon as it was received by LBIE.
The alternative is hard to reconcile with the fiduciary relationship, which must be taken to have been designed to protect the client from having to claim under the general law of insolvency.
It was accepted that there is nothing to prevent a final internal reconciliation from being carried out to take account of movements in clients entitlements during the gap period.
In any event I would so read the relevant provisions of CASS 7.
That being so, I do not find it difficult to conclude, in agreement with Briggs J and Lord Walker, that this is what ought to be done in this case.
I would therefore dismiss GLGs appeal on the second point and make the order which has been proposed by Lord Walker.
The question raised by the Scottish Law Commission as to whether the same level of client protection is available in Scotland as elsewhere in the United Kingdom may not have been entirely resolved by the way the questions before us in this appeal have been answered.
But it respectfully seems to me that the direction in section 139(3) of the 2000 Act that the reference to money being held on trust is to be read as a reference to its being held as agent offers a level of protection that is no less effective.
This is because it is to be assumed that the relationship between the agent and the client is a fiduciary relationship of the kind identified in Jopp v Johnstons Trustee and Council of the Law Society of Scotland v McKinnie.
It is worth noting too that I have found it helpful to examine the problems that this case gives rise to by assuming that the relationship between LBIE and its clients was indeed one of agency.
The clarity with which the effect and consequences of that relationship has been described is compelling.
As it is to be assumed that the protection given by the trust approach was intended to be just as effective, I think that the Scottish approach provides strong support for the conclusions that Lord Walker has reached in accordance with the direction in section 139(1) of the Act that applies to England and Wales.
I share Lord Walkers concern at the effect of the answers that the majority give to the second and third issues, and especially to the third issue which is so crucial to the protection of investors generally.
LORD WALKER
Introduction
Lehman Brothers International (Europe) (LBIE) is incorporated in England as an unlimited company with its head office in London.
It was the principal European trading company in the Lehman Brothers group.
It was authorised and regulated by the Financial Services Authority (FSA).
LBIE was not a licensed deposit taker but it was authorised to hold clients money.
Its ultimate holding company is Lehman Brothers Holdings Inc (LBHI), a company incorporated in Delaware and based in New York, now in Chapter 11 bankruptcy.
LBIE was put into administration by an order of Henderson J made before the opening of business on Monday, 15 September 2008.
Many difficulties have arisen in the administration and the administrators have made several applications to the Companies Court for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986.
Probably the most contentious and difficult of these is the client money application, which has led to this appeal.
Nine representative claimants were joined as parties to argue the issues.
On 15 December 2009 Briggs J, after a twelve day hearing, made an order giving directions on a range of issues concerned with client money: [2009] EWHC 3228 (Ch), [2010] 2 BCLC 301.
Some of the issues were matters of detail but others are of general and fundamental importance to LBIEs clients.
Four of these general issues were made the subject of an appeal to the Court of Appeal, and on 2 August 2010 the Court of Appeal (Lord Neuberger of Abbotsbury MR, Arden LJ and Sir Mark Waller) allowed the appeal on two of the four issues: [2010] EWCA Civ 917, [2011] Bus LR 277, [2011] 1 CMLR 27, [2011] 2 BCLC 164.
Permission to appeal or cross appeal to the Supreme Court was granted on three of those issues.
They are closely interconnected, and all of them depend on the application (to a complicated set of assumed facts) of what is known as CASS 7, that is, chapter 7 (Client money: MiFID business) of the Client Assets Sourcebook issued by the FSA.
MiFID is an abbreviation for the Markets in Financial Instruments Directive 2004/39/EC and CASS 7 has evolved from earlier regulatory instruments into a form intended to transpose MiFID and its Implementing Directive, Commission Directive 2006/73/EC dated 10 August 2006.
The FSAs powers of making rules and publishing guidance are conferred by sections 138, 139, 155 and 157 of the Financial Services and Markets Act 2000 (FSMA).
Section 139(1)(a) expressly permits rules to make provision which results in clients money being held on trust in accordance with the rules.
At the beginning of his judgment Briggs J (paras 2 to 7) gave an introduction to the problems in terms which I gratefully adopt: 2.
When first read, CASS 7 appears to provide a relatively straightforward and intelligible code for the safeguarding of client money by regulated firms.
In the barest outline, it provides for client money to be identified and promptly paid into segregated accounts, segregated that is from the firms house accounts.
It provides for client money to be held on trust, in substance for the clients for whom it is received and held.
Finally in the event of the failure of the firm, the rules provide for the pooling of the client money, thus far segregated and held on trust, and for its distribution to those entitled to it under that trust, pari passu in the event of a shortfall. 3.
In an ideal world, the flawless operation of the scheme created by the CASS 7 rules would ensure first, that the clients money could not be used by the firm for its own account and secondly, that upon the firms insolvency, the clients would receive back their money in full, (subject only to the proper costs of its distribution) free from the claims of the firms creditors under the statutory insolvency scheme.
The rules would achieve those twin objectives by ensuring that, promptly upon receipt, client money was held by a firm as trustee, separately and distinctly from the firms own money and other assets, and therefore out of the reach both of the firm (for the conduct of its business) and of the firms administrator or liquidator upon its insolvency (for distribution among its creditors). 4.
In the imperfect and hugely complex real world occupied by LBIE and its numerous clients, there has on the facts which I am invited to assume for present purposes been a falling short in the achievement of both of those objectives on a truly spectacular scale.
This shocking underperformance has occurred for a number of reasons, of which two stand out as prime causes.
The first is that (again on the facts which I am invited to assume) LBIE failed to identify as client money, and therefore also failed to segregate, vast sums received from or on behalf of a significant number of its clients.
In this respect, the most significant group of clients whose money LBIE failed to segregate were its own affiliates, that is members of the Lehman Brothers group of companies of which [LBHI] is the ultimate parent.
Those affiliates have advanced client money claims against LBIE in aggregate exceeding US$3 billion.
To put that extraordinary amount in perspective, the aggregate of the amounts actually held by LBIE in segregated accounts for clients for which it recognised a segregation obligation pursuant to CASS 7 when it went into administration on the morning of 15 September 2008 had a face value of only US$2.16 billion approximately. 5.
To the un segregated affiliates claims in excess of US$3 billion must be added claims of independent clients of LBIE who have challenged LBIEs treatment of its relationship with them as one of debtor/creditor rather than trustee and beneficiary, pursuant to the terms of its standard form contracts.
The amount of under segregation which may be attributable to that failure (if failure it be) has not been identified.
In addition, LBIE routinely treated otherwise than as client money sums deriving from options and derivative OTC transactions with its clients, regardless of the terms of the agreements pursuant to which LBIE conducted such trading for those clients.
The amount of potential segregation failure in respect of option transactions alone is said to have been US$146m. 6.
The second main reason for under achievement of the objectives behind the CASS 7 rules lies in the insolvent failure of another LBIE affiliate, Lehman Brothers Bankhaus AG (Bankhaus), with which LBIE had deposited no less than US$1 billion of segregated client money.
Bankhaus was subjected to a moratorium by the German regulator on 15 September 2008, and insolvency proceedings in relation to it were commenced on 12 November 2008.
The administrators have been unable even to hazard a guess at the amount, if any, of client money which may be recovered from Bankhaus.
Thus, even if there were no claims at all by clients whose client money LBIE failed to segregate, there exists a real risk that the shortfall on client account will exceed 40% due to the Bankhaus failure, quite apart from the costs and charges liable to be levied against the segregated fund in connection with its distribution, including the very large costs of this application. 7.
The combination of a massive failure to identify and segregate client money, coupled with the credit loss shortfall attributable to the Bankhaus failure, has thrown up a series of fundamental problems in the interpretation and application of the rules in CASS 7 to LBIEs business and insolvency.
The judge then went on to mention further complications and difficulties, some of which are still relevant to this appeal.
In the course of the appeal process the number of representative claimants has been reduced.
Of the original nine only four have been parties to the appeal to the Supreme Court, as follows: (1) GLG Investments plc (subfund: European Equity Fund) (GLG) was the representative of LBIEs fully segregated clients.
It was the winner before Briggs J on issues 2 and 3 but the loser (with the benefit of a preemptive costs order) before the Court of Appeal on all three issues.
It is the appellant (without the benefit of a preemptive costs order) in this court.
GLG appeared by Mr Antony Zacaroli QC, Mr David Allison and Mr Adam Al Attar. (2) CRC Credit Fund Limited (CRC) was the principal appellant before the Court of Appeal, as a representative of what Briggs J (para 25) referred to as the wholly unsegregated end of the spectrum.
Having succeeded before the Court of Appeal it is the principal respondent (with the benefit of a preemptive costs order) before this court, and it has appeared by Mr Robert Miles QC and Mr Richard Hill. (3) and (4) Lehman Brothers Inc. and Lehman Brothers Finance AG (the LB affiliates) are, on the assumed facts, largely unsegregated clients of LBIE, but they have been joined and represented separately, at their own risk as to costs, because of their special position as members of the Lehman Brothers group.
They have appeared by Mr Jonathan Crow QC, Mr Jonathan Russen QC and Mr Richard Brent, who have supported and supplemented the submissions made by Mr Miles.
The administrators have appeared by Mr Iain Milligan QC, Ms Rebecca Stubbs and Mr Richard Fisher.
The FSA was represented by leading counsel before Briggs J and the Court of Appeal.
It has not appeared by counsel in this court but has made written submissions prepared by Mr David Mabb QC and Mr Stephen Horan.
The FSA was generally supportive of the respondent claimants position.
In his judgment Briggs J had to answer no fewer than 26 questions, some of them subdivided.
He had to go into a number of technical matters that arose from the complex and varied character of LBIEs trading activities, including futures, margins, currency transactions, stock loans, depot breaks, fails, and unapplied credits.
Some of these terms are briefly explained in para 2.16 of the statement of assumed facts (SAF), most of which is reproduced in para 49 of Briggs Js judgment.
In this court the argument has on the whole proceeded at a more general level.
But at least a superficial acquaintance with some of the technicalities is necessary in order to understand the process of internal reconciliation of accounts that has to be undertaken on every business day by a firm operating the alternative approach described in paras 38 and 39 below.
The Directives
MiFID (Directive 2004/39/EC of the European Parliament and of the Council, dated 21 April 2004) replaces Council Directive 93/22/EEC on investment services in the securities field.
Its general purpose is set out in Recital (2): In recent years more investors have become active in the financial markets and are offered an even more complex wide ranging set of services and instruments.
In view of these developments the framework of the Community should encompass the full range of investor oriented activities.
To this end, it is necessary to provide for the degree of harmonisation needed to offer investors a high level of protection and to allow investment firms to provide services throughout the Community, being a Single Market, on the basis of home country supervision.
Recital (26) refers to the importance of segregation of clients funds from those of the firm: In order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm those rights should in particular be kept distinct from those of the firm.
This principle should not, however, prevent a firm from doing business in its name but on behalf of the investor, where that is required by the very nature of the transaction and the investor is in agreement, for example stock lending.
The Directive is intended to state broad general framework principles to be implemented later (recital (64)).
Article 13 (Organisational requirements) imposes on the home member state (that is, the state in which an investment firm has its registered or head office) the duty of requiring the firm to comply with the organisational requirements set out in paragraphs 2 to 8 of the article.
These include: (7) An investment firm shall, when holding financial instruments belonging to clients, make adequate arrangements so as to safeguard clients ownership rights, especially in the event of the investment firms insolvency, and to prevent the use of a clients instruments on own account except with the clients express consent. (8) An investment firm shall, when holding funds belonging to clients, make adequate arrangements to safeguard the clients rights and, except in the case of credit institutions, prevent the use of client funds for its own account.
Paragraph 10 indicates that the Commission will by the Implementing Directive specify the concrete organisational requirements to be imposed on investment firms.
The Implementing Directive 2006/73/EC implemented MiFID as anticipated in article 13(10).
In particular article 16(1) imposes on member states the obligation to require investment firms to keep and maintain records and accounts, to make regular reconciliations, and (in subparagraph (e)) to ensure that client funds deposited, in accordance with article 18, in [an institution authorised by article 18] are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm.
Article 16(1)(f) requires member states to introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor administration, inadequate record keeping or negligence.
Article 18(1) provides that investment firms are to be required, on receiving any client funds, promptly to place those funds into one or more accounts with a central bank, an authorised credit institution, a bank authorised in a third country, or a qualifying money market fund.
Article 4 of the Implementing Directive (additional requirements on investment firms in certain cases) is concerned with what has been referred to as gold plating that is, transposing the Directive into national law in a form that imposes on investment firms requirements not imposed by the Directive itself.
Article 4(1) provides: Member states may retain or impose requirements additional to those in this Directive only in those exceptional cases where such requirements are objectively justified and proportionate so as to address specific risks to investor protection or to market integrity that are not adequately addressed by this Directive, and provided that one of the following conditions is met: (a) the specific risks addressed by the requirements are of particular importance in the circumstances of the market structure of that member state; (b) the requirement addresses risks or issues that emerge or become evident after the date of application of this Directive and that are not otherwise regulated by or under Community measures.
Any such requirements are to be notified and justified to the Commission.
No such notification or justification has been made in respect of CASS 7.
Gold plating was raised as an issue in the lower courts, as a possible argument against the imposition of an immediate trust of clients funds.
It was not relied on by Mr Zacaroli in this court, but Mr Milligan mentioned it as a point which we might feel bound to consider of our own initiative.
For my part I do not think it necessary to go further into the point.
CASS 7
CASS 7 (Client money: MiFID business) consists of nine sections, each subdivided into paragraphs containing mandatory rules (denoted R) and (distributed through the rules in smaller print) non mandatory guidance (denoted G).
Defined terms are printed in italics, the definitions being found in a separate glossary.
So for instance para 7.1.1R (Application) tells the reader that: This chapter (the client money rules) applies to: (1) A MiFID investment firm: (a) that holds client money. and para 7.1.2G tells the reader that CASS 7.2 (Definition of client money) sets out the circumstances in which money is considered client money for the purposes of this chapter.
There is also an annex setting out the standard method of internal client money reconciliation.
The rules contain numerous cross references to the Directives, to other chapters of CASS and to other FSA regulatory instruments including COBS (the current Conduct of Business Sourcebook) and SYSC (the part of the handbook on High Level Standards which has the title Senior Management Arrangements, Systems and Controls).
It is necessary to give a fairly full summary of CASS 7.
For brevity I will refer to particular sections and paragraphs without the prefix CASS.
The two crucial provisions are emboldened for emphasis.
The general scheme of CASS 7 is that section 7.1 sets out the scope of the client money rules and section 7.2 defines client money, doing so by a wide general definition followed by numerous specific exceptions.
There is no general exception for money belonging to an affiliated company (7.1.12G). 7.2.15R (discharge of fiduciary duty) lays down when money ceases to be client money.
Section 7.3 lays down general organisational requirements, substantially reproducing article 13(8) of MiFID and article 16(1)(f) of the Implementing Directive.
Section 7.4 (Segregation of client money) begins by reproducing the substance of article 18 of the Implementing Directive.
It then addresses client bank accounts and sets out rules and guidance that call for detailed treatment.
The direct quotations below follow the official text in the use of italics (though it can be something of a distraction) but use the same font size for rules and guidance alike.
7.4.11R, reproducing the substance of article 16(1)(e) of the Implementing Directive, provides: A firm must take the necessary steps to ensure that client money deposited, in accordance with CASS 7.4.1R, in a central bank, a credit institution, a bank authorised in a third country or a qualifying money market fund is held in an account or accounts identified separately from any accounts used to hold money belonging to the firm. 7.4.12G provides: A firm may open one or more client bank accounts in the form of a general client bank account, a designated client bank account or a designated client fund account (see CASS 7.9.3G). 7.4.13G explains when and how a designated client account may be used. 7.4.14G (payment of client money into a client business account) provides: Two approaches that a firm can adopt in discharging its obligations under the MiFID client money segregation requirements [defined in the glossary by reference to CASS 7.4.1R and CASS 7.4.11R] are: (1) the normal approach; or (2) the alternative approach.
The following rules and guidance about the normal approach and the alternative approach must be set out in full.
The alternative approach was first introduced in 1995.
Originally its adoption required formal consent from the statutory regulator, but this requirement was replaced by the procedure in 7.4.15R: 7.4.15R A firm that does not adopt the normal approach must first send a written confirmation to the FSA from the firms auditor that the firm has in place systems and controls which are adequate to enable it to operate another approach effectively. 7.4.16G The alternative approach would be appropriate for a firm that operates in a multi product, multi currency environment for which adopting the normal approach would be unduly burdensome and would not achieve the client protection objective.
Under the alternative approach, client money is received into and paid out of a firms own bank accounts; consequently the firm should have systems and controls that are capable of monitoring the client money flows so that the firm comply with its obligations to perform reconciliations of records and accounts (see CASS 7.6.2R).
A firm that adopts the alternative approach will segregate client money into a client bank account on a daily basis, after having performed a reconciliation of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank account and client transaction accounts to determine what the client money requirement was at the close of the previous business day. 7.4.17G Under the normal approach, a firm that receives client money should either: (1) pay it promptly, and in any event no later than the next business day after receipt, into a client bank account; or (2) pay it out in accordance with the rule regarding the discharge of a firms fiduciary duty to the client (see CASS 7.2.15R). 7.4.18G Under the alternative approach, a firm that receives client money should: (1)(a) pay any money to or on behalf of clients out of its own account; and (b) perform a reconciliation of records and accounts required under CASS 7.6.2R (Records and accounts), SYSC 4.1.1R and SYSC 6.1.1R, adjust the balance held in its client bank accounts and then segregate the money in the client bank account until the calculation is re performed on the next business day; or (2) pay it out in accordance with the rule regarding the discharge of a firms fiduciary duty to the client (see CASS 7.2.15R). 7.4.19G A firm that adopts the alternative approach may: (1) receive all client money into its own bank account; (2) choose to operate the alternative approach for some types of business (for example, overseas equity transactions) and operate the normal approach for other types of business (for example, contingent liability investments) if the firm can demonstrate that its systems and controls are adequate (see CASS 7.4.15R); and (3) use an historic average to account for uncleared cheques (see paragraph 4 of CASS 7 Annex 1G). 7.4.20G Pursuant to the MiFID client money segregation requirements a firm should ensure that any money other than client money deposited in a client bank account is promptly paid out of that account unless it is a minimum sum required to open the account, or to keep it open. 7.4.2.1R If it is prudent to do so to ensure that client money is protected, a firm may pay into a client bank account money of its own, and that money will then become client money for the purposes of this chapter.
Section 7.5 deals with transfers of client money to third parties.
Section 7.6 (records, accounts and reconciliations) reproduces the substance of article 16 (1)(a), (b) and (c) of the Implementing Directive.
It also introduces, in a curiously indirect way, the annex to CASS 7. 7.6.6G deals with internal reconciliations of client money balances and 7.6.6G (3) provides: The standard method of internal client money reconciliation sets out a method of reconciliation of client money balances that the FSA believes should be one of the steps that a firm takes when carrying out internal reconciliations of client money.
The first set of italics sends the reader to the glossary, which defines the phrase by reference to CASS 7 Annex 1G.
The provisions of the annex are summarised, so far as relevant, in paras 63 and 64 below.
Section 7.7 (Statutory trust) is of central importance in this appeal.
It must be set out in full: 7.7.1G Section 139(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which result in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only).
This section creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust. 7.7.2R A firm receives and holds client money as trustee (or in Scotland as agent) on the following terms: (1) for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules; subject to (3) [it is common ground that this is an error for (2) (4)], for the clients (other than clients which are insurance undertakings when acting as such with respect of client money received in the course of insurance mediation activity and that was opted in to this chapter) for whom that money is held, according to their respective interests in it; (3) after all valid claims in (2) have been met, for clients which are insurance undertakings with respect of client money received in the course of insurance mediation activity according to their respective interests in it; (4) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and (5) after all valid claims and costs under (2) to (4) have been met, for the firm itself.
Section 7.8 requires the trust affecting client money to be notified to and acknowledged by banks and other intermediaries.
Section 7.9 (Client money distribution) is also of central importance. 7.9.1 to 7.9.8 must be set out in full: 7.9.1R This section (the client money (MiFID business) distribution rules) applies to a firm that holds client money which is subject to the client money rules when a primary pooling event or a secondary pooling event occurs. 7.9.2G The client money (MiFID business) distribution rules seek to facilitate the timely return of client money to a client in the event of the failure of a firm or third party at which the firm holds client money. 7.9.3G A firm can hold client money in either a general client bank account, a designated client bank account or a designated client fund account.
A firm holds all client money in general client bank accounts for its clients as part of a common pool of money so those particular clients do not have a claim against a specific sum in a specific account; they only have a claim to the client money in general.
A firm holds client money in designated client bank accounts or designated client fund accounts for those clients that requested their client money be part of a specific pool of money, so those particular clients do have a claim against a specific sum in a specific account; they do not have a claim to the client money in general unless a primary pooling event occurs.
A primary pooling event triggers a notional pooling of all the client money, in every type of client money account, and the obligation to distribute it.
If the firm becomes insolvent, and there is (for whatever reason) a shortfall in money held for a client compared with that clients entitlements, the available funds will be distributed in accordance with the client money (MiFID business) distribution rules.
A primary pooling event occurs: 7.9.4R (1) on the failure of the firm; (2) on the vesting of assets in a trustee in accordance with an assets requirement imposed under section 48(1)(b) of the Act; (3) on the coming into force of a requirement for all client money held by the firm; or (4) when the firm notifies, or is in breach of its duty to notify, the FSA, in accordance with CASS 7.6.16 R (Notification requirements), that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.
CASS 7.9.4R (4) does not apply so long as: 7.9.5R (1) the firm is taking steps, in consultation with the FSA, to establish those records; and (2) there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period. 7.9.6R If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. 7.9.7R (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, the credit must be offset against the debit reducing the individual client balance for that client. (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, the credit must be offset against the debit reducing client equity balance for that client. 7.9.8G A clients main claim is for the return of client money held in a client bank account.
A client may be able to claim for any shortfall against money held in a firms own account.
For that claim, the client will be an unsecured creditor of the firm.
Section 7.9 goes on to deal with client money received after a primary pooling event, and mixed remittances (7.9.10 to 7.9.12).
It then deals with secondary pooling events, defined in the glossary by reference to 7.9.14R: A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred under CASS 7.4.1R(1) to CASS 7.4.1R(3) (depositing client money) or CASS 7.5.2R (Transfer of client money to a third party). 7.9.13R provides that if both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event are to apply.
In this case there was a secondary pooling event (SPE), that is the failure of Lehman Brothers Bankhaus AG, mentioned in para 6 of the judgment of Briggs J and quoted in para 27 above, as well as a primary pooling event (PPE), that is the failure of LBIE.
Mr Zacaroli relied on the provisions as to the consequences of SPEs (7.9.18G to 7.9.25R as regards any bank failure) as reinforcing his submission that losses on segregated and non segregated funds are in general intended to lie where they fall, and to be shared rateably between those on whom they fall (this is an argument on the correct construction of CASS 7 which does not of course depend on the fact of the failure of Bankhaus).
The correct approach to construction of CASS 7
This appeal turns on the correct construction, in context, and against the background of the general law of trusts, of a small number of the provisions set out or summarised above.
The crucial provisions are 7.7.2R and 7.9.6R, set out above in bold type.
I have felt obliged to set out a large number of much more peripheral provisions because the text of CASS 7 has been subjected, both in the courts below and in this court, to a detailed analysis in which small verbal points (possibly an indication of no more than imperfect drafting) have been put forward and relied on as significant.
That is not intended as a complaint.
The correct construction of CASS 7 gives rise to real difficulties.
The modern approach of the court to construing commercial or regulatory documents is to prefer a purposive to a literal approach.
That approach is reinforced by the FSA Handbook, in which GEN 2.2.1R provides, Every provision in the Handbook must be interpreted in the light of its purpose.
But in this case any attempt to adopt a purposive approach runs almost immediately into difficulties.
It is clear that the Directives intended to achieve a high level of protection of clients money, and that the prompt and scrupulous segregation of clients money, confirmed by regular internal reconciliations and monitored by the national regulatory authority, was to be the means of achieving that end.
Equally it is clear that CASS 7 was intended to transpose the Directives into national law, and in doing so to make use of a basic concept of English law, the trust (Lord Hope has in his judgment addressed the application of CASS 7 where the law of Scotland applies).
It is not now contended that the use of the trust concept involves gold plating.
Whatever the position may be in other member states, under United Kingdom insolvency law mere segregation of clients money, without the support of an effective trust, would not give adequate protection in the event of a firms failure.
So far, so good.
But neither in the Directives nor in CASS 7 is there any indication of what is to happen if the organisational requirements are not complied with, and clients money is not segregated as it should be.
Both the Directives and CASS 7 assume compliance and do not address the possibility of any significant degree of non compliance, let alone non compliance on what Briggs J referred to as a truly spectacular scale.
In the Court of Appeal Arden LJ (para 63) instanced 7.6.13R as an example of a provision that contemplates non compliance.
It is one of three provisions (7.6.13R, 7.6.14R and 7.6.15R) which deal with the resolution of reconciliation discrepancies.
These routine rules, which contemplate internal reconciliations operating effectively, cannot, with respect, be taken as negating the rules general assumption of compliance.
On the contrary, their relatively trivial nature seems to me to underline a general assumption of compliance with organisational requirements that permeates CASS 7.
In these circumstances, with very large sums of money at stake, it is inevitable that the text of CASS 7 should have been subject to very close analysis.
Although the distinction between R rules and G guidance is important for regulatory purposes, it is common ground that for the purposes of construction provisions which contain guidance, as well as rules, should be taken into account.
Summary of assumed facts
The judgment of Briggs J contains quite a full account of LBIEs organisation and operating methods, partly in paras 1 to 45 of the judgment and partly in the SAF reproduced (except for its description of the claimants) in para 49.
For present purposes a shorter summary is sufficient.
LBIEs business was organised in three segments: capital markets, investment banking and investment management.
It provided a wide range of financial services to clients (including governments, trading corporations and wealthy individuals), and also traded on its own account (proprietary trading).
It regularly and on a daily basis handled money in more than 50 currencies on behalf of more than 1,500 clients in different time zones.
In order to cope with this volume of varied business it adopted the alternative approach (see paras 38 and 39 above) for the segregation of clients money.
As recorded in para 2.11 of the SAF: Client money would be paid directly into and out of LBIEs own bank accounts (or an affiliates bank accounts) and LBIE would segregate client money by making a single daily reconciling payment to (or withdrawal from) bank accounts used exclusively by LBIE in order to segregate client money.
The amount of any such payment would be calculated by LBIE each business day morning based on data as at close of business on the previous business day.
The client money segregated by LBIE would then be adjusted accordingly later that day.
In calculating the amounts which it had to segregate as clients money, LBIE generally did so by reference to a range of components, which varied according to the type of financial services undertaken for a particular client, and the terms of the contract with that client.
Under some contracts LBIE expressly agreed to provide client money protection.
Under others LBIE sought to rely on the total title collateral transfer exemption contained in CASS 7.2 (SAF para 2.6).
Clients money was received by LBIE, or was recognised as clients money by LBIE, in three different ways: payments from clients; payments from third parties; and appropriations by LBIE of its own money by segregating it in a clients money account in order to satisfy a pecuniary obligation such as a manufactured dividend on a stock lending transaction (SAF paras 2.18 and 2.19).
LBIE had more than 700 different bank accounts, falling broadly into three categories: (1) accounts used exclusively for clients money, referred to as core client [money] bank accounts; (2) an intermediate category of accounts (numbering more than 300) referred to as non core client money bank accounts; and (3) house accounts (numbering over 440) containing money of which LBIE regarded itself (in some cases, on the assumed facts, wrongly) as the beneficial owner (SAF 2.20; the word money does not occur in the actual designation in 2.20.1 but it does occur elsewhere, for instance in the next line of 2.20.1 and in 2.26).
In addition, clients money was held in client transaction accounts, that is accounts held in the name of LBIE in a fiduciary capacity, with about ten different clearing houses and brokers.
LBIE also had house transaction accounts for the purpose of its proprietary trading.
Sometimes a single transaction account was used for both clients money and proprietary trading (SAF paras 2.42 to 2.49).
LBIE had a liquidity management process described in SAF paras 2.21 to 2.27.
Its general object was to ensure, by projections of funding needs and appropriate transfers, that LBIE had sufficient liquidity, but not a large surplus of funds, for its trading operations.
Daily transfers were made between LBIE and LBHI so as to achieve this.
In the months leading up to its failure, LBIE was a net debtor of LBHI, so that the effect of transfers from LBIE to LBHI was to reduce the intra group indebtedness.
SAF 2.26 describes how client money was dealt with as part of that process: All of LBIEs bank accounts were subject to the liquidity management process save that, in relation to LBIEs core client money bank accounts, surplus funds would only be withdrawn from these accounts where LBIEs reconciliation and segregation calculation permitted LBIE to reduce the amount of money segregated by it.
Prior to the Time of Appointment therefore, client money first received into one of LBIEs bank accounts was regularly transferred to LBHIs bank account(s) each evening prior to LBIE segregating an equivalent amount the next morning.
As to the events immediately before LBIE was put into administration by an order made at 7.56 am on Monday 15 September 2008, the last internal reconciliation of clients funds took place on the morning of Friday 12 September 2008 by reference to data as at the close of business on Thursday 11 September.
SAF para 2.26 goes on to record: Given that, it is possible that client money received into LBIEs non core client money bank accounts or house accounts between [close of business] on 11 September 2008 and close of business on 12 September 2008 would have been passed up to LBHI as part of the liquidity management process prior to the Time of Appointment [of the Administrators].
There is a more detailed account of these events in SAF para 2.50.
In the judgment of Briggs J the close of business on 11 September 2008 is referred to as the Point of Last Segregation (PLS) and 7.56 am on 15 September 2008 is referred to as the Time of Appointment or, in the context of CASS 7, the PPE.
The appointment of the administrators on 15 September 2008 may be seen as a supervening event which made it impossible for LBIE to perform its obligation (under the alternative approach) to segregate clients money within one business day.
The other failures to segregate seem to have started long before and to have continued over a long period.
They are described as follows (by way of example) in SAF para 2.52: (1) LBIE did not segregate any money in relation to trading in any transactions, including margined transactions, carried out in respect of Affiliates trading on their own account.
The amounts claimed by the Affiliates in connection with this exceed USD3 billion. (2) LBIE did not segregate any money in connection with certain complex arrangements that it had for the trading of various positions with its Affiliates, in connection with which amounts would fall due and payable as between LBIE and those Affiliates but would be posted to the relevant intercompany ledger account rather than always immediately paid. [A footnote refers to a separate application relating to the RASCALS process.] (3) LBIE often entered into agreements with its clients under which LBIE understood that client money protection would not be afforded to various types of money held by it for those clients.
Where this was the case, LBIE did not generally segregate money on behalf of such clients.
A number of clients with agreements of these types seek to argue that the particular language contained in their agreements was not effective to exclude client money protection, at least not in its entirety.
Similarly where clients entered into a number of agreements with LBIE which provided for differing levels of client money protection, those clients may seek to argue that amounts which were held by LBIE for them at the Time of Appointment were held pursuant to an agreement which provided for some client money protection as opposed to another which did not. (4) LBIE did not generally segregate as client money certain amounts relating to options transactions with its clients.
This was the case for all clients, irrespective of whether they had in place title transfer arrangements with LBIE.
Whilst LBIE segregated premiums received for sold options and variation margin on certain options and gains on options closed out, it did not otherwise generally segregate for unrealised gains on open options positions.
As at 12 September 2008, the approximate aggregate value of unrealised gains (not deducting unrealised losses) arising from options transactions which had not been segregated was USD146m. (5) LBIE did not segregate any money in respect of OTC derivatives because all such money was regarded by LBIE as being held pursuant to total title transfers in accordance with CASS 7.2.3R. (6) From time to time operational errors occurred which led to a failure by LBIE to segregate an appropriate amount for a client.
There were also some potential instances of over segregation.
The particular facts relevant to CRC are summarised in SAF para 6: (1) CRC was a prime brokerage client of LBIE. (2) CRC is a wholly Unsegregated Client for whom no client money was segregated by LBIE at the Time of Appointment. (3) LBIE should have segregated as client money for CRC sums including USD52m in connection with FX transactions and a cash balance of approximately USD24m in various currencies on other accounts.
Claren Road Credit Master Fund Ltd (which was a party to the original application but is not represented on this appeal) is an example of a client for whom money was received on 12 September 2008 but whose money was not segregated because LBIE went into administration.
Details of its interest are given in SAF para 7.
The first issue
The first issue is the time at which the statutory trust arises.
In the case of money received from a client or from a third party, the two competing answers are time of receipt and time of segregation.
In the case of satisfaction of a monetary obligation of the firm to a client (the fourth issue in the Court of Appeal) it is now common ground that the trust arises on the appropriation of funds in satisfaction of the obligation, normally by a payment into a segregated client account.
On the first issue Briggs J and the Court of Appeal were in agreement that the statutory trust arises on receipt of the money; and this court, I understand, unanimously agrees that they were right.
In the circumstances I can deal with the point fairly shortly, and mainly by reference to the judges reasons.
Briggs J began his discussion with the observation (para 138), with which I agree, There is much to be said for the proposition, advanced by Mr Milligan in reply, that the question when the statutory trust attaches to client money is really a short point of construction, unambiguously answered by the opening words of CASS 7.7.2R: A firm receives and holds client money as trustee .
I would readily adopt those reasons, expressed in the judges words, as my In paras 139 and 140 he summarised the contrary arguments (put before him not by Mr Zacaroli but by counsel for a representative unsecured non client money creditor and by counsel for LBHI).
In paras 141 to 165 he gave his reasons for rejecting those arguments.
own, but I can summarise them, with some loss of finesse, as follows. (1) Where money is received from a client, or from a third party on behalf of a client, it would be unnatural, and contrary to the primary purpose of client protection, for the money to cease to be the clients property on receipt, and for it (or its substitute) to become his property again on segregation.
It would also be contrary to the natural meaning of the comprehensive language of 7.7.2R (paras 144 146). (2) Segregation without a trust would not achieve MiFIDs objective.
Under the alternative approach an immediate trust of identifiable client money does provide protection, though mixed funds are subject to a variety of risks (para 148). (3) The absence of express restrictions, under the alternative approach, on use of clients money while held in a house account does not mean that the firm is free to use it for its own purposes.
Its obligation is to segregate it promptly, and both section 7.3 of CASS and the general law of trusts would prevent use of clients money for proprietary purposes.
There are at least two methods, one contemplated by 7.4.21R, of ensuring the protection of clients money temporarily held in a house account (paras 149 156). (4) The most formidable argument in favour of segregation (premised on the view that the provision of the distribution rules in 7.9.6R(1) applies only to segregated funds) is that there is under the alternative approach potentially a black hole into which clients money may vanish, so as not to be caught by the distribution rules.
This is a point of substance, but it does not outweigh the opposing arguments.
To allow a limited defect of the alternative approach to dictate the interpretation of the essential provisions of section 7.2 would be to let the tail wag the dog.
In the Court of Appeal both Lord Neuberger MR (paras 190 203) and Arden LJ (paras 104 106) agreed with the reasoning of Briggs J, although each added some further particular reasons.
In his able submissions on behalf of GLG Mr Zacaroli sought to draw a fundamental distinction between the normal approach and the alternative approach.
He submitted that the latter approach is a complete contrast, under which the firm is expressly permitted to pay money into house accounts in which it would swill around with all the money in the firms house accounts.
This point is largely covered by the judges reasoning as briefly summarised in para 63(3) above.
I would add only that the alternative method is available not for the convenience of the firm, but as a better means of securing client protection (the judges second point in para 104 of his judgment).
Both methods are intended to achieve a high degree of client protection, either by immediate segregation or by very prompt segregation.
Moreover client money held temporarily in a house account does not, in the eyes of trust law, swill around but sinks to the bottom in the sense that when the firm is using money for its own purposes it is treated as withdrawing its own money from a mixed fund before it touches trust money (the point made by the judge in para 153 of his judgment).
I would therefore dismiss GLGs appeal on the first issue.
The second and third issues before Briggs J
The second and third issues are stated in the agreed statement of facts and issues in these terms: (2) Do the primary pooling arrangements apply to client money in house accounts? (3) Is participation in the pool dependent on actual segregation? They were formulated in similar, but not identical terms in the Court of Appeal (para 6 of Arden LJs judgment).
These are the issues on which the Court of Appeal unanimously differed from the judge.
I shall try to summarise the main lines of reasoning in the courts below, although (again) my summary will not do justice to many of the finer points in the judgments.
Briggs J covered what is now the second issue (his third issue, rather differently formulated) at paras 166 to 198.
Because the issue as to the constitution of the client money pool (CMP) was differently formulated, many of the arguments which the judge had to consider have not been pursued on appeal.
With hindsight derived from the hard toil of the appeal process I find it a little surprising that the judge concentrated so much on the language of 7.9.6R(1), to the exclusion of 7.7.2.
The statutory trust in 7.7.2 received only an indirect mention in para 195: There is in any event a persuasive symmetry between that part of CASS 7 which requires the identification and segregation of client money by a firm while in business, and the distribution rules which, on that interpretation, require the money thus segregated to be promptly distributed to the clients entitled to it upon the firms failure.
The judge concluded on this issue (para 197): (i) The CMP is constituted as at the PPE only by client money in segregated accounts. (ii) Client money outside the firms segregated accounts does not form part of the CMP. (iii) The identification of client money (if any) outside the firms segregated accounts depends upon the established principles by which a beneficiary must trace his property in order to pursue a proprietary claim in relation to it [with references to five well known cases].
As to the third issue, the basis of sharing the CMP, Briggs J approached that as a contest between what he called the contributions theory and the claims theory.
This corresponds closely to the contest as to whether in CASS 7 client money entitlement refers to contractual or proprietary entitlement.
It is to be noted that however the issue is formulated it arises as a problem, except in relation to the last business day, only in the event of non compliance with CASS 7.
The judge saw the contest as a difficult question with large consequences, which is undoubtedly correct.
He observed (para 228): Unhappily, CASS 7 provides no clear guidance on this question.
This is probably because the draftsman working in the utopian world of full compliance by the firm with the client money rules before its failure, assumed that there would be no substantial difference between the amount which should have been segregated and the amount which was actually segregated for any particular client.
The only differences would arise from dealings with client money during the short period between the PLS and the PPE, and then only in relation to a firm using the alternative approach.
In para 234 the judge came back to the point that the Directives contemplate that the protection of clients money will be achieved by compliance with the Directives organisational requirements.
In paras 238 and 239 he analysed the effect of 7.7.2R, in conjunction with other provisions, in imposing the statutory trust for the clients for whom that money is held, according to their respective interests in it.
Para 241 in effect sets out the case for the contributions theory at its highest, and then notes that there are counter arguments: The result is in my judgment that the MiFID Directives, the general law and an analysis of the proprietary rights in the segregated accounts prior to pooling, all support the contributions theory as against the claims theory.
There remains nonetheless the question whether, as submitted by (and for) the un segregated clients, the language of the distribution machinery contained in CASS 7.9.6R, 7R and 9R requires the application of a claims rather than contributions basis of calculation as a matter of interpretation.
For that purpose, there is no escape from a painstaking analysis of the meaning and purpose of those three paragraphs, and in particular paragraph 7.9.7R.
The counter arguments are summarised in seven sub paragraphs in para 242, described in the next paragraph as constituting a formidable textual argument.
But the judge discerned weaknesses in it.
First, the expression client money entitlement in CASS 7 does not have a single fixed meaning.
Second, the draftsman could not have contemplated a disparity between the results of the two methods because his aim was (para 246) to construct a scheme of obligations with which he expected firms to comply, rather than flout.
Moreover (para 250) it is no part of the distribution rules to confer upon clients whose money was, in breach of the client money rules, not contributed to the segregated accounts from which the CMP is constituted, a beneficial interest in that fund which did not exist immediately prior to the PPE.
The judge then embarked on what is indeed a painstaking examination of 7.9.6R(2), 7.9.7R and 7.9.9R, which took him into the purposes and structure of the annex.
He concluded (para 275): My conclusion on this issue therefore is that the basis for sharing in the CMP is the amount which the firm actually segregated for each client, as revealed by the last internal reconciliation account carried out by the firm before the PPE, and in LBIEs case (because it used the alternative approach) by reference to the PLS, subject to certain adjustments necessitated by CASS 7.9.7R, and by subsequent events, to which I will return later in this judgment.
The second and third issues in the Court of Appeal
In the Court of Appeal Arden LJ covered the second issue at paras 108 to 142 of her judgment, with her conclusions beginning at para 124.
She saw client money account (an undefined expression) as having a wide meaning.
She thought it significant that the statutory trust was a single trust, that client money entitlement in 7.9.6R(2) naturally referred to a contractual entitlement, and that 7.9.3G envisaged a pooling of all the client money, in every type of client money account (para 127).
She saw the contributions theory as producing unfair results (paras 130 and 131).
She rejected the argument that the claims theory involved any interference with the rights, prior to the PPE, of fully segregated clients (para 134).
Similarly she discounted the judges symmetry (para 195 of his judgment, quoted in para 67 above) as a distraction (para 137).
She concluded that there was to be a pooling of all client money in segregated accounts and house accounts (para 139), and that there should be a final reconciliation covering events down to the PPE (paras 140 142).
Lord Neuberger MR addressed the second issue at paras 204 to 224.
He could get only limited textual assistance, though he considered numerous detailed points (paras 205 to 215).
He saw some force in the submission that at least on a primary pooling event, the clients of the firm are in it together, and client money is pooled and paid out to all clients on a pro rata basis, and that the claims theory was fairer in avoiding a degree of randomness (paras 217 and 218).
He also attached some weight to the notion that the statutory trust was a single trust, and to the Directives aim of providing a single and consistent level of protection (paras 221 and 222).
So Lord Neuberger reached the same agreement as Arden LJ on the second issue, and Sir Mark Waller agreed with both of them.
Lord Neuberger does not seem to have commented on Lady Ardens view that a further, final reconciliation was appropriate, and the order of the Court of Appeal as perfected does not refer to this point.
But Mr Miles in his written case (para 182) and his oral submissions (Day 4, page 96) relied on Sir Mark Wallers general agreement with Arden LJ on the topic of pooling.
Arden LJ addressed the third issue at paras 143 to 163, with her conclusions beginning at para 154.
She repeated that client money entitlement referred to contractual entitlement, even if it meant distributing funds to clients with no proprietary claim.
It was open to the FSA, she stated, to treat the failure of the firm as a common misfortune in which those who had claims to the recovery of client money should share without distinction (para 154).
She noted that even under the contributions theory, adjustments have to be made, and considered that the judges reference to a glitch (in para 265 of his judgment) understated the problem (para 157 of the judgment of Arden LJ).
Referring to the words for the clients . for whom that money is held, according to their respective interests in it in 7.7.2R (3) Arden LJ stated (para 160): While the firm is a going concern those interests are the several interests of the clients but on a PPE a pooling occurs so that on any view those interests are varied.
Accordingly as from the happening of a PPE, the expression their respective interests must mean their respective interests under CASS 7.9.6R.
So Arden LJs conclusion was in favour of the claims theory.
So was that of Lord Neuberger MR (paras 225 234).
He regarded the objections to the contributions theory (set out in para 242 of the judges judgment) as not merely formidable but also decisive.
He thought that client money entitlement did have a consistent meaning if the claims theory was adopted; it was only if the contributions theory was adopted that inconsistency occurred.
Again, Sir Mark Waller agreed with Lord Neuberger and Arden LJ.
The intricate textual arguments outlined above (and it is merely an outline) have now been debated between highly skilled counsel for a total of 20 days.
Many of them seem to be the result of drafting imperfections in CASS 7.
As was pointed out below, there is no definition of the expression client money account, although the glossary (which is the size of a small dictionary) does contain definitions of client bank account (as a current or deposit account at a bank, in the name of the firm, which holds the money of one or more clients) and client transaction account (explained in 7.4.16G).
It is, I accept, impossible to avoid the most important of the textual arguments, particularly the formidable argument (paras 242 and 243 of the judgment of Briggs J) which ultimately persuaded Lord Neuberger, and also influenced Arden LJs conclusions (paras 154 to 160).
I shall return to those arguments.
But in my view the resolution of the second and third questions (which are closely bound together) depends ultimately on the general scheme and structure of the regulatory framework in CASS 7, and on seeing (in general terms) how segregation of clients money worked in practice, not merely on the catastrophic failure of the firm on the PPE, but from business day to business day during the firms trading operations.
The nature of the statutory trust
In the search for the essential scheme and structure of CASS 7 the outstanding feature is the statutory trust.
In line with the clear conclusion reached on the first issue, the effect of CASS 7 is that under the alternative approach, as well as under the normal approach, a firm receives and holds clients money as a trustee, with beneficial ownership remaining in the clients.
The trust in 7.7.2R is (1) for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules; (2) subject to [(4) costs of distribution on failure] for the clients [subject to an irrelevant exception] for whom that money is held, according to their respective interests in it.
The client money rules are defined in the glossary as CASS 7.1 to 7.8, and the client money (MiFID business) distribution rules as CASS 7.9.
The latter rules apply only in what was (until shortly before LBIEs failure) no doubt regarded as a remote contingency, that is the failure of the firm or some other event amounting to a PPE.
Unless and until such an untoward event happens, the purposes of the statutory trust are those in CASS 7.1 to 7.8.
This point needs to be made since Mr Miles, for understandable reasons, referred to the statutory trust as a purpose trust and placed emphasis on the purposes of the client money distribution rules in CASS 7.9, and especially 7.9.6R.
Those rules came into operation on the failure of the firm on 15 September 2008.
Until then clients money had been held, no doubt in some cases for years, in client money bank accounts (some general and some designated) for all the purposes of CASS 7.4, 7.5, 7.6 and 7.8 that is segregation, transfer to third parties, record keeping and internal reconciliation, and protection (by notice to banks) of client money bank accounts.
Those purposes were not ends in themselves (as in a trust for charitable purposes).
They were purposes directed to the protection and management of clients money in the beneficial ownership of clients who were identified beneficiaries of the trust, being (as 7.7.2R(2) puts it) those for whom that money is held, according to their respective interests in it.
The biggest objection to the claims theory of interpreting 7.9.6R is that it involves, on the assumed facts of this case, a cataclysmic shift of beneficial interest on the PPE, to the detriment of those clients who must have supposed that their funds were safely segregated in accordance with CASS 7.1 to 7.8.
That shift (or bifurcation, to use a term which counsel used a great deal in argument) is in striking contrast to the persuasive symmetry that Briggs J (para 195 of his judgment, para 67 above) found in the contributions method.
It is a far more extraordinary bouleversement than the relatively trivial bifurcation involved in segregation of clients money being deferred, under the alternative approach, until the next business day after its receipt.
In his written case (para 34) Mr Zacaroli suggested that it would amount to the segregated clients funds being used as a strange form of compensation fund for disappointed clients whose funds had not been segregated.
The Court of Appeal was aware of this difficulty.
Arden LJ recognised (para 134) that the court should not of course interfere with property rights but dismissed the difficulty on the ground that dealings between the firm and its clients take place on the basis of CASS 7, and thus pooling is implicit in their dealings, followed by a reference to 7.9.3G.
It is true that money in a general client account is pooled, and is at a risk that it will be shared rateably between the beneficial owners in the event of a SPE (such as the failure of a bank holding clients money) occurring without a PPE.
But the notion that clients must be taken to have implicitly accepted the risk of discovering, on a PPE, that their carefully segregated funds must be shared with non segregated clients (including Lehman Brothers affiliates) seems, with respect, quite unrealistic.
An associated point on the judgments in the Court of Appeal is the notion that all the clients of LBIE were victims of a common misfortune or disaster.
Arden LJ referred to this (para 125 and, for what she called the happenstance point, para 131).
Arden LJ did not accept Mr Zacarolis submission that the correct analysis was not the common misfortune of the firms failure, but the separate misfortune (suffered by some clients but not by others) of LBIEs assumed failure, on a massive scale, to comply with its obligations under CASS 7.4.
Both Arden LJ (para 131) and Lord Neuberger (para 218) seem to have accepted the submission of Mr Mabb QC (appearing for the FSA, the statutory regulator whose share of responsibility for the misfortunes of some or all of LBIEs clients is not an issue in these proceedings) that the non segregation was happenstance and that equal treatment seems fairer than randomness.
With great respect to the Court of Appeal, I regard that approach as inappropriate.
The court has to give directions to the administrators on the basis of the assumed facts set out in the SAF.
Those assumed facts are stated for the most part at a high level of generality, and with an almost clinical detachment from what the judge referred to as LBIEs shocking underperformance.
We simply do not know how it came about that so much clients money was paid into house accounts when it should have been segregated.
In particular, apart from the terse statements in SAF 2.52 (para 58 above) we do not know the circumstances in which LBIE came to overlook, or decide not to apply 7.1.12G (Affiliated companies) in dealing with Lehman Brothers affiliates (SAF 2.52(1) and (2)); or the circumstances in which terms were negotiated with clients leaving room for argument as to whether client money protection was wholly or partly excluded (SAF 2.52(3)).
There is no basis, in my respectful opinion, for deciding that one scheme of distribution would be fairer than another.
Our task is to construe CASS 7, and then apply it to the assumed facts.
In construing CASS 7 we have to look at its essential scheme and structure.
Beyond that a purposive approach gives little assistance, since it is plain (as already noted) that neither the Directives nor CASS 7 contemplate non compliance with regulatory requirements (in the judges words) on a truly spectacular scale.
Both Lord Neuberger and Arden LJ gave some weight to the statutory trust being a single trust, without much explanation of what that meant or why they saw it as significant.
The trust is declared in simple terms as affecting client money, but the detailed guidance, especially that in 7.9.3G, shows that some client money will be pooled in general client bank accounts, while other client money will be held separately in designated client bank accounts.
Some but not all clients will be entitled to interest on their client money (7.2.14R).
A bank holding client money may fail (as Bankhaus did) and on a SPE any loss will fall rateably only on those clients whose money was deposited with that bank not on all clients.
So the single trust argument does not provide much support for the claims theory.
The majority judgments in this court
Lord Dyson disagrees with the views set out in para 81 above.
In his view (para 159) a purposive interpretation clearly supports the claims basis for participation.
That is because the Directives overriding purpose is to safeguard the assets of all clients and to provide all clients with a high degree of protection (his emphasis).
This purpose is to be achieved, in his view, by a solution which means that no client of LBIE is provided with a high degree of protection, even those whose funds were (at all times down to the PPE) meticulously segregated and accounted for in accordance with CASS 7.
With the greatest possible respect, I simply cannot follow this argument.
I consider the majority view also gives insufficient weight to the fact that, although CASS 7 provides a detailed code, that code is erected on the foundation of the general law of trusts.
Lord Collins refers (para 186) to Professor Gowers Review of Investor Protection (1984), noting that under English law segregation of funds provides a client with insufficient protection unless it is backed by the clients continuing beneficial ownership.
So (as already noted) CASS 7 was not gold plating the Directives.
But it is equally clear that a trust without segregation is a very precarious form of protection because of the risk or rather, in this context, the strong probability that the element of trust property in unsegregated funds will rapidly become untraceable.
Immediately before the PPE, many of the non segregated clients probably the great majority of them had no identifiable trust property held in trust for them.
The funds of the segregated clients, by contrast, belonged in equity, immediately before the PPE, to the respective clients for whom they had been segregated.
Lord Dyson (para 144) and the others in the majority evidently regard it as realistic to suppose that those segregated clients accepted the risk of having the bulk of their beneficial interests divested in order to compensate other non segregated clients who, immediately before the PPE, had no beneficial interest in any identifiable trust property (and of whom, and of whose affairs, the segregated clients knew nothing).
The majoritys decision makes investment banking more of a lottery than even its fiercest critics have supposed.
Internal client money reconciliation (the Annex)
Any trustee which holds large sums of money in trust for clients must have in place appropriate procedures, keep accurate records, and regularly reconcile its balances.
For a financial services firm like LBIE, which offered a wide variety of services to a large number of clients, these obligations were of particular importance, and CASS 7.6, together with the Annex, laid down detailed and fairly complicated rules.
These were needed because clients did not leave their money inactive.
They deployed it in trading activities in which their positions might change from day to day.
So the daily internal reconciliation had to cover clients money held in client transaction accounts (SAF 2.12 and 2.42 to 2.49) or committed to futures or other margin transactions (SAF 2.28 to 2.39).
These complications are reflected in the Annex.
I gratefully adopt the judges summary (paras 256 to 258): 256The standard method of client money reconciliation is set out in [the Annex].
It requires a firm on each business day to identify its client money requirement (as defined by paragraph 6) and to ensure that its client money resource is at least equal to the client money requirement. 257.
The firms client money requirement is (in the first of two alternative formulations in paragraph 6) the aggregate of all individual client balances, excluding negative client balances and client equity balances, together with the total margined transaction requirement, which is (as appears from paragraph 14) the aggregate of all positive client equity balances, subject to certain deductions which do not matter for present purposes. 258.
Paragraphs 12, 18 and 19 of [the Annex] give the firm certain discretions as to how to carry out these calculations.
Paragraph 12 gives the firm a discretion to deduct fees and other expenses due and payable by the client to the firm.
Paragraph 18 (further explained by paragraph 19) gives the firm a discretion to make an offset between a positive individual client balance and a negative client equity balance, or vice versa, so as to reduce either the individual client balance or the client equity balance.
Client equity balance is defined in the glossary as the amount which a firm would be liable (ignoring any non cash collateral held) to pay to a client (or the client to the firm) in respect of his margined transactions if each of his open positions was liquidated at the closing or settlement prices published by the relevant exchange or other appropriate pricing source and his account closed.
That explains why the balance can be either positive or negative.
Briggs J went on (paras 258 to 261) to a detailed consideration of 7.9.7 R, under which it is mandatory, after a PPE, to make the paragraph 18 offset which has until then been discretionary.
That point is best considered as part of the discussion of 7.9.6R and 7.9.7R, which follows.
The third issue: the effect of primary pooling
Mr Miles arranged his written and oral submissions so as to deal with the third issue (how is the CMP to be distributed?) before the second issue (what is to go into the CMP?).
There are advantages in that approach.
The second issue, if understood (as it must be) in a way that does not pre empt the third issue, becomes a relatively narrow issue limited to any money which was held in house accounts at the PPE and was identifiable, under the general law of trusts, as clients money.
Mr Zacaroli submitted that if he lost on the second issue he could still win on the third, and (he might have added) the third issue is almost certainly of much greater importance in financial terms, both to his client and to the other claimants.
I shall therefore adopt Mr Miless approach and consider the third issue before the second issue.
PPE: It is worth repeating the crucial provisions which come into operation on a 7.9.6R If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. 7.9.7R (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, the credit must be offset against the debit reducing the individual client balance for that client. (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, the credit must be offset against the debit reducing client equity balance for that client.
At the beginning of his discussion of the second issue Briggs J observed (para 166): The (perhaps old fashioned) principle of construction that words are there for a purpose suggests that the phraseology used was designed to achieve at least the following two purposes.
The first is that it was not the intention of the draftsman to capture all client money held by the firm, but only client money held in each client money account of the firm.
Secondly, it was not the intention to capture all money held in each client money account of the firm, but only client money held in such accounts.
I agree that that is the right starting point, not only for the second issue, but also (as they are so closely connected) for the third issue.
The expression client money account is not defined in the glossary, but it naturally refers to (i) every client bank account (which is a defined term and covers every general client bank account, every designated client bank account and every designated client fund account of the firm, those being the different forms of account mentioned in 7.9.3G) and (ii) every client transaction account (which is a defined term and is explained in 7.4.16G).
These are the accounts affected by the internal reconciliation obligation, as appears from the unnumbered preamble to the Annex.
Arden LJ considered (para 136) that the expression client money account must have been deliberately chosen as being wider than client bank accounts and client transaction accounts but I do not understand her reasoning and I respectfully differ from her conclusion.
Lord Neuberger considered the textual arguments to be much more evenly balanced (paras 205 to 215) and he seems ultimately to have decided the point by a general appeal to fairness, with which I have already expressed my respectful disagreement.
For these reasons I approach the third issue on the provisional basis, at least, that the CMP the distributable pool consists of the aggregate of the segregated funds holding clients money immediately before the PPE.
Those funds are assumed to have been subject to internal reconciliation on every business day, following the detailed procedure in the Annex, so that the client money resource is at least equal to the client money requirement (Annex, paras 2 and 6).
That pool is to be distributed in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
As the judge observed (para 251), had this provision stopped at the comma after 7.7.2R there would have been no doubt but that the clients entitled to participate in the distribution were those identified in the last reconciliation.
They were under 7.7.2 R (2) the clients . for whom that money is held and it was to be distributed according to their respective interests in it.
In the course of his excellent submission Mr Miles urged that each client in 7.9.6R must be taken as meaning what it says.
But the words must be read in context.
When read in context, they mean each client for whom client money is held.
In In re Global Trader Europe Ltd [2009] EWHC 602 (Ch) [2009] 2 BCLC 18, para 99, Sir Andrew Park reached the same conclusion as Briggs J on this point.
The second part of 7.9.6R(2) begins with the words so that.
Those words are apt to introduce the natural consequences of what has gone before, rather than to herald an abrupt change.
The reference to a rateable distribution of the CMP indicates the possibility of a shortfall, and in practice a shortfall is almost inevitable on the failure of the firm, since in that event the costs of distributing the CMP are to be a first charge on it under 7.7.2R(4).
There are also some more technical reasons which may produce a shortfall in the CMP, though any such shortfall would probably be relatively small.
These are identified in paras 262 to 269 of the judges judgment.
I agree with the judges analysis and I need not repeat it.
The final words of 7.9.6R(2) are calculated in accordance with CASS 7.9.7R.
The judge said of this (paras 254 to 256, whose language I gratefully adopt as I cannot improve on it): 254.It is this concluding phrase, and its incorporation of CASS 7.9.7R, that lies at the heart of the argument of the protagonists for a claims basis of sharing in the CMP.
Put another way, the case for rejecting a contribution basis rests wholly on an understanding of CASS 7.9.7R, to which I now turn. 255.
The first thing to notice about CASS 7.9.7R is that it does not purport to constitute a comprehensive formula for the calculation of a client money entitlement.
It merely provides for the offset of two particular types of accounting debit against two particular types of accounting credit.
By subparagraph (1) a positive individual client balance is to be reduced by offsetting a negative equity balance.
By subparagraph (2) a positive client equity balance is to be reduced by any negative individual client balance.
It says nothing about the situation where a client has positive balances, or negative balances, of both types.
It is, as Mr Zacaroli described it, a reducing mechanism.
Its effect is, in the stated circumstances, to reduce what otherwise might have been identified as a clients client money entitlement, which is to serve as the basis for his rateable participation in the CMP. 256.
In the case of a reasonably compliant firm, it may be assumed that the basis upon which the firm had segregated client money for each of its clients prior to the PPE would be disclosed from the last internal client money reconciliation account, upon the basis of which (for example) a firm using the alternative approach would have adjusted the amount of the segregated accounts as at the PLS.
The judge then continued with the passage that I have already quoted at para 90 above, and went on to comment that the option conferred by paragraph 18 of the Annex permits, but does not require, a firm to carry out precisely the same offsetting process as is made mandatory after a PPE by CASS 7.9.7R (para 258).
He regarded the purpose of 7.9.7R as obscure (para 232).
Arden LJ noted (para 152) that it has a limited operation, but did not go further into its purpose.
Nor did Lord Neuberger (paras 189 and, in a quotation from the judge, 228).
I agree with Briggs J that it is very hard to see why one point of detail in the Annex has been singled out, as it were, for particular mention in 7.9.7R.
But I am in full agreement with his conclusion (para 261) that this obscure provision does not necessitate a construction, contrary to all other indications, that the CMP is to be distributed on the basis of the claims theory rather than the contributions theory.
For these reasons, which are the same as those of the judge, I would allow GLGs appeal on the third issue.
The second issue: final reconciliation as at the PPE
If the first and third issues are resolved in the way set out above, the second issue is seen to be within a relatively narrow compass.
It becomes focused on movements in the client money requirement as between the PLS (close of business on Thursday, 11 September 2008, the critical time for the data on which an internal reconciliation took place on Friday, 12 September) and the PPE (7.56am on Monday, 15 September).
I shall refer to this period as the gap period.
This court has to decide the issue as a matter of principle, proceeding on the basis of assumed facts.
But it may be worth pulling together the few passages in the SAF which touch on this point.
SAF para 2.26 (quoted in paras 56 and 57 above) mentions the possibility that client money received into non core client money accounts or house accounts would have been passed up to LBHI as part of the liquidity management process.
SAF 2.50.1 states that a total sum of over $45m of client money was paid to clients from house accounts during the gap period.
At first instance Mr Zacaroli accepted that a client who was repaid client money during the gap period could not expect to be repaid twice (para 268 of Briggs Js judgment).
SAF 2.50 does not state in terms how much client money was received during the gap period.
But SAF para 2.20.3 states that 24 house accounts regularly used for client transactions had at the PLS credit balances totalling about $162m, and that at the PPE 26 accounts had credit balances totalling about $297m.
The third supplement to the SAF, para 1, adds to this that the 24 accounts mentioned in SAF 2.20.3 were not swept to zero on 12 September 2008 (that point does not seem to have been picked up by Briggs J at para 110 of his judgment).
Para 2 of the third supplement adds that on the current state of the administrators knowledge much of the money in these accounts was probably not clients money.
It is not necessary, or indeed possible, to try to go much further into the incompletely stated (and in any event assumed) facts about movement of funds in the gap period.
But the mere fact that there was no sweep under the liquidity management process on 12 September 2008 makes it possible that significant sums of client money are traceable, under the general law of trusts, as still held in LBIEs house accounts at the PPE.
In practice the second issue resolves itself into a contest between two theories. (1) One theory (the final reconciliation theory) is that as soon as possible after the PPE LBIE, although then under the control of the administrators, should have carried out a final reconciliation in accordance with the provisions of the Annex. (2) The other theory (the general trust law theory) is that it was not the administrators duty to carry out a final reconciliation, but that a similar result would be produced by clients whose money was stranded in a house account during the gap period claiming it, not under CASS 7, but under the general law of trusts.
In reply to a question from Lord Clarke Mr Miles said (Day 3, page 93) that exactly the same result was produced by either route.
I do not think that is quite right (though I may have misunderstood Mr Miles).
Under the final reconciliation theory there would be a small alteration in the constitution of the CMP and any clients making last minute contributions to the CMP would share rateably, and suffer rateably any inadequacy in the pool (whether from the failure of Bankhaus, or from the costs of distribution under 7.7.2R(4), or from any other cause).
Under the general trust law theory they would claim the whole of their respective contributions, so far as sufficient client money could be traced and identified, and there might be some deduction for administrative costs under the principle in In re Berkeley Applegate (Investment Consultants) Ltd [1989] Ch 32.
So the outcome would not be exactly the same, but it might well be similar.
Under the general trust law theory an unsegregated last minute provider of client money would be left to his claim as an unsecured creditor only if and so far as his money was not traceable and identifiable in credit balances in house accounts.
The guidance in 7.9.8G (set out in para 43 above) is therefore (to put it no higher) incomplete.
Briggs J recorded (para 127) that before him leading counsel then appearing for the FSA roundly declared that it was wrong, and that the FSA intended to change it as soon as practicable.
In his judgment Briggs J considered the final reconciliation theory (though not under that name) as part of an important passage (paras 199 to 226), much of which was concerned with whether LBIE was under a duty to top up the CMP out of its own funds.
He held that that would be contrary to basic principles of insolvency law, and there is no appeal on that point.
He then more briefly rejected the suggestion that there was an obligation to top up the CMP with any identifiable client money in house accounts, concluding (para 224): In my judgment the lacuna is sufficiently filled by the general law, which permits those clients whose money is identifiable within house accounts, and not therefore part of the CMP, to pursue proprietary claims for its recovery, if they can surmount the evidential obstacles imposed by the need to trace.
It is interesting to note (para 225) that at that stage Mr Zacaroli, if correctly reported, seems to have been supporting the final reconciliation theory, or something like it.
In the Court of Appeal Arden LJ expressed a clear preference for the final reconciliation theory (paras 140 to 142).
I have already noted that Lord Neuberger did not cover this point, and the order of the Court of Appeal leaves it in doubt whether Sir Mark Wallers general agreement with Arden LJ should be taken as covering this particular point.
Before this court Mr Miles and Mr Crow have supported the final reconciliation theory with some detailed written submissions (paras 179 to 183 and 49 to 52 of their respective written cases) as well as in oral argument.
They have pointed out that it avoids a bifurcated scheme and achieves a symmetrical result.
Mr Zacaroli dealt with this point quite briefly in his written case (para 213) and in his oral submissions.
On this issue I accept the submissions of Mr Miles and Mr Crow.
There was no real challenge to Mr Miles argument that there is nothing in CASS 7, or in the general law of insolvency applicable to administrators, to prevent a final internal reconciliation being carried out on the data as they were at the PPE, limited to taking account of events during the gap period (and not reopening previous reconciliations down to and including the PLS).
That interpretation avoids bifurcation, achieves symmetry, and assimilates the effect of the alternative approach with that which would have occurred under the normal approach.
I would therefore dismiss GLGs appeal on the second issue so far as it relates to movements in clients entitlements during the gap period.
But I would allow the appeal to the extent of limiting the wide language of the direction or declaration in para 5 of the Court of Appeals order.
Whatever the outcome of this appeal, the terms of the order are going to need careful consideration and drafting in order to give the administrators the clearest possible guidance.
As a postscript, I have not overlooked the parties submissions on two points: legislative history and the need for a timely, workable solution.
As to the first, counsel have been very helpful in exploring how this area of regulatory law has evolved, but I do not think it gives the court any significant assistance in the task of construing CASS 7.
As to the need for the administrators to have a workable scheme which provides for a timely distribution, that is an aspiration which has already, sadly, perished.
A straightforward, timely distribution is impossible because of LBIEs massive non compliance with CASS 7.
Because of it, there is in one sense no commercially sensible solution to the problem, and that is the bleak situation in which the court has to give guidance to the administrators.
But I have little doubt that the decision of the majority will lead to much more delay, uncertainty and expense than if the judges directions had been restored.
LORD CLARKE
I had initially intended simply to add my agreement with the judgment and reasons of Lord Dyson.
That intention was formed on the basis that it is rarely helpful to publish a concurring judgment which does no more than repeat the conclusions and reasoning of the principal writer.
However, in the light of the sharp division of opinion between the members of the court, I offer this short contribution.
I remain of the view that this appeal should be dismissed for the reasons given by Lord Dyson.
I also agree with the reasoning in the short judgment written by Lord Collins.
In particular, I agree with them that the questions raised by the issues in this appeal depend, not upon the ordinary law of trusts, but on the true construction of the relevant provisions of CASS 7.
Lord Dyson has described with clarity the factual background against which CASS 7 must be construed.
The most important features of that background are MiFiD and the Implementing Directive, the purposes of which include providing a high level of protection for all clients who provide moneys for investment on their behalf.
As I see it, one of the principal purposes of CASS 7 is to provide protection as between clients on the one hand and the firm on the other.
Clients as a whole have a higher level of protection if all clients who have provided money and who have a claim against the company are entitled to claim against the pool than if such claims are limited to those with a proprietary right.
I do not see anything odd or inappropriate in such a conclusion.
On the contrary, it seems to me to be consistent with the principles underlying MiFiD and the Implementing Directive.
All the judges who have considered the issues have concluded that a trust arises on receipt of client moneys by the firm.
Thus CASS 7.7.2(1)R provides that a firm receives and holds money for the purposes of the client money rules and the distribution rules.
By CASS 7.2.1 client money means any money that a firm receives or holds for or on behalf of a client.
It follows that the fiduciary duties imposed by CASS are owed by the firm before there is segregation of client moneys and whether or not there has been segregation.
By CASS 7.2.15, which is under the heading Discharge of fiduciary duty, money ceases to be client money in certain specific circumstances, notably when it is paid away on the instructions of the client.
Until then, the money remains client money and, importantly, the firm retains fiduciary duties in relation to it.
I agree with Lord Collins approach to the first issue.
In particular I agree with Lord Collins conclusion at para 192 that, if the trust does not arise until segregation, then whether or not clients are protected by CASS 7 would become arbitrary and dependent upon the firms own practices; and the greater the level of incompetence or misconduct on the part of the firm, the less the protection for the clients.
This consideration seems to me to support the conclusion that CASS 7 is intended to protect all clients who provided money and have contractual claims.
Similar considerations support Lord Dysons conclusions on the second issue at paras 161 to 167, namely that money received by the firm before a PPE is to be treated as pooled, whether it is received before or after the PLS.
In particular I agree with his conclusions at paras 164 to 167.
By CASS 7.9.6R(1), if a PPE occurs, client money held in each client money account of the firm is treated as pooled.
I agree with Lord Dyson at para 164 (and Lord Neuberger of Abbotsbury MR [2011] Bus LR 277, paras 207 and 208), that the expression client money account of the firm should be given the wider meaning, namely that it extends to any account of the firm into which client money has been paid and that it is not restricted to segregated client money accounts.
I agree with Lord Dyson at para 165 that to exclude identifiable money in house accounts from the distribution regime runs counter to the policy underlying CASS, which is to provide a high degree of protection to all clients in respect of money in each money account of the firm (Lord Dysons emphasis).
As I read CASS, it is only CASS 7.9.6R(1) which governs what money is treated as pooled.
Thus it is only client money held in a client money account.
If the narrower meaning is given to that expression, only money held in a segregated account is included.
All other client money, whether received in the gap period between the PLS and the PPE, or before the PLS and not segregated (although it ought to have been), will not be treated as pooled because it would not be covered by CASS 7.9.6R(1) and there is no other provision of CASS under which it would be so treated.
Yet it is accepted by Lord Walker and Lord Hope that it would be unsatisfactory to exclude money which could not have been segregated because it was received by the firm after the PLS because of the inevitable time gap between segregations.
They therefore accept that unsegregated moneys received by the firm between the PLS and the PPE should be treated as pooled and that a reconciliation should take place as at the PPE.
They prefer that approach (the final reconciliation theory), to the general trust theory, under which clients whose money is stranded in a house account during the gap period would have to rely upon the general law of trusts.
I agree with them that it would be unsatisfactory to exclude money which was received after the PLS.
However, as I see it, the difficulty with the final reconciliation theory, if it is limited to money received in the gap period between the PLS and the PPE, is that it has no support in CASS.
I agree with Arden LJ [2011] Bus LR 277, para 142 and Lord Walker that there must be a final reconciliation as at the PPE.
I can however see no reason why it should be limited to money received after the PLS and in this respect I agree with Arden LJ at para 142.
It seems to me that it must be the duty of the administrators to conduct the reconciliation exercise fully and effectively.
Thus, in principle, it must be their duty to conduct the reconciliation in accordance with CASS 7.
I see no warrant for their being entitled to assume that the segregation as at the last PLS had been carried out correctly.
Indeed, in a case where the failure of the firm has caused the PPE, it is not unlikely that the firm will not have done so.
There are many possible ways in which the firm may have carried out the last segregation otherwise than in accordance with CASS.
For example, there may have been no segregation for several days (or more) before the PPE.
Or the firm may have segregated only the funds of one client (or some clients) and not others, or it may have segregated only some of a particular clients (or particular clients) money.
A number of questions arise.
For example, what would be the position if the firm had conducted no segregations at all for some days preceding the PPE? Would the administrators final reconciliation cover: (a) all identifiable moneys deposited between the date of the last actual segregation and the PPE; or (b) all identifiable moneys deposited between the date when the last segregation ought to have taken place and the PPE?
Neither option seems satisfactory.
Option (a) draws a sharp dividing line at the time of the last actual segregation, no matter how limited (would a single act of segregation suffice?) or ineffectual (would segregation of 1 suffice?) it may have been.
However option (b) draws an arbitrary distinction between clients who deposited moneys during the last business day before the PPE and all other clients.
If LBIE wholly failed to comply with their segregation obligation for several days in a row, why afford preferential treatment to clients who deposited funds on the last day before the PPE? All these clients funds would be unsegregated and, as I see it, they should be treated in the same way.
Either they should all be treated as having money in the pool or none of them should be so treated.
As I understand it, Lord Walker and Lord Hope accept that unsegregated client money received by the firm between the PLS and a PPE must be treated as pooled under CASS 7.9.6R(1).
In my opinion, that is only permissible on the basis that client money in a firm account is held in a client money account of the firm.
It seems to me that, if that is so, there is no reason not to hold that client money held in a firm account before the PLS is also in a client money account of the firm.
In these circumstances, in agreement with Lord Dyson at paras 165 and 167 and with the Court of Appeal (per Arden LJ at paras 124 to 142 and Lord Neuberger at paras 204 to 224), I would hold that the primary pooling arrangements apply to client money in firm accounts whenever it was paid in and that issue 2 should be answered on that basis.
That conclusion seems to me to be entirely consistent with the conclusion (reached by everyone) that a trust comes into existence on receipt of client money by the firm.
The answer to issue 2 seems to me to point the way to the answer to issue 3.
Although I can see that, if issue 3 is taken first, it can be said with some force that the reverse is the case, it does seem to me that, logically, it is sensible to take issue 2 first, as the Court of Appeal did.
It makes more sense to identify the CMP before deciding who should share in it rather than the other way round.
I agree with Lord Neuberger at para 226 that, as he put it, it could be dangerous to look at the general law of trusts because CASS 7 is intended to be a code.
The distribution model underlying the CASS 7 trust differs markedly from that of private trust law.
The focus of issue 3 is CASS 7.9.6R(2), which provides that, if a PPE occurs: (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
It appears to me that, if that paragraph is read as a whole, as to my mind it should be, the words after the comma are of considerable importance because they tell the firm that it must distribute client money so that each client receives a sum which is rateable to the client money entitlement in accordance with CASS 7.9.7R.
In short, the distribution must be in accordance with CASS 7.9.7.
Reference to that provision seems to me strongly to support the claims basis.
I agree with Lord Neubergers conclusion at para 227 that, once one accepts that client money includes such money when paid into a mixed money house account, then the concept of "client money entitlement" carries with it the notion of all money, which (in my opinion correctly) he says is a point reinforced by CASS 7.9.1R.
As Lord Dyson notes at para 152, the judge (at para 243) described the respondents case on the construction of CASS as involving a formidable textual argument.
With apologies for repetition, but because of what I regard as its significance in this appeal, I set out the argument again here.
In para 242, after referring to CASS 7.9.6R(2) and underlining calculated in accordance with CASS 7.9.7R, the judge said: ii) CASS 7.9.7R requires, on a client by client basis, a netting process to be carried out between each client's individual client balance and that client's client equity balance. iii) CASS 7.9.9R(2) makes it clear (albeit for a different purpose) that the client money entitlement for each client will be calculated in accordance with CASS 7.9.7R as at the time of the PPE. iv) The phrase client equity balance is defined in the Glossary by reference to the amount which a firm would be liable to pay to a client in respect of that clients margined transactions if each of his open positions was liquidated at the prices published by the relevant exchange and his account closed.
It is a form of entitlement having nothing to do with the amount contributed by the client to the firm's segregated accounts. v) The phrase individual client balance is not a term defined in the Glossary, but it is fully explained in paragraph 7 of Annex 1, again in terms which are based upon the contractual position between the client and the firm, rather than the amount actually contributed by the client to the firm's segregated accounts. vi) Thus it necessarily follows that the phrase client money entitlement, where used both in CASS 7.9.6R(2) and 7.9.9R(2) is a reference to the clients contractual entitlement to have money segregated for it, rather than to the client's proprietary interest in the CMP, derived from having had its money actually segregated, ie paid into the segregated accounts from which the CMP is constituted.
Lord Dyson has considered and rejected the reasons given by the judge for not accepting the textual argument.
I agree with Lord Dysons conclusions at paras 152 to 160.
In particular, I agree with him that there is no legitimate basis upon which CASS 7.9.6R(2) can be construed by disregarding the words after the comma.
On the contrary, as indicated above, they point the way.
Moreover, they are mandatory and clear.
I agree with Lord Dyson that there is no good reason for construing the expression each client in CASS 7.9.6(2) as being limited to each client for whom money is held.
As I see it, each client means what it says and thus includes each client who deposited money and has a claim.
Further, I see nothing ambiguous in the reference in CASS 7.9.6(2) to CASS 7.9.7R.
It simply provides that the client money entitlement must be calculated in accordance with CASS 7.9.7R.
There are a number of difficulties with the contributions approach.
For example, the consequence of treating the PLS as the critical moment is that parties whose moneys were deposited in house accounts after the PLS would certainly have their funds effectively segregated by the administrators (provided that those moneys are still identifiable).
Those parties would therefore be able to participate in the CMP.
By contrast, clients whose moneys were deposited before the PLS would only be able to participate in the CMP if the firm actually complied with their obligation to segregate those funds.
Given the firms widespread failure to comply with this obligation, many of those clients would not be able to participate in the CMP.
The net effect would be that parties who deposited funds in house accounts after the PLS would be likely to be in a better position than parties who deposited funds in house accounts before the PLS.
This seems to me to be a strange result.
If, as I believe to be the case, CASS 7.9.7R applies to any distribution, there can in my opinion be no real doubt that the claims basis must be correct.
If the basis of the right to claim were a contributions basis, a clients entitlement to participate in the CMP would depend on whether or not it had made a contribution to the CMP.
Yet the distribution rules, namely CASS 7.9.6R and 7.9.7R, make it clear that the quantum of a participants share depends not upon the size of their contribution to the pool but upon the size of their contractual entitlement vis vis the firm.
In this regard I agree with the conclusions of Arden LJ at paras 154 to 164.
In particular I agree with her concerns expressed in paras 156 and 157 that, on the contributions basis, significant problems arise which cannot be dismissed as a glitch in the way in which they were by the judge at para 265.
In short I agree with Lord Dyson, Lord Neuberger, Arden LJ (and indeed Sir Mark Waller) that the natural construction of the CASS rules is that client moneys as at the PPE are to be distributed on a claims and not a contributions basis.
I also agree with them that such a construction gives better effect to the underlying purpose of the CASS code, namely the protection of all those who deposited money with the firm.
LORD DYSON
I am grateful to Lord Walker for setting out the facts and the relevant documentation so clearly and so comprehensively.
This appeal raises three issues concerning the true construction of CASS 7.
These are (i) when does the statutory trust created by 7.7.2(R) arise; (ii) do the primary pooling arrangements apply to client money held in house accounts; and (iii) is participation in the notional client money pool (CMP) dependent on actual segregation of client money? I agree with the conclusions of Briggs J, the Court of Appeal and Lord Walker, Lord Hope and Lord Collins on the first issue.
I cannot improve on their reasons for holding that the statutory trust created by 7.7.2(R) arises at the time of the firms receipt of the client money.
But I have reached a different conclusion from that of Briggs J, Lord Walker and Lord Hope on the second and third issues.
Before I turn (to the extent that it is necessary to do so) to the points of detail that have been debated so meticulously, I wish to make two preliminary points.
Two preliminary points
The first point is that CASS 7 provides a detailed code for the safeguarding of client money by firms regulated by the Financial Services Authority.
On the assumed facts, there was shocking underperformance by LBIE.
As the judge put it, there was non compliance with the regulatory requirements on a truly spectacular scale (para 4).
Furthermore, the most significant group of clients whose money LBIE failed to segregate was its own affiliates, who have advanced money claims against LBIE in excess of $US 3 billion.
But it is important not to allow these exceptionally striking facts to influence the outcome of this appeal.
The issues of construction that are raised are of general application.
Their resolution cannot depend on the size of the firm or the scale of its non compliance or the identity of the particular client in question.
Indeed, 7.1.12G states that a firm that holds money on behalf of, or receives money from, an affiliated company in respect of MiFID business must treat the affiliated company as any other client of the firm for the purposes of [chapter 7].
The second point that I wish to emphasise at the outset is that the client money which is subject to the statutory trust is any money that a firm receives from, or holds for, or on behalf of, a client in the course of, or in connection with, its MiFID business unless otherwise specified in this section (7.2.1R).
Accordingly, unless otherwise specified in section 7.2, all client money is subject to the statutory trust.
The Directives
It is not in issue that CASS 7 was made for the purpose of fulfilling the EU requirements contained in the Markets in Financial Instruments Directive 2004/39/EC (MiFID) and the Commission Directive 2006/73/EC (the Implementing Directive) and that CASS 7 should therefore be interpreted, as far as possible, so as to give effect to these Directives: see, for example, HM Revenue and Customs Comrs v IDT Card Services Ireland Ltd [2006] STC 1252.
As Arden LJ explained at paras 59 to 62 of her judgment, this requires a two stage test to be applied.
The first involves interpreting the Directives.
The second involves interpreting CASS 7 in the light of the meaning of the Directives.
At para 57 of his judgment, Briggs J correctly stated that domestic legislation which is made for the purposes of fulfilling the requirements of EU law contained in a Directive must be interpreted in accordance with the following principles: (i) it is not constrained by conventional rules of construction; (ii) it does not require ambiguity in the legislative language; (iii) it is not an exercise in semantics or linguistics; (iv) it permits departure from the strict and literal application of the words which the legislature has elected to use; (v) it permits the implication of words necessary to comply with Community law; and (vi) the precise form of the words to be implied does not matter.
The purposes of MiFID and the Implementing Directive include providing a high level of protection for clients and safeguarding their rights to funds in the event of the insolvency of the firm to which their funds have been entrusted.
The recitals to MiFID include recital (2) which states it is necessary to provide for the degree of harmonisation needed to offer investors a high level of protection (emphasis added); recital (17) which states that persons who provide the investment services and/or perform their investment activities covered by this Directive should be subject to authorisation by the home member states in order to protect investors and the stability of the financial system; and recital (26) which provides: in order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm, those rights should in particular be kept distinct from those of the firm.
The aim of protecting investors is also expressed in recitals (31), (44), (61) and (71).
Article 13(7) of MiFID requires an investment firm to make adequate arrangements in relation to financial instruments belonging to clients to safeguard clients ownership rights, especially in the event of the investment firms insolvency.
Article 13(8) requires an investment firm, when holding funds belonging to clients, to make adequate arrangements to safeguard the clients rights and prevent the use of client funds for its own account.
The Implementing Directive contains detailed rules for giving effect to the objectives of MiFID.
Its recital (2) states that rules for the implementation of the regime governing organisational requirements for investment firms should be consistent with the aim of [MiFID].
Recital (5) states that the rules for the implementation of the regime governing operating conditions for the performance of investment services and activities should reflect the aim underlying that regime.
That is to say they should be designed to ensure a high level of investor protection to be applied in a uniform manner through the introduction of clear standards and requirements governing the relationship between an investment firm and its client (emphasis added).
Article 16 of the Implementing Directive contains rules for safeguarding client assets and gives effect to article 13(7) and (8) of MiFID.
Article 16(1) makes provision for record keeping and accounts (para (1)(a) and (b)); conduct of reconciliations (para (1)(c)); ensuring that client financial instruments and funds that are deposited are identified separately, ie are segregated (para (1)(d) and (e)); and organisational arrangements designed to minimise the risk of loss or diminution of client assets or of rights in connection with those assets, as a result of fraud, poor administration, inadequate record keeping or negligence (para (1)(f)).
Article 16(2) provides: If, for reasons of the applicable law, including in particular the law relating to property or insolvency, the arrangements made by investment firms in compliance with paragraph 1 to safeguard clients rights are not sufficient to satisfy the requirements of article 13(7) and (8) of [the MiFID Directive], member states shall prescribe the measures that investment firms must take in order to comply with those obligations.
It follows that the effect of article 13(7) and (8) of MiFID and article 16(2) of the Implementing Directive is that member states are under a duty to prescribe measures that firms should take to ensure that there are adequate arrangements under the domestic law relating to insolvency to safeguard the clients rights to funds belonging to them in order to achieve the investor protection purpose of MiFID.
When dealing with the first issue, Briggs J acknowledged the importance of interpreting CASS 7 by reference to the MiFID Directives (para 148).
He said in relation to the first issue that an interpretation of 7.7.2R by reference to the Directives was strongly supportive of the case that a trust of client money received by a firm arises upon receipt, rather than only upon segregation.
He added: Quite simply, that analysis better serves the MiFID objectives of protecting clients rights in relation to their funds, both from use of those funds for the firms own purposes, and from the consequences of the firms insolvency.
He added that the imposition of a statutory trust was the kind of additional requirement contemplated by article 16(2) of the Implementing Directive necessary to make the requirements set out in article 16(1) effective in the context of the domestic law of a particular member state.
I entirely agree with this approach.
When he came to deal with the third issue, he did not derive decisive assistance from an analysis of the purposes behind the MiFID Directives.
He said (para 234): On the one hand it may be said that the general aspiration to provide a high level of investor protection is best served by conferring a right to share in the CMP upon all clients whose money should have been segregated, whether or not it was.
On the other hand, the MiFID Directives are, as I have sought to explain, aimed at the establishment of obligations and organisational requirements which, if complied with, would protect clients funds both from misuse by the firm, and from loss occasioned by the firms insolvency.
The contemplation of the Directives was that this would be achieved by identification, reliable accounting and segregation, such that clients money actually dealt with in that way would be protected, but not otherwise.
I shall examine the third issue later in this judgment.
It seems that the judge considered that the underlying purpose of the Directives was sufficiently met by the introduction into our domestic law of the organisational requirements specified in article 16(1) of the Implementing Directive.
In other words, the requirement in article 13(7) and (8) of MiFID to make adequate arrangements to safeguard the clients rights in relation to financial instruments and funds would be satisfied by meeting the specific requirements of article 16(1) of the Implementing Directive.
But the requirements prescribed by article 16(1) are not to be equiparated with the requirements stated in article 13(7) and (8) of MiFID.
Indeed, as the judge recognised when he addressed the first issue, article 16(2) contemplates that the arrangements made by investment firms in compliance with article 16(1) might not be sufficient to satisfy the requirements of article 13(7) and (8) of MiFID.
The important point, however, is that the judge rightly acknowledged the principle that it is necessary to construe CASS 7 in a manner which promotes the purpose of providing a high level of protection for clients as required by the Directives.
The third issue
The second and third issues are closely related.
Lord Walker and Lord Hope prefer to start with the third issue.
I am content to take the same course.
The question raised by this issue is whether participation in the CMP is based on (i) the amount of client money which has actually been segregated at the date of the primary pooling event (PPE) (the so called contributions basis for participation) or (ii) the amount which ought to have been segregated at that date (the so called claims basis for participation).
The resolution of this issue depends on the proper interpretation of 7.9.6R, 7.9.7R and 7.7.2R.
The starting point is 7.7.2R which provides that a firm receives and holds client money (ie any money that it receives from or holds for, or on behalf of, a client) on the terms set out in 7.7.2R (1) to (5).
The beneficiaries of the trust are identified at 7.7.2R (2) as being the clients. for whom [the client money] is held, according to their respective interests in it and the trust is for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules (7.7.2R(1)).
The client money rules are defined as the rules contained in 7.1 to 7.8.
The client money (MiFID business) distribution rules (the distribution rules) are defined as the rules contained in 7.9.
I accept that until a PPE occurs, client money is held for the purposes of 7.3, 7.4, 7.5, 7.6 and 7.8 (ie safeguarding, segregation, transfer to third parties, record keeping and internal reconciliation and protection (by notice to banks) of client money bank accounts).
As Lord Walker says (para 77), these purposes are directed to the protection and management of clients money in the beneficial ownership of clients who are identified beneficiaries of the trust, being those (as 7.7.2R(2) puts it) for whom that money is held, according to their respective interests in it.
Lord Walker says (at para 78) that the biggest objection to the claims basis of interpreting 7.9.6R is that it involves on the assumed facts of this case a cataclysmic shift of beneficial interest on the PPE, to the detriment of those clients who must have supposed that their funds were safely segregated in accordance with CASS 7.1 to 7.8.
It would amount to the segregated clients funds being used as a strange form of compensation fund for disappointed clients whose funds had not been segregated.
It is true that, on the assumed facts of this case, the claims basis can be said to involve a cataclysmic shift of beneficial ownership on the PPE.
But that is because, on the assumed facts, there was a spectacular failure to comply with the CASS 7 rules for a very long period.
But I have already counselled against allowing the exceptional nature of the assumed facts to compel a particular conclusion to the issues of construction that arise in this case.
More importantly, CASS 7.7.2R provides that the trust is for the purposes and on the terms of the client money rules and the distribution rules.
Thus 7.7.2R itself points to the beneficiaries under the distribution rules as being all the clients for whom the firm has received and is holding client money.
In other words, such interest under the trust as any clients have is expressly on the terms of the distribution rules, of which 7.9.6R is the principal operative provision.
Lord Walker says that the notion that clients must be taken to have implicitly accepted the risk of discovering, on a PPE, that their carefully segregated funds must be shared with non segregated clients (including LBIEs own affiliates) seems quite unrealistic (para 79).
I respectfully disagree.
The general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money by the firm.
This includes money received from the firms affiliated companies.
I have already referred to the wide definition of client money in 7.2.1R (para 130 above).
The client money rules are, therefore, intended to protect all the clients money received prior to a PPE.
The distribution rules are intended to protect all the clients money in the event of a PPE.
There is nothing surprising in the notion that, once a PPE occurs, the treatment of client money is subject to a different regime from that to which it was subject before.
It is the exceptional nature of the assumed facts in this case which makes the consequences of a change of regime so striking.
I accept that, in order to reach a conclusion on the third issue, it is necessary to examine the language of the relevant rules.
But I start from the position that it is not inherently unlikely that the draftsman intended that clients with established proprietary interests in segregated funds should have those interests disturbed by the distribution rules in the event of a PPE.
There is no a priori reason why the draftsman would not have intended to produce a scheme pursuant to which the protection afforded to clients is modified in the event of a PPE.
There is nothing unrealistic in a scheme which provides that, in the event of the failure of a firm, the beneficial interests in the client money are adjusted so as to provide that each client receives a rateable proportion of the aggregate of all the client money; in other words that all clients share in the common misfortune of the failure.
The draftsman had to decide what provision to make for the distribution of client money in the event of a PPE.
He could have decided that pooling and distribution was to be limited to client money which had been segregated or that it should include all client money.
That was a policy choice he had to make.
Which choice he made depends on the true construction of CASS 7.
In my view, it does not depend on a consideration of any general principles of trust law.
I acknowledge that segregation is an important part of the CASS 7 system.
But it does not follow that the draftsman intended that upon a PPE only segregated client money would qualify for distribution under the distribution rules.
As Mr Miles points out, on any view of the distribution rules, client money which has been segregated is treated as pooled on a PPE and must be distributed so that each client receives a rateable share of the CMP.
The distribution model underlying the CASS 7 trust therefore differs from that of private trust law.
To this extent at least, the notion that a client has a fixed beneficial interest in the segregated moneys which cannot be disturbed on the failure of a firm is incorrect.
The only question is how far that disturbance goes: is the rateable sharing with other segregated clients or with all clients?
As I have said, the resolution of this question depends on the true construction of the relevant provisions of CASS 7.
But in approaching this question of construction, it is necessary to bear in mind that (i) all client money is subject to the statutory trust and, (ii) where there is a choice of possible interpretations, the court should adopt the one which affords a high degree of protection for all clients who have client money with the firm and to safeguard their interests, thereby furthering the purposes of the Directives.
It is not the purpose of the Directives to provide a level of protection only for those clients who are recorded in the firms ledger as clients with client money entitlements when the firm calculated the net amount to segregate at the last reconciliation.
Lord Walker is of the view that, in construing CASS 7, we have to look at its essential scheme and structure.
Beyond that, he says, a purposive approach gives little assistance, since it is plain that neither the Directives nor CASS 7 contemplate non compliance with regulatory requirements (paras 48 and 81).
But even if the premise that the Directives did not contemplate non compliance with regulatory requirements is correct, it does not follow that rules introduced by member states to give effect to the Directives should not be construed in the manner which best fulfils the overriding purpose of the Directives to provide a high degree of protection to money entrusted by clients to investment firms.
If there are two possible interpretations of CASS 7, it seems to me to be axiomatic that the interpretation which more closely meets the purpose of the Directives should be adopted.
I do not see how this can be affected by whether the Directives did or did not contemplate non compliance with the regulatory requirements.
As I have already said, the judge did not derive decisive assistance from the Directives because he considered that their purpose was met by the incorporation in CASS 7 of requirements which satisfy the provisions of article 16(1) of the Implementing Directive.
But article 16(2) makes it clear that member states are required to prescribe the measures that firms must take in order to comply with the obligations set out in article 13(7) and (8) of MiFID, if compliance with article 16(1) does not suffice.
I do not see why the existence in domestic law of rules which satisfy the requirements of article 16(1) makes it unnecessary to interpret the distribution rules contained in 7.9, so far as possible, as imposing obligations which satisfy the requirements of article 13(7) and (8) of MiFID, thereby affording clients a high degree of protection.
I now turn to examine some of the detailed points arising from the language of the relevant provisions of CASS 7.
So far as material, 7.9.6R provides: If a primary pooling event occurs: (1) (2) client money held in each client money account of the firm is treated as pooled; and the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
Mr Miles relies on the reference to a calculation in accordance with CASS 7.9.7R as supporting the claims basis rather than the contributions basis for participation.
The steps in the argument were carefully set out by the judge at para 242 of his judgment as follows: (i) CASS 7.9.6R(2) requires the firm to distribute client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R [his underlining]. (ii) CASS 7.9.7R requires, on a client by client basis, a netting process to be carried out between each clients individual client balance and that clients client equity balance. (iii) CASS7.9.9R(2) makes it clear (albeit for a different purpose) that the client money entitlement for each client will be calculated in accordance with CASS 7.9.7R as at the time of the PPE. (iv) The phrase client equity balance is defined in the Glossary by reference to the amount which a firm would be liable to pay to a client in respect of that clients margined transactions if each of his open positions was liquidated at the prices published by the relevant exchange and his account closed.
It is a form of entitlement having nothing to do with the amount contributed by the client to the firms segregated accounts. (v) The phrase individual client balance is not a term defined in the Glossary, but it is fully explained in paragraph 7 of Annex 1, again in terms which are based upon the contractual position between the client and the firm, rather than the amount actually contributed by the client to the firms segregated accounts. (vi) Thus it necessarily follows that the phrase client money entitlement, where used both in CASS 7.9.6R(2) and 7.9.9R(2) is a reference to the clients contractual entitlement to have money segregated for it, rather than to the clients proprietary interest in the CMP, derived from having had its money actually segregated, ie paid into the segregated accounts from which the CMP is constituted. (vii) By way of a postscript, Mr Knowles submitted that, in any event, not all contributions to the segregated accounts were made in respect of particular clients.
For example, he pointed to the prudential payments contemplated by CASS 7.4.21R. Segregation in relation to depot breaks is another example: see below.
At para 243, the judge described this as a formidable textual argument.
He rejected it for the following principal reasons.
First, the phrase client money entitlement means different things in different places, so that its meaning in any particular paragraph must be informed by its context.
Secondly, (for the reasons that he gave at paras 255 to 262) the correct interpretation of 7.9.7R does not support the claims basis for participation in the CMP.
He pointed out that 7.9.7R does not purport to constitute a comprehensive formula for the calculation of a client money entitlement.
It merely provides for the offset of two particular types of accounting debit against two particular types of accounting credit.
It is a reducing mechanism, whose effect is, in the stated circumstances, to reduce what otherwise might have been identified as a clients client money entitlement, which is to serve as the basis for his rateable participation in the CMP (para 255).
He said that the existence of these offsetting provisions is not sufficient to indicate that it was intended to go behind the last internal reconciliation account to establish if necessary by enormous forensic endeavour and even litigation, the true contractual entitlements of the firms clients to have their money segregated, without limitation in historical time, so as to include un segregated and partially segregated clients as beneficiaries of the CMP, with obvious adverse consequences in terms of the timely and efficient distribution of the pooled client money to the clients entitled to it (para 261).
Both the judge (para 232) and Lord Walker (para 97) said that the purpose of 7.9.7R is obscure and, at least by inference, that the reference to it in 7.9.6R(2) cannot bear the weight that Mr Miles seeks to place on it.
But I do not think that the reference in 7.9.6R (2) to the sum being calculated in accordance with CASS 7.9.7R can be brushed aside so easily.
CASS 7.9.7R provides for a calculation which takes account of each clients individual client balance and client equity balance.
The individual client balance calculation is dealt with in detail in para 7 of Annex 1.
The client equity balance is defined in the glossary as the amount which a firm would be liable (ignoring any non cash collateral held) to pay to a client (or the client to the firm) in respect of his margined transactions if each of his open positions was liquidated at the closing or settlement prices published by the relevant exchange or other appropriate pricing source and his account closed.
As Mr Miles says, the calculation involves an assessment of the clients actual and objective entitlement in respect of client money.
It has nothing to do with the amount which may or may not in fact have been segregated for the client, nor with the ledger entries which the firm may have made in respect of any particular segregation or reconciliation.
The reducing mechanism interpretation favoured by the judge (and supported by Mr Zacaroli) treats the phrase client money entitlement in 7.9.6R(2) as envisaging (i) a calculation by reference to the historical amounts recorded in the ledgers, and (ii) (as a downward adjustment) a calculation by reference to 7.9.7R.
But there is no support for this two fold scheme of calculation in the language.
As Mr Miles points out, 7.9.6R(2) simply refers to the client money entitlement being calculated in accordance with 7.9.7R.
Like Lord Neuberger MR (para 230), I do not consider that there are sound reasons for rejecting the formidable textual argument.
Lord Walker at para 94 (in agreement with the judge) says that, if 7.9.6R(2) had stopped at the comma after in accordance with CASS 7.7.2R, there would have been no doubt that the right to receive a distribution from the CMP was limited to those clients for whom the firm had actually segregated client money or those identified as entitled to participate in the distribution in the last reconciliation.
They were under 7.7.2R(2) the clients for whom that money is held and it was to be distributed according to their respective interests in it.
Lord Walker says that each client in 7.9.6R does not mean what it says; in context, it means each client for whom client money is held.
I see the force of this argument.
But 7.9.6R(2) must be read as a whole, including the words which follow the comma after in accordance with CASS 7.7.2R. So read, I think the better interpretation is that the right to share in a distribution is given to each client of the firm, so that all clients with a client money entitlement are entitled to share.
That is what 7.9.6R(2) says.
The reason for referring back to 7.7.2R is not to identify the client money that is to be distributed (that is done in 7.9.6R(1) and (2)).
It is to introduce the order of priorities referred to in 7.7.2R.
Thus, for example, the incorporation of 7.7.2R(2) throws the costs properly attributable to the distribution of client money on to the client money (rather than on to the general assets of the firm).
The costs of distribution will have to come from the trust before division to clients.
One final textual point.
I think that Mr Miles is right to say that some support for his case on the meaning of client money entitlement can be found in 7.9.9R(2).
This creates an exception from the usual rule that all client money received by the firm after a PPE must be returned to the client.
The exception is where it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 7.9.7R, shows that money is due from the client to the firm at the time of the primary pooling event.
This is a reference to a calculation being performed in the manner prescribed in Annex 1 (albeit with mandatory off setting).
The exercise is intended to establish whether, objectively and in fact, the client is a debtor of the firm, in which case the firm can keep the money.
In the context of 7.9.9R(2), client money entitlement has nothing to do with the amounts actually segregated for a client by the firm.
It is telling that 7.9.9R(2), like 7.9.6R(2), requires the client money entitlement to be calculated in accordance with 7.9.7R as at the date of the PPE.
To summarise, for the reasons that I have given, the language of the relevant provisions of CASS 7 tends to support the claims basis for participation in the CMP.
I accept, however, that the linguistic points are not conclusively supportive of this interpretation.
That is why it is necessary to stand back from the detail and ask which interpretation better promotes the purpose of CASS 7.
In my view, a purposive interpretation clearly supports the claims basis for participation.
This basis better reflects the fact that all client money is subject to the statutory trust and that CASS 7 is intended to give effect to the Directives whose overriding purpose is to safeguard the assets of all clients and to provide all clients with a high degree of protection.
I should add that we heard detailed submissions about the complexities of the process that the claims basis would entail and the inevitable costs and delay that it would occasion.
The judge was impressed by these points: see, for example, para 152 above.
I have little doubt that distribution on the claims basis in this case would be complex and would take a long time to complete.
That is because of the extraordinary circumstances of this case.
In other cases, the position might well be very different.
But it has not been shown that, in a typical case, the complexity of the claims basis will necessarily be greater than that of the contributions basis.
Still less has it been shown that, in a typical case, the complexity of the claims basis will be so much greater than that of the contributions basis that the draftsman could not have intended the former.
I do not think that it would be right to allow the scale of the exercise that would be required in this case to lead to a solution which, for the reasons that I have given, would defeat the underlying purpose of CASS 7.
For the reasons that I have given, I have reached the strong provisional conclusion that participation in the CMP is not dependent on actual segregation at the time of the PPE.
But I recognise that the second and third issues are closely linked.
The third issue concerns the true construction of 7.9.6R(2).
The second issue concerns the true construction of 7.9.6R(1).
The closeness of the link between the two issues is seen clearly in 7.9.6R(2) which provides that the firm must distribute that client money in accordance with CASS 7.7.2R (underlining added).
That client money is the client money referred to in 7.9.6R(1), ie client money held in each client money account of the firm.
The second issue focuses on whether the client money to be distributed must be in a client account or may be identifiable client money held in a house account of the firm.
The second issue
If, as Lord Walker and Lord Hope would hold, participation in the CMP is dependent on actual segregation at the time of the point of last segregation (PLS), then the second issue is limited to the question whether there is anything in CASS 7 or the general law of insolvency to prevent a final internal reconciliation from being carried out on the data as they were at the PPE, but limited to taking account of events during the gap period between the PLS and the PPE (and not reopening previous reconciliations down to and including the PLS).
In the light of the conclusion that I have reached on the third issue, the second issue cannot be viewed so restrictively.
It is necessary to decide whether 7.9.6R(1) requires all identifiable client money to be treated as pooled, or only that client money which is held in the firms segregated client accounts.
The phrase client money account of the firm is not defined.
As a matter of ordinary language, the phrase client money account is capable of meaning (i) an account which contains or is intended to contain exclusively client money or (ii) an account of the firm which contains client money.
Even where a firm is fully compliant, CASS 7 contemplates that client money will be held in the firms own account.
Thus, where the alternative approach of payment of client money into a client bank account is adopted under 7.4.16G, 7.4.18G and 7.4.19G, the firm may receive client money into its own bank account before (on the next business day) paying it out to or on behalf of the client (see 7.4.18G).
The question of whether a house account in which client money is held is a client money account of the firm arises, therefore, both in relation to money held by the firm where it adopts the alternative approach and where (as in the present case) it wrongly retains client money in its own account.
A number of detailed textual points have been made on both sides of the argument.
Some of these are discussed by Lord Neuberger at paras 205 to 215 of his judgment.
I agree with his conclusion on these (para 223) that they are fairly limited in their value and pretty finely balanced in their relative strengths and that overall they do not favour either interpretation.
I, therefore, see no point in rehearsing them in this judgment.
Since an examination of the text shows that there are two possible interpretations of the phrase each client money account of the firm, it seems to me that the correct interpretation is the one which best promotes the purpose of CASS 7 as a whole.
As I have already explained, the fundamental purpose of CASS 7 is to provide a high level of protection for client money received by financial services firms.
That is why all client money received from or held for or on behalf of a client in the course of, or in connection with its MiFID business (7.2.2R) is held on trust upon receipt and why the other client money rules in 7.1 to 7.8 are expressed as they are; and that is the policy underlying the distribution rules.
To exclude identifiable client money in house accounts from the distribution regime runs counter to this policy.
It creates what was referred to in argument as a bifurcated scheme which provides clients with different levels of protection, namely a right to claim in the CMP under the CASS 7 rules for those whose money is held in segregated client accounts but no right (other than a right to trace in equity) to those whose money is held in the firms house accounts.
The purpose of the scheme (as required by the Directives) is to provide a high level of protection to all clients and in respect of client money held in each money account of the firm.
That purpose would be frustrated if the protection were restricted in this way.
As Mr Miles and Mr Crow point out, a bifurcated scheme would provide clients with different levels of protection based on the happenstance of whether the firm has segregated money on behalf of that client.
That is an arbitrary basis for a scheme which is intended to provide protection to all clients who entrust their money to a firm.
It is unlikely that the draftsman of CASS 7 intended the scheme to have this effect.
It is improbable that the draftsman contemplated that there would be two regimes substantially in operation for the distribution of client money (one under the CASS 7 rules set up for the purpose and one under equitable tracing principles and outside CASS 7).
There is the further point that, in view of the overriding purpose of the scheme, it is unlikely that client money which had yet to be segregated under the alternative approach was intended to be treated differently from client money which had been segregated, whether under the normal approach or the alternative approach.
It is unlikely that the draftsman would have intended that a client who makes a payment to a firm which adopts the alternative approach should, albeit for a short period, be at risk in a way in which a client who makes a similar payment to a firm which adopts the normal approach would not be.
Lord Walker and Lord Hope recognise the force of this last point.
They would meet it by holding that a final reconciliation must be carried out on the data as they were at the PPE limited to taking account of events during the gap period (and not reopening previous reconciliations down to and including the PLS).
I accept that, in relation to client money received after the PLS, this interpretation avoids bifurcation, achieves symmetry and assimilates the effect of the alternative approach with that which would have occurred under the normal approach.
But it does not avoid bifurcation or achieve symmetry as between client money received before the PLS which is held in segregated clients accounts and client money which is held in the firms house accounts.
I would hold, in agreement with the Court of Appeal, that the primary pooling arrangements apply to client money in house accounts.
This conclusion is consistent with and reinforces the conclusion which I have expressed on the third issue.
In these circumstances, it is not necessary to deal with the alternative submission of Mr Miles that, as at the PPE, the firm remains a regulated firm subject to CASS 7 and is therefore obliged to perform a final reconciliation as at the PPE.
This is the submission that Arden LJ accepted at para 142 of her judgment.
Lord Walker and Lord Hope accept this submission, but only so as to take account of events during the gap period between the PLS and the PPE.
I agree with them, but am inclined to think that there is no good reason why the final reconciliation should be limited in the way that they suggest.
There is nothing in the language of 7.6 which supports such a limitation.
Since (as I have held) all client money is held by the firm on trust for the purpose of distribution in accordance with the distribution rules, if it were necessary to decide the point, I would hold that the final reconciliation should not be limited to an examination of what has happened between the PLS and the PPE.
Overall conclusion
I would, therefore, dismiss this appeal.
I would hold that (i) client money is held on the statutory trust imposed by CASS 7.7. from the time of receipt by a firm; (ii) the money treated as pooled at the PPE should be distributed to clients in accordance with their respective client money entitlements under CASS 7 construed in accordance with this judgment; and (iii) the pooling at the PPE includes all client money identifiable in any account of LBIE into which client money has been received and is not limited to client money in the firms segregated accounts.
If the implications of these holdings call for further decision, application should be made to Briggs J for directions.
LORD COLLINS
The issues on this appeal are of great importance to financial institutions and regulatory authorities, and the amount of money involved is enormous.
They raise some difficult questions of construction of CASS 7 in accordance with settled principles, but not points of law of general importance.
Two of these questions have divided the courts below and the members of this court.
I agree with the judgments of Lord Walker and Lord Hope on the first issue, and those of Lord Dyson and Lord Clarke (and with the conclusions of Lord Neuberger MR, Arden LJ, and Sir Mark Waller in the Court of Appeal) on the second and third issues.
I begin with my views on the first issue, namely whether the statutory trust over client money contained in CASS 7.7 attaches only to client money in segregated accounts or whether it also extends to client money which LBIE was entitled to, and did, pay or receive into its own house accounts.
The question is whether the statutory trust over clients funds arises on receipt of the funds, as CASS 7.7.2R seems to say (A firm receives and holds client money as trustee) and as Briggs J and the Court of Appeal decided, or whether it arises only when the money is received and segregated.
Recital 26 of the Markets in Financial Instruments Directive 2004/39/EC (MiFID) recites that In order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm those rights should in particular be kept distinct from those of the firm, .
Article 13(8) of MiFID provides: An investment firm shall, when holding funds belonging to clients, make adequate arrangements to safeguard the clients' rights and, except in the case of credit institutions, prevent the use of client funds for its own account.
Article 16(1) of Commission Directive 2006/73/EC (the Implementing Directive) provides that: Member states shall require that, for the purposes of safeguarding clients rights in relation to financial instruments and funds belonging to them, investment firms comply with the following requirements (e) they must take the necessary steps to ensure that client funds deposited, in accordance with article 18, in a central bank, a credit institution are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm; (f) they must introduce adequate organisational arrangements to minimise the risk of loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of assets, fraud, poor administration, inadequate record keeping or negligence. and article 16(2) provides: If, for reasons of the applicable law, including in particular the law relating to property or insolvency, the arrangements made by investment firms in compliance with paragraph 1 to safeguard clients rights are not sufficient to satisfy the requirements of article 13(7) and (8) of [MiFID], member states shall prescribe the measures that investment firms must take in order to comply with those obligations.
Section 139(1)(a) of the Financial Services and Markets Act 2000 (FSMA) provides for rules to make provision which results in clients money being held on trust in accordance with the rules.
CASS 7.3 (Organisational requirements: client money) provides: Requirement to protect client money 7.3.1R A firm must, when holding client money, make adequate arrangements to safeguard the client's rights and prevent the use of client money for its own account. [Note: article 13(8) of MiFID] Requirement to have adequate organisational arrangements 7.3.2R A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record keeping or negligence. [Note: article 16(1)(f) of the MiFID implementing Directive]
CASS 7.2.1R defined client money as any money that a firm receives from or holds for, or on behalf of, a client.
CASS 7.7 (Statutory trust) provides (omitting the special provisions for insurance undertakings): 7.7.1G Section 139(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which result in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only).
This section creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust.
Requirement 7.7.2R A firm receives and holds client money as trustee (or in Scotland as agent) on the following terms: (1) and the client money (MiFID business) distribution rules; (2) that money is held, according to their respective interests in it; (4) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and (5) for the firm itself. subject to (3) [an error for (4)], for the clients for whom for the purposes of and on the terms of the client money rules after all valid claims and costs under (2) to (4) have been met,
CASS 7.8 requires the trust affecting client money to be notified to and acknowledged by banks and other intermediaries.
Where client money is held in a client bank account, the firm is obliged to notify the third party bank that the account is a trust account, and to require from the third party bank an acknowledgment that money standing to the credit of the account is trust money, and that the bank is not entitled to combine the account with any other account or to exercise any right of set off or counterclaim against the money in that account: CASS 7.8.1R.
The client money rules do not impose any such obligation where client money is held in a house account.
The essence of the appellants elaborate argument that the enormous sums which Lehman failed to segregate in this case are not subject to the statutory trust comes down to two main points: the first is that as a matter of construction the statutory trust does not arise before segregation.
The second, which is put at the forefront of the argument, is that CASS 7 allows client money to be paid into the firms house accounts under the alternative approach.
The essential feature of a trust is that the trustee must deal with the trust property solely for the purposes of the trust.
Under the alternative approach the firm is free to use the client money paid into its house accounts for its own purposes, and that is inconsistent with an intention that such funds are held on trust for others.
The first argument, on the construction of the wording, is that the opening words of CASS 7.7.2R (A firm receives and holds client money as trustee on the following terms) do not show that the trust was intended to apply to all client money from the moment of its receipt by the firm.
The use of the phrase receives and holds is explained by the fact that it tracks the definition of client money in CASS 7.2.1R, being any money that a firm receives from or holds for, or on behalf of, a client, which reflects the fact that the firm may come under an obligation to treat money as client money in two separate circumstances: (1) where it receives money from or on behalf of a client; and (2) where, as a result of a transaction involving a client, the firm is obliged to segregate some of its own money into a client bank account as client money.
There is nothing in MiFID in general, or in article 13(8) of MiFID or article 16(1) and (2) of the Implementing Directive or in CASS 7.3 in particular, which requires a trust to be imposed from the moment of receipt.
The second argument is essentially that the use of the alternative approach by investment firms such as LBIE operating in a complex environment is inconsistent with the imposition of a trust on receipt.
In practice it is impossible in such an environment for the firm to keep track, on a real time basis, of the extent to which each trade, or movement in the market, or payment relating to a particular client gives rise to a requirement to make a payment into or out of the segregated client bank accounts (as required by the normal approach).
As a result, with auditor certification, the firm is permitted to receive client money from or on behalf of clients into its own accounts, and to pay any money to or on behalf of clients out of its own accounts.
The firm is required to maintain in the client bank accounts an amount equal to the aggregate amount of client money it is required to hold for clients (less the amount held in the client transaction accounts).
Since it is impossible to achieve this on a real time basis, an adjustment is required to be done daily, by performing a reconciliation of records and accounts required under CASS 7.6.2R, and adjusting the balance held in its client bank accounts to accord with that reconciliation, until the process is repeated on the next business day.
The firm is under no obligation in relation to the actual money received as client money; but it is obliged to make payments to or on behalf of clients out of the funds in its own accounts (ie its own funds), and permitted to receive client money into its own accounts.
It must, on a daily basis, ensure that there is sufficient money in the segregated accounts to satisfy the client money requirement as at the close of business on the previous business day.
If necessary, this will involve a payment from the firms own accounts into the client bank accounts, but it may instead involve a withdrawal from the client bank accounts, or no change to the aggregate balance in the client bank accounts.
The appellants say that under the alternative approach the firm is free to use the client money paid into its house accounts for its own purposes, and that is inconsistent with an intention that such funds are held on trust for others: Henry v Hammond [1913] 1 KB 515, 521; Paragon Finance Plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400, 416.
A trust over client money in the firms house accounts would create practical problems which the draftsman cannot have intended.
It is in practice impossible for the firm to monitor, on a real time basis: (1) the payments made into its house accounts which attract the MiFID client money segregation requirements; (2) the payments which do not; and (3) the payments out of its house accounts which would impact on the application of those requirements.
The draftsman must have envisaged that a firm which received client money into its house accounts under the alternative approach would necessarily be unable to distinguish what was client money in each account from its own funds, and would therefore in the ordinary course make payments from its house accounts without differentiating between them.
In my judgment, the appeal on the first issue fails.
That the trust arises on receipt is not only consistent with the objectives of the Directives and the Rules, but also emerges clearly from the wording of CASS 7.7.2R in its context.
The statutory trust to safeguard clients funds pre dates MiFID.
It has its origin in section 55(2)(a) of the Financial Services Act 1986.
In his report Review of Investor Protection, Report: Part 1 (1984) (Cmnd 9125) (which preceded the Financial Services Act), para 6.31, Professor Gower noted that under English law mere segregation of funds was not enough to protect those funds from the firms creditors in the event of its insolvency, and investors money could be safeguarded by segregation only if it was segregated in such a way that ownership remained with them, ie under a trust: The ultimate safeguard for investors is an assurance that on the failure of the investment business such of their money or investments as have not been disposed of in the legitimate conduct of that business are recoverable by them.
In most cases this can be achieved only by a combination of two methods.
The first is by the segregation of clients money and investments from the firms money and investments.
This is effective only if clients money and investments are segregated in such a way that ownership remains with them.
This is not achieved merely by holding their money in a designated clients account.
Unless that account is held on trust for the clients it will not afford protection, as many clients of recently liquidated investment managers and commodity dealers have learnt to their cost.
In its 2000 consultation paper, Protecting Client Money on the failure of an authorised firm, para. 4.13, the FSA said: All consumers have an interest in the system of regulatory protection that safeguards client money held by a firm.
When a firm fails, its clients will want to know that their money can be returned to them as quickly as possible.
When it amended the client money rules to take account of the Directives, the FSA retained the existing trust mechanism.
In its consultation paper 06/14, Implementing MiFID for Firms and Markets (July 2006) at para 10.17 it said: MiFIDs segregation provisions require a firm, on receiving any client funds, promptly to segregate those funds in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm.
Our view is that under English law, a trust is the most appropriate mechanism for segregating client money and a statutory trust has advantages over a private law trust.
For example, the incorporation of the client money distribution rules into the statutory trust assists in the efficient and prompt distribution of client money.
The FSA proposed (para 10.18): to use the existing requirements concerning the establishment of the statutory trust and the segregation and operation of client money accounts.
This will provide certainty as to beneficial ownership and the authority of the firm.
And it would preserve the solid foundation for action by us, or liquidators or other persons appointed on their behalf, in the event of firm default.
A statutory trust does not necessarily bear all the indicia of a trust as would be recognised by a Court of Chancery.
Thus in Ayerst v C&K (Construction) Ltd [1976] AC 167, 180, Lord Diplock said (in the context of a trust arising on insolvency) that all that might be meant by the use of the word trust was giving property the essential characteristic which distinguishes trust property from other property; namely, it cannot be used or disposed of by the legal owner for his own benefit but must be used or disposed of for the benefit of others.
Thus CASS 7.7.1G provides that the statutory trust creates a relationship under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
Consequently, it does not follow that, when the word trust is used, that brings with it the full range of trust indicia associated with a traditional private law trust, particularly so when the trust is imposed by statute and is in the context of the exercise of a public function: cf In re Ahmed & Co [2006] EWHC 480 (Ch); 8 ITELR 779.
The starting point on issue 1 is the wording of CASS 7.7.2R, which expressly provides that [a] firm receives and holds client money as trustee on the following terms.
There is nothing to suggest that the trust does not arise on receipt.
Other provisions of CASS 7 are consistent with the conclusion that a firm which receives client money is under an immediate fiduciary duty, including (1) the definition of client money in CASS 7.2.1R which refers to a firm receiving or holding money; (2) CASS 7.2.15R, which provides for the limited situations in which client money is released from fiduciary obligations on the part of the firm, and (3) CASS 7.4.23G (Mixed remittance), which provides that pursuant to the client money segregation requirements, a firm operating the normal approach which receives a mixed remittance (part client money and part other money) must pay the full sum into a client bank account promptly, and in any event, no later than the next business day after receipt; and pay the money that is not client money out of the client bank account promptly, and in any event, no later than one business day of the day on which the firm would normally expect the remittance to be cleared.
That conclusion is also inevitable in the light of the requirement in article 13(8) of MiFID, which obliges member states to require an investment firm when holding funds belonging to clients to prevent the use of client funds for its own account.
CASS 7 must be construed in order to comply with that requirement.
It is also supported by articles 16(1) and 16(2) of the Implementing Directive, and by CASS 7.3.
Article 16(1) of the Implementing Directive provides that client funds are to be held in accounts separate from the firms funds, and that firms must introduce adequate organisational arrangements to minimise the risk of loss or diminution of client assets, as a result of (inter alia) the misuse of assets.
Most important, if because of insolvency law the arrangements are not sufficient to safeguard clients rights, member states have to prescribe the measures that investment firms must take in order to comply with those obligations: article 16(2).
CASS 7.3.1R provides that the firm must prevent the use of client money for its own account.
I accept the respondents argument that if the trust did not arise until segregation, then whether or not clients are protected by the CASS rules would become arbitrary and dependent on the firms own practices: the greater the level of incompetence (or misconduct) on the part of the failed firm, the lesser the protection for clients.
As for the arguments based on the use of the alternative approach, the starting point is that the alternative approach is merely a method which firms are entitled to adopt, in certain circumstances, if to do so would achieve the client protection objective.
The alternative approach is not expressly contemplated by MiFID and is an option permitted only if the firm has in place systems and controls which are adequate to enable it to operate the alternative approach effectively: CASS 7.4.15R.
The alternative approach does not, and cannot, assist in the interpretation of the Directives, nor does it help in the interpretation of CASS 7.7.2R.
I agree with Briggs J (at [144]) that since the purpose of the statutory trust is to protect client money from misuse, it would be odd if client money (originally the client's beneficial property) ceased to be the client's property upon receipt by the firm, and it (or substitute money) then became the clients property again upon segregation shortly thereafter.
There is no doubt that money in a mixed fund may be held on trust, and that a trust of money can be created without an obligation to keep it in a separate account: In re Kayford Ltd [1975] 1 WLR 279, 282, per Megarry J.
The supposed difficulties in operating the alternative method if there were a continuing trust of client money are in my judgment of no substance, and in any event irrelevant to the question whether the trust arises on receipt.
For those reasons I would uphold the conclusions of Briggs J and the Court of Appeal [2011] Bus LR 277 on the first issue.
I add only a few words about the third issue.
Lord Walker and Lord Dyson have between them set out fully all of the textual and policy considerations which divide them.
My principal reasons for coming to the conclusion that the claims basis is the right basis (as does Lord Dyson, and as did Lord Neuberger MR, Arden LJ and Sir Mark Waller in the Court of Appeal) are these: (a) although CASS 7 uses trust concepts, it is not intended to codify, or be limited by, the ordinary rules of trust law; (b) the exercise is purely one of construction of CASS 7; (c) CASS 7.7.2R provides that the trust is for the purposes and on the terms of the client money rules and the distribution rules; (d) CASS 7.9.6R provides that, on a primary pooling event, client money held in each client money account of the firm is treated as pooled; and the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R; (e) client money entitlement is a reference to the contractual entitlement to have money segregated for the client; (f) that interpretation better serves the purposes of MiFID and the Rules.
| UK-Abs | This appeal arises from the insolvency and administration of the Lehman Brothers group of companies.
Lehman Brothers International (Europe) (LBIE) was the principal European trading company in the group and is incorporated in England as an unlimited company with its head office in London.
LBIE is authorised and regulated by the Financial Services Authority (FSA).
Its ultimate holding company is Lehman Brothers Holdings Inc (LBHI), incorporated in Delaware and based in New York.
LBHI is now in Chapter 11 bankruptcy.
LBIE was put into administration by order of the High Court made before the opening of business (at 07.56am) on Monday 15 September 2008: [24].
Many difficulties have arisen in the administration and the administrators have made several applications to the Companies Court for directions.
The application which gives rise to this appeal relates to the provisions governing client money, namely chapter 7 (Client money: MiFID business) of the Clients Assets Sourcebook issued by the FSA (CASS 7), made under the Financial Services and Markets Act 2000 (FSMA): [25] [26].
CASS 7 provides for a normal approach and an alternative approach to discharging a firms client money segregation requirements.
LBIE adopted the alternative approach. 7.4.16G of CASS 7, among other things, provides that Under the alternative approach, client money is received into and paid out of a firms own bank accounts A firm that adopts the alternative approach will segregate client money into a client bank account on a daily basis, after having performed a reconciliation of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the entitlement of each client for whom the firm holds in client bank account and client transactions accounts to determine what the client money requirement was at the close of the previous business day.
CASS 7 (7.7.2R) further provides that A firm receives and holds client money as trustee (or in Scotland as agent) Where the firm fails, this is known as a primary pooling event (PPE). 7.9.6R provides that If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred (7.9.14R). 7.9.13R provides that if both a primary pooling event and a secondary pooling event occur, the provisions relating to a primary pooling event are to apply: [44].
In an ideal world, the flawless operation of the scheme created by the CASS 7 rules would ensure that, upon a firms insolvency, the clients would receive back their money in full, free from the claims of the firms creditors.
In the imperfect and highly complex real word occupied by LBIE and its numerous clients, there has been a falling short in the achievement of these objectives on a truly spectacular scale.
This is a result of two prime causes: first, on the basis of the assumed facts, LBIE failed to identify as client money, and therefore also failed to segregate, vast sums received from or on behalf of a significant number of its clients; second is the failure of another LBIE affiliate, Lehman Brothers Bankhaus AG (Bankhaus) with which LBIE had deposited at least US$1 billion of segregated client
money: [27].
Before the administration order, the last internal reconciliation of clients funds took place on the morning of Friday 12 September 2008.
This appeal has proceeded on assumed facts and raises three issues concerning the true construction of CASS 7: (i) when does the statutory trust created by 7.7.2R arise; (ii) do the primary pooling arrangements apply to client money held in house accounts; and (iii) is participation in the notional client money pool (CMP) dependant on actual segregation of client money? [128]
The Supreme Court dismisses the appeal by a majority (Lords Hope and Walker dissenting as to the second and third issues): the statutory trust under CASS7 arises on receipt of client money; the primary pooling arrangements apply to client money in house accounts; and, participation in the CMP is not dependant on the segregation of client money.
As to when the statutory trust arises, the two competing answers are time of receipt and time of segregation of the funds.
The Court unanimously holds that the trust arises at time of receipt.
Where money is received from a client or from a third party on behalf of a client it would be unnatural, and contrary to the primary purpose of client protection, for the money to cease to be the clients property on receipt, and for it (or its substitute) to become his property again on segregation.
It would also be contrary to the natural meaning of the comprehensive language of CASS 7.7.2R. Segregation without a trust would not achieve MiFIDs objective whereas under the alternative approach an immediate trust of identifiable client money does provide protection: [62] [63], [182] [183].
Lord Hope further supports this conclusion on the basis that the same result would be obtained using the law of agency, as it is in Scots law: [7] [14].
As to whether participation in the notional CMP is dependant on actual segregation of the clients money, the answer is to be found in the proper interpretation of CASS 7, in particular 7.9.6R, 7.9.7R and 7.7.2R: [139].
It does not depend on a consideration of any general principles of trust law: [145].
The general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money.
The client money rules are therefore intended to protect all the clients money received prior to a PPE.
The distribution rules are intended to protect all the clients money in the event of a PPE, all client money is subject to a statutory trust and where there is a choice of possible interpretations, the court should adopt the one which affords a high degree of protection for all clients: [147].
The language of the relevant provisions of CASS 7 tends to support the claims basis for participation in the CMP (i.e. that no segregation is required).
As the linguistic points are not conclusive, it is necessary to stand back from the detail and ask which interpretation better promotes the purpose of CASS 7.
This clearly supports the claims basis: [159].
As to whether the primary pooling arrangements apply to client money held in house accounts, it is necessary to decide whether 7.9.6(1)R requires all identifiable client money to be treated as pooled, or only that client money which is held in the firms segregated client accounts.
Since an examination of the text shows that there are two possible interpretations of the relevant CASS 7 rule, the correct interpretation is the one which best promotes the purpose of CASS 7 as a whole, namely to provide a high level of protection for client money.
To exclude identifiable client money in house accounts from the distribution regime runs counter to this policy.
The alternative would provide different levels of protection based on the happenstance of whether the firm has segregated money, which is arbitrary: [164] [165].
The primary pooling arrangements apply to client money in house accounts: [167].
|
Each of the appellants has been committed for trial at the Crown Court on charges of false accounting.
I shall refer to them as the defendants.
The charges relate to claims in respect of parliamentary expenses and are alleged to have been committed when each defendant was a serving member of the House of Commons.
A fourth defendant, Lord Hanningfield, who is a member of the House of Lords, faces similar charges.
Each defendant and Lord Hanningfield is facing a separate trial but each of them has raised an important point of law.
Each claims that criminal proceedings cannot be brought against him because they infringe parliamentary privilege.
A single preparatory hearing pursuant to section 29 of the Criminal Procedure and Investigations Act 1996 was held to consider this point in relation to all four defendants.
On 11 June 2010 Saunders J, sitting in Southwark Crown Court, ruled against the four defendants.
All four appealed to the Court of Appeal.
On 30 July 2010 that court, Lord Judge CJ, Lord Neuberger MR and Sir Anthony May, President of the Queens Bench Division, dismissed their appeal.
On 14 September 2010 the court certified that the appeal had raised a point of law of general public importance, refused permission to appeal to this court and granted a representation order for one leading counsel, one junior counsel and one solicitor to represent the four defendants jointly in the event of an application to this court for permission to appeal and any consequent appeal.
The defendants, but not Lord Hanningfield, sought permission to appeal.
Lord Hanningfield sought permission to intervene.
Permission was granted to him to intervene in writing for the limited purpose of drawing attention to any distinction between expenses schemes and privileges in the two Houses of Parliament.
At the opening of the hearing the court granted permission to appeal.
On 10 November the court ordered that each of the three appeals be dismissed, for reasons to be delivered in due course.
These are my reasons.
The charges
Each of the defendants has been charged with false accounting contrary to section 17(1)(b) of the Theft Act 1968, which provides in so far as material: False accounting (1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another, (b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular; he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years. (2) For purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.
Mr Morley is charged with making use of monthly expenses claim forms for additional costs allowance which, initially, claimed as mortgage interest sums which were in part repayments of capital and, latterly, made claims for repayment of mortgage interest after the mortgage had been repaid.
Mr Chaytor is charged with making use of an expenses claim form for incidental expenses provision in relation to two invoices relating to the supply of IT services when no such services had been supplied.
He is further charged with making use of expenses claim forms for additional costs allowance in respect of payments of monthly rent when such payments had never been made.
Mr Devine is charged with making use of expenses claim forms for additional costs allowance and personal additional accommodation expenditure in respect of invoices relating to cleaning and maintenance services when no such services had been supplied.
He is further charged with submitting expenses claim forms in respect of communications allowance and supporting invoices in respect of the supply of stationery when no such stationery had been supplied.
The claim forms which form the subject matter of all charges were submitted to the Fees Office of the House of Commons.
Form ACA2 in respect of additional costs allowance contains a declaration, signed by the Member in the following form: I confirm that I incurred these costs wholly, exclusively and necessarily to enable me to stay overnight away from my only or main home for the purpose of performing my duties a Member of Parliament.
The issues of fact in each case would seem to be whether the expenses claimed were incurred and not the purpose for which they were incurred.
Entitlement to and administration of allowances
The entitlement of Members of Parliament to claim certain expenses dates back to 1911, but the system under which the claims with which the present appeals are concerned was introduced in 1971 and the circumstances in which such allowances and expenses may be claimed are determined by Resolutions of the House.
On 29 January 2004 the House passed a Standing Order establishing the House of Commons Members Estimate Committee (the Estimate Committee), which is chaired by the Speaker.
One of the functions of this Committee is to report to the House from time to time on the provisions of the Resolutions of the House relating to expenditure charged to the Estimate for the House of Commons: Members, as codified and modified by the Committee.
In effect the House itself is responsible for the overall scheme of allowances and the Estimate Committee is responsible for the detail.
The House of Commons (Administration) Act 1978 created the House of Commons Commission (the Commission) consisting of the Speaker, the Leader of the House, a Member nominated by the Leader of the Opposition and three other Members, not being Ministers, appointed by the House.
Under Schedule 1 to this Act the Commission is a body corporate.
The primary functions of the Commission are to appoint the staff in the House Departments, to determine their numbers, and to determine their remuneration and other terms and conditions of service (section 2).
The various House Departments include the Department of Finance and Administration.
This is divided into three main offices.
One of these is the Fees Office.
Until recently this performed the functions of receiving claim forms for allowances and expenses, which might be submitted in person or by post, considering the claims and making payments in relation to claims that appeared to be properly made.
The claim to privilege
The defendants contend that the Crown Court has no jurisdiction to try them in respect of these charges on the ground that this would infringe parliamentary privilege.
This claim to privilege has two bases.
The first is article 9 of the Bill of Rights 1689 (article 9).
This provides: That the Freedome of Speech and Debates or Proceedings in Parlyament ought not to be impeached or questioned in any Court or Place out of Parlyament.
The defendants further rely on privilege that has its origin before 1689 and which is wider than, and embraces, article 9.
This has customarily been described as the exclusive cognisance of Parliament but has also been described in argument as exclusive jurisdiction.
I shall use the former description.
Who decides the issue?
In the 17th and 18th centuries there was a dispute between the courts and the
House of Commons, often acrimonious, as to who was the final arbiter of the scope of parliamentary privilege.
This dispute was largely resolved in the course of the 19th century.
In Stockdale v Hansard (1839) 9 Ad & E 1 at pp 147 148 Lord Denman CJ said of the argument that the House of Commons was a separate Court with exclusive jurisdiction over the extent of its privileges: Where the subject matter falls within their jurisdiction, no doubt we cannot question their judgment; but we are now enquiring whether the subject matter does fall within the jurisdiction of the House of Commons.
It is contended that they can bring it within their jurisdiction by declaring it so.
To this claim, as arising from their privileges, I have already stated my answer: it is perfectly clear that none of these Courts could give themselves jurisdiction by adjudging that they enjoy it.
It is now accepted in Parliament that the courts are not bound by any views expressed by parliamentary committees, by the Speaker or by the House of Commons itself as to the scope of parliamentary privilege.
On 4 March 2010 the Clerk of the Parliaments wrote to the solicitor acting for Lord Hanningfield a letter that had received the approval of the Committee for Privileges.
This stated: Article 9 limits the application of parliamentary privilege to proceedings in Parliament.
The decision as to what constitutes a proceeding in Parliament, and therefore what is or is not admissible as evidence, is ultimately a matter for the court, not the House.
This statement was correct.
It applies as much to the House of Commons as to the House of Lords, and to an issue as to the scope of the exclusive cognisance of Parliament as it does to an issue as to the application of article 9.
Although the extent of parliamentary privilege is ultimately a matter for the court, it is one on which the court will pay careful regard to any views expressed in Parliament by either House or by bodies or individuals in a position to speak on the matter with authority.
In Stockdale v Hansard at p 157 Lord Denman CJ commented: The authority to which the Attorney General last appealed is one to which particular attention is due: I mean the report of the committee appointed by the late House of Commons to examine the subject albeit that the comments that he went on to make suggest that in the event the report did not carry the weight that he had suggested that it deserved.
Both Saunders J and the Court of Appeal attached weight to views expressed or to be implied within Parliament both as to the scope of parliamentary privilege in general and as to whether such privilege attaches on the facts of these appeals.
The decision of Saunders J
Saunders J referred at para 19 to concessions made by the prosecution which narrowed the issues.
The first was that the scheme for the payment of expenses as prescribed by resolution of the Houses of Parliament was covered by privilege either under article 9 or as part of the exclusive jurisdiction of the House.
This meant that the High Court would have no power judicially to review the scheme.
The second was that the administration of the scheme by officials in the Fees Office under the supervision of a committee was also covered by parliamentary privilege.
Saunders J expressed reservations about this concession, but treated it as correctly made.
The third was: While an instinctive reaction might be that, while honest claims are covered by privilege, dishonest ones are not, the prosecution accept that, if the submission of forms by an MP is covered by privilege then dishonest claims are also covered.
That is because, in order to prove dishonesty, the prosecution would have to question the document, which is not permitted if it is covered by privilege.
Saunders J held that he was satisfied that this concession was properly made.
It is not altogether easy to reconcile this with an earlier finding at para 18 that in the context of criminal charges parliamentary privilege should be narrowly construed, but I understand that what he meant was that, because it has the effect of ousting criminal jurisdiction, parliamentary privilege should be narrowly construed.
At para 6 Saunders J also recorded an area of ground common to all, or nearly all, counsel.
Privilege did not attach to criminal conduct within the House which was not connected to the activities of the House.
Such conduct could be described as ordinary criminal conduct.
This covered such criminal offences as an assault in the corridors of the House, theft of another Members money, or a sexual offence, none of which related to parliamentary activity or proceedings in Parliament.
Addressing the exclusive jurisdiction of Parliament, Saunders J held that the submission of a claim form fell to be distinguished from the subsequent processing of the form.
Even if the latter was covered by privilege, the former was not.
Privilege covered actions which were part of the collective processes of Parliament.
Claiming expenses was not such an action.
It was a voluntary individual activity for the benefit of the individual and not of direct benefit to Parliament.
So far as article 9 was concerned, Saunders J considered that this essentially protected freedom of speech in Parliament.
The protection extended to some actions that were incidental to exercising that freedom of speech, making a claim for expenses could not properly be said to be one of them.
Accordingly the privilege claimed was not made out.
The decision of the Court of Appeal
In the Court of Appeal the Crown withdrew its concession that the administration of the allowances and expenses scheme by officials in the Fees Office under the supervision of a committee was covered by parliamentary privilege.
At para 69 the Court of Appeal approached this withdrawal with caution, commenting: The issue in these appeals is not whether the actions of officials in allowing the defendants expenses claims is or may be privileged, but whether in submitting their claims, and making the allegedly false statements contained in them to the officials, the defendants were taking part in proceedings in Parliament, within the ambit of article 9 and privilege, as explained in the relevant authorities.
The Court of Appeal attached considerable weight to indications from within Parliament that the defendants claims were not covered by privilege, to which I shall return in due course, but went on to consider arguments advanced on behalf of the defendants.
At paras 74 and 75 the court rejected the submission that making a statement to officials in the Fees Office could be equated with making a statement to the House or to a parliamentary committee: A claim for expenses is not submitted to any other member of the House, nor even to the Speaker or Lord Speaker or to his or her office: it is submitted to an official in the Fees Office, and although that official is appointed by and is an agent of the House, he is not officiating in connection with the business carried on within the Chamber or within a committee.
He is merely carrying out an administrative task, albeit one mandated by the relevant House, and one subject to the detailed rules approved by that House.
The Court of Appeal went on to develop the theme that claiming expenses had nothing to do with the essential, or core, functions of a Member of Parliament.
In doing so, however, the court repeatedly considered this question in relation to the presenting of dishonest claims for expenses: In truth, it is impossible to see how subjecting dishonest claims for expenses to criminal investigation would offend against the rationale for parliamentary privilege (para 76).
It would therefore be curious if privilege were to apply to the member who defrauded the Fees Office by submitting a false claim for expenses (para 77). the decision to set up, and the terms of the system could not be subject to the courts jurisdiction.
Be that as it may, it does not then follow that the dishonest operation of this system by individual members is excluded from it (para 78). on the basis that the implementation of the scheme might constitute a proceeding in Parliament, it does not follow as a matter of logic, convenience or principle, that the dishonest actions by a member when making his claim should be immune from criminal prosecution (para 78).
It can confidently be stated that parliamentary privilege or immunity from criminal prosecution has never ever attached to ordinary criminal activities by members of Parliament (para 81).
The stark reality is that the defendants are alleged to have taken advantage of the allowances scheme designed to enable them to perform their important public duties as members of Parliament to commit crimes of dishonesty to which parliamentary immunity or privilege does not, has never, and, we believe, never would attach.
If the allegations are proved, and we emphasise, if they are proved, then those against whom they are proved will have committed ordinary crimes.
Even stretching language to its limits we are unable to envisage how dishonest claims by members of Parliament for their expenses or allowances begin to involve the legislative or core functions of the relevant House, or the proper performance of their important public duties (para 82).
Counsel for the defendants submitted that claiming expenses was part of a scheme that was covered by privilege in that the payment of expenses was necessary to enable, or for the purpose of enabling, Parliament to perform its core or essential parliamentary business, to which article 9 related.
This was the whole object of the system of allowances.
More particularly, counsel submitted that the Court of Appeal had erred in principle in examining this issue on the premise that the claims for expenses were dishonest.
Privilege from criminal prosecution would be nugatory if it did not apply to criminal conduct.
I consider that there was force in this criticism.
The concept of an ordinary crime, the origin of which I shall identify in due course, is only of value in the present context where it describes an act which has no connection with the conduct of parliamentary business, as counsel rightly agreed see para 18 above.
Making claims for parliamentary allowances does not fall into this category.
Such claims form part of the business of Parliament, giving that phrase a broad meaning.
The issue is whether business of this nature amounts to proceedings in Parliament, within the meaning of article 9, or is otherwise privileged from scrutiny in the criminal courts because it falls within the exclusive cognisance or jurisdiction of Parliament.
It is not appropriate to approach that question on the premise that the claims are dishonest.
Article 9
I propose to start by considering article 9, because the issues in relation to article 9 are relatively narrow and clear cut, compared to those that arise in relation to the exclusive cognisance of Parliament.
Jurisprudence
Much of the jurisprudence in relation to article 9 relates to what constitutes impeaching or questioning proceedings in Parliament most notably Pepper v Hart [1993] AC 593.
The meaning of those words is not in issue in the present case and so I shall not refer to authority dealing with that question.
What is at issue is the reach of the phrase proceedings in Parliament.
The Bill of Rights 1689 reflected the attitude of Parliament, after the Restoration, to events in the reign of Charles I, and in particular the acceptance by the Court of Kings Bench that parliamentary privilege did not protect against seditious comments in the Chamber R v Eliot, Holles and Valentine (1629) 3 St Tr 293 336.
The primary object of the article was unquestionably to protect freedom of speech in the House of Commons.
The question is, having regard to that primary object, how far the term proceedings in Parliament extends to actions that advance or are ancillary to proceedings in the Houses.
Erskine May, Parliamentary Practice, 23rd ed (2004), summarises the position as follows at pp 110 111: The term proceedings in Parliament has received judicial attention, (not all of it in the United Kingdom) but comprehensive lines of decision have not emerged and indeed it has been concluded that an exhaustive definition could not be achieved.
Nevertheless, a broad description is not difficult to arrive at.
The primary meaning of proceedings, as a technical parliamentary term, which it had at least as early as the seventeenth century, is some formal action, usually a decision, taken by the House in its collective capacity.
This is naturally extended to the forms of business in which the House takes action, and the whole process, the principal part of which is debate, by which it reaches a decision.
An individual Member takes part in a proceeding usually by speech, but also by various recognized forms of formal action, such as voting, giving notice of a motion, or presenting a petition or report from a committee, most of such actions being time saving substitutes for speaking.
One of the problems when considering the scope of article 9 is that decisions on parliamentary privilege frequently make no mention of the Bill of Rights.
That is true of Bradlaugh v Gossett (1884) 12 QBD 271.
The plaintiff, Bradlaugh, had been elected to the House of Commons.
He required the Speaker to call him to the table to take the oath and the Speaker declined to do so and the House resolved that the Serjeant at Arms should exclude Bradlaugh from the House.
Bradlaugh then sought an injunction restraining the Serjeant at Arms from complying with the resolution.
The court refused the injunction.
Lord Coleridge CJ held, at p 275: What is said or done within the walls of Parliament cannot be inquired into in a court of lawThe jurisdiction of the Houses over their own members, their right to impose discipline within their walls, is absolute and exclusive.
Stephen J was less categorical.
He held, at p 278: I think that the House of Commons is not subject to the control of Her Majestys Courts in its administration of that part of the statute law which has relation to its own internal proceedings, and that the use of such actual force as may be necessary to carry into effect such a resolution as the one before us is justifiable.
These statements do not distinguish between the narrow privilege under article 9 and the broader exclusive cognisance of Parliament.
More pertinent are some comments made by Stephen J as to what was not covered by privilege.
At p 283 he stated: The only force which comes in question in this case is such force as any private man might employ to prevent a trespass on his own land.
I know of no authority for the proposition that an ordinary crime committed in the House of Commons would be withdrawn from the ordinary course of criminal justice.
Stephen J pointed out at p 284 that, while Elliot established that nothing said in Parliament by a member as such could be treated as an offence by the ordinary courts, the House of Lords had carefully avoided deciding the question whether the Court of Kings Bench could try a Member for an assault on the Speaker in the House.
His was a cogent statement of opinion that parliamentary privilege, including that conferred by article 9, will not preclude a criminal prosecution in respect of the conduct of a Member merely because it has taken place within the House of Commons.
While Pepper v Hart was concerned with the circumstances in which reference could be made to proceedings in Parliament, Lord Browne Wilkinson made the following comment on the object of article 9, at p 638: Article 9 is a provision of the highest constitutional importance and should not be narrowly construed.
It ensures the ability of democratically elected Members of Parliament to discuss what they will (freedom of debate) and to say what they will (freedom of speech)In my judgment, the plain meaning of article 9, viewed against the historical background in which it was enacted, was to ensure that Members of Parliament were not subjected to any penalty, civil or criminal, for what they said and were able, contrary to the previous assertions of the Stuart monarchy, to discuss what they, as opposed to the monarch, chose to have discussed.
Lord Browne Wilkinson made a similar observation when giving the judgment of the Judicial Committee of the Privy Council in Prebble v Television New Zealand Ltd [1995] 1 AC 321 at p 334.
These observations are of limited assistance when considering the extent to which article 9 applies to actions that are incidental or in some way connected to proceedings on the floor of either House or in parliamentary committee.
The suggestion that article 9 should not be narrowly construed conflicted with an observation of Viscount Radcliffe when giving the advice of the Judicial Committee of the Privy Council in Attorney General of Ceylon v de Livera [1963] AC 103 at p 120.
Section 14 of the Bribery Act of Ceylon made it an offence to offer an inducement or reward to a member of the House of Representatives for doing or forbearing to do any act in his capacity as such member.
The issue was the scope of those words.
Viscount Radcliffe drew an analogy with article 9.
He said: What has come under inquiry on several occasions is the extent of the privilege of a member of the House and the complementary question, what is a proceeding in Parliament? This is not the same question as that now before the Board, and there is no doubt that the proper meaning of the words proceedings in Parliament is influenced by the context in which they appear in article 9 of the Bill of Rights (1 Wm & M, Sess 2, c 2); but the answer given to that somewhat more limited question depends upon a very similar consideration, in what circumstances and in what situations is a member of the House exercising his real or essential function as a member? For, given the proper anxiety of the House to confine its own or its members privileges to the minimum infringement of the liberties of others, it is important to see that those privileges do not cover activities that are not squarely within a members true function.
Alleged bribery of members in respect of their participation in the proceedings on the floor of one of the Houses of Parliament or in committee has raised the question of whether the connection between the act of bribery outside Parliament and the undoubted proceedings in Parliament to which the bribe relates renders the former subject to article 9 or similar privilege.
In Ex p Wason (1869) LR 4 QB 573 the issue was whether a prosecution would lie against three persons, two of whom were members of the House of Lords, for conspiring to deceive the House.
The court held that it would not.
Cockburn CJ held at p 576: It is clear that statements made by members of either House of Parliament in their places in the House, though they might be untrue to their knowledge, could not be made the foundation of civil or criminal proceedings, however injurious they might be to the interest of a third person.
And a conspiracy to make such statements would not make the persons guilty of it amenable to the criminal law.
Blackburn and Lush JJ agreed.
Lush J ended his short judgment with the following statement: I am clearly of opinion that we ought not to allow it to be doubted for a moment that the motives or intentions of members of either House cannot be inquired into by criminal proceedings with respect to anything they may do or say in the House.
It is not clear whether the reasoning of the court was that the act of conspiring was itself subject to privilege or that, as the object of the conspiracy was not an indictable offence, no indictment could lie for the conspiracy itself.
Ex p Wason was distinguished by the Supreme Court of Ontario in R v Bunting (1885) 7 OR 524, where it was held that a conspiracy to bring about a change in the Government of Ontario by bribing members of the Legislative Assembly to vote against the Government was an indictable offence at common law committed at the time of the conspiracy itself and within the jurisdiction of the ordinary courts.
Ex p Wason has also been cited by the Supreme Court of the United States in the context of considering the ambit of the Speech or Debate clause in article 1, section 6 of the Constitution.
This provides that for any speech or debate in either House, Senators or Representatives shall not be questioned in any other place see United States v Johnson (1966) 383 US 169 and United States v Brewster (1972) 408 US 501.
Each case involved an allegation of bribery to purchase support in proceedings in the House.
In the latter case Burger CJ gave the opinion of the court.
At p 518 he commented: The very fact of the supremacy of Parliament as Englands highest tribunal explains the long tradition precluding trial for official misconduct of a member in any other and lesser tribunal.
This is not an accurate summary either of parliamentary privilege in this jurisdiction or of the reason for it, but the issue of interpretation facing the Supreme Court mirrors that raised by article 9 and some of the reasoning in Brewster is relevant to consideration of the scope of that article.
At p 524 Burger CJ commented: As we noted at the outset, the purpose of the Speech or Debate Clause is to protect the individual legislator, not simply for his own sake, but to preserve the independence and thereby the integrity of the legislative process.
But financial abuses by way of bribes, perhaps even more than Executive power, would gravely undermine legislative integrity and defeat the right of the public to honest representation.
Depriving the Executive of the power to investigate and prosecute and the Judiciary of the power to punish bribery of Members of Congress is unlikely to enhance legislative independence.
Burger CJ went on to hold that prosecution for bribery did not infringe the Speech and Debate clause because there was no need to show that the defendant in fact fulfilled the alleged illegal bargain.
It was the acceptance of the bribe that constituted the offence.
Brennan J, with whom Douglas J joined, delivered a powerful dissent.
He held that one count actually charged that the defendant committed the act for which the bribe was paid, so that the defendants conduct in the House would have to be investigated.
Other counts, which merely charged receipt of the bribe, put in question the defendants motive for the legislative acts which followed, even if those acts did not have to be considered by the court.
Similar reasoning to that of Brennan J led the Supreme Court of India to hold that Members of Parliament were protected by privilege from prosecution for bribery in respect of voting in parliamentary proceedings: Rao v State (1998) 1 SCJ 529.
In 1992 a prosecution was brought against a Member of Parliament, Mr Harry Greenway, for the common law offence of bribery to use his position as a Member of Parliament to further the interests of a company in his constituency.
He applied to have the indictment quashed on the ground, inter alia, that the prosecution was precluded by parliamentary privilege.
Buckley J dismissed the application [1998] PL 357.
He referred with approval to comments of Lord Salmon in debate in the House of Lords (Hansard (HL Debates), 6 December 1976, col 631).
Lord Salmon had chaired a Royal Commission on Standards of Conduct in Public Life and the debate was on its Report, Cmnd 6524 (1976).
The passages cited by Buckley J were: To my mind equality before the law is one of the pillars of freedom.
To say that immunity from criminal proceedings against anyone who tries to bribe a Member of Parliament and any Member of Parliament who accepts the bribe, stems from the Bill of Rights is possibly a serious mistake.
Now this [the Bill of Rights] is a charter for freedom of speech in the House.
It is not a charter for corruption.
To my mind, the Bill of Rights, for which no one has more respect than I have, has no more to do with the topic which we are discussing than the Merchandise Marks Act.
The crime of corruption is complete when the bribe is offered or given or solicited and taken.
Buckley J made the following comments (pp 361 362,363): It is important to note that which Lord Salmon pointed out, namely, that corruption is complete when the bribe is offered or given, solicited or [sic] taken.
If, as is alleged here, a bribe is given and taken by a member of Parliament, to use his position dishonestly, that is to favour the briber as opposed to acting independently and on the merits, the crime is complete.
It owes nothing to any speech, debate or proceedings in Parliament.
Proof of the element of corruption in the transaction is another and quite separate consideration.
Privilege might well prevent any inquiry by a court into Parliamentary debates or proceedings.
However, it is not a necessary ingredient of the crime that the bribe worked.
A jury will usually be asked to infer corruption from the nature of and circumstances in which the gift was given.
I cannot see that article 9 in any way prevents that That a Member of Parliament against whom there is a prima facie case of corruption should be immune from prosecution in the courts of law is to my mind an unacceptable proposition at the present time.
I do not believe it to be the law.
The Committee of Privileges is not well equipped to conduct an enquiry into such a case, nor is it an appropriate or experienced body to pass sentence.
Unless it is to be assumed that it would be prejudiced in his favour, I cannot see that it would be in the Members own interest for the matter to be dealt with by the Committee.
The courts and legislature have over the years built up a formidable body of law and codes of practice to achieve fair treatment of suspects and persons ultimately charged and brought to trial.
Again, unless it is to be assumed that his peers would lean in his favour, why should a Member be deprived of a jury and an experienced judge to consider his guilt or innocence and, if appropriate, sentence? Why should the public be similarly deprived?
These decisions in relation to bribery lend support for a narrow construction of article 9.
If Greenway was rightly decided it leads inexorably to the conclusion that submitting claims for expenses falls outside the definition of proceedings in Parliament in article 9.
The nexus between bribes intended to influence what is said and proceedings in the House is much closer than the link between submitting a claim for expenses and taking part in such proceedings.
Indeed, it is the closeness of the former nexus that raises a question as to whether Greenway was correctly decided.
The dissent in Brewster is food for thought.
Accusing a Member of Parliament of taking bribes in exchange for statements to be made in the House will necessarily raise an inference that any statements that were subsequently made were corruptly motivated, even if this forms no part of the criminal inquiry.
The same point can, however, be made where a Member of Parliament affirms outside the House a statement made in the House.
Such an affirmation can found a claim in defamation.
This may well involve a challenge to the good faith of the defendant in affirming the statement, which will inferentially challenge his good faith in making the original statement.
Lord Bingham dealt with this point when giving the advice of the Judicial Committee of the Privy Council in Buchanan v Jennings (Attorney General of New Zealand intervening) [2005] 1 AC 115, at para 13: It is common ground in this appeal that statements made outside Parliament are not protected by absolute privilege even if they simply repeat what was said therein.
That proposition, established by R v Abingdon (1794) 1 Esp 226 and R v Creevey (1813) 1 M & S 273 was more recently applied by the High Court of Ontario in Stopforth v Goyer (1978) 87 DLR (3d) 373 and the Supreme Court of the United States in Hutchinson v Proxmire (1979) 443 US 111, 126 et seq.
In such a case there will inevitably be an inquiry at the trial into the honesty of what the defendant had said, and if the defendants extra parliamentary statement is found to have been untrue or dishonest the same conclusion would ordinarily, although not always, apply to the parliamentary statement also.
But such an inquiry and such a conclusion are not precluded by article 9, because the plaintiff is founding his claim on the extra parliamentary publication and not the parliamentary publication.
Lord Bingham went on to hold that it made no difference that, in that case, the repetition of what had been said in Parliament was merely by reference.
At para 17 Lord Bingham tested this conclusion for compliance with the principle underlying the absolute privilege accorded to parliamentary statements, namely the right of Members of Parliament to speak their minds in Parliament without any risk of incurring liability as a result.
He concluded that liability for repeating outside Parliament what had been said within did not conflict with this principle.
The jurisprudence to which I have referred is sparse and does not bear directly on the facts of these appeals.
It supports the proposition, however, that the principal matter to which article 9 is directed is freedom of speech and debate in the Houses of Parliament and in parliamentary committees.
This is where the core or essential business of Parliament takes place.
In considering whether actions outside the Houses and committees fall within parliamentary proceedings because of their connection to them, it is necessary to consider the nature of that connection and whether, if such actions do not enjoy privilege, this is likely to impact adversely on the core or essential business of Parliament.
If this approach is adopted, the submission of claim forms for allowances and expenses does not qualify for the protection of privilege.
Scrutiny of claims by the courts will have no adverse impact on the core or essential business of Parliament, it will not inhibit debate or freedom of speech.
Indeed it will not inhibit any of the varied activities in which Members of Parliament indulge that bear in one way or another on their parliamentary duties.
The only thing that it will inhibit is the making of dishonest claims.
Some reliance was placed by the defendants on the terms of section 13 of the Defamation Act 1996, which are as follows: 13.
Evidence concerning proceedings in Parliament (1) Where the conduct of a person in or in relation to proceedings in Parliament is in issue in defamation proceedings, he may waive for the purposes of those proceedings, so far as concerns him, the protection of any enactment or rule of law which prevents proceedings in Parliament being impeached or questioned in any court or place out of Parliament. (2) Where a person waives that protection (a) any such enactment or rule of law shall not apply to prevent evidence being given, questions being asked or statements, submissions, comments or findings being made about his conduct, and (b) none of those things shall be regarded as infringing the privilege of either House of Parliament. (3) The waiver by one person of that protection does not affect its operation in relation to another person who has not waived it. (4) Nothing in this section affects any enactment or rule of law so far as it protects a person (including a person who has waived the protection referred to above) from legal liability for words spoken or things done in the course of, or for the purposes of or incidental to, any proceedings in Parliament. (5) Without prejudice to the generality of subsection (4), that subsection applies to (a) the giving of evidence before either House or a committee; (b) the presentation or submission of a document to either House or a committee; (c) the preparation of a document for the purposes of or incidental to the transacting of any such business; (d) the formulation, making or publication of a document, including a report, by or pursuant to an order to either House or a committee; and (e) any communication with the Parliamentary Commissioner for Standards or any person having functions in connection with the registration of members interests.
In this subsection a committee means a committee of either House or a joint committee of both Houses of Parliament.
Reliance was placed on the reference in subsection (4) to protection from legal liability for words spoken or things done for the purposes of or incidental to, any proceedings in Parliament and in subsection (5)(b) to the presentation or submission of a document to either House or a committee.
I do not consider that these provisions advance the defendants case.
Section 13 is not capable of extending the ambit of article 9.
Subsection (4) cannot found a submission that any words spoken or things done that are incidental to proceedings in Parliament have automatically to be treated as part of those proceedings.
The reference to submission of a document to either House or a committee envisages the submission of documents for the purpose of the deliberations of the House or committee in question.
No comparison can be drawn between this and the presentation of claims for allowances or expenses to the Fees Office.
The views of Parliament
I now turn to views expressed in Parliament as to the ambit of article 9.
Once again it is not always easy to differentiate between comments that bear on this narrow privilege as opposed to the broader exclusive cognisance of Parliament.
The report of the Select Committee on the Official Secrets Acts 1938 1939 (the 1939 Report) included the following: 2.
The privilege to which Your Committee were directed by the order of reference to have due regard is that usually referred to as the privilege of freedom of speech.
This privilege is declared by the Bill of Rights in the following terms: That the freedom of speech and debates or proceedings in parliament ought not to be impeached or questioned in any court or place out of parliament. 3.
The article in the Bill of Rights is not necessarily an exhaustive definition of the cognate privileges.
But even assuming that it is, the privilege is not confined to words spoken in debate or to spoken words, but extends to all proceedings in parliament.
While the term proceedings in parliament has never been construed by the courts, it covers both the asking of a question and the giving written notice of such question, and includes everything said or done by a member in the exercise of his functions as a member in a committee of either House, as well as everything said or done in either House in the transaction of parliamentary business. 4.
The privilege of freedom of speech being confined to words spoken or things done in the course of parliamentary proceedings, words spoken or things done by a member beyond the walls of parliament will generally not be protected.
Cases may, however, easily be imagined of communications between one member and another, or between a member and a minister, so closely related to some matter pending in, or expected to be brought before, the House, that though they do not take place in the chamber or a committee room they form part of the business of the House, as, for example, where a member sends to a minister the draft of a question he is thinking of putting down or shows it to another member with a view to obtaining advice as to the propriety of putting it down or as to the manner in which it should be framed.
It is noteworthy that the Committee envisaged the need for a close relationship of communications outside the House to business within it in order to attract privilege.
The conclusion of the Committee was later agreed by the House CJ (1938 39) 480.
The Joint Committee on the Publication of Proceedings in Parliament in its Second Report in 1970 HL 109, HC 261 recommended that proceedings in Parliament should be defined by statute, and offered the following definition at para 27: (1) For the purpose of the defence of absolute privilege in an action or prosecution for defamation the expression proceedings in Parliament shall without prejudice to the generality thereof include a) all things said done or written by a Member or by any officer of either House of Parliament or by any person ordered or authorised to attend before such House, in or in the presence of such House and in the course of a sitting of such House, and for the purpose of the business being or about to be transacted, wherever such sitting may be held and whether or not it be held in the presence of strangers to such House: provided that for the purpose aforesaid the expression House shall be deemed to include any Committee sub Committee or other group or body of members or members and officers of either House of Parliament appointed by or with the authority of such House for the purpose of carrying out any of the functions of or of representing such House; and b) all things said done or written between Members or between Members and officers of either House of Parliament or between Members and Ministers of the Crown for the purpose of enabling any Member or any such officer to carry out his functions as such provided that publication thereof be no wider than is reasonably necessary for that purpose. (2) In this section Member means a Member of either House of Parliament; and officer of either House of Parliament means any person not being a Member whose duties require him from time to time to participate in proceedings in Parliament as herein defined.
No effect was given to this recommendation.
The Joint Committee on Parliamentary Privilege Report of 1999 HL 43 1; HC214 1 (the 1999 Report) gave detailed consideration to article 9.
At para 12 it commented: Freedom of speech is central to Parliaments role.
Members must be able to speak and criticise without fear of penalty.
This is fundamental to the effective working of Parliament, and is achieved by the primary parliamentary privilege: the absolute protection of proceedings in Parliament guaranteed by article 9 of the Bill of Rights 1689.
Members are not exposed to any civil or criminal liabilities in respect of what they say or do in the course of proceedings in Parliament.
There is no comprehensive definition of the term proceedings in Parliament, although it has often been recommended there should be.
Proceedings are broadly interpreted to mean what is said or done in the formal proceedings of either House or the committees of either House together with conversations, letters and other documentation directly connected with those proceedings.
At para 103 the Committee expressed the view that Members correspondence did not form part of parliamentary proceedings: Article 9 protects parliamentary proceedings: activities which are recognisably part of the formal collegiate activities of Parliament.
The Committee did not recommend the extension of parliamentary privilege to cover Members correspondence.
It commented at para 110: There is another consideration.
Article 9 provides an altogether exceptional degree of protection, as discussed above.
In principle this exceptional protection should remain confined to the core activities of Parliament, unless a pressing need is shown for an extension.
Each House has agreed a set of rules and guidance governing the conduct expected of its members.
The Parliamentary Commissioner for Standards is appointed to monitor the operation of the Code of Conduct of Members of the House of Commons and to advise the Committee on Standards and Privileges on the interpretation of the code.
In 15 December 2002 the Mail on Sunday published an article alleging that Mr Michael Trend MP had improperly submitted claims in respect of additional costs allowance in respect of a London home which he did not occupy.
The Commissioner for Standards submitted a memorandum on the matter which concluded that Mr Trend had claimed additional costs allowance in breach of the rules relating to that allowance.
In a post script under the heading The Criminal Law he commented: The decision whether Mr Trend or any other Member who may be shown to have wrongly claimed parliamentary allowances should face a criminal prosecution is one for the police and prosecuting authorities, not for me.
As the briefing note on the law on obtaining by deception at Annex C makes clear, there are a number of ingredients to the offence which would have to be proved if a prosecution were to succeed; achieving this would not necessarily be easy.
However, the point that needs to be made here is that claiming an allowance is not a proceeding in Parliament and the provisions of parliamentary privilege do not apply.
Members of Parliament are no less subject to the criminal law in this respect than anyone else.
They must have its provisions in mind at all times like anyone else, and decisions about whether it should be invoked against them must be taken applying the same tests as would be applied to any other citizen.
On 8 February 2010 the Speaker made a statement to the House about the application of the sub judice rule in relation to the prosecutions of the three defendants, in the following terms.
I wish to make a statement to the House about the application of the sub judice rule.
Once criminal proceedings are active by a charge having been made, cases before the courts shall not be referred to in any motion, debate or question.
The House will be aware that charges have been made against three Members of the House and that therefore the sub judice rule applies to their cases.
The matter is therefore before the courts, and the House and Members would not wish to interfere with the judicial process, risk affecting the fairness of a criminal trial or, furthermore, prevent such a trial taking place.
The last sentence does not suggest that the Speaker had any concern that the trials of the defendants might constitute a breach of the privilege enjoyed by Parliament.
It is possible that the Speaker had already received orally the advice of the Clerk of the House that was conveyed to him in writing on the following day.
This included the following paragraph: In order to make the case that privilege applies to claims it would be necessary to establish that they are indeed transactions of business of the House or one of its Committees.
Although I accept that the ACA scheme arises from Resolutions of the House, the proposition that all actions or claims under it are proceedings, seems to me to be unsustainable.
The House agrees to many things by Resolution for example to build a new building but that does not mean that all activities in connection with its erection are proceedings.
Proceedings must imply, in the words of the Joint Committee on Parliamentary Privilege, formal collegiate activities of Parliament rather than merely the consequences of decisions that either House has taken.
It also seems to me to be pertinent to the consideration of claims under the ACA scheme being protected that throughout the Houses involvement in Freedom of Information cases in respect of publication of claims and expenses, the House has never sought an exemption under section 34 of the Act which covers matters deemed to infringe parliamentary privilege.
None of these expressions of Parliamentary views lends support to the suggestion that submitting claims for allowances and expenses constitutes proceedings in Parliament for the purposes of article 9.
On the contrary they all suggest, either expressly or by implication, that the submission of such claims falls outside the protection of that article.
The recovery of allowances and expenses to defray the costs involved in attending Parliament, or travelling on Parliamentary business, has no closer nexus with proceedings in Parliament than incurring those expenses.
The question was asked rhetorically of what the position would be if Members had to go before the Estimate Committee, or even the House, to ask for their expenses.
It was submitted on behalf of the defendants that in that event their claims would constitute proceedings in Parliament and be protected by privilege, and that the same was true of claims made to the Fees Office as that office was acting on behalf of the House in receiving and considering the claim forms.
The answer is that the submission and consideration of allowances and expenses claims is essentially a matter of administration, properly to be performed by officials, and that it would be absurd for this exercise to be performed by a committee or by the House.
There are good reasons of policy for giving article 9 a narrow ambit that restricts it to the important purpose for which it was enacted freedom for Parliament to conduct its legislative and deliberative business without interference from the Crown or the Crowns judges.
The protection of article 9 is absolute.
It is capable of variation by primary legislation, but not capable of waiver, even by Parliamentary resolution.
Its effect where it applies is to prevent those injured by civil wrongdoing from obtaining redress and to prevent the prosecution of Members for conduct which is criminal.
As to the latter, Parliament has no criminal jurisdiction.
It has limited penal powers to treat criminal conduct as contempt.
These once included imprisonment for a limited period.
As to this Lord Denman CJ commented at p 114 in Stockdale v Hansard: The privilege of committing for contempt is inherent in every deliberative body invested with authority by the Constitution.
But, however flagrant the contempt, the House of Commons can only commit till the close of the existing session.
Their privilege to commit is not better known than this limitation of it.
Though the party should deserve the severest penalties, yet, his offences being committed the day before a prorogation, if the House ordered his imprisonment but for a week, every Court in Westminster Hall and every Judge of all the Courts would be bound to discharge him by habeas corpus.
Imprisonment has not been imposed in recent times and the same is true of the theoretical power to fine.
Nor is it clear that Parliament is in a position to satisfy all the requirements of article 6 which apply when imposing penal sanctions see Demicoli v Malta (1991) 14 EHRR 47.
Thus precedent, the views of Parliament and policy all point in the same direction.
Submitting claims for allowances and expenses does not form part of, nor is it incidental to, the core or essential business of Parliament, which consists of collective deliberation and decision making.
The submission of claims is an activity which is an incident of the administration of Parliament; it is not part of the proceedings in Parliament.
I am satisfied that Saunders J and the Court of Appeal were right to reject the defendants reliance on article 9.
Exclusive cognisance
This phrase describes areas where the courts have ruled that any issues should be left to be resolved by Parliament rather than determined judicially.
Exclusive cognisance refers not simply to Parliament, but to the exclusive right of each House to manage its own affairs without interference from the other or from outside Parliament.
The boundaries of exclusive cognisance result from accord between the two Houses and the courts as to what falls within the exclusive province of the former.
Unlike the absolute privilege imposed by article 9, exclusive cognisance can be waived or relinquished by Parliament.
Thus in 1980 Parliament agreed to a resolution which permitted reference to be made in court to certain Parliamentary papers which, up to then, had been subject to a claim of exclusive cognisance see Erskine May at p 105.
The areas subject to exclusive cognisance have very significantly changed, in part as a result of primary legislation.
The exclusive cognisance of Parliament was originally based on the premise that the High Court of Parliament had its own peculiar law which was not known to the courts.
The 17th edition (1814) of Blackstones Commentaries on the Laws of England observed at pp 158 159: It will be sufficient to observe, that the whole of the law and custom of parliament has its original from this one maxim; that whatever matter arises concerning either house of parliament, ought to be examined, discussed, and adjudged in that house to which it relates and not elsewhere.
In Stockdale v Hansard at p 118 Denman CJ said of all internal proceedings
of the House of Commons: With respect to them, I freely admit that the Courts have no right to interfere, nor, perhaps, any regular means of obtaining information.
I have already cited at paras 29 and 30 passages from the judgments of Lord Coleridge CJ and Stephen J in Bradlaugh v Gossett which are relevant in the present context.
It is, of course, always open to Parliament by legislation to provide for the courts to encroach on matters falling within its exclusive cognisance, or even on article 9 privilege, as did the Parliamentary Elections Act 1695, the Parliamentary Oaths Act 1866, the Perjury Act 1911, and the Defamation Act 1996 see Erskine May at p 115.
These statutes expressly address matters that were previously subject to privilege under article 9, or the exclusive cognisance of Parliament.
Where a statute does not specifically address matters that are subject to privilege, it is in theory necessary as a matter of statutory interpretation to decide a number of overlapping questions.
Does the statute apply within the precincts of the Palace of Westminster? If it does, does it apply in areas that were previously within the exclusive cognisance of Parliament? If so, does the statute override the privilege imposed by article 9? In practice there are not many examples of these questions being considered, either within Parliament or by the courts.
If Parliament accepts that a statute applies within an area that previously fell within its exclusive cognisance, then Parliament will, in effect, have waived any claim to privilege.
The 1939 Report is an example of Parliament considering whether privilege was overridden by statute.
In two cases the courts considered the application of the Licensing Acts within the precincts of the Palace of Westminster.
In Williamson v Norris [1899] 1 QB 7 Lord Russell of Killowen CJ considered a submission that the Houses of Parliament, in the regulation of their internal arrangements as to the sale of liquor, were entirely outside the control of the law as to licensing.
He stated that he was very far from being satisfied that this proposition was correct, but decided the case on another point.
In R v Graham Campbell, Ex p Herbert [1935] 1 KB 594 Mr A P Herbert had laid two informations at Bow Street Police Station for summonses against fifteen named Members of Parliament, who were members of the Kitchen Committee of the House of Commons and the manager of the Refreshment Department of the House alleging the unlawful sale of alcohol without a licence contrary to the Licensing (Consolidation) Act 1910.
The Chief Metropolitan Magistrate held that the Members of Parliament were not susceptible to the jurisdiction of the court because they were protected by the privileges of the House.
On application for orders in the nature of mandamus, Lord Hewart CJ upheld the decision and the reasoning of the magistrate.
Only as an afterthought did he express the view that the majority of the provisions of the 1910 Act were inapplicable to the House of Commons.
Avory and Swift JJ agreed, albeit that Avory J devoted most of his judgment to the question of whether the Act on its true construction applied to the House of Commons.
The Joint Committee on Parliamentary Privilege Report HL paper 43 1, HC 214 1 (1998 99) (the 1999 Report) states at para 15 that since this case Acts of Parliament have been taken not to apply within the precincts of either House in the absence of express provision that they should apply and that the legislation that has been taken not to apply includes the Health and Safety at Work etc Act 1974 and the Data Protection Acts 1984 and 1998 but that in practice Parliament voluntarily abides by some of these statutory provisions.
The 1999 Report returns to this topic under the heading Right of each House to administer its internal affairs within its precincts.
It comments at para 240 that each House has the right to administer its internal affairs within the parliamentary precincts.
It continues at para 241: In one important respect this heading of privilege is unsatisfactory.
Internal affairs and equivalent phrases are loose and potentially extremely wide in their scope.
On one interpretation they embrace, at one edge of the spectrum, the arrangement of parliamentary business and also, at the other extreme, the provision of basic supplies and services such as stationery and cleaning.
This latter extreme would be going too far if it were to mean, for example, that a dispute over the supply of photocopy paper or dismissal of a cleaner could not be decided by a court or industrial tribunal in the ordinary way.
Here, as elsewhere the purpose of parliamentary privilege is to ensure that Parliament can discharge its functions as a legislative and deliberative assembly without let or hindrance.
This heading of privilege best serves Parliament if not carried to extreme lengths.
A little later the Report considers the dividing line between matters that fall within this type of parliamentary privilege and those which fall outside it.
This lies at the heart of these appeals and merits quotation in full: 246 Putting aside the activities of individuals, there is a need to distinguish between activities of the House which call for protection under this head of privilege and those which do not.
The Palace of Westminster is a large building; it requires considerable maintenance; it provides an extensive range of services for members; it employs and caters for a large number of staff and visitors.
These services require staff and supplies and contractors.
For the most part, and rightly so, these services are not treated as protected by privilege.
It is difficult to see any good reason why claims for breach of contract relating to catering or building services, for example, should be excluded from the jurisdiction of the courts, or why a person who sustains personal injury within the precincts of Parliament should not be able to mount a claim for damages for negligence.
This has been formally recognised in the Parliamentary Corporate Bodies Act 1992.
Under this Act each House established a corporate officer who can sign contracts on behalf of the House and sue or be sued. 247 The dividing line between privileged and non privileged activities of each House is not easy to define.
Perhaps the nearest approach to a definition is that the areas in which the courts ought not to intervene extend beyond proceedings in Parliament, but the privileged areas must be so closely and directly connected with proceedings in Parliament that intervention by the courts would be inconsistent with Parliaments sovereignty as a legislative and deliberative assembly.
One example is the Speakers decision on which facilities within the precincts of the House should be available to members who refuse to take the oath or affirmation of allegiance.
Another example might be steps taken by the library of either House to keep members informed upon matters of significant political interest.
Such steps, if authorised by the presiding officer of the House, would properly be within the scope of the principle and not amenable to orders of the court. 248 It follows that management functions relating to the provision of services in either House are only exceptionally subject to privilege.
In particular, the activities of the House of Commons Commission, a statutory body appointed under the House of Commons (Administration) Act 1978, are not generally subject to privilege, nor are the management and administration of the House departments.
The boundary is not tidy.
Occasionally management in both Houses may deal with matters directly related to proceedings which come within the scope of article 9.
For example, the members pension fund of the House of Commons is regulated partly by resolutions of the House.
So too are members salaries and the appointment of additional members of the House of Commons Commission under section 1(2)(d) of the House of Commons (Administration) Act.
These resolutions and orders are proceedings in Parliament, but their implementation is not.
The foundation of the modern system of administration of the House of Commons is the House of Commons (Administration) Act.
This established the Commission and gave it corporate status, so that it is capable of suing and being sued.
In 1992 each House took full responsibility for managing its own internal administration, which included responsibility for the maintenance of the structure of the Palace of Westminster see Erskine May p 233.
In that year, as the 1999 Report explains, the Parliamentary Corporate Bodies Act was passed a necessary practical step to facilitate the bringing of actions in contract and tort arising out of the internal administration of the House.
This has rendered easier, and implicitly contemplates, inroads into areas that previously fell within the exclusive cognisance of the House.
Statutory inroads have been made by express provisions of the Employment Act 1990, the Trade Union Reform and Employment Rights Act 1993 and the Employment Rights Act 1996 see Erskine May at pp 115 to 116.
So far as actions in contract and tort are concerned arising out of the internal administration of the House the courts are unlikely to accept the submission, in the unlikely event that it is advanced, that their jurisdiction is precluded because of the exclusive cognisance of the House.
The reasoning of Judge Russell, sitting in the Industrial Court in Bear v State of South Australia (1981) 48 SAIR 604 is likely to be followed.
Different considerations apply to claims for judicial review in relation to the conduct by each House of its internal affairs.
The courts will respect the right of each House to reach its own decision in relation to the conduct of its affairs.
Two examples will illustrate this.
In Re McGuinnesss Application [1997] NI 359 the applicant sought to challenge by judicial review the decision of the Speaker that those who had not complied with the requirements of the Parliamentary Oaths Act 1866 would be denied certain of the facilities of the House.
Kerr J dismissed his application.
He held at p 6 : I am quite satisfied that, whether it qualifies as a proceeding in Parliament or not, the Speakers action lies squarely within the realm of internal arrangements of the House of Commons and is not amenable to judicial review.
In R v Parliamentary Commissioner for Standards, Ex p Al Fayed [1998] 1 WLR 669 the Parliamentary Commissioner for Standards had published a report relating to a complaint by the applicant against a Member of Parliament.
The applicant sought permission to challenge this by judicial review.
The application was refused by Sedley J and renewed before the Court of Appeal.
Lord Woolf MR gave a judgment with which the other members of the court agreed dismissing the application.
He said, at p 673: The focus of the Parliamentary Commissioner for Standards is on the propriety of the workings and the activities of those engaged within Parliament.
He is one of the means by which the select committee set up by the House carries out its functions, which are accepted to be part of the proceedings of the House.
This being the role of the Parliamentary Commissioner for Standards, it would be inappropriate for this court to use its supervisory powers to control what the Parliamentary Commissioner for Standards does in relation to an investigation of this sort.
The responsibility for supervising the Parliamentary Commissioner for Standards is placed by Parliament, through its standing orders, on the Committee of Standards and Privileges of the House, and it is for that body to perform that role and not the courts.
In summary, extensive inroads have been made into areas that previously fell within the exclusive cognisance of Parliament.
Following Ex p Herbert there appears to have been a presumption in Parliament that statutes do not apply to activities within the Palace of Westminster unless they expressly provide to the contrary.
That presumption is open to question.
In 1984 three Law Lords, Lord Diplock, Lord Scarman and Lord Bridge of Harwich, on the Committee for Privileges expressed the view that sections 2 6 of the Mental Health Act 1983 applied to members of the House of Lords, although the Act did not expressly so state.
Crime and Parliament
I have considered the encroachment by the laws of contract and tort on areas that previously fell within the exclusive cognisance of Parliament and pointed out the distinction that must be drawn between such claims and applications for judicial review.
I now come to consider the position where an act is committed which, absent any question of parliamentary privilege, would constitute a crime falling within the jurisdiction of the criminal courts.
Parliament has never challenged, in general, the application of criminal law within the precincts of Parliament and has accepted that the mere fact that a crime has been committed within these precincts is no bar to the jurisdiction of the criminal courts.
In May 1812 John Bellingham was indicted, tried and convicted of the murder of the Prime Minister, Spencer Percival, at the entrance to the lobby of the House of Commons.
Bellingham was not a Member of Parliament, but it would have made no difference had he been.
Where a crime is committed within the House of Commons, this may well also constitute a contempt of Parliament.
The courts and Parliament have different, overlapping, jurisdictions.
The House can take disciplinary proceedings for contempt and a court can try the offender for the crime.
Where a prosecution is brought Parliament will suspend any disciplinary proceedings.
Conversely, if a Member of Parliament were disciplined by the House, consideration would be given by the Crown Prosecution Service as to whether a prosecution would be in the public interest.
In 1988 Mr Ron Brown MP damaged the mace in the course of a heated debate and declined to apologise.
The House exercised its penal powers in relation to both the damage to the mace and the lack of respect for the authority of the Chair.
The Director of Public Prosecutions subsequently halted an attempt to bring a private prosecution.
Erskine May records at pp 162 163 that in cases of breach of privilege which are also offences at law, where the punishment which the Commons has power to inflict would not be adequate to the offence, or where for any other reason the House has thought proceeding at law necessary, either as a substitute for, or in addition to, its own proceedings, the Attorney General has been directed to prosecute the offender.
It is of note that in two of the cases cited the Attorney General was directed to prosecute witnesses to parliamentary committees for wilful and corrupt perjury CJ (1860) 258 and CJ (1866) 239.
No instance is cited beyond the 19th century and a footnote records that on two occasions in the 1970s the House authorities informally invited the police to consider prosecuting those responsible for gross misbehaviour in the gallery.
Thus the House does not assert an exclusive jurisdiction to deal with criminal conduct, even where this relates to or interferes with proceedings in committee or in the House.
Where it is considered appropriate the police will be invited to intervene with a view to prosecution in the courts.
Furthermore, criminal proceedings are unlikely to be possible without the cooperation of Parliament.
Before a prosecution can take place it is necessary to investigate the facts and obtain evidence.
The powers of the police in respect of these activities are contained in the Police and Criminal Evidence Act 1984.
I am not aware that any court has had to consider the extent to which, if at all, the provisions of this Act apply within the Palace of Westminster.
What occurs is that Parliament permits the police to carry out their investigations within the precincts.
I shall give some examples of this cooperation which are of particular relevance in the context of these appeals.
On 3 April 2008 a meeting took place between the Chairman of the Committee on Standards and Privileges, the Parliamentary Commissioner for Standards and the Commissioner of Police of the Metropolis.
Following this an agreed statement was released: All parties agreed that, other than in the limited context of participation in proceedings in Parliament, Members of Parliament are in no different position in respect of alleged criminal behaviour than any other person.
The Chairman reiterated the Committees belief in the general principle that criminal proceedings against Members, where these are considered appropriate, should take precedence over the Houses own disciplinary proceedings.
The meeting discussed how the respective parties might coordinate their activities to ensure the effective delivery of this principle.
Where the Metropolitan Police receive information which suggests a Member of Parliament may have committed a criminal offence, they will take the decision on whether to institute inquiries on their own initiative, on the same basis as they would in any other case, and without regard to whether the same information had formed any part of a complaint to the Parliamentary Commissioner.
The Metropolitan Police undertook to inform the Parliamentary Commissioner in the normal course of events if they were considering initiating criminal inquiries into a Member, with a view to establishing whether the alleged conduct was also the subject of a complaint under the Code.
The Parliamentary Commissioner confirmed that he had regard, where appropriate, to the possibility of criminal behaviour when investigating complaints he received against Members of Parliament.
He would continue the practice in specific cases of liaising with the Metropolitan Police or other relevant force whenever he considered it appropriate to do so, initiating the process at the earliest opportunity.
All parties welcomed this.
If at any point in his investigation of a complaint, the Parliamentary Commissioner considers that there are sufficient grounds to justify reporting the matter to the police for them to consider a criminal inquiry, he confirmed that he would submit a recommendation to that effect to the Committee on Standards and Privileges who would decide whether such a report should be made.
Where this was done, the Chairman confirmed that the Committee would normally expect the Parliamentary Commissioner to suspend his inquiries until the question of possible criminal proceedings had been resolved.
The Parliamentary Commissioner and the Committee would follow similar procedures if informed by the police that they are considering initiating criminal inquiries into a matter which was also the subject of a complaint.
The Chairman also confirmed that if in the course of the Committees consideration of the outcome of the Commissioners investigation of a complaint it concluded that there were sufficient grounds to justify a report to the police, it would normally expect to advise the House accordingly, and defer reporting substantively on the complaint until the question of possible criminal proceedings had been resolved.
On 27 November 2008 the offices of the Conservative front bencher, Mr Damian Green, were searched by the police without a warrant.
On 8 December 2008 the Speaker issued a protocol setting out future procedures where the police sought to execute a search warrant in the House, the most material part of which provides as follows: 1.
Responsibility for controlling access to the precincts of the House has been vested by the House in me.
It is no part of my duties as Speaker to impede the proper administration of justice, but it is of equal concern that the work of the House and of its Members is not necessarily hindered. 2.
The precincts of Parliament are not a haven from the law.
A criminal offence committed within the precincts is no different from an offence committed outside and is a matter for the courts.
It is long established that a Member may be arrested within the precincts. 3.
In cases where the police wish to search within Parliament, a warrant must be obtained and any decision relating to the execution of that warrant must be referred to me.
In all cases where any Officer or other member of the staff of the House is made aware that a warrant is to be sought the Clerk of the House, Speakers Counsel, the Speakers Secretary and the Serjeant at Arms must be informed.
No Officer or other member of the staff of the House may undertake any duty of confidentiality which has the purpose or effect of preventing or impeding communication with these Officers. 4.
I will consider any warrant and will take advice on it from senior officials.
As well as satisfying myself as to the formal validity of the warrant, I will consider the precision with which it specifies the material being sought, its relevance to the charge brought and the possibility that the material might be found elsewhere.
I reserve the right to seek advice of the Attorney General and Solicitor General. 5.
I will require a record to be provided of what has been seized, and I may wish to attach conditions to the police handling of any parliamentary material discovered in a search until such time as any issue of privilege has been resolved.
On 30 September 2010 Mr Andrew Gibson, a budget officer in the Fees Office, was sentenced to 9 months imprisonment after pleading guilty to three counts of obtaining money transfers by deception.
He had drawn up false invoices in the names of three former Members of Parliament.
It is reasonable to assume that this prosecution was brought with the assistance of the House authorities.
The court was provided with information that on 12 October 2010 the Standards and Privileges Committee agreed that the Parliamentary Commissioner for Standards should report to the Metropolitan Police Service the conduct of Mr Denis MacShane MP in relation to claims for expenses.
According to the procedures agreed between the Committee, the Commissioner and the Metropolitan Police an inquiry by the Commissioner into a complaint against Mr MacShane was suspended until the question of possible criminal proceedings was resolved.
In the course of the hearing of these appeals the court was informed that, with the consent of the defendants, the Fees Office had provided the prosecution with documentation in relation to the defendants claims for allowances and expenses.
Conclusions
Parliament by legislation and by administrative changes has to a large extent relinquished any claim to have exclusive cognisance of the administrative business of the two Houses.
Decisions in relation to matters of administration are taken by parliamentary committees and it has been common ground before the Court that these decisions are protected by privilege from attack in the courts.
The 1999 Report distinguishes, however, between such decisions and their implementation, expressing the view that the latter is not subject to privilege.
I consider that view to be correct.
Where the House becomes aware of the possibility that criminal offences may have been committed by a Member in relation to the administration of the business of Parliament in circumstances that fall outside the absolute privilege conferred by article 9, the considerations of policy to which I have referred at para 61 above require that the House should be able to refer the matter to the police for consideration of criminal proceedings, or to cooperate with the police in an inquiry into the relevant facts.
That is what the House has done in relation to the proceedings brought against the three defendants.
The area of activity to which these prosecutions relate is administrative.
The payment of allowances and expenses had until recently been entrusted to the Fees Office by the Commission, a body set up for the purposes of administration see paras 9 to 11 above.
These administrative tasks are now performed by the Independent Parliamentary Standards Authority, set up under the Parliamentary Standards Act 2009.
The House has asserted a disciplinary jurisdiction over claims that have been made for allowances and expenses and, to that end, the Members Estimate Committee set up a review of such claims under Sir Thomas Legg.
The House has not, however, asserted exclusive cognisance, or jurisdiction, in respect of such claims.
On the contrary, on 20 July 2009 the Committee excluded from the claims referred to Sir Thomas any that were under investigation by the police.
Even if the House were not co operating with the prosecuting authorities in these cases, I do not consider that the court would be prevented from exercising jurisdiction on the ground that they relate to matters within the exclusive cognisance of Parliament.
If an applicant sought to attack by judicial review the scheme under which allowances and expenses are paid the court would no doubt refuse the application on the ground that this was a matter for the House.
Examination of the manner in which the scheme is being implemented is not, however, a matter exclusively for Parliament.
It was not suggested that Members have a contractual entitlement to allowances and expenses, but if they were to have such contractual rights, I see no reason why they should not sue for them.
If a question were raised as to whether allowances and expenses were taxable, the court would be entitled to examine the circumstances in which they were paid.
Equally there is no bar in principle to the Crown Court considering whether the claims made by the defendants were fraudulent.
This is not to exclude the possibility that, in the course of a criminal prosecution, issues might arise involving areas of inquiry precluded by parliamentary privilege, although that seems unlikely having regard to the particulars of the charges in the cases before us.
For these reasons I am satisfied that neither article 9 nor the exclusive cognisance of the House of Commons poses any bar to the jurisdiction of the Crown Court to try these defendants.
That is why I decided that each appeal should be dismissed.
LORD RODGER
The appellants are three former Members of Parliament who are charged with false accounting, contrary to section 17(1)(b) of the Theft Act 1968 (the Theft Act).
The first count on the indictment against Mr Morley, for example, is in these terms: STATEMENT OF OFFENCE False accounting, contrary to section 17(1)(b) of the Theft Act 1968.
PARTICULARS OF OFFENCE ELLIOT MORLEY, between 1 April 2004 and 28 February 2006, dishonestly, with a view to gain for himself or with intent to cause loss to another, in furnishing information for the purpose of making allowance claims, produced or made use of documents required for an accounting purpose, namely 19 Form ACA2 claim forms, which to his knowledge were or may have been misleading, false or deceptive in a material particular, in that they stated he was paying 800 per month in mortgage interest, when in fact he was paying a lesser amount.
The appellants have not suggested that the indictments do not disclose an offence under English law or that the counts are otherwise defective.
The argument which has eventually brought these appeals to this Court arises out of an aspect of the indictments which does not emerge immediately, even from the particulars of the offences: at the relevant time Mr Morley and the other appellants were MPs.
The reference to Form ACA2 is, however, a reference to a form which MPs used for submitting claims for allowances to the Fees Office of the House of Commons.
When submitting such claims MPs had to sign a declaration to the effect that they had incurred the costs in question wholly, exclusively and necessarily to enable [them] to stay overnight away from [their] only or main home for the purpose of performing [their] duties as a Member of Parliament.
The argument for the appellants is that the counts refer to the submission of claims by MPs to an office of the House of Commons and that, in these circumstances, a prosecution is precluded by parliamentary privilege, by reference either to article 9 of the Bill of Rights or to the exclusive jurisdiction of Parliament to regulate its own affairs.
As it existed at the relevant time, the system for payment of Members allowances had been created by, and continued to rest solely on, Resolutions of the House of Commons.
A request for the necessary funds to pay the allowances was included in the Members Estimate which was laid by the Treasury each year as part of the Governments Main Supply Estimates.
The Members Estimate Committee was responsible for oversight of the expenditure on the allowances.
The Committee on Members Allowances advised the Members Estimate Committee on this matter.
In his role as Accounting Officer, the Clerk of the House of Commons was responsible for compiling the necessary accounts and was accountable to the House for the money spent.
The Members Estimate Audit Committee advised the Clerk of the House in this connexion.
The various allowances available to Members were set out in the Green Book, on which the Committee on Members Allowances advised the Speaker, the Members Estimate Committee and the Leader of the House.
Moreover, if any question arose as to the application of the rules in the Green Book, a Member could refer it to the Committee on Members Allowances, from which there was an appeal to the Members Estimate Committee.
The administration of the system of allowances (including payment of the allowances) was handled by an office, usually referred to as the Fees Office, within the Operations Directorate.
If the Fees Office refused a Members claim to an allowance, the Member could appeal to the Committee on Members Allowances and from there to the Members Estimate Committee.
A further point to notice about the indictments is that the particulars of the offences do not specify where the MPs are alleged to have been when they submitted the claims.
For all we know, they could have completed the forms at home, whether in England or in Scotland, and sent them in by post.
Equally, they could have completed the forms while in the House of Commons and have submitted them in person to the Fees Office.
It does not matter since, on either view, the misleading information would have been furnished to the Fees Office of the House.
But, to test the point taken by the appellants, it is best to assume that the allegation is that they completed the forms in the House of Commons and submitted them in person.
So all stages of the alleged offence would have taken place within the precincts of the House of Commons.
The Theft Act extends to England and Wales.
In other words, it forms part of the law of England and Wales.
The Houses of Parliament and their dpendances are in England and so the criminal law of England applies to what is done there.
The most famous illustration of this elementary point is, perhaps, the murder of the Prime Minister, Mr Spencer Percival, in the lobby of the House of Commons in 1812.
John Bellingham was arrested, prosecuted, tried for murder at the Old Bailey, convicted and executed all according to the common law of England.
If the assassin had been a fellow MP, then by the law of England he too would have committed murder.
The same would have applied if the MP had assassinated the Prime Minister in the chamber of the House of Commons.
Less dramatically, if a Member of Parliament were to steal money from a fellow Members wallet in a room in the House of Commons or from the till in the Members Dining Room, he would commit theft under section 1 of the Theft Act.
Similarly, if a Member intentionally damaged one of the statues of former Prime Ministers in the lobby of the House of Commons, he would commit criminal damage under section 1 of the Criminal Damage Act 1971.
Equally to come to the present cases if a Member of Parliament dishonestly, with a view to gain for himself, submitted a claim form which to his knowledge was false in a material particular, the law of England would apply.
The Member would commit an offence under section 17(1) of the Theft Act, even if he completed the form in the House of Commons and submitted it in person to the Fees Office.
As already noted, the appellants say, however, that their prosecution in the Crown Court for this offence is precluded by parliamentary privilege, by reference either to article 9 of the Bill of Rights or to the exclusive jurisdiction of Parliament to regulate its own affairs.
An invocation of parliamentary privilege is apt to dazzle lawyers and judges outside Parliament.
In Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 660, Lord Brougham LC warned courts of justice against acceding to claims of privilege the instant they hear that once magical word pronounced.
A few years later, in Stockdale v Hansard (1839) 9 Ad & E 1, 112, Lord Denman CJ remarked that the privileges are well known, it seems, to the two Houses, and to every Member of them, as long as he continues a Member; but the knowledge is as incommunicable as the privileges to all beyond that pale.
Happily, it is unnecessary on this occasion to penetrate too deeply into these mysteries if mysteries they be.
The appellants formulation of their argument might seem to suggest that article 9 of the Bill of Rights deals with matters that would not necessarily fall within the exclusive jurisdiction of Parliament to regulate its own affairs.
A moments reflection shows, however, that, unless a matter did fall within the exclusive jurisdiction of Parliament with the result that it did not fall within the legitimate jurisdiction of the ordinary courts of the land, whether civil or criminal, or of any other body article 9 could not itself legitimately purport to exclude all consideration of the matter outside Parliament.
In other words, article 9 cannot be intended to apply to any matter for which Parliament cannot validly claim the privilege of exclusive cognizance.
Indeed, as the distinguished Clerk of the House of Commons, Sir Gilbert Campion (later Lord Campion), pointed out in his Memorandum to the Select Committee on the Official Secrets Acts in 1939, the relevant words in the Preamble to the Bill of Rights make this clear: Whereas the late King James the Second by the Assistance of diverse evill Councellors Judges and Ministers imployed by him did endeavour to subvert and extirpate the Protestant Religion and the Lawes and Liberties of this Kingdome By Prosecutions in the Court of Kings Bench for Matters and Causes cognizable onely in Parlyament and by diverse other Arbitrary and Illegall Courses And thereupon the said Lords Spirituall and Temporall and Commons pursuant to their respective Letters and Elections being now assembled in a full and free Representative of this Nation takeing into their most serious Consideration the best meanes for attaining the Ends aforesaid Doe in the first place (as their Auncestors in like Case have usually done) for the Vindicating and Asserting their auntient Rights and Liberties, Declare (Emphasis added).
Sir Gilbert added: The mischief the statute was intended to remedy was therefore the drawing into examination in inferior courts of matters cognizable only in Parliament.
See the Committees Report, p 24.
Therefore, even though the appellants put their case by reference to both article 9 and the exclusive jurisdiction of the House of Commons, in truth there is really only one basic question: does the matter for which the appellants are being prosecuted in the Crown Court fall within the exclusive jurisdiction or cognizance of Parliament or, more particularly, of the House of Commons? If so, then the appellants must prevail; if not, neither article 9 of the Bill of Rights nor any other doctrine gives them a right to have the prosecution stopped on the ground of parliamentary privilege.
The expression, the High Court of Parliament, makes the point that Parliament has a certain power of judicature as do the two Houses in their separate capacities.
In exercising this jurisdiction the Houses apply the law and custom of Parliament (lex et consuetudo parliamenti).
Cf Kielley v Carson (1843) 4 Moo PC 63, 89, per Parke B.
The present case concerns the House of Commons.
Since about the time of Floyds Case (1621) the Commons have accepted that they have no power to punish except for a contempt of their House: F W Maitland, The Constitutional History of England (1908), p 245.
Obviously, therefore, the House neither has, nor claims to have, any power to try anyone for an offence under English criminal law.
If, for example, someone steals money within the precincts of the House of Commons, the House cannot try him for the contravention of the Theft Act: only the ordinary courts can do that.
So, when Mr Andrew Gibson, a budget officer in the Fees Office, obtained the transfer of money by submitting false invoices to the Office in the names of three former MPs, he was prosecuted for a contravention of section 15A of the Theft Act and pleaded guilty at Southwark Crown Court, where he was sentenced to nine months imprisonment on 30 September 2010.
In such cases the most that the House itself could do would be to treat the conduct as a contempt of the House and, in the exercise of its power of judicature, punish the offender, not for the criminal offence, but for his contempt of the House.
Of course, the power to treat conduct as contempt of the House is potentially open to abuse and it was in fact abused in the past, to restrain and punish a wide variety of acts to which MPs happened to take exception.
In Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 658 660, Lord Brougham LC denounced past abuses.
A catalogue of examples is attached to the report of the speech of counsel for the plaintiff in Stockdale v Hansard (1839) 9 Ad & E 1, 12 13.
It is not suggested that such abuses would readily occur nowadays.
On the contrary, todays House of Commons is unlikely to use its power to take proceedings for contempt against a thief or fraudster operating within its precincts if only because the police and the ordinary criminal law and courts are much better adapted to dealing with such cases.
In former times, when the House rightly considered that a matter could be better dealt with by the ordinary courts than by the House under its contempt jurisdiction, it either ordered the Attorney General to institute criminal proceedings in the appropriate court or presented an address to the Sovereign, asking for such proceedings to be commenced.
See the examples in the Second Report from the Select Committee appointed to consider of the Proceedings had, and to be had, in respect of the several papers signed Francis Burdett, 15 June 1810, in J Hatsell, Precedents of Proceedings in the House of Commons vol 1, 2nd ed (1818), pp 294 295 and 302 303; and in Erskine May, Parliamentary Practice, 23rd ed (2004), p 163 n 1.
Today, the House authorities would presumably contact the police and leave the matter in their hands.
In Mr Gibsons case, for example, Scotland Yard was called in as a result of information uncovered in the course of Sir Thomas Leggs investigation of MPs expenses.
Therefore the mere fact that the House could treat a matter as one of contempt does not mean that the House must do so.
On the contrary, if the conduct in question would also constitute an offence under the ordinary criminal law of England, then the individual can be prosecuted in the criminal courts in the usual way.
The jurisdiction of the House to deal with the matter as one of contempt overlaps with the jurisdiction of the ordinary courts to deal with it as a criminal offence.
In short, the matter does not fall within the exclusive cognizance of Parliament.
The examples I have given concerned offenders, hypothetical and actual, who were not Members of Parliament.
But, in principle, the same must apply to MPs who commit an ordinary crime, such as theft.
Admittedly, it is possible to find passages in the authorities which are so widely stated that they might seem to imply that even an ordinary crime committed by a Member of Parliament within the precincts of the House of Commons would fall within the exclusive cognizance of the House.
For example, in his Commentaries on the Laws of England, 17th ed (1814), vol 1, Bk 1, chap 2, pp 158 159, under reference to Cokes Institutes, Blackstone says that the whole of the law and custom of parliament has its original from this one maxim: that whatever matter arises concerning either house of parliament, ought to be examined, discussed, and adjudged in that house to which it relates, and not elsewhere.
Similarly, in Stockdale v Hansard (1839) 9 Ad & E 1, 114, referring to the two Houses of Parliament, Lord Denman CJ says that whatever be done within the walls of either assembly must pass without question in any other place.
These very generalised statements have, however, to be seen in the context of the actual practice of the House.
Despite their wide terms, as pointed out in para 107 above, it was, for example, the practice of the House of Commons to direct the Attorney General to prosecute someone who was alleged to have committed perjury when giving evidence to a committee of the House: James Welsh (1860) CJ 258; Henry Chambers (1866) CJ 239.
More particularly, however, for centuries the House of Commons has not claimed the privilege of exclusive cognizance of conduct which constitutes an ordinary crime even when committed by a Member of Parliament within the precincts of the House.
In this context the expression ordinary crime occurs in the judgment of Stephen J in Bradlaugh v Gossett (1884) 12 QBD 271, 283, where he said: I know of no authority for the proposition that an ordinary crime committed in the House of Commons would be withdrawn from the ordinary course of criminal justice.
Although his use of the expression has been criticised, Stephen J was clearly drawing a distinction between an ordinary crime (such as theft) and a crime (such as sedition) which a Member of Parliament committed by saying something in the exercise of his freedom of speech in the House.
What the Member said in the House would fall within the exclusive cognizance of the House and would be protected by article 9 of the Bill of Rights.
The House of Commons alone could consider the matter and decide what sanction, if any, should be applied to the MP.
So he could not be prosecuted for the crime in the ordinary courts and, if any attempt were made to prosecute him, the House would intervene to stop the prosecution in order to protect the privilege of freedom of speech and debate of the House itself and, simultaneously, the particular Members exercise of that privilege.
In expressing the view that a Member of Parliament could be prosecuted for an ordinary crime committed in the House of Commons, Stephen J referred to the case of Sir John Elliot (1629) 3 St Tr 293.
In 1629 Sir John Elliot and two others were prosecuted in the Kings Bench for uttering seditious words in the House of Commons and for laying violent hands on the Speaker.
The defendants took a plea to the jurisdiction of the court because these offences are supposed to be done in parliament, and ought not to be punished in this court, or in any other, but in parliament.
The court overruled the plea and the defendants were convicted.
In 1667, after the Civil War and the Restoration, a report of the trial was published and came to the notice of the House of Commons: (1629) Cro Car 181.
The House resolved that the judgment had been illegal and against the freedom and privilege of Parliament.
A conference was arranged with the House of Lords.
Mr John Vaughan (later Sir John Vaughan, the Chief Justice of the Common Pleas) spoke on behalf of the Commons.
He argued, at col 317, that the judges had craftily dealt with the allegations of seditious speech and of violence to the Speaker together: So that perhaps whatsoever was criminal in the actions might serve for a justification of their rule, and might make it seem in time to become a precedent, and a ruled case against the Liberty of Speech in Parliament, which they durst not singly and bare faced have done.
Mr Vaughan went on to say, at col 318: [I]t is very possible the Plea of those worthy persons, Denzil Hollis, Sir John Elliot, and the rest, was not sufficient to the jurisdiction of the court, if you take in their criminal actions altogether; but, as to the words spoken in parliament, the court could have no jurisdiction while this act of 4 Hen 8 is in force, which extends to all members that then were (or ever should be,) as well as Strode; and was a public general law, though made upon a private and a particular occasion.
On a writ of error at the instance of Denzil Hollis (by now, Lord Hollis), the House of Lords held, at cols 333 334, that the original judgment should be reversed.
It can be inferred from the Report by the Chief Justice (Sir John Kellynge), at col 332, that the House criticised the original decision on essentially the same basis as had been advanced by Mr Vaughan, viz, that the judges had treated the allegation of seditious words and the allegation of violence to the Speaker together.
In the Chief Justices view, the allegations should have been considered separately since, even if an allegation of violent trespass to the person could or should perhaps (forte) be heard and decided in the Kings Bench, nevertheless whatever is said and published in the House of Commons by a serving Member of the House should not be heard or decided anywhere else than in Parliament.
Although, as Stephen J noted in Bradlaugh v Gossett (1884) 12 QBD 271, 284, the House of Lords was careful not to express a concluded view on the matter, the indication that the charge relating to the violence to the Speaker could have been tried in the Kings Bench is pretty clear.
Indeed, it was under reference to this case that Maitland was able to say, We may take it to be law that an ordinary crime, such as theft committed by a Member in the House, might be punished in the ordinary courts in the ordinary way: Constitutional History of England, p 321.
Moreover, the simple fact is that, since 1667, the House has never claimed a privilege of exclusive cognizance in a case where a Member has committed an ordinary crime in the House or its precincts.
The Attorney General (Sir Thomas Inskip KC) drew attention to this in his argument in R v Graham Campbell, Ex p Herbert [1935] 1 KB 594, 597 598.
He submitted that it showed that there was nothing to bar a prosecution in such a case: Coke was expressing an opinion in support of the view now contended for when he said that the exercise of the power of judicature of the House of Commons was best understood by reading the judgments and records of Parliament at large, . and the book of the clerk of the House of Commons, which is a record . : see Institutes, Part IV, c 1, Of Judicature.
Admittedly, a person committing an ordinary felony or misdemeanour, even on the very steps of the Speakers chair, would not be protected by the privilege of the House, but would be amenable to the jurisdiction of the criminal courts.
That, however, is merely because the House has never claimed the right to adjudicate on such matters.
Adapting the words of Coke, there is no record of such a privilege having been exercised, and it can, therefore, be taken not to exist.
That remains the position to this day.
I have therefore no doubt that, if the offences with which the appellants are charged are to be regarded as ordinary crimes, then even assuming that they are alleged to have been committed entirely within the precincts of the House the appellants can be prosecuted in the Crown Court.
The only question, therefore, is whether there is any aspect of the offences which takes them out of the category of ordinary crime and into the narrower category of conduct in respect of which the House would claim a privilege of exclusive cognizance.
In theory, even though the allegations are of false accounting, that could be the position.
In Ex p Wason (1869) LR 4 QB 573, for example, an information alleged that three members of the House of Lords had entered into a conspiracy.
Conspiracy is, in itself, an ordinary crime.
But it was held that a charge of conspiracy to make statements which the members of the House knew to be untrue, in order to frustrate a petition to the House, was not cognizable by the criminal law since it concerned statements to be made, or actually made, in the House.
That was considered to take the alleged conspiracy into an area of conduct which would be cognizable only by the House of Lords itself.
In the present cases the charges arise out of claims for allowances that the appellants are alleged to have submitted to the Fees Office.
As explained at paras 96 97 above, at the time, the system for claiming and paying allowances rested on Resolutions of the House and was supervised by the Members Estimate Committee, with the assistance of the Committee on Members Allowances.
It was very much a matter over which the House exercised exclusive control, except in relation to the laying of the relevant estimate.
Moreover, a system of allowances can rightly be seen as providing a necessary support to Members in carrying out all their parliamentary activities, including their core activities.
It is therefore quite possible that the rules of the system would have fallen within the area for which the House would claim exclusive cognizance.
And it may be that the same could have been said of decisions by the Fees Office and, on appeal, by the supervising Committees, as to a particular claim by a Member for payment of an allowance.
A challenge to any of these matters in the ordinary courts by a Member or by anyone else might well have called into question decisions taken by Committees of the House, or on their behalf, on a matter which was intended to be under the exclusive control and cognizance of the House and its Committees.
Obviously, the offences which the appellants are alleged to have committed could not have been committed if the House of Commons had not established and operated the system for payment of Members allowances.
But it is equally true that a hypothetical Member could not steal from the till in the Members Dining Room if the Administration Committee did not consider that the Dining Room should continue to operate and to provide a service to Members.
The Dining Room merely provides the setting for the theft, however.
Prima facie, therefore, a charge against a Member of theft from the till would not call into question any decision of that Committee or of the House in relation to the Dining Room or other refreshment services.
So the alleged conduct would not, in my view, fall within the area for which the House would claim the privilege of exclusive cognizance.
A theft of that kind would be an ordinary crime which could be prosecuted in the ordinary courts.
Doubtless, the House could also treat it as a contempt of the House, but this would be in the exercise of an overlapping, not an exclusive, jurisdiction.
Similarly, in the present case, the appellants alleged conduct could well be regarded as an affront to the system of Members allowances established by the House and, so, as a contempt of the House, which the House could punish in the exercise of its power of judicature.
But even though the alleged offences presuppose the existence of the allowances system, nothing in the particulars in the indictments indicates, or even suggests, that the prosecution of the charges would raise any issue as to decisions of the House or of its Committees, or of any officers or employees acting on their behalf, as to the system or its operation.
Nor would the prosecution touch on any other core activities of Members of the House which the privilege of exclusive cognizance exists to protect their right, for example, to debate, to speak, to vote, to give notice of a motion, to present a petition, to serve on a committee, and to present a report to the House.
In short, there is nothing in the allegations against the appellants which relates in any way to the legislative or deliberative processes of the House of Commons or of its Members, however widely construed.
The charges against the appellants are simply charges that they have committed the ordinary crime of false accounting in circumstances where, it so happens, the allegedly misleading information was furnished to the Fees Office of the House of Commons.
The allowances system merely provides the setting for the alleged offences, which are ordinary crimes.
Therefore they can be prosecuted in the Crown Court.
Again, the potential jurisdiction of the House in contempt is an overlapping, not an exclusive, jurisdiction.
The very fact that the House authorities co operated with the police in the investigations which led to the charges against the appellants suggests, at least, that the House authorities do not see the allegations as falling into the category in respect of which the House would claim the privilege of exclusive cognizance.
The fact that the Speaker has not intervened to assert the privilege points in the same direction.
If the privilege of the House to exercise exclusive cognizance in cases of this kind had previously been established, then the appellants might have been able to assert that privilege, even if the House authorities had chosen not to: Wellesley v Duke of Beaufort (1831) 2 Russ & M 639, 655, per Lord Brougham LC.
It is unnecessary to express a view on this point, however, since the position in the present cases is different: the appellants are claiming a privilege which the House has not asserted in the past in these circumstances and which it has not asserted on this occasion.
The Court is entitled to notice, and to draw an inference from, that clamant silence.
I am accordingly satisfied that the prosecution does not infringe article 9 of the Bill of Rights by impeaching or questioning the freedom of speech, the freedom of debates or the freedom of proceedings of the House or of its Members.
I am equally satisfied that the prosecution is not precluded on any other basis relating to the Commons privilege of exclusive cognizance.
Of course, the Court can judge the situation only as it stands at present.
If the trial goes ahead, it may turn out that, contrary to expectations, some issue arises which is said to touch on the core activities of MPs or of the House itself.
If that were actually so, the proceedings might be trespassing on an area for which the House would claim exclusive cognizance and to which article 9 would apply.
In that event the Speaker or the House authorities might seek to intervene.
It would be up to the presiding judge, with the assistance of counsel, to decide what should be done.
In the meantime, however, there is nothing on the face of the indictments which would justify this Court in preventing the appellants trial from proceeding.
For these reasons, which I understand to coincide in substance with those advanced by Lord Phillips, I favoured dismissing the appeals.
LORD HOPE, LADY HALE, LORD BROWN, LORD MANCE, LORD
COLLINS, LORD KERR
We have read the judgments of Lord Phillips and Lord Rodger.
We agree with them and for the reasons they give we too considered that these appeals should be dismissed.
LORD CLARKE
My reasons for agreeing that these appeals should be dismissed were those given by Lord Phillips and, subject to what follows, by Lord Rodger.
I add a few words of my own limited to the second type of privilege relied upon, which is known as exclusive cognisance.
It is to my mind plain from Lord Phillips analysis of this principle that it is a privilege which belongs to Parliament and not to individual members.
This is I think clear from the fact that, unlike the privilege provided for in article 9 of the Bill of Rights, Parliament can waive or relinquish it.
It seems to me to follow logically from that conclusion that it is for Parliament, and not the individual member to rely upon it.
In his paras 79 to 83 Lord Phillips has demonstrated that Parliament has never asserted the privilege in cases of the kind at present before the court.
He then gives examples based on these and similar cases in recent times at paras 84 to 88.
In the light of the practice of Parliament over many years he then concludes in paras 89 to 92 that Parliament has never asserted the privilege in such cases and, subject to the possibility of an Act of Parliament conferring such a privilege, that it is not now open to it to do so.
I agree with him that it follows that it is not open to the appellants to do so.
Even if it were open to Parliament to rely upon the privilege in cases of this type, since Parliament has the right to waive or relinquish the right to do so, I do not think that an individual member could rely upon the privilege if Parliament has waived or relinquished the right in the particular case.
It appears to me that, on the basis of the facts stated by Lord Phillips between paras 84 to 91, Parliament has waived or relinquished any right it might otherwise have had to claim the privilege.
Having referred the investigation of allegations such as those made against the appellants to the police with a view to possible prosecution and having co operated with the police, I do not see how Parliament could now assert the exclusive cognisance relied upon.
In these circumstances it seems to me that it is not open to the appellants as individual members to do so.
I recognise that this conclusion may be inconsistent with the statement made by Lord Brougham LC in Wellesley v Duke of Beaufort (1831) 2 Russ & M 639 at 655, which is referred to by Lord Rodger at para 124 above.
Lord Broughams statement, which did not form part of the judgment and was no more than a view expressed in the course of the argument, was in these terms: If a Court of Law or of Equity, upon due deliberation, entertains an opinion that a Member of either House of Parliament has privilege of Parliament, that Court is, in my judgment, bound to give him the benefit of his privilege, and to give it him with all its incidents, even although the House to which he belongs abandons it as a claim of right; for a Court knows nothing judicially of what takes place in Parliament till what is there done becomes an Act of the Legislature.
That principle may apply to the article 9 privilege but I do not think that it can apply to the exclusive cognisance privilege.
It is inconsistent with Lord Phillips conclusion at para 63 above that exclusive cognisance can be waived or relinquished by Parliament.
Based on p 105 of the 23rd edition of Erskine May on Parliamentary Practice, Lord Phillips refers to a 1980 resolution which permitted reference to be made in court to certain Parliamentary papers which had up to then been subject to a claim for exclusive cognisance.
It appears to me to follow from those statements that, where Parliament has waived or relinquished the privilege in respect of a particular matter, no individual member can rely upon it.
In so far as Lord Brougham expressed a different view, I would not accept it.
The reason he gives sounds odd to modern ears.
I do not think that it can properly be said today that a court knows nothing judicially of what takes place in Parliament till what is there done becomes an Act of the Legislature.
In these circumstances I would not accept that Lord Broughams statement, which was after all only made arguendo, is correct today.
| UK-Abs | These appeals concern whether the criminal courts are prevented from trying certain former Members of Parliament on charges relating to expenses claims on the basis that the proceedings would infringe parliamentary privilege.
The three Appellants, Mr Morley, Mr Chaytor and Mr Devine have been committed for trial in the Crown Court on charges of false accounting, contrary to section 17(1)(b) of the Theft Act 1968.
The charges relate to claims for parliamentary expenses and are alleged to have been committed when each Appellant was a serving member of the House of Commons.
The claims concerned mortgage payments, IT services, rent for accommodation, cleaning and maintenance services, and the supply of stationery.
A fourth defendant, Lord Hanningfield, who is a member of the House of Lords, faces similar charges.
The system for payment of Members of Parliaments allowances and expenses, as it existed at the relevant time, was created by Resolutions of the House of Commons and overseen by the Members Estimate Committee.
The Fees Office received and considered claim forms and made payments in relation to claims.
The claim forms which are the subject matter of all the charges were submitted to the Fees Office and contained a declaration, signed by the Member, confirming that the costs were incurred exclusively for the purpose of performing duties as a Member of Parliament.
Each Appellant is facing a separate trial but all have raised a common point of law, namely that criminal proceedings cannot be brought because they would infringe parliamentary privilege.
The claim to privilege has two bases.
The first is Article 9 of the Bill of Rights 1689, which provides: That the Freedome of Speech and Debates or Proceedings in Parlyament ought not to be impeached or questioned in any Court or Place out of Parlyament.
The second is described alternatively as the exclusive cognisance or exclusive jurisdiction of Parliament and refers to the right of each House to manage its own affairs without interference from the other or from outside Parliament.
It is a privilege which is wider than, and embraces, Article 9.
A single preparatory hearing was held to consider the point of law.
The judge ruled against the Appellants and Lord Hanningfield, and the Court of Appeal upheld that decision.
The Appellants appealed to the Supreme Court.
Lord Hanningfield did not appeal but was granted permission to intervene on a limited basis.
On 10 November 2010 the Supreme Court ordered that each of the three appeals be dismissed, with reasons to follow.
The Court now delivers those reasons.
The Supreme Court unanimously dismisses the appeals.
Lord Phillips (President) and Lord Rodger give the lead judgments.
The Court holds that neither Article 9 nor the exclusive jurisdiction of the House of Commons poses any bar to the jurisdiction of the Crown Court to try the Appellants.
The issue under Article 9 was whether making claims for parliamentary expenses fell within the phrase proceedings in Parliament.
The Court held that conduct of a Member is not privileged merely because it occurs within the House of Commons.
The principal matter to which Article 9 is directed is freedom of speech and debate in the Houses of Parliament and parliamentary committees.
In considering whether actions outside the Houses and committees fall within parliamentary proceedings because of their connection to them, it is necessary to consider the nature of that connection and whether, if such actions do not enjoy privilege, this is likely to impact adversely on the core or essential business of Parliament.
On this basis, submission of expenses claims does not qualify for the protection of privilege.
Scrutiny of claims by the courts will not inhibit freedom of speech or debate.
The only thing that it will inhibit is the making of dishonest claims: [48].
Parliament has expressed the same conclusion and although the extent of parliamentary privilege is ultimately a matter for the courts, it is one on which the courts will pay careful regard to the views of Parliament: [16]; [59].
There are also good policy reasons for giving Article 9 a narrow ambit, namely that its protection is absolute and, where it applies, it denies redress to those injured by civil wrongdoing and prevents Members being prosecuted for conduct which is criminal, despite the fact that Parliament has only limited penal powers of its own: [61].
On the exclusive jurisdiction issue, Parliament has to a large extent relinquished any claim to have exclusive jurisdiction over the administrative business of the two Houses.
Nor does Parliament assert an exclusive jurisdiction to deal with criminal conduct within the walls of Parliament, even where it relates to or interferes with proceedings in committee or the Houses.
The courts and Parliament have different, overlapping, jurisdictions.
Parliament can hear proceedings for contempt of Parliament and a court can try the offender for the crime.
The area of activity to which the present prosecutions relate is administrative: it concerns the implementation of the expenses scheme, not the decisions of parliamentary committees in respect of the scheme itself.
The expenses scheme merely provides the setting for the alleged offences and there is nothing in the allegations against the Appellants which relates to the core activities of Parliament, namely the legislative and deliberative processes, however widely construed.
The House of Commons has asserted a disciplinary jurisdiction over expenses claims and has set up a review of such claims under Sir Thomas Legg.
It has not, however, asserted exclusive jurisdiction.
On the contrary, it has co operated with the police investigation and excluded from the claims referred to Sir Thomas Legg any that are under investigation by the police: [89] [92]; [122] [123].
For these reasons, the Court held that the prosecutions neither infringed Article 9 nor impinged upon the exclusive jurisdiction of Parliament.
|
It is now well established that an employment contract is subject to an implied term that the employer and employee may not, without reasonable and proper cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
In Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518, the claimant sought to rely on an alleged breach of this implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for damages for the manner of his dismissal.
But the House of Lords refused to extend the implied term to allow an employee to recover damages for loss arising from the manner of his dismissal because (per all members of the House except Lord Steyn) such a development of the law would be contrary to the intention of Parliament that there should be such a remedy, but that it should be limited by the statutory code regarding unfair dismissal now to be found in the Employment Rights Act 1996 (the 1996 Act).
Some regarded the decision in Johnson as contentious: see, for example, Deakin and Morris Labour Law, 5th ed (2009), at para 5 45.
At para 36 of Mr Bothams written case, Mr Reynold QC invited the court to depart from Johnson, but this suggestion was not developed in the written case or in oral argument.
Indeed, it was reaffirmed by the majority of the House of Lords in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2004] UKHL 35; [2005] 1 AC 503 (Eastwoods case).
Loss arising from the unfair manner of a dismissal is not therefore recoverable as damages for breach of the implied term of trust and confidence: it falls within what has been called the Johnson exclusion area.
The principal questions that arise in these two appeals are (i) whether the reasoning in Johnson applies so as to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and if so (ii) whether the claims made by Mr Edwards or Mr Botham fall within the Johnson exclusion area.
It is submitted on behalf of Mr Edwards and Mr Botham that the first question should be answered in the negative and that their claims for damages should be assessed in accordance with orthodox common law principles.
In Mr Edwards case, the Court of Appeal (Ward, Lloyd and Moore Bick LJJ) accepted this submission and in Mr Bothams case, Slade J did not.
By a consent order dated 31 August 2010, the Court of Appeal (Pill LJ) reversed the decision of Slade J.
The case of Mr Edwards
The Chesterfield Royal Hospital NHS Foundation Trust (the Trust) was established on 1 January 2005 as an NHS Foundation Trust and acquired the rights and liabilities of its predecessor, the Chesterfield and North Derbyshire Royal Hospital NHS Trust.
Mr Edwards had been employed by the Trusts predecessor as a consultant trauma and orthopaedic surgeon pursuant to a contract which incorporated the terms of its letter to Mr Edwards dated 2 June 1998.
Para 2 of the letter referred to the Trust terms and conditions of employment copies of which could be seen at the Medical Personnel Office.
Para 8 stated that the employment was subject to three months notice on either side.
Para 13 stated that in matters of professional misconduct, Mr Edwards would be subject to a separate procedure which had been negotiated and agreed by the Local Negotiating Committee.
By letter dated 22 December 2005, disciplinary proceedings were instituted against Mr Edwards arising from allegations that he had undertaken an inappropriate internal examination of a female patient and had then denied that the examination had taken place.
It is his case that the applicable procedure at that time was that set out in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
Annex B to HC(90)9 sets out in detail the procedures which authorities should use when handling serious disciplinary charges, for example, where the outcome of disciplinary action could be the dismissal of the medical or dental practitioner concerned (para 1).
A disciplinary hearing was held on 9 February 2006.
On 10 February, the disciplinary panel decided that Mr Edwards should be summarily dismissed from his employment on grounds of gross personal and professional misconduct.
This decision was confirmed by a letter dated 16 February which set out in detail the panels findings and the reasons for its decision.
Mr Edwards appeal against this decision was dismissed on 24 April 2006.
On 12 May 2006, Mr Edwards started unfair dismissal proceedings before the Sheffield Employment Tribunal.
The matters on which he relied as giving rise to the alleged unfairness of his dismissal included that the disciplinary panel had been inappropriately constituted.
His case was that his contract of employment entitled him to have a panel including a clinician of the same medical discipline as himself and a legally qualified chairman.
The disciplinary hearing of 9 February was chaired by the Trusts medical director who was not legally qualified and the panel did not include an orthopaedic or trauma surgeon.
Mr Edwards had always maintained that, if the panel had been properly constituted, it would not have made incorrect findings and he would not have been dismissed.
Prior to the pre hearing review before the tribunal, Mr Edwards withdrew his claim for unfair dismissal and it was dismissed by order of the tribunal on 17 August 2006.
The Trust referred the complaints against Mr Edwards to the General Medical Council (GMC).
The GMCs Investigation Committee decided not to refer the matter to a Fitness to Practise Panel and the complaint was closed.
In the result, Mr Edwards was not subjected to any practising restrictions by the GMC arising out of the subject matter of the Trusts disciplinary investigation.
By a claim issued on 15 August 2008, Mr Edwards issued proceedings in the High Court against the Trust in which he claimed damages for breach of his employment contract and its wrongful termination.
By his particulars of claim, he alleges that the termination of his contract was wrongful and in breach of contract in a number of procedural respects.
It is not necessary to refer to them all.
They include the plea that the panel had not been properly constituted.
Other allegations are that he was denied a fair hearing with legal representation before a properly constituted and unbiased panel; the Trust caused or permitted the Investigator of the allegations to become a witness and the effective prosecutor to become an adjudicator; and he was denied the right to cross examine the key witnesses who were called to give evidence against him.
His case is that, if the panel had included a clinician of the same discipline as himself, it would not have reached the erroneous conclusions it did and the Claimants contract would not have been wrongfully terminated.
The preliminary schedule of loss alleged that, but for his dismissal, Mr Edwards would have continued to work in his role as a consultant orthopaedic surgeon with the Trust until his retirement in 2022 and that he had suffered loss of earnings (including future earnings) in excess of 3.8 million.
By an application notice issued on 17 February 2009, the Trust applied to the court for an order that Mr Edwards claim for damages for loss in respect of a period in excess of his three months contractual notice period be struck out under CPR 24.4.
District Judge Jones acceded to the application.
Mr Edwards appealed.
Nicol J [2009] EWHC 2011 (QB) allowed the appeal, but only to the extent of holding that, subject to liability for breach of contract being established, in addition to compensation for the three months period of his contractual notice, Mr Edwards was also entitled to compensation for the additional period that it would have taken to conduct the disciplinary procedure if it were conducted and completed with reasonable expedition (the so called Gunton extension).
In allowing this additional compensation, the judge was applying the Court of Appeal decision in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Mr Edwards appealed to the Court of Appeal.
The lead judgment was given by Moore Bick LJ.
It was recorded at para 44 of his judgment that Mr Edwards was now advancing two discrete claims of breach of contract, namely (i) a claim of wrongful dismissal (termination of the contract without notice) and (ii) a claim that the Trust had failed to carry out the proper disciplinary procedure.
The failure to carry out the proper disciplinary procedure was alleged to have resulted in the findings of misconduct which damaged his reputation.
It was said that, even if Mr Edwards had continued in his employment with the Trust after the disciplinary process had concluded, he would still have suffered difficulty in obtaining (a) private work (b) expert witness work and (c) employment in a different NHS hospital in the event that he chose to leave Chesterfield Hospital.
The focus of the hearings before the Court of Appeal and the Supreme Court was on the claim for damages for loss of reputation resulting from the panels findings.
The Court of Appeal held that this second claim did not fall within the Johnson exclusion area and that Mr Edwards was in principle entitled to recover whatever damages he could prove he had suffered as a result of the Trusts failure to carry out the proper disciplinary procedure and that he was not limited in respect of that cause of action to compensation for the three months period or the three months period plus the Gunton extension.
Mr Sutton QC submitted to us that Mr Edwards should not be permitted to advance the second claim because it had not been pleaded in the particulars of claim.
There is some force in the submission that it had not been pleaded.
But the pleading point was not taken before the Court of Appeal.
The validity of the second claim was the subject of detailed submissions in the Court of Appeal.
It is too late for objection to be taken now.
At each stage of these proceedings, it has been accepted by the Trust that the court should proceed on the assumption that Mr Edwards will succeed in establishing all the allegations he makes in the particulars of claim.
The case of Mr Botham
Mr Botham was employed by the Ministry of Defence (MOD) as a youth community worker from 1988 until 30 September 2003.
His employment was terminable on three months notice.
He was suspended from work on 10 December 2002 and on 4 June 2003 charged with gross misconduct: it was alleged that he had behaved inappropriately in relation to two teenage girls.
Following disciplinary proceedings, on 30 September 2003 he was summarily dismissed for gross misconduct.
Because his dismissal was for gross misconduct in relation to young people, he was placed on the list of persons deemed unsuitable to work with children kept by the Department of Education and Skills pursuant to the Protection of Children Act 1999 (POCA).
Mr Botham brought a claim for unfair dismissal and wrongful dismissal in the Southampton Employment Tribunal.
By its liability judgment dated 17 May 2007, the tribunal found that he had been unfairly dismissed and that his summary dismissal was in breach of contract.
The conclusion of unfair dismissal was based on a number of findings including that the MOD had committed breaches of the express and implied terms of the contract of employment.
The express terms were set out in the Discipline Code contained in the MODs Personnel Manual and contained various requirements in relation to the disciplinary procedures that were to be followed.
After a remedies hearing on 19 October 2007, in its judgment dated 7 November 2007 the tribunal awarded Mr Botham damages for wrongful dismissal in the sum of approximately 7,000 based on loss of salary and benefits for the three months notice period; a basic award for unfair dismissal of 1,989 (after a 55% reduction for contributory fault); and a compensatory award for unfair dismissal of 53,500 (after a 55% reduction for contributory fault and the operation of the statutory cap).
Mr Bothams name had been removed from the unsuitable person POCA register on 27 July 2007.
The MODs appeal against liability was dismissed by the Employment Appeal Tribunal on 6 October 2008.
On 21 April 2009, Mr Botham issued proceedings in the High Court seeking damages for breach of the express terms of his contract of employment.
In his particulars of claim he relies on a number of findings that were made by the tribunal in its liability judgment that, in conducting the disciplinary process, the MOD failed to comply with several provisions of the Discipline Code.
The alleged breaches are (i) failing to establish the relevant facts before proceeding with the disciplinary action; (ii) failing sufficiently or at all to define the charge, set out the facts to support the charge and to provide and list any documentary evidence; (iii) recommending dismissal without a proper investigation of the facts; and (iv) causing or permitting the Deciding Officer to make reference to other unsubstantiated allegations or suspicions of other offences.
His case is that by reason of these breaches of contract, he was dismissed from his employment, suffered a loss of reputation, was placed on the POCA register and was precluded from further employment in his chosen field.
His claim for damages includes a claim for loss of future earnings.
His claim was dismissed by Slade J [2010] EWHC 646 (QB).
She noted at para 57 of her judgment that all the breaches of contract relied on by Mr Botham were alleged to have resulted in Mr Bothams dismissal and the damages claimed were consequential on the dismissal.
Accordingly, the claim fell within the Johnson exclusion area and the damages were not recoverable.
Mr Botham appealed to the Court of Appeal.
In view of the decision of the Court of Appeal in the case of Mr Edwards, on 1 September 2010 and by consent, Pill LJ allowed Mr Bothams appeal and granted the MOD permission to appeal to the Supreme Court.
Does the reasoning in Johnson preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract?
It is necessary to start with some background.
The statutory right to claim compensation for unfair dismissal was first introduced by the Industrial Relations Act 1971 (the 1971 Act).
It is clear from the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (Cmnd 3623) (the Donovan report) that the 1971 Act was intended to enhance the protection of employees.
The Donovan report stated at para 522: An employee has protection at common law against wrongful dismissal, but this protection is strictly limited; it means that if an employee is dismissed without due notice he can claim the payment of wages he would have earned for the period of notice.
Beyond this, the employee has no legal claim at common law, whatever hardship he suffers as a result of his dismissal.
Even if the way in which he is dismissed constitutes an imputation on his honesty and his ability to get another job is correspondingly reduced he cannotexcept through an action for defamationobtain any redress (see the decision of the House of Lords in [Addis v Gramophone Co Ltd [1909] AC 488]).
As the Donovan report stated, the relevant common law position was that stated in Addis.
There has been much debate as to whether the headnote to the law report of the decision in Addis accurately reflects the decision of the majority of the House of Lords: see, for example, per Lord Steyn in Mahmud at pp 50 51 and again in Johnson at paras 1 to 5 and 15 and 16.
The headnote is in these terms: Where a servant is wrongfully dismissed from his employment the damages for dismissal cannot include compensation for the manner of the dismissal, for his injured feelings, or for the loss he may sustain from the fact that the dismissal of itself makes it more
difficult for him to obtain fresh employment
But as Lord Nicholls said at para 2 in Eastwoods case, by the time of the Donovan report, it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The protection at common law was strictly limited.
The employer was entitled to bring the contract of employment to an end without cause.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard employees against unfair dismissal.
Parliament gave effect to this recommendation in the 1971 Act.
The relevant provisions are now contained in Part X of the 1996 Act.
An employee has the right not to be unfairly dismissed.
The remedies for unfair dismissal are set out in Chapter II of Part X. A complaint may be made to an employment tribunal.
If the tribunal upholds the complaint, it may make an order for reinstatement or re engagement or an award of compensation for unfair dismissal.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal and on the remedies available where unfair dismissal is proved.
The most striking of these are: (i) complaints of unfair dismissal must be brought within a period of three months and time will only be extended where timely presentation of the claim is not reasonably practicable (section 111); (ii) subject to exceptions for automatically unfair dismissals, the normal rule is that, in order to qualify to bring an unfair dismissal claim, an employee must have been continuously employed for not less than one year ending with the effective date of termination; (iii) there is a statutory cap on the level of the compensatory award which can be made by an employment tribunal (for dismissals on or after 1 February 2011 the cap is 68,400); and (iv) the employment tribunal has the power to reduce an employees compensation for unfair dismissal if it is satisfied that he has contributed to his dismissal by conduct which can be characterised as culpable or blameworthy (Nelson v British Broadcasting Corporation (No 2) [1980] ICR 110, 121 per Brandon LJ).
It can be seen, therefore, that Parliament decided to give a remedy that was strikingly less generous than that which the common law would give for a breach of contract in the ordinary way.
As Lord Nicholls said in Eastwoods case at paras 12 and 13, Parliament has addressed the highly sensitive and controversial issue of what compensation should be paid to employees who are dismissed unfairly.
In fixing the limits on the amount of compensatory awards, Parliament has expressed its view on how the interests of employers and employees, and the social and economic interests of the country as a whole, are best balanced in cases of unfair dismissal.
In Johnson, the employee claimed common law damages for breach of the implied term of trust and confidence.
He alleged that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable work.
His claim was struck out as disclosing no reasonable cause of action.
The ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal.
Lord Nicholls (para 2) was unwilling to create a new common law right covering the same ground as the statutory right not to be unfairly dismissed since it would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims.
He added that it would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law.
Lord Hoffmann also regarded the statutory background as determinative of the question whether the new common law right should be created.
He concluded (para 58) that for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent.
Lord Millett was of the same opinion.
At para 80, he said that the creation of the statutory right made the development of the common law for which the employee contended both unnecessary and undesirable.
He made the same points as those made by Lord Nicholls and Lord Hoffmann and added: even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Bingham agreed with Lord Hoffmann and Lord Millett and dismissed the appeal for the reasons they gave.
Only Lord Hoffmann in Johnson considered the question of what the position would be if the manner of the dismissal was in breach of express terms of the contract of employment.
He said: 60.
There is one further point.
During the argument there was some discussion of whether the provisions for disciplinary hearings were express terms of Mr Johnson's contract and what the consequences would be if they were.
No such express terms were pleaded and Mr Faulks, who appeared for Mr Johnson, was not enthusiastic about doing so.
Nevertheless, it may be useful to examine the matter in a little more detail. 61.
Section 1(1) of the 1996 Act provides that upon commencing employment, an employee shall be provided with a written statement of particulars of employment.
This includes, but is not limited to, the terms and conditions of employment concerning various matters, including the length of notice which the employee is obliged to give and entitled to receive to terminate his contract of employment (section 1(4)(e)).
Section 3(1) then provides that a statement under section 1 shall include a note. specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee. 62.
Consistently with these provisions, Mr Johnson was written a letter of engagement which stated his salary and summarised the terms and conditions of his employment, including the notice period.
Apart from the statement that in the event of gross misconduct, the company could terminate his employment without notice, it made no reference to disciplinary matters.
It was however accompanied by the employee handbook, which the letter of engagement said outlines all the terms and conditions of employment.
This was divided into various sections, the first being headed Employment terms and conditions.
These made no reference to the disciplinary procedure, which appeared in a subsequent section under the heading Other procedures.
There one could find the various stages of the disciplinary procedure: formal verbal warning, written warning, final written warning, culminating in dismissal, as well as the separate procedure for summary dismissal in cases of serious misconduct. 63.
So did the disciplinary procedures constitute express terms of the contract of employment? Perhaps for some purposes they did.
But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is Part X of the 1996 Act.
The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed.
So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson's employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts. 64.
Section 199(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 gives Acas power to issue Codes of Practice containing such practical guidance as it thinks fit for the purpose of promoting the improvement of industrial relations.
By section 207, a failure to comply with any provision of a Code is not in itself actionable but in any proceedings before an industrial tribunal any provision of the Code which appearsrelevant to any question arising in the proceedings shall be taken into account in determining that question.
In 1977 Acas issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
It explained why it was important to have disciplinary rules and procedures which were in writing and readily available to management and employees.
It said in paragraph 4: The importance of disciplinary rules and procedures has also been recognised by the law relating to dismissals, since the grounds for dismissal and the way in which the dismissal has been handled can be challenged before an industrial tribunal. 65.
In paragraph 10 it listed what disciplinary procedures should include.
The Unisys procedures have clearly been framed with regard to the Code of Practice. 66.
My Lords, given this background to the disciplinary procedures, I find it impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended that the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions and limits which Parliament had imposed on compensation for unfair dismissal.
The whole of the reasoning which led me to the conclusion that the courts should not imply a term which has this result also in my opinion supports the view that the disciplinary procedures do not do so either.
It is I suppose possible that they may have contractual effect in determining whether the employer can dismiss summarily in the sense of not having to give four weeks' notice or payment in lieu.
But I do not think that they can have been intended to qualify the employer's common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
Parliament has legislated on the subject of the disciplinary procedures applicable to contracts of employment on a number of occasions and in different ways.
I shall start with sections 1 and 3(1) of the 1996 Act.
Section 1 obliges an employer to provide the employee with a written statement of particulars of employment.
Section 3(1) provides: (1) A statement under section 1 shall include a note (a) specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee, (aa) specifying any procedure applicable to the taking of disciplinary decisions relating to the employee, or to a decision to dismiss the employee, or referring the employee to the provisions of a document specifying such a procedure which is reasonably accessible to the employee.
Section 3(1)(aa) was introduced on 1 October 2004 by section 35(2) of the Employment Act 2002 (the 2002 Act).
As is stated in Deakin and Morris (loc cit) at para 4.24: even if, in principle, contract and [the] statement [required by section 1] are conceptually discrete, in practice one or both of the parties may regard the statement as being equivalent to a contract in both form and effect.
Where the statement favours the employee, it represents strong prima facie evidence of the contract terms and the written particulars place a heavy burden on the employer to show that the actual terms of contract are different from those which he has set out in the statutory statement: per Browne Wilkinson J in System Floors (UK) Ltd v Daniel [1982] ICR 54, 58.
In so far as the statement specifies the disciplinary rules, it favours the employee because these rules are designed to ensure that the employee is not unfairly dismissed.
The effect of sections 1 and 3(1), therefore, is that Parliament has decided, at least in most cases, that contractual force should be given to applicable rules and procedures.
But Parliament has gone further than merely providing that if an employer has applicable disciplinary rules and procedures, they will normally have contractual effect.
It has recognised that a breach of disciplinary rules and procedures in the course of a dismissal process is relevant to the question whether the dismissal is unfair.
It has from time to time adopted different statutory mechanisms to encourage or enforce compliance with appropriate disciplinary procedures in order to protect employees from dismissals which are procedurally unfair.
Thus, in 1977, ACAS issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
Para 4 explained the importance of disciplinary rules and procedures which were in writing and readily available to management and employees: see para 64 of Lord Hoffmanns speech in Johnson.
The 1977 Code was revised in 1997.
Section 207 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act) provides that any provision of a Code of Practice which appears to be relevant to any question arising in unfair dismissal proceedings shall be taken into account in determining that question.
This is the point that was discussed by Lord Hoffmann at paras 64 and 65 of his speech.
The 2002 Act introduced statutory dispute resolution procedures: see section 29 and Schedule 2.
The dismissal and disciplinary procedures prescribed by Schedule 2 were similar to the ACAS procedures.
Section 30 provided: (1) Every contract of employment shall have effect to require the employer and employee to comply, in relation to any matter to which a statutory procedure applies, with the requirements of the procedure. (2) Subsection (1) shall have effect notwithstanding any agreement to the contrary, but does not affect so much of an agreement to follow a particular procedure as requires the employer or employee to comply with a requirement which is additional to, and not inconsistent with, the requirements of the statutory procedure.
Section 31 provided that if, in the case inter alia of unfair dismissal proceedings, it appeared to the employment tribunal that a claim to which the proceedings related concerned a matter to which one of the statutory procedures applied, and the statutory procedure was not completed before the proceedings began by reason of a failure of the employer or employee to comply with the requirements of the procedure, then the tribunal was required to increase or reduce any award in accordance with the provisions of section 31(2) or (3) (as the case may be).
Section 34 introduced a new section 98A into the 1996 Act.
It provided: (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal, (b) the procedure has not been completed, and (c) the non completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements.
Pursuant to the powers conferred by section 31(6), the Secretary of State made the Employment Act 2002 (Dispute Resolution) Regulations 2004 (SI 2004/752).
These were detailed regulations inter alia about the application of the statutory procedures and what constituted compliance with a requirement of a statutory procedure.
These procedures proved to be unduly complicated.
It was concluded by the Government that they carried an unnecessarily high administrative burden for both employers and employees and have had unintended negative consequences which outweigh their benefits: Better Dispute Resolution: A Review of Employment Dispute Resolution in Great Britain (the Gibbons Review) DTI, March 2007, p 8.
The Government therefore decided to return to reliance on an ACAS Code of Practice, but provided for tribunals to have a discretion to adjust awards by up to 25% in the event of non compliance with the Code.
Accordingly, sections 29 33 and 34(2) and Schedule 2 of the 2002 Act were repealed by the Employment Act 2008 (the 2008 Act) and the 2004 Regulations lapsed upon the repeal.
Section 3 of the 2008 Act introduced a new section 207A into the 1992 Act.
It provides that, if in the case inter alia of unfair dismissal proceedings it appears to an employment tribunal that the claim concerns a matter to which a relevant Code of Practice applies and the employer or employee has unreasonably failed to comply with the Code in relation to that matter, then the tribunal may, if it considers it just and equitable to do so, increase or reduce any award it makes to the employee by no more than 25%.
A relevant Code of Practice means a Code of Practice which relates exclusively or primarily to procedure for the resolution of disputes.
Relevant Codes of Practice have been issued by ACAS from time to time.
Thus, for example, the 2003 Code states that it: provides practical guidance to employers, workers and their representatives on The statutory requirements relating to disciplinary and grievance issues; What constitutes reasonable behaviour when dealing with disciplinary and grievance issues; Producing and using disciplinary and grievance procedures.
The April 2009 Code states that it sets out the basic requirements of fairness that will be applicable in most cases; it is intended to provide the standard of reasonable behaviour in most instances.
To summarise, under section 207 of the 1992 Act, any non compliance with the ACAS Code of Practice relevant to a question arising in unfair dismissal proceedings was to be taken into account in determining that question.
Under the 2002 Act, Parliament adopted the direct approach of introducing mandatory dispute resolution procedures and, if a statutory procedure had not been completed for reasons attributable to the employer, providing for the employee to be regarded as unfairly dismissed and for an adjustment of awards in unfair dismissal proceedings.
Under the 2008 Act, Parliament reverted to the earlier model (but with modifications) of providing that an unreasonable failure to comply with a relevant Code of Practice may be reflected in the amount of an award of compensation for unfair dismissal.
The important point is that in each case, Parliament linked a failure to comply with disciplinary or dismissal procedures with the outcome of unfair dismissal proceedings.
To adopt the language of Lord Hoffmann at para 63 of Johnson, the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair dismissal.
It follows that, if provisions about disciplinary procedure are incorporated as express terms into an employment contract, they are not ordinary contractual terms agreed by parties to a contract in the usual way.
At para 38 of his judgment, Moore Bick LJ said whether the parties intend the provisions relating to disciplinary procedures to sound in damages depends on the true construction of the contract.
As a general proposition, this is obviously true.
But in the present context, it ignores the statutory link between the provisions about disciplinary procedures and the law of unfair dismissal.
The question remains whether, if provisions about disciplinary procedure are incorporated into a contract of employment, they are intended to be actionable at common law giving rise to claims for damages in the ordinary courts.
Parliament intended such provisions to apply to contracts of employment inter alia in order to protect employees from unfair dismissal and to enhance their right not to be unfairly dismissed.
It has specified the consequences of a failure to comply with such provisions in unfair dismissal proceedings.
It could not have intended that the inclusion of these provisions in a contract would also give rise to a common law claim for damages for all the reasons given by the House of Lords in Johnson for not extending the implied term of trust and confidence to a claim for damages for unfair manner of dismissal.
It is necessarily to be inferred from this statutory background that, unless they otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
In these circumstances, I agree entirely with para 66 of Lord Hoffmanns speech.
The unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of a dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates disciplinary procedures leading to a dismissal.
Parliament has made certain policy choices as to the circumstances in which and the conditions subject to which an employee may be compensated for unfair dismissal.
A dismissal may be unfair because it is substantively unfair to dismiss the employee in the circumstances of the case and/or because the manner in which the dismissal was effected was unfair.
The manner may be unfair because it was done in a humiliating manner or because the procedure adopted was unfair inter alia because the agreed disciplinary procedure which led to the dismissal was not followed.
It may be unfair because defamatory findings were made which damage the employees reputation and which, following a dismissal, make it difficult for the employee to find further employment.
Any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal subject to the various constraints to which I have referred.
Parliament did not intend that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament for the exercise of this statutory jurisdiction.
Lord Phillips agrees that (at any rate in the absence of express agreement) damages are not recoverable for breach of an express term of an employment contract as to the manner of dismissal.
He reaches this conclusion by applying and extending the Addis principle (ie as a matter of common law), presumably, for reasons of principle or policy.
But the statutory dimension and the link between contractual disciplinary procedures and the statutory law of unfair dismissal cannot be ignored.
I think that Lord Phillips implicitly recognises this.
This is because he concludes that to permit a claim for damages for failure to comply with a disciplinary code leading to dismissal would undermine the decisions in Johnson and Eastwood.
I agree.
But those decisions are based on the intention of Parliament derived from the unfair dismissal legislation.
I need to deal with the suggestion that was made during the argument (accepted by Lady Hale and Lords Kerr and Wilson) that claims such as those made by Mr Edwards and Mr Botham would have been available as common law claims for breach of contract before the enactment of the 1971 Act and that neither that statute nor its successors should be interpreted as having taken away existing rights enjoyed by employees.
The answer to this argument is that the right to claim damages in respect of the manner of a dismissal did not exist before the 1971 Act: see paras 20 and 21 above.
I accept that there has been debate as to what Addis decided.
It is not necessary to enter into this debate.
It is, however, clear that the Donovan report which inspired the 1971 Act stated that the law was as summarised in the headnote to the law report to Addis and Lord Nicholls expressed the same view at para 2 in Eastwoods case.
In any event, at the very least it was not clear whether an employee could claim damages for the unfair manner in which he was dismissed.
No example was cited to us of any case decided before the 1971 Act in which an employee was awarded damages for breach of contract for the unfair manner in which he had been dismissed.
In these circumstances, I cannot accept that an application of the reasoning in Johnson should be rejected because it involves saying that the 1971 Act took away an employees existing rights and that this could not have been intended by Parliament.
That is not to say that an employer who starts a disciplinary process in breach of the express terms of the contract of employment is not acting in breach of contract.
He plainly is.
If that happens, it is open to the employee to seek an injunction to stop the process and/or to seek an appropriate declaration.
Miss ORourke QC submitted that, if in such a situation there is a breach of contract sufficient to support the grant of an injunction but (for whatever reason) the employee does not obtain an injunction, it is anomalous if the normal common law remedy of damages is in principle not available to him.
The short answer to this submission is that an injunction to prevent a threatened unfair dismissal does not cut across the statutory scheme for compensation for unfair dismissal.
None of the objections based on the co existence of inconsistent parallel common law and statutory rights applies.
The grant of injunctive or declaratory relief for an actual or threatened breach of contract would not jeopardise the coherence of our employment laws and would not be a recipe for chaos in the way that, as presaged by Lord Millett in Johnson, the recognition of parallel and inconsistent rights to seek compensation for unfair dismissal in the tribunal and damages in the courts would be.
Miss ORourke relies on the Court of Appeal decision in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 and in particular the House of Lords decision in Skidmore v Dartford and Gravesham NHS Trust [2003] UKHL 27; [2003] ICR 721 and on the Court of Appeal decision in Gunton [1981] Ch 448 in support of the conclusion reached by the Court of Appeal in the present case.
In Saeed at para 12, Hale LJ said that if an employee thinks that the employer has chosen the wrong disciplinary procedure, then he can try to have it changed in advance or seek damages after the event.
This was not a dismissal case and in any event it pre dates Johnson.
Understandably, it does not engage with the reasoning in Johnson and therefore it does not shed light on the issue that arises on these appeals.
Skidmore is an unfair dismissal case.
It was held that the employer had adopted the wrong disciplinary procedures and the employees unfair dismissal claim was remitted to an employment tribunal.
At para 15, Lord Steyn said that it was for the employer to decide which disciplinary route should be followed, but that the decision should be in accordance with the contract.
If a non conforming decision was taken and acted upon, there is a breach of contract resulting in the usual remedies.
Lord Steyn expressed his agreement with what Hale LJ had said in Saeed.
But these observations were obiter dicta.
The question of what remedy would be available to the employee if a non conforming decision was taken was not in issue in that case.
No doubt that is why Johnson was not cited to the House and not mentioned by Lord Steyn and why he did not grapple with the relationship between the statutory code which regulates unfair dismissal claims and common law claims for damages for breach of contract.
Although great respect should always be paid to any observations of Lord Steyn, I do not think that it would be right to place weight on these dicta.
Gunton was a wrongful dismissal case.
The claimant was employed under a contract of service terminable on one months notice.
Regulations prescribing a procedure for the dismissal of an employee on disciplinary grounds were incorporated into his contract.
The employer gave one months notice of termination, but without first having followed the prescribed disciplinary procedure in all respects.
It was held by the Court of Appeal by a majority that the employee could not lawfully be dismissed on a disciplinary ground until the procedure had been properly carried out and that his dismissal was accordingly wrongful.
The measure of damages for wrongful dismissal was loss of wages up to the date on which the contract could properly have been determined by the employer (on an application of the least onerous principle: see McGregor on Damages, 18th ed (2010), at para 8 094.) It was held that the period by reference to which damages were to be assessed was a reasonable period for carrying out the disciplinary process plus one month: see per Buckley LJ at p 470 and per Brightman LJ at p 474.
Miss ORourke submits that the case of Gunton is an example of damages being awarded for breach of a disciplinary process leading to a dismissal.
In my view, this submission is based on a misreading of the case.
It was a conventional wrongful dismissal case involving the breach of a term relating to a notice of termination.
It was held that it was not open to the employer to give one months notice without first undertaking the disciplinary process properly.
As Brightman LJ put it at p 474, the failure to undertake the process properly meant that the notice was invalid and a nullity.
It was not a claim for damages for breach of the disciplinary process.
It was a claim for wrongful dismissal for purporting to terminate the contract on the basis of an invalid notice.
In my view, there is nothing in this case which is inconsistent with the Johnson principle.
I would, therefore, hold that the reasoning in Johnson is a bar to a claim for damages for breach of an express term of an employment contract as to the manner of a dismissal.
The demarcation boundary
But that is not an end to the enquiry because the question remains in any given case whether the claim falls within the Johnson exclusion area or not.
The issue of where the boundary is to be found was considered in Eastwood [2005] 1 AC 503.
Lord Nicholls gave valuable guidance at paras 27 to 33: 27.
Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28.
In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29.
Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over. 30.
If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
Particularly in cases concerning financial loss flowing from psychiatric illnesses, some of the practical consequences are far from straightforward or desirable.
The first and most obvious drawback is that in such cases the division of remedial jurisdiction between the court and an employment tribunal will lead to duplication of proceedings.
In practice there will be cases where the employment tribunal and the court each traverse much of the same ground in deciding the factual issues before them, with attendant waste of resources and costs. 31.
Second, the existence of this boundary line means that in some cases a continuing course of conduct, typically a disciplinary process followed by dismissal, may have to be chopped artificially into separate pieces.
In cases of constructive dismissal a distinction will have to be drawn between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract.
The loss flowing from the impugned conduct taking place before actual or constructive dismissal lies outside the Johnson exclusion area, the loss flowing from the dismissal itself is within that area.
In some cases this legalistic distinction may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed.
Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed. 32.
The existence of this boundary line produces other strange results.
An employer may be better off dismissing an employee than suspending him.
A statutory claim for unfair dismissal would be subject to the statutory cap, a common law claim for unfair suspension would not.
The decision of the Court of Appeal in Gogay v Hertfordshire County Council [2000] IRLR 703 is an example of the latter.
Likewise, the decision in Johnson v Unisys Ltd [2003] 1 AC 518 means that an employee who is psychologically vulnerable is owed no duty of care in respect of his dismissal although, depending on the circumstances, he may be owed a duty of care in respect of his suspension. 33.
It goes without saying that an interrelation between the common law and statute having these awkward and unfortunate consequences is not satisfactory.
The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal.
Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss.
So, understandably, employees and their legal advisers are seeking to side step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's implied contractual obligation to act fairly.
This situation merits urgent attention by the Government and the legislature.
The question in each case is, therefore, whether or not the loss founding the cause of action flows directly from the employers failure to act fairly when taking steps leading to dismissal and precedes and is independent of the dismissal process (Lord Nicholls at para 29).
In other words, the court must decide whether earlier events do or do not form part of the dismissal process (Lord Steyn at para 39).
This is a fact specific question.
As Lord Nicholls observed at paras 15 and 30 to 33, drawing the boundary line in this way leads to unsatisfactory and anomalous results.
One of these is that an employer may be better off dismissing an employee than suspending him.
But this is the inevitable consequence of the interrelation between the common law and statute.
The unfair dismissal legislation occupies the unfair dismissal territory to the exclusion of the common law, but it does not impinge on any cause of action which is independent of a dismissal (such as a common law claim for damages for suspension in breach of contract).
It is instructive to see how the House of Lords approached this question in the Eastwood case itself.
The case of Eastwood v Magnox concerned two employees (Mr Eastwood and Mr Williams) both of whom pursued claims for unfair dismissal before the tribunal which were compromised.
They both then started proceedings in the county court claiming that they had suffered personal injuries in the form of psychiatric illnesses caused by a deliberate course of conduct by certain individuals using the machinery of the dismissal process.
On the assumed facts, the House of Lords held that these claims were independent of the dismissal process and did not fall within the Johnson exclusion area.
The claimants had acquired a cause of action for breach of contract before their dismissal.
On the other hand, as we have seen (para 24 above) in Johnson itself, the claim was for damages for the mental breakdown that the claimant alleged that he had suffered as a result of the manner and the fact of his dismissal: that claim did fall within the Johnson exclusion area.
The third case considered by the House of Lords in the Eastwood case was that of Mr McCabe.
Mr McCabe lodged a complaint of unfair dismissal with a tribunal on the grounds that his dismissal was in breach of the relevant disciplinary procedures.
He was awarded compensation and then started proceedings in the High Court against the employer claiming damages inter alia for breach of contract.
The primary complaint in his statement of claim as originally served was that by reason of the councils failure to investigate the allegations properly and to conduct the disciplinary hearings properly and his dismissal he had sustained psychiatric illness.
But later (and in response to the decision in Johnson), he sought to amend his statement of claim by limiting the focus of his complaint to the period before his dismissal, that is to the period of his suspension and to the employers failure to carry out a proper investigation of the allegations against him.
On the assumed facts on which the amended claim was based, the House of Lords held that Mr McCabes cause of action had accrued before his dismissal and was independent of it.
Do the present cases fall outside the Johnson exclusion area?
Mr Edwards
It is accepted by Miss ORourke that Mr Edwards claim for unfair dismissal falls within the Johnson exclusion area.
But she submits that his claim for damages for loss of reputation consequent on the findings of misconduct made by the disciplinary panel does not.
She contends that these findings resulted from the fact that (in breach of the contractual disciplinary procedures) the disciplinary panel was not properly constituted and acted in a manner which was procedurally unfair.
This breach, she submits, occurred independently of the dismissal.
The undisputed facts are that Mr Edwards disciplinary hearing was held on 9 February 2006.
He was notified of his summary dismissal on the following day.
The decision was confirmed in a long letter from the chairman of the disciplinary panel dated 16 February which set out in detail the allegations and the panels findings.
The complaint is that the panels erroneous conclusions flowed from these findings.
The findings and conclusions were first published in the letter which was sent six days after the decision to dismiss had been communicated to Mr Edwards and were contained in the letter which confirmed his dismissal.
In my view, it is impossible to divorce the findings on which Mr Edwards seeks to found his claim for damages for loss of reputation from the dismissal when they were the very reasons for the dismissal itself.
In these circumstances, Mr Edwards claim for damages for loss of reputation is not one of those exceptional cases to which Lord Nicholls referred in Eastwood where an employers failure to act fairly in the steps leading to a dismissal causes the employee financial loss.
This claim does not arise from anything that was said or done before the dismissal.
It is not independent of the dismissal.
It arises from what was said by the Trust as part of the dismissal process.
It follows that I cannot accept the distinction made by Lord Kerr and Lord Wilson between the findings or reasons for the dismissal and the dismissal itself.
I agree with what Lord Mance says about that.
Mr Botham
The case pleaded at para 20 of the particulars of claim is that as a result of the MODs breaches of contract, Mr Botham foreseeably, was dismissed from employment, and was caused (wrongly) to suffer loss and damage to his reputation and to be precluded from further employment in his chosen field and to be placed on the register of persons deemed unsuitable to work with children.
The damages claimed include loss of earnings and other benefits from the date of dismissal.
The statement of facts and issues agreed for the purposes of the appeal state that Mr Botham was placed on the register as a consequence of the dismissal for gross misconduct (para 5) and the relief sought by him includes damages on the grounds that his dismissal and his inclusion on the POCA precluded him from further employment as a youth community worker (para 15(3)).
In my view, this case is a fortiori that of Mr Edwards.
In Mr Edwards case, it is alleged that the damages for loss of reputation were caused by the erroneous findings made by the panel, rather than the dismissal.
Mr Botham goes further and says that the damages he claims for loss of reputation were caused by the dismissal itself.
For the reasons already given, it falls within the Johnson exclusion area.
That was the view of Slade J and I agree with it.
The consent order made by the Court of Appeal on 31 August 2010 should therefore be set aside.
Conclusion on the main issue in relation to Mr Edwards and Mr Botham
It follows that I would allow the appeals by the Trust and the MoD.
In both cases, the employment was terminated by dismissal.
Had they both been suspended, the position would have been completely different.
As it is, their claims are for damages arising from what was said in the course of the dismissal process and must be rejected for the reasons that I have given.
As I have said (para 10 above), Nicol J held that, subject to liability for breach of contract being established, the maximum amount of damages recoverable by Mr Edwards for wrongful dismissal was compensation for the three months notice period and the Gunton extension period.
There was some discussion before us as to whether Gunton was correctly decided.
The point was described as difficult by Staughton LJ in Boyo v Lambeth London Borough Council [1994] ICR 727 at 747H 748A.
But in view of my conclusion on the main issue, this point does not arise and I do not find it necessary to express a view on whether Gunton was correctly decided.
Claims by Mr Botham for costs as damages
Cost of legal representation in the disciplinary proceedings
Mr Botham had the benefit of legal assistance in the disciplinary proceedings.
It is common ground that, in view of the nature of the charge against him, it was reasonable and foreseeable that he would obtain such assistance.
Mr Reynold QC submits that, since the charge was preferred in circumstances which constituted a breach of the express terms of the contract of employment, Mr Botham is entitled to his legal costs on ordinary principles as loss flowing from the breach.
I reject this submission largely for the reasons given by Ms Outhwaite QC and the judge.
At para 6 of its remedies judgment, the Employment Tribunal made a finding that Mr Bothams culpable conduct was the sole reason for the disciplinary procedure.
It follows that the cost of legal assistance during the disciplinary process was caused by Mr Bothams culpable conduct in triggering the disciplinary process and did not arise out of a breach of contract by the MOD.
Furthermore, Parliament designed the Tribunal system so that there was no need for legal representation and, therefore, litigation costs are not normally recoverable.
It would be odd if an employee was entitled to recover costs for legal representation for the disciplinary proceedings before his employer, but could not recover costs for legal representation before the Employment Tribunal itself.
Litigation costs before the Employment Tribunal and the Employment Appeal
Tribunal
Mr Reynold submits that, but for the breaches of contract, the costs of legal representation before the Employment Tribunal and the Employment Appeal Tribunal would not have been incurred.
Mr Botham is, therefore, entitled to recover these costs as damages for breach of contract on normal common law principles.
I would also reject this submission again largely for the reasons given by Ms Outhwaite and the judge.
The unfair dismissal claim arose necessarily out of the dismissal and, for the reasons given earlier, fell within the Johnson exclusion area.
Legal costs were incurred because Mr Botham had been dismissed.
A claim in respect of these costs falls within the Johnson exclusion area and is not recoverable as damages for breach of contract for the same reasons as damages are not recoverable for loss of earnings and benefit.
Every unfair dismissal claim involves at the very least an alleged breach of the implied term of trust and confidence, and probably involves an alleged breach of express contractual terms as well.
If the court were to award damages for legal representation in dismissal proceedings, such claims would arise following all unfair dismissal claims.
This would defeat Parliaments statutory regime which was intended to provide a fast, cost free resolution to dismissals which are alleged to be unfair by a specialist tribunal.
All such claims would result in satellite litigation to recover litigation costs.
Nor would there be any reason to confine such satellite litigation to successful claims for unfair dismissal.
Mr Botham chose to bring a claim for unfair dismissal before the Employment Tribunal.
Having elected to bring a claim in a forum where no costs are usually awarded, he should bear the cost consequences of having done so.
There are strong policy reasons for awarding costs only in exceptional circumstances.
The statutory regime should not be circumvented so as to allow a damages action for costs.
Conversely, the MOD had no choice of forum.
It responded to the claim after the forum had been chosen by Mr Botham.
If the MOD had successfully defended the unfair dismissal claim, it too would not have been able to recover its costs.
Overall conclusion
For the reasons that I have given, I would allow the appeal of the Trust in the case of Mr Edwards and of the MOD in the case of Mr Botham.
LORD PHILLIPS
When initially I saw in draft the judgment of Lord Dyson, my reaction was that it was so plainly right in the result that my inclination was simply to add my agreement to it.
The judgments of Lady Hale and Lord Kerr have, however, caused me to give further consideration to this difficult area of the law.
While I have not changed my mind as to the result, the route by which I have reached it is not on all fours with that of Lord Dyson.
For that reason I am adding my judgment to those of Lord Dyson and Lord Mance.
Each of the claimants was dismissed from his employment after a disciplinary hearing.
Each disciplinary hearing should have complied with a disciplinary code that had contractual force.
Each hearing failed to comply with the code.
Each claimant alleges that as a consequence of this the relevant tribunal wrongly made findings of misconduct that have inhibited him from obtaining alternative employment and thus caused him financial loss.
Each claimant has sought to recover this loss in an action in the High Court for breach of contract.
I shall describe each of these claims as a stigma claim.
Mr Edwards has combined his stigma claim with what is now a separate claim for wrongful dismissal.
He has brought no proceedings other than these two claims.
Mr Botham initially commenced proceedings in the Southampton Employment Tribunal, pursuant to legislation that I shall describe compendiously as unfair dismissal legislation.
He successfully claimed compensation for both wrongful dismissal and unfair dismissal.
His damages for the former were limited to three months salary and benefits, in respect of the period of notice of which he was deprived.
His compensation for the latter was reduced to reflect a finding of 55% contributory fault and the effect of the statutory cap.
Mr Botham then commenced his stigma claim in the High Court.
Neither claim succeeded at first instance.
Each was held to be precluded because it fell within the so called Johnson exclusion area.
Mr Edwards appealed successfully to the Court of Appeal, after which Mr Botham made a similar appeal, which was allowed by consent.
Two questions arise. (1) Are the stigma claims outside the Johnson exclusion area because they are discrete from and independent of the claims for wrongful dismissal? (2) Are the stigma claims outside the Johnson exclusion area because they are claims for breaches of express, and not implied, contractual terms? The majority answers both questions in the negative.
Lady Hale answers the second question in the affirmative, and holds that the judgments of the Court of Appeal were correct for this reason.
Lord Kerr and Lord Wilson consider that the first question is critical.
So far as Mr Edwards is concerned, his stigma claim is sound because it is discrete and independent of the claim for wrongful dismissal.
Mr Bothams claim is, however, for loss consequential on his dismissal.
In these circumstances his claim is invalid.
Lord Dyson holds that each stigma claim arises out of the manner of the claimants wrongful dismissal.
I agree with him.
If that conclusion is correct it is, I believe, common ground that each claim must fail if Lord Hoffmanns obiter dicta in Johnson were correct.
Lord Dyson has set out at para 1 of his judgment the implied term upon which the claim in Johnson was founded (the trust and confidence implied term).
The majority in Johnson, Lord Steyn dissenting on the point, held that this implied term had no application to the manner of dismissal of an employee by his employer.
This was because Parliament had made alternative provision for this situation by the unfair dismissal legislation.
Lord Hoffmann alone expressed the view that, even if the manner of dismissal involved the failure to comply with a disciplinary code that had contractual effect, no claim at common law could be based upon that failure.
The vital question in the present case is whether Lord Hoffmann was correct.
That question might well have been raised in Eastwood.
There also the trust and confidence implied term was invoked to found common law claims by employees who had been dismissed after disciplinary hearings that had been improperly conducted.
Each of the employees claimed that the hearings had caused them psychiatric damage prior to dismissal.
The employers sought to rely on the Johnson exclusion.
No one suggested that the claims could be founded on breaches of express contractual obligations in relation to the disciplinary hearings.
Instead, the claims were held to be viable on the basis that they fell outside the Johnson exclusion area in as much as their causes of action preceded and were independent of their subsequent dismissals.
Lord Steyn devoted a lengthy concurring speech to the suggestion that there might be good reason to reconsider Johnson.
He did not suggest that it could simply be finessed by bringing a claim for failure to comply with the relevant disciplinary codes.
In Johnson at para 66, when dealing with the intention of Parliament when passing section 3(1) of the 1996 Act, Lord Hoffmann observed that the disciplinary procedures could not have been intended to qualify the employers common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
The intention of which he spoke was both that of Parliament and that of the parties themselves.
This is echoed by a passage in the judgment of Lord Dyson, when applying Lord Hoffmanns reasoning in the present case.
Lord Dyson sets out at para 26 of his judgment the critical passage from the speech of Lord Hoffmann in Johnson.
He then expands on the Parliamentary history of the requirement that disciplinary procedures should be incorporated in contracts of employment.
He demonstrates that Parliament also provided that failure to comply with those procedures should have specific consequences in unfair dismissal proceedings.
Lord Dyson at para 38 observes that disciplinary procedures incorporated into an employment contract are not ordinary contractual terms.
At para 39 he concludes that it is necessarily to be inferred from the statutory background that, unless the parties otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, on Lord Dysons analysis, no claim to damages can be founded on breach of a disciplinary code that is incorporated into the contract because it is to be inferred that the parties have so agreed.
This echoes Lord Hoffmanns reference to the intention of the parties themselves.
Courts often refer to the intention of Parliament.
When they do so the intention is usually implied or imputed.
The courts ascribe to Parliament an intention that the relevant legislation will bear a meaning that is rational and coherent.
The intention is thus somewhat artificial.
It is even more artificial in the present context to impute to every party to a contract of employment the same intention that Lord Hoffmann and Lord Dyson have ascribed to Parliament in relation to the effect of disciplinary codes.
While this may be a legitimate approach to making sense of this area of the law, I believe that there is a more satisfactory route that leads to the conclusion that Lord Dyson has reached in this case.
This case is about remoteness of damage.
That is what Addis was about.
In Addis the plaintiff was employed to manage a business in Calcutta on terms that entitled him to 6 months notice.
He was given 6 months notice, but immediately replaced, with the result that he returned to England.
His claim for breach of contract succeeded before judge and jury.
The jury awarded him 600 for wrongful dismissal.
In the House of Lords the principal issue was as to the measure of damage to which he was entitled.
There were a number of problems.
First it was not clear whether the breach of contract lay in constructively dismissing the plaintiff without notice, or in refusing to let him act as manager during the notice period.
Significantly, Lord Loreburn LC held at p 490 that it made no difference.
The damages were the same on either footing.
The second problem was that it was not clear on what bases the jury had awarded 600 damages.
Lord Atkinson at pp 494 and 496 and Lord Collins at pp 497, 498 and 501 considered the case on the footing that the jury might have purported to award exemplary damages.
The majority of their Lordships considered, however, that the case raised the issue of principle of whether it was open to the jury to award damages for the consequences of the dismissal in so far as these extended beyond direct financial loss.
They considered whether damages could be awarded in respect of injury to feelings or the fact that the dismissal of itself made it more difficult to obtain fresh employment see Lord Loreburn at p 491, Lord Atkinson at p 493, Lord Collins at p 497 and Lord Shaw of Dumferline at p 504.
It is particularly material in the present context that they considered whether wrongful dismissal could give rise to a claim for stigma damages.
The majority held that it could not.
The reason for this was that such a head of loss, together with any claim for distress or injury to feelings, was properly the subject of a claim in tort rather than in contract see Lord James of Hereford at p 492, Lord Atkinson at p 496, Lord Gorell at p 502 and Lord Shaw at pp 503 and 504.
Thus Addis was not a case about the scope of the contractual duty of an employer, but a case about the measure of damage recoverable for breach of the employers contractual duty.
As Lord Dyson points out at para 19, the 1971 Act was passed on the basis that the law had not changed since Addis.
That was the first of a series of statutes, set out by Lord Dyson, that put in place a complex scheme that provided a specifically limited remedy for employees for unfair dismissal that took account of the circumstances of the dismissal, including procedural unfairness and, in particular, any failure to comply with the procedural code that the legislation required to be incorporated in the contract.
In the meantime the common law relating to contracts of employment developed in a manner favourable to employees, both by the development of implied obligations on the part of the employer and by recognising heads of damage that could be recovered both in tort and in contract that had not been recognised at the time of Addis.
One such obligation arose under the trust and confidence implied term.
In Mahmud the House of Lords held that this implied term could give rise to stigma damages.
Stigma damage constituted a novel head of damage for breach of a contract of employment.
The stigma damages recognised in Mahmud were not caused by wrongful dismissal.
Stigma damages cannot be awarded for wrongful dismissal without reversing Addis.
In Addis at p 500 Lord Collins summarised, with approval, an observation of Lord Coleridge CJ in Maw v Jones (1890) 25 QBD 107 as follows: dismissal with an imputation might well be thought by a jury to hurt the plaintiffs prospects of finding another situation, and on that ground alone might give a legal claim to consequential damages within the ordinary rule.
The majority held, however, that stigma damages could not be recovered as a head of damage flowing from wrongful dismissal.
Johnson was decided on the premise that Addis remained good law see Lord Millett at para 68 although he did go on at para 70 to raise the question of whether Mahmud might have changed the position.
Addis was not challenged in Eastwood.
Addis has not been challenged in the present case.
Until Addis is reversed it remains the law that stigma damages cannot be recovered for wrongful dismissal.
The stigma effect can, however, be taken into account in a claim under statute for unfair dismissal.
If the courts in developing the common law principles of measure of damage can exclude a claim for stigma damages for breach of contract that consists of wrongful dismissal, it is equally open to them to exclude such a head of claim for breach of contract that consists of a failure to comply with a disciplinary code.
The question in this case is whether this Court should do so.
If this Court follows the reasoning of the House of Lords in Johnson and in Eastwood this question must be answered in the affirmative.
The chain of causation linking a failure to follow a disciplinary procedure with stigma is more tenuous than the chain of causation linking wrongful dismissal with stigma.
If the law does not permit recovery of stigma damages in the latter case, it makes no sense to permit it in the former.
More generally, to permit such a claim based on a failure to comply with a disciplinary code leading to dismissal undermines the decisions of the House of Lords in Johnson and Eastwood.
The same is not true of Gunton, if that case was rightly decided, for that case applied the same restrictive approach to measure of damage as Addis.
On my reading of Lady Hales judgment, I am inclined to suspect that her quarrel is not simply with Lord Hoffmanns obiter dicta, it is with Addis, with Johnson and with Eastwood.
If so, she stands shoulder to shoulder with Lord Steyn.
They may both be right.
It may be that this area of the law merits fundamental review.
That is not, however, the battleground on which this Court was invited to tread.
The issue before this Court is narrower.
It is whether the reasoning in the latter two cases can be subverted by applying to a claim for breach of a disciplinary code a head of damage that the law does not presently permit to be advanced in a claim for wrongful dismissal.
I agree with Lord Dyson and Lord Mance that the answer to that question is no.
Accordingly, I would allow each of these appeals.
LORD MANCE
I agree with Lord Dysons reasoning and conclusions.
Mr Bothams case, as pleaded in paragraph 20 of his particulars of claim and as Slade J said in paragraphs 17 18, 25, 29 and 66 of her judgment, is that the Armys breach of contractual terms relating to the implementation of the disciplinary procedure laid down in the Army Discipline Code led to his wrongful dismissal, which in turn led to his alleged loss (save the costs of disciplinary proceedings).
Lord Dyson concludes, and I agree, that such a claim is unsustainable in the light of the decision in Johnson v Unisys Ltd [2003] 1 AC 518, the dicta of Lord Hoffmann in that case at para 66, and the further considerations relating to the common law and statutory position mentioned by Lord Dyson at paras 19 to 48.
The law would be incoherent otherwise.
Lord Phillips prefers an analysis according to which the present case is governed by a principle of remoteness which he derives from Addis v Gramaphone Co Ltd [1909] AC 488.
That case establishes that an employee cannot recover damages for injured feelings, mental distress or damage to his reputation, arising out of the manner of his dismissal: Johnson v Unisys Ltd, para 44, per Lord Hoffmann.
But it is questionable whether this is a principle of remoteness, as opposed to causation: see eg Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51D E, per Lord Steyn and Johnson v Unisys Ltd, paras 39 and 44, citing McLachlin J s dictum in Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 39 that A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination in support of a conclusion that the only loss caused by a wrongful dismissal flows from a failure to give proper notice or make payment in lieu.
Put another way, a dismissal is wrongful where there is such a failure (and, of course, no basis for summary dismissal).
Other circumstances (such as the reasons for the failure, the employers state of mind or the impact on the employee) are simply irrelevant to the breach or the loss recoverable for it.
The respondent employees case on the present appeals is that the disciplinary procedures which they say were prescribed were, in contrast, by their nature intended to give then contractual protection against unfair dismissal, meaning dismissal for unfair reasons or in an unfair manner.
On this basis, they submit, there is no reason to treat as irrecoverable any financial loss caused to them by stigma resulting from improper disciplinary procedures leading to unfair findings.
I see the argument, but its acceptance would, as Lord Phillips points out, undermine the decisions of the House of Lords in both Johnson and Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503.
These decisions were in turn based upon a consideration of the legal position resulting from Parliaments introduction of a statutory scheme relating to and providing carefully delimited remedies for unfair dismissal.
Just as the employees argument depends upon the rationale for the prescribed disciplinary procedures, namely to avoid unfair dismissal, so the answer to it depends upon the existence of a statutory scheme providing remedies for unfair dismissal.
Employers and employees when contracting, in particular when introducing prescribed disciplinary procedures, must be taken to have in mind the statutory scheme relating to unfair dismissal, and to contemplate that scheme as providing the relevant remedies in the event of unfair dismissal.
It does not seem to me artificial to ascribe such an intention to them, any more than it did to Lord Hoffmann in Johnson, paras 63 and 66.
They cannot have intended that procedures put in place to avoid the need to invoke the statutory scheme should in fact circumvent and make irrelevant the careful limitations of that scheme.
Parties could by express agreement attach a different significance to the prescribed disciplinary procedures.
But, in the absence of express contrary agreement, the Johnson exclusion area must be taken to cover both loss arising from dismissal and financial loss arising from failures in the steps leading to such dismissal, unless the loss claimed can be regarded as occurring quite independently of the dismissal, as the psychiatric loss claimed by the claimants in Eastwood could be.
There are further potential objections to Mr Bothams proposed case.
It depends upon the propositions (a) that one alleged breach of contract or duty can be said to have caused the commission of another breach of contract or duty by the same person or entity, and (b) that where recovery for the latter breach is limited, a claim may, by relying on the former breach as causing the latter breach, avoid the limit.
Both propositions are in my view open to question.
First, so far as the failure to take proper disciplinary steps can be separated from the dismissal, then it constituted not a reason for dismissing, but a reason for not dismissing.
The dismissal was a fresh decision, which the employer ought not to have taken and without which there would have been no loss.
But, second, assuming the first point in Mr Bothams favour, any loss that he suffered flowed from the wrongful or unfair dismissal, and was recoverable either as compensation for breach of contract or for unfair dismissal, subject in either case to the relevant limits.
If the wrongful or unfair dismissal is to be attributed causatively to the prior failure to take proper disciplinary steps, I find it difficult to see why or how the damages recoverable for the prior failure should or could exceed the compensation recoverable for the later dismissal.
However, these points were not fully developed in argument, and I express no further view on them.
Reference was made in argument to the decision in King v University Court of the University of St Andrews [2002] IRLR 252, where the University had employed the claimant on terms that it was entitled . for good cause shown to terminate the appointment of the employee by giving three months notice in writing.
The claimant claimed on two bases, first, a breach of the alleged express term not to terminate his employment except on good cause shown, and, secondly, a breach of an alleged implied term of trust and confidence consisting in an alleged failure to act fairly and reasonably in investigating whether good cause was shown.
The issue before Lady Smith concerned the second basis of claim.
She distinguished Johnson on the basis that the University was only entitled to terminate the claimants appointment by three months notice for good cause shown, and she held that this involved the implication that there should, before any dismissal, be a prior hearing and investigation, fairly conducted in accordance with a mutual duty of trust and confidence.
Whether any and if so what damages could be recovered on that basis, in circumstances where the claimant had been dismissed (and the only damages pleaded were alleged to follow from the dismissal) was not discussed.
In any event, the decision, at first instance on a preliminary issue, concerned a contract very different to the present, in particular a contract containing express term which was treated as involving an obligation not to dismiss save for good cause shown.
The decision does not assist on the issues now before the Supreme Court.
Mr Edwardss written case identifies the issue as being whether a person who suffers damage as a result of findings of personal or professional misconduct leading to dismissal and loss of professional status that were made against him in disciplinary proceedings conducted in breach of contract, but which would not otherwise have been made, can recover damages at large (para 30); and the question for the Supreme Court as being whether damages flowing from a breach of an express term of an employment contract, anterior to and separate from dismissal, are in any way restricted; and, if so, on what basis (para 31).
In para 67 it accepts that there will be a burden on Mr Edwards to prove that if the procedure had been followed, no dismissal would have resulted, but suggests that, even if this could not be shown, he might still recover limited damages of an unspecified nature.
In para 95 it also asserts that the disciplinary findings would still have caused him recoverable damages, by way of restricted future working opportunities, even if they had not been followed by his dismissal by the Trust.
These ways of putting the case depart from or expand upon the pleaded particulars of claim, as I read them.
While I agree that that should not itself be an absolute bar to their pursuit, I would myself have wished to have a draft amended pleading, before any decision to permit their pursuit.
As, however, I have come to the conclusion that they cannot succeed, this is unnecessary.
The fact is that Mr Edwards was dismissed on the basis of and contemporaneously with the disciplinary findings about which he seeks to complain.
In so far as his claim consists of loss allegedly suffered by dismissal, it falls directly within the exclusion area which was recognised in Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 and which I have referred to in paragraphs 90 to 94 above.
But, in my opinion, it is quite unrealistic in this context to seek to differentiate any of the loss he has allegedly suffered from his dismissal.
Any breach of disciplinary procedure did not cause of itself identifiably separate loss or illness, as was alleged in Eastwood v Magnox Electric Ltd. [2004] UKHC 35, [2005] 1 AC 503, where (a) Mr Williams claimed that he had suffered stress related illness caused by a long campaign of deliberate harassment independently of his subsequent dismissal, and (b) Mr McCabes claim was for psychiatric injury caused by events occurring before any dismissal.
Where the findings reached in the disciplinary proceedings and the dismissal are, as in the present case, a part of a single process, the remedy for any unjustified stigma lies, short of circumstances establishing a claim for defamation, in the restoration of reputation which may in the ordinary course be expected to result from a successful claim for wrongful or unfair dismissal.
Since writing this judgment, I have read Lord Kerrs judgment, with which Lord Wilson agrees, by which they would allow the Ministry of Defences appeal in the case of Mr Botham, but dismiss the Trusts appeal in the case of Mr Edwards, as well as Lady Hales judgment, by which she would dismiss both appeals.
Essentially, Lord Kerr would permit Mr Edwards to recover damages for any reputational damage from the adverse findings accompanying his dismissal that he can show would have flowed from such findings even if they had not been accompanied by dismissal.
On this approach, although the alleged breach in failing to follow the correct investigatory process could not give rise to damages for dismissal (other than damages in lieu of notice), it could give rise to damages in respect of financial loss caused by the reasons given for the dismissal.
I am unable to agree with this suggested distinction.
The reasons given were part and parcel of the dismissal.
The reasons would be very relevant to a claim for unfair dismissal, as Lord Dyson explains in para 40.
But they fall to be dealt with in that context, rather than by a claim for damages (at least in the absence of actionable defamation).
The contrary approach advocated by Lord Kerr would outflank both the rule in Addis set out by Lord Dyson in para 20 and the Johnson exclusion as explained in Johnson itself and in Eastwood, as well in paras 90 to 94 above.
Bearing in mind the modern prevalence of disciplinary procedures (required under section 3(1) of the Employment Rights Act 1996 to be noted in any employees written statement of particulars of employment), it could also make commonplace what Lord Nicholls identified in para 29 in Eastwood as exceptional.
Further, on Lord Kerrs approach, damages could not and would not be awarded by reference to what actually happened.
The dismissal would have to be discounted.
Damages would be awarded on a hypothesis of adverse findings issued independently of any dismissal that is, either without any disciplinary measure at all or in conjunction with some different measure such as suspension.
This would involve an enquiry which was both speculative and unreal.
Quite apart from the difficulty of an assumption that the same findings would have been made without dismissal, how would one sensibly assess whether any and what loss would have been suffered from the findings if there had been no dismissal? The exercise would also involve, to an even greater degree, distinctions regarding causation and consequences of the sort that Lord Hoffmann found problematic in Johnson at paras 48 and 54.
As Lord Nicholls made clear in Eastwood at para 32, the applicability of the Johnson exclusion and so the recoverability of loss may depend upon whether an employer dismisses the employee, as opposed (for example) to simply suspending him.
The fact of dismissal can make all the difference.
Here, whatever the correct disciplinary process may or should have been, it required the employer to explain the reasons if dismissal was the outcome.
When applying the Johnson exclusion, the dismissal and the reasons accompanying it cannot be distinguished in the manner proposed.
If there was a failure in the disciplinary process, it led to both, and, if the law is to be coherent, both must fall within the Johnson exclusion.
Lady Hales approach would treat damages as recoverable at large for any breach of any contractually provided disciplinary procedure, irrespective of whether dismissal followed or led to the loss claimed.
For reasons indicated in paras 90 to 94 above, I do not agree with that approach.
The case of an employee with an express contractual right not to be dismissed save for cause is not before us, and gives rise to different issues to those which are.
Damages for wrongful dismissal in breach of such a contract would on the face of it be measured on the basis that the contract would have continued unless and until the employee left, retired or gave cause for dismissal (in relation to the prospects of all of which an assessment would have to be made), but questions would no doubt also arise as to whether the employee had accepted or had to accept the dismissal and/or had to mitigate or had mitigated his or her loss.
In view of my conclusion on the main issues, it is unnecessary to express any view about the decision of the Court of Appeal in Gunton v Richmond on Thames London Borough Council [1981] Ch 448, or in particular the so called Gunton extension, whereby the damages awarded for wrongful dismissal in that case were calculated by adding the one months contractual notice period to a notional period which a proper disciplinary process would have taken.
The Trust did not appeal against Nicol Js decision to award Mr Edwards damages in accordance with the Gunton extension.
Before the Supreme Court the Trust simply put a question mark in principle against the correctness of the extension.
Mr Edwards and Mr Bothams Cases sought to distinguish Gunton on its facts as well as to draw some support, for a proposition that damages can be recoverable at large, from the recovery under the Gunton extension of damages calculated by reference to the notional period of a proper disciplinary process.
I do not think that Gunton lends any real weight to that contention.
Indeed, the claimant in Gunton was by amendment seeking damages continuing until his normal retirement age (subject only to the contingencies of redundancy or dismissal under a proper disciplinary process).
These he was not awarded.
The reasoning upon which the Gunton extension was based appears to operate independently of what would or might have been the outcome of a proper disciplinary process.
It is not binding upon us.
The extension may be difficult to reconcile with Lord Hoffmanns view in Johnson, para 66, that any contractual disciplinary procedures cannot have been intended to qualify the employers common law power to dismiss without cause on giving such [ie due contractual] notice.
But, assuming it to be correct, it neither compels nor leads to any different conclusion to that which I have reached on the central issues whether Mr Edwards and Mr Botham can recover damages at large for the breaches of disciplinary procedures which they allege.
I therefore agree with Lord Dyson that both the appeal of the Trust in the case of Mr Edwards and the appeal of the Ministry of Defence in the case of Mr Botham be allowed.
LADY HALE
In my view the Court of Appeal reached the right conclusions for the right reasons and both appeals should be dismissed.
As the majority take a different view, I shall be brief.
But I should perhaps declare an interest, as the only member of this court to have spent a substantial proportion of her working life as an employee rather than as a self employed barrister or tenured office holder.
There is no reason at all to suppose that, in enacting the Industrial Relations Act 1971, Parliament intended to cut down upon or reduce the remedies available to employees whose employers acted in breach of their contracts of employment.
Quite the reverse.
Parliament intended to create a new statutory remedy for unfair dismissal which would supplement whatever rights the employee already had under his contract of employment.
Parliament did that because most employees had very few rights under their contracts of employment.
In particular, although many employees had a reasonable expectation that they would stay in their jobs unless and until there was a good reason to dispense with their services, most of them had no legal right to do so.
The 1971 Act gave them the right not to be dismissed without what appeared at the time to be a good reason, determined after a fair process.
They were to be compensated, within modest limits, not principally for their hurt feelings but for the loss of their job.
That the main target of the new jurisdiction is the loss of the job is borne out by the later inclusion of the remedy of reinstatement.
The common law would not normally give damages for the loss of a job.
Then, as now, the great majority of contracts of employment gave both the employer and the employee the right to terminate their relationship on giving the prescribed period of notice.
So if the employer terminated the relationship summarily, without giving the required period of notice, he would be liable to compensate the employee for that which he would have received had his contract been kept and no more: Addis v Gramophone Company Ltd [1909] AC 488, per Lord Atkinson at p 496.
In other words, he would get his pay during the period of notice which he should have had and any contractual commission or bonus which he would have earned during that period.
The majority of the House of Lords in Addis decided that the wrongfully dismissed employee was not entitled to any extra damages, either for the injury to his feelings caused by the way in which he had been dismissed or for the fact that his dismissal might make it more difficult for him to get another job.
Lord Collins disagreed: he thought that damages for wrongful dismissal might include compensation for the difficulty caused in getting another job.
But he was in a minority of one.
The majority view was that the employee was entitled to the normal measure of damages in contract, to be placed in the position in which he would have been had his contract been properly performed, and any consequential loss within the contemplation of the parties, but no more.
In short, there was no right to be compensated for the longer term consequences of the loss of a job.
But let us suppose a contract of employment where the employer is only entitled to dismiss the employee for good cause.
Rightly or wrongly, most University teachers employed under the contracts of employment which were current in the 1960s believed that they could only be dismissed for cause.
If judges, instead of being office holders, were employed under contracts of employment, they could only be dismissed for cause.
Under such a contract, if the employer dismisses the employee without good cause, the employee is entitled to be compensated for the consequences of the loss of the job.
Obviously, the calculation of damages will have to take account of contingencies such as the possibility of good cause arising in the future.
This is the application of the ordinary principles of the law of contract.
However, a great many contracts of employment, perhaps now the vast majority, fall between these two extremes.
They couple the right of either party to terminate it on giving a certain period of notice with a provision that, if the employer wishes to terminate it on disciplinary grounds, he must follow a prescribed procedure.
Such contracts could be analysed in a number of ways.
First, the contract could mean that the employee can be dismissed on notice for non disciplinary grounds, such as incapacity or redundancy or indeed for any other reason the employer might have for wanting to dismiss him; but that, if the employer wants to dismiss him on disciplinary grounds, he can only do so by following the required procedure.
Failure to follow this procedure correctly would lead to damages for loss of the job.
That was the result reached by the trial judge in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Second, the contract could mean that if the employer wants to dismiss the employee on disciplinary grounds, he can only do so after following the prescribed procedure, but that having followed the prescribed procedure and irrespective of the result, he remains entitled to dismiss the employee by giving the usual period of notice.
Thus the employee is entitled only to damages for the period during which the correct disciplinary process would have been taking place, plus the contractual notice period on top of that (presumably on the assumption that whatever findings the disciplinary process might have reached would not have justified a summary dismissal).
That is the result reached by the Court of Appeal in Gunton (the difference of opinion in the Court of Appeal was as to the effect of a repudiatory breach of contract by the employer whether it automatically brought the contract to an end or whether it only did so if accepted by the employee, an important point which does not arise in this case but does arise in another which may shortly come before this Court).
A third analysis is that the contract could mean that the employer always remains free to dismiss on giving the required period of notice, with or without following the contractual disciplinary process, so the employee is only ever entitled to the Addis measure of damages.
The two cases before us both fall into that ambiguous category.
There is a contractual notice period but also a contractual disciplinary process which (we must assume in Mr Edwards case) was not complied with.
But in neither case are we concerned with damages for loss of the job as such.
Mr Botham made a successful claim for unfair dismissal to the employment tribunal.
Mr Edwards withdrew his.
Both are concerned with the adverse consequences of the factual findings of a disciplinary process conducted in breach of contract.
In Mr Edwards case, those findings are said to have made it impossible for him to obtain another post as an NHS consultant and to have adversely affected his earnings in private practice.
In Mr Bothams case, those findings meant that the resulting dismissal had to be reported to the Department of Education and Skills, so that for a while he was placed on the register of people deemed unsuitable to work with children (the POCA list).
These are losses which flow from the breach of contractually agreed disciplinary processes.
Why should they not be recoverable in the ordinary way? Lord Phillips says that it is a matter of remoteness.
These are not losses which fall within the reasonable contemplation of the parties when they make the contract.
I have difficulty with that.
Why include disciplinary processes within the employment contract if you do not expect that they will influence the employers decision? The losses flowing from the breach of a contractually agreed disciplinary process are much more directly related to the breach of contract than are the losses flowing from the dismissal as such, especially where the employer was entitled to dismiss whenever he wanted provided that he gave the contractual notice.
There were no such contractually agreed processes in Addis, so the cases are readily distinguishable.
But for the others in the majority, it is said that such damages would fall within the so called exclusion area created by the House of Lords decision in Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, as further examined and explained in the House of Lords decision in Eastwood v Magnox Electric plc [2004] UKHL 35, [2005] 1 AC 503.
Both of those cases concerned alleged breaches of the term, now implied into all contracts of employment, that neither party will, without good cause, conduct themselves in a manner calculated to destroy or seriously damage their relationship of mutual trust and confidence.
Arnold J is generally credited as the first to recognise the existence of this implied term in Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84.
If the employer acted in breach of the term, the employee was entitled to treat himself as constructively dismissed and thus to take advantage of the remedies for unfair dismissal which Parliament had now provided.
Lord Nicholls explained in Eastwood v Magnox, at p 325, that this development of the common law was prompted by the 1971 Act, to enable employees to regard themselves as dismissed if their employers had conducted themselves in a way which no employee could be expected to tolerate.
In Johnson v Unisys Ltd, the majority of the House of Lords decided that the implied term of trust and confidence did not give the employee a right of action for damages at common law resulting from the manner in which he had been dismissed.
The House was persuaded that Parliament had provided the limited remedy of unfair dismissal to cover that ground and it would be wrong to develop the common law to circumvent the limits which Parliament had laid down.
In Eastwood v Magnox Electric, on the other hand, the House recognised that if the employee could establish a cause of action for breach of the implied term independently of the dismissal, then that was not excluded by the statutory regime.
However, as Lord Nicholls explained, at para 30, If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
He went on to illustrate the difficulties and anomalies, not least that an employer might have to pay full compensation to an employee who was suspended in breach of the implied term but only the statutorily limited compensation to an employee who was dismissed: see Gogay v Hertfordshire County Council [2000] IRLR 703.
This case is ample demonstration of the wisdom of Lord Nicholls words.
The majority have held that the Johnson exclusion area covers the breach of express as well as implied terms in an employment contract and that the particular losses claimed here fall within the exclusion area.
Lord Kerr and Lord Wilson also hold that the exclusion area extends to breach of express terms as well as the implied term; but they hold that it only extends to damage resulting from the dismissal itself, and not to damage resulting from the findings of the wrongful disciplinary process rather than the dismissal.
This enables them to distinguish between Mr Edwards and Mr Botham.
Mr Edwards is claiming for the adverse consequences of the findings made against him rather than for his dismissal as such.
Mr Botham is claiming for the adverse consequences of being placed on the POCA list, which could only happen because of his dismissal.
It is understandable to wish to distinguish between the two, as Mr Bothams claim is designed to circumvent the tribunals finding of contributory fault.
It seems to me, however, that it has long been recognised that the law of contract is defective in not recognising the concept of contributory fault in certain circumstances: see, for example, the Law Commissions Report on Contributory Negligence as a Defence in Contract (1993, Law Com No 219).
The solution to problems like that is principled and comprehensive law reform.
We have seen how the Johnson exclusion area has been productive of anomalies and difficulties.
There is no reason at all to extend it any further than the ratio of that case.
As the Court of Appeal held in this case, it should be limited to the consequences of dismissal in breach of the implied term of trust and confidence.
The House of Lords was persuaded that the common law implied term, developed for a different purpose, should not be extended to cover the territory which Parliament had occupied.
In fact, the territory which Parliament had occupied was the lack of a remedy for loss of a job to which the employee had no contractual right beyond the contractual notice period.
Parliament occupied that territory by requiring employers to act fairly when they dismissed their employees.
But there was and is nothing in the legislation to take away the existing contractual rights of employees.
There was and is nothing to suggest that Parliament intended to limit the entitlement of those few employees who did and do have a contractual right to the job, the right not to be dismissed without cause.
It is for that reason that I am afraid that I cannot agree that the key distinction is between the consequences of dismissal and the consequences of other breaches.
The key distinction must be between cases which must rely on the implied term to complain about the dismissal and cases which can rely on an express term.
I am uncertain as to how the majority would regard the case of an employee with the contractual right only to be dismissed for cause.
Like Lord Kerr, I am puzzled as to how it can be possible for an employee with a contractual right to a particular disciplinary process to enforce that right in advance by injunction but not possible for him to claim damages for its breach after the event.
And I am also puzzled why it should make a difference if the right to claim damages is expressly spelled out in the contract.
I would have dismissed both appeals.
LORD KERR (WITH WHOM LORD WILSON AGREES)
The Report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan Report) was commissioned because of the perceived inadequacy of the law relating to dismissal of employees.
This much, at least, is uncontroversial in this case.
But how did it set about making recommendations to deal with those inadequacies? Did it recommend, and more particularly, did its offspring, the Industrial Relations Act 1971, provide, a comprehensive and exclusive scheme for the compensation of those who had been improperly dismissed from employment? Or was the 1971 Act a statute simply designed to provide wrongly dismissed employees with greater rights than the then only available claim in respect of their dismissal viz for wages that they would have earned during the notice period, while leaving intact any other contractual rights that might have been available to them?
An insight into the essential purpose of the Donovan report can be obtained from a number of its passages, albeit that they do not speak directly to the issue that has been starkly expressed above.
Paragraph 522 of the report (quoted by Lord Dyson at para 19 of his judgment) sets the scene.
Beyond a claim for wrongful dismissal (with the limited redress that afforded) an employee had no rights whatever in relation to the circumstances in which he was dismissed.
The only action that he could take about the manner of his dismissal, where that involved an imputation on his honesty, was for defamation.
This was a situation which the Donovan report considered could no longer be tolerated.
Those who were unfairly dismissed, because of the potentially massive impact that such an event had on their lives, needed to have something more to compensate them beyond the few weeks or even months wages that they would have earned during a notice period.
The scene thus set is emphatically in the realm of dismissal from employment and the impact that dismissal has on the future fate of the dismissed employee.
That theme emerges strongly from para 526 of the report: In practice there is usually no comparison between the consequences for an employer if an employee terminates the contract of employment and those which will ensue for an employee if he is dismissed.
In reality people build much of their lives around their jobs.
Their incomes and prospects for the future are inevitably founded in the expectation that their jobs will continue.
For workers in many situations dismissal is a disaster.
For some workers it may make inevitable the breaking up of a community and the uprooting of homes and families.
Of course, at the time that this was written, contractual provisions in relation to disciplinary procedures, if not unheard of, were certainly not the staple of most contracts of employment.
It is not surprising, therefore, that there was no reference to the consequences of a failure on the part of employers to adhere to such provisions, whether in relation to the termination of employment or as regards the disadvantages that an employee might suffer in terms of future employability, even if he was not dismissed.
Significantly, there is no suggestion in the report that its authors contemplated a complete charter for all claims arising from dismissal from employment.
On the contrary, the statement in para 529 that it [is] urgently necessary for workers to be given better protection against unfair dismissal strongly suggests that the primary purpose of the proposals for a change in the law was to enlarge the remedies available to employees rather than to confine the remedies to a single unitary system.
Indeed, at para 551 the report states ideally, the remedy available to an employee who is found to have been unfairly dismissed is reinstatement in his old job.
The committee actually considered whether the remedy for unfair dismissal should be confined to reinstatement.
That stance would sit oddly with the notion that the legislation was designed to be a charter that would bring the curtain down on all manner of claims by employees following their dismissal.
Now it is true that at para 553 it is stated: The labour tribunal should normally be concerned to compensate the employee for the damage he has suffered in the loss of his employment and legitimate expectations for the future in that employment, in injured feelings and reputation and in the prejudicing of further employment opportunities. (emphasis supplied).
But, although at first sight this might be thought to indicate that actions for reputational damage should be subsumed into the unfair dismissal claim, I do not consider that this was the reports intention.
Obviously, the fact that one has been dismissed from employment, whatever the circumstances of the dismissal, can carry a disadvantage in terms of future employability.
It is right that this should be reflected in the recoverable compensation where the dismissal is unfair.
But that circumstance does not alone warrant the conclusion that breach of a term of the contract which leads to a finding that there has been misconduct on the part of the employee and which leads in turn to dismissal cannot have contractual consequences beyond the enhancement of a claim for unfair dismissal.
As a matter of elementary contract law, a term which binds an employer to a particular form of disciplinary hearing, if breached, will give rise to a claim on the part of the employee for the consequences of the breach.
Indeed, the employers in these cases concede that such a term would found an application for an injunction to restrain its breach.
But it is argued that when one comes to a remedy following the breach (as opposed to in anticipation of it) a claim for damages is not viable because of the effect of the 1971 Act and succeeding statutory provisions.
It is conceivable that legislation can have the effect of removing or nullifying a contractual right and it will be necessary to examine the basis on which it is said that this has occurred in the present context.
It is important, however, to start with the clear understanding, that, absent any such legislative intervention, there can be no question of terms in an agreement in relation to the conduct of disciplinary hearings being different from other contractual terms.
This is so, in my view, whether they have become incorporated into the contract as a result of statutory requirement or are the product of independent agreement between the parties to the contract.
Nothing in the 1971 Act suggests that Parliament intended to restrict an employees rights under his contract of employment.
If, at the time of the enactment of that legislation, an employees contract of employment included a term that his employer would conduct disciplinary proceedings against him according to a particular set of rules and if, in breach of that term, the employer failed to adhere to those rules, any loss suffered by the employee in consequence would surely be compensatable on a breach of contract claim.
As Hale LJ said in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 at para 12: The employer who is contemplating disciplinary action against an employee has to decide which procedure should be followed.
If the employee thinks that the employer has made the wrong choice, he can try to have it changed in advance or seek damages after the event.
The court will have to perform its usual task of construing the contract and applying it to the facts of the case.
I did not understand either of the employers in these appeals to challenge the correctness of that statement of the law although it is, of course, right, as Lord Dyson has pointed out in para 44, that Saeed was decided before Johnson (Johnson v Unisys Ltd [2003] 1 AC 518).
It will be necessary to say something presently about the effect that the later decision may have had on the reasoning in the earlier case but, for present purposes, Saeed is important authority for the proposition that breach of a contractual term in relation to the conduct of a disciplinary hearing could be relied on by an employee in a claim for damages.
Lord Dyson has observed that Saeed was not a dismissal case but that does not affect the essential point.
There is nothing unusual about breach of such a term giving rise to a claim for damages.
The importance of Saeed to the present appeals lies in its recognition that the contractual right to a particular form of disciplinary proceeding is no different from other contractual rights.
Ms Outhwaite QC suggested that a claim based on such a contractual right, if pursued after dismissal, would involve the creation of a new cause of action.
I do not accept that.
It is a perfectly conventional claim in contract involving the breach of an agreed term giving rise to loss on the part of the employee.
If one accepts that there is a claim in contract if there is no termination of employment, an impossibly anomalous situation arises if the claim cannot be pursued when the employment is terminated.
Suppose that someone who was the subject of disciplinary proceedings had an offer of extremely remunerative employment and that this was withdrawn as the result of adverse findings in the disciplinary proceedings but those findings did not result in his dismissal, would he be entitled to seek damages for the loss of his prospective new employment? Why not? If he has a contractual right to a properly constituted tribunal and can show that such a tribunal would not have made the findings that were instrumental in the offer of employment being withdrawn, can he not say that the failure to constitute a proper tribunal was a breach of a duty owed to him under contract? And if he can show that, as a direct consequence of that breach, he suffered a loss, can he not maintain an action for compensation for breach of contract? This does not represent a novel action or a novel development of the common law.
It is merely the application of settled principles of contract law to a particular set of circumstances.
Moreover, if an employee can maintain such an action if he is not dismissed, why should he not be able to maintain it if he is dismissed? The loss of the chance of more remunerative employment does not, in the mooted example, flow from the dismissal; it is the direct consequence of the adverse findings.
There is no logical reason to draw a distinction between the situation where he has not been dismissed and that where he has been.
The employers in these appeals attempt to confront this anomaly by saying that an injunction can be obtained and the employees legal rights should be confined to that.
But what is the legal or juridical basis for that assertion? As a matter of first principle, an injunction is available on the basis that a legal wrong is anticipated.
If that legal wrong materialises, why should it not be actionable at the suit of the person who could have obtained the injunction?
This point, albeit in a somewhat different context, was expressed by Lord Nicholls in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2005] 1 AC 503.
In that case one of the claimants, having obtained the statutory maximum compensation for unfair dismissal, sought damages for psychiatric injury caused by the defendant employers suspension of him and its failure to inform him of allegations made against him or to carry out a proper investigation of those allegations.
This was said to represent a breach of the necessary relationship between employer and employee of trust and confidence and breach of the employers duty to provide a safe system of work.
At para 27 Lord Nicholls said: If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
In the present appeals, on Mr Edwards case, he had a contractual right to have his disciplinary hearing conducted by a tribunal constituted as stipulated in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
At what point did this right (which for the purposes of the appeal, we must assume existed) give rise to a cause of action? Mr Edwards claims that there was a breach of the contractual right as soon as the wrongly constituted panel was convened.
Did the cause of action arise then? Or did it first materialise when the decision to dismiss him was taken? It might be argued that Mr Edwards suffered no loss until he was summarily dismissed but this seems to me to take too narrow a view of the position.
The Trust accepts that, if the facts as he asserts them are established, Mr Edwards could have applied for an injunction to prevent the tribunal from considering his case.
That (rightly made) concession must proceed on the premise that, on those facts, he already had a cause of action at that stage.
On Lord Nicholls analysis in Eastwood, therefore, if Mr Edwards can establish his case on the pleaded factual assertions, he had a cause of action at law before his dismissal which should remain unimpaired by his subsequent dismissal.
Mr Bothams case is somewhat different.
In the agreed Statement of Facts and Issues in his case it is stated that [a]s a consequence of the dismissal for gross misconduct, Mr Botham was reported to the Department of Education and Skills and was placed on the register of persons deemed unsuitable to work with children (emphasis supplied).
The reputational damage suffered by Mr Botham is therefore directly linked to his dismissal rather than any defect in the procedures which led to it.
The employers in both cases argue, however, that both involve claims for damages arising from the unfair manner of their dismissal and that the reasoning in the Johnson and Eastwood cases preclude such claims.
It is therefore necessary to look more closely at both decisions.
As Lord Dyson has pointed out (in paras 19 21), the background to the 1971 Act and the Donovan report was that at common law an employee was not entitled to recover damages in respect of the manner of his dismissal.
Moreover, an employee could only recover damages if he was actually dismissed.
If he had chosen to leave employment because of mistreatment by his employer, he could not maintain an action for wrongful dismissal.
In mitigation of the harshness of this rule, the courts developed the concept of the implied term of mutual trust and confidence which, shortly stated, stipulates that an employment contract is subject to the implied term that the parties to it may not conduct themselves in a manner likely to destroy the confidence and trust that is essential to the relationship of employer and employee: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
It was the concept of the implied term of mutual trust and confidence which predominated in Johnson.
The claimant sought to rely on such a term to promote a claim at common law relating to the manner of his dismissal.
He alleged that because of the way in which he had been dismissed, he had suffered a mental breakdown and was unable to work.
His claim was therefore inextricably, indeed uniquely, linked to the manner of his dismissal.
And the manner of his dismissal was in turn said to be unlawful because it was in breach of the implied term of mutual trust and confidence.
The issues which the House of Lords had to squarely face, therefore, were (i) whether the implied term of mutual trust and confidence could be used as a foundation for a claim that focused exclusively on the manner in which the employee was dismissed; and (ii) whether a common law action claiming damages could be maintained on that basis, notwithstanding that Parliament had legislated to provide a comprehensive code for compensation of unfair dismissal claims.
In dismissing the employees appeal, Lord Nicholls said in para 2 that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed.
At para 47 Lord Hoffmann suggested that it would be jurisprudentially possible to imply a term which would give a remedy in Mr Johnsons case but he doubted the wisdom of doing so.
This was not the basis on which he dismissed the appeal, however.
His reasons for doing so are contained in para 54: The remedy adopted by Parliament was not to build upon the common law by creating a statutory implied term that the power of dismissal should be exercised fairly or in good faith, leaving the courts to give a remedy on general principles of contractual damages.
Instead, it set up an entirely new system outside the ordinary courts, with tribunals staffed by a majority of lay members, applying new statutory concepts and offering statutory remedies.
Many of the new rules, such as the exclusion of certain classes of employees and the limit on the amount of the compensatory award, were not based upon any principle which it would have been open to the courts to apply.
They were based upon policy and represented an attempt to balance fairness to employees against the general economic interests of the community.
At para 79 Lord Millett suggested that, if the 1971 Act and subsequent legislation in this field had not been enacted, the courts might well have developed the law by imposing a more general obligation upon an employer to treat his employee fairly even in the manner of his dismissal.
He explained why this had not been necessary in para 80: the creation of the statutory right has made any such development of the common law both unnecessary and undesirable.
In the great majority of cases the new common law right would merely replicate the statutory right; and it is obviously unnecessary to imply a term into a contract to give one of the contracting parties a remedy which he already has without it.
In other cases, where the common law would be giving a remedy in excess of the statutory limits or to excluded categories of employees, it would be inconsistent with the declared policy of Parliament.
In all cases it would allow claims to be entertained by the ordinary courts when it was the policy of Parliament that they should be heard by specialist tribunals with members drawn from both sides of industry.
And, even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Dyson has suggested that the ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal (para 24).
Moore Bick LJ in the Court of Appeal in Edwards case cast it in slightly different terms.
At para 23 of his judgment he said: the ratio is that the common law does not imply into a contract of employment a term that the employer will not act unfairly towards the employee in relation to his dismissal and that the courts are not at liberty to develop the common law implied term of trust and confidence in order to give rise to such an obligation.
I would prefer to express the ratio in terms that more clearly recognise the two separate aspects of the decision.
In the first place, the House of Lords rejected the notion that the implied term of mutual trust and confidence had any role in determining the nature of the employers obligations at the time of the dismissal of the employee.
Secondly, it concluded that compensation for loss flowing from the manner in which an employee is dismissed must be sought within the statutory scheme devised by Parliament in the 1971 Act and continued in successor enactments.
It seems to me that it is the latter of these two which is the more relevant to the issues that arise on this appeal.
Importantly, I do not construe anything in the opinions in Johnson as casting doubt on the correctness of Hale LJs statement in Saeed that choice of the wrong form of disciplinary action can give rise to a claim for damages.
Indeed, para 44 of Lord Hoffmanns speech would appear to contemplate precisely that type of action.
He was there discussing the effect of Addis v Gramophone Co Ltd [1909] AC 488 (in which it had been held that if the way in which an employee was dismissed constituted an imputation on his honesty he could not except through an action in defamation obtain any redress).
On that subject, Lord Hoffmann said this: if wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation.
On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addiss case does not stand in the way. (emphasis supplied)
A claim for breach of contract arising from the employers selection of the wrong form of disciplinary proceeding need not be a claim for unfair or wrongful dismissal.
The choice of the wrong procedure might lead to dismissal but if the employer is contractually bound to follow a particular route, his failure to do so will give rise to a cause of action which can be entirely independent of any claim in respect of termination of employment.
The two aspects of the Johnson decision are reflected in the opinions of the House of Lords in the later cases of Eastwood and McCabe.
Perhaps significantly, at para 8 of his opinion, Lord Nicholls characterised the claim in Johnson as one which relied on breach of the trust and confidence implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for unfair dismissal.
It is clear from this and other statements made by Lord Nicholls that reliance on the implied term in a claim for damages unrelated to dismissal would be viable.
It was because Mr Johnson's claim was founded on the fact that he had been dismissed, and the trust and confidence implied term could not be applied to dismissal itself that it was bound to fail see para 10 of Eastwood.
In the most important part of his speech in Eastwood (at least, so far as the present appeals are concerned) in paras 27 29, Lord Nicholls discussed what he described as the boundary line drawn by the Johnson decision.
I have already quoted from para 27 (at para 135 above).
It is now necessary to set this passage out in full: The boundary line 27 Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employees remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28 In the ordinary course, suspension apart, an employers failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29 Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employers failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over.
A number of important principles can be distilled from these paragraphs: i) If a cause of action is in existence before dismissal, it is not extinguished by subsequent dismissal.
As I understand Lord Nicholls opinion, that statement holds true even if the dismissal is consequent on the state of affairs that gave rise to the cause of action; ii) If financial loss occurs (as it normally will in a dismissal situation) from the dismissal itself, such loss is not recoverable other than by a claim for unfair dismissal.
Although Lord Nicholls does not address the question directly (since he did not need to do so), it seems to me to be consistent with his opinion that, to be thus excluded, the financial loss must flow solely from dismissal; iii) Where financial loss flows directly from an employers failure to act fairly (or by his failure to abide by the terms of the contract of employment) even though that failure relates to steps taken which lead to dismissal, it is recoverable at the suit of the employee other than by an unfair dismissal claim.
Of course, Lord Nicholls was careful to point out that if an employee brings proceedings in court and before the tribunal, he cannot recover overlapping heads of loss twice over but he did not suggest that separate claims arising from the same set of circumstances could not be brought.
The same set of circumstances can give rise to an unfair dismissal claim and a claim for breach of contract.
Mr Edwards experience perfectly exemplifies this.
On his case, the adverse findings made by the wrongly constituted tribunal led to his dismissal but they also caused the reputational damage which, he says, causes his ongoing financial loss.
It is a fundamental error, his counsel argues, to conclude that, because the findings led to the dismissal, the financial loss caused by the findings must be subsumed in his unfair dismissal claim.
On that argument I believe that Miss ORourke is entirely right.
Lord Dyson has said in para 39 of his judgment that Parliament could not have intended that the incorporation of provisions in relation to disciplinary procedures into contracts of employment would give rise to a common law claim for damages.
It is not clear why this should be so.
Contractual terms, whether they are the product of incorporation or independent agreement, should have contractual force.
And if it is the case that breach of a contractual term, whether or not it has been incorporated by statute, can give rise to a cause of action which is quite separate and distinct from an unfair dismissal claim, why should it be assumed that Parliament intended to take away the right to such a cause of action? Lord Dyson says that this is to be necessarily inferred from the statutory background but this, with respect, is a circular argument, depending as it does on the proposition that Parliament intended that the legislation relating to unfair dismissal should provide a comprehensive charter for all claims made by an employee following dismissal.
In a further passage in para 39 Lord Dyson states that unless the contracting parties expressly agree they are to be taken as not having intended that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, if they do agree that terms of the contract should have normal contractual force and record that agreement, a common law claim for damages is feasible but if they fail to expressly state that they intend that a contractually binding term should have conventional contractual force, then it is to be treated as unenforceable by the normal route of a claim for damages.
This seems a curious result and I am unable to understand on what basis it can be reached unless for some unstated public policy reason.
And if it is the case that the proposition is underpinned by a public policy consideration, it seems highly curious that it can be displaced by the express agreement of the parties.
In Mr Edwards case Lord Dyson has said that it is impossible to divorce the findings on which he seeks to found his claim for reputational damage from the dismissal when the findings which allegedly caused the reputational damage also constituted the reasons for the dismissal (para 55).
In my respectful view, this conflates two quite distinct and readily separable sets of consequences.
The findings, on Mr Edwards case, were the reasons that he was dismissed.
But, quite independently of the dismissal, those findings, according to Mr Edwards, also did enormous damage to his reputation.
Lord Dyson appears to accept (in para 59) that if Mr Edwards had not been dismissed but had merely been suspended, and had been able to establish the facts needed to sustain his claim for reputational damage, he would have had a perfectly viable claim for breach of contract.
In such a scenario, the reputational damage claim would not have depended on the fact of suspension; it would have had a quite separate existence.
I cannot accept that it does not have an equally separate existence from the fact of dismissal.
As I have said, however, (at para 137 above) Mr Bothams case is different.
It is accepted that the reputational damage which he is alleged to have suffered was inextricably linked to the fact of his dismissal.
His cause of action in respect of that reputational damage did not exist before he was dismissed, therefore.
Such financial loss as he may have suffered as a consequence is the result of his dismissal.
I consider, therefore, that compensation for damage to his reputation could only have been sought as part of his unfair dismissal claim.
For these reasons, I would dismiss the appeal in Mr Edwards case but allow the appeal in the case of Mr Botham.
| UK-Abs | The central issue in these appeals is whether at common law an employee can recover damages for loss arising from the unfair manner of his dismissal in breach of an express term of an employment contract.
Each of Mr Edwardss and Mr Bothams employment contracts contained express terms governing the procedure for dismissal in cases of misconduct and each were summarily dismissed from their employment as, respectively, consultant orthopaedic surgeon and youth community worker [3], [15].
In Mr Edwards case, disciplinary proceedings were instituted against him in December 2005.
He was alleged to have undertaken an inappropriate internal examination of a female patient and then denied that the examination had taken place [4].
In February 2006, a disciplinary hearing was held and the panel decided that he should be summarily dismissed for gross personal and professional misconduct [5].
By a claim issued in the High Court in August 2008, Mr Edwards claimed damages for breach of his employment contract and its wrongful termination.
Among other procedural breaches, he alleged that the disciplinary panel had not been constituted in line with the applicable policy, which formed a term of his contract.
His case was that, if the panel had included a clinician of the same discipline as him, his contract would not have been terminated.
His preliminary schedule of loss alleged that he lost earnings (past and future) of over 3.8 million [9].
Mr Botham was suspended from work in December 2002 and was charged with gross misconduct for behaving inappropriately in relation to two teenage girls.
Following disciplinary proceedings, in September 2003 he was summarily dismissed for gross misconduct.
Because his misconduct was in relation to young people, he was placed on the list of persons deemed unsuitable to work with children under the Protection of Children Act 1999 (the POCA list) [14].
Mr Botham brought proceedings in respect of his dismissal in the employment tribunal.
In May 2007, it held he had been unfairly dismissed and his summary dismissal was a breach of contract.
In relation to the unfair dismissal, it found that the Ministry of Defence (MoD) had breached express terms of his contract set out in the Discipline Code found in the MoDs Personnel Manual [15].
The tribunal awarded him 7,000 loss of salary and benefits for his notice period, a basic award of 1,989 and a compensatory award of 53,500.
His name was removed from the POCA list [16].
Mr Botham then issued proceedings in the High Court seeking damages for breach of the express terms of his contract.
Relying on the findings of the tribunal, he alleged that the MoD, in conducting the disciplinary process, failed to comply with provisions of the Disciplinary Code, by reason of which he suffered a loss of reputation, was put on the POCA list and prevented from obtaining further employment in his chosen field.
The Supreme Court by a majority allows the appeal.
Employees may not recover damages for loss suffered as a result of a breach of a term in their employment contract as to the manner of their dismissal unless the loss can be said to precede and be independent of the dismissal.
Compensation for the manner of dismissal is limited to what they may recover pursuant to the Employment Rights Act 1996 (the 1996 Act).
Lord Dyson gives the leading judgment with which Lord Mance (adding further comments) and Lord Walker agree.
Lord Phillips agrees that the appeals should be allowed, but for different reasons.
Lady Hale and Lords Kerr and Wilson dissent.
In Johnson v Unisys Ltd [2001] UKHL 13, the House of Lords held that loss arising from the unfair manner of dismissal is not recoverable as damages for breach of the implied term of trust and confidence in employment contracts: it falls within what has been called the Johnson exclusion area [1].
By the time of the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan report) it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard against unfair dismissal [21].
Parliament gave effect to this recommendation in the Industrial Relations Act 1971.
The relevant provisions are now contained in the 1996 Act.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal, such as the three month time limit for bringing a claim, and on the remedies available: there is a cap on the level of the compensatory award (now 68,400).
Therefore, Parliament decided to give a remedy which was less generous than that which the common law would give for breach of contract in the ordinary way [19] [23].
In each legislative modification to the unfair dismissal scheme, Parliament linked failure to comply with disciplinary procedures with the outcome of unfair dismissal proceedings; the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair (not wrongful) dismissal [30] [37].
It follows that, if provisions about disciplinary procedures are incorporated as express terms of an employment contract, they are not ordinary contractual terms.
Parliament intended such provisions to apply to employment contracts to protect employees from unfair dismissal.
It has specified the consequences of a failure to comply in unfair dismissal proceedings.
It could not have intended that they would also give rise to a common law claim for damages.
Unless the parties express otherwise, they are taken not to intend that a failure to comply with contractual disciplinary procedures will give rise to a common law claim for damages [37] [39],[94].
This is regardless of whether the term is express or implied.
A dismissal may be unfair for a variety of reasons and any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal, not that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament [40].
However, other remedies, such as injunction, which do not cut across the statutory scheme, are not excluded [44].
Whether individual cases fall within the Johnson exclusion area is a matter of fact and depends on whether the procedural breach forms part of the dismissal process: [51].
Mr Edwards dismissal flowed from the panels erroneous findings, which flowed from its improper constitution.
Likewise, Mr Botham alleges that the loss of reputation was caused by the dismissal itself.
Both cases therefore fall within the Johnson exclusion area [55] [59], [99].
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This is another case arising out of the economically controversial but legally well established policy of the EU relating to parallel imports of genuine goods bearing registered trade marks.
Broadly stated, the question at issue is whether a person who has imported goods bearing the mark into the EEA and offered them for sale there without the consent of the trade mark proprietor, is entitled to defend an action for infringement on the ground that the proprietor of the mark is engaged in conduct calculated to obstruct the free movement of such goods between member states or to distort competition in the EEA market for them.
Ever since the Trade Marks Act 1994 gave effect in the United Kingdom to directive 89/104/EC, the rights of proprietors of registered trade marks have been governed by a uniform scheme of EU law.
That directive has now been replaced by the current directive 2008/95/EC, but the two directives are in the same terms in every respect relevant to the present dispute.
I shall refer to them indifferently as the Trade Mark Directive or the directive.
The fundamental provisions are articles 5 and 7.
Article 5 defines the rights of the trade mark proprietor.
It provides, so far as relevant: Rights conferred by a trade mark 1.
The registered trade mark shall confer on the proprietor exclusive rights therein.
The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered; 3.
The following, inter alia, may be prohibited under paragraphs 1 and 2: (a) affixing the sign to the goods or to the packaging thereof; (b) offering the goods, or putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder; (c) importing or exporting the goods under the sign; (d) using the sign on business papers and in advertising.
Article 5 is subject to article 7, which provides: Exhaustion of the rights conferred by a trade mark 1.
The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent. 2.
Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.
It has been accepted ever since the decisions of the Court of Justice in Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft mbH (Case C 355/96) [1999] Ch 77 and Sebago Inc v GB Unic SA (Case C 173/98) [2000] Ch 558, that the combined effect of articles 5 and 7.1 of the directive is to confer on the trade mark proprietor the exclusive right to control the first marketing in the EEA of goods bearing his trade mark, even if they are genuine goods which have previously been put on the market by him or with his consent outside the EEA.
This is the only right attaching to the trade marks which is relevant in the present case.
The subsequent decision of the Court in Zino Davidoff SA v A&G Imports Ltd (Joined Cases C 414/99 to 416/99) [2002] Ch 109, underlined its absolute nature by establishing that the consent of the trade mark proprietor had to be such as to amount to an unequivocal renunciation of the right.
It could therefore rarely be implied, and never from the mere fact of his having placed the goods on the market outside the EEA and/or his silence on the question whether they had been lawfully placed in the market within the EEA: see paras 53 56.
These decisions are understandably unpopular with parallel traders not forming part of the authorised distribution network of the trade mark proprietors.
But they are securely established as part of the legal order of the EU in the domain of trade mark protection.
Proposals to modify their effect or to adopt a rule of international exhaustion have been firmly rejected by the EC Commission and the Economic and Social Committee and no attempt was made to change the position when the new directive was adopted in 2008.
There is an interesting account of these debates in Stothers, Parallel Trade in Europe (2007), at pp. 347 354.
The Claimants, Oracle America Inc, were at the relevant time called Sun Microsystems and that is how I shall refer to them.
They are manufacturers of computer systems, workstations and related goods.
They are also the proprietors of five relevant Community trade marks and two relevant United Kingdom trade marks registered for use in connection with computer hardware.
M Tech is a supplier of computer hardware in Manchester, which in 2009 fulfilled a trap order from a purchaser called KSS Associates in Epsom for 64 new Sun disk drives.
The disk drives had originally been supplied by Sun to purchasers in China, Chile and the United States.
M Tech had bought them through a broker in the United States and imported them into the United Kingdom.
Although there was at one time a dispute about this, it is now common ground that Sun had not consented to their being put on the market in the EEA.
On the face of it, therefore, M Tech infringed the marks contrary to article 5.1(a) by using them in circumstances where Suns exclusive right had not been exhausted under article 7.1.
The present appeal arises out of an application initially made by Sun to Kitchin J for summary judgment for (among other things) damages for the infringement, and an injunction restraining any further infringements of the same kind.
There is no challenge to the validity of the trade marks, nor to the facts said to constitute the infringement.
M Techs defence is set out in a number of witness statements, whose contents are the basis of a draft pleading served shortly after Sun applied for summary judgment.
In summary, M Tech say that Suns trade marks are not enforceable because (i) the object and effect of enforcement would be to partition the EEA market in Sun hardware contrary to the treaty provisions relating to the free movement of goods (articles 34 to 36 of the Treaty on the Functioning of the European Union); and (ii) the exercise of Suns trade mark rights is connected with its distribution agreements, which are said to contain restrictive provisions inconsistent with article 101.
After the hearing before Kitchin J, M Tech added a third argument, to the effect that enforcement of Suns trade marks would constitute an abuse of rights as that concept is understood in EU law.
Euro defences of this kind have been deployed by alleged infringers of intellectual property rights for many years, and the English courts have varied in the robustness with which they approach them.
The dilemma is that litigation devalues intellectual property rights, by increasing the cost and delay associated with their enforcement.
It may also serve to confer on the alleged infringer a temporary immunity or an improvement of his bargaining power in settlement negotiations, to which he will turn out not to be entitled.
The effect can often extend beyond the parties or transactions in issue, to many other cases in which similar questions might be raised.
These factors mean that defences like the present one must be scrutinised with some care, even if that requires a certain amount of analysis.
On the other hand, a defendant must be allowed to go to trial if it has raised a triable issue of fact which is relevant in point of law.
For obvious reasons, this is especially important when the case is founded on fundamental principles of the European Union such as the free movement of goods and undistorted competition.
Kitchin J resolved this dilemma in favour of the trade mark proprietor.
He gave summary judgment, ordering (among other things) an inquiry as to damages and an injunction.
The Court of Appeal (Lord Neuberger of Abbotsbury MR, Arden LJ and Tomlinson LJ) allowed the appeal and set aside the order.
This court has been invited to order a reference to the Court of Justice of the European Union.
It is I think common ground that if there is an arguable defence in EU law, there will have to be a reference at some stage, either now or after the facts have been found at a trial.
But the first question is whether there is.
Articles 34 to 36: Free movement of goods
Articles 34 and 35 of the treaty prohibit quantitative restrictions on imports and exports between member states and measures having equivalent effect.
Both are subject to article 36, which provides that they do not apply to prohibitions or restrictions. justified on grounds of. the protection of industrial and commercial property, provided that these do not constitute a means of arbitrary discrimination or a disguised restriction on trade between member states.
The facts on which M Tech relies as engaging these provisions are disputed, at least in part, but must for present purposes be assumed to be true.
They can be summarised as follows.
There is a large global market for second hand computer hardware, much of which is in the hands of independent resellers who do not belong to the manufacturers authorised distribution networks.
In 2007, according to M Tech, the secondary market in the EEA for Sun hardware alone was worth US$1.07 billion, of which US$0.64 billion was sold by independent resellers.
Much of the trade which independent resellers handle is entirely lawful because it involves goods which were previously marketed in the EEA by or with the consent of the trade mark proprietors.
The allegation is that since 2007 Sun has deliberately set about securing this market for itself and its authorised dealers by declining to supply information which would enable independent resellers to discover whether any particular equipment was first put on the EEA market by or with Suns consent.
This information is not available from any other source.
It is not apparent from the goods themselves.
Nor can it be inferred from the circumstances in which they have been acquired.
This is because the same goods may be resold several times in the course of their serviceable life and they are not necessarily located in the same territory as the vendor or broker selling them.
The result, they say, is to produce a chilling effect on independent sellers, deterring them from dealing in any Sun hardware, whether it is legitimately present on the EEA market or not, because their inability to distinguish between the two exposes them to the risk of enforcement actions by Sun.
This risk is increased by the vigour with which Sun enforces its trade mark rights against independent resellers found dealing in the EEA in hardware which has not been marketed there by them or with their consent.
The combination of aggressive enforcement of its trade mark rights and the withholding of information about provenance has, says M Tech, both the object and the effect of eliminating the legitimate as well as the illegitimate parallel trade in the EEA, thus giving Sun effective control of the secondary market in its products there, and enabling them to partition that market through its control of an authorised network of dealers.
M Tech say that they have been harmed by Suns practice of withholding information about the provenance of their products, because that practice was among the reasons why they had largely ceased to deal with Sun equipment by about 2007 or 2008.
The KSS transaction of 2009 is said to have occurred as a result of a failure of their ordinary procedures.
However, it is important to note that the 64 disk drives supplied to KSS were new goods which were imported into the EEA and first marketed there by M Tech themselves, without Suns consent as they now accept.
M Tech do not say that this happened as a result of any policy on Suns part of withholding information about the provenance of the goods.
The position is exactly the same in relation to transactions affected by the injunction.
In the form that Kitchin J granted it, the injunction restrained only the marketing by M Tech within the EEA of Suns trade marked goods which had not previously been marketed there by Sun or with its consent.
There is a proviso designed to ensure that Sun does supply information about the provenance of goods potentially affected by the injunction.
Its effect is that the injunction is not to apply to goods marketed by M Tech unless Sun have confirmed within ten days of being told the serial and part numbers of the goods in question that their records show that they have not been put on the EEA market by them or with their consent.
It will be apparent that it is not good enough for M Techs purposes to establish a breach of the treaty.
It has to show that that breach gives them a defence to an action for infringement of the marks.
There is a principle of English public policy, which is common to the national legal systems of most member states, that a person may not profit from his own illegal act.
The Court of Justice has held that it is open to member states to apply that principle to causes of action arising from directly applicable provisions of EU law, as indeed it has sometimes done itself: see Courage Ltd v Crehan (Case C 453/99) [2002] QB 507, at para 31.
However, Mr. Vajda QC (who appeared for M Tech) disclaimed any reliance on the principle.
His case is that Sun has no enforceable rights under article 5 of the Trade Mark Directive in the circumstances of this case, because that article is subject to an implied limitation to be derived as a matter of construction from articles 34 to 36 of the EU treaty.
The effect of the suggested limitation is to preclude any exercise of trade mark rights which would have the object or effect of partitioning the EU internal market.
What this amounts to is a general suspension of a proprietors trade mark rights as against the entire EEA market, and not just in respect of those transactions which are affected by Suns policy of refusing to disclose the provenance of the goods.
M Tech must, as it seems to me, put its case in this way because the chilling effect on the secondary market, which is said to result from that policy, has not affected the particular transaction which has given rise to the allegation of infringement in this case and cannot affect any future transactions restrained by the injunction.
It follows that the fundamental question on this appeal is whether the implied limitation on the application of article 5 of the directive for which Mr. Vajda contends can be supported as a matter of EU law.
The Trade Mark Directive is in most respects substantially based on the case law of the Court of Justice as it had developed over the two previous decades.
It is a harmonising measure concerned with (among other things) the achievement of the internal market and the free movement of goods: see recitals (2) and (10).
Its efficacy as a harmonising measure uniformly applicable across the whole of the EU depends on treating it as an exhaustive statement of the rights of trade mark proprietors.
For that reason, the Court of Justice held in Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft mbH (Case C 355/96) [1999] Ch 77, at para 25 that articles 5 to 7 of the Trade Mark Directive must be construed as embodying a complete harmonisation of the rules relating to the rights conferred by a trade mark.
In Zino Davidoff SA v A&G Imports Ltd (Joined Cases C 414/99 to 416/99) [2002] Ch 109 the Court of Justice reaffirmed the principle, observing that articles 5 to 7 of the Directive accordingly define the rights of proprietors of trade marks in the Community: paras 32, 39.
These statements reflect the general rule that where a particular area of commercial activity engaging the principle of the free movement of goods is regulated by harmonising legislation of the EU, then that legislation supersedes the general provisions of articles 34 to 36 of the treaty.
The rule, which originates in the decision of the Court of Justice in Tedeschi v Denkavit Commerciale Srl (Case 5/77) [1977] ECR 1555, has been reiterated many times in many contexts, including the EU legislation relating to trade marks: see Bristol Myers Squibb v Paranova A/S (Joined Cases C 427/93, C 429/93, C 436/93) [2003] Ch 75 at paras 25 26; Phytheron International SA v Jean Bourdon SA (Case C 352/95) [1997] ECR I 1729 at para 17.
Its rationale is not that the EU legislator is at liberty to override or displace the provisions of the treaty.
It is that harmonisation measures are directed to the achievement of the single market.
They must therefore be treated, assuming that they are valid, as giving effect in the relevant commercial context both to the principle of the free movement of goods and to the limitations on that principle embodied in article 36.
In its Guide to the Application of Treaty Provisions governing the Free Movement of Goods (2010), at para 3.1.1, the European Commission, after stating the Tedeschi principle, puts the point in this way: This is due to the fact that harmonising legislation can be understood as substantiating the free movement of goods principle by establishing actual rights and duties to be observed in the case of specific products.
Therefore, any problem that is covered by harmonising legislation would have to be analysed in the light of such concrete terms and not according to the broad principles enshrined in the treaty.
Mr. Vajda submits that the treaty remains relevant as the dominant instrument which informs the construction of the directive.
For my part, I need no persuasion of this.
To say that the directive is the relevant source of law is entirely consistent with resort to the treaty as an aid to discovering what it means.
The Trade Mark Directive must be construed on the assumption that it was intended to be consistent with treaty provisions relating to the free movement of goods, and indeed with other relevant treaty provisions.
The case law which I shall cite below can be treated as so many variations on that theme.
But I do not think that this carries the argument any further, because there is no potential inconsistency between the language of the directive and the provisions of the treaty which calls to be resolved by reference to the latter.
This is because the scheme of articles 5 and 7 of the directive already embodies both the primary provisions governing the free movement of goods in articles 34 and 35, and the limited exception in article 36 for the protection of industrial and commercial property.
Article 5 of the directive provides that the proprietor of a trade mark shall be entitled to exercise certain rights, including the right to prevent the use by others of his own or an identical trade mark in connection with goods of the class for which the mark is registered.
It is not qualified by any proviso relating to the free movement of goods within the EU, because it does not need to be.
The reason is that the reconciliation between article 5 of the directive and articles 34 to 36 of the treaty is achieved in the directive by article 7.
The rights derived from article 5 of the directive are exhausted under article 7.1 as soon as the goods are first put on the market in the EU by or with the consent of the proprietor of the mark.
Thereafter, subject to article 7.2, the proprietor has no subsisting rights capable of engaging the prohibition in articles 34 and 35 of restrictions on trade between member states.
As the Court of Justice observed in Bristol Myers Squibb v Paranova A/S (Joined Cases C 427/93, C 429/93, C 436/93) [2003] Ch 75 at para 40: Article 7 of the Directive, like article 36 of the treaty, is intended to reconcile the fundamental interest in protecting trade mark rights with the fundamental interest in the free movement of goods within the common market, so that those two provisions, which pursue the same result, must be interpreted in the same way.
The one exception to the EU rule of exhaustion stated in article 7.1 of the directive is the situation envisaged by article 7.2.
This deals with the only circumstances in which a proprietor may, by virtue of his trade mark, control the marketing (commercialisation) of the goods after they have been put on the market in the EEA by him or with his consent.
It is therefore qualified by the requirement that there should be legitimate reasons for him to exercise that control.
Since the exception in article 36 for the protection of industrial or commercial property does not extend to the use of the rights derived from that property as disguised restrictions on trade between member states, it goes without saying that a desire to achieve such restrictions does not constitute legitimate reasons.
The case law of the Court of Justice accordingly differentiates between (i) cases where the goods have not previously been marketed in the EEA by the proprietor or with his consent and the proprietor is seeking to exercise his rights under article 5 of the Trade Mark Directive in circumstances where his rights are not yet exhausted under article 7.1, and (ii) cases governed by article 7.2, where the goods are legitimately in circulation within the EEA but the proprietor nevertheless claims to have legitimate reasons to oppose their further commercialisation.
Category (i): Enforcement to prevent first marketing in the EEA
The law relating to cases in this category was stated in EMI Records Ltd v CBS United Kingdom Ltd (Case 51/75) [1976] ECR 811.
This case was decided long before the first Directive was adopted in 1989, and turned on direct application of what are now articles 34 to 36 of the treaty.
The main question at issue was whether EMI, which owned the Columbia trademark throughout the European Community, could consistently with those provisions of the treaty prevent CBS from marketing in the Community records bearing the mark that had been imported from third countries.
The Court considered that the principle of the free movement of goods was incapable of restricting the right of a trade mark proprietor to prevent the first marketing within the Community of goods imported from outside the Community: 9 Article 36, in particular, after stipulating that Articles [34 and 35] shall not preclude restrictions on imports, exports or goods in transit justified inter alia on grounds of the protection of industrial and commercial property, states that such restrictions shall in no instance constitute a means of arbitrary discrimination or disguised restriction on trade between Member States. 10 Consequently the exercise of a trade mark right in order to prevent the marketing of products coming from a third country under an identical mark, even if this constitutes a measure having an effect equivalent to a quantitative restriction, does not affect the free movement of goods between Member States and thus does not come under the prohibitions set out in Article [34] et seq. of the Treaty.
In such circumstances the exercise of a trade mark right does 11 not in fact jeopardize the unity of the common market which Article [34] et seq. are intended to ensure. 21 It follows that neither the rules of the Treaty on the free movement of goods nor those on the putting into free circulation of products coming from third countries nor, finally, the principles governing the common commercial policy, prohibit the proprietor of a mark in all the Member States of the Community from exercising his right in order to prevent the importation of similar products bearing the same mark and coming from a third country.
This decision is not an aberration, nor does it depend on any quirk of the facts.
It has subsequently been applied in the context of the corresponding rule of exhaustion relating to patent protection: see Generics (UK) Ltd and Harris Pharmaceuticals Ltd v Smith Kline & French Laboratories Ltd. (Case C 191/90) [1992] ECR I 5335, at para. 17.
It is regularly cited as authoritative by Advocates General, for example Advocate General Jacobs in his opinions in Criminal proceedings against Aim Richardt and Les Accessoires Scientifiques (Case C 367/89) [1991] ECR I 4621, at para 14, and Silhouette [1999] Ch 77, at para 49.
It has continued to be regarded as self evident by text book writers: see, in particular, Kerlys Law of Trade Marks and Trade Names, 15th ed. (2011), para 16.091.
In Levi Strauss & Co v Tesco Stores Ltd [2003] RPC 18, Pumfrey J observed at para 51 that it could hardly be clearer.
It has formed, with the principle of exhaustion, the basis for the application of the principles of free movement in the context of trade marks and other intellectual property rights.
I agree with this observation, and I think that it is worth pausing to note the context in which it was made.
The Levi Strauss case was, like the present one, concerned with goods imported into the European Community without the consent of the trade mark proprietor.
It had been joined in the same reference to the Court of Justice as Zino Davidoff SA v A&G Imports Ltd (Joined Cases C 414/99 to 416/99) [2002] Ch 109.
I have already referred to the Courts decision on this reference as part of a consistent line of authority for the propositions (i) that the Directive must be construed as a definitive statement of the harmonised law concerning the rights of trade mark proprietors, and (ii) that it confers on trade mark proprietors a right to control the first marketing of their goods in the EEA save in cases where that right had been unequivocally renounced.
Pumfrey J, after noting these propositions and referring to the statement of principle in EMI Records, proceeded to reject a submission very similar to M Techs in the present case, that the exercise of a right to control the first marketing of the goods in the EEA could be precluded by the treaty provisions relating to the free movement of goods.
He gave summary judgment in favour of the proprietor, and declined to refer the question to the Court of Justice: see paras 51 55, 58.
Category (ii): Enforcement to prevent further commercialisation
The position in relation to the exercise of the proprietors extended right under article 7.2 is different.
This is because in cases governed by article 7.2 the goods have by definition been put onto the market in the EEA by or with the consent of the proprietor, who is seeking to prevent their further commercialisation.
It follows that the principle of the free movement of goods may be engaged, depending on the facts.
The great majority of cases in this category are repackaging cases.
Their characteristic feature is that the trade mark proprietor is seeking to prevent a trader who has acquired the proprietors branded goods in one member state from altering them so as to enable them to be sold in another member state, commonly by repackaging them with the same mark so as to comply with different national languages, regulations or marketing practices.
The proprietor in these cases is generally attempting to exercise his trade mark rights in a way which directly partitions the internal market by objecting to a repackaging which is necessary to enable the goods to be sold in a particular national market.
The case law on what may constitute legitimate reasons really begins with the decision of the Court of Justice in Hoffmann La Roche AG & Co v Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH (Case C 102/77) [1978] ECR I 1139, but the leading modern decision is Bristol Myers Squibb v Paranova A/S (Joined Cases C 427/93, C 429/93, C 436/93) [2003] Ch 75.
Two arguments were advanced in Bristol Myers Squibb to justify the proprietors position.
The first was that article 7.1 provided for the exhaustion of the proprietors trade mark rights only in respect of the goods in the exact form in which they were originally put on the market in the EEA.
Therefore, even without article 7.2, the proprietor was said to be entitled to object to their being marketed in their repackaged form.
The Court of Justice rejected this contention because one of the objectives of the EU principle of exhaustion was precisely to allow trade in branded goods between member states once they had been put on the market in the EEA by or with the consent of the trade mark proprietor: paras 34 37.
The second argument was that article 7.2 justified the proprietors position because there were legitimate reasons for opposing the further commercialisation of the goods in their repackaged form.
In addressing this argument, the Court took it for granted that the protection of a national market within the EU was not a legitimate reason.
It then proceeded to formulate the conditions on which a trade mark proprietor might oppose repackaging which was necessary for sales to be made in a particular market.
Broadly speaking, the least that he would have to show was that his opposition was objectively justified by some adverse effect of the repackaging on the condition or reputation of the goods.
The same principles were applied in two cases decided at the same time, Eurim Pharm Arzneimittel GmbH v Beiersdorf AG (Joined Cases C 71 73/94) [1996] ECR I 3603 and MPA Pharma GmbH v Rhone Poulenc Pharma GmbH (Case 232/94) [1996] EC I 3671; and later in Pharmacia & Upjohn SA v Paranova A/S (Case C 379/97) [2000] Ch 571.
On the same ground, it has been held that a trade mark proprietor may not object to the removal of identification codes or marks which would reveal the traders sources of supply to the trade mark proprietor and thereby make it impossible for the trader to serve that market at all: Frits Loendersloot (t/a F Loendersloot Internationale Expeditie) v George Ballantine & Sons Ltd. (Case C 349/95) [1997] ECR I 6227, at para 40.
The reasoning of these decisions is applicable only in cases where the goods are already lawfully in circulation within the EEA with the consent of the trade mark proprietor, and he is trying to exercise the only right of control which the directive allows him in that situation.
It is right to add that even in that context, the Court did not hold that a right expressly conferred by the directive in unqualified terms was unenforceable when the effect of enforcement would be to impede trade between member states.
What it held was that the right did not exist at all.
That conclusion was possible in the case of rights governed by article 7.2 because it provides that the rights exist only if there are legitimate reasons.
A corresponding conclusion would not have been possible in the case of rights governed by article 5 which were not exhausted under article 7.1, because those rights are in every relevant respect unqualified.
There was a good deal of debate before us, as there was in the courts below, about the effect of the case law of the Court of Justice concerning the burden of proving whether the trade mark proprietor did or did not consent to the marketing of the goods in the EEA.
This question does not arise in the present case, because it is now accepted that the goods were first marketed in the EEA by M Tech and that Sun did not consent.
But the case law is said to have a broader relevance, as authority for the general approach of the Court of Justice to the enforcement of trade mark rights in a manner said to be inconsistent with the free movement of goods.
In summary, the rule is that while national law may place the burden of proving consent on the alleged infringer who asserts it, nevertheless if the effect would be to enable the trade mark proprietor to partition national markets within the EU, the burden of proof must lie with the proprietor.
The authority for this is Van Doren + Q GmbH v Lifestyle sports and sportswear Handelsgesellschaft mbH (Case C 244/00) [2003] ECR I 3051, paras 37 41.
It is apparent from the judgment in that case at paras 21 and 40, that the concern of both the referring court and the Court of Justice was that a requirement that the alleged infringer should prove that the goods had been marketed in the EEA with the proprietors consent would in practice require him to identify an authorised distributor in the EEA from whom he had obtained his supplies, thereby enabling the proprietor to use his control over his distribution network to prevent him from obtaining any more.
However, the rule does not apply (indeed, the problem does not arise) in a case where it is admitted or clear, as it is in the present case, that the goods in question were imported into to the EEA by third parties without the proprietors consent: Zino Davidoff SA v A&G Imports Ltd (Joined Cases C 414/99 to 416/99) [2002] Ch 109 at para 54; subsequently reaffirmed in Class International BV v Colgate Palmolive Company (Case C 405/03) [2006] Ch 154, at paras 71 74.
The difference between the two situations is discussed in the judgment in Van Doren, at paras 28 31.
It corresponds to the long standing distinction between trademarked goods which are already legitimately in circulation in the EEA and those which are not.
The reason for the difference of treatment is that where it is established that the goods have not previously been on the market in the EEA, the proprietor is only exercising his right to control the first marketing of his branded goods in the EEA.
This right is conferred on him by EU law and does not engage the treaty provisions concerning the free movement of goods.
Where, on the other hand, it may turn out that the goods were already legitimately circulating in the EEA because the trade mark proprietor had consented to their previous marketing there, the attempted enforcement of the trade mark rights potentially affects trade between member states.
Application to the facts alleged by M Tech
The real question in the present case is whether, applying those principles, the facts alleged by M Tech would give them a defence if they could be proved.
Like Kitchin J, I do not consider that they would.
The reason is that, once the scheme of articles 5 and 7 of the directive are correctly understood, it is clear that the unlawful conduct alleged by M Tech is collateral to the particular right which Sun is seeking to enforce.
The first and main reason follows directly from the scheme of those articles.
On the agreed facts, these goods were never marketed in the EEA until they were imported and marketed there by M Tech without Suns consent.
It is therefore not in dispute that the only right derived from its trade marks which Sun is seeking to enforce by these proceedings is its right to control the first marketing of the goods in the EEA.
This is an exercise of rights which does not engage the principle of the free movement of goods between member states embodied in articles 34 to 36 of the treaty.
It affects only the entry of the goods onto the EEA market, not the movement of the goods within it.
It is specifically authorised by articles 5 and 7.1 of the Trade Mark Directive, which are part of an exhaustive code that itself fully reflects the requirements of articles 34 to 36 of the treaty.
M Techs argument to the contrary, and the decision of the Court of Appeal accepting it, are both substantially based on decisions of the Court of Justice under article 7.2 concerning the use of trade mark rights to obstruct the trading between member states of goods already legitimately in circulation within the EEA.
That is a different, and for present purposes irrelevant situation.
Second, what produces the impediment to the free movement of goods is not the enforcement of Suns right to control the first marketing of its products in the EEA.
On M Techs account of the facts, the adverse effect on the free movement of goods arises from the partitioning of the market through Suns controlled distribution network.
That is made possible by the disappearance of the independent secondary market for its hardware, which removes any alternative source of supply.
The disappearance of the independent secondary market is in turn the result of Suns refusal to disclose where any particular goods were first marketed and, if it was in the EEA, whether it happened with its consent.
This is said to achieve the chilling effect on both the legitimate and the illegitimate parallel trade, which has served to eliminate independent resellers in both categories.
This is the only economically intelligible way in which M Techs case may be understood.
It is also the mechanism which is clearly being put forward in the evidence of the two witnesses, Mr. Marion and Mr. Buta, who deal with this matter on their behalf.
The difficulty about M Techs argument is that the act of a trade mark proprietor in seeking to control the first marketing of his products in the EEA is in principle an ordinary exercise of the essential right conferred on him by articles 5 and 7.1 of the directive.
He may or may not also engage in activities such as withholding information about provenance, which are designed to eliminate the independent parallel trade.
But Sun cannot be prevented from doing something which is in itself entirely lawful and consistent with the principle of the free movement of goods, simply because it proposes to do something else as well which is unlawful and inconsistent with that principle.
It does not advance the argument to say, as M Tech does, that Suns policy of withholding information about provenance is effective only because it is combined with a policy of vigorously enforcing its trade mark rights.
The only conceivable relevance of the fact that Sun seeks to control the first marketing of its trade marked products in the EEA is that if they did not do this, then it would be impossible to eliminate independent resellers by withholding information about provenance, because they could supply themselves with stock from outside the EEA regardless of provenance and market it in the EEA regardless of Suns objection.
But that is the very thing that EU law unquestionably says that they cannot do.
It cannot therefore follow that because Sun enforces its trade mark rights vigorously it should have no trade mark right to enforce in those circumstances.
Nor, in my view, does it advance the argument to refer to the enforcement of Suns trade mark rights as part of a scheme to eliminate the independent resellers from the secondary market.
This is simply a pejorative way of making the same unsustainable point.
Third, even if (which is not the case) the jurisprudence arising from article 7.2 about the obstruction of trade within the EEA in goods which are already legitimately in circulation there had any application to the particular right which Sun is seeking to enforce, the case law would not justify the conclusion pressed upon us by M Tech.
I have already discussed the cases on article 7.2.
They are authority for the proposition that a trade mark proprietor cannot claim a right under the directive to oppose the further commercialisation of the goods if the exercise of that right would itself unjustifiably impede the free movement of goods between member states.
However, none of the cases go so far as to hold non existent or unenforceable rights whose exercise would in itself have no impact on trade between member states, merely because they are accompanied by other acts which do.
The law responds to this situation by restraining the acts which do.
It does not pull down the whole temple.
Fourth and last, it is a consequence of the collateral character of the unlawful acts alleged against Sun that M Tech have to advance a case which may fairly be characterised as extreme.
The argument that article 5 of the directive is impliedly limited in the manner suggested by Mr. Vajda necessarily operates to suspend Suns trade mark rights indiscriminately as against the entire EEA market, including traders who are entirely unaffected by the withholding of information about provenance because, for example, they are knowingly importing Suns goods without their consent.
The argument would be exactly the same, and just as sound or unsound whether or not the trader needed to be told the provenance of the goods.
Mr. Vajda accepts this.
Logically, as he also acknowledged, the effect would be to make the rights unavailable not only as against unauthorised parallel importers like M Tech but as against any other categories of infringer, for example industrial counterfeiters.
This is a submission of truly remarkable breadth.
In Imperial Chemical Industries Ltd v Berk Pharmaceuticals Ltd [1981] 2 CMLR 91, at [9], Sir Robert Megarry V C characterised a somewhat similar argument as a proposal to treat a person guilty of collateral breaches of the treaty as an outlaw, unable to enforce any of his rights against any one.
None of the cases relied upon by M Tech come close to justifying such a proposition, which would be quite unnecessary to vindicate the principles of the treaty and contrary to the object and express terms of the directive.
It may well be that M Tech has a perfectly good cause of action against Sun based on articles 34 to 36 of the treaty for damages for preventing them from selling Sun products by their policy of withholding information about the previous history of the goods.
I make no comment on that, because it is irrelevant to this appeal.
We are not concerned in these proceedings with business that M Tech have been prevented from doing, still less with business that other traders have been prevented from doing.
We are concerned with business which M Tech have done in infringement of Suns trade marks.
It is not a defence to proceedings brought on that basis that there is other business that M Tech have been prevented from doing by Suns arguably unlawful policy of withholding information.
Article 101: anti competitive agreements
Article 101 of the treaty prohibits agreements and concerted practices so far as they have as their object or effect the prevention, restriction or distortion of competition within the internal market.
An intellectual property right is not itself an agreement or concerted practice capable of contravening article 101 of the treaty.
But there are undoubtedly circumstances in which it may be unenforceable because there is a sufficient nexus between the exercise of the right and the agreement or concerted practice in question.
The test, which dates back to the venerable but still authoritative decision of the Court of Justice in Sirena Srl v Eda Srl (Case 40/70) [1971] ECR 69, at para 9, is whether it is the subject, the means or the result of a restrictive practice: see also Keurkoop BV v Nancy Kean Gifts BV (Case C 144/81) [1982] ECR 2853, at para 27 (the exercise of that right may be subject to the prohibitions contained in the Treaty when it is the purpose, the means or the result of an agreement or concerted practice.
The facts relied upon as engaging article 101 in this case are that Sun distributes its products through a network of authorised dealers.
The dealers are said to be bound by distribution agreements which require them to obtain their supplies from Sun or from other authorised Sun dealers, unless the goods in question cannot be supplied from those sources.
It is alleged that this is contrary to article 101, and for present purposes Sun is prepared to assume that it is.
The question is whether that has any relevant connection with the exercise by Sun of its right to control the first marketing in the EEA of its trade marked goods.
The argument seems to have undergone a certain amount of refinement since it was presented to the judge.
As presented in M Techs printed case, it was that the restriction in the distribution agreements served to reinforce the chilling effect of withholding information about the provenance of the goods.
This is because, so it is said, Suns authorised dealers are able to access the Sun database from which the provenance of the goods can be identified.
They are not therefore inhibited from sourcing their supplies from independent resellers by Suns policy of withholding provenance information from the independent market.
Therefore, in order to achieve its objective of eliminating the independent secondary market, it is necessary to prevent the authorised dealers contractually from buying from them.
In effect, what is being said is that Sun has two tactics for eliminating the independent secondary market, one (withholding information) aimed directly against independent resellers and the other aimed at their own distributors.
The two tactics. , say M Tech, work in tandem.
There are two insuperable difficulties about this part of M Techs case.
The first is that there is no relevant connection between the policy of withholding information about provenance and the prevention, restriction and distortion of competition by means of the distribution agreements.
The whole premise of the argument is that the policy of withholding information has no anti competitive effect on the choices of Suns authorised distributors.
The second difficulty is that there is no relevant connection between the policy of withholding information about provenance and the enforcement of Suns right to control the first marketing of its trade marked products in the EEA, for the same reasons as there is no such connection in the context of articles 34 to 36.
More generally, neither the trade marks nor the rights conferred on their proprietor by the directive can be characterised as the subject, the means or the result of an agreement or concerted practice contravening article 101.
Abuse of rights
The final point taken by M Tech seems to me to be incapable of succeeding in circumstances where their other points have failed.
The leading case on the EU concept of abuse of rights is the decision of the Court of Justice in Halifax Plc v Customs and Excise Comrs (Case C 255/02) [2006] Ch 387, in which a tax saving scheme which formally complied with the requirements of the Sixth VAT Directive was said to be abusive.
In his opinion, at paras 62 71, Advocate General Poiares Maduro traced the development of the concept in the jurisprudence of the Court of Justice, before expressing the principle as being that no provision of Community law can be formally relied on to secure advantages manifestly contrary to its purposes and objectives: para. 74.
This test was adopted by the Grand Chamber in its judgment.
The Court said: 74 it would appear that, in the sphere of VAT, an abusive practice can be found to exist only if, first, the transactions concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the Sixth Directive and the national legislation transposing it, result in the accrual of a tax advantage the grant of which would be contrary to the purpose of those provisions. 75 Secondly, it must also be apparent from a number of objective factors that the essential aim of the transactions concerned is to obtain a tax advantage.
As the Advocate General observed in para 89 of his opinion, the prohibition of abuse is not relevant where the economic activity carried out may have some explanation other than the mere attainment of tax advantages. 76.
It is for the national court to verify in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined, whether action constituting such an abusive practice has taken place in the case before it.
The rule of EU law which Sun is invoking in the present case is to be found in articles 5 and 7.1 of the Trade Mark Directive.
It is beyond argument that the purpose of those provisions was (among other things) to enable the trade mark proprietor to control the first marketing of his trade marked goods in the EEA.
The exercise of that right by Sun did not only satisfy the formal requisites of those articles.
It was entirely consonant with their purpose.
Even if (contrary to my view) M Tech were right to say that by achieving that purpose Sun was enabled to do other things which tended to eliminate independent resellers from the secondary market, that would not make it an abuse of rights.
Reference
Once the Court of Justice has laid down the relevant principles of law in terms which are clear, consistent, and sufficient for the decision of the case, it is the function of national courts to apply them.
That there are obscurities in parts of this area of EU law is beyond question.
But the particular legislative provisions and legal principles which make M Techs case impossible are in my judgment entirely clear.
A reference is not required to elucidate them.
M Techs real problem, under all three heads of their argument, is that they are unable to establish a relevant connection between the exercise of Suns right to control the first marketing of their trade marked goods in the EEA and any breach of the treaty.
Conclusion
I would allow the appeal and restore the order of Kitchin J.
| UK-Abs | Oracle America Inc, formerly known as Sun Microsystems, [Sun] are the manufacturers of computer systems, workstations and related goods.
Sun is the proprietor of trade marks registered for use in connection with computer hardware [5].
M Tech Data Limited, is a supplier of computer hardware [5].
Articles 5 and 7 of Directive 89/104/EC confer upon a trade mark proprietor the exclusive right to control the first marketing in the European Economic Area [EEA] of goods bearing his trade mark, even if the goods are genuine and have previously been put on the market by him or with his consent outside the EEA [4].
This means that third parties cannot import or sell a product for the first time in the EEA without the trade mark proprietors consent.
Sun has the right to first market its hardware in the EEA.
In 2009, a trap order was placed by a UK purchaser called KSS Associates for 64 Sun disk drives [5].
A trap order is used in litigation to gather evidence as to what a potential defendant supplies in response to a request for a trade mark proprietors products.
M Tech supplied 64 Sun disk drives sourced from a US broker, which had previously been sold in China, Chile and the USA.
Sun had never consented to these goods being put on the market in the EEA.
Consequently, M Tech infringed Suns trade marks contrary to Article 5.1(a) of the Directive [5].
Sun sought summary judgment for damages for the infringement and an injunction restraining further infringements [6].
In its defence, M Tech alleged that Sun had sought to secure the secondary market for its hardware, worth US$ 1.07 billion, for itself and its authorised dealers by declining to supply information on whether any particular equipment was first put on the EEA market by or with Suns consent [9].
This had a chilling effect on independent resellers, including M Tech, as a result of Suns aggressive enforcement of its trade mark rights and withholding of the requisite information, which was not otherwise available and could not be inferred from circumstances [9].
In fact, the disks had been imported and supplied by M Tech because of internal procedure failures and not due to any alleged policy by Sun to withhold the requisite information [10].
M Techs defence was that Suns trade marks are not enforceable at all because (i) the object and effect of enforcement would be to partition the EEA market contrary to the free movement of goods within the EU enshrined in Articles 34 to 36 of the Treaty on the Functioning of the European Union; (ii) the exercise of Suns trade marks is connected with its distribution agreements that contained restrictive provisions inconsistent with Article 101 and (iii) enforcement of Suns trade marks would constitute an abuse of rights under EU law [6].
Kitchin J granted summary judgment, ordering an inquiry into damages, and an injunction that prevented M Tech marketing goods if Sun has confirmed that those goods have not previously been put on the EEA market by Sun or with Suns consent [7, 10].
The Court of Appeal allowed M Techs appeal and set aside the order [7].
Sun appeals to the Supreme Court, inviting the court to make a reference to the Court of Justice of the European Union [CJEU'] [7].
The issue is whether a person who has imported and sold goods in the EEA without the consent of the trade mark proprietor is entitled to defend an action for infringement on the ground that the proprietor of the trade mark is engaged in conduct calculated to obstruct the free movement of goods or distort competition in the EEA market [1].
If this were an arguable defence in EU law, a reference to the CJEU would be necessary [7].
The Supreme Court unanimously allows the appeal and restores the order of Kitchin J.
The Supreme Court declines to make a reference to the CJEU [36].
Lord Sumption delivers the judgment of the Court.
The fundamental question is whether, as a matter of construction of Articles 34 to 36 of the EU Treaty, there is an implied limitation on the application of Article 5 of the Directive to preclude any exercise of trade mark rights that would have the object or effect of partitioning the EEA internal market [11].
Such a limitation would effectively suspend Suns trade mark rights as against the entire EEA market [11].
The scheme of Articles 5 and 7 of the Directive embodies both the primary provisions of the Treaty governing free movement of goods and the limited exception in Article 36 of the Treaty for the protection of industrial and commercial property [14].
Reconciliation of the right under Article 5 to prevent the use by others of his own or identical trade mark for the registered class of goods with the Treaty is achieved by Article 7.1, as the right is exhausted as soon as goods are put on the EEA market by or with the consent of the trade mark proprietor [15].
This is subject to Article 7.2, which permits a proprietor to control the marketing of his goods within the EEA market for legitimate reasons, which naturally do no include restricting trade between member states [16].
The principle of the free movement of goods is incapable of restricting the right of a trade mark proprietor to prevent the first marketing within the EEA of goods imported from outside the EEA, per EMI Records Ltd v CBS United Kingdom Ltd 9 (Case 51/75) [1976] ECR 811 [18 20].
The Directive is a definitive statement of the harmonised law concerning the rights of trade mark proprietors that confers on them a right to control the first marketing of their goods in the EEA, save where that right has been unequivocally renounced [20].
The right affects only the entry of goods onto and not the movement of goods within the EEA market [25].
Under Article 7.2, when goods have been put on the EEA market, the free movement of goods may be engaged and control of the marketing can only be exercised for legitimate reasons [21].
Where there are no such legitimate reasons, the right to control the marketing does not exist at all [22].
This reasoning cannot be applied to the right to control the first marking of goods in the EEA as that right is in every relevant respect unqualified [22].
National law may place the burden of proving the consent of the trade mark proprietor to put goods on the EEA market on an alleged infringer who asserts it, unless the effect would be to enable the partitioning of national markets, in which case the burden lies with the proprietor [23].
This rule is of no application in a case where it is admitted or clear that the goods were imported into the EEA without the proprietors consent [23].
It is clear that the unlawful conduct alleged by M Tech does not amount to a defence, even if proved [24].
On the agreed facts, the disk drives were never marketed in the EEA until they were imported by M Tech without Suns consent.
The only right that Sun is seeking to enforce is the right to control the first marketing of goods in the EEA and the exercise of these rights affects only the entry of goods onto the EEA market and thus does not engage the principle of the free movement of goods [25].
The control of marketing of goods in circulation within the EEA under Article 7.2 is a different and irrelevant situation [25].
Sun cannot be prevented from enforcing its right to control first marketing, which is entirely lawful and consistent with the principle of the free movement of goods, simply because it is alleged that Sun proposes to withhold information about the provenance of its goods, which is unlawful and inconsistent with that principle [26].
The case law on Article 7.2 only prevents a trade mark proprietor claiming a right to oppose further commercialisation if the exercise of that right itself would unjustifiably impede the free movement of goods.
It does not restrain any exercise that does not [27].
The limitation contended for would have the effect of preventing Sun enforcing its trade mark rights against anyone, which is unnecessary to vindicate the Treaty and contrary to the object and terms of the Directive [28].
There is no relevant connection between the alleged policy of withholding information about the provenance of goods and the prevention, restriction or distortion of competition, contrary to Article 101 of the Treaty, by means of distribution agreements with a network of authorised Sun dealers.
The policy had no effect on the choices made by the dealers and neither trade marks nor the right to enforce them can be characterised as the subject, means or result of an agreement or concerted practice [32].
The exercise of Suns rights was not an abuse of rights in EU law [35].
A reference to the CJEU is not necessary as the legislative and legal principles that made M Techs case impossible are entirely clear [36].
|
This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Kingarth and Lord Brodie) of 10 September 2010: [2010] CSIH 78, 2010 SLT 1047, 2011 SC 70.
By that interlocutor the First Division allowed a reclaiming motion by Blajosse Charlotte Eba against an interlocutor of the Lord Ordinary (Lord Glennie) dated 31 March 2010: [2010] CSOH 45, 2010 SLT 547.
It refused a cross appeal against that interlocutor by the Advocate General for Scotland, representing the Department for Work and Pensions.
The issue with which it was concerned was the scope of the remedy of judicial review in the Court of Session of decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act) which are excluded from review by way of an appeal.
The Lord Ordinary had dismissed Ms Ebas petition for judicial review of a decision of Judge DJ May QC, sitting as a judge of the Upper Tribunal, dated 6 February 2009.
Judge May had refused her application for permission to appeal to the Upper Tribunal against the refusal on 27 January 2009 by the First tier Social Entitlement Chamber of her appeal against the refusal by the Department on 11 February 2008 of her claim to disability living allowance.
The First Division, reversing the decision of the Lord Ordinary, held that the decision of the Upper Tribunal on this matter was amenable to judicial review under the supervisory jurisdiction of the Court of Session and that the grounds on which it could be reviewed were not subject to any limitation on policy or discretionary grounds: para 65.
Ms Eba had also sought judicial review of the decision by the First tier Tribunal on 27 January 2009 to refuse her application for permission to appeal to the Upper Tribunal.
Section 11(3) of the 2007 Act provides that the right to appeal to the Upper Tribunal may be exercised only with permission.
Section 11(4) provides that permission may be given by the First tier Tribunal or the Upper Tribunal.
But, as there was an alternative remedy against the decision of the First tier Tribunal because permission could also be sought from the Upper Tribunal, the focus of attention throughout these proceedings has been on the decision of the Upper Tribunal to refuse permission: see the Lord Ordinary, 2010 SLT 547, para 1.
It should be noted that there was no right of appeal to the Court of Session against the Upper Tribunals decision to refuse permission, as section 13(1) of the 2007 Act provides that the right to appeal to that court on any point of law arising from a decision of the Upper Tribunal does not extend to an excluded decision.
Section 13(8)(c) provides that for the purposes of section 13(1) an excluded decision includes any decision of the Upper Tribunal on an application under section 11(4) for permission to appeal.
So the only way that unappealable decisions of that kind would be open to challenge in Scotland would be by way of judicial review in the Court of Session under the supervisory jurisdiction of that Court.
The issues
The appeal by the Advocate General in Ms Ebas case was heard together with appeals by the applicants against the decision of the Court of Appeal in R (Cart) v Upper Tribunal [2010] EWCA Civ 859, [2011] 2 WLR 36, [2011] QB 120 and that by Sullivan LJ in MR (Pakistan) v Upper Tribunal [2010] EWHC 3558 (Admin) which raised the same issue.
In Cart the Court of Appeal held that the unappealable decisions of the Upper Tribunal were amenable to the supervisory jurisdiction of the High Court in those cases only where the Upper Tribunal had exceeded its own jurisdiction in the sense understood prior to the decision of the House of Lords in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 or where it conducted the hearing so unfairly as to render its decision a nullity: [2011] 2 WLR 36, para 37.
In setting the boundaries of the supervisory jurisdiction in this very narrow way in relation to the Upper Tribunal, the Court of Appeal in Cart applied the decision in R (Sivasubramaniam) v Wandsworth County Court [2002] EWCA Civ 1738, [2003]1 WLR 475.
In that case the Court of Appeal held that the supervisory jurisdiction was not available for the review of decisions of the county courts, save only in very rare and exceptional circumstances.
These were where it was sought on the ground of an absence of jurisdiction as opposed to a mere error of law, or where there had been a procedural irregularity such that the applicant had been denied a fair hearing.
In MR (Pakistan) Sullivan LJ held that the reasoning in Cart, in which the decision that was under review came from the Social Entitlement Chamber, applied to unappealable decisions of the Immigration and Asylum Chamber of the Upper Tribunal too.
The Lord Ordinary in Ms Ebas case followed the reasoning of the Divisional Court in Cart: 2010 SLT 547, para 76.
The Advocate General joined with the Secretary of State for Justice, the Secretary of State for the Home Department and the Child Maintenance and Enforcement Commission in supporting the decision of the Court of Appeal in Cart and of the High Court in MR (Pakistan), and there is much that is common ground between all three appeals.
But a separate judgment is needed in Ms Ebas case in view of the questions that her case raises that are of particular interest in Scotland.
The principal issue in her case relates to the grounds on which a decision of the Upper Tribunal to refuse permission to appeal under section 11(4) of the 2007 Act is amenable to the supervisory jurisdiction of the Court of Session.
Ms Eba submits that unappealable decisions of the Upper Tribunal are amenable to the supervisory jurisdiction of the Court of Session on the grounds applicable to public tribunals in general which, she maintains, are without limit and have never been, and should not be, circumscribed.
This issue lies at the heart of the relationship between the Court of Session and the new system for specialist tribunals which was created by the 2007 Act.
On the one hand there is the rule of law, which is the basis on which the entire system of judicial review rests.
Wherever there is an excess or abuse of the power or jurisdiction which has been conferred on a decision maker, the Court of Session has the power to correct it: West v Secretary of State for Scotland 1992 SC 385, 395.
This favours an unrestricted access to the process of judicial review where no other remedy is available.
On the other hand there is the principle of finality.
There is obvious merit in achieving finality at the tribunal level in the delivery of administrative justice.
The new structure introduced by the 2007 Act lends force to this argument.
The importance of the issue is not, of course, confined to Scotland.
The new, simplified statutory framework for tribunals which the 2007 Act created extends to England and Wales and to Northern Ireland too.
The provisions of section 11 as to the right to appeal to the Upper Tribunal with permission (or, in Northern Ireland, leave) on any point of law arising from a decision made by the First tier Tribunal apply to those jurisdictions as well.
The provisions of section 13(1) and section 13(8)(c), which exclude from the right of appeal under section 13(2) decisions of the Upper Tribunal to refuse permission to appeal to the Court of Session, apply also to refusals of permission to appeal to the Court of Appeal in England and Wales or the Court of Appeal in Northern Ireland.
There are however two further issues which need to be considered in Ms Ebas case.
The first arises because there are significant differences between the circumstances in which the remedy of judicial review is available in England and Wales and Northern Ireland and the right of the citizen to invoke the supervisory jurisdiction of the Court of Session in Scotland.
The first question, then, is whether in Scotland too the scope for judicial review of unappealable decisions of the Upper Tribunal should be restricted in some way.
The Advocate Generals position is that the intention of Parliament was that the Upper Tribunal should be amenable to judicial review to the same extent in the Court of Session as in the High Court in England, and that the First Division of the Court of Session was wrong to hold otherwise.
For Ms Eba it is submitted that this argument should be rejected as, whatever may be held to be the position in England, the suggestion that the grounds of judicial review of decisions of the Upper Tribunal should be restricted in Scotland is not supported by authority and to adopt it would destroy the consistency of Scots law.
The position in Scotland is also more complicated than that which arises in England and Wales.
The 2007 Act can be said to have effected a complete re ordering of the system of administrative justice in England and Wales.
But that is certainly not true of Scotland.
There are a large number of tribunals and other similar bodies which sit in Scotland which have not been included within the new structure.
They are mainly confined to the Scottish tribunals that deliver administrative justice in matters devolved under the Scotland Act 1998 whose functions cannot be transferred to either the First tier or the Upper Tribunal by order of the Lord Chancellor: section 30(5)(a).
Various Scottish tribunals which exercise functions in relation to devolved matters have been restructured under legislation that applies only in Scotland.
These measures include the Mental Health (Care and Treatment) (Scotland) Act 2003, the Planning etc (Scotland) Act 2006, the Judiciary and Courts (Scotland) Act 2008 and the creation of Additional Support Tribunals under the Education (Additional Support for Lifelong Learning) (Scotland) Act 2004.
However, at least one tribunal exercising functions in Scotland in relation to reserved matters the Pensions Appeal Tribunal remains at first instance mainly outwith the structure of the 2007 Act.
So too do the Employment Tribunals and the Employment Appeal Tribunal.
So there is this further question.
Should there be a different approach to the grounds on which judicial review of unappealable decisions is available in the case of tribunals over which the supervisory jurisdiction of the Court of Session is exercised that are within the scheme of the 2007 Act from those that lie outside it?
Background
A comprehensive description of the statutory framework that the 2007 Act provides is to be found in the opinion of the First Division which was delivered by the Lord President (see 2011 SC 70, paras 2 4) and in the judgment of Lady Hale in the cases of Cart and MR (Pakistan) in this Court: [2011] UKSC 28, paras 22 29.
It is necessary, in order to set the scene for the purposes of this judgment, only to sketch in a few details.
The 2007 Act was designed to implement proposals in a report by a committee chaired by Sir Andrew Leggatt, Tribunals for users One System, One Service (DCA 2001).
It sets out a two tier structure which comprises a First tier Tribunal, into which were transferred most existing first instance tribunals exercising functions in relation to reserved matters, and an Upper Tribunal whose function is primarily to deal with appeals from the First tier Tribunal but also to take over the work of some first instance tribunals from which there was no appeal.
Both the First tier Tribunal and the Upper Tribunal are composed of a number of separate Chambers into which the work of the existing tribunals was grouped according to subject matter.
One of the aims of this reform, as described in para 6.30 of the Leggatt Report, was to create a comprehensive and systematic right of appeal on points of law from the First tier Tribunal to the Upper Tribunal and from there to the Court of Session or the Court of Appeal.
Any point of law was to be open to challenge before experts within the Tribunals system, and the senior members of the Upper Tribunal were to be judges.
They were to include judges of the Court of Session, judges of the Court of Appeal in England and Wales, Lord Justices of Appeal in Northern Ireland and puisne judges of the High Court in England and Wales and Northern Ireland: see section 6(1)(a) (d).
In para 6.30 the Leggatt Report added this comment: It would be significantly to users benefit to use that appeal system, rather than have recourse to the more complicated procedures and more limited remedies of judicial review.
We think that this latter possibility should be excluded.
Slightly different arguments apply to the appellate Division and first tier tribunals.
In para 6.31 it offered two options for the removal of judicial review from the Upper Tribunal.
One was to constitute all the appeal tribunals a superior court of record, as had already been done with the Employment Appeal Tribunal and the Transport Tribunal.
The other was to exclude judicial review by express statutory provision.
It recognised that the option of designating most of the First tier Tribunals as superior courts of record was manifestly inappropriate.
The recommendation in their case was a statutory provision prohibiting review of their decisions where there was a right of appeal which had not been exercised.
In the event the 2007 Act does not contain any provision which excludes judicial review of decisions of either the First tier or the Upper Tribunal.
It provides instead that the Upper Tribunal is to be a superior court of record: section 3(5).
This is a term that is unknown to the law of Scotland and has never been applied to any of the Scottish courts.
But it is to be found in legislation relating to courts in other parts of the United Kingdom and to the Supreme Court of the United Kingdom itself: Constitutional Reform Act 2005, section 40(1).
It is used there to indicate a court that keeps a permanent record of its acts and proceedings and has power to punish for contempt.
The Divisional Court in R (Cart) v Upper Tribunal held that section 3(5) of the 2007 Act did not have the effect of excluding the judicial review jurisdiction from the Upper Tribunal, whatever the historic scope of the expression superior court of record might be: [2009] EWHC 3052 (Admin), [2011] QB 120, paras 31 32.
This was because the supervisory jurisdiction can only be ousted by the most clear and explicit words: R v Medical Appeal Tribunal, Ex p Gilmore [1957] 1 QB 574, 583, per Denning LJ.
Laws LJ said that it was a constitutional solecism to suggest that the effect of section 3(5) was to exclude it by implication: para 38.
Counsel for the Advocate General did not challenge that conclusion.
But it was said to be an indicator of an intention by Parliament, when taken together with the seniority of the judges who were to sit on it, that the Upper Tribunal was to take its place alongside courts of the level of importance of the High Court in England and Wales and Northern Ireland and not to be an inferior tribunal.
The 2007 Act sets out a carefully organised system for the review of decisions and appeals.
Review of decisions of the First tier Tribunal and of the Upper Tribunal is provided for by sections 9 and 10.
Section 11 provides for a right of appeal to the Upper Tribunal, with permission or leave, on any point of law arising from a decision made by the First tier Tribunal other than an excluded decision.
A list of excluded decisions is set out in section 11(5), which has been supplemented by paragraph 2 of the Appeals (Excluded Decisions) Order 2009 (SI 2009/275) as amended.
The same formula is repeated in section 13, which provides for a right of appeal to the Court of Session and the equivalent courts in England and Wales and Northern Ireland.
As already noted, permission or leave is required.
In the case of appeals under section 13, this can be given either by the Upper Tribunal or the relevant court.
A list of the decisions that are excluded decisions for the purposes of this section is set out in section 13(8), which has also been supplemented by paragraph 3 of the Appeals (Excluded Decisions) Order 2009 as amended.
It includes the following: (a) any decision of the Upper Tribunal on an appeal under section 28(4) or (6) of the Data Protection Act 1998 (c 29) (appeals against national security certificate), (b) any decision of the Upper Tribunal on an appeal under section 60(1) or (4) of the Freedom of Information Act 2000 (c 36) (appeals against national security certificate), (c) any decision of the Upper Tribunal on an application under section 11(4)(b) (application for permission or leave to appeal), (d) a decision of the Upper Tribunal under section 10 (i) to review, or not to review, an earlier decision of the tribunal, (ii) to take no action, or not to take any particular action, in the light of a review of an earlier decision of the tribunal, or (iii) to set aside an earlier decision of the tribunal. (e) a decision of the Upper Tribunal that is set aside under section 10 (including a decision set aside after proceedings on an appeal under that section have begun), or (f) any decision of the Upper Tribunal that is of a description specified in an order made by the Lord Chancellor.
Decisions of the descriptions in section 13(8)(a) and (b) are decisions from which, under the legislation referred to, there was no statutory right of appeal.
Counsel for the government accepted that they are subject to the ordinary process of judicial review in the sense indicated by Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147.
Ms Ebas appeal is directed to decisions of the description set out in section 13(8)(c).
The Advocate General submitted in his cross appeal to the Inner House that decisions of the Upper Tribunal were not in any circumstances amenable to the supervisory jurisdiction of the Court of Session: 2011 SC 70, para 13.
The Lord President devoted much of his opinion to a discussion of that argument, which was rejected on the ground that the jurisdictional rule in Scotland pointed to an exclusion of the supervisory jurisdiction only where the subject body was a manifestation of the Court of Session or akin to such a manifestation, which the Upper Tribunal was not: para 54.
The focus of the argument has accordingly shifted very considerably from that which was considered in the Inner House.
It is no longer maintained that the supervisory jurisdiction has been excluded altogether.
The question is as to the extent, if at all, it has been restricted in the case of decisions of the Upper Tribunal that are unappealable.
There is one other provision in the 2007 Act which should be mentioned.
Section 13(6) provides that the Lord Chancellor may, as respects an application for permission or leave to appeal to the Court of Appeal in England and Wales or Northern Ireland from any decision of the Upper Tribunal on an appeal under section 11 from a decision of the First tier Tribunal, make provision by order for permission or leave not to be granted on the application unless the Upper Tribunal or the relevant court considers (a) that the proposed appeal would raise some important point of principle or practice, or (b) that there is some other compelling reason for the relevant appellate court to hear the appeal.
An order to this effect has been made by the Lord Chancellor: see The Appeals from the Upper Tribunal to the Court of Appeal Order 2008 (SI 2008 no. 2834), which came into force on 3 November 2008.
The 2007 Act did not confer an equivalent power on the Lord President in relation to Scotland, perhaps because the question of second appeals was being considered in the Scottish Civil Courts Review that was then taking place under the Chairmanship of Lord Gill.
But a provision broadly to the same effect as section 13(6) was made by SSI 2008/349 with effect from 3 November 2008 by inserting into the Rules of the Court of Session 1994 a new rule 41.59.
It provides: (1) This rule applies where an application is made to the court under section 13(4) of the Tribunals, Courts and Enforcement Act 2007 for permission to appeal a decision of the Upper Tribunal which falls within section 13(7) of that Act and for which the relevant appellate court is the Court of Session. (2) Permission shall not be granted on the application unless the court considers that (a) the proposed appeal would raise some important point of principle or practice, or (b) there is some other compelling reason for the court to hear the appeal.
As a result the position in relation to the granting of permission for a second appeal is now the same in the Court of Session as it is in the High Court under the statute.
But it should be noted that the Scottish Rule of Court does not apply to applications made to the Upper Tribunal as opposed to the Court of Session, while the Order in other parts of the United Kingdom applies to applications to either the Upper Tribunal or the Court of Appeal.
Some areas of common ground
Mr Mitchell QC, in his helpful submissions for Ms Eba, drew together various matters relating to the position in Scotland which he said appeared to be common ground between the parties.
It is worth repeating some of them, as they help to put into focus the points on which the parties are divided.
First, the issue before this Court is confined to those decisions of the Upper Tribunal which are unappealable because, in the language of section 13(8) of the 2007 Act, they are excluded decisions.
The effect of the exclusion is that these decisions are not amenable to the process of internal review within the tribunal system under the statute, which has not provided any alternative remedy.
So, as Mr Mitchell submitted, it is either judicial review or it is nothing.
Second, the question for decision is not whether judicial review is available at all.
In the Inner House the Advocate General submitted that, in view of its constitution, jurisdiction and powers and its relationship with the Court of Session, the Upper Tribunal should properly be regarded as having a status so closely equivalent to the latter that its decisions were not appropriately amenable to its supervisory jurisdiction at all: 2011 SC 70, para 14.
That extreme position is no longer contended for.
The question is as to the scope or extent of the remedy.
Third, the grounds of judicial control of administrative action in Scotland are based on legal principle.
Judicial review by the Court of Session is not an exercise of judicial discretion, in contrast to what was said as to the position in English law in R (Sivasubramaniam) v Wandsworth County Council [2003] 1 WLR 475, para 47.
Every person who complains that he has suffered a wrong because of an error or abuse of the power conferred on a decision maker is entitled to apply to the Court of Session for judicial review under Ch 58 of the Rules of the Court of Session 1994 as of right, in exactly the same way as he could have done by way of an ordinary action before the Rules of Court were amended to introduce the current procedure in 1985: West v Secretary of State for Scotland 1992 SC 385, 404.
He does not have to apply for permission to do so and, although the Court has a discretion to refuse a remedy in judicial review on what may be described as equitable grounds, it has no discretion to refuse to entertain a competent application: Tehrani v Secretary of State for the Home Department 2007 SC (HL) 1, para 53.
As the law currently stands, the hurdle that a petitioner must cross for a motion for a first order to be granted is a low one.
In the Inner House the Lord President said that it seemed that this had been done only where the application was manifestly without substance: para 35.
This approach was confirmed in Y v Secretary of State for the Home Department [2011] CSIH 3, 2011 SLT 508, where the Extra Division said that only in very exceptional circumstances should a refusal to grant first orders be made: para 16.
Watt v Lord Advocate
It is also common ground that the history and nature of the supervisory jurisdiction in Scotland shows that, contrary to what was said in Watt v Lord Advocate 1979 SC 120, the Court of Session has power to correct an error of law made by a statutory tribunal that acts within its statutory jurisdiction but has misunderstood the question that it has been given power to decide.
In that case the pursuer sought and was granted reduction of a decision of a National Insurance Commissioner that he was not entitled to unemployment benefit.
Lord President Emslie said that it was not necessary for him to express a concluded view on the point, as he had held that the Commissioner had exceeded his statutory powers and that his decision was ultra vires, but that he had the gravest doubt whether, if that had not been so the Court would have had power to review it.
The Lord President went on to say this at p 131: it seems clear that, however much this is to be regretted, the Court Session has never had power to correct an intra vires error of law made by a statutory tribunal or authority exercising statutory jurisdiction.
As Lord Justice Clerk Moncrieff said in Lord Advocate v Police Commissioners of Perth (1869) 8 M 244 at p 245 In the ordinary case it would now, I think, be held that where statutory powers are given, and a statutory jurisdiction is set up, all other jurisdictions are excluded There is no indication in any subsequent authority that this view has been doubted or even questioned and I entirely agree with the Lord Ordinary for the reasons which he gives that the fact that the Court of Session may have exercised a comprehensive corrective jurisdiction over determinations of parochial aid in the 18th and early 19th Centuries does not in any way support the existence of a jurisdiction in this court to correct errors by a statutory tribunal in the due performance of its statutory duties.
As the Advocate General has pointed out, this approach suggests that the supervisory jurisdiction of the Court of Session is restricted to what is commonly referred to as pre Anisminic error.
That is not the way that Lord Fraser of Tullybelton seems to have understood the position to be, as in Brown v Hamilton District Council 1983 SC (HL) 1, 42, he said: It is not necessary for me to consider the grounds on which judicial review may be open.
The decisions in the English cases of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, and Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, so far as they relate to matters of substance and not of procedure, are accepted as being applicable in Scotland: see Watt v Lord Advocate 1979 SC 102.
There is no difference in substance between the laws of the two countries on this matter.
It does appear however that, in expressing the position as narrowly as he did in Watt, the Lord President failed to appreciate the significance of the decision in Anisminic, which abolished the distinction between errors of law that went to jurisdiction only in the strict sense and those that did not: Clyde and Edwards, Judicial Review, paras 22.21 22.24.
quoted in Watt at p 130, Lord Reid said: In a passage from his speech in Anisminic at p 171 which the Lord President It has sometimes been said that it is only where a tribunal acts without jurisdiction that its decision is a nullity.
But in such cases the word jurisdiction has been used in a very wide sense, and I have come to the conclusion that it is better not to use the term except in the narrow and original sense of the tribunal being entitled to enter on the inquiry in question.
But there are many cases where, although the tribunal had jurisdiction to enter on the inquiry, it has done or failed to do something in the course of the inquiry which is of such a nature that its decision is a nullity.
There then followed a list of examples which, as Lord Reid said was not intended to be exhaustive of errors that fell into that category, including where the tribunal has misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question that was not remitted to it, has refused to take into account something that it was required to take into account or has based its decision on some matter which it had no right to take into account.
He ended this passage with these words, which indicate precisely where the boundary lies between what is open to review and what is not: But if it decides a question remitted to it for decision without committing any of these errors it is as much entitled to decide that question wrongly as it is to decide it rightly.
As the Lord President observed in the present case, Anisminic has come to be interpreted and applied in the English courts in a way that does not appear to sit easily with Lord President Emslies dictum: 2011 SC 70, para 43.
The distinction between jurisdictional and other errors, which he was endorsing, has been abandoned.
Furthermore, the way that his dictum has been applied in practice appears to have been somewhat patchy.
It was applied in ONeill v Scottish Joint Negotiating Committee for Teaching Staff 1987 SC 90, by Lord Jauncey at p 94 and in Rae v Criminal Injuries Compensation Board 1997 SLT 291, by Lord Macfadyen at 295I J. More recently, since the decision in West v Secretary of State for Scotland 1992 SC 385 in which the court said at p 413 that there is no substantial difference between English and Scots law as to the grounds on which the process of decision making may be open to review, it has been ignored, as in Mooney v Secretary of State for Work and Pensions 2004 SLT 1141 and Donnelly v Secretary of State for Work and Pensions 2007 SCLR 746.
In Diamond v PJW Enterprises 2004 SC 430, paras 37 38 the Lord Justice Clerk referred to the argument that Anisminic had made obsolete the traditional distinction that was recognised in Watt between an error of law as to jurisdiction and an error of law made intra vires but found it unnecessary to decide the issue.
In Hyaltech Ltd, Petitioners 2009 SLT 92, para 53 too, as there had been no misapplication of the relevant law, the court found this not be necessary.
But the dictum has never been expressly disapproved.
In my opinion the time has come for it to be declared that Lord President Emslies dictum in Watt v Lord Advocate 1979 SC 102, 131 is incompatible with what was decided in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147.
In In re Racal Communications Ltd [1981] AC 374, 382 Lord Diplock said that the decision in Anisminic was a legal landmark which proceeded on the presumption that, where Parliament confers on an administrative tribunal or authority power to decide particular questions defined by the Act, it intends to confine that power to answering the question as it has been so defined and that, if there is any doubt what that question is, this is a matter that the court must resolve.
I would hold that the dictum in Watt cannot be reconciled with that interpretation of the decision and that it should no longer be followed.
Once again it must be stressed that there is, in principle, no difference between the law of England and Scots law as to the substantive grounds on which a decision by a tribunal which acts within its jurisdiction may be open to review: Brown v Hamilton District Council 1983 SC (HL) 1, 42 per Lord Fraser; West v Secretary of State for Scotland 1992 SC 385, 402 and 413.
The extent of the remedy in English law
The choices in relation to unappealable decisions of the Upper Tribunal in England and Wales were examined in the judgment that the Court has given today in Cart and MR (Pakistan): [2011] UKSC 28.
As Lady Hale explained in para 37, three points had become clear in the course of oral argument.
First, there is nothing in the 2007 Act which purports to exclude judicial review of unappealable decisions of the Upper Tribunal.
Second, it would be inconsistent with the new structure introduced by the 2007 Act to distinguish between the scope of judicial review in the various jurisdictions which it has gathered together in that new structure.
I note in passing that the Advocate General submitted in Ms Ebas case that its scope should be the same across all the chambers of the Upper Tribunal, that there was no submission from anyone else to the contrary and that the Inner House agreed that there should be no distinction between any of them: 2011 SC 70, para 61.
Third, as the object of judicial review is to ensure that decisions are taken in accordance with the law and not otherwise, the question is what machinery is necessary to ensure that mistakes as to what the law requires are kept to a minimum.
Should there be any jurisdiction in which mistakes of law are immune from scrutiny in the higher courts?
There were, then, three possible approaches which the Court could have taken.
First, it could have endorsed the decision of the Court of Appeal in Cart and held that the scope of judicial review should be restricted to an excess of jurisdiction in the pre Anisminic sense or where there had been a procedural irregularity such that the applicant had been denied a fair hearing.
Second, it could have held that nothing had changed and that judicial review of the kind that had always been available before the 2007 Act should be retained.
Third, a course between these two options could be adopted in which judicial review would be limited to the grounds on which permission might be granted for a second tier appeal to the Court of Appeal.
The first option was rejected.
The approach of the Court of Appeal in Cart was too narrow, as it left the possibility that serious errors of law affecting large numbers of people would go uncorrected: para 44.
The second option, too, was rejected.
Although the courts have adopted principles of judicial restraint when considering the decisions of expert tribunals, it had found more favour in some contexts than others.
A principled but proportionate approach was now required: paras 49 50.
Unrestricted judicial review was not necessary for the maintenance of the rule of law and was not proportionate: Lord Dyson, para 128.
This left the adoption of the second tier appeals criteria, which would be a rational and proportionate restriction upon the availability of judicial review.
It would recognise that the new tribunal structure deserves a more restrained approach to judicial review than had previously been the case: para 57.
But, as Lord Phillips said in his judgment at para 92, some overall judicial supervision was needed in order to guard against the risk that errors of law of real significance may slip through the system.
So it was the third approach which was adopted.
Should the same approach be followed in Scotland?
For the Advocate General, Mr Johnston QC submitted that the conclusion that was reached as to the extent of the remedy for England and Wales should be applied to Scotland too.
He expressed concern about the extent of the burden that applications for judicial review would impose if the decision of the Inner House were to be supported, especially in immigration and asylum cases.
The Scottish Court Service had drawn attention to this problem in the consultation on immigration appeals in 2008, pointing out that many of these applications took in excess of one judge day to consider and that they accounted for approximately the equivalent of the time of one full time judge for which no additional resource had been provided.
While the number of these applications might seem to be small in comparison to the position in England and Wales, it was nevertheless a significant burden on the Scottish Courts.
There was no current mechanism for sifting out unmeritorious applications, apart from that indicated by Y v Secretary of State for the Home Department [2011] SLT 508, para 16.
The fact that petitions for judicial review occupied a disproportionate amount of sitting days had been noted by Lord Gill in his Report of the Scottish Civil Courts Review (September 2009), chapter 12, para 50.
The recommendation in para 51 of that chapter that a requirement to obtain leave should be introduced had not yet been implemented.
It was open to the court to set the parameters.
This was not just a matter for Parliament.
The Inner House had been wrong to decline this opportunity: 2011 SC 70, para 60.
He drew attention to the fact that the scope of the remedy can be tailored by the court to the needs of the particular body.
A good example of this was the ecclesiastical case of McDonald v Burns 1940 SC 376, in which Lord Justice Clerk Aitchison at p 383 had addressed the question as to the circumstances in which the Courts would entertain actions arising out of the judgments of ecclesiastical bodies.
As the Lord Ordinary had pointed out, there were many fields in which the courts in Scotland had tailored their approach to the nature of the tribunal, the subject matter of the dispute and the perceived parliamentary intention behind any relevant legislation: 2010 SLT 547, para 89.
The Inner House had simply been wrong to rely on the mere fact that a petitioner was entitled to bring the case into court: 2011 SC 70, para 60.
Tehrani did not support this approach to the grounds on which the remedy might be exercised.
Also the 2007 Act is an enactment of the Parliament of the United Kingdom.
It should not be applied in a way that would encourage forum shopping.
Intervening on behalf of the Lord Advocate, Mr Mure QC submitted that there was no pressing need to control the exercise of the supervisory jurisdiction in Scotland in respect of the 2007 Act tribunals by restricting the grounds of review.
He accepted that this case provided the court with an opportunity to mould its approach, but he maintained the post Anisminic grounds of review should remain.
It should be left to the Court of Session to adapt the intensity of the review to the needs of each case.
Resources were an issue, but this was a matter for the Scottish Government to address.
The 2007 Act was a United Kingdom statute, but it had been careful to make separate provision for Scotland.
This allowed for a different approach to be taken to the way the supervisory jurisdiction should be exercised in Scotland from that which might be adopted in England.
For Ms Eba, Mr Mitchell stressed that the Scottish approach to the supervisory jurisdiction was that described in West v Secretary of State for Scotland.
She had a right to have her complaint dealt with by the court.
The Inner House had been right to observe that in Scotland, in contrast to what had happened in England and Wales, the right of the citizen to invoke the jurisdiction of the Court of Session to control the actings of statutory bodies had never been circumscribed on discretionary or similar grounds: 2011 SC 70, para 60.
It had always been accepted in Scotland that it would require clear, unambiguous and express words to oust that jurisdiction: e.g. Dunbar v Scottish County Investments 1920 SC 201, 217; Hume v Nursing and Midwifery Council 2007 SC 644, para 17; Clyde and Edwards, Judicial Review, para 11.04.
Mr Mitchell accepted that the grounds for review could vary according to the nature of the bodies themselves.
But he submitted that it would not be right to restrict the intensity of review by analogy with the test that the 2007 Act had laid down for second appeals.
The Act had not effected a complete re ordering of administrative justice in Scotland, as there was not and could not be a unified system for the whole range of Scots tribunals.
There was no reason why the approach that was taken to a decision made by a sheriff under the Mental Health (Scotland) Act 1984 in R v Secretary of State for Scotland 1999 SC (HL) 17 should not be applied generally.
It was wrong to see the 2007 Act as having created something that was fundamentally different from what was there before.
It had long been established in the social security context that unappealable refusals of leave to appeal were amenable to judicial review on ordinary grounds, with due recognition and respect for specialist expertise.
Such statistics as were available suggested that the increase in the number of applications in immigration and asylum cases was not a pressing issue that was incapable of being dealt with by case management.
The court should not pre empt what might come from the reforms indicated by the Civil Courts Review.
The submissions which I have set out in this brief summary were, of course, presented on the assumption that one of the choices with which the court was presented was to endorse the approach of the Court of Appeal in Cart.
There is no doubt that a decision by this Court to endorse that approach with regard to unappealable decisions of the Upper Tribunal in England and Wales would have presented a very real problem in Scotland.
To extend it to Scotland would have created a rift between the broad and flexible approach that is taken to the supervisory jurisdiction in Scotland generally, which is available as of right to everyone, and the very limited opportunity for review which it would have provided in the case only of that class of unappealable decisions.
It would also lead us back, in their case only, to the distinction between jurisdictional and other errors to which Lord President Emslie referred in Watt v Lord Advocate 1979 SC 102, 131 but was effectively abandoned after Anisminic, as Lady Hale said in Cart and MR, para 39.
This would indeed have destroyed the consistency of the approach to the supervisory jurisdiction in Scots law, as was submitted for Ms Eba.
It would have been hard to justify.
As it is, the decision of this court in Cart and MR not to endorse that approach has removed that objection.
It has made it much easier for the Scots approach to the supervisory jurisdiction in relation to unappealable decisions of the Upper Tribunal in Scotland to find common ground with that which must now be taken in England and Wales.
The key to our doing so lies in a recognition that the issue is not one about access to the remedy, which will remain available to the citizen as of right, or the purpose for which the supervisory jurisdiction may be exercised.
It is an issue about how best to tailor the scope of the remedy according to the nature and the expertise of the Upper Tribunal and the subject matter of the decisions that have been entrusted to it by Parliament.
There is no doubt that the supervisory jurisdiction is capable of being moulded in this way.
As was pointed out in West v Secretary of State for Scotland 1992 SC 385, 397, a distinction must be made between the question of competency as to whether a decision is open to review by the Court of Session in the exercise of its supervisory jurisdiction, and the substantive grounds on which it may do so: The extent of the supervisory jurisdiction is capable of a relatively precise definition, in which the essential principles can be expressed.
But the substantive grounds on which that jurisdiction may be exercised will of course vary from case to case.
And they may be adapted to conform to the standards of decision taking as they are evolved from time to time by the common law.
There is an element of flexibility within this system that has enabled the grounds of judicial review to be adapted to a diverse range of decision making bodies.
As the Lord Ordinary observed, the Court of Session has been slow to interfere with decisions of specialist tribunals, and it has been restrained in its approach in reviewing decisions of arbitrators and decisions of adjudicators under the Housing Grants, Construction and Regeneration Act 1996: 2010 SLT 547, para 89.
This can be compared with the cautious approach to giving permission to appeal from decisions of the Social Security Commissioners in England and Wales because of their particular expertise in a highly specialised area of the law that was indicated by Hale LJ in Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All ER 278, paras 15 17.
The fact that, as was stressed repeatedly in West v Secretary of State for Scotland (see pp 403, 405 and 413), there is no substantial difference between English and Scots law as to the grounds on which the process of decision making may be open to review provides further support for the argument that there should be no difference between them as to the scope for the judicial review of unappealable decisions of the Upper Tribunal on either side of the Border.
This is why Scots law has been able to follow the developments in the English approach to judicial review since Anisminic in preference to the approach indicated in Watt v Lord Advocate 1979 SC 102, 131.
Lord Frasers observations in Brown v Hamilton District Council 1983 SC (HL) 1, 42 show that there is no obstacle to its doing this.
It would not, therefore, be a very large step for the Scots approach to unappealable decisions of the Upper Tribunal to align itself with that which has now been decided should be taken in England and Wales.
As to whether it should now do so, I would unhesitatingly answer that question in the affirmative.
I would do so for reasons that have at least as much to do with the restraint that the Court of Session has already recognised it should take to decisions of that kind as with the need for it to find common ground with the position in English law.
Two factors seem to me to carry particular weight.
One is the familiar point that the court should be slow to interfere with decisions that lie within the expertise of specialist tribunals.
As Dyson LJ said in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, para 54, the reviewing court should not be astute to detect some error in their decision to refuse leave to appeal.
That is already well established, as a matter of practice, in Scots law.
The other is the fact that the limitation on the scope for second appeals in section 13(6) of the 2007 Act has been reproduced in rule 41.59 of the Rules of the Court of Session: see paras 22 and 23, above.
That rule gives effect to a particular intention about when questions of law should be subject to further scrutiny by a higher court.
It would not be consistent with that intention, to which the amendment to the Rules has given effect, for the court to provide a wider opportunity for the decisions of the Upper Tribunal to refuse permission to appeal to itself to be reconsidered by way of judicial review.
So I would hold that the phrases some important point of principle or practice and some other compelling reason, which restrict the scope for a second appeal, provide a benchmark for the court to use in the exercise of its supervisory jurisdiction in relation to decisions that are unappealable that is in harmony with the common law principle of restraint: see, as to how these phrases are applied in practice in England and Wales, Uphill v BRB (Residuary) Ltd [2005] EWCA Civ 60, paras 17 and 24 per Dyson LJ and Cramp v Hastings Borough Council [2005] EWCA Civ 1005 para 68 per Brooke LJ.
Underlying the first of these concepts is the idea that the issue would require to be one of general importance, not one confined to the petitioners own facts and circumstances.
The second would include circumstances where it was clear that the decision was perverse or plainly wrong or where, due to some procedural irregularity, the petitioner had not had a fair hearing at all.
I would leave it to the Court of Session to give such further guidance as may be needed as to how this analogy with the second appeals criterion should be applied in practice.
But it may be helpful if I were to mention these points: (a) Lord Reids observation in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, 171 that if a statutory tribunal decides a question remitted to it for decision without committing an error of law as to what that question is, it is as much entitled to decide that question wrongly as it is to decide it rightly remains the basic yardstick: see also West v Secretary of State for Scotland 1992 SC 385, p 413, para 2. (b) The court must then distinguish between errors of law that raise an important issue of principle or practice, or reasons that are compelling, and those that do not answer to this description.
The question whether the application meets this test must depend on the facts of each case.
It ought to be capable of being applied at the earliest possible stage, and certainly at the stage of the first hearing, as a matter of relevancy. (c) Under the current rules a person who invokes the supervisory jurisdiction does not require permission to do so.
But a petition for judicial review can be dismissed at the stage of a motion for a first order: Sokha v Secretary of State for the Home Department 1992 SLT 1049; Butt v Secretary of State for the Home Department, 15 March 1995, unreported (1995) GWD 16 905.
As the law currently stands, the hurdle that a petitioner must cross for a motion for a first order to be granted is a low one: Y v Secretary of State for the Home Department 2011 SLT 508; see para 28, above.
I think that this is perfectly acceptable as the test for use in relation to applications to the supervisory jurisdiction of the Court of Session generally.
But its application to that special category of cases where a petitioner seeks to bring unappealable decisions of the Upper Tribunal under review needs now to be reconsidered. (d) The ever increasing pressure on the courts business by applications for judicial review to which our attention has been drawn, together with the fact that the new tribunal structure requires that a more restrained approach be taken to judicial review of decisions of this kind, suggests that the Lord Ordinary to whom a petition is presented under rule 58.7 for a first order for the review of an unappealable decision of the Upper Tribunal should be encouraged to consider the question whether there is an arguable case that the criterion referred to in para (b) is satisfied before he or she decides whether or not a first order should be granted.
It seems to me, with respect, that the approach which Lady Smith took to this issue in the Outer House when she declined to grant the petitioners motion for first orders because she was not satisfied that an arguable case had been made out in Y v Secretary of State for the Home Department 2010 SLT 170, paras 12 14, has much to commend it, and that it would be appropriate for use in relation to cases falling within this special category.
Other Scottish Tribunals
For the Advocate General Mr Johnston said that there were good grounds for distinguishing between those tribunals that are within the system of the 2007 Act and those that are not.
Tribunals of the latter kind should be left to another day.
For the Lord Advocate Mr Mure said the position is still in flux and that this court should be wary of telling the Court of Session how to deal with them.
A number of tools are available and it should be left to the Court of Session to choose between them.
For Ms Eba Mr Mitchell expressed concern about what he referred to as seepage into decisions of the other tribunals if the approach of the Court of Appeal in Cart were to be applied to unappealable decisions of the Upper Tribunal in Scotland.
That problem, however, does not now arise.
As noted above, it is already well established in Scots law as a matter of common law that restraint should be exercised in the opening up of decisions of specialist tribunals to judicial review.
What is lacking in the case of these other tribunals is the intention of Parliament which is indicated by the statutory restriction on the availability of second appeals.
Rule 41.59 does not apply to them.
But the harmony between the statutory restriction and the common law principle of restraint suggests that the absence of that additional element is unlikely to make any substantial difference in practice.
It is not necessary for us to reach any decision on the point, as a case that has been the subject of decision by a tribunal within this group is not before us.
But I do not see any good reason why a different approach should be taken to the application of the common law principle of restraint to unappealable decisions of those tribunals from that which must now be taken to those of the Upper Tribunal that are unappealable.
Conclusion
Ms Eba accepted before the Lord Ordinary that she had not pled herself within the exceptional circumstances test that was used as a shorthand for an excess of jurisdiction in the pre Anisminic sense: 2010 SLT 547, para 4.
But it was also accepted that, if the Advocate Generals argument were to fail, there would require to be further procedure to determine the merits of Ms Ebas case.
Scrutiny of the merits of her case was taken no further in the Inner House in view of its decision that the scope of the supervisory jurisdiction of the Court of Session to judicially review unappealable decisions of the Upper Tribunal was unrestricted.
I would therefore dismiss the appeal by the Advocate General and, although for different reasons, affirm the interlocutor of the Inner House of the Court of Session.
The case should be remitted by the Inner House to the Lord Ordinary to examine the question whether Ms Eba has sufficient grounds for judicial review of Judge Mays decision, which was to refuse her application for permission to appeal to the Upper Tribunal against the refusal of her claim to disability living allowance.
I would direct him, when he does so, to apply the approach to the scope for review that has been described in the judgment of this Court.
| UK-Abs | The issue in this appeal is the scope of the remedy of judicial review in the Court of Session of decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
Ms Ebas claim for disability living allowance was refused by the Department of Work and Pensions on 1 February 2008.
Her appeal against this decision to the First Tier Social Entitlement Chamber was dismissed.
She was refused permission to bring a further appeal to the Upper Tribunal by a judge of the Upper Tribunal.
There was no right of appeal from that decision under the 2007 Act.
Ms Eba therefore sought to bring proceedings for judicial review.
Her claim for judicial review was dismissed by the Lord Ordinary (Lord Glennie) on 31 March 2010.
The First Division of the Court of Session, however, allowed a reclaiming motion, holding that the decision of the Upper Tribunal was amenable to judicial review under the supervisory jurisdiction of the Court of Session and that the grounds on which it would be reviewed were not subject to any limitation on policy or discretionary grounds.
The Advocate General for Scotland appealed to the Supreme Court.
The appeal was heard with appeals in two English cases raising the same issue, R (Cart) v Upper Tribunal and MR (Pakistan) v Upper Tribunal.
The Supreme Court unanimously dismisses the appeal and affirms the interlocutor of the Inner House of the Court of Session, although for different reasons.
It holds that unappealable decisions of the Upper Tribunal are amenable to judicial review in cases which raise some important point of principle or practice or some other compelling reason to be heard.
Ms Ebas case should be remitted by the Inner House to the Lord Ordinary to examine the question of whether she has sufficient grounds for her claim, applying this approach.
Lord Hope gives the judgment of the court.
The issue in the appeal lay at the heart of the relationship between the Court of Session and the new system for specialist tribunals created by the 2007 Act.
On the one hand was the rule of law, which gave the Court of Session power to correct excesses or abuses of the power or jurisdiction conferred on a decision maker by the system of judicial review; on the other was the interest in achieving finality at the tribunal level in the delivery of administrative justice [8].
Although there are differences in judicial control of administrative actions in Scotland, there is in principle no difference between the law of England and Wales and Scots law as to the substantive grounds on which a decision by a tribunal which acts within its jurisdiction may be open to review [34].
The potential approaches in relation to unappealable decisions of the Upper Tribunal in England and Wales were examined in the judgments in the linked appeals in Cart and MR(Pakistan).
The Supreme Court in those appeals has held that the adoption of the criteria for the grant of permission to bring second tier appeals provided by the 2007 Act would be a rational and proportionate restriction on the availability of judicial review while guarding against the risk that errors of law may slip through the system [37].
The outcome of those appeals, by overturning the restrictive approach of the Court of Appeal in Cart, has made it much easier for the Scots approach to find common ground with that now being taken in England and Wales.
The issue is not one about access to the remedy, which will remain available to the citizen as of right, or the purpose for which the supervising jurisdiction may be exercised, but one of how best to tailor the scope of the remedy according to the nature and expertise of the Upper Tribunal and the subject matter of the decisions that have been entrusted to it by Parliament [44].
Two factors already established in Scots law support the conclusion that Scots law should now align itself with the position in English law.
The first is that the court should be slow to interfere with decisions that lie within the expertise of the specialist tribunals.
The second is the fact that the limitation on the scope for second appeals in the 2007 Act has been reproduced in the Rules of the Court of Session and it would be inconsistent with the intention behind that rule to provide a wider opportunity for the decisions of the Upper Tribunal to refuse permission to appeal to itself to be reconsidered by way of judicial review [47].
It will be for the Court of Session to give such further guidance as may be needed as to how this analogy with the second appeals criteria should be applied in practice, but ideally the Lord Ordinary should give consideration of whether the criteria are arguably met at the stage of the first order [49].
There is no good reason to take a different approach in the application of the common law principle of restraint in cases relating to other Scottish tribunals outside the 2007 Act, although it does not arise for decision in the present appeal [51].
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This is the judgment of the Supreme Court.
The principal issues in this appeal are whether a civil court (the court) has power to strike out a statement of case as an abuse of process after a trial at which the court has held that the defendant is liable in damages to the claimant in an ascertained sum and, if so, in what circumstances such a power should be exercised.
The driving force behind the appeal is the defendants liability insurers, who say that fraudulent claims of the kind found to exist here are rife and should in principle be struck out as an abuse of the courts process under CPR 3.4(2) or under the inherent jurisdiction of the court.
The facts and judgment at first instance
The claimant was born on 16 June 1976.
On 13 May 2003, while employed by the defendant, he was injured in an accident at work.
He fell from a stacker truck and suffered both a fractured scaphoid bone in his right hand and a comminuted fracture of his left calcaneum, or heel bone.
On 28 October 2003, the defendant admitted liability through its insurers.
On 10 May 2006 the claimant issued a claim form which alleged breach of duty or negligence on the part of the defendant but did not contain detailed particulars of quantum.
On 7 July 2006 the defendant applied for permission to withdraw the admission of liability after seeing medical records which appeared to cast doubt on the claimants account of the accident.
In March 2007 the defendant served an amended defence on liability.
On 28 August 2007, after trial, His Honour Judge Tetlow (the judge) gave judgment for the claimant on liability, with damages to be assessed.
He made an interim award of 2,000 on account of costs.
The defendant subsequently made a voluntary interim payment of 10,000 on account of damages.
On 4 October 2007 the defendant for the first time obtained images of the claimant by means of undercover surveillance.
Until then the defendants case had not been based upon abuse of process.
On 5 October 2007 the claimant signed a witness statement which included the assertion that he was not able to stand for more than 10 to 15 minutes.
The defendant continued to subject the claimant to undercover surveillance, the last such surveillance being on 25 September 2008.
On 17 November 2008 the parties orthopaedic experts met and prepared a joint statement without either expert seeing the surveillance videos.
On 9 December 2008 the claimant served his first schedule of loss.
It was in the sum of 838,616.
On 23 December 2008 the defendant disclosed the surveillance evidence to the claimant and served a re amended defence alleging that the claimants claim was grossly and dishonestly exaggerated and asserting that it should be struck out in its entirety.
Detailed particulars of the dishonesty were given.
The defendant also served a counter schedule setting out a secondary case on quantum.
On 29 January 2009 the claimant made a Part 36 offer to settle for 190,200.
On 9 February 2009 the orthopaedic experts, who had by now seen the surveillance material, met again and prepared a second joint statement.
In May 2009 the Department of Work and Pensions (DWP) disclosed surveillance showing the claimant apparently working without difficulty in 2009.
On 29 June 2009 the claimant served a second schedule of loss valuing the claim at 250,923.
He made a Part 36 offer to settle for 150,000.
On 22 July 2009 the trial of quantum was adjourned because of the DWP disclosure.
On 24 November 2009 the claimants solicitors invited the defendant to attend a joint settlement meeting but the defendant declined to do so.
On 14 December 2009 the claimant served a third schedule of loss in almost the same sum as the second schedule.
The claim was put at 251,481.
All the claimants pleadings and schedules of loss were supported by statements of truth.
That claim was maintained at the trial which took place between 25 and 27 January 2010.
In the light of the joint statement, neither of the orthopaedic experts was called to give oral evidence and the surveillance evidence was not challenged.
Indeed, the principal, if not the only, witness to give oral evidence was the claimant.
There was however a good deal of written medical evidence before the judge, together with extracts from the claimants wifes diary which appeared to show him working and playing football.
On 23 February 2010 the judge handed down a 27 page judgment which analysed the facts and the issues in considerable detail and with impressive clarity.
The critical findings of facts are set out in paras 54 to 61 as follows: 54.
Having rehearsed the evidence at some length it is time to come to some conclusions.
Firstly as to the nature and extent of the disability caused by the injury.
There is no doubt that the Claimant suffered a fracture of the right scaphoid and a serious ankle fracture which required at least two operations for an arthrodesis.
The schedule of loss prepared on 9th December 2008 and signed with a statement of truth by the Claimant maintained the Claimant was at that date still in constant pain taking pain killers, needing to use crutches outside and to wear an ankle brace at all times.
Standing and sitting was limited due to pain; he was still suffering psychiatrically from the effects of the accident.
He had not worked since the accident and was unlikely to do so for the 55. foreseeable future.
In the light of the surveillance evidence the subsequent two schedules opted for a sum of 30,000 instead of the original 47,500 put forward for general damages.
Further the loss of earnings in the second schedule of the 19th June 2009 ran up to 13th October 2008 only, in effect accepting that the orthopaedic experts' conclusion as to the Claimant's fitness for work was correct.
That said the Claimant by his evidence does not accept that that is correct and that position was maintained from the witness box.
I am prepared to accept that the Claimant's ankle injury was sufficiently serious as to require the first arthrodesis; further that the first operation failed necessitating the second one.
Although I accept in the light of subsequent events that the second operation also failed to create complete fusion, the result of that second operation was to render the Claimant asymptomatic to all intents and purposes as is disclosed by the surveillance videos from October 2007 onwards.
I can accept as Messrs O'Connor and Hodgkinson conclude that the Claimant would not be fit for heavy work and would find walking over uneven ground uncomfortable but those are the only outstanding disabilities.
I can also accept their conclusion that the Claimant would have been weight bearing without crutches within six months of the second operation i.e. by March 2007.
Since the Claimant was clearly fit for work in early October 2007 I conclude that the Claimant was fit for work some months earlier than that and capable of getting a job including a job as a site supervisor as he had pre accident, that not being heavy work.
I conclude that the time when the Claimant was fit and should have got back to work as being at the end of June 2007.
I accept that he would not have been able to work before then.
There is no evidence that the ankle even though not properly fused was likely to give rise to problems in the future. 56.
Although the Claimant was not fit for work between the date of the accident and the end of June 2007, in my judgment, I do not conclude he was in that period as housebound and incapable of activity as the Claimant maintains.
The recorded incident of June 2003 of the Claimant, upset at being told that the effects of the injury might be permanent, going out to the pub to drown his sorrows demonstrates greater agility than the Claimant maintains and sounds more probable than the Claimant's now explanation that it all happened at home.
It is rather similar to the Claimant's curious denial of having been convicted of an offence. 57.
I have also concluded that the psychiatric problems alluded to by the psychiatrist were genuine initially and were materially contributed to by the effects of the accident.
I agree with the conclusion of Dr Wood with which Dr Thomas does not appear to disagree that such problems had settled to all intents and purposes by about June 2007.
It is interesting that that conclusion was come to in ignorance of what the surveillance evidence showed.
That ties in nicely with my conclusion as to when the Claimant was able to resume and should have resumed work. 58.
Those conclusions must mean that I reject what the Claimant said to his treating doctors and the medical experts as to ongoing symptoms in and after March 2007.
I do so because; (a) What is seen on the video tapes is absolutely inconsistent with such disabilities; it is also absolutely inconsistent with what is contained in the DWP application form. (b) The Claimant's explanation that when he was being filmed he was taking strong pain killers in order to force himself with the object of getting back into work is just not credible in particular when he is seen on two separate occasions going to and from two separate medical experts' consulting rooms without crutches when leaving and returning home and with crutches when entering and leaving the doctors premises. (c) The Claimant's wife's diary belies any such protestation of ongoing symptoms. 59.
The evidence before me is sufficiently cogent to sustain a claim of fraud not only applying the civil standard of being satisfied on the balance of probabilities but also on the criminal standard of being satisfied beyond reasonable doubt insofar as that standard is materially different when allegations of fraud are made.
In my judgment the Claimant has deliberately lied to the medical men and to the Department of Work and Pensions on the application form when he said he had ongoing symptoms after March 2007.
The Claimant was clearly able to work without difficulty or pain when filmed in October 2007 driving and loading a van with kitchen fitting components and again in 2009 when filmed with the mobile food van.
His wife's diary confirms he was working at various other times.
I can only infer he was working for reward; the diary confirms such a conclusion; the explanations of helping out for free, of pushing himself and of learning the business of a mobile food van with a view to purchase is deliberate falsehood and an attempt to explain away what cannot be explained away.
Messrs O'Connor and 60. 61.
Hodgkinson's final opinion already referred to is in my judgment absolutely right.
I am not able to say on what days the Claimant was gainfully employed but that matters not.
He was fit for work and able to get work and was in a position to do so, as I have found, since the end of June 2007.
I am also satisfied that the Claimant was able to do cooking, washing and other housework and most activities involving DIY and decorating by March 2007 when Mr Hodgkinson considered the Claimant no longer needed crutches.
Any residual disability as regards DIY and decorating would have ceased by the end of June 2007.
He was certainly fit enough to play football by early 2009.
It is urged upon me that the third arthrodesis is attributable to the accident.
In my judgment it is not.
It is attributable to the lies he told Mr Dalal that he was in continuous horrible pain; there can be no doubt that if he had told Mr Dalal the truth namely that he was to all intents and purposes better the surgeon would never have advised him to undergo a further procedure.
The Claimant has got stuck with his own lie; had he told the truth he would be admitting this claim is grossly exaggerated and that he has been claiming benefits under false pretences; this he is not prepared to do as is evidenced by his testimony before me, false as I find, that he is still in pain and needing to use crutches.
In para 62 the judge rejected the claimants evidence that he suffered psychiatric problems after June 2007, except in January 2009 when he was distraught at having been found out.
The judge further rejected any suggestion that any such illness then was caused by the accident.
In para 63 he allowed the loss of earnings claim for the period from the date of the accident to 30 June 2007.
In para 64 he rejected the claimants evidence as to the prospects of promotion.
He did so on the basis that, in the light of the unreliability of the claimants evidence, he would not accept that there were such prospects in the absence of independent evidence.
He accordingly found no future loss.
At para 65, for similar reasons he refused to make a Smith v Manchester award.
He held that the claimant was at no greater disadvantage in the open labour market than he had been before the accident.
He so held on the basis that it behoved the claimant to prove such a disadvantage and that he had only himself to blame for failing to do so.
As to care, he analysed the figures in some detail in para 66 and again said that, if he had been less than generous to the claimant, the claimant had only himself to blame.
He reached similar conclusions as to services, DIY and decorating in paras 67 and 68.
In short, it is plain from the judgment that, because of the behaviour of the claimant and the unreliability of his evidence, the judge drew a series of inferences adverse to him.
It was not suggested that the judge was not entitled to do so.
Indeed none of his conclusions is challenged in this appeal.
It seems almost certain that, if the claimant had advanced an honest claim and given reliable evidence, the measure of damages would have been greater, perhaps significantly greater, than found by the judge.
As to general damages, by the time of the trial the claimant had reduced the figure he had originally contended for to 30,000.
The defendant argued for 10,000.
The judge awarded 18,500.
The parties subsequently agreed that, on the basis of the judges findings of fact, namely that he was fit to return to work by the end of June 2007, the claimants loss of earnings caused by the accident was 63,776.76.
In addition care and assistance were assessed at 5,400 and other services at 1,040.
The total figure found by the judge was thus 88,716.76 before deduction of various benefits and the interim payment of 10,000.
At the end of his principal judgment the judge noted in para 72 that the defendant wished to argue that the court had power to strike out the claim on the ground that it was tainted by fraud and was an abuse of process and that Ul Haq v Shah [2009] EWCA Civ 542; [2010] 1 WLR 616, which was followed in November 2009 by Widlake v BAA Limited [2009] EWCA Civ 1256 (Widlake v BAA), was wrongly decided.
The judge further noted that it was recognised on behalf of the defendant that those decisions were both binding on him.
At a subsequent hearing on 16 April 2010 the judge granted permission to appeal on the basis that there was a real prospect that this court would take a different view from the Court of Appeal in those two cases.
He contemplated that the Court of Appeal would dismiss the appeal leaving the defendant to take his chances here.
The judge also granted a stay of the order in favour of the claimant pending appeal.
At the hearing in 16 April the judge heard argument on interest and costs and considered an application on behalf of the defendant for permission to commence contempt proceedings against the claimant.
As appears below, in our opinion, his decisions in these respects are of some significance in resolving the issues in this appeal.
It is important to note that the defendant did not challenge any of those decisions in its appeals to the Court of Appeal or to this court.
As to interest, it was contended on behalf of the defendant that no interest should be awarded on general or special damages after 30 June 2007.
It relied on the finding that the claimant had lied about the extent of his injuries, about his ability to work and about his need for care and assistance.
It further relied upon the fact that the claimant maintained the lie up to and during the trial.
The judge accepted the defendants submissions as to the claimants behaviour but nevertheless awarded interest over the whole period.
The judge set out the position relating to the claimants Part 36 offers and noted that the defendant did not make a Part 36 offer of its own.
He also observed that the defendant refused to attend a joint settlement meeting saying that its attendance would not change its position regarding the dishonest and fraudulent behaviour of the claimant.
While recognising that the claimant maintained his dishonest stand in his later witness statement and at trial, the judge had regard to the fact that his solicitors were taking a realistic position as to the courts likely findings and were willing to negotiate on that basis.
The defendant, on the other hand, was not willing to negotiate because it wanted more out of the litigation than a settlement, which would probably have been on advantageous terms both as to quantum and as to costs.
In particular it wanted an opportunity of persuading the Supreme Court to strike out the whole claim.
The judge held that, as a result, the claimant was locked in, he had a valid claim and discontinuance was not a sensible option.
He found that in these circumstances the claimants lies as to continuing disability did not affect the defendants attitude to negotiation or settlement.
He referred to the law as stated in Ul Haq v Shah and, in the exercise of his discretion, directed that the claimant should have interest on the damages to which the court had held he was entitled over the whole period.
As to costs, the defendants primary submission before the judge was that the claimant should pay all the defendants costs from the date of the judgment on liability.
In the alternative it contended for no order for costs on the basis that the claimants fraudulent conduct had increased the costs.
The judge correctly directed himself as to the relevant principles by reference to the decision of the Court of Appeal in Widlake v BAA and in particular to paras 36 to 44 of the judgment of Ward LJ, with whom Smith and Wilson LJJ agreed.
He identified these five propositions as relevant to this case. (1) If, as here, the conduct of the claimant is unreasonable the court must take it into account. (2) As regards such conduct, the court should principally enquire into its causative effect.
To what extent did the claimants lies and gross exaggeration cause costs to be incurred or wasted? (3) In addition, the court is entitled in an appropriate case to say that the conduct is so egregious that a costs penalty should be imposed on the offending party.
There is, however, a considerable difference between a concocted claim and an exaggerated claim and the court must be astute to measure how reprehensible the conduct is. (4) Defendants have the means of defending themselves against false or exaggerated claims by making a Part 36 offer. (5) Where the facts are well enough known for the defendant to make a Part 36 offer, failure to make a sufficiently high offer counts against the defendant.
At para 13 of his second judgment the judge summarised the principal factors in this way.
If the claimant had come clean there would have been an earlier trial on quantum.
The claimant persisted in his lies up to and including trial.
On the other hand, unbeknown to the claimant, by October 2007 the defendant knew that he was grossly exaggerating his disability.
The judge said that he understood that the defendant would wish to obtain further evidence to demonstrate the claimants falsity rather than prematurely disclose what it had discovered.
However he recognised that it could be argued that it should have disclosed the video evidence earlier than January 2009.
On the other hand, the defendant did not want to let the claimant off the hook once the video evidence was disclosed, even though the claimant's solicitors were eager to come to terms.
It wanted to obtain, as the judge put it, a clarification of or advance in the law.
The judge added this at para 13(6): Despite the Defendant's pleas to the contrary the Defendant had the means of assessing the true value of the Claimant's claim so soon as they got the video evidence in October 2007 and by obtaining as they did further medical advice from Mr Hodgkinson.
The Defendant was not deflected from ascertaining the true position by the Claimant's continued lies.
They saw through them.
The Claimant was living in a fools paradise until January 2009.
Thereafter his continued denials of recovery fooled no one; it is difficult to tell why he did so; it may be he could not bring himself to own up in part because of the action of the Department of Work and Pensions in investigating his benefit fraud and the Defendant's insurers reporting the Claimant's dishonesty to the police; that is speculation since I do not know when the Claimant became aware of such investigations or complaints.
The judge further added that, in spite of the claimants solicitors wishing to negotiate and making Part 36 offers, which in the event were too high, the defendant was not willing to negotiate and deliberately decided not to make any counter offer when it could have done so.
As a result, although the claimants dishonesty caused the proceedings to be extended, the defendant by its own choice caused them to take longer to get to trial and to end in a trial by their refusal to negotiate with a view to settlement, which would in all probability have been achieved if the defendant had been willing to take part in negotiations.
Moreover the defendant was not fooled by the claimants dishonesty.
The judge ordered the defendant to pay the claimants costs up to February 2008, save that the claimant was to pay the defendants costs of obtaining the surveillance evidence.
He made no order for costs after March 2008.
The defendant has not challenged the judges decision on interest or costs on appeal.
Nor has it challenged the judges refusal to give it permission to bring proceedings for contempt against the claimant.
As to contempt, by CPR 32.14(1), proceedings for contempt may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.
However, by CPR 32.14(2), such proceedings may only be brought by the Attorney General or with the permission of the court.
The judge held at para 18 that, given his findings, there was a strong prima facie case for believing that the defendant would be able to show that the claimant was guilty of contempt to the criminal standard.
He added that the same was true of the criminal offences of attempting to pervert the course of justice, or to obtain property or a pecuniary advantage by deception.
The only question was whether it was in the public interest that these proceedings should be brought to an end or whether the court should exercise its discretion to give the permission sought.
He held that it was not in the public interest.
He took into account broadly the same considerations as led him to his conclusions on interest and costs.
He further noted that the claimants wrongdoing had been publicly recognised by the judgment in the action.
Finally he said that, if the defendant was dissatisfied, it (or the insurers) could try to persuade the Attorney General to take up the baton.
So far as we are aware, no such attempt was made.
We were informed that the CPS considered whether to prosecute the claimant but concluded that it was not in the public interest to do so.
The Court of Appeal
The appeal to the Court of Appeal came on before Ward and Smith LJJ on 7 October 2010.
They held that they were bound by Ul Haq v Shah and Widlake v BAA to hold that the court had no power to strike out the claim in its entirety.
The Court of Appeal refused permission to appeal to this Court, which subsequently granted it.
Jurisdiction
As stated at the outset, it was submitted on behalf of the defendant that the court has power to strike out the claim both under CPR 3.4(2) and under its inherent jurisdiction.
CPR 3.4(2) provides: The court may strike out a statement of case if it appears to the court a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or (c) that there has been a failure to comply with a rule, practice direction or court order.
Attention was also drawn, both to the overriding objective stated in CPR 1.1 and 1.2 that the court must deal with cases justly, and to the courts general powers of case management in CPR 3.1(2), which includes a power in CPR 3.1(2)(m) to take any other step or make any other order for the purpose of managing the case and furthering the overriding objective.
It was submitted that under those rules the court has ample power to strike out the claimants claim as an abuse of process.
It was further submitted that CPR 3.4(2) should be seen as a codified expression of the pre existing inherent jurisdiction to strike a claim out as an abuse of process.
It was correctly accepted on behalf of the claimant that, in making false statements of truth which he knew to be false and in presenting a dishonest case as to the effect of his injuries and on quantum, he was guilty of a serious abuse of process.
It was initially submitted on his behalf that there was nevertheless no power to strike the claim out for the reasons given by the Court of Appeal in Ul Haq v Shah and Widlake v BAA.
In the alternative, it was submitted either that the court has no power, or that it would be wrong in principle, for the court to strike the claim out after a trial at which the court has held that a defendant is liable to the claimant in an ascertained sum.
In the further alternative, it was submitted that the court should not strike the claim out on the facts of this case.
Reliance was placed in particular upon Ul Haq v Shah and Widlake v BAA.
In Ul Haq v Shah there had been a collision between a car driven by Mr Ul Haq and a car driven by Mrs Shah.
Mrs Shah caused the collision by negligently driving into the back of Mr Ul Haqs car.
Mr Ul Haq claimed for damage to the car and for minor whiplash injuries.
His wife also claimed for minor whiplash injuries.
It was common ground that Mr Ul Haq, his wife and their two children were in the car when the accident occurred.
However there was an issue as to whether Mr Ul Haqs mother was also in the car.
She too made a claim in respect of alleged whiplash injuries.
Her claim was defended on the basis that she was not in the car and so could not have suffered whiplash or any injury as a result of the accident.
At the trial before the recorder, after hearing evidence from Mr Ul Haq, his wife and his mother, the recorder held that Mr Ul Haq and his wife had suffered injury and awarded each a modest sum.
However he held that Mr Ul Haqs mother had not been in the car and that her claim was fraudulent.
He dismissed her claim and ordered her to pay costs on an indemnity basis.
He concluded that Mr Ul Haq and his wife had conspired to support the fraudulent claim and ordered them to pay two thirds of Mrs Shahs costs.
In the result all the claimants incurred a net loss.
Before the recorder it was submitted that the claims of Mr Ul Haq and his wife should be struck out as an abuse of the process of the court under CPR 3.4(2).
It was conceded on behalf of the claimants that the court had power to make such an order under that rule.
The recorder had some doubts as to his jurisdiction but accepted the concession.
On an appeal to Walker J, he held that there was power to strike out a genuine claim, even after the trial of an action, but declined to do so.
In the Court of Appeal, although it was again conceded that there was such a power, the court disagreed and dismissed the appeal for want of jurisdiction.
The principal judgment was given by Smith LJ, with whom Ward and Toulson LJJ agreed.
Toulson LJ added a valuable judgment of his own.
The case was argued entirely on the basis of CPR 3.4(2).
It was not suggested that the substantive rights of Mr and Mrs Ul Haq to damages were affected by their abuse of process in supporting his mothers claim.
Smith LJ noted at para 17 that in nearly 40 years experience she knew of no case in which a judge had refused to award damages for a genuine injury on the ground that the claimant had dishonestly sought to exaggerate the injury or its effects.
As we read the judgments of Smith and Toulson LJJ, their reasoning can be summarised in this way.
It is the policy of the law and the invariable rule that a person cannot be deprived of a judgment for damages to which he is otherwise entitled on the ground of abuse of process (paras 16, 17, 20 and 36).
The Court of Appeal rejected the submission that the principles of insurance law should apply in this context.
As Toulson LJ explained in para 37, there is a special rule of insurance law that an insured cannot recover in respect of any part of a claim in a case where the claim has been fraudulently exaggerated or where a genuine claim has been supported by dishonest devices: Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd [2003] 1 AC 469; Agapitos v Agnew [2003] QB 556; and Axa General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445.
The principle relates only to fraudulent insurance claims: see Axa per Mance LJ at para 31.
In addition, it is restricted to the period prior to the issue of proceedings: see Manifest Shipping per Lord Hobhouse at para 77 and Agapitos v Agnew per Mance LJ at paras 47 53.
In Ul Haq v Shah the submission that the court should not have proceeded to give judgment on the claims but could and should have struck out the whole claim as an abuse of process under CPR 3.4(2)(b) was rejected (para 43).
The inclusion of a false claim with a genuine claim or claims does not of itself turn a genuine claim into a false one or justify the striking out of the genuine claim or claims.
To do so would be to deprive a claimant of his substantive rights as a mark of disapproval, which the court has no power to do (para 46).
It was not a case, like Arrow Nominees Inc v Blackledge [2000] 2 BCLC 167, where the conduct of a litigant put the fairness of the trial in jeopardy, even in the broadest sense, in which case the claim might be struck out as an abuse, but a case in which it was not suggested that there could not be a fair trial of the claims of Mr Ul Haq and his wife (paras 25 28 and 47 49).
Further the Court of Appeal said that CPR 3.4 is directed at the control of the process of litigation and is not apt to describe the decision that a judge makes at the end of a trial; at that stage the judge either upholds the claim or dismisses it, he does not strike it out (paras 24 and 29 per Smith LJ).
The point was concisely summarised thus by Toulson LJ in the course of para 50: Where, as in this case, there has been a full trial, the proper course for the judge is to give judgment on the issues which have been tried.
To have struck out the claims of the first and third claimants would have been to invoke a case management power not for a legitimate case management purpose (in other words, for the purpose of achieving a just and expeditious determination of the parties rights, or avoiding an unjust determination where a partys conduct had made a safe determination impossible), but for the very different purpose of depriving those parties of their legal right to damages by way of punishment for their complicity in the second claimants fraudulent claim, which in my judgment he had no power to do.
It was open to him to impose costs sanctions on the first and third claimants, which he did, but that is a different matter.
The principles in Ul Haq v Shah were restated by the Court of Appeal in Widlake v BAA.
We recognise that there have been many cases in which claimants dishonestly inflate their claims or even, as in the case of Mr Ul Haqs mother, fraudulently invent them.
In the last sentence of his judgment referred to above Toulson LJ said that if, as has been suggested, such fraudulent claims have reached epidemic proportions, it may be that prosecutions are needed as a deterrent to others.
We see the force of that.
The first question in this appeal, however, is whether we should decline to follow Ul Haq v Shah and hold that there is power to strike out a claim under CPR 3.4(2), even where there has been a trial of an action and, as here, the judge has been able fairly to assess the damages.
It is striking that there is no appeal from the judges assessment of the claimants damages, namely 88,716.76.
Nor, as explained above, is there any appeal from the judges decisions on interest or costs, or indeed from his decision refusing the defendants application for permission to take proceedings against the claimant for contempt.
We have reached the conclusion that, notwithstanding the decision and clear reasoning of the Court of Appeal in Ul Haq, the court does have jurisdiction to strike out a statement of case under CPR 3.4(2) for abuse of process even after the trial of an action in circumstances where the court has been able to make a proper assessment of both liability and quantum.
However, we further conclude, for many of the reasons given by the Court of Appeal, that, as a matter of principle, it should only do so in very exceptional circumstances.
We are conscious of the fact that there are now many cases decided since the advent of the CPR where it has been held that the court should approach the CPR as a code and that it should decline to have regard to decisions under the RSC.
However, this is an exceptional class of case and it seems to us that it is appropriate to have regard to the way in which the inherent jurisdiction of the court was exercised in cases of abuse of process before the CPR came into force.
The pre CPR authorities established a number of propositions as follows: i) The court had power to strike out a claim for want of prosecution, not only in cases of inordinate and inexcusable delay which caused prejudice to the defendant, but also where the court was satisfied that the default was intentional and contumelious, eg disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court: Birkett v James [1978] AC 297 per Lord Diplock at p 318F G.
In the latter case it was not necessary to show that a fair trial was not possible or that there was prejudice to the defendant.
See also, for example, Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, per Lord Woolf MR (with whom Waller and Robert Walker LJJ agreed) at p 1436H. ii) In a classic, much followed, statement in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 Lord Diplock described the courts power to deal with abuse of process thus at p 536C: This is a case about abuse of the process of the High Court.
It concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people.
The circumstances in which abuse of process can arise are very varied.
It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power. iii) The court had power to strike out a claim on the ground of abuse of process, even though the effect of doing so would be to extinguish substantive rights.
It follows from the conclusion in Birkett v James that the court could strike out a claim as an abuse of process for intentional and contumelious conduct amounting to an abuse of the process of the court without the necessity to show prejudice that the fact that a strike out might extinguish substantive rights is not a bar to such an order. iv) Although it appears clear that in the vast majority of cases in which the court struck out a claim it did so at an interlocutory stage and not after a trial or trials on liability and quantum, the cases show that the power to strike out remained even after a trial in an appropriate case.
The relevant authorities, such as they are, were considered by Colman J in National Westminster Bank plc v Rabobank Nederland [2006] EWHC 2959 (Comm), where he summarised the position thus in paras 27 and 28: 27.
In my judgment, there can be no doubt that the court does have jurisdiction to strike out a claim or any severable part of a claim of its own volition whether immediately before or during the course of a trial.
This is clear from the combined effect of CPR 1.4, 3.3 and 3.4 as well as 3PD 1.2, and by reason of its inherent jurisdiction. 28.
However, the occasion to exercise this jurisdiction after the start of the trial is likely to be very rare.
The normal course will be for all applications to strike out a claim or part of a claim on the merits to be made under CPR 3.4 or 24.2 and determined well in advance of the trial. v) We agree with Colman J. His conclusions are consistent with Glasgow Navigation Co v Iron Ore Co [1910] AC 293, Webster v Bakewell RDC (1916) 115 LT 678, Harrow LBC v Johnstone [1997] 1 WLR 459, Bentley v Jones Harris & Co [2001] EWCA Civ 1724 per Latham LJ at para 75 and The Royal Brompton Hospital NHST v Hammond [2001] EWCA Civ 550; [2001] Lloyds Rep PN 526, per Clarke LJ at paras 104 109, especially at para 107.
As we see it, the present position is that, whether under the CPR or under its inherent jurisdiction, the court has power to strike out a statement of case at any stage on the ground that it is an abuse of process of the court, but it will only do so at the end of a trial in very exceptional circumstances.
Some assistance is to be derived from Masood v Zahoor [2009] EWCA Civ 650, [2010] 1 WLR 746, where the judgment of the Court of Appeal (comprising Mummery, Dyson and Jacob LJJ) was given by Mummery LJ.
It had been argued that the judge should have struck the claim out as an abuse of process on the ground that some at least of the claims were based on forged documents and false written and oral evidence.
The Court of Appeal referred extensively to the decision of the Court of Appeal in Arrow Nominees Inc v Blackledge and held at para 71 that it was authority for the proposition that, where a claimant is guilty of misconduct in relation to proceedings which is so serious that it would be an affront to the court to permit him to continue to prosecute his claim, then the claim may be struck out for that reason.
It noted that in the Arrow case, the misconduct lay in the petitioners persistent and flagrant fraud whose object was to frustrate a fair trial.
It held that the question whether it is appropriate to strike out a claim on this ground will depend on the particular circumstances of the case.
It added that it was not necessary to express any view as to the kind of circumstances in which (even where the misconduct does not give rise to a real risk that a fair trial will not be possible) the power to strike out for such reasons should be exercised.
It then referred to what this Court agrees is a valuable discussion by Professor Zuckerman in a note entitled Access to Justice for Litigants who Advance their case by Forgery and Perjury in (2008) 27 CJQ 419.
The Court of Appeal expressed its conclusions of principle as follows: 72.
We accept that, in theory, it would have been open to the judge, even at the conclusion of the hearing, to find that Mr Masood had forged documents and given fraudulent evidence, to hold that he had thereby forfeited the right to have the claims determined and to refuse to adjudicate upon them.
We say in theory because it must be a very rare case where, at the end of a trial, it would be appropriate for a judge to strike out a case rather than dismiss it in a judgment on the merits in the usual way. 73.
One of the objects to be achieved by striking out a claim is to stop the proceedings and prevent the further waste of precious resources on proceedings which the claimant has forfeited the right to have determined.
Once the proceedings have run their course, it is too late to further that important objective.
Once that stage has been achieved, it is difficult see what purpose is served by the judge striking out the claim (with reasons) rather than making findings and determining the issues in the usual way.
If he finds that the claim is based on forgeries and fraudulent evidence, he will presumably dismiss the claim and make appropriate orders for costs.
In a bad case, he can refer the papers to the relevant authorities for them to consider whether to prosecute for a criminal offence: we understand that this was done in the present case.
In para 74 the Court of Appeal stressed the importance, if possible, of making an application to strike out at an early stage in order to preserve court resources and save costs.
However, it also appreciated that in a complex case it might not be possible to avoid a full trial.
It appears to us that the approach identified in paras 71 74 of Masood v Zahoor is somewhat different from that in Ul Haq v Shah.
It recognises the possibility of striking out a claim at the end of a trial, whereas, as we read Ul Haq v Shah, it was there held that such a course was not permissible.
We prefer the approach of Masood v Zahoor.
We can summarise what we see as the correct approach in this way.
The language of the CPR supports the existence of a jurisdiction to strike a claim out for abuse of process even where to do so would defeat a substantive claim.
The express words of CPR 3.4(2)(b) give the court power to strike out a statement of case on the ground that it is an abuse of the courts process.
It is common ground that deliberately to make a false claim and to adduce false evidence is an abuse of process.
It follows from the language of the rule that in such a case the court has power to strike out the statement of case.
There is nothing in the rule itself to qualify the power.
It does not limit the time when an application for such an order must be made.
Nor does it restrict the circumstances in which it can be made.
The only restriction is that contained in CPR 1.1 and 1.2 that the court must decide cases in accordance with the overriding objective, which is to determine cases justly.
Under the CPR the court has a wide discretion as to how its powers should be exercised: see eg Biguzzi v Rank Leisure Plc [1999] 1 WLR 1926.
So the position is that the court has the power to strike out a statement of case for abuse of process but at the same time has a wide discretion as to which of its many powers to exercise.
The position is the same under the inherent jurisdiction of the court, so that in the future it is sufficient for applications to be made under the CPR.
We can see no reason why the conclusion reached should be any different, whether the application is made under the CPR or the inherent jurisdiction of the court.
We agree with the Court of Appeal in Masood v Zahoor at para 72 quoted above that, while the court has power to strike a claim out at the end of a trial, it would only do so if it were satisfied that the partys abuse of process was such that he had thereby forfeited the right to have his claim determined.
The Court of Appeal said that this is a largely theoretical possibility because it must be a very rare case in which, at the end of a trial, it would be appropriate for a judge to strike out a case rather than dismiss it in a judgment on the merits in the usual way.
We agree and would add that the same is true where, as in this case, the court is able to assess both the liability of the defendant and the amount of that liability.
We have considered whether the possibility is so theoretical that it should be rejected as beyond the powers of the court.
However it was ultimately accepted on behalf of the claimant that one should never say never.
Moreover we are mindful of Lord Diplocks warning in Hunter quoted at para 35 above that it would be unwise to limit in advance the kinds of circumstances in which abuse might be found.
See also the speech of Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2002] 2 AC 1, at 31.
It was submitted that an ascertained claim for damages could only be removed by Parliament and not by the courts.
We are unable to accept that submission.
It is for the court, not for Parliament, to protect the courts process.
The power to strike out is not a power to punish but to protect the courts process.
The European Convention on Human Rights
The right to a fair and public hearing in the determination of civil rights is enshrined in Article 6 of the European Convention on Human Rights (ECHR).
The right includes a right of access to a court: Golder v United Kingdom (1975) 1 EHRR 524.
The court must act compatibly with Article 6: Human Rights Act 1998 section 6(1).
The court is of course itself a public authority: section 6(3).
The right of access is not absolute: Golder at para 38.
In Ashingdane v United Kingdom (1985) 7 EHRR 528 the European Court of Human Rights accepted at para 57 that the right might be subject to limitations.
Contracting States enjoy a margin of appreciation.
However, the essence of the right of access must not be impaired, any limitation must pursue a legitimate aim and the means employed to achieve the aim must be proportionate.
In the instant case the claimant obtained judgment on liability for damages to be assessed.
We accept that that judgment is a possession within the meaning of Article 1 Protocol 1 of the ECHR and that the effect of striking out his claim for damages would be to deprive him of that possession, which would only be permissible if in the public interest and subject to the conditions provided for by law The State has a wide margin of appreciation in deciding what is in the public interest, but is subject to the principle of proportionality: Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301 at paras 31 39.
It is in the public interest that there should be a power to strike out a statement of case for abuse of process, both under the inherent jurisdiction of the court and under the CPR, but the Court accepts the submission that in deciding whether or not to exercise the power 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 achieving the aim of controlling the process of the court and deciding cases justly.
The exercise of the power
As noted at para 42 above, the court has a wide discretion as to how to exercise its case management powers.
These include the power to strike out the whole or any part of a statement of case at whatever stage it is made, even if it is made at the end of the trial.
However the cases stress the flexibility of the CPR: see eg Biguzzi per Lord Woolf MR at p 1933B, Asiansky Television v Bayer Rosin [2001] EWCA Civ 1792; [2002] CPLR 111 per Clarke LJ at para 49 and Aktas v Adepta [2010] EWCA Civ 1170, [2011] QB 894, where Rix LJ said at 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.
The draconian step of striking a claim out is always a last resort, a fortiori where to do so would deprive the claimant of a substantive right to which the court had held that he was entitled after a fair trial.
It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate.
Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small.
It was submitted on behalf of the defendant that it is necessary to use the power to strike out the claim in circumstances of this kind in order to deter fraudulent claims of the type made by the claimant in the instant case because they are all too prevalent.
We accept that all reasonable steps should be taken to deter them.
However, there is a balance to be struck.
To date the balance has been struck by assessing both liability and quantum and, provided that those assessments can be carried out fairly, to give judgment in the ordinary way.
The reasons for that approach are explained by the Court of Appeal in both Masood v Zahoor and Ul Haq v Shah.
We accept that such an approach will be correct in the vast majority of cases.
Moreover, we do not accept the submission that, unless such claims are struck out, dishonest claimants will not be deterred.
There are many ways in which deterrence can be achieved.
They include ensuring that the dishonesty does not increase the award of damages, making orders for costs, reducing interest, proceedings for contempt and criminal proceedings.
A party who fraudulently or dishonestly invents or exaggerates a claim will have considerable difficulties in persuading the trial judge that any of his evidence should be accepted.
This may affect either liability or quantum.
In the instant case, as explained above, the claimants fraud and dishonesty led the judge to reject his evidence except where it was supported by other evidence.
The judge naturally refused to draw any inferences of fact in his favour.
It is likely that, if the claimant had told the truth throughout, his damages would have been assessed at a somewhat larger figure than they were in fact.
This is often likely to be the case.
As to costs, in the ordinary way one would expect the judge to penalise the dishonest and fraudulent claimant in costs.
It is entirely appropriate in a case of this kind to order the claimant to pay the costs of any part of the process which have been caused by his fraud or dishonesty and moreover to do so by making orders for costs on an indemnity basis.
Such cost orders may often be in substantial sums perhaps leaving the claimant out of pocket.
It seems to the Court that the prospect of such orders is likely to be a real deterrent.
There was much discussion in the course of the argument as to whether the defendant can protect its position in costs by making a Part 36 offer or some other offer which will provide appropriate protection.
It was submitted that a Part 36 offer is of no real assistance because, if it is accepted, the defendant must pay the claimants costs under CPR 36.10.
We accept the force of that argument.
However, we see no reason why a defendant should not make a form of Calderbank offer (see Calderbank v Calderbank [1976] Fam 93) in which it offers to settle the genuine claim but at the same time offers to settle the issues of costs on the basis that the claimant will pay the defendants costs incurred in respect of the fraudulent or dishonest aspects of the case on an indemnity basis.
In Fox v Foundation Piling Ltd [2011] EWCA Civ 790 the Court of Appeal correctly accepted at para 45 that the parties were entitled to make a Calderbank offer outside the framework of Part 36.
The precise formulation of such an offer would of course depend upon the facts of a particular case, but the offer would be made without prejudice save as to costs and, unless accepted, would thus be available to the defendant when the issue of costs came to be considered by the trial judge at the end of a trial.
The court can also reduce interest that might otherwise have been awarded to a claimant if time has been wasted on fraudulent claims.
As to contempt, we do not accept the submission that it cannot be an effective sanction for the kind of behaviour evidenced in this case.
We were referred to a number of examples.
In South Wales Fire and Rescue Service v Smith [2011] EWHC 1749 (Admin) an application was made to commit the defendant to prison for contempt of court on the ground that, having been injured at work as a fireman, he made a false claim that since his accident he had been unable to work.
The case thus has some similarities to the instant case.
The Divisional Court sentenced him to 12 months imprisonment for the contempt.
The sentence was suspended for 12 months on certain terms because of the particular circumstances of the case, notably the delays since the offence.
However, the case is of some importance because it set out the general approach of the courts to this type of case.
In giving judgment, with which Dobbs J agreed, Moses LJ said this at paras 2 7: 2.
For many years the courts have sought to underline how serious false and lying claims are to the administration of justice.
False claims undermine a system whereby those who are injured as a result of the fault of their employer or a defendant can receive just compensation. 3.
They undermine that system in a number of serious ways.
They impose upon those liable for such claims the burden of analysis, the burden of searching out those claims which are justified and those claims which are unjustified.
They impose a burden upon honest claimants and honest claims, when in response to those claims, understandably those who are liable are required to discern those which are deserving and those which are not. 4.
Quite apart from that effect on those involved in such litigation is the effect upon the court.
Our system of adversarial justice depends upon openness, upon transparency and above all upon honesty.
The system is seriously damaged by lying claims.
It is in those circumstances that the courts have on numerous occasions sought to emphasise how serious it is for someone to make a false claim, either in relation to liability or in relation to claims for compensation as a result of liability. 5.
Those who make such false claims if caught should expect to go to prison.
There is no other way to underline the gravity of the conduct.
There is no other way to deter those who may be tempted to make such claims, and there is no other way to improve the administration of justice. 6.
The public and advisors must be aware that, however easy it is to make false claims, either in relation to liability or in relation to compensation, if found out the consequences for those tempted to do so will be disastrous.
They are almost inevitably in the future going to lead to sentences of imprisonment, which will have the knock on effect that the lives of those tempted to behave in that way, of both themselves and their families, are likely to be ruined. 7.
But the prevalence of such temptation and of those who succumb to that temptation is such that nothing else but such severe condemnation is likely to suffice.
We have set out those paragraphs verbatim because we agree with them and in order to make clear to all what is the correct approach to contempt of court on the facts of cases such as this.
The approach in that case was followed by the Divisional Court in Nield v Loveday [2011] EWHC 2324 (Admin) and in Lane v Shah [2011] EWHC 2692 (Admin), where sentences were imposed of between three and nine months imprisonment.
Although contempt proceedings have to be brought in the High Court whereas the underlying proceedings may be in the county court, there should be no practical difficulty in that regard: see eg Ali v Esure Services Ltd [2011] EWCA Civ 1582.
The defendant indicated some reluctance to proceed by way of proceedings for contempt.
We, however, see no difficulty in proceedings by way of contempt in such cases, provided of course that the relevant facts can be proved.
It was submitted in the course of argument that there might be difficulties in inviting the trial judge to hear applications for permission to bring proceedings for contempt.
However, in the absence of special circumstances, we cannot see any difficulty in the trial judge hearing both the application for permission and, if permission is granted, the proceedings themselves.
On the contrary, it seems to us that the trial judge is likely to be best placed to hear both.
Such an approach is likely to be both the most economical and the most just way to proceed.
The only circumstances in which that would not be the case would be where there was apparent bias on the part of the judge: see eg Wilkinson v S [2003] EWCA Civ 95; [2003] 1 WLR 1254, per Hale LJ at para 25.
Finally, the possibility remains of criminal proceedings being brought.
It would be open to the judge to refer the matter to the CPS or the DPP in an appropriate case.
The test in every case must be what is just and proportionate.
It seems to us that it will only be in the very exceptional case that it will be just and proportionate for the court to strike out an action after a trial.
The more appropriate course in the civil proceedings will be that proposed in both Masood v Zahoor and Ul Haq v Shah.
Judgment will be given on the claim if the claimants case is established on the facts.
All proper inferences can be drawn against the claimant.
The claimant may be held entitled to some costs but is likely to face a substantial order for indemnity costs in respect of time wasted by his fraudulent claims.
The defendant may well be able to protect itself against costs by making a Calderbank offer.
Moreover, it is open to the defendant (or its insurer) to seek to bring contempt proceedings against the claimant, which are likely to result in the imprisonment of the claimant if they are successful.
It seems to us that the combination of these consequences is like to be a very effective deterrent to claimants bringing dishonest or fraudulent claims, especially if (as should of course happen in appropriate cases) the risks are explained by the claimants solicitor.
It further seems to us that it is in principle more appropriate to penalise such a claimant as a contemnor than to relieve the defendant of what the court has held to be a substantive liability.
We note two points by way of postscript.
First, nothing in this judgment affects the correct approach in a case where an application is made to strike out a statement of case in whole or in part at an early stage.
As the Court of Appeal put it in Masood v Zahoor at para 73 (set out above) in a passage with which we agree, one of the objects to be achieved by striking out a claim is to stop proceedings and prevent the further waste of precious resources on proceedings which the claimant has forfeited the right to have determined.
Secondly, nothing in this judgment affects the case where the fraud or dishonesty taints the whole claim.
In that event, if the court is aware of it before the end of the trial, judgment will be given for the defendant and, if it comes to light afterwards, it will be open to a defendant to raise the issue in an appeal.
Application to the facts
If the approach set out above is applied to the facts of this case, we conclude that this is not an appropriate case in which to strike the action out instead of giving judgment for the claimant.
It would not be proportionate or just to do so.
It would therefore be wrong in principle to do so.
We accept the submission that this is a serious case of abuse of process.
The claimant persistently maintained his claim on a basis or bases which he knew to be false, both before he was found out and thereafter at the trial.
Nevertheless, as a matter of substantive law, he had suffered significant injury as a result of the defendants breach of duty and, on those findings of fact, subject to the deductions referred to below was entitled to damages amounting to 88,716.76.
The judge then made the orders for costs and interest referred to above which he explained in detail and which the defendant does not challenge on appeal.
He further refused the defendant permission to bring contempt proceedings for the reasons explained in his judgment.
The defendant has not appealed against that decision.
But for the particular circumstances of this case, which the defendant (or its insurer) was determined to bring as a test case, it seems likely that permission would have been granted to bring proceedings for contempt, which would have had every prospect of success.
We note by way of further postscript that substantial sums fall to be deducted from the sum of 88,716.76 referred to above before any money is paid to the claimant.
The interim payment of 10,000 must of course be deducted.
So must the value of the various state benefits which the claimant received.
That value is not agreed but we were a given a figure of over 63,000.
Whatever the true figures turn out to be, it seems unlikely that the claimant will receive much, if anything, out of the award of 88,716.76.
CONCLUSION
Although we have accepted the defendants submission that the court has power under the CPR and under its inherent jurisdiction to strike out a statement of case at any stage of the proceedings, even when it has already determined that the claimant is in principle entitled to damages in an ascertained sum, we have concluded that that power should in principle only be exercised where it is just and proportionate to do so, which is likely to be only in very exceptional circumstances.
We have further concluded that this not such a case.
Submissions upon the precise form of the order and on costs should be made within 28 days.
| UK-Abs | On 13 May 2003 the Respondent was injured in an accident at work.
In May 2006 the Respondent issued a claim against the Appellant, his former employer, alleging breach of duty and/or negligence.
In August 2007 the county court gave judgment for the Respondent on liability, with damages to be assessed at a later date.
Between October 2007 and September 2008 the Appellant subjected the Respondent to undercover surveillance.
This revealed the Respondent was grossly exaggerating the effect of his injuries and his incapacity to work.
In December 2008 the Respondent served his first schedule of loss.
He claimed damages of 838,616 including a claim for loss of earnings up to October 2008.
Soon afterwards the Appellant disclosed the surveillance evidence to the Respondent.
At the same time it served a re amended defence asserting that the Respondents claim was dishonestly exaggerated and should be struck out in its entirety.
The Respondent subsequently served two further schedules of loss valuing the claim at approximately 250,000.
All of the Respondents pleadings and schedules of loss were supported by statements of truth.
The trial on damages took place in January 2010.
The Respondent did not challenge the surveillance evidence.
The judge held there was no doubt the Respondent had suffered serious fractures which required at least two operations.
However he also found that the evidence established beyond reasonable doubt that the Respondent had fraudulently misstated the extent of his injuries and had deliberately lied to the medical experts and to the Department of Work and Pensions.
The judge found that the Respondent had been fit for work and able to get work since the end of June 2007.
Before that date he had been unable to work, but was not as housebound and incapable of activity as he claimed.
On the basis of these findings the judge awarded the Respondent damages for loss of earnings between the date of the accident and 30 June 2007.
In addition, he awarded general damages of 18,500 and damages for additional care and assistance.
The total award was 88,716.76.
The Appellant submitted that the court had power to strike out the claim in its entirety on the ground that it was tainted by fraud and was an abuse of process.
Both the judge and the Court of Appeal (Ward and Smith LJJ) held they were bound by the decisions of the Court of Appeal in Ul Haq v Shah [2009] EWCA Civ 542 and Widlake v BAA [2009] EWCA Civ 1256 to refuse the application on the ground that the court had no power to strike out a statement of case in such circumstances.
The Supreme Court unanimously holds that the court does have jurisdiction to strike the claim out for abuse of process, but declines to exercise the power in the present case.
The judgment of the Court is given by Lord Clarke.
The issues in the appeal are (1) whether, following a trial at which the court has held that the defendant is liable in damages to the claimant in an ascertained sum, the court nevertheless has power to strike out the claimants
statement of case on the basis that it is an abuse of process; and (2) if so, in what circumstances that power should be exercised [1].
In Ul Haq v Shah the Court of Appeal held there is an invariable rule that a person cannot be deprived of a judgment for damages to which he is otherwise entitled on the ground that he is guilty of an abuse of process [25] [28].
The principles in Ul Haq were restated by the Court of Appeal in Widlake v BAA [31].
Notwithstanding those decisions, the court does in fact have power to strike out a statement of case even after the trial of an action where the court has been able to make a proper assessment of both liability and the amount of damages [33].
The language of the Civil Procedure Rules supports the existence of a jurisdiction to strike a claim out for abuse of process even where to do so would defeat a substantive claim.
The express words of CPR 3.4(2)(b) give the court power to strike out a statement of case on the ground that it is an abuse of the courts process.
It is common ground that deliberately to make a false claim and to adduce false evidence is an abuse of process.
It follows from the language of the rule that in such a case the court has power to strike out the statement of case.
There is nothing in the rule itself to qualify this power.
The only restriction is that contained in CPR 1.1 and 1.2 that the court must decide cases in accordance with the overriding objective of determining cases justly [41].
The position is the same under the inherent jurisdiction of the court, so that in future it is sufficient for applications to be made under the CPR [42] However as a matter of principle the court should only exercise this power in very exceptional circumstances [36], [65].
Under the CPR the court has a wide discretion as to how its powers should be exercised.
The power to strike out a claim at the end of a trial should only be exercised if the court is satisfied that the partys abuse of process was such that he had thereby forfeited the right to have his claim determined.
This is a largely theoretical possibility.
It must be a very rare case in which, at the end of a trial, it would be appropriate for a judge to strike out a case rather than dismiss it in a judgment on the merits in the usual way.
The same is true where, as in this case, the court is able to assess both the liability of the defendant and the amount of that liability [43].
This conclusion is compatible with the European Convention on Human Rights (ECHR).
In deciding whether or not to exercise the power to strike out the court will examine the circumstances of the case scrupulously.
It will only strike out the claim if this is a proportionate means of achieving the aim of controlling the process of the court and dealing with cases justly [46] [48].
It is very difficult to think of circumstances in which such a measure would be proportionate.
However they might include a case where there had been a massive attempt to deceive the court but the award of damages would be very small [49].
The Court rejects the submission that unless exaggerated claims are struck out, dishonest claimants will not be deterred.
There are many other ways in which deterrence can be achieved.
These include ensuring that the dishonesty does not increase the award of damages, making orders for costs (including indemnity costs), reducing interest, proceedings for contempt and criminal proceedings.
In appropriate cases adverse inferences can also be drawn against the claimant [52],[61].
In the present case the Respondent accepts that in making statements of truth which he knew to be false and in presenting a dishonest case as to the effect of his injuries and on quantum, he was guilty of a serious abuse of process [24].
Nevertheless, as a matter of substantive law the Respondent did suffer significant injury as a result of the Appellants breach of duty.
In all the circumstances it would not be proportionate or just to strike the claim out.
The appeal is therefore dismissed [63] [65].
|
The specific issue raised by this appeal is whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by legal advice privilege (LAP), in a case where the legal advice was given by accountants in relation to a tax avoidance scheme.
The more general question raised by this issue is whether LAP extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far LAP thereby extends, or should be extended.
The statutory provisions applicable in this case
The statutory provisions in force at the time during which the events giving rise to the present proceedings took place were in the Taxes Management Act 1970 (TMA).
All references in this judgment to sections are to sections of that Act, unless the contrary is stated.
Section 20(1)(a) provided that an inspector of taxes may by notice in writing require a person to deliver to him such documents as (in the inspectors reasonable opinion) contain, or may contain, information relevant to (i) any tax liability to which that person is or may be subject, or (ii) the amount of any such liability.
Section 20(3) extended this power to require any other person to deliver or make available such documents to an inspector.
By virtue of section 20(7), an inspector needed the consent of the special or general commissioners before serving a notice under either subsection.
It was established by R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563 (Morgan Grenfell) that the provisions of section 20 could not be invoked to force anyone to produce documents to which LAP attached.
Lord Hoffmann at paras 7 and 9 said that a statute could only remove such a fundamental human right if it expressly stated that it was doing so, or if the intention appear[ed] by necessary implication, and, as Lord Hobhouse emphasised at para 45, [a] necessary implication is a matter of express language and logic not interpretation.
Section 20A, inserted by the Finance Act 1976 (the 1976 Act), empowered an inspector to call for documents to be produced by a person who had stood in relation to others as a tax accountant and who had been convicted of an offence relating to tax or had had a penalty imposed on him under section 99.
Section 20D(2), also inserted by the 1976 Act, explained that a person stands in relation to another as tax accountant when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax .
Section 20B was also inserted by the 1976 Act (and was amended in 1988, 1989 and 1990).
Section 20B(1) required an inspector, before serving a notice under section 20(1) or (3) on any person, to give that person a reasonable opportunity to deliver (or make available) the documents in question .
Section 20B also included the following subsections: (8) A notice under section 20(3) or section 20A(1) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his clients consent, any document with respect to which a claim to professional privilege could be maintained. (9) Subject to subsection (11) below, a notice under section 20(3) (a) does not oblige a person who has been appointed as an auditor for the purposes of any enactment to deliver or make available documents which are his property and were created by him or on his behalf for or in connection with the performance of his functions under that enactment, and (b) does not oblige a tax adviser to deliver or make available documents which are his property and consist of relevant communications. (10) In subsection (9) above relevant communications means communications between the tax adviser and (a) a person in relation to whose tax affairs he has been appointed, or (b) any other tax adviser of such a person, the purpose of which is the giving or obtaining of advice about any of those tax affairs; and in subsection (9) above and this subsection tax adviser means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that other person or by another tax adviser of his). (11) subsection (9) above shall not have effect in relation to any document which contains information explaining any information, return, accounts or other document which the person to whom the notice is given has, as tax accountant, assisted any client of his in preparing for, or delivering to, the inspector or the Board.
Section 20BA was inserted by the Finance Act 2000 (the 2000 Act), and it extended the power granted by section 20 to make an order for the delivery of documents by any person who appears to have such documents in his possession or power.
Paragraph 5(1) of Schedule 1AA, also inserted by the 2000 Act, exempted from the ambit of section 20BA items subject to legal privilege, which were defined in para 5(2) as: (a) communications between a professional legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client; (b) communications between a professional legal adviser and his client or any person representing his client or between such an adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and (c) items enclosed with or referred to in such communications and made (i) in connection with the giving of legal advice .
These various provisions of TMA have now been replaced by provisions contained in section 113 of, and Schedule 36 to, the Finance Act 2008 (the 2008 Act).
While there are differences between the regime in TMA and that in the 2008 Act, they are of no significance for present purposes.
Paragraph 23 of Schedule 36 to the 2008 Act, which effectively replaces section 20B(8), provides that: (1) An information notice does not require a person (a) to provide privileged information, or (b) to produce any part of a document that is privileged. (2) For the purpose of this Schedule, information or a document is privileged if it is information or a document in respect of which a claim to legal professional privilege, or (in Scotland) to confidentiality of communications as between client and professional legal adviser, could be maintained in legal proceedings. the In 2004, international And paragraphs 24 to 26 of Schedule 36 to the 2008 Act contain provisions relating to communications with auditors and with tax advisers, which are similar to those in subsections (9) to (11) of section 20B.
The factual and procedural background to this appeal
firm of chartered accountants, PricewaterhouseCoopers (PwC), devised a marketed tax avoidance scheme (the scheme).
In accordance with the requirements of Part 7 of the Finance Act 2004, PwC disclosed the scheme to the Commissioners for Inland Revenue, or Her Majestys Revenue and Customs (HMRC) as they became a year later and as I will refer to them.
At about that time the Prudential group of companies instructed PwC to advise them in connection with certain overseas holdings, and PwC identified that the scheme could be adapted for their benefit.
Thereafter the Prudential group implemented the scheme, which involved a series of transactions (the Transactions).
The details of the scheme and the Transactions do not matter for present purposes.
It is enough to say that the aim of the scheme was to give rise to a substantial tax deduction in Prudential (Gibraltar) Ltd, a subsidiary company of Prudential plc, which could then be set off against the profits of that company, which profits were ordinarily chargeable to corporation tax in this country.
Mr Pandolfo, the inspector of taxes responsible for this aspect of the Prudential groups tax liabilities, considered it necessary to look into the details of the Transactions (for reasons which are not challenged).
To that end, he served notices under section 20B(1) on Prudential (Gibraltar) Ltd and Prudential plc (together Prudential) giving them the opportunity to make available specified classes of documents in relation to the Transactions prior to his serving notices under section 20(1) and (3).
Prudential disclosed many of the documents requested by Mr Pandolfo, but refused to disclose certain documents (the disputed documents) on the ground that Prudential was entitled to claim legal advice privilege in respect of them.
Mr Pandolfo considered that questions were raised by the documents which were disclosed, and he sought authorisation from the Special Commissioners under section 20(7) to require Prudential to disclose the disputed documents.
Such authorisation was given, and, on 16 November 2007, Mr Pandolfo served notices under section 20(1) and (3) on Prudential (Gibraltar) Ltd and Prudential plc respectively, requiring disclosure of the disputed documents.
Prudential then issued the present application for judicial review challenging the validity of those notices on the ground that they sought disclosure of documents which related to the seeking (by Prudential) and the giving (by PwC) of legal advice in connection with the Transactions, which were therefore said to be excluded from the disclosure requirements of section 20 by virtue of LAP, in accordance with the decision of the House of Lords in Morgan Grenfell.
That application came before Charles J, who rejected it on the ground that, although the disputed documents would have attracted LAP (and would have been thereby excluded from the disclosure requirements of section 20) if the advice in question had been sought from, and provided by, a member of the legal profession, no such privilege extended to advice, even if identical in nature, provided by a professional person who was not a qualified lawyer.
His decision, [2009] EWHC 2494 (Admin), was upheld, substantially for the same reasons, by the Court of Appeal (Mummery, Lloyd and Stanley Burnton LJJ), [2010] EWCA Civ 1094. (Both decisions are now reported at [2011] QB 669.)
Prudential now appeal to this court.
Legal advice privilege
Where legal professional privilege (LPP) attaches to a communication between a legal adviser and a client, the client is entitled to object to any third party seeing the communication for any purpose, unless (i) the client has agreed or waived its right, (ii) a statute provides that the privilege can be overridden, (iii) the document concerned was prepared for, or in connection with, a nefarious purpose, or (iv) one of a few miscellaneous exceptions applies (eg in a probate case where the validity of a will is contested).
As Lord Carswell explained in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610 (Three Rivers), para 105, LPP is a single integral privilege, whose sub heads are legal advice privilege and litigation privilege.
This case is concerned with the first of those subheads, legal advice privilege (LAP).
In summary terms, as is common ground on this appeal, LAP applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice, i.e. advice which relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law Three Rivers (No 6), [2005] 1 AC 610, para 38, per Lord Scott.
The development and rationale of LAP are explained in terms which I could not begin to improve on by Lord Sumption in paras 115 to 121 below.
In modern times, LPP, and more particularly LAP, have been fully considered and refined in a number of authoritative decisions, which speak for themselves.
Particularly as they throw no direct light on the issue thrown up by this appeal, it is only necessary to identify three points which emerge from them before turning to the issue itself.
First, LAP exists to ensure that there is what Justice Rehnquist referred to in the Supreme Court of the United States as full and frank communication between attorneys and their clients, which promote[s] broader public interests in the observance of law and administration of justice Upjohn Co v United States (1981) 449 US 383, 389, quoted by Lord Scott in Three Rivers (No 6) at para 31.
As Lord Scott went on to explain at para 34, the principle that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers legal skills , should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else is founded upon the rule of law.
Secondly, LAP exists solely for the benefit of the client.
As Bingham LJ said in Ventouris v Mountain [1991] 1 WLR 607, 611, the expression legal professional privilege is unhappy in so far as it suggests that the privilege is that of the legal profession, when it is the client who enjoys the privilege.
Thus, as Lord Hoffmann pointed out in Morgan Grenfell at para 37, [i]f the client chooses to divulge the information, there is nothing the lawyer can do about it.
Thirdly, LAP is a common law principle, which was developed by the judges in cases going back at least to the 16th century see Berd v Lovelace (1577) Cary 62, which, together with subsequent cases, is discussed in the opinion of Lord Taylor of Gosforth CJ in R v Derby Magistrates Court, Ex p B [1996] AC 487, 504 505.
As Lloyd LJ said in the Court of Appeal at [2011] QB 669, 709, para 30, LAP and its rationale was probably first coherently characterised in a judgment by Lord Brougham LC in Greenough v Gaskell (1833) 1 My & K 98, 102 103. (Litigation privilege seems to have developed rather later see per Lord Carswell in Three Rivers (No 6), para 96.)
The issue on this appeal
This appeal is concerned with the breadth of LAP, in the sense of the types of advisers with whom communications can attract LAP.
The particular issue on this appeal is whether LAP should attach to communications passing between chartered accountants and their client in connection with expert tax advice given by the accountants to their client, in circumstances where there is no doubt that LAP would attach to those communications if the same advice was being given to the same client by a member of the legal profession.
The case advanced by Lord Pannick QC for Prudential, supported by Ms Patricia Robertson QC for the Institute of Chartered Accountants for England and Wales, was that this court should hold that LAP does attach to such communications.
This case is based on the proposition that LAP is a common law right created by the judges, which should be applied, and if necessary extended, so as to accord with the principles which underlie and justify the right.
More particularly, it is said that, given that LAP is justified by the rule of law, and that it exists for the benefit of a client who seeks and receives legal advice, for instance on its tax affairs, there is no principled basis upon which it can be restricted to cases where the adviser happens to be a member of the legal professions, as opposed to a qualified accountant.
This point was said to be reinforced by reference to relatively modern developments, in particular the fact that the great majority of legal advice on taxation matters is now given by accountants rather than by lawyers.
In addition reliance was placed on (i) section 330 of the Proceeds of Crime Act 2002 (POCA), (ii) the Human Rights Act 1998 (the HRA), and (iii) the Legal Services Act 2007 (the 2007 Act).
The contrary case was advanced by Mr James Eadie QC for HMRC, supported by Sir Sydney Kentridge QC for the Law Society, Mr Bankim Thanki QC for the Bar Council, and Mr Michael Edenborough QC for AIPPI UK.
Their case was that it has been universally assumed that LAP is restricted to advice given by lawyers, and the court should not extend it to accountants in connection with tax advice for a number of reasons.
Those reasons, in summary form, were that (i) the effect of extending LAP would involve a potentially nuanced policy decision, with unpredictable and potentially wide ranging public and forensic consequences, which is therefore best left to Parliament, and (ii) Parliament has legislated on the assumption that LAP is restricted to advice given by lawyers, and has further considered and rejected a proposal to extend LAP to tax advisers.
It was also argued that there is a good principled reason in the modern world to restrict LAP to advice given by lawyers.
The ambit of LAP as it is generally understood
There is room for argument whether, by allowing Prudentials appeal, we would be extending the breadth of LAP or would simply be identifying the breadth of LAP.
On the former view we would be changing the common law; on the latter view, we would be declaring what the common law always has been.
I do not think it necessary to address this issue, as the important point for present purposes is that it is universally believed that LAP only applies to communications in connection with advice given by members of the legal profession, which, in modern English and Welsh terms, includes members of the Bar, the Law Society, and the Chartered Institute of Legal Executives (CILEX) (and, by extension, foreign lawyers).
That is plain from a number of sources, which speak with a consistent voice.
First, there are clear judicial statements of high authority to that effect over the past century and more.
Sir George Jessel MR referred to LAP as being confined to communications between a client and his legal adviser, that is, between solicitor and client or barrister and client in Slade v Tucker (1880) 14 Ch D 824, 828, a view he repeated in Wheeler v Le Marchant (1881) 17 Ch D 675, 681 682.
In Minter v Priest [1930] AC 558, 581, Lord Atkin said that a [professional] communication pass[ing] for the purpose of getting legal advice must be deemed confidential, and added that it should be understood that the profession is the legal profession.
More recently, the view that LAP is confined to advice from lawyers was repeated by Lord Denning MR in Attorney General v Mulholland [1963] 2 QB 477, 489 490, in a passage approved by Lord Edmund Davies in D v National Society for the Prevention of Cruelty to Children [1978] AC 171, 243 244.
Secondly, in three more recent cases, on the basis that LAP is confined to advice given by lawyers, the courts have refused to extend LAP to legal advice given by a trade mark agent, a patent agent, or a personnel consultant see, respectively, Dormeuil Trade Mark [1983] RPC 131 (Nourse J), Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 (CA, Waller and Dillon LJJ), and New Victoria Hospital v Ryan [1993] ICR 201 (EAT, Tucker J).
Thirdly, and unsurprisingly, the current editions of textbooks on privilege and evidence state that LAP is limited to communications in connection with obtaining legal advice from qualified lawyers see the summary given by Charles J at first instance in this case at [2011] QB 669, 683, para 45(5).
Fourthly, more than one significant official report has expressed the view, and proceeded on the basis, that LAP is restricted to legal advice given by a professional lawyer.
Thus, The 16th Report of the Law Reform Committee (Privilege in Civil Proceedings) (1967) (Cmnd 3472) stated at para 24, in relation to LAP that [t]he category of professional legal advisers is confined to barristers and solicitors; the committee included Lord Pearson, Diplock LJ, Winn LJ, Megarry J and Roger Parker QC (later Parker LJ).
To the same effect, Chapter 26 of the 1983 Report of the Committee on Enforcement Powers of the Revenue Departments, Cmnd 8822 (the Keith Report), prepared by a committee presided over by Lord Keith of Kinkel, proceeds on the clear basis that LAP was limited to communications with a clients lawyers and did not extend to communications with their tax accountants, even where these communications involve the seeking and giving of legal advice.
Fifthly, in 2003, the Government (by which I mean the executive as opposed to Parliament) rejected a proposal, which had been made in 2001, by the Director General of Fair Trading that legal advice given by accountants should be subject to the same privilege as that conferred upon advice given by professional lawyers.
This shows that both the Director General and the Government clearly proceeded in the belief that legal advice was not protected by LAP unless given by a member of the legal profession.
Sixthly, and more importantly, Parliament has legislated in a way which plainly implies that it assumes that LAP is limited to advice given by lawyers.
Thus, there are the statutory extensions of LAP to patent attorneys, to trade mark agents and to licensed conveyancers see respectively section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994 (as amended by the Legal Services Act 2007), and section 33 of the Administration of Justice Act 1985.
Then there are the provisions of section 20B of TMA itself: the terms in which subsection (8) is expressed, particularly when one looks at subsections (3) and (9), plainly show that Parliament believed that there was a difference in the tax advice given by a barrister, advocate or a solicitor, as opposed to the more generic tax adviser.
Seventhly, the substantial re enactment of the relevant provisions of TMA in paragraphs 23 to 26 of Part 4 of Schedule 36 to the Finance Act 2008 were considered in the usual way by the House of Commons Public Bill Committee.
In their deliberations on 10 June 2008, the Committee actually discussed extending LAP to tax advice given by accountants through the medium of an amendment to what is now paragraph 23 of Schedule 36 to the 2008 Act see the Hansard report of this discussion, (HC Debates), cols 606 608.
No details were given to us as to what happened following those discussions, but what is clear is that Parliament none the less decided in Schedule 36 to the 2008 Act to maintain the difference between (i) a person with whom communications attracted legal professional privilege (in England and Wales, and a professional legal adviser in Scotland) in paragraph 23, and (ii) a tax adviser in paragraph 25.
Although it could be said to beg the question which we have to decide, a combination of the general understanding as to the breadth of LPP and the absence of any suggestion of a Parliamentary intention to depart from TMA in this connection, leads to the clear conclusion, in my view, that paragraph 23 was intended to be limited to professional lawyers.
The implications of allowing this appeal
If we were to allow this appeal, we would therefore be extending LAP beyond what are currently, and have for a long time been understood to be, its limits.
Indeed, we would be extending it considerably, as the issue cannot simply be treated as limited to the question whether tax advice given by expert accountants is covered by LAP.
While that is the specific question between the parties, it is just a subset, no doubt an important subset, of a much larger set.
To concentrate on tax advice given by accountants would be wrong, because it would ineluctably follow from our accepting Prudentials argument that legal advice given by some other professional people would also be covered.
In that connection, Sir Sydney pointed out in argument that there have been some variations in the way in which Prudential has formulated its case as to the precise breadth of LAP.
In my view, the most powerful formulation is that favoured by Lord Sumption, namely that LAP is confined to cases where legal advice is given by a professional person whose profession ordinarily includes the giving of legal advice.
It is the most powerful formulation because it is the simplest and the most consistent with the basis on which LAP has been justified by the courts.
The case for allowing this appeal
There is no doubt that the argument for allowing this appeal is a strong one, at least in terms of principle, as anyone reading Lord Sumptions judgment can appreciate.
LAP is based on the need to ensure that a person can seek and obtain legal advice with candour and full disclosure, secure in the knowledge that the communications involved can never be used against that person.
And LAP is conferred for the benefit of the client, and may only be waived by the client; it does not serve to protect the legal profession.
In light of this, it is hard to see why, as a matter of pure logic, that privilege should be restricted to communications with legal advisers who happen to be qualified lawyers, as opposed to communications with other professional people with a qualification or experience which enables them to give expert legal advice in a particular field.
This is especially true at the present time when, as Lord Pannick pointed out, almost all qualified lawyers specialise in limited fields, and when the provision of legal advice is no longer a service limited to professional lawyers, as (in terms of practice) is demonstrated by the specific example of tax advice, and as (in terms of law) is illustrated by the fact that the provision of legal advice is not a reserved legal activity under the 2007 Act.
As Charles J said at [2011] QB 669, 691, paras 64 65: [there is] a compelling, and indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and it is firms of accountants, rather than firms of solicitors, who do give such advice and represent clients in disputes with the revenue on many aspects of their tax affairs.
Further many firms of accountants now employ lawyers to advise on tax and what they, and qualified accountants in the same firm, do in this context is the same.
So, in my view, [it has been] shown that accountants do what lawyers are described as doing in the cases that establish [LAP].
This has been the case for some time and in my view an equivalent position can be said to exist in respect of other professions.
The principled arguments for restricting LAP to lawyers advice
The principled arguments for restricting LAP to communications with professional lawyers which have been put forward appear to me to be weak, but not wholly devoid of force.
They are based on (i) the close connection between members of the legal profession and the court, (ii) historical observations and relics (albeit important relics), such as the involvement of the court in disciplinary procedures of solicitors and barristers, (iii) the duties to the court owed by members of their profession, and (iv) the view that solicitors and barristers are in a special position, in that they are held by the courts to higher standards than members of other professions.
At any rate, to modern eyes, it is hard to see why the connection between lawyers and the courts, and in particular the reliance which judges place upon lawyers to act properly, is a good reason in principle for limiting LAP to the legal profession.
One can see why the argument might have carried real weight 150 years ago, but for the point to convince today would require something more than such a general statement.
Judicial and other observations from the 19th century are of little use, as we are now in a world where a great deal of legal advice is tendered by professional people other than members of the legal profession, as is recognised by the fact, mentioned above, that giving legal advice is not a reserved legal activity under the 2007 Act.
The appeal functions of the judges in the disciplinary procedures of the legal profession do not seem to me, at least in general, to be much greater than their judicial review functions in relation to the disciplinary procedures of other professions.
It is also true that solicitors and barristers owe a formal duty to the court, but (i) that duty only would be relevant in connection with litigation, whereas LAP goes much wider, and (ii) every professional person involved in litigation can fairly be said to have a duty to the court.
Such principled justification as there is for the restriction of LAP to lawyers seems to me to be further undermined by the extension of LAP which the court has approved to all foreign lawyers, without (it would seem) regard to their particular national standards, regulations or rules with regard to privilege.
That extension appears to originate from Lawrence v Campbell (1859) 4 Drew 485 (Sir Richard Kindersley V C), and was approved and applied in Macfarlan v Rolt (1872) LR 14 Eq 580 (Sir John Wickens V C), In re Duncan, decd [1968] P 306 (Ormrod J), and Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529, 536 (Templeman LJ). (I do not consider, however, that Prudentials argument is assisted by the fact that advice from employed lawyers attracts LAP: that seems entirely consistent with the notion that LAP applies where legal advice is being sought from or given by members of the legal profession).
In the light of these points, particularly as it is entirely a creation of the common law for the benefit of individuals or companies seeking and obtaining legal advice, I accept that there is a strong case in terms of logic for allowing this appeal.
Conclusion: introductory
While I accept that it would accord with its underlying logic to extend LAP as Prudential contend, [t]he life of the [common] law has not been logic, as Oliver Wendell Holmes, Jr observed on the first page of The Common Law (1881).
As he went on to say, the life of the common law has been experience.
The common law has been created and developed by judges over more than eight centuries, and, as Holmes also observed, [i]n order to know what it is, we must know what it has been .
It is therefore inevitable that the common law will include some rules which, while entirely valid today, have limitations or other aspects which are only explicable by reference to historical practices or beliefs.
LAP, as it is currently understood, is such a rule.
There is no doubt that the justification for LAP is as valid in the modern world as it was when it was first developed by the courts.
However, its restriction to advice from members of the legal profession, while it can fairly be said to be illogical in the modern world, is explicable by reference to history.
In particular, until the last century, (i) it was very rare for any professional person other than a lawyer to give legal advice, and (ii) the connection between the legal profession and the courts was thought to be of greater significance than it is now.
Where a common law rule is valid in the modern world, but it has an aspect or limitation which appears to be outmoded, it is by no means always right for the courts to modify the aspect or remove the limitation.
In any such case, the court must consider whether the implications of the proposed modification or removal are such that it would be more appropriate to leave the matter to Parliament.
The court must also consider whether the aspect or limitation in question has led to problems, and whether it has been assumed, approved or disapproved impliedly or expressly by Parliament.
And if Parliament has unequivocally endorsed the aspect or limitation then the courts should not, of course, alter it.
Subject to that last qualification, the question whether to remove or modify the aspect of the rule in question must inevitably be considered on a case by case basis.
Where the court decides that it is inappropriate to remove or modify, it is, in my view, wrong to characterise the result as unprincipled: in a common law system, no well understood rule or aspect of a rule can sensibly be so described.
Turning to this case, then, despite the powerful arguments advanced to the contrary, and in agreement with the clear and careful judgments below, I consider that we should not extend LAP to communications in connection with advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give.
I reach this conclusion for three connected reasons, which together persuade me that what we are being asked to do by Prudential is a matter for Parliament rather than for the judiciary.
First, the consequences of allowing Prudentials appeal are hard to assess and would be likely to lead to what is currently a clear and well understood principle becoming an unclear principle, involving uncertainty.
Secondly, the question whether LAP should be extended to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament.
Thirdly, Parliament has enacted legislation relating to LAP, which, at the very least, suggests that it would be inappropriate for the court to extend the law on LAP as proposed by Prudential.
Conclusion: uncertainties and unknown consequences
At the moment, although there are inevitably still arguments about whether a party can rely on LAP on particular facts, these arguments are very much at the margins (as Lord Scott recognised in Three Rivers (No 6) at para 43).
That is because the presently accepted state of the law on LAP is clear to any professional advisers who need to understand it, and relatively easy to explain to their clients who are meant to benefit from it.
The implications for society, for the courts, and for the executive, of LAP only applying where it is members of the legal profession who are giving the advice, have been generally understood, accepted and allowed for by the rules and practice of the courts and in legislation.
The suggested reformulation proffered by Lord Sumption is, as I have said, clear and principled in conceptual terms.
However, closer examination of the suggestion that LAP should apply in any case where legal advice is given by a person who is a member of a profession [which] ordinarily includes the giving of legal advice suggests to me that this is an inappropriate formulation for us to adopt, as it would carry with it an unacceptable risk of uncertainty and loss of clarity in a sensitive area of law.
For example, it is unclear to me whether occupations such as town planners, engineers, or pension advisers would be members of a profession for this purpose.
They require training and qualifications, and they have associations, with rules and disciplinary procedures.
Further, like, for instance, actuaries, auditors, architects and surveyors (undoubtedly professionals), they often, as a result of education and/or experience, have considerable specialist legal expertise, on which clients draw and expect to be able to draw.
And that may well become more in point now that legal advice is not a reserved legal activity under the 2007 Act.
As I see it, it could be necessary for a court to delve into the qualifications or standing, and maybe into the rules and disciplinary procedures, of a particular group of people to decide whether the group constitutes a profession for the purpose of LAP.
So there would be room for uncertainty, expenditure and inconsistency, if the court had to decide such an issue.
Further, I am not clear quite how a court is to decide whether a profession is one which ordinarily includes the giving of legal advice.
Many chartered surveyors, architects and accountants, for instance, may not ordinarily give legal advice, but there are many who do.
Should the issue be judged by reference to the profession generally, a particular branch of the profession (which could lead to definitional issues), or the practice of the particular member of the profession in the case, and, if this last possibility is correct, would the issue be determined on that members say so? In addition, I suspect that much of the advice given by most members of those professions could not infrequently be characterised as legal in nature by some people but not by others.
Consider cases such as (i) a town planner instructed to try and obtain planning permission for a development or to advise whether it was needed or what had to be done to get it, (ii) a pension consultant asked to advise on whether a payment could be made, or a contribution should be demanded, by trustees of a pension scheme, (iii) a valuation surveyor asked to advise on rental value under a rent review clause or for rating purposes, or (iv) an auditor asked as to the appropriate treatment of a receipt or debt.
In each such case, the issue on which advice is sought may well involve a point of law on which the professional concerned is well qualified to advise.
In each case, it could very well be open to argument whether LAP attached to such advice.
So long as LAP is limited to advice from members of the legal profession, the strong, and justified, presumption will be that LAP does apply in connection with any communications in that context, because lawyers normally only give legal advice.
However, where members of other professions give legal advice, it will often not represent the totality of the advice, and there may well be difficult questions to resolve, as to whether, and, if so, in respect of which documents, LAP could be claimed.
For instance, it is unclear whether LAP would apply where the legal advice is only subsidiary, and, if so, how one determines subsidiarity; and, in a case where LAP could be claimed, there may be difficulties in deciding how to deal with documents (which may frequently be the majority of documents concerned with the giving of advice in the case) which contain legal and non legal advice.
The specific issue in Three Rivers (No 6) provides the basis for an example of my concerns.
In that case, it was held that advice to a client as to how to present its case at an inquiry was privileged if it was given by the clients lawyers, who were also giving general legal advice, which was undoubtedly subject to LAP.
I am unclear whether, on Prudentials case, it would follow that a letter from town planning experts advising their client how to present its case at a planning inquiry would attract LAP; the answer might, for instance, depend on whether the advisers were also giving legal advice, but that would seem inconsistent with the requirement for consistency across the professions inherent in Prudentials case.
And if LAP would apply in such a case, there might be obvious difficulties in disentangling letters seeking or giving both legal and technical advice.
A policy issue best left to Parliament
Apart from these concerns, it seems to me that this appeal gives rise to an issue, possibly a series of issues, of policy, which constitutes an area into which the courts should generally be reluctant to tread.
Rather than extending LAP beyond its present accepted boundaries, we should leave it to Parliament to decide what, if anything, it wishes to do about LAP.
Much of what is said in the preceding section of this judgment demonstrates that quite wide questions of public policy may be thrown up by Prudentials argument.
The general implications of extending the generally understood limits of LAP as suggested by that argument could clearly have significant implications, which, at least in my view, would be very difficult to identify, let alone to assess.
To put it at its lowest, they may well have significant consequences which should be considered through the legislative process, with its wide powers of inquiry and consultation and its democratic accountability.
There are no doubt many pieces of legislation giving the executive the power to call for documents, in respect of which LAP could be invoked to avoid delivering up such documents.
One of the most vital functions of the courts is to protect citizens against abuses by the executive, but that role must be exercised with discrimination.
However, it would, I think, require exceptional circumstances before that function was invoked to create a new right, or to extend an existing right substantially beyond what is currently understood by everyone, including Parliament when enacting such legislation, to be its existing limits.
In addition, there is the fast changing landscape of the legal terrain following the passing and implementation of the Legal Services Act 2007.
That Act is also another indication that Parliament is ready to change common law practices which involve special rules for lawyers when it wishes to do so.
Another reason why the present issue should be left to Parliament is that the extension of LAP to professions other than lawyers may only be appropriate on a conditional or limited basis.
That is an aspect which can be properly considered and implemented by Parliament, and cannot appropriately be assessed, let alone imposed, by the courts.
This point is well illustrated by reference to the very type of case with which this appeal is concerned.
In 1983, when the Keith Committee recommended that LAP should be extended to communications in connection with tax advice given by expert accountants, it included two qualifications.
The first was that the privilege should be overridden where it would . unreasonably impede the ascertainment of facts necessary to the proper determination of the taxpayers tax liabilities, being facts not otherwise capable of ascertainment (para 26.6.5).
The second was that LAP should not extend to advice given by in house professional advisers (para 26.6.13).
It would be open to Parliament to impose such types of restriction or condition: it would not realistically be open to the courts.
Further, as demonstrated by the facts set out in paras 33 34 above, the sort of extension to the currently understood law of LAP sought by the appellants has been (i) reported on by two committees, (ii) discussed in a parliamentary committee, and (iii) proposed to the executive.
Despite thinking it appropriate to extend LAP to certain other professions, as explained in para 35 above, Parliament has apparently chosen not to extend LAP to accountants giving tax advice.
Of course, in another case, points such as these could be overcome if the court was satisfied that there was a pressing need, in terms of the rule of law, injustice or even practicality, for the common law to move from its generally understood position in a particular area.
However, although there is evidence of some concern about the presently understood limits of LAP, there is no evidence that even gets near establishing a pressing need to change those limits.
Parliament has relevantly legislated and declined to legislate
Parliament has on a number of occasions legislated relevantly in this field.
On three occasions it thought it appropriate to extend LAP, and did so on the basis that LAP was limited to advice given by members of the legal profession.
I have in mind section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994, and section 33 of the Administration of Justice Act 1985, referred to in para 35 above.
All these provisions would have been demonstrably unnecessary if the breadth of LAP was as Prudential submits.
Parliament also legislated in the very field with which this appeal is concerned on the assumption that LAP only applies to advice given by lawyers see section 20B of TMA and paragraphs 23 to 26 of Part 4 of Schedule 36 to the 2008 Act, referred to in paras 6 to 9 above.
Lord Pannick sought to meet this point by relying on the approach adopted by the House of Lords in Morgan Grenfell, where it was held that although the general words of sections 20 and 20B of the TMA might appear to imply the removal of LAP in some circumstances, they did not do so because, as already mentioned, [a]n intention to override such [a fundamental human right] must be expressly stated or appear by necessary implication (emphasis added) to quote from Lord Hoffmann at [2003] 1 AC 563, para 8.
In my opinion, that principle does not apply here, although I accept that one must be careful about placing too much weight on the points I have identified in paras 63 and 64 above.
The reason that it does not apply is that, in Morgan Grenfell, the Revenue was arguing that what undoubtedly was universally accepted as being LAP in common law had been impliedly cut down by legislation.
Given that there was therefore no doubt that the LAP claimed by the appellant in that case existed at common law, it was to be expected that, if the 1970 Act had been intended to cut down LAP, Parliament [would have] squarely confront[ed] what it [was] doing and accept[ed] the political cost per Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, cited by Lord Hobhouse in Morgan Grenfell, para 44.
But the position in this case is different from the position in that case, even though in both cases HMRC seek to rely on implication (rather than necessary implication) to defeat the taxpayers argument based on LAP.
The difference arises from the fact that in this case, as demonstrated from the discussion in paras 30 36 above, the generally accepted view is that the type of LAP invoked by Prudential does not exist.
In other words, HMRCs contention is not that a statutory provision impliedly shows that Parliament intended to remove LAP which plainly would otherwise exist (as in Morgan Grenfell): rather it is that a number of recent statutory provisions clearly show that Parliament, along with the courts, the textbook writers, and the writers of relevant reports, considered the type of LAP contended for by Prudential does not exist.
Various other points
I referred in para 45 above to four cases where it was held that LAP applied where the advice was tendered by foreign lawyers.
In none of those cases does it appear that there was any significant analysis as to why and to what extent LAP was to be accorded where it was a foreign lawyer who had given the advice.
It is none the less understandable why LAP was so extended: the extension was, I suspect, based on fairness, comity and convenience.
While that extension does rather undermine much of the principled justification for LAP being confined to cases where the advice is given by professional lawyers, it is consistent with the argument that the court should restrict LAP to its currently understood bounds for reasons of practicality and certainty.
Nor do I consider that HRA or POCA take the case any further.
The decision and reasoning of the Strasbourg court in Van der Mussele v Belgium (1983) 6 EHRR 163, AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, and Campbell v United Kingdom (1992) 15 EHRR 137 effectively undermine any suggestion that it would somehow be contrary to article 14 of the Convention to hold that LAP applies to communications with professional lawyers and not with other professional people.
Nor do I accept the argument that so to hold would infringe article 8 read together with article 14.
As for section 330 of POCA, it is in a form which was intended to give effect to the Second Money Laundering Directive (2001/97/EC), and I do not see how it can be said to represent any sort of indication by Parliament as to its understanding of the extent of LAP.
I am also unimpressed by Prudentials reliance on the 2007 Act.
At best, it merely acknowledges two realities which I have accepted anyway, namely that legal advice is now given by many professional people other than lawyers, and that lawyers can work in firms with other professionals, and vice versa: the only change affected by the 2007 Act is that lawyers can now go into partnership with people in other professions.
Disposition
For these reasons, I would dismiss this appeal.
LORD HOPE
For the reasons given by Lord Neuberger, Lord Mance and Lord Reed I too would dismiss this appeal.
I should like to add just a few words of my own to explain why I am of that opinion.
A search for a principled answer might well lead one to the conclusion that there was no good reason at all for holding that the tax advice of chartered accountants should be treated differently from similar advice given by a barrister or a solicitor, as Lord Sumptions powerfully reasoned judgment so ably demonstrates.
He starts from the position that English law has always taken a functional approach to legal advice privilege, and that all one needs to do is to recognise as a matter of fact that much legal advice falling within the principles governing legal advice privilege is given today by people who are not lawyers: see paras 123 and 128, below.
If the issue is approached on that basis, I agree that it is quite difficult to see how in principle according barristers and solicitors a special status on this matter can be justified.
I would find it very hard to distinguish between the legal and factual basis for any claim of privilege in this respect as between chartered accountants on the one hand and lawyers on the other.
The functions that they perform when giving tax advice are essentially the same in each case.
And I would certainly not find it possible to draw any relevant distinction between these two professions as to their standards of training or discipline.
My starting point, however, is the same as that indicated by Lord Neuberger: see para 29.
The reason why the issue is before us at all in this case is quite simple.
It is to be found in what people generally understand the position to be.
Legal advice privilege, as generally understood, applies only to advice that is given by lawyers.
If we were to declare that the matter is to be determined not by the profession to which the adviser belongs but by the function that he is performing, we would be changing the ambit of the privilege.
And it would be a significant change because the position as generally understood has clearly defined limits and, in consequence, the inestimable advantages of clarity and certainty.
Can we be certain that that will be so if the privilege were to be extended to tax advice by chartered accountants, on the ground that they too are advisers whose profession has as an ordinary part of its function the giving of skilled legal advice? If the privilege were to be extended that far, what about tax advice given by other members of the accountancy profession? As Sir Sydney Kentridge QC put it, the change we are asked to make would need a very good reason evidence that something was not working properly.
I agree with Lord Neuberger that no such pressing need has been demonstrated, and that to adopt the functional test would give rise to a significant risk of uncertainty.
I also think that the courts are not best placed to assess how profound such a change would be, whether there are good reasons of policy for making it and what protections, if any, are needed to ensure that the ambit of the privilege is kept within limits that are acceptable.
Principle is an uncertain guide in such matters, if all one has to go on is the function that is being performed by the adviser.
We do not need to go down that road, and it seems to me that the wiser course is not to do so.
If there are reasons of public policy for making the change, the matter should be left to Parliament.
LORD MANCE
I have had the great advantage of reading the judgments prepared by Lord Neuberger, with whom Lord Hope agrees, and Lord Sumption, with whom Lord Clarke agrees.
I come down on the same side as Lord Neuberger, basically for all the reasons which he gives.
I add only a few words, principally to address the suggested logic of recognising that clients of tax accountants enjoy legal advice privilege (LAP) in respect of tax advice given them professionally by such accountants paralleling the LAP normally enjoyed by the clients of lawyers.
LAP has developed and been accepted on a general basis in respect of lawyers because they are lawyers and their business is normally dealing with legal matters.
There has been no particular occasion to examine specific areas of legal advice or lawyers activity, in order to consider whether it merits special treatment and, if so, how such areas of their activity would be defined.
Such questions do however arise in respect of Prudentials current claim that the courts should recognise the underlying logic of LAP and accept that it applies in respect of legal advice given professionally in any particular area where the professional who gives it is a member of a profession which has as an ordinary part of its function the giving of skilled legal advice in that particular area.
The relevant profession here is accountancy and the relevant area the giving of tax advice.
But there are, as Lord Neuberger notes in paras 54 to 60, other professions which might be said to give legal advice in particular areas in the course of their ordinary professional activity.
In relation to tax or any other particular areas where legal advice is given professionally, specific considerations may exist which could on examination point away from a recognition of LAP, or away at least from its recognition on an unqualified basis.
That was certainly the conclusion of the Keith Committee, when it recommended that LAP be recognised in respect of tax advice by accountants, but only on a significantly qualified basis: see Lord Neubergers judgment, para 65.
Similarly, when the New Zealand Parliament legislated by the Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 in June 2005 to create a statutory privilege in relation to any confidential tax advice document, it did so by inserting into the Tax Administration Act 1994 a complex of statutory provisions (sections 20B to 20G) requiring the relevant tax advisor to be a member of an approved advisor group approved by the Commissioner on Inland Revenue and providing that disclosure must nonetheless be made, from any tax advice document, of tax contextual information.
This was defined to include, inter alia, (a) a fact or assumption relating to a transaction that has occurred or is postulated by the person creating the tax advice document; (b) a description of a step involved in the performance of a transaction that has occurred or is postulated by the person creating the tax advice document; (c) advice that does not concern the operation and effect on the person of tax laws; (d) advice that concerns the operation and effect on the person of tax laws relating to the collection by the Commissioner of debts payable to the Commissioner; (e) a fact or assumption relating to advice that is referred to in paragraph (c) or (d); and (f) a fact or assumption from, or relating to the preparation of (i) financial statements of the person, or (ii) a document containing information that the person is required to provide to the Commissioner under an Inland Revenue Act.
In Australia the Law Reform Commission, in A Review of Legal Professional Privilege and Federal Investigatory Bodies (report ALRC 107 dated December 2007) supported the New Zealand model of creating a separate tax advice privilege, rather than simply extending client legal privilege to accountants giving tax advice; and it did this specifically because it would allow Parliament greater control over the operation and scope of tax advice privilege (para 6.278).
As to the nature of the control, it said (para 6.281): The ALRC is also supportive of the provision in the New Zealand legislation which does not apply the privilege to contextual information provided for the purpose of providing tax advice.
It should be very clear in the operation of this privilege that only the advice itself will be protected, and not any other information that may form part of the accountants file or briefing.
The legislation should state that no privilege should apply to tax contextual information given for the purpose of providing tax advice.
Tax contextual information should be defined as information about: a fact or assumption that has occurred or is postulated by the person creating the tax advice document; a description of a step involved in the performance of a transaction that has occurred or is postulated by the person creating the tax advice document; or advice that does not concern the operation and effect of tax laws.
The justification of LAP advanced in respect of lawyers includes candour that is, that it enables clients to provide their lawyers with all the facts and matters that they might need to advise on the law: see eg the quotation from Lord Scott in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610, quoted by Lord Sumption at para 118.
But it is evident from paras 86 to 88 above that, when the present issue has been considered by law reform committees or legislators in the United Kingdom, New Zealand and Australia, this justification has not been felt to have the same force.
Rather, a specific need has been felt to ensure, by appropriate legislative qualification of the scope of LAP, that the Revenue is put in possession of a full understanding of the facts and the nature of the relevant transactions, so as to be able then to advise itself as to the correct legal conclusions to be derived therefrom as a matter of tax law.
Another, not unrelated, feature of this case, to which I attach considerable importance, is that the United Kingdom Parliament has on a number of occasions not only treated lawyers as the only persons whose advice gives rise to LAP on the part of their clients (see Lord Neubergers judgment, para 35 et seq), but has also specifically decided to maintain a distinction between lawyers and tax advisers when it was suggested that the latters advice ought to give rise to a general LAP paralleling that existing in respect of lawyers advice (Lord Neuberger, para 36).
If LAP extended to professions other than lawyers, it is accepted that it would not be on a general basis, but that a careful distinction, in practice normally irrelevant in the case of lawyers, would have to be drawn between privileged and non privileged activities.
Although such a distinction can sometimes be relevant with lawyers (eg where a lawyer acts as a man of business or purely administratively, rather than as a lawyer), it is not normally so.
But in the case of other professions, the distinction would become highly relevant and would not necessarily be easy to draw.
For all these and the other reasons given by Lord Neuberger, any recognition in respect of tax accountants of a privilege which has traditionally been and is still regarded as relevant only to legal advice given by lawyers in the course of their profession, or of any parallel privilege, should in my opinion take place, if at all, in Parliament, not in the courts.
I agree that this appeal should be dismissed, for the reasons given by Lord
LORD REED
Neuberger, Lord Hope and Lord Mance.
The argument that existing legal principle already recognises the privilege claimed by the appellants, although powerfully put by Lord Clarke and Lord Sumption, is not one that I find persuasive.
The process of reasoning by which a legal principle is derived from a body of authority was explained by Lord Diplock in Dorset Yacht Co Ltd v Home Office [1970] AC 1004, 1058 1059.
Speaking of the law of negligence, his Lordship explained that the process involved two stages, the first of which was inductive, and involved an analysis of the characteristics of the conduct and relationship involved in each of the decided cases: This analysis leads to a proposition which can be stated in the form: In all the decisions that have been analysed a duty of care has been held to exist wherever the conduct and the relationship possessed each of the characteristics A, B, C, D, etc, and has not so far been found to exist when any of these characteristics were absent.
For the second stage, which is deductive and analytical, that proposition is converted to: In all cases where the conduct and relationship possess each of the characteristics A, B, C, D, etc, a duty of care arises.
The conduct and relationship involved in the case for decision is then analysed to ascertain whether they possess each of these characteristics.
If they do the conclusion follows that a duty of care does arise in the case for decision (p 1059).
Applying that approach in the context of legal advice privilege, in each of the decided cases in which the privilege was held to exist, the relationship of the persons between whom the communication passed was that of client (or prospective client) and professional lawyer acting as such; and the privilege has not so far been held to exist when any of the characteristics of that relationship were absent.
One can therefore deduce from the authorities a principle which applies when that relationship exists.
That relationship does not however exist in the present case.
As Lord Diplock explained (ibid), again in the context of the law of negligence, where the conduct or relationship which is involved in the case at hand lacks at least one of the characteristics which have been identified, the court has a choice whether or not to extend the kinds of conduct or relationships which give rise to a duty of care: And the choice is exercised by making a policy decision as to whether or not a duty of care ought to exist if the characteristic which is lacking were absent or redefined in terms broad enough to include the case under consideration.
The choice to extend is given effect to by redefining the characteristics in more general terms so as to exclude the necessity to conform to limitations imposed by the former definition which are considered to be inessential.
Applying that approach in the present context, since the case at hand lacks one of the characteristics which has been present in all previous cases in which legal advice privilege has been held to exist, the court has a choice whether or not to extend legal advice privilege to situations where legal advice was sought from a professional person other than a lawyer.
That choice is exercised by making a policy decision of the kind which Lord Diplock explained.
It is open to the court to redefine the characteristics of legal advice privilege in more general terms, for example by holding that legal advice, given in the exercise of a professional activity which involves the giving of such advice, is subject to legal advice privilege.
It is also open to the court to adhere to the narrower principle which can be derived from the existing body of case law.
A judgment has to be made as to the most appropriate course of action.
That judgment, in this case, requires a number of considerations to be taken into account, as Lord Neuberger has explained.
There are considerations which weigh in favour of an extension of the principle.
In particular, it can be argued that the underlying rationale of the privilege favours its application whenever legal advice is sought from a person who is suitably qualified to give such advice, whether that person is a member of the legal profession or of some other profession whose activities include the giving of legal advice.
There are on the other hand countervailing considerations.
One which seems to me to be particularly significant is that the privilege must be capable of being relied upon if it is to serve its purpose of enabling clients and their legal advisers to communicate with each other with complete candour.
It is therefore highly desirable that the privilege should, as far as possible, be based upon a principle which is clear, certain and readily understood.
The existing common law principle meets those requirements.
The variety of possible formulations of an extended common law principle, and the consequent scope for debate as to whether particular professional persons, in particular situations, would or would not fall within its scope, would detract from the certainty and clarity which presently exist.
More fundamentally, it is necessary to give consideration to the respective roles, in relation to the development of this area of the law, of the courts, the executive and the legislature.
In doing so, it is necessary to have regard to the measures taken (or not taken) in this area by the executive and the legislature, after consultation and consideration of a wider character than can be carried out by courts determining disputes between particular parties.
In my judgment, having regard particularly to the latter consideration, the court should decide the case as Lord Neuberger proposes.
No question arises in this appeal as to the scope of the privilege in Scots law.
It may nevertheless be helpful to add some observations about the case from a Scottish perspective, given the likely interest in the case in Scotland as well as in England and Wales.
My observations are not however intended to pre empt a full discussion of the matter should the issue arise in Scottish proceedings.
The law in this area developed separately in Scotland from in England.
The two systems have however developed in the same direction.
There are a number of differences in the case law in relation to particular aspects of the law, but the general principle, its fundamental importance, and the considerations of public policy which underlie it, are common to both systems.
By the late seventeenth century it was established in Scotland that an advocate was not bound to disclose any private advice or secret of his calling or employment: Creditors of Wamphray v Lady Wamphray (1675) Mor 347; Earl of Northesk v Cheyn (1680) Mor 353; Stair, Institutions of the Law of Scotland, IV.xliii.8.
The rationale was explained by Sir George Mackenzie as being the public interest in persons being able to obtain legal advice based upon complete knowledge of the relevant circumstances: An Advocate is by the Nature of his Imployment tied to the same Faithfulness that any Depositor is: For his Client has depositate in his Breast his greatest Secrets; and it is the Interest of the Common wealth, to have that Freedom allowed and secured without which Men cannot manage their Affairs and private Business: And who would use that Freedom if they might be ensnared by it? This were to beget a Diffidence betwixt such who should, of all others, have the greatest mutual Confidence with one another; and this will make Men so jealous of their Advocates that they will lose their private Business, or succumb in their just Defence, rather than Hazard the opening of their Secrets to those who can give them no Advice when the case is Half concealed, or may be forced to discover them when revealed. (Observations upon the 18th Act of the 23rd Parliament of King James the Sixth against Dispositions made in Defraud of Creditors etc (1675), in Sir George Mackenzie's Works, vol 2 (1755), p 1).
It became clear during the eighteenth century, if not earlier, that this approach also applied to other types of lawyer engaged in legal proceedings (McLeod v McLeod (1744) Mor 16754), and that the concept of a secret extended to anything of which a lawyer had been informed by his client (Leslie v Grant (1760) 5 Browns Supp 874).
A crucial step in the further development of the principle was taken in Executors of Lady Bath v Sir John Johnston, 12 November 1811, FC, which has been interpreted (notably in McCowan v Wright (1852) 15 D 229) as having decided that the privilege was not confined to communications made in connection with legal proceedings which were then pending or in contemplation.
It was also understood by the early nineteenth century, if not earlier, that the privilege was that of the client, not the lawyer: see eg Bell, Principles of the Law of Scotland, 4th ed (1839), para 2254.
The general principle, as it was understood by the mid nineteenth century, was summarised by Lord Wood in McCowan v Wright at p 237: The rule by which the communications between clients and their legal advisers are protected from discovery, is one of great value and importance, and, within its legitimate limits, ought to be strictly observed.
According to the law of Scotland, such communications are privileged although they may not relate to any suit depending or contemplated, or apprehended.
Comparing the Scottish authorities down to that date with the review of the English case law by Lord Brougham in Greenough v Gaskell (1833) 1 My & K 98, it could be said that the general principles governing the privilege of communications between lawyer and client in the two jurisdictions were in alignment; and that is reflected in the citation of numerous authorities from England as well as Scotland in Bells account of the subject.
More recent development of these general principles, notably in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, where the privilege was characterised as a fundamental human right, has not depended on matters peculiar to either jurisdiction.
In Scotland, as in England and Wales, all the cases in which the privilege has been upheld appear to have concerned lawyers acting in a professional capacity, clerks or assistants acting on their behalf, or other intermediaries to whom a communication had been made for transmission to or from such a person.
It has been held that the privilege did not attach to communications made to an accountant (Wright v Arthur (1831) 10 S 139); but the case was not one in which it was suggested that the accountant had given legal advice, and it long pre dated the era in which the giving of tax advice, in particular, became one of the principal areas of practice of many accountants.
It is not apparent that the courts have hitherto been required to make a judgment as to whether the privilege ought to be confined to legal advice given by lawyers acting as such, as opposed to legal advice given by members of other professions.
As far as I have ascertained, therefore, the authorities do not foreclose the possible application of the privilege to advice given by accountants.
Nevertheless, as in England and Wales, the general understanding is that the privilege applies only to members of the legal professions.
In Narden Services Ltd v Inverness Retail and Business Park Ltd 2008 SC 335, 338 for example, the court described the notion of legal professional privilege (an expression which was adopted in that case, and has been used in subsequent cases, in preference to the older term confidentiality, which could lead to confusion between the privilege and the different sense in which confidentiality is employed in other contexts), as enshrined in the common law of Scotland, as (in broad terms) a right of absolute privilege in respect of communications emanating between a solicitor and a client relating to advice and also in respect of any documents, including those coming from accountants, which were prepared in the contemplation of litigation.
The apparent implication is that documents prepared by accountants may come within the scope of litigation privilege (in the older terminology, post litem motam confidentiality) if they were prepared in contemplation of litigation, but that legal advice privilege is confined, in broad terms, to communications between a solicitor and his client.
The court was not however addressing the question whether the scope of the privilege might be extended where legal advice was given by accountants.
Textbooks proceed on a similar basis, assuming that the privilege applies only where advice is given by lawyers, but not specifically addressing the question whether it might also apply where legal advice was given by members of other professions.
The title on Evidence in the Stair Memorial Encyclopaedia of the Laws of Scotland, (Reissue), for example, states that the privilege is restricted to communications made to professionally qualified and instructed lawyers (para 205), and that any attempt to plead privilege by bankers, accountants and other professional business and personal advisers will fail (para 209).
Ross and Chalmers, Walker and Walker, The Law of Evidence in Scotland, 3rd ed (2009), similarly proceed on the basis that the privilege is confined to professional lawyers (para 10.2.7).
As in England and Wales, bodies concerned with law reform have also proceeded on the basis of such an understanding.
The Keith Report, discussed by Lord Neuberger, concerned the United Kingdom as a whole, and was prepared by a committee presided over by a Scottish member of the Appellate Committee of the House of Lords.
It discussed the relevant rules of Scots law, which it described as not differing materially from the English rules, although some differences in matters of detail were noted (para 26.1.5).
This area of the law was also considered by the Scottish Law Commission in its Memorandum No 46, Law of Evidence (1980), where it expressed the view that solicitor/client privilege is reasonably well defined and works satisfactorily in practice: para S 21.
The Commission did not suggest that the privilege applied, or ought to apply, in situations where legal advice was sought from members of other professions; nor was that issue touched upon in the reports which followed upon the consultative memorandum.
As in relation to England and Wales, Parliament has legislated in relation to Scotland in ways which assumed that legal advice privilege was confined to advice given by lawyers.
Section 20B of the Taxes Management Act 1970 and the replacement provisions in Schedule 36 to the Finance Act 2008, discussed by Lord Neuberger, apply to Scotland.
So also do section 280 of the Copyright, Designs and Patents Act 1988 and section 87 of the Trade Marks Act 1994, which extend the privilege under Scots law to patent attorneys and trade mark agents respectively.
Section 22 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 made provision for communications made to or by a licensed conveyancer or registered executry practitioner to be protected from disclosure in like manner as if the practitioner had at all material times been a solicitor acting for the client.
Finally, just as Parliament legislated in the Legal Services Act 2007 to create a framework for the future of the provision of legal services, and for the regulation of such provision, in England and Wales, a comparable framework was created by the Scottish Parliament in the Legal Services (Scotland) Act 2010.
The provision of legal advice is a legal service falling within the scope of the legislation: section 3.
The professions whose members can own or control a licensed provider of legal services under the Act include chartered accountants and chartered certified accountants: Licensed Legal Services (Specification of Regulated Professions) (Scotland) Regulations, SSI 2012/213.
The Act makes express provision in section 75, headed professional privilege, that communications made to or by a licensed provider (or a designated person within the licensed provider) in the course of its acting as such in its provision of legal services, are in any legal proceedings, privileged from disclosure as if the licensed provider or (as the case may be) the person had at all material times been a solicitor acting for the client.
Since that provision applies only to licensed providers and designated persons within such providers, it therefore applies only where a licence has been granted; and such grants are dependent upon the existence of appropriate regulatory schemes and licensing rules.
Against that background, if the question were to arise in Scotland whether the common law privilege should be extended to legal advice given by accountants, the courts would have to make a policy decision, as I have explained.
That decision would have to be made in the context which I have discussed, including the enactment of legislation, following consultation and consideration in the Scottish Parliament, providing the privilege where other professions are involved in the provision of legal services, on a conditional and limited basis.
LORD SUMPTION (dissenting)
In my opinion the law is that legal professional privilege attaches to any communication between a client and his legal adviser which is made (i) for the purpose of enabling the adviser to give or the client to receive legal advice, (ii) in the course of a professional relationship, and (iii) in the exercise by the adviser of a profession which has as an ordinary part of its function the giving of skilled legal advice on the subject in question.
The privilege is a substantive right of the client, whose availability depends on the character of the advice which he is seeking and the circumstances in which it is given.
It does not depend on the advisers status, provided that the advice is given in a professional context.
It follows, on the uncontested evidence before us, that advice on tax law from a chartered accountant will attract the privilege in circumstances where it would have done so had it been given by a barrister or a solicitor.
They are performing the same function, to which the same legal incidents attach.
The starting point for any analysis of these matters is the rationale of the privilege attaching to the process of obtaining legal advice.
It has been described by the Supreme Court of the United States as the oldest of the privileges for confidential communications known to the common law: Upjohn Company v United States 449 US 383, 389 (1981).
In some respects its development has been peculiar to the English common law and those legal systems which have adopted it.
In most civil law countries, the protection of professional confidences is founded on the status of the adviser.
In French law, which can stand as the paradigm case, information given to an adviser in the course of a confidential professional relationship is subject to the rules governing the secret professionnel.
The source of the confidence is the professional obligations of the adviser, and the provisions of the Penal Code which reinforce them with criminal sanctions.
Consistently with this approach, French law like most European civil law systems accords the same protection to other confidential professional relationships, for example with doctors or priests, and indeed has in recent times extended it to some non professional ones: see Code Pnal, article 226 13.
English law originally protected professional confidences on a similar basis.
The origins of the privilege have been traced in the speech of Lord Taylor of Gosforth CJ in R v Derby Magistrates Court, Ex p B [1996] AC 487, 504 507 and in Holdsworth, History of English Law, 3rd ed, ix (1944), 201 202.
It originated in the practice of the Court of Chancery in the years after the statute of 1562 which first made witnesses compellable: see Berd v Lovelace (1577) Cary 62; Dennis v Codrington (1579) ib, 100.
By the early eighteenth century most writers were agreed that it was based on the protection of the honour of the adviser, who would be discredited by being required to disclose his clients confidences.
It followed that the adviser was permitted but not compellable to give evidence of them.
This theory was disposed of by Lord Mansfield in the Duchess of Kingstons Case (1776) 20 St Tr 355, 574.
The famous surgeon Sir Caesar Hawkins declined to give evidence against the Duchess on her trial for bigamy, saying: I do not know how far any thing that has come before me in a confidential trust in my profession should be disclosed consistent with my professional honour.
Lord Mansfield ruled that he must testify, because if the sole ground of refusal was the protection of his honour, it was a sufficient answer to those who might subsequently impugn it that he was compellable.
In the half century following this decision, the juridical basis of the privilege was redefined by the courts.
It became a right of the client, which was justified as serving a specific public interest in his freedom of action in dealings with his legal advisers.
In Wilson v Rastall (1792) 4 TR 753, it was established (i) that the privilege was a right of the client, not of the lawyer, (ii) that the lawyer was therefore precluded from giving evidence of privileged matters even if he was willing to, and (iii) that the privilege was not confined to the litigation in which disclosure was sought nor to litigation in which the client was a party, but extended to any litigation in which it was sought to compel the production of documents or the appearance of a witness.
In Greenough v Gaskell (1833) 1 My & K 98, Lord Brougham LC reviewed the case law going back to the late eighteenth century.
In a judgment which is generally regarded as the foundation of the modern law, he held that the privilege was unaffected by the question whether proceedings were pending or contemplated, for a person oftentimes requires the aid of professional advice upon the subject of his rights and his liabilities, with no reference to any particular litigation, and without any other reference to litigation generally than all human affairs have, in so far as every transaction may, by possibility, become the subject of judicial inquiry (p 102).
In a celebrated passage, Lord Brougham said (p 103): The foundation of this rule is not difficult to discover.
It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings.
If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case.
If the privilege were confined to communications connected with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous.
The only exception to the principle thus stated which Lord Brougham was prepared to recognise was the case where the communication for which privilege was claimed was made to a professional legal adviser but not in the course of a professional relationship with him: see pp 104 115.
This was not an indirect way of recognising the special status of professional lawyers.
It is clear from the context that the point which Lord Brougham was making was that the privilege attaches only to legal advice taken in a professional context, i.e. not in a social one.
Not every one has applauded the principle as it was developed in the late eighteenth and early nineteenth centuries.
But it is fair to say that many of its critics have been animated by broader misgivings about the whole process of forensic inquiry and the role of the legal profession in it.
Jeremy Bentham, who regarded lawyers as obstacles to the administration of justice, famously characterised legal professional privilege as a doctrine which turned the lawyer into the accomplice of his client.
His views were the subject of a ferocious refutation in the pages of the Edinburgh Review by Thomas Denman, a barrister, member of Parliament, and lifelong friend of Lord Brougham, later to become Lord Chief Justice, who restated the classic view of the privilege as fundamental to the rights of the citizen.
History has gone Denmans way and not Benthams.
Lord Broughams judgment in Greenough v Gaskell remains to this day the classic statement of the rationale for legal advice privilege.
In AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, 913, Sir Gordon Slynn, Advocate General, after reviewing the law relating to the protection of confidences imparted to lawyers across the member states of the European Community observed Whether it is described as the right of the client or the duty of the lawyer, this principle has nothing to do with the protection or privilege of the lawyer.
It springs essentially from the basic need of a man in a civilised society to be able to turn to his lawyer for advice and help, and if proceedings begin, for representation; it springs no less from the advantages to a society which evolves complex law reaching into all the business affairs of persons, real and legal, that they should be able to know what they can do under the law, what is forbidden, where they must tread circumspectly, where they run risks.
More recently, in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610, Baroness Hale took up the same theme at para 61: It may thus impede the proper administration of justice in the individual case.
This makes the communications covered different from most other types of confidential communication, where the need to encourage candour may be just as great.
But the privilege is too well established in the common law for its existence to be doubted now.
And there is a clear policy justification for singling out communications between lawyers and their clients from other professional communications.
The privilege belongs to the client, but it attaches both to what the client tells his lawyer and to what the lawyer advises his client to do.
It is in the interests of the whole community that lawyers give their clients sound advice, accurate as to the law and sensible as to their conduct.
I do not propose to multiply citations, but it is right to point out that precisely the same underlying rationale has been given for the privilege in modern times by the Supreme Court of the United States: Upjohn Company v United States 449 US 383, 389 (1981); Swidler & Berlin v United States 524 US 399, 403 (1998).
By the High Court of Australia: Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49, at para 35; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at para 44 (McHugh J).
And by the Supreme Court of Canada: R v McClure [2001] SCC 14, [2001] 1 SCR 445, at paras 36 39.
Doubts have sometimes been expressed about how important the assurance of absolute confidentiality really is to clients who consult legal advisers, particularly when they do so in civil or non contentious matters.
How often these doubts are justified is impossible to say.
We can assume that they sometimes, perhaps often are.
As Lord Scott pointed out in Three Rivers (No 6) at para 34, it is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non disclosure that the present law of privilege provides.
It does not matter for two reasons.
The first is that the law is that the confidence must be protected if proper legal advice is to be obtained.
It has been established in this sense for many years and no one is asking us to depart from it.
The second, which is perhaps more satisfying, is that it would be wrong to depart from it in any event.
The underlying principle is that those clients who do wish to consult a lawyer on the basis of absolute confidence should be entitled to do so, notwithstanding that absolute confidence may be less important to others.
Consistently with the underlying principle, the modern case law has developed the law of privilege in three principal respects which are relevant to the issues on this appeal.
First, the courts have held that the privilege is absolute, subject only to a narrowly defined exception for cases where the client is seeking legal advice in order to enable himself the better to commit a fraud or crime.
In R v Derby Magistrates Court, Ex p B [1996] AC 487 the House of Lords, after reviewing the case law on the juridical basis of the privilege from its origins in the sixteenth century, held that it did not depend on balancing the public interest in sustaining the confidence against any competing public interest.
In the circumstances of that case, it could not be overridden even if the information withheld was likely to be material evidence to exonerate a man charged with murder.
Second, although litigation (civil or criminal) will generally be the occasion for seeking disclosure of information said to be privileged, the modern case law has reaffirmed the principle first stated by Lord Brougham that the privilege does not just exist in aid of forensic litigation.
It attaches to confidences given in circumstances where no proceedings were contemplated or where the proceedings contemplated were not litigation but, for example, a domestic or public inquiry: Three Rivers District Council v Bank of England (No 6) [2005] 1 AC 610.
Third, in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, Lord Hoffmann, with whom the rest of the House of Lords agreed, recognised at para 7 what was implicit in these propositions, namely that the privilege was not a mere procedural incident of the forensic process, but a fundamental human right long established in the common law, which was a necessary corollary of the right of any person to obtain skilled advice about the law.
Legal advice privilege is sometimes described as essential to the effective administration of justice, and Lord Brougham himself put it that way.
By this, they did not mean the effective conduct of legal proceedings.
On the contrary, as Baroness Hale pointed out in her speech in Three Rivers (quoted above), privilege may obstruct the forensic process by making relevant evidence unavailable.
Lord Scott pointed out in the same case, para 34, that the relevant public interest was in reality the rule of law, which depends upon the citizen being able without inhibition to find out what his legal position is.
The complexity of the modern law and its progressive invasion of the interstices of daily life, have made this a public interest of greater importance than ever before.
It is perhaps particularly significant in the area of tax law, where the citizen is brought up against the power of the state and the law is often technically complex.
From the origins of the privilege in the late eighteenth century to the present day, the case law refers to it as attaching to the advice of lawyers, i.e. barristers, solicitors and attorneys and, in the very early days of the doctrine, the scriveners who drew up wills, charters and other legal instruments.
In most of the early cases lawyers were identified in contradistinction not to other sources of professional legal advice, but to professionals whose advice was not legal at all, such as priests or doctors.
Once this distinction became too well understood to require repetition, the references in the cases to the advice of lawyers persisted but simply reflected the assumption that lawyers were the only source of skilled professional legal advice.
Until modern times, this assumption was correct.
The routine resort to accountants for legal advice on tax does not seem to have become common until the 1960s.
The only English case before this one to address directly the difference between legal advice received from barristers and solicitors on the one hand and other legal advisers on the other was Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, in which it was held that patent agents were not lawyers and that privilege did not attach to their advice.
I shall say something more about this case below.
Once it is appreciated (i) that legal advice privilege is the clients privilege, (ii) that it depends on the public interest in promoting his access to legal advice on the basis of absolute confidence, and (iii) that it is not dependent on the status of the adviser, it must follow that there can be no principled reason for distinguishing between the advice of solicitors and barristers on the one hand and accountants on the other.
The test is functional.
The privilege is conferred in support of the clients right to consult a skilled professional legal adviser, and not in support of his right to consult the members of any particular professional body.
The findings of Charles J, which are borne out by the evidence, show that today there are at least three professions whose practitioners have as part of their ordinary professional functions the giving of skilled legal advice on tax.
Accountants are among them.
Any distinction for this purpose between some skilled professional advisers and others is not only irrational, but inconsistent with the legal basis of the privilege.
It would make it dependent not just on the nature of the advice or the circumstances in which it was given, which have always been relevant considerations, but to a substantial degree on the status of the adviser, which has not been a relevant consideration for 250 years.
It is consistent with the view that I have expressed that the courts have in recent times expanded the categories of lawyer whose advice may attract privilege, in particular to cover salaried legal advisers and foreign lawyers.
This development has been the natural consequence of the functional character of the test combined with the laws pragmatic willingness to recognise the changing patterns of professional life.
The privilege attaching to the advice of salaried legal advisers was first recognised judicially by the Court of Appeal in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No 2) [1972] 2 QB 102.
Lord Denning MR, at p 129, justified the result primarily on the ground that, although the communications of a corporation with an in house legal adviser were internal to the corporation, nevertheless the adviser was performing the same function as the lawyer in independent practice.
Relevant communications with foreign lawyers have for many years attracted the same privilege for the same reason.
In Lawrence v Campbell (1859) 4 Drew 485 privilege was claimed in English litigation for communications between a Scottish client and a Scottish solicitor practising in London.
Sir Richard Kindersley V C held (at p 491) that the same principle that would justify an Englishman consulting his English solicitor would justify a Scotchman consulting a Scotch solicitor.
Subsequently, communications with foreign lawyers were treated as being entitled as a matter of course to the same privilege as communications with English lawyers in like circumstances: see Macfarlan v Rolt (1872) LR 14 Eq 580; In re Duncan, decd [1968] P 306; Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529, 535 536.
Sir Sydney Kentridge QC, appearing for the Law Society, described these cases as anomalous.
But he did not suggest that they were wrong.
I think that they were clearly right, and I do not regard them as anomalous.
They reflect the functional approach which English law has always taken to legal advice privilege.
The only sustained arguments addressed to us for treating barristers and solicitors as having a special status justifying their unique treatment by the law of privilege were (i) that other professionals did not have the same stringent legal obligations of non disclosure as lawyers; and (ii) that barristers and solicitors have a unique relationship with the courts.
The first of these points can be shortly dealt with.
If privilege attaches to the tax advice of accountants in the same circumstances as it would attach to similar advice from a barrister or solicitor, then its legal incidents are exactly the same in either case.
It does not matter that the professional rules of at least some accountants permit them to disclose confidential client information in some circumstances in which it could not lawfully be disclosed by a solicitor.
These rules do not prevent accountants from assuming more stringent and less qualified obligations, and they would be treated as doing so by giving advice in privileged circumstances.
This is because the juridical source of the accountants duty in relation to privileged material is the right of the client under the law of privilege, not the accountants professional rules.
The second reason for attributing a unique status to the advice of barristers and solicitors was that the existence of the privilege has always depended on the close relationship of the courts with the legal professions.
The authority of the judges, it is said, has always been the ultimate source of standards of admission and of the disciplinary powers exercisable over legal practitioners.
But they have never been concerned with the professional standards or organisation of the accountancy profession.
Sir Sydney Kentridge, who was mainly responsible for developing this argument, did not of course suggest that accountants were unworthy of being treated on a par with solicitors and barristers, nor was any such suggestion advanced by any one else on this appeal.
His point was that judicial recognition and supervision of the legal profession was historically part of the basis on which privilege attached to their advice.
This, he submitted, was not something that could be ignored simply because others have come to perform the same functions.
This approach was to some extent invited by the concession of the appellants that the privilege would attach only to communications with members of recognised professions.
But in my view the argument, like the concession which provoked it, is mistaken.
In the first place, the main judicial safeguard against abuse lies, as Lord Denning pointed out in the Alfred Crompton case (p 129), in the right of the court to examine the legal and factual basis for any claim of privilege at the time when it is made.
The court is in as good a position to do this when accountants are involved as it is when the advice was sought from lawyers.
Secondly, none of the statements of principle in the case law have identified the relationship of lawyers with the court or the arrangements for the admission or discipline of lawyers as a relevant factor.
If it had been, then the English courts would not have recognised a privilege for legal advice which was wholly independent of any forensic proceedings, actual or prospective.
Nor would they have recognised the privilege attaching to the advice of foreign lawyers.
There is no suggestion in any of the cases about foreign legal advice of any interest on the part of the English court in the standards of their training or discipline, and they are certainly not amenable to the supervision of English judges.
Nor could Sir John Romilly have recognised the privilege attaching to the advice of a person whom the client believed to be a solicitor and professionally consulted on that basis, but who in fact was not: see Calley v Richards (1854) 19 Beav 401.
Third, the legal basis of the privilege was worked out by the courts at a time when most claims for legal advice privilege concerned communications with solicitors and attorneys, whose professional standards were then notoriously low.
Many of them were not enrolled and the courts supervision of their professional practices was nominal or non existent.
This was particularly true of attorneys, who practised in the common law courts and whom Sir Vicary Gibbs, Chief Justice of Common Pleas from 1813, once memorably described as the growling jackals and predatory pilot fish of the law: see The Oxford History of the Laws of England, xi (2010), 1110 (the whole of this chapter repays reading).
The high modern standing of solicitors (as all of them were called after 1873) was due very largely to the work of the Law Society, which was founded after 1825 to address this perception, and which together with its provincial affiliates gradually transformed the profession in the course of the nineteenth century.
Neither Charles J nor the Court of Appeal took issue with these points in principle.
On the contrary, Charles J considered, at paras 64 65, that the appellants had put forward a compelling, indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and it is firms of accountants, rather than firms of solicitors, who do give such advice and represent clients in disputes with the revenue on many aspects of their tax affairs.
So in my view, Prudential have shown that accountants do what lawyers are described as doing in the cases that establish LPP.
The courts below decided the question mainly on the ground that the wider implications of recognising a privilege attaching to the advice of accountants made it a matter for Parliament.
Most of the argument addressed to us on behalf of the respondents and those interveners who supported them, was directed to this proposition.
In reality, it comprises three distinct points.
The first is a classic floodgates argument, namely that it would involve an extension of scope of the privilege which would considerably increase the number of persons whose advice qualified.
The second argument is that recognising the privilege attaching to accountants advice would directly conflict with statute.
The third is that fixing the boundaries of the privilege for legal advice from non lawyers and determining the conditions on which it was exercisable were inherently legislative processes.
The main difficulty about the first point is its premise.
This is that by recognising the privilege attaching to the legal advice of accountants we would be extending the scope of the privilege at common law.
In my view this premise is wrong.
Acceptance of the appellants basic submission would not involve any change to the principles governing the availability of legal advice privilege.
It would only involve recognising that as a matter of fact much legal advice falling within those principles is nowadays given by legal advisers who are not barristers and solicitors but accountants.
It is the function of the courts, and in particular of this court, to ensure that changes in legal, commercial or social practice are properly reflected in the way that the law is applied.
I do not doubt that as a result the number of claims to privilege will be increased.
But that is because the growing complexity of tax law and the increasing number of people and organisations affected by it, have led to an exponential increase in the number of people seeking legal advice.
A mere increase in the number of people who can take advantage of an existing rule of law cannot be a good reason for failing to apply general principles coherently.
Nor can it justify an arbitrary distinction between different professions performing exactly the same function.
The second point (that the supposed extension of the privilege would be directly inconsistent with statute) was based on the provisions of sections 20 and 20B of the Taxes Management Act 1970, which were the legal basis of the Revenues demand in this case.
Section 20(1) confers on an Inspector of Taxes the power to call for documents in the possession or power of the taxpayer, and section 20(3) confers on him a corresponding power to call for documents from third parties such as advisers.
By section 20(9), these provisions are subject to the restrictions in section 20B.
Under section 20B(3), only the Commissioners of Inland Revenue (not an Inspector) may exercise the power under section 20(1) or (3) against a barrister, advocate or solicitor.
And by section 20B(8), a barrister, advocate or solicitor is not obliged to produce any document for which legal professional privilege could be maintained.
Section 20B(9) and (11) make additional provision for dispensing auditors and tax advisers from having to produce relevant communications which are their property (i.e., in effect, their working papers) or which are merely explanatory.
For this last purpose, a tax adviser means any person appointed to give advice about the tax affairs of another person.
The argument is that these sections make special provision for the assertion of privilege in respect of communications with barristers and solicitors, thus implicitly excluding the assertion of privilege for communications with any one else.
The point is said to be reinforced by the fact that Parliament has made distinct provision in section 20B(9) for documents in the possession of a broader category of tax advisers.
In my view this argument cannot be accepted in the light of the decision of the House of Lords in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, which concerned the same provisions of the Taxes Management Act.
The relevant advice in that case had been given by solicitors and counsel, but the argument was similar.
Section 20B(8) expressly preserved legal professional privilege in respect of documents requisitioned from third parties under section 20(3) but not in respect of documents requisitioned from the taxpayer himself under section 20(1).
The point made for the Inland Revenue, as summarised by Lord Hoffmann at para 10, was that Parliament has provided a number of specific safeguards and restrictions for the protection of the taxpayer, including an express preservation of LPP for documents in the possession of a barrister, advocate or legal adviser.
It therefore necessarily follows that no wider qualification of the general words of section 20(1) was intended: see also para 21.
The argument failed essentially because the provisions relating to privilege in this part of the Act could not be regarded as a complete code governing its availability.
Section 20B(8) was held to be directed at a limited problem arising from dicta in Parry Jones v Law Society [1969] 1 Ch 1, which appeared to suggest that documents in the hands of a lawyer were protected only by the law of confidence, not by privilege.
As for section 20B(9), that was held to be irrelevant because it was not concerned with privilege at all: see paras 14 and 19.
More generally, Lord Hoffmann, with whom the rest of the Appellate Committee agreed, held at para 8 that the fundamental character of the clients right to invoke privilege meant that it could be overridden by statute only if an intention to do so was expressly stated or appear[s] by necessary implication.
As Lord Hobhouse pointed out in his concurring judgment, at para 45, A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context.
It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have been included.
A necessary implication is a matter of express language and logic not interpretation.
The decision in Morgan Grenfell illustrates the difficulty of arguing that statutory provisions expressly reserving legal professional privilege in some circumstances impliedly override it in all others.
The most that can be said about section 20B(8) in the present context is that, like some other statutes conferring power to requisition documents or information, it assumes that privilege is available only in cases where a barrister, advocate or solicitor is involved.
That is understandable at a time when no court had pronounced on the application of privilege to tax advice given by any one else.
But it is axiomatic that the assumptions of Parliament are not the same as its enactments.
In my view it is impossible to spell out of these provisions a necessary implication that Parliament intended to confine the privilege to communications with lawyers even if the common law extended it to others.
On the footing that privilege attaches to communications about tax advice from accountants on exactly the same basis as corresponding communications with lawyers, I can discern no rational reason why Parliament should have intended to distinguish between them.
The truth is that Parliament was not intending to deal with the advice of non lawyers at all.
I come therefore to the third of the arguments for leaving the present issue to Parliament, which is to my mind the strongest of them.
It can fairly be summarised as follows: (1) Legal professional privilege has been extended by statute to patent and trade mark attorneys, licensed conveyancers, and persons who without being barristers or solicitors are authorised to provide certain legal services under the Courts and Legal Services Act 1990 or the Legal Services Act 2007.
There has been no equivalent extension to accountants. (2) A substantial number of statutes confer on the police or regulatory and disciplinary bodies the powers to obtain documents or information, subject to reservations for legal professional privilege which refer to professional legal advisers.
Other provisions, such as section 2 of the Criminal Justice Act 1987 (which confers a corresponding power on the Serious Fraud Office), preserve legal professional privilege subject to exceptions which refer in terms to lawyers.
The possibility of extending the privilege to accountants was (3) considered on a number of occasions between 1967 and 2008, but on none of them was Parliament prompted to extend the privilege to the advice of accountants. (4) More generally, the question which professionals qualify would be left uncertain if the appellants argument succeeded.
They are seeking the recognition only of the privileged status of tax advice given by members of the Institute of Chartered Accountants and the Chartered Institute of Taxation, but the principle which is said to justify such recognition would be capable of affecting a wider and wholly uncertain category of legal adviser.
In my view, none of these considerations require this court to refrain from giving a principled answer to the question posed on this appeal.
The first point to be made is that we are not here concerned with social or economic issues or other issues of macro policy which are classically the domain of Parliament.
Nor are we concerned with legal principles derived from statute.
Legal professional privilege is a creation of the common law, whose ordinary incidents are wholly defined by the common law.
In principle, therefore, it is for the courts of common law to define the extent of the privilege.
The characterisation of privilege as a fundamental human right at common law makes it particularly important that the courts should be able to perform this function.
Fundamental rights should not be left to depend on capricious distinctions unrelated to the legal policy which makes them fundamental.
Statute has intervened frequently in the past half century, but it is important to appreciate on what basis it has done so.
In the great majority of cases, statute has intervened for the limited purpose of reserving privilege when creating new powers to obtain documents or information by compulsion.
Sometimes, the privilege is reserved subject to some qualification, although the commonest qualification relates to the right to require a lawyer to disclose his clients name and address, something that would not necessarily be privileged anyway.
Section 20 of the Taxes Management Act 1970 is one of the earliest interventions of this kind.
They have become commoner as statutory regulation has become more pervasive and powers of compulsion have multiplied.
Some of the enactments in question, like the Taxes Management Act itself, assume that the privilege applies only to communications involving barristers and solicitors.
Some of them, particularly in more recent times, have assumed that it applies to communications involving legal advisers or professional legal advisers, a term which would naturally include any person who gives legal advice in the course of his profession.
Provisions of these kinds are not concerned to define the extent or incidents of the privilege at common law.
They operate by reference to the common law as it is declared by the courts.
They may proceed on assumptions about the categories of legal adviser to which the relevant common law applies, which may be expressed with greater or lesser precision.
Either way, assumptions of this kind are entirely consistent with the courts continuing to perform their historic role of clarifying and developing the common law.
Indeed, the regularity of statutory intervention makes it the more important for the courts to declare the common law so that Parliament can proceed on a correct assumption about what it is.
The problem at the moment is that Parliament is legislating against the background of assumptions about the common law which are contrary to principle, discriminatory and out of date.
Only the courts can be expected to rectify that state of affairs.
Certainly, the frequency of references to privilege in statutes providing for the compulsory provision of documents or information has not prevented the courts from recognising the privileged status of relevant dealings with foreign lawyers.
A French notary or a German Rechtsanwalt, for example, could not properly be described as a barrister or solicitor for the purposes of section 20B(8) of the Taxes Management Act, but it would be surprising to hear it said that a client who consulted one of these professionals could not claim privilege for their communications in response to a requisition under section 20.
The other purpose for which statute has intervened in recent years is to recognise certain professional activities other than those of barristers and solicitors as attracting the privilege.
I find it difficult to attach much significance to this.
None of the enactments in question attempt a comprehensive scheme of recognition which could make the omission of accountants tax advice significant.
There has been piecemeal legislation applying the privilege to certain professional activities of patent and trade mark attorneys and licensed conveyancers.
In the case of patent and trade mark attorneys, this was necessary in order to reverse the effect of Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, which had held that their activities did not attract privilege.
A more systematic attempt to address the issue was made by section 63 of the Courts and Legal Services Act 1990, which has now been superseded by section 190 of the Legal Services Act 2007.
Section 190(2) of the 2007 Act provides that where advocacy, litigation, conveyancing or probate services are provided by individuals who are not barristers or solicitors, legal professional privilege is to attach in like manner as if [the individual] had at all material times been acting as [his] clients solicitor.
By section 190(4), it is also to attach where a body licensed by the Legal Services Board provides services through a person who is a relevant lawyer or acts under the supervision or direction of a relevant lawyer.
Relevant lawyers include solicitors, barristers, Scottish advocates, registered foreign lawyers, European lawyers and also an indeterminate category of persons authorised by the Board to carry on a reserved legal activity.
These provisions can contribute very little to the present debate for two reasons.
First, legal advice is not as such covered by the statutory scheme.
It is regulated only so far as it is incidental to one of the services specified for the purpose of subsection (2) or the reserved legal activities relevant to subsection (4).
The latter are defined in section 12.
Secondly, section 190(7) provides that the rest of the section is without prejudice to any. rule of law by virtue of which a communication, a document, material or information is privileged from disclosure.
So far as any policy can be discerned which is relevant to the present issue, it is to enable legal services to be supplied on a comparable basis as to privilege and other matters, irrespective of traditional demarcation lines between barristers, advocates and solicitors on the one hand and other persons providing the same services on the other.
There is a well established difference between a case where Parliament has merely made assumptions about the common law in framing legislation, and cases where the legislation in question is workable only if that assumption is correct.
It was pointed out by Lord Reid in Birmingham Corporation v West Midlands Baptist (Trust) Association Inc [1970] AC 874, 898F G, and the courts have implicitly addressed it on many occasions.
Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70 is one of them.
The House of Lords extended the right to restitution of unlawfully demanded tax, notwithstanding that important policy considerations were engaged and notwithstanding extensive statutory intervention in the relevant area.
Lord Slynn observed at p 200 C E: I do not consider that the fact that Parliament has legislated extensively in this area means that no principle of recovery at common law can or should at this stage of the development of the law be found to exist.
If the principle does exist that tax paid on a demand from the Crown when the tax was the subject of an ultra vires demand can be recovered as money had and received then, in my view, it is for the courts to declare it.
In so doing they do not usurp the legislative function.
I regard the proper approach as the converse.
If the legislature finds that limitations on the common law principle are needed for reasons of policy or good administration then they can be adopted by legislation.
At the other extreme, in Marcic v Thames Water Utilities Ltd [2004] 2 AC 42 and Johnson v Unisys [2003] 1 AC 518 the suggested developments of the common law would have made apparently comprehensive schemes of statutory regulation unworkable in the manner which Parliament intended.
In a case like this, where the suggested development conflicts with some of the assumptions of Parliament but not with its intentions, the courts should be extremely wary before acceding to invitations to leave those assumptions uncorrected when their practical application has become anomalous or incoherent in the light of modern developments.
Over the years, there have been some proposals to protect communications with accountants relating to tax advice by statute.
Their rejection or abandonment is said by the respondents to suggest that Parliament has taken a position on the question.
In 1967, the Law Reform Committee advised in its Sixteenth Report (Cmnd 3472) against creating a statutory privilege for confidential professional relationships generally.
The privilege would have been an enhanced rule of confidentiality along the same lines as the secret professionnel in most European civil law jurisdictions.
It would have applied to doctors, priests, bankers and accountants.
It is, however, clear that the Committee was dealing with the possibility that such a privilege might be desirable by virtue of the confidential character of the relationship, rather than any public interest in enabling persons to take legal advice.
This has nothing to do with legal professional privilege.
The Keith Committee came rather closer to the mark when they reported in 1983 on the enforcement powers of the revenue departments (Cmnd 8822).
The Committee considered (para 26.6.13) that there does not appear to be any reason to distinguish between a legally qualified tax agent and any other, at least in the tax field.
They recommended by a majority that the privilege should extend to non legally qualified tax agents in private practice who were members of an incorporated society of accountants or the Institute of Taxation.
They considered that the privilege should be subject in all cases (including lawyers) to a right in the tribunal to override it where its exercise would unreasonably impede the ascertainment of the facts.
For reasons which do not appear to be recorded, nothing came of this proposal.
It would have involved an extension of the categories of relevant adviser but some significant restrictions of the scope of the privilege.
This may have been why it got no further.
In 2003, the Government rejected a recommendation of the Director General of Fair Trading that accountants legal advice should be privileged on the same basis as that of lawyers, on the ground that the discrimination between them was anti competitive.
Its stated reason was that it was undesirable to increase the number of people who could decline on the ground of privilege to produce information about money laundering transactions or tax avoidance schemes.
Finally, there was a brief discussion in the committee stage of the Finance Bill 2008 of a proposed amendment to Schedule 36, which substantially re enacted the various powers of the revenue departments to requisition documents or information.
Schedule 36 as enacted does in fact allow tax advisers (generally accountants) to withhold material requisitioned by the Revenue if they constitute communications for the purpose of giving or obtaining advice about a clients tax affairs.
The proposed amendment was directed to the fact that whereas the advice of lawyers was to be privileged in the hands of both the adviser and the client, the corresponding statutory protection for communications with tax advisers applied only to material in the hands of the adviser.
The same material could be obtained by compulsion from the client himself.
The Financial Secretary to the Treasury said that the Government was reluctant to extend the protection for privileged material too widely but would consider the position, and on that basis the amendment was withdrawn.
The matter does not seem to have resurfaced.
The differentiation between material in the hands of the adviser and in the hands of the client was criticised as irrational by Lord Hoffmann in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563 at para 22, in the context of section 20B(8) of the Taxes Management Act, which made a similar distinction in a case where the advice was sought from a lawyer.
The same criticism was made by Sir Gordon Slynn as Advocate General in AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, 913 914.
It is a poor advertisement for the coherence of English statute law in this area.
In my view these proposals and their reception fall a very long way short of suggesting that Parliament has implicitly taken a position on the application of legal professional privilege to communications with accountants.
The material shows that the Government is reluctant to increase the number of claims to privilege in tax investigations, which will surprise no one.
I do not think that it shows any more than that.
Only the Keith Report and the Government response to the proposals of the Director General of Fair Trading directly address the question whether privilege or some statutory equivalent should attach to communications with accountants.
The former appears to have been rather cursorily discussed in Parliament and the latter not at all.
The proposal in 2008 to deal with the anomalous distinction between materials in the hands of a tax adviser and his client was discussed in Parliament, but was left inconclusively in Limbo.
Looking at these matters in the round, one point stands out.
Most of the policy considerations urged upon us on this appeal ultimately rest on concerns that privilege may get out of hand if it may be claimed in respect of legal advice from non lawyers.
It is said that only Parliament can address this problem so far as it is one.
I do not underestimate these concerns.
But I do not think that they impinge on the issue in this appeal.
This is because, although there are perfectly rational reasons why one might wish to see the scope of legal professional privilege limited or the occasions for claiming it curtailed, there are no rational reasons for addressing the issue by discriminating between different categories of legal adviser performing precisely the same function.
If privilege is abused by professional legal advisers, and there is no evidence that it is, then the answer lies in (i) the scrutiny to which all claims to privilege are ultimately exposed in court, and (ii) in a sufficiently extreme case, professional disciplinary sanctions against those involved.
None of this requires an arbitrary distinction to be made between different kinds of legal adviser which has no basis in principle.
If on the other hand, the scope of privilege at common law is thought to be too broad, then the remedy is legislation to modify the common law principles as they apply to all professionals performing the relevant functions and not just some of them.
As applied to tax advice this should be straightforward if there is enough Parliamentary support for it: there is a Finance Bill once a year.
But none of this has anything to do with the present appeal.
We are not here concerned with the breadth of the scope of privilege at common law, but only with identifying the categories of adviser to which the existing principles apply.
I turn, finally, to the argument that in recognising that privilege attaches to the advice of members of the Institute of Chartered Accountants or the Chartered Institute of Taxation, we would be acknowledging a principle which would let in an uncertain and potentially large category of other professionals.
I would accept that so far as other professionals are found to be giving legal advice on substantially the same basis as barristers and solicitors do, the privilege will apply to them in the same way.
Coherence and rationality demand nothing less.
But fears of a flood of privilege claims arising from the activities of supernumerary legal advisers strike me as extravagant.
The privilege is confined, as it always has been, to the taking of legal advice in the course of a professional relationship with a person whose profession ordinarily includes the giving of legal advice.
There are other advisory professions whose practitioners although not lawyers require some knowledge of law.
A chartered surveyor advising on the structural integrity of a building may require a knowledge of the building regulations.
An investment banker advising on a takeover may require a knowledge of the Takeover Code and associated regulatory codes.
An auditor will require a basic knowledge of company and insolvency law.
The activities of these professionals will no doubt be informed by their understanding of the relevant law.
But it does not follow that their profession has as an ordinary part of its functions the giving of legal advice.
The legal element involved in their advisory work is likely to be purely incidental to the exercise of a broader advisory function.
The distinctive feature of accountants advice on tax law is that advice on tax law is itself the service which clients routinely seek from them.
I very much doubt whether many other professions will find themselves in the same position.
It may be that patent agents did in 1984 when the Court of Appeal held in Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 that their legal advice did not attract privilege.
But so far as this decision is based on the proposition that communications for the purpose of giving or receiving legal advice are never capable of being privileged if given by non lawyers, I think that it was wrong.
As far as patent and trade mark attorneys are concerned, the point no longer matters.
Their position has since been regulated by statute.
I would allow the appeal and remit the case to the High Court to decide whether the material requisitioned by the respondent would have been privileged if a solicitor or barrister had performed the functions that the accountants performed, and a direction to quash the notices if it would have been.
LORD CLARKE (dissenting)
I have read the judgments of Lord Neuberger, Lord Sumption and Lord Hope with great interest.
I agree with Lord Sumption that the appeal should be allowed, essentially for the reasons he gives.
I briefly summarise my reasons for reaching that conclusion because the true position at common law does seem to me to be a matter of some importance and I hope that the whole issue will be considered by Parliament as soon as reasonably practicable.
The striking feature of the judgments of Lord Neuberger and Lord Sumption, and indeed of Lord Hope, is to my mind that they agree what the common law is or should be if the issue is treated as one of principle.
As I see it, that principle can readily be seen by taking a simple example.
Suppose that two individuals, A and B, have the same problem, the solution to which depends upon an application of the legal principles of taxation law to the same, or substantially the same, facts.
Suppose that A seeks advice from, say, Freshfields, and that B seeks advice from, say, PricewaterhouseCoopers.
Each asks the same question and gives an account of what are substantially the same facts to the person from whom the advice is sought.
Each is receiving legal advice.
The question for decision in this appeal is whether the information given and the advice received are privileged as legal advice.
Are both A and B entitled to claim the privilege and refuse to disclose to HMRC the information and the advice?
In my opinion, the only principled answer to that question is yes.
It is accepted on all sides that the privilege is that of the client, that is A and B, and not that of either the solicitors or the accountants.
It is also accepted that, as recently confirmed in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563, the privilege is a fundamental human right long established in the common law, which was a necessary corollary of the right of any person to obtain skilled advice about the law: per Lord Hoffmann, with whom the other members of the House of Lords agreed, at para 7.
As Lord Sumption says at para 122, the privilege depends upon the public interest in promoting A and Bs access to legal advice on the basis of absolute confidence.
It seems to me to follow that, if the common law treats the information and advice as privileged in the case of A, principle requires that it must do the same in the case of B. The advice is the same legal advice in both cases and the expertise of the adviser in each case is broadly similar, if not the same.
Indeed some accountants may be able to give more specialised legal advice than some solicitors.
I agree with Lord Sumption, for the reasons he gives (at para 122), that the privilege is conferred in support of the clients right to consult a skilled professional adviser and not in support of a right to consult the members of any particular professional body.
On the respondents case, as Lord Sumption describes at para 123, the privilege extends to advice given by salaried legal advisers and to foreign lawyers.
According to Lord Neuberger at para 29, it also extends to members of CILEX.
The privilege also applied historically to scriveners.
It is thus clear that it is not limited to advice given by solicitors and barristers.
If it extends to foreign lawyers, it is to my mind impossible to see how it can properly be denied in the case of advice given by an accountant qualified to give advice on the law of tax.
It is important to note that the issue in this appeal relates only to legal advice privilege and not litigation privilege.
It is thus not directly related to the administration of the courts by judges.
Lord Scott put it clearly in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610 at para 34: None of these judicial dicta tie the justification for legal advice privilege to the conduct of litigation.
They recognise that in the complex world in which we live there are a multitude of reasons why individuals, whether humble or powerful, or corporations, whether large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they recognise that the seeking and giving of this advice so that the clients may achieve an orderly arrangement of their affairs is strongly in the public interest; they recognise that in order for the advice to bring about that desirable result it is essential that the full and complete facts are placed before the lawyers who are to give it; and they recognise that unless the clients can be assured that what they tell their lawyers will not be disclosed by the lawyers without their (the clients) consent, there will be cases in which the requisite candour will be absent.
It is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non disclosure that the present law of privilege provides.
But the dicta to which I have referred all have in common the idea that it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers legal skills in the management of their (the clients) affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else (see also paras 15.8 to 15.10 of Zuckermans Civil Procedure (2003) where the author refers to the rationale underlying legal advice privilege as the rule of law rationale).
I, for my part, subscribe to this idea.
It justifies, in my opinion, the retention of legal advice privilege in our law, notwithstanding that as a result cases may sometimes have to be decided in ignorance of relevant probative material.
That same analysis seems to me to lead to the conclusion that where advice on tax law is sought from and given by an accountant it should be subject to legal advice privilege in the same way and that there is no difference between the positions of A and B in my example.
It was no doubt considerations of this kind that led Charles J to say in this case at first instance (at paras 64 65), in my opinion correctly, that there is a compelling, indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and that it is firms of accountants rather than firms of solicitors who give such advice and represent clients in disputes with the HMRC on many aspects of their tax affairs.
He concluded that the respondents had shown that accountants do what lawyers are described as doing in the cases that establish legal advice privilege.
Lord Neuberger has demonstrated that the ambit of the privilege as widely understood is that it is limited to lawyers and does not extend to accountants.
He has not, however, been able to point to any principled analysis of the reason why it is so limited.
The decided cases do not provide such an analysis.
For example, in a case entitled Dormeuil Trade Mark [1983] RPC 131, in which privilege was claimed in respect of the disclosure of correspondence between the plaintiffs and their trade mark agents, although Nourse J rejected the claim, he did not give any principled basis for doing so.
He noted at page 136 that historically cases had been conducted only by solicitors and counsel and added this: [Counsel for the defendants] says that in those days it was never necessary for anybody to consider whether the privilege should apply in a case where other professional men, far less non professional men, were concerned in advising clients, or indeed in conducting litigation on their behalf.
He says that in these days the rule should be different.
Like the learned Master, I see great force in that submission.
It does seem to me to be a little odd and possibly perverse, that if a trade mark agent is entitled to advise a client in relation to certain legal matters and to conduct certain legal proceedings on his behalf, the same privilege should not apply as would certainly apply in a case where the advice was being given and the proceedings were being conducted by a solicitor.
Nevertheless I do not think it is open to me in this court to fly in the face of the established rule, as enunciated in Wheeler v Le Marchant, the statement of Chitty J in Moseley v Victoria Rubber Company, and the fact that in 1968 the legislature seemed to think it was necessary expressly to extend the privilege to the case of patent agents.
In the circumstances Nourse J made the order with some reluctance.
He certainly did not identify the principle behind the rule.
Nor did either of the cases he referred to.
In Wheeler v Le Marchant (1881) 17 Ch D 675 the Court of Appeal made it clear that the privilege was limited to legal advice obtained from professional persons, by which was meant, as Nourse J put it at p 135, persons who have a full legal qualification here or abroad.
In Moseley v Victoria Rubber Company (1886) 55 LT 482 Chitty J had said that it was quite clear that communication between a man and his patent agent were not privileged.
He did not identify the rationale for such a rule.
Nor to my mind did Wilden Pump Engineering Co v Fusfeld [1985] FSR 159.
In any event, I agree with Lord Sumption (at para 137) that, to the extent that that decision was based on the proposition that communications for the purpose of giving or receiving legal advice are never capable of being privileged if given to non lawyers, it was wrong.
Legal advice privilege is a creature of the common law.
As such it should be capable of redefinition to cater for changed conditions.
If principle requires that it should apply to situations to which it was previously thought not to apply, I can see no reason why this court should not so state, unless prevented from doing so, either expressly or necessary implication, by statute.
We have been referred to no such statute.
Attention has been drawn to a number of areas in which Parliament may have assumed that the common law was different.
However, in my opinion the principle identified by Lord Slynn in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70, at p 200C E (and quoted by Lord Sumption at para 134 above) applies equally to the issue for decision in this appeal.
He put the point thus: I do not consider that the fact that Parliament has legislated extensively in this area means that no principle of recovery at common law can or should at this stage of the development of the law be found to exist.
If the principle does exist that tax paid on a demand from the Crown when the tax was the subject of an ultra vires demand can be recovered as money had and received then, in my view, it is for the courts to declare it.
In so doing they do not usurp the legislative function.
I regard the proper approach as the converse.
If the legislature finds that limitations on the common law principle are needed for reasons of policy or good administration then they can be adopted by legislation.
If principle requires the court to hold that legal advice privilege extends to advice given by accountants on a professional basis, the court should in my opinion so declare.
As Lord Slynn put it, if the legislature finds that limitations on that principle are required for reasons of policy they can be adopted by legislation.
It is of interest to note that when the Keith committee considered the position, it could not identify a rationale for the distinction advanced on behalf of the respondents and it did not recommend the continuation of the status quo.
As Lord Sumption observes at para 135, it recommended that the privilege should extend to at least some tax advisers but that it should be subject to a limitation in all cases.
As Lord Sumption says, the matter was only cursorily discussed in Parliament.
In all the circumstances, I do not think that any of the pragmatic considerations identified by Lord Neuberger and Lord Hope are sufficient to confer the privilege on A in my example and to deny it to B.
I agree with Lord Sumptions striking conclusion at the end of para 131 that fundamental rights should not be left to depend on capricious distinctions unrelated to the legal policy which makes them fundamental.
Lord Sumption expresses the view in para 114 that the privilege extends to advice given by members of a profession which has as an ordinary part of its function the giving of skilled legal advice.
I would expect that criterion to be satisfied only where, and to the extent, that they are members of a properly regulated professional body.
For these reasons, which are essentially the same as those of Lord Sumption, I would allow the appeal and make the order which he proposes.
| UK-Abs | This appeal concerns the scope of legal advice privilege.
Legal advice privilege applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice.
The specific issue raised by this appeal is whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by legal advice privilege, in a case where the legal advice was given by accountants in relation to a tax avoidance scheme.
The more general question raised by this issue is whether legal advice privilege extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far legal advice privilege thereby extends, or should be extended.
In 2004, PricewaterhouseCoopers (PwC) devised a marketed tax avoidance scheme (the scheme).
PwC adapted the scheme for the benefit of the Prudential group of companies, who implemented the scheme through a series of transactions (the transactions).
The inspector of taxes considered it necessary to look into the details of the transactions.
To that end, he served notices under section 20B(1) of the Taxes Management Act 1970 on Prudential (Gibraltar) Ltd and Prudential plc (together Prudential) giving them the opportunity to make available specified classes of documents.
Prudential refused to disclose certain documents (the disputed documents) on the ground that Prudential was entitled to claim legal advice privilege in respect of them, because they related to the seeking (by Prudential) and the giving (by PwC) of legal advice in connection with the transactions.
The inspector obtained authorisation from the Special Commissioners to require Prudential to disclose the disputed documents.
Prudential issued an application for judicial review challenging the validity of those notices.
Charles J rejected the application on the ground that, although the disputed documents would have attracted legal advice privilege if the advice in question had been sought from, and provided by, a member of the legal profession, no such privilege extended to advice, even if identical in nature, provided by a professional person who was not a qualified lawyer.
His decision was upheld, substantially for the same reasons, by the Court of Appeal (Mummery, Lloyd and Stanley Burnton LJJ).
The Supreme Court, by a majority of five to two (Lord Clarke and Lord Sumption dissenting), dismisses the appeal.
Lord Neuberger gives the lead judgment for the majority.
The majority hold that legal advice privilege should not be extended to communications in connection with advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give [51].
To do so would extend legal advice privilege beyond what are currently, and have for a long time been, understood to be its limits [37], [80].
It is universally believed that legal advice privilege only applies to communications in connection with advice given by members of the legal profession [29].
There are clear judicial statements of high authority to that effect [30].
The current editions of textbooks on privilege and evidence, as well as more than one significant official report, have proceeded on this basis [32], [33].
Extending legal advice privilege to any case where legal advice is given by a person who is a member of a profession which ordinarily includes the giving of legal advice would be likely to lead to a clear and well understood principle becoming uncertain, because it is unclear which occupations would be members of a profession for this purpose [52] [55], [80], [100].
There would be room for uncertainty, expenditure, and inconsistency, if the court had to decide whether a group constitutes a profession for the purposes of legal advice privilege [56].
It is also unclear how a court would decide whether a profession is one which ordinarily includes the giving of legal advice [57], [91].
Where members of other professions give legal advice, it will often not represent the totality of the advice, so it may also be difficult to decide how to deal with documents which contain legal and non legal advice [59].
Further, the extension of legal advice privilege to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament [52], [81], [92].
The consequences of extending legal advice privilege should be considered through the legislative process, with its wide powers of inquiry and consultation and its democratic accountability [62].
The extension of legal advice privilege to professions other than lawyers may only be appropriate on a conditional or limited basis, which cannot appropriately be assessed, let alone imposed, by the courts [65].
Parliament has on a number of occasions legislated in this field on the assumption that legal advice privilege only applies to advice given by lawyers.
Therefore it would be inappropriate for the Supreme Court to extend the law [52].
The minority consider that legal advice privilege extends to advice given by members of a profession which has as an ordinary part of its function the giving of skilled legal advice [114], [148], and that recognising the privilege attaching to the legal advice of accountants would not be extending the scope of legal advice privilege [128].
English law has always taken a functional approach to legal advice privilege [123].
On this view, the availability of legal advice privilege depends on the character of advice which the client is seeking and the circumstances in which it is given, and not on the advisers status, provided that the advice is given in a professional context [114], [142].
Lord Reed adds some observations about the case from a Scottish perspective, without intending to pre empt a full discussion on the matter should the issue arise in Scottish proceedings [102] [113].
These observations are made on the basis that the general principle, its fundamental importance, and the considerations of public policy which underlie it, are common to both Scots law and English law.
Lord Reed concludes that if the question were to arise in Scotland whether the common law privilege should be extended to legal advice given by accountants, the courts would have to make a policy decision [113].
|
The appellants await trial in the Crown Court at Southwark on three counts of an indictment.
Count two charges them with making funds available to Iraq, contrary to articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 and section 1 of the United Nations Act 1946.
The particulars of offence allege that the appellants being directors of Mabey & Johnson Ltd, between 1 May 2001 and 1 November 2002, consented to, or connived in, the making of 422,264 available to the government of the Republic of Iraq, or a person resident in the Republic of Iraq, by Mabey & Johnson, without the authority of a licence granted by the Treasury.
Mabey & Johnson Ltd were in the business of exporting pre fabricated bridges to developing countries and the essential allegation against the appellants is that they consented to the companys entering into an arrangement which facilitated the Iraqi Governments avoidance of international sanctions by allowing it indirectly to access funds held in a United Nations controlled account.
The appellants have pleaded not guilty both to that count and to the other two counts, each of false accounting.
The appellants have sought to have count two quashed on the basis that the Iraq (United Nations Sanctions) Order 2000 (SI 2000/3241) was ultra vires section 1 of the United Nations Act 1946.
In essence they say that such an Order cannot be made under the 1946 Act unless made at or about the same time as the Security Council Resolution which it is implementing is itself made.
This Order was made 10 years after the relevant Resolution.
The argument failed before Judge Rivlin QC, the Recorder of Westminster, at a preparatory hearing at Southwark on 18 June 2010 (conducted pursuant to section 7 of the Criminal Justice Act 1987).
It failed again on an interlocutory appeal (brought by leave of the Recorder pursuant to section 9(11) of the 1987 Act) to the Court of Appeal (Criminal Division), (Hooper LJ, Owen and Roderick Evans JJ) on 22 October 2010: [2010] EWCA Crim 2437.
The Court of Appeal refused leave to appeal but certified two points of law of general public importance: (i) May the power to create criminal offences granted to Her Majesty in Council by section 1 of the United Nations Act 1946 only lawfully be exercised at or about the time of the relevant Security Council Resolution? (ii) If yes, are articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 to the extent to which they create a criminal offence, ultra vires section 1 of the United Nations Act 1946 given that the relevant Security Council Resolution was adopted in 1990? The matter came before this court on 6 December 2010 when, at the outset of the hearing, the appellants were granted permission to appeal; at the conclusion of the hearing the appeal was dismissed for reasons to be given later.
These reasons now follow.
It is convenient at once to set out the most material parts of the three instruments here calling for particular consideration, beginning with the Security Council Resolution (SCR) referred to in the two certified questions. (1) SCR 661 (1990) (SCR 661) was adopted by the Security Council under Chapter VII of the UN Charter on 6 August 1990 (four days after Iraq invaded Kuwait, an invasion condemned that same day by SCR 660 (1990)).
The Council reaffirmed SCR 660; by article 2 they decided to take measures to secure Iraqs compliance with it; by article 3 they imposed an embargo on trade with Iraq and Kuwait; and by article 4 the Council: decides that all states shall not make available to the government of Iraq, or to any commercial, industrial or public utility undertaking in Iraq or Kuwait, any funds or any other financial or economic resources and shall prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to that government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq or Kuwait, except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs. (2) The United Nations Act 1946 (the 1946 Act) provides by section 1(1): If, under article 41 [in Chapter VII] of the Charter of the United Nations . (being the article which relates to measures not involving the use of armed force) the Security Council of the United Nations call upon His Majestys Government in the United Kingdom to apply any measures to give effect to any decision of that Council, His Majesty may by Order in Council make such provision as appears to Him necessary or expedient for enabling those measures to be effectively applied, including (without prejudice to the generality of the preceding words) provision for the apprehension, trial and punishment of persons offending against the Order. (3) The Iraq (United Nations Sanctions) Order 2000, made on 13 December 2000 and coming into force on 14 December 2000 (the 2000 Order), recites: Whereas under article 41 of the Charter of the United Nations the Security Council of the United Nations have, by a resolution adopted on 6 August 1990, called upon Her Majestys Government in the United Kingdom and all other states to apply certain measures to give effect to a decision of that Council in relation to Iraq: Now, therefore, Her Majesty, in exercise of the powers conferred on Her by section 1 of the United Nations Act 1946, is pleased, by and with the advice of Her Privy Council to order, and it is hereby ordered, as follows.
Articles 3 and 11 (the two articles referred to in count 2 and in the second certified question) provide: 3.
Any person who, except under the authority of a licence granted by the Treasury under article 5 (a) makes any funds available to the Government of the Republic of Iraq or any person who is resident in the Republic of Iraq, or, (b) otherwise remits or removes any funds from the United Kingdom to a destination in the Republic of Iraq, is guilty of an offence. 11. (1) Any person guilty of an offence under article 3 . shall be liable (a) on conviction on indictment to imprisonment for a term not exceeding seven years, or a fine, or both . (4) Where a body corporate is guilty of an offence under this Order, and that offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Essentially the appellants argument comes to this.
The 1946 Act was enacted, and the government was thereby permitted to introduce by executive order highly restrictive measures including new criminal offences and sanctions without a parliamentary majority or even parliamentary scrutiny, specifically so as to enable urgent (prompt, hasty, speedy and immediate were other words used by the appellants in the course of argument) action to be taken to implement article 41 UN Resolutions.
Urgency alone justifies such wide executive power and the bypassing of the ordinary parliamentary processes and safeguards.
The power, therefore, must be construed as subject to there being a need for its immediate exercise and limited, therefore, to its being exercised within a very short time scale.
If not exercised at or about the same time as the Resolution being implemented, runs the argument, the power is lost by the effluxion of time.
The appellants candidly acknowledge that they can find no example of any other power once given expiring by the effluxion of time (absent, obviously, legislation containing express sunset clauses).
They submit, however, that, novel as their argument may be, there is support for it to be found in a number of the speeches made during the parliamentary debates leading to the passage of the 1946 Act and some support too in the judgments of this court in A v HM Treasury [2010] 2 AC 534.
Principal amongst the passages from Hansard relied upon are these: (i) Subsection (4) provides that Orders in Council shall be laid forthwith before Parliament, but it excludes the application of a provision in the Rules Publication Act requiring the publication in the London Gazette of notice of the proposal to make the Order in Council for 40 days before the Order is made, it being obvious that the urgency with which decisions of the Security Council must be carried out renders any such notice quite impracticable. (Lord Jowitt LC, introducing the Bill at its second reading in the House of Lords: Hansard (HL Debates), 12 February 1946, col 376. (ii) [The Lord Chancellor] is fortunate in being able to bring forward a Bill to enable this Government to do things by Order in Council which will, I believe, have the complete, unanimous, and enthusiastic support of everybody in this House.
If this organisation fails, all fails.
If it is to succeed, it must be able to take effective action, and that action must be prompt and immediate.
All the world must know that when it takes a decision, all the member states will be prompt and loyal in giving effect to such a decision.
For the reasons the noble and learned Lord Chancellor has given, this method of Orders in Council is the only effective way by which we can do that. (Viscount Swinton, supporting the Bill at its second reading: Hansard (HL Debates), 12 February 1946, col 377. (iii) Subsection (4) provides that Orders in Council shall be forthwith laid before Parliament, but it excludes the application of a provision in the Rules Publication Act requiring publication in the London Gazette of notice of the proposal to make the Order in Council for 40 days before the Order is made.
It is evident that that must be so, because, if we are to take action at all in pursuance of a decision by the Security Council, it must be taken with the least possible delay.
Therefore, any such notice of 40 days would be really out of the question. (Mr Philip Noel Baker, Minister of State, introducing the Bills second reading before the House of Commons: Hansard (HC Debates, 5 April 1946, col 1516. (iv) The procedure by way of Order in Council under this Bill when it becomes an Act possesses the necessary combination of speed and authority to enable instant effect to be given to these international obligations to which we are pledged. (Mr W S Morrison, supporting the Bills second reading in the House of Commons.
Hansard (HC Debates, 5 April 1946, col 1517).
The terms of these debates, submit the appellants, demonstrate Parliaments clear intention that the powers granted under section 1(1) of the 1946 Act must be used with haste after the passing of the relevant United Nations Resolution requiring implementation.
It was for that reason alone, they contend, that Parliament consented to the summary procedure for which the Act provides.
The power must therefore be exercised speedily or not at all.
As for the recent decision of this court in A v HM Treasury [2010] 2 AC 534, the appellants fix in particular upon passages in the judgments which recognise as had earlier judgments in the House of Lords, most notably in R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539 and R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 that a power conferred by Parliament in general terms is not to be taken to authorise the overriding of fundamental human rights or basic legal principles unless unambiguously conferred with that intention.
They rely, for example, upon Lord Hopes judgment at p 626, para 47: I would approach the language of section 1 of the 1946 Act, therefore, on the basis that Parliament did not surrender its legislative powers to the executive any more than must necessarily follow from the words used by it.
The words necessary and expedient both call for the exercise of judgment.
But this does not mean that its exercise is unlimited.
As, however, the appellants rightly recognise, A was concerned with a very different aspect of the scope of the power under the 1946 Act than is under consideration here.
Whereas A was concerned with the proper limits of the content of Orders that can be made under the Act, the present appeal seeks to impose limits upon the time within which the power is properly exercisable.
It is not suggested that an Order precisely in the terms of the 2000 Order could not properly have been made at around the time SCR 661 was adopted on 6 August 1990.
What is contended is rather that, by 13 December 2000, the 1946 Act had long since ceased to be an available legislative route by which to implement the 1990 Resolution; the appellants argue that the new offences created by the 2000 Order could at that stage only have been introduced by ordinary parliamentary legislation.
By the same token that A demonstrates the Order making power under the 1946 Act not to be unrestricted as to content, so too, the appellants submit, this court should now hold it not to be unrestricted as to the time of implementation either.
And certainly, if the urgency of the need to give effect to a United Nations Resolution were indeed a precondition of the right to exercise the power, the strength of the appellants case would be obvious: ten years elapsed before the 2000 Order gave effect to (part of) the measures required by article 4 of SCR 661.
Is, then, the suggested analogy between the situation facing the court in A and that arising here a true one? In our judgment it is not.
The critical feature of the Orders in Council under consideration in A was that they plainly overrode the fundamental rights of those affected.
Orders of that kind, the court held, were impermissible: the 1946 Act had neither expressly nor by necessary implication conferred so extreme a power.
The essential reason why the court in A was prepared, indeed anxious, to examine the parliamentary material surrounding the passage of the 1946 Act was to make sure that there had in fact been nothing said by those introducing the Bill to suggest that the executive power being conferred was intended to permit fundamental human rights to be overridden.
In short, Hansard was being examined to confirm the absence of a clear statement of such intention, the argument there being that a power of the width contended for by the Minister needed to have been conferred unambiguously.
In the present case, by contrast, we can see no good reason to look behind the enactment of the 1946 Act, and a real risk of breaching parliamentary privilege if one does.
As already stated, it is not suggested here that the 2000 Order overrides anyones fundamental human rights or is otherwise ultra vires the order making power conferred by the 1946 Act (save as to the delay in the Order being made).
Obviously it was envisaged that the order making power would ordinarily need to be exercised speedily.
But that is a far cry from saying that it was Parliaments clear intention to confine it to urgent use.
Had that been the intention, one would have expected it to be clearly provided for in the Act.
And inevitably, if it had been, some identifiable limit of time would have been formulated: how otherwise is the Minister, or the court in the event of legal challenge, to determine what precisely is the legal limit of the power?
So far from anything of this kind being found in the legislation, it is entirely silent on the question, there being no hint of any such restriction in the language of the section.
Indeed, it goes somewhat further even than this: section 1(3) of the 1946 Act provides: Any Order in Council made under this section may be varied or revoked by a subsequent Order in Council.
The appellants necessarily, therefore, recognise that some variations may be made to existing Orders by subsequent Orders made perhaps years later.
They are thus constrained to argue rather that this power of variation cannot be invoked to create serious criminal offences.
Once the initial urgency has passed, they must submit, such offences can only be created through the normal legislative process.
Again, however, had Parliament intended to place such limitations upon this power of variation, one would have expected it to say so rather than leave the position entirely uncertain.
We have considered the issue thus far purely as one of principle and on the barest of facts, by reference simply to the long passage of time between the United Nations Resolution requiring measures to be taken and the Order giving effect to it.
The Crown, indeed, have been anxious that we should do so, concerned no doubt lest otherwise anyone wishing to contest the vires of an apparently delayed 1946 Act Order will be able to require an explanation as to how the delay came about.
As will now be apparent, moreover, even on this somewhat blinkered approach, it is our clear conclusion that the appellants argument must fail.
We think it right, however, briefly to sketch in something of the broader context in which the 2000 Order in fact came to be made, partly to show that the case is not simply one of inexplicable tardiness on the part of a negligent government (indeed, succession of governments), but in part also to demonstrate that there may be perfectly good reason to act as the government did here which, of course, assuming that is so, makes it yet more unlikely that Parliament on conferring the power had been intent upon tightly circumscribing the time within which it could lawfully be exercised.
As already indicated, SCR 661 was adopted on 6 August 1990, four days after Iraq invaded Kuwait.
In the meantime, on 4 August, the Treasury had already given directions in exercise of powers conferred by section 2 of the Emergency Laws (Re enactments and Repeals) Act 1964 forbidding (save with Treasury permission) the carrying out of orders by the Government of, or any resident in, Iraq requiring any person to make any payment or to part with any gold or securities or requiring any change to be made in the persons to whose credit any sum is to stand or to whose order any gold or securities are to be held.
To an extent, therefore, these directions anticipated the requirements of SCR 661.
Shortly afterwards, namely two days after SCR 661 and in substantial implementation of the measures required by it, the Government on 8 August made the Iraq and Kuwait (United Nations Sanctions) Order 1990 (SI 1990/1651) pursuant to the 1946 Act power, imposing restrictions (as the Explanatory Note put it) on the exportation of goods from Iraq and Kuwait and on supply of goods to Iraq and Kuwait as well as certain related activities and dealings, including the carriage of such goods in British ships or aircraft.
This Order thus gave effect to the entirety of SCR 661 save just a part of article 4.
It was then amended on 29 August to add a new article 4A so as to ban the payment of any bond given in respect of a contract whose performance was prohibited under any other article: article 4 of the Iraq and Kuwait (United Nations Sanctions) (Amendment) Order 1990 (SI 1990/1768).
There followed a succession of SCRs dealing with the Iraqi situation as it continued to develop over the next ten years.
Putting it very shortly, on 15 August 1991 SCR 706 (1991) authorised the setting up of an oil for food programme, a programme, however, which was then rejected by Iraq on the grounds that it interfered with their sovereignty.
On 14 April 1995 SCR 986 (1995) again authorised such a programme and this finally began to operate at the end of 1996.
Thereafter the programme was extended on a six monthly basis by further Resolutions, each of which re affirmed the terms of SCR 661.
With the passage of time, however, the scale and complexity of the humanitarian programme grew, and oil prices increased, to the point where there was ever greater scope for the manipulation of the programme by the Iraqi government.
By September 2000 there were consistent reports of Iraq demanding a surcharge on all oil sales and on the purchase of all humanitarian goods, to be paid directly or indirectly to the Government of Iraq.
In December 2000 the United Nations 661 Committee agreed that the payment of all such surcharges was illegal and in breach of the UN sanctions imposed on Iraq.
On 5 December 2000 SCR 1330 (2000) was adopted inter alia allow[ing] the Council to take further action with regard to the prohibitions referred to in Resolution 661 .
It was in the context of this ever changing diplomatic and international landscape that on 13 December 2000 the 2000 Order came to be made.
If this brief history establishes nothing else, it demonstrates surely that Security Council Resolutions are not simply one off measures requiring immediate implementation by member states and then receding into history, and that situations can develop in the course of their subsequent enforcement which call for further measures to be taken, sometimes with considerable urgency, to meet emerging problems.
It would be not merely inappropriate as a matter of construction but regrettable as a matter of fact were this court now to stultify the power conferred under the 1946 Act by confining its exercise within an artificially restricted time frame.
For the sake of completeness we record that, since the above judgment was written, the appellants have now been convicted on count 2, the sanctions count.
We have in the result lifted the anonymity order which was earlier imposed in these proceedings.
| UK-Abs | This appeal concerns the question whether the power to create criminal offences granted to Her Majestys government by section 1 of the United Nations Act 1946 (the 1946 Act) may only lawfully be exercised at or about the time of the relevant resolution by the Security Council of the United Nations which such order is implementing.
At the time of the hearing of this appeal, the appellants, Forsyth and Mabey, were awaiting criminal trial on a number of charges, of which one is an offence of making funds available to Iraq contrary to the Articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 (the Order).
As a preliminary issue prior to the trial, the appellants sought to establish that the Order creating the offence of making funds available to Iraq was ultra vires section 1 of the 1946 Act.
Section 1 grants power to the government to implement resolutions of the Security Council by an executive order without any parliamentary process.
The appellants argument was that such a wide executive power could be justified only if the resolutions of the Security Council were implemented urgently and the power, therefore, must be construed as subject to its being exercised within a very short timescale.
In essence, the appellants maintained that unless the power to make an order under the 1946 Act is exercised at or about the same time as the relevant Security Council resolution, that power is lost by the passage of time.
The Order in question was made 10 years after the relevant resolution.
The appellants lost both in the Crown Court and the Court of Appeal.
The matter came before this court on 6 December 2010 when, at the outset of the hearing, the appellants were granted permission to appeal; at the conclusion of the hearing the appeal was dismissed for reasons to be given later.
The present judgment contains those reasons.
Lord Brown delivered the judgment of the court which held that the power conferred on the government by section 1 of the 1946 Act cannot be restricted by confining its exercise within an artificially restricted timeframe.
The suggested analogy between the case of A v HM Treasury which was concerned with proper limits of the content of orders made pursuant to section 1 of the 1946 Act and the present appeal seeking to impose limits upon the time within which the power is properly exercisable is false: [9].
Unlike the case of A, where Hansard needed to be examined to confirm the absence of parliamentary intention to permit fundamental human rights to be overridden, there is no good reason to look behind the actual words of the 1946 Act in this case, and indeed a real risk of breaching parliamentary privilege if one does.
Had Parliament intended to confine the order making power to urgent use, one would have expected it to be clearly provided for in the 1946 Act: [10] [11].
Instead, the 1946 Act is entirely silent on the question and indeed provides for a power to vary the existing order without placing any time limitations upon this power of variation: [12].
The history of how the Order in the present case came to be made so long after the UN resolution it was implementing confirms that it would be inappropriate to limit the exercise of the power conferred by the 1946 Act within a restricted timeframe by demonstrating that Security Council resolutions are not simply one off measures requiring immediate implementation by member states which then recede into history: [18].
|
The appellants await trial in the Crown Court at Southwark on three counts of an indictment.
Count two charges them with making funds available to Iraq, contrary to articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 and section 1 of the United Nations Act 1946.
The particulars of offence allege that the appellants being directors of Mabey & Johnson Ltd, between 1 May 2001 and 1 November 2002, consented to, or connived in, the making of 422,264 available to the government of the Republic of Iraq, or a person resident in the Republic of Iraq, by Mabey & Johnson, without the authority of a licence granted by the Treasury.
Mabey & Johnson Ltd were in the business of exporting pre fabricated bridges to developing countries and the essential allegation against the appellants is that they consented to the companys entering into an arrangement which facilitated the Iraqi Governments avoidance of international sanctions by allowing it indirectly to access funds held in a United Nations controlled account.
The appellants have pleaded not guilty both to that count and to the other two counts, each of false accounting.
The appellants have sought to have count two quashed on the basis that the Iraq (United Nations Sanctions) Order 2000 (SI 2000/3241) was ultra vires section 1 of the United Nations Act 1946.
In essence they say that such an Order cannot be made under the 1946 Act unless made at or about the same time as the Security Council Resolution which it is implementing is itself made.
This Order was made 10 years after the relevant Resolution.
The argument failed before Judge Rivlin QC, the Recorder of Westminster, at a preparatory hearing at Southwark on 18 June 2010 (conducted pursuant to section 7 of the Criminal Justice Act 1987).
It failed again on an interlocutory appeal (brought by leave of the Recorder pursuant to section 9(11) of the 1987 Act) to the Court of Appeal (Criminal Division), (Hooper LJ, Owen and Roderick Evans JJ) on 22 October 2010: [2010] EWCA Crim 2437.
The Court of Appeal refused leave to appeal but certified two points of law of general public importance: (i) May the power to create criminal offences granted to Her Majesty in Council by section 1 of the United Nations Act 1946 only lawfully be exercised at or about the time of the relevant Security Council Resolution? (ii) If yes, are articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 to the extent to which they create a criminal offence, ultra vires section 1 of the United Nations Act 1946 given that the relevant Security Council Resolution was adopted in 1990? The matter came before this court on 6 December 2010 when, at the outset of the hearing, the appellants were granted permission to appeal; at the conclusion of the hearing the appeal was dismissed for reasons to be given later.
These reasons now follow.
It is convenient at once to set out the most material parts of the three instruments here calling for particular consideration, beginning with the Security Council Resolution (SCR) referred to in the two certified questions. (1) SCR 661 (1990) (SCR 661) was adopted by the Security Council under Chapter VII of the UN Charter on 6 August 1990 (four days after Iraq invaded Kuwait, an invasion condemned that same day by SCR 660 (1990)).
The Council reaffirmed SCR 660; by article 2 they decided to take measures to secure Iraqs compliance with it; by article 3 they imposed an embargo on trade with Iraq and Kuwait; and by article 4 the Council: decides that all states shall not make available to the government of Iraq, or to any commercial, industrial or public utility undertaking in Iraq or Kuwait, any funds or any other financial or economic resources and shall prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to that government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq or Kuwait, except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs. (2) The United Nations Act 1946 (the 1946 Act) provides by section 1(1): If, under article 41 [in Chapter VII] of the Charter of the United Nations . (being the article which relates to measures not involving the use of armed force) the Security Council of the United Nations call upon His Majestys Government in the United Kingdom to apply any measures to give effect to any decision of that Council, His Majesty may by Order in Council make such provision as appears to Him necessary or expedient for enabling those measures to be effectively applied, including (without prejudice to the generality of the preceding words) provision for the apprehension, trial and punishment of persons offending against the Order. (3) The Iraq (United Nations Sanctions) Order 2000, made on 13 December 2000 and coming into force on 14 December 2000 (the 2000 Order), recites: Whereas under article 41 of the Charter of the United Nations the Security Council of the United Nations have, by a resolution adopted on 6 August 1990, called upon Her Majestys Government in the United Kingdom and all other states to apply certain measures to give effect to a decision of that Council in relation to Iraq: Now, therefore, Her Majesty, in exercise of the powers conferred on Her by section 1 of the United Nations Act 1946, is pleased, by and with the advice of Her Privy Council to order, and it is hereby ordered, as follows.
Articles 3 and 11 (the two articles referred to in count 2 and in the second certified question) provide: 3.
Any person who, except under the authority of a licence granted by the Treasury under article 5 (a) makes any funds available to the Government of the Republic of Iraq or any person who is resident in the Republic of Iraq, or, (b) otherwise remits or removes any funds from the United Kingdom to a destination in the Republic of Iraq, is guilty of an offence. 11. (1) Any person guilty of an offence under article 3 . shall be liable (a) on conviction on indictment to imprisonment for a term not exceeding seven years, or a fine, or both . (4) Where a body corporate is guilty of an offence under this Order, and that offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Essentially the appellants argument comes to this.
The 1946 Act was enacted, and the government was thereby permitted to introduce by executive order highly restrictive measures including new criminal offences and sanctions without a parliamentary majority or even parliamentary scrutiny, specifically so as to enable urgent (prompt, hasty, speedy and immediate were other words used by the appellants in the course of argument) action to be taken to implement article 41 UN Resolutions.
Urgency alone justifies such wide executive power and the bypassing of the ordinary parliamentary processes and safeguards.
The power, therefore, must be construed as subject to there being a need for its immediate exercise and limited, therefore, to its being exercised within a very short time scale.
If not exercised at or about the same time as the Resolution being implemented, runs the argument, the power is lost by the effluxion of time.
The appellants candidly acknowledge that they can find no example of any other power once given expiring by the effluxion of time (absent, obviously, legislation containing express sunset clauses).
They submit, however, that, novel as their argument may be, there is support for it to be found in a number of the speeches made during the parliamentary debates leading to the passage of the 1946 Act and some support too in the judgments of this court in A v HM Treasury [2010] 2 AC 534.
Principal amongst the passages from Hansard relied upon are these: (i) Subsection (4) provides that Orders in Council shall be laid forthwith before Parliament, but it excludes the application of a provision in the Rules Publication Act requiring the publication in the London Gazette of notice of the proposal to make the Order in Council for 40 days before the Order is made, it being obvious that the urgency with which decisions of the Security Council must be carried out renders any such notice quite impracticable. (Lord Jowitt LC, introducing the Bill at its second reading in the House of Lords: Hansard (HL Debates), 12 February 1946, col 376. (ii) [The Lord Chancellor] is fortunate in being able to bring forward a Bill to enable this Government to do things by Order in Council which will, I believe, have the complete, unanimous, and enthusiastic support of everybody in this House.
If this organisation fails, all fails.
If it is to succeed, it must be able to take effective action, and that action must be prompt and immediate.
All the world must know that when it takes a decision, all the member states will be prompt and loyal in giving effect to such a decision.
For the reasons the noble and learned Lord Chancellor has given, this method of Orders in Council is the only effective way by which we can do that. (Viscount Swinton, supporting the Bill at its second reading: Hansard (HL Debates), 12 February 1946, col 377. (iii) Subsection (4) provides that Orders in Council shall be forthwith laid before Parliament, but it excludes the application of a provision in the Rules Publication Act requiring publication in the London Gazette of notice of the proposal to make the Order in Council for 40 days before the Order is made.
It is evident that that must be so, because, if we are to take action at all in pursuance of a decision by the Security Council, it must be taken with the least possible delay.
Therefore, any such notice of 40 days would be really out of the question. (Mr Philip Noel Baker, Minister of State, introducing the Bills second reading before the House of Commons: Hansard (HC Debates, 5 April 1946, col 1516. (iv) The procedure by way of Order in Council under this Bill when it becomes an Act possesses the necessary combination of speed and authority to enable instant effect to be given to these international obligations to which we are pledged. (Mr W S Morrison, supporting the Bills second reading in the House of Commons.
Hansard (HC Debates, 5 April 1946, col 1517).
The terms of these debates, submit the appellants, demonstrate Parliaments clear intention that the powers granted under section 1(1) of the 1946 Act must be used with haste after the passing of the relevant United Nations Resolution requiring implementation.
It was for that reason alone, they contend, that Parliament consented to the summary procedure for which the Act provides.
The power must therefore be exercised speedily or not at all.
As for the recent decision of this court in A v HM Treasury [2010] 2 AC 534, the appellants fix in particular upon passages in the judgments which recognise as had earlier judgments in the House of Lords, most notably in R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539 and R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 that a power conferred by Parliament in general terms is not to be taken to authorise the overriding of fundamental human rights or basic legal principles unless unambiguously conferred with that intention.
They rely, for example, upon Lord Hopes judgment at p 626, para 47: I would approach the language of section 1 of the 1946 Act, therefore, on the basis that Parliament did not surrender its legislative powers to the executive any more than must necessarily follow from the words used by it.
The words necessary and expedient both call for the exercise of judgment.
But this does not mean that its exercise is unlimited.
As, however, the appellants rightly recognise, A was concerned with a very different aspect of the scope of the power under the 1946 Act than is under consideration here.
Whereas A was concerned with the proper limits of the content of Orders that can be made under the Act, the present appeal seeks to impose limits upon the time within which the power is properly exercisable.
It is not suggested that an Order precisely in the terms of the 2000 Order could not properly have been made at around the time SCR 661 was adopted on 6 August 1990.
What is contended is rather that, by 13 December 2000, the 1946 Act had long since ceased to be an available legislative route by which to implement the 1990 Resolution; the appellants argue that the new offences created by the 2000 Order could at that stage only have been introduced by ordinary parliamentary legislation.
By the same token that A demonstrates the Order making power under the 1946 Act not to be unrestricted as to content, so too, the appellants submit, this court should now hold it not to be unrestricted as to the time of implementation either.
And certainly, if the urgency of the need to give effect to a United Nations Resolution were indeed a precondition of the right to exercise the power, the strength of the appellants case would be obvious: ten years elapsed before the 2000 Order gave effect to (part of) the measures required by article 4 of SCR 661.
Is, then, the suggested analogy between the situation facing the court in A and that arising here a true one? In our judgment it is not.
The critical feature of the Orders in Council under consideration in A was that they plainly overrode the fundamental rights of those affected.
Orders of that kind, the court held, were impermissible: the 1946 Act had neither expressly nor by necessary implication conferred so extreme a power.
The essential reason why the court in A was prepared, indeed anxious, to examine the parliamentary material surrounding the passage of the 1946 Act was to make sure that there had in fact been nothing said by those introducing the Bill to suggest that the executive power being conferred was intended to permit fundamental human rights to be overridden.
In short, Hansard was being examined to confirm the absence of a clear statement of such intention, the argument there being that a power of the width contended for by the Minister needed to have been conferred unambiguously.
In the present case, by contrast, we can see no good reason to look behind the enactment of the 1946 Act, and a real risk of breaching parliamentary privilege if one does.
As already stated, it is not suggested here that the 2000 Order overrides anyones fundamental human rights or is otherwise ultra vires the order making power conferred by the 1946 Act (save as to the delay in the Order being made).
Obviously it was envisaged that the order making power would ordinarily need to be exercised speedily.
But that is a far cry from saying that it was Parliaments clear intention to confine it to urgent use.
Had that been the intention, one would have expected it to be clearly provided for in the Act.
And inevitably, if it had been, some identifiable limit of time would have been formulated: how otherwise is the Minister, or the court in the event of legal challenge, to determine what precisely is the legal limit of the power?
So far from anything of this kind being found in the legislation, it is entirely silent on the question, there being no hint of any such restriction in the language of the section.
Indeed, it goes somewhat further even than this: section 1(3) of the 1946 Act provides: Any Order in Council made under this section may be varied or revoked by a subsequent Order in Council.
The appellants necessarily, therefore, recognise that some variations may be made to existing Orders by subsequent Orders made perhaps years later.
They are thus constrained to argue rather that this power of variation cannot be invoked to create serious criminal offences.
Once the initial urgency has passed, they must submit, such offences can only be created through the normal legislative process.
Again, however, had Parliament intended to place such limitations upon this power of variation, one would have expected it to say so rather than leave the position entirely uncertain.
We have considered the issue thus far purely as one of principle and on the barest of facts, by reference simply to the long passage of time between the United Nations Resolution requiring measures to be taken and the Order giving effect to it.
The Crown, indeed, have been anxious that we should do so, concerned no doubt lest otherwise anyone wishing to contest the vires of an apparently delayed 1946 Act Order will be able to require an explanation as to how the delay came about.
As will now be apparent, moreover, even on this somewhat blinkered approach, it is our clear conclusion that the appellants argument must fail.
We think it right, however, briefly to sketch in something of the broader context in which the 2000 Order in fact came to be made, partly to show that the case is not simply one of inexplicable tardiness on the part of a negligent government (indeed, succession of governments), but in part also to demonstrate that there may be perfectly good reason to act as the government did here which, of course, assuming that is so, makes it yet more unlikely that Parliament on conferring the power had been intent upon tightly circumscribing the time within which it could lawfully be exercised.
As already indicated, SCR 661 was adopted on 6 August 1990, four days after Iraq invaded Kuwait.
In the meantime, on 4 August, the Treasury had already given directions in exercise of powers conferred by section 2 of the Emergency Laws (Re enactments and Repeals) Act 1964 forbidding (save with Treasury permission) the carrying out of orders by the Government of, or any resident in, Iraq requiring any person to make any payment or to part with any gold or securities or requiring any change to be made in the persons to whose credit any sum is to stand or to whose order any gold or securities are to be held.
To an extent, therefore, these directions anticipated the requirements of SCR 661.
Shortly afterwards, namely two days after SCR 661 and in substantial implementation of the measures required by it, the Government on 8 August made the Iraq and Kuwait (United Nations Sanctions) Order 1990 (SI 1990/1651) pursuant to the 1946 Act power, imposing restrictions (as the Explanatory Note put it) on the exportation of goods from Iraq and Kuwait and on supply of goods to Iraq and Kuwait as well as certain related activities and dealings, including the carriage of such goods in British ships or aircraft.
This Order thus gave effect to the entirety of SCR 661 save just a part of article 4.
It was then amended on 29 August to add a new article 4A so as to ban the payment of any bond given in respect of a contract whose performance was prohibited under any other article: article 4 of the Iraq and Kuwait (United Nations Sanctions) (Amendment) Order 1990 (SI 1990/1768).
There followed a succession of SCRs dealing with the Iraqi situation as it continued to develop over the next ten years.
Putting it very shortly, on 15 August 1991 SCR 706 (1991) authorised the setting up of an oil for food programme, a programme, however, which was then rejected by Iraq on the grounds that it interfered with their sovereignty.
On 14 April 1995 SCR 986 (1995) again authorised such a programme and this finally began to operate at the end of 1996.
Thereafter the programme was extended on a six monthly basis by further Resolutions, each of which re affirmed the terms of SCR 661.
With the passage of time, however, the scale and complexity of the humanitarian programme grew, and oil prices increased, to the point where there was ever greater scope for the manipulation of the programme by the Iraqi government.
By September 2000 there were consistent reports of Iraq demanding a surcharge on all oil sales and on the purchase of all humanitarian goods, to be paid directly or indirectly to the Government of Iraq.
In December 2000 the United Nations 661 Committee agreed that the payment of all such surcharges was illegal and in breach of the UN sanctions imposed on Iraq.
On 5 December 2000 SCR 1330 (2000) was adopted inter alia allow[ing] the Council to take further action with regard to the prohibitions referred to in Resolution 661 .
It was in the context of this ever changing diplomatic and international landscape that on 13 December 2000 the 2000 Order came to be made.
If this brief history establishes nothing else, it demonstrates surely that Security Council Resolutions are not simply one off measures requiring immediate implementation by member states and then receding into history, and that situations can develop in the course of their subsequent enforcement which call for further measures to be taken, sometimes with considerable urgency, to meet emerging problems.
It would be not merely inappropriate as a matter of construction but regrettable as a matter of fact were this court now to stultify the power conferred under the 1946 Act by confining its exercise within an artificially restricted time frame.
For the sake of completeness we record that, since the above judgment was written, the appellants have now been convicted on count 2, the sanctions count.
We have in the result lifted the anonymity order which was earlier imposed in these proceedings.
| UK-Abs | This appeal concerns the question whether the power to create criminal offences granted to Her Majestys government by section 1 of the United Nations Act 1946 (the 1946 Act) may only lawfully be exercised at or about the time of the relevant resolution by the Security Council of the United Nations which such order is implementing.
At the time of the hearing of this appeal, the appellants, Forsyth and Mabey, were awaiting criminal trial on a number of charges, of which one is an offence of making funds available to Iraq contrary to the Articles 3(a) and 11(4) of the Iraq (United Nations Sanctions) Order 2000 (the Order).
As a preliminary issue prior to the trial, the appellants sought to establish that the Order creating the offence of making funds available to Iraq was ultra vires section 1 of the 1946 Act.
Section 1 grants power to the government to implement resolutions of the Security Council by an executive order without any parliamentary process.
The appellants argument was that such a wide executive power could be justified only if the resolutions of the Security Council were implemented urgently and the power, therefore, must be construed as subject to its being exercised within a very short timescale.
In essence, the appellants maintained that unless the power to make an order under the 1946 Act is exercised at or about the same time as the relevant Security Council resolution, that power is lost by the passage of time.
The Order in question was made 10 years after the relevant resolution.
The appellants lost both in the Crown Court and the Court of Appeal.
The matter came before this court on 6 December 2010 when, at the outset of the hearing, the appellants were granted permission to appeal; at the conclusion of the hearing the appeal was dismissed for reasons to be given later.
The present judgment contains those reasons.
Lord Brown delivered the judgment of the court which held that the power conferred on the government by section 1 of the 1946 Act cannot be restricted by confining its exercise within an artificially restricted timeframe.
The suggested analogy between the case of A v HM Treasury which was concerned with proper limits of the content of orders made pursuant to section 1 of the 1946 Act and the present appeal seeking to impose limits upon the time within which the power is properly exercisable is false: [9].
Unlike the case of A, where Hansard needed to be examined to confirm the absence of parliamentary intention to permit fundamental human rights to be overridden, there is no good reason to look behind the actual words of the 1946 Act in this case, and indeed a real risk of breaching parliamentary privilege if one does.
Had Parliament intended to confine the order making power to urgent use, one would have expected it to be clearly provided for in the 1946 Act: [10] [11].
Instead, the 1946 Act is entirely silent on the question and indeed provides for a power to vary the existing order without placing any time limitations upon this power of variation: [12].
The history of how the Order in the present case came to be made so long after the UN resolution it was implementing confirms that it would be inappropriate to limit the exercise of the power conferred by the 1946 Act within a restricted timeframe by demonstrating that Security Council resolutions are not simply one off measures requiring immediate implementation by member states which then recede into history: [18].
|
The issue in this appeal raises what the courts below have correctly described as a short point of construction.
It relates to a contract which the appellants, Stewart Milne Group Limited, entered into with the respondents, Aberdeen City Council, for the purchase of land with a view to its development to form a business park or for industrial development.
The subjects comprised an area of about 11 acres lying to the north of the B9119 public road at Westhill, Aberdeen.
The purchase price was 365,000, but it was subject to a possible uplift in the events described in clause 9 of the missives.
In general terms this was to be payable if the appellants issued a notice indicating their wish to buy out the respondents share of the open market value of the land with the benefit of all necessary consents and agreements for its development, or if the appellants wished to dispose of the whole or part of the subjects by sale or by a lease for a term of more than 25 years.
The negotiations which were recorded in the missive letters between the parties were conducted over a period of several years.
They began with a missive letter by the appellants solicitors dated 6 November 2001 in which all the terms relevant to the present dispute are set out.
By missive letter dated 8 November 2001 the respondents accepted the appellants offer on the terms and conditions contained in the letter of 6 November 2001 and held the bargain as concluded.
But further negotiations then followed, the missives were re opened and the bargain was not finally concluded until 26 August 2004.
The appellants took title to the subjects as heritable proprietors.
A development of the kind contemplated by the missives was then carried out.
On 4 October 2006 the appellants transferred their title to the subjects to another company within the Stewart Milne Group called Stewart Milne (Westhill) Limited (Westhill).
On 13 December 2006 their solicitors wrote to the respondents stating that they had disposed of the subjects to Westhill by way of sale.
Their contention was that the effect of this transaction was to trigger the obligation to pay the uplift to the purchase price that the missives provided for.
They contended also that the gross sale proceeds for the purposes of the calculation of the uplift that the missives provided for must be taken to be that part of the total consideration paid by Westhill for the whole of the development land that was attributable to the subjects, which was 483,020.
As this was less than the allowable costs which were to be deducted from the sale price in terms of the missives, the result was that no uplift was payable to the respondents.
The respondents refused to accept that the transaction had this effect, as they maintained that the open market value of the subjects was greatly in excess of the consideration paid by Westhill.
The parties were unable to agree on this matter, so the respondents raised an action in the Court of Session in which they concluded for declarator that any further sum due to them in terms of the missives falls to be calculated by reference to the open market value of the subjects referred to in the contract as at the date of their sale by the appellants to Westhill, less the allowable costs as defined in the schedule to the missive letter of 6 November 2001.
The appellants defence to this action was that the contract between the parties, on its true construction, did not provide that any additional payment under clause 9 of the missives should, in the case of a sale of the subjects, be calculated on the basis of their open market value.
It was agreed that the matter was capable of being resolved by debate.
The debate took place before the Lord Ordinary, Lord Glennie, in May 2009.
On 3 June 2009 he found in favour of the respondents and granted decree of declarator in terms of the conclusion of the summons.
The appellants reclaimed and the reclaiming motion was heard by an Extra Division (Lord Clarke, Lord Hardie and Lord Drummond Young) on 6 July 2010.
On 14 October 2010 the Extra Division refused the reclaiming motion and adhered to the Lord Ordinarys interlocutor.
The appellants have now appealed to this court.
Their solicitor advocate, Mr Craig Connal QC, invited us to recall the Extra Divisions interlocutor and to dismiss the action.
The contractual provisions
The appellants were referred to in the missive letter of 6 November 2001 as the Purchasers.
The respondents were referred to as the Sellers.
In clause 2 it was stated that the purchase price of 365,000 payable for the subjects on the date of entry was subject to any uplift payable in terms of clause 9.
Clause 4 contained a list of conditions which were described as conditions suspensive of the missives.
They provided for a site and soil survey report and an environmental audit on the subjects, the obtaining of outline planning permission and sewage connection consent and water authority consent for the construction and subsequent operation of the development on the subjects.
The opening paragraph of clause 9, which was headed Uplift, was in these terms: In addition to the purchase price detailed in Clause 2 hereof, the Purchasers and the Sellers have agreed that the Sellers shall be entitled to a further payment (the Profit Share) upon the Purchasers purifying the suspensive conditions contained in Clause 4 hereof and issuing a notice to the Sellers intimating to the Sellers that the Purchasers wish to purchase the relevant part of the profit share as defined in the Schedule to which the Sellers are entitled.
The Sellers entitlement to the relevant part of the profit share will also be triggered by the Purchasers disposing either by selling or by granting a lease of the whole or part of the Subjects.
Various expressions used in clause 9 were defined in a Schedule to the missives.
They included a definition of the Allowable Costs.
The definition, which does not need to be quoted in full, comprised various costs that were likely to be incurred by the appellants with a view to obtaining planning permission and all other necessary consents in connection with the development and servicing of the subjects.
Among the other definitions were the following: Estimated Profit means the Open Market Valuation under deduction of the Allowable Costs.
Gross Sale Proceeds means the aggregate of the sale proceeds of the Subjects received by the Purchasers for the Subjects. lease means a lease for a term of more than 25 years.
Lease Value means the open market capital valuation of the Subjects or that part of the Subjects to be leased having regard to the terms of the lease but assuming that the lease is an open market transaction carried out at arms length with no consideration or other incentives being paid by either party other than the rent or, in the case of a lease granted in consideration of a grassum, the grassum Open Market Valuation means the open market value of the Subjects or relevant part thereof as specified in the notice at the date of the notice served in accordance with clause 9.5, with the benefit of and subject to the necessary consents and all agreements entered into with the local Planning Road [sic], Water or other Authority or service provider relative to the Subjects and making due and proper allowance for the costs of remedying any adverse ground conditions, any off site infrastructure or planning gain contributions to be made in terms of any of the necessary consents or the aftermentioned agreements and the costs of completing any access road within or serving the Subjects to adoptable standard.
Profit means the Gross Sale Proceeds under deduction of the Development Costs. the Profit Share means 40% of 80% of the estimated profit or gross sale proceeds or lease value less the Allowable Costs as herein defined.
By clause 9.1 the appellants were to be obliged to keep accounts in respect of the Allowable Costs, which the respondents were to be entitled to examine at any time.
Clause 9.2 provided that the profit share was to be calculated in the first instance by the appellants, and that in the event of the respondents disputing their calculations the matter was to be referred to an independent chartered surveyor for his determination.
Clause 9.3 provided for what was to happen if the appellants served notice in respect of a part only of the subjects or if they sold or leased part only of them after servicing.
Clause 9.4 was in these terms: The relevant part of the profit share due to the Sellers shall be paid by the Purchasers to the Sellers within 14 days of it being calculated in accordance with clause 9.2 hereof or in the event of a sale 14 days after receipt of the gross sale proceeds by the Purchasers.
Clause 9.5 provided that the appellants were to be entitled to serve a notice to the respondents intimating that they wished to purchase the profit share at any time after purification of the suspensive conditions in clause 4.
Clause 9.6 provided that in the event of the respondents disputing the appellants Estimated Profit or the Lease Value the matter was to be referred, failing agreement between the parties, to an independent chartered surveyor for his determination.
Clause 9.7 was in these terms: For the avoidance of doubt in the event of all or part of the Profit Share being paid following upon the grant of a lease of all or part of the Subjects no further Profit Share shall be payable upon the sale of that part of the Subjects in respect of which the Profit Share has already been paid.
It should be noted that, quite apart from the problem that has given rise to the present dispute, the drafting of these provisions is not without its defects.
The definitions of the expressions Estimated Profit and the Profit Share in the Schedule, if they were to be taken literally, would require the Allowable Costs to be deducted twice in arriving at the Profit Share in the event of the amount that it refers to having to be calculated by means of an open market valuation.
That plainly cannot be right.
So one of those two directions must be disregarded to make sense of the agreement.
The definitions of Lease Value and Open Market Valuation both direct attention to the capital value of the subjects in the open market.
But they differ in their description of the assumptions on which these valuations are to be arrived at.
The date as at which the valuation in the open market is to be arrived at is provided for in the definition of Open Market Valuation.
But a direction on this point is absent in the case of the capital valuation that is to be undertaken in the case of the Lease Value.
These infelicities appear to be due more to untidy drafting than to differences in matters of substance.
I mention these drafting points because they may make it easier to attribute the problem that we have to deal with to oversight rather than to a deliberate choice when the agreement was being drafted.
The issues
The appellants primary case is that the effect of their sale of the subjects to Westfield is to trigger clause 9 of the missives, with the result that their obligation is to pay to the respondents 40% of 80% of the gross sale proceeds less the Allowable Costs.
They submit that the language of the missives is clear.
The definition of the Profit Share, read together with the opening paragraph of clause 9 (see para 6, above), contemplates three different situations in which an uplift may be payable: (1) a buy out of the respondents interest in the development value of the subjects, (2) a disposal by way of sale; and (3) a disposal by way of a lease for more than 25 years.
Each of these alternatives provides its own base figure for the calculation of the Profit Share: (1) the estimated profit in the case of buy out; (2) the gross sale proceeds in the case of a sale; and (3) the lease value in the case of a lease.
The respondents reply to this argument is that the agreement does not require the sale proceeds to be used as the basis of calculation in all circumstances where the subjects were disposed of by way of sale.
The commercial purpose of the agreement was to enable the respondents to participate in a share of the development value of the subjects.
This was to be arrived at by assuming an open market transaction carried out at arms length, whatever the event was that gave rise to the respondents right to a share of the uplift.
Effect should be given to that purpose when construing the words of the agreement.
Mr Connal sought leave to present an entirely different argument which he had attempted to raise in the Inner House at a late stage but had been prevented from doing so.
This was because on 9 June 2010 he was refused permission to add this argument to his grounds of appeal, presumably because it was inconsistent with the case that was presented in his pleadings, and was then on 25 June 2010 refused leave to amend his pleadings in respect that, as the interlocutor of that date puts it, his motion to do this came too late.
The point which he wished to argue was that any commercial absurdity could be addressed by holding that the transfer of the subjects to Westhill did not fall within the definition of a sale for the purposes of the obligation to make payment to the respondents of an uplift.
In other words, the word disposal in the opening words of clause 9 should be read as referring to market value at arms length to a third party rather than to an associated company for a notional value as had happened in this case.
For the respondents Mr Sandison QC submitted that the appellants should not be allowed to present this argument as it had not been heard by the Inner House and it did not form part of the appellants written case in this court.
But, very properly, he conceded that he had received notice of it and that it did not raise any new matters of fact which would require to be investigated before he was in position to reply to it.
An appeal under section 40 of the Court of Session Act 1988 has the effect of submitting all the prior interlocutors in the cause to the review of this court: section 40(4).
But I do not think that it is either necessary or appropriate to become involved in the niceties of procedure.
The overriding aim should be to do substantial justice as between the parties.
This aim is best served by allowing the further argument about how the contract should be construed to be presented.
It is, after all, just another way of trying to make sense of the words used in the missives in the light of admitted facts.
Discussion
It is helpful, at the outset, to take an overall view of what the agreement appears to have had in mind in the provisions that it sets out for the payment to the respondents of a share of the uplift.
Three events are identified as triggers to bring the appellants obligation into effect.
They are set out in the opening words of clause 9 and are picked up again in the Schedule where the expression the Profit Share is defined.
The Schedule then sets out three ways in which the base figure for the profit share is to be arrived at.
At first sight they appear to be mutually exclusive.
In the case of a buy out, the base figure is the estimated profit.
This is to be arrived at by means of an open market valuation of the subjects, or the relevant part of it as specified in the notice, as at the date when the notice is served in accordance with clause 9.5: see the definition of Open Market Valuation.
In the case of a sale it is the gross sale proceeds.
In the case of a lease it is to be arrived at by means of a capital valuation of the subjects in the open market.
These three approaches appear, as I have said, to be mutually exclusive.
But the context tends to indicate that they have one thing in common.
This is that the base figure is to be taken to be the amount which the subjects would fetch in a transaction that was conducted at arms length in the open market.
This is expressly provided for in the case of a buy out, in which event a valuation of the subjects must be undertaken.
This is also provided for expressly in the case of a lease.
No mention is made of a valuation exercise in the case of a sale.
But a sale at arms length is usually taken to be the best evidence of the value of the subjects in the open market.
On this view there was nothing more to be said about the base figure in the event of a sale, other than that it was to be the gross sale proceeds.
As the choice between these three methods lay entirely in the hands of the appellants and clause 9.7 precludes the respondents entitlement to any further Profit Share in the future, it is a reasonable assumption that these methods were expected to produce the same base figure, albeit by different routes or methods of calculation.
Otherwise it would be open to the appellants to avoid the basis for the calculation in the case of a disposal by lease by disposing of the subjects to an associated company at an undervalue and arranging for the lease to be entered into by that company.
Basing the calculation on the open market value was, on a fair reading of the agreement, the commercial purpose that these various methods were intended to serve.
The problem that the facts of this case give rise to is that it was not expressly stated anywhere in clause 9 or the definitions set out in the schedule that the gross sale proceeds were only to be used in the event of a sale at arms length in the open market.
Was this a deliberate choice, or was it simply an oversight? The answer to this question is to be found by examining how the agreement can be given effect on the assumption that this was an oversight.
There are, of course, well understood limits to the extent to which a court can depart from the express terms of an agreement that has been reduced to writing in solving a problem of this kind.
Would the court be transgressing these limits if it were to give effect to the case for the respondent in the face of the appellants submission that the contract should simply be given effect according to its terms?
The problem can be addressed by taking the definitions in the Schedule in their logical order.
First, there is the definition of the Profit Share.
The three methods of arriving at the base figure are presented as alternatives.
They are separated by the word or.
It is plain that the method referred to as the lease value would be appropriate only in the case of a disposal by way of lease.
But the wording of the definition does not, in terms, confine the method to be used in the case of a sale to the gross sale proceeds.
In the case of a sale at arms length in the open market a separate valuation would be a needless formality, as it would almost certainly produce the same figure as was provided for in the contract.
But it would serve a very real purpose if the sale was clearly not one undertaken at arms length in the open market, as happened in this case.
The question then is whether there is anything in the definition of the expression Open Market Valuation which shows that this method cannot be used in the case of a sale.
The definition directs attention to the open market value of the subjects or the relevant part thereof as specified in the notice at the date of the notice served in accordance with clause 9.5.
There is no requirement for a notice in accordance with clause 9.5 in the case of a sale.
But the absence of a notice does not make the valuation exercise directed by this definition unworkable.
In the case of a sale the information that a notice would provide is to be found in the contract, just as in the case of lease it seems not to have been thought necessary to identify the date as at which the subjects were to be valued in order to arrive at the Lease Value.
It seems to me therefore that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share.
I see this as the product of the way I would interpret this contract.
This was, in essence, the approach which the Extra Division took to the problem.
In para 12 of his opinion Lord Drummond Young said that any other approach would defeat the parties clear objectives.
Martin Hogg, a much respected senior lecturer in law at the University of Edinburgh, has criticised this decision: Fundamental issues for reform of the law of contractual interpretation (2011) 15 Edin LR 406, 420.
Why, he asks, where a party has been feckless in allowing a clause susceptible of a commercially disadvantageous sense to form part of a contract, should it be protected by the court giving the contract a commercially sensible interpretation rather than allowing the party simply to suffer the results of its commercial fecklessness? Why should commercial good sense be attributed to a party which has not shown it in the drafting of the contract? At pp 421 422 he recommends a departure from what he refers to as a nave focus on subjective intention in favour of an objective approach to the interpretation of contracts.
That would minimise the temptation which some courts have shown to improve upon the bargain reached by parties in the name of commercial good sense.
I would not, for my part, view the present case in that way.
It seems to me that the position here is quite straightforward.
The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The fact that this makes good commercial sense is simply a makeweight.
The words of the contract itself tell us that this must be taken to have been what they had in mind when they entered into it.
The only question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement.
For the reasons I have given, I would hold that the words which they used do not prevent its being given effect in the way I have indicated.
Mr Connal said that the appellants would never have agreed to having to pay the uplift before the profit that was expected to result from the development had been realised.
At any rate the likelihood of their agreeing to this was very slight.
So it would be wrong to read the words of the contract in a way that produced that result in this case.
But the answer to that submission is to be found in the fact that the sellers entitlement to the relevant part of the profit share is triggered by the grant of a lease of the whole or part of the subjects for more than 25 years, and in the definition of the Profit Share which requires that the capital sum produced by the calculation of the Lease Value be paid when the lease is entered.
As Mr Sandison pointed out, the obligation to pay this sum could anticipate the date when the profit had been realised.
So I do not accept that the contract must be approached on the basis that it was an essential element of the bargain that the profit had actually been realised before the obligation to pay the Profit Share was triggered by any of the transactions referred to.
It should be noted too that the timing of the transactions that would give rise to that obligation was entirely in the hands of the appellants.
I turn then to Mr Connals alternative argument.
It seems to me that it creates more problems than it solves.
It also tends to support the need to approach the agreement in the way the respondents contend for.
There is obvious force in his starting point.
This is the assumption that when clause 9 refers to a disposal by way of sale it contemplates a sale at arms length in the open market.
But it is also clear that the sale, and the only sale, that it contemplates is a sale by the appellants.
This is made clear by the definition of the expression Gross Sale Proceeds, which refers to the sale proceeds received by the Purchasers for the subjects.
The opening paragraph of the missive letter of 6 November 2001 states that the appellants are referred to in it as the Purchasers.
The appellants, it must be emphasised, are the only parties with whom this contract was being entered into.
Mr Connal suggested that the sale to Westhill should be disregarded and the obligation to pay the uplift triggered instead by a sale of the subjects in the open market by Westhill.
But that solution cannot fit with the words used in the contract, to which Westhill are not a party.
It would not be enough merely to substitute for the word Purchasers in the definition words that would include an associate company.
It would also be necessary to write in clauses to protect the respondents against the obvious risks that such an arrangement would give rise to.
As the contract stands, there would be nothing to prevent the appellants from disposing of the subjects to a wholly owned subsidiary and then disposing of that company to a third party over which it had no control.
It would require the insertion of a number of carefully worded provisions to restrict the appellants opportunity for avoiding the obligation to account to the respondents for the uplift when it was realised.
This would involve re writing the bargain for the parties, which the court cannot do.
Conclusion
I am not persuaded that the Extra Division was wrong to uphold the decision of the Lord Ordinary.
I would dismiss the appeal and affirm the Extra Divisions interlocutor.
I gratefully adopt Lord Hopes account of the facts and the missives.
I agree LORD CLARKE (WITH WHOM LORD HOPE, LADY HALE, LORD MANCE AND LORD KERR AGREE)
that the appeal should be dismissed.
In the course of argument some reference was made to the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900.
That appeal was concerned with the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
It was held that in such a case the court should adopt the more, rather than the less, commercial construction.
The court applied the principle that the ultimate aim in construing a contract is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant; the relevant reasonable person being one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
This appeal is concerned with a somewhat different problem from that which arose in Rainy Sky.
Under the missives the respondent sellers were entitled to the Profit Share arising out of the on sale of the subjects by the appellant buyers.
The expression Profit Share was defined as the Gross Sale Proceeds, which were in turn defined as the aggregate of the sale proceeds of the Subjects received by the Purchasers for the Subjects.
Lord Hope has drawn attention in para 9 to certain infelicities of drafting.
However, the critical language in clause 9.4 is the promise on the part of the appellants to pay 40% of 80% of the gross sale proceeds within 14 days after receipt of the gross sale proceeds.
On the face of it the reference to the gross sale proceeds is a reference to the actual sale proceeds received by the appellants.
It is not easy to conclude, as a matter of language, that the parties meant, not the actual sale proceeds, but the amount the appellants would have received if the on sale had been an arms length sale at the market value of the property.
Nor is it easy to conclude that the parties must have intended the language to have that meaning.
As Baroness Hale observed in the course of the argument, unlike Rainy Sky, this is not a case in where there are two alternative available constructions of the language used.
It is rather a case in which, notwithstanding the language used, the parties must have intended that, in the event of an on sale, the appellants would pay the respondents the appropriate share of the proceeds of sale on the assumption that the on sale was at a market price.
In this regard I entirely agree with Lord Hopes conclusions at para 22 above.
As he puts it, the context shows that the parties must be taken to have intended that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The parties expressly agreed that in the case of a buy out or lease the profit would be arrived at by reference to market value.
Rather like counsel for the respondent bank in Rainy Sky, Mr Craig Connal QC was not able to advance any commercially sensible argument as to why the parties would have agreed a different approach in the event of an on sale.
I have no doubt that he would have done so if he had been able to think of one.
As Lord Hope says at para 17, on the appellants approach, it would be open to them to avoid the provisions relating to the open market value of a lease by selling the subjects to an associate company at an undervalue and arranging for the lease to be entered into by that company.
The parties could not sensibly have intended such a result.
Lord Hope says at para 20 that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share.
I agree.
If the officious bystander had been asked whether such a term should be implied, he or she would have said of course.
Put another way, such a term is necessary to make the contract work or to give it business efficacy.
I would prefer to resolve this appeal by holding that such a term should be implied rather than by a process of interpretation.
The result is of course the same.
| UK-Abs | The Appellants entered into a contract with the Respondents for the purchase of land with a view to its development to form a business park, or for industrial development.
The purchase price was 365,000, but it was subject to a possible uplift (the Profit Share) in the events described in clause 9 of the missives.
This was to be payable if the Appellants issued a notice indicating their wish to buy out the Respondents share of the open market value of the land, or if the Appellants wished to dispose of the whole part of the subjects by sale or by a lease for a term of more than 25 years.
The Appellants took title to the subjects on 26 August 2004, and the land was developed as anticipated in the missives.
On 4 October 2006, the Appellants transferred their title to the subjects to another company in the group, called Stewart Milne (Westhill) Limited (Westhill).
They informed the Respondents of this sale.
The Appellants contention is that the effect of this transaction was to trigger the obligation to pay the uplift to the purchase price as set out in the missives.
Since the gross sale proceeds for the relevant part of the development land were less than the allowable costs which were to be deducted from the sale price in terms of the missives, the result was that no uplift was payable to the Respondents.
The Respondents refused to accept that the transaction had this effect, since the open market value of the subjects at the date of the sale was greatly in excess of the consideration paid by Westhill.
The Respondents raised an action for declarator that any uplift due to them in terms of the missives falls to be calculated by reference to the open market value of the subjects as at the date of sale by the Appellants to Westhill, less the allowable costs.
Declarator was granted by the Outer House, and was upheld on appeal by an Extra Division in the Inner House.
The Supreme Court unanimously dismisses the appeal, upholding the declarator that was granted in favour of the Council.
The leading judgment is delivered by Lord Hope.
Lord Clarke gives a short concurring judgment.
The three events which trigger the Appellants obligation to pay the uplift are set out in clause 9.
The definition of the Profit Share in the Schedule then sets out three ways in which the base figure for the profit share is to be arrived at: namely, by reference to the estimated profit or gross sale proceeds or lease value [15].
At first, they appear to be mutually exclusive, but the context tends to indicate that they have one thing in common.
This is that the base figure is to be taken to be the amount which the subjects would fetch in a transaction that was conducted at arms length in the open market.
Unlike the provisions for the case of a buy out or lease, no mention is made of a valuation exercise in the case of a sale.
But a sale at arms length is usually taken to be the best evidence of the value of the subjects in the open market [16].
It is a reasonable assumption that these methods were expected to produce the same base figure, albeit by different routes or methods of calculation.
Basing the calculation on the
open market was, on a fair reading of the agreement, the commercial purpose that these various methods were intended to serve [17].
The problem is that it was not expressly stated that the gross sale proceeds were only to be used in the event of a sale at arms length in the open market.
Was this a deliberate choice, or simply an oversight? The answer is to be found by examining how the agreement can be given effect on the assumption that it was an oversight.
There are, of course, well understood limits to the extent to which a court can depart from the express terms of a written agreement in solving a problem of this kind [18].
The wording of the definition of Profit Share does not, in terms, confine the method to be used in the case of a sale to the gross sale proceeds [19].
There is nothing in the definition of Estimated Profit (or Open Market Valuation) to show that this method cannot be used in the event of a sale.
There would therefore be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the Profit Share [20].
The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
It can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement.
The court considers that the words used do not prevent its being given effect in this way [22].
The provisions for payment of the Profit Share on the grant of a lease over the subjects undermine the Appellants argument that it must have been an essential element of the bargain that the profit had actually been realised before the obligation to pay the Profit Share was triggered [23].
A further, alternative argument was put forward by the Appellants.
They had been prevented from presenting the argument in the Inner House, presumably because it was inconsistent with the case presented in the pleadings.
But the overall aim should be to do substantial justice as between the parties, so the Court considers that this further argument about how the contract should be construed should be permitted.
The Appellants point was that any commercial absurdity could be addressed by holding that the word disposal in clause 9 should be read as referring to an arms length transfer at market value rather than a transfer to an associated company for a notional value [13 14].
So the sale to Westhill should be disregarded and the obligation to pay the uplift triggered instead by a sale of the subjects in the open market by Westhill.
But that solution cannot fit with the words used in the contract, to which Westhill are not a party.
It would not be enough merely to substitute for the word Purchasers in the definition words that would include an associate company.
It would also be necessary to write in clauses to protect the Respondents against the obvious risks that such an arrangement would give rise to.
This would involve re writing the bargain for the parties, which the court cannot do [25].
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In 1680, in the city of Rheims, Jean Baptiste De La Salle founded an Institute known as the Brothers of the Christian Schools (the Institute).
The members of the Institute are lay brothers of the Catholic Church.
They are now to be found in many countries, including the United Kingdom.
Their Rules, approved by Papal Bull in 1724, provided that they should make it their chief care to teach children, especially poor children, those things which pertain to a good and Christian life.
That has remained the mission of the Institute and the mission and apostolate of each brother.
This appeal is concerned with the legal implications of acts of physical and sexual abuse committed, or alleged to have been committed, by brothers who were, or should have been, pursuing that mission at a residential institution at Market Weighton for boys in need of care called St Williams (the school)
The Institute is, in civil law, an unincorporated association of its members.
It has, however, corporate features, including a hierarchy of authority.
Steps have been taken on behalf of the Institute to create legal bodies that are capable of owning property and entering into legal relations in pursuance of the Institutes mission.
Some of these are reflected in the identity of the individual defendants who have been described collectively as the De La Salle Defendants.
Expert evidence was given as to the nature and status of the Institute as a matter of canon law.
These matters have not been explored before this Court.
The preliminary issue with which this Court is concerned is whether the Institute is responsible in law for the alleged acts of sexual and physical abuse of children at St Williams committed by its members.
To a large extent this preliminary issue has been canvassed as if the Institute were a corporate body having separate legal identity.
I shall refer to the Institute as if this were the case, although it will be necessary in due course to grapple with the nature of the Institute.
This appeal requires this Court to review the application of the principles of vicarious liability in the context of sexual abuse of children.
Unhappily this is today not an unusual context and it is one in which vicarious liability has received recent consideration not merely by other courts in the United Kingdom, but at the highest level in Canada and Australia.
The claims in this group action are brought by 170 men in respect of abuse to which they allege that they were subjected at St Williams between 1958 and 1992.
The claims are brought against two groups of defendants.
The first group consists of the Middlesbrough Defendants.
They took over the management of the school in 1973 and inherited, under statute, the liabilities of the managers of the school before that date.
They, or those they represent, concluded contracts of employment with the brother teachers.
They were held at first instance to be vicariously liable for acts of abuse by those teachers and no longer challenge that liability.
By this appeal they seek, however, to challenge the judges finding, confirmed by the Court of Appeal, that the second group of defendants, the De La Salle Defendants, were not also vicariously liable for the acts of abuse committed by members of the Institute.
The claimants are content to look to the Middlesbrough Defendants for their relief and anxious not to risk liability in respect of the costs of the appeal to this Court.
Accordingly they have played no part in the appeal.
This case is almost a carbon copy of McE v De La Salle Brothers [2007] CSIH 27; 2007 SC 566, in which a similar preliminary issue was tried.
In that case a single pursuer claimed damages in respect of physical abuse to which he had been subjected by Brother Benedict, a De La Salle brother, while at a school in Scotland.
The claim was however a test case as there were pending some 150 additional cases where abuse was alleged at the hands of brothers at that school.
The Court of Session held that there was no basis upon which the allegation of vicarious liability on the part of the Institute could succeed and the claim was accordingly dismissed.
The facts
No significant challenge has been made in respect of the facts found by the judge of first instance, His Honour Judge Hawkesworth QC, sitting as a judge of the High Court and these have formed the basis of the Statement of Agreed Facts and Issues.
The Institute
The head of the Institute is the Superior General in Rome, elected by the General Chapter of the brothers, which is itself made up of elected representatives of all brothers.
For the purposes of administration the Institute is divided into districts called Provinces, each headed by a Provincial.
At different times there has been a London Province, an English Province and a Great Britain Province.
Within a province the brothers live in communities, each headed by a Director.
The brothers are bound together by lifelong vows of chastity, poverty and obedience and by detailed and very strict rules of conduct (the Rule).
The Rule has its origin in the rules approved by the Pope in 1724, but these were amended from time to time.
During the period to which this action relates the relevant rules were the Common Rules of 1947.
The vow of obedience carries the obligation to obey the superiors of the Institute, including the Provincial and the Director of the community.
Each brother undertakes to go wherever I may be sent and to do
whatever I may be assigned by the [Institute] or its superior
The Rule is highly particular and governs all aspects of the life and conduct of a brother including such matters as the taking of communal meals and other required communal activities.
It contains provisions governing how the children taught are to be treated, including a chapter on correction or punishment which prohibits touching a child or corporal punishment.
One chapter deals with chastity and this includes a provision that They shall not touch their pupils through playfulness or familiarity, and they shall never touch them on the face.
There is a requirement to advertise to each other any faults of which they are conscious and extreme reserve is required, for example in speaking to women.
Pursuant to the vow of poverty, any brother who is employed to teach by an outside body has to hand over all his earnings to the Institute.
In England this duty is performed by entering into a deed of covenant to pay the earnings to a charitable trust.
The pleadings disclose that there is a 1947 Trust relating to property held in connection with first the London province and subsequently the Great Britain province, and a 1953 trust relating to property held in connection with the England province.
Judge Hawkesworth at paras 30 and 31 recorded that Brother Thomas gave evidence that the DLS trust had substantial funds derived from the sale of its properties and from the covenanted funds of the brothers employed in education at St Williams and elsewhere.
The Institute provides the brothers with the wherewithal to live and looks after them after their retirement.
The Institute owns schools, presumably through its charitable trusts.
Where it does so the teaching is provided by a community of brothers who will usually live within the school.
The Director of the community almost always acts as the headmaster of the school.
However the Institute never owned St Williams.
St Williams
In paras 25 to 34 of the leading judgment in the Court of Appeal [2010] EWCA Civ 1106 Hughes LJ has set out the history of St Williams, as found by Judge Hawkesworth.
It was founded in or about 1865 by a group of Catholic benefactors who placed the school in the ownership of a charitable trust.
It was managed by a group of local people as a reformatory school for boys.
They entrusted the running of the school to a religious congregation called the Rosminians.
They did not prove satisfactory and, in 1912 the managers replaced them with the Institute, under a formal agreement made with the Superior General of the Institute.
This agreement effectively delegated the running of the school to the Institute.
Thereafter, up to 1933, the school was entirely staffed by brothers of the Institute.
These were members of a community whose bedrooms and refectory were within the school grounds.
Most of the brothers in the community worked in the school, but there were some who did not.
The Director of the community was almost always the headmaster of the school.
In 1933 the regime changed pursuant to provisions of the Children and Young Persons Act 1933.
St Williams became an approved school, for the detention of boys up to the age of 17 who had been convicted of custodial offences.
Under the 1933 Act, and the Approved School Rules 1933 made under it, the staff became the direct statutory responsibility of the managers.
All teaching staff had to be employed by them under written contracts and the headmaster was made responsible to the managers for the efficient conduct of the school.
The managers at this time, as described by the judge, at para 25, were a self perpetuating group of like minded people, linked by their Catholic faith, who would be appointed subject to the Bishops approval.
From this time the managers began to employ lay teachers in addition to the brothers and the proportion of brother teachers to lay teachers fluctuated but generally diminished.
In 1954 there were 5 brother teachers and 5 lay teachers.
The regime changed again in 1973 when the provisions of the Children and Young Persons Act 1969 took effect.
St Williams then became an assisted community home for children in the care of the local authority.
Under section 42 of the 1969 Act the responsibility for managing St Williams was vested in the voluntary organisation responsible for its management, equipment and maintenance or the responsible organisation.
The Middlesbrough Diocesan Rescue Society (MDRS) undertook this role, replacing the previous managers.
The MDRS was an unincorporated association consisting of the Catholic bishop of the diocese, as President, and priests appointed by him.
On 28 July 1982 the Catholic Child Welfare Society (Diocese of Middlesbrough) (CCWS), an incorporated charitable company, replaced the MDRS as the responsible organisation.
After 1973 the proportion of brother teachers to lay staff diminished further.
After 1976 there were never more than two brother teachers and for much of the time there was only one, while there were as many as a dozen lay teachers.
Some of these lived on the site in premises apart from those of the dwindling community of brothers.
Other lay teachers lived in the town.
At all times the managers chose to leave it to the Institute, in the form of the relevant Provincial, to designate a brother to act as headmaster of the school.
In 1976 the headmaster, Brother Reginald, retired.
With the agreement of the MDRS the Provincial replaced him with Brother James, who had been a brother teacher and housemaster at St Williams since 1968.
Brother James is now Mr Carragher, having been expelled from the Institute.
This expulsion followed his dismissal in disgrace from the post of headmaster in 1990 because it had been discovered that he had been guilty of systematic sexual abuse of the boys in his care.
In 1993 Mr Carragher pleaded guilty to a number of offences of sexual abuse and was sentenced to 7 years imprisonment.
In 2004, after a 10 week trial, he was found guilty of 21 counts of serious sexual offences against boys, spanning a period of some 20 years, and sentenced to 14 years imprisonment.
Some of the claimants allege that they were abused by Mr Carragher.
Others allege abuse by other brothers.
Of the 150 claimants on whose behalf particulars have been given, 146 allege that they were abused by members of the Institute.
After the dismissal of Mr Carragher the number of boys at the school dwindled.
The Institute disengaged from the school and it finally closed in 1994.
Control
The undertaking by each brother to go wherever he might be sent meant that the Institute controlled where it was that the brothers taught.
The Institute could not, of course, control whether schools owned by third parties engaged brothers as teachers.
It could, however, control whether a brother worked in a school that was prepared to engage him.
Because the managers of St Williams were always keen to have a brother as headmaster of the school, the Institute in effect determined who the headmaster of the school should be.
Thus in 1963 the Provincial informed the managers of the school that Brother Dominic would replace Brother Vincent as headmaster and this was accepted.
In 1965, by decision of the Superior General in Rome responsibility for St Williams was transferred from the English province to the London province.
This resulted in the three brothers, including the headmaster and the deputy headmaster, resigning and being replaced by other brothers.
The managers, with a degree of reluctance, accepted this.
It is an agreed fact that If a brother was sent to a school managed by a third party, the Institutes control over his life remained complete.
He remained bound by his vows, and every year the Provincial made an annual visit of inspection of the community and the brothers living in it, which embraced their role within the school.
An overview of the issues
The law of vicarious liability is on the move.
On 12 July 2012, shortly before the hearing of the appeal in this case, the Court of Appeal handed down its judgments in JGE v The Trustees of the Portsmouth Roman Catholic Diocesan Trust [2012] EWCA Civ 938.
That case was concerned with the preliminary issue of whether the Diocesan Trust could be vicariously liable for acts of sexual abuse committed by a parish priest in the diocese.
The court held, by a majority, that he could.
Before us Mr Leggatt QC, for the Middlesbrough Defendants, suggested that the Court would no doubt wish to read the judgments in full.
He was right to do so.
The hearing of that case before the Court of Appeal lasted but a day, but the impressive leading judgment of Ward LJ evidences consideration of case law and academic writings that goes far beyond the material to which counsel can have had time to refer in that short hearing.
At paras 20 and 21 of his judgment Ward LJ traces the origin of vicarious liability back to the middle ages, but rightly identifies that the law upon which he and I cut our teeth rendered the employer, D2, liable for the tortious act of the employee, D1, provided that the act in question was committed in the course of the employees employment.
Thus, in a case about vicarious liability, the focus was on two stages: (1) was there a true relationship of employer/employee between D2 and D1? (2) was D1 acting in the course of his employment when he committed the tortious act?
Since Ward LJ and I cut our teeth the courts have developed the law of vicarious liability by establishing the following propositions: i) It is possible for an unincorporated association to be vicariously liable for the tortious acts of one or more of its members: Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1973] AC 15, 99; Thomas v National Union of Mineworkers (South Wales Area) [1986] Ch 20, 66 7; Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366. ii) D2 may be vicariously liable for the tortious act of D1 even though the act in question constitutes a violation of the duty owed to D2 by D1 and even if the act in question is a criminal offence: Morris v CW Martin & Sons Ltd [1966] 1 QB 716; Dubai Aluminium; Brinks Global Services v Igrox [2010] EWCA Civ; [2011] IRLR 343. iii) Vicarious liability can even extend to liability for a criminal act of sexual assault: Lister v Hesley Hall [2001] UKHL 22; [2002] 1 AC 215. iv) It is possible for two different defendants, D2 and D3, each to be vicariously liable for the single tortious act of D1: Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd and others [2005] EWCA Civ 1151; [2006] QB 510.
None of these developments of the law of vicarious liability has been challenged by Lord Faulks QC, who has represented the Institute.
I consider that he was right not to challenge them, for they represent sound and logical incremental developments of the law.
They have, however, made it more difficult to identify the criteria that must be demonstrated to establish vicarious liability than it was 50 years ago.
At para 37 of his judgment in this case Hughes LJ rightly observed that the test requires a synthesis of two stages: The first stage is to consider the relationship of D1 and D2 to see i) whether it is one that is capable of giving rise to vicarious liability. ii) Hughes LJ identified the second stage as requiring examination of the connection between D2 and the act or omission of D1.
This is not entirely correct.
What is critical at the second stage is the connection that links the relationship between D1 and D2 and the act or omission of D1, hence the synthesis of the two stages.
Both stages are in issue in the present case.
There is an issue as to whether the relationship between the Institute and the brothers teaching at St Williams was one that was capable of giving rise to vicarious liability.
There is also an issue as to whether the acts, or alleged acts, of sexual abuse were connected to that relationship in such a way as to give rise to vicarious liability.
It is the Institutes case that the relationship of the individual brothers to the Institute, considered as a body, is insufficiently close to give rise, of itself, to vicarious liability on the part of the Institute for sexual abuse by brother teachers.
Only a body managing a school and employing a brother in that school as a teacher, will have a sufficiently close relationship to that brother teacher to be vicariously liable for his wrongdoing.
That is why the Middlesbrough Defendants are liable and the De La Salle Defendants are not, as held by the courts below.
It is the Middlesbrough Defendants case, as developed by Mr Leggatt, that the courts below have failed to give effect to the principles properly to be derived from the relevant authorities, particularly those dealing with vicarious liability for sexual abuse.
The necessary closeness of connection between the relationship between the Institute and the brothers and the abuses committed by the brothers is provided by the fact that the Institute sent the brothers to St Williams to further the purpose of the Institute, clothed with the status of members of the Institute, and thereby significantly increased the risk that brothers would sexually abuse the children with whom they were in close physical proximity.
This is indeed a synthesis of stage 1 the relationship of the brothers with the Institute and stage 2 the connection between that relationship and the acts of abuse.
A closer view of the issues
I turn then to the central issue that divides the parties.
Is the relationship between the individual brothers who taught at the school and the Institute such as to give rise to vicarious liability on the part of the Institute for acts of sexual abuse committed in the school? The Institute accepts that the relationship between the brother teachers and the Middlesbrough Defendants has given rise to vicarious liability on the part of the latter, but contends that this is because the Middlesbrough Defendants entered into contracts of employment with the brothers and managed and controlled both them and the school.
The Institute contends that the relationship between the brothers and the Institute lacks these critical features.
The Institute further contends that it cannot be held to be vicariously liable in addition to the Middlesbrough Defendants unless the criteria for dual liability laid down by the Court of Appeal in Viasystems are demonstrated.
It contends that these criteria are not demonstrated.
Hughes LJ reached a similar conclusion.
His judgment focussed largely on the extent to which the brothers were under the control of the Institute, and he concluded that this was insufficient to give rise to vicarious liability.
The Middlesbrough Defendants rely on the recent decisions on vicarious liability for sexual abuse as demonstrating that the relationship of employer/employee is not an essential prerequisite.
They submit that the closeness of the relationship between brothers and the Institute, the fact that the brothers were sent out to further the object of the institute, namely to teach boys, and the fact that this created a risk of sexual abuse of the boys by the brothers, sufficed to render the Institute vicariously liable for the abuse committed by the brothers.
The nature of the Institute
Before considering stage 1 of the test for vicarious liability I must address the problem of the Institute.
Hughes LJ held, and Lord Faulks now accepts, that it is possible for vicarious liability to arise out of the relationship between one member of an unincorporated association and the other members, at least where the former acts on behalf of the others.
He held, however, at para 57 that there was not a sufficiently close connection between the brothers of the Institute scattered all over the world and the torts committed by the brother teachers at St Williams to give rise to vicarious liability.
This raises the question of whether it is right to treat the De La Salle Defendants as being simply an unincorporated band of brothers scattered around the world.
A similar problem perplexed Ward LJ in JGE.
The issue in that case was whether there was vicarious liability for sexual abuse committed by a Roman Catholic priest.
He observed at para 5 that there had been other occasions on which the Church had been called on to answer for the acts of its clergy and that JGE was the first occasion on which the Church had challenged the allegation that it was the employer of its clergy.
The issue had always before been simply whether the acts of abuse had been committed in the course of that employment.
The defendants against whom the claim was brought were the Trustees of the Portsmouth Roman Catholic Diocesan Trust.
Ward LJ observed at para 8 that because English law did not recognise the Catholic Church as a legal entity in its own right but saw it as an unincorporated association with no legal personality, the diocese usually established a charitable trust to enable it to own and manage property and otherwise conduct its financial affairs in accordance with domestic law.
At para 18 Ward LJ remarked that there had been understandable confusion as to whom to sue and that the case had proceeded effectively against the Bishop, though it was the trustees who would be covered by the relevant insurance should liability be established.
He added that intuitively one would think that, as a priest is always said to be a servant of god, the Roman Catholic Church itself would be the responsible defendant, but the Roman Catholic Church could not be a party as it had no legal personality.
In those circumstances Ward LJ treated the Bishop as being the person whose vicarious liability was in issue.
There are parallels between this aspect of JGE and the present case.
The choice of defendants suggests that the claimants may well have been in doubt as to whom they should sue, as they have adopted something of a scatter gun approach.
Of the 35 defendants on the pleadings, the action has proceeded against 13.
Of these I select as a typical De La Salle defendant the 10th defendant, Patrick Joseph Campbell sued on his own behalf and as a former trustee of the 1947 trust and as representing all persons (other than any other party to the claim) who were at any time relevant to the claimants claims: i) members of the Order ii) members of the English Province or the Great Britain Province iii) responsible for the supervision management or direction of brothers carrying on the work of the England Province or the Great Britain Province, or iv) Trustees of the 1947 trust before 14 July 1992.
I can appreciate Hughes LJs difficulty in accepting that a De La Salle brother in Australia could be vicariously liable for the sexual assault by a brother at St Williams.
Indeed, there is something paradoxical in the concept of an attempt to hold vicariously liable a world wide association of religious brothers, all of whom have taken vows of poverty and so have no resources of their own.
So far as individual defendants are outside the jurisdiction this might also have given rise to an interesting question of conflict of laws.
This is, however, a long way from the realities of these proceedings and Lord Faulks has not taken any point on the nature of the Institute.
It is open to the claimants on the pleadings to seek to establish vicarious liability on the part of an unincorporated association made up at the relevant times of the brothers world wide, or of members of the London Province, or of the England Province, or of the Great Britain Province.
At the end of the day what is likely to matter will be access to the funds held by the trusts, or to insurance effected by the trustees.
Whether one looks at the picture world wide, or within Great Britain, the salient features are the same.
The Institute is not a contemplative order.
The reason for its creation and existence is to carry on an activity, namely giving a Christian education to boys.
To perform that activity it owns and manages schools in which its brothers teach, and it sends its brothers out to teach in schools managed by other bodies.
The Institute is, for administrative purposes divided into Provinces, each administered by its Provincial.
To carry out its activities it has formed trusts that have recognised legal personality.
The trusts are funded in part from the earnings of those brothers who receive payment for teaching.
The trust funds are used to meet the needs of the brothers and the financial requirements of the teaching mission.
It seems to me more realistic to view the brothers of the Province from time to time responsible for the area in which Market Weighton lies as members of the relevant unincorporated association rather than the Order as a whole, but I doubt if it makes any difference in principle.
Because of the manner in which the Institute carried on its affairs it is appropriate to approach this case as if the Institute were a corporate body existing to perform the function of providing a Christian education to boys, able to own property and, in fact, possessing substantial assets.
Stage 1: the essential elements of the relationship
Vicarious liability is a longstanding and vitally important part of the common law of tort.
A glance at the Table of Cases in Clerk & Lindsell on Torts, 20th ed (2010) shows that in the majority of modern cases the defendant is not an individual but a corporate entity.
In most of them vicarious liability is likely to be the basis upon which the defendant was sued.
The policy objective underlying vicarious liability is to ensure, insofar as it is fair, just and reasonable, that liability for tortious wrong is borne by a defendant with the means to compensate the victim.
Such defendants can usually be expected to insure against the risk of such liability, so that this risk is more widely spread.
It is for the court to identify the policy reasons why it is fair, just and reasonable to impose vicarious liability and to lay down the criteria that must be shown to be satisfied in order to establish vicarious liability.
Where the criteria are satisfied the policy reasons for imposing the liability should apply.
As Lord Hobhouse pointed out in Lister at para 60 the policy reasons are not the same as the criteria.
One cannot, however, consider the one without the other and the two sometimes overlap.
The relationship that gives rise to vicarious liability is in the vast majority of cases that of employer and employee under a contract of employment.
The employer will be vicariously liable when the employee commits a tort in the course of his employment.
There is no difficulty in identifying a number of policy reasons that usually make it fair, just and reasonable to impose vicarious liability on the employer when these criteria are satisfied: i) The employer is more likely to have the means to compensate the victim than the employee and can be expected to have insured against that liability; ii) The tort will have been committed as a result of activity being taken by the employee on behalf of the employer; iii) The employees activity is likely to be part of the business activity of the employer; iv) The employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee; v) The employee will, to a greater or lesser degree, have been under the control of the employer.
The significance of control
In days gone by, when the relationship of employer and employee was correctly portrayed by the phrase master and servant, the employer was often entitled to direct not merely what the employee should do but the manner in which he should do it.
Indeed, this right was taken as the test for differentiating between a contract of employment and a contract for the services of an independent contractor.
Today it is not realistic to look for a right to direct how an employee should perform his duties as a necessary element in the relationship between employer and employee.
Many employees apply a skill or expertise that is not susceptible to direction by anyone else in the company that employs them.
Thus the significance of control today is that the employer can direct what the employee does, not how he does it.
Control and the transfer of vicarious liability
There is one area of the law of vicarious liability where control has been of critical importance.
I must explore it because it is relevant on the facts of this case.
It has long been recognised that there are circumstances in which vicarious liability for the tortious act of a workman can be transferred from his employer to a third person who is using the employees services under a contract, or other arrangement, with his employer see Donovan v Laing, Wharton & Down Construction Syndicate Ltd [1893] 1 QB 629.
The circumstances in which such a transfer could take place were considered by the House of Lords in Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ltd [1947] AC 1.
Their Lordships imposed a test that was so stringent as to render a transfer of vicarious liability almost impossible in practice.
It may well be that that was their intention.
The negligence in question was that of the driver of a crane, which had been hired, together with the services of the driver, by the drivers employer to a firm of stevedores.
Viscount Simon at pp10 and 11 said that a heavy burden of proof lay on the general or permanent employer to shift responsibility for the negligence of servants engaged and paid by such employer to the hirer for the time being who had the benefit of the services rendered.
This could only be achieved where the hirer enjoyed the right to control the way in which the act involving negligence was done.
The inquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it.
Lord Macmillan at p 14, Lord Porter at p 17 and Lord Uthwatt at pp 22 23 applied the same test.
Mersey Docks remained the leading case in this area of the law at the time of the decision in Viasystems where, unusually for a case of such importance, only two members of the Court of Appeal sat on the appeal.
Modern construction enterprises often involve a chain of contractors and sub contractors working together to a common end, and such a situation can lead to a dispute between them as to who is vicariously liable for the negligence of a workman employed on the project.
That was the position in Viasystems.
The claimants engaged the first defendants to install air conditioning in their factory.
The first defendants sub contracted ducting work to the second defendants.
The second defendants contracted with the third defendants to provide fitters and fitters mates on a labour only basis.
They were working under the supervision of a self employed fitter contracted to the second defendants.
One of the fitters mates in a moment of folly crawled through a section of ducting and negligently fractured the fire protection filter system, flooding the factory.
At first instance the third defendants were held vicariously liable for the damage caused and the second defendants held not to be vicariously liable.
The Court of Appeal raised the question of whether it was possible in law to have dual vicarious liability and, after considering the authorities, decided that, although for 180 years courts had always proceeded on the basis that only one defendant could be vicariously liable for a tortious act, there was no case that bound the court so to find.
Academic writers favoured the possibility of dual vicarious liability and, on the facts of the case, this was the principled solution.
At para 16 May LJ, applying Mersey Docks, held that the enquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it.
Who was entitled, and perhaps theoretically obliged, to give orders as to how the work should or should not be done? The answer on the facts of the case was both the second and the third defendants.
There was dual control and thus there should be dual vicarious liability.
Rix LJ reached the same conclusion, but his reasoning was not the same.
At para 55 he commented that the basis of vicarious liability was, generally speaking, that those who set in motion and profit from the activities of their employees should compensate those who are injured by such activities, even when performed negligently.
Liability was extended to the employer on the practical assumption that because he could spread the risk through pricing and insurance, he was better organised and able to bear the risk and was, at the same time, encouraged to control the risk.
Dealing with the test of control, Rix LJ observed at paras 59 and 64 that the right to control the method of doing work had long been an important and sometimes critical test of the master/servant relationship.
The courts had, however, imperceptibly moved from using the test of control as determinative of the relationship of employer and employee to using it as the test of vicarious liability of a defendant.
At para 79 he questioned whether the doctrine of vicarious liability was to be equated with control.
Vicarious liability was a doctrine designed for the sake of the claimant, imposing a liability incurred without fault because the employer was treated at law as picking up the burden of an organisational or business relationship which he had undertaken for his own benefit.
Accordingly, what one was looking for was: a situation where the employee in question, at any rate for relevant purposes, is so much a part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence.
The brothers who taught at the school were not contractually employed by the Institute; they were contractually employed by or on behalf of the Middlesbrough Defendants.
By this appeal the Middlesbrough Defendants seek to establish dual vicarious liability.
The question arises of whether the approach of May LJ or that of Rix LJ should be applied in determining whether the Institute is also vicariously liable for the brothers torts.
The test that May LJ applied was that applied in Mersey Docks.
I do not consider that there is any justification for applying this stringent test when considering whether there is dual vicarious liability.
Where two defendants are potentially vicariously liable for the act of a tortfeasor it is necessary to give independent consideration to the relationship of the tortfeasor with each defendant in order to decide whether that defendant is vicariously liable.
In considering that question in relation to each defendant the approach of Rix LJ is to be preferred to that of May LJ.
Two subsequent decisions of the Court of Appeal, Hawley v Luminar Leisure Ltd [2006] EWCA Civ 18; [2006] Lloyd's Rep IR 307 and Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] EWCA Civ 1257; [2009] QB 775 applied the test of control when holding only one of two defendants to be vicariously liable.
It is arguable that the facts of each case could have supported a finding of dual vicarious liability.
At paragraph 35 above I have identified those incidents of the relationship between employer and employee that make it fair, just and reasonable to impose vicarious liability on a defendant.
Where the defendant and the tortfeasor are not bound by a contract of employment, but their relationship has the same incidents, that relationship can properly give rise to vicarious liability on the ground that it is akin to that between an employer and an employee.
That was the approach adopted by the Court of Appeal in JGE.
JGE was specifically concerned with stage 1 of the test of vicarious liability.
The claimant alleged that when, as a young girl, she was resident in a childrens home run by the first defendants, an order of nuns, she was sexually abused by a visiting Roman Catholic priest who had been appointed by the second defendant trust, which stood in the place of, and could be equated with, the diocesan bishop.
A preliminary issue was ordered as to whether the relationship between the priest and the trust was one that was capable of giving rise to vicarious liability.
Although this issue was restricted to the stage 1 test MacDuff J at first instance held that it could not be considered in isolation from stage 2, as the test of vicarious liability involved a synthesis of the two stages.
In a lucid and bold judgment he held that the relationship could give rise to vicarious liability: see E v English Province of Our Lady of Charity [2011] EWHC 2871 (QB); [2012] 2 WLR 709.
There was no contract of employment between the trust and the priest.
As the headnote summarised the evidence, there were no terms, conditions, wages or right of dismissal except through the church in Rome and effectively no control over a priest once appointed since, although he was subject to canon law and owed the bishop obedience, he was free to conduct his ministry as he saw fit without interference from the bishop, whose role was advisory not supervisory.
But at paras 35 and 36 MacDuff J queried the relevance of these matters when the question was whether, in justice, the trust should be responsible for the tortious acts of the man appointed and authorised by it to act on its behalf.
The crucial features were that the priest was appointed in order to do the work of the church with the full authority to fulfil that role, being provided with the premises, the pulpit and the clerical robes.
He was directed into the community and given free rein to act as representative of the church.
He had been trained and ordained for that purpose and his position of trust gave him great power.
In the Court of Appeal [2012] EWCA Civ 938 Ward LJ essentially adopted the reasoning of MacDuff J.
He did so, however, on the footing that what MacDuff J had identified as the crucial features created a relationship between the priest and the bishop that was akin to employment.
When considering vicarious liability it was not appropriate to apply tests of employment laid down by the courts when dealing with unfair dismissal, or taxation, or discrimination.
Nor was control any longer to be treated as the critical touchstone of employment, albeit that it was an important consideration.
The question of control should not be approached merely by enquiring whether an employer could tell the workman how to do his work, but in terms of whether the workman was under the management of and accountable to an employer.
It was necessary to identify whether the workman was working on behalf of an enterprise or on his own behalf and, if the former, how central the workmans activities were to the enterprise and whether these activities were integrated into the organisational structure of the enterprise.
In applying these criteria Ward LJ acknowledged the assistance that he had derived from an article by Professor Richard Kidner, Vicarious Liability: for whom should the employer be liable? (1995) 15 LS 47.
Ward LJ concluded that the relationship of the bishop and the priest was so close in character to one of employer/employee that it was just and fair to hold the employer vicariously liable (para 73).
He was accountable to the bishop in as much as he owed him reverence and obedience and could be dismissed from his office by him in the event of gross breach of his duties under Canon law.
His activities in ministering to the souls of the faithful were central to the objectives of the organisation the Roman Catholic Church, which in its organisational structure looked like a business.
He was part and parcel of that organisation and wholly integrated in it.
In his work he behaved more as if he was an employee than someone in business on his own account (paras 73 to 79).
Davis LJ delivered a concurring judgment.
He also concluded that the relationship between the bishop and the priest was sufficiently akin to employment to be capable of giving rise to vicarious liability.
The bishop had a degree of control over the priest.
The priests activity of visiting the residential home where the claimant lived was carried out in furtherance of the bishops aims and purposes, namely perpetuating the works of Christ in the diocese.
Tomlinson LJ dissented.
He agreed with the passage in Lord Milletts speech in Lister that I have quoted at para 71 below, but held that it could not be transposed so as to treat a priest as carrying on his work for the benefit of the bishop.
In JGE the claimant is also seeking to establish vicarious liability on the part of the charity which ran the home in which the abuse is alleged to have taken place.
The Court of Appeal did not consider that the possibility of dual vicarious liability affected the test to be applied.
In summary, in JGE MacDuff J found the bishop vicariously liable for the acts of the priest notwithstanding that the relationship between them was significantly different from a contract of employment (para 35).
In the Court of Appeal, Ward and Davis LJJ found it possible to describe the relationship between the bishop and the priest as being akin to employment.
Ward LJ achieved this by treating the ministry of the Roman Catholic Church as a business carried on by the bishop, by finding that the priest carried on that business under a degree of control by the bishop and by finding that the priest was part and parcel of the organisation of the business and integrated into it.
Ward and Davis LJJ distinguished the decision of the Court of Appeal in the present case.
Ward LJ did so implicitly and Davis LJ for reasons that I do not find persuasive.
The truth is that the case for finding vicarious liability is much stronger in the present case than it was in JGE.
In the context of vicarious liability the relationship between the teaching brothers and the Institute had many of the elements, and all the essential elements, of the relationship between employer and employees: The institute was subdivided into a hierarchical structure and i) conducted its activities as if it were a corporate body. ii) The teaching activity of the brothers was undertaken because the Provincial directed the brothers to undertake it.
True it is that the brothers entered into contracts of employment with the Middlesbrough Defendants, but they did so because the Provincial required them to do so. iii) The teaching activity undertaken by the brothers was in furtherance of the objective, or mission, of the Institute. iv) The manner in which the brother teachers were obliged to conduct themselves as teachers was dictated by the Institutes rules.
The relationship between the teacher brothers and the Institute differed from that of the relationship between employer and employee in that: The brothers were bound to the Institute not by contract, but by their i) vows. ii) Far from the Institute paying the brothers, the brothers entered into deeds under which they were obliged to transfer all their earnings to the Institute.
The Institute catered for their needs from these funds.
Neither of these differences is material.
Indeed they rendered the relationship between the brothers and the Institute closer than that of an employer and its employees.
Hughes LJ held at para 54 that the brothers no more acted on behalf of the Institute than any member of a professional organisation who accepts employment with that status is acting on behalf of the organisation when he does his job.
I do not agree with this analysis.
The business of the Institute was not to train teachers or to confer status on them.
It was to provide Christian teaching for boys.
All members of the Institute were united in that objective.
The relationship between individual teacher brothers and the Institute was directed to achieving that objective.
For these reasons I consider that the relationship between the teaching brothers and the Institute was sufficiently akin to that of employer and employees to satisfy stage 1 of the test of vicarious liability.
There is a simpler analysis that leads to the conclusion that stage 1 was satisfied.
Provided that a brother was acting for the common purpose of the brothers as an unincorporated association, the relationship between them would be sufficient to satisfy stage 1, just as in the case of the action of a member of a partnership.
Had one of the brothers injured a pedestrian when negligently driving a vehicle owned by the Institute in order to collect groceries for the community few would question that the Institute was vicariously liable for his tort.
Stage 2: The connection between the brothers acts of abuse and the relationship between the brothers and the Institute.
Where an employee commits a tortious act the employer will be vicariously liable if the act was done in the course of the employment of the employee.
This plainly covers the situation where the employee does something that he is employed to do in a manner that is negligent.
In that situation the necessary connection between his relationship with his employer and his tortious act will be established.
Stage 2 of the test will be satisfied.
The same is true where the relationship between the defendant and the tortfeasor is akin to that of an employer and employee.
Where the tortfeasor does something that he is required or requested to do pursuant to his relationship with the defendant in a manner that is negligent, stage 2 of the test is likely to be satisfied.
But sexual abuse can never be a negligent way of performing such a requirement.
In what circumstances, then, can an act of sexual abuse give rise to vicarious liability?
Vicarious liability for sexual abuse
The extension of statutory periods of limitation coupled with the identification of the serious psychiatric injury that is often caused by child abuse has led to something of a proliferation of claims by adults for personal injury caused by sexual abuse in their childhood.
Unhappily in quite a number of cases the abuse was perpetrated by a priest or a member of a religious order.
Such cases can raise problems both at stage 1 and at stage 2 of the analysis.
Although the law in this area is developing, there are some priests who do not serve under contracts of employment and the question then arises of whether the priest has a relationship with any body that can give rise to vicarious liability on the part of the body.
If there is such a body, the second question is whether there is a connection between the priests relationship with that body and the sexual abuse committed by the priest that can make that body vicariously liable for the priests actions.
JGE was such a case, albeit that the preliminary issue focussed on stage 1.
In dealing with stage 2 I propose to start with two Canadian cases on sexual abuse, where the tortfeasors were lay employees, so that no issue arose in relation to stage 1.
These cases have had a significant influence on the English jurisprudence.
Bazley v Curry (1999) 174 DLR (4th) 45 was one of two decisions involving child abuse given by the Supreme Court of Canada on the same day.
A not for profit organisation, D2, ran two residential care facilities for the treatment of emotionally troubled children.
They unwittingly employed a paedophile, D1, who sexually abused one of the children in the home.
The court, in a judgment delivered by McLachlin J, held D2 vicariously liable for the abuse.
The issue related to stage 2.
Could acts of sexual abuse properly be the subject of vicarious liability and, if so, on what basis? The court held that this question should be directly addressed in the light of considerations of policy.
Two particular principles of policy were identified.
The first was that where an employer puts into the community an enterprise carrying with it certain risks and those risks materialise and cause injury it is fair that, having created the enterprise and the risk, the employer should bear the loss.
The second was that holding the employer vicariously liable might have a deterrent effect, causing employers to exercise a greater degree of care in relation to the appointment and supervision of employees.
So far as the legal test of liability was concerned, para 42 of the judgment summarised the position as follows: there must be a strong connection between what the employer was asking the employee to do (the risk created by the employers enterprise) and the wrongful act.
It must be possible to say that the employer significantly increased the risk of the harm by putting the employee in his or her position and requiring him to perform the assigned tasks.
Markesinis and Deakins Tort Law, 6th ed (2007) describe this as the enterprise risk approach.
The court had no difficulty in finding that the test was satisfied in Bazley, for D1s duties under his employment by D2 included bathing the children and putting them to bed, In Jacobi v Griffiths (1999) 174 DLR (4th) 71, the other decision reached on the same day, the court applied the same test but, by a majority, reached a different conclusion on the facts.
In that case D1 was employed by D2 to run a youth club.
D1 sexually abused two children whom he had met in the club, but the abuse did not take place on the clubs premises or in connection with club activities.
The majority held that there was not the strong connection between D1s employment at the club and his acts of abuse that was necessary to give rise to vicarious liability.
The Canadian Supreme Court returned to the theme in John Doe v Bennett [2004] 1 SCR 436, a case whose facts are closer to those with which we are concerned, and even closer to those of JGE.
On this occasion the court was presided over by McLachlin CJ, who gave the judgment of the court.
A Roman Catholic priest had sexually assaulted boys in his parishes.
The relevant issue was whether the diocesan Episcopal corporation sole, which was equated with the bishop, was vicariously liable.
The priest was not employed by the corporation sole or the bishop.
The court held, however, at para 27 that the relationship between a bishop and a priest in a diocese was akin to an employment relationship, inasmuch as the priest took a vow of obedience to the bishop, the bishop exercised extensive control over the priest, including the power of assignment, the power to remove the priest from his post and the power to discipline him.
At para 17 the court stated that the justification for vicarious liability was that as the person responsible for the activity or enterprise in question, the employer or principal should be held responsible for loss to third parties that result from the activity or enterprise.
At para 20 the court put forward a variation on this theme: Vicarious liability is based on the rationale that a person who puts a risky enterprise into the community may fairly be held responsible when those risks emerge and cause loss or injury to members of the public (my emphasis).
Applying Bazley, the court held that the necessary connection between the employer created or enhanced risk and the wrong complained of was established.
The Bishop provided the priest with the opportunity to abuse his power, this opportunity being incidental to the functions of a parish priest.
The priests wrongful acts were strongly related to the psychological intimacy inherent in his role as priest.
Finally, in his remote parishes the status of a priest carried with it immense power.
The court declined, on the ground of inadequacy of the record, to consider whether the Roman Catholic Church itself was vicariously liable for the priests wrongdoing.
In conclusion of this review of the Canadian authorities it is of interest to note that 11 days after the English Court of Appeal held in Viasystems that it was possible in law to have dual vicarious liability for a single tortious act, McLachlin CJ, giving the judgment of the Supreme Court, reached the same conclusion in Blackwater v Plint (2005) 258 DLR (4th) 275.
Applying the test in Bazley, the court held both the Government of Canada and the United Church of Canada vicariously liable for sexual assaults committed by a dormitory supervisor in a school which they jointly managed and controlled.
In Lister v Hesley Hall Ltd [2002] 1 AC 215 the House of Lords, reversing previous authority, held the owners and managers of a school vicariously liable for sexual assaults committed by the warden of a boarding house, employed by them.
Although the result was unanimous the reasoning of the House was not identical.
Lord Steyn at para 27 referred to Bazley and Jacobi as luminous and illuminating judgments which would henceforth be the starting point for consideration of similar cases.
He held, however, that it was not necessary to express views on the full range of policy considerations examined in those decisions.
At para 10 he stated that those cases enunciated a principle of close connection and at para 28 he said that the question was whether the wardens torts were so closely connected with his employment that it would be fair and just to hold the employers vicariously liable.
He gave an affirmative answer to that question, observing that the sexual abuse was inextricably interwoven with the carrying out by the warden of his duties at the school.
Lord Clyde also referred with approval to the Canadian decisions.
He held at para 48 that their essence lay in the recognition of a sufficient connection between the acts of the employee and the employment.
At para 50 he found that connection in the fact that the wardens position brought him into close contact with the boys and the fact that the defendants had delegated to the warden the general duty to look after and care for the boys.
Lord Hutton agreed with the speech of Lord Steyn.
Lord Millett began his judgment with a review of academic writings about the nature of vicarious liability.
These identified the underlying policy that an employer ought to be liable for those torts which could fairly be regarded as reasonably incidental risks to the type of business carried on.
Lord Millett commented at para 65 that the relevant passages: are not to be read as confining the doctrine to cases where the employer is carrying on business for profit.
They are based on the more general idea that a person who employs another for his own ends inevitably creates a risk that the employee will commit a legal wrong.
If the employers objectives cannot be achieved without a serious risk of the employee committing the kind of wrong which he has in fact committed, the employer ought to be liable.
The fact that his employment gave the employee the opportunity to commit the wrong is not enough to make the employer liable.
He is liable only if the risk is one which experience shows is inherent in the nature of the business.
At para 70 he also stated that it was critical that attention should be directed to the closeness of the connection between the employees duties and his wrongdoing and, in that context, referred with approval to the Canadian decisions.
As to the test of closeness, Lord Millett placed importance on the employees act being an abnegation of a specific duty imposed upon him by his employment.
At para 83, referring again to the Canadian decisions, he said: Experience shows that in the case of boarding schools, prisons, nursing homes, old peoples homes, geriatric wards, and other residential homes for the young or vulnerable, there is an inherent risk that indecent assaults on the residents will be committed by those placed in authority over them, particularly if they are in close proximity to them and occupying a position of trust.
This suggests an endorsement of the Canadian Supreme Courts approach to treating the creation of risk as a basis for the imposition of vicarious liability in cases of abuse.
Lord Hobhouse agreed with Lord Steyn (para 63).
At para 55 he, like Lord Millett, singled out schools, prisons and hospitals as being places where vicarious liability was likely to be incurred, but in doing so he treated vicarious liability as being based on an assumption of a duty of care by the employer the performance of which is then entrusted to the employee.
At para 60 he drew a distinction between the reasons of policy that justified vicarious liability and the legal criteria that gave rise to this.
He expressed the view that creation of risk fell into the former rather than the latter category.
It is not easy to deduce from Lister the precise criteria that will give rise to vicarious liability for sexual abuse.
The test of close connection approved by all tells one nothing about the nature of the connection.
Lord Clyde and Lord Hobhouse found it significant that the tortfeasors employment involved exercising care for the victim.
Only Lord Millett expressly endorsed the importance that the Canadian decisions attached to the creation of risk.
This has, however, been identified as of significance in most of the cases that have followed.
The reasoning in Lister was applied by the House of Lords in a commercial context.
In Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366 the relevant issue was whether dishonest conduct by a solicitor could involve the firm in liability under section 10 of the Partnership Act 1890 as having been carried on in the ordinary course of the business of the firm.
Giving the leading speech Lord Nicholls held that it was necessary to apply the legal policy underlying vicarious liability, which he stated at para 21: is based on the recognition that carrying on a business enterprise necessarily involves risks to others.
It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on.
When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.
This has strong echoes of the enterprise risk approach of the Canadian Supreme Court and, indeed, Lord Nicholls went on at para 23 to cite with approval from the judgment of McLachlin CJ in Bazley.
When considering the stage 2 test of the ordinary course of employment he suggested at para 23 that the wrongful conduct must be so closely connected with the acts the employee was authorised to do that the wrongful conduct might fairly and properly be regarded as done in the ordinary course of employment.
The authorities on vicarious liability for unauthorised wrongful acts were reviewed by Lord Steyn when giving the advice of the Board in Bernard v Attorney General for Jamaica [2004] UKPC 47; [2005] IRLR 398.
He endorsed the close connection test, observing at para 23 that the principle of vicarious liability was not infinitely extendable.
At para 18 he held that a relevant factor was the risks to others created by an employer who entrusts duties, tasks and functions to an employee.
He added that this strand in the reasoning in Lister was best expressed in the passage from the speech of Lord Millett that I have quoted at para 72 above.
In Brown v Robinson [2004] UKPC 56, a differently constituted Board of the Privy Council at para 11 of the advice delivered by Lord Carswell endorsed the view expressed by Lord Hobhouse in Lister that risk, while it might be a strong policy consideration, was not a criterion of vicarious liability.
In Majrowski v Guys and St Thomas NHS Trust [2006] UKHL 34 Lord Nicholls, with whom Lady Hale, Lord Carswell and Lord Brown agreed, again stressed the importance of the creation or augmentation of risk in relation to the doctrine of vicarious liability.
Maga v Archbishop of Birmingham and another [2010] EWCA Civ 256; [2010] 1 WLR 1441 is a case that bears a factual resemblance to JGE.
The difference is that employment was conceded.
A claim was brought against the Birmingham Archdiocese of the Roman Catholic Church in respect of sexual abuse that had been committed by a priest, employed by the Archdiocese, upon the claimant when a boy.
The claimant was not a Catholic and the grooming that preceded the sexual abuse occurred in the course of youth work carried on by the priest for the benefit of Catholics and non Catholics alike.
Nonetheless the Court of Appeal unanimously held that vicarious liability was established.
Giving the leading judgment Lord Neuberger MR applied the close connection test, identifying a number of factors that led to the test being satisfied.
He further held that the material increase of risk test applied in the Canadian cases was also satisfied.
Longmore LJ, concurring, also applied the close connection test, observing at para 86 that McLachlin Js exposition of the law in Bazley, including the material increase in risk test, was highly relevant to the position of the priest.
For completion I should add that the High Court of Australia, when considering whether a school authority could be vicariously liable for sexual assault committed on a pupil by a teacher, has shown a bewildering variety of analysis: New South Wales v Lepore [2003] HCA 4; 212 CLR 511.
Only Gleeson CJ and Kirby J were prepared to consider following the approach of the Canadian and English decisions.
Discussion
Sexual abuse of children is now recognised as a widespread evil and the Criminal Records Bureau was established under Part V of the Police Act 1997 to reduce the risk of this by enabling screening of those seeking positions involving greater contact with young people and vulnerable adults.
In Lister at para 48 Lord Clyde said that cases of sexual abuse by an employee should be approached in the same way as other cases in the context of vicarious liability.
None the less the courts have been tailoring this area of the law by emphasising the importance of criteria that are particularly relevant to this form of wrong.
In this way the courts have succeeded in developing the law of vicarious liability so as to ensure that a remedy for the harm caused by abuse is provided by those that should fairly bear that liability.
Where those who have abused children have been members of a particular church or religious order and have committed the abuse in the course of carrying out activities in that capacity claimants have had difficulty in establishing the conventional relationship of employer/employee.
What has weighed with the courts has been the fact that the relationship has facilitated the commission of the abuse by placing the abusers in a position where they enjoyed both physical proximity to their victims and the influence of authority over them both as teachers and as men of god.
The precise criteria for imposing vicarious liability for sexual abuse are still in the course of refinement by judicial decision.
Sexual abuse of children may be facilitated in a number of different circumstances.
There is currently concern at the possibility that widespread sexual abuse of children may have occurred within the entertainment industry.
This case is not concerned with that scenario.
It is concerned with the liability of bodies that have, in pursuance of their own interests, caused their employees or persons in a relationship similar to that of employees, to have access to children in circumstances where abuse has been facilitated.
Starting with the Canadian authorities a common theme can be traced through most of the cases to which I have referred.
Vicarious liability is imposed where a defendant, whose relationship with the abuser put it in a position to use the abuser to carry on its business or to further its own interests, has done so in a manner which has created or significantly enhanced the risk that the victim or victims would suffer the relevant abuse.
The essential closeness of connection between the relationship between the defendant and the tortfeasor and the acts of abuse thus involves a strong causative link.
These are the criteria that establish the necessary close connection between relationship and abuse.
I do not think that it is right to say that creation of risk is simply a policy consideration and not one of the criteria.
Creation of risk is not enough, of itself, to give rise to vicarious liability for abuse but it is always likely to be an important element in the facts that give rise to such liability.
This case
In this case both the necessary relationship between the brothers and the Institute and the close connection between that relationship and the abuse committed at the school have been made out.
The relationship between the brothers and the Institute was much closer to that of employment than the relationship between the priest and the bishop in JGE.
The Institute was subdivided into a hierarchical structure and conducted its activities as if it were a corporate body.
The brothers were subject to the directions as to their employment and the general supervision of the Provincial, their superior within that hierarchical structure.
But the relationship was not simply one akin to that of employer and employee.
The business and mission of the Institute was the common business and mission of every brother who was a member of it.
That business was the provision of a Christian education to boys.
It was to achieve that mission that the brothers joined and remained members of the Institute.
The relationship between the Institute and the brothers enabled the Institute to place the brothers in teaching positions and, in particular, in the position of headmaster at St Williams.
The standing that the brothers enjoyed as members of the Institute led the managers of that school to comply with the decisions of the Institute as to who should fill that key position.
It is particularly significant that the Institute provided the headmasters, for the running of the school was largely carried out by the headmasters.
The brother headmaster was almost always the Director of the Institutes community, living on the school premises.
There was thus a very close connection between the relationship between the brothers and the Institute and the employment of the brothers as teachers in the school.
Living cloistered on the school premises were vulnerable boys.
They were triply vulnerable.
They were vulnerable because they were children in a school; they were vulnerable because they were virtually prisoners in the school; and they were vulnerable because their personal histories made it even less likely that if they attempted to disclose what was happening to them they would be believed.
The brother teachers were placed in the school to care for the educational and religious needs of these pupils.
Abusing the boys in their care was diametrically opposed to those objectives but, paradoxically, that very fact was one of the factors that provided the necessary close connection between the abuse and the relationship between the brothers and the Institute that gives rise to vicarious liability on the part of the latter.
There was a very close connection between the brother teachers employment in the school and the sexual abuse that they committed, or must for present purposes be assumed to have committed.
There was no Criminal Records Bureau at the time, but the risk of sexual abuse was recognised, as demonstrated by the prohibition on touching the children in the chapter in the Rule dealing with chastity.
No doubt the status of a brother was treated by the managers as an assurance that children could safely be entrusted to his care.
The placement of brother teachers in St Williams, a residential school in the precincts of which they also resided, greatly enhanced the risk of abuse by them if they had a propensity for such misconduct.
This is not a borderline case.
It is one where it is fair, just and reasonable, by reason of the satisfaction of the relevant criteria, for the Institute to share with the Middlesbrough Defendants vicarious liability for the abuse committed by the brothers.
I would allow this appeal.
| UK-Abs | The Institute of the Brothers of the Christian Schools (the Institute) was founded in 1680 with the mission to teach children, and its members are lay brothers of the Catholic Church.
The question arising in this appeal is whether the Institute is responsible in law (vicariously liable) for alleged acts of sexual and physical abuse of children by its members between 1952 and 1992 at St Williams, a residential institution at Market Weighton for boys in need of care (the School).
The Institute did not own the School, which was founded in 1865 by a group of Catholic benefactors and run locally as a reformatory school for boys.
In 1933 it became an approved school for boys convicted of custodial offences under a group of managers.
Brothers from the Institute taught at the School alongside lay teachers and a brother always acted as headmaster of the School.
In 1973 the School became an assisted community home for children in the care of the local authority, managed by the Middlesbrough Diocesan Rescue Society until 1982, and thereafter by the Catholic Child Welfare Society (Diocese of Middlesbrough).
In 1990 the headmaster of the School, Brother James, was expelled from the Institute after it was discovered he was guilty of systematic sexual abuse of boys in his care.
In 1993 and 2004 he was convicted of numerous counts of serious sexual offences against boys over a period of 20 years.
The School was closed in 1994.
Claims have been brought by 170 men in respect of abuse to which they allege they were subjected at the School, by Brother James and by other brothers.
The claims are against two groups of defendants.
The first group consists of the managers of the school from 1973, who inherited the statutory liabilities of the former managers and entered into contracts of employment with the brother teachers (the Middlesbrough Defendants).
The second group consisted of members of the Institute (the Institute Defendants).
As a preliminary issue, the High Court held that the Institute Defendants were not vicariously liable for the acts of abuse committed by brothers at the School.
The Court of Appeal upheld that ruling.
The Middlesbrough Defendants appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It holds that it is fair, just and reasonable for the Institute Defendants to share with the Middlesbrough Defendants vicarious liability for sexual abuse committed by the brothers.
The judgment is given by Lord Phillips, with whom the other Justices agree.
The law of vicarious liability had developed recently to establish a number of important propositions: It is possible for unincorporated associations (such as the Institute) to be vicariously liable for the wrongful acts of its members It is possible to be vicariously liable even if the wrongdoers act is in breach of the duty he owes to the person liable and even if the act was the criminal offence of sexual assault; and It is possible for two or more different defendants each to be vicariously liable for a single wrongful act [20] The criteria to be demonstrated to establish vicarious liability involved a synthesis of two stages: first, whether the relationship between the member and the Institute was one which was capable of giving rise to vicarious liability; and secondly examination of the connection that linked the relationship between them with the members wrongful act or omission [21].
Both were in issue in this case.
The Institute relied on the fact that the Middlesbrough Defendants entered into contracts of employment with the brothers and managed and controlled both them and the School, and contended that the absence of these critical features meant that the relationship between the brothers and the Institute could not give rise to vicarious liability.
The Institute was an unincorporated association but because of the manner in which it carried on its affairs Lord Phillips considered that it was appropriate to approach the case as if it was a corporate body existing to perform the function of providing a Christian education, able to own property and other assets through charitable trusts [33].
When two sets of defendants are potentially vicariously liable for the act of a wrongdoer it was necessary to give independent consideration to the relationship with each set in order to decide whether they should be liable [45].
The relationship between the Institute and the teaching brothers at the School had all of the essential elements of that between employer and employee.
The teaching activity was undertaken because the brothers were so directed by the Institute; it was in furtherance of the mission of the Institute and the manner in which the brother teachers were obliged to conduct themselves was dictated by the Institutes rules.
The fact that they were bound to the Institute by their vows rather than contract, and transferred all their earnings to the Institute, did not make a material difference [56 58].
Thus the first stage of the test for vicarious liability was satisfied.
Stage 2 of the test is usually satisfied when a wrongdoer does something he has been required or requested to do pursuant to his relationship with the defendant in a manner that is negligent.
But sexual abuse can never be a negligent way of performing such a requirement.
Where abusers have been members of a church or religious order, what has weighed with the courts has been the fact that the relationship has facilitated the commission of the abuse by placing the abusers in a position where they enjoyed both physical proximity to their victims and the influence of authority over them as teachers and men of god [84].
The necessary close connection between the relationship between the defendant and the wrongdoer is established where a defendant, whose relationship with the abuser put it in the position to use the abuser to carry on its business, did so in a way which created or significantly enhanced the risk of abuse [86].
In this case the Institute placed the brothers in teaching positions and in particular the position of headmaster, responsible for running the School.
The boys living on the premises were particularly vulnerable, not just as children in a school but because they were virtually prisoners and would have difficulty making credible allegations of abuse because of their personal histories [92].
The status of a brother was no doubt treated by the managers as an assurance that children could safely be entrusted to his care.
The placement of brother teachers in a residential school thus greatly enhanced the risk of abuse by them if they had a propensity for such misconduct.
This was not a borderline case and it was fair just and reasonable for the Institute to share vicarious liability in this case with the Middlesbrough Defendants [94].
|
From time to time over many years the Secretary of State for the Home Department has been concerned to deport a foreign national on the grounds of national security.
Sometimes, indeed with increasing frequency, those facing such deportation decisions have wished to contest them, either by challenging that they present a national security risk, or by invoking the European Convention on Human Rights and contending that they would be at risk of article 3 ill treatment if returned to their home country.
To enable such cases to be properly heard, Parliament, by the Special Immigration Appeals Commission Act 1997 (the 1997 Act) established SIAC and, as will be very familiar to all with any interest in this area of the law, provided for an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
All this has been rehearsed time and again in a succession of judgments not least, indeed, in paras 4 15 of the judgment below and no useful purpose would be served by my repeating it all here.
Put very shortly, if the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the appellant, SIACs rules and procedures provide for this to be done just how satisfactorily being a matter of continuing debate into which, happily, there is on this appeal no need to enter.
The difficulty raised by the present case is a very different one and, it should be recognised at once, one that faces the court with what can only be regarded as the most unpalatable of choices.
It is lesser evils which the court is searching for here, not perfect solutions.
The difficulty and dilemma now before us can most easily be illustrated by my immediately sketching out a notional set of facts.
Suppose that an appellant before SIAC (A) is a suspected terrorist whom it is proposed to return to Algeria.
Such, indeed, is the position of each of the appellants now before us.
Suppose this, too, is no mere supposition; it has been common ground before SIAC in a number of cases that Algeria is a country where torture is systematically practised by the DRS (Information and Security Department) and that no DRS officer has ever been prosecuted for it; and that: in the absence of [certain assurances from the Algerian Government] there would be a real risk that on his return to Algeria A (and persons in a similar position) would be tortured or subject to other ill treatment (SIACs judgment of 8 February 2007 in G v Secretary of State for the Home Department: Appeal No SC/02/05 G being one of the appellants now before us).
Suppose that the Algerian authorities are hostile to any independent scrutiny of their actions in the human rights sphere: human rights organisations such as Amnesty and Human Rights Watch are not permitted to operate there; even the International Red Cross is denied access to DRS facilities.
And suppose, as is also here the case, that the Secretary of State obtains assurances from the Algerian Government that As rights will be respected on return, the value of these assurances being the principal question at issue on As SIAC appeal.
Suppose, then, that A wishes to adduce evidence from someone with inside knowledge of the position in Algeria asserting that, notwithstanding the Algerian Governments official assurances, those in As position on return to Algeria are in fact likely to be subject to torture or other article 3 ill treatment.
Perhaps this prospective witness (W) was himself ill treated on return.
Perhaps W is a whistleblower working within the Algerian prison service: an official or an interrogator or a medical practitioner.
Perhaps he is a journalist or other outsider who has obtained particular information as to the fate of those like A on their return.
Suppose that W (whether or not himself still in Algeria) is in a vulnerable position: he fears future torture or ill treatment either of himself or of someone near and dear to him.
Perhaps at an earlier stage he had raised his concerns internally and been threatened that if ever he voiced them abroad his wife or children would suffer for it.
Suppose finally that, such being the circumstances, W is not prepared to give evidence in As appeal to SIAC save only on one unalterable condition, namely that his identity and evidence will forever remain confidential to SIAC and the parties to the appeal (A and the Secretary of State).
He is concerned in particular that the Secretary of State might seek to communicate something at least of his evidence to the Algerian authorities (or indeed to others in such a way as may bring him to the attention of the Algerian authorities) if only to seek to assess its veracity and reliability, and that her doing so might place him or his family in peril, something he is simply not prepared to risk.
W, therefore, requires an absolute and irreversible guarantee of total confidentiality before he will permit his identity and evidence to be disclosed to the Secretary of State.
Is it open to SIAC to make an order providing for such a guarantee? That, as will shortly appear, is the central question now before us.
It is not, I should make clear at this stage, the appellants case that, SIAC having made an absolute and irreversible order giving W the guarantee he seeks, Ws evidence will necessarily then have to be regarded by SIAC as properly before them when finally it comes to their determining the disputed issue as to As safety on return.
Rather the appellants propose an intermediate, inter partes hearing, by which time the Secretary of State must have been provided with full information as to Ws identity and intended evidence, and at which she will be able to contend that, for whatever reason, it would be wrong for SIAC to admit Ws evidence on the substantive appeal.
She may suggest that in reality W has advanced no coherent case for saying that he is at risk of reprisals.
Or she may say that Ws proposed evidence is inherently implausible and that, without her being afforded the least opportunity to check its authenticity or credibility or reliability it would simply not be right to afford it any weight whatever.
Or she may have other arguments to advance.
If, having heard them, SIAC then chooses to shut the evidence out, so be it.
If, however, SIAC admits the evidence, then, reluctant though doubtless they will be to give it the weight it might have been expected to carry had the Secretary of State been permitted to check it, at least it will be before them (when ex hypothesi it would otherwise not have been) and in the result SIAC will have the benefit of the fullest possible picture on a critically important issue in the appeal: the question of As safety on return.
It is on this basis and in this context that the question now arises: in such circumstances can SIAC ever properly make an absolute and irreversible order (necessarily on an ex parte application by A without the Secretary of State having an opportunity to resist it), prohibiting the Secretary of State from ever disclosing to anyone anything of Ws identity or evidence?
This question the Court of Appeal on 29 July 2010 answered in the negative: [2010] EWCA Civ 898.
Giving the only reasoned judgment (with which Jacob and Sullivan LJJ simply agreed), Sir David Keene (at para 27) concluded that: [I]t is not open to SIAC to make an order giving the absolute and irrevocable guarantee which is sought by the appellants.
This may create a difficulty for the appellants, because of the reluctance of their potential witnesses, but it is inescapable.
The adverse effect on them can be mitigated by such steps as anonymity orders and hearings in private, but irrevocable orders preventing the Secretary of State from disclosing material to a foreign state in any circumstances cannot properly be made by SIAC in advance of the Secretary of State seeing that material.
As counsel for the Secretary of State said at the SIAC hearing, such a proposal is unworkable and in my view falls outside the scope of SIACs powers to give directions, broad though those powers are.
Before turning to the Secretary of States objections I should observe that, although Sir David there spoke of the appellants proposals fall[ing] outside the scope of SIACs powers, he had earlier, at para 20, recorded that: Mr Tam QC, on behalf of the Secretary of State, accepts that SIAC could give directions under the Procedure Rules preventing the Secretary of State from disclosing such material to any other person, including the Algerian authorities.
He acknowledges that SIACs power under rule 39 (1) to give directions relating to the conduct of any proceedings is expressed in wide and unlimited terms and could be used in conjunction with the rule 43(2) power to conduct a hearing in private for any good reason so as to prevent disclosure to other persons, including the authorities of the appellants country of origin.
And that, indeed, I understand to remain the Secretary of States position.
It is not for want of jurisdiction that SIAC should never make an order of the sort here contended for; rather it is because, so the Secretary of State submits, such an order could never properly be made; it can never be appropriate.
Such being the case, I shall not burden this judgment with an exposition and analysis of all the various rules which arguably bear upon SIACs powers but instead shall turn at once to the Secretary of States principal reasons for saying that no order of the kind here sought should ever be made, notwithstanding that, for want of it, evidence directly going to the issue of As safety on return will on occasion not be available to SIAC when otherwise it would have been.
Essentially, it seems clear, the Secretary of States fundamental objection to an order of the sort proposed is this: such an order having been made, the Secretary of State may then find herself in possession of information which (whether or not appreciated by SIAC, A or even W himself) might in one way or another suggest the existence of a terrorist threat abroad or some other risk to national security.
Viewed in the context of myriad other pieces of information, it may be seen to form part of a jigsaw or mosaic (one is well familiar with the concept) whereby such risks come to be recognised.
Because, however, of SIACs order, the Secretary of State will be unable to alert the foreign state to the risk, thereby gravely imperilling future diplomatic relations.
True, but for the order, the Secretary of State would never have been put in possession of the information in the first place.
But, runs the argument, the Secretary of State is in fact worse off with it than without it.
Without it she cannot be criticised.
But with it, yet bound by SIACs order to keep it to herself, she may become deeply embarrassed if the risk were then to eventuate.
The court below, at paras 24 and 25 of Sir David Keenes judgment, accepted this argument: SIAC cannot, it seems to me, tie its hands in advance and say that, whatever the fresh slant on the material provided by the Secretary of State, it will in no circumstances allow disclosure to the authorities of a foreign state.
How could it? It might be that the appellants material, innocuous when seen in isolation, becomes of vital diplomatic importance once combined with material in the possession of the Secretary of State.
As was explored in argument, it might reveal a potential terrorist risk within the foreign state.
It might indicate that, instead of the appellant having been the perpetrator of a terrorist outrage, as suspected hitherto, the true culprit remains at large in a foreign state and presents a real and immediate threat to that state.
It is no answer for Mr Fordham to argue that, without the cast iron and irrevocable guarantee of non disclosure, the British Government would not even come into possession of the information.
That is true, but the consequences for the United Kingdoms diplomatic relations differ radically between the two scenarios.
If this countrys government is in possession of information indicating the existence of a risk of a terrorist outrage in a foreign state with which we have friendly relations and it does not warn that state, the potential impact on the United Kingdoms diplomatic relations with that state could be very serious indeed if it ever became known that our government knew of the risk.
If, however, the government does not possess such information, then while the terrorist risk to the foreign state may remain the same, this country could not be accused of withholding vital information, and our diplomatic relations would not be affected.
I confess to finding the argument a good deal less persuasive than did the Court of Appeal.
Nor to my mind was it made good by a post hearing note submitted by the Secretary of State at our invitation giving five examples of prospective scenarios (understandably at a high level of generality) suggested to illustrate the problem.
In all five examples, as it happens, the Home Secretarys stated concern is at her inability to communicate not with the country to which she proposes deporting A (here Algeria) but rather with some other foreign country (country C) to which, let us suppose, W, a known terrorist mastermind who trains suicide operatives, now says that he has moved (following torture on his return to Algeria), something about which the Secretary of State would wish to inform country C (an example in fact suggested by Lord Kerr during the hearing).
Even, however, were such a scenario to play out and culminate in a terrorist atrocity in country C and it were later to emerge that the Secretary of State had known, but failed to warn country C, about Ws move there, it must surely be a substantial defence to any diplomatic complaint by country C that the Secretary of State was subject to a final and absolute court order prohibiting her from acting differently.
After all, as the appellants point out, a number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context see, for example, article 13 of the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; Principle 3(b) of Annex I to the Istanbul Protocol Principles on the Effective Investigation and Documentation of Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; paras 3, 7, 12, 13 and 20 of the 28 July 2010 Report of the United Nations High Commissioner for Human Rights on the Right to the truth; and para 3.2.8 (under the heading, Handling reluctant Sources) of the November 2010 EU common guidelines on (Joint) Fact Finding Missions.
In short, I regard the Secretary of States concerns at learning more than she is permitted to divulge as an insufficient ground on which to deny A and SIAC the possible benefits of Ws evidence.
That said, I do not overlook the radical nature of orders of the sort proposed here, nor, indeed, the kinds of difficulty they may bring in their wake.
In the first place, such orders could be thought to come perilously close to offending against basic principles of open justice.
There is nothing novel, of course, in the making of ex parte orders.
But it is difficult to think of any other situation in which a respondent would be unable to seek release from a permanent injunction in this case, not to communicate his knowledge to others.
The respondent can, as indicated, object at the inter partes hearing to the material being used at the eventual substantive hearing.
But that is by no means the same thing as seeking to overturn the original order.
There is, moreover, as the respondent points out, the further difficulty that, even though theoretically it will be open to SIAC at the inter partes hearing to rule out Ws evidence, it may be difficult for them to ignore it entirely.
SIAC are, after all, required by section 5(6)(a) of the 1997 Act and by rule 4(3) of their 2003 Rules to ensure that on the material before them they can properly determine the proceedings.
And there could hardly be a more important issue in those proceedings than that of As safety on return.
It is that consideration, indeed, which weighs so very heavily in As favour in justifying the making of these proposed orders in the first place, given that without them SIAC will by definition never see the material.
There is the obvious further problem with regard to evidence adduced on the basis proposed that the Secretary of State will be largely unable to investigate it and will find it difficult, therefore, to explain or refute it.
Accordingly, the very making of the initial order must to a degree undermine the likely weight of the evidence and devalue its overall worth.
In the last analysis, however, none of these considerations to my mind outweighs the imperative need to maximise SIACs chances of arriving at the correct decision on the article 3 issue before them and their need, therefore, to obtain all such evidence as may contribute to this task.
I would rule, therefore, that it is open to SIAC to make such absolute and irreversible ex parte orders as are here contended for and that on occasion it may be appropriate to do so.
This is, I conclude, the least worst option open to us the lesser of two evils as I put it at the outset.
But at the same time I should make plain that I am far from enthusiastic about such orders and would certainly not expect a rash of them.
Rather it would seem to me that the power to make them should be most sparingly used.
There is, of course, the risk that the very availability of such orders may be exploited by the unscrupulous in the hope that SIAC may thereby be induced to receive untruthful evidence which, had it in the ordinary way been subject to full investigation, would have been exposed as such.
I would advocate that before making one of these proposed ex parte orders, SIAC should require the very fullest disclosure from A of (a) Ws proposed evidence (namely a detailed final statement or proof of evidence depending upon whether it is proposed to adduce the evidence orally or in writing, and if the latter why in writing), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage him to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in these circumstances, namely by anonymity orders and hearings in private.
If, moreover, one of these orders is made and it does then come to appear to the Secretary of State that the information disclosed may indeed be of some importance with regard to national security concerns, whether here or abroad, it should be open to the Secretary of State to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information to enable these national security concerns to be met or, if such waiver, unreasonably in SIACs view despite their recognition of Ws fears, proves unobtainable, to shut out (or regard with additional scepticism) the evidence submitted.
This power, in other words, should be exercised sensibly as well as sensitively, there being ample room for flexibility in its operation notwithstanding the absolute and irreversible nature of whatever order may initially be made.
I should perhaps add this.
In striking the balance in this way, I am in no way influenced by the consideration that, as earlier stated, there are circumstances in which the Secretary of State for her part is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A.
I do not see the scope for orders of the sort contended for here as, so to speak, levelling the playing field or providing equality of arms between the parties.
The plain fact is that the Secretary of State is acting in these cases in the wider public interest, not as an interested party.
She is, for example, obliged (now under the rules) to search for and disclose material, both open and closed, which may possibly assist As case. (He, of course, is under no corresponding duty towards the Secretary of State.) And the special advocate will to the best of his ability serve As interests, procuring on occasion rulings which may preclude the Secretary of State from relying on material however apparently damning to As cause.
As Sir David Keene observed below (at para 26): The reality is that the position of an appellant and the position of the Secretary of State are not comparable, because of the public responsibilities of the latter.
Since completing this judgment I have seen in draft the judgment of Lord Dyson and agree with him also.
I would accordingly allow these appeals to the extent indicated.
It must, of course, now be for SIAC to consider what, if any, impact our decision has upon the outcome of these appellants individual appeals: whether there is a need now to reopen them and what, if any, orders should now be made.
It is to be hoped that no further order (save as to costs as to which the parties may have 28 days for written submissions) is required from this court.
LORD DYSON
National security issues continue to present difficult challenges to the courts.
Lord Brown has explained the problem that is raised by the facts of the present case.
The appellants are all Algerian nationals whom the Secretary of State for the Home Department decided under section 3(5)(a) of the Immigration Act 1971 to deport to Algeria on the basis that their presence in the United Kingdom is not conducive to the public good on grounds of national security.
They appealed to the Special Immigration Appeals Commission (SIAC) who held that they posed a risk to national security and that the decisions to deport them were lawful and compatible with the European Convention on Human Rights (the Convention).
Their appeals were dismissed by the Court of Appeal.
The issue in all these cases is whether, if returned to Algeria, there is a real risk that the appellants would be subjected to ill treatment at the hands of the Algerian Authorities (AAs) contrary to article 3 of the Convention.
One of the appellants (Z) was in a position to put forward material from a source or sources in Algeria which was relevant to safety on return.
But the source(s) feared reprisals in Algeria if there were to be any disclosure of their identity to the AAs.
They were willing to tell their story to SIAC (and indeed to the Secretary of State), but only on an absolute and irrevocable assurance that there would be no onward disclosure to the AAs.
Rule 4(1) of the Special Immigration Appeals Commission (Procedure) Rules 2003 (SI 2003/1034) (the SIAC Rules) provides that, when exercising its functions, SIAC shall secure that information is not disclosed in any other circumstances where disclosure is likely to harm the public interest.
Rule 39(1) confers on SIAC the power to give directions relating to the conduct of any proceedings.
Subrule (2) provides that the power to give directions is to be exercised subject to the obligation in rule 4(1); and subrule (5) provides that directions under rule 39(1) may in particular (e) relate to any matter concerning the preparation for a hearing.
Rule 43(2) enables SIAC to conduct a hearing or part of a hearing in private for any good reason (in addition to the reason identified in rule 43(1) which is not material to the appeal).
It is common ground that these rules are wide enough to give SIAC the jurisdiction to make an absolute and irrevocable order prohibiting the Secretary of State from disclosing material to any person and to do so at or after a hearing from which the Secretary of State is excluded.
The question is in what circumstances (if any) it may be appropriate to make such an order (which I shall refer to as an irrevocable non disclosure order).
For the appellants, Mr Fordham QC submits that SIAC has the power to make such an order although it has not received informed representations from the Secretary of State as to whether the order should be made.
It is able subsequently to hear informed representations from the Secretary of State as to the admission of the material in evidence.
For the Secretary of State, Mr Tam QC accepts that there may be cases where an appellant is found to have good reasons for wishing to keep certain material confidential and this might provide a sound basis for SIAC to exercise its power to hold a private hearing under rule 43 and make an irrevocable non disclosure order.
But he submits that it is never appropriate to make such an order on the basis of a hearing from which the Secretary of State is excluded and she should always be given the opportunity to apply subsequently to vary or discharge the order.
In testing these submissions, it should be borne in mind that, as is illustrated by the circumstances of the present appeals, two conflicting considerations are in play here.
On the one hand, the appellants say that, unless the order that they seek is made, they will be unable to place material before SIAC which may be crucial to their case that, if returned to Algeria, they face a real risk of ill treatment by the AAs contrary to article 3 of the Convention.
If they are able to persuade SIAC of this risk, their appeals will succeed.
Thus, the appellants say that it is essential to their case that they are able to place this evidence before SIAC: the stakes could hardly be higher for them (short of a risk to life itself).
They also rely on rule 4(3) of the SIAC Rules which provides that subject to paragraphs (1) and (2), SIAC must satisfy itself that the material available to it enables it properly to determine proceedings.
In other words, it has a duty to ascertain all relevant facts.
On the other hand, it is said on behalf of the Secretary of State that there are important countervailing considerations both in relation to the conduct of the appeals and more generally.
So far as the conduct of the appeals is concerned, the ability of the Secretary of State to participate in them effectively may be seriously undermined by an irrevocable non disclosure order.
There are two aspects to consider.
First, the cogency and validity of the reasons asserted by the source(s) in support of the claimed need for confidentiality may be open to question, but the Secretary of State will be denied the ability to test the reasons or to obtain information and/or adduce evidence from or with the assistance of the AAs to demonstrate that the asserted reasons for the claim to confidentiality are groundless.
Secondly (and of perhaps even greater importance) is the fact that the Secretary of State may be seriously disadvantaged in her ability to test and challenge the substance of the evidence of the witness(es).
The effect of the order may be to deprive the Secretary of State of the ability to place before SIAC relevant evidence which it should properly consider in deciding the substantive issues arising in the appeals.
This would occur, for example, if the AAs were able to provide information bearing on the issue of safety on return of the appellants, but could not do so unless the identity of the witness(es) and what they have to say are disclosed to them.
Once the authorities know the identity of the witness(es) and the substance of their evidence, the authorities might be able to demonstrate that what is said about the risk to the appellants on return to Algeria is false.
I should add that the SIAC Rules do not make provision for the appointment of special advocates to represent the interests of the Secretary of State and it is (rightly) not suggested that SIAC could appoint special advocates under any of the powers conferred by the general rules.
It follows that the difficulties to which the Secretary of State draws attention cannot be overcome or even mitigated by the appointment of a special advocate.
In addition to the problems that are likely to be suffered by the Secretary of State in relation to the appeals, she says that irrevocable non disclosure orders may also cause collateral prejudice.
It became clear during the course of the argument that this prejudice is the potential risk of harm to future diplomatic relations with a friendly foreign state.
This is a factor which carried considerable weight with the Court of Appeal and which Lord Brown deals with at paras 11 to 15.
In weighing these competing considerations, I have no doubt that the scales come down in favour of making an irrevocable non disclosure order where SIAC is satisfied that such an order is necessary in the interests of justice.
I agree entirely with what Lord Brown says at paras 19 to 21 as to how the power to make an order should be exercised.
SIAC should be astute to guard against the danger of abuse and should scrutinise with great care and test rigorously the claimed need for an order.
But if SIAC (i) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (ii) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals in Algeria if his identity and the evidence that he is willing to give were disclosed to the AAs, then in my view an irrevocable non disclosure order should be made.
I accept that to make such an order is a striking step for any court to take and is contrary to the instincts of any common lawyer.
It is inimical to the fundamental principles which we rightly cherish of open justice and, above all, procedural fairness.
To make an order without giving the Secretary of State an opportunity to be heard is a clear breach of the principles of natural justice.
Any such order requires compelling justification.
Regrettably, however, the circumstances of a case sometimes call for unusual and undesirable remedies.
Ultimately, the court has to decide what is demanded by the interests of justice.
In weighing the prejudice that the Secretary of State may suffer in the appeal process as a result of an irrevocable non disclosure order, it should not be overlooked that the appeals themselves will be conducted entirely inter partes.
In particular, no material that is placed before SIAC by the appellants will be withheld from the Secretary of State.
She may be able to demonstrate that the claimed need for confidentiality is without foundation and to persuade SIAC to give the evidence little or no weight for that reason alone.
She may also be able to test the evidence of the witness(es) effectively even though she has been unable to discuss it with the AAs.
For example, she may be able to show on the basis of objective general material about the conditions in Algeria that the evidence of the witness is unlikely to be true; and even where the evidence is more specific, she may be able to obtain information from the AAs which will enable her to rebut the evidence without divulging the name or identity of the witness or saying anything which might lead to his or her identification.
It will, of course, depend on the nature of the evidence to be given by the witness.
I do not wish to suggest that the effect of an irrevocable non disclosure order may not inhibit the ability of the Secretary of State to resist the appeals.
In some cases, such an order will undoubtedly have that effect.
But it cannot safely be said that it is bound to do so in every case.
As regards the collateral prejudice claimed by the Secretary of State, like Lord Brown I consider that this has relatively little weight for the reasons that he gives.
In my view, if SIAC concludes that the two conditions to which I have referred at para 34 above are satisfied, then the countervailing considerations relied on by the Secretary of State should not outweigh the need to ensure that the appellants are able to deploy any material which might show that, on return to Algeria, they would face a real risk of treatment contrary to article 3 of the Convention.
The same considerations and the same result would follow if the case raised a question under article 2 of the Convention.
But if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the Convention, the balance will almost certainly be struck the other way.
For example, in many appeals against orders for deportation, the ground of appeal is that to deport the appellant would involve a breach of his or her article 8 rights.
I find it difficult to conceive of a case in which it would be appropriate to make an order in order to protect the wish for confidentiality of a witness in those circumstances.
For these reasons as well as those given by Lord Brown (with which I am in entire agreement), these appeals should be allowed to the extent indicated.
LORD PHILLIPS, LORD KERR AND LORD WILSON
We agree with both the judgments of Lord Brown and Lord Dyson.
| UK-Abs | The appellants, all Algerian nationals, were suspected terrorists whom the Secretary of State proposed to deport to Algeria.
It was common ground that Algeria was a country where torture was systematically practised by state officials and no state official had ever been prosecuted for it.
The Secretary of State obtained assurances from the Algerian Government that the appellants rights not to be tortured or subjected to other ill treatment would be respected on return to Algeria.
The Special Immigration Appeals Commission Act 1997 established an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
If the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the other party, SIACs rules and procedures provide for this to be done.
In this case, however, it was one of the appellants who wished to adduce evidence from a witness (W), who had inside knowledge of the position in Algeria and asserted that, notwithstanding the Algerian Governments official assurances, those in the appellants positions were in fact likely to be subjected on return to torture or other ill treatment.
W was prepared to give evidence in the appellants appeals to SIAC only on one unalterable condition: that his identity and evidence would by order remain absolutely and irrevocably confidential to SIAC and the parties to the appeals.
W was concerned that the Secretary of State might otherwise seek to communicate his evidence to the Algerian authorities, if only to assess its veracity and reliability, and that her doing so would place him and/or his family in peril.
The Secretary of State had two main objections to such an order being made.
First, she would be unable to participate effectively in the conduct of the appeals before SIAC, being unable to test either the validity of the reasons asserted by W in support of his claimed need for confidentiality or the substance of Ws evidence itself.
Secondly, the Secretary of State may find herself in possession of information pointing to the existence of a terrorist threat abroad or some other risk to national security, yet, bound by SIACs order, unable to alert the foreign state to the risk.
This could gravely imperil future diplomatic relations with foreign states.
The question in the appeals therefore was whether it was open to SIAC to make an order for an absolute and irreversible guarantee of total confidentiality in respect of Ws identity and evidence before the same were disclosed to the Secretary of State (in circumstances where it would nevertheless remain open to the Secretary of State to challenge the admissibility or weight of that evidence before SIAC in its determination of the substantive appeals).
The Supreme Court unanimously allows the appeals.
Lord Brown gives the leading judgment of the Court; Lord Dyson gives a concurring judgment.
The fundamental objection of the Secretary of State to the proposed order, based on her concerns about being obliged to withhold vital information relating to national security from a foreign state, thereby imperilling future diplomatic relations, is unpersuasive [11] [13].
It must surely be a substantial defence to any diplomatic complaint by a foreign state that the Secretary of State is subject to a final and absolute court order prohibiting her from acting differently [14].
A number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context [15].
The imperative need here is to maximise SIACs chances of arriving at the correct decision on the issue before them concerning the safety of the appellants on return to Algeria and, therefore, for SIAC to obtain all such evidence as may contribute to this task [18].
Accordingly, it is open to SIAC to make absolute and irreversible ex parte orders of the kind sought in this case and on occasion it may be appropriate to do so [19].
The power to make such orders should however be used most sparingly [19].
Before making one of the proposed ex parte orders, SIAC should require the very fullest disclosure from the applicant (A) of (a) the proposed evidence from As proposed witness (W), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage W to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in such circumstances (e.g. anonymity orders and hearings in private) [20].
SIAC should only then, in the interests of justice, grant such an order if it (1) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (2) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals if his identity and the evidence that he is willing to give were disclosed to the relevant foreign state [34].
Notwithstanding the absolute and irreversible nature of the order, it should in addition be open to the Secretary of State, upon such order being made, to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information, or, if such waiver proves unobtainable, to exclude or regard with additional scepticism the evidence submitted [21].
The Court, in permitting the making of such ex parte orders in the circumstances of this case, has in no way been influenced by the circumstances in which the Secretary of State is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A. The scope of the orders sought here should not be regarded as levelling the playing field between the parties: the Secretary of State in cases before SIAC acts in the wider public interest and not as an interested party [22].
The same considerations and the same result would follow if the case engaging as it does here the rights of the appellants under article 3 of the ECHR raised a question under article 2 of the same.
However, if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the ECHR (e.g. article 8), the balance will almost certainly be struck the other way.
In those circumstances it would be inappropriate to make an ex parte order to protect the confidentiality of a witness [38].
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From time to time over many years the Secretary of State for the Home Department has been concerned to deport a foreign national on the grounds of national security.
Sometimes, indeed with increasing frequency, those facing such deportation decisions have wished to contest them, either by challenging that they present a national security risk, or by invoking the European Convention on Human Rights and contending that they would be at risk of article 3 ill treatment if returned to their home country.
To enable such cases to be properly heard, Parliament, by the Special Immigration Appeals Commission Act 1997 (the 1997 Act) established SIAC and, as will be very familiar to all with any interest in this area of the law, provided for an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
All this has been rehearsed time and again in a succession of judgments not least, indeed, in paras 4 15 of the judgment below and no useful purpose would be served by my repeating it all here.
Put very shortly, if the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the appellant, SIACs rules and procedures provide for this to be done just how satisfactorily being a matter of continuing debate into which, happily, there is on this appeal no need to enter.
The difficulty raised by the present case is a very different one and, it should be recognised at once, one that faces the court with what can only be regarded as the most unpalatable of choices.
It is lesser evils which the court is searching for here, not perfect solutions.
The difficulty and dilemma now before us can most easily be illustrated by my immediately sketching out a notional set of facts.
Suppose that an appellant before SIAC (A) is a suspected terrorist whom it is proposed to return to Algeria.
Such, indeed, is the position of each of the appellants now before us.
Suppose this, too, is no mere supposition; it has been common ground before SIAC in a number of cases that Algeria is a country where torture is systematically practised by the DRS (Information and Security Department) and that no DRS officer has ever been prosecuted for it; and that: in the absence of [certain assurances from the Algerian Government] there would be a real risk that on his return to Algeria A (and persons in a similar position) would be tortured or subject to other ill treatment (SIACs judgment of 8 February 2007 in G v Secretary of State for the Home Department: Appeal No SC/02/05 G being one of the appellants now before us).
Suppose that the Algerian authorities are hostile to any independent scrutiny of their actions in the human rights sphere: human rights organisations such as Amnesty and Human Rights Watch are not permitted to operate there; even the International Red Cross is denied access to DRS facilities.
And suppose, as is also here the case, that the Secretary of State obtains assurances from the Algerian Government that As rights will be respected on return, the value of these assurances being the principal question at issue on As SIAC appeal.
Suppose, then, that A wishes to adduce evidence from someone with inside knowledge of the position in Algeria asserting that, notwithstanding the Algerian Governments official assurances, those in As position on return to Algeria are in fact likely to be subject to torture or other article 3 ill treatment.
Perhaps this prospective witness (W) was himself ill treated on return.
Perhaps W is a whistleblower working within the Algerian prison service: an official or an interrogator or a medical practitioner.
Perhaps he is a journalist or other outsider who has obtained particular information as to the fate of those like A on their return.
Suppose that W (whether or not himself still in Algeria) is in a vulnerable position: he fears future torture or ill treatment either of himself or of someone near and dear to him.
Perhaps at an earlier stage he had raised his concerns internally and been threatened that if ever he voiced them abroad his wife or children would suffer for it.
Suppose finally that, such being the circumstances, W is not prepared to give evidence in As appeal to SIAC save only on one unalterable condition, namely that his identity and evidence will forever remain confidential to SIAC and the parties to the appeal (A and the Secretary of State).
He is concerned in particular that the Secretary of State might seek to communicate something at least of his evidence to the Algerian authorities (or indeed to others in such a way as may bring him to the attention of the Algerian authorities) if only to seek to assess its veracity and reliability, and that her doing so might place him or his family in peril, something he is simply not prepared to risk.
W, therefore, requires an absolute and irreversible guarantee of total confidentiality before he will permit his identity and evidence to be disclosed to the Secretary of State.
Is it open to SIAC to make an order providing for such a guarantee? That, as will shortly appear, is the central question now before us.
It is not, I should make clear at this stage, the appellants case that, SIAC having made an absolute and irreversible order giving W the guarantee he seeks, Ws evidence will necessarily then have to be regarded by SIAC as properly before them when finally it comes to their determining the disputed issue as to As safety on return.
Rather the appellants propose an intermediate, inter partes hearing, by which time the Secretary of State must have been provided with full information as to Ws identity and intended evidence, and at which she will be able to contend that, for whatever reason, it would be wrong for SIAC to admit Ws evidence on the substantive appeal.
She may suggest that in reality W has advanced no coherent case for saying that he is at risk of reprisals.
Or she may say that Ws proposed evidence is inherently implausible and that, without her being afforded the least opportunity to check its authenticity or credibility or reliability it would simply not be right to afford it any weight whatever.
Or she may have other arguments to advance.
If, having heard them, SIAC then chooses to shut the evidence out, so be it.
If, however, SIAC admits the evidence, then, reluctant though doubtless they will be to give it the weight it might have been expected to carry had the Secretary of State been permitted to check it, at least it will be before them (when ex hypothesi it would otherwise not have been) and in the result SIAC will have the benefit of the fullest possible picture on a critically important issue in the appeal: the question of As safety on return.
It is on this basis and in this context that the question now arises: in such circumstances can SIAC ever properly make an absolute and irreversible order (necessarily on an ex parte application by A without the Secretary of State having an opportunity to resist it), prohibiting the Secretary of State from ever disclosing to anyone anything of Ws identity or evidence?
This question the Court of Appeal on 29 July 2010 answered in the negative: [2010] EWCA Civ 898.
Giving the only reasoned judgment (with which Jacob and Sullivan LJJ simply agreed), Sir David Keene (at para 27) concluded that: [I]t is not open to SIAC to make an order giving the absolute and irrevocable guarantee which is sought by the appellants.
This may create a difficulty for the appellants, because of the reluctance of their potential witnesses, but it is inescapable.
The adverse effect on them can be mitigated by such steps as anonymity orders and hearings in private, but irrevocable orders preventing the Secretary of State from disclosing material to a foreign state in any circumstances cannot properly be made by SIAC in advance of the Secretary of State seeing that material.
As counsel for the Secretary of State said at the SIAC hearing, such a proposal is unworkable and in my view falls outside the scope of SIACs powers to give directions, broad though those powers are.
Before turning to the Secretary of States objections I should observe that, although Sir David there spoke of the appellants proposals fall[ing] outside the scope of SIACs powers, he had earlier, at para 20, recorded that: Mr Tam QC, on behalf of the Secretary of State, accepts that SIAC could give directions under the Procedure Rules preventing the Secretary of State from disclosing such material to any other person, including the Algerian authorities.
He acknowledges that SIACs power under rule 39 (1) to give directions relating to the conduct of any proceedings is expressed in wide and unlimited terms and could be used in conjunction with the rule 43(2) power to conduct a hearing in private for any good reason so as to prevent disclosure to other persons, including the authorities of the appellants country of origin.
And that, indeed, I understand to remain the Secretary of States position.
It is not for want of jurisdiction that SIAC should never make an order of the sort here contended for; rather it is because, so the Secretary of State submits, such an order could never properly be made; it can never be appropriate.
Such being the case, I shall not burden this judgment with an exposition and analysis of all the various rules which arguably bear upon SIACs powers but instead shall turn at once to the Secretary of States principal reasons for saying that no order of the kind here sought should ever be made, notwithstanding that, for want of it, evidence directly going to the issue of As safety on return will on occasion not be available to SIAC when otherwise it would have been.
Essentially, it seems clear, the Secretary of States fundamental objection to an order of the sort proposed is this: such an order having been made, the Secretary of State may then find herself in possession of information which (whether or not appreciated by SIAC, A or even W himself) might in one way or another suggest the existence of a terrorist threat abroad or some other risk to national security.
Viewed in the context of myriad other pieces of information, it may be seen to form part of a jigsaw or mosaic (one is well familiar with the concept) whereby such risks come to be recognised.
Because, however, of SIACs order, the Secretary of State will be unable to alert the foreign state to the risk, thereby gravely imperilling future diplomatic relations.
True, but for the order, the Secretary of State would never have been put in possession of the information in the first place.
But, runs the argument, the Secretary of State is in fact worse off with it than without it.
Without it she cannot be criticised.
But with it, yet bound by SIACs order to keep it to herself, she may become deeply embarrassed if the risk were then to eventuate.
The court below, at paras 24 and 25 of Sir David Keenes judgment, accepted this argument: SIAC cannot, it seems to me, tie its hands in advance and say that, whatever the fresh slant on the material provided by the Secretary of State, it will in no circumstances allow disclosure to the authorities of a foreign state.
How could it? It might be that the appellants material, innocuous when seen in isolation, becomes of vital diplomatic importance once combined with material in the possession of the Secretary of State.
As was explored in argument, it might reveal a potential terrorist risk within the foreign state.
It might indicate that, instead of the appellant having been the perpetrator of a terrorist outrage, as suspected hitherto, the true culprit remains at large in a foreign state and presents a real and immediate threat to that state.
It is no answer for Mr Fordham to argue that, without the cast iron and irrevocable guarantee of non disclosure, the British Government would not even come into possession of the information.
That is true, but the consequences for the United Kingdoms diplomatic relations differ radically between the two scenarios.
If this countrys government is in possession of information indicating the existence of a risk of a terrorist outrage in a foreign state with which we have friendly relations and it does not warn that state, the potential impact on the United Kingdoms diplomatic relations with that state could be very serious indeed if it ever became known that our government knew of the risk.
If, however, the government does not possess such information, then while the terrorist risk to the foreign state may remain the same, this country could not be accused of withholding vital information, and our diplomatic relations would not be affected.
I confess to finding the argument a good deal less persuasive than did the Court of Appeal.
Nor to my mind was it made good by a post hearing note submitted by the Secretary of State at our invitation giving five examples of prospective scenarios (understandably at a high level of generality) suggested to illustrate the problem.
In all five examples, as it happens, the Home Secretarys stated concern is at her inability to communicate not with the country to which she proposes deporting A (here Algeria) but rather with some other foreign country (country C) to which, let us suppose, W, a known terrorist mastermind who trains suicide operatives, now says that he has moved (following torture on his return to Algeria), something about which the Secretary of State would wish to inform country C (an example in fact suggested by Lord Kerr during the hearing).
Even, however, were such a scenario to play out and culminate in a terrorist atrocity in country C and it were later to emerge that the Secretary of State had known, but failed to warn country C, about Ws move there, it must surely be a substantial defence to any diplomatic complaint by country C that the Secretary of State was subject to a final and absolute court order prohibiting her from acting differently.
After all, as the appellants point out, a number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context see, for example, article 13 of the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; Principle 3(b) of Annex I to the Istanbul Protocol Principles on the Effective Investigation and Documentation of Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; paras 3, 7, 12, 13 and 20 of the 28 July 2010 Report of the United Nations High Commissioner for Human Rights on the Right to the truth; and para 3.2.8 (under the heading, Handling reluctant Sources) of the November 2010 EU common guidelines on (Joint) Fact Finding Missions.
In short, I regard the Secretary of States concerns at learning more than she is permitted to divulge as an insufficient ground on which to deny A and SIAC the possible benefits of Ws evidence.
That said, I do not overlook the radical nature of orders of the sort proposed here, nor, indeed, the kinds of difficulty they may bring in their wake.
In the first place, such orders could be thought to come perilously close to offending against basic principles of open justice.
There is nothing novel, of course, in the making of ex parte orders.
But it is difficult to think of any other situation in which a respondent would be unable to seek release from a permanent injunction in this case, not to communicate his knowledge to others.
The respondent can, as indicated, object at the inter partes hearing to the material being used at the eventual substantive hearing.
But that is by no means the same thing as seeking to overturn the original order.
There is, moreover, as the respondent points out, the further difficulty that, even though theoretically it will be open to SIAC at the inter partes hearing to rule out Ws evidence, it may be difficult for them to ignore it entirely.
SIAC are, after all, required by section 5(6)(a) of the 1997 Act and by rule 4(3) of their 2003 Rules to ensure that on the material before them they can properly determine the proceedings.
And there could hardly be a more important issue in those proceedings than that of As safety on return.
It is that consideration, indeed, which weighs so very heavily in As favour in justifying the making of these proposed orders in the first place, given that without them SIAC will by definition never see the material.
There is the obvious further problem with regard to evidence adduced on the basis proposed that the Secretary of State will be largely unable to investigate it and will find it difficult, therefore, to explain or refute it.
Accordingly, the very making of the initial order must to a degree undermine the likely weight of the evidence and devalue its overall worth.
In the last analysis, however, none of these considerations to my mind outweighs the imperative need to maximise SIACs chances of arriving at the correct decision on the article 3 issue before them and their need, therefore, to obtain all such evidence as may contribute to this task.
I would rule, therefore, that it is open to SIAC to make such absolute and irreversible ex parte orders as are here contended for and that on occasion it may be appropriate to do so.
This is, I conclude, the least worst option open to us the lesser of two evils as I put it at the outset.
But at the same time I should make plain that I am far from enthusiastic about such orders and would certainly not expect a rash of them.
Rather it would seem to me that the power to make them should be most sparingly used.
There is, of course, the risk that the very availability of such orders may be exploited by the unscrupulous in the hope that SIAC may thereby be induced to receive untruthful evidence which, had it in the ordinary way been subject to full investigation, would have been exposed as such.
I would advocate that before making one of these proposed ex parte orders, SIAC should require the very fullest disclosure from A of (a) Ws proposed evidence (namely a detailed final statement or proof of evidence depending upon whether it is proposed to adduce the evidence orally or in writing, and if the latter why in writing), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage him to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in these circumstances, namely by anonymity orders and hearings in private.
If, moreover, one of these orders is made and it does then come to appear to the Secretary of State that the information disclosed may indeed be of some importance with regard to national security concerns, whether here or abroad, it should be open to the Secretary of State to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information to enable these national security concerns to be met or, if such waiver, unreasonably in SIACs view despite their recognition of Ws fears, proves unobtainable, to shut out (or regard with additional scepticism) the evidence submitted.
This power, in other words, should be exercised sensibly as well as sensitively, there being ample room for flexibility in its operation notwithstanding the absolute and irreversible nature of whatever order may initially be made.
I should perhaps add this.
In striking the balance in this way, I am in no way influenced by the consideration that, as earlier stated, there are circumstances in which the Secretary of State for her part is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A.
I do not see the scope for orders of the sort contended for here as, so to speak, levelling the playing field or providing equality of arms between the parties.
The plain fact is that the Secretary of State is acting in these cases in the wider public interest, not as an interested party.
She is, for example, obliged (now under the rules) to search for and disclose material, both open and closed, which may possibly assist As case. (He, of course, is under no corresponding duty towards the Secretary of State.) And the special advocate will to the best of his ability serve As interests, procuring on occasion rulings which may preclude the Secretary of State from relying on material however apparently damning to As cause.
As Sir David Keene observed below (at para 26): The reality is that the position of an appellant and the position of the Secretary of State are not comparable, because of the public responsibilities of the latter.
Since completing this judgment I have seen in draft the judgment of Lord Dyson and agree with him also.
I would accordingly allow these appeals to the extent indicated.
It must, of course, now be for SIAC to consider what, if any, impact our decision has upon the outcome of these appellants individual appeals: whether there is a need now to reopen them and what, if any, orders should now be made.
It is to be hoped that no further order (save as to costs as to which the parties may have 28 days for written submissions) is required from this court.
LORD DYSON
National security issues continue to present difficult challenges to the courts.
Lord Brown has explained the problem that is raised by the facts of the present case.
The appellants are all Algerian nationals whom the Secretary of State for the Home Department decided under section 3(5)(a) of the Immigration Act 1971 to deport to Algeria on the basis that their presence in the United Kingdom is not conducive to the public good on grounds of national security.
They appealed to the Special Immigration Appeals Commission (SIAC) who held that they posed a risk to national security and that the decisions to deport them were lawful and compatible with the European Convention on Human Rights (the Convention).
Their appeals were dismissed by the Court of Appeal.
The issue in all these cases is whether, if returned to Algeria, there is a real risk that the appellants would be subjected to ill treatment at the hands of the Algerian Authorities (AAs) contrary to article 3 of the Convention.
One of the appellants (Z) was in a position to put forward material from a source or sources in Algeria which was relevant to safety on return.
But the source(s) feared reprisals in Algeria if there were to be any disclosure of their identity to the AAs.
They were willing to tell their story to SIAC (and indeed to the Secretary of State), but only on an absolute and irrevocable assurance that there would be no onward disclosure to the AAs.
Rule 4(1) of the Special Immigration Appeals Commission (Procedure) Rules 2003 (SI 2003/1034) (the SIAC Rules) provides that, when exercising its functions, SIAC shall secure that information is not disclosed in any other circumstances where disclosure is likely to harm the public interest.
Rule 39(1) confers on SIAC the power to give directions relating to the conduct of any proceedings.
Subrule (2) provides that the power to give directions is to be exercised subject to the obligation in rule 4(1); and subrule (5) provides that directions under rule 39(1) may in particular (e) relate to any matter concerning the preparation for a hearing.
Rule 43(2) enables SIAC to conduct a hearing or part of a hearing in private for any good reason (in addition to the reason identified in rule 43(1) which is not material to the appeal).
It is common ground that these rules are wide enough to give SIAC the jurisdiction to make an absolute and irrevocable order prohibiting the Secretary of State from disclosing material to any person and to do so at or after a hearing from which the Secretary of State is excluded.
The question is in what circumstances (if any) it may be appropriate to make such an order (which I shall refer to as an irrevocable non disclosure order).
For the appellants, Mr Fordham QC submits that SIAC has the power to make such an order although it has not received informed representations from the Secretary of State as to whether the order should be made.
It is able subsequently to hear informed representations from the Secretary of State as to the admission of the material in evidence.
For the Secretary of State, Mr Tam QC accepts that there may be cases where an appellant is found to have good reasons for wishing to keep certain material confidential and this might provide a sound basis for SIAC to exercise its power to hold a private hearing under rule 43 and make an irrevocable non disclosure order.
But he submits that it is never appropriate to make such an order on the basis of a hearing from which the Secretary of State is excluded and she should always be given the opportunity to apply subsequently to vary or discharge the order.
In testing these submissions, it should be borne in mind that, as is illustrated by the circumstances of the present appeals, two conflicting considerations are in play here.
On the one hand, the appellants say that, unless the order that they seek is made, they will be unable to place material before SIAC which may be crucial to their case that, if returned to Algeria, they face a real risk of ill treatment by the AAs contrary to article 3 of the Convention.
If they are able to persuade SIAC of this risk, their appeals will succeed.
Thus, the appellants say that it is essential to their case that they are able to place this evidence before SIAC: the stakes could hardly be higher for them (short of a risk to life itself).
They also rely on rule 4(3) of the SIAC Rules which provides that subject to paragraphs (1) and (2), SIAC must satisfy itself that the material available to it enables it properly to determine proceedings.
In other words, it has a duty to ascertain all relevant facts.
On the other hand, it is said on behalf of the Secretary of State that there are important countervailing considerations both in relation to the conduct of the appeals and more generally.
So far as the conduct of the appeals is concerned, the ability of the Secretary of State to participate in them effectively may be seriously undermined by an irrevocable non disclosure order.
There are two aspects to consider.
First, the cogency and validity of the reasons asserted by the source(s) in support of the claimed need for confidentiality may be open to question, but the Secretary of State will be denied the ability to test the reasons or to obtain information and/or adduce evidence from or with the assistance of the AAs to demonstrate that the asserted reasons for the claim to confidentiality are groundless.
Secondly (and of perhaps even greater importance) is the fact that the Secretary of State may be seriously disadvantaged in her ability to test and challenge the substance of the evidence of the witness(es).
The effect of the order may be to deprive the Secretary of State of the ability to place before SIAC relevant evidence which it should properly consider in deciding the substantive issues arising in the appeals.
This would occur, for example, if the AAs were able to provide information bearing on the issue of safety on return of the appellants, but could not do so unless the identity of the witness(es) and what they have to say are disclosed to them.
Once the authorities know the identity of the witness(es) and the substance of their evidence, the authorities might be able to demonstrate that what is said about the risk to the appellants on return to Algeria is false.
I should add that the SIAC Rules do not make provision for the appointment of special advocates to represent the interests of the Secretary of State and it is (rightly) not suggested that SIAC could appoint special advocates under any of the powers conferred by the general rules.
It follows that the difficulties to which the Secretary of State draws attention cannot be overcome or even mitigated by the appointment of a special advocate.
In addition to the problems that are likely to be suffered by the Secretary of State in relation to the appeals, she says that irrevocable non disclosure orders may also cause collateral prejudice.
It became clear during the course of the argument that this prejudice is the potential risk of harm to future diplomatic relations with a friendly foreign state.
This is a factor which carried considerable weight with the Court of Appeal and which Lord Brown deals with at paras 11 to 15.
In weighing these competing considerations, I have no doubt that the scales come down in favour of making an irrevocable non disclosure order where SIAC is satisfied that such an order is necessary in the interests of justice.
I agree entirely with what Lord Brown says at paras 19 to 21 as to how the power to make an order should be exercised.
SIAC should be astute to guard against the danger of abuse and should scrutinise with great care and test rigorously the claimed need for an order.
But if SIAC (i) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (ii) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals in Algeria if his identity and the evidence that he is willing to give were disclosed to the AAs, then in my view an irrevocable non disclosure order should be made.
I accept that to make such an order is a striking step for any court to take and is contrary to the instincts of any common lawyer.
It is inimical to the fundamental principles which we rightly cherish of open justice and, above all, procedural fairness.
To make an order without giving the Secretary of State an opportunity to be heard is a clear breach of the principles of natural justice.
Any such order requires compelling justification.
Regrettably, however, the circumstances of a case sometimes call for unusual and undesirable remedies.
Ultimately, the court has to decide what is demanded by the interests of justice.
In weighing the prejudice that the Secretary of State may suffer in the appeal process as a result of an irrevocable non disclosure order, it should not be overlooked that the appeals themselves will be conducted entirely inter partes.
In particular, no material that is placed before SIAC by the appellants will be withheld from the Secretary of State.
She may be able to demonstrate that the claimed need for confidentiality is without foundation and to persuade SIAC to give the evidence little or no weight for that reason alone.
She may also be able to test the evidence of the witness(es) effectively even though she has been unable to discuss it with the AAs.
For example, she may be able to show on the basis of objective general material about the conditions in Algeria that the evidence of the witness is unlikely to be true; and even where the evidence is more specific, she may be able to obtain information from the AAs which will enable her to rebut the evidence without divulging the name or identity of the witness or saying anything which might lead to his or her identification.
It will, of course, depend on the nature of the evidence to be given by the witness.
I do not wish to suggest that the effect of an irrevocable non disclosure order may not inhibit the ability of the Secretary of State to resist the appeals.
In some cases, such an order will undoubtedly have that effect.
But it cannot safely be said that it is bound to do so in every case.
As regards the collateral prejudice claimed by the Secretary of State, like Lord Brown I consider that this has relatively little weight for the reasons that he gives.
In my view, if SIAC concludes that the two conditions to which I have referred at para 34 above are satisfied, then the countervailing considerations relied on by the Secretary of State should not outweigh the need to ensure that the appellants are able to deploy any material which might show that, on return to Algeria, they would face a real risk of treatment contrary to article 3 of the Convention.
The same considerations and the same result would follow if the case raised a question under article 2 of the Convention.
But if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the Convention, the balance will almost certainly be struck the other way.
For example, in many appeals against orders for deportation, the ground of appeal is that to deport the appellant would involve a breach of his or her article 8 rights.
I find it difficult to conceive of a case in which it would be appropriate to make an order in order to protect the wish for confidentiality of a witness in those circumstances.
For these reasons as well as those given by Lord Brown (with which I am in entire agreement), these appeals should be allowed to the extent indicated.
LORD PHILLIPS, LORD KERR AND LORD WILSON
We agree with both the judgments of Lord Brown and Lord Dyson.
| UK-Abs | The appellants, all Algerian nationals, were suspected terrorists whom the Secretary of State proposed to deport to Algeria.
It was common ground that Algeria was a country where torture was systematically practised by state officials and no state official had ever been prosecuted for it.
The Secretary of State obtained assurances from the Algerian Government that the appellants rights not to be tortured or subjected to other ill treatment would be respected on return to Algeria.
The Special Immigration Appeals Commission Act 1997 established an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
If the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the other party, SIACs rules and procedures provide for this to be done.
In this case, however, it was one of the appellants who wished to adduce evidence from a witness (W), who had inside knowledge of the position in Algeria and asserted that, notwithstanding the Algerian Governments official assurances, those in the appellants positions were in fact likely to be subjected on return to torture or other ill treatment.
W was prepared to give evidence in the appellants appeals to SIAC only on one unalterable condition: that his identity and evidence would by order remain absolutely and irrevocably confidential to SIAC and the parties to the appeals.
W was concerned that the Secretary of State might otherwise seek to communicate his evidence to the Algerian authorities, if only to assess its veracity and reliability, and that her doing so would place him and/or his family in peril.
The Secretary of State had two main objections to such an order being made.
First, she would be unable to participate effectively in the conduct of the appeals before SIAC, being unable to test either the validity of the reasons asserted by W in support of his claimed need for confidentiality or the substance of Ws evidence itself.
Secondly, the Secretary of State may find herself in possession of information pointing to the existence of a terrorist threat abroad or some other risk to national security, yet, bound by SIACs order, unable to alert the foreign state to the risk.
This could gravely imperil future diplomatic relations with foreign states.
The question in the appeals therefore was whether it was open to SIAC to make an order for an absolute and irreversible guarantee of total confidentiality in respect of Ws identity and evidence before the same were disclosed to the Secretary of State (in circumstances where it would nevertheless remain open to the Secretary of State to challenge the admissibility or weight of that evidence before SIAC in its determination of the substantive appeals).
The Supreme Court unanimously allows the appeals.
Lord Brown gives the leading judgment of the Court; Lord Dyson gives a concurring judgment.
The fundamental objection of the Secretary of State to the proposed order, based on her concerns about being obliged to withhold vital information relating to national security from a foreign state, thereby imperilling future diplomatic relations, is unpersuasive [11] [13].
It must surely be a substantial defence to any diplomatic complaint by a foreign state that the Secretary of State is subject to a final and absolute court order prohibiting her from acting differently [14].
A number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context [15].
The imperative need here is to maximise SIACs chances of arriving at the correct decision on the issue before them concerning the safety of the appellants on return to Algeria and, therefore, for SIAC to obtain all such evidence as may contribute to this task [18].
Accordingly, it is open to SIAC to make absolute and irreversible ex parte orders of the kind sought in this case and on occasion it may be appropriate to do so [19].
The power to make such orders should however be used most sparingly [19].
Before making one of the proposed ex parte orders, SIAC should require the very fullest disclosure from the applicant (A) of (a) the proposed evidence from As proposed witness (W), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage W to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in such circumstances (e.g. anonymity orders and hearings in private) [20].
SIAC should only then, in the interests of justice, grant such an order if it (1) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (2) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals if his identity and the evidence that he is willing to give were disclosed to the relevant foreign state [34].
Notwithstanding the absolute and irreversible nature of the order, it should in addition be open to the Secretary of State, upon such order being made, to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information, or, if such waiver proves unobtainable, to exclude or regard with additional scepticism the evidence submitted [21].
The Court, in permitting the making of such ex parte orders in the circumstances of this case, has in no way been influenced by the circumstances in which the Secretary of State is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A. The scope of the orders sought here should not be regarded as levelling the playing field between the parties: the Secretary of State in cases before SIAC acts in the wider public interest and not as an interested party [22].
The same considerations and the same result would follow if the case engaging as it does here the rights of the appellants under article 3 of the ECHR raised a question under article 2 of the same.
However, if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the ECHR (e.g. article 8), the balance will almost certainly be struck the other way.
In those circumstances it would be inappropriate to make an ex parte order to protect the confidentiality of a witness [38].
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Part II of the Housing Act 1980 was enacted in order to give the residential tenants of local authorities and certain other social landlords a degree of protection broadly comparable to that enjoyed by private tenants under the Rent Act 1977.
It introduced a category of secure tenancy, whose essential features were that the tenant enjoyed a qualified security of tenure, and that the tenancy was transmissible once only to a member of the tenants family occupying the property.
The relevant statutory provisions governing secure tenancies are now to be found in Part IV of the Housing Act 1985.
This appeal raises a short but difficult point of law about the effect of the provisions governing the transmission of secure tenancies, where the property is let to joint tenants.
Mr. and Mrs. Hickin became the joint tenants of a three bedroom terraced house at 81 Leahill Croft, Chelmsley Wood, Solihull in 1967.
The freehold owner was initially Birmingham City Council, but the property was transferred in September 1980 to Solihull Metropolitan Borough Council, who were thereupon substituted as the landlords.
On 3 October 1980, Part II of the Housing Act 1980 came into force and the tenancy became a secure tenancy.
Mr. and Mrs. Hickin lived in the house together until some time after 1980 when Mr. Hickin left.
Thereafter, Mrs. Hickin continued to live there until her death on 8 August 2007.
Their daughter Elaine, the Appellant on this appeal, has lived in the house from the inception of the tenancy and is still there.
The joint tenancy was never severed or replaced and was still subsisting at the time of Mrs. Hickins death.
At common law, upon the death of a joint tenant, the tenancy is vested in the survivor, or jointly in the survivors if there is more than one: Cunningham Reid vs Public Trustee [1944] KB 602.
Upon Mrs. Hickins death, therefore, her absent husband would have become the sole tenant.
On that footing, the Council served notice to quit on him, and then began proceedings against Elaine for possession.
Her case is that the common law right of her father was displaced by section 89 of the Act, which vested the tenancy in her.
After a trial on agreed facts, Deputy District Judge Hammersley rejected that contention and ordered possession.
HHJ Oliver Jones QC allowed the appeal and declared that the tenancy vested in Elaine on her mothers death.
The Court of Appeal (Lord Neuberger MR, Laws LJ and Sullivan LJ) allowed the appeal and restored the order of the Deputy District Judge.
The Housing Act 1985 has recently been amended, but the relevant provisions are those in force in August 2007, when Mrs. Hickin died.
They are as follows: 79.
Secure tenancies (1) A tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied. (2) Subsection (1) has effect subject to the exceptions in Schedule 1 (tenancies which are not (a) secure tenancies), sections 89 (3) and (4) and 90 (3) and (4) (tenancies (b) ceasing to be secure after death of tenant), and (c) sections 91 (2) and 93 (2) (tenancies ceasing to be secure in consequence of assignment or subletting). (3) The provisions of this Part apply in relation to a licence to occupy a dwelling house (whether or not granted for a consideration) as they apply in relation to a tenancy. 81.
The tenant condition The tenant condition is that the tenant is an individual and occupies the dwelling house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home. 87.
Persons qualified to succeed tenant A person is qualified to succeed the tenant under a secure tenancy if he occupies the dwelling house as his only or principal home at the time of the tenants death and either (a) he is the tenants spouse or civil partner, or (b) he is another member of the tenants family and has resided with the tenant throughout the period of twelve months ending with the tenants death; unless, in either case, the tenant was himself a successor, as defined in section 88. 88.
Cases where the tenant is a successor (1) The tenant is himself a successor if (a) the tenancy vested in him by virtue of section 89 (succession to a periodic tenancy), or (b) he was a joint tenant and has become the sole tenant, or the tenancy arose by virtue of section 86 (periodic (c) tenancy arising on ending the term certain) and the first tenancy there mentioned was granted to another person or jointly to him and another person, or (d) he became the tenant on the tenancy being assigned to him (but subject to subsections (2) to (3), or (e) he became the tenant on the tenancy being vested in him on the death of the previous tenant, or (f) the tenancy was previously an introductory tenancy and he was a successor to the introductory tenancy. 89.
Succession to periodic tenancy (1) This section applies where a secure tenant dies and the tenancy is a periodic tenancy. (2) Where there is a person qualified to succeed the tenant, the tenancy vests by virtue of this section in that person, or if there is more than one such person in the one to be preferred in accordance with the following rules (a) the tenants spouse or civil partner is to be preferred to another member of the tenants family; (b) of two or more other members of the tenants family such of them is to be preferred as may be agreed between them or as may, where there is no such agreement, be selected by the landlord. (3) Where there is no person qualified to succeed the tenant, the tenancy ceases to be a secure tenancy. (a) when it is vested or otherwise disposed of in the course of the administration of the tenants estate, unless the vesting or other disposal is in pursuance of an order made under (i) (ii) section 23A or 24 of the Matrimonial Causes Act 1973 (property adjustment orders made in connection with matrimonial proceedings), section 17 (1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, &c.), or (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil (property Partnership Act 2004 adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership, etc.) (b) when it is known that when the tenancy is so vested or disposed of it will not be in pursuance of such an order. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 90.
Devolution of term certain (1) This section applies where a secure tenant dies and the tenancy is a tenancy for a term certain. (2) The tenancy remain a secure tenancy until (a) it is vested or otherwise disposed of in the course of the administration of the tenant's estate, as mentioned in subsection (3), or it is known that when it is so vested or disposed of it will not be a secure tenancy. (3) The tenancy ceases to be a secure tenancy on being vested or otherwise disposed of in the course of administration of the tenant's estate, unless (a) the vesting or other disposal is in pursuance of an order made under section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings), or (b) (b) the vesting or other disposal is to a person qualified to succeed the tenant. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 91.
Assignment in general prohibited (1) A secure tenancy which is a periodic tenancy, or a tenancy for a term certain granted on or after November 5, 1982, is not capable of being assigned except in the cases mentioned in subsection (3). (a) (b) . (2) The exceptions are (a) (b) (i) (ii) with an assignment in accordance with section 92 (assignment by way of exchange); an assignment in pursuance of an order made under section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection matrimonial proceedings), section 17(1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, etc.), (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil (property Partnership Act 2004 adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership etc.) an assignment to a person who would be qualified to succeed the tenant if the tenant died immediately before the assignment. (c) . 113.
Members of a persons family (1) A person is a member of anothers family within the meaning of this Part if (a) he is the spouse or civil partner of that person, or he and that person live together as husband and wife or as if they were civil partners, or (b) he is the persons parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew or niece.
The Appellants argument is very simple.
It is that sections 87 to 89 of the Act constitute an exhaustive code governing the fate of a secure periodic tenancy upon the death of a tenant.
The operation of these provisions is mandatory and automatic, displacing the general law.
The tenancy therefore vested automatically in her under section 89 if four and only four conditions were satisfied, namely (i) that a secure tenant, i.e. Mrs. Hickin, had died; (ii) that the tenancy was a periodic tenancy; (iii) that the Appellant occupied the house as her only or principal home for the period of twelve months ending with Mrs. Hickins death, and (iv) that the Mrs. Hickin was not herself a successor as defined in section 88.
There is no issue about conditions (ii), (iii) and (iv).
They were all satisfied.
But the Court of Appeal held that condition (i) was not.
In my view, they were right about this.
The relationship between Part IV of the Housing Act and the common law is not in doubt.
A secure tenancy is not just a personal right of occupation.
It is an estate in land whose incidents are defined by the general law, save insofar as these are modified by the Act.
Subject to that proviso, as Lord Hoffmann pointed out in Birmingham City Council v Walker [2007] 2 AC 262 at [5], it can be assigned, held in joint names, pass by survivorship and be disposed of by will on death, and can in principle pass in any way permissible at common law.
Sections 87 to 89 of the Act are part of a wider scheme contained in sections 87 to 91.
These provisions extensively modify the general law which would otherwise govern the transmission of a secure tenancy.
Their general scheme is that, subject to limited exceptions (such as property adjustment orders in matrimonial proceedings), a secure tenancy cannot be transmitted with the benefit of the statutory security of tenure, whether inter vivos or in the course of the administration of the tenants estate, except to a person qualified to succeed under section 87.
This means the deceaseds spouse or civil partner, or any other member of the deceaseds family within the very broad definition in section 113.
This result is achieved in one or other of three ways.
In the case of a purported disposition inter vivos of a periodic tenancy or a tenancy for a term certain granted on or after 5 November 1982, it is achieved by providing that the tenancy is not transferrable at all except to a qualified person: see section 91 and Burton v Camden London Borough Council [2000] 2 AC 399.
In the case of the death of a periodic tenant, where there is a person qualified to succeed, it is achieved by providing for the secure tenancy to vest automatically in that person: section 89(2).
In three cases, namely (i) the death of a periodic tenant where there is no person qualified to succeed, (ii) the death of a tenant for a term certain, and (ii) the disposition inter vivos of a tenancy for a term certain granted before 5 November 1982, the Act proceeds on the footing that the tenancy may be transmitted in any manner permitted by the general law, but achieves the statutory purpose by providing that the tenancy thereupon ceases to be secure: see sections 89(3), 90 and 91(2).
It will be apparent that sections 87 to 91 of the Act do not wholly displace the general law, even in the area which they cover.
In the first place, they are concerned only with the transmission of secure tenancies by dispositions inter vivos or upon death.
They do not deal, at any rate expressly, with the subsisting contractual and proprietary relationship between the landlord and an existing tenant who has not died or disposed of his interest.
Second, the statute necessarily operates by reference to certain basic principles of the law of property which serve to identify what are the legal characteristics of the estates in land whose transmission is being regulated.
Third, in a number of cases the Act does not modify the general law governing the transmission of tenancies, but only the statutory security of tenure available where the tenancy has been transferred.
Against that background, the first question to be addressed is what is the legal basis on which Mr Hickin would be entitled to the tenancy apart from section 89 of the Act.
This depends on the legal incidents of a joint tenancy at common law.
Upon the death of one of two persons holding under a joint tenancy, the interest of the deceased person is extinguished.
The survivor thereby becomes the sole tenant.
But there is no transmission of the tenancy.
In Tennant v Hutton (Court of Appeal, 9 July 1996, unreported) , Millett LJ, delivering the judgment of the Court of Appeal, put the point in this way: The essence of a joint tenancy is that the property is vested in all or both of the joint tenants together.
In contemplation of law there is only one tenant, though the tenant consists of two or more persons and the survivors and survivor of them.
On the death of any one of them, the property becomes vested in survivors or survivor.
There is no true transmission of title.
The property remains vested after the death in the same tenant as it did before, though the number of persons who compose the tenant is reduced by one.
The result, at common law, is this.
By virtue of section 81 of the Housing Act, both Mr and Mrs Hickin were secure tenants for as long as at least one of them occupied the property as an only or principal home.
Upon Mrs Hickins death, the tenancy subsisted and Mr. Hickin remained the tenant.
He did not succeed Mrs Hickin.
He simply continued to enjoy the same rights as he had always had, under an agreement with the local authority landlord to which he was and remained party.
The only change in his position was that there was no longer another person concurrently enjoying the same rights.
Accordingly, he became the sole tenant.
Since he was absent, there was now no one occupying the property as his or her only or principal home.
The tenant condition in section 81 of the Act was therefore no longer satisfied, and the tenancy while continuing to exist ceased to be secure.
But because a tenancy may be a secure tenancy at any time when the landlord condition and the tenant condition are satisfied (see section 79), it would have been open to Mr. Hickin to revive its secure status by returning to live in the property at any time before the tenancy was terminated by service of a notice to quit.
The next question is whether this result and the analysis that leads to it is excluded by the terms of the Housing Act.
In Tennant v Hutton, which I have already cited for Millett LJs analysis of the right of survivorship at common law, a very similar question arose under the succession provisions of the Rent Act 1977.
Schedule I, Part 1 of the Rent Act provided that where a protected or statutory tenant died, a qualifying member of his family who was living with him in the property at the time of his death (and in some cases for a minimum period before) became the statutory tenant in his or her place.
The facts were that a husband and wife held the property as joint tenants under a three year lease protected by the Act and lived in it with their daughter.
The issue was whether, upon the death of the wife, the husband or the daughter was the statutory tenant. by succession, after the death of the person. who, immediately before his death, was a protected tenant of the dwelling house.
The Court of Appeal held that the daughter could not succeed by statute to the tenancy of the wife, because upon the wifes death the tenancy still subsisted at common law in the husband.
Millett LJ, who delivered the sole reasoned judgment, based this conclusion on the legal characteristics of a joint tenancy by reference to which the Act must be assumed to operate.
The daughter, he held, cannot claim a statutory tenancy by succession to her mother because immediately before her death her mother was not the protected tenant of the house.
She was merely one of the two persons who constituted the tenant.
He concluded: Parliament's intention is clear and accords with a literal application of the statute.
The family of a statutory tenant is to be protected from eviction when the tenancy comes to an end on the death of the tenant.
When the tenancy is vested in joint tenants, the tenancy does not come to an end on the death of the first of them to die and the survivor needs no protection.
There is neither need nor room for the application of the schedule and the statutory rules of succession until the death of the survivor.
Until after Mrs Tennant's death, there was no single tenant of the house on whose death the statutory provisions could or needed to apply.
As it happens, the daughter was unrepresented in Tennant v Hutton.
But Millett LJ recorded that he was satisfied that all the relevant material had been put before the court by counsel for the landlord.
It has not been suggested before us that anything was overlooked or that the decision was wrong as applied to the Rent Act 1977.
On the contrary, I think it was clearly right.
It does not of course follow that Part IV of the Housing Act 1985 produces the same outcome, in spite of the similar purpose of that legislation.
What does follow, as it seems to me, is that there must be something in the language of the Housing Act or inherent in its purpose which excludes the operation of the relevant features of the general law relating to joint tenancies.
The only possible basis for such an exclusion in the case of the Housing Act is the use of the indefinite article in the phrase where a secure tenant dies in section 89(1).
The argument has to be (and is) that in the case of a joint tenancy a secure tenant means any one of the individuals constituting the joint tenant.
A similar argument was considered by Millett LJ in Tennant v Hutton.
The precondition for the operation of the succession provisions of the Rent Act 1977 is the death of a person who, immediately before his death, was either a protected tenant of the dwelling house or the statutory tenant of it: section 2(1)(b).
Millett LJ declined to read these words as referring, in the case of a joint tenancy, to the death of any one or more of the joint tenants.
In my view, the argument is no better as applied to the corresponding language of section 89 of the Housing Act 1985.
For the purposes of subsection (1), a secure tenant dies when a sole tenant dies.
If the tenancy is a joint tenancy, the tenant has not died if there remains at least one living joint tenant in whom all the proprietary and contractual rights attaching to the tenancy subsist.
Section 89 of the Housing Act 1985 is a mandatory provision which is wholly concerned with the transmission of the tenancy to a person other than the previous tenant, on account of the latters death.
This makes sense only on the assumption that there no longer is a previous tenant.
Where there is a surviving joint tenant, the whole statutory basis for disposing of the succession to the tenancy is absent.
It is no answer to this to say that the purpose of the statute is to transfer the tenancy to members of the tenants family living in the house.
That simply begs the question.
It is not necessary to provide for the transmission of a tenancy on death unless there is, so to speak, a vacancy.
If the tenancy subsists in the surviving joint tenant, there is none.
It is obvious that section 89 implicitly excludes the possibility of the transmission of the tenancy upon death in a manner inconsistent with its terms.
But the recognition of the right of the survivor under a joint tenancy is not inconsistent with the provisions of section 89 relating to the transmission of tenancies, because the survivors right is not a matter of transmission.
The survivor has the same rights as he always did.
It follows from the basic legal characteristics of a joint tenancy that the argument based on the use of the indefinite article in section 89(1) depends on a false distinction between a tenant and the tenant.
The distinction is false because the section is concerned with the tenant and the tenancy, not with the partial interest of any one individual in the tenancy.
Where property is held under a joint tenancy, there is only one tenant, albeit that there are two or more people who jointly constitute that tenant.
The draftsman of the Housing Act undoubtedly envisaged that secure tenancies might be held jointly.
The possibility is referred to in terms in sections 81 and 88(1)(b).
In construing a statute, the ordinary presumption is that Parliament appreciated the legal incidents of those relationships which it is regulating.
If, therefore, the draftsman had intended a secure tenant in section 89 to mean any one of two or more joint tenants it is hardly conceivable that he would have left that intention to be inferred from his use of an indefinite article, instead of dealing with the point expressly (e.g. a secure tenant, or in the case of a joint tenancy, any person having an interest under a joint tenancy).
It remains to consider the effect of section 88(1)(b) of the Housing Act, which assumed some importance in the argument and is the main basis on which Lord Mance has reached the conclusion that Mr. Hickins rights as the surviving joint tenant were displaced in favour of his daughter.
I do not, with respect, believe that this provision will bear the weight which Lord Mance has placed on it.
Section 88 is a definition section which operates in conjunction with section 87.
Section 87 is concerned with the succession to the tenant under a secure tenancy, i.e. to a person who was a secure tenant when he or she was alive.
The proviso in the final words of section 87, mean that a spouse or other member of the tenants family occupying the property as his only or principal residence at the relevant time, is nevertheless not qualified to succeed the tenant if the tenant is himself a successor.
Section 88 determines who is to be treated as a successor for this particular purpose.
Section 88(1)(b) provides that a successor includes a person who was a joint tenant and has become the sole tenant.
The result is that upon his wifes death Mr. Hickin was deemed to be her successor for the purpose of section 87, notwithstanding that there was no transmission of the tenancy at common law but only a continuation of the rights which as tenant had always been vested in him as the tenant.
It does not, however, follow that Mr. Hickin ceased to be the tenant.
On the contrary, section 88(1)(b) recognises that he became the sole tenant upon his wifes death, something which could not have happened if the tenancy passed automatically to his daughter at that point.
Nor does it follow that Mr Hickins rights as the deemed successor of his wife had to compete with the claim of his daughter to succeed her.
All that follows from section 88(1)(b) is that since there was deemed to have been a succession on Mrs. Hickins death, there could not thereafter be another one.
So if Mr Hickin had exercised his right as the now sole tenant to move back into the property after his wifes death, thereby becoming a secure tenant, and had then died, no one would have been qualified under section 87 to succeed him and section 89 would not have applied.
The provisions of sections 87 and 88 are there for the protection of the landlord against being kept too long out of the property.
They do not serve to create rights of succession in resident family members which would otherwise not exist.
In my judgment, the tenancy did not vest in the Appellant upon Mrs Hickins death because the rights of the previous tenant still subsisted.
A secure tenant had not died.
All that had happened was that one of the two persons constituting the secure tenant had died.
I am fortified in this conclusion by another consideration.
If, as the Appellant argues, the tenancy vests in a third party upon the death of one of two joint tenants, then the survivors contractual right and his interest in the property are expropriated.
It is a consistent theme of the interpretation of statutes that an intention to take away the property of a subject without giving him a legal right to compensation for the loss of it is not to be imputed to the legislature unless that intention is expressed in unequivocal terms.
The words are those of Lord Atkinson in Central Control Board (Liquor Traffic) v Cannon Brewery Co Ltd [1919] AC 744, 752, but the principle has been restated many times, and has been applied not only to property but to other vested common law rights, including contractual rights.
Yet if the Appellant is right Parliament must be supposed not only to have abrogated the subsisting tenancy of the survivor, but to have done it without express words, let alone unequivocal ones, without any provision for compensation, and without regard to the survivors circumstances.
This seems to me to be an extremely implausible construction of the Act.
It is fair to say that on the facts of the present case Mr. Hickin will suffer no detriment because his interest as the surviving joint tenant was of little if any real value to him.
He had been out of occupation for a number of years when Mrs. Hickin died, and had no intention of returning to the former family home.
The tenancy was not assignable.
Its subsistence mattered only to the landlord, and then only for the purpose of enabling the landlord to terminate it by serving notice to quit.
I therefore have every sympathy for Elaine Hickins position.
However, the issue before us cannot be decided simply on her particular facts.
If she is right in principle, the operation of section 89 will have a much wider application.
It will apply to defeat the interest of a surviving joint tenant who is out of occupation but wishes to return to the property on the death of the deceased and has every interest in doing so, for example because the survivor is the deceaseds wife who left the property on account of her husbands violence or abuse.
It will apply to defeat the interest of a survivor who has been in occupation throughout but is not a member of the deceaseds family.
If Mr. and Mrs. Hickin had been divorced, and it was Mr. Hickin who died, section 89 would on the Appellants construction require the automatic expropriation of Mrs. Hickins joint tenancy in favour of her daughter, notwithstanding that she was occupying the property, because in those circumstances the daughter but not the mother would be a member of the deceaseds family as defined in section 113.
Mrs. Hickin would on that hypothesis have been converted by the operation of section 89 from a secure tenant to an unprotected licensee.
The same result would follow if the joint tenants had never been members of the same family but had simply been sharing accommodation and the one who died had a child or other close relative living with him or her at the relevant time.
I have no doubt that in the great majority of cases, the joint tenants of social landlords will be members of the same family within the very broad definition in section 113.
They will therefore be qualified to succeed each other under section 87, even if their subsisting rights as joint tenants have been abrogated.
But I do not think that Parliament can be taken to have legislated on the assumption that that would always be so, or that the exceptions were unimportant.
Public sector landlords are likely to vary in their letting policies, both as between themselves and over time.
The letting policies of housing associations, housing co operatives and charitable housing trusts (which are also covered by Part IV) may well be even more heterogeneous, depending on their purposes.
The examples that I have cited are not fanciful.
What they show is that although it may seem arbitrary, even capricious, for Elaine Hickins claim to be defeated on account of the rights of her absent father, equally arbitrary and capricious consequences follow from any alternative construction.
It is difficult to say which consequences will arise more often.
Nor does it matter.
Any system of statutory protection which deals with interests as varied as residential tenancies and depends for its practical operation on the accidents of cohabitation, matrimonial break up and death will inevitably give rise to anomalies at the margins.
But the scope of the rights created and the circumstances in which they arise are questions to be resolved on a principled basis.
It is not productive, on an issue like this one, to decide it by reference to the competing anomalies and injustices that result from each side of the argument.
For these reasons, I would dismiss the appeal.
LORD HOPE
For the reasons given by Lord Sumption I too would dismiss this appeal.
As there is a difference of opinion and the case is far from easy, I should like to add a few words of my own to explain why I have reached this conclusion.
The starting point must be that the rules of the common law apply except to the extent that they are abrogated or modified by the words of the statute.
Where there is a joint tenancy there is one estate which is vested in all of them, with a right of survivorship.
According to that principle, Mr Hickin became the sole tenant of the dwelling house by reason of his right of survivorship on his wifes death.
The tenancy remained in being, except that there was now only one person entitled to the rights that were vested in the tenant under it.
The question is whether the provisions in Part IV of the Housing Act 1985, which confer on tenants who occupy the dwelling house as their only or principal home the additional benefit of a secure tenancy, had the effect of depriving Mr Hickin of his right of survivorship to the tenancy at common law.
Mr Hickin was not qualified to succeed to the secure tenancy when his wife died, as he was residing somewhere else.
The tenant condition in section 81 was, for the time being at least, no longer satisfied.
But this did not mean that the tenancy itself had ceased to exist.
That is indicated by section 79(1), which provides that a tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in section 80 and 81 as the landlord and the tenant condition are satisfied.
The words at any time when show that there can be a period during the life of a tenancy that is recognised by the statute when these conditions, or one or other them, are not satisfied.
So it would have been open to Mr Hickin to resume occupation of the dwelling house as his only or principal home, so long as he did so before the tenancy was terminated by the operation of the notice to quit served on him by the landlord.
In that event, as the tenant condition would then have been satisfied, the continuing tenancy would have become a secure tenancy.
Section 89(4) excludes the resumption of that protection where a tenancy has ceased to be a secure tenancy by virtue of the provisions of that section.
But that exclusion does not apply more generally.
This sets the scene for the way that Part IV of the 1985 Act addresses the question of how succession on the death of a tenant under a secure tenancy should be approached.
If full weight is given to the right of survivorship to the tenancy at common law (which, until one reaches section 87, the Act has done nothing to abrogate or modify), the question whether there was a person qualified to succeed the tenant under a secure tenancy did not need to be answered when Mrs Hickin died.
There was still a tenant, although the tenant condition was no longer satisfied.
The argument to the contrary is that the common law is displaced by the fact that when she died the tenancy was a secure tenancy.
In that situation the governing section is section 89, as this is what subsection (1) of that section itself provides.
If there is a person qualified to succeed the tenant under the rules in sections 87 and 88, the tenancy vests in that person by virtue of section 89.
As the appellant is such a person because she satisfies the conditions in section 87, the tenancy has vested in her to the exclusion of the common law right of survivorship.
There is nothing inherently unreasonable in such a result, so long as it can be said to have been provided for expressly by the statute or by necessary implication from the provisions that it sets out.
An example of how this can be done is provided by the Housing (Scotland) Act 2001, asp 10.
Chapter 1 of Part 2 of that Act provides for a form of tenancy in the field of social housing that is known as a Scottish secure tenancy.
It recognises that the tenancies to which its provisions apply can include joint tenancies.
But it also recognises that there can be policy objections to the situation where not all of the joint tenants under a tenancy which is a secure tenancy occupy the dwelling house as their only or principal home.
Section 81 of the 1985 Act that applies to England and Wales permits this, so long as at least one of the joint tenants satisfies this condition.
But section 20 of the 2001 Act enables the landlord under a Scottish secure tenancy, if it has reasonable grounds for believing that a joint tenant is not occupying the house and does not intend to occupy it as the tenants home, to bring that tenants interest in the tenancy to an end.
The rules about succession to a Scottish secure tenancy apply the same policy to joint tenants who no longer have their only or principal home in the house which is the subject of a secure tenancy when a tenant dies.
Section 22(1) of the 2001 Act provides that, on the death of a tenant under a Scottish secure tenancy, the tenancy passes by operation of law to a qualified person.
Section 22(5) gives effect to Schedule 3, which makes provision as to who are qualified persons for the purposes of that section.
Paragraphs 1 4 of Schedule 3 provide as follows: 1 For the purposes of section 22, a person falling within any of paragraphs 2 to 4 is a qualified person. 2 (1) A person whose only or principal home at the time of the tenants death was the house and (a) who was at the time (i) the tenants spouse, or (ii) living with the tenant as husband and wife or in a relationship which has the characteristics of the relationship of husband and wife except that the persons are of the same sex, or (b) who is, where the tenancy was held jointly by two or more individuals, a surviving tenant. (2) In the case of a person referred to in sub paragraph (1)(a)(ii), the house must have been the persons only or principal home throughout the period of 6 months ending with the tenants death. 3 A member of the tenants family aged at least 16 years where the house was the persons only or principal home at the time of the tenants death. 4 A carer providing, or who has provided, care for the tenant or a member of the tenants family where (a) the carer is aged at least 16 years, (b) the house was the carers only or principal home at the time of the tenants death, and (c) the carer had a previous only or principal home which was given up.
Paragraph 2(1)(b), when read with section 22(1) and the opening words of that sub paragraph, makes it clear that the common law right of survivorship has been replaced with a right of succession by operation of law under the statute.
It is a condition of a surviving joint tenants continuing right to remain as a tenant that the house was his only or principal home at the time of the other joint tenants death.
It would, of course, be wrong to use the 2001 Act as an aid to the construction of the provisions of Part IV of the 1985.
The contrast between the wording of these two statutes is nevertheless instructive.
It shows what can be done if the policy to which the statute seeks to give effect is to override the common law right of survivorship and to restrict those who are qualified as persons to whom the tenancy can pass to those for whom the house was their only or principal home.
I do not detect a policy imperative of that kind in the wording of Part IV of the 1985 Act.
The wording of the tenant condition in section 81 indicates that the common law rights of the individual tenants under a joint tenancy are not being subjected to a requirement that they must each occupy the house as their only or principal home.
Confirmation that the common law right of survivorship is not being abrogated or modified is provided by section 88(1)(b), which recognises that a person who was a joint tenant may become the sole tenant in the exercise of that right irrespective of where his only or principal home is.
The closing words of section 87 (unless, in either case, the tenant was himself a successor, as defined in section 88) do two things.
First, they restrict the succession to a qualified tenancy to one succession only.
But, secondly, when read with section 88(1)(b), they also show that it is only when the last to die of the joint tenants under a secure tenancy dies that the question of who is qualified to succeed under it will arise.
The words the tenant in the closing words refer to the tenant in the opening words of the section, to whose succession the question of qualification is directed because that tenant has died.
Against that background, I agree with Lord Sumption that the words where a secure tenant dies in section 89(1) must be understood as applying only where there is a vacancy because there no longer is a tenant: para 11, above.
So long as at least one of the tenants under a joint tenancy survives and the tenant condition in section 81 continues to be satisfied, there will still be a secure tenant.
There is no need to consider the question of succession, as the right of survivorship applies.
Nor is there any question of the tenancy vesting or being otherwise disposed of in the course of the administration of the tenants estate, as section 89(3) contemplates, because questions of that kind are rendered irrelevant by the right of survivorship.
The tenancy will, of course, cease to be a secure tenancy if the person or persons who are entitled to continue as tenants under the right of survivorship do not occupy the dwelling house as their only or principal home.
In that event the landlord can serve a notice to quit, as was done in this case.
The provisions about succession are designed to extend the benefit of a secure tenancy on strict conditions, and then once only, to persons who were not party to the original tenancy.
But a tenancy which continues to exist has no need of them.
LORD MANCE
Introduction
Mr and Mrs Hickin, were joint tenants at 81 Leahill Croft, a three bedroom terraced house in Chelmsley Wood, Solihull initially from 1967 of Birmingham City Council and later from 29th September 1980 of the respondent Solihull Metropolitan Borough Council.
They became secure tenants from 3rd October 1980 when Part II of the Housing Act 1980 came into force.
Mr Hickin left the property at some time after 1980.
Mrs Hickin continued to live there until her death on 8th August 2007.
Mr and Mrs Hickins daughter Miss Hickin has lived there since her birth in 1967.
Notice to quit was served by the Council on Mr Hickin on 18th January
2008 and on Miss Hickin on 6th February 2009.
The Council offered Miss Hickin alternative accommodation, but Miss Hickin wishes to remain in her home.
She maintains that on her mothers death she herself succeeded to a secure tenancy under what is now section 89(2) of the Housing Act 1985.
The Council did not seek within the permitted period of six to twelve months after Mrs Hickins death to recover possession from Miss Hickin on the ground that, if she was a successor under section 89, the accommodation afforded by the dwelling house is more extensive than is reasonably required by her: Ground 16 in Part III of Schedule 2 to the Housing Act 1985.
The Council denies that Miss Hickin succeeded to her mothers position as secure tenant.
It submits that the effect of the continuing joint tenancy between Mr and Mrs Hickin was that Mr Hickin became sole surviving tenant at common law on Mrs Hickins death.
Since he was not in occupation of the house, he could not be a tenant under a secure tenancy under section 79 or qualify under section 87 (if otherwise applicable) to become a secure tenant by succession.
The notice to quit addressed to him was therefore valid.
The Council adds for good measure that, since the combination of section 87 and 88(1) treats a joint tenant [who] has become the sole tenant as a successor to the previous joint tenancy, there could in any event be no question under sections 87 to 89 of Miss Hickin being qualified to succeed to any interest of Mr Hickin.
The Council commenced possession proceedings against Miss Hickin on 1st April 2009.
Deputy District Judge Hammersley upheld its claim on 10th August 2009.
HHJ Oliver Jones QC allowed Miss Hickins appeal on 18th December 2009.
The Court of Appeal (Lord Neuberger MR, Laws LJ and Sullivan LJ) allowed the Councils appeal on 27th July 2010 and restored the Deputy District Judges order for possession.
In this eminently arguable case, Miss Hickin now appeals to the Supreme Court by permission granted on 24th March 2011.
Housing Act 1985
The relevant provisions of the Housing Act 1985 are contained in Part IV headed Secure Tenancies and Rights of Secure Tenants.
They read in August 2007 as follows: 79.
Secure tenancies (1) A tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied. (2) Subsection (1) has effect subject to (a) the exceptions in Schedule 1 (tenancies which are not secure tenancies), (b) sections 89 (3) and (4) and 90 (3) and (4) (tenancies ceasing to be secure after death of tenant), and (c) sections 91 (2) and 93 (2) (tenancies ceasing to be secure in consequence of assignment or subletting). (3) The provisions of this Part apply in relation to a licence to occupy a dwelling house (whether or not granted for a consideration) as they apply in relation to a tenancy. 81.
The tenant condition The tenant condition is that the tenant is an individual and occupies the dwelling house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home. 87.
Persons qualified to succeed tenant A person is qualified to succeed the tenant under a secure tenancy if he occupies the dwelling house as his only or principal home at the time of the tenants death and either (a) he is the tenants spouse or civil partner, or (b) he is another member of the tenants family and has resided with the tenant throughout the period of twelve months ending with the tenants death; unless, in either case, the tenant was himself a successor, as defined in section 88. 88.
Cases where the tenant is a successor (1) The tenant is himself a successor if (a) the tenancy vested in him by virtue of section 89 (succession to a periodic tenancy), or (b) he was a joint tenant and has become the sole tenant, or (c) the tenancy arose by virtue of section 86 (periodic tenancy arising on ending of term certain) and the first tenancy there mentioned was granted to another person or jointly to him and another person, or (d) he became the tenant on the tenancy being assigned to him (but subject to subsections (2) to (3)), or (e) he became the tenant on the tenancy being vested in him on the death of the previous tenant, or (f) the tenancy was previously an introductory tenancy and he was a successor to the introductory tenancy. 89.
Succession to periodic tenancy (1) This section applies where a secure tenant dies and the tenancy is a periodic tenancy. (2) Where there is a person qualified to succeed the tenant, the tenancy vests by virtue of this section in that person, or if there is more than one such person in the one to be preferred in accordance with the following rules (a) the tenants spouse or civil partner is to be preferred to another member of the tenants family; (b) of two or more other members of the tenants family such of them is to be preferred as may be agreed between them or as may, where there is no such agreement, be selected by the landlord. (3) Where there is no person qualified to succeed the tenant, the tenancy ceases to be a secure tenancy (a) when it is vested or otherwise disposed of in the course of the administration of the tenants estate, unless the vesting or other disposal is in pursuance of an order made under (i) section 23A or 24 of the Matrimonial Causes Act 1973 (property adjustment orders made in connection with matrimonial proceedings), (ii) section 17 (1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, &c.), or (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil Partnership Act 2004 (property adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership, etc.) (b) when it is known that when the tenancy is so vested or disposed of it will not be in pursuance of such an order. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 91.
Assignment in general prohibited (1) A secure tenancy which is (a) a periodic tenancy, or (b) a tenancy for a term certain granted on or after November 5, 1982, is not capable of being assigned except in the cases mentioned in subsection (3). (3) The exceptions are (a) an assignment in accordance with section 92 (assignment by way of exchange); (b) an assignment in pursuance of an order made under (i) section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings), (ii) section 17(1) of the Matrimonial and Family Proceedings Act (property adjustment orders after overseas divorce, etc.), (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil Partnership Act 2004 (property adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership etc.) (c) an assignment to a person who would be qualified to succeed the tenant if the tenant died immediately before the assignment. 113.
Members of a persons family (1) A person is a member of anothers family within the meaning of this Part if (a) he is the spouse or civil partner of that person, or he and that person live together as husband and wife or as if they were civil partners, or (b) he is the persons parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew or niece.
Common law joint tenancy
At common law, Mr and Mrs Hickin were and remained joint tenants until Mrs Hickins death, whereafter Mr Hickin continued as sole tenant.
Millett LJ said in Tennant v Hutton (1996) 73 P&CR D10 that: The essence of a joint tenancy is that the property is vested in all or both of the joint tenants together.
In contemplation of law there is only one tenant, though the tenant consists of two or more persons and the survivors and survivor of them.
On the death of any one of them, the property becomes vested in survivors or survivor.
There is no true transmission of title.
The property remains vested after the death in the same tenant as it did before, though the number of persons who compose the tenant is reduced by one.
Section 3(4) of the Administration of Estates Act 1925 supplements the common law for the purposes of inheritance, by providing: The interest of a deceased person under a joint tenancy where another tenant survives the deceased is an interest ceasing on his death.
However, as Millett LJ recognised, the concept of the tenant under a joint tenancy was in Lloyd v Sadler [1978] 1 QB 774 benevolently extended in the context of the policy of the Rent Acts to protect the possession of a tenant against eviction by the landlord.
In that case one joint tenant had left permanently to get married and the surviving tenant alone was held to remain the protected tenant.
The words the tenant were read in context as meaning the joint tenants or any one or more of them.
By contrast in Tennant v Hutton Mr and Mrs Tennant had been joint tenants under a three year lease, and as such were protected tenants under the Rent Act 1977.
Though divorced, both lived separately in the house together with their daughter Caroline until Mrs Tennants death during the currency of the lease.
On the expiry of the lease Mr Tennant became a statutory tenant under the Rent Act 1977 while he continued to occupy the house as his home.
Their daughter Caroline continued to live there with Mr Tennant until he remarried and moved out permanently.
She then claimed to be a statutory tenant on the basis that she had succeeded to her mother as a protected tenant under Rent Act provisions which provided who could become a statutory tenant in succession to someone who immediately before his or her death was a protected tenant pursuant to Schedule 1, paras 1 to 3 to the Rent Act 1977.
The Court of Appeal dismissed her claim on the basis that on Mrs Tennants death the contractual tenancy vested in Mr Tennant as sole surviving joint tenant and Caroline was no more than his licensee.
Millett LJ said that any other result would operate to the detriment of the other joint tenant rather than the landlord and would, I think, be completely unworkable.
Moreover, it would be inconsistent with Lloyd v Sadler.
If one of two joint tenants can become the statutory tenant when the other leaves the property, notwithstanding the fact that the joint tenancy is not thereby determined, he must be capable of becoming the only statutory tenant when the departing joint tenant dies.
In Tennant v Hutton, Mr Tennant, the surviving tenant, was, as stated, in occupation before and for some period after Mrs Tennants death.
That Mr Tennant was and remained in occupation after Mrs Tennants death was in my opinion critical to the decision.
This can be seen from the provisions of the Rent Act 1977.
Under section 1 (as enacted) a tenancy under which a dwelling house . is let as a separate dwelling is a protected tenancy for the purposes of this Act.
Section 2 provided that: . (a) after the termination of a protected tenancy of a dwelling house the person who, immediately before that termination, was the protected tenant of the dwelling house shall, if and so long as he occupies the dwelling house as his residence, be the statutory tenant of it; and (b) Part I of Schedule 1 to this Act shall have effect for determining what person (if any) is the statutory tenant of a dwelling house at any time after the death of a person who, immediately before his death, was either a protected tenant of the dwelling house or the statutory tenant of it by virtue of paragraph (a) above.
Schedule 1 provided: STATUTORY TENANCIES STATUTORY TENANTS BY SUCCESSION PART I 1.
Paragraph 2 or, as the case may be, paragraph 3 below shall have effect, subject to section 2(3) of this Act, for the purpose of determining who is the statutory tenant of a dwelling house by succession after the death of the person (in this Part of this Schedule referred to as " the original tenant") who, immediately before his death, was a protected tenant of the dwelling house or the statutory tenant of it by virtue of his previous protected tenancy. 2.
If the original tenant was a man who died leaving a widow who was residing with him at his death then, after his death, the widow shall be the statutory tenant if and so long as she occupies the dwelling house as her residence. 3.
Where paragraph 2 above does not apply, but a person who was a member of the original tenant's family was residing with him at the time of and for the period of 6 months immediately before his death then, after his death, that person or if there is more than one such person such one of them as may be decided by agreement, or in default of agreement by the county court, shall be the statutory tenant if and so long as he occupies the dwelling house as his residence.
Had Mr Tennant left the house before his wifes death, she would, in accordance with the decision in Lloyd v Sadler [1978] 1 QB 774, have remained as the protected tenant (and, if she had lived till the end of the lease, then have become the statutory tenant).
Lloyd v Sadler establishes that, where one joint tenant leaves, the other who remains becomes the sole statutory tenant: see per Megaw LJ at pp. 782B C and 783D, per Lawton LJ at pp.l798A B and 790C E and per Shaw LJ at p.790E H, even though this may mean that the landlord can no longer sue the departed tenant for rent.
It is clear that the court would not in these circumstances have regarded Mr Tennant, after his departure, as continuing to be either a protected or the statutory tenant under section 1 or section 2(1)(a) by virtue of his wifes occupation.
Lawton LJ stated as much at p.789A. Caroline would thus have become statutory tenant of the house upon Mrs Tennants death under section 2(1)(b) read with Schedule 1 paragraphs 1 and 3 of the Rent Act 1977.
In arriving at its conclusion in Lloyd v Sadler, the Court of Appeal recognised that its role was to find an efficient, sensible and humane way of filling any remaining gaps in the law as to the effect of joint tenancies in the Rent Acts: p.785D per Megaw LJ, and to construe the word tenant in a way which avoided unreasonable results, or results which the legislature is unlikely to have intended: p.786G H per Megaw LJ.
We should adopt a similar general approach in relation to the present scheme.
The Housing Act 1985
In the present case, while Mrs Hickin was alive she continued to reside in the house, although Mr Hickin did not.
Under section 81 of the Housing Act 1985, her occupation was sufficient for the joint tenancy to meet the tenant condition.
The joint tenancy was therefore a secure tenancy when she died.
Mr Jan Luba QC for Miss Hickin submits that in these circumstances the 1985 Act mandates a staged approach, starting with section 89.
Where a secure tenant dies (section 89(1)), it is necessary to consider under section 89(2), read with sections 87 and 88, whether there is a person qualified to succeed the tenant.
Under section 87(1), a person is and can only be qualified to succeed the tenant under a secure tenancy, if he [or she] occupies the dwelling house as his only or principal home at the time of the tenants death.
Here, there was only one such candidate, Miss Hickin, so no problem of priority could arise under the rules of preference in section 89(2).
On this basis, Mr Luba submits that Miss Hickin, succeeded under the statute to the secure tenancy previously held by her mother; any rights which Mr Hickin might otherwise have had at common law on or after the death of his joint tenant were to that extent over ridden; under section 89(2), the tenancy vests by virtue of this section in whoever is entitled to be preferred under the rules in section 89(2), here Miss Hickin; the statutory provisions for succession render irrelevant any other disposition that a secure tenant may have purported to make, and the statute is capable of vesting the secure tenancy in a relative who was not one of the previous joint secure tenants.
I agree with Mr Luba that section 89 is a logical starting point.
Sections 87 and 88 are definitional sections needed for the operation of section 89.
It is worth noting that the 1985 Act was passed to consolidate various previous statutes including the Housing Act 1980, in which section 30(1), the equivalent of section 89(2) in the 1985 Act, was placed first, and followed by section 30(2), the equivalent of section 87, and section 31, the equivalent of section 88.
I also agree that section 89(1) is capable in certain circumstances of vesting a secure tenancy in a spouse, civil partner or family member who has been in occupation for 12 months prior to a previous secure tenants death, irrespective of any other disposition that the previous secure tenant may have purported to make.
Section 89(3) makes clear that a secure tenancy will be vested and continue by succession in a spouse, civil partner or other family member qualified by occupation to succeed under section 87, over riding any other disposition.
In Birmingham City Council v Walker [2007] UKHL 22, [2007] 2 AC 262, in an opinion concurred in by all members of the House, Lord Hoffmann explained (para 3) that in providing for the new interest called a secure tenancy, the 1980 and 1985 Acts adopted a technique different from that used by the Rent Acts.
Under section 32 of the 1980 Act, and now section 82 of the 1985 Act, the contractual tenancy was preserved, by a scheme which added statutory incidents to that tenancy which overrode some of the contractual terms.
Those overriding provisions include the provisions which prevent it being terminated except by an order of the court on the statutory grounds.
They also include the provisions of section 89 under which a secure tenancy vests in statutorily specified successors, irrespective of what might otherwise be the position as a matter of contract and/or property law.
However, Mr Lubas further submissions assume that, when section 89(1) speaks of a secure tenant dying, it is sufficient to activate the statutory provisions for succession that only one of two joint tenants under a secure tenancy has died, and that the survivor can only retain any right as a secure tenant in respect of the property if in occupation, and even then only if entitled to preference in accordance with the rules stated in section 89(2).
The joint tenancy is of no relevance unless either the joint tenant is the person entitled to succeed under section 89 or no one is entitled to succeed.
In the latter case, the common law survivorship can take effect unconstrained by the statute.
Mr Bryan McGuire QC for the Council takes issue with all these submissions.
He submits that it would require clear words to oust the common law rule of survivorship, and that nothing in the statute overrides the contractual and property rights inherent in a joint tenancy which at common law enure to the benefit of the survivor.
The policy of the Act, he further submits, is to protect a secure tenant from the loss of that tenancy and Mr Hickin was a tenant under a secure tenancy while his wife lived, even though he was not himself in occupation.
Although Mr Hickin had not in fact shown any interest in doing this, he might after his wifes death have wished to resume occupation of the house.
Although the Council has in fact served notice to quit on Mr Hickin because he is not in occupation, the court should not adopt an interpretation which would, or at least might in other circumstances, impinge on rights on which Mr Hickin might have wished to rely under article 1 of the First Protocol to the European Convention on Human Rights.
At a linguistic level, Mr McGuire submits that the statutory references to the or a tenant must in the context of a joint tenancy be read as referring to both or all joint tenants wherever they appear in sections 87 to 89.
In particular, the phrase where a secure tenant dies in section 89(1) must refer to and can only apply on the death of all joint tenants.
The succession provisions were thus inapplicable since Mr Hickin remained alive and could continue as tenant at common law after Mrs Hickins death.
The phrase where a secure tenant dies in section 89(1) is clearly not used to cater for the rare situations where joint tenants die simultaneously.
Further, the legislator, when speaking of the tenants spouse or civil partner in section 89(2) cannot have had in mind joint tenants having together a third person as their spouse or civil partner.
Elsewhere, in sections 81 and 88(1)(b), the Act distinguishes between the individuals holding a joint tenancy.
So too in section 89(1) the phrase where a secure tenant dies must contemplate an individual secure tenant.
On Mr McGuires approach, therefore, the phrase must, in the case of a joint tenancy, be read as referring to the death of the last surviving joint tenant who is a secure tenant.
But on that basis section 89 can never apply to enable succession to a sole surviving joint tenant.
Under section 88(1)(b) anyone who has become the sole tenant, having previously been a joint tenant, is a successor for the purposes of section 87, and under section 87 there can be no statutory succession to someone who was him or herself a successor.
There thus appears to be no reason, in the case of a joint tenancy, to read the tenant in sections 87 to 89 as referring to the last surviving tenant, or indeed to worry at all about how the word applies.
It contemplates situations where a secure tenant an individual dies and there is a person qualified under section 89(2), read with sections 87 and 88, to succeed to the secure tenancy.
In support of the Councils case, Mr McGuire invites consideration of the situation of two joint tenants who both occupy a property until one dies.
He points out that on Mr Lubas case the survivor could find him or herself deprived of possession in favour of a third person, also in occupation of the property but with a prior claim to succession under the rules of preference stated in section 89(2)(a) and (b).
He submits that it is unlikely that the legislator intended to override the survivorship rights of a joint tenant in this way.
The Master of the Rolls was likewise strongly influenced by possible situations in which on Mr Lubas case the common law interests of a joint tenant could be overridden in favour of a third party.
As one example, he took the hypothesis of a joint tenancy involving joint occupation by two friends who were not married or in civil partnership and not members of the same family within the broad definition in section 113; if one of them then died leaving a child, the secure tenancy would, on Mr Lubas case, vest in the child, leaving the surviving joint tenant without his or her former secure tenancy.
The Master of the Rolls also referred to two further examples: one related to siblings who were joint tenants living together with their children, but Mr Lubas riposte to this is that the definition of family would bring them on Mr Lubas case within the rules of preference in section 89(2); the other example related to gay couples, but the riposte to this is that the definition of family in section 50(3) of the 1980 Act (the forerunner of section 113 of the 1985 Act) was clearly drawn to exclude them (as Ministerial statements on the debate in Standing Committee F on the Housing Bill on 28th February 1980, Hansard column 681 682 confirm).
As to the basic example of joint tenancies between friends, one of them with a child who could succeed under section 89(2), it seems likely that any apparent problems dissipate or are marginal in the light of practical realities.
Joint tenants are most commonly spouses or partners.
The definition of family has always included persons living together as husband and wife (and now also includes persons living together as if they were civil partners).
If Mr Lubas submissions are otherwise correct, the need to address the position of a surviving joint tenant through the means of section 89 is unlikely often to disturb such expectations as otherwise attach to a joint tenancy.
Further analysis
Nonetheless, I accept that there is some oddity about a conclusion, unlikely though it may be often to arise, that a joint tenancy between two persons both actually occupying a property is automatically subordinated to any prior claim which a third person might be able to make under the rules of preference in section 89(2).
There is weight in Mr McGuires submissions that one might have expected this to be made clear and in his invocation by analogy of Millett LJs words in Tennant v Hutton, quoted in paragraph 32 above.
However, this appeal is not concerned with the right of survivorship as between joint tenants both in occupation.
In relation to the subject matter which it does concern, it can in my view be said to be at least equally odd indeed odder, especially when it is probably a much commoner situation that a joint tenant, who was not in occupation and whose tenancy was only secure by virtue of the occupation of the other joint tenant, should be treated as the surviving sole tenant after the death of the other, when such a conclusion excludes succession by a relative who would otherwise qualify under section 89(2) and brings the secure tenancy to an end, rather than continues it.
Mr McGuires arguments that Mr Hickin had valuable contractual and property rights of which he should not lightly be deprived strike a particularly hollow note in this connection; the Councils only aim in asserting such rights is to rely on their vulnerability in the face of the notice of quit which it served on Mr Hickin on 18th January 2008.
If, as Mr McGuire submits, the policy of the Act is to protect a secure tenant from the loss of that tenancy, Mr McGuires analysis runs in a different direction to that policy and applies to the 1985 Act a less protective approach than the courts were in Lloyd v Sadler [1978] 1 QB 774 ready to adopt under the Rent Acts towards persons in occupation.
In these circumstances, Mr Lubas case comes in my view much closer than Mr McGuires to reflecting the protective purpose of the 1980 and 1985 Acts, and I prefer it.
But, although it is unnecessary to decide this definitively on this appeal, I also consider that Mr Luba probably puts his case higher than is appropriate, and that the better analysis of situations of joint tenancies lies between the opposing cases.
The 1985 Act is focused on the creation and preservation of secure tenancies, and I see no reason why its provisions need or should be read as overriding common law rules where these would themselves secure the continued existence of the secure tenancy.
In this connection, it is highly significant that the Act recognises the existence of joint tenants, and expressly provides that the occupation of one of them is sufficient to constitute the tenancy a secure tenancy (sections 79 and 81), and that it further provides that, where a person was a joint tenant and has become a sole tenant, he is treated as a successor: section 88(1)(b).
This latter definition, Mr McGuire accepts, only arises and applies where the person who was a joint tenant and has become a sole tenant was before and remains after the survivorship a tenant under a secure tenancy: see the opening words of section 87.
Leggatt LJ rightly observed in Bassetlaw D. C. v Renshaw [1992] 1 All ER 925, 928d: Successor [in section 88] must mean successor to the tenancy referred to in section 87.
When, therefore, the draftsman in para (b) says he was a joint tenant and has become the sole tenant he must be referring to the secure tenancy referred in section 87.
In Birmingham City Council v Walker at para 11, Lord Hoffmann endorsed this conclusion: the word successor most naturally means successor to a secure tenancy. he was a joint tenant and has become the sole tenant in section 88(1)(b) means that he was a joint tenant under a secure tenancy and has become the sole tenant under a secure tenancy.
The prime situation in which one joint tenant becomes a sole tenant is of course on death of the other joint tenant: see e.g. Burton v Camden London Borough Council [2000] 2 AC 399, 410E per Lord Millett.
If two joint tenants are both in occupation, the secure tenancy can, on the death of one, continue in favour of the survivor, even in those rare cases where the other has a spouse, civil partner or relative who would otherwise have been qualified to succeed under sections 87 and 88.
This situation is outside the scope of the provisions regarding succession contained in section 89.
However, it is recognised by section 88(1)(b) which provides that the conversion of the joint tenancy on the death of one joint tenant into a tenancy held by the sole surviving tenant counts as a succession preventing any relative or family member of the latter being qualified to succeed to the latter.
Section 88(1)(b) expressly recognises a type of succession by a surviving joint tenant which falls outside the scope of the succession regulated by section 89.
It is section 88(1)(a) that refers to succession falling within section 89.
However, section 88(1)(b) only contemplates succession by a surviving joint tenant who, because he or she is in occupation, can continue the secure tenancy held previously as joint tenant: see the authorities cited in paragraph 45 above.
Where a joint tenant who is in occupation and is a secure tenant dies, and the surviving joint tenant is not in occupation, the secure tenancy cannot continue in the surviving tenant and the surviving tenant cannot be a secure tenant.
In this situation, nothing in the Act recognises or permits any right of survivorship which can oust the mandatory statutory provisions for succession contained in section 89, read with sections 87 and 88.
Where a secure tenant dies, the language of section 89(1) and (2) vests the secure tenancy immediately on the death in any person qualified under the definitional sections 87 and 88.
Here, it vested and continued in Miss Hickin the secure tenancy which until her mothers death existed by virtue of her mothers occupation.
It is immaterial on this appeal to consider whether a person who otherwise has priority under the rules in section 89(2) enjoys any and what right to disclaim the benefit of the secure tenancy thus vested in him or her by the statute.
The statutory language makes clear that his or her entitlement to the benefit of the secure tenancy arises immediately on the death.
There is no opportunity for anyone else to intervene, or, in particular, for the joint surviving tenant to resume occupation which a view to foreclosing or preventing the statutory vesting.
Any objections to which this might lead seem unlikely to exist except in remote and unusual situations, and to give rise to no real objection to a solution which does justice in the great majority of foreseeable contexts.
The majority view
Since writing the first draft of this judgment, I have seen Lord Sumptions judgment reaching an opposite result and Lord Hopes judgment concurring with it and making additional remarks on Scottish law.
A number of points arise, which have led me to insert paragraphs 33 and 34 above and lead to the following further observations.
First, Lord Sumption notes (para 1), and I agree, that the Housing Act 1980 was enacted to give residential tenants of local authorities and certain other social landlords a degree of protection broadly comparable to that enjoyed by private tenants under the Rent Act 1977, and he relies upon the Rent Act case of Tennant v Hutton on which I have also relied in paragraph 32 above.
In my opinion, the result he reaches, far from being comparable with or supported by the position under the Rent Act 1977, is inconsistent with it.
As indicated in paragraphs 33 and 34 above, in comparable circumstances, Miss Hickin would under the Rent Act scheme succeed as statutory tenant to her mothers protected or statutory tenancy.
Second, the suggestion (Lord Sumptions paragraph 13) that section 88(1)(b) recognises that [Mr Hickin] became the sole tenant is not consistent with the case law.
Section 88(1)(b) postulates and is only concerned with situations in which the sole tenant was a joint tenant under a secure tenancy and has become the sole tenant under a secure tenancy: see the citations in paragraph 45 above, I cannot therefore agree with Lord Hopes statement (paragraph 24) that section 88(1)(b) recognises that a person who was a joint tenant may become the sole tenant in the exercise of that right irrespective of where his only or principal home is.
That is the common law rule, but section 88(1)(b) deals and deals only with situations where a secure joint tenancy becomes a secure tenancy in the hands of a surviving sole tenant.
That situation can only arise where the surviving sole tenant is in occupation at the time when the death and survivorship occur.
If (as in the case of Mr Hickin) the surviving sole tenant is not in occupation at that time, he cannot be a secure tenant, because he does not fulfil the tenant condition in section 81.
In this situation, section 89 prescribes the consequence: on the death of a secure tenant, the secure tenancy vests in the person qualified to succeed under sections 87 and 88.
This occurs automatically on the death.
There is no such window of opportunity, as Lord Hope suggests in paragraph 19 for someone like Mr Hickin (out of occupation in 2007 for up to 25 years) to resume his position as a secure tenant: see paragraph 48 above.
The words at any time when in section 79(1) relate to the period of a tenants life.
If on death a tenant is not in occupation, no secure tenancy then exists, and no one can succeed under the language of section 89.
When Mrs Hickin died, she was in occupation, but Mr Hickin was not qualified to succeed her under sections 87 and 88, because he was not in occupation.
But Miss Hickin was qualified and can therefore succeed under section 89.
Third, Lord Sumption focuses on and rejects Mr Lubas submission that a successor under section 89 could oust a surviving joint tenant who remained in occupation: see e.g. paragraph 15.
For the reasons given in paragraphs 41 to 44 above, I believe that the problem is over stated, and does not raise any insuperable obstacle to acceptance of Mr Lubas submissions about what Parliament must be taken to have intended.
However, as explained in paragraphs 42 to 46 above, I also think that Mr Luba put his case higher than necessary or appropriate; the better analysis is, in my view, one whereby the problem never arises: a successor under section 89 cannot oust an surviving joint tenant who was in occupation, but the secure tenancy can on a joint tenants death vest under section 89 in a qualified successor where the surviving joint tenant is not in occupation.
Fourth, references to the extreme implausibility of Parliament having decided to expropriate Mr Hickins interest appear to me unpersuasive for all the various reasons indicated in paragraphs 36, 43 and 49 above.
On any view, the effect of the legislation is in certain circumstances to vest a secure tenancy on death in any spouse, civil partner or family member occupying the house with the deceased, irrespective of any other purported disposition by the deceased.
In my opinion, those circumstances include the present.
Finally, it is of interest to note the Housing (Scotland) Act 2001 to which Lord Hope draws attention.
Section 22(1) provides that On the death of a tenant under a Scottish secure tenancy, the tenancy passes by operation of law to a qualified person.
By section 22(5), Schedule 3 makes provision as to who are qualified persons for this purpose.
Under paragraph 2 of Schedule 3, one such person is, as Lord Hope notes, a person whose only or principal home at the time of the tenants death was the house and . (b) who is, where the tenancy was held jointly by two or more individuals, a surviving tenant.
So, the Scottish drafters, presumably with the English legislation before them, had no difficulty in using the terms the death of a tenant in section 22(1) and the tenants death in Schedule 3 paragraph 2 to refer to the death of only one joint tenant.
There should be equally little difficulty in doing so under section 89(1)
The fact that the Scottish Act, which is differently framed, made clear the position that a surviving joint tenant could succeed to a secure tenancy provided that the house was his or her only or principal home does not, of course, mean that a similarly enlightened position is not implicit in the English Act.
In my opinion, it is.
Conclusion
In summary, Mr Hickin was not in occupation and could not succeed to or continue to hold any secure tenancy.
Section 88(1)(b) did not apply to make Mr Hickin a successor, because it only applies where a joint tenant is in occupation and can succeed as a secure tenant.
In contrast, Miss Hickin was qualified to succeed to her mothers secure tenancy under section 87.
The effect of section 89 was to provide that, on Mrs Hickins death, the secure tenancy enjoyed by virtue of Mrs Hickins occupation vest[ed] by virtue of this section in Miss Hickin, notwithstanding the common law right of survivorship which Mr Hickin would otherwise have had despite his lack of occupation.
I would accordingly allow the appeal, set aside the order made by the Court of Appeal and restore the order made by HHJ Oliver Jones QC.
The majoritys opinion is, however, to the contrary.
It leads to what I regard as an unhappy discordance with both the Rent Act and the Scottish legal positions.
The philosophy of the Housing Act 1985 is that one statutory succession to a secure tenancy should be available between a tenant and a qualified successor, each in turn enjoying occupation as secure tenant.
The majoritys opinion means that, on Mrs Hickins death in 2007, no such statutory succession could occur as between Mrs Hickin and her otherwise qualified daughter who had lived together in the house from 1967.
This is because of the notional and insecure legal interest which Mr Hickin, who departed the house and family up to 25 years before Mrs Hickins death, is said to enjoy and on which the Council only relies in order to serve notice to quit on him to terminate it.
If this is the law, I would suggest that Parliament might appropriately take another look at it, and see whether similar protection should not be made available to persons in Miss Hickins position to that made specific in Scotland.
I would allow this appeal, essentially for the reasons given by Lord Mance.
LORD CLARKE
I add a few words of my own because the court is divided.
The question is one of construction of the Housing Act 1985 (the Act), and especially section 89(1), which provides that the section applies where a secure tenant dies and the tenancy is a periodic tenancy.
In particular, the question is whether the reference to a secure tenant includes a reference to a tenant under a periodic joint tenancy.
The majority say that it does not.
As Lord Sumption puts it at para 11, if the tenancy is a joint tenancy, the tenant has not died if there remains at least one living joint tenant in whom all the proprietary and contractual rights attaching to the tenancy subsist.
However, I respectfully disagree.
By section 79, a tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the landlord condition and the tenant condition are satisfied.
Section 81 provides that the tenant condition is satisfied where the tenancy is a joint tenancy and each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home.
It appears to me that, as a matter of language, the Act recognises that in such a case joint tenants are tenants under a secure tenancy.
In these circumstances the natural meaning of secure tenant in section 89(1) includes an individual joint tenant under a secure tenancy.
It follows that a secure tenant dies within the meaning of section 89(1) when a joint tenant dies and that section 89 accordingly applies in such a case.
By section 89(2), where there is a person qualified to succeed the tenant, the tenancy vests by virtue of the section in that person.
In this case there was such a person, namely Mrs Hickins daughter, because she satisfied the condition in section 87(b).
The vesting takes place automatically on the death, with the result that, by necessary implication, the rights of a joint tenant such as Mr Hickin, must lapse.
As I see it, the position would be different if, at the date of the tenants death, there was a joint tenant who occupied the dwelling house as his only or principal home.
In that event the ordinary common law rule would apply and he or she would become a sole tenant under a secure tenancy.
Thus if, on Mrs Hickins death, Mr Hickin had occupied the house as his only or principal home, he would have satisfied the first part of the tenant condition in section 81.
The effect of section 88(1)(b) is that Mr Hickin would have been treated as a successor to Mrs Hickin.
As Lord Mance notes at para 45, under section 88(1)(b) anyone who has become a sole tenant, having previously been a joint tenant, is a successor for the purposes of section 87, but only where the person who was a joint tenant and has become a sole tenant was before and remains after the survivorship a tenant under a secure tenancy.
This is made clear by the opening words of section 87.
I agree with Lord Mances analysis at paras 46 to 48.
In particular, I agree that section 88(1)(b) recognises a type of succession by a surviving joint tenant which falls outside the scope of the succession regulated by section 89.
It applies only where the survivor, because he or she is in occupation, can continue the secure tenancy held previously as joint tenant.
In the case where the survivor is not in occupation, the secure tenancy cannot continue in the surviving tenant and the surviving tenant cannot be a secure tenant.
Thus in the present case the effect of the Act is that Miss Hickin was the successor to the secure tenancy.
I prefer this approach to that adopted by the majority because it seems to me to be more consistent with the language of the Act, especially section 89(1), construed in its context.
It also seems to me to be consistent with the authorities referred to by Lord Mance.
Both approaches contain some oddities but this solution is consistent with the approach to the Rent Acts and, indeed with the position in Scotland.
I recognise that this is a minority view but I agree with Lord Mance that consideration might be given to the question whether it would be appropriate for the approach in England and Scotland to be the same.
| UK-Abs | Mr and Mrs Hickin became the joint tenants of a three bedroom terraced house in Chelmsley Wood, Solihull in 1967 [2].
The Appellant, Elaine Hickin, is their daughter who has lived in the house since the beginning of the tenancy.
The Respondent, Solihull Metropolitan Borough Council, became the freehold owner and landlord in 1980 [2].
On 3 October 1980, the tenancy became a secure tenancy pursuant to Part II of the Housing Act 1980 [2].
The Housing Act 1980 was later consolidated into the Housing Act 1985.
Mr and Mrs Hickin both lived in the house until some time after 1980 when Mr Hickin left.
The tenancy remained a joint tenancy in the names of Mr and Mrs Hickin [2].
Mrs Hickin continued to live there with the Appellant until her death on 8 August 2007 [2].
Shortly after Mrs Hickins death, the Respondent served noticed on Mr Hickin to quit the property as it considered that he had become the sole tenant and since he no longer resided there the tenancy was no longer secure.
It also commenced proceedings against the Appellant for possession of the house [3].
The Appellant resisted the possession proceedings on the basis that on her mothers death the secure tenancy had vested in her, rather than her father, as a result of section 89 of Housing Act 1985 [3].
At the trial, on agreed facts, Deputy District Judge Hammersley ordered possession.
HHJ Oliver Jones QC, sitting in the High Court, allowed the appeal and declared that the tenancy vested in the Appellant.
The Court of Appeal allowed the Respondent councils appeal and restored the order of the Deputy District Judge [3].
The Appellant appealed to the Supreme Court.
The issue in the appeal is whether the common law rights of Mr Hickin as joint tenant of the secure tenancy had been displaced by the Housing Act 1985 statutory scheme in favour of the Appellant upon the death of Mrs Hickin [3].
The Supreme Court dismisses the appeal by a 3 2 majority, Lord Mance and Lord Clarke dissenting.
Lord Sumption gives the leading judgment (with whom Lord Walker agrees) restoring the order of the Deputy District Judge.
Lord Hope, Deputy President, gives a short concurring judgment.
A secure tenancy under the Housing Act 1985 is not just a personal right of occupation, but is also an estate in land [6].
At common law, upon the death of a joint tenant, the tenancy is vested in the surviving joint tenant or in all of the survivors if there is more than one [1].
There is no transmission of the tenancy upon death, rather the interest of the deceased person is extinguished [8].
Sections 87 to 91 of the Housing Act 1985 operate to determine the transmission of a secure tenancy [6].
Subject to limited exceptions, a secure tenancy cannot be passed on to a third person with the benefit of the statutory security, either during the lifetime of the tenant or in the course of the administration of their estate after their death, except if that person is qualified to succeed under section 87 [6].
A person is qualified to succeed if he or she is the deceased tenants spouse or civil partner or any other member of the deceaseds family, within a broad definition contained in section 113 [6].
Section 89 of the Housing Act 1985 vests a tenancy in a qualified person if (i) a secure tenant has died; (ii) the tenancy was a periodic tenancy; (iii) the qualified person occupies the house as her only or principal home for the period of twelve months proceeding the death and (iv) the tenant was not herself a successor within the meaning of Section 88 [5].
The Housing Act 1985 does not, however, wholly displace the common law.
The Act necessarily operates by reference to basic principles of the law of property and does not modify the common law governing the transmission of tenancies; rather it merely affects the statutory security of the tenure available when the tenancy has been transferred [7].
At common law and by virtue of section 8 of the Housing Act 1985, Mr and Mrs Hickin were joint secure tenants for as long as one of them occupied the property as an only or principal home [8].
Upon Mrs Hickins death, Mr Hickin remained the sole tenant under the agreement with the Respondent, to which he remained party, but since he was not occupying the property the tenancy ceased to be secure [8].
Mr Hickin could have made the tenancy secure again by moving back to the property at any time before the local authority served a notice to quit [8].
The provisions of the Housing Act 1985 do not affect this result.
For the purposes of section 89(1), a secure tenant dies only when a sole tenant dies; if the tenancy is a joint tenancy a secure tenant has not died if there remains at least one living joint tenant [11].
The provisions of the Housing Act 1985 concern the transmission of the tenancy to a person other than the previous tenant on account of the latters death.
Where there is a surviving joint tenant, the whole statutory basis for disposing of the succession to the tenancy is absent [11].
It is only necessary to provide for the transmission of a tenancy on death if there is a vacancy but where a joint tenant remains living there is none [11, 25].
The surviving tenant has the same contractual rights as he always did [11].
If Parliament had intended the section to operate to exclude the common law rights of a joint tenant it would have done so expressly [12].
Lord Hope notes that such express provision was made in the Housing (Scotland) Act 2001 [21 23] and whilst that Act could not be an aid to the construction of the relevant provisions of the Housing Act 1985, it indicates the kind of statutory language that can be used if the policy is to override the common law right of survivorship [23].
Lord Mance would have allowed the appeal on the grounds that where the surviving joint tenant is not in occupation, the secure tenancy cannot continue in the surviving tenant who cannot be a secure tenant [47].
In this situation, nothing in the Housing Act 1985 recognises or permits any right of survivorship to oust the mandatory statutory provisions contained in section 89 [47].
The tenancy vested in the Appellant upon Mrs Hickins death [47].
Lord Clarke would also have allowed the appeal on the ground that transmission under the Housing Act 1985 to a qualified person occurs when any individual joint tenant dies, and in this case the person qualified to succeed Mrs Hickin was the Appellant [60].
|
From time to time over many years the Secretary of State for the Home Department has been concerned to deport a foreign national on the grounds of national security.
Sometimes, indeed with increasing frequency, those facing such deportation decisions have wished to contest them, either by challenging that they present a national security risk, or by invoking the European Convention on Human Rights and contending that they would be at risk of article 3 ill treatment if returned to their home country.
To enable such cases to be properly heard, Parliament, by the Special Immigration Appeals Commission Act 1997 (the 1997 Act) established SIAC and, as will be very familiar to all with any interest in this area of the law, provided for an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
All this has been rehearsed time and again in a succession of judgments not least, indeed, in paras 4 15 of the judgment below and no useful purpose would be served by my repeating it all here.
Put very shortly, if the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the appellant, SIACs rules and procedures provide for this to be done just how satisfactorily being a matter of continuing debate into which, happily, there is on this appeal no need to enter.
The difficulty raised by the present case is a very different one and, it should be recognised at once, one that faces the court with what can only be regarded as the most unpalatable of choices.
It is lesser evils which the court is searching for here, not perfect solutions.
The difficulty and dilemma now before us can most easily be illustrated by my immediately sketching out a notional set of facts.
Suppose that an appellant before SIAC (A) is a suspected terrorist whom it is proposed to return to Algeria.
Such, indeed, is the position of each of the appellants now before us.
Suppose this, too, is no mere supposition; it has been common ground before SIAC in a number of cases that Algeria is a country where torture is systematically practised by the DRS (Information and Security Department) and that no DRS officer has ever been prosecuted for it; and that: in the absence of [certain assurances from the Algerian Government] there would be a real risk that on his return to Algeria A (and persons in a similar position) would be tortured or subject to other ill treatment (SIACs judgment of 8 February 2007 in G v Secretary of State for the Home Department: Appeal No SC/02/05 G being one of the appellants now before us).
Suppose that the Algerian authorities are hostile to any independent scrutiny of their actions in the human rights sphere: human rights organisations such as Amnesty and Human Rights Watch are not permitted to operate there; even the International Red Cross is denied access to DRS facilities.
And suppose, as is also here the case, that the Secretary of State obtains assurances from the Algerian Government that As rights will be respected on return, the value of these assurances being the principal question at issue on As SIAC appeal.
Suppose, then, that A wishes to adduce evidence from someone with inside knowledge of the position in Algeria asserting that, notwithstanding the Algerian Governments official assurances, those in As position on return to Algeria are in fact likely to be subject to torture or other article 3 ill treatment.
Perhaps this prospective witness (W) was himself ill treated on return.
Perhaps W is a whistleblower working within the Algerian prison service: an official or an interrogator or a medical practitioner.
Perhaps he is a journalist or other outsider who has obtained particular information as to the fate of those like A on their return.
Suppose that W (whether or not himself still in Algeria) is in a vulnerable position: he fears future torture or ill treatment either of himself or of someone near and dear to him.
Perhaps at an earlier stage he had raised his concerns internally and been threatened that if ever he voiced them abroad his wife or children would suffer for it.
Suppose finally that, such being the circumstances, W is not prepared to give evidence in As appeal to SIAC save only on one unalterable condition, namely that his identity and evidence will forever remain confidential to SIAC and the parties to the appeal (A and the Secretary of State).
He is concerned in particular that the Secretary of State might seek to communicate something at least of his evidence to the Algerian authorities (or indeed to others in such a way as may bring him to the attention of the Algerian authorities) if only to seek to assess its veracity and reliability, and that her doing so might place him or his family in peril, something he is simply not prepared to risk.
W, therefore, requires an absolute and irreversible guarantee of total confidentiality before he will permit his identity and evidence to be disclosed to the Secretary of State.
Is it open to SIAC to make an order providing for such a guarantee? That, as will shortly appear, is the central question now before us.
It is not, I should make clear at this stage, the appellants case that, SIAC having made an absolute and irreversible order giving W the guarantee he seeks, Ws evidence will necessarily then have to be regarded by SIAC as properly before them when finally it comes to their determining the disputed issue as to As safety on return.
Rather the appellants propose an intermediate, inter partes hearing, by which time the Secretary of State must have been provided with full information as to Ws identity and intended evidence, and at which she will be able to contend that, for whatever reason, it would be wrong for SIAC to admit Ws evidence on the substantive appeal.
She may suggest that in reality W has advanced no coherent case for saying that he is at risk of reprisals.
Or she may say that Ws proposed evidence is inherently implausible and that, without her being afforded the least opportunity to check its authenticity or credibility or reliability it would simply not be right to afford it any weight whatever.
Or she may have other arguments to advance.
If, having heard them, SIAC then chooses to shut the evidence out, so be it.
If, however, SIAC admits the evidence, then, reluctant though doubtless they will be to give it the weight it might have been expected to carry had the Secretary of State been permitted to check it, at least it will be before them (when ex hypothesi it would otherwise not have been) and in the result SIAC will have the benefit of the fullest possible picture on a critically important issue in the appeal: the question of As safety on return.
It is on this basis and in this context that the question now arises: in such circumstances can SIAC ever properly make an absolute and irreversible order (necessarily on an ex parte application by A without the Secretary of State having an opportunity to resist it), prohibiting the Secretary of State from ever disclosing to anyone anything of Ws identity or evidence?
This question the Court of Appeal on 29 July 2010 answered in the negative: [2010] EWCA Civ 898.
Giving the only reasoned judgment (with which Jacob and Sullivan LJJ simply agreed), Sir David Keene (at para 27) concluded that: [I]t is not open to SIAC to make an order giving the absolute and irrevocable guarantee which is sought by the appellants.
This may create a difficulty for the appellants, because of the reluctance of their potential witnesses, but it is inescapable.
The adverse effect on them can be mitigated by such steps as anonymity orders and hearings in private, but irrevocable orders preventing the Secretary of State from disclosing material to a foreign state in any circumstances cannot properly be made by SIAC in advance of the Secretary of State seeing that material.
As counsel for the Secretary of State said at the SIAC hearing, such a proposal is unworkable and in my view falls outside the scope of SIACs powers to give directions, broad though those powers are.
Before turning to the Secretary of States objections I should observe that, although Sir David there spoke of the appellants proposals fall[ing] outside the scope of SIACs powers, he had earlier, at para 20, recorded that: Mr Tam QC, on behalf of the Secretary of State, accepts that SIAC could give directions under the Procedure Rules preventing the Secretary of State from disclosing such material to any other person, including the Algerian authorities.
He acknowledges that SIACs power under rule 39 (1) to give directions relating to the conduct of any proceedings is expressed in wide and unlimited terms and could be used in conjunction with the rule 43(2) power to conduct a hearing in private for any good reason so as to prevent disclosure to other persons, including the authorities of the appellants country of origin.
And that, indeed, I understand to remain the Secretary of States position.
It is not for want of jurisdiction that SIAC should never make an order of the sort here contended for; rather it is because, so the Secretary of State submits, such an order could never properly be made; it can never be appropriate.
Such being the case, I shall not burden this judgment with an exposition and analysis of all the various rules which arguably bear upon SIACs powers but instead shall turn at once to the Secretary of States principal reasons for saying that no order of the kind here sought should ever be made, notwithstanding that, for want of it, evidence directly going to the issue of As safety on return will on occasion not be available to SIAC when otherwise it would have been.
Essentially, it seems clear, the Secretary of States fundamental objection to an order of the sort proposed is this: such an order having been made, the Secretary of State may then find herself in possession of information which (whether or not appreciated by SIAC, A or even W himself) might in one way or another suggest the existence of a terrorist threat abroad or some other risk to national security.
Viewed in the context of myriad other pieces of information, it may be seen to form part of a jigsaw or mosaic (one is well familiar with the concept) whereby such risks come to be recognised.
Because, however, of SIACs order, the Secretary of State will be unable to alert the foreign state to the risk, thereby gravely imperilling future diplomatic relations.
True, but for the order, the Secretary of State would never have been put in possession of the information in the first place.
But, runs the argument, the Secretary of State is in fact worse off with it than without it.
Without it she cannot be criticised.
But with it, yet bound by SIACs order to keep it to herself, she may become deeply embarrassed if the risk were then to eventuate.
The court below, at paras 24 and 25 of Sir David Keenes judgment, accepted this argument: SIAC cannot, it seems to me, tie its hands in advance and say that, whatever the fresh slant on the material provided by the Secretary of State, it will in no circumstances allow disclosure to the authorities of a foreign state.
How could it? It might be that the appellants material, innocuous when seen in isolation, becomes of vital diplomatic importance once combined with material in the possession of the Secretary of State.
As was explored in argument, it might reveal a potential terrorist risk within the foreign state.
It might indicate that, instead of the appellant having been the perpetrator of a terrorist outrage, as suspected hitherto, the true culprit remains at large in a foreign state and presents a real and immediate threat to that state.
It is no answer for Mr Fordham to argue that, without the cast iron and irrevocable guarantee of non disclosure, the British Government would not even come into possession of the information.
That is true, but the consequences for the United Kingdoms diplomatic relations differ radically between the two scenarios.
If this countrys government is in possession of information indicating the existence of a risk of a terrorist outrage in a foreign state with which we have friendly relations and it does not warn that state, the potential impact on the United Kingdoms diplomatic relations with that state could be very serious indeed if it ever became known that our government knew of the risk.
If, however, the government does not possess such information, then while the terrorist risk to the foreign state may remain the same, this country could not be accused of withholding vital information, and our diplomatic relations would not be affected.
I confess to finding the argument a good deal less persuasive than did the Court of Appeal.
Nor to my mind was it made good by a post hearing note submitted by the Secretary of State at our invitation giving five examples of prospective scenarios (understandably at a high level of generality) suggested to illustrate the problem.
In all five examples, as it happens, the Home Secretarys stated concern is at her inability to communicate not with the country to which she proposes deporting A (here Algeria) but rather with some other foreign country (country C) to which, let us suppose, W, a known terrorist mastermind who trains suicide operatives, now says that he has moved (following torture on his return to Algeria), something about which the Secretary of State would wish to inform country C (an example in fact suggested by Lord Kerr during the hearing).
Even, however, were such a scenario to play out and culminate in a terrorist atrocity in country C and it were later to emerge that the Secretary of State had known, but failed to warn country C, about Ws move there, it must surely be a substantial defence to any diplomatic complaint by country C that the Secretary of State was subject to a final and absolute court order prohibiting her from acting differently.
After all, as the appellants point out, a number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context see, for example, article 13 of the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; Principle 3(b) of Annex I to the Istanbul Protocol Principles on the Effective Investigation and Documentation of Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; paras 3, 7, 12, 13 and 20 of the 28 July 2010 Report of the United Nations High Commissioner for Human Rights on the Right to the truth; and para 3.2.8 (under the heading, Handling reluctant Sources) of the November 2010 EU common guidelines on (Joint) Fact Finding Missions.
In short, I regard the Secretary of States concerns at learning more than she is permitted to divulge as an insufficient ground on which to deny A and SIAC the possible benefits of Ws evidence.
That said, I do not overlook the radical nature of orders of the sort proposed here, nor, indeed, the kinds of difficulty they may bring in their wake.
In the first place, such orders could be thought to come perilously close to offending against basic principles of open justice.
There is nothing novel, of course, in the making of ex parte orders.
But it is difficult to think of any other situation in which a respondent would be unable to seek release from a permanent injunction in this case, not to communicate his knowledge to others.
The respondent can, as indicated, object at the inter partes hearing to the material being used at the eventual substantive hearing.
But that is by no means the same thing as seeking to overturn the original order.
There is, moreover, as the respondent points out, the further difficulty that, even though theoretically it will be open to SIAC at the inter partes hearing to rule out Ws evidence, it may be difficult for them to ignore it entirely.
SIAC are, after all, required by section 5(6)(a) of the 1997 Act and by rule 4(3) of their 2003 Rules to ensure that on the material before them they can properly determine the proceedings.
And there could hardly be a more important issue in those proceedings than that of As safety on return.
It is that consideration, indeed, which weighs so very heavily in As favour in justifying the making of these proposed orders in the first place, given that without them SIAC will by definition never see the material.
There is the obvious further problem with regard to evidence adduced on the basis proposed that the Secretary of State will be largely unable to investigate it and will find it difficult, therefore, to explain or refute it.
Accordingly, the very making of the initial order must to a degree undermine the likely weight of the evidence and devalue its overall worth.
In the last analysis, however, none of these considerations to my mind outweighs the imperative need to maximise SIACs chances of arriving at the correct decision on the article 3 issue before them and their need, therefore, to obtain all such evidence as may contribute to this task.
I would rule, therefore, that it is open to SIAC to make such absolute and irreversible ex parte orders as are here contended for and that on occasion it may be appropriate to do so.
This is, I conclude, the least worst option open to us the lesser of two evils as I put it at the outset.
But at the same time I should make plain that I am far from enthusiastic about such orders and would certainly not expect a rash of them.
Rather it would seem to me that the power to make them should be most sparingly used.
There is, of course, the risk that the very availability of such orders may be exploited by the unscrupulous in the hope that SIAC may thereby be induced to receive untruthful evidence which, had it in the ordinary way been subject to full investigation, would have been exposed as such.
I would advocate that before making one of these proposed ex parte orders, SIAC should require the very fullest disclosure from A of (a) Ws proposed evidence (namely a detailed final statement or proof of evidence depending upon whether it is proposed to adduce the evidence orally or in writing, and if the latter why in writing), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage him to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in these circumstances, namely by anonymity orders and hearings in private.
If, moreover, one of these orders is made and it does then come to appear to the Secretary of State that the information disclosed may indeed be of some importance with regard to national security concerns, whether here or abroad, it should be open to the Secretary of State to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information to enable these national security concerns to be met or, if such waiver, unreasonably in SIACs view despite their recognition of Ws fears, proves unobtainable, to shut out (or regard with additional scepticism) the evidence submitted.
This power, in other words, should be exercised sensibly as well as sensitively, there being ample room for flexibility in its operation notwithstanding the absolute and irreversible nature of whatever order may initially be made.
I should perhaps add this.
In striking the balance in this way, I am in no way influenced by the consideration that, as earlier stated, there are circumstances in which the Secretary of State for her part is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A.
I do not see the scope for orders of the sort contended for here as, so to speak, levelling the playing field or providing equality of arms between the parties.
The plain fact is that the Secretary of State is acting in these cases in the wider public interest, not as an interested party.
She is, for example, obliged (now under the rules) to search for and disclose material, both open and closed, which may possibly assist As case. (He, of course, is under no corresponding duty towards the Secretary of State.) And the special advocate will to the best of his ability serve As interests, procuring on occasion rulings which may preclude the Secretary of State from relying on material however apparently damning to As cause.
As Sir David Keene observed below (at para 26): The reality is that the position of an appellant and the position of the Secretary of State are not comparable, because of the public responsibilities of the latter.
Since completing this judgment I have seen in draft the judgment of Lord Dyson and agree with him also.
I would accordingly allow these appeals to the extent indicated.
It must, of course, now be for SIAC to consider what, if any, impact our decision has upon the outcome of these appellants individual appeals: whether there is a need now to reopen them and what, if any, orders should now be made.
It is to be hoped that no further order (save as to costs as to which the parties may have 28 days for written submissions) is required from this court.
LORD DYSON
National security issues continue to present difficult challenges to the courts.
Lord Brown has explained the problem that is raised by the facts of the present case.
The appellants are all Algerian nationals whom the Secretary of State for the Home Department decided under section 3(5)(a) of the Immigration Act 1971 to deport to Algeria on the basis that their presence in the United Kingdom is not conducive to the public good on grounds of national security.
They appealed to the Special Immigration Appeals Commission (SIAC) who held that they posed a risk to national security and that the decisions to deport them were lawful and compatible with the European Convention on Human Rights (the Convention).
Their appeals were dismissed by the Court of Appeal.
The issue in all these cases is whether, if returned to Algeria, there is a real risk that the appellants would be subjected to ill treatment at the hands of the Algerian Authorities (AAs) contrary to article 3 of the Convention.
One of the appellants (Z) was in a position to put forward material from a source or sources in Algeria which was relevant to safety on return.
But the source(s) feared reprisals in Algeria if there were to be any disclosure of their identity to the AAs.
They were willing to tell their story to SIAC (and indeed to the Secretary of State), but only on an absolute and irrevocable assurance that there would be no onward disclosure to the AAs.
Rule 4(1) of the Special Immigration Appeals Commission (Procedure) Rules 2003 (SI 2003/1034) (the SIAC Rules) provides that, when exercising its functions, SIAC shall secure that information is not disclosed in any other circumstances where disclosure is likely to harm the public interest.
Rule 39(1) confers on SIAC the power to give directions relating to the conduct of any proceedings.
Subrule (2) provides that the power to give directions is to be exercised subject to the obligation in rule 4(1); and subrule (5) provides that directions under rule 39(1) may in particular (e) relate to any matter concerning the preparation for a hearing.
Rule 43(2) enables SIAC to conduct a hearing or part of a hearing in private for any good reason (in addition to the reason identified in rule 43(1) which is not material to the appeal).
It is common ground that these rules are wide enough to give SIAC the jurisdiction to make an absolute and irrevocable order prohibiting the Secretary of State from disclosing material to any person and to do so at or after a hearing from which the Secretary of State is excluded.
The question is in what circumstances (if any) it may be appropriate to make such an order (which I shall refer to as an irrevocable non disclosure order).
For the appellants, Mr Fordham QC submits that SIAC has the power to make such an order although it has not received informed representations from the Secretary of State as to whether the order should be made.
It is able subsequently to hear informed representations from the Secretary of State as to the admission of the material in evidence.
For the Secretary of State, Mr Tam QC accepts that there may be cases where an appellant is found to have good reasons for wishing to keep certain material confidential and this might provide a sound basis for SIAC to exercise its power to hold a private hearing under rule 43 and make an irrevocable non disclosure order.
But he submits that it is never appropriate to make such an order on the basis of a hearing from which the Secretary of State is excluded and she should always be given the opportunity to apply subsequently to vary or discharge the order.
In testing these submissions, it should be borne in mind that, as is illustrated by the circumstances of the present appeals, two conflicting considerations are in play here.
On the one hand, the appellants say that, unless the order that they seek is made, they will be unable to place material before SIAC which may be crucial to their case that, if returned to Algeria, they face a real risk of ill treatment by the AAs contrary to article 3 of the Convention.
If they are able to persuade SIAC of this risk, their appeals will succeed.
Thus, the appellants say that it is essential to their case that they are able to place this evidence before SIAC: the stakes could hardly be higher for them (short of a risk to life itself).
They also rely on rule 4(3) of the SIAC Rules which provides that subject to paragraphs (1) and (2), SIAC must satisfy itself that the material available to it enables it properly to determine proceedings.
In other words, it has a duty to ascertain all relevant facts.
On the other hand, it is said on behalf of the Secretary of State that there are important countervailing considerations both in relation to the conduct of the appeals and more generally.
So far as the conduct of the appeals is concerned, the ability of the Secretary of State to participate in them effectively may be seriously undermined by an irrevocable non disclosure order.
There are two aspects to consider.
First, the cogency and validity of the reasons asserted by the source(s) in support of the claimed need for confidentiality may be open to question, but the Secretary of State will be denied the ability to test the reasons or to obtain information and/or adduce evidence from or with the assistance of the AAs to demonstrate that the asserted reasons for the claim to confidentiality are groundless.
Secondly (and of perhaps even greater importance) is the fact that the Secretary of State may be seriously disadvantaged in her ability to test and challenge the substance of the evidence of the witness(es).
The effect of the order may be to deprive the Secretary of State of the ability to place before SIAC relevant evidence which it should properly consider in deciding the substantive issues arising in the appeals.
This would occur, for example, if the AAs were able to provide information bearing on the issue of safety on return of the appellants, but could not do so unless the identity of the witness(es) and what they have to say are disclosed to them.
Once the authorities know the identity of the witness(es) and the substance of their evidence, the authorities might be able to demonstrate that what is said about the risk to the appellants on return to Algeria is false.
I should add that the SIAC Rules do not make provision for the appointment of special advocates to represent the interests of the Secretary of State and it is (rightly) not suggested that SIAC could appoint special advocates under any of the powers conferred by the general rules.
It follows that the difficulties to which the Secretary of State draws attention cannot be overcome or even mitigated by the appointment of a special advocate.
In addition to the problems that are likely to be suffered by the Secretary of State in relation to the appeals, she says that irrevocable non disclosure orders may also cause collateral prejudice.
It became clear during the course of the argument that this prejudice is the potential risk of harm to future diplomatic relations with a friendly foreign state.
This is a factor which carried considerable weight with the Court of Appeal and which Lord Brown deals with at paras 11 to 15.
In weighing these competing considerations, I have no doubt that the scales come down in favour of making an irrevocable non disclosure order where SIAC is satisfied that such an order is necessary in the interests of justice.
I agree entirely with what Lord Brown says at paras 19 to 21 as to how the power to make an order should be exercised.
SIAC should be astute to guard against the danger of abuse and should scrutinise with great care and test rigorously the claimed need for an order.
But if SIAC (i) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (ii) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals in Algeria if his identity and the evidence that he is willing to give were disclosed to the AAs, then in my view an irrevocable non disclosure order should be made.
I accept that to make such an order is a striking step for any court to take and is contrary to the instincts of any common lawyer.
It is inimical to the fundamental principles which we rightly cherish of open justice and, above all, procedural fairness.
To make an order without giving the Secretary of State an opportunity to be heard is a clear breach of the principles of natural justice.
Any such order requires compelling justification.
Regrettably, however, the circumstances of a case sometimes call for unusual and undesirable remedies.
Ultimately, the court has to decide what is demanded by the interests of justice.
In weighing the prejudice that the Secretary of State may suffer in the appeal process as a result of an irrevocable non disclosure order, it should not be overlooked that the appeals themselves will be conducted entirely inter partes.
In particular, no material that is placed before SIAC by the appellants will be withheld from the Secretary of State.
She may be able to demonstrate that the claimed need for confidentiality is without foundation and to persuade SIAC to give the evidence little or no weight for that reason alone.
She may also be able to test the evidence of the witness(es) effectively even though she has been unable to discuss it with the AAs.
For example, she may be able to show on the basis of objective general material about the conditions in Algeria that the evidence of the witness is unlikely to be true; and even where the evidence is more specific, she may be able to obtain information from the AAs which will enable her to rebut the evidence without divulging the name or identity of the witness or saying anything which might lead to his or her identification.
It will, of course, depend on the nature of the evidence to be given by the witness.
I do not wish to suggest that the effect of an irrevocable non disclosure order may not inhibit the ability of the Secretary of State to resist the appeals.
In some cases, such an order will undoubtedly have that effect.
But it cannot safely be said that it is bound to do so in every case.
As regards the collateral prejudice claimed by the Secretary of State, like Lord Brown I consider that this has relatively little weight for the reasons that he gives.
In my view, if SIAC concludes that the two conditions to which I have referred at para 34 above are satisfied, then the countervailing considerations relied on by the Secretary of State should not outweigh the need to ensure that the appellants are able to deploy any material which might show that, on return to Algeria, they would face a real risk of treatment contrary to article 3 of the Convention.
The same considerations and the same result would follow if the case raised a question under article 2 of the Convention.
But if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the Convention, the balance will almost certainly be struck the other way.
For example, in many appeals against orders for deportation, the ground of appeal is that to deport the appellant would involve a breach of his or her article 8 rights.
I find it difficult to conceive of a case in which it would be appropriate to make an order in order to protect the wish for confidentiality of a witness in those circumstances.
For these reasons as well as those given by Lord Brown (with which I am in entire agreement), these appeals should be allowed to the extent indicated.
LORD PHILLIPS, LORD KERR AND LORD WILSON
We agree with both the judgments of Lord Brown and Lord Dyson.
| UK-Abs | The appellants, all Algerian nationals, were suspected terrorists whom the Secretary of State proposed to deport to Algeria.
It was common ground that Algeria was a country where torture was systematically practised by state officials and no state official had ever been prosecuted for it.
The Secretary of State obtained assurances from the Algerian Government that the appellants rights not to be tortured or subjected to other ill treatment would be respected on return to Algeria.
The Special Immigration Appeals Commission Act 1997 established an appeal system which allows where necessary for closed material procedures and the appointment of special advocates.
If the Secretary of State wishes to adduce evidence which, for reasons of national security or other sufficient public interest reasons, cannot safely be communicated to the other party, SIACs rules and procedures provide for this to be done.
In this case, however, it was one of the appellants who wished to adduce evidence from a witness (W), who had inside knowledge of the position in Algeria and asserted that, notwithstanding the Algerian Governments official assurances, those in the appellants positions were in fact likely to be subjected on return to torture or other ill treatment.
W was prepared to give evidence in the appellants appeals to SIAC only on one unalterable condition: that his identity and evidence would by order remain absolutely and irrevocably confidential to SIAC and the parties to the appeals.
W was concerned that the Secretary of State might otherwise seek to communicate his evidence to the Algerian authorities, if only to assess its veracity and reliability, and that her doing so would place him and/or his family in peril.
The Secretary of State had two main objections to such an order being made.
First, she would be unable to participate effectively in the conduct of the appeals before SIAC, being unable to test either the validity of the reasons asserted by W in support of his claimed need for confidentiality or the substance of Ws evidence itself.
Secondly, the Secretary of State may find herself in possession of information pointing to the existence of a terrorist threat abroad or some other risk to national security, yet, bound by SIACs order, unable to alert the foreign state to the risk.
This could gravely imperil future diplomatic relations with foreign states.
The question in the appeals therefore was whether it was open to SIAC to make an order for an absolute and irreversible guarantee of total confidentiality in respect of Ws identity and evidence before the same were disclosed to the Secretary of State (in circumstances where it would nevertheless remain open to the Secretary of State to challenge the admissibility or weight of that evidence before SIAC in its determination of the substantive appeals).
The Supreme Court unanimously allows the appeals.
Lord Brown gives the leading judgment of the Court; Lord Dyson gives a concurring judgment.
The fundamental objection of the Secretary of State to the proposed order, based on her concerns about being obliged to withhold vital information relating to national security from a foreign state, thereby imperilling future diplomatic relations, is unpersuasive [11] [13].
It must surely be a substantial defence to any diplomatic complaint by a foreign state that the Secretary of State is subject to a final and absolute court order prohibiting her from acting differently [14].
A number of recent international instruments are replete with statements urging states to ensure that witnesses are protected against ill treatment or intimidation, particularly in a human rights context [15].
The imperative need here is to maximise SIACs chances of arriving at the correct decision on the issue before them concerning the safety of the appellants on return to Algeria and, therefore, for SIAC to obtain all such evidence as may contribute to this task [18].
Accordingly, it is open to SIAC to make absolute and irreversible ex parte orders of the kind sought in this case and on occasion it may be appropriate to do so [19].
The power to make such orders should however be used most sparingly [19].
Before making one of the proposed ex parte orders, SIAC should require the very fullest disclosure from the applicant (A) of (a) the proposed evidence from As proposed witness (W), (b) the particular circumstances in which W claims to fear reprisals, and (c) how A and his legal advisers came to hear about Ws proposed evidence and what if any steps they have taken to encourage W to give that evidence in the usual way subject to the usual steps generally taken to safeguard witnesses in such circumstances (e.g. anonymity orders and hearings in private) [20].
SIAC should only then, in the interests of justice, grant such an order if it (1) is satisfied that a witness can give evidence which appears to be capable of belief and which could be decisive or at least highly material on the issue of safety of return and (2) has no reason to doubt that the witness genuinely and reasonably fears that he and/or others close to him would face reprisals if his identity and the evidence that he is willing to give were disclosed to the relevant foreign state [34].
Notwithstanding the absolute and irreversible nature of the order, it should in addition be open to the Secretary of State, upon such order being made, to try to persuade SIAC either to seek from A and W a sufficient waiver of the ex parte order forbidding any further communication of the information, or, if such waiver proves unobtainable, to exclude or regard with additional scepticism the evidence submitted [21].
The Court, in permitting the making of such ex parte orders in the circumstances of this case, has in no way been influenced by the circumstances in which the Secretary of State is on occasion entitled to adduce evidence in closed proceedings divulged only to a special advocate and not to A. The scope of the orders sought here should not be regarded as levelling the playing field between the parties: the Secretary of State in cases before SIAC acts in the wider public interest and not as an interested party [22].
The same considerations and the same result would follow if the case engaging as it does here the rights of the appellants under article 3 of the ECHR raised a question under article 2 of the same.
However, if the ground on which an appellant is resisting deportation is an alleged risk of breach of some other article of the ECHR (e.g. article 8), the balance will almost certainly be struck the other way.
In those circumstances it would be inappropriate to make an ex parte order to protect the confidentiality of a witness [38].
|
I consider that each of the nine appeals should be dismissed.
In my respectful view the approach of Lord Phillips, Lady Hale and Lord Kerr to the meaning of the word knowledge in sections 11(4) and 14(1) of the Limitation Act 1980 (the Act) is misconceived and would throw the practical application of the subsections into disarray.
I also consider that any exercise of the discretion under section 33 so as to permit any of the nine actions to proceed would be aberrant in circumstances in which they have no real prospect of success.
What is the nature of the exercise which the court conducts when asked by a defendant to rule that an action in respect of personal injuries is time barred under section 11 of the Act? Subsection (4) provides that the action shall not be brought after the expiration of three years from (a) (b) the date on which the cause of action accrued; or the date of knowledge (if later) of the person injured.
The subsection refers, at (a), to the cause of action notwithstanding that, if the action is to continue, it may well transpire that the claimant has no cause of action.
When the subsection turns, at (b), to the date of knowledge (if later) and so requires the court to appraise the claimants knowledge of the four facts specified in section 14(1), which relate to, although do not comprise all elements of, his cause of action, the assumption that indeed he has a cause of action remains.
That explains why sections 11(4)(b) and 14(1) refer to knowledge (which can be only of matters which are true) rather than to belief (which can be in matters which are untrue as well as in those which are true).
Knowledge of the second of the four facts specified in section 14(1) is that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
This knowledge of attributability (as it is convenient to describe it) is predicated upon the assumption that the claimant has a valid cause of action and thus would be able to establish among other things, even in the teeth of opposition from the defendant, not just attributability (which means only that there is a real possibility that the act or omission caused the injury: Spargo v North Essex District Health Authority [1997] P1QR P235 at P242, Brooke LJ) but, rather, that his act or omission actually caused the injury in the legally requisite sense.
In the decision of the Court of Appeal in Halford v Brookes [1991] 1 WLR 428 the trial judge, Schiemann J, is quoted, at p 442H, as having referred to the bizarre situation when a defendant asserts that the plaintiff had knowledge of a fact which the plaintiff asserts as a fact but which the defendant denies is a fact.
The situation may indeed seem bizarre until one remembers that, at the stage of an inquiry under section 11, the exercise requires the existence of the fact to be assumed.
Were the action to continue, the defendant might well deny it; but he does not do so at that stage.
The assumption that, in an inquiry under sections 11(4) and 14(1) of the Act, the cause of action exists leads me, with inevitable discomfiture, to a profound disagreement with one of the essential foundations for the conclusions of the minority in this court.
It was the preferred view of Foskett J, upon which he would have acted had he not felt constrained by authority to act otherwise, that the veterans who issued their claim on 23 December 2004 acquired the requisite knowledge of attributability only on a later date, namely 29 June 2007, when the Rowland report was privately presented to them.
It is the conclusion of the minority that (a) it is indeed possible for a claimant to lack knowledge of attributability at the time when he issues his claim and, if so, time will not have begun to run against him; and irrespective of whether the later presentation to them of the Rowland report then led them to acquire it, the veterans lacked such knowledge when they issued their claim, with the result that none of them is time barred. (b) In my view, however, it is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim.
By that date he must in law have had knowledge of it.
Pursuant to CPR 22.1(1)(a) and (4), he must verify his claim form by a statement that he believes that the facts stated in it are true.
The word in the statement of truth is believes rather than knows only because of course the assumption that the cause of action exists does not apply to the claim form.
That it exists is indeed only a claim.
Although the statement of truth covers wider ground, it can in my view be regarded as an explicit recognition by the claimant that he then has knowledge of attributability for the purpose of section 14(1).
Irrespective, however, of the degree of significance to be attached to the statement of truth, it is clear to me that the inquiry mandated by section 14(1) is retrospective, namely whether the claimant first had knowledge of it (and of the other specified facts) within or outside the period of three years prior to the date of issue.
As Lord Mance said of an analogous section of the Act in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, at para 106, Under section 14A the onus is on a claimant to plead and prove that he first had the knowledge required for bringing his action within a period of three years prior to its bringing.
And, see, to similar effect, the judgment of the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782 at p 796H.
Lord Phillips cites, at para 143 below, the view of Waite LJ in Whitfield v North Durham Health Authority [1995] 6 Med LR 32 in support of the proposition that lack of knowledge of attributability can survive the issue of a claim.
In 1987, thus prior to the claim issued in 1992 with which the Court of Appeal was there concerned, the claimant had issued a claim which had never been served.
Waite LJ observed that her issue of the claim in 1987 did not necessarily betoken that she had knowledge under section 14(1).
But the observation was an aside in that the court proceeded to find that she had had the requisite knowledge in 1985.
In the Eli Lilly case, cited above, by contrast, the Court of Appeal, in a passage at 795H 796A cited with approval by Judge LJ in Sniezek & Bundy (Letchworth) Ltd [2000] PIQR P213 at P228, observed that it had difficulty in perceiving how in any case where a claimant has sought advice and taken proceedings, it can rightly be held that the claimant had not then had relevant knowledge.
It follows that I prefer the latter approach.
Yet, frankly, I doubt whether in any of those three cases the Court of Appeal was afforded the leisurely consideration of the nature of knowledge for the purpose of sections 11(4) and 14(1) which has been afforded to this court in the present case.
The statutes of limitation, which stretch back to 1540, have been in place for two main reasons.
One is to protect defendants from being vexed by stale claims.
They are Acts of peace: see ACourt v Cross (1825) 3 Bing 329, 332 (Best CJ).
The other is to require claims to be put before the court at a time when the evidence necessary for their fair adjudication is likely to remain available, or, in the words of the preamble to the 1540 Act, at a time before it becomes above the Remembrance of any living Man. to. know the perfect Certainty of such Things.
Conventionally, therefore, they have required the assertion, by claim, of a cause of action within a specified period following its accrual.
The modification of the conventional requirement now reflected in sections 11 and 14 of the Act was born of the injustice suffered by a claimant who lost his right to claim damages for personal injuries before he knew of its existence: see para 17 of the Report of the Committee on Limitation of Actions in Cases of Personal Injury dated September 1962, Cmnd 1829, chaired by Edmund Davies J.
But, in para 30, the committee also expressed its concern not to encourage actions of a speculative character.
In the event it set out, at para 34, its conclusion that the conventional requirement should not apply so as to bar a claimant if (a) the first occasion on which he discovered, or could reasonably have been expected to discover, the existence of his injury, or the cause to which it was attributable, was such that it was not reasonably practicable for him to start proceedings in time; and (b) he has in fact started proceedings within a certain period (which we consider should be twelve months) after such occasion.
The committee recommended that, additionally, such a claimant should need the leave of the court.
The result was section 1 of the Limitation Act 1963, the terminology of which was to prove troublesome (see Smith v Central Asbestos Co Ltd [1973] AC 518) and thus to lead to the improvements first included in section 1 of the Limitation Act 1975 and soon consolidated in sections 11 and 14 of the Act.
For present purposes the only importance of section 1 of the 1963 Act is that, reflective of the recommendations in the Edmund Davies report, it referred to facts being outside the knowledge of the claimant until a date which. was a date not earlier than twelve months before the date on which the action was brought (italics supplied).
So, by the latter date, the claimant was taken to have acquired the knowledge; and the only question was whether he had issued his claim within the specified period after having done so.
This was in my view an essential boundary of the scheme by which the conventional requirement was relaxed; and I see no reason to doubt that it so remains.
It is in my view heretical that a claimant can escape the conventional requirement to assert his cause of action for personal injuries within three years of its accrual by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it.
Indeed it is, as Smith LJ observed in the course of argument in the Court of Appeal, a bit Alice in Wonderland.
What, then, is comprised in the knowledge of attributability which section 14 (1) of the Act requires? In articulating his preferred view Foskett J made no bones about it: he considered that one of the constituents of the knowledge should be evidence, specifically that the veteran should appreciate that there was credible evidence that, as a result of the tests, he had been exposed to ionising radiation at a level above that to which all human beings are exposed and that his injury was capable of having been caused by his exposure to it.
Lord Phillips states, at para 141, that the preferred view of Foskett J was in principle correct.
But, no doubt because Mr James Dingemans QC concedes on behalf of the veterans that evidence is no part of knowledge for the purpose of the subsection, Lord Phillips reformulates the preferred view of Foskett J so as to require that the claimants belief be based (para 137) or founded (para 141) on known fact.
For her part, Lady Hale suggests, at paras 168 and 170, that the belief should have a reasonable basis either in evidence or, alternatively, in objective fact.
And, for his part, Lord Kerr, who adheres strictly to the word knowledge, concludes at para 209 that it exists only when founded on objectively verifiable facts.
In reality, however, all three of these formulations in my view remain requirements that the claimant must, actually or constructively, have evidence before he is to be fixed with the knowledge which will set time running.
Indeed, in paras 140 and 142, Lord Phillips suggests that, although the appellants may for long have believed that their injuries were attributable to the exposure, they lacked knowledge of attributability because, at least until presentation to them of the Rowland report, there was no scientific evidence available that provided significant support to the belief.
And, in para 172, electing not there to apply her difficult alternative requirement of a basis in objective fact (for which facts are other than objective?), Lady Hale explains her conclusion that the appellants have lacked knowledge because they have lacked evidence.
If, indeed, upon a preliminary issue as to limitation, the court is required to weigh the nature, strength and verifying quality of the evidence as to the attributability of the injuries which became available, actually or constructively, to the claimant, and to identify the time when it did so, the determination of the issue will in my view expand into a preliminary trial entirely contrary to the intention of Parliament as expressed in the subsection.
This court should not readily jettison the welter of jurisprudence about the meaning of knowledge in section 14(1) of the Act which has accumulated over more than 20 years.
Lord Phillips has helpfully charted it in paras 112 to 121.
His analysis is, at para 117, that the Eli Lilly case, cited above, is the first of a series of decisions which equated knowledge with subjective belief and, at para 141, that the equation was wrong.
In fact the phrase subjective belief is not to be found in any of the decisions.
The concepts of belief and indeed of knowledge are inherently subjective.
Even when under section 14(3) it fixes a claimant with constructive knowledge, the law deems him to have subjective knowledge.
So I take Lord Phillips phrase to be no more than a convenient shorthand for the antithesis of what in his view is connoted by the word knowledge, namely that it must be belief which is founded on fact.
In the early case of Davis v Ministry of Defence, 26 July 1985, [1985] CLY 2017, the Court of Appeal took a narrow view of the meaning of knowledge in section 14(1) of the Act.
May LJ said that reasonable belief was not enough.
But in the Halford case, cited above, Lord Donaldson MR said, at p 443F, that reasonable belief would normally suffice and that Davis had been an exceptional case.
For twenty years Lord Donaldsons approach has prevailed.
It was specifically endorsed by Judge LJ in the Sniezek case, cited above, at P228 and ultimately also in the House of Lords, namely in the Haward case, cited above, in the passage in the speech of Lord Nicholls quoted by Lord Phillips in para 121 below.
Lord Phillips is therefore correct to point out that when, in the present proceedings, it accepted that the belief had to be held with a degree of confidence but, as an aside, declined to accept that it had to be reasonable, the Court of Appeal was, apparently without so realising, disagreeing with a statement of Lord Nicholls in the House of Lords as well as with that of Lord Donaldson.
Had I been offering a view of the meaning of knowledge in section 14(1) in circumstances in which I had been unassisted by authority, I think that I might have ventured the phrase reasoned belief rather than reasonable belief.
The word reasoned might even better have conveyed the need for the belief not only to be held with a degree of confidence (rather than to be little more than a suspicion) but also to carry a degree of substance (rather than to be the product of caprice).
But the distinction between the phrases is a matter of little more than nuance.
In the resolution of marginal issues, and even at the level of this court, there is a lot to be said for maintaining consistency in the law.
So I consider that this court should reiterate endorsement for Lord Donaldsons proposition that a claimant is likely to have acquired knowledge of the facts specified in section 14 when he first came reasonably to believe them.
I certainly accept that the basis of his belief plays a part in the inquiry; and so, to that limited extent, I respectfully agree with para 170 of Lady Hales judgment.
What I do not accept is that he lacks knowledge until he has the evidence with which to substantiate his belief in court.
Indeed we should not forget that, if the action is to continue, the court will not be directly interested in evidence about mere attributability; it will require proof of actual causation in the legally requisite sense.
What then is the degree of confidence with which a belief should be held, and of the substance which it should carry, before it is to amount to knowledge for the purpose of the subsection? It was, again, Lord Donaldson in the Halford case, cited above, who, in the passage quoted by Lord Phillips in para 115 below, offered guidance in this respect which Lord Nicholls in the Haward case, cited above, was, at para 9, to describe as valuable and upon which, at this level of generality, no judge has in my view yet managed to improve: it is that the belief must be held with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
In Broadley v Guy Clapham & Co [1994] 4 All ER 439 Hoffmann LJ, in the passage quoted by Lord Phillips at para 118 below, paraphrased Lord Donaldsons guidance in terms of a search for the moment at which the claimant knows enough to make it reasonable for him to begin to investigate whether he has a case against the defendant.
I respectfully agree with the analysis by Lord Phillips of what Hoffmann LJ meant.
The investigation upon which the claimant should reasonably embark is into whether in law he has a valid claim (in particular whether the act or omission of the defendant involves negligence or other breach of duty, being a matter of which the claimant is specifically not required to have had knowledge under section 14(1)) and, if so, how that claim can be established in court.
So it is an investigation likely to be conducted with the assistance of lawyers; but, in the light of their advice, it may well also embrace a search for evidence, including from experts.
The focus is upon the moment when it is reasonable for the claimant to embark on such an investigation.
It is possible that a claimant will take legal advice before his belief is held with sufficient confidence and carries sufficient substance to make it reasonable for him to do so.
Thus, as Judge LJ pointed out in the Sniezek case, cited above, at P229 and P232, it does not automatically follow that, by the date when he first took legal advice, the claimant will have acquired the requisite knowledge; but such an inference may well be justified.
I hasten however to attach an obvious rider.
From the fact that a claimant may well need to consult experts after he has acquired the requisite knowledge, it in no way follows that he will have acquired such knowledge by the date when he first consults an expert.
Section 14(3) expressly recognises that the facts which he is required to know may be ascertainable by the claimant only with the help of experts and deems him to have acquired such knowledge at the point at which he might, with their help, reasonably have been expected to acquire it.
In my view the date upon which the claimant first consulted an expert is not, on its own, likely to assist the court in determining whether by then he had the requisite knowledge.
Instead the court will have regard broadly to the confidence with which the claimant held the belief, and to the substance which it carried, prior to his consulting the expert (and in particular, no doubt, the reasons which induced the claimant to consult him) and also, if the conclusion is that at that prior stage the claimant lacked belief of the requisite character, the effect upon the claimants belief of his receipt of the experts report.
In short the assistance given to a claimant by an expert in this respect can be of two kinds.
One is assistance in his acquiring knowledge of the facts required by section 14.
He may, for example, advise the claimant that he has a medical condition, of which he was previously unaware, which provides him with a substantive basis for believing that his injury is attributable to an act or omission of the defendant.
The other is the provision of evidence which will, in court, help him to substantiate the claim which, in the light (among other things) of his knowledge of the limited matters specified by section 14(1), he proposes to bring.
To the above, at its level of generality, I find it impossible to make useful addition.
In principle, and subject to the fact that the assault by the appellants in this court upon the reasoning of the Court of Appeal is of a generic character, there is no escape from turning at this stage to attend at least broadly to the individual facts of the nine appeals before the court.
They are nine out of a large number of claims which have been made subject to a Group Litigation Order because they give rise to common or related issues of fact or law: see CPR 19.10.
Indeed, along with the claim of the late Mr Sinfield continued by his widow, which is not time barred, they were no doubt chosen because, so it was considered, they had material similarities with many of the other claims in the group and thus their determination would inform that of many of the others.
But, with respect to Lord Phillips, I cannot subscribe to his conclusion, at paras 159 and 160 below, that the existence of the other claims in the group should affect determination of the nine appeals.
CPR 19.12(1)(a) provides that this courts judgment or order is binding on the parties to all other claims presently within the group unless the court orders otherwise.
If, as to which I have no view, there would be any particular injustice in visiting adverse judgments in the nine appeals upon other, materially similar, claims within the group, the quoted clause would cater for it.
Mr Ayres
Mr Ayres claim was issued on 1 February 2007.
He died on 29 November 2010.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 1 February 2004.
He had served with the RAF as an aircraft fitter on Christmas Island in 1957 when detonations had taken place off Malden Island, and again in 1958, when others had taken place off Christmas Island itself.
He was well aware that the detonations caused radiation and that the aeroplanes upon which he worked had had to be decontaminated for that reason.
In the late 1990s he developed haematuria (blood in the urine).
By then he was aware of the existence of the British Nuclear Tests Veterans Association (BNTVA).
He knew that it was an action group committed to secure compensation for veterans who suffered injuries believed to have been caused by radiation and that, to that end, it and three of its members had taken proceedings in the European Court of Human Rights (the ECtHR) in which they had alleged exposure of the servicemen to ionising radiation and consequential illnesses.
He kept newspaper articles about the campaign.
Mr Ayres said in evidence that, when he developed haematuria, he firmly believed that it was capable of having been caused by his exposure to radiation.
But the injury upon which his action is founded is prostate cancer, with which he was diagnosed on 2 December 2003.
His evidence, unsurprising in the light of what he already believed, was that, on receiving the diagnosis, he knew that there was a real possibility that the cancer had also been caused by his exposure to radiation.
Mr Brothers
Mr Brothers died on 13 June 2000 and his widows claim under the Fatal Accidents Act 1976 was issued on 23 December 2004.
Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 23 December 2001.
Mr Brothers had served with the RAF as a navigator on sniffer planes in 1956 and 1957 which collected radioactive samples from clouds generated by the detonations.
In 1997 he was diagnosed as suffering from cancer of the oesophagus.
For at least the previous 20 years it had been his practice to smoke 20 cigarettes a day.
At the time of the diagnosis, however, Mrs Brothers knew that cancer was capable of being caused by radiation and that Australian veterans had claimed damages for illnesses, including cancer, which they alleged to have been the result of exposure to radiation.
Although in evidence she explained that Mr Brothers denied to her that it was possible that his cancer had been the result of his exposure, she added that she believed that it was capable of having caused it.
Indeed in letters to two doctors in March 2002 she wrote that she had always believed that his cancer had been caused by it.
Mr Clark
Mr Clark died on 28 September 1992.
His widows claim under the 1976 Act was issued on 31 March 2008.
Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 31 March 2005.
Mr Clark had done part of his National Service on Christmas Island as a Sapper with the Royal Engineers in 1957 and 1958 when detonations had taken place in the vicinity.
In February 1991 he was diagnosed with the lung cancer from which, within two years, he was to die.
From his teenage years he had smoked 20 cigarettes a day.
Days prior to the diagnosis, however, he had mentioned his service on Christmas Island to the doctors and had told them that he had been unprotected.
He got in touch with the BNTVA.
In March 1991 he signed a home made statement, for possible reference in future court proceedings, in which he described his exposure to the tests, his subsequent suffering from various conditions and the recent diagnosis of his terminal cancer.
Of those actions on his part Mrs Clark was aware.
Shortly after his death she made an unsuccessful application for a war pension on the basis that his cancer had been linked to his service on Christmas Island.
In 2002 she consulted solicitors about bringing a claim under the 1976 Act.
Mr Dickson
Mr Dicksons claim was issued on 23 December 2004.
He died of heart disease in May 2006.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served as a lance corporal in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity.
Soon afterwards he began to suffer skin disorders and, by 1990, he had begun to suffer a variety of other illnesses, including colitis.
In 1986 he became a member of the BNTVA and embarked upon a tireless public campaign on its behalf for veterans to be compensated for injuries alleged to have been sustained by exposure to radiation.
He had, so Foskett J found, a genuine belief, which he communicated to his doctor, that his own ill health had been caused by exposure to it; and he also believed that the respondents denials about the level of exposure to servicemen had been untrue.
In 1989 he applied for a war pension on the ground that his exposure to it in 1958 had damaged his immune system; as in the case of all the other applications for war pensions to which I will refer, the respondent denied that the detonations had caused any significant exposure to radiation and the application was refused.
In 1990 Mr Dickson was for some reason expelled from the BNTVA but continued his campaign alone.
In 1992 he was quoted in The People as saying, on a basis which is unclear, that his army files demonstrated his exposure to a high level of radiation; he added that he wanted action.
Mr Hart
Mr Harts claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had performed his National Service as an engineer mechanic with the Royal Navy and in 1956 had served aboard HMS Diana near the Monte Bello islands when its function had been to monitor the fall out from two nuclear explosions conducted there.
In 1959, following his return to civilian life, he first developed a lipoma (a benign fatty lump on the skin) and, during the next decades, developed numerous further lipomas which spread all over his body.
From 1973, if not before, he considered that they might have been caused by his exposure to radiation in 1956.
In 1988 he joined the BNTVA and well understood the link which it was asserting between radiation and the injuries of its members.
In 1991 he applied for a war pension on the basis that his lipomas had been caused by exposure to radiation.
Much later, namely in July 2002, Mr Hart was diagnosed with bowel cancer, whereupon he consulted solicitors.
Thereafter his claim was issued reasonably promptly.
But he claimed damages for the lipomas as well as for the cancer and it is now common ground that the inquiry is into his knowledge of their attributability.
Mr McGinley
Mr McGinleys claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served as a plant operator in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity.
Soon afterwards he began to suffer from bouts of vomiting and diarrhoea and from blisters on the skin.
In 1976 he was diagnosed as infertile.
He was a founder member of the BNTVA.
He was its Chair from its inception in 1983 until 2000; and he was perhaps its most vociferous spokesman.
In 1984 he applied for a war pension on the ground that exposure to radiation in 1958 had caused his infertility.
In 1991, with the assistance of a journalist, he wrote a book, entitled No Risk Involved, in which he set out his experiences on Christmas Island and his subsequent ill health.
In 1991 he launched one of the applications to the ECtHR to which I have referred in para 16.
In a document in support of it, signed by him in 1993, he referred to the realisation that his prolonged and continuing debilitating illnesses and infertility were caused by his deliberate and unprotected exposure by the UK in 1958 to the detonations.
In his present claim, however, Mr McGinley does not repeat the allegation that the exposure was deliberate, known as the guinea pig allegation.
Mr Noone
Mr Noones claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served in the RAF as an air frame mechanic on Christmas Island in 1957 when detonations had taken place in the vicinity.
From then onwards he suffered from severe and persistent acne.
He soon came to suspect that it had been caused by exposure to radiation.
By 1983, notwithstanding contrary advice from a consultant dermatologist, he had come to believe that it had been so caused.
On 3 June 1983 he was reported in The Guardian as having stated that the exposure had caused his condition.
In the same year he joined the BNTVA and made a similar statement in an application for a war pension.
In 1986 and 1989 he suggested likewise to different GPs.
Mr Ogden
Mr Ogden died of cancer on 5 August 2004 and his step daughters claim for the benefit of his estate was issued on 23 December 2004.
Under section 11(4) and (5) of the 1980 Act her claim was barred if Mr Ogden first had the requisite knowledge prior to 5 August 2001.
He had served with the RAF as an air wireless fitter on Christmas Island in 1958 when detonations had taken place in the vicinity.
In 1986 he suffered a brain tumour, became a member of the BNTVA and promptly applied for a war pension on the basis that the tumour had been caused by his exposure to radiation in 1958.
In 1994 he was diagnosed with cancer of the colon and on 12 April 2001, in making a second application for a pension so as to encompass the cancer as well as the tumour, he wrote that they had been caused by his proximity to the detonations.
Mr Rokoratu
The Claim of Mr Rokoratu (who has sadly died days prior to the delivery of these judgments) was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He is a citizen of Fiji and had served as a stevedore with the Fijian Royal Naval Volunteer Reserves on Christmas Island in 1958 when detonations had taken place in the vicinity.
From 1961 onwards he suffered a variety of illnesses, in particular lipomas.
In October 1998 he applied to the ECtHR on the basis that he had suffered injuries as a result of exposure to radiation on Christmas Island.
In a report dated 9 November 1998 in support of the application a consultant physician in Fiji wrote that his lipomas were likely to be linked to his exposure to the detonations in 1958.
Mr. Rokoratu told Foskett J that the report had confirmed his belief in the link.
In my view the Court of Appeal was correct to conclude that all nine of the appellants had the requisite knowledge prior to the period of three years relevant to them.
For the facts of each case which I have distilled in the above paragraphs drive a conclusion that, prior to the relevant period, each reasonably believed that the injury was able to be attributed to the nuclear tests conducted by the respondent between 1956 and 1958.
Their many private and public statements down the years about the cause of their conditions; the nation wide campaign for compensation pursued for so long and with such vigour through the BNTVA; the applications for war pensions; and the applications to the ECtHR: all these were the product of reasonable beliefs.
The appellants held them with sufficient confidence to have made it reasonable for them to begin to investigate whether they had valid claims against the respondent.
In asking the court to allow them further time in which to obtain it, Mr. Dingemans concedes that even today the appellants lack evidence with which to establish a credible case that the injuries were caused by the tests; and so it follows that, irrespective of when they began to investigate whether they had valid claims against the respondent, they would probably have learned that, as remains the position today, their claims had no reasonable prospect of success.
But that is entirely irrelevant to an inquiry under sections 11(4) and 14(1): once the requisite knowledge has arisen, the difficulty of actually establishing the claim confers no right thereunder to a further, open ended, extension of the time within which the action must be brought.
In so saying I have returned to the irrelevance of evidence to an inquiry under the subsections.
If their actions were to proceed, the nine appellants therefore needed to persuade the court to exercise its discretionary power under section 33 of the 1980 Act to disapply section 11(1).
Section 33 requires the court first, by subsection (1), to conduct an inquiry into the degree of prejudice likely to be suffered by the defendant in the event of exercise of the power and by the claimant in the event of a refusal to do so; and second, by subsection (3), to have regard to all the circumstances of the case and in particular to six specified matters.
But the appellants grounds of appeal require this court to consider only one, generic, feature of the reasoning which led the Court of Appeal to decline to exercise the power under section 33 in any of the nine actions; and, at the end of his oral presentation of the appeals which stretched in effect over almost two days, Mr. Dingemans wisely devoted only the final five minutes to the ground referable to section 33.
It is that the Court of Appeal wrongly elevated the issue of causation to be the determining factor under the section.
It is indeed a fair reading of that courts full judgment upon the issue that it regarded the difficulties which confront the appellants in establishing that their injuries were caused by the tests as determinative against exercise of the power under section 33.
I stress, however, that it carefully weighed all the other relevant factors, for example that, as will have been noted, the claim of Mr Ayres was out of time by less than two months whereas the claims of the other eight appellants were out of time by between three years (in the case of Mr Rokoratu) and 18 years (in the case of Mr Noone).
It is undesirable that a court which conducts an inquiry into whether a claim is time barred should, even at the stage when it considers its power under section 33, have detailed regard to the evidence with which the claimant aspires to prove his case at trial.
But the ten claims placed before Foskett J were of particular complexity; and the nature of the submissions made to him on behalf of the appellants about the meaning of knowledge for the purpose of section 14(1) of the 1980 Act led him to undertake, over ten days of hearing and expressed in 885 paragraphs of judgment, a microscopic survey of the written evidence available to the parties, in particular to the appellants, in relation to causation.
At all events the result was to yield to the Court of Appeal an unusual advantage, namely a mass of material which enabled it with rare confidence to assess the appellants prospects of establishing causation.
It expressed its conclusion in terms of the very great difficulties which confronted the appellants in that regard.
But, in line with the realistic concession made by Mr Dingemans in this court, the fact is that, for the reasons set out by Lord Phillips in paras 156 to 158 below, their claims have no real prospect of success.
In my view it would have been absurd for the Court of Appeal to have exercised the discretion to disapply section 11 so as to allow the appellants to proceed in circumstances in which the next stage of the litigation would be likely to have been their failure to resist entry against them of summary judgment pursuant to CPR 24.2(a)(i).
In this regard I do not share the view of Lord Phillips, at para 160 below, about the relevance of the fact that, at least until that next stage, the action brought by the late Mr Sinfield, together no doubt with other actions in the group which do not fall foul of section 11, are to proceed.
LORD WALKER
The decision of the House of Lords in Cartledge v E Jopling & Sons Ltd [1963] AC 758 revealed a serious injustice in the law relating to limitation of actions.
Workmen suffering from an insidious industrial disease, pneumoconiosis, might find that their rights of action against their employers were statute barred before they even knew that they were suffering from the disease.
To remedy that injustice Parliament enacted the Limitation Act 1963.
That Act was severely criticised by the House of Lords in Smith v Central Asbestos Co Ltd [1973] AC 518 and it was repealed and replaced by the Limitation Act 1975, now consolidated as part of the Limitation Act 1980 (the 1980 Act).
The need for the claimant to know the legal significance of the proposed defendants acts or omissions (one of the main points of criticism) was removed.
But two important general features were reproduced (though in a different form) in the new legislation.
One was that the commencement of the limitation period was to be triggered by the claimants actual or constructive knowledge of certain facts.
The other was that these included the fact that the claimants personal injuries were attributable to conduct of the proposed defendant (which was described in the original statute in terms of negligence, nuisance or breach of duty, but in the new statute as the act or omission which is alleged to constitute negligence, nuisance or breach of duty).
The new legislation also has produced difficult problems for the courts.
They can be roughly grouped under two general heads.
First, what is it that the claimant has to know at the date of knowledge (the what? question).
Secondly, how must the claimant know what he has to know that is, what state of mind, assessed subjectively or objectively or by a mixture of the two, amounts to knowledge for this purpose (the how? question).
The what? question depends on the interpretation and application of section 14(1) of the 1980 Act, and in particular (since it gives rise to most of the problems) section 14(1)(b), which relates to the fact that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
The how? question depends partly on the interpretation and application of section 14(3) of the 1980 Act: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.
It also depends on giving a fair and workable meaning to the provisions as a whole.
Almost all of the many authorities cited to the Court in this appeal are concerned with one or both of these questions.
My perception is that the case law has made more progress in clarification of the what? question than of the how? question.
That may be because in some of the leading cases the House of Lords or the Court of Appeal has been able to reach a conclusion on actual knowledge and has not found it necessary to consider constructive knowledge.
For instance in Haward v Fawcetts [2006] 1 WLR 682 the defendants (a firm of accountants) relied only on the actual knowledge of the claimant, and the House of Lords found that his actual knowledge of the financial state of the business in which he had invested was sufficient to make it reasonable for him to consider whether his accountants advice had been flawed.
The case was concerned with section 14A of the 1980 Act, added by the Latent Damage Act 1986, but the same principles apply.
So the difficulties of constructive knowledge do not feature in Lord Nicholls admirably brief statement of the relevant principles at paras 7 to 15.
In Spargo v North Essex District Health Authority [1997] PIQR P235, P242 Brooke LJ referred to this branch of the law being already grossly over loaded with reported cases.
That was fifteen years ago, and the overload has increased.
But this appeal requires the Court, in the context of heavy group litigation, to grapple with some unresolved difficulties.
In view of the differences of opinion in the Court I wish, while conscious of adding to the overload, to set out my reasons in my own words.
I start with some observations on the what? question and then address the how? question.
The what?
question
The case law on the concept of attributable has developed in a coherent way.
It is not without its difficulties, especially in cases involving specialised and technical areas of expertise (discussed by Lord Mance in Haward v Fawcetts [2006] 1 WLR 682 at paras 114 to 121).
But on the whole the case law is consistent and provides a workable test.
In Smith v Central Asbestos Co Ltd [1973] AC 518, 543 Lord Pearson quoted the Oxford English Dictionary definition of attributable (capable of being attributed or ascribed, especially as owing to, produced by) and stated that attributable refers to causation.
This view has been consistently followed in later authorities on the legislation in its present form.
In Haward v Fawcetts [2006] 1 WLR 682, para 45, Lord Scott quoted a passage from the judgment of Hoffmann LJ in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181, which conveniently sets out some of the most important cases: In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence .
It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know the essence of the act or omission to which the injury is attributable (Purchas LJ in Nash v Eli Lilly & Co [1993] 1 WLR 782, 799) or the essential thrust of the case (Sir Thomas Bingham MR in Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1238) or that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based (Hoffmann LJ in Broadley v Guy Clapham & Co [1993] 4 Med LR 328, 332).
In this context, therefore, attributable has been interpreted by the courts as directed to a real possibility of a causal link: Lord Nicholls in Haward v Fawcetts at para 11, citing Nash v Eli Lilly & Co at pp 797 798.
In that case Purchas LJ (who gave the judgment of the Court) quoted with approval some observations of Hidden J in his second judgment on the preliminary issue: The stark strength of the word knowledge does not stand alone.
It is knowledge that attribution is merely possible, a real possibility and not a fanciful one, a possible cause as opposed to a probable cause of the injury.
At this point the what? question and the how? question come into close proximity, since confident knowledge that there may be some causal link between two events is not dissimilar from a less confident belief that there is indeed a causal link between them.
So the way in which attributable has been interpreted in the case law eases the Courts task in deciding whether knowledge includes more or less firmly held belief.
But it does not remove all the difficulties, as this appeal shows.
Broadley v Guy Clapham & Co [1994] 4 All ER 439 was an unusual case because it involved a double limitation point.
Mrs Broadley had a complaint against a surgeon who had operated on her in August 1980, but she did not consult a solicitor (the defendant) until June 1983.
The solicitor arranged for her to see a specialist in July 1983, who gave a favourable oral opinion.
But for some unexplained reason nothing was done to pursue the claim and in August 1990, having taken other legal advice, Mrs Broadley sued the solicitor whom she had consulted in 1983.
He pleaded that the claim against him was statute barred, because (as he contended) her claim against the surgeon became statute barred in August 1983, and so that was when any cause of action against him arose.
So there was an issue as to whether the standard three year period applied to her original claim against the surgeon, or was to be treated as extended under sections 11 and 14 of the 1980 Act.
In his judgment Hoffmann LJ used a colloquial expression, barking up the wrong tree, which has been repeated in some later cases.
He said ([1994] 4 All ER 439, 449): Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant.
But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.
He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree.
Driscoll Varley v Parkside Health Authority [1991] 2 Med LR 346 is mentioned a little earlier in the judgment.
It was a case in which the plaintiff thought that an injury to her leg had been caused by a surgeons negligence, but later discovered that the real cause was not the operation but the removal of the leg from traction during subsequent treatment.
It seems a rather marginal example of barking up the wrong tree, since the plaintiffs misapprehension was in relation to the causative event in a single course of treatment, although the real complaint was about the after care rather than the operation itself.
The point is relevant in this appeal because Mr Dingemans QC put in the forefront of his case the submission that those of his clients who thought they had been exposed to ionising radiation were barking up the wrong tree, because they were focusing on prompt (gamma ray) radiation.
Foskett J was inclined to accept that submission (para 515, in the course of the discussion of his preferred view).
The Court of Appeal (para 86) rejected this, having observed in the previous paragraph that the claimants contention on this point demonstrated a fundamental misunderstanding of the concept of knowledge for limitation purposes.
The how? question
That leads on to the how? question.
Many of the authorities which discuss this question are concerned with a range of significant injuries (such as dermatitis, hearing loss or pneumoconiosis) caused by an employers failure to provide a proper working environment and a safe system of work.
One employee may be unaware of even the possibility that his injury is caused by his working environment.
Another may be in a state of suspicion, which he would wish to have confirmed by a medical expert.
Yet another may be totally convinced, on not wholly rational grounds, that the working environment is the cause of his trouble.
One may wait an unreasonable length of time before taking medical advice; another may consult his general practitioner, but get no further; yet another may be referred to a specialist consultant.
And where the potential claimant does seek medical advice, whether from a general practitioner or from a specialist, it may on occasion turn out to be wrong.
So the courts have had to interpret and apply the provisions of section 14 to a wide variety of factual situations.
I shall consider some of them, in chronological order.
Like Lord Phillips, I start with Davis v Ministry of Defence 26 July 1985, CA transcript 413 of 1985.
The plaintiff worked for the defendant as a welder from 1955 until 1971.
In 1973 he started an action for damages for dermatitis which he and his general practitioner thought to have been caused by dust in his working environment.
For reasons that are not clear, the first action lapsed but in 1982 Mr Davis started a fresh action.
The Court of Appeal allowed his appeal against an order striking out the new action.
Lord Phillips sets out two passages from the judgment of May LJ including his much quoted observation: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough.
I have to say that I find the judgment of May LJ quite puzzling.
Early in the judgment he directed himself, correctly, that attributable meant capable of being attributed to.
He recorded that at the time when the first action was commenced, Mr Davis firmly believed that his trouble was caused by his work, that his doctor shared that view, and that a doctor who examined Mr Davis on behalf of the Ministry considered his condition to be not unconnected with the work which he had been doing.
On the other hand Mr Davis stated in an affidavit that his specialist medical opinions were in some respects conflicting and confused and that having considered counsels final opinion he was forced to conclude that his dermatitis might have been caused by his own predisposition.
That seems to leave open at least the possibility that it had been caused by dust in the workplace.
But May LJ referred to the combined state of mind of the appellant himself, as a layman, and that of his doctors and legal advisers as not amounting to knowledge in the relevant sense.
I am left wondering whether, although asking himself whether they knew that the dermatitis was capable of being attributed to the working environment, May LJ was setting too high a threshold in his interpretation of capable of being attributed, as compared with the passages referred to in para 35 above.
In Halford v Brookes [1991] 1 WLR 428 Lord Donaldson of Lymington MR described the facts of Davis v Ministry of Defence as highly unusual.
He summarised the advice given to Mr Davis as more conclusively unfavourable to him than appears from my reading of the transcript.
But on any view Halford v Brookes was itself a much more unusual case, in that it was concerned (under section 14(1) (c)) with the identity of the proposed defendant or defendants in a claim arising out of a lethal attack on a teenage girl.
That was the context in which Lord Donaldson made his much quoted observation that reasonable belief will normally suffice.
But in fact he concluded that the plaintiff (the dead girls mother) knew (with sufficient confidence to justify embarking on the preliminaries to the issue of a writ against both defendants) all the facts listed in section 14(1), including that the acts of violence against her daughter were done by one or other, or both, of the proposed defendants.
The Court of Appeal held that actual knowledge was established, and that it was not a case in which constructive knowledge had any part to play.
The Court of Appeal exercised discretion under section 33 of the 1980 Act to allow the claim to proceed.
Neither of those cases can be said to have settled the law, but Halford v Brookes has had much more influence on its development.
Nash v Eli Lilly & Co [1993] 1 WLR 782 is the first case bearing any resemblance to the present appeal.
The limitation issues arose in class actions alleging injuries caused by a pharmaceutical product for relief of arthritic pain, marketed in the United Kingdom as Opren between October 1980 and August 1982, when it was withdrawn because it was producing unacceptable side effects including photosensitivity and onycholysis, and sometimes fatal liver and kidney failure.
On the trial of preliminary issues Hidden J held that the claims of almost all of the lead plaintiffs were statute barred, and declined to exercise discretion under section 33 in their favour.
The Court of Appeal allowed three of the eighteen appeals, two on the grounds that the claims were not statute barred, and one by exercising discretion under section 33 (the judgment on the individual appeals is not reported).
The judgment of the Court of Appeal had to deal with three aspects of section 14(1): significant injury under para (a), attributability under (b), and (because different companies in the pharmaceutical group were sued) identification of defendants under para (c).
It also had to consider the how? question, including constructive knowledge under section 14(3).
In a section of the judgment headed Knowledge the Court of Appeal discussed Davis v Ministry of Defence and Halford v Brookes and tended to prefer the approach in the latter case (p 792): We do not, of course, intend to lay down a definition of the word knowledge for the purposes of a statute in which Parliament left the word to speak for itself.
In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.
Whether or not a state of mind for this purpose is properly to be treated by the court as knowledge seems to us to depend, in the first place, upon the nature of the information which the plaintiff has received, the extent to which he pays attention to the information as affecting him, and his capacity to understand it.
There is a second stage at which the information, when received and understood, is evaluated.
It may be rejected as unbelievable.
It may be regarded as unreliable or uncertain.
This was essentially a subjective approach.
In relation to the issue of significant injury (which was an important issue in that case) a subjective element may appear to be mandated by section 14(2), but the House of Lords has recently shown that approach to be mistaken: see Lord Hoffmann in A v Hoare [2008] AC 844 at paras 33 to 35; compare Lady Hale at paras 56 to 61.
Taken together, the unanimous decisions of House of Lords in A v Hoare (on section 14(2)) and Adams v Bracknell Forest Borough Council [2005] 1 AC 76 (on section 14(3); paras 42 to 51 are particularly in point) appear to me to mark a decisive shift away from a subjective approach on these issues.
What was within a claimants actual knowledge is undoubtedly a subjective question.
But the notion that whether a claimant has knowledge depends both upon the information he has received and upon what he makes of it (Nash v Eli Lilly & Co [1993] 1 WLR 782, 795) can no longer be accepted, at any rate without a lot of qualification.
The recent authorities recognise that the policy of the law is for the date of knowledge to be ascertained in the same way for all claimants, without regard to their personal characteristics, which can be taken into account at the later stage of exercising discretion under section 33 of the 1980 Act.
As Lord Hoffmann put it in Adams v Bracknell Forest Borough Council [2005] 1 AC 76, para 45: The Court of Appeal in Forbes [v Wandsworth Health Authority [1997] QB 402] was right in saying that the introduction of the discretion under section 33 had altered the balance.
As I said earlier, the assumptions which one makes about the hypothetical person to whom a standard of reasonableness is applied will be very much affected by the policy of the law in applying such a standard.
Since the 1975 Act, the postponement of the commencement of the limitation period by reference to the date of knowledge is no longer the sole mechanism for avoiding injustice to a plaintiff who could not reasonably be expected to have known that he had a cause of action.
It is therefore possible to interpret section 14(3) with a greater regard to the potential injustice to defendants if the limitation period should be indefinitely extended.
Actual knowledge and constructive knowledge
Adams shows that in Nash v Eli Lilly & Co the Court of Appeal was wrong, in para 4 of the summary of its conclusions (at p796) to state that the temporal and circumstantial span of reasonable inquiry [under section 14(3)] will depend on the factual context of the case and the subjective characteristics of the individual plaintiff involved.
But that is not the only point on section 14(3) that calls for examination.
As already mentioned, many of the reported cases were decided simply on actual knowledge.
It may be that both litigants and judges tend to regard that as a more satisfactory approach, with a focus on the claimants oral evidence given at the hearing of a preliminary issue, or at trial.
The issue of constructive knowledge generally calls for more elaborate pleadings and for expert evidence.
Although the general burden of proving that he is entitled to the benefit of a deferred date of knowledge is on the claimant, in practice it is for the defendants to raise issues under section 14(3), as Haward v Fawcetts illustrates (the issue of burden of proof in these cases was fully, and in my view correctly, examined by Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159, 169 173).
So in practice the parties tend to join issue on actual knowledge, and judges to reach a conclusion on that issue, with constructive knowledge being held in reserve, as it were.
As Lord Phillips points out in para 119 of his judgment, the well known survey of the relevant principles made by Brooke LJ in Spargo v North Essex District Health Authority [1997] PIQR P235, P242 does not deal with constructive knowledge at all.
But understandable though it is that courts may tend to look first at actual knowledge, that approach does not give full effect to Parliaments purpose in enacting section 14(3).
What the statute requires is a single inquiry as to the claimants knowledge, which under section 14(3) is extended, not only to facts which he could have learned with the help of medical or other appropriate expert advice, but also more generally to facts observable or ascertainable by him.
There is little authority as to these wide general words, but it was suggested in Nash v Eli Lilly & Co [1993] 1 WLR 782, 800, that they would include any relevant information that had been given wide publicity in the press or on television, for instance as to a drugs unacceptable side effects, or its withdrawal from the market.
In this appeal the Ministry of Defence has pleaded a large number of matters of that sort, starting in 1945 and going down to 1999, in sub paragraphs (a) to (j) of para 31 of its points of defence on the limitation issue.
Adams marks a very important shift towards a more objective approach to the claimants state of knowledge.
This goes a long way to blunt or blur the clear distinction, in ordinary discourse, between knowledge and belief.
As Simon Brown LJ said in ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, 221, knowledge and belief inevitably shade into one another.
Lord Donaldsons well known statement that reasonable belief will normally suffice is reinforced, but weight must be given to the belief being reasonable or, as Lord Wilson suggests, reasoned.
The significance of legal advice
There is one further problem about the how? question that I must address, before trying to draw some conclusions.
It is the significance of the claimant seeking legal advice by consulting a solicitor.
This is a topic that crops up repeatedly in the authorities, and judicial opinions have varied a good deal.
In Halford v Brookes [1991] 1 WLR 428, 434, Russell LJ rejected the suggestion that other appropriate expert advice included legal advice.
One of the most important changes, when the Limitation Act 1963 was replaced by the Limitation Act 1975, was to get away from the claimant needing to know about the technicalities of different causes of action.
In general, legal advice is not a prerequisite to knowledge within the meaning of the 1980 Act (though this must be qualified in some cases within section 14A concerned with questionable advice on technical matters such as financial services and pensions: Haward v Fawcetts [2006] 1 WLR 682, paras 59 to 62 and 113 to 117).
In line with that, in Halford v Brookes (p 443) Lord Donaldson put forward the test of knowledge as know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
This formulation has been taken up in later cases, notably Nash v Eli Lilly & Co [1993] 1 WLR 784, 796 (point 3), Spargo v North Essex District Health Authority [1997] PIQR P235, P242 (point 3) and Haward v Fawcetts [2006] 1 WLR 682, para 9 (Lord Nicholls).
That is a formidable line of authority.
But still there is no clear consensus.
Most strikingly, in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213, Judge LJ (at P229) rejected the notion that time automatically starts to run against a client who has taken legal advice, whereas Simon Brown LJ (at P 234) found it difficult indeed to imagine a case where, having consulted a solicitor with a view to making a claim for compensation, a claimant could still then be held lacking in the requisite knowledge.
I respectfully but unhesitatingly prefer the view of Judge LJ.
The typical scenario for a claim for personal injury sustained from a bad working environment (exemplified by Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129) is for the potential claimant to go for medical advice to his general practitioner.
The overworked GP is naturally more interested in diagnosis and treatment than in aetiology, unless his patient presses him.
It is often a trade union representative (or in Mr Alis case a community worker) who at some later date advises the claimant to take legal advice, which at that stage can be no more than preliminary; it generally results in a referral to a medical specialist who is asked to advise on the likely cause of the trouble, as well as on the seriousness of the injury and its prognosis.
The facts of Sniezek, as recounted in detail by Bell J at P216 to P217, show how protracted and uncertain that process can be.
Mr Sniezek first consulted his union solicitors in 1990; it was 1994 before he obtained favourable medical advice linking the hyposensitivity of his aerodigestive tract with polymer exposure; and further investigations postponed the issue of the writ until 1998 (the reference to 1988 on P217 of the report is one of several obvious errors in editing).
So in practice a claimants first visit to a solicitor may do no more than initiate the process of obtaining expert medical advice.
That process may take years, with the solicitors function limited to the collation of medical and other technical evidence (such as the nature of the polymer in Ali, or the nature of the pesticide in Griffin v Clwyd Health Authority [2001] EWCA Civ 818, [2001] P1QR P31).
In the present appeal several different branches of science and medicine are relevant to the what? question under section 14(1)(b), as appears from the different specialisms of the expert witnesses on both sides.
To return to the original formulation in Halford v Brookes, it is clear that Lord Donaldson envisaged that the collection of evidence to support the claimants claim was something which would normally come after the date of knowledge, when the claimant first knows that he has a possible claim.
That is how it was understood by Hoffmann LJ in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 449.
In a passage just before his reference to barking up the wrong tree Hoffmann LJ observed: How does one determine the essence of the act or omission? The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant.
He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ.
Sniezek shows that in practice three years may not be enough where the claim for personal injury raises difficult issues of causation, and in the present appeal the causation issues are very complex indeed.
Nevertheless there is a distinction in principle between a claimants knowledge (actual or constructive) that he has a real possibility of a claim (Brooke LJs second point in Spargo), and the assembly by the claimant and his legal team, with the help of experts, of material justifying the commencement of proceedings with a reasonable prospect of success.
Of all the difficulties in this anxious appeal, the biggest difficulty of all, to my mind, is in the practical application of this abstract distinction between knowledge of the essence of a claim and the evidence necessary to prove it to the requisite legal standard.
The judgments below
There has been a good deal of discussion of the judges preferred view referred to in paras 514 to 521 of his judgment.
It is apparent from para 521 that it amounts to setting a relatively high threshold [to] the level of appreciation of the material matters.
But it is not entirely clear whether this relates to the degree of specificity of the section 14(1)(b) facts (which in this appeal is much the most important element in the what? question) or to the clarity or confidence of the lead claimants state of mind (the how? question).
Paras 514 to 517 are concerned with the specificity of the facts, but then the judge seems to move on to the claimants state of mind.
The Court of Appeal had no doubt that the preferred view set the threshold too high.
It stated (para 85): It is clear from the principles set out in Spargo that it is the knowledge of possibilities that matters; a claimant needs only enough knowledge for it to be reasonable to expect him to set about investigation.
He can have knowledge even though there is no helpful evidence yet available to him.
The claimants contention that they did not have knowledge of possible attributability until they received the results of the Rowland study demonstrates a fundamental misunderstanding of the concept of knowledge for limitation purposes.
This is to be contrasted with the judges preferred view (in para 514 of his judgment) that a claimant would not have knowledge unless he appreciated, not only that his injury was capable of being caused by abnormal radiation, but also that there is some credible evidence that he was exposed to ionising radiation at an abnormal level during, or shortly after, and in consequence of, the nuclear tests.
The Court of Appeal described the judges preferred view (and the critical importance which it places on the Rowland study) as demonstrating a fundamental misunderstanding.
In my respectful view this criticism is too strongly expressed.
The judge had, during his ten days of the hearing of the preliminary issue, and the further period when he was writing his very clear and comprehensive judgment, taken on board an enormous mass of complex evidence and some intricate legal submissions.
There was no legal test by which he could, as with an alchemists touchstone, distinguish essence from evidential support.
It was a matter of considering the voluminous material before him, stepping back, and making an evaluative judgment.
It is an exercise on which an appellate court will be slow to differ from the trial judge who has seen and heard several of the lead claimants (or their widows) giving evidence.
I respectfully doubt whether the Court of Appeal was right to differ from the judge in his conclusion that the belief of many of the claimants that they had been exposed to prompt radiation was a significant misconception which (had it stood alone) would have amounted to barking up the wrong tree.
But as the Court of Appeal pointed out, it did not stand alone.
The facts as to fallout exposure to alpha and beta radiation were readily available and widely known, and exposure to fallout was pleaded as part of the lead claimants case.
More crucially, however, I respectfully consider that the judge was wrong, not only in his preferred view, but also in his evaluation of the state of knowledge at the lower level of appreciation which he instructed himself to apply.
Even under the more demanding test adopted on the preferred view, it was common knowledge from the 1980s (indeed, from soon after the bombs dropped on Hiroshima and Nagasaki in 1945) that exposure to fallout radiation could cause leukaemia, many other forms of cancer, infertility and other serious injuries.
It was also well known that many of the 22,000 service personnel who took part in the nuclear tests had been exposed to fallout radiation which, while relatively low, was above the normal background radiation to which all living creatures are exposed.
The real difficulty for the claimants was to produce cogent evidence, either from their individual medical histories or from epidemiological material, that the dose of radiation was sufficiently high for a causative link with their injuries to be established on the balance of probabilities.
The Ministry of Defence adamantly maintained throughout that their exposure was for practical purposes negligible, and this seems to have been confirmed by successive NRPB epidemiological reports in 1988, 1993 and 1999 (apart from a small additional risk in respect of most forms of leukaemia and multiple myeloma) and by the Phelps Brown study (of cataracts) in 1996 1997.
The Rowland study (the results of which were made available to the claimants in 2007, before its full publication in 2008) was seen by the claimants and their advisers as a long awaited breakthrough in the evidence of causation (the Ministry of Defence are very critical of this report, but that issue lies in the future).
All this is carefully recorded, in very much greater detail, in the judges judgment.
But the judge did in my view err in treating the Rowland report as essential rather than evidential.
Putting it in the simplest terms (and I am very conscious of the danger of over simplification in this appeal), I think that the judge erred on the what? question rather than on the how? question.
My final position is therefore close to that set out in Lord Wilsons judgment, and I gratefully adopt his summary (at paras 16 to 24) of the particular circumstances of the individual appellants.
I agree with Lord Wilson that it was appropriate for the Court of Appeal to make a fresh exercise of discretion under section 33 of the 1980 Act.
I also agree that because of the unusual course which the preliminary issue has taken, and the mass of evidence touching on the causation issue, the Court of Appeal was in an unusually good position to exercise that discretion, and this Court should not interfere with its decision not to let any of the appellants claims proceed.
I do however have reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action.
No doubt this is correct in the general sense that every claimant who issues a claim form commencing contentious proceedings is assumed to have a cause of action unless and until his particulars of claim are struck out, or the action is discontinued or dismissed.
But I do not see that this general assumption helps, and it may actually be a distraction, in understanding the way that sections 11, 14 and 14A of the 1980 Act operate.
The putative character of the section 14(1)(b) and section 14A(8)(a) facts depends not on any implicit assumption but on the long standing and consistent meaning which the courts have given to attributable.
So I am inclined to think that this is a novel and unnecessary refinement.
Like Lord Wilson and Lord Mance, I most respectfully disagree with much of Lord Phillipss reasoning.
I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act.
More generally, I consider that the practical result of Lord Phillipss analysis would be a situation that Parliament cannot have intended when it enacted these provisions.
It would mean that persons (and sometimes, as in this case, large groups of persons) with a belief that they had suffered personal injuries through the fault of a government department or local authority, or any other public sector or private sector body, but with no real prospect of proving legal liability on the balance of probability, would be able to keep their claims on ice, as it were, for an indefinite period, in the hope that one day the right evidence might turn up.
Our judgments on this appeal will not, I fear, be an ideal source of guidance to lower courts which regularly have to deal with these difficult problems.
There are two reasons for that: the extreme complexity of this group litigation, and the division of opinion in the Court.
For my part I would suggest that short summaries like that of Brooke LJ in Spargo (which Lord Phillips rightly describes as a valiant attempt) may be unhelpful if treated as if they were statutory texts.
The words of the 1980 Act themselves must be the starting point, illuminated where necessary by judicial exposition, of which the opinion of Lord Nicholls in Haward v Fawcetts [2006] 1 WLR 682, paras 8 to 15, is the most authoritative.
To that guidance I would tentatively add two points.
In a complex case section 14(3) is an essential part of the statutory scheme, not an occasional add on.
And the date of a claimants first visit to a solicitor is (without more) of very little significance in most cases.
LORD BROWN
I too would dismiss these appeals for the reasons given by Lord Walker, Lord Mance and Lord Wilson.
I do not believe that there are any significant differences between their three judgments but, if there are, and if something approaching a canonical text is required, I would align myself principally with Lord Wilsons reasoning.
Perhaps the most critical proposition to which each of the above three judgments commits is (in Lord Wilsons words at para 3): It is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim.
As Lord Walker puts it at para 67: I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act.
Although Lord Walker in the previous paragraph expressed reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action, I do not myself understand these reservations to amount to any ultimate difference in approach.
Rather it seems to me that the only point Lord Wilson (and Lord Mance) are making when they say that, in deciding whether a given claim is statute barred, the court has to assume that the claimant has knowledge of the facts necessary to support his pleaded cause of action, is that the claimant cannot at that stage be heard to suggest otherwise ie just what Lord Walker then says in the above quoted para 67.
In short, once a claimant issues his claim, it is no longer open to him to say that he still lacks the knowledge necessary (by reference to sections 11 and 14) to set time running.
On Lord Phillips approach, the more hopeless the claim, the likelier it is that the claimant will be in a position to defeat the Limitation Act defence, and this, indeed, no matter how long ago (some half a century in the present cases) the alleged cause of action arose.
With the best will in the world, this simply cannot have been Parliaments intention.
I share to the hilt Lord Phillips view (expressed at para 158) that these claims have no reasonable prospect of success.
But I profoundly disagree with his conclusion that on this account, because there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation (para 139), even the Rowland report fall[ing] well short of establishing causation according to established principles of English law (para 157), time has still to this day not begun to run.
Nor do I find any more persuasive Lord Kerrs view that time [began] to run from the date that [the veterans] became aware of or ought to have been aware of the contents of the Rowland report (para 211) so as to delay the claimants date of knowledge until after their claims were issued presumably until they saw the Rowland report in June 2007.
The plain fact is that, despite decades spent urgently trying to assemble a viable case, on the evidence as it presently stands these claims (in which huge costs have already been expended) are doomed to fail.
As the claimants then leading counsel readily accepted in argument for the Court of Appeal, We havent got material which gets you near a balance of probabilities so that a further policy exception (to the Fairchild exception) would be needed to allow for a claim based merely on a material increase in risk a development of which, in the light of this courts judgments in Sienkiewicz v Greif [2011] 2 AC 229, Lord Phillips at para 157 rightly recognised there to be no foreseeable possibility.
Even had I been persuaded that time had not run in any of these cases I would, like Lord Mance, nevertheless have been disposed to dismiss them.
As he says at para 88: If proceedings have no proper basis in fact, they should not be allowed to persist.
In short, although the veterans can hardly be expected to recognise this, these appeals now provide the court with the opportunity, rather than yet again to extend, instead once and for all to end, the false hopes on which these claims have for so long rested.
LORD MANCE
Lord Phillips and Lord Wilson have expressed radically different views about the concept of knowledge in the Limitation Act 1980.
The present appeals concern personal injuries claims, and their disagreement relates to the knowledge referred to in sections 11(4)(b), 12(2)(b) and 14.
But parallel disagreement must necessarily exist between them with regard to sections 11A(4)(b) and (5)(b) (actions in respect of defective products) and 14A (special time limit for negligence actions, other than for personal injuries, where facts relevant to cause of action are not known at date of accrual).
The correct resolution of this disagreement is of general importance.
In my opinion, Lord Wilsons analysis is consistent with and correct in the light of prior authority, and is the analysis which makes sense of the statute and its purpose.
I agree with his reasoning and conclusions.
I shall not repeat his examination of authority, but content myself with a few points.
First, the statute assumes that a cause of action has accrued (section 11(4)(a)) and that facts exist of which knowledge may exist (section 14(1)).
Such facts include an injury which is significant (section 14(1)(a)), and which is attributable to an act or omission now alleged to constitute negligence, nuisance or breach of duty (section 14(l)(b)).
Attributable here means capable of being attributed as a possible cause of the damage, as opposed to a probable one: see Spargo v North Essex District Health Authority [1997] PIQR P235 and Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, paras 10 11, per Lord Nicholls).
The facts further include the identity of the defendant (section 14(1)(c)) and, if the relevant act or omission is of some other person, the identity of that person and the additional facts supporting the bringing of an action against the defendant (section 14(1)(d)).
The assumption that a cause of action and relevant facts exist favours the claimant.
They are taken as given.
There is no investigation at this stage as to whether they can be made good.
The facts to which paragraphs (a) to (d) of section 14(1) refer must be ascertained from the way in which the claimant puts his or her case in the proceedings which are being pursued.
Hoffmann LJ encapsulated this in a much quoted sentence in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 448h j: Section 14(1)(b) requires that one should look at the way in which the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based.
This passage was repeated by Hoffmann LJ, giving the judgment of the court, in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181.
Significantly, it received full approval by the House of Lords in Haward v Fawcetts [2006] 1 WLR 682, a decision under section 14A(5).
Lords Nicholls, Lord Walker and I all quoted the passage with approval (paras 10, 62 and 120), with Lord Walker adding: The court is concerned with the identification of the facts which are the essence or essential thrust of the case or which distil what [the claimant] is complaining about (para 66).
Lord Scott accepted and applied the opinions expressed in Nash v Eli Lilly & Co [1993] 1 WLR 782, Dobbie v Medway Health Authority [1994] 1 WLR 1234 and Hallam Eames that the requisite knowledge is knowledge of the facts constituting the essence of the complaint of negligence (para 49).
Lord Brown said that What the claimant must know to set time running is the essence of the act or omission to which his damage is attributable, the substance of what ultimately comes to be pleaded as his case in negligence (para 90).
The speeches in the House of Lords endorsed guidance regarding the concept of knowledge given in a series of Court of Appeal decisions, going back to Halford v Brookes [1991] 1 WLR 428.
Lord Nicholls said (para 9): Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443.
He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction.
It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: 'suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice'.
In other words, the claimant must know enough for it to be reasonable to begin to investigate further.
Lord Walker noted at para 57 the numerous cases showing that the starting point may occur at a time when a claimants knowledge about his complaint is far from complete, that a claimant may have the requisite knowledge . even though he may not yet have the knowledge sufficient to enable him or his legal advisers to draft a fully and comprehensively particularised statement of claim, but that by the time, often years later, that the limitation issue comes to be decided, whether as a preliminary issue or at trial, the claimant's case will have been pleaded, and the defendant's act or omission which is alleged to constitute negligence will (or at any rate should) have been clearly identified.
I referred to the same passage as Lord Nicholls (paras 112 and 126).
These passages indicate that courts, by using the words reasonable belief as part of the description of the requisite knowledge, are focusing not so much on whether or how far the belief is evidence based, but more on whether it is held with a sufficient degree of confidence to justify embarking on the preliminaries to making a claim including collecting evidence.
There is a degree of circularity about such a definition, but this is probably inherent in the concept of knowledge in any context (cf Insurance Corporation of the Channel Islands v Royal Insurance (UK) Ltd (unreported) (Comm Ct, 30 July 1997), where, in the different context of affirmation, I described it as a jury question).
If a claimant is pursuing proceedings which he has issued for personal injuries and his state of mind when he issued them was in substance no different from his state of mind for more than the three prior years, then, in agreement with Lord Wilsons para 5 and the passages he there cites, I find it difficult to see how he can claim in those proceedings that he lacked sufficient knowledge of the facts asserted for the purposes of the Limitation Act 1980.
It is of course for a claimant to put his case as he thinks fit.
No one is bound to commence proceedings, and the position may be different it is unnecessary to decide if the claimant has issued proceedings which he is no longer pursuing and in relation to which no limitation issue can therefore arise (as was the case in Whitfield v North Durham Health Authority [1995] 6 Med LR 32).
But, if a claimant elects to issue and is pursuing proceedings, he must identify the case made and stand by it.
Among the allegations which must, either explicitly or implicitly, be made, is that the case is not time barred.
Once an issue of knowledge is identified as arising under sections 11(4)(b) and 14(1), the onus lies upon the claimant to make good his case on knowledge, as I noted in Haward v Fawcetts, para 106.
A claimant bringing proceedings necessarily asserts that he or she has a properly arguable claim.
In the present cases, the claims were expressly to the effect that the claimants had suffered personal injuries by reason of the negligence of the defendant in exposing them to radiation, radioactivity or contaminated material in one way or another.
In modern procedure, such an assertion is attested by a statement of belief, as Lord Wilson notes in para 3, and so it was here.
Once proceedings are begun, it is by reference to the facts asserted as giving rise to the claim that the question of knowledge must be tested.
The claimant cannot avoid this.
Indeed, it is difficult in normal circumstances to think of a claimant trying to do so.
Nor did the claimants originally try to do so in the present case.
They pleaded a case of conventional causation.
However, shortly before and at trial, the case run acknowledged in effect that causation could not be established as a matter of probability.
The argument then was that a material increase in risk was sufficient.
The hope was to invoke the principle or an extension of the principles in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and/or Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32.
That was and is, however, a hope without prospect of success.
During the trial of the present issue, the emphasis shifted to an attempt to show that, by the time of any trial on the merits, the claimants could hope to have acquired evidence to show causation by reference to a balance of probability or a doubling of risk or a synergical effect.
As matters stand, the claimants clearly have no case on causation.
But that is no answer in my opinion to their limitation problems.
They have chosen to bring proceedings on the basis of certain facts.
Whether the facts by reference to which their case falls to be assessed for limitation purposes are those pleaded (a straightforward allegation of causation) or those later asserted (an increase in the risk of injury being caused or, now, an admission that the claimants cannot presently establish causation, coupled with a submission that the proceedings should continue in the hope that causation will in future prove possible to establish), the limitation question is not whether those facts give rise to a good claim in law.
It is when the claimants first had knowledge of those facts, in accordance with the test indicated in Halford v Brookes.
This they did, in each of the nine cases before the Court, more than three years prior to the issue of the proceedings (or, in the case of Mr Ogden, more than three years prior to his death).
The opposite view of the law taken by Lord Phillips leads him to the conclusion that the claimants can overcome or avoid any limitation problems, because they have never had and still do not have the knowledge of any facts which could lead to success.
The defendants appropriate response to this situation would, in his view, have been to apply to strike out the claims or for summary judgment.
If Lord Phillips is right about this bifurcation of remedies, then, contrary to Lord Phillips reference to the present case involving an unusual feature (para 93) or unusual facts (para 147), I think that it could often be relevant.
The present case illustrates that the weakness of a claimants factual case may become apparent in relation to issues arising in conjunction with a limitation defence, such as an application for an extension of time under section 33.
Defendants often deny that any factual basis exists for a claim, and, particularly though not exclusively where the claim is said to have been fabricated, it would follow that, on their case, the claimant could never have had knowledge, in the evidence based sense in which Lord Phillips uses the word, of essential facts on which the claim was based.
As a matter of caution, a defendant contemplating the possibility that the claim might be time barred would be bound to consider the possibility that the court might conclude that the claimant had probably not had evidence based knowledge of the facts alleged, and so that the claim could not properly be struck out.
To cover this possibility the defendant would have to adopt a double limbed approach.
One limb would be based on limitation; in relation to that the onus would be on the claimant.
The other limb would involve an application to strike out or for reverse summary judgment, grounded on the absence of any factual basis for the claimants case; in relation to that the onus would be on the defendant.
In the present case, Lord Phillips concludes that the claimants can overcome the limitation problem, because even now they have no evidence for the facts that they need to show in order to succeed.
But Lord Phillips refuses to strike out or dismiss the claims, because the defendant has not pursued any formal application to that effect.
That is a result which would I think be viewed with some surprise by an observer of the English legal system.
It is not one with which I could concur, even if I were otherwise of Lord Phillips view.
If proceedings have no proper basis in fact, they should not be allowed to persist.
I agree with Lord Wilsons remarks in this connection, particularly with his indication that the fact that this is a group action should not be allowed to prejudice any other claimant who may show that in his or her particular circumstances there is a viable claim which is not time barred.
On the question whether there should be an extension of time under section 33, the Court of Appeal was in my view right in concluding that the judge erred in the exercise of his discretion and that it was incumbent on it to re exercise the discretion, as it did on a generic basis.
To the reasons it gave, particularly in paras 103 to 111, one might add the judges under estimate of the difficulties on causation (evident for example in paras 187 and 230 of his judgment) when linked with references to the claimants genuinely believing on apparently reasonable grounds that they have a case and to a credible fall out case (paras 618 and 625).
These passages also suggest that he must have approached the issue of discretion on a wrong basis.
DISSENTING JUDGMENTS LORD PHILLIPS
Introduction
Between October 1952 and September 1958 the respondent (MoD) carried out experimental explosions in the atmosphere of a total of 21 thermonuclear devices.
This was a mammoth operation.
It took place in Australia and the South Pacific and involved approximately 22,000 soldiers, sailors and airmen, many of whom were performing National Service.
From these servicemen are drawn the majority of the 1011 claimants, most of whom commenced a group action on 23 December 2004 but a minority of whom have joined the action by claim forms issued on various dates between 16 November 2007 and 29 September 2008.
They have become known as atomic veterans and I shall call them the veterans.
Some of the claims are brought by the personal representatives of veterans who have died.
Each claim alleges breach of duty on the part of the MoD in exposing the veteran to radiation that has caused illness, disability or death.
I shall refer to these alleged consequences, which in most cases involve some form of cancer, simply as injuries.
There is an issue in many of the individual cases as to whether the claim is time barred under the provisions of the Limitation Act 1980.
On 5 July 2007 the Senior Master ordered, inter alia, that this question be tried as a preliminary issue.
Further to that order the group and the MoD each selected five lead cases for the trial of the issue of limitation.
The object of the Senior Masters order was to obtain rulings on issues that are generic to all the cases.
It has been common ground that the question of whether their claims are time barred has to be decided case by case on consideration of the particular facts of each case, but there are issues of law and of the application of the law in a case such as this that are generic.
The application of the 1980 Act to claimants involved in group litigation raises particular difficulties that will have to be explored.
The issues
Three generic issues arise.
Sections 11 and 14 of the 1980 Act (section 11 and section 14) together provide that the limitation period within which a claimant must bring a claim in respect of personal injuries that he has suffered is three years from the date when the cause of action accrued or, if later, the date when he acquired knowledge that he had sustained an injury that was attributable to the act or omission which he alleges constituted breach of duty on the part of the defendant.
I shall refer to this as knowledge of attributability by way of shorthand.
A similar provision in relation to knowledge applies in the case of a claim brought by a personal representative or dependant of someone who has died.
For the sake of simplicity I shall throughout this judgment treat the veterans as being the claimants.
The first generic issue relates to the extent to which knowledge can be equated with belief.
So far as concerns the existence of facts, knowledge and belief are words that can, in some circumstances at least, be used to describe the same state of mind.
My knowledge of my birthday is the same as my belief as to the day on which I was born.
There is an issue as to whether, in all circumstances, knowledge can be equated with subjective belief for the purposes of sections 11 and 14.
The second generic issue arises out of an unusual feature of this case.
It is the MoDs case that there are no known facts that support the allegations of breach of duty and causation pleaded by the claimants.
It is the veterans own primary case that they only acquired knowledge of attributability after they had commenced their proceedings.
This raises the question of the effect of the 1980 Act and the proper approach of the court if proceedings are commenced before the litigant has acquired the knowledge that would normally cause time to begin to run.
That question has to be considered in the context of a group action.
The third generic issue relates to section 33 of the 1980 Act (section 33).
This gives the court power to allow an action to proceed notwithstanding that it has not been commenced within the limitation period.
The Court of Appeal declined to exercise this power in relation to any of the veterans.
A common reason for the decision in the case of each veteran was that the claim had no realistic prospect of success.
There is an appeal against that decision in each case.
The question arises of the relevance of individual prospects of success where group litigation is being pursued.
The uncertainties
The problems to which this appeal gives rise are due, in large measure, to the absence of evidence of fact that supports the claim that the veterans injuries are attributable to exposure to ionising radiation.
Exposure to radiation can damage your health in one of two ways.
If you are close to the explosion you can be exposed to what is called prompt radiation from gamma rays.
This radiation, while powerful, is short lived.
Alternatively you may be exposed to fall out of alpha and beta particles.
These can be carried quite some distance from the seat of the explosion.
If they are ingested by breathing or swallowing they can remain within the body for a significant period during which they will continue to radiate, producing a cumulative effect.
The master particulars of claim were served on 29 December 2006.
The veterans solicitor has endorsed them with the requisite statement on behalf of the veterans that they believe the facts stated in the particulars of claim to be true.
Those facts include: allegations in para 13 of both external and internal exposure and i) an allegation in para 2 that each veteran was exposed to radiation, radiation contamination, radioactivity, radioactive fallout and/or biological residue during the conduct of the tests and their aftermath; ii) failure to protect against exposure to ionising radiation; iii) allegations in para 13 of failure to prevent servicemen from contamination with radioactive fallout as a result of swimming and consuming seafood.
Thus both prompt and fallout exposure is alleged.
The uncertainties
The areas of uncertainty were and are twofold, albeit that the two are interlinked.
The first is whether the veterans were exposed to radiation as alleged.
The second is whether their injuries have been caused by exposure to radiation.
Each of these matters is alleged by the veterans and denied by the MoD. Mr Dingemans QC submits that this uncertainty has recently significantly diminished.
Although the claimants believed that the veterans had been exposed to ionising radiation there was no objective ground for this belief until the preparation of a report (the Rowland report) in 2007.
The Rowland report gives the results of tests on blood samples taken from 50 New Zealand veterans who had served on ships that were no closer to the site of some of the tests than had been most, if not all, of the claimants.
Many, though not all, of the samples showed an abnormal incidence of changes to chromosomes that was indicative of exposure to low dose radioactive fallout.
Mr Dingemans submits that these tests provided, for the first time, objective grounds for concluding that the veterans were subjected to similar exposure.
I shall deal with the significance of this submission in due course.
At the start of the hearing of the limitation issue before Foskett J the veterans abandoned that part of their claim that alleged exposure to prompt radiation.
As allegations of exposure to prompt radiation had been at the forefront of their claims this was a dramatic change of stance.
The claims are now solely based on alleged exposure to radioactive fallout.
If that alleged exposure can be proved, it does not follow that the veterans have viable claims.
It will still be necessary to prove that the injuries in respect of which the claims are made were caused by the exposure.
The veterans are not currently in a position to prove this.
There is scientific evidence that demonstrates that ionising radiation is capable of causing some, at least, of the injuries in respect of which individual claims are brought.
There are, however, other potential causes of such injuries.
They are experienced by many of the same age as the veterans for a variety of reasons.
The most that the evidence currently available can establish is that such low dose exposure as may be proved will have increased the risk to the particular veteran of sustaining the injury in respect of which the claim is made.
There is no known basis for concluding that the exposure will have gone so far as to double that risk.
On the law as it stands, merely proving an increase in risk will not establish a good cause of action.
To succeed a veteran must show that, on balance of probability, the injury would not have been sustained had it not been for the exposure.
In the course of argument Mr Dingemans accepted that none of the 9 lead claimants currently has the evidence needed to establish a credible case of causation.
The 1980 Act
The following are the material provisions of the 1980 Act. 11 Special time limit for actions in respect of personal injuries. (1) This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statue or independently of any contract or any such provision) where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to the plaintiff or any other person. (3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) or (5) below. (4) Except where subsection (5) below applies, the period acceptable is three years from (a) the date on which the cause of action accrued: or (b) the date of knowledge (if later) of the person injured. (5) If the person injured dies before the expiration of the period mentioned in subsection (4) above, the period applicable as respects the cause of action surviving for the benefit of his estate by virtue of section 1 of the Law Reform (Miscellaneous Provisions) Act 1934 shall be three years from (a) the date of death: or (b) the date of the personal representatives knowledge; whichever is the later. 14 Definition of date of knowledge for purposes of sections 11 and 12 (1) In sections 11 and 12 of this Act references to a persons date of knowledge are references to the date on which he first had knowledge of the following facts (a)that the injury in question was significant; and (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty; and (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant; and knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, nuisance or breach of duty is irrelevant. (2) For the purposes of this section an injury is significant if the person whose date of knowledge is in question would reasonably have considered it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment. (3) For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, act on) that advice. 33 Discretionary exclusion of time limit for actions in respect of personal injuries or death. (1) If it appears to the court that it would be equitable to allow an action to proceed having regard to the degree to which (a) the provisions of section 11 or 12 of this Act prejudice the plaintiff or any person whom he represents; and (b) any decision of the court under this subsection would prejudice the defendant or any person whom he represents; the court may direct that those provisions shall not apply to the action, or shall not apply to any specified cause of action to which the action relates.
The draftsman of the Act seems to have proceeded on the basis that, by the time that the action was commenced, there would be no doubt that the act or omission alleged had caused the claimants injury.
That impression is further supported by section 33(3) (e).
This includes in the matters relevant to the exercise of the discretion that the court enjoys under section 33: the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to which the injury was attributable, might be capable at that time of giving rise to an action for damages.
Thus the Act does not address what constitutes knowledge that an injury is attributable to an alleged act or omission where there is an issue between the parties as to whether the alleged act or omission occurred at all and, if it did, as to whether it caused the claimants injury.
The approach of the courts below
One of the ten lead cases related to a veteran called Sinfield.
Foskett J held that he was first diagnosed as having a significant injury less than two years before he commenced proceedings.
That finding has not been challenged by the MoD, which now accepts that the claim in relation to Mr Sinfield is not time barred.
It is the other 9 cases that raise the question of the meaning of knowledge.
Foskett J and the Court of Appeal held that the test of knowledge had been laid down by binding authority.
The relevant case law demonstrated that the knowledge referred to in sections 11 and 14 could be equated with subjective belief.
Each veteran had pleaded exposure to atomic radiation causing injury.
Each veteran acquired the relevant knowledge at that moment in time when he formed the subjective belief that his injury was attributable to exposure to radiation.
Attributable to did not mean caused by but capable of having been caused by.
Thus the courts below held that each case turned on its own facts.
The evidence bearing on each veterans state of mind had to be examined in order to identify when he first had the belief that started time running.
The hearing before Foskett J lasted 10 days.
The evidence called included expert evidence in relation to the development of scientific knowledge of the effects of ionising radiation.
Individual veterans gave evidence of their knowledge and belief in relation to the injuries sustained and their cause.
Having analysed the evidence Foskett J delivered a judgment that was 885 paragraphs in length.
He held that 5 of the 10 claims had been commenced more than 3 years after the date when the relevant knowledge was acquired.
In relation to those claims he exercised his discretion under section 33 in favour of the veteran, so that the claims were permitted to proceed.
He held that the other 5 claims had been started within three years of acquiring the relevant knowledge, so that they were in time.
The hearing before the Court of Appeal spanned a week.
The judgment of the Court, delivered by Smith LJ, was 305 paragraphs in length.
The Court of Appeal did not differ in principle from the approach of Foskett J.
The test to be applied was one of subjective belief.
When looking at the individual cases, however, the Court repeatedly held that Foskett J had applied too high a threshold of knowledge or belief.
The Court held that in the case of each of the 9 claimants knowledge had been acquired more than three years before proceedings were commenced.
The Court of Appeal held that Foskett J had erred in principle in the exercise of his discretion under section 33.
None of the 9 claims should be permitted to proceed.
There was one common objection to permitting the claims to proceed.
This was that none of them had a realistic prospect of success.
We were told that the veterans have been represented in the limitation proceedings under a conditional fee agreement (CFA) that is restricted to those proceedings and that if they were successful they would seek to recover from the MoD costs in the sum of 17.5m, inclusive of success fee and ATE premium.
The first generic issue: the meaning of knowledge
Foskett J had toyed with an alternative test of knowledge, which he had described as his preferred view.
This introduced into the test of knowledge an objective element.
No veteran could acquire the knowledge that started limitation running until there was accessible to him scientific evidence that demonstrated the possibility that his injury was caused by exposure to ionising radiation.
That evidence was provided for the first time by the Rowland report.
All claims were brought within three years of the publication of that report, indeed most of them, including the claims of all of the lead cases, were brought before it was published.
It followed that no claim was out of time.
Foskett J concluded, however, that he was precluded by authority from applying his preferred view.
The Court of Appeal held that he was right to reach that conclusion.
Mr Dingemans has put the preferred view at the forefront of his case before us.
He has urged this Court to hold that no veteran acquired knowledge until the Rowland findings were published.
By way of alternative submission he has sought to restore the findings of Foskett J, urging that they were correct and not findings with which the Court of Appeal should properly have interfered.
Mr Gibson QC for the MoD observed that, if the preferred view is correct, none of the nine claimants had the relevant knowledge when they commenced proceedings.
He submitted that the Court of Appeal was correct both in its approach and in its conclusions.
Subjective belief in attributability amounts to knowledge of attributability.
What is the test of knowledge?
I turn to consider the authorities that led Foskett J, reluctantly, and the Court of Appeal to conclude that knowledge could be equated with subjective belief.
Sections 11 and 14 are concerned with knowledge of what section 14(1) describes as facts.
The significant facts are (i) the injury sustained by the claimant (ii) the act or omission of the defendant alleged to constitute a breach of duty and (iii) the fact that the injury is attributable to that act or omission.
In many claims for personal injury all three will be matters of which a claimant can sensibly say he has knowledge.
The cause of the injury will be known to the claimant from his own observation.
There will be some cases, however, where cause and effect are not clear.
Primary facts may be in issue.
Or the causal nexus between those facts may only be capable of ascertainment by the application of specialist knowledge or expertise that the claimant does not enjoy.
Even then, they may only be capable of evaluation on the basis of degree of probability.
This is such a case.
I turn to consider the cases that address the problem of knowledge where the material facts are not clear.
My starting point is the unreported case of Davis v Ministry of Defence (July 26 1985, CA; Transcript No 413 of 1985).
The plaintiff contracted dermatitis when working for the defendant.
He believed that it was caused by his conditions of work.
His general practitioner was of the same view.
Accordingly he started an action against the defendant in 1973, but he did not pursue it because he received advice, including expert medical advice, that the action had no reasonable prospect of success.
He continued to believe, however, that the defendant was responsible.
In 1982 after another attack of dermatitis he received fresh medical advice that, contrary to the previous advice, his condition was likely to be caused by his conditions of work.
He began a fresh action.
An application to strike this out on the ground that his claim was unarguably out of time succeeded at first instance, but was reversed by the Court of Appeal.
May LJ said this at pp 7 and 9 of the transcript in relation to knowledge under section 14: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough.
The relevant question merits repetition When did the appellant first know that his dermatitis was capable of being attributed to his conditions at work? With all respect to the learned judge, I think that he wrongly assimilated what the appellant firmly believed throughout to what he knew.
I have no doubt, as I have said, that the appellant has always believed that his dermatitis was due to his employers fault and that he had a good claim against them.
However, it is clear that he was advised that he did not and the combined state of mind of the appellant himself, as a layman and that of his doctors and legal advisers, which must be attributable to him by section 14(3) of the 1980 Act, cannot, in my opinion so surely be said to have been such that they knew, prior to 10 November 1978 that the dermatitis was capable of being attributed to the appellants working conditions.
This is the first case where the plaintiff knew of both the facts that he alleged had caused his illness and of the illness itself, but where the uncertainty related to causation.
It is of particular interest that May LJ applied section 14(3) so as to give the plaintiff constructive knowledge that his illness was not attributable to his conditions of work.
Also significant is his interpretation of attributable as meaning capable of being attributed.
Where the uncertainty is as to causation of an illness or disease there may be a number of possible causes.
In this situation the meaning of knowledge raises particular problems.
The claimant is unlikely to be in a position to form a considered view of the cause of his illness from his own knowledge.
He will need advice on this.
The relevant knowledge is thus likely to be constructive, under section 14(3)(b).
Applying the approach of May LJ, the claimant will not have knowledge that his illness is attributable to a particular cause unless there is a body of respectable medical opinion that recognises that this is possible.
In Halford v Brookes [1991] 1 WLR 428 the plaintiff had issued a writ as administratrix making a civil law claim for damages against two defendants for murdering her daughter nine years before.
One defendant had been prosecuted for murder and acquitted, essentially because, although it was obvious that one or other of the defendants had murdered the young girl, it was not clear which had done so.
There were strong grounds for suspecting that both defendants had been complicit in the murder.
The plaintiff delayed commencing proceedings because she was unaware that it was open to her to make a civil claim.
The defendants defence denied the allegation of murder but, at the same time, contended that the claim was time barred because the plaintiff had had knowledge that the murder was attributable to them for well over three years.
At first instance Schiemann J remarked upon the paradox of this stance, but held that the claim was time barred.
In the Court of Appeal Lord Donaldson of Lymington MR held that May LJs definition of knowledge in Davis could only be applied to the special facts of that case.
He held at p 443: Knowledge clearly does not mean know for certain and beyond possibility of contradiction.
It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.
Thus the Master of the Rolls applied an objective test to the quality of the belief.
It had to be sufficiently firm to justify taking the preliminary steps towards the issue of proceedings.
Furthermore, although Lord Donaldson referred to belief, the belief in question was based upon knowledge of facts that gave rise to the inference that the two defendants had been guilty of murder.
This was not a case, such as Davis, where the uncertainty was whether medical evidence supported a link between working conditions and the illness contracted.
It was uncertainty as to some of the primary facts.
Where some of the primary facts are in the exclusive knowledge of the defendant, reasonable belief in the existence of those facts will necessarily be founded on other secondary facts.
Thus, on analysis, the test applied in Halford was whether the facts known to the plaintiff should have led a reasonable person with knowledge of the law to take steps to commence legal proceedings.
Davis received detailed consideration by the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782.
This case is of particular importance because, like the present case, it involved a group action in which lead claimants had been selected.
The group action was for personal injuries, in the form of unpleasant side effects (injuries), in particular photosensitivity, alleged to have been caused by taking the drug known as Opren.
This drug was withdrawn from the market in 1982 and by the time of the limitation proceedings it was common ground that Opren was capable of causing the injuries in respect of which the claims were brought.
The actions were commenced in 1987 and 1988.
Just as in the present case limitation was tried as a preliminary issue.
One issue related to the date at which each plaintiff acquired knowledge that he had sustained a significant injury.
The more pertinent issue was the date on which he acquired knowledge that this injury was attributable to Opren.
The trial judge held that if a plaintiffs medical practitioner would have advised him that his symptoms could be attributable to Opren, he had constructive knowledge of that fact.
The position of each of the lead plaintiffs was explored and it was held that most of the claims were time barred.
The hearing in the Court of Appeal lasted 12 days and the judgment of the Court was delivered by Purchas LJ.
A particular issue arose in relation to the position of at least one of the claimants who had formed the firm belief that his injuries were attributable to Opren but who did not bring proceedings because he was advised by a specialist that this was not so.
The Court gave detailed consideration to Davis in a lengthy portion of its judgment dealing with the distinction between belief and knowledge.
This included the following critical passage: It is to be noted that a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it.
If negative expert advice is obtained, that fact must be considered in combination with all other relevant facts in deciding when, if ever, the plaintiff had knowledge.
If no inquiries were made, then, if it were reasonable for such inquiries to have been made, and if the failure to make them is not explained, constructive knowledge within the terms of section 14(3) must be considered.
If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run.
The last sentence suggests that a firm belief that an injury is attributable to an alleged act or omission can start the limitation period running however unreasoned or ill informed that belief may be.
This was the start of a series of decisions that equated knowledge with subjective belief.
Broadley v Guy Clapham & Co [1994] 4 All ER 439 involved a claim against a solicitor for professional negligence.
There was an underlying issue as to whether a claim that the plaintiff had enjoyed against a surgeon had become time barred.
The surgeon had operated on the plaintiffs knee and the operation had left her with foot drop.
The trial judge held that she did not herself have knowledge that the surgeon had caused this outcome but should have sought medical advice that would have disclosed this fact.
Thus she acquired constructive knowledge under section 14(3)(b).
The Court of Appeal upheld both his decision and his reasoning.
Hoffmann LJ said, at p 448: Section 14(1)(b) requires that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based.
He went on to make a statement that, if not read with care, is capable of misleading.
He said, at p 449 The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 3 All ER 559 at 573, [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant.
He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ.
Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant.
But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.
He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree.
The statement that time begins to run when the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant relates to an investigation whether, having regard to the knowledge of attributability that has been acquired, a case against the defendant exists.
The passage should not be read as holding that time begins to run as soon as the claimant knows enough to make it reasonable to make a further investigation of the facts that are relevant to attributability.
I can now proceed to Spargo v North Essex District Health Authority [1997] PIQR P235 in which Brooke LJ set out the effect of a number of decisions, including Nash v Eli Lilly: (1) The knowledge required to satisfy section 14(1)(b) is a broad knowledge of the essence of the causally relevant act or omission to which the injury is attributable; (2) Attributable in this context means capable of being attributed to, in the sense of being a real possibility; (3) A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant.
Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to seek advice about making a claim for compensation; (4) On the other hand she will not have the requisite knowledge if she thinks she knows the acts or omissions she should investigate but in fact is barking up the wrong tree: or if her knowledge of what the defendant did or did not do is so vague or general that she cannot fairly be expected to know what she should investigate; or if her state of mind is such that she thinks her condition is capable of being attributed to the act or omission alleged to constitute negligence, but she is not sure about this, and would need to check with an expert before she could be properly said to know that it was.
This summary has been treated as definitive see McGee on Limitation Periods, 6th ed (2010) at 8.026.
The summary is a valiant attempt to summarise the previous jurisprudence, but is capable of confusing.
It does not deal with constructive knowledge.
Significantly it states that a firm belief in attributability can amount to knowledge.
Courts have had particular difficulty in interpreting Nash v Eli Lilly and Spargo in circumstance where it is reasonable to expect a potential plaintiff to seek expert medical advice on causation, whether or not he or she holds a firm belief that an injury has been caused by medical treatment or by conditions at work see ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129 and Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213.
The facts of this last case might have been devised as an examination question on limitation.
The claimant experienced a sensation of burning on his lips and throat and formed the firm view that this was the result of exposure to polymer at his workplace, a view that he never abandoned.
He stopped work because of this in 1988 and sought legal and medical advice.
He was seen by a number of experts, all of whom could find nothing wrong with him.
One indeed concluded that his symptoms were psychosomatic.
Ultimately, in 1994 a senior ENT Registrar advised that his symptoms might well be attributable to exposure to polymer.
The trial judge took that as the date on which he acquired knowledge for the purpose of section 14.
The Court of Appeal did not agree, holding that the claimants firm belief in the face of expert advice to the contrary constituted knowledge for the purpose of section 14.
In Haward v Fawcetts [2006] UKHL 9; [2006] 1 WLR 682 the House of Lords considered knowledge for the purposes of sections 11 and 14 in the context of a claim for professional negligence in giving investment advice.
Lord Nicholls of Birkenhead at para 9 approved the approach of Lord Donaldson MR in Halford v Brookes.
He said Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443.
He noted that knowledge does not mean knowing for certain and beyond the possibility of contradiction.
It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice and collecting evidence: Suspicion, particularly if it is vague and unsupported will indeed not be enough but reasonable belief will normally suffice.
In other words, the claimant must know enough for it to be reasonable to begin to investigate further.
At para 11 he paraphrased the position by stating that time does not begin to run until the claimant knows that there is a real possibility that his damage was caused by the act or omission in question.
The decision of Foskett J in relation to knowledge
I propose to refer to only a few particularly relevant incidents of the hearing before Foskett J. Suspicion that veterans may have been injured by exposure to ionising radiation in the tests has a long history.
This was explored in voluminous evidence.
This focussed on events in the 1980s and thereafter.
Of particular significance was the formation in May 1983 of the British Nuclear Test Veterans Association (BNTVA).
The objects of the BNTVA included the relief of persons suffering from disability attributed to the effects of exposure to radioactivity particularly dealing with nuclear weapons testsTo conduct or promote research into the causes, effects, and treatment of such disablement and to claim financial assistance, benefits and compensation as they may be entitled to. (My emphasis) 268 of the claimants have been members of the BNTVA and all five of the lead claimants selected by the MoD have been members.
Substantial evidence was also adduced before Foskett J of the progress of scientific research and opinion in relation to the effect of exposure to ionising radiation, with particular reference to the position of the veterans.
In 1985 a veteran called Melvyn Pearce commenced an action against the MoD in which he alleged that a lymphoma that he had developed in 1978 was caused by exposure to ionising radiation during nuclear testing at Christmas Island.
After a successful excursion as far as the House of Lords on a preliminary point on Crown immunity ([1988] AC 755) Mr Pearce discontinued his action because those acting for him concluded that it would be impossible to prove that radiation had caused his cancer.
The Government commissioned the National Radiological Protection Board (NRPB) to survey the possible effects of radiation on the servicemen who had participated in the tests.
The NRPB published reports in 1988, 1993 and 2003.
These showed no general increase in mortality on the part of veterans either generally or from cancers.
The reports have been subject to expert criticism the methodology of which has itself been criticised by the MoD.
A number of other epidemiological surveys were carried out in relation to veterans who had taken part in the atomic testing.
None of these led to the conclusion that veterans were suffering a disproportionate incidence of injuries.
I have referred at para 97 to the Rowland report which was published in 2008, but shown privately to the appellants in 2007.
This dealt with assays on 50 New Zealand veterans who served on two ships that took part in some of the tests, which were compared with results of similar assays on 50 controls.
Two of the assays showed no difference, but the third, which was an assay known as mFISH, indicated that aberrant changes to chromosomes had occurred in veterans with three times the frequency of similar changes in the controls.
The report concluded that the likely cause of this was ionising radiation thus indicating that the veterans had incurred long term genetic damage as a result of their participation in the tests.
The report emphasised, however at p 6, that the current study makes no claims on the health status of the veterans.
Before Foskett J the MoD argued that there was no evidence that the veterans had been exposed to abnormal ionising radiation or that such radiation had caused their injuries, but that the belief that their injuries were attributable to radiation none the less amounted to knowledge of attributability for the purposes of sections 11 and 14.
Counsel for the veterans description of this argument was set out by Foskett J as follows at para 519 Mr Browne has submitted that there is a logical tension in the defendant's case on limitation in that it is contended that each individual claimant should at the first sign of significant health effects have realised the link to the negligent acts or omissions concerning the tests such that the limitation clock started ticking, yet in the same breath it is contended that no reputable scientist then (or indeed now) could support any such link thus denying any chance of establishing liability.
He has submitted that the defendant's argument seems to proceed on the basis that whatever the state of scientific knowledge might have been at any time as to whether any participant or veteran had been exposed to substantial ionising radiation and as to whether such exposure had the potential to cause the significant injury suffered, none the less if the lay participant or veteran suspected that he had been exposed to such radiation and suspected that there might be a link between such exposure and the relevant injury, then he should be fixed with actual knowledge to that effect.
Foskett J at para 520 said that he sympathised with the submission that there was a logical tension in this argument.
That was why he would have liked to decide the limitation issue on the basis of his preferred view, which he expounded at paras 514 to 518 as follows.
Knowledge of attributability under section 14 meant that each veteran had to have knowledge of two matters.
The first was that his injury was capable of being caused by abnormal radiation.
The second was that he had been exposed to such radiation.
This knowledge could only be obtained from scientific material.
Insofar as the veterans had believed that they had been exposed to prompt radiation, there had been no foundation for that belief and it was unsound.
They had been barking up the wrong tree.
Not until the Rowland report was there material upon which knowledge could be based both that the veterans could have been exposed to fall out contamination well after the explosions and that this exposure was capable of causing chromosomal aberrations that evidenced the kind of mechanism that could have led to at least some of the injuries of which they complained.
In short, Foskett J favoured a test of knowledge of attributability that required belief to be reasonably founded on fact.
He concluded, reluctantly, that the decided cases precluded the adoption of his preferred view.
Instead his approach was to look in each case for the moment at which the veteran had manifested not merely suspicion but a firm belief that his illness was attributable to exposure to radiation.
This was the moment at which the relevant knowledge of attributability was acquired.
The decision of the Court of Appeal in relation to knowledge
The Court of Appeal held that Foskett J had been right to reject the preferred view.
After reference to authority, and citation of the passage from Haward v Fawcetts that I have set out at para 121 above, the Court summarised the position as follows at para 92: So, in a case where the claimant's state of mind is more accurately described as one of belief rather than knowledge, it seems to us that what matters is whether his state of belief is such as to make it reasonable to expect him to begin to investigate further.
In general that assessment will have to be made by reference to the things that he has said and done.
For example, if he says that, at such and such a time, he had a firm belief that his illness had been caused by radiation, it would obviously be reasonable to expect him to begin investigating.
If he said that he had a firm belief that his illness could have been caused by radiation, that would also, we think, be enough.
The Court went on at para 93 to indicate a critical disagreement with the test of Lord Donaldson MR that Lord Nicholls had approved: We note that, in Halford, Lord Donaldson MR suggested that a belief would have to be reasonable before it could amount to knowledge.
With great respect, we do not think that the belief needs to be objectively reasonable.
We think that what matters is the claimant's subjective state of mind.
If a claimant comes to believe that there is a causal connection between his condition and the matters complained of, it will matter not from where he has derived that belief, even it were from an incompetent expert adviser or from a newspaper article which was not based on sound research.
If the belief were of such strength that it was reasonable to expect him to start investigating his claim, it would amount to knowledge within section 14.
The Court applied a test of subjective belief when considering the individual cases.
By way of example I quote the following passage from para 222 in respect of Mrs Clarks state of mind in relation to the cause of her late husbands cancer: In so far as Mrs Clarks state of mind would more aptly be described in terms of belief rather than knowledge, she needed only to have a strong enough belief to make it reasonable to expect her to start making inquiries.
The application of this test led the Court to conclude that all 9 claimants had acquired knowledge of attributability more than three years before the commencement of proceedings.
Conclusions in respect of the first generic issue
Section 14 is about knowledge, actual and constructive, of facts.
The object of the section is apparent from its terms.
Time will begin to run when the claimant has, or ought reasonably to have, knowledge of the facts that make up the essential elements of his claim.
These are: the fact that he has sustained a significant injury; the identity of the defendant; the act or omission alleged to constitute negligence, nuisance or i) ii) iii) breach of duty; iv) the fact that the injury is attributable to that act or omission; v) if the act or omission was of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of the action against the defendant.
It is unnecessary for the claimant to know that the alleged act or omission constituted negligence, nuisance or breach of duty.
Knowledge is limited to fact, not law.
Section 14(3) defines constructive knowledge.
It lays down a test of knowledge that the claimant ought reasonably to have been expected to acquire either from facts observable or ascertainable by him or facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek.
Thus the claimant is expected, where it is reasonable to do so, to make inquiries in order to ascertain the relevant facts and, if he does not do so, will be deemed to have knowledge of the facts that those inquiries would have disclosed.
The words that I have emphasised underline the fact that objective standards have to be applied.
There has been some divergence of view as to whether, when applying the test of what is reasonable, allowance has to be made for particular characteristics of the claimant contrast the views of Lord Hoffmann, Lord Walker and Lady Hale in Adams v Bracknell Forest Borough Council [2004] UKHL 29; [2005] 1 AC 76 at paras 44 46, 75 78 and 91 respectively.
Lord Hoffmann disagreed with statements in earlier cases that it was necessary to have regard to the character and intelligence of the plaintiff when considering whether he had acted reasonably.
He applied a test that was strictly objective.
His approach was followed by the Court of Appeal in B v Nugent Care Society (Practice Note) [2009] EWCA Civ 827; [2010] 1 WLR 516, rightly in my view.
If a claimant is suffering from any disadvantage in comparison to the reasonable man regard can be had to this when exercising discretion under section 33.
The wording and the scheme of section 14 does not permit the replacement of the test of actual or constructive knowledge of the specified facts with a test of subjective belief.
There is good reason for this.
It is not desirable that a plaintiff should commence an action on the basis of subjective belief that is not reasonably founded on a basis of fact.
Nor would it be just to discriminate between two claimants who had identical knowledge of the material facts on the ground that one believed that they demonstrated attributability while the other formed the view that they did not.
Section 14 envisages different stages in the acquisition of knowledge and different degrees of knowledge.
At each stage the claimants state of mind has to be assessed according to an objective standard.
In some circumstances the claimant will have the knowledge of attributability as a result of his own observation of the circumstances in which he has sustained his injury.
The facts that he knows will leave him in no doubt as to what act or omission has caused his injury and who was responsible for it.
In that situation he will normally have the knowledge that would lead a reasonable person to consult a solicitor with a view to making a claim for compensation.
In other circumstances he will not know, from his own observation, all the relevant facts in relation to the cause of his injury.
His limited knowledge may be such as would lead a reasonable person to make further investigations as to the facts.
In that situation he will have imputed to him the knowledge that he would have acquired if he had made those investigations.
The question will then be whether that knowledge would have led a reasonable person to consult a solicitor with a view to making a claim for compensation.
At no stage, as a matter of law, is it relevant to consider the subjective belief of the claimant divorced from the facts that have led to that belief.
When considering the claimants state of mind the relevant question will not be what he believed, but what he reasonably believed.
A reasonable belief will be based to some degree on known facts.
In practice the distinction between knowledge and belief is not one that will normally arise.
The starting point will be a claimant who has commenced proceedings more than three years from the date when the cause of action arose.
The claimant will normally have pleaded a viable case; the act or omission alleged will be one that was capable of having caused the injury in respect of which he claims.
It will be common ground that he had the relevant knowledge of attributability at the time that he commenced the proceedings.
The issue will be when he first acquired that knowledge.
The distinction between knowledge and belief is critical in the present case because it is common ground that when the nine lead claimants started these proceedings there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation.
Insofar as veterans believed that their injuries were attributable to such exposure that belief was not reasonable.
No individual claimant was in a position to know that his injury was attributable to exposure from his own observation or from facts that he was capable of ascertaining by himself.
The reasonable course for any veteran who suspected that his injury might be attributable to exposure to radiation was to seek expert advice.
Some did so.
Those who did not were all in a similar position.
They had constructive knowledge of the scientific data available to those from whom they should reasonably have sought advice.
Experts had carried out epidemiological surveys to see if these suggested that the veterans were suffering a disproportionate incidence of injuries compared to the rest of the population and concluded that they were not.
The MoD denied that the veterans had been exposed to ionising radiation and there was no known reason to gainsay this.
In short, there was no scientific evidence available that provided significant support to the belief that the veterans injuries were attributable to exposure to ionising radiation.
Foskett J and the Court of Appeal fell into error in equating subjective belief with knowledge.
In so far as there were statements in earlier decisions of the Court of Appeal to which I have referred in paras 112 to 121 above which lent support to that approach, those statements were unsound.
I question both the reasoning and the conclusions about knowledge of the Court of Appeal in Sniezek v Bundy, Foskett Js preferred view was correct in principle.
Belief in attributability had to be founded on known fact if it was to amount to knowledge.
It had to be reasonable belief.
The Court of Appeal was wrong to alter this test, which had been advanced originally by Lord Donaldson MR, so as to remove the requirement that the belief should be reasonable.
The search for the moment when each of the lead veterans formed a subjective belief that it was possible that his injuries were attributable to exposure to radiation was misconceived.
The scientists were the people to whom it was reasonable for the veterans to look for advice but, at least before the publication of the Rowland report, such scientific data as was or became available did not support the theory that there was a serious possibility that the veterans injuries were attributable to exposure to radiation.
In their Amended Points of Claim on Limitation those veterans who commenced proceedings before the publication of the Rowland report allege that their knowledge of the existence of scientific evidence that demonstrated that their injuries were attributable to the acts or omissions of the defendants did not arise until after the commencement of proceedings.
It is open to question whether the Rowland report demonstrates that the veterans injuries are attributable to exposure to radiation, as to which see paras 155 to 157 below.
What is not open to question is that, prior to the publication of that report, there was no evidence that demonstrated that the veterans injuries were attributable either to prompt radiation or to fall out radiation.
In effect the proceedings were commenced on a speculative basis.
The veterans further plead that the consequence of this is that their claims are not time barred.
Whether that submission is correct is the second generic issue.
The second generic issue: the effect of starting proceedings for personal injury
without reasonable grounds for belief that the injury was caused by breach of duty
What is the position where a claimant starts an action for personal injury against a defendant in circumstances where he has no reasonable grounds for believing that his injury is attributable to the act or omission that he alleges against the defendant? Such a situation was considered by the Court of Appeal in Whitfield v North Durham Health Authority [1995] 6 Med LR 32.
The question arose in limitation proceedings of the effect of a writ that had been issued but not served.
Waite LJ held that the issue of a writ was not determinative of knowledge under section 14.
He observed that it might be the product of a generalised though as yet unspecifically informed sense of grievance (memorably rendered by Stanley Holloway as Somebodys got to be summonsed)
Where a personal injury action is commenced more than three years after the cause of action arose and the defendant raises a challenge on the ground that it is time barred, the onus is on the claimant to prove that the action was started less than three years from the date on which he acquired knowledge, as defined by section 14 see the comprehensive analysis of burden of proof in the context of limitation of Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159 at pp 169 173.
If the claimants response to the limitation challenge is to allege that he started proceedings without knowledge that his injury was attributable to the act or omission that he alleges caused it the defendant is likely to contend that the action should not be permitted to proceed.
There are three arguments that can be advanced for bringing such an action to an end, all three of which have been advanced in the present case: The claimant is time barred because the requirements of sections 11 i) and 14 are not satisfied. ii) The claim should be struck out on the ground that it discloses no reasonable cause of action and is an abuse of process. iii) Summary judgment should be given in favour of the defendant.
I shall consider each in turn.
Limitation
In the present case the MoD sought to show that the veterans claims were time barred by showing that they had subjectively come to believe that their injuries were attributable to exposure to radiation more than three years before they commenced proceedings, notwithstanding that, according to the MoD, they had no reasonable grounds for that belief.
For the reasons that I have given that approach was misconceived.
At one time I was attracted to the argument that a claimant who cannot point to any moment in time before commencement of proceedings when he acquired knowledge of attributability is not in a position to discharge the burden of proving that he commenced the proceedings within three years of acquiring knowledge as required by section 11.
The MoD did not advance that argument and, on reflection, I believe that it would have been fallacious.
Section 11 provides that an action may not be brought after the expiration of the period of three years that commences with knowledge.
If the claimant has not acquired knowledge before bringing the action, that period has not begun to run.
For these reasons I have concluded that on the unusual facts of this case the MoD was not in a position to raise a limitation defence to the veterans claims.
The Court of Appeals finding that all the claims were out of time must accordingly be reversed.
The MoD had other options.
It could simply have left the veterans to attempt to prove the exposure and causation that the MoD denied.
In the case of the claim brought by Pearce they took no limitation defence and the claim was ultimately dropped because of the problem of proving causation.
The Ministry might have taken the view that the same was likely to occur in the present case.
It did not, however, take that course.
Nor did it formally apply to strike out the proceedings or apply to the court to grant it summary judgment.
None the less in the course of the limitation proceedings it sought to persuade the court to do one or the other of its own motion.
I turn to consider whether the court should have done so.
Strike out
In this case the MoD invited Foskett J to strike out the lead claims pursuant to CPR r 3.4 on the ground that each claim was bound to fail as the claimant was not in a position to establish causation.
He declined to do so on the grounds that it would not be right to prejudge the issue of causation.
He was not persuaded that the veterans were bound to fail on that issue.
The Court of Appeal held at paras 70 72 that the judge had reached the right answer, but that he should have based his decision on procedural grounds.
The Court held at para 71 that CPR r 3.4(2) only permits the court to strike out proceedings where the terms of the pleading itself justify this course.
That may be true, but CPR rr 3.1(1) and 3.4(5) preserve the inherent jurisdiction of the court to strike out proceedings on the ground of abuse of process and the Court of Appeal was wrong not to consider the overall merits of the veterans position.
I am not persuaded that the conduct of the veterans in commencing proceedings before they had reasonable grounds to believe that their injuries were caused by exposure to radiation constituted an abuse of process.
A case such as this poses special problems for the litigant.
It is not uncommon for a number of people who suffer injury or disease to form the suspicion or even belief that this is attributable to the exposure of their bodies to some noxious substance or process.
Initially there may be no significant scientific support for such suspicion or belief.
The suspicion or belief that the MMR injection causes autism, or that the use of mobile phones causes brain tumours are, perhaps, examples of such suspicions or belief.
The parents of victims of thalidomide, or those who suffered from taking Opren, may initially have had no sound basis for suspecting the cause of the conditions caused by those products.
In such circumstances no individual victim can reasonably be expected to commence proceedings on suspicion.
Nor can any individual reasonably be expected single handed to obtain the necessary expert assistance to investigate whether his suspicions or belief are well founded.
Group action is the sensible way forward.
Once a group is formed the practical course for anyone who suspects or believes that he may be in the same position as the other members of the group is likely to be to join the group.
In that case the knowledge of the group and those advising it will become the constructive knowledge of the individual.
Whether and when it will be reasonable for a group to commence legal proceedings will depend upon the particular circumstances.
Normally investigation of the facts will precede the commencement of proceedings.
The pre action protocol for disease and illness claims may well be relevant.
It is possible to conceive of circumstances where it may be reasonable to commence group proceedings even though investigations are ongoing and there is uncertainty as to attributability of a disease to a suspected cause.
This might be a reasonable precautionary step in order to forestall the possibility of a limitation challenge such as the present or it might assist in obtaining funding.
In the present case problems of funding played a role in the initiation and pursuit of the litigation.
Some funding appears to have been obtained from the Legal Services Commission to carry out investigations and proceedings were instituted with this assistance at the end of 2004.
The Treasury Solicitor then agreed to an extension of the time for service of Particulars of Claim because of difficulties arising out of the funding certificate.
The Legal Services Commission withdrew funding on 17 August 2005.
This led to a hiatus in the proceedings.
Ultimately a Conditional Fee Agreement backed by after the event insurance was obtained.
Although this was limited to the limitation issue alone this may have had some influence upon the fact that master particulars of claim were settled and were served on 29 December 2006.
Having regard to this history I do not consider that the initiation of this group action, albeit that it was launched on a speculative basis, constituted an abuse of process and it would not have been right to strike it out on that basis.
If the MoD wished to bring the proceedings to an end the appropriate course was to seek summary judgment pursuant to CPR r 24.2 on the ground that the claimants had no real prospects of succeeding on their claims.
Although the MoD did not make a formal application to this end it did give the veterans notice that it would be contending at the limitation hearing that the claimants had no real prospects of success and invited Foskett J to strike the proceedings out on this basis.
Summary judgment
The Court of Appeal stated at paras 5 and 70 that the judge declined to give the MoD summary judgment pursuant to CPR r 24(2) although I do not believe that the judge, having declined to strike out the proceedings, gave separate consideration to summary judgment.
At all events the Court of Appeal itself considered whether it should grant the defendant summary judgment on the ground that the claims had no real prospect of success.
The Court ruled at para 75 that it would not be right to do, basing its ruling on purely procedural grounds: We are of the view that we should refuse summary judgment on purely procedural grounds.
We recognise that the claimants had been informally put on notice that causation would be raised in an application for summary judgment.
Further, we acknowledge that, even without such informal notice, it behoved the claimants to prepare themselves to show the general merits of their claims in case the judge had to consider whether to exercise his discretion under section 33.
But notwithstanding those two factors, we consider that we should not grant summary judgment in the absence of a formal application.
The claimants should have been left in no doubt that they faced summary judgment if they could not show an arguable case on causation.
It was simply not appropriate in a case of this importance and complexity to place on the judge the decision as to whether or not to exercise the jurisdiction under Part 24 of his own motion.
Thus, because of the lack of formal notice, we consider that it would not be fair to give summary judgment against the claimants under this rule.
The Court of Appeal considered the problems that the veterans would experience in establishing causation when it came to consider of the exercise of discretion under section 33.
They concluded, at para 156, that the veterans cases on causation faced very great difficulties which were much more serious than they appeared to Foskett J. I would endorse that conclusion.
The current difficulties facing the veterans in relation to causation appear to me to be very great indeed.
The Rowland report assists them a little but it does not have the significance that Mr Dingemans has sought to attach to it.
The Rowland report shows that many of the New Zealand veterans had a raised incidence of chromosome translocation that suggested exposure to abnormal, albeit low level, fall out radiation.
But this was not true of all of the veterans assayed.
The assays of some showed no abnormalities.
This is no more than one would expect.
Exposure to fall out radiation results from inhalation or ingestion of fall out.
It may result from swallowing sea water while swimming or eating contaminated fish.
Thus it can vary from one man to the next.
The most that can be deduced from the Rowland report is that it is probable that individual veterans were exposed to low level fall out.
There is currently no evidence that there is any correlation between the raised incidence of chromosome translocation of individual New Zealand veterans and the incidence of cancer or any of the other conditions of which the claimant veterans complain.
Nor is not suggested that the aberrant chromosomes identified by the mFISH assay could themselves have had a mechanistic link in the contraction of cancer, although there is an established mechanistic link between some chromosome aberrations and cancer.
The Rowland report results simply constitute a biomarker suggesting exposure to radiation.
The most that the veterans as a group are currently in a position to establish is that there is a possibility that some of them were exposed to a raised, albeit low level, of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim.
This falls well short of establishing causation according to established principles of English law.
Foskett J was prepared to contemplate the possibility that the Supreme Court would extend the principle in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 so as to equate causing an increase of risk with causing injury.
The Court of Appeal at para 154 held that there was no foreseeable possibility of this.
In the light of the observations of this Court in Sienkiewicz v Greif [2011] UKSC 10; [2011] 2 AC 229 the Court of Appeal was plainly correct.
For these reasons I do not believe that the veterans claims have a reasonable prospect of success.
Despite this conclusion I have decided that the Court of Appeal was right not to grant the MoD summary judgment.
There are two interrelated reasons for this.
The first is that I agree with the Court of Appeal that it would be unjust to enter summary judgment against the 9 lead claimants when the MoD made no formal application for summary judgment.
While the veterans allegation that they had been ambushed by the MoD was unjustified, they could properly complain that they had not been given adequate warning that they would have to resist summary judgment.
The other reason is that these are lead cases in group litigation.
The object of selecting lead claimants for the purpose of trying preliminary issues is that the decisions of the court in the lead cases will be determinative, or treated as determinative, in the other cases that raise the same issues.
It does not seem to me fair to those other claimants to expect them to accept a ruling that the claims have no reasonable prospects of success when that issue was not fairly and squarely on the table when the arrangements were made for the hearing of the lead cases.
Section 33
As I have concluded that none of the claims is out of time, the question of exercising discretion under section 33 does not arise.
Had it arisen I might not have reacted to it in the same way as the Court of Appeal.
The 1011 claimants must include a significant number in respect of whom there is no limitation defence.
These will include those whose injuries were diagnosed, or appreciated to be significant, less than three years before proceedings were commenced.
One of the principal reasons for limitation of actions is to protect defendants from being vexed by stale claims.
Where group claims are proceeding in any event, this is not such a significant consideration.
It may be unjust to preclude some claimants from participating in the litigation on the ground that they did not bring their claims soon enough.
This is a factor that the Court of Appeal does not appear to have taken into account.
It might have led me to differ from the Court of Appeals conclusion.
As it is, on my view of the case no issue arises under section 33.
For the reasons that I have given I would allow all 9 appeals and reinstate the actions of the lead claimants.
LADY HALE
Limitation of actions is a creature of statute, not of the common law.
Until the Limitation Act 1623, there were no limitation periods for non land related claims.
When introduced, they were and remain a procedural, not a substantive, bar to the claimants action.
If the defendant does not plead limitation, the cause of action subsists and the court must try the claim.
In an age of private claims against private defendants, it may even have been regarded as ungentlemanly to raise a limitation defence, but we can hardly blame the Government or a liability insurer for seeking to protect the interests of the taxpayer or its policy holders and shareholders by doing so in a case such as this.
The current law of limitation is complicated and incoherent.
This is, as the Law Commission pointed out in 1998, largely because it has been subjected to a wide range of ad hoc reforms, following the recommendations of reform bodies charged with recommending reforms of particular pockets of law.
The Commission went on to comment that the traditional approach of limitation periods running from accrual of a cause of action has led to problems, which the Legislature has tried to solve, either by moving to a discoverability starting date (as in the Latent Damage Act 1986) or by relying on a judicial discretion to disapply the limitation period (as in the Defamation Act 1996), or by using both approaches (as in the regime for personal injuries) (Consultation Paper No 151, Limitation of Actions, para 1.21).
In other words, this is a field in which statute has intervened for policy reasons.
But in policy terms the current regime for personal injury claims, combining discoverability with discretion, might be thought to have the worst of all possible worlds.
From the defendants point of view, one aim of limitation periods is to ensure that a fair trial will still be possible because the evidence will not have been lost or deteriorated.
Another aim is that the defendant will not be harassed with stale claims and he (or his insurer) can treat matters as closed after a certain length of time.
From the states point of view, there is also an interest both in fair trials and in an end to litigation.
From the claimants point of view, there may be some interest in being encouraged to get on with it while the evidence is still fresh, but in general the claimant will want as long as possible in which to recognise and consider their cause of action, to take legal advice on their case, and to attempt to negotiate a settlement with defendants (para 1.36).
In policy terms, the crucial question is whether a fair trial is still possible in the individual case, coupled with the ability to write off claims after a period of time.
Where a cause of action depends upon damage resulting from the defendants tort, a limitation period based upon the accrual of the cause of action may have nothing to do with whether a fair trial will still be possible or with the interests of the defendant in not being harassed by stale claims.
Mr Sinfields illness was not diagnosed until many years after the exposure which is alleged to have caused it.
The action was brought within the three years after the diagnosis.
The defendant will have to live with the evidentiary and other consequences of that.
Even if the illness had occurred earlier, and thus the cause of action had arisen earlier, it was not discovered until the diagnosis.
When the Limitation Act 1963 responded to Cartledge v E Jopling and Sons Ltd [1963] AC 758, by introducing discoverability into the personal injury limitation regime, it was prioritising the interests of the claimant in being compensated for his injury over the interests of both the defendant and the state.
But given the length of time which some illnesses take to develop after exposure to the causative agent, perhaps it did not seem such a very radical step.
By contrast, the introduction of the power to disapply the limitation period in personal injury cases in the Limitation Act 1975 was a radical step.
But it was a step more closely linked to the policy aims underlying the limitation legislation.
It enables the court to ask whether the defendant deserves to enjoy the windfall of a limitation defence, or the claimant to lose the benefit of a claim, by reference to the crucial questions of whether a fair trial of the action will still be possible and whether there is a good reason for the delay in bringing the claim.
In policy terms, the world would be a more sensible and predictable place if we had only the discretion provided by section 33 of the Limitation Act 1980, without the discoverability provisions in sections 11 and 14.
It might be better still if the cause of action accrued at the date of the wrongful act or omission rather than at the date of damage.
Hence, in policy terms, it is understandable that the Law Commission welcomed the approach to discoverability in personal injury actions which has been developed in the Court of Appeal.
In policy terms, shifting the burden to the discretion in section 33 is preferable to postponing the date when time begins to run.
The Court of Appeals approach, as we know, culminated in the view that a strong but completely irrational belief that an injury was attributable to the act or omission of the defendant equated with knowledge of that fact for the purpose of section 14(1) of the 1980 Act.
Once there was power to disapply the limitation period in cases where a fair trial would still be possible, justice could be done to both parties irrespective of the date of knowledge.
The realist in me is not surprised that the Court of Appeal applied a subjective test to the date of knowledge.
The court could then get on with weighing the competing interests under section 33.
I remember doing just that in Roberts v Winbow [1999] Lloyds Rep Med 31.
However, that is not what the statute provides.
Like it or not, time does not begin to run until the claimant has knowledge of the essential facts.
We have been focussing in this case on knowledge (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
The Court of Appeal has reached the position that a sufficiently strong subjective belief to send the claimant to a solicitor to investigate making a claim is knowledge of attributability for this purpose, even though there is no reasonable basis in evidence or objective fact for that belief.
This leads to unedifying inquiries, such as those which took place in these cases, into the strength of the various claimants belief, however unreasonable inquiries made on behalf of a defendant who has always maintained that there is no reasonable basis for their beliefs (and thus contributing to the strong sense of injustice they feel).
On the Court of Appeal authorities, a claimant who strongly believed, on no reasonable ground whatsoever, that his illness was caused by exposure to radiation has knowledge of the fact that his injury is attributable to that exposure, whereas a claimant who strongly believed that it was not, on the reasonable ground that those in a position to know the truth denied it, has no such knowledge.
The strength of a claimants subjective belief is not a sensible basis for deciding who does, and who does not, have an absolute right to pursue his action.
I suspect that that point would never have been reached had the law confined itself to knowledge of the fact of injury.
That was the problem in Cartledge v Jopling.
Diagnosis is a relatively clear cut question.
You do or do not have the disease.
You do or do not know, on the basis of a reliable diagnosis, that you do or do not have the disease.
The hypochondriac who believes, on no ground whatsoever, that he has a disease cannot be said to have knowledge of the fact that he has an injury, let alone that it is significant.
If this had been the only context in which knowledge had come to be explored, I do not think that the Court of Appeal would have found itself in the place where it eventually arrived.
But most of the cases are about knowledge of attributability.
Even on the basis that attributable means capable of being attributed to, it is difficult to see how an unreasonable belief in attributability can amount to knowledge of the fact of attributability.
It clearly does not.
It amounts to an unreasonable belief.
Only when there is some reasonable basis in evidence or objective fact for that belief can it be turned into something approaching knowledge.
We do not need in this case to debate the point at which belief can turn into knowledge because we can confidently state that there was no such basis for the veterans beliefs, however strongly held, until at the earliest the publication of the Rowland report.
It is my belief, therefore, that the Court of Appeal, bit by bit in the way that Lord Kerr and Lord Phillips have described, turned a very sensible policy approach to how the law should approach limitation in personal injury cases into a construction of section 14 of the Limitation Act 1980 which cannot be justified by the words used.
Some of these claimants did have a strongly held belief that their illnesses were caused by exposure to radiation.
That depended on (a) proof of their exposure and (b) proof that their exposure caused their illnesses.
There was no evidence to get them to point (a) until the Rowland report, but that only supplied the possibility.
Each of the claimants would have to be assessed to see whether the same chromosomal effects were found in them.
There is still no evidence to supply a causal connection between that exposure and the claimants various illnesses.
In agreement with Lord Phillips and Lord Kerr, upon whose analysis of the law I cannot improve, I would hold that none of these actions is statute barred and the discretion under section 33 does not arise.
As we are in a minority, it is not necessary for me to choose between them, but logically I prefer Lord Phillips view.
Rowlands has got the claimants further than they were before, but it has not supplied the basis for a belief in causation as well as exposure.
So the claimants still do not have the knowledge required for time to begin to run.
There is a very good case for the law being different.
But I do not think that we should translate our view of what a sensible law of limitation would say into our view of what it does say.
Knowledge and belief are different concepts and there is no reason to believe that Parliament intended to equate the two.
I would therefore allow this appeal and make the order which Lord Phillips proposes.
LORD KERR
The genesis of the statutory provisions
In the Report of the Committee on Limitation of Actions in Cases of Personal Injury (1962) (Cmnd 1829) (prompted by the decision in Cartledge v E Jopling & Sons Ltd [1963] AC 758 and leading to the enactment of the Limitation Act 1963) at para 8 the following appears: [The claimant] may, for example, obviously be suffering from a particular disease without being able to attribute it to the conditions under which he has been working, either because there is no sufficiently widespread knowledge of the causal connection between the processes on which he is, or formerly was, engaged and the disease in question, or because he has no reason to suppose that these processes in fact expose, or exposed, him to some noxious substance.
The problem in the state of the law which the Committee had identified was therefore firmly linked to an absence of knowledge of the fact that an employees disease had been caused by work processes.
And this was reflected in the terms of the 1963 Act.
By section 1(1) of that Act, section 2(1) of the Limitation Act 1939, which had imposed a time limit of three years for bringing certain actions, was to no longer afford a defence where the requirements of section 1(3) were fulfilled.
Section 1(3) provided: The requirements of this subsection are fulfilled in relation to a cause of action if it is proved that the material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which (a) either was after the end of the three year period relating to that cause of action or was not earlier than twelve months before the end of that period, and (b) in either case, was a date not earlier than twelve months before the date on which the action was brought (emphasis added).
The material facts expression in this subsection was explained in section 7(3) of the Act: any reference to the material facts relating to a cause of action is a reference to any one or more of the following, that is to say (a) the fact that personal injuries resulted from the negligence, nuisance or breach of duty constituting that cause of action; (b) the nature or extent of the personal injuries resulting from that negligence, nuisance or breach of duty; (c) the fact that the personal injuries so resulting were attributable to that negligence, nuisance or breach of duty, or the extent to which any of those personal injuries were so attributable.
For time to begin to run, therefore, the claimant had to know as a fact that the personal injuries resulted from negligence etc and that they were attributable to that default.
As Lord Walker has observed (in para 29 of his judgment) these twin requirements were replicated in the Limitation Act 1975 (which is now consolidated as part of the Limitation Act 1980).
The 1975 Act followed on the Law Reform Committees Interim Report on Limitation of Actions in Personal Injury Claims of May 1974 (Cmnd 5630).
In para 49 of the Report, the committee confronted directly the question of how the date of knowledge should be determined.
It outlined various tests that had been considered: It has not been suggested to us, and in our view could not reasonably be suggested, that the plaintiff's date of knowledge should arrive until he has knowledge (actual or constructive) both of his injured condition and of its having been caused by an act or omission of the defendant.
In our view, the crucial question to be answered is whether the date of knowledge should arrive (1) on the plaintiff's acquiring knowledge of those facts; or (2) on his acquiring knowledge of these facts and also that he has a worthwhile cause of action against the defendant; or (3) at some intermediate point between these states of knowledge, as for example on his becoming aware, in the words of Lord Pearson, [in Smith v Central Asbestos Co Ltd [1973] AC 518] (as a matter of fact in the same manner as a jury would decide) that the defendants were at fault and that his injuries were attributable to their fault.
The Committee chose the first of these alternatives.
It is significant that the way that it expressed its conclusion was that the plaintiffs knowledge should arrive only when he had actually or constructively acquired knowledge of two matters which it described as facts.
The first was his injured condition and the second that the condition had been caused by an act or omission of the defendant.
In my view, the characterisation of the second of these as a fact clearly indicates that it was contemplated that there would have to be some factual foundation for it.
I am reinforced in that view by the later passage in the Law Reform Committees report at para 54 where it said that the only possible intermediate solution was that adopted by Lord Pearson in Smiths case (set out in sub para (3) of para 49 of the report and quoted above).
Although the committee rejected this formulation it did so because the concept of fault could not be satisfactorily defined and because it contained a considerable subjective element.
It did not suggest that the knowledge of the plaintiff should be other than knowledge of a particular set of facts.
Nothing in the report suggests that the committee considered that mere belief in a state of affairs would be sufficient.
Indeed, in para 55, it put its conclusion in this way: that the plaintiff should have knowledge, actual or constructive, both of his injured condition and of its having been caused by acts or omissions of the defendant.
This seems plainly to point to the requirement that there be an objective basis for the knowledge of facts which the plaintiff had to have.
In light of this, it is unsurprising that the prefatory words of section 14(1) of the 1980 Act are that the date of knowledge is the date on which the plaintiff first had knowledge of the facts which are outlined in the sub paragraphs which follow.
The facts contained in those sub paragraphs of which the plaintiff is required to have knowledge are (a) that the injury was significant; (b) that it was attributable to the act or omission of the defendant; (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.
In relation to the attributability element of the plaintiffs knowledge, what was stipulated was that the plaintiff was required to know as a fact that the injury was attributable to (in the sense of being capable of being the cause of) the act or omission.
From a purely textual analysis of the statute, therefore, it is impossible to suggest that what it intended to convey was that the test should be that the plaintiff would have statutory knowledge when he believed (or even firmly believed) that the injury was attributable to the defendants act or omission.
The natural meaning of the language used was that the plaintiff needed to know it rather than to believe it and that he needed to know it as a fact.
Indeed, the phrase knowledge of facts permeates the section.
Section 14(1)(d), for instance, provides that, if it is alleged that the act or omission was that of a person other than the defendant, time would begin to run only when the plaintiff had knowledge of the identity of that person and the additional facts supporting the bringing of an action against the defendant.
The word knowledge appears nine times in the subsections which precede section 14(3) and in all but one of these, knowledge is associated with facts.
Knowledge of facts is also the same formula used in section 14(1A).
It is interesting to note, therefore, that knowledge of the facts is required for a wide spectrum of circumstances such as: (i) the identity of the defendant; (ii) that the injury was significant; and (iii) the further unspecified facts that are needed to support the bringing of an action against the defendant when it is alleged that the act or omission was that of a person other than the defendant.
The direct association between knowledge and facts continues in section 14(3) which provides: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.
Subjective belief versus knowledge of facts
If, as the respondent contends, the rubric knowledge of the facts is to be interpreted as firm belief in a state of affairs, it surely must have that meaning for each of the circumstances in which it is employed.
Therefore, if the respondent is right, the claimant need only have a belief in the identity of the defendant rather than knowing who he is; he need only believe that his injury was significant rather than knowing it to be such; and need only believe the other facts that support the bringing of an action against the defendant, where it is alleged that the act or omission was that of a person other than the defendant.
If the respondents argument was correct, there is therefore a wide and surprising range of matters and circumstances that a claimant needs only to believe in rather than to know, for statutory knowledge to arise.
If that interpretation were to be accepted, the repeated use in the section of the word knowledge (which is in no sense a natural synonym of belief) is mystifying.
It would have been a simple task to convey that a claimant need only believe in these matters if that had been the intention of Parliament.
But it is, to my mind, inherently unlikely that Parliament could ever have intended that claimants should be encouraged to commence litigation when all that they had to go on was a belief, however strongly held.
It is possible to imagine states of mind that might be required of a claimant as points on a spectrum, with, at one end, simple belief with no factual foundation whatever and, at the other, objectively verifiable certainty.
On the belief side of this spectrum, various alternative formulations of states of mind can be envisaged.
Belief in a state of affairs which, if true, would constitute the requisite knowledge; or reasonable grounds for believing certain facts; or a real possibility that the facts which the claimant believes are correct; or credible information supporting the correctness of the facts.
To interpret section 14 so as to fasten on any one of those formulations would require, at least, a determinedly purposive approach.
But the respondent in this case would have us go further than any of these and construe the section as requiring no more than mere belief.
Simple unvarnished belief is qualified only (in the respondents submission) by the requirement that it be belief of such a quality as would prompt a sensible person to begin investigations into the viability of proceedings.
This is, in essence, a purely subjective state of mind.
The second element, that a sensible person holding such a belief would be moved to investigate whether to bring proceedings, does not sound at all on the source or accuracy of the belief.
So an unreasoning belief, provided it was sufficiently firmly held, would qualify as knowledge activating the beginning of the limitation period.
That precisely constructed and specifically defined set of circumstances that an individual should have a belief that was personal to him or her and that this would act as the catalyst for an inquiry whether to launch proceedings seems to me to be impossibly and impermissibly incompatible with the natural meaning of section 14.
It is not clear what becomes of the limitation period as a consequence of the progress (or lack of it) of the inquiries, if the respondents argument is accepted.
On its analysis, when the moment arrives that a claimants belief in a set of affairs hardens into a conviction that inquiries should be made, time begins to run.
But what happens if the inquiries are initially unproductive and the claimants belief falters? Mr Gibson QC submitted that what mattered was the claimants subjective state of mind and his degree of certainty.
He said that statutory knowledge equates with firmness of belief.
He also argued that belief was transformed to the status of fact by its inclusion in a statement of claim.
But what happens if the claimant loses belief after the statement of claim has been issued? What if the firmness of his purpose, the strength of his belief crumbles? Is the limitation period to be suspended? If subjective belief of sufficient resolution is the catalyst for time starting to run, why should not a failure of belief stop time running? And how is the question of whether subjective belief is present to be judged? Is this inevitably linked to the issue of proceedings? What if a claimant testifies that he or she did not believe that there was a connection between the exposure and the onset of disease but was advised to issue proceedings in the hope that evidence could be obtained to forge such a link, are they to be fixed with a belief that, in truth and in fact, they did not hold? These considerations clearly point, in my opinion, to the unworkability of a system so directly linked to and uniquely dependent on a claimants subjective belief.
Other anomalies arise, if subjective belief is substituted for knowledge based on objective fact.
If two individuals are exposed to the same noxious materials and both develop disease in consequence, but medical science has not evolved to the point where either could be fixed with constructive knowledge that this was due to the exposure, time begins to run against the claimant who has a firm belief in the cause of his illness sufficient to lead him to consult a solicitor but not against his fellow employee who does not share that strength of belief.
Such a situation defies logic as well as legal principle.
The authorities
The obvious starting point is that chosen by Lord Phillips (in para 112 of his judgment) of Davis v Ministry of Defence (unreported).
In that case May LJ decried what he considered was the wrongful assimilation by the trial judge of firm belief and knowledge.
The facts of the case required the question of belief versus knowledge to be addressed directly.
The appellant had always believed that his dermatitis had been caused by working conditions.
But he was advised that there was not sufficient evidence of this.
His belief was therefore not supported by objective evidence.
As Lord Wilson has pointed out (in para 9 of his judgment), in Halford v Brookes [1991] 1 WLR 428, 443F, Lord Donaldson MR characterised Davis as an exceptional case.
Indeed, at 442H he suggested that the facts of Davis were highly unusual.
But one wonders, in the light of contemporary experience, if the case was quite as unusual as it has been portrayed.
Developing medical science about the aetiology of various conditions, particularly perhaps in the field of asbestos related disease, has shown its remarkable tendency to catch up with and provide support for the firmly held beliefs of workers that the condition from which they suffered was caused by their working conditions.
In any event, the important thing, as it seems to me, is not whether Davis can be dismissed as an exceptional case but whether the reasoning that led to its outcome is sound and can be applied to the present appeal.
In my judgment the reasoning is indeed sound and is directly relevant to the problem that this case poses.
Lord Wilson considers it to be heretical to allow a claimant to escape what he describes as the conventional requirement to assert his cause of action for personal injuries within three years of its accrual (para 6 of his judgment) by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it.
One can see the initial attraction of that argument.
But it is necessary, I believe, to take a step back.
The important question on which to focus is when the action accrues.
Like it or not, the legislature has decreed that this occurs when a claimant is in a mental state which amounts to knowledge of facts that are, among other things, capable of showing that the personal injury which is the subject of his claim was due to the default of the defendant.
True it may be, as Lord Wilson says, that the concepts of belief and knowledge are inherently subjective but that does not mean that they are interchangeable.
I know something to be true because I have a factual foundation for my knowledge of its truth.
I may believe something to be true without any basis in practical reality whatever.
And simply because I assert the truth of a particular proposition, I cannot be taken to know (as opposed to believe) it to be so.
I am of the opinion, therefore, that the Court of Appeal in Davis was right to recognise the clear distinction between belief (even firm belief) and knowledge.
The latter concept is inexorably tied to an objective assessment of what is known rather than what is taken on faith or impression.
The approach of May LJ in Davis was approved by Slade LJ in Wilkinson v Ancliff (BLT) Ltd [1986] 1 WLR 1352 but the retreat from its clear demarcation of knowledge of facts from firm belief may be supposed to have begun with Halford.
The facts of the latter case have been set out by Lord Phillips at para 114 of his judgment and need not be repeated.
At 434B Russell LJ said: Once the plaintiff in this case realised that her daughter's death was capable of being attributed to the activities of the defendants or one or other of them, time began to run and, subject to the provisions of section 33 of the Act, she had three years thereafter in which to issue her proceedings.
It should be noted that, although the distinction between knowledge and belief might have begun to be blurred by this case, Russell LJs formulation does not equate knowledge with belief.
Realised is the word employed rather than knew.
Realisation is, of course, a concept which could span both knowledge and belief although it might be considered to be more comfortably accommodated in the former.
In any event, Lord Donaldson MR addressed the issue in somewhat different terms.
At 443E F he said: The word [knowledge] has to be construed in the context of the purpose of the section, which is to determine a period of time within which a plaintiff can be required to start any proceedings.
In this context knowledge clearly does not mean know for certain and beyond possibility of contradiction.
It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.
It is important to observe that the Master of the Rolls said that it was necessary that the plaintiff should know with sufficient confidence that a state of affairs existed that justified embarking on the preliminary steps that would lead to the issue of proceedings.
And, of course, in this case, Mrs Halford was deemed to know that her daughter had been killed by one or other of the defendants.
It was not a question of her merely believing that one or other had committed the crime.
But, importantly, Lord Donaldson MR in this passage described the quality of knowledge required as that which was sufficient to prompt inquiries to be made and in the same passage suggested that reasonable belief would normally be sufficient.
In my opinion, these two concepts have been conflated in later decisions, so that belief (as opposed to knowledge) sufficient to prompt investigations has become the yardstick.
I doubt if this was Lord Donaldson MRs intention.
He did not elaborate on what was meant by reasonable belief in this context but, juxtaposed as this was with the statement that a plaintiff should know with sufficient confidence that further inquiries were justified, one can only suppose that he considered that the belief would have to have a sufficiently secure factual foundation in order to activate the limitation period.
In Nash v Eli Lilly & Co [1993] 1 WLR 782, Purchas LJ disavowed an attempt to define knowledge see 792C.
But in the passage of his judgment at 796 F H quoted by Lord Phillips at para 117 above he addressed the question of whether firm belief could be equated with knowledge.
In the first part of this passage, Purchas LJ appears to strongly reject this notion for he said: a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it.
It can be deduced from this passage that the firm belief, in order to be transformed to a condition of knowledge, required to be bolstered by reassurance or confirmation from experts in other words, they would need to confirm that there was a sound basis in fact for holding the belief.
So far, so unexceptionable.
But the final sentence of the passage, as Lord Phillips has pointed out, led to the later misapprehension that belief, provided it was of sufficient firmness, could, without more, be equated with knowledge.
There Purchas LJ, in what seems to be a complete reversal of the statement quoted above, said: If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run.
In an earlier passage at 792C D the same approach can be detected: In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.
What, with respect, these passages neglect to address is the source of the certainty.
One can express oneself certain in a particular belief but knowledge depends on factual information rather than simple belief, however fervently held.
Where the decision in Nash fell into error was in concentrating on the plaintiffs state of mind and the degree of certainty with which the belief that constituted that state of mind was held rather than making the all important link between knowledge and facts sufficient to support it.
Essentially the same confusion of knowledge with belief is apparent in Spargo v North Essex District Health Authority [1997] PIQR P225 where Brooke LJ said at P242: A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant.
Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to
seek advice about making a claim for compensation
In the first sentence of this passage, the plaintiff is treated as having the necessary knowledge when she knows enough.
In the second sentence firm belief is said to be another way of putting the need to know.
I must respectfully disagree.
Knowing is not believing.
To know something to be true is different from believing it to be so.
The confusion begun by Nash between knowledge and belief was continued in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213 CA.
In that case Simon Brown LJ recognised that the difficulty in conceptualising what is meant by knowledge in section 14 generally arose in relation to knowledge of the fact of attributability (P233).
And at P234 he observed that, as had been held in Spargo, a real possibility of establishing causation constitutes attributability.
In an earlier passage at P223 P234 he said this: it seems to me that the real contrast being struck in Nash vs Eli Lilly is between on the one hand the mere believer whose situation is described in the first passage in the judgment, and on the other hand the firm believer sufficiently certain of his case to have clearly in mind (although always, of course, subject to the taking of appropriate advice and the preparation of evidence) the making of a compensation claim.
I do not have difficulty with the proposition that knowledge that there is a real possibility that the condition was caused by the act or default of the defendant constitutes statutory knowledge of attributability.
And one can understand why it might be considered that there is a small step between knowing of a real possibility and firmly believing that there is a connection between the injury and the default of the defendant.
But there is a significant difference between the two.
Knowledge of a real possibility that the act or omission of the defendant caused the injury involves some evaluation of the factual foundation for the claim.
It is not essential to the holding of a firm belief that a similar examination be conducted.
The focus of the debate should be on what the claimant knew as a fact or, at least, on what he knew was a possible fact and not on what he believed.
This is, I think, well captured by Lord Mance in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682 at para 128 where he said: the question is when Mr Haward actually knew both enough of the acts or omissions now alleged to constitute negligence and that the loss suffered was capable of being attributable thereto to make it reasonable for him to begin to investigate whether or not the claimants had a claim (emphasis added).
The claimant needs to know that the acts or omissions possibly caused the injury.
He does not need to know that they constitute actionable fault.
But he needs to know at least that there is a reasonable possibility that those acts or omissions were responsible for his injury.
As Lord Nicholls put it in para 11 of Haward, time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question (emphasis added).
The effect of the issue of proceedings
Lord Wilson considers that it is a legal impossibility for a claimant to assert that he did not have knowledge of attributability for the purpose of section 14 (1) after he has issued his claim.
My disagreement with this view is inevitable in light of the conclusion that I have reached as to the proper interpretation to be given to knowledge for the purposes of section 14.
The plain fact is that a claimant need only verify that he believes the facts stated in his claim form to be true.
The terms in which this requirement is couched reflect, in my opinion, the prosaic truth that the significant averments in claim forms consist of assertions that are, by definition, likely to be controversial.
Claimants cannot be supposed to know that what is asserted is true in any conventional sense.
It is only if one gives knowledge a specialised meaning (which abandons its normal connotation for a concept that is entirely different) for the purposes of section 14 that it becomes possible to say that when a claimant says that he believes something to be true, he is in effect to be taken as saying that he knows it to be such.
The proper test
Foskett J formulated his preferred view of the elements of the knowledge that a claimant is required to have in para 514 of his judgment.
According to this test they required to know: That the injury of which he complains was capable of being caused i) by the act or omission of the defendant; and ii) That there is credible evidence that the act or omission alleged had occurred.
Lord Phillips considered that this preferred view (which, in light of the authorities, Foskett J felt unable to follow) was correct in principle and, with respect, so do I but with one minor qualification, which may amount to no more than a slight reworking of the same test.
In Haward and Spargo it was held that the claimants were required to know that there was a real possibility of the act or omission having caused the damage.
This reflected the circumstance that attributable in the context of section 14 has been construed as meaning capable of being attributed.
If a condition is capable of being attributed to exposure to a noxious agent, it follows that there is a real possibility that it was so attributable if the condition has developed and harmful exposure is established.
I would therefore express the test compendiously as follows: the claimant must know from objectively verifiable facts that there was a real possibility that the injury suffered was due to the act or omission complained of.
Applying the test to these cases
The Ministry of Defence has consistently denied that the veterans were exposed to ionising radiation that was in any way capable of causing injury.
That remains their position.
Although many of the veterans have for many years believed (with varying levels of conviction and passion) that the conditions that they have suffered were caused by exposure to this radiation, until they were made aware or ought to have become aware of the findings of the Rowland study they could not have known from objectively verifiable facts that there was a possible connection between their exposure and the various conditions from which they have suffered.
As Foskett J said, before the Rowland report, all the evidence raised nothing more than a suspicion of exposure to excess ionising radiation with no clear link to the conditions of which complaint is made para 517 of his judgment.
In my judgment, the Rowland report has supplied the necessary objective factual foundation for knowledge on the part of the veterans that there is a real possibility of a connection between their exposure and the conditions that they have suffered.
Lord Phillips has said that the most that the veterans as a group can show, on the basis of this report, is that there is a possibility that some of them were exposed to a raised, albeit low, level of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim (para 157 of his judgment).
But this is enough, in my opinion, to meet the test of knowledge from objectively verifiable facts that there is a possible connection between tortious exposure and injury.
I would therefore hold that time has begun to run from the date that they became aware of or ought to have been aware of the contents of the Rowland report.
Striking out and summary judgment
For the reasons given by Lord Phillips, with which I agree, Foskett J was right not to accede to the application to strike out these proceedings and to refuse the defendants application for summary judgment.
I consider that the judge was fully justified in his view that the veterans were not bound to fail on the issue of causation.
True it is that the evidence on this issue does not look especially promising for them at present.
But, as Lord Phillips has illustrated, there are examples in the past of group litigation where the signs cannot have been propitious when litigation was commenced and, as he has said, depending on the particular circumstances of the case, it may well be prudent to issue proceedings, even though investigations are continuing.
It may well be correct, as Lord Phillips has suggested in para 154, that the judge did not give separate consideration to the question of summary judgment, having decided to refuse the strike out application but, if this is the position, it is hardly surprising.
Once he had decided that the veterans were not bound to fail, it was not open to him to accede to the application for summary judgment against them.
Moreover, at a more general level, I would question the propriety of giving summary judgment on a preliminary hearing on whether an action is statute barred, particularly where detailed medical evidence is required in order to address the question of causation.
Although in the present case there was an extensive review of the evidence, its presentation was principally geared to the examination of its relevance to the date of the claimants knowledge for the purposes of section 14.
As Foskett J said (at para 5 of his judgment) the merits of the individual claims [did] not arise for consideration.
A confident judgment on the myriad issues that the question of causation in a complicated case such as the present raises will normally only be possible when there has been a full ventilation and testing of the experts evidence on both sides.
Conclusion
I would allow the appeals and make the order that Lord Phillips has proposed.
| UK-Abs | Between October 1952 and September 1958 the Respondent [the MoD] carried out experimental atmospheric explosions of 21 thermonuclear devices in the South Pacific, involving 22,000 soldiers, sailors and airmen [90].
From these servicemen are drawn the majority of the 1011 claimants in this case, most of whom caused their claims to be issued on 23 December 2004 and some of whom did so later [the Veterans].
Some of the claims are brought by the personal representatives of veterans who have sadly died [90].
The Veterans allege that they were exposed to fallout radiation from the nuclear tests and that this exposure has caused illness, disability or death [90]; both exposure and causation are denied by the MoD. The claims were made subject to a Group Litigation Order because they gave rise to common or related issues of fact or law [15].
There is an issue as to whether many of the claims are time barred under the provisions of the Limitation Act 1980, section 11(4) of which provides that an action shall not be brought after the expiration of three years from (a) the date on which the cause of action accrued; or (b) the date of knowledge (if later) of the person injured [2].
The group and the MoD each selected five lead claimants for the trial of the limitation issue [91].
The Veterans alleged that they did not have the requisite knowledge within the meaning of the Limitation Act 1980 until 29 June 2007, some two and a half years after most of them caused their claims to be issued, when a report by Dr Rowland [the Rowland Report] demonstrated an abnormal incidence of chromosomal changes in blood samples of 50 New Zealand veterans, who had served on ships that were no closer to the tests than had been most, if not all, of the Veterans, thus providing objective evidence of exposure to low dose fallout radiation [97].
The Veterans accept that there is no credible evidence to prove that this exposure caused their injuries [25].
The MoD, whilst denying both exposure and that such low dose exposure could cause injury, contended that the Veterans knew the facts alleged more than three years before issuing their claims.
At first instance, five lead claimants were found to have issued within the limitation period and Foskett J exercised his discretion under section 33 of the Limitation Act 1980 to allow the remaining five cases to proceed [104].
The Court of Appeal held that nine of the claimants had acquired knowledge more than three years before proceedings were commenced and that Foskett J had erred in the exercise of his discretion under section 33, so that none of the nine claims should be permitted to proceed [105].
The nine claimants appeal to the Supreme Court.
This appeal raises three issues: (i) how is knowledge to be defined for the purposes of section 11(4) of the Limitation Act 1980; (ii) is it possible for a claimant to commence proceedings before having acquired the knowledge that would normally cause time to run, and if so what is the proper approach of the court to such proceedings; and (iii) should the court exercise its discretion under section 33 of the Limitation Act 1980 to allow the claims to proceed in the event that they had not been commenced within the limitation period?
The Supreme Court dismisses the appeal by a 4 3 majority; Lord Phillips, Lady Hale and Lord Kerr dissenting.
The Limitation Act 1980 [the 1980 Act] provides that the limitation period is to be triggered by a claimants actual or constructive knowledge of certain facts [111].
Two questions arise in respect of knowledge: firstly, what is it that the claimant has to know at the date of knowledge? Secondly what state of mind, assessed subjectively or objectively or a mixture of the two, amounts to knowledge for this purpose [30]? What the claimant must know depends on the interpretation of section 14(1) of the 1980 Act, in particular section 14(1)(b) which provides that one of the facts is that the injury was attributable in whole or in part to the act or omission which is alleged to
constitute negligence, nuisance, or breach of duty [30].
Attributable refers to causation and means capable of being attributed or ascribed to [34], and has been interpreted as directed to a real possibility of a causal link [35].
It is a legal impossibility for a claimant to lack knowledge of attributability for the purposes of section 14(1) after issuing his claim [3, 70].
The Claimant must verify his claim form by a statement that he believes that the facts stated in it are true, which can be regarded as an explicit recognition that he has knowledge for the purpose of section 14(1) [3]; further, the inquiry mandated by section 14(1) is retrospective [4] and is predicated on the assumption that there is a valid cause of action [2].
A claimant is likely to have developed the requisite state of mind to amount to knowledge of the facts specified in section 14(1) when he first came reasonably to believe them [11, 50], that is to say that he held a belief which is more than a mere suspicion, but rather is held with sufficient confidence to justify that he should reasonably begin an investigation into whether he has a valid claim and, if so, how that claim can be established in court [12], and which also carries a degree of substance rather than being the product of caprice [11].
The test is objective, without regard to a claimants personal characteristics, which can be taken into account at the later stage of exercising discretion under section 33 of the 1980 Act [47].
A distinction is to be drawn between knowledge of the essence of a claim and the evidence necessary to prove it to the requisite legal standard [58].
The facts by reference to which limitation are to be assessed are those pleaded or later asserted, and the question is not whether those facts give rise to a good claim in law [86].
Once the requisite knowledge has arisen, evidential difficulties confer no right to a further, open ended, extension of the limitation period [25].
A claimant will not always have acquired knowledge by the date when he first consults an expert [13].
Section 14(3) recognises that some facts may be ascertainable only with the help of experts, so the court will have regard to the confidence and the substance of a claimants belief prior to consulting an expert and the effect on that belief of receipt of the experts report [13].
An expert may assist a claimant in acquiring knowledge of the facts required by section 14 or he may provide evidence to help him substantiate the claim [14].
Application of this test to the facts of the nine lead cases [16 24] drives a conclusion that, prior to three years before issue, each reasonably believed that their injuries were capable of being attributed to the nuclear tests, particularly in light of their many private and public statements about the cause of their conditions, the nation wide campaign for compensation, applications for war pensions and applications to the ECtHR [25], as well as the fact that it was common knowledge from at least the 1980s that exposure to fallout radiation could cause leukaemia, many other forms of cancer, infertility and other serious injuries [63].
The difficulty for the Veterans had been to produce cogent evidence, whether from their individual medical histories or from epidemiological material, that the dose of radiation was sufficiently high to establish a causative link with their injuries [64].
The Rowland Report was evidential, rather than assisting the Veterans in acquiring knowledge of the essence of their claim [64].
The Court of Appeal correctly declined to exercise its discretionary power under section 33 of the 1980 Act to disapply section 11 [26].
Having weighed all the other relevant factors [26] and in light of its unusual advantage in the mass of detailed material summarised by the judge [27], that Court held that the Veterans had very great difficulties in establishing causation.
The fact is that the Veterans claims have no real prospect of success and it would be absurd to disapply section 11, only for their claim inevitably to be struck out [27].
The minority considers, however, that knowledge and belief are different concepts [174], and that a claimants subjective belief is not a sensible basis for deciding whether the claim is time barred [168].
A claimant can be said to have knowledge only when he has a reasonable belief that is founded on known fact [141] or objective fact [170].
It is even possible for a claimant to lack knowledge of attributability at the time when he issues his claim so that the limitation period has yet to begin to run [146].
At the time when the Veterans issued proceedings, there were no known facts capable of supporting a belief that their injuries were attributable to exposure to ionising radiation [139], thus none of the claims is time barred.
Lord Phillips would have held that the initiation of the group action did not constitute an abuse of process and it would not have been right to strike it out on that basis [153], and, although the Veterans do not have a reasonable prospect of success, the Court of Appeal was correct not to grant the MoD summary judgment in the absence of a formal application [158].
Lord Kerr agrees that it was correct not to strike out proceedings and to refuse to grant summary judgment [212, 214].
|
These appeals are concerned with a little used provision in article 1F(c) of the Geneva Convention on the Status of Refugees (the Refugee Convention).
This excludes from refugee status and protection any person with respect to whom there are serious reasons for considering that . he has been guilty of acts contrary to the purposes and principles of the United Nations.
For the time being at least, however, the Home Secretary accepts that these appellants cannot be returned to their home countries because they face a real risk of torture or inhuman or degrading treatment or punishment there.
It is the grant of refugee status, rather than the right to stay in this country, which is in issue in these proceedings.
The issues in the two cases are different.
In Al Sirri, the question is whether all activities defined as terrorism by our domestic law are for that reason alone acts contrary to the purposes and principles of the United Nations, or whether such activities must constitute a threat to international peace and security or to the peaceful relations between nations.
In DD, the question is whether armed insurrection is contrary to the purposes and principles of the United Nations if directed, not only against the incumbent government, but also against a United Nations mandated force supporting that government, specifically the International Security Assistance Force (ISAF) in Afghanistan.
Although the issues are different, many of the relevant materials are the same, as must be the general approach to article 1F(c), and so we deal with them in one judgment to avoid unnecessary repetition.
In all article 1F cases, there is also the issue of the standard of proof: what is meant by serious reasons for considering a person to be guilty of the acts in question? (1) The general approach
Relevant treaty and legislative provisions
Article 1F of the Refugee Convention excludes three types of person from the definition of refugee: 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) he has been guilty of acts contrary to the purposes and principles of the United Nations.
It will be apparent that a particular act may fall within more than one of these categories.
In particular, terrorism may be both a serious non political crime and an act contrary to the purposes and principles of the United Nations.
Member States of the European Union are, moreover, bound to observe the standards laid down in Council Directive 2004/83/EC 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).
Its main objective is to ensure common standards in the identification of people genuinely in need of international protection and a minimum level of benefits for them in all Member States (recital 6).
Recital 22 deals with article 1F(c): Acts contrary to the purposes and principles of the United Nations are set out in the preamble and articles 1 and 2 of the Charter of the United Nations and are, amongst others, embodied in the United Nations Resolutions relating to measures combating terrorism, which declare that acts, methods and practices of terrorism are contrary to the purposes and principles of the United Nations and that knowingly financing, planning and inciting terrorist acts are also contrary to the purposes and principles of the United Nations.
Article 12 of the Qualification Directive both reflects and expands slightly upon article 1F of the Refugee Convention (the changes and additions are italicised): 2.
A third country national or a stateless person is excluded from being a refugee where there are serious reasons for considering that: (a) he or she 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 or she has committed a serious non political crime outside the country of refuge prior to his or her admission [to that country] as a refugee; which means the time of issuing a residence permit based on the granting of refugee status; particularly cruel actions, even if committed with an allegedly political objective, may be classified as serious non political crimes; (c) he or she has been guilty of acts contrary to the purposes and principles of the United Nations as set out in the Preamble and articles 1 and 2 of the Charter of the United Nations. 3.
Paragraph 2 applies to persons who instigate or otherwise participate in the commission of the crimes or acts mentioned therein.
The Qualification Directive is transposed into United Kingdom law by the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525).
Regulation 2 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.
The Immigration Rules provide, in paragraph 334, that a person will be granted asylum, inter alia, if (ii) he is a refugee, as defined in regulation 2 of The Refugee or Person in Need of International Protection (Qualification) Regulations 2006.
However, section 54 of the Immigration, Asylum and Nationality Act 2006 (the 2006 Act), provides: (1) In the construction and application of article 1F(c) of the Refugee Convention the reference to acts contrary to the purposes and principles of the United Nations shall be taken as including, in particular (a) acts of committing, preparing or instigating terrorism (whether or not the acts amount to an actual or inchoate offence), and (b) acts of encouraging or inducing others to commit, prepare or instigate terrorism (whether or not the acts amount to an actual or inchoate offence). (2) In this section the Refugee Convention means the Convention relating to the Status of Refugees done at Geneva on 28 July 1951, and terrorism has the meaning given by section 1 of the Terrorism Act 2000.
There is no need to set out the definition of terrorism contained in section 1 of the 2000 Act.
The essence is the use or threat of certain dangerous actions designed to influence this or any other government or intimidate the public for the purpose of advancing a political, religious, racial or philosophical cause.
But if firearms or explosives are involved, the act or threat need not be designed to influence the government or intimidate the public.
Terrorism designed solely to achieve political change within the United Kingdom, with no international repercussions, is clearly covered, as is terrorism committed here with a view to achieving internal political change in another country.
The Preamble to the Charter of the United Nations recites the determination of the peoples of the United Nations to save succeeding generations from the scourge of war; to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small; to maintain justice and respect for international law; and to promote social progress and better standards of life in larger freedom; and for these ends to live together in peace, unite to maintain international peace and security, ensure that armed force is used only in the common good, and employ international machinery for the economic and social advancement of all peoples.
The purposes of the United Nations are set out in article 1 of the Charter.
The first purpose is 1.
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 for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace.
The second is to develop friendly relations among nations based on respect for the principle of equal rights and self determination of peoples, and to take other appropriate measures to strengthen universal peace; the third is to achieve international cooperation in solving international problems of an economic, social, cultural, or humanitarian nature, and in promoting and encouraging respect for human rights and for fundamental freedoms for all; and the fourth is to be a centre for harmonising the actions of nations in the attainment of these common ends.
Article 2 of the Charter requires the United Nations and its Member States to act in accordance with the seven Principles set out therein.
These are: the sovereign equality of all Members; the duties of all Members to fulfil their obligations under the Charter in good faith; to settle their disputes by peaceful means; to refrain from the threat or use of force against the territorial integrity or political independence of any state; to give the United Nations every assistance in taking action in accordance with the Charter and to refrain from assisting any state against which it is taking action; the duty of the United Nations to ensure that non member states act in accordance with these principles so far as may be necessary to maintain international peace and security; and, finally, that Nothing contained in the present Charter shall authorise the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state .
The general approach to article 1F(c)
The appellants, with the support of the UNHCR, argue that article 1F must be interpreted narrowly and applied restrictively because of the serious consequences of excluding a person who has a well founded fear of persecution from the protection of the Refugee Convention.
This was common ground in R (JS (Sri Lanka)) v Secretary of State for the Home Department [2010] UKSC 15, [2011] 1 AC 184, in the context of article 1F(a), and must apply a fortiori in the context of article 1F(c).
Concern was expressed during the drafting of the Convention that the wording was so vague as to be open to misconstruction or abuse.
Professor Grahl Madsen comments that It seems that agreement was reached on the understanding that the phrase should be interpreted very restrictively: The Status of Refugees in International Law, 1966, p 283.
Secondly, article 1F(c) is applicable to acts which, even if they are not covered by the definitions of crimes against peace, war crimes or crimes against humanity as defined in international instruments within the meaning of article 1F(a), are nevertheless of a comparable egregiousness and character, such as sustained human rights violations and acts which have been clearly identified and accepted by the international community as being contrary to the purposes and principles of the United Nations.
The appellants rely on Pushpanathan v Canada, Minister of Citizenship and Immigration (Canadian Council for Refugees intervening) [1998] 1 SCR 982 (Pushpanathan) per Bastarache J at para 65: .In my view, attempting to enumerate a precise or exhaustive list [of acts contrary to the purposes and principles of the United Nations] stands in opposition to the purpose of the section and the intentions of the parties to the Convention.
There are, however, several types of acts which clearly fall within the section.
The guiding principle is that where there is consensus in international law that particular acts constitute sufficiently serious and sustained violations of fundamental human rights as to amount to persecution, or are explicitly recognised as contrary to the purposes and principles of the United Nations, then article 1F(c) will be applicable.
On the other hand, not every act which is condemned by the United Nations is for that reason alone to be deemed contrary to its purposes and principles.
In Pushpanathan itself, the majority held that international drug trafficking did not fall within article 1F(c), despite the co ordinated efforts of the international community to suppress it, through United Nations treaties, declarations and institutions.
As the UNHCR explains, in its Background Note on the Application of the Exclusion Clauses: Article 1F (September 2003), at para 47: The principles and purposes of the United Nations are reflected in myriad ways, for example by multilateral conventions adopted under the aegis of the UN General Assembly and in Security Council resolutions.
Equating any action contrary to such instruments as falling within article 1F(c) would, however, be inconsistent with the object and purpose of this provision.
Rather, it appears that article 1F(c) only applies to acts that offend the principles and purposes of the United Nations in a fundamental manner.
Article 1F(c) is thus triggered only in extreme circumstances by activity which attacks the very basis of the international communitys co existence under the auspices of the United Nations.
The key words in article 1F(c) acts contrary to the purposes and principles of the United Nations should therefore be construed restrictively and its application reserved for situations where an act and the consequences thereof meet a high threshold.
This threshold should be 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.
Thus, crimes capable of affecting international peace, security and peaceful relations between states would fall within this clause, as would serious and sustained violations of human rights.
Thirdly, for exclusion from international refugee protection to be justified, it must be established that there are serious reasons for considering that the person concerned had individual responsibility for acts within the scope of article 1F(c): see the detailed discussion at paras 50 to 75 of the UNHCR Background Note.
This requires an individualised consideration of the facts of the case, which will include an assessment of the persons involvement in the act concerned, his mental state and possible grounds for rejecting individual responsibility.
As a general proposition, individual responsibility arises where the individual committed an act within the scope of article 1F(c), or participated in its commission in a manner that gives rise to individual responsibility, for example through planning, instigating or ordering the act in question, or by making a significant contribution to the commission of the relevant act, in the knowledge that his act or omission would facilitate the act.
In Bundesrepublik Deutschland v B and D (Joined Cases C 57/09 and C 101/09) [2011] Imm AR 190 (B and D) the Grand Chamber of the Court of Justice of the European Union confirmed the requirement of an individualised assessment and held that it was not justifiable to base a decision to exclude solely on a persons membership of a group included in a list of terrorist organisations.
This too is consistent with the approach adopted by this Court in R (JS (Sri Lanka)) v Secretary of State for the Home Department [2011] 1 AC 184.
In our view, this is the correct approach.
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.
However, those general observations are not enough in themselves to resolve the questions raised by the two cases before us, to which we now turn. (2) The case of Al Sirri
The facts
The appellant is a citizen of Egypt.
He arrived in the United Kingdom in April 1994 and claimed asylum then.
His claim was eventually turned down on 11 October 2000, on the ground that article 1F(c) of the Refugee Convention applied to him, but he was told that he would be granted exceptional leave to enter the United Kingdom.
That never happened, but on 1 April 2004 he was granted discretionary leave to enter which has been extended for periods of six months at a time ever since.
Under section 83 of the Nationality, Immigration and Asylum Act 2002, the grant of discretionary leave for an aggregate of more than a year also gave him the right to appeal against the refusal of asylum.
This he did in September 2006.
On 2 August 2007, the Asylum and Immigration Tribunal (the AIT) (Hodge J, President, Senior Immigration Judge Lane and Immigration Judge Woodhouse) dismissed his appeal.
On 18 March 2009, the Court of Appeal (Sedley, Arden and Longmore LJJ) set aside the Tribunals determination and remitted the case to be determined afresh by a differently constituted tribunal: [2009] EWCA Civ 222, [2009] INLR 586.
Nevertheless, the appellant has appealed to this Court because he takes issue with some aspects of the leading judgment given by Sedley LJ.
The Home Secretary relied upon seven matters to show that there are serious reasons for considering that the appellant has been guilty of acts contrary to the purposes and principles of the United Nations.
Four of these are accepted facts: (i) that the appellant had published and written the Foreword to an Arabic language book, Bringing to light some of the most important judgments in Islam; the author, Rifai Ahmed Musa, has been credibly named as having been a member of the Egyptian organisation, al Gamma al Islamiyya; the AIT pointed out that that organisation is proscribed under the Terrorism Act 2000, and also in Canada and the United States and within the European Union by Council Common Position 2005/936/CFSP; (ii) that the appellant was in possession of an unpublished Arabic manuscript, Expectations of the Jihad Movement in Egypt; the author, Ayman Al Zawahiri, is a former leader of the organisation, Egyptian Islamic Jihad; (iii) that the appellant possesses books and videos relating to Osama bin Laden and Al Qaeda; (iv) that the appellant had transferred money to and from foreign countries, allegedly in sums greater than his known income could explain.
The AIT relied upon a long and detailed statement from Acting Detective Inspector Dingemans of the Counter Terrorism Command at Scotland Yard, containing what Sedley LJ described as a damaging account and analysis of the material found at Mr Al Sirris premises (para 67).
Sedley LJ commented that the preferable course would have been for the AIT to be shown the documentary material supporting the allegations, to hear what both sides had to say about it, to consider any explanations given by the appellant, and to make up their own mind about it.
The Court of Appeal was not satisfied that this material, together with the more serious allegation referred to in para 22 below, would inevitably have led the AIT to conclude that the appellant fell within article 1F(c); it follows that they would not have been so satisfied on the basis of the above material alone.
Two of the matters relied upon were more serious, but the Court of Appeal ruled that the AIT was required by law to give them no weight, and the Home Secretary has not appealed against that ruling: (i) that the appellant has twice been convicted in his absence by the Supreme Military Court of Egypt: in March 1994, when he was sentenced to death for conspiracy to kill Dr Atef Sidqi, Prime Minister of Egypt; and in January 1999, when he was sentenced to 15 years imprisonment for membership of a terrorist organisation.
These convictions cannot be relied upon because they were probably secured by the use of torture.
Although the AIT placed little weight upon them, the Court of Appeal correctly ruled that this was a serious error of law, and the only principled way of dealing with them was to afford them no weight at all (para 44); (ii) that a grand jury in the United States District Court for the Southern District of New York had indicted him for allegedly providing material support to a terrorist organisation, al Gamma al Islamiyya, and soliciting the commission of a crime of violence.
The AIT had accorded this substantial weight, although none of the evidence on which the indictment was based had been disclosed, and as a result (under extradition law as it then stood) the Home Secretary had declined to authorise an extradition request based upon the indictment to proceed.
The Court of Appeal ruled that it should be accorded no evidential weight whatsoever.
This leaves the most important matter relied upon: that the appellant had conspired in the murder of General Ahmad Shah Masoud in Afghanistan on 9 September 2001, just two days before the atrocities of 11 September 2001.
The background to this is common knowledge, some of which is confirmed by the witness statement of General Masouds brother, Charg dAffaires in London for the Islamic State of Afghanistan.
This was then the recognised government of Afghanistan and General Masoud was its Vice President and Defence Minister.
But at the time the Taliban were in control of most of the country, apart from the territory in the north east of the country which was under the control of the Northern Alliance.
General Masoud was leader of the Northern Alliance.
Earlier that year he had travelled to Europe to address the European Parliament on the situation in Afghanistan and it is said that he had warned of an impending Al Qaeda attack upon the United States on a larger scale than the bombing of the US embassies in Kenya and Tanzania in 1998.
It is also believed that his assassination may have been ordered by Osama bin Laden to cut off the most obvious source of support for US retaliation against such an attack.
Be that as it may, the appellant was indicted at the Old Bailey for conspiracy to murder General Masoud.
The case against him was described by the Common Serjeant as follows.
The General had been murdered by two Arab suicide bombers posing as a journalist and photographer who had been granted an interview with him.
A letter of introduction, purportedly signed by the appellant, from the Islamic Observation Centre (IOC) which was run by the appellant in London, and informing the reader that the two were journalists of Arab News International, a TV subsidiary of the IOC, had played a part in securing this interview.
However, the letters actually carried by the assassins at the time of the murder were in fact, as the Common Serjeant put it, careful and elaborate forgeries of the letters that the appellant had created.
So did the appellant know that the letters which he created were to be used to secure an interview with the General at which he would be killed? Or were they used by the assassins as a template for the letters which they would forge, the appellant being an innocent fall guy who knew nothing of their intended use? The Common Serjeant concluded that the evidence was as consistent with the innocence of the accused (who had made no secret of his authorship of the templates which could easily be traced to him and had not destroyed any of the relevant documentation in his possession) as it was with his guilt.
Accordingly, on 16 May 2002, he dismissed the charge on the ground that the evidence would not be sufficient for a jury properly to convict.
The AIT reminded themselves that the standard of proof in criminal proceedings is not the same as that under article 1F(c).
They concluded that the evidence seriously points to some knowing involvement of the appellant in the events which led to the death of General Masoud (para 46).
Sedley LJ considered whether this conclusion, together with the Dingemans evidence referred to in para 19 above, would have been bound to lead to a finding adverse to the appellant (para 62).
He concluded that there was a realistic possibility that a tribunal of fact, confining itself to the admissible evidence and excluding the two items ruled inadmissible by the Court of Appeal, might have rejected the submission that the appellant fell within article 1F(c) (para 64).
Hence the case was remitted to be determined afresh on the basis of the admissible evidence.
Why then this appeal?
The appellant originally took issue with the Court of Appeal on three matters: (1) The Court of Appeal rejected his argument that article 1F was aimed only at state actors people who had in some way abused the powers of a sovereign state.
Although this had the support both of academic commentators on the Refugee Convention and of the UNHCR, it had been rejected as an absolute rule by the Supreme Court of Canada in Pushpanathan.
The appellant was originally given permission to argue the point in this Court, but has now abandoned it in the light of the later decision of the Court of Justice of the European Union in B and D. In these proceedings, Mr Fordham QC, who appears for the UNHCR, has accepted that it is possible for non state actors to be guilty of acts contrary to the purposes and principles of the United Nations. (2) Sedley LJ saw the force of the appellants submission that terrorism must have an international character or aspect in order to come within article 1F(c) (paras 29 and 32).
However, he did not think that this helped the appellant.
On the face of it, the assassination was in support of a domestic Afghan quarrel.
The international repercussions were referred to but not described by the AIT.
But what in his view gave it a dimension which brought it within the purposes and principles of the United Nations was that, if true, it involved the use of a safe haven in one state to destabilise the government of another by the use of violence (para 51).
The appellant wishes, therefore: (i) clearly to establish that the act in question must have an international character, because the relevant purposes and principles of the United Nations are limited to matters which significantly affect international peace and security; and (ii) clearly to establish that it is not enough to supply that international character that actions are taken in one state to destabilise the government of another. (3) Sedley LJ rejected the submission that serious reasons for considering the appellant to be guilty of acts falling within article 1F(c) imported the criminal standard of proof (paras 33 to 35).
The appellant was originally refused permission to appeal on this ground.
But he now wishes to appeal on the different ground that, for there to be such serious reasons, it must be found more likely than not that the appellant is guilty of the relevant acts.
This is of particular importance in his case, because of the Common Serjeants finding that the evidence was as consistent with his innocence as with his guilt.
An international dimension?
The question is whether labelling an act as terrorism or a person as a terrorist is sufficient to bring the act or the person within the scope of article 1F(c).
Before the Court of Appeal, Mr Eicke QC, on behalf of the Home Secretary, did not dispute that article 1F(c) was not as wide as the definition of terrorism in section 1 of the Terrorism Act 2000 (see para 29).
Further, by common consent the Qualification Directive conditions and qualifies the application of section 1 of the Terrorism Act to article 1F proceedings (see para 28).
Before this Court, Mr Eicke has withdrawn any such concession and argues that, because the United Nations has condemned terrorism but not defined it, Member States are free to adopt their own definitions and that, therefore, acts falling within the domestic definition of terrorism will also be acts contrary to the purposes and principles of the United Nations, whether or not they have any international dimension or repercussions for international peace and security.
In support of his argument, he cites the numerous General Assembly and Security Council resolutions on the subject of terrorism, sometimes with and sometimes without the adjective international.
In 1994, the General Assembly of the United Nations adopted, by resolution 49/60, the annexed Declaration on Measures to Eliminate International Terrorism.
By article 1: The States Members of the United Nations solemnly reaffirm their unequivocal condemnation of all acts, methods and practices of terrorism, wherever and by whomever committed, including those which jeopardise the friendly relations among states and peoples and threaten the territorial integrity and security of states.
By article 2: Acts, methods and practices of terrorism constitute a grave violation of the purposes and principles of the United Nations, which may pose a threat to international peace and security, jeopardise friendly relations among states, hinder international cooperation and aim at the destruction of human rights, fundamental freedoms and democratic bases of society.
And by article 3: Criminal acts intended or calculated to provoke a state of terror in the general public, a group of persons or particular persons for political purposes are in any circumstance unjustifiable, whatever the considerations of a political, philosophical, ideological, racial, ethnic, religious or any other nature that may be invoked to justify them.
By article 5(f), states were required to take effective measures before, among other things, granting asylum to ensure that the asylum seeker has not engaged in terrorist activities.
In 1996, the General Assembly adopted, by resolution 51/210, the Declaration to Supplement the 1994 Declaration on Measures to Eliminate International Terrorism.
By article 3: The States Members of the United Nations reaffirm that States should take appropriate measures in conformity with the relevant provisions of national and international law, including international standards of human rights, before granting refugee status, for the purpose of ensuring that the asylum seeker has not participated in terrorist acts, . and, after granting refugee status, for the purpose of ensuring that that status is not used for the purpose of preparing or organising terrorist acts intended to be committed against other states or their citizens.
Declarations are not, of course, binding in international law.
Resolution 51/210 referred to the possibility of considering in the future the elaboration of a comprehensive convention on international terrorism and established an ad hoc committee to that end; a draft text has been prepared for discussion but as yet no such Convention has been agreed.
In the meantime, a number of specific Conventions requiring states to criminalise certain particular acts of terrorism have been agreed.
The Security Council has passed numerous resolutions concerning threats to international peace and security caused by acts of terrorism, including Resolution 1624 of 2005.
Paragraph 8 of the Preamble to this reaffirms that acts, methods, and practices of terrorism are contrary to the purposes and principles of the United Nations, as is knowingly financing, planning and inciting terrorist acts.
But paragraph 2 also stresses that States must ensure that any measures taken to combat terrorism comply with all their obligations under international law, and should adopt such measures in accordance with international law, in particular international human rights law, refugee law, and humanitarian law.
Mr Fitzgerald QC, on behalf of the appellant, argues that an act of terrorism can only be contrary to the purposes and principles of the United Nations if it impacts in some significant way upon international peace and security.
In the Guidelines on International Protection: Application of Exclusion Clauses: Article 1F of the 1951 Convention relating to the Status of Refugees, 2003, para 17, the UNHCR takes a view of terrorism which is consistent with the general principles quoted above at para 14: In cases involving a terrorist act, a correct application of article 1F(c) involves an assessment as to the extent to which the act impinges on the international plane in terms of its gravity, international impact, and implications for international peace and security.
This position is maintained in the UNHCRs Note on the Impact of Security Council Resolution 1624 (2005) on the Application of Exclusion under Article 1F of the 1951 Convention relating to the Status of Refugees: The focus should . continue to be on the nature and impact of the acts themselves.
In many cases, the acts in question will meet the criteria for exclusion as serious non political crimes within the meaning of article 1F(b).
In others, such acts may come within the scope of article 1F(a), for example as crimes against humanity, while those crimes whose gravity and international impact is such that they are capable of affecting international peace, security and peaceful relations between states would be covered by article 1F(c) of the 1951 Convention.
Thus, the kinds of conduct listed in [preambular paragraph] 8 of Resolution 1624 ie acts, methods and practices of terrorism and knowingly financing, planning and inciting terrorist acts qualify for exclusion under article 1F(c), if distinguished by these larger characteristics. (Emphasis supplied)
B and D was decided by the Grand Chamber of the CJEU after the decision of the Court of Appeal in Al Sirri.
The principal question referred by the Bundesverwaltungsgericht was whether mere membership of or support for an organisation listed in the Annex to the Council Common Position of 17 June 2002 on the application of specific measures to combat terrorism constituted a serious non political crime within article 12(2)(b) or an act contrary to the purposes and principles of the United Nations within article 12(2)(c) of the Qualification Directive.
The Advocate General drew a distinction between terrorist acts in general, which depending upon the circumstances were likely to be categorised as serious non political crimes, and terrorist acts which were contrary to the purposes and principles of the United Nations.
As to the latter, in his view, the UNHCR Guidelines and Background Note suggested that it is nevertheless necessary to verify whether they have an international dimension, especially in terms of their seriousness and their impact and implications for international peace and security.
Within those limits, it therefore seems permissible to make a distinction between international terrorism and domestic terrorism (para 70, Adv Gen).
The Grand Chamber confirmed that terrorist acts, even if committed with a purportedly political objective, fall to be regarded as serious non political crimes (para 81).
Coming on to acts contrary to the principles and purposes of the United Nations, the Grand Chamber thought it clear from the Security Council Resolutions that the Security Council takes as its starting point the principle that international terrorist acts are generally speaking, and irrespective of any state participation, contrary to the purposes and principles of the United Nations (para 83).
It is for that reason that the appellant has conceded that non state actors can be guilty of such acts.
The Grand Chamber continued (para 84): It follows that as is argued in their written observations by all the governments which submitted such observations to the court, and by the European Commission the competent authorities of the Member States can also apply article 12(2)(c) of Directive 2004/83 to a person who, in the course of his membership of an organisation which is on the list forming the Annex to Common Position 2001/931, has been involved in terrorist acts with an international dimension.
The B and D case is prayed in aid on each side of the argument.
Mr Eicke, for the Secretary of State, correctly points out that the international dimension was not what the case was all about.
The principal issue was whether mere membership of and support for a listed organisation was sufficient for either article 12(2)(b) or (c) to apply.
The answer to this question was clearly no.
The national authorities had first to consider whether the acts committed by the organisation fell within those provisions and secondly whether individual responsibility for carrying out those acts could be attributed to the persons concerned.
In that context, little weight could be attached to the references to international terrorism and terrorist acts with an international dimension.
Against that, argues Mr Fitzgerald, it is clear that both the Advocate General and the Grand Chamber were drawing a distinction between paragraphs (b) and (c) of article 12(2).
There is no mention of an international element in the terrorist acts which could fall within paragraph (b), whereas the international element is referred to whenever reference is made to paragraph (c).
Discussion and conclusions
Approaching the matter in the light of the general principles discussed earlier, it is clear that the phrase acts contrary to the purposes and principles of the United Nations must have an autonomous meaning.
It cannot be the case that individual Member States are free to adopt their own definitions.
As Lord Steyn said in R v Secretary of State for the Home Department, Ex p Adan [2000] UKHL 67, [2001] 2 AC 477, In principle, there can be only one true interpretation of a treaty.
There is, at least as yet, no specialist international court or other body to adjudicate upon Member States compliance with the Refugee Convention.
The guidance given by the UNHCR is not binding, but should be accorded considerable weight, in the light of the obligation of Member States under article 35 of the Convention to facilitate its duty of supervising the application of the provisions of the Convention (see R v Asfaw [2008] AC 1061, per Lord Bingham at para 13, and R v Uxbridge Magistrates Court, Ex p Adimi [2001] QB 667, 678).
Within the European Union the Qualification Directive is designed to lay down minimum standards with which Member States must comply.
Sedley LJ correctly concluded that the adoption by section 54(2) of the 2006 Act of the meaning of terrorism contained in the 2000 Act has where necessary to be read down in an article 1F[(c)] case so as to keep its meaning within the scope of article 12(2)(c) of the Directive.
The United Nations Security Council has declared that acts, methods, and practices of terrorism are contrary to the purposes and principles of the United Nations and this is repeated in recital 22 to the Qualification Directive.
But it has done so in a context where there is as yet no internationally agreed definition of terrorism, no comprehensive international Convention binding Member States to take action against it, and where the international declarations adopted by the General Assembly are headed Measures to eliminate international terrorism.
Above all, however, the principal purposes of the United Nations are to maintain international peace and security, to remove threats to that peace, and to develop In those circumstances, it is our view that the appropriately cautious and friendly relations among nations.
It is also noteworthy that the CJEU, despite recital 22 to the Directive, consistently referred to international terrorism, when discussing article 12(2)(c) in B and D.
restrictive approach would be to adopt para 17 of the UNHCR Guidelines: Article 1F(c) is only triggered in extreme circumstances by activity which attacks the very basis of the international communitys coexistence.
Such activity must have an international dimension.
Crimes capable of affecting international peace, security and peaceful relations between states, as well as serious and sustained violations of human rights would fall under this category.
The essence of terrorism is the commission, organisation, incitement or threat of serious acts of violence against persons or property for the purpose of intimidating a population or compelling a government or international organisation to act or not to act in a particular way (see, for example, the definition in article 2 of the draft comprehensive Convention), as Sedley LJ put it in the Court of Appeal, the use for political ends of fear induced by violence (para 31).
It is, it seems to us, very likely that inducing terror in the civilian population or putting such extreme pressures upon a government will also have the international repercussions referred to by the UNHCR.
In this particular case, the AIT did not consider that any such repercussions were required, but commented that if we are wrong about that we consider the killing itself to be an act of terrorism likely to have significant international repercussions, as indeed it appears to have done (para 47).
When the case returns to the Tribunal, the Tribunal will have to consider the totality of the evidence and apply the test set out above.
Finally, is it enough to meet that test that a person plots in one country to destabilise conditions in another? This must depend upon the circumstances of the particular case.
It clearly would be enough if the government (or those in control) of one state offered a safe haven to terrorists to plot and carry out their terrorist operations against another state.
That is what the Taliban were doing by offering Osama bin Laden and Al Qaeda a safe haven in Afghanistan at the time.
As the UNHCR says, this would have clear implications for inter state relations.
The same may not be true of simply being in one place and doing things which have a result in another.
The test is whether the resulting acts have the requisite serious effect upon international peace, security and peaceful relations between states. (3) The case of DD
The facts
The appellant is a citizen of Afghanistan.
He arrived in the United Kingdom on 18 January 2007 and applied for asylum on the same day.
The basis of his claim was that he feared persecution because of his association with his brother AD, who was a well known Jamiat e Islami commander in Afghanistan.
Following the fall of the Najibullah government in 1992, the appellants brother became responsible for other commanders in the north of Afghanistan and formed a number of strategic alliances, ultimately allying himself with the Taliban.
The appellant acted as his deputy and commanded between 50 and 300 men.
He was later demoted and reduced to the command of no more than 20 men.
Following US military intervention in Afghanistan, the appellant and his brother fled to Pakistan.
In 2004, the appellants brother was assassinated in Pakistan by his enemies who held positions in the Karzai government of Afghanistan.
The appellant was also a target of the assassination attempt and sustained gunshot injuries.
After about a month, he returned to Afghanistan and sought protection from his enemies by joining a military grouping, Hizb e Islami.
He commanded 10 15 people and engaged in both offensive and defensive military operations against both the Afghan government and the forces of ISAF.
The appellants nephew (the son of his deceased brother) was killed in Peshawar in about September 2006.
The appellant was ordered to fight in his home area.
He decided that it would be too dangerous for him to do so as he had enemies there who were high ranking members of the Karzai government.
He fled once again to Pakistan and arrangements were made through an agent for him to travel from there to the United Kingdom.
He claimed asylum saying that he feared that, if he were returned to Afghanistan, he would be killed by his deceased brothers enemies or by Hizb e Islami as a traitor.
By letter dated 27 April 2007, the Secretary of State refused the claim on the grounds that the appellants account was not credible.
In particular, he did not accept the account that he gave of his role in Hizb e Islami.
By letter dated 6 August 2007, the Secretary of State gave supplementary reasons for the refusal.
These were that, even if the appellants claimed activities in Afghanistan were substantiated, he was not entitled to asylum in any event.
This was because his claim that he had fought against ISAF, if accepted, meant that he had been guilty of acts contrary to the purposes and principles of the United Nations and was therefore excluded from the definition of refugee by reason of article 1F(c) of the Refugee Convention.
The appellant appealed to the Asylum and Immigration Tribunal (AIT).
IJ Morgan found the appellant to be credible and allowed his appeal under the Refugee Convention and under article 3 of the European Convention on Human Rights (ECHR).
He had a well founded fear of persecution by his brothers enemies some of whom were members of the Karzai government.
The judge was not persuaded that the appellant had been guilty of acts contrary to the purposes and principles of the United Nations.
For reasons that are immaterial to the present appeal, a second stage reconsideration was ordered by SIJ Moulden.
The second stage reconsideration was conducted by IJ Simpson who, by a determination promulgated on 28 August 2008, allowed the appellants appeal on both asylum and article 3 of the ECHR grounds.
The judge found the appellant to be credible, except that she rejected his assertion that his actions with Hizb e Islami in Afghanistan were defensive.
He had a longstanding history of military involvement in Afghanistan, including at a high level, deputy to his Commander brother, and independently a Commander in Hizb e Islami Hekmatayar in Kunar.
There were prima facie grounds for considering his actions were both offensive and defensive.
As regards article 1F(c), the judge concluded that section 54 of the 2006 Act (see para 7 above), which came into effect on 31 August 2006, appeared to have effected a substantive change in the law and that, as a matter of natural justice, it applied only to acts after it came into force, that is from September 2006.
She concluded at para 151: Having regard to the combined lack of specificity of evidence of the appellants conduct with Hizb e Islami and the highly reasonable likelihood, given the chronology, that his involvement with Hizb e Islami was at its end stage after September 2006 and the coming into effect of section 54, I find in sum there are not serious grounds for considering he committed a barred act(s).
I find article 1F(c) does not apply.
The Court of Appeal
The issues before the Court of Appeal concerned (i) the interpretation and applicability of the 2006 Act and (ii) whether and, if so, to what extent on the AITs findings the appellant had been guilty of acts contrary to the purposes and principles of the United Nations within the meaning of article 1F(c) of the Refugee Convention.
Pill LJ (with whom Rimer and Black LJJ agreed) allowed the Secretary of States appeal.
He held that, on the findings of the AIT, the appellant had not committed any acts of terrorism within the meaning of section 54 of the 2006 Act.
The nub of the courts reasoning on the article 1F(c) point is contained in para 64 of Pill LJs judgment: The UN Security Council has mandated forces to conduct operations in Afghanistan.
The force is mandated to assist in maintaining security and to protect and support the UNs work in Afghanistan so that its personnel engaged in reconstruction and humanitarian efforts can operate in a secure environment.
Direct military action against forces carrying out that mandate is in my opinion action contrary to the purposes and principles of the United Nations and attracts the exemption provided by article 1F(c) of the Convention.
As we explain below, we substantially agree with this conclusion.
The Court of Appeal nevertheless remitted the case for reconsideration by the Upper Tribunal because the AIT had failed to consider the appellants individual responsibility as required by this Court in JS (Sri Lanka) (and by the CJEU in B and D) and whether he had been guilty of acts contrary to the purposes and principles of the United Nations.
The United Nations and Afghanistan
Ever since the Soviet withdrawal from Afghanistan in 1989, the United Nations has been trying to bring an end to the fighting that has been taking place in that country.
As long ago as 28 August 1998, Security Council Resolution 1193 called for a ceasefire and expressed grave concern about the continuing Afghan conflict and the Taliban forces offensive which was causing a serious and growing threat to regional and international peace and security, as well as extensive human suffering.
Similar resolutions followed.
For security reasons, all international United Nations personnel were withdrawn from Afghanistan in September 2001.
On 5 December 2001, the participants in the United Nations Talks on Afghanistan entered into the Bonn Agreement on Provisional Arrangements in Afghanistan Pending the Re establishment of Permanent Government Institutions.
The participants pledged their commitment to do all within their means and influence to ensure that security was provided in Afghanistan.
They agreed that an Interim Authority should be established (to be the repository of Afghan sovereignty) and that, pending the establishment and training of new Afghan security and armed forces, they would request the United Nations Security Council to consider authorising the early deployment in Afghanistan of a United Nations mandated force to assist in the maintenance of security in Kabul and its surrounding areas.
By Resolution 1383 (6 December 2001), the Security Council endorsed the Bonn Agreement.
By Resolution 1386 (20 December 2001), acting under Chapter VII of the United Nations Charter, the Security Council authorised the establishment for 6 months of ISAF 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.
The resolution (i) authorised the Member States participating in ISAF to take all necessary measures to fulfil its mandate; called upon ISAF to work in close consultation with the Afghan Interim Authority in the implementation of the force mandate; (ii) called upon all Afghans to cooperate with ISAF; and (iii) called upon the Member States participating in ISAF to provide assistance to help the Afghan Interim Authority in the establishment and training of new Afghan security and armed forces.
On 18 March 2002, the Secretary General submitted a long report entitled The situation in Afghanistan and its implications for international peace and security.
The report contained a good deal of detail about the situation and expressed the hope that the Security Council would support the wish of the Afghan people for the expansion of the operation of ISAF.
At para 95, it said: the next step, to ensure that all United Nations efforts are harnessed to fully support the implementation of the Bonn Agreement, would be to integrate all the existing United Nations elements in Afghanistan into a single mission, the United Nations Assistance Mission in Afghanistan (UNAMA).
The missions mandate would be (i) to fulfil the tasks and responsibilities, including those related to human rights, the rule of law and gender issues, entrusted to the United Nations in the Bonn Agreement, which were endorsed by the Security Council in its resolution 1383 (2001); (ii) to promote national reconciliation and rapprochement throughout the country; and (iii) to manage all United Nations humanitarian relief, recovery and reconstruction activities in Afghanistan under the overall authority of the United Nations Special Representative and in coordination with the Interim Authority and successor administrations of Afghanistan.
By Resolution 1401 (28 March 2002), the Security Council endorsed the establishment of UNAMA for an initial period of 12 months with the mandate and structure set out in the Secretary Generals report of 18 March 2002.
By Resolution 1413 (23 May 2002), the Security Council extended the mandate of ISAF for a further 6 months from 20 June 2002, authorising the Member States participating in ISAF to take all necessary steps to fulfil its mandate.
By one of its recitals, the Security Council determined that the situation in Afghanistan still constituted a threat to international peace and security.
The mandate was extended for a further year beyond 20 December 2002 by Resolution 1444 (27 November 2002).
Once again, the threat to international peace and security posed by the situation in Afghanistan was recorded.
The mandate of UNAMA was extended for a further period of 12 months by Resolution 1471 (28 March 2003).
On 23 July 2003, the Secretary General reported on the situation in Afghanistan and its implications for international peace and security.
At para 67 of his report, he said that the consequences of failing to provide for sufficient security for the Bonn process to succeed may have implications far beyond Afghanistan.
On 11 August 2003, NATO assumed command of ISAF.
By Resolution 1510 (13 October 2003), the Security Council extended ISAFs mandate for a further 12 months 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 Kabul and its environs, so that the Afghan Authorities as well as the personnel of the United Nations and other international civilian personnel engaged, in particular in reconstruction and humanitarian efforts, can operate in a secure environment, and to provide security assistance for the performance of other tasks in support of the Bonn Agreement.
It called upon ISAF to continue to work in close consultation with the Afghan Transitional Authority and its successors as well as the Special Representative of the Secretary General.
By its recitals, the Security Council recognised that the responsibility for providing security and law and order throughout the country resided with the Afghans themselves and welcomed the continuing cooperation of the Afghan Transitional Authority with ISAF.
Yet again, the resolution recorded that the situation still constituted a threat to international peace and security.
By Resolution 1536 (26 March 2004), the Security Council extended the mandate of UNAMA for a further 12 months.
By Resolution 1563 (17 September 2004), the mandate of ISAF was extended for a further 12 months beyond 13 October 2004.
In subsequent years, the mandates of UNAMA and ISAF were again extended for periods of 12 months at a time.
As will become apparent, the differences between ISAF and UNAMA have assumed some importance in this case.
ISAF is an armed force, but it is not a United Nations force.
It has never been under direct United Nations command.
It was initially under the lead command of single nations (starting with the United Kingdom).
Since August 2003 it has been under the command of NATO.
On the other hand, UNAMA is an assistance mission under United Nations control.
It is not an armed force.
But the objectives of ISAF and UNAMA are essentially the same, although the means by which they seek to achieve them differ.
In particular, they both aim to promote the Bonn Agreement and to maintain peace and security in Afghanistan, thereby reducing the threat to international peace and security posed by the situation in Afghanistan.
Some of the more recent Security Council resolutions explicitly make the link between the two organisations.
Thus, recital 7 to Resolution 1776 (19 September 2007) is in these terms: Stressing the central role that the United Nations continues to play in promoting peace and stability in Afghanistan, noting, in the context of a comprehensive approach, the synergies in the objectives of the United Nations Assistance Mission in Afghanistan (UNAMA) and of ISAF, and stressing the need for further sustained cooperation, coordination and mutual support, taking due account of their respective designated responsibilities (underlining added).
Similar language appears in the recitals to Resolution 1806 (20 March 2008), Resolution 1833 (22 September 2008), Resolution 1868 (23 March 2009) and subsequent resolutions.
The appellants case on article 1F(c)
Mr Drabble QC, on behalf of DD, relies upon the general approach to article 1F(c) discussed earlier.
In particular, he argues that participation in an armed attack against forces operating under and carrying out a United Nations mandate does not without more engage article 1F(c).
Armed insurrection is not, in itself, contrary to the purposes and principles of the United Nations.
Internal armed conflict is now covered by international humanitarian law, in the shape of the 1949 Geneva Conventions.
United Nations mandated forces are often deployed during or after an armed conflict, where international humanitarian law provides the appropriate legal framework for determining the lawfulness of armed attacks against them.
The distinction between ISAF and UNAMA is crucial to the argument.
Armed attacks on UNAMA could be characterised as contrary to the purposes and principles of the United Nations.
UNAMA is a non combatant peacekeeping force which is protected under the 1994 Convention and the 2005 Protocol on the Safety of United Nations and Associated Personnel, whereas ISAF is not.
Article 1(a)(i) of the 1994 Convention defines United Nations Personnel as persons engaged or deployed by the Secretary General of the United Nations as members of the military, police or civilian components of a United Nations operation.
Article 1(c) defines a United Nations operation as an operation established by the component organ of the United Nationsand conducted under United Nations authority and control.
Article 9 provides that various specified acts against any United Nations or associated personnel (including murder or other attacks) shall be made by each State Party a crime under its national law.
But article 2(2) provides that the Convention is not to apply to a United Nations operation authorised by the Security Council as an enforcement action under Chapter VII of the Charter of the United Nations in which any of the personnel are engaged as combatants against organised armed forces and to which the law of international armed conflict applies.
Article 2(2) is consistent with the broad principle that the laws of war apply to UN forces engaged in hostilities, and therefore such forces do not have immunity from attack: p 624 of Documents on the Laws of War, ed Roberts and Guelff, 3rd ed (2000).
The distinction between combatants and peacekeeping personnel was considered by the Special Court for Sierra Leone in Prosecutor v Issa Hassan Sesay, Morris Kallon & Augustine Gbao (Case No SCSL 04 15T, 2 March 2009).
In that case, the Special Court handed down the first convictions for the war crime of attacking personnel involved in a peacekeeping operation, namely members of the United Nations Assistance Mission in Sierra Leone, who were entitled to the protection given to civilians under the international law of armed conflict.
Therefore, it is argued, military activities against United Nations mandated forces should only provide a basis for exclusion under article 1F(c) where (i) the act or acts in question constitute a crime in international law; or (ii) the act or acts, which must be of sufficient gravity to have a negative impact on international peace and security, have been specifically identified as contrary to the purposes and principles of the United Nations, either by clear decision of the Security Council acting within its competence, or by way of agreement or consensus among states at large; and (iii) there are serious reasons for considering that the individual concerned was personally responsible for the act or acts in question.
Discussion and conclusions
The acts relied on by the Secretary of State are acts of violence by the appellant against ISAF, the international force that was mandated by the United Nations for the express purpose of maintaining peace and security in Afghanistan, thereby assisting in the maintaining of international peace and security.
Time and again, the resolutions of the Security Council recorded that the role and responsibility of ISAF was to assist in the maintaining of international peace and security.
This is one of the most important purposes set out in article 1 of the United Nations Charter (see para 10 above).
In these circumstances, it might be thought to be obvious at first sight that such acts are contrary to the purposes and principles of the United Nations.
It is noteworthy that Mr Drabble (rightly) accepts that, if the appellant had been guilty of fighting UNAMA, he would in principle have been guilty of acts contrary to the purposes and practices of the United Nations.
We say in principle, because it would still be necessary to examine all the facts (as per B and D).
So why does it make any difference that the appellant was fighting ISAF rather than attacking UNAMA? That the aims and objectives of ISAF and UNAMA are congruent is amply borne out by the Security Council Resolutions: see para 58 above.
The answer given by Mr Drabble and Mr Fordham is that the 1994 Convention and 2005 Protocol would apply to attacks on UNAMA, but not to attacks on ISAF.
Peacekeeping forces, unlike combat forces, are entitled to the same protection against attack as that accorded to civilians under international humanitarian law, as long as they are not taking a direct part in hostilities.
Under the Statute of the International Criminal Court (articles 8(2)(b)(iii) and 9(e)(iii)), intentionally directed attacks against personnel involved in a peacekeeping mission in accordance with the Charter of the United Nations constitute a war crime: see rule 33 in Customary International Humanitarian Law vol 1:Rules (2005, International Committee of the Red Cross).
We accept the points made by Mr Drabble and Mr Fordham about the differences between ISAF and UNAMA which are summarised at paras 60 and 61 above.
These differences are not in doubt.
But they are not material to the issue of whether the appellant is excluded from the refugee status by article 1F(c).
The question which rules of law apply to attacks on ISAF and UNAMA is categorically different from (and irrelevant to) the question whether an attack against either body is contrary to the purposes and principles of the United Nations.
This latter question must be determined on an examination of all the relevant facts.
These include the terms of the Security Council Resolutions by which ISAF was mandated in the first place, and by which its mandate was renewed from time to time.
Mr Drabble submits that it is relevant to the issue in this case that, although the Security Council has mandated many military enforcement operations, it has never sought to characterise opposition, even armed opposition, as contrary to the purposes and principles of the United Nations.
In some cases, a United Nations resolution explicitly states that a particular activity is contrary to the purposes and principles of the United Nations. (One example is the condemnation of international terrorism in General Assembly resolution 49/60, referred to in para 27 above.) However, it is not suggested, either by the UNHCR or by the Supreme Court of Canada in Pushpanathan, that this is the only criterion.
In our view, the principled test is that put forward by the UNHCR in para 17 of its Guidelines and quoted at para 38 above.
In Pushpanathan, the court did not have to consider whether an attack on a United Nations body or a United Nations mandated body constitutes acts contrary to the purposes and principles of the United Nations.
We conclude that there is no basis for the view that such an attack can only be regarded as an act contrary to the purposes and principles of the United Nations in circumstances where (i) it is by consensus in international law explicitly recognised as being contrary to these purposes and principles, or (ii) it amounts to a serious and sustained violation of fundamental human rights.
This conclusion is consistent with Mr Drabbles acceptance that an attack on UNAMA is in principle capable of satisfying article 1F(c), despite the fact that there appears to be no United Nations resolution (or other formal international decision) which explicitly recognises that an attack against UNAMA would be contrary to the purposes and principles of the United Nations.
In short, an attack on ISAF is in principle capable of being an act contrary to the purposes and principles of the United Nations.
The fundamental aims and objectives of ISAF accord with the first purpose stated in article 1 of the United Nations Charter.
By attacking ISAF, the appellant was seeking to frustrate that purpose.
To hold that his acts are in principle capable of being acts contrary to the purposes and principles of the United Nations accords with common sense and is correct in law.
This conclusion accords with that of Hogan J in the High Court of Ireland in B v Refugee Appeals Tribunal and others [2011] IEHC 198 at para 56.
For these reasons, we agree with the conclusion of the Court of Appeal, quoted in para 47 above.
(4) Standard of proof
This issue arises in an acute form in Al Sirri but could arise in any proposed exclusion under article 1F.
The article requires that there be serious reasons for considering that the individual asylum seeker has committed the crimes referred to in article 1F(a) or (b) or been guilty of the acts referred to in article 1F(c).
In Al Sirri, it was argued in the Court of Appeal that this imported the criminal standard of proof beyond reasonable doubt.
In rejecting that submission, Sedley LJ said this, at para 33: . it clearly sets a standard above mere suspicion.
Beyond this, it is a mistake to try to paraphrase the straightforward language of the Convention: it has to be treated as meaning what it says.
In JS (Sri Lanka), at para 39, Lord Brown was inclined to agree with this
passage, having also pointed out that . serious reasons for considering obviously imports a higher test for exclusion than would, say, an expression like reasonable grounds for suspecting.
Considering approximates rather to believing than to suspecting.
In Al Sirri, the Common Serjeant had considered that the evidence admissible in a criminal trial for conspiracy to murder General Masoud was as consistent with innocence as with guilt.
Thus he, at least, was not satisfied of Al Sirris guilt even on the balance of probabilities.
Mr Fitzgerald QC argues that it is not possible to have serious reasons for considering a person to have committed a crime or be guilty of a particular act unless you can be satisfied that it is more likely than not that he did it.
In this he is less ambitious than the UNHCR.
Its 2003 Guidelines, at para 35, state that clear and credible evidence is required.
It is not necessary for an applicant to have been convicted of a criminal offence, nor does the criminal standard of proof need to be met.
However, the 2003 Background Note, at para 107, also states that: . in order to ensure that article 1F is applied in a manner consistent with the overall humanitarian objective of the 1951 Convention, the standard of proof should be high enough to ensure that bona fide refugees are not excluded erroneously.
Hence, the balance of probabilities is too low a threshold.
He also relies upon the Australian case of W97/164 v Minister for Immigration and Multicultural Affairs [1998] AATA 618, in which Mathews J said this at para 42: The article provides a direction to decision makers in words that are clear of meaning and relatively easy of application.
To re state this test in terms of a standard of proof is unnecessary and may in some cases lead to confusion and error.
But she went on in para 43 to say this: I find it difficult to accept that the requirement that there be serious reasons for considering that a crime against humanity has been committed should be pitched so low as to fall, in all cases, below the civil standard of proof.
The seriousness of the allegation itself and the extreme consequences which can flow from an alternative finding upon it would, in my view, require a decision maker to give substantial content to the requirement that there be serious reasons for considering (emphasis added) that such a crime has been committed.
On the other hand, in Arquita v Minister for Immigration and Multi cultural Affairs [2000] FCA 1889, 106 FCR 465, at para 54, Weinberg J disagreed.
There must be evidence available upon which it could reasonably and properly be concluded that the applicant has committed the crime alleged.
To meet that requirement, the evidence must be capable of being regarded as strong.
But evidence could properly be characterised as strong without meeting either the criminal or the civil standard of proof.
He did, however, say at para 58 that it would have to go beyond establishing merely that there was a prima facie case.
The New Zealand courts have followed the Court of Appeal in Al Sirri in taking the view that the Refugee Convention simply means what it says and that adding glosses by analogy with civil litigation or criminal prosecution simply confuses matters: see Hammond J in Tamil X v Refugee Status Appeals Authority; Attorney General (Minister of Immigration) v Y [2009] NZCA 488, [2009] 2 NZLR 73, paras 77, 79; upheld by the Supreme Court in Attorney General (Minister of Immigration) v Tamil X [2010] NZSC 107, [2011] 1 NZLR 721, para 39.
In Canada, the courts have adopted a lower standard of proof than the balance of probabilities: see Ramirez v Minister of Employment and Immigration (1992) 89 DLR (4th) 173, para 5.
But in Cardenas v Canada (Minister of Employment and Immigration) [1994] FCJ No 139, it was said that the Board must base its decision to exclude only on clear and convincing evidence, not simply on suspicion and speculation.
And the German Bundesverwaltungsgericht has said that as a rule, reasons are good when there is clear, credible evidence that such crimes have been committed (BVerwG 10 C 2.10).
We are, it is clear, attempting to discern the autonomous meaning of the words serious reasons for considering.
We do so in the light of the UNHCR view, with which we agree, that the exclusion clauses in the Refugee Convention must be restrictively interpreted and cautiously applied.
This leads us to draw the following conclusions: (1) Serious reasons is stronger than reasonable grounds. (2) The evidence from which those reasons are derived must be clear and credible or strong. (3) Considering is stronger than suspecting.
In our view it is also stronger than believing.
It requires the considered judgment of the decision maker. (4) The decision maker need not be satisfied beyond reasonable doubt or to the standard required in criminal law. (5) It is unnecessary to import our domestic standards of proof into the question.
The circumstances of refugee claims, and the nature of the evidence available, are so variable.
However, if the decision maker is satisfied that it is more likely than not that the applicant has not committed the crimes in question or has not been guilty of acts contrary to the purposes and principles of the United Nations, it is difficult to see how there could be serious reasons for considering that he had done so.
The reality is that there are unlikely to be sufficiently serious reasons for considering the applicant to be guilty unless the decision maker can be satisfied on the balance of probabilities that he is.
But the task of the decision maker is to apply the words of the Convention (and the Directive) in the particular case.
(5) Disposal
We would dismiss the appeal in DD.
The object of his argument was to establish that his activities could not be contrary to the principles and purposes of the United Nations.
In this he has failed.
However, the Court of Appeal were correct to hold that there were material errors of law in the AITs findings in that they failed to examine the appellants conduct in the manner prescribed by this court in JS and to consider whether he had been guilty of acts contrary to the purposes and principles of the United Nations.
The order remitting the case to the Upper Tribunal for reconsideration should stand.
The appeal in Al Sirri is rather different.
Technically, the appellant has challenged the decision of the Court of Appeal to remit his case to the tribunal, rather than to find that he was not excluded from the status of refugee.
We would dismiss that appeal.
But the reality is that he was challenging certain aspects of the guidance given to the tribunal which would hear the remitted case.
In that he has succeeded to some extent.
Consideration will also have to be given to whether it is more appropriate for the case to be remitted to the First tier or to the Upper Tribunal, given that the evidence will have to be examined afresh.
The parties therefore have 14 days from the date of judgment to file their submissions as to the precise form of the order and as to costs.
| UK-Abs | These appeals concern a little used provision in article 1F(c) of the Geneva Convention on the Status of Refugees.
This excludes from protection any person with respect to whom there are serious reasons for considering thathe has been guilty of acts contrary to the purposes and principles of the United Nations.
Both appellants have been refused the grant of refugee status by the respondent on this ground.
Al Sirri is a citizen of Egypt who arrived in the UK in 1994.
The facts relied on for the refusal of his asylum claim included his possession of and contribution to books connected with Al Qaeda and other proscribed organisations and his alleged involvement in the murder of General Masoud in Afghanistan in 2001.
The issue raised by his case is whether all activities defined as terrorism by United Kingdom domestic law are for that reason acts falling within article 1F(c), or whether such activities must constitute a threat to international peace and security.
DD is a citizen of Afghanistan who came to the UK in 2007.
His claim for asylum was based on his fear of persecution as the brother of the leader of forces allied with the Taliban, who had fought against both the Afghan government and the UN mandated International Security Assistance Force (ISAF).
In his case the question is whether armed insurrection against not only the incumbent government but also a UN mandated force supporting that government falls within article 1F(c).
In both appeals the issue also arises as to what is meant by serious reasons for considering a person to be guilty of the act in question.
The appellants appealed against the respondents refusal to grant asylum.
On 18 March 2009 the Court of Appeal set aside the determination of the Asylum and Immigration Tribunal (AIT) in Al Sirris case and remitted it to be determined afresh omitting certain matters on which the respondent had sought to rely.
DD was initially successful in his appeals but the Court of Appeal remitted his case for reconsideration by the Upper Tribunal because the AIT had failed to consider DDs individual responsibility and whether he fell within article 1F(c).
Both appellants have nonetheless pursued an appeal to the Supreme Court in order to challenge the approach of the Court of Appeal to the interpretation of article 1F(c) in a number of respects.
The Supreme Court unanimously dismisses both appeals.
Both cases will now be remitted to the relevant tribunal for reconsideration in accordance with the orders of the Court of Appeal.
In the case of Al Sirri the guidance given to that tribunal should be in line with the judgment of the Supreme Court.
The judgment is given by Lady Hale and Lord Dyson, with whom the other justices agree.
The general approach to article 1F(c) Article 1F(c) should be interpreted restrictively and applied with caution.
There should be a high threshold defined by the gravity of the act in question, the manner in which the act is organised, its international objectives and its implications for international peace and security.
There should be serious reasons for considering that the person concerned bore individual responsibility for acts of that character [16].
International dimension It is clear that the phrase acts contrary to the purposes and principles of the United Nations must have an autonomous meaning and member states are not free to adopt their own definitions.
There is as yet no internationally agreed definition of terrorism.
It was appropriately cautious therefore to adopt paragraph 17 of the United Nations High Commissioner for Refugees (UNHCR) Guidelines which provided that article 1F(c) was only triggered in extreme circumstances by activity which attacks the very basis of the international communitys co existence.
Such activity must have an international dimension.
Crimes capable of affecting international peace, security and peaceful relations between States, as well as serious and sustained violations of human rights would fall under this category [36 38].
It could be enough if one person plotted in one country to destabilise another.
The test was whether the resulting acts had the requisite serious effect upon international peace [40].
Armed insurrection against UN mandated forces DD had been engaged in fighting against ISAF in Afghanistan.
ISAF was an armed force under the lead command of individual nations authorised by the UN from 2001, and was distinct from the United Nations Assistance Mission in Afghanistan (UNAMA), which was established in 2002 as a peacekeeping force.
Both ISAF and UNAMA had the same objective to maintain peace and security in Afghanistan.
DD argued that simple participation in an attack against UN mandated forces did not engage article 1F(c).
The Supreme Court agreed that the protection for ISAF against attack was not the same as for peacekeeping forces.
This was not however material to the issue under article 1F(c) which was to be judged under the same principle in paragraph 17 of the UNHCR Guidelines quoted above [66].
The fundamental aims and objectives of ISAF accorded with the purposes stated in the UN Charter and DD was seeking to frustrate that purpose [68].
Standard of proof This issue arose in acute form in Al Sirri.
Al Sirri had been indicted at the Old Bailey in relation to the murder of General Masoud but the charge was dismissed on the ground that the evidence was as consistent with his innocence as it was with his guilt.
Article 1F(c) required that there be serious reasons for considering that the asylum seeker had been guilty of the acts.
This had an autonomous meaning, and was not the same as the criminal standard of proof beyond reasonable doubt, or any domestic standard.
Serious reasons was stronger than reasonable grounds, strong or clear and credible evidence had to be present and the considered judgment of the decision maker was required.
The reality was that there were unlikely to be sufficiently serious reasons for considering an applicant to be guilty unless the decision maker could be satisfied that it was more likely than not that he was.
But the task of the decision maker was to apply the words of article 1F(c) in the particular case [75].
|
Ill health can be dreadfully cruel.
Some 30 years ago the appellant was the prima ballerina of Scottish Ballet.
Alas, in September 1999 (then aged 56) she suffered an incapacitating stroke leaving her with severely limited mobility and other disabilities besides.
In April 2006 she fell heavily and broke her hip in several places, remaining in hospital for four months.
She then suffered two further falls each leading to further hospitalisation.
The problem at the centre of these proceedings, however, is that the appellant suffers also from a small and neurogenic bladder which makes her have to urinate some two to three times a night.
Up to now she has dealt with this by accessing a commode with the help of a carer provided by the respondent Royal Borough as part of a package of care services to ensure her safety.
For some years past, however, the respondents have been proposing instead that the appellant should use incontinence pads or special sheeting (hereafter pads) which would avoid the need for a night time carer.
The respondents say that this would provide the appellant with greater safety (avoiding the risk of injury whilst she is assisted to the commode), independence and privacy, besides reducing the cost of her care by some 22,000 per annum.
The appellant, however, is appalled at the thought of being treated as incontinent (which she is not) and having to use pads.
She considers this an intolerable affront to her dignity.
Whether night time care can be provided on this revised basis is the critical issue in these proceedings.
The history of the proceedings
The respondents decision to reduce the sum allocated to the appellants weekly care was communicated by letter dated 21 November 2008 and was sought to be challenged by the appellants judicial review application made on 22 December 2008.
The application came before Frances Patterson QC sitting as a Deputy High Court Judge in the Administrative Court on 5 March 2009 at a rolled up hearing (the application for permission and substantive inter partes hearing being dealt with together), at the end of which permission was refused.
A Needs Assessment dated 2 July 2008, completed on 28 October 2008, on which the impugned decision had been based, had described the appellants needs as assistance to use the commode at night and the deputy Judge resolved in the respondents favour what she described as the very narrow issue arising, namely whether that need fell to be read literally or whether, as the respondents contended, it was permissible to examine its underlying rationale and treat it as a need for safe urination at night.
Given that it was the latter, the deputy judge held that it was open to the respondents to meet that need in the more economical manner, ie by the provision of pads.
Article 8 of the European Convention on Human Rights had also been invoked, but not as a freestanding ground of challenge.
Permission to apply for judicial review having thereafter been granted by a single Lord Justice, and the case reserved to the Court of Appeal, the substantive challenge came before Rix LJ, Wilson LJ and Sir David Keene on 29 April 2010.
At the Court of Appeal hearing the arguments were expanded.
The respondents sought to rely not only on their Needs Assessment of 2 July 2008 but additionally upon their subsequent Care Plan Reviews of 4 November 2009 and 15 April 2010.
The appellant for her part again sought to invoke article 8 (this time, submits Mr Cragg, wrongly understood by the Court to be again merely ancillary to the appellants primary ground), and for the first time sought also to rely on section 21E of the Disability Discrimination Act 1995 (the DDA 1995), as inserted by section 2 of the Disability Discrimination Act 2005.
By their reserved judgment dated 13 October 2010 the Court of Appeal disagreed with the deputy judge that the Needs Assessment of 2 July 2008 could properly be understood as a need for the management of the appellants night time urination rather than (as the deliberately chosen language of the assessment put it: para 49) as assistance to use the commode at night, so that, at the time when the proceedings were commenced, the Court of Appeal held the respondents to have been in breach of their statutory duty.
But the court held that, since the December 2008 decision was not in fact put into operation, and since the need had been reassessed in the Care Plan Reviews of November 2009 and April 2010, the appellant had no substantial complaint.
The court also rejected the appellants claims under article 8 and under the DDA 1995.
Rix LJ gave the only reasoned judgment: [2010] EWCA Civ 1109, (2010) 13 CCL Rep 664.
The issues before this Court
appeal: Four issues are identified by the parties as arising for decision on this (1) Was the Court of Appeal correct to hold that the 2009 and 2010 Care Plan Reviews are to be read as including a reassessment of the appellants community care needs? (2) Did the respondents decision to provide pads interfere with the appellants article 8 rights and, if so, was such an interference justified and proportionate? (3) Were the respondents operating any relevant policy or practice for the purposes of section 21E(1) of the DDA 1995 and, if so, was this policy justified as a proportionate means of achieving a legitimate aim, namely the equitable allocation of limited care resources? (4) Have the respondents failed to have due regard to the needs specified in section 49A of the DDA 1995 (the general disability equality duty) when carrying out their functions in this case? (The appellant needs the courts leave to raise this issue, permission to invoke section 49A having been refused by a single Lady Justice before the Court of Appeal hearing and not sought afresh from that court.)
Issue One the 2009/2010 Care Plan Reviews
With regard to the first three issues and, indeed, the entire framework of this appeal, both factual and legal I really cannot hope to improve upon Rix LJs judgment below.
I could, of course, lengthen it: one can always do that.
But I prefer instead to refer any interested reader to it and to confine myself to a substantially shorter summary of the reasons why for my part I agree with its conclusions.
I cannot, however, escape a brief recitation of the main legal provisions governing care arrangements.
I shall start with section 47 of the National Health Service and Community Care Act 1990 (NHSCCA 1990) since it is common ground here that (i) the appellant is substantially and permanently handicapped within the meaning of section 29(1) of the National Assistance Act 1948 (NAA 1948), (ii) the respondents are required under that section to make arrangements for promoting her welfare, (iii) the respondents are satisfied that it is necessary in order to meet the appellants needs to make arrangements for the provision of practical assistance for her in her own home within the meaning of section 2(1)(a) of the Chronically Sick and Disabled Persons Act 1970 (CSDPA 1970), and (iv) the respondents are accordingly pursuant to that section under a duty to make those arrangements, acting under the Secretary of States general guidance issued pursuant to section 7(1) of the Local Authority Social Services Act 1970 (LASSA 1970).
Section 47 of NHSCCA 1990 provides: (1) . where it appears to a local authority that any person for whom they may provide or arrange for the provision of community care services may be in need of any such services, the authority (a) shall carry out an assessment of his needs for those services; and (b) having regard to the results of that assessment, shall then decide whether his needs call for the provision by them of any such services. (4) The Secretary of State may give directions as to the manner in which an assessment under this section is to be carried out or the form it is to take but, subject to any such directions . , it shall be carried out in such manner and take such form as the local authority consider appropriate.
Before turning to the Secretary of States guidance issued under section 7(1) of LASSA 1970 (the Fair Access to Care Services (FACS) Guidance) and directions issued under section 47(4) of NHSCCA 1990, I should say a word about the relevance of a local authoritys social care resources both to the assessment of the handicapped persons needs and to the way in which such assessed needs may then be met.
It was decided by the House of Lords in R v Gloucestershire County Council Ex p Barry [1997] AC 584 (by a majority of three to two) that need within the meaning of section 2(1) of CSDPA 1970 is a relative concept and that needs for services cannot sensibly be assessed without having some regard to the cost of providing them.
A persons need for a particular type or level of service cannot be decided in a vacuum from which all considerations of cost have been expelled. (Lord Nicholls of Birkenhead, at p 604).
The position now established is that the local authority are under a duty to make an assessment of needs under section 47(1)(a) of NHSCCA 1990 and in doing so may take account of their resources.
Assuming, as in the present case, that the need falls into one of the four bands critical, substantial, moderate or low as described in the FACS Guidance which, having regard to their resources, the local authority have indicated that they will meet, then meet it they must, although in deciding how to do so they are once again entitled to take account of their resources.
None of this, I may say, was in dispute before us; least of all did the appellant suggest that we might like to revisit the decision in Barry, controversial though at the time that was.
I come then to the FACS Guidance issued on 1 January 2003 which remained in force until fresh guidance (for present purposes not materially different) was issued in February 2010.
Amongst its most directly relevant passages are these: Councils should ensure that . within a council area, individuals in similar circumstances receive services capable of achieving broadly similar outcomes (paras 1 and 54); Reviews should be undertaken at regular intervals to ensure that the care provided to individuals is still required and achieving the agreed outcomes.
These reviews should include a re assessment of an individuals needs (para 4); under the heading General principles of assessment, it is important for assessment to be rounded and person centred and for the evaluation of assessment information to lead to appropriate eligibility decisions and services that promote independence (para 35) and the evaluation of risks should focus on the following aspects that are central to an individuals independence: autonomy and freedom to make choices, health and safety including freedom from harm, abuse and neglect . , the ability to manage personal and other daily routines, involvement in family and wider community life . (para 40); under the heading Reviews, Reviews should: establish how far the services provided have achieved the outcomes, set out in the care plan, re assess the needs and circumstances of individual service users, help determine individuals continued eligibility for support, confirm or amend the current care plan . (para 58), the re assessment part of the review should follow the general principles of assessment in this guidance (para 59), reviews should be scheduled at least annually or more often if individuals circumstances appear to warrant it (para 60).
Finally before returning to the facts of the present case I should note the following paragraphs within the Secretary of States Directions the Community Care Assessment Directions 2004 issued under section 47(4) of NHSCCA 1990: 2(2) The local authority must consult the person, consider whether the person has any carers and, where they think it appropriate, consult those carers. 2(3) The local authority must take all reasonable steps to reach agreement with the person and, where they think it appropriate, any carers of that person, on the community care services which they are considering providing to him to meet his needs.
The care plan reviews of 4 November 2009 and 15 April 2010 are both lengthy documents, the latter extending to 15 pages.
The following brief quotations from the 2010 review (in large part foreshadowed in the 2009 review) must suffice: Toileting/Substantial Risk: Ms McDonald has been diagnosed with having a neurogenetic bladder, which makes [her] want to go to the toilet more frequently.
Ms McDonald needs assistance to access the toilet during the day, and if she uses it at night.
Ms McDonald and the carers confirm that she needs to go to the toilet two to three times during the night. no issues were raised about the need to open her bowels at night.
Ms McDonald did not want to discuss the option of using incontinence pads or Kylie sheets as a way of meeting her toileting needs.
Ms McDonald said that she is not incontinent and has repeatedly said that she is opposed to wearing a pad to meet her toileting needs.
Ms McDonald became angry and upset when discussing this.
As Ms McDonald has not consented to a referral to the Continence Service, it has not been possible to fully explore how all of her needs can best be managed.
Conclusion: Ms McDonald continues to live safely at home.
There have been no hospital admissions since she was discharged in early 2007.
Ms McDonald has chosen not to take up the offer of assistive technology to help monitor her safety, has declined the offer of moving to one of the boroughs extra care sheltered housing schemes and she has to date refused to consider incontinence pads as a means to manage risk when she cannot safely get to the commode unaided. it remains social services view that the use of incontinence pads is a practical and appropriate solution to Ms McDonalds night time toileting needs.
I remain of the opinion that Ms McDonalds need to be kept safe from falling and injuring herself can be met by the provision of equipment (pads and/or absorbent sheets).
She has, however, consistently refused this option, refusing even to try the pads or to discuss the absorbent sheet option.
I am aware that she considers pads and/or sheets to be an affront to her dignity.
Other service users in my experience have held similar views when such measures were initially suggested but once they have tried them, and been provided with support in using them, they have realised that the pads/sheets improve quality of life by protecting them from harm and allowing a degree of privacy and independence in circumstances which, as a result of health problems, are less than ideal.
The practicalities can be managed within the existing care package to accommodate Ms McDonalds preferred bedtime and to allow her to be bathed in the morning and/or have sheets changed.
If Ms McDonald were willing to try this option, she might similarly alter her views.
In the light of those passages from the reviews and the Secretary of States FACS Guidance and Directions it seems to me impossible to disagree with Rix LJs conclusion on this first issue: 53.
In my judgment, the 2009 and 2010 reviews are to be read as including a reassessment of Ms McDonalds needs.
It is irrelevant that there has been no further separate Needs Assessment document.
Such a document is not, it seems, necessary in the first place, because a care plan could incorporate a needs assessment; but in any event FACS itself contemplates that a care plan review will incorporate a review of assessed needs.
As for the 2009 and 2010 reviews in this case, it is noticeable that they no longer assess Ms McDonalds needs as including assistance to access the commode at night, although they recognise that that is what Ms McDonald wants.
On the contrary, they refer to Ms McDonalds night time toileting needs in much more general terms (as the earlier needs assessments had at one time done).
Thus they speak of need for support at night and that the need should be managed through the use of incontinence pads.
They specifically consider that the elimination of the risk of injury is best achieved by avoiding a transfer to the commode, and that Ms McDonalds desire for independence and privacy is best accommodated by dispensing with a night time carer.
Ms McDonald needs assistance safely to access the toilet only if she uses it at night, but, with the use of pads there is no need for such use.
The issue is whether pads should be used or not to meet her toileting needs.
The use of pads is a practical and appropriate solution to Ms McDonalds night time toileting needs.
Ms McDonald did not want to discuss the use of pads as a way of meeting her toileting needs.
Her need to be kept safe from falling and injuring herself can be met by the provision of equipment.
I would add that to my mind the respondents could hardly have gone further in compliance with the Secretary of States Directions in their efforts to consult the appellant and if possible agree with her the services they were considering providing to meet her needs.
The 2010 Review rightly described the appellants position on this as entrenched and the situation reached as an impasse.
The respondents also fully consulted the appellants partner, Mr McLeish who, although not in fact her carer indeed, he himself has experienced health problems and is no longer actually living with her for a time assisted with her night time needs.
Before leaving issue one, I should just note that, as I understood Mr Craggs argument, it was no part of the appellants case that the respondents were not entitled under domestic legislation to re assess her need as night time toileting need or need for safe urination at night or some equivalent designation, and to meet such need, as proposed, by pads (together with whatever further assistance might be advised following the proposed referral of the appellant to the Continence Service).
Rather the case, as clearly reflected in the terms in which issue one has been formulated, is that the 2009 and 2010 reviews in fact contained no such reassessment so that the respondents remained bound to continue the same care provision as had been made under the differently worded 2008 needs assessment.
I add for good measure that in any event I am clear that there can be no objection under domestic law (leaving aside the other issues) to the respondents identifying and meeting the appellants night time needs in the manner proposed.
Issue Two Article 8
Article 8 is too well known to require citation again here.
There is no dispute that in principle it can impose a positive obligation on a state to take measures to provide support and no dispute either that the provision of home based community care falls within the scope of the article provided the applicant can establish both (i) a direct and immediate link between the measures sought by an applicant and the latters private life Botta v Italy (1998) 26 EHRR 241, paras 34 and 35 and (ii) a special link between the situation complained of and the particular needs of [the applicants] private life: Sentges v The Netherlands (2003) 7 CCLR 400, 405.
Even assuming that these links do exist, however, the clear and consistent jurisprudence of the Strasbourg Court establishes the wide margin of appreciation enjoyed by states in striking the fair balance . between the competing interests of the individual and of the community as a whole and in determining the steps to be taken to ensure compliance with the Convention, and indeed that this margin of appreciation is even wider when . the issues involve an assessment of the priorities in the context of the allocation of limited state resources Sentges, at p 405, Pentiacova v Moldova (Application No 14462/03 (unreported) 4 January 2005, p 13) and Molka v Poland (Application No 56550/00 (unreported) 11 April 2006, p 17).
Really one only has to consider the basic facts of those three cases to recognise the hopelessness of the article 8 argument in the present case.
Sentges (considered by Rix LJ at para 64 of his judgment) concerned a sufferer from muscular dystrophy complaining of a refusal to supply him with a robotic arm.
Without it he depended on others for every single act and so was unable to develop and establish relationships with others; with it, his severely curtailed level of self determination would be increased: 7 CCLR 400, 404.
The applicants in Pentiacova suffered from renal failure and complained of insufficient funding for their haemodialysis treatment.
The applicant in Molka was confined to a wheelchair and, for want of positive assistance, was unable to vote in local elections.
The complaints in all three cases were unanimously held to be manifestly ill founded and thus inadmissible.
This approach is consistent too with the domestic jurisprudence on the point.
The appellant seeks to rely on R (Bernard) v Enfield London Borough Council [2002] EWHC 2282 (Admin); [2003] HRLR 111; [2003] LGR 423 (considered by Rix LJ at para 63 of his judgment).
But really what is striking about Bernard is the contrast between that case and this.
The claimants there were husband and wife.
They had six children.
The wife was severely disabled and confined to a wheelchair.
In breach of their duty under section 21(1)(a) of NAA 1948, the respondent council failed for some 20 months to provide the family with accommodation suited to her disability.
The consequences were appalling.
The wife was doubly incontinent and, because there was no wheelchair access to the lavatory, was forced to defecate and urinate on the living room floor.
And she was unable to play any part in looking after her six children.
Small wonder that Sullivan J, at para 31, described the article 8 case as not finely balanced and awarded 10,000 damages.
The leading domestic case on the positive obligation to provide welfare support under article 8 is Anufrijeva v Southwark London Borough Council [2004] QB 1124; [2003] EWCA Civ 1406.
It concerned three separate asylum seekers, one complaining of a local authoritys failure to provide accommodation to meet special needs, the other two of maladministration and delay in the handling of their asylum applications.
All three failed in their claims.
Giving the judgment of the court, Lord Woolf, CJ observed (at para 33) that: It is not possible to deduce from the Strasbourg jurisprudence any specific criteria for the imposition of such a positive duty [ie the duty to provide positive welfare support].
At para 43, however, the court concluded that Bernard was rightly decided family life [having been] seriously inhibited by the hideous conditions prevailing in the claimants home but that: We find it hard to conceive . of a situation in which the predicament of an individual will be such that article 8 requires him to be provided with welfare support, where his predicament is not sufficiently severe to engage article 3.
Article 8 may more readily be engaged where a family unit is involved.
Where the welfare of children is at stake, article 8 may require the provision of welfare support in a manner which enables family life to continue. (Bernard was said to illustrate that.)
There is, of course, a positive obligation under article 8 to respect a persons private life.
But it cannot plausibly be argued that such respect was not afforded here.
As already indicated, the respondents went to great lengths both to consult the appellant and Mr McLeish about the appellants needs and the possible ways of meeting them and to try to reach agreement with her upon them.
In doing so they sought to respect as far as possible her personal feelings and desires, at the same time taking account of her safety, her independence and their own responsibilities towards all their other clients.
They respected the appellants human dignity and autonomy, allowing her to choose the details of her care package within their overall assessment of her needs: for example, the particular hours of care attendance, whether to receive direct payments in order to employ her own care assistant, and the possibility of other options like extra care sheltered housing.
These matters are all fully covered in paras 5, 42 and 66 of Rix LJs judgment below.
Like him, I too have the greatest sympathy for the appellants misfortunes and a real understanding of her deep antipathy towards the notion of using incontinence pads.
But I also share Rix LJs view that the appellant cannot establish an interference here by the respondents with her article 8 rights.
I add only that, even if such an interference were established, it would be clearly justified under article 8(2) save, of course, for the period prior to the 2009 review when the respondents proposed care provision was not in accordance with the law on the grounds that it is necessary for the economic well being of the respondents and the interests of their other service users and is a proportionate response to the appellants needs because it affords her the maximum protection from injury, greater privacy and independence, and results in a substantial costs saving.
Issue Three Section 21 of the DDA 1995
All the relevant parts of section 21 are to be found set out in Rix LJs judgment below (at para 68) and need not be repeated all, that is, save for section 21D(5) (referred to in section 21D (2)(b)): Treatment, or a failure to comply with a duty, is justified under this subsection if the acts of the public authority which give rise to the treatment or failure are a proportionate means of achieving a legitimate aim.
Mr Craggs argument under these provisions, if I understand it, is that, in substituting incontinence pads for a night time carer to meet the appellants night time toileting need, the respondents are manifesting or applying a practice, policy or procedure which makes it (a) impossible or unreasonably difficult for disabled persons to receive any benefit that is or may be conferred, or (b) unreasonably adverse for disabled persons to experience being subjected to any detriment to which a person is or may be subjected, by the carrying out of a function by the authority within the meaning of section 21E(1), so that, as provided by section 21E(2), it is their duty to take such steps as it is reasonable, in all the circumstances of the case, for the authority to have to take in order to change that practice, policy or procedure so that it no longer has that effect.
If that be right, then, by virtue of section 21D(2)(a) and 21B(1), a failure to comply with that duty constitutes unlawful discrimination by the respondents against the appellant unless the respondents can show pursuant to section 21D(2)(b) that this failure is justified under section 21D(5), namely that its acts are a proportionate means of achieving a legitimate aim.
The argument to my mind is hopeless.
In the first place I find it impossible to regard the respondents decision in this case as the manifestation or application of anything that can properly be characterised as a practice, policy or procedure within the meaning of this legislation.
Rather, in taking the impugned decision, the respondents were doing no more and no less than their statutory duty as fully described under issue one above.
Secondly, even were that not so, it follows from all that I have already said (not least with respect to article 8(2)) that the respondents acts here must be regarded as constituting a proportionate means of achieving a legitimate aim within the meaning of section 21D(5) (even assuming that there were otherwise steps which it would have been reasonable for them to take to change their practice, policy or procedure within the meaning of section 21E(2)).
Here again, therefore, I agree with the views of the court below except only that, whereas Rix LJ was merely sceptical as to whether any relevant policy or practice for the purposes of section 21E(1) exists in this case (para 73), I am clear that it does not.
Issue Four Section 49A of the DDA 1995
Having permitted Mr Cragg to advance his section 49A argument, it must be dealt with albeit not at any great length.
So far as material, under the heading General duty, section 49A provides: (1) Every public authority shall in carrying out its functions have due regard to . (c) the need to promote equality of opportunity between disabled persons and other persons; (d) the need to take steps to take account of disabled persons disabilities, even where that involves treating disabled persons more favourably than other persons; .
As Dyson LJ held in an analogous context in R (Baker) v Secretary of State for Communities and Local Government [2008] EWCA Civ 141; [2008] LGR 239, due regard here means appropriate in all the circumstances see too in this regard R(Brown) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2008] EWHC 3158 (Admin); [2009] PTSR 1506.
It is Mr Craggs submission that, no express reference to section 49A being found in the respondents documentation in this case, it is to be inferred that, in determining how to assess and meet the appellants needs, they failed in their general duty under this section.
This argument too is in my opinion hopeless.
Where, as here, the person concerned is ex hypothesi disabled and the public authority is discharging its functions under statutes which expressly direct their attention to the needs of disabled persons, it may be entirely superfluous to make express reference to section 49A and absurd to infer from an omission to do so a failure on the authoritys part to have regard to their general duty under the section.
That, I am satisfied, is the position here.
The question is one of substance, not of form.
This case is wholly unlike Pieretti v Enfield London Borough Council [2010] EWCA Civ 1104; [2011] PTSR 565 (which held that the section 49A duty complements a housing authoritys duties to the homeless under Part 7 of the Housing Act 1996).
For the sake of completeness I should just add that both section 21 and section 49A of the DDA 1995 have now been superseded by broadly comparable provisions in the Equality Act 2010.
I would dismiss this appeal.
Since writing the above I have read the judgments of both Lady Hale and Lord Walker.
I cannot but agree with everything that Lord Walker says.
I add only that it seems to me, with great respect to Lady Hales acknowledged expertise in social care law, particularly surprising to find her saying (in para 77) that logically, on the majoritys view, the local authority could properly withdraw care even though the client needed to defecate during the night and thus might be left lying in her faeces until the carers came in the morning or, indeed, withdraw this help during the day.
One might just as well say that logically, on Lady Hales approach, it would be irrational not to supply a night carer to take the client to the commode, irrespective of cost, if there is any likelihood of the client having to urinate even once during the night.
The true position is that the decision is one for the local authority on the particular facts of the case and, on the particular (and undisputed) facts here, it is nothing short of remarkable to characterise the respondents decision as irrational.
As to the cost, Lady Hale says (at para 74) that it might well have been open to the local authority . to provide her with the sort of night time care that she was asking for . in one of the Extra Care Sheltered Housing Schemes in the borough.
As, however, may be seen from the Conclusion to the boroughs 2010 review (quoted in para 11 above), the appellant has declined the offer of moving to one of the boroughs extra care sheltered housing schemes.
In other words, the appellant specifically refused that very solution which Lady Hale mentions.
LORD WALKER
I agree with Lord Brown and Lord Dyson that this appeal should be dismissed, for the reasons given in their judgments, which address the issues which were argued before the court.
But I feel bound to say something about the dissenting judgment of Lady Hale.
Having expressed the view that the appeal has focused on a narrow issue which is not a point of law of general public importance, she makes some strongly worded observations on an issue Wednesbury irrationality which was not referred to in the agreed statement of facts and issues, and was not argued by Miss McDonalds counsel.
It was raised only in a single paragraph of the written submissions on behalf of the intervener, Age UK.
Lady Hale states that the idea that anyone should be obliged to go into a care home in order to be treated with ordinary dignity is extraordinary.
Leaving aside the problems of managing functional incontinence in care homes (which are addressed in paras 37 to 46, and in particular para 39, of the witness statement of Mr Harrop, the Director of Policy and Public Affairs at Age UK), I can see no evidence that the respondent (RBKC) is not well aware of Miss McDonalds right to have her dignity respected.
She is a courageous and determined lady and RBKCs Adult Social Care Department have tried hard to find a solution to her problems.
In successive reviews and assessments they have fully and fairly recorded her feelings and wishes, even when those show antipathy towards RBKC.
They have invited her to choose how to deploy, in terms of timing and duration of visits, the weekly sum of 450 available for carers visits.
In 2008 they offered to put her in touch with the Home Share Scheme, under which someone such as a female student might have given Miss McDonald help at night in return for rent free accommodation, but she declined because she did not want a stranger living in her house.
In 2010 they offered her a move to one of RBKCs Extra Care Sheltered Housing schemes, but Miss McDonald did not want to consider this.
Miss McDonald is not incontinent.
She can control her bodily functions, but she does need to urinate, sometimes quite frequently, during the night.
But paragraphs 74 to 78 of Lady Hales judgment, agreeing with Age UKs argument that RBKC have been irrational in the classic Wednesbury sense, seem to me to ignore completely the evidence of Mr Thomas Brown, the very experienced Head of Assessment at RBKCs Adult Social Care Department.
In his second witness statement dated 22 September 2009 he stated (paragraphs 11 12): The court should be aware that the solution of incontinence pads in a case of this nature is not exclusive to RBKC, nor did the suggestion that the claimant should wear them originate from social services, as my previous statement makes clear.
In my experience the use of incontinence pads for patients who are not clinically incontinent is both widespread and accepted practice in the provision of social services.
Whilst RBKC accepts that the claimant is not clinically incontinent of urine, it is important to emphasise that her difficulty is that, due to impaired mobility, she cannot safely transfer from bed to a commode at night.
In practical terms this presents substantially the same problems as a person who is incontinent.
A person with this condition is often described as functionally incontinent .
He then referred (in a passage which seems to have some words missing) to the website of the St Helens and Knowsley Teaching Hospitals NHS Trust.
(paragraphs 13 16): In his third witness statement dated 16 April 2010 Mr Brown stated It is my experience based on 16 years in social care (most of them working with older people) and another four years working in a large general hospital that, in medical and residential care settings, it is general practice in the management of functional incontinence to use night time incontinence pads or absorbent sheets as a means of enduring safety in patients/residents with severely compromised mobility.
This management technique was suggested to the council by the claimants GP Dr Parameshwaran on 19 September 2006 and also by the district nursing service, and the suggestion is consistent with my own knowledge of the care management of such persons.
The management plan would remain the same if the claimant needs to pass faeces at night, although good practice would be to encourage toileting last thing at night when her night time carer visits and to encourage appropriate dietary changes.
The need for morning bathing will arise whether or not faeces are passed at night and it is practical within the care package offered by the council.
It should be noted that the need to pass faeces at night was not raised as an issue at the most recent review held in March 2010.
I am aware of guidance (DOH 2000) to the effect that incontinence pads should not be offered prematurely in order to prevent dependence on them.
I am also aware that aids and adaptations should be explored before such an option is considered.
Unfortunately the claimants situation is such that there is no equipment or adaptation which will enable her to access the toilet or commode without assistance.
In any event any movement, even assisted, carries a risk to the claimants safety.
The primary care need of the claimant is to ensure her safety by protecting her from the risk of further falls, and I remain of the view that the use of night time pads and/or absorbent sheets maximises the claimants safety.
Having regard to the guidance and to the particular circumstances of the claimant as well as to the cost indications of the care options, I remain satisfied that the use of continence products is appropriate notwithstanding the claimants objections.
I note her concerns about privacy and dignity and about the need to maintain her relationship with her partner.
It is the councils view that the use of continence products provides greater privacy and dignity than the presence of a carer assisting with personal and intimate functions at night time.
Miss McDonald strongly differs from this view, and so may others.
But I do not see how it could possibly be regarded as irrational.
It will be noted that in his last witness statement Mr Brown referred to a possible need to pass faeces at night, but noted that it had not been raised as an issue at the most recent review.
In view of this I find it rather regrettable that Lady Hales judgment makes so many references to defecation.
She says, at the end of para 77, that the consequences (of what she describes as the logical implications of the majority decision) do not bear thinking about.
But in this case we do have to think about urine and faeces.
For an adult to use incontinence pads for urination may be quite unpleasant for both the user and the carer, but most people would agree that it is a good deal less unpleasant and undignified than their use for defecation.
I totally disagree with, and I deplore, Lady Hales suggestion that the decision of the majority would logically entitle a local authority to withdraw help from a client so that she might be left lying in her faeces day and night, relieved only by periodic changes of absorbent pads or sheets.
On top of her other misfortunes Miss McDonald has had to have some very personal and private matters aired at public hearings in court.
I am sorry to add anything more to that, but I think it should be recorded that according to the very full documentary evidence Miss McDonald has not complained of bowel trouble since an episode about five years ago, when her general health was very frail.
As already noted, she did not raise any issue about this at her last assessment.
It is true that in her witness statements she did refer to the possibility of sitting around in my own urine or faeces but the latter point was not relied on or even mentioned by her counsel at the appeal hearing.
Only counsel making written submissions on behalf of Age UK, saw fit to give it prominence both in the first paragraph and in the last paragraph of his written submissions.
LORD KERR
Not without regret, I agree that this appeal must be dismissed but I have formed a somewhat different view on the first issue than that expressed by Lord Brown and Lord Dyson.
I consider that the respondent authority did not purport to carry out a re assessment of the appellants needs when it conducted the reviews of 4 November 2009 and 15 April 2010.
The documents that these reviews generated are both entitled Care Plan Review.
By contrast the assessments of the appellants needs which were conducted in February and July 2008 were recorded on forms with the heading, Needs Assessment.
The Care Plan that was carried out in November 2008 contained a section in which the appellants needs were specified and particulars were given as to how those needs were to be met.
There is nothing in the forms of 4 November 2009 and 15 April 2010 which suggests that an assessment of the appellants needs was being undertaken on either occasion.
Rix LJ in para 53 of his judgment (quoted by Lord Brown in para 12 above) stated that the 2009 and 2010 reviews are to be read as including a reassessment of Ms McDonalds needs.
If by this Rix LJ meant that the respondent had carried out a re assessment of Ms McDonalds needs, I would, with respect, disagree.
In so far as there is any reference to her needs in the report of 4 November 2009, it is to the effect that they remained as before.
See the passage from the report quoted by Lord Brown at para 11 Ms McDonald needs assistance to access the toilet during the day, and if she uses it at night.
The needs were therefore defined as being associated with access to the lavatory, in other words, difficulties with mobility.
The same holds true for the report on the review on 15 April 2010.
Again the only reference to needs in this report was in relation to mobility problems.
The decision to change the care plan was not prompted by any change in the view about Ms McDonalds needs but by the conclusion that the arrangements that were in place to meet the needs exceeded what was required.
And this was the basis on which the case was presented both to the deputy High Court judge and the Court of Appeal.
The clinching document in this regard is a letter from the respondent to Ms McDonald dated 4 November 2010 which stated unequivocally that if Ms McDonalds needs had not changed from the previous review, then generally a care plan review would take place.
That was precisely what had happened in November 2009 and 15 April 2010.
Clearly, if on those dates a re assessment of needs was deemed necessary, a form of review different from that which took place on each of those occasions would have been undertaken and a different type of form would have been completed.
The fact that in November 2009 and again in April 2010 a care plan review was undertaken (the very type of review which the November 2010 document stated was appropriate when there had been no change in the appellants needs) demonstrates clearly that it was not the intention of the respondent to carry out any re assessment of the appellants needs on either date.
In my opinion, therefore, the Court of Appeals decision can only be upheld on the basis that, although the respondent did not intend to carry out a re assessment of the appellants needs on 4 November 2009 or 15 April 2010, in fact the exercise then conducted yielded sufficient information to allow the court to conclude that the appellants needs could properly be re cast and warranted a change in the means by which those needs may legally be met.
This is, at first sight at least, not an easy conclusion to reach.
Ms McDonalds needs were precisely the same as they had been when they were originally assessed.
The change had come about not because there had been any authentic re evaluation of what the appellants needs were but because it was felt necessary to adjust how those would be expressed in order to avoid undesired financial consequences.
And one, somewhat absolutist, way of approaching the case is to say that the appellant is not incontinent.
Incontinence pads are provided for use by those who are.
She needs help to move and she needs to move during the night.
Her needs are therefore related to her difficulty with mobility, not to a problem with incontinence.
Properly understood, she needs help with movement, not services which eliminate the need to move.
On this approach, the deputy High Court judge was wrong to describe the need as the safety of the claimant and the Court of Appeal was likewise wrong to describe the need as a need to urinate safely at night.
Ms McDonald has no problem in urinating safely at night.
She does not need assistance to do so.
She does need to be helped to move to a place where she can urinate, however.
After some hesitation, I have concluded that this is to take a rather too technical and inflexible approach to the issue.
And I certainly do not think that it can be said that where the respondent has decided what needs are on one occasion, it is forever bound to that assessment.
The essential question on the first issue, it seems to me, is whether needs partake partly of the means by which the disabilities of the appellant may be catered for, as well as the actual nature of the disability and, on reflection, I think that this is the correct approach.
In the Guidance on Eligibility Criteria for Adult Social Care document (issued by the Department of Health on 28 May 2002) the issues and problems that are identified when individuals contact, or are referred to, councils seeking social care support are defined as "presenting needs".
If needs are defined as the issues and problems that the particular individual presents, that would appear to open the way to taking a rather broader view of what needs means and includes not only the narrow connotation of needs but also how those needs may be met.
On that basis, it can be said that the reviews in 2009 and 2010, although it was not their purpose, in fact involved a re assessment of the appellants needs and that they may now be regarded as the need to avoid having to go to the lavatory during the night.
Viewed thus, the needs can be met by the provision of incontinence pads and suitable bedding.
Not without misgivings, I have therefore concluded that it was open to the respondent to re assess the appellants needs, to re categorise them as a need to avoid leaving bed during the night and to conclude that that need could be met by providing the appellant with the materials that would obviate the requirement to leave her bed.
Although that is not the way in which the respondent actually dealt with the appellants case, this was no more than a technical failure on its part and is moreover one that could easily be overcome.
Even if it can be said, therefore, that the respondent did not comply with the legal requirement that it re assess the appellants needs before deciding to change the means by which those needs should be met, quite clearly it could and doubtless would, if required do so.
In these circumstances, the appellants challenge would have to fail in the exercise of
the courts discretion
I agree with all that Lord Brown has had to say on the other issues that arise on the appeal.
There is nothing that I could usefully add to his admirable judgment on all of those matters.
LORD DYSON
I agree that, for the reasons given by Lord Brown, this appeal should be dismissed.
I wish to add some words of my own on the first issue.
Mr Cragg makes two points in relation to the 2009 and 2010 Care Plan Reviews.
The first is that they contained no reassessment of Ms McDonalds needs which remained as needs assistance to use the commode at night.
The second is that, if the Care Plan Reviews did reassess her care needs, the reassessment was unlawful because it was undertaken in breach of the Community Care Assessment Directions 2004 (the 2004 Directions) and the Fair Access to Care Services (FACS) guidance.
Ms McDonald suffers from a small and neurogenic bladder so that she needs to urinate some three times during the night.
The combination of this and the fact that, as a result of a stroke, she has very limited mobility (and is therefore liable to fall) means that she cannot safely access a commode without assistance.
The history of the respondents assessments of her care needs is set out in detail by Rix LJ (2010) 13 CCL Rep 664, paras 10 to 27.
The following is a summary.
A Needs Assessment with a start date of 22 January 2007 (signed off on 9 February 2007) stated that frequent toileting still appears to be the major issue.
It also stated that Ms McDonald had refused to use incontinence pads and that she was requesting seven hours of care each night to assist her with using a commode.
One of her needs was described in these terms: 3.
Ms McDonald needs support with health needs including medication and continence issue.
Substantial need.: para 12.
So at this early stage, her needs were described in general terms as being assistance with toileting.
This general description was to be repeated later in the Care Plan Reviews for 2009 and 2010 which contained several references to Ms McDonalds toileting needs.
The 2007 Assessment showed that two very different ways of meeting these needs had been identified: the provision of a carer to assist her with the use of a commode and the provision of pads.
Ms McDonald made it clear that she wanted the former and was implacably opposed to the latter.
That has always been her position.
A Care Plan dated 27 April 2007 recorded the fact that Ms McDonald did not use pads because she found them undignified and was in any event not incontinent and that she preferred to have assistance in using the toilet during the day and the commode at night.
The plan stated that her needs were to be met inter alia by providing assistance with toileting when it is required during the night.
Ten hours over night care.
The summary of key problems/needs stated: Miss McDonald needs assistance to manage continence at night.
Substantial Need.
This summary description was, however, later amended to read Miss McDonald needs assistance at night to use the commode.
Moderate Need.
The explanation for the change in the description of the need is given by Thomas Brown who is the Service Manager in the respondents Adult Social Care Department.
He says at paragraph 8 of his first witness statement that the respondent made it clear to Ms McDonald from January 2007 that there would be no funding for night care.
But it agreed to provide such funding on a short term basis pending her application to the Independent Living Fund (ILF) for financial support on the basis that this would be refunded by the ILF to the respondent if her application was successful.
Mr Brown says that this was a concession on the part of the respondent.
It is not clear from the evidence whether Ms McDonald made this application and, if so, with what result.
A further Needs Assessment was made in February 2008.
There had been no change in Ms McDonalds condition or in her attitude.
She was still requesting assistance with using a commode at night and was still opposed to the use of pads.
Her relevant need was expressed in these terms: Miss McDonald needs assistance to use the commode at night Substantial Need.
In other words, the need was expressed in the same terms as in the Care Plan of 27 April 2007, although it was now described as a substantial rather than a moderate need.
On 17 October 2008, the respondent decided to reduce the amount allocated for Ms McDonalds weekly care to reflect its view that she did not need a night time carer and that pads would meet her toileting needs.
This decision was recorded in a letter dated 21 November 2008.
Nevertheless, the Needs Assessment started on 2 July 2008 (and signed off on 28 October 2008) and the Care Plan dated 17 November 2008 repeated the description of Ms McDonalds need as assistance to use the commode at night.
In the Care Plan Review dated 4 November 2009, the respondent stated formally that it had concluded that the current care arrangements exceeded those reasonably needed to meet Ms McDonalds toileting needs.
It said that it remained of the view that the use of pads is a practical and appropriate solution to Ms McDonalds night time toileting needs.
The same view was expressed in the Care Plan Review dated 15 April 2010 from which Lord Brown has quoted at para 11 above.
From this history, the following points emerge.
First, it was never in dispute that Ms McDonald had toileting needs and those needs did not change throughout the relevant period: she needed to urinate three times a night and could not use a commode unaided.
Her toileting needs could be met either by providing a carer who would assist her to use a commode or by providing pads.
No other way of meeting the needs was canvassed as a possibility.
Secondly, Ms McDonald was always opposed to the use of pads.
Thirdly, the respondent was always of the view that the most practical and appropriate way of meeting her toileting needs was by using pads.
Pads were safer (there was no risk of falls) and cheaper.
But in the knowledge that Ms McDonald was opposed to the use of pads and as a concession, the respondent agreed to fund the provision of night time care pending her application for funding to the ILF.
Fourthly, the reassessment of her need in the Care Plan dated 27 April 2007 (as amended) as needs assistance at night to use the commode did not reflect the respondents view either of her need or of the most practical and appropriate way of meeting it.
It was clear that it remained of the view that the most practical and appropriate way of meeting her toileting needs was by using pads and that she therefore had a need for the provision of pads.
In these circumstances, I am very doubtful that it was necessary or appropriate for the respondent to reassess Ms McDonalds needs in 2007.
Her condition had not changed and the respondents view as to how to deal with it remained constant.
The fact that, as a concession, it made a grant of funding for night care (refundable if the application to the ILF was successful) did not require it to reassess her care needs.
Nevertheless, the fact is that the respondent did describe her need in the 2007 documentation as assistance to use the commode at night and the question raised by the first issue is whether it reassessed her need in the 2009 Care Plan Review.
Like Lord Brown, I entirely endorse para 53 of the judgment of Rix LJ.
It is not in dispute that it is open to a local authority to reassess a persons needs in a Care Plan Review.
Nor do I understand it to be in issue that the fact that a persons underlying presenting need has not changed does not prevent a local authority from making a reassessment.
Provided that it does not act in a Wednesbury unreasonable way or in breach of a persons rights under the European Convention on Human Rights, it is open to an authority to make a reassessment in circumstances including that (i) there has been a change in the eligibility criteria for the assessment of needs; (ii) there have been relevant medical or technological developments which justify a change and (iii) the authority has simply had further thoughts and changed its mind as to what is the proper assessment of the need.
In construing assessments and care plan reviews, it should not be overlooked that these are documents that are usually drafted by social workers.
They are not drafted by lawyers, nor should they be.
They should be construed in a practical way against the factual background in which they are written and with the aim of seeking to discover the substance of their true meaning.
Adopting that approach, I am in no doubt that the Care Plan Reviews of 2009 and 2010 contained reassessments of Ms McDonalds needs.
My reasons are essentially those given by Rix LJ.
I would merely add the following.
It is true that the Care Plan Reviews did not explicitly purport to be reassessments of Ms McDonalds needs.
This is because the documents stated that it remained the respondents view that the use of pads was a practical and appropriate solution to Ms McDonalds night time toileting needs.
As I have said, the respondents view as to her night time toileting needs had not in fact changed and Ms McDonald could have been in no doubt about that.
It is true that the night time care needs had been differently described in the 2007 documentation, but that was only as a concession and on a temporary basis.
Following the decisions of 17 October and 21 November 2008, it must have been clear that the respondent was withdrawing its concession and that the need was no longer being assessed as assistance to use the commode at night.
It is true that the Care Plan Reviews did not state in terms that the need was being reassessed from assistance at night to use the commode to toileting needs or the provision of pads for night time use.
But there can be no doubt that this is the effect of the words used in the documents.
In substance, the respondent was saying in the Care Plan Reviews that it was adhering to the view it had always held and which had been reflected in the documentation at all times except during the period of the concession.
As regards Mr Craggs second point, he submits that there has been a breach of Direction 2 of the 2004 Directions (set out by Lord Brown at para 10 above) and a breach of the requirements of the FACS guidance that councils should ensure that individuals are active partners in the assessment of their needs (para 28) and councils should recognise that individuals are the experts on their own situation and encourage a partnership approach to assessment.
There is a history of consultation in this case.
Since 2006, as Mr Brown makes clear in his statements, the respondents officers have sought to maintain a productive dialogue with Ms McDonald and her representatives as regards her care needs.
She was consulted in relation to each care plan review.
These were scheduled reviews of which she was given advance warning.
Since the meeting on 17 October 2008 (if not before), the respondent sought to agree the care package with her.
Rix LJ was fully justified in concluding at para 42 that: It is clear from the facts stated above that the Royal Borough has taken great pains to consult both Ms McDonald and [her partner] about Ms McDonalds needs and their assessment and solution, and to seek agreement with Ms McDonald about such matters.
For these reasons (as well as those given by Lord Brown) I would dismiss this appeal.
I should add that, since writing this judgment, I have read the judgments of Lord Walker and Lady Hale.
Like Lord Brown, I entirely agree with what Lord Walker says.
Ms McDonald needs to urinate three times a night and cannot safely use a commode unaided.
Her need can be met either by providing a carer or by the provision of pads.
These two very different ways of meeting her need are not themselves her needs.
Of course, if (as Lady Hale does) you define them as needs, then it is irrational to confuse the two and meet one need in the way that is appropriate to the other: it obviously makes no sense to say that the need for help to get to the commode can be met by the provision of pads.
But Lady Hale is only able to say that the authoritys decision is irrational because she has chosen to define the two ways of meeting Ms McDonalds need as needs themselves.
If the provision of help to get to the commode and the provision of pads are seen as different ways of meeting Ms McDonalds need (described above as her toileting needs), then the only question is whether the authoritys decision to opt for the pads solution is unlawful.
The unchallenged evidence of Mr Brown cannot be brushed aside in the way that Lady Hale seeks to do.
The use of incontinence pads for patients who are not clinically incontinent is both widespread and accepted practice in the provision of social services and is general practiceas a means of ensuring safety in patients/residents with severely compromised mobility.
The use of pads was suggested in this case by Ms McDonalds own GP.
In these circumstances, in my view it is impossible to characterise the authoritys decision as irrational.
It is no answer to this evidence to say that there is no evidence that it is accepted practice in effect to oblige the client to accept it.
The fact that the client may have no alternative but to accept the accepted practice does not mean that to adopt the general practice against the wishes of the client is irrational.
And if it is not irrational, it is not unlawful.
LADY HALE
This case is about a really serious question which could affect any one of us: is it lawful for a local authority to provide incontinence pads (or absorbent sheets) for a person who is not in fact incontinent but requires help to get to the lavatory or commode? It raises an important point of law on the proper interpretation and application of section 2(1) of the Chronically Sick and Disabled Persons Act 1970 (Alf Morriss Act).
Unfortunately the parties have not addressed themselves to this point.
Instead, most of the argument has focussed upon a much narrower question which is essentially one of fact: whether two documents prepared by the local social services authority entitled care plan review were to be taken also as a reassessment of the appellants community care needs.
This is not a point of law of general public importance.
But there is ample precedent for this court addressing itself to an important point which has not been argued by the parties (see, for example, Granatino v Radmacher (formerly Granatino) [2010] UKSC 42, [2011] 1 AC 534) and in this case we have a relevant intervention from Age UK, the principal charity working for older people in this country.
I propose, therefore, briefly to address the question which we might have been asked.
To do so, it is necessary to explain a little of the background to the assessment of and entitlement to social care.
Since the foundation of the welfare state in the post war years, local authorities have had power to provide a range of social services for adults who need them, usually because of age, ill health or disability.
It is, perhaps, unlikely that the original framers of the legislation envisaged that any of these powers would give rise to an individual entitlement to be provided with a particular service: they were framed in terms of devising schemes to provide such services which would be approved by the Minister.
Means tested benefits, on the other hand, became available to fund accommodation in residential care.
More and more public money was being spent on old and other vulnerable people living in private or voluntary nursing or care homes without any professional assessment of whether they actually needed to be there.
This was not only wasteful and inefficient; it was also inconsistent with the policy aim of enabling people to live independent lives in their own homes for as long as possible.
The system was changed following reports from the Audit Commission, Making a Reality of Community Care (1986) and Sir Roy Griffiths, Community Care: Agenda for Action: A Report to the Secretary of State for Social Services (1988), and a White Paper, Caring for People: Community Care in the next Decade and Beyond (1989, Cm 849).
Local social services authorities were to be given the task of assessing peoples needs and either providing or arranging appropriate services for those who needed them to do so.
Thus, section 47(1)(a) of the National Health Service and Community Care Act 1990 requires a local authority to carry out an assessment if it appears that any person for whom they have power to provide or arrange community care services may be in need of them.
Section 46(3) of the 1990 Act defines community care services as those which a local authority may provide or arrange under four different statutory regimes, all of which pre dated the 1990 Act.
These include Part III of the National Assistance Act 1948.
Part III was amended to draw a clear distinction between two sorts of service: residential accommodation for people who because of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them, under section 21(1)(a), (as amended by section 42(1) of the 1990 Act; and a range of other services for disabled people, under section 29.
As amended by section 195 of, and paragraph 2 of the Schedule 23 to, the Local Government Act 1972, both sections provide that the local authority may with the approval of the Secretary of State, and to such an extent as he may direct shall provide the service described for the identified client group.
The requisite approvals and directions are contained in the Department of Health Local Authority Circular LAC (93)10.
This requires that services be provided for, among others, people who are ordinarily resident in the local authoritys area.
This appellant is a disabled person who ordinarily resides in the area of the respondent local authority.
But are these merely target duties, owed towards the relevant population as a whole, or do they give rise to individual rights? It was held in R v Sefton Metropolitan Borough Council, Ex p Help the Aged [1997] 4 All ER 532, that section 21(1)(a) of the 1948 Act does give rise to an individual entitlement to accommodation once the local authority have decided that the individual fulfils the statutory criteria.
No one has since challenged that decision and, indeed, it has been assumed to be correct in more than one decision of the House of Lords: see R (M) v Slough Borough Council [2008] UKHL 52, [2008] 1 WLR 1808.
Logically, the position should be the same for both section 21 and section 29, as the relevant wording has been identical since 1972: the observation in R v Islington London Borough Council, Ex p Rixon [1997] 32 BMLR 136, 139, that the duties in section 29 were merely target duties pre dated the decision that section 21(1)(a) created individual rights. (Incidentally, the Law Commission, in its recent report, Adult Social Care (2011) (Law Com No 326), has recommended that there should be an enforceable right to all the community care services required to meet the individuals eligible needs: para 6.12, recommendation 16.)
In any event, it is quite clear that section 2(1) of the Chronically Sick and Disabled Persons Act 1970 was intended to create an individual right to services if its criteria were met.
So far as relevant to this case, it reads as follows: Where a local authority having functions under section 29 of the National Assistance Act 1948 are satisfied in the case of any person to whom that section applies who is ordinarily resident in their area that it is necessary in order to meet the needs of that person for that authority to make arrangements for all or any of the following matters, namely (a) the provision of practical assistance for that person in his home; . then, . , it shall be the duty of that authority to make those arrangements in exercise of their functions under the said section 29.
The 1970 Act thus specified certain services which had to be provided for disabled people who needed them under section 29 and gave those people an enforceable right to those services.
Implicit in that right was a right to have ones needs assessed, at least if the local authority were asked to do so.
But the matter was put beyond doubt by section 4 of the Disabled Persons (Services, Consultation and Representation) Act 1986.
This requires that, when requested to do so by or on behalf of a disabled person, a local authority shall decide whether the needs of the disabled person call for the provision by the authority of any services in accordance with section 2(1) of the 1970 Act.
Significantly, this wording draws a clear distinction between the needs of the disabled person and the services which should be provided in response.
The duty in section 4 of the 1986 Act remains in force despite the enactment of the more comprehensive duty in section 47(1) of the 1990 Act.
As section 2(1) services are provided in the exercise of the authoritys functions under section 29 of the 1948 Act, it has been held that they are also included in the definition of community care services in section 46 of the 1990 Act and thus within the duty to assess the need for them in section 47(1): see R v Kirklees Metropolitan Borough Council, Ex p Daykin (1996) 1 CCLR 512.
Having carried out an assessment under section 47(1)(a), section 47(1)(b) requires that the authority having regard to the results of that assessment, shall then decide whether his needs call for the provision by them of any such services.
But not all community care services are a right, so section 47(2) of the 1990 Act expressly preserves the special position of disabled people who are entitled to services under section 2(1) of the 1970 Act.
If at any time during an assessment of needs under section 47(1)(a) it appears that the client is a disabled person, then the authority must proceed to make a decision as to the services which he requires under the 1970 Act without being requested so to so.
This underlines the fact that Parliament intended to treat the needs of disabled people as a special case.
Otherwise, it is hard to see why they did not simply subsume the former provisions in the new.
In sum, disabled people have an individual right to certain services under section 2(1) of the 1970 Act and a right to have their entitlement to such services assessed and a decision made under both section 4 of the 1986 Act and section 47 of the 1990 Act.
Clearly, it is for the local authority and not the court to make that assessment.
It is for the authority to be satisfied that the criteria are met.
But in doing so they have to ask themselves the right questions and provide rational answers.
The key question is what is meant by necessary in order to meet the needs of the disabled person in section 2(1) of the 1970 Act.
These words contain two separate questions: first, what are the needs of the disabled person; and second, what is necessary to meet those needs? The second question is then supplemented by a third: having decided what is necessary to meet those needs, is it necessary for the local authority to arrange it?
In R v Gloucestershire County Council, Ex p Barry [1997] AC 584, the issue was whether it was lawful for the local authority to take their resources into account in answering those questions.
It was common ground that there was a good deal of flexibility in the arrangements which could be made to meet a persons assessed needs.
So the authoritys resources could be taken into account at the second stage, provided always that the need was met.
The dispute was over whether those resources could be taken into account in assessing what the persons needs were.
Lord Lloyd of Berwick, with whom Lord Steyn agreed, held that they could not.
Lord Nicholls of Birkenhead and Lord Clyde, with whom Lord Hoffmann agreed, held that they could.
The subsequent Guidance on Adult Social Care, Fair Access to Care Services, Guidance on Eligibility Criteria for Adult Social Care (2003) sought to make sense of the distinction which the House of Lords had elided.
Thus it distinguished between a persons presenting needs and her eligible needs: paragraph 2.
The presenting needs were those which the client actually had.
The eligible needs were those which the authority were prepared to meet.
This depended upon whether they were assessed as being critical, substantial, moderate or low: paragraph 16.
The authority could decide which categories of need they would meet.
This was designed to achieve a good degree of consistency within authorities as to the needs which would be met, but obviously produced a considerable disparity between those authorities who would meet only critical and substantial needs and those authorities who would also meet moderate or even low needs.
The lesson which I learn from this guidance (and from its replacement, Prioritising Need in the Context of Putting People First: A Whole System Approach to Eligibility for Social Care (2010)) is that there is an obvious distinction between what people need and what the authorities are prepared to do to meet that need.
How otherwise can it be the case that a person with a particular level of need in one local authority area will have that need met but a person with the same level of need in another local authority will not?
Hence I confess that I find the reasoning of the minority in Barry much more convincing, both as a matter of statutory construction and as a matter of everyday life, than the reasoning of the majority.
There is a clear distinction between need and what is done to meet it.
We all need to eat and drink.
Resources do not come into it.
But there are various ways of meeting that need and it is perfectly sensible to choose the most efficient and economical way of meeting it.
Our nutritional needs can met by simple, wholesome food, rather than by giving us the expensive foods that we prefer.
I could have wished, therefore, that counsel had taken the opportunity presented by coming to this court to argue that Barry was wrongly decided.
It was, after all, a comparatively recent decision, taken by a bare majority, on a highly arguable point of statutory construction.
Lord Nicholls acknowledged (at p 604C) that the contrary argument was, at first sight, compelling.
The majority view was obviously heavily influenced by the impossible position in which the local authority had been put by the government of the time: wishing to maintain the services which their clients needed but unable to do so because of the combination of rate capping and reduction in the central government grant.
The principled view, taken by the minority, was that this was not a good enough reason to interpret the authoritys statutory duties otherwise than in accordance with their plain meaning.
Without the decision in Barry, it would be easy to answer the question in this case.
If resources did not come into the assessment of need, it would be easy to state what a particular individual needed.
Everyone needs to urinate and defecate.
People who can control their bladder and/or bowels need a safe and hygienic place in which to do so.
People who cannot control their bladder and/or bowels need equipment designed to cater for the fact that they cannot avoid performing these natural functions in the wrong place.
The former group of people do not need the latter equipment although they may need help in getting to the safe place.
Once the need is accurately identified, the most efficient and economical way of meeting it can be chosen.
Just as any parent has to choose whether to use disposable or re usable nappies (to take an obvious example), a local authority can choose the most efficient and economical equipment to meet the need.
Likewise, if the need is for help to use the lavatory or commode, there may be all sorts of choices available as to when, how or even where to offer the service.
Thus, it might well have been open to the local authority to say to Ms McDonald that it was too expensive for them to provide her with the sort of night time care that she was asking for in her own flat, but that they could do so in one of the Extra Care Sheltered Housing Schemes in the borough, or in her own flat through the Homeshare scheme.
She too can be expected to co operate with the authority in choosing the most economical and acceptable way of meeting the need that she has.
However, I do not think that it is necessary to hold that Barry was wrongly decided in order to allow this appeal.
Section 2(1) clearly does ask two separate questions.
Nothing in Barry denies that.
Both of those questions have to be answered, and answered rationally, in relation to the individual disabled person.
It seems to me that the need for help to get to the lavatory or commode is so different from the need for protection from uncontrollable bodily functions that it is irrational to confuse the two, and meet the one need in the way that is appropriate to the other.
Of course, there may well be people who are persuaded that this is in fact a more convenient, comfortable and safer way of solving the problem; then it is no longer irrational to meet their need in this way.
The authority suggest that this is accepted practice but they cannot point to evidence that it is accepted practice in effect to oblige the client to accept it.
Such Department of Health Guidance as there is points the other way: that people should not be offered this form of assistance prematurely, in case they become unnecessarily dependent upon it.
client should not have to have one need met with the solution to another
It is clear from the evidence that this local authority have never been prepared to fund the night time care which Ms McDonald wants.
They only agreed to do so as a temporary measure while the application to the Independent Living Fund was being processed.
It is not clear why their offer of payment lapsed.
But ever since then they have been trying to reduce the care to the figure which they have allocated for her.
No one can blame them for that.
I dare say that they have not found Ms McDonald an easy person to deal with.
But the fact that they have been trying so hard for so long to persuade her to accept their point of view does not mean that it is a rational view or one which she is bound to accept.
For the reasons already given, I do not think that it is.
Furthermore, I am troubled by the implications of the contrary view.
A person in her situation needs this help during the day as well as during the night and irrespective of whether she needs to urinate or to defecate.
Logically, the decision of the majority in this case would entitle a local authority to withdraw this help even though the client needed to defecate during the night and thus might be left lying in her faeces until the carers came in the morning.
This is not Ms McDonalds problem at the moment, but her evidence leaves one in no doubt that this is one of her fears.
Indeed, the majority view would also entitle an authority to withdraw this help during the day.
The only constraint would be how frequently (or rather how infrequently) it was deemed necessary to change the pads or sheets, consistently with the avoidance of infection and other hazards such as nappy rash.
The consequences do not bear thinking about.
I therefore agree with the argument of the interveners, Age UK, when they say that it is irrational in the classic Wednesbury sense to characterise the appellant as having a different need from the one which she in fact has.
As I understand it, it would not be regarded as acceptable to treat a hospital patient or care home resident in this way.
Regulation 17 of the Health and Social Care Act 2008 (Regulated Activities) Regulations 2010 (SI 2010/781) requires a registered person, so far as reasonably practicable, to make suitable arrangements to ensure the dignity, privacy and independence of service users.
The Care Quality Commissions Guidance, Essential Standards of Quality and Safety (2010), p 117 requires that people who use services have access to toilets, baths and showers that enable them to maintain privacy and dignity and are in close proximity to their living areas.
The Commissions recent Review of Compliance at Ipswich Hospital NHS Trust found that dignity was not always sufficiently considered because people were not taken to a toilet away from their bed space and commodes were used all the time: p 8.
There is no suggestion that people with mobility problems should not be able to enjoy the same access to toilet facilities as those who do not.
There is no suggestion that it would be acceptable to treat patients in hospital in the way that it is suggested that someone living in her own home should be treated.
But the overall cost of admitting anyone to residential or nursing care is usually greater than providing them with what they need in their own homes.
The policy aim underlying all the recent guidance is to help people to live independently in their own homes for as long as possible.
As Lord Lloyd put it in Barry in every case, simple or complex, the need of the individual will be assessed against the standards of civilised society as we know them in the United Kingdom (p 598F).
In the United Kingdom we do not oblige people who can control their bodily functions to behave as if they cannot do so, unless they themselves find this the more convenient course.
We are, I still believe, a civilised society.
I would have allowed this appeal.
| UK-Abs | This appeal concerns the question of whether the Respondent Royal Borough acted unlawfully in seeking to amend the Appellants care package by substituting her night time carer with provision of incontinence pads or absorbent sheets (hereafter pads) when the Appellant is not in fact incontinent.
In September 1999, the Appellant, Ms McDonald, suffered a stroke leaving her with severely limited mobility.
She also suffers from a small and neurogenic bladder which makes her have to urinate some two to three times a night.
Up to now she has dealt with this by accessing a commode with the help of a carer provided by the Respondent Royal Borough as part of her care package.
In November 2008, however, the Respondent proposed instead that the appellant should use pads, avoiding the need for a night time carer and thereby providing her with greater safety (preventing the risk of injury whilst she as assisted to the commode), independence and privacy and in addition reducing the cost of her care by some 22,000 per annum.
It is this decision the Appellant is seeking to challenge, maintaining that the thought of being treated as incontinent (which she is not) and having to use pads is an intolerable affront to her dignity.
In the High Court, the deputy judge dismissed Ms McDonalds arguments and held that it was open to the Respondent to meet Ms McDonalds need, identified in the Needs Assessment dated 2 July 2008 as assistance to use the commode at night, in a more economical manner by provision of pads.
The Court of Appeal disagreed holding that the clear language of the Needs Assessment could not be extended in a way proposed by the deputy judge and that at the time when proceedings were commenced the Respondents were in breach of their statutory duty.
However, since the Respondents decision to amend the care package was not in fact put into operation, and since the need had been reassessed in the Care Plan Reviews of November 2009 and April 2010 as the appellants night time toileting need, the Appellant had no substantial complaint.
In the Supreme Court, the Appellant put her argument against the Respondents decision on four separate basis: (i) the 2009/2010 Care Plan Reviews did not in fact contain a reassessment of her needs; (ii) the decision breached Ms McDonalds rights under article 8 of the European Convention on Human Rights (article 8); (iii) the decision was taken in breach of section 21 of the Disability Discrimination Act 1995 (DDA); and (iv) the Respondents failed to have due regard to the need to promote equality of opportunity of disabled persons under section 49A of the DDA (now superseded by comparable provisions in the Equality Act 2010).
The Supreme Court, by a majority of 4 1, dismissed the appeal.
The lead judgment was given by Lord Brown.
Lord Dyson gave a separate concurring judgment.
Lord Walker agreed with Lord Brown and Lord Dyson, delivering a short opinion on the point raised by Lady Hale in her dissenting opinion.
Lord Kerr agreed with the majoritys conclusion but for different reasons on issue 1.
Lady Hale gave a dissenting judgment for the Appellant on a point that, although not taken by the Appellant, was raised in Age UKs intervention.
Issue 1 the 2009/2010 Care Plan Reviews The court agreed with Rix LJs conclusion in the Court of Appeal.
In accordance with the Fair Access to Care Services (FACS) Guidance issued by the Secretary of State, the Care Review Plans could and in fact did incorporate a review of Ms McDonalds needs: [12], [52].
Care plan reviews are usually drafted by social workers rather than lawyers and thus should be construed in a practical way: [53].
Given the history of consultation in this case, the Respondent complied with the relevant FACS Guidance: [13], [55].
Lord Kerr agreed with the majority but on a narrower basis.
Although the Respondent did not intend to carry out a re assessment of the Appellants needs in the 2009/2010 Care Plan Reviews, in fact the exercise then conducted yielded sufficient information to allow the court to conclude that the Appellants needs could be properly re cast: [38].
In this context, the definition of needs includes the means by which those needs are to be met: [40].
Issue 2 Article 8 The Appellant could not establish interference with her article 8 rights.
The Respondent respected Ms McDonalds dignity and autonomy, allowing her to choose the details of her care package.
Even if article 8 interference were established, it would be justified under article 8(2) on the ground that it is (a) necessary for the economic well being of the Respondent Royal Borough and the interests of its other service users and (b) a proportionate response to the Appellants needs by affording her greater privacy and protection from injury: [19].
Issue 3 section 21 of the DDA Under section 21 of the DDA, the Respondent may not operate any practice, policy or procedure which makes it impossible or unreasonably difficult for disabled persons to receive any benefit conferred on them.
The Appellant failed to show that the Respondents decision could properly be characterised as a practice, policy or procedure and thus the Respondent did not breach its section 21 duty.
Even if that were not so, the Respondents acts would have been justified as constituting a proportionate means of achieving a legitimate aim within the meaning of section 21D(5): [22].
Issue 4 section 49A of the DDA Where the public authority is discharging its functions under statutes which expressly direct its attention to the needs of the disabled persons, it may be entirely superfluous to make express reference to section 49A of the DDA.
It would be absurd on the facts of the present case to infer a breach of section 49A of the DDA from an omission to refer to that section in any of the Respondents documentation: [24].
Issue 5 section 2(1) of the Chronically Sick and Disabled Persons Act 1970 (CSDPA) Lady Hale would have allowed Ms McDonalds appeal on a different basis outlined by Age UK in its intervention, namely that it was Wednesbury irrational for the Respondent Royal Borough to characterise the Appellant as having a need different from the one she in fact has: [78].
Under section 2(1) of the CSDPA disabled people have a right to practical assistance from their local authority to meet their needs.
In complying with section 2(1) the local authority has to answer rationally the following two questions: (i) what are the needs of the disabled person and (ii) what is necessary to meet those needs: [69].
It is clear that the need for help to get to the commode is so different from the need for protection from uncontrollable bodily functions that it is irrational to confuse the two, and meet the one need in the way that is appropriate to the other: [75].
|
The issue in this case is whether the Secretary of State for Work and Pensions can continue to recoup Social Fund loans and benefit overpayments by deduction from current benefit payments during the moratorium period after the making of a Debt Relief Order (DRO) under Part 7A of the Insolvency Act 1986.
The present state of the law is untidy, to say the least.
Cranston J in the High Court and a majority of the Court of Appeal (Smith and Toulson LJJ) have held in this case that the Secretary of State cannot continue to make these deductions: [2010] EWHC 2162 (Admin), [2010] BPIR 1389 and [2010] EWCA Civ 1431, [2011] 1 WLR 1723.
But Keene J in the High Court has held that such deductions can continue to be made between the making of a bankruptcy order and the bankrupts discharge from bankruptcy: R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
The House of Lords has reached the same conclusion in the context of the rather different Scottish bankruptcy law: Mulvey v Secretary of State for Social Security 1997 SC (HL) 105.
Once a bankrupt is discharged, however, the Court of Appeal has held that the liability to repay the Secretary of State is also discharged: R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327, [2008] 1 WLR 564.
The Secretary of State would like to introduce coherence into the scheme in two ways: firstly by assimilating the position during the moratorium after a DRO with the position after a bankruptcy order; and secondly by reversing Balding, so that the debt can continue to be recouped after a bankrupts discharge.
Ideally, the same would apply at the end of the DRO moratorium period.
The claimants, on the other hand, would ideally introduce coherence by holding that the Secretary of States deduction power does not survive the making either of a DRO or of a bankruptcy order.
Balding was correctly decided and the same principle applies at the end of the moratorium period.
The facts
The facts of the two test cases before us are typical of many.
Mrs Payne was made a Social Fund loan of 843 in September 2007 in order to replace her washing machine and cooker.
The Secretary of State did not start to recover this by deduction from her benefits at that stage.
But in August 2009, she obtained a DRO listing the loan among her qualifying debts.
When she informed the Secretary of State of this, he began deducting 23.59 per week from her income support, although this was reduced in December to 11.64 per week.
These proceedings for judicial review of the legality of the deductions were begun in March 2010.
In August 2010, the one year moratorium period came to an end and the debt was discharged.
Ms Cooper is in receipt of incapacity benefit and disability living allowance.
In August 2009, the Secretary of State determined that she had been overpaid incapacity benefit in the sum of 1,195.07 and in December 2009 he began recovering this from her by deducting 128.44 from her benefits every four weeks.
In January 2010, Ms Cooper obtained a DRO which listed the overpayment as one of her qualifying debts.
In March 2010, she too began proceedings to challenge the continued deductions from her benefits.
In January 2011, the one year moratorium ended and the debt was discharged.
The power to deduct
The Secretary of State is entitled to recover benefits which have been overpaid because of misrepresentation or non disclosure: Social Security Administration Act 1992 (SSAA), section 71(1).
Before he can do so, the erroneous award of benefit must have been reversed or varied on appeal, or revised or superseded by a fresh award under section 9 or 10 of the Social Security Act 1998: SSAA, section 71(5A).
Amounts recoverable under section 71(1) may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits: SSAA, section 71(8).
All kinds of benefits, whether contributory or non contributory, income related or payable irrespective of means, are prescribed: see Social Security (Payments on account, Overpayments and Recovery) Regulations 1988, SI 1988/664, reg 15.
However, not only is this without prejudice to any other method of recovery, but it is also expressly provided that overpayments can be recovered by execution issued from the county court as if they were payable under an order of that court (and equivalent provision is made for Scotland): SSAA, section 71(10).
Section 71 is also applied with modifications to overpayments from the Social Fund: SSAA, section 71ZA.
In the same way, if a Social Fund award is recoverable that is, a loan then Without prejudice to any other method of recovery, the Secretary of State may recover an award by deduction from prescribed benefits: SSAA, section 78(2).
Equivalent provision is made for the recovery of any amount of housing benefit paid in excess of entitlement: SSAA, section 75(4).
Her Majestys Revenue and Customs (HMRC) also have equivalent powers to recover overpayments of working tax credit and child tax credit by deduction from payments of any tax credit: Tax Credits Act 2002, section 29(4).
We are told that considerable sums of money owed to HMRC, the Secretary of State and other public bodies are listed in DROs.
The figures quoted to us were respectively nearly 9m to HMRC, nearly 8m to the Secretary of State, of which over 6m was in respect of Social Fund loans, and 20.7m to other public bodies.
Whether these include other debts as well as loans, overpaid benefits and tax credits was not clear.
Nor were we told how much has currently to be written off at the end of the moratorium period.
Debt Relief Orders
To put it shortly, debt relief orders (DROs) are a new and simplified way of wiping the slate clean for debtors who are too poor to go bankrupt.
As Toulson LJ explained in the Court of Appeal, they were the product of two consultation papers: the first was issued by the Department for Constitutional Affairs in 2004, entitled A Choice of Paths Better options to manage over indebtedness and multiple debt.
This proposed a new scheme for people with no income, no assets who were unable to pay their debts.
The second was issued by the Insolvency Service in 2005, entitled Relief for the Indebted An Alternative to Bankruptcy, and suggested criteria for such a scheme and how it was intended to operate.
The new scheme was introduced into the Insolvency Act by the Tribunals, Courts and Enforcement Act 2007 and came into force in February 2009.
Application is made, not to a court, but to the official receiver through a qualified intermediary (such as a specialist debt adviser): Insolvency Act (IA) 1986, section 251B.
The debtor must fulfil certain prescribed conditions: IA 1986, section 251C(5), Schedule 4ZA, Insolvency Rules (SI 1986/1925), Part 5A, and Insolvency Proceedings (Monetary Limits) Order 1986 (SI 1986/1996), as amended.
For example, her monthly surplus income must not exceed the prescribed amount, currently 50; the total value of her property (leaving out such things as clothes, furniture and household equipment, tools of the trade and a modest domestic motor vehicle) must not exceed the prescribed amount, currently 300; and her overall indebtedness must not exceed the prescribed amount (currently 15,000).
To avoid people repeatedly running up debts and having them wiped out by an order, it is not possible to get another DRO within six years.
The DRO is made in respect of qualifying debts.
A debt qualifies if it is for a liquidated sum payable either immediately or at some certain future time and is not excluded: IA 1986, section 251A(2).
It does not qualify to the extent that it is secured: IA 1986, section 251A(3).
Excluded debts are those which are prescribed in the Insolvency Rules 1986, rule 5A.2.
These include student loans but do not include Social Fund loans or overpaid benefits.
It is not suggested that the liability to repay these is not a debt for the purpose of section 251A.
The application has to list the debts to which the debtor is subject at the date of the application: section 251B(2)(a).
The official receiver can ask for further information from the debtor but does not at this stage give notice to the creditors.
When the order is made, it must list the debts which the official receiver is satisfied were qualifying debts at the application date: section 251E(3).
When the order is made, a moratorium commences on the effective date for a debt relief order in relation to each qualifying debt specified in the order: IA section 251G(1).
What does the moratorium mean? This is governed by section 251G(2): During the moratorium, the creditor to whom a specified qualifying debt is owed (a) has no remedy in respect of the debt, and (b) may not (i) commence a creditors petition in respect of the debt, or (ii) otherwise commence any action or other legal proceedings against the debtor for the debt, except with the permission of the court and on such terms as the court may impose.
During the moratorium period, the creditors may object to the making of the order, or the inclusion of a debt in the order, or the details of the debt specified in the order: IA 1986, section 251K.
The official receiver has power to revoke or amend the order: IA 1986, section 251L.
If the order continues throughout the moratorium period of one year (which may be extended in certain circumstances), the debtor is discharged from all the qualifying debts specified in the order: IA 1986, section 251I(1).
This does not apply to debts incurred as a result of fraud or if a court later revokes the DRO: IA 1986, section 251I(3), (5).
Otherwise the slate is wiped clean.
On the face of it, then, as Social Fund loans and benefit overpayments have not been excluded from the qualifying debts, the creditor has no remedy in respect of them during the moratorium period and they are discharged after it has run its course.
The issue, therefore, is whether recovery by deduction from benefits (or tax credits) is a remedy in respect of the debt for this purpose.
To understand the argument that it is not, it is necessary to turn to the authorities under the bankruptcy regime.
The authorities
They begin with Bradley Hole v Cusen [1953] 1 QB 300.
The creditor was a tenant of rent controlled premises who had been charged too much rent by his landlord.
Section 14(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 provided that the overpaid rent was recoverable by the tenant and may, without prejudice to any other method of recovery, be deducted by the tenant . from any rent . payable by him to the landlord .
The landlord went bankrupt and the trustee in bankruptcy claimed to be entitled to the full amount of the recoverable rent since the bankruptcy from the tenant.
The trustee argued that the claim in respect of overpaid rent had been converted into a right to prove the debt in the bankruptcy any other method of recovery was barred by the predecessor to what is now section 285(3) of the Insolvency Act 1986: After the making of a bankruptcy order no person who is a creditor of the bankrupt in respect of a debt provable in the bankruptcy shall (a) have any remedy against the property or person of the bankrupt in respect of that debt, or (b) before the discharge of the bankrupt, commence any action or other legal proceedings against the bankrupt except with the leave of the court and on such terms as the court may impose.
The Court of Appeal rejected that argument.
The property passed to the trustee in the same plight and condition in which it was in the bankrupts hands and that included the right of the tenant to live there rent free until the overpaid rent had been recouped.
The tenants rights included the right to be considered as having paid rent in advance up to the amount of the excess.
The argument was repeated in R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
Like the respondents in this case, the applicants were respectively the recipient of a Social Fund loan and a claimant who had been overpaid benefit.
Both were declared bankrupt.
After that, the Secretary of State began to recover the loan and overpayment by deduction from their current benefits.
They argued that he was unable to do so because of section 285(3) of the Insolvency Act: the right of deduction was a remedy against the property or person of the bankrupt in respect of that debt.
Keene J took the view that Bradley Hole applied.
The tenant was not exercising a remedy against the property of the landlord but simply refraining from making a payment to which the pre existing debt would be a defence if he were sued.
Even if that were not so, the Secretary of State was not seeking to go against the property of the bankrupt.
Their entitlement was only to the net amount of benefit after deduction of the loan or overpayment and not to the full amount.
Taylor and Chapman was decided after the decision of the Inner House in the Scottish case of Mulvey v Secretary of State for Social Security 1996 SC 8 and before the decision of the House of Lords in that case 1997 SC(HL) 105.
Keene J saw considerable force in the approach of Lord Clyde, to the effect that the right to recover by deduction was but one element in the calculation of the benefit to which the claimant was entitled.
This approach has been characterised by the Secretary of State in this case as the net entitlement principle.
Mulvey was a case about loans from the Social Fund which were being repaid by deduction from the claimants income support when her estate was sequestrated under the Scottish bankruptcy laws.
The claimant argued that continuing to make the deductions amounted to an attempt to set off a pre sequestration debt against a post sequestration obligation, which was impermissible at common law.
So their Lordships were not concerned with the interpretation of a statutory provision such as section 285(3) of the IA 1986.
There appears to be no exact equivalent in the Bankruptcy (Scotland) Act 1985 and certainly none was discussed in either the Inner House or the House of Lords.
Section 37 of the 1985 Act limits the rights of creditors shortly before and after the sequestration, but not in the same sort of terms as sections 251G and 285(3) of the IA 1986.
Section 32(5) prohibits diligence against the debtor against the after sequestration income, which is preserved for her under section 32(1), in respect of debts from which she will be released when discharged from the bankruptcy.
In the House of Lords, Lord Jauncey remarked that By no stretch of the imagination could the respondents exercise of his statutory right be described as diligence for the purpose of the law of Scotland (1997 SC (HL) 105, at 109F).
Nor would it be right to apply the common law rule: The deductions made by the respondent were not, as in the normal case of compensation in bankruptcy, a result of the bankruptcy, but were made in pursuance of a statutory scheme which was already in operation at the time of sequestration and with which the permanent trustee can have no concern.
Prior to sequestration, the appellant had no right to receive by way of income support benefit more than her gross entitlement under deduction of such sum as had been notified to her by the respondent prior to payment of the award by the respondent.
This was the result of the statutory scheme and she could not have demanded more.
Mr Sheldon QC, for the Secretary of State, understandably places some weight on the net entitlement principle there enunciated by Lord Jauncey.
For completeness, although it is concerned with what happens at the end of the process, we should consider R (Balding) v Secretary of State for Work and Pensions [2007] EWHC 759 (Admin), [2007] 1 WLR 1805, [2008] EWCA Civ 1327, [2008] 1 WLR 564, decided in the Divisional Court after the House of Lords decision in Mulvey.
Section 281 of the IA 1986 provides that (with qualifications which have no bearing on the case) . where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts, .
The question, therefore, was whether the claimants liability to repay overpaid benefit was a bankruptcy debt.
Section 382(1)(a) defines this, inter alia, as any debt or liability to which he is subject at the commencement of the bankruptcy.
Section 382(3) gives a very wide meaning to debt or liability, it being immaterial whether it is present or future, certain or contingent, liquidated or unliquidated, or capable of being ascertained by fixed rules or as a matter of opinion (compare the definition of a qualifying debt for the purpose of the DRO scheme, at para 9 above).
Section 382(4), except in so far as the context otherwise requires, defines liability to mean a liability to pay money or moneys worth, including any liability under an enactment .
Not surprisingly, both the Divisional Court and the Court of Appeal held that the liability to repay was a bankruptcy debt.
In doing so, Davis J had this to say of the net entitlement argument (para 46): [Counsels] approach in any event seems to assume that the individual is only ever entitled to the net benefit after deduction.
But in my view that is not right.
That will no doubt be so if the Secretary of State has actually elected as he did in this case to recoup the overpaid benefit by deduction at source from subsequent prescribed benefits.
But the Secretary of State may in other cases decide to effect recovery by other means.
As I see it, the liability to repay cannot be said to be not a bankruptcy debt (as defined) if one form of recovery . is adopted but can be a bankruptcy debt if another form of recovery is adopted.
The liability arising under section 71 of the 1992 Act, upon determination made prior to bankruptcy, either is or is not on a subsequent bankruptcy a bankruptcy debt, as defined.
In my view, it is.
The Court of Appeal agreed for the same reasons.
It followed that the debt was wiped out when the bankrupt was discharged.
The argument
For the Secretary of State, Mr Sheldon does not argue that the liability to repay under SSAA section 71(1) and its equivalents is not a qualifying debt (that point would in any event have been better taken by challenging its inclusion in the list before the official receiver and then the court).
He argues that the right of recovery under SSAA section 71(8) is not a remedy in respect of the debt for the purpose of the moratorium in section 251G(2).
He argues for a coherent and harmonious approach to the construction of the bankruptcy and DRO schemes, which are to be found within the same legislation.
He points to a long list of similarities between the two regimes.
The statutory power of deduction is not a remedy but an adjustment to the level of benefit which the claimant is entitled to receive.
She is only ever entitled to the net sum.
The overpayment is to be regarded as payment in advance of future benefit.
Bradley Hole and Taylor and Chapman were rightly decided and Mulvey reaches the same result.
He also argues that Balding was wrongly decided.
Where the Secretary of State elects to recover by deduction, it is not a debt or liability to pay but an adjustment to the amount of benefit to which she is entitled because of the net entitlement principle.
Lord Jauncey left the point open in Mulvey at p 109E.
The broad definition of a liability in section 382(4) can be qualified because the policy imperatives mean that the context otherwise requires.
Mr Drabble QC, for the respondent claimants, challenges the so called net entitlement principle as a heresy.
Only if the overpayment is being recouped from current payment of the same benefit is it even possible to regard it as an advance payment of the current benefit.
But loans and overpayments can be recouped from a wide range of wholly unrelated benefits, which may have come into payment long after the liability was incurred, of which the loan or overpayment cannot possibly be regarded as a payment in advance.
The natural meaning of remedy clearly encompasses the power to deduct.
If need be, bankruptcy can be distinguished.
Firstly the wording of section 285(3) is different it refers to any remedy against the property or person of the bankrupt in respect of that debt.
Secondly, the purpose of the moratorium in the DRO scheme is different from the purpose of the period between order and discharge in bankruptcy.
In bankruptcy, the purpose is for the trustee to gather in all the assets of the bankrupt and distribute the proceeds equitably among the creditors.
In the DRO, there is no trustee, there are no assets to be distributed, and there is no potential dividend for the creditors.
The moratorium is simply there because the creditors have not had an opportunity to dispute the amount or the inclusion of their debt before the order is made and also because there may be other inquiries and challenges to the order.
It was these distinctions which persuaded the majority of the Court of Appeal to uphold the decision of Cranston J to distinguish the two.
Finally, Balding is clearly rightly decided.
The same liability cannot either be a debt or not be a debt according to the method of recovery chosen by the creditor from time to time.
Whether or not there is a prescribed benefit from which to deduct the liability, whether or not the Secretary of State chooses to make those deductions, the Secretary of State is always free to enforce the liability by other means.
If he does so, it is plainly a bankruptcy debt and will be wiped out when the bankruptcy is discharged.
The liability is also a qualifying debt for the DRO scheme and also wiped out when the moratorium has run its course.
Discussion
This Court is in the fortunate position of being able to adopt a coherent approach which it would have been difficult for the courts below to achieve.
In my view, there is no such thing as the so called net entitlement principle.
The claimant to any kind of social security benefit has a statutory entitlement to the amount of benefit which she is awarded by the Secretary of State or a tribunal.
The members of this Court are, for example, statutorily entitled to the state retirement pension should they choose to claim it.
Some claimants may have a prior liability to repay previously overpaid benefits, whether of the same or an entirely different kind, or they may have taken out a Social Fund loan which they are liable to repay.
By no stretch of the imagination does a Social Fund loan to buy a cooker amount to an advance payment of retirement pension to which the claimant later becomes entitled.
It could more plausibly be regarded as an advance payment of future income support.
But at the point when the loan is made and the liability to repay arises it cannot be known whether the claimant will continue to be reliant on income support.
She may get a job, marry a rich man, or win the lottery.
The liability to repay arises independently of her entitlement to any benefit from which the Secretary of State may later decide to recoup it.
In any ordinary use of language, the power to recover the debt by deduction from benefit is a remedy in respect of the debt.
Moreover, if self help remedies such as this were not included in the concept of a remedy, it is difficult to see why both section 251G(2)(b) and section 285(3)(b) specifically prohibit the use of court proceedings to enforce the debt.
They would be otiose if the only remedies contemplated by the prohibition of any remedy were court proceedings.
There is no sense in a scheme which prohibits recovery of the liability by one method but allows it by another.
Furthermore, I do not see any reason to distinguish between the DRO scheme and bankruptcy in this respect.
There is a minor difference between the language of section 251G(2) and section 285(3) but this is readily explicable by the antiquity of the latter provision.
It can be traced back to the time when remedies against the person of the debtor were universally applicable (and not restricted to certain statutory creditors as they are today).
There is, as the majority of the Court of Appeal pointed out, a major difference between the purpose of the waiting periods in each scheme.
But this does not affect the analysis of the nature of the liability to repay and of the Secretary of States power to recoup.
It is just as much a remedy against the property of the bankrupt as it is a remedy in respect of a debt listed in a DRO.
For my part, therefore, I would hold that Taylor and Chapman was wrongly decided.
The Secretary of State loses the power to recoup overpayments and Social Fund loans on the making of a bankruptcy order just as he does on the making of a DRO.
This result is inconsistent with the result reached in Mulvey.
But Mulvey depended on the Scottish common law of bankruptcy together with the Bankruptcy (Scotland) Act 1985, which has no exact equivalent of the English provisions with which we are concerned.
In those circumstances, it cannot be for this Court in an English case to over turn the decision of the House of Lords in a Scottish case.
We can merely place a question mark against that element in the reasoning which has been referred to as the net entitlement principle.
Nor is it necessary for us to question the decision of the Court of Appeal in Bradley Hole.
In that context, it makes some sense to regard the overpayment as giving the tenant the right to live rent free in the property until the overpayment is exhausted, a right to which the landlords and thus the trustees right to the reversion is subject.
The analogy was drawn with the deserted wifes personal right to continue to live in the former matrimonial home (a right recognised by the Court of Appeal in Bendall v McWhirter [1952] 2 QB 466 which survived the denial of her so called equity against third parties in National Provincial Bank Ltd v Ainsworth [1965] AC 1175).
Finally, it is clear that Balding was rightly decided and that the principle applies equally to the DRO scheme.
It is worth noting, therefore, that the impact of this decision is not as great as might have been thought.
All those liabilities to repay overpaid benefits, tax credits and Social Fund loans listed in DROs (see para 6 above) will in any event be wiped out at the end of the moratorium period.
We are talking about the power to continue to deduct during that period.
The sums involved, though not insignificant, will be much less than the total of the liabilities involved.
It would, of course, be open to the Government to promote delegated legislation to exclude these liabilities from the definition of qualifying debts in the DRO scheme altogether (and, indeed, to seek corresponding amendment to section 382 with regard to bankruptcy debt), but that would raise policy issues which are not for this Court.
I would therefore dismiss the appeal.
LORD BROWN
I am in full agreement with Lady Hales judgment.
Its logic appears irresistible and its conclusion inevitable.
One might have preferred to arrive at the contrary view: as Lord Mance points out (para 44), larger social security benefits will now be payable to those made bankrupt or subject to a DRO scheme than they would otherwise have received and, indeed, the Social Fund (a fund of limited resource designed to be replenished by repayment and thereby enabled to provide financial assistance to others in particular need) will be diminished.
But a contrary view could only be reached by torturing the statutory language and by creating or reinforcing absurd and anomalous distinctions both between the DRO and bankruptcy regimes and between the debtors situation respectively before and after the end of the moratorium period/discharge from bankruptcy.
As both Lady Hale (para 26) and Lord Mance (para 44) observe, it must now be for Government to consider whether or not to achieve a different result by amending legislation.
It will hardly be surprising if they do.
LORD MANCE
It is with some misgivings that I concur in the dismissal of this appeal.
Viewing the statutory provisions in the abstract, I would find no difficulty in doing this.
Against the background of relevant prior authority, I do, however, doubt whether the legislator can have contemplated the result at which the Supreme Court now finds itself obliged to arrive.
The result will create apparent anomalies as between different recipients of social security benefit and may cost the Exchequer, or potential beneficiaries of the limited Social Fund, quite dearly.
It may necessitate legislative reconsideration for the future.
The relevant prior authority relates primarily to the context of bankruptcy.
There is, as Lady Hale says at para 23, no real reason to distinguish between the provisions applicable in that context and in the present context of a debt relief order (DRO).
For bankruptcy purposes, it is clear that a liability to refund an overpayment of social security benefits or to refund a Social Fund loan constitutes a bankruptcy debt within the extended meaning of section 382 of the Insolvency Act 1986.
Under section 382(4) that meaning includes both debt and liabilities and in particular any liability under an enactment, and so, on the face of it, covers a liability to repay overpaid social security benefits or a Social Fund loan.
The DRO scheme, introduced as section 251A et seq of the same Act by the Tribunals, Courts and Enforcement Act 2007, applies to a more limited class of qualifying debts, defined as meaning a debt which is for a liquidated sum payable either immediately or at some certain future time and which is not an excluded debt.
However, as Lady Hale notes at paras 9 and 19, the Secretary of State has not suggested that a liability to repay an overpayment of social security benefits or to refund a Social Fund loan is not a qualifying debt within that definition.
On that basis, essentially the same question arises in respect of both bankruptcy and a DRO.
Where the Secretary of State is recovering an overpayment or loan by deductions up to the permitted limits from future prescribed benefits as and when these become payable, is the Secretary of State able to continue to do so after the onset of bankruptcy or the making of a DRO? The argument against any such ability is that the making of any such deduction would involve the exercise of a remedy in respect of the debt, contrary in the case of bankruptcy to section 285(3) or in the case of a DRO to section 251G(2) of the 1986 Act.
As a matter of language and logic, the argument is difficult to resist.
In law, the making of deductions is no more than one way in which the Secretary of State may recoup such an overpayment or loan.
The payment of future social security benefits depends on the circumstances from time to time, as does the making of deductions.
The commencement of bankruptcy or the making of a DRO does not exclude all possibility that some other means of recoupment might become available.
Each deduction is separate from any prior deduction, even if the Secretary of State has given prior notice of an intention to make continuing deductions from future payments of social security benefits.
For this reason, viewing the statutory wording by itself, I agree that its natural effect is, as explained by Lady Hale, that in making each and any deduction the Secretary of State is exercising a remedy in respect of the debt constituted by the overpayment or loan.
However, the 1986 Act and the DRO scheme introduced in 2007 should be seen against the background of any relevant prior authority.
In Bradley Hole v Cusen [1953] 1 QB 300 the Court of Appeal was concerned with a tenants right to recover overpaid rent.
Section 14(1) of the Increase of Rent and Mortgage Interest (Restrictions) Act 1920 made such overpaid rent recoverable without prejudice to any other method of recovery by deduction from any rent payable by him to the landlord.
The rent recoverable was clearly a debt.
But the landlord went bankrupt, and the predecessor of section 285(3) of the 1986 Act precluded the tenant from having any remedy in respect of that debt after the making of the bankruptcy order.
Could the tenant continue to deduct the overpaid rent from the rent otherwise due after the making of the bankruptcy order? The Court held that he could, suggesting that the overpayment could be regarded as the payment of rent in advance.
As Lady Hale recounts in paras 14 15, in R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505, Keene J applied parallel reasoning under section 285(3) of the 1986 Act in relation to deductions from social security benefits in respect of prior overpayments of benefit and an unpaid Social Fund loan.
Moreover, this was after Lord Clyde in the Inner House had in Mulvey v Secretary of State for Social Security referred to the right to recover by deduction as but one element in the calculation of benefit which the claimant was to receive: 1996 SC 8 (Ct of Sess), 15G 16A; and Lord Clydes approach appears to me to have received full endorsement in the House of Lords at 1997 SC(HL) 105, 109F H in the passage from Lord Jaunceys speech quoted by Lady Hale in para 16.
It is of interest to note that Lord Jauncey went on expressly to invoke in support of his analysis the case of Bradley Hole v Cusen: p 110A B. Further, Lord Jauncey found it unnecessary in deciding the position during the bankruptcy to determine what the position might be when the bankrupt came to be discharged (p 109E).
In the light of these authorities, there is a considerable case for saying that Parliament, when it enacted the DRO scheme in 2007, must have had in mind that, during bankruptcy and by parity of reasoning during the running of a DRO scheme, deductions in respect of any prior overpayment or un repaid Social Fund loan could continue to be made, as before, without infringing the rule that no remedy may be exercised in respect of any outstanding debt.
In reality, the Court of Appeal in Bradley Hole was adopting a beneficent fiction, when it spoke of the overpayment there as a payment of rent in advance.
The fiction had in that case the particular attraction that the overpayment was of rent, and it was being deducted from future rent.
But in law the overpayment was a debt, which the tenant was free to recover in any way he could and which he could have recovered as a debt, even if for some reason it proved not to be covered by or capable of deduction from future rent.
Nevertheless, the tenants choice to make deductions on a continuing basis was sufficient to persuade the Court of Appeal to treat the overpayment as a payment of rent in advance.
So here also, it would be possible to say that the Secretary of States choice to make deductions on a continuing basis entitles the court to treat the outstanding debts, arising from prior overpayments and unpaid Social Fund loan amounts, as payments on account of future social security benefits.
However, I do not think it either sensible or possible to focus solely on what might be a possible solution in relation to the position during the currency of a bankruptcy or a DRO.
It seems to me necessary also to consider the position which would exist on discharge from bankruptcy and at the end of the moratorium period.
In each case, that normally occurs after one year: see sections 279(1) and 251H(1) respectively.
The statutory language is in this context framed in terms of release or discharge from debts.
In particular, on discharge of a bankrupt the bankrupt is released from all bankruptcy debts under section 281(1), and as at the end of the moratorium period a person subject to a DRO scheme is discharged from all outstanding DRO debts under section 251I(1).
Accordingly, unless it can be said that no such debt exists in either case, the position remains incoherent if the analysis set out in para 39 above is accepted.
The debtor would remain subject to deductions during the currency of the bankruptcy or DRO scheme, but would be released or discharged from the outstanding balance after one year when it ended.
I do not think that we can overlook the potential incongruity, even though the House appears to have been prepared to do so in Mulvey.
In R (Balding) v Secretary of State for Work and Pensions [2007] EWHC 759 (Admin), [2007] 1 WLR 1805, [2008] EWCA Civ 1327, [2008] 1 WLR 564, the Divisional Court and the Court of Appeal concluded that the existence of a bankruptcy debt could not depend upon whether or not the creditor was choosing to recover it by deduction from social security benefits.
Further, in the present case, the Secretary of State has accepted that there is an outstanding debt within the scope of the DRO.
We would have to overrule Balding and to hold that the Secretary of States concession was wrong, before we could conclude that the right to deduct survived the discharge from bankruptcy or the end of the moratorium period under a DRO.
I see no real basis on which we would do this.
The beneficent fiction of a payment in advance cannot be stretched to the point of a conclusion that no debt at all exists.
Nor can a debt exist for some purposes (recovery other than by way of deduction), but not exist in so far as it is recovered by deductions.
A position whereby deductions can continue to be made during the currency of a bankruptcy or moratorium period, but the remainder of the outstanding debt is extinguished at its conclusion has little to commend it.
I am forced to the conclusion that the natural meaning of the statutes must be given effect.
I reach this conclusion with misgivings, as I said at the outset.
It will mean that those who have received overpayments or failed to repay Social Fund loans, but have become bankrupt or subject to a DRO scheme, will now receive larger social security benefit payments larger than they did prior to the bankruptcy or DRO and larger also than the social security benefits received by persons subject to such deductions who have avoided bankruptcy or a DRO scheme; it will also diminish the amount available in the limited Social Fund for the benefit of all potential claimants on that Fund.
It must be questionable whether any of this is sensible or desirable, but that is a matter for the legislature to consider, if it wishes.
LORD WILSON
I agree that the appeal should be dismissed for the reasons given by Lady Hale but I wish also to associate myself with the remarks made by Lord Brown and Lord Mance in their concurring judgments.
| UK-Abs | The issue in the case is whether the Secretary of State can continue to recoup Social Fund loans and overpayment of benefits by deduction from current benefit payments during the moratorium period after the making of a Debt Relief Order (DRO) under Part 7A of the Insolvency Act 1986 (the IA).
Mrs Payne obtained a Social Fund budgeting loan in September 2007.
In August 2009, she obtained a DRO listing the loan among her qualifying debts.
When she notified the Secretary of State, he began making deductions from her income support.
In August 2010, the moratorium period came to an end and the debt was discharged.
Ms Cooper incurred an overpayment of benefit.
In December 2009 the Secretary of State began making deductions from her incapacity benefit in order to recover the overpayment.
In January 2010, Ms Cooper obtained a DRO which listed the overpayment as one of her qualifying debts.
Section 251G(2)(a) of the IA provides that during the moratorium the creditor to whom a specified qualifying debt is owed has no remedy in respect of the debt.
Mrs Payne and Ms Cooper brought judicial review proceedings challenging the lawfulness of the deductions made after the making of the DROs; their cases were consolidated.
Cranston J at first instance found in their favour, holding that the power to make deductions from current benefits ceased to be available when Mrs Payne and Ms Cooper obtained the DROs.
A majority of the Court of Appeal (Smith and Toulson LJJ) confirmed the High Courts decision.
The Secretary of State appealed.
In the context of bankruptcy, the High Court has held that such deductions can continue to be made between the making of the bankruptcy order and the bankrupts discharge from bankruptcy: R v Secretary of State for Social Security, Ex p Taylor and Chapman [1997] BPIR 505.
The House of Lords reached the same conclusion in the context of Scottish bankruptcy law: Mulvey v Secretary of State for Social Security 1997 SC (HL) 105.
Once a bankrupt is discharged, however, the Court of Appeal has held that the liability to repay the Secretary of State is also discharged: R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327.
The Supreme Court unanimously dismisses the appeal.
The leading judgment was given by Lady Hale, with whom the other justices agreed (Lord Brown and Lord Mance adding short concurring judgments).
The Court holds that there is no such thing as the net entitlement principle.
The claimant has a statutory entitlement to the amount of benefit which she is awarded.
The liability to repay arises independently of her entitlement to any benefit from which the Secretary may later decide to recoup it [21].
The power to recover the debt by deduction from benefit is a remedy in respect of a debt which may not be exercised during the moratorium, according to section 251G(2) of the IA [22], [34].
The Court sees no reason to distinguish between the DRO scheme and bankruptcy in this respect.
The Court considers that Taylor and Chapman was wrongly decided.
The Secretary of State loses the power to recoup overpayments and Social Fund loans on the making of a bankruptcy order just as he does on the making of a DRO [23].
The Court affirms Balding and finds that the principle equally applies to the DRO scheme.
All the liabilities to repay overpaid benefits, tax credits and Social Fund loans listed in DROs will in any event be wiped out at the end of the moratorium period [26].
The Court comments that it would be open to the Government to promote delegated legislation to exclude these liabilities from the definition of qualifying debts in the DRO scheme and to seek equivalent legislative amendment of the the bankruptcy scheme.
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
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The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
Suppose that a convicted drug trafficker is found to have benefited from his trafficking to the extent of 1m but, having at the time realisable property worth only 100,000, a confiscation order is initially made against him just for this lesser sum.
Suppose then that the defendant, entirely legitimately, later acquires property to the value of upwards of a further 900,000.
Is he at that stage liable to a further court order increasing to the full extent of his criminal gain the amount recoverable under the confiscation order by reference to these after acquired assets?
It is not in doubt that, assuming his offences were committed after 24 March 2003, and that he were therefore subject to the provisions of the Proceeds of Crime Act 2002 (POCA), the answer would be a clear yes see particularly section 22(3) of POCA.
But what if, as in the case of this appellant, his offences were committed before that date so that he falls to be dealt with under the Drug Trafficking Act 1994 (the 1994 Act), in particular under section 16 of that Act? Section 16, as amended by section 165(1) of, and paragraph 169 of Schedule 9 to, the Powers of Criminal Courts (Sentencing Act 2000, provides: (1) This section applies where, by virtue of section 5(3) of this Act, the amount which a person is ordered to pay by a confiscation order is less than the amount assessed to be the value of his proceeds of drug trafficking. (2) If, on an application made in accordance with subsection (3) below, the High Court is satisfied that the amount that might be realised in the case of the person in question is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased) the court shall issue a certificate to that effect, giving the courts reasons. (3) An application under subsection 2 above may be made either by the prosecutor or by a receiver appointed in relation to the realisable property of the person in question under section 26 or 29 of this Act or in pursuance of a charging order. (4) Where a certificate has been issued under subsection (2) above the prosecutor may apply to the Crown Court for an increase in the amount to be recovered under the confiscation order; and on that application the court may (a) substitute for that amount such amount (not exceeding the amount assessed as the value referred to in subsection (1) above) as appears to the court to be appropriate having regard to the amount now shown to be realisable; and (b) increase the term of imprisonment or detention fixed in respect of the confiscation order under subsection (2) of section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 (as it has effect by virtue of section 9 of this Act) if the effect of the substitution is to increase the maximum period applicable in relation to the order under subsection (4) of that section.
Is the High Court, on an application made under section 16(2), entitled to have regard to after acquired assets? That is the critical question now for decision by this court, leave to appeal in respect of it having been granted on 11 April 2011.
It was a question expressly left open by the House of Lords successively in In re Maye [2008] 1 WLR 315 (see Lord Scott of Foscotes speech at para 24) and R v May [2008] AC 1028 (see Lord Binghams speech at para 41).
There is, however, a preliminary issue also to be decided: was section 16 in force at the material time?
With that brief introduction let me sketch in, to the limited extent necessary, the particular facts of the present case.
On 7 January 1997 the appellant pleaded guilty before Judge Slinger at the Crown Court sitting at Preston to five offences of conspiracy to supply controlled drugs, two offences relating to Class A drugs, three to Class B drugs, all committed in 1995.
On 8 January 1997 he was sentenced to 12 years imprisonment, reduced on appeal to ten years.
In confiscation proceedings commenced under the 1994 Act the judge assessed the value of the appellants proceeds of drug trafficking to be 273,717.50 but the amount then realisable to be only 823.
Accordingly, on 10 July 1997, pursuant to section 5 of the 1994 Act, the judge made a confiscation order for 823 payable within 14 days, an order which was duly satisfied.
Following his release from prison in November 2000, the appellant went into the property business with his father and acquired very substantial further assets.
In the light of this change of circumstances, the prosecution sought and obtained from the High Court, initially a restraint order under section 26 (made by Richards J on 18 March 2005) and thereafter a certificate under section 16(2) (issued by Mitting J on 18 May 2005) certifying that the amount that might now be realised was greater than the 823 taken into account when the confiscation order was first made.
Armed with that certificate the prosecution then applied to the Crown Court under section 16(4) for an increase in the amount to be recovered under the confiscation order.
On 26 October 2007, following a seven day hearing, Judge Slinger found that the appellant now held realisable assets to the value of 348,315.54 and on 14 November 2007 he exercised his discretion to substitute for the 823 originally recoverable the sum of 273,717.50 (the full value of the appellants proceeds from crime) to be paid within six months, with three years imprisonment in default.
On 20 February 2009 (for reasons given on 2 April 2009) the Court of Appeal (Criminal Division) dismissed the appellants appeal, brought on the basis that Judge Slinger had over estimated the value of his realisable assets and had failed to take properly into account in the exercise of his discretion the length of time which had elapsed since the appellants release from prison.
The appellant no longer contends that, in making the order under section 16(4), Judge Slinger exercised his discretion incorrectly.
Subsequently the prosecution obtained from Pitchford J on 18 December 2009 an order under section 31 of the 1994 Act appointing a receiver with a view to enforcing the revised confiscation order.
However, in the light of the appellants argument (citing the reservations of the House of Lords in In re Maye and R v May) that Mitting Js section 16(2) certificate, made by reference to after acquired assets, had been issued without jurisdiction, the judge suspended the receivers powers pending a proposed appeal.
The appellants appeal, brought by leave of Black LJ granted on 30 June 2010, was heard by the Court of Appeal (Arden, Thomas and Etherton LJJ) on 10 November 2010 and dismissed on 20 December 2010.
Arden LJ gave the only reasoned judgment.
She regarded the court as bound by an earlier decision of the Court of Appeal (Criminal Division) (judgment given by Rose VP) in R v Tivnan [1999] 1 Cr App R(S) 92 in the prosecutions favour.
She in any event agreed with it.
As for the appellants submission that section 16 no longer had effect after POCA came into force on 24 March 2003, Arden LJ regarded it as clearly wrong having regard to the terms of The Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003 (SI 2003/333) (the Commencement Order).
It is convenient, and in any event appropriate, to deal first with the appellants argument that, by the time of Mitting Js section 16(2) certificate, section 16 was no longer in force.
The Commencement Order
Unless saved by the transitional provisions of the Commencement Order, it is clear that POCA repealed the relevant sections of the 1994 Act with effect from 24 March 2003.
One turns, therefore, to article 3 of the Commencement Order headed Transitional Provisions relating to confiscation orders England and Wales and in particular to article 3(1): Section 6 of the Act (making a confiscation order) shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24 March 2003.
Section 6 of POCA (to broadly similar effect as section 2 of the 1994 Act) is the opening section of Part 2 of POCA dealing generally with confiscation orders in England and Wales and it comes into play when two conditions are satisfied, the first (specified by section 6(2)) being that a defendant has been convicted or is being committed to the Crown Court in respect of certain offences.
The second condition is for present purposes immaterial.
What, then, is the position where, as here, the relevant offences were committed before 24 March 2003 so that, by virtue of article 3 of the Commencement Order, section 6 of POCA does not have effect? The answer to this is to be found in article 10 of the Commencement Order under the heading Savings for England and Wales: (1) Where, under article 3 . a provision of the Act does not have effect, the following provisions shall continue to have effect . (e) sections 1 to 36 and 41 of the Drug Trafficking Act 1994;
The appellants contention is that article 3 (and, in turn, article 10) only come into play when not only was the relevant offending before 24 March 2003 but also no confiscation order had by then been made.
Section 6 of POCA, he submits, is concerned only with the making of a confiscation order, not with any subsequent adjustments, up or down, of the amount payable under it.
If no confiscation order has been made in respect of pre 24 March 2003 offending, and after that date it appears that such an order may be appropriate, then, since article 3 precludes that happening under section 6 of POCA, article 10 provides that the relevant provisions of the 1994 Act continue to have effect instead.
These include sections 13 and 14 (concerning respectively the reconsideration of a case where initially the court did not consider making a confiscation order under section 2 and reassessing whether the defendant has in fact benefited from drug trafficking, both therefore predicating that no confiscation order has yet been made).
Sections 15 and 16, however, (concerning respectively a revised assessment of the proceeds of drug trafficking and an increase in realisable property) would not continue to have effect since both these sections predicate that a confiscation order has already been made.
Nor, for the same reason, would section 17 (concerning the inadequacy of the defendants realisable property to pay the amount outstanding under a confiscation order) continue to have effect, much though the defendant might wish to invoke it.
Mr Pownall QC for the appellant accepts that there is no good reason why, in the circumstances he postulates, Parliament should have wished to repeal rather than give continuing effect to sections 15 and 16, still less section 17, of the 1994 Act.
Construing article 3 as he does, however, namely as applying only to the actual making of confiscation orders and not to other legislative provisions in respect of them, such, he submits, is the (admittedly unsatisfactory) effect of the commencement order.
The Court of Appeal was to my mind clearly right to reject this argument.
Section 6 of POCA is the foundational section for the whole confiscation order scheme and article 3, in disapplying it in respect of pre 24 March 2003 offending, is thereby disapplying the entire POCA confiscation order regime, leaving it to article 10, in particular article 10(1)(e), to continue in force the whole confiscation order scheme earlier provided for by the 1994 Act.
So much for this preliminary issue.
Does section 16(2) extend to after acquired assets?
Mr Perry QC for the prosecution submits that section 16(2) is concerned with the amount that might be realised as at the date of the High Court hearing of the application.
It is couched in the present tense and contains no words of limitation as to time.
It is thus intended and apt to be operated in any or all of the following four differing (but sometimes overlapping) factual situations: (a) where the defendant concealed assets at the time the confiscation order was originally made (concealed assets); (b) where the assets originally taken into account were initially undervalued (undervalued assets); (c) where the assets originally taken into account have since increased in value (appreciated assets); (d) where, subsequent to the making of the original confiscation order, the defendant has increased his realisable property (after acquired assets).
The appellant argues that while section 16(2) applies to the first three situations, it does not apply to the fourth.
It is, I should add, common ground that, with regard to the first three situations, section 16(2) applies no less to different property representing property actually held by the defendant at the time of the original confiscation order as to such property as was originally held.
So much, indeed, was decided by the House of Lords in In re Maye [2008] 1 WLR 315 which held (with regard to comparable legislation in Northern Ireland) that the appellants interest in his parents unadministered estates (an interest later valued at 18,000) had been a thing in action, and accordingly his property, when the confiscation order had originally been made; and so too an action for damages for false imprisonment, subsequently settled for 2,500.
In deciding upon the correct construction of section 16(2) the court must, of course, be guided principally by the language of the section itself and by the definition sections in the 1994 Act which bear upon it.
Section 64 provides that: In this Act the expressions listed below are defined by, or otherwise fall to be construed in accordance with, the provisions of this Act indicated below.
Amongst the expressions then listed is amount that might be realised, the provision indicated being section 6(1).
Section 6(1) provides (so far as presently material): For the purposes of this Act the amount that might be realised at the time a confiscation order is made against the defendant is (a) the total of the values at that time of all the realisable property held by the defendant .
Section 6(2) then defines realisable property to mean (again, so far as presently material) (a) any property held by the defendant .
Mr Pownalls central submission is that those definition sections require section 16(2) to be construed as if it read: If, on an application made in accordance with subsection (3) below, the High Court is satisfied that the total values of all property held by the person in question at the time the confiscation order is made is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased) the court shall issue a certificate to that effect, giving the courts reasons.
For my part I find that a difficult submission.
The words in section 16(2) falling to be construed in accordance with section 6(1) are not amount that might be realised at the time a confiscation order is made against the defendant but are rather amount that might be realised.
When, therefore, one comes to section 6(1), which defines the former (longer) rather than the latter (shorter) expression, it seems to me that the meaning of this shorter expression (that in section 16(2) and section 64) is to be found in the part of section 6(1)(a) reading the total of the values . of all the realisable property held by the defendant ie excluding the words at that time which refer back to the time a confiscation order is made against the defendant, words conspicuously absent from section 16(2).
I would accordingly construe the material words in section 16(2) as if they read: If . the High Court is satisfied that the total of the values of all the realisable property held . is greater than the amount taken into account in making the confiscation order . the court shall issue a certificate .
In short, nothing in the definition sections requires section 16(2) to be construed for all the world as if it referred to the amount that might have been realised at the time the confiscation order was made.
On the contrary, it seems to me plainly directed to the amount that might be realised now and by reference to realisable property now held by the defendant.
As for the words in parenthesis (whether it [the amount that might be realised, as both sides agree] was greater than was thought when the order was made or has subsequently increased) it seems to me that they are designed to encompass all ways in which the amount might have grown and can apply equally to after acquired assets as to concealed assets, undervalued assets or appreciated assets.
The Court of Appeal in the present case thought that after acquired assets fell for consideration within the first limb of the parenthesis.
The Court of Appeal in Northern Ireland in In re Maye [2005] NI CA 41; [2006] NI 206 thought rather that they fell within the second limb, as having caused the realisable amount to be subsequently increased.
For my part I prefer the Northern Ireland view but really it matters not.
No one suggests that the critical issue now arising can be determined by reference to the words in parenthesis.
It follows that, as a matter of pure construction of section 16 itself, I prefer Mr Perrys argument.
There are, however, as it seems to me, other pointers too in the same direction.
It is, for example, accepted that after acquired assets are properly to be taken into account in the operation of sections 15 and 17 of the Act.
True it is that, so far as section 15 is concerned, the question is put beyond doubt by subsections 7 and 9.
But presumably that is because section 15 is directed essentially to revising the assessment of the proceeds of drug trafficking and, but for these subsections, would not appear to involve any recalculation of realisable assets.
Sections 16 and 17 by contrast are directly concerned with determining the value of the defendants realisable property section 16 to see whether it has increased, section 17 to see whether it has proved to be or has become inadequate to pay the amount outstanding.
To my mind it is logical that, by the same token that the defendant cannot require his after acquired assets to be ignored in the determination of his present ability to pay, (as was expressly conceded by Mr Pownall both in his written case and in his oral argument although now rather surprisingly Lord Hope suggests an entirely different view of section 17), nor should they be ignored in deciding whether he can pay an additional amount up to the point when he will have disgorged an amount equivalent to all the benefit which has accrued to [him] from drug dealing (per Rose LJ in Tivnan [1999] 1 Cr App R (S) 92, 97).
The symmetry between sections 16 and 17 is to my mind striking.
Their sidenotes read respectively: Increase in realisable property and Inadequacy of realisable property.
Sidenotes, as Lord Hope explained in R v Montila [2004] 1 WLR 3141, paras 33 34, although unamendable and thus carrying less weight than other parts of the Act, can nevertheless properly be considered in the Acts construction.
Why should realisable property, in one case but not the other, be confined to that held by the defendant at the time of the original confiscation order?
The Court of Appeal in Tivnan [1999] 1 Cr App R (S) 92, 97 further found support for the prosecutions contended for construction of section 16 in section 9(5) of the 1994 Act: Where the defendant serves a term of imprisonment or detention in default of paying any amount due under a confiscation order, his serving that term does not prevent the confiscation order from continuing to have effect, so far as any other method of enforcement is concerned.
Although I would not myself place very much weight upon it, I too would regard section 9(5) as at least a straw in the wind: an indication of Parliaments intention that even serving a term in default will not exonerate a defendant from the possibility of eventually having to disgorge assets up to the extent of his criminal gains.
I also see some force in Mr Perrys argument that Parliament would not willingly have sought to put upon the court the burden of disentangling the value of assets held at the time of the confiscation order from their value at the time of a section 16(2) application.
Suppose that when the confiscation order was made the defendant had partly completed the manuscript of a novel or a painting which was later completed and then sold for a substantial sum.
Or suppose that at the time of the confiscation order he was part way to acquiring a statutory right to buy his council house at a favourable price (the factual background to the Court of Appeal (Criminal Division) decision in R v Bates [2007] 1 Cr App R (S) 9).
Why should the court have to apportion the eventual gain and ignore that part of it acquired subsequent to the confiscation order? Or suppose the defendant wins the lottery.
Why should it make all the difference whether he bought his ticket the day before or the day after the confiscation order was made? Of course, considerations of this kind cannot be decisive.
But I see no good reason to ignore them entirely.
The main argument in support of the appellants case is that it is unfair and counter productive to increase the amount of a confiscation order by reference to after acquired assets.
This, it is said, would militate against his reform and rehabilitation and be likely to discourage him (once he has satisfied any initial confiscation order and been released from any sentence of imprisonment) from engaging in lawful and openly profitable employment.
And, of course, the longer after conviction it is sought to confiscate after acquired assets, the more unfair it may appear.
Such no doubt were the considerations which led the House of Lords in In re Maye [2008] 1 WLR 315 and in R v May [2008] AC 1028 to leave open what Lord Scott in In re Maye, para 24 called this important and difficult question for later decision.
In the same connection Mr Pownall points to the six year limitation period six years beginning with the date of conviction to which applications under sections 13, 14 and 15 of the 1994 Act are all made subject.
If the prosecution cannot beyond such six year time limit seek to obtain, or increase the amount payable under, a confiscation order by reference to the defendants gains from drug trafficking, he asks, why should they be entitled to increase the amount payable in respect of such gains by reference to after acquired assets with no limitation of time whatever?
There seems to me, however, nothing in this latter point.
It is plain that section 16 contains no limitation period, yet no one disputes that it can be invoked without limit of time in respect of concealed, undervalued or appreciated assets.
The absence of a limitation period, therefore, tells one nothing about whether section 16 applies also to after acquired assets.
The reason for introducing a six year time limit into sections 13, 14 and 15 must surely be to establish a finite period for determining the full extent of a defendants criminal gains the ultimate ceiling for any confiscation order.
These sections fix the extent of a defendants criminal liability for disgorgement under the confiscation scheme; sections 16 and 17 go to the very different question as to how far this liability is required to be met.
As for the main argument, based on fairness and rehabilitation, naturally I recognise that Parliament could have chosen a different policy with regard to after acquired assets.
But it seems to me perfectly understandable that in fact Parliament decided (as indisputably it did when later enacting POCA) to leave it open to the courts as a matter of discretion to mulct a defendant of his criminal gains on an ongoing basis irrespective of precisely how and when he came by any increased wealth.
That the court does indeed have a discretion in the matter is plain both from the wording of section 16(4) and from a number of authorities, notably In re Saggar (Confiscation Order: Delay) [2005] 1 WLR 2693; R v Bates [2007] 1 Cr App R (S) 9; and R v Griffin [2009] 2 Cr App R (S) 587.
This is not, however, the occasion to explore the approach to the proper exercise of that discretion or, indeed, the question whether its exercise could ever be affected by considerations arising under the Human Rights Act 1998.
As already noted, there is no challenge here to the exercise of the Crown Courts section 16(4) discretion, only to whether the section 16(2) certificate was lawfully issued.
In my judgment the section 16(2) certificate here was lawfully issued: the section requires that after acquired assets are properly to be taken into account.
In common, therefore, with Lord Walker and Lord Wilson, with both of whose judgments I am in full agreement, I too would dismiss this appeal.
LORD WALKER
On the first issue in this appeal the court is unanimous, and I need say no more than that I agree with the reasoning and conclusions of Lord Brown (with whom Lord Wilson agrees) and Lord Hope (with whom Lady Hale agrees).
But on the second issue there is division.
I agree with Lord Browns reasoning and conclusions of Lord Brown and Lord Wilson and I respectfully disagree with Lord Hopes.
I shall set out my reasons as briefly as possible.
On the second issue Lord Hope takes as his starting point the well established principle of statutory construction that property rights are not to be taken away without compensation unless Parliaments intention to expropriate them has been expressed in clear and unambiguous terms.
The principle is in no doubt.
But the statutory purpose of the Drug Trafficking Act 1994 (the 1994 Act), and similar statutes, could hardly have been made clearer.
As Lord Steyn observed in relation to Part VI of the Criminal Justice Act 1998 in R v Rezvi [2003] 1 AC 1099, 1152, para 14: It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime.
Effective but fair powers of confiscating the proceeds of crime are therefore essential.
The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct.
Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises.
These objectives reflect not only national but also international policy.
The United Kingdom has undertaken, by signing and ratifying treaties agreed under the auspices of the United Nations and the Council of Europe, to take measures necessary to ensure that the profits of those engaged in drug trafficking or other crimes are confiscated: see the United Nations convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (19 December 1988); Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Strasbourg, 8 November 1990.
These Conventions are in operation and have been ratified by the United Kingdom.
There are numerous other authoritative statements to the same effect.
It is sufficient to refer to the observations of Lord Bingham in McIntosh v Lord Advocate [2003] 1 AC 1078, para 4 and in R v May [2008] AC 1028, paras 7 to 9.
Once it is recognised that Parliament certainly did intend to strip those convicted of serious crimes of the proceeds of their wrongdoing, the force of the general principle of construction is considerably attenuated.
Of course the fact remains that the 1994 Act is a statute of a penal nature, and its detailed provisions must be closely considered and fairly applied.
But I am not persuaded that the linguistic points mentioned by Lord Hope in paras 60 to 67 of his judgment raise any real doubt, so as to enable the appellant to be given the benefit of that doubt.
Before considering these detailed points I would draw attention to an ambiguity in the expression after acquired property which may lead to confusion (as it did in R v Maye [2008] 1 WLR 315, an appeal from Northern Ireland which must be distinguished from R v May [2008] AC 1028).
A newly acquired asset may be obtained in place of another asset in numerous ways: for instance, by making changes in a portfolio of investments, or by remortgaging a house in order to pay the deposit on a second house, or by receiving cash on the surrender or maturity of a life policy.
These may be termed substituted assets but they are not after acquired property in the relevant sense, that is property accruing to a person (whether as earnings or by gift, inheritance or some other windfall) without a corresponding diminution in that persons existing assets.
All this is elementary and was explained by Lord Scott in R v Maye. (The distinction is clearest in the law of personal insolvency.
Under section 307 of the Insolvency Act 1986 an undischarged bankrupts trustee in bankruptcy can give notice causing after acquired property of the bankrupt to vest in him.
This necessarily means after acquired property in the full sense, since assets acquired by any sort of process of exchange would necessarily already belong to the trustee.)
Section 6 of the 1994 Act explains the meaning of the amount that might be realised when a confiscation order is made.
Section 6(1)(a) shows that it is an aggregate value: The total of the values at that time of all the realisable property held by the defendant, subject to adjustment in two ways that are not now material.
The plural form values indicates, as one would expect, that separate items of property are to be identified and valued.
Section 6(1) expressly focuses on the time when a confiscation order is made.
Section 6(3), referring to various coercive orders that may be made under penal statutes, does not have the same explicit focus.
If the language of section 6(1) has to be adapted to valuation at a later time, as sections 16 and 17 plainly require, I see no reason why section 6(3) should not be adapted in the same way.
In paras 63 and 64 Lord Hope refers to section 15(7) and (9) of the 1994 Act.
Section 15 is concerned with reassessing the proceeds of drug trafficking as determined (in the normal course) under the provisions of sections 2 and 4.
It is a central feature of the legislation that under section 2(4) (and apart from the special procedure for postponed determinations under section 3) the determination of the amount to be recovered is to be made under section 4 (assessing the proceeds of drug trafficking) and section 5 (amount to be recovered under confiscation order) before the convicted defendant is sentenced.
A reassessment of the proceeds of drug trafficking is therefore a major step and subsections (6) to (14) of section 15 are required in order to spell out the detailed changes in the statutory procedure needed to make the process of reassessment workable.
Section 16 is concerned, as Lord Hope observes, with the other part of the formula defining the quantum of any varied confiscation order.
Section 16 (and its counterpart, section 17) are less complicated because the amount of the proceeds (whether as assessed before the original confiscation order was made, or as reassessed under section 15) are by then a given, and section 16 is unmistakeably looking at the matter at the time of the application under that section.
Section 16(2) provides: If . the High Court is satisfied that the amount that might be realised . is greater than the amount taken into account in making the confiscation order.
The section then has a parenthesis with two loosely framed alternatives (Whether it [the amount] was greater than was thought when the order was made or has subsequently increased).
The amount is, as already noted, an aggregate value of separate items of property which must be first identified and then valued.
The past tense of the words was greater is surprising but I do not think anything can turn on it.
It would be odd, to my mind, if separate items of realisable property were to be identified at one date (that of the original confiscation order) but valued at another (the date when the section 16 application is heard).
I agree with Lord Hope that it is not necessary to read section 16 as extending to after acquired assets in order to give it some sensible meaning.
But if after acquired property is excluded, difficult problems of identification and tracing are likely to arise, especially if the individual in question has engaged in business activities highly geared by borrowing, such as those of which the appellant gave evidence.
Had Parliament intended to draw a distinction between substituted assets and after acquired assets it could easily have made its intention clearer.
Neither side made any submission as to the effect of section 7(3) of the 1994 Act.
In relation to section 17 Lord Hope does not accept the submission of Mr Perry QC as to his construction producing symmetry between section 16 (increase in realisable property) and section 17 (inadequacy of realisable property).
Lord Hopes point (though not put quite so bluntly) is that this argument begs the question in that it makes the unreasoned assumption that for the purposes of section 17 after acquired property must be taken into account.
But in my opinion there are sound reasons for approaching the question of symmetry on that basis.
Under section 17 a convicted criminal subject to a confiscation order is asking to be released from his obligation.
The justification for section 17 is that not even the worst offender should be sent to prison for an additional term if he is simply incapable of complying with his obligation under an existing order.
If he can comply with it out of his after acquired assets, he should be required to do so.
For these reasons, and for the fuller reasons set out in the judgments of Lord Brown and Lord Wilson, I would dismiss this appeal.
LORD WILSON
I agree with Lord Brown and Lord Walker that the appeal should be dismissed.
On the first issue I wish to add nothing to Lord Browns judgment.
On the second issue I add this judgment only because the other four members of the court are evenly divided.
I consider that a natural reading of section 16(2) of the 1994 Act yields the conclusion that after acquired assets fall to be taken into account upon applications to the High Court and thereafter to the Crown Court under the section.
There is in my view a fallacy at the heart of the construction which Mr Pownall QC presses upon the court.
The inquiry of the High Court is whether the amount that might be realised is greater than another specified and easily identified amount.
Mr Pownall is right to say that, in the construction of the quoted phrase, section 64 sends the court back to section 6.
But then comes his misconstruction.
Section 6 provides that the amount that might be realised at the time a confiscation order is made. is. the total of the values at that time of all the realisable property held by the defendant subject to adjustments.
But the two references to the time when a confiscation order is made form no part of the meaning of the phrase.
The draftsman of the section is doing no more than to apply the meaning of the phrase, viz the total of the values. of all the realisable property held by the defendant, to the particular time which section 6 is designed to address.
The particular time which, by contrast, section 16(2) is designed to address is the time of the application made thereunder: is the amount that might be realised greater than the other specified amount? In my view, moreover, Mr Pownalls construction does not work if only because it is common ground that, in relation to pre acquired assets, the inquiry is into their value at the time of the application rather than their value at the time when the confiscation order was made.
So I find nothing in section 16(2) to suggest an exclusion of after acquired assets.
On the contrary I consider that the words in parenthesis confirm their inclusion.
The words are whether [the amount that might be realised] was greater than was thought when the order was made or has subsequently increased.
The Court of Appeal relied on the first alternative whereas I consider that the relevant alternative is the second.
The use of the aorist tense (was) in the first alternative requires the court to survey pre acquired assets, in particular when hidden or undervalued at the time when the confiscation order was made, and to assess their true value at that time.
But the use of the perfect tense (has increased) in the second alternative requires the court to survey any increase up to the date of its inquiry in the amount that might be realised, not just because of a rise in the value of the pre acquired assets.
A second obvious reason for such an increase is the acquisition of assets after the date of the confiscation order.
Sections 16 and 17 of the 1994 Act are opposite sides of the same coin.
Their side notes describe their subject matter as increase in realisable property and inadequacy of realisable property respectively.
Both sections address the situation in which, pursuant to section 5(3), the court has ordered that the amount to be recovered from the defendant is the amount that might be realised rather than the higher amount of his proceeds of drug trafficking and in which, subsequently, the prosecution and the defendant wish to argue that the ordered amount should then be seen to be too low or too high respectively and be adjusted accordingly.
There was no issue before this court but that, on an application by the defendant under section 17, the High Court should survey the present value of all the defendants property, whether acquired before or after the making of the confiscation order.
Such was decided by the Court of Appeal, Civil Division, in In re ODonoghue [2004] EWCA Civ 1800 in relation to a provision, namely section 83(1) of the Criminal Justice Act 1988, in substantially identical terms.
It would be surprising if the courts survey under section 16 lacked the same width.
Section 16 does not oblige the Crown Court to order an increase in the amount of the confiscation order (which is subject in any event to the ceiling of the assessed value of the defendants proceeds of drug trafficking) in parallel with its assessment of the amount of the increase in the defendants realisable property.
Subsection (4) confers on it a discretion to order such lesser increase as appears to the court to be appropriate having regard to the amount now shown to be realisable.
It is clear from the decision of the Court of Appeal, Criminal Division, in R v Bates [2006] EWCA Crim 1015, [2007] 1 Cr App R (S) 9, at paras 12 and 13, that factors such as the defendants abandonment of a life of crime, the legitimate nature of his acquisition of the assets, the passage of time since the confiscation order was made and matters of exceptional hardship may be relevant to the exercise of the discretion.
Such is in my view the area which Parliament has provided for the court to make allowance for the type of factors which, as is clear in para 59, Lord Hope instead prefers to weigh in his approach to the exercise of construction.
I agree with the observation of Lord Hope, at para 61 below, that, in the exercise of construction, broad generalisations about the purpose of the 1994 Act are to be avoided.
That is why, in my respectful view, there may be pitfalls in an approach founded first upon a proposition that the Act is not designed to provide for confiscation in the sense in which schoolchildren and others understand it (para 57) or in the popular sense (para 58) and then upon a conclusion that the respondents construction of section 16 would provide for confiscation in such senses.
Nor do I agree that a rule of construction apt to a provision which expropriates property without compensation should be applied to a provision designed to extract from a defendant a sum which cannot exceed the value of his proceeds of drug trafficking.
In my view the most arguable point in favour of the appellants construction of section 16(2) is that Parliament could have made it clearer or, as I prefer to say, even clearer that after acquired assets were to be included.
In this regard a contrast is fairly made with section 22(3) of the Proceeds of Crime Act 2002 and, in particular, with section 15(7) and (9)(c) of the 1994 Act itself.
But then Parliament could have made it clearer or, as I prefer to say, would have made it clearer had such been its intention that after acquired assets were to be excluded.
So, albeit that it is the most arguable, the point fails in my mind to deflect the force of the arguments in support of their inclusion which I have sought to articulate.
LORD HOPE (with whom Lady Hale agrees)
I agree with Lord Brown, for the reasons he gives, that section 16 of the Drug Trafficking Act 1994 was in force on 18 May 2005 in relation to existing confiscation orders such as those which were made against the appellant on 10 July 1997 when Mitting J issued his certificate under that section.
Section 6 of the Proceeds of Crime Act 2002 sets out the basic framework for the making of a confiscation order under the 2002 Act.
Article 3(1) of the Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003 provides that section 6 of the 2002 Act shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24 March 2003.
There is therefore a clear dividing line between the 1994 Act on the one hand and the 2002 Act on the other as to the date when the scheme of the 1994 Act was to cease to apply and the scheme of the 2002 Act was to take effect.
It would be surprising, however, if article 3(1), which is in the widest terms, was intended to prevent the courts from increasing the amount to be recovered under a confiscation order that was made under the 1994 Act where it turns out after the scheme of the 2002 Act has come into operation that the real value of the proceeds of drug trafficking was greater than the assessed value, or that there was an increase in the defendants realisable property.
That these contingencies, which sections 15 and 16 of the 1994 Act provided for, were not overlooked becomes plain when the Commencement Order is read as a whole.
Article 10(e) states that, where under article 3, a provision of the 2002 Act does not have effect, sections 1 to 36 and 41 of the 1994 Act shall continue to have effect.
These words ensure that the scheme of the 1994 Act is preserved in relation to persons such as the appellant whose offences were committed before 24 March 2003.
It is worth noting, as Lord Brown points out at the end of para 14, that the scheme of the 1994 Act contains, in section 17, a provision that is designed to operate in favour of a defendant unlike sections 15 and 16 which are available to be invoked against him by the prosecutor.
That provision is available where the defendants realisable property is inadequate to enable him to satisfy the terms of the confiscation order.
The court can, if satisfied that this is the situation, substitute a different amount as the amount to be recovered under it.
But for that provision, defendants in the situation that it refers to would be exposed to the risk of a prison sentence for failing to meet the terms of the confiscation order.
The need to preserve the protection that it gives to the defendant is not one which the draftsman of the Commencement Order is likely to have overlooked.
Mr Pownall QC for the appellant submitted, however, that the saving provision in article 10 applied only to orders made after 23 March 2003 by virtue of sections 13, 14 or 19 of the 1994 Act.
This was because orders made under those sections were confiscation orders within the meaning of section 2(9) of the 1994 Act, not variations of existing confiscation orders.
He acknowledged that Parliament was unlikely to have wanted to prevent a defendant whose confiscation order was made before that date from applying for relief under section 17, and he was unable to suggest any good reason for supposing that it was Parliaments intention to exclude the application of sections 15 and 16 in such a case either.
But he said that the wording of the Commencement Order was clear and that article 3(1) was to be read narrowly according to its own terms.
Its effect, in a case such as this, was that section 22 of the 2002 Act which provides for the making of a fresh order on reconsideration of the available amount could not apply, as it was available only in the case of orders made under section 2 of that Act and those referred to in section 2(9).
The answer to this submission is, as I have already indicated, that article 3 does not stand alone.
It has to be read in the context of the Commencement Order as a whole.
Article 10(e) of the Order says all that is needed to preserve the scheme that was comprised in sections 1 to 36 of the 1994 Act.
Its effect is to fill the gap that would have been created if those sections were not to continue to be available where the offence was committed before 23 March 2003.
As sections 15 to 17 were part of that scheme, they remain available.
I would hold that the appellant fails on this issue.
The more difficult question is whether section 16(2) of the 1994 Act extends to after acquired assets in the full sense of that expression as explained by Lord Walker in para 35.
The difficulty lies partly in the wording of that subsection, which is framed in general terms and does not address this question directly, and partly in the nature of the exercise that, on the respondents construction of it, the court is required to carry out.
In R v May [2008] AC 1028, para 9 Lord Bingham of Cornhill said the process for which the statute provides is not confiscation in the sense in which schoolchildren and others understand it.
This was because the object is to deprive the criminal who has benefited financially from crime, directly or indirectly, of what he has gained: see also para 48(1) where he added that the system does not operate by way of a fine.
He had already made that point in McIntosh v Lord Advocate [2003] 1 AC 1078, para 4, where he said that one of the important premises on which the Proceeds of Crime (Scotland) Act 1995 rested was that it was desirable to deprive traffickers of their ill gotten gains.
Lord Steyn in R v Rezvi [2003] 1 AC 1099, para 14 said that the measures that the United Kingdom had undertaken to take by signing and ratifying the relevant treaties was to ensure that the profits of those engaged in drug trafficking are confiscated.
I do not find anything in these observations that suggests that they had mind the problem raised by this case.
The respondent says that the object of the scheme of which section 16 forms part is to deprive the defendant of realisable assets whether or not they consist of after acquired assets in the full sense, albeit not exceeding the value of the benefit received from his offending.
He points out that, when proceeding under section 6 of the 1994 Act, the court was required to assess the amount that might be realised at the time the confiscation order was made by having regard to all assets, irrespective of whether they were acquired by criminal conduct or legitimate means.
The amount to be recovered was not limited to the product of the defendants criminal enterprise.
But it seems to me that if legitimate after acquired assets were to be included too, this would indeed amount to their confiscation in the popular sense.
It seems to be clear that the effect of reading section 16(2) of the 1994 Act in that way could be to penalise a defendant for the efforts of his own enterprise and hard work after he is released from custody.
That objection can indeed be made in this case.
The appellant was released from prison in November 2000.
There is no suggestion that the increase in the value of his assets that has accrued since then has had anything to do with his previous offending.
The assumption must be that the assets that he has acquired as a result of his business activities are entirely legitimate.
I think that to deprive him of the increase can properly be described as confiscation.
This is the kind of situation that, according to well established principles, ought not to be assumed to have been what Parliament intended unless it provided for this in clear terms.
Section 22(3) of the 2002 Act, which states that the court must apply the available amount provision in section 9 when that amount is being recalculated under it as if references to the time the confiscation order is made were to the time of the new calculation, does satisfy this test.
There is no doubt that the solution which section 22(3) has adopted meets the problems of identification and tracing if after acquired property is excluded to which Lord Walker refers in para 39.
The question is whether the same result was achieved by section 16(2), which lacks a clear direction to that effect.
The general principle of construction is that a statute should not be held to take away property rights without compensation unless the intention to do so is expressed in terms which are clear and unambiguous: Colonial Sugar Refining Co Ltd v Melbourne Harbour Trust Comrs [1927] AC 343, 359, per Lord Warrington of Clyffe.
As Lord Reid explained in Westminster Bank Ltd v Beverley Borough Council [1971] AC 508, 529, this principle flows from the fact that Parliament seldom intends to do that, and that before attributing such an intention we should be sure that it was really intended.
But he added this qualification to the way the principle was expressed by Lord Warrington: When we are seeking the intention of Parliament that may appear from express words but it may also appear by irresistible inference from the statute read as a whole.
But I would agree that, if there is a reasonable doubt, the subject should be given the benefit of the doubt.
There is no hint here that this principle should be attenuated according to the impression one forms as to whether or not the subject deserves, or does not deserve, to be given that benefit.
It is a principle of universal application.
Its force would be greatly weakened if it were otherwise.
Lord Bingham was, I think, making the same point in R v May [2008] AC 1028 when, in the course of his description of the principles to be followed by those called upon to exercise this jurisdiction in the future, he said in para 48, under item (4) of his list, that in view of its importance and difficulty the court should focus very closely on the language of the statutory provision in question and in the light of any statutory definition.
We are not concerned in this case with his warning to avoid being distracted by proliferating case law or any judicial gloss or exegesis, as the question which we have to address here was left open both in R v May and in In re Maye [2008] 1 WLR 315.
But his advice that guidance should be sought in the statutory language itself is very much in point in this case.
Broad generalisations as to what the legislation was designed to achieve will not do.
One must concentrate on the words that were used by Parliament.
The wording that the head note to section 16 uses is Increase in realisable property.
The expression realisable property is defined in section 6(2) of the Act: see the index of defined expressions in section 64.
Section 6(1) states that for the purposes of the Act an amount that might be realised at the time a confiscation order is made against the defendant includes, among other things, the total of the values at that time of all the realisable property held by the defendant.
It is in that context that section 6(2) provides: In this Act realisable property means, subject to subsection (3) below (a) any property held by the defendant; and (b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Act.
Section 6(3) provides that property is not realisable property if an order made under various Acts which provide for the forfeiture of property is in force in respect of it.
The context in which the definition appears directs attention to the time that the confiscation order is made.
It does not appear to contemplate the carrying out of the exercise that section 6(1) refers to at any later date.
Mr Pownalls argument that the expression realisable property has nothing to do with after acquired property is reinforced by the presence in section 15, which deals with the revised assessment of the proceeds of drug trafficking, of subsections (7) and (9)(c).
Section 15(7) provides: Any determination under section 2(4) of this Act by virtue of this section shall be by reference to the amount that might be realised at the time when the determination is made. [emphasis added] Section 15(9)(c) provides that section 6(1) of the Act shall have effect as if for confiscation order is made there were substituted of the determination.
These modifications would not have been required if the expression the amount that might be realised in section 6(1), read together with section 6(2), was capable of embracing assets acquired after the date when the confiscation order was made.
Section 15 is concerned with the amount assessed to be the value of the defendants proceeds of drug trafficking.
Section 16 is concerned with the other part of the formula that defines the amount to be recovered under the compensation order, as the head note makes clear.
In contrast to what one finds in sections 15(7) and 15(9)(c), there is no indication that in this context the date as at which the realisable property held by the defendant is to be identified, for the purpose of assessing the amount that might be realised by it, is different from that as at which the exercise directed by section 6(1) was carried out.
The fact that recourse to the court under section 16 is not subject to any time limit, unlike section 15(15) which imposes a six year time limit on applications for a revised assessment of the proceeds, adds weight to this argument.
It is not inconceivable that it was the intention that assets acquired legitimately many decades after the making of the confiscation should enable the recoverable amount to be recalculated and it can, of course, be said that there are no words that exclude after acquired property.
But the confiscatory nature of the exercise requires us to be satisfied that this was what Parliament really intended and to give the benefit of the doubt to the defendant if we are not.
Moreover, it is not necessary to read section 16 as extending to after acquired property to make sense of it.
Mr Perry QC for the respondent accepted that section 16 can be invoked where the defendant concealed assets at the time of the confiscation order, or where the assets that were originally taken into account were undervalued when the order was made or where they have increased in value.
The presence of the words in parenthesis in section 16(2), which contemplate that the amount that might be realised was greater than was thought when the order was made or has subsequently increased, is sufficiently explained by those three situations.
They do not point irresistibly to the conclusion that after acquired assets may be taken into account too when the court is determining the amount that might be realised under that section.
Section 17 deals with the problem which arises where the realisable property is inadequate for the payment of any amount remaining to be recovered under the compensation order.
It was said by Mr Perry to support his argument that section 16 extended to after acquired property.
There was, he said, a symmetry between the two sections which enabled the court to have regard to the defendants assets as a whole when it was making its assessment.
There is an obvious symmetry if the cause of the problem is that the assets that were originally taken into account were overvalued at that time or that they have decreased in value.
In either of these situations the property that was taken into account as realisable property within the meaning of section 6(2) would be incapable of providing the defendant with the funds needed to meet the terms of the confiscation order.
So means are provided for an adjustment to be made to take account of this.
There is obvious force in the point that Lord Walker makes in para 41 that the offender should not be excused from his prison sentence if he can comply with the terms of the existing order.
But there is no indication in section 17 that any assets that the defendant may have acquired after the making of the compensation order have any part to play in this assessment.
The fact that it uses the defined expression realisable property (which section 6(2), read with the direction in section 64 as to how these words are to be construed, identifies as the assets held by the defendant at the time of the making of the confiscation order) to identify the subject matter of the exercise is an indication to the contrary.
The symmetry argument might, indeed, be said to support the conclusion that section 16 is no more concerned with after acquired property than, on this reading of it, is section 17.
Section 23(2) of the 2002 Act solves this problem, as does section 22(3), by making it clear in express terms that the available amount is to be re assessed at the time of the new calculation.
It is perhaps worth noting that the author of the unusually detailed annotations to the 1994 Act in Current Law Statutes included the following sentence in his general note on section 16: Note that this section does not apply to property which comes into the possession of the defendant after the order is made.
No reasons are given for this observation.
But this may be because the annotator, who had studied the background to this enactment in great detail, regarded the point as so obvious as not to require any explanation.
In any event, it is of some interest that this was what a contemporary writer understood to be the effect of the section.
For the reasons I have given, I do not think that it is self evident that he was wrong.
A contrast can, no doubt, be drawn between the phrase the amount that might be realised in section 16(2) and the phrase the amount that might be realised at the time a confiscation order is made in section 6(1).
As Lord Brown says in para 21, the words at the time a confiscation order is made are conspicuously absent from the phrase used in section 16(2).
It can also be said that section 16(2) does not in terms confine its attention to what, as defined by section 6(2), is realisable property.
But, as the head note to section 16 indicates, the exercise that it contemplates is concerned only with an increase in the value of realisable property, which is a defined expression.
None of the language that it uses is unworkable on that assumption.
I do not think that the other factors that Lord Brown so helpfully refers to in his judgment carry much weight.
I do not see that section 9(5) of the 1994 Act, to which the Court of Appeal in R v Tivnan [1999] 1 Cr App R (S) 92 attached some importance, as providing any guidance as to what Parliament intended in a case where a defendant who was in default had acquired more assets after the date of the making of the confiscation order.
All one can say is that the purpose of the terms imposed in default of payment is to encourage or coerce payment of the sum due under the order.
They are not imposed as a substitute for payment.
So it makes sense for the order to continue to have effect, for what it may be worth.
I have not found this an easy question to answer, and I confess that my initial impression was that Mr Perry was right and, as there was no express direction to the contrary, that the High Court was entitled under section 16 to have regard to after acquired assets in determining the amount that might be realised.
But, on further reflection, I have concluded that the proper approach is that indicated by Lord Reid in Westminster Bank Ltd v Beverley Borough Council [1971] AC 508, 529.
Before attributing such an intention to Parliament we have to be sure that this is what it really intended.
The section, in contrast to what one finds in section 15, does not say this expressly, and I am unable to say that such an intention appears by irresistible inference when the statue is read as a whole.
I cannot, with the greatest of respect, agree with Lord Walker that the linguistic points that I have mentioned do not raise any real doubt.
In my opinion there is such a doubt, and the benefit of the doubt must go to the appellant.
For these reasons I would allow the appeal and set aside the section 16(2) certificate.
| UK-Abs | In January 1997, Mr Peacock was convicted of five offences of conspiracy to supply controlled drugs and sentenced to 12 years imprisonment, reduced on appeal to ten years.
Mr Peacock was found to have benefited from his drug trafficking to the extent of 273,717.50.
However, at the time of sentence, he owned realisable assets worth only 823, so, accordingly, a confiscation order was made against him just for this lesser sum.
Following his release from prison in November 2000, Mr Peacock went into the property business and, entirely legitimately, acquired very substantial assets.
The prosecution sought recovery of the full 273,717.50 and applied to the High Court.
The High Court granted the appropriate certificate increasing the realisable amount under the original confiscation order; and, on application by the prosecution, the Crown Court substituted for the 823 originally recoverable the sum of 273,717.50.
Mr Peacock appealed the lawfulness of the certificate issued by the High Court.
The Court of Appeal dismissed his appeal.
Had Mr Peacock committed the drug trafficking offences of which he was convicted after 24 March 2003, the Proceeds of Crime Act 2002 (POCA) would have applied and, under section 22(3) of that Act, Mr Peacock would clearly have been liable to a further court order increasing to the full extent of his criminal gain the amount recoverable under the confiscation order by reference to his after acquired assets.
However, Mr Peacock committed the relevant drug trafficking offences in 1995, and the question therefore arose whether the same position had obtained under section 16(2) of the Drug Trafficking Act 1994 (the 1994 Act).
The questions for the Supreme Court were: (1) Did section 16 of the 1994 Act apply after POCA came into force on 24 March 2003? (2) If section 16 was in force after 24 March 2003, was the High Court entitled to have regard to after acquired assets under section 16(2) when issuing a certificate to increase the amount payable under the confiscation order?
The Supreme Court dismisses the appeal by a majority (Lord Hope and Lady Hale dissenting on the second issue).
Lord Brown gives the leading judgment of the Court with which Lord Walker and Lord Wilson agree.
The first issue before the Court is dealt with swiftly and by unanimous agreement.
The statutory transitional provisions implemented alongside POCA in 2003 disapplied the entire POCA confiscation order regime in respect of offences committed prior to 24 March 2003.
In respect of such offences, the whole confiscation order scheme provided for by the 1994 Act continues in force.
Accordingly, section 16 of the 1994 applies to Mr Peacocks circumstances [16].
The statutory purpose of the 1994 Act could hardly have been made clearer: to strip those convicted of serious crimes of the proceeds of their wrongdoing [33] [34].
Section 16(2) of the 1994 Act enables
the High Court, on application, to issue a certificate certifying that the amount that might be realised in the case of a person against whom a confiscation order has been made is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased).
Nothing in the definition sections of the 1994 Act requires section 16(2) to be construed as if it refers to the amount that might have been realised at the time the confiscation order was made.
On the contrary, section 16(2) is plainly directed to the amount that might be realised now and by reference to realisable property now held by the defendant [21].
It is common ground between the parties that, in relation to pre acquired assets, the inquiry is into their value at the time of the application rather than their value at the time when the confiscation order was made [44].
That the provision also applies to after acquired assets property accruing to a person (whether as earnings or by gift, inheritance or some other windfall) without a corresponding diminution in that persons existing assets [35] is clear from the words in section 16(2) in parentheses which encompass all ways in which the amount might have grown [22].
Parliament would have made it clearer had its intention been to exclude after acquired assets from the scope of section 16(2) [49].
Section 17 of the 1994 Act, enabling the High Court on application to grant a certificate that the defendants realisable property is inadequate to meet the amount remaining to be recovered under the confiscation order, is symmetrical to section 16 [23], [41].
They are opposite sides of the same coin [46].
It is logical that, by the same token that a defendant cannot require his after acquired assets to be ignored in the determination of his present ability to pay, nor should they be ignored in deciding whether he can pay an additional amount up to the point when he will have disgorged an amount equivalent to all the benefit which has accrued to him from drug trafficking [23].
By enacting section 16, Parliament decided to leave it open to the courts as a matter of discretion under section 16(4) to deprive a defendant of his criminal gains on an ongoing basis irrespective of precisely how and when he came by any increased wealth [29] [30], [47].
Accordingly, the section 16(2) certificate here was lawfully issued and the appeal is dismissed [31].
Lord Hope (with whom Lady Hale agrees) dissents from the outcome reached by the majority of the Court.
The effect of reading section 16(2) so as to include legitimate after acquired assets could be to penalise a defendant for the efforts of his own enterprise and hard work after he is released from custody.
To deprive Mr Peacock of the increase in the value of his assets legitimately accrued following his release from custody ought not, according to well established principles, to be assumed to have been what Parliament intended unless it provided for this in clear terms [59].
The general principle of construction, of universal application, is that a statute should not be held to take away property rights without compensation unless the intention to do so is expressed in terms which are clear and unambiguous [60].
Although there are no words that exclude after acquired property from the scope of section 16, the confiscatory nature of the exercise under that provision requires us to be satisfied that the inclusion of after acquired property within its scope was what Parliament really intended and to give the benefit of the doubt to the defendant if we are not [64], [71].
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These two appeals relate to one of the rules currently in force by which the appellant, the Secretary of State for the Home Department, determines an application for a visa to enter or remain in the United Kingdom made by the spouse of a person who is present and settled in the UK (a marriage visa).
The Secretary of State appeals against the order of the Court of Appeal dated 21 December 2010 (Sedley, Pitchford and Gross LJJ) [2010] EWCA Civ 1482, [2011] 3 All ER 81) by which it declared that her application of the rule so as to refuse marriage visas to the two effective respondents was unlawful as being so the majority concluded in breach of their rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms 1950 (the ECHR).
In effect pursuant to supplementary orders made by the Court of Appeal the Secretary of State has now granted marriage visas to each of the two respondents.
But her appeals to this court, although academic for them, retain a general importance which has justified their continued prosecution.
The rule is rule 277 of the Immigration Rules 1994 (HC395).
The version of the rule which, as substituted by HC1113, came into force on 27 November 2008 was as follows: Nothing in these Rules shall be construed as permitting a person to be granted entry clearance, leave to enter, leave to remain or variation of leave as a spouse or civil partner of another if either the applicant or the sponsor will be aged under 21 on the date of arrival in the United Kingdom or (as the case may be) on the date on which the leave to remain or variation of leave would be granted.
That rule therefore governed a spouse or civil partner.
There were parallel rules which governed a fianc(e) or proposed civil partner (rule 289AA) and an unmarried or same sex partner (rule 295AA).
A sponsor is defined by rule 6 as the person in relation to whom an applicant is seeking leave to enter or remain as their spouse (etc).
Thus, for present purposes, the sponsor is the spouse who is present and settled in the UK, for example (as in each of the cases before the court) a British citizen present and ordinarily resident in the UK.
The applicant is the other spouse.
Prior to 27 November 2008 rule 277 like the parallel rules was in the same terms save only that its reference to age was under 18 rather than under 21.
Such had been the rule since December 2004, when the minimum age for the applicant had been raised from 16 to 18 so as to become the same as the minimum age for the sponsor, which had been raised to the same extent in April 2003.
With effect from 6 April 2010 rule 277 like the parallel rules was amended in a small and largely irrelevant respect.
After the words under 21 were inserted, in parenthesis, the words or aged under 18 if either party is a serving member of HM Forces.
The appeals require focus upon the Secretary of States purpose in amending rule 277 so as to provide that, with effect from 27 November 2008, a marriage visa should not in the absence of exceptional, compassionate circumstances which would attract the exercise of her discretion outside the ambit of the rules be granted until both the sponsor and the applicant had attained the age of 21.
The Secretary of States purpose is clear.
It was not to control immigration.
It was to deter forced marriages.
At the heart of the appeals is her analysis of the nexus between entry into a forced marriage and the increase in the minimum ages requisite for the grant of a marriage visa.
No one could contend that the nexus is very obvious.
B. FORCED MARRIAGE
A forced marriage is a marriage into which one party enters not only without her or his free and full consent but also as a result of force including coercion by threats or by other psychological means: section 63A(4) and (6) of the Family Law Act 1996, inserted into it by section 1 of the Forced Marriage (Civil Protection) Act 2007 (the Act of 2007).
The forcing of a person into marriage is a gross and abhorrent violation of her or his rights under, for example, article 16(2) of the Universal Declaration of Human Rights 1948, article 23(3) of the International Covenant on Civil and Political Rights 1966 and article 12 of the ECHR.
A forced marriage is entirely different from an arranged marriage in which, in conformity with their cultural expectations, two persons consent to marry each other pursuant to an arrangement negotiated between their respective families.
The prevalence of forced marriage within sections of our community in the UK has come increasingly to the attention of a shocked public during, say, the last 12 years as victims of it, or witnesses to it, have at last and less infrequently summoned the courage to report it.
In 1999 the Home Office established a Forced Marriage Working Group, which published its findings in 2000.
Parliament has responded actively to revelation of the problem by enactment of the Act of 2007, which provides the court with a flexible jurisdiction to make orders protective of a person who may be, or has been, forced into marriage.
Under renewed discussion is whether there is any value in also making the act of forcing a person into marriage into a specific criminal offence.
The other main instrument of the states response to the revelation of the problem has been the creation in 2005 by the Home Office and the Foreign and Commonwealth Office of the Forced Marriage Unit (the FMU).
In November 2008 the Secretary of State published guidance under section 63Q of the Family Law Act 1996, as inserted by the Act of 2007.
It was for the benefit of those exercising public functions potentially relevant to instances of forced marriage.
In the guidance the Secretary of State addressed the motives of those who forced a person to marry in the following terms: 36 Some of the key motives that have been identified are: Controlling unwanted sexuality (including perceived promiscuity, or being lesbian, gay, bisexual or transgender) particularly the behaviour and sexuality of women.
Controlling unwanted behaviour, for example, alcohol and drug use, wearing make up or behaving in a westernised manner.
Preventing unsuitable relationships, e.g. outside the ethnic, cultural, religious or caste group.
Protecting family honour or izzat.
Responding to peer group or family pressure.
Attempting to strengthen family links.
Achieving financial gain.
Ensuring land, property and wealth remain within the family.
Protecting perceived cultural ideals.
Protecting perceived religious ideals which are misguided.
Ensuring care for a child or vulnerable adult with special needs when parents or existing carers are unable to fulfil that role.
Assisting claims for UK residence and citizenship.
Long standing family commitments.
Thus Assisting claims for UK residence and citizenship was one of 13 suggested motives.
Data included in the guidance or otherwise provided by the FMU suggest the following: (a) most persons forced into marriage in the UK are female; (b) for example 86% of the 815 possible cases of forced marriage considered by the FMU between September 2009 and February 2010 related to female victims; (c) most victims are aged between 13 and 29; (d) more particularly, of the 145 cases in 2005 in which the FMU provided direct support (as opposed to general or preliminary advice) to victims or potential victims of forced marriage, 44, i.e. 30%, related to victims aged between 18 and it is usually the parents (or one of them) of the victim who apply the force; 20; in 2006 the number of victims of that age was again 44 albeit out of 167 cases, i.e. 26%; and in 2007 the number was 69 out of 212 cases, i.e. 33%; (e) (f) most victims are members of South Asian families; and for example, of the cases in which the FMU gave general or preliminary (g) advice in 2008, 2009 and 2010, over 70% related to families of Pakistani, Bangladeshi or (to a much lesser extent) Indian origin.
THE FACTS
Mr Aguilar Quila, the first respondent, is a national of Chile who was born on 12 July 1990.
His wife, Ms Amber Aguilar, is a British citizen who was born on 25 April 1991 and who until 2009 lived in England.
They began a relationship in 2006 when, with his parents, the first respondent was living temporarily in London.
Later, on 17 August 2008, he returned to the UK on a student visa which was expressed to expire on 3 August 2009.
In September 2008 they became engaged and on 22 November 2008 they were married.
The Secretary of State acknowledges that they married because they were in love.
By then they were aware of the imminent change in the rule; but even under the old rule the first respondent was not then entitled to a marriage visa because, although he had attained the age of 18, his wife would not attain it until 25 April 2009.
On 23 November 2008 the first respondent sought a marriage visa on the basis of exceptional, compassionate circumstances.
The Secretary of State responded to the effect that the first respondents wife had not attained the age of 18 and that there were no such exceptional, compassionate circumstances as would justify a discretionary grant.
On 1 May 2009, acting by the Joint Council for the Welfare of Immigrants, the first respondent sought a fresh decision on the basis that his wife had by then attained the age of 18 and by reference to fresh material which was said to call for the exercise of the Secretary of States discretion.
But she responded to the effect that, because of the serious nature of forced marriages, the minimum age of both parties had been raised to 21; that by then the first respondents case fell to be determined and inevitably refused by reference to that new minimum age; and that, as before, there was no basis for a discretionary grant.
She reminded the first respondent that, by virtue of the fact that he had leave to remain in the UK until 3 August 2009 and of the terms of section 82(2)(d) of the Nationality, Immigration and Asylum Act 2002, he had no right of appeal against her decision.
Thus, on 31 July 2009, the first respondent, accompanied by his wife, duly returned to Chile.
But by then he had issued the claim for judicial review, which was to be dismissed by Burnett J in the Queens Bench Division, Administrative Court, on 7 December 2009 but was to be the subject of the successful appeal to the Court of Appeal.
The exceptional, compassionate circumstances which the first respondent had pressed unavailingly on the Secretary of State related in particular to the position of his wife.
He stated that it would be intolerable for them not to live together for the following three years but that the effect on her of removal to Chile for such a period would be highly detrimental.
He explained that both her parents were teachers; that she wanted to become a teacher of modern languages; that it would take five years for her so to qualify in the attainment of an undergraduate degree for four years and of a Post Graduate Certificate of Education for the fifth year; that she had been offered a place at Royal Holloway, University of London, to study French and Spanish for four years beginning in October 2009, provided that (as later she duly did) she were to attain the requisite grades at A level; and that life in Chile for three years would set back the plans for her career to a grossly unfair and in that the marriage was not forced to a wholly unnecessary extent.
In August 2010 the first respondent and his wife, who had been staying with his family in cramped conditions in Santiago, moved to Ireland, where she embarked on a course at University College, Dublin.
The paradox that the first respondent and his wife were entitled to live in Ireland but not in the UK arose from the fact that, as an EEA citizen exercising treaty rights to live in an EU state, the first respondents wife had a right to live there with him.
In February 2011 the Secretary of State granted the marriage visa to the first respondent with the result that, with his wife, he moved back to the UK.
Bibi (as she invites the court to describe her), the effective second respondent, is a citizen of Pakistan who was born on 7 July 1990 and has always lived there.
Her husband, Mohammed (as he invites the court to describe him), is a British citizen who was born on 8 April 1990 and who, save for some weeks in 2008, has always lived in England.
They were married in Pakistan on 30 October 2008.
It was a marriage which, in accordance with their cultural traditions, their two sets of parents had arranged.
They allege and the Secretary of State does not dispute that each of them freely consented to the marriage and that they had been engaged since October 2007, whereupon they had begun to speak occasionally on the telephone.
They had first met in Pakistan about a week prior to the marriage.
On 1 December 2008 the second respondent, with the help of her father in law, applied to the Entry Clearance Officer (the ECO) in Islamabad, for a marriage visa.
But the ECO had already told the father in law that, unless she were to apply prior to 27 November 2008 (which was to prove impracticable for her), her application would be rejected on the basis that, although both she and her husband had attained the age of 18, neither had attained the age of 21.
On 19 January 2009 the ECO duly refused the application on that ground.
Following the marriage the second respondent and her husband appear to have cohabited briefly in Pakistan perhaps only for some weeks whereupon he returned to England.
In April 2009, together with her husband, she applied to the Administrative Court for permission to apply for judicial review of the ECOs refusal.
It was against His Honour Judge Pearls refusal of permission on 5 August 2009 that she brought her successful appeal to the Court of Appeal.
In May 2011 the Secretary of State granted the marriage visa to her, with the result, I presume, that she has joined her husband in the UK.
D. THE GENESIS OF THE AMENDMENT TO RULE 277
On 22 September 2003 the Council of the European Union adopted Directive 2003/86/EC.
Its purpose was to determine the conditions under which third country nationals, i.e. not citizens of the EU, who were residing lawfully in an EU state could, by sponsorship, secure entry to it for their spouses and other family members.
It did not address, even implicitly, how an EU state should respond to such requests when made by one of its own citizens or by a citizen of another EU state.
Article 4(5) provided: In order to ensure better integration and to prevent forced marriages Member States may require the sponsor and his/her spouse to be of a minimum age, and at maximum 21 years, before the spouse is able to join him/her.
The UK, Ireland and Denmark were not bound by the directive.
As it happens, Denmark had already in 2002 raised to 24 the minimum ages both for the applicant and for the sponsor, and indeed in effect for all sponsors permanently resident in Denmark: see now section 9(1)(i) of the Aliens (Consolidation) Act 2009.
At the time when the ages were raised, it was argued not only that the change would promote better integration of foreign spouses into Danish society but also that it would contain forced marriage.
But subsequent research in Denmark did not confirm that the reform had reduced forced marriage; and it highlighted negative and socially alienating effects on the reasonable aspirations of young spouses whose marriages were not forced.
In about 2004, in the wake of the directive, several other EU states, such as Germany and the Netherlands, raised their minimum ages to 21 and, again at least in the case of some such states, not merely in the case of the limited category of potential sponsors who had been the subject of the directive.
I will assume that such states made the change in the hope of achieving each of the goals described in the article: but there is no evidence as to whether their hope has proved to be justified in either respect.
In the above circumstances it was entirely appropriate that the Secretary of State should examine whether the minimum ages for a marriage visa should be raised to 21 or 24 in the UK.
In 2006 she commissioned Professor Hester and a team at Bristol University to prepare a report on the merits of any such change.
But Professor Hesters report, dated 15 February 2007, was expressly negative.
Her first recommendation was that [t]he age of sponsorship/entry should not be raised either to 21 or 24.
She said that the predominant view across all aspects of the research was that any such increase would be detrimental and, in particular, discriminatory on racial and ethnic grounds and with regard to arranged and love marriages.
The Secretary of State did not publish Professor Hesters report; and it was later published independently.
It was the view of the Secretary of State and of two external peer reviewers that, while the methodology used for the research had been sound, the report was marred by unsubstantiated statements, unclear terminology and sampling bias, and thus that its findings should be treated with considerable caution.
In these proceedings there has been no debate about the validity of these criticisms.
In December 2007 the Secretary of State issued a consultation paper entitled Marriage to Partners From Overseas.
The main questions were whether, in order to reduce the incidence of forced marriage, the minimum ages for a marriage visa should be increased to 21.
A subsidiary question was whether a person should be required to declare her intention to be a sponsor prior to departure from the UK in order to contract a marriage abroad.
On 13 June 2008 the Home Affairs Select Committee of the House of Commons published a report entitled Domestic Violence, Forced Marriage and Honour Based Violence.
It was a magisterial report upon various types of domestic abuse in the UK and it extended far beyond the subject of forced marriage.
But the report included a section on the question which the Secretary of State had put out for consultation.
It noted that the use of visa application rules in order to tackle forced marriage was controversial.
It concluded as follows: 110.
The testimony we heard from forced marriage survivors suggests that the desire to procure a marriage visa for a spouse can be an important factor in forced marriage.
When we asked for their views on this issue, survivors told us that raising the age of sponsorship for marriage visas from 18 to 21 could better equip victims to refuse an unwanted marriage.
However, associated with such a change is a significant risk that young people would be kept abroad for sustained periods between a marriage and being able to return to the UK with their spouse. 111.
We have not seen sufficient evidence to determine whether or not raising the age of sponsorship would have a deterrent effect on forced marriage.
Given the potential risks involved, we urge the Government to ensure that any changes it proposes to its policy on visa application procedures in respect of sponsorship are based on further research and conclusive evidence as to the effect of those changes.
This evidence must demonstrate that any changes will not inadvertently discriminate against any particular ethnic groups.
In July 2008, in the light, inter alia, of the responses to the consultation, the Secretary of State issued her proposals for reform in a report entitled Marriage Visas: The Way Forward.
Although there were proposed provisions which would equip applicants for marriage visas with greater knowledge of English, its main proposal was to increase the minimum ages from 18 to 21.
The report stated as follows: 3.4 We believe that there will be a number of benefits involved in raising the age, these include: It will provide an opportunity for individuals to develop maturity and life skills which may allow them to resist the pressure of being forced into a marriage.
It will provide an opportunity to complete education and training.
It will delay sponsorship and therefore time spent with (sometimes abusive) spouse if the sponsor returns to the UK.
It will allow the victim an opportunity to seek help/advice before sponsorship and extra time to make a decision about whether to sponsor.
CONSULTATION RESPONSES 3.5 Supporters of the increased sponsorship age felt the proposal: provided an opportunity for individuals to develop maturity and life skills. removed young people from parental pressure to marry. gave them an opportunity to complete education and training.
Opponents raised a variety of reasons against the proposal, stating that it: could be perceived as discrimination based on cultural differences. was detrimental to the human rights of young people. would not prevent forced marriage since this affects people of all ages. would penalise those with genuine marriage intentions.
Then the report quoted the urgent request recently made by the Home Affairs Select Committee that no increase in the minimum ages be made without conclusive evidence that it would deter forced marriage and not be discriminatory.
The reports response was as follows: 3.8 We believe there is such conclusive evidence because reports of forced marriage peak sharply at ages 18 and above.
By age 21, reports of forced marriage begin to decline sharply.
There was then a reference, in tabular form, to the statistics provided by the FMU about the age of victims of forced marriage, to which I have referred in para 11(d) above.
But the response at para 3.8 above to the Select Committees call for conclusive evidence was wholly inadequate: for the call had been for evidence not about the age of victims of forced marriage but about whether an increase in the minimum ages for a marriage visa would deter it.
The relevant section of the report concluded as follows: 3.14 We have carefully considered the issues raised by the Home Affairs Select Committee and the respondents to the consultation.
We have paid particular attention to whether an increase in age from 18 21 would be proportionate given concerns that raising the age would penalise a number of genuine couples and discriminates against specific religious communities where the average age of marriage is likely to be lower including such communities where forced marriage is uncommon. 3.15 The committee was also concerned that there is a significant risk that young people would be kept abroad for sustained periods between a marriage and being able to return to the UK with their spouse.
However, this has not been the general pattern of movement observed by the Forced Marriage Unit who indicated that sponsors generally return to the UK until they reach the sponsorship age.
There was no attempt in the document to explain why the Secretary of State had concluded that the increase would indeed be proportionate in the light of its effect on those who entered into marriages which were not forced and of whom at least one was aged between 18 and 21.
There was no attempt even to address the size of that constituency.
In an annexe to the report there was an analysis of the responses to the consultation.
It was to the effect that, of the 89 relevant respondents, 45 had supported the increase, 41 had opposed it and three had expressed mixed views.
Of the 45 in support, most had suggested that an increasing level of maturity and education during the three years would help a potential sponsor to resist being forced to marry but four of them had nevertheless doubted whether the increase would achieve its stated aim.
Of the 41 in opposition, many had suggested that it would be discriminatory towards ethnic communities in which marriage at a young age was the cultural norm and would impact unfairly on the parties to marriages in which at least one of them was aged between 18 and 21 in that most of such marriages were not forced.
In general the analysis of responses in the annexe was fairly summarised in para 3.5 of the document, set out at para 27 above.
THE ENGAGEMENT OF ARTICLE 8, ECHR
In R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, [2004] 2 AC 368, Lord Bingham suggested, at para 17, that the engagement of article 8 depended upon an affirmative answer to two questions, namely whether there had been or would be an interference by a public authority with the exercise of a persons right to respect for his private or family life and, if so, whether it had had, or would have, consequences of such gravity as potentially to engage the operation of the article.
Having analysed the authority, namely Costello Roberts v United Kingdom (1993) 19 EHRR 112, which, at para 18, Lord Bingham had cited by way of justification of the terms in which he had cast his second question, the Court of Appeal in AG (Eritrea) v Secretary of State for the Home Department [2007] EWCA Civ 801, [2008] 2 All ER 28, observed, at para 28, that the threshold requirement referable to the nature of the consequences was not a specially high one.
Mr McCullough QC, on behalf of the Secretary of State, concedes that family life arose upon the marriage of each of the respondents to their sponsors notwithstanding that, at the date of the refusals of the marriage visas, it had scarcely been established in the case of the second respondent and was relatively undeveloped in the case of the first respondent.
Counsel correctly suggests, however, that the more exiguous is the family life, the more substantial are the requisite consequences.
These were two British citizens who had lived throughout their lives in the UK and who, aged 17 and 18 respectively, had just embarked upon a consensual marriage.
The refusal to grant marriage visas either condemned both sets of spouses to live separately for approximately three years or condemned the British citizens in each case to suspend plans for their continued life, education and work in the UK and to live with their spouses for those years in Chile and Pakistan respectively.
Unconstrained by authority, one could not describe the subjection of the two sets of spouses to that choice as being other than a colossal interference with the rights of the respondents to respect for their family life, however exiguous the latter might be.
But central to this appeal is Mr McCulloughs reliance in this regard on the decision of the ECtHR in Abdulaziz v United Kingdom (1985) 7 EHRR 471.
Three women, all lawfully settled in the UK, had married third country nationals but at any rate at first the Secretary of State had refused permission for their husbands to remain with them, or join them, in the UK.
In the second and third cases, as a result of a relaxation of the Immigration Rules, adequate permissions had ultimately been granted and had rendered the applications largely academic.
In the present proceedings the Court of Appeal distinguished the courts decision in Abdulaziz on the ground that the three women were not British citizens but women of other nationalities with, therefore, a right of abode elsewhere.
But in the first case the woman had been deprived of her Malawi citizenship and, at the date of the refusal, was stateless; she almost certainly had no right of abode in Malawi.
In the second case the woman had become a British citizen albeit following the date of the refusal.
And in the third case the woman, albeit not a British citizen until later, was a citizen of the United Kingdom and Colonies at the date of the refusal.
In these circumstances it is accepted on behalf of the respondents that the ground of distinction favoured by the Court of Appeal is untenable.
The decision of the ECtHR in Abdulaziz was that the refusals of permission had not infringed the rights of the women and of their husbands to respect for their family life under article 8 but that, in that the ground for the refusals had been a rule which had afforded a different and unjustified treatment of male, as opposed to female, spouses of persons lawfully settled in the UK, the women had suffered discrimination on the ground of sex in violation of their rights under article 14, taken together with article 8, of the Convention.
The importance of the decision for present purposes is the route by which the court came to reject the complaint under article 8 alone.
The majority held that article 8 was not engaged; two judges, however, concurred in the conclusion in relation to article 8 only on the basis that, although the article had been engaged, the interference with respect for the family life of the applicants had been justified under article 8(2).
In para 66 to para 68 of their judgment the majority stressed that: (a) the suggested obligation of the state was a positive one i.e. to take active steps to admit the husbands and especially as far as positive obligations are concerned, the notion of respect is not clear cut; immigration control was an area in respect of which states enjoyed a wide margin of appreciation; (b) (c) (d) the rights of the husbands to enter, or remain in, the UK under the rules were known to be precarious when the marriages were contracted; and the extent of a states obligation to admit spouses of settled immigrants depended upon the circumstances of each case and the women had not shown that they could not establish family life in their own or their husbands home countries.
The majority also said, at para 68: The duty imposed by article 8 cannot be considered as extending to a general obligation on the part of a contracting state to respect the choice by married couples of the country of their matrimonial residence and to accept the non national spouses for settlement in that country.
The above proposition has recently been cited with approval both in the ECtHR (see Y v Russia (2008) 51 EHRR 21, at para 103) and in this court (see ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 WLR 148, at para 19, per Baroness Hale).
Four decisions of the ECtHR subsequent to Abdulaziz deserve attention.
First, Gl v Switzerland (1996) 22 EHRR 93.
A Turkish father, who had been permitted on humanitarian grounds to reside with his wife in Switzerland, failed to establish that, by refusing to allow their seven year old son to join them in Switzerland, the state had interfered with respect for his family life.
Although, therefore, the court applied the decision in Abdulaziz, it stressed, at para 41, that the father and his wife had no permanent right of abode in Switzerland.
In a powerful dissenting opinion two judges explained why in their opinion the state had not only interfered with the applicants right under article 8 but, by reference to the terms of its paragraph two, had violated it.
In effect they pointed out, at para 7 and para 8, that in Abdulaziz stress had been laid on the fact that the disputed obligation was positive (to allow the husbands to reside in the UK); that the disputed obligation in the present case was similar (to allow the son to reside in Switzerland); that, where the challenge was to the states removal of a person, the disputed obligation was negative (not to remove him); that it would be illogical if this elusive difference were to affect whether there had been interference with rights under article 8; and that indeed, since the decision in Abdulaziz in 1985, the difference in the courts treatment of positive and negative obligations had dwindled away.
Second, Boultif v Switzerland (2001) 33 EHRR 1179.
An Algerian citizen married a Swiss citizen and was permitted to reside in Switzerland.
Following his conviction for a robbery the state refused to extend his residence permit and he was removed from Switzerland.
The court found that his right under article 8 had been infringed.
The court, at para 40, summarily addressed the initial question whether the state had interfered with his right as follows: In the present case, the applicant, an Algerian citizen, is married to a Swiss citizen.
Thus, the refusal to renew the applicants residence permit in Switzerland interfered with the applicants right to respect for his family life The question whether the couple could reasonably live together in Algeria was answered, negatively, at para 53, only in the course of the courts enquiry into whether the interference was justified.
Third, Tuquabo Tekle v The Netherlands [2006] 1 FLR 798.
A mother, father and their three sons were of Eritrean ethnicity but lived in the Netherlands and had acquired Dutch citizenship.
When leaving Eritrea in 1989, the mother had left behind a daughter, then aged eight.
When she was aged 15, an application was made for her to be allowed to enter the Netherlands in order to live with the family; but it was refused.
The court held that, by the refusal, the state had violated the rights under article 8 of all six of its members.
The court observed, at para 41 and para 42, that the asserted obligation of the state was positive, that the boundaries between the states positive and negative obligations under this provision do not lend themselves to precise definition and that the applicable principles are, nonetheless, similar.
The minority view in Gl had become that of the majority.
The court did not tarry to consider interference: it moved straight to justification.
And fourth, Rodrigues da Silva, Hoogkamer v Netherlands (2006) 44 EHRR 729.
A Brazilian citizen lived, albeit unlawfully, in the Netherlands.
She gave birth to a daughter who lived with the father but with whom she had contact.
The court held that the states refusal to grant a residence permit to the mother had violated her right and that of the daughter under article 8.
The court acknowledged, at para 38, that, in that the state had never granted a residence permit to the mother, its breach was of a positive, rather than of a negative, obligation.
The difficulty for the respondents which arises out of the case of Abdulaziz lies less in the proposition at para 68 of the judgment, set out in para 36 above, and more in the actual decision of the majority.
The proposition is only to the effect that article 8 imposes no general obligation on a state to facilitate the choice made by a married couple to reside in it.
On analysis, the proposition is unexceptionable: it invites, instead, a fact specific investigation, which logically falls within the realms of whether the states obstruction of that choice is justified under paragraph 2.
But the actual decision enables Mr McCullough to ask: inasmuch as there was not even an interference with the rights under article 8 of the three women in Abdulaziz in refusing to allow their husbands to join them, or remain with them, how can the analogous decisions of the state in the present cases generate a different conclusion?
Having duly taken account of the decision in Abdulaziz pursuant to section 2 of the Human Rights Act 1998, we should in my view decline to follow it.
It is an old decision.
There was dissent from it even at the time.
More recent decisions of the ECtHR, in particular Boultif and Tuquabo Tekle, are inconsistent with it.
There is no clear and consistent jurisprudence of the ECtHR which our courts ought to follow: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295 at para 26, per Lord Slynn.
The court in Abdulaziz was in particular exercised by the fact that the asserted obligation was positive.
Since then, however, the ECtHR has recognised that the often elusive distinction between positive and negative obligations should not, in this context, generate a different outcome.
The area of engagement of article 8 in this limited context is, or should be, wider now.
In that in Tuquabo Tekle the states refusal to admit the 15 year old daughter of the mother, in circumstances in which they had not seen each other for seven years, represented an interference with respect for their family life, the refusals of the Secretary of State in the present case to allow the foreign spouses to reside in the UK with the British citizens with whom they had so recently entered into a consensual marriage must a fortiori represent such an interference.
The only sensible enquiry can be into whether the refusals were justified.
F. JUSTIFICATION UNDER ARTICLE 8(2)
The burden is upon the Secretary of State to establish that the interference with the rights of the applicants under article 8, wrought by the amendment to rule 277 effective from 27 November 2008 (the amendment), was justified under paragraph 2 of the article: see Marcic v Thames Water Utilities Ltd [2003] UKHL 66, [2004] 2 AC 42, para 37.
But in an evaluation which transcends matters of fact it is not in my view apt to describe the requisite standard of proof as being, for example, on the balance of probabilities.
The amendment had a legitimate aim: it was for the protection of the rights and freedoms of others, namely those who might otherwise be forced into marriage.
It was in accordance with the law.
But was it necessary in a democratic society? It is within this question that an assessment of the amendments proportionality must be undertaken.
In Huang v Secretary of State for the Home Department [2007] 2 AC 167, Lord Bingham suggested, at para 19, that in such a context four questions generally arise, namely: a) b) c) d) is the legislative objective sufficiently important to justify limiting a fundamental right? are the measures which have been designed to meet it rationally connected to it? are they no more than are necessary to accomplish it? do they strike a fair balance between the rights of the individual and the interests of the community? In the present case the requisite enquiry may touch on question (b) but the main focus is on questions (c) and (d).
But what is the nature of the courts enquiry? In R (SB) v Governors of Denbigh High School [2007] 1 AC 100 Lord Bingham said, at para 30: it is clear that the court's approach to an issue of proportionality under the Convention must go beyond that traditionally adopted to judicial review in a domestic setting There is no shift to a merits review, but the intensity of review is greater than was previously appropriate, and greater even than the heightened scrutiny test The domestic court must now make a value judgment, an evaluation, by reference to the circumstances prevailing at the relevant time.
Proportionality must be judged objectively, by the court Lord Browns call, at para 91 below, for the courts in this context to afford to government a very substantial area of discretionary judgement is at odds with my understanding of the nature of their duty.
Indeed, in the case of Huang cited above, Lord Bingham proceeded to explain, at para 16, that it would be wrong to afford deference to the judgments of the Secretary of State on matters related to the above questions albeit that appropriate weight had to be given to them to the extent, in particular, that she was likely to have had access to special sources of knowledge and advice in connection with them.
He added, at para 17, that, notwithstanding the limited right of Parliament to call upon the Secretary of State to reconsider proposed changes in the Immigration Rules provided by section 3(2) of the Immigration Act 1971, it would go too far to say that any changes ultimately made had the imprimatur of democratic approval such as would be relevant in particular to any answer to question (d) set out in para 45 above.
In the present appeals the questions identified above fall upon two sides.
One side asks whether, and if so to what extent, the amendment is likely to have deterred, and to continue to deter, forced marriages.
The other side asks how many parties to unforced marriages are likely to be condemned by the amendment to suffer the interference with their rights exemplified in the two cases before the court.
The Secretary of States contention that the amendment is likely to deter forced marriages remains based upon the four bullet points included in para 34 of her report entitled Marriage Visas: The Way Forward, set out in para 27 above.
Her main suggestion is that the passage of up to three years should strengthen the ability of either the intended or the actual victim of a forced marriage to resist either entry into it or her later act of sponsorship which, were she to have remained living in the UK, would enable the spouses to cohabit here.
The suggestion is tenable.
But ten other questions arise and, since they are but questions, there is no need for me to identify in the materials and submissions presented to the court the source from which they come.
In what follows I will, for convenience, take the victim of a forced marriage to be a girl present and settled in the UK whose parents force her to marry a man resident abroad without a pre existing right of abode in the UK.
The ten questions are as follows: a) Of the 13 motives for forcing a marriage suggested in para 36 of the guidance published by the Secretary of State in November 2008, set out in para 10 above, how prevalent in the genesis of forced marriages is that of Assisting claims for UK residence and citizenship? b) From the fact that a forced marriage has precipitated an application for a marriage visa does it follow that the motive behind it was immediately to secure the visa and that, were it not immediately available, the marriage would not have occurred? c) Even if by virtue of the amendment, the ages of the girl and/or of the man were such as to preclude the grant of a marriage visa for up to three years, might the parents nevertheless force the girl into the marriage in order, for example, to prevent her from entering into a consensual marriage which they regarded as unsuitable? d) Even if the effect of the amendment were to preclude the immediate grant of a marriage visa, might the girl nevertheless be forced to marry the man abroad and thereupon be kept under control abroad until their ages were such as to enable her successfully to sponsor his application for a visa? In the example at (d) might the girl kept under control abroad there have a lesser opportunity to escape from the forced marriage than if the rules had enabled her to set up home with the man in the UK immediately following the marriage? e) f) Alternatively to the example at (d), might the girl be brought to the UK following the forced marriage and be kept under control in the UK until their respective ages were such as to enable her successfully to sponsor the mans application for a visa? g) Even if the preclusion of the grant of a marriage visa for up to three years were to deter her parents from forcing the girl to marry at that stage, might the result be an increased intensity of control on their part over her for that period whether by moving her abroad or by continuing to keep her in the UK and, in either event, would her increasing maturity be likely to enable her to combat it? h) How readily could one or more false certificates of birth be obtained which would deceive the immigration authorities into accepting that the girl and the man were both aged over 21? i) Might the effect of the amendment be to precipitate a swift pregnancy in the girl, following the forced marriage and an act or acts of rape, such as might found an application for a discretionary grant of a marriage visa by reference to exceptional, compassionate circumstances? j) Even if the effect of the amendment were to deter her parents from forcing the girl to marry a man resident abroad without a pre existing right of abode in the UK, might they instead force her to marry a man with UK or EU citizenship or some other pre existing right of abode in the UK?
The ten questions are not easily answered.
Professor Hester and her team attempted to address most, if not all, of them but, for reasons good or bad, the Secretary of State did not accept her report.
In June 2008 the Home Affairs Select Committee urged the Secretary of State not to introduce the amendment until, following further research, there was conclusive evidence about its effect.
But she proceeded to introduce it.
The questions remain unanswered.
The Secretary of State has failed to demonstrate that, when she introduced it, she had robust evidence of any substantial deterrent effect of the amendment upon forced marriages.
I turn to unforced marriages.
What was the likely scale of the inevitably detrimental effect of the amendment on unforced marriages.
A subsidiary question, raised by the Home Affairs Select Committee in June 2008, was whether the detrimental effect was likely to be visited disproportionately upon members of communities with a tradition of marriage at a young age.
In this regard the evidence of the Secretary of State in these proceedings was provided by Ms Smith, Deputy Director of Immigration Policy.
She said: 17.
The question of proportionality in terms of the impact upon couples intending to enter a marriage that was not forced where one or both of the couple are aged under 21 was considered carefully when drafting the policy. 20. the numbers affected by the rule change constituted a very small proportion of those applying for marriage visas for the UK.
In 2006, for example, 7% (3,420) of spouses granted leave to enter the UK were aged between 18 and 20 and 2.5% (520) of people granted leave to remain in the UK as a spouse were within this age group.
In 2007, 2.7% (1,245) of spouses granted leave to enter and 2.6% (700) of spouses granted leave to remain in the UK as a spouse were aged 18 to 20 21.
We concluded that as the policy would affect less than 3% of those granted both leave to enter and leave to remain in the UK as a spouse in 2007, and as the evidence demonstrated that the rates of forced marriage were highest amongst those aged 17 20 in 2005 2008, the policy would represent a proportionate response to the issue of forced marriage, and the importance of protecting the rights and freedoms of vulnerable persons who might be forced into marriage would outweigh the significance of any adverse impact on
particular communities or age groups
But it establishes nothing to note first that 3,940 and 1,945 marriage visas were granted in 2006 and 2007 respectively to those aged between 18 and 20; second that at any rate the figure for 2007 was less than 3% of all marriage visas granted in that year (therefore presumably amounting to about 65,000); and that the rates of forced marriage were highest (ie about 30% see para 11(d) above) among those aged between 17 or 18 and 20.
To deny marriage visas to 3,940 or even only to 1,945 applicants in a year is, irrespective of percentages, to deny them in a vast number of cases.
The relevant question relates to the likely size of forced marriages within these numbers.
The evidence does not begin to provide an answer to this question.
By referring back to para 11(d) above, we can compare the number of cases in 2006 in which the FMU provided support to victims or potential victims of forced marriage aged between 18 and 20, namely 44, with the number of visas granted to that age group, in that year, namely 3,940; for 2007, the comparison is of 69 with 1,945; and, albeit only partly visible in what I have set out above, the evidence suggests a comparison for 2005 of 44 with 3,065.
But the above exercise is hardly worth the undertaking.
For on the one hand the FMUs figures relate to all forced marriages, irrespective of whether the spouse may reside in the UK only pursuant to a marriage visa.
On the other hand and no doubt much more importantly the FMUs figures understandably represent only a proportion of all intended forced marriages.
So double them? Or treble them? Or multiply them by ten? The only conclusion soundly available on the evidence before the court not challenged by the Secretary of State save in relation to the emotive word exile is, in the words of Sedley LJ in the Court of Appeal, that rule 277 is predictably keeping a very substantial majority of bona fide young couples either apart or in exile and that it has a drastic effect on thousands of young adults who have entered into bona fide marriages.
As the Secretary of State acknowledges, the amendment is, in the words of Gross LJ, a blunt instrument.
On 10 May 2011 the Home Affairs Select Committee of the House of Commons published a report, entitled Forced Marriage, by which it reviewed developments in relation to the matters which it had addressed in its report published on 13 June 2008.
In a short section it noted the amendment introduced by the Secretary of State and the decision of the Court of Appeal in these proceedings.
It then summarised evidence which it had received both from Karma Nirvana, a respected organisation providing support to victims or potential victims of forced marriage, and from Southall Black Sisters, an intervener in these appeals and an equally respected organisation dedicated to the protection of black and Asian women from abuse of all types including forced marriage.
The committee stated: 16.
Karma Nirvana supported the change in the Immigration Rules on the grounds that: We at Karma Nirvana have received feedback from victims that they have been helped by the rule.
On the helpline we receive a number of calls from potential victims (and professionals on their behalf) under the age of 21 years asking about their legal position.
Most, if not all, seem quite relieved to find that they have extra breathing space in which to make up their minds. 17.
However, Southall Black Sisters disagreed that the change has had a positive effect, stating that it does not in reality protect victims from forced marriage, but simply increases pressure on them to remain within an abusive situation, and discriminates against migrant communities.
In evidence to our predecessor Committee in March 2010, Nazir Afzal of the Crown Prosecution Service, had mixed views: I have spoken to several members of the third sector and police officers and they tell me that it has had a very positive effect in terms of the people who would ordinarily have been forced into marriage at an earlier age several hundred women have not been forced into marriage because they have been given the opportunity to wait until beyond 21 It has sent out a message to some families and to some communities that they need to be taking this a little bit more seriously than they have done.
However, there has been an increase in relation to fraud involving birth certificates obtained abroad for individuals who are trying to pretend that they are 21 when they are not. 18.
We have received mixed evidence about the impact of the change in the Immigration Rules in 2008 to require sponsors of marriage visas and their incoming spouses to be over the age of 21.
We recognise that the change may be seen as discriminatory and has the potential for young people to be held in abusive situations for longer; however, it has undoubtedly helped a number of young people to resist forced marriage.
The Secretary of State suggests that the Select Committees recent report, not available to the Court of Appeal, remedies any deficiencies in her case in relation to the proportionality of the amendment and thus to the justification for her interference with the rights of the respondents.
I disagree.
Although its reference to discrimination against migrant communities is, by implication, a reference to unforced marriages within those communities, the Select Committees report is, as its title suggests, upon forced marriage; and the focus of the conflicting evidence which it surveyed related to whether the amendment had succeeded in deterring it.
The committee did not also weigh its effect on unforced marriages in the manner mandated of the court by article 8(2).
There is a helpful parallel with the decision in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53, [2009] AC 287.
In order to prevent marriages of convenience in the UK the Secretary of State introduced a scheme under which certain persons subject to immigration control required her written permission to marry and would not receive it unless they were present in the UK pursuant to a grant of leave for more than six months of which at least three months was unexpired.
The House of Lords held that, notwithstanding that the right to marry under article 12 was not qualified in the way in which article 8(2) qualified the right in article 8(1), the state could take reasonable steps to prevent marriages of convenience; but that the scheme represented a disproportionate interference with the right to marry.
It was, said Lord Bingham at para 31, a blanket prohibition on exercise of the right to marry by all in the specified categories, irrespective of whether their proposed marriages are marriages of convenience.
The scheme, said Lady Hale at para 43, was overinclusive and [m]aking a serious attempt to distinguish between the sham and the genuine was considered too difficult and too expensive.
On 14 December 2010, in ODonoghue v United Kingdom (Application No 34848/07), the ECtHR approved the decision in Baiai and extended it to two later versions of the Secretary of States scheme.
Furthermore, in Thlimmenos v Greece (2000) 31 EHRR 411 it held that the application of a rule that a felon could not become a chartered accountant infringed the rights under article 14, taken in conjunction with article 9, of a pacifist convicted of the felony of refusing to perform military service.
The court observed, at para 47, that it was legitimate to exclude some felons from entitlement to become chartered accountants but that there was no objective and reasonable justification for having treated the applicant in that way.
I would, in conclusion, acknowledge that the amendment is rationally connected to the objective of deterring forced marriages.
So the Secretary of State provides a satisfactory answer to question (b) set out in para 45 above.
But the number of forced marriages which it deters is highly debatable.
What seems clear is that the number of unforced marriages which it obstructs from their intended development for up to three years vastly exceeds the number of forced marriages which it deters.
Neither in the material which she published prior to the introduction of the amendment in 2008 nor in her evidence in these proceedings has the Secretary of State addressed this imbalance still less sought to identify the scale of it.
Even had it been correct to say that the scale of the imbalance was a matter of judgement for the Secretary of State rather than for the courts, it is not a judgement which, on the evidence before the court, she has ever made.
She clearly fails to establish, in the words of question (c), that the amendment is no more than is necessary to accomplish her objective and, in the words of question (d), that it strikes a fair balance between the rights of the parties to unforced marriages and the interests of the community in preventing forced marriages.
On any view it is a sledge hammer but she has not attempted to indentify the size of the nut.
At all events she fails to establish that the interference with the rights of the respondents under article 8 is justified.
By refusing to grant marriage visas to the respondents the Secretary of State infringed their rights under article 8.
Her appeals must be dismissed.
In line with the helpful analysis of the Upper Tribunal (Immigration and Asylum Chamber) conducted in somewhat similar circumstances in FH (Post flight spouses: Iran) v Entry Clearance Officer, Tehran [2010] UKUT 275 (IAC), I consider that, while decisions founded on human rights are essentially individual, it is hard to conceive that the Secretary of State could ever avoid infringement of article 8 when applying the amendment to an unforced marriage.
So in relation to its future operation she faces an unenviable decision.
LADY HALE
I agree that the Secretary of State has infringed the article 8 rights of the parties to each of the marriages with which we are concerned and that these appeals should therefore be dismissed.
Lord Wilson has dealt comprehensively with the relevant evidence, information and arguments and I add these few comments only because we are not all of the same mind.
The issue, as Mr Drabble reminded us at the outset of his submissions, is whether the Secretary of State has acted incompatibly with the Convention rights of these particular young people.
By reason of section 6(1) of the Human Rights Act 1998, it is unlawful for her to do so.
This is subject to section 6(2), where a public authority is acting, to put it loosely, in compliance with primary legislation which cannot be read or given effect in any other way.
That is not this case.
The Secretary of State has acted in compliance with her own Immigration Rules, which do not even have the status of delegated legislation: see Odelola v Secretary of State for the Home Department [2009] UKHL 25, [2009] 1 WLR 1230.
She does have a choice and it is her duty to act compatibly with the Convention rights of the people with whom she is concerned.
Of course, where delicate and difficult judgments are involved in deciding whether or not she has done so, this Court will treat with appropriate respect the views taken by those whose primary responsibility it is to make the judgments in question.
But those views cannot be decisive.
Ultimately, it is for the court to decide whether or not the Convention rights have been breached: R (SB) v Governors of Denbigh High School [2006] UKHL 15, [2007] 1 AC 100; Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420.
The immigration rules in question, paragraph 277 (which applies to spouses and civil partners) and its counterpart in paragraph 289AA (which applies to fianc(e)s and proposed civil partners), make an exception to the general rules governing the admission of spouses and fianc(e)s, civil partners and proposed civil partners, of people who are present and settled or being admitted for settlement here.
Those rules (paragraphs 281 and 290) require principally that the parties have met and intend to live permanently with each other as spouses or civil partners; there are also requirements as to self sufficiency and knowledge of the English language.
These requirements have a discernible connection with immigration control.
The rules reflect a general policy that, subject to such conditions, spouses, partners and fianc(e)s should be able to join their spouses, partners and fianc(e)s who are settled here.
The exception with which we are concerned prohibits the grant of a marriage visa (strictly, entry clearance, leave to enter, leave to remain or variation of leave on marriage grounds) unless both parties to the marriage or civil partnership will be aged 21 or over on the date of the applicants arrival in the United Kingdom or the grant of leave to enter, leave to remain or variation of leave, as the case may be.
We happen to be concerned with the extension of that exception from those below 18 to those below 21.
No one challenged its introduction for 16 and 17 year olds, so we cannot speculate about them.
The crucial point is that, as the Secretary of State assures us, and the other parties accept, the purpose of this exception has nothing to do with immigration control.
Its sole purpose is to deter or prevent forced marriages.
Forced marriage can be defined in a number of different ways.
There is a definition in section 63A(4) and (6) of the Family Law Act 1996 for the purpose of the power to grant civil protection orders, which was inserted into the 1996 Act by the Forced Marriage (Civil Protection) Act 2007: see para 68 earlier.
In 2000 a Home Office Working Group, in A Choice by Right, defined forced marriage as a marriage conducted without the valid consent of both parties where duress is a factor (p 6).
But the Group took a broad view of what constituted duress.
They pointed out that, for the purpose of rendering a marriage voidable under section 12(c) of the Matrimonial Causes Act 1973, the Court of Appeal in Hirani v Hirani (1984) 4 FLR 232 had defined the test for duress as whether the mind of the applicant (the victim) has in fact been overborne, howsoever that was caused (p 7).
They went on to explain that There is a spectrum of behaviours behind the term forced marriage, ranging from emotional pressure, exerted by close family members and the extended family, to the more extreme cases, which can involve threatening behaviour, abduction, imprisonment, physical violence, rape and in some cases murder (p 11).
More recently, The Right to Choose: Multi agency statutory guidance for dealing with forced marriage (2008), takes a similar broad view, defining a forced marriage as one in which one or both spouses do not (or, in the case of some vulnerable adults, cannot) consent to the marriage and duress is involved.
The duress in question is not limited to physical duress, but may involve emotional, psychological, financial or sexual duress.
An example given of emotional duress is making the individual feel as though she is bringing shame upon her family by not entering into the marriage.
Hence both the definitions of a forced marriage referred to above give a wider meaning to duress than its traditional definition in the criminal law, which is limited to threats of physical harm (Archbold, Criminal Pleading Evidence and Practice 2011, para 17.120).
But most forced marriages will be legally valid unless or until they can be avoided or dissolved.
Forced marriages, even in the wider sense set out in these definitions, are quite different from arranged marriages, in which the families of both spouses take a leading role in arranging the marriage, but the choice whether to solemnise the arrangement remains with the spouses and can be exercised at any time (A Choice by Right, p 10).
In various forms this has been a common and perfectly acceptable practice in many, even most, societies throughout history.
The idea that young (and not so young) people should find and choose their partners without either the help or approval of their families is a comparatively modern one.
But clearly the dividing line between an arranged and a forced marriage may be difficult to draw, particularly in communities where there is a strong cultural tradition that it is for the parents to control their childrens marriages.
But anyone who has read Jasvinder Sangheras powerful novel based on her own experiences, Shame (Hodder and Staughton, 2007), can be in no doubt that the difference is real and the consequences of forcing anyone into a marriage which she does not want are grave indeed, not only for the victims but often also for their families.
As the Working Group pointed out, the perpetrators aim may be to strengthen the family and protect their culture, but it may have the reverse effect of turning their children against their background because of their experiences (A Choice by Right, p 20).
In todays world, it is recognised that everyone has the right to decide whether or not to enter a particular marriage.
Article 23(3) of the International Covenant on Civil and Political Rights (ICCPR), in an exact echo of article 16(2) of the Universal Declaration of Human Rights, requires that No marriage shall be entered into without the full and free consent of the intending spouses: see also article 1 of the Convention on Consent to Marriage, Minimum Age for Marriage and Registration of Marriages, article 10(1) of the International Covenant on Economic, Social and Cultural Rights (ICESC), article 16(1)(b) of the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW).
Full and free means that the marriage should be entered into without improper pressure of any kind.
Equally, it is recognised that anyone of marriageable age is free to marry whom they choose: see article 16(1) of the Universal Declaration, article 23(2) of the ICCPR, article 16(1)(a) of CEDAW, and of course article 12 of the ECHR.
The right to marry is just as important as the right not to marry.
Married couples also have the right to live together.
This is inherent in the right to found a family, which is coupled with the right to marry in the Universal Declaration, the ICCPR and the ECHR.
But the ECHR goes further, because article 8 protects the right to respect for family life.
Family life arises virtually automatically upon a genuine marriage.
In Abdulaziz, Cabales and Balkandali v United Kingdom (1985) 7 EHRR 471, at para 62, the European Court of Human Rights observed that Whatever else the word family may mean, it must at any rate include the relationship that arises from a lawful and genuine marriage, such as that contracted by Mr and Mrs Abdulaziz and Mr and Mrs Balkandali, even if a family life of the kind referred to by the Government has not yet been fully established.
The Court also decided, at para 63, that family life had been established between Mr and Mrs Cabales, even though there was a question mark over the formal validity of their marriage, because they had gone through a ceremony of marriage, believed themselves to be married and genuinely wished to cohabit and lead a normal family life.
Hence all three marriages were sufficient to attract such respect as may be due under article 8.
Most significantly for our purposes, the Court held at para 62 that the expression family life in the case of a married couple, normally comprises cohabitation.
The latter proposition is reinforced by the existence of article 12, for it is scarcely conceivable that the right to found a family should not encompass the right to live together.
However, in the context of immigration control, the court went on to hold, at para 68, that The duty imposed by article 8 cannot be considered as extending to a general obligation on the part of a contracting state to respect the choice by married couples of the country of their matrimonial residence and to accept the non national spouses for settlement in that country.
In all three cases, the marriage had been contracted after the UK spouse had become settled here as a single person, at a time when they must have known that there was no right for the non UK spouse to join them here, and it had not been shown that there were obstacles to establishing family life in their husbands countries or the countries from which they had originally come, or that there were special reasons why this should not be expected of them.
The majority therefore held that there was no lack of respect for family life and thus no breach of article 8.
A minority held that there was a lack of respect, but that it was justified under article 8(2) in the interests of the economic well being of the country.
Although it has not wholly disappeared, subsequent developments have eroded the distinction between the negative obligation, not to interfere in family life by expelling one member of the family, and the positive obligation, to respect family life by allowing family reunion to take place.
Many later cases have repeated the principle stated in Gl v Switzerland (1996) 22 EHRR 93, at para 38, that the boundaries between the states positive and negative obligations under this provision do not lend themselves to precise definition.
The applicable principles are, none the less, similar.
In both contexts regard must be had to the fair balance that has to be struck between the competing interests of the individual and of the community as a whole; and in both contexts the state enjoys a certain margin of appreciation.
The language of fair balance is much more compatible with a search for justification under article 8(2) than with identifying a lack of respect under article 8(1).
Nevertheless, the Court continues to state that, in expulsion cases, the question is whether the interference with the family life established in the host country can be justified, whereas in reunion cases, the question is whether the host country should be obliged to allow the family to settle there: for a recent example, see Haghighi v Netherlands (2009) 49 EHRR SE8.
The factors applicable in deciding whether an expulsion can be justified under article 8(2) have been laid down in the Chamber decision in Boultif v Switzerland (2001) 33 EHRR 1179, approved and augmented in the Grand Chamber in ner v Netherlands (2006) 45 EHRR 421.
A similar but not identical set of factors has been referred to when deciding whether a failure to grant a permit for family reunion violates article 8, in cases such as Sen v Netherlands (2001) 36 EHRR 81, Tuquabo Tekle v Netherlands [2006] 1 FLR 798, Rodrigues da Silva v Netherlands (2006) 44 EHRR 729 and Y v Russia (2008) 51 EHRR 531.
However, the reunion cases do draw upon the distinction, which they attribute to Abdulaziz, between cases where family life was established in another country, which the parents left to come to the host country, and now wish to bring a left behind child to the host country, and cases, like Abdulaziz itself, where a couple marry when one is settled in the host country and wish to establish a home there.
In the former type of case, apart from Gl itself, the Court has often found a violation in failing to allow the left behind member to join the family in the host country.
In Y v Russia, on the other hand, the Court found no violation in refusing to allow a failed asylum seeker from China to remain with his Russian wife in Russia.
Significantly, however, he had made no attempt to obtain a residence permit as the husband of a Russian national (to which it appears that he would prima facie have been entitled under Russian law) so it was an open question whether he could have done so or whether his wife could join him in China.
Even more significantly, perhaps, while drawing its statement of principle, in para 103, virtually word for word from para 39 of Rodrigues da Silva, the Court referred to Boultif in one of its footnotes.
It would appear, therefore, that although all these cases depend upon their particular facts and circumstances, the approach is now similar in all types of case.
The Courts approach is much more compatible with an analysis in terms of justification under article 8(2) than with an analysis of the extent to which respect is due under article 8(1): and in Omoregie v Norway [2009] Imm AR 170, the Court expressly analysed a reunion case in article 8(2) terms.
It would seem, therefore, that we can safely consign the no lack of respect aspect of Abdulaziz to history.
But in this case that debate seems to me to be something of a red herring.
In Abdulaziz itself it was clearly established that family life exists between husband and wife by virtue of their marriage and that family life normally comprises cohabitation.
Absent the immigration dimension, there can be no doubt that forcing a married couple to choose either to live separately for some years or to suspend their plans to live in one place and go to live where neither of them wishes to live, is, as Lord Wilson puts it at para 32, a colossal interference with their right to respect for family life.
And in this case, the immigration dimension can be ignored.
This measure has not been adopted as a measure of immigration control.
The United Kingdom has no objection to admitting genuine spouses who fulfil certain self sufficiency and language requirements to this country.
The Secretary of State cannot at one and the same time say that she is not doing this for the purpose of controlling immigration and rely upon jurisprudence which is wholly premised on the states right to control immigration.
So the only question is whether this colossal interference can be justified under article 8(2).
The justification claimed is that this measure will prevent, deter or delay forced marriages.
This is undoubtedly a legitimate aim, in article 8(2) terms, for the protection of the rights and freedoms of others.
The action taken was undoubtedly in accordance with the law.
The sole question is whether it was necessary in a democratic society, in other words, whether it was a proportionate response to a pressing social need.
As Lord Wilson has shown, there are many reasons to conclude that it was not.
First and foremost, although nobody knows the figures, it is clear that the rule will interfere with many more entirely voluntary marriages than it will prevent, deter or delay forced marriages.
The scale and severity of the impact upon these unforced marriages has scarcely been considered.
Nicola Smith, in her first witness statement on behalf of the Secretary of State, says that it was considered carefully, but the reasoning was that, as only a small proportion of foreign spouses are from this age group, the impact was proportionate.
No one has said: We know that many innocent young people will be caught by this rule but we think that the impact upon them will not be so great while the protection given to victims of forced marriage will be so much greater.
There are, of course, circumstances in which the imposition of a blanket rule can be justified.
The best known example is the ban on assisting suicide, upheld by the Strasbourg Court even though not every would be suicide was vulnerable and in need of its protection: see Pretty v United Kingdom (2002) 35 EHRR 1.
But even then, an important factor in the Courts decision was the prosecutors discretion: It does not appear to be arbitrary to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution . (para 76).
We know from cases such as Hirst v United Kingdom (No 2) (2005) 42 EHRR 849, para 82, that a general, automatic, indiscriminate restriction (their word) on a vitally important Convention right falls outside any acceptable margin of appreciation.
We are, of course, concerned with a restriction rather than a perpetual ban, but it is none the less general, automatic and indiscriminate.
In this case, it is understood that individualised decisions may create their own problems, because taking steps to determine whether or not the marriage is forced may exacerbate the risks to the reluctant spouse.
But, as the House of Commons Home Affairs Committee has pointed out, the Government has a mechanism to help reluctant sponsors: Domestic Violence, Forced Marriages and Honour based Violence, 6th Report of Session 2007 08, HC 263 I, paras 112114.
Secondly, it is entirely unclear whether the rule does have the desired effect upon the marriages which it is designed to prevent or deter.
Karma Nirvana gave evidence that some girls ringing their helpline have found it helpful to be able to say to their families that they will not be able to sponsor an immigrant spouse until they are both 21: House of Commons Home Affairs Committee, Forced Marriage, 8th Report of Session 2010 12, HC 880, para 16.
But there is also evidence that the desire to obtain a visa is not the predominant motive for forcing a child into marriage.
It is only the 12th of the list of 13 motives given in the statutory guidance: see para 10 earlier.
We have no idea how many forced marriages with non resident spouses have been deterred.
We have no idea how many forced marriages with resident spouses have been substituted for those which have been deterred.
We do know that the rule can have no effect at all upon the forced marriages which take place within this country or within the European Union.
Thirdly, we also know that if the rule is not effective in preventing a forced marriage it may do a great deal more harm than good.
A young woman may be sent abroad and forced to marry against her will and kept there until she can sponsor her husband to come here.
During this time she may be raped many times, bear children she does not want to have and be deprived of the education and life which she would otherwise have had here.
Even if she is allowed to come home, she will not be able to escape from the marriage.
She will be obliged to stay married so that she can sponsor her husband to come here.
The rule will have made her life more difficult.
The cases coming before the Family Division of the High Court, although only the tip of the iceberg, provide ample illustration of the difficulties of rescuing a young person who has been trapped into marriage abroad: see, for example, In re KR (Abduction: Forcible Removal by Parents) [1999] 2 FLR 542.
Hence it is scarcely surprising that the views of knowledgeable people and organisations are so divided.
While Karma Nirvana support the change, Southall Black Sisters and the Henna Foundation do not.
In 2008, the Home Affairs Committee concluded, at para 111, that there was not sufficient evidence to determine whether it would have the desired deterrent effect.
Given the potential risks involved, it urged that the age should not be raised without further research and conclusive evidence.
There certainly was no conclusive evidence when the change was made.
The Department had previously commissioned research from Bristol and Manchester Universities, which found that the change would be unlikely to prevent forced marriages, and indeed might increase the risk of negative actions associated with the increased age (Hester and others, Forced Marriage: the risk factors and the effect of raising the minimum age for a sponsor, and of leave to enter the United Kingdom as a spouse or fianc(e), 2007, chapter 3).
The Department concluded that, because of methodological difficulties, these findings should be treated with caution and not regarded as representative.
They went on to publish their own consultation paper, Marriage to Partners from Overseas (December, 2007).
Six months later, they published their conclusions, in Marriage Visas: The Way Forward (July, 2008).
Clearly, those who choose to respond to consultation papers are even less representative than the organisations, individuals and focus groups who were chosen for the purpose of the academic research.
Even so, the response was hardly a ringing endorsement: 15 of the 29 individual respondents supported the change, the organisations were evenly divided between supporters and opponents and three organisations had mixed views.
None of this amounts to the conclusive evidence for which the Home Affairs Committee called in 2008.
None of it amounts to a sufficient case to conclude that the good done to the few can justify the harm done to the many, especially when there are so many other means available to achieve the desired result.
There is a further reason for holding the interference disproportionate.
Although the means used is an interference with article 8 rights, the object is to interfere with article 12 rights.
The aim is to prevent, deter or delay marriage to a person from abroad.
The right to marry is a fundamental right.
It does not include the right to marry in any particular place, at least if it is possible to marry elsewhere: see Savoia and Bounegru v Italy (Application No 8407/05) (unreported), Admissibility Decision of 11 July 2006.
But it is not a qualified right: the state can only restrict it to a limited extent, and not in such a way or to such an extent as to impair its very essence.
In ODonoghue v United Kingdom (Application No 34848/07) (unreported) given 14 December 2010, the Court was concerned with the Home Office scheme for approving marriages with people from abroad, the first version of which was struck down by the House of Lords in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53, [2009] 1 AC 287.
The Court agreed that a system of approval designed to establish the capacity of the parties to marry and whether or not it is a marriage of convenience is not objectionable.
But this scheme was objectionable for a number of reasons: first, the decision to grant a certificate was not based on the genuineness of the marriage; second, it imposed a blanket prohibition on certain categories of people; and third, the fee was set at a level which the needy could not pay.
A fee fixed at such a level could impair the essence of the right to marry.
This scheme shares all three characteristics.
The delay on entry is not designed to detect and deter those marriages which are or may be forced.
It is a blanket rule which applies to all marriages, whether forced or free.
And it imposes a delay on cohabitation in the place of their choice which may act as at least as severe a deterrent as a large fee.
I say this, not to conclude that there has been a violation of these couples right to marry.
They have in fact both been able to get married, one in England and one in Pakistan.
But these factors lend weight to the conclusion that it is a disproportionate and unjustified interference with the right to respect for family life to use that interference for the purpose of impeding the exercise of another and even more fundamental Convention right in an unacceptable way.
Like Lord Wilson, therefore, I would hold that the Secretary of State has acted incompatibly with the Convention rights of these two couples.
I also agree with him that, although we are only concerned with these young people, it is difficult to see how she could avoid infringing article 8 whenever she applied the rule to an unforced marriage.
LORD BROWN
Forced marriages are an appalling evil.
Most commonly the victims are young women and all too often such marriages occur within the immigrant community.
One reason for this, amongst several identified by the National Centre for Social Research (NCSR) in their July 2009 report, is that: FM can be a way of ensuring land, property and wealth remain within a family.
It may take place because of a long standing family commitment or to appease an aggrieved family member.
This is often associated with assisting a claim for UK residency and citizenship. (para 2.1)
One way of seeking to combat this aspect at least of the problem of forced marriages has been by raising the age at which a UK national or settled resident can sponsor a fiance or spouse seeking admission to this country (and also the age at which a fiance or spouse may gain entry).
In April 2003 the age for sponsorship was raised from 16 to 18 and in December 2004 the age for those seeking entry was similarly raised.
As stated in the July 2008 Home Office UK Border Agency Report (proposing a further such increase from 18 to 21) Marriage Visas: The Way Forward: These measures were introduced to help tackle the problem of forced marriage with the aim of giving young people extra time to mature which would help them to resist inappropriate family pressure to marry. (para 3.1)
The proposed further increase from 18 to 21 was implemented by the amendment of paragraph 277 of the Immigration Rules (HC 395) with effect from 27 November 2008.
It is this increase which by order made on 21 December 2010 the Court of Appeal declared to be unlawful, at least where, as in the present cases, one party to the (actual or proposed) marriage is a UK national.
The essential ground on which the Court of Appeal held the increase to be unlawful was that its interference with the respondents article 8(1) rights was unjustified and disproportionate (indeed, in Gross LJs view, irrational or unreasonable in the traditional, common law, Wednesbury sense).
It is my misfortune to disagree with what I understand will be the decision of the majority of the court on this further appeal to uphold the Court of Appeals conclusion.
The Court of Appeal did not have, as this Court has had, the advantage of the May 2011 report (with evidence annexed) of the House of Commons Home Affairs Committee on Forced Marriage.
This report, having noted the Court of Appeals ruling in the present case and that this matter is still currently before the courts continues: 16.
Karma Nirvana [the largest NGO concerned with the victims of forced marriage and an organisation of unchallenged repute] supported the change in the Immigration Rules on the grounds that: We at Karma Nirvana have received feedback from victims that they have been helped by the rule.
On the helpline we receive a number of calls from potential victims (and professionals on their behalf) under the age of 21 years asking about their legal position.
Most, if not all, seem quite relieved to find that they have extra breathing space in which to make up their minds. 17.
However, Southall Black Sisters disagreed that the change has had a positive effect, stating that it does not in reality protect victims from forced marriage, but simply increases pressures on them to remain within an abusive situation and discriminates against migrant communities.
In evidence to our predecessor Committee in March 2010, Nazir Afzal of the Crime Prosecution Service, had mixed views: I have spoken to several members of the third sector and police officers . and they tell me that it has had a very positive effect in terms of the people who would ordinarily have been forced into marriage at an earlier age . several hundred women have not been forced into marriage because they have been given the opportunity to wait until beyond 21 .
It has sent out a message to some families and to some communities that they need to be taking this a little bit more seriously than they have done.
However, there has been an increase in relation to fraud involving birth certificates obtained abroad for individuals who are trying to pretend that they are 21 when they are not. 18.
We have received mixed evidence about the impact of the change in the Immigration Rules in 2008 to require sponsors of marriage visas and their incoming spouses to be over the age of 21.
We recognise that the change may be seen as discriminatory and has the potential for young people to be held in abusive situations for longer; however, it has undoubtedly helped a number of young people to resist forced marriage.
The overall balance of this latest report, as it seems to me, is in favour of the rule change.
True, Southall Black Sisters (one of the interveners before this court) are against it.
But their view is more than offset by that of Karma Nirvana and Mr Afzals only concern appears to be in respect of forged birth certificates.
There is furthermore before this court information about the practice of other EU countries which impose minimum ages for marriage visas.
Germany, Austria and the Netherlands impose an age requirement of 21 for both parties (including their own citizens) precisely as the UK does.
Belgium is planning to have the identical rule (although at present it does not apply to Belgian citizens or EU nationals).
Denmark has the same rule except that it imposes a minimum age requirement of 24 rather than 21.
In addition our attention is drawn to Council Directive 2003/86/EC of 22 September 2003 on the right to family reunification which, with regard to third country national sponsors, provides (by article 4(5)): In order to ensure better integration and to prevent forced marriages Member States may require the sponsor and his/her spouse to be of a minimum age, and at maximum 21 years, before the spouse is able to join him/her. (emphasis added) The October 2008 Report from the Commission to the European Parliament and the Council on the application of that Directive stated in respect of article 4(5): Most Member States made use of this optional clause, arguing that it can help prevent forced marriages.
Now it is of course obvious that this rule has significant disruptive effects on many young couples whose actual or proposed marriages are entirely voluntary indeed, the very substantial majority of those affected.
Predictably these couples, whether or not they marry, will be kept apart or have to live abroad.
As, moreover, is recognised in a recent statement (dated 9 June 2011) from Suzelle Dickson, the Joint Head of the Forced Marriage Unit (FMU): The FMU is aware of a concern that the increase in the minimum age for obtaining a marriage visa would lead to young people being kept abroad against their will for an extended period following the marriage until reaching the age for sponsorship.
She adds, however: From the FMUs experience the majority of reluctant sponsors return to the UK soon after the marriage although there are no statistics or data held in relation to this.
This is generally so that the sponsor can establish themselves financially, gaining employment so that they can support the visa application.
It is also perfectly true that, certainly at the time this measure was introduced in November 2008, there had been little in the way of research to indicate just how far the rule would help in combating forced marriages.
As, indeed, the 2011 Home Affairs Committee Report noted (at para 14), their predecessor committee in May 2008 had concluded: We have not seen sufficient evidence to determine whether or not raising the age of sponsorship would have a deterrent effect on forced marriage.
Given the potential risks involved, we urge the government to ensure that any changes it proposes to its policy on visa application procedures in respect of sponsorship are based on further research and conclusive evidence as to the effect of those changes.
The unfortunate fact is, however, that, by the same token that the full extent of the problem of forced marriage is impossible to gauge as stated in the NCSR July 2009 report (para 3), it is likely that there are a large number of victims who have not come to the attention of any agencies or professionals, described as hidden cases so too research is problematic and conclusive evidence impossible to come by.
The reason forced marriages are hard to detect is, of course, that victims inevitably risk yet further serious harm and suffering if they reveal the true facts.
Lord Wilson (at para 49 of his judgment) poses ten questions all, I readily accept, perfectly good questions which (at para 50) he recognises are not easily answered and remain unanswered.
The unfortunate fact is, however, that these questions can never be satisfactorily answered and that a judgment call is therefore required.
This is a matter to which I return at para 91 below.
Or is it to be said that the whole matter is all just too difficult and uncertain and that the Secretary of State is therefore disabled from taking the course adopted by those other EU countries which share her view on the best way forward (although not apparently from increasing the sponsoring age from 16 to 18 as was earlier done)?
For my part, therefore, I would be less critical than the majority of the Secretary of States view the Hester Research Report having been analysed by Immigration Research and Statistics and two external peer reviewers as not of sufficient quality to be published by the Home Office that, public consultation [having] found that a small majority of respondents were in favour . , raising the marriage visa age would represent a robust and publicly endorsed approach to the problem of forced marriage. (para 33 of Nicola Smiths witness statement for the appellant dated 30 October 2009).
Altogether more important than this, however, as it seems to me, is that this courts duty is to decide the appeal, not by a reference to the sufficiency or otherwise of the research carried out by the Home Office before the new rule was introduced, but rather by reference to the proportionality as perceived today between the impact of the rule change on such innocent young couples as are adversely affected by it and the overall benefit of the rule in terms of combating forced marriage.
As Lord Bingham of Cornhill said in R (SB) v Governors of Denbigh High School [2007] 1 AC 100, 116, para 31: what matters in any case is the practical outcome, not the quality of the decision making process that led to it.
In the light of all the material now before this court, most notably the May 2011 Home Affairs Committee Report and Karma Nirvanas evidence before it, the evidence of other EU countries imposing similar minimum age requirements for sponsoring marriages, the 2003 EC Directive (and the 2008 Council Report on its application) recognising that such requirements are widely regarded as helping to prevent forced marriages, the original, never disputed, increase in the age requirement for sponsorship from 16 to 18 with that aim in mind, together with such (admittedly, albeit to my mind inevitably, limited) Home Office statistical evidence as suggests the benefit of a further such increase from 18 to 21, I find it hard to see how this court can properly strike down the rule as incompatible with article 8.
The extent to which the rule will help combat forced marriage and the countervailing extent to which it will disrupt the lives of innocent couples adversely affected by it is largely a matter of judgment.
Unless demonstrably wrong, this judgment should be rather for government than for the courts.
Still more obviously, the comparison between the enormity of suffering within forced marriages on the one hand and the disruption to innocent couples within the 18 21 age group whose desire to live together in this country is temporarily thwarted by the rule change, is essentially one for elected politicians, not for judges.
Lady Hale suggests (at para 66 of her judgment) that: The right to marry is just as important as the right not to marry.
But she cannot possibly mean by this that the postponement by up to three years of a couples wish to live together as man and wife in this country involves just as great a violation of human rights as a forced marriage.
What value, then, is to be attached to preventing a single forced marriage? What cost should each disappointed couple be regarded as paying? Really these questions are questions of policy and should be for government rather than us.
Of course, the ultimate decision on article 8(2) proportionality must be for the courts but in this particular context the courts should to my mind accord government a very substantial area of discretionary judgment.
Huang v Secretary of State for the Home Department [2007] 2 AC 167 (to which Lord Wilson refers at para 46 of his judgment) was a very different sort of case from the present, concerning as it did the article 8 claims of two particular individuals on their own special facts.
No one was seeking there, as here, actually to strike down an immigration rule.
Certainly, at paragraph 16 of the committees opinion (given by Lord Bingham) in Huang, we deprecated the use of the term deference to describe the weight to be given to certain factors considered important by the Secretary of State.
But we expressly recognised the need to accord appropriate weight to the judgment of a person with responsibility for a given subject matter and access to special sources of knowledge and advice.
That is precisely what I am suggesting should be done here: it is the Secretary of State who has the responsibility for combating forced marriages in the context of immigration and who should be recognised as having access to special sources of knowledge and advice in that regard.
Lady Hale (at para 74 of her judgment) says that: We know from cases such as Hirst v United Kingdom (No 2) (2005) 42 EHRR 849, para 82, that a general, automatic, indiscriminate restriction on a vitally important Convention right falls outside any acceptable margin of appreciation.
I confess to the greatest difficulty in understanding the suggested relevance of Hirst in the present context.
Were the UK government now to legislate to accord the vote, say, to all prisoners serving less than four year terms of imprisonment, could it then seriously be argued that the rule (denying the vote to those serving four years or more) would still fall foul of some principle against a general, automatic, indiscriminate restriction? I suggest not and that that would be the real parallel with the rule in the present case (just as with the previous rule postponing sponsorship from 16 to 18 as to which Lady Hale says nothing as, indeed, she says nothing about the similar rules adopted in other Council of Europe states).
In any event, it is not as if the Secretary of State makes no exception whatever to the operation of the rule.
Obviously, given the difficulty of discovering which marriages (or proposed marriages) are forced, exceptions cannot be too readily made if the rule is to have its intended effect.
But, in exceptional compassionate circumstances (perhaps, for example, where children are involved or the woman is pregnant) or where, indeed, on the particular facts of an individual case article 8 would otherwise be breached (the demonstrable disadvantage to a particular couple plainly outweighing the public interest in maintaining a general rule for the benefit of the wider community, a category of exception likely to overlap with the first), the rule will be disapplied.
Such exceptions, one may note, are broadly mirrored in the Danish legislation (helpfully supplied to us following the hearing by Mr Setright QC acting on behalf of the second interveners) which, by section 9c(i) of the Aliens (Consolidation) Act 2009, provides for a resident permit to be issued to an alien under 24 upon the fulfilment of certain specified conditions if exceptional reasons make it appropriate, including regard for family unity.
Similarly the exception to rule 277 constituted by its further amendment with effect from 6 April 2010 to reduce the minimum age to 18 if either party is a serving member of HM Forces, so far from mak[ing] all but untenable the Home Secretarys contention that an all embracing rule, making no distinction of persons, is necessary if the objective is to be met (Sedley LJs judgment at para 57), is to my mind convincingly explained in Nicola Smiths third witness statement (before the Court of Appeal) dated 14 October 2010: The change reflects the unique circumstances in which military personnel operate.
Additional support provided by the Armed Forces to families during deployments is more efficiently delivered if they live close to the Service persons duty station.
This support gives a Service person a degree of reassurance when they are deployed on operations and is considered to have a positive effect on families at home.
It is the Ministry of Defences view that military personnel will be more operationally effective when deploying to difficult environments if they have increased certainty that their spouse or partner will not be excluded from the UK.
Mr Al Mustakim on behalf of the respondents in the second appeal and all the interveners (although conspicuously not Mr Drabble QC for the respondents in the first appeal) seek to rely on the decision of the House of Lords in R (Baiai) v Secretary of State for the Home Department [2009] AC 287 in support of an argument under article 12 of the Convention.
As Sedley LJ records (para 47 of his judgment), Mr Al Mustakim and the AIRE Centre placed the right to marry at the centre of their arguments and, indeed, Mr Satvinder Juss for the third intervener contends before us (para 1 of his written case) that Baiai is dispositive of this appeal.
In my judgment, however, the differences between the two cases are altogether more striking than their similarities and reliance here on the decision in Baiai is entirely misplaced.
Baiai involved a direct contravention of the first limb of article 12, the right to marry.
Here by contrast the case cannot be put higher than an interference with the right to found a family.
As stated in Clayton and Tomlinsons The Law of Human Rights, 2nd ed, (2009) para 13.114: a claim that legal restrictions preclude a couple from marrying will come under article 12 whereas complaints concerning the states failure to provide the material circumstances which make marriage effective will engage article 8.
Secondly, the legitimate aim advanced for the blanket prohibition in Baiai was the combating of marriages of convenience, ie marriages designed to defeat immigration control.
Here by contrast the aim is to combat forced marriages, obviously a more compelling objective.
Thirdly, the justification advanced for adopting a blanket prohibition rather than investigating each application individually has been very different in the two cases.
It is one thing to stigmatize a rule as insufficiently precisely targeted (Ms Monaghan QCs characterisation of the respective policies at para 20 of her written argument for the AIRE Centre) if the only reason put forward for not considering cases individually is that such investigation is too expensive and administratively burdensome (para 31 of Lord Bingham of Cornhills judgment in Baiai); quite another to do so given, as here, the impossibility (explicitly recognised by Mr Setright in argument) of satisfactorily investigating individual applications in the context of forced marriages.
It is now an established principle of our law that the Convention should not be interpreted and applied more generously in favour of an applicant than the Strasbourg jurisprudence clearly warrants.
If this court now concurs in striking down rule 277 on article 8 grounds, there is nothing the Secretary of State can do by way of an appeal to Strasbourg to reinstate it.
Are we really to say that the position is plain and that Germany, Austria, the Netherlands, Belgium, Denmark and other such Council of Europe states with similar rules must also necessarily be in breach of article 8? What if the equivalent rule is later challenged elsewhere in Europe and eventually upheld in Strasbourg? Article 8 is a difficult provision which has already led to some highly contentious, not to say debateable, decisions.
Upon that I am sure we would all agree.
In a sensitive context such as that of forced marriages it would seem to me not merely impermissible but positively unwise for the courts yet again to frustrate government policy except in the clearest of cases.
To my mind this cannot possibly be regarded as such a case.
I would allow these appeals.
LORD PHILLIPS AND LORD CLARKE
We agree that these appeals should be dismissed for the reasons given by Lord Wilson and Lady Hale.
| UK-Abs | The issue is whether the ban on the entry for settlement of foreign spouses or civil partners unless both parties are aged 21 or over, contained in paragraph 277 of the Immigration Rules, was a lawful way of deterring or preventing forced marriages.
Paragraph 277 of the Immigration Rules [Paragraph 277] was amended with effect from 27 November 2008 to raise the minimum age for a person either to be granted a visa for the purposes of settling in the United Kingdom as a spouse or to sponsor another for the purposes of obtaining such a visa from 18 to 21.
The purpose of the amendment was not to control immigration but to deter forced marriages.
A forced marriage is a marriage into which at least one party enters without her or his free and full consent through force or duress, including coercion by threats or other psychological means.
Mr Quila, a Chilean national, entered into a fully consensual marriage with Ms Jeffery, a British citizen.
Mr Aguilar Quila applied for a marriage visa before the amendment took effect, but his application was refused as his wife was only 17 and a sponsoring spouse had to be 18.
By the time that Ms Jeffrey had turned 18 the amendment was in force and the Home Office refused to waive it.
Consequently, Mr Quila and his wife were forced to leave the UK initially to live in Chile (his wife having had to relinquish a place to study languages at Royal Holloway, University of London) and subsequently to live in Ireland.
Bibi (as she invited the Court to describe her) is a Pakistani national who applied to join her husband, Mohammed, a British citizen, in the UK.
Bibi and Mohammed had an arranged marriage in Pakistan in October 2008, to which each of them freely consented.
Their application was refused as both parties were under 21.
The Respondents claims for judicial review of the decisions were both rejected in the High Court.
The Respondents successfully appealed to the Court of Appeal, which declared that the application of Paragraph 277 so as to refuse them marriage visas was in breach of their rights under Article 8 of the European Convention on Human Rights and Fundamental Freedoms 1950 [the ECHR].
The Secretary of State has appealed to the Supreme Court.
The Supreme Court, by a 4 1 majority, dismisses the Secretary of States appeal on the grounds that the refusal to grant marriage visas to the Respondents was an infringement of their rights under Article 8 ECHR.
Lord Wilson gives the leading judgment; Lady Hale gives a concurring judgment.
Lord Phillips and Lord Clarke agree with Lord Wilson and Lady Hale.
Lord Brown gives a dissenting judgment.
Article 8 ECHR was engaged [43; 72].
Applying R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, the relevant question was whether there had been an interference by a public authority with the exercise of a persons right to respect for his private or family life and if so, whether it had had consequences of sufficient gravity to engage the operation of the article [30].
Unconstrained by authority,
Lord Wilson would have considered it a colossal interference to require for up to three years either that the spouses should live separately or that a British citizen should leave the UK for up to three years [32].
The ECtHR in Abdulaziz v United Kingdom (1985) 7 EHRR 471 has, however, held that there was no lack of respect for family life in denying entry to foreign spouses.
There was no positive obligation on the State to respect a couples choice of country of matrimonial residence [35 36].
Lord Wilson holds that Abdulaziz should not be followed in this respect; there was dissent at the time and no clear and consistent subsequent jurisprudence from the ECtHR as four more recent decisions [38 41] were inconsistent with the decision [43].
The ECtHR has since recognized that the distinction between positive and negative obligations should not generate different outcomes [43].
The Secretary of State has failed to establish that the interference with the Respondents rights to a family life was justified under Article 8(2) ECHR.
Paragraph 277 has a legitimate aim, namely the protection of the rights and freedoms of those who might be forced into marriage [45] and is rationally connected to that objective, but its efficacy is highly debatable [58].
A number of questions remain unanswered including how prevalent the motive of applying for UK citizenship is in the genesis of forced marriages; whether the forced marriage would have occurred in any event and thus the rule increase the control of victims abroad and whether the amendment might precipitate a swift pregnancy in order to found an application for a discretionary grant of a visa [49].
The Secretary of State has failed to adduce any robust evidence that the amendment would have any substantial deterrent effect [50; 75].
By contrast, the number of forced marriages amongst those refused a marriage visa had not been quantified [53].
The only conclusion that could be drawn was that the amendment would keep a very substantial number of bona fide young couples apart or forced to live outside the UK [54], vastly exceeding the number of forced marriages that would be deterred [58; 74].
The measure was similar to the blanket prohibition on persons subject to immigration control marrying without the Secretary of States written permission found to be unlawful in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53 [57, 78 79].
The Secretary of State has failed to exercise her judgement on this imbalance and thus failed to establish both that the measure is no more than is necessary to accomplish the objective of deterring forced marriage and that it strikes a fair balance between the rights of parties to unforced marriages and the interests of the community in preventing forced marriage.
On any view, the measure was a sledgehammer but the Secretary of State has not attempted to identify the size of the nut [58].
Lady Hale holds that the debate on Abdulaziz is something of a red herring as the Secretary of State could not simultaneously state that the measure was not for the purpose of controlling immigration and rely upon jurisprudence wholly premised on the States right to control immigration [72].
She further holds that the restriction was automatic and indiscriminate [74]; failed to detect forced marriages and imposed a delay on cohabitation in the country of choice, which was a deterrent that could impair the essence of the right to marry under Article 12 ECHR [78 79].
Whilst the judgment is essentially individual, it is hard to conceive that the Secretary of State could avoid infringement of Article 8 ECHR when applying Paragraph 277 to an unforced marriage [59; 80].
Lord Brown, dissenting, holds the extent of forced marriage is impossible to quantify so the deterrent effect of Paragraph 277 could never be satisfactorily determined [87].
The judgement of how to balance the enormity of suffering within forced marriages with the disruption to innocent couples was one for elected politicians, not for judges [91].
The measure was not an automatic indiscriminate restriction [92]; would be disapplied in exceptional circumstances [93] and similar rules applied in other European countries [85].
To disapply the rule would exceed ECtHR jurisprudence and in such a sensitive context, government policy should not be frustrated except in the clearest cases [97].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
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The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| UK-Abs | These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
There are three cases before the Court, two on appeal from the Court of Appeal of England and Wales and one from the Inner House of the Court of Session in Scotland.
This judgment deals with the two English cases, while a separate judgment will deal with the Scottish case.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
It is no longer argued on behalf of the Government that such decisions are not amenable to judicial review at all.
But it is argued that they are only reviewable in exceptional circumstances.
The claimants argue that no such limit exists.
The debate, therefore, has focussed upon the effect of the creation of a wholly new and integrated tribunal structure under the 2007 Act.
The cases
It has been helpful to hear three different cases together, all raising essentially the same question in different contexts.
In all of them the claimant failed in an appeal to the First tier Tribunal set up under the 2007 Act and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
In R (Cart) v The Upper Tribunal, Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency (whose functions have since been taken over by the Child Maintenance and Enforcement Commission) to revise a variation in the level of child maintenance to be paid to his ex wife for the support of their children.
His appeal was dismissed in October 2007.
He applied for permission to appeal to the Child Support Commissioners.
In June 2008, Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The functions of the Child Support Commissioners were then taken over by the Administrative Appeals Chamber of the Upper Tribunal.
Following a hearing in January 2009 the Upper Tribunal, consisting of the Senior President, Carnwath LJ, and Tribunal Judge Jacobs (as the Commissioner had now become) dismissed his appeal on the three grounds for which permission had been given and declined permission to reopen the fourth: [2009] UKUT 62 (AAC).
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
It was agreed that the amenability of the Upper Tribunal to judicial review should be determined as a preliminary issue.
In December 2009, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances: [2009] EWHC 3052 (Admin), [2010] 2 WLR 1012.
In July 2010, the Court of Appeal dismissed his appeal, reaching the same result but by a different route: [2010] EWCA Civ 859; [2011] 2 WLR 36.
It will be necessary to return to their reasoning in due course.
Mr Cart now appeals to this Court.
R (MR (Pakistan)) v The Upper Tribunal concerns a native of Pakistan who has been in the United Kingdom since June 2007.
At that stage he had a multi visit visa valid until June 2009.
In March 2010 he applied for asylum on the basis of his conversion to Christianity.
This was refused in April 2010.
His appeal to the Immigration and Asylum Chamber of the First tier Tribunal was dismissed less than two weeks later.
His application to the First tier Tribunal for permission to appeal to the Upper Tribunal was refused in May and his application to the Upper Tribunal was refused only days later by Ouseley J, sitting as a judge of the Upper Tribunal.
MR sought judicial review of Ouseley Js decision.
Permission to apply was granted by Judge Nicholas Cooke QC, sitting as a High Court Judge.
But at the hearing of the claim in December 2010, Sullivan LJ determined a preliminary issue concerning the amenability of the Upper Tribunal to judicial review in accordance with the decision of the Court of Appeal in Cart and dismissed the claim: [2010] EWHC 3558 (Admin).
He granted a certificate under section 12 of the Administration of Justice Act 1969, so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
In Eba v Advocate General for Scotland, Ms Eba appealed to the Social Entitlement Chamber of the First tier Tribunal against the refusal of her claim for disability living allowance.
Her appeal was also refused, as were her applications both to the First tier Tribunal and to the Upper Tribunal for permission to appeal to the Upper Tribunal against that refusal.
Ms Ebas petition for judicial review of each of those decisions was dismissed by the Lord Ordinary, who followed the reasoning of the Divisional Court in Cart: [2010] CSOH 45, 2010 SLT 547.
She reclaimed that refusal, on the ground that judicial review was not so limited.
The Advocate General cross appealed on the ground that the Upper Tribunal was not amenable to judicial review at all.
The First Division refused the cross appeal but allowed Ms Ebas reclaiming motion on the basis that the supervisory jurisdiction of the Court of Session was not so limited and that, notwithstanding the decision of the Court of Appeal in Cart, it did not follow that the result should be the same in Scotland: [2010] CSIH 78; 2010 SLT 1047.
The First Division granted the Advocate General permission to appeal to this Court.
Conveniently, however, we heard first the arguments of all three claimants, Mr Richard Drabble QC for Mr Cart, Mr Jonathan Mitchell QC for Ms Eba, and Mr Manjit Gill QC for MR, followed by oral arguments for two of the interveners, Mr Michael Fordham QC for the Public Law Project, and Mr James Mure QC for the Lord Advocate, followed by Mr James Eadie QC for the Secretaries of State for Justice and for the Home Department and the Child Maintenance and Enforcement Commission and Mr David Johnston QC for the Advocate General for Scotland.
Mr Alex Bailin QC and others also made helpful written submissions on behalf of the intervener JUSTICE.
It has been particularly useful to be able to look at the issues in the context of the two jurisdictions, social security (including for this purpose child support) and immigration and asylum, which together make up the great bulk of the business of the new tribunal system, and in the context of the supervisory jurisdiction of the higher courts in both Scotland and England and Wales.
The judgment in Eba will deal with the supervisory jurisdiction of the Court of Session in Scotland while this judgment will deal with the supervisory jurisdiction of the High Court in England and Wales.
The tribunal systems with which we are concerned, both before and after their restructuring in the 2007 Act, however, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
The tribunal system
One of the most important and controversial features of the development of the legal system in the 20th century was the creation and proliferation of statutory tribunals separate from the ordinary courts.
Mostly they were set up to determine claims between an individual and the state to war pensions, to social security benefits, to immigration and asylum, to provision for special educational needs, to be released from detention in a psychiatric hospital, against the refusal or withdrawal of licences or approvals to conduct certain kinds of business, for the determination of liability to direct and indirect taxation, for compensation for compulsory purchase and so on.
In some instances, they were set up to adjudicate upon statutory schemes, generally those which modified what would otherwise be an ordinary contractual relationship between private persons between employer and employee or between landlord and tenant of residential property.
These jurisdictions were and remain very diverse.
The subject matter can range from liability to VAT or entitlement to performing rights or the price of leasehold enfranchisement, which can be worth millions of pounds, to the amount of weekly means tested benefits or war pensions entitlement, which may be worth only a few pounds at a time but may mean a great deal to the claimants involved and to others like them.
The judiciary, also, could and still can be very diverse, ranging from seconded High Court judges or senior Queens Counsel to fee paid part timers from a great variety of legal professional backgrounds.
In many cases, tribunals also had and still may have members who were not legally qualified but had other professional qualifications or experience which was particularly suited to the subject matter of the claim.
Some had single tier structures, some with and some without a right of appeal to the High Court or Court of Appeal.
Some had two tier structures with their own appellate tier, again with or without a right of appeal to the High Court or Court of Appeal.
But in general these tribunal systems shared some common characteristics.
They were set up by statute to administer complex and rapidly changing areas of the law.
Their judges were expected to know this law without having to have lawyers for the parties to explain it to them.
Their members were expected to have relevant expertise or experience in the subject matter of the dispute, not only so that they would be able to adjudicate upon factual issues without the help of lawyers for the parties, but also so that the parties could feel confident that the overall balance of the panel (for example between employers and employees) would produce impartial results.
Their procedures were also tailored to the subject matter of the dispute and they were not bound by the technical rules of evidence.
While legal representation was common in those tribunals where large sums of money were at stake, and latterly in mental health review tribunals where personal liberty was at stake, the original expectation in most tribunals was that people would not need representation, or could be helped by specialist non lawyer representatives.
In theory, therefore, the respective roles of the tribunal and the parties were rather different from their roles in the ordinary courts.
The tribunal was more than a neutral referee before whom each party was expected to lay out all the material necessary to decide the case for the judge to choose which he preferred (compare Bingham, The Rule of Law, 2010, p 89).
In general, this diverse specialism was regarded as a strength rather than a weakness, although the concomitant lack of legal aid in almost all tribunals was regretted by those who saw the benefits which skilled representation could bring.
However, another feature of these tribunal systems was more controversial.
They were mostly resourced and administered by whichever Department of State was responsible for the statutory scheme in question, rather than by the Department which was responsible for the administration of justice in the ordinary courts.
This led to fears that they were not, or at least were not seen to be, sufficiently independent of those sponsoring Departments.
The Department may have seen the independence and expertise of the tribunals as an integral part of the proper administration of a statutory scheme which was designed to bring certain benefits to the people.
But others may have feared that they were simply accomplices with the Department in denying to claimants the benefits which were properly theirs.
In between these two extremes, there might well be a perceived risk that the tribunals would be more inclined to accept the Departmental view of what the law was, rather than an alternative view which was more favourable to the claimant or taxpayer or whomever.
The system was greatly improved by the Tribunals and Inquiries Act 1958, following the Report of the Franks Committee on Administrative Tribunals and Inquiries in 1957 (Cmnd 218), with its insistence on openness and accountability to the higher courts.
In particular, provision was made in section 9 for appeals to the High Court which could be applied to any specified tribunal; and all (save two) previous exclusions of judicial review were abrogated by section 11.
The Franks Committee was firm that the prerogative orders were clearly necessary in cases where questions of jurisdiction are involved and in cases where no provision is made for appeals on points of law.
Accordingly no statute should contain words purporting to oust those remedies (para 117).
A later improvement was to strengthen the leadership of particular tribunal systems by introducing a presidential structure, headed by a High Court or Circuit Judge.
The final solution, following the Report of Sir Andrew Leggatt, Tribunals for Users One System, One Service (TSO, March 2001), was to transfer the administration of tribunals to the Ministry of Justice and to set up a new, integrated tribunal structure to take over the jurisdiction of most, but not all, of the existing systems under the 2007 Act.
But before turning to the effect of that Act, it is necessary to see how judicial review was employed under the old system.
Judicial review in its modern form, of course, is the product of two developments.
One was the integration and simplification of the procedures for obtaining the former prerogative writs of certiorari, prohibition and mandamus or declaratory relief, in the revised Order 53 of the Rules of the Supreme Court, introduced in 1978 following the recommendations of the Law Commissions Report on Remedies in Administrative Law (1976, Law Com No 73).
The other was the vigorous development of the substantive law, most notably of course in Anisminic v Foreign Compensation Commission [1969] 2 AC 147.
Mr Fordham, for the Public Law Project, rightly reminds us that the remedy of certiorari had long been available to quash the decision of an inferior court or tribunal for error of law on the face of the record: see R v Northumberland Compensation Appeal Tribunal, Ex p Shaw [1952] 1 KB 338.
There the tribunal had wrongly interpreted the service to be taken into account in assessing the applicants compensation for loss of office.
There was no right of appeal against its decisions.
The Attorney General had argued that certiorari would only lie to prevent a tribunal exceeding its jurisdiction.
Both the Divisional Court and the Court of Appeal emphatically disagreed.
This was not to assume an appellate function which had not been given to it; the court had an inherent jurisdiction to control all inferior tribunals, not in an appellate capacity, but in a supervisory capacity.
This control extends not only to seeing that the inferior tribunals keep within their jurisdiction, but also to seeing that they observe the law.
The control is exercised by means of a power to quash any determination by the tribunal which, on the face of it, offends against the law.
The Kings Bench does not substitute its own views for those of the tribunal, as a Court of Appeal would do.
It leaves it to the tribunal to hear the case again . : see Denning LJ, at pp 346 7.
Singleton LJ lamented the lack of a right of appeal on a point of law, which he thought would save a great deal of time and trouble in deciding whether certiorari would lie: see pp 345 6.
No doubt such views were influential when the Franks Committee came to recommend such a right.
Then came Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, where not only was there no right of appeal from the Commissions decisions but there was also an express provision in the Foreign Compensation Act 1950 that those decisions shall not be called in question in any court of law (s 4(4)).
This provision was one of the two expressly excepted from the general abrogation of such clauses in section 11 of the 1958 Act.
In holding that, nevertheless, it was not effective to oust the jurisdiction of the High Court to set aside a decision which was a nullity, and that a decision made in error of law was a nullity, the House of Lords effectively removed the distinction between error of law and excess of jurisdiction.
Where there was a right of appeal, of course, an aggrieved party would be expected to use that rather than judicial review.
Judicial review was always a remedy of last resort.
However, where there was no such right, there are numerous examples, at the highest level, of resort to judicial review to correct an error of law made by an inferior tribunal.
Two will suffice.
In Re Woodling, Woodling v Secretary of State for Social Services [1984] 1 WLR 348, the question of law was whether cooking meals was attention in connection with bodily functions for the purpose of attendance allowance.
It reached the House of Lords by way of judicial review of the refusal of the Social Security Commissioner to grant leave to appeal from the decision of the Attendance Allowance Board.
Significantly for the cases before this Court, the Board and the Commissioner were bound by an earlier decision of the Court of Appeal (R v National Insurance Commissioner, Ex p Secretary of State for Social Services [1981] 1 WLR 1017) excluding cooking; and when it was suggested to the Commissioner that this decision was wrong he indicated that he could add nothing to his earlier refusal of leave. (The challenge failed in the House of Lords, their lordships taking the view that attention in connection with bodily functions referred to things which the fit man normally does for himself, it not occurring to them that this might include cooking his own meals.)
That was a social security case.
R v Immigration Appeal Tribunal, Ex p Bakhtaur Singh [1986] 1 WLR 910 was an immigration case.
The claimants appeal against the decision of the Secretary of State to deport him failed before the adjudicator and the Immigration Appeal Tribunal refused leave to appeal to that Tribunal.
The case reached the House of Lords by way of judicial review of that refusal.
The issue was whether the public interest in paragraph 154 of the Immigration Rules could include the interests of the Sikh community as well as the public interest in maintaining effective immigration control.
Once again, the adjudicator had considered himself bound by dicta in an earlier High Court case (R v Immigration Appeal Tribunal, ex p Darsham Singh Sohal [1981] Imm AR 20).
Thus the principle was firmly established that the unappealable decisions of inferior tribunals, including the refusal of leave to appeal, were amenable to judicial review on all the usual grounds.
Indeed, in some cases, judicial review was considered a more appropriate remedy, even though statute provided another way of correcting errors of law: in Bone v Mental Health Review Tribunal [1985] 3 All ER 330, for example, Nolan J thought judicial review preferable to the power of a mental health review tribunal to state a case for the opinion of the High Court and the case stated procedure fell into disuse.
However, the availability of judicial review was seen as a particular problem in the context of immigration and asylum appeals.
In the Nationality, Immigration and Asylum Act 2002, s 101(2), Parliament introduced a form of statutory review of the refusal by the Immigration Appeal Tribunal of permission to appeal to that Tribunal.
This was conducted by a single High Court judge without either an oral hearing or any appeal from his decision.
It was therefore much swifter than the standard judicial review process, which involves the possibility of both written and oral submissions before both a High Court judge and a Lord Justice of Appeal.
In R (G) v Immigration Appeal Tribunal [2005] 1 WLR 1445, the Court of Appeal held that, although the introduction of this new statutory procedure did not remove the judicial review jurisdiction, the new procedure was an adequate and proportionate protection for the claimants rights and it was therefore a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which were or could have been the subject of statutory review.
Lord Phillips MR observed, at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
When Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
The same approach was adopted when the Asylum and Immigration (Treatment of Claimants et cetera) Act 2004 collapsed the former two tier appellate structure into one.
If the Asylum and Immigration Tribunal refused to order the reconsideration of a decision, the aggrieved party could ask the High Court to review the matter on paper and its decision was final (2002 Act, s 103A).
The Tribunals, Courts and Enforcement Act 2007
Part 1 of the 2007 Act established the new unified tribunal structure which was recommended in the Leggatt Report.
There is a First tier Tribunal, which is organised into chambers according to subject matter, each with its own President.
It consists of its judges and other (non lawyer) members.
There is an Upper Tribunal, also organised into chambers according to subject matter, each with its own President.
With one exception, the Upper Tribunal Presidents are all High Court judges, but this is not a statutory requirement.
It too consists of its judges and other (non lawyer) members.
While most of the tribunal judiciary are specifically appointed to that role, all the judges in the ordinary courts, from the Lords Justices of Appeal to the District Judges in the Magistrates Courts, are automatically judges of both the First tier and Upper Tribunals.
The whole is presided over by the Senior President of Tribunals, who shares the responsibility for organising the chambers with the Lord Chancellor (see s 7).
The Senior President is currently a Lord Justice of Appeal, but the Act provides two routes to appointment: the first is that the Lord Chancellor and heads of the judiciary in England and Wales, Scotland and Northern Ireland all agree to recommend an appeal court judge for appointment; and only if that process does not produce a result does the second route, selection by the Judicial Appointments Commission, which is not limited to appeal court judges, apply (see Schedule 1, para 2(5)).
Parliament has therefore expected, but not insisted, that the Senior President be an appeal court judge.
The new structure may look neat but the diversity of jurisdictions accommodated means that it is not as neat as it looks.
Thus, for example, the jurisdiction of the Special Commissioners of Income Tax and the VAT and Duties Tribunal has been assigned to the First tier Tribunal, although the importance of the decisions they make and the expertise of their judiciaries is, and should be, at least the equivalent of that of the Social Security Commissioners, who as appellate judges are assigned to the Upper Tribunal.
Section 3(5) provides that The Upper Tribunal is to be a superior court of record.
The Upper Tribunal has in fact three different roles.
First, it may be the tribunal of first instance.
Thus, for example, the Lands Chamber has both the first instance and appellate jurisdictions of the former Lands Tribunal; the Administrative Appeals Chamber has the jurisdiction of the former Transport Tribunal; and the Tax and Chancery Chamber has the jurisdiction of the former Financial Services and Markets Tribunal.
Thus some first instance jurisdictions have been transferred to the Upper Tribunal whereas others of equivalent importance and difficulty, particularly in the tax field, have been transferred to the First tier Tribunal.
Second, and this is a major innovation in the 2007 Act, it may exercise a statutory jurisdiction which is the equivalent of the judicial review jurisdiction of the High Court in England and Wales or Northern Ireland (ss 15, 16, 17).
This only applies if certain conditions are met, the most important of which is that the application falls within a class specified in a direction given by the Lord Chief Justice or his nominee with the consent of the Lord Chancellor under Part 1 of Schedule 2 to the Constitutional Reform Act 2005 (s 18(6)).
Once such a direction has been given, any application for judicial review or permission to apply for judicial review which is made to the High Court in that class of case must be transferred to the Upper Tribunal (Senior Courts Act 1981, s 31A(2)).
The High Court also has power to transfer judicial review cases of other kinds to the Upper Tribunal if it appears just and convenient to do so (1981 Act, s 31A(3)).
Similar provision is made in Scotland, in that judicial review cases in a specified class must, and others may, be transferred from the Court of Session to the Upper Tribunal (2007 Act, s 20(1)).
The difference is that the application must first be made to the Court of Session, whereas in England and Wales and Northern Ireland applications in the specified classes should be made direct to the Upper Tribunal.
Third, and probably most important, there is a right of appeal to the Upper Tribunal on any point of law arising from a decision made by the First tier Tribunal other than an excluded decision (s 11(1), (2)).
This right may only be exercised with the permission of either the First tier or the Upper Tribunal (s 11(3), (4)).
Section 11(5) lists the decisions which are excluded from the right of appeal.
These include decisions of a description specified in an order made by the Lord Chancellor (s 11(5)(f)).
The current list is contained in the Appeals (Excluded Decisions) Order 2009, as amended in 2010 to take account of the inclusion of immigration and asylum appeals within the new structure.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application under section 11(4)(b) (application for permission or leave to appeal) (s 13(8)(c)).
These appeals also require permission either from the Upper Tribunal or, if refused by the Upper Tribunal, from the relevant appellate court (s 13(3), (4), (5)).
Where this would be a second tier appeal (that is, an appeal from the decision of the Upper Tribunal on appeal from the First tier Tribunal), the Lord Chancellor has exercised the power granted to him by section 13(6) to order that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal (Appeals from the Upper Tribunal to the Court of Appeal Order 2008, SI 2008 No 2834, art 2).
Equivalent provision has been made for appeals from the Upper Tribunal to the Court of Session in Scotland by rule 41.59 of the Act of Sederunt (Rules of Court of Session 1994) 1994 (inserted by SSI 2008 No 349).
These criteria are, of course, those applicable to a second tier appeal from a court to the Court of Appeal in England and Wales under section 55(1) of the Access to Justice Act 1999.
It is worth noting that both the First tier Tribunal and the Upper Tribunal have power to review their own decisions, but this power does not apply to excluded decisions (see ss 9(1) and 10(1) respectively).
This means that the Upper Tribunal has no power to review its own decision to refuse permission to appeal to the Upper Tribunal, even if it is convinced that that decision was wrong (compare the facts of Re Wooding, para 19 earlier).
There is no express provision in the 2007 Act which makes any attempt to limit or remove the supervisory jurisdiction of the High Courts of England and Wales or Northern Ireland and the Court of Session in Scotland to review the decisions of the Upper Tribunal.
It is nevertheless argued, and both the Divisional Court and the Court of Appeal held, that in the light of the system introduced by the 2007 Act the exercise of that jurisdiction should be limited to certain exceptional cases.
Before turning to the possible approaches available to this Court, it is worth noting the various ways in which that argument has been put in the course of these proceedings.
The developing argument
The Cart case was heard by the Divisional Court along with two cases involving the Special Immigration Appeals Commission (SIAC).
As does section 3(5) of the 2007 Act, section 1(3) of the Special Immigration Appeals Commission Act 1997 provides that SIAC shall be a superior court of record.
The Governments primary case was that this made both tribunals immune from judicial review.
This is not surprising, given that the same view had been expressed, of the Employment Appeal Tribunal, by Morison J in Chessington World of Adventures Ltd v Reed [1998] ICR 97, and by Sedley LJ in R v Regional Office of the Employment Tribunals (London North), Ex p Sojorin (unreported), 21 February 2000, and at para 6.31 of the Leggatt Report, and of the Upper Tribunal itself in de Smiths Judicial Review 6th ed (2007), para I 093.
Nevertheless the argument was comprehensively demolished by Laws LJ, with whom Owen J agreed, in a typically subtle and erudite judgment, to which the following brief summary cannot do justice.
It was a constitutional solecism to consider that merely to designate a body a superior court of record was sufficient to preclude judicial review.
This could only be done by the most clear and explicit language and not by implication, still less by what was effectively a deeming provision.
The rule of law requires that statute law be interpreted by an authoritative and independent judicial source: . the need for such an authoritative judicial source cannot be dispensed with by Parliament.
This is not a denial of legislative sovereignty, but an affirmation of it .
The requirement of an authoritative judicial source for the interpretation of law means that Parliaments statutes are always effective; . (para 38).
That source was the High Court.
This was not because it was a superior court of record but because it was a court of unlimited jurisdiction.
Other courts and tribunals, having a limited jurisdiction, were not that source and were susceptible to judicial review by the High Court.
Unreviewable courts of limited jurisdiction were exceptional.
In the light of that comprehensive demolition, Mr Eadie has not since tried to rebuild the argument.
He does not need to do so, because (in relation to the Upper Tribunal but not to SIAC) he has succeeded on his secondary case, that judicial review is only exercisable in rare and exceptional cases.
Laws LJ accepted the argument on the basis that the newly constituted Upper Tribunal was the alter ego of the High Court within the areas covered by the tribunal system: it constituted an authoritative, impartial and independent judicial source for the interpretation and application of the relevant statutory tests.
The rule of law did not require that it be subject to review for error of law within its jurisdiction: it had the final power to interpret for itself the law it must apply (para 94).
But in the grossly improbable event that [Upper Tribunal] were to embark upon a case which was frankly beyond the four corners of its statutory remit there was no reason why the High Court should not correct it.
With more caution, he accepted that it might also intervene where there has been a wholly exceptional collapse of fair procedure: something as gross as actual bias on the part of the tribunal (para 99).
Laws LJ recognised that if the Upper Tribunal were in truth the alter ego of the High Court the logical consequence would be that it was wholly immune from the supervision of the High Court.
The Government therefore pursued that argument before the Court of Appeal.
Sedley LJ, giving the judgment of the court, rejected it: . the [Upper Tribunal] is not an avatar of the High Court at all: far from standing in the High Courts shoes, . , the shoes the [Upper Tribunal] stands in are those of the tribunals it has replaced (para 19).
But he agreed that the supervisory jurisdiction of the High Court, well known to Parliament as one of the great historic artefacts of the common law, runs to statutory tribunals both in their old and in their new incarnation unless ousted by the plainest possible statutory language.
There is no such language in the 2007 Act (para 20).
Nevertheless, it did not follow that judicial review should be available on the full panoply of grounds which had been developed over the last half century.
Judicial review had always been a remedy of last resort.
As the Court of Appeal had recognised in R (Sivasubramaniam) v Wandsworth County Court [2003] 1 WLR 475, permission would not be granted where satisfactory alternative recourse existed, whether or not it had been exhausted.
The scope of judicial review was a matter of principle, not discretion.
But it could be changed to keep pace with other changes.
The complete reordering of administrative justice was such a change: The tribunal system is designed to be so far as possible a self sufficient structure, dealing internally with errors of law made at first instance and resorting to higher appellate authority only where a legal issue of difficulty or of principle requires it.
By this means serious questions of law are channelled into the legal system without the need of post Anisminic judicial review. (para 30) Two principles needed to be reconciled: one was the relative autonomy which Parliament had invested the tribunals as a whole and the Upper Tribunal in particular; the other was the constitutional role of the High Court as guardian of the standard of legality and due process from which the Upper Tribunal was not exempt (para 35).
There was a true jurisprudential difference between an error of law made in the course of an adjudication which a tribunal is authorised to conduct and the conducting of an adjudication without lawful authority.
For the former, no system of law can guarantee to be infallible.
But [o]utright excess of jurisdiction by the [Upper Tribunal] and or denial by it of fundamental justice, should they ever occur, are in a different class: they represent the doing by the [Upper Tribunal] of something that Parliament cannot possibly have authorised it do so (para 36).
Thus, by this rather different route, the Court of Appeal in Cart arrived at the same practical conclusion as had both the Divisional Court in Cart and the Court of Appeal in Sivasubramaniam [2003] 1 WLR 475.
Sivasubramaniam was, of course, dealing with the new system of civil appeals brought in under the Access to Justice Act 1999 in response to the Bowman Report (1997).
For the first time, virtually all appeals from a district judge to a circuit judge in a county court required permission to appeal.
Refusal of permission by the circuit judge meant that there was no way, other than by judicial review, of having the case scrutinised by a High Court judge.
However, while judicial review was not ousted, the Court of Appeal considered the new scheme provided the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error (para 54).
Permission to apply for judicial review should therefore not be granted except in very rare cases where it was sought on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing (para 56).
In R (Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305, [2006] 3 All ER 650, essentially the same approach was applied to the refusal, by a non lawyer member of the Lands Tribunal, of permission to appeal from a determination of a Leasehold Valuation Tribunal relating to residential service charges.
Thus the mere fact that a decision by the Lands Tribunal was obviously wrong in law was not enough to justify its being judicially reviewed (para 56); although there might be exceptional circumstances other than those identified in Sivasubramaniam which would justify this, for example where there were conflicting decisions in Leasehold Valuation Tribunals which cried out for definitive resolution (para 57).
On the other hand, in Sivasubramaniam itself, the Court of Appeal had recognised the special features of the asylum jurisdiction which justified the former practice of unrestricted judicial review of refusals of leave to appeal.
In MR (Pakistan), therefore, Mr Manjit Gill argued that those special features justified making an exception to the principles adopted by the Court of Appeal in Cart.
Sullivan LJ disagreed.
The immigration and asylum jurisdiction was not the only one in which claimants might be unrepresented, or particularly vulnerable, or where fundamental human rights were involved, or where the law was complex.
There was no principled justification for maintaining a historical exemption: one of the basic purposes of the 2007 Act was to unify the procedures of the many and disparate tribunals which had been gathered into the new structure.
It would be a significant invasion of the coherence of the new system to maintain such a historical exemption (para 53).
The field of choice in this Court
The way in which the argument has developed through the proceedings which are now collected before us enables us to be clear on three points.
First, there is nothing in the 2007 Act which purports to oust or exclude judicial review of the unappealable decisions of the Upper Tribunal.
Clear words would be needed to do this and they are not there.
The argument that making the Upper Tribunal a superior court of record was sufficient to do this was killed stone dead by Laws LJ and has not been resurrected.
Second, it would be completely inconsistent with the new structure introduced by the 2007 Act to distinguish between the scope of judicial review in the various jurisdictions which have now been gathered together in that new structure.
The duties of the Senior President, set out in section 1(2), clearly contemplate that the jurisdictions will retain their specialist expertise, so that one size does not necessarily fit all; but the relationships of its component parts with one another and with the ordinary courts are common to all.
So too must be the principles adopted by the High Court in deciding the scope of judicial review.
Third, the scope of judicial review is an artefact of the common law whose object is to maintain the rule of law that is to ensure that, within the bounds of practical possibility, decisions are taken in accordance with the law, and in particular the law which Parliament has enacted, and not otherwise.
Both tribunals and the courts are there to do Parliaments bidding.
But we all make mistakes.
No one is infallible.
The question is, what machinery is necessary and proportionate to keep such mistakes to a minimum? In particular, should there be any jurisdiction in which mistakes of law are, either in theory or in practice, immune from scrutiny in the higher courts?
In the course of oral argument before the Court it became clear that there were three possible approaches which the Court could take.
First, we could accept the view of the courts below in Cart and MR that the new system is such that the scope of judicial review should be restricted to pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances such as those identified in Sinclair Gardens).
Second, we could accept the argument, variously described in the courts below as elegant and attractive, that nothing has changed.
Judicial review of refusals of leave to appeal from one tribunal tier to another has always been available and with salutary results for the systems of law in question.
Third, we could adopt a course which is somewhere between those two options, and was foreshadowed by Dyson LJ (with the enthusiastic support of Longmore LJ) in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258 but rejected by the Court of Appeal in Cart, namely that judicial review in these cases should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted.
(i) The exceptional circumstances approach
The approach of the Divisional Court and Court of Appeal would lead us back to the distinction between jurisdictional and other errors which was effectively abandoned after Anisminic.
It is a distinction which lawyers can readily grasp.
As Denning MR put it in Shaws case [1952] 1 KB 338, 346, A tribunal may often decide a point of law wrongly whilst keeping well within its jurisdiction.
There are, however, several objections to reviving it.
First, we would not in fact be turning the clock back to the days before Anisminic because, as we have seen, certiorari was available to correct errors of law on the face of the record made by tribunals of limited jurisdiction.
We would be re introducing a distinction which had become relevant for the most part only where judicial review was expressly excluded, which it is not here.
Secondly, the distinction was given its quietus by the majority in Anisminic not least because the word jurisdiction has many meanings ranging from the very wide to the very narrow.
By the narrow original sense both Lord Reid and Lord Pearson meant that the tribunal had asked itself the wrong question.
But, as Lord Reid explained, a tribunal does this if it does any of the things which would ordinarily render its decision susceptible to judicial review (at p 171).
And, as Lord Pearson observed, there has been evolution over the centuries and there have been many technicalities.
There have also been many border line cases (at p 195).
And Lord Wilberforce did not find the expressions asking the wrong question or applying the wrong test wholly satisfactory, although he agreed that such decisions were a nullity (at p 210).
If the approach of the Court of Appeal in Cart is maintained we may expect a return to some of the technicalities of the past.
Thirdly, as Lord Wilberforce pointed out (at p 207), it does of course lie within the power of Parliament to provide that a tribunal of limited jurisdiction should be the ultimate interpreter of the law which it has to administer: the position may be reached, as the result of statutory provisions, that even if they make what the courts might regard as decisions wrong in law, these are to stand.
But there is no such provision in the 2007 Act.
There is no clear and explicit recognition that the Upper Tribunal is to be permitted to make mistakes of law.
Certain decisions are unappealable and for the most part there are obvious practical reasons why this should be so.
But this does not mean that the tribunal must always be permitted to make errors of law when making them.
The consideration which weighed most heavily with the Court of Appeal in Sivasubramaniam was proportionality.
There must be a limit to the resources which the legal system can devote to the task of trying to get the decision right in any individual case.
There must be a limit to the number of times a party can ask a judge to look at a question.
The Court of Appeal took the view that, in the sorts of cases coming before the district judges in the county courts, it was enough if both the district judge and the circuit judge could detect no arguable case that the district judge had gone wrong.
There was no need, save in the two extreme and exceptional cases identified, for a High Court judge to take another look especially as, under the current judicial review procedures, it would then be possible for the case to be looked at another four times.
This approach accepts that a certain level of error is acceptable in a legal system which has so many demands upon its limited resources.
Some might question whether it does provide sufficient protection against mistakes of law.
In the ordinary courts, unlike the new tribunal system, there may be an appeal on a point of fact as well as law.
It makes sense to limit such appeals to those with a real prospect of success.
But judicial review is not such an appeal.
The district judge and the circuit judge may both have gone wrong in law.
They may work so closely and regularly together that the latter is unlikely to detect the possibility of error in the former.
But at least in the county courts such errors are in due course likely to be detected elsewhere and put right for the future.
The county courts are applying the ordinary law of the land which is applicable in courts throughout the country, often in the High Court as well as in the county courts.
The risk of their developing local law is reduced although by no means eliminated.
But that risk is much higher in the specialist tribunal jurisdictions, however expert and high powered they may be.
As a superior court of record, the Upper Tribunal is empowered to set precedent, often in a highly technical and fast moving area of law.
The judge in the First tier Tribunal will follow the precedent set by the Upper Tribunal and refuse permission to appeal because he is confident that the Upper Tribunal will do so too.
The Upper Tribunal will refuse permission to appeal because it considers the precedent to be correct.
It may seem only a remote possibility that the High Court or Court of Appeal might take a different view.
Indeed, both tiers may be applying precedent set by the High Court or Court of Appeal which they think it unlikely that a higher court would disturb.
The same question of law will not reach the High Court or the Court of Appeal by a different route.
There is therefore a real risk of the Upper Tribunal becoming in reality the final arbiter of the law, which is not what Parliament has provided.
Serious questions of law might never be channelled into the legal system (as Sedley LJ put it at para 30) because there would be no independent means of spotting them.
High Court judges may sit in the Upper Tribunal but they will certainly not be responsible for all the decisions on permission to appeal, nor is it possible for the Upper Tribunal to review its own refusals, even when satisfied that they are wrong in law.
Furthermore, it appears to be accepted that full judicial review of the unappealable decisions of the First tier Tribunal, and possibly of excluded decisions of the Upper Tribunal other than the refusal of permission to appeal, remains available.
It is difficult to spell out a principled basis for such anomalies.
In short, while the introduction of the new system may justify a more restricted approach, the approach of the Court of Appeal in Cart is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected. (ii) The status quo ante but which?
Mr Drabble, together with (in the rather different context of Scotland) Mr Mitchell, makes a powerful case for the status quo, by which he means the position obtaining in the social security system before the 2007 Act.
The Social Security Commissioners were a highly skilled body of senior lawyers, thoroughly steeped in the intricacies of social security law, yet they could occasionally fail to detect the possibility of error in a social security tribunals decision for example because both were following an authoritative decision of the High Court or Court of Appeal which had stood for some time.
Judicial review of the refusal of leave enabled such questions of law, often important to a great many people, to be examined in the higher courts to the benefit of the jurisdiction in question.
It is, after all, the object of the benefits system to get things right to pay people the benefits to which Parliament has said that they are entitled, not a penny more but also not a penny less.
He also rightly points out that nothing much has changed.
The Social Security Commissioners are now judges of the Upper Tribunal but they are (mostly) the same people doing the same job.
The new structure has followed the model of the previous social security adjudication system.
What is so different that it justifies the removal of a right from which each party in a social security claim could benefit, the Department as well as the individual claimant?
Mr Manjit Gill makes essentially the same argument in immigration and asylum cases.
They too had a two tier appellate structure with the possibility of judicial review of unappealable decisions until the 2002 Act.
The 2002 Act introduced the alternative form of statutory review, but it still gave access to a High Court judge.
The 2004 Act collapsed the two tier structure into one, but provided an equivalent form of statutory review giving access to a High Court judge.
Now, as Sullivan LJ put it in FA (Iraq) and PD (India) v Secretary of State for the Home Department [2010] EWCA Civ 827, at para 1, The wheel has come full circle.
Once again there is a two tier appellate structure with a right of appeal with permission on a point of law from the First tier to the Upper Tribunal and a further right of appeal, with permission, to the Court of Appeal.
The only change from the old two tier structure is the introduction of the limited grounds for a second tier appeal to the Court of Appeal.
The statutory reviews introduced by the 2002 and 2004 Acts have been abolished.
Hence, he argues, in that system too we are now back where we began and there is no reason to restrict the availability of judicial review of unappealable decisions.
But it is impossible to leave out of account the reasons why those statutory reviews were introduced.
It is not difficult to dress up an argument as a point of law when in truth it is no more than an attack upon the factual conclusions of the first instance judge.
In most tribunal cases, a claimant will have little to gain by pressing ahead with a well nigh hopeless case.
He may have less money than he otherwise would, but he will not have to leave the country and may make another claim if circumstances change.
But in immigration and asylum cases, the claimant may well have to leave the country if he comes to the end of the road.
There is every incentive to make the road as long as possible, to take every possible point, and to make every possible application.
This is not a criticism.
People who perceive their situation to be desperate are scarcely to be blamed for taking full advantage of the legal claims available to them.
But the courts resources are not unlimited and it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
Mr Gills answer is that under the new system the burden on the High Court and Court of Appeal is to be reduced by transferring judicial review applications relating to the refusal of the Secretary of State to treat new representations as a fresh claim to the Upper Tribunal (see the announcement made by Lord McNally, Hansard (HL), 3 March 2011, col WS120).
But this, of course, does not address the perceived burden resulting from attempts to achieve a judicial review of the decisions of the Tribunal itself.
Mr Fordham, in particular, argues that there is no need to introduce further restrictions upon judicial review.
The courts have already adopted principles of judicial restraint when considering the decisions of expert tribunals.
As long ago as R v Preston Supplementary Benefits Appeal Tribunal, Ex p Moore [1975] 1 WLR 624, before the creation of the unified social security appeal tribunals with a common right of appeal to the Commissioners, Lord Denning MR observed, at pp 631 2, that the courts should leave the tribunals to interpret the Supplementary Benefits Act in a broad reasonable way, according to the spirit and not the letter.
But it was important that cases raising the same points should be dealt with in the same way, so the courts should be prepared to consider points of law of general application.
Individual cases of particular application should be left to the tribunals.
More recently, in Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All ER 279, paras 15 17, I (with the agreement of both Clarke LJ and Butterfield J) urged appropriate caution in giving permission to appeal from the Social Security Commissioners, because of their particular expertise in a highly specialised area of the law, where it was quite probable that . the Social Security Commissioner will have got it right.
Those observations have been referred to many times since, not least by Dyson LJ in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, paras 53 54, where he said this: Thus, in seeing whether it can detect some error of law by the commissioner who has refused leave to appeal, the reviewing court should not be astute to find such error.
This is a further reason why there need be no real concern that the established approach to judicial review in these cases would lead to an opening of the floodgates.
It is, however, fair to say that this restraint has found more favour in some contexts than in others.
Although it was adopted in the asylum context in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] AC 678, at para 30, the courts are also well aware of the anxious scrutiny required in asylum cases and of the particular difficulties facing the tribunals in this jurisdiction.
Had they adopted the same restraint in asylum as in social security cases, it might not have been thought necessary to introduce the statutory review procedures.
Ironically, therefore, the more troubling the context, the more necessary it has seemed to limit the availability of judicial review.
The real question, as all agree, is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever.
Equally the fact that the courts have hitherto found it difficult to deter repeated or unmeritorious applications in immigration and asylum cases does not mean that such applications should become virtually impossible.
There must be a principled but proportionate approach.
(iii) The second tier appeals criteria
An important innovation in the 2007 Act was the power given to the Lord Chancellor in section 13(6), to prescribe the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales.
These have now been prescribed for second tier appeals from the Upper Tribunal in all three jurisdictions. (It was the previous lack of such criteria which led to the remarks about restraint in Cooke.) This gives, at the very least, an indication of the circumstances in which Parliament considered that questions of law should be, as Sedley LJ put it, channelled into the legal system.
In Wiles, Dyson LJ considered that there was much to be said for applying the same criteria to judicial review of a Social Security Commissioners refusal of permission to appeal to himself (para 48).
This would reflect the fact that (i) the issues that arise . may affect the lives not only of the individual claimant, but also of many others who are in the same position, some of whom are among the most vulnerable members of our society; and (ii) the issues may be of fundamental importance to them, sometimes making the difference between a reasonable life and a life of destitution (para 47).
This proposal was warmly endorse[d] by Longmore LJ (para 79).
It was, however, expressly rejected by Sedley LJ in Cart, because the new tribunal structure is something greater than the sum of its parts.
It represents a newly coherent and comprehensive edifice designed, among other things, to complete the long process of divorcing administrative justice from departmental policy, to ensure the application across the board of proper standards of adjudication, and to provide for the correction of legal error within rather than outside the system (para 42).
While all of this is true, it seems to me to do little justice to the independence and expertise of the tribunal judiciaries in the old system and to over estimate what has changed in the new.
There must be some risk that the amalgamation of very different jurisdictions in the new chambers will dilute rather than enhance the specialist expertise of their judges and members.
Mental health and special educational needs, for example, are similar in some ways but very different in others.
It would be difficult to say that bringing them together has reduced the capacity for error although of course we all hope that it has not been increased.
The claimants accept that if there is to be any restriction on the availability of judicial review, this approach would be far preferable to that of the Court of Appeal in Cart.
Their main objection is that it would deprive the parties of the second substantive hearing to which they would have been entitled if the Upper Tribunal had spotted the error and given permission to appeal.
Another objection is that it would leave uncorrected those errors of law which do not raise an important point of principle or practice and where there is no other compelling reason for the court to hear the case.
But no system of decision making is perfect or infallible.
There is always the possibility that a judge at any level will get it wrong.
Clearly there should always be the possibility that another judge can look at the case and check for error.
That second judge should always be someone with more experience or expertise than the judge who first heard the case (it is to be hoped that the new structure will not perpetuate the possibility, exemplified in Sinclair Gardens, that a non lawyer member might be entrusted with deciding whether a tribunal chaired by a legally qualified tribunal judge had gone wrong in law, but this is left to the good sense of the Senior President rather than enshrined in the legislation).
But it is not obvious that there should be a right to any particular number of further checks after that.
The adoption of the second tier appeal criteria would lead to a further check, outside the tribunal system, but not one which could be expected to succeed in the great majority of cases.
Conclusion
For all those reasons, together with those given by Lord Dyson (in this case) and Lord Hope (in Eba), the adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
It follows that the approach in Sinclair Gardens should no longer be followed.
If this approach is adopted, the Civil Procedure Rules Committee might also wish to consider the scope for stream lining the procedure for considering applications for permission to apply for judicial review of these decisions.
I agree with Lord Phillips that it would be totally disproportionate to allow the four stage system of paper and oral applications to both the High Court and the Court of Appeal in such cases.
The previous procedures for statutory reviews in immigration and asylum cases showed that there is nothing inherently objectionable in a paper procedure, particularly if there has been an oral hearing of the first application for permission to appeal.
But, in agreement with Lord Clarke, it seems to me that this is a matter for the rules committee rather than for this Court to determine.
In the result, however, there is clearly nothing in Mr Carts case to bring it within the second tier appeal criteria.
The tribunal considered very carefully whether he had been prejudiced by the failure of the Secretary of State to give him notice of the application to vary and it was clear that he had not, so any difference of approach to whether prejudice was necessary would not affect the result.
The same is true of the case of MR (Pakistan).
As Ouseley J said in refusing permission to appeal to the Upper Tribunal, crucial to the decision was the finding that the applicant was not a genuine convert to Christianity.
The question of how a genuine convert would be treated did not arise.
I would therefore dismiss the appeals in the cases of Cart and MR (Pakistan) but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
LORD PHILLIPS
I have had the benefit of reading the judgment of Lady Hale, which illuminates the background to the English appeals, and the issues that are raised by them.
I have also had the benefit of reading the judgment of Lord Hope in the Scottish appeal.
His conclusions are in harmony with those of Lady Hale.
I am in agreement with both judgments.
My own contribution is essentially by way of emphasis, directed largely to the fundamental issue of principle raised by these appeals.
That is whether the courts should apply a principle of proportionality when deciding whether to accede to an application to judicially review a decision of the Upper Tribunal.
For the reasons that follow I have decided that they should, but that, at least in England and Wales, the needs of proportionality also require changes in the Civil Procedure Rules (CPR).
Introduction
In March 2001 a Committee chaired by Sir Andrew Leggatt delivered a report (the Leggatt Report) to the Lord Chancellor on the delivery of justice through tribunals.
The Committee was confronted with 70 different administrative tribunals employing about 3,500 people and handling nearly one million cases a year.
The Leggatt Report made recommendations for bringing these tribunals into a single Tribunals System.
In July 2004 a Government White Paper accepted the broad thrust of those recommendations.
Parliament then implemented this by enacting the Tribunals, Courts and Enforcement Act 2007 (TCEA).
A striking feature of the tribunals system created by the TCEA is the creation of two tiers, a First tier Tribunal and an Upper Tribunal.
Appeals lie from the First tier Tribunal to the Upper Tribunal.
Carnwath LJ was appointed the first Senior President of the new system.
In his article Tribunal Justice a New Start in [2009] Public Law 48 he commented of the Upper Tribunal that it would be operating in parallel with the existing Administrative Court and would become the principal agency for judicial review of the legality of tribunal decisions.
He suggested that there was scope for rethinking the traditional allocation, as between courts and tribunals, of responsibilities for definitive interpretation of substantive law, including human rights law, in specialist fields.
These three conjoined appeals raise a single issue.
This is the extent to which decisions of the Upper Tribunal are properly subject to judicial review by the Administrative Court in England and Wales and the Court of Session in Scotland.
That issue calls for a review of the roles of the legislature, the executive and the judiciary in maintaining the rule of law in this country.
The rule of law requires that the laws enacted by Parliament, together with the principles of common law that subsist with those laws, are enforced by a judiciary that is independent of the legislature and the executive.
Laws LJ, in paras 43 to 51 of his judgment in Cart [2009] EWHC 3052 (Admin), has summarised the history of the role of the courts from 1066 to 1873 in upholding and developing the law.
In particular, he has described the growth of the supremacy under the common law of the court of the Kings Bench as a court of unlimited jurisdiction with the power by means of the prerogative writs to supervise the other courts, described as inferior courts of record.
The Judicature Act 1873 marked the assumption by Parliament of responsibility for the infrastructure necessary for the administration of justice.
A new hierarchy of courts was created, including a High Court and a Court of Appeal.
The common law powers of the Kings Bench were vested in the High Court.
The creation of a Court of Appeal provided, however, an alternative means of reviewing errors of law on the part of inferior courts and, in particular, the County Court, which replaced the use of the prerogative writs.
Since 1873 there has been a series of statutes dealing with the administration of justice, of which the Supreme Court Act 1981 (now the Senior Courts Act 1981) was particularly significant.
Section 4 of that Act defined the composition of the High Court.
Section 19 provided that the High Court should continue to exercise the jurisdiction that it enjoyed prior to the 1981 Act.
Thus the common law powers of judicial review were preserved.
Section 31 of the 1981 Act provided for rules of court to be made governing the procedure to be followed on an application for judicial review and required the leave of the High Court to be obtained for such an application.
Part 54 of the CPR gives effect to that requirement.
At the same time as making provision for the structure of the general court system, Parliament created tribunals to adjudicate on disputes in specialised areas and a number of specialist courts.
A common theme can be identified in relation to most of these, as well as in relation to the general court system.
The possibility of at least one appeal is desirable in order to address the possibility of error of law on the part of the court or tribunal first seised of the matter.
Legislation dealing with the court system in general and with specialist courts and tribunals usually makes provision for appeals.
Prior to 1999 there was growing concern that rights of appeal in civil proceedings were over generous with the result that the pursuit of appeals that lacked merit was resulting in unnecessary delay and consumption of limited judicial resources.
Lord Woolfs final report on Access to Justice published in July 1996 reached a similar conclusion on this topic to that subsequently reached by the Bowman Report published in September 1997.
Both concluded that civil appeals served both a private and a public purpose.
The private purpose was to correct an error, unfairness or wrong exercise of discretion leading to an unjust result.
The public purpose was to ensure public confidence in the administration of justice and, in appropriate cases, to clarify and develop the law, practice and procedure and to help maintain the standards of first instance courts and tribunals.
Many of the existing provisions for appeals failed, however, to have regard to proportionality.
Rights of appeal should be proportionate to the grounds of complaint and the subject matter of the dispute.
More than one level of appeal would not normally be justified unless an important point of principle or practice was involved.
The Bowman Report led to provisions in the Access to Justice Act 1999 which resulted in a new Part 52 of the CPR to replace the provisions of the Rules of the Supreme Court dealing with, inter alia, appeals to the High Court from lower courts and tribunals and appeals to the Court of Appeal.
Section 54 of the 1999 Act provided that rules of court could introduce a requirement that any right of appeal be exercised only with permission.
It further provided that no appeal could be made against a decision of a court to give or refuse permission, albeit that rules of court might provide for the making of a further application for permission to that court or another court.
CPR 52.3 introduced a permission requirement in relation to appeals from lower courts, but not from tribunals, albeit that it stated that other enactments might require permission for particular appeals.
CPR 52.3(6) provides that permission to appeal may only be given where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason why the appeal should be heard.
CPR 52.13(2) provides that in the case of a second appeal to the Court of Appeal the court will only give permission to appeal if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
The power of the High Court to conduct judicial review subsists alongside these statutory provisions for appeal.
It is not, however, the practice of the Court to use this power where a satisfactory alternative remedy has been provided by Parliament.
Where this is not the case the power of judicial review is a valuable safeguard of the rule of law.
It is one which the judges guard jealously.
The decision of the House of Lords in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 finessed what, on its face, appeared to be an attempt by Parliament to exclude judicial review of the decisions of the Commission.
Since that case Parliament has not purported, as it might have done, expressly to preclude the exercise by the High Court of the power of judicial review.
At paras 39 to 40 of his judgment in Cart Laws LJ stated that the general principle was clear: The rule of law requires that statute should be mediated by an authoritative and independent judicial source; and Parliaments sovereignty itself requires that it respect this rule.
None of this, of course, is to say that Parliament may not modify, sometimes radically, the procedures by which statute law is mediated.
It may impose tight time limits within which proceedings must be bought.
It may provide a substitute procedure for judicial review, as it has by a regime of statutory appeals in fields such as town and country planning, highways, and compulsory purchase: where, however, the appeal body remains the High Court.
It may create new judicial authorities with extensive powers.
It may create rights of appeal from specialist tribunals direct to the Court of Appeal.
The breadth of its power is subject only to the principle I have stated.
The proposition that Parliamentary sovereignty requires Parliament to respect the power of the High Court to subject the decisions of public authorities, including courts of limited jurisdiction, to judicial review is controversial.
Hopefully the issue will remain academic.
Before the Divisional Court in Cart the Secretary of State contended that, by enacting in section 3(5) of TCEA that the Upper Tribunal should be a superior court of record, Parliament had rendered its decisions immune from judicial review.
The Divisional Court rejected that submission, and it has not been pursued.
The issue before this Court relates to the principles that should govern the exercise of the power judicially to review the decisions of the Upper Tribunal.
The appellants in the English appeals, supported by JUSTICE as intervener, adopt the same approach as the Lord Advocate in the Scottish Appeal and contend that judicial review should be permitted whenever there is an arguable case that the Upper Tribunal has made any error of law.
The Secretary of State submits that the statutory provisions for appeal in the TCEA meet the requirements of the rule of law in all ordinary circumstances.
Judicial review of the Upper Tribunal is only appropriate in exceptional circumstances, which do not exist in any of the appeals before the Court.
The issue of principle raised by these appeals is thus whether, and on what basis, the right to judicial review of a decision of the Upper Tribunal should be restricted.
All three appeals have, however, an important common factor.
Each arises out of the refusal of the Upper Tribunal to give permission to appeal to it from a decision of the First tier Tribunal or, in the case of Cart, of the Tribunal whose functions have been taken over by the First tier Tribunal.
In each of the English cases a claim for judicial review of the Upper Tribunals decision was dismissed on the ground that this could only be justified in exceptional circumstances.
In the Scottish case a similar application was granted, and the Advocate General appeals against the decision granting the application for judicial review.
It became apparent in the course of argument that the appellants in the English cases were particularly aggrieved that they had been denied the right to have their appeals heard.
Because there was no right to appeal to the Court of Appeal from the Upper Tiers refusal to give permission to appeal, they had only had one substantive hearing.
Mr Gill QC for MR accepted that it was this fact, rather than the status of the tribunal that had refused permission to appeal, that gave rise to his principal complaint.
There have already been a number of decisions of lower courts in which it has been held appropriate to circumscribe the right to judicial review.
The appellants in the English appeals submit that they were wrongly decided and I propose first to consider them.
Next I shall consider the recommendations made by the Leggatt Report in relation to the availability of judicial review.
After that I shall examine the extent to which Parliament gave effect to those recommendations.
Finally I shall answer the issue of principle posed above, with specific reference to the individual appeals.
Restrictions on the right to judicial review
The first of a series of cases in which the court held that there was a right to judicial review which was restricted involved two appeals by the same appellant in relation to two unsuccessful applications for judicial review.
In R (Sivasubramaniam) v Wandsworth County Court; R (Sivasubramaniam) v Kingston upon Thames County Court (Lord Chancellors Department intervening) [2002] EWCA Civ 1738, [2003] 1 WLR 475, which I shall hereafter refer to as Siva, the applicant brought bizarre claims before two district judges.
Each had been dismissed.
Applications for permission to appeal were dismissed in each case by a county court judge.
In the latter, but not the former, case he could have appealed to the Court of Appeal.
He did not do so.
He applied in each case to the High Court for permission to claim judicial review.
His applications were dismissed.
He appealed against the dismissals to the Court of Appeal.
In the second case the Court of Appeal refused the application on the ground that there had been a satisfactory alternative remedy.
The Court rejected the submission by the respondents that section 54(4) of the Access to Justice Act ousted judicial review of the decision of the county court judge.
It held, however, at para 48: Under the 1999 Act, and the rules pursuant to it, a coherent statutory scheme has been set up governing appeals at all levels short of the House of Lords.
One object of the scheme is to ensure that, where there is an arguable ground for challenging a decision of the lower court, an appeal will lie, but to prevent court resources being wasted by the pursuit of appeals which have no prospect of success.
The other object of the scheme is to ensure that the level of judge dealing with the application for permission to appeal, and the appeal if permission is given, is appropriate to the dispute.
This is a sensible scheme which accords with the object of access to justice and the Woolf reforms.
It has the merit of proportionality.
To permit an applicant to bypass the scheme by pursuing a claim for judicial review before a judge of the Administrative Court is to defeat the object of the exercise.
We believe that this should not be permitted unless there are exceptional circumstances and we find it hard to envisage what these could be.
So far as the first case was concerned, the Court adopted a similar approach.
It held: 54 This scheme we consider provides the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error.
The substantive issue will have been considered by a judge of a court at two levels.
On what basis can it be argued that the decision of the judge of the appeal court should be open to further judicial review? The answer, as a matter of jurisprudential theory, is that the judge in question has limited statutory jurisdiction and that it must be open to the High Court to review whether that jurisdiction has been exceeded.
But the possibility that a circuit judge may exceed his jurisdiction, in the narrow pre Anisminic sense, where that jurisdiction is the statutory power to determine an application for permission to appeal from the decision of a district judge, is patently unlikely.
In such circumstances an application for judicial review is likely to be founded on the assertion by the litigant that the circuit judge was wrong to conclude that the attack on the decision of the district judge was without merit.
The attack is likely to be misconceived, as exemplified by the cases before us.
We do not consider that judges of the Administrative Court should be required to devote time to considering applications for permission to claim judicial review on grounds such as these.
They should dismiss them summarily in the exercise of their discretion.
The ground for so doing is that Parliament has put in place an adequate system for reviewing the merits of decisions made by district judges and it is not appropriate that there should be further review of these by the High Court.
This, we believe, reflects the intention of Parliament when enacting section 54 (4) of the 1999 Act.
While Parliament did not legislate to remove the jurisdiction of the High Court judicially to review decisions of county court judges to grant or refuse permission to appeal, we do not believe that Parliament can have anticipated the spate of applications for judicial review that section 54 (4) appears to have spawned. 55 Everything that we have said should be applied equally to an application for permission to claim judicial review of the decision of a judge of the county court granting permission to appeal.
We are not aware that such an application has yet been made.
Exceptional circumstances 56 The possibility remains that there may be very rare cases where a litigant challenges the jurisdiction of a circuit judge giving or refusing permission to appeal on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicant's right to a fair hearing.
If such grounds are made out we consider that a proper case for judicial review will have been established.
The Court commented on the fact that permission to claim judicial review was regularly given in relation to refusals by the Immigration Appeal Tribunal of permission to appeal to the tribunal against decisions of special adjudicators.
The Court observed at para 52 that on the face of it judicial review of such decisions might seem anomalous, but explained the practice as follows: There are, in our judgment, special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the tribunal.
In asylum cases, and most cases are asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
The number of applications for asylum is enormous, the pressure on the tribunal immense and the consequences of error considerable.
The most anxious scrutiny of individual cases is called for and review by a High Court judge is a reasonable, if not an essential, ingredient in that scrutiny.
In Gregory v Turner [2003] EWCA Civ 183; [2003] 1 WLR 1149 the Court of Appeal followed Siva when it refused an application for judicial review of the decision of a circuit judge who refused permission to appeal from the decision of a district judge, despite the fact that there were grounds for concluding that the district judge had fallen into error.
At para 46 Brooke LJ explained the reason for what might appear to be an injustice: In his Interim Report on Access to Justice (1995), Section I, Chapter 4, paras 5 and 6 Lord Woolf highlighted the tensions that exist between a desire to achieve perfection and a desire to achieve a system of justice which is not inaccessible to most people on grounds of the time and cost involved.
He quoted tellingly from a 1970 broadcast by Lord Devlin: is it right to cling to a system that offers perfection for the few and nothing at all for the many? Perhaps: if we could really be sure that our existing system was perfect.
But of course it is not.
We delude ourselves if we think that it always produces the right judgment.
Every system contains a percentage of error; and if by slightly increasing the percentage of error, we can substantially reduce the percentage of cost, it is only the idealist who will revolt.
Both Siva and Gregory v Turner involved attempts to review decisions of the County Court.
In R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305; [2006] 3 All ER 650 the Court of Appeal applied the same reasoning to the scheme laid down by Parliament for leasehold valuation.
The statutory scheme in that case provided for an appeal from the Leasehold Valuation Tribunal to the Lands Tribunal provided that one or the other gave permission to appeal.
Both having refused permission, a landlord sought permission to review the decision of the Lands Tribunal to refuse permission to appeal.
The application was refused and the landlord appealed to the Court of Appeal.
The Court dismissed the appeal.
Giving the only reasoned judgment, Neuberger LJ said this: 56 I do not accept that the mere fact that a decision of the Lands Tribunal refusing permission to appeal was obviously wrong in law would be sufficient to justify its being judicially reviewed.
Such a basis for judicial review would fly in the face of the conclusion and reasoning in Sivasubramaniams case and in Gregory v Turner, which appear to me to be applicable in this case for the reasons given above.
Before permission to seek judicial review could be granted, it would not be enough to show that the refusal of permission to appeal was plainly wrong in law.
It would also have to be established that the error was sufficiently grave to justify the case being treated as exceptional. 57 I think it is appropriate to say, that there could, in my view, be cases, which would be wholly exceptional, where it would be right to consider an application for judicial review of such a decision on the basis of what could be said to be an error of law.
A possible example would be if the Lands Tribunal, despite being aware of the position, refused, without any good reason, permission to appeal on a difficult point of law of general application, which had been before a number of different LVTs which had taken different views on it, and which cried out for a definitive answer in the public interest.
In that connection, it seems to me that one could say that it was not so much the point of law itself which justified judicial review, but more the failure of a public tribunal to perform its duty to the public, as well as what one might call its duty to the parties in that particular case.
In Siva the Court of Appeal recognised that there were special circumstances that justified judicial review of decisions of the Immigration Appeal Tribunal that refused permission to appeal to it.
Parliament then intervened by section 101(2) of the Nationality, Immigration and Asylum Act 2002 to provide for a statutory review, to be carried out by a High Court judge on paper, of such refusals.
In R(G) v Immigration Appeal Tribunal [2004] EWCA Civ 1731, [2005] 1 WLR 1445 the Court of Appeal endorsed the view of Collins J at first instance that it was Parliaments intention that this should provide a satisfactory alternative to judicial review, thereby avoiding the delay that was involved in the four stage process of the latter.
The Court of Appeal held that the statutory regime provided adequate and proportionate protection of the asylum seekers rights and that it was, accordingly, a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which had been, or could have been the subject of statutory review.
The Court stated at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
Where Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
This approach was followed by the Court of Appeal in R (F (Mongolia)) v Asylum and Immigration Tribunal [2007] 1 WLR 2523 in relation to the new review procedure introduced under the Asylum and Immigration (Treatment of Claimants, etc Act) 2004 see Lady Hales judgment at para 31.
This series of cases was considered by the Court of Appeal in Wiles v Social Security Commissioner [2010] EWCA Civ 258, when considering an appeal against the refusal to grant judicial review of the decision of a social security commissioner refusing permission to appeal from a decision of the Social Security Appeal Tribunal under the regime that pre dated the TCEA.
Giving the leading judgment, Dyson LJ held at para 43 that it was impossible to find in the relevant legislation any indication that Parliament intended to oust, or even to limit, the jurisdiction to grant judicial review.
That jurisdiction had been exercised in social security cases for nearly thirty years.
In the light of this it would not be right to curtail it.
But for this, however, Dyson LJ would have favoured applying the same criteria to an application for judicial review as was applied by the court when considering an application for permission to bring a second appeal, as set out at para 70 above.
The Leggatt recommendations
The Leggatt Report recommended a two tier tribunal system, describing the upper tier as the appellate Division.
There would be a comprehensive and systematic right of appeal from first tier tribunals to the appellate Division, and from there to the Court of Appeal.
In these circumstances the Report recommended that the right of judicial review should be excluded 6.30.
This recommendation had regard to the waste of scarce resources involved where judicial review was available in parallel with statutory rights of appeal to a tribunal and to the huge number of judicial review applications in immigration and asylum cases, most of which were unsuccessful 6.27.
The Report commented, erroneously, that this goal could be achieved by making the appellate Division a superior court of record 6.33.
It recommended, however, an express statutory exclusion of judicial review 6.34.
Parliaments response
Parliament made the Upper Tribunal a superior court of record see section 3(5) of the TCEA.
Although the Government argued in Cart that this meant that its decisions were not susceptible to judicial review see Lady Hales judgment at para 30 it does not follow that this was Parliaments intention, or indeed the Governments intention in promoting the Act.
In the Home Office Consultation Paper on immigration appeals, Fair Decisions; Faster Justice, of 12 August 2008 it was stated at para 23 that the Government had been advised that except in the most exceptional circumstances decisions of the Upper Tribunal would not be subject to judicial review.
What must, I believe, be beyond doubt is that it was Parliaments intention that the two tier structure set up by the TCEA would provide a statutory right of appeal in relation to decisions of tribunals that would, in most cases, provide a satisfactory alternative to judicial review.
Discussion
It is now common ground that the fact that the Upper Tribunal is a superior court of record does not render its decisions immune from judicial review.
The issue raised by these appeals falls into two parts: (i) is it right to impose restrictions on the grant of judicial review in relation to decisions of the Upper Tribunal? (ii) If it is, what restrictions should be imposed?
It was submitted on behalf of the English appellants, with support from the Public Law Project represented by Mr Fordham QC as intervener, that the courts had taken a wrong turning in the recent series of cases that had imposed restrictions on the grant of judicial review.
There was no justification for departing from the long established practice of the court to entertain a claim for judicial review whenever there were reasonable grounds for contending that an inferior court had made an error of law.
The Scottish respondent contended that the Court of Session had rightly applied the ordinary principles of judicial review to a decision of the Upper Tribunal.
Mr Eadie QC, responding to the English appeals, and Mr Johnston QC, for the Advocate General for Scotland, submitted that Parliament had by the TCEA deliberately set up a self sufficient structure dealing internally with errors of law and that, in accordance with Parliaments intention, applications for judicial review should only be entertained in exceptional circumstances.
I am in no doubt that the submissions of the English appellants should be rejected.
The administration of justice and upholding of the rule of law involves a partnership between Parliament and the judges.
Parliament has to provide the resources needed for the administration of justice.
The size and the jurisdiction of the judiciary is determined by statute.
Parliament has not sought to oust or fetter the common law powers of judicial review of the judges of the High Court and I hope that Parliament will never do so.
It should be for the judges to decide whether the statutory provisions for the administration of justice adequately protect the rule of law and, by judicial review, to supplement these should it be necessary.
But, in exercising the power of judicial review, the judges must pay due regard to the fact that, even where the due administration of justice is at stake, resources are limited.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law.
Lady Hale observes in para 51 of her judgment, that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
To this question I would add the two words if any.
I add those two words because if the court is to entertain applications for judicial review of the decisions of the Upper Tribunal this will require a High Court or Deputy High Court judge to consider every such application, however stringent may be the criteria for granting permission.
For the reasons given by Lady Hale in para 47 of her judgment, the stringency of the criteria that must be demonstrated will not discourage a host of applications in the field of immigration and asylum which are without any merit.
Thus the first question is whether there is justification for imposing this burden on the High Court.
My initial inclination was to treat the new two tier tribunal system as wholly self sufficient.
It is under the presidency of a judge who is likely to be a member of the Court of Appeal, and High Court judges can and will sit in the Upper Tribunal.
There is considerable flexibility in the system in relation to the administration and composition of the Upper Tribunal.
Can it not be left to the Senior President, in consultation with the President of the Queens Bench Division and other judicial colleagues to ensure that the tribunal judiciary is so deployed as to ensure the appropriate degree of judicial scrutiny of decisions of the lower tier?
Having considered, however, the judgment of Lady Hale, who has great experience in this field, and those of other members of the Court, I have been persuaded that there is, at least until we have experience of how the new tribunal system is working in practice, the need for some overall judicial supervision of the decisions of the Upper Tribunal, particularly in relation to refusals of permission to appeal to it, in order to guard against the risk that errors of law of real significance slip through the system.
What would, however, be totally disproportionate, is that this judicial supervision should extend to the four stage system of paper and oral applications first to the Administrative Court and then, by way of appeal, to the Court of Appeal, to which the ordinary judicial review procedure is subject.
What are first required are readily identifiable criteria for the grant of permission to seek judicial review.
That these exist should be capable of demonstration by paper applications, and my firm view is that applications for judicial review should be restricted to a single paper application, unless the court otherwise orders.
This is, however, a matter for the Civil Procedure Rule Committee.
As to the criteria, I have been persuaded, for the reasons given by Lady Hale, that the test laid down by the Court of Appeal in Siva is not the most satisfactory, and that the test governing second appeals in the courts of England and Wales should be adopted.
For these reasons I endorse the conclusions reached by Lady Hale.
I consider, however, that the procedural change, the possibility of which she contemplates in paragraph 58 of her judgment, will prove a necessity.
I concur in the order that she proposes at para 60.
LORD HOPE AND LORD RODGER
For the reasons given by Lady Hale, Lord Phillips and Lord Dyson, we would make the order proposed by Lady Hale.
LORD BROWN
The critical issue raised by these appeals is the scope of the High Courts supervisory jurisdiction over a particular but important category of unappealable decisions of the Upper Tribunal, namely those by which the Upper Tribunal refuses leave to appeal to it from a First tier Tribunal decision.
Having had the advantage of reading in draft the detailed judgments of Lord Phillips, Lord Hope (in Eba), Lady Hale and Lord Dyson, and respectfully agreeing with all of them as I do, there is singularly little that I wish to add.
Really the only point I am concerned to emphasise is that our decision on these appeals to adopt the second appeals approach when deciding whether or not to permit a judicial review challenge in these cases cannot properly be regarded as in any way contrary to principle.
The point can be simply made.
The very fact that Parliament, by section 13(6) of the 2007 Act, has prescribed the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales destroys any possibility of an absolutist argument to the effect that the rule of law requires, post Anisminic (Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147), unrestricted judicial review over all unappealable decisions of courts or tribunals of limited jurisdiction to ensure that they are not permitted, unsupervised by the higher courts, to commit errors of law.
The second tier appeals approach expressly contemplates that some Upper Tribunal decisions, even though erroneous in point of law, will be refused leave to appeal on the basis that they raise no important point of principle or practice and that there is no other compelling reason to hear them.
Understandably, it has never been suggested that, following a refusal of leave to appeal on this basis, the underlying decision is nonetheless judicially reviewable for error of law.
If, then, the rule of law allows certain errors of law in substantive decisions of the Upper Tribunal on appeal from the First tier Tribunal to go uncorrected, why as a matter of principle should it not similarly allow this in respect of decisions of the Upper Tribunal refusing leave to appeal to itself from the First tier Tribunal? True it is, of course, that the refusal of leave to appeal will have deprived the party refused of a second substantive hearing.
Realistically, however, the very fact that he was refused leave to appeal to the Upper Tribunal (by both tribunals) tends to indicate the unlikelihood of there having been a genuinely arguable error of law in the first place.
And certainly this situation calls no less for a proportionate answer to the question arising as to the required scope of the Courts supervisory jurisdiction to safeguard the rule of law.
The rule of law is weakened, not strengthened, if a disproportionate part of the courts resources is devoted to finding a very occasional grain of wheat on a threshing floor full of chaff.
For the reasons given in the other judgments to which I have referred (together with the reasoning above if, indeed, it adds anything to what others have said), I too would make the order proposed and leave it to the Rules Committee to decide how precisely to stream line the procedure for considering applications for permission to apply for judicial review in this class of case.
LORD CLARKE
I entirely agree with paras 1 to 50 of Lady Hales judgment, which set out the relevant history and issues with great clarity.
I also agree with her that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
It was common ground between the parties that at least some judicial scrutiny was required.
It is, as I see it, a matter for the courts to determine what that scrutiny should be.
I am not persuaded that judicial review requires the same degree of scrutiny in every case.
All depends upon the circumstances.
The circumstances have been described in detail by both Lady Hale and Lord Phillips as regards England and, in the Eba case, by Lord Hope as regards Scotland.
The relevant circumstances include the following.
The tribunal structure provides for the Upper Tribunal, as a superior court of record, to review the decision of the First tier tribunal.
As Lord Phillips observes at para 91, the new system is under the presidency of a judge who is likely to be a member of the Court of Appeal and High Court judges can and will sit in the Upper Tribunal.
Further scrutiny of a decision by the Upper Tribunal refusing permission to appeal is only needed in case something has gone seriously wrong.
I agree with Lady Hale, Lord Phillips and Lord Dyson (and with Lord Hope in Eba) that adequate scrutiny will be provided if the High Court applies the same test as is applied by the Court of Appeal in the case of a second appeal.
As Lord Phillips observes at para 70, in such a case the Court of Appeal will only give permission to appeal under CPR 52.13(2) if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
My experience as Master of the Rolls was that such a test worked well for second appeals.
On the one hand it limited the number of appeals and thus the expenditure of excessive resources while, on the other hand, it enabled the court to hear cases raising an important point and cases where there was some other compelling reason to do so.
In that way the court has been able to deal with cases where something has gone seriously wrong.
In my opinion the same would be true in the case of a proposed challenge to a refusal of permission to appeal by the Upper Tribunal.
I agree with Lady Hale at para 57 that such an approach would be both rational and proportionate.
I also agree with Lord Phillips at para 86 that there can be no doubt that Parliament intended that the two tier tribunal structure would provide a statutory right of appeal in relation to decisions of lower tier tribunals which would, in most cases, provide a satisfactory alternative to judicial review.
Finally I agree with Lord Phillips at para 94 that the second appeals test should be adopted in preference to the approach laid down in Siva.
The question which then arises is whether the application for permission to apply for judicial review should be dealt with wholly on paper or whether, if it was refused on paper, there should be a right to renew the application orally.
There would then be a further question whether, if the application was refused at the first instance, it would be open to the applicant to apply to the Court of Appeal for permission to appeal and, if so, what the procedure should be.
I agree with Lord Phillips at para 93 that it would be totally disproportionate to provide for the four stage system of paper and oral applications to which the ordinary judicial review procedure is subject.
Although there is much to be said for his view that the application should be determined on paper unless the court otherwise orders, I also agree with him that this is a matter for the Civil Procedure Rules Committee.
For these reasons I concur with the order proposed by Lady Hale at para 60.
LORD DYSON
Introduction
It is common ground (and rightly so) that the Tribunals, Courts and Enforcement Act 2007 (TCEA) does not oust the courts jurisdiction to grant judicial review of unappealable decisions of the Upper Tribunal (UT).
What is in issue is the scope of this jurisdiction.
The Divisional Court and the Court of Appeal described it in similar terms.
Laws LJ in the Divisional Court said ([2010] 2 WLR 1012, para 99) that it was limited to exceptional cases where there was an excess of jurisdiction in the narrow pre Anisminic sense ([1969] 2 AC 147) or where there has been a wholly exceptional collapse of fair procedure.
Sedley LJ, delivering the judgment of the Court of Appeal, adopted at [2011] 2 WLR 36, para 42 what he described as the Sivasubramaniam model ([2003] 1 WLR 475) ie excess of jurisdiction in the pre Anisminic sense or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing Sivasubramaniam para 56.
This is the scope of the jurisdiction for which Mr Eadie QC (in Cart) and Mr Johnston QC (in Eba) contend.
Like Lady Hale, I shall refer to it as the exceptional circumstances approach.
On the other hand, Mr Drabble QC (supported by Mr Fordham QC and Mr Bailin QC) in Cart and Mr Mitchell in Eba submit that there is no justification for any restriction in the scope of the judicial review jurisdiction: it should in principle be available in all cases of legal error; and Mr Manjit Gill QC in MR (Pakistan) makes the same submission in the particular context of immigration and asylum cases.
The exceptional circumstances approach
I agree with Lady Hale that, for the reasons that she gives, the exceptional circumstances approach is not justified.
As Mr Fordham points out, there are objections to it both in principle and in practice.
As regards principle, the concept of jurisdictional error in the pre Anisminic sense (where, for example, a tribunal embarks on a case that is beyond its statutory remit) was used to indicate that a decision was so fundamentally flawed as to be a nullity, so that judicial review could be granted notwithstanding the existence of a statutory ouster.
There is no statutory ouster in the present context.
Even if there were, the importance of Anisminic is that it showed that a material error of law renders a decision a nullity so that the decision is in principle judicially reviewable.
It is difficult to see any principled basis for holding that only jurisdictional errors of law by the UT should be judicially reviewable.
In practical terms, it is immaterial to the victim of an error of law whether it is a jurisdictional error or should be differently classified.
Non jurisdictional error may be egregious and obvious.
Laws LJ accepted (para 99) that on the exceptional circumstances approach a decision which gets it wrong, even extremely wrong will not justify judicial review, whereas if the issue can be classified as jurisdictional, mere error will suffice.
Thus a non jurisdictional error of law on a point of general public importance (for example, an important point of statutory interpretation) would not be amenable to judicial review; whereas a one off jurisdictional error of no general significance would be.
Such a distinction does not promote the rule of law.
In my view, as a matter of principle, there is no justification for drawing the line at jurisdictional error.
Lady Hale has referred to the problem of practice.
The distinction between jurisdictional error and other error is artificial and technical.
I agree with what the editors of De Smiths Judicial Review 6th ed, (2007) state at para 4 046: It is, however, doubtful whether any test of jurisdictional error will prove satisfactory.
The distinction between jurisdictional and non jurisdictional error is ultimately based on foundations of sand.
Much of the super structure had already crumbled.
What remains is likely quickly to fall away as the courts rightly insist that all administrative actions should be simply, lawful, whether or not jurisdictionally lawful.
Unrestricted judicial review
In my view, the case for retaining unrestricted judicial review is more formidable.
There are a number of strands to the argument.
First, there is nothing to indicate that Parliament intended to restrict the High Courts previous jurisdiction over unappealable decisions of tribunals.
Although the TCEA made substantial changes to the organisation of tribunals, it is contended that these do not justify the court, as a matter of judicial policy, making a major change to the scope of judicial review.
The High Courts supervisory jurisdiction to correct any error of law in unappealable decisions of the predecessors of the UT has been beneficial for the rule of law.
There is a real risk that the exclusion of judicial review will lead to the fossilisation of bad law such, for example, as that which was corrected in Woodling v Secretary of State for Social Services [1984] 1 WLR 348 (see para 19 of Lady Hales judgment).
There are also risks in restricting the judicial review jurisdiction in relation to errors of law in unappealable decisions of tribunals in cases involving fundamental rights and EU law.
In such cases, if the UT makes an error of law in refusing permission to appeal, the consequences for the individual concerned may be extremely grave.
Indeed, in Sivasubramaniam itself, the Court of Appeal recognised the existence of special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the [immigration appeal tribunal] (para 52).
In asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
Secondly, as Lady Hale says (para 49), the courts have established a principle of judicial restraint when considering decisions of expert tribunals.
If this principle towards decisions of the UT is respected (as it should be), then judicial review of unappealable decisions provides a system of justice which is proportionate and appropriate to protect the rule of law.
Further restrictions on the scope of judicial review are unnecessary.
Finally, in so far as a floodgates argument is relied on by the respondents to justify restricting the scope of judicial review, this should be resisted.
First, there is no evidence of a floodgates problem in relation to any tribunals except in the field of immigration and asylum.
Secondly, this is in any event not a legitimate basis for the courts to restrict the scope of judicial review as a matter of judicial policy where Parliament, in enacting the TCEA, decided not to do so for itself.
As Lord Bridge said in Leech v Deputy Governor of HMP Parkhurst [1988] AC 533 at 566C: In a matter of jurisdiction it cannot be right to draw lines on a purely defensive basis and determine that the court has no jurisdiction over one matter which it ought properly to entertain for fear that acceptance of jurisdiction may set a precedent which will make it difficult to decline jurisdiction over other matters which it ought not to entertain.
Historically, the development of the law in accordance with coherent and consistent principles has all too often been impeded, in diverse areas of the law besides that of judicial review, by the courts fear that unless an arbitrary boundary is drawn it will be inundated by a flood of unmeritorious claims.
Despite their apparent strength, I cannot accept these arguments.
The TCEA has made a major change to the order of things.
It implemented many of the recommendations of the committee chaired by Sir Andrew Leggatt, Tribunals for usersOne System, One Service (2001).
The committees terms of reference included a review of the delivery of justice through tribunals to ensure that there are fair, timely, proportionate and effective arrangements for handling those disputes, within an effective framework for decision making which encourages the systematic development of the area of law concerned, and which forms a coherent structure, together with the superior courts, for the delivery of administrative justice.
As stated in the overview of its report, the committee considered that its proposals would give to tribunals a collective standing to match that of the Court System and a collective power to fulfil the needs of users in the way that was originally intended (para 8).
The report contains many proposals which were designed to meet that overall objective.
Para 6.16 is important: These arrangements will create for the first time a complete structure of appellate tribunals, covering all tribunal jurisdictions.
As we explain in further detail in paragraphs 6.376.38 below, the President of each Division will be a judge, often a senior one.
All members will be experts, specialising in the jurisdiction of the Division or Divisions in which they sit.
They will also be trained to conduct hearings in the distinctive enabling approach common to all tribunals.
For all these reasons, we think the time has come for a change in the relationship between tribunals and the courts.
Hitherto, tribunal decisions have in general not set precedents.
In some tribunals, there have been arrangements to identify individual cases as carrying particular weight or authority, which future tribunals are normally expected to observe.
We do not think that will suffice to give the greater coherence and consistency that we would recommend in the Tribunals System.
We therefore wish to see systematic arrangements for the setting of precedent.
We think that this should lead to changing the relationship between tribunals and the supervisory jurisdiction of the High Court.
There is also a section of the report (paras 6.27 to 6.36) headed The place of judicial review.
It notes (para 6.27) that the proportion of immigration and (mostly) asylum cases in applications for permission for judicial review in 1999 was approaching two thirds of the total.
While the great majority of them were unsuccessful, they demonstrated the waste of scarce resources which can arise from problems in the relationship between tribunals and courts.
It states (para 6.31) that the EAT and the Transport Tribunal have been designated as superior courts of record and as such have a status formally equivalent to that of the High Court and therefore escape judicial review.
Others do not.
Para 6.32 states that the aim of the new appellate Division would be to develop by its general expertise and the selective identification of binding precedents, a coherent approach to the law.
It would be comparable in authority to the High Court so far as tribunals are concerned.
For that reason, it would be inappropriate to subject the Presidents of the appellate Division to review by another judge of equal status.
The report considers two ways of excluding judicial review.
One is by constituting all the appeal tribunals as a superior court of record, but this is rejected for the reasons stated in para 6.33.
The other is to exclude judicial review by express statutory provision (para 6.34).
It is this proposal that is recommended, the advantage being said to be that it would preserve a clear distinction between the new System and the courts.
It is true that this last proposal was not accepted by Parliament.
But it is clear that the Leggatt committee proposed that judicial review of decisions by what was to become the UT should be excluded altogether because they thought that their proposals for restructuring and enhancing the tribunal system and the resultant change in the relationship between the tribunals and the courts meant that judicial review was no longer necessary.
Since Parliament adopted the main thrust of the committees proposals, the views of the committee as to the significance of those changes for the relationship between the tribunals and the courts are entitled to respect.
The fact that Parliament did not accept the recommendation to exclude judicial review of unappealable decisions of the UT does not mean that it rejected the committees view that there had been a significant change in the structure of the tribunal system such as might justify a reappraisal of the scope of the judicial review jurisdiction.
As I shall explain, the Government certainly did not disagree with that view and there is no reason to think that Parliament disagreed with it either.
It merely means that Parliament was not willing to adopt the controversial suggestion that judicial review should be excluded altogether.
An insight into the thinking of Government and Parliament is to be found in the Government White Paper: Transforming Public Services: Complaints, Redress and Tribunals presented to Parliament in July 2004 (Cm 6243).
At para 7.27, the paper stated that it was intended to strengthen the UT by the secondment of circuit judges and, for cases of sufficient weight, High Court judges with relevant expertise.
Para 7.28 stated: With this structure the only possible role for judicial review in the High Court would be on a refusal by the first and second tier to grant permission to appeal.
It is this possible route to redress which has caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
When permission to appeal has been refused by both tiers, and provided that the tribunal appellate judiciary are of appropriate quality, as we intend that they should be, there ought not to be a need for further scrutiny of a case by the courts.
However, complete exclusion of the courts from their historic supervisory role is a highly contentious constitutional proposition and so we see merit in providing as a final form of recourse a statutory review on paper by a judge of the Court of Appeal.
Thus a consequence of giving effect to the Leggatt report was to bring about a strategic reorganisation of the tribunals system by making it more coherent and improving its expertise and standing.
I agree with the views expressed in the Leggatt report and the 2004 White Paper that the changes demanded a reappraisal of the scope of judicial review.
Parliament refused to undertake it.
The task of deciding the scope of the judicial review jurisdiction falls therefore to be performed by the courts.
It follows that the fact that in the pre TCEA era there was unrestricted availability of judicial review of refusals of permission to appeal by appeal tribunals is not of itself a good reason for holding that that situation should survive the enactment of the TCEA.
It is for the court to decide in the post TCEA world whether any and, if so, what restrictions should be placed on the availability of judicial review.
I accept that any restrictions call for justification.
Prima facie, judicial review should be available to challenge the legality of decisions of public bodies.
Authority is not needed (although much exists) to show that there is no principle more basic to our system of law than the maintenance of rule of law itself and the constitutional protection afforded by judicial review.
But the scope of judicial review should be no more (as well as no less) than is proportionate and necessary for the maintaining of the rule of law.
The status and functions of the UT to which I have already referred are important here.
In my view, there are three reasons why unrestricted judicial review of unappealable decisions of the UT is neither proportionate nor necessary for maintaining the rule of law.
First, there is the status, nature and role of the UT to which I have already referred.
Secondly, the TCEA gives those who wish to challenge the decision of a First tier Tribunal (FTT) the opportunity to have the decision scrutinised on several occasions: first when the FTT decides whether or not to review its decision under section 9(1) and (2); second, if the FTT decides not to review its decision, when it decides whether or not to grant permission to appeal to the UT under section 11(4)(a); third, if the FTT refuses permission to appeal, when the UT decides whether or not to grant permission to appeal under section 11(4)(b).
The UT initially decides this on the papers.
In certain categories of case, there is a right to renew the application at an oral hearing (Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698) rules 22(3) and (4); in any event, the UT has the power, if it considers it appropriate to do so, to hold an oral hearing to decide permission (ibid, rules 5(1) and 5(3)(g)).
The third reason involves the issue of resources.
There is no doubt that immigration and asylum cases have presented huge problems for the justice system.
The relevant history is summarised at paras 46 and 47 of Lady Hales judgment.
It is singled out for particular mention in the 2004 White Paper as having caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
The adoption of unrestricted judicial review of refusals of permission to appeal by the Upper Tribunal (Immigration and Asylum Chamber) would involve a return to the position under the Immigration Act 1971 and the Asylum and Immigration Appeals Act 1993 when the courts were inundated with unmeritorious applications for judicial review of refusals by the Immigration Appeal Tribunal of decisions of the special adjudicator.
Parliament recognised the existence of the problem and sought to overcome it successively by enacting Nationality, Immigration and Asylum Act 2002 and the Asylum and Immigration (Treatment of Claimants etc) Act 2004 (see para 21 of Lady Hales judgment).
It cannot have been intended by Parliament when it enacted the TCEA that there should, in effect, be a return to the situation that obtained before the enactment of the 2002 Act.
Mr Gill does not suggest that this was Parliaments intention.
His point is simply that, in the absence of the plainest express words to restrict the courts historical role of supervising statutory tribunals of limited jurisdiction, it is unconstitutional for the courts to limit that role.
Recognising that a return to the pre 2002 Act days would be unlikely to commend itself to this court as necessary and proportionate for the maintenance of the rule of law, Mr Gill suggested in his reply, as an alternative to his principal submission, that judicial review should lie in cases where there was clear and obvious error and where the prospects of success were strong as opposed to real.
One can readily sympathise with the argument that problems that are peculiar to the immigration and asylum cases should not determine the scope of judicial review in all other cases.
It seems that the courts have not been inundated with unmeritorious applications for judicial review of the refusal of leave to appeal from other tribunals.
But Sullivan LJ was right, for the reasons that he gave at paras 51 to 53 of his judgment in MR (Pakistan), to hold that the same approach should be applied to permission decisions made by the Immigration and Asylum Chamber of the Upper Tribunal as they do to decisions made by other chambers.
In the light of the unified tribunal structure created by the TCEA, there should be a unified approach as to the grounds, if any, on which a judicial review of decisions of the UT can be sought.
It would be contrary to the unifying purpose of the TCEA for a different approach to be adopted depending on the subject matter of the decision being appealed.
I accept that floodgates arguments must be examined with care.
But they cannot be ignored, particularly in the light of the experience in the immigration and asylum field.
As Lord Phillips says, judicial resources are limited.
It is clear from the general acceptance of the Leggatt report and from the terms of the 2004 White Paper that Parliament intended that there should not be a return to the pre 2002 Act days in immigration and asylum cases when the courts were overwhelmed with unmeritorious judicial review claims.
If the floodgates argument were the only point militating against unrestricted judicial review, I doubt whether it would be enough.
But it does not stand alone.
The various factors to which I have drawn attention (in particular, the reorganisation of the tribunal system) lead me to conclude that it is not necessary or proportionate for the maintaining of the rule of law to allow unrestricted judicial review of unappealable decisions of the UT.
For these reasons, I would hold that unrestricted judicial review is not necessary for the maintenance of the rule of law and is not proportionate.
The second tier appeals approach
It follows from what I have said so far that the court must find another solution.
The problem with the exceptional circumstances approach is that, although it recognises the need to restrict the scope of judicial review, it does so in a way which creates its own problems and does not target arguable errors of law of general importance.
The problem with unrestricted judicial review is that it captures all arguable errors of law without discriminating between them notwithstanding the countervailing factors to which I have referred.
In R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, I suggested that there was much to be said for applying (by analogy) the criteria for the grant of permission by the UT to the Court of Appeal.
Section 13(6) of the TCEA provides that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal.
These criteria are identical to those that apply to any second appeal in the courts: see section 55(1) of the Access to Justice Act 1999.
It seems to me that the second appeal criteria approach offers a number of advantages.
First, and obviously, it does not suffer from the defects of the two alternatives that I have rejected.
Secondly, and positively, it ensures that errors on important points of principle or practice do not become fossilised within the UT system.
An individual who has been unsuccessful before the FTT will be able to raise an important point of law in the courts if the UT refuses to grant permission to appeal to itself.
As explained by the Court of Appeal in Uphill v BRB (Residuary) Ltd [2005] 1 WLR 2070, it is not enough to point to a litigants private interest in the correction of error in order to obtain permission for a second appeal.
Permission will only be given where there is an element of general interest, which justifies the use of the courts scarce resources: see also Zuckerman on Civil Procedure 2nd ed, (2006) para 23.139.
It follows that, if the law is clear and well established but arguably has not been properly applied in the particular case, it will be difficult to show that an important point of principle or practice would be raised by an appeal.
The position might be different where it is arguable that, although the law is clear, the UT is systematically misapplying it: see, for example, Cramp v Hastings Borough Council [2005] 4 All ER 1014.
Thirdly, the second limb of the test (some other compelling reason) would enable the court to examine an arguable error of law in a decision of the FTT which may not raise an important point of principle or practice, but which cries out for consideration by the court if the UT refuses to do so.
Care should be exercised in giving examples of what might be some other compelling reason, because it will depend on the particular circumstances of the case.
But they might include (i) a case where it is strongly arguable that the individual has suffered what Laws LJ referred to at para 99 as a wholly exceptional collapse of fair procedure or (ii) a case where it is strongly arguable that there has been an error of law which has caused truly drastic consequences.
The second appeal criteria have been in force in the courts since October 2000.
The exceptional nature of the test is well understood.
A perusal of the commentary in Civil Procedure (2011) (The White Book) on CPR 52 r 13(2)(a) and (b) suggests that the application of the second appeals test has not caused difficulty.
That also accords with the experience of Lord Clarke.
It also accords with mine.
I agree with others that rules should be made by the Civil Procedure Rule Committee (CPRC) to govern the exercise of the judicial review jurisdiction of unappealable decisions of the UT.
The mistakes of the past should not be repeated.
A fair but streamlined system should be introduced with an emphasis on applications being made and dealt with on paper.
Ultimately, however, it will be for the CPRC, taking account of the judgments of this court and after due consultation, to decide what is the appropriate procedure to adopt.
In practice, there is little if any substantive difference between an appeal on a point of law and judicial review, although each may, of course, be subject to different procedural conditions.
Parliament has shown a liking for the second appeal criteria in second appeals and in particular in the tribunal context of appeals from the UT to the Court of Appeal.
It can at least be said that to import those criteria into the judicial review jurisdiction in the present context does not go against the grain of the TCEA.
More positively, in my view the second tier appeals approach provides a proportionate answer to the question: what scope of judicial review of unappealable decisions of the UT is required to maintain the rule of law?
For these reasons, as well as those given by Lady Hale and Lord Phillips (in Cart) and by Lord Hope (in Eba), I would allow these appeals on the jurisdictional issue.
But, in agreement with them, I would dismiss the appeals in both cases as well as in MR (Pakistan).
| UK-Abs | This judgment deals with two English cases, while a separate judgment deals with the Scottish case Eba v Advocate General for Scotland.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
In all of them the claimant failed in an appeal to the First tier Tribunal and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
The tribunal systems with which the three cases are concerned, both before and after their restructuring in the 2007 Act, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
Part 1 of the 2007 Act established a new unified tribunal structure, which accommodates a diversity of jurisdictions.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application for permission or leave to appeal (s 13(8)(c)).
Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency to revise a variation in the level of child maintenance to be paid to his ex wife.
His appeal was dismissed.
He applied for permission to appeal to the Child Support Commissioners (whose functions were subsequently taken over by the Administrative Appeals Chamber of the Upper Tribunal).
Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The Upper Tribunal dismissed his appeal on the first three grounds and declined permission to reopen the fourth.
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
Determining the amenability of the Upper Tribunal to judicial review as a preliminary issue, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances.
The Court of Appeal dismissed his appeal, reaching the same result but by a different route.
MR is a native of Pakistan whose application for asylum was refused.
His appeal to the Immigration and Asylum chamber of the First tier Tribunal was dismissed.
Both the First tier Tribunal and then the
Upper Tribunal refused his application for permission to appeal to the Upper Tribunal.
MR sought judicial review of the Upper Tribunals refusal of permission to appeal.
Sullivan LJ dismissed the judicial review claim in accordance with the decision of the Court of Appeal in Cart.
He granted a certificate so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
The Supreme Court unanimously dismisses the appeals but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
It decides that permission for judicial review should only be granted where the criteria for a second tier appeal apply, that is where there is an important point of principle or practice or some other compelling reason to review the case.
Lady Hale gives the leading judgment.
The scope of judicial review is an artefact of the common law whose object is to maintain the rule of law.
The question is, what machinery is necessary and proportionate to keep mistakes of law to a minimum? What level of independent scrutiny outside the tribunal structure is required by the rule of law? [37], [51] There are three possible approaches which the Court could take.
First, that the scope of judicial review should be restricted to the exceptional circumstances identified in the Divisional Court and Court of Appeal, namely pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances).
Second, that unrestricted judicial review should be available.
Third, that judicial review should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted, namely (a) the proposed appeal would raise some important point of principle or practice, or (b) there is some other compelling reason for the court to hear the appeal. [38] While the introduction of the new system may justify a more restricted approach, the exceptional circumstances approach is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected.
As regards the second approach, it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever. [44], [47], [51] The adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
There is clearly nothing in Mr Cart or MRs cases to bring them within the second tier appeal criteria. [57], [59], [128], [130], [131], [133] Per Lord Phillips.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of limited judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law. [89]
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This appeal is concerned with legislation under which planning authorities have the duty of reviewing what are commonly referred to as old planning permissions for mineral working.
The process of review is sometimes referred to by the acronym ROMP (Review [of] Old Mineral [planning] Permissions).
The statutory provisions were introduced by the Environment Act 1995 and then reenacted in substantially the same form in the Town and Country Planning (Scotland) Act 1997 (the 1997 Act).
The principal legislative purpose of these provisions is to ensure that old mineral permissions are made subject to conditions meeting modern environmental standards.
Some of the old permissions were granted many years ago subject to conditions less stringent and less precise than are appropriate today.
Where more stringent conditions are imposed compensation is payable in certain cases, but only where the mineral site in question is classified as active rather than dormant.
A subsidiary purpose of the legislation is to achieve better and more reliable records of old planning permissions for mineral working.
The evolution of the legislation has been described in detail by the Lord President (Lord Cullen) in Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, paras 2 and 3.
The relevant provisions of the 1997 Act are section 74 and Schedule 9 (Review of Old Mineral Planning Permissions).
Schedule 9 contains several special definitions and some interlocking provisions which call for careful examination, but on examination (and with the background history as explained by the Lord President) its general scheme becomes clear.
It distinguishes between three categories of mineral sites, and lays down how the process of review is to affect each category.
The three categories are Phase I active sites, Phase II active sites and dormant sites.
The difference in treatment as between the first and second of these categories is a simple matter of administrative prioritisation: Phase I active sites include sites of particular environmental sensitivity (para 2(4)) and those which are the oldest sites dealt with by Schedule 9, and so most likely to have inadequate conditions (para 2(6); it should be added, for the sake of completeness, that an even older category of permissions, those granted before 1 July 1948, had been covered by earlier legislation).
Phase I active sites are therefore to be reviewed first.
By contrast the difference in treatment between all active sites (on the one hand) and dormant sites (on the other hand) is more substantial.
Dormant sites (which may be either Phase I or Phase II) are defined (para 1(1)) as sites on which no substantial minerals development was carried out in the period beginning 22 February 1982 and ending with 6 June 1995.
Although a planning permission cannot be lost by abandonment, Parliament thought it right to deal with dormant sites in a rather more robust way, by freezing any further mineral working until new conditions had been applied for and approved (para 12(3)).
This appeal relates to a dormant site.
As the Lord Justice Clerk (Lord Gill) said in his opinion in the Inner House (para 8) there are two stages in the Schedule 9 procedure.
Stage 1 involves the preparation of two lists, termed the first list (para 3) and the second list (para 4).
The first list has three main functions: (i) to list all mineral sites in the authoritys area (para 3(1) and (2)); (ii) to sort them into the three categories already mentioned (para 3(3)); and (iii) for active Phase I sites only, to specify a date by which a para 9 application is to be made (para 3(4) and (5)).
In that way active Phase I sites are given priority.
The second list is simpler.
It relates only to active Phase II sites and performs function (iii) above for them (para 4(3), (4) and (5)).
Paragraphs 5, 6, 7 and 8 contain further administrative provisions relevant to what the Lord Justice Clerk called stage 1.
Counsel for the appellant placed particular emphasis on the provisions of para 6 (Applications for inclusion in the first list of sites not included in that list as originally prepared and appeals from decisions upon such applications) but it is better to defer consideration of that point.
Paragraphs 9 to 16 of Schedule 9 deal with Stage 2.
Some of these provisions (including those as to compensation) do not apply to dormant sites.
In relation to dormant sites the key provisions are para 9(1) and (5), para 11 and para 12(3) and (4).
Para 9(1) is as follows: Any person who is the owner of any land, or who is entitled to an interest in a mineral, may, if that land or mineral is or forms part of a dormant site or an active Phase I or II site, apply to the planning authority to determine the conditions to which the relevant planning permissions relating to that site are to be subject.
Para 9(5) is as follows: Where the planning authority receive an application under this paragraph in relation to a dormant site or an active Phase I or II site they shall determine the conditions to which each relevant planning permission relating to the site is to be subject; and any such permission shall, from the date when the conditions to which it is to be subject are finally determined, have effect subject to the conditions which are determined under this Schedule as being the conditions to which it is to be subject.
Para 11 gives a right of appeal (now to Scottish Ministers) as to the terms of any new conditions to be imposed.
Para 12(3) is as follows: Subject to sub paragraph (4), no relevant planning permission which relates to a dormant site shall have effect to authorise the carrying out of minerals development unless (a) an application has been made under paragraph 9 in respect of that site, and (b) that permission has effect in accordance with paragraph 9(5).
Para 12(4) provides for the termination of mineral permissions which are not included in the first list (either initially or on an application under para 6) except so far as concerns conditions for restoration or aftercare.
The facts
Some of the documentary evidence has to be addressed in detail.
The relevant documents are not in chronological order in the appendix.
The references are to pages in the hard copy of the appendix.
The mineral site with which this appeal is concerned is in a sparsely populated area on the edge of Strathspey.
It is on the A938 road between Carrbridge and Dulnain Bridge, near Grantown on Spey.
The appellant company, G. Hamilton (Tullochgribban Mains) Ltd (Tullochgribban Mains) is the heritable proprietor of tenanted farmland in the vicinity.
The first respondent, the Highland Council (the Council) is the planning authority for the area, having taken over that responsibility from the Inverness County Council.
The second respondent, Breedon Aggregates Scotland Ltd, formerly Ennstone Thistle Ltd (Breedon) is the proprietor of the minerals on the site and has the right to work them.
Both Tullochgribban Mains and Breedon derive title from the same landowner, Lord Reidhaven.
By a disposition [66] signed on 21 April 1967 and registered on 6 July 1967 Lord Reidhaven disponed to Breedons predecessor in title, George MacWilliam and Son (Contractors) Ltd (MacWilliam) all the deposits of sand and gravel and associated substances (except coal) in, on or under the land delineated in red on an annexed plan [74].
This land (the red land) is adjacent to and on the north of the Carrbridge road.
It is roughly rectangular except that it does not include a small loch, Loch Mor, which juts into the land on the east side.
The disposition provided for entry on 1 August 1965.
The property disponed included a number of express rights and privileges, including full right and power . to search for work and carry away the minerals included in the disposition.
Counsel did not find it necessary to make any submissions about the detailed terms of the disposition.
The pleadings show that at the time when the proceedings were commenced in 2008, Tullochgribban Mains was in the course of registering its title under a disposition made by Lord Reidhaven.
Possibly for that reason, its title has not been formally admitted.
But nothing turns on that.
The argument has proceeded at every level on the basis that Tullochgribban Mains has a sufficient interest to give it locus standi in the proceedings, and that its rights are subject to the mineral rights in the red land disponed to Breedons predecessor in title.
The dispute is about planning law, not property law.
The original planning permission [75] was granted to MacWilliam by Inverness County Council on 12 February 1965.
It was expressed in general terms as permission for the working of minerals on land at Tullochgorum, Carrbridge, in accordance with the plan(s) submitted and docquetted.
The permission set out eleven conditions in numbered paragraphs, stated to be in the interests of health, safety and amenity.
It is common ground that the names Tullochgribban and Tullochgorum are variants of the same name.
The docquetted plan is not extant.
It is common ground that it has been lost, possibly at the time when responsibility as planning authority passed to the Council.
It would be surprising if it had shown an area materially different from the red land shown on the plan annexed to Lord Reidhavens disposition and Breedon and its predecessors in title appear to have acted consistently with the supposition that they were the same.
MacWilliams immediate successor was Tilcon (Scotland) Ltd (Tilcon), and Breedon is Tilcons immediate successor.
The mineral site was worked for some years, but it is common ground that no work has taken place for at least 20 years.
The direction of working, when it took place, was towards the north, away from the road.
The worked area (which has come to be called the green land) was relatively small.
Counsel for the appellant put it at about one sixth or one seventh of the whole area of the red land.
In March 1997 the Council issued its first list of mineral sites [76].
It was then acting under Schedule 13 of the Environment Act 1995, but it is agreed that the procedure was just the same as under the 1997 Act.
The Tullochgribban site was not included in the first list, and in May 1997 Tilcon (which had by then acquired the mineral rights from MacWilliam) applied for it to be included as a Phase I active site.
It did so by an undated letter, received on 7 May 1997 [77], with enclosures of (i) a copy of the planning permission dated 12 February 1965 [78]; (ii) a plan [79] (apparently copied from the plan on Lord Reidhavens 1967 disposition) showing the red land; and (iii) a reserve schedule [80] intended to serve as evidence that the site was an active site (that is, one on which some extraction took place after 22 February 1982).
The Council (acting by Mr Andrew Brown, who has made an affidavit in the proceedings) replied on 26 June 1997 [107] pointing out that the reserve schedule was inadequate as evidence of working since 1982, and stating that the site would be registered as dormant.
Tilcon accepted this by a letter dated 7 July 1997 [108] without further argument and it is not an issue in the appeal.
Of more direct relevance, the Councils letter of 26 June 1997 stated: From the information provided, the Council has been able to trace this old planning permission (Reference number ICC/1964/798, approved on 12 February 1965) and has been able to locate a working on the ground as shown by the enclosed map.
It would therefore seem appropriate to include Tullochgribban in the first list of sites.
The Council then sent Tilcon a letter dated 15 July 1997 [81] framed (as counsel for the appellant pointed out) in the formal language of a decision letter.
The substance of the decision was in the first two paragraphs: I refer to your letter of 7 July 1997 in relation to previous correspondence, and hereby give notice that the above mineral site [identified as Tullochgribban Quarry, Carrbridge] has been added to the first list of sites prepared by the Council as a Dormant site.
The appropriate reference sheet and site plan relating to this additional entry are enclosed.
As this site has been classified as Dormant, no development consisting of the winning and working of minerals or involving the depositing of mineral waste may lawfully be carried out until new planning conditions have been submitted to, and approved by, the Council.
The letter was signed by Mr Bob Shannon, who was the Councils Head of Strategic Plans, and Mr Browns superior.
The first of the enclosures, the reference sheet [82], was clear and uncontroversial.
It set out particulars, correct in every respect, of the original planning permission.
It noted at the foot, Original definitive site plan not available.
The second enclosure [83] is at the heart of the controversy.
It was a plan which identified the green land, a roughly kidney shaped area forming an island within the southern part of the red land.
Counsel for the appellant did not accept that the site plan enclosed with the Councils letter of 15 July 1997 was the same as the enclosure with the Councils letter of 26 June 1997 (which referred to the Council being able to locate a working on the ground as shown by the enclosed map), and Mr Browns affidavit (para 4) indicates that the earlier enclosure was probably an extract from the Councils visual record plan [110, which is Appendix 4 of Mr Browns affidavit, with a better copy at 119].
The site plan [83] enclosed with the letter of 15 July 1997 was headed Review of Old Mineral Workings and there is discernible on it, at two places just within the boundary of the green land, the word spreads (apparently indicating some sort of land slippage).
The site was therefore classified, by a revision of the first list, as a dormant site [109].
Tilcon did not make any comment on the letter of 15 July 1997 and its enclosures.
There is no indication that it occurred to any of Tilcons management that the letter and enclosures were intended to reduce dramatically the extent of the original planning permission, or that it had that effect.
Mr Browns affidavit (para 8) indicates that it was not intended to have that effect: It was not the intention of this site plan to seek to restrict the original planning permission to the area indicated.
To have done so would not have been reasonable since the site would have been restricted in extent to its prior workings, thereby excluding any possible reserves, without evidence that this reflected the 1965 permission.
The intention as explained in paragraph 5 was that the mineral operator when submitting an application for updated conditions could indicate a larger or more definitive area over which the application should relate, with due justification.
The Council would then consider this along with the proposed new conditions in the light of the information to hand.
Nothing else material occurred until October 2006, by which time Breedon had acquired the mineral rights.
As the site had been classified as a dormant site, there was no time limit for the making of a paragraph 9 application, but in the meantime no further working could take place.
On 17 October 2006 Breedons agents sent to the Council a copy of the plan annexed to Lord Reidhavens 1967 disposition.
On behalf of the Council Mr Brown (then a senior planner engaged on development control) sent a reply dated 24 October 2006 [88] acknowledging the copy of the plan and stating: On this basis, and given that no more definitive information appears to be available concerning the site boundary for Inverness County Council Permission No 1964/798, it is agreed that an application under Section 74 of the Town and Country Planning (Scotland) Act 1997 should be on the basis of this boundary, with the following exception that the south eastern boundary should be revised to exclude Loch Mor as it presently extends.
The shape of Loch Mors shoreline had undergone some change since 1967.
On 20 April 2007 Breedon made its paragraph 9 application for approval of a schedule of conditions.
After discussion with the Council a final draft of new conditions was prepared [93] which the Council was minded to approve.
The first numbered condition was as follows: For the avoidance of doubt, in the absence of a definitive docquetted site plan, the boundary of the site to which these conditions relate under planning permission ICC/1964/798, issued by the County Council of Inverness on 12 February 1965, shall be as outlined in red on the approved plans EG 320/RMP/F/01&2.
But after the application was advertised in May 2007, Tullochgribban Mains contended that it would be ultra vires for the Council to approve conditions in relation to the red land.
It contended that the Council had, when it revised the first list so as to include Tullochgribban Quarry, definitively determined its extent as being limited to the green land.
Tullochgribban Mains commenced these proceedings seeking declarator, reduction of the Councils purported decision, and interdict ad interim.
The decisions in the courts below
In her reserved judgment the Lord Ordinary (Lady Clark of Calton) carefully analysed the provisions of Schedule 9 to the 1997 Act.
She stated (para 27): when a planning authority in accordance with paragraph 3 prepares a list of mineral sites within their area (the first list) what they are preparing is a list of the land to which a relevant planning permission relates.
I consider that the intention of the legislation in relation to review of old mineral planning permissions in Schedule 9, is not to permit the planning authority to change the boundaries of land by reducing or increasing an area of land to which a relevant planning permission has been granted at an earlier date.
The listing procedure envisages a listing of something which pre exists ie the planning permission granted at an earlier date in respect of mineral sites.
The last sentence was criticised by counsel for the appellant as suggesting that the first list was to be a list of planning permissions.
But it is clear from the passage as a whole, and indeed from the Lord Ordinarys judgment as a whole, that she well understood that it was to be a list of sites to which a relevant planning permission related (the wording used in Schedule 9, para 1(2)(b)).
Normally the boundaries of the site would be identifiable from a plan referred to in the planning permission, but fixing the exact boundaries was not necessary at the listing stage.
What was required was identification of the site.
The Lord Ordinary considered that the submissions made on behalf of Tullochgribban Mains were not well founded.
By an interlocutor of 10 March 2009 she repelled Tullochgribban Mainss first and second pleas in law and dismissed the petition.
On 7 January 2011 the Inner House of the Court of Session refused Tullochgribban Mains reclaiming motion for review of the Lord Ordinarys interlocutor.
The Lord Justice Clerk gave an opinion in which Lord Carloway and Lady Smith concurred.
The Lord Justice Clerk defined the two issues in the appeal: (i) whether the Council was entitled or obliged to define the extent of the mineral site in the first list; (ii) whether, if it had power to define the extent of the site at that stage, the Council defined it as the green land.
On the first issue counsel for the appellant argued (as he has before this Court) that the boundaries of a mineral site fell to be determined by the planning authority in the first list, at what the Lord Justice Clerk called Stage 1 (para 30 of his judgment, summarising counsels argument): that is to say, an entry in the first list is not merely site specific but boundary specific too.
It follows, on this submission, that at Stage 2, when it comes to consider the question of conditions, it is too late for the planning authority to define the boundaries of the site.
The Lord Justice Clerk did not accept that argument.
He considered the Lord Ordinarys decision to be correct (paras 33 34, with two case references rearranged): Looking at the overall scheme of Schedule 9, I think that the procedure of listing (paras 3 to 6) is administrative in nature (Dorset CC v Secretary of State [1999] JPL 633, at pp 642 643).
Listing is the qualification that entitles the interested party to apply to the planning authority to determine the conditions that should govern the existing planning permission (cf R v Oldham MBC and Anr, ex p Foster [2000] Env LR 395; and R (Payne) v Caerphilly CBC [2002 PLCR 496, [2003] Env LR 679 (Court of Appeal).
Listing is about preserving an extant planning permission, not about restricting or rescinding it.
The first list is a census of the mineral sites in the planning authoritys area (para 3(1); R v Oldham MBC and Anr, ex p Foster, supra at p 402; R (Payne) v Caerphilly CBC, supra; Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, at para 37).
It is not a list of defined areas of land.
It is drawn up to identify where the mineral sites are and to classify each of them in order to determine the procedures that are to be followed at Stage 2.
The existence of a relevant planning permission relating to it is the condition precedent to the inclusion of the site in the list.
Therefore the planning authority is bound to satisfy itself that a relevant planning permission exists; but it need not identify the planning permission in the list itself (R v Oldham MPC, ex p Foster, supra) and a fortiori, in my view, it need not define its boundaries.
Since the site is by definition land to which a relevant planning permission relates, the extent of it will be defined by the planning permission itself.
If the site is then listed, the extant planning permission will remain alive in its entirety.
It is only when the site is listed that the extent of the existing development rights over it becomes important.
That question will be determined at Stage 2 by reference to the relevant planning permission itself.
It is at that stage that planning judgments have to be made on the merits of each case.
The Lord Justice Clerk considered that Tullochgribban Mains case was based on a misinterpretation of Schedule 9, para 6(3).
A planning authority could grant an application for listing in part (giving rise to a right of appeal) only if satisfied, on clear evidence, that part of the land sought to be listed did not enjoy a relevant planning permission at all.
That was quite different from a case where the plan on the original planning permission had been lost.
On the second issue, the Lord Justice Clerk concluded that the Council did not purport to exercise its power under para 6(3)(b) to list part only of a site for which an application for listing was made.
He accepted that on the uncontradicted evidence of Mr Brown, the green land was no more than an indication of the area which had been worked by then.
The Council was not at that stage intending to make a definitive statement about boundaries.
Conclusions
In my judgment the Lord Ordinary and the Inner House were plainly correct.
Counsel for the appellant criticised their reasoning as inadequate.
But once the general scheme of Schedule 9 of the 1997 Act is understood the first point is really quite a short one.
The procedure at what the Lord Justice Clerk called Stage 1 is administrative and preliminary in nature.
It involves the identification of sites and the setting of an order of priority for Stage 2 (with activity on a dormant site being frozen in the meantime).
By contrast Stage 2, which is initiated in every case by a paragraph 9 application, requires decisions calling for planning judgment.
Counsel for the appellant concentrated in his submissions on para 6 of Schedule 9, and on the right of appeal conferred by it.
But the Lord Justice Clerk was correct in his analysis of paragraph 6.
It is possible to imagine some circumstances (such as overlapping applications) in which a planning authority might at Stage 1 find it necessary to form a provisional view as to the boundaries of a site.
But such cases would be unusual and a provisional determination at Stage 1 could not have the effect of cutting down a valid existing planning permission.
The second issue identified by the Lord Justice Clerk does not therefore strictly arise for decision.
But the Lord Ordinary and the Inner House were also plainly correct in their observations on this point.
Even without Mr Browns affidavit, the correspondence as a whole, considered objectively, gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission.
I would therefore dismiss this appeal.
It is not an appeal for which permission would have been given by this Court, had permission been necessary.
It does not raise any point of law of general importance, and the judgments below set out the position clearly and correctly.
| UK-Abs | This appeal is concerned with the process by which planning authorities review what are commonly referred to as old planning permissions for mineral working, under the Environment Act 1995 and the Town and Country Planning (Scotland) Act 1997.
The review is necessary because the conditions attached to old permissions often fail to meet modern environmental needs.
The legislation distinguishes between three categories of mineral sites, Phase I active, Phase II active and dormant, and lays down how the process of review is to affect each category.
Dormant sites are those on which no substantial minerals development was carried out in the period from 22 February 1982 and 6 June 1995.
On classification as dormant, all further mineral working is frozen until new conditions have been applied for and approved.
The procedure for classification of sites is in two stages.
Stage 1 involves the preparation of two lists.
The first list enables Phase I active sites to be given priority.
The second list relates to Phase II active sites.
Stage 2 enables a person who owns the land or has an interest in minerals to apply to the planning authority to determine the conditions to which the relevant planning permission is to be subject with a right of appeal to Scottish Ministers, and provisions for compensation for some active sites.
The mineral site in question is in a sparsely populated area on the edge of Strathspey.
The Appellant company (Tullochgribban Mains) is the heritable proprietor of tenanted farmland in the vicinity.
The First Respondent, the Highland Council (the Council) is the planning authority for the area and the Second Respondent, Breedon Aggregates Scotland Ltd (Breedon) is the proprietor of the minerals on the site and has the right to work them.
Tullochgribban Mains and Breedon derive title from Lord Reidhaven, who by a disposition registered on 6 July 1967 disponed to Breedons predecessor in title all the deposits of sand and gravel and associated substances (except coal) in, on or under the land delineated in red on an annexed plan (the red land) The property included a number of rights and privileges including full right and powerto search for workand carry away the minerals.
The original planning permission was granted on 12 February 1965 and was expressed in general terms as permission for the working of minerals on land at Tullochgorum, Carrbridge, in accordance with the plan(s) submitted and docquetted.
It set out 11 conditions stated to be in the interests of health, safety and amenity.
The original plan has been lost.
The site was worked for some years, but no work has taken place for a least 20 years.
The worked area (the green land) was quite small, about one sixth or seventh of the red land.
In March 1997, the Council issued its first list of mineral sites.
The Tullochgribban site was not included and in May 1997 an application was made for it to be included as a Phase I active site.
Council decided to register it as dormant as there was inadequate evidence of working since 1982.
This was communicated by the Council by letter dated 15 July 1997 which included with it a plan which identified the green land, a roughly kidney shaped area forming an island within the southern part of the red land.
In 2007, by which time Breedon had acquired the mineral rights, Breedon made its application for approval of a schedule of conditions.
After the application was advertised in May 2007, Tullochgribban Mains contended that it would be outside the power of the Council to approve conditions in relation to the red land, contending that when the Council revised the first list so as to include Tullochgribban Quarry, it definitively determined its extent as being limited to the green land.
By an interlocutor of 10 March 2009 the Lord Ordinary (Lady Clark of Calton) dismissed Tullochgribban Mains petition.
On 7 January 2011, the Inner House of the Court of Session (Lord Justice Clerk, Lord Carloway and Lady Smith) refused Tullochgribban Mains appeal against that decision.
Tullochgribban Mains seeks to appeal that decision to the Supreme Court.
The Supreme Court unanimously dismisses Tullochgribban Mains appeal.
The Stage 1 procedure is administrative and preliminary in nature.
In any event, the correspondence as a whole gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission.
The Court notes that, as a Scottish civil case, permission was not required to bring an appeal to the Supreme Court.
Had it been required, permission would not have been given by this Court.
It does not raise any point of law of general importance and the judgments below set out the position clearly and correctly.
Lord Walker gives the leading judgment with which Lords Hope, Kerr, Clarke and Dyson agree.
The stage 1 procedure is administrative and preliminary in nature.
It involves the identification of sites and the setting of an order of priority for Stage 2.
By contrast Stage 2 requires planning judgment.
It is possible to imagine circumstances, such as overlapping applications, in which a planning authority might at Stage 1 find it necessary to form a provisional view as to the boundaries of a site.
But such cases would be unusual and a provisional determination at Stage 1 could not have the effect of cutting down a valid existing planning permission.
The correspondence as a whole, considered objectively, gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission.
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This judgment is concerned with two connected questions: (i) (ii) Is it possible in principle for the Supreme Court to adopt a closed material procedure on an appeal? If so, Is it appropriate to adopt a closed material procedure on this particular appeal? A closed material procedure involves the production of material which is so confidential and sensitive that it requires the court not only to sit in private, but to sit in a closed hearing (ie a hearing at which the court considers the material and hears submissions about it without one of the parties to the appeal seeing the material or being present), and to contemplate giving a partly closed judgment (ie a judgment part of which will not be seen by one of the parties).
Open justice and natural justice
The idea of a court hearing evidence or argument in private is contrary to the principle of open justice, which is fundamental to the dispensation of justice in a modern, democratic society.
However, it has long been accepted that, in rare cases, a court has inherent power to receive evidence and argument in a hearing from which the public and the press are excluded, and that it can even give a judgment which is only available to the parties.
Such a course may only be taken (i) if it is strictly necessary to have a private hearing in order to achieve justice between the parties, and, (ii) if the degree of privacy is kept to an absolute minimum see, for instance A v Independent News & Media Ltd [2010] EWCA Civ 343, [2010] 1 WLR 2262, and JIH v News Group Newspapers Ltd [2011] EWCA Civ 42, [2011] 1 WLR 1645.
Examples of such cases include litigation where children are involved, where threatened breaches of privacy are being alleged, and where commercially valuable secret information is in issue.
Even more fundamental to any justice system in a modern, democratic society is the principle of natural justice, whose most important aspect is that every party has a right to know the full case against him, and the right to test and challenge that case fully.
A closed hearing is therefore even more offensive to fundamental principle than a private hearing.
At least a private hearing cannot be said, of itself, to give rise to inequality or even unfairness as between the parties.
But that cannot be said of an arrangement where the court can look at evidence or hear arguments on behalf of one party without the other party (the excluded party) knowing, or being able to test, the contents of that evidence and those arguments (the closed material), or even being able to see all the reasons why the court reached its conclusions.
In Al Rawi v Security Service [2012] 1 AC 531, Lord Dyson made it clear that, although the open justice principle may be abrogated if justice cannot otherwise be achieved (para 27), the common law would in no circumstances permit a closed material procedure.
As he went on to say at [2012] 1 AC 531, para 35, having explained that, in this connection, there was no difference between civil and criminal proceedings: [T]he right to be confronted by ones accusers is such a fundamental element of the common law right to a fair trial that the court cannot abrogate it in the exercise of its inherent power.
Only Parliament can do that.
The effect of the Strasbourg Courts decisions in Chahal v United Kingdom (1996) 23 EHRR 413 and A and others v United Kingdom [2009] ECHR 301 is that Article 6 of the European Convention on Human Rights (Article 6, which confers the right of access to the courts) is not infringed by a closed material procedure, provided that appropriate conditions are met.
Those conditions, in very summary terms, would normally include the court being satisfied that (i) for weighty reasons, such as national security, the material has to be kept secret from the excluded party as well as the public, (ii) a hearing to determine the issues between the parties could not fairly go ahead without the material being shown to the judge, (iii) a summary, which is both sufficiently informative and as full as the circumstances permit, of all the closed material has been made available to the excluded party, and (iv) an independent advocate, who has seen all the material, is able to challenge the need for the procedure, and, if there is a closed hearing, is present throughout to test the accuracy and relevance of the material and to make submissions about it.
The importance of the requirement that a proper summary, or gist, of the closed material be provided is apparent from the decision of the House of Lords in Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28, [2010] 2 AC 269.
At para 59, Lord Phillips said that an excluded party must be given sufficient information about the allegations against him to enable him to give effective instructions in relation to those allegations, and that this need not include the detail or the sources of the evidence forming the basis of the allegations.
As he went on to explain: Where, however, the open material consists purely of general assertions and the case against the [excluded party] is based solely or to a decisive degree on closed materials the requirements of a fair trial will not be satisfied, however cogent the case based on the closed materials may be.
The nature and functions of a special advocate are discussed in Al Rawi [2012] 1 AC 531, by Lord Dyson, paras 36 37, and by Lord Kerr, para 94.
As Lord Dyson said, the use of special advocates has limitations, despite the fact that the rule makers and the judges have done their best to ensure that they are given all the facilities that they need, and despite the fact that the Treasury Solicitor has ensured (to the credit of the Government) that they are of consistently high quality.
In a number of statutes, Parliament has stipulated that, in certain limited and specified circumstances, a closed material procedure may, indeed must, be adopted by the courts.
Of course, it is open to any party affected by such legislation to contend that, in one respect or another, its provisions, or the ways in which they are being applied, infringe Article 6.
However, subject to that, and save maybe in an extreme case, the courts are obliged to apply the law in this area, as in any other area, as laid down in statute by Parliament.
The statutory and factual background to this appeal
The statute in question in this case is the Counter Terrorism Act 2008 (the 2008 Act), which, as its name suggests, is concerned with enabling steps to be taken to prevent terrorist financing and the proliferation of nuclear weapons, and thereby to improve the security of citizens of the United Kingdom.
The particular provisions which apply in the present case are in Parts 5 and 6 of the 2008 Act.
The first relevant provision is section 62, which is in Part 5 and confer[s] powers on the Treasury to act against terrorist financing, money laundering and certain other activities in accordance with Schedule 7.
Paragraphs 1(4), 3(1) and 4(1) of Schedule 7 to the 2008 Act permit the Treasury to give a direction to any credit or financial institution, if the Treasury reasonably believes that the development or production of nuclear . weapons in [a] country poses a significant risk to the national interests of the United Kingdom.
According to paras 9 and 13 of the schedule, such a direction may require the person on whom it is served not to enter into or to continue to participate in a specified description of transactions or business relationships with a designated person.
Paragraph 14 requires any such direction to be approved by affirmative resolution of Parliament.
Pursuant to these provisions, on 9 October 2009, the Treasury made the order the subject of these proceedings, the Financial Restrictions (Iran) Order 2009 (the 2009 Order), which, three days later, was laid before Parliament, where it was approved.
The 2009 Order, which was in force for a year, directed all persons operating in the financial sector not to enter into, or continue to participate in, any transaction or business relationship with two companies, one of which was Bank Mellat (the Bank), or any branch of either of those two companies.
The Bank is a large Iranian bank, with some 1800 branches and nearly 20 million customers, mostly in Iran, but also in other countries, including the United Kingdom.
In 2009, prior to the 2009 Order, it was issuing letters of credit in an aggregate sum of over US$11bn, of which around 25% arose out of business transacted in this country.
It has a 60% owned subsidiary bank incorporated and carrying on business here, which was at all material times regulated by the Financial Services Authority.
The Order effectively shut down the United Kingdom operations of the Bank and its subsidiary, and it is said to have damaged the Banks reputation and goodwill both in this country and abroad.
The first section of Part 6 of the 2008 Act is section 63, of which subsection (2) gives any person affected by a direction the right to apply to the High Court (or the Court of Session) to set it aside, and any such application is defined by section 65 as financial restrictions proceedings.
The Bank issued such proceedings to set aside the Order on 20 November 2009.
The Government took the view that some of the evidence relied on by the Treasury to justify the 2009 Order was of such sensitivity that it could not be shown to the Bank or its representatives.
Mitting J accepted the Governments case that justice required that the evidence in question be put before the court and that it had to be dealt with by a closed material procedure.
Accordingly, he gave appropriate directions as to how the hearing should proceed.
The two day hearing before him was partly in open court and partly a closed hearing.
The open hearing involved all evidence and arguments (save the closed material) being produced at a public hearing, with both parties, the Bank and the Treasury, seeing the evidence and addressing the court through their respective counsel, in the normal way.
The closed hearing was conducted in private, in the absence of the Bank, its counsel, and the public, and involved the Treasury producing the closed material and making submissions on it through counsel.
The interests of the Bank were protected, at least to an extent, by (i) the Treasury providing the Bank with a document which gave the gist of the closed material, and (ii) the presence at the closed hearing of special advocates, who had been cleared to see the material, and who made such submissions as they could on behalf of the Bank about the closed material.
Following the two day hearing, Mitting J handed down two judgments on 11 June 2010.
The first judgment was an open judgment, in which the Judge dismissed the Banks application for the reasons which he explained [2010] EWHC 1332 (QB).
The second judgment was a closed judgment, which was seen by the Treasury, but not by the Bank, and is, of course, not publicly available.
The closed judgment was much shorter than the open judgment, although it should be added that the open judgment is not particularly long.
In his open judgment, Mitting J referred to his closed judgment in two
passages.
At [2010] EWHC 1332 (QB), para 16, the Judge considered, inter alia, the activities of one of the Banks former customers, Novin.
Having referred to the fact that Novin had been designated by the [UN] Security Council as a company which operates within and has transferred funds on behalf of the Atomic Energy Organisation of Iran (AEOI), he said that [b]y reason of the designation and for reasons set out in the closed judgment I accept that Novin was an AEOI financial conduit and did facilitate Irans nuclear weapons programme.
At [2010] EWHC 1332 (QB), para 18, the Judge considered the activities of another of the Banks former customers, Doostan International and its managing director, Mr Shabani.
He said that [f]or reasons which are set out in the closed judgment, I am not satisfied that Mr Shabani has made a full disclosure and am satisfied that he and Doostan have played a part in the Iranian nuclear weapons programme.
The Bank appealed, and the appeal was heard by the Court of Appeal largely by way of an ordinary, open, hearing.
However, there was a short closed hearing at which they considered the closed judgment of Mitting J, and at which the special advocates, but not representatives of the Bank, were present.
The Banks appeal was dismissed by the Court of Appeal (Maurice Kay and Pitchford LJJ, Elias LJ dissenting in part) in an open judgment, which was handed down on 13 January 2011 [2011] EWCA Civ 1.
In the last paragraph of his judgment, [2011] EWCA Civ 1, para 83, Maurice Kay LJ said that although the Court held a brief closed hearing in the course of the appeal, he did not find it necessary to refer to it or to the closed judgment of Mitting J.
The Bank then appealed to this Court.
Before the hearing of the appeal, it was clear that the Treasury would ask this Court to look at the closed judgment of Mitting J.
Therefore, it was agreed between the parties that the first day of the three day appeal should be given over to the question of whether the Supreme Court could conduct a closed hearing.
At the end of that days argument, we announced that, by a majority, we had decided that we could do so and that we would give our reasons later.
The second day and most of the third day of the hearing were given over to submissions made in open court by counsel for the Bank (and counsel for certain interested parties, shareholders in the Bank) in support of the appeal, and to submissions in reply on behalf of the Treasury.
We were then asked by counsel for the Treasury to go into closed session in order to consider the closed judgment of Mitting J.
This was opposed by counsel for the Bank and by the special advocates.
While we were openly sceptical about the necessity of acceding to the application, by a bare majority we decided to do so.
Accordingly, the Court had a closed hearing which lasted about 20 minutes, at which we heard brief submissions on behalf of the Treasury and counter submissions from the special advocates.
We then resumed the open hearing for the purpose of counsel for the Bank making his closing submissions.
Contemporaneously with this judgment, we are giving our judgment on the substantive issue, namely whether the 2009 Order should be quashed.
The purpose of this judgment is (i) to explain why we decided that we had power to have a closed material hearing, and (ii) to consider the closed material procedure we adopted on this appeal, and to give some guidance for the future in relation to the closed material hearing procedure on appeals.
The closed material procedure in the courts of England and Wales
The practice and procedure of the civil courts of England and Wales (the County Court, the High Court and the Court of Appeal) are governed by the Civil Procedure Act 1997 (the 1997 Act).
Section 1(1) of the 1997 Act provides for the practice and procedure to be set out in the Civil Procedure Rules (CPR), and states that they are to be made, and modified, by the negative statutory instrument procedure.
Section 1(3) of the 1997 Act states that the power to make the CPR is to be exercised with a view to securing that the civil justice system is accessible, fair and efficient.
The underlying purpose of the CPR is enshrined in the so called overriding objective in CPR 1(1), which requires every case to be dealt with justly.
By CPR 1(2), this expression is stipulated to include so far as is practicable ensuring that the parties are on an equal footing [and] ensuring that [every case] is dealt with fairly.
The CPR contain detailed rules with regard to procedures before, during and after trial, which seek to ensure that all civil proceedings are conducted in a way which is fair and effective, and, in particular for present purposes, in a way which achieves, as far as is possible in this imperfect, complex and unequal world, openness and equality of treatment as between the parties.
In a series of provisions in Part 6 of the 2008 Act, Parliament has recognised that financial restrictions proceedings may require the rules of general application in the CPR to be changed or adapted if a closed material procedure is to be permitted.
The first of those provisions is section 66(1), which explains that: The following provisions apply to rules of court relating to (a) financial restrictions proceedings, or (b) proceedings on an appeal relating to financial restrictions proceedings.
Section 66(2) requires the rules of court to have regard to the need to secure that both (a) directions made under schedule 7 to the 2008 Act are properly reviewed, and (b) that information is not disclosed when [it] would be contrary to the public interest.
Section 66(3) of the 2008 Act states that rules of court may make provision for various aspects of financial restrictions proceedings, including (a) the mode of proof and about evidence and (c) about legal representation.
Section 66(4) states that [r]ules of court may (a) enable the proceedings to take place without full particulars of the [direction] being given to a party , (b) enable the court to conduct proceedings in the absence of any person, including a party , (c) deal with the functions of a special advocate, (d) empower the court to give [an excluded] party a summary of evidence taken in the partys absence.
Section 67 of the 2008 Act is concerned with rules about disclosure in cases covered by section 66(1).
Section 67(2) provides that, subject to the ensuing subsections, [r]ules of court must secure that the Treasury give disclosure on the normal principles ie that they must disclose material which (i) they rely on, (ii) adversely affects their case, and (iii) supports the case of another party.
Section 67(3) states that [r]ules of court must secure that (a) the Treasury can apply not to disclose material, (b) they can do so under a closed material procedure, with a special advocate present, and (c) the court should accede to the application if it considers that the disclosure of the material would be contrary to the public interest, in which case (d) the court must consider requiring the Treasury to provide a summary of the material to every party, provided that (e) the summary should not include material the disclosure of which would be contrary to the public interest.
Section 67(6) emphasises that nothing in the section should require the court to act in such a way as to contravene Article 6.
Section 68 of the 2008 Act is concerned with the appointment of special advocates for the purpose of financial restrictions proceedings.
Section 72 of the 2008 Act enabled the Lord Chancellor to make the original rules referred to in the preceding sections.
Section 72(4) provides that (a) any such rules should be laid before both Houses of Parliament, and (b) if they are not approved within forty days, any such rules will cease to have effect.
The final provision in Part 6 of the 2008 Act is section 73, the interpretation section, which states that, for the purposes of Part 6 of the 2008 Act: rules of court means rules for regulating the practice and procedure to be followed in the High Court or the Court of Appeal or in the Court of Session.
Pursuant to sections 66 and 67 of the 2008 Act, the Civil Procedure (Amendment No 2) Rules (SI 2008/3085) were made by the Lord Chancellor on 2 December 2008, laid before Parliament the next day, and came into force on 4 December 2008.
As a result, the CPR now include a new rule 79, which applies to Proceedings under the Counter Terrorism Act 2008.
CPR 79.2 (1) modifies the overriding objective and so far as relevant any other rule, to accommodate (2) the courts duty to ensure that information is not disclosed contrary to the public interest.
CPR 79 then goes on to modify, disapply or replace many of the generally applicable provisions of the CPR in relation to proceedings under the 2008 Act.
Most of these variations arise from the provision for a closed material procedure in some such proceedings.
Thus, the CPR are amended to take into account the potential need for (i) involvement of special advocates (in e.g. CPR 79.8, CPR 79.18 21), (ii) an application for a closed material procedure (dealt with in CPR 79.11 and CPR 79.25), (iii) directions if such a procedure is ordered (in CPR 79.26), (iv) modification of the rules in relation to evidence and disclosure, including disapplication of CPR 31 relating to public interest immunity (in CPR 79.22), and (v) the possibility of a closed judgment (in CPR 79.28).
The statutory provisions and procedural rules of the Supreme Court
The Supreme Court was created by the Constitutional Reform Act 2005 (the 2005 Act).
Section 40(2) of the 2005 Act states that [a]n appeal lies to the Court from any order or judgment of the Court of Appeal in England and Wales in civil proceedings.
The effect of section 40(3) is that the right of appeal to the Supreme Court from any Scottish court remains the same as it was in relation to appeals to the House of Lords.
Section 40(5) states that the Supreme Court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
Section 40(6) provides that [a]n appeal under subsection (2) lies only with the permission of the Court of Appeal or the Supreme Court .
Section 45(1) of the 2005 Act provides that the President of the Supreme Court may make rules (to be known as Supreme Court Rules) governing the practice and procedure to be followed in the Court.
Section 45(3) states that this power must be exercised so as to ensure that (a) the Court is accessible, fair and efficient, and (b) the rules are both simple and simply expressed.
Section 46 of the 2005 Act states that these rules (1) must be submitted to the Lord Chancellor by the President of the Supreme Court (or, in the case of the initial rules, the senior Lord of Appeal in Ordinary), and then (2) must be laid before Parliament by the Lord Chancellor, and (3) are then subject to the negative resolution procedure.
Pursuant to sections 45 and 46 of the 2005 Act, the Supreme Court Rules 2009 (SI 2009/1603) were duly made and laid before Parliament, and came into force on 1 October 2009, the day on which the Supreme Court opened.
These rules (SCR) now govern the procedure of this Court.
They are far simpler than the CPR (unsurprisingly, as they are only concerned with appeals, indeed appeals which are almost always second, or even third, appeals).
SCR 2 is headed Scope and objective, and SCR 2(2) states that the overriding objective of the SCR is to secure that the Court is accessible, fair and efficient.
The SCR contain no provisions which enable public interest immunity to be avoided, and no express provisions for closed procedures other than SCR 27(2), as set out in the next paragraph.
Thus, SCR 22(1)(b) provides for the service by the appellant of an appendix of the essential documents which were in evidence before, or which record the proceedings in, the courts below, and SCR 28 states that a Supreme Court judgment may be delivered in open court; or promulgated by the Registrar.
However, it is to be noted that SCR 29(1) begins by stating that In relation to an appeal , the Supreme Court has all the powers of the court below.
SCR 27 is headed Hearing in open court, and it provides: (1) Every contested appeal shall be heard in open court except where it is necessary in the interests of justice or in the public interest to sit in private for part of an appeal hearing. (2) Where the Court considers it necessary for a party to be excluded from a hearing or part of a hearing in order to secure that information is not disclosed contrary to the public interest, the Court must conduct the hearing, or that part of it from which the party [is] excluded, in private but the Court may exclude a party only if a person who has been appointed as a special advocate to represent the interests of that party is present when the party [is] excluded. (3) Where the Court decides it is necessary for the Court to sit in private, it shall announce its reasons for so doing publicly before the hearing begins.
Can the Supreme Court conduct a closed material procedure: introductory
If a closed material procedure was lawfully conducted at the first instance hearing, it would seem a little surprising if an appellate court was precluded from adopting such a procedure on an appeal from the first instance judgment.
As the advocate to the Court said in the course of his full and balanced argument, one would normally expect an appeal court to be entitled to have access to all the material available to the court below and to see all the reasoning of the court below.
Otherwise, it is hard to see how an appeal process could be conducted fairly or even sensibly.
And, if that involves the appellate court seeing and considering closed material, it would seem to follow that that court would have to adopt a closed material procedure.
However, particularly in the light of the fundamental principle established in Al Rawi [2012] 1 AC 531, the question needs to be looked at with great care.
In particular, it is necessary to enquire whether statute requires the Supreme Court to adopt a closed material procedure, at least in some circumstances, on an appeal from the Court of Appeal upholding (or reversing) a first instance decision on an application under section 63(2) of the 2008 Act.
As was said by counsel for Liberty (interveners on this appeal), supported by counsel for the Bank, any contention that a closed material procedure in a particular court in particular circumstances is sanctioned by a statute must be closely and critically scrutinised.
The case for saying that this Court can conduct a closed material procedure
The contention that this court has the power to have a closed material procedure is based on section 40(2) of the 2005 Act, supported by section 40(5).
The argument proceeds as follows. (i) Section 40(2) provides that an appeal lies to the Supreme Court against any judgment of the Court of Appeal; (ii) that must extend to a judgment which is wholly or partially closed; (iii) in order for an appeal against a wholly or partially closed judgment to be effective, the hearing would have to involve, normally only in part, a closed material procedure; (iv) such a conclusion is reinforced by the power accorded to the Court by section 40(5) to determine any question necessary for the purposes of doing justice, as justice will not be able to be done in some such cases if the appellate court cannot consider the closed material.
The strength of this argument is reinforced when one considers the possible outcomes if the Supreme Court cannot consider a closed judgment (or the closed part of the judgment) under a closed material procedure.
If that were the case, then, as I see it, there would be five possible consequences.
The first possibility would be that the appeal could not be entertained: that cannot be right, because it would conflict with section 40(2), which simply and unambiguously confers on the Supreme Court the power to hear appeals from any judgment of the Court of Appeal.
The Supreme Court frequently refuses permission to bring an appeal from the Court of Appeal, but that is covered by section 40(6) of the 2005 Act, which expressly provides for such permission.
It is one thing to cut down section 40(2) by providing that permission to appeal can be refused on a case by case basis expressly catered for in section 40(6); it is quite another to suggest that a whole class of appeals is impliedly excluded from the wide and general words of section 40(2).
The second possibility would be that the Supreme Court could consider the whole judgment, with the closed part being considered in open court.
While it can be said that such a course would not involve a breach of any specific provision of Part 6 of the 2008 Act, if construed on a strictly semantic basis, it would wholly undermine its purpose, and the procedural structure it has set up.
Unsurprisingly, this second possibility was not canvassed in argument.
The third possibility would be that the appeal could be entertained, but only on the basis that the Supreme Court could not look at the closed material.
In an extreme case, where the whole judgment of the Court of Appeal was closed, this would be impossible, and would run into the same difficulty under section 40(2) as identified in para 39 above.
Even in a case where the Court of Appeal judgment was only closed in part, such a course would be self evidently unsatisfactory and would seriously risk injustice, and in some cases it would be absurd.
The fourth possibility would be that the Court was bound to allow the appeal; the fifth possibility would be that, conversely, the Court was bound to dismiss the appeal.
There are clearly theoretical arguments in favour of either course, but it is unnecessary to consider them, because each of those courses is self evidently equally unsatisfactory.
If either of them was correct, it would mean that, when exercising its power to give permission under section 40(6) of the 2005 Act, the Supreme Court would effectively be deciding the appeal, and, indeed, would be doing so without seeing the whole of the judgment below, and without hearing oral argument.
In my view, subject to any arguments to the contrary, this analysis establishes that the Supreme Court can conduct a closed material procedure where it is satisfied that it may be necessary to do so in order to dispose of an appeal.
This conclusion is reinforced by section 40(5) of the 2005 Act.
An appeal under section 40(2) is an appeal under any enactment.
Accordingly, where an appeal is brought against a decision under the 2008 Act, the Supreme Court has power to determine any question necessary to be determined for the purposes of doing justice in such an appeal.
On any appeal where the judgment is wholly or partly closed, it seems to me that this court could not do justice, or at least would run a very serious risk of not doing justice, if it could not consider the closed material, and it could only do that if it adopted a closed material procedure.
It might, I suppose, be said that adopting a closed material procedure on any
appeal would involve the antithesis of doing justice in that appeal.
In a case where Parliament and the CPR have lawfully provided for a closed material procedure at first instance and in the Court of Appeal, I am of the view that, on the contrary, for this Court to entertain an appeal without considering the closed material would, at least in many cases, not be doing justice, either in the sense of fairly determining the appeal or in the sense of being seen fairly to determine the appeal, notwithstanding that the material will be considered in a closed hearing.
The view that the Supreme Court can conduct a closed material procedure also derives some support from the provisions of SCR 27(2), and from SCR 29(1).
However, if the Supreme Court would not otherwise have the power to conduct a closed material procedure, it could not, in my view, derive such a power solely from its rules.
Accordingly those two rules can fairly be said to do no more than to give comfort to my conclusion.
It is right to mention that on this appeal, we are not being invited to consider a closed judgment of the Court of Appeal, as they did not find it necessary to give a closed judgment or even to include a closed paragraph in their open judgment.
However, the trial judge gave a closed judgment, and, if it is open to this Court to consider, in a closed material procedure, a closed Court of Appeal judgment for the reasons just discussed, it must follow that we can consider, in a closed material procedure, a closed judgment given by the trial judge.
Accordingly, I conclude that, unless there are stronger arguments to the contrary, the Supreme Court has power to entertain a closed material procedure on appeals against decisions of the courts of England and Wales on applications brought under section 63(2) of the 2008 Act.
The arguments that we cannot conduct a closed material procedure
Having reached this provisional conclusion, it is right to acknowledge and consider the contrary arguments.
Those arguments are: i. A closed material procedure is such a serious inroad into natural justice that it can only be justified by clear and unambiguous statutory words, such as are found in Part 6 of the 2008 Act, but not in the 2005 Act; ii.
Parliament has plainly limited the closed material procedure under the 2008 Act to the High Court, the Court of Appeal and the Court of Session; iii.
It is appropriate to exclude the Supreme Court from the courts which can have a closed material procedure, given its role as a constitutional court and ultimate guardian of the common law; iv.
A closed material procedure requires a set of rules such as CPR 79 which are detailed and appropriately modify the generally applicable rules, and there is no such set of rules for the Supreme Court.
None of these points meets the basic argument which persuades me that it is open to the Supreme Court to undertake a closed material procedure, but they nonetheless merit careful attention.
Before discussing them, however, it is right to address Libertys understandable reliance on the fact that, in Al Rawi [2012] 1 AC 531, this Court uncompromisingly set its face against introducing a closed material procedure.
The stand taken by this Court in Al Rawi [2012] 1 AC 531 remains unquestioned, but it does not amount to any sort of indication that there could be no circumstances in which those concerned with the administration of justice could reasonably introduce a closed material procedure.
Indeed, at the end of the short passage quoted in para 4 above from Lord Dysons judgment, he acknowledged that Parliament can do so.
Having said that, any judge, indeed anybody concerned about the dispensation of justice, must regard the prospect of a closed material procedure, whenever it is mooted and however understandable the reasons it is proposed, with distaste and concern.
However, such distaste and concern do not dictate the outcome in a case where a statute provides for such a procedure; rather, they serve to emphasise the care with which the courts must consider the ambit and effect of the statute in question.
At a relatively high level, in terms of constitutional principle and governmental functions, it seems to me that the following propositions apply. (i) The executive has a duty to maintain national security, which includes both stopping the financing of terrorism and nuclear proliferation and ensuring that some of the information relating to the financing of terrorism remains confidential; (ii) the rule of law requires that any steps aimed at preventing financing of terrorism which damage a person should be reviewable by the courts, and, as far as possible in open court and in accordance with natural justice; (iii) given that such reviews will often involve the executive relying on confidential material, it is for the legislature to decide and to prescribe in general how the tension between the need for natural justice and the need to maintain confidentiality is to be resolved in the national interest; (iv) in the absence of a written constitution, it is the European Convention, through Article 6, as signed up to by the executive and interpreted by the courts, which operates as a principled control mechanism on what the legislature can prescribe in this connection; (v) it is for the courts to decide, within the parameters laid down by the legislature, how the tension between the two needs of natural justice and confidentiality is to be resolved in any particular case.
In the more specific context of the issues with which the 2008 Act is
concerned, it would be unreasonable not to accept that (i) the Acts aims of fighting the spread of terrorist activity and nuclear proliferation, and improving the security of UK citizens, are important aspects of the most fundamental duties of the executive, and (ii) those aims would be at real risk of being severely hampered if the courts hearing financial restrictions proceedings could not adopt a closed material procedure.
Point (i) is self evident: the two most fundamental functions of the executive are the maintenance of the defence of the realm and of the rule of law, and the 2008 Act appears to me to be within the scope of both those functions.
In relation to point (ii), if there can be no closed material procedure, either (a) sensitive material would be seen by a person who may be supporting terrorism or nuclear proliferation, which might advance the very activities which the 2008 Act is designed to deter, or (b) such material would not be put in evidence, in which case a direction under that Act, which was appropriate and in the public interest, may be discharged for lack of evidential support.
The legislature has laid down in Part 6 of the 2008 Act, as expanded by CPR 79, how challenges to a direction under schedule 7 to the 2008 Act should be dealt with by the courts, and this includes a closed material procedure, which aims to strike a balance between two competing public interests, and it is a balance which has been held by the Strasbourg Court to be compatible in principle with Article 6.
Whether or not one agrees with it, the justification for the way in which the balance has been struck by the legislature in Part 6 of the 2008 Act is clear, lawful and rational.
It is against that background that the issue of principle raised on this appeal must be judged.
Turning now to the four arguments raised by the intervener and the Bank, there is a basic principle that fundamental rights cannot be taken away by a generally or ambiguously expressed provision in a statute see eg per Lord Hoffmann in R v Secretary of State, Ex p Simms [2000] 2 AC 115, 132.
There is also a basic principle that fundamental rights can only be overridden by a statutory provision through express words or by necessary implication, not merely by reasonable implication see eg per Lord Hobhouse in R (Morgan Grenfell) v Special Commissioners [2003] 1 AC 563, para 45.
While these two basic principles are of fundamental importance, they should not be applied without regard to the purpose and context of the statutory provision in issue.
Section 40(2) is plainly intended to render every decision of the Court of Appeal to be capable of being appealed to the Supreme Court (unless specifically precluded by another statute), and, as explained, where it is necessary for this court to consider closed material in order to dispose of the appeal justly, this would only be achievable if a closed material procedure could be adopted.
In any event, I am unconvinced that the wording of section 40(2) of the 2005 Act could be fairly described as general in the sense that that word is used in Simms [2000] 2 AC 115, 132: it would be more accurate to describe it as being broad, indeed as broad as possible, in its intended application.
Further, if section 40(2) is to be given its full natural meaning, then, for the reasons discussed in the preceding section of this judgment, it necessarily means that the Supreme Court can adopt a closed material procedure.
It is true that section 67, read together with section 73, of the 2008 Act only
extends to the rules of the Court of Appeal, High Court and Court of Session, but there were no Supreme Court Rules when that Act was passed.
Indeed, there was no Supreme Court at that time: the Judicial Committee of the House of Lords, the Law Lords, were still in place, although they had a very short life expectancy (as an institution).
They sat as a committee of the House of Lords, and could have been expected to look after their own procedure.
It is true that the 2005 Act had been enacted by the time that the Bill which became the 2008 Act was being considered, but those drafting and debating the Bill would have known that the 2005 Act contained sections 40(2) and (5); they would also have known that the SCR had yet to be promulgated, and could have assumed that they would provide for a closed material procedure as indeed they do in SCR 27(2), and, indirectly, in SCR 29(1).
In any event, rules governing what should be done before and during a trial
have to be far more detailed than those governing what should be done before and during an appeal.
Given that there were to be very detailed procedures prescribed for a closed material procedure at first instance (and on the first appeal), Parliament could fairly have assumed that there would be no need for very detailed provisions for a closed material procedure in this Court: again, in the light of SCR 27(2) and 29(1), such a view would have been prescient.
It is true that sections 66 73 of the 2008 Act apply to the Court of Appeal as well as to the High Court, but that is because the CPR apply to both courts.
I am unimpressed by the argument that the Supreme Court was intentionally
excluded from the ambit of closed material procedures in sections 66 73 of the 2008 Act, because of the Courts status.
If that was the legislative intention, one would have expected it not only to have been spelt out, but to have been catered for, especially in the light of section 40(2) of the 2005 Act.
It seems most unlikely that Parliament would have left section 40(2) unamended, while intending the Supreme Court to be unable to adopt a closed material procedure.
If it had had such an intention, Parliament would, in my view, have provided that, in relation to cases where the courts below had adopted a closed material procedure, appeals to the Supreme Court were excluded, or could only proceed on a certain specified procedural basis.
Otherwise, on this hypothesis, Parliament would have intended to leave this Court with the series of unsatisfactory options considered in paras 39 42 above.
The notion that the Supreme Courts constitutional role is so important that it cannot conduct a closed material procedure has a certain appeal (particularly perhaps to a Supreme Court Justice), but I am unimpressed by it.
The Supreme Court is not a special constitutional court, but it generally limits the appeals it considers to those that raise points of general public importance.
If the Supreme Court were to adopt a closed material procedure on an appeal, it would be most unlikely to result in a judgment which contained any statements of general public importance, or even of general significance, which were in closed form.
Almost by definition, the closed evidence will be factual (including, possibly, expert) in nature, and it will normally be specific to the particular case.
It is hard to believe that there could be circumstances in which it would be impossible for the Court to provide an open judgment which dealt clearly and comprehensively with all the points of any general legal significance in the appeal, even if some of the discussion of the details of the evidence and arguments has to remain closed.
And if such circumstances did arise, then the problem would be a measure of the extraordinary sensitivity of the material concerned, which would make it all the more important that it remained closed.
Having read in draft the judgment of Lord Hope, I would like to record my agreement with what he says in paras 98 100 in connection with this Court giving a closed judgment.
We were taken to other statutes which provide for a closed material procedure, but all that they establish, in my view, is that there is more than one drafting technique available to prescribe for such procedures.
All in all, therefore, I am unpersuaded by the various arguments raised against my provisional view that it is open to this Court to adopt a closed material procedure in an appeal under the 2008 Act if justice requires it.
The decision to have a closed material procedure on this appeal
At the end of their open submissions in defence of the decision of the Court of Appeal that the 2009 Order should be discharged, counsel for the Treasury asked us to adopt a closed material procedure in order to consider the closed judgment of Mitting J.
We were sceptical about the need to do so, for three reasons.
First, the proposal was opposed on the ground that it was unnecessary, by the special advocates (who had seen the closed judgment) and by counsel on behalf of the Bank (who had not seen the closed judgment).
Secondly, the Judge had referred in his open judgment to the closed judgment on two occasions; on each occasion, it was to draw support for a conclusion which was not challenged before us, and we thought it unlikely that he would have relied to any significant extent on any other part of his closed judgment without saying so in his open judgment.
Thirdly, the Court of Appeal had found it unnecessary to refer to any part of the closed judgment.
Nonetheless, on instructions from his clients, counsel for the Treasury told us that a closed session could make a difference to the outcome of this appeal.
By a bare majority, with those in the majority (which included me) all having real misgivings, the Court decided that it should accede to the proposal to have a closed material procedure.
Although we strongly suspected that nothing in the closed judgment would have any effect on the outcome of the appeal, we could not be sure in the absence of seeing the closed judgment and listening to submissions on it.
And, as we all appreciated that there was a real possibility that we were going to allow the appeal, and therefore to disagree with Mitting J (who gave the closed judgment) and the Court of Appeal (who had seen the closed judgment), we felt that there would be a real risk of justice not being seen to be done, and an outside possibility of justice actually not being done, to the Treasury if we did not proceed to hold a closed hearing, as the Treasury requested.
In anticipation that we might take that course, we had required counsel for the
Treasury to supply the special advocates with a note summarising the Treasurys case on the closed judgment.
Having decided to have a closed hearing, we proceeded to read the closed judgment and heard argument on it in a closed hearing from counsel for the Treasury, from the special advocate, and from counsel to the court (who, like us, saw the closed judgment for the first time just before the closed hearing).
In my opinion, there was no point in our seeing the closed judgment.
There was nothing in it which could have affected our reasoning in relation to the substantive appeal, let alone which could have influenced the outcome of that appeal.
So far as it was said to have included relevant findings, the most that could be said of the closed judgment is that it put some evidential flesh on some fairly bare bones embodying some of the conclusions of fact reached in the open judgment.
It is fair to say that, in two respects, Mitting J made findings in his closed judgment, which supported views he had expressed in his open judgment, over and above the two passages referred to in para 16 above.
However, as with the views expressed in those two passages, the views were not ones which were challenged on this appeal.
Applications for closed material hearings on appeal I draw certain conclusions from this experience.
First, where a judge gives an open judgment and a closed judgment, it is highly desirable that, in the open judgment, the judge (i) identifies every conclusion in that judgment which has been reached in whole or in part in the light of points made or evidence referred to in the closed judgment, and (ii) that the judge says that this is what he or she has done.
This was a point made by Carnwath LJ, in a judgment given after Mitting Js judgments in this case, in AT v Secretary of State for the Home Department [2012] EWCA Civ 42, para 51.
Secondly, a judge who has relied on closed material in a closed judgment, should say in the open judgment as much as can properly be said about the closed material which he has relied on.
Any party who has been excluded from the closed hearing should know as much as possible about the courts reasoning, and the evidence and arguments it received.
Further, the more the judge can say about the closed material in the open judgment, the less likely it is that a closed hearing will be asked for or accorded on an appeal.
In cases where judges have to give a closed judgment, they should say in their open judgment, as far as they properly can, what the closed material has contributed to the overall assessment they have reached in their open judgment.
On an appeal against an open and closed judgment, an appellate court should, of course, only be asked to conduct a closed hearing if it is strictly necessary for fairly determining the appeal.
So my third point is that any party who is proposing to invite the appellate court to take such a course should consider very carefully whether it really is necessary to go outside the open material in order for the appeal to be fairly heard.
If the advocate for one of the parties invites an appellate court to look at the closed judgment on the ground that it may be relevant to the appeal, it is very difficult for the court to reject the application, at least without looking at the closed judgment, which involves the initiation of a closed material procedure, which should be avoided if at all possible.
This puts an important onus on the legal representatives of the party asking an appeal court to look at closed material.
An advocate acting for a party who wants a closed hearing should carefully consider whether the request is one which should, or even can properly, be made and advise the client whether such a course is necessary or appropriate.
Advocates, perhaps particularly when acting for the executive, have a duty to the court as well as a duty to their clients, and the court itself is under a duty to avoid a closed material procedure if that can be achieved.
Fourthly, if the appellate court decides that it should look at closed material, careful consideration should be given by the advocates, and indeed by the court, to the question whether it would nonetheless be possible to avoid a closed substantive hearing.
It is quite feasible for a court to consider, and be addressed on, confidential material in open court.
If such a course is taken, the advocates and the court must obviously take care in how they refer to the contents of the closed material, and sometimes a brief closed hearing will be necessary to set the ground rules.
Sometimes, the closed material will be so sensitive or so difficult to refer to elliptically, that such a course will be impracticable.
However, it should always be considered, as it is plainly less objectionable to have a brief closed procedural hearing to discuss the possibility than to have a closed hearing which considers substantive issues.
I should add that, if such a course is taken, the court should order that, despite it being referred to and looked at in open court, the documents in issue cannot be shown to anyone and their contents cannot be referred to out of court.
Fifthly, if the court decides that a closed material procedure appears to be necessary, the parties should try and agree a way of avoiding, or minimising the extent of, a closed hearing.
This would also involve the legal representatives to the parties to any such appeal advising their clients accordingly, and, if a closed hearing is needed, doing their best to agree a gist of any relevant closed document (including any closed judgment below).
Sixthly, if there is a closed hearing, the lawyers representing the party who is relying on the closed material, as well as that party itself, should ensure that, well in advance of the hearing of the appeal, (i) the excluded party is given as much information as possible about any closed documents (including any closed judgment) relied on, and (ii) the special advocates are given as full information as possible as to the nature of the passages relied on in such closed documents and the arguments which will be advanced in relation thereto.
Finally, appellate courts should be robust about acceding to applications to go into closed session or even to look at closed material.
Given that the issues will have already been debated and adjudicated upon, there must be very few appeals where any sort of closed material procedure is likely to be necessary.
And, in those few cases where it may be necessary, it is hard to believe that an advocate seeking to rely on closed material or seeking a closed hearing, could be unable to articulate convincing reasons in open court for taking such a course.
As already mentioned, the closed material procedure on this appeal added nothing.
Had counsel for the Secretary of State had the benefit of the guidance set out above, and in particular in paras 70 and 71, I very much doubt that he would have felt able to contend that we should have a closed material procedure.
For the future, any party or appellate court considering whether to adopt such a procedure would do well to bear in mind what Lord Hope says in paras 89 97 of his judgment, with which I agree.
LORD HOPE (dissenting)
This case raises some fundamental issues about the effect of provisions in Parts 5 and 6 of the Counter Terrorism Act 2008.
Part 5 of the Act, which gives effect to Schedule 7, confers far reaching powers on the Treasury to deal with terrorist financing and money laundering.
Part 6 creates a scheme for appeals against financial restrictions decisions by the Treasury.
In a nutshell these issues can be summarised in a single sentence: how much attention should this court pay to what Parliament has, or has not, actually said as to how financial restriction proceedings are to be conducted in the courts?
Parliament has set out in Part 6 of the 2008 Act provisions for the use in appeals against financial restrictions decisions of the Treasury of material that the Treasury refuse to disclose to appellants or their legal representatives, commonly referred to as closed material.
Chapter 2 of Part 6 is closely modelled on the Schedule to the Prevention of Terrorism Act 2005.
Section 67(3), which appears in that Chapter, requires that rules of court must provide the Treasury with the opportunity to apply to the court for permission not to disclose material otherwise than to the court and to any person appointed as a special advocate.
Section 73 provides that in that Chapter the expression rules of court means rules for regulating the practice and procedure to be followed in the High Court or the Court of Appeal or in the Court of Session.
But no mention is made here, or anywhere else in the 2008 Act, of the use of closed material in the court of last resort in the United Kingdom the appellate committee of the House of Lords as it then was, or the Supreme Court of the United Kingdom as it was to become.
The 2008 Act received the Royal Assent on 26 November 2008.
The bulk of Part 3 of the Constitutional Reform Act 2005, which made provision for the Supreme Court, was not brought into force until 1 October 2009: Constitutional Reform Act 2005 (Commencement No 11) Order 2009 (SI 2009/1604).
But sections 45 and 46, which provide for the making of the Rules of the Supreme Court, were brought into force on 27 February 2006: Constitutional Reform Act 2005 (Commencement No 4) Order (SI 2006/228).
These rules were already in draft and had been circulated to consultees for their comments by 28 November 2008.
Yet the Treasury, by which the legislation in Parts 5 and 6 of the 2008 Act was being promoted, did not seek the views of Parliament as to whether the Rules of the Supreme Court should, like those of the other courts mentioned in section 73, make provision for the use of closed material in proceedings brought under Part 6 of the 2008 Act.
In the light of this background, which leaves the issue for decision by this court uninstructed by Parliament, I am unable, with respect, to agree with the conclusions reached on it by the majority.
Closed material
The issue as to the use of closed material, as I see it, raises three distinct questions, although they are all interconnected.
The first is an issue of principle: when, if ever, will it be open to the Supreme Court to adopt a closed material procedure? The second is whether it is necessary, in the interests of justice or in the public interest, for the closed material to be seen and considered by the court in this case.
The third is whether, having done so, the court should issue a closed judgment, bearing in mind that the effect of doing this will be that the party to whom the material has not been disclosed will be unable to see the courts reasons for the conclusions that it has reached on a consideration of that material.
(a) the issue of principle
The issue of principle as to the use of closed material was examined by Lord Dyson in Al Rawi v Security Service [2011] UKSC 43, [2012] 1 AC 531.
He concluded that a closed material procedure should only be introduced in ordinary civil procedure if Parliament saw fit to do so.
I said that I agreed with the reasons that he gave, as did Lord Kerr.
But we both added some further reasons of our own.
It is worth noting too the width of the issue to which the argument both in the Court of Appeal and in this court was addressed: see para 71.
I thought that the view which we took would resolve the issue in a case of this kind too.
The crucial points that we all made can be summarised, quite briefly, in this way.
The right to know and effectively challenge the opposing partys case is a fundamental feature of the judicial process.
The right to a fair trial includes the right to be confronted by ones accusers and the right to know the reasons for the outcome.
It is fundamental to our system of justice that, subject to certain established and limited exceptions, trials should be conducted and judgments given in public.
There may come a point where a line must be drawn when procedural choices of one kind or another have to be made.
A distinction may be drawn between choices which do not raise issues of principle and choices that affect the very substance of a fair trial.
There is no room for compromise where the choices are of the latter kind.
The court cannot abrogate the fundamental common law right by the exercise of any inherent power.
Any weakening of the laws defences would be bound to lead to state of uncertainty and, sooner or later, to attempts to widen the breach still further.
The court has for centuries been the guardian of these fundamental principles.
The rule of law depends on its continuing to fulfil that role.
Acknowledging that closed material procedures and the use of special advocates were controversial, Lord Dyson said in para 47 of his judgment in Al Rawi that it was not for the courts to extend the procedure beyond the boundaries which had been drawn for its use by Parliament.
I said in para 74 of my judgment that fundamental issues as to where the balance lay between the principles of open justice and of fairness and the demands of national security were best left for determination through the democratic process by Parliament.
Lord Brown and Lord Kerr were doubtful whether it would be possible as a matter of principle for the court to be invested with jurisdiction in this way: paras 86, 99.
para 48 of Al Rawi, where he said: I would, for my part, be content to agree with the way Lord Dyson put it in The common law principles to which I have referred are extremely important and should not be eroded unless there is a compelling case for doing so.
If this is to be done at all, it is better done by Parliament after full consultation and proper consideration of the sensitive issues involved.
It is not surprising that Parliament has seen fit to make provision for a closed material procedure in certain carefully defined situations and has required the making of detailed procedural rules to give effect to the legislation.
In para 69 he agreed with the Court of Appeal that the issues of principle raised by the closed material procedure were so fundamental that a closed material procedure should only be introduced in ordinary civil litigation if Parliament saw fit to do so.
He then added these words: No doubt, if Parliament did decide on such a course, it would do so in a carefully defined way and would require detailed procedural rules to be made (such as CPR Pts 76and 79) to regulate the procedure.
The answer which I would give to the first of the three questions which I have identified in para 79, above, is that it will be open to the Supreme Court to adopt a closed material procedure if, but only if and only to the extent that, the use of that procedure has been expressly sanctioned by Parliament.
The fact that this procedure has been sanctioned for use in the lower courts does not meet Lord Dysons point that the procedure nevertheless erodes fundamental common law principles.
And the fact that it has been used in the lower courts leaves open the question whether it would be consistent with fundamental principle for it to be used in the court of last resort.
It leaves open the question whether it can ever be right for the Supreme Court, of all courts, without the sanction of Parliament to hear argument on points of which one of the parties has had no notice and is unable to address in argument, and whether it can ever be right for it to have to give its reasons, in whole or in part, in a closed judgment.
The word fundamental, which appears so often in Lord Dysons judgment in Al Rawi, and appears again in my own judgment in paras 72 74 and Lord Kerrs judgment in para 94, serves to emphasise the enormity of the issues that are at stake if the objections to such a procedure are to be overcome.
If the procedure is to be used in this court, the issues of principle require that its use should always be carefully provided for and defined by Parliament and never be left to implication.
Only then can one be confident that Parliament really has squarely confronted what it is doing.
Otherwise, as Lord Hoffmann said in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 132, there is too great a risk that the full implications may have passed unnoticed in the democratic process.
The absence of a direction in Part 6 of the 2008 Act that the provisions about rules of court relating to proceedings on an appeal relating to financial restrictions proceedings extend to the Supreme Court is, therefore, especially significant.
This makes it plain that Parliament was not asked to address its mind to this issue at all.
Nor was the Supreme Court, for its part, put on notice that the President when making the Supreme Court Rules, the provisions about which were already in force (see para 77, above), was to have regard to the matters set out in sections 63(2) (4) of the Act.
The fact that rule 27(2) of the Supreme Court Rules contemplates that the court might consider it necessary for a party and that partys representative to be excluded from a hearing in order to secure that information is not disclosed contrary to the public interest does not answer this point.
It was, no doubt, a wise precaution to make provision for a variety of situations of that kind that might arise.
But it does not address directly the use of a closed material procedure with all the consequences that might then follow, including the possibility of having to issue a closed judgment.
The question whether the Supreme Court had power to adopt such a procedure had not yet been tested in argument when the rules were made, and it was not open to the President in the exercise of his rule making function to confer on the court a power that it did not have.
The argument that the provisions of sections 40(2) and (5) of the 2005 Act show that this court can conduct such a procedure to dispose of an appeal where the judgment appealed against was wholly or partly closed does not meet my point that the issue is so fundamental that it must be left to an express and carefully defined provision by Parliament.
I do not think that a point of such fundamental importance can be left to implication.
It is plain that the issue was not brought before Parliament when it enacted Part 3 of the 2005 Act.
There is nothing in the express language of section 40 which shows that the statute must have given authority to the Supreme Court for the use of this procedure: see R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563, para 45 per Lord Hobhouse.
For these reasons I was of the opinion at the end of the hearing on the first days argument that it was not open to the Supreme Court to adopt a closed material procedure in this case, as it had not been expressly authorised by Parliament.
I remain of that opinion.
The effect of the decision of the majority, however, is that there is now no way back on this issue.
The Rubicon has been crossed. (b) should the closed material be seen and considered in this case?
As the majority view was in favour of the view that it was open in principle to the court to resort to the closed material procedure, I gave careful thought to the question whether it should be resorted to in this case.
It seemed to me that the onus was on the Treasury to show that this was necessary.
It was not just a question of asserting, without reasons, that there was material in Mitting Js closed judgment at [2010] EWHC 1332 (QB) that was relevant to the issues in the appeal.
I do not think that it would be inconsistent with the majoritys decision on the issue of principle for the court to set a high standard on the issue of necessity.
Convincing reasons must be given as to why the closed material should be looked at.
The Treasury submitted that the court would have to have regard to the judgment if it was to be in a position properly and fairly to exercise its jurisdiction in the appeal, unless it was prepared to dismiss the Banks case.
This was because the closed reasons formed part of Mitting Js findings on the Treasurys evidence and of his conclusions as to its case.
So it might be impossible for the appeal to be fairly determined if the court was not willing to have regard to them.
But there are various reasons why, as it seemed to me, the Treasurys approach fell far short of what was needed to show that it was necessary for this procedure to be resorted to.
First, there is the fact that the Court of Appeal, which did see and consider Mitting Js closed judgment and held a brief closed hearing in the course of the appeal to that court, did not find it necessary to refer to the closed judgment in more detail than the judge himself did: [2011] EWCA Civ 1, [2012] QB 101, para 83.
That, in itself, would not be a conclusive reason for not resorting to the procedure in this court if it was necessary to do justice on the appeal.
But it does point to the need for the Treasury to give convincing reasons as to why this should be done.
Mitting J referred to his closed judgment in para 16 of his judgment, where he said that he accepted that Novin Energy Company was a conduit for the Atomic Energy Organisation of Iran and that it did facilitate Irans nuclear weapons programme.
He referred to it again in para 18, where he said that for the reasons set out in the closed judgment, he was satisfied that Doostan International had played a part in the Iranian nuclear programme.
The Court of Appeal had the opportunity to say if those findings were not justified.
It did not do so, and it was not submitted for the Bank that the reasons that the judge gave for those findings should be reviewed again by this court.
Second, there are the views of the special advocates to which close attention should always be paid.
Mr Chamberlain drew attention to the fact that there was no closed ground of appeal in this case, and that neither of the two findings which were based on material in the closed judgment was in issue.
This was because the Banks case was that those findings were not enough to justify the order made by the Treasury.
His advice was that the court did not need to consider closed material in order to determine that issue.
Third, there are the reasons that were set out in a note that was provided to the special advocate at the courts request by the Treasury and which the special advocates had seen when Mr Chamberlain gave the advice referred to in the previous paragraph.
It was to the contents of this note that much of the discussion as to whether it was necessary for the court to see the closed judgment was directed.
The first three paragraphs of the note refer to various passages in the closed judgment which, as was stated in the fourth paragraph, demonstrated the weight to be attached to the judges conclusion that the Bank had the capacity to assist proliferators, that such assistance could be afforded to a range of companies involved in proliferation and that the assistance provided was material.
It did not seem to me that it was necessary to look at the closed material to reinforce this point, as its importance was already apparent from points made by Mitting J in his open judgment.
In the last sentence of para 16, having described the Banks relationship with Novin, the judge said that he accepted the conclusion of the Treasurys witness Mr Robertson that Irans banking system provides many of the financial services which underpin procurement of the raw materials and components needed for its nuclear and ballistic missile programmes.
The fifth paragraph of the note was in these terms: See further, the last sentence of para 5 of the closed judgment.
This point is important in its own right in demonstrating the existence of the rational/proportionate connection.
Mr Eicke QC for the Treasury was asked repeatedly to say what the point was to which this paragraph refers.
It was made clear that the court was looking not for the details which supported whatever was said in that sentence, but simply for an indication of its subject matter.
Mr Eicke declined, no doubt on instruction, to provide this information.
He declined also to say what the point was to which para 6(3) was directed, where it was said that, to the extent that it was necessary to do so, the Banks case at para 60 was contradicted by the point at para 2 of the closed judgment.
In para 60 of its case the Bank states that there is nothing in the judges findings to suggest that the Bank had done anything to materially increase the risk that the United Kingdom financial sector would be embroiled in proliferation related transactions.
It seemed reasonable to ask how looking at the closed judgment would assist on this point, but the court was provided with no answer as to how it might do so.
I was not impressed by Mr Eickes inability to answer these questions.
The guiding principles seem to me to be these.
Resort to the closed material procedure will result in every case in an inequality of arms between the State, which will always be the party who invokes the procedure and will always have access to that material, and the other party against whom the State has taken action and to whom access to that material is always denied.
Regard must, of course, be had to the national interest which requires that some sensitive material must be kept secret.
But the court must be astute not to allow the system to be over used by those in charge of that material.
The need for care in this respect increases as the issues are refined at the stage of an appeal.
In a case of this kind, where the judge has told the appellate courts in his open judgment how he has used the closed material and the Court of Appeal has found nothing in the closed judgment that required comment, resort to it for further information could only be justified if there was a point of real substance in it that had, in fairness to the State, to be taken into account at the stage of the appeal.
The Treasurys refusal to come out of its closet and provide even the merest hint as to what these points were was as unattractive as it was unconvincing.
I would therefore, if left to myself, have declined to look at the closed
judgment.
It seemed to me that the judge had said enough in his judgment to explain the significance of the points to which the Treasury had regard when they decided to make the Order.
Any points to which emphasis had to be attached could be made sufficiently in open court in the course of the oral argument. (c) should the court issue a closed judgment?
The most obnoxious feature of the closed material procedure at the stage of an appeal is the possibility that the appellate court may have to give the whole or part of its reasons for the disposal of the appeal in a judgment to which the State only, and not the other party to the appeal or anyone else, has access.
As was stressed several times by Lord Dyson and those who agreed with him in Al Rawi, fundamental principles of the right to a fair trial include the right to know the reasons for the outcome: see, for example, [2012] 1 AC 531, para 45.
This point loses none of its force at the stage of an appeal.
And it has even more force at the stage of a final appeal, as once the Supreme Court has given its reasons in a judgment of that kind there will be no opportunity for any further review of the closed material by a special advocate or by anyone else.
Secret justice at this level is really not justice at all.
I very much hope that the Supreme Court will never find itself in a position
when it has to resort to the giving of a closed judgment in the disposal of an appeal.
A stern and steadfast resistance to the use of that procedure would go some way to redressing the unwelcome departure from the principle of open justice that the decision that the Supreme Court may in principle adopt a closed material procedure will inevitably give rise to.
In itself, merely looking at a closed judgment to see whether there is anything in it that might be of significance may be thought not give rise to any unfairness to the party who does not have access to that material.
A check of that kind may not seem a large step to take.
It is an entirely different matter if it leads to the issuing of even more material in the form of a closed judgment that the other party cannot see.
As it happened, it was not necessary to answer this question.
It became clear in this case, when the judges closed judgment had been seen and considered, that there was nothing in it which required any such judgment to be issued by this court.
The fact this was so reinforces my suspicion that the Treasury were being over cautious in their refusal to offer any assistance as to what the points were to which reference was made in their note to the Special Advocates and that they were over using the procedure.
I am not to be taken as suggesting that it was wrong for the Treasury to make use of closed material in the lower courts, where its use has been expressly authorised by Parliament.
But the attitude which they have adopted in this appeal was a misuse of the procedure, because they invited the court to look at the closed judgment when there was nothing in it that could not have been gathered equally well from a careful scrutiny of the open judgment.
This experience should serve as a warning that the State will need to be much more forthcoming if an invitation to this court to look at closed material were to be repeated in the future.
LORD KERR (dissenting)
Two principles of absolute clarity govern the law in relation to the manner in which trials should be conducted.
The first is that a party to proceedings should be informed of the case against him and should have full opportunity to answer that case in open court.
The second principle is that the first principle may not be derogated from except by clear parliamentary authority.
These principles received emphatic endorsement by the Supreme Court in Al Rawi v Security Service [2012] 1 AC 531.
In delivering the leading judgment, Lord Dyson said this: 10.
There are certain features of a common law trial which are fundamental to our system of justice (both criminal and civil).
First, subject to certain established and limited exceptions, trials should be conducted and judgments given in public.
The importance of the open justice principle has been emphasised many times: see, for example, R v Sussex Justices, Ex p McCarthy [1924] r KB 256, 259, per Lord Hewart CJ, Attorney General v Leveller Magazine Ltd [1979] AC 440, 449H 450B, per Lord Diplock, and recently R (Mohamed) v Secretary of State for Foreign and Commonwealth Affairs (No 2) (Guardian News and Media Ltd intervening) QB 218, paras 38 39, per Lord Judge CJ. 11.
The open justice principle is not a mere procedural rule.
It is a fundamental common law principle.
In Scott v Scott [1913] AC 417, Lord Shaw of Dunfermline (p 476) criticised the decision of the lower court to hold a hearing in camera as constituting a violation of that publicity in the administration of justice which is one of the surest guarantees of our liberties, and an attack upon the very foundations of public and private security.
Viscount Haldane LC (p 438) said that any judge faced with a demand to depart from the general rule must treat the question as one of principle, and as turning, not on convenience, but on necessity. 12.
Secondly, trials are conducted on the basis of the principle of natural justice.
There are a number of strands to this.
A party has a right to know the case against him and the evidence on which it is based.
He is entitled to have the opportunity to respond to any such evidence and to any submissions made by the other side.
The other side may not advance contentions or adduce evidence of which he is kept in ignorance.
The Privy Council said in the civil case of Kanda v Government of Malaya [1962] AC 322,337: If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him.
He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them. 13.
Another aspect of the principle of natural justice is that the parties should be given an opportunity to call their own witnesses and to cross examine the opposing witnesses.
As was said by the High Court of Australia in Lee v The Queen (I998) I95 CLR 594, para 32: Confrontation and the opportunity for cross examination is of central significance to the common law adversarial system of trial.
The essential ratio of Al Rawi, so far as concerns the present appeal, was neatly expressed by Lord Dyson in para 35 where he said, the right to be confronted by one's accusers is such a fundamental element of the common law right to a fair trial that the court cannot abrogate it in the exercise of its inherent power.
Only Parliament can do that.
The simple question which lies at the heart of this appeal is whether Parliament has done that for hearings before the Supreme Court.
It was suggested that the decision in Al Rawi can be distinguished or that it has no application to the present appeal because it was concerned with a trial and not with an appeal from a decision in proceedings where there was statutory authority to conduct a closed hearing.
I do not accept this argument.
The principle recognised in Al Rawi is both fundamental and general.
Its effect is straightforward.
Courts do not have power to authorise a closed material procedure unless they has been given that power by Parliament.
If Parliament has not conferred the power on this court, it matters not that those courts from which an appeal lies to this court have been empowered to conduct such a hearing.
Representing as it does such a radical departure from the conventional mode of trial and, more importantly, such a drastic infringement on a centuries old right, it is to be expected that a closed materials procedure would be provided for in the most unambiguous and forthright terms or by unmistakably necessary implication.
On that basis alone, section 40(5) of the Constitutional Reform Act is hardly a promising candidate.
But before looking more closely at that provision, I should say something about the relevant provisions in the Counter Terrorism Act 2008, principally to examine how Parliament has in fact set about making explicit provision for closed material procedures in other courts and to point up the contrast with the route that the respondent in this case would have us take to arrive at the same destination.
The first and most obvious thing to say about the Counter Terrorism Act is, of course, that it was enacted three years after the Constitutional Reform Act.
We now know (not least by reason of Al Rawi) that the High Court and the Court of Appeal could not have ordered a closed material procedure in a case such as the present by recourse to an inherent power.
This required the authorisation of the 2008 Act.
It appears to me, therefore, that an argument that the Supreme Court did have power to hold such a hearing before 2008, when the High Court and the Court of Appeal did not, would be utterly implausible.
But if section 40(5) did not empower the Supreme Court before 2008 to hold a closed material procedure hearing, how can it be said to have done so after the enactment of the Counter Terrorism Act and Rules made I thereunder, all of which conspicuously make no reference whatever to this court? shall return to this question briefly below.
Bank Mellats proceedings before the High Court were brought under section 63 of the 2008 Act.
Section 63(2) gives a person affected by a decision taken by the Treasury in connection with a range of asset freezing and other financial powers the right to apply to the High Court to have that decision set aside.
These are known as financial restrictions proceedings section 65.
Provisions as to how they are to be conducted are made in sections 66 to 72.
Section 66 contains general provisions about rules of court to be made in relation to financial restrictions proceedings.
Subsection (2) enjoins the person making the rules to have regard to (a) the need to secure that the decisions that are the subject of the proceedings are properly reviewed; and (b) the need to secure that disclosures of information are not made where they would be contrary to the public interest.
Subsection (3) states that rules of court may make provision (a) about the mode of proof and about evidence in the proceedings; (b) enabling or requiring the proceedings to be determined without a hearing; and (c) about legal representation in the proceedings.
Section 66(4) is an important provision which foreshadows rules of court authorising significant differences from the conventional mode of trial in the way that financial restrictions proceedings may be conducted.
It provides: Rules of court may make provision (a) enabling the proceedings to take place without full particulars of the reasons for the decisions to which the proceedings relate being given to a party to the proceedings (or to any legal representative of that party); (b) enabling the court to conduct proceedings in the absence of any person, including a party to the proceedings (or any legal representative of that party); (c) about the functions of a person appointed as a special advocate; (d) enabling the court to give a party to the proceedings a summary of evidence taken in the party's absence.
Section 67(2) provides that rules of court must secure that the Treasury is required to disclose material on which they rely; material which adversely affects its case; and material which supports the case of a party to the proceedings.
This subsection is made subject to the succeeding provisions of the section, however.
These include subsection (3) which introduces significant qualifications on the duties imposed in subsection (2).
It provides: (3) Rules of court must secure (a) that the Treasury have the opportunity to make an application to the court for permission not to disclose material otherwise than to (i) the court, and (ii) any person appointed as a special advocate; (b) that such an application is always considered in the absence of every party to the proceedings (and every party's legal representative); (c) that the court is required to give permission for material not to be disclosed if it considers that the disclosure of the material would be contrary to the public interest; (d) that, if permission is given by the court not to disclose material, it must consider requiring the Treasury to provide a summary of the material to every party to the proceedings (and every party's legal representative); (e) that the court is required to ensure that such a summary does not contain material the disclosure of which would be contrary to the public interest.
As the interveners, Liberty, have pointed out, section 67(3) heralded the effective disapplication of the law relating to public interest immunity.
Simply stated, that law required a court, faced with a request by a party to authorise the withholding of relevant evidence, to balance the public interest which the application was said to protect against those public interests which favoured its production, including the fair administration of justice.
No such weighing of competing interests could take place after the enactment of the rules which section 67(3) stipulated should secure, among other things, that the court must give permission for material not to be disclosed if it considered that its disclosure would be contrary to the public interest.
That outcome was inevitable as soon as the conclusion that revelation of the material was contrary to the public interest.
Countervailing interests such as the due and fair administration of justice were to be of no consequence.
The effective abolition of public interest immunity in financial restrictions proceedings and the requirement that applications be entertained for evidence to be withheld from all except the court and special advocates clearly called for the protection, in some other guise, of the interests of the litigant who had been denied access to the withheld material.
This was provided for in section 68.
Subsection (1) of that section provides: (1) The relevant law officer may appoint a person to represent the interests of a party to (a) financial restrictions proceedings, or b) proceedings on an appeal, or further appeal, relating to financial restrictions proceedings, in any of those proceedings from which the party (and any legal representative of the party) is excluded.
This is referred to in this Chapter as appointment as a special advocate.
The 2008 Act had therefore set up a reasonably elaborate structure for the making of rules which would authorise, in financial restrictions proceedings, a significant departure from the system of trial that would normally obtain in most other forms of civil disputes.
But section 73 of the Act made it clear that this system of trial was intended only for the High Court, the Court of Appeal and the Court of Session for it provided that rules of court, where that expression had been used in the legislation, meant rules for regulating the practice and procedure to be followed in the High Court or the Court of Appeal or in the Court of Session.
The principal rules in the Civil Procedure Rules are made pursuant to section 1 of the Civil Procedure Act 1997.
Section 1(3) of this Act provides that the power to make Civil Procedure Rules shall be exercised with a view to securing that the civil justice system is accessible fair and efficient.
Part 79 of the Civil Procedure Rules (which was designed to implement the rules which Part 6 of the 2008 Act, dealing with financial restrictions proceedings, contemplated) was inserted in the Civil Procedure Rules by the Civil Procedure (Amendment No 2) Rules 2008/308517.
As well as making detailed rules to fulfil the provisions of sections 66 and 67, Parts 79.2 and 79.13 modified the overriding objective which otherwise applies to proceedings in both the High Court and the Court of Appeal.
That objective is stated in CPR Part 1.1, to be to deal with cases justly.
Rule 1.1 (2) (a) provides that dealing with cases justly includes, so far as is practicable, ensuring that parties are on an equal footing.
But by Parts 79.2 and 79.13 this overall objective (in so far as it related to financial restrictions proceedings) was to be read and given effect to compatibly with the court's statutory duty (in section 66(2) of the 2008 Act) to ensure that information was not disclosed contrary to the public interest.
Part 79.22 disapplied in its entirety Part 31 of the CPR which had contained the procedural rules relating to public interest immunity.
Again it can be seen that, in relation to financial restrictions proceedings a fairly radical re ordering of the rules that governed most forms of civil litigation was introduced.
All of this is in stark contrast to the position as regards the Supreme Court.
Section 40(5) of the Constitutional Reform Act 2005 provides: (5) The Court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
As I have said, there cannot be any plausible argument that this provision gave the Supreme Court power to conduct a closed procedures hearing before the enactment of the Counter Terrorism Act in November 2008.
Is it possible that the power of the court to conduct such a hearing has been animated by the 2008 Act? One can recognise a theoretical argument that in order to determine any question in an appeal against a finding made by a lower court in a closed material procedures hearing, it is necessary for the Supreme Court to be able to conduct such a hearing.
That argument must, however, immediately confront the fact that nothing in the 2008 Act refers to the Supreme Court.
Notwithstanding the elaborate structure that has been put in place to govern the conduct of such a hearing in the High Court, the Court of Appeal and the Court of Session, no provision has been made as to how a closed material procedure hearing in the Supreme Court might take place.
For my part, I find it inconceivable that it was intended that the Supreme Court should have power to carry out a closed materials procedure while leaving it bereft of the structure and safeguards which were deemed essential for the other courts in which such a hearing is expressly permitted.
Moreover, the use of a closed materials procedure involves the suspension of the law relating to public interest immunity.
Thus, for the Supreme Court to recognise that it has power to conduct a closed materials procedure hearing necessarily involves an acceptance that its power to conduct an inquiry into whether public interest immunity requires the withholding of the material is no longer available.
That this should be the effect of section 40(5) would be surprising enough.
But that it should have that effect for the first time three years after the Constitutional Reform Act 2005 was passed is surely wholly improbable.
Section 40(5) gives the Supreme Court power to determine questions which need to be determined for the purposes of doing justice in an appeal.
But the conferring of that power should not be confused with authorising the use of a wholly different procedure for the manner in which those questions are to be determined.
This is particularly so when that different procedure was not in contemplation at the time the section was enacted.
It is significant that the subsection confers the power for the express purpose of doing justice in an appeal.
The doing of justice is conventionally understood to mean that all parties to litigation will have equal access to material which is liable to influence the outcome of the dispute.
This is echoed in section 45 of the Constitutional Reform Act the provision which deals with rule making powers.
Section 45(1) invests the President of the Court with the power to make rules governing the practice and the procedure to be followed in the court.
Subsection (3)(a) requires that the President must exercise that power with a view to securing that the court is accessible, fair and efficient.
This mirrors section 1(3) of the Civil Procedure Act 1997.
And Rule 2 of the Supreme Court Rules 2009 sets out the overriding objective as being to secure that the court is accessible, fair and efficient, terms which are not dissimilar to the overall objective in CPR 1.1.
There has been no modification of this overall objective such as was introduced by Part 79 of the CPR, however.
Indeed, nothing in the 2009 Rules intimates an intention to accommodate a closed material procedure in any way.
Rule 27(1) states that every contested appeal shall be heard in open court except where it is necessary in the interests of justice or the public interest to sit in private for part of an appeal hearing.
Rule 27(2) provides: (2) Where the Court considers it necessary for a party and that party's representative to be excluded from a hearing or part of a hearing in order to secure that information is not disclosed contrary to the public interest, the Court must conduct the hearing, or that part of it from which the party and the representative are excluded, in private but the Court may exclude a party and any representative only if a person who has been appointed as a special advocate to represent the interests of that party is present when the party and the representative are excluded.
In my view, it is clear that this rule was made to allow an ex parte application to be made for the withholding of material as part of a public interest immunity exercise.
To suggest that it was designed to cover the holding of a closed material procedure would be farfetched, given that there is no mention in any other part of the rules of such a procedure.
Indeed, the very next rule, rule 28 states that a judgment of the court may be delivered in open court or, if the court directs, be promulgated by the Registrar.
But for the circumstance that the 2008 Act introduced a closed material procedure for the High Court, the Court of Appeal and the Court of Session and that appeals lie from those courts to the Supreme Court, there would be no argument that the Constitutional Reform Act and the Supreme Court rules even address, much less contemplate, the possibility of such a hearing taking place before this court.
It is only by a process of ex post facto rationalisation that section 40(5) is said to permit a closed materials procedure in the Supreme Court.
That cannot be said to have been its original purpose.
In my view, the revised and expanded purpose which the respondent seeks to ascribe to it cannot be accepted.
The contended for modification of the courts powers and procedures involves simply too important, not to say too fundamental, a transformation to be countenanced.
It can be submitted that a steadfast refusal to allow some softening of the Al Rawi line in relation to appeals is unrealistic; that the failure to admit closed material in an appeal before the Supreme Court when the same material had been before the courts against whose decisions the appeal is brought creates an asymmetrical anomaly.
And indeed, it has been suggested by the advocate to the court, Mr Tam QC, that advantages in recognising at least the power of the Supreme Court to receive closed material can be detected.
The primary advantage he identified was the assistance which such an exercise provided in enabling the court to arrive at the correct result.
For the reasons that I gave in Al Rawi and the associated case of Tariq v Home Office [2012] 1 AC 452, I consider that the assumption that a court, presented with all of what is claimed to be relevant material, will be in a better position to arrive at the right conclusion when some of that material is untested is, at least, misplaced and may prove in some cases to be palpably wrong.
But I do not consider it profitable to renew the debate on that particular topic in the present case.
For the sake of examining the claim that this court should recognise a power to examine closed material, let us assume that there is force in the argument that a court is, as a matter of principle and common experience, better placed to reach a more correct result if it receives all the material which one of the parties says is relevant to its decision, even though the other party is denied knowledge of its content.
Does that circumstance warrant recognition of the power? In my view it does not.
Pragmatic considerations can and, where appropriate, should play their part in influencing the correct interpretation to be placed on a particular statutory provision.
But pragmatism has its limits in this context and we do well to recognise them.
As a driver for the interpretation of section 40(5) for which the respondent contends, pragmatism might seem, at first blush, to have much to commend it.
After all, this is an appeal from courts where closed material procedures took place.
How, it is asked, can justice be done to an appeal if the court hearing the appeal does not have equal access to a closed material procedure as was available to the courts whose decision is under challenge? And if one proceeds on the premise that the court will be more fully informed and better placed to make a more reliable decision, why should the Supreme Court not give a purposive interpretation to section 40(5)?
The answer to this deceptively attractive presentation is that this was never the purpose of section 40(5).
It was not even a possible, theoretical purpose at the time that it was enacted.
It was never considered that it would be put to this use.
The plain fact is that Parliament introduced a closed material procedure for the High Court, the Court of Session and the Court of Appeal and did not introduce such a procedure for the Supreme Court.
This court has said in Al Rawi that it does not have the inherent power to introduce a closed material procedure.
Only Parliament could do that.
Parliament has not done that.
And to attempt to graft on to a statutory provision a purpose which Parliament plainly never had in order to achieve what is considered to be a satisfactory pragmatic outcome is as objectionable as expanding the concept of inherent power beyond its proper limits.
A majority of this court has held that it does have power to hold a closed material procedure, however, and it is therefore necessary for me to address the question of whether it was right to hold a closed material procedure on this appeal.
It was not in dispute between the parties, the interveners and the advocate to the court that, as Mr Chamberlain on behalf of the special advocates put it, if section 40(5) confers on the court power to consider closed material, it does so only if, and to the extent that, closed material is relevant to a question whose determination is necessary for the purposes of doing justice in the appeal.
Equally, it was not disputed that the obligation to show that the closed material was relevant and the extent to which it was relevant rested with the party so asserting, in this instance the respondent.
But the circumstances of this case immediately exemplified the inherent difficulty in applying that principle.
In seeking to persuade the court that it was necessary to look at the closed judgment, the respondent felt unable to state what the closed judgment contained.
This is, of course, a problem which will beset every application for a closed material procedure.
And, ultimately, counsel for the respondent was driven to utter warnings couched in the most general terms of the danger of this court reaching a conclusion on the appeal in the appellants favour when it might have been influenced to a different view had it seen the closed material.
If the principle that the closed material procedure has to be shown to be necessary is to be something more than an empty aspiration, then the party asking for a closed material procedure must surely do more than merely assert that this is necessary.
Here, however, the respondent did not even do that.
The Treasurys final position was that, in a certain eventuality (the appellants appeal succeeding), the material might cause the court to take a different view.
That seems to me to be an impossibly far cry from showing that it was necessary that we should look at the closed judgment.
The difficulty is enhanced where, as here, article 6 of the European Convention on Human Rights and Fundamental Freedoms governed the proceedings.
Where that is the case, nothing in the closed material, or the judges conclusion on it, may be determinative of the outcome unless the gist of the material has been relayed to the appellant.
So one must start the examination of whether it is necessary to examine the closed judgment on the basis that nothing in that judgment can have been determinative of the case against the bank.
The examination of whether the necessity test has been satisfied then must include acknowledgment of Mitting Js single reference to his closed judgment in para 16 of his open judgment to the effect that there were closed reasons as well as those expressed in his open judgment for his finding that one of the banks customers, Novin Energy Company, had imported materials which could be used to produce or facilitate the production of nuclear weapons.
In the first place, the fact that open reasons for that finding had been given certainly does not help the case that it was necessary to look at the closed judgment.
But that case was weakened further by the judges statement that this was common ground between the parties and, in my view, it was demolished by the fact that this finding was not challenged by Bank Mellat before this court.
In truth, this courts decision to look at the closed judgment depended on nothing more than the plea of counsel for the Treasury that, against the possibility that we might be inclined to find for the appellant, we should look at the closed material just in case it might persuade us to a different view.
That, in my opinion, comes nowhere near to showing that it was necessary to look at the closed judgment and sadly, but all too predictably, when the closed judgment was considered in the course of a closed material procedure, it became abundantly clear that it was quite unnecessary for us to have done so.
LORD REED (dissenting)
This appeal has raised several points of constitutional importance.
The present judgment is concerned with the questions whether this court can adopt a closed material procedure in a case of this nature, and, if so, whether it ought to do so in this particular case.
I agree with the judgments` of Lord Hope and Kerr, and add some observations only in view of the importance of these issues and the division in the court.
The issue of principle
The first question raised is whether this court has the power, when hearing an appeal relating to financial restrictions proceedings under Part 6 of the Counter Terrorism Act 2008 (the 2008 Act), to exclude from the hearing the party challenging the Treasurys exercise of its powers, to consider a closed judgment which has not been disclosed to that party, and to give a closed judgment, containing part or all of the reasons for its decision, which is not disclosed to that party or to the public.
I was of the opinion, when the issue arose at the end of the first day of the hearing, that the court has no such power.
I remain of that opinion.
It is a fundamental principle of justice under the common law that a party is entitled to the disclosure of all materials which may be taken into account by the court when reaching a decision adverse to that party (see for example In re D (Minors) (Adoption Reports: Confidentiality) [1996] AC 593, 615 per Lord Mustill, and the other authorities cited in R (Roberts) v Parole Board [2005] UKHL 45; [2005] 2 AC 738, para 16 per Lord Bingham of Cornhill).
That principle can only be qualified or overridden by statute.
It is also a basic principle of justice that a party is entitled to be present during the hearing of his case by the court (subject to a number of established exceptions, none of which is germane to the present case), and to know the reasons for the courts decision.
Section 66 of the 2008 Act, read with section 73, makes special provision for rules of court regulating the practice and procedure to be followed in appeals relating to financial restrictions proceedings in the High Court, the Court of Appeal and the Court of Session.
Section 66(4) permits such rules of court to make provision for a closed material procedure.
Section 67 imposes specific duties in relation to disclosure upon persons making rules of court in respect of those courts alone.
The law relating to public interest immunity is by implication disapplied.
It is plain beyond argument that Parliament did not apply those provisions to the court of last resort.
If Parliament had intended the same procedures to be applied in this court, it would surely have said so.
The general powers conferred upon this court by the Constitutional Reform Act 2005 (the 2005 Act) are silent on the matter.
It is argued that they are to be construed as conferring the necessary powers, since the court cannot decide an appeal in a case where a closed judgment has been issued without knowing, and hearing argument upon, all the reasons for the decisions of the courts below, and must therefore hear argument upon the closed judgment, necessarily in a hearing from which the party challenging the Treasurys exercise of its powers is excluded.
There is however a strong presumption that Parliament does not intend to interfere with the exercise of fundamental rights.
It will be understood as doing so only if it does so expressly or by necessary implication (R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539, 574 per Lord Browne Wilkinson; R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131 per Lord Hoffmann).
The common law rights of a party to an appeal to be present throughout the hearing of the appeal, to see the material before the court, and to know the reasons for the courts decision of the appeal, are undoubtedly fundamental rights to which that principle applies.
The argument advanced on behalf of the Treasury is directly contrary to that principle: reliance is placed upon general words to override a fundamental right.
I find it particularly difficult to accept the argument against the background of the specific provision made by Parliament in respect of other courts in the 2008 Act.
In so far as the argument seeks to rely upon the Supreme Court Rules made under the 2005 Act, it begs the anterior question as to the effect of the 2005 Act itself.
I accept of course, as a general proposition, that it is desirable that an appellate court should be able to consider all the reasoning of the courts below, and all the material which was before them.
This court has not however in the past found it either necessary or appropriate to consider closed judgments of the courts below: RB (Algeria) v Secretary of State for the Home Department [2009] UKHL 10; [2010] 2 AC 110, para 3.
I do not in any event regard these pragmatic considerations as conclusive.
It has to be borne in mind in the first place that it is a matter of great importance that proceedings in the highest court in the land should be conducted in accordance with the highest standards of justice: in particular, that the court should sit in public, and that all parties should be equally able to participate in the hearing.
There is to my mind a very serious question whether secret justice at this level is acceptable.
It also has to be borne in mind that there are other possible means of protecting national security in court proceedings besides the adoption of a closed material procedure, and that some of those means enable the court to sit in public and the parties to attend the whole of the hearing.
One possibility, where a closed judgment has been issued by a lower court, is to determine the appeal on the basis of the material which that court, exercising its judgment, has set out in its open judgment.
That was the procedure followed in RB (Algeria).
Another is to apply the law relating to public interest immunity, as the House of Lords did in the past.
Another is to follow the approach adopted in a number of European courts, such as the German courts, where the court can examine the material for itself, without its being canvassed during the hearing.
A comparative analysis might disclose other possibilities.
That is not to say that the alternatives to closed material procedure are necessarily preferable: they may cause equal or greater concern for other reasons.
The point of these considerations, however, is that there are choices to be made.
Those choices are appropriately made by Parliament after full consideration and debate.
They are too important to be left to judges.
The most serious difficulty with the Treasurys argument, however, is that for the court to conduct a closed hearing is contrary to a fundamental principle of the common law, and therefore requires clear statutory authority.
Even interpreted as generously as possible, the 2005 Act cannot in my opinion be said to provide clear authority.
Whether this court should have adopted a closed material procedure in the present
The second question raised is whether, given the view of the majority of the court that it did possess such a power, that power should have been exercised in the circumstances of the present case.
I am emphatically of the opinion that it should not.
The Treasurys argument, which I have already summarised, was one which would apply in every case in which a closed judgment had been given.
In the present case, however, Mitting J had properly indicated in his open judgment ([2010] EWHC 1332, paras 16 and 18) the two specific findings that he had made for which his reasoning was set out in the closed judgment.
Neither of those findings was challenged before this court.
Counsel for the Treasurys assertion that it was nevertheless necessary for this court to hear submissions on the closed judgment, and for that purpose to sit in a closed session, was unsupported by any specific reasons why such an exceptional course should be adopted.
No indication was given of the nature of the closed material, contrary to the requirement that a summary should be provided (Secretary of State for the Home Department v AF [2009] UKHL 28; [2010] 2 AC 269).
The plea that, if there was any possibility that the court might otherwise allow the appeal, it ought to consider the closed judgment just in case anything in it might alter the courts view, falls far short of demonstrating that a departure from the fundamental principle of open justice was truly necessary.
When closed material procedure was first introduced in 1997, in proceedings before the Special Immigration Appeals Commission, it was said to be an exceptional measure justified by national security concerns.
Having gained a foothold in the legal system, the procedure has spread progressively, initially to other specialist tribunals, and then to the courts.
It has been used even where issues of national security are not involved (as, for example, in R (Roberts) v Parole Board [2005] UKHL 45; [2005] 2 AC 738).
Now that its use has been extended to proceedings before this court, it is of great importance, if a degradation of standards of justice at the highest level is to be avoided, that it should be resorted to only where it has been convincingly demonstrated to be genuinely necessary in the interests of justice.
LORD DYSON (dissenting in part)
I agree with Lord Neuberger that, for the reasons that he has given, this court has the power to adopt a closed material procedure in an appeal under the Counter Terrorism Act 2008.
For the reasons given by Lords Hope, Kerr and Reed, I did not favour exercising the power in this case.
In my view, the power should only be exercised where it has been convincingly demonstrated that it is necessary to do so in the interests of justice.
I agree with what Lord Neuberger says about this at para 69 of his judgment.
The present case illustrates the danger of the court acceding too readily to an assertion by a party that a closed session could make a difference to the outcome of an appeal.
That is what counsel for the Treasury asserted on instructions in the present case.
He was unable to say more.
As Lord Neuberger says at para 64, the court strongly suspected that nothing in the closed judgment would affect the outcome of the appeal, but we could not be sure in the absence of seeing the closed judgment and hearing submissions on it.
Our strong suspicions were amply borne out.
The closed judgment contained nothing that it could reasonably have been thought would or might affect the outcome of the appeal.
In my view, if the court strongly suspects that nothing in the closed material is likely to affect the outcome of the appeal, it should not order a closed hearing.
I remain of the view that the power should not have been exercised in the present case.
A bare plea for a closed hearing should not suffice.
I agree with Lord Hope that convincing reasons should be given as to why closed material should be looked at.
Anything less is likely to lead to closed hearings becoming routine.
In my view, they should be exceptional.
Trinity Term [2013] UKSC 39 On appeal from: [2011] EWCA Civ 1 Bank Mellat (Appellant) v Her Majesty's Treasury (Respondent) (no. 2) Lord Neuberger, President Lord Hope, Deputy President JUDGMENT before Lady Hale Lord Kerr Lord Clarke Lord Dyson Lord Sumption Lord Reed Lord Carnwath 19 June 2013 JUDGMENT GIVEN ON Heard on 19, 20 and 21 March 2013 Appellant Michael Brindle QC Amy Rogers Dr Gunnar Beck (Instructed by Zaiwalla and Co) Special Advocates Martin Chamberlain QC Melanie Plimmer (Instructed by Special Advocates Support Office) Intervener Nicholas Vineall QC (Instructed by Zaiwalla and Co) Respondent Jonathan Swift QC Tim Eicke QC Robert Wastell (Instructed by Treasury Solicitors) Advocate to the Court Robin Tam QC (Instructed by Treasury Solicitors) LORD SUMPTION (with whom Lady Hale, Lord Kerr, and Lord Clarke agree in whole; Lord Neuberger and Lord Dyson agree only on the procedural grounds, Lord Carnwath only on the substantive grounds) Introduction 1.
This appeal is about measures taken by H.M. Treasury to restrict access to the United Kingdoms financial markets by a major Iranian commercial bank, Bank Mellat, on the account of its alleged connection with Irans nuclear weapons and ballistic missile programmes. 2.
The proliferation of nuclear weapons is an international issue of great importance to the security of the United Kingdom and the international community.
For a number of years, Iran has had a major industrial programme which the United Kingdom, along with the rest of the international community, believes to be directed to the development of the technical capability to produce nuclear weapons and to the improvement of its ballistic missile capabilities.
Between 2006 and 2008 the United Nations Security Council adopted a number of resolutions under Article 41 of the United Nations Charter, which deals with threats to international peace and security.
Security Council Resolution 1737 (2006) called on Iran to suspend various proliferation sensitive nuclear activities, and called on states to take measures to control the trade in certain critical materials, components, equipment and services.
Paragraph 12 of this Resolution also required states to freeze the assets in their national territory of a number of persons or organisations identified in Annex I as being involved in Irans nuclear and ballistic missile programmes.
Resolution 1747 (2007) extended these provisions to a number of additional persons and organisations identified in Annex I to the new resolution.
These included entities providing ancillary services to Irans nuclear and armaments industries, among them two banks.
Security Council Resolution 1803 (2008) strengthened the measures required by Resolutions 1737 and 1747.
In relation to the provision of banking and other financial services to support Irans weapons programmes, the new resolution called upon all states to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, in particular with Bank Melli and Bank Saderat, and their branches and subsidiaries abroad, in order to avoid such activities contributing to the proliferation sensitive nuclear activities, or to the development of nuclear weapon delivery systems. 3.
There are two principal legislative instruments available to the United Kingdom government for the purpose of restricting the operations in the United Kingdom of Iranian financial institutions associated with the countrys nuclear and ballistic missiles programmes.
The first, which is not directly in point in these proceedings but is an important part of the background, is the Iran (Financial Sanctions) Order 2007 SI 2007/281.
This is an Order in Council made under section 1 of the United Nations Act 1946, which gives effect to the asset freeze provisions of Security Council Resolutions 1737 and 1747.
Article 6 of the Order freezes the assets in the United Kingdom of the entities identified in Annex I of those resolutions. 4.
The second, which is the instrument directly relevant to the present appeal, is Section 62 of the Counter Terrorism Act 2008, which gives effect to Schedule 7.
Schedule 7 is not exclusively concerned with Iran or with nuclear proliferation.
It empowers the Treasury to make a direction by statutory instrument in situations specified in paragraph 1, involving three categories of risk associated with a foreign country outside the European Economic Area.
The relevant categories of risk are those arising from terrorist financing, money laundering and nuclear proliferation.
The risk of nuclear proliferation is dealt with in paragraph 1(4), which imposes a statutory condition that . the Treasury reasonably believe that (4) the development or production of nuclear, radiological, biological or chemical weapons in the country, or the doing in the country of anything that facilitates the development or production of any such weapons, poses a significant risk to the national interests of the United Kingdom. 5.
If the conditions in paragraph 1 as to the existence of a relevant risk are satisfied, the Treasury may give a direction to one or more persons operating in the financial sector (essentially credit and financial institutions) regulating their dealings with any designated person.
A designated person includes any person carrying on business in or resident or incorporated in the foreign country in question: see paragraph 9(1).
The direction may require the financial institutions to whom it is addressed to exercise an enhanced customer due diligence so as to obtain information about the designated person and those of its activities which contribute to the risk (paragraph 10).
It may require enhanced monitoring (paragraph 11) or systematic reporting (paragraph 12) to the same end.
But the most draconian provision is paragraph 13, which provides that the direction may require those to whom it is addressed not to enter into or continue to participate in. any transaction or business relationship with a designated person.
Under paragraph 16(4), any direction made in the exercise of these powers expires a year after it is made.
A direction made under Schedule 7 must be contained in an order: see paragraph 14(1).
By section 96, any order under the Act must be made by statutory instrument. 6.
It will be apparent that for designated persons with a substantial business in the United Kingdom, especially if they are banks, the exercise of the power conferred by paragraph 13 will have extremely serious and possibly irreversible consequences.
The Act provides three relevant safeguards against the unwarranted use of this power.
First, under Schedule 7, paragraph 14(2), if the direction contains requirements of a kind mentioned in paragraph 13 of Schedule 7 (limiting or ceasing business with a designated person) it must be laid before Parliament after being made and unless approved by affirmative resolution within 28 days will cease to have effect at the end of that period.
Second, Schedule 7, paragraph 9(6) provides that the requirements imposed by a direction must be proportionate having regard, in the case within paragraph 1(4) to the risk referred to in that paragraph.
This means the risk to the national interests of the United Kingdom presented by the development of nuclear weapons, radiological, biological or chemical weapons in the foreign country.
Third, section 63 of the Act provides a special procedure by which a person affected by any decision of the Treasury, including a decision under Schedule 7, may apply to the High Court to set it aside, applying the principles applicable on an application for judicial review. 7.
On 9 October 2009 the Treasury made an order, the Financial Restrictions (Iran) Order 2009 SI 2009/2725, which came into force three days later on 12 October.
It was made under Schedule 7, paragraph 13 of the Act and required all persons operating in the financial sector not to enter into or to continue to participate in any transaction or business relationship with Bank Mellat or any of its branches or with a shipping line called IRISL.
The direction was laid before Parliament on 12 October 2009.
It was approved by the Delegated Legislation Committee of the House of Commons on 28 October and by the Grand Committee of the House of Lords on 2 November. 8.
Under Schedule 7, paragraph 16(4), the direction expired automatically after a year, on 8 October 2010.
By that time it had been effectively superseded by the extension to Bank Mellat of a general asset freeze under EU legislation, which occurred on 26 July 2010.
On 29 January 2013, however, the application of the EU measures to Bank Mellat was annulled by the General Court, primarily on the ground of the insufficiency of the stated reasons for it.
This decision is currently under appeal to the Court of Justice of the European Union and is suspended pending that appeal.
Subject to that, there are no restrictions on Bank Mellats business currently in force. 9.
The object of the direction, as the Treasury acknowledges, was to shut the Bank out of the UK financial sector, and that has been its effect.
Before the direction, the Bank had a substantial international business, much of it international trade finance transacted through London.
In the year to March 2009, it issued letters of credit with an aggregate value of about US$11 billion, of which about a quarter represents letters of credit in respect of business transacted through the United Kingdom.
The Banks own estimate of its revenue losses is about US$25 million a year.
In addition, the Bank has been prevented from drawing on 183 million euros of call and time deposits with its part owned subsidiary in London.
Important banking relationships have been lost to other banks.
The judge found that since the direction, the bank has been unable to make profitable use of the goodwill which it had established in the United Kingdom, which was a possession for the purpose of article 1 of the First Protocol to the European Convention on Human Rights.
He held that on any view the effect has been substantial, and suffices to require all of the Banks challenges to the Order to be addressed and determined.
This much is not in dispute.
The present proceedings 10.
On 20 November 2009, Bank Mellat applied in the High Court under section 63 of the Counter Terrorism Act 2008 to have the direction set aside on grounds which fall under two heads.
In the courts below, these were called the procedural and the substantive grounds.
The procedural ground is that the Treasury failed to give the bank an opportunity to make representations before making the order.
The Bank had no express statutory right to such an opportunity, but it contends that such an opportunity was required at common law and by article 6 and article 1, Protocol 1 of the European Convention on Human Rights.
The substantive grounds are that the decision was irrational, disproportionate and discriminatory, that the Treasury failed to give adequate reasons for making it, and that their reasons were vitiated by irrelevant considerations or mistakes of fact.
In the High Court, Mitting J dismissed the banks application under both heads.
The Court of Appeal (Maurice Kay, Elias and Pitchford L.JJ) dismissed the appeal, unanimously in the case of the substantive grounds, by a majority (Elias LJ dissenting) in the case of the procedural ground.
The Treasurys reasons 11.
Bank Mellat is the only Iranian bank to have been designated under Schedule 7 of the Act.
It is, however, only part of the Iranian banking sector.
According to a staff report of the International Monetary Fund put before us by the Treasury, Iran has a comparatively large banking sector.
It comprises 26 banks, including eight large general commercial banks, four of which are publicly owned and the other four (among them Bank Mellat) relatively recently privatised.
The Treasurys evidence is that it is difficult for Iranian banks to access the United Kingdoms financial markets directly, because few banks in the United Kingdom are willing to deal with them or hold correspondent accounts for them in view of the risks involved.
It is easier for Iranian banks to do business in the United Kingdom through UK incorporated subsidiaries, which do not present the same risks for their counterparties.
Five of the eight general commercial banks in Iran have wholly or partly owned subsidiaries in the United Kingdom.
They are Bank Mellat, Bank Melli, Bank Sepah, Bank Saderat and Bank Tejarat.
Of these, Bank Melli, Bank Sepah and Bank Saderat had wholly owned banking subsidiaries in the United Kingdom.
Bank Mellat and Bank Tejarat had a jointly owned banking subsidiary, Persia International Bank Plc (PIB), through which they transacted most if not all of their United Kingdom business.
At the time of the Treasury direction, some of the Iranian banks with banking subsidiaries in the United Kingdom were restricted under other legislation.
Bank Sepah and its UK subsidiary Bank Sepah International Plc were included in Annex I to Security Council Resolution 1747, and were accordingly covered by the asset freeze imposed under the Iran (Financial Sanctions) Order 2007.
Bank Melli and its UK subsidiary Bank Melli Plc were subject to a similar asset freeze under EU legislation.
On 27 July 2010, some time after the direction relating to Bank Mellat was made, the EU asset freeze was extended to Bank Mellat and PIB as well as to Bank Saderat and its UK subsidiary Bank Saderat Plc which had previously been subject to reporting obligations only.
At the same time the EU asset freeze was extended to three other Iranian banks which did not have UK branches or subsidiaries.
That left, among banks with a UK presence, only Bank Tejarat, which was finally brought within the EU asset freeze on 24 January 2012. 12.
It is abundantly clear from statements made to Parliament when the direction was laid before it that the reason for singling out Bank Mellat from other Iranian banks was that it had been identified as having assisted Irans weapons programmes by providing banking and financial services to entities involved with them.
The explanatory memorandum which accompanied the direction explained it as follows: These restrictions are being imposed in respect of these entities because of their provision of services for Iran's ballistic missile and nuclear programmes.
It is considered that a direction to cease business with these entities will contribute to addressing the risk to the UK national interests posed by Irans proliferation activities.
This was expanded in a written ministerial statement.
After explaining why the Treasury considered that the Iranian nuclear programme posed significant risks for the national interests of the United Kingdom, the document continued: We cannot and will not ignore specific activities undertaken by Iranian companies which we know to be facilitating activity identified by the UN as being of concern, particularly where such activities have the potential to affect the UK' s interests.
Of the particular entities in question .
Bank Mellat has provided banking services to a UN listed organisation connected to Iran's proliferation sensitive activities, and been involved in transactions related to financing Iran's nuclear and ballistic missile programme.
The direction to cease business will therefore reduce the risk of the UK financial sector being used, unknowingly or otherwise, to facilitate Iran's proliferation sensitive activities.
In response to a request from the Banks solicitors for further information about the contents of this statement, the Treasury wrote on 27 October 2009: Iran's nuclear and ballistic missile programmes clearly require financing mechanisms to underpin them, and access to the international banking system remains essential for transactions with foreign suppliers.
As set out in the Written Ministerial Statement Bank Mellat has provided banking services to a UN listed organisation connected to Iran's proliferation sensitive activities, and been involved in transactions related to financing Iran's nuclear and ballistic missile programme.
The direction prevents Bank Mellat from conducting transactions or business relationships with persons operating in the UK financial sector and therefore restricts the financing mechanisms available to entities involved in lrans nuclear programme and its missile programme.
It also protects the UK financial sector from being unknowingly implicated in financing Iran's nuclear programme through transactions with Bank Mellat.
Finally, on 17 December 2009, the Exchequer Secretary to the Treasury answered a number of questions relating to the order in the House of Commons.
She said: The first question was on how the Government assess the impact on Iran's proliferation activities.
International finance services underpin the actions of Bank Mellat and IRISL.
Restricting their access to UK financial services will lock them out of a key financial centre, which will make their contribution to Iran's nuclear programme more difficult.
Obviously, our action applies to the UK.
The Hon Member for Fareham used the word sanction, but the order is not a sanction on Iran, but a direction for financial institutions in the UK.
And later in the same debate: The restriction targets Bank Mellat and IRISL transactions.
Other Iranian banks are not subject to the restrictions.
As long as all financial sanctions and relevant risk warnings are complied with, alternative banks may be used, otherwise an application for a licence of exemption may be made to the Treasury. 13.
In response to Bank Mellats proceedings, Mr James Robertson, a senior civil servant at the Treasury, made a witness statement which in its original form was dated 18 December 2009.
His statement was subsequently re served with additional material, after Mitting J had required the Treasury to disclose certain material which they had initially sought to rely on as closed material.
In his statement, Mr Robertson provided some of the detail behind the general allegations in the written ministerial statement about Bank Mellats dealings with a UN listed organisation connected to Iran's proliferation sensitive activities, and the transactions related to financing Iran's nuclear and ballistic missile programme.
It came down to three points: (1) The UN listed organisation was Novin Energy Company, which had been identified in Annex I of Resolution 1747 as a company which operates within AEOI and has transferred funds on behalf of AEOI to entities associated with Irans nuclear programme.
AEOI is the Atomic Energy Organisation of Iran.
It is an umbrella organisation concerned with the coordination of the programme.
It is listed in Annex I of Resolution 1737.
Mr Robertsons evidence was that Bank Mellat had serviced and maintained AEOI accounts mainly through AEOIs financial conduit Novin Energy. (2) Bank Mellat was said to have provided banking services to senior officials of Irans Aerospace Industries Organisation (or AIO), including a Mr Taghizadeh and a Mr Esbati.
AIO is not an organisation listed in the Annexes to the Security Council resolutions, but it is the parent of four entities which are listed.
Mr Robertson alleged that senior AIO officials concerned with Irans ballistic missile programme, by inference including Mr Taghizadeh and Mr Esbati, had in 2007 and 2008 used Bank Mellat services to conduct business with companies associated with Iranian procurement attempts. (3) Between autumn 2007 and spring 2009 the Bank had a banking relationship with a company called Doostan International, which was said to be an intermediary company that had in the past been used by subsidiary organisations of AIO listed in the Security Council resolutions, and which was linked to Irans nuclear programme.
In addition, Mr. Robertson said that the Treasury had been influenced by 14. two wider considerations not directly related to Bank Mellats alleged role in providing banking services to entities involved in Irans weapons programmes.
One was that it might encourage the United Kingdom financial sector to wind down business with Iran more generally.
The other was that it would increase pressure on the Iranian government to comply with its international obligations, by restricting the financial services available to it for procuring material required for its weapons programmes.
In this context, Mr Robertson said that it was important to note that although Bank Mellat had been privatised, the government of Iran still directly controlled 20% of its shares and indirectly controlled another 60%. 15.
In his open judgment Mitting J made the following findings, which represent at best a very partial acceptance of the Treasurys case on the facts: (1) Bank Mellat has in place a mechanism, which it operates conscientiously, to ensure that it does not provide banking services to Security Council designated entities and individuals.
This finding reflected the Banks evidence, which described its due diligence procedures. (2) Novin Energy Company was a financial conduit for AEOI and did facilitate Irans nuclear weapons programme.
But once it was designated in Security Council Resolution 1747, the Bank ran down and eventually terminated its relationship with it. (3) Doostan International had played a part in the Iranian nuclear weapons programme.
The Bank holds accounts for Doostan and for its managing director Mr Shabani, but the Bank had investigated the position in good faith and found nothing unusual or suspicious.
Mitting J considered that the position with regard to Doostan does not greatly matter. (4) Mitting J was not satisfied on the information available to him that the Bank had provided banking services to the two individuals said to be senior officials of the AIO.
Their names are very common in Iran and it had not proved possible to identify them in the Banks records. (5) Bank Mellat is not controlled by the Iranian government, which exercises voting rights only in respect of the 20% of the shares which it owns.
Nonetheless some pressure would be brought to bear on the Iranian government by the direction.
In substance, therefore, Mitting J found that while the Bank had provided 16. banking services to two entities, Novin and Doostan, which were involved in the Iranian nuclear weapons and ballistic missiles programmes, this had happened without their knowledge and in spite of their conscientiously operated procedures to avoid doing so.
The judge nevertheless dismissed the Banks substantive grounds of application because these very facts demonstrated the risk that is in any event obvious, that however careful the bank may be, the banks facilities are open to use by entities participating in Irans nuclear weapons programme.
The judge put the point in this way at para 16: The Treasury's case is not that the bank has knowingly assisted Security Council designated entities after designation, or even that it has knowingly assisted entities liable to be designated, but which have not yet been, by providing banking facilities to them, but that it has the capacity to do so, has in one instance done so and is likely to do so in the future.
The fundamental justification for the Order is that, even as an unknowing and unwilling actor, the bank is, by reason of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance.
Concealment of the true nature of imported goods paid for by a letter of credit is straight forward: all that an issuing bank sees are documents.
On presentation of compliant documents describing innocent goods, the bank must pay, whatever the nature of the goods in fact imported.
Access to the international financial system is, as the Financial Action Task Force reported on 18 June 2008, essential for what it describes as "proliferators".
I accept Mr Robertson's conclusion, in paragraph 57 of his statement, that Iran's banking system provides many of the financial services which underpin procurement of the raw materials and components needed for its nuclear and ballistic missile programmes.
In addition to his open judgment, Mitting J delivered a closed judgment, 17. which we have read.
It contains nothing which alters or supplements the findings in his open judgment in any respect relevant to the present appeal. 18.
The judges findings of fact were not challenged before the Court of Appeal, which endorsed his conclusions about them.
The Banks substantive grounds 19.
The bank now accepts, at least for the purpose of this litigation, that the statutory prerequisites in Schedule 1, paragraph 1 of the Act for the making of the direction were satisfied.
In other words, the Treasury reasonably believed that Irans nuclear and ballistic missiles programmes posed a significant risk to the national interests of the United Kingdom.
But that is not enough to justify the order.
This is because unlike the Iran (Financial Sanctions) Order 2007, a Schedule 7 direction is not a sanctions regime.
Its purpose is directly to restrict the availability of financial services which contribute to the relevant risk.
Directions made under it are essentially preventative and remedial rather than punitive or deterrent.
Thus Schedule 7 applies in the same way to the risk of terrorist financing and money laundering associated with a foreign country as it does to the risk of nuclear proliferation.
All of the specific directions for which Schedule 7 provides are addressed to the particular risks whose existence has given rise to the direction.
They require things to be done by the financial institutions to whom they are addressed with a view to directly restricting the contribution which the designated person may make to that risk, whether it be by gathering or reporting of information relating to its activities or, as in the present case, by wholly ceasing business dealings with him.
Critically, paragraph 9(6) of Schedule 7 posits a functional relationship between the conduct which may be required by the direction and the particular risk which justified the making of it in the first place.
It follows that the essential question raised by the Banks substantive objections to the direction is whether the interruption of commercial dealings with Bank Mellat in the United Kingdoms financial markets bore some rational and proportionate relationship to the statutory purpose of hindering the pursuit by Iran of its weapons programmes. 20.
The requirements of rationality and proportionality, as applied to decisions engaging the human rights of applicants, inevitably overlap.
The classic formulation of the test is to be found in the advice of the Privy Council, delivered by Lord Clyde, in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 80.
But this decision, although it was a milestone in the development of the law, is now more important for the way in which it has been adapted and applied in the subsequent case law, notably R (Daly) v Secretary of State for the Home Department [2001] 2 AC 532 (in particular the speech of Lord Steyn), R v Shayler [2003] 1 AC 247 at paras 57 59 (Lord Hope of Craighead), Huang v Secretary of State for the Home Department [2007] 2 AC 167 at para 19 (Lord Bingham of Cornhill) and R (Quila) v Secretary of State for the Home Department [2012] 1 AC 621 at para 45.
Their effect can be sufficiently summarised for present purposes by saying that the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community.
These four requirements are logically separate, but in practice they inevitably overlap because the same facts are likely to be relevant to more than one of them.
Before us, the only issue about them concerned (iii), since it was suggested that a measure would be disproportionate if any more limited measure was capable of achieving the objective.
For my part, I agree with the view expressed in this case by Maurice Kay LJ that this debate is sterile in the normal case where the effectiveness of the measure and the degree of interference are not absolute values but questions of degree, inversely related to each other.
The question is whether a less intrusive measure could have been used without unacceptably compromising the objective.
Lord Reed, whose judgment I have had the advantage of seeing in draft, takes a different view on the application of the test, but there is nothing in his formulation of the concept of proportionality (see his paras 68 76) which I would disagree with. 21.
None of this means that the court is to take over the function of the decision maker, least of all in a case like this one.
As Maurice Kay LJ observed in the Court of Appeal, this case lies in the area of foreign policy and national security which would once have been regarded as unsuitable for judicial scrutiny.
The measures have been opened up to judicial scrutiny by the express terms of the Act because they may engage the rights of designated persons or others under the European Human Rights Convention.
Even so, any assessment of the rationality and proportionality of a Schedule 7 direction must recognise that the nature of the issue requires the Treasury to be allowed a large margin of judgment.
It is difficult to think of a public interest as important as nuclear non proliferation.
The potential consequences of nuclear proliferation are quite serious enough to justify a precautionary approach.
In addition, the question whether some measure is apt to limit the risk posed for the national interest by nuclear proliferation in a foreign country, depends on an experienced judgment of the international implications of a wide range of information, some of which may be secret.
This is pre eminently a matter for the executive.
For my part, I wholly endorse the view of Lord Reed that the making of government and legislative policy cannot be turned into a judicial process. 22.
Nonetheless there are, as it seems to me, two serious difficulties about the conclusion which both Mitting J and the Court of Appeal reached in the present case.
The first is that it does not explain, let alone justify, the singling out of Bank Mellat, if as both courts below agreed the problem is a general problem of international banking.
The second is that the justification for the direction which they have found was not the one which ministers advanced when laying the direction before Parliament, and was in some respects inconsistent with it. 23.
As I have pointed out, by reference to the various statements of Treasury ministers, the justification for the measure which was given to Parliament was that there was a particular problem about Bank Mellat which did not apply to the generality of Iranian banks.
As the Exchequer Secretary pointed out on 17 December 2009, the direction was a targeted measure which did not apply to transactions with other banks.
That must mean, and would certainly have conveyed to Parliament, either (i) that Bank Mellat was knowingly collaborating in transactions related to the Iranian programmes, or at least turning a blind eye to them, or else (ii) that Bank Mellat, even on the footing that it was acting in good faith had unacceptably low standards of customer due diligence, which made it especially liable to let through such transactions.
The existence of special problems at Bank Mellat was also a substantial part of the justification put forward in the more detailed explanation given in Mr Robertson in his witness statement.
Unfortunately, it was the part which the judge did not accept.
The judge has found that Bank Mellat had a conscientiously applied policy of not providing banking facilities and banking services to entities identified in the United Nations list as being connected to the Iranian weapons programmes.
He has found that it wound down and then terminated its relationship with Novin once it had been added to the list, and that an investigation into Doostan had thrown up nothing unusual or suspicious.
When (after the hearing before Mitting J) Doostan was added to the list of entities connected with the Iranian weapons programmes by the United Nations Security Council, the relationship with them was terminated as it had been in Novins case.
The judge made no finding about the inadequacy of Bank Mellats controls.
Neither the Treasury ministers when justifying the measure to Parliament nor Mr Robertson when explaining it to the court suggested that they were particularly lax.
Mr Robertson did say that in general Iranian standards of due diligence were low.
This, he said, made them vulnerable to being used to channel illicit finance, and meant that UK financial institutions dealing with them could not assume that they would necessarily have procedures in place to screen out transactions of concern.
Mr Robertson did not, however, suggest that Bank Mellat was especially deficient in this respect and the judges finding about their procedures suggests that they were satisfactory, at any rate in relation to the weapons programmes.
Against this background, the emphasis of the Treasurys argument underwent a radical shift after the order was challenged towards a justification based on the risk that Bank Mellat might be the unwitting and unwilling channel by which the entities directly involved in the Iranian weapons programmes financed their importation of materials, services and equipment. 24.
Mitting J and the Court of Appeal accepted this argument.
They considered that the justification for the direction was to be found not in any problem specific to Bank Mellat but in the general problem for the banking industry of preventing their facilities from being used for purposes connected with the Iranian weapons programmes.
As the judge pointed out, concealment of the true nature of the imported goods paid for by letters of credit is straightforward.
However careful a bank may be, he said, the banks facilities are open to use by entities participating in Irans nuclear weapons programme.
For this reason, he thought that the direction represented the only reasonably practicable means of ensuring reliably that the facilities of an Iranian bank with international reach will not be used for the purpose of facilitating the development of nuclear weapons by Iran.
However, the direction made no attempt to prevent every Iranian bank with an international reach from facilitating Irans weapons programmes, but only one of them.
Indeed, by emphasising that it remained open to international traders to use other banks, the Exchequer Secretary apparently invited them to use instead channels of trade finance many, perhaps all of which would be affected by precisely the same inherent problems as Bank Mellat. 25.
A measure may respond to a real problem but nevertheless be irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification.
The classic illustration is A v Secretary of State for the Home Department [2005] 2 AC 68, another case in which the executive was entitled to a wide margin of judgment for reasons very similar to those which I have acknowledged apply in the present case.
The House of Lords was concerned with a derogation from the Convention permitting the detention of non nationals whose presence in the United Kingdom was considered by the Home Secretary to be a risk to national security and who could not be deported.
The House held that this was not a proportionate response to the terrorist threat which provoked it: see in particular paras 31, 43 44 (Lord Bingham of Cornhill), 132 (Lord Hope of Craighead), and 228 (Baroness Hale of Richmond).
No one disputed that the executive had been entitled to regard the applicants as a threat to national security.
Plainly, therefore, the legislation in question contributed something to the statutory purpose of protecting the United Kingdom against terrorism, if only by keeping some potential terrorists in prison.
It was nevertheless disproportionate, principally because it applied only to foreign nationals.
That was relevant for two reasons.
One was that the distinction was arbitrary, because the threat posed by comparable UK nationals, to whom the legislation did not apply, was qualitatively similar, although quantitatively smaller.
The other was that it substantially reduced the contribution which the legislation could make to the control of terrorism, and made it difficult to suggest that the measure was necessary.
This was because if (as the Committee assumed) the threat from UK nationals could be adequately addressed without depriving them of their liberty, no reason was shown why the same should not be true of foreign nationals.
As Lord Hope put it at para 132, the distinction raises an issue of discrimination, . but as the distinction is irrational, it goes to the heart of the issue about proportionality also. 26.
Every case turns on its own facts, and analogies with other decided cases can be misleading.
The suppression of terrorism and the prevention of nuclear proliferation are comparable public interests, but the individual right to liberty engaged in A v Secretary of State for the Home Department can fairly be regarded as the most fundamental of all human rights other than the right to life and limb.
The right to the peaceful enjoyment of business assets protected by article 1 of the First Protocol, is not in the same category of human values.
But the principle is not fundamentally different. 27.
I would not go so far as to say that the Schedule 7 direction in this case had no rational connection with the objective of frustrating as far as possible Irans weapons programmes.
On the footing that a precautionary approach is justified, the elimination of any Iranian bank from the United Kingdoms financial markets may well have added something to Irans practical problem in financing transactions associated with those programmes, just as the incarceration of some potential terrorists under Part IV of the Crime and Security Act 2001 may have made some difference to the reduction of terrorism.
But I think that the distinction between Bank Mellat and other Iranian banks which was at the heart of the case put to Parliament by ministers was an arbitrary and irrational distinction and that the measure as a whole was disproportionate.
This is because once it is found that the problem is not specific to Bank Mellat but an inherent risk of banking, the risk posed by Bank Mellats access to those markets is no different from that posed by the access which comparable banks continued to enjoy.
Moreover, the discriminatory character of the direction must drastically reduce its effectiveness as a means of impeding the Iranian weapons programmes.
As the Exchequer Secretary herself pointed out, as long as all financial sanctions and relevant risk warnings are complied with, alternative banks may be used.
Nothing in the Treasurys case explains why we should accept that it is necessary to eliminate Bank Mellats business in London in order to achieve the objective of the statute, if the same objective can be sufficiently achieved in the case of comparable banks by requiring them to observe financial sanctions and relevant risk warnings.
It may well be that other Iranian banks have not been found to number among their clients entities involved in Irans nuclear and ballistic missile programmes.
But it follows from the fact that this is a problem inherent in the conduct of international banking business that they are as likely to do so as Bank Mellat.
The direction was irrational in its incidence and disproportionate to any contribution which it could rationally be expected to make to its objective.
I conclude that that it was unlawful.
The Banks procedural grounds 28.
I also consider that the Bank is entitled to succeed on the ground that it received no notice of the Treasurys intention to make the direction, and therefore had no opportunity to make representations. 29.
The duty to give advance notice and an opportunity to be heard to a person against whom a draconian statutory power is to be exercised is one of the oldest principles of what would now be called public law.
In Cooper v Board of Works for the Wandsworth District (1863) 14 CB (NS) 180, the Defendant local authority exercised without warning a statutory power to demolish any building erected without complying with certain preconditions laid down by the Act.
I apprehend, said Willes J at 190, that a tribunal which is by law invested with power to affect the property of one Her Majestys subjects is bound to give such subject an opportunity of being heard before it proceeds, and that rule is of universal application an founded upon the plainest principles of justice.
In R v Secretary of State for the Home Department Ex p Doody [1994] 1 30.
AC 531, 560, Lord Mustill, with the agreement of the rest of the Committee of the House of Lords, summarised the case law as follows: My Lords, I think it unnecessary to refer by name or to quote from, any of the often cited authorities in which the courts have explained what is essentially an intuitive judgment.
They are far too well known.
From them, I derive that (1) where an Act of Parliament confers an administrative power there is a presumption that it will be exercised in a manner which is fair in all the circumstances. (2) The standards of fairness are not immutable.
They may change with the passage of time, both in the general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation.
What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal and administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification; or both. (6) Since the person affected usually cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer.
It follows that, unless the statute deals with the point, the question whether 31. there is a duty of prior consultation cannot be answered in wholly general terms.
It depends on the particular circumstances in which each direction is made.
Some directions that might be made under Schedule 7 of the Act could not reasonably give rise to an obligation on the Treasurys part to consult the targeted entity, for example because there was a real problem about the implicit or explicit disclosure of secret intelligence or because prior consultation might frustrate the object of the direction by enabling the targeted entity to evade its operation, notably in a case involving money laundering or terrorism.
In this case, the Treasury has raised only two practical difficulties about consulting the Bank in advance of the direction.
The first was the difficulty raised by Mr Robertson that it would not have been appropriate to have notified Bank Mellat of the Treasury's intention to make the direction contained in the 2009 Order before 12 October 2009, because this would have provided it with the opportunity to rearrange business relationships or transactions with the UK financial sector to ensure (for example) that they were indirect and so not caught by the prohibitions.
The judge rejected this, pointing out that the Bank could just as easily do that after the direction as before.
That conclusion, which seems inescapable, has not been challenged on appeal.
The second practical difficulty was raised by way of submission in the Court of Appeal and dealt with in the judgment of Maurice Kay LJ, who thought that it had some force.
This was the supposed practical difficulty of permitting representations in a situation where there is closed material.
I have to say that for my part I am not impressed by this difficulty.
In justifying the direction in the course of these proceedings, the Treasury disclosed the gist of the closed material including the provision of banking facilities to Novin and Doostan and their alleged provision to Mr Taghizadeh and Mr Esbati.
I cannot see why they should have had any greater difficulty in disclosing before the making of the direction the material that they were quite properly required to disclose afterwards.
In my opinion, unless the Act expressly or impliedly excluded any relevant 32. duty of consultation, it is obvious that fairness in this case required that Bank Mellat should have had an opportunity to make representations before the direction was made.
In the first place, although in point of form directed to other financial institutions in the United Kingdom, this was in fact a targeted measure directed at two specific companies, Bank Mellat and IRISL.
It deprived Bank Mellat of the effective use of the goodwill of their English business and of the free disposal of substantial deposits in London.
It had, and was intended to have, a serious effect on their business, which might well be irreversible at any rate for a considerable period of time.
Secondly, it came into effect almost immediately.
The direction was made on a Friday and came into force at 10.30 a.m. on the following Monday.
It had effect for up to 28 days before being approved by Parliament.
Third, for the reasons which I have given, there were no practical difficulties in the way of an effective consultation exercise.
While the courts will not usually require decision makers to consult substantial categories of people liable to be affected by a proposed measure, the number of people to be consulted in this case was just one, Bank Mellat, and possibly also IRISL depending on the circumstances of their case.
I cannot agree with the view of Maurice Kay LJ that it might have been difficult to deny the same advance consultation to the generality of financial institutions in the United Kingdom, who were required to cease dealings with Bank Mellat.
They were the addressees of the direction, but not its targets.
Their interests were not engaged in the same way or to the same extent as Bank Mellats.
Fourth, the direction was not based on general policy considerations, but on specific factual allegations of a kind plainly capable of being refuted, being for the most part within the special knowledge of the Bank.
For these reasons, I think that consultation was required as a matter of fairness.
But the principle which required it is more than a principle of fairness.
It is also a principle of good administration.
The Treasury made some significant factual mistakes in the course of deciding whether to make the direction, and subsequently in justifying it to Parliament.
They believed that Bank Mellat was controlled by the Iranian state, which it was not.
They were aware of a number of cases in which Bank Mellat had provided banking services to entities involved in the Iranian weapons programmes, but did not know the circumstances, which became apparent only when the Bank began these proceedings and served their evidence.
The quality of the decision making processes at every stage would have been higher if the Treasury had had the opportunity before making the direction to consider the facts which Mitting J ultimately found.
In these circumstances, the only ground on which it could be said that the 33.
Treasury was not obliged to consult Bank Mellat in advance, was that such a duty, although it would otherwise have arisen at common law in the particular circumstances of this case, was excluded by the Act in cases such as the present one.
It was certainly not expressly excluded.
But the submission is that it was impliedly excluded on two overlapping grounds: (i) that the statutory right of recourse to the courts after the making of the direction, which is provided by section 63 of the Act, is enough to satisfy any duty of fairness, or at least must have been intended by Parliament to be enough; and (ii) that consultation is not in law required before the making of subordinate legislation, especially when it is subject to the affirmative resolution procedure.
Mitting J and the majority of the Court of Appeal rejected the Banks procedural case on both grounds. 34. the courts. 35.
The duty of fairness governing the exercise of a statutory power is a limitation on the discretion of the decision maker which is implied into the statute.
But the fact that the statute makes some provision for the procedure to be followed before or after the exercise of a statutory power does not of itself impliedly exclude either the duty of fairness in general or the duty of prior consultation in particular, where they would otherwise arise.
As Byles J observed in Cooper v Board of Works for the Wandsworth District (1863) 14 CB(NS) 190, 194, the justice of the common law will supply the omission of the legislature.
In Lloyd v McMahon 1987] 1 AC 625, 702 3, Lord Bridge of Harwich regarded it as I shall deal first with the implications of the statutory right of recourse to well established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness.
Like Lord Bingham in R (West) v Parole Board [2005] 1 WLR 350 at para 29, I find it hard to envisage cases in which the maximum expressio unius exclusio alterius could suffice to exclude so basic a right as that of fairness. 36.
It does not of course follow that a duty of prior consultation will arise in every case.
The basic principle was stated by Lord Reid forty years ago in Wiseman v Borneman [1971] AC 297, 308, in terms which are consistent with the ordinary rules for the construction of statutes and remain good law: Natural justice requires that the procedure before any tribunal which is acting judicially shall be fair in all the circumstances, and I would be sorry to see this fundamental general principle degenerate into a series of hard and fast rules.
For a long time the courts have, without objection from Parliament, supplemented procedure laid down in legislation where they have found that to be necessary for this purpose.
But before this unusual kind of power is exercised it must be clear that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the apparent purpose of the legislation. Cf.
Lord Morris of Borth y Gest at 309B C. 37.
Leaving aside, for a moment, the fact that the direction was required to be made by statutory instrument subject to Parliamentary approval, it is not in my view implicit in section 63 that the right of recourse to the courts is the sole guarantee of fairness.
Nor is it implicit that what the common law would otherwise require to achieve fairness is excluded.
I say this for three reasons.
The first is that section 63 largely reproduces the rights which a person affected by the direction would have anyway.
It confers on him the right to apply to the High Court for an adjudication based on the principles of judicial review, and on the court such powers as could be made on judicial review.
The only difference which section 63 makes is that permission is not required for such an application.
The express provision of a right of recourse to the courts is essentially a peg on which to hang the various procedural provisions in sections 66 72.
It would I think be surprising if the mere fact that the right of persons affected to apply for judicial review had been superseded by a statutory application with substantially the same ambit, were to make all the difference to the content of the Treasurys common law duty of fairness.
Whatever else Parliament may have intended by enacting section 63, it cannot in my view have intended to reduce the procedural rights of those affected by the Treasurys orders.
Second, the statutory right of recourse will not be sufficient to achieve fairness in every case and is certainly not enough to achieve it in cases like this one, falling under Schedule 7, paragraph 13.
This is because a direction may take effect, as it did in this case, immediately or almost immediately and, subject to Parliamentary scrutiny, will remain in effect unless and until it is set aside by the Court.
An application under section 63 is likely to require evidence on both sides.
With the best will in the world it is unlikely to be determined in less than three months and may take considerably longer even without allowing for appeals.
In this case, some seven months elapsed before Mitting J gave judgment.
This may not matter much in the case of a direction to exercise heightened customer due diligence or to monitor or report.
But it matters a great deal when the direction is in the draconian terms permitted by paragraph 13.
A direction to financial institutions to cease business with a designated person is apt to achieve serious and immediate damage while it remains in effect, extending well beyond transactions related to nuclear proliferation.
Even if it is set aside, the impact on the designated persons goodwill may be substantial and in some cases irreversible.
In some cases, where the decision impugned infringed the applicants Convention rights, damages will be recoverable after the event.
Claims for damages are, however, far from straightforward, and loss can be difficult to prove to the standard which the courts have traditionally required.
Third, the recognition of a duty of prior consultation would not frustrate the purpose of the statutory scheme, nor would it cut across its practical operation.
Schedule 7 directions made in circumstances like these are not the kind of directions whose effectiveness depends on the ability to strike without warning.
As the judge pointed out, the kind of avoiding action which a designated person might be minded to take could equally be taken after the direction had been made. 38. to be made in subordinate legislation, subject to Parliamentary approval. 39.
The Treasury submit that the legislative form of a Schedule 7 direction takes it out of the area in which the courts can imply a duty of fairness or prior consultation.
This is self evident in the case of primary legislation.
There is not yet a statute into which such a duty of consultation can be implied.
Parliament is not in any event required to be fair.
Even if a legitimate expectation has been created, the courts cannot, consistently with the constitutional function of Parliament, control the right of a minister, in his capacity as a member of Parliament, to introduce a bill in either house: R (on the application of Wheeler) v Office of the Prime Minister [2008] EWHC 1409 (Admin.) at para 49; R (on the application of UNISON) v Secretary of State for Health [2010] EWHC 2655 (Admin).
I turn, therefore, to the implications of the fact that the direction is required 40.
The position in relation to secondary legislation is necessarily different, because a statutory instrument is made under powers conferred by statute.
These powers are accordingly subject to whatever express or implied limitations or conditions can be derived from the parent Act as a matter of construction.
In R v Electricity Commissioners Ex p London Electricity Joint Committee Company (1920) Limited [1924] 1 KB 171, 208, Lord Atkin observed at a very early stage in the development of public law that he knew of no authority which compels me to hold that a proceeding cannot be a judicial proceeding subject to prohibition or certiorari because it is subject to confirmation or approval, even where the approval has to be that of the Houses of Parliament.
It has sometimes been suggested that this applies only where the ground of objection to a statutory instrument is that it is wholly outside the power conferred by the Act.
This was the view expressed by Lord Jauncey and affirmed by the Inner House in City of Edinburgh District Council v Secretary of State for Scotland 1985 SC 261.
He considered that where Parliament had reserved the right to consider the merits (as opposed to the vires) of a statutory instrument, it was not open to the courts to review their rationality or their procedural fairness. 41.
I do not think that this distinction is sustainable.
In F. Hoffman La Roche and Co v Secretary of State for Trade and Industry [1975] AC 295, the applicants objected to a statutory instrument under the Monopolies and Mergers Act 1965 regulating the prices of their medicines, which had been approved by Parliament under the affirmative resolution procedure.
The relevant power was to make orders giving effect to a report of the Monopolies Commission, which the applicants alleged was vitiated by a failure to observe the rules of natural justice.
The issue was about the availability of an injunction enforcing the order in circumstances where the Secretary of State was not prepared to give an undertaking in damages.
Moreover, it is fair to say that the applicants case was that the Commissions report was invalid for procedural reasons, and therefore that there was no report on which the Secretary of State could found any power to make the order.
But Lord Diplock considered the status of the order generally, at 365: In constitutional law a clear distinction can be drawn between an Act of Parliament and subordinate legislation, even though the latter is contained in an order made by statutory instrument approved by resolutions of both Houses of Parliament.
Despite this indication that the majority of members of both Houses of the contemporary Parliament regard the order as being for the common weal, I entertain no doubt that the courts have jurisdiction to declare it to be invalid if they are satisfied that in making it the Minister who did so acted outwith the legislative powers conferred upon him by the previous Act of Parliament under which the order is ultra vires by reason of its contents (patent defects) or by reason of defects in the procedure followed prior to its being made (latent defects). 42.
In R (Asif Javed) v Secretary of State for the Home Department [2002] QB 129, the Court of Appeal held that it was entitled to review the rationality of a ministers exercise of a statutory power to designate Pakistan by order as a country in which there was in general no serious risk of persecution, notwithstanding that the order had been laid before Parliament in draft under the affirmative resolution procedure and the position in Pakistan to some extent discussed.
Lord Phillips of Worth Matravers MR, echoing the language of Atkin LJ, said at para 51 that there was no principle of law that circumscribes the extent to which the court can review an order that has been approved by both Houses of Parliament under the affirmative resolution procedure.
The order was declared to be unlawful. 43.
These statements seem to me to be correct in principle.
If a statutory power to make delegated legislation is subject to limitations, the question whether those limitations have been observed goes to the lawfulness of the exercise of the power.
It is therefore reviewable by the courts.
In principle, this applies as much to an implied limitation as to an express one, and as much to a limitation on the manner in which the power may be exercised as it does to a limitation on the matters which are within the scope of the power.
The reason why this does not intrude upon the constitutional primacy of Parliament is not simply that delegated legislation, however approved, does not have the status of primary legislation.
It is that a statutory instrument is the instrument of the minister (or other decision maker) who is empowered by the enabling Act to make it.
The fact that it requires the approval of Parliament does not alter that.
The focus of the court is therefore on his decision to make it, and not on Parliaments decision to approve it.
If that is true (as I think it is) as a matter of general principle, it is particularly true of the statutory judicial review for which section 63 of the Counter Terrorism Act provides.
Under section 63(2) the application is to set aside a decision of the Treasury.
The relevant decision of the Treasury is the decision under Schedule 7, paragraph 1 to give a direction.
If the court sets aside that decision, it is then required by section 63(4) to quash the resulting order. 44.
Where the courts have declined to review the procedural fairness of statutory orders on the ground that they have been subject to Parliamentary scrutiny, they have not generally done so on the ground that Parliamentary scrutiny excludes the duty of fairness in general or the duty of prior consultation in particular.
These decisions have generally been justified by reference to three closely related concepts which for my part I would not wish to challenge or undermine in any way.
First, when a statutory instrument has been reviewed by Parliament, respect for Parliaments constitutional function calls for considerable caution before the courts will hold it to be unlawful on some ground (such as irrationality) which is within the ambit of Parliaments review.
This applies with special force to legislative instruments founded on considerations of general policy.
Second, there is a very significant difference between statutory instruments which alter or supplement the operation of the Act generally, and those which are targeted at particular persons.
The courts originally developed the implied duty to consult those affected by the exercise of statutory powers and receive their representations as a tool for limiting the arbitrary exercise of statutory powers for oppressive objects, normally involving the invasion of the property or personal rights of identifiable persons.
Cooper v Board of Works for the Wandsworth District (1863) 14 CB (NS) 180 was a case of this kind, and when Willes J (at 190) described the duty to give the subject an opportunity to be heard as a rule of universal application, he was clearly thinking of this kind of case.
Otherwise the proposition would be far too wide.
While the principle is not necessarily confined to such cases, they remain the core of it.
By comparison, the courts have been reluctant to impose a duty of fairness or consultation on general legislative orders which impact on the population at large or substantial parts of it, in the absence of a legitimate expectation, generally based on a promise or established practice.
Third, a court may conclude in the case of some statutory powers that Parliamentary review was enough to satisfy the requirement of fairness, or that in the circumstances Parliament must have intended that it should be.
It is particularly likely to take this view where the measure impugned is a general legislative measure.
The reason is that when we speak of a duty of fairness, we are speaking not of the substantive fairness of the measure itself but of the fairness of the procedure by which it was adopted.
Parliamentary scrutiny of general legislative measures made by ministers under statutory powers will often be enough to satisfy any requirement of procedural fairness.
The same does not necessarily apply to targeted measures against individuals. 45.
These considerations lie behind the judgments in the Court of Appeal in R on the application of BAPIO Action Limited v Secretary of State for the Home Department [2007] EWCA Civ. 1139, which both Mitting J and Maurice Kay LJ in the Court of Appeal placed at the forefront of their reasoning.
BAPIO was a judicial review of the decision of the Home Secretary to amend the Immigration Rules without prior consultation so as to abolish permit free training for doctors without a right of abode in the United Kingdom.
There were transitional provisions for those who had already begun their training under the old rules, which protected almost all those who might have claimed to have a legitimate expectation based on the old rules.
Sedley LJ, who delivered the leading judgment, began by referring to a dictum of Lord Scarman in Nottinghamshire County Council v Secretary of State for the Environment [1986] AC 240.
This was a judicial review of the Secretary of States assessment of the proper level of expenditure by a local authority.
It was a classic issue of general policy, involving decisions about the use of resources and the level of taxation, potentially affecting every householder in Britain, and quite obviously exceptionally difficult to challenge on rationality grounds.
Lord Scarman said, at 250, in a passage that is not always quoted in full: To sum it up, the levels of public expenditure and the incidence and distribution of taxation are matters for Parliament, and, within Parliament, especially for the House of Commons.
If a statute, as in this case, requires the House of Commons to approve a ministers decision before he can lawfully enforce it, and if the action proposed complies with the terms of the statute. , it is not for the judges to say that the action has such unreasonable consequences that the guidance upon which the action is based and of which the House of Commons had notice was perverse and must be set aside.
For that is a question of policy for the minister and the Commons, unless there has been bad faith or misconduct by the minister.
Where Parliament has legislated that the action to be taken by the Secretary of State must, before it is taken, be approved by the House of Commons, it is no part of the judges' role to declare that the action proposed is unfair, unless it constitutes an abuse of power in the sense which I have explained.
Sedley LJ rightly pointed out in BAPIO that this reasoning was predicated on the inapt nature of the subject matter public finance for judicial scrutiny, not upon a quasi immunity from judicial review of delegated legislation or rules which have been laid before Parliament.
He pointed out that there was no such immunity, and that the Immigration Rules would be reviewable for want of power to make them or for irrationality.
Turning to the question whether they were reviewable for procedural unfairness he said this: The real obstacle which I think stands in the appellants' way is the difficulty of propounding a principle which reconciles fairness to an adversely affected class with the principles of public administration that are also part of the common law.
These are not based on administrative convenience or potential embarrassment.
They arise from the separation of powers and the entitlement of executive government to formulate and reformulate policy, albeit subject to such constraints as the law places upon the process and the product.
One set of such constraints in modern public law are the doctrines of legitimate expectation, both procedural and substantive.
I agree with this in the cases to which Sedley LJ was referring, namely those in which delegated legislation was an expression of legislative policy.
I think that it represents a more nuanced and accurate statement of the law than the more hard edged formulations of Maurice Kay LJ and Rimer LJ in the same case. 46.
The present case, however, is entirely different.
In point of form, a statutory instrument embodying a Schedule 7 direction is legislation.
But, as Megarry J observed in Bates v Lord Hailsham of St. Marylebone [1972] 1 WLR 1373, the fact that an order takes the form of a statutory instrument is not decisive: what is important is not its form but its nature, which is plainly legislative (page 1378).
The Treasury direction designating Bank Mellat under Schedule 7, paragraph 13, was not legislative in nature.
There is a difference between the sovereigns legislation and his commands.
The one speaks generally and impersonally, the other specifically and to nominate persons.
As David Hume pointed out in his Treatise of Human Nature (Book III, Part ii, sec 2 6), all civil laws are general, and regard alone some essential circumstances of the case, without taking into consideration the characters, situations and connexions of the person concerned.
The Treasury direction in this case was a command.
The relevant legislation and the whole legislative policy on which it was based, were contained in the Act itself.
The direction, although made by statutory instrument, involved the application of a discretionary legislative power to Bank Mellat and IRISL and nothing else.
It was as good an example as one could find of a measure targeted against identifiable individuals.
Moreover, as I have pointed out in dealing with the Banks substantive complaints, it singled out Bank Mellat from other Iranian banks on account of the Banks conduct or, in Humes words, its characteristics, situations and connexions.
It directly affected the Banks property and business assets.
If the direction had not been required to be made by statutory instrument, there would have been every reason in the absence of any practical difficulties to say that the Treasury had a duty to give prior notice to the Bank and to hear what they had to say.
In a case like this, is the position any different because a statutory instrument was involved? I think not.
That was simply the form which the specific application of this particular legislation was required to take. 47.
With a measure such as this one, targeted against designated persons, it is not possible to say that procedural fairness is sufficiently guaranteed by Parliamentary scrutiny or to suppose that Parliament in enacting the Counter Terrorism Act ever thought it was.
The justification for the direction depends on the particular character and conduct of the designated person, about which Parliament cannot have the same plenitude of information as it is assumed to have about matters of general legislative policy.
Many of the essential facts about the particular target will be peculiarly within the designated persons knowledge, and even those known to the Treasury will not necessarily be publicly disclosed. 48.
In some cases, the procedure might be regarded as fair even in the case of a targeted measure, and even if the target did not have an opportunity to be heard before the order was made, if he was in a position to make effective representations in the course of the passage of the affirmative resolutions through Parliament.
But this was hardly a realistic alternative to prior consultation in the present case.
In the first place, the Bank was not in a position to defend itself against the Treasurys allegation that they had had dealings with entities involved in the Iranian weapons programmes until the Treasury identified the entities that they were referring to.
They did not identify them in the course of justifying the order in Parliament.
They were first identified in correspondence with the Banks solicitors on 3 December 2009, after the present proceedings had been begun and a month after the Parliamentary processes were complete.
Second, unlike other statutory instruments made under the Counter Terrorism Act, an order giving effect to a Schedule 7 direction is not laid before Parliament in draft before taking effect.
It may and in this case did take effect upon being made and was capable of continuing in effect for up to 28 days in advance of an affirmative resolution.
This is quite long enough to achieve substantial damage to the interests of the designated person.
Third, Schedule 7, paragraph 14(5), expressly excludes the application of the hybrid instrument procedure to such an order.
The hybrid instrument procedure is a procedure under the standing orders of the House of Lords which applies to certain instruments directly affecting private or local interests in a manner different from other persons or interests in the same category.
Its effect is to allow the House to receive petitions from parties affected.
The result is to exclude any right which a designated person might otherwise have had to make representations by petition as part of the formal Parliamentary process.
In my view, these factors underline the value and the importance in the interests of fairness of the Treasury giving the Bank an opportunity to be heard before the order was made. 49.
I conclude that the Treasurys direction designating Bank Mellat was unlawful for want of prior notice to them or any procedure enabling them to be heard in advance of the order being made.
This makes it unnecessary to consider the more difficult question whether a duty of prior consultation arose by virtue of Article 6 of the European Convention on Human Rights or Article 1 of the First Protocol.
Conclusion I would allow the appeal, set aside the decision of the Treasury to make the 50. direction and quash the order giving effect to it.
LORD REED (dissenting) Introduction 51.
These proceedings are brought by Bank Mellat under section 63(2) of the Counter Terrorism Act 2008 (the 2008 Act).
In terms of section 63(1)(c), the section applies to any decision of the Treasury in connection with the exercise of any of their functions under Schedule 7 to the 2008 Act.
Section 63(3) provides that in determining whether the decision should be set aside the court is to apply the principles applicable on an application for judicial review.
In terms of section 63(5), if the court sets aside the decision of the Treasury to make an order under Schedule 7, it must quash the order. 52.
Bank Mellat seeks to have a decision of the Treasury to make an order under Schedule 7 set aside, and the order quashed.
Bank Mellat relies on a number of common law grounds of judicial review, including procedural unfairness and unreasonableness, and maintains that the order is also ultra vires since it fails to comply with paragraph 9(6) of Schedule 7, which stipulates that the requirements imposed by a direction under that schedule must be proportionate.
Bank Mellat further contends that the making of the order was in any event unlawful by virtue of section 6 of the Human Rights Act 1998.
The latter contention is based on the argument that there has been a breach of the procedural standards imposed by article 6 of the Convention and article 1 of Protocol No 1 (A1P1), and in addition that the order constitutes a disproportionate interference with Bank Mellats enjoyment of its possessions, contrary to A1P1.
Procedural fairness 53.
In relation to the issues of procedural fairness arising under the common law, there is much in Lord Sumptions judgment with which I respectfully agree.
In particular, I agree that the fact that the decision challenged in these proceedings concerned the giving of a direction in the form of a statutory instrument, which had to be approved by Parliament within 28 days in order to remain in force, does not in itself necessarily exclude the application of common law standards of procedural fairness.
I also agree that there is no fundamental distinction in principle between the jurisdiction of the court to review the legality of a statutory instrument on procedural and other grounds: see in particular F Hoffmann La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, 365 per Lord Diplock. 54.
I also agree with Lord Sumption that the reason why a statutory instrument lies within the scope of the courts supervisory jurisdiction, whereas an Act of Parliament does not, is that the making of a statutory instrument is an act of the executive, exercising limited powers.
This point was explained by Sir John Donaldson MR in R v Her Majestys Treasury, Ex p Smedley [1985] 1 QB 657, 666 667: Furthermore, whilst Parliament is entirely independent of the courts in its freedom to enact whatever legislation it sees fit, legislation by Order in Council, statutory instrument or other subordinate means is in a quite different category, not being Parliamentary legislation.
This subordinate legislation is subject to some degree of judicial control in the sense that it is within the province and authority of the courts to hold that particular examples are not authorised by statute, or, as the case may be by the common law, and so are without legal force or effect.
A similar explanation was given by Lord Phillips of Worth Matravers MR in R (Asif Javed) v Secretary of State for the Home Department [2001] EWCA Civ 789; [2002] QB 129, para 33.
Since the executive is acting under powers conferred by Parliament when it makes a statutory instrument, it can only act within the scope of those powers as determined by the courts.
The subject matter of the courts supervision is the lawfulness of the decision taken by the executive: there is no question of judicial supervision of the exercise by Parliament of its power to approve the instrument or to withhold its approval.
That distinction is reflected in section 63 of the 2008 Act, which, as I have mentioned, permits an application to be made to set aside the decision of the Treasury.
If the court sets aside that decision, it then quashes the resulting order, but it does not review anything done by Parliament. 55.
Where I part company with Lord Sumption and the majority of the court is in relation to the application of the common law principles of procedural fairness in the context of Schedule 7 to the 2008 Act.
In relation to that matter, I agree with the judgment of Lord Hope, and wish to make only a few additional observations in view of the implications of the contrary approach.
I also agree with Lord Hopes judgment in relation to the issues of procedural fairness arising under the Human Rights Act. 56.
Lord Hope has described the provisions of Part 4 of Schedule 7 to the 2008 Act.
Parliament has laid down in those provisions a detailed scheme for the making of orders such as the order with which this appeal is concerned.
That scheme contains no provision entitling the person designated in the order to be given a hearing before the order is made by the Treasury or approved by Parliament.
The absence of such provision does not in itself automatically entail that Parliament intended that there should be no such entitlement, but in the context of such detailed procedural provisions it is a pointer towards such an intention: if Parliament had intended that there should be consultation prior to the making of an order, one would expect that also to have been specified in the provisions.
The inference that Parliament did not intend that there should be such an entitlement derives support from a number of other considerations. 57.
First, it is readily understandable that no such entitlement should be provided, given the subject matter and the context in which the decision making function is exercised.
Part 1 of Schedule 7 lays down in paragraph 1 the conditions which must be met in relation to a country before the Treasury may give a direction under that schedule.
Put shortly, they are that the Financial Action Task Force (FATF: an inter governmental body founded by the G7 countries which sets standards for controls to prevent money laundering and the financing of terrorism) has advised that measures should be taken in relation to the country because of the risk of terrorist financing or money laundering activities being carried on there or by its government or persons resident or incorporated there (paragraph 1(2)), or the Treasury reasonably believe that there is such a risk (paragraph 1(3)), or the Treasury reasonably believe that the development or production of nuclear, radiological, biological or chemical weapons in the country poses a significant risk to the national interests of the United Kingdom (paragraph 1(4)).
In the present case, it is paragraph 1(4) which is relevant.
Given the nature of those conditions, prior consultation with the persons who may be affected by a direction, including for example the persons believed to be involved in terrorism, is liable to be inappropriate or impossible: it may, for example, be excluded by a need for action to be taken urgently in the national interest.
That factor is reflected in the provision for the order to have effect in advance of Parliamentary approval: paragraph 14(2)(b). 58.
The scope for meaningful representations by the designated person is also liable to be limited by the impossibility of disclosing, other than in broad outline, the basis upon which the conditions laid down in paragraphs 1(3) or (4) are considered to be satisfied.
That factor is reflected in the provisions of sections 66 to 68 in respect of proceedings under section 63, which allow for closed material procedure.
Parliament has made no provision for any analogous procedure before the order has been made or approved.
In some circumstances, prior consultation could in addition reduce the 59. practical effectiveness of the requirements imposed under paragraph 13 of Schedule 7, by affording the designated person an opportunity to take avoidance action.
This risk is discounted by Lord Sumption, as it was by Mitting J, but I am less confident that it can be entirely disregarded.
Part of Bank Mellats complaint in the present case, for example, is that the effect of the order was to freeze accounts held by it with its UK subsidiary, in which assets of 183m were deposited.
Court orders which have the effect of freezing assets are generally granted on an ex parte basis, precisely because they are liable to be ineffective if prior notice is given. 60.
Lord Sumptions response to these points is that whether there is a duty of consultation depends on the particular circumstances in which a direction is made.
I can see, in principle, that since the requirements of fairness vary from case to case, the need for a particular procedural step can in principle be assessed on a case by case basis.
The problem with applying that approach to a statutory scheme however is that it can make it difficult in practice for decision makers (and individuals affected by decisions) to predict what is required by way of procedure in particular cases.
In a context in which vital national interests are engaged, such as that in which the powers under Schedule 7 have to be exercised, it is of great importance that the Treasury should be in no doubt as to what is required.
Lord Sumption addresses that point by distinguishing between targeted and other measures.
That distinction draws attention to a factor of undoubted importance, but it is not the only factor relevant to an assessment of what fairness requires: as Lord Sumption acknowledges, other matters, such as the risk of disclosing intelligence material or jeopardising the effectiveness of the measure, are also relevant.
I do not consider that Parliament is likely to have intended that the Treasury should have to undertake such an uncertain assessment of what fairness might require in each individual case before they could act, particularly when it would do so at the risk of judicial review (prior to the making of the order) if their conclusion, for example as to the extent of necessary disclosure, were to be challenged.
In practice, that approach would leave the Treasury in an impossible position.
As Taylor LJ observed in R v Birmingham City Council, Ex p Ferrero Ltd [1993] 1 All ER 530, 542, when rejecting a similar argument in relation to consumer protection legislation, if the supposed duty to consult were to depend upon the facts and urgency of each case, enforcement authorities would be faced with a serious dilemma. 61.
The direction in paragraph 14(5) that the order is not to proceed in Parliament as a hybrid instrument seems to me, in agreement with Lord Hope, to be a further indication of Parliaments intention, since, as Lord Hope has explained, the practical effect of that direction is to exclude the potential application of procedures under which the designated person can participate in the Parliamentary proceedings.
I appreciate that the Parliamentary procedure is distinct from the antecedent procedure under which the order is made.
It nevertheless appears to me to have some bearing on the point in issue, in that, if it was intended that the designated person should be entitled to participate in the procedure leading to the making of the order, it would make little sense to enact a provision specifically preventing him from participating in the procedure leading to its approval by Parliament. 62.
Finally, the provisions of sections 63 and 65 to 68 create a statutory procedure under which any person affected by a decision taken by the Treasury under Schedule 7 is entitled as of right to apply to the courts to have that decision set aside.
Those provisions give such persons greater rights than those enjoyed by the ordinary applicant for judicial review (except in Scotland), insofar as the ordinary applicant has to apply for permission to make such an application.
The provisions indicate that Parliament intended to ensure judicial protection of the interests of such persons after the decision had been made.
In these circumstances, it appears to me that Parliament has by implication 63. excluded any duty to consult the designated person or to allow an opportunity for representations to be submitted before the order is made.
There is therefore no room for the application of common law requirements of procedural fairness.
No doubt, as Lord Sumption points out, a procedure involving consultation could contribute to good administration by making additional information available to the Treasury.
It is however apparent that Parliament has given priority to other competing considerations.
It is not the function of the courts to re write the scheme intended by Parliament.
The substantive grounds of challenge I also have the misfortune to differ from the majority of the court in relation 64. to the substantive grounds on which the decision is challenged.
I set out the reasons for my dissent more fully than I might otherwise have done in view of the importance of the issues, and the fact that my conclusion on this aspect of the case was also reached by all the judges of the lower courts.
The relevant legal principles I am largely in agreement with Lord Sumption as to the relevant legal 65. principles: other than in relation to the ratio of A v Secretary of State for the Home Department [2004] UKHL 56; [2005] 2 AC 68, and the issue discussed in paras 123 124, we differ only in relation to the application of the law to the facts.
I wish first however to consider two issues which appear to me to be important and which affect the structure of the analysis to be carried out. 66.
The first issue, which caused difficulty in the courts below and remains in dispute before this court, is what the principle of proportionality involves: in particular, whether it is aptly expressed in the well known dictum of Lord Clyde in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Land and Housing [1999] 1 AC 69, 80.
It is evident from the difficulties experienced by the lower courts in the present case, and from the differing approaches which they adopted, that some clarification is desirable. 67.
The second issue concerns the meaning of paragraph 9(6) of Schedule 7 to the 2008 Act.
This issue also caused difficulty in the courts below and was in dispute before this court.
The provision stipulates that the requirements imposed by a direction under Schedule 7 must be proportionate having regard to the advice received from the FATF under paragraph 1(2) of Schedule 7 or, as the case may be, the risk mentioned in paragraph 1(3) or (4) to the national interests of the United Kingdom.
The question is whether the requirement imposed by paragraph 9(6) is the same as the principle of proportionality as understood in the context of Convention rights.
The latter principle is of course relevant to the question whether the decision of the Treasury was incompatible with A1P1 and therefore unlawful by virtue of section 6(1) of the Human Rights Act.
The concept of proportionality 68.
The idea that proportionality is an aspect of justice can be traced back via Aquinas to the Nicomachean Ethics and beyond.
The development of the concept in modern times as a standard in public law derives from the Enlightenment, when the relationship between citizens and their rulers came to be considered in a new way, reflected in the concepts of the social contract and of natural rights.
As Blackstone wrote in his Commentaries on the Laws of England, 9th ed (1783), Vol 1, p 125, the concept of civil liberty comprises natural liberty so far restrained by human laws (and not farther) as is necessary and expedient for the general advantage of the public.
The idea that the state should limit natural rights only to the minimum extent necessary developed in Germany into a public law standard known as Verhltnismigkeit, or proportionality.
From its origins in German administrative law, where it forms the basis of a rigorously structured analysis of the validity of legislative and administrative acts, the concept of proportionality came to be adopted in the case law of the European Court of Justice and the European Court of Human Rights.
From the latter, it migrated to Canada, where it has received a particularly careful and influential analysis, and from Canada it spread to a number of other common law jurisdictions. 69.
Proportionality has become one of the general principles of EU law, and appears in article 5(4) of the Treaty on European Union (TEU).
The test is expressed in more compressed and general terms than in German or Canadian law, and the relevant jurisprudence is not always clear, at least to a reader from a common law tradition.
In R v Ministry of Agriculture, Fisheries and Food, ex p Fedesa and others (Case C 331/88) [1990] ECR I 4023, the European Court of Justice stated (para 13): The Court has consistently held that the principle of proportionality is one of the general principles of Community law.
By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.
The intensity with which the test is applied that is to say, the degree of weight or respect given to the assessment of the primary decision maker depends upon the context. 70.
As I have mentioned, proportionality is also a concept applied by the European Court of Human Rights.
As the court has often stated, inherent in the whole of the Convention is a search for a fair balance between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights (see eg Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 69).
The court has described its approach to striking such a balance in different ways in different contexts, and in practice often approaches the matter in a relatively broad brush way.
In cases concerned with A1P1, for example, the court has often asked whether the person concerned had to bear an individual and excessive burden (see eg James v United Kingdom (1986) 8 EHRR 123, para 50).
The intensity of review varies considerably according to the right in issue and the context in which the question arises.
Unsurprisingly, given that it is an international court, its approach to proportionality does not correspond precisely to the various approaches adopted in contracting states. 71.
An assessment of proportionality inevitably involves a value judgment at the stage at which a balance has to be struck between the importance of the objective pursued and the value of the right intruded upon.
The principle does not however entitle the courts simply to substitute their own assessment for that of the decision maker.
As I have noted, the intensity of review under EU law and the Convention varies according to the nature of the right at stake and the context in which the interference occurs.
Those are not however the only relevant factors.
One important factor in relation to the Convention is that the Strasbourg court recognises that it may be less well placed than a national court to decide whether an appropriate balance has been struck in the particular national context.
For that reason, in the Convention case law the principle of proportionality is indissolubly linked to the concept of the margin of appreciation.
That concept does not apply in the same way at the national level, where the degree of restraint practised by courts in applying the principle of proportionality, and the extent to which they will respect the judgment of the primary decision maker, will depend upon the context, and will in part reflect national traditions and institutional culture.
For these reasons, the approach adopted to proportionality at the national level cannot simply mirror that of the Strasbourg court. 72.
The approach to proportionality adopted in our domestic case law under the Human Rights Act has not generally mirrored that of the Strasbourg court.
In accordance with the analytical approach to legal reasoning characteristic of the common law, a more clearly structured approach has generally been adopted, derived from case law under Commonwealth constitutions and Bills of Rights, including in particular the Canadian Charter of Fundamental Rights and Freedoms of 1982.
The three limb test set out by Lord Clyde in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69, 80 has been influential: whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective.
De Freitas was a Privy Council case concerned with fundamental rights under the constitution of Antigua and Barbuda, and the dictum drew on South African, Canadian and Zimbabwean authority.
The three criteria have however an affinity to those formulated by the Strasbourg court in cases concerned with the requirement under articles 8 to 11 that an interference with the protected right should be necessary in a democratic society (eg Jersild v Denmark (1994) Publications of the ECtHR Series A No 298, para 31), provided the third limb of the test is understood as permitting the primary decision maker an area within which its judgment will be respected. 73.
The De Freitas formulation has been applied by the House of Lords and the Supreme Court as a test of proportionality in a number of cases under the Human Rights Act.
It was however observed in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167, para 19 that the formulation was derived from the judgment of Dickson CJ in R v Oakes [1986] 1 SCR 103, and that a further element mentioned in that judgment was the need to balance the interests of society with those of individuals and groups.
That, it was said, was an aspect which should never be overlooked or discounted.
That this aspect constituted a fourth criterion was noted by Lord Wilson, with whom Lord Phillips and Lord Clarke agreed, in R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621, para 45. 74.
The judgment of Dickson CJ in Oakes provides the clearest and most influential judicial analysis of proportionality within the common law tradition of legal reasoning.
Its attraction as a heuristic tool is that, by breaking down an assessment of proportionality into distinct elements, it can clarify different aspects of such an assessment, and make value judgments more explicit.
The approach adopted in Oakes can be summarised by saying that it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measures effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
The first three of these are the criteria listed by Lord Clyde in De Freitas, and the fourth reflects the additional observation made in Huang.
I have formulated the fourth criterion in greater detail than Lord Sumption, but there is no difference of substance.
In essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure. 75.
In relation to the third of these criteria, Dickson CJ made clear in R v Edwards Books and Art Ltd [1986] 2 SCR 713, 781 782 that the limitation of the protected right must be one that it was reasonable for the legislature to impose, and that the courts were not called upon to substitute judicial opinions for legislative ones as to the place at which to draw a precise line.
This approach is unavoidable, if there is to be any real prospect of a limitation on rights being justified: as Blackmun J once observed, a judge would be unimaginative indeed if he could not come up with something a little less drastic or a little less restrictive in almost any situation, and thereby enable himself to vote to strike legislation down (Illinois Elections Bd v Socialist Workers Party (1979) 440 US 173, 188 189); especially, one might add, if he is unaware of the relevant practicalities and indifferent to considerations of cost.
To allow the legislature a margin of appreciation is also essential if a federal system such as that of Canada, or a devolved system such as that of the United Kingdom, is to work, since a strict application of a least restrictive means test would allow only one legislative response to an objective that involved limiting a protected right.
In relation to the fourth criterion, there is a meaningful distinction to be 76. drawn (as was explained by McLachlin CJ in Alberta v Hutterian Brethren of Wilson Colony [2009] 2 SCR 567, para 76) between the question whether a particular objective is in principle sufficiently important to justify limiting a particular right (step one), and the question whether, having determined that no less drastic means of achieving the objective are available, the impact of the rights infringement is disproportionate to the likely benefits of the impugned measure (step four).
Paragraph 9(6) of Schedule 7 77.
A direction under Schedule 7 may only be given to a credit or financial institution that is a United Kingdom person or is acting in the course of a business carried on by it in the United Kingdom: paragraphs 3 and 4.
The effect of the direction is to impose requirements upon such an institution or institutions.
Under paragraph 9(1), the requirements may apply in relation to transactions or business relationships with (a) a person carrying on business in the country [in respect of which the conditions mentioned in paragraph 1 are satisfied]; (b) the government of the country; (c) a person resident or incorporated in the country.
Under paragraph 9(2), the requirements may be imposed in relation to (a) a particular person within sub paragraph (1) [known as a designated person: paragraph 9(3)], (b) any description of persons within that sub paragraph, or (c) all persons within that sub paragraph.
Under paragraph 9(4), different types of requirement may be imposed upon the institution or institutions: enhanced customer due diligence in relation to transactions or business relationships with a designated person, ongoing monitoring of such relationships, systematic reporting in respect of such transactions or relationships, or limiting or ceasing such transactions or relationships.
Under paragraph 9(5), a direction may make different provision in relation to different descriptions of designated person and in relation to different descriptions of transaction or relationship.
It is in that context that paragraph 9(6) provides: The requirements imposed by a direction must be proportionate having regard to the advice mentioned in paragraph 1(2) or, as the case may be, the risk mentioned in paragraph 1(3) or (4) to the national interests of the United Kingdom.
In the present case, Mitting J proceeded on the basis that the word 78. proportionate was used in paragraph 9(6) in the sense in which it is used in Strasbourg and Luxembourg.
He formed that view on the basis that proportionality had been introduced into English law mainly via Luxembourg and Strasbourg, and the 2008 Act would have been intended to be compliant with Convention rights.
The Court of Appeal proceeded on the same basis.
Lord Sumption proceeds, as I understand his judgment, on the basis that paragraph 9(6) requires there to be a relationship between the requirements imposed by the direction and the risk which justifies the making of the direction which is rational and proportionate, the latter term importing the test of proportionality set out in De Freitas, as subsequently developed in Huang.
I agree with that interpretation, but think it worth spending a moment to explain why. 79.
Paragraph 9(6) does not appear to me to be concerned with either EU law or the Convention.
There is no necessity for Parliament to have replicated the requirements of EU law in so far as they might be relevant, bearing in mind that the power to give a direction is not exercisable in relation to an EEA state: paragraph 1(5).
To the extent that the requirements of a direction might interfere with the exercise of a freedom protected by EU law, the EU rights of the person affected would in any event be directly effective.
Nor is there any reason for Parliament to have singled out and replicated the proportionality element of the test of compatibility with Convention rights.
That element would in any event apply along with the other elements of the test, in the event that a direction interfered with Convention rights, by virtue of the Human Rights Act. 80.
As Lord Sumption has explained, paragraph 9(6) appears from its terms to be concerned with the relationship between the requirements imposed by a direction, on the one hand, and the risk to the national interests of the United Kingdom, on the other hand.
The issue is whether the requirements are proportionate to the risk.
That is consistent with the context in which the provision appears: the remainder of paragraph 9 sets out the various types of requirement which can be imposed upon the person to whom a direction is given, some more onerous than others.
The focus of paragraph 9(6) is therefore not upon the relationship between the requirements and their effect upon the designated persons Convention rights.
So, in the present case, the central question arising under paragraph 9(6) is whether the requirements imposed on the United Kingdom financial sector are proportionate having regard to the risk posed to the United Kingdoms national interests by nuclear proliferation in Iran. 81.
If there were otherwise any doubt about the problem which paragraph 9(6) was intended to address, the Parliamentary history appears to me to resolve it.
When the provisions in Schedule 7 were introduced, at Report Stage in the House of Lords, there was no provision in the form of paragraph 9(6).
Concern was expressed about the financial cost of compliance with requirements which would be incurred by United Kingdom businesses to which directions were given (Hansard (HL Debates), 11 November 2008, col 585).
The Financial Secretary to the Treasury responded to that concern at the end of the debate by stating that Ministers would seek to balance the need to take effective action against the potential impact on United Kingdom business, and gave an undertaking that the Government would table an amendment at Third Reading to include a provision giving effect to that approach (col 593).
Paragraph 9(6) was subsequently tabled in accordance with that undertaking (Hansard (HL Debates), 17 November 2008, col 933).
The potential problem that paragraph 9(6) was intended to guard against therefore had nothing to do with European law. 82.
In stipulating that the requirements must be proportionate having regard to the risk, paragraph 9(6) reflects a principle which has roots in the common law: there are a number of cases where administrative acts of an oppressive or penal character have been quashed as being disproportionate, a well known example being R v Barnsley Metropolitan Borough Council, Ex p Hook [1976] 1 WLR 1052.
In the context of legislation enacted in 2008, however, it seems to me that Parliament can be taken to have been aware of the development of a more structured approach to proportionality by United Kingdom courts, in particular following De Freitas, and to have intended that that approach should be applied.
I would therefore interpret paragraph 9(6) as stipulating that the requirements must be proportionate to the risk in the sense that they meet the second, third and fourth criteria listed in para 74 (it being implicit in the legislation itself that the first criterion is met).
Applying the proportionality test 83.
There is no doubt that the objective of the order to reduce access by entities involved in Irans nuclear weapons programme to the UK financial sector, and thereby inhibit the development of nuclear weapons by Iran and the consequent risk to the national interests of this country is sufficiently important to justify an interference with Bank Mellats enjoyment of its possessions.
The question under paragraph 9(6) of Schedule 7, and under the Human Rights Act, is whether the remaining three criteria of proportionality are satisfied.
Lord Sumption identifies the central issue as being whether the singling out of Bank Mellat has been justified, and considers that issue in the context of the second and, more briefly, the third and fourth criteria: whether the measure is rationally connected to its objective, whether a less intrusive measure would have been equally effective, and whether the measure is proportionate having regard to its effects upon Bank Mellats rights.
I shall proceed on the same basis.
Before considering these issues, it may however be helpful to recall some aspects of the relevant background.
The background 84.
On 23 December 2006 the UN Security Council adopted Resolution 1737, which imposed a range of sanctions targeted at Irans nuclear and ballistic missile programmes.
These included, in paragraph 12, a requirement that all States should freeze the funds owned or controlled by designated persons and entities and of other persons and entities subsequently designated as being involved in Irans nuclear or ballistic missile activities, and ensure that funds and financial assets were prevented from being made available by persons or entities within their territories to or for the benefit of those persons or entities.
The UK gave effect to the resolution by the Iran (Financial Sanctions) Order 2007 (SI 2007/281) and directions made under that order. 85.
On 24 March 2007 the Security Council adopted Resolution 1747, which designated Novin Energy Company (Novin), Bank Sepah and its subsidiary Bank Sepah International plc as such entities.
The resolution stated in particular that Novin operated within the Atomic Energy Organisation of Iran (AEOI) and had transferred funds on its behalf to entities associated with Irans nuclear programme.
Bank Sepah and Bank Sepah International were said to provide support for Irans Aerospace Industries Organisation (AIO) and its subordinates, two of which had been designated under Resolution 1737. 86.
On 19 April 2007 the EC Council adopted Regulation 423/2007/EC (OJ L 103/1) concerning restrictive measures against Iran.
Article 7(1) required all funds and economic resources held or controlled by persons designated under Resolution 1737 to be frozen.
Those persons were listed in Annex IV.
Article 7(2) imposed a similar requirement in respect of persons listed in Annex V to the regulation.
The regulation was amended the following day, by Regulation 441/2007/EC (OJ L 104/28) to add a number of entities, including Novin, Bank Sepah and Bank Sepah International, to those listed in Annex IV. 87.
On 25 October 2007 the assets of Bank Mellat and its subsidiaries in the United States were frozen, and US persons were prohibited from engaging in transactions with them, as the result of a designation by the US Treasury Departments Office of Foreign Assets Control.
The designation was made on the basis that Bank Mellat provided banking services in support of Irans nuclear programme. 88.
On 3 March 2008 the Security Council adopted Resolution 1803, paragraph 10 of which called upon all states to exercise vigilance over the activities of financial institutions in their territories with banks domiciled in Iran, and in particular with Bank Melli and Bank Saderat and their subsidiaries. 89.
On 23 June 2008 the EC Council adopted Decision 2008/475/EC (OJ L 163/29), which added a number of persons to those listed in Annex V of Regulation 423/2007.
They included Bank Melli and its subsidiaries, including Melli Bank plc.
The reason given was that these entities had been providing or attempting to provide financial support for companies which were involved in, or procured goods for, Irans nuclear and missile programmes, including Novin.
In particular, Bank Melli was said to have provided a range of financial services to such companies, including opening letters of credit and maintaining accounts. 90.
On 10 November 2008 the EC Council adopted Regulation 1110/2008/EC (OJ L 300/1), which imposed obligations, including requirements of vigilance and reporting requirements, upon financial institutions in the EC in relation to their activities with financial institutions domiciled in Iran, and in particular with Bank Saderat.
Similar obligations, backed by criminal penalties, were also imposed upon Bank Saderat branches and subsidiaries in the EC. 91.
The provisions of the 2008 Act concerned with financial restrictions, including Schedule 7, were introduced during the passage of the Bill following a statement issued by the FATF on 16 October 2008, which called on its members, and urged all jurisdictions, to strengthen preventive measures to protect their financial sectors from risks posed by Iran, as a result of its failure to introduce measures to address the risk of terrorist financing.
As I have explained, Regulation 1110/2008/EC was adopted at about the same time.
Rational connection 92. 291 Wilson J observed: In Lavigne v Ontario Public Service Employees Union [1991] 2 SCR 211, The Oakes inquiry into rational connection between objectives and means to attain them requires nothing more than showing that the legitimate and important goals of the legislature are logically furthered by the means government has chosen to adopt.
The words furthered by point towards a causal test: a measure is rationally connected to its objective if its implementation can reasonably be expected to contribute towards the achievement of that objective.
The manner in which the courts should determine whether that test is satisfied requires careful consideration. 93.
Legislation may be based on an evaluation of complex facts, or considerations (for example, of economic or social policy, or national security) which are contestable and may be controversial.
In such situations, the court has to allow room for the exercise of judgment by the executive and legislative branches of government, which bear democratic responsibility for these decisions.
The making of government and legislative policy cannot be turned into a judicial process.
In the Canadian case of RJR MacDonald Inc v Canada [1995] 3 SCR 199, for example, concerned with a legislative ban on tobacco advertising, expert evidence was led at a lengthy trial, following which the trial judge concluded that there was no reliable evidence to support the policy of banning advertising, and that there was therefore no rational connection between the ban and its objective.
That conclusion was however overturned by the Supreme Court.
McLachlin J, giving the judgment of the majority, stated (at para 153) that in order to establish a rational connection, the government must show a causal connection between the infringement and the benefit sought on the basis of reason or logic.
She added (at para 154) that, where legislation was directed at changing human behaviour, the court had been prepared to find a causal connection on the basis of reason or logic, without insisting on proof of a relationship between the infringing measure and the legislative objective.
La Forest J, giving the other principal judgment, considered that a common sense connection was sufficient to satisfy the requirement that there be a rational connection (para 86). 94.
These observations found an echo, in a not dissimilar context, in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437; [2012] QB 394, concerned with a ban on the sale of tobacco from vending machines.
It was argued, in the context of the proportionality of the restriction on the free movement of goods under EU law, that the ban was not suitable to achieve the objective of reducing tobacco consumption, since tobacco products could still be bought over the counter.
All the members of the Court of Appeal emphasised the responsibility of elected government for the protection of public health, and the consequent need to allow a broad margin of appreciation to the decision maker.
Lord Neuberger of Abbotsbury MR observed that, in considering whether the aim of the ban was achieved, at least arguably and to some extent, the court should be careful to avoid substituting itself for the decision maker or being over particular about the reasoning or evidence relied on by the decision maker (paras 232 233).
He commented that the evidence and analysis in the explanatory memorandum and impact assessment which had been laid before Parliament with the draft regulations were neither very convincing nor very telling, not least because of the absence of any evidence to suggest that the ban would have any effect (para 236).
Nevertheless, the Secretary of States assessment or belief that the ban would lead to some reduction in smoking did not seem unreasonable: The unsatisfactory basis for the figures and analysis in the [impact assessment] does not, in the absence of any other factor, justify concluding that the ban is disproportionate, given the wide margin of appreciation to be accorded.
If one takes away one source of cigarettes, particularly one that involves no control over the identity of the purchaser, it is scarcely unreasonable to conclude that it will reduce consumption of cigarettes to some extent, although that conclusion is not one which necessarily follows ineluctably.
Like La Forest and McLachlin JJ in the RJR MacDonald case, Lord Neuberger MR treated common sense and logic (paras 238, 242 and 244) as a sufficient basis for finding that the ban was rational.
In the parallel litigation in the Court of Session, the court also referred to common sense as a basis for concluding that the legislation was apt to achieve its objective (Sinclair Collis Ltd v Lord Advocate 2013 SLT 100, para 62). 95.
A more problematical case is that of A v Secretary of State for the Home Department [2004] UKHL 56; [2005] 2 AC 68: a case which is particularly relevant to the decision of the majority in the present case, as appears from Lord Sumptions judgment.
The issue was whether a derogation from article 5(1) of the Convention, so as to permit legislation providing for the indefinite detention without trial of foreign terrorist suspects, was strictly required by the public emergency represented by the threat of terrorist attacks in the United Kingdom.
A majority of the House of Lords found that the derogation was not strictly required, since the legislation was disproportionate and was in addition discriminatory, contrary to article 14 of the Convention.
The latter finding need not be considered in the present context, but the finding in relation to proportionality is of importance. 96.
Lord Bingham of Cornhill identified the central problem (at para 43) as being: that the choice of an immigration measure to address a security problem had the inevitable result of failing adequately to address that problem (by allowing non UK suspected terrorists to leave the country with impunity and leaving British suspected terrorists at large) while imposing the severe penalty of indefinite detention on persons who, even if reasonably suspected of having links with Al Qaeda, may harbour no hostile intentions towards the United Kingdom.
Lord Bingham did not explicitly apply the three De Freitas criteria or the fuller Oakes analysis (to which he referred at para 30), but in the passage cited appears to balance the severity of the effects on the rights of the persons detained against the importance of the objective: that is to say, step four in the analysis.
Lord Hope of Craighead focused on the question whether there was some other way of dealing with the emergency which would not be incompatible with the Convention rights (para 124): in other words, a test of necessity.
Lord Scott of Foscote also considered that the legislation failed to meet the necessity test, since it had not been shown that monitoring arrangements or movement restrictions would not suffice (para 155).
That was also the approach adopted by Lord Rodger of Earlsferry, who stated that, proceeding on the same basis as the Government and Parliament, that detention of the British suspects was not strictly required to meet the threat that they posed to the life of the nation, the detention of the foreign suspects could not be strictly required either to meet the comparable threat that they posed (para 189).
Baroness Hale of Richmond also focused on the question of necessity, observing that if it was not necessary to lock up the nationals it could not be necessary to lock up the foreigners (para 231).
Lord Carswell agreed with Lord Bingham. 97.
I have spent some time considering the basis of the decision in A v Secretary of State for the Home Department in order to clarify what the case did not decide.
First, it did not decide that the legislation lacked a rational connection to its objective because it would be only partially effective.
As in Sinclair Collis, the legislation would have made a contribution to the achievement of its objective.
Secondly, the case did not decide that the legislation lacked a rational connection to its objective because it was discriminatory.
The difference in treatment of British and foreign suspects was relevant to proportionality because it bore on the question whether the interference with the rights of the foreign suspects had been shown to be necessary. 98.
In the present case, it is apparent that any judicial assessment of the rationality of a direction under Schedule 7 must recognise the need to allow the Treasury a wide margin of appreciation, for the reasons explained by Lord Sumption at para 21. 99.
Lord Sumption identifies two flaws in the reasoning which led the courts below to conclude that the requirements imposed by the direction were rational and proportionate: first, their conclusion did not explain, let alone justify, the singling out of Bank Mellat; and secondly, the justification which they found was not the one which Ministers advanced before Parliament, and was in some respects inconsistent with it.
The justification for making the order 100.
Subject to one qualification, Mitting J accepted the Treasurys explanation of why the order had been made, as set out in paras 73 to 75 of a witness statement made by Mr James Robertson, who had been since December 2008 the head of the Financial Crime Team in the International Finance Directorate of the Treasury. 101.
In his statement, Mr Robertson explained that, in exercising their functions under Schedule 7 of the 2008 Act, the Treasury worked in close collaboration with a number of government departments and agencies, including in particular those concerned with intelligence.
He explained the serious risk to UK national interests which would result from Irans development of nuclear weapons: the consequent destabilising effect upon a region where the UK has personnel and installations, the potential disruption of global oil and gas supplies, the economic consequences of such disruption, the possibility of an attack on Iran, and the potential implications of such an attack. 102.
Mr Robertson also explained that it was considered that Irans banking system provided many of the financial services which underpinned its nuclear and ballistic missile programmes.
Irans banking system lacked the controls which existed in most other countries to prevent money laundering and the financing of terrorism, and which would also serve to identify transactions related to Irans nuclear and ballistic missile programmes.
As a consequence, Iranian financial institutions were vulnerable to being used to channel illicit finance.
This had been highlighted in several reports by the FATF.
As a result, UK financial institutions dealing with Iranian entities could not rely on such checks having taken place in Iran.
This problem was reflected in the targeting of Iranian banks in the Security Council resolutions and in the EU legislation. 103.
In relation to the decision to make the order in question, Mr Robertson explained that, following the coming into force of the 2008 Act, the Treasury commissioned work on the role of Iranian banks in financing Irans nuclear and ballistic missile programmes.
That work highlighted concerns about the role of Bank Mellat, and identified three particular areas of concern.
First, it had provided banking services to Novin, and had maintained accounts for the AEOI, mainly through Novin, since 2003.
It had managed accounts and facilitated money transfers for Novin after Novin had been designated under Resolution 1747.
Secondly, senior officials of the AIO, the parent of entities which were involved in Irans ballistic missile sector and designated under Security Council Resolution 1737, had used Bank Mellats services during 2007 and 2008 to conduct business connected with Irans ballistic missile programme.
Thirdly, between 2007 and 2009 Bank Mellat had provided banking services for Doostan International (Doostan), a company linked to the ballistic missile programme. 104.
Mr Robertson summarised the case for making the order as follows (para 73): The Treasury was satisfied that Bank Mellat has provided financial services to companies engaged in Iran's nuclear and ballistic missile programmes.
A direction to cease business with Bank Mellat would restrict the financial services available to entities involved in Iran's nuclear and ballistic missile programmes by denying them access to the UK financial sector through Bank Mellat.
This would have the maximum possible adverse impact on the nuclear and ballistic missile programmes of the measures available under Schedule 7 in relation to Bank Mellat.
If Bank Mellat wished to continue its activities in support of those programmes it would need to seek other sources of financial services, assuming such alternatives were actually available to it.
There was also the possibility that as a bank subject to restrictions in the United Kingdom, Bank Mellat would not be in a position to access the global financial system as effectively in order to seek substitute arrangements for those no longer available to it in the UK.
At the very least, this would impede the Iranian nuclear and ballistic missile programmes by imposing additional costs and delays on the programmes. 105.
Mr Robertson explained at para 74 that it had been recognised that entities connected with the nuclear and missile programmes which wished to route transactions through the UK could do so by using another Iranian bank.
A potential effect of the order was however that the UK financial sector would decide to wind down business with Iran more generally, which would reduce the risk of business being routed through another Iranian bank.
Even if that did not occur, the order would make transactions involving the UK more difficult.
Iranian banks generally experienced difficulties in dealing with UK banks as a result of the international sanctions.
A small number of Iranian banks had access to the UK via their British subsidiaries.
The action taken against Bank Mellat, which had a British subsidiary, narrowed access to the UK financial sector and further restricted the options available to Iranian banks. 106.
Finally, Mr Robertson said at para 75 that the order would also increase pressure on the Iranian Government to comply with its international obligations.
Applying such a restriction to one of Irans largest banks would reduce the financial services available to the Iranian Government.
In relation to that aspect, Mr Robertson stated that the Iranian Government still controlled a significant amount of the shares in Bank Mellat, following its privatisation in February 2009: 20% of the shares were officially owned by the Government, another 20% were held by Government social security organisations for the benefit of their employees, and a further 40% were allocated to low income shareholders whose voting rights were exercised by the Government. 107.
Mitting J accepted the Treasurys reasons for making the order as stated at paras 73 75 of Mr Robertsons statement.
The only qualification was that, in relation to para 75, Mitting J accepted evidence that the Iranian Government only exercised voting rights over its 20% shareholding in Bank Mellat.
That qualification was not considered to be of any materiality. 108.
Lord Sumption states that Mitting J did not accept the part of Mr Robertsons statement which described the problems relating to Bank Mellat, which I have summarised at para 103.
It appears to me however that what was said in that connection by Mr Robertson was substantially accepted, other than the allegation relating to senior officials of AIO, which Bank Mellat said it was unable to investigate without additional information.
Mitting J stated that it was common ground that Bank Mellat had provided trade finance or banking facilities for an importer of materials used in the production of nuclear weapons, namely Novin.
He accepted that Novin was an AEOI financial conduit and had facilitated Irans nuclear programme.
He also accepted that Bank Mellat had provided banking facilities to Doostan and its managing director, Mr Shabani, who had each played a part in Irans nuclear weapons programme. 109.
It is true that Mitting J accepted that, once Novin had been designated by the Security Council under Resolution 1747, Bank Mellat ran down and eventually ceased its relationship with Novin, and that it had in place a mechanism, which it operated conscientiously, to ensure that it did not provide banking facilities to entities or persons designated by the Security Council.
Mitting J also accepted that Bank Mellat had investigated the accounts held by Doostan and Mr Shabani, in response to the Treasurys allegations in these proceedings, and had found nothing unusual or suspicious.
Mitting J nevertheless found that Doostan and Mr Shabani had played a part in Irans nuclear programme, and rejected Mr Shabanis evidence to the contrary. 110.
Lord Sumptions statement that Mitting J found that Bank Mellats provision of banking services to entities involved in the Iranian nuclear weapons and ballistic missile programmes, namely Novin and Doostan, had happened in spite of their conscientiously operated procedures to avoid doing so, appears to me, with respect, to convey a different impression from Mitting Js judgment.
It was no answer to the Treasurys concerns in relation to Novin that procedures were initiated after it had been designated by the Security Council: procedures triggered by a Security Council Resolution did not sufficiently address the risk, since they operated long after objectionable banking activities had already taken place.
In relation to Doostan, it was only in the course of the proceedings that Bank Mellat carried out the investigations referred to.
The value of those investigations can be judged from the fact that on 9 June 2010, after the hearing before Mitting J, Doostan was designated by Security Council Resolution 1929 as an entity involved in Iranian ballistic missile activities, and was subjected to the asset freezing regime established by Resolution 1737.
It was only following that designation that Bank Mellats procedures would have been applicable.
In the circumstances, I am unable to agree with Lord Sumptions statement that Mitting Js finding about Bank Mellats procedures suggests that they were satisfactory, at any rate in relation to the weapons programmes. 111.
Far from regarding the foregoing matters as undermining the Treasurys case, Mitting J treated them as being essentially beside the point: The Treasurys case is not that the bank has knowingly assisted Security Council designated entities after designation, or even that it has knowingly assisted entities liable to be designated, but which have not yet been, by providing banking facilities to them, but that it has the capacity to do so, has in one instance done so and is likely to do so in the future.
The fundamental justification for the order is that, even as an unknowing and unwilling actor, the bank is, by reason of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance.
It was on that basis that Mitting J commented that Bank Mellats dealings with Doostan and Mr Shabani did not greatly matter. 112.
Lord Sumptions criticism of the rationality of the connection between the direction and its objective is that the direction made no attempt to prevent every Iranian bank with an international reach from facilitating Irans weapons programme, but only one of them.
It is said that the distinction [drawn] between Bank Mellat and other Iranian banks was an arbitrary and irrational distinction. 113.
I am unable to agree with this criticism.
It is true that the problems in relation to the lack of adequate controls within Irans banking system, identified by the FATF and mentioned by Mr Robertson in his statement, were not unique to Bank Mellat.
It followed that UK financial institutions were at risk when dealing with Iranian entities in general, as Mr Robertson explained.
The response of the UN Security Council and the EC Council had not however been to impose restrictions in respect of all Iranian banks, but in respect of particular banks where there was evidence of their involvement in the financing of Irans nuclear weapons programme: notably Bank Sepah, Bank Sepah International, Bank Melli, Bank Saderat and their subsidiaries.
The Treasury followed the same approach when it obtained evidence of Bank Mellats involvement. 114.
Lord Sumption states that other Iranian banks were as likely as Bank Mellat to number entities involved in Irans nuclear and ballistic missile programmes amongst their clients.
As I have explained, Mr Robertson acknowledged at para 74 of his statement that entities involved in Irans nuclear weapons programme could in principle use other Iranian banks.
He pointed out however that the order might lead the UK banking sector to wind down business with Iran generally, and that the order would in any event make transactions involving the UK more difficult.
That was because it was difficult for Iranian banks to access UK financial markets directly, since UK banks were reluctant to deal with them.
The exceptions were the small number of Iranian banks which had UK subsidiaries.
Those were Bank Melli, Bank Sepah, Bank Saderat and Bank Mellat.
As I have explained, the UK subsidiaries of Bank Melli and Bank Sepah were already subject to asset freezing orders.
The order under challenge applied to Persia International Bank plc (PIB), which was the UK subsidiary of Bank Mellat.
The UK subsidiary of the remaining Iranian bank with such a subsidiary, Bank Saderat, was subject at the time to systematic reporting requirements under Regulation 1110/2008, as I have explained.
Subsequent to the making of the order under challenge, it was subjected to an asset freeze. 115.
In these circumstances, an order directed specifically against Bank Mellat and its UK subsidiary was far from being pointless or arbitrary.
One effect of the order was to prevent the only UK subsidiary of an Iranian bank which was not already subject to controls, namely PIB, from dealing with its parent, Bank Mellat.
Lord Sumption notes that PIB was not prevented from dealing with its minority shareholder, Bank Tejarat.
There is however nothing to indicate that Bank Tejarat had any involvement with entities involved in the Iranian nuclear weapons programme.
If information indicating such involvement were to emerge, no doubt action would be taken.
In the event, PIBs assets were subsequently frozen by Council Regulation (EU) 668/2010, made on 26 July 2010.
Although Iranian banks, or Iranian entities involved in the nuclear weapons programme, could in principle seek to use non Iranian international banks, those could be expected to have compliance mechanisms in place: it was only in relation to Iran that the absence of such mechanisms had caused the FATF to call for preventive measures. 116.
It is of course true that the direction would not of itself prevent the development of nuclear weapons in Iran.
It could however reasonably be expected to realise the objective of hindering their development at least to some extent (to adopt the phrase used by Lord Neuberger MR in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437; [2012] QB 394).
That is sufficient to establish a rational connection between the direction and its objective. 117.
In the light of the foregoing, Mitting J was entitled to accept that there was a rational connection between the requirements imposed by the order and its objective, on the basis that, as he found, a direction to cease business with Bank Mellat would restrict the financial services available to entities involved in [Irans nuclear and ballistic missile] programme by denying them access to the UK financial sector through the bank; suspect entities would find it difficult to replace existing arrangements through the bank; and some pressure would be brought to bear on the Iranian Government to comply with its international obligations.
Mitting J was therefore entitled to hold that he was satisfied that the requirements imposed by the order are rationally connected to the objective of inhibiting the development of nuclear weapons in Iran and, so, the risk to the national interests of the United Kingdom.
Those findings were affirmed by the Court of Appeal, which commented that a contrary conclusion would resonate with navet.
A different justification from that given to Parliament 118.
A separate point made by Lord Sumption is that the justification for the making of the order which was accepted by Mitting J was not the one which Ministers advanced when laying the order before Parliament, and was in some respects inconsistent with it: indeed, it is said that the Treasurys argument underwent a radical shift. 119.
This point does not appear to me to be well founded in fact.
It does not in any event appear to me to affect the question whether the requirements imposed by the order were rationally connected to its objective. 120.
Considering first the factual position, a written Ministerial statement was made on 12 October 2009, three days after the order had been made.
It stated: Iran continues to pursue its proliferation sensitive nuclear and ballistic missile activities in defiance of five UN Security Council Resolutions.
We cannot and will not ignore specific activities undertaken by Iranian companies which we know to be facilitating activity identified by the UN as being of concern, particularly where such activities have the potential to affect the UKs interests.
On the particular entities in question, vessels of the Islamic Republic of Iran Shipping Lines (IRISL) have transported goods for both Irans ballistic missile and nuclear programmes.
Similarly, Bank Mellat has provided banking services to a UN listed organisation connected to Irans proliferation sensitive activities, and been involved in transactions related to financing Irans nuclear and ballistic missile programme.
The direction to cease business will therefore reduce the risk of the UK financial sector being used, knowingly or otherwise, to facilitate Irans nuclear proliferation sensitive activities. 121.
An explanatory memorandum to the order was also laid before Parliament the same day.
Under the heading What is being done and why, the memorandum stated: These restrictions are being imposed in respect of these two entities because of their provision of services for Irans ballistic missile and nuclear programmes.
It is considered that a direction to cease business with these entities will contribute to addressing the risk to the UK national interests posed by Irans nuclear proliferation sensitive activities.
Similar explanations of the thinking behind the order were also provided by Ministers during the Parliamentary proceedings leading to the approval of the order. 122.
The Treasury did not in these documents and statements accuse Bank Mellat of being knowingly involved in Irans nuclear and ballistic missile programme: what was said was that it had provided banking services to a UN listed organisation, and that it had been involved in transactions related to financing that programme.
Those were statements of objective fact.
The objective of the order was explained as being to reduce the risk of the UK financial sector being used, unknowingly or otherwise, to facilitate Irans proliferation sensitive activities.
That explanation appears to me to be consistent with the more detailed account of the Treasurys reasoning provided by Mr Robertson.
As Mitting J found, the statements made to Parliament gave an adequate summary. 123.
Proceeding however on the hypothesis that the reasons given to Parliament were inconsistent with the reasons put forward by Mr Robertson in his statement, that difference has no evident bearing on the answer to the question whether the measure is rationally connected to its objective.
As I have explained at paras 92 94, that question poses an objective test concerned with the capacity of the measure to realise its objective, based on common sense or logic.
If Parliament approved the measure on the basis of a given justification, that might affect the credibility of evidence subsequently putting forward a different justification; but that is not an issue which arises on this appeal.
It could also affect the weight which the court might give to Parliamentary approval of the measure when considering its proportionality; but that is not a factor which has been taken into account in considering the question of rational connection. 124.
This objective approach to the criterion of rational connection is consistent with what was said, in relation to proportionality more generally, in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167, para 11: The task on an appeal on a Convention ground against a decision of the primary decision maker is to decide whether the challenged decision is unlawful as incompatible with a Convention right or compatible and so lawful.
It is not a secondary, reviewing, function dependent on establishing that the primary decision maker misdirected himself or acted irrationally or was guilty of procedural impropriety.
To similar effect, Lord Hoffmann noted in R (SB) v Governors of Denbigh High School [2006] UKHL 15; [2007] 1 AC 100, para 68: Article 9 of the Convention is concerned with substance, not procedure.
It confers no right to have the decision made in any particular way.
What matters is the result.
In this respect, there is no difference between article 9 and other Convention rights.
Less intrusive means 125.
Lord Sumption concludes that the direction also fails the proportionality test at the third stage of the analysis, on the basis that it cannot be necessary to require UK financial institutions to cease dealing with Bank Mellat if less drastic measures are considered to provide sufficient protection in relation to other Iranian banks.
For the reasons I have given, I do not consider that the Iranian banks in question (that is to say, the smaller banks without UK subsidiaries) are truly in a comparable position to Bank Mellat.
Like the Court of Appeal, I attach importance to the evidence of Mr Robertson that the Treasury considered but rejected less intrusive measures, for reasons which he explained.
In a matter of this kind, great weight must be given to the considered judgment of the Treasury.
Against that background, I accept Mitting Js conclusion that there is no other reasonably practicable means of ensuring that the facilities of an Iranian bank with international reach will not be used in the UK for the purpose of facilitating the development of nuclear weapons by Iran.
Proportionate effect 126.
If, as I would hold, (1) the Governments objective was sufficiently important to justify limiting the rights of Bank Mellat, (2) the requirements imposed by the direction were rationally connected to that objective and (3) no less intrusive measure would have been equally effective in achieving the objective, the question remains whether (4) having regard to the severity of its effect on Bank Mellats rights, the direction was justified by the importance of the objective.
Lord Sumption concludes that it was not, given that, in his view, the direction would make little if any contribution to the achievement of its objective.
For the reasons I have explained, I do not agree with that assessment.
On the basis that the direction would make a worthwhile contribution to the achievement of the Governments objective, I agree with Mitting J that its impact upon the rights of Bank Mellat is proportionate. 127.
In that connection, I would make three observations.
The first is that the effects upon Bank Mellats business cannot in my opinion be considered disproportionate to a significant reduction in the risk of very great harm to the UKs vital national interests.
The Bank claims that it has suffered a revenue loss of US$25m a year, that it was prevented for the duration of the order from drawing on deposits of 183m, and that its reputation and goodwill have been damaged.
The severity of those effects has however to be considered in the context of the very substantial scale of the business conducted by the Bank, illustrated by its evidence that it holds some 33 million accounts for over 19 million customers, has almost 2000 branches, and issued letters of credit in 2009 to the value of $11bn.
If the contribution made by the direction towards the achievement of the Governments objective was limited, the impact upon the Bank was also limited. 128.
The second is that the right in issue, under A1P1, is not of the most sensitive character; the person affected, a major international bank, does not fall into a vulnerable or marginalised category; and the order is temporary in nature. 129.
The third is that the court does not possess expertise or experience in international relations, national security or financial regulation.
The risks to our national interests, if the wrong judgment is made in relation to nuclear proliferation, could hardly be more serious.
Democratic responsibility and accountability for protecting the citizens of this country from those risks rest upon the Government, not upon the courts.
In a complex situation of this kind, where the stakes are so high, the court has to attach considerable weight to the Governments assessment that the requirements are necessary and proportionate to the risk.
Conclusion 130.
For these reasons, and those given by Lord Hope in relation to procedural fairness, I would dismiss the appeal.
LORD HOPE (DISSENTING) 131.
I find myself unable, with respect, to agree with the conclusions that the majority have reached on both the substantive and the procedural issues in this case.
I, for my part, would dismiss the appeal.
The substantive issues 132.
I agree with Lord Reed and Lord Sumption about the formulation of the test that should be applied to the question raised by Bank Mellats objections to the direction.
The more difficult issue is as to the result when that test is applied to the facts.
I was inclined at the end of the argument to think that the making of the Financial Restrictions (Iran) Order 2009 (SI 2009/2725) (the Order) was disproportionate because the Bank had been singled out for special treatment, and because the distinction that was drawn between it and other Iranian banks in that respect appeared to be arbitrary and irrational.
There seemed to me to be force in the arguments that Lord Sumption has given for thinking that the effect of the Order on the commercial dealings of the Bank was out of proportion to any contribution that the directions were likely to make to the statutory purpose that it was designed to serve. 133.
I have however been persuaded by Lord Reeds careful analysis of the explanation that was given on the Treasurys behalf by Mr Robertson that the reasons that Mitting J and the Court of Appeal gave for coming to the contrary conclusion were sound.
In matters of this kind a wide margin of appreciation must be given to the Treasury, and I am satisfied that sufficient grounds were shown for finding that an order directed only against the Bank and its UK subsidiary was rationally connected to the objective of inhibiting the development of nuclear weapons in Iran and that it was proportionate.
There were good reasons for not involving all the other Iranian banks, and the facts as a whole show that the choice that was made was not arbitrary.
The problem that the Order was designed to address was restricted to a small number of Iranian banks with UK subsidiaries, and the Bank was not being singled out in the pejorative sense that those words convey.
I also agree with Lord Reed that the question whether the directions in the Order were rationally connected to its purpose does not depend on whether the justification that the courts below found established was the same as that which was given in the statement when the Order was laid before Parliament.
Like him I would hold that the objective was sufficiently important to justify restricting the Banks activities, that the requirements imposed by the direction were rationally connected to that objective and that Mitting J was entitled to hold that there were no other reasonably practicable means of achieving it.
The procedural issues 134.
The question to which these issues are directed is whether there was a duty to consult the Bank before the Order was made under section 62 of the Counter Terrorism Act 2008.
The powers conferred on the Treasury for the making of such a direction are set out in Schedule 7 to the Act.
The procedures that are to be followed are in Part 4 of that Schedule.
Paragraphs 14(1) and (2) provide that a direction is to be contained in an order made by the Treasury, that the order must be laid before Parliament after being made and that it ceases to have effect if not approved by a resolution of both Houses of Parliament within 28 days.
Paragraph 14(5) states that, if apart from that sub paragraph an order under paragraph 14 would be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not such an instrument.
Hybrid instruments are subject to a special procedure in the House of Lords which gives those who are specially and directly affected by the instrument to present their arguments to a select committee for consideration on their merits before the instrument can be approved by either House. 135.
Paragraph 15 of Schedule 7 provides that, where a direction is given to a particular person, the Treasury must give notice of the direction to that person.
The direction in this case was given not to the Bank or to any other particular person, but to a description of persons operating in the financial sector in the United Kingdom: see paragraph 14(1)(a).
They were directed by the Order not to enter into, or to continue to participate in, any transaction or business relationship with the Bank.
The sequence in which these paragraphs appear in Part 4, as in the case of paragraph 16 which deals with publication, indicates that the direction will have already have been made by the time when notice is given under paragraph 15.
Its purpose is to alert the person concerned so that steps can be taken at once to comply with the direction. 136.
Here, then, is a provision which excludes the procedure which allows those directly affected to ask for an examination of the direction on its merits before the instrument is approved under paragraph 14(2).
And there is another provision which provides for notice to be given, but only to a particular person to whom the direction is given and only after the making of the direction.
Is it nevertheless open to the court to require the Treasury to consult with a body which will be affected by a direction which is to be given to others before the order is made, as the Bank maintains? This is a step which finds no place in the procedure which has been provided for by Parliament.
Is a procedure for delegated legislation which has been approved by Parliament open to scrutiny by the courts with a view to the imposition of additional procedural safeguards? 137.
The Bank submits that the Treasury were required both by domestic law and by the procedural requirements of article 6(1) of the European Convention on Human Rights and article 1 of the First Protocol to give the Bank an opportunity to make representations before they made the direction.
It points to the fact that the direction imposed the most extreme form of sanction that was available to the Treasury in the exercise of these powers.
It bound the entirety of the United Kingdoms financial sector and the Bank, and all its branches were designated persons with whom the financial sector was directed to cease doing business.
Yet the procedure in the 2008 Act under which the Order which contained the direction was made gave no opportunity for affected persons to make representations before it was made and then laid before Parliament. 138.
This challenge was dismissed by Mitting J.
He said that it was readily understandable why no provision was made for affected persons to be given such an opportunity: [2010] EWHC 1332 (QB), para 5.
Although in this case I am only concerned with a direction made in the circumstances set out in paragraph 1(4) of Schedule 7 in respect of a bank, there are many other circumstances in which directions could be made when Parliament cannot have intended that there should be an opportunity for affected persons to make representations.
They include individuals engaged in terrorist financing or money laundering activities (paragraphs 1(3)(c) and 9(1)(c)); and governments reasonably believed to be engaged in the development or production of nuclear etc weapons (paragraphs 1(4)(a) and 9(1)(b); and the manifold persons in the UK financial sector to whom the direction is given (paragraph 3(1)).
He also pointed out that a duty to permit prior representations where there was no reason to believe that avoiding action would be taken by an affected person would be judge made.
Where Parliament had conferred a rule making power on the executive subject to Parliamentary control, it was not generally for the courts to superimpose additional procedural safeguards: R (Bapio) v Secretary of State for the Home Department [2007] EWCA Civ 1139. 139.
In paras 6 8 the judge rejected the challenge under A1P1 on the ground that section 63 was the means by which the Bank was afforded a reasonable opportunity of effectively challenging the measures contained in the Order: Jokela v Finland (2002) 37 EHRR 581, para 45.
He also rejected the challenge under article 6(1) on the ground that there was no dispute over a civil right at the time when the Order was made: Micallef v Malta (2009) 50 EHRR 920, para 74.
In any event a hybrid procedure, consisting of an executive decision affirmed by Parliament which was subject to a later challenge before a court, was compatible with the article.
He added that there was no claim for a declaration of incompatibility under section 4 of the Human Rights Act 1998. 140.
In the Court of Appeal Maurice Kay and Pitchford LJJ rejected the Banks procedural challenge on similar grounds: [2011] EWCA Civ 1.
But Elias LJ held that the Treasury had failed to comply with the common law principles of fairness and that it was also in breach of A1P1 and article 6(1).
He said that the Order was of a qualitatively different character to that with which the court was concerned in the Bapio case.
It was not laying down rules which affected a broad and amorphous class or classes of person.
It was specifically directed at the Bank and the Treasury knew that the action of implementing the Order would damage its rights, as was its purpose.
He was not persuaded that Parliament in formulating the procedures in Schedule 7 must have intended to exclude any rights to natural justice.
The judges analysis of the challenge under article 6(1) that there was no dispute when the Order was made was inconsistent with the decision in R (Wright) v Secretary of State for Health [2009] 1 AC 739.
As the Treasury had conceded that there was insufficient urgency to justify a failure to allow the Bank to seek to answer the allegations against it before the Order was made, the only proper conclusion was that the failure to give a hearing infringed article 6(1).
It followed that the subsequent procedure was not sufficient to comply with A1P1. (a) the common law challenge 141.
The Order which the Treasury made under Schedule 7 to the 2008 Act was a statutory instrument within the meaning of section 1(1) of the Statutory Instruments Act 1946.
It was made in the exercise of a power to make a direction under paragraph 1(1) of the Schedule which was required by paragraph 14(1) to be given by means of an order that was to be laid before Parliament.
Section 96(1) of the 2008 Act provides that orders under the Act must be made by statutory instrument.
For the purposes of the definition in section 1 of the 1946 Act, a power to make, confirm or approve orders that is conferred on the Treasury is deemed to be conferred on the Minister of the Crown in charge of that department: 1946 Act, section 11(1). 142.
The procedure that is laid down for Parliamentary approval of an order under Part 4 of Schedule 7 which contains a direction of the kind that was given in this case provides that the order is to be laid before Parliament before it is made, and that it ceases to have effect if not approved by a resolution of each House within 28 days: paragraph 14(2).
Erskine May, Treatise on the Law, Privileges, Proceedings and Usages of Parliament (24th ed, 2011) states at p 676 that this type of affirmative procedure is frequently resorted to when delegated legislation must come into force immediately on being made without any prior consultation.
It appears from that comment that it is standard practice for orders to be made under this procedure without prior consultation with those who are likely to be affected by them.
Paragraph 14(5) states that, if apart from that sub paragraph it would be treated for the purposes of the standing orders of either House as a hybrid instrument, it is to proceed in that House as if it were not such an instrument. 143.
Under the hybrid instrument procedure the instrument is subject to a procedure which enables those who are affected by the instrument to present arguments against it to a select committee which reports on its merits and recommends whether or not it should be approved: Erskine May, p 684.
The disapplication of this procedure by an express provision of this kind is said to be relatively common in recent times: Craies on Legislation (10th ed, 2012), para 6.2.2.3.
Nevertheless it is feature of the procedure under Part 4 of the Schedule that it has expressly excluded the possibility of consultation before the order is made.
It excludes the possibility of presenting arguments against the order prior to its receiving approval in either House. 144.
Part 4 of Schedule 7 must be read together with sections 63 and 65 68 of the Act.
These sections provide for the making of an application to set aside any decision of the Treasury in connection with the exercise of their functions under Schedule 7 to the Act, with the same relief as may be made or given in proceedings for judicial review.
Permission is not required for the making of an application under section 63, and there is no time limit.
Provisions of the kind that appear in this group of sections are unusual.
They must be taken to have been included in the Act as a counterweight to the absence of any procedure for prior consultation with affected persons or the making of representations by them at any earlier stage.
The provision for a closed material procedure indicates that Parliament was aware that some at least of the reasoning for the making of a direction would be likely to require to be withheld from affected persons. 145.
These provisions reinforce the impression conveyed by the provisions of paragraph 14 of Schedule 7 that Parliament cannot have intended that there should be an opportunity for representations before the decision was made or as part of the Parliamentary process.
A ministerial statement was issued on the making of the order on 12 October 2012 in accordance with a prior commitment to do so by the Minister when the Bill was passing through Parliament.
By this means the Treasurys reasons for making the Order were placed before each House before it was approved.
The question then is whether the Bank had a common law right to be consulted before the making of the decision contained in the Order that was laid before Parliament.
I readily acknowledge that the duty to give advance notice before a statutory power that may affect the subject adversely is exercised, whether by statutory instrument or otherwise, is deeply rooted in the common law.
But, as Lord Sumption says in para 31 above, whether there is such a duty where the enabling statute does not deal with the point expressly must depend on the circumstances.
The Bank accepts there is no authority that is on all fours with this case.
Cases such as R v Secretary of State for Health, Ex p United States Tobacco International Inc [1992] QB 353, where it was held that the Secretary of State had a duty to give the applicants an opportunity to make representations on the expert advice he had received before making regulations banning oral snuff in view of the history of his dealings with them as well as the effect on their business, are far removed from the facts of this case.
The closest analogy is the Bapio case, where the provisions in question were alterations by the Home Secretary to the Immigration Rules and advice given to NHS employers by the Department of Health.
Elias LJ was right to draw attention to the fact that the Order in this case was of a different character as it was specifically directed at the Bank.
But the reasons given by the Court of Appeal for rejecting the proposition that there was duty to consult in that case seems to me to be capable of being applied more widely and to be just as much in point here as in Bapio.
First, there is the point made by Sedley LJ in para 44 that, if the Bank is right, its argument raises serious and very troublesome questions as to its implications.
What limits, if any are to be placed on those to whom the duty is owed? As Mitting J pointed out in para 5 of his judgment, the conditions for the making of a direction in paragraph 1 of Schedule 7 and the requirements that may be imposed under paragraph 9 include various circumstances in which Parliament cannot have intended that there should be an opportunity to make prior representations.
They include, for example, cases falling within the second condition described in paragraph 1(3) of Schedule 7, which applies where terrorist financing or money laundering activities are being carried on by persons resident or incorporated in the country which pose a significant risk to the national interests of the United Kingdom.
Is the duty to notify the persons affected to apply in those cases too? The urgency that the Treasury saw in the Banks case was not as extreme as it might be in that situation, but its case must not be considered in isolation.
A decision in its favour on this point will have far reaching consequences for the application of Schedule 7 generally.
It will also call into question the practice referred to by Erskine May for the affirmative resolution procedure to be resorted to when delegated legislation must come into force immediately on being made without any prior consultation: see para 140.
Are the majority to be understood as saying that this must never happen?
If an opportunity to make prior representations is to be given, how is the exercise to be carried out, and under what conditions and subject what safeguards to ensure that any responses are properly taken into account? What information must be given to the affected party to ensure that its representations are effective? How is material that it would not be in the public interest to disclose to the affected party to be dealt with? There is also the possibility that the affected party may seek a judicial review of the way the process is being conducted before the direction is given: see R v Secretary of State for the Environment, Ex p Brent London Borough Council [1982] QB 593.
This too would raise issues about the disclosure of material that in the public interest ought not to be disclosed.
It could also significantly delay the whole process if, as Lord Sumption acknowledges in para 37 above, an application of the kind envisaged by section 63 would be unlikely to be determined within three months.
I do not think that these questions can be ignored or left unanswered.
Clear and precise guidance is needed if the procedure that the majority say must be implied into Schedule 7 is to be workable.
I do not know where that guidance is to be found.
Then there are the points made by Maurice Kay LJ in para 58, with whose reasons Pitchford LJ agreed in para 65.
He doubted whether, as a matter of principle, a duty to consult can generally be superimposed on a statutory rule making procedure which required the intended rules to be laid before Parliament and subjected to the negative resolution procedure.
And he attached some significance to the fact that the primary legislation had not provided an express duty of prior consultation as it had on many other occasions.
Those points have added force in this case in view of the point made by Erskine May at p 676, as the paragraph 14 procedure requires the order to be made before it is laid and that it be approved by an affirmative resolution of each House of Parliament.
The disapplication of the hybrid instrument procedure is a further factor, as is the provision in paragraph 15 for the giving of notice of the direction to a particular person after the order has been laid and the opportunity that sections 63 and 65 68 give for an application to be made to set it aside, subject to rules designed to secure that disclosures of information are not made when they would be contrary to the public interest.
The structure of the legislation, the scope for its application and the sensitive nature of the information on which decisions in this area of activity are likely to have been based all point in the same direction.
They indicate that there was here a deliberate decision by Parliament not to subject the Treasury to a duty to consult before making the direction.
This is readily understandable, in view of the nature of the risks to the national interest that the legislation was intended to deal with.
I would hold therefore that the Bank did not have a common law right to be consulted before the direction was given.
Elias LJ said in para 97 that in his judgment the preconditions for supplementing the procedure to secure a right to natural justice that were identified by Lord Reid in Wiseman v Borneman [1971] AC 297, 308 were met in this case, as the statutory procedure was insufficient to achieve justice and it was not contended that complying with the basic elements of natural justice would frustrate the purpose of the legislation.
But Lord Reid did not go so far as to say that the court must always intervene whenever those preconditions were satisfied.
Whether it would be right for the court to do this must always depend on the circumstances.
I would, for my part, respect the evident intention of Parliament that the Treasury should have power to make orders of the kind contemplated by paragraphs 1 and 9 of Schedule 7 without prior consultation, and that the basic elements of natural justice were to be met in the manner prescribed by sections 63 and 65 68.
For the court to insist upon a prior duty to consult at common law would be inconsistent with the purpose of the legislation, which is to protect the national interests of the United Kingdom in circumstances where there is a significant risk to those interests, and it would contradict what I would understand to have been the will of Parliament.
I do not think that it is open to this court to take that course.
I would reject the challenge that is made at common law.
(b) the Convention rights challenge
The gravamen of this challenge is that, as the making of the direction was incompatible with the Convention rights on which the Bank founds, it was unlawful for the Treasury to make the direction: Human Rights Act 1998, section 6(1).
Counsel for the Treasury did not seek to argue that this was a case to which section 6(1) did not apply because the primary legislation could not be read or given effect in a way which was compatible with the Convention rights and it was acting so as to give effect to those provisions: section 6(2)(b).
It is convenient to examine the argument that was directed to article 6(1) first, as the A1P1 argument too is about the absence of a procedural protection for the Banks rights.
In Jokela v Finland (2002) 37 EHRR 581, para 45 the Strasbourg court said that, in considering whether a person was afforded a reasonable opportunity of putting his case to the responsible authorities for the purposes of A1P1, a comprehensive view must be taken of the applicable procedures.
The procedural challenge in both cases rests on essentially the same grounds.
The Bank submitted that the Treasurys decision to make the Order was a determination of the Banks civil rights within the meaning of article 6(1), and that their failure to allow the Bank any opportunity to make representations was a plain breach of that article.
It was also submitted that its case is indistinguishable from R (Wright) v Secretary of State for Health [2009] UKHL 3, [2009] AC 739, where the provisional listing of persons considered to be unsuitable to work with vulnerable adults was held to be unlawful because the workers were denied an opportunity to answer the allegations that were made against them before they were listed.
As Baroness Hale of Richmond said in Wright at para 19, the article 6(1) issue raises two questions.
The first is whether the case is concerned with a civil right at all.
The second is whether the making of the direction amounted to a determination of a civil right.
The first question is easily answered.
It is not disputed that the Banks right to carry on its business was a civil right and that the effect of the direction was greatly to impede the exercise of that right.
The difficult issue is whether the making of a direction amounted to a determination of the Banks civil right, given that an opportunity for the determination by an independent and impartial tribunal of its right to carry on its business unimpeded by the direction was afforded by the right to make an application to the court under section 63 after the direction was made.
It is well established that decisions which determine civil rights and obligations may be made by the administrative authorities, provided that there is then access to an independent and impartial tribunal which is in a position to exercise full jurisdiction as to the issues involved: Bryan v United Kingdom (1995) 21 EHRR 342; Wright, para 23.
For the provisions of article 6(1) about the determination of a civil right to be applicable there must be a dispute over a civil right which can be said, at least on arguable grounds, to be recognised under domestic law: Micallef v Malta (2010) 50 EHRR 37, para 74.
The Strasbourg court also concluded that for article 6(1) to apply the result of the proceedings must be directly decisive for the right in question.
As Baroness Hale said in Wright, para 21: It is one thing temporarily to freeze a persons assets, so that he cannot divest himself of them before an issue is tried; it is another thing to deprive someone of their employment by operation of law.
The Order in this case was not simply an asset freezing order, but I agree with Maurice Kay LJ, para 76, that there are similarities.
It can be seen, as Pitchford LJ said in para 126, as an interim preventive measure taken in a situation which, on the Treasurys view of the matter, was of some urgency.
At the stage when the decision was taken there was, in my view, no directly decisive determination of the Banks civil rights.
The Treasury were in no position to carry out an article 6(1) compliant determination at that stage, and they could not do so anyway as they were not an independent or impartial tribunal.
But the procedure for the making of an application under section 63 was available as soon as the person could claim to be affected by the decision: section 63(2).
There was then an issue about the Banks civil rights which could be determined in a manner that was compatible with article 6(1).
It was, no doubt, for this purpose, that section 63 was enacted.
As there was then an opportunity for the Order to be set aside without delay on an application of judicial review principles, I think that it was unnecessary for an opportunity to be provided for the Bank to be consulted before the Order was made in order to satisfy the requirements of the article.
For these reasons, together with the further reasons given by Lord Reed, I would reject the Banks contention that the way in which the Order was made was incompatible with article 6(1) because it was not given an opportunity to make representations.
On a comprehensive view of the applicable procedures, I would for the same reasons reject the Banks challenge to the making of the Order under A1P1.
LORD NEUBERGER (dissenting in part)
Introductory
Bank Mellat seeks to challenge the Financial Restrictions (Iran) Order 2009, SI 2009/2725 (the Order) on two grounds.
The first is substantive, namely that the reasons for which Her Majestys Treasury (the Treasury) decided to give the direction (the Direction), which resulted in the Order, were fundamentally flawed.
The second ground of challenge is procedural, namely that, before giving the Direction, the Treasury should have given the Bank an opportunity to make representations.
I have reached the conclusion that (i) in agreement with Lord Reed, the substantive challenge fails, but (ii) in agreement with Lord Sumption, the procedural challenge succeeds.
The substantive ground of challenge
The prevention of nuclear proliferation (proliferation), including impairing its funding, is an issue which is not just very important.
It is an issue which has diplomatic, national security, and financial market dimensions, and which presents the executive with enormous technical and practical difficulties.
Further, any attempts to prevent proliferation will almost inevitably have substantial repercussions for third parties, innocent as well as guilty.
It should therefore cause no surprise that decisions and actions which are aimed by the executive at preventing proliferation throw into sharp focus the delicacy of the balance between the courts duty to uphold the rule of law and the courts duty not to trespass into areas which are properly left to the executive.
Judges have no more important function than that of protecting individuals and organisations from abuse or misuse by the executive of its considerable and extensive powers even, as is almost always the case, when such abuse or misuse does not involve bad faith.
The substantial adverse financial consequences for Bank Mellat of the giving of the Direction in this case provide a good example of the importance of this function.
On the other hand, the judiciarys power to review decisions of the executive must be exercised bearing in mind that responsibility for the decision lies with the executive, not the judiciary, and judges do not have the relevant expertise or experience of those responsible for the decision.
In the present case, the importance and relevance of expertise and experience in international relations, national security and financial regulation, is self evident.
Accordingly, while the court has to apply well established legal principles when deciding whether the Direction can be substantively justified, I agree with Lord Sumption when he says in para 21 that the Treasury must be allowed a large margin of judgment, or, as Lord Reed puts it in para 92, a wide margin of appreciation, when taking steps to prevent proliferation internationally, through the means of giving a direction under Schedule 7 to the Counter Terrorism Act 2008 (the 2008 Act).
Indeed, there is very little between Lord Sumption and Lord Reed as to the principles to be applied when addressing a challenge to such a direction, or to an order made pursuant to it.
I agree with Lord Reeds general and far ranging observations about proportionality in his paras 69 78, and what he says in paras 79 84 about the word proportionate in para 9(6) of Schedule 7 to the 2008 Act (Schedule 7).
I also agree with his observations about rational connection in paras 86 90.
As Lord Reed implies in para 65, there is very little difference between what he says in those 21 paragraphs and what Lord Sumption says in paras 20, 21, 25 and 26.
The only real difference arises from their interpretation of the grounds upon which the House of Lords decided A v Secretary of State for the Home Department [2005] 2 AC 68.
On that issue, while there are passages in some of the opinions which support the rather wider ratio suggested by Lord Sumption in para 25, I agree with what Lord Reed says in para 95 97.
The explanation for the fact that Lord Sumption and Lord Reed have reached opposing conclusions on Bank Mellats substantive challenge to the Direction largely lies in the difference between their respective analyses of the facts.
Essentially, Lord Sumption concludes that the Treasurys decision to make the Direction was legally flawed for two main reasons, which he summarises in para 22.
First, that there was no reason to single out Bank Mellat, as the problem [which the Treasury relies on] is a general problem of international banking; secondly, that the ground now advanced by the Treasury for the Direction is different from that advanced by Government ministers when the Order was placed before Parliament.
I have concluded that, while those two points each have some force in a qualified form, neither of them amounts to a sufficiently justified criticism of the Direction to justify quashing the Order.
I agree with Lord Reeds analysis in relation to the first point in paras 105 117, and, in relation to the second point, paras 119 124.
However, because the issue is finely balanced, as evidenced by the division of opinion in this Court, I will briefly summarise my reasons.
As to the first point, it seems to me that the Treasury considered that it was appropriate to make a direction under Schedule 7 against Bank Mellat for a combination of grounds.
In summary, those grounds were (i) Bank Mellat was an Iranian bank, and Irans banking system lacked the controls to prevent the funding of proliferation, which most other countries had, (ii) Bank Mellat had, as a matter of fact, provided banking services to businesses connected with Irans nuclear weapons programme (the programme), (iii) other Iranian banks with branches or subsidiaries in London, who had helped finance the programme, were subject to asset freezing orders or to a systematic reporting requirement, and (iv) although other Iranian banks could be used for the purpose, the Order would represent a severe constraint on Irans ability to obtain banking services for the purpose of funding the programme.
Ground (iii) and, to some extent, ground (iv) are defensive rather than inherently justificatory.
Ground (i) is, I accept, weakened by the fact that it is very difficult for any bank or national banking system to identify the ultimate purpose for which facilities are being provided, especially where the customer wishes to conceal that purpose.
Nonetheless, that does not wholly undermine ground (i), especially in relation to an Iranian bank which has supported entities connected with the programme.
As to ground (ii), it is true that Bank Mellat conscientiously took steps to sever its relationship with the entities which had been involved with the programme, but that was only after UN Security Council resolution 1747 in 2007, and, even then, facilities were being provided to one such entity even after these proceedings had been initiated.
Despite ground (iii), there may have been some Iranian banks which had access to the London market, but they were few and small, and there was no evidence that they were funding entities which supported the programme.
Ground (iv) on its own would not be impressive, but it is, in my view, a reasonable additional factor which helps underpin the decision to give the Direction.
I do not find it easy to resolve the question of whether Bank Mellats substantive challenge to the Direction should succeed.
As the brief summary in the preceding two paragraphs suggests, and as is also apparent from the much fuller analysis proffered by Lord Reed, the arguments raised by the Treasury to justify the Direction are not particularly strong, and the financial consequences of the Direction and subsequent Order against the Bank, which is not suggested to have intentionally supported the programme, are very grave.
The Treasurys case is further weakened by the fact that, when it gave the Direction and promulgated the Order, it believed that the great majority of the shares in Bank Mellat were owned by the Iranian government, which is, and at all material times, was not the case.
It is not a major point, but it does have a little traction, given that the grounds for the Direction are not particularly strong, and that this mistake does have some bearing on the Treasurys ground (iv) in para 10.
All in all, while the four grounds summarised in para 170 above, even when taken together, are not overwhelming, I have reached the conclusion that they are strong enough to justify the Treasurys contention that, despite the very serious financial consequences for Bank Mellat, the Direction was given on grounds which were unassailable as a matter of law.
The Direction was in an area, and related to an issue, in respect of which the courts should accord the executive a wide margin of appreciation, and, while the grounds advanced by the Treasury for giving the Direction do not appear very strong on examination, they are rational and they have some force.
In those circumstances, were it not for the grave effect of the Direction on the Bank, I would fairly readily have concluded that the Treasury had acted lawfully in giving it.
However, I entertain real doubt as to whether the Direction was justifiable once one weighs the benefits it was likely to achieve, in the light of the relative weakness of the grounds, against the inevitable and substantial harm it would cause to Bank Mellat.
However, in the end, I am not persuaded that a court can properly conclude that the benefit of the Direction must have been so slight that the Treasury could not reasonably have concluded that it was right to give it, notwithstanding the harm the Bank would thereby suffer.
On my view of the facts on the second reason identified in para 168 above, it is unnecessary to decide the further question of principle which divides Lord Sumption and Lord Reed, which the latter discusses in paras 123 124.
I prefer to leave that question open.
If the Treasurys justification for giving the Direction, and Ministers explanation for it to Parliament, had been that Bank Mellat knew that it was funding entities which supported the programme, which the Treasury now accepts would not have been right, a not unfamiliar question would arise.
That question is the extent to which the court should uphold a decision of the executive which was justified by one reason when it was made, but when the matter comes to court, the reason is abandoned and the decision is sought to be justified by a different reason.
It is an issue on which there are a number of judicial observations in a domestic judicial review context, most famously perhaps that of Megarry J in an oft quoted passage in John v Rees [1970] Ch 345, at p 402, cited with qualified approval on a number of occasions, eg in Secretary of State for the Home Department v AF [2010] 2 AC 269, paras 61 2 and 73.
I would have thought that there was room for argument as to how such a question should be approached in the present context, following the introduction of the European Convention on Human Rights into UK law, especially as this is a case where the Convention is engaged (through Article 1 of the First Protocol), where proportionality is referred to in the empowering statute, and where the decision has been put before, and approved by, Parliament.
The procedural ground of challenge
As Lord Sumption says in paras 29 30, where the executive intends to exercise a statutory power to a persons substantial detriment, it is well established that, in the absence of special facts, the common law imposes a duty on the executive to give notice to that person of its intention, and to give that person an opportunity to be heard before the power is so exercised.
While this has been described as a rule of universal application founded upon the plainest principles of justice (per Willes J in Cooper v Board of Works for the Wandsworth District (1863) 14 CB (NS) 180, 190), it has more recently been expressed in somewhat more measured terms.
In R v Secretary of State for the Home Department Ex p Doody [1994] 1 AC 531, 560, Lord Mustill said that fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations either before the decision is taken ; or after it is taken, with a view to procuring its modification.
In my view, the rule is that, before a statutory power is exercised, any person who foreseeably would be significantly detrimentally affected by the exercise should be given the opportunity to make representations in advance, unless (i) the statutory provisions concerned expressly or impliedly provide otherwise or (ii) the circumstances in which the power is to be exercised would render it impossible, impractical or pointless to afford such an opportunity.
I would add that any argument advanced in support of impossibility, impracticality or pointlessness should be very closely examined, as a court will be slow to hold that there is no obligation to give the opportunity, when such an obligation is not dispensed with in the relevant statute.
For the reasons given by Lord Sumption in paras 28 49, I consider that the Direction in this case was invalid owing to the failure of the Treasury to afford Bank Mellat the opportunity of making representations prior to its being made.
Because of the division of opinion on this issue, I will attempt to summarise my
reasons
On the face of it at least, this was a paradigm case for the giving of prior notice. (i) The Direction was targeted at just two entities, one of which was the Bank; (ii) the consequences of giving the Direction and the making of the Order would clearly be drastic so far as the Bank was concerned; (iii) there was no need for secrecy or great haste in giving the Direction; (iv) the Direction would come into effect virtually at once; (v) the reasons for the Direction and Order were all based on the Banks dealings and ownership, so there could have been little doubt but that the Bank would have had relevant things to say about the proposed direction.
On this last point, the Banks knowledge of its customers activities, the Banks ability to deal with the problem of unknowingly assisting the programme, and the ownership of the Bank are all points on which the Bank would have made strong and relevant representations if it had been given the chance to do so.
Despite this, Bank Mellat was given no notice of the Treasurys intention to give the Direction against it or to put the Order before Parliament, and therefore it had no opportunity to put its case as to why such a direction should not be made.
The Treasury raised a number of arguments as to why it was entitled not to give notice to the Bank of its intention to give the Direction.
Some of those arguments were based on provisions of the 2008 Act; others were based on impracticality.
I have no hesitation in rejecting the arguments based on impracticality, namely that (i) notice would have given the Bank the opportunity to re arrange its relationships, (ii) notice would have been ineffective or difficult because of the Treasurys reliance on secret material, (iii) notice would have to have been given to all those who dealt with the Bank, which would not have been realistic.
As to those arguments, I have nothing to add to what Lord Sumption says at paras 31 32.
I turn then to the Treasurys arguments based on the terms of the 2008 Act.
There is nothing in the express terms of the statute which assists the Treasury, and it therefore has to rely on implication.
In that connection, two arguments are raised as to why no consultation was required, namely (i) the fact that the Order had to be approved by affirmative resolution in both Houses of Parliament, and (ii) section 63 of the 2008 Act (section 63) entitled Bank Mellat to challenge any direction, and thus any consequential order, after it was made, and, when taken together with other provisions of Schedule 7, it is clear that there was no duty to have prior consultation.
I would reject the contention that the fact that the Direction is enshrined in, or approved by, the Order means that its validity cannot be considered by the court.
I agree with what is said by Lord Sumption in paras 40 45 and by Lord Reed in para 54.
The fact that the Order in the present case was confirmed by Parliament does not detract from the applicability of the rule, in so far as it applies to the actions of the executive, i.e. the Treasury decision to make the Direction, as opposed to the legislative decision to confirm the consequent Order.
Consequently, if the administrative decision to make the Direction was legally flawed for failure to consult the Bank, then the consequential Order should be quashed.
There is no question of such a decision of this court in any way impinging on the sovereignty of Parliament.
Lord Reed, however, relies in para 61 on para 14(5) of Schedule 7, which provides that if an order under Schedule 7 would be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not such an instrument.
In my view, the provision takes the matter no further, as it relates to the characterisation of, and Parliamentary processes relating to the making of, an order.
I do not, with respect, see how it can impinge on the lawfulness of the Treasurys processes when deciding to make the antecedent direction.
If anything, the exclusion of Bank Mellat from the Parliamentary process, as illuminatingly explained by Lord Hope, seems to me to support the argument that the Bank ought to have been consulted earlier.
As to the Treasurys second argument, it may be that, in some cases, the fact that the statute granting the power in question gives a specific right of challenge subsequent to its exercise can be enough to dispense with any prior obligation to consult.
However, in my view, it is by no means a sufficient answer in many cases.
As a matter of logic, the two rights are a long way away from being mutually inconsistent or even duplicative.
Indeed, if it were otherwise, the right to be consulted would be very rare, because, as Lord Sumption points out in para 37, there is almost always a right to challenge a decision of the executive as a matter of public law.
A right to be consulted before a power is exercised is very different in its nature and in its potential effect from a right to challenge it after it has been exercised.
The former involves representations to the intending exerciser of the power in relatively informal and flexible circumstances with a variety of possible outcomes, whereas the latter involves arguing against the exerciser in a formal, forensic context, where the courts powers are relatively constrained.
In an era where mediation is increasingly supported, not least by the executive, the desirability of prior consultation, even where subsequent challenge through the courts is possible, is at least as great as it ever was.
As between the two rights, the present case provides a very good demonstration of the difference between them in terms of their effect.
The right to challenge a direction under Schedule 7 has many drawbacks compared with a right to be consulted before the direction is given.
Particularly as the Direction has virtually immediate effect, the time it may take to challenge any subsequent order, coupled with the uncertainty while such challenge is under way, and the costs involved in such a challenge, mean that a subsequent right of challenge would be much less valuable than a right to make representations in advance.
Further, there must be a real risk of a significant adverse effect on a banks reputation if a direction is made, even if it is subsequently quashed.
Ignoring the subsequent appeals, well over seven months elapsed between the giving of the Direction in this case and Mitting Js decision as to its validity.
Seven months is a very long time from the Banks perspective, and, even viewed objectively, it is a long time given that the Direction was only to last for twelve months.
I am unimpressed by the Treasurys reliance on section 63.
It purports to grant little, if anything, more than a specific statutory right to persons against whom a direction is made than they would be accorded by public law.
That is clear from subsection (3) which provides that, on any challenge to a direction the court shall apply the principles applicable on an application for judicial review.
Unlike Lord Reed in para 62, I do not see section 63 as giving greater rights to a person against whom a direction is made than they would enjoy under public law; nor do I consider that sections 65 68 of the 2008 Act suggest otherwise.
Those sections were included, in my view, to deal with the need to protect confidential material in any proceedings under section 63.
Indeed, I suspect that section 63 was included in the Act because it was more sensible in drafting terms to link those procedures to proceedings specified in the 2008 Act.
Lord Reed identifies a number of other factors in paras 58 62 of his judgment which, when taken together with sections 63, and 65 8, of the 2008 Act, persuade him that the normal duty to consult has been abrogated.
I do not agree.
At a high level, I consider that, while the right to be consulted in advance about the exercise of a statutory power which will cause significant harm can be abrogated by implication in the statute, the right is so important that the implication must be very clear.
More specifically, I am unimpressed with the various other factors which weigh with Lord Reed.
The difficulty of consulting because of the need for confidentiality does not impress me for the reason given by Lord Sumption in para 31.
It may be that, where the Treasury was proposing to make a direction against another bank or banks in different circumstances, it may not be practicable to give it or them to give an opportunity to comment, but such a point must be assessed on a case by case basis and in this case it fails for the reasons given by Lord Sumption in paras 31 33.
As already explained, I do not consider that para 14(5) of Schedule 7 assists.
Nor do I find para 15 of Schedule 7 of much help.
The 2008 Act clearly had to specify the date from which a direction took effect, and where the direction concerned a specific person, as in this case, it was obviously sensible to provide that it took effect on the date on which it was served on that person.
I find it impossible to think of any other way of ensuring both clarity and fairness.
Conclusion
In my view, therefore, Bank Mellats appeal should be allowed, the direction made by the Treasury should be set aside, and the Order quashed.
I end by pointing out that the two grounds of challenge to the Direction in this case are not entirely unrelated either in principle or in fact.
The uniting principle which applies both to the Banks substantive challenge and to its procedural challenge is the fundamental public law rule that the executive must exercise a statutorily conferred power fairly.
When it comes to giving a direction under Schedule 7 which will foreseeably and substantially harm an entity, fairness requires the Treasury to have good enough reasons for giving the direction.
It equally requires the Treasury to give the entity notice of the intention to give the direction, so that the entity can make representations about it in advance.
So far as the facts are concerned, I have explained in paras 170 174 above why there is in my view considerable force in the Banks substantive challenge to the giving of the Direction, The fact that the justification for the Direction was not very strong, coupled with the more specific facts that the Treasury was wrong about the ownership of Bank Mellat and could usefully have discovered what steps the Bank was taking to avoid inadvertently supporting the programme, provide specific and practical support for the conclusion that the Bank should have been given an opportunity to make representations before the Direction was given.
LORD DYSON (dissenting in part)
I agree, for the reasons given by Lord Sumption, that the appeal should be allowed on the procedural issue.
I was at first persuaded by Lord Sumptions judgment that the appeal should also be allowed on the substantive issue.
But, like Lord Hope and Lord Neuberger, I find Lord Reeds analysis at paras 102 to 117 and 118 to 122 more convincing.
Like Lord Neuberger, I express no view on paras 123 and 124 of Lord Reeds judgment.
The Treasury has explained why Bank Mellat was singled out.
The explanation is summarised at paras 103 to 106 and 113 of Lord Reeds judgment.
Lord Sumption accepts (para 27) that the Schedule 7 direction may well have added something to Irans practical problem in financing transactions associated with its weapons programmes.
But he concludes that the direction was irrational in its incidence and disproportionate to any contribution which it could rationally be expected to make to its objective.
This conclusion is based on (i) making an assessment of what effect the direction would have on Irans ability to finance the weapons programme and (ii) conducting a proportionality exercise by balancing that effect against the undoubtedly grave consequences that the direction would have for Bank Mellat.
As Lord Sumption acknowledges at para 21, any assessment of the rationality and proportionality of the direction must recognise that the nature of the issue requires that the Treasury be allowed a large area of judgment or margin of appreciation.
The court is in a poor position to weigh the effectiveness of a measure whose object is to reduce (if not eliminate) Irans ability to fund its weapons programmes.
This is not an area in which the court has any expertise.
Accordingly, it should only hold that such a measure is irrational or disproportionate if it is confident that this has been clearly demonstrated.
For the reasons given by Lord Reed, I am not confident that this has been done in the present case.
I would therefore dismiss the appeal on the substantive issue.
LORD CARNWATH (dissenting in part)
judgments in support, I do not propose to add anything of my own.
It seems better that Lord Sumptions reasoning should stand as the single majority judgment on this crucial issue.
On the procedural point, by contrast, I find myself clearly on the side of the minority, agreeing wholly with the reasoning of Lord Hope on what I regard as a point of considerable general importance (paras 134 159).
Like the other partial dissentients my views on the substantive issue have wavered.
In the end however I am persuaded by Lord Sumption that the appeal should succeed on that issue for the reasons he gives (his paras 19 27).
Notwithstanding the force of Lord Reeds alternative analysis, and the other
| UK-Abs | This appeal concerns the use of a closed material procedure (CMP) in the Supreme Court.
A CMP involves the production of material which is so confidential and sensitive that it requires the court not only to sit in private, but to sit in a closed hearing.
At a closed hearing, the court considers the material and hears submissions about it without one of the parties to the appeal seeing the material or being present, although that partys interests are protected, at least to an extent, by the presence of special advocates who make such submissions as they can on behalf of that party.
A CMP also involves the court at least contemplating giving a judgment, part of which will be closed and not be seen by one of the parties or the public.
Pursuant to various provisions of the Counter Terrorism Act 2008 (the 2008 Act), the Treasury made the Financial Restrictions (Iran) Order 2009 (the 2009 Order), which Parliament subsequently approved.
The 2009 Order effectively shut down the United Kingdom operations of Bank Mellat (the Bank) and its subsidiary.
Section 63 of the 2008 Act gives any party affected by such an order the right to apply to the High Court to set it aside.
The Bank made such an application.
The Government took the view that some of the evidence relied on by the Treasury to justify the 2009 Order was of such sensitivity that it could not be shown to the Bank or its representatives.
In the High Court, Mitting J accepted the Governments case that justice required that the evidence in question be put before the court and that it had to be dealt with by a CMP.
The hearing before him was partly in open court and partly at a closed hearing.
Mitting J handed down an open judgment, in which he dismissed the Banks application, and a shorter closed judgment, which was seen by the Treasury, but not by the Bank, and is not publicly available.
In the Court of Appeal, the appeal was heard largely by way of an open hearing.
However, there was a short closed hearing at which the closed judgment of Mitting J was considered.
The Court of Appeal dismissed the Banks appeal in an open judgment, and while it referred in general terms to the closed material in that open judgment, the Court of Appeal found it unnecessary to give a closed judgment.
Before the Supreme Court, the Banks appeal was divided into two issues.
The first issue concerned the use of a CMP in the Supreme Court.
The second issue concerned the Banks appeal against the Court of Appeals decision to approve Mitting Js upholding of the 2009 Order.
This judgment is on the first issue.
A second judgment is given on the second issue: see Bank Mellat v Her Majestys Treasury (no. 2) [2013] UKSC 39.
The Supreme Court decides (i) by a majority of six to three (Lord Hope, Lord Kerr and Lord Reed dissenting), that it is possible for the Supreme Court to adopt a CMP on an appeal, (ii) by a majority of five to four (Lord Hope, Lord Kerr, Lord Dyson, and Lord Reed dissenting), that it was appropriate to adopt a CMP in this appeal.
Lord Neuberger gives the judgment of the majority on both (i) and (ii).
Closed material procedures in the Supreme Court Section 40(2) of the Constitutional Reform Act 2005 (the 2005 Act) provides that an appeal lies to the Supreme Court against any judgment of the Court of Appeal.
That must extend to a judgment which is wholly or partially closed.
It would appear to be implicit in the notion that an appeal can be brought against a closed judgment that the appellate court can consider the closed judgment, and, at least at first sight, that could only be done at a closed hearing.
That view is reinforced once one considers the other alternative courses of action, all of which are patently unsatisfactory [38] [42].
The notion that the Supreme Court has power to take such a course is reinforced by section 40(5) of the 2005 Act, which gives the Court the power to determine any question necessary for the purposes of doing justice [37].
Therefore, the Supreme Court can conduct a CMP where it is satisfied that it may be necessary to do so in order to dispose of an appeal [43].
It follows that the Supreme Court has the power to entertain a CMP on appeals against decisions of the courts of England and Wales on applications brought under section 63 of the 2008 Act [47].
Where a CMP has been adopted at first instance and in the Court of Appeal, for the Supreme Court to entertain an appeal without considering the closed material would, at least in many cases, not be doing justice, either in the sense of fairly determining the appeal, or in the sense of being seen fairly to determine the appeal [44].
The minority consider that Parliament has not conferred the power to conduct a CMP on the Supreme Court [78],[134].
For the Supreme Court to conduct a CMP would be contrary to the fundamental principle of the common law right to a fair trial [103],[138].
There is a strong presumption that Parliament does not intend to interfere with the exercise of fundamental rights, and it will be understood as doing so only if it does so expressly or by necessary implication [105],[135].
In the 2008 Act, Parliament introduced a CMP for the High Court, the Court of Session, and the Court of Appeal, but did not introduce such a procedure for the Supreme Court [125].
It is inconceivable that it was intended that the Supreme Court should have the power to carry out a CMP while leaving it bereft of the structure and safeguards which were deemed essential for those courts in which such a hearing is expressly permitted [116].
There are alternatives to CMPs in the Supreme Court, and choices to be made in relation to them, which are appropriately made by Parliament after full consideration [137].
Closed material procedure in this appeal Despite strong suspicions that nothing in Mitting Js closed judgment would have any effect on the outcome of the appeal, the majority decided to grant the Treasurys request to hold a CMP to consider it.
This was because they could not be sure, without seeing the closed judgment and listening to submissions on it, whether the closed judgment would have any effect on the outcome of the appeal, and there seemed to be a real risk of justice not being seen to be done to the Treasury if the Supreme Court did not proceed to hold a closed hearing [64].
Having held a closed hearing, it turned out that there had been no point in the Supreme Court seeing the closed judgment, because there was nothing in it which could have affected the Supreme Courts reasoning in relation to the substantive appeal on the 2009 Order [65] [66].
Several conclusions can be drawn from this experience, which should be considered by any appellate court considering whether to adopt a CMP and by any advocate considering inviting an appellate court to take such a course [67] [74],[89] [97].
The minority consider that the Treasury fell far short of what was needed to show that a CMP was necessary in this case [90],[130],[139],[145].
This was because (i) the Court of Appeal did not find it necessary to refer to the closed judgment in any detail [91], (ii) there was no closed ground of appeal in this case [92], and (iii) the Treasury failed to indicate how looking at the closed judgment would assist in the disposal of the appeal [93] [96].
A CMP should be resorted to only where it has been convincingly demonstrated to be genuinely necessary in the interests of justice [128],[140].
If the Court strongly suspects that nothing in the closed material is likely to affect the outcome of the appeal, it should not order a closed hearing [144].
|
On 26 October 2010 this Court issued its judgment in Cadder v HM Advocate [2010] UKSC 43, 2010 SLT 1125.
It held that the Crowns reliance on admissions made by an accused without legal advice when detained under section 14 of the Criminal Procedure (Scotland) Act 1995 gave rise to a breach of his right to a fair trial, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421.
This was because the leading and relying on the evidence of the appellants interview by the police was a violation of his rights under article 6(3)(c) read in conjunction with article 6(1) of the European Convention on Human Rights: see Cadder v HM Advocate, para 63.
The evidence that was in question in Cadder had been obtained when the appellant was being questioned while in detention at a police station.
The applicant in Salduz too had been taken into custody before he was interrogated during his detention by police officers of the anti terrorism branch of the Izmir Security Directorate.
But the facts of those cases by no means exhaust the situations in which the prosecution may seek to rely on answers to questions that have been put to the accused by the police.
The Court now has before it four references by judges of the High Court of Justiciary which have been required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998.
Common to them all is the fact that incriminating answers were given to questions put by the police when the accused did not have access to legal advice.
In three of them the evidence that is objected to was obtained by the police otherwise than by questioning at a police station following detention under section 14 of the 1995 Act.
They can be grouped together and are the subject of this judgment.
The fourth is concerned with the question whether the ratio of the decision in Salduz extends to lines of enquiry to which the accuseds answers to questions while in detention have given rise.
That reference is dealt with in a separate judgment: P v HM Advocate [2011] UKSC 44.
The issues that the first three references raise are (1) whether the right of access to a lawyer prior to police questioning, which was established by Salduz, applies only to questioning which takes place when the person has been taken into police custody; and (2) if the rule applies at some earlier stage, from what moment does it apply.
The first reference is of a case which is the subject of an appeal against conviction.
The second is of a case which is before the Appeal Court in an appeal against a ruling by a sheriff on the admissibility of evidence.
The third is of case which is the subject of a devolution minute which was referred by the trial judge to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998.
The cases that are the subject of the second and third references that have not yet gone to trial, so the names of the parties involved have been anonymised.
In each case the reference has been made by the Appeal Court at the request of the Lord Advocate.
The first reference
The appellant in the first case, John Paul Ambrose, was prosecuted on summary complaint at Oban Sheriff Court on a charge of contravening section 5(1)(b) of the Road Traffic Act 1988 as being in charge of a motor vehicle whilst having consumed a level of alcohol in excess of the prescribed limit.
He had been found by two police officers sitting in the passenger seat of a car parked by the roadside.
A female was sitting in the drivers seat.
A member of the public had expressed concerns to the police about them because they were thought to be drunk.
As there was vomit beside the drivers door and the female was seen to be upset, the police officers decided to speak to the appellant.
Having formed the view that he had been drinking, one of the police officers cautioned the appellant but did not give him any specification about the offence which he was suspected of having committed.
The appellant made no reply when cautioned.
He was then asked three questions, to which he gave answers, by the police.
They were as follows: Q Where are the keys for the vehicle? A In my pocket.
Q Do you drive the car? A Yes.
Q Are you going to drive the car? A Ah, well she wisnae well or Aye, well she wisnae well.
The appellant then removed the car keys from his trouser pocket.
He was asked whether he had anything to drink in the last 20 minutes and replied that he had not.
He was then given a roadside breath test which he failed.
He was taken to Oban police station where he gave a breath/alcohol reading that was well in excess of the prescribed limit.
The appellant pled not guilty to the complaint.
He went to trial before a
Sheriff on 31 May 2010 and 2 July 2010.
The evidence of the questions and answers was led without objection from his solicitor.
After the Crown had closed its case the appellants solicitor challenged the admissibility of this evidence on the ground that the police had not informed the appellant of the offence of which he was suspected before he was questioned.
The sheriff repelled this submission.
After hearing evidence from the appellant and a defence witness, he found the appellant guilty.
He was fined 375, was disqualified from driving for two years and had his licence endorsed.
The appellant then lodged an appeal against his conviction.
Among the grounds on which he applied for a stated case was the submission that the act of the Lord Advocate in seeking a conviction in reliance on the evidence of the police interview was incompatible with his right to a fair trial under article 6(1).
Leave to appeal having been refused at the first sift, he appealed to the second sift and then lodged a devolution minute in which it was stated that for the Lord Advocate to support the conviction would be incompatible with his rights under article 6(1) and article 6(3)(c).
In a note which he lodged on 12 October 2010 in support of the appeal he submitted, with reference to the decision in Salduz, that the use of the evidence of the interview was unfair as he did not have access to legal representation before or during the police interview.
On 3 November 2010 leave to appeal was granted at the second sift.
Following a procedural hearing on 26 January 2011 and at the request of the
Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125.
The second reference
The accused in the second case, referred to as M, has been indicted in the
sheriff court on a charge of assault to severe injury, permanent disfigurement and permanent impairment.
Shortly after the assault took place on 30 August 2008, in the course of initial inquiries, the police took the accuseds details from him but allowed him to leave the locus.
On 4 September 2008 however he was traced to his home address where, after administering a common law caution to the effect that he was not required to say anything but that anything he did say might be used in Page4 evidence, a police officer asked a total of seven questions, each of which was answered by the accused.
They were as follows: Q I am investigating a serious assault which happened on Saturday night there, within a bar named [X].
There was a large disturbance in there too.
Were you there? A Yes, aye.
Q Were you involved in the fight? A Aye.
Q Who were you with? A My dad and just boys fae [Y] where I used to work.
Q Were they involved too? A I think so, the other boys started it.
I got punched a couple of times on the eyebrow.
Its still sair.
Q OK, what were you wearing? A Pale blue t shirt, jeans, trainers.
Q OK [M], I will stop there.
I need to speak to you further except it will be recorded in a taped interview format.
Can you be at [Z] Police Office tomorrow night at 8 pm? A Yes.
Q I need to take your t shirt you had on, is that OK? A Aye.
At this point the police officer concluded his questions because he felt that it had become obvious that the accused had some involvement on the incident and that it was not appropriate to carry out an interview there.
The accused attended the police office the next day.
He was then detained and interviewed under section 14 of the 1995 Act, in the course of which he made further admissions.
The accused was indicted for trial, and after sundry procedure he lodged a minute raising the issue whether the Crown had power to lead evidence of the admissions which he had made.
When the minute was argued before the sheriff on 9 November 2010 the Crown conceded that the evidence of the admissions made during the section 14 interview was inadmissible.
But the sheriff ruled that evidence relating to the questions and answers at the accuseds home on 4 September 2008 was admissible.
The accused appealed against that decision to the High Court of Justiciary, contending that by failing to allow him access to legal advice prior to interview and there being no compelling reasons to justify this, his admissions allegedly obtained under caution had been unfairly obtained and were therefore inadmissible.
Following a procedural hearing on 26 January 2011 and at the request of the Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice would be incompatible with the accuseds rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125.
The third reference
The accused in the third case, referred to as G, has been indicted in the High Court of Justiciary with offences including the possession of controlled drugs under the Misuse of Drugs Act 1971 and possession of prohibited firearms and ammunition under the Firearms Act 1968.
The police had obtained a search warrant under the 1971 Act for the search of a flat where on 4 June 2008, having forced entry, they found the accused.
Before commencing the search in terms of the warrant the accused, who had been handcuffed following a struggle, was cautioned in these terms: A systematic search will be carried out in your presence.
I must caution that you are not obliged to say anything or make any comment regarding any article that may be found, but anything you do say will be noted and may be used in evidence.
The accused was then detained and searched.
Prior to being searched he admitted to having drugs in his jeans pocket, from which a bag of brown powder was recovered that was later found to be heroin.
He was then arrested for contravention of section 23(4) of the 1971 Act.
He was not arrested or charged with any other offence in the course of the search of the premises.
During the search he was asked questions about the items which were found.
He was not offered access to legal advice or to a solicitor before being asked these questions.
After the search was concluded he was removed to a police station where he was detained under section 14 of the 1995 Act and again interviewed by the police in connection with alleged offences involving controlled drugs and firearms.
He was not allowed access to legal advice before or during this interview.
The Crown does not seek to rely on answers which the accused gave while he was being interviewed in the police station, but it seeks to rely on the statements and answers which he made at the premises in the course of the search.
They are set out in a schedule which was completed as the search of the flat was carried out.
Without that evidence there would not be sufficient evidence to convict the accused.
The accused has lodged a devolution minute in which he contends that the leading of evidence of the statements and answers which he made at the premises would be incompatible with his Convention right to a fair trial.
The trial judge decided to refer this issue to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998.
On 18 January 2011 at the request of the Lord Advocate the Appeal Court referred the following question to this court: Is it incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule?
In each of these three cases the circumstances differ from those that were before the court in Cadder and before the Grand Chamber in Salduz.
The evidence that is objected to was obtained, in Ambroses case before he was taken to the police station for further procedures to be carried out under section 7 of the Road Traffic Act 1988 following his failure of a road side breath test, and in the cases of M and G before they were detained and questioned at a police station under section 14 of the 1995 Act.
It is precisely because the issue that the references raise was not the subject of decision in either case that the courts guidance is now sought by the Lord Advocate.
His position is that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz.
These features are all taken from words used by the Grand Chambers judgment in that case: see paras 55 and 56.
First, he must be a suspect.
Second, he must be in police custody.
Third, he must be the subject of police interrogation.
Unless all three features are present, he has no right of access to legal advice under article 6.
These propositions all assume, of course, that the court finds that article 6(1) was engaged when the incriminating statements were made.
This is because the protection of articles 6(1) and 6(3)(c) is afforded only to those who have been charged, as that word has been interpreted by the Strasbourg court.
Each of these expressions will need to be analysed in the discussion that follows.
Background
Two very important points need, however, to be made at the outset.
The first is that the jurisdiction of this court is limited to a consideration of the devolution issue which is raised by each of these references.
That is plain from the wording of paragraph 33 of Schedule 6 to the Scotland Act 1998 under which the references have been made, but it needs to be emphasised yet again.
The High Court of Justiciary is the court of last resort in all criminal matters in Scotland: see section 124(2) of the Criminal Procedure (Scotland) Act 1995; McInnes v HM Advocate [2010] UKSC 7, 2010 SLT 266, para 5, Fraser v HM Advocate [2011] UKSC 24, 2011 SLT 515, para 11.
It is not our function to rule on how the circumstances referred to in each case would fall to be dealt with under domestic law, although this does form part of the background.
The second point is that a decision by this court that there is a rule that a person who is suspected of an offence but is not yet in custody has a right of access to a lawyer before being questioned by the police unless there are compelling reasons to restrict that right would have far reaching consequences.
There is no such rule in domestic law: see para 22, below.
If that is what Strasbourg requires, then it would be difficult for us to avoid holding that to deny such a person access to a lawyer would be a breach of his rights under articles 6(1) and 6(3)(c) of the Convention.
But the consequences of such a ruling would be profound, as the answers to police questioning in such circumstances would always have to be held in the absence of compelling reasons for restricting access to a lawyer to be inadmissible.
The effect of section 57(2) of the Scotland Act 1998 would be that the Lord Advocate would have no power to lead that evidence.
I agree with Lord Matthew Clarke that this would have serious implications for the investigation of crime by the authorities: see para 116, below.
This suggests that a judgment pointing unequivocally to that conclusion would be required to justify taking that step.
If Strasbourg has not yet spoken clearly enough on this issue, the wiser course must surely be to wait until it has done so.
Section 126(1) of the Scotland Act 1998 provides that the Convention rights has the same meaning as in the Human Rights Act 1998.
Section 2(1) of the Human Rights Act requires this court in determining any question which has arisen in connection with a Convention right to take into account any relevant Strasbourg case law.
In R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 26 Lord Slynn of Hadley said that, although the Human Rights Act did not provide that a national court is bound by these decisions, it is obliged to take account of them so far as they are relevant: In the absence of some special circumstances it seems to me that the court should follow any clear and constant jurisprudence of the European Court of Human Rights.
If it does not do so there is at least a possibility that the case will go to that court, which is likely in the ordinary case to follow its own constant jurisprudence.
In R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 Lord Bingham of Cornhill said that Lord Slynns observations in that case reflected the fact that the Convention is an international instrument, the correct interpretation of which can be expounded only by the Strasbourg court.
From that it followed that a national court should not without strong reason dilute or weaken the effect of the Strasbourg case law.
It was its duty to keep pace with it as it evolved over time.
There is, on the other hand, no obligation on the national court to do more than that.
As Lord Bingham observed, it is open to member states to provide for rights more generous than those guaranteed by the Convention.
But such provision should not be the product of interpretation of the Convention by national courts.
Lord Kerr says that it would be wrong to shelter behind the fact that Strasbourg has not so far spoken and use that as a pretext for refusing to give effect to a right if the right in question is otherwise undeniable: para 130, below.
For reasons that I shall explain later, I do not think that it is undeniable that Strasbourg would hold that any questions put to a person by the police from the moment he becomes a suspect constitute interrogation which cannot lawfully be carried out unless he has access to a lawyer, which is the principle that Lord Kerr derives from his consideration of the mainstream jurisprudence: see para 146, below.
But his suggestion that there is something wrong with what he calls an Ullah type reticence raises an important issue of principle.
It is worth recalling that Lord Binghams observations in Ullah were not his first pronouncements on the approach which he believed should be taken to the Convention.
In Brown v Stott 2001 SC (PC) 43, 59 he said: In interpreting the Convention, as any other treaty, it is generally to be assumed that the parties have included the terms which they wished to include and on which they were able to agree, omitting other terms which they did not wish to include or on which they were not able to agree.
Thus particular regard must be had and reliance placed on the express terms of the Convention, which define the rights and freedoms which the contracting parties have undertaken to secure.
This does not mean that nothing can be implied into the Convention.
The language of the Convention is for the most part so general that some implication of terms is necessary, and the case law of the European Court shows that the court has been willing to imply terms into the Convention when it was judged necessary or plainly right to do so.
But the process of implication is one to be carried out with caution, if the risk is to be averted that the contracting parties may, by judicial interpretation, become bound by obligations which they did not expressly accept and might not have been willing to accept.
As an important constitutional instrument the Convention is to be seen as a living tree capable of growth and expansion within its natural limits (Edwards v Attorney General for Canada ([1930] AC 124) at p 136 per Lord Sankey LC), but those limits will often call for very careful consideration.
The consistency between this passage and what he said in Ullah shows that Lord Bingham saw this as fundamental to a proper understanding of the extent of the jurisdiction given to the domestic courts by Parliament.
Lord Kerr doubts whether Lord Bingham intended that his discussion of the issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they had been pronounced upon by Strasbourg: para 128, below.
I, for my part, would hesitate to attribute to him an approach to the issue which he did not himself ever express and which, moreover, would be at variance with what he himself actually said.
Lord Binghams point, with which I respectfully agree, was that Parliament never intended to give the courts of this country the power to give a more generous scope to those rights than that which was to be found in the jurisprudence of the Strasbourg court.
To do so would have the effect of changing them from Convention rights, based on the treaty obligation, into free standing rights of the courts own creation.
That is why, the courts task in this case, as I see it, is to identify as best it can where the jurisprudence of the Strasbourg court clearly shows that it stands on this issue.
It is not for this court to expand the scope of the Convention right further than the jurisprudence of the Strasbourg court justifies.
The background in domestic law
The powers of the police to detain a person and to subject him to questioning depend on the category into which the person falls at the time these powers are being exercised.
They differ according to whether the person is a witness, a suspect or an accused.
Where a person is not under suspicion, the police have no power to take him into custody or to compel him to submit to police questioning.
Such a person is classified, at most, as a witness.
A person who is in that category can be asked to provide personal information, such as his name and address.
Further questions may be put as part of a routine investigation into the events that have happened.
So long as he is being questioned as a potential witness rather than as a suspect, the right to protection against self incrimination is not in play.
There is no obligation to advise him of his rights, such as the right to silence or his right to seek legal advice.
As Lord Justice Clerk Thomson said in Chalmers v HM Advocate 1954 JC 66, 81, a person ultimately accused may be interviewed as part of the ordinary routine investigation of the police into the circumstances of the crime.
It would unduly hamper the investigation of crime if the threat of inadmissibility were to tie the hands of the police in asking questions at this stage.
The position changes if the stage is reached when suspicion begins to fall on the person who is being questioned.
Once suspicion has begun to fall on him the need to protect him against self incrimination comes into play.
As Lord Justice General Cooper explained in Chalmers v HM Advocate 1954 JC 66, 78: The theory of our law is that at the stage of initial investigation the police may question anyone with a view to acquiring information which may lead to the detection of the criminal; but that, when the stage has been reached at which suspicion, or more than suspicion, has in their view centred upon some person as the likely perpetrator of the crime, further interrogation of that person becomes very dangerous, and, if carried too far, eg to the point of extracting a confession by what amounts to cross examination, the evidence of that confession will almost certainly be excluded.
It was for a time thought that this passage was to be taken to establish that answers by suspects to police questioning were inadmissible by virtue of the persons position as a person under serious consideration as the perpetrator of the crime.
But, as the law has developed, the position is less easy to define: see Renton and Brown, Criminal Procedure, 6th ed looseleaf (1996), para 24 38.
In Miln v Cullen 1967 JC 21 it was held that the incriminating answers which the driver of a car gave when questioned by police officers who had formed the opinion that he was under the influence of drink were admissible in evidence.
Lord Justice Clerk Grant said at p 25 that the constable, in asking the simple question whether he was the driver, was not merely acting reasonably, properly and fairly but was acting in accordance with the duties incumbent upon him.
Lord Wheatley said at pp 30 31 that it was difficult to define with exactitude when a person becomes a suspect in the eyes of a police officer, as it may vary from a very slight suspicion to a clearly informed one, and that what happened after that had to be judged by the test of fairness.
In Lord Advocates Reference (No 1 of 1983) 1984 JC 52, 58 Lord Justice General Emslie said that Lord Wheatleys statement in Miln v Cullen, at p 31 that in each case the issue is whether the question was in the circumstances a fair one was a sound statement of the law: A suspects self incriminating answers to police questioning will indeed be admissible in evidence unless it can be affirmed that they have been extracted from him by unfair means.
The simple and intelligible test which has worked well in practice is whether what has taken place has been fair or not? (see the opinion of the Lord Justice General (Clyde) in Brown v HM Advocate 1966 SLT 105 at 107).
In each case where the admissibility of answers by a suspect to police questioning becomes an issue it will be necessary to consider the whole relevant circumstances in order to discover whether or not there has been unfairness on the part of the police resulting in the extraction from the suspect of the answers in question.
He went on to say that, where the words interrogation and cross examination were used in the decided cases in discussing unfair tactics on the part of the police, they were to be understood to refer only to improper forms of questioning tainted with an element of bullying or pressure designed to break the will of the suspect or to force from him a confession against his will.
The current position as described in Renton and Brown, para 24 39 is therefore that the fact that the accused was at the time under suspicion or even under arrest is not in itself crucial.
It is merely a circumstance like any other to be taken into account in assessing the fairness of the police questioning.
The legal basis for detaining and questioning a suspect was clarified by section 2 of the Criminal Justice (Scotland) Act 1980 which was consolidated as section 14 of the Criminal Procedure (Scotland) Act 1995.
The background to the legislation was described with characteristic skill and attention to detail by Lord Rodger in Cadder, para 74 86.
As he explained in para 86, one aim was to put an end to the doubts about the legal basis for holding suspects for questioning when they had not been arrested.
Another was to clarify the law as to the power of the police to question suspects and as to the admissibility of any answers that the suspects gave to such questions.
A person may be detained for the purpose of carrying out investigations where a constable has reasonable grounds for suspecting that he has committed or is committing an offence punishable by imprisonment: section 14(1).
Where a person has been detained under section 14(1) a constable may, without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence: section 14(7).
The effect of the decision in Cadder is that the Lord Advocate has no power to lead and rely on answers by a detainee who was subjected to questioning by the police while he was without access to legal advice.
In none of the situations described in each of the references was the person who was being questioned a detainee under section 14 of the 1995 Act.
The domestic law test for the admissibility of the answers that were given to the questions put by the police is whether or not there was unfairness on the part of the police.
The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it is no more than that.
There is no rule in domestic law that says that police questioning of a person without access to legal advice who is suspected of an offence but is not in custody must always be regarded as unfair.
The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court.
The reasoning in Salduz
The starting point for an examination of this question must be the reasoning of the Grand Chamber in Salduz.
Some of the propositions that are set out in its judgment are expressed in a way that might suggest that the right of access to a lawyer is not confined to persons who are subjected to police questioning while they are in custody.
Para 55 of the judgment is in these terms: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Even where compelling reasons may exceptionally justify denial of access to a lawyer, such restriction whatever its justification must not unduly prejudice the rights of the accused under article 6.
The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction.
Read on its own, and without taking full account of the context in which these sentences were written, that paragraph suggests that the features which determine whether access to legal advice is to be provided are (a) that the person is a suspect, and (b) that he is subject to police interrogation.
No mention is made in this paragraph of his being in police custody.
The fact is, however, that the applicant was in police custody when he was interrogated by the police.
The narrative of the facts in paras 12 14 shows that it was not until after he had been taken into custody by police officers from the Anti Terrorism Branch of the Izmir Security Directorate that he was interrogated.
That being so, it is necessary to look elsewhere in the judgment to see whether the court was contemplating anything other than an interrogation in police custody when it came to set out what it did in para 55 of the judgment.
In Part II A of the judgment, under the heading Domestic law, the court referred to legislation in force at the time of the application which provided that anyone suspected or accused of a criminal offence had a right of access to a lawyer from the moment they were taken into police custody.
The reason why this had not been provided to the applicant was that the legislation did not apply to persons accused of offences falling within the jurisdiction of the state security courts, which his offence did.
The challenge, therefore, was to a systematic departure from the right of access to a lawyer which the law gave to everyone else.
In its examination of recent amendments in paras 29 31 of the judgment too its focus was on provisions that deal with juveniles taken into police custody.
That continued to be its focus in its examination of the relevant international law materials in Part IIB.
Chapter 1 of that Part refers to materials from the Council of Europe and the United Nations dealing with procedure in juvenile cases where the child had been deprived of his liberty by means of pre trial detention.
The heading of Chapter 2 is Right of access to a lawyer during police custody.
Reference is made in para 37 of the judgment to rule 93 of the Standard Minimum Rules for the Treatment of Prisoners adopted by the Council of Europe Ministers, which states that an untried prisoner shall be entitled as soon as he is imprisoned to choose his legal representatives and to receive visits from his legal adviser, and, in para 38, to a recommendation of the Committee of Ministers to Member States of the Council of Europe dealing with the right of prisoners to legal advice.
There is no sign here or in its examination of the United Nations materials in paras 41 42 that the Grand Chamber was interested in the position of suspects who were questioned by the police when not in custody.
Nor is there any sign of an international consensus that there is a right of access to a lawyer at that stage.
The part of the judgment which deals with the alleged violation of article 6 of the Convention begins at para 45.
The first section, which is headed Access to a lawyer during police custody, continues to para 63.
It includes para 55, which I have already quoted: see para 26, above.
In para 45 it is stated that the applicants allegation was that his defence rights had been violated as he had been denied access to a lawyer during his police custody.
The parties submissions, as narrated in paras 47 49 were directed to this issue.
There then follows a discussion of the general principles which were applicable to the case: paras 50 55.
In this passage, to which I will return, the court does not, at least in so many words, limit its scrutiny of the principles to what they require in cases where the person concerned is in police custody.
But in the next section, where it applies the principles to the case of applicant, the fact that he was in police custody lies at the heart of the discussion; paras 56 62.
The holding in para 80 states that there had been a violation of the applicants rights under article 6(1) in conjunction with article 6(3)(c) on account of the lack of legal assistance while he was in police custody.
But for the discussion of the relevant principles in paras 50 55, which is not so limited, there would be no doubt at all that the Grand Chambers declaration in the last sentence of para 55 that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction was directed to the situation where that interrogation took place while the person was in police custody.
That is the conclusion that one would naturally draw from the context.
The concurring opinions of Judge Bratza and Judge Zagrebelsky lend further support to this conclusion.
Judge Bratza said in para O I2 that, like Judge Zagrebelsky, he thought that the court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 required that, as a rule, a suspect should be granted legal advice from the moment he is taken into police custody or pre trial detention.
No mention is made in either of these opinions of any rule to the effect that the suspect should be granted legal advice at any earlier stage.
It may be, as Lord Rodger suggested in Cadder, para 70, that what these judges were contemplating was legal assistance for other purposes such as support for an accused who was distressed or to check on the conditions of detention.
Whatever the reason, they were plainly not addressing their remarks to situations such as those described in the references where the questioning took place before the suspect was taken into police custody.
The discussion of the general principles in paras 50 55 is not limited in this way.
As para 50 makes clear, the fact that the applicants case was concerned with pre trial proceedings did not mean that article 6 had no application.
The point is made that the fairness of a trial may be seriously prejudiced by an initial failure to comply with its provisions.
In para 51 reference is made to the right of everyone charged with a criminal offence to be effectively defended by a lawyer, the choice of means of ensuring this being left to the contracting states.
The paragraph ends with a warning that assigning counsel does not in itself ensure the effectiveness of the assistance he may afford an accused.
So far there is nothing to suggest that the Grand Chamber was searching for a basis for a ruling that the right of access to a lawyer arose at a stage before the suspect was taken into police custody.
In para 52 reference is made for the first time to the attitude of the accused at the initial stages of police interrogation and to the fact that article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at this stage.
No mention is made of where he was assumed to be when he is being questioned, but the cases referred to in the footnote to this paragraph are all cases where the applicant was in custody when he was subjected to interrogation by the police: Murray v United Kingdom (1996) 22 EHRR 29, Brennan v United Kingdom (2001) 34 EHRR 507 and Magee v United Kingdom (2000) 31 EHRR 822.
In para 53 it is stated that the principles outlined in the previous paragraph are also in line with the generally accepted international human rights standards which, as the footnote to this paragraph indicates, are those set out in Part B of the judgment: see para 28, above.
These are said to be at the core of the concept of a fair trial.
Their rationale relates in particular to the protection of an accused against abusive coercion on the part of the authorities.
The language used and the international materials referred to suggest that what the Grand Chamber had in mind here was the need for protection of the accused against abusive coercion while he was in custody.
In para 54 it underlined the importance of the investigation stage for the preparation of criminal proceedings and referred to the fact that the accused often finds himself in a particularly vulnerable position at that stage of the proceedings and to the fact that early access to a lawyer was part of the procedural safeguards to which the court will have particular regard.
The stage in the proceedings that the court had in mind is not specified other than by reference to the accuseds vulnerability.
This is said to be amplified by the fact that legislation in criminal procedure tends to become increasingly complex.
It seems that what the Grand Chamber had in mind here was a stage when the accused was being subjected to detailed questioning of the kind that, under the inquisitorial systems, will invariably take place after the accused has been taken into custody.
This impression is reinforced by the reference in the third last sentence of the paragraph to the recommendations of the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment about the right of a detainee to have access to legal advice as a fundamental safeguard against ill treatment to which, I would infer, it was thought a detainee might be vulnerable.
This analysis of the reasoning of the Grand Chamber in Salduz suggests that the judgment was concerned only with establishing a rule that there was a right of access to a lawyer where the person being interrogated was in police custody.
The alternative view is that in para 55 it recognised a broader principle that the rule applies as soon as the person has been charged so that article 6 is engaged.
This alternative has a certain logical appeal for the reasons that Lord Kerr has identified.
The prejudice suffered by the accused is the same irrespective of the stage at which an incriminating statement is made in answer to questions put by the police.
But the base on which this proposition rests is not that the Convention prohibits absolutely any reliance on incriminating statements.
The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47.
It is primarily concerned with respecting the will of the person to remain silent: Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
Everyone is entitled to respect for the right not to incriminate himself, irrespective of whether or not he is in police custody.
Nevertheless a person can confess if he is willing to do so, and his confession will be admissible if it is truly voluntary.
The underlying principle therefore is that there is a right against self incrimination which in some circumstances must be protected by special measures to protect the person against the risk that a confession may be obtained from him against his will by unfair tactics by the police.
That is why the court recognised in its application of those principles to Salduzs case, as it had already done in para 54, that an interview which takes place in police custody has particular features which require the provision of an especially strong protection to protect the rights of the defence against a forced confession.
It is that aspect of Salduzs case which seems to have informed the whole of the courts judgment.
It seems to me that the Grand Chambers judgment, when taken as a whole, does not indicate with a sufficient degree of clarity or indeed, I would suggest, in any way at all that the ruling in para 55 about incriminating statements made without access to a lawyer applies to questions put by the police before the accused is taken into custody.
The context would have required this to be stated expressly if it was what was intended, as the rule which the judgment laid down can be departed from only where there are compelling reasons to justify its restriction.
It would have had to have been stated precisely to what situations outside police custody the rule was to apply, and it was not.
The jurisprudence since Salduz
The Grand Chambers judgment has, not surprisingly, been referred to many times by the Strasbourg court since the judgment in that case was delivered.
The question is whether there is an indication in any of the cases that the right of access to a lawyer arises, as a rule, as soon as a person whose rights under article 6 are engaged is subject to questioning by the police.
There are passages in some of the cases which indicate that Salduz is regarded as having been concerned only with the need for legal advice while the person was in custody.
In Dayanan v Turkey (application no 7377/03) (unreported) given on 13 October 2009, which is a decision of the Second Section and is available only in French, the applicant was arrested and detained as part of an operation against the Hizbullah.
He was informed of his right to silence and exercised it, as he refused to answer the questions put to him by the police.
It was held nevertheless that there had been a breach of article 6(3)(c) in conjunction with article 6(1) because he did not have access to a lawyer while he was being interrogated.
The court said: 31.
Elle estime que lquit dune procdure pnale requiert dune manire gnrale, aux fins de larticle 6 de la Convention, que le suspect jouisse de la possibilit de se faire assister par un avocat ds le moment de son placement en garde vue ou en dtention provisoire. 32.
Comme le souligne les normes internationales gnralement reconnues, que la Cour accepte et qui encadrent sa jurisprudence, un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat et cela indpendamment des interrogatoires quil subit (pour les textes de droit international pertinents en la matire, voir Salduz, prcit, paras 37 44) The proposition in para 32 that an accused must have access to a lawyer from the moment he is deprived of his liberty (un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat) seems to go further than what the Grand Chamber itself said in Salduz.
It is more in keeping with the concurring opinions of Judge Bratza and Judge Zagrebelesky.
However that may be, the passages which I have quoted indicate the importance that appears to have been attached by Strasbourg to the fact that the person was in police custody when he was being interrogated.
It is especially significant that this is what the court saw the international consensus (les normes internationales gnralement reconnues) to be on this issue.
Three other cases from Turkey are to the same effect.
In Arzu v Turkey (application no 1915/03) (unreported) given on 15 September 2009 the applicant, who was arrested and placed in custody, complained that he had been denied access to a lawyer during the initial stages of the criminal proceedings against him.
The court said that Salduz had considered the grievance of a lack of access to a lawyer whilst in police custody: para 46.
In Duman v Turkey (application no 28439/03) (unreported) given on 23 March 2010 the court said in para 46 that the use of statements obtained at the stage of the police inquiry and the judicial investigation is not inconsistent with article 6(1), provided that the rights of the defence are respected.
On that point the court said that it relied on the basic principles laid down in its judgments, including Salduz, para 55, concerning the notion of a fair procedure.
In Takin v Turkey (application no 5289/06) (unreported) given on 1 February 2011 the applicant complained that he had had no legal assistance before he made his police statement or during his interrogation before the public prosecutor while in custody.
The court observed that it had already examined the issue concerning the lack of legal assistance in police custody in Salduz, paras 56 62.
In all these cases, as in Salduz itself, there was a systemic restriction on access to legal advice by anyone held in police custody in connection with proceedings that were to be taken in the state security courts.
In Pishchalnikov v Russia (application no 7025/04) (unreported) given on 24 September 2009 the applicant, who had been arrested, was interrogated while he was in police custody.
The pattern of the First Sections judgment followed that of the Grand Chamber in Salduz.
It repeated many of the propositions in paras 50 55 of Salduz in its assessment of the case under the heading Restrictions on access to a lawyer in the police custody, and referred in para 71 to the fact that the right to silence and the right not to incriminate oneself are generally recognised international standards which lie at the heart of a fair procedure under article 6.
But, as it was a custody case, it does not examine the question whether these propositions require access to a lawyer at any earlier stage.
In Sharkunov and Mezentsev v Russia (application no 75330/01) (unreported) given on 10 June 2010 the question before the court was again directed to the lack of legal assistance while in police custody and the use at the trial of incriminating statements that had been made at that stage.
In para 97 the court repeated the proposition that was first stated in Salduz, para 55 that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction.
But once again the police interrogation in the course of which these statements were made took place while the applicant was in police custody.
In Borotyuk v Ukraine (application no 33579/04) (unreported) given on 16 December 2010 the applicant was, once again, in police custody during the pre trial investigation.
Here too the propositions on which the court based its judgment are closely modelled on what the Grand Chamber said in para 55 of Salduz.
In para 79 it summarised the general principles that are to be found there.
It stated that, as a rule, access to a lawyer must be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances that there are compelling reasons to restrict that right.
As in para 55 of Salduz, no indication is given that the principles are restricted to cases where the accused was in police custody.
But, as in Salduz, that was the background against which the case was heard.
Once again it is unclear whether the general propositions on which the judgment was based must equally be applied, as a rule, to cases where the accused was not in custody when the questioning took place.
Zaichenko v Russia
The First Section had the opportunity to clarify where the court stood on this issue in Zaichenko v Russia (application no 39660/02) (unreported) given on 18 February 2010.
This appears to have been the only case to date in which the complaint was of lack of legal assistance during questioning by the police when the applicant was not in custody.
He was stopped while he was driving home from work and his car was inspected by the police as there had been reports of workers stealing diesel from their service vehicles.
Two cans of diesel were discovered in the car.
The applicant made self incriminating statements in reply to questions put to him by the police at the roadside.
He was charged with stealing the cans, and he was convicted.
His complaint was that he had not been advised of the privilege against self incrimination when he made his admission to the police.
His position at the trial was that he had purchased the diesel at a petrol station and that he did not give this explanation to the police because he felt intimidated and did not have a receipt to prove the purchase.
In its assessment the court set out the general principles that are relevant to a consideration of whether there has been a violation of the right to a fair trial.
It noted that article 6(3)(c) especially might be relevant before a case is sent to trial if and in so far as the fairness of the trial is likely to be seriously prejudiced by a initial failure to comply with its requirements.
In para 36 it recalled, as the Grand Chamber did in Salduz, the proposition that the court set out in Imbrioscia v Switzerland (1993) 17 EHRR 441, para 38 that the manner in which articles 6(1) and 6(3)(c) were to be applied during the preliminary investigation depended on the special features of the proceedings and on the circumstances of the case.
Account was taken in para 37 of the principles set out in Salduz, para 55 and in para 38 of the fact that the right to silence and the right not to incriminate oneself are generally recognised standards which lie at the heart of the notion of a fair procedure.
Para 38 then contains these important propositions which did not receive the same attention in Salduz: The right not to incriminate oneself presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused (see, inter alia, J B v Switzerland, no 31827/96, para 64, ECHR 2001 III).
In this sense the right is closely linked to the presumption of innocence contained in article 6(2) of the Convention.
In examining whether a procedure has extinguished the very essence of the privilege against self incrimination, the Court must examine the nature and degree of the compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained is put (ibid).
Applying these propositions to the applicants case, the court noted in para 42 that in criminal matters article 6 comes into play as soon as a person is charged and that this may occur on a date prior to the case coming before the trial court, such as the date of arrest, the date when the person concerned was officially notified that he would be prosecuted or the date when the preliminary investigations were opened.
Eckle v Germany (1982) 5 EHRR 1, para 73 was referred to, which includes the proposition taken from cases such as Deweer v Belgium (1980) 2 EHRR 439, para 46 that the test as to whether a person has been charged for the purposes of article 6(1) is whether the situation of the person has been substantially affected.
The court concluded that, given the context of the road check and the applicants inability to produce any proof of the diesel purchase at the moment of his questioning by the police, there was a suspicion of theft against him from that moment and that, although he was not yet accused of any criminal offence, his situation in the proceedings at the roadside was substantially affected.
So article 6(1) was engaged at that point.
But the fact that article 6(1) was engaged did not mean that a right of access to a lawyer arose at that point.
The court observed in para 47 that the case was different from previous cases concerning the right to legal assistance in pre trial proceedings.
This was because the applicant was not formally arrested or in police custody but was stopped for a roadside check which was carried out in the presence of two attesting witnesses.
In para 48 it said: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicants freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings.
In para 49 it noted that the role of the police in such a situation was to draw up an inspection record and receive the applicants explanation as to the origin of the cans in his car.
Having done so, the police transferred the documents to the inquirer who submitted a report to his superior which prompted him to open a criminal case against the applicant.
In para 51 it held that the absence of legal representation at the roadside check did not violate his right to legal assistance under article 6(3)(c).
In a partly dissenting opinion Judge Spielmann said that the interview took place in circumstances that could in no way be compared to those normally observed during routine road checks and he could not agree that the circumstances of the case disclosed no significant curtailment of the applicants freedom of action such as to require legal assistance.
He did not take issue with the principle formulated in para 48.
His dissent was as to its application to the facts of the case.
Mr Scott for Ambrose submitted that it was wrong to look at the courts reasoning in Salduz through what it decided in Zaichenko.
Mr Shead for M submitted that Zaichenko was so out of line with the other cases, and so hard to reconcile with the basic principles that were stated in Salduz, that it should be regarded as having been wrongly decided.
I would reject these arguments.
The President of the Court, Judge Rozakis, was a member of the Grand Chamber in Salduz, as was Judge Spielmann.
The importance of the question that the case raised, which was whether the ruling in Salduz applied to questioning where the applicant was not in police custody, would not have been overlooked.
The reasoning shows that the reasoning in Salduz was fully taken into account.
The finding in para 48 that the circumstances did not disclose a sufficient curtailment of the applicants freedom of action which could be sufficient for activating a requirement for legal assistance indicates that the court was well aware that it had to give reasons for reaching a different result.
That it did so in the way that it did shows that this is a judgment which must be taken into account in the search for an answer to the question where the jurisprudence of the Strasbourg court stands on the question we have to decide.
Abdurahman v United Kingdom
The question whether the right of access to a lawyer applies at a stage before the person is taken into custody is now before the Strasbourg court in an application by Ismail Abdurahman, application no 40351/09.
He was questioned by the police as a witness in connection with the attempt to detonate four bombs at separate points in the London public transport system two weeks after the bombings that took place on 7 July 2005.
He had been approached by two police officers who took him to a police station.
According to their evidence at the voir dire at the applicants trial, this was with a view to his assisting the police as a potential witness.
They began interviewing him, but after about 45 minutes of questioning they considered that, as a result of the answers that he was giving, he was in danger of incriminating himself and should be cautioned.
On instructions from a senior officer they continued nevertheless to interview him as if he were a witness.
It was not until after he had completed and signed his witness statement, which contained statements that were incriminating and was made without access to legal assistance, that they were told to arrest him and he was then taken into custody.
This case is still awaiting a hearing in Strasbourg.
It has reached the stage of the court posing questions to the parties, which are whether there has been a violation of article 6(1) together with article 6(3)(c) arising from (a) the failure to caution the applicant before he gave his witness statement (Aleksandr Zaichenko v Russia, no 39660/02, 18 February 2010); and/or (b) the failure to provide him with legal assistance before he gave the witness statement? In particular, were the rights of the defence irretrievably prejudiced by the use of the witness statement at trial (Salduz v Turkey [GC], no 36391/02, para 55, 27 November 2008)? It is, of course, too early to say what view will be taken of this case when the facts have been assessed by the court in the light of the relevant principles.
But it is at least likely that its judgment will provide some useful guidance as to the approach that is to be taken to a persons rights under article 6(1) together with article 6(3)(c) where the prosecution seeks to rely on answers given to questions by the police before he is formally taken into custody.
The key issue, so far as the references that are before the court in this case are concerned, is whether, as a rule, access to a lawyer must always be provided when a person is questioned at any stage in the proceedings after he has become a suspect and must be taken to have been charged for the purposes of article 6 (see paras 62 63, below), or whether access to a lawyer is required, as a rule, only where the person has been taken into custody or his freedom of action has been significantly curtailed.
The fact that this application is still pending suggests that, if there was any doubt as to where the jurisprudence of the Strasbourg court stands, it would have been wise to wait for its judgment in Abdurahman before holding that there is a rule that access must be provided in any situation that is not analogous on its facts to that which was before the court in Salduz.
But that is for another day, as the delivery of the judgment in that case cannot be taken to be imminent.
Miranda v Arizona
The Lord Advocate placed considerable weight in support of his argument on the judgment of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966).
In that case the Supreme Court held that the prosecution may not use statements, whether incriminatory or exculpatory, stemming from custodial interrogation of a defendant unless it demonstrated the use of procedural safeguards which were sufficient to secure the privilege against self incrimination.
These safeguards require that, unless other fully effective means are devised to inform the accused person of the right to silence and to assure continuous opportunity to exercise it, he must be warned that he has a right to remain silent, that any statement that he does make may be used as evidence against him, that he has the right to consult with an attorney and that, if he cannot afford one, a lawyer will be appointed to represent him.
Custodial interrogation for the purposes of this rule means questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way: p 444.
Miranda has been referred to in a number of individual opinions given by judges of the Strasbourg court.
Judge De Meyer referred to it in his dissenting opinion in Imbrioscia v Switzerland (1993) 17 EHRR 441.
The applicant in Imbrioscia had been questioned several times without access to a lawyer while he was in police custody but the court held, considering the proceedings as a whole, that there had been no breach of article 6(1) read with article 6(3)(c).
Judge De Meyer said that the court had failed to recognise the rules governing the right to legal advice during custodial interrogation which the Supreme Court has summarised in its Miranda judgment and which he said belonged to the very essence of fair trial.
In Murray v United Kingdom (1996) 22 EHRR 29 the applicant had been denied legal advice for 48 hours after he had been taken into custody.
The court held that there had been a violation of article 6(1) read with article 6(3)(c).
The partly dissenting judges, Judge Pettiti, joined by Judge Valticos, and Judge Walsh, joined by Judges Makarczyk and Lhmus, also referred to the Miranda judgment in this context.
Judge Walsh pointed out that the Supreme Court had affirmed that the constitutional protection against self incrimination contained in the Fifth Amendment guarantees to the individual the right to remain silent unless he chooses to speak in the unfettered exercise of his own free will whether during custodial interrogation or in court.
Much more recently, but prior to the Grand Chambers decision in Salduz, Judge Fura Sandstrm joined by Judge Zupani referred to Miranda in Galstyan v Armenia (2007) 50 EHRR 618 when, in para 0 I5, she described the right to be assisted by a lawyer as a bright line rule which nobody should cross and said that its purpose was to neutralise the distinct psychological disadvantage that suspects are under while dealing with the police.
The Strasbourg court has not referred to Miranda in any of its judgments, and Imbrioscia, Murray and Galstyan are the only cases where it has been referred to in a dissenting opinion in the context of what is described in Miranda as custodial interrogation.
But it can be assumed that the court will not have overlooked it in its search for generally accepted international human rights standards.
The dissenting judgments in Imbrioscia and Murray which drew attention to it were given before the Grand Chamber considered the issue in Salduz, and those cases were cited to it in that case.
As T A H M van der Laar and R L de Graaf, Salduz and Miranda: is the US Supreme Court pointing the way? [2011] 3 EHRLR 304, 315 have pointed out, the test that the Strasbourg court described in paras 47 and 48 of Zaichenko when it considered that the applicant was neither formally arrested nor interrogated in police custody and that there was no significant curtailment of his freedom of action echoes the statement in Miranda, p 477 that the rule of access to a lawyer that it describes applies when the suspect is subjected to police interrogation while in custody or otherwise deprived of his freedom of action in any significant way.
It is not unreasonable to think that Miranda and subsequent cases that the ruling in that case have given rise to in the United States will influence the thinking of the Strasbourg court as it develops the principles described in Salduz.
The significance of Miranda is that it follows the custodial approach to the question as to when access to a lawyer is required.
The core of that decision, as der Laar and de Graaf have described it in [2011] EHRLR 304, 310, is that a suspects statement made as a result of interrogation initiated by the interrogating authorities while he is in custody cannot be used in evidence unless the prosecutor can prove that the procedural safeguards that were used were effective enough to secure the suspects right not to incriminate himself.
The underlying reason is that the circumstances in which such an interrogation takes place are inherently intimidating.
As Chief Justice Warren explained at p 445, an understanding of the nature and setting of the in custody interrogation was essential to the courts decision: incommunicado interrogation in a police dominated atmosphere.
But it was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime.
General on the scene questioning as to facts surrounding the crime or other general questioning of citizens was not affected.
The right to legal advice was held not to extend that far because the compelling atmosphere inherent in the process of in custody interrogation was not necessarily present: Miranda, pp 477 478.
The accused in that position is protected by the rule that only statements voluntarily made are admissible.
I think that there is an indication here about the way the Strasbourg courts jurisprudence may develop, if there are doubts as to the significance of the courts decision in Zaichenko.
Miranda shows that reasons can be given which, at the very least, the court has not yet said are irrelevant for thinking that it would be going too far to hold that there is a rule that there must be access to a lawyer irrespective of whether the person who is being questioned by the police is being held in custody.
The basis for the ruling in Miranda is that police custody or its equivalent creates particular pressures which mean that the persons will is more likely to be overcome when he is being questioned under conditions of that kind.
The observation in Salduz, para 53 that the rationale of the generally recognised international human rights standards relates in particular to the protection of the accused against abusive coercion on the part of the authorities fits in with this line of reasoning.
This feature is likely to be absent when questions are being put at the locus or in the persons home simply with a view to deciding whether the person being questioned is to be treated as a suspect and, as such, to be subjected to further procedures.
The case for police custody or its equivalent
I should like, before stating my conclusions, to say a bit more about why I would hold that in principle the line as to when access to legal advice must be provided before the person is questioned should be drawn as from the moment that he has been taken into police custody, or his freedom of action has been significantly curtailed as it was put in Zaichenko, para 48.
I return to the points I made in para 34, above.
The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47; Brown v Stott 2001 SC (PC) 43, 64, per Lord Steyn.
At p 60 Lord Bingham said that while it could not be doubted that such a right must be implied, there is no treaty provision which expressly governs the effect or extent of what is to be implied.
At p 74 I said that implied rights are open, in principle, to modification or restriction so long as this is not incompatible with the right to a fair trial.
We do know however that the right is primarily concerned with respecting the will of the person to remain silent: see Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
A person is therefore free to speak to the police and to answer questions if he is willing to do so, even after he has been cautioned.
He can provide them with self incriminating answers if he is willing to do this, and his answers will be admissible if they are truly voluntary.
This approach to the problem is familiar in domestic law: see para 22, above.
So long as it is applied the fundamental right under article 6 to a fair trial will be guaranteed.
The test is whether the will of the person to remain silent, if that is his will, has been respected.
Answers cannot be extracted from him by unfair means, and he must be protected against the risk that they may be forced out of him.
It is well understood that in some circumstances merely to caution the person that he has the right to remain silent will not be enough to protect him against the risk of a forced confession.
The paradigm case is where he is in police custody.
In such a situation the circumstances surrounding his questioning are likely to be oppressive and intimidating.
The questioning is likely to be prolonged, and the atmosphere is likely to be coercive.
In such circumstances it is reasonable to assume that he will be vulnerable to having a confession extracted from him against his will and to insist that special measures are needed to ensure that his rights are respected.
As Lord Kerr points out, common experience tells us that a coercive atmosphere can exist independently of custody: para 147, below.
That is why it was recognised in Miranda and in Zaichenko that a persons freedom of action to act as he wishes may be significantly impaired in other circumstances.
But it does not follow that this will be so in every case when the police engage in conversation with a suspect.
Circumstances will vary, and questioning which may become objectionable as the process continues may not be so during its initial stages.
That is why I believe that a more flexible approach to the problem is called for than the rigid principle that Lord Kerr would adopt, which would involve laying down a rule that access to lawyer must always be provided before any police questioning can take place: see para 146, below.
Lord Kerr says in para 148 that there is no reason to suppose that a person questioned by the police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions.
The important question, he says, is whether the questions asked are liable to be productive of incriminating answers, not the circumstances in which they are being asked.
That leads him to say that whenever questions of that kind are being put to a suspect they must be asked in the presence of a lawyer.
I do not think that there is any support in the Strasbourg cases, or in such international authorities as we have been shown, for that proposition.
The point that was being made in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 SCR 353 to which he refers in para 147 was that there are situations in which psychological constraint amounting to detention have been recognised: the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ at para 30.
These are where the subject is legally required to comply with a direction or command and where there is no such obligation but a reasonable person in the subjects position would feel so obligated.
Not every conversation that takes place between the police and a suspect in which questions are asked is of that character.
A demand or direction by a police officer is one thing.
Questioning under caution is another.
It is understandable that a person who is confronted by a direction or a demand by a police officer to provide information will feel that he has to comply with it.
It is understandable too if the circumstances are such that he feels that he has no real choice in the matter.
That is why the law requires that before questions are put to him by the police the suspect must be cautioned.
In that way a fair balance is struck between the interests of the individual and the public interest in the detection and suppression of crime.
The search for that balance is inherent in the whole of the Convention: Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 69.
The whole point of the caution is to make it clear to the person that he is under no obligation to answer the questions that are being put to him.
The requirement would be pointless if it is to be assumed that he will nevertheless feel, whatever the circumstances, that he has no alternative but to answer them.
Whether the caution is enough to ensure that the person will have a fair trial will depend on the circumstances.
Conclusion
I return to the Lord Advocates submission that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz.
First, he must be a suspect.
Second, he must be in police custody.
Third, he must be the subject of police interrogation.
The submission is that, unless all three features are present, he has no right of access to legal advice under article 6.
The correct starting point, when one is considering whether the persons Convention rights have been breached, is to identify the moment as from which he was charged for the purposes of article 6(1).
The guidance as to when this occurs is well known.
The test is whether the situation of the individual was substantially affected: Deweer v Belgium (1980) 2 EHRR 439, para 46; Eckle v Germany (1982) 5 EHRR 1, para 73.
His position will have been substantially affected as soon as the suspicion against him is being seriously investigated and the prosecution case compiled: Shabelnik v Ukraine (application no 16404/03) (unreported) given on 19 February 2009, para 57.
In Corigliano v Italy (1982) 5 EHRR 334, para 34 the court said that, whilst charge for the purposes of article 6(1) might in general be defined as the official notification given to the individual by the competent authority of an allegation that he has committed an criminal offence, as it was put in Eckle, para 73, it may in some instances take the form of other measures which carry the implication of such an allegation.
In ubinski v Slovenia (application no 19611/04) (unreported) given on 18 January 2007, paras 62 63 the court said that a substantive approach, rather than a formal approach, should be adopted.
It should look behind the appearances and investigate the realities of the procedure in question.
This suggests that the words official notification should not be taken literally, and that events that happened after the moment when the test is to be taken to have been satisfied may inform the answer to the question whether the position of the individual has been substantially affected.
It is obvious that the test will have been satisfied when the individual has been detained and taken into custody.
It must be taken to have been satisfied too where he is subjected to what Salduz, para 52 refers to as the initial stages of police interrogation.
This is because an initial failure to comply with the provisions of article 6 at that stage may seriously prejudice his right to a fair trial.
The moment at which article 6 is engaged when the individual is questioned by the police requires very sensitive handling if protection is to be given to the right not to incriminate oneself.
The mere fact that the individual has been cautioned will not carry the necessary implication.
But, when the surrounding circumstances or the actions that follow immediately afterwards are taken into account, it may well do so.
The moment at which the individual is no longer a potential witness but has become a suspect provides as good a guide as any as to when he should be taken to have been charged for the purposes of article 6(1): Shabelnik v Ukraine, para 57.
The Lord Advocate submitted that the protection of article 6(3)(c) was not engaged until the individual was actually taken into custody.
But this cannot withstand the emphasis that the Strasbourg court puts on the consequences of an initial failure to comply with its provisions, as in Salduz, para 50; see also Zaichenko v Russia, para 42.
As for the requirement that the individual must be in police custody, I would hold that the Strasbourg court has not said, or at least has not said with a sufficient degree of clarity, that a person who has become a suspect and is not in custody must, as a rule, have access to a lawyer while he is being questioned.
I would attach particular importance to the judgment in Zaichenko v Russia, for the reasons given in para 46, above.
That is not to say that the fact that the individual had no access to legal advice in that situation is of no consequence.
If it was practicable for access to legal advice to be offered, this will be one of the circumstances that should be taken into account in the assessment as to whether the accused was deprived of a fair hearing, as he is entitled to respect for the right not to incriminate himself.
But it is no more than that.
The fact that the incriminating statements were made without access to a lawyer does not of itself mean that the rights of the defence are irretrievably prejudiced, as was held to be the case in Salduz on account of the lack of legal assistance while the applicant was in custody.
The phrase police interrogation appears frequently in the cases where the applicant was detained in custody.
It was suggested that, for the purposes of the rule about access to a lawyer, it means something more than just asking questions of an individual.
These words are, however, extremely fact sensitive.
Any questioning of an individual who has been detained in custody by persons who are referred to in the Strasbourg cases as representing the investigating authorities with the aim of extracting admissions on which proceedings could be founded will amount to interrogation for the purposes of the rule: for a statement to that effect in England, see R v Absolam (1989) 88 Cr App R 332, 336, per Bingham LJ.
The same could be said of questioning that takes place at the roadside or in the persons home, depending on the circumstances.
It is not necessary, if access to a lawyer is needed for the right to a fair trial to remain practical and effective (see Salduz, para 55), that the questioning should amount to an interrogation in the formal sense.
It need not be a detailed and sustained course of questioning.
Questions that the police need to put simply in order to decide what action to take with respect to the person whom they are interviewing are unlikely to fall into this category.
But they are likely to do so when the police have reason to think that they may well elicit an incriminating response from him.
With that introduction, I now turn to the questions that have been referred to this court.
As I understand them, they invite us not only to deal with the situations that they describe as raising issues of principle but also to express our own view as to the answers that the Appeal Court should give on the facts as presented to us in each case.
The answers to the questions referred
The question in Ambroses case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c).
I would answer this question in the negative.
Applying the test that I have described in para 62, above, I would hold that Ambrose was charged for the purposes of article 6 when he was cautioned and that the police officer had reason to think that the second and third questions were likely to elicit an incriminating response from him.
This conclusion is supported by the way the question whether the applicant was charged was dealt with in Zaichenko v Russia, para 41, where the court said that, given the context of the road check and the applicants inability to produce proof that he had purchased the diesel, there should have been a suspicion of theft against the applicant at the moment of his questioning by the police.
The context in Ambroses case was that, when he was approached by the police, he was drunk and sitting in the car.
Suspicion that he was committing an offence fell on him as soon as he told the police that the keys were in his pocket.
But I would hold it would be to go further than Strasbourg has gone to hold that the appellant is entitled to a finding that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being subjected to this form of questioning at the roadside.
This leaves open the question whether taking all the circumstances into account it was fair to admit the whole or any part of this evidence.
There may, perhaps, still be room for argument on this point.
So I would leave the decision as to how that question should be answered to the Appeal Court.
The question in Ms case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice was incompatible with the accuseds rights under article 6(1) and 6(3)(c).
I would hold that M was charged for the purposes of article 6 when he was cautioned by the police officer at his home address.
Although he did yet not have enough information as that stage to detain him as a suspect under section 14 of the 1995 Act, his actions were sufficient to carry the implication that the purpose of his visit was to establish whether M was in that category.
Even if that was not so at the moment when M was cautioned, the first question which the police officer put to him carried that implication.
I also think that the police officer had reason to think that the second question that he asked (Were you involved in the fight?) was likely to elicit an incriminating response from him.
But I would answer the question in this reference also in the negative, as it would be to go further than Strasbourg has gone to hold that the accused is entitled to a ruling that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being asked these preliminary questions in his own home with a view to determining what further steps should be taken to deal with him in connection with the offence.
As in Ambroses case, this leaves open the question whether, taking all the circumstances into account, it would be fair to admit the whole or any part of this evidence.
I would leave it to the sheriff to answer that question.
The question in Gs case is whether it is incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule.
The Lord Advocate conceded that G was a suspect from the time of his first admission to possession of a quantity of heroin in his jeans.
In must follow that he had been charged for the purposes of article 6 by the time the police began their search.
The feature of this case which distinguishes it from the other two is that, although G had not yet been formally arrested and or taken into police custody, there was a significant curtailment of his freedom of action.
He was detained and he had been handcuffed.
He was, in effect, in police custody from that moment onwards.
So I would answer the question in the affirmative.
The circumstances were sufficiently coercive for the incriminating answers that he gave to the questions that were put to him without access to legal advice about the items to be found to be inadmissible.
I would hold however that the same result need not follow in every case where questions are put during a police search to a person who is to be taken to have been charged for the purposes of article 6.
It would be to go further than Strasbourg has gone to hold that a person has, as a rule, a Convention right of access to a lawyer before answering any questions put to him in the course of a police search.
It is not because there is a rule to this effect that I would answer the question in the affirmative.
Rather it is because it is plain from the particular circumstances of the case that G was, in effect, a detainee when he was being questioned by the police.
In the absence of such indications of coercion the question, as in the other cases, will be whether, taking all the circumstances into account, it would be fair to admit the whole or any part of the evidence.
I am in full agreement with Lord Hopes judgment in this case and there is
LORD BROWN
comparatively little that I want to say in addition.
Cadder is authority for an absolute rule, derived from the European Court of Human Rightss decision in Salduz v Turkey (2008) 49 EHRR 421, that the Crown cannot lead and rely upon evidence of anything said by an accused without the benefit of legal advice during questioning under detention at a police station.
For convenience I call this the Cadder rule and refer to it as absolute notwithstanding the Courts recognition in Salduz itself (at para 55) that compelling reasons may exceptionally justify denial of access to a lawyer (providing always that such a restriction does not unduly prejudice the defence) since for present purposes those possible exceptional cases can safely be ignored.
The critical issue arising for our determination on these references is whether the Cadder rule applies equally to anything said by an accused in answer to police questioning even before he is detained at a police station, providing only that at the time of such questioning he is already a suspect and charged within the meaning of article 6(1) of the Convention (his situation substantially affected as explained by Lord Hope at para 39).
Although these are, of course, Scottish references and, rather to my regret, we have not had the benefit of any intervention on behalf of English and Welsh prosecuting authorities to assist us as to the legal position south of the border, I cannot but notice that on their face the statutory provisions governing the position in England and Wales sit a little uneasily even with the absolute rule in Cadder, let alone with the substantial extension to that rule now proposed by the respective accused in these references.
Section 76(2) of the Police and Criminal Evidence Act 1984 (PACE) provides: If, in any proceedings where the prosecution proposes to give in evidence a confession made by an accused person, it is represented to the court that the confession was or may have been obtained (a) by oppression of the person who made it; or (b) in consequence of anything said or done which was likely, in the circumstances existing at the time, to render unreliable any confession which might be made by him in consequence thereof, the court shall not allow the confession to be given in evidence against him except in so far as the prosecution proves to the court beyond reasonable doubt that the confession (notwithstanding that it may be true) was not obtained as aforesaid.
By section 82(1) of PACE, confession is defined to include any statement wholly or partly adverse to the person who made it and by section 76(8) oppression is defined to include torture, inhuman or degrading treatment, and the use or threat of violence (whether or not amounting to torture).
The only absolute statutory rule, therefore, is that confessions are inadmissible under PACE if obtained by oppression or in consequence of anything said or done likely to render them unreliable.
Generally speaking the court would not regard a confession elicited during questioning under detention at a police station as unreliable merely because the suspect had not at the time had the benefit of legal advice (unless, of course, by reason of youth or mental frailty or for any other reason the suspect may be regarded as having been particularly vulnerable to such questioning see, for example, R v McGovern (1990) 92 Cr App R 228).
Nevertheless the principle established in Salduz that underlies the Cadder rule is, I apprehend, properly given effect in England and Wales by the appropriate application of sections 58 and 78 of PACE which provide respectively: 58(1) A person arrested and held in custody in a police station or other premises shall be entitled, if he so requests, to consult a solicitor privately at any time. 78(1) In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it.
Consistently, therefore, with the operation of the Cadder rule in Scotland, the discretion to exclude evidence under section 78(1) is, I apprehend, routinely exercised in England and Wales in the case of significant and substantial breaches of the right to legal advice conferred by section 58 and the related rights arising under Code C of the Codes of Practice established under PACE.
In England and Wales, however, suspects do not, as I understand it, have a right to free legal advice before their arrest and admission into custody.
The polices only obligation at this earlier stage is to caution the suspect before questioning begins.
Once, however, a decision to arrest is made and once grounds for arrest exist it cannot then be delayed so as to defer the suspects right to legal advice the police are required to stop the questioning and to resume it only at the police station.
On arrival at the police station the detainee must be advised about his right to free legal advice, including a right to speak to a solicitor on the telephone, and he must be asked if he wishes to do so.
Once the interview begins he must again be reminded of his right to free legal advice.
So much for the position obtaining under English law.
Somewhat to my surprise, my own brief judgment in Cadder is sought to be prayed in aid in support of the respondents contention on these references that the principle against self incrimination requires a suspect to be given access to legal advice before he is first questioned whatever may be the circumstances of that questioning providing only that article 6(1) is engaged (as indeed it was held to be engaged even in the situation that arose in Zaichenko v Russia (application no 39660/02) (unreported) (judgment given 18 February 2010) see paras 41 44 of Lord Hopes judgment).
With the best will in the world, however, I cannot recognise my judgment in Cadder as offering the least support for any such contention.
On the contrary, the whole context of that judgment was interrogation in a police station and in the last sentence I was endeavouring to explain the principal considerations which seem to me to underlie the principle against self incrimination, namely the importance of guarding against both inadequate police investigation and the exploitation of vulnerable suspects.
Strasbourgs evident core concern in Salduz (see in particular para 53 of the Courts judgment) is that suspects should be protected against abusive coercion and that miscarriages of justice should be prevented.
Quintessentially such risks arise in the very situation under consideration in Salduz: the interrogation of a terrorist suspect in police custody.
Small wonder that the court (at para 53) saw its decision as in line with the generally recognised international human rights standards, standards which may be seen from the instruments referred to in the footnotes to relate specifically to rights of access to a lawyer during, rather than before, suspects are taken into police custody.
Another decision relied upon by the respondents is that of the Supreme Court of Canada in R v Grant [2009] 2 SCR 353 and true it is that the court there, having given a wide meaning to the concept of detention, concluded on the particular facts of that case (which involved the kerbside questioning of a suspect leading to his being searched and found to be carrying a loaded firearm) that the police had breached section 10(b) of the Canadian Charter of Rights and Freedoms by failing before questioning the suspect to advise him of his right to speak to a lawyer.
Section 10(b) provides: Everyone has the right on arrest or detention . (b) to retain and instruct counsel without delay and to be informed of that right .
Importantly, however, the Supreme Court concluded that, the breach of section 10(b) notwithstanding, the trial judge had been entitled pursuant to section 24(2) of the Charter to admit the incriminating evidence and in the result upheld the conviction.
Section 24(2) provides: Where . a court concludes that evidence was obtained in a manner that infringed or denied any rights or freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute.
For present purposes, two paragraphs only from the head note to the courts immensely long judgments must suffice: When faced with an application for exclusion under section 24(2), a court must assess and balance the effect of admitting the evidence on societys confidence in the justice system having regard to: (1) the seriousness of the Charter infringing state conduct, (2) the impact of the breach on the Charter protected interests of the accused, and (3) societys interest in the adjudication of the case on its merits.
At the first stage, the court considers the nature of the police conduct that infringed the Charter and led to the discovery of the evidence.
The more severe or deliberate the state conduct that led to the Charter violation, the greater the need for the courts to dissociate themselves from that conduct, by excluding evidence linked to that conduct, in order to preserve public confidence in and ensure state adherence to the rule of law.
The second stage of the inquiry calls for an evaluation of the extent to which the breach actually undermined the interests protected by the infringed right.
The more serious the incursion on these interests, the greater the risk that admission of the evidence would bring the administration of justice into disrepute.
At the third stage, a court asks whether the truth seeking function of the criminal trial process would be better served by admission of the evidence or by its exclusion.
Factors such as the reliability of the evidence and its importance to the Crowns case should be considered at this stage.
The weighing process and the balancing of these concerns is a matter for the trial judge in each case.
Where the trial judge has considered the proper factors, appellate courts should accord considerable deference to his or her ultimate determination.
Here, the gun was discovered as a result of the accuseds statements taken in breach of the Charter.
When the three stage inquiry is applied to the facts of this case, a balancing of the factors favours the admission of the derivative evidence.
The Charter infringing police conduct was neither deliberate nor egregious and there was no suggestion that the accused was the target of racial profiling or other discriminatory police practices.
The officers went too far in detaining the accused and asking him questions, but the point at which an encounter becomes a detention is not always clear and the officers mistake in this case was an understandable one.
Although the impact of the Charter breach on the accuseds protected interests was significant, it was not at the most serious end of the scale.
Finally, the gun was highly reliable evidence and was essential to a determination on the merits.
The balancing mandated by section 24(2) is qualitative in nature and therefore not capable of mathematical precision.
However, when all these concerns are weighed, the courts below did not err in concluding that the admission of the gun into evidence would not, on balance, bring the administration of justice into disrepute.
The significant impact of the breach on the accuseds Charter protected rights weighs strongly in favour of excluding the gun, while the public interest in the adjudication of the case on its merits weighs strongly in favour of its admission.
However, the police officers were operating in circumstances of considerable legal uncertainty, and this tips the balance in favour of admission.
In short, the position in Canada, just as in England and Wales, is that no absolute rule applies to exclude incriminating evidence obtained in breach of a constitutional right to legal advice although it may be supposed that in flagrant cases equivalent to those where the Cadder rule itself would apply directly (where a suspect in police custody is denied access to a lawyer during interrogation) the Canadian courts would invariably strike the section 24(2) balance in the accuseds favour.
It follows from all this that I share Lord Hopes view that the court in Salduz ought not to be understood to be laying down an absolute rule of exclusion with regard to admissions made without the opportunity to take legal advice irrespective of whether or not the suspect was at the time actually in police custody.
The contention that Salduz requires the Cadder rule to be extended in this way to my mind founders on a proper understanding both of what the Strasbourg Court was there saying in the particular factual context of that case, and of the recognised international human rights standards underlying that decision.
It also seems to me inconsistent both with the terms of Judge Bratzas concurring opinion in that case (implicit in which was a recognition that under the majority judgment the very earliest time at which a suspect could be found entitled to legal advice is when he is taken into police custody or pre trial detention) and with Strasbourgs post Salduz jurisprudence (helpfully analysed by Lord Hope in great detail), most notably the judgment in Zaichenko v Russia itself.
Also like Lord Hope (see paras 50 53 above) I find some assistance here in the decision of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966).
As Lord Hope observes (at para 53), the significance of Miranda is that it adopts a custodial approach to the question as to when access to a lawyer is required, the fundamental reason being that it is at that point that the circumstances in which [the suspects] interrogation takes place are inherently intimidating, because [of] the compelling atmosphere inherent in the process of in custody interrogation.
As, however, Lord Hope also observes: It was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime.
I have already indicated (at para 80 above) my own understanding of the central considerations underlying the principle against self incrimination: the importance of guarding against the exploitation of vulnerable suspects and also against inadequate police investigation.
In the intimidating circumstances of custodial interrogation there are undoubtedly some suspects who confess to crimes of which in truth they are innocent.
And undoubtedly too, once a suspect has confessed, the police are likely to become less inclined to pursue other useful avenues of investigation that may identify the actual offender.
Thus it is that miscarriages of justice can occur.
As Miranda suggests, however, the introduction of a right to legal advice (and what, of course, is being contended for here is an absolute right to free legal advice) at some pre custodial stage, so far from encouraging proper police investigation into crime, would in fact tend to inhibit it.
It is, in short, one thing to require of the police that they caution a suspect before questioning him, quite another to require that he be provided with legal assistance as a precondition of any self incriminating answers later becoming admissible in evidence against him.
This is the critical distinction which Zaichenko v Russia so clearly illustrates.
The Court there considered quite separately the applicants article 6 complaints as to (i) legal assistance and (ii) the privilege against self incrimination and the right to remain silent and in the event it found no violation of article 6 (3)(c) in respect of the former but a violation of article 6(1) in respect of the latter (the applicants self incriminatory answers to the polices roadside questioning having been elicited without his first being cautioned).
Like Lord Hope, I too would in the present context give full weight to what has come to be known as the Ullah principle see para 20 of Lord Binghams judgment in R (Ullah) v Special Adjudicator [2004] 2 AC 323.
It would seem to me quite wrong for this court now to interpret article 6 of the Convention as laying down an absolute exclusory rule of evidence that goes any wider than Strasbourg has already clearly decided to be the case.
And whatever else one may say about the Strasbourg jurisprudence, it can hardly be regarded as deciding the present issue clearly in the respondents favour.
In the result I agree with the answers proposed by Lord Hope to the questions posed in the respective references.
Essentially it comes to this.
In the cases of Ambrose and M there is no absolute rule such as that laid down in Cadder which precludes reliance on the evidence in question.
Rather it must be for the trial court to decide just as an English court must decide under section 78(1) of PACE whether the evidence ought fairly to be admitted or excluded.
In Gs case, however, because he was, as Lord Hope puts it (para 71), in effect, in police custody from the time when, following his arrest, he was handcuffed and detained, the Cadder rule should be held to apply to his questioning during the subsequent search.
That said, I also agree with Lord Hope (para 72) that the Cadder rule would by no means routinely apply to exclude answers to questions put to a suspect without his having been given the opportunity to seek legal advice during a search.
That too would be to go further than Strasbourg has yet gone.
LORD DYSON
I agree with the answers proposed by Lord Hope for the reasons that he gives as well as those given by Lord Brown.
In Salduz v Turkey (2008) 49 EHRR 421 (applied by this court in Cadder v HM Advocate [2010] UKSC 43, [2010] SLT 1125), the ECtHR decided that article 6 of the European Convention on Human Rights (the Convention) requires that, as a rule, access to a lawyer should be provided to a suspect when he is interrogated by the police while he is in detention; and that there will usually be a violation of article 6 if incriminating statements made by a suspect during a police interrogation in such circumstances are relied on to secure a conviction.
I shall refer to this as the Salduz principle.
The central question that arises in the present proceedings is whether the Salduz principle also applies to interrogations of a suspect that are conducted before he is placed in detention.
Lord Hope says that there is no sufficiently clear indication in the Strasbourg jurisprudence of how the ECtHR would resolve this question and that we should not apply the Salduz principle to situations to which the ECtHR has not clearly stated that it applies.
Lord Kerr says that (i) even if the ECtHR has not clearly decided whether article 6 requires the Salduz principle to be applied to statements obtained from a suspect when he is not in detention, that is not a sufficient reason for this court to refuse to do so (paras 126 to 130); (ii) to draw a distinction between evidence obtained before and after a suspect is detained is not only arbitrary, it is illogical (para 136); and (iii) in any event, an analysis of the Strasbourg jurisprudence clearly shows that it draws no distinction between the two cases (paras 146 and 148).
It is convenient to start with explaining why I cannot accept Lord Kerrs third proposition, since, if it is clear from the Strasbourg jurisprudence that the Salduz principle applies whether or not the evidence is obtained from the suspect while he is in detention, then the premise on which the judgments of Lord Hope and Lord Brown are based falls away.
As Lord Hope explains at paras 26 to 33, the judgment in Salduz was concerned with whether there was or should be a rule that there was a right of access to a lawyer where the person being interrogated was in police custody.
On its facts, it was a case about a suspect who had been interrogated by the police while he was in custody.
The references in para 53 to generally recognised international human rights standards (which are concerned with the position of suspects who are in custody) and to abusive coercion strongly suggest that the court was only considering the position of suspects who are in custody.
Paras 37 to 44 contains a discussion of the international law materials relating to a suspects right of access to a lawyer during police custody.
Unsurprisingly, the judgment says nothing explicitly about the position of a suspect who is not in custody.
I agree with Lord Hope that the concurring opinions of Judge Bratza and Judge Zagrebelski lend further support to the conclusion that the court was only considering the position of suspects who are in custody.
Lord Kerr says that Salduz is authority for the broad proposition that a suspect is entitled to have access to a lawyer at the investigation stage (because he is in a particularly vulnerable position at that stage of the proceedings) and that there is nothing in the reasoning of the decision to indicate that the investigation stage only begins after the suspect has been detained.
But the judgment should be read as a whole.
In my view, the better interpretation is that, for the reasons I have already given, the court was only addressing the issue of police interrogation of a suspect in custody.
It was making the point that for such a suspect the investigation stage takes place while he is in custody, where there is the risk of abusive coercion and he is in a particularly vulnerable position of making self incriminating statements.
Further, the decision of the First Section in Zaichenko provides clear support for the view that the Strasbourg jurisprudence draws a distinction between the fruits of police questioning of a suspect who is in detention and one who is not.
I agree with the reasons given by Lord Hope at para 46 for rejecting the arguments that Zaichenko was wrongly decided.
I note that Lord Kerr does not suggest that it was wrongly decided.
He analyses the reasoning of Zaichenko closely at paras 24 to 40.
He says that the basis for the courts decision that there had not been a violation of article 6(3)(c) is the cumulative effect of a number of factors (which he identifies at para 33) and that none of them, if taken in isolation, would have been sufficient to support the courts conclusion.
I cannot accept this interpretation of the courts reasoning in Zaichenko.
It is true that at para 46, the court notes at the outset that the applicant waived his right to a lawyer.
But the court went on to give other reasons for its decision at para 47.
It said that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings (see Salduz. .) because the applicant was not formally arrested or interrogated in police custody.
He was stopped for a roadcheck. (emphasis added).
The court was, therefore, fully alive to the difference between police questioning of a suspect at the roadside and police questioning of a suspect who has been taken into custody.
It was in the context of this difference that the court made express reference to Salduz.
Plainly and explicitly it did not apply the Salduz principle and it gave its reasons for not doing so.
The principal reason was given at para 48 which Lord Kerr has set out at para 160 below.
I agree with Lord Kerr that this paragraph is not easy to follow.
But what is clear is that the court considered that, whatever restrictions faced the suspect when he was being questioned at the roadside, they did not amount to a significant curtailment of [his] freedom of action sufficient to entitle him to legal assistance at this early stage of the proceedings.
This is an essential part of the courts reasoning.
It is clear that the court considered that the fact that the questioning took place before the suspect had been formally arrested or detained was critical.
I conclude, therefore, that the Strasbourg jurisprudence does not clearly show that the Salduz principle applies to statements made by a suspect who is not in detention when he is questioned by the police.
The only case to which our attention has been drawn in which the Salduz principle has been considered in relation to statements made by a suspect who is not in detention is Zaichenko.
For the reasons that I have given, Zaichenko strongly suggests that the Salduz principle does not apply in that situation.
I turn to Lord Kerrs second proposition.
He says that the animation of the right under article 6(1) cannot be determined in terms of geography (para 133) and that it is arbitrary and illogical to hold that a suspect has no right to access to a lawyer if he is questioned by the police until he is taken into custody: the suspect is as likely to make incriminating statements outside as inside a police station and is therefore in equal need of the protection of article 6(3)(c) in both situations.
The essential question is at what stage of the proceedings access to a lawyer should be provided in order to ensure that the right to a fair trial is sufficiently practical and effective for the purposes of article 6(1).
What fairness requires is, to some extent, a matter of judgment.
I accept that opinions may reasonably differ on whether the line for providing a suspect with access to a lawyer should be drawn at the point when the person being questioned becomes a suspect or at the point when he is taken into custody.
I do not doubt that being interrogated by the police anywhere can be an intimidating experience and that a person may make incriminating statements to the police wherever the interrogation takes place.
This can occur in a situation of what the majority of the Canadian Supreme Court described as psychological detention in R v Grant 2009 SCC 32 ; [2009] 2 SCR 353, at para 30.
On the other hand, the arresting of a suspect and placing him in custody is a highly significant step in a criminal investigation.
The suspect cannot now simply walk away from the interrogator.
For most suspects, being questioned after arrest and detention is more intimidating than being questioned in their home or at the roadside.
The weight of the power of the police is more keenly felt inside than outside the police station.
As was said in Miranda v Arizona 384 US 436 (1966) at p 478, there is a compelling atmosphere inherent in the process of in custody interrogation.
No doubt, it is also present to the mind of the suspect that the possibility of abusive coercion is greater inside than outside the police station.
Whether the difference between interrogation inside and outside the police station is sufficient to justify according the suspect access to a lawyer in one situation but not the other is a matter on which opinions may differ.
But I do not see how it can be said to be arbitrary or illogical to recognise that there is a material difference between the two situations.
I can agree with Lord Kerr (para 167) that one should be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence.
But this counsel of caution is hardly consistent with the assertion that the adoption of the distinction made in Miranda is arbitrary and illogical.
So what should this court do in these circumstances? This brings me to Lord Kerrs first proposition.
As I have said, to the extent that the ECtHR has spoken on the question at all, Zaichenko contains a clear statement that the Salduz principle does not apply to statements made by a suspect during police questioning while the suspect (i) is not in custody or (ii) is not deprived of his freedom of action in any significant way.
I derive (ii) from para 48.
That paragraph echoes the language of p 477 of Miranda: The principles announced today deal with the protection which must be given to the privilege against self incrimination when the individual is first subjected to police interrogation while in custody at the station or otherwise deprived of his freedom of action in any significant way (emphasis added).
I accept, however, that there is no clear and constant Strasbourg jurisprudence on the point.
So the obligation in section 2 of the Human Rights Act 1998 to take account of judgments of the ECtHR does not compel a decision one way or the other: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295 para 26.
Nor is this a case where, although Strasbourg has not expressly decided the point, it can nevertheless clearly be deduced or inferred from decisions of the ECtHR how the court will decide the point if and when it falls to be determined.
Lord Kerr has referred to para 20 of Lord Binghams speech in R (Ullah) v Special Adjudicator [2004] 2 AC 323 and the dictum that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less.
Lord Brown extended this in R (Al Skeini and others) v Secretary of State for Defence [2008] 1 AC 153 at para 106 by saying that Lord Binghams dictum could as well have ended: no less, but certainly no more.
At para 107 Lord Brown said that the Convention should not be construed as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach.
Lady Hale said much the same at para 90.
This approach was explicitly endorsed in R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1 by Lord Phillips at para 60, Lord Hope at para 93 and Lord Brown at para 147.
But these statements are not entirely apposite where Strasbourg has spoken on an issue, but there is no clear and constant line of authority.
That is the case here because there is only one case in which the ECtHR has expressly decided that the Salduz principle does not apply in relation to the interrogation of a suspect who is not in detention (Zaichenko).
Moreover, despite the view I have expressed earlier in this judgment, I accept that it is arguable that the language of para 55 of the judgment in Salduz can and should be interpreted as holding that the Salduz principle does apply in such circumstances.
So what should a domestic court do in this situation? Recognising that it is our duty to give effect to the domestically enacted Convention rights, I think that the correct approach was suggested at para 199 of the judgment of Lord Mance in Smith: However, it is our duty to give effect to the domestically enacted Convention rights, while taking account of Strasbourg jurisprudence, although caution is particularly apposite where Strasbourg has decided a case directly in point or, perhaps, where there are mixed messages in the existing Strasbourg case law and, as a result, a real judicial choice to be made there about the scope or application of the Convention.
The position here is that Strasbourg has decided a case which is directly in point (Zaichenko).
The most that can be said on behalf of the accused in these three cases is that by reason of (i) the broad terms in which para 55 of the judgment in Salduz is expressed and (ii) the decision in Zaichenko, it is arguable that there are mixed messages in the Strasbourg case law as to whether the Salduz principle applies to evidence obtained from a suspect who has been interrogated without access to a lawyer outside the police station.
To use the words of Lord Mance, it follows that there is a real judicial choice to be made.
Whether fairness requires the Salduz principle to apply in both situations raises questions of policy and judgment on which opinions may reasonably differ and as to which there is no inevitable answer.
To demonstrate this, it is sufficient to contrast the approach of the US Supreme Court in Miranda with that of the Canadian Supreme Court in Grant.
In these circumstances, I consider that caution is particularly apposite and that the domestic court should remind itself that there exists a supranational court whose purpose is to give authoritative and Europe wide rulings on the Convention.
If it were clear, whether from a consideration of the Strasbourg jurisprudence or otherwise, that the Salduz principle applies to statements made by suspects who are not detained or otherwise deprived of their freedom of action in any significant way, then it would be our duty so to hold.
But for the reasons that I have given, it is not clear that this is the case.
In these circumstances, we should hold that the Salduz principle is confined to statements made by suspects who are detained or otherwise deprived of their freedom in any significant way.
LORD MATTHEW CLARKE
I refer to Lord Hopes judgment for his detailed description of the references and the background to them which I gratefully adopt.
In R v Samuel [1988] QB 615 at p 630 Hodgson J, delivering the judgment of the Court of Appeal, described the right of a suspect to consult and instruct a lawyer as one of the most important and fundamental rights of a citizen.
His Lordship did so in the context of section 58(1) of the Police and Criminal Evidence Act 1984 (PACE).
The present references have raised the question as to when, and in what circumstances, such a right emerges as part of Scots law by virtue of the application of Article 6 ECHR.
The Grand Chamber of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421 held that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction (para 55).
In Cadder v HM Advocate 2010 SLT 1125 this court applied that decision to the existing law of Scotland and, in particular, to the operation of the powers of detention of persons then contained in sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995.
As a result of the courts decision in Cadder the Scottish Parliament enacted certain provisions in the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010.
In particular a new section 15A to the 1995 Act was enacted which is in the following terms: 15A Right of suspects to have access to a solicitor (c) (a) (a) (b) (1) This section applies to a person (the suspect) who is detained under section 14 of this Act, attends voluntarily at a police station or other premises or place for the purpose of being questioned by a constable on suspicion of having committed an offence, or is (i) arrested (but not charged) in connection with an offence, and (ii) being detained at a police station or other premises or place for the purpose of being questioned by a constable in connection with the offence. (2) The suspect has the right to have intimation sent to a solicitor of any or all of the following the fact of the suspects (i) detention (ii) attendance at the police station or other premises or place, or (iii) arrest (as the case may be), (b) the police station or other premises or place where the suspect is being detained or is attending, and (c) that the solicitors professional assistance is required by the suspect. (3) The suspect also has the right to have a private consultation with a solicitor (a) before any questioning of the suspect by a constable begins, and (b) at any other time during such questioning. (4) Subsection (3) is subject to subsections (8) and (9). (5) In subsection (3), consultation means consultation by such means as may be appropriate in the circumstances, and includes, for example, consultation by means of telephone. (6) The suspect must be informed of the rights under subsections (2) and (3) (a) without delay, or (b) (a) on arrival at the police station or other premises or place, and (b) in the case where the suspect is detained as mentioned in subsection (1)(a), or arrested as mentioned in subsection (1)(c), after such arrival on detention or arrest, (whether or not, in either case, the suspect has previously been informed of the rights by virtue of this subsection). (7) Where the suspect wishes to exercise a right to have intimation sent under subsection (2), the intimation must be sent by a constable if some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is necessary. (8) In exceptional circumstances, a constable may delay the suspects exercise of the right under subsection (3) so far as it is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders that the questioning of the suspect by a constable begins or continues without the suspect having had a private consultation with a solicitor. (9) Subsection (3) does not apply in relation to the questioning of the suspect by a constable for the purpose of obtaining the information mentioned in section 14(10) of this Act.
Prior to that enactment, and the decision in Cadder, the position was that the courts in Scotland had never recognised a suspects right to have access to a solicitor before or during questioning of him by the police.
The position was, as stated in pre Cadder versions of Renton and Browns Criminal Procedure, 6th edition at para 24 39 as follows: any statement by a suspect in answer to police questions will be inadmissible in evidence at the subsequent trial of that suspect unless it has been obtained fairly, and that all the circumstances of the questioning (apart from whether or not a caution was given to a person accused of a crime) are relevant in so far, and only in so far, as they indicate the presence or absence of unfairness.
That passage continued later: The current situation is that the fact that the accused was at the same time under suspicion or even under arrest is not in itself crucial, but is merely a circumstance like any other to be taken into account in assessing the fairness of the police, in the same way as the fact that he.did not have the services of a solicitor Reference was made to, inter alia, Law v McNicol 1965 JC 32, HM Advocate v Whitelaw 1980 SLT (Notes) 25 and HM Advocate v Anderson 1980 SLT (Notes) 104.
As was also noted in Renton and Brown at para 24 39 There are no legal rules in Scotland governing the questioning of a suspect such as the Judges Rules and Administrative Directions issued by the Home Office.
Nor were there, until the 2010 Act, any provisions similar to those provided in England and Wales under PACE.
In HM Advocate v Cunningham 1939 JC 61 Lord Moncrieff at page 65 noted that after the accused had been charged and had replied, he subsequently received an incidental intimation that he might, if he so desired, require and obtain the assistance of a law agent.
His Lordship continued: I think it would have been desirable that that intimation should have been made formally and should have been made at the very outset before the making of any charge, but I am satisfied that, in not making it, the police officers followed their usual practice and acted with an intention of complete fairness.
Nonetheless, any such practice, in my opinion, ought to be reformed The later full bench decision in Chalmers v HM Advocate 1954 JC 66 gave some support for the view that all answers given by a suspect to a police officer were inadmissible and nothing was said about a suspects right to have a solicitor present when he was being questioned.
Although that decision was never over ruled its influence was considered to have been virtually removed by subsequent case law, concerned, it seems, with rising crime rates, which made the criterion of admissibility, fairness see Lord Advocates Reference (no. 1 of 1983), 1984 JC 52.
The decision in the case of Cadder, in applying the law as set out in Salduz, can be seen as truly innovative as regards what had been understood to be the domestic law of Scotland up until that time.
The present references raise, in the first place, the question as to how far the innovation goes having regard to the relevant Strasbourg jurisprudence.
The focus of the hearing before this court was concerned, to a significant extent, with how the suspects right to access to a lawyer has been defined to date by the Strasbourg court, either expressly, or by necessary implication, whatever other arguments there may be in principle, or policy, for defining it otherwise.
The defence in the cases before us sought to take from the language of the ECtHR, in discussing the right in the decided cases on the topic, a broad approach to its nature and its extent.
They had some basis for doing so having regard to how the court expressed itself in Salduz at para 55 where the Grand Chamber was to the effect Article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police.
At para 52 of the judgment one finds the following Article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer already at the initial stages of police interrogation.
That language, it was submitted, focused on the status of the person as a suspect when determining his rights rather than his position being that of a person in custody.
Similar language can be seen in previous judgments of the Court.
For example in Panovits v Cyprus (Application No 4268/04) (unreported) given 11 December 2008 the Court, at para 66, observed that the concept of fairness enshrined in Article 6 requires that the accused be given the benefit of the assistance of a lawyer already at the initial stages of police interrogation see also Borotyuk v Ukraine (Application No 33579/04) (unreported) given 16 December 2010 at para 79.
It should, however, be noted that Panovits was a case which concerned the questioning of a child when the child had gone to the police station with his father, as requested by the police, and was thereafter arrested.
Borotyuk was also a custody case.
In Panovits, at para 65, the court, having said that it was reiterating that the right to silence and the right not to incriminate oneself were generally recognised international standards, which lay at the heart of the notion of a fair procedure under Article 6, went on to say: Their rationale lies, inter alia, in the protection of the accused against improper compulsion by the authorities, thereby contributing to the avoidance of miscarriages of justice and to the fulfilment of the aims of Article 6.
In Salduz similar remarks were made by the court at paragraph 53: These principles, outlined at para 52 above, are also in line with the generally recognised international human rights standards which are at the core of the concept of a fair trial and whose rationale relates in particular to the protection of the accused against abusive coercion on the part of the authorities.
They also contribute to the prevention of miscarriages of justice and the fulfilment of the aims of Article 6, notably equality of arms between the investigating or prosecuting authorities and the accused.
Those remarks would tend, in my judgement, to support the contention that the focus of the courts concern in Salduz, and other cases, has been in relation to those situations where methods of coercion or oppression might be more readily, and effectively, employed upon a suspect person, namely when his liberty has been curtailed by the authority detaining him.
Significant support for that being the focus of such a rule is to be found in the jurisprudence of the United States, and particularly the seminal decision of the US Supreme Court in Miranda v State of Arizona 384 US 436 (1966), where at p 467, para 23 the court said: Today, then, there can be no doubt that the Fifth Amendment privilege is available outside of criminal court proceedings and serves to protect persons in all settings in which their freedom of action is curtailed in any significant way from being compelled to incriminate themselves.
We have concluded that without proper safeguards the process of in custody interrogation of persons suspected or accused of crime contains inherently compelling pressures which work to undermine the individuals will to resist and to compel him to speak where he would not otherwise do so freely.
In order to combat these pressures and to permit a full opportunity to exercise the privilege against self incrimination, the accused must be adequately and effectively apprised of his rights and the exercise of those rights must be fully honoured.
The court then at pp 478 479, paras 66, 67 defined the right and its extent, together with its rationale in the following way: To summarise, we hold that when an individual is taken into custody or otherwise deprived of his freedom by the authorities in any significant way and is subjected to questioning the privilege against self incrimination is jeopardised.
Procedural safeguards must be employed to protect the privilege and unless other fully effective means are adopted to notify the person of his right of silence and to assure that the exercise of the right will be scrupulously honoured, the following measures are required.
He must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires.
Opportunity to exercise these rights must be afforded to him throughout the interrogation.
After such warnings have been given, and such opportunity afforded him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement.
But unless and until such warnings and waiver are demonstrated by the prosecution at trial, no evidence obtained as a result of interrogation can be used against him.
The Miranda decision has informed international legal discussion of the right of the suspect to have access to a lawyer, since the decision was given.
Another factor pointing towards the more restrictive extent of the right in question is that the Strasbourg court, in defining it, has done so by referring to the context of what are described as pre trial proceedings, see para 50 of the Salduz judgment.
The person taken into detention who, in due course, may face being tried for a crime, might well be said to be involved, at the stage of any questioning, while detained, to be in pre trial proceedings for the purposes of Article 6.
That that is the context in which the Strasbourg court has been considering the right in question under Article 6 is, I think, supported by what the court had to say recently in Affaire Brusco c France (Requete No 1466/07) (unreported) given 14 October 2010, at para 45: La Cour rappelle galement que la personne place en garde vue a le droit dtre assiste dun avocat ds le dbut de cette mesure ainsi que pendant les interrogatoires, et ce a fortiori lorsquelle na pas t nforme par les autorits de son droit de se taire.
That passage also, to my mind, points to the phrases in Salduz early access to a lawyer and from the first interrogation of a suspect by the police as being references to the earliest point in time after the person is taken into custody with his liberty having been restricted by the investigating authorities.
The reference by the Strasbourg court to equality of arms, at para 53 of its judgment in Salduz, also, in my opinion, supports that approach.
Once a persons liberty is curtailed by the authorities, the balance of power between him and the representatives of the state shifts significantly and, it might be said, requires to be redressed by his having access to a lawyer.
All of these considerations, taken together, with what Lord Hope has to say in his analysis of the Salduz decision, and other Strasbourg jurisprudence, ultimately persuades me that the proper understanding of those decisions is that the right to have access to a lawyer emerges at the point when the suspect is deprived of his liberty of movement, to any material extent, by the investigating authorities and is to be questioned by them.
It follows that I am in agreement with Lord Hope that the Strasbourg jurisprudence, to date, does not support the defence contention in these references that the ECtHR has gone as far as to say that the right emerges as soon as a suspect is to be questioned by the police in whatever circumstances.
As to whether this court should go further than the ECtHR seems to have gone so far, certain important considerations lead me to the conclusion that it should not.
The first is the difficulty that can arise in relation to defining precisely at what point in time someone becomes a suspect, as opposed to being a witness or a detained person.
The second is that the broader version of the right, contended for by the defence in these cases, could have serious implications for the proper investigation of crime by the authorities.
If the police are to be required to ensure that a person who they wish to question about the commission of a crime (in a situation where the circumstances point to the person being a possible suspect) should have access to a lawyer, if he so wishes, then such a requirement could hamper proper and effective investigations in situations which are often dynamic, fast moving and confused.
The unfortunately regular street brawls in city and town centres, or disturbances in crowded places like night clubs, which, on occasions, result in homicide, are simply examples of situations which highlight the problems that might be involved.
In relation to the first of these considerations I note that the limits of the Miranda rights have been, very recently, (16 June 2011) re visited by the US Supreme Court in JDB v North Carolina 564 US 2011.
That case involved the questioning of a 13 year old.
The majority of the court held that the childs age was a relevant factor to be taken into account in addressing the question as to whether he had been in custody at the time of questioning.
The majority did not depart from the test being whether or not the person was in custody at the relevant time and at page 18 of the opinion of the court they directed the state court to address that question, taking account of all of the relevant circumstances of the interrogation, including the childs age at the time.
The disagreement between the majority and minority was with regard to the relevance of the childs age in judging of the question as to whether or not he was in custody at the relevant time.
In giving the dissenting judgment, with which the rest of the minority concurred, Alito J at pp 1 2 said Mirandas custody requirement is based on the proposition that the risk of unconstitutional coercion is heightened when a suspect is placed under formal arrest or is subjected to some functionally equivalent limitation on freedom of movement.
Alito J, then, at page 8 of his judgment, under reference to previous authorities remarked that a core virtue of the Miranda rule has been the clarity and precision of its guidance to police and courts.
Again at page 13 he remarked that a core virtue of Miranda was the ease and clarity of its application.
I am persuaded that the value of clarity and certainty in this area are relevant factors in deciding the extent of the right.
As to the second consideration, I recall what was said by Lord Wheatley in Miln v Cullen 1967 JC 21 at pp 29 30: While the law of Scotland has always very properly regarded fairness to an accused person as being an integral part of the administration of justice, fairness is not a unilateral consideration.
Fairness to the public is also a legitimate consideration, and in so far as police officers in the exercise of their duties are prosecuting and protecting the public interest, it is the function of the Court to seek to provide a proper balance to secure that the rights of individuals are properly preserved, while not hamstringing the police in their investigation of crime with a series of academic vetoes which ignore the realities and practicalities of the situation and discount completely the public interest.
That dictum is, of course, of its time and pre dates the experience of examples of convictions obtained on false confessions which have caused justifiable public concern.
Nevertheless it is difficult, even now, to contradict the substance of what his Lordship said.
As was said by Binnie J in the Canadian case of R v Grant 2009 SCC 32 [2009] 2 SSC 353 at para 180 It is not controversial that in the early stages of a criminal investigation the police must be afforded some flexibility before the lawyers get involved.
The police do have the right to ask questions and they need to seek the co operation of members of the public, including those who turn out to be miscreants.
It seems to me that the balancing of legitimate interests referred to by Lord Wheatley is a further justification for restricting the right to have access to a lawyer to situations in which the suspect is in custody.
The law in formulating a right designed to protect and support a legitimate interest, such as the right to silence, should seek to avoid defining that right in such a way, as to damage, or unduly inhibit another legitimate interest such as the efficient investigation of crime.
The task, which may be a delicate and difficult one, is to produce a result which strikes a rational balance between the two interests.
I consider the balance struck in the US Miranda jurisprudence achieves that end.
For the foregoing reasons I agree entirely with Lord Hope as to the way in which references in the cases of Ambrose and M should be answered.
In relation to these two cases the admissibility or otherwise of the replies to questioning will fall to be determined by the Appeal Court and the trial judge respectively in accordance with the rules as to fairness.
In the passage in his judgment in Miln v Cullen, cited above, Lord Wheatley continued: Even at the stage of routine investigations, where much greater latitude is allowed, fairness is still the test, and that is always a question of circumstances.
As regards Gs case I consider that the right to access to a lawyer, before questioning, arises not only when the suspect is taken into the physical surroundings of a police station.
The focus should be on whether, at the commencement of the proposed questioning, the individuals liberty is significantly restricted by the police.
The location where that occurs is not in itself conclusive.
In relation to rights of this kind matters should be judged in accordance with what the substance of the position is rather than its form.
It follows that I, therefore, also agree with Lord Hope in the way in which the reference in Gs case should be answered.
I also agree with Lord Hope, for the reasons given by him, that the Cadder rule would not necessarily routinely apply to exclude answers to questions, put to a suspect, without his having been given the opportunity to seek legal advice, during a search.
There is no justification in the Strasbourg jurisprudence, as I read it, for the right to be so interpreted.
By way of a footnote I would add this.
Our attention was drawn by the defence, in support of their position, to a Proposal for a Directive of the European Parliament and of the Council on the right of access to a lawyer in criminal proceedings and on the right to communicate upon arrest recently published by the European Commission Brussels, XXX COM (2011) 326/3.
Article 3(1) of the draft of the proposed Directive, attached to that document is in the following terms: 1.
Member States shall ensure that suspects and accused persons are granted access to a lawyer as soon as possible and in any event: (a) before the start of any questioning by the police or other law enforcement authorities; (b) upon carrying out any procedural or evidence gathering act at which the persons presence is required or permitted as a right in accordance with national law, unless this would prejudice the acquisition of evidence; (c) from the outset of deprivation of liberty.
The proposed Article 3 appears to envisage three discrete situations where the right of access to a lawyer should arise.
The authors of the proposal appear to believe that those draft provisions reflect the settled jurisprudence of the Strasbourg court see para 13.
It follows from what I have said above that their apparent understanding of the Strasbourg jurisprudence does not coincide with my own.
LORD KERR
Introduction
The well known aphorism of Lord Bingham in para 20 of R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323 that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less has been given a characteristically stylish twist by Lord Brown in R (Al Skeini and others) v Secretary of State for Defence [2007] UKHL 26; [2008] 1 AC 153 at para 106 where he said that the sentence could as well have ended: no less, but certainly no more.
In keeping with this theme, some judges in this country have evinced what might be described as an Ullah type reticence.
On the basis of this, it is not only considered wrong to attempt to anticipate developments at the supra national level of the Strasbourg court, but there is also the view that we should not go where Strasbourg has not yet gone.
Thus, in the present case Lord Hope says that this courts task is to identify where the jurisprudence of the Strasbourg court clearly shows that it currently stands and that we should not expand the scope of the Convention right further than the current jurisprudence of that court justifies.
Lord Binghams formulation of the principle expressed in para 20 of Ullah was prompted by his consideration of the effect of section 2 of the Human Rights Act 1998 by which the courts of this country are enjoined to take into account Strasbourg case law.
Therefore, said Lord Bingham, although such case law was not strictly binding, where a clear and constant theme of jurisprudence could be detected, it should be followed because the Convention, being an international instrument, had as the authoritative source of its correct interpretation the Strasbourg court.
A refusal to follow this would dilute or weaken the effect of the Strasbourg case law.
I greatly doubt that Lord Bingham contemplated much less intended that his discussion of this issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they have been pronounced upon by Strasbourg.
I believe that, in the absence of a declaration by the European Court of Human Rights as to the validity of a claim to a Convention right, it is not open to courts of this country to adopt an attitude of agnosticism and refrain from recognising such a right simply because Strasbourg has not spoken.
There are three reasons for this, the first practical, the second a matter of principle and the third the requirement of statute.
It is to be expected, indeed it is to be hoped, that not all debates about the extent of Convention rights will be resolved by Strasbourg.
As a matter of practical reality, it is inevitable that many claims to Convention rights will have to be determined by courts at every level in the United Kingdom without the benefit of unequivocal jurisprudence from ECtHR.
Moreover, as a matter of elementary principle, it is the courts duty to address those issues when they arise, whether or not authoritative guidance from Strasbourg is available.
The great advantage of the Human Rights Act is that it gives citizens of this country direct access to the rights which the Convention enshrines through their enforcement by the courts of this country.
It is therefore the duty of this and every court not only to ascertain where the jurisprudence of the Strasbourg court clearly shows that it currently stands but to resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view.
Finally, section 6 of the Human Rights Act leaves no alternative to courts when called upon to adjudicate on claims made by litigants to a Convention right.
This section makes it unlawful for a public authority, including a court, to act in a way which is incompatible with a Convention right.
That statutory obligation, to be effective, must carry with it the requirement that the court determine if the Convention right has the effect claimed for, whether or not Strasbourg has pronounced upon it.
In this context, it would be particularly unsatisfactory, I believe, if, because of an Ullah type reticence, we should feel constrained not to reach a decision on the arguments advanced by the respondents to these references just because those very arguments are likely to be ventilated on behalf of the applicant in ECtHR in Abdurahman v United Kingdom application no 40351/09 and we cannot say how Strasbourg will react to them.
If the much vaunted dialogue between national courts and Strasbourg is to mean anything, we should surely not feel inhibited from saying what we believe Strasbourg ought to find in relation to those arguments.
Better that than shelter behind the fact that Strasbourg has so far not spoken and use it as a pretext for refusing to give effect to a right that is otherwise undeniable.
I consider that not only is it open to this court to address and deal with those arguments on their merits, it is our duty to do so.
The nature of the right under article 6(1) taken in conjunction with article 6(3)(c)
The true nature of the right under article 6(1), taken in conjunction with article 6(3) (c), can only be ascertained by reference to its underlying purpose.
What is its purpose? The respondents argue that its purpose is that when a person becomes a suspect, because of the significant change in his status that this entails; because of the potential that then arises for him to incriminate himself or to deal with questions in a way that would create disadvantage for him on a subsequent trial; and because of the importance of these considerations in terms of his liability to conviction, the essential protection that professional advice can provide must be available to him.
The right, it is argued, should not be viewed solely as a measure for the protection of the individuals interests.
It is in the interests of society as a whole that those whose guilt or innocence may be determined by reference to admissions that they have made in moments of vulnerability are sufficiently protected so as to allow confidence to be reposed in the reliability of those confessions.
For reasons that I will develop, I consider that these arguments should prevail.
If it has taught us nothing else, recent experience of miscarriage of justice cases has surely alerted us to the potentially decisive importance of evidence about suspects reactions to police questioning, whether it is in what they have said or in what they have failed to say, and to the real risk that convictions based on admissions made without the benefit of legal advice may prove, in the final result, to be wholly unsafe.
The role that a lawyer plays when the suspect is participating in what may be a pivotal moment in the process that ultimately determines his or her guilt is critical.
Thus understood, the animation of the right under article 6(1) cannot be determined in terms of geography.
It does not matter, surely, whether someone is over the threshold of a police station door or just outside it when the critical questions are asked and answered.
And it likewise does not matter whether, at the precise moment that a question is posed, the suspect can be said to be technically in the custody of the police or not.
If that were so, the answer to a question which proved to be the sole basis for his conviction would be efficacious to secure that result if posed an instant after he was taken into custody but not so an instant before.
That seems to me to be a situation too ludicrous to contemplate, much less countenance.
Two supremely relevant, so far as these appeals are concerned, themes run through the jurisprudence of Strasbourg in this area.
The first is that, in assessing whether a trial is fair, regard must be had to the entirety of the proceedings including the questioning of the suspect before trial see, for instance, Imbrioscia v Switzerland (1993) 17 E.H.R.R. 441, Murray v United Kingdom (1996) 22 E.H.R.R. 29; Averill v United Kingdom (2000) 31 E.H.R.R. 839; Magee v United Kingdom (2000) 31 E.H.R.R. 822; and Brennan v United Kingdom (2001) 34 E.H.R.R. 507.
The second theme is that, although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of a fair trial Poitrimol v France (1993) 18 E.H.R.R. 130 and Demebukov v Bulgaria (Application No 68020/01) (unreported) given 28 February 2008 at para 50.
Taken, as they must be, in combination, these features of a fair trial lead inexorably to the conclusion that where an aspect of the proceedings which may be crucial to their outcome is taking place, effective defence by a lawyer is indispensable.
When one recognises, as Strasbourg jurisprudence has recognised for quite some time, that the entirety of the trial includes that which has gone before the actual proceedings in court, if what has gone before is going to have a determinative influence on the result of the proceedings, it becomes easy to understand why a lawyer is required at the earlier stage.
There is no warrant for the belief that vulnerability descends at the moment that one is taken into custody and that it is absent until that vital moment.
The selection of that moment as the first occasion on which legal representation becomes necessary is not only arbitrary, it is illogical.
The need to have a lawyer is not to be determined on a geographical or temporal basis but according to the significance of what is taking place when the later to be relied on admissions are made.
This much, I believe, is clear from paras 54 and 55 of the judgment in Salduz v Turkey (2008) 49 EHRR 421.
It is worth setting out para 54 to examine its constituent parts and in order to draw together the various strands of guidance that it contains.
This is what the court said in that para: the Court underlines the importance of the investigation stage for the preparation of the criminal proceedings, as the evidence obtained during this stage determines the framework in which the offence charged will be considered at the tria1.
At the same time, an accused often finds himself in a particularly vulnerable position at that stage of the proceedings, the effect of which is amplified by the fact that legislation on criminal procedure tends to become increasingly complex, notably with respect to the rules governing the gathering and use of evidence.
In most cases, this particular vulnerability can only be properly compensated for by the assistance of a lawyer whose task it is, among other things, to help to ensure respect of the right of an accused not to incriminate himself.
This right indeed presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused.
Early access to a lawyer is part of the procedural safeguards to which the Court will have particular regard when examining whether a procedure has extinguished the very essence of the privilege against self incrimination.
In this connection, the Court also notes the recommendations of the CPT [European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment], in which the committee repeatedly stated that the right of a detainee to have access to legal advice is a fundamental safeguard against ill treatment.
Any exception to the enjoyment of this right should be clearly circumscribed and its application strictly limited in time.
These principles are particularly called for in the case of serious charges, for it is in the face of the heaviest penalties that respect for the right to a fair trial is to be ensured to the highest possible degree by democratic societies.
The first question that arises from this passage concerns the meaning of the investigation stage.
That stage is stated to be particularly important for two related reasons.
The first is that evidence obtained at that stage determines the framework in which the offence with which the defendant is charged will be considered at trial.
In other words, evidence obtained during the investigation stage can significantly influence the outcome of the proceedings and on that account it requires close attention as to its reliability.
The second reason is that at that very time (viz when evidence capable of influencing the trials outcome is being obtained) the accused finds himself in a vulnerable position.
It may seem trite to ask why he should be vulnerable at that time but the answer, it seems to me, is both plain and significant.
He is vulnerable because at this investigation stage, evidence which may be instrumental in securing a finding of guilt against him is being obtained and collated.
The way that he reacts during the collection of that evidence may prove to be of critical importance in his subsequent trial.
His vulnerability may be enhanced, moreover, because increasingly complex legislation permits the evidence to be obtained and used in ways that were not previously possible.
I return then to the anterior question.
What is meant by the investigation stage? It must surely include any point or juncture at which evidence which is potentially inculpatory of an accused is being obtained.
This is of especial importance when the investigation stage provides the setting for a statement by the accused person that might incriminate him.
ECtHR recognised in para 54 of Salduz that an incriminating statement might occur at an early stage of the investigation and it was for this reason that early access to a lawyer was considered to be necessary.
That early access is expressly required so that the very essence of the right not to incriminate oneself is not destroyed.
But extinction of the essence of the right, it seems to me, is precisely what may happen if statements tending to incriminate, made without the benefit of legal advice, are admitted in evidence against their maker on his or her trial.
And that conclusion reinforces my view that it is not the place at which admissions are made nor whether the individual making the statements has been detained that is important.
What is important is the use to which such statements may subsequently be put.
The same message is provided by the opening words of para 55 of Salduz: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective" article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Once more, it is noteworthy that the court here does not refer to the place at which the first interrogation takes place nor whether the person who is answering questions has been detained.
It is from the moment of the first interrogation that the need for the presence of a lawyer is deemed to be required and that point is chosen because that is precisely when self incriminating statements may begin to be made.
In this connection I should say that I do not construe the judgments of Judge Bratza and Judge Zagrebelsky in Salduz as seeking to link the need for a lawyers presence inextricably with the moment that a suspect is taken into custody.
At O I2 Judge Bratza said: At para 55 of the judgment, the Court states as a general principle that in order for the right to a fair trial to remain sufficiently, practical and effective, article 6 requires that, as a rule, access to a lawyer should be provided, as from the first interrogation of a suspect by the police.
This principle is consistent with the Court's earlier case law and is clearly sufficient to enable the Court to reach a finding of a violation of article 6 on the facts of the present case.
However, I share the doubts of Judge Zagrebelsky as to whether in appearing to hold that the right of access to a lawyer only arises at the moment of first interrogation, the statement of principle goes far enough.
Like Judge Zagrebelsky, I consider that the Court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 requires that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention.
It would be regrettable if the impression were to be left by the judgment that no issue could arise under article 6 as long as a suspect was given access to a lawyer at the point when his interrogation began or that article 6 was engaged only where the denial of access affected the fairness of the interrogation of the suspect.
The denial of access to a lawyer from the outset of the detention of a suspect which, in a particular case, results in prejudice to the rights of the defence may violate article 6 of the Convention whether or not such prejudice stems from the interrogation of the suspect.
It is immediately obvious from this passage that Judge Bratzas concern was that the judgment of the court did not go far enough.
It is clear that his assumption was that the first interrogation of a suspect would normally take place after he had been taken into custody.
He felt that to prescribe that the presence of a lawyer was only then required might not be sufficient.
Statements could be made or events could occur which might prove incriminating after the suspect was taken into custody but before the first formal interrogation began.
That was why Judge Bratza suggested that a lawyer was required when the accused was taken into custody.
But his statement to that effect does not betoken a view that the moment that custody begins should be invested with some special significance.
On the contrary, it reflects concern that the suspects vulnerability and his need for a lawyer should not be seen as inevitably coincident with the opening of the formal interview.
Statements made or events occurring before that time are just as likely to require the presence of a lawyer if the fairness of the trial is to be assured.
The cases decided in Strasbourg post Salduz and discussed by Lord Hope in paras 36 40 of his judgment do not appear to me, with respect, to contribute much to the debate except for the case of Borotyuk v Ukraine (Application no. 33579/04).
All of the cases concerned suspects who were already in custody when the questioning began.
Lord Hope has suggested that importance was attached by Strasbourg in some of these cases to the fact that the person was in custody when he was being interrogated.
I do not so read them.
It seems to me that the cases are at least as consistent with the view that the important factor in play was that the interrogation was the occasion when inculpatory statements might be made and on that account a lawyers presence was considered an indispensable concomitant of a fair trial.
In Borotyuk an interesting passage appears at para 79.
There the court said: The Court emphasises that although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of fair trial (see Poitrimol, cited above, para 34).
As a rule, access to a lawyer should be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police questioning without access to a lawyer are used to secure a conviction (see Salduz vs Turkey [(2008) 49 EHRR 421], para 55.
Quite apart from the observation that access to a lawyer was deemed necessary as from the first questioning of a suspect, the emphasis in this passage seems to be on the inevitable prejudice that will occur if questioning takes place at a time and in circumstances where incriminating statements might be made.
This, as it seems to me, is entirely consonant with the underlying philosophy of article 6(1) taken in conjunction with article 6(3)(c).
The essential question is: when the questioning is taking place, is the suspect in a position where the advice of a lawyer is essential if a fair trial is to occur.
If he is liable to incriminate himself at that time, a lawyers presence is required so that he may be fully advised as to how he may or should respond to the interrogation.
Likewise, if he requires advice as to how he should react to questioning, for example by giving information that may subsequently emerge at the trial, he needs to have proper guidance.
Remaining silent when a perfectly innocent explanation is available may fatally undermine a subsequently proffered defence.
I would therefore express the principle, to be derived from a consideration of the mainstream Strasbourg jurisprudence, in this way: where a person becomes a suspect, questions thereafter put to him or her that are capable of producing inculpatory evidence constitute interrogation.
Before such interrogation may be lawfully undertaken, the suspect must be informed of his or her right to legal representation and if he or she wishes to have a lawyer present, questions must be asked of the suspect, whether or not he or she is in custody, in the presence of a lawyer.
The Lord Advocate in the present appeal submitted that the touchstone should be the taking into custody of the individual because this marked the start of the coercive atmosphere in which the vulnerability of the suspect was aroused.
I cannot accept that argument.
Common experience tells us that a coercive atmosphere can exist independently of custody.
The subject was also helpfully considered, albeit in a different context, in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 S.C.R. 353.
In that case the Supreme Court of Canada held that what it described as psychological detention such as to give rise to rights under section 9 of the Canadian Charter of Rights and Freedoms was established where an individual has a legal obligation to comply with a restrictive request or demand, or where a reasonable person would conclude by reason of the state conduct that he or she had no choice but to comply.
Although the right under section 9 of the Charter is one that entitles an individual not to be arbitrarily detained or imprisoned, as opposed to the right not to incriminate oneself, the relevance of the decision to the present appeal lies in the courts analysis of when the interaction between a police officer and the person he has stopped and questioned assumes a coercive quality.
At para 30 of the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ it was stated: we find that psychological constraint amounting to detention has been recognized in two situations.
The first is where the subject is legally required to comply with a direction or demand, as in the case of a roadside breath sample.
The second is where there is no legal obligation to comply with a restrictive or coercive demand, but a reasonable person in the subject's position would feel so obligated.
The rationale for this second form of psychological detention was explained by Le Dain J. in [R v Therens [1985] 1 SCR 613, 644] as follows: In my opinion, it is not realistic, as a general rule, to regard compliance with a demand or direction by a police officer as truly voluntary, in the sense that the citizen feels that he or she has the choice to obey or not, even where there is in fact a lack of statutory or common law authority for the demand or direction and therefore an absence of criminal liability for failure to comply with it.
Most citizens are not aware of the precise legal limits of police authority.
Rather than risk the application of physical force or prosecution for wilful obstruction, the reasonable person is likely to err on the side of caution, assume lawful authority and comply with the demand.
The element of psychological compulsion, in the form of a reasonable perception of suspension of freedom of choice, is enough to make the restraint of liberty involuntary.
Detention may be effected without the application or threat of application of physical restraint if the person concerned submits or acquiesces in the deprivation of liberty and reasonably believes that the choice to do otherwise does not exist.
There is no reason to suppose that a person questioned by police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions.
In as much, therefore, as a coercive atmosphere is required in order to stimulate the need for the protection that a lawyers presence brings, I consider that it is just as likely that this will occur outside a police station as within.
As I have said, the important question is whether the circumstances in which questions are asked are liable to be productive of incriminating answers, not whether those questions are being asked in a police station or whether the suspected person can be said to be in custody.
Zaichenko v Russia
This decision needs to be examined because of the possibly discordant note that it strikes in what I consider to be the clear message of what I have described as the mainstream European jurisprudence on the subject.
The applicant had been stopped by police when driving away from his place of work on 21 February 2001.
He was asked to account for two cans of diesel that were discovered in his car.
He replied that he had poured the fuel from the tank of a service vehicle that he drove as an employee into the containers that the police had found in his car.
He said that he intended to use it for his own personal purposes in other words, he admitted to having stolen it.
A vehicle inspection record was prepared by a police officer at the scene in which it was stated that the applicant had explained that he had poured out the fuel from the company premises.
The applicant signed that document.
He also signed another document entitled explanations in which his statement to the following effect was recorded: Since 1997 I have been employed as a driver by a private company.
On 21 February 2001 I arrived to my workplace at 9 am.
During the day I was repairing my service vehicle.
In the evening I poured out thirty litres of fuel from the tank of my service vehicle.
I have previously brought the cans, ten and twenty litres each, from home.
After work, at around 8 pm, I was driving home in my car and was stopped by the police.
The car was inspected in the presence of the attesting witnesses.
I poured out the fuel for personal use.
On 2 March 2001 an official known as an inquirer compiled a report on the events of 21 February 2001.
It was recorded that the applicant had intentionally stolen thirty litres of diesel from his service vehicle.
The report was stated to have been based on, among other things, the inspection record compiled by the police at the scene and the applicant's written statement.
The accusation section of this statement read, At 8 pm on 21 February 2001 [the applicant] . being at work intentionally stole from his service vehicle the diesel in the amount of thirty litres.
Thereby, he caused to the company pecuniary damage in the amount of 279 roubles.
The applicant appended his signature to the following certificates that appeared at the foot of the statement: I have been informed of the nature of the accusation, the right to have access to the case file, the right to legal representation, the right to make requests and challenge the inquiring authorities' actions. and I have studied the case file and have read this document.
I have no requests or motions.
I do not require legal assistance; this decision is based on reasons unrelated to lack of means.
I will defend myself at the trial.
At his trial the applicant retracted the confession and instead advanced a defence that he had purchased the fuel.
He maintained that evidence of his admissions to police officers when his car was stopped should not have been admitted because he had not been informed of his right against self incrimination.
At para 19 of ECtHRs judgment it is recorded that the appeal court in Russia had decided that the applicant's allegation of self incrimination had been rightly rejected by the trial court as unfounded.
At paras 42 and 43 of its judgment, ECtHR dealt with the question of whether the applicant had been charged during the events of 21 February 2001.
As to that the court said this: 42.
The Court reiterates that in criminal matters, Article 6 of the Convention comes into play as soon as a person is charged; this may occur on a date prior to the case coming before the trial court, such as the date of arrest, the date when the person concerned was officially notified that he would be prosecuted or the date when preliminary investigations were opened (see Eckle vs Germany, 15 July 1982, 73, Series A no. 51, and more recently, O'Halloran and Francis vs the United Kingdom [GC], nos. 15809/02 and 25624/02, 35, ECHR 2007. ).
Charge, for the purposes of Article 6 1, may be defined as the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence, a definition that also corresponds to the test whether the situation of the [person] has been substantially affected (see Shabelnik vs Ukraine, no. 16404/03, 57, 19 February 2009; Deweer vs Belgium, 27 February 1980, 46, Series A no. 35; and Saunders vs the United Kingdom, 17 December 1996, 67 and 74, Reports of Judgments and Decisions 1996 VI).
Given the context of the road check and the applicant's inability to produce any proof of the diesel purchase at the moment of his questioning by the police, the Court considers that there should have been a suspicion of theft against the applicant at that moment. 43.
Applying these principles to the facts of the case, the Court notes that the trial court's use made of the admissions made on 21 February 2001, which led to the institution of criminal proceedings against the applicant and then served for convicting him of theft, is at the heart of the applicant's complaints under Article 6 of the Convention (compare Saunders, cited above, 67 and 74; and Allen vs the United Kingdom (dec.), no. 76574/01, 10 September 2002).
It is also noted that the inspection record itself indicated Article 178 of the RSFSR Code of Criminal Procedure as the legal basis for the inspection (see paragraph 26 above).
Thus, although the applicant was not accused of any criminal offence on 21 February 2001, the proceedings on that date "substantially affected" his situation.
The Court accepts that Article 6 of the Convention was engaged in the present case.
Nor was there any disagreement on this point between the parties.
The substantial effect which prompted the finding that article 6 was engaged appears to comprise the suspicion which the court felt the police must have had that the applicant had been guilty of theft and the fact that the events that occurred at the roadside check led to his subsequent prosecution and conviction.
On that basis the same conclusion (that article 6 is engaged) is irresistible in the three cases involved in these references.
In each of the cases it is clear that, at the time that the relevant admissions were made, the police either did have or should have had a suspicion that the persons to whom they were posing questions were guilty of the offences that were under investigation and that the statements made in answer to those questions were or were likely to be highly incriminating of all three.
But why in Zaichenko, if article 6 was engaged, was the applicant not entitled to the protection of article 6(3)(c), taken in conjunction with article 6(1)? For an answer to this, one must conduct a probe of the later passages of the judgment which, I should confess in advance, has not led me to an entirely clear understanding of the rationale underlying the courts conclusion on the issue.
At para 46 the court said this: 46.
The Court notes at the outset that the applicant only complained that he had not been afforded enough time to contact a lawyer in a nearby town.
The Court cannot but note that, as confirmed by the applicant's representative in his letter to the European Court dated 26 July 2002, both on 21 February and 2 March 2001 the applicant chose not to exercise his right to legal representation with the hope that the court would give him a fair trial even without counsel.
It is difficult to be sure that, in using the phrase, the court cannot but note, the judgment at this point was indicating that, because the applicant had elected not to have legal representation, this was a basis on which it could be concluded that there had not been a violation of article 6(3)(c).
Observations that appear later in the judgment would tend to support that view, however.
In the first instance, the para following (para 47) opens with the word moreover which suggests that the decision of the applicant not to seek legal representation was, at least, one of a number of reasons for the finding that article 6(3)(c) had not been breached.
Secondly, at para 50 of the judgment, the court refers to the applicants election not to seek legal assistance either on 21 February or on 2 March 2001 as a waiver of his right to legal assistance.
Some of the other reasons for finding that there had not been a violation of article 6(3)(c) appear in para 47: 47.
Moreover, the Court observes that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings because the applicant was not formally arrested or interrogated in police custody.
He was stopped for a road check.
This check and the applicant's self incriminating statements were both carried out and made in public in the presence of two attesting witnesses.
It is true that the trial record contains a statement by the applicant suggesting that the writing down of the inspection record and/or his subsequent statement were started on the spot but were completed in the village of Birofeld.
Nevertheless, the Court concludes on the basis of the materials in the case file that the relevant events, namely the drawing of the inspection record and the taking of the applicant's explanation, were carried out in a direct sequence of events.
The distinction between Zaichenkos case and earlier decisions that is highlighted here viz that the applicant had not been arrested or interrogated while in police custody is not expressly stated to be a reason that alone would warrant a finding that there had not been a violation of article 6(3)(c) taken in conjunction with article 6(1).
It seems to me impossible to say, on the basis of the statements in this paragraph, that ECtHR has concluded that formal arrest and interrogation in custody are essential prerequisites to the invocation of the right.
Rather, it appears that the court treated the cumulative effect of factors that were peculiar to this particular case as the basis for the finding that there had not been a violation of article 6(3)(c).
These factors can be enumerated as follows: (1) the applicant had waived his right to a lawyer and had explicitly stated that he did not want a lawyer to represent him despite having been told on 2 March 2001 that he was entitled to legal representation; (2) he had not been formally arrested or interrogated in police custody; (3) the initial questioning of the applicant took place at a road check and not in any formal setting; (4) the applicant was questioned in a public place with other witnesses present who could attest to a lack of coercion on the part of the police; and (5) the checking of the applicants car and his questioning as to the source of the diesel all occurred as part of a seamless process.
I do not believe that any one of these factors can be elevated to a position of pre eminence nor does it appear to me that it can be said with confidence that any single factor, taken in isolation, would be sufficient to support the finding that there had not been a breach of article 6(3)(c).
The succeeding paragraphs in the judgment repeat the matters dealt with in paras 46 and 47 or expand on them to some extent.
It is not necessary to consider these in any detail but I should mention para 48, if only to say that I have had a little difficulty in following the reasoning that it contains.
It reads: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicant's freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings.
It is not immediately clear why someone who was not free to leave the scene could be said not to have had any significant curtailment of his freedom of action.
Be that as it may, it appears to be the case that if the court had found that there had been a significant curtailment of the applicants freedom of action, it would have regarded this as a sufficient basis for a finding of a violation of article 6(3)(c).
What would constitute such a curtailment of freedom of action has not been made clear, however.
Altogether, it is not easy to distil any obvious principle from this paragraph and I would be reluctant to ascribe to it any significance beyond that relevant to the circumstances of the case of Zaichenko itself.
Although ECtHR concluded that Mr Zaichenko had waived his right to legal assistance, it decided that there had not been a waiver of his right not to incriminate himself.
At para 52 the court held that it was incumbent on the police to inform the applicant of the privilege against self incrimination and the right to remain silent.
Their failure to do so at the roadside check before putting questions to him constituted a violation of article 6(1), therefore.
In a partly dissenting opinion, Judge Spielmann (who, as Lord Hope pointed out in para 46 of his judgment, was a member of the Grand Chamber in Salduz) addressed forthrightly the question of when the right to legal representation arose and, relating it directly to the decision in Salduz, came down firmly in favour of what I believe to be the logical position, namely, that it began when police questioning started.
In para 3 of his opinion, Judge Spielmann said: 3.
In Salduz vs Turkey the Court held that as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police (see Salduz vs Turkey [GC], no. 36391/02, 55, ECHR 2008 . ).
The Court also held that the lack of legal assistance during a suspect's interrogation would constitute a restriction of his defence rights and that these rights would in principle be irretrievably prejudiced when incriminating statements, made during police interrogation without access to a lawyer, were used for a conviction.
The Court took a similar approach in the equally important judgment in Panovits (Panovits vs Cyprus, no. 4268/04, 66 and 70 73, 11 December 2008). (original emphasis)
Judge Spielmann also questioned the reasoning of the majority that is contained in para 48 of the courts judgment.
At para 6 he said: 6.
Contrary to what is said in para 48 of the judgment, I cannot agree that the circumstances of the case disclose no significant curtailment of the applicant's freedom of action.
I am of the opinion that those circumstances were sufficient to activate a requirement for legal assistance.
I do not understand Judge Spielmanns dissent necessarily to indicate that there was a divergence of views between him and the majority about the nature of the principle at stake.
The principle which I believe can be said to be common to both is that when a suspect is interrogated by police he is entitled to legal assistance.
Where Judge Spielmann parted company with the majority was in its conclusion as to whether the principle applied.
Because of the accumulation of factors that the court had identified (see para 158 above) and because it concluded that there had not been a curtailment of Mr Zaichenkos freedom of action, it held that the principle did not apply.
Judge Spielmann, by contrast, did not attach the weight to the factors that the majority had considered militated against a finding of violation of article 6(3)(c) and he disagreed (in my view, quite properly) with the suggestion that someone who was not free to leave the scene nevertheless had not suffered any curtailment of his freedom of action.
Miranda v Arizona
As Lord Hope has said in para 52, curtailment of freedom of action carries echoes from Miranda v Arizona 384 US 436 (1966).
And as Lord Hope suggests, it may well be that Miranda will influence the thinking of Strasbourg, it having featured in a number of prominent dissenting judgments in that court already.
But I question whether this will lead to the adoption of the custodial approach to the question as to when access to a lawyer is required.
Curtailment of an individuals freedom of action can arise even when he has not been taken into custody.
The important question must surely be whether the suspect feels constrained to answer the questions posed to him by the police officer.
As the Grant case illustrates, this can arise either because of the manner in which the police officer manages the exchange with the suspect or because of the latters belief that he has no option but to answer the questions put to him.
Quite apart from these considerations, however, I believe that one must be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence in any wholesale way.
The implications of that decision must be considered in the context of police practice in the United States of America.
Nothing that has been put before this court establishes that it is common practice in America to ask incriminating questions of persons suspected of a crime other than in custody.
Indeed, it is my understanding that as soon as a person is identified as a suspect, police are trained that they should not ask that person any questions until he or she has been given the Miranda warnings.
Custody was identified in Miranda as one of the features necessary to activate the need for legal representation but custody has been held to mean either that the suspect was under arrest or that his freedom of movement was restrained to an extent associated with a formal arrest Stansbury vs California, 511 US 318 (1994); New York vs Quarles, 467 U.S. 649, 655 (1984).
So it is clear that the rule that custody is required before entitlement to legal representation arises is not inflexible or static and that its underlying rationale is closely associated with the question whether the person questioned feels under constraint to respond.
Hampering police investigation
One of the principal practical arguments advanced against the requirement that a suspect be informed that he is entitled to legal representation before incriminating questions are put to him is that this will hamper police investigations.
The argument is a venerable one.
It has been deployed in reaction to various proposals for safeguards intended to protect suspects rights including the right to have a solicitor present during interviews and the audio recording or the videotaping of interviews.
There is no evidence that the introduction of those measures brought about any widespread impediment to police investigations nor is there, in my view, any convincing evidence that this would be the result of recognising the right of a suspect to be informed that he or she is entitled to legal representation before being required to provide potentially incriminating answers to police questioning.
As the respondents have pointed out, in the final analysis, these cases are about the admissibility of evidence.
There is no legal prohibition on police asking questions of a suspect that may produce incriminating answers.
The legal consequence of doing so without first informing the suspect of his or her right to be legally represented will be, in my opinion, that the answers produced will be inadmissible in evidence unless compelling reasons such as were discussed in para 55 of Salduz exceptionally justify denial of access to a lawyer.
One can anticipate, therefore, that police may decide in appropriate circumstances to proceed with questions in order to further the investigation but have to accept that if they are capable of producing incriminating answers from someone who is a suspect, the replies will be inadmissible.
A balance will always have to be struck between unfettered police investigatory powers and the complete safeguarding of suspects rights.
The history of criminal jurisprudence shows how that balance has been struck in different ways and at different times, reflecting, no doubt, changing attitudes as to what properly reflects contemporary standards.
It is my belief that the proper balance to strike for our times is the one that I have suggested in para 146 above.
Conclusions
For the reasons given in para 153 above, I consider that article 6 of ECHR was engaged in each of the respondents cases at the time that the relevant questions were asked.
I have no doubt that when they were asked those questions each of them was suspected of having committed an offence.
I agree with Lord Hope that the administration of a caution is not necessarily determinative of this issue but, in the particular circumstances of these cases, I do not believe that any other conclusion is possible.
The second and third questions that were put to the respondent, Ambrose, were clearly capable of producing incriminating responses.
In fact they did so and it is evident that the answers have been relied on in order to establish his guilt, (although that might well have been possible simply by proving that he was in the car and in possession of the keys).
In these circumstances, I am of the view that he had a right under article 6(3)(c) taken in conjunction with article 6(1) of ECHR to be informed, after his reply to the first question, that he was entitled to legal representation before answering further questions, and that, absent such a warning, the incriminating answers given by him to the second and third questions were not admissible.
The questions put to the respondent who has been referred to as M, apart from the first question, were also clearly capable of producing incriminatory replies although whether they would in fact be probative of guilt would be a matter for trial, if indeed the answers were held to be admissible.
Since they clearly had the capacity of producing inculpatory responses, however, I consider that the questions put to M at his home, apart from the first question, are inadmissible.
In the case of the respondent referred to as G, for the reasons given by Lord Hope (with which I agree), it is indisputable that, at the time the impugned questions were put to him, he was in custody and, whatever view one takes of the effect of the European jurisprudence, the incriminating answers that he gave are inadmissible.
But, for the same reasons that I have given in the cases of Ambrose and M, I would have held that they were inadmissible, regardless of whether G was in custody at the time that the answers were given.
| UK-Abs | In Cadder v HM Advocate [2010] UKSC 43, the Supreme Court held, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421, that the Crowns reliance on admissions made by an accused who had no access to a lawyer while he was being questioned as a detainee at a police station was a violation of his rights under Article 6(3)(c), read with Article 6(1) of the European Convention on Human Rights.
The issues in these cases are whether the right of access to a lawyer prior to police questioning, which was established by Salduz, applies only to questioning which takes place when the person has been taken into police custody; and, if the rule applies at some earlier stage, from what moment does it apply.
The accused in the first case, John Paul Ambrose, was prosecuted on a charge of contravening section 5(1)(b) of the Road Traffic Act 1988 as being in charge of a motor vehicle while over the alcohol limit.
He was questioned by two police officers by the roadside, who cautioned him but did not give him any specification about the offence he was suspected of having committed.
In response to their questions, he confirmed that he was in possession of the car keys, and that he might be intending to drive the car.
Breath tests indicated that he was substantially over the prescribed limit.
In his trial the Crown led evidence of the questions and answers at the roadside.
In M, the accused was charged with assault to severe injury, permanent disfigurement and permanent impairment.
A few days after the incident, the police visited him at his home, cautioned him, and asked him a number of questions, in response to which he confirmed his attendance at the locus on the night in question and his involvement in the fight.
He was detained the following day, and questioned further while he was in custody.
At trial, he objected to the Crowns reliance upon the admissions he had made in his home, on the basis that he had not had access to legal advice prior to interview.
In G, the accused was indicted with offences including the possession of controlled drugs under the Misuse of Drugs Act 1971 and possession of prohibited firearms and ammunition under the Firearms Act 1968.
The police had obtained a warrant to search the accuseds flat.
They forced entry and found him there.
He struggled, and was handcuffed and cautioned.
He admitted to having drugs in his pocket, and responded to a number of questions about items found in the flat.
He was subsequently arrested and taken to a police station where he answered further questions.
He objected to the Crowns reliance at trial on the statements he made during the course of the search of the flat.
In each of the three cases, the Appeal Court of the High Court of Justiciary referred to this Court the question whether the act of the Lord Advocate in leading and relying on the evidence in question would be incompatible with the appellants rights under Article 6(1) and (3)(c) of the European Convention on Human Rights.
The Supreme Court, by a majority of 4 to 1, finds that, in the cases of Ambrose and M, the act of the Lord Advocate in leading and relying at the trial on the evidence that was obtained from them in response to police questioning without having had access to legal advice was not incompatible with the Article 6(1) and (3)(c) right; and in the case of G that it was incompatible.
In Ambrose and M, the question whether, taking all the circumstances into account, it would be fair to admit this evidence, is left open for decision by the Appeal Court and Sheriff Court respectively.
Lord Hope gives the leading judgment.
Lord Kerr gives a separate dissenting judgment finding in all three cases that the evidence would be inadmissible.
In each of these three cases, the circumstances differ from those before the Supreme Court in Cadder and before the Grand Chamber in Salduz, in that the evidence in question was obtained through police questioning before the individuals were detained at a police station.
The Supreme Court notes, firstly, that the jurisdiction of this court is limited to a consideration of the devolution issue which is raised by each of these references, and does not extend to ruling on how the circumstances referred to in each case would fall to be dealt with under domestic law.
Secondly, it notes that a decision by this court that there is a rule that a person who is suspected of an offence but is not yet in custody has a right of access to a lawyer before being questioned by the police would have far reaching consequences for the investigation of crime by the authorities.
Therefore, if Strasbourg has not yet spoken clearly on this issue, the court would be wise to wait until it has done so [14 15].
The duty of the domestic court in interpreting the Convention is to keep pace with the Strasbourg case law as it evolves over time.
There is no obligation upon domestic courts to do more than that (R (Ullah) v Special Adjudicator [2004] UKHL 26, para 20 per Lord Bingham of Cornhill) [17].
The courts task in this case is to identify where the Strasbourg court stands on this issue.
It is not for this court to expand the scope of the Convention right further than the jurisprudence of the Strasbourg court justifies [20].
In domestic law, where an individual has not yet been detained under section 14 of the Criminal Procedure (Scotland) Act 1995, the test for the admissibility of answers given to questions put by police is whether or not there was unfairness on the part of the police.
The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it carries no more weight than that.
There is no rule in domestic law that provides that police questioning of a person without access to legal advice who is suspected of an offence but is not in police custody must always be regarded as unfair.
The question is whether a rule to that effect is to be clearly found in the jurisprudence of the Strasbourg court [25].
The Grand Chamber in Salduz had in mind the need to protect an accused against abusive coercion while in custody.
The judgment appears to have been concerned only with establishing a rule that there was a right of access to a lawyer where the person being interrogated was in police custody [33].
That assessment is supported by subsequent Strasbourg case law, in particular Zaichenko v Russia (Application no.39660/02), the only case to date in which the complaint was of lack of legal assistance during police questioning when the applicant was not in custody [46].
If the Salduz judgment were to apply to statements made by a person in response to police questioning before being taken into custody, the court would have had to have said so expressly.
It did not do so [35].
The privilege against self incrimination is not an absolute right (Murray v United Kingdom (1996) 22 EHRR 29, para 47).
It is primarily concerned with respecting the will of the person to remain silent (Saunders v United Kingdom (1996) 23 EHRR 313, para 68), and a person is free to confess if he is willing to do so.
Police custody or its equivalent creates a need for protection of the accused against abusive coercion.
The same is not the case for questioning at the locus or in a persons home [54].
In principle, the line as to when access to legal advice must be provided before the person is questioned should be drawn as from the moment that he has been taken into police custody, or his freedom of action has been significantly curtailed [55].
The correct starting point when considering whether the persons Convention rights have been breached is to identify the moment at which he is charged for the purposes of Article 6(1); that is whether his situation is substantially affected (Deweer v Belgium (1980) 2 EHRR 439, para 46; Eckle v Germany (1982) 5 EHRR 1, para 73).
That will be the case as soon as the suspicion against him is being seriously investigated and the prosecution case compiled [62].
The fact that a person who has become a suspect and is not in
custody is questioned without access to legal advice will be a relevant factor in the assessment whether the accused was deprived of a fair hearing, but it will be no more than that.
In Ambrose and M, the question is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning, conducted under common law at the roadside or at the accuseds home, without the accused having had access to legal advice, was incompatible with Article 6(1) and (3)(c).
This is answered in the negative.
Ambrose was charged for the purposes of Article 6 when he was cautioned.
Suspicion that he was committing an offence fell on him as soon as he told the police that the keys were in his pocket [67].
M was charged when he was cautioned by the police officer at his home [69].
But it would be to go further than Strasbourg has gone to hold that the appellants are entitled to a finding that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being subjected to questioning at the roadside [68 & 70].
The question whether, taking all the circumstances into account, it would be fair to admit this evidence, is left open for the Appeal Court and Sheriff Court respectively.
In G, the question whether it is incompatible with his Convention rights for the Lord Advocate to lead evidence of his statements made during the course of the search is answered in the affirmative.
He was charged for the purposes of Article 6 by the time the police began their search.
The difference with this case was that there was a significant curtailment of Gs freedom of action.
He was detained and had been handcuffed, and was, in effect, in police custody from that moment onwards.
The circumstances were, therefore, sufficiently coercive for the incriminating answers that he gave to the questions that were put to him without access to legal advice to be inadmissible [71].
The same result need not, however, follow in every case where questions are put during a police search to a person who is to be take to have been charged for the purposes of Article 6; that, again, would be going further than Strasbourg has gone [72].
Lord Kerr would have found the evidence in question to be inadmissible in all three cases.
It is not open to courts of this country to refrain from recognising a claim to a Convention right simply because Strasbourg has not spoken clearly on the matter [128].
In practice, it is inevitable that many claims to Convention rights will have to be determined by the UK courts without the benefit of unequivocal jurisprudence from Strasbourg.
It is the duty of every domestic court to resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view [129].
As regards the right of access to a lawyer, the selection of the moment of being taken into custody as the first occasion on which legal representation becomes necessary is both arbitrary and illogical.
The judgment in Salduz indicates that the need to have a lawyer is not to be determined on a geographical or temporal basis but according to the significance of what is taking place when the admissions in question are made [136].
The essential question is: when the questioning is taking place, is the suspect in a position where the advice of a lawyer is essential if a fair trial is to occur.
If he is liable to incriminate himself at that time, a lawyers presence is required [145].
The judgment in Zaichenko is not clear, but does not indicate that formal arrest and interrogation in custody are essential prerequisites to the invocation of the right to legal assistance [158].
|
The respondent, Mrs Sumithra Hewage, was born in Sri Lanka.
She has been a British citizen since 1998.
She has devoted her professional career to the practice of dentistry.
Her speciality is orthodontics.
On 1 December 1993 she commenced employment with Grampian Health Board (the Board) at Aberdeen Royal Infirmary as a consultant orthodontist.
In 1996 she became Head of Service for the Orthodontics Department.
She resigned from that position on 30 November 2003.
On 24 December 2004 she resigned from her employment with the Board with effect from 31 March 2005.
In September 2005 she commenced proceedings against the Board in which she claimed under section 94(1) of the Employment Rights Act 1996 that she had been unfairly dismissed from that employment.
She also claimed under the Sex Discrimination Act 1975 and the Race Relations Act 1976 that she had been discriminated against on the grounds of her sex and race.
Mrs Hewages claims came before an employment tribunal sitting in Aberdeen.
On the penultimate day of the hearing, which took place on various dates between January and June 2007, it was conceded by counsel for the Board that Mrs Hewage had been constructively and unfairly dismissed.
In a judgment which was delivered on 4 December 2007 the employment tribunal held that she had been unlawfully discriminated against on a number of grounds of both sex and race.
By a majority decision issued on 15 April 2009 the Employment Appeal Tribunal upheld an appeal by the Board against the decision of the employment tribunal and dismissed Mrs Hewages claims of discrimination.
She appealed against that decision to the Inner House of the Court of Session.
On 14 January 2011 the Second Division (Lord Justice Clerk Gill, Lord Bonomy and Lord Nimmo Smith) allowed her appeal and quashed the decision of the Employment Appeal Tribunal: [2011] CSIH 4, 2011 SLT 319.
It remitted the case to the employment tribunal to decide whether, if it had had regard to the only issues which the court considered to be relevant to the claims of discrimination, it would have come to the same or a different conclusion.
The Board has now appealed against the decision of the Inner House of the Court of Session to this Court.
In the meantime the employment tribunal, having considered the matter that was remitted to it by the Inner House, has affirmed its decision to uphold Mrs Hewages claims of discrimination.
The facts
The complaints have their source in allegations by Mrs Hewage that she was bullied and harassed by employees of the Board.
When she held the position of Head of Service of the Orthodontics Department Mrs Hewage attended regular monthly management meetings to discuss how her department was functioning.
These meetings were normally attended by Mrs Helen Strachan, who was the service manager for surgical specialities, and Mrs Edith Munro, who was the clinical nurse manager.
One of these meetings took place in Mrs Strachans office on 9 September 2003.
Mrs Hewage alleged that Mrs Strachan and Mrs Munro were verbally abusive, hostile and aggressive towards her.
She was very upset by their conduct and could not bring herself to talk to anyone about the way she had been treated.
So she decided to consult an occupational health doctor, who wrote on her behalf to the Boards Chief Executive, Mr Alex Cumming.
Mrs Hewage met Mr Cumming on 7 October 2003.
She told him about the difficulties that she had been having with Mrs Strachan and Mrs Munro.
She said that it would be very difficult for her to continue to work with them and that she would be considering her position.
His response did not satisfy her, so she resigned from her position as Head of the Department.
Mrs Hewages complaint about Mrs Strachans conduct was not the first to have been brought to the attention of the Boards senior management.
Professor John Forrester had experienced difficulty with Mrs Strachan when he was Head of Service for the Department of Ophthalmology.
On 4 April 2002 she accused him of having deliberately manipulated his waiting list the previous morning to engineer the cancellation of day case cataracts booked for that day and told him that she would never allow that to happen again.
When asked to explain herself, she said that her accusation was based on remarks by one of his consultant colleagues.
Professor Forrester was taken aback by her challenge to his clinical judgment that the operations should be cancelled, and by the fact that one of his consultant colleagues had apparently spoken to her in those terms.
He decided that he could no longer work with her and that his position as Head of Service for his department was untenable.
Professor Forrester wrote to the Chief Executive, Mr Cumming, on 5 April 2002 making it clear that he would not be willing to return to the position of Head of Service if Mrs Strachan continued to have responsibilities in his department.
His resignation led to a review of the department.
It was reorganised so as to provide its Head of Service with a deputy who would be responsible for its day to day running rather than having Mrs Strachan as its service manager.
The position of Head of Service was advertised, and Professor Forrester was the only applicant.
He was re appointed, and the plan for the departments reorganisation was implemented.
When Mrs Hewage resigned as Head of Service in the Orthodontics Department Mr Colin Larmour, a consultant orthodontist, took over from her in November 2003, initially on a temporary basis.
Prior to his appointment Mrs Hewage had made it known repeatedly that she was of the view that there should be a consultant on the interview panel for the appointment of dental nurses.
This was a matter about which she felt very strongly.
But her requests that she should sit on this panel, which were made over a period of about two years to Mrs Edith Munro and Sister Moira Munro, always met with resistance and they refused to agree to them.
Within days of Mr Larmours appointment, however, a meeting took place on 12 December 2003 at Sister Munros suggestion to discuss the issue.
Mr Larmour then spoke to a consultant in the Restorative Dentistry Department, who agreed with Mr Larmour that a consultant should be on the interview panel.
He reported this conversation to Mrs Munro and Sister Munro, who agreed immediately that a consultant should be present.
Their recommendation was then put in place.
When Mr Larmour was appointed as Head of Service in the Orthodontics Department in April 2004, both Mr Alisdair Chisholm, the Boards General Manager, and Mr Kenneth McLay, its Associate Medical Director, assured him of their support.
He told Mrs Hewage that Mr Chisholm told him that if he had any problems with Mrs Strachan he should let him know immediately.
He also told her that Mr McLay had advised him to be friends with the service manager and youll get anything signed.
In December 2003 Mrs Hewage wrote to Mr McLay to complain about the way she had been treated by Mrs Strachan and Mrs Munro at the meeting on 9 September 2003.
Her complaint was referred to Dr Dijkhuizen, the Boards Medical Director.
In March 2004 Dr Dijkhuizen wrote to Mrs Hewage advising her that he had decided to proceed with a formal investigation by a panel under the Boards Dignity at Work Policy.
On 15 June 2004 a copy of the main body of the report of the investigation was sent to Mrs Hewage.
She considered it to be full of inaccuracies and omissions, and it did not reach any conclusions or make any recommendations.
It contained an allegation by Mrs Strachan that Mrs Hewages conduct had led to Mrs Gillian Cartwright having to go on sick leave suffering from work related stress caused by Mrs Hewages conduct.
This was later shown to be a false allegation.
In her evidence to the employment tribunal Miss Cartwright called it a blatant lie, the truth being that her stress had been caused by Mrs Strachan herself.
On 24 June 2004 Mrs Hewage, who was distressed by the report, met Mr Chisholm and asked him to relieve Mrs Strachan of any responsibilities that she had in her department.
He did not do this.
The Dignity at Work panel issued its final report on 6 August 2004.
It contained some recommendations, but for the most part it simply repeated the stated positions of Mrs Hewage, Mrs Strachan and Mrs Munro.
On 20 August 2004 Mrs Hewage met Dr Dijkhuizen to discuss it.
She again asked him to remove Mrs Strachan from duty as service manager for her department.
He replied that there was no basis for doing this in the report, which both Mrs Strachan and Mrs Munro considered to be totally unsatisfactory.
They had told him that they were seeking an apology from Mrs Hewage for making the complaint.
On 26 August 2004 Dr Dijkhuizen wrote to Mrs Hewage, Mrs Strachan and Mrs Munro saying that he would write to them again in September to indicate how the report would be taken forward.
But when he wrote to them again on 15 September 2004 he told them that he had decided to not to recommend that any action should be taken.
On 25 November 2004 he wrote to the appellant to inform her that no action would be taken against Mrs Strachan regarding her false accusation about Miss Cartwright.
On 30 November 2004 Mrs Hewage wrote to Mr Chisholm applying for a review of the outcome of the report.
On 24 December 2004, having still not received a reply to her application, she submitted her resignation from her employment with the Board with effect from 31 March 2005.
The proceedings
Mrs Hewage intimated her intention to raise a grievance by a letter to the Boards human resources manager, Miss Ashley Catto, dated 10 April 2005.
She gave details of her grievance in a letter dated 18 May 2005, and by letters dated 30 June 2005 and 22 August 2005 the British Medical Association amplified her grievance on her behalf.
Her allegation at this stage was based on one specific comparison, which was the case of Professor Forrester.
The Board appointed a panel to consider her grievance, and an investigation was carried out.
When the panel reported on 22 March 2006 it held that Mrs Hewages grievance was partly justified in relation to the Boards delay in dealing with it.
But it rejected her allegations of bullying and harassment and of discrimination on grounds of sex and race.
In her application form ET/1, in which she alleged that she had been unfairly dismissed, Mrs Hewage gave details of her complaint of bullying and harassment at the hands of Mrs Strachan.
It also contained this statement: The claimant submits that other white male consultants were not subjected to the same bullying and harassing treatment that she suffered and that she would not have been treated in the way in which she was were it not for her sex and race.
Accordingly, she submits that she was subjected to less favourable treatment on the grounds of her sex and race contrary to the Sex Discrimination Act 1975 and the Race Relations Act 1976. [Emphasis added.] In its reply form ET/3 the Board denied that Mrs Hewage had been constructively dismissed.
It did not respond to the allegation of discrimination, nor did it call for further particulars as it could have done under the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861), Schedule 1.
During the hearing before the employment tribunal Mrs Hewages evidence of discrimination was led without objection.
Moreover, as the Lord Justice Clerk observed in para 30 of his opinion, the Board chose not to call Mr McLay, Mr Chisholm or Miss Catto to give evidence on its behalf.
As it was conceded that Mrs Hewage had been constructively and unfairly dismissed, the employment tribunal concentrated on her complaints of discrimination.
It considered the Boards treatment of Professor Forrester, the change of attitude as to the presence of a consultant on the interview panel and its treatment of Mr Larmour.
It found that there was both sex and race discrimination in each of these three respects.
It also dealt with a number of other matters that had been referred to in evidence, for which counsel for Mrs Hewage conceded in the Inner House no foundation had been laid in the form ET/1.
It held that the cumulative effect of this less favourable discriminatory treatment was the reason for her resignation and her constructive unfair dismissal: para 132.
The criticism that was advanced in the Inner House that it erred in basing this conclusion on the cumulative effect of all the matters referred to in evidence has been met by its determination on the remit that it would have come to the same conclusion if it had had regard only to the three respects mentioned above.
The Employment Appeal Tribunal held by a majority (Lady Smith and Miss Ayre, Mr Thomson dissenting) that Mrs Hewage had not given fair notice of a claim of discriminatory dismissal, and that she had not given fair notice of any allegation of discrimination beyond that which involved comparing her with Professor Forrester: paras 37 and 38.
It was not for the tribunal to extend the range of complaints of its own motion, which was what it appeared to have done.
The EAT also held that the employment tribunal had misapplied the test laid down by the Court of Appeal in Igen Ltd (formerly Leeds Career Guidance) v Wong [2005] ICR 931 as to how to apply section 63A of the Sex Discrimination Act 1975 (inserted by the Sex Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001 (SI 2001/2660)) and section 54A of the Race Relations Act 1976 (inserted by the Race Relations Act 1976 (Amendment) Regulations 2003 (SI 2003/1626)).
Giving the judgment of the Court of Appeal in that case, Peter Gibson LJ said in para 17: The statutory amendments clearly require the employment tribunal to go through a two stage process if the complaint of the complainant is to be upheld.
The first stage requires the complainant to prove facts from which the tribunal could, apart from the section, conclude in the absence of an adequate explanation that the respondent has committed, or is to be treated as having committed, the unlawful act of discrimination against the complainant.
The second stage, which only comes into effect if the complainant has proved those facts, requires the respondent to prove that he did not commit or is not to be treated as having committed the unlawful act, if the complaint is not to be upheld.
The majority held that, to discharge the burden of proof that the provisions of the statutes placed on her, Mrs Hewage was required to establish facts from which the employment tribunal could properly infer that she had been the victim of discrimination.
If it did not do this, there could be no question of its going on to ask whether the Board had proved that it did not commit an act of discrimination.
That question did not arise if there was no prima facie case of discrimination to answer.
The employment tribunal had fallen into error because it said in para 107 of its decision that it was required at the first stage to make an assumption in order to shift the burden of proof at the second stage, and because it looked at only limited aspects of the evidence where Mrs Hewage and the comparators had received different treatment.
It had closed its mind to the evidence relied on by the Board as showing that Professor Forrester and Mr Larmour were not appropriate like for like comparators: paras 73 and 74.
Mrs Hewage had confined herself to a case that she should be compared to actual comparators, but the actual comparators that she had chosen did not suffice for the purpose of discharging the burden of proof that lay on her: para 82.
Mr Thomson disagreed with the majority.
In his opinion the employment tribunal were entitled to treat the comparators that Mrs Hewage had chosen as valid comparators and, as the decision of the employment tribunal could not be said to be perverse, it should not be interfered with.
In the Inner House, giving the opinion of the court, the Lord Justice Clerk said on the issue of fair notice that on a fair and reasonable reading of the ET/1 it was clear that Mrs Hewage had given notice that she sought a remedy in respect of a dismissal that was both unfair and discriminatory.
She had also given notice that the comparators on which she relied were white male consultants.
She had specifically mentioned Professor Forrester, and it was obvious that the only other white male consultant who could be a relevant comparator was Mr Larmour: para 38 and 39.
On the issue of onus of proof, the Lord Justice Clerk said that the approach of the employment tribunal was correct.
It was plain, reading its decision as a whole, that it had decided that a conclusion was there to be drawn that the Board had treated Mrs Hewage differently from the two comparators and to her detriment and that, in light of its handling of the appellants complaints, the difference of treatment justified a prima facie inference of discrimination which it was for the Board to rebut.
In his view, in considering what inferences or conclusions could be drawn from the primary facts, the employment tribunal had to assume that there was no adequate explanation for them.
It was sufficient for it to decide whether, on the primary facts, it could conclude in the absence of an adequate explanation that the Board had committed an act of discrimination.
If it so decided, the burden of proof shifted to the Board: para 41.
As for the choice of comparators, the EAT had simply substituted its own judgment on the point on a consideration of the findings of fact.
Unless the employment tribunals judgment on a question of that kind was absurd or perverse, it was not for the EAT to impose its own judgment on the point.
It was entitled to conclude that Professor Forrester and Mr Larmour were appropriate comparators: para 43.
The issues in this appeal
Mr Truscott QC for the Board directed his argument to the process of legal reasoning which the employment tribunal adopted in determining that Mrs Hewage had been discriminated against on grounds of both sex and race.
He accepted that both Professor Forrester and Mr Larmour were properly before the employment tribunal as comparators.
I think that he was not only right but bound to do so, in view of the wording of Mrs Hewages ET/1 and the fact that her evidence about the treatment which Mr Larmour received was led without objection.
The key issue, therefore, was the question of comparison.
He submitted that the employment tribunal could only conclude that there was a prima facie case of discrimination if there was a like for like comparison.
In this case it was not comparing like with like.
It had misconstrued the approach that was to be taken.
It had left out of account material parts of the evidence that would have shown that the situations in the cases of Professor Forrester and Mr Larmour that Mrs Hewage was relying on were entirely different.
There were so many differences between these situations that it was not open to the tribunal to draw the conclusion that it did.
It determined the issue of discriminatory dismissal without any reasoning at all.
These were errors of law which the EAT was entitled to correct.
Mr Truscott also submitted that the way the employment tribunal had approached the issues in this case showed that further guidance was needed as to the process of reasoning that should be adopted.
In every case the tribunal should approach the issue of discrimination by asking the question why: Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11, [2003] ICR 337, per Lord Nicholls at para 7.
The mental process of the alleged discriminator must be examined in every case.
That had not been done here.
He accepted that it was open to a tribunal to draw inferences.
But the burden of proof was on the claimant to show that there had been treatment which was discriminatory.
The Inner House had been wrong to reverse the EAT on this point.
His primary submission was that Mrs Hewages discrimination claim should be dismissed.
If the appeal were to be dismissed, however, he said that the question which the Inner House had remitted to the employment tribunal should be remitted to a differently constituted tribunal because the original tribunals jurisdiction was spent.
The Board had appealed against its decision on the remit to keep this point open.
Discussion (a) was there an error of law?
The submission that the Inner House erred in holding that the employment tribunal was entitled to hold that Professor Forrester and Mr Larmour were appropriate comparators is, I think, unsustainable.
It is true that the situations which were being compared in each case were not precisely the same.
Professor Forresters circumstances were different.
His was a much larger department.
He resigned in anger immediately on hearing of Mrs Strachans unfounded allegations against him, the decision to remove her from her position as service manager was taken by three people two of whom were not involved when Mrs Hewage complained, he made it clear that he would not return to his position unless she was removed and no one else applied for it.
The proposal that there should be a consultant on the interview panel was dealt with on an inter departmental basis following a meeting with Mr Larmour that took place at Sister Munros suggestion.
As for the supportive comments that were made to Mr Larmour on his appointment, there was no evidence as to what was said to Mrs Hewage when she took up her position as Head of Service in the same department seven years earlier.
The question whether the situations were comparable is, however, a question of fact and degree, and there was a good deal of evidence the other way.
In the case of Professor Forrester the employment tribunal summarised various reasons that had been put forward by counsel for the Board for holding that he was not an appropriate comparator.
Its assessment, however, was that the manner in which the Board dealt with his complaint about his service manager was in marked contrast to the manner in which it dealt with Mrs Hewages complaint: see paras 108 109.
This was because Mrs Strachan was removed from her position as service manager not for any organisational reasons but solely because of the deterioration of her relationship with Professor Forrester.
It had broken down due to her behaviour, as it had between her and Mrs Hewage.
The Board addressed this inter personal problem by replacing Mrs Strachan in his case but not hers, despite her complaints.
When Mrs Hewage made her requests that she should be on the interview panel, Mrs Munro and Sister Munro appeared to the employment tribunal to regard it as a matter of principle that this was their role, not hers.
Yet within a matter of days following her resignation Mr Larmour was able to reach agreement with them on this point without any apparent difficulty.
In its view the change in attitude on their part was astounding and inexplicable: see paras 111 113.
The treatment of Mr Larmour by senior officials on his appointment was quite different from the way Mrs Hewage had been treated by them over a prolonged period after she had told the Board that she could no longer work with Mrs Strachan and had sought their support.
There was evidence, which the employment tribunal accepted, that Mr McLay was dismissive and sarcastic when Mrs Hewage discussed her problems with him, and she received nothing like the immediate support that was offered to Mr Larmour in the way her complaint was dealt with under the Dignity at Work Policy: para 114.
The majority in the EAT were of the opinion that the employment tribunal failed to work through stage one of the stages referred to in Igen v Wong adequately or sufficiently: paras 73 75.
They criticised its reasoning as to what it was required to do at the first stage.
In para 107 of its judgment the tribunal said that it was mindful that it was required to make an assumption at that stage, the purpose being to shift the burden of proof at the second stage so that, unless the respondent provided an adequate explanation, the claimant would succeed.
The majority thought that the tribunal was wrong to say that it was required to make an assumption at the first stage for the purpose of shifting the burden of proof.
They thought that this meant that it had decided to look only at limited aspects of the relevant evidence.
So it failed to ask itself whether, bearing in mind all the evidence and the submissions of the parties on the like for like comparison, Mrs Hewage had discharged the initial burden of proof.
The Lord Justice Clerk said in para 41 of his opinion that the majoritys strictures on this point were not well founded, and I respectfully agree with that assessment.
In the sentence which the majority criticised the employment tribunal was simply following the guidance in Igen v Wong, where the court said that, in considering what inferences or conclusions can be drawn from the primary facts, the tribunal must assume that there is no adequate explanation for those facts: see paras 21 and 22 and para (6) of the Annex to the Court of Appeals judgment.
As these passages make clear, the purpose of that assumption is to shift the burden of proof at the second stage.
It does not diminish in any way the burden of proof at the first stage, when the tribunal is looking at the primary facts that must be established.
As Peter Gibson LJ said in para 17 of his judgment in that case, the first stage requires the complainant to prove the facts from which the tribunal could, apart from the section, conclude in the absence of an adequate explanation that the respondent has committed, or is to be treated as having committed, the unlawful act of discrimination against the complainant.
It is well established, and has been said many times, that one ought not to take too technical a view of the way an employment tribunal expresses itself, that a generous interpretation ought to be given to its reasoning and that it ought not to be subjected to an unduly critical analysis.
But I do not think that it is necessary to rely on that principle in this case.
It is perfectly clear from the reasoning which follows its preliminary observation that the tribunal then proceeded to examine the evidence in order to decide what, in the absence of an adequate explanation, it could hold had been proved.
It was careful to explain, step by step in each case, what it saw as lying at the core of Mrs Hewages complaint.
It addressed the central issue, which was whether these were like for like comparisons.
Having done that, it found that differences of treatment had been proved for which, in its judgment, there appeared to be no adequate explanation.
It expressed its findings as to each case in a way that made it plain that it felt itself entitled in these circumstances to draw a prima facie inference of sex and race discrimination in Mrs Hewages favour, which it was for the Board to rebut and it failed to do.
I do not think that there is any substance in the suggestion that the tribunal misdirected itself or that it considered only part of the evidence that it was required to examine at the first stage.
For these reasons Mr Truscotts primary submission that the employment tribunal misdirected itself as to the onus of proof and failed to apply its mind properly to the evidence must be rejected.
(b) guidance
Mr Truscott submitted that there was a need for guidance to be given by this court as to how cases should be approached under section 63A(2) of the 1975 Act and section 54A(2) of the 1976 Act.
Section 63A(2) provides: Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent (a) has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2 . or (b) is by virtue of section 41 or 42 to be treated as having committed such an act of discrimination . the tribunal shall uphold the complaint unless the respondent proves that he did not commit, or, as the case may be, is not to be treated as having committed, that Act.
Section 54A(2) is, mutatis mutandis, in the same terms.
In Igen v Wong, para 16, Peter Gibson LJ said that, while it was possible to offer practical help (as to which see para 17 of his judgment quoted in para 14, above), there was no substitute for the statutory language.
And in Madarassy v Nomura International plc [2007] ICR 867, para 9 Mummery LJ emphasised that the Court of Appeal had gone out of its way in Igen to say that its guidance was not a substitute for statute.
As he put it, Courts do not supplant statutes.
Judicial guidance is only guidance.
In para 11 he said that there was really no need for another judgment giving general guidance: Repetition is superfluous, qualification is unnecessary and contradiction is confusing.
And in para 12: Most cases turn on the accumulation of multiple findings of primary fact, from which the court or tribunal is invited to draw an inference of a discriminatory explanation of those facts.
It is vital that, as far as possible, the law on the burden of proof applied by the fact finding body is clear and certain.
The guidance in Igen Ltd v Wong meets these criteria.
It does not need to be amended to make it work better.
Nevertheless Mummery LJ went on in paras 56 and following of his judgment in Madarassy to offer his own comments as to how the guidance in Igen v Wong ought to be interpreted, which I would respectfully endorse.
In para 70, having re stated what the tribunal should and should not do at each stage in the two stage process, he pointed out that from a practical point of view, although the statute involved a two stage analysis, the tribunal does not in practice hear the evidence and the argument in two stages: The employment tribunal will have heard all the evidence in the case before it embarks on the two stage analysis in order to decide, first, whether the burden of proof has moved to the respondent and, if so, secondly, whether the respondent has discharged the burden of proof.
In para 77, in a passage which is particularly in point in this case in view of the employment tribunals reference in para 107 to its being required to make an assumption, he said: In my judgment, it is unhelpful to introduce words like presume into the first stage of establishing a prima facie case.
Section 63A(2) makes no mention of any presumption.
In the relevant passage in Igen Ltd v Wong the court explained why the court does not, at the first stage, consider the absence of an adequate explanation.
The tribunal is told by the section to assume the absence of an adequate explanation.
The absence of an adequate explanation only becomes relevant to the burden of proof at the second stage when the respondent has to prove that he did not commit an unlawful act of discrimination.
The assumption at that stage, in other words, is simply that there is no adequate explanation.
There is no assumption as to whether or not a prima facie case has been established.
The wording of sections 63A(2) and 54A(2) is quite explicit on this point.
The complainant must prove facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondent has committed an act of discrimination against the complainant which is unlawful.
So the prima facie case must be proved, and it is for the claimant to discharge that burden.
The points made by the Court of Appeal about the effect of the statute in these two cases could not be more clearly expressed, and I see no need for any further guidance.
Furthermore, as Underhill J pointed out in Martin v Devonshires Solicitors [2011] ICR 352, para 39, it is important not to make too much of the role of the burden of proof provisions.
They will require careful attention where there is room for doubt as to the facts necessary to establish discrimination.
But they have nothing to offer where the tribunal is in a position to make positive findings on the evidence one way or the other.
That was the position that the tribunal found itself in in this case.
It is regrettable that a final resolution of this case has been so long delayed by arguments about onus of proof which, on a fair reading of the judgment of the employment tribunal, were in the end of no real importance.
(c) the remit
I cannot accept Mr Truscotts submission that the question which was remitted to the employment tribunal by the Inner House should have been remitted by it to a differently constituted tribunal.
It remained open to the original tribunal to re examine the issues that were before it if directed to do so by an appellate court.
There was an obvious advantage in remitting the matter to the original tribunal rather than a tribunal which was differently constituted as it had already heard and been able to assess the evidence.
This was pre eminently a matter for the Inner House, and there are no grounds for thinking that it made the wrong choice.
The matter was properly remitted, and happily it has now been dealt with promptly thus eliminating the possibility of any further delay in the final resolution of Mrs Hewages claim.
Conclusion
I would dismiss the appeal.
I would affirm that part of the Second Divisions interlocutor in which it allowed the appeal to the Inner House and quashed the decision of the EAT.
The Board must pay the costs of the appeal to the Supreme Court.
| UK-Abs | Mrs Hewage was born in Sri Lanka, and has been a British citizen since 1998.
On 1 December 1993 she commenced employment with Grampian Health Board (the Board) at Aberdeen Royal Infirmary as a consultant orthodontist.
In 1996 she became Head of Service for the Orthodontic Department.
She resigned from that position on 30 November 2003.
On 24 December 2004 she resigned from her employment with the Board with effect from 31 March 2005.
In September 2005 she commenced proceedings against the Board in which she claimed under section 94(1) of the Employment Rights Act 1996 that she had been unfairly dismissed from that employment.
She also claimed under the Sex Discrimination Act 1975 and the Race Relations Act 1976 that she had been discriminated against on the grounds of her sex and race.
At a hearing before an employment tribunal, the Board conceded that Mrs Hewage had been constructively and unfairly dismissed.
The tribunal held on 4 December 2007 that she had been unlawfully discriminated against on a number of grounds of both sex and race.
On 15 April 2009 the Employment Appeal Tribunal (the EAT) upheld an appeal by the Board and dismissed Mrs Hewages claims of discrimination.
She appealed to the Inner House of the Court of Session, and on 14 January 2011 the Second Division allowed her appeal and quashed the decision of the EAT.
It remitted the case to the employment tribunal to decide whether, if it had had regard to the only issues which the court considered to be relevant to the claims of discrimination, it would have come to the same or a different conclusion.
The Board appeals against that decision.
The complaints have their source in allegations by Mrs Hewage that she was bullied and harassed by employees of the Board.
In her position as Head of Service she attended monthly management meetings of the department.
She claimed that at one of the meetings, two colleagues (Mrs Helen Strachan, the service manager for surgical specialities, and Mrs Edith Munro, the clinical nurse manager) were verbally abusive, hostile and aggressive towards her.
An occupational health doctor wrote on her behalf to the Boards Chief Executive, and Mrs Hewage met with the Chief Executive to discuss the matter.
But she was not satisfied by his response and resigned from her position as Head of the Department.
The conduct of Mrs Strachan had previously been brought to the attention of the Boards senior management by Professor John Forrester, Head of Service for the Department of Opthalmology, who had resigned as a result of her behaviour towards him.
In response to his resignation, the department was reorganised, Mrs Strachan was removed from the position of service manager, and Professor Forrester was re appointed.
When Mrs Hewage resigned as Head of Service in November 2009, Mr Colin Larmour, a consultant orthodontist, took over from her, initially on a temporary basis.
On his appointment to a permanent role, the Boards General Manager and Associate Medical Director assured him of their support, especially in relation to Mrs Strachan.
In meetings regarding the appointment of dental nurses, Mrs Edith Munro and Sister Moira Munro willingly agreed to a proposal by Mr Larmour which they had fiercely resisted when it was proposed by Mrs Hewage.
Mrs Hewage complained that the formal investigation undertaken by a panel under the Boards Dignity at Work Policy resulted in a report that was full of inaccuracies and omissions, and did not reach any conclusions or make any recommendations.
She repeatedly explained her concerns about the inadequacy of the report to the Boards Medical Director, but he took no further action.
So she raised discrimination proceedings against the Board on the basis that other white male consultants, such as Professor Forrester and Mr Larmour, were not subject to the same bullying and harassing treatment that she suffered and that she would not have been treated in the way in which she was were it not for her sex and race.
The Supreme Court unanimously dismisses the Boards appeal, and affirms that part of the Second Divisions interlocutor in which it allowed the appeal to the Inner House and quashed the decision of the Employment Appeal Tribunal.
The judgment is given by Lord Hope, with whom the other Justices agree.
The employment tribunal was entitled to hold that Professor Forrester and Mr Larmour were appropriate comparators, despite the fact that the situations which were being compared in each case were not precisely the same.
The question whether the situations were comparable is a question of fact and degree, and there was a good deal of evidence to indicate that they were indeed comparable [21 22].
Previous case law is clear on how cases should be approached under section 63A(2) of the Sex Discrimination Act 1975 and section 54A(2) of the Race Relations Act 1976.
The employment tribunals approach to the two stage test set out in those provisions was correct.
At stage one, the complainant must prove facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondent has committed an act of discrimination against the complainant which is unlawful.
So the prima facie case must be proved, and it is for the claimant to discharge that burden.
In considering at that stage what inferences or conclusions can be drawn from the primary facts, the tribunal must assume that there is no adequate explanation for those facts.
The purpose of that assumption is to shift the burden of proof onto the respondent at the second stage.
It does not diminish in any way the burden of proof at the first stage, when the tribunal is looking at the primary facts that must be established.
But it is important not to make too much of the role of the burden of proof provisions.
They will require careful attention where there is room for doubt as to the facts necessary to establish discrimination.
They have nothing to offer where the tribunal is in a position to make positive findings on the evidence one way or the other.
That was the position in this case [25 & 32].
It is clear that the tribunal addressed whether the situations of Professor Forrester and Mr Larmour were like for like comparisons.
Having done that, it found that difference of treatment had been proved for which, in its judgment, there appeared to be no adequate explanation.
It was entitled in these circumstances to draw a prima facie inference of sex and race discrimination in Mrs Hewages favour, which it was for the Board to rebut and it failed to do.
There is no substance in the suggestion that the tribunal misdirected itself or that it considered only part of the evidence that it was required to examine at the first stage [26].
It was not necessary for the question remitted to the employment tribunal by the Inner House to be remitted to a differently constituted tribunal.
There was an obvious advantage in remitting the matter to the original tribunal as it had already heard and been able to assess the evidence.
This was pre eminently a matter for the Inner House, and there are no grounds for thinking that it made the wrong choice [33].
|
Almost all long leases of flats contain an obligation on the landlord (or a service company) to provide services, such as repairing the exterior and common parts of the block, and a concomitant obligation on the tenants to pay service charges, ie a specified proportion of the cost of providing such services.
The right of a landlord to recover such service charges obviously depends on the terms of the particular lease, but, since 1972, Parliament has imposed certain statutory requirements and restrictions on a landlord, which impinge on its ability to recover service charges.
The current statutory requirements are contained in the Landlord and Tenant Act 1985 (the 1985 Act), which has been frequently amended, most relevantly for present purposes by the Commonhold and Leasehold Reform Act 2002 (the 2002 Act).
All references hereafter to sections are to sections of the 1985 Act as amended, unless the contrary is stated.
Section 20(1) provides that unless certain consultation requirements are (a) complied with by the landlord (or service company), or (b) dispensed with by the Leasehold Valuation Tribunal (LVT), the landlord cannot recover more than a specified sum in respect of works for which the service charge would otherwise be greater.
The issue on this appeal concerns the width and flexibility of the LVTs jurisdiction to dispense with the consultation requirements, and the principles upon which that jurisdiction should be exercised.
The statutory provisions
Sections 18 to 30 are in a portion of the 1985 Act headed Service charges.
Section 18 is headed Meaning of service charge and relevant costs.
Subsection (1) defines service charge as being an amount payable by a tenant of a dwelling for repairs, maintenance the whole or part of which varies according to the relevant costs.
Section 18(2) defines relevant costs as the costs incurred in connection with the matters for which the service charge is payable.
Section 19 is headed Limitation of service charges: reasonableness.
Subsection (1) provides that relevant costs shall be taken into account in determining the amount of a service charge (a) only to the extent that they are reasonably incurred, and (b) only if the works are of a reasonable standard.
Section 20 is headed Limitation of service charges: consultation
requirements, and section 20ZA is headed Consultation requirements: supplementary.
By virtue of section 20(3), (4)(a) and (5) and section 20ZA(2), section 20 applies where the cost of qualifying works exceed an appropriate amount set by regulations.
Regulation 6 of the Service Charges (Consultation Requirements) (England) Regulations 2003, SI 2003/1987 (the 2003 Regulations) sets that amount at a sum which results in the service charge contribution of any tenant to the cost of the relevant works being more than 250.
The centrally relevant provisions for present purposes are to be found in sections 20(1) and 20ZA(1).
Section 20(1) states that:
[T]he relevant contributions of the tenants are limited in accordance with subsection (6) unless the consultation requirements have been either a) b) complied with in relation to the works , or dispensed with in relation to the works by (or on appeal from) a [LVT].
Section 20ZA(1) provides that: Where an application is made to [an LVT] for a determination to dispense with all or any of the consultation requirements in relation to any qualifying works , the tribunal may make the determination if satisfied that it is reasonable to dispense with the requirements.
Section 20(2) defines relevant contribution as being, in effect, the amount due under the service charge provisions in respect of the works, and section 20(7) limits the contribution to 250 per flat see regulation 6 of the 2003 Regulations.
The consultation requirements are defined in section 20ZA(4) as being requirements prescribed by regulations, which section 20ZA(5) states may in particular include provisions requiring the landlord to take certain steps.
Those steps include providing details of the proposed works to the tenants, obtaining estimates, inviting the tenants to propose possible bidders, and having regard to the tenants observations on the proposed works and estimates.
The consultation requirements applicable in the present case are contained in Part 2 of Schedule 4 to the 2003 Regulations.
A summary of those requirements were helpfully agreed between the parties in the following terms (which I have slightly abbreviated): Stage 1: Notice of intention to do the works Notice must be given to each tenant and any tenants association, describing the works, or saying where and when a description may be inspected, stating the reasons for the works, specifying where and when observations and nominations for possible contractors should be sent, allowing at least 30 days.
The landlord must have regard to those observations.
Stage 2: Estimates The landlord must seek estimates for the works, including from any nominee identified by any tenants or the association.
Stage 3: Notices about Estimates The landlord must issue a statement to tenants and the association, with two or more estimates, a summary of the observations, and its responses.
Any nominees estimate must be included.
The statement must say where and when estimates may be inspected, and where and by when observations can be sent, allowing at least 30 days.
The landlord must have regard to such observations.
Stage 4: Notification of reasons Unless the chosen contractor is a nominee or submitted the lowest estimate, the landlord must, within 21 days of contracting, give a statement to each tenant and the association of its reasons, or specifying where and when such a statement may be inspected.
Sections 20A to 20C set out certain further Limitation[s] of service charges, and sections 21 to 23A give rights to tenants and impose obligations on landlords with respect to the provision of information about service charges.
Sections 26 to 30 contain other ancillary provisions with regard to service charges.
The factual background
Queens Mansions (the building) is a building in Muswell Hill, north London, the freehold of which is owned by Daejan Investments Ltd (Daejan), the appellant in this appeal.
The building consists of shops on the ground floor and seven flats on the upper floors.
Five of the seven flats are held under long leases, and each of those leases is held by a respondent to this appeal (collectively the respondents).
Each lease includes an obligation on the landlord to provide services, including the repair and decoration of the structure, exterior, and common parts of the building.
Each lease also includes an obligation on the tenant to pay a specified fixed proportion of the cost of providing, inter alia, the services which the landlord is obliged to provide.
The five respondents were, at all material times, members of the Queens Mansions Residents Association (QMRA), which is chaired by Ms Marks, who is the partner of one of the respondents.
The building is managed by Highdorn Co Ltd, In his judgment at para 98, Lord Wilson has given a fairly full account as to which, like Daejan, is part of the Freshwater group of companies, and which carries on business under the name of Freshwater Property Management (FPM).
By early 2005, it was clear that major works were required to the building, and, in February that year, FPM told the respondents and QMRA that Daejan intended to carry out such works.
Three weeks later, FPM sent QMRA a specification in respect of the proposed works.
Thereafter, pursuant to a request from Ms Marks, FPM appointed Robert Edward Associates (REA), who had been advising QMRA on the proposed works, as contract administrator.
what then happened.
A briefer summary is as follows.
REA prepared a fresh specification, which was sent to QMRA and the respondents on 30 August 2005, a few weeks after a stage 1 notice of intention to carry out works had been sent, on 6 July 2005.
This specification was then the subject of discussion with Ms Marks, some of whose observations were then incorporated into the specification.
Following that, tenders were sought, and priced tenders were received by REA from four contractors.
In a fairly full report sent to the respondents on 6 February 2006, REA stated that two of those tenders appeared to be the most competitive.
One was from Rosewood Building Contractors (Rosewood), who had quoted 453,980 for a 24 week contract period; the other was from Mitre Construction Ltd (Mitre), who had quoted 421,000 for a 32 week contract period, although its tender did not comply entirely with the tender directions.
The respondents and QMRA were only provided with the priced specification submitted by Mitre and not that submitted by Rosewood.
During 2006, Ms Marks was pressing FPM for the opportunity to inspect the priced tenders, and, although this request had not yet been satisfied, FPM was indicating a preference for instructing Mitre.
In the meantime, in a letter of 14 July 2006, Ms Marks made a large number of fairly detailed points about the proposed Works to FPM, making it clear that those points were provisional until she had seen all the priced tenders.
FPM purportedly served Stage 3 notices on QMRA and the respondents on 14 June and on 28 July 2006, each of which stated when the priced estimates could be inspected.
However, such estimates were not available for inspection by the respondents or QMRA until 31 July 2006.
Before the estimates were inspected, the respondents and QMRA were informed by Daejan (orally on 8 August and by letter two days later) that the contract for the proposed works had been awarded to Mitre, and, at least by implication, that the statutory consultation process had accordingly ended.
It appears that this information was, in fact, inaccurate, but it was never corrected.
Despite this, there were some further communications between Ms Marks and FPM about the proposed works.
It appears that it was, in fact, only on 11 September 2006 that Daejan contracted for the proposed works (the Works) with Mitre, and this was formally communicated to the respondents and QMRA 16 days later.
On 3 October 2006, Mitre started carrying out the Works, and completed them, albeit apparently late and not without criticisms from the respondents and QMRA.
The procedural history
On 14 July 2006, four of the respondents applied to the LVT for a determination of the service charges payable under their respective leases for the period between 1994 and 2007 (as they were entitled to do under section 27A).
Those proceedings were concerned with the respondents allegations of failures on the part of Daejan in relation to (i) the provision of services over 14 years, and (ii) the Works.
Inevitably, a number of issues and sub issues were raised.
Of those issues, only one is directly relevant to the present appeal.
It is what the LVT called Issue 10, which was whether Daejan had complied with the requirements of part 2 of Schedule 4 to the 2003 Regulations (the Requirements) in relation to the Works.
Following a hearing and determination on a preliminary point, there was an eight day hearing which took place in disconnected periods between February and November 2007 (partly explained by illness of counsel).
Thereafter, the LVT (Miss A Seifert FCI Arb, Mr MA Matthews FRICS and Mr LG Packer MA MPhil) issued its decision on 11 March 2008 Case Reference LON/00AP/LSC/2006/0246.
Crucially for present purposes, the LVT concluded on Issue 10 that Daejan had failed to comply with the stage 3 Requirements in two respects.
First, neither of the purported stage 3 notices contained any summary of observations.
Secondly, the estimates were not available for inspection as stated [in either notice], and were only inspected on 11 August.
It is also worth mentioning that the LVT considered, under what it called Issue 11, a number of criticisms of the Works, which were being carried out during the hearing, and dismissed almost all of them.
There was then a further, one day, hearing before the LVT, devoted to the issue of whether the Requirements should be dispensed with in relation to the Works pursuant to sections 20(1)(b) and 20ZA(1).
Daejan relied on the fact that, if it had been free to enforce the service charge provisions in all the leases held by the respondents, it would be entitled to recover just under 280,000 in total from the respondents by way of service charge payments in respect of the Works, whereas, if no dispensation was granted, it would be limited to recovering service charges of 250 per respondent in respect of the Works, ie a total of 1,250.
On 8 August 2008, the LVT issued its decision that it should not dispense with the Requirements in relation to the Works LON/00AP/LSC/2007/0076.
The LVT observed in para 98 that it was matter of speculation what comments may or may not have been made by Ms Marks and [the respondents] and how this may have influenced the carrying out of the major works had they had the opportunity to comment having seen all the estimates.
It had earlier said in paras 86 87 that the failure by Daejan to comply with the [Requirements] [had] caused substantial prejudice to the respondents, and that it was a matter of great concern to Ms Marks that Daejan had not provided copies of all the estimates.
The LVT continued at para 90: the cutting short of the consultation period, by indicating that the decision had been made to award the contract to Mitre removed from the leaseholders the opportunity to make observations on the estimates to which landlord was obliged to have regard.
This opportunity to make informed comment on these matters was central to the consultation process.
It had been stressed in correspondence how important this was to the leaseholders.
The LVT concluded in paras 96 98 that: Although this was not a case where the landlord made no attempt to comply with the Regulations, and some extra statutory consultation was carried out this did not make good the landlord's omission in failing to provide the estimates and an opportunity to make observations.
The Tribunal considers that the fact that they did not have this opportunity amounts to significant prejudice.
The LVT then referred at para 99 to a proposal from Daejan that if, contrary to [its] submissions, the Tribunal considered that there has been prejudice to the [respondents], the Tribunal should consider the fair figure to compensate [them] for any prejudice, such sum to be deducted from the cost of the eventual charge when calculating the service charges for the [W]orks.
During the course of the hearing, Daejan had proposed a deduction of 50,000, which it had described as more than generous, but which had not been accepted by the respondents.
The LVT rejected this proposal at para 101, saying that there was no explanation of [how] the figure of 50,000 could be regarded as generous or as sufficient compensation for the prejudice suffered.
It also said at para 103 that the offer does not alter the existence of substantial prejudice to the leaseholders.
Daejan appealed to the Upper Tribunal (Lands Chamber) (Carnwath LJ and Mr NJ Rose FRICS), which rejected the appeal [2009] UKUT 233 (LC), [2010] 2 P&CR 116.
The Upper Tribunal agreed with the LVT that Daejan had failed to comply with the stage 3 Requirements in the two respects identified by the LVT.
However, the Upper Tribunal considered that the failure to include a summary of observations in the stage 3 notice was a relatively minor breach, which caused no prejudice to the respondents, as there [was] no reason to think that [it] would have assisted them, because they all knew what observations Daejan had received about the proposed works see paras 47 48.
Daejans more important failure, according to the Upper Tribunal in para 52, was the fact that the consultation process was for all practical purposes curtailed, a finding which had been open to the LVT.
The Upper Tribunal was, however, troubled by the LVTs finding that the respondents had suffered any consequential prejudice.
Only one specific item was seen to be of any weight, namely the respondents preference for Rosewood over Mitre, but, as the Upper Tribunal pointed out, this was based on evidence two years after the event, and it was hard to see why it could not have been raised by the respondents during the period of consultation which Daejan had allowed.
Nonetheless, at para 61, the Upper Tribunal said that the LVT was entitled to regard this as a [case involving a] serious breach, rather than a technical or excusable oversight, as the respondents right to make further representations [at stage 3] was nullified.
The Upper Tribunal also said that it was not for the respondents to show prejudice, but for Daejan to show that they had suffered no prejudice, as a result of Daejans default, and that, in that connection, it was enough that there was a realistic possibility that further representations might have influenced Daejans decision to engage Mitre rather than Rosewood.
The Upper Tribunal said that it had not found this an easy case, because the evidence of actual prejudice is weak.
Nonetheless, at para 62, it decided that, as the LVT was the primary decision maker, its decision to reject Daejans application to dispense with the Requirements in relation to the Works should be respected, as it was a view which the LVT had been entitled to arrive at.
Daejan was given permission to appeal to the Court of Appeal, on terms that it would not seek its costs if the appeal succeeded.
The court (Sedley, Pitchford and Gross LJJ) dismissed the appeal, for reasons principally given by Gross LJ [2011] EWCA Civ 38, [2011] 1 WLR 2330.
In his judgment, Gross LJ concentrated on what he considered to have been the three principal points which had been debated.
First, he held in para 59 that the financial effect of the grant or refusal of dispensation [on the individual landlord and tenants] is an irrelevant consideration when exercising the discretion under section 20ZA(1).
Secondly, in paras 66 67, he held that the LVT had not erred in treating Daejan more harshly than if it had been a landlord controlled or owned by the lessees.
Thirdly, in para 72, Gross LJ accepted Daejans contention that significant prejudice to the tenants is a consideration of first importance in exercising the dispensatory discretion under section 20ZA(1).
However, in the following paragraph, Gross LJ said that Daejans failure in this case constituted a serious failing and did cause the respondents serious prejudice, and he echoed the LVT and Upper Tribunal in saying that this was not a technical, minor or excusable oversight.
He also said that the LVT was entitled not to speculate on what would have happened if there had been no breach, on the ground that the respondents loss of opportunity (to make further representations and have them considered) itself amount[ed] to significant prejudice.
In para 76, in agreement with the Upper Tribunal, Gross LJ doubted that the LVT would have been entitled to accede to Daejans offer to reduce the chargeable amount by 50,000, and that, anyway, the LVT was entitled to reject that proposal.
Sedley LJ delivered a short concurring judgment, and Pitchford LJ agreed with both judgments.
Daejan was given permission to appeal to this court on terms similar to those which were imposed when permission was given to appeal to the Court of Appeal.
The issues on this appeal
In the light of the arguments which have been addressed to us, it appears to me that three questions of principle arise, and need to be answered, before deciding how to resolve this appeal.
Those questions are: (i) The proper approach to be adopted on an application under section 20ZA(1) to dispense with compliance with the Requirements; (ii) Whether the decision on such an application must be binary, or whether the LVT can grant a section 20(1)(b) dispensation on terms; (iii) The approach to be adopted when prejudice is alleged by tenants owing to the landlords failure to comply with the Requirements.
I propose to consider those three questions (which inevitably overlap to some
extent) in turn, and then to address the resolution of this appeal.
The proper approach to dispensing under section 20ZA(1)
Section 20ZA(1) gives little specific guidance as to how an LVT is to exercise its jurisdiction to dispense with all or any of the [Requirements] in a particular case.
The only express stipulation is that the LVT must be satisfied that it is reasonable to do so.
There is obvious value in identifying the proper approach to the exercise of this jurisdiction, as it is important that decisions on this topic are reasonably consistent and reasonably predictable.
Otherwise, there is a real risk that the law will be brought into disrepute, and that landlords and tenants will not be able to receive clear or reliable advice as to how this jurisdiction will be exercised.
However, the very fact that section 20ZA(1) is expressed as it is means that it would be inappropriate to interpret it as imposing any fetter on the LVTs exercise of the jurisdiction beyond what can be gathered from the 1985 Act itself, and any other relevant admissible material.
Further, the circumstances in which a section 20ZA(1) application is made could be almost infinitely various, so any principles that can be derived should not be regarded as representing rigid rules.
So I turn to consider section 20ZA(1) in its statutory context.
It seems clear that sections 19 to 20ZA are directed towards ensuring that tenants of flats are not required (i) to pay for unnecessary services or services which are provided to a defective standard, and (ii) to pay more than they should for services which are necessary and are provided to an acceptable standard.
The former purpose is encapsulated in section 19(1)(b) and the latter in section 19(1)(a).
The following two sections, namely sections 20 and 20ZA appear to me to be intended to reinforce, and to give practical effect to, those two purposes.
This view is confirmed by the titles to those two sections, which echo the title of section 19.
Thus, the obligation to consult the tenants in advance about proposed works goes to the issue of the appropriateness of those works, and the obligations to obtain more than one estimate and to consult about them go to both the quality and the cost of the proposed works.
Mr Rainey QC and Mr Fieldsend for the respondents point out that sometimes the tenants may want the landlord to accept a more expensive quote, for instance because they consider it will lead to a better or quicker job being done.
I agree, but I do not consider that it invalidates my conclusion: loss suffered as a result of building work or repairs being carried out to a lower standard or more slowly is something for which courts routinely assess financial compensation.
Given that the purpose of the Requirements is to ensure that the tenants are protected from (i) paying for inappropriate works or (ii) paying more than would be appropriate, it seems to me that the issue on which the LVT should focus when entertaining an application by a landlord under section 20ZA(1) must be the extent, if any, to which the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements.
Thus, in a case where it was common ground that the extent, quality and cost of the works were in no way affected by the landlords failure to comply with the Requirements, I find it hard to see why the dispensation should not be granted (at least in the absence of some very good reason): in such a case the tenants would be in precisely the position that the legislation intended them to be ie as if the Requirements had been complied with.
I do not accept the view that a dispensation should be refused in such a case solely because the landlord seriously breached, or departed from, the Requirements.
That view could only be justified on the grounds that adherence to the Requirements was an end in itself, or that the dispensing jurisdiction was a punitive or exemplary exercise.
The Requirements are a means to an end, not an end in themselves, and the end to which they are directed is the protection of tenants in relation to service charges, to the extent identified above.
After all, the Requirements leave untouched the fact that it is the landlord who decides what works need to be done, when they are to be done, who they are to be done by, and what amount is to be paid for them.
Furthermore, it does not seem to be convenient or sensible to distinguish in this context, as the LVT, Upper Tribunal and Court of Appeal all thought appropriate, between a serious failing and a technical, minor or excusable oversight, save in relation to the prejudice it causes.
Such a distinction could lead to an unpredictable outcome, as it would involve a subjective assessment of the nature of the breach, and could often also depend on the view one took of the state of mind or degree of culpability of the landlord.
Sometimes such questions are, of course, central to the enquiry a court has to carry out, but I think it unlikely that it was the sort of exercise which Parliament had in mind when enacting section 20ZA(1).
The predecessor of section 20ZA(1), namely the original section 20(9), stated that the power (vested at that time in the County Court rather than the LVT) to dispense with the Requirements was to be exercised if it was satisfied that the landlord acted reasonably.
When Parliament replaced that provision with section 20ZA(1) in 2002, it presumably intended a different test to be applied.
The distinction could also, I think, often lead to uncertainty.
Views as to the gravity of a landlords failure to comply with the Requirements could vary from one LVT to another.
And questions could arise as to the relevance of certain factors, such as the landlords state of mind.
The present case provides an example of the possible uncertainties.
In para 99 of his judgment, Lord Wilson understandably expresses a very unfavourable view of Daejans failure in this case.
However, to some people it might seem that Daejans failure in the present case was not a serious failing, given that (i) the evidence of any resulting prejudice to the respondents is weak, (ii) Daejan adhered fully to stages 1 and 2, and to a significant extent to stage 3, (iii) Daejan did consult the respondents, through both REA and FPM, (iv) Daejan did some things which went beyond the Requirements (eg employing REA at Ms Markss request), and (v) Daejan did give summary details of the tenders even though it did not accord the respondents sight of the tenders themselves.
So, too, views may differ as to whether Daejan should be blamed for not taking up the time of the LVT with attempts to excuse its failures, and as to whether it was an innocent misunderstanding or flagrant incompetence which caused Daejans representatives to tell the LVT that the contract had been placed with Mitre weeks before it had been. (None of those points undermines the basic fact that there was an undoubted failure by Daejan to comply with the Requirements).
I also consider that the distinction favoured in the tribunals below could lead to inappropriate outcomes.
One can, for instance, easily conceive of a situation where a minor or excusable oversight could cause severe prejudice, and one where a gross breach causes the tenants no prejudice.
For instance, where the landlord miscalculates by a day, and places a contract for works a few hours before receiving some very telling criticisms about the proposed works or costings.
Or, on the other hand, where the landlord fails to get more than one estimate despite being reminded by the tenants, but there is only one contractor competent to carry out undoubtedly necessary works.
In their respective judgments, the LVT, the Upper Tribunal and the Court of Appeal also emphasised the importance of real prejudice to the tenants flowing from the landlords breach of the Requirements, and in that they were right.
That is the main, indeed normally, the sole question for the LVT when considering how to exercise its jurisdiction in accordance with section 20ZA(1).
And it is fair to the courts below to add that where the landlord is guilty of a serious failing it is more likely to result in real prejudice to the tenants than where the landlord has been guilty of a technical, minor or excusable oversight.
It also follows from this analysis that I consider that Daejan is wrong in its contention that the financial consequences to the landlord of not granting a dispensation is a relevant factor when the LVT is considering how to exercise its jurisdiction under sections 20(1)(b) and 20ZA(1).
In that, I agree with the views of the courts below (although it can be said that such consequences are often inversely reflective of the relevant prejudice to the tenants, which is, as already mentioned, centrally important).
It also seems to me that the nature of the landlord is not a relevant factor either, and I think that was the view of the Court of Appeal as well.
As already indicated, I do not agree with the courts below in so far as they support the proposition that sections 20 and 20ZA were included for the purpose of transparency and accountability, if by that it is intended to add anything to the two purposes identified in section 19(1)(a) and (b).
It is true that that proposition may arguably receive some support from Lewison J in Paddington Basin Developments Ltd v West End Quay Ltd [2010] EWHC 833 (Ch), [2010] 1 WLR 2735, para 26.
However, I consider that there are no grounds for treating the obligations in sections 20 and 20ZA as doing any more than providing practical support for the two purposes identified in section 19(1).
The sections are not concerned with public law issues or public duties, so there is no justification for treating consultation or transparency as appropriate ends in themselves.
Is the LVT faced with a binary choice on a section 20ZA(1) application?
The respondents contend that, on an application under section 20ZA(1), the LVT has to choose between two simple alternatives: it must either dispense with the Requirements unconditionally or refuse to dispense with the Requirements.
If this argument is correct, then as the Upper Tribunal held, and the Court of Appeal thought probable, it would not have been possible for the LVT in this case to grant Daejans section 20ZA(1) application on the terms offered by Daejan, namely to reduce the aggregate of the sum payable by the respondents in respect of the Works by 50,000.
In my view, the LVT is not so constrained when exercising its jurisdiction under section 20ZA(1): it has power to grant a dispensation on such terms as it thinks fit provided, of course, that any such terms are appropriate in their nature and their effect.
In the absence of clear words precluding the LVT imposing terms, I consider that one would expect it to have power to impose appropriate terms as a condition of exercising its power of dispensation.
The circumstances in which an application could be made are, as already mentioned, potentially almost infinitely various, and, given the purpose of sections 20 and 20ZA, it seems unlikely that the LVTs powers could have been intended to be as limited as the respondents suggest.
More detailed consideration of the circumstances in which the jurisdiction can be invoked confirms this conclusion.
It is clear that a landlord may ask for a dispensation in advance.
The most obvious cases would be where it was necessary to carry out some works very urgently, or where it only became apparent that it was necessary to carry out some works while contractors were already on site carrying out other work.
In such cases, it would be odd if, for instance, the LVT could not dispense with the Requirements on terms which required the landlord, for instance, (i) to convene a meeting of the tenants at short notice to explain and discuss the necessary works, or (ii) to comply with stage 1 and/or stage 3, but with (for example) 5 days instead of 30 days for the tenants to reply.
Further, consider a case where a landlord carried out works costing, say, 1m, and failed to comply with the Requirements to a small extent (eg in accidentally not having regard to an observation), and the tenants establish that the works might well have cost, at the most, 25,000 more as a result of the failure.
It would seem grossly disproportionate to refuse the landlord a dispensation, but, equally, it would seem rather unfair on the tenants to grant a dispensation without reducing the recoverable sum by 25,000.
In some cases, such a reduction could be achieved by the tenants invoking section 19(1)(b), but there is no necessary equivalence between a reduction which might have been achieved if the Requirements had been strictly adhered to and a deduction which would be granted under section 19(1)(b) see the next section of this judgment.
Accordingly, where it is appropriate to do so, it seems clear to me that the LVT can impose conditions on the grant of a dispensation under section 20(1)(b).
In effect, the LVT would be concluding that, applying the approach laid down in section 20ZA(1), it would be reasonable to grant a dispensation, but only if the landlord accepts certain conditions.
In the example just given, the condition would be that the landlord agrees to reduce the recoverable cost of the works from 1m to 975,000.
I also consider that the LVT would have power to impose a condition as to
costs eg that the landlord pays the tenants reasonable costs incurred in connection with the landlords application under section 20ZA(1).
It is true that the powers of the LVT to make an actual order for costs are very limited.
The effect of para 10 of Schedule 12 to the 2002 Act is that the LVT can only award costs (in a limited amount) (i) where an application is dismissed on the ground that it is frivolous, vexatious or an abuse of process, or (ii) where the applicant has acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably in connection with the proceedings.
However, in my view, that does not preclude the LVT from imposing, as a condition for dispensing with all or any of the Requirements under section 20(1)(b), a term that the landlord pays the costs incurred by the tenants in resisting the landlords application for such dispensation.
The condition would be a term on which the LVT granted the statutory indulgence of a dispensation to the landlord, not a free standing order for costs, which is what para 10 of Schedule 12 to the 2002 Act is concerned with.
To put it another way, the LVT would require the landlord to pay the tenants costs on the ground that it would not consider it reasonable to dispense with the Requirements unless such a term was imposed.
The case law relating to the approach of courts to the grant to tenants of relief from forfeiture of their leases is instructive in this connection.
Where a landlord forfeits a lease, a tenant is entitled to seek relief from forfeiture.
When the court grants relief from forfeiture, it will often do so on terms that the tenant pays the costs of the landlord in connection with the tenants application for relief, at least in so far as the landlord has acted reasonably see eg Egerton v Jones [1939] 2 KB 702, 705 706, 709.
However, if and in so far as the landlord opposes the tenants application for relief unreasonably, it will not recover its costs, and may even find itself paying the tenants costs, as in Howard v Fanshawe [1895] 2 Ch 581, 592.
As Mr Dowding QC, for Daejan, pointed out, in Factors (Sundries) Ltd v Miller [1952] 2 All ER 630, the tenant was legally aided and the court was precluded by statute from making an order for costs against him, but the Court of Appeal held that there was nonetheless jurisdiction to require him to pay the landlords costs as a condition of being granted relief from forfeiture.
As Somervell LJ explained it at 633D F, the liability under such a condition was not an order to pay costs in the ordinary sense, but a payment of a sum equal to the costs as a condition of relief.
Like a party seeking a dispensation under section 20(1)(b), a party seeking relief from forfeiture is claiming what can be characterised as an indulgence from a tribunal at the expense of another party.
Accordingly, in so far as the other party reasonably incurs costs in considering the claim, and arguing whether it should be granted, and, if so, on what terms, it seems appropriate that the first party should pay those costs as a term of being accorded the indulgence.
The correct approach to prejudice to the tenants
Where a landlord has failed to comply with the Requirements, there may often be a dispute as to whether, and if so to what extent, the tenants would relevantly suffer if an unconditional dispensation was accorded. (I add the word relevantly, because the tenants can always contend that they will suffer a disadvantage if a dispensation is accorded; however, as explained above, the only disadvantage of which they could legitimately complain is one which they would not have suffered if the Requirements had been fully complied with, but which they will suffer if an unconditional dispensation were granted.)
It was suggested by Mr Rainey QC and Mr Fieldsend that the determination of such a question would often involve a very difficult exercise (or an invidious exercise in speculation as Gross LJ put it at para 73(iv) in the Court of Appeal) and would frequently be unfair on the tenants.
It may occasionally involve a difficult exercise, but the fact that an assessment is difficult has never been regarded as a valid reason for the court refusing to carry it out (although in some cases disproportionality may be a good reason for such a refusal).
While each case must, inevitably, be decided on its particular facts, I do not think that many cases should give rise to great difficulties.
As to the contention that my conclusion would place an unfair burden on tenants where the LVT is considering prejudice, it is true that, while the legal burden of proof would be, and would remain throughout, on the landlord, the factual burden of identifying some relevant prejudice that they would or might have suffered would be on the tenants.
However, given that the landlord will have failed to comply with the Requirements, the landlord can scarcely complain if the LVT views the tenants arguments sympathetically, for instance by resolving in their favour any doubts as to whether the works would have cost less (or, for instance, that some of the works would not have been carried out or would have been carried out in a different way), if the tenants had been given a proper opportunity to make their points.
As Lord Sumption said during the argument, if the tenants show that, because of the landlords non compliance with the Requirements, they were unable to make a reasonable point which, if adopted, would have been likely to have reduced the costs of the works or to have resulted in some other advantage, the LVT would be likely to proceed on the assumption that the point would have been accepted by the landlord.
Further, the more egregious the landlords failure, the more readily an LVT would be likely to accept that the tenants had suffered prejudice.
The LVT should be sympathetic to the tenants not merely because the landlord is in default of its statutory duty to the tenants, and the LVT is deciding whether to grant the landlord a dispensation.
Such an approach is also justified because the LVT is having to undertake the exercise of reconstructing what would have happened, and it is because of the landlords failure to comply with its duty to the tenants that it is having to do so.
For the same reasons, the LVT should not be too ready to deprive the tenants of the costs of investigating relevant prejudice, or seeking to establish that they would suffer such prejudice.
This does not mean that LVT should uncritically accept any suggested prejudice, however far fetched, or that the tenants and their advisers should have carte blanche as to recovering their costs of investigating, or seeking to establish, prejudice.
But, once the tenants have shown a credible case for prejudice, the LVT should look to the landlord to rebut it.
And, save where the expenditure is self evidently unreasonable, it would be for the landlord to show that any costs incurred by the tenants were unreasonably incurred before it could avoid being required to repay as a term of dispensing with the Requirements.
Apart from the fact that the LVT should be sympathetic to any points they may raise, it is worth remembering that the tenants complaint will normally be, as in this case, that they were not given the requisite opportunity to make representations about proposed works to the landlord.
Accordingly, it does not appear onerous to suggest that the tenants have an obligation to identify what they would have said, given that their complaint is that they have been deprived of the opportunity to say it.
Indeed, in most cases, they will be better off, as, knowing how the works have progressed, they will have the added benefit of wisdom of hindsight to assist them before the LVT, and they are likely to have their costs of consulting a surveyor and/or solicitor paid by the landlord.
Overview of the analysis so far
Before turning to the disposition of this appeal, it is worth considering the effect of the conclusions I have reached so far.
If a landlord fails to comply with the Requirements in connection with qualifying works, then it must get a dispensation under section 20(1)(b) if it is to recover service charges in respect of those works in a sum greater than the statutory minimum.
Insofar as the tenants will suffer relevant prejudice as a result of the landlords failure, the LVT should, at least in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount claimed as service charges to compensate the tenants fully for that prejudice.
That outcome seems fair on the face of it, as the tenants will be in the same position as if the Requirements have been satisfied, and they will not be getting something of a windfall.
On the approach adopted by the courts below, as the Upper Tribunal said at the very end of its judgment, requiring the landlord to limit the recoverable service charge to the statutory minimum in a case such as this may be thought to be disproportionately damaging to the landlord, and disproportionately advantageous to the lessees.
That criticism could not, it seems to me, be fairly made of the conclusion I have reached.
However, drilling a little deeper, if matters rested there, the simple conclusion described in para 71 could be too favourable to the landlord.
It might fairly be said that it would enable a landlord to buy its way out of having failed to comply with the Requirements.
However, that concern is, I believe, answered by the significant disadvantages which a landlord would face if it fails to comply with the Requirements.
I have in mind that the landlord would have (i) to pay its own costs of making and pursuing an application to the LVT for a section 20(1)(b) dispensation, (ii) to pay the tenants reasonable costs in connection of investigating and challenging that application, (iii) to accord the tenants a reduction to compensate fully for any relevant prejudice, knowing that the LVT will adopt a sympathetic (albeit not unrealistically sympathetic) attitude to the tenants on that issue.
All in all, it appears to me that the conclusions which I have reached, taken together, will result in (i) the power to dispense with the Requirements being exercised in a proportionate way consistent with their purpose, and (ii) a fair balance between (a) ensuring that tenants do not receive a windfall because the power is exercised too sparingly and (b) ensuring that landlords are not cavalier, or worse, about adhering to the Requirements because the power is exercised too loosely.
The resolution of this appeal
Turning now to this case, I consider that the LVT, the Upper Tribunal, and the Court of Appeal adopted the wrong approach to Daejans section 20ZA(1) application.
That is because (i) they took into account the gravity (as they saw it) of the failure to comply with stage 3 of the Requirements, not only in the prejudice it may have caused to the tenants, but as a free standing matter, (ii) they considered that the mere possibility of prejudice, apparently however speculative, and in the absence of any evidence to support its existence, would be enough to preclude the grant of a dispensation, and (iii) (in the case of the Upper Tribunal and the Court of Appeal) they did not consider (or doubted) that it was open to the LVT to grant a dispensation on terms, and (in the case of the LVT) they did not address the question whether the 50,000 offered by Daejan exceeded any relevant prejudice which the tenants could establish.
In adopting their approach, the courts below based themselves in part on the reasoning in the Upper Tribunals decision in Camden London Borough Council v Leaseholders of 37 Flats at 30 40 Grafton Way (LRX/185/2006).
That case may have been rightly decided, but, if so, it was for the wrong reasons.
As explained above, the correct question which the LVT should have asked itself was, whether the respondents would suffer any relevant prejudice, and, if so, what relevant prejudice, as a result of Daejans failure, if the section 20(1)(b) dispensation was granted unconditionally.
On the basis of the evidence before the LVT, it seems to me, substantially in agreement with the Upper Tribunal, that it is highly questionable whether any such prejudice at all would have been suffered.
The only specific prejudice identified by the Upper Tribunal was in relation to what the LVT called in para 98 of its decision a matter of speculation, namely that the respondents lost the opportunity of making out the case for using Rosewood to carry out the Works, rather than Mitre.
Mr Rainey QC and Mr Fieldsend make the additional points that (i) the respondents were deprived of their right to be consulted properly, and (ii) it was difficult for the respondents to identify any relevant prejudice that they would suffer if Daejan was entitled to recover a service charge based on the full cost of the Works.
I have already dealt with these points in general terms.
As to (i), the right to be consulted in accordance with sections 20 and 20ZA is not a free standing right.
As to (ii), difficulty is not a good argument in itself, and the LVT should in any event be sympathetic to the respondents on any credible allegation of relevant prejudice.
In any event, it is clear from the first decision of the LVT that, even after Daejans and the respondents respective experts had met and agreed a number of items, there were still many items of dispute which were contested by the respondents before the LVT on issue 11: the respondents were therefore well able to identify any complaints they had in relation to the Works.
That leaves the issue whether it is possible for this court to conclude that the 50,000 offer by Daejan was sufficient to compensate the tenants for any relevant prejudice they suffered in this case.
Given that the LVT did not address this issue properly, there is, at least on the face of it, a strong case for saying that that is an issue which should be remitted, on the ground that we cannot fairly decide it.
However, on closer examination of the facts, I am of the view that we can fairly decide the issue, and that we should therefore do so.
This view is based on two reasons, which, when taken together, seem to me to establish that it would be pointless to remit the case.
First, the tenants do not appear to have identified to the LVT any relevant prejudice which they suffered, or may have suffered, as a result of Daejans failure to comply with the Requirements.
As mentioned, the Upper Tribunal described the evidence of any such prejudice as weak.
In this court, no contention as to the existence of possible relevant prejudice was advanced by Mr Rainey QC or Mr Fieldsend, save that they suggested that (i) Rosewood may have agreed to carry out the Works for some 11,000 less than the contract sum ultimately agreed with Mitre, and (ii) they relied on the fact that Mitre overran the six month contract substantially.
As to (i), I am not sure where the 11,000 comes from, but it is substantially less than the 50,000 offered by Daejan.
As to (ii), I would have thought that the prejudice has to be measured as at the date of the breach of the Requirements, and anyway there was no attempt to show that Rosewood would have been any quicker or to quantify any prejudice.
Secondly, the tenants had been given a substantial opportunity to comment on the proposed works, and took full advantage of that opportunity.
REAs detailed tender report of February 2006 was based on Mitres detailed tender, and resulted in a very detailed response from Ms Marks in July 2006.
I agree with Mr Dowding QC that it is hard to see what further submissions or suggestions the respondents could have presented if Daejan had complied fully with the Requirements.
Again, no argument appears to have been advanced at any level of these proceedings on behalf of the tenants that any specific points, which had not been made, would or might have been made if Daejan had fully complied with the Requirements.
There appears to have been no evidence called before the LVT, and no suggestion made to the LVT, the Upper Tribunal or the Court of Appeal or indeed this court, to support the contention that the tenants suffered relevant prejudice worth as much as 50,000 as a result of Daejans failure to comply with the Requirements.
If they were to justify resisting the LVT accepting Daejans proposal, it was, in my I would accordingly allow this appeal, set aside the orders below, and grant the judgment, incumbent on the tenants to advance some credible evidence and some rational argument which established that they had suffered, or at least may well have suffered such relevant prejudice.
Accordingly, although there was an undoubted, albeit partial, failure by Daejan to comply with stage 3 of the Requirements, the relevant prejudice to the respondents of granting the dispensation could not be higher than the 50,000 discount offered by Daejan.
The fact that the 50,000 can fairly be said to have been plucked out of the air is irrelevant: the essential point is that it exceeds any possible relevant prejudice which, on the evidence and arguments put before it, the LVT could have concluded that the respondents would suffer if an unqualified dispensation were granted.
In those circumstances, as there are no other relevant factors in this case, it seems to me that the LVT ought to have decided that Daejans application for a dispensation under section 20(1)(b) should be granted on terms that (i) the respondents aggregate liability to pay for the Works be reduced (presumably on a pro rata basis) by 50,000, and (ii) Daejan pay the reasonable costs of the respondents in so far as they reasonably tested its claim for a dispensation and reasonably canvassed any relevant prejudice which they might suffer.
dispensation under section 20(1)(b) on the terms indicated.
LORD HOPE (dissenting)
I am, with respect, unable to agree with the approach that Lord Neuberger has
taken to this case.
I think that the issues which I wish to raise are sufficiently important to justify taking a second look at what he says.
They also affect how I think this appeal should be disposed of.
The fundamental point of principle to which I would attach greater importance is that the issues to which section 20ZA(1) of the Landlord and Tenant Act 1985, as amended, directs attention have been entrusted by the statute to an expert tribunal.
The leasehold valuation tribunal (the LVT) amply qualifies for that description, both in respect of the expertise and experience of its members and in respect of its familiarity with the subject matter.
Questions such as whether or not a landlords breach or departure from the consultation requirements was serious or was technical, minor or excusable (see para 47, above) are questions of fact and degree.
Questions of that kind are best left to its judgment.
So too are questions as to whether a breach or departure is sufficiently serious to justify refusal of a dispensation or whether an offer to reduce the chargeable amount is acceptable.
The wording of section 20ZA(1) adopts this approach.
It is open ended and unqualified.
It leaves these matters to the tribunals determination.
This is an area of tribunal law and practice where it has been recognised, out of respect for the tribunals expertise, that judicial restraint should be exercised: see Lady Hales observations in Cooke v Secretary of State for Social Security [2002] 3 All ER 279, paras 15 17 and R (Cart) v Upper Tribunal (Public Law Project Intervening) [2011] UKSC 28, [2012] 1 AC 663, para 49; Ravat v Halliburton Manufacturing and Services Ltd [2012] UKSC 1; [2012] ICR 389, para 35.
The context for the exercise of that restraint is usually a challenge to the lawfulness of the decision on the ground, for example, that it was based on an error of law.
In my opinion, however, judicial restraint is just as much in point where, as here, an appellate court is prescribing limits on the way the expert tribunal is to perform the tasks as to issues of fact that have been delegated to it by the statute.
I would be reluctant, therefore, to rule out the possibility that a LVT may
lawfully refuse dispensation simply on the ground of the seriousness of the breach or departure.
It is true that the end to which the consultation requirements are directed is the protection of tenants in relation to service charges.
But I do not agree that there is a factual burden on the tenants in every case to identify some element of relevant prejudice (by which I understand Lord Neuberger to mean financial prejudice or other disadvantage that can be quantified) that they would or might suffer if dispensation were to be given before it would be open to the LVT to refuse to dispense: see paras 67 69.
I can accept that it would almost always be appropriate for the tribunal to require the tenants to provide some indication of the respects, if any, in which they would be prejudiced.
That would, of course, be so if the breach or departure appeared to be technical, minor or excusable.
It would be necessary then for some relevant prejudice to be inquired into and identified.
So too as cases are encountered on an ascending scale of gravity.
But I do not think that it is fanciful to assume that there could be extreme cases where the breach or departure was so serious, or so flagrant, that it would on that ground alone not be reasonable, as section 20ZA(1) puts it, to dispense with the consultation requirements.
In my opinion it should be, and is, open to the tribunal to take that view in the interests of preserving the integrity of the legislation, and to do so without conducting any such inquiry.
For these reasons I am unable to agree with the conclusion in para 47 that the LVT, the Upper Tribunal and the Court of Appeal were wrong to hold that it should be open to the LVT to distinguish, in the exercise of its judgment, between breaches or departures according to their level of seriousness, without having first to consider the amount of prejudice they may cause or may have caused.
Of course, these two things may run together.
But I do not think that it would be right for us in this court, relatively remote as we are from the day to day business of the tribunals, to hold that to separate the two can never be appropriate.
It seems to me that this rather more cautious, less prescriptive, approach is consistent with the conclusion that is reached in para 74, that the power to dispense with the consultation requirements should be exercised in a proportionate way that is consistent with their purpose.
It is also more consistent with the language of the section, which does not place any limits on the way the tribunal may exercise the power that is given to it to make the determination.
All it says is that the tribunal must be satisfied that it is reasonable to dispense with the requirements.
I would hold that judicial restraint has a part to play, too, in an examination of the question whether the LVT was entitled to decline to accept Daejans offer to reduce the chargeable amount by 50,000.
It rejected the proposal on the ground that there was no explanation of how that figure could be regarded as generous or as sufficient compensation for the prejudice suffered.
Neither the Upper Tribunal nor the Court of Appeal thought it right to reverse the LVT on this point, holding that it was entitled to reject the proposal.
I agree that the essential point is that the figure suggested should exceed, or at least be commensurate with, any possible prejudice which the respondents would suffer if an unqualified dispensation were to be granted: see para 84.
The LVT did not express its reasoning in that way.
But I am not prepared to assume from this that the proposal was rejected simply because it was a figure plucked out of the air.
The question whether or not an explanation was required from Daejan was one for the judgment of the expert tribunal.
It was for it, after all, to decide whether or not to accept the proposal.
It was for it to determine, as a matter of fact, whether it had been properly quantified.
I am not persuaded that its decision to reject the proposal was based on an error of law that would entitle this court to interfere with it.
As Lord Wilson says in para 117, it was entitled in its discretion to decline to accept a reduction without knowing the proportion which it bore to the overall cost of the works.
For these reasons, and for those given by Lord Wilson with which I am in full agreement, I would dismiss the appeal and affirm the order of the Court of Appeal.
LORD WILSON (dissenting)
I respectfully disagree with central aspects of the exposition by Lord Neuberger of the principles to be applied by the LVT in its determination of an application that it should dispense with one or more of the Requirements specified in the Schedules to the 2003 Regulations.
I have had greater hesitation about the proper disposal of the actual appeal but I have concluded that this court should dismiss it.
When in 2002 it inserted into the 1985 Act the new section 20 and the additional section 20ZA, and when it accepted the 2003 Regulations made thereunder, Parliament made various provisions about a landlords consultation with a tenant in relation to proposed works of a specified character for which, through the service charge, the tenant would later be required to pay.
On the face of them, the provisions seem to impact severely upon the landlord; and the severity is in my view testament to the importance which Parliament attached to his compliance with the Requirements.
Thus dispensation with them is available only if the LVT is satisfied (ie by the landlord) that it is reasonable to grant it (section 20ZA(1)); even if so satisfied, the LVT has a discretion in that, under that subsection, it then may grant the dispensation; and, in the absence of compliance or dispensation, the contribution of the tenant to the cost of such works is limited to 250 irrespective of the size of the cost (section 20(1)(3) and (5) and Regulation 6).
Lord Neubergers conclusion at para 47 that the gravity of the landlords non compliance with the Requirements is relevant to dispensation not of itself but only insofar as it causes financial prejudice to the tenant seems to me to subvert Parliaments intention.
The concern which he expresses at paras 47 and 48 about the difficulties which would confront the LVT in making reasonably consistent assessments of the gravity of breaches is not one which I share.
His conclusion at para 50 that real prejudice to the tenant should normally be the sole consideration for the LVT seems to me to depart from the width of the criterion (reasonable) which Parliament has specified.
His inevitable further conclusion at para 67 that the factual burden lies on the tenant to prove such prejudice seems to me, as a matter of reality, to reverse the burden of proof which Parliament has identified.
And in my view the hypothetical exercise in which his conclusions require the parties to engage (and upon which they require the LVT to adjudicate) fails to recognise the complications which often attend a comparison of, for example, one estimate with another in terms not just of overall cost but of individual costings, of the proposed starting date for the works, of the period of the works to which the rival contractors will commit themselves and of their perceived capacity to perform the works satisfactorily.
Whether the burden which Lord Neuberger casts upon the tenant is one which he can often discharge seems to me to be very doubtful.
First, however, I wish in the following respects to amplify the summary of the facts helpfully given by Lord Neuberger at paras 14 to 22: In August 2005, in response to Daejans stage 1 notice, four of the five (a) respondents nominated Rosewood as their preferred contractor.
In its report to Daejan dated 30 November 2005, REA, the contract (b) administrator, (i) analysed the four tenders which Daejan had received and appended a comparative schedule of the individual costings of three of them, including Rosewood; (ii) noted that Rosewood had offered to reduce its quotation from 454,000 to 432,000, which therefore became only 11,000 higher than that of the contractor, namely Mitre, for which Daejan had at all times indicated a provisional preference; (iii) observed that the contract period proposed by Rosewood was 24 weeks, whereas that proposed by Mitre was 32 weeks; (iv) indicated that the choice was between Rosewood and Mitre; (v) suggested that Rosewoods tender was the most complete and possibly the more realistic; (vi) said that it could vouch for Rosewood as a quality contractor but that Daejan could presumably vouch analogously for Mitre; and (vii) concluded that, were it to reduce its contract period to 24 weeks (which indeed it subsequently did), Mitre should be awarded the contract.
In February 2006 Daejan forwarded to the respondents copies of (c) Mitres tender and of REAs report on the tenders. (d) But the respondents also wanted to see a copy of Rosewoods tender.
Apart from reference to it in the schedule of individual costings, REAs report had made only general observations upon its tender over one page. (e) On five separate occasions between January and July 2006 the respondents in vain asked Daejan for a copy of Rosewoods tender. (f) Daejan admits that its first stage 3 notice, dated 14 June 2006, did not comply with some of the Requirements.
Its main defect was to fail to refer to Rosewoods tender in breach of para 4(8) of Part 2 of Schedule 4. (g) So Daejan served a second stage 3 notice dated 28 July 2006.
In the notice Daejan said (as required by para 4(5)(c)) that Rosewoods tender was available for inspection.
Moreover, in accordance with para 4(10)(c)(iii) and regulation 2(1), which require that a tenant be allowed 30 days in which to make observations, it also stated that, subject to any observations made by the respondents, it proposed to award the contract to Mitre but that it would not do so prior to 31 August 2006. (h) Meanwhile, on 17 July 2006, four of the respondents had applied to the LVT for a determination of their liability to pay service charges to Daejan for each year since 1994.
For the then current year, namely 2006, the respondents explained in their application that the issue related to major works costing 600,000 and that one of the questions for determination by the tribunal would be was the consultation process properly carried out? (i) At the LVTs pre trial review, held on 8 August 2006, there was a remarkable development: for Daejans solicitor announced that the contract had already been awarded to Mitre.
By letter to Daejan, written later that day, the respondents referred to the solicitors announcement and protested about it. (j) Daejan wrote two letters to the respondents dated 10 August 2006.
It did not deny that its solicitor had made the announcement.
On the contrary, in one letter it appeared to confirm that Mitre had been awarded the contract.
In the other letter, however, it said only that Mitre would be awarded the contract. (k) It transpires that Daejan awarded the contract to Mitre only on 11 September 2006.
But it had made clear to the respondents on 8 and 10 August that it had made its decision to do so.
Thereafter, and although on 11 August they finally received a copy of Rosewoods 50 page tender, the respondents reasonably concluded (as the LVT found) that it would be futile for them to accede to Daejans previous invitation to make observations prior to 31 August.
Indeed Daejan never suggested otherwise.
Thus, to speak plainly, Daejan aborted the stage 3 consultation.
Having correctly invited the respondents to make observations by 31 August 2006, it made clear on and after 8 August that the decision had been made.
Even more extraordinarily, Daejan made it clear at a hearing before a tribunal which was beginning to investigate whether, among other things, it had consulted the respondents in compliance with the Requirements.
In my view the LVT was clearly entitled to conclude that the opportunity for the respondents to make informed observations on the rival tenders prior to 31 August had been central to the consultation process.
Notwithstanding positive aspects of the earlier stages of the consultation to which Lord Neuberger refers at para 48, the sudden termination of the process, which Daejan never sought to reverse nor even to explain, represented, as both of the tribunals and the Court of Appeal all concluded, serious non compliance with the Requirements.
In my view therefore this appeal requires the court to consider the LVTs proper treatment of serious non compliance with the Requirements when invited to dispense with them.
What financial prejudice did the respondents suffer from Daejans termination of their opportunity to make submissions, in particular, of course, submissions in favour of Rosewood? Albeit without access to Rosewoods tender, they had already made extensive submissions.
The LVT concluded that the REA report had raised numerous points which might have been clarified by the respondents access to all the relevant tenders.
It was an unsurprising conclusion.
Nevertheless the Upper Tribunal was correct to observe that the LVT had not elaborated upon it.
Moreover, at all four stages of these proceedings, Daejan has been at pains to make the point that, in their evidence before the LVT, the respondents never identified specific aspects of Rosewoods tender to which, had the consultation not been terminated, they would have referred in their intended observations.
In that this is an appeal on a point of law from, originally, the exercise of a discretionary jurisdiction, it is worthwhile to note that, in its conclusions, the LVT expressly addressed the point before concluding that it was speculative.
But it remains Daejans strongest point.
If, as Lord Neuberger considers, the respondents are now to be told that, when they opposed the dispensation, the initial burden had been on them to prove that the termination caused significant financial prejudice to them, the conclusion must indeed be that they failed to discharge it.
But is the gravity of non compliance relevant to whether dispensation is reasonable irrespective of consequential financial prejudice?
In giving a negative answer to this question Lord Neuberger refers to what one might call the basic jurisdiction, conferred on the LVT by sections 19 and 27A of the 1985 Act, to determine the limit of a service charge by reference to whether the underlying costs were reasonably incurred by the landlord and whether the services thereby provided, or the works thereby carried out, were of a reasonable standard.
He suggests at paras 42 and 52 that the Requirements set out in section 20 and in the 2003 Regulations are intended only to reinforce the purposes behind sections 19 and 27A and to give practical support to them; and he proceeds to suggest at para 44 that the LVT should therefore focus upon whether non compliance with the Requirements has led the landlord to incur costs in an unreasonable amount or to incur them in the provision of services, or in the carrying out of works, which fell below a reasonable standard, in other words upon whether the non compliance has in that sense caused prejudice to the tenant.
With great respect, I consider that the legislative history of the Requirements for consultation runs counter to the above suggestion.
What I have described as the basic jurisdiction, now exercised under sections 19 and 27A of the 1985 Act, originated in section 124(1) of the Housing Act 1974 through its insertion of section 91A into the Housing Finance Act 1972.
The jurisdiction was then conferred only on the High Court or the county court; it applied only to flats and to certain types of tenancy; but otherwise it was described in terminology quite similar to the present (section 91A(3)).
It was by the same insertion that Parliament introduced an embryonic requirement for consultation (section 91A(1)).
That subsection provided that, in case of any dispute about the recoverability of a service charge thereunder, evidence of the views of the tenant obtained during the requisite consultation should be admitted.
There was no express provision about the effect of a landlords failure to conduct the consultation; but it was clearly intended that a tenant could also deploy such a failure in a dispute with the landlord before a court which was exercising the basic jurisdiction to determine whether an amount or a standard was reasonable.
In other words the section inserted in 1974 into the 1972 Act made the link which Lord Neuberger perceives in the current legislation.
But Parliament replaced section 91A of the 1972 Act by provisions contained in Schedule 19 to the Housing Act 1980.
By paragraphs 2 and 3, it reiterated the basic jurisdiction.
By paragraph 5, it amplified the Requirements for consultation.
By paragraph 4, it provided that, unless the Requirements had been complied with or dispensed with, the excess of a landlords costs above a prescribed amount should not be recoverable through the service charge.
And, by paragraph 6, it provided that, if satisfied that the landlord acted reasonably, the court had power to dispense with a Requirement.
The pattern of provisions contained in paras 1 to 6 of schedule 19 to the 1980 Act has broadly been maintained to date.
Those paragraphs were replaced by sections 18 to 20 of the Landlord and Tenant Act 1985.
The basic jurisdiction was then placed into section 19.
The consultation jurisdiction was then placed into section 20; and, by subsection (5), the threshold criterion for exercise of the power to grant dispensation with the Requirements, namely that the landlord acted reasonably, was retained.
By section 151 of the Commonhold and Leasehold Reform Act 2002, the consultation jurisdiction was changed into its present form by the substitution of section 20, the insertion of section 20ZA and the making thereunder of the 2003 Regulations.
In order to underline the distinction between the basic jurisdiction in section 19 and the consultation jurisdiction in section 20, the headnote of the former referred to reasonableness whereas that of the latter referred to consultation requirements.
The pattern of provisions introduced by the 1980 Act and maintained to date is important for present purposes.
For the link which Lord Neuberger perceives in the current legislation seems to me to have been broken by that Act.
Non compliance with a Requirement for consultation was no longer simply a factor to be weighed in the exercise of the basic jurisdiction.
An independent sanction was attached to it, namely that, unless the Requirement was dispensed with, the costs incurred by the landlord in the specified circumstances and above the statutory limit were irrecoverable through the service charge.
They were irrecoverable even if they had been reasonably incurred and had been incurred in the provision of services, or in the carrying out of works, to a reasonable standard, ie even if there was no scope for them to be disallowed in the exercise of the basic jurisdiction.
Even if, in that respect, the tenant had suffered no prejudice, they were irrecoverable.
Such was the free standing importance which Parliament has for 33 years attached to compliance with the Requirements.
I therefore agree with the analysis of Lewison J in Paddington Basin Developments Ltd v West End Quay Estate Management Ltd [2010] EWHC 833 (Ch), [2010] 1 WLR 2735, at para 26 as follows: [T] here are two separate strands to the policy underlying the regulation of service charges.
Parliament gave two types of protection to tenants.
First, they are protected by section 19 from having to pay excessive and unreasonable service charges or charges for work and services that are not carried out to a reasonable standard.
Second, even if service charges are reasonable in amount, reasonably incurred and are for work and services that are provided to a reasonable standard, they will not be recoverable above the statutory maximum if they relate to qualifying works or a qualifying long term agreement and the consultation process has not been complied with or dispensed with.
It follows that the consultation provisions are imposed for an additional reason; namely, to ensure a degree of transparency and accountability when a landlord decides to undertake qualifying works or enter into a qualifying long term agreement.
As Robert Walker LJ observed in Martin & Seale v Maryland Estates Ltd (1999) 32 HLR 116, 125 in relation to a previous version of the consultation requirements: Parliament has recognised that it is of great concern to tenants, and a potential cause of great friction between landlord and tenants, that tenants may not know what is going on, what is being done, ultimately at their expense.
The statutory changes wrought by the 2002 Act, which, together with the Regulations, came into force in 2003, not only enabled the LVT to exercise each of the service charge jurisdictions but altered the threshold criterion for exercise of the power to grant dispensation with the Requirements.
The criterion was no longer whether the landlord had acted reasonably but whether it was reasonable to dispense with the requirements (section 20ZA(1), as inserted into the 1985 Act).
The new criterion was therefore wider and, no doubt, more favourable to the landlord.
It certainly included appraisal of any financial prejudice suffered by the tenant as a result of the non compliance, being an aspect which could be said only with great difficulty, if at all, to have been embraced in the old criterion.
On any view the focus of the old criterion had been the gravity of the landlords non compliance.
What, however, I find impossible to conclude is that the change in effect banished consideration of what had previously been the focus: the words of the new criterion are inapt to yield such a conclusion.
In August 2002, just after the 2002 Act had received royal assent, the Office of the Deputy Prime Minister published a consultation paper in relation to a draft of the Regulations, entitled Revised Procedures for Consulting Service Charge Payers about Service Charges.
In Chapter 4 it explained: 3.
The dispensation procedure is intended to cover situations where consultation was not practicable (eg for emergency works) and to avoid penalising landlords for minor breaches of procedure which do not adversely effect service charge payers interests. [Emphasis supplied] The paragraph tends to confirm my view that substantial non compliance with the Requirements is, without more, intended to entitle the LVT, in the exercise of its discretion, to refuse to dispense with them in order, in Lord Hopes phrase at para 91, to preserve the integrity of the legislation.
Lord Neuberger points out at para 46 that the Requirements leave untouched the fact that it is the landlord who decides what works should be done and what amount should be paid for them.
What, however, the Requirements recognise is surely the more significant fact that most if not all of that amount is likely to be recoverable from the tenant.
In Camden London Borough Council v The Leaseholders of 37 Flats at 30 40 Grafton Way LRX/185/2006 30 June 2008, the Lands Tribunal (George Bartlett QC, President, and NJ Rose FRICS) dismissed Camdens appeal against the LVTs refusal to dispense with the stage 3 Requirements.
Camden had prepared the requisite statement, including the offer to afford inspection of the tenders, but had failed to send it to the tenants and had proceeded to enter into the contract.
The Lands Tribunal, at para 35, described Camdens error as gross.
I agree; and I do not perceive much difference between a landlords total failure to send the statement and its sending a statement which, after 11 days, it deprives of all further significance.
The Lands Tribunal concluded: The extent to which, had [the tenants] been told of the estimates, [they] would have wished to examine them and make observations upon them can only be a matter of speculation.
The fact is that they did not have the opportunity and this amounted to significant prejudice.
The above analysis by the Lands Tribunal in the Grafton Way case, namely that a substantial failure of a landlord to consult in compliance with the Requirements could, in itself, amount to significant prejudice to a tenant, was adopted by the Court of Appeal in the present case (Gross LJ [2011] 1 WLR 2330, para 73 (iii)).
For reasons already given, I am not persuaded that a failure of that gravity needs to be described as amounting to prejudice to the tenant.
I consider, with respect, that it is reasonable for Lord Neuberger to adopt a narrower definition of the word prejudice, to be calculated only in monetary terms and by reference to the likely ultimate outcome of a duly conducted consultation.
But the semantics are unimportant.
I believe that, along with any prejudice in that narrower sense (which I accept will often be a matter of prime importance), the LVT should weigh the gravity of the non compliance with a Requirement in determining whether to dispense with it.
In the present case the LVT did so.
The LVT also proceeded to reject Daejans contention that it was relevant for it to consider the size of the difference between the amounts recoverable from the respondents in the event of dispensation on the one hand and of its refusal on the other.
Here too the LVT made no error.
In this respect I agree with Lord Neuberger at para 51 that the size of the difference is irrelevant.
It remains only to consider whether the LVT fell into error in its rejection of Daejans offer to accept the attachment to a grant of dispensation of a condition that it should reduce the cost of the works to be charged to the respondents by 50,000.
I agree with Lord Neuberger that it is open to the LVT to attach a condition of that character; and I regard it as valuable for the LVT that this court should so rule.
In making provision for the consequences of non compliance with the Requirements, Parliament will have had in mind the established ability of a court or tribunal to attach conditions to its exercise of a discretion: for example a condition that undertakings be given by an applicant before it grants a freezing order; or a condition which (so this court was told) the LVT itself already sometimes attaches to the grant of an adjournment, namely that the applicant for it, whom the tribunal has no power actually to order to pay the costs thrown away, should nevertheless do so.
Lord Neuberger also explains at para 56 that urgent applications for dispensation in advance of carrying out the works may be particularly suited to be granted on conditions.
Nevertheless I regard the exercise of the jurisdiction to attach a condition to the grant of dispensation with a Requirement as not being without difficulty.
Consequential prejudice to the respondents in the narrow sense of that word will sometimes arise not from works which might have been done more cheaply but, for example, from works which, for good reason, should have been conducted at somewhat greater expense or which were conducted over an unreasonably long period or which did not extend to everything that was reasonably required to be done; prejudice of that sort may be hard to quantify in monetary terms.
My own view, namely that the gravity of the non compliance remains relevant independently of prejudice, makes the identification of an appropriate figure harder still.
So it seems to me that, as Lord Hope suggests in paras 88 and 93, considerable latitude is to be afforded to the LVT, as the specialist decision maker, in relation to its determination whether to accept a landlords offer or to reject it outright or, in rejecting it, to identify some higher figure which, if offered, it would accept as a condition of a grant of dispensation.
Appeals from these aspects of the exercise of the LVTs discretion should not lightly be permitted to proceed.
Had the LVT in the present case concluded that it had no jurisdiction to incorporate Daejans offer into a condition attached to a grant of dispensation, it would have made an error of law which would have required re exercise of its discretion at an appellate level.
But it did not so conclude.
It was the Upper Tribunal which, at para 40, wrongly concluded that the LVT had no such jurisdiction; and it was the Court of Appeal which, at para 76(i), overcautiously doubted whether the jurisdiction existed.
Before the LVT, by contrast, the parties agreed that it existed and the LVT proceeded on that basis.
It is important to note that, having embarked on the works in October 2007, Mitre was still engaged upon them at the time of the LVTs hearing of Daejans application for dispensation in March 2008 and probably at the time of its decision in August 2008.
The evidence does not permit a conclusion to be drawn about the reasons for the overrun.
At all events the LVTs expressed reason for rejecting Daejans offer of a reduction of 50,000 was that it was impossible to assess it in the light of the cost of the works already undertaken and of the estimated cost of the works still to be undertaken, as to neither of which had Daejan adduced evidence.
The gravity of Daejans non compliance with the Requirements made the LVTs appraisal of any offer extremely difficult.
But it was in any event entitled, in its discretion, to decline to accept the offered reduction without knowing the proportion which it bore to the overall cost of the works.
After receiving the parties submissions as to the form of order and costs, Lord Neuberger gave the following judgment with which Lord Hope, Lord Clarke, Lord Wilson and Lord Sumption agreed.
Trinity Term [2013] UKSC 54 On appeal from: [2011] EWCA Civ 38 JUDGMENT Daejan Investments Limited (Appellant) v Benson and others (Respondents) (no. 2) before Lord Neuberger, President Lord Hope, Deputy President Lord Clarke Lord Wilson Lord Sumption JUDGMENT GIVEN ON 24 July 2013 Heard on 4 December 2012 Appellant Nicholas Dowding QC Stephen Jourdan QC (Instructed by GSC Solicitors LLP) 1st 4th Respondents Philip Rainey QC Jonathan Upton (Instructed by Excello Law Limited) 5th Respondent James Fieldsend (Instructed by Jaffe Porter Crossick LLP) LORD NEUBERGER (with whom Lord Hope, Lord Clarke, Lord Wilson and Lord Sumption agree) 1.
On 6 March 2013, by a majority of three to two, this Court allowed an appeal brought by Daejan Investments Ltd (Daejan) against the decision of the Court of Appeal, which had unanimously upheld a decision of the Upper Tribunal (Lands Chamber) (the UT), which had in turn upheld a decision of the Leasehold Valuation Tribunal (the LVT).
The effect of the decisions below was that Daejan was not entitled to a dispensation under section 20ZA(1) of the Landlord and Tenant Act 1985 (the 1985 Act), as amended, which it had sought from the LVT, to enable it to recover any payment by way of service charges from the respondent tenants, in respect of the cost of certain works of repair (the works) which it had carried out to a block of flats.
In our decision, we decided that Daejan was entitled to such a dispensation 2. (a dispensation), albeit on terms.
The effect of our decision is that, notwithstanding its failure to comply with some of the procedural steps set out in Part 2 of Schedule 4 to the Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 2003/1987) (the Regulations), Daejan is entitled to recover service charges in respect of the cost of the works from the respondents, subject to (i) a deduction of 50,000 and (ii) terms as to costs. 3.
The issues which now arise between the parties concern the details of the consequential order (the Order) which the Court should make as a result.
In order to deal with those issues, it is unnecessary to set out the factual history, the relevant law, the procedural background, or the reasons for the decision, as they are fully set out in our earlier judgment (the main judgment) [2013] UKSC 14, [2013] 1 WLR 854. 4.
The parties are agreed that the Order should contain the following provisions: i. A statement that Daejans appeal is allowed; ii.
A statement that the decisions of the LVT, the UT and the Court of Appeal are set aside; iii.
A direction that, as a condition of the dispensation, Daejan is to pay the reasonable costs of the respondents: (a) already incurred in the proceedings in the LVT, albeit that the scope of this direction is in dispute; (b) which may be incurred in their being determined by the LVT if and to the extent that the [LVT] determines that the costs of that application were reasonably incurred; iv.
A direction (subject to the wording) that, as a condition of the dispensation, Daejans costs of applying for a dispensation (or of any appeal in that connection) cannot be claimed back through service charges; vs A direction that, subject to an argument in relation to part of those costs, there be no order for costs in this Court and in the Court of Appeal (save that Daejan does not seek to recover 3,000 it was ordered to pay to the Access to Justice Foundation); vi.
A direction that, if the dispensation is effective and Daejan is able to recover the cost of the works, the liability of each respondent to pay by way of service charge is reduced by an agreed sum, to reflect the 50,000 deduction; vii.
A direction that the proceedings be restored before the LVT for the costs issues under sub para (iii) to be determined. 5.
The parties are not agreed about a number of other terms of the Order, and the purpose of this judgment is to deal with those disputed terms.
In their written submissions, the respondents suggest that our decision on some of the points which divide the parties may be relied on in future cases where a landlord seeks a dispensation.
Partly for that reason, and partly because the submissions raise a number of issues, some of which are not straightforward, it is right not merely to give our decision on the terms of the Order, but also our reasons, in the form of this brief judgment, for that decision. 6.
To get one point out of the way, there is an arid argument as to whether the provisions which Daejan must comply with in order to obtain the dispensation (i.e. under paras 4(iii), (iv) and (vi) above) are terms or conditions.
Nothing hangs on this, although it is probably preferable to call them conditions, which is the description which I shall adopt.
The important point is that, unless and until Daejan has complied with the conditions in so far as they require compliance, it is not entitled to give effect to the dispensation and to recover the service charges the subject of these proceedings. 7.
The first issue concerns the point touched on in para 4(iii)(a) above.
It has three aspects. (i) Daejan contends that the respondents are only entitled to their costs in the LVT insofar as those costs were incurred in reasonably testing [Daejans] claim for dispensation or in reasonably canvassing any prejudice which [the respondents] might suffer, whereas the respondents contend that their costs should be recoverable from Daejan insofar as they were incurred in reasonably investigating and establishing non compliance with the Regulations, investigating or seeking to establish prejudice, and investigating and challenging [Daejans] application for dispensation. (ii) The respondents also contend that the Order should provide that these costs are not limited to those incurred after the issue of Daejans application for a dispensation. (iii) The respondents further contend that the Order should state that these costs can include costs incurred in connection with the hearing which resulted in the earlier determination referred to in para 24 of the main judgment. 8.
On analysis, there is, in truth, little, if any, difference between the two formulations, but that of the respondents is to be preferred.
As to (i), the respondents wording spells things out more fully and leaves less room for argument.
It is true that Daejans wording follows para 85 of the main judgment, but the meaning of the respondents wording is quite consistent with what is said in that paragraph.
So far as (ii) is concerned, the only objection to the respondents proposal is that it amounts to surplusage: an order for costs in relation to proceedings is not limited to costs incurred after the proceedings start.
However, as Daejan opposes the respondents proposal, it should be adopted to ensure there can be no dispute.
As to (iii), at first sight it may appear surprising that the respondents can claim as costs in relation to the issue decided in a later determination (viz. that mentioned in para 26 of the main judgment) expenditure incurred on issues decided in an earlier determination.
However, as Daejan appears to accept, although there were two determinations, at least some of the evidence and the arguments in relation to the first were important and relevant in relation to the second determination. 9.
The second issue between the parties is touched on in para 4(v) above.
Daejan says that there should be no order for costs in the UT, in the Court of Appeal and in this Court, whereas the respondents contend that they should be able to recover their costs from Daejan in all three tribunals insofar as they fall within the scope of the form of order they have proposed as quoted in point (i) in para 7 above (and which is accepted in relation to the LVT costs see para 8 above). 10.
It is not open to Daejan to seek any costs in the Court of Appeal or in this Court, as it was granted permission to appeal to each court on terms that it did not seek its costs (see paras 33 and 37 of the main judgment).
That was for the very good reason that Daejan, as a large landlord, had a significant interest in the issue in this case being conclusively determined, whereas the respondents had no such interest.
When one adds to that point the fact that it was Daejans default which ultimately caused these appeals to be necessary, and the fact that the decision of this Court can be said to have represented a change in what the law was perceived to be, it seems right that Daejan should not claim its costs in the UT any more than in the Court of Appeal or in this Court. 11.
However, although one must have some sympathy for the respondents, it would not be appropriate to go further by making any order in their favour so far as the costs in the UT, the Court of Appeal or the Supreme Court are concerned.
In the absence of special circumstances, Daejan can fairly say that the normal order for costs in a case where the ultimate appeal court decides in favour of one party (the successful party) is that that party recovers all its costs from the opposing party.
In this case, there are undoubtedly two special factors, namely (i) the successful party only succeeded on the basis that it should have succeeded at first instance on terms that it paid some of the opposing partys costs (see paras 59 64, 73(ii) and 85(ii) of the main judgment, and paras 7 and 8 above), and (ii) the successful party is precluded from seeking its costs in this Court and the Court of Appeal (see paras 33 and 37 of the main judgment). 12.
In these circumstances, to deprive Daejan of its costs of the hearing before the UT (in addition to the Court of Appeal and this Court) could be said to be generous to the respondents, although, for the reasons briefly given in para 10, it is appropriate in this case.
However, it would not be right to make an order for costs in the UT or higher courts which was more favourable to the respondents than no order for costs. 13.
It is said by the respondents that they acted reasonably in resisting Daejans successive appeals.
That is true, but Daejan also acted reasonably in pursuing the appeals, and, unlike the respondents, Daejan was ultimately successful. 14.
It is also true that Daejan has to pay a large proportion of the respondents costs before the LVT, even though it obtained the dispensation it was seeking, but that is because it was asking for an indulgence from the LVT (as explained in paras 58 64 of the main judgment).
However, the appeals concerned a point of law, namely the correct approach to a dispensation application by a landlord who had failed to comply with the Regulations, and it was a point on which, ultimately, Daejan won and the respondents lost.
Prima facie, therefore, Daejan should have its costs of the appeals, but, as explained in para 10, the correct order in respect of the appeal costs is that there be no order. 15.
It is also argued by the respondents that, as Daejan raised the argument at all levels of appeal that the financial consequences to it of refusing a dispensation represented a relevant factor when deciding whether to grant it a dispensation, the fact that this argument failed should be reflected in any order for costs on the appeals.
In arguments about costs, it is normally inappropriate to single out a particular strand of argument (in this instance, prejudice to the landlord) in connection with what is in reality a single point (the principles applicable to granting a dispensation), particularly on an appeal, where no question of the cost of particular evidence arises.
This case is no exception.
Furthermore, while prejudice to the landlord was rejected as a relevant factor, it does represent the windfall to the tenants which is relevant (see para 51 and 71 of the main judgment). 16.
This leads to the third issue.
As a result of the conclusion on the second issue, Daejan is entitled to recover any costs which it has paid to the respondents in respect of the UT or Court of Appeal hearings.
However, the respondents should be entitled, despite Daejans objection to the contrary, to a direction for a stay on any order that they repay these costs, while the parties await the decision of the LVT as to the sums which Daejan should be required to pay to them pursuant to the order referred to in para 4(iii) above, with a view to setting off any such costs liabilities against each other.
However, if the respondents unreasonably delay matters being determined by the LVT, Daejan has the right to apply to the LVT to lift this stay. 17.
The fourth issue arises from an argument about the wording of the provision which gives effect to the term described in para 4(iv) above.
Daejan suggests that it is not to include in the service charge costs its costs of applying for dispensation in the [LVT] or its costs of appealing from a refusal of that dispensation.
The respondents proposal is that it should be the costs which Daejan incurred in resisting a determination that it had failed to comply with the Regulations or in respect of its application for dispensation.
Daejans formulation is arguably too narrow, and the respondents formulation could apply to any application in the future.
The appropriate form of words is that Daejan must not include in the service charge costs its costs of (i) resisting the respondents application for a determination that it had failed to comply with the Regulations, (ii) supporting its application for dispensation (including any costs it has to pay to the respondents), or (iii) appealing from a refusal of that dispensation. 18.
The fifth issue arises from the respondents request for a direction under section 20C(1) of the 1985 Act (section 20C) in connection with the costs incurred by Daejan in relation to its application for a dispensation.
Section 20C permits a tenant to apply for an order that all or any of the costs incurred by the landlord in connection with proceedings before a court, [LVT], or [UT], are not to be regarded as relevant costs to be taken into account in determining the amount of any service charge .
At first sight, there seems little point in including such a direction, given the agreement to the provision set out in para 4(iv), and discussed in para 17 above.
However, as the respondents point out, the agreed provision in para 4(iv) is, strictly speaking at least, no more than a condition imposed on Daejan as a term of granting it the dispensation it seeks.
In theory, Daejan might not take up the dispensation.
Accordingly, as it would be wrong for Daejan to seek to include the costs involved in a future service charge demand, the order sought by the respondents under section 20C should be granted. 19.
Sixthly, the respondents wish the Order to record that any dispensation will take effect on the date on which Daejan complies with the conditions set out in para 4(iii).
At first sight, the question of when the dispensation takes effect may well not matter, and, if it does, it should be determined as and when the reason for which it matters is identified.
This point appears to be linked to another issue. 20.
That is the seventh issue which divides the parties.
It arises from the fact that the lease under which each respondent holds his or its flat from Daejan provides for interest on late payments of money due under the lease at the rate of 14% per annum.
The respondents seek to be released from liability for this interest in relation to the service charges which Daejan anticipates recovering in the light of the main judgment. 21.
There is no need for the respondents to seek a release of this liability to pay contractual interest.
It seems clear from the wording of section 20(1)(b) of the 1985 Act (which applies in this case and limits the service charge contribution as explained in para 10 of the main judgment unless the consultation requirements have been .,. complied with) that, where that provision applies, the date on which any service charge would fall due (the due date) must be the later of (i) the date when the service charge would fall contractually due in the absence of any statutory restriction, and (ii) the date when any dispensation becomes effective.
And, in this case, the due date must be the day on which the conditions imposed on Daejan for the grant of the dispensation are complied with. 22.
This means that interest will only start to run on the service charges the subject of these proceedings once the costs payable by Daejan in accordance with para 4(iii) above have been determined and, if appropriate, paid (within fourteen days of the determination).
It may well be that the costs will be less than the costs already paid to the respondents in relation to the orders for costs made on the appeals in the courts below (see para 16 above), and therefore no payment will be due from Daejan to the respondents.
However, that would not undermine the point made in para 21 above: until the conditions on which the dispensation is granted are known and quantified, there is no operative dispensation, and time does not begin to run for interest. 23.
If the respondents were to delay paying Daejan the service charges assessed in accordance with the Order (beyond fourteen days, to allow time to organise payment) once the dispensation becomes operative, there would (at least in the absence of special facts which have not so far arisen) be no basis for depriving Daejan of its contractual right to claim interest at 14% per annum. 24.
Accordingly, the Order should include a provision to deal with the sixth and seventh issues.
That provision should state that the dispensation will take effect once all conditions subject to which the dispensation is granted have been determined (and, where appropriate, satisfied), and that interest pursuant to the terms of the respondents leases can only run from a date fourteen days after the dispensation takes effect. 25.
The eighth issue relates to the agreed remission of the matter to the LVT, referred to in para 4(vii) above.
The respondents wish the remission to be to the same panel as heard the proceedings and gave the decisions referred to in paras 23 28 of the main judgment (the original panel), whereas Daejan argues for a different panel.
There is possible advantages in having the original panel, given that it heard this matter, including evidence and arguments, over more than eight days, but the benefit is likely to be slight as that hearing was some time ago, and a different panel would have the benefit of two very full decisions of the original panel.
There is nothing in Daejans argument that the original panel would be, or would appear to be, inappropriate because its decision has been reversed.
The reversal was based on an issue of law, and does not cast doubt on the panels ability to determine the issues which are now to be determined, if they cannot be agreed. 26.
The correct direction to give in this connection is simply to remit the issues, which remain to be determined as a result of the Order, to the LVT, on the basis that it can be, but need not be, the same panel who heard the proceedings in 2007 and 2008.
This is on the basis that there may be some value in the original panel hearing the matter, but it is unlikely to be very advantageous, and that there may be difficulties in getting the original panel to reconvene. 27.
The parties can no doubt now agree a form of order which reflects what they have agreed as augmented by what we have decided in this further judgment.
I conclude that the LVT made no error of law in refusing Daejans application for dispensation with the Requirements; that the Upper Tribunal and the Court of Appeal were correct in determining not to set its refusal aside; and that this court should determine likewise.
| UK-Abs | Provisions in the Landlord and Tenant Act 1985 (the 1985 Act) and the Service Charges (Consultation requirements) (England) Regulations 2003 (SI 2003/1987) impose statutory requirements and restrictions on a landlord, which impinge on its ability to recover service charges from tenants, typically of flats in a block of flats.
Unless certain consultation requirements (the Requirements), which can be conveniently divided into four stages, are complied with by the landlord, or dispensed with by the Leasehold Valuation Tribunal (the LVT), the landlord cannot recover more than 250 from each tenant in respect of works for which the service charge would otherwise be greater.
Section 20ZA(1) of the 1985 Act provides that the LVT may dispense with the Requirements if satisfied that it is reasonable to do so.
The issue on this appeal concerns the width and flexibility of the LVTs jurisdiction to dispense with the Requirements, and the principles upon which that jurisdiction should be exercised.
Daejan Investments Limited (Daejan) is the owner of the freehold of Queens Mansions (the Building).
The Building is managed by Highdorn Co Ltd, which carries on business under the name of Freshwater Property Management (FPM).
Five of the seven flats in the building are held under long leases, each of which is held by a respondent to this appeal (collectively the respondents).
Each lease includes an obligation on the tenant to pay a specified fixed proportion of the cost of providing, among other things, the services which the landlord is obliged to provide, which include the repair of the structure, exterior and common parts of the building.
The respondents were, at all material times, members of the Queens Mansions Residents Association (QMRA).
In 2005, FPM sent QMRA a specification in respect of proposed works to the building (the Works), and appointed Robert Edward Associates (REA) as contract administrator.
REA sent to QMRA and the respondents a notice of intention to carry out the Works, and provided estimates for them, thereby complying with stages 1 and 2 of the Requirements.
REA informed the respondents and QMRA that two tenders appeared to be the most competitive: one from Rosewood Building Contractors (Rosewood); the other from Mitre Construction Ltd (Mitre).
The respondents and QMRA were only provided with the priced specification submitted by Mitre.
Daejan contracted for the Works with Mitre, but in so doing failed to comply with the third of the four stages of the Requirements, which required, among other things, Daejan to issue a statement to QMRA with a summary of observations on the estimates, its responses to them, and notice of where they would be available for inspection.
Daejan requested the LVT to grant it dispensation from the Requirements, so that Daejan would be entitled to recover just under 280,000 in total from the respondents, as opposed to 1,250 in the absence of dispensation.
During the course of the proceedings, Daejan proposed a 50,000 deduction to the 280,000.
The LVT regarded Daejans failure as a serious breach of the Requirements, which amounted to serious prejudice to the respondents.
Accordingly, the LVT refused dispensation.
The Upper Tribunal and the Court of Appeal agreed with this refusal.
The Supreme Court, by a majority of three to two (Lord Hope and Lord Wilson dissenting), allows the appeal, granting Daejan dispensation from the Requirements on terms that (i) the respondents aggregate
liability to pay for the works be reduced by 50,000, and (ii) Daejan pay the reasonable costs of the respondents in relation to the proceedings before the LVT.
Lord Neuberger gives the majority judgment.
The correct question in this case was whether, if dispensation was granted, the respondents would suffer any relevant prejudice, and, if so, what relevant prejudice, as a result of Daejans failure to comply with the Requirements.
It is highly questionable whether any such prejudice would have been suffered.
The only specific prejudice was a matter of speculation, namely that the respondents lost the opportunity of making out the case for using Rosewood to carry out the Works, rather than Mitre [77].
Although there was a partial failure by Daejan to comply with the third stage of the Requirements, the relevant prejudice to the respondents could not be higher than the 50,000 effectively offered by Daejan [84].
It would be pointless to remit to the LVT the issue as to whether the 50,000 was sufficient compensation [80].
The purpose of the Requirements is to ensure that tenants are protected from paying for inappropriate works, or paying more than would be appropriate.
In considering dispensation requests, the LVT should focus on whether the tenants were prejudiced in either respect by the failure of the landlord to comply with the Requirements [44].
The Requirements are a means to the end of the protection of tenants in relation to service charges [46].
There is no justification for treating consultation and transparency as appropriate ends in themselves [52].
The right to be consulted is not a free standing right [78].
As regards compliance with the Requirements, it is neither convenient nor sensible to distinguish between a serious failing, and a minor oversight, save in relation to the prejudice it causes.
Such a distinction could lead to uncertainty, and to inappropriate and unpredictable outcomes [47] [49].
The LVT has power to grant dispensation on appropriate terms [54], and can impose conditions on the grant of dispensation [58], including a condition as to costs that the landlord pays the tenants reasonable costs incurred in connection with the dispensation application [59] [61].
Where a landlord has failed to comply with the Requirements, there may often be a dispute as to whether the tenants would relevantly suffer if an unconditional dispensation was granted [65].
While the legal burden is on the landlord throughout, the factual burden of identifying some relevant prejudice is on the tenants [67].
They have an obligation to identify what they would have said, given that their complaint is that they have been deprived of the opportunity to say it [69].
Once the tenants have shown a credible case for prejudice, the LVT should look to the landlord to rebut it and should be sympathetic to the tenants case [68].
Insofar as the tenants will suffer relevant prejudice, the LVT should, in the absence of some good reason to the contrary, effectively require the landlord to reduce the amount claimed to compensate the tenants fully for that prejudice.
This is a fair outcome, as the tenants will be in the same position as if the Requirements have been satisfied [71].
This conclusion does not enable a landlord to buy its way out of having failed to comply with the Requirements, because a landlord faces significant disadvantages for non compliance [73].
This conclusion achieves a fair balance between ensuring that tenants do not receive a windfall, and that landlords are not cavalier about observing the Requirements strictly [74].
The minority considers that the LVT should weigh the gravity of the non compliance with the Requirements in determining whether to grant dispensation [111].
This includes distinguishing between breaches or departures according to their level of seriousness, without having first to consider the amount of prejudice they may cause or may have caused [92].
The legislative history of the Requirements suggests that the gravity of non compliance is relevant [103] [109].
Substantial non compliance with the Requirements entitles the LVT to refuse to grant dispensation [91],[110].
Daejans termination of the consultation process represented serious non compliance with the Requirements [99].
Questions as to the gravity of non compliance are questions of fact and degree best left to the judgment of the LVT [88].
Judicial restraint should be exercised by an appellate court where it is prescribing limits on the way an expert tribunal is to perform its functions [89].
The LVTs decision to reject the 50,000 proposal was not based on an error of law that would entitle the Supreme Court to interfere with it [94],[117].
|
If you drive into Dundee from the west along the A90 (T), you will pass on your left a large industrial site.
It was formerly occupied by NCR, one of Dundees largest employers, but its factory complex closed some years ago and the site has lain derelict ever since.
In 2009 Asda Stores Ltd and MacDonald Estates Group plc, the interveners in the present appeal, applied for planning permission to develop a superstore there.
Dundee City Council, the respondents, concluded that a decision to grant planning permission would not be in accordance with the development plan, but was nevertheless justified by other material considerations.
Their decision to grant the application is challenged in these proceedings by Tesco Stores Ltd, the appellants, on the basis that the respondents proceeded on a misunderstanding of one of the policies in the development plan: a misunderstanding which, it is argued, vitiated their assessment of whether a departure from the plan was justified.
In particular, it is argued that the respondents misunderstood a requirement, in the policies concerned with out of centre retailing, that it must be established that no suitable site is available, in the first instance, within and thereafter on the edge of city, town or district centres.
The legislation
force at the time of the relevant decision, provides: Section 37(2) of the Town and Country Planning (Scotland) Act 1997, as in In dealing with [an application for planning permission] the authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations.
Section 25 provides: Where, in making any determination under the planning Acts, regard is to be had to the development plan, the determination is, unless material considerations indicate otherwise (a) to be made in accordance with that plan.
The development plan
The development plan in the present case is an old development plan within the meaning of paragraph 1 of Schedule 1 to the 1997 Act.
As such, it is defined by section 24 of the 1997 Act, as that section applied before the coming into force of section 2 of the Planning Etc. (Scotland) Act 2006, as including the approved structure plan and the adopted or approved local plan.
The relevant structure plan in the present case is the Dundee and Angus Structure Plan, which became operative in 2002, at a time when the NCR plant remained in operation.
As is explained in the introduction to the structure plan, its purpose is to provide a long term vision for the area and to set out the broad land use planning strategy guiding development and change.
It includes a number of strategic planning policies.
It sets the context for local plans, which translate the strategy into greater detail.
Its preparation took account of national planning policy guidelines.
The structure plan includes a chapter on town centres and retailing.
The introduction explains that the relevant Government guidance is contained in National Planning Policy Guidance 8, Town Centres and Retailing (revised 1998).
I note that that document (NPPG 8) was replaced in 2006 by Scottish Planning Policy: Town Centres and Retailing (SPP 8), which was in force at the time of the decision under challenge, and which was itself replaced in 2010 by Scottish Planning Policy (SPP).
The relevant sections of all three documents are in generally similar terms.
The structure plan continues, at para 5.2: A fundamental principle of NPPG 8 is that of the sequential approach to site selection for new retail developments On this basis, town centres should be the first choice for such developments, followed by edge of centre sites and, only after this, out of centre sites which are currently or potentially accessible by different means of transport.
In relation to out of centre developments, that approach is reflected in Town Centres and Retailing Policy 4: Out of Centre Retailing: In keeping with the sequential approach to site selection for new retail developments, proposals for new or expanded out of centre retail developments in excess of 1000 sq m gross will only be acceptable where it can be established that: no suitable site is available, in the first instance, within and thereafter on the edge of city, town or district centres; individually or cumulatively it would not prejudice the vitality and viability of existing city, town or district centres; the proposal would address a deficiency in shopping provision which cannot be met within or on the edge of the above centres; the site is readily accessible by modes of transport other than the car; the proposal is consistent with other Structure Plan policies.
The relevant local plan is the Dundee Local Plan, which came into operation in 2005, prior to the closure of the NCR plant.
Like the structure plan, it notes that national planning policy guidance emphasises the need to protect and enhance the vitality and viability of town centres.
It continues, at para 52.2: As part of this approach planning authorities should adopt a sequential approach to new shopping developments with first preference being town centres, which in Dundees case are the City centre and the District Centres.
That approach is reflected in Policy 45: Location of New Retail Developments: The City Centre and District Centres will be the locations of first choice for new or expanded retail developments not already identified in the Local Plan.
Proposals for retail developments outwith these locations will only be acceptable where it can be established that: a) no suitable site is available, in the first instance, within and thereafter on the edge of the City Centre or District Centres; and individually or cumulatively it would not prejudice the vitality b) and viability of the City Centre or District Centres; and c) the proposal would address a deficiency in shopping provision which cannot be met within or on the edge of these centres; and d) the site is readily accessible by modes of transport other than the car; and e)
It is also relevant to note the guidance given in NPPG 8, as revised in 1998, to which the retailing sections of the structure plan and the local plan referred.
Under the heading Sequential Approach, the guidance stated: the proposal is consistent with other Local Plan policies. 12.
Planning authorities and developers should adopt a sequential approach to selecting sites for new retail, commercial leisure developments and other key town centre uses First preference should be for town centre sites, where sites or buildings suitable for conversion are available, followed by edge of centre sites, and only then by out of centre sites in locations that are, or can be made easily accessible by a choice of means of transport 13.
In support of town centres as the first choice, the Government recognises that the application of the sequential approach requires flexibility and realism from developers and retailers as well as planning authorities.
In preparing their proposals developers and retailers should have regard to the format, design, scale of the development, and the amount of car parking in relation to the circumstances of the particular town centre.
In addition they should also address the need to identify and assemble sites which can meet not only their requirements, but in a manner sympathetic to the town setting.
As part of such an approach, they should consider the scope for accommodating the proposed development in a different built form, and where appropriate adjusting or sub dividing large proposals, in order that their scale might offer a better fit with existing development in the town centre 14.
Planning authorities should also be responsive to the needs of retailers and other town centre businesses.
In consultation with the private sector, they should assist in identifying sites in the town centre which could be suitable and viable, for example, in terms of size and siting for the proposed use, and are likely to become available in a reasonable time 15.
Only if it can be demonstrated that all town centre options have been thoroughly addressed and a view taken on availability, should less central sites in out of centre locations be considered for key town centre uses.
Where development proposals in such locations fall outwith the development plan framework, it is for developers to demonstrate that town centre and edge of centre options have been thoroughly assessed.
Even where a developer, as part of a sequential approach, demonstrates an out of centre location to be the most appropriate, the impact on the vitality and viability of existing centres still has to be shown to be acceptable
The consideration of the application
The interveners application was for planning permission to develop a foodstore, caf and petrol filling station, with associated car parking, landscaping and infrastructure, including access roads.
The proposals also involved improvements to the junction with the A90 (T), the upgrading of a pedestrian underpass, the provision of footpaths and cycle ways, and improvements to adjacent roadways.
A significant proportion of the former NCR site lay outside the application site.
It was envisaged that vehicular access to this land could be achieved using one of the proposed access roads.
In his report to the respondents, the Director of City Development advised that the application was contrary to certain aspects of the employment and retailing policies of the development plan.
In relation to the employment policies, in particular, the proposal was contrary to policies which required the respondents to safeguard the NCR site for business use.
The Director considered however that the application site was unlikely to be re developed for business uses in the short term, and that its re development as proposed would improve the development prospects of the remainder of the NCR site.
In addition, the infrastructure improvements would provide improved access which would benefit all businesses in an adjacent industrial estate.
In relation to the retailing policies, the Director considered the application in the light of the criteria in Retailing Policy 4 of the structure plan.
In relation to the first criterion he stated: It must be demonstrated, in the first instance, that no suitable site is available for the development either within the city/district centres or, thereafter on the edge of these centres While noting that the Lochee District Centre lies within the primary catchment area for the proposal, [the retail statement submitted on behalf of the interveners] examines the potential site opportunities in and on the edge of that centre and also at the Hilltown and Perth Road District Centres.
The applicants conclude that there are no sites or premises available in or on the edge of existing centres capable of accommodating the development under consideration.
Taking account of the applicants argument it is accepted that at present there is no suitable site available to accommodate the proposed development.
In relation to the remaining criteria, the Director concluded that the proposed development was likely to have a detrimental effect on the vitality and viability of Lochee District Centre, and was therefore in conflict with the second criterion.
The potential impact on Lochee could however be minimised by attaching conditions to any permission granted so as to restrict the size of the store, limit the type of goods for sale and prohibit the provision of concessionary units.
The proposal was also considered to be in conflict with the third criterion: there was no deficiency in shopping provision which the proposal would address.
The fourth criterion, concerned with accessibility by modes of transport other than the car, was considered to be met.
Similar conclusions were reached in relation to the corresponding criteria in Policy 45 of the local plan.
In view of the conflict with the employment and retailing policies, the Director considered that the proposal did not fully comply with the provisions of the development plan.
He identified however two other material considerations of particular significance.
First, the proposed development would bring economic benefits to the city.
The closure of the NCR factory had been a major blow to the economy, but the re development of the application site would create more jobs than had been lost when the factory finally closed.
The creation of additional employment opportunities within the city was considered to be a strong material consideration.
Secondly, the development would also provide a number of planning benefits.
There would be improvements to the strategic road network which would assist in the free flow of traffic along the A90 (T).
The development would also assist in the re development of the whole of the former NCR site through the provision of enhanced road access and the clearance of buildings from the site.
The access improvements would also assist in the development of an economic development area to the west.
These benefits were considered to be another strong material consideration.
The Director concluded that the proposal was not in accordance with the development plan, particularly with regard to the employment and retailing policies.
There were however other material considerations of sufficient weight to justify setting aside those policies and offering support for the development, subject to suitable conditions.
He accordingly recommended that consent should be granted, subject to specified conditions.
The application was considered by the respondents entire council sitting as the respondents Development Quality Committee.
After hearing submissions on behalf of the interveners and also on behalf of the appellants, the respondents decided to follow the Directors recommendation.
The reasons which they gave for their decision repeated the Directors conclusions: It is concluded that the proposal does not undermine the core land use and environmental strategies of the development plan.
The planning and economic benefits that would accrue from the proposed development would be important to the future development and viability of the city as a regional centre.
These benefits are considered to be of a significant weight and sufficient to set aside the relevant provisions of the development plan.
The present proceedings
The submissions on behalf of the appellants focused primarily upon an alleged error of interpretation of the first criterion in Retailing Policy 4 of the structure plan, and of the equivalent criterion in Policy 45 of the local plan.
If there was a dispute about the meaning of a development plan policy which the planning authority was bound to take into account, it was for the court to determine what the words were capable of meaning.
If the planning authority attached a meaning to the words which they were not properly capable of bearing, then it made an error of law, and failed properly to understand the policy.
In the present case, the Director had interpreted suitable as meaning suitable for the development proposed by the applicant; and the respondents had proceeded on the same basis.
That was not however a tenable meaning.
Properly interpreted, suitable meant suitable for meeting identified deficiencies in retail provision in the area.
Since no such deficiency had been identified, it followed on a proper interpretation of the plan that the first criterion did not require to be considered: it was inappropriate to undertake the sequential approach.
The Directors report had however implied that the first criterion was satisfied, and that the proposal was to that extent in conformity with the sequential approach.
The respondents had proceeded on that erroneous basis.
They had thus failed to identify correctly the extent of the conflict between the proposal and the development plan.
In consequence, their assessment of whether other material considerations justified a departure from the plan was inherently flawed.
The respondents had compounded their error, it was submitted, by treating the proposed development as definitive when assessing whether a suitable site was available.
That approach permitted developers to drive a coach and horses through the sequential approach: they could render the policy nugatory by the simple expedient of putting forward proposals which were so large that they could only be accommodated outside town and district centres.
In the present case, there was a site available in Lochee which was suitable for food retailing and which was sequentially preferable to the application site.
The Lochee site had been considered as part of the assessment of the proposal, but had been found to be unsuitable because it could not accommodate the scale of development to which the interveners aspired.
In response, counsel for the respondents submitted that it was for the planning authority to interpret the relevant policy, exercising its planning judgment.
Counsel accepted that, if there was a dispute about the meaning of the words in a policy document, it was for the court to determine as a matter of law what the words were capable of meaning.
The planning authority would only make an error of law if it attached a meaning to the words which they were not capable of bearing.
In the present case, the relevant policies required all the specified criteria to be satisfied.
The respondents had proceeded on the basis that the proposal failed to accord with the second and third criteria.
In those circumstances, the respondents had correctly concluded that the proposal was contrary to the policies in question.
How the proposal had been assessed against the first criterion was immaterial.
So far as concerned the assessment of suitable sites, the interveners retail statement reflected a degree of flexibility.
There had been a consideration of all sites of at least 2.5 ha, whereas the application site extended to 6.68 ha.
The interveners had also examined sites which could accommodate only food retailing, whereas their application had been for both food and non food retailing.
The Lochee site extended to only 1.45 ha, and could accommodate a store of only half the size proposed.
It also had inadequate car parking.
The Director, and the respondents, had accepted that it was not a suitable site for these reasons.
Discussion
It has long been established that a planning authority must proceed upon a proper understanding of the development plan: see, for example, Gransden & Co Ltd v Secretary of State for the Environment (1985) 54 P & CR 86, 94 per Woolf J, affd (1986) 54 P & CR 361; Horsham DC v Secretary of State for the Environment (1991) 63 P & CR 219, 225 226 per Nolan LJ.
The need for a proper understanding follows, in the first place, from the fact that the planning authority is required by statute to have regard to the provisions of the development plan: it cannot have regard to the provisions of the plan if it fails to understand them.
It also follows from the legal status given to the development plan by section 25 of the 1997 Act.
The effect of the predecessor of section 25, namely section 18A of the Town and Country (Planning) Scotland Act 1972 (as inserted by section 58 of the Planning and Compensation Act 1991), was considered by the House of Lords in the case of City of Edinburgh Council v Secretary of State for Scotland 1998 SC (HL) 33, [1997] 1 WLR 1447.
It is sufficient for present purposes to cite a passage from the speech of Lord Clyde, with which the other members of the House expressed their agreement.
At p 44, 1459, his Lordship observed: In the practical application of sec 18A it will obviously be necessary for the decision maker to consider the development plan, identify any provisions in it which are relevant to the question before him and make a proper interpretation of them.
His decision will be open to challenge if he fails to have regard to a policy in the development plan which is relevant to the application or fails properly to interpret it.
In the present case, the planning authority was required by section 25 to consider whether the proposed development was in accordance with the development plan and, if not, whether material considerations justified departing from the plan.
In order to carry out that exercise, the planning authority required to proceed on the basis of what Lord Clyde described as a proper interpretation of the relevant provisions of the plan.
We were however referred by counsel to a number of judicial dicta which were said to support the proposition that the meaning of the development plan was a matter to be determined by the planning authority: the court, it was submitted, had no role in determining the meaning of the plan unless the view taken by the planning authority could be characterised as perverse or irrational.
That submission, if correct, would deprive sections 25 and 37(2) of the 1997 Act of much of their effect, and would drain the need for a proper interpretation of the plan of much of its meaning and purpose.
It would also make little practical sense.
The development plan is a carefully drafted and considered statement of policy, published in order to inform the public of the approach which will be followed by planning authorities in decision making unless there is good reason to depart from it.
It is intended to guide the behaviour of developers and planning authorities.
As in other areas of administrative law, the policies which it sets out are designed to secure consistency and direction in the exercise of discretionary powers, while allowing a measure of flexibility to be retained.
Those considerations point away from the view that the meaning of the plan is in principle a matter which each planning authority is entitled to determine from time to time as it pleases, within the limits of rationality.
On the contrary, these considerations suggest that in principle, in this area of public administration as in others (as discussed, for example, in R (Raissi) v Secretary of State for the Home Department [2008] QB 836), policy statements should be interpreted objectively in accordance with the language used, read as always in its proper context.
That is not to say that such statements should be construed as if they were statutory or contractual provisions.
Although a development plan has a legal status and legal effects, it is not analogous in its nature or purpose to a statute or a contract.
As has often been observed, development plans are full of broad statements of policy, many of which may be mutually irreconcilable, so that in a particular case one must give way to another.
In addition, many of the provisions of development plans are framed in language whose application to a given set of facts requires the exercise of judgment.
Such matters fall within the jurisdiction of planning authorities, and their exercise of their judgment can only be challenged on the ground that it is irrational or perverse (Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 780 per Lord Hoffmann).
Nevertheless, planning authorities do not live in the world of Humpty Dumpty: they cannot make the development plan mean whatever they would like it to mean.
The principal authority referred to in relation to this matter was the judgment of Brooke LJ in R v Derbyshire County Council, Ex p Woods [1997] JPL 958 at 967.
Properly understood, however, what was said there is not inconsistent with the approach which I have described.
In the passage in question, Brooke LJ stated: If there is a dispute about the meaning of the words included in a policy document which a planning authority is bound to take into account, it is of course for the court to determine as a matter of law what the words are capable of meaning.
If the decision maker attaches a meaning to the words they are not properly capable of bearing, then it will have made an error of law, and it will have failed properly to understand the policy.
By way of illustration, Brooke LJ referred to the earlier case of Northavon DC v Secretary of State for the Environment [1993] JPL 761, which concerned a policy applicable to institutions standing in extensive grounds.
As was observed, the words spoke for themselves, but their application to particular factual situations would often be a matter of judgment for the planning authority.
That exercise of judgment would only be susceptible to review in the event that it was unreasonable.
The latter case might be contrasted with the case of R (Heath and Hampstead Society) v Camden LBC [2008] 2 P & CR 233, where a planning authoritys decision that a replacement dwelling was not materially larger than its predecessor, within the meaning of a policy, was vitiated by its failure to understand the policy correctly: read in its context, the phrase materially larger referred to the size of the new building compared with its predecessor, rather than requiring a broader comparison of their relative impact, as the planning authority had supposed.
Similarly in City of Edinburgh Council v Scottish Ministers 2001 SC 957 the reporters decision that a licensed restaurant constituted similar licensed premises to a public house, within the meaning of a policy, was vitiated by her misunderstanding of the policy: the context was one in which a distinction was drawn between public houses, wine bars and the like, on the one hand, and restaurants, on the other.
A provision in the development plan which requires an assessment of whether a site is suitable for a particular purpose calls for judgment in its application.
But the question whether such a provision is concerned with suitability for one purpose or another is not a question of planning judgment: it is a question of textual interpretation, which can only be answered by construing the language used in its context.
In the present case, in particular, the question whether the word suitable, in the policies in question, means suitable for the development proposed by the applicant, or suitable for meeting identified deficiencies in retail provision in the area, is not a question which can be answered by the exercise of planning judgment: it is a logically prior question as to the issue to which planning judgment requires to be directed.
It is of course true, as counsel for the respondents submitted, that a planning authority might misconstrue part of a policy but nevertheless reach the same conclusion, on the question whether the proposal was in accordance with the policy, as it would have reached if it had construed the policy correctly.
That is not however a complete answer to a challenge to the planning authoritys decision.
An error in relation to one part of a policy might affect the overall conclusion as to whether a proposal was in accordance with the development plan even if the question whether the proposal was in conformity with the policy would have been answered in the same way.
The policy criteria with which the proposal was considered to be incompatible might, for example, be of less weight than the criteria which were mistakenly thought to be fulfilled.
Equally, a planning authority might misconstrue part of a policy but nevertheless reach the same conclusion as it would otherwise have reached on the question whether the proposal was in accordance with the development plan.
Again, however, that is not a complete answer.
Where it is concluded that the proposal is not in accordance with the development plan, it is necessary to understand the nature and extent of the departure from the plan which the grant of consent would involve in order to consider on a proper basis whether such a departure is justified by other material considerations.
In the present case, the Lord Ordinary rejected the appellants submissions on the basis that the interpretation of planning policy was always primarily a matter for the planning authority, whose assessment could be challenged only on the basis of unreasonableness: there was, in particular, more than one way in which the sequential approach could reasonably be applied ([2010] CSOH 128, para 23).
For the reasons I have explained, that approach does not correctly reflect the role which the court has to play in the determination of the meaning of the development plan.
A different approach was adopted by the Second Division: since, it was said, the proposal was in head on conflict with the retail and employment policies of the development plan, and the sequential approach offered no justification for it, a challenge based upon an alleged misapplication of the sequential approach was entirely beside the point (2011 SC 457, [2011] CSIH 9, para 38).
For the reasons I have explained, however, even where a proposal is plainly in breach of policy and contrary to the development plan, a failure properly to understand the policy in question may result in a failure to appreciate the full extent or significance of the departure from the development plan which the grant of consent would involve, and may consequently vitiate the planning authoritys determination.
Whether there has in fact been a misunderstanding of the policy, and whether any such misunderstanding may have led to a flawed decision, has therefore to be considered.
I turn then to the question whether the respondents misconstrued the policies in question in the present case.
As I have explained, the appellants primary contention is that the word suitable, in the first criterion of Retailing Policy 4 of the structure plan and the corresponding Policy 45 of the local plan, means suitable for meeting identified deficiencies in retail provision in the area, whereas the respondents proceeded on the basis of the construction placed upon the word by the Director of City Development, namely suitable for the development proposed by the applicant.
I accept, subject to a qualification which I shall shortly explain, that the Director and the respondents proceeded on the latter basis.
Subject to that qualification, it appears to me that they were correct to do so, for the following reasons.
First, that interpretation appears to me to be the natural reading of the policies in question.
They have been set out in paras 4 and 5 above.
Read short, Retailing Policy 4 of the structure plan states that proposals for new or expanded out of centre retail developments will only be acceptable where it can be established that a number of criteria are satisfied, the first of which is that no suitable site is available in a sequentially preferable location.
Policy 45 of the local plan is expressed in slightly different language, but it was not suggested that the differences were of any significance in the present context.
The natural reading of each policy is that the word suitable, in the first criterion, refers to the suitability of sites for the proposed development: it is the proposed development which will only be acceptable at an out of centre location if no suitable site is available more centrally.
That first reason for accepting the respondents interpretation of the policy does not permit of further elaboration.
Secondly, the interpretation favoured by the appellants appears to me to conflate the first and third criteria of the policies in question.
The first criterion concerns the availability of a suitable site in a sequentially preferable location.
The third criterion is that the proposal would address a deficiency in shopping provision which cannot be met in a sequentially preferable location.
If suitable meant suitable for meeting identified deficiencies in retail provision, as the appellants contend, then there would be no distinction between those two criteria, and no purpose in their both being included.
Thirdly, since it is apparent from the structure and local plans that the policies in question were intended to implement the guidance given in NPPG 8 in relation to the sequential approach, that guidance forms part of the relevant context to which regard can be had when interpreting the policies.
The material parts of the guidance are set out in para 6 above.
They provide further support for the respondents interpretation of the policies.
Paragraph 13 refers to the need to identify sites which can meet the requirements of developers and retailers, and to the scope for accommodating the proposed development.
Paragraph 14 advises planning authorities to assist the private sector in identifying sites which could be suitable for the proposed use.
Throughout the relevant section of the guidance, the focus is upon the availability of sites which might accommodate the proposed development and the requirements of the developer, rather than upon addressing an identified deficiency in shopping provision.
The latter is of course also relevant to retailing policy, but it is not the issue with which the specific question of the suitability of sites is concerned.
I said earlier that it was necessary to qualify the statement that the Director and the respondents proceeded, and were correct to proceed, on the basis that suitable meant suitable for the development proposed by the applicant.
As paragraph 13 of NPPG 8 makes clear, the application of the sequential approach requires flexibility and realism from developers and retailers as well as planning authorities.
The need for flexibility and realism reflects an inbuilt difficulty about the sequential approach.
On the one hand, the policy could be defeated by developers and retailers taking an inflexible approach to their requirements.
On the other hand, as Sedley J remarked in R v Teesside Development Corporation, Ex p William Morrison Supermarket plc and Redcar and Cleveland BC [1998] JPL 23, 43, to refuse an out of centre planning consent on the ground that an admittedly smaller site is available within the town centre may be to take an entirely inappropriate business decision on behalf of the developer.
The guidance seeks to address this problem.
It advises that developers and retailers should have regard to the circumstances of the particular town centre when preparing their proposals, as regards the format, design and scale of the development.
As part of such an approach, they are expected to consider the scope for accommodating the proposed development in a different built form, and where appropriate adjusting or sub dividing large proposals, in order that their scale may fit better with existing development in the town centre.
The guidance also advises that planning authorities should be responsive to the needs of retailers.
Where development proposals in out of centre locations fall outside the development plan framework, developers are expected to demonstrate that town centre and edge of centre options have been thoroughly assessed.
That advice is not repeated in the structure plan or the local plan, but the same approach must be implicit: otherwise, the policies would in practice be inoperable.
It follows from the foregoing that it would be an over simplification to say that the characteristics of the proposed development, such as its scale, are necessarily definitive for the purposes of the sequential test.
That statement has to be qualified to the extent that the applicant is expected to have prepared his proposals in accordance with the recommended approach: he is, for example, expected to have had regard to the circumstances of the particular town centre, to have given consideration to the scope for accommodating the development in a different form, and to have thoroughly assessed sequentially preferable locations on that footing.
Provided the applicant has done so, however, the question remains, as Lord Glennie observed in Lidl UK GmbH v Scottish Ministers [2006] CSOH 165, para 14, whether an alternative site is suitable for the proposed development, not whether the proposed development can be altered or reduced so that it can be made to fit an alternative site.
In the present case, it is apparent that a flexible approach was adopted.
The interveners did not confine their assessment to sites which could accommodate the development in the precise form in which it had been designed, but examined sites which could accommodate a smaller development and a more restricted range of retailing.
Even taking that approach, however, they did not regard the Lochee site vacated by the appellants as being suitable for their needs: it was far smaller than they required, and its car parking facilities were inadequate.
In accepting that assessment, the respondents exercised their judgment as to how the policy should be applied to the facts: they did not proceed on an erroneous understanding of the policy.
Finally, I would observe that an error by the respondents in interpreting their policies would be material only if there was a real possibility that their determination might otherwise have been different.
In the particular circumstances of the present case, I am not persuaded that there was any such possibility.
The considerations in favour of the proposed development were very powerful.
They were also specific to the particular development proposed: on the information before the respondents, there was no prospect of any other development of the application site, or of any development elsewhere which could deliver equivalent planning and economic benefits.
Against that background, the argument that a different decision might have been taken if the respondents had been advised that the first criterion in the policies in question did not arise, rather than that criterion had been met, appears to me to be implausible.
Conclusion
For these reasons, and those given by Lord Hope, with which I am in entire agreement, I would dismiss the appeal.
LORD HOPE
The question that lies at the heart of this case is whether the respondents acted unlawfully in their interpretation of the sequential approach which both the structure plan and the relevant local plan required them to adopt to new retail developments within their area.
According to that approach, proposals for new or expanded out of centre developments of this kind are acceptable only where it can be established, among other things, that no suitable site is available, in the first instance, within and thereafter on the edge of city, town or district centres.
Is the test as to whether no suitable site is available in these locations, when looked at sequentially, to be addressed by asking whether there is a site in each of them in turn which is suitable for the proposed development? Or does it direct attention to the question whether the proposed development could be altered or reduced so as to fit into a site which is available there as a location for this kind of development?
The sequential approach is described in National Planning Policy Guidance Policy 8, Town Centres and Retailing, para 5.2 as a fundamental principle of NPPG 8.
In R v Rochdale Metropolitan Borough Council, Ex p Milne, 31 July 2000, not reported, paras 48 49, Sullivan J said that it was not unusual for development plan polices to pull in different directions and, having regard to what Lord Clyde said about the practical application of the statutory rule in City of Edinburgh v Secretary of State for Scotland 1998 SC (HL) 33 at p 44, that he regarded as untenable the proposition that if there was a breach of any one policy in a development plan a proposed development could not be said to be in accordance with the plan.
In para 52 he said that the relative importance of a given policy to the overall objectives of the development plan was essentially a matter for the judgment of the local planning authority and that a legalistic approach to the interpretation of development plan policies was to be avoided.
I see no reason to question these propositions, to which Mr Kingston QC for the appellants drew our attention in his reply to Mr Armstrongs submissions for the respondents.
But I do not think that they are in point in this case.
We are concerned here with a particular provision in the planning documents to which the respondents are required to have regard by the statute.
The meaning to be given to the crucial phrase is not a matter that can be left to the judgment of the planning authority.
Nor, as the Lord Ordinary put it in his opinion at [2010] CSOH 128, para 23, is the interpretation of the policy which it sets out primarily a matter for the decision maker.
As Mr Thomson for the interveners pointed out, the challenge to the respondents decision to follow the Directors recommendation and approve the proposed development is not that it was Wednesbury unreasonable but that it was unlawful.
I agree with Lord Reed that the issue is one of law, reading the words used objectively in their proper context.
In Lidl UK GmbH v The Scottish Ministers [2006] CSOH 165 the appellants appealed against a decision of the Scottish Ministers to refuse planning permission for a retail unit to be developed on a site outwith Irvine town centre.
The relevant provision in the local plan required the sequential approach to be adopted to proposals for new retail development out with the town centre boundaries.
Among the criteria that had to be satisfied was the requirement that no suitable sites were available, or could reasonably be made available, in or on the edge of existing town centres.
In other words, town centre sites were to be considered first before edge of centre or out of town sites.
The reporter held that the existing but soon to be vacated Lidl town centre site was suitable for the proposed development, although it was clear as a matter of fact that this site could not accommodate it.
In para 13 Lord Glennie noted that counsel for the Scottish Ministers accepted that a site would be suitable in terms of the policy only if it was suitable for, or could accommodate, the development as proposed by the developer.
In para 14 he said that the question was whether the alternative town centre site was suitable for the proposed development, not whether the proposed development could be altered or reduced so that it could fit in to it.
Mr Kingston submitted that Lord Glennies approach would rob the sequential approach of all its force, and in the Inner House it was submitted that his decision proceeded on a concession by counsel which ought not to have been made: [2011] CSIH 9, 2011 SC 457, para 31.
But I think that Lord Glennies interpretation of the phrase was sound and that counsel was right to accept that it had the meaning which she was prepared to give to it.
The wording of the relevant provision in the local plan in that case differed slightly from that with which we are concerned in this case, as it included the phrase or can reasonably be made available.
But the question to which it directs attention is the same.
It is the proposal for which the developer seeks permission that has to be considered when the question is asked whether no suitable site is available within or on the edge of the town centre.
The context in which the word suitable appears supports this interpretation.
It is identified by the opening words of the policy, which refer to proposals for new or expanded out of centre retail developments and then set out the only circumstances in which developments outwith the specified locations will be acceptable.
The words the proposal which appear in the third and fifth of the list of the criteria which must be satisfied serve to reinforce the point that the whole exercise is directed to what the developer is proposing, not some other proposal which the planning authority might seek to substitute for it which is for something less than that sought by the developer.
It is worth noting too that the phrase no suitable site is available appears in Policy 46 of the local plan relating to commercial developments.
Here too the context indicates that the issue of suitability is directed to the developers proposals, not some alternative scheme which might be suggested by the planning authority.
I do not think that this is in the least surprising, as developments of this kind are generated by the developers assessment of the market that he seeks to serve.
If they do not meet the sequential approach criteria, bearing in mind the need for flexibility and realism to which Lord Reed refers in para 28, above, they will be rejected.
But these criteria are designed for use in the real world in which developers wish to operate, not some artificial world in which they have no interest doing so.
For these reasons which I add merely as a footnote I agree with Lord Reed, for all the reasons he gives, that this appeal should be dismissed.
I would affirm the Second Divisions interlocutor.
| UK-Abs | On 18 January 2010, Dundee Council granted planning permission for the construction of an Asda superstore on a site at Myrekirk Road, Dundee.
The Appellants operate a supermarket at a site on South Road, Dundee, some 800m from the proposed Asda site.
Scottish Executive policy guidance states that, subject to material considerations indicating otherwise, proposed sites should be considered in the following descending order of preference: (a) town centre, (b) edge of town, (c) other commercial centres identified in the development plan and (d) out of centre locations that can be accessed by various transport modes (the sequential test).
Effect is given to the sequential test by the policies set out in the statutory development plan, comprising the structure plan and the local plan.
In considering Asdas application, the Council noted that the proposed site was out of town and fell therefore in the least desirable category.
There was an available site at Methven Road in the Lochee district of Dundee, but the Council discounted it as being too small for the proposed store.
There was no other available site within categories (a), (b) or (c) that would have been suitable.
The Council accepted that the proposal failed to comply with the sequential test, but given that (i) it did not undermine the core land use strategies of the development plan; and (ii) it had a number of other planning, economic and social benefits, permission was granted.
Tesco applied for judicial review of the Councils decision arguing that it had improperly interpreted and applied the development plan and that it had failed to consider its own policy in respect of the Lochee district.
The petition was dismissed by the Lord Ordinary and a reclaiming motion against his interlocutor was refused by the Inner House.
Tesco now appeals to this court.
The Supreme Court dismisses the appeal.
The lead judgment is given by Lord Reed, with whom the other justices agree.
Lord Hope adds a brief concurring judgment.
The Appellants contended that the Respondents had misinterpreted a criterion in one of the policies set out in the structure plan, and its equivalent in the local plan.
The requirement in the policy reads as follows: In keeping with the sequential approach to site selection for new retail developments, proposals for new or expanded out of centre retail developments in excess of 1000 sq m gross will only be acceptable where it can be established that: no suitable site is available, in the first instance, within and thereafter on the edge of city, town or district centres [] [13].
The Appellants submitted that if there was a dispute about the meaning of a policy in the development plan it was for the court to determine what the words were capable of meaning.
If the planning authority attached a meaning to the words which they were not properly capable of bearing, then it made an error of law, and had failed properly to understand the policy [13].
In the present case, the Respondents Director had interpreted suitable as meaning suitable for the development proposed by the applicant.
But suitable meant suitable
for meeting identified deficiencies in retail provision in the area.
As no such deficiency had been identified, it was inappropriate to undertake the sequential approach and the Respondents had proceeded on an erroneous basis.
They had failed to identify correctly the extent of the conflict between the proposal and the development plan and their assessment of whether other material considerations justified a departure from the plan was inherently flawed [13].
They had compounded their error by treating the proposed development as definitive when assessing whether a suitable site was available [14].
In response, the Respondents submitted that it was for the planning authority to interpret the relevant policy, exercising its planning judgment.
The planning authority would only make an error of law if it attached a meaning to the words of the policy document which they were not capable of bearing.
In the present case, the relevant policies required all the specified criteria to be satisfied.
The Respondents had considered that the proposal failed to accord with the second and third criteria.
In those circumstances, they had correctly concluded that the proposal was contrary to the policies in question. [15].
So far as concerned the assessment of suitable sites, Asdas retail statement had reflected a degree of flexibility: it considered smaller sites and sites which could accommodate only food retailing, whereas its application was also for non food retailing [16].
The Supreme Court considers that, in this area of public administration as in others, policy statements should be interpreted objectively in accordance with the language used, read as always in its proper context.
That is not to say that such statements should be construed as if they were statutory or contractual provisions.
Many of the provisions of development plans are framed in language whose application to a given set of facts requires the exercise of judgment.
Such matters fall within the jurisdiction of planning authorities, and their exercise of their judgment can only be challenged on the ground that it is irrational or perverse.
Nevertheless, planning authorities do not live in the world of Humpty Dumpty: they cannot make the development plan mean whatever they would like it to mean [18 19, 35].
In the present case, the question what the word suitable means cannot be answered by the exercise of planning judgment: it is a logically prior question as to the issue to which planning judgment requires to be directed [21].
Moreover, where, as here, it is concluded that the proposal is not in accordance with the development plan, it is necessary to understand the nature and extent of the departure from the plan which the grant of consent would involve in order to consider on a proper basis whether such a departure is justified by other material considerations [22].
The Supreme Court considers that the Respondents were correct to proceed on the basis that the word suitable meant suitable for the development proposed by the applicant, subject to the qualification that flexibility and realism must be shown by developers [24, 28, 37 38].
The Supreme Court makes this finding for the following reasons: (1) this is the natural reading of the policies [25]; (2) the interpretation favoured by the Appellants conflates the first and third criteria of the policies in question [26]; and (3) the policies were intended to implement the guidance given in National Planning Policy Guidance 8, which focuses upon the availability of sites which might accommodate the proposed development, rather than upon addressing an identified deficiency in shopping provision [27].
In the present case, it is apparent that a flexible approach was adopted [30].
An error in interpreting the policies would be material only if there was a real possibility that the determination might have been different.
The Court is not persuaded that in the present case there was any such possibility [31].
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Subsets and Splits